To those on the outside, there was an element of déjà vu about Apollo Global Real Estate’s filing with the Securities and Exchange Commission (SEC) in July, punching the ticket for the launch of its first Asia real estate opportunity fund.
That is because news of AGRE Asia Pacific Real Estate already had been reported as long ago as March 2010 and was listed as being in the market by various data sources, including our Capital Watch section at the back of the magazine. The New York-based firm declined to comment but, according to sources familiar with its activities, the fund was never officially launched – until now.
In November 2010, when Apollo acquired Citigroup’s real estate investment platform, Citi Property Investors, inheriting its $1.29 billion CPI Capital Partners Asia Pacific fund in the process, the fund’s LPs persuaded Apollo to shelve its new fund plans in favour of managing and harvesting CPI’s assets. Apollo has since exited from two-thirds of those assets and has maintained a comparatively healthy performance for a fund closed in 2007. It is thought to be projecting an IRR of around 13 percent for that vehicle, and that has encouraged investors to embrace the firm’s ambitions to hit the fundraising trail again.
AGRE Asia Pacific Real Estate is expected to corral equity commitments of $600 million, $100 million more than Apollo’s original plan to raise $500 million. That extra amount is a reflection of its current investment strategy, which is grounded in targeting growing distress in Asia’s real estate debt markets, particularly non-performing senior loans with healthy, stabilised collateral.
Debt is an area of expertise for Apollo’s Asia head Grant Kelley, who previously was in charge of Colony Capital’s Asia division. The current thesis is that debt can be used as a conduit to obtaining control of the underlying assets. Expect Australia, Japan and Korea to figure heavily, especially Australia. Development, long the strategy of choice for much of Asia, will remain part of the remit as well, PERE understands, predominantly in China although India also is in the brief.
China offers another talking point for market observers, as it appears to be the subject of a volte-face by Apollo. The platform saw two departures from the country when it appeared China would not figure prominently in Apollo’s investment plans. Former CPI China head Wendy Yao left for Irish real estate company Treasury Holdings as Apollo inked its takeover of CPI. Yao was followed out the door by investment executive Helen Yang as the newly-acquired platform’s reach in China shrank.
Now, however, there is a desire among the firm’s investors to include China in its investing programme, which has led to a new team being built. Leo Chen has joined from Colony Capital and Ian Cohen from Morgan Stanley Real Estate Investing, both as associates, in the past months.
News of Apollo’s first Asia real estate fund turned out to be something of a damp squib but, more than two years later, the vehicle officially has launched. Observers can now await the fireworks for real this time.