ADNOC and Apollo enter into $5.5 bln real estate investment partnership

The Abu Dhabi National Oil Company (ADNOC) announced, that it has entered into a long-term strategic investment with accounts and entities owned and/or advised by Apollo Global Management Inc. and its subsidiaries (Apollo), one of the world’s largest alternative investment managers, and a group of institutional investors, for an  underlying real estate portfolio valued at $5.5 billion.

The strategic investment will leverage the rental income streams from select ADNOC real estate assets under a 24-year master lease agreement. The investment will unlock new pools of global institutional long-term capital for ADNOC, while supporting investment in its core business and strategic growth projects.

The transaction will result in upfront proceeds of $2.7 billion to ADNOC and is expected to close before year-end, subject to customary closing conditions and regulatory approvals.

In one of the region’s largest real estate transactions, Apollo led a consortium of institutional investors in the acquisition of a 49 per cent stake in Abu Dhabi Property Leasing Holding Company RSC Limited (henceforth referred to as ADPLHC), a wholly owned affiliate of ADNOC. Notably, the transaction included no financing, and was placed entirely with insurance and pension fund investors that focus on long-term and high-quality investments. ADNOC will retain a 51 per cent majority stake, maintaining full ownership and control over the select real estate and social infrastructure assets and responsibility for all operations and maintenance. ADPLHC holds the long-term leasehold interests underpinned by the sizeable, diversified portfolio of assets located across the Emirate of Abu Dhabi.

Commenting on the transaction, His Excellency Dr. Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO, said: “We are pleased to partner with Apollo and leverage their world-class real estate asset management expertise to achieve international best practice standards in managing and driving cost efficiencies across our real estate portfolio. This strategic partnership allows ADNOC to unlock and monetize significant value from its non-oil and gas strategic infrastructure assets and reinvest into our core business to deliver further growth and realize greater returns.

“The innovative and flexible deal structure ensures ADNOC maintains full ownership and control over its real estate assets, while further strengthening our balance sheet and allowing for greater capital flexibility. This transaction builds on our highly successful and ongoing track-record of attracting leading global institutional capital into the UAE and Abu Dhabi, further solidifying the country’s position as a credible and trusted go-to investment destination for global investors, even in the current unprecedented environment.”

For Apollo, the investment presents a unique opportunity to access high-quality lease assets with a superior, risk-adjusted return profile, and lock in long-term, recurring and stable cashflows from a tenant that is one of the world’s leading and most creditworthy energy companies and a portfolio of assets which is expected to achieve strong occupancy and rental rates. Apollo originated and structured the transaction, drawing upon its ability to navigate complex global market environments and leveraging expertise across its integrated investment platform, including real estate, infrastructure and insurance solutions.

Leon Black, Apollo Chairman, Chief Executive Officer and Founder commented: “We are pleased to invest in ADNOC’s real estate portfolio, simultaneously supporting achievement of their strategic plans while presenting our investors with a highly attractive risk-reward opportunity. Sourcing and structuring a long-term institutional investment of this nature is demonstrative of Apollo’s unique ability to embrace complexity and tailor investments to a company’s specific objectives. In a market where high-quality, long-dated yield is scarce, this transaction allows our institutional and insurance clients, including Athene, to participate in a proprietary investment alongside a world-class company like ADNOC.”