NEW YORK, NY--(Marketwire - Feb 4, 2013) - Apollo Commercial Real Estate Finance, Inc. (the "Company" or "ARI") (NYSE: ARI) today announced the closing of two mezzanine financing transactions totaling $43 million. The first investment was an $18 million mezzanine loan secured by a pledge of the equity interests in the owner of two buildings in midtown Manhattan that will be converted into 215 multifamily rental units and the second investment was a $25 million mezzanine loan secured by a pledge of the equity interests in the owner of a portfolio of four hotels totaling 1,231 keys located in Rochester, Minnesota. Since the beginning of 2013, ARI has announced the closing of $183 million of new investments which have been underwritten to generate a weighted average IRR of 13%(1).
In addition, today ARI also announced a two year extension to the Company's master repurchase facility with JPMorgan Chase Bank, N.A. (the "JPMorgan Facility") as well as the repayment of two mezzanine loans secured by the equity interests in the owner of a portfolio of retail shopping centers totaling $50 million.
Mezzanine Loan for New York City Multifamily Conversion
The Company provided an $18 million mezzanine loan secured by a pledge of the equity interests in the owner of two buildings in midtown Manhattan. The buildings contain a total of 181,637 rentable square feet that is being converted into 215 multifamily rental units. The mezzanine loan is part of a $90 million, three-year (two-year initial term with one one-year extension option) interest-only, floating rate financing comprised of the mezzanine loan and a $72 million first mortgage loan. At the time of ARI's investment, the interest rate on the mezzanine loan was LIBOR+10.0% and will increase to LIBOR+11.0% as certain mortgage funding hurdles are met. ARI received a 1.0% transaction fee at closing. When the first mortgage loan is fully funded, the mezzanine loan will have an appraised loan-to-value of approximately 60% and has been underwritten to generate an IRR of approximately 13%(1).
Mezzanine Loan for Rochester, Minnesota Hotel Portfolio
The Company provided a $25 million mezzanine loan secured by a pledge of the equity interests in the owner of a portfolio of four hotels totaling 1,231 keys located in Rochester, Minnesota. The hotels are within walking distance of the Mayo Clinic, an internationally renowned health care facility that treats over one million patients annually from around the world. The mezzanine loan is part of a $145 million five-year, fixed rate loan, comprised of a $120 million first mortgage loan and the mezzanine loan, which was provided in connection with the acquisition of the portfolio. The interest rate on the mezzanine loan is 11.0%. The mezzanine loan has an appraised loan-to-value of approximately 69% and has been underwritten to generate an IRR of approximately 12%(1).
Amendment to JPMorgan Facility
The Company amended its JPMorgan Facility to extend the term for two years (one year initial term with a one year extension option). Pricing on the JPMorgan Facility will remain at LIBOR+2.5% and ARI will pay a 0.5% fee for the first year and a 0.25% extension fee for the second year. The Company primarily uses the JPMorgan Facility to finance ARI's first mortgage loan investments.
Repayment of Mezzanine Loans
The Company received principal repayment on two mezzanine loans totaling $50 million secured by the equity interests in the owner of a portfolio of retail shopping centers located throughout the United States. In connection with the repayment, the Company received a yield maintenance payment totaling $2.5 million. With the yield maintenance payment, the Company realized a 15% IRR(1) on its mezzanine loan investment.
(1) The IRRs for the investments detailed in this press release reflect the returns underwritten by ACREFI Management, LLC, the Company's external manager. The IRRs are calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assume extensions as well as the cost of borrowings and derivative instruments under the Company's master repurchase agreement with Wells Fargo Bank, N.A. With respect to the mezzanine loan for the New York City Multifamily Conversion, the IRR calculation assumes certain projections with respect to the timing of the funding of the senior loan. There can be no assurance the actual IRRs will equal the underwritten IRRs shown 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 over time.
About Apollo Commercial Real Estate Finance, Inc.
Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a commercial mortgage real estate investment trust that primarily 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 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 $110 billion of assets under management at September 30, 2012.
Additional information can be found on the Company's website at www.apolloreit.com.
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, except as required by law.