Apollo Commercial Real Estate Finance, Inc. (the “Company” or
“ARI”) (NYSE:ARI) today reported financial results for the quarter
ended March 31, 2019.
First Quarter 2019 Highlights
- Reported net income available to common stockholders of $60.9
million, or $0.43 per diluted share of common stock, for the three
months ended March 31, 2019;
- Reported Operating Earnings (a non-GAAP financial measure
defined below) of $68.4 million, or $0.50 per diluted share of
common stock, for the three months ended March 31, 2019;
- Generated $82.8 million of net interest income during the
quarter from the Company’s $5.2 billion commercial real estate loan
portfolio;
- Committed $448.7 million to new commercial real estate loans
($441.8 million of which was funded at closing) and funded an
additional $110.3 million for loans closed prior to the
quarter;
- Subsequent to quarter end, committed $75.6 million (£58.0
million) to a new commercial real estate loan;
- Amended the master repurchase agreement with Goldman Sachs (the
"Goldman Facility") to increase borrowing capacity to $500 million
from $300 million, bringing ARI's total borrowing capacity to $3.2
billion as of March 31, 2019;
- Issued 1,967,361 shares of common stock in connection with the
conversion of the 5.50% Convertible Senior Notes due 2019 (the
"2019 Notes"); and
- Declared a $0.46 dividend per share of common stock for the
three months ended March 31, 2019.
"ARI has had a strong start to 2019 committing to over $523
million of commercial real estate loans year-to-date," said Stuart
Rothstein, Chief Executive Officer and President of the Company.
"As we approach ARI's 10-year anniversary as a public company, we
are extremely proud of the platform we have built, as well as ARI's
reputation as a reliable and creative capital solutions provider.
The Company's portfolio has surpassed the $5.0 billion mark and the
pipeline remains healthy."
First Quarter 2019 Investment
ActivityNew Investments - During the first quarter of
2019, ARI committed capital to the following commercial real estate
loans:
- $203.9 million first mortgage loan ($197.0 million of which was
funded during the quarter)
- $244.8 million of subordinate loans (all of which were funded
during the quarter)
Funding of Previously Closed Loans - During the
first quarter of 2019, ARI funded $110.3 million for loans closed
prior to the quarter.
Loan Repayments - During the first quarter of
2019, ARI received $322.4 million from loan repayments, comprised
of $192.4 million from first mortgage loans and $130.0 million from
subordinate loans. ARI received $3.7 million in pre-payment
penalties in connection with two of these repayments.
First Quarter 2019 Capital Markets
ActivityConversion and Maturity of Convertible Notes - ARI
issued 1,967,361 shares of common stock and paid $0.7 million in
cash in connection with the conversion and maturity of the
remaining $34.5 million of outstanding 2019 Notes.
Expansion of Goldman Facility - ARI amended the
Goldman Facility to expand borrowing capacity to $500 million from
$300 million. The Goldman Facility matures in November 2019, plus
two one-year extensions available at our option, subject to certain
conditions.
Quarter End Commercial Real Estate Loan
Portfolio SummaryThe following table sets forth certain
information regarding the Company’s commercial real estate loan
portfolio at March 31, 2019 ($ amounts in thousands):
Description |
|
Amortized Cost |
|
Weighted Average Coupon (1) |
|
Weighted Average All-in Yield (1)(2) |
|
Secured Debt (3) |
|
Cost of Funds |
|
Equity at cost(4) |
Commercial mortgage
loans, net |
|
$ |
4,003,089 |
|
|
7.0 |
% |
|
7.8 |
% |
|
$ |
2,159,767 |
|
|
4.1 |
% |
|
$ |
1,843,322 |
|
Subordinate loans,
net |
|
1,183,910 |
|
|
12.9 |
% |
|
14.3 |
% |
|
— |
|
|
— |
|
|
1,183,910 |
|
Total/Weighted-Average |
|
$ |
5,186,999 |
|
|
8.4 |
% |
|
9.3 |
% |
|
$ |
2,159,767 |
|
|
4.1 |
% |
|
$ |
3,027,232 |
|
(1) Weighted-Average Coupon and
Weighted-Average All-in Yield are based on the applicable benchmark
rates as of March 31, 2019 on the floating rate loans.(2)
Weighted-Average All-in Yield includes the
amortization of deferred origination fees, loan origination costs
and accrual of both extension and exit
fees.(3) Gross of deferred financing costs
of $17.8 million.(4) Represents loan
portfolio at amortized cost less secured debt outstanding.
Book ValueThe Company’s book
value per share of common stock was $16.13 at March 31, 2019
as compared to book value per share of common stock of $16.20 at
December 31, 2018. The decrease is primarily driven by the
vesting of stock awards related to our equity incentive plan.
Subsequent EventsThe following
events occurred subsequent to quarter end:
New Investments - ARI committed $75.6 million
(£58.0 million) to a first mortgage loan.
Funding of Previously Closed Loans - ARI funded
$41.3 million for previously closed loans.
Loan Repayments - ARI received $13.1 million
from loan repayments, including $12.8 million from first mortgage
loans and $0.3 million from subordinate loans.
Operating Earnings
Operating Earnings is a non-GAAP financial measure that we
define 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 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
our foreign currency hedges, (v) the non-cash amortization expense
related to the reclassification of a portion of our convertible
senior notes to stockholders’ equity in accordance with GAAP, and
(vi) provision for loan losses and impairments. Beginning with the
quarter ended September 30, 2016, we slightly modified our
definition of Operating Earnings to include realized gains (losses)
on currency swaps related to interest income on investments
denominated in a currency other than U.S. dollars. In addition,
beginning with the quarter ended December 31, 2018, we further
modified our definition of Operating Earnings to include the impact
from forward points on our foreign currency hedges, which reflect
the interest rate differentials between the applicable base rate
for our foreign currency investments and USD LIBOR. These forward
contracts effectively convert the rate exposure to USD LIBOR,
resulting in additional interest income earned in U.S. dollar
terms. These amounts are not included in GAAP net income. In order
to conform to the 2018 year end presentation, which incorporates
this modification, prior year Operating Earnings results presented
below have been modified accordingly. Operating Earnings may also
be adjusted to exclude certain other non-cash items, as determined
by the Manager and approved by a majority of our independent
directors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Non-GAAP Financial
Measures-Operating Earnings" in our quarterly report on Form 10-Q
for the quarter ended March 31, 2019 for more information
regarding Operating Earnings, including why we believe the measure
provides useful information to investors regarding our financial
condition and results of operations.
A significant limitation associated with Operating Earnings as a
measure of our financial performance over any period is that it
excludes unrealized gains (losses) from investments. In
addition, our presentation of Operating Earnings may not be
comparable to similarly-titled measures of other companies, who may
use different calculations. As a result, Operating Earnings should
not be considered as a substitute for our GAAP net income as a
measure of our financial performance or any measure of our
liquidity under GAAP.
Reconciliation of Operating Earnings to
Net Income Available to Common Stockholders
The table below reconciles Operating Earnings
and Operating Earnings per share of common stock with net income
available to common stockholders and net income available to common
stockholders per share of common stock for the three months ended
March 31, 2019 and March 31, 2018 ($ amounts in
thousands, except per share data):
|
Three months ended |
|
Earnings Per Share(1) |
|
Three months ended |
|
Earnings Per Share(1) |
|
March 31, 2019 |
|
|
March 31, 2018 |
|
Operating Earnings: |
|
|
|
|
|
|
|
Net income available to common stockholders |
$ |
60,923 |
|
|
$ |
0.45 |
|
|
$ |
42,598 |
|
|
$ |
0.38 |
|
Adjustments: |
|
|
|
|
|
|
|
Equity-based compensation
expense |
3,901 |
|
|
0.03 |
|
|
3,342 |
|
|
0.03 |
|
Loss on derivative instruments |
6,720 |
|
|
0.05 |
|
|
11,032 |
|
|
0.10 |
|
Foreign currency gain, net(2) |
(6,894 |
) |
|
(0.05 |
) |
|
(10,125 |
) |
|
(0.09 |
) |
Net realized gains relating to
interest income on foreign currency hedges, net |
418 |
|
|
— |
|
|
(237 |
) |
|
— |
|
Net realized gains relating to
forward points on foreign currency hedges, net |
2,431 |
|
|
0.02 |
|
|
174 |
|
|
— |
|
Amortization of the convertible
senior notes related to equity reclassification |
909 |
|
|
— |
|
|
1,140 |
|
|
0.01 |
|
Total adjustments: |
7,485 |
|
|
0.05 |
|
|
5,326 |
|
|
0.05 |
|
Operating Earnings(3) |
$ |
68,408 |
|
|
$ |
0.50 |
|
|
$ |
47,924 |
|
|
$ |
0.43 |
|
Basic weighted-average shares of common stock
outstanding |
134,607,107 |
|
|
|
|
110,211,853 |
|
|
|
Weighted-average diluted shares -
Operating Earnings |
|
|
|
|
|
|
|
Weighted-average diluted shares - GAAP |
164,683,086 |
|
|
|
|
111,871,429 |
|
|
|
Weighted-average unvested RSUs |
1,849,564 |
|
|
|
|
— |
|
|
|
Reversal of hypothetical conversion of the
convertible senior notes(4) |
(30,075,979 |
) |
|
|
|
— |
|
|
|
Weighted-average diluted shares - Operating
Earnings |
136,456,671 |
|
|
|
|
111,871,429 |
|
|
|
(1) Certain per share amounts rounds to
zero.(2) In order to conform to the 2019
presentation of the reconciliation from net income available to
common stockholders to Operating Earnings, $0.2 million was
reclassified from Foreign currency gain, net for the three months
ended March 31, 2018.(3) For the computation of
diluted Operating Earnings per share of common stock, for the three
months ended March 31, 2019, $8.4 million of interest expense
related to the Notes is not deducted from the numerator and the
potentially dilutive shares related to the Notes are excluded from
the denominator.(4) See "Management's Discussion
and Analysis of Financial Condition and Results of
Operations-Non-GAAP Financial Measures-Operating Earnings" in our
quarterly report on Form 10-Q for the quarter ended March 31, 2019
for more information.
Computation of Share Count for Operating
Earnings |
Basic weighted-average
shares of common stock outstanding |
134,607,107 |
|
|
|
|
110,211,853 |
|
|
|
Weighted-average unvested RSUs |
1,849,564 |
|
|
|
|
1,659,576 |
|
|
|
Weighted-average
diluted shares - Operating Earnings |
136,456,671 |
|
|
|
|
111,871,429 |
|
|
|
Teleconference Details:The
Company will host a conference call to discuss its financial
results on Thursday, April 25, 2019 at 10:00 a.m. ET. Members of
the public who are interested in participating in the Company’s
first quarter 2019 earnings teleconference call should dial from
the U.S., (877) 331-6553, or from outside the U.S., (760) 666-3769,
shortly before 10:00 a.m. and reference the Apollo Commercial Real
Estate Finance, Inc. Teleconference Call (number 8078599). Please
note the teleconference call will be available for replay beginning
at 1:00 p.m. on Thursday, April 25, 2019 and ending at midnight on
Thursday, May 2, 2019. To access the replay, callers from the U.S.
should dial (855) 859-2056 and callers from outside the U.S. should
dial (404) 537-3406, and enter conference identification number
8078599.
Webcast:The conference call
will also be available on the Company's website at
www.apolloreit.com. To listen to a live broadcast, please go to the
site at least 15 minutes prior to the scheduled start time in order
to register, download and install any necessary audio software. A
replay of the call will also be available for 30 days on the
Company's website.
Supplemental InformationThe
Company provides supplemental financial information to offer more
transparency into its results and make its reporting more
informative and easier to follow. The supplemental financial
information is available in the investor relations section of the
Company's website at www.apolloreit.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
real estate 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, LLC, a leading global alternative
investment manager with approximately $280.3 billion of assets
under management as of December 31, 2018.
Additional information can be found on the
Company's website at www.apolloreit.com.
Dividend Reinvestment PlanThe
Company adopted a Direct Stock Purchase and Dividend Reinvestment
Plan (the “Plan”). The Plan provides new investors and existing
holders of the Company’s common stock with a convenient and
economical method to purchase shares of its common stock. By
participating in the Plan, participants may purchase additional
shares of the Company’s common stock by reinvesting some or all of
the cash dividends received on their shares of the Company’s common
stock. In addition, the Plan permits participants to make optional
cash investments of up to $10,000 per month, and, with the
Company’s prior approval, optional cash investments in excess of
$10,000 per month, for the purchase of additional shares of the
Company’s common stock.
The Plan is administered by Equiniti Trust
Company (“Equiniti”). Stockholders and other persons may obtain a
copy of the Plan prospectus and an enrollment form by contacting
Equiniti at (800) 468-9716 or (651) 450-4064, if outside the United
States, or visiting Equiniti’s website at
www.shareowneronline.com.
This communication does not constitute an offer
to sell or the solicitation of an offer to buy securities.
Forward-Looking
StatementsCertain 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: 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.
Apollo Commercial Real Estate Finance,
Inc. and SubsidiariesCondensed Consolidated
Balance Sheets (in thousands-except share data)
|
March 31, 2019 |
|
December 31, 2018 |
Assets: |
(Unaudited) |
|
|
Cash and cash
equivalents |
$ |
109,343 |
|
|
$ |
109,806 |
|
Commercial mortgage loans, net
(includes $3,679,993 and $3,197,900 pledged as collateral under
secured debt arrangements in 2019 and 2018, respectively) |
4,003,089 |
|
|
3,878,981 |
|
Subordinate loans, net |
1,183,910 |
|
|
1,048,612 |
|
Loan proceeds held by servicer |
— |
|
|
1,000 |
|
Other assets |
36,540 |
|
|
33,720 |
|
Derivative assets, net |
8,715 |
|
|
23,700 |
|
Total Assets |
$ |
5,341,597 |
|
|
$ |
5,095,819 |
|
Liabilities and
Stockholders' Equity |
|
|
|
Liabilities: |
|
|
|
Secured debt arrangements, net (net
of deferred financing costs of $17,828 and $17,555 in 2019 and
2018, respectively) |
$ |
2,141,939 |
|
|
$ |
1,879,522 |
|
Convertible senior notes, net |
558,664 |
|
|
592,000 |
|
Accounts payable, accrued expenses
and other liabilities |
91,557 |
|
|
104,746 |
|
Payable to related party |
9,613 |
|
|
9,804 |
|
Total Liabilities |
2,801,773 |
|
|
2,586,072 |
|
Commitments and Contingencies (see Note 14) |
|
|
|
Stockholders’ Equity: |
|
|
|
Preferred stock, $0.01 par value, 50,000,000
shares authorized: |
|
|
|
Series B preferred stock, 6,770,393
shares issued and outstanding ($169,260 liquidation
preference) |
68 |
|
|
68 |
|
Series C preferred stock, 6,900,000
shares issued and outstanding ($172,500 liquidation
preference) |
69 |
|
|
69 |
|
Common stock, $0.01 par value,
450,000,000 shares authorized, 136,254,352 and 133,853,565 shares
issued and outstanding in 2019 and 2018, respectively |
1,363 |
|
|
1,339 |
|
Additional paid-in-capital |
2,671,100 |
|
|
2,638,441 |
|
Accumulated deficit |
(132,776 |
) |
|
(130,170 |
) |
Total Stockholders’ Equity |
2,539,824 |
|
|
2,509,747 |
|
Total Liabilities and Stockholders’ Equity |
$ |
5,341,597 |
|
|
$ |
5,095,819 |
|
Apollo Commercial Real Estate Finance,
Inc. and SubsidiariesCondensed Consolidated
Statement of Operations (Unaudited)(in
thousands-except share and per share data)
|
Three months ended
March 31, |
|
2019 |
|
2018 |
Net interest income: |
|
|
|
Interest income from
commercial mortgage loans |
$ |
78,286 |
|
|
$ |
52,114 |
|
Interest income from subordinate
loans |
40,839 |
|
|
33,853 |
|
Interest expense |
(36,295 |
) |
|
(22,740 |
) |
Net interest income |
82,830 |
|
|
63,227 |
|
Operating expenses: |
|
|
|
General and administrative expenses
(includes equity-based compensation of $3,901 and $3,342 in 2019
and 2018, respectively) |
(6,151 |
) |
|
(4,998 |
) |
Management fees to related
party |
(9,613 |
) |
|
(8,092 |
) |
Total operating expenses |
(15,764 |
) |
|
(13,090 |
) |
Other income |
518 |
|
|
203 |
|
Foreign currency gain |
6,894 |
|
|
10,125 |
|
Loss on derivative instruments
(includes unrealized losses of $14,985 and $8,855 in 2019 and 2018,
respectively) |
(6,720 |
) |
|
(11,032 |
) |
Net income |
$ |
67,758 |
|
|
$ |
49,433 |
|
Preferred dividends |
(6,835 |
) |
|
(6,835 |
) |
Net income available to common stockholders |
$ |
60,923 |
|
|
$ |
42,598 |
|
Net income per share of
common stock: |
|
|
|
Basic |
$ |
0.45 |
|
|
$ |
0.38 |
|
Diluted |
$ |
0.43 |
|
|
$ |
0.38 |
|
Basic weighted-average shares of common stock
outstanding |
134,607,107 |
|
|
110,211,853 |
|
Diluted weighted-average shares of common stock
outstanding |
164,683,086 |
|
|
111,871,429 |
|
Dividend declared per share of common stock |
$ |
0.46 |
|
|
$ |
0.46 |
|
CONTACT:Hilary
Ginsberg
(212) 822-0767
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