Apollo Commercial Real Estate Finance, Inc. (ARI)·Q3 2025 Earnings Summary

Executive Summary

• Q3 delivered mixed optics: GAAP EPS of $0.34 benefited from a $17.4M litigation gain, while “run-rate” Distributable Earnings (DE) were $0.23 per share, slightly below the dividend; total DE was $0.30, covering the dividend 1.2x .
• Street vs. actual: normalized EPS (Primary EPS) modest miss ($0.23 vs. $0.25 est*) while “revenue” (S&P Global definition) materially beat ($68.0M vs. $47.7M est*). Company-reported total net revenue was $61.6M .
• Portfolio momentum: $1.0B new originations in Q3 (YTD $3.0B), repayments $1.3B in Q3 (YTD $2.1B), and add-on fundings $234M; loan book $8.3B, 98% first mortgage, 98% floating, W/A yield 7.7%, W/A risk rating 3.0 .
• Balance sheet/liquidity: $312M liquidity (incl. $259M cash), revolver upsized to $275M, new credit facility adding $280M capacity; leverage at 3.8x vs. 4.1x prior quarter .
• Potential near-term catalysts: redeployment of 111 West 57th Street proceeds (three units closed post-Q3 for ~$54M) and strong originations pipeline could lift Q4 earnings, with further upside into 2026 as “focus assets” are resolved .

What Went Well and What Went Wrong

What Went Well

• Strong origination engine and pipeline: “With $1.0 billion of new loan originations during the quarter…continued to benefit from the strength of the Apollo real estate credit platform.” Management expects earnings benefit to start in Q4 .
• Portfolio construction and credit mix: $8.3B portfolio with 98% first mortgages, 98% floating, W/A yield 7.7%, W/A risk rating 3.0; 54% originated post‑2022 rate hikes, tilting to fresher vintage risk .
• Liquidity and financing breadth: $312M liquidity, new $280M secured facility, revolver upsized to $275M and extended to August 2028; lenders “remain actively engaged” across facilities .

What Went Wrong

• Slight shortfall in “run-rate” earnings vs. dividend: DE prior to realized items of $0.23 per share lagged the $0.25 dividend due to timing of redeployment; management flagged Q4 uplift as proceeds are reinvested .
• Realized losses still a drag: $7.4M realized loss tied to a discounted office payoff and note sale, offset by $17.4M litigation gain; optics complicate underlying run-rate comparison .
• FX and estimate optics: S&P “revenue” definition beat but can differ from company’s total net revenue ($61.6M); normalized EPS tracked by Street ($0.23) was below ~$0.25 est*, suggesting modest disappointment on ex‑items earnings power .

Financial Results

Quarterly performance vs prior periods and dividend

Street vs actual (S&P Global consensus)

Values retrieved from S&P Global.
Note: Company-reported total net revenue for Q3 2025 was $61.6M .

KPIs and balance sheet

Portfolio mix (carrying value)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “With $1.0 billion of new loan originations during the quarter ARI continued to benefit from the strength of the Apollo real estate credit platform…we expect the resulting benefit to earnings to begin materializing in the fourth quarter.” — Stuart Rothstein, CEO .
• “Run rate distributable earnings…was slightly below the dividend level, given the timing of redeployment…Reinvestment of proceeds from unit sales at 111 West 57th Street will provide upside to earnings in Q4 and further in 2026.” — Anastasia Mironova, CFO .
• “ARI’s ability to deploy capital in Europe continues to be a differentiating factor…with the lower rate environment enabling transactions to have positive leverage again.” — CEO .

Q&A Highlights

• 111 West 57th and The Brooke timing: goal to finish 111 in early 2026; bring The Brooke to market late spring/early summer 2026 with potential closing late Q3/early Q4 2026 .
• Leverage framework: run the business around ~4x when fully deployed, with back leverage in the 65–75% range on senior loans .
• Liberty Center update: tenant bankruptcy process underway; potential for new operator; better exit visibility by late Q1/early Q2 next year .
• Repayment dynamics: markets “fully open” with improved clarity; expect healthy but lumpy repayments; redeployment remains strong .
• Sector stances: ongoing interest in hotels; constructive on housing (incl. senior housing); office is market-specific, with better traction in NY/London .

Estimates Context

• Normalized EPS (Primary EPS) modest miss: $0.23 vs. $0.25 est* for Q3 2025. Company-reported DE prior to realized items also $0.23, underscoring timing-related redeployment headwind .
• “Revenue” (S&P definition) strong beat: $67.99M vs. $47.73M est*; company-reported total net revenue was $61.62M .
• Estimate breadth: 6 EPS estimates; 3 revenue estimates for Q3 2025*.

Values retrieved from S&P Global.

Key Takeaways for Investors

• Run-rate earnings inflecting: Timing pushed “run-rate” DE below dividend in Q3, but redeployment of 111 W 57th proceeds and YTD originations point to Q4 uplift and 2026 acceleration .
• Quality and flexibility of funding are differentiators: $312M liquidity, new/upsized facilities, and 2029 TLB maturity profile support scalable redeployment at target ROEs .
• Mix shift improves resilience: 98% first mortgages, 98% floating, and 54% post‑2022 originations enhance credit quality and rate sensitivity management .
• European platform is a competitive moat: ARI leverages Apollo’s leading alternative lending footprint in Europe amid resurgent activity and fragmented competition .
• Watch the focus assets cadence: Post‑quarter 111 W 57th closings (~$54M) and Liberty Center process are key swing factors for book value recovery and capital redeployment velocity .
• Expect estimate revisions: Slight normalized EPS miss vs. Street likely narrows as redeployment flows through; revenue beat suggests higher fee/REO contributions this quarter, but recurring NII improvement hinges on reinvestment pace .
• Dividend looks better covered ahead: Total DE already covered the dividend in Q3 ($0.30 vs. $0.25), and management commentary implies improving coverage in Q4 and into 2026 .