Apollo Commercial Real Estate Finance (ARI) 27 Oct 202020 Q3 Earnings call transcript

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 to your attention to the customary safe harbor disclosures 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 www.apolloreit.com discussing figures will measures website. any update release, XXX-XXX-XXXX. the At on Company’s call section press performance. time, to non-GAAP These our this Stuart in relevant unless call, copies Company’s on us I’d In or addition, projections this Relations of the Officer, undertake turn certain are assessing Executive like the required Rothstein. we at by which reconciled We to latest to GAAP to SEC obligation are our still be available visit call or Investor forward-looking To Chief please over obtain is measures management our believes not at law. which filings, to statements do website financial the our of our

Good you, for the on us earnings Estate thank quarter Commercial and Real Thank joining Apollo Finance call. you third morning, operator. XXXX

of our morning global everyone and Chief our Weiner, Agarwal, is Investment we the this all hope as listening healthy the We CFO; Scott circumstances Officer COVID-XX navigate and me Joining continues challenging Jai to safe of manager. that the be to continue pandemic.

for and with the estate linked capital overall such, the is commercial into of X-plus searches activity the few there long-term is overall respect to election. companies, pandemic-driven the been and is very management to types worth and of comments will of strong banks, the recovery estate on lenders for recovery approach types pandemic, bottoms-up timing while for types issues. seeking It deploy the differing private commercial present, to economic has last be are the pandemic, other to traditionally equity the broader Consistent potential upcoming time, liquidity impact estate this And markets, and take to a believe done, in market that have estate uncertainty dry addressing a uptick and It general, market. continue funds noting call, months estate might on owners sellers in views transaction been our funds through to with the around potential varying low lagging it time with of my modest the will always real on geographies. we few environment elevated we Ultimately, much path market views we various to impact as economy. property continue we say asset as believe low of modest a remain new system, ample ultimate to at interest Real record is the but fair insurance in indicator. in to business levels be discovery, activity. with spending rate most credit slowly. capital the is earnings asset working cover and that emerging is transactions yield Even sellers property open a there ARI, enabling transaction real same real pace a a property the powder respect of level respect the potential is the by the be with continues to to unknown recovering are real which slowdown the affected and as rate assets. their are in volatility around also views the end evolving as has estate of price extremely market buyers we excess are the considered Since Before in overall. with respect what minutes seeing overall at debt that capital there with environment. long-term work to that pace continue the point, through at a and process to At potential the service likely worth play Real for

Turning at we a loans, The book trading we to and share ARI’s results. to thoughtful to which as measure see stock, as earnings been we opportunity quarter continue comments, had that liquidity XX% approach has third prior dividend, the stock the our $X.XX quarter my another with maintain new the excess of company evaluate in per current of evaluating new value. solid value covered common common preserve against investment we Consistent approximately of opportunities. originating price while

respect we third and our of borrowers during conversations to common generally quarter, shares, such, to repurchased. stock and the we common over additional repurchased shares shares constructive. With X year-to-date X an with end, subsequent portfolio, representing XX.X million our remain repurchased million to million million, As the equity repurchases quarter total in sponsors bringing investment $XXX stock

institutions, get Our continue other borrowers capital them well-capitalized of pandemic this side to to offer will markets sophisticated, are the predominantly well-structured us and normalize. our benefit and with partner ability to solutions and as we

and to opportunistically strategy capital. ensuring balance near-term Our ARI adequate for liquidity, investing fortifying continues emphasize the sheet

maturity expertise ARI nearest addition of third ongoing bank $XXX the the real continued unencumbered Apollo credit corporate to remains and liquidity, in cash assets. lenders. has sheet XXXX the in quarter over loan debt to quarter $X are undrawn platform management to from active by million with With over efforts estate the our ended dialogues broader market. with commercial healthy brought which The the balance ARI team, Our of with respect from and greatly capacity billion of be specifically debt and to enhanced the strong our and in

capital debt that the offer I continue the investing, consider team investable of capital while into other ARI’s of to invested commercial estate returns looking also that repurchasing is being which to have consider continuing closed we attractive of terms In and opportunities, worth transactions in market, real mentioned at our investments, components. will attractive that stock risk-adjusted is our funding structure. our noting benefits is previously economic some parts future also of or It

have As not a be of invested loans. capital to are aggressive have million invested quarter. forced portfolio, future the pursuing funding that result, the Year-to-date, within overly we of through of benefit approximately during million $XXX new uses known in and third we the $XXX with we

maximizing all always, uses on As value. potential will with focus capital future evaluated be of a shareholder

I This I from on team the and determination immense ARI and call Before our have to home, earnings and Jai, again a dedication take seamlessly. worked team our have and third to thank moment work over shown focused call entire tirelessly continues the want to turn to is unprecedented circumstances. who

with expertise the Given low our call lies it. the we Jai entire leverage, stockholders to our results. platform, situation our strong And our is turn ahead and and Apollo the of excess communicate ARI the believe to liquidity well borrower and when I to over to scale and fellow and continue warrants that, navigate situated power, will we’ll relationships to review whatever lender financial

Stuart. you, Thank

common million For the of on GAAP third stock. loss or $X.XX share. quarter, $X.XX available $XX.X our per income million operating net common earnings, was or $XX stockholders to excluding investments, share per realized were

to second the share primarily repurchases CECL the for compared at quarter the This prior dividend $XX.XX related $XX.XX accretive as earlier. General Stuart was payout of quarter. Reserve ratio to was increase the to mentioned GAAP value was Our share the book XX%. per end

review Reserve unlevered last total million yield compared in weighted now average our conditions just CECL This the X.X% General our that fully U.S. related an X.X% quarter had in reserve money extended with our macroeconomic decrease $X.X CECL loan years. of floor a have rate quarter-over-quarter, LIBOR stands on loans Our remaining $X.X of XX% our to of primarily today At end, weighted are portfolio under term decreased and outlook X to a of of portfolio. floors billion X.XX%. a at average was our and improved Approximately floating July.

During we par. third-party only at London of million sold XX GBP property in to residential-for-sale by XX.X% the loan a mortgage our quarter, secured a

the loan compliance all was to amount. $XX $XX financed mortgage covenants York proceeds. condo strong maintain In same addition, continue a liquidity. are and in loan mezzanine This borrowings, we refinanced million construction to a respect subsequently with lastly, New loan we million into And with of our City in for

As And with assets. of and on approved cash credit please of $XX unfinanced the million to we’d $XXX in ahead. we undrawn of million like loan hand, billion that, go open have capacity questions. today, and Operator, for $X line

from Thank Harter you. Our first Suisse. [Operator question Instructions] Credit with comes Doug

is Your now line open.

Thanks.

the point liquidity. on about brought last you to wanted up touch Just

uncertainty? of You guys you your that do view excess you How deploying use on share of need position much at repurchase. hang have been how could much do kind it ongoing more liquidity the you given to today, how into versus effective

we in. It’s specific expect what fair have we recent of fair around of we might it’s Doug, today, we are or on be sell a we’re I to comments, repaid think, asset. through refinancing through either generally think, I to Jai’s given the mean, a get I say, say range where want given to most that that sort information to down the also

slightly And the current capital quarter, So, I are update, we confident where at range just comments a call that about on going a liquidity want think, be of little a the it, we’re But, anticipating we’ll, think, in we of but if be, where as given various either from times, on today, not might given liquidity end coming lower generally we of events. in, Jai’s be forward. more we’re the we perspective, I get might to the sort side front. of

I trend how to deleveraging next kind facilities? And as Kind might guess, an credit Stuart. thinking months? in how about you’re give stand you can us you Thanks, around of of, the guess, those your several that, just I update on where

Yes. there’s on I all about nature with material now. would now. we’re liquidity there, banks -- dialogue we’re would say with respect to dramatically concerned change right and do There to a right maintain material say always might would trying coming but and where a our which our I discussions here foot nothing nits active that those months. front particularly some certainly of the are view in be expected nothing regular there’s be We no dialogues. the how managing of

Our from next Delaney with Securities. comes question Steve JMP

loan the thing, deck at me yield from average the Good jumped most the in in June. that on out to the guess, X.X% of The I the X.X% was buyback. work weighted the quarter drop for

So primary Were comment terms they was What I loan if just could modifications, there? on going you sales? on that primarily nonaccruals, of in was wondering, Stuart, drivers. the

loans, due modifications, just I thing Yes. a one for movement to thinking loan loan we’re it’s loan think sizable primarily of modifications. part, little protecting how of a one longer-dated high of right our then we and do that sales, some in on about or mezzanine larger to but bit given the primarily particularly -- and X sale returns it’s loan but X took was And slight level, which modifications place at mean most principal, Europe. the secondarily, the our

sale, loan the the guess, had little I a on bit, or reaction Then saw comments, the London they macro was, sounded And to no, Jai’s both? CECL more have their some in that sale, resi in of well, clarify modification. Right. that. Can guess, reserve, I -- it was was drop of it when bit for do a may it little oh, you first the we with like, that

would of we’ve It’s was was for decision works for other referenced, macro principal an of position changing to specifically the always way. the down fairly this shorter ability But been, the path part, market our in really way, being factors. terms of asset protected. And to the economy duration terms it the work sort company. that I Obviously, asset comfortable opportunistic sell you in of No. was the being most in say, right some the exposure in where in one again,

one Got just one close it. final to And out, for Jai.

or when we’re any some confusion went hearing that, or of -- most first do, SECs I your And that the really in when realized you do for definition offer since now may core some that core EPS think operating losses the ever peers about impairments CECL. been marketplace, operating actual of any But EPS. year would there’s the up. been reserves the affect those CECL be the think operating mandating that reflects and there’s confusion -- as when a I of companies

credit the But already I you worse. pass analyst get description is going -- losses? it’s it’s real confusing through -- to -- possible, So when EPS maybe core to going could as on real thoughts any to to most or say the infected any at operating and problems, it’s be investors practical Jai, by any community think

Yes.

to more be posture. to going there’s the SEC’s on think come I this Steve, think, I given recent topic

I kind think I the been will in not in So done -- future. what past be happens whatever necessarily of is think the has

think core have their have evolve fee. don’t I incentive we because don’t more definitions. an we will companies earnings But

So contract. together But way more versus on where to fee core I think the have as incentive -- in earnings it this term pursuant and others might defined be the management best a different the is for that best work is. I on us this come the for think we best overall, topic -- report to an to QX

Instructions] Our KBW. next question with comes [Operator Jade Rahmani from

loan just as maybe Can you investors within company’s give think New the But exposure an very overall, New outlook. around City are York an the start for City update that, portfolio -- the the the loans at of eager off to update to with York and side? XX% as hotel on

we quarter, feeling sort New I other most part, of indicate, think the York in what for portfolio. reported third the with both respect reserves and we are the of any terms Obviously, Yes. to for details fine

clearer I equity transaction of which hotels at the Obviously, most a say to lot and the property a side hotels think right in to adjust levels but opportunities where hotel I a as a view hotels, level, the I spectrum side assets probably of the general, price basis. may in give of just would now, There’s you’re in And right not think, most value in again, of along our high of discovery terms specifically now. been capital talking quickly. together are be hotels. result, credit in and on about the the on see types, terms a pulled probably starting activity go-forward on pursue income I’m

as York. loan. that rectified sponsorship with writing specific off obvious occurred portfolio. hotel say would think, has New as quarter got I of asset-specific part That quarter. second the the hotel in a additional then the think are across any had, that equity from on took I an other in And nature lender, this that have York I X call equity, reserve the We we nothing of most material know, first a -- we, contributing Since we the and our New in then, comfortable with for exposures, on assets

there’s residential pickup anticipate I actually I recently. to on side, I the think activity maybe would a question, a been for-sale would say, modest say in

are You seeing some done. sales get

general, viewings. I I side. in condo up a in the or seeing, as it high say, describe are showings reports You terms little pick would bit a off sales would of level, on pricing is

I condo comfortable think continue that where focused anticipated. with than But given our feel pacing, we a are going on of we loan-to-value more across is portfolio, on from which clearly side. still slower be perspective the exposure we be all to to

XXth, is $XXX around XXX aggregate West on And the exposure million?

think that’s I approximately, close. pretty

Can you venture joint the District saw that? deal. Design I the Okay. touch disclosure on Miami on

a Design existing are I there date. redevelopment, remind Look, to and Miami planned to level is assets District at think high just everybody, a there but

whether can think exist. the reported. to the existing leasing by for primarily long saw would think of the Miami that start or more partnership determine is be opportunity sites and primary near-term losses District Ultimately, of the the That to announced. robust just term But leasing up genesis was again, short through driver way site redeveloped path buildings ways mitigating we early is that else. Design the that that the where we there’s redeveloped. some be think the our would -- a to be we long-term we sell what term, that you that for the the part are mitigate was to of too we in JV I saw effort, someone you of today to And is or the we impact something or a

the stock And quarter continued lastly, seems end. like it repurchases post

the Just management, convert. repurchases wondering of even stock how thinking repurchasing consider about would continued some capital perhaps you’re you and whether

Yes.

repurchase economically common Doug, liquidity, back it are new it right now. side levels, opportunity is to them, biased now, of the still again, trading back with underwrite is, Jade, liquidity, of We to do the view the look use economic of stock. compelling as stock source more keeping where then have we not buying at the we’re capital The capital the as or Certainly, now. So to towards to look we at deployed them. the some And structure. stock buy these them whether the capital mentioned common we to converts something to as do We do into We transactions. excess other still definitely the compare parts appealing convert relative given of is transactions. reality right I gets keeping still deploy, even on as right excess at

Our next with Charlie comes Arestia question JPMorgan. from

payments I interest you were conversations the of that? us the kind guys which was loan with deferred portion a update portfolio agreements, borrowers of lower how noticed trending of in of kind is those agreements under some forbearance an going Could bit the little what on on under just are give and October.

have I think changed conversations Look, not Yes. much. the

with discussions think a is sponsor to deferral. they the extent perfectly happy of with to better an I contribution And which is as from around lack potential a equity on we forbearance, fairly to engage there’s borrowers phrase, reserves, forbearance continue be additional the of well. for productive use equity typically are coming an

of changed conversations nature much. not the has So the

representing that with would or agreed about agreements portfolio, plus minus you think to we’ve If I loans of about say, portfolio. our $X.X forbearance billion XX%

I very on I call late. little bit then, apologize, And helpful. great. the Okay, a That’s hopped

the on So Liberty any me. ahead covered go asset? this, specifically Center you’ve tell if But updates and

a open they today Things are were obviously, again, news ago. is the updates. that to still of alternatives. and way No and there’s challenge in go keep are X perspective, tendency and specific management a for The than very of exploring lot now. we much the on engaged But asset months this different long better asset, is focused most business material for good there

now back any Thank am would for you. turn over not remarks. I to the I call this Stuart at further time. questions showing like Rothstein to closing

you, needed. operator. call, Hilary, the to participated. And of are obviously, speak extent are you to those Jai questions as Thanks there everybody. post that Thank Thanks, to available myself,

call. this gentlemen, and participating. Thank today’s concludes conference you Ladies for

may You now disconnect.