Yet another milestone passed last week in the consolidation and aggregation of major private asset platforms with the announcement by Apollo Global Management that it will acquire real estate firm Bridge Investment Group in an all-share deal valued at about US$1.5 billion.
The deal is “highly aligned with Apollo’s strategic focus on expanding our origination base in areas of our business that are growing but not yet at scale”, according to David Sambur, partner and co-head of equity at Apollo. “Bridge brings a seasoned team with deep expertise and a strong track record in their sectors.”
Apollo has real estate assets under management of around $77 billion, which should increase to around $115 billion with the deal, according to Morningstar, which also said the merger should help Apollo diversify its asset base away from its historic concentration on private equity, debt investments and insurance.
Recent performance expectations around private real estate have firmed up, which may help underscore the rationale for the deal.
According to BlackRock’s recent private markets outlook for 2025, “after a challenging two-year downturn, we believe the real estate sector is now poised to benefit from a number of economic tailwinds, with both cyclical and structural trends at play”. Prices in decline over the past couple of year in Western markets, partly from high interest rates on this leveraged asset class, are now showing signs of recovery, particularly in BlackRock’s high-conviction sub-sectors such as residential, industrial and logistics.
Bridge will operate as a standalone platform within Apollo’s asset management business after the merger with its existing brand, management team and key teams intact. Bob Morse, Bridge’s executive chairman, will become an Apollo partner and lead the firm’s real estate equity franchise.
The deal still leaves Apollo behind Blackstone’s roughly $602 billion real estate portfolio and somewhat ahead of KKR’s $80 billion.
According to the BlackRock report, “the new cycle will likely look very different compared to the period following the global financial crisis, with a relatively higher cost of capital and further dispersion between winners and losers”. Apollo clearly wants to be among the winners.
