Apollo has agreed to invest $1.34bn (€1.2bn) to take an approximate two-thirds stake in a new $2bn joint venture created with US residential real estate investment trust (REIT) UDR.
UDR will retain a one-third interest in the partnership which will hold a portfolio of 19 multifamily communities comprising 7,059 apartment homes.
UDR will continue to operate and manage the assets, while retaining an option to repurchase Apollo’s stake after five years.
The REIT plans to use transaction proceeds to reduce debt and fund higher-growth assets.
Jamshid Ehsani, Apollo partner, said: “We are proud to serve as a capital partner to UDR. UDR is a recognised leader in the real estate industry with a track record of operational excellence and disciplined capital allocation.
“This transaction provides a cost-efficient capital solution tailored to UDR’s needs. Apollo’s investment further demonstrates the ability of our High Grade Capital Solutions business to partner with and support leading companies around the world.”
Tom Toomey, UDR’s chairman, president and CEO, said: “Access to equity capital is one of UDR’s strategic priorities. With this transaction, we believe we will be positioned to take advantage of compelling opportunities in the marketplace while improving the quality of our wholly-owned portfolio and strengthening our balance sheet, all in an accretive manner.
“Our shareholders will benefit not only from the flexibility to move assets in and out of our newly established joint venture, but also from the ability to realise outsized value creation over time.”
Dave Bragg, UDR’s CFO, said: “UDR’s partnership with Apollo provides access to a new, low-cost permanent source of equity capital. We expect the transaction to be accretive to earnings and intend to deploy the proceeds into higher-growth assets and other general corporate purposes.
“Proceeds will also be utilised for debt reduction, strengthening the balance sheet at an opportune moment.”
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