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Apollo Global real estate team eyes 'series of funds'

Fresh off raising $208m from the IPO of its mortgage REIT, Apollo Global says it could raise a series of private equity real estate funds. The firm’s sixth buyout fund has taken a hit following investments in Harrah’s and Realogy.

Apollo Global Management says it could launch a series of real estate funds as it looks to expand its investments in distressed property debt and equity recapitalisations.

In September, the firm’s real estate team floated the mortgage real estate investment trust, Apollo Commercial Real Estate Finance, raising a total of $208 million in equity from the public real estate market.

However the firm is also eyeing private capital, with Apollo saying in a securities filing yesterday it “may seek to serve as the manager or sponsor a series of real estate funds that focus on other opportunistic investments in distressed debt and equity recapitalisation transactions”. People familiar with the situation said the firm is preparing to launch its first closed-ended property fund.

The filing added the team, led by Joseph Azrack, planned to target “corporate real estate, distress for control situations, and the acquisition and recapitalization of real estate portfolios, platforms and operating companies including non-performing and deeply discounted loans”.

Apollo is in the process of following rivals into the New York Stock Exchange and yesterday’s filing was an update on its plans to list its shares.

The firm, which first announced its decision to float last April before the markets crashed – said in the three months to September 2009 the net income attributable to Apollo Global Management was a loss of $46 million. The firm had total revenues of $213 million in the third quarter, compared to total expense of $404.5 million, $348 million of which was compensation and benefits.

Apollo also revealed its sixth buyout fund, Fund VI, which raised $10.1 billion in 2006, had a net IRR of zero percent to the end of September, having realised $2.4 billion from investments. The firm said the fund’s multiple was currently 1.1x. The fund has investments in casino company Harrah’s Entertainment and real estate broker Realogy.

The firm said it was too early to provide returns for its 2008 $14.7 billion Fund VII, which has realised $1.5 billion to date against $3.9 billion of invested capital. Apollo’s $3.7 billion Fund V had a net IRR of 46 percent; the $3.6 billion Fund IV had a net IRR of 8 percent; Apollo’s $1.5 billion Fund III had a net IRR of 11 percent to the end of the third quarter. The firm added the overall net IRR of its funds was 26 percent with a 2.6x multiple.