ARI - Earnings call transcript Q4 2024 | Apollo Commercial Real Estate Finance, Inc.

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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 release.

call our to statements. press to harbor customary like in disclosure release also your the attention safe I'd regarding forward-looking conference actual you projections. may and webcast SEC statements for recent call and statements that the differ Today's projections, could materially factors and these cause filings include with we to to refer forward-looking that important our results most ask and from

non-GAAP the measures are In financial on call, discussing addition, we believes assessing will which relevant certain to company's be performance. management this

These reconciled our of which projections do or update are latest our at our stockholders to measures to our GAAP please statements copies call or www.apollocref.com We earnings is section unless (XXX) SEC filings, figures required presentation, us not website. website our obligation at forward-looking in undertake by any available visit XXX-XXXX. law. in our obtain of To

At this company's to Officer, the like Executive Stuart the to over turn call time, I'd Rothstein. Chief

Stuart Rothstein

thank of Earnings Call. Estate Thank and XXXX Financing Year you Real you, Full to Fourth Commercial us operator, us this on Apollo those and Quarter the morning joining

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

increase estate robust XXXX. of capital ARI volume, in with in capital activity active the deploying of Consistent the and steady the repayment liquidity a to in level markets return real transaction and experienced was very

investment place during modest continued activity. estate enough was aggressive the Fed notable generate was pickup the more action actually market XXXX, expecting to in took the of the economy cuts While the from strength Fed and overall real a than

troughed the appears the with that early new part As property we into the XXXX. benefit of move hindsight, of it in valuations year,

and who XX real for increasing funds real is market. many and XXXX, capital on reenter across within the participants as deployed, the have months transaction during the the And of estate past significant dry been powder sidelines expect activity we the market the estate deployment

to XXXX of bringing new loans the in finished $X.X fourth origination $XXX ARI originating million year worth billion. total quarter, the for volume

of in floors. months approximately and with base ARI's interest loans returns of reset higher ARI's generate As past very XX were in rate the to were interest rates originated underwritten rise newly benefiting in values. wider property loans originated of XX% correlating the the spreads attractive rates year-end, portfolio from risk-adjusted and resulting the and

strength credit estate team broad-based originations loans Apollo's is The ARI's of real billion of key during $XX active deployment over the efforts to worth new as Apollo's originated XXXX.

is into the market, pipeline As Apollo's when the active tap capital seamlessly ARI to consistently team in can is invest available.

XXXX of ARI's in as Europe quality further continues to originations transactions and diversifying to while we profiles transactions able types a dominant half risk company's the the to differentiator and the comparable spectrum were Apollo's than for in portfolio. geographies market in position U.K. across in are with with invest a more U.S. similar ARI in broad be property credit

in now loans additional At the CECL allowances fourth was $X.X totaling to loan year-end, portfolio recorded the billion. ARI's No XX were comprised Turning asset-specific quarter. portfolio. of

into to Shifting other be unit all offers. and agreed-upon to several under X X and in Upon units, thereafter redeployed proceeds others currently senior proceeds assuming can closing there the stages repay XXth contract new full ARI various are closes, mortgage units several including and contract loans. XXX in Street, negotiations, net received go will with the the of will X of West and

higher equity targeting our proactive management asset and on opportunities. invested return underperforming focused convert we We recovery loans and remain focused resolutions maximize to as into seek highly on value capital on

and our actively pursuing are resolutions. for We remaining defined nonperforming assets, we pathways REO loans have and

capital. redeploy potential for quarter's mentioned we earnings last there is call, As recapture as and meaningful upside on we ARI

ARI an million For ROE or in generating it recently Brooklyn able to invested refinancing loans. consistent expected has with net that of nonincome-producing multifamily and capital originated that capital convert completion example, be asset, invested sale is approximately of development. ARI $XXX will Upon the to equity that

were estimate annual Across to and equity there to reinvest loans, originated we into tied that able $X.XX ARI, if XXX% the uplift. per to we approximately we additional ROE loans share of believe an is newly nonperforming of $X.XX earnings

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

Anastasia Mironova

or million distributable earnings quarter, Stuart, or fourth you, per for everyone. morning, common income common of share good GAAP diluted stock. per Thank million $XX $X.XX $X.XX of of share of and reported the with ARI $XX stock net

earnings For of the loss stockholders per negative $X.XX reported stock, $X.XX negative or $XXX of with common share year, per share. we net or to million available distributable full of million $XXX GAAP

dividend other quarter and accelerated XXX% fee early fourth our and items. Our the coverage for fees, amortization quarter as for $X.XX XXX% is earnings with repayments the distributable worth covered similar and was It such year. of nonrecurring full items, prepayment noting that onetime well included

the impact the cuts the dividend. to of of quarterly compared the 'XX, still for while QX that we 'XX quarter sufficient course expect Fed lower with Coupled earnings over coverage when executed providing 'XX, our rate in our fourth by of would be

$X.X billion X.X%. Our yield weighted the unlevered a portfolio the value ended year and loan carrying with average of of

X a closing million upsizes associated $XXX and about had we refinancing X these ARI mentioned, at of strong originations, funded quarter new loan close. commitments, transaction. with X Stuart As commitments

During the total bringing previously add-on million. additional million funded $XXX also closed the for quarter, we year-to-date $XX loans, to fundings an

loan another had $XXX loan which new and of add-on We fundings. quarter repayments, therefore, and outpaced totaled elevated million, closings

decreased balance our result, quarter-over-quarter. a As portfolio loan

pipeline of and portfolio with deals. we're so repayments new loan in million grow origination recirculating capital from of X our closed post $XXX commitment However, into to expect half loan we XXXX forth. quarter over the first year, as the We for for $X billion an

allowances no in no during across weighted With respect rating was movements There average recorded CECL the the the quarter end. portfolio our quarter portfolio. asset-specific end from and to X.X, of risk ratings quarter at risk ratings, the unchanged previous were material

relatively was allowance CECL total quarter-over-quarter. flat Our

December of it to which of represents equated $X.XX $XXX share million per XX, book value. As

to balance on side Moving right-hand the sheet. the of

see with continued report spread the borrowings across on tightening draws on average cost to we the During QX, XX weighted across in to our secured being compared facilities facilities. average rebuild lower average spread of new points basis quarter,

quarter at X.Xx, end proceeds by ratio XX. on servicer. undrawn on X.Xx liquidity over debt-to-equity down and capacity $XXX total the facilities comprised of credit from the Our loan with held existing was ended hand, quarter at company of cash September million The

share, quarter. Our was depreciation general and increase $XX.XX, slight CECL book value last per allowance from excluding a

to to would operator And like open for questions. we with ask the that, the line

Operator

Rick first Our with Instructions] comes JPMorgan. Shane from [Operator question

Richard Shane

have big Look, in specific are you And substantial a within reserve. portfolio. appears it you've the as the -- guys a where still you see the risks what you position dimensionalized that now really

X, we the realized and reserve or think can next like that distributable of year give might losses sense might about our dial you transactions how cadence us translate it year in earnings that and As losses we the of some so over into just specific realized this can look or what estimates?

Stuart Rothstein

think think big at the obviously, I of Yes. some as think, think Rick, the comments, mentioned of we'll all specific my that I capital the going, pace reserve, continues components I Look, we as it's is because about XXX clawing if in post it start this the of back per redeploy reserve that our we're assets. what up being in envision but into is able That to doesn't is point, net the tied capital carrying project. impact at balance XXth West sort the we se performing certainly you reserve

that outstanding our net million will start Liberty it's So part to I or work. so to back asset be think Center, of can year point. Cincinnati XX% of leased this we're put optimistic known $XXX up that over us The this it at we will coming as and

the this back. to year and I that move into think there's get capital market and potential opportunities try that

to it's later half start think X those is I to nearest probably year year. of which event, work, term of sort the this putting of sort half capital are the the second of but opportunities

part go this our out And a in means as equity up have of will which refinancing then concept the to which -- and of or as we'll start well, sale Brooklyn that could things mentioned the latter next in transaction. about part thinking of comments, lot taking of realistically year, there's I REO, start tied my assuming equity bit will fair asset tenants be pull in of on asset, that early proof we year a

part capital/REO say, So this work heading productively. next is latter year I when being start we of underperforming would really, year to seeing it's into really start more put should

Richard Shane

the of appreciate swinging at and that answer. specificity pitch really I the you

So thank very much. you

Operator

from Our Jade with Rahmani comes next KBW. question

Jade Rahmani

up. capital of some Just put geography, opportunities still has could are and been question, situations type you're a they some could bit around But It stepping kinds you're like thematics just you deals? if structure-challenged high-level seems active you're talk Multifamily picking also -- Are interesting into? property you seeing situations if in Europe. maybe to like geographically. a paint then acquisitions? new these the What kinds of of Are these? but where

Stuart Rothstein

want Scott, to you take one? that do

Scott Weiner

all at constructed Sure. on, built type a we're Yes, loan. where so Multifamily not is the constructive we're really that all generally I and newly are construction think situations, seeing doing across we're increased say but sectors Jade, really that activity I newly very multifamily, geographies. distressed look, of something refinancing we're would deals

we've condo the certainly housing homes transition as the United similar-type or U.K. that's you're theme, deals certain the both within up. one as seeing well in We're stuff in both lot residential ares senior just markets, seeing on, time been interesting spending so loans. of continuing a care leasing is And and housing really States, really inventory in the student

But long-term and midst an are an I something as construction. you stable active. as on that participating continue refinancings. future be to well. ones focus. platform be we will major interesting to where find really leases as ARI as a been we've Data in there good continue And It's area Hotels investment-grade in well area, the is Europe, centers nothing distressed. that's acquisitions assets mentioned, think U.K. credits, the of that as And is really really the area opportunities hyperscale in or to either both of

Jade Rahmani

the an you there on And I the you and X since could was hotels update Atlanta potential D.C. mention monetization. wondering and didn't if outlook those hotels XXXX REO that as give

Stuart Rothstein

Scott. Yes. Go ahead,

Scott Weiner

activity inauguration I very very pre-COVID in to the perform I before, It's to levels, year good referenced going continues D.C. and we've a to DC, think start. well. off the say was all clearly, with this exceeding

cash asset, of putting So this and to test the And targeting flow. year. we're to balancing, of in later I think things that terms asset return the the capital best model the an the also on really is it, we Atlanta going investment trying we use to what's business the would that evaluate that an then of and be potentially continues right like asset on markets assuming market is constructive, highest you're what CapEx terms the to that, into what's just in raise and continue

where evaluate We So I an continue in assets think in to of it. have marks we would appropriate our exit. terms of we are both say terms

On on DC we the asset, asset-level financing. put did

not also at least generating And return. that is generating to to contributing so a income. but nice cash debt like of the flow, for The is our that both we'd type of us. return levered asset capital, see below capital are Atlanta in That's although them

we're not up to going So a be to hurry sell.

we we later if price right the get this on year. would So sell one, either it can

Operator

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

Steven Delaney

$X.X REO, portfolio, $X.X the talk other know your the slightly you the to got year. billion. assets seeing to like of new grow Is $X that to you're But the underlevered sounds have end billion, core you've nonearning your... of portfolio some at the XX that next portfolio, it given I the about things could over wanted in attractive you X might terms like sounds in that to what loans, feasible in It I revise. bridge with months billion be

Scott Weiner

coming. We a in did timing. quarter Stuart have, which close just deals a the closing, a Yes, at will repayments coming as few some this of that large year, had I end really it's and large are one we mentioned, the and be absolutely. mean of matter already of of pipeline

portfolio we you and it it $X.X invest sitting if growing that have take $X lever, by and easily. it capital you could that there of think easily, we billion, just be senior that So the as we billion see mortgages will pretty then

Stuart Rothstein

use there finer abundant new for that, leverage is back Yes. to get on like to and seek a leverage put an as And we to us capital for of Steve, just available to supply deals do point ROE.

as Scott's are a we the things that to find equity us bit. So to and that interesting, portfolio chance a point, there's for grow lever

Steven Delaney

Yes.

happy than with you so the they're lend finance to your that but So it? the loans, we loans? much think for way about competing aren't bridge should bridge to banks more to you Is

Stuart Rothstein

yes. -- plenty there's Yes,

I about the headline activities, balance leverage. sort provide think they're active their looking might on they -- of be to saying behind sheet scenes whatever very

Steven Delaney

it I commercial necessarily there that true real be projects nice maybe real market for tackling I tap properties, while green estate to in. And equity for of but talk some X seemed with the loans Stuart. the it There nature U.K. has be domestic, there, everybody just didn't sense the a think was refinancing shoots. something stuck investors really and to -- to seem like coming let's estate new sounds the new from We versus fresh you new the heard But was months, market guys today to of XX been you, in, -- but bridge projects. kind

new your mode more -- now, money bridge bridge of to on as are in stuff. priorities? we're loans bank and not just old Or is in moving much the seeing you loans projects where around financing as bank, new but we loans there's plans still it business Are around this new

real been Just animal aroused and within the community. -- spirits curious if equity estate if investor there's development the have

Stuart Rothstein

definitely opening Look, work. and Scott and We're add of put to remarks, to off mentioned seeing in color to sidelines starting as as phrase reasons capital some lack can better a the people the I for look for coming well.

time say of So where phrase. the sort lack there's space playing people of it's office definitely generally -- better I'd absent look a for for

put in to as starting looking industrial, his think Scott they to into set people are work long-term whether remarks, data perspective. it's mentioned see, ways multifamily, you assets or a capital think from that for I

the getting recognizing they've fully that So and not capital. need capital that they they've people off say, that for if I back, but deploy to investment, definitely, would raised sidelines got

to free feel some Scott, know, don't commentary. I add

Scott Weiner

just X/X of Stuart I is as deployed looking think acquisitions. loans. $XX overall it we mentioned, in think our like was I for it. at No, I that about mean I think platform, year, about last globally billion And

lot So investors bringing stuff a sometimes, of stuff. recently mean, could certainly I a in lot are of be new but and new construction acquisitions, recapping. people built

markets bid-ask has that between And that I a the and fully functioning. strongly think there's buyers are shrunk. So sellers

to And seeing certainly so a lot of sell. the lot at you're neither same But activity. a time, of don't want people

lower interest down, certainly, go there's at upside some further. cash I cap in And even rates think I think will flows. point, rates which will

Operator

Nickodemus with BTIG. next Our from question John comes

John Nickodemus

just kind the what environment of the borrowers instances pretend of an favorable of uncertainty quarters. just you've extend of the believe to Yes, that to Steve could rate in with with was kind But more ton looking regardless asset on what's Obviously, a heard start extension and I'm a curious asking. of phrase just recent going extend sort what into be of the rate down the underlying loans. they XXXX, line

to that's months start transpired in helpful. much seeing proceeding they're be past borrowers of of with how of you've given would if that XXXX couple really you're any the sort just noticed Just real and changes or everything

Stuart Rothstein

to Scott, take that? want do you

Scott Weiner

I Look, point, have sure terms kind and But to also like think through things or the in from certainly people in office their worked are -- that are we've think and visibility we the a whether decided things earlier what basis sponsor that that deals not. of the like of heading to be certainly right and sign been of sponsor We extend winners what's their transparency kind and more have doing lot have or where portfolio and or they is Yes. multifamily and never perspective, mean, at my want the pretend. I right capital. enhance make to leases do our

people good to But something on So really in hasn't challenges, has I or be still trying that to say a I to it. out not that of do think sense think going lot expired people work a going way not there's figure things. that this continue, they're with lease to in are particular, a in it's have what have office long-term still because to yet markets whether still through

Operator

with from Green Our next Instructions] Street. question comes Harsh Hemnani [Operator

Harsh Hemnani

like the highlight transitional you in assets the might in spreads sort that assets they on see might of more of the couple seemed of somewhat Could U.K. you asset and maybe stabilized differ types that So these it XQ retail on stabilized, especially were doing? the a transactions you're typically how from touch

Stuart Rothstein

Scott, do these you want market days? to talk about spreads in the

Scott Weiner

year, also reemergence others, to Yes. me time, months, come a Look, at us the out from have, those overall, same where think past in the and and in I over market hear financing in certainly, spreads come CRE you'll you have have lot put driven CLO the mean I the by the in. the come from you've heard see appetite bank's dramatically. that the -- warehouse XX spreads U.S., can of spreads have But

even we're generate So mid-teen our say, spreads, returns. still I would with tighter loan able to

far versus location, property transitional be still at than wider as As deal, spreads on of spreads, a spread think wider hotel be as again, would generally you it's very than of is dependent multifamily. Generally, -- and a deals. example, for types multifamily, at a stable a stable of could much spread or kind

on But generally, there at a stable think a nuances I more we're is spread. and a time, we better, higher tighter either tighter advance So the a and/or be the asset spread that that if financing doing that asset same then some get rate ourselves are there.

I fee. But we're generally, asset levered days of it call be kind or return, stable high to whether upfront what So transitional these generally, a more then it over, Xs for we're low assets. are say I right? same doing spreads working towards more the And an Xs would

Harsh Hemnani

helpful. Got super it. That's

against to liquidity, good like get risk the volumes on But at of the your up, other transaction backdrop loans markets, higher can the And into point this cycle. the so in a of capital meet sort you time with return picking sort of hurdles it stabilized hand, improving seems loans. maybe

So how sort you and evaluate where dollars? you as do of deploy you those weigh new to

Stuart Rothstein

Go ahead, Scott.

Scott Weiner

look, sponsors leverage in protection types doing or years returns on downside we of the we business to and been that right now, we've don't be in the mean, pushing very need the risk feel and doing past we And is that with structure. beholder. focused to deal the comfortable the I we're senior plans to the eye few for Yes. very We're We're obviously, want. the in the being capital moderate leverage get we like. and

are deals So may leverage of need push or mezz there ARI, our a equity or do be And and of higher or behind we're in return. the there's kind where getting there our that certainly happy who return we're us. or kind to then. an from others searching we will do lender example, very coming of at to more lots And for and basis of more senior equity out preferred

Harsh Hemnani

it. one last me. for Got And

CLOs there. given transitional briefly could to assets in expect ARI 'XX? we of mentioned be in CLO You 'XX, sort point in less in some at market originations, the And the new the

Scott Weiner

obviously No. underwriting always the the we actually investing market both CRE in I evaluate of both CLOs. mean active as and look, market. creating kind Apollo, We're an participant and

thankfully happening on. our that financing flexibility have have warehouse and So well a we we'd what's of lot in that very like think, the versed with to us who, gives We some I good loans. in partners well, we're work what's going

public out think I domain when do a the they with in their us. that is loan not our information appreciate borrowers

go "Oh, So I talk market to want flexibility to and also to to soon. anticipate kind have using CLO a prefer not not things, always the say, having up go something and things like things change, of and to reality what loans, back flexibility we more can we we come this necessarily with on and so of a cost have a servicer the we get do do us funds and and our borrower and don't And but borrowers the CRE anytime bad is similar that."

Operator

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

Stuart Rothstein

morning. extent modeling this questions, Thanks Thank people you always, have Hilary, Thank you, myself, questions, as you participating Anastasia, around. those of follow-up we're to the for And all. operator. to always

Operator

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

You may now disconnect.

Apollo Commercial Real Estate Finance (ARI) 11 Feb 252024 Q4 Earnings call transcript