Core Viewpoint - The article compares Apollo Commercial Finance (ARI) and Ladder Capital (LADR) to determine which stock is more attractive to value investors [1] Valuation Metrics - ARI has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to LADR, which has a Zacks Rank of 4 (Sell) [3] - ARI's forward P/E ratio is 9.31, while LADR's forward P/E ratio is 10.74 [5] - ARI has a PEG ratio of 0.24, suggesting it is undervalued relative to its expected earnings growth, whereas LADR has a PEG ratio of 2.16 [5] - ARI's P/B ratio is 0.72, compared to LADR's P/B ratio of 0.87, indicating ARI's market value is lower relative to its book value [6] - Based on these metrics, ARI earns a Value grade of B, while LADR receives a Value grade of D [6] Earnings Outlook - ARI is noted for its improving earnings outlook, which enhances its attractiveness in the Zacks Rank model [7]

Company Performance - Apollo Commercial Finance (ARI) has returned approximately 10.7% year-to-date, outperforming the average gain of 2.7% in the Finance sector [4] - The Zacks Consensus Estimate for ARI's full-year earnings has increased by 33.8% over the past 90 days, indicating improving analyst sentiment and a positive earnings outlook [3] - ARI is part of the REIT and Equity Trust industry, which has seen a decline of about 4.8% this year, further highlighting ARI's strong performance relative to its peers [5] Industry Context - The Finance sector ranks 3 in the Zacks Sector Rank, which evaluates 16 different sector groups based on the average Zacks Rank of individual stocks [2] - The REIT and Equity Trust industry, where ARI operates, is currently ranked 167 in the Zacks Industry Rank [5] - Another stock in the Finance sector, AIA (AAGIY), has also outperformed the sector with a year-to-date return of 9.9% [4][6]

Group 1 - The credit markets have faced significant challenges due to rapidly rising interest rates, impacting property values and investment opportunities [1] - High Dividend Opportunities have been particularly affected by these market conditions, leading to a reevaluation of investment strategies [1] Group 2 - The Income Method promoted by the company aims to generate strong returns, targeting a yield of 9-10%, which could appeal to investors seeking reliable income streams [3] - A month-long paid trial is being offered at $49, with an additional 5% discount, to attract new investors to the portfolio [3]

Core Insights - Apollo Commercial Real Estate Finance Inc. (NYSE: ARI) did not generate sufficient distributable profits to cover its dividend in the first quarter of 2025, which is a significant concern for investors [1] Company Summary - The primary takeaway from ARI's 1Q25 earnings presentation is the inability to earn its dividend through distributable profits, indicating potential financial instability [1]

Q1 2025 Financial Results Apollo Commercial Real Estate Finance, Inc. April 24, 2025 Unless otherwise noted, information as of It should not be assumed that investments made in the future will be profitable or will equal the performance of the investments shown in this document. March 31, 2025 Forward Looking Statements and Other Disclosures Q1 Summary Results This presentation may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Se ...

Financial Data and Key Metrics Changes - Apollo Commercial Real Estate Finance reported distributable earnings of $33 million or $0.24 per share for Q1 2025, with GAAP net income of $23 million or $0.16 per diluted share, providing 96% coverage of the quarterly dividends [15][16] - The loan portfolio ended the quarter with a carrying value of $7.7 billion, up from $7.1 billion at year-end, with a weighted average yield of 7.9% [17][19] - The debt-to-equity ratio at quarter end was 3.5x, up from 3.2x at year-end, reflecting the recirculation of proceeds from repayments into new leveraged deals [22] Business Line Data and Key Metrics Changes - The first quarter saw continued velocity in loan originations, with $650 million of new loans committed, primarily secured by residential properties and a data center construction loan [9][10] - Loan repayments totaled $93 million during the quarter, which were quickly redeployed through new origination post-quarter end, amounting to $709 million in total commitments on new loans in Q2 to date [18][20] Market Data and Key Metrics Changes - The real estate market is experiencing modest spread widening and a more cautious tone, with a broad recession presenting the greatest risk to ongoing recovery [7][8] - Limited new supply due to tariff effects driving up construction costs is expected to positively impact long-term real estate values and fundamentals [8] Company Strategy and Development Direction - The company is focused on proactive asset management and executing plans on focus loans to maximize value recovery and convert capital into higher return opportunities [13] - The strategy includes financing developers of data centers with strong credit tenants and long-term leases, reflecting a commitment to sectors with strong secular tailwinds [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the loan portfolio's ability to produce distributable earnings that support the current quarterly dividend run rate, despite Q1 earnings being slightly below this rate [14][16] - The company anticipates a recovery in distributable earnings for the remaining quarters of 2025, driven by growth in the loan portfolio and recirculation of underperforming capital [16] Other Important Information - The company has defined pathways for each focus asset and is actively pursuing resolutions, with a focus on selling the Liberty Center asset in the latter part of the year [28] - The company ended the quarter with $218 million of total liquidity, comprised of cash on hand and committed undrawn credit capacity [22] Q&A Session Summary Question: Concerns about realizing losses on non-accruing assets - Management indicated that specific CECL allowances are tied to two assets, with plans to sell Liberty Center later this year and positive sales momentum for 111 West 57th Street [26][28] Question: Market impacts on loan repayments and new money deployment - Management noted that the market remains robust, with no anticipated slowdown in transactions despite recent volatility [34][36] Question: Updates on specific assets and portfolio growth - Management provided updates on various assets, indicating positive leasing activity and potential recapitalization strategies for the Manhattan office [56][63] Question: Exposure in the U.K. and Europe - Management explained that the company's European operations were established through relationships with U.S. sponsors and have developed a strong presence in the market over the past decade [87][90]

Core Viewpoint - The article compares Apollo Commercial Finance (ARI) and Ladder Capital (LADR) to determine which stock is more attractive to value investors [1] Group 1: Zacks Rank and Earnings Outlook - ARI has a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision trend, while LADR has a Zacks Rank of 4 (Sell) [3] - The improving earnings outlook for ARI positions it favorably in the Zacks Rank model [7] Group 2: Valuation Metrics - ARI has a forward P/E ratio of 9.28, compared to LADR's forward P/E of 10.57 [5] - ARI's PEG ratio is 0.23, indicating a favorable valuation relative to its expected earnings growth, while LADR's PEG ratio is 2.36 [5] - ARI's P/B ratio is 0.67, which is lower than LADR's P/B of 0.85, suggesting ARI is undervalued compared to its book value [6] - Based on these metrics, ARI earns a Value grade of B, while LADR receives a Value grade of C [6]

Financial Data and Key Metrics Changes - Apollo Commercial Real Estate Finance reported distributable earnings of $33 million or $0.24 per share for Q1 2025, with GAAP net income of $23 million or $0.16 per diluted share, providing 96% coverage of the quarterly dividend [12][16] - The loan portfolio increased to $7.7 billion from $7.1 billion at year-end, with a weighted average yield of 7.9% [13][16] - The debt to equity ratio at quarter-end was 3.5 times, up from 3.2 times at year-end [16] Business Line Data and Key Metrics Changes - The company committed to $650 million in new loans during Q1, with a total of $1.5 billion in year-to-date volume including add-on fundings [8][9] - Loan repayments totaled $93 million during the quarter, which were redeployed through new originations [13] Market Data and Key Metrics Changes - The real estate market is experiencing significant capital availability despite increased volatility, with a cautious tone emerging due to macroeconomic concerns [5][6] - Construction starts for multifamily and logistics properties are at ten-year lows, indicating limited supply which is expected to support long-term real estate values [6][7] Company Strategy and Development Direction - The company is focused on proactive asset management and maximizing value recovery from its loan portfolio [11] - There is a strategic emphasis on financing data centers and residential properties, which are expected to perform well even in recessionary scenarios [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about a potential broad recession being the greatest risk to the ongoing real estate recovery, but noted that real estate is better positioned than many other asset classes [5][7] - The company anticipates that Q1 results represent a trough, with expectations for distributable earnings to meet or exceed the quarterly dividend rate for the remaining quarters of 2025 [12][13] Other Important Information - The company has a strong pipeline of transactions in both the U.S. and Europe, with continued activity in loan originations [8][9] - The update on 111 West 50 Seventh Street indicated strong sales momentum, generating $35 million in net proceeds from unit closings [10] Q&A Session Summary Question: Concerns about realizing losses and redeploying capital - Management indicated that specific CECL allowances are tied to two assets, with plans to sell the Liberty Center asset later this year, which should help crystallize losses and allow for capital redeployment [19][20] Question: Market conditions affecting loan repayments and new money deployment - Management noted that the market remains robust, with no anticipated slowdown in transactions despite recent volatility [25][26] Question: Portfolio growth and repayment expectations - Management expects approximately $1.5 billion in repayments this year, with active market participation anticipated [34] Question: Performance of specific assets - Management provided updates on various assets, indicating positive leasing activity and potential for improved risk ratings [40][41][44][46] Question: Exposure in the UK and Europe - Management explained the company's established presence in Europe, highlighting a dedicated team and strong relationships that facilitate successful operations in the region [64][66]

Financial Performance - Net income available to common stockholders was $23 million, or $0.16 per diluted share[7]. - Distributable Earnings totaled $33 million, or $0.24 per diluted share, with a declared common stock dividend of $0.25 per share, resulting in an 11.0% dividend yield[7]. - The company reported a net income available to common stockholders of $22,923,000, resulting in a net income per diluted share of $0.16[48]. - Distributable earnings for the three months ended March 31, 2025, were $33,235,000, translating to a diluted distributable earnings per share of $0.24[49]. - The company incurred total operating expenses of $38,439,000 during the same period[48]. - Preferred dividends paid amounted to $3,068,000, impacting the net income available to common stockholders[48]. Loan Portfolio - The total loan portfolio reached $7.7 billion, with a weighted-average unlevered all-in yield of 7.9% and 95% of loans being first mortgages[7]. - The total senior loan portfolio amounts to $7,319 million, with $989 million in unfunded commitments[28]. - The office loan segment has a subtotal of $1,706 million, with $251 million in unfunded commitments[26]. - The hotel loan segment totals $1,604 million, with $29 million in unfunded commitments[27]. - The residential loan segment has a subtotal of $1,477 million, with $27 million in unfunded commitments[27]. - The retail loan segment totals $2,958 million, with $414 million in unfunded commitments[27]. - The industrial loan segment amounts to $543 million, with $235 million in unfunded commitments[28]. - The mixed-use loan segment totals $317 million, with $18 million in unfunded commitments[28]. - The weighted-average risk rating of the loan portfolio is 3.0, with a loan-to-value ratio of 57%[19]. Funding and Liquidity - Committed $650 million to new loans, with $460 million funded at close, and loan repayments and sales amounted to $93 million[7]. - Total liquidity at the end of the quarter was $218 million, including $170 million in cash[7]. - The company funded $994 million across four new originations in Q2 2025, bringing year-to-date fundings to over $1.5 billion[31]. - The company expects net future fundings to be $934,000,000 in 2025, decreasing to $9,000,000 in 2029 and beyond[42]. - The company has a cash and cash equivalents balance of $166,424,000 as of March 31, 2025[46]. Debt and Capital Management - Upsized secured credit facility with JPMorgan by $500 million, increasing total capacity to $2 billion and extending maturity to March 2030[7]. - Closed two new secured credit facilities with an aggregate borrowing capacity of $690 million[7]. - The company has a debt to equity ratio of 3.5x, indicating a conservative capital management strategy[35]. - The foreign loan portfolio is structured to mitigate foreign exchange risk, with 73% of secured debt arrangements in local currency[39]. Revenue and Interest Income - Total net revenue for the three months ended March 31, 2025, was $65,816,000, with net interest income of $39,485,000[48]. - The interest income from commercial mortgage loans was $143,985,000, with an interest expense of $105,057,000[48]. Asset and Liability Overview - Total assets as of March 31, 2025, amounted to $8,784,193,000, while total liabilities were $6,923,585,000[46]. - The expected increase in net interest income sensitivity to benchmark rates is projected at $0.01 for each increase in rates[42].

Core Insights - Apollo Commercial Finance reported a revenue of $39.49 million for the quarter ended March 2025, reflecting a year-over-year decline of 30.3% and an EPS of $0.24 compared to $0.35 a year ago [1] - The reported revenue fell short of the Zacks Consensus Estimate of $44.63 million, resulting in a surprise of -11.53%, while the EPS also missed the consensus estimate of $0.25 by -4.00% [1] Financial Performance Metrics - The company’s net interest income from commercial mortgage loans was $143.99 million, slightly above the average estimate of $143.82 million from two analysts [4] - Interest income from subordinate loans and other lending assets was reported at $0.56 million, below the average estimate of $0.83 million [4] - Revenue from real estate owned operations reached $26.33 million, exceeding the two-analyst average estimate of $24.50 million [4] Stock Performance - Over the past month, shares of Apollo Commercial Finance have returned -7.2%, compared to a -5.1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), suggesting potential outperformance against the broader market in the near term [3]