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Apollo’s second RE fund draws $354m

The firm continued to post losses in real estate, but executives spoke of opportunities in Europe and the US.

Apollo Global Management has raised $354 million for Apollo U.S. Real Estate Fund II, according to the firm’s third-quarter earnings presentation.

The opportunistic fund was launched in December, according to filings with the US Securities and Exchange Commission. Apollo raised more than half of that capital in the second and third quarters, according to its earnings presentations.

The second fund had $179 million invested as of September 30. One of the New York-based firm’s recent investments out of the fund was an $89.6 million purchase of an office and retail center in an Atlanta suburb in September.

Apollo manages $7.2 billion through its real estate funds with about $4.5 billion of that capital invested. In the last quarter, the firm’s real estate arm deployed capital through commercial mortgage lending activity and equity investments in hotel and office properties, according to the investor presentation.

Apollo co-founder Josh Harris said on an investor call that he sees fully-valued core markets in some parts of the US, leading the firm to seek deals in secondary markets. He also said commercial real estate in Europe presents opportunities.

“Large portfolios of assets are being sold at discounted cap rates because of some of the regulations that are hitting the banks,” he said. “As a result of being able to buy in bulk we’re able to get discount cap rates.”

Apollo’s third-quarter profit more than tripled after it increased its stake in annuity seller Athene Holding. The firm’s gains stood out among third-quarter losses from private equity peers The Blackstone Group, The Carlyle Group and Kohlberg Kravis Roberts.

In real estate, Apollo had a $768 million loss in economic net income, compared with a $2.9 billion loss in the third quarter of 2014. Its third-quarter real estate assets under management rose to $10.8 billion, up from $9.2 billion in the same period last year. Overall, the firm manages $161.8 billion in assets.