Apollo Commercial Real Estate Finance Q1 Earnings Call Highlights

Key Points

• Apollo closed the sale of its $9 billion loan portfolio to Athene on April 24, leaving the company with approximately $1.3 billion of cash and four REO assets with about $900 million gross value after repaying secured borrowings and other indebtedness.
• The company has repurchased about 6.8 million shares year-to-date and the board authorized a new share buyback program of up to $150 million, which management says has been accretive to book value.
• Management is conducting a strategic review and expects updates in the coming months, while reaffirming a target annualized dividend yield of roughly 8% on book value per share and signaling dividends will likely include a significant return-of-capital component while keeping cash unlevered.

Apollo Commercial Real Estate Finance NYSE: ARI used its first-quarter 2026 earnings call to outline the company’s radically reshaped balance sheet following the sale of its loan portfolio and to provide an update on remaining real estate owned (REO) assets, capital return activity, and its ongoing strategic review.

Portfolio sale closes; balance sheet shifts to cash and REO

Chief Executive Officer Stuart Rothstein said the company completed the previously announced sale of its $9 billion loan portfolio to Athene on April 24. He said that after repaying ARI’s financing facilities, other indebtedness, and transaction expenses, the company’s total assets now consist of approximately $1.3 billion of cash along with four REO assets representing about $900 million in gross value.

Rothstein said the sale “delivered ARI stockholders a compelling premium to where the stock has traded in recent years” and characterized the transaction as consistent with management’s focus on maximizing stockholder value.

Chief Financial Officer Anastasia Mironova added that the company repaid its secured borrowing facilities, fully repaid its Term Loan B, and deposited funds to satisfy and discharge its senior secured notes, which she said “will be redeemed at par on or about June 15th.”

Mironova also noted that only one commercial mortgage loan remains on the balance sheet: a non-accrual loan secured by a hotel property in Chicago with an amortized cost basis of $42 million and an upcoming May maturity. She said the company expects repayment through a sale of the underlying property, and that a purchase agreement was executed during the first quarter with “hard money deposits received by the sponsor.”

Q1 results: net income of $23 million; distributable earnings of $31 million

For the first quarter of 2026, Mironova reported net income available to common stockholders of $23 million, or $0.16 per diluted share. Distributable earnings were $31 million, or $0.22 per diluted share.

Net interest income for the quarter was $36 million, compared to $39 million in the first quarter of 2025. Mironova said interest income from commercial mortgage loans increased modestly to $150 million from $144 million, driven primarily by loan portfolio growth of about $1.2 billion (on an amortized cost basis) compared to March 31, 2025, which outweighed the impact of lower average index rates. Interest expense rose to $114 million from $105 million, reflecting higher average secured debt balances associated with funding the portfolio compared to last year.

Book value per share was $12.01 at March 31, down from $12.14 at the end of the fourth quarter of 2025. Mironova attributed $0.10 of the decrease to “the impact of vested and delivery of restricted stock units,” which she said is a trend typically observed in the first quarter.

Mironova also provided a pro forma figure tied to the portfolio sale. She said pro forma book value per share at the closing—without giving effect to REO quarter-to-date activity and certain quarterly accruals—was $12.15, reflecting reversal of general CECL allowance in excess of discount and closing costs for the sale, as well as accretion from share repurchases.

Share repurchases expand; board authorizes $150 million program

Mironova said the company repurchased approximately 2.9 million common shares during the first quarter at a weighted average price of $10.52 per share. After quarter-end, ARI repurchased an additional 3.9 million shares at a weighted average price of $10.72, bringing total year-to-date repurchases to about 6.8 million shares.

She said the repurchases resulted in $0.07 of book value per share accretion year-to-date, with $0.03 in the first quarter and $0.04 in the second quarter to date. Mironova also said the board authorized a new share repurchase program, leaving the company with “up to a total of $150 million available” to repurchase common stock.

Asked by KBW’s Jade Rahmani why ARI is buying back stock ahead of a strategic review, Rothstein said the company has “significant confidence in where the book value per share is today” and that the amount of capital used for repurchases is “not material” in terms of limiting strategic options for the remaining capital.

REO updates: leasing progress at The Brook; hotels show mixed results

Rothstein said two assets—The Brook, a multifamily property in Brooklyn, and The Mayflower Hotel in Washington, D.C.—represent about 80% of the REO net equity value.

• The Brook: Rothstein said the market-rate residential component is about 80% leased, while affordable units are roughly 70% leased, with 95% of units selected. He said both components are expected to reach stabilization by the summer, and management is monitoring the market and evaluating an exit strategy “either pre or post-stabilization,” while continuing efforts to add value to the western parcel.
• The Mayflower Hotel (Washington, D.C.): Rothstein said the hotel had a strong first quarter with net cash flow “well ahead of budget,” driven by margin improvements and higher occupancy. He said the company sees opportunity for continued year-over-year improvement and expects more clarity on an exit strategy in the second half of the year, subject to market conditions.
• The Cortland Grand: Rothstein said first-quarter performance was below budget due to broader market softness. However, he said business interruption insurance related to offline units and expected benefits from the upcoming Soccer World Cup over the summer should bring full-year performance in line with expectations. He added the company is in active dialogue with potential buyers regarding alternative uses as it evaluates exit options.
• Two former hospital assets: Rothstein said the two remaining former hospital assets represent about $24 million of combined book value. He said the company is engaged in rezoning efforts and discussions with local operating partners to determine optimal exit scenarios.

Strategic review continues; dividend target reiterated

Rothstein said management, the board, and senior investment professionals at Apollo are evaluating a range of commercial real estate-related strategies, and that the company has been speaking with bankers and industry experts since the end of January. He said ARI anticipates providing an update “in the coming months.”

While Rothstein declined to discuss specific asset types being considered, he said he does not envision waiting until the end of the year to provide direction, adding that he expects “meaningful progress” in the next few months and “significant clarity” by the next time the company speaks with investors, “if not sooner.” He also said any strategic path needs to be pursued only with “full confidence” it will create more than the company’s current book value per share.

In response to a JPMorgan question about how the company might invest its cash while the review continues, Mironova said CMBS and agency securities are “typically good REIT assets,” and added that the company has “a number, more than a handful at this point, of high yield in deposit accounts” as another option. She said the REIT asset test is measured as of quarter-end, while the income test is annual. When asked about leverage, management responded, “No leverage as we envision to date.” Rothstein emphasized that the priority is ensuring cash remains available for strategic paths under consideration and not putting capital at risk from market movements.

On dividends, Rothstein said declarations will remain subject to board approval and that the company will announce the second-quarter dividend “a few weeks prior to the end of the quarter” according to its customary schedule. He reiterated that ARI intends to continue paying a quarterly dividend while evaluating strategic opportunities and that the previously indicated target—an annualized dividend yield of roughly 8% on book value per share—“remain[s] intact.” Rothstein added that given the company’s cash balance and conservative investment approach, future dividends “likely will contain a significant return of capital component.”

Rahmani also asked how REO resolution might interact with the strategic review if ARI ultimately chose to return capital rather than pursue a new strategy. Rothstein said nothing is set in stone, but suggested a structure more akin to a liquidating trust would be “more likely” than a bulk REO sale, which he said could carry a discount, because the company would want time to maximize value from each of the four REO assets.

About Apollo Commercial Real Estate Finance NYSE: ARI

Apollo Commercial Real Estate Finance, Inc NYSE: ARI is a real estate finance company structured as a real estate investment trust (REIT). The company focuses on originating, acquiring and managing a diversified portfolio of commercial real estate debt and preferred equity investments. As an externally managed vehicle, ARI leverages the expertise and resources of an affiliate of Apollo Global Management, a leading global alternative investment manager.

ARI's investment strategy is centered on providing first mortgage loans, mezzanine debt financing, bridge loans and preferred equity across a broad range of property types, including office, retail, industrial and multifamily assets.

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