NEW YORK, NY--(Marketwired - May 12, 2014) - Apollo Commercial Real Estate Finance, Inc. (the "Company" or "ARI") (NYSE: ARI) today announced the Company closed two commercial real estate loan transactions totaling $189 million. In addition, ARI amended the Company's master repurchase agreement with JPMorgan Chase Bank, N.A. (the "JPMorgan Facility") to increase the total borrowing capacity to $147 million from $100 million and amended the Company's master repurchase agreement with Deutsche Bank AG (the "Deutsche Bank Facility") to increase the total borrowing capacity to $200 million from $100 million. Year-to-date, ARI has invested or committed to invest over $450 million in commercial real estate loan transactions and commercial mortgage-backed securities ("CMBS").
ARI closed two loan transactions totaling $189 million. The transactions include the following:
- $155 million floating-rate whole loan secured by the first mortgage and equity interests in an entity that owns a resort hotel in Aruba. The property consists of 442 hotels rooms, 114 timeshare units, two casinos and approximately 131,500 square feet of retail space. ARI anticipates within the next 60 days the Company will syndicate a $90 million senior participation in the loan and will retain a $65 million junior participation in the loan. The whole loan has a three-year term with two one-year extension options and an appraised loan-to-value of 60%. The whole loan was underwritten to generate an internal rate of return1 ("IRR") of approximately 10% and the junior participation ARI anticipates retaining was underwritten to generate an IRR1 of approximately 14%; and
- $34 million floating-rate first mortgage loan for the acquisition of a newly renovated 301-key hotel located in downtown Philadelphia. The first mortgage has a three-year term with two one-year extension options and an underwritten loan-to-cost of 58%. The first mortgage loan was underwritten to generate an IRR1of approximately 7%. ARI anticipates financing the loan, and on a levered basis, the loan was underwritten to generate an IRR1 of approximately 13%.
Amendment of JPMorgan Facility and Deutsche Bank Facility
ARI amended the Company's JPMorgan Facility to expand the total borrowing capacity to $147 million from $100 million. The facility expires in January 2015. In addition, ARI amended the Company's Deutsche Bank Facility to expand the total borrowing capacity to $200 million from $100 million. The Deutsche Bank Facility expires in April 2018 and is used to finance the acquisition of CMBS.
Commenting on the transactions, Scott Weiner, the Chief Investment Officer of the Company's Manager, said: "We were extremely pleased ARI was able to quickly deploy capital following the Company's recent common equity raise into two well-structured mortgage loans which we expect will generate attractive, risk-adjusted returns. ARI's global origination activity has gained significant momentum, bolstered by the Company's relationships and reputation as an innovative commercial real estate lender. In addition, with the expansion of the JPMorgan Facility, we believe ARI can prudently use leverage to fund new investments, while continuing to maintain a relatively conservative level of overall leverage."
About Apollo Commercial Real Estate Finance, Inc.
Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a real estate investment trust that primarily originates, invests in, acquires and manages performing commercial first mortgage loans, subordinate financings, CMBS and other commercial real estate-related debt investments. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company and an indirect subsidiary of Apollo Global Management, LLC, a leading global alternative investment manager with approximately $159.3 billion of assets under management at March 31, 2014.
(1) The underwritten IRR for the investments listed in this press release reflect the returns underwritten by ACREFI Management, LLC, the Company's external manager (the "Manager"), calculated on a weighted average basis assuming no dispositions, early prepayments or defaults. With respect to certain loans, the underwritten IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, and assumes no defaults. IRR is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment. It is the discount rate that makes the net present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on investment). It is derived from the negative and positive cash flows resulting from or produced by each transaction (or for a transaction involving more than one investment, cash flows resulting from or produced by each of the investments), whether positive, such as investment returns, or negative, such as transaction expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected to occur, and compounding interest accordingly. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in this press release. See "Item 1A--Risk Factors--The Company may not achieve its underwritten internal rate of return on its investments which may lead to future returns that may be significantly lower than anticipated" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the press release over time.
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; the Company's ability to deploy the proceeds of its capital raises or acquire its target 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, except as required by law.