Abu Dhabi-based Aldar Investment Properties (AIP), the largest real estate management company in Abu Dhabi and subsidiary of Aldar Properties (Aldar), is the latest corporate to issue a Green Sukuk – a US$500 million inaugural Reg S senior unsecured benchmark Green hybrid offering.
The issuance is the first offering under AIP’s Corporate Sukuk Issuance Programme to support its growth agenda and sustainability commitments, in line with the goals of the 2015 Paris Agreement, the UAE Net Zero by 2050 Strategic Initiative and Aldar’s plan to be a net zero carbon business by 2050.
The Sukuk proceeds will be deployed in accordance with Aldar’s Green Finance Framework, which governs investment in sustainable projects such as green buildings, property upgrades to enhance energy efficiency, sustainable water management, pollution control measures, and renewable energy sources.
AIP had earlier mandated HSBC and Standard Chartered Bank to act as joint global coordinators, and along with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank and Mashreq as joint lead managers and joint bookrunners, and to arrange a series of investor meetings and calls with accounts in the GCC, UK, Europe, Asia and Offshore US.
The 10-year Sukuk attracted robust demand and was oversubscribed four times. The transaction was priced with a 4.875% coupon rate, which according to AIP is amongst the highest price tightening of any corporate issuance in 2023.
“The effective funding cost for AIP will be significantly lower due to a successful pre-hedging strategy implemented in 2021 and 2022 when long term rates were materially lower. As a result, the forward starting swaps secured will reduce the issuance’s effective rate to 3.85%,” maintained AIP in a statement.
Following a global investor roadshow, the issuance was four times oversubscribed, attracting a range of local, regional, and international investors that placed total orders of over US$2.3 billion.
According to Faisal Falaknaz, Acting Chief Financial and Sustainability Officer at Aldar Properties, “This issuance marks Aldar’s return to international capital markets for the first time since 2019 and is the first corporate benchmark sized Sukuk issued from Abu Dhabi since 2020. It is also Aldar’s inaugural green issuance, and the robust investor demand reflects the confidence in Aldar’s approach to ESG and the business model that will deliver on our net zero commitments.
“As a leading integrated real estate developer, investor, and manager, Aldar has a clear responsibility and opportunity to align fully with the UAE’s net zero ambitions. We are already investing significantly in energy efficiency across our property portfolio. Our green financing initiatives will now allow us to step up our climate action agenda.”
AIP’s last foray into the Sukuk market was in in October 2019 when it issued a fixed rate 10-year US$500 million Sukuk. That transaction was priced at a coupon rate of 3.875% per annum, the lowest rate ever achieved by Aldar at the time, following strong investor demand. The transaction, which marked the first 10-year public Sukuk offering by an Abu Dhabi-based issuer, was 6 times oversubscribed, with global investors accounting for 71% of the total transaction allocation.
AIP houses a diversified portfolio of income-generating real estate assets valued at over AED23 billion. Aldar’s progress on sustainability has driven recent improvements in its ESG ratings with an upgraded MSCI ESG rating to BBB and an enhanced score of 16.1 on Sustainalytics’ ESG risk assessment scale, indicating the company’s lower level of ESG risk. Similarly, Aldar achieved 60 points on the Dow Jones Sustainability Index (DJSI) which moved the company into the top 7% of the 237 global real estate companies surveyed.
Aldar has adopted a green financing framework, which aligns with the United Nations Sustainable Development Goals and is based on principles set out by the International Capital Markets Association (ICMA) and the Loan Market Association. The framework sets out criteria for use of proceeds and is governed by Aldar’s Sustainability Council, which comprises senior management and is chaired by Aldar’s Group Director of Sustainability and CSR.
Furthermore, in accordance with industry best practice, Aldar has obtained a ‘Second Party Opinion’ from Sustainalytics to externally verify the sustainability quality of the Framework and its alignment with Green Finance Principles.
In January 2023, Aldar launched its Net Zero Plan, with a commitment to becoming a net zero carbon business across its Scope 1, Scope 2, and Scope 3 greenhouse gas (GHG) emissions by 2050. The company also set science-aligned 2030 interim targets, which will see it achieve Net Zero in its Scope 1 and Scope 2 GHG emissions and deliver a 45% reduction in the intensity of its Scope 3 GHG emissions relative to the company’s 2021 baseline.
Aldar’s Net Zero Plan explains how it will achieve Net Zero in its direct emissions and the embodied carbon of all its developments and projects, as well as emissions associated with its supply chain and tenants.