Apollo lands $8bn Citi Property Investors

Leon Black’s Apollo Global Management has been chosen as the preferred bidder to take control of Citi Property Investors, the real estate investment arm of Citigroup.

Apollo Global Management, the New York-based private equity firm led by Leon Black, has won the race to buy Citi Property Investors (CPI), the real estate arm of US bank Citigroup.

According to PERE sources, Apollo was selected last week from a final shortlist, which also included Macquarie Capital. The decision by Citi Alternative Investments, the Citi division which controls CPI, is expected to be announced within a month and the deal is due to conclude before the end of the second quarter.

It brings the curtain down on a sale process spanning the best part of eight months. The platform was put up for sale last August and a fierce bidding competition ensued. Other firms to have previously bid on the platform included ING Real Estate Investment Management and John Kukral’s Northwood Investors.

Citi also is selling its private equity fund of funds group, Citi Private Equity.

It is not thought any material sum of money will be paid by Apollo for the platform, however Citi would benefit from an earn-out structure agreed between the two parties which will enable the bank to benefit, in the short-term, from future positive Apollo performances.

The tie-up sees Apollo’s 28-staff strong platform, led by ex-CPI head Joe Azrack, inherit a team of approximately 80 staff across offices in Europe, North America and Asia. CPI currently has approximately $8 billion of assets under management across three real estate funds, one in each region.

Apollo was chosen after garnering enough support from the LPs from each of CPI’s funds as well as from Citi itself, which is also an investor in the funds as well as the owner of the platform. The LPs interests in the process were represented by Park Hill Group, the Blackstone-owned placement business.

It is believed that Apollo has successfully addressed a key LP concern about how CPI staff would be integrated into the business – an issue that had led the sales process to drag on further than its originally intended final decision date of January.

The details of how Apollo will integrate the staff of the two organisations remains unclear, however former Colony Capital Asia head Grant Kelley is expected to lead its Asia platform. Kelley and his seven-strong team joined Apollo last month after merging his Holdfast Capital start-up business. A debut Asia opportunity fund, to focus on distressed situations, is currently in the works.

Neither Apollo nor CPI were available for comment.