Apollo Commercial Real Estate Finance (ARI), a US-based real estate investment trust (REIT) that lends against commercial properties, has announced its intention to liquidate. The New York-listed firm said it would sell off its remaining assets and distribute the proceeds to shareholders, effectively winding down operations. The decision follows a prolonged period of underperformance driven by mounting losses on office and retail loans.
The company, which is externally managed by an affiliate of Apollo Global Management, has seen its share price fall by more than 60 per cent over the past two years. In a statement, the board said that a strategic review had concluded that a liquidation was in the best interests of stockholders. The move underscores the deepening distress in the US commercial real estate sector, where higher interest rates and a shift to remote working have crushed demand for office space.
For UK investors, the situation serves as a cautionary tale. Many British pension funds and institutional investors hold exposure to US commercial real estate through similar REITs and private credit funds. The Bank of England has previously warned that UK lenders face significant risks from losses on US commercial property loans, particularly those tied to offices in major cities such as New York and San Francisco.
Analysts at Jefferies noted in a recent report that the liquidation of ARI could trigger a broader reassessment of valuations across the sector. 'If a well-capitalised lender like Apollo is forced to exit, it suggests that underlying asset values may be significantly lower than book values,' they wrote. The news comes as UK commercial property also faces headwinds, with the MSCI UK Monthly Property Index showing a 12 per cent decline in capital values over the past year.
Shareholders in ARI are expected to receive distributions over the next 12 to 18 months, though the final amount will depend on the sale prices achieved for the loan portfolio. The company has not yet provided a timeline for the liquidation process.