Apollo Finalizes Buy of Citi Property Unit

NEW YORK CITY-Completing a deal first reported eight months ago, an affiliate of Apollo Global Real Estate Management LP has acquired Citi Property Investors, the real estate investment management group of Citigroup. Terms of the transaction were not disclosed; CPI had more than $3 billion in assets under management as of June 30.

As part of the transaction, a majority of CPI’s employees will join AGRE, which will take over the management of a number of CPI’s funds, including its flagship funds, CPI Capital Partners Asia Pacific LP, CPI Capital Partners Europe LP and CPI Capital Partners North America LP. CPI has locations in Asia, Europe and North America.

For some of those employees, the deal could be deja vu all over again, as Joseph Azrack, AGRE’s managing partner and head since its formation in 2008, was formerly president and CEO of CPI from 2004 to ‘08. “I believe the global reach of this combined platform will strengthen our ability to serve our investor base while growing as we do so,” Azrack says in a release. I am also pleased to note that with the completion of this transaction, we have rounded out AGRE’s leadership team.”

Roger Orf, who most recently served as the president and CEO of CPI, will now head up the AGRE Europe team. In that capacity, he joins Ray Mikulich, head of AGRE North America, and Grant Kelley, head of AGRE Asia Pacific.

The combined group will be headquartered in New York with offices in London, Hong Kong, Mumbai and Los Angeles. The firm’s real estate investment team will work integrally with other Apollo investment groups to source, underwrite, structure and manage investments in commercial real estate assets, companies and operating platforms, according to a release.

Both Bloomberg and the Wall Street Journal reported in March that an agreement had been reached for Apollo to buy CPI, and was expected to close within a few months. Bloomberg reported that the move would more than triple the value of the private-equity firm’s property assets, giving Apollo 65 real estate investments in 26 countries with a net asset value of $3.5 billion.

At one time, that net asset value was considerably higher. The WSJ reported that the CPI portfolio’s worth plummeted from a high of nearly $13 billion following Azrack’s departure. In March, the WSJ said CPI’s North America-focused fund, which raised $600 million from investors, declined in value at an average rate of 28.2% a year between December 2006 and June 2009, according to the annual report from New York State Teachers Retirement System.

CPI is part of Citi Holdings, a division formed in January 2009 to manage illiquid assets and businesses that Citigroup plans to wind down as it focuses on core operations. The financial services giant at that time split into Citicorp and Citi Holdings, and CEO Vikram Pandit said in a statement, “In light of the opportunities we see in the market today, we believe this new structure will provide a wide range of options going forward to continue strengthening our core franchise.”

Law firm Paul Hastings represented Citi in Friday's CPI sale, while Sullivan & Cromwell advised Apollo.