Apollo REIT Could Dissolve After Selling $9B Loan Portfolio To Insurance Subsidiary
A publicly traded real estate lender managed by Apollo Global Management is selling its $9B loan portfolio to another of the private equity giant's subsidiaries — leaving the future of the REIT uncertain.
Apollo Commercial Real Estate Finance Inc., a REIT trading under the ticker ARI, reached an agreement to sell the loan portfolio to Athene Holding Ltd., an insurance company Apollo acquired four years ago.
The sale price equates to 99.7% of the value of ARI's loan commitments, and it represents around a 23% premium to the company's recent stock price, Apollo said in an investor presentation on the deal.
"Like many peers in the sector, ARI’s common stock has traded below book value for an extended period and has not fully reflected the intrinsic value of the Company’s loan portfolio," ARI CEO Stuart Rothstein said in a statement.
"At the same time, attractive yield-generating assets such as ARI’s are highly valued, in short supply, and continue to attract strong demand from the institutional market," he added.
The sale is expected to close in the second quarter. It excludes two loans totaling $146M that ARI expects to be repaid before closing.
Following the sale, ARI would have $1.4B in cash, and it would retain its equity ownership in a handful of properties totaling $466M. Those properties are The Mayflower Hotel in D.C., the Courtland Grand Hotel in Atlanta, a newly built 591-unit multifamily tower in Brooklyn, and two former Steward Health Care hospitals it took over last year in Massachusetts.
ARI's executives and board plan to evaluate potential strategies for the company after the sale, including potential merger and acquisition opportunities.
If no new asset strategy or M&A transaction is reached by year-end, the release states that Apollo would recommend that ARI's board explore strategic alternatives, including a dissolution of the company.
Eastdil Secured is serving as Athene's financial adviser on the deal, it said in a release, and Sidley Austin is its legal adviser. BofA Securities is ARI's financial adviser, and Clifford Chance is its legal adviser.
One of the world's largest private equity firms, Apollo Global Management has been active in the commercial real estate market, ranking as one of the top buyers of multifamily and industrial properties in the U.S. last year.
Apollo acquired Athene in January 2022 in an $11B all-stock deal, after previously holding a large stake in the insurance company.
Insurance companies are a major source of capital to the commercial real estate sector, and private equity firms such as Apollo have increasingly invested in insurance firms as a way to increase their CRE holdings. As of 2023, private equity firms held nearly $800B of insurance assets in the U.S., twice as much as they held five years before.
