(Adds paragraph on debt transfer to new subsidiary, IPO option)
By Stanley Carvalho
ABU DHABI, Sept 12 (Reuters) - Abu Dhabi’s largest developer Aldar Properties is spinning off its recurring-revenue assets worth 20 billion dirhams ($5.4 billion) into a new, fully-owned subsidiary as it seeks to achieve operational efficiencies and raise cheaper capital. The state-linked builder of Abu Dhabi’s Formula One circuit said on Wednesday the subsidiary, Aldar Investment Properties LLC, will take ownership of some of Aldar’s highest revenue-generating assets. The new company follows the recent Abu Dhabi decree granting full onshore real estate ownership rights to Aldar Properties and its subsidiaries in the capital of the United Arab Emirates.
“It’s an evolution that brings a new degree of operating capital efficiency. And by focusing (on) our recurring revenue assets legally and financially, we can raise capital cheaper,” Greg Fewer, chief financial officer, Aldar Properties told Reuters.
Aldar Investments has been assigned a Baa1 rating by Moody’s, a notch above Aldar’s, and plans to issue new, benchmark sukuk, or Islamic bonds, shortly, he said.
Aldar Properties has hired banks to arrange a U.S. dollar-denominated sukuk issue of at least $750 million, sources told Reuters on Monday. “The new sukuk will be linked to the existing sukuk,” Fewer said, without elaborating further.
Fewer told reporters at a press event on Wednesday that Aldar Properties will move its existing debt to the new subsidiary. Shares in the new entity could be sold through an initial public offering in the future, he added.
Aldar could emulate what Dubai’s Emaar Properties did with the listing of Emaar Malls in 2014, said Ayub Ansari, senior analyst at SICO Bank in Bahrain.
“Typically in a spin-off, the company is looking for an IPO (initial public offering), aiming for better value. You also have immediate cash flow for the parent i.e. Aldar Properties.”
Aldar Investments will have its own board. The existing asset management team of Aldar Properties will be part of the new subsidiary, he said.
Aldar Investments, incorporated at Abu Dhabi Global Market (ADGM), the financial free zone of the emirate, will also actively assess opportunities to expand its asset base beyond traditional real estate asset classes.
Aldar’s shares were down 1 percent on Wednesday. The stock is trading below its fundamental value given weak sentiment in the market, SICO’s Ansari said. (Reporting by Stanley Carvalho, Editing by Saeed Azhar and Louise Heavens)