Commercial Real Estate

A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands. Some REITs engage in financing real estate. The law providing for REITs was enacted by the U.S. Congress in 1960.[1] The law was intended to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.[2] REITs are strong income vehicles because, to avoid incurring liability for U.S. Federal income tax, REITs generally must pay out an amount equal to at least 90 percent of their taxable income in the form of dividends to shareholders.[3]

REITs can be publicly traded on major exchanges, public but non-listed, or private.[3] The two main types of REITs are equity REITs[4] and mortgage REITs (mREITs).[5] In November 2014, equity REITs were recognized as a distinct asset class[6] in the Global Industry Classification Standard by S&P Dow Jones Indices and MSCI. The key statistics to examine the financial position and operation of a REIT are net asset value (NAV), funds from operations (FFO), and adjusted funds from operations (AFFO).[citation needed]

Contents

• 1 History
  • 1.1 Creation
  • 1.2 Evolution
• 2 Africa
  • 2.1 Kenya
  • 2.2 Ghana
  • 2.3 Nigeria
  • 2.4 South Africa
• 3 Asia
  • 3.1 Australia
  • 3.2 Hong Kong
  • 3.3 India
  • 3.4 Japan
  • 3.5 Malaysia
  • 3.6 Pakistan
  • 3.7 Philippines
  • 3.8 Singapore
  • 3.9 Thailand
  • 3.10 United Arab Emirates
  • 3.11 Saudi Arabia
• 4 Europe
  • 4.1 Belgium
  • 4.2 Bulgaria
  • 4.3 Finland
  • 4.4 France
  • 4.5 Germany
  • 4.6 Ireland
  • 4.7 United Kingdom
  • 4.8 Spain
• 5 North America
  • 5.1 Canada
  • 5.2 Mexico
  • 5.3 United States
    • 5.3.1 History
    • 5.3.2 Legislation
    • 5.3.3 Structure
• 6 South America
  • 6.1 Brazil
• 7 See also
• 8 References
• 9 External links

History[edit]

Creation[edit]

REITs were created in the United States after President Dwight D. Eisenhower signed Public Law 86-779, sometimes called the Cigar Excise Tax Extension of 1960.[7][8] The law was enacted to give all investors the opportunity to invest in large-scale, diversified portfolios of income-producing real estate in the same way they typically invest in other asset classes – through the purchase and sale of liquid securities. The first REIT was American Realty Trust founded by Thomas J. Broyhill, cousin of Virginia U.S. Congressmen Joel Broyhill in 1961[9] who pushed for the creation under Eisenhower.

Since then, more than 30 countries around the world have established REIT regimes, with more countries in the works. The spread of the REIT approach to real estate investment around the world has also increased awareness and acceptance of investing in global real estate securities.[10]

A comprehensive index for the REIT and global listed property market is the FTSE EPRA/Nareit Global Real Estate Index Series,[11] which was created jointly in October 2001 by the index provider FTSE Group, Nareit and the European Public Real Estate Association (EPRA).

As of December 2017, the global index included 477 stock exchange listed real estate companies from 35 countries representing an equity market capitalization of about $2 trillion (with approximately 78% of that total from REITs).[12]

Evolution[edit]

Around the time of their creation in 1960, the first REITs primarily consisted of mortgage companies. The industry experienced significant expansion in the late 1960s and early 1970s. The growth primarily resulted from the increased use of mREITs in land development and construction deals. The Tax Reform Act of 1976 authorized REITs to be established as corporations in addition to business trusts.

The Tax Reform Act of 1986 also impacted REITs. The legislation included new rules designed to prevent taxpayers from using partnerships to shelter their earnings from other sources. Three years later, REITs witnessed significant losses in the stock market.

Retail REIT Taubman Centers Inc. launched the modern era of REITs in 1992 with its creation of the UPREIT. In an UPREIT, the parties of an existing partnership and a REIT become partners in a new “operating partnership.” The REIT typically is the general partner and the majority owner of the operating partnership units, and the partners who contributed properties have the right to exchange their operating partnership units for REIT shares or cash.The industry struggled beginning in 2007 as the global financial crisis kicked in. In response to the global credit crisis, listed REITs responded by deleveraging (paying off debt) and re-equitizing (selling stock to get cash) their balance sheets. Listed REITs and REOCs raised $37.5 billion in 91 secondary equity offerings, nine IPOs and 37 unsecured debt offerings as investors continued to act favorably to companies strengthening their balance sheets following the credit crisis.

For the five-year period ending Dec. 31, 2017, all stock exchange listed REITs posted total returns of 60.29%, with compound annual total returns of 9.90%. Stock exchange listed equity REITs had total returns of 59.85% during that same period, with compound annual total returns of 9.83%. The S&P 500 had total returns of 108.14% during that same period, with compound annual total returns of 15.79%. Economic climates characterized by rising interest rates have a detrimental effect on REIT shares. The dividends paid by REITs look less attractive when compared to bonds that have increasing coupon rates. Also, when investors shy away from REITs, it makes it difficult for management to raise additional funds to acquire more property.[13]

Africa[edit]

Kenya[edit]

The first REIT in Kenya was approved by the Capital Markets Authority in October 2015. The REIT is issued by Stanlib Kenya under the name Fahari I-Reit scheme. The REIT scheme will provide unit holders stable cash inflows from the income generating real estate properties. The unrestricted IPO will be listed on the main investment market segment of the Nairobi Securities Exchange.[14]

Ghana[edit]

REITs have been in existence in Ghana since 1994. The Home Finance Company, now HFC Bank, established the first REIT in Ghana in August 1994. HFC Bank has been at the forefront of mortgage financing in Ghana since 1993. It has used various collective investment schemes as well as corporate bonds to finance its mortgage lending activities. Collective Investment Schemes, of which REITs are a part, are regulated by the Securities and Exchange Commission of Ghana.

Nigeria[edit]

In 2007, the Securities and Exchange Commission (SEC) issued the first set of guidelines for the registration and issuance of requirements for the operation of REITs in Nigeria as detailed in the Investment and Securities Act (ISA). The first REIT, the N50 billion Union Homes Hybrid Real Estate Investment Trust, was launched in September 2008. In November 2015 there were three listed REITS on the Nigerian Stock Exchange:[15] Skye Shelter Fund, Union Home and UPDC. A Haldane McCall REIT did not list after failing to reach the minimum 50% subscription in a January 2015 initial public offer amid poor market prospects.[16]

South Africa[edit]

By October 2015 there were 33 South African REITS and three non-South African REITs listed on the Johannesburg Stock Exchange, according to the SA REIT Association,[17] which said market capitalization was more than R455 billion.

Asia[edit]

Australia[edit]

Main article: Australian real estate investment trust

The REIT concept was launched in Australia in 1971. General Property Trust was the first Australian real estate investment trust (LPT) on the Australian stock exchanges (now the Australian Securities Exchange). REITs which are listed on an exchange were known as Listed Property Trusts (LPTs) until March 2008, distinguishing them from private REITs which are known in Australia as Unlisted Property Trusts. They have since been renamed Australian Real Estate Investment Trusts (A-REITs) in line with international practice.[18]

REITs have shown numerous benefits over direct investment including lower tax rates and increased liquidity. There are now more than 70 A-REITs listed on the ASX, with market capitalization in excess of A$100bn.[18]

Australia is also receiving growing recognition as having the world’s largest REITs market outside the United States. More than 12 percent of global listed property trusts can be found on the ASX.[19]

Hong Kong[edit]

REITs have been in existence in Hong Kong since 2005, when The Link REIT was launched by the Hong Kong Housing Authority on behalf of the Government. Since 2005, there have been 7 REIT listings as at July 2007, most of which, including Sunlight REIT have not enjoyed success because of low yield. Except for The Link and Regal Real Estate Investment Trust, share prices of all but one are significantly below initial public offering (IPO) price. Hong Kong issuers’ use of financial engineering (interest rate swaps) to improve initial yields has also been cited as having reduced investors’ interest[20]

As of July 2012 there are nine REITs listed with a total market capitalization of approximately €15 billion which amounts to almost 2% of the total global REIT market capitalization. Two out of the nine listed REITs are also included in the EPRA index, an index published by the European Public Real Estate Association (EPRA). The current top five REITs in Hong Kong are The Link REIT with a total market capitalization of €8 billion, Hui Xian REIT with a total market capitalization of €2.3 billion, Champion REIT with a total market capitalization of €1.8 billion, Fortune REIT with a total market capitalization of €1 billion and Regal Real Estate with a total market capitalization of €700 million.[21]

India[edit]

Main article: Business Trust in India

As of August 2014, India approved creation of real estate investment trusts in the country.[22] Indian REITs (country specific/generic version I-REITs) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate. The government and Securities and Exchange Board of India through various notifications is in the process of making it easier to invest in real estate in India directly and indirectly through foreign direct investment, through listed real estate companies and mutual funds. In the budget of 2014, finance minister Arun Jaitley has introduced a law for setting up of REITs.[23]

China

China is one of countries that motivated and interested to approve creation of real estate investment trusts.

Japan[edit]

Japan is one of a handful of countries in Asia with REIT legislation (other countries/markets include Hong Kong, Singapore, Malaysia, Taiwan and Korea), which permitted their establishment in December 2001. J-REIT securities are traded on the Tokyo Stock Exchange, and most service providers of the J-REITs are Japanese real estate companies, Japanese conglomerates and foreign investment banks.[citation needed]

Since the burst of the real estate bubble in 1990, property prices in Japan have seen steady drops through 2004, with some signs of price stabilization and possibly price increase in 2005 and 2006. Some see J-REITs as a way to increase investment in the real estate market, although notable increases in asset values have not yet been realized.[citation needed]

A J-REIT (a listed real estate investment trust) is strictly regulated under the Law concerning Investment Trusts and Investment Companies (LITIC) and established as an investment company under the LITIC.

In addition to REITs, Japanese law also provides for a parallel system of special purpose companies which can be used for the securitization of particular properties on the private placement basis

Malaysia[edit]

The Bursa Malaysia (www.bursamalaysia.com) has 18 REIT listed with five Islamic REITS (shariah compliant – according to Islamic investment compliance).

Pakistan[edit]

The Securities and Exchange Commission of Pakistan is in the process of implementing a REIT regulatory framework that will allow full foreign ownership, free movement of capital and unrestricted repatriation of profits. It will curb speculation in Pakistani real estate markets and gives access to small investors who want to diversify into real estate. The Securities and Exchange Commission of Pakistan is proposing a regulatory framework similar to that of Singapore and Hong Kong.[citation needed]

The Securities and Exchange Commission of Pakistan expected that about six REITs would be licensed within the first year, mainly large asset management companies. Pakistan has seen an outflow of investments by foreign real estate development companies, mostly based in Malaysia and Dubai.[24]

SECP has issued licenses to four parties namely, Arif Habib REIT Management Company, AKD REIT Management Company, Eden Developers REIT Management Company and SB Global REIT Management Company.

Philippines[edit]

REITs in the Philippines have been available to the public after the Real Estate Investment Trust Act of 2009 (RA 9856) passed into law on December 17, 2009. Its Implementing Rules and Regulations were approved by the Securities and Exchange Commission in May 2010. However, it failed to attract investors due to its restrictive tax policies and high friction cost.[25]

Singapore[edit]

Commonly referred to as S-REITs, there are 31 REITs listed on the Singapore Exchange, with the latest REIT, Cromwell European REIT, listed on 30 November 2017. The first one to be set up being CapitaMall Trust[26] in July 2002. They represent a range of property sectors including retail, office, industrial, hospitality and residential. S-REITs hold a variety of properties in countries including Japan, China, Indonesia and Hong Kong, in addition to local properties.[27][28] In recent years, foreign assets listing on the Singapore Exchange has grown to overtake those traditional listing with local assets.

S-REITs are regulated as Collective Investment Schemes under the Monetary Authority of Singapore’s Code on Collective Investment Schemes,[29] or alternatively as Business Trusts.[30]

Some of the regulations that S-REITs have to adhere to includes:[31]

• Maximum gearing ratio of 35%
• Annual valuation of its properties
• Restriction to certain types of investments the S-REITs can make
• Distribution of at least 90% of its taxable income

S-REITs benefit from tax advantaged status where the tax is payable only at the investor level and not at the REITs level. In addition to REITs, there are ten Business Trusts (“BTs”) (similar to REITs but may hold assets that are not conventional and are not subjected to stringent rules as compared to SREITs), and six Stapled Instruments (composed of a stapled Business Trust Unit and a REIT unit), which are listed on the Singapore Exchange. The total market capitalisation of the listed Trust on Singapore Exchange approximate SGD 100 billion (as at 30 Nov 17).

Thailand[edit]

The Securities and Exchange Commission created regulations to establish REITs as an investment vehicle in late 2012, opening the doors for the first REITs to be listed in 2013.[32]

United Arab Emirates[edit]

The REIT legislation was introduced by Dubai International Financial Centre (DIFC) to promote the development of REIT’s in the UAE by passing The Investment Trust Law No.5 that went into effect on August 6, 2006.[citation needed] This restricts all ‘true’ REIT structures to be domiciled within the DIFC. The first REIT license to be issued will be backed by Dubai Islamic Bank with a REIT named ‘Emirates REIT’ headed up by the dot com entrepreneur, Sylvain Vieujot.[citation needed]

The issue is that DIFC domiciled REITs cannot acquire non-Freezone assets within the Emirate of Dubai. The only federally approved Freezone within the UAE is the DIFC itself so therefore any properties outside this zone are purchasable by local Gulf (GCC) passport holders only. However, through a collaboration with local authorities, Emirates REIT has been able to establish a platform enabling it to purchase properties anywhere in Dubai given a minimum of 51% of local ownership of its shares. This allows the company to diversify its portfolio with an efficient revenue generating mix of properties in the prime locations of Dubai. Emirates REIT is the first REIT established within the United Arab Emirates. It is also the first REIT listed on NASDAQ Dubai and one of the five Shari’a compliant REIT in the world with a focus on Income-producing assets.

Emirates REIT has a portfolio of over USD 575.3 million consisting of a total of seven properties primarily focus on commercial and office space as of Dec 2014. It has had substantial growth over the last four years. Further information can be found at www.reit.ae

Saudi Arabia[edit]

Commonly referred to as Real Estate Investment Fund, the regulations were launched in July 2006 by the Saudi Capital Market Authority, The regulation did not allow the funds to be traded in the stock market and force all funds to be structured by a licensed Investment companies by CMA with a presence of a real estate developer and some other key persons.[33]

Europe[edit]

Over the past few years[when?] new REIT regimes have been introduced[by whom?] in Europe to meet the growing demand from investors for tax-efficient real-estate investment vehicles; existing REIT regimes in Europe have also been improved.[34][not in citation given] In Europe, the top-performing REIT and the largest publicly-traded real-estate company is Unibail-Rodamco SE.[35][36]

Belgium[edit]

Bernheim Comofi (now AG Real Estate) introduced Belgian REITs in 1995 with the constitution of Befimmo. Others REITs in Belgium include Cofinimmo and Ascensio.[37]

Bulgaria[edit]

REITs were introduced in Bulgaria in 2004 with the Special Purpose Investment Companies Act. They are pass-through entities for corporate income tax purposes (i.e., they are not subject to corporate income-tax), but are subject to numerous restrictions.[38]

Finland[edit]

Finnish REITs were established in 2010, when the Finnish parliament passed “the tax exemption law” (Laki eräiden asuntojen vuokraustoimintaa harjoittavien osakeyhtiöiden verohuojennuksesta, 299/2009).[39] Together with the “Law on Real Estate Funds” (Kiinteistörahastolaki, 1173/1997)[40] it enables the existence of tax-efficient residential REITs.

Qualifications

• REITs have to be established as public listed companies (julkinen osakeyhtiö, Oyj) for this specific purpose. When the REIT is established the minimum equity is 5M€ and it has to be distributed over five separate investors.
• Minimum holding period: five years.
• At least 80% of its assets have to be invested in residential real-estate.
• At least 80% of the REIT’s gross revenues must come from residential rental income.
• At least 90% of the REIT’s taxable income, excluding unrealised capital gains, has to be distributed to its shareholders through dividends.
• The corporation is income-tax-exempt, but the shareholders will have to pay individual income tax on the dividends.
• The largest individual shareholder may own less than 10% of company shares (maximum 30% till the end of 2013).

As of 2018[update] Orava Residential REIT is the only REIT in Finland.[41]

France[edit]

The French acronyms for REIT are SIIC or “SCPI” (which are two different kinds of real-estate trust). In France, Unibail-Rodamco is the largest SIIC.[42] Gecina is the second-largest publicly traded property company in France, with the third-highest asset value among European REITs.[43][44]

Germany[edit]

Germany planned to introduce German REITs (short, G-REITs) in order to create a new type of real estate investment vehicle. The Government feared that failing to introduce REITs in Germany would result in a significant loss of investment capital to other countries.[citation needed] Nonetheless there still is political resistance to these plans, especially from the Social Democratic Party).

A law concerning G-REITs was enacted 1 June 2007, effective retroactively to 1 January 2007:[45]

• REITs have to be established as corporations – “REIT-AG” or “REIT-Aktiengesellschaft”.
• At least 75% of its assets have to be invested in real estate.
• At least 75% of the G-REIT’s gross revenues must be real-estate related.
• At least 90% of the REIT’s taxable income has to be distributed to its shareholders through dividends.
• The corporation is income-tax-exempt, but the shareholders will have to pay individual income tax on the dividends.
• Some restrictions apply on establishing residential REITs

The German public real-estate sector accounts for 0.21% of the total global REIT market capitalization. Three out of the four G-REITS are represented in the EPRA index, an index managed by the European Public Real Estate Association (EPRA).[46]

Ireland[edit]

The 2013 Finance Act contained provisions for creating REIT structures in Ireland.[47]

United Kingdom[edit]

See also: English land law and Corporation Tax Act 2010

The legislation laying out the rules for REITs in the United Kingdom was enacted in the Finance Act 2006 (now see the Corporation Tax Act 2010 sections 518 to 609) and came into effect in January 2007 when nine UK property-companies converted to REIT status, including five FTSE 100 members at that time: British Land, Hammerson, Land Securities, Liberty International and Slough Estates (now known as “SEGRO”). The other four companies were Brixton (now known as “SEGRO”), Great Portland Estates, Primary Health Properties and Workspace Group.[48]

British REITs have to distribute 90% of their income to investors. They must be a close-ended investment trust and be UK-resident and publicly listed on a stock exchange recognised by the Financial Services Authority.[citation needed] The EPRA in Brussels each year publishes a breakdown of the UK REIT structure requirements.[49]

To support the introduction of REITs in the UK, several commercial property and financial-services companies formed the REITs and Quoted Property Group. Other key bodies involved include the London Stock Exchange the British Property Federation and Reita. The Reita campaign was launched on 16 August 2006 by the REITs and Quoted Property Group in order to provide a source of information on REITs, quoted property and related investment-funds. Reita aims to raise awareness and understanding of REITs and of investment in quoted property companies. It does this primarily through its portal www.reita.org, providing knowledge, education and tools for financial advisers and investors.[50]

Doug Naismith, managing director of European Personal Investments for Fidelity International, said[when?]: “As existing markets expand and REIT-like structures are introduced in more countries, we expect to see the overall market grow by some ten percent per annum over the next five years, taking the market to $1 trillion by 2010.”[51]

The Finance Act 2012 brought five main changes to the REIT regime in the UK:

• the abolition of the 2% entry charge to join the regime – this should make REITs more attractive due to reduced costs
• relaxation of the listing requirements – REITs can now be AIM quoted[52] (the London Stock Exchange’s international market for smaller growing companies) – making a listing more attractive due to reduced costs and greater flexibility
• a REIT now has a three-year grace period before having to comply with close company rules (a close company is a company under the control of five or fewer investors)
• a REIT will not be considered to be a close company if it can be made close by the inclusion of institutional investors (authorised unit trusts, OEICs, pension schemes, insurance companies and bodies which are sovereign immune) – this makes REITs attractive investment trusts[citation needed]
• the interest cover test of 1.25 times finance costs is not as onerous

Boyd Carson of Sapphire Capital Partners LLP commented that “the most important of these advantages is the ability for REITs to be listed on the AIM and the abolition of the 2% entry charge to the regime is also a significant step forward.”[53]

Spain[edit]

SOCIMI (Sociedad cotizada de Capital Inmobiliario)

North America[edit]

Canada[edit]

See also: List of REITs in Canada

Canadian REITs were established in 1993. They are required to be configured as trusts and are not taxed if they distribute their net taxable income to shareholders. REITs have been excluded from the income trust tax legislation passed in the 2007 budget by the Conservative government. Many Canadian REITs have limited liability.[54] On December 16, 2010, the Department of Finance proposed amendments to the rules defining “Qualifying REITs” for Canadian tax purposes. As a result, “Qualifying REITs” are exempt from the new entity-level, “specified investment flow-through” (SIFT) tax that all publicly traded income trusts and partnerships are paying as of January 1, 2011.[55]

Mexico[edit]

Mexico has passed legislation to allow for the equivalent of REITs, known as FIBRAs[56] (Fideicomiso de Infraestructura y Bienes Raíces),[57] to be traded in the Mexican Stock Exchange. Like REITs legislation in other countries, companies must qualify as a FIBRA by complying with the following rules:[58]

• at least 70% of assets must be invested in financing or owning of real estate assets, with the remaining amount invested in government-issued securities or debt-instrument mutual funds.[58]
• Acquired or developed real estate assets must be income generating and held for at least four years.[58]
• If shares, known as Certificados de Participación Inmobiliarios or CPIs, are issued privately, there must be more than 10 unrelated investors in the FIBRA.[58]
• The FIBRA must distribute 95% of annual profits to investors.[58]

The first Mexican REIT was launched in 2011 and is called FIBRA UNO.[59] According to the Wall Street Journal, Mexican REITs debuted in March 2011 “after government regulatory changes made the structure possible. Fibras offered investors an easy way to own Mexican real estate and pick up an attractive dividend at the same time. Like U.S. REITs, Fibras avoid paying corporate taxes as long as they distribute at least 95% of their income to shareholders as dividends.”[57]

United States[edit]

History[edit]

From 2008 to 2011, REITs faced challenges from both a slowing United States economy and the late-2000s financial crisis, which depressed share values by 40 to 70 percent in some cases.

Legislation[edit]

Under U.S. Federal income tax law, an REIT is “any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages” under Internal Revenue Code section 856.[60] The rules for federal income taxation of REITs are found primarily in Part II (sections 856 through 859) of Subchapter M of Chapter 1 of the Internal Revenue Code. Because a REIT is entitled to deduct dividends paid to its owners (commonly referred to as shareholders), a REIT may avoid incurring all or part of its liabilities for U.S. federal income tax. To qualify as a REIT, an organization makes an “election” to do so by filing a Form 1120-REIT with the Internal Revenue Service, and by meeting certain other requirements. The purpose of this designation is to reduce or eliminate corporate tax, thus avoiding double taxation of owner income. In return, REITs are required to distribute at least 90% of their taxable income into the hands of investors. A REIT is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. Some REITs also engage in financing real estate. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.[2]

Structure[edit]
See also: List of public REITs in the United States

In the United States, a REIT is a company that owns, and in most cases operates, income-producing real estate. Some REITs finance real estate. To be a REIT, a company must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.[61]

To qualify as a REIT under U.S. tax rules, a company must:

• Be structured as a corporation, trust, or association[62]
• Be managed by a board of directors or trustees[63]
• Have transferable shares or transferable certificates of interest[64]
• Otherwise be taxable as a domestic corporation[65]
• Not be a financial institution or an insurance company[66]
• Be jointly owned by 100 persons or more[67]
• Have 95 percent of its income derived from dividends, interest, and property income[68]
• Pay dividends of at least 90% of the REIT’s taxable income[69]
• Have no more than 50% of the shares held by five or fewer individuals during the last half of each taxable year (5/50 rule)[70]
• Have at least 75% of its total assets invested in real estate[71]
• Derive at least 75% of its gross income from rents or mortgage interest[72]
• Have no more than 25% of its assets invested in taxable REIT subsidiaries.[73]

Because of their access to corporate-level debt and equity that typical real estate owners cannot access, REITs have a favorable capital structure. They are able to use this capital to finance tenant improvement costs and leasing commissions that less capitalized owners cannot afford.[citation needed]

South America[edit]

Brazil[edit]

REITs were introduced in Brazil in 1993 by the law 8668/93 and initially ruled by the instruction 205/94 and, nowadays, by instruction 472/08 from CVM (Comissão de Valores Mobiliários – which is the Brazilian equivalent of SEC). Locally they are described as “FII”s or “Fundos de Investimento Imobiliário”. FII’s dividends have been free of taxes for personal investors (not companies) since 2006, but only for the funds which have at least 50 investors and that are publicly traded in the stock market. FIIs, referred to as “REIT” to correspond with the similar investment vehicle in the US, have been used either to own and operate independent property investments, associated with a single property or part property, or to own several real properties (multiple properties) funded through the capital markets.[citation needed]

See also[edit]

• EPRA index
• Australian real estate investment trust
• Closed-end fund
• Income trust
• Investment trust
• Mutual fund
• Real estate investing
• Royalty trust
• Stock market
• Real estate fund
• Taxable REIT subsidiaries
• real estate mortgage investment conduit (REMIC)

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• ^ http://cma.gov.sa/Ar/Documents/lahiya%20sanadeek%20(aqaree).pdf
• ^ REITs: a comparative approach throughout Europe, CMS Legal
• ^ Stephen Wilmot, Unibail-Rodamco: Europe’s top Reit, Investors Chronicle, 28 June 2012
• ^ Simon Packard, Unibail-Rodamco to Enter Germany in Perella Weinberg Deal, Bloomberg, 14 June 2012
• ^ “Bernheim Comofi richt vastgoedbevak op van 10 miljard fr”. Tijd.be.
• ^ “Real Estate Investments in Bulgaria” (PDF). Retrieved 2008-01-01.
• ^ “FINLEX ® – Ajantasainen lainsäädäntö: 24.4.2009/299”. Finlex.fi. Retrieved 2012-12-18.
• ^ Kiinteistörahastolaki; http://www.finlex.fi/fi/laki/ajantasa/1997/19971173
• ^ “Orava – NASDAQ OMX NORDIC”.
• ^ European Investment Commentary Cohen & Steers[permanent dead link], November 2011
• ^ “Gecina largest office space in France”.
• ^ “Gecina Reports First-Half Profit as French Company’s Properties Gain Value”. 2010-07-28.
• ^ Alan O’Sullivan (1 June 2007). “G-Reit news for German property”. citywire.co.uk. Archived from the original on 2007-09-27. Retrieved 2007-06-30.
• ^ Hackemann, Tim. “Global REIT Survey 2012: Germany”. Global REIT Survey 2012. European Public Real Estate Association. Retrieved 20 February 2013.
• ^ “Real Estate Investment Trusts introduced in Ireland” (PDF). EY REIT Alert. Retrieved 19 April 2014.
• ^ “REITs (Real Estate Investment Trusts)”. ShareWorld. Retrieved 5 February 2012.
• ^ Rowe, Rosalind. “Global REIT Survey 2012: UK”. Global REIT Survey 2012. European Public Real Estate Association. Retrieved 19 April 2013.
• ^ “Reita – UK REITs – Real Estate Investment Trust and property investment portal”. Bpf.org.uk. Retrieved 2012-12-18.
• ^ “Archived copy”. Archived from the original on 2011-09-30. Retrieved 2012-04-04.
• ^ “UK REITS SapphireCapitalPartners.co.uk”. sapphirecapitalpartners.co.uk. Retrieved 15 March 2018. [permanent dead link]
• ^ “Sapphire Capital Partners LLP”. sapphirecapitalpartners.co.uk. Retrieved 15 March 2018. [permanent dead link]
• ^ Mark Rothschild (November–December 2005). “Spotlight on North America/Canada”. Reit.com. Retrieved 2006-10-17.
• ^ David Dittman. “REIT Investing, Canadian Style”. InvestingDaily.com. Retrieved 2011-01-14.
• ^ “Fibras Get Their Footing”. reit.com. Retrieved 4 December 2014.
• ^ a b Morrissey, Janet; Grant, Peter (November 10, 2016), A Young Mexican REIT Market Evolves, New York City: Wall Street Journal, retrieved February 1, 2017
• ^ a b c d e Luis F. Moreno Trevino, Julio Planas Vidal. “The Infrastructure and Real Estate Trust in Mexico (FIBRA)”. Haynes and Boone. Retrieved 2013-05-27.
• ^ “Mexican REIT FIBRA Uno Raises $300M”. Institutional Investor. Retrieved 2013-05-27.
• ^ CCH 2008 U.S. Master Tax Guide, paragr. 2326, page 681.
• ^ “Real Estate Investment Trusts (REITs)”. U.S. Securities and Exchange Commission. Retrieved 16 March 2012.
• ^ Internal Revenue Code Sect. 856(a)
• ^ Internal Revenue Code Sect. 856(a)(1)
• ^ Internal Revenue Code Sect. 856(a)(2)
• ^ Internal Revenue Code Sect. 856(a)(3)
• ^ See Internal Revenue Code Sect. 856(a)(4). See also Internal Revenue Code Sect. 582(c)(2) (defining financial institutions for these purposes); Internal Revenue Code Sect. 801 et. seq. (defining insurance companies for these purposes).
• ^ Internal Revenue Code Sect. 856(a)(5).
• ^ Internal Revenue Code Sect. 856(c)(2)
• ^ Internal Revenue Code sect. 857(a)
• ^ Internal Revenue Code sections 856(h)(1) and 542(a)(2)
• ^ Internal Revenue Code sect. 856(c)(4)
• ^ Internal Revenue Code sect 856(c)(4)
• ^ Internal Revenue Code sect. 856(c)(4)(B)(ii)

External links[edit]

• List of U.S. REITs
• NAREIT – National Association of Real Estate Investment Trusts
• Real Estate Investment Trusts at Curlie (based on DMOZ)
• EPRA – European Public Real Estate Association

Source: https://en.wikipedia.org/wiki/Real_estate_investment_trust

HFF, Inc. is a provider of capital markets and brokerage services to owners of commercial real estate.

History[edit]

In 1974, John Fowler and Peter Goedecke founded Fowler, Goedeneke & Company. In 1982, Holliday Fenoglio & Co was founded by Harold E. (Hal) Holliday and John Fenoglio.[2]

In 1994, Amresco acquired Holliday Fenoglio Dockerty & Gibson.[3]

In 1998, Amresco acquired Fowler, Goedecke, Ellis & O’Connor Inc. and merged the two companies to form Holliday Fenoglio Fowler L.P.[4]

In 1999, the company was sold to Lend Lease Group for $228 million.[5][6]

In 2007, the company became a public company via an initial public offering that raised $257 million.[7][8][9]

In 2012, founders Holliday and Fenoglio went to work for CBRE Group.[10]

References[edit]

^ a b c d e f g HFF, Inc. 2016 Form 10-K Annual Report

^ “HFF”. The Real Deal. 

^ “Amresco plans to buy commercial loan firm”. American Banker. August 10, 1994. (subscription required)

^ “Amresco acquires Boston banking firm”. American City Business Journals. January 28, 1998. 

^ Cook, Lynn J. (December 26, 1999). “Holliday Fenoglio Fowler sold to U.S. Lend Lease subsidiary”. American City Business Journals. 

^ Parker, Andres D. (March 22, 2000). “Lend Lease Closes on AMRESCO Sale”. CoStar Group. 

^ “HFF Announces Pricing of Initial Public Offering” (Press release). Business Wire. January 31, 2007. 

^ “HFF IPO raises $257 mln, above range”. Reuters. January 30, 2007. 

^ Ambroz, Jillian (January 8, 2007). “UPDATE: HFF Prices IPO”. CoStar Group. 

^ Forbes, Laurie (March 26, 2012). “Holliday, Fenoglio Lead Veteran Team to CBRE”. CoStar Group. 

Source: https://en.wikipedia.org/wiki/HFF_(commercial_real_estate)

The term commercial property (also called commercial real estate, investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income.[1] Commercial property includes office buildings, industrial property, medical centers, hotels, malls, retail stores, farm land, multifamily housing buildings, warehouses, and garages. In many states, residential property containing more than a certain number of units qualifies as commercial property for borrowing and tax purposes.

Contents

• 1 Types of commercial property
• 2 Investment
• 3 Commercial property transaction process (Deal Management)
• 4 See also
• 5 Further reading
• 6 References
• 7 External links

Types of commercial property[edit]

Commercial real estate is commonly divided into six categories:

Office Buildings – This category includes single-tenant properties, small professional office buildings, downtown skyscrapers, and everything in between.

Industrial – This category ranges from smaller properties, often called “Flex” or “R&D” properties, to larger office service or office warehouse properties to the very large “big box” industrial properties. An important, defining characteristic of industrial space is Clear Height. Clear height is the actual height, to the bottom of the steel girders in the interior of the building. This might be 14–16 feet for smaller properties, and 40+ feet for larger properties. We also consider the type and number of docks that the property has. These can be Grade Level, where the parking lot and the warehouse floor are on the same level, to semi-dock height at 24 inches, which is the height of a pickup truck or delivery truck, or a full-dock at 48 inches which is semi-truck height. Some buildings may even have a rail spur for train cars to load and unload.

Retail/Restaurant – This category includes pad sites on highway frontages, single tenant retail buildings, small neighborhood shopping centers, larger centers with grocery store anchor tenants, “power centers” with large anchor stores such as Best Buy, PetSmart, OfficeMax, and so on even regional and outlet malls.

Multifamily – This category includes apartment complexes or high-rise apartment buildings. Generally, anything larger than a fourplex is considered commercial real estate.

Land – This category includes investment properties on undeveloped, raw, rural land in the path of future development. Or, infill land with an urban area, pad sites, and more.

Miscellaneous – This catch all category would include any other nonresidential properties such as hotel, hospitality, medical, and self-storage developments, as well as many more. [4]

Of these, only the first five are classified as being commercial buildings. Residential income property may also signify multifamily apartments.

Investment[edit]

The basic elements of an investment are cash inflows, outflows, timing of cash flows, and risk. The ability to analyze these elements is key in providing services to investors in commercial real estate.

Cash inflows and outflows are the money that is put into, or received from, the property including the original purchase cost and sale revenue over the entire life of the investment. An example of this sort of investment is a real estate fund.

Cash inflows include the following:

• Rent
• Operating expense recoveries
• Fees: Parking, vending, services, etc.
• Proceeds from sale
• Tax Benefits
• Depreciation
• Tax credits (e.g., historical)

Cash outflows include:

• Initial investment (down payment)
• All operating expenses and taxes
• Debt service (mortgage payment)
• Capital expenses and tenant leasing costs
• Costs upon Sale

The timing of cash inflows and outflows is important to know in order to project periods of positive and negative cash flows. Risk is dependent on market conditions, current tenants, and the likelihood that they will renew their leases year-over-year. It is important to be able to predict the probability that the cash inflows and outflows will be in the amounts predicted, what is the probability that the timing of them will be as predicted, and what the probability is that there may be unexpected cash flows, and in what amounts they might occur.

The total value of commercial property in the United States was approximately $11 trillion in 2009, as measured by the CoStar Group and published in the Journal of Real Estate Management.[2] The relative strength of the market is measured by the U.S. Commercial Real Estate Index which is composed of eight economic drivers and is calculated weekly,

According to Real Capital Analytics, a New York real estate research firm, more than $160 billion of commercial properties in the United States are now in default, foreclosure, or bankruptcy. In Europe, approximately half of the €960 billion of debt backed by European commercial real estate is expected to require refinancing in the next three years, according to PropertyMall, a UK‑based commercial property news provider PropertyMall. Additionally, the economic conditions surrounding future interest rate hikes; which could put renewed pressure on valuations, complicate loan refinancing, and impede debt servicing could cause major dislocation in commercial real estate markets.

However, the contribution to Europe’s economy in 2012 can be estimated at around €285 billion according to EPRA and INREV, not to mention social benefits of an efficient real estate sector.[3] It is estimated that commercial property is responsible for securing around 4 million jobs across Europe.

Commercial property transaction process (Deal Management)[edit]

Typically, a broker will identify a property that fits a set of criteria set out by an acquisitions, capital investment, or private equity firm. The firm will perform an informal assessment of the property location and potential profitability, and if they are interested, they will signal their intent to move forward with a letter of intent (LOI).

An investment committee with senior acquisitions executives reviews all pending deals and advises whether to move forward with a purchase and sale agreement, or PSA, and a deposit. A PSA is an exclusive agreement between the seller and a single interested buyer. No other LOIs or PSA may exist for one property at a time.

Once a PSA is executed, the acquisitions team usually has 30 days to perform due diligence, unless an extension is granted. During this 30-day period, the acquisitions team investigates the property thoroughly in an attempt to uncover any undesirable characteristics, damage, or other circumstances that could affect the profitability or final selling price of the property.

The acquisitions team may want to investigate the rent roll, existing vendor contracts, city permits, insurance policies, etc.. The acquisitions firm may hire a third party to conduct an appraisal, environmental reports, traffic counts, and more. The ultimate goal is to gather as much information as possible to make an informed investment decision.

Once due diligence is complete, the acquisitions team must decide whether to move forward with the purchase to closing. Closing is a window of 10-15 days during which the acquisitions firm owes an additional deposit, and they must finalize financing.

When a deal closes, post-closing processes may begin, including notifying tenants of an ownership change, transferring vendor relationships, and handing over relevant information to the asset management team.[citation needed]

See also[edit]

• Class A office space
• Commercial building
• Commercial Information Exchange
• International real estate
• Real estate
• Estoppel certificate

Further reading[edit]

• Maliene, V., Deveikis, S., Kirsten, L. and Malys, N. (2010). “Commercial Leisure Property Valuation: A Comparison of the Case Studies in UK and Lithuania”. International Journal of Strategic Property Management. 14 (1): 35–48. doi:10.3846/ijspm.2010.04. CS1 maint: Multiple names: authors list (link)

References[edit]

^ Investopedia Definition

^ Florance, Andrew. “Slicing, Dicing, and Scoping the Size of the” (PDF). Journal of Real Estate Management. Retrieved 2011-08-18. 

^ Gareth, Lewis (2012). “Real estate in the real economy” (PDF). 

External links[edit]

Source: https://en.wikipedia.org/wiki/Commercial_property

Commercial Real Estate Women (CREW) Network is a North American business networking organization that focuses on the advancement of women in commercial real estate.

History[edit]

See also[edit]

• Real estate
• List of real estate topics
• Commercial real estate

References[edit]

Source: https://en.wikipedia.org/wiki/Commercial_Real_Estate_Women

Apollo Global Management, LLC is an American private equity firm, founded in 1990 by former Drexel Burnham Lambert banker Leon Black.[2] The firm specializes in leveraged buyout transactions and purchases of distressed securities involving corporate restructuring, special situations, and industry consolidations. Apollo is headquartered in New York City, and also has offices in Purchase, New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai.[3]

As of August 2017, Apollo managed over US$232 billion of investor commitments across its private equity, credit and real asset funds and other investment vehicles making it the second largest US-based alternative asset management firm.[4] Among the most notable companies currently owned by Apollo are Claire’s, Caesars Entertainment Corporation, CareerBuilder, Novitex Enterprise Solutions, and Rackspace.[5]

Contents

• 1 History
  • 1.1 1990s
  • 1.2 2000-2005
  • 1.3 2005-2010
  • 1.4 2010-2016
• 2 Operations
• 3 Investment vehicles
  • 3.1 Private equity funds
  • 3.2 Apollo Investment Corporation
  • 3.3 AP Alternative Assets
• 4 Portfolio investments
• 5 Affiliated businesses
  • 5.1 Lion Advisors
  • 5.2 Ares Management
• 6 References
• 7 External links

History[edit]

Apollo, originally referred to as Apollo Advisors, was founded in 1990, on the heels of the collapse of Drexel Burnham Lambert in February 1990. It was founded by Leon Black, the former head of Drexel’s mergers and acquisitions department, along with other Drexel alumni.[6] Among the most notable founders are John Hannan, Drexel’s former co-director of international finance; Craig Cogut, a lawyer who worked with Drexel’s high-yield division in Los Angeles; and Arthur Bilger, the former head of the corporate finance department. Other founding partners included Marc Rowan, Josh Harris and Michael Gross, who both worked under Black in the mergers and acquisitions department, and Antony Ressler, who worked as a senior vice president in Drexel’s high yield department with responsibility for the new issue/syndicate desk.[7][8][9]

Less than six months after the collapse of Drexel, the founders of Apollo had already begun a series of ventures. Apollo Investment Fund L.P., the first of their private equity investment funds, was formed to make investments in distressed companies. Apollo’s first fund raised approximately $400 million of investor commitments on the strength of Black’s reputation as a prominent lieutenant of Michael Milken and key player in the buyout boom of the 1980s.[7] Lion Advisors was set up to provide investment services to Credit Lyonnais, which was seeking to profit from depressed prices in the high yield market.[10]

1990s[edit]

At the time of Apollo’s founding, financing for new leveraged buyouts was minimal and Apollo turned instead to a strategy of distressed-to-control takeovers.[11][12] Apollo would purchase distressed securities which could be converted into a controlling interest in the equity of the company through a bankruptcy reorganization or other restructuring. Apollo used distressed debt as an entry point, enabling the firm to invest in such firms as Vail Resorts,[13] Walter Industries,[14][15] Culligan and Samsonite.[16]

Early on, Apollo made a name for itself by acquiring interests in companies that Drexel had helped finance by purchasing high-yield bonds from failed savings and loans and insurance companies. Apollo acquired several large portfolios of assets from the U.S. government’s Resolution Trust Corporation.[17] One of Apollo’s earliest and most successful deals involved the acquisition of Executive Life Insurance Company’s bond portfolio. Using this vehicle, Apollo would purchase the Executive Life portfolio, generating tremendous profits when the value of high yield bonds recovered, but also resulting in a variety of state regulatory issues for Apollo and Credit Lyonnais over the purchase.[18] More than a decade after the purchase, in 2002, California Attorney General Bill Lockyer accused Apollo, Leon Black, and an investor group led by French bank Credit Lyonnais, of illegally acquiring the assets and bond portfolio of Executive Life Insurance Co. in 1991. According to the State of California, Lion allegedly violated a California law that prohibited foreign government-owned banks from owning California insurance companies.[19]

AREA Property Partners logo

In 1993, Apollo Real Estate Advisers was founded in collaboration with William Mack to seek opportunities in the U.S. property markets.[20] Apollo Real Estate Investment Fund, L.P., the first in a family of real estate “opportunity funds” was closed in April 1993 with $500 million of investor commitments. In 2000, Apollo exited the partnership, which continued to operate as Apollo Real Estate Advisers until changing its name to AREA Property Partners, effective January 15, 2009. That firm is owned and controlled by its remaining principals, who include William Mack, Lee Neibart, William Benjamin, John Jacobsson, Stuart Koenig and Richard Mack.[21] Apollo Real Estate Investment Fund, L.P., the first in a family of real estate “opportunity funds” was closed in April 1993 with $500 million of investor commitments. As of 2008, the firm was investing out of three funds: Apollo Real Estate Investment Fund V, Apollo European Real Estate Fund II, and Apollo Value Enhancement Fund VII. In 2004, Apollo Real Estate acquired the Value Enhancement Funds family of investment vehicles to broaden its offerings in the “value-added” segment of the real estate investment spectrum. Apollo also operates a real estate mezzanine lending program and real estate securities hedge fund called Claros Real Estate Securities Fund, L.P.[22]

In 1995, Apollo raised its third private equity fund, Apollo Investment Fund III with $1.5 billion of investor commitments from investors that included CalPERS and the General Motors pension fund.[23][24] Unlike its first two funds and later funds, Fund III would ultimately prove only an average performer for private equity funds of its vintage. Among the investments made in Fund III (invested through 1998) were: Alliance Imaging, Allied Waste Industries, Breuners Home Furnishings, Levitz Furniture,[25] Communications Corporation of America,[26] Dominick’s, Ralphs (acquired Apollo’s Food-4-Less),[27] Move.com, NRT Incorporated,[28] Pillowtex Corporation,[29] Telemundo[30] and WMC Mortgage Corporation.[31]

Apollo invested in AMC in 2001 and would buy out the company in 2004

Also in 1995, Apollo founding partner Craig Cogut left the firm to found a smaller competitor Pegasus Capital Advisors. Since inception Pegasus has raised $1.8 billion in four private equity funds focused on investments in middle-market companies in financial distress. In 1997, Apollo co-founder Tony Ressler founded Ares Management as the successor to its Lion Advisors business which would manage collateralized debt obligation vehicles.[32]

In 1998, Apollo raised its fourth private equity fund, Apollo Investment Fund IV, with $3.6 billion of investor commitments.[23] Among the investments made in Fund IV (invested through 2001) were: Allied Waste Industries,[33] AMC Entertainment,[34] Berlitz International,[35] Clark Retail Enterprises,[36] Corporate Express (Buhrmann), Encompass Services Corporation, National Financial Partners, Pacer International,[37] Rent-A-Center, Resolution Performance Products, Resolution Specialty Materials, Sirius Satellite Radio, SkyTerra Communications, United Rentals and Wyndham Worldwide.[38]

2000-2005[edit]

Apollo’s headquarters in the Solow Building at 9 West 57th Street in New York City, formerly occupied by Tyco

Apollo deployed its fourth fund during the booming markets of the late 1990s, only to experience difficulties with the collapse of the Internet bubble and the onset of the recession. Amid the turmoil of collapsing markets, Apollo was able to raise its fifth private equity fund in 2001, Apollo Investment Fund V, with $3.7 billion of investor commitments, roughly the same amount raised as for its previous fund.[23] Among the investments made in Fund V (invested through 2006) were Affinion Group, AMC Entertainment, Berry Plastics, Cablecom, Compass Minerals, General Nutrition Centers (GNC), Goodman Global, Hexion Specialty Chemicals (Borden), Intelsat, Linens ‘n Things, Metals USA, Nalco Investment Holdings, Sourcecorp, Spectrasite Communications, and Unity Media.

Meanwhile, Ares continued to grow through the late 1990s and profited significantly from investments made after the collapse of the high yield market in 2000 and 2001.[citation needed] Although technically, the founders of Ares had completed a spin out with the formation of the firm in 1997, they had maintained a close relationship with Apollo over its first five years and operated as the West Coast affiliate of Apollo. By 2002, when Ares raised its first corporate opportunities fund, the firm announced that it was more formally separating itself from its former parent company. The timing of this separation also coincided with Apollo’s legal difficulties with the State of California over its purchase of Executive Life Insurance Company in 1991.[citation needed]

Following the spin-off of Ares in 2002, Apollo developed two new affiliates to continue its investment activities in the capital markets. The first of these new affiliates, founded in 2003, was Apollo Distressed Investment Fund (DIF) Management a credit opportunity investment vehicle.[39] The following year, in April 2004, Apollo raised $930 million through an initial public offering (IPO) for a listed business development company, Apollo Investment Corporation (NASDAQ: AINV)). Apollo Investment Corporation was formed to invest primarily in middle-market companies in the form of mezzanine debt and senior secured loans, as well as by making certain direct equity investments in companies. The Company also invests in the securities of public companies.[40][41]

2005-2010[edit]

Caesars Palace, acquired as part of Apollo’s LBO of Harrah’s Entertainment

The 2005 – 2007 period marked a boom period in private equity with new “largest buyout” records set and surpassed several times in an 18-month window from the beginning of 2006 through the middle of 2007.[42] Apollo was among the most active investors in leveraged buyout transactions during this period. Although Apollo was involved in a number of notable and large buyouts, the firm largely avoided the very largest transactions of this period. Among Apollo’s most notable investments during this period included Harrah’s Entertainment, a leading US gaming and casino company; Norwegian Cruise Line, the cruise line operator; Claire’s Stores, the retailer of costume jewelry; and Realogy, the real estate franchisor that owns Coldwell Banker, Century 21 and Sotheby’s International Realty.[43]

In August 2006, Apollo launched a $2 billion publicly traded private equity vehicle in Europe, AP Alternative Assets (ENXTAM:AAA).[41] The IPO of this new vehicle followed in the footsteps of Kohlberg Kravis Roberts, which raised $5 billion for its KKR Private Equity Investors vehicle in May 2006.[44] Apollo initially attempted to raise $2.5 billion for the public vehicle but fell short when it offered the shares in June, raising only $1.5 billion. Apollo raised an additional $500 million via private placements in the weeks following that sale.[45]

As the private equity industry expanded through 2006 and 2007, several of the largest private equity firms, most notably The Blackstone Group and Kohlberg Kravis Roberts, announced plans to realize value from their firms through the sale of shares in the public equity markets. Apollo Management chose a slightly different path, by completing a private placement of shares in its management company in July 2007. By pursuing a private placement rather than a public offering, Apollo would be able to avoid much of the public scrutiny applied to Blackstone and KKR.[41][46] In November 2007, Apollo was able to realize additional value from the sale of a 9% ownership interest in its management company to the Abu Dhabi Investment Authority (ADIA).[47] Ultimately, in April 2008, Apollo would file with the U.S. Securities and Exchange Commission (SEC)[48] to permit some holders of its privately traded stock to sell their shares on the New York Stock Exchange and in March 2011, Apollo completed its initial public offering (NYSE: APO).[49] In 2008, the firm opened an office in India, marking their first push into Asia.[50]

Apollo lost its investment in retailer Linens ‘n Things with the company’s 2008 bankruptcy[51]

As the deterioration of the financial markets worsened into 2008, Apollo saw several of its investments come under pressure. Apollo’s 2005 investment in the struggling US retailer, Linens ‘n Things suffered from a significant debt burden and softening consumer demand. In May 2008, Linens was forced to file for bankruptcy protection, one of several high-profile retail bankruptcies in 2008, costing Apollo all of its $365 million investment in the company.[51][52] At the same time, Apollo’s investment in Claire’s, Realogy and Harrah’s Entertainment came under pressure.[43] Apollo would respond actively to its investment difficulties seeking to exchange a portion of the existing debt at Harrah’s and Realogy to more favorable securities.[53] At Claire’s, Apollo exercised its “PIK toggle” option to shut off cash interest payments to its bondholders and issue more debt instead, in order to provide the company with additional financial flexibility.[54]

In December 2008, Apollo completed fundraising for its latest fund, Apollo Investment Fund VII with approximately $14.7 billion of investor commitments.[55] Apollo had been targeting $15 billion, but had been in fundraising for more than 16 months, with the bulk of the capital raised in 2007.[56]

In December 2009, it was announced that Apollo would acquire Cedar Fair Entertainment Company shares and the company would be become private underneath the management group.[57] The deal includes a cash payment of $635 million and assumed debt which gives the transaction a value of $2.4 billion.[58] It was later announced in April 2010 that the deal was pulled due to poor shareholder response.[59]

2010-2016[edit]

In March 2012, Apollo made a second attempt to acquire an amusement park operator with a $225.7 million offer for Great Wolf Resorts.[60] In November 2012, Apollo acquired The McGraw-Hill Companies’ education division (“McGraw-Hill Education”) in a deal totaling $2.5 billion.[61]

On March 11, 2013, Apollo Global Management made the only bid for the snacks business of Hostess Brands, including Twinkies, for $410 million.[62] Apollo bought a portfolio of Irish home loans from Lloyds Bank in December 2013 for €307m, less than half their nominal £610m (€367m) value.[clarification needed] The shares were bought by an Apollo Global Management subsidiary, Tanager Limited. The portfolio made a £33m loss last year.[63]

In January 2014, Apollo and CEC Entertainment, the parent company of Chuck E. Cheese’s, announced that Apollo bought the company and its brand for about $1 billion.[64]

In October 2014, Apollo finalized the merger of its Endemol television studio with 21st Century Fox’s Shine Group. The merged company became Endemol Shine Group, with AGM and Fox each owning half of the studio.[65]

In June 2015, Apollo Global Management made a successful offer of around $1.03 billion in cash to privatise OM Group.[66] Also that month, Apollo won the bidding during an auction for Saint-Gobain’s Verallia glass bottle manufacturing unit for a rumoured fee of around 2.95 billion.[67]

In February 2016, ADT Corporation agreed to be acquired by Apollo Global Management.[68] Apollo Education Group[69] shareholders approved a merger with Apollo Global Management in May 2016. In June 2016, Apollo Global Management made a successful offer to purchase Diamond Resorts International.[70] Apollo made a successful offer to purchase Rackspace in August 2016.[71]

In March 2017, Apollo acquired Outerwall, owner of Redbox, Coinstar, and ecoATM for about $1.6B.[72] Apollo Global Management acquired ClubCorp, one of the largest operators of golf and country clubs, in July 2017 for about $1.1B.[73]

In October 2017, Apollo acquired West Corporation for about $2 Billion.[74]

On December 19, 2017, AGM acquired Mexican restaurant Qdoba for $305 million.[75]

Operations[edit]

Apollo is operated by its managing partners, Leon Black, Joshua Harris and Marc Rowan and a team of more than 250 investment professionals, as of March 31, 2013. The firm’s headquarters are located in the Solow Building at 9 West 57th Street[76] in New York City, and the firm operates additional offices in Purchase, New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai[48]

Apollo’s executive committee includes: Leon Black, chairman and chief executive officer; Josh Harris, senior managing director; Marc Rowan, senior managing director; and Marc Spilker who was hired as President in November 2010.[77]

Apollo operates three business lines in an integrated manner:

• Private equity—The private equity business is the cornerstone of Apollo’s investment activities. Apollo invests through a variety of private equity strategies, most notably leveraged buyouts and distressed buyouts and debt investments. This business operates primarily through the firm’s family of private equity investment funds (See: Investment funds)[48]
• Credit—Apollo invests through a variety of credit strategies to complement its core private equity business. Apollo invests through a variety of investment vehicles including mezzanine funds, hedge funds, European non-performing loan funds and senior credit opportunity funds.[78]
• Real Estate—Apollo Global Real Estate (AGRE) was established in 2008 to build upon Apollo’s history of investing in real estate-related sectors such as hotels and lodging, leisure and logistics. AGRE manages a number of debt and equity-oriented real estate investment funds.[78]

Joshua Harris, a founder of Apollo Global Management, was advising Trump administration officials on infrastructure policy. During that period, he met on multiple occasions with Jared Kushner, President Trump’s son-in-law and senior adviser, said three people familiar with the meetings. Among other things, the two men discussed a possible White House job for Mr. Harris.[79]

Investment vehicles[edit]

Private equity funds[edit]

Apollo has historically relied primarily on private equity funds, pools of committed capital from pension funds, insurance companies, endowments, fund of funds, high-net-worth individuals, family offices, sovereign wealth funds and other institutional investors. Since 2014, Apollo has begun investing its eighth private equity fund, Apollo Investment Fund VIII, which raised approximately $18 billion of investor commitments. In 2017, Apollo raised $24.6 billion for its ninth flagship private equity fund, making it the largest in history.[80] Since inception in 1990, Apollo has raised a total of nine private equity funds, including:[23]

Apollo Investment Corporation[edit]

Apollo Investment Corporation is a US-domiciled publicly traded private equity closed-end fund and an affiliate of Apollo. AIC was formed to invest primarily in middle-market companies in the form of mezzanine debt and senior secured loans, as well as by making certain direct equity investments in companies. The Company also invests in the securities of public companies.[40][41]

AIC is structured as a business development company, a type of publicly traded private equity vehicle that is designed to generate interest income and long-term capital appreciation. AIC historically has not invested in companies controlled by Apollo’s private equity funds.[83]

AP Alternative Assets[edit]

AP Alternative Assets (Euronext: AAA) is a Guernsey-domiciled publicly traded private equity closed-end limited partnership, managed by Apollo Alternative Assets, an affiliate of Apollo Management. AAA was formed to invest alongside Apollo’s main private equity funds and hedge funds.[40][41]

AAA was launched in August 2006, shortly after Kohlberg Kravis Roberts completed an initial public offering for its $5 billion for its KKR Private Equity Investors vehicle in May 2006.[41][44] Apollo raised a total of $2 billion for AAA including the vehicle’s $1.5 billion IPO and a subsequent private placement.[45]

AAA’s investment portfolio is made up of a mix of private equity and capital markets investments:[84]

Portfolio investments[edit]

Apollo has been an active private equity investor through the mid-2000s buyout boom.[85] The following is a list of Apollo’s most recent and currently active private equity investments. The bulk of these investments are held in Apollo Investment Fund V, VI and VII.

Other investments include Connections Academy and Unity Media GMBH.

Affiliated businesses[edit]

From its inception, Apollo built as part of a network of affiliated businesses focusing on private equity and a variety of distressed investment strategies.

Lion Advisors[edit]

Lion Advisors (or Lion Capital), which was founded at the same time as Apollo in 1990, focused on investment management and consulting services to foreign institutional accounts targeting investments in public and private high yield debt securities in the US. In 1992, Lion entered into a more formal arrangement to manage the $3 billion high-yield portfolio for Credit Lyonnais which together with a consortium of other international investors provided the capital for Lion’s investment activities. The Lion business would ultimately be replaced by Ares Management.[122]

Ares Management[edit]

Main article: Ares Management

Ares Management, founded in 1997, was initially established to manage a $1.2 billion market value collateralized debt obligation vehicle. Ares would grow to manage a family of collateralized loan obligation (CLO) vehicles that would invest in capital markets-based securities including senior bank loans and high-yield and mezzanine debt. Ares was founded by Antony Ressler and John H. Kissick, both partners at Apollo as well as Bennett Rosenthal, who joined the group from the global leveraged finance group at Merrill Lynch.[123]

Ares I and II which were raised were structured as market value CLOs. Ares III though Ares X were structured as cash flow CLOs. In 2002, Ares completed a spinout from Apollo management. Although technically, the founders of Ares had completed a spinout with the formation of the firm in 1997, they had maintained a close relationship with Apollo over its first five years and operated as the West Coast affiliate of Apollo. Shortly thereafter, Ares completed fundraising for Ares Corporate Opportunities Fund, a special situations investment fund with $750 million of capital under management.[122][123]

In 2004, Ares debuted a publicly traded business development company, Ares Capital Corporation (NASDAQ:ARCC).[124] In 2006, Ares raised a $2.1 billion successor special situations fund (Ares Corporate Opportunities Fund II).[123]

References[edit]

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• ^ Company News; Walter Industries’ Bondholders in Accord. New York Times, April 9, 1994
• ^ Settlement For Walter Industries And Creditors. New York Times, October 21, 1994
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• ^ Pillowtex to Acquire Fieldcrest for $400 Million. New York Times, September 12, 1997
• ^ Telemundo Plan Backed. New York Times, July 21, 1994
• ^ Weyerhaeuser Mortgage Company sale closes. Business Wire, May 22, 1997
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• ^ For a Theater Chain, A Revival May Be Near. New York Times, January 27, 2002
• ^ Apollo Takes 20% Stake In Berlitz For $100 Million. New York Times, October 8, 1998
• ^ Apollo Affiliate Is Acquiring Clark’s Store Operations. New York Times, May 14, 1999
• ^ Neptune Orient To Sell North American Train Network. New York Times, March 18, 1999
• ^ Wyndham Receives $1 Billion From Investor Group. New York Times, July 1, 1999
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• ^ a b In Private Equity, the Limits of Apollo’s Power. New York Times, December 7, 2008
• ^ a b Timmons, Heather. “Opening Private Equity’s Door, at Least a Crack, to Public Investors.” New York Times, May 4, 2006.
• ^ a b Apollo equity fund IPO falls short of its target. International Herald Tribune, June 9, 2006
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• ^ Apollo chief says sold nine percent of firm to Abu Dhabi. Reuters, November 7, 2007
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• ^ Forget slowdown, PEs still heading to India. The Economic Times, August 8, 2008
• ^ a b Bankruptcy Protection for Retailer. New York Times, May 3, 2008
• ^ Apollo Struggles to Keep Debt From Sinking Linens ‘n Things. New York Times, April 14, 2008
• ^ a b An End Run Around Realogy’s Lenders. New York Times, November 27, 2008
• ^ PIK and Roll: Companies Seize On Perks of Loose Lending . Wall Street Journal, May 19, 2008
• ^ “Apollo First-Quarter Profit Rises 76% as Holdings Gain”. Bloomberg.
• ^ a b Apollo Closes Buyout Fund Near $15 Billion Target. Wall Street Journal, January 23, 2009. Most recently, Apollo acquired Cedar Fair L.P. for about $650 million dollars cash. The company had seen profits plummet in the recent recession. Net income dropped more than $45 million from last year, and Cedar Fair was forced to sell. Apollo acquired more than 1.5 billion dollars of debt.
• ^ Press Releases :: Cedar Fair Entertainment Company Archived December 21, 2009, at the Wayback Machine.
• ^ “Coastal Business: Charleston Port activity studied”. The Sun News. December 31, 2009. Retrieved January 1, 2010. [dead link]
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• ^ “Equity firm Apollo buys $419.4m (€307m) of Irish home loans from Lloyds”. Irish Independent. December 6, 2013. Retrieved December 18, 2013.
• ^ “Chuck E. Cheese sold in near-bn deal – FT.com”. Financial Times.
• ^ https://variety.com/2014/tv/news/21st-century-fox-and-apollo-seal-deal-to-merge-shine-endemol-and-core-1201326611
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• ^ Andrew Callus (June 7, 2015). “Apollo wins auction for St-Gobain’s Verallia”. Reuters. Retrieved June 8, 2015.
• ^ Picker, Leslie (February 16, 2016). “ADT in $6.9 Billion Deal to Sell Itself to Apollo Buyout Firm”. The New York Times. ISSN 0362-4331. Retrieved July 21, 2017.
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• ^ “Rackspace to Go Private in $4.3 Billion Deal”. August 26, 2016. Retrieved August 26, 2016 – via Wall Street Journal.
• ^ “CEO of Redbox and Coinstar maker Outerwall out as businesses split into separate enterprises following acquisition”. GeekWire. Retrieved October 16, 2017.
• ^ “Struggling golf club operator ClubCorp bought by Apollo for $1.1B”. USA TODAY. Retrieved September 28, 2017.
• ^ “Apollo Global to buy West Corp for about $2 billion”. Reuters. 2017. Retrieved 2018-02-07.
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• ^ a b Amendment No. 8 to Form S-1
• ^ https://www.nytimes.com/2018/02/28/business/jared-kushner-apollo-citigroup-loans.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news
• ^ Dasha Afanasieva (July 27, 2017). “Apollo raises $24.6 billion for largest private equity fund ever”. Reuters.
• ^ a b Apollo Investment (AINV) annual SEC income statement filing via Wikinvest.
• ^ a b Apollo Investment (AINV) annual SEC balance sheet filing via Wikinvest.
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• ^ Berry Plastics to Be Sold Again. Reuters, June 29, 2006
• ^ Costume Jewelry Retailer Agrees to a Takeover. New York Times, March 21, 2007
• ^ Wave of Bankruptcy Filings Expected From Retailers in Wake of Holidays. Wall Street Journal, January 12, 2009
• ^ Apollo Sweetens Countrywide PLC Bid. Wall Street Journal, April 13, 2007
• ^ Dutch Postal Deal. Associated Press, August 24, 2006
• ^ Citi Is Said to Be Near Deal to Sell $12.5 Billion of Loans. New York Times, April 9, 2008
• ^ Apollo, GSO Debt Funds Have Faced Margin Call Issues. Wall Street Journal, November 12, 2008
• ^ Black: Apollo’s debt bets were ‘a little early’. Private Equity Online, January 23, 2009
• ^ Ahmed, Azam (March 13, 2012). “Apollo to Acquire Water Park Operator for $703 Million”. The New York Times.
• ^ Sorkin, Andrew Ross. “Harrah’s Is Said to Be in Talks to Accept $16.7 Billion Buyout.” New York Times, December 18, 2006.
• ^ Manufacturer of Chemicals Agrees to Bid From Apollo. New York Times, July 13, 2007
• ^ Huntsman Settles With Apollo, New York Times, December 14, 2008
• ^ a b Jacuzzi Brands Is Going Private. Reuters, October 12, 2006
• ^ [1]. New York Times, November 26, 2012
• ^ Apollo Management to buy GE Advanced Materials Business. AltAssets, September 18, 2006 Archived June 8, 2008, at the Wayback Machine.
• ^ Mine Company Sells U.S. Unit. New York Times, April 12, 2007
• ^ Closes $1 Billion Investment by Apollo. Reuters, January 7, 2008
• ^ Oceania Cruises sold to new owners. USA Today, February 27, 2007 Archived September 5, 2007, at the Wayback Machine.
• ^ Oceania Cruises Closes A Transaction With Apollo Management: Completes $850 Million Strategic Partnership. Oceania Cruises press release, April 30, 2007 Archived December 5, 2008, at the Wayback Machine.
• ^ Latest Deal in Real Estate for $9 Billion. New York Times, December 18, 2006
• ^ “Apollo Management, L.P. Completes Acquisition Of Realogy Corporation”. Realogy. Archived from the original on September 27, 2007. Retrieved June 5, 2007.
• ^ Icahn Sues Real Estate Company Over Debt. New York Times, December 2, 2008
• ^ Apollo to buy cruise company Regent Seven Seas Cruises. AltAssets, December 12, 2007 Archived December 2, 2008, at the Wayback Machine.
• ^ Carlyle to sell Rexnord Corporation to Apollo for $1.8bn. AltAssets, May 25, 2006 Archived March 7, 2008, at the Wayback Machine.
• ^ Smart & Final sells to Apollo Management affiliate in $813.9M deal. Los Angeles Business, February 20, 2007
• ^ Whole Foods Deal. Bloomberg, June 21, 2007
• ^ Hamstra, Mark (February 16, 2011). “Apollo Combines Sprouts, Henry’s”. Supermarket News. Penton Media, Inc. Retrieved December 4, 2011.
• ^ Crabtree, Penni (February 27, 2011). “Merger of Henry’s, Sprouts is latest in Boney family’s retail saga”. SignOn San Diego. The San Diego Union-Tribune, LLC. Retrieved December 4, 2011.
• ^ Apollo Management Invests in Buyer of Mortgage Assets. New York Times, May 28, 2008
• ^ Verso Paper turns a page with IPO; President & CEO Mike Jackson credits a foundation document, focused strategies, and talented employees for company’s success. Paper360, Oct 2008
• ^ Verso Paper Sets I.P.O. Range. New York Times, April 29, 2008
• ^ Apollo Global Management to Acquire Management Services Business from Pitney Bowes. Pitney Bowes Inc, July 30, 2013
• ^ “News & Insights – Document Outsourcing – Novitex”. Retrieved July 4, 2016.
• ^ “Cotton ornaments, ‘Happy Thai Horses’ (set of 4)”. Retrieved July 4, 2016.
• ^ “Philips completes sale of 80.1% interest in Lumileds to funds managed by affiliates of Apollo Global Management”. August 10, 2017.
• ^ “Philips to Sell Lumileds to Apollo”. Bloomberg Technology. Retrieved August 10, 2017.
• ^ a b Ares Enhanced Loan Investment Strategy IR, Ltd. Prospectus. September 22, 2008[dead link]
• ^ a b c Ares Management to Take New Fund Public. Los Angeles Times, April 22, 2004
• ^ Ares Capital IPO Raises $165 Million. Los Angeles Times, October 6, 2004

External links[edit]

• Companies portal

Official website

Investors

• Corporations
• Institutional investors
• Pension funds
• Insurance companies
• Fund of funds
• Endowments
• Foundations
• Investment banks
• Merchant banks
• Commercial banks
• High-net-worth individuals
• Family offices
• Sovereign wealth funds
• Crowdfunding

Related financial terms

• AUM
• Cap table
• Capital call
• Capital commitment
• Capital structure
• Distribution waterfall
• EBITDA
• Envy ratio
• High-yield debt
• IPO
• IRR
• Leverage
• Liquidation preference
• M&A
• PME
• Taxation of private equity and hedge funds
• Undercapitalization
• Vintage year

• Private equity and venture capital investors
• Private equity firms
• Venture capital firms
• Angel investors
• Portfolio companies

Source: https://en.wikipedia.org/wiki/Apollo_Global_Management