Apollo Places Oakland Marriott City Center Hotel Into New Investment Fund

New York City-based Apollo Global Management has made two investments in the San Francisco Bay Area as part of its new closed-end commingled fund, Apollo U.S. Real Estate Fund II. This is according to a document from the San Bernardino County Employees’ Retirement Association.

A company representative of Apollo stated in an e-mail that the manager declined to comment when contacted for this story.

One of the investments for Fund II was the $84 million acquisition of the Oakland Marriott City Center hotel. The amount of equity that the commingled fund invested in the property was $32 million.

The 21-story property is a full-service hotel with control of 90,000 square feet of meeting space, which includes the Oakland Convention Center. A document from San Bernardino County spelled out the business plan for the property going forward. This involves a deep value-add capital improvement plan, implementing expense savings, which would lead to driving net operating income growth in the future.

Fund II has also made a $50 million allocation into a California industrial platform strategy. The targeted markets for this capital would include the San Francisco Bay Area and Los Angeles. The investment strategy for this capital is to acquire existing food-related distribution and processing facilities in infill California markets. A board meeting document from San Bernardino County document stated that this strategy is attractive as supply of this kind of real estate is muted due to the cost of specialized improvements and there is durability of demand from stable food sector.

San Bernardino County is planning to formally approve a $20 million allocation into Fund II as its board meeting on December 3rd. It was stated in a board meeting document that the planned total capital raise for the commingled fund is $750 million. The planned co-investment from Apollo is 5 percent of the total commitments for the fund.

The targeted gross IRR return for Fund II is 18 percent. In a board meeting document it was stated that the investment strategy calls for a focus on middle market properties across the top 25 metropolitan areas in the United States. This commingled fund is considered to have a value-add strategy.

Fund II will have four main investment strategies. These would include infill industrial assets, opportunistic office, hospitality repositioning and recovery and capital markets-driven opportunities.

1001 Broadway, Oakland, CA 94607