Group 1 - American Healthcare REIT (AHR) has returned 49.4% year-to-date, significantly outperforming the average Finance sector gain of 13% [4] - AHR is part of the Finance sector, which includes 869 individual stocks and currently holds a Zacks Sector Rank of 1, indicating strong performance relative to other sectors [2] - The Zacks Rank system, which emphasizes earnings estimates and revisions, currently gives AHR a Zacks Rank of 2 (Buy), suggesting a positive earnings outlook [3] Group 2 - The Zacks Consensus Estimate for AHR's full-year earnings has increased by 3.5% over the past quarter, reflecting improved analyst sentiment [4] - AHR is categorized under the REIT and Equity Trust - Other industry, which consists of 99 companies and has an average gain of 4.7% this year, further highlighting AHR's strong performance [6] - Apollo Commercial Finance (ARI), another Finance stock, has returned 20% year-to-date and has a Zacks Rank of 2 (Buy), indicating it is also performing well within the sector [5][7]

Mortgage Market Overview - Mortgage rates are currently at the lowest levels of 2025, with the average 30-year mortgage rate at 6.58% as of August 21, 2025, unchanged from the previous week and down from 6.91% at the start of 2025 [1][9] - The decline in mortgage rates reflects market optimism for potential Federal Reserve rate cuts later in the year, along with changing inflation and bond market dynamics [4] mREITs Performance and Outlook - mREITs such as Apollo Commercial Real Estate Finance (ARI), Annaly Capital Management (NLY), and Orchid Island Capital (ORC) are expected to benefit from lower mortgage rates, which are lifting mortgage originations and driving stronger refinancing activity [5][9] - With improving purchase originations and refinancing activities, mREITs are likely to see book value improvement as Agency market spreads tighten, enhancing net interest spread and financial performance [7][9] Apollo Commercial Real Estate Finance (ARI) - Apollo Commercial has a portfolio of $8.6 billion in loans, primarily secured by properties in the U.S. and European gateway cities, with 96% of its lending consisting of floating-rate loans [10] - Despite a 23.9% year-over-year decline in net interest income (NII) in the first half of 2025, NII is expected to rise due to declining mortgage rates, with a current dividend yield of 9.9% and a payout ratio of 96% [11] Annaly Capital Management (NLY) - Annaly manages an $89.5 billion portfolio, with a focus on residential credit, mortgage servicing rights (MSRs), and Agency mortgage-backed securities (MBS), which helps reduce volatility and interest rate sensitivity [14][15] - NLY's NII increased to $493.2 million in the first half of 2025 from $47.1 million a year ago, supported by improving purchase originations and refinancing, with a current dividend yield of 13.6% and a payout ratio of 99% [16][17] Orchid Island Capital (ORC) - Orchid focuses on Agency residential mortgage-backed securities (RMBS) and has seen its NII rise to $42.9 million in the first half of 2025, compared to net interest expenses of $3.2 million in the same period last year [22] - The company currently offers a dividend yield of 20.4% and has increased its dividend twice in the past five years, with earnings estimates indicating significant year-over-year growth of 450% and 39.7% for 2025 and 2026, respectively [23]

Group 1 - Apollo Commercial Finance (ARI) has returned 14.9% year-to-date, outperforming the Finance sector average of 8.5% [4] - The Zacks Rank for Apollo Commercial Finance is 1 (Strong Buy), indicating strong analyst sentiment and a positive earnings outlook [3] - The Zacks Consensus Estimate for ARI's full-year earnings has increased by 2.1% over the past quarter, reflecting improving analyst sentiment [3] Group 2 - Apollo Commercial Finance is part of the REIT and Equity Trust industry, which consists of 33 companies and is currently ranked 181 in the Zacks Industry Rank [6] - The average return for the REIT and Equity Trust industry is 0.6% year-to-date, indicating that ARI is performing significantly better [6] - American Healthcare REIT (AHR), another outperforming stock in the Finance sector, has returned 40.3% year-to-date [4]

Group 1 - David A. Johnson is the founder and principal of Endurance Capital Management, a New Jersey Limited Liability Company, with over 30 years of investment experience [1] - Johnson's investment strategy includes a diverse range of assets such as stocks, bonds, options, ETFs, REITs, real estate, closed-end funds, hedge funds, and private credit [1] - He holds a Master of Science (MS) Degree in Finance with a concentration in Investment Analysis from Boston University, a Certificate in Financial Planning, and an MBA from Fordham University [1]

Apollo Commerical Finance (ARI) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked ...

Financial Data and Key Metrics Changes - ARI reported distributable earnings of $36 million or $0.26 per share for Q2 2025, an 8% increase from the previous quarter, providing dividend coverage of about 104 times [7][11] - The carrying value of ARI's portfolio increased 12% from the prior quarter to approximately $8.6 billion, up from $7.7 billion at the end of Q1 [8][10] - The weighted average unlevered yield of the portfolio was 7.8% [8] Business Line Data and Key Metrics Changes - ARI committed $1.4 billion to new loans during Q2 2025, with year-to-date commitments totaling $2 billion [2][9] - Loans secured by residential properties now comprise approximately 25% of ARI's portfolio, representing the largest property type concentration [3] - The portfolio's risk rating remained stable at 3.0, with no downgrades or asset-specific CECL allowances recorded during the quarter [10] Market Data and Key Metrics Changes - Approximately 50% of ARI's portfolio is in Europe, which accounted for 18% of originations year-to-date, benefiting from recent interest rate cuts [3] - The market for acquisitions in Europe is gaining momentum, with a healthy pipeline across property types [3] Company Strategy and Development Direction - ARI is focused on executing value maximization plans for its focus assets, aiming to convert underperforming capital into higher-yielding reinvestment opportunities [5] - The company plans to continue capital rotation, which is expected to positively impact earnings in 2025 and throughout 2026 [5] - ARI's strategy includes maintaining a diversified loan portfolio and leveraging Apollo's real estate credit platform for transaction flow [2] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to redeploy capital into newly originated loans and identify attractive opportunities across the U.S. and Western Europe [2] - The management noted that the commercial real estate market is expected to remain robust through the end of the year, with increased deal flow and activity [34][35] - There is ongoing dialogue about potentially extending the duration of the portfolio, but no significant shift in strategy is expected at this time [38] Other Important Information - ARI completed a new five-year floating rate $750 million term loan B, which repaid existing loans with pending maturities in 2026 and 2028 [6] - The company ended the quarter with $2.8 billion in total liquidity, including cash on hand and committed undrawn credit capacity [12] - A settlement agreement with the Commonwealth of Massachusetts is expected to yield approximately $18 million for ARI, which will be recycled into new loan origination [11] Q&A Session Summary Question: What is the expected timeline for cash flow from the Brook asset? - Management anticipates meaningful progress on leasing by the end of the year, with the asset turning modestly cash flow positive in early next year [17] Question: Is there potential upside from land parcels near the Brook? - Discussions are ongoing regarding a small parcel that could increase density, but it is too early to predict the likelihood of success [22] Question: What is the plan for the capital structure and leverage? - Management plans to maintain current leverage levels while converting non-earning assets into earning assets to drive dividend growth [25] Question: How does the company view the commercial real estate transaction market? - Management is optimistic about the transaction market, noting increased activity and confidence in finding suitable opportunities [34] Question: Is ARI considering extending the duration of its portfolio? - While monitoring the situation, management does not expect a meaningful shift in strategy at this time [38] Question: What is the outlook for senior housing investments? - Management is focused on private pay senior housing, which is expected to benefit from favorable demographic trends [52]

Financial Performance - Net income available to common stockholders was $18 million, or $0.12 per diluted share[10] - Distributable Earnings reached $36 million, or $0.26 per diluted share[10] - The company declared common stock dividends of $0.25 per share, resulting in a dividend yield of 10.2%[10] Loan Portfolio - The total loan portfolio amounted to $8.6 billion with a weighted-average unlevered all-in yield of 7.8%, with 98% in first mortgages and 96% floating rate[10] - New loan commitments totaled $2.0 billion year-to-date, with $1.4 billion funded at close, and $1.4 billion in Q2, with $916 million funded at close[10] - Loan repayments and sales amounted to $724 million year-to-date, with $631 million in Q2[10] Capitalization and Liquidity - The company ended the quarter with a total common equity book value of $1.7 billion[10] - Total liquidity at the end of the quarter was $208 million, including $182 million in cash and $26 million available leverage[10] - A new $750 million Term Loan B due June 2030 was refinanced, bearing interest at SOFR + 3.25%[10] Real Estate Owned (REO) - Total REO held for investment had a net equity of $444 million, comprised of Brooklyn Multifamily Development ($289 million), D C Hotel ($85 million), and Atlanta Hotel ($70 million)[21] - Nine units at 111 West 57th Street closed, generating ~$170 million of net sales proceeds, ~$141 million of which reduced ARI's basis[23] Foreign Exchange Risk Mitigation - The company reported a total foreign loan capital stack of $4.307 billion, with $3.267 billion offset by local currency denominated secured debt arrangements[52] - The net equity of foreign loans was $1.041 billion[53]

Earnings Performance - Apollo Commercial Finance reported quarterly earnings of $0.26 per share, matching the Zacks Consensus Estimate, but down from $0.35 per share a year ago [1] - The company posted revenues of $43.07 million for the quarter, missing the Zacks Consensus Estimate by 1.28% and down from $51.76 million year-over-year [2] - Over the last four quarters, Apollo Commercial Finance has surpassed consensus EPS estimates two times but has not beaten revenue estimates [2] Stock Performance and Outlook - Apollo Commercial Finance shares have increased approximately 12.7% since the beginning of the year, outperforming the S&P 500's gain of 8.6% [3] - The company's earnings outlook is crucial for future stock performance, with current consensus EPS estimates at $0.29 for the coming quarter and $1.05 for the current fiscal year [7] Industry Context - The REIT and Equity Trust industry, to which Apollo Commercial Finance belongs, is currently ranked in the top 20% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Apollo's stock performance [5][6]

[Introduction & Disclosures](index=1&type=section&id=Introduction%20%26%20Disclosures) This section provides standard forward-looking statements and disclosures regarding investment performance and the use of the company name [Forward Looking Statements and Other Disclosures](index=2&type=section&id=Forward%20Looking%20Statements%20and%20Other%20Disclosures) This section outlines standard forward-looking statements and other disclosures, emphasizing that future investments may not be profitable and past performance is not indicative of future returns. It also clarifies the use of 'Apollo' in the presentation - Investments made in the future are not guaranteed to be profitable or to equal past performance[2](index=2&type=chunk) - Past performance is not indicative nor a guarantee of future returns[4](index=4&type=chunk) - The presentation contains forward-looking statements regarding financial results and future expectations, which are subject to various risks and uncertainties[3](index=3&type=chunk) [Q2 2025 Performance Summary](index=3&type=section&id=Q2%202025%20Performance%20Summary) This section details Apollo's Q2 2025 financial results, loan portfolio, capitalization, liquidity, and per-share metrics [Key Financial Highlights](index=3&type=section&id=Key%20Financial%20Highlights) Apollo Commercial Real Estate Finance, Inc. reported Q2 2025 net income of $18 million, or $0.12 per diluted share, and Distributable Earnings of $36 million, or $0.26 per diluted share. The company declared a common stock dividend of $0.25 per share, representing a 10.2% dividend yield Q2 2025 Financial Results | Metric | Value | | :------------------------------------- | :----------------------------------- | | Net income available to common stockholders | $18 million, or $0.12 per diluted share | | Distributable Earnings¹ | $36 million, or $0.26 per diluted share | | Declared common stock dividends | $0.25 per share (10.2% dividend yield) | [Loan Portfolio Overview](index=3&type=section&id=Loan%20Portfolio%20Overview) The total loan portfolio reached $8.6 billion in Q2 2025, characterized by a weighted-average unlevered all-in yield of 7.8%. The portfolio primarily consists of first mortgages (98%) and floating-rate loans (96%), with a weighted-average risk rating of 3.0 Q2 2025 Loan Portfolio Snapshot | Metric | Value | | :--------------------------------- | :------------------- | | Total loan portfolio | $8.6 billion | | W/a unlevered all-in yield² | 7.8% | | First mortgages | 98% | | Floating rate | 96% | | W/A risk rating | 3.0 | - Committed **$2.0 billion** to new loans year-to-date (**$1.4 billion** funded at close), with **$1.4 billion** committed in Q2 (**$916 million** funded at close)[5](index=5&type=chunk) - Loan repayments and sales totaled **$724 million** year-to-date, with **$631 million** occurring in Q2[5](index=5&type=chunk) [Capitalization and Liquidity](index=3&type=section&id=Capitalization%20and%20Liquidity) Apollo ended Q2 2025 with a total common equity book value of $1.7 billion and $208 million in total liquidity. The company refinanced its 2026 and 2028 term loans with a new $750 million Term Loan B due June 2030 and expanded its borrowing capacity by $1.4 billion through new and upsized credit facilities Q2 2025 Capitalization & Liquidity | Metric | Value | | :--------------------------------- | :------------------- | | Total common equity book value⁶ | $1.7 billion | | Total liquidity | $208 million | | Cash | $182 million | | Available leverage on secured debt | $26 million | - Refinanced 2026 and 2028 term loans with a new **$750 million Term Loan B** due **June 2030**, bearing interest at **SOFR + 3.25%**[5](index=5&type=chunk) - Closed three new secured credit facilities and upsized an existing one, providing an additional **$1.4 billion** of aggregate borrowing capacity[5](index=5&type=chunk) [Subsequent Events](index=3&type=section&id=Subsequent%20Events) Subsequent to the quarter end, Apollo received a full repayment of a $250 million first mortgage on a Manhattan retail property. Additionally, a settlement agreement was reached in a Massachusetts lawsuit, resulting in an additional $44 million payment ($18 million attributable to ARI) by August 20, 2025 - Received full repayment of a **$250 million** first mortgage secured by a retail property in Manhattan, NY[5](index=5&type=chunk) - A settlement agreement was reached in a Massachusetts lawsuit, where The Commonwealth agreed to pay Saint Elizabeth, LLC an additional **$44 million** (**$18 million** attributable to ARI) by **August 20, 2025**[5](index=5&type=chunk) [Per Share Metrics](index=4&type=section&id=Per%20Share%20Metrics) Apollo's Distributable Earnings per share increased to $0.26 in Q2 2025 from $0.25 in Q1 2025, covering the quarterly dividend of $0.25 per share. Book Value Per Share (post-CECL allowance & depreciation) slightly decreased to $12.07 in Q2 2025 from $12.18 in Q1 2025 Distributable Earnings Per Share & Quarterly Dividend | Metric | 1Q'25 | 2Q'25 | | :----------------------------- | :---- | :---- | | Distributable Earnings per Share¹ | $0.25 | $0.26 | | Quarterly Dividend | $0.25 | $0.25 | Book Value Per Share⁶ | Metric | 1Q'25 | 2Q'25 | | :------------------------------------------ | :------ | :------ | | BVPS Post-General CECL Allowance & Depreciation | $12.18 | $12.07 | | General CECL Allowance & Depreciation | $0.48 | $0.52 | - Q2 Dividend per share of **$0.25** was covered by Distributable Earnings¹ of **$0.26** per share[9](index=9&type=chunk) [Portfolio Activity and Real Estate Owned (REO)](index=5&type=section&id=Portfolio%20Activity%20and%20Real%20Estate%20Owned%20(REO)) This section reviews Apollo's Q2 and year-to-date portfolio activity, including new funding, repayments, and updates on Real Estate Owned assets [Q2 and 1H'25 Portfolio Activity](index=5&type=section&id=Q2%20and%201H%2725%20Portfolio%20Activity) Apollo demonstrated robust portfolio activity in Q2 2025, with $916 million in new funding and $394 million in add-on funding, offset by $631 million in repayments. Year-to-date, new funding reached $1,376 million and add-on funding $467 million, against $724 million in repayments Portfolio Activity (in $mm) | Activity | Q2'25 | 1H'25 | | :----------------- | :---- | :---- | | New Funding | $916 | $1,376 | | Add-on Funding | $394 | $467 | | Repayments | ($631) | ($724) | [REO Overview and Update](index=5&type=section&id=REO%20Overview%20and%20Update) As of June 30, 2025, Apollo's Real Estate Owned (REO) held for investment totaled $821 million in assets, with $444 million in net equity. Significant progress was made on the Brooklyn Multifamily Development, with initial residential TCO received and strong leasing momentum. For 111 West 57th Street, nine units closed, generating approximately $170 million in net sales proceeds, reducing ARI's basis by $141 million REO Held for Investment (as of June 30, 2025, in $mm) | Metric | Assets | Debt (A) | Net Equity | | :-------------------------- | :----- | :------- | :--------- | | Brooklyn Multifamily Development | $821 | ($304) | $289 | | D.C. Hotel | $158 | ($73) | $85 | | Atlanta Hotel | $70 | ($181) | $70 | | Total REO Held for Investment⁷ | $821 | ($377) | $444 | - Brooklyn Multifamily Development received initial residential TCO in **June**, with final TCO expected in **Q4**, and strong leasing momentum with move-ins commencing in **July 2025**[12](index=12&type=chunk) - **Nine units** closed at 111 West 57th Street, generating ~**$170 million** of net sales proceeds, with ~**$141 million** reducing ARI's basis after full repayment of third-party senior loan[13](index=13&type=chunk) [Loan Origination Highlights](index=6&type=section&id=Loan%20Origination%20Highlights) This section highlights new loan commitments in Q2 and 1H 2025, detailing their characteristics and notable originations [Q2 and 1H'25 New Commitments](index=6&type=section&id=Q2%20and%201H%2725%20New%20Commitments) Apollo originated $1.4 billion in new loan commitments in Q2 2025 and $2.0 billion year-to-date. These commitments were 100% first mortgages, predominantly floating rate, with weighted-average unlevered all-in yields of 8.0% (Q2) and 8.1% (1H'25), and weighted-average loan-to-value ratios of 59% (Q2) and 57% (1H'25) Q2 & 1H'25 Loan Origination Highlights | Metric | Q2 | 1H'25 | | :-------------------------- | :------- | :------- | | New Commitments Closed | $1.4 billion | $2.0 billion | | First Mortgages | 100% | 100% | | Weighted Average Unlevered All-in Yield³ | 8.0% | 8.1% | | Weighted Average Loan-to-Value | 59% | 57% | - Notable Q2 originations include a **$400 million** floating-rate senior loan for a pre-let data center development in the **Southwest US** and a **$186 million** floating-rate senior loan for a luxury residential-led mixed-use scheme in the **United Kingdom**[14](index=14&type=chunk)[16](index=16&type=chunk) [Detailed Loan Portfolio Analysis](index=8&type=section&id=Detailed%20Loan%20Portfolio%20Analysis) This section provides an in-depth analysis of Apollo's loan portfolio, covering overall characteristics, diversification, and specifics for various property types [Overall Portfolio Characteristics](index=8&type=section&id=Overall%20Portfolio%20Characteristics) Apollo's loan portfolio has a carrying value of $8.6 billion across 53 loans, with 98% being first mortgages and a weighted-average unlevered all-in yield of 7.8%. The portfolio maintains a weighted-average risk rating of 3.0, a loan-to-value of 57%, and a remaining fully-extended term of 2.7 years Loan Portfolio Key Characteristics | Metric | Value | | :------------------------------------ | :------------------- | | Carrying Value / Number of Loans | $8.6 billion / 53 Loans | | W/A Unlevered All-in Yield³ | 7.8% | | Loan Position | 98% First Mortgage | | W/A Portfolio Risk Rating⁹ | 3.0 | | W/A Portfolio Loan-to-Value(b) | 57% | | W/A Remaining Fully-Extended Term⁹ | 2.7 Years | - **41%** of the portfolio was originated **post-2022**, indicating a relatively recent vintage for a significant portion of assets[19](index=19&type=chunk) [Collateral and Geographic Diversification](index=8&type=section&id=Collateral%20and%20Geographic%20Diversification) The loan portfolio is diversified across various collateral types, with residential (25%), office (23%), and hotel (16%) being the largest segments. Geographically, the portfolio has significant exposure to the United Kingdom (36%), New York City (17%), and other European markets (13%) Collateral Diversification (by % of portfolio) | Collateral Type | Percentage | | :---------------- | :--------- | | Residential(d) | 25% | | Office | 23% | | Hotel | 16% | | Retail | 14% | | Industrial | 12% | | Mixed Use | 4% | | Other(c) | 6% | Geographic Diversification (by % of portfolio, in $mm) | Region | Total ($mm) | Percentage | | :------------- | :---------- | :--------- | | United Kingdom | $3,140 | 36% | | New York City | $1,497 | 17% | | Other Europe | $1,158 | 13% | | West | $899 | 10% | | Southeast | $804 | 9% | | Midwest | $560 | 7% | | Other(d) | $605 | 7% | | **Total** | **$8,664** | **100%** | [Office Loan Portfolio Specifics](index=10&type=section&id=Office%20Loan%20Portfolio%20Specifics) The office loan portfolio comprises 10 loans with a carrying value of $2.0 billion, all being first mortgages. It has a weighted-average loan-to-value of 51% and a risk rating of 2.7. A significant portion (42%) is located in London, UK, with maturities extending up to 2030 Office Loan Portfolio Key Metrics | Metric | Value | | :-------------------------- | :------------------- | | Number of Loans(a) | 10 Loans | | Carrying Value | $2.0 Billion | | First Mortgage⁹ | 100% | | W/A Loan-to-Value(b) | 51% | | W/A Risk Rating⁹ | 2.7 | - The largest commitment in the office portfolio is **$757 million** across **3 loans**, which are **100% leased** to credit tenants[25](index=25&type=chunk) Office Loan Portfolio Location Breakdown | Location | Percentage | | :--------------- | :--------- | | London, UK | 42% | | New York City | 24% | | Chicago, IL | 9% | | Various, United States | 9% | | Berlin, Germany | 5% | | Milan, Italy | 4% | | Other | 7% | [Senior Loan Portfolio Details](index=11&type=section&id=Senior%20Loan%20Portfolio%20Details) The detailed senior loan portfolio, totaling $8.518 billion in amortized cost, is segmented by property type, including residential, office, hotel, retail, industrial, mixed-use, and other categories. It shows varying levels of unfunded commitments and fully-extended maturities across different locations Senior Loan Portfolio Summary (in $mm) | Property Type | Amortized Cost | Unfunded Commitments | | :-------------- | :------------- | :------------------- | | Residential | $1,981 | $32 | | Office | $1,910 | $175 | | Hotel | $1,372 | $12 | | Retail | $1,161 | $166 | | Industrial | $1,001 | $591 | | Mixed Use | $313 | $27 | | Other | $780 | $16 | | **Subtotal - First Mortgage** | **$8,518** | **$1,019** | - The portfolio has a weighted-average fully-extended maturity of **2.7 years** for first mortgages[31](index=31&type=chunk) [Residential Senior Loans](index=11&type=section&id=Residential%20Senior%20Loans) The residential senior loan portfolio has an amortized cost of $1,981 million with $32 million in unfunded commitments. Loans are diversified across various locations including the UK and US, with maturities ranging from 2025 to 2030 - The largest residential loan (Loan 1) has an amortized cost of **$251 million**, originated in **December 2021**, and matures in **February 2027**, located in **various UK properties**[27](index=27&type=chunk) [Office Senior Loans](index=11&type=section&id=Office%20Senior%20Loans) The office senior loan portfolio totals $1,910 million in amortized cost, with $175 million in unfunded commitments. Key loans include a $651 million loan in London, UK, 100% leased by a credit tenant, maturing in December 2028 - Loan 16, secured by an office property in **London, UK**, has an amortized cost of **$651 million** and is **100% leased** by a credit tenant for a **20-year term**, maturing in **December 2028**[27](index=27&type=chunk) [Hotel Senior Loans](index=12&type=section&id=Hotel%20Senior%20Loans) The hotel senior loan portfolio has an amortized cost of $1,372 million and $12 million in unfunded commitments. Loans are spread across Europe and various US locations, with maturities up to 2030 - Loan 24, a hotel loan originated in **December 2023**, has an amortized cost of **$321 million** and matures in **December 2028**, located in **various European properties**[29](index=29&type=chunk) [Retail Senior Loans](index=12&type=section&id=Retail%20Senior%20Loans) The retail senior loan portfolio amounts to $1,161 million in amortized cost, with $166 million in unfunded commitments. It includes loans in the UK and US, with maturities ranging from 2025 to 2030 - Loan 34, a retail loan originated in **April 2022**, has an amortized cost of **$528 million** and **$22 million** in unfunded commitments, located in **various UK properties**, maturing in **April 2027**[29](index=29&type=chunk) [Industrial Senior Loans](index=12&type=section&id=Industrial%20Senior%20Loans) The industrial senior loan portfolio has an amortized cost of $1,001 million, with substantial unfunded commitments of $591 million. This segment includes construction loans and is diversified across Sweden, the US, and the UK - Loan 44, an industrial loan originated in **May 2025**, has **$400 million** in unfunded commitments and is a construction loan located in **Abilene, TX**, maturing in **June 2030**[29](index=29&type=chunk) [Mixed Use Senior Loans](index=13&type=section&id=Mixed%20Use%20Senior%20Loans) The mixed-use senior loan portfolio has an amortized cost of $313 million and $27 million in unfunded commitments, with properties in London, UK, and Brooklyn, NY, maturing between 2027 and 2029 - Loan 45, a mixed-use loan originated in **May 2025**, has an amortized cost of **$162 million** and **$10 million** in unfunded commitments, located in **London, UK**, maturing in **May 2027**[31](index=31&type=chunk) [Other Senior Loans](index=13&type=section&id=Other%20Senior%20Loans) The 'Other' senior loan category includes pubs, caravan parks, and a portfolio of office, industrial, and retail properties, totaling $780 million in amortized cost with $16 million in unfunded commitments. These loans are primarily located in the UK and Germany - Loan 47, a pubs loan originated in **December 2023**, has an amortized cost of **$226 million** and matures in **January 2029**, located in **various UK properties**[31](index=31&type=chunk) [Subordinate Loans and Other Lending Assets](index=14&type=section&id=Subordinate%20Loans%20and%20Other%20Lending%20Assets) Apollo's portfolio includes $146 million in subordinate loans with a weighted-average maturity of 0.3 years, primarily secured by residential properties in Manhattan, NY. Additionally, there is a corporate note classified as 'Other Lending Assets' with a fair value of $40 million and a weighted-average maturity of 4.3 years Subordinate Loan & Other Lending Assets Portfolio (in $mm) | Asset Type | Amortized Cost / Fair Value | Unfunded Commitments | W/A Maturity | | :-------------------------- | :-------------------------- | :------------------- | :----------- | | Subordinate Loans | $146 | - | 0.3 Years | | Other Lending Assets (Corporate Note) | $40 | - | 4.3 Years | | **Total Loans, Net** | **$8,625** | | | - Loan 53, an office subordinate loan, matured in **September 2024**, with negotiations with the sponsor currently in process[33](index=33&type=chunk) [Capital Structure and Risk Management](index=15&type=section&id=Capital%20Structure%20and%20Risk%20Management) This section examines Apollo's capital structure, foreign exchange risk mitigation strategies, and loan maturity and interest rate sensitivities [Capital Structure Composition](index=15&type=section&id=Capital%20Structure%20Composition) Apollo's capital structure is conservatively managed, with secured debt arrangements constituting 63% ($6,222 million) of total capital. Common equity book value represents 18% ($1,749 million), and the company has no corporate debt maturities until June 2029, having added $1.9 billion in financing capacity during 2025 Capital Structure Composition (in $mm) | Component | Amount ($mm) | Percentage | | :------------------------------------ | :----------- | :--------- | | Secured Debt Arrangements(a),(b),(c) | $6,222 | 63% | | Debt Related to Real Estate Owned | $379 | 4% | | Senior Notes | $1,250 | 13% | | Preferred Stock | $169 | 2% | | Common Equity Book Value(d) | $1,749 | 18% | - Apollo employs a conservative capital management strategy, with **10 secured debt arrangements** across **8 counterparties** and a **~73% weighted-average available advance rate**[36](index=36&type=chunk) - The company added **$1.9 billion** of financing capacity during 2025 and has no corporate debt maturities until **June 2029**[36](index=36&type=chunk) [Foreign Exchange Risk Mitigation](index=16&type=section&id=Foreign%20Exchange%20Risk%20Mitigation) Apollo actively mitigates foreign exchange risk by structuring secured debt arrangements in local currency and economically hedging net equity and net interest income of foreign loans through forward currency contracts. In Q2 2025, the company realized a $0.6 million gain from forward point impact on currency contracts hedging net equity, despite a $72 million loss on foreign currency forward contracts Foreign Exchange Rate Change (Local/USD) | Currency | % FX Change YoY | % FX Change QoQ | | :------- | :-------------- | :-------------- | | GBP | 6% | 9% | | EUR | 9% | 10% | | SEK | 10% | 12% | - Secured debt arrangements are structured in **local currency**, reducing FX exposure to **net equity** on foreign loans, with a **76% weighted average advance** on the total foreign loan portfolio[40](index=40&type=chunk) Q2 2025 Gain (Loss) on Net Equity & Forward Contracts (in $mm) | Metric | Total | | :------------------------------------ | :---- | | Net Gain on Foreign Loan Principal(e) | $71 | | Q2 gain (loss) on forward contracts(f) | ($72) | [Loan Maturities and Interest Rate Sensitivity](index=17&type=section&id=Loan%20Maturities%20and%20Interest%20Rate%20Sensitivity) Apollo's fully-extended loan maturities (net equity) are spread across future years, with $441 million maturing in 2025 and $430 million in 2026. Expected net future fundings are relatively low. The company's net interest income per share shows sensitivity to benchmark rates, particularly SOFR/LIBOR, with a +$0.01 impact for a 0.25% rate change Fully-Extended Loan Maturities and Expected Future Fundings by Net Equity (in $mm) | Year | Fully-Extended Maturities (Net Equity)(a) | Expected Net Future Fundings(a) | | :--------- | :---------------------------------------- | :------------------------------ | | 2025 | $441 | $16 | | 2026 | $430 | $4 | | 2027 | $402 | $20 | | 2028 | $363 | $20 | | 2029 & Beyond | $78 | $0 | Net Interest Income Sensitivity to Benchmark Rates (Per Share) | Index | Change in Benchmark Rate | Net Interest Income Per Share | | :---------- | :----------------------- | :---------------------------- | | SOFR/LIBOR | +0.25% | +$0.01 | | SOFR/LIBOR | -0.75% | -$0.03 | | EURIBOR | All changes | $0.00 | | SONIA | All changes | $0.00 | [Appendix](index=18&type=section&id=Appendix) This section includes consolidated financial statements and a reconciliation of GAAP net income to distributable earnings [Consolidated Balance Sheets](index=19&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, Apollo reported total assets of $9.82 billion, an increase from $8.41 billion at December 31, 2024. This growth was primarily driven by an increase in commercial mortgage loans, net, which rose to $8.48 billion from $6.72 billion. Total liabilities also increased to $7.97 billion from $6.54 billion, mainly due to higher secured debt arrangements Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | Total Assets | $9,816,957 | $8,411,591 | | Commercial mortgage loans, net | $8,479,438 | $6,715,347 | | Total Liabilities | $7,970,571 | $6,537,110 | | Secured debt arrangements, net | $6,213,188 | $4,814,973 | | Total Stockholders' Equity | $1,846,386 | $1,874,481 | [Consolidated Statement of Operations](index=20&type=section&id=Consolidated%20Statement%20of%20Operations) For Q2 2025, Apollo's net interest income decreased to $43.07 million from $51.76 million in Q2 2024, leading to a total net revenue of $70.90 million, down from $81.11 million year-over-year. Net income available to common stockholders for Q2 2025 was $17.67 million ($0.12 per diluted share), compared to $32.72 million ($0.23 per diluted share) in Q2 2024. The company reported a significant foreign currency translation gain of $73.71 million in Q2 2025, contrasting with a loss in the prior year, but also a substantial loss on foreign currency forward contracts Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net interest income | $43,070 | $51,758 | | Total net revenue | $70,902 | $81,108 | | Net income (loss) available to common stockholders | $17,671 | $32,717 | | Net income (loss) per diluted share of common stock | $0.12 | $0.23 | | Foreign currency translation gain (loss) | $73,705 | ($1,362) | | Gain (loss) on foreign currency forward contracts | ($82,139) | $6,377 | | Dividend declared per share of common stock | $0.25 | $0.35 | [Reconciliation of GAAP Net Income to Distributable Earnings](index=21&type=section&id=Reconciliation%20of%20GAAP%20Net%20Income%20to%20Distributable%20Earnings) For Q2 2025, Apollo's Distributable Earnings were $36.42 million, or $0.26 per diluted share, derived from GAAP net income available to common stockholders of $17.67 million after various adjustments totaling $18.75 million. This represents an increase from Q1 2025, where Distributable Earnings were $33.24 million ($0.24 per diluted share) Reconciliation of GAAP Net Income to Distributable Earnings (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :------------------------------------------ | :-------------- | :------------- | | Net income (loss) available to common stockholders | $17,671 | $22,923 | | Total adjustments | $18,745 | $10,312 | | Distributable Earnings | $36,416 | $33,235 | | Diluted Distributable Earnings per share of common stock | $0.26 | $0.24 | - Key adjustments include **equity-based compensation expense**, **losses on foreign currency forwards**, **foreign currency gains**, and **increases in current expected credit loss allowance**[52](index=52&type=chunk) [Footnotes](index=22&type=section&id=Footnotes) This section contains supplementary notes and explanations relevant to the financial report

```markdown [PART I - FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Apollo Commercial Real Estate Finance, Inc. and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, fair value disclosures, loan portfolio specifics, debt arrangements, and other financial details [Condensed Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Condensed Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | **Assets:** | | | | Cash and cash equivalents | $177,623 | $317,396 | | Commercial mortgage loans, net | $8,479,438 | $6,715,347 | | Subordinate loans, net | $145,472 | $388,809 | | Real estate owned, held for investment, net | $805,653 | $752,643 | | Total Assets | $9,816,957 | $8,411,591 | | **Liabilities:** | | | | Secured debt arrangements, net | $6,213,188 | $4,814,973 | | Senior secured term loans, net | $729,416 | $754,210 | | Senior secured notes, net | $496,826 | $496,433 | | Total Liabilities | $7,970,571 | $6,537,110 | | **Stockholders' Equity:** | | | | Total Stockholders' Equity | $1,846,386 | $1,874,481 | | Total Liabilities and Stockholders' Equity | $9,816,957 | $8,411,591 | - Total Assets increased by **$1.4 billion** from December 31, 2024, to June 30, 2025, primarily driven by a significant increase in commercial mortgage loans, net[8](index=8&type=chunk) - Total Liabilities increased by **$1.4 billion**, largely due to an increase in secured debt arrangements, net[8](index=8&type=chunk) [Condensed Consolidated Statement of Operations (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations%20(Unaudited)) Condensed Consolidated Statement of Operations (Unaudited) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $43,070 | $51,758 | $82,555 | $108,436 | | Total net revenue | $70,902 | $81,108 | $136,718 | $161,643 | | Total operating expenses | $(38,561) | $(40,715) | $(77,000) | $(82,058) | | Net income (loss) before taxes | $20,855 | $35,885 | $46,962 | $(68,525) | | Net income (loss) | $20,739 | $35,785 | $46,730 | $(68,739) | | Net income (loss) available to common stockholders | $17,671 | $32,717 | $40,594 | $(74,875) | | Basic EPS | $0.12 | $0.23 | $0.28 | $(0.54) | | Diluted EPS | $0.12 | $0.23 | $0.28 | $(0.54) | | Dividend declared per share of common stock | $0.25 | $0.35 | $0.50 | $0.70 | - Net income available to common stockholders decreased by **46%** for the three months ended June 30, 2025, compared to the same period in 2024, from **$32.7 million** to **$17.7 million**[13](index=13&type=chunk) - For the six months ended June 30, 2025, the company reported a net income of **$46.7 million**, a significant improvement from a net loss of **$68.7 million** in the prior year period[13](index=13&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) | Metric (in thousands) | Balance at January 1, 2025 | Balance at June 30, 2025 | | :------------------------------------ | :------------------------- | :----------------------- | | Preferred Stock Par | $68 | $68 | | Common Stock Par | $1,382 | $1,389 | | Additional Paid-In-Capital | $2,695,701 | $2,697,576 | | Accumulated Deficit | $(822,670) | $(852,647) | | Total Stockholders' Equity | $1,874,481 | $1,846,386 | - Total Stockholders' Equity decreased from **$1,874.5 million** at January 1, 2025, to **$1,846.4 million** at June 30, 2025, primarily due to dividends declared on common and preferred stock, partially offset by net income[15](index=15&type=chunk) - Common stock shares issued and outstanding increased from **138,174,636** at January 1, 2025, to **138,943,831** at June 30, 2025, mainly due to the Equity Incentive Plan[15](index=15&type=chunk) [Condensed Consolidated Statement of Cash Flows (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows%20(Unaudited)) Condensed Consolidated Statement of Cash Flows (Unaudited) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $102,542 | $103,089 | | Net cash used in investing activities | $(1,255,405) | $(215,535) | | Net cash provided by financing activities | $1,010,812 | $59,312 | | Net decrease in cash and cash equivalents | $(142,051) | $(52,557) | | Cash and cash equivalents end of period | $177,623 | $174,703 | - Net cash used in investing activities significantly increased to **$1.26 billion** in the first six months of 2025, compared to **$215.5 million** in the same period of 2024, primarily due to higher new and add-on funding of commercial mortgage loans[17](index=17&type=chunk) - Net cash provided by financing activities increased substantially to **$1.01 billion** in the first six months of 2025, up from **$59.3 million** in 2024, driven by higher proceeds from secured debt arrangements[17](index=17&type=chunk) [Note 1 – Organization](index=8&type=section&id=Note%201%20%E2%80%93%20Organization) - Apollo Commercial Real Estate Finance, Inc. (ARI) is a Maryland corporation that has elected to be taxed as a REIT, primarily investing in and managing performing commercial first mortgage loans, subordinate financings, and other commercial real estate debt investments[22](index=22&type=chunk) - ARI is externally managed and advised by ACREFI Management, LLC, an indirect subsidiary of Apollo Global Management, Inc[23](index=23&type=chunk) - To maintain REIT status, ARI must distribute at least **90%** of its taxable income (excluding net capital gains) to stockholders annually and meet other asset, income, and ownership tests[24](index=24&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=8&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in accordance with GAAP, requiring estimates and assumptions, with current expected credit loss (CECL) allowances being the most significant estimate[25](index=25&type=chunk) - The company operates in one reporting segment[27](index=27&type=chunk) - The company is evaluating the impact of new FASB ASUs 2024-03 (Expense Disaggregation Disclosures) and 2023-09 (Improvements to Income Tax Disclosures), but does not expect a material impact on its consolidated financial statements[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 3 – Fair Value Disclosure](index=9&type=section&id=Note%203%20%E2%80%93%20Fair%20Value%20Disclosure) - Fair value measurements are categorized into a three-level hierarchy based on input observability: **Level I** (quoted prices in active markets), **Level II** (significant observable inputs), and **Level III** (significant unobservable inputs)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - Foreign currency forwards and interest rate caps are classified as **Level II**, while loans and other lending assets held for sale, and real estate owned, are classified as **Level III** due to the use of unobservable inputs[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk)[43](index=43&type=chunk) Fair Value of Financial Instruments | Financial Instrument (in thousands) | Fair Value as of June 30, 2025 | Fair Value as of December 31, 2024 | | :---------------------------------- | :----------------------------- | :------------------------------- | | Foreign currency forwards, net | $(57,758) | $57,753 | | Interest rate cap assets | $171 | $416 | | Note receivable, held for sale | $39,964 | $41,200 | | Total financial instruments | $(17,623) | $99,369 | [Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net](index=11&type=section&id=Note%204%20%E2%80%93%20Commercial%20Mortgage%20Loans,%20Subordinate%20Loans%20and%20Other%20Lending%20Assets,%20Net) Loan Portfolio Summary | Loan Type (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Commercial mortgage loans, net | $8,479,438 | $6,715,347 | | Subordinate loans, net | $145,472 | $388,809 | | Total loans, net | $8,624,910 | $7,104,156 | | Note receivable, held for sale | $39,964 | $41,200 | | Carrying value, net | $8,664,874 | $7,145,356 | - The loan portfolio grew significantly, with commercial mortgage loans increasing by **$1.76 billion** from December 31, 2024, to June 30, 2025, while subordinate loans decreased by **$243.3 million**[47](index=47&type=chunk) Loan Portfolio Statistics | Loan Portfolio Statistics | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Number of loans | 54 | 46 | | Principal balance | $9,095,527 | $7,550,410 | | Unfunded loan commitments | $1,018,901 | $840,627 | | Weighted-average cash coupon | 7.2% | 7.5% | | Weighted-average remaining fully-extended term | 2.7 years | 2.5 years | | Weighted-average expected term | 2.0 years | 1.9 years | - The loan portfolio is **96%** floating rate loans as of June 30, 2025[48](index=48&type=chunk) Loan Portfolio by Property Type | Property Type (Carrying Value, in thousands) | June 30, 2025 | % of Portfolio | December 31, 2024 | % of Portfolio | | :------------------------------------------- | :------------ | :------------- | :---------------- | :------------- | | Residential | $2,126,799 | 24.6% | $1,556,819 | 21.8% | | Office | $2,027,872 | 23.5% | $1,756,965 | 24.6% | | Hotel | $1,371,199 | 15.8% | $1,575,270 | 22.1% | | Retail | $1,190,400 | 13.7% | $946,017 | 13.3% | | Industrial | $1,057,883 | 12.2% | $399,546 | 5.6% | | Mixed Use | $313,526 | 3.6% | $363,211 | 5.1% | | Other | $576,079 | 6.6% | $537,164 | 7.5% | | Total Carrying Value, net | $8,624,910 | | $7,104,156 | | Loan Portfolio by Geographic Location | Geographic Location (Carrying Value, in thousands) | June 30, 2025 | % of Portfolio | December 31, 2024 | % of Portfolio | | :------------------------------------------------- | :------------ | :------------- | :---------------- | :------------- | | United Kingdom | $3,140,487 | 36.2% | $2,423,856 | 33.9% | | New York City | $1,497,147 | 17.3% | $1,539,995 | 21.6% | | Other Europe | $1,157,797 | 13.3% | $1,265,344 | 17.7% | | West | $899,484 | 10.4% | $489,008 | 6.9% | | Southeast | $804,340 | 9.3% | $511,742 | 7.2% | | Midwest | $559,857 | 6.5% | $560,436 | 7.9% | | Other | $604,646 | 7.0% | $344,611 | 4.8% | | Total Carrying Value, net | $8,624,910 | | $7,104,156 | | Loan Portfolio Risk Rating | Risk Rating (Amortized Cost, in thousands) | June 30, 2025 | % of Portfolio | December 31, 2024 | % of Portfolio | | :----------------------------------------- | :------------ | :------------- | :---------------- | :------------- | | 1 (Very low risk) | $0 | 0% | $0 | 0% | | 2 (Low risk) | $734,766 | 8.5% | $560,180 | 7.9% | | 3 (Moderate/average risk) | $7,731,635 | 89.3% | $6,169,860 | 86.4% | | 4 (High risk/potential for loss) | $73,112 | 0.8% | $279,732 | 3.9% | | 5 (Impaired/loss likely) | $124,245 | 1.4% | $125,220 | 1.8% | | Weighted-Average Risk Rating | 3.0 | | 3.0 | | CECL Allowances | CECL Allowances (in thousands) | December 31, 2024 | June 30, 2025 | | :----------------------------- | :---------------- | :------------ | | Specific CECL Allowance | $342,500 | $342,500 | | General CECL Allowance (Funded) | $30,836 | $38,848 | | General CECL Allowance (Unfunded) | $5,948 | $5,057 | | Total CECL Allowance | $379,284 | $386,405 | - The General CECL Allowance increased by **$3.1 million** during Q2 2025, primarily due to loan originations and extended repayment dates, partially offset by portfolio seasoning[66](index=66&type=chunk) - Risk-rated 5 loans, analyzed for Specific CECL Allowances, totaled **$124.2 million** (net of allowance) as of June 30, 2025, including retail, residential, and office properties[79](index=79&type=chunk) - A commercial mortgage loan secured by an office property in Berlin, Germany, was modified, extending its maturity to June **2030** and upgrading its risk rating from **4** to **3**[84](index=84&type=chunk) - Loans on nonaccrual status decreased from **$486.8 million** at December 31, 2024, to **$366.9 million** at June 30, 2025[87](index=87&type=chunk) - A promissory note classified as held for sale, with a fair value of **$39.96 million** as of June 30, 2025, was subsequently sold in July 2025 at **97.0%** of its value, resulting in a realized loss[96](index=96&type=chunk) [Note 5 – Real Estate Owned](index=18&type=section&id=Note%205%20%E2%80%93%20Real%20Estate%20Owned) - Real estate owned, held for investment, includes three properties: the D.C. Hotel, the Brooklyn Multifamily Development, and the Atlanta Hotel[98](index=98&type=chunk) - The D.C. Hotel generated net profit of **$3.6 million** and **$6.2 million** for the three and six months ended June 30, 2025, respectively[105](index=105&type=chunk) - The Brooklyn Multifamily Development had a cost basis of **$593.9 million** as of June 30, 2025, with **$53.0 million** in capitalized construction and financing costs during the six months ended June 30, 2025[111](index=111&type=chunk) - The Atlanta Hotel recorded net profit of **$0.6 million** and **$1.1 million** for the three and six months ended June 30, 2025, respectively, improving from a net loss in the prior year period[116](index=116&type=chunk) [Note 6 – Other Assets](index=19&type=section&id=Note%206%20%E2%80%93%20Other%20Assets) Other Assets Breakdown | Other Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Interest receivable | $74,886 | $58,470 | | Collateral deposited under derivative agreements | $56,140 | $0 | | Loan proceeds held by servicer | $4,530 | $50,843 | | Other | $33,080 | $28,714 | | Total | $168,636 | $138,027 | - Collateral deposited under derivative agreements increased significantly to **$56.1 million** at June 30, 2025, from zero at December 31, 2024, indicating a net liability position with derivative counterparties[118](index=118&type=chunk) - The company's equity method investment in the Massachusetts Healthcare JV was **$23.2 million** as of June 30, 2025, following the acquisition of two unsold hospitals[122](index=122&type=chunk) [Note 7 – Secured Debt Arrangements, Net](index=20&type=section&id=Note%207%20%E2%80%93%20Secured%20Debt%20Arrangements,%20Net) - During the first six months of 2025, the company secured **$1.1 billion** in new credit facilities and upsized existing facilities by **$776.6 million**, while terminating two facilities[124](index=124&type=chunk) Secured Debt Arrangements | Secured Debt Arrangement (in thousands) | Borrowings Outstanding (June 30, 2025) | Borrowings Outstanding (December 31, 2024) | | :-------------------------------------- | :------------------------------------- | :--------------------------------------- | | JPMorgan Facility | $1,771,528 | $1,033,504 | | Morgan Stanley Facility - GBP | $165,324 | $0 | | Morgan Stanley Facility - USD | $266,694 | $0 | | Atlas Facility | $530,518 | $462,886 | | HSBC Facility | $698,940 | $627,646 | | Barclays Facility - USD | $321,546 | $321,546 | | Barclays Facility - GBP | $126,925 | $0 | | Goldman Sachs Facility - GBP | $438,039 | $373,706 | | Deutsche Bank Facility | $27,300 | $123,434 | | Barclays Private Securitization | $1,837,360 | $1,587,780 | | Revolving Credit Facility | $37,500 | $0 | | Total Secured Debt Arrangements, net | $6,213,188 | $4,814,973 | - Weighted-average borrowing costs as of June 30, 2025, were applicable benchmark rates plus spreads of USD: **+2.30%**, GBP: **+2.08%**, EUR: **+2.07%**, SEK: **+1.50%**[131](index=131&type=chunk) - Approximately **41%** of outstanding secured borrowings were recourse to the company as of June 30, 2025[132](index=132&type=chunk) - The company amended its financial covenants effective June 30, 2025, changing the maximum ratio of total indebtedness to tangible net worth to a ratio of total indebtedness to total assets not to exceed **83.33%** (**81.82%** for Revolving Credit Facility) The company was in compliance with all covenants[154](index=154&type=chunk) [Note 8 – Senior Secured Term Loans, Net](index=25&type=section&id=Note%208%20%E2%80%93%20Senior%20Secured%20Term%20Loans,%20Net) - In June 2025, the company refinanced its existing 2026 and 2028 Term Loans with a new **$750.0 million** 2030 Term Loan, maturing in June **2030** and bearing interest at **SOFR + 3.25%**[156](index=156&type=chunk) Senior Secured Term Loans | Term Loan (in thousands) | Principal Amount | Carrying Value (June 30, 2025) | Rate | Maturity Date | | :----------------------- | :--------------- | :----------------------------- | :--- | :------------ | | 2030 Term Loan | $750,000 | $729,416 | SOFR + 3.25% | 6/13/2030 | - The 2030 Term Loan was issued at **99.3%** and has an all-in cost of **SOFR+3.92%** as of June 30, 2025[156](index=156&type=chunk) [Note 9 – Senior Secured Notes, Net](index=26&type=section&id=Note%209%20%E2%80%93%20Senior%20Secured%20Notes,%20Net) - The company has **$500.0 million** of **4.625%** Senior Secured Notes due **2029**, with a carrying value of **$496.8 million** as of June 30, 2025[162](index=162&type=chunk) - The **2029** Notes are secured by a first-priority lien and rank pari-passu with other first lien obligations[162](index=162&type=chunk) - The company was in compliance with all covenants related to the **2029** Notes as of June 30, 2025, and December 31, 2024[163](index=163&type=chunk) [Note 10 – Derivatives](index=26&type=section&id=Note%2010%20%E2%80%93%20Derivatives) - The company uses forward currency contracts to economically hedge interest and principal payments on foreign currency denominated loans and interest rate caps to manage variable cash flow exposure on borrowings[164](index=164&type=chunk)[165](index=165&type=chunk) - As of June 30, 2025, the company was in a net liability position with derivative counterparties, posting **$56.1 million** in collateral, compared to a net asset position with no collateral posted at December 31, 2024[166](index=166&type=chunk) Derivative Contracts | Derivative Type | Aggregate Number of Contracts (June 30, 2025) | Notional Amount (in thousands) | Weighted Average Years to Maturity | | :---------------- | :-------------------------------------------- | :----------------------------- | :------------------------------- | | Fx contracts - GBP | **110** | 673,578 | **1.35** | | Fx contracts - EUR | **29** | 272,678 | **0.68** | | Fx contracts - SEK | **12** | 603,079 | **0.87** | | Interest rate caps | **2** | 238,535 | **0.18** | Derivative Gain (Loss) | Derivative Gain (Loss) (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Forward currency contracts | $(82,139) | $6,377 | $(121,111) | $29,775 | | Interest rate caps | $65 | $94 | $23 | $450 | [Note 11 – Accounts Payable, Accrued Expenses and Other Liabilities](index=29&type=section&id=Note%2011%20%E2%80%93%20Accounts%20Payable,%20Accrued%20Expenses%20and%20Other%20Liabilities) Other Liabilities | Liability (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Collateral held under derivative agreements | $0 | $54,420 | | Accrued dividends payable | $37,852 | $37,976 | | Accrued interest payable | $35,003 | $28,261 | | Accounts payable and other liabilities | $10,607 | $11,574 | | General CECL Allowance on unfunded commitments | $5,057 | $5,948 | | Total | $88,519 | $138,179 | - Total accounts payable, accrued expenses, and other liabilities decreased by **$49.7 million**, primarily due to the absence of collateral held under derivative agreements at June 30, 2025, compared to **$54.4 million** at December 31, 2024[171](index=171&type=chunk) [Note 12 – Income Taxes](index=29&type=section&id=Note%2012%20%E2%80%93%20Income%20Taxes) - As a REIT, the company is generally required to distribute at least **90%** of its taxable income annually and is subject to U.S. federal, state, and local income taxes on its domestic taxable REIT subsidiaries (TRS)[173](index=173&type=chunk) - Income tax provision for both the three and six months ended June 30, 2025, and 2024, was **$0.1 million** and **$0.2 million**, respectively, related to TRS activities[174](index=174&type=chunk) - As of June 30, 2025, the company had net operating losses of **$8.5 million** and capital losses of **$25.2 million** available for carryforward[175](index=175&type=chunk) [Note 13 – Related Party Transactions](index=29&type=section&id=Note%2013%20%E2%80%93%20Related%20Party%20Transactions) - The company incurred **$8.4 million** and **$16.9 million** in base management fees to its Manager for the three and six months ended June 30, 2025, respectively, a decrease from the prior year[180](index=180&type=chunk) - The Management Agreement was automatically renewed in September 2024 and can be terminated by independent directors based on unsatisfactory performance or unfair fees, with a termination fee of three times the average annual base management fee[178](index=178&type=chunk)[179](index=179&type=chunk) - Apollo Global Funding, LLC, an affiliate of the Manager, received **$1.0 million** in arrangement fees for the 2025 refinancing of the 2030 Term Loan[183](index=183&type=chunk) - The company's **41.2%** equity interest in the Massachusetts Healthcare JV, formed with Apollo Co-Lenders, was deemed an equity method investment with a balance of **$23.2 million** as of June 30, 2025[188](index=188&type=chunk) [Note 14 – Share-Based Payments](index=31&type=section&id=Note%2014%20%E2%80%93%20Share-Based%20Payments) - The 2024 Equity Incentive Plan (2024 LTIP) was adopted, providing for grants of restricted common stock, RSUs, and other equity-based awards up to **7,500,000** shares[189](index=189&type=chunk)[190](index=190&type=chunk) - Stock-based compensation expense related to restricted stock and RSU vesting was **$3.4 million** and **$6.8 million** for the three and six months ended June 30, 2025, respectively, a decrease from the prior year[191](index=191&type=chunk) - As of June 30, 2025, unrecognized compensation expense for restricted stock and RSUs totaled approximately **$17.4 million**, expected to be recognized over a weighted-average period of **1.3 years**[191](index=191&type=chunk)[192](index=192&type=chunk) [Note 15 – Stockholders' Equity](index=32&type=section&id=Note%2015%20%E2%80%93%20Stockholders'%20Equity) - As of June 30, 2025, there were **138,943,831** shares of common stock and **6,770,393** shares of **7.25%** Series B-1 Cumulative Redeemable Perpetual Preferred Stock outstanding[195](index=195&type=chunk) Dividends Declared Per Share | Dividends Declared Per Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Common Stock | $0.25 | $0.35 | $0.50 | $0.70 | | Series B-1 Preferred Stock | $0.45 | $0.45 | $0.90 | $0.90 | - No common stock repurchase activity occurred during the three and six months ended June 30, 2025 As of June 30, 2025, **$131.6 million** remained available under the stock repurchase program[196](index=196&type=chunk) [Note 16 – Commitments and Contingencies](index=32&type=section&id=Note%2016%20%E2%80%93%20Commitments%20and%20Contingencies) - The company is involved in ongoing legal proceedings, including the AmBase Corporation lawsuit, with an appeal granted by the Court of Appeals on February 18, 2025 No reasonable estimate of possible loss can be made[199](index=199&type=chunk)[200](index=200&type=chunk) - A settlement agreement was reached on July 22, 2025, with the Commonwealth of Massachusetts regarding the Massachusetts Healthcare lawsuit, where the Commonwealth agreed to pay an additional **$44.0 million** (**$18.1 million** attributable to ARI)[201](index=201&type=chunk)[210](index=210&type=chunk) - As of June 30, 2025, the company had **$1.0 billion** in unfunded loan commitments, with approximately **$666.7 million** expected to be funded in the short term[202](index=202&type=chunk)[275](index=275&type=chunk) [Note 17 – Fair Value of Financial Instruments](index=33&type=section&id=Note%2017%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) Fair Value of Financial Instruments | Financial Instrument (in thousands) | Carrying Value (June 30, 2025) | Estimated Fair Value (June 30, 2025) | Carrying Value (December 31, 2024) | Estimated Fair Value (December 31, 2024) | | :---------------------------------- | :----------------------------- | :----------------------------------- | :--------------------------------- | :----------------------------------- | | Cash and cash equivalents | $177,623 | $177,623 | $317,396 | $317,396 | | Commercial mortgage loans, net | $8,479,438 | $8,346,330 | $6,715,347 | $6,616,694 | | Subordinate loans, net | $145,472 | $145,472 | $388,809 | $388,780 | | Secured debt arrangements, net | $(6,213,188) | $(6,213,188) | $(4,814,973) | $(4,814,973) | | Senior secured term loans, net | $(729,416) | $(750,938) | $(754,210) | $(757,772) | | Senior secured notes, net | $(496,826) | $(473,750) | $(496,433) | $(432,500) | | Debt related to real estate owned, held for investment, net | $(376,504) | $(376,504) | $(324,587) | $(324,587) | - Estimated fair values for cash, cash equivalents, Senior Secured Notes, and Term Loans are measured using observable **Level I** inputs, while other financial instruments use significant estimates or unobservable **Level III** inputs[203](index=203&type=chunk) [Note 18 – Net Income (Loss) per Share](index=34&type=section&id=Note%2018%20%E2%80%93%20Net%20Income%20(Loss)%20per%20Share) - Unvested Restricted Stock Units (RSUs) are considered participating securities and are included in the calculation of basic earnings per share[204](index=204&type=chunk) EPS Metrics | EPS Metric (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders, basic and diluted | $17,115 | $31,837 | $39,477 | $(76,641) | | Basic weighted-average shares of common stock outstanding | 138,943,566 | 140,438,676 | 138,792,126 | 141,154,140 | | Diluted weighted-average shares of common stock outstanding | 139,208,860 | 140,611,532 | 139,103,947 | 141,154,140 | | Basic EPS | $0.12 | $0.23 | $0.28 | $(0.54) | | Diluted EPS | $0.12 | $0.23 | $0.28 | $(0.54) | - Diluted EPS for the six months ended June 30, 2025, was **$0.28**, a significant improvement from a diluted loss per share of **$(0.54)** in the prior year period[206](index=206&type=chunk) [Note 19 – Segment Reporting](index=34&type=section&id=Note%2019%20%E2%80%93%20Segment%20Reporting) - The company operates as a single reportable segment, with its chief operating decision maker (CODM) being the senior management team[207](index=207&type=chunk) - The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is primarily derived from the difference between interest income on loans and financing costs[208](index=208&type=chunk) [Note 20 – Subsequent Events](index=35&type=section&id=Note%2020%20%E2%80%93%20Subsequent%20Events) - Subsequent to June 30, 2025, the company funded approximately **$54.7 million** for previously closed loans and received **$327.3 million** from loan repayments, including a full repayment of a **$250.4 million** first mortgage[209](index=209&type=chunk) - A settlement agreement was reached on July 22, 2025, with the Commonwealth of Massachusetts regarding the Massachusetts Healthcare lawsuit, resulting in an additional **$44.0 million** payment (**$18.1 million** attributable to ARI) by August 20, 2025[210](index=210&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key performance drivers, market conditions, and financial metrics [Overview](index=36&type=section&id=Overview) - Apollo Commercial Real Estate Finance, Inc. (ARI) operates as a REIT, focusing on originating, acquiring, investing in, and managing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments[214](index=214&type=chunk) - ARI is externally managed by ACREFI Management, LLC, an indirect subsidiary of Apollo Global Management, Inc., benefiting from Apollo's global infrastructure and expertise[215](index=215&type=chunk)[216](index=216&type=chunk) - The company is monitoring developments regarding the SEC's climate disclosure rules, which were stayed in April 2024 and whose defense was ended by the SEC in March 2025[217](index=217&type=chunk) [Current Market Conditions](index=37&type=section&id=Current%20Market%20Conditions) - External events, including public health issues, natural disasters, political/economic instability, and geopolitical issues, have adversely impacted the global economy and contributed to financial market volatility[218](index=218&type=chunk) - Recent macroeconomic trends, such as inflation and higher interest rates, continue to pose business risks[218](index=218&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Net Income and EPS Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders | $17,700 | $32,700 | $40,600 | $(74,900) | | Diluted EPS | $0.12 | $0.23 | $0.28 | $(0.54) | - Net income available to common stockholders for the three months ended June 30, 2025, decreased to **$17.7 million** (**$0.12** diluted EPS) from **$32.7 million** (**$0.23** diluted EPS) in the prior year[219](index=219&type=chunk) - For the six months ended June 30, 2025, net income available to common stockholders was **$40.6 million** (**$0.28** diluted EPS), a significant improvement from a net loss of **$(74.9) million** (**$(0.54)** diluted EPS) in the prior year[220](index=220&type=chunk) Quarter-over-Quarter Operating Metrics | Operating Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | Change (QoQ) | | :------------------------------------------ | :------------------------------- | :-------------------------------- | :----------- | | Net interest income | $43,070 | $39,485 | $3,585 | | Net income related to real estate owned | $4,188 | $3,108 | $1,080 | | Total operating expenses | $(14,917) | $(15,216) | $299 | | Increase in General CECL Allowance, net | $(3,113) | $(4,008) | $895 | | Valuation allowance, loans and other lending assets held for sale | $(1,236) | $0 | $(1,236) | | Net income before taxes | $20,855 | $26,107 | $(5,252) | - Net interest income increased by **$3.6 million** quarter-over-quarter due to loan portfolio growth, partially offset by higher debt balances[223](index=223&type=chunk) - Net income from real estate owned operations increased by **$1.1 million** quarter-over-quarter, primarily due to the seasonality of the D.C. Hotel's operations[224](index=224&type=chunk) - General CECL Allowance increased by **$3.1 million** in Q2 2025, driven by loan originations and extended repayment dates, partially offset by portfolio seasoning[225](index=225&type=chunk) - A **$1.2 million** fair value adjustment was recorded for a promissory note held for sale in Q2 2025[229](index=229&type=chunk) - Foreign currency translation and derivative gains/losses resulted in a net loss of **$8.4 million** in Q2 2025, compared to a net gain of **$1.6 million** in Q1 2025, mainly due to higher forward point estimates[230](index=230&type=chunk) Year-over-Year Operating Metrics | Operating Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------- | | Net interest income | $82,555 | $108,436 | $(25,881) | | Net income related to real estate owned | $7,296 | $4,604 | $2,692 | | Management fees to related party | $(16,920) | $(18,594) | $1,674 | | Net realized loss on investments | $0 | $(679) | $679 | | Increase in Specific CECL Allowance | $0 | $(149,500) | $149,500 | | Increase in General CECL Allowance, net | $(7,121) | $(8,442) | $1,321 | | Gain (loss) on foreign currency forward contracts | $(121,111) | $29,775 | $(150,886) | | Foreign currency translation gain (loss) | $114,263 | $(20,925) | $135,188 | | Net income (loss) before taxes | $46,962 | $(68,525) | $115,487 | - Net interest income decreased by **$25.9 million** year-over-year, primarily due to lower average index rates and loan balances, and the conversion of two commercial mortgage loans from floating to fixed rates[232](index=232&type=chunk)[233](index=233&type=chunk) - Net income from real estate owned increased by **$2.7 million** year-over-year, mainly due to higher net income from the Atlanta Hotel, which was impacted by catch-up depreciation in the prior year[234](index=234&type=chunk) - Management fees decreased by **$1.7 million** year-over-year due to lower Stockholders' Equity[236](index=236&type=chunk) - No change in Specific CECL Allowance in H1 2025, compared to a **$149.5 million** increase in H1 2024 related to two subordinate loans[239](index=239&type=chunk) - Foreign currency translation and derivative activities resulted in a net loss of **$6.8 million** in H1 2025, a significant shift from a net gain of **$8.9 million** in H1 2024[244](index=244&type=chunk) [Subsequent Events](index=41&type=section&id=Subsequent%20Events) - Subsequent to June 30, 2025, the company funded **$54.7 million** for existing loans and received **$327.3 million** from loan repayments, including a **$250.4 million** first mortgage[209](index=209&type=chunk)[245](index=245&type=chunk) - A settlement was reached in the Massachusetts Healthcare lawsuit, resulting in an additional **$44.0 million** payment (**$18.1 million** attributable to ARI) by August 20, 2025[210](index=210&type=chunk)[245](index=245&type=chunk) [Non-GAAP Financial Measures](index=41&type=section&id=Non-GAAP%20Financial%20Measures) - Distributable Earnings, a non-GAAP measure, adjusts GAAP net income for non-cash items like equity-based compensation, unrealized gains/losses, and CECL allowances, serving as a key factor for dividend setting[246](index=246&type=chunk)[250](index=250&type=chunk) Distributable Earnings | Distributable Earnings (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | | :--------------------------------------------------------- | :------------------------------- | :-------------------------------- | | Distributable Earnings | $36,416 | $33,235 | | Diluted Distributable Earnings per share of common stock | $0.26 | $0.24 | | Weighted-average diluted shares - Distributable Earnings | 141,178,754 | 141,297,044 | - Book value per share decreased from **$12.34** at December 31, 2024, to **$12.07** at June 30, 2025[253](index=253&type=chunk) [Investment Guidelines](index=42&type=section&id=Investment%20Guidelines) - Investment guidelines include maintaining REIT qualification, avoiding investment company registration, predominantly investing in target assets, and limiting single investment exposure to **20%** of net equity[254](index=254&type=chunk)[255](index=255&type=chunk) - Any changes or waivers to these guidelines require board of directors' approval[255](index=255&type=chunk) [Investment Activity](index=43&type=section&id=Investment%20Activity) - During the first six months of 2025, the company committed **$2.0 billion** to new loans (**$1.4 billion** funded at closing) and provided **$467.2 million** in add-on fundings[256](index=256&type=chunk) - Loan repayments and sales totaled **$724.0 million** during the same period[256](index=256&type=chunk) [Loan Portfolio Overview](index=43&type=section&id=Loan%20Portfolio%20Overview) Loan Portfolio Summary | Loan Portfolio (in thousands) | Carrying Value | Weighted-Average Coupon | Weighted-Average All-in Yield | Secured Debt Arrangements | Cost of Funds | Equity at Cost | | :---------------------------- | :------------- | :---------------------- | :---------------------------- | :------------------------ | :------------ | :------------- | | Commercial mortgage loans, net | $8,479,438 | 7.3% | 7.9% | $6,221,675 | 6.2% | $2,257,763 | | Subordinate loans, net | $145,472 | 0.0% | 0.0% | $0 | 0% | $145,472 | | Total Loans/Weighted-Average | $8,624,910 | 7.2% | 7.8% | $6,221,675 | 6.2% | $2,403,235 | - The portfolio's weighted-average origination LTV ratio was **57%** (excluding risk-rated '5' loans) as of June 30, 2025, indicating significant equity value[264](index=264&type=chunk) - The weighted-average risk rating of the loan portfolio was **3.0** as of June 30, 2025, based on a quarterly review assessing factors like LTV, property type, and market dynamics[267](index=267&type=chunk) Loan Portfolio Risk Rating Distribution | Risk Rating (in thousands) | Number of Loans | Total (Net of Specific CECL Allowance) | % of Portfolio | | :------------------------- | :-------------- | :------------------------------------- | :------------- | | 2 (Low risk) | 2 | $734,766 | 8.5% | | 3 (Moderate/average risk) | 47 | $7,731,635 | 89.3% | | 4 (High risk/potential for loss) | 1 | $73,112 | 0.8% | | 5 (Impaired/loss likely) | 3 | $124,245 | 1.4% | | Total | 53 | $8,663,758 | 100.0% | [Leverage Policies](index=46&type=section&id=Leverage%20Policies) - The company uses leverage solely for financing its portfolio, not for speculating on interest rate changes, and monitors limits set by credit providers and rating agencies[270](index=270&type=chunk) - The debt-to-equity ratio was **4.1** at June 30, 2025, up from **3.2** at December 31, 2024[272](index=272&type=chunk) - The company generally finances mortgage loans with **2.0 to 3.0 turns** of leverage and typically does not finance its subordinate loan portfolio due to inherent structural leverage[271](index=271&type=chunk) [Contractual Obligations, Liquidity, and Capital Resources](index=46&type=section&id=Contractual%20Obligations,%20Liquidity,%20and%20Capital%20Resources) - Current debt obligations include **$1.3 billion** in corporate debt, **$6.2 billion** in secured debt arrangements, and **$378.6 million** in debt related to real estate owned[274](index=274&type=chunk) - The company anticipates **$1.9 billion** in repayments of secured debt arrangements in the short term[274](index=274&type=chunk) - As of June 30, 2025, liquidity included **$177.6 million** cash, **$4.5 million** loan proceeds held by servicer, **$25.7 million** available borrowings, **$310.5 million** unencumbered assets, and **$83.6 million** additional capacity on construction financing[276](index=276&type=chunk) Borrowings Overview | Borrowings (in thousands) | Outstanding (June 30, 2025) | Weighted-Average Maturity (June 30, 2025) | Outstanding (December 31, 2024) | Weighted-Average Maturity (December 31, 2024) | | :------------------------ | :-------------------------- | :---------------------------------------- | :-------------------------------- | :------------------------------------------ | | Secured Credit Facilities | $4,346,815 | December 2028 | $3,235,982 | November 2026 | | Barclays Private Securitization | $1,837,360 | September 2027 | $1,587,780 | May 2027 | | Revolving Credit Facility | $37,500 | March 2026 | $0 | March 2026 | | Debt Related to Real Estate Owned | $378,589 | July 2027 | $327,662 | July 2027 | | Senior Secured Term Loans | $750,000 | June 2030 | $761,250 | January 2027 | | Senior Secured Notes | $500,000 | June 2029 | $500,000 | June 2029 | | Total Borrowings | $7,850,264 | | $6,412,674 | | - Common stock dividends decreased from **$0.35** per share in Q2 2024 to **$0.25** per share in Q2 2025, while preferred stock dividends remained constant at **$0.45** per share[286](index=286&type=chunk) [Critical Accounting Policies and Use of Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) - The most critical accounting policies involve significant judgment and assumptions, particularly for Real Estate Owned (REO) and Current Expected Credit Losses (CECL)[287](index=287&type=chunk) - Fair value of REO is determined using income, market, or cost approaches, requiring assumptions on cash flows, comparable sales, and replacement costs, which are inherently uncertain[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - The General CECL Allowance uses the WARM method, relying on historical loss rates from CMBS data, adjusted for macroeconomic forecasts (e.g., unemployment, real estate prices, market liquidity), and expected loan repayment timing[297](index=297&type=chunk)[298](index=298&type=chunk)[300](index=300&type=chunk) - Specific CECL Allowance for collateral-dependent loans is based on the fair value of the underlying collateral, adjusted for selling costs, when a borrower is experiencing financial difficulty, involving significant judgment in valuation methodology and inputs[302](index=302&type=chunk)[303](index=303&type=chunk) [Supplemental U.S. Federal Income Tax Considerations](index=50&type=section&id=Supplemental%20U.S.%20Federal%20Income%20Tax%20Considerations) - The One Big Beautiful Bill Act (OBBB), enacted July 4, 2025, relaxed the REIT asset test for taxable REIT subsidiaries to **25%** (from **20%**) for taxable years beginning after January 1, 2026[307](index=307&type=chunk) - The OBBB permanently extended the **20%** pass-through qualified business income deduction for ordinary REIT dividends and the maximum U.S. federal income tax rate of **37%** for individuals, both effective for tax years beginning after January 1, 2026[307](index=307&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to various market risks, including credit, interest rate, prepayment, market, inflation, and currency risks, and describes the strategies employed to manage these risks [Credit Risk](index=52&type=section&id=Credit%20Risk) - The company focuses on acquiring high credit quality assets to mitigate credit risk, employing a value-driven underwriting approach with emphasis on sponsor/borrower due diligence and cash flow assessment[309](index=309&type=chunk) [Interest Rate Risk](index=52&type=section&id=Interest%20Rate%20Risk) - The company is exposed to interest rate risk from its target assets and financing obligations, which are sensitive to fiscal/monetary policies and economic conditions[310](index=310&type=chunk) - Strategies to manage interest rate risk include structuring financing with diverse maturities, using hedging instruments (e.g., interest rate swaps), and employing securitization financing to match asset duration[313](index=313&type=chunk) Interest Rate Sensitivity Analysis | Currency | Net floating rate assets subject to interest rate sensitivity (in thousands) | 50 basis point increase: Increase to net interest income (in thousands) | 50 basis point increase: Increase to net interest income (per share) | 50 basis point decrease: Decrease to net interest income (in thousands) | 50 basis point decrease: Decrease to net interest income (per share) | | :------- | :--------------------------------------------------------- | :-------------------------------------------------------------------- | :--------------------------------------------------- | :-------------------------------------------------------------------- | :--------------------------------------------------- | | USD | $110,264 | $1,312 | $0.01 | $(367) | $0.00 | | GBP | $745,231 | $3,726 | $0.03 | $(3,726) | $(0.03) | | EUR | $285,257 | $437 | $0.00 | $190 | $0.00 | | SEK | $52,437 | $262 | $0.00 | $(262) | $0.00 | | Total | $1,193,189 | $5,737 | $0.04 | $(4,165) | $(0.03) | [Prepayment Risk](index=53&type=section&id=Prepayment%20Risk) - Prepayment risk, where principal is repaid faster than anticipated, is managed by including prepayment penalties in loan agreements[314](index=314&type=chunk) [Market Risk](index=53&type=section&id=Market%20Risk) - Commercial mortgage assets are subject to volatility from national/local economic conditions, real estate market dynamics, and other factors, which could reduce collateral value and lead to losses[315](index=315&type=chunk) [Inflation](index=53&type=section&id=Inflation) - The company's performance is primarily influenced by interest rates rather than inflation, as most assets and liabilities are interest rate sensitive[316](index=316&type=chunk) [Currency Risk](index=53&type=section&id=Currency%20Risk) - Exposure to foreign currency fluctuations from non-USD denominated loans and debt is mitigated through foreign currency forward contracts[317](index=317&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal control over financial reporting during the period - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely information collection, evaluation, and disclosure[318](index=318&type=chunk) - No material changes to internal control over financial reporting occurred during the period ended June 30, 2025[319](index=319&type=chunk) [PART II - OTHER INFORMATION](index=54&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed disclosures regarding legal proceedings, which are further elaborated in the notes to the financial statements - The company is involved in various claims and legal actions arising in the ordinary course of business, with further details provided in Note 16 – Commitments and Contingencies[323](index=323&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the comprehensive discussion of risk factors that could impact the company's operations, financial condition, and liquidity, as detailed in its most recent Annual Report on Form 10-K - Information regarding factors that could affect the company's results of operations, financial condition, and liquidity is discussed in 'Item 1A. Risk Factors' in the most recent Annual Report on Form 10-K[324](index=324&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there are no unregistered sales of equity securities or use of proceeds to report for the period [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company's operations [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report for the period [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, indentures, certifications, and XBRL-related documents - The exhibits include Articles of Amendment and Restatement, Amended and Restated Bylaws, Articles Supplementary for Preferred Stock, Specimen Stock Certificate, various Indentures, and certifications (**302** and **906**) as required by the Sarbanes-Oxley Act of **2002**[330](index=330&type=chunk) - XBRL Instance Document, Taxonomy Extension Schema, and Cover Page Interactive Data File are also filed as exhibits[330](index=330&type=chunk) ```