Apollo Siblings to Merge in $600M-Plus Deal

By Scott Baltic, Contributing Editor

ARI Chairman Jeffrey M. Gault

New York—The big REIT deals keep coming, and this time, it’s an indirect subsidiary of Apollo Global Management looking to merge with another such affiliate. Apollo Commercial Real Estate Finance Inc. (ARI) has agreed to acquire Apollo Residential Mortgage Inc. (AMTG) for roughly $641 million, the two companies announced Friday.

ARI will acquire AMTG for cash and shares of ARI common stock, which would value AMTG at about $14.59 per share of common stock, a price that reportedly represents a premium of about 44 percent over the closing share price on the previous day. The deal has been approved by the boards of both companies, but remains subject to shareholder approval and to a 35-day period in which AMTG  may evaluate alternative proposals from third parties. Assuming the transaction goes through, it’s expected to closed in the second or third quarter.

Key to this deal from the CRE side is how ARI plans to redeploy its new capital.

“ARI continues to see compelling investment opportunities in our core commercial real estate lending business,” ARI chairman Jeffrey M. Gault said in a prepared statement. “Upon successful closure of the AMTG transaction, ARI intends to redeploy the capital from the transaction to fund ARI’s current investment pipeline and pursue attractive new commercial real estate debt opportunities expected to drive earnings growth.”

Significantly perhaps, the announcement emphasized this point, noting that “ARI’s management believes there is significant opportunity to deploy capital into commercial real estate debt investments at attractive returns…. ARI has a robust pipeline of commercial real estate debt investments with attractive risk-adjusted returns in which to invest the incremental capital from the acquisition, in addition to $86 million of fundings for previously closed transactions that are scheduled throughout 2016.”

ARI declined to provide Commercial Property Executive with further information about its plans.

Last August, the news broke that Apollo Global Management would take the majority interest in new firm AR Global Investments, more than doubling its CRE AUM (to about $27 billion) at one stroke.

Later that month, a fund sponsored by AGM paid $103 million for a 700,000-square-foot portfolio sold by Duke Realty Corp., consisting of six office properties in Ohio.