Apollo Commercial Real Estate Finance, Inc. Reports Fourth Quarter 2023 Results
- Stable and well-covered dividend provided to stockholders
- Proactive steps taken in managing the loan portfolio and optimizing the balance sheet
- Commitment to new loan origination transactions
- None.
Insights
The reported net income and Distributable Earnings by Apollo Commercial Real Estate Finance, Inc. (ARI) reflect the company's financial health and operational efficiency. From a financial analysis perspective, the net income figures of $0.30 and $0.29 per diluted share for the quarter and year, respectively, indicate a level of profitability that is essential for evaluating the company's performance. The consistency in Distributable Earnings of $0.36 for the quarter and $1.09 to $1.69 for the year, prior to adjustments, signals a stable cash flow available for distribution, which is a critical factor for income-focused investors, particularly in the real estate investment trust (REIT) sector where dividend payouts are a significant aspect of shareholder returns.
Moreover, the proactive management of the loan portfolio and balance sheet optimization mentioned by CEO Stuart Rothstein suggests a strategic approach to capital deployment and risk management. This is particularly noteworthy given the 'challenging macro environment', which could imply a cautious yet opportunistic investment strategy. The commitment to new loan origination transactions indicates potential growth and an expansion of the company's revenue-generating assets.
For stakeholders, the short-term implications include confidence in the company's ability to maintain dividends, while long-term implications may involve the benefits of a robust commercial real estate credit platform and the potential for capital growth. However, investors should also consider the risks associated with the real estate market and the impact of broader economic factors on the company's performance.
From a market research standpoint, ARI's performance must be contextualized within the broader commercial real estate finance industry. The company's ability to deliver stable dividends despite economic challenges is indicative of a resilient business model and may differentiate ARI from competitors who struggle under similar conditions. The commitment to new loan origination transactions also suggests a strategic positioning to capture market opportunities as they arise, which could enhance ARI's competitive edge.
Furthermore, the mention of Distributable Earnings as a key factor for dividend setting by the board of directors is significant for market analysts and investors, as it provides insight into the company's dividend policy and its alignment with shareholder interests. The adjustments made to calculate Distributable Earnings reflect a focus on cash earnings, which are often considered a more accurate representation of a company's operational success than GAAP net income, which includes non-cash items and one-time events.
Investors might also find the reconciliation of Distributable Earnings to GAAP net income useful for transparency and comparison with peers. It's important to note that while Distributable Earnings exclude unrealized gains or losses, these figures can still provide a valuable indicator of the company's ability to generate cash flow and sustain its dividend payouts over time.
From a legal perspective, it's pertinent to highlight the regulatory requirements for REITs, as mentioned in the report. ARI's adherence to the stipulation that requires distribution of at least 90% of its REIT taxable income is crucial for maintaining its REIT status and the associated tax benefits. This underscores the importance of Distributable Earnings as a measure for ensuring compliance with federal income tax law.
The company's intention to pay dividends equal to its net taxable income, if authorized by the board, aligns with the legal framework governing REITs and is an essential factor for investors to consider, as it directly impacts the potential for dividend income. The adjustments made to net income to calculate Distributable Earnings are also noteworthy because they reflect management's discretion in presenting a financial measure that they believe is more representative of the company's operational performance and is useful for investors.
However, the limitations of Distributable Earnings as a performance measure must be recognized, as they exclude unrealized gains and losses which could be material to the financial position of the company. The legal expert's role here is to ensure that the company's disclosures and financial reporting are in compliance with regulations and that investors are adequately informed about the measures used to evaluate financial performance.
NEW YORK, Feb. 06, 2024 (GLOBE NEWSWIRE) -- Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported results for the quarter and year ended December 31, 2023.
Net income available to common stockholders per diluted share of common stock was
Commenting on 2023 performance, Stuart Rothstein, Chief Executive Officer and President of the Company, said: “Despite the challenging macro environment over the past year, ARI delivered strong performance for our stockholders in 2023, consistently providing a stable and well covered dividend. We took proactive steps in managing our loan portfolio and optimizing our balance sheet, which positioned us well to pivot towards offense as the year progressed. We committed to two new loan origination transactions in the fourth quarter and will continue to opportunistically deploy capital alongside Apollo’s broader commercial real estate credit platform.”
ARI issued a detailed presentation of the Company’s quarter and year ended December 31, 2023 results, which can be viewed at www.apollocref.com.
Conference Call and Webcast
The Company will hold a conference call to review fourth quarter and year end results on February 7, 2024, at 10am ET. To register for the call, please use the following link:
https://register.vevent.com/register/BI71d3df57eff14851afda964c885d4e57
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
During the year ended December 31, 2023, the Company recorded in the consolidated statement of operations a realized loss on a subordinate loan secured by an ultra-luxury residential property and a realized loss related to the acquisition of a hotel property through a deed-in-lieu of foreclosure. The realized losses were partially offset by realized gains on extinguishment of debt related to our convertible notes.
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 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, and Distributable Earnings prior to net realized loss on investments and realized gain on extinguishment of debt, to GAAP net income (loss) available to common stockholders is included in the detailed presentation of the Company’s quarter and year ended December 31, 2023 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
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 was ARI's net income per diluted share of common stock for the year ended December 31, 2023?
What is the Distributable Earnings per share for the quarter ended December 31, 2023?
Where can I view the detailed presentation of ARI’s quarter and year ended December 31, 2023 results?
