Apollo Commercial Real Estate Finance, Inc. Reports First Quarter 2024 Results

Rhea-AI Summary

Apollo Commercial Real Estate Finance, Inc. (ARI) reported a net loss per diluted share of ($0.76) and Distributable Earnings of $0.35 per share for the first quarter of 2024. The company recorded an incremental CECL allowance of $142 million on a mezzanine loan in NYC, resulting in a book value decline. A detailed presentation of the results is available online. A conference call to review the results will be held on April 30, 2024.

Insights

Financial Analyst

The recent announcement by Apollo Commercial Real Estate Finance, Inc. regarding a net loss per diluted share of common stock of ($0.76) for the first quarter of 2024 juxtaposed against distributable earnings of $0.35 per share yields a multifaceted understanding of the company's current fiscal health. While the net loss points to immediate financial strain, possibly due to a non-cash allowance for credit losses on a New York City mezzanine loan, the distributable earnings reflect an adjusting mechanism that removes certain non-cash expenses and non-operating gains and losses, thus offering a different measure of profitability.

Long-standing investors may find solace in the fact that the company has maintained its dividend payout at $0.35 per share for sixteen quarters, suggesting a stable cash distribution policy. Yet, the sizeable $142 million CECL allowance could be indicative of specific asset quality issues and may warrant caution for prospective stakeholders. The stability of dividends, despite a recorded net loss, showcases a dichotomy between accounting losses and cash earnings that must be scrutinized for a comprehensive investment analysis.

Real Estate Market Analyst

The substantial CECL allowance indicates a stressed valuation of luxury real estate assets, particularly a high-end condominium development in New York City. This scenario suggests that the company's exposure to the luxury real estate market, which is often volatile and susceptible to market fluctuations, has faced a downturn. The report of sales price reductions and delayed unit sales could have broader implications for the real estate market, pointing to a potential softening in luxury property demand or a broader market recalibration.

For investors, understanding the relationship between real estate market trends and Apollo's portfolio composition is essential, as it can greatly influence the company's asset performance and risk profile. The consistency in dividend payments, despite the real estate market's current challenges, reflects management's confidence in their long-term strategy and asset resilience.

NEW YORK, April 29, 2024 (GLOBE NEWSWIRE) -- Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported results for the quarter ended March 31, 2024.

Net loss attributable to common stockholders per diluted share of common stock was ($0.76) for the quarter ended March 31, 2024. Distributable Earnings (a non-GAAP financial measure defined below) per share of common stock was $0.35 for the quarter ended March 31, 2024.

Commenting on this quarter’s results, Stuart Rothstein, Chief Executive Officer and President of the Company said: “ARI recorded an incremental CECL allowance in the first quarter of 2024 of approximately $142 million on a mezzanine loan secured by an ultra-luxury condominium development in New York City due to a reduction in sales price and delayed timing on the remaining units, resulting in a $1.00 decline in book value per share. The allowance did not impact distributable earnings or ARI’s ability to pay the dividend per share of common stock, which has remained at $0.35 per share for sixteen consecutive quarters. There were no additional Specific CECL Allowances recorded against any other loans in ARI’s portfolio during the quarter.”

ARI issued a detailed presentation of the Company’s quarter ended March 31, 2024 results, which can be viewed at www.apollocref.com.

Conference Call and Webcast
The Company will hold a conference call to review first quarter results on April 30, 2024, at 10am ET. To register for the call, please use the following link:      

https://register.vevent.com/register/BI6ac2030931b8437da1c4188b5f3b1634

After you register, you will receive a dial-in number and unique pin. The Company will also post a link in the Stockholders’ section on ARI’s website for a live webcast. For those unable to listen to the live call or webcast, there will be a webcast replay link posted in the Stockholders’ section on ARI’s website approximately two hours after the call.

Distributable Earnings
“Distributable Earnings,” a non-GAAP financial measure, is defined as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items (including depreciation and amortization related to real estate owned) included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on the Company’s foreign currency hedges, and (v) provision for loan losses.

As a REIT, U.S. federal income tax law generally requires the Company to distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that the Company pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. Given these requirements and the Company’s belief that dividends are generally one of the principal reasons shareholders invest in a REIT, the Company generally intends over time to pay dividends to its stockholders in an amount equal to its net taxable income, if and to the extent authorized by the Company’s board of directors. Distributable Earnings is a key factor considered by the Company’s board of directors in setting the dividend and as such the Company believes Distributable Earnings is useful to investors.

The Company believes it is useful to its investors to also present Distributable Earnings prior to net realized loss on investments and realized gain on extinguishment of debt, in applicable periods, to reflect its operating results because (i) the Company’s operating results are primarily comprised of earning interest income on its investments net of borrowing and administrative costs, which comprise the Company’s ongoing operations and (ii) it has been a useful factor related to the Company’s dividend per share because it is one of the considerations when a dividend is determined. The Company believes that its investors use Distributable Earnings and Distributable Earnings prior to net realized loss on investments and realized gain on extinguishment of debt, or a comparable supplemental performance measure, to evaluate and compare the performance of the Company and its peers.

A significant limitation associated with Distributable Earnings as a measure of the Company’s financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, the Company’s presentation of Distributable Earnings may not be comparable to similarly titled measures of other companies, that use different calculations. As a result, Distributable Earnings should not be considered as a substitute for the Company’s GAAP net income as a measure of its financial performance or any measure of its liquidity under GAAP. Distributable Earnings are reduced for realized losses on loans which include losses that management believes are near certain to be realized.

A reconciliation of Distributable Earnings to GAAP net income (loss) available to common stockholders is included in the detailed presentation of the Company’s quarter ended March 31, 2024 results, which can be viewed at www.apollocref.com.

About Apollo Commercial Real Estate Finance, Inc.
Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a real estate investment trust that primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings and other commercial real estate-related debt investments. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company and an indirect subsidiary of Apollo Global Management, Inc., a high-growth, global alternative asset manager with approximately $651 billion of assets under management at December 31, 2023.

Additional information can be found on the Company’s website at www.apollocref.com.

Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. When used in this release, the words believe, expect, anticipate, estimate, plan, continue, intend, should, may or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: higher interest rates and inflation; market trends in the Company’s industry, real estate values, the debt securities markets or the general economy; the timing and amounts of expected future fundings of unfunded commitments; the return on equity; the yield on investments; the ability to borrow to finance assets; the Company’s ability to deploy the proceeds of its capital raises or acquire its target assets; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. For a further list and description of such risks and uncertainties, see the reports filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

CONTACT:	Hilary Ginsberg
	Investor Relations
	(212) 822-0767

FAQ

What were Apollo Commercial Real Estate Finance, Inc.'s (ARI) earnings per share for the first quarter of 2024?

ARI reported a net loss per diluted share of ($0.76) for the first quarter of 2024.

What was Apollo Commercial Real Estate Finance, Inc.'s (ARI) Distributable Earnings per share for the first quarter of 2024?

ARI reported Distributable Earnings of $0.35 per share for the first quarter of 2024.

What caused the decline in book value per share for Apollo Commercial Real Estate Finance, Inc. (ARI) in the first quarter of 2024?

The decline in book value per share was due to an incremental CECL allowance of $142 million on a mezzanine loan secured by an ultra-luxury condominium development in NYC.

When will the conference call to review Apollo Commercial Real Estate Finance, Inc.'s (ARI) first quarter results take place?

The conference call to review the first quarter results will be held on April 30, 2024, at 10am ET.

Where can the detailed presentation of Apollo Commercial Real Estate Finance, Inc.'s (ARI) quarter ended March 31, 2024 results be viewed?

The detailed presentation of the results can be viewed at www.apollocref.com.