Abu Dhabi’s ADNOC, Apollo-led consortium enter into $5.5bn investment partnership

The Abu Dhabi National Oil Company (ADNOC) has entered into a $5.5bn real estate investment partnership with the accounts and entities owned and/or advised by Apollo Global Management and its subsidiaries (Apollo), it announced on September 2.

Apollo is one of the world’s largest alternative investment managers. The strategic investment will capitalise on the rental income streams from select ADNOC real estate assets under a 24-year master lease agreement.

Meanwhile, the investment partnership will open new sources of global institutional long-term capital for ADNOC, while supporting investment in its core business and strategic growth projects.

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 (ADPLHC), a wholly owned affiliate of ADNOC. The transaction included no financing, and was placed entirely with the 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, while ADPLHC holds the long-term leasehold interests.

The transaction will result in upfront proceeds of $2.7bn to ADNOC and is expected to close before the end of 2020, subject to closing conditions and regulatory approvals.

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 monetise significant value from its non-oil and gas strategic infrastructure assets and reinvest into our core business to deliver further growth and realise 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.”

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.”

Since the announcement of its investment model and the more proactive management of its assets and capital in 2017, ADNOC has entered the debt capital markets for the first time, issuing a $3bn bond backed by the Abu Dhabi Crude Oil Pipeline; partially floated ADNOC Distribution, the first-ever IPO of an ADNOC Group company; and entered into several strategic partnerships in its drilling, refining, fertiliser and trading businesses, amongst others.

HSBC acted as financial advisor to ADNOC while Moelis & Company acted as an independent financial advisor to ADNOC.