Yahoo Finance Apollo Commercial Real Estate Finance Inc (ARI) (Q1 2024) Earnings Call Transcript Highlights: ...
Distributable Earnings: $0.35 per share of common stock.
GAAP Net Loss: $108 million or $0.76 per diluted share of common stock.
Total Repayments: $176 million received during the quarter.
Portfolio Carrying Value: $8.3 billion with a weighted average unlevered yield of 9.1%.
Add-on Fundings: $322 million from previously closed loans.
Dividend: Consistent at $0.35 per share of common stock for 16 consecutive quarters.
Debt to Equity Ratio: 3.3 times at quarter end.
Book Value Per Share: $13.59, excluding general CECL reserves and depreciation.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: As you evaluate the outlook, could you give an overview or summary of your target returns at this point? If those have changed at all the underwriting criteria, seems like there's probably an opportunity there, pretty consistent returns to the past with no lower LTVs, maybe finance some in-place cash flow. But if you could just give an overview on that, that would be helpful. A: Stuart Rothstein, CEO of Apollo Commercial Real Estate Finance, responded that the business model continues to work well, aiming for low to mid-10s returns. He noted that lower LTVs, which are high 50s to low 60s, are feasible today when deploying new capital. The company sees opportunities for deploying capital both in new transactions and potentially in repurchasing parts of ARI's capital structure.
Q: Can you discuss expected credit outcomes on upcoming loan maturities? For example, the Hawaii hotel loan, I think had a fully extended maturity in April. The decision was made to sell that at close to par. How are you thinking about upcoming maturities? A: Rothstein indicated that ARI expects about $1 billion worth of repayments this year, based on ongoing dialogues with borrowers who plan to refinance or sell their properties. He expressed a generally optimistic tone about repayment prospects and the overall transaction activity in the financing markets.
Q: Can you just tell us in dollars and on a per share basis, the drag from nonaccruals? I'm a little bit confused when I compare and two weighted average cash coupon in mixed use, which is 8.4% on that zeroes, the non-accruals and slide 6, that has a weighted average unlevered all-in yield on the loan portfolio of 6.5%. A: Rothstein explained that there are about $550 million to $600 million worth of loans on non-accrual at the end of the quarter, with about $375 million of net equity on non-accrual. He suggested a follow-up discussion with CFO Anastasia Mironova for detailed calculations.
Q: Thanks for taking the follow-up on 111 West 57th to do you have a rough number of what the quantity of remaining units are? A: Rothstein mentioned that there are about 25 units still to be sold at 111 West 57th Street, which is less than half of the project. He noted that there are a few units under contract and expected to be signed soon.
Q: On the office portfolio, we are still seeing a lot of pressure in the office sector. I think you noted that in your opening remarks, but definitely, you know, the liability structure of the lender is a big driver of how much no wiggle room there is modifications and flexibility to work with power. And so what are you seeing in the office portfolio? I know the predominance also is in Europe, but if you could give a comment there, that'd be helpful. A: Rothstein acknowledged the ongoing pressure in the office sector, particularly highlighting a major redevelopment in London that is fully leased by a financial institution. He mentioned that ARI had seen some positive leasing activity for newly created products in the office sector and continues to have productive dialogues with borrowers across the portfolio.
Q: Hi, good morning, guys. Thanks for taking my question. Can you just tell us in dollars and on a per share basis, the drag from nonaccruals? I'm a little bit confused when I compare and two weighted average cash coupon in mixed use, which is 8.4% on that zeroes, the non-accruals and slide 6, that has a weighted average unlevered all-in yield on the loan portfolio of 6.5%. A: Rothstein clarified that there are approximately $550 million to $600 million worth of loans on non-accrual at the end of the quarter. Some of this is financed, so on an equity basis, it's about $375 million of net equity on non-accrual. He suggested a post-call discussion for detailed calculations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
