April 28, 2015
Apollo Commercial Real Estate Finance, Inc. Reports First Quarter 2015 Financial Results and Declares a Common Stock Quarterly Dividend of $0.44 Per Share
-- 18.9% Increase in Operating Earnings Per Share of Common Stock --
NEW YORK--(BUSINESS WIRE)--Apr. 28, 2015-- Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported financial results for the quarter ended March 31, 2015.
First Quarter 2015 Highlights
- Reported Operating Earnings (a non-GAAP financial measure defined below) per diluted share of common stock of $0.44 for the quarter ended March 31, 2015, an increase of 18.9% as compared to Operating Earnings per diluted share of common stock of $0.37 for the quarter ended March 31, 2014;
- Generated $28.6 million of net interest income from the Company’s $1.8 billion commercial real estate debt portfolio, which had a levered weighted average underwritten internal rate of return (“IRR”) of approximately 14.2% at March 31, 2015;
- Completed $195.2 million of commercial real estate first mortgage and mezzanine loan transactions, $175.2 million of which were funded at closing and 90% of which were floating rate;
- Funded $39.9 million for commercial real estate first mortgage and mezzanine loans that were previously closed in 2014;
- Completed an underwritten public offering of 11.5 million shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares, raising net proceeds of $193.1 million;
- Amended and restated the Company’s master repurchase agreement with JPMorgan Chase Bank, N.A. (the “JPMorgan Facility”) to increase the borrowing capacity to $300 million, lower the interest rate on current balances and extend the maturity and entered into a $52.5 million repurchase agreement with Goldman Sachs Bank USA (the “Goldman Sachs Loan”) secured by certain participation interests in a first mortgage loan; and
- Increased the quarterly dividend per share of common stock by 10% to $0.44 for the quarter ended March 31, 2015.
“ARI has had a very strong start to 2015 with respect to capital deployment, capital formation and financial performance,” said Stuart Rothstein, Chief Executive Officer and President of the Company. “Year to date, ARI has completed $195.2 million of commercial real estate loan transactions and has funded $39.9 million of transactions that closed in 2014. In addition, ARI successfully completed a common stock offering, which brought the Company’s equity market capitalization over the $1 billion mark and expanded ARI’s main credit facility to increase borrowing capacity. ARI’s pipeline of commercial mortgage loans, both first mortgage and mezzanine, remains robust and the Company continues to benefit from a favorable macro-economic environment for commercial real estate lending.”
First Quarter 2015 Operating Results
The Company reported Operating Earnings of $22.2 million, or $0.44 per diluted share of common stock, for the three months ended March 31, 2015, representing a per share increase of 18.9% as compared to Operating Earnings of $14.0 million, or $0.37 per diluted share of common stock, for the three months ended March 31, 2014. Net income available to common stockholders for the three months ended March 31, 2015 was $23.7 million, or $0.47 per share of common stock, as compared to net income available to common stockholders of $15.7 million, or $0.42 per share of common stock, for the three months ended March 31, 2014.
First Quarter 2015 Investment Activity
New Investments – During the first quarter, ARI completed the following commercial real estate first mortgage and mezzanine loan transactions:
- $92.5 million first mortgage loan ($72.6 million of which was funded during the quarter) which was underwritten to generate a levered weighted average IRR of approximately 21%;
- $102.7 million of subordinate loans with a weighted average underwritten IRR of approximately 10%; simultaneously with closing, ARI syndicated a $30.7 million pari passu participation in one of the subordinate loans to a fund managed by affiliates of Apollo Global Management, LLC and retained a $52.0 million participation; and
- $39.9 million of fundings from previously closed loans.
Quarter End Commercial Real Estate Debt Portfolio Summary
The following table sets forth certain information regarding the Company’s commercial real estate debt portfolio at March 31, 2015 ($ amounts in thousands):
|
Description | Amortized Cost | Weighted Average Yield | Debt | Cost of Funds | Equity at Cost(1) |
Current
Weighted Average Underwritten IRR (2) | Levered Weighted Average Underwritten IRR(2)(3) | |||||||||
| First mortgage loans | $ 563,390 | 8.6% | $141,528 | 2.9% | $ 421,862 | 11.0% | 16.4% | |||||||||
| Subordinate loans(4)(5) | 736,838 | 11.7 | 1 | 3.7 | 707,201 | 13.0 | 13.1 | |||||||||
| CMBS | 510,740 | 6.5 | 433,904 | 3.4 | 106,963 | 16.2 | 16.2 | |||||||||
| Total/Weighted Average | $1,810,968 | 9.3% | $575,433 | 3.1% | $1,236,026 | 12.6% | 14.2% | |||||||||
Please see chart footnotes at the end of the press release.
Loan-to-Value
At March 31, 2015, the Company’s commercial real estate loan portfolio, which includes CMBS, held-to-maturity, had a weighted average LTV of 62%. Within the commercial real estate loan portfolio, the first mortgage loans had a weighted average LTV of 60% and the subordinate loans (including CMBS, held-to-maturity) had a weighted average LTV of 64%.
Book Value
The Company’s book value per share of common stock at March 31, 2015 was $16.44 as compared to $16.39 at December 31, 2014. For purposes of GAAP accounting, the Company carries loans at amortized cost and its CMBS are marked to market. Management has estimated that the fair value of the Company’s loan portfolio at March 31, 2015 was approximately $9.9 million greater than the carrying value as of the same date.
Capital Markets Activities
During the first quarter of 2015, ARI completed the following capital markets activities:
- Common Stock Offering – ARI completed a public offering of 11.5 million shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares, raising net proceeds of $193.1 million;
- JP Morgan Facility – ARI amended and restated the JPMorgan Facility to increase the borrowing capacity from $175.0 million to $300.0 million. In addition, the JPMorgan Facility now has a two-year term plus a one-year extension option and the interest rate spread ranges from LIBOR + 2.25% to LIBOR + 4.75% depending on the collateral pledged, which may include mortgage and mezzanine loans secured by properties located in the United States, England or Wales; and
- Goldman Sachs Loan – ARI entered into the $52.5 million Goldman Sachs Loan. The Goldman Sachs Loan bears interest at LIBOR + 3.5% and is secured by certain participation interests in a first mortgage loan secured by a portfolio of international destination homes. The maturity date on the Goldman Sachs Loan is the earlier of April 30, 2019 or the repayment or sale of the purchased loan.
Subsequent Events
New Investments – Subsequent to quarter end, ARI completed $8.0 million of fundings from previously closed loans.
Loan Repayments – Subsequent to quarter end, ARI received a $24.6 million principal repayment from a first mortgage loan secured by a hotel in Silver Springs, Maryland.
Dividend – ARI’s Board of Directors declared a dividend of $0.44 per share of common stock, which is payable on July 15, 2015 to common stockholders of record on June 30, 2015.
Definition of Operating Earnings
Operating Earnings is a non-GAAP financial measure that is used by the Company to approximate cash available for distribution and is defined by the Company as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding); (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders; (iii) unrealized income from unconsolidated joint ventures; (iv) foreign currency gains/(losses) and (v) the non-cash amortization expense related to the reclassification of a portion of the convertible senior notes to stockholders’ equity in accordance with GAAP.
Reconciliation of Operating Earnings to Net Income Available to Common Stockholders
The tables below reconcile Operating Earnings and Operating Earnings per share of common stock with net income available to common stockholders and net income available to common stockholders per share of common stock for the three month periods ended March 31, 2015 and March 31, 2014 ($ amounts in thousands, except share and per share data):
|
Three Months Ended
March 31, 2015 | Earnings Per Share (Diluted) |
Three Months Ended
March 31, 2014 | Earnings Per Share (Diluted) | ||||||||||||
| Operating Earnings: | |||||||||||||||
| Net income available to common stockholders | $ | 23,653 | $ | 0.47 | $ | 15,720 | $ | 0.42 | |||||||
| Adjustments: | |||||||||||||||
| Unrealized gain on securities | (3,409 | ) | (0.07 | ) | (2,184 | ) | (0.06 | ) | |||||||
| Unrealized loss on derivative instruments | 3,044 | 0.06 | - | - | |||||||||||
| Equity-based compensation expense | 1,117 | 0.02 | 426 | 0.01 | |||||||||||
| Foreign currency gain | (2,722 | ) | (0.05 | ) | - | - | |||||||||
| Amortization of convertible senior notes | |||||||||||||||
| related to equity reclassification | 539 | 0.01 | 29 | - | |||||||||||
| Total adjustments: | (1,431 | ) | (0.03 | ) | (1,729 | ) | (0.05 | ) | |||||||
| Operating Earnings | $ | 22,222 | $ | 0.44 | $ | 13,991 | $ | 0.37 | |||||||
|
Basic weighted average shares of
common stock outstanding: 49,563,822 | 37,122,842 | ||||||||||||||
|
Diluted weighted average shares of
common stock outstanding: 50,171,687 | 37,341,050 | ||||||||||||||
Teleconference Details:
The Company will host a conference call to discuss its financial results on Wednesday, April 29, 2015 at 11:00 a.m. Eastern Time. Members of the public who are interested in participa