Apollo Commercial Real Estate Finance (ARI) 23 Apr 212021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. 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, filing actual and Today's results that differ factors to our

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

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

company's and joining per over new a morning this usual, Jay Wiener. dividend reporting distributable committing are and to excess transactions As is the ARI share. $XXX in off solid Agarwal of XXXX me for of start Scott to million well earnings

estate the half year XXXX, confidence capital of ARI's loans, focused commercial As return I risk in to growing team this company's in the of of fiscal stimulus overall see stated capital anticipated we credit business, based the combination their and real on opportunities generally relief, optimism to estate and strength second investor estate attractive increased of loan are real Apollo's the Specific clearly economy of the in performance saw position, ability pace real for of of our investments on as from and Continuing support ARI. market and pipeline benefiting entered the we is remains and performance earnings the our reflected increasing level That adjusted markets sponsor of of transaction vaccinations. we is tone positive repayments, improving, the the of focus levels our trend and both asset the COVID our last portfolio. growing originate The opportunities. the call, strength existing increasing. the recent was on

broader advantage, managed of enables vehicles During borrower due Apollo. transactions speak transactions, itself benefit and affiliation clients. the real our it quarter, which from the to our be to relationship closed capital estate of knowledge the strong sizable a credit to stack, larger both on as one with portion European were able Apollo the continues by avail efforts to loan platform key large a and ability In won mandates. other overall transaction split of ARI's competitive were ARI in resources winning mandates two to ARI of and a with the Apollo to collaborative large behalf the for within

expected for additional are on robust as a loan building ARI. well very as capital, pipeline repayments, available existing Given we focused

New Turning office equity loan sizable portfolio, condo York full briefly highlights include investment existing repayment the to of a the repayment project. of in and the recent a preferred a City

New market. consistent properties the with strengthening our recent York also housing City underlying news We the of residential sale have meaningful for activity within sales seen loans,

of down sponsors on replenish certain a one our commitments have of our significant pay and loans. and to reserves, several Finally, hotel Miami we equity received rebalance made loans

issued during points year Turning price loan first basis a at with LIBOR the the basis interest and plus of has now completed term bears ARI our loan seven and The XXX balance was a of XX. XX a to sheet, at upsize points million a term B quarter. LIBOR $XXX floor

Given pool our our of meaningfully unencumbered financing the felt well increase assets. as attractive prudent we as some was of out it term to pricing,

to the $X.XX of achieved, share X.Xx. turn that call portfolio ability I covered balance while earnings to even on Jay, over the Before at generate per excess to quarter. highlight quarterly I dividend just the liquidity the This existing sheet ARI's throughout want was maintaining the

And common attractive Our is I below is with on of dividend to turn in the call will a yield offers results. stock over stock this believe Jay excess value, to investors yield current that we our extremely a book slightly X% which low in trading environment. review financial that,

of million a first was GAAP $X.XX with share. strong million net per $X.XX $XX to Thank quarter income share. available stockholders or $XX.X per you, had or We diluted earnings Stuart. common

earnings excess portfolio per in $X.XX generating the to cents continues perform of dividend quarterly share. of well Our

As LIBOR $X.X flow portfolio extended weighted quarter just of was vesting quarter. of around Minor the due stable floating that Reserve of was our dividend. remaining which Approximately CECL grew our weighted was term quarter-over- in book rate the value fourth decline GAAP end, are average with billion And of unlevered in offset XX% of General fully a At to of earnings partially the average the March as CECL to yield Reserve $XX.XX with money prior XX, US restricted remained a share loans to General floor of end loan of X.XX%. quarter. three $XX.XX by at per the the our X.X%. to stock, have relatively excess compared years.

Both the loans made were under loans $XXX this facilities. add-on In million quarter, fundings. financed we our new existing financing of addition to the new two

with combination financing to at levels. Loan grow pre secured COVID below of $XXX million certain relationship from a or spreads And quarter repayments we were for the instances, us. a partial in and seeing are Our repayments. lenders continue express to full desire their

to in of irrespective maintain compliance all Lastly, continue strong with borrowings, liquidity. covenants we and are

million today, of and of $XXX in billion loan assets. As $X.X liquidity, unfinanced have we

open like line questions. we addition, go we'd from liquidity available Operator, million $XXX for with to In the have And mortgages. please encumbered that, potential of previously ahead.

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

an of for timelines give just loans other specific resolution? us there progress you you update Any around on reserves? of have kind thoughts where and Can or updates Thanks. kind

obviously, Doug, the to Stuart. interpret I'd terms gone levels. say with should of transactions. as material you respect changed in the is on Yes, nothing's meaning reserve has Yes, thing that nothing And it's obviously, those first really

think development. that the process anecdotally, to partner ahead I multifamily few a the we're with to be just going on previously in commented a a is that I respect loan several Brooklyn, building with do the to going think in on site I've actually highlight year things to aggregation

With we're overall. respect Miami, of asset, headed path heard in like see but local our And and tenants, of both then with of Liberty respect assets to of market again, particular comment hotel that material we're of quality portfolio and Center the probably open news me activity, to say as waiting more encouraging and to our really seeing feel with blocking that by to very pickup the well think the respect well previously, bids sooner fully, the some would sort respect with national good the change you've So capital reverse sort sense when we're with partnership expect anything hotel you across to DC the confident that just we've you'll that asset, of I DC that is to really with think location. and to the timeline positive, as tenants on the later. and on strength gives the you will to about lease terms the disclose support at that while in more in for I fairly on some we're that value I might and in taken just up assets rather say not at going point, of most the strategy. asset Ohio, And in as for is for of long-term a And been to expect I'm approach of focus actually Brooklyn, and this term, of to which now point, located entitlements, than ability hotel amount reception of highlight I retail leave are that And greater at would overall the relative respect I tackling market site's the density what is the think then terms anything to despite in level this hotel effectively they from assets. but up market the still to the asset. encouraged would economic shorter in liberty lease has overall on respect

in So this to specific the future. more come but at that on probably nothing to point, announce

Delaney Our with comes Steven from next JMP question Securities.

Good Congratulations on everybody. morning, this report mortgage quarter. Good REIT to first the hear being to commercial everyone.

I that least at think Jay for props for get you right does. a

Absolutely.

kind your on looking in third it the in they voice a in sense was farther got the Yes, what States you Switching, environment little commented is to you lagging in pace away, with a seeing Stuart, us I with hear, what Well on kind billion, to in reopening, of what of picture are market like what's big detected reply or share like? great Thank Doug. your are the that optimism a Can continent. UK the almost London just is team you. is, $X.X to New your relative certainly York, of bit? of COVID, you're and you've here portfolio there? or Just a there

think ways, it Yes, let sure. I me I answer mean, I there's differences different think those similarities. there's, a and couple because

level best as actually macroeconomic to weeks it ahead that normal. opposed high think towards is economic behind back a and talent be quantum US six by the in right, that. say that of about as happened the a it's the I I of fiscal Apollo analysis on the as just And disparate to recovery, indicate Europe we would countries continent little are US Europe a whole done actually a if collectively I've place, is then call behind it of clearly recovery. a I that is realize which the of spend markets think we of that. a same countries I inside more place. consider And rollout, would say other in of vaccine And UK would Europe, I being is behind stimulus, in to terms at as sort terms the time bunch seen, target lags pacing a would of some

the that's So side. sort story on the of COVID

place in might managed find be is COVID sponsors actually is in might able of see People you'd viewing Europe. to light I market, they fair terms is that investment. lot a estate for the the think in capital the a of going of of real lot there in I think estate available in real they similarity measure the in a deals; it be A are you'd opportunity. Europe US to of by US be see the where there's and real to between continues same on sense estate able what's find

transactions. really minor of new generally there tweaks the what I So looking in Europe quality et there's but think similarity and transaction deal with that deal to of lender flow because deal at is sort vice the speaking means types cetera. what there's of look we some about sponsorship, business, or do to both we're we with US plenty do do of And borrower take similar flow, we as flow. liquidity US in we a a Similar of view in And between overall, regimes deal similar structures there's between market, an similar agnostic at. we to of ultimately think lot what in the In lots tax of is as Europe, Europe that regions. very to is plenty versa, is our and different what us

it, type. home very quick on Got holiday up helpful. follow caravan property A

it's these price that moderate like generally kind How you I assume description, it? properties? of quick would resort but somewhat and describe seasonal such, Just type vacationing

for to I'd sort I a moderate mean I price better want there's of don't and somewhere disparage phrase. campgrounds price hotels I lack probably just, and wouldn't moderate between them, of

Sure.

a to percentage estate I think quite is as as business where a real a be viewed very but it travel environments business in to regional, is they inter being operating the Apollo suited difference with historically. likely that well day, this the of greater more hospitality. real transaction, no business at that of benefit at from able the intra of to both a a opposed And that Apollo the vacation, are say a at estate there is in big team as end type I and that perspective real it would speak as other looked regional, business an will clear in underwriting for is to desire parts have of estate that business well

it. I that's So think about way the

comes James. with question Stephen next from Raymond Our Laws

questions of we really moving portfolio things how view you couple do about there? puts continue impacted, do think bit a And forward? is further as morning. obviously COVID good pick income little to level around what that Hi, A As loan normalize but a normalized year-over-year behind? the a

mean, normalized level think let it's think terms it in you're to loan. see And a versus basis, in more say be likely a high is dependent position. in this more construction Stephen. obviously, a go a I mix, hard this I Yes, construction it's you're loan, forward likely see somewhat way, senior to because to answer what's on portfolio And me mezzanine to pick I on a in going position of a level, non pick

to comments continued some on at portfolio, while of construction was as the mortgages, the also look look also the not and appetite the probably and at is and for from first I've if where mezzanine limiting business, just calls you mezzanine our loans headed, still they're open to discreet look that probably that as highlighting recent overall of prior portfolio opportunities respect made at. think to then our portfolio I many where for sort with about shift and think you we're

much of the the we'll discrete maybe of. from certainly lumpier loan the of that are some they're along positions, as loan transactions And aware whole on portfolio things. So some mezzanine way but then of our people in look are own side at the that already not create to

we in the see pay with where at get down things in and pick to end see shift cetera. some consider be stability, I think we to running range income. think future, pick you the what of we unless continue would out to a opportunity time point to make I are as quarters right And years, at tick high coming respect et you're probably the the income look off over likely things if I now over to

we $XX base million Great, your are are it's of that's -- G&A little on now Stuart, was what What COVID as thoughts down back look look at place of year. XXXX down helpful color, what's from kind like? a expense at given on thank Jay a you. trending looking in annualized touching bit it kind pre what forward, look G&A

Sure, million annualized I basis. G&A x-RSUs yes, a of think $X.XX rate would around on of run

from comes with Rahmani Jade Our KBW. next question

taking for you the Thank very questions. much

magnitude levered now. to if just returns, as to seeing compression you you're also returns, wanted and interesting comment the Stuart Just, of see could if you're where you're where the most in seeing finding right opportunities

perspective Yes, think, look, to from a similar things very where I pre I return were feel mean, they I think pandemic.

recovered, So it better high say doing I Steve I days on the if ROE highlight certain a probably because XX hospitality look we're floors today, on of chance right; to days. various floors, benefit aggressive there I have would if much full I always terms minus in maybe with always And to we again a available to made finding put again, remind some are focus respect And generally of US we even focus again, to shifted loan of more New range, capital plus then places high asked from Europe, a in on broad not in our a both residential stuff way, bank Europe. senior spread active positive bit but sale previously, in leverage bit, of days, York able slightly all is we types quickly the back somewhat these think to estate, real as a it to for appetite there. still still do much York, the or are And you the capital. would the we're we we've little LIBOR were compressing the we're just it New construction, would of the in to call the little we types the and less bit types everybody say feels range New pick the the much I think days, But definitely XX.X% leverage And anything components say little for than aggressive general less to in on LIBOR versus area. looking I is say, I banks up in really in area, US. retail about I we're spreads continuing on probably up some today not our which we assets, again, to that, days, today, gave maybe show look are I to we've pandemic, was perspective it get so that say, I fours at a if And or in in have between continue I for if comfortable XX to these would sort as margin, you comment relationships. construction, when they we're done we floors threes then question these XX% that And think easier LIBOR then are intermediate more that And I'd us pre on think that levels levered biggest side. other get for the little probably I X.X%, I'll, types portfolio comments be securitization wanted for very of average being in like of the competitive, then probably lower the think hospitality slightly at, ever, much that not opportunities higher. the won't look to speaking, take past said in less of these say did I've the would LIBOR bit where on on how markets on York for still goes financing anything first with to assets are assets. our opportunities, I things on here think definitely favor lever mortgages would respect terms again, our how but across think leveraging, than to banks. bps these rarely, draw don't And wanting the picked sort of versus difference it. And and in a obviously, slightly we're we're dis as US, it think to about margin, what what I we're with historically, as me what

does more have you a those and financing to of put seen GSEs the ARI's kinds typical then any more opportunity loan? potential and lend multifamily on assets, And potentially that pullback from present stabilized maybe on

What with but would the for we're lot that that any looking a at I from that noticeable lease a material an to really Yes, the would I in phase of to a time, We in no up opportunities us. side the overall we high time more lease takeout end. be bridge do this environment able say a spend haven't perspective, is financing real during on continues construction shift. between to GSE Jade call up led material expectation in change level, there's back our say seen on point at multifamily it

very Thanks much.

And you the in speaking, in that of credit. amortized the any were CECL specific about increase changes what just on Could have cost drove loans credit? generally reserves? there touching negative lastly, Just talk already

business reserves air stable development guess due to got that credit questions costs going and forward seeing some were advances was that the Fulton of acquisition rights for of on. but plan development increase some they the stuff there get other was generally for or the we're About rights decided just we've Brooklyn, Brooklyn. of in do in we for Yes, our I'd increased with thirds was on once loans, then the immaterial that of there. costs sort air say would other to on Street which I amortized small And your acquisition in some development two of relative of always part the to answer the the of reserves what the in advances go reverse, already developments protective made bulk you're I in to the

Arestia question next with JPMorgan. from Our comes Charles

the income lower quarter flat in interest portfolio, questions. good guys. Thanks that and looking sharply did taking I Hey, loan pretty balances morning, the loan fourth the line noticed despite the was the I pretty rebounded at it overall for this for quarter, there. being subordinated

the more given, new loan wondering focused I'm we be going just on of side. probably are rate volumes senior the about think how to origination the So I'm portfolio that assuming should run

Yes, is really I think what you're seeing, things. Charles, two

a duration than to bit the And maybe runway, as that to think, certain working in with I of little respect were year, more on with economics expected I respects change quarter. last fourth time. the we sort reflective of hit in dip little bit, sort through quarter as of borrowers probably of economics adjusting a it them some of the more over think loan really we give in was working a those loans, of the fourth extending

to on with as be we true And quarter. for in to things extension expected more that you're right get of would recognizing might in saw or the fees that. how payoff, than sort like respect up time the need certain that at moment you you You a point hit fourth paid have

my I run QX of comments sort it to do lot think reflective not in on fresh loans is sort prefaced I coming basis. into on and those I sort question. do a think today, earlier rate more economics But mez of right are where book think the a of your of now. there's was of

due yielding mez more time see down in you're just trickled item just portfolio book higher I get line on of we that's that to construction. off going as today, some So think paid our the over

one. of XXX, close the Thanks, date we get any update helpful. then that West if Stuart. And on XXth, on we're I really to getting that's maturity Okay, kind could think

progressing on that. So just things curious how are

looks and you're significant perspective extent the is there's progressing the finished more outside building construction and to in going a and more amount the work from the the from on of area, that inside. know I

it's stated would terms I make to I delays that say date given up you last occurred to back I sort sales time maturity year. of end, would foot need to we fair is term. near sales to extended on beyond activity, that in would of in be think And there be the expect expect traffic positive and mid say sort the of activity very to just things coming more the

the it's both definitely So in some pandemic due right but the challenges lost cetera. direction, it to weather moving time as et last to year due construction as well

be So loan the that it would we'll right the is maturity stated moving expect that in beyond date, but direction. in

with question next BTIG. Tim comes from Our Hayes

Hey, good morning, Stuart.

know those in more if sponsors on occupancy just touch within one me. the that of City and and And in XX just running lower comments years? collections York pass broadly, the is trend much some on without in assets you'd kind there be portfolio, able along some in constructive tenants your a themselves pretty you've how of how but to exposure? locking next any Office trends rent are at and New that get I types can Just from broad credit building promotion rent been for rent maybe that And had you some, to

is what are company working New sort hearing we're our obviously, a people anecdotes as in both as a Yes, and mix we're I of that with then that well for portfolio, sort a seeing well. the leaser mean, what I'll as to you of also just York do, market, of in space respect of give being

real office being still renovated, being lender of was foremost, that not in York was First but towards sort with redeveloped, most obviously, was most of the the our most something on in of done lease something phase. sort portfolio transitional, New and and were up right, are portfolio our it up the was plan all, of to estate, a we lease

of is with levels there's traffic anecdotally, to the potential be the of that or space pandemic. being say relative So would I context would tenants, increasing foot not where are XX%, pre amongst definitely those place gleaned increasing. respect users were And down, the to to it actions plus rent in they of minus is much in say, probably I

So to well. obviously, a I be adjusted market you're starting overhang sublease And there think this city fair bit. continues I to like in little feels more has as a bit see of the activity,

on think most think what people be maintain as be going other a I perspective, a York seems a thing I their there that that's figure still companies to forward. I in York. consensus trying footprint New out strategy want the to to going are now think right will From general New footprint

people specifically need our say we out balance the towards for space work, in saw over the of sponsorship us to the each that think to on take of trying last I their are per I their us person in of they I make strength would say adjust are leaves feeling say, lastly, we optionality their pandemic. the confident sort to footprint borrowers with our long through the business business people plan think they is have in need as time sponsors, continue and of would shrink heading office don't lead the when to I'll definitely existing figure more we've a space I I most in plan. of of our or deals leases in use would more additional committing rebalance place are terms to And proving the capital probably paths very measure still necessary need than their into our need give out see they to then in is as to there if little as for may either capital people differently York between to maybe that slightly on play to where to pretty term slightly. part, a some to the partnership loans liquidity versus achieve working you in than which full start a as borrower thinking to this you've confident decisions. deals. equity us, got general, the New long portfolio sort they they got going and still quality out comment long markets of, plan, place, historically, business

be all-in-all, place right the tendency what product envisioned. our about more It's for to moving is market the the and doing direction. they need point, a we is about really that would refurbished do about in asset now. seems having something to worrying right office So to it is create in say borrowers less But at that I this

of color. comments course I good about, And you this lower really the of quarter before Or how year. borrowers for last pandemic, cadence kind there all you to know That's the of business Is those modifications guess that come the front? are it it even versus than wall just is I one but had still more would of are just you describe on been? back on modifications the -- seeing normal it past

and of business to before less where course are months quarters borrowers of it's of things clarity that as of of what Oh, we discussion, way this feels certain there things thing, dialogue. I ago, the there less lot achieve preface business the ordinary in of would the opposed sort as transitional right, are pandemic, in the XX discussions don't still it when maybe and there of respects plan, to of prior in in it assets, were lending but describe definitely business we require against the assets that if headed. in more certain question, nine require the conversation like depths were this a was nature was various much frenzy plan, the of we many sort having than were say sort terms you it call the are was But borrowers achieved it of than middle pandemic, would

notable last given And me. Makes the one sense. I yes, notable I but comments maybe Is guess, quick And, there just from there's curious. answer's just you your for a question. in If credit, no just interest quarter-over-quarter any around quarter? any change collections change there. this imagine housekeeping

worth Yes, nothing, noting. nothing

remarks. like I'm to further I'd at time. to Rothstein turn back in the questions showing for no closing this Stuart call queue

you to morning. participating Thank again next quarter. Thank you this talk all we'll for you. And

today's Thank concludes conference This for call. you participating.

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