Apollo Global Management LLC, the alternative-asset manager run by Leon Black, is buying the bulk of embattled real estate investor Nicholas Schorsch’s holdings.
Apollo will take a 60 percent in a new company called AR Global Investments, which will absorb about $19 billion now overseen by Schorsch, the New York-based firm said Thursday in a statement. Apollo will pay $200 million in cash and $178 million in stock for the stake in AR, which will manage real estate investment trusts and other investments, according to a presentation on the firm’s website.
Schorsch’s holdings were thrown into disarray in October when one of his REITs disclosed that it had accounting errors that were intentionally concealed. Apollo is also investing in RCS Capital Corp., a network of brokers that sell Schorsch’s REITs to retirees and other individual investors.
Schorsch, 54, resigned from RCS’s board in December but still controls the company through his stock ownership, according to a June regulatory filing. RCS shares fell 29 percent to $4.25 at 4:15 p.m. in New York trading and have lost more than half their value since the disclosure of the REIT’s accounting issues. Apollo was little changed at $20.14.
Apollo will invest $25 million in RCS and purchase RCS’s wholesale distribution business for $25 million, according to the statement. It also entered into a strategic agreement with Cetera Financial Group, a brokerage that is part of RCS.
Apollo and competitors including Ares Management LP and Fortress Investment Group LLC have sought to increase their permanent-capital investment offerings, including some types of REITs. Private equity pools traditionally must unload holdings and return capital to investors after 10 or more years.
“We believe AR Global will be well positioned to benefit from the growing trend among retail investors to seek yield-oriented investment solutions and at the same time drive meaningful growth for Apollo,” Apollo co-founder Marc Rowan said in the statement.
The deal lifts Apollo’s managed real estate assets to $27 billion from $10 billion, according to the statement, while the firm’s total assets, which include private equity and credit products, will rise by 12 percent to $182 billion.