Q3 2024 Apollo Commercial Real Estate Finance Inc Earnings Call

Okay.

I'd like to remind everyone that today's call and webcast 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.

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Speaker Change: Reported distributable earnings prior to the realized loss of 44 million or 31 cents per share of common stock for the third quarter.

Speaker Change: GAAP net loss attributable to common stockholders was 95 million or negative <unk> 69 cents per diluted share of common stock.

Speaker Change: This net loss amount includes 128 million realized loss.

Speaker Change: Incurred in connection with the resolution of the loan secured by the portfolio of hospitals in Massachusetts.

As we disclosed in our Q2 filing the amortized cost basis of this loan as of June 30 was $342 million.

Speaker Change: Following up on Stuart's remarks about the developments with the loans you're in the quarter, Larry Steve at about $50 million to $55 million of proceeds from the guarantee payment the sale of other collateral and interest cost recovery proceeds all of which were applied against the amortized cost basis of the room.

Speaker Change: The loan was extinguished as of the end of the quarter and we retain and we reflect as retained asset for $160 million comprised of a receivable from the Commonwealth of Massachusetts for the eminent domain taken of one of the hospitals.

Speaker Change: And these are in escrow for the remaining seven hospitals.

Speaker Change: The proceeds from sale of five hospitals will then distributed on October 1st.

Speaker Change: Subsequent to the sale of five hospitals are right is routine years, indeed to the two closed hospitals.

Speaker Change: Specific nature and sort of <unk>.

Speaker Change: <unk> of converting that type of property.

Speaker Change: How do you think about that does that presumably that sort of limits.

Speaker Change: Potential outcomes and potential.

Speaker Change: Uh huh.

Speaker Change: Other party stepping in.

Speaker Change: I would say at this point give.

Speaker Change: Given the work we've done from an appraisal process and then also sort of very.

Speaker Change: Early days of thinking about alternative uses.

Speaker Change: I would say, we feel confident in the $20 million or so of value that were carrying in carrying on our books.

And we're grinding through it but.

I would say we feel good about the ability to ultimately achieve.

The value that we're carrying that on the balance sheet.

Speaker Change: Got it and thank you. Thank you alternative uses the phrase I was apparently struggling to find this early in the morning.

Speaker Change: Second question look you've talked about.

Speaker Change: The improving opportunity the deal flow picking up.

Can you give us a sense.

Speaker Change: Both in terms of where specific areas, where you have appetite, but also given some of the challenges that you faced or your ability to take advantage of those opportunities.

Yeah, I'll start and I'll work backwards, and maybe then Scott to chime in as well look I think the.

Speaker Change: <unk>.

Speaker Change: The ability to take advantages is purely driven based on our.

Speaker Change: Eventually.

Gross is when we start taking.

Speaker Change: We're receiving back.

Some of the equity over time on what we would call the focus assets or the.

Our assets that are.

Speaker Change: Levered below.

Speaker Change: We're we're carrying those focus assets and that will give us the ability to grow the portfolio.

Speaker Change: With a modest uptick.

Speaker Change: Uptick in leverage just because we would be taking things that are for the most part unlevered and using our typical type of leverage on alone to sort of put that equity to work productively.

Alright I appreciate the comments this morning Stuart Thank you.

Speaker Change: Thank you.

Our next question comes from Harsha <unk> with Green Street, you May proceed.

Harsha: Thanks for taking the question maybe just following up on that train of thought.

Speaker Change: Repayments of course, then extremely healthy throughout the year outpacing most of our expectation.

Given given what rates have done early in the fourth quarter are you seeing those trend and.

Do you expect the end of the year to be just as strong as the third quarter.

Given what we're hearing from borrowers now again I think.

Speaker Change: Third quarter was elevated in some respects just given timing of when things were happening vis vis the underlying loans, but I would say.

Speaker Change: Given current dialogue with borrowers and what we're seeing in the market I would say everything.

We are expecting to happen in the fourth quarter or early in the first quarter sales teams to be very much on track.

Got it that's helpful. And then maybe on the other side of that rate originations have as a result also been strong and so.

It seems like about 20% of the loans in the portfolio now come from newer.

Newer vintage loans 23 in 2000 and forward.

You know really being no see MBS market here and also while the banks are more functioning than they are maybe in the U S. In terms of terms of being active lenders.

Speaker Change: We still kind of can win a lot of business based on uncertainty and ease of execution.

And it cuts both ways I mean, one of our larger.

Speaker Change: The payments.

What was the large hotel portfolio that we had done that that got paid off so it kind of cuts both ways. There is more activity going on.

While we are deploying capital you know Theres also loans that are getting repaid, but you know we were constructive on retail here logistics.

You know what they call a multifamily Prs student housing hotels as well so continue to be actively looking at deals in UK and in Europe.

So we've been active on the continent as well as you know.

Great. Thanks, so much I appreciate that color.

And last one for me and a little more broad speaking here.

We heard last week from one of your peers that wider market value recovery could translate into some of their impaired assets is that something that you and the team views of possibility for any of your watch list loans going forward or just sort of taking it day by day quarter by quarter from timing. Thanks.

Yeah, I mean, I would certainly say the answer is yes, I mean, you know one of our properties is a retail property clearly retail has shown to be a strength coming out of COVID-19 those properties that have.

Speaker Change: Survive the e-commerce, and so ours is an open air retailer with lots of F&B and experiential. So I think we both benefited from increased leasing activity in sales, but also you know I would say more stability to cap rate and financing. So that's one asset in particular also same thing on the hospitality side.

Speaker Change: Where we own two hotels again financing readily available at attractive rates and cap rates have stabilized. So yes, I would say certainly the macro environment is helping on that front 111, as Stuart said is really more geared towards the high net worth ultra high net worth.

So there was kind of in their own world. If you will and that continues to make progress as well.

Great really prominent mass X the last one.

B, our Brooklyn multifamily deal, which is benefiting on all sides of it in New York City multifamily continues to be strong rents keep going up vacancy extremely low Brooklyn in particular continues to do great and then clearly New York City multi isn't as an asset class or investors lots of liquidity lots of trading and so feel very.

Speaker Change: Good about cap rates on that asset when we're ready to exit.

That hopefully next year.

Really appreciate it thank you.

Speaker Change: Thank you I would now like to turn the call back over to Stuart Rothstein for any closing remarks.

Stuart Rothstein: Thank you all for participating obviously as always Hillary Anastasia myself or Scott if needed are available after the call for questions, but I appreciate everybody taking the time. This morning. Thank you.

Thank you. This concludes the conference. Thank you for your participation you may now disconnect.

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