Apollo Global Management experienced considerable growth in the first quarter of 2011, as total revenue jumped 211 percent from the same period one year ago.
In its first quarterly report since going public via a $565 million initial public offering earlier this year, the New York-based alternative asset manager firm said revenue grew to $696.3 million, driven by $558.8 million of carried interest income during the quarter. That carried interest figure also saw a surge, up 414 percent from the same quarter last year.
During its earnings call on Thursday, Apollo revealed that total revenues from its real estate operation reached $9.3 million—a $7.7 million surge from $1.6 million one year ago—due to increased management fees following its acquisition of Citi Property Investors (CPI) in November 2010. However, the firm also acknowledged that its CPI acquisition led to higher expenses for its real estate segment, causing an economic net loss of $5.4 million for the first quarter, compared to a $3.8 million loss for the same period one year ago.
Still, Apollo's efforts to build its global real estate team have led to substantial growth in its real estate assets under management. As of March 31, assets under management had reached $6.5 billion, some two-and-a-half times greater than the $2.5 billion it reported one year ago. Helping that figure, in addition to the acquisition of CPI, was the launch of AGRE US Real Estate Fund, a closed-end private investment fund targeting real estate-related investments principally in the US. The fund held an initial closing on $108 million in equity in January 2011.
Whereas its real estate business saw an economic net loss for the quarter, Apollo’s private equity segment reported quarterly net income of $287.4 million, a significant jump from $46.6 million last year. That surge in income was due primarily to a $371.8 million increase in carried interest income.
According to the company, carried interest income from Apollo’s private equity business was $441.7 million for the first quarter of 2011, which included unrealized gains of $323.1 million from appreciation of Fund IV, Fund VI and Fund VII investments, as well as $118.6 million in realized gains driven by the sale of certain Fund VII investments. Uncalled private equity commitments, or “dry powder,” totaled $10.2 billion at the end of the quarter.
In terms of returns, Fund VII generated an annual net IRR of 32 percent since its inception in 2008. Fund VI, which began investing in 2006, generated an annual net IRR of 12 percent, and Fund V generated an annual net IRR of 45 percent since its inception in 2001. Finally, Fund IV generated an annual net IRR of 9 percent since its inception in 1998.
In terms of the overall business, Apollo reported total net income of $390.2 million for the first quarter, up 406 percent from one year ago. According to the firm, the increase was driven by Apollo’s Incentive Business, which reported $361.9 million of net income for the first quarter. That was an increase of $296.2 million compared to the first quarter of 2010, resulting largely from higher carried interest income in Apollo’s private equity segment. Apollo’s Management Business reported $28.3 million of economic net income for the first quarter of 2011, an increase of $16.9 million compared to the first quarter of 2010.