Sang Yu
Partner, Real Assets at Apollo Global Management
Where in the capital stack are you most comfortable playing today, and where are you finding the best lending opportunities?
We are relatively agnostic as to whether we are senior or subordinate in the capital stack — as long as we have conviction in the underlying property’s business plan, the sponsor and their ability to effectuate the plan, the market and, most importantly, the transaction’s structure and intercreditor agreement. When we are in the subordinate position, we have a seat at the table with respect to negotiating the documents and structuring the transaction to ensure we are adequately secured. Given the volatility in today’s market, we are finding attractive risk-adjusted returns in both the senior loan market and the subordinate loan market, which currently is becoming more relevant as leverage levels are being cut back and the need for subordinate loans has increased. Luckily at Apollo, we have balance sheet capital with an appetite to lend across the risk/return spectrum.
What’s your best piece of advice for borrowers seeking financing during turbulent times?
Certainty of execution is of the utmost importance in this volatile market, so it is paramount to work with a lender you trust, who has a track record of lending through all market environments, and who can show up at the closing table without changing loan terms. As a balance sheet lender, Apollo has the ability to commit to large loans, without the need to syndicate it. There are not that many other lenders who can speak for large loans on their own.
Would you rather finance a well-established sponsor on a Class B office renovation in New York City, or the first-time developer of a multifamily project in the Sun Belt today? Discuss.
If we learned anything after the pandemic, it was that quality of sponsorship really matters. Throughout COVID, we found that our institutional, well-capitalized sponsors understood the long-term value in their assets and were willing to put additional equity into their transactions in exchange for some relief on their loans. While we do not love Class B office in New York city, every deal we do is a bottom-up underwriting and, if we believe in an experienced, well-capitalized sponsor’s ability to implement a business plan, we would consider it. Right now, cap rates on
multifamily assets, even in strong Sun Belt markets, are continuing to widen, but we think there will still be further price adjustments and, in the current market environment, these assets have negative leverage.
What would you do differently during the next pandemic?
Lighting Round: Would you rather…
Do a 30-day all-haggis diet or extend a suburban mall loan for three years?
All-haggis diet.
Traverse Jurassic Park on foot, or relive 2008?
Jurassic Park.
Babysit triple infants who just ate their weight in beans or finance Adam Neumann’s latest venture?
Infants.
Be paid in crypto or Nestle Crunch bars?
Crypto.
