NEW YORK--(BUSINESS WIRE)--Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today announced the Company closed three first mortgage loans totaling $290 million. Year-to-date, ARI has committed to invest over $987 million of equity into $1.4 billion of transactions.
Commenting on the new transactions, Scott Weiner, the Chief Investment Officer of the Company’s manager, said: “The diversity of these new, floating-rate first mortgage loans demonstrates the breadth of the Company’s origination platform and the broad scope of the Company’s underwriting and structuring abilities. In addition, each of these transactions has well-capitalized, strong sponsorship and is expected to generate attractive risk-adjusted returns for ARI’s growing commercial real estate debt portfolio.”
ARI closed three loan transactions totaling $290 million. The transactions include the following:
- $165 million ($20 million of which was funded at closing) floating-rate first mortgage loan for the development of the majority of the retail portion of a mixed-use lifestyle center in Cincinnati, Ohio. When completed, the 65-acre property will consist of 626,791 square feet of retail space, a 200,000 flagship retail building, 233 residential units, a 130-key hotel and 4,216 structured and surfaced parking spaces. The balance of the loan will be funded throughout the next eighteen months. The first mortgage loan has a 42-month term with two one-year extension options and a loan-to-cost of approximately 56%. Over the next eighteen months, the first mortgage loan was underwritten to generate an internal rate of return(1) (“IRR”) of approximately 10% on an unlevered basis. After the eighteen month period, ARI anticipates the Company will finance the loan, and on a levered basis, the first mortgage loan was underwritten to generate an IRR of approximately 14%;
- $67 million floating-rate first mortgage loan for the acquisition and predevelopment of an existing 12-story industrial building planned to be converted into a luxury residential condominium with approximately 86,000 square feet of net sellable residential space located in the West Village neighborhood of New York City. The first mortgage loan is part of an $87 million first mortgage which consists of ARI’s $67 million A-note and a subordinate $20 million B-note. ARI will have the option, but not the obligation, to participate in the development financing for the property. The A-note has an 18-month term and one six-month extension option and a loan-to-cost of approximately 58%. The A-note loan was underwritten to generate a levered IRR of approximately 25%; and
- $58 million floating rate first mortgage loan secured by a 330-unit, eight building apartment community and 36 single-family rental homes located in Williston, North Dakota. Williston is located at the epicenter of oil drilling activity for the Bakken Formation and the property is part of a master-developed residential community. The first mortgage loan has a three-year term with two one-year extension options and an appraised loan-to-value of 73%. The first mortgage has been underwritten to generate a levered IRR of approximately 13%.
In November, ARI received a $25 million principal repayment from a first mortgage loan secured by an office condominium in New York City. Also in November, ARI received a $31 million principal repayment from a first mortgage loan secured by a hotel in New York City.
About Apollo Commercial Real Estate Finance, Inc.
Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a real estate investment trust that primarily originates, invests in, acquires and manages performing commercial first mortgage loans, subordinate financings, CMBS and other commercial real estate-related debt investments. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company and an indirect subsidiary of Apollo Global Management, LLC, a leading global alternative investment manager with approximately $164 billion of assets under management at September 30, 2014.
(1) The underwritten IRR for the investments listed in this press release reflect the returns underwritten by ACREFI Management, LLC, the Company’s external manager (the “Manager”), calculated on a weighted average basis assuming no dispositions, early prepayments or defaults. With respect to certain loans, the underwritten IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, and assumes no defaults. IRR is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment. It is the discount rate that makes the net present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on investment). It is derived from the negative and positive cash flows resulting from or produced by each transaction (or for a transaction involving more than one investment, cash flows resulting from or produced by each of the investments), whether positive, such as investment returns, or negative, such as transaction expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected to occur, and compounding interest accordingly. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in this press release. See “Item 1A—Risk Factors—The Company may not achieve its underwritten internal rate of return on its investments which may lead to future returns that may be significantly lower than anticipated” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the press release over time.
Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These forward-looking statements include information about possible or assumed future results of the Company's business, financial condition, liquidity, results of operations, plans and objectives. When used in this release, the words believe, expect, anticipate, estimate, plan, continue, intend, should, may or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; the Company’s ability to deploy the proceeds of its capital raises or acquire its target assets; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. For a further list and description of such risks and uncertainties, see the reports filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.