Issuer: Aldar Investment Properties Sukuk Limited
Obligor: Aldar Investment Properties
Size: $500 million
Structure: Sukuk al-wakala/murabaha
Tenor: 10 years
Banks: HSBC and Standard Chartered (joint global coordinators and green structurers); Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank and Mashreq Bank (joint lead managers and joint bookrunners)
Date: May 2023
Amid growing issuance of green sukuk across the Middle East, there are certain transactions that stand out. Last year, one such deal was the debut in the format from the UAE real-estate developer Aldar Investment Properties.
The $500 million 10-year green sukuk stood out for several reasons, making it Euromoney’s best Islamic real-estate deal.
Perhaps the most important is that it is the inaugural green sukuk from a company linked to Abu Dhabi’s sovereign wealth fund, which was returning to the international capital markets for the first time since 2019.
Combined with the size and scale of Aldar – it is Abu Dhabi’s biggest developer – and capital markets track record (Aldar has two outstanding sukuks maturing in 2025 and 2029), these qualities were crucial in attracting impressive demand for the transaction, which peaked at over $2.3 billion.
This enabled Aldar and its banks to price the deal at 150 basis points over Treasuries – 35bp inside initial guidance and flat to the estimated fair value – with a profit rate of 4.875% (although this cost for Aldar effectively drops to 3.85% due to a pre-hedging strategy).
Importantly, and notable given that the deal was not available to US investors, distribution of the dollar-denominated sukuk was well-balanced between Gulf Cooperation Council Islamic investors and international institutional buyers in the UK, Europe and Asia.
Roughly a third of the deal was allocated to investors with an environmental, social and governance (ESG) mandate.
Proceeds from the sukuk will be used to finance, refinance and/or invest in certain eligible green projects under Aldar’s green finance framework
The orderbook was mostly split between fund managers (allocated 55% of the deal) and banks and private banks (43%), with the remainder going to corporate treasuries and insurers.
While this is Aldar’s first green sukuk, it has previously raised sustainable finance, firstly in the form of a Dh300 million ($82 million) sustainability-linked loan in 2021, which was the first of its kind by a real-estate firm in the Middle East and North Africa. The company followed this in December last year with a Dh1 billon sustainability linked facility, which in total takes Aldar’s ESG financing facilities to Dh4.8 billion.
This deal forms part of a $2 billion financing programme to support the company’s growth and sustainability commitments in line with the goals of the Paris Agreement, the UAE Net Zero by 2050 strategic initiative and the issuer’s own plan to be a net-zero carbon business by 2050.
Proceeds from the sukuk will be used to finance, refinance and/or invest in certain eligible green projects under Aldar’s green finance framework, which is aligned with the International Capital Market Association’s Green Bond Principles, and the Loan Markets Association’s Green Loan Principles.
Sustainalytics provided the second-party opinion for the framework, which covers projects including green buildings, energy efficiency, sustainable water management, pollution prevention control and renewable energy.
In a statement at the time of the deal, Faisal Falaknaz, Aldar’s acting chief financial and sustainability officer, said: “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.”
Aldar is 25% owned by Mamoura Diversified Global Holding, the debt issuing unit of Mubadala, the sovereign wealth fund of Abu Dhabi.
