Aldar secures $1bn hybrid funding deal

Aldar Properties has raised $1 billion through a privately placed issue of subordinated hybrid notes to Apollo Global Management, bolstering its balance sheet as the Abu Dhabi-based developer pursues expansion across its core real estate platforms.

Rated Baa2 with a stable outlook by Moody’s, Aldar structured the notes with a non-call period of 10.25 years, underlining the long-term nature of the funding. The transaction was executed through a private placement, with Apollo acting as the sole investor. Proceeds have been injected as equity into Aldar Investment Properties, the group’s subsidiary that owns and manages income-generating real estate assets.

Company executives described the hybrid instrument as a strategic capital-raising move that enhances financial flexibility while preserving credit metrics. Because subordinated hybrid notes are treated as equity by rating agencies to varying degrees, the structure enables Aldar to strengthen its capital base without immediate dilution to shareholders or a direct increase in conventional debt levels.

Aldar Investment Properties, the recipient of the funds, holds a diversified portfolio spanning retail, residential, commercial and logistics assets. The unit has been central to the group’s recurring income model, generating stable cash flows from long-term leases and high-quality tenants. By deploying the net proceeds as equity into AIP, the parent company aims to support asset growth and refinancing initiatives within the platform.

The deal comes at a time when regional property developers are seeking to balance ambitious growth plans with prudent leverage management. Abu Dhabi’s real estate sector has shown resilience, supported by population growth, regulatory reforms and sustained government-backed infrastructure investment. Aldar, one of the largest listed developers in the emirate, has expanded both organically and through acquisitions in recent years, increasing its exposure to recurring income streams.

Hybrid securities, which blend characteristics of debt and equity, have become more common among investment-grade corporates seeking to optimise their capital structures. These instruments typically offer issuers flexibility on coupon deferral and are subordinated to senior debt, resulting in higher yields for investors. For companies with solid credit ratings, hybrids can provide an efficient means of raising long-term capital while maintaining rating stability.

Moody’s Baa2 rating places Aldar firmly within investment-grade territory, reflecting the group’s asset quality, strong liquidity profile and support from Abu Dhabi’s economic environment. The stable outlook signals expectations of steady operating performance and disciplined financial management. Market analysts have noted that maintaining this rating is crucial for keeping funding costs competitive, particularly as global interest rates remain elevated compared with pre-pandemic levels.

Apollo Global Management, one of the world’s largest alternative asset managers, has been active in private credit and structured financing transactions globally. Its participation in the placement underscores investor appetite for high-quality regional credits offering attractive risk-adjusted returns. Private placements of this scale also illustrate the depth of institutional capital available for Middle East corporates, reducing reliance on public bond markets that can be more volatile.

Aldar’s broader strategy has centred on scaling up its investment properties arm to increase the proportion of recurring revenues relative to development income. While property development remains a significant contributor to earnings, recurring income from leased assets provides greater visibility and resilience across economic cycles. The equity injection into AIP is expected to support further acquisitions, asset enhancements and potential refinancing of existing liabilities.

Over the past several years, Aldar has executed major transactions to expand its portfolio of schools, commercial buildings and residential communities. The group has also ventured beyond Abu Dhabi into other emirates and international markets, reflecting a diversification strategy aimed at mitigating concentration risk. Strengthening the capital base of its investment platform aligns with these ambitions, particularly as competition for prime assets intensifies.

From a balance sheet perspective, subordinated hybrids are often treated by rating agencies as part equity and part debt, depending on their specific terms. The long non-call period of 10.25 years supports equity credit treatment, given the permanence of capital implied. This feature is likely to have been a key consideration in structuring the instrument to protect leverage ratios.