Aldar prices $1bn hybrid notes to fund expansion

Aldar Properties PJSC has priced $1 billion of subordinated dated hybrid notes, securing long-term capital to support its expansion plans as demand for Gulf real estate assets continues to draw global investors. The Abu Dhabi-based developer said the transaction was met with strong interest from international institutional accounts, reflecting confidence in its balance sheet and strategy at a time when funding costs remain elevated worldwide.

The issuance marks Aldar’s return to the hybrid market and represents one of the largest corporate hybrid transactions from the region. The notes, which are treated as equity by rating agencies to a significant extent, allow the company to bolster capital without diluting shareholders. Proceeds are expected to be used to accelerate development pipelines, pursue selective acquisitions and refinance existing obligations, according to people familiar with the transaction.

Investor demand was described as broad-based, spanning Europe, Asia and the Middle East, with asset managers, pension funds and insurers participating. Bankers involved said the order book built quickly, enabling pricing at the tighter end of initial guidance. That outcome highlights the appetite for high-quality Gulf credits, particularly those with exposure to Abu Dhabi’s expanding residential, commercial and retail markets.

Aldar Properties PJSC has spent the past several years reshaping its portfolio, shifting from a predominantly development-led model to one with a larger base of recurring income. Rental assets, including shopping centres, offices and logistics facilities, now account for a substantial share of earnings, providing predictable cash flows that underpin credit metrics. This diversification has been closely watched by investors assessing the sustainability of returns across property cycles.

The hybrid notes are subordinated to senior debt and carry features such as optional deferral of coupons, characteristics that strengthen Aldar’s capital structure. While hybrids typically come at a higher cost than senior bonds, they offer issuers flexibility and help preserve headroom for future borrowing. Market participants said Aldar’s ability to execute a deal of this size points to improving sentiment towards hybrid instruments after a cautious period driven by volatility in global rates.

Abu Dhabi’s real estate sector has been buoyed by population growth, business formation and government-backed investment in infrastructure and tourism. Demand for residential units has been supported by long-term visas and initiatives aimed at attracting skilled professionals, while office and logistics segments have benefited from the emirate’s push to broaden its economic base beyond hydrocarbons. Developers with scale and access to capital have been best placed to capitalise on these trends.

For Aldar, the funding comes as it advances several large-scale projects across the emirate, including mixed-use developments and community-focused residential schemes. The company has also expanded its asset management platform, overseeing investment vehicles that target income-generating properties. Executives have previously indicated that disciplined capital allocation and balance-sheet strength remain priorities as competition intensifies and land prices rise.

The timing of the transaction is notable given shifting expectations around global monetary policy. While borrowing costs remain higher than in the previous decade, issuers with strong credit profiles have found windows to access markets on favourable terms. Analysts said Aldar’s hybrid pricing would likely serve as a reference point for other regional corporates considering similar instruments, potentially opening the door to further issuance.

Rating agencies have generally viewed Aldar’s strategy positively, citing its diversified income streams, government-linked shareholder base and conservative leverage. The hybrid notes are expected to receive partial equity credit, which helps maintain ratios even as the company invests for growth. That consideration has become increasingly important as developers balance expansion ambitions with the need to withstand cyclical downturns.