Apollo Commercial Real Estate Finance Inc. (ARI) has reported its third-quarter 2025 financial results, showing significant activity in loan originations and repayments. The company achieved a GAAP net income of $48 million, or $0.34 per diluted share. This performance marks a notable period for the commercial real estate lender.
Distributable earnings for the quarter reached $42 million, translating to $0.30 per share. However, run-rate distributable earnings came in at $32 million, or $0.23 per share, which was slightly below the dividend level. This difference highlights the timing of capital redeployment efforts.
Key Takeaways
- GAAP Net Income reached $48 million ($0.34 per share).
- $1 billion in new loan originations during Q3, with $3 billion year-to-date.
- Loan portfolio carrying value stands at $8.3 billion.
- Leverage reduced from 4.1x to 3.8x quarter-over-quarter.
- Strong liquidity maintained at $312 million.
Robust Origination and Repayment Activity
ARI demonstrated strong momentum in its lending operations during the third quarter. The company committed to an additional $1 billion in new loans, bringing its year-to-date originations to an impressive $3 billion. This activity positions ARI for a potential record year in commercial real estate loan originations, with over $19 billion closed to date.
Quick Fact
The weighted average unlevered yield on ARI's loan portfolio is 7.7%, indicating a healthy return on its lending activities.
Repayments and sales also saw significant volume, totaling $1.3 billion for the quarter. Year-to-date, these figures stand at $2.1 billion. This pace of repayments is tracking expectations and reflects an active market environment.
"The capital markets are fully open, and there is improved operating performance across asset classes. The market has accepted a valuation reset, leading to a healthy pace of repayments," stated Stuart Rothstein, CEO of ARI. "We expect this trend to continue, though it may be lumpy quarter-to-quarter."
Strategic Market Presence
ARI continues to leverage its strong presence in Europe. The company benefits from a fragmented lender landscape and a less developed securitization market in the region. This strategic positioning allows ARI to capitalize on unique opportunities and maintain a competitive edge.
Financial Health and Portfolio Overview
The company's loan portfolio maintains a carrying value of $8.3 billion. Its book value per share is reported at $12.73, excluding the general CECL allowance and depreciation. These figures demonstrate a solid foundation for ARI's operations.
Liquidity remains robust, with $312 million in cash available. This includes committed undrawn capacity and loan proceeds held by the servicer, providing financial flexibility for future investments and operations.
Understanding CECL Allowance
The Current Expected Credit Loss (CECL) allowance is a financial accounting standard that requires companies to estimate and provision for expected credit losses over the life of their financial instruments. An increase in this allowance can indicate potential credit risk concerns, even if slight.
Leverage decreased from 4.1 times to 3.8 times quarter-over-quarter. This reduction indicates a more conservative financial stance, though it also suggests a slight reduction in immediate financial flexibility for new deployments. The general CECL allowance increased by $1 million due to origination activity, now standing at 438 basis points.
Key Asset Updates and Future Outlook
During the earnings call, CEO Stuart Rothstein provided updates on several key assets. For 111 West 57th Street, only three units remain, including a quadplex and a penthouse. Sales are anticipated to finalize in early 2026. This project is nearing its conclusion, freeing up capital.
The Brook and Liberty Center
The Brook asset is performing well, and if leasing continues as expected, ARI plans to bring it to market in late spring or early summer of 2026. A transaction closing is aimed for late third or early fourth quarter of 2026.
Regarding the Liberty Center asset, the parent company of the movie theater filed for bankruptcy. While the theater continues to pay rent, it operates below optimal levels. ARI is actively involved in the bankruptcy proceedings and expects to assess an exit timeline by late first or early second quarter of next year.
- 111 West 57th Street: Three units remaining, sales expected early 2026.
- The Brook: Market entry planned for late spring/early summer 2026, closing by Q4 2026.
- Liberty Center: Movie theater parent in bankruptcy, exit timing assessment by Q2 2026.
The Mayflower hotel continues to perform well, experiencing some expected seasonality in its third-quarter numbers. The focus remains on optimizing expenses to boost net cash flow.
Leverage Target
ARI aims to maintain a leverage level of approximately four turns when fully deployed and capital efficient, according to CEO Stuart Rothstein. This includes corporate leverage from the Term Loan B and senior secured notes.
While run-rate distributable earnings were slightly below the dividend, this is attributed to the timing of capital redeployment. The company's overall financial health, strong origination pipeline, and active management of its portfolio suggest a stable outlook for the coming quarters.
