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DATE
Friday, October 31, 2025 at 10 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Stuart Rothstein
Chief Investment Officer — Scott Weiner
Chief Financial Officer — Anastasia Mironova
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TAKEAWAYS
New Loan Originations -- $1 billion in new loans committed in Q3 2025, bringing year-to-date originations to $3 billion.
Total Loan Portfolio -- $8.3 billion carrying value at quarter end.
Portfolio Mix -- 54% of loans are post-2022 rate hike originations.
Repayments -- $1.3 billion in repayments and sales in Q3 2025, totaling $2.1 billion year to date.
Residential Exposure -- Residential loans, including multifamily, for-sale residential, senior housing, and student housing, comprise 31% of the loan portfolio, and represent the largest underlying property type.
Asset Sales at 111 West 57th Street -- Six new contracts signed since last call; three closed post quarter end, generating approximately $55 million in proceeds after Q3 2025
Brook Investment Exit -- The Brook, a multifamily development, is on target for exit in 2026.
GAAP Net Income -- $48 million, or $0.34 per diluted share for 2025.
Distributable Earnings -- Distributable earnings were $42 million, or $0.30 per share for 2025.
Run Rate Distributable Earnings -- Run rate distributable earnings were $32 million, or $0.23 per share for 2025; slightly below the dividend level due to timing of capital redeployment.
Book Value Per Share -- $12.73, excluding general CECL allowance and depreciation, up by $0.14 at quarter end.
Weighted Average Unlevered Yield -- 7.7% at quarter end for the loan portfolio.
Add-on Funding -- $234 million in add-on funding for previously closed loans in the quarter ended September 30, 2025, and $702 million year to date.
Additional Loan Commitments After Quarter End -- $388 million committed after Q3 2025 and $324 million already funded after Q3 2025 quarter close.
Liquidity Position -- $312 million at Q3 2025, comprised of cash, undrawn committed facility capacity, and loan proceeds held by servicer.
Leverage Ratio -- Down from 4.1x at June 30 to 3.8x at September 30.
Credit Facility Expansion -- Revolving credit facility upsized by $115 million and maturity extended to August 2028; two new banks joined the syndicate.
Risk Rating -- Weighted average risk rating of 3.0, unchanged from the previous quarter; no new asset-specific CECL allowances or rating changes recorded.
CECL Reserve Movements -- Specific reserve decreased $7.5 million due to partial reversal and charge-off on Michigan office loan in Q3 2025. General CECL allowance increased by $1 million in Q3 2025.
Loan Pipeline -- Robust pipeline of new loans expected to close by year end.
SUMMARY
Management signaled a sustained origination pace, underpinned by redeployment of capital from maturing or exited focus assets. The company stated that residential assets constituted the largest portfolio component at 31%, reflecting a strategic property type shift. New European loan facility and expanded revolving credit highlight ongoing funding diversification efforts. Asset sales and contractual progress at 111 West 57th Street are on track, with expectations for resolution of major focus assets and additional capital rotation into 2026.
Rothstein disclosed, "early part of next, you know, sometime in the first part of next year, we would hope to be at the finish line on 111 West 57th Street," clarifying targeted sales timing for that asset.
Rothstein outlined expected Brook exit timing, stating, "bringing the asset to market, you know, call it sometime in the late spring, early summer next year," with potential closing in late third or early fourth quarter.
Rothstein noted core leverage expectations of "around four terms of leverage when we are fully deployed and capital efficient, including return of capital from focus assets."
Liberty Center disposition timing remains uncertain and is contingent on current tenant bankruptcy process conclusions, with a more definitive timeline projected "late Q1, early Q2 of next year." according to Stuart Rothstein.
Offices in New York and London are seeing positive leasing momentum, while Chicago performance is mixed by asset and building age.
The $17.4 million litigation settlement gain from the Massachusetts healthcare portfolio contributed to the reported book value per share increase in Q3 2025.
INDUSTRY GLOSSARY
CECL (Current Expected Credit Loss): An accounting standard requiring companies to estimate and report anticipated credit losses on financial assets, including loans, cumulatively over their lifetime.
Distributable Earnings: A supplemental, non-GAAP performance measure representing net income available for distribution, typically excluding certain non-cash or one-time items.
Run Rate Distributable Earnings: An adjusted measure of distributable earnings that removes realized gains/losses on investments and litigation settlements to show normalized, ongoing earning power.
Focus Assets: Assets specifically identified by management as a strategic priority for resolution, divestment, or capital redeployment.
Leverage Ratio: A measure of company debt relative to equity or assets, here expressed as a multiple (e.g., 3.8x), indicating the extent of borrowed capital supporting the asset base.
Full Conference Call Transcript
Stuart Rothstein: Good morning, and thank you for joining us on the Apollo Commercial Real Estate Finance third quarter 2025 earnings call. As usual, I am joined today by Scott Weiner, our chief investment officer, and Anastasia Mironova, our chief financial officer. ARI's third quarter was highlighted by continued strong origination activity and progress with our focus assets, as transaction activity and operating in the broader real estate market continues to improve. Importantly, as capital from focus assets is freed up and made available for redeployment into newly originated loans, ARI continues to benefit from the strength and breadth of the Apollo real estate credit platform.
Overall, Apollo is on pace for a record year of commercial real estate loan originations, with over $19 billion closed to date. This provides ARI with an incredibly robust pipeline of transactions and enables us to effectively deploy capital and construct a diversified loan portfolio on behalf of ARI. During the quarter, ARI committed to an additional $1 billion of new loans, bringing year-to-date originations to $3 billion. Consistent with recent activity, this quarter's originations were divided between the US and Europe. ARI's ability to deploy capital in Europe continues to be a differentiating factor. Apollo is the most active alternative lender in Europe, which has a fragmented lender universe given the less developed securitization market.
Fundamentals in Europe remain healthy across property types, and with the lower rate environment enabling transactions to have positive leverage again, the acquisition market has picked up significantly. The third quarter loans closed included residential transactions, and as of the end of the third quarter, residential loans encompassing multifamily, for-sale residential, senior housing, and student housing represent ARI's largest underlying property type in the portfolio at 31%. Repayments continued to track expectations with $1.3 billion of repayments and sales during the quarter, bringing year-to-date repayments to $2.1 billion. Turning now to the loan portfolio and an update on ARI's focus assets. At quarter end, the carrying value of the portfolio totaled $8.3 billion.
54% of ARI's loan portfolio now represents loans originated post the 2022 rate hikes. The headline for ARI's focused assets is continued sales momentum at 111 West 57th Street, with six new contracts signed since the last earnings call, three of which closed post quarter end, generating approximately $55 million in proceeds and further reducing ARI's loan basis. At the Brook, ARI's multifamily development in Brooklyn, we have seen strong leasing velocity to date and are still on target to exit that investment in 2026. Anastasia will discuss in her comments, but we expect this capital rotation out of focus assets will have a meaningful impact on ARI's earnings run rate going forward.
Shifting to the right side of our balance sheet, ARI continues to maintain robust liquidity and has access to additional capital from the company's various financing facilities. ARI's lenders remain actively engaged in the sector with ongoing dialogue around in-place or potential new financings. ARI continues to diversify the company's lender base and expand sources of capital, having entered into a new secured borrowing facility during the quarter in Europe. In addition, we upsized the borrowing capacity on our revolving credit facility by $115 million and extended the maturity to August 2028. With that, I will turn the call over to Anastasia to review ARI's financial results for the quarter. Thank you, Stuart.
Anastasia Mironova: And good morning, everyone. For 2025, ARI reported GAAP net income of $48 million or 34¢ per diluted share of common stock. Distributable earnings were $42 million or 30¢ per share. Distributable earnings prior to realized loss on investments and realized gain on litigation settlement, or the measure we refer to as run rate distributable earnings, was $32 million or 23¢ per share of common stock. Run rate distributable earnings during the quarter was slightly below the dividend level, given the timing of redeployment of capital within the quarter. It is worth noting that we often do not have control over the timing of new loan transactions closing and its correlation to the timing of repayment in the portfolio.
Reinvestment of proceeds from unit sales at 111 West 57th will provide upside to earnings in Q4 and further in 2026. We continue to address other focused assets in our portfolio and foresee resolutions on a number of them towards the second part of the year in 2026. Recycling of capital from those self-performing assets will provide further uplift to earnings in 2026. During the quarter, we received discounted payoff proceeds associated with our Michigan office loan, which was previously fully reserved. As a result, we recorded a partial reversal of the specific CECL allowance in the amount of $1.3 million and the charge-off of $6.2 million.
We also realized a $1.2 million loss on sale of the promissory note, which was previously reflected as note receivable held for sale on our balance sheet. This realized loss was in line with the previously recorded valuation allowance for this asset. Additionally, during the quarter, we recognized a $17.4 million gain in connection with the settlement of the litigation related to one of the assets in the Massachusetts healthcare portfolio. The aggregate impact of these events was a 14¢ increase in book value per share. As a result, our book value per share, excluding general CECL allowance and depreciation, was $12.73 as of the end of the quarter.
Our loan portfolio ended the quarter with a carrying value of $8.3 billion and a weighted average unlevered yield of 7.7%. As Stuart mentioned, we had a strong quarter of loan origination totaling $1 billion and completing an additional $234 million in add-on funding for previously closed loans. Year to date, through Q3 quarter end, we originated over $3 billion of new commitments and completed a total of $702 million of add-on funding for previously closed loans. Subsequent to quarter end, we committed an additional $388 million towards new loans, $324 million of which have already been funded.
In addition to those closings, we have a robust pipeline of loans which are expected to close before the end of the year. With respect to risk rating, the weighted average risk rating of the portfolio at quarter end was 3.0, unchanged from the previous quarter end. There were no new asset-specific CECL allowances recorded during the quarter and no other movements in ratings across the portfolio. Our specific CECL reserve decreased by $7.5 million due to partial reversal and the associated charge-off on the Michigan office loan, as mentioned earlier. Our general CECL allowance increased this quarter by $1 million due to origination activity in the portfolio.
Total CECL allowance percentage points of the loan portfolio amortized cost basis is up slightly quarter over quarter from 429 basis points to 438 basis points, driven by a slightly lower loan portfolio balance at the end of the quarter compared to the previous quarter end. We ended the quarter with strong liquidity of $312 million, comprising cash on hand, committed undrawn capacity on existing facilities, and loan proceeds held by the servicer. Our leverage is down quarter over quarter from 4.1 times at June 30 to 3.8 times at September 30.
We continue to diversify and strengthen our banking relationships, with two new banks joining the syndicate to our revolving credit facility, which was upsized by $115 million during the quarter and extended by three years. Liquidity in the secured borrowing market remains plentiful, and with continued spread tightening, we have been able to generate returns consistent with our historical and target levels. With that, we would like to ask the operator to open the line for questions. Thank you.
Operator: As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. Our first question comes from Doug Harter with UBS. You may proceed.
Doug Harter: Thanks. You know, as you think about the timeline to monetizing the Brook and, you know, how should we think about the pacing of future sales at 111 West 57th? Yeah. Thanks, Doug. Look. Let me take those in reverse because it's at 111 West 57th, we're effectively down to three units at this point. You know, including what the market knows of as a quadplex and then another penthouse. So there's actually, you know, foot traffic and interest continues to be good at 111 West 57th Street. I would say, you know, given the size of the units we're talking about moving, it's tough to know exactly from a timing perspective.
But certainly, you know, our expectation in dialogue with the team working on it is that, you know, certainly the early part of next, you know, sometime in the first part of next year, we would hope to be at the finish line on 111 West 57th Street. Think with respect to the Brook, if things keep along pacing from a lease-up perspective, and there's nothing else unforeseen in the marketplace. You know. Today, we would think about bringing the asset to market, you know, call it sometime in the late spring, early summer next year with the hope of closing a transaction sometime late third quarter, early fourth quarter. Great.
And then, you know, as you think about leverage, you know, what do you think is the right leverage level, you know, for this business to be run, you know, as you think about, you know, the level of redeployment that you can do as you free up capital?
Stuart Rothstein: Let me look. I think for us, it hasn't changed much. What's, you know, the leverage has moved up in the company over time only because we've pivoted out of your mezz loans and more into all senior loans where you end up, you know, roughly same attachment points. And generating your ROE that way. I think, you know, for us, we will continue to originate senior loans at, you know, call it, and then back lever somewhere in the, you know, 65 to 75% range from a back leverage perspective.
That would imply ultimately a leverage level, you know, call it in the mid-threes, but then you've got some corporate leverage as well through the term loan B and the senior secured notes. So we're gonna run the business around, you know, around four terms of leverage when we are fully deployed and capital efficient, including return of capital from focus assets.
Doug Harter: Great. Thank you, Stuart.
Stuart Rothstein: Sure. Thank you.
Operator: Our next question comes from Harsh Hemnani with Green Street. You may proceed.
Harsh Hemnani: Thank you. And thanks for the update on, you know, the Brook and 111 West 57th. Both of it seem like, you know, 2026, excuse me, and part of it in the '26. Do you have any thoughts or update on the Liberty Center asset and how that's progressing?
Stuart Rothstein: Yeah. The, you know, the news on Liberty Center, which was actually not a surprise when it happened. I guess we knew it was ultimately going to happen, but we thought, you know, the we thought the market would accept a sale through that, which was the parent of the movie theater at Liberty Center filed bankruptcy. I think the feedback through the sales process that we were early stages on earlier in this year was that, you know, we'll get a better response from the marketplace on the sales side as that gets resolved. At this point, the movie theater is continuing to pay rent. But is, I would say, operating the theater suboptimally.
We will let the process play out through the bankruptcy court. We are very much involved in the process. And we'll determine whether they are going to accept or reject the lease. It is clear from incoming inquiries that there are other operators interested in the movie theater space if it becomes available. But at this point, we need to let that process play out, and I think we will be in a better position to assess timing of an exit probably late Q1, early Q2 of next year.
Harsh Hemnani: Got it. That's how it works. And then maybe on the repayment side, it's been a little lumpy this year, but this quarter was specifically, you know, a big step up in repayments. Is there anything particular to point to that's driving the elevated level of repayments, and do you think that will continue perhaps in the fourth quarter and moving into early next year?
Stuart Rothstein: Yeah. Look. We're never, you know, we're never gonna predict, you know, the exact timing, and we tend not to spend a lot of time losing sleep over quarterly variations. I do think to your question, you know, at a broad level, repayments are occurring because the capital markets are fully open. There's the ability for people to access repayment capital, but you're also seeing improved operating performance in a lot of asset classes, and the market has accepted a reset from a valuation perspective.
So I think a lot of the sort of stasis that we saw in the market in 2022, early 2023 as people were trying to digest elevated interest rates and not really sure where the economy was headed. I would say both in the US and Europe relevant to our portfolio. There's just better clarity in the market. I think a lot of the capital that was sitting on the sidelines, particularly on the equity side, is biased towards transacting these days. So I think we will continue to see a healthy pace of repayments across the portfolio. And I would say, you know, it'll be lumpy quarter to quarter just because you're never quite sure when deals will close.
But as we look out in terms of projected repayments, you know, the big headline was that repayments are consistent with what we would have expected. And we don't see that changing going forward.
Harsh Hemnani: Great. Thank you.
Operator: Our next question comes from Jade Rahmani with KBW. You may proceed.
Jade Rahmani: Hi. This is Jason Sapshaw on for Jade. Thank you for taking my question. So on 111 West 57th, total exposure was up slightly this quarter to $279 million. I'm assuming that was due to increased capitalized cost on development spend, maybe TIs on the retail lease. Is that accurate?
Stuart Rothstein: Yes. Jason. It was it's accurate. Yeah. We had some in connection with the bottom lease. We had to pay for some, you know, ongoing TI.
Jade Rahmani: Got it. So I think it would matter if I would I would also say I'm sorry, Scott. So it's the other thing I'd say, it's it's consistent with the underwriting we did at the time we took the reserve on 111 West 57. So I would say it's consistent with expectations. I'm sorry, Scott. Go ahead.
Scott Weiner: Yeah. I was just gonna say we didn't have any of the any of the contracts closed in the So I think you saw in our release that we'd already have three contracts closed that'll reduce the balance. And then, you know, Stuart was saying that there's three unsold units, but there also are three more units that are under contract that we expect to close the remainder of the quarter. So there should be six units at least closing this quarter paying down our balance.
Jade Rahmani: Oh, wow. Okay. That's great. And then on Brooklyn multifamily, what's the difference between the debt listed in the slide deck at $330 million and capitalized financing and construction costs in the 10-Q at $393? Sorry. $330 in the slide deck and $393 in the 10-Q.
Stuart Rothstein: And, Stacia, you wanna handle that now or just get back after the call?
Anastasia Mironova: Yeah. This is Anastasia. I will take a look at the map here. I'll get back to you after the call.
Jade Rahmani: Alright. Thank you. And then just on the two hotels, the Mayflower and the Atlanta hotels, any update there would be helpful.
Stuart Rothstein: I mean, think on the Mayflower, the hotel continues to perform well. Obviously, there's some seasonality in the numbers, which sort of always impact what occurs in Q3. But overall, from an NOI perspective, particularly relative to basis, the hotel is performing quite well. And we are now stepping into a focus on optimizing the expense side. At the hotel, but we continue to feel quite positive on performance of the hotel and just think there's some more net cash flow uplift that we can Thank you. Hotel two more stabilized level.
Jade Rahmani: Alright. Thank you.
Operator: Our next question comes from John Nicodemus with BTIG. You may proceed.
John Nicodemus: Hello. Morning, everyone, and thanks for taking my question. As Harsh mentioned, it was definitely a high repayment quarter, but it sounds like originations are a full go into the end of the year, which is exciting. Obviously, this is all can fluctuate on a quarter-by-quarter basis, but how do you envision the size of the loan portfolio trending not just in the next quarter, but kind of as we further into, you know, 2026 and maybe even end of next year, you have any insight on that? Thanks.
Stuart Rothstein: I mean, where the growth in the loan portfolio is gonna come from, John, is, right, to the extent we are able to take unlevered capital. Right? If you think about repayments on 111 West 57th Street, or ultimately selling Liberty Center. Right? You're gonna take unlevered capital and then, you know, deploy it and lever it into assets. So you'll see some portfolio growth as we bring back what we would call the focus asset capital. You'll see less impact if and when we ultimately sell the Brook. Does that is levered as a construction deal already, we'll be able to use, you know, more leverage against the senior first mortgage than you can against a construction deal.
So you'll see some pickup in asset level, but it won't be as dramatic as just assuming all of the capital is coming back to us. But that's what's really gonna drive portfolio growth going forward is taking focus assets, which for the most part are unlevered or underlevered and deploying them into senior loans where we'll use, you know, quote-unquote full leverage per my response to Doug's question earlier in the conference call.
John Nicodemus: Great. Really helpful, Stuart. Thank you. And then another one for me, saw the team originate two sizable loans on upscale hotels during the quarter. I'm just curious if there's something about the hospitality sector that you're finding more attractive at this time. Or were these more just unique opportunities in New York and San Diego? Thanks.
Scott Weiner: Yeah. I mean, I would say, look, we've always been active in the hotel front both in the US and Europe and, you know, happen to like these deals just given size and in-place cash flow. You know, one of the deals, we partner with someone, and there's a mezzanine behind us. We're able to structure a very low leverage deal and then one in New York City was an asset we're familiar with in a sponsorship group with acquisition financing. So nothing special. You know, I think hotels always have a part of the portfolio and think it's, you know, we've gotten a bunch of repayments in hotels. So we thought it made sense to add these two deals.
John Nicodemus: Awesome. Thanks so much, Scott, and appreciate the time.
Anastasia Mironova: Thank you. And as a reminder, to ask a question, please press 11 on your telephone. Our next question comes from Rick Shane with JPMorgan. You may proceed.
Rick Shane: Hey, this is AJ on for Rick. So it seems like office trends are continuing to improve. Was just wondering if you can give us an update on what you're seeing in your office portfolio right now.
Scott Weiner: Yeah. Look. I mean, I think look. It's still very much city by city with office. I mean, I think we're fortunate, you know, where our exposure generally is. But I would say, certainly, you know, in the stats that we're getting from the landlords, you know, people are back in the office more, and that's really across the board. Clearly, New York, I think they're maybe even higher than pre-COVID. Lots of positive, you know, leasing momentum. Again, you know, New York and London in particular. You know, Chicago where we do have some exposure, you know, it's, you know, I would say it's, again, asset by asset.
We happen to have a loan on one of the new buildings in Chicago, and that's doing great. We have a loan on an older building that is seeing some positive leasing, not as much as the, you know, the newer build, which I think, again, is consistent in other markets. So I think we're pleased. And I think overall, so we're seeing more capital market activity. You're seeing certainly the financing of office deals is back across the board, both stabilized deals as well as lease-up, and then you are starting to see more transaction activity.
Rick Shane: Super helpful. Thank you. And then just one more another one on repayment. So, you know, now that rates are finally starting to come down, could you see a bit of a tick up in repayment rates, for some of those, you know, earlier COVID-era advantages that have been waiting for lower rates for so long?
Scott Weiner: Yeah. I mean, I think as we look at our portfolio, you know, consistent with all real estate. Right? Yeah. Good. Scott. Go for it. I was just gonna say, there's a bunch of our stuff is actually being sold. So people have achieved their business plan, and they're selling it, and we're getting repaid. You know, other deals are being refinanced and whether, you know, pulling out money or just, again, the loan is coming due. So I don't really see it as a trend where someone had really high expensive debt from COVID or pre-COVID. I think it's just normal, you know, these are floating rate loans with, you know, a few years of call protection.
When we do a loan, we kind of expect it to be out two, three years. And I just think people are, you know, the markets are open and where they want to, you know, refinance or sell, they're doing that now.
Rick Shane: Yep. Thank you very much. That's all for me.
Operator: Thank you. I would now like to turn the call back over to Stuart Rothstein for any closing remarks.
Stuart Rothstein: No closing remarks. As always, appreciate everybody's time. And if you have questions after the fact, myself, Hillary, Anastasia, we are always reachable and available. Thank you all.
Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.