Apollo Commercial Real Estate Finance, Inc. Reports Third Quarter 2022 Results

Rhea-AI Summary

Apollo Commercial Real Estate Finance (ARI) reported third quarter results with net income available to common stockholders at $1.13 per diluted share. Distributable Earnings were $0.67 per share, indicating a solid performance despite market volatility. CEO Stuart Rothstein highlighted resilience in ARI's floating rate loan portfolio and progress in asset management, allowing reinvestment of capital. ARI intends to pay dividends reflecting net taxable income, aligned with U.S. tax requirements. The company will host a conference call on October 25, 2022, to discuss these results.

Positive

• Net income of $1.13 per diluted share indicates strong performance.
• Distributable Earnings of $0.67 per share exceed dividend payments.
• Resilience in floating rate loan portfolio amid market volatility.
• Significant progress in asset management initiatives enabling reinvestment.

Negative

• None.

NEW YORK, Oct. 24, 2022 (GLOBE NEWSWIRE) -- Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported results for the quarter and nine months ended September 30, 2022.

For the third quarter of 2022, net income available to common stockholders per diluted share of common stock was $1.13 and Distributable Earnings (a non-GAAP financial measure defined below) and Distributable Earnings prior to realized gains on real estate owned and investments were $0.67 and $0.37 per share of common stock, respectively.

“Our third quarter results demonstrate the resilience of ARI’s floating rate loan portfolio in a quickly evolving and volatile market environment,” said Stuart Rothstein, Chief Executive Officer and President of the Company.  “In addition to reporting distributable earnings in excess of our common stock dividend, ARI has made significant progress with key asset management initiatives for several of our loans, which enables ARI to reinvest capital that previously was not earning an optimal return.”

ARI issued a detailed presentation of the Company’s three and nine months ended September 30, 2022 results, which can be viewed at www.apollocref.com.

Conference Call and Webcast:
The Company will hold a conference call to review third quarter results on October 25, 2022, at 10am ET. To register for the call, please use the following link:

https://register.vevent.com/register/BI590b61978ebd4f2e9b2325f0cb102240

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 on 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, (v) the non-cash amortization expense related to the reclassification of a portion of the Company’s convertible senior notes (the “Notes”) to stockholders’ equity in accordance with GAAP, and (vi) provision for loan losses.

The weighted-average diluted shares outstanding used for Distributable Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Notes. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, these potentially issuable shares are excluded until a conversion occurs, which the Company believes is a useful presentation for investors. The Company believes that excluding shares issued in connection with a potential conversion of the Notes from its computation of Distributable Earnings per weighted-average diluted share is useful to investors for various reasons, including the following: (i) conversion of Notes to shares requires both the holder of a Note to elect to convert the Note and for the Company to elect to settle the conversion in the form of shares; (ii) future conversion decisions by Note holders will be based on the Company’s stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Notes from the computation of Distributable Earnings per weighted-average diluted share is consistent with how the Company treats other unrealized items in its computation of Distributable Earnings per weighted-average diluted share; and (iv) the Company believes that when evaluating its operating performance, investors and potential investors consider the Company’s Distributable Earnings relative to its actual distributions, which are based on shares outstanding and not shares that might be issued in the future.

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.

During the nine months ended September 30, 2022, the Company recorded a realized gain in the condensed consolidated statement of operations related to the asset acquisition of one of our first mortgage loans and transfer to real estate owned. The gain was reflective of the difference between the fair value of the property and the carrying value of the loan.

The Company believes it is useful to its investors to also present Distributable Earnings prior to realized gains (losses) and impairments on real estate owned, and investments, 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 realized gains (losses) and impairments on real estate owned, and investments, 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 realized gains (losses) and impairments on real estate owned and investments, to GAAP net income (loss) available to common stockholders is included in the detailed presentation of the Company’s three and nine months ended September 30, 2022 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 $515 billion of assets under management at June 30, 2022.

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: macro- and micro-economic impact of the COVID-19 pandemic, increasing interest rates and inflation; the severity and duration of the COVID-19 pandemic, including the emergence and spread of COVID-19 variants; actions taken by governmental authorities to contain the COVID-19 pandemic or treat its impact; the efficacy of vaccines or other remedies and the speed of their distributions and administration; the impact of the COVID-19 pandemic on the Company’s financial condition, results of operations, liquidity and capital resources; market trends in the Company’s industry, interest rates, 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 are the third quarter 2022 results for ARI?

For Q3 2022, ARI reported a net income of $1.13 per diluted share and Distributable Earnings of $0.67 per share.

When will ARI hold its conference call to discuss earnings?

ARI's conference call to review third quarter results is scheduled for October 25, 2022, at 10am ET.

What did ARI's CEO say about the company's performance?

CEO Stuart Rothstein emphasized the resilience of ARI's floating rate loan portfolio in a volatile market.

What are Distributable Earnings for ARI?

ARI's Distributable Earnings are defined as net income available to common stockholders adjusted for certain items, with Q3 earnings at $0.67 per share.