Inside MaxCap’s Milestone Deal with Apollo

It was a date with destiny says MaxCap co-founder Brae Sokolski of the game-changing partnership deal the leading Australian non-bank lender has inked with US investment giant Apollo Global Management.

Touted as the biggest ever deal for Australia’s non-bank sector, both numerically and in terms of its potential future impact on the nation's evolving lending landscape, it is the fulfilment of a long-planned strategic milestone for MaxCap.

Sokolski and co-founder Wayne Lasky have signed over a 50 per cent equity stake in their unlisted commercial real estate debt and investment company to global goliath Apollo, which has $472 billion in assets under management.

According to Sokolski, however, it was never just about finding a partner willing to pay the right price.

"It was legitimately about finding the right partner for the long-term benefit of the business and to achieve the bold ambitions of Wayne and myself," he told The Urban Developer.

"So, we threw the net far and wide."

The formal process began about 12 months ago with a call for expressions of interest that attracted huge interest and approaches from a who’s who list of 60 global players.

“But it’s not something that happened overnight,” Sokolski said.

“We’ve always had the intent to bring in a strategic partner. This has been 15 years in the making ... we were just waiting for the right time.

“It was an incredibly intense process and harder in the context of Covid.

“It’s like dating online. It’s not quite the same as being face to face so it made it more difficult but it was evident really early on that they [Apollo] just got Wayne and I as individuals, and there was this strong mutual respect immediately between the parties and we just liked them as people.”

Sokolski said interest came mainly from “very large global fund management businesses that saw the Australian commercial real estate market as particularly attractive and MaxCap as a really compelling vehicle for them to deploy capital”.

“We did have a shortlist and, honestly, we were incredibly flattered by that shortlist,” he said.

“There were some other hugely successful globally significant organisations in that list ... but in our mind Apollo were always a standout, not just by virtue of their size and scale but also just from a chemistry perspective, and them genuinely buying into the culture of MaxCap and the way Wayne and I run the business and want to run the business in the future.

"We didn’t want to be just another acquisition for a large multinational that wouldn’t really matter whether it worked or not.

"It had to be more than just about the investment in the business and the upside on the business growth.

“When you’re bringing in a partner and you’re wanting to stay as heavily involved as we are ... more critical than any other consideration is ensuring that you actually get on and like the people that you’re partnering with.

“Essentially, it’s the same as making a decision about any important relationship in your life.”

Not only is MaxCap’s partnership coup a major boost to the Melbourne-based company’s value but also to its firepower in taking on the major banks in Australia’s $300 billion commercial real estate lending market.

Sokolski said there had been a tectonic shift in the sector in recent years and the Apollo partnership was "a harbinger for more institutional capital flowing into the Australian marketplace and a win-win for everyone".

“This is going to be a game-changer not just for our business but for the entire industry,” he said.

“Wayne and I have a very deliberate strategy on where we want MaxCap to be in the next five years and this is an enabler.

“We legitimately want to be seen as the number one lender in real estate in this country and take the banks head-on. We can’t do that alone.

“At the moment we’re playing an important role and filling a niche but there’s a lot of other areas in real estate debt and investment that we want to target, particularly when you look at investment loans, lower-yielding opportunities for core and core-plus assets that we don’t have the capital to meet demand for,” Sokolski said.

“It’s about being the full solution real estate lender across the cycle, across the capital stack, across all geographies, across all asset classes.

“Apollo bring the capital to enable that ... and they see MaxCap as being a ready-made vehicle for them to deploy capital and that’s why it’s such a mutually beneficial relationship and there’s such great synergies between the organisations.

"It's a very logical marriage between the two companies—us having such a strong frontline and volume of deal flow, and them having an incredibly significant war chest of capital.

“They have what we don’t have and we have what they don’t have. So, we are perfectly aligned in that regard.”

Apollo co-president Scott Kleinman said Australia and its partnership with MaxCap offered significant long-term opportunities for the New York-listed company.

“This is an exciting opportunity to expand our origination capabilities, support the strong management team and together leverage our highly complementary platforms and expertise,” he said.

Apollo’s real estate senior partner, Philip Mintz, said MaxCap’s strong track record of origination, its market positioning in Australia and New Zealand, and its performance made them "a partner of choice" for investors and borrowers alike.

“Together, we see significant opportunity ahead as the non-bank real estate credit market continues to grow in the region,” he said.