Earnings call transcript: Apollo Commercial RE Finance Q1 2025 beats expectations

Apollo Commercial Real Estate Finance, Inc. (ARI) reported its first-quarter earnings for 2025, surpassing analyst expectations with earnings per share (EPS) of $0.24 compared to the forecasted $0.22. The company also exceeded revenue forecasts, reporting $65.82 million against an expected $62.32 million. Despite these positive results, the stock saw a slight decline of 0.33% in after-hours trading, closing at $9.09. According to InvestingPro analysis, ARI currently appears undervalued based on its Fair Value calculation, while offering an impressive 11% dividend yield. The company has maintained consistent dividend payments for 16 consecutive years, demonstrating strong shareholder commitment.

Key Takeaways

• Apollo’s Q1 earnings exceeded both EPS and revenue forecasts.
• The loan portfolio increased to $7.7 billion from $7.1 billion at year-end.
• The company committed $650 million in new loans during Q1, primarily in residential properties.
• Market volatility and recession fears are influencing the commercial real estate sector.
• The stock price fell slightly by 0.33% in after-hours trading.

Company Performance

Apollo Commercial Real Estate Finance showed robust performance in Q1 2025, with distributable earnings reaching $33 million, or $0.24 per share. This was a notable achievement as it covered 96% of the quarterly dividend. The company’s loan portfolio grew significantly, reflecting a strong commitment to expanding its lending activities. Despite market concerns, Apollo’s strategic focus on residential properties and data centers appears to have paid off. InvestingPro data reveals the company maintains a FAIR overall financial health score, with particularly strong ratings in price momentum and cash flow metrics. Unlock 6 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Financial Highlights

• Revenue: $65.82 million, exceeding forecasts by $3.5 million.
• Earnings per share: $0.24, surpassing forecasts by $0.02.
• Loan portfolio carrying value: $7.7 billion, up from $7.1 billion.
• Book value per share: $12.66.
• Debt to equity ratio: 3.5x, increased from 3.2x at year-end.

Earnings vs. Forecast

Apollo’s actual EPS of $0.24 beat the forecast of $0.22 by 9.1%. Revenue also exceeded expectations, coming in at $65.82 million compared to the predicted $62.32 million, marking a 5.6% surprise. This positive deviation from forecasts highlights the company’s effective management and strategic initiatives.

Market Reaction

Despite the earnings beat, Apollo’s stock experienced a minor decline of 0.33% in after-hours trading, closing at $9.09. This movement contrasts with the company’s strong financial performance and may reflect broader market volatility and investor caution amid recessionary fears. The stock remains within its 52-week range of $7.7 to $11.2. Recent momentum has been positive, with InvestingPro data showing an 8.9% return over the past week and similar gains over the past six months. The stock’s beta of 1.48 indicates higher volatility compared to the broader market.

Outlook & Guidance

Looking ahead, Apollo expects to receive $1.5 billion in loan repayments this year and anticipates that distributable earnings will continue to meet or exceed the quarterly dividend rate. The company remains cautious about potential recession impacts but is committed to deploying capital opportunistically. According to InvestingPro forecasts, net income is expected to grow this year, with analysts projecting a return to profitability. Get deeper insights into ARI’s future prospects with InvestingPro’s comprehensive research reports, available for over 1,400 US stocks.

Executive Commentary

• Stuart Rothkin, CEO, stated, "Commercial real estate tends to be a lagging indicator," highlighting the sector’s resilience amid economic fluctuations.
• Rothkin also noted, "We believe real estate was better positioned than many other asset classes," emphasizing the company’s strategic confidence.
• Anastasia Moranova, CFO, mentioned, "Liquidity in the secured borrowing market continues to be plentiful," indicating a favorable financing environment.

Risks and Challenges

• Economic uncertainty and recession fears may impact real estate valuations.
• Rising interest rates could affect borrowing costs and investment returns.
• Increased competition in the real estate finance sector.
• Potential geopolitical tensions affecting international markets.
• Supply chain disruptions impacting construction timelines and costs.

Q&A

During the earnings call, analysts inquired about specific assets such as 111 West 57th Street and the Berlin and Chicago offices. Discussions also touched on the potential impacts of a recession on various real estate asset classes, with management expressing confidence in the company’s strategic positioning in both European and U.S. markets.

Full transcript - Apollo Commercial Real Estate Finance Inc (ARI) Q1 2025:

Operator/Moderator: I’d like to remind everyone that today’s call and webcast are being recorded. Please note that we are the property of Apollo Commercial Real Estate Finance, Inc. And that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release. I’d also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward looking statements.

Today’s conference call and webcast may include forward looking statements and projections,

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: and we ask that you

Operator/Moderator: refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. In addition, we will be discussing certain non GAAP measures on this call, which management believes are relevant to assessing the company’s financial performance. These measures are reconciled to GAAP figures in our earnings presentation, which is available in the stockholders section of our website. We do not undertake any obligation to update our financial statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apollocraft.com or call us at (212) 515-3200.

At this time, I’d like to turn the call over to the company’s chief executive officer, Stuart Rothkin.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Thank you, operator, and good morning, and thank you to those of us for joining us on the Apollo Commercial Real Estate Finance first quarter twenty twenty five earnings call. I am joined today by Scott Wiener, our Chief Investment Officer and Anastasia Moranova, our Chief Financial Officer. Quite a bit has changed since our year end conference call, where we expressed optimism about the positive momentum in the real estate market given the healthy overall macroeconomic view and increasing real estate transaction activity at the time. As we highlighted on that call, we perceived a slowdown in the overall macro economy as the biggest risk to the real estate market. Without getting into the weeds with respect to monetary policy and the approach to implementing tariffs, it is safe to say that overall capital markets volatility has increased as investors try to understand the short and long term implications of the changes announced and recessionary fears have risen.

As I previously stated, commercial real estate tends to be a lagging indicator. In the present, real estate market participants are still quite active, and there continues to be significant amounts of both equity and credit capital available for deployment into real estate. To date, the recent volatility has led to modest spread widening and a more cautious tone in the market, and we still hold the view that a broad recession presents the greatest risk

Operator/Moderator: to

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: the ongoing real estate recovery. We believe tariff effects are likely to drive up construction costs and further reduce new supply as evidenced by recent data on new construction starts for multifamily and logistics properties indicating levels at ten year lows. Limited supply should be positive for long term real estate values and fundamentals. Also, when compared to other asset classes, real estate appears to be starting from a more reasonable relative value position. As such, while clearly not immune to volatility in the short term, we believe real estate was better positioned than many other asset classes, and historically, real estate has performed quite well in an inflationary environment.

Specific to ARI, the first quarter saw continued velocity in loan originations as we committed to $650,000,000 of new loans. Our Q1 originations were for loans secured by properties in The United States, although our foreign pipeline continues to consist of transactions in The U. S. And Europe. 3 of the four transactions closed in the quarter were loans secured by residential properties, and asset class that continues to have strong secular tailwinds even in potential recessionary scenarios.

The other transaction was a data center construction loan, which is an area we have been become very active in over the past eighteen months. Our strategy with data centers has been to finance developers where we are confident in their ability to deliver facilities on time and and within agreed upon specs

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: and to

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: provide loans on facilities that have been pre leased to strong credit tenants with long term leases. ARI continues to benefit from Apollo’s broad based real estate credit origination efforts, which totaled over $5,000,000,000 of originations in Q1. Following quarter end, ARI completed an additional four transactions totaling just over $700,000,000 bringing year to date volume to $1,500,000 including add on fundings. Turning now to the loan portfolio. At quarter end, ARI’s portfolio was comprised of 48 loans totaling $7,700,000,000 No additional assets specific CECL allowances were recorded in the first quarter.

The update on 111 West 50 Seventh Street is that strong sales momentum has continued and the closing of three units in the first quarter generated $35,000,000 in net proceeds. Subsequent to quarter end, two additional units closed. And with those closing, the senior loan ahead of ARI’s position was fully repaid and also allowed for a $29,000,000 reduction in ARI’s net exposure. Going forward, all unit closings will go toward reducing ARI’s loan. And currently, there is an additional $127,000,000 in executed or pending contracts across another seven units.

We remain highly focused on proactive asset management and executing the plans on our focused loans as we seek to maximize value recovery and convert the capital into higher return on invested equity opportunities. We have defined pathways for each of our purchase assets, and we are actively pursuing resolutions. Before I turn the call over to Anastasia to review the financial results, I wanted to reiterate that while Q1 earnings were slightly below the current quarterly dividend run rate, as we look to the rest of 2025, we are comfortable that ARI’s loan portfolio will produce distributable earnings that supports the current quarterly dividend run rate. With that, I will turn the call over to Anastasia to review ARI’s financial results for the year.

Anastasia Moranova, Chief Financial Officer, Apollo Commercial Real Estate Finance: Thank you, Stuart, and good morning to everyone. ASI reported distributable earnings of $33,000,000 or $0.24 per share of common stock for the past quarter, with GAAP net income of $23,000,000 or $0.16 per diluted share of common stock. As Stuart mentioned, our Q1 earnings was slightly lower than the current quarterly dividend rate, providing 96% coverage of the quarterly dividend. It is worth noting that our first quarter distributable earnings included the impact of timing of capital deployment in Q1, which was heavily weighted towards the end of the quarter. As we look for the rest of the year, we see Q1 results representing a trough, the distributable earnings per share is expected to meet or exceed the quarterly dividend rate for the remaining quarters.

The expected increase in distributable earnings is driven by the sequential growth of the loan portfolio from previous year end and recirculation of underperforming capital to continue transactions. Our loan portfolio ended the quarter with a carrying value of 7,700,000,000.0 up from 7,100,000,000.0 at year end. The weighted average and leverage yield of our loan portfolio as of the quarter end was 7.9%. We had a strong quarter of loan origination, closing four new commitments for a total of 650,000,000 and completing an additional 73,000,000 in add on funding for previously closed loans. Loan repayment totaled 93,000,000 during the quarter, which we were able to redeploy through new originations at quarter end.

Such activity in q two to date amounted to $7.00 9,000,000 in total commitments on new loans in addition to another $3.00 9,000,000 in add on funds. With respect to risk rating, the weighted average risk rating of the portfolio at quarter end was three point o, unchanged from the previous quarter end. There were no asset specific CECL allowances recorded during the quarter and no movement in ratings across the portfolio. Our general CECL allowance increased this quarter by 4,000,000, reflecting the growth of the loan portfolio from the previous quarter end as well as the more cautious gains on the macroeconomic outlook. Total CECL allowance and percentage point of the loan portfolio amortized cost basis is down quarter over quarter from five zero seven basis points to four seventy five basis points.

Moving on to the right hand side of the balance sheet. During the quarter, we were very active with our secured borrowing excuse me, with our secured borrowing counter price, upsizing our facility with JP Morgan back to 500,000,000, so total capacity is 2,000,000. We also expect the maturity to now JP Morgan and the Wichita facility for three and a half and two years respectively. This quarter end, we closed two new secured credit facilities with new counterparties for an aggregate borrowing capacity of about 700,000,000 and unfavorable terms. Liquidity in the secured borrowing market continues to be plentiful as lenders get favorable capital treatment from these facilities and in many instances prefer them over directly lending to properties.

Our debt to equity ratio at quarter end was 3.5 times, up from 3.2 times at year end as we recirculated proceeds from a number of repayments that happened right before year end due to new leverage deals in q one. The company ended the quarter with 218,000,000 of total liquidity comprised of cash on hand, committed undrawn credit capacity on existing facilities, and loan proceeds held by the servicer. AIR book value per share, including general CECL allowance and depreciation, was $12.66, a slight decrease from last quarter, primarily attributable to the feedback from the RSU revenue and delivery. And with that, we would like to ask operator to open the line for questions.

Operator/Moderator: Thank you. As a reminder, to ask a

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: question,

Operator/Moderator: please press 11 on your telephone and with your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Rich King with JP Morgan. You may proceed.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Hey, guys. Thanks for taking my questions.

Anastasia Moranova, Chief Financial Officer, Apollo Commercial Real Estate Finance: Look. One of the things that

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: stands out is that you guys have significant specific allowances. It’s actually been

Operator/Moderator: a while since you have realized any material losses. I suspect and and, again, like, the optics of realizing losses are not optimal, but at the same time, you have a full $500,000,000 in non accruing assets. I’m curious how we think about the cadence of actually realizing those losses and being able to redeploy the capital. And I’m curious if the strong origination volume that we have seen post quarter particularly is a signal that some of that capital is about to be recycled.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Hey, Rick. Thanks for the question. Look, I think, right, from from a cadence perspective, I would say the way to think about it just from a pure cadence perspective is, you know, a lot of this specific CECL is tied up in two assets. Right? One eleven West fifty seven and then Liberty Center, which is our asset retail asset in Ohio.

We expect to be in market in selling the Liberty Center asset sometime the latter part of this year. We are pretty confident from a valuation perspective and as such, to get to the finish line, and that’ll sort of crystallize things. We feel good about where we’re reserved there. And obviously, you heard the update on 111 West West 50 Seventh in terms of sales progress. Not sure when we get to the full finish line, but Momentum is certainly positive there.

So I think what you’re, you know, what you’re seeing seeing in our actions is that we feel confident right now that there are no additional surprises coming, and we are comfortable putting the capital to work expecting that the latter part of this year and the early part of next year, there will be more capital coming our way through resolutions.

Operator/Moderator: Okay. It’s just a very helpful answer, and thank you. And and clearly making some strong progress in terms of selling units that that certainly comes through.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Thanks, Greg.

Operator/Moderator: Thank you. Our next question comes from Doug Harter with UBS. You may proceed.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Thanks. Understanding that, you know, kind of the change in the market is still relatively fresh, but, you know, any sense you have in in conversations about whether this might delay either repayment of of loans or or kind of the, you know, putting out of of new money and and kind of how you’re thinking about the marketing effects? Yeah. Look. I I think the market is still functioning pretty robustly, and I and I’ll you know, I would say across a broad spectrum of credit opportunities.

I would say the volatility that we’ve seen in the equity market has been much more muted in the credit market. So I would say at this point, no anticipation of slowdown and no anticipation of people walking away from transactions or pulling back from transactions. I think the real question in our mind, Doug, is, you know, if you think about a decision tree if recession, and then if we assume yes recession, are we talking something that is shallow and short lived or something that has breadth and length to it. I think it’s too early for most people to know just given sort of the, you know, the fairly hot changes from direction to direction given what’s going on. But I would say right now, the need to put capital to work, the volumes of capital looking for return are over weighting sort of what might be some change behavior if we truly enter into some sort of meaningful recession.

: Appreciate that. And as you think about, you

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: know, the asset classes either in your portfolio or more broadly, you know,

Operator/Moderator: if if,

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: you know, if we have a recession, you know, how are you thinking about the vulnerability of of various asset classes? So, look, I mean, obviously, if if we had a a recession, you know, the the the asset class that we would think most about would be on the hospitality side short term because, obviously, the ability for cash flows to move there most quickly. You know, I think you heard my comments on on multifamily, which I think has legs even in a recession just given sort of the need for housing. And then, you know, to the extent you, quote, unquote, worry about things and a recession causing, you know, big capital decisions to be made, I think we’ve clearly been in a recovering office market, and it’s been moving in the right direction. Does a, you know, a meaningful recession cause people to slow down those decisions?

I think it’s something you always worry about. I would say we haven’t seen it today, and we’re actually pretty encouraged about the level of activity across our various office across the office assets supporting our loans. But, you know, that’s how we think about it from an asset price perspective. But, again,

Operator/Moderator: you know,

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: the the long term positive implications are, I think, we’re gonna be living in a muted supply environment in quite some time. So it should mean that existing assets are better protected both in terms of replacement cost or operating position as you think about limited new supply. But, you know, I think as you as you tightly inquired, I think if we do get into a recession, I would say, you’re you’re worried about hospitality first just given the ability for for, you know, revenues to move quickly.

: Sure. Appreciate that, sir.

Operator/Moderator: Thank you. Our next question comes from Tom Katherwood with BTIG.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: You may proceed. Hi. Good morning, everybody. Stuart, maybe on 111 West 50 Seventh, now that you’re seeing your mezz loan a has become senior in the cap deck, does that portion go back on accrual? And can you start recognizing income again, or is it very different there?

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: No. There there’s a different treatment, and let me let me try and set a finer point on it. Right? So so we’ve had like, our position is still comprised of both mortgage and meds, and and what was in front of us was a a financing from JPMorgan that was effectively financing a piece of our position. At this point, if we were to turn income back on, we’d effectively just be paying ourselves, in which case, we’d be taking income increasing basis and then putting more pressure on what the ultimate recovery needs to be.

Our approach is going to be to keep income turned off and to the extent recovery is better than expected and certainly we’re ahead of pacing today, but I don’t know that that that will continue. But the extent recovery is better than expected, it will come through in recovery of reserve as opposed to taking near term near term income now.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Got it. I appreciate making sense of that. And then in terms of in terms of portfolio growth, obviously, first quarter was light from a repayments front. What are your kind of near term repayment expectations? And do you think you can continue to grow the portfolio of the kind

Operator/Moderator: of fees that you’re able to

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: do in the first quarter?

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Yeah. Look. And I I yeah. I’m sure there are many who are tired of me talking about not getting too hung up on one quarter or another. But I think look.

I think we I think we’re looking at, you know, plus or minus a billion and a half of repayments this year. This could be more if pacing on some of the focus assets is even better than expected. So we’re gonna be active in the market. It would be lumpy quarter over quarter. Yes.

But, you know, with a billion and a half coming back our way and having already done, you know, call it, $6.06 50 in the first quarter, It’s gonna be a pretty active year from a deployment perspective. I just can’t tell you what quarters it’ll come in, but I would say, you know, a lot of the repayment, I would say, is expected to come in sort of about at middle middle to late second quarter to middle to late third quarter as you think about when the dollars will be coming back to us. And, obviously, we’d like to be ready to deploy as soon as the money comes back so there’s no earnings. Right?

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Got it. And then last one for me just quickly. The you mentioned focused assets. Any update on performance intensity flower, the the TC hotel, how that’s been holding up?

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Yeah. Look. Year to date, it’s been a good year. It’s out it’s outpacing last year. Obviously, a little bit of help in the first quarter given inauguration, etcetera, but it’s been performing quite well.

I think that is an asset that, on a finance basis, generates a nice levered return for ARI. Since ARI is perceived better if we reduce REO over time, I think the question for us is when is the right time to bring a hotel to market, particularly in light of some of the back and forth. Doug and I had two minutes ago about what asset classes might, you know, might have a more negative bias if we truly do get a recession. But it’s for the hotel itself right now is performing quite well.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Got it. Appreciate the answers. Thanks, everyone. Thanks. Thank you.

Operator/Moderator: Our next question comes from Jade Rahmani with KBW. You may proceed. Hey, man.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Just wanted to ask about a couple assets we haven’t touched on in quite some time. The Berlin office, the Chicago office, both of those risk rated four, and then two risk rated three is Manhattan office and Cleveland multifamily. Would you be able to touch on those four items? Yeah. I mean I mean, I’ll give a I mean, I’ll give a bullet point.

Need side. You on do you wanna talk about this?

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Yeah. I’m on it. Hey, Chris. Yeah. I would say the with the Berlin office, you know, we are working with the sponsor who’s also a colender on the deal with Ahmad, where there’s a new equity invested as well as more time for lease up, and they’re also getting close on a on a major lease.

So, you know, we wanted to wait till that was fully documented from before returning it to a three. So our expectation is in the in the coming quarter, assuming that all gets tapered with new equity coming in in the mod, that was a three. Like you said, we’re we’re hopeful that this, you know, could at least get signed. That will help reduce the vacancy. As far as the Chicago office goes, yeah, there has also been some recent positive leasing and some additional subsidies coming in from the sponsor.

So, again, hopeful, you know, as as I think Chicago is behind New York, but

Operator/Moderator: we are seeing green shoots,

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: you know, in in other assets across the the non air I portfolio that we have in Chicago in terms of, you know, tours, inquiries, and leasing and return to office staff. So on that deal, the sponsor actually owns other properties in the market and has been working on, you know, some people who needed to grow from one property to another moving into this building, which has been helpful. Was there another one? Or

Anastasia Moranova, Chief Financial Officer, Apollo Commercial Real Estate Finance: Yeah. Manhattan office,

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: 256,000,000 risk rated three, and Cleveland multifamily, $7,076,000,000 risk rated three.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Yeah. On the New York office, that is one where we are the senior most in capital structure, and there are various players of mezz and equity. That one, we’ve been working on a recapitalization with the senior most has who’s willing to invest capital. And right now, exploring two two options, one would be taking advantage of the and and change in in in law and code in New York and converting part of that to multifamily and getting an answer to tax. So the the junior capital has been working on that business plan.

At the same time, with the new with New York leaking off and and the quality of this property and location, there also is a strategy of of just maintaining it as office. And so, you know, it’s kind of parallel passing both of those. I think, you know, it it would the conversion, you know, makes a lot of sense and and still, you know, helping for for in a good shape there. At the same time, you know, there’s some dialogue around some major tenants. And so if if you can get one or two of these major tenants who’s exploring the property to commit and and take a lot of agency, then it’s easier to keep it as as office.

But in all cases, you know, the two capital behind us is is willing and and committing additional capital on that. And then as far as Cleveland, yeah, it’s a it’s a multifamily there. It is it’s doing well. You know, the junior capital there who stepped in and foreclosed the prior owner out and put capital in. You know, recruiting management is doing well there.

There’s also a retail component that has really been the focus in terms of, you know, some of that was converting that from, you know, to percentage rent to direct rent. So I’m heading heading in the right direction for high quality property, and and we can we have senior tax roll who has been, you know, committed in in investing additional capital behind us.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Okay. And then 111 West 57, so tracking the numbers, the balance was $4.00 3,000,000 as of 03/31, which is up from $390,000,000 at year end. Do know why it increased?

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Yeah. There were some costs that we need to to fund, you know, for, like, most of it just really sort of the detail. We had kinda launched a leasing bottoms to move their their Austin house headquarters there. And so as part of that, there’s some GI leasing commissions that were funded as well as, you know, some carry costs. And that was already all factored into our, you know, our our reserves on those costs.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Okay. And do we need to expect further increases?

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: No. The I mean, the the the numbers as as we’ve been selling units and and, obviously, some of money in the retail are are are are much lower, but the the amount of sales that we have, you know, will be know, each quarter, you’ll be seeing a dramatic increase in in the size position.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Okay. And so it’s $4.00 3, then there’s 29,000,000 plus quarter end, and then a hunt another hundred and 27,000,000. Stewart mentioned seven executed contracts. So once those close, the pro form a balance should be something like 247,000,000, and there’s also some transaction costs, I assume, commissions and such. How does that in the ballpark?

You’re in the you’re in the ballpark, Jamie.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Yeah. Yeah. To clarify, there’s five prime contracts, which you can see on StreetEasy, and then we have two contracts out with the system.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Okay. Yes, James. Your math is roughly roughly in the ballpark. Okay. And then that would suggest nine or so.

Actually, QuadQuest probably consolidate some units. So are there around seven units remaining to be sold? 11. Oh, 11 remaining to be sold, including the five including the seven, the five signed contracts and two offers. Yes.

Yes, sir. If if the seven eight because the seven eight, you’ve got 11 units plus you’ve got the condo. Yeah. And then, certainly, as we indicated on prior calls, there’s also some insurance proceeds, etcetera, that will come to us when settled due to sort of construction issues along the way. Okay.

Alright. Thanks so much. Thanks, Jade.

Operator/Moderator: Thank you. Our next question comes from Steve Blaney with PNC Securities. You may proceed.

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: Okay. Good morning, everyone. And, Stuart, thanks for your macro talk. Bit of talk. There’s certainly certainly a lot of uncertainty out there for all of us to deal with.

I wanted to touch on, I guess, probably the most unique thing about Apollo is your, you know, your exposure in The UK and and Europe, almost half the portfolio and and just under 4,000,000,000. I think Palm actually started that in this recent upgrade of the of the company. But it totally is unique among the 20 something with the mortgage REIT.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Just talk a little

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: bit about how Apollo or AOI has been able to do that. Does Apollo on a larger scale have have, you know, boots on the ground in The UK and Europe? And if not, you know, how are you sourcing and managing these assets if you’re not using, you know, your own Apollo people? I’m curious about how that kind of evolved and given sort of unique edge to to KRI.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Yeah. Look. I’ll start, and then Scott may may add some comments. The short story is we were the real estate credit business was was effectively told to doing deals in Europe because some of the sponsors that we have in The US were certainly active in Europe, like the relationship with us. And I asked if they would consider, you know, opportunities there, and that was sort of the genesis of the of the business in 02/1213.

We committed, and we took one of the more senior members of our team by the name of Ben Effley and moved him to London in, I’m gonna say, 02/2013. I could be off by a year or so. And, you know, Ben, with the help of of many, including Apollo’s commitment to the to the European market in general, has built a, you know, wholesale originations management engine based in London covering Europe throughout. We’ve got a investment team comprising of, you know, plus or minus a dozen folks. We’ve got an asset management infrastructure on the ground in London covering Europe.

And I would say, you know, to his credit, Ben and team or to their credit, Ben and and team have over, you know, a dozen years worth of work established themselves as a, you know, leading bridge lender in the market. So we’re, you know, fully committed to the market. Not everything we does not everything we do ends up in ARI. No different than the way we do things in North America. There’s oftentimes when we share transactions across capital, because there’s other Apollo capital looking to deploy into the market.

And there’s also times where there are things our team sources that doesn’t necessarily fit for ARI, but fits with some of our regulated balance sheet. And it just furthers the track record, reputation, relationships that Ben and team have created. So, you know, we made a commitment to the market a dozen plus years ago, and the execution has been pretty strong. And as you’ve heard me say, you know, from ARI’s perspective often, similar quality sponsors, similar types of real estate transactions, functioning only lending in markets do we feel as if our lender protections are no different than between The US and Europe. And it’s really turned into just a seamless part of the overall real estate credit business.

I’m sure Scott might have some additional help, but just to clarify. I mean,

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: I’m actually sitting in a London office again. So I’m actually I spent quite a lot of time here. Yeah. So so I I would say we got a little bit of a first mover advantage because we have been here over a decade. We actually were voted an alternative lender of the year last year, so we’ve been quite active.

And I would say if we we we can benefit from the overall Apollo platform because it’s the, you know, the financing and the leverage that we get is important to a great relationship with with the banks here. But I would say there’s there’s really some structural differences in this market, if you like. First and foremost, this is really not a very active securitization market. So we’re in The US, the single asset in the power market can be very active and and and make the challenges to larger deals. It doesn’t exist here.

And so, you know, our ability to speak to larger deals comparing the AIR capital or other capital and doing 10 European deals, larger deals, portfolio deals is really a competitive advantage.

Operator/Moderator: And just like in

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: The US, as Stuart said, you know, relationships are important. It’s a piece of business. So so people know when we say we’re gonna do something, we do it, and and we we can do, you know, everything from, you know, what’s in call to the FDA here, which is housing, from logistics, data center, hotels, really, all the property types across the geographies. And so it’s it’s a really good active active business for us. And I would say, you know, we also hedge everything $50, so we’re not taking FX risk.

And and that is not obviously, it can also help

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: to help

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: the return. So we’re we’re not taking any kind of effects with, you know, legally. You know, we’re making sure we’re all in different countries that we can always enforce, and and we have different structures for that. Yeah. So it’s really just, you know, an extension of the strategy that we do in The US.

You just have to see something over here.

Operator/Moderator: Okay. Thanks for the

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: most detailed explanation. It’s a lot of history, and it’s it’s out of nowhere else, but greatly appreciated. Great. Great year ahead in UK and in The US. Thanks, Steve.

Thank

Operator/Moderator: you. Our next question comes from Arjunani with Green Street. You may proceed.

: Thank you. Stuart, you mentioned that you were expecting a more than three and a half hundred payments through the course of the year. And just looking at what you’ve done year to date, it seems like a billion and a half is already been funded and sounds like you wanna continue on the deployment part. So how are you thinking of funding those incremental deployments? Is it when it comes to incremental leverage equity issuance, you know, resolving some audio assets?

How are you thinking about that?

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Yeah. Look. Working backwards, right, given given where the entire sector is trading, I think, you know, until the sector and we specifically can get that up above book value, there’s no equity issuance coming. The new deployment will be funded based on repayment from existing outstanding loans or achieving resolution on some of the focused assets, which will bring back which will bring capital back that we can redeploy. There will be a natural increase in leverage, which is in no way a reflection of any change to our view of leverage in general, which is is to say when I have a underperforming asset that I’m not levering, when I can get to a resolution and get that capital back, I will most likely deploy that capital into something where I originate a new loan and then use that leverage to generate my return, which is sort of standard operating procedure.

So there’ll be a modest uptick in leverage just because I bring back some of the capital that I wanna get back from the Focus assets. But, you know, it’s basically repayments and getting some resolution on the focused assets should give us more than enough capital to need to be quite active in the market this year.

: Got it. Yes. Hi, sir. And then maybe given a lot of the transactions and once you were focused in The US, it seems like some of the transactions post quarter end have also, you know, boosted more than usual towards The US. Is that is that sort of something we should be expecting going forward through the year as well?

And and maybe on that point, right, I think the question is that the private market hasn’t really changed quite a bit in terms of lending activity still happening. But maybe given the slowdown we’ve seen in securitized markets, is

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: it is it sort of trying to

: assume that you might be getting increase in bonds from borrowers at at this point?

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Yeah. I mean I

Operator/Moderator: think Go ahead. Go I mean

Scott Wiener, Chief Investment Officer, Apollo Commercial Real Estate Finance: yeah. So I would say, certainty in The US with with the disruptions in the securitized market, yes, I I think the balance sheet option that we offer is just the certainty because I think we’re we’ve seen it because there are deals that we lost to to a securitized bid where where they said they were following the execution may result in not getting. So, certainly, you know, whether it be economics or certainty in The US, those larger deals, we’re certainly spending more time on them and getting more and more inbound. Europe is is a is a bit different. Like I said, it’s not too much to monetize.

It’s the, you know, it would be, you know, more more banks or other other lenders we’d be competing with. But, I mean, in some ways, we’re headed. Right? The you know, most of the new activity we’re gonna be doing is gonna be in response to repayment. So if some of these repayments don’t materialize, we just won’t be doing new new deals.

Right? Because the the the growth is really coming from, for example, Steinway as you get that money back to 01/11. Money, you know, that was debt capital that will redeploy. But, you know, if if a $300,000,000 loan doesn’t get repaid, then we don’t have that capital back, and and we don’t need to get the capital back because we’re earning a good return on that money. We just want to, you know, we’ll do less new business.

So that’s why it’s kinda like, okay. Like, we’re we’re we’re hedged a little we’re for loans that are are gonna get refinanced, obviously. We like them and happy that they’re they’re levered appropriately and generating a good return. So it’s just that long, but it’s kinda that’s not gonna happen.

: Alright. Thank you.

Operator/Moderator: Thank you. I would now like to turn the call back over to mister Rothstein for any closing remarks.

Stuart Rothkin, Chief Executive Officer, Apollo Commercial Real Estate Finance: Thank you, operator, and thanks to those of you who participated this morning. Obviously, myself, Scott, Hillary, Anastasia, we are around if there are

: further questions. Thank you all.

Operator/Moderator: This concludes the conference. Thank you for your

: participation.

Operator/Moderator: You may

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.