Exhibit 10.18

EXECUTION

CONFIDENTIAL

APOLLO GLOBAL REAL ESTATE MANAGEMENT, L.P.

9 West 57th Street

New York, NV 10019

June 2, 2008

Mr. Joseph F. Azrack

19 Bedford Road

Lincoln, MA 01773

Dear Joe:

We are pleased to confirm and agree to the following terms in connection with
your service as a partner of Apollo Global Real Estate Management, LP. (the
“Company”). As used herein, “Affiliate” shall have the same meaning applied to
it in paragraph (d) of Exhibit B to the attached Annex A.

 

•  

Position. You will serve as Managing Partner of the Real Estate Business (as
defined below) of Apollo Management Holdings, L.P. and its Affiliated investment
management companies (collectively, “Apollo”). Your period of service to the
Company shall begin on a date to be mutually agreed but not later than July 8,
2008 (the actual date that your service with the Company commences, the “Start
Date”). You will report to the Executive Committee of Apollo (the members of
which are currently Leon D. Black, Marc J. Rowan and Joshua J. Harris). The
parties acknowledge that, as of the date hereof, there is no precise definition
of the Real Estate Business of Apollo and that you are being hired to organize,
develop and oversee that business and its integration with Apollo’s private
equity and capital markets businesses. However, the parties agree that the “Real
Estate Business” will refer to the investment management activities to be
conducted by Apollo and its Affiliates for newly formed or acquired pooled
investment vehicles (whether structured as private equity, hedge or other types
of funds) that have a primary investment objective to invest in real estate and
companies that are primarily engaged in the management, ownership or development
of real estate (each, a “Real Estate Fund”) (it being acknowledged that no such
pooled investment vehicles are managed by Apollo today). As the Managing Partner
of the Real Estate Business, you will be a member of the senior management team
of Apollo Global Management, LLC (“AGM”) (sometimes informally referred to as
the management group of AGM) and the Chairman of the Investment Committee for
the Real Estate Business. AGM has received and accepted in principle (with the
understanding that such discussion outline is non-binding and that flexibility
will be needed in developing and operating the Real Estate Business) a
discussion outline prepared by you that describes the time, staffing, working
capital and seed investment capital you believe to be necessary to build the
Real Estate Business, with an initial focus on the United States and Europe but
with a long term view to expand the business into Asia. We both understand the
challenges and opportunities in this business plan and will work together to
access our internal assets (including internal funding where appropriate and
relationships with Apollo limited partners) as appropriate to provide for the
success of this endeavor.

 

•  

Compensation. You will be entitled to base pay (“Base Pay”) at the annual rate
of $500,000 during your period of service as a partner, which Base Pay shall
accrue day to day and be paid in accordance with the Company’s normal payroll
practices applicable to similarly situated executives (which, for purposes of
this letter agreement, will mean the most senior managing partners of Apollo and
its Affiliates other than the partners who serve on the Executive Committee), as
a draw against the Net Profit to which you are entitled pursuant to the next
section. For services provided during each of 2008 and 2009, you will receive
total cash compensation (including Base Pay, management and incentive fee and
carry distributions and all other cash payments) equal to the greater of (i)
$4,500,000 per year (the “Guaranteed Compensation”), provided your service is
not terminated before the conclusion of either such period by you without “Good
Reason” (as defined in the award agreement evidencing the Plan Grant described
below and attached hereto as Annex A), by reason of your death or “Disability,”
or by the Company for “Cause” (as such terms are defined in the Plan (as defined
below)), and (ii) the amount determined under the section entitled “Net Profit”
below for such period; provided, however, that for services provided in 2008 the
Guaranteed Compensation shall be reduced by the compensation you receive from
your existing employer for services provided in 2008. To the extent that by
mutual agreement you undertake investment management responsibilities outside
the Real Estate Business, you and the Company will discuss in good faith your
appropriate remuneration for such activities.

--------------------------------------------------------------------------------

•  

Net Profit.

 

  •  

From and after the Start Date, you will be entitled to 12.5% of the management
and incentive fees earned (other than from carry from private equity-type funds,
which is provided for in the next paragraph) by Apollo and its Affiliates from
the Real Estate Business on assets under management less all expenses
attributable or allocated in good faith to the Real Estate Business, such as
office expenses, compensation expenses, allocable overhead and returns of
previous operating deficits (the “Net Profit”). Your right to participate in Net
Profits will terminate as provided below in the section entitled, “Notice
Entitlement.” Operating deficits arise when revenues from the Real Estate
Business in any fiscal year are less than the total expenses. An operating
deficit for any fiscal year (other than fiscal years 2008 and 2009) will be
allocated as an expense equally over the next three fiscal years, along with a
rate of interest payable to Apollo based on Apollo’s cost of capital. For hedge
funds or other “evergreen” funds, you shall receive distributions at the same
time as distributions are made to the other participants in such income
(generally within 45 days after each quarterly period) except that the
installment for the fourth quarter and annual period will be paid to you no
later than April 15th of the year after the applicable fiscal year.

 

  •  

In the case of the carried interest allocable to a private equity-type Real
Estate Fund, you will receive 12.5% of the points of carry in each such fund and
your rights to such carry shall be subject to monthly vesting at the rate of
l/60th per month over five years from the time such points are allocated (which
allocations shall occur as of the closing of the applicable Real Estate Fund’s
first capital call for an investment). Upon your termination of employment
without Cause or for Good Reason you shall be immediately vested in 75% of the
aggregate carry previously awarded to you in any private equity-type Real Estate
Fund that has commenced investing prior to such termination. Notwithstanding
anything to the contrary contained herein or otherwise, you shall retain any
such carry rights that have vested as of your service termination date and you
shall receive distributions thereon, including in connection with dispositions
or other liquidity events applicable to the investments made by such funds with
respect to your vested carried interest. Generally, an additional 27.5% of the
points of carry in each fund will be allocated to the balance of the Real Estate
Business team, and such carry will be subject to the same additional vesting as
your carry upon a team member’s termination without Cause. In addition, the
balance of the Real Estate Business team will receive allocations of equity
interests in AGM in a manner consistent with the culture and economics of AGM.
Such allocations of carry, and the allocations of equity rights in AGM, to the
balance of the Real Estate Business team, shall be made by the Executive
Committee in light of your recommendations as Managing Partner and in
consultation with you. Apollo anticipates that the above-stated carry points,
when combined with grants under the Plan currently anticipated to be made,
consistent with Apollo’s culture and practices, to the Real Estate Business
team, shall provide the Real Estate Business team with interests that would
reasonably be expected to have an aggregate economic value equivalent to
approximately 50% or more of the total carry points.

--------------------------------------------------------------------------------

  •  

If Apollo acquires an existing investment management business that provides
investment management services to funds with a primary investment objective in
the real estate area during your service with the Company, the applicable
percentage (12.5%) of the Net Profit you are entitled to receive with respect to
such business shall be determined based on 12.5% of the Net Profit generated for
Apollo by such business on any net increase, and after an appropriate return on
investment to Apollo based on Apollo’s cost of capital, (a) for hedge funds and
other evergreen funds, in such acquired business’s assets under management from
and after the acquisition date (with all Net Profit being deemed to be generated
evenly across all assets under management), and (b) for private equity-type
funds, in committed but undeployed capital.

 

•  

Plan Grant. On the last day of the calendar quarter that includes the Start
Date, you shall be granted, subject to the approval of the committee that
administers the Plan, restricted share units (“RSUs”) covering 950,000 Class A
shares of AGM (the “Plan Grant”) under the Apollo Global Management, LLC 2007
Omnibus Equity Incentive Plan (the “Plan”). The committee that administers the
Plan shall permit you to transfer the Plan Grant to a family trust within the
meaning of Rule 701(c)(3) of the Securities Act. Each RSU shall be granted
pursuant to the Plan and shall be subject to the terms and conditions of the RSU
award agreement in the form of Annex A attached hereto, which terms and
conditions are no less favorable, taken as a whole, than the terms and
conditions applicable to those set forth in the RSU agreements of similarly
situated executives, except that vesting of these units shall occur over a
period of three and one half (3 1/2) years, with the first installment to vest
on the anniversary of the grant date and the balance vesting in 10 equal
quarterly installments thereafter. In addition to the Plan Grant, subject to the
approval of the committee that administers the Plan, you shall be granted the
additional RSUs (the “Additional RSUs”) shown below on the last day of the
calendar quarter in which the corresponding level of assets under management of
the Real Estate Funds, as determined in good faith by the Executive Committee,
is first attained:

 

Number of Additional RSUs

   Aggregate assets under management of the Real Estate  Funds  

612,500

   $ 2,500,000,000   

204,166

   $ 3,333,333,333   

204,167

   $ 4,166,666,667   

204,167

   $ 5,000,000,000   

The Additional RSUs will be granted pursuant to the Plan and shall be subject to
the terms and conditions of the RSU award agreement in the form of Annex A
attached hereto, except that vesting shall be in equal quarterly installments
over the 12 quarters following the date of grant. Assets under management will
be measured based on capital (whether committed or funded) on which management
fees are paid.

 

•  

Incentive Program. A portion of your total cash compensation each calendar year
or portion thereof (beginning January 1, 2009) will be deferred and payable
pursuant to an incentive compensation program adopted by the Executive Committee
prior to the beginning of such calendar year (the “Incentive Program”). Any
amounts payable under the Incentive Program will be subject to three year
vesting in equal annual installments, commencing on the last day of the year
following the year in which the services were performed, which vesting shall be
contingent on your continued service as a partner or employee on each vesting
date. For services performed in 2009, the amount of compensation to be subject
to the Incentive Program shall be as follows:

 

  •  

No part of the first $250,000 of your compensation;

--------------------------------------------------------------------------------

  •  

10% of compensation from $250,000 to $500,000;

 

  •  

20% of compensation from $500,000 to $1,000,000

 

  •  

25% of compensation from $1,000,000 to $2,000,000; and

 

  •  

30% of compensation in excess of $2,000,000;

provided, however, that (x) the Guaranteed Compensation (or an amount of Net
Profit distributions received in lieu thereof) shall not be subject to the
Incentive Program, and (y) all amounts in excess of the amount specified in
clause (x) shall be subject to the Incentive Program until your compensation
reaches a level that all amounts that would have been subject to the Incentive
Program had clause (x) not applied to you have become subject to the Incentive
Program, and thereafter the bulleted formula shall apply without modification by
this proviso.

 

•  

Notice Entitlement. On written notice to you, the Company may terminate your
service as a partner (which, in any case, will also terminate your employment,
if you are then an employee) with or without Cause, it being understood that
such a termination shall not be a breach by the Company or any of its Affiliates
of their agreements hereunder or otherwise. The period of notice that we will
give you to terminate your service as a partner without Cause is 90 days. The
Company may terminate your service as a partner for Cause without notice. The
minimum period of notice that you are required to give us to terminate your
service as a partner without Good Reason is 90 days. We reserve the right to
require you to not be in Apollo’s offices and/or not to undertake all or any of
your duties and/or not to contact Apollo clients, colleagues or advisors during
all or part of any period of notice of your termination of service. Should we
exercise this right, your terms and conditions of service and duties of fidelity
and confidentiality to us remain in full force and effect. During any such
period, you remain a service provider to the Company with a duty of fidelity to
the Company and should not be employed or engaged in any other business.
Notwithstanding anything to the contrary contained herein or in any plan,
agreement or arrangement between you and Apollo, in the event that your service
as a partner or employee with the Company or any of its Affiliates is terminated
by the Company or any of its Affiliates without Cause or by you for Good Reason
at any time after the Start Date and before January 1,2010, the Company will pay
you, in cash in quarterly installments through December 31, 2009 and subject to
the effectiveness and irrevocability of a general release of claims executed by
you (in the form of Annex B hereto), the balance of the unpaid Guaranteed
Compensation (if any). In addition, notwithstanding anything to the contrary
contained herein or in any plan, agreement or arrangement between you and
Apollo, if at any time after the Start Date your service as a partner or
employee with the Company or any of its Affiliates is terminated by the Company
or any of its Affiliates without Cause or by you for Good Reason, on the next
quarterly distribution date following the termination date, to the extent not
duplicative of any payment of Guaranteed Compensation, you will be paid an
amount in cash in a lump sum equal to 12.5% of the unpaid Net Profit earned by
Apollo from the Real Estate Business (if any) for such quarterly period up to
and including your termination date (Net Profit (i.e., carry) distributions on
private equity-type vehicles will continue to be made on your vested points in
the ordinary course after your termination of service).

 

•  

Payment in lieu of notice. Subject to the “Compliance” section below, we reserve
the right to pay you in lieu of notice on a termination without Cause.

 

•  

Benefit Plans. You will be entitled to participate in the various group health,
disability and life insurance plans and other benefit programs as may generally
be offered to similarly situated executives from time to time, provided that
your available paid vacation will not be less than four (4) weeks in each
calendar year (subject to the Company’s vacation policy as in effect from time
to time regarding any limits on the ability to carry forward to a subsequent
year accrued but unused vacation).

--------------------------------------------------------------------------------

  In addition, you will be entitled to prompt reimbursement of (i) your legal
fees reasonably incurred in connection with the preparation and negotiation of
this letter agreement, and (ii) all business expenses reasonably incurred by you
in the course of your service with the Company in accordance with the Company’s
policies in respect of such matters (including that any amount so incurred shall
be reimbursed by not later than the end of the calendar year following the year
incurred; expenses eligible for reimbursement in any calendar year will not
effect the expenses that are eligible for reimbursement in any other calendar
year and will not be subject to liquidation or exchange for any other benefit).

 

•  

Office Location. Your primary office location shall be in New York. You may
maintain a personal office for yourself in Boston but shall not spend more than
six (6) days per month working out of such office. The Company will reimburse
you for reasonable out-of-pocket expenses incurred in connection with the
maintenance of such office in an amount not to exceed $10,000 per month,
consistent with Apollo’s policies regarding expense reimbursements as in effect
from time to time.

 

•  

Coinvestments. You will be offered coinvestment opportunities in Apollo funds
generally offered to similarly situated executives. During your service with the
Company, following the first closing of a substantial investment by a third
party in a Real Estate Fund, you will be obligated to invest your pro rata
portion (12.5%) of the capital required of the general partner and its
Affiliates for such Real Estate Fund (but shall not be obligated to invest more
than $2,000,000 in all Real Estate Funds in any twelve month period). You will
be entitled to participate in any management fee waiver program established with
respect to any Real Estate Fund. You will also be provided opportunities to
invest in private equity and capital markets funds managed by Apollo and its
Affiliates on terms offered to similarly situated executives generally.

 

•  

Compliance. The Company is subject to and has various compliance procedures in
place. You understand that your continued service will be subject to, among
other things, your adherence to the Company’s policies and procedures and other
applicable compliance manuals, copies of which will be separately made available
to you.

 

•  

Restrictive Covenants. You acknowledge and agree that you shall be bound by the
confidentiality and restrictive covenant provisions contained in the award
agreement evidencing the Plan Grant described above and attached hereto as Annex
A and that your engagement by the Company is conditioned on your agreement to be
bound thereby.

 

•  

Confidentiality. You will maintain the confidentiality of this letter agreement
(and any related understandings, including your compensation arrangements and
amounts) at all times and will not discuss such matters with any person other
than your spouse, accountant, financial and tax advisors or attorney, except
that you may make such disclosure (i) to the extent necessary with respect to
any litigation, arbitration or mediation involving this letter agreement, or
(ii) when disclosure is required by law or by any court or arbitrator with
apparent jurisdiction to order you to disclose or make accessible any
information.

 

•  

Indemnification. During the term of your service with the Company and its
Affiliates and thereafter, the Company agrees to, and agrees to cause Apollo
Management Holdings, L.P. to, indemnify and hold you and your heirs and
representatives harmless, to the same extent applicable to similarly situated
executives, against any and all damages, claims, costs, liabilities, losses and
expenses (including reasonable attorneys’ fees) as a result of any claim or
proceeding, or threatened claim or proceeding, against you that arises out of or
relates to your service as an officer, director, partner or employee, as the
case may be, of the Company, any of its Affiliates or other entity at the
request of the Company or any of its Affiliates. During the term of your service
and thereafter, the Company also shall provide, and shall cause Apollo
Management Holdings, L.P. to provide, you with coverage under its directors’ and
officers’ liability policy(s) to the same extent as similarly situated
executives.

--------------------------------------------------------------------------------

•  

Choice of Law; Forum; Waiver of Jury Trial. This letter agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
(without regard to any conflicts of laws principles thereof that would give
effect to the laws of another jurisdiction), and the parties submit to the
exclusive jurisdiction of the federal and state courts of New York, New York
(Borough of Manhattan) in relation to any dispute arising in connection
herewith. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED,
YOU AND WE HEREBY WAIVE, AND COVENANT THAT YOU AND WE WILL NOT ASSERT (WHETHER
AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS LETTER AGREEMENT OR
ANY MATTERS CONTEMPLATED HEREBY, WHETHER NOW OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND AGREE THAT ANY OF THE COMPANY OR
ANY OF ITS AFFILIATES OR YOU MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS
WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE
COMPANY AND ITS AFFILIATES, ON THE ONE HAND, AND YOU, ON THE OTHER HAND,
IRREVOCABLY TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER
BETWEEN SUCH PARTIES RELATING TO THIS LETTER AGREEMENT, THE PLAN OR ANY AWARD
AGREEMENT, AND THAT ANY SUCH PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

•  

Assurances. You represent that the written limitations furnished by you to the
Company with respect to your prior employer constitute all limitations on your
post-employment activities imposed by your prior employer and, to your
knowledge, will not preclude you, after the Start Date, from joining the Company
and satisfactorily and effectively performing the services contemplated thereby.
You represent to the Company and its Affiliates that, to your knowledge, as of
the Start Date there shall be no other obligations or restrictions that would
keep you from joining the Company and performing the services contemplated
hereby. You represent to the Company that you possess any licenses or
certifications necessary for you to perform such services. You represent that
you will honor all obligations concerning confidentiality and nonsolicitation
that you have to your prior employer, and that you will not take to the Company
any confidential information or trade secrets of your prior employer, nor use or
disclose any confidential information or trade secrets of your prior employer
while employed at the Company.

 

•  

Section 409A. The payments to you in connection with your termination of
employment or service pursuant to this letter agreement are intended to be
exempt from Section 409A of the Internal Revenue Code of 1986, as amended
(“Section 409A”), to the maximum extent possible, under either the separation
pay exemption pursuant to Treasury Regulation § 1.409A-1(b)(9)(iii) or as a
short-term deferral pursuant to Treasury Regulation § 1.409A-1 (b)(4), and for
purposes of the separation pay exemption, any post-employment installment paid
to you shall be considered a separate payment. Notwithstanding any other
provision in this Agreement, if on the date of your separation from service,
within the meaning of Section 409A (the “Separation Date”), you are a “specified
employee,” as defined in Section 409A, then to the extent any amount payable
under this letter agreement constitutes the payment of nonqualified deferred
compensation, within the meaning of Section 409A, that under the terms of this
letter agreement would be payable prior to the six-month anniversary of the
Separation Date, such payment shall be delayed until the earlier to occur of
(A) the six-month anniversary of the Separation Date or (B) the date of your
death. For purposes of determining the timing of payments to you following
termination of employment or service, all references to such termination shall
mean the Separation Date.

--------------------------------------------------------------------------------

•  

Miscellaneous. This letter agreement may not be modified, amended or waived
unless in a writing signed by the undersigned parties. Any notice required
hereunder shall be made in writing, as applicable, to the Company in care of its
general counsel at his principal office location or to you at your principal
office location or home address most recently on file with the Company, such
notice to be deemed effective on the earlier of receipt or two days after it is
issued. This letter agreement may not be assigned by the parties other than as
expressly provided herein. This letter agreement may be executed through the use
of separate signature pages or in any number of counterparts, including via
facsimile or pdf, with the same effect as if the parties executing such
counterparts had executed one counterpart.

[Continues on next page]

--------------------------------------------------------------------------------

The effectiveness of these terms is subject to your execution and return of this
letter agreement on or before June 2, 2008. This letter agreement (including
Annex A attached hereto) constitutes the entire agreement between the parties in
relation to its subject matter and supersedes any previous agreement or
understanding between the parties relating thereto, all of which are hereby
cancelled, and you confirm that in signing this letter agreement you have not
relied on any warranty, representation, assurance or promise of any kind
whatsoever other than as are expressly set out in this letter agreement or in
the plans and documents referenced herein.

 

Sincerely, /s/    John J. Suydam John J. Suydam Vice President

 

Agreed and Accepted:

/s/    Joseph F. Azrack

Joseph F. Azrack Date: June 2, 2008