Apollo Global Management is moving into retail in a big way, acquiring a majority interest in AR Global Investments, which will in turn own a majority of the assets of retail real estate asset management firm AR Capital, said Charles Zehren, Apollo spokesman, in an e-mail.
AR Global is a new company formed as part of this transaction.
AR Global will more than double Apollo's real estate assets under management to $27 billion when the deal is finalized. When the deal closes, Apollo’s total assets under management will increase 12% to $182 billion from $162.5 billion as of June 30. Its total retail business will grow to 20% from 12% of the firm’s total assets under management.
Apollo will pay $378 million upfront plus future payments contingent on performance. The initial payment will be split between $200 million in cash and $178 million of Apollo equity. The deal is expected to close in 60 days, subject to regulatory and other customary closing conditions.
At the same time, the alternative investment management firm is acquiring RCS Capital, a wholesale distribution business for $25 million in cash. Apollo has also entered into a strategic relationship with RCS Capital's retail advice business Cetera Financial Group. Apollo will be buying $25 million in newly issued RCS preferred stock. The RCS deal is expected to close concurrent with the AR Global transaction.
“Apollo believes it will add meaningfully to the firm's long-term growth, while continuing to diversify the firm's AUM and distribution channels,” Apollo said in a news release.
AR Global will be governed by a new board of directors consisting of six Apollo executives, one of whom will be appointed chairman, and AR Capital's four partners. Apollo's board members consist of Josh Harris and Marc Rowan, Apollo co-founders; Anthony Civale, lead partner and chief operating officer of Apollo's credit business; Stephanie Drescher, global head of business development and investor relationship management; Martin Kelly, chief financial officer; and John Suydam, chief legal officer. AR Capital's four partners are Peter Budko, William Kahane, Nicholas Schorsch and Michael Weil.
Mr. Kahane, AR Capital's co-founder and head of real estate investments, will be CEO of AR Global pending a search for a new CEO at AR Capital, after which Mr. Kahane will also serve as chief investment officer of AR Global's real estate business. Mr. Schorsch will be senior managing director of AR Global.
