Apollo Global Management is putting $1 billion to work in everyday retail real estate — properties with tenants such as Dollar General, CVS and grocery stores — through a new joint venture with net-lease giant Realty Income.
The deal gives New York's Apollo a 49% stake in roughly 500 single-tenant retail properties. Realty Income, a San Diego-based real estate investment trust, retains majority control and would continue to manage the assets.
The structure creates a replicable financing model for cheaper capital that bypasses the public equity markets entirely. Realty Income CEO Sumit Roy called the deal a "template" for multibillion-dollar co-investing relationships in the United States.
Arrangements of REITs turning to private firms started showing up recently in the data center sector, where there has been a growing need for vast amounts of capital.
For example, Equinix, one of the world's largest digital infrastructure companies, signed a joint venture agreement with Singapore-based GIC Real Estate and the Canada Pension Plan Investment Board in late 2024 with the intent to raise over $15 billion for data center development in the U.S.
The trend has expanded since then. Late last year, healthcare REIT Welltower closed its Seniors Housing Fund I with $2.5 billion in total equity commitments, with the Abu Dhabi Investment Authority as the anchor investor. About 50% of committed equity capital has been deployed.
The Apollo transaction moves the structure deeper into the REIT sector.
"As cost of capital remains a key differentiator, structures like this will continue to reshape how real estate is financed across both public and private platforms," Scott Merkle, managing partner of SLB Capital Advisors, said in a statement. SLB, a real estate firm focused on sale-leasebacks, was not involved in the Apollo deal.
Merkle added that the transaction underscores the continued evolution of sale-leaseback and net-lease capital into structured partnerships.
"The ability to access large-scale private capital at a defined cost of equity represents a compelling alternative to traditional public market funding," he said.
Net-lease properties favored by Realty Income have become attractive to big institutional players such as private equity giant Blackstone, the world's largest commercial property owner. In a net-lease arrangement, tenants are required to cover some or all of the building maintenance, taxes and insurance costs, in addition to the base rent.
The Apollo-Realty Income venture strengthens Realty Income's balance sheet without diluting public shareholders' holdings in the REIT, according to analysis cited by the firm.
"This structured equity funding arrangement with Apollo is expected to unlock a source of meaningful savings relative to our long-term cost of public equity capital," Realty Income Chief Financial Officer Jonathan Pong said in a statement. He added that the cost of capital in the future is expected to be priced independently of public markets, thus supporting a more stable source of funding.
Apollo partner Jamshid Ehsani called the venture "a landmark deal in the public REIT space." The companies said if the model scales as they intend, it could fundamentally alter how investment-grade REITs fund acquisitions.
Apollo's capped internal rate of return is fixed at 6.875%, well below Realty Income's estimated long-term public equity cost of 7% to 12%, according to Realty Income.
The joint venture portfolio carries $140 million in annualized base rent across about 500 U.S. retail properties. The weighted average lease term stands at 9.1 years. Dollar stores represent the largest tenant concentration at 9.9% of base rent, followed by quick-service restaurants at 8.3% and drug stores at 7.9%.
Investment-grade tenants account for 28% of base rent, slightly below Realty Income's broader corporate portfolio that sits at 32.2%, according to Realty Income.
The transaction is expected to close on March 31.