Apollo Commercial Real Estate Finance, Inc

I'd like to remind everyone that today's call and webcasts 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. Today's conference call and webcast may include forward-looking statements and projections. and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. In addition, we will be discussing certain non-GAAP measures on this call, which management believes are relevant to assessing the company's financial performance. These measures are reconciled to GAAP figures in our earnings presentation, which is available in our stockholders section of our website. We do not undertake any obligation to update our forward-looking statements or projections, unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apollocraft.com or call us at 212-515-3200. At this time, I'd like to turn the call over to the company's Chief Executive Officer, Stuart Rothstein.

Thank you, Operator, and thank you to those of us joining us this morning on the Apollo Commercial Real Estate Financing Fourth Quarter and Full Year 2024 Earnings Call. As usual, I am joined today by Scott Wiener, our Chief Investment Officer, and Anastasia Maranova, our Chief Financial Officer. Consistent with the return of liquidity to the real estate capital markets and the steady increase in transaction volume, ARI experienced a robust level of repayment activity and was very active in deploying capital in 2024. While the market was expecting more aggressive action from the Fed than actually took place during 2024, the continued strength of the overall economy and the modest Fed cuts was enough to generate a notable pickup in real estate investment activity. As we move into the new year, with the benefit of hindsight, it appears that property valuations troughed in the early part of 2024. And during 2025, we expect increasing capital deployment and transaction activity across the real estate market as the significant dry powder within real estate funds is deployed. And many of the participants who have been on the sidelines for the past 18 months reenter the market. ARI finished 2024 originating $782 million worth of new loans in the fourth quarter, bringing total origination volume for the year to $1.9 billion. As of year end, approximately 30% of the loans in ARI's portfolio were originated in the past 24 months, correlating with the rise in interest rates and the resulting reset of property values. ARI's newly originated loans were underwritten to generate very attractive risk-adjusted returns benefiting from wider spreads and higher base rates and interest rate floors. The strength of Apollo's broad-based real estate credit originations efforts is the key to ARI's active deployment. As Apollo's team originated over $16 billion worth of new loans during 2024. As Apollo's team is consistently active in the market, ARI can seamlessly tap into the pipeline when capital to invest is available. ARI's originations in 2024 were across a broad spectrum of property types and geographies with more than half in the UK. Apollo's dominant market position in Europe continues to be a differentiator for ARI as we are able to invest in transactions with similar risk profiles and comparable credit quality to transactions in the U.S. while further diversifying the company's portfolio. Turning now to the loan portfolio, at year end, ARI's portfolio was comprised of 46 loans totaling $7.1 billion. No additional asset-specific CECL allowances were recorded in the fourth quarter. Shifting to 111 West 57th Street, there are currently four units under contract and several others in various stages of contract negotiations, including several with agreed upon offers. Upon closing of the four units and assuming one other unit closes, The net proceeds received will repay the senior mortgage in full, and all proceeds thereafter will go to ARI and can be redeployed into new loans. We remain highly focused on proactive asset management and targeting resolutions on our focus loans as we seek to maximize value recovery and convert underperforming capital into higher return on invested equity opportunities. We have defined pathways for our remaining non-performing loans and REO assets, and we are actively pursuing resolutions. As we mentioned on last quarter's call, there is meaningful upside earnings potential for ARI as we recapture and redeploy capital. For example, ARI has approximately $300 million of net equity invested in the Brooklyn multifamily development. Upon completion, Upon completion and sale or refinancing of that asset, it is expected that ARI will be able to convert that non-income producing capital to invested capital generating an ROE consistent with recently originated loans. Across ARI, we estimate that if we were able to reinvest 100 percent of the equity tied to non-performing loans in ROE into newly originated loans, We believe there is an additional approximately 40 to 60 cents per share of annual earnings uplift. With that, I will turn the call over to Anastasia to review ARI's financial results for the year.

Thank you, Stuart, and good morning, everyone. ARI reported distributable earnings of 45 million or 32 cents per share of common stock for the fourth quarter. with gap net income of $38 million or $0.27 per diluted share of common stock. For the full year, we reported distributable earnings of $190 million or $1.33 per share of common stock, with gap net loss available to stockholders of negative $132 million or negative $0.97 per share. Our dividend was well covered with 128% coverage for the quarter and 111% for the full year. It is worth noting that our fourth quarter distributable earnings included 7 cents of non-recurring items, such as prepayment fees, accelerated fee amortization on early repayments, and other similar one-time items. Coupled with the impact of rate cuts executed by the Fed over the course of the fourth quarter of 24, we expect that our quarterly earnings in 25 would be lower when compared to Q4 24, while still providing sufficient coverage for our dividend. Our loan portfolio ended the year with a carrying value of $7.1 billion and a weighted average and leveraged yield of 8.1%. As Stuart mentioned, we had a strong quarter of loan originations, closing three new commitments, two upsizes, and one refinancing transaction. ARI funded about $300 million associated with these commitments at close. During the quarter, we also funded an additional $97 million for previously closed loans, bringing the year-to-date total add-on funding to $627 million. We had another quarter of elevated loan repayments, which totaled $830 million, and therefore outpaced new loan closings and add-on funding. As a result, our loan-per-toller balance decreased quarter over quarter. However, with an origination pipeline of over $1 billion for the first half of the year, we expect our loan-per-toller to grow in 2025 as we are recirculating capital from repayments into new yields. We closed one loan commitment for $114 million post-quarter end so far. With respect to risk ratings, the weighted average risk rating of our portfolio at quarter end was 3.0 unchanged from the previous quarter end. There were no asset-specific CFO allowances recorded during the quarter and no material movements in ratings across the portfolio. Our total CECL allowance was relatively flat quarter over quarter. As of December 31, it equated to $379 million, which represents $2.74 per share of book value. Moving on to the right-hand side of the balance sheet. During the quarter, we continued to see spread tightening across repo facilities, with average spread on new repo draws in Q4 being on average 45 basis points lower compared to the weighted average cost of borrowing across our secured facilities. Our debt-to-equity ratio at quarter end was 3.2 times down from 3.5 times at September 30. The company ended the quarter with over $380 million of total liquidity comprised of cash on hand, undrawn credit capacity on existing facilities, and loan proceeds held by the servicer. Our book value per share, excluding general CISO allowance and depreciation, was $12.77, a slight increase from last quarter. And with that, we would like to ask the operator to open the line for questions.