Weekly Real Estate News
Summary
Apollo Commercial Real Estate Finance expects November 6 to be its last NYSE trading day before transferring remaining assets and liabilities to a liquidating trust. Shareholders face a $4.10 initial distribution and generally nontransferable trust interests.
Apollo Commercial Real Estate Finance expects its shares to trade on the New York Stock Exchange for the final time November 6, setting a deadline for investors before the commercial mortgage REIT transfers its remaining assets into a liquidating trust whose interests generally cannot be sold.
The timetable, disclosed in an October 16 filing with the Securities and Exchange Commission, moves the company closer to dissolution after shareholders approved its liquidation September 29. Apollo Commercial said it expects to file a Form 25 delisting notice around October 27, end NYSE trading November 6 and deregister with the SEC around November 9. Those are projected dates, not completed actions.
Investors will not simply receive cash in exchange for their shares when the stock stops trading. The company plans to transfer its remaining assets and liabilities to a Maryland statutory trust and then distribute one beneficial interest in the trust for each outstanding common share. Except for limited transfers such as inheritance or operation of law, those interests will be nontransferable and will not trade on an exchange.
That distinction makes the coming weeks consequential for shareholders. Anyone holding through the transition may have to wait for trustees to sell assets, resolve liabilities and determine when further payments can be made. The company has not promised a final distribution date or amount.
A $4.10 distribution comes first — with an unusual trading rule
The October 16 update follows another important announcement: on October 9, Apollo Commercial declared an initial cash liquidating distribution of $4.10 per share, payable October 29 to shareholders of record October 20. The New York Stock Exchange set October 30 as the ex-dividend date because the distribution represents more than 25% of the share price.
As a result, shares will trade with so-called due bills between October 20 and the close on October 29. A shareholder who sells during that period also transfers the right to the $4.10 distribution to the buyer, despite the earlier record date. Apollo warned that an investor wishing to retain the distribution must hold through October 29 and should consult a broker about the exchange’s due-bill process.
The record date alone therefore does not guarantee a seller will keep the payment. Nor should investors confuse the $4.10 initial distribution with the ultimate amount they may recover from the liquidation. Future payments depend on the remaining assets, obligations, expenses and reserves.
What remains after the $9 billion loan-portfolio sale
Apollo Commercial’s wind-down follows the April sale of its approximately $9 billion commercial real estate loan portfolio to Athene Holding, a transaction that substantially changed the REIT’s balance sheet and left the company focused on realizing value from its remaining holdings.
Earlier liquidation materials described a mix of cash, real estate owned and debt following that transaction. Those historical figures are not a current valuation of the trust’s future assets. The amount ultimately available for distribution will depend on the sale prices realized, carrying costs, debt repayment, claims and reserves. Apollo has not provided a binding per-share recovery figure in the October 16 filing.
Shareholders approved the plan at a September 29 special meeting, as Weekly Real Estate News previously reported. Friday’s filing is a separate material development: it provides the expected final trading date and describes how ownership will change once the company moves into the trust.
Trust interests will be difficult to exit
The liquidating trust is intended to preserve and realize the value of remaining assets while satisfying or providing for liabilities. Apollo expects ACREFI Management LLC, or an affiliate, to manage the trust’s day-to-day operations. The trustees will decide the timing and amount of additional liquidating distributions.
Because beneficial interests generally cannot be transferred, holders will lose the liquidity normally provided by public stock trading. That restriction could matter to funds with mandates requiring exchange-traded securities, investors who need access to capital and shareholders who prefer to sell rather than await the outcome of asset disposals.
The company said the trust is expected to file annual reports on Form 10-K containing unaudited financial statements and current reports on Form 8-K under its existing SEC file number, based on SEC guidance in comparable circumstances. That would provide some continuing public disclosure, though it is not equivalent to owning freely tradable stock in an operating REIT.
Tax treatment may also vary. Apollo directs investors to the SEC filings associated with its liquidation plan for discussion of potential federal income-tax consequences and cautions that individual circumstances can produce different outcomes. The October 16 update does not establish a single tax result for every holder.
The broader commercial mortgage market will not experience an immediate transfer of Apollo’s former $9 billion loan book as a result of November’s delisting; that portfolio sale already closed in April. The approaching change primarily concerns the company’s remaining assets and the rights of its shareholders. The key unanswered question is how much value those assets will produce after obligations are settled, and how long investors will wait to receive it.
