Private capital giant Apollo Global has agreed to buy a real estate investment group as it seeks to compete more aggressively with rivals including Blackstone, KKR and Brookfield.
New York-based Apollo has said it will purchase Bridge Investment Group for $1.5bn in stock, a deal that will significantly expand its real estate assets, an area where the credit and buyout investment titan has lagged behind its rivals. Apollo currently manages $77bn in real estate debt and equity investments, just a fraction of the hundreds of billions in assets that both Blackstone and Brookfield oversee.
Apollo has targeted New York-listed Bridge, which manages about $50bn in assets, because of its deep ties to independent wealth managers and its presence in niche markets such as property loans and those dedicated to buying second-hand fund stakes. Bridge manages billions in assets for independent wealth managers that Apollo and others have earmarked as fuelling their next wave of asset growth.
The deal also comes as many investment groups predict a bottoming in property valuations after the pandemic and a 2022 surge in interest rates soured many investors’ interest in the sector. Apollo will use Bridge to increase its dealmaking in the property sector, bolstering a formidable new competitor.
The acquisition was “highly aligned with Apollo’s strategic focus on expanding our origination base in areas of our business that are growing but not yet at scale”, said David Sambur, the Apollo executive behind the deal, in a statement.
Monday’s tie-up comes amid a wave of merger and acquisition activity in the alternative assets sector as large listed groups like Apollo diversify their investments and smaller rivals sell out.
This year, Apollo struck a deal to purchase Argo Infrastructure Partners, a specialist manager with $6bn in assets. Meanwhile, rival Ares last year agreed to purchase the international arm of real estate investment manager GLP Capital Partners for up to $5.2bn, giving it a larger footprint in industrial and data centre properties.
Apollo chief executive Marc Rowan has also focused on building investment capacity in areas such as property to then originate new loans that can feed its massive insurance operations. He has said Apollo’s growth is limited primarily by its ability to underwrite new deals and bought a number of companies to bolster that ability, including Credit Suisse’s structured products unit. Bridge currently has more than 300 investors sourcing property bets.
Apollo is using its stock, which has soared nearly 40 per cent over the past year, to purchase Bridge, underscoring how listed private capital groups can use their shares as an appealing currency to strike acquisitions.
Bridge, which went public in 2021, has seen its shares fall by about half since that time. But Apollo is paying $11.50 per share in its stock, equating to a more than 40 per cent premium from Bridge’s closing trading price on Friday.