Last updated: February 10, 2012 4:02 pm

Apollo swings to $301m loss

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Apollo Global reported a full year loss as volatile markets hit the unrealised value of companies owned by the alternative asset manager.

Economic net income, a measure of profits that excludes certain costs relating to the group’s listing, was a loss of $301m compared with a $1.3bn gain in 2010.

The loss was largely caused by lower valuations within Apollo’s private equity and capital markets businesses, which reduced the carried interest, or share of investor profits which the asset manager accrues. The group also changed the way economic net income is calculated to reflect recurring aspects of employee stock-based compensation.

However, Apollo also generated $645m of cash from its share of investor profits, more than double that of the year before, a record for the group as it successfully sold businesses and realised investment gains.

Leon Black, founder and chief executive, said this “demonstrates the value of our integrated investment platform, particularly amid challenging market conditions.” Like listed peer Blackstone, the group has expanded beyond its roots in private equity into other alternative assets.

Assets under management rose to $75bn at the end of 2011, up 11 per cent year-on-year. The group attracted $3.8bn of new capital in the year, as it paid out over $5bn to investors in its funds. Assets were also boosted by acquisitions, including the purchase of CPI, a real estate business, and Gulf Stream, which manages $3bn in corporate loan assets.

The group is also due to complete the purchase of Stone Tower, another collatalised loan obligation, or CLO, business, which will add $17bn of investor capital.

The group made $1.2bn of investments by its private equity funds during the fourth quarter. Uncalled private equity commitments, or “dry powder”, currently stand at $2bn.

On Friday, the group also announced that it had completed the purchase of the 480-room Novotel Hotel in New York’s Times Square, in partnership with the Chartres Lodging Group. Terms of the deal were not disclosed.

Apollo declared a distribution of $0.46 per share for the fourth quarter of 2011, bringing full-year distributions to $1.12 per share.

Analysts were disappointed by the profit numbers, but distributions were slightly ahead of expectations.

“We are encouraged by the strong underlying fundamentals and see 2012 as another robust year around capital raising,” said Bill Katz, analyst for Citigroup, in a note to clients.

Apollo shares were down 3 per cent by mid-morning in New York at $14.9 per share. The company sold shares to the public at $19 per share in March last year.

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