Abu Dhabi National Oil Company (Adnoc) has inked a key agreement worth $5.5 billion with Apollo Global Management of the US to lease out some of its key real estate assets on a long-term basis, as the Emirati giant aims to unlock capital from its non-core assets.

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, the Abu Dhabi state-owned giant said in a statement on Wednesday.

Adnoc is selling stakes in its real estate assets, midstream and gas pipelines business in line with its commercially focused 2030 smart growth strategy, which has seen it consolidate its business over the past three years and enter the global capital markets for the first time.

As a part of the agreement with Apollo, a consortium of investors led by Apollo would acquire a 49% stake in Adnoc subsidiary Abu Dhabi Property Leasing Holding Company (ADPLHC), it said.

Adnoc will retain a 51% majority stake, maintaining full ownership and control over the select real estate and social infrastructure assets and responsibility for all operations and maintenance, the state-owned giant said.

The US-based asset manager and its subsidiaries will receive rental income from select Adnoc properties over a period of 24 years.

Adnoc’s chief executive Sultan Ahmed al Jaber said the strategic partnership allows the company “to unlock and monetise significant value from its non-oil and gas strategic infrastructure assets,” and reinvest into its core business.

“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,” al Jaber said.

HSBC acted as financial advisor to Adnoc in the landmark real estate deal, while Moelis & Company acted as an independent financial advisor.

Pipeline deal

The Adnoc real estate agreement follows a key pipeline deal this year with an international consortium of infrastructure investors that will see the new partners together acquire a 49% stake in the state-owned giant's natural gas pipeline business, valued at around $20.7 billion.

A consortium comprising Global Infrastructure Partners (GIP), Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities and Italy's Snam are poised to jointly take up the stake in Adnoc's gas pipeline business.

The state-owned giant said earlier this year that the transaction “will result in upfront proceeds of over $10 billion to Adnoc and is subject to customary closing conditions and regulatory approvals".

The Abu Dhabi giant last year signed a $4 billion deal, forming a midstream pipeline infrastructure partnership involving oil pipelines with investment companies KKR and BlackRock.

The trio had announced the formation of a new company named Adnoc Oil Pipelines, which will be 40% owned by a consortium between KKR and BlackRock with Adnoc holding the majority 60% share.

The company would be jointly leasing Adnoc’s interest in 18 pipelines, which span 750 kilometres and transport oil and condensate across Adnoc’s offshore and onshore concessions in the United Arab Emirates, for a 23-year period.

The Abu Dhabi giant has major expansion plans as it aims to ramp up its oil production capacity to 4 million barrels per day by end of this year and to 5 million bpd by 2030.

It also envisages adding more than 3 billion cubic feet per day of gas production over the next decade from offshore sour gas fields, gas cap and unconventional resources.

Abu Dhabi’s oil & gas expansion plans are likely to cost billions of dollars and the state-owned giant is likely to benefit from its stake sale in the pipeline and real estate business.