Ladies and gentlemen, thank you for standing by. I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo Commercial Real Estate Finance, Inc., and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release. I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these statements and projections.

Thank you, operator and good morning and thank you to those of us joining us on the Apollo Commercial Real Estate Finance First Quarter 2021 Earnings Call. As usual, joining me this morning are Jay Agarwal and Scott Wiener. ARI is off to a solid start for 2021 committing to over $500 million of new transactions and reporting distributable earnings well in excess of the company's dividend per share. As I stated on our last earnings call, we entered this year focused on growing ARI's portfolio. That focus was based on confidence in the strength of the company's capital position, the performance of our existing loans, and the ability of Apollo's real estate credit team to originate attractive risk-adjusted return opportunities for ARI. Continuing the trend we saw in the second half of 2020, the overall tone of the commercial real estate market remains positive as asset level performance is generally improving, and transaction levels are increasing. The economy clearly is benefiting from the combination of COVID relief, fiscal stimulus and the increasing pace of vaccinations. Specific to our business, we see both the strength of the real estate capital markets and increased investor optimism reflected in recent and anticipated loan repayments, sponsor support of their investments and our growing pipeline of opportunities. During the quarter, ARI closed two large European loan transactions on behalf of one of our larger clients. In both transactions, the mandates were won due to a strong borrower relationship and the ability to speak for a sizable portion of the overall capital stack, which we were able to split with other vehicles managed by Apollo. ARI's affiliation with the broader Apollo real estate credit platform continues to be a key competitive advantage, as it enables ARI to avail itself of the knowledge and resources within Apollo and to benefit from our collaborative efforts in winning large transaction mandates.

Thank you, Stuart. We had a strong first quarter with earnings of $56.1 million or $0.39 per share. GAAP net income available to common stockholders was $55 million or $0.37 per diluted share. Our portfolio continues to perform well generating earnings in excess of the quarterly dividend of $0.35 per share. As of March 31, our General CECL Reserve remained relatively stable quarter-over-quarter. GAAP book value per share prior to the General CECL Reserve was $15.35 as compared to $15.38 at the end of the fourth quarter. Minor decline was due to vesting of restricted stock, which was partially offset by earnings in excess of the dividend. At quarter end, our loan portfolio grew to $6.8 billion with a weighted average unlevered yield of 6.8%. And the remaining fully extended term of just around three years. Approximately 88% of our floating rate US loans have LIBOR floors that are in the money with a weighted average floor of 1.46%.

Our first question comes from Doug Harter with Credit Suisse.

Thanks. Can you just give us an update on other loans where you have specific reserves? Any kind of progress or updates there and thoughts around timelines for resolution?

Yes, Doug, it's Stuart. Yes, obviously, the first thing I'd say is nothing's changed in terms of the reserve levels. And obviously, you should interpret that as meaning nothing really material has gone on with respect to those transactions. I think anecdotally, to just highlight a few things I think I've commented previously that with respect to the loan on the aggregation in Brooklyn, we're going ahead with a partner in building multifamily on that site. This is going to be a several-year process to actually do the development. So that gives you some sense of the timeline and sort of when you might expect anything material to change with respect to that asset, but I'm very confident in our partnership and feel good about the market overall. And I like the path we're headed on with respect to that particular asset. With respect to Miami, again, I think you've heard me comment previously, we've sort of taken the reverse approach on that asset relative to Brooklyn, which is despite the site's ability to support greater density in terms of entitlements, we're actually going to leave the assets effectively as they are for now and focus on more of a shorter-term retail lease-up strategy. And while I'm not at liberty to disclose anything at this point, I would say the reception from the market overall has been fairly positive, both in terms of national as well as local tenants, and would expect that you'll see some news with respect to lease-up on that sooner rather than later. I think the quality of tenants will highlight the long-term value of that location.

Our next question comes from Steven Delaney with JMP Securities.

Good morning, everyone. Congratulations on being the first commercial mortgage REIT to report this quarter. Good to hear everybody. I think you get props for that, at least Jay does.

Absolutely.

Yes, Stuart, kind of big picture you commented on New York, and it was just great to hear. I detected optimism certainly in your voice and in your reply there to Doug. Switching, looking a little farther away, you've got $2.3 billion, almost a third of the portfolio in the UK or the continent. Can you kind of share with us what your team in London is, what the environment is like there? Well relative to COVID, reopening, are they on pace with what you're seeing here in the States or lagging a bit? Just a sense of what that market is like? Thank you.

Yes, sure. I mean, I think there's, let me answer it a couple of different ways. Because I think there are those differences and similarities. I think at a high level is if we think about Europe as a place, and the more time I spend in Europe, I realize it's actually just a bunch of disparate countries that happen to be on the same continent as opposed to actually being a place. I would say clearly behind the US in terms of economic recovery, vaccine rollout, and the quantum of fiscal stimulus, right; it lags the best macroeconomic analysis I've seen, some of which is done by talent inside Apollo would indicate that Europe as a whole collectively is sort of six weeks behind the US in terms of recovery and call it a pacing towards back to normal. And I would say the UK is ahead of that. And then other countries that we would consider as target markets are a little behind that. So that's sort of the story on the COVID side. I think in terms of what's going on in the real estate market, I think there continues to be a fair measure of similarity between the US and Europe in the sense that there's a lot of capital available for real estate investment. A lot of it is actually managed by the same sponsors you'd see in the US; you'd see in Europe. People are viewing real estate is in light of COVID as a place where they might be able to find deals; they might be able to find opportunity. So there's plenty of liquidity in the market, and there's plenty of transaction flow.

Got it, very helpful. A quick follow up on caravan holiday home property type. Just a quick description, generally that I assume it's somewhat seasonal vacationing and such, but these kind of like moderate price resort type properties? How would you describe it?

I mean I wouldn't, and I don't want to disparage them. I'd probably just say there's somewhere between moderate price hotels and moderate price sort of campgrounds for lack of a better phrase.

Sure.

I think they are viewed as a business that is very well suited in environments where there is a clear desire to vacation, but it is quite likely that a greater percentage of that travel will be more intra-regional, as opposed to inter-regional, and it is both a real estate business as well as an operating business at the end of the day, no different than hospitality. And a business that I would say in underwriting the transaction, has a big benefit to the real estate team at Apollo for being able to speak with other parts of Apollo that have looked at this type of real estate from a business perspective historically. So that's the way I think about it.

Our next question comes from Stephen Laws with Raymond James.

Hi, good morning. A couple of questions as things continue to normalize a little bit around pick income year-over-year obviously impacted, but how do we think about that moving forward? And what do you view as a really normalized level there? As the loan portfolio puts COVID further behind?

Yes, I mean, let me answer it this way, Stephen. And I think it's hard to say this is what's going to be a normalized level on a go-forward basis, because I think it's somewhat dependent on portfolio mix, in terms of high level, obviously, you're more likely to see pick in a construction loan. And in a non-construction loan, you're more likely to see pick in a mezzanine position versus a senior position. I think as you look at our portfolio, and sort of think about where the portfolio was and where the portfolio is headed, if you just look at our continued shift from mezzanine loans to first mortgages, and then also some of the prior comments that I've made on recent calls with respect to probably limiting the appetite overall for construction and also highlighting that while we're still open for business, there's probably not as many discreet mezzanine opportunities to look at.

Great, that's helpful, Stuart, thank you. Jay, as we look ahead at G&A, it seems to be trending down a bit. Looking back to 2019, it was $20 million, which was a pre-COVID year. What do you think the annualized G&A expense will be given the current situation?

Sure, yes, I would think of annualized G&A x-RSUs of around $9.25 million on a run rate basis.

Our next question comes from Jade Rahmani with KBW.

Thank you very much for taking the questions. Just, Stuart just wanted to see if you could comment as to where you're seeing levered returns, if you're seeing compression in the magnitude of returns, and also where you're finding the most interesting opportunities right now.

Yes, I mean, I think, look, I think from a return perspective things feel very similar to where they were pre-pandemic. So I would say the components of it have shifted a little bit, I would say, from the loan perspective spreads are definitely compressing generally speaking, I would say we're sort of in a broad range, call it high threes to high fours these days for the types of stuff we look at, on the senior side. And definitely lower LIBOR floors, right; LIBOR floors are probably 45 to 50 basis points these days versus where they were previously, when LIBOR was higher. And if you look across our portfolio LIBOR floors is probably 1.5%, on average today, that being said we're able to pick up some benefit in the terms of how we lever our first mortgages with our various bank relationships. I would say we've picked up some spread in our favor there. And I would say, we're continuing to get comfortable leverage levels on what we show to banks. And I'll, again, remind everybody that rarely, if ever, do we take full leverage on anything that we're leveraging, so again I think leverage is always in that plus or minus 11.5% to 12% range these days. And it feels very much like it did pre-pandemic, which again, I think goes back to comments I've made in the past on just how quickly the capital markets for real estate, in general, recovered. I think there are probably somewhat better return on equity always available today if you wanted to get a little bit more aggressive with respect to construction, a little bit more aggressive with respect to certain types of hospitality assets, not all types of hospitality assets. And then I won't even really comment on sort of retail these days, because we don't have much appetite for it. And then I think in terms of opportunities, obviously, the question Steve asked gave me a chance to highlight that we continue to be active both in the US and Europe. And I think if anything as I think about Europe, on the margin, maybe slightly less competitive, maybe a little bit easier for us to dis-intermediate banks or securitization financing than it is here in the US. But then I think for things in the US, again, the types of assets we're looking at I would say that the biggest difference I'd probably draw between what we're doing today versus what we've done historically, on the margin, slightly less in the New York area, but we're still wanting to look in New York, but slightly less than the New York area. And then again, not as much focus on construction, not as much focus on for sale residential these days, as we think about opportunities and in a positive way, we're still finding other places to put capital.

And have you seen any pullback from the GSEs and does that present a potential opportunity to maybe lend on more stabilized multifamily and potentially put more financing on those kinds of assets, then ARI's typical loan?

Yes, I would say at a high level, Jade from our perspective, we haven't really seen a noticeable shift. What we're able to do on the multifamily side continues to be more lease-up call it bridge financing in between construction during the lease-up phase with an expectation that there's a GSE takeout on the back end. We spend a lot of time looking, but I would say at this point in time, no real material change in that overall environment that has led to any material opportunities for us.

Thanks very much. Just lastly, touching on credit. Could you talk about what drove the increase in amortized cost of the loans that already have specific CECL reserves? And just generally speaking, were there any negative changes in credit?

Yes, I guess I'd answer your questions in reverse. I would say credit generally stable. The increase in reserves for advances or costs for stuff that we've already got reserves on. About two-thirds of that was due to the acquisition of some air rights relative to the development we're going to do on the Fulton Street development in Brooklyn. And then there were just some other small sort of immaterial protective advances made on some of the other loans, but the bulk of what you're seeing in the increased amortized costs was the acquisition of air rights for the development in Brooklyn, which was always part of our business plan once we decided to go forward with the developments there.

Our next question comes from Charles Arestia with JPMorgan.

Hey, good morning, guys. Thanks for taking the questions. I was looking at the interest income line for the subordinated loan portfolio, I noticed that it did lower in the fourth quarter and rebounded pretty sharply this quarter, despite the overall loan balances being pretty flat there. So I'm just wondering how we should think about the run rate of that portfolio, given I'm assuming the new origination volumes are probably going to be more focused on the senior loan side.

Yes, I think what you're seeing, Charles, is really two things. I think with respect to sort of the dip in the fourth quarter last year, I think in some respects as we were working through extending duration on certain of those loans, working with borrowers to give them a little bit more runway, maybe adjusting economics a little bit, probably more of that than we expected hit in the fourth quarter. And it was really reflective of sort of as the economics of a loan change over time. You need to be at the right point as sort of a moment in time with respect to how you're recognizing certain fees that you might get paid for extension or on payoff, things like that. And you saw more than we would have expected that true-up hit in the fourth quarter. I think Q1 is more reflective of sort of where economics are on those loans today, sort of on a run rate basis. But to my earlier comments, I do think, and it was sort of prefaced in your question, I do think there's not a lot of fresh mezzanine coming into the book right now. So as we get paid off on some of the higher yielding mezzanine that's in our book today, I think you're going to see that line item just trickle down over time more just due to portfolio construction.

Okay, that's really helpful. Thanks, Stuart. And then if we could get any update on 111, West 57th, I think we're getting kind of close to the maturity date on that one. So just curious how things are progressing on that.

I know that from a construction perspective and is progressing to the extent you're in the area, the building looks more and more finished from the outside and there's a significant amount of work going on inside. I think it's fair to say I would expect things to be extended beyond the stated maturity date just given sort of delays that occurred last year. And you sort of need to make up that time on the back end, I would say foot traffic is very positive in terms of sales activity, and we would expect there to be more sales activity coming in the near to mid-term. So it's moving in the right direction, but it definitely lost some time last year due to both the pandemic as well as construction challenges due to weather, et cetera. So would expect that we'll be in that loan beyond the stated maturity date, but it is moving in the right direction.

Our next question comes from Tim Hayes with BTIG.

Hey, good morning, Stuart. Just one more from me. And I know that you've had pretty constructive comments on credit broadly, but can you just touch on your New York City Office exposure? And maybe if you'd be able to pass along some, just some broad trends how rent collections have been in that portfolio, and how is occupancy and rent trends in there within those assets and any types of promotion that sponsors are kind of running to get some tenants in the building without locking themselves in at a much lower rent for the next 10 years?

Yes, I mean, I'll give you a mix of sort of anecdotes that are both with respect to our portfolio, as well as obviously, just being in the market, sort of what we're hearing what we're seeing people do, and then also working for a company that is a leaser of space in New York as well. First and foremost, most not all, but most of our portfolio office in New York, are obviously, we were the lender on something that was transitional, right, something was being done to the real estate, it was being renovated, redeveloped, with a plan towards sort of lease-up and most of our portfolio was sort of still in the lease-up phase. So there's not much to be gleaned with respect to the actions of in-place tenants, I would say, anecdotally, the foot traffic among those that are potential users of space is definitely increasing. And I would say it is increasing in the context of rent levels probably being down, plus or minus 15% relative to where they were pre-pandemic. So I think you're starting to see more activity. It feels like the market has adjusted a little bit. And obviously, there continues to be a fair bit of sublease overhang in this city as well. I think the other thing that's going on right now is I think most companies are still trying to figure out what their strategy will be going forward. From a New York footprint perspective, I think there seems to be a general consensus that people want to maintain a footprint in New York. I think people are trying to figure out the balance between the need maybe to shrink that footprint slightly to give people more optionality in terms of where they work, versus the need to probably use space a little differently than they have historically, which may lead towards more space per person than we saw heading into the pandemic. I still think this is going to play out over a long time in New York as sort of, for the most part, you've got long term leases in place, and people are still sort of thinking through their decisions. I would say the last comment I'll make on our portfolio specifically is I'm very confident in the quality of sponsorship we've got on each of our office deals. I would say the strength of the capital markets in general, leaves us feeling pretty confident that there are definitely paths to liquidity for our borrowers to take us out if and when they start proving some measure of the business plan. They don't need to achieve full business plan. And then lastly, I would say we continue to see our equity sponsors, committing additional capital to their deals as they need to either to rebalance their existing loans as necessary or in working in partnership with us, as borrowers as they adjust their business plan slightly. So all-in-all, it seems to be moving in the right direction. But I would say at this point, what we need our borrowers to do is really to create the product they envisioned. It's more about doing that and having something that is a refurbished office asset for the market is less about worrying about in-place tendency right now.

That's all really good color. And I guess just on one of those last comments there about, I know modifications are the normal course of business for you even before the pandemic, but how would you describe the cadence of modifications this quarter versus the past year? Is it lower than it had been? Or are you still seeing more borrowers come back to the wall on that front?

Oh, it's definitely less of a frenzy than it was, call it than prior quarters in the middle of the pandemic. There are still various assets that require dialogue. But in many respects sort of the way you preface the question, it feels like it was maybe before the pandemic, right, certain borrowers achieved business plan, certain borrowers don't achieve business plan, and in the nature of lending against transitional assets, there are things that require discussion, but I would say the discussions are much more of what we would describe as sort of ordinary course of business as opposed to if we were having this conversation nine to 12 months ago when we were sort of in the depths of this thing and there was a lot less clarity in terms of where things were headed.

Makes sense. And I guess, just last one for me. And, yes, just a quick maybe housekeeping question. Is there any notable change in interest collections from you this quarter? I imagine the answer's no given your comments around credit, but just curious if there's any notable change quarter-over-quarter there.

Yes, nothing worth noting.

I'm showing no further questions in queue at this time. I'd like to turn the call back to Stuart Rothstein for closing remarks.

Thank you all for participating this morning. And we'll talk to you again next quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.