SOURCE: Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc.

September 03, 2013 16:15 ET

Apollo Commercial Real Estate Finance, Inc. Closes Two Loan Transactions Totaling $84.9 Million

NEW YORK, NY--(Marketwired - Sep 3, 2013) - Apollo Commercial Real Estate Finance, Inc. (the "Company" or "ARI") (NYSE: ARI) today announced the closing of two loan transactions totaling $84.9 million. ARI provided a $22.5 million mezzanine loan for the acquisition of a mixed-use property in the central business district of Pittsburgh, PA. In addition, the Company provided a $62.4 million whole loan for the conversion of a commercial building into luxury residential condominiums in the Greenwich Village section of New York City. Combined, the two transactions have an underwritten weighted average internal rate of return ("IRR") of approximately 13%(1).

With these closings, ARI's 2013 investment activity year-to-date totaled $277.9 million of commercial real estate debt transactions with an underwritten weighted average IRR of approximately 14%(1).

"ARI continues to see interesting transactions in our core first mortgage and mezzanine lending businesses that offer attractive, risk-adjusted returns," said Scott Weiner, Chief Investment Officer of the Company's Manager. "The mezzanine loan for the mixed-use property has strong, well-capitalized sponsorship. The whole loan for the residential conversion represents a highly-structured transaction in a prime location for a premier New York City real estate developer. Both transactions are structured with floating interest rates, which we believe will be beneficial to ARI in a rising interest rate environment."

The transactions include the following:

  • $22.5 million mezzanine loan secured by a pledge of the equity interest in a borrower that owns a mixed-use property located in the central business district of Pittsburgh, PA and consists of (i) a 27-story multi-tenant office building, (ii) an adjoining 616-key convention center hotel, and (iii) a 479-space underground parking garage. The mezzanine loan is part of a $105 million floating rate loan comprised of an $82.5 million first mortgage loan and ARI's $22.5 million mezzanine loan. The mezzanine loan has a three-year initial term and two one-year extension options, at the borrower's option, subject to certain conditions. ARI's loan basis represents an appraised loan-to-value of 69%. The mezzanine loan has been underwritten to generate an IRR of approximately 12%; and

  • $62.4 million whole loan, which is split into a $33.0 million first mortgage and a $29.4 million mezzanine loan secured by a pledge of the equity interests in a borrower that owns an eight-story commercial building in the Greenwich Village section of New York City. The whole loan will fund the conversion of the existing building into a 12-story luxury residential condominium consisting of approximately 37,000 square feet comprising eight residential units and approximately 3,600 square feet of ground-floor retail space. The whole loan has a two year term, including one 12-month extension option, at the borrower's option, subject to certain conditions. On a fully funded basis, the whole loan represents an appraised loan-to-net-sellout of 55%. The whole loan has been underwritten to generate an IRR of approximately 14%.

(1) The IRRs for the investments in this press release reflect the returns underwritten by ACREFI Management, LLC, the Company's external manager. They are calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but do assume that extension options are exercised. With respect to the mezzanine loan for the New York City condominium construction that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, as well as assuming no defaults. With respect to the New York City condominium conversion loan closed in August 2013, the IRR assumes any remaining loan proceeds are contractually funded in the ninth month the loan is outstanding and does not assume the borrower exercises the 12-month extension option. 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 the actual IRRs will equal the underwritten IRRs shown in the table and elsewhere in this press release. 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 its investments shown over time.

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 real estate mortgage loans, subordinate financings, CMBS and other commercial real estate-related debt investments throughout the U.S. 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 $113 billion of assets under management at June 30, 2013.

Additional information can be found on the Company's website at

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; 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.

Contact Information

    Hilary Ginsberg
    Investor Relations
    (212) 822-0767