Apollo Management LP agreed to buy Citigroup Inc.’s real estate investment unit in a move that will more than triple the value of the private-equity firm’s property assets, a person with knowledge of the deal said yesterday.
The purchase of Citi Property Investors will give New York- based Apollo 65 real estate investments in 26 countries with a net asset value of $3.5 billion, said the person, who asked not to be named because the negotiations are private. Apollo’s global head of real estate, Joseph Azrack, helped assemble the portfolio when he led the Citigroup unit from 2004 to 2008.
The sale to Apollo shows the unit’s limited partners have confidence in the buyer and a recovery in global prices, said Matthew Anderson, partner at Foresight Analytics LLC in Oakland, California. Global commercial property values have plunged since their 2007 peak, dropping 41 percent in the U.S. through last year, according to Moody’s Investors Service.
“Having it go to Apollo is in a certain sense returning it to the previous management,” Anderson said in an interview. “It’s an opportune time to be doing the bidding since generally prices are depressed globally, not just in the U.S.”
Citigroup, 27 percent-owned by the U.S. Treasury Department, has been under pressure from regulators to sell assets to shore up its balance sheet. The New York-based bank valued the property division at $12.5 billion as of June, according to its Web site. The unit is part of Citi Holdings, the businesses Chief Executive Officer Vikram Pandit said he would sell, wind down or restructure.
‘Victim’ of Times
“Apollo is getting a lot of good assets with a lot of good sponsors because I think Citi was good at it,” said Gary Mozer, principal at George Smith Partners, a real estate investment firm in Los Angeles. “They were just a victim of the times.”
The unit’s properties are located in Asia, Europe and the U.S., the person familiar with the deal said.
Kelly Nugent, an outside spokeswoman for Apollo, and Shannon Bell, a Citigroup spokeswoman, declined to comment.
Citi Property Investors may have financed about $9.1 billion of its purchases, based on bank announcements that it raised about $3.4 billion in equity in 2006 and 2007, according to Anderson. The unit’s North American fund fell 28 percent at an annualized rate from November 2006 through June 2009, according to the annual report of the New York State Teachers’ Retirement System, which held almost $17 million in the fund.
In November 2007, Citi Property Investors’ Asia fund bought three office buildings in Taipei at a record price for a single property transaction in Taiwan, its first real estate deal in that country, the Taipei-based, Chinese-language Commercial Times reported, without citing a source. Citi paid close to NT$10 billion ($315 million) to CLSA’s securities unit for the buildings, the newspaper reported.
Apollo signed a letter of intent and the purchase may take as long as three months to close, the person with knowledge of the deal said. The firm plans to keep the Citi Property staff, according to the person.
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