Q1 2025 Apollo Commercial Real Estate Finance Inc Earnings Call
Okay.
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The authorized 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 Dot Apollo crafts dot com or call us at 2125153200 at this time I'd like to turn the call over to the company's Chief Executive Officer Stuart Rothstein.
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.
Speaker Change: I am joined today by Scott Weiner, our Chief investment Officer, and anesthesia Myron about our Chief Financial Officer.
Speaker Change: Quite a bit has changed since our year end conference call, where we express 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 this slowdown in the overall.
Speaker Change: Macro economy as the biggest risk to the real estate market.
Speaker Change: 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 try to understand the short and long term implications of the changes announced and recessionary fears have risen.
Speaker Change: Yeah.
Speaker Change: As I've previously stated the 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 amount of both equity and credit capital available for deployment into real estate to date. The recent volatility has.
Speaker Change: 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.
Speaker Change: We believe tariff effects are likely to drive up construction costs and further reduced new supply as evidenced by recent data on new construction starts for multifamily and logistics properties, indicating levels at 10 year lows.
Speaker Change: Minutes 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.
Speaker Change: 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 and in an inflationary environment.
Speaker Change: Specific to the <unk>.
Speaker Change: First quarter saw continued velocity and loan originations as we committed to $650 million of new loans are Q1 originations were for loans secured by properties in the United States. Although our forward pipeline continues to consist of transactions in the U S and Europe.
Speaker Change: Three of the four transactions closed in the quarter were loans secured by residential properties and asset class that continues to have strong secular tailwind even in potential recessionary scenarios.
Speaker Change: Their transaction was a data center construction loan, which is an area. We have been become very active in over the past 18 months.
Speaker Change: 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.
Speaker Change: <unk> continues to benefit from Apollo's broad based real estate credit origination efforts, which totaled over $5 billion of originations in Q1.
Speaker Change: Following quarter end <unk> completed an additional four transactions totaling just over $700 million bring.
Speaker Change: Bringing year to date volume to one and a half billion dollars, including add on fundings.
Speaker Change: Turning now to the loan portfolio at quarter end <unk> portfolio was comprised of 48 loans totaling $7 $7 billion no additional asset specific seasonal allowances were recorded in the first quarter.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Going forward all unit closings will go towards reducing Ari's loan.
Speaker Change: Currently there is an additional $127 million and executed our pending contracts across another seven units.
Speaker Change: We remain highly focused on proactive asset management and executing the plans on our focus loans as <unk>.
Speaker Change: Seek to maximize value recovery and convert the capital into higher return on invested equity opportunities.
Speaker Change: We have defined pathways for each of our focus assets and we are actively pursuing resolution before.
Speaker Change: Before I turn the call over to Anastasia to review the financial results I wanted to reiterate that while Q, where 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.
Speaker Change: The current quarterly dividend run rate.
Anastasia: With that I will turn the call over to Anastasia to review <unk> financial results for the year.
Anastasia: Thank you Stuart and good morning, everyone.
Anastasia: And Ray reported distributable earnings of 33 million or <unk> 24 cents per share of common stock for the first quarter.
Anastasia: GAAP net income of 23 million or 16 cents per diluted share of common stock.
Speaker Change: As Stuart mentioned, our Q1 earnings was slightly lower than the current quarterly dividend rate provided 96% coverage over the quarterly dividend.
Speaker Change: It is worth noting that our first quarter distributable earnings included the impact of timing of capital deployment in Q1.
Speaker Change: It was heavily weighted towards the end of the quarter.
Speaker Change: As we look through the rest of the year, we see Q1 results representing a trust with distributable earnings per share expected to meet or exceed the quarterly dividend rate for the room.
Speaker Change: And in quarters.
Speaker Change: The expected increase in distributable earnings is driven by the sequential growth of the loan portfolio from previous year end.
Speaker Change: Andrei circulation of underperforming capital continued transaction.
Speaker Change: Our loan portfolio ended the quarter with a carrying value of $7 7 billion up from seven 1 billion at year end.
Speaker Change: The weighted average unlevered yield of our loan portfolio as of quarter end was seven 9%.
Speaker Change: We had a strong quarter of loan origination closing four new commitments for a total of $650 million and completed an additional $73 million in add on funding for previously closed loans.
Speaker Change: Loan repayments totaled 93 million during the quarter.
Speaker Change: Which we were quickly able to redeploy through new originations post quarter end.
Speaker Change: Such activity in Q2 to date amounted to $7 9 million in total commitments on new loans. In addition to another $309 million in add ons funding.
Speaker Change: 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.
Speaker Change: There were no asset specific seasonal allowances recorded during the quarter and no movement in ratings across the portfolio.
Speaker Change: Our junior Oc still allowance increased this quarter by 4 million, reflecting the growth of the loan portfolio from the previous quarter and <unk>.
Speaker Change: Well, it's a more cautious stance on the macroeconomic outlook.
Speaker Change: So what else do you fill allowance in percentage point or the loan portfolio amortized cost basis is down quarter over quarter from $5 seven basis points to 475 basis points.
Speaker Change: Moving onto the right hand side of the balance sheet.
Speaker Change: During the quarter, we were very active with our secured borrowing.
Speaker Change: Excuse me with our secured borrowing counter parties.
Speaker Change: <unk> de Novo facility with Jpmorgan by 500 million, which brought total capacity to $2 billion.
Speaker Change: We also extended the maturity and now with J P Morgan and Deutsche Bank facilities by three under half.
Speaker Change: Two years, respectively.
Speaker Change: Post quarter end, we closed two new secured credit facilities with new contract wise for.
Speaker Change: For an aggregate borrowing capacity of about 700 million and on favorable terms.
Speaker Change: Liquidity of the secured boren market continues to be plentiful.
Speaker Change: As lenders get favorable capital treatment for these facilities and in many instances prefer them over directly limbs into properties.
Speaker Change: Our debt to equity ratio at quarter end was three five times.
Speaker Change: From three two times at year end, absolutely right circulated proceeds from a number of repayments that happened right before year end.
Speaker Change: The new leverage deal in Q1.
Speaker Change: The company ended the quarter with $218 million of total liquidity.
Speaker Change: The cash on hand committed undrawn credit capacity in existing facilities and loan proceeds held by the servicer.
Speaker Change: Book value per share, excluding junior Oc still allowance and depreciation was $12 66.
Speaker Change: A slight decrease from last quarter.
Primarily attributable to the impact or there arent, you vesting and delivery.
Speaker Change: And with that we'd like to ask the operator to open the line for questions.
Speaker Change: Thank you.
Speaker Change: A reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Rick Shane: Our first question comes from Rick Shane with JP Morgan You May proceed.
Hey, guys. Thanks for taking my questions.
Speaker Change: Look one of the things that stands out is that.
Speaker Change: You guys have significant specific.
Speaker Change: Allowances.
Speaker Change: Actually been a while since you have realized any material losses.
Speaker Change: I suspect and again like the optics of realizing losses are not optimal but at the same time, you have almost $500 million in non accruing assets.
Speaker Change: I am curious, how we think about the cadence of actually realizing those losses and being able to redeploy the capital and I am curious if the strong origination volume that we have seen.
Speaker Change: Post quarter, particularly is a signal that some of that capital is about to be recycled.
Rick Shane: Hey, Rick Thanks for the question look I think right.
Rick Shane: Cadence perspective, I would say the way to think about it just from a pure cadence perspective is.
Rick Shane: A lot of the specifics he saw is tied up in.
Rick Shane: Two assets right 111 west 57th.
Rick Shane: And then Liberty Center, which is our asset.
Rick Shane: Retail asset.
Rick Shane: In Ohio.
Rick Shane: We expect to be in market.
Rick Shane: In selling the Liberty Center asset sometime the latter part of this year.
Rick Shane: We are pretty confident from a valuation perspective and as such.
Rick Shane: Hope to get to the finish line and that all sort of crystallized things, but we feel good about where our reserve there.
Rick Shane: And obviously you heard the update on.
Rick Shane: 111, West West 57th in terms of sales progress not sure when we get to the fall finish line, but momentum is certainly positive there. So I think what you're.
Rick Shane: What you're seeing are seeing in our actions is that we feel confident right now that there are no.
Rick Shane: Additional surprises coming and.
Rick Shane: And we are comfortable.
Rick Shane: Putting capital to work expecting that the latter part of this year and the early part of next year, there will be more capital coming our way through resolutions.
Rick Shane: Great. It's a very helpful answer and thank you and clearly making some.
Rick Shane: Strong progress in terms of selling units that certainly comes through thanks guys.
Craig: Thanks, Craig.
Rick Shane: Thank you.
Speaker Change: Our next question comes from Doug Harter with UBS you May proceed.
Craig: Okay.
Craig:
Craig: Understanding that.
Craig: The change in the market is still relatively fresh but any sense.
Craig: You have in conversations about whether this might delay either repayment of loans or kind of the.
Craig: Putting out of new money and kind of how youre thinking about the market impact.
Craig: Yeah look I think the market is still functioning I'm pretty robustly.
Craig: I would say.
Craig: Across a broad spectrum of credit opportunities I would say the volatility that we've seen.
Craig: And the equity markets has been.
Craig: Much more muted in the credit market. So I would say at this point.
Craig: No anticipation of slowdowns.
Craig: No anticipation of people.
Speaker Change: Walking away from transactions or pulling back from transactions I think the real question in our mind Doug is.
Speaker Change: If you think about a decision tree.
Speaker Change: If recession.
Speaker Change: And then if we assume yes recession are we talking something that is sure.
Speaker Change: <unk> in short lift or something that has.
Speaker Change: Breath and lengths to it I think it's too early.
Speaker Change: For most people to know just given sort of the.
Speaker Change: Meanwhile, the fairly violent changes from direction to direction, given what's going on but I would say right now the.
Speaker Change: <unk>.
Speaker Change: Need to put capital to work.
Speaker Change: Volumes of capital looking for return.
Speaker Change: Our over waiting.
Speaker Change: Sort of what might be some change behavior, if we truly enter into some sort of meaningful recession.
Speaker Change: I appreciate that and as you think about the.
Speaker Change: Asset classes, either in your portfolio or more broadly.
Speaker Change: If we have a recession how are you thinking about the vulnerability of the various asset classes.
Speaker Change: Yeah look I think obviously, if we had a recession.
The asset class that we would think most about.
Speaker Change: Would be on the hospitality side short term because obviously the ability for cash flows to move there.
Speaker Change: Most quickly.
Speaker Change: I think you heard my comments on multifamily, which.
Speaker Change: I think has legs.
Even in a recession, just given sort of the need.
Speaker Change: For housing and then to the extent you quote unquote worry about things in a recession, causing.
Speaker Change: Big capital decisions to be made I think we've clearly been in a.
Speaker Change: Recovering office market.
Speaker Change: It's been moving in the right direction does a.
Speaker Change: A meaningful recession caused people to slowdown those decisions.
Speaker Change: I get something you always worry about I would say, we haven't seen it today and we're actually pretty encouraged about.
Speaker Change: The level of activity across our various office.
Speaker Change: Across the office asset supporting our loans, but yes.
Speaker Change: That's how we think about it from an asset.
Speaker Change: Thai perspective again.
Speaker Change: Long term.
Speaker Change: The positive implications are I think we're going to be living in a muted supply environment for quite some time. So it should mean that existing assets are.
Speaker Change: Better protected both in terms of replacement cost or operating position as you think about limited new supply but.
Speaker Change: Yes, I think as you as you rightly inquired I think if we do get into a recession I would say youre.
Speaker Change: Do you worry about hospitality first just given the ability for Rev.
Speaker Change: Revenues to move quickly.
Speaker Change: Great I appreciate that.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Tom Catherwood with <unk> you May proceed.
Tom Catherwood: Thanks, and good morning, everybody.
Speaker Change: Stuart maybe on 111 west 57th now that Youre, a senior Mezz loan a has become senior in the cap stack does that portion go back on accrual and can you start recognizing interest income again or is there a different treatment there.
Speaker Change: There's a different treatment and let me, let me try and put a finer point on it right. So we've had.
Speaker Change: Our position is still comprised of both mortgage and Mezz and what was in front of us was a.
Speaker Change: Our financing from JP Morgan that was effectively financing a piece of our position.
Speaker Change: At this point, if we weren't a turn.
Speaker Change: Income backed on we'd effectively just be paying ourselves in which case we'd be taking.
Speaker Change: Taking income increasing basis, and then putting more pressure on what the ultimate recovery needs to be.
Speaker Change: Our approach is going to be to keep income turned off and to the extent recovery is better than expected and certainly were.
Speaker Change: Ahead of pacing today, but I don't know that that that will continue but to the extent recovery is better than expected. It will come through in recovery of reserve as opposed to taking near term near term income now.
Speaker Change: Got it I appreciate making sense of that.
Speaker Change: Then in terms of in terms of portfolio growth.
Speaker Change: Obviously first quarter was light from a repayments front.
Speaker Change: What are your kind of near term repayment expectations and do you think you'd continue continue to grow the portfolio with that kind of pace that you were able to in the first quarter.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: I'm sure there are many who.
Speaker Change: <unk>.
Speaker Change: Part of me.
Speaker Change: Talking about not getting too hung up on one quarter or another but I think look I think we.
Speaker Change: I think we're looking at.
Speaker Change: Our minus 1 billion and a half of repayments this year and it could be more if pacing on some of the focus assets is even better than expected. So.
Speaker Change: We're going to be active in the market will it be lumpy quarter over quarter, yes, but.
Speaker Change: With a 1 billion and a half coming back our way.
Speaker Change: Having already done call it.
Speaker Change: Six $6 50 in the first quarter, it's going to be a pretty active year from a deployment perspective I just can't tell you what quarters it will come in but I would say.
Speaker Change: A lot of the repayment I would say is expected to come in sort of.
Speaker Change: Think about it middle middle to late second quarter to middle to late third quarter. As you think about when the dollars will be coming back to us and obviously, we'd like to be.
Speaker Change: Ready to deploy as soon as the money comes back. So there is no earnings track.
Speaker Change: Got it.
Speaker Change: Last one for me just quickly you mentioned focused assets.
Speaker Change: Any update on performance at the Mayflower, The DC hotel, how that's been holding up.
Speaker Change: Yeah look year to year to date, it's been a good year, it's out it's outpacing last year.
Speaker Change: A little bit of help.
Speaker Change: In the first quarter, given inauguration et cetera, but it's been performing quite well.
Speaker Change: I think that is an asset that.
Speaker Change: On a finance basis generates a nice levered return.
Speaker Change: Sure.
Speaker Change: Hi.
Speaker Change: Thank <unk> perceived better if we reduce already over time I think the question for US is when is the right time to bring a hotel to market, particularly in light of some of the back and forth.
Speaker Change: Doug and I had two minutes ago about what asset classes might might have a more negative bias. If we truly do get a recession, but Pittsburgh the hotel itself right now is performing quite well.
Speaker Change: Okay.
Speaker Change: Got it I appreciate the answers thanks, everyone.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Jade Rahmani with gay VW you May proceed.
Speaker Change: Hey, Mark just wanted to ask about a couple.
Speaker Change: Assets, we havent touched on in quite some time.
Speaker Change: The Berlin office, the Chicago office, both of those risk rated four and then to risk rated three as the Manhattan office in Cleveland multifamily, but you'd be able to touch on those four items.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: I'll give a bullet point on aegis, Scott or Jan do you want to talk about yet.
Speaker Change: Hey, great.
Speaker Change: Yes, I would say.
Speaker Change: The Berlin office we.
Speaker Change: We are working with the sponsor who is also a co lender on the deal with our mod whether it be new equity invested as well as more time for lease up and they are also getting close on a on a major lease so.
Speaker Change: We wanted to wait till that was fully documented.
Speaker Change: Before returning it two or three but our expectation is in the coming quarter.
Speaker Change: Assuming that all gets papered with new equity coming in and the Mod that would become a three and like I said, we're hopeful that this.
Speaker Change: Lease gets signed which will help reduce the vacancy.
Speaker Change: As far as the Chicago Office goes.
Speaker Change: There. There has also been some recent positive leasing and some additional equity coming in from the sponsor there.
Speaker Change: So again hopeful.
Speaker Change: I think Chicago is behind New York, but we are seeing green shoots.
Speaker Change: And other assets across the non <unk> portfolio that we have in Chicago in terms of tours and inquiries.
Speaker Change: And leasing in return to office stats on that deal the sponsor actually owns other properties in the market and has been working on.
Speaker Change: Some people who needed to grow from one property to another moving them to this building which has been helpful.
Speaker Change: Was there another one or Manhattan office $256 million risk rated three and Cleveland multifamily 70 $76 million risk rated three.
Speaker Change: Yes on the New York Office.
Speaker Change: That is one where we are the senior most of the capital structure and their various layers of Mezz and equity.
Speaker Change: That one we've been working on a recapitalization with the senior most mezz, who is willing to invest capital and right now exploring two options one would be taking advantage of the change in law in code in New York and converting part of that to multifamily and take advantage.
Speaker Change: The taxes. So the junior capital has been working on that business plan at the same time.
Speaker Change: With New York leasing up and the quality of this property and the location. There also is a strategy of just maintaining as office.
Speaker Change: And so kind of parallel pathing both of those.
Speaker Change: I think.
Speaker Change: The conversion.
Speaker Change: Makes a lot of sense and feel.
Speaker Change: We're in a good shape there at the same time.
Speaker Change: Dialog around some major tenants and so if we can get one or two of these major tenants who have inventory in the property to.
Speaker Change: To commit and take up all of the vacancy that is easier to keep it as office.
Speaker Change: But in all cases, the capital behind Us is willing and committing additional capital behind us on that.
Speaker Change: And then as far as Cleveland.
Speaker Change: The multifamily there is doing well.
Speaker Change: The junior capital there who stepped in foreclosed the prior owner out has put capital in.
Speaker Change: Replace managements are doing well there theres also a retail component.
Speaker Change: That has really been the focus in terms of some of that converting that from.
Speaker Change: Some percentage rents the direct rent so.
Speaker Change: Heading in the right direction, it's a high quality property and we again, we have junior capital who has been.
Speaker Change: Committed in investing additional capital behind us.
Speaker Change: Okay.
Speaker Change: And then just on 111 West 57 so.
Speaker Change: Checking the numbers the <unk>.
Speaker Change: Balance was $4 3 million as of $3 31, which is up from $390 million a year and do you know why it increased.
Speaker Change: Yes, there were some.
Speaker Change: Costs that we need to fund for example for most of it was really for the retail we had signed a long term lease with bottoms to move their auction house headquarters there and so as part of that there is some ti and leasing commissions that were funded as well as some carry costs that.
Speaker Change: That was already all factored into our are our reserves on those costs.
Speaker Change: Okay, and do we need to expect further increases.
Speaker Change: No.
Speaker Change: The numbers as we have been selling units and obviously throughout the mine and the retail are much lower but the amount of sales that we have will be each quarter youll be seeing a dramatic decrease in the size of the position.
Speaker Change: Okay and so it's four three and then there is $29 million post quarter end and then another 127 million Stuart mentioned seven executed contracts. So once those close the pro forma balance should be something like $247 million. Then there's also some transaction costs.
Speaker Change: I assume commissions and such.
Jade: But is that in the ballpark youre in the ballpark Jade yeah, Yeah to clarify Theres five signed contracts, which you can see on Streeteasy and then we have to contract out for signature.
Speaker Change: Christa.
Speaker Change: Okay.
Speaker Change: Your math is roughly roughly in the ballpark.
Speaker Change: Okay and then.
Speaker Change: That would suggest.
Speaker Change: Nine or so actually the quadplex, probably consolidate some units. So are there around seven units remaining to be sold.
11.
Oh 11 remaining to be sold including the including the seven five signed contracts in two after signature.
Speaker Change: Kevin May right up to seven make <unk> got 11 units plus you've got the condo.
Speaker Change: And then as we've indicated on prior calls there's also some.
Speaker Change: Insurance proceeds et cetera, et cetera that will come to us when settle due to construction issues along the way.
Speaker Change: Okay.
Speaker Change: Alright, thanks, so much.
Speaker Change: Thanks Jay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Steve Delaney with citizens JMP Securities You May proceed.
Speaker Change: Hi, good morning, everyone and Stuart Thanks for your macro thoughts.
Speaker Change: Kick things off we certainly certainly a lot of uncertainty out there for all of us to deal with.
Speaker Change: I wanted to touch on.
Speaker Change: Probably the most unique thing about Apollo is your your exposure in the UK and Europe almost half the portfolio and just under $4 billion I think Tom actually.
Speaker Change: Cited that in his recent upgrade of the of the company.
Speaker Change: It totally is unique among the 20, some commercial mortgage REIT.
Speaker Change: Talk a little bit about how Apollo or AOR I've been.
Speaker Change: <unk> been able to do that.
Speaker Change: Theres, a paolo on a larger scale have boots.
Boots on the ground in the UK and Europe.
Speaker Change: How are you sourcing and managing these assets.
Speaker Change: Youre not using your own Apollo people, just curious about how that's kind of evolved and given sort of a unique edge to AI.
Speaker Change: Yes look I'll start and then Scott May may add some comments like the short story is.
Speaker Change:
Speaker Change: We were the real estate credit business was effectively pull to doing deals in Europe, because some other sponsors that we backed.
Speaker Change: In the U S. We're certainly active in Europe like the relationship with US and asked if I would consider.
Speaker Change: Opportunities there and that was sort of the genesis of that.
Speaker Change: The business in 2012 13.
Speaker Change: We committed and we took one of the more senior members of our team by the name of Ben apply and moved him to London.
Speaker Change: I'm going to say 2013, I could be off by a year or so.
Speaker Change: You know that.
Speaker Change: And with the help of many including Apollo's commitment to the to the European market in General has built a.
Speaker Change: Full scale originations management engine based in London, but covering Europe throughout we've got a.
Speaker Change: The investment team comprising of.
Speaker Change: Plus or minus it doesn't folks we've got an asset management.
Speaker Change: Infrastructure on the ground.
Speaker Change: In London, covering Europe, and I would say.
Speaker Change: To his credit.
Speaker Change: Ben and team are to their credit Ben and team have.
Speaker Change: Over.
As in years worth of work established themselves as a yes.
Speaker Change: Leading bridge lender in the market. So we're fully committed to the market not everything we does not everything we do ends up in <unk> no different than the way, we do things in North America. There is often times when we.
Speaker Change: Sure transactions across capital because theres other Apollo capital looking to deploy into the market and there's also times where.
Speaker Change: There are things our team sources that doesn't necessarily fit for IRI, but fits with some of our regulated balance sheets just furthers the.
Speaker Change: Our track record reputation relationships that Ben and team have created so.
Speaker Change: We made a commitment to the market.
Speaker Change: Doesn't plus years ago, and the execution has been pretty strong and as you've heard me say.
Speaker Change: From <unk> perspective, often.
Speaker Change: Similar quality sponsors similar types of real estate transactions only functioning only lending in markets, where we feel as if our lender protections are no different than between the U S and Europe.
Speaker Change: And it's really <unk>.
Speaker Change: Turned into just a seamless part of the overall real estate credit business I'm sure Scott May have some additional thoughts but.
Speaker Change: Quite what I mean.
Speaker Change: I am actually sitting in our London office with Ben.
Speaker Change: Quite a lot of time here, yes. So so I would say look we got a little bit of a first mover advantage because we have been here over a decade. We're actually were voted alternative lender of the year last year. So we've been quite active and I would say, yes, we benefit from the overall Apollo platform because cook.
Speaker Change: Financing and back leverage that we get.
Speaker Change: So we have great relationships with the banks here, but I would say there is really some structural differences in this market, which we like first and foremost is theres really not a very active securitization market. So we're in the U S. The single asset single borrower market. It can be very active and make it challenging to do larger deals that doesn't exist.
Speaker Change: Here and so our ability to speak for larger deals by marrying the air on capital or other capital and doing Pan European deals larger deals portfolio deals as really a competitive advantage and just like in the U S. As Stuart said relationships are important it's a people business. So people know when we say we are.
Speaker Change: To do something we do it and we can do.
Speaker Change: Everything from you know what they call Pvs, a here, which is student housing to logistics data center hotels really all the property types across the geographies and so yes.
Speaker Change: Yes, it's been a really good active active business for us and I would say, we also hedge everything back to dollars. So we're not taking FX risks and that at times. Obviously it can also help.
Speaker Change: The returns, but we're not taking any kind of FX risk legally we're making sure. We're all in good in countries, where we can always enforced and we have different structures for that.
Speaker Change: Yes, so it's really just an.
Speaker Change: An extension of the strategy that we do in the U S.
Speaker Change: It just happened to be in over here.
Speaker Change: Excellent well. Thank you both for the detailed explanation and so a lot of history.
Speaker Change: Was not aware of.
Speaker Change: Greatly appreciate it.
Speaker Change: Yes.
Speaker Change: Great.
Speaker Change: Have a great year ahead in.
Speaker Change: In the U K.
Speaker Change: Yes, Thanks, Steve.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Harsha <unk> with Green Street, you May proceed.
Speaker Change: Thank you.
Speaker Change: Stuart You mentioned, you were expecting about 1 billion and a half and repayments through the course of the year.
Speaker Change: And just looking at what you've done year to date, it seems like $1 billion in a hospital drag has been funded.
Speaker Change: And sounds like you want to continue on their deployment, but so how are you thinking of funding those incremental deployments is it going to come through incrementally leverage equity issuance.
Speaker Change: The oil and commodity assets, how are you thinking about that.
Speaker Change: Yes.
Speaker Change: Working backwards, I've, given where given where the entire sector is trading.
Speaker Change: Until this sector and we specifically you can get back up above book value. There is no equity issuance coming.
Speaker Change: The.
Speaker Change: New deployment will be funded based on repayment from existing outstanding loans.
Speaker Change: Or.
Speaker Change: Achieving resolution on some of the focused assets, which will bring back.
Which will bring capital back that we can redeploy there will be a.
Speaker Change: Natural increase in leverage which is in no way a reflection of any change to our view of leverage in general which is to say when I have a.
Speaker Change: Underperforming asset that not levering when I can get to a resolution and get that capital back I will most likely deploy that capital into something where I.
Speaker Change: Originated new loan and then use back leverage to generate my return, which is sort of standard operating procedure, so there'll be a modest uptick.
Speaker Change: <unk> leverage just as I.
Speaker Change: Bring back.
Speaker Change: Some of the capital that I wanted to get back from the focus assets, but.
Speaker Change: It's basically repayments and getting to resolution on the focus assets should give us more than enough capital.
Speaker Change: To need to be quite active in the market this year.
Speaker Change: Got it that's helpful.
Speaker Change: And then maybe given.
Speaker Change: Larger transactions in <unk>.
Speaker Change: <unk> in the U S. It seems like somewhat.
Speaker Change: Transactions post quarter end of oilfield.
Speaker Change: Filtered more than usual towards the U S.
Speaker Change: Is that is that sort of something we should be expecting going forward through the year.
Speaker Change: Maybe on that point right I think you mentioned a little bit that the.
Speaker Change: Gigabit market Hasnt really changed quite a bit in terms of lending activity is still happening.
Speaker Change: But maybe given.
Speaker Change: The slowdown we've seen in securitized markets.
Speaker Change: Is it sort of fair to assume that you might be getting.
Speaker Change: Increased inbounds from borders at this point.
Speaker Change: Yes.
Speaker Change: Go ahead Scott.
Scott May: Yes, so I would say certainly in the U S with the disruptions in the securitized markets, Yes, I think the balance sheet option that we offer gives people certainty because I think.
Speaker Change: We've seen it right there are deals that we lost.
Scott May: Securitize bid where the spread they were told in the execution. They were told us they're not getting so certainly.
Speaker Change: Whether it be economics or certainty.
Scott May: In the U S. Those larger deals we're certainly.
Speaker Change: Spending more time on them and getting more inbounds.
Speaker Change: Europe is a bit different like I said, it's not so much <unk>.
Speaker Change: It would be more more banks or other other lenders we'd be competing with.
Speaker Change: I mean in some ways, we're hedged right.
Speaker Change: Most of the new activity, we're going to be doing is going to be in response to repayments. So if some of these repayments don't materialize, we just won't be doing new deals right. The growth is really coming from for example, Steinway as we get that money back. The 111 money that was that capital that will redeploy but.
Speaker Change: Well its about $300 million alone doesn't get repaid then we don't have that capital back and we don't need to get the capital back as we're earning a good return on that money. We just wont do that we'll do less new business.
Speaker Change: So that's why you're kind of like to say like we're hedged a little bit.
Speaker Change: The loans that are going to get refinance where obviously, we like them happy and they're levered appropriately and generating a good return so if they stay out longer that's not a bad thing.
Speaker Change: Got it thank you.
Speaker Change: Thank you I would now like to turn the call back over to Mr. Ross Dean for any closing remarks.
Ross Dean: Thank you operator, and thanks to those of you who participated this morning obviously.
Speaker Change: Myself, Scott Hillary Anastasia, we are around if there are further questions. Thank you all.
Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
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