ARI - Earnings call transcript Q2 2024 | Apollo Commercial Real Estate Finance, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

I'd like to remind everyone that today's call and webcast are being recorded. Please note that they 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. important webcast that forward-looking most materially you with SEC and and and recent from call cause the ask could projections. we refer for these conference statements may to statements include projections, filings actual and Today's results that differ factors to our

earnings certain figures will are which company's this financial our presentation, these measures measures call, in to which the In addition, of non-GAAP relevant the we management to assessing GAAP the reconciled our be discussing in section available on believes are is performance, Stockholders website.

obligation We Chief (XXX) do our not update XXX-XXXX. Executive I'd like At website company's at the or undertake law. our copies visit any projections by unless this over of time, To www.apollocref.com please obtain to turn the to required Officer, to or at statements us call Rothstein. filings, SEC Stuart latest forward-looking call

Stuart Rothstein

thank joining Real those Second you, morning, to Call. of operator, Commercial Apollo you the for and us Estate XXXX on Earnings good and Quarter Thank Finance us

joined I our Mironova, Chief our Officer; Investment usual, Scott Weiner, today Anastasia As Financial and Officer. Chief by am

update I in the ARI's speak performance an quarter portfolio subsequent I Before would yesterday. provide to event second updates, disclosed filed the like XX-Q and about on

was not portion the operations and performance the the XX% also joint Apollo-managed in the operator served have and to secured ARI's own million. the Healthcare, lease. a Massachusetts. hospitals. hospitals. X lend joint who loan In under loan of properties March of Steward's does totaled XXXX, Steward venture of ARI That involvement in first of to not leased loan loan-to-cost the the or then to any the in The hospitals the parties Apollo did origination, venture other made with as In Steward mortgage entities capitalization co-originated between by hospitals $XXX connection X of

XX% amortization XXXX. June structure represents since cost have $XXX and of loan balance and and ARI's collateral amortized for provided approximately origination XX, of loan The the the that was cash as covenants original million in

As Steward XX of in current loan all on Chapter May for interest XXXX. payments. the bankruptcy remains today, contractual filed

the rating process to to negotiations was to received risk end, subsequent and X and multiple X quarter During bid constituencies. evolve bids are the quarter, downgraded the with second loan's from continuing

CECL is there upon filing uncertainty, While $XX CECL currently XX-Q as in information and the we actual Steward's XX, a high The currently taking specific which bankruptcy July differ anticipate account materially into based still made continuing degree quarter, documents on based million. a subsequent recording of of court allowance a available be to allowance specific may the approximately we on estimate publicly available development.

of of performance, level for Shifting year. months to to $XXX continued second ARI the loan first receive quarter X healthy repayments which million the totaled a

During of the transactions million redeployed Kingdom additional new X X into completed quarter transactions totaling capital quarter, in approximately GBP United XXX ARI following approximately million. we and $XXX end, the

earn than attractive in on new vintage deployed legacy and are to to enable our lower transactions points structured portfolio All levered the spreads capital. of wider and these loans ARI attachment have ROEs newly

we share market receive as to continues in capital the and which fill broader pipeline void real to market benefit credit retrench. back, platform, Apollo's continue sources we As of capital gain from the estate the traditional

$X.X ARI's Turning was XX billion. At portfolio comprised end, quarter now of the totaling to portfolio. loans

an of the During including additional into that went currently senior of closing units with West million units XXth the quarter momentum $XX the mortgage by subsequent a were totaling X used to X at pay Street there XXX third down is was X contract, proceeds approximately which sales to held quarter, party. gross significant penthouses. Notably, end,

units balance of and Following of close. will a senior the once have under those contract, inclusive loan million is what paydown approximately the $XX

property, confident marketing been this of for are dedicated continue. their new successful, and momentum global on through will brokerage leadership. already has sales we this reach proven hiring a Their with There luxury focus effort market renowned renewed their coupled a team international the has

I review the ARI's to With the will results over call to turn quarter. that, Anastasia for financial

Anastasia Mironova

Thank ARI or distributable ARI carrying average $XX stockholders unleveraged billion share $X.X portfolio stock the yield and attributable per Stuart, and common quarter stock. per share GAAP $X.XX with value the a of of of earnings you, $X.XX good common to the everyone. common morning, for income quarter. second of diluted was reported of weighted ended net million X.X%.

of previously In the on million million. quarter, completed loans, addition to from gross investments funding year-to-date we $XXX the bringing fundings $XXX add discussed, closed during to add-on Stuart new gross

proceeds For subordinate loan. the Subsequent of from first sales. and an loan end, additional we million of repayment senior million from to $XXX ARI repayments of the X and XXXX, quarter $XXX received X X received months

a ARI this A Class million quarter, of has adverse we allowance the current that as portfolios well CECL attributable a for the at Michigan risk in June to end $X.X loan compared as our X that recording for is the a was loan, risk allowance service X. QX. worth CECL basis by recorded secured all noting rated loan a on previously general payments. at building During this rating is office points In property increase specific with It subordinate its This outlook primarily debt certain more CECL downgraded when been types. specific allowance amortized stood XX contractual of XX, in conjunction at Troy, interest loan loan increase the as a new basis to The point cost originations X.

repurchased a generated share $XX.XX XX.X% during stock at of XXX average was accretive end $X.XX $XX allowance CECL ARI from share, general represents of quarter share CECL book $X.XX value per cost last to depreciation, book and which and $XX.XX, total excluding per XX, value We million amortized was June book which price our basis basis the $XX.XX ROE. of quarter. at portfolio's at value. loan reserves the of up the weighted common points per was of Our

rise respect an all we Post the our to comprised end, total of price the covenants. of our credit quarter liquidity facilities and capacity hand, share. on the The existing of cash on $X.XX common $X borrowings, at million million stock ended proceeds quarter company compliance by acquired with in With undrawn $XXX per with weighted a servicer. average of additional held loan

XX, million June we At also held of assets. unencumbered $XXX

to determine optimal put Hotel time return enhanced ARI quarter, Mayflower a continue accretive the on an to enabling of to the leverage equity sell the earn financing to the as During the in Washington, $XX million place in ARI market D.C, we for monitor hotel.

with during additional of provide credit $XXX ARI secured million also Barclays an We additional the upsized quarter, our with capacity. facility

at was debt-to-equity X.Xx. Our ratio end quarter

As to And debt a questions. maturities until the would we reminder, the operator we May XXXX. have for line ask open that, no corporate with

Operator

[Operator Instructions]

question Doug from first UBS. Our with Harter comes

Douglas Harter

hospitals? the On obligations the the the just you hospital operator borrower loan, wondering to of ultimate any recourse and if or have

Stuart Rothstein

No, we do not.

Douglas Harter

it. Got

So it's just real estate?

Stuart Rothstein

a what -- from we a to I mean our can loan lender. have rights We real protect and as we'll it's estate do our perspective, Doug,

Douglas Harter

that Great. about guess just as those you about recovery extent ultimately I hospitals you how are to And think the closed. think or class, of that values some asset do

Stuart Rothstein

I lent but I would Look, in X now X there's right things a it of against -- and I while as would individual as we flux, hospitals, each at say assets them are think we think look recover And the portfolio we're about each doing in constituents sort work we keeping how collateral in much also concerns value to piece necessary say mind well. of of individually. the process as the as other of while somewhat

Operator

Shane comes from JPMorgan. Rick next with Our question

Richard Shane

now think inning in within like over of sort great and years, the us outlook. a Look, world period operate -- And of other the going the each X idea bit last be end a the deal going timelines. reaching problematic next evolved portfolio of challenges it's risk in the One is the you has portfolio. of those? few is rate interest the the in of curious, terms additional about Can do sort that what the a talk is forward, you I'm going you we're of loans. just emergence I resolution. within to you Can little resolution good tell existing we're that of month the to feel emergence on pretty And of are the have where we

Stuart Rothstein

Yes.

feel which our hotspots what I with premise to know your target resolution, could sector Rick, I we've I because of which or of resolution question, out towards there And just path date general stated I is sort that we a know is date. at think like the focused a I maturity all enough are. this agree And on a list some around focus time. we're been think think or our what long point, play the over

over where process iterative an through go can it time. out things plays Sometimes

at some that things get market the in the which the I to enhanced we've think where you are more think is there sitting I where got a sure encouraged are the given getting a can resolution on the value But making we to good those back what question, be into say clarity I where and feel activity, while started on capital fact that here would around time, we're getting of And that redeployed our to need excited matter of list, us is comes to same things transact of we sense a job on. about. really focus good we're focus doing it's are things to today, I by general, like seems resolved. that leads that

Richard Shane

of a there's look, quickly of market how go quickly? mean, borrowers guys outlook. concept likely the impacting you day, this XX And your terms a behavior become over how in think carrying I just of weeks you Are next borrowers? rational seeing costs And to we defending expectations. to terms conversations. that into rate having of amongst positions XX every sentiment given Or potentially are curious terms going the more to things shift Got their change in see we're and it. outlook aggressive in what But expect the rate about months? of I'm are should you tenor in the are seismic the pretty you down again, you're

Stuart Rothstein

think it's the you're -- think I I mean I question. asking Yes. right

right fairly interest certainly, step the new things real occurring are the say, might renewed it's it there's might they is anecdotal like in terms dis-attached I into feels transaction get business feeling people a on I arguably they anecdotally, and a have it a rate can existing Anecdotally, market sort potential a equity assets month of for well somewhat of market. both would best sooner financing for if could estate but they of of side in as end than like perspective where attractive up the thought. think general today, from quickly, at fairly I in of people also in borrowers say time, as as sort period now

Operator

from Our next James. question comes Stephen with Raymond Laws

Stephen Laws

how events timing you on reserve follow out? Stuart, thoughts today. that it's in to to I loan you nonperforming. And up Or will the just hospital. first go Or do that that plays know are in of question there around the out Doug's that? the future QX? further specific as drive happen on Any said hit current expect

Stuart Rothstein

of should out half today lot just is any of be guess give in a the that right sound involved Best moving but more tough second don't year. playing it's the pieces, to lot There's now. coming want constituents is and daily, the and reserve to of nonresponsive, clarity we it a

Stephen Laws

investment a Understood. originations. there quarter That's July. in Shifting to pipeline, of the a lot active gears pretty continued with

being the far QX continue had with over as can as talk of you over X months investments. loans. the new the this in year? about we July last and expect coincidental, loans. coming pace into your the and take But recent half X to it's U.S. should over Europe but repayments had And remainder turning portfolio pipeline that you in, think what back recycled I expect X

Stuart Rothstein

I or add rate say, the last transactional only finding my economy are to active and activity. anything, done. Look, if so implies indicated pretty vis-a-vis movements the behind response for what ways get the investors I as Rick. right people would momentum a positive from volatility now, and those certainly the I transactions to think, market mean, And question I equity it's over in the around probably certain to week lenders that

to that the I credit Apollo, pretty speaking, going estate overall terms across we're real at a deployment. and lot paid year. the in positioned a about have broadly things, capital this repaid think we're looking we're we things get of anticipated pipeline And back us. comes optimistic getting year to to at So the is result, we as on business robust think capital be And a robust, back we well of as ARI redeployed and to remain

Stephen Laws

XX% over XX.X% view dividend. implies the on a hospital new The kind loan, touch the about on then be finally, sustainable seeing on it would ROE the on what your given a investment of wanted current that reserve for Great. And pro return for the dividend as forma do I book portfolio and rate outlook then to specific book, coming you you're returns on side? little and

Stuart Rothstein

I I mean what historically. with in my I think ROEs think as -- consistent we're remarks, I implied we've generating done

So feels that good.

Board, think now. weeks always, through from dividend minus we'll or the discussion plus as which with I X handle our the quarterly is

us I environment. capital, think there's see we the make sure but what mindful trajectory for and over do like we some positive time. we to us, that for as want the being we rate momentum just earnings underperforming Obviously, for are of curve hope looks interest of might

the pretty we're historically. of lot will But they're So the consistent of been they've new terms in with overall. factors into go on generating transactions, a where dialogue ROEs just

Operator

question next JMP Steve comes Delaney from with Citizens Our Securities.

Steven Delaney

coverage challenging was But just half second My 'XX, market rounded first to to it's a piggyback quarter. and back at year, the maybe the number right bit. your for it's June a question same on by Congrats subs dividend on portfolio within $X.X but or million, design, including at XX. the is ironically, full of looking $XXX and in the seniors billion, it the year-end Stephen, the your

second look of in best kind as this year, modeling the you stick a year? rest As the the flattish think maybe with be analysts you to forward the of of the half approach would we look portfolio for to would from

that just like answer it -- material thoughts, the question, but prevent about XXXX more opportunities years of lender's your year? question, a X and your after you feels And two, hope the over but pretty portfolio. one not seeing are the to have would for market to XXXX appears this be the shrinkage, maintain you through curious half like X CRE, sounds of just given It to to given what's could can new this the that I equity expectation of long what a want get we developing and second next beyond into end active be year, for coming sorry

Stuart Rothstein

say things. So a I'd few

of sort is a of terms capital put per sideways I we'll of a portfolio side get in But se. reasonable really think your catalyst not back, notion capital moving XXXX growth there's We'll out. assumption. for

feels we're direction, either don't me $XXX hard a [ ] pretty talking million good. give if again, about So in time but that

thinking it sitting I also what both estate here of today, others what we we're various real lens pools and looking our through the capital. seeing of at think I'm vis-a-vis real estate are in but credit about business, and equity

pretty rates capital if I achieve pretty XXXX that. there. Obviously, for an there's economy year. overall lot of and some around active hope of hanging with a soft overlay be could busy. do landing could sort be think there's economic a XXXX moderation do active But the looking we think be interest with of I to the still in

in management be to into to us asset for opportunity capital situations some turning growing challenging us greatest which XXXX the of around back our give which with and think more is deploy. I resolutions, more active

the obviously, back I go work senior which getting So paid you West to on every senior to involved sales because back comments, then, offensively. well. around back, think XXX of to if the on back incremental capital other And in once directly, is to we're my us dollar harping comes the unit some put everybody of as provides XXth is paid situations

Steven Delaney

course, help guess XXXX? do for rate, close That's a scenario, I that helpful. Fed that doesn't to And get anything we of if but X% something funds right,

Stuart Rothstein

are think you I yes. right,

Operator

with from comes KBW. Jade question Rahmani next Our

Jade Rahmani

Could if West deal to the be you we summarize the left ARI's give and this position. units with Starting at sold XXX remaining stage? could just XXth,

Stuart Rothstein

ended specific $XXX has the roughly be down been of I in front not loan million another units there's number with to rather as the but the I'd of and on paid million we a first $XX about being position. That indicated there ARI's units, start $XXX in of quarter sort to Jade, contract. senior of million, under question, remarks,

of we confidence million continued that short in with down front. think order sales front So around we in us $XX to are on

Jade Rahmani

will the So million that's what frame over close? time that under contract, $XX

Stuart Rothstein

half close It second will of the during year. the

Jade Rahmani

position for of $XX million ARI's meds of second Okay. $XXX quarter, million the of And $XX and million million? med of and a included $XXX as junior senior total

Stuart Rothstein

Yes.

Jade Rahmani

just to I make wanted Okay. was sure that clear.

an XX-XX, real to Turning will operator. situation. health X the are the venture, on quite estate a lease. too property joint and bids that this be hospitals complicated there and The because care the then the rent that weren't that reports least Can situation. of There's say media in you the rejected the an high, was whether also the at there owner reports of REO There's it's payments complicated. is operator

do So I anticipate ongoing the don't with this will such. know But be REO. negotiations state and there's an you

Stuart Rothstein

I I'll Doug's think as question, point, will be X need you that I I to at outcomes was think individual for consolidated is different assets to what think it I refer opposed portfolio. said possible think, X think which back to about differentiated this there certainly is, hospitals. to, I is And

Jade Rahmani

the Okay. reserves. REITs could any XX% but loan be say Anything industry, And it to $XX of to $XX tend know comes reserve, you of it this then on you as about the talk to the exposure, overly sorry color adequacy conservative but million how to million? that? about mortgage ARI's when don't the got I about to is

Stuart Rothstein

the we've through process reserve for with CECL through every went we reserve taken. we've for was this process been the think consistent specific I other

Jade Rahmani

front, on Okay. ARI's multifamily. origination on perspective I've new always then appreciated differentiated the And

low a And LTV loans are multifamily I X well. see quite as now which so refinanced at loans,

the ARI something how are has you thinking a in? played future LTV sure stabilized So the about not multifamily or I'm basis if historically but really approaching space what projected is, not that's

Stuart Rothstein

Look, the think term, and Long Yes. is high-quality for macro still demand there that the level perspective I need for is at multifamilies.

in we multifamily cetera. to respect historic the general, competition has with in situations certain been reticence So over valuations, a et space our from like of concerns combination

in been for on like multifamily, a think positioning for window some today, maybe brief here we work found situations on of There's been whereby transactions we've long-term we the macro pursued, of that a I competition the margin. we certain us. sitting and period time, less

As run a portfolio the deal-by-deal to on always, basis. we continue bottoms-up

overall to able deal, this by the for deal I was desire thesis some would of moment ROEs this sort opportunities. valuations a percentage. of to something for on So always in read space. It's team sort but to in We'll certain at opportunities? source the macro thought about in any We've interesting look continue how at moment in time, or versus into not a change the thesis about a basis volatility risk-adjusted really pretty a a had given marketplace, multifamily deals other we And been create a the time. positive about

Jade Rahmani

the A, And at going completed what Are are luxury, looks in recently deals doing of but like perhaps are after? X you you're construction these Class least them deals deck, slide the -- new California financing a these and the build, one or... in lease-up

Stuart Rothstein

It's product lease-up place. Yes. new

Scott Weiner

think, you that. and I stuff one stuff of normal D.C. in -- -- think COVID if terms and I the a, not some recall, I lease-up XXXX. in That with built, with tenants guess, recently was Jade, D.C. in laws one, was was like liberal had the pretty like it's it play

that. the disruptions been through. we've That's in evictions some things and sponsor terms had working with So like tenants of

roll, equity on now invested they're when the a it down rent the working substantial for this, will. So up loan, and if the was cleaning you refinance sponsor pay

Operator

Dray comes of Our with next Bank from Eric America. question

Eric Dray

little seeing are just of the kind office I and you of most most of can opportunity Jade about in there questions. And talk the of just kind there, covered in one, in about maturities a guess, upcoming also, the you're office Europe. was bit pipeline. over your terms is what portfolio of I curious in Europe But the my trends

kind that could on give of you color any as interesting would So be well.

Scott Weiner

Yes, sure.

I back market be go I'll the than and seriously to I a the and if our exposure -- much question. London, start U.S., say, the office friendly thankfully, markets, -- is environmentally say, every better of in of of similar would is going say I'll you I'll city in would with most start is so look, I U.S. much would more more back phenomenon, which here So different. little to in continues people the offices. the to occupiers. will, taken Europe, office. by other the It's the in lead London tighter one importance

real London in safe space. you is so time, think -- tenants viewed a place same the green at a for have see I And as And new be to modern you for capital. need

continue there. you going So to capital international see

the also in newer as signing both available London, and see I well say being back office capital in particular, in seeing the leases acquisitions. So people as would you're occupiers financing you is at buildings,

for lease our is office in exposure and largest Thankfully, also building. headquarters long-term is London it us, a

have we XX-year institution a So headquarters. lease large to as financial a their

that So continue to largest and over up our fund time. will that's one,

But So obviously, I that say to that's seeing But fund. going London why continues other markets office comfortable that on and trends seeing generally positive Europe. you're would deal. in up in very exposure we're our because

a capital corporate They deal market of, much did not CMBS the have, [ market As far given or has market never but bond root. Solvency there that say, over ] robust that never or had a II took opportunity, took reasons, way. CMBS more I advantage for other would large REITs as say, Europe, really would I really

to SASB by seems done whereas getting be everything in the So U.S., market. the

That doesn't Europe. exist in really

don't so where getting And to there you're as multi-jurisdictional, because banks having they're much. go seen really deals like for we've us, pan-European opportunity the the

where can Apollo deals or take and other bar and have syndication good also not right, just basically technology we marry acquisition in have across a vehicles, types We capital risk. industrial facilities some there, then or property not larger

financing things business very I alive U.S., say, all then the competitive had Europe. similar or warehouse advantage. been have to in a And where is Those we've the much loan would loan on

non-mark-to-market stuff, we're absolute advance so terms attractive very to get to able create we're able rate terms of attractive return. spread, an in So

shift. would really right then dollar. to or There the pound hedging obviously basis, would euro little a dollar. to much pickup not say to from of I be And there's pound bit a pickup things continue on a from now say does I any of from pickup

Operator

turn I closing remarks. you. any the call back Mr. now over would Thank for like to to Rothstein

Stuart Rothstein

for participating. you all Thank

Operator

This your Thank Thank concludes conference. you for participation. the you.

You disconnect. may now

Apollo Commercial Real Estate Finance (ARI) 7 Aug 242024 Q2 Earnings call transcript