REAL ESTATE – The Pennsylvania Public School Employees Retirement System has chosen to invest up to $150m (€116m) into a new real estate finance company being created by Apollo Real Estate Advisors.
The name of the new company is Apollo Real Estate Finance Corporation. The commitment made by the pension fund can’t exceed 25% of the total committed capital to the company.
Pennsylvania Public School looks at this investment as a unique one in the real estate industry. There aren’t too many new real estate finance companies being created in the marketplace.
Apollo is able to pull this off by having more than 40 investment professionals with significant real estate investment and capital market expertise. This has given them a large network of industry relationships and can get to deals before anyone else is aware of them.
Pennsylvania Public School sees high returns for its investment in Apollo Real Estate Finance. It projects this to be a gross IRR in the range of 16% to 18%. The majority of the return will be generated through current income on the investment portfolio.
The investment strategy for Apollo Real Estate Finance will be in writing loans for assets in transition. This means properties that have leasing issues or that requires redevelopment, re-tenanting or repositioning.
Look for Apollo to consider deals in the major metropolitan markets around the country. This will include the four main property types of office, industrial, retail and apartments.
Apollo will be investing through a variety of real estate financing vehicles. Some of these are whole loans, mezzanine debt, preferred equity, B-notes, strategic joint ventures and corporate real estate. The deals could be on individual assets or portfolio transactions.
Apollo has a strong track record delivering solid returns for its investors. Through its previous 11 closed-ended investment vehicles, the fund manager has invested in excess of $5bn in real estate and produced a projected aggregate gross realized and unrealized IRR of 18.8%.