Apollo inks Philippines biggest RE deal

The global private equity giant has sealed the largest private real estate deal in the Philippines to date with the sale of five office buildings in Manila inherited from its takeover of Citi Property Investors.

Apollo Global Management, the New York-based alternative asset manager, has inked the largest private equity real estate deal in the Philippines to date with the sale of five office buildings in the Bonifacio Global City business district of Manila.

Apollo confirmed to PERE that it has entered into contract with SM Investment Corporation, a local conglomerate best known for large retail malls. However, the firm declined to comment on any further details.

On a positive note for the Philippine real estate market, this deal is understood to have had a hotly contested bidding process, with an initial 20 interested bidders and a short-list of five, including several international private equity firms and reportedly domestic conglomerate Ayala Corporation.

The size of the deal was not disclosed, but it is understood that the firm originally bought the offices for approximately $100 million, and this exit would give Apollo better than value-added returns. Indeed, according to one of the underbidders, the exit could generate a 2x equity multiple for the fund.

The five office buildings, with a combined floor area of 1.6 million square feet, were built and mostly leased by the time Apollo took control of the assets in 2010. Today, they generate an annual net income of more than PHP1 billion (€17 million; $23 million). According to Philippines market experts, Bonifacio is primed to be the country’s second central business district in Manila, with occupational demand primarily coming from outsourcing requirements.

Once this deal is closed, Apollo will have no further assets in the Philippines. It inherited the offices through its acquisition of Citi Property Investors (CPI), as part of a $3.6 billion portfolio held in three opportunistic real estate funds, including a $1.29 billion pan-Asia fund. Once the sale of the offices is completed, the fund is understood to have only nine investments left.

With over $113 billion assets under management globally across all its platforms, Apollo’s global real estate platform had grown to approximately $8.1 billion as of last year. Currently, most of those assets are understood to be in North America and Europe, with Asia taking up less than $1 billion of its real estate portfolio.