Apollo’s Trophy Property work rewarded with re-ups

Apollo Global Management’s rescue job on a development fund for Chinese residential-led projects has officially ended with its investors seeing three-quarters of their money returned, PERE can confirm.

As forecast, the approximately 100 investors in the Trophy Property Development Fund received $725 million of its eventual $950 million equity corpus, reflecting a return of 76 cents on the dollar. While that represents a loss, at one stage investors ranging from US pension funds to wealthy individuals were thought to have been eyeing just a 0.4x multiple.

The vehicle, raised in 2008 by Hong Kong-based hedge fund turned private equity real estate firm Winnington Capital, was once talk of the city as the firm’s founder Kenneth Hung teamed up with his brother-in-law, property magnate Vincent Lo, to develop five mixed-used developments in mainland China. When the plans unravelled owing to reasons including escalating costs and timing issues, the two fell out and various intermediaries were required to reach a solution for both sides, as well as the investors in the fund.

This is where Venator Real Estate Capital Partners came in. The business of Asia property veteran Philip Mintz was instrumental in returning value to the fund’s investors, employing various measures including asset swaps and sell-backs. His firm’s work in part convinced Apollo Global Management, the US private equity firm led by Leon Black, to acquire Venator and install Mintz as his general in the East to revive its own property investing ambitions in the region.

Black’s faith was vindicated as investors in Trophy followed Mintz and friends into Apollo Asia Real Estate Fund, the firm’s first opportunistic property fund in the region. Three of the investors opted to re-up, including US public pension Michigan Department of Treasury and Swiss alternatives management Partners Group. These investors account for around $175 million, or 30 percent of the fund’s $588 million total equity – a meaningful percentage of re-ups from a vehicle once considered a lost cause. Michigan’s commitment was $75 million.

Apollo’s Asia investment program is today a far broader offering than that of Winnington’s Trophy fund. For one, it has investments in India and Thailand, as well as China. Among the outlays was a $165 million investment made at the turn of the year in companies controlling the MahaNakhon Tower in Bangkok, Thailand’s biggest skyscraper, in a deal completed in partnership with Goldman Sachs’ Special Situations Group. Approximately $500 million has been invested in the last 12 months by Mintz’s platform, including co-investments, thought to be approximately 50 percent of the fund and associated vehicle’s total equity.

Indications so far are that the vehicle is performing to its 20 percent IRR and 2x equity multiple target. Should it conclude at that performance, Michigan, Partners and the other investor that kept faith will be rewarded for their loyalty. And Mintz and Apollo will be hoping those Trophy investors which stayed away, and others besides, will think more deeply about any sequel offerings when the time comes.

Apollo declined to comment.