• New Loan Originations (Q4 2024): $782 million.
• Total Loan Origination Volume (2024): $1.9 billion.
• Loan Portfolio (Year-End 2024): 46 loans totaling $7.1 billion.
• Distributable Earnings (Q4 2024): $45 million or $0.32 per share.
• GAAP Net Income (Q4 2024): $38 million or $0.27 per diluted share.
• Distributable Earnings (Full Year 2024): $190 million or $1.33 per share.
• GAAP Net Loss (Full Year 2024): Negative $132 million or negative $0.97 per share.
• Dividend Coverage (Q4 2024): 128%.
• Dividend Coverage (Full Year 2024): 111%.
• Weighted Average Unlevered Yield: 8.1%.
• Loan Repayments (Q4 2024): $830 million.
• Debt-to-Equity Ratio (Year-End 2024): 3.2 times.
• Total Liquidity (Year-End 2024): Over $380 million.
• Book Value Per Share (Excluding CECL and Depreciation): $12.77.

• Warning! GuruFocus has detected 5 Warning Signs with ARI.

Release Date: February 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Apollo Commercial Real Estate Finance Inc (NYSE:ARI) experienced a robust level of repayment activity and was very active in deploying capital in 2024, originating $1.9 billion in new loans.
• The company reported distributable earnings of $45 million or $0.32 per share for the fourth quarter, with a strong dividend coverage of 128% for the quarter.
• ARI's newly originated loans were underwritten to generate attractive risk-adjusted returns, benefiting from wider spreads and higher base rates.
• The company has a strong origination pipeline of over $1 billion for the first half of 2025, indicating potential growth in the loan portfolio.
• ARI's portfolio is diversified across a broad spectrum of property types and geographies, with more than half of the originations in the U.K., leveraging Apollo's dominant market position in Europe.

Negative Points

• ARI reported a GAAP net loss available to stockholders of negative $132 million or negative $0.97 per share for the full year.
• The company had another quarter of elevated loan repayments, totaling $830 million, which outpaced new loan closings and add-on fundings, leading to a decrease in the loan portfolio balance.
• There is a substantial specific reserve, and the company is working on dimensionalizing the big risks within the portfolio, which could translate into realized losses.
• The company anticipates that quarterly earnings in 2025 will be lower compared to Q4 2024 due to the impact of rate cuts executed by the Fed.
• Some of ARI's assets, such as the Brooklyn multifamily development and certain REO hotels, are non-income-producing and require strategic management to convert into higher return opportunities.

Q & A Highlights

Q: Can you provide insight into the specific reserve and how it might translate into realized losses or transactions this year? A: Stuart Rothstein, CEO: We expect to start recovering capital tied up in the 111 West 57th project this year, which will be redeployed into performing assets. The Cincinnati asset, Liberty Center, is over 90% leased, and we might move it into the market later this year. The Brooklyn REO will start taking tenants later this year, with potential sale or refinancing early next year. We anticipate seeing underperforming capital being put to work more productively in the latter part of this year and into next year.

Q: Could you discuss the geographic and property type opportunities you are seeing? A: Scott Weiner, CIO: We are seeing increased activity across all sectors and geographies. Multifamily, senior housing, student housing, and data centers are areas of focus. In Europe, particularly the U.K., we find interesting opportunities. We are involved in both acquisitions and refinancings, with no distressed situations.

Q: What is the outlook for the REO hotels in D.C. and Atlanta? A: Scott Weiner, CIO: The D.C. hotel is performing well and could be tested in the market later this year. The Atlanta hotel is being evaluated for the best business model and cash flow improvement. Both assets are contributing to income, and we will consider selling if the right price is offered.

Q: Is it feasible for the loan portfolio to grow to $7.5 billion or $8 billion in the next six to twelve months? A: Scott Weiner, CIO: Yes, it is feasible. We have a large pipeline of deals closing, and with available capital and leverage, the portfolio could grow by $0.5 billion to $1 billion.

Q: Are you seeing more new business plans and priorities in bridge loans, or is it still refinancing existing projects? A: Stuart Rothstein, CEO: We are seeing more investors coming off the sidelines and looking to deploy capital into assets with long-term potential. While the office space remains challenging, sectors like data centers, multifamily, and industrial are seeing increased activity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.