The attempt by New York-based private equity firm Apollo Global Management to establish itself as a force in Asian private equity real estate has all but fizzled out, just four years after it began.
Following last month’s resignation of regional head Grant Kelley, Apollo has decided to retire his role rather than replace him. In addition, the firm’s maiden pan-Asia fund, AGRE Asia Pacific Real Estate, has been discontinued, pointing to a deeper retrenchment by the firm in Asia.
Today, a bench of six mostly asset management professionals are winding down the legacy assets of CPI Capital Partners Asia Pacific, a $1.29 billion pan-Asia opportunity fund inherited in Apollo’s takeover of Citi Property Investors (CPI), Citigroup’s former property platform. With just nine investments of the original 32 left to harvest, their responsibilities are diminishing as well.
Today, the most senior real estate professionals left on the Asia platform – head of asset management Peter Succoso and principals Suresh Maramreddy and Ian Cohen – now report to global chief operating officer Stuart Rothstein and the firm’s senior-most Hong Kong-based partner, private equity-focused Steve Martinez.
Going forward, Apollo is understood to want to continue to invest in Asian real estate deals. However, such opportunities now will be transacted on a case-by-case basis and there is no dedicated capital source within the firm.
Observers blame Apollo’s false start in Asia on the personnel situation it faced as it was completing the acquisition of CPI in 2010. Months before completing the deal, the firm hired Kelley, who brought with him a seven-strong team from a start-up business called Holdfast Capital, which he created after leaving Colony Capital two years earlier.
Kelley’s original strategy of investing in the established Asian markets of Japan, Korea and Australia saw departures among the CPI team, as many of them were focused on China, India and other emerging Asian markets. Departures included previous regional head Ravi Hansoty, chief financial officer Marco Ho, China head Wendy Yao and China investment director Helen Yang.
Whether down to a dire capital-raising market at that time or because prospective investors requested that China be reintroduced in Apollo’s investing plans, a maiden fund reported shortly after Kelley joined was not followed by news of capital closings. Then, in the summer of 2012, a fund with the same name as the original was registered with the US Securities and Exchange Commission. Analysis revealed that, again, established Asia figured prominently in the strategy. This time, however, so did the region’s emerging markets, including previously omitted China, where the CPI team had become depleted.
In a twist of fate, Cohen’s hire from Morgan Stanley Real Estate Investing in 2012 is believed to have led to Apollo’s only Asian real estate investment since the platform was created – a preferred equity investment in a retail development in China. Whether Apollo ramps up once again in the region depends largely on whether its skeletal team can source similarly opportunistic deals. In the meantime, the focus of its real estate team lies elsewhere.