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| 8-K - FORM 8-K - Apollo Commercial Real Estate Finance, Inc. | d603855d8k.htm |
 Investor Presentation
September 2013
Information is as of June 30, 2013 except as otherwise noted.
It should not be assumed that investments made in the future will be
profitable or will equal the performance of investments in this document.
Exhibit 99.1 |
 1
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Legal Disclaimer
We make forward-looking statements in this presentation and other
filings we make with the SEC within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
and such statements are intended to be covered by the safe harbor
provided by the same. Forward-looking statements are
subject to substantial risks and uncertainties, many of which are
difficult to predict and are generally beyond our control.
These forward-looking statements include information about
possible or assumed future results of our business, financial
condition, liquidity, results of operations, plans and objectives.
When we use the words “believe,” “expect,” “anticipate,”
“estimate,” “plan,” “continue,”
“intend,” “should,” “may” or similar expressions, we intend to identify forward-looking
statements. Statements regarding the following subjects, among others,
may be forward-looking: our business and investment
strategy; our operating results; our ability to obtain and maintain financing arrangements; the return on equity,
the yield on investments and risks associated with investing in real
estate assets, including changes in business conditions and the
general economy. The forward-looking statements are based on our beliefs,
assumptions and expectations of our future performance, taking
into account all information currently available to us.
Forward-looking statements are not predictions of future events.
These beliefs, assumptions and expectations can change as a result of
many possible events or factors, not all of which are known to
us. Some of these factors are described under “Risk Factors,” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” as included in
Apollo Commercial Real Estate Finance, Inc.’s (“ARI”)
Annual Report on Form 10-K for the fiscal year ended December 31,
2012 and other periodic reports filed with the Securities and
Exchange Commission. If a change occurs, our business, financial condition, liquidity and results of
operations may vary materially from those expressed in our
forward-looking statements. Any forward-looking statement
speaks only as of the date on which it is made. New risks and
uncertainties arise over time, and it is not possible for us to
predict those events or how they may affect us. Except as required by
law, we are not obligated to, and do not intend to, update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This presentation may contain statistics and other data that in some
cases has been obtained from or compiled from information made
available by third-party service providers. Past performance is not indicative nor a guarantee of future
returns. Index performance and yield data are shown for illustrative purposes
only and have limitations when used for comparison or for other
purposes due to, among other matters, volatility, credit or other factors (such as number and types of
securities). Indices are unmanaged, do not charge any fees or
expenses, assume reinvestment of income and do not employ
special investment techniques such as leveraging or short
selling. No such index is indicative of the future results of any
investment by ARI.
|
 2
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Company Overview
Ticker (NYSE)
ARI
Equity
Capitalization
(1)
$676 million
Dividend
per
Common
Share
(2)
$1.60
Portfolio as of 6/30/2013
$733 million
Levered Weighted Average Portfolio IRR as of 6/30/2013
(4)
14.2%
Dividend
Yield
(3)
10.0%
Apollo Commercial Real Estate Finance, Inc. is
a commercial mortgage real estate investment
trust focused on investing in performing senior
and subordinate mortgage loans and
commercial mortgage-backed securities
(1)
Includes common equity market capitalization as of September 23, 2013
and preferred equity outstanding at June 30, 2013.
(2)
Current dividend per common share of $0.40 annualized.
(3)
Based upon the annualized current dividend per common share and
ARI’s closing common share price of $15.99 on September 23, 2013.
(4)
The Internal Rate of Return (“IRR”) reflects the returns on
the investments in the Company’s portfolio underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early
prepayments or defaults but assumes extensions are exercised and that
the cost of borrowings and derivative instruments under the Company’s master repurchase agreement with Wells Fargo Bank N.A. (the
“Wells Facility”) remains constant over the remaining terms
and extension terms under the facility. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are
exercised. With respect to the mezzanine loan for the New York City
multifamily condominium conversion that closed in December 2012 and the mezzanine loan for the New York City condominium construction
that closed in January 2013, the IRR calculation assumes certain
estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, as well as
assuming no defaults. IRR is the annualized effective compounded
return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a
percentage of the investment. It is the discount rate that makes the net
present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on investment). It is derived
from the negative and positive cash flows resulting from or produced by
each transaction (or for a transaction involving more than one investment, cash flows resulting from or produced by each of the
investments), whether positive, such as investment returns, or negative,
such as transaction expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected
to occur, and compounding interest accordingly. See “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and subsequent filings by ARI,
for a discussion of some of the factors that could adversely
impact the returns received by the Company from the investments over time. Substantially all of the Company’s borrowings under the Company's master repurchase
facility with JPMorgan Chase Bank, N.A. (the "JPMorgan
Facility") were repaid. The Company's ability to achieve its levered weighted average underwritten IRR is additionally dependent upon the
Company re-borrowing approximately $53 million under the
JPMorgan Facility or any replacement facility. Without such re-borrowing, the levered weighted average IRR with regard to its portfolio of first mortgage
loan will be significantly lower than the amount shown above, as
indicated by the current weighted average underwritten IRR on slide 8. |
 3
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Investment Highlights
Experienced
Management Team
and Relationship
with Apollo
Stable Investment
Portfolio
Well Positioned in
Rising Interest Rate
Environment
Macro
Environment
Continues to Create
Opportunities
$1.6
trillion
of
commercial
mortgage
debt
will
mature
over
the
next
five
years
in
the
U.S.
(1)
Increased CRE transaction volume has led to increased need for
financing U.S.
CMBS
issuance
YTD
2013
is
$56.7
billion
compared
to
$28.1
billion
YTD
2012
(2)
Apollo’s CRE debt platform has invested $3.8 billion of equity
into $7 billion of CRE debt investments since 2009 Long standing
and deep relationships with global investment banks, insurances companies and CRE owners
Amortized
cost
basis
of
$733
million
with
a
levered
weighted
average
IRR
of
approximately
14.2%
(3)
Weighted average duration of 3.0 Years
Investments diversified by geographic region and underlying property
type Attractive Price
and Dividend Yield
34% of loans in the portfolio have floating interest rates; Fixed rate
loans had WAC of 11.1% at June 30, 2013 ARI continues to be
low-levered; As of June 30, 2013, the debt-to-common equity ratio was 0.4:1
As loans mature or pay-off, ARI can re-deploy capital in a
higher rate environment As of September 23, 2013
10.0% dividend yield
0.98 price/book, based upon June 30, 2013 book value per common share
of $16.26 Capacity to structure and underwrite complex
transactions across a broad spectrum of property types (1)
Source: Trepp, LLC
(2)
Source: Commercial Mortgage Alert, September 17, 2013
(3)
The IRR for the investments listed reflect the returns
underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assumes extensions as well as the cost of borrowings and
derivative instruments under the Wells Facility. The calculation also
assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised. With respect to the mezzanine loan for the New York City multifamily
condominium conversion that closed in December 2012 and the mezzanine
loan for the New York City condominium construction that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude
of future fundings for the remaining commitments and associated loan
repayments, as well as assuming no defaults. IRR is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return
on an investment over a holding period expressed as a percentage of the
investment. It is the discount rate that makes the net present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on
investment). It is derived from the negative and positive cash flows
resulting from or produced by each transaction (or for a transaction involving more than one investment, cash flows resulting from or produced by each of the investments), whether
positive, such as investment returns, or negative, such as transaction
expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected to occur, and compounding interest accordingly. See “Risk
Factors” in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2012, and subsequent filings by ARI, for a discussion of some of the factors that could adversely impact the returns received by the Company from the
investments over time. Substantially all of the Company’s
borrowings under the JPMorgan Facility were repaid. The Company's ability to achieve its levered weighted average underwritten IRR is additionally dependent upon the Company re-
borrowing approximately $53 million under the JPMorgan Facility or any
replacement facility. Without such re-borrowing, the levered weighted average IRR with regard to its portfolio of first mortgage loan will be significantly lower than the
amount shown above, as indicated by the current weighted average
underwritten IRR on slide 8. |
 4
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
CRE Debt Market Overview
$1.6
trillion
of
commercial
mortgage
debt
is
maturing
in
the
next
five
years
in
the
U.S.
(1)
U.S.
CMBS
issuance
is
gaining
momentum
but
is
significantly
lower
than
the
2005-2007
peak
levels
(2)
Pricing in the CMBS market has stabilized
U.S. CRE Loan and CMBS Maturities
(1)
(1)
Source: Trepp, LLC
(2)
Source: Commercial Mortgage Alert, September 2013
(3)
Source: JP Morgan
$210
$185
$156
$112
$85
$24
$23
$22
$24
$23
$62
$67
$102
$112
$133
$72
$69
$59
$59
$52
$0
$100
$200
$300
$400
2013
2014
2015
2016
2017
Bank
Insurance Company
CMBS
Other
U.S. CMBS Issuance
(2)
Lack of Issuance
Flood of Capital
New-Issue
10-Year
AAA
and
BBB
Spreads
Over
Swaps
(3)
$293
$368
$344
$339
$307 |
 5
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
CRE Property Market Overview
Commercial property transaction volume is accelerating, leading to an
increased need for financing U.S. commercial property values have
increased 32% from the March 2010 trough, and 39% in major
markets
(1)
U.S. CRE Property Sales Volume
(2)
Moody’s/RCA
Commercial
Property
Price
Index
(1)
(1)
Source: Moody’s and Real Capital Analytics. Index is equal to
100 as of 12/31/2000 (2)
Source: Wells Fargo and Real Capital Analytics
Price
recovery
has
led
to
an
increase
in
CRE
transactions,
which
leads
to
an
increased
need
for
CRE
debt
financing
0
25
50
75
100
125
150
175
200
225
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
National All-Property
Major Markets (All-Property)
Non-Major Markets (All-Property) |
 6
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Apollo Global Management LLC’s Platform
Private Equity
$40bn
AUM
Opportunistic buyouts
Distressed buyouts and debt
investments
Corporate carve-outs
Credit
(3)
$62bn
AUM
U.S. Performing Credit
Opportunistic Credit
European Credit
Non-Performing Loans
Structured Credit
Athene
Real Estate
$9bn
AUM
Residential and commercial
Global private equity and
distressed debt investments
Performing fixed income
(CMBS, CRE Loans)
Firm Profile
(1)
Founded:
1990
AUM:
$113 bn
(2)
Employees:
660
Inv. Prof.:
253
Global
Offices:
9
Investment Approach
Value-oriented
Contrarian
Integrated investment
platform
Opportunistic across market
cycles and capital structures
Focus on nine core
industries
Principal Investment Businesses
(1)
(1)
As of June 30, 2013
(2)
Includes $1.2 billion of commitments that have yet to be deployed into
one of the funds managed by Apollo Global Management LLC’s (together with its subsidiaries, “Apollo”) three business segments. Please refer to slide 15 for a definition of Assets Under Management
(3)
Includes six funds that are denominated in Euros and translated into
U.S. dollars at an exchange rate of €1.00 to $1.30 as of June 30, 2013
Global Footprint |
 7
ARI’s Competitive Advantages
Ability to underwrite transactions with complexity in
execution, operations or structure
Proven track record to negotiate and execute transactions
quickly
“Solutions
provider”
for
sponsors
and
sectors
in
need
of
capital
“First
Call”
for
Wall
Street
firms,
brokers
and
borrowers
for subordinate debt
Leverage off of Apollo’s relationships and reputation
– Apollo’s CRE Debt Platform has invested $3.8 billion
of equity into $7 billion of CRE debt investments since
2009 Recent Strategic Focus
NYC Construction/Conversion Transactions
In
the
past
12-months,
ARI
has
committed
to
~
$275
million
in
six
separate
NYC
transactions
and
~
$414
million
since
inception
Compelling risk adjusted returns achieved by targeting
transactions with an attractive basis, strong sponsorship
and creative structuring
Structured
as
first
mortgages,
mezzanine
loans
or
preferred
equity
NYC continues to be one of the strongest residential
markets,
with
a
2%
multifamily
vacancy
rate
(1)
Non-Core Opportunistic Investments
Triple Net Lease
Partnering with a best-in-class operator to target triple
net lease investments in secondary markets throughout
the United States
Expected to target $50 million equity deployment over
the next eighteen months
Minority Participation in KBC Bank Deutschland
Commitment to invest up to $50 million, representing
21% of the ownership of scalable German banking
platform
Expected
to
close
within
nine
months,
pending
antitrust
and regulatory approval
(1)
Source: Green Street Advisors
ARI Strategic Focus
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
|
 8
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Portfolio Overview
Asset Type
($000s)
Amortized
Cost
Borrowings
Equity
at Cost
Remaining
Weighted
Average Life
(years )
(1)
Current
Weighted
Average
IRR
(2)(3)
Levered
Weighted
Average
IRR
(4)
First Mortgage Loans
(2)
$143,492
$3
$143,489
2.1
11.0%
15.8%
Subordinate Loans
354,865
-
354,865
4.2
13.8
13.8
CMBS -
AAA
165,553
144,200
21,353
1.4
15.8
15.8
CMBS -
Hilton
69,521
47,109
22,412
2.4
12.6
12.6
Investments at June 30, 2013
$733,431
$191,312
$542,119
3.0 Years
13.1%
14.2%
As of June 30, 2013.
(1)
Remaining Weighted Average Life assumes all extension options are
exercised. (2)
Borrowings under the Company’s JPMorgan Facility bear interest at
LIBOR plus 250 basis points, or 2.7% at June 30, 2013. The IRR calculation further assumes the JPMorgan Facility or any replacement facility will remain available over the life of these
investments.
(3)
The
IRR
for
the
investments
shown
in
the
above
table
reflect
the
returns
underwritten
by
the
Manager,
calculated
on
a
weighted
average
basis
assuming
no
dispositions,
early
prepayments
or
defaults
but
assumes
extensions
are
exercised
and
that
the
cost
of
borrowings and derivative instruments under the Wells Facility remains
constant over the remaining terms and extension terms under this facility. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are
exercised. With respect to the mezzanine loan for the New York City
multifamily condominium conversion that closed in December 2012 and the mezzanine loan for the New York City condominium construction that closed in January 2013, the IRR calculation
assumes certain estimates with respect to the timing and magnitude of
future fundings for the remaining commitments and associated loan repayments, as well as assuming no defaults. IRR is the
annualized effective compounded return rate that accounts for the
time-value
of
money
and
represents
the
rate
of
return
on
an
investment
over
a
holding
period
expressed
as
a
percentage
of
the
investment.
It
is
the
discount
rate
that
makes
the
net
present
value
of
all
cash
outflows
(the
costs
of
investment)
equal
to
the
net
present
value
of
cash
inflows
(returns
on
investment).
It
is
derived
from
the
negative
and
positive
cash
flows
resulting
from
or
produced
by
each
transaction
(or
for
a
transaction
involving
more
than
one
investment,
cash
flows
resulting
from
or
produced
by
each
of
the
investments), whether positive, such as investment returns, or negative,
such as transaction expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected to occur, and compounding interest accordingly.
There can be no assurance the actual IRRs will equal the underwritten
IRRs shown in the table. See “Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and subsequent filings by ARI, for a discussion of some
of the factors that could adversely impact the returns received by the
Company from the investments shown in the table over time.
(4)
Substantially
all
of
the
Company’s
borrowings
under
the
JPMorgan
Facility
were
repaid.
The
Company's
ability
to
achieve
its
underwritten
levered
weighted
average
IRR
with
regard
to
its
portfolio
of
first
mortgage
loans
is
additionally
dependent
upon
the
Company re-borrowing approximately $53,000 under the JPMorgan
Facility or any replacement facility. Without such
re-borrowing, the levered weighted average IRRs will be as indicated in the current weighted average IRR column above. |
 9
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Net Invested Equity at Amortized Cost Basis
Gross Assets at Amortized Cost Basis
Geographic Diversification by Net Equity
Property Type by Net Equity
As of June 30, 2013
(1) Other category includes the subordinate financing on a ski
resort and a first mortgage loan on a development site with income producing parking lots.
Portfolio Diversification |
 10
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Loan Portfolio Overview
Fully
Extended
Loan
Maturity
Schedule
($000s)
(1)(2)
As of June 30, 2013
(1) Based upon Face Amount of Loans; Does not include CMBS (AAA or
Hilton). (2) For the NYC condominium conversion loan that closed
in December 2012 and the NYC condominium construction loan that closed in January 2013, the maturities reflect the fully funded amounts of the loans.
Loan Position and Rate Type
(1)
$16.9
$44.0
$116.8
$98.1
$120.0
$84.9
$-
$8.9
$-
$16.4
$32.0
$0
$20
$40
$60
$80
$100
$120
$140
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
66% Fixed Rate with an 11.1% WAC
34% Floating Rate
Senior Loan Fixed
17%
Subordinate Loan
Fixed
49%
Subordinate Loan
Floating
22%
Senior Loan
Floating
12% |
 11
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Recent Transactions
NYC Condominium Mezzanine Loan
$60 million mezzanine loan commitment secured by the pledge of
preferred equity interests in a 352,624 net salable square foot,
146-unit condominium tower being constructed in downtown New
York City. On a fully funded basis, the Company’s loan
basis represents an underwritten loan- to-net sellout of
approximately 48% Underwritten IRR
(1)
~ 16%
Warehouse Portfolio Mezzanine Loan
$32 million mezzanine loan commitment secured by pledge of the equity
interests in the owner of a portfolio of 15 warehouse facilities
totaling 2.8 million square feet spanning nine states
Part of a $322 million, ten-year, fixed rate financing comprised of
the $32 million junior
mezzanine
loan,
a
$70
million
senior
mezzanine
loan
and
a
$220
million
first mortgage loan
Underwritten
LTV
–
75%
Underwritten IRR
(1)
~ 12%
(1)
The IRR for the investment listed reflects the returns underwritten by
the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assumes extensions as well as the cost of borrowings and derivative instruments under
the Wells Facility.With respect to the mezzanine loan for the New York
City condominium development that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments
and associated loan repayments, as well as assuming no defaults.
IRR is the annualized effective compounded return rate that accounts
for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the
investment. It is the discount rate that makes the net present value of
all cash outflows (the costs of investment) equal to the net
present value of cash inflows (returns on investment). It is derived from the negative and positive cash flows resulting from or produced by each
transaction (or for a transaction involving more than one investment,
cash flows resulting from or produced by each of the investments), whether positive, such as investment returns, or negative, such as transaction expenses or other costs of investment, taking into account
the
dates
on
which
such
cash
flows
occurred
or
are
expected
to
occur,
and
compounding
interest
accordingly.
There
can
be
no
assurance
the
actual
IRRs
will
equal
the
underwritten
IRRs
shown.
See
“Risk
Factors”
in
the
Company’s
Annual
Report
on
Form
10-K
for
the
year ended December 31, 2012, and subsequent filings by ARI, for a
discussion of some of the factors that could adversely impact the returns received by the Company from the investments over time. |
 12
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Portfolio Performance
Loan
Returns
–
All
Fully
Realized
Investments
Since
Inception
Since inception through September 23, 2013, ARI has had 6 loans fully
repay, representing ~$147.7 million of equity The repaid loans
resulted in a weighted average realized IRR of 17.0% and a multiple on invested capital (“MOIC”) of
1.31x
The
remaining
$43.7
million
of
equity
invested
in
CMBS
continues
to
outperform
projections
Bonds purchased at a premium continue to extend beyond the initial
underwriting No Realized or Projected Losses Across the
Portfolio Investment
Investment Date
Initial Equity
Investment
Realized IRR
MOIC
Mezzanine -
Retail
December 2009
$50,000,000
15.3%
1.45x
First Mortgage -
Hotel
(1)
August 2010
$8,556,000
17.5%
1.29x
Bridge Loan -
Multifamily
March 2011
$8,800,000
7.9%
1.01x
Repurchase Agreement
March 2011
$47,439,169
16.6%
1.23x
Mezzanine -
Hotel
March 2012
$15,000,000
19.2%
1.22x
First Mortgage -
Parking/Development Site
April 2012
$17,883,212
25.1%
1.31x
Total/Weighted Average
$147,678,381
17.0%
1.31x
(1)
IRR and MOIC represent the levered return, assuming the mortgage was
financed with 64% leverage on the JP Morgan Facility during the full term of the loan. |
 13
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Capitalization
Over the past 18-months, ARI completed three equity capital raises
totaling $355.7 million In
August
2012,
ARI
completed
an
underwritten
public
offering
of
3.45
million
shares
of
8.625%
Series
A
Cumulative Redeemable Perpetual Preferred Stock, raising net proceeds
of $83.2 million In
October
2012,
ARI
completed
an
underwritten
public
offering
of
7.4
million
shares
of
common
stock
at
a
price of $16.81 per share, raising net proceeds of $124.1 million
In March 2013, ARI completed an underwritten public offering of 8.8
million shares of common stock at a price
of
$16.90
per
share,
raising
net
proceeds
of
approximately
$148.5
million
Capitalization
June 30, 2013
($ in thousands)
(unaudited)
Wells Fargo Facilility
191,309
JP Morgan Facility
3
Total Debt
$191,312
Preferred Equity
86,250
Common Equity
599,744
Total Equity Capitalization
$685,994 |
 14
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Investment Highlights
First call relationships for subordinate loan transactions
Experienced management team
Strong sponsorship through Apollo Global Management, LLC
Well positioned in a rising interest rate environment
Opportune time for CRE debt investing
Attractive 10.0% dividend yield |
 15
COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)
Definition of Assets Under Management
– refers to the
investments managed by Apollo Global Management, LLC, together with its subsidiaries
(“Apollo”), or with respect to which Apollo has control,
including capital Apollo has the right to call from its investors pursuant to their capital commitments to various
funds managed by Apollo. AUM equals the sum of: (i) the fair value of
Apollo’s private equity investments plus the capital that Apollo is entitled to call from its investors
pursuant to the terms of their capital commitments to the extent a fund
is within the commitment period in which management fees are calculated based on total
commitments to the fund; (ii) the net asset value of the credit funds
managed by Apollo, other than certain collateralized loan obligations or certain CLOs, which Apollo
measures by using the mark-to-market value of the
aggregate principal amount of the underlying CLO and collateralized debt obligation credit funds that have a fee
generating basis other than mark-to-market assets or
liabilities, plus used or available leverage and/or capital commitments; (iii) the gross asset value or net asset value
of Apollo’s real estate entities and the structured portfolio
company investments included within the funds Apollo manages, which includes the leverage used by such
structured portfolio companies; (iv) the incremental value associated
with the reinsurance investments of the portfolio company assets that Apollo manages; and (v) the
fair value of any other investments that Apollo manages plus unused
credit facilities, including capital commitments for investments that may require pre-qualification
before investment plus any other capital commitments available
for investment that are not otherwise included in the clauses above. The AUM measure includes AUM
for which Apollo charges either no or nominal fees. The definition of
AUM is not based on any definition of AUM contained in Apollo’s operating agreement or in any of
Apollo’s fund management agreements. Apollo considers multiple
factors for determining what should be included in the definition of AUM. Such factors include but are
not limited to (1) Apollo’s ability to influence the
investment decisions for existing and available assets; (2) Apollo’s ability to generate income from the underlying
assets in the funds it manages; and (3) the AUM measures that Apollo
uses internally or believes are used by other investment managers. Given the differences in the
investment strategies and structures among other alternative investment
managers, Apollo’s calculation of AUM may differ from the calculations employed by other
investment managers and, as a result, this measure
may not be directly comparable to similar measures presented by other investment managers.
Assets Under Management (“AUM”) Definition |