Apollo Commercial Shareholders Approve REIT’s Liquidation and Dissolution

Share this article!

Shareholders of Apollo Commercial Real Estate Finance have approved the mortgage REIT’s complete liquidation and dissolution, clearing the way for a company that began the year with roughly $9 billion of commercial real estate loans to finish winding down.

At a Sept. 29 special meeting, 72,217,727 shares voted for the dissolution proposal, 799,088 voted against it and 439,400 abstained, according to the company’s Sept. 29 Form 8-K. About 57.1% of outstanding shares were represented at the meeting.

The vote converts what had been a board recommendation into an approved wind-down plan. Apollo Commercial, which trades on the New York Stock Exchange as ARI, is an externally managed mortgage REIT that historically originated and held commercial real estate debt.

A $9 billion portfolio sale set the stage

The company’s path toward dissolution accelerated in January, when it agreed to sell essentially its entire commercial real estate loan portfolio to Athene Holding for a purchase price based on 99.7% of total loan commitments, net of asset-specific credit reserves. The transaction covered approximately $9 billion of loans, with two loans totaling $146 million expected to repay before closing.

The asset sale closed April 24. After repaying financing facilities and other debt, Apollo Commercial evaluated new real estate strategies, M&A and other alternatives. In June, its board concluded that liquidation and dissolution were in shareholders’ best interests.

The company paid a $3.75-per-share dividend in July that it said would be predominantly classified as a return of capital. The definitive proxy for Tuesday’s vote laid out a plan to sell remaining properties, settle liabilities and distribute net proceeds to shareholders.

External management agreement will end

Apollo Commercial, its operating subsidiary and ACREFI Management also entered into a termination agreement Sept. 29. The management agreement will terminate when Maryland accepts the company’s articles of dissolution and they become effective.

ACREFI Management waived any termination fee, while Apollo Commercial agreed to pay accrued unpaid management compensation and reimbursable expenses through the applicable wind-down date.

Shareholders separately approved, on a nonbinding advisory basis, compensation that may become payable to named executive officers in connection with the liquidation plan. That proposal received 68,240,751 votes for, 4,229,423 against and 986,035 abstentions.

What remains

The shareholder vote does not mean the company disappears immediately. Apollo Commercial still must complete the formal dissolution process, dispose of remaining assets, settle obligations and distribute remaining value.

For commercial real estate finance, the wind-down is notable because it removes a long-established public mortgage REIT from the lending market after a single transaction transferred nearly its entire loan book. It also illustrates how quickly a balance-sheet lender can move from portfolio sale to liquidation when a board concludes that redeploying capital does not offer shareholders an attractive enough risk-adjusted return.