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 the 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.apollocreft.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 good morning, and thank you to those of us for joining us on the Apollo Commercial Real Estate Finance First Quarter 2025 Earnings Call. I am joined today by Scott Wiener, our Chief Investment Officer, and Anastasia Maranova, our Chief Financial Officer. Quite a bit has changed since our year-end conference call, where we expressed optimism about the positive momentum in the real estate market, given the healthy overall macroeconomic view, and increasing real estate transaction activity at the time. As we highlighted on that call, we perceived a slowdown in the overall macroeconomy as the biggest risk to the real estate market. Without getting into the weeds with respect to monetary policy and the approach to implementing tariffs, it is safe to say that overall capital markets volatility has increased as investors tried to understand the short and long-term implications of the changes announced and recessionary fears have risen. As I've previously stated, commercial real estate tends to be a lagging indicator. At present, real estate market participants are still quite active and there continues to be significant amounts of both equity and credit capital available for deployment into real estate. To date, the recent volatility has led to modest spread widening and a more cautious tone in the market, and we still hold the view that a broad recession presents the greatest risk to the ongoing real estate recovery. We believe tariff effects are likely to drive up construction costs and further reduce new supply, as evidenced by recent data on new construction starts for multifamily and logistics properties indicating levels at 10-year lows. Limited supply should be positive for long-term real estate values and fundamentals. Also, when compared to other asset classes, real estate appears to be starting from a more reasonable relative value position. As such, while clearly not immune to volatility in the short term, we believe real estate looks better positioned than many other asset classes, and historically real estate has performed quite well in an inflationary environment. Specific to ARI, the first quarter saw continued velocity in loan originations as we committed to $650 million of new loans. Our Q1 originations were for loans secured by properties in the United States, although our forward pipeline continues to consist of transactions in the US and Europe. Three of the four transactions closed in the quarter were loans secured by residential properties an asset class that continues to have strong secular tailwinds even in potential recessionary scenarios. The other transaction was a data center construction loan, which is an area we have become very active in over the past 18 months. Our strategy with data centers has been to finance developers where we are confident in their ability to deliver facilities on time and within agreed upon specs, and to provide loans on facilities that have been pre-leased to strong credit tenants with long-term leases. ARI continues to benefit from Apollo's broad-based real estate credit origination efforts, which totaled over $5 billion of originations in Q1. Following quarter end, ARI completed an additional four transactions totaling just over $700 million bringing year-to-date volume to $1.5 billion, including add-on funding. Turning now to the loan portfolio, at quarter end, ARI's portfolio was comprised of 48 loans totaling $7.7 billion. No additional asset-specific CECL allowances were recorded in the first quarter. The update on 111 West 57th Street is that strong sales momentum has continued, and the closing of three units in the first quarter generated $45 million in net proceeds. Subsequent to quarter end, two additional units closed, and with those closing, the senior loan ahead of ARI's position was fully repaid and also allowed for a $29 million reduction in ARI's net exposure. Going forward, all unit closings will go toward reducing ARI's loan. And currently, there is an additional $127 million in executed or pending contracts across another seven units. We remain highly focused on proactive asset management and executing the plans on our focus loans as we seek to maximize value recovery and convert the capital into higher return on invested equity opportunities. We have defined pathways for each of our focus assets, and we are actively pursuing resolutions. Before I turn the call over to Anastasia to review the financial results, I wanted to reiterate that while Q1 earnings were slightly below the current quarterly dividend run rate, as we look to the rest of 2025, we are comfortable that ARI's loan portfolio will produce distributable earnings that supports the current quarterly dividend run rate. 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 $33 million, or $0.24 per share of common stock, for the first quarter, with gap net income of $23 million, or $0.16 per diluted share of common stock. As Stuart mentioned, our Q1 earnings were slightly lower than the current quarterly dividend rate, providing 96% coverage of the quarterly dividend. It is worth noting that our first quarter distributable earnings included the impact of timing of capital deployment in Q1, which was heavily weighted towards the end of the quarter. As we look to the rest of the year, we see Q1 results representing a trough with distributable earnings per share expected to meet or exceed the quarterly dividend rate for the remaining quarters. The expected increase in distributable earnings is driven by the sequential growth of the loan portfolio from previous year end and recirculation of underperforming capital into new transactions. Our loan portfolio ended the quarter with a carrying value of $7.7 billion up from $7.1 billion at year end. The weighted average unlevered yield of our loan portfolio as of the quarter end was 7.9%. We had a strong quarter of loan origination, closing four new commitments for a total of $650 million and completing an additional $73 million in add-on funding for previously closed loans. Loan repayments totaled $93 million during the quarter. which we were quickly able to redeploy through new originations post-quarter end. Such activity in Q2 to date amounted to $709 million in total commitments on new loans, in addition to another $309 million in add-on funding. With respect to risk ratings, the weighted average risk rating of the portfolio at quarter end was 3.0, unchanged from the previous quarter end. There were no asset-specific CECL allowances recorded during the quarter and no movements in ratings across the portfolio. Our general CECL allowance increased this quarter by $4 million, reflecting the growth of the loan portfolio from the previous quarter end, as well as a more cautious stance on the macroeconomic outlook. Total CECL allowance and percentage points of the loan portfolio amortized cost basis is down quarter over quarter from 507 basis points to 475 basis points. Moving on to the right-hand side of the balance sheet. During the quarter, we were very active with our secured borrowing counterparties, upsizing our facility with JP Morgan by $500 million, which brought total capacity to $2 billion. We also extended the maturity on our JP Morgan and Deutsche Bank facilities by three and a half and two years respectively. Post-quarter end, we closed two new secured credit facilities with new counterparties for an aggregate borrowing capacity of about $700 million and on favorable terms. Liquidity in the secured borrowing market continues to be plentiful as lenders get favorable capital treatment for these facilities and in many instances prefer them over directly lending to properties. Our debt-to-equity ratio at quarter end was 3.5 times, up from 3.2 times at year end, as we recirculated proceeds from a number of repayments that happened right before year end into new levered deals in Q1. The company ended the quarter with $218 million of total liquidity, comprised of cash on hand, committed undrawn credit capacity on existing facilities, and loan proceeds held by the servicer. ARI book value per share, excluding general CECL allowance and depreciation, was $12.66, a slight decrease from last quarter, primarily attributable to the impact of the RSU vesting and delivery. And with that, we would like to ask the operator to open the line for questions.