Friday Letter Clash of the Apollos

Leon Black’s Apollo Global Management has been looking to go large in the real estate space, and it won’t be with Apollo Real Estate Advisors. 

Earlier this week, a Purchase, New York-based private equity real estate firm took control of Canada’s largest retailer, Hudson’s Bay Company. The firm was co-founded two years ago by Apollo Real Estate Advisors senior partners Bill Mack and Lee Neibart.

The activities of Mack and Neibart via NRDC Equity Partners becomes all the more interesting now that is reporting Leon Black has been considering taking private equity firm Apollo Global Management back into real estate some 15 years after co-founding Apollo Real Estate Advisors with Mack. But of course it does raise that all important question: just what does the future hold for Apollo Real Estate? Perhaps more superficially, which Apollo will get to keep the name?

At the start of the year, Black’s Apollo was scouting for someone to run a new real estate operation. A source familiar with these plans says Apollo Global (the new name of the parent entity that controls several of the Black-led firm’s operations) does not see Apollo Real Estate as the right real estate platform for its global ambitions.

Apollo Real Estate is widely admired. Led by Mack, Neibart, John Jacobson, Richard Mack, Stuart Koenig and William Benjamin (in Europe), it has a long history of investing successfully in the US and more recently expanding operations in places such as India and Turkey.

But according to one source, a key issue is whether Apollo Real Estate has proved able or inclined to grow as large as Black had envisioned 15 years ago. Measured on capital raised for opportunistic investing in the last five years, the firm falls outside of the top 10 largest private equity real estate firms in the world. The PERE 30, published in PERE magazine in May, ranked Apollo 14th in the world having raised $5.4 billion since 2003. The Blackstone Group, Morgan Stanley Real Estate, Tishman Speyer, Goldman Sachs and Colony Capital have raised twice as much in the same period.

The case of Apollo vs. Apollo comes to the fore ahead of plans for Apollo Global Management to transfer its shares from a private Goldman Sachs-run exchange to the New York Stock Exchange.

In an interview with PERE magazine in March 2006, Neibart said: “In 1993 we saw that the opportunities were unlimited.”

Perhaps Black has come to the same conclusion in 2008.