SOURCE: Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc.

March 02, 2011 16:05 ET

Apollo Commercial Real Estate Finance, Inc. Announces Fourth Quarter 2010 Earnings

NEW YORK, NY--(Marketwire - March 2, 2011) - Apollo Commercial Real Estate Finance, Inc. (the "Company") (NYSE: ARI) reported net income available to common stockholders for the three months ended December 31, 2010 of $3,966, or $0.22 per share. Net loss available to common stockholders for the same period in 2009 was $(2,081), or $(0.20) per share. (All currency amounts discussed herein are in thousands, except share and per share amounts. All per share information is presented on a diluted basis.)

The Company's GAAP book value per share at December 31, 2010 was $16.97. For purposes of accounting principles generally accepted in the United States of America ("GAAP"), the Company carries its first mortgage and mezzanine loans at amortized cost and its CMBS securities are marked to market. Management has estimated that the fair value of the Company's financial assets at December 31, 2010 was approximately $14,100 in excess of the carrying value of the Company's investment portfolio as of the same date, which represents a premium of $0.80 per share over the Company's GAAP book value as of December 31, 2010, and results in a book value per share of approximately $17.77 per share.

Investment Activity

During the fourth quarter of 2010, the Company deployed $15,638 of additional equity to purchase CMBS with a face amount of $102,962 and an aggregate cost of $107,539. The purchases were financed with $91,902 of borrowings under the Company's $250,000 repurchase facility closed with Wells Fargo Bank, N.A. during August 2010.

Total borrowings of $242,728 outstanding under the Wells Facility bear interest at a fully-hedged weighted average interest rate of 2.2% and are collateralized by AAA-rated CMBS with an estimated fair value of $279,124 at December 31, 2010. Through the date hereof, the Company has deployed equity totaling $39,670 under the Wells Facility.

In order to mitigate interest rate risk resulting from the Company's floating-rate borrowings under the Wells Facility, the Company entered into interest rate swap and cap agreements with an aggregate notional equal to the borrowings outstanding under the Wells Facility. Because the Company chose not to pursue hedge accounting for the derivative instruments and elected the fair value option for the CMBS securing the Wells Facility borrowings, the Company recognized a loss of $1,480 related to changes in mark-to-market on CMBS securing the Wells Facility borrowings and a gain of $1,077 related to interest rate agreements hedging the Wells Facility borrowings for the three months ended December 31, 2010.

Quarter End Portfolio Summary

The following table sets forth certain information regarding the Company's investments at December 31, 2010:

                                                     Invested    Weighted
                                                     equity at   Average
Asset type                  Cost Basis  Borrowings     cost       IRR *
                            ----------- ----------  ----------- ----------
Commercial mortgage loans   $   109,695 $        -  $   109,695        8.3%
Mezzanine Loans                  58,985          -       58,985       13.0
AAA CMBS - financed with
 TALF borrowings                357,301   (297,334)      59,967       13.4
AAA CMBS - financed with
 Wells Facility borrowings      280,890   (242,728)      38,162       11.6
                            ----------- ----------  ----------- ----------
Total invested equity at
 cost                       $   806,871 $ (540,062) $   266,809       11.0%
                            =========== ==========  =========== ==========

* The IRRs for the investments shown in the above table reflect the returns underwritten by ACREFI Management, LLC, the Company's external manager, at the time each investment is made, calculated on a weighted average basis assuming no extensions, dispositions, early prepayments or defaults and include the fully hedged cost of borrowings under the Wells Facility. We have also assumed that the cost of financing each investment will remain constant over the life of the investment. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in the table. See "Risk Factors" in the reports filed by the Company with the Securities and Exchange Commission for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the table over time.

Stuart Rothstein, Chief Financial Officer of the Company, commented, "While we still have approximately $75,000 to $90,000 of capital to deploy, depending on asset mix and use of available leverage, we believe we are on track to have the majority of that capital invested before the end of the first quarter."

Operating Earnings

The Company reported Operating Earnings (as defined below) of $7,320, or $0.41 per share, for the three months ended December 31, 2010. Operating Earnings is a non-GAAP financial measure that is used to approximate cash available for distribution and is defined by the Company as net income, computed in accordance with GAAP, adjusted for (i) non-cash equity compensation expense, (ii) depreciation and amortization and (iii) any unrealized gains or losses or other non-cash items included in net income. Table 1, provided below, reconciles Operating Earnings per share to diluted net income per share available to common stockholders.

Reconciliation of Operating Earnings Per Share to Net Income Available to Common Stockholders Per Share (Table 1)

The table below reconciles Operating Earnings with net income available to common stockholders for the three months ended December 31, 2010:

                                                Three Months
                                                    Ended     Earnings Per
                                                December 31,      Share
                                                    2010        (Diluted)
                                                ------------  ------------
Operating earnings:
Net income                                      $      3,966  $       0.22
Adjustments:
  Unrealized loss on securities                        1,480          0.08
  Unrealized gain on derivative instruments           (1,077)        (0.06)
  Non-cash stock-based compensation expense              354          0.02
  Amortization expense
    Premium amortization                               2,227          0.13
    Deferred financing cost amortization                 370          0.02
                                                ------------  ------------
Total adjustments:                                     3,354          0.19
                                                ------------  ------------
Operating earnings                              $      7,320  $       0.41
                                                ============  ============

Basic weighted average common shares
 outstanding                                                    17,549,009
Diluted weighted average common shares
 outstanding                                                    17,670,468

Teleconference Details:

The Company will be hosting a conference call to discuss its financial results on Thursday, March 3, 2011at 8:30 a.m. Eastern Time. Members of the public who are interested in participating in the Company's fourth quarter earnings teleconference call should dial from the U.S., (877) 263-2989, or from outside the U.S., (702) 928-7168, shortly before 8:30 a.m. and reference the Apollo Commercial Real Estate Finance, Inc. Teleconference Call (number 44456659). Please note that the teleconference call will be available for replay beginning at 9:30 a.m. on Thursday, March 3, 2011, and ending at midnight on Thursday, March 10, 2011. To access the replay, callers from the U.S. should dial (800) 642-1687 and callers from outside the U.S. should dial (706) 645-9291, and enter conference identification number 44456659.

Webcast:

The conference call will also be available on the Company's website at www.apolloreit.com. To listen to a live broadcast, 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.

About Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a commercial real estate finance company that originates, invests in, acquires and manages senior performing commercial real estate mortgage loans, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the U.S. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company, an indirect subsidiary of Apollo Global Management, LLC. Additional information can be found on the Company's website at www.apolloreit.com.

Forward-Looking Statements

Certain 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; 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.

       Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
            Condensed Consolidated Balance Sheets (Unaudited)
             (in thousands - except share and per share data)


   
                                                December 31,  December 31,
                                                    2010          2009
                                                ------------- ------------
Assets:
     Cash and cash equivalents                  $      37,894 $    129,969
     Contractual deposits                                   -           90
     Securities available-for-sale, at
      estimated fair value                            363,660      153,614
     Securities at estimated fair value               279,124            -
     Commercial mortgage loans                        109,695            -
     Mezzanine loans                                   58,985       50,000
     Interest receivable                                5,553        1,210
     Deferred financing costs, net                      2,818          254
     Derivative instruments                               387            -
     Other assets                                          31            -
                                                ------------- ------------
Total Assets                                    $     858,147 $    335,137
                                                ============= ============

Liabilities and Stockholders' Equity
Liabilities:
     TALF borrowings                            $     297,334 $    128,106
     Borrowings under repurchase agreements           242,728            -
     Accounts payable and accrued expenses              2,375          349
     Payable to related party                             683        1,385
     Dividends payable                                  7,189            -
     Deferred underwriting fee ($8,000 of which
      is payable to the Manager)                       10,000       10,000
                                                ------------- ------------
Total Liabilities                                     560,309      139,840

Commitments and Contingencies

Stockholders' Equity:
     Common stock, $0.01 par value, 450,000,000
      shares authorized, 17,551,828 and
      10,762,500 shares issued and outstanding
      in 2010 and 2009, respectively                      175          107
     Additional paid-in-capital                       291,304      198,436
     Accumulated deficit                                    -       (2,172)
     Accumulated other comprehensive income
      (loss)                                            6,359       (1,074)
                                                ------------- ------------
Total Stockholders' Equity                            297,838      195,297
                                                ------------- ------------
Total Liabilities and Stockholders' Equity      $     858,147 $    335,137
                                                ============= ============




       Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
        Condensed Consolidated Statement of Operations (Unaudited)
             (in thousands - except share and per share data)

                                                Three Months  Three Months
                                                    Ended         Ended
                                                December 31,  December 31,
                                                    2010          2009
                                                ------------  ------------
Net interest margin:
   Interest income from securities              $      6,468  $        364
   Interest income from commercial mortgage loans      2,313             -
   Interest income from mezzanine loans                1,952           231
   Interest expense                                   (3,421)         (104)
                                                ------------  ------------
Net interest margin                                    7,312           491

Operating expenses:
General and administrative expenses (includes
 $354 and $392 of non-cash stock based
 compensation in 2010 and 2009, respectively)          1,400         1,889
Management fees to related party                       1,118           747
                                                ------------  ------------
Total operating expenses                               2,518         2,636
Other income (loss):
 Interest income from cash balances                        7            64
 Unrealized loss on securities                        (1,480)            -
 Unrealized gain on derivative instruments             1,077             -
 Realized loss on derivative instruments                (432)            -
                                                ------------  ------------
Net income                                      $      3,966  $     (2,081)
                                                ============  ============

Basic net income per share of common stock      $       0.23  $      (0.20)
                                                ============  ============
Diluted net income per share of common stock    $       0.22  $      (0.20)
                                                ============  ============

Basic weighted average common shares
 outstanding                                      17,549,009    10,500,000
Diluted weighted average common shares
 outstanding                                      17,670,468    10,500,000

Dividend declared per share of common stock     $       0.40  $          -