8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 29, 2015

Apollo Commercial Real Estate Finance, Inc.

(Exact name of registrant as specified in its charter)

Maryland	001-34452	27-0467113
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

c/o Apollo Global Management, LLC 9 West 57th Street, 43rd Floor New York, New York	10019
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 515-3200

n/a

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. Results of Operations and Financial Condition.

On October 29, 2015, Apollo Commercial Real Estate Finance, Inc. (the “Company”) issued an earnings release announcing its financial results for the quarter ended September 30, 2015. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

On October 29, 2015, the Company posted supplemental financial information on the Investor Relations section of its website (www.apolloreit.com). A copy of the supplemental financial information is furnished as Exhibit 99.2 hereto and incorporated herein by reference.

The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.

ITEM 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Earnings Release dated October 29, 2015
99.2	Supplemental Financial Information for the quarter ended September 30, 2015

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Apollo Commercial Real Estate Finance, Inc.
By:	/s/ Stuart A. Rothstein
Name:	Stuart A. Rothstein
Title:	President and Chief Executive Officer

Date: October 29, 2015

Exhibit Index

Exhibit No.	Description
99.1	Earnings Release dated October 29, 2015
99.2	Supplemental Financial Information for the quarter ended September 30, 2015

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE		NYSE:ARI
CONTACT:	Hilary Ginsberg
	Investor Relations
	(212) 822-0767

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC. REPORTS

THIRD QUARTER 2015 FINANCIAL RESULTS

—20.4% Increase in Operating Earnings Per Share of Common Stock –

— Record Quarter for Growth in Operating Earnings —

New York, NY, October 29, 2015 – Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported financial results for the quarter ended September 30, 2015.

Third Quarter 2015 Highlights

• Reported Operating Earnings (a non-GAAP financial measure defined below) per diluted share of common stock of $0.53 for the quarter ended September 30, 2015, an increase of 20.4% as compared to Operating Earnings per diluted share of common stock of $0.44 for the quarter ended September 30, 2014; Reported Operating Earnings per diluted share of common stock of $1.42 for the nine months ended September 30, 2015, an increase of 14.5% as compared to Operating Earnings per diluted share of common stock of $1.24 for the nine months ended September 30, 2014;

• Generated $38.7 million of net interest income during the quarter from the Company’s $2.3 billion commercial real estate debt portfolio, which had a levered weighted average underwritten internal rate of return (“IRR”)⁽²⁾ of approximately 13.9% at September 30, 2015;

• Committed $331.5 million to commercial real estate debt investments during the quarter, $269.4 million of which were funded at closing and 100% of which were floating rate; Committed over $1.0 billion to commercial real estate debt investments year to date, $781.5 million of which were funded at closing;

• Funded $155.5 million for commercial real estate debt investments during the quarter that were previously closed in 2014, bringing year to date fundings of previously closed investments to $199.0 million; and

• Completed a private placement of common and preferred stock to a wholly owned subsidiary of the Qatar Investment Authority, generating $348 million of gross proceeds for the Company:

• Sold 8,823,529 shares of common stock at a purchase price of $17.00 per share, for gross proceeds of approximately $150 million; and

• Sold 8,000,000 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock (the “Series B Preferred Stock”) with a liquidation preference of $25.00 per share at a purchase price of $24.71 per share, resulting in gross proceeds of approximately $198 million.

“ARI had the Company’s strongest quarter to date with respect to growth in operating earnings and capital formation,” said Stuart Rothstein, Chief Executive Officer and President of the Company. “Year to date, ARI has committed to over $1.0 billion of commercial real estate debt investments and the Company has a very robust origination pipeline. Importantly, the credit quality of ARI’s loan portfolio remains stable and we continue to identify investments that we believe offer the Company attractive, risk adjusted returns. Given the strength of the pipeline, we were extremely pleased with the completion of ARI’s $348 million private placement of preferred and common stock, which provides the Company with dry powder to capitalize on new investment opportunities.”

Third Quarter 2015 Operating Results

The Company reported Operating Earnings of $31.7 million, or $0.53 per diluted share of common stock, for the three months ended September 30, 2015, representing a per share increase of 20.4% as compared to Operating Earnings of $20.8 million, or $0.44 per diluted share of common stock, for the three months ended September 30,

2014. Net income available to common stockholders for the three months ended September 30, 2015 was $23.5 million, or $0.39 per diluted share of common stock, as compared to net income available to common stockholders of $17.3 million, or $0.37 per diluted share of common stock, for the three months ended September 30, 2014.

For the nine months ended September 30, 2015, the Company reported Operating Earnings of $80.3 million, or $1.42 per diluted share of common stock, representing a per share increase of 14.5% as compared to Operating Earnings of $52.8 million, or $1.24 per diluted share of common stock, for the nine months ended September 30, 2014. Net income available to common stockholders for the nine months ended September 30, 2015 was $70.0 million, or $1.24 per diluted share of common stock, as compared to net income available to common stockholders of $55.1 million, or $1.30 per diluted share of common stock, for the nine months ended September 30, 2014.

Third Quarter 2015 Investment Activity

New Investments – During the third quarter, ARI committed to the following commercial real estate debt investments:

• $149.1 million of first mortgage loans ($99.5 million of which were funded during the quarter), which were underwritten to generate a levered weighted average IRR⁽²⁾ of approximately 14%; and

• $182.4 million of subordinate loans ($169.9 million of which were funded during the quarter), which were underwritten to generate a weighted average IRR⁽²⁾ of approximately 14%.

Funding of Previously Closed Loans – During the third quarter, ARI completed $155.5 million of fundings for previously closed loans.

Loan Repayments – During the third quarter, ARI received approximately $187.3 million from loan repayments and sales, including the repayment of $107.3 million of loans secured by New York City residential properties.

Quarter End Commercial Real Estate Debt Portfolio Summary

The following table sets forth certain information regarding the Company’s commercial real estate debt portfolio at September 30, 2015 ($ amounts in thousands):

Description	Amortized Cost		Weighted Average Yield			Debt		Cost of Funds			Equity at Cost(1)		Current Weighted Average Underwritten IRR (2)			Fully- Levered Weighted Average Underwritten IRR(2)
First mortgage loans	$	905,681		8.2	%	$	301,533		2.7	%	$	604,148		12.1	%		14.7	%
Subordinate loans(3)(4)		926,304		12.0			—		—			896,200		13.2			13.2
CMBS		512,107		6.6			433,904		3.4			108,330		16.2			16.2
Total/Weighted Average	$	2,344,092		9.4	%	$	735,437		3.0	%	$	1,608,678		13.0	%		13.9	%

Please see chart footnotes at the end of the press release.

Loan-to-Value

At September 30, 2015, the Company’s commercial real estate loan portfolio, which includes CMBS, held-to-maturity, had a weighted average loan-to-value (“LTV”) of 61%. Within the commercial real estate loan portfolio, the first mortgage loans had a weighted average LTV of 60% and the subordinate loans (including CMBS, held-to-maturity) had a weighted average LTV of 63%.

Book Value

The Company’s book value per share of common stock at September 30, 2015 was $16.35. For purposes of GAAP accounting, the Company carries loans at amortized cost and its CMBS are marked to market. Management has estimated that the fair value of the Company’s loan portfolio at September 30, 2015 was approximately $16.2 million greater than the carrying value as of the same date.

2

Capital Raise

In September 2015, the Company completed a private placement of 8,823,529 shares of common stock to QH RE Asset Company LLC, a wholly owned subsidiary of the Qatar Investment Authority (the “Investor”), at a purchase price of $17.00 per share, for gross proceeds of approximately $150 million. In addition, the Company completed a private placement of 8,000,000 shares of Series B Preferred Stock to the Investor at a purchase price of $24.71 per share, resulting in gross proceeds of approximately $198 million. Combined, the two offerings resulted in approximately $348 million of total gross proceeds to the Company.

Subsequent Events

New Investments – Subsequent to quarter end, ARI closed a $55 million mezzanine loan for the acquisition of an existing residential property on the Upper West Side of New York City. The mezzanine loan is part of a $93.8 million financing, comprised of a $38.8 million first mortgage loan, and ARI’s mezzanine loan. The floating rate loan has a three-year initial term with one six-month extension option and an appraised LTV of 81%. The loan has been underwritten to generate an IRR⁽²⁾ of approximately 13%.

Funding of Previously Closed Loans – Subsequent to quarter end, ARI completed $46.5 million of fundings from previously closed loans.

Loan Repayments – Subsequent to quarter end, ARI received approximately $129.8 million from loan repayments.

Dividend – The Board of Directors will meet in December to determine the dividend per share of common stock for the quarter ended December 31, 2015.

Definition of Operating Earnings

Operating Earnings is a non-GAAP financial measure that is used by the Company to approximate cash available for distribution and is defined by the Company as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding); (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders; (iii) unrealized income from unconsolidated joint ventures; (iv) foreign currency gains/(losses) and (v) the non-cash amortization expense related to the reclassification of a portion of the convertible senior notes to stockholders’ equity in accordance with GAAP.

Reconciliation of Operating Earnings to Net Income Available to Common Stockholders

The tables below reconcile Operating Earnings and Operating Earnings per share of common stock with net income available to common stockholders and net income available to common stockholders per share of common stock for the three and nine month periods ended September 30, 2015 and September 30, 2014 ($ amounts in thousands, except share and per share data):

3

	Three Months Ended September 30, 2015			Earnings Per Share (Diluted)			Three Months Ended September 30, 2014			Earnings Per Share (Diluted)
Operating Earnings:
Net income available to common stockholders	$	23,543		$	0.39		$	17,299		$	0.37
Adjustments:
Equity-based compensation expense		756			0.01			308			0.01
Unrealized loss on securities		6,926			0.12			2,147			0.04
Unrealized (gain) on derivative instruments		(2,096	)		(0.04	)		(3,026	)		(0.07	)
Foreign currency loss		2,165			0.04			3,596			0.08
Amortization of convertible senior notes related to equity reclassification		556			0.01			356			0.01
Income from unconsolidated joint venture		(108	)		—			88			—
Total adjustments:		8,199			0.14			3,469			0.07
Operating Earnings	$	31,742		$	0.53		$	20,768		$	0.44
Basic weighted average shares of common stock outstanding:		59,355,613						46,848,675
Diluted weighted average shares of common stock outstanding:		59,934,008						47,068,929
	Nine Months Ended September 30, 2015			Earnings Per Share (Diluted)			Nine Months Ended September 30, 2014			Earnings Per Share (Diluted)
Operating Earnings:
Net income available to common stockholders	$	69,993		$	1.24		$	55,118		$	1.30
Adjustments:
Equity-based compensation expense		2,695			0.05			1,096			0.03
Unrealized (gain)/loss on securities		5,792			0.10			(4,787	)		(0.11	)
Unrealized (gain)/loss on derivative instruments		4,144			0.07			(1,933	)		(0.05	)
Foreign currency (gain)/loss		(3,424	)		(0.06	)		2,637			0.06
Amortization of convertible senior notes related to equity reclassification		1,642			0.03			586			0.01
Income from unconsolidated joint venture		(495	)		(0.01	)		88			—
Total adjustments:		10,354			0.18			(2,313	)		(0.06	)
Operating Earnings	$	80,347		$	1.42		$	52,805		$	1.24
Basic weighted average shares of common stock outstanding:		55,818,731						42,322,380
Diluted weighted average shares of common stock outstanding:		56,415,082						42,538,744

Teleconference Details:

The Company will host a conference call to discuss its financial results on Friday, October 30, 2015 at 10:00 a.m. Eastern Time. Members of the public who are interested in participating in the Company’s third quarter 2015 earnings teleconference call should dial from the U.S., (877) 331-6553, or from outside the U.S., (760) 666-3769, shortly before 10:00 a.m. and reference the Apollo Commercial Real Estate Finance, Inc. Teleconference Call (number 54887856). Please note the teleconference call will be available for replay beginning at 1:00 p.m. on Friday, October 30, 2015 and ending at midnight on Friday, November 6, 2015. To access the replay, callers from the U.S. should dial (855) 859-2056 and callers from outside the U.S. should dial (404) 537-3406, and enter conference identification number 54887856.

4

Webcast:

The conference call will also be available on the Company’s website at www.apolloreit.com. To listen to a live broadcast, please go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. A replay of the call will also be available for 30 days on the Company’s website.

Supplemental Information

The Company provides supplemental financial information to offer more transparency into its results and make its reporting more informative and easier to follow. The supplemental financial information is available in the investor relations section of the Company’s website at www.apolloreit.com.

About Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a real estate investment trust that primarily originates, acquires, invests in and manages performing commercial real estate 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 $161.8 billion of assets under management at September 30, 2015.

Additional information can be found on the Company’s website at www.apolloreit.com.

Dividend Reinvestment Plan

The Company adopted a Direct Stock Purchase and Dividend Reinvestment Plan (the “Plan”). The Plan provides new investors and existing holders of the Company’s common stock with a convenient and economical method to purchase shares of its common stock. By participating in the Plan, participants may purchase additional shares of the Company’s common stock by reinvesting some or all of the cash dividends received on their shares of the Company’s common stock. In addition, the Plan permits participants to make optional cash investments of up to $10,000 per month, and, with the Company’s prior approval, optional cash investments in excess of $10,000 per month, for the purchase of additional shares of the Company’s common stock.

The Plan is administered by a division of Wells Fargo Bank, N.A. (“Wells”). Stockholders and other persons may obtain a copy of the Plan prospectus and an enrollment form by contacting Wells at (800) 468-9716 or (651) 450-4064, if outside the United States, or visiting Wells’ website at www.shareowneronline.com.

This communication does not constitute an offer to sell or the solicitation of an offer to buy securities.

Forward-Looking Statements

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.

5

Footnotes

(1) CMBS includes $30,127 of restricted cash related to the Company’s repurchase facility with UBS AG.

(2) The underwritten IRR for the investments shown in the above table and elsewhere in this press release reflect the returns underwritten by ACREFI Management, LLC, the Company’s external manager, taking into account leverage and calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assuming that extension options are exercised and that the cost of borrowings remains constant over the remaining term. 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 the table. 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, 2014 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the table over time.

(3) Subordinate loans include CMBS, held-to-maturity, which represents a loan the Company closed during May 2014 that was subsequently contributed to a securitization during August 2014. During May 2014, the Company closed a $155,000 floating-rate whole loan secured by the first mortgage and equity interests in an entity that owns a resort hotel in Aruba. During June 2014, the Company syndicated a $90,000 senior participation in the loan and retained a $65,000 junior participation. During August 2014, both the $90,000 senior participation and the Company’s $65,000 junior participation were contributed to a CMBS securitization. In exchange for contributing its $65,000 junior participation, the Company received a CMBS secured solely by the $65,000 junior participation. ARI presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to GAAP. At September 30, 2015, ARI had one such participation sold with a carrying amount of $89,303.

(4) Subordinate loans also are net of a participation sold during February 2015. The Company presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to GAAP. At September 30, 2015, the Company had one such participation sold with a face amount of £19,900 and a carrying amount of $30,104.

6

Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands—except share and per share data)

	September 30, 2015			December 31, 2014
	(Unaudited)
Assets:
Cash	$	20,158		$	40,641
Restricted cash		30,127			30,127
Securities available-for-sale, at estimated fair value		—			17,105
Securities, at estimated fair value		512,485			522,730
Securities, held-to-maturity		153,799			154,283
Commercial mortgage loans, held for investment		905,681			458,520
Subordinate loans, held for investment		861,808			561,182
Investment in unconsolidated joint venture		20,183			37,016
Derivative assets		246			4,070
Interest receivable		14,424			10,829
Deferred financing costs, net		8,125			7,444
Other assets		767			1,200
Total Assets	$	2,527,803		$	1,845,147
Liabilities and Stockholders’ Equity
Liabilities:
Borrowings under repurchase agreements	$	735,437		$	622,194
Convertible senior notes, net		247,736			246,464
Participations sold		119,407			89,584
Accounts payable and accrued expenses		4,668			7,578
Payable to related party		4,100			3,240
Dividends payable		32,060			21,018
Total Liabilities		1,143,408			990,078
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series A Preferred stock, 3,450,000 shares issued and outstanding ($86,250 aggregate liquidation preference) in 2015 and 2014		35			35
Series B Preferred stock, 8,000,000 shares issued and outstanding ($200,000 aggregate liquidation preference) in 2015		80			—
Common stock, $0.01 par value, 450,000,000 shares authorized, 67,145,252 and 46,900,442 shares issued and outstanding in 2015 and 2014, respectively		671			469
Additional paid-in-capital		1,408,448			868,035
Retained earnings (accumulated deficit)		(22,225	)		(10,485	)
Accumulated other comprehensive loss		(2,614	)		(2,985	)
Total Stockholders’ Equity		1,384,395			855,069
Total Liabilities and Stockholders’ Equity	$	2,527,803		$	1,845,147

7

Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries

Condensed Consolidated Statement of Operations

(in thousands—except share and per share data)

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Net interest income:
Interest income from securities	$	8,293		$	6,129		$	24,846		$	12,914
Interest income from securities, held to maturity		2,596			2,219			9,050			2,219
Interest income from commercial mortgage loans		15,184			8,025			37,246			18,475
Interest income from subordinate loans		25,445			18,983			65,206			51,951
Interest expense		(13,187	)		(8,786	)		(36,287	)		(15,802	)
Net interest income		38,691			26,570			100,061			69,757
Operating expenses:
General and administrative expenses (includes $756 and $2,695 of equity-based compensation in 2015 and $308 and $1,096 in 2014, respectively)		(2,099	)		(1,434	)		(6,512	)		(4,355	)
Management fees to related party		(4,097	)		(3,193	)		(11,325	)		(8,725	)
Total operating expenses		(6,196	)		(4,627	)		(17,837	)		(13,080	)
Income from unconsolidated joint venture		108			(88	)		495			(88	)
Other income		239			21			252			26
Realized loss on sale of securities		—			—			(443	)		—
Unrealized gain/(loss) on securities		(6,926	)		(2,147	)		(5,792	)		4,787
Foreign currency gain/(loss)		(2,165	)		(3,596	)		3,424			(2,637	)
Gain/(loss) on derivative instruments		2,096			3,026			(4,144	)		1,933
Net income		25,847			19,159			76,016			60,698
Preferred dividend		(2,304	)		(1,860	)		(6,023	)		(5,580	)
Net income available to common stockholders	$	23,543		$	17,299		$	69,993		$	55,118
Basic and diluted net income per share of common stock	$	0.39		$	0.37		$	1.24		$	1.30
Basic weighted average shares of common stock outstanding		59,355,613			46,848,675			55,818,731			42,332,380
Diluted weighted average shares of common stock outstanding		59,934,008			47,068,929			56,415,082			42,538,744
Dividend declared per share of common stock	$	0.44		$	0.40		$	1.32		$	1.20

8

EX-99.2

Information is as of September30, 2015, except as otherwise noted. 

It should not be assumed that investments made in the future will be profitable or will equal the performance of investments in this document.

Supplemental

Financial

Information

Package

–

Q3

2015

October 30, 2015

Exhibit 99.2

Forward Looking Statements and Other Disclosures

This

presentation

may

contain

forward-looking

statements

that

are

within

the

meaning

of

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

management’s

control.

These

forward-

looking

statements

may

include

information

about

possible

or

assumed

future

results

of

Apollo

Commercial

Real

Estate

Finance,

Inc.’s

(“ARI”

or

the

“Company”)

business,

financial

condition,

liquidity,

results

of

operations,

plans

and

objectives.

When

used

in

this

presentation,

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:

ARI’s

business

and

investment

strategy;

ARI’s

operating

results;

ARI’s

ability

to

obtain

and

maintain

financing

arrangements;

the

return

on

equity,

the

yield

on

investments

and

risks

associated

with

investing

in

real

estate

assets;

and

changes

in

business

conditions

and

the

general

economy.

The

forward-looking

statements

are

based

on

management’s

beliefs,

assumptions

and

expectations

of

future

performance,

taking

into

account

all

information

currently

available

to

ARI.

Forward-looking

statements

are

not

predictions

of

future

events.

These

beliefs,

assumptions

and

expectations

can

change

as

a

result

of

many

possible

events

or

factors,

not

all

of

which

are

known

to

ARI.

Some

of

these

factors

are

described

under

“Risk

Factors,”

and

“Management’s

Discussion

and

Analysis

of

Financial

Condition

and

Results

of

Operations”

included

in

ARI’s

Annual

Report

on

Form

10-K

for

the

fiscal

year

ended

December

31,

2014

and

other

periodic

reports

filed

with

the

Securities

and

Exchange

Commission

(“SEC”),

which

are

accessible

on

the

SEC’s

website

at

www.sec.gov.

If

a

change

occurs,

ARI’s

business,

financial

condition,

liquidity

and

results

of

operations

may

vary

materially

from

those

expressed

in

ARI’s

forward-looking

statements.

Any

forward-looking

statement

speaks

only

as

of

the

date

on

which

it

is

made.

New

risks

and

uncertainties

arise

over

time,

and

it

is

not

possible

for

management

to

predict

those

events

or

how

they

may

affect

ARI.

Except

as

required

by

law,

ARI

is

not

obligated

to,

and

does

not

intend

to,

update

or

revise

any

forward-looking

statements,

whether

as

a

result

of

new

information,

future

events

or

otherwise.

This

presentation

contains

information

regarding

ARI’s

financial

results

that

is

calculated

and

presented

on

the

basis

of

methodologies

other

than

in

accordance

with

accounting

principles

generally

accepted

in

the

United

States

(“GAAP”),

including

Operating

Earnings

and

Operating

Earnings

per

share.

Please

refer

to

slide

3

for

a

definition

of

“Operating

Earnings”

and

the

reconciliation

of

“Operating

Earnings”

to

the

applicable

GAAP

financial

measure

set

forth

on

slide

18.

This

presentation

may

contain

statistics

and

other

data

that

in

some

cases

has

been

obtained

from

or

compiled

from

information

made

available

by

third-party

service

providers.

ARI

makes

no

representation

or

warranty,

expressed

or

implied,

with

respect

to

the

accuracy,

reasonableness

or

completeness

of

such

information.

Past

performance

is

not

indicative

nor

a

guarantee

of

future

returns.

Index

performance

and

yield

data

are

shown

for

illustrative

purposes

only

and

have

limitations

when

used

for

comparison

or

for

other

purposes

due

to,

among

other

matters,

volatility,

credit

or

other

factors

(such

as

number

and

types

of

securities).

Indices

are

unmanaged,

do

not

charge

any

fees

or

expenses,

assume

reinvestment

of

income

and

do

not

employ

special

investment

techniques

such

as

leveraging

or

short

selling.

No

such

index

is

indicative

of

the

future

results

of

any

investment

by

ARI.

1

ARI Q3 2015 Earnings Call

2

October 30, 2015

Stuart Rothstein

Chief Executive Officer and President

Scott Weiner

Chief Investment Officer of the Manager

Megan Gaul

Chief Financial Officer, Treasurer and Secretary

Hilary Ginsberg

Investor Relations Manager

Financial Summary

3

(1)

Operating

Earnings

is

a

non-GAAP

financial

measure

that

is

used

by

the

Company

to

approximate

cash

available

for

distribution

and

is

defined

by

the

Company

as

net

income

available

to

common

stockholders,

computed

in

accordance

with

GAAP,

adjusted

for

(i)

equity-based

compensation

expense

(a

portion

of

which

may

become

cash-based

upon

final

vesting

and

settlement

of

awards

should

the

holder

elect

net

share

settlement

to

satisfy

income

tax

withholding),

(ii)

any

unrealized

gains

or

losses

or

other

non-cash

items

included

in

net

income

available

to

common

stockholders,

(iii)

unrealized

income

from

unconsolidated

joint

ventures,

(iv)

foreign

currency

gains/losses,

and

(v)

the

non-cash

amortization

expense

related

to

the

reclassification

of

a

portion

of

the

convertible

senior

notes

to

stockholders’

equity

in

accordance

with

GAAP.

Please

see

slide

18

for

a

reconciliation

of

Operating

Earnings

and

Operating

Earnings

per

Share

to

GAAP

Net

Income

and

GAAP

Net

Income

per

share.

(2)

Includes

Commercial

Mortgage-Backed

Securities

(“CMBS”),

held-to-maturity,

which

are

net

of

a

participation

sold

during

June

2014.

ARI

presents

the

participation

sold

as

both

assets

and

non-recourse

liabilities

because

the

participation

does

not

qualify

as

a

sale

according

to

GAAP.

At

September

30,

2015,

ARI

had

one

such

participation

sold

with

a

carrying

amount

of

$89,303.

Subordinate

loans

also

are

net

of

a

participation

sold

in

February

2015.

At

September

30,

2015,

this

participation

sold

had

a

face

amount

of

£19,900

and

a

carrying

amount

of

$30,104.

(3)

Debt

to

common

equity

is

net

of

participations

sold.

(4)

Fixed

charge

coverage

is

EBITDA

divided

by

interest

expense

plus

the

preferred

stock

dividends.

($ amounts in thousands, except per share data)

Income Statement

September 30, 2015

September 30, 2014

% Change

September 30, 2015

September 30, 2014

% Change

51,878

$      

35,356

$           

46.7%

136,348

$    

85,559

$       

59.4%

(13,187)

$     

(8,786)

$             

50.1%

(36,287)

$     

(15,802)

$      

129.6%

Net interest income

38,691

$      

26,570

$            

45.6%

100,061

$    

69,757

$       

43.4%

Operating earnings

(1)

31,742

$      

20,768

$            

52.8%

80,347

$      

52,805

$       

52.2%

0.53

$         

0.44

$                

20.5%

1.42

$         

1.24

$            

14.5%

59,934,008

47,068,929

27.3%

56,415,082

42,538,744

32.6%

Balance sheet

September 30, 2015

December 31, 2014

% Change

2,344,092

$  

1,618,623

$       

44.8%

1,608,678

$  

1,026,556

$       

56.7%

Common stockholders' equity

1,098,145

$  

768,819

$           

42.8%

286,250

$    

86,250

$            

231.9%

735,437

$    

622,194

$           

18.2%

Convertible senior notes

247,736

$    

246,464

$           

0.5%

0.9x

1.2x

3.1x

2.8x

Three Months Ended

Nine Months Ended

Interest income

Interest expense

Operating earnings per diluted share

(1)

Diluted weighted average shares of common

stock outstanding

Investments at amortized cost

(2)

Net equity in investments at cost

Preferred stockholders' equity

Debt to common equity

(3)

Outstanding repurchase agreement borrowings

Fixed charge coverage

(4)

Historical Financial Overview

4

Operating Earnings ($000s)

(1)

Net Interest Income ($000s)

Dividends per Share of Common Stock

Operating Earnings per Share of Common Stock

(1)

(1)

Operating

Earnings

is

a

non-GAAP

financial

measure

that

is

used

by

the

Company

to

approximate

cash

available

for

distribution

and

is

defined

by

the

Company

as

net

income

available

tocommon

stockholders,

computed

in

accordance

with

GAAP,

adjusted

for

(i)

equity-based

compensation

expense

(a

portion

of

which

may

become

cash-based

upon

final

vesting

and

settlement

of

awards

should

the

holder

elect

net

share

settlement

to

satisfy

income

tax

withholding),

(ii)

any

unrealized

gains

or

losses

or

other

non-cash

items

included

in

net

income

available

to

common

stockholders,

(iii)

unrealized

income

from

unconsolidated

joint

ventures,

(iv)

foreign

currency

gains/losses,

and

(v)

the

non-cash

amortization

expense

related

to

the

reclassification

of

a

portion

of

the

convertible

senior

notes

to

stockholders’

equity

in

accordance

with

GAAP.

Please

see

slide

18

for

a

reconciliation

of

Operating

Earnings

and

Operating

Earnings

per

Share

to

GAAP

Net

Income

and

GAAP

Net

Income

per

share.

$80,347

$100,061

$1.42

$1.32

$5,047

$8,796

$11,963

$13,991

$22,222

$7,086

$8,526

$11,721

$18,045

$26,385

$7,643

$9,218

$13,272

$20,768

$31,742

$8,277

$7,376

$14,488

$21,179

$0

$15,000

$30,000

$45,000

$60,000

$75,000

$90,000

2011

2012

2013

2014

2015

$7,599

$11,187

$17,067

$19,403

$28,554

$9,683

$11,951

$17,233

$23,784

$32,817

$10,236

$13,236

$18,786

$26,570

$38,691

$10,946

$12,303

$20,021

$27,049

$0

$15,000

$30,000

$45,000

$60,000

$75,000

$90,000

$105,000

$120,000

2011

2012

2013

2014

2015

$0.40

$0.40

$0.40

$0.40

$0.44

$0.40

$0.40

$0.40

$0.40

$0.44

$0.40

$0.40

$0.40

$0.40

$0.44

$0.40

$0.40

$0.40

$0.40

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

2011

2012

2013

2014

2015

$0.29

$0.42

$0.39

$0.37

$0.44

$0.40

$0.41

$0.31

$0.42

$0.45

$0.38

$0.44

$0.35

$0.44

$0.53

$0.39

$0.27

$0.39

$0.45

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

2011

2012

2013

2014

2015

5

Q3 Financial Highlights

Financial Results & Earnings Per Share

Operating Earnings for the quarter ended September 30, 2015 of $31.7 million, or $0.53 per diluted

share of common stock, a 20.4% per share increase as compared to Operating Earnings of $20.8

million,

or

$0.44

per

diluted

share

of

common

stock

for

the

quarter

ended

September

30,

2014

(1)

–

Net interest income of $38.7 million

–

Total expenses of $6.2 million, comprised of management fees of $4.1 million, G&A of $1.3 million and

equity-based compensation of $0.8 million

–

Net income available to common stockholders for the quarter ended September 30, 2015 of $23.5 million, or

$0.39 per diluted share of common stock

Dividends

Declared a dividend of $0.44 per share of common stock for the quarter ended September 30, 2015

10.4% annualized dividend yield based on $16.87 closing price on October 28, 2015

Declared a dividend on the Company’s 8.625% Series A Cumulative Redeemable Perpetual Preferred

Stock of $0.5391 per share for stockholders of record on September 30, 2015

Book Value

GAAP book value of $16.35 per share as of September 30, 2015

(1)

Operating

Earnings

is

a

non-GAAP

financial

measure

that

is

used

by

the

Company

to

approximate

cash

available

for

distribution

and

is

defined

by

the

Company

as

net

income

available

to

common

stockholders,

computed

in

accordance

with

GAAP,

adjusted

for

(i)

equity-based

compensation

expense

(a

portion

of

which

may

become

cash-based

upon

final

vesting

and

settlement

of

awards

should

the

holder

elect

net

share

settlement

to

satisfy

income

tax

withholding),

(ii)

any

unrealized

gains

or

losses

or

other

non-cash

items

included

in

net

income

available

to

common

stockholders,

(iii)

unrealized

income

from

unconsolidated

joint

ventures,

(iv)

foreign

currency

gains/losses,

and

(v)

the

non-cash

amortization

expense

related

to

the

reclassification

of

a

portion

of

the

convertible

senior

notes

to

stockholders’

equity

in

accordance

with

GAAP.

Please

see

slide

18

for

a

reconciliation

of

Operating

Earnings

and

Operating

Earnings

per

Share

to

GAAP

Net

Income

and

GAAP

Net

Income

per

share.

Q3 –

New Investments and Funding

6

Summary of New Investments

(1)

Based

upon

committed

amount

of

loan.

(2)

The

Internal

Rate

of

Return

(“IRR”)

for

the

investments

shown

in

this

presentation

reflect

the

returns

underwritten

by

ACREFI

Management,

LLC,

the

Company’s

external

manager

(the

“Manager”),

taking

into

account

leverage

and

calculated

on

a

weighted

average

basis

assuming

no

dispositions,

early

prepayments

or

defaults

but

assuming

that

extension

options

are

exercised

and

that

the

cost

of

borrowings

remains

constant

over

the

remaining

term.

With

respect

to

certain

loans,

the

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

presentvalue

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

above.

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,

2014

for

a

discussion

of

some

of

the

factors

that

could

adversely

impact

the

returns

received

by

the

Company

from

the

investments

shown

in

the

table

over

time.

Quarter Ended

9/30/2015

9-Months Ended

9/30/2015

Number of Loans Closed

5

17

Commitments to New Loans

($ in thousands)

$331,480

$1,052,548

Funding of New Loans

($ in thousands)

$269,369

$781,510

Fixed Rate %/Floating Rate %

(1)

0%/100%

4%/96%

First Mortgage %/Subordinate Loan %

(1)

45%/55%

35%/65%

Weighted Average Loan-to-Value

57%

57%

Weighted Average Levered IRR

(2)

14%

15%

Funding of Previously Closed Loans

($ in thousands)

$155,527

$199,143

7

Commercial Real Estate Debt Portfolio Overview

(1)

CMBS

includes

$30.1

million

of

restricted

cash

related

to

the

Company’s

master

repurchase

agreement

with

UBS

AG

(the

“UBS

Facility”).

(2)

Remaining

Weighted

Average

Life

assumes

all

extension

options

are

exercised.

(3)

The

underwritten

IRR

for

the

investments

shown

in

this

table

reflect

the

returns

underwritten

by

the

Manager,

taking

into

account

leverage

and

calculated

on

a

weighted

average

basis

assuming

no

dispositions,

early

prepayments

or

defaults

but

assuming

that

extension

options

are

exercised

and

that

the

cost

of

borrowings

remains

constant

over

the

remaining

term.

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

the

table.

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,

2014

for

a

discussion

of

some

of

the

factors

that

could

adversely

impact

the

returns

received

by

the

Company

from

the

investments

shown

in

the

table

over

time.

(4)

Represents

an

underwritten

levered

weighted

average

IRR.

The

Company's

ability

to

achieve

the

underwritten

levered

weighted

average

IRR

additionally

depends

upon

the

Company

re-borrowing

under

the

JPMorgan

Facility

or

any

replacement

facility

with

similar

terms

with

regard

to

its

portfolio

of

first

mortgage

loans.

Without

such

re-borrowing,

the

levered

weighted

average

underwritten

IRR

will

be

lower

than

the

amount

shown

above,

as

indicated

in

the

current

weighted

average

underwritten

IRR

column.

(5)

Subordinate

loans

include

CMBS,

held-to-maturity,

which

represents

a

loan

the

Company

closed

during

May

2014

that

was

subsequently

contributed

to

a

securitization

during

August

2014.

During

May

2014,

the

Company

closed

a

$155,000

floating-rate

whole

loan

secured

by

the

first

mortgage

and

equity

interests

in

an

entity

that

owns

a

resort

hotel

in

Aruba.

During

June

2014,

the

Company

syndicated

a

$90,000

senior

participation

in

the

loan

and

retained

a

$65,000

junior

participation.

During

August

2014,

both

the

$90,000

senior

participation

and

the

Company's

$65,000

junior

participation

were

contributed

to

a

CMBS

securitization.

In

exchange

for

contributing

its

$65,000

junior

participation,

the

Company

received

a

CMBS

secured

solely

by

the

$65,000

junior

participation.

ARI

presents

the

participation

sold

as

both

assets

and

non-recourse

liabilities

because

the

participation

does

not

qualify

as

a

sale

according

to

GAAP.

At

September

30,

2015,

ARI

had

one

such

participation

sold

with

a

carrying

amount

of

$89,303.

(6)

Subordinate

loans

also

are

net

of

a

participation

sold

during

February

2015.

The

Company

presents

the

participations

sold

as

both

assets

and

non-recourse

liabilities

because

the

participation

does

not

qualify

as

a

sale

according

to

GAAP.

At

September

30,

2015,

the

Company

had

one

such

participation

sold

with

a

face

amount

of

£19,900

and

a

carrying

amount

of

$30,104

Asset Type

($000s)

Amortized

Cost

Borrowings

Equity at

Cost

(1)

Remaining

Weighted

Average

Life

(years)

(2)

Current

Weighted

Average

Underwritten

IRR

(3)

Fully-Levered

Weighted

Average

Underwritten

IRR

(3)(4)

First Mortgage Loans

$        905,681

$     301,533

$      604,148

3.1

12.1%

14.7%

Subordinate

Loans

(5)(6)

926,304

-

896,200

4.3

13.2

13.2

CMBS

512,107

433,904

108,330

1.7

16.2

16.2

Investments at September  30, 2015

$     2,344,092

$     735,437

$   1,608,678

3.3 Years

13.0%

13.9%

Commercial Real Estate Debt Portfolio Overview

8

Net Invested Equity at Amortized Cost Basis

(1)

Geographic Diversification by Net Equity

Property Type by Net Equity

(1)

Subordinate

loans

include

CMBS,

held-to-maturity

and

are

net

of

participations

sold

of

$

119,407.

ARI

presents

the

participations

sold

as

both

assets

and

non-recourse

liabilities

because

the

participation

does

not

qualify

as

a

sale

according

to

GAAP.

CMBS

8%

First Mortgage

Loans

42%

Subordinate Loans

50%

Securities

7%

Residential -

rental

11%

Industrial

5%

Hotel

24%

Mixed Use

1%

Office

2%

Healthcare

6%

Ski Resort

1%

Retail

11%

Residential -

for

sale

32%

New York City

32%

Northeast (excluding

NYC)

5%

Securities

7%

Southeast

7%

Mid-Atlantic

11%

Midwest

15%

West

8%

Southwest

3%

International

12%

Commercial Real Estate Loan Portfolio –

Maturity and Type

9

Fully Extended Loan Maturities and Future

Fundings

(1)(2)(3)(4)

(1)

Based

upon

face

amount

of

loans;

Does

not

include

CMBS,

but

does

include

CMBS,

held-to-maturity.

(2)

Maturities

reflect

the

fully

funded

amounts

of

the

loans.

(3)

Subordinate

loans

include

CMBS,

held-to-maturity

and

are

net

of

participations

sold

of

$119,407.

ARI

presents

the

participations

sold

as

both

assets

and

non-recourse

liabilities

because

the

participation

does

not

qualify

as

a

sale

according

to

GAAP.

(4)

Future

funding

dates

are

based

upon

the

Manager’s

projections

and

are

subject

to

change.

Loan Position and Rate Type

(1)(3)

75% Floating Rate/25% Fixed Rate

$-

$154.9

$293.7

$218.6

$536.8

$785.2

$50.0

$105.1

$32.0

$-

$25.0

$110.3

$187.6

$48.3

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Fully extended maturity

Future funding commitment

Senior Loan Fixed

8%

Subordinate Loan

Fixed

17%

Subordinate Loan

Floating

42%

Senior Loan

Floating

33%

Loan Portfolio –

Loan Level LTV (Through Last Invested Dollar)

10

(1)

This

first

mortgage

loan

is

for

the

same

property

as

the

$2.5

million

NYC

hotel

mezzanine

loan

listed

on

page

11.

(2)

LTV

is

based

upon

the

fully

committed

loan

amount

of

$65.1

million.

(3)

This

first

mortgage

loan

is

for

the

same

property

as

the

$11.4

million

NYC

condo

conversion

mezzanine

loan

listed

on

page

11.

(4)

This

first

mortgage

loan

is

for

the

same

property

as

the

$12.3

million

NYC

retail

mezzanine

loan

listed

on

page

11.

First Mortgage Loans

Description ($ in thousands)

Location

Balance at

9/30/2015

Starting LTV

Ending LTV

First Mortgage -

Retail

Ohio

128,700

$         

0%

55%

First Mortgage -

Hotel

(1)

New York

97,807

$            

0%

47%

First Mortgage -

Destination homes

Various

95,984

$            

0%

49%

First Mortgage -

Retail

New York

85,770

$            

0%

57%

First Mortgage -

Condo development

Maryland

80,000

$            

0%

65%

First Mortgage -

Pre-development loan

New York

67,300

$            

0%

58%

First Mortgage -

Multifamily

North Dakota

55,140

$            

0%

69%

First Mortgage -

Destination homes

New York/Hawaii

50,000

$            

0%

75%

First Mortgage -

Hotel portfolio

Various

45,400

$            

0%

63%

First Mortgage -

Pre-development loan

Florida

45,000

$            

0%

75%

First Mortgage -

Multifamily

New York

34,500

$            

0%

72%

First Mortgage -

Hotel

Pennsylvania

34,000

$            

0%

65%

First Mortgage -

Condo development

(2)

Maryland

33,000

$            

0%

66%

First Mortgage -

Pre-development loan

Florida

33,000

$            

0%

73%

First Mortgage -

Condo conversion

(3)

New York

24,131

$            

0%

34%

First Mortgage -

Retail

(4)

New York

1,653

$              

0%

34%

Total/Weighted Average

911,385

$         

60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

11

Loan Portfolio –

Loan Level LTV (Through Last Invested Dollar)

Subordinate Financings

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Description ($ in thousands)

Location

Balance at 

9/30/2015

Starting LTV

Ending LTV

Subordinate -

Condo development

(1)

New York

84,396

$           

32%

48%

Subordinate -

Condo development

(2)

New York

75,473

$            

50%

60%

Subordinate -

Hotels

Various

75,000

$            

64%

70%

Subordinate -

Condo development

(3)

New York

73,072

$            

22%

42%

Subordinate -

Resort Hotel

(4)

Aruba

64,581

$            

34%

59%

Subordinate -

Pre-development loan

(5)

London

52,024

$            

45%

81%

Subordinate -

Healthcare portfolio

(6)

UK

51,958

$            

51%

69%

Subordinate -

Condo conversion 

New York

50,764

$            

39%

48%

Subordinate -

Healthcare portfolio

Various

45,588

$            

56%

61%

Subordinate -

Industrial portfolio

New York

45,000

$            

61%

79%

Subordinate -

Condo development

(2)

New York

30,000

$            

60%

63%

Subordinate -

Industrial portfolio

Various

32,000

$            

64%

72%

Subordinate -

Hotel

Arizona

25,000

$            

46%

58%

Subordinate -

Hotel  portfolio

Minnesota

24,261

$            

56%

67%

Subordinate -

Multifamily

(7)

Florida

22,000

$            

66%

80%

Subordinate -

Hotel

Washington D.C.

20,000

$            

61%

69%

Subordinate -

Hotel

California

20,000

$            

58%

74%

Subordinate -

Multifamily/Condo/Hotel

Various

19,500

$            

79%

90%

Preferred Equity -

Multifamily

(7)

Florida

15,500

$            

80%

89%

Subordinate -

Ski resort

Montana

15,000

$            

43%

56%

Subordinate -

Office

New York

14,000

$            

61%

70%

Subordinate -

Retail

(8)

New York

12,347

$            

34%

73%

Subordinate -

Condo conversion

(9) 

New York

11,437

$            

34%

50%

Subordinate -

Office

Missouri

9,604

$              

59%

69%

Subordinate -

Office

Michigan

8,769

$              

40%

52%

Subordinate -

Mixed-use

North Carolina

6,525

$              

62%

74%

Subordinate -

Hotel

(10)

New York

2,562

$              

47%

52%

Total/Weighted Average

906,361

$         

63%

(1)

LTV is based upon the fully funded loan amount of $60 million plus PIK interest.

(2)

LTV is based upon the fully committed loan amount of $105 million; Both loans are secured by the same property. The $30 million loan is structured as a corporate loan and has additional collateral.

(3)

LTV is based upon the fully funded loan amount of $275 million.

(4)

This is CMBS, held-to-maturity and is net of a participation sold.  ARI presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to GAAP.  At September 30, 2015, this participation sold had a carrying amount of $89,303.

(5)

Based upon £31.2 face amount plus PIK converted to USD based upon the conversion rate on September 30, 2015.

(6)

Based upon £34.4 face amount converted to USD based upon the conversion rate on September 30, 2015, net of participation sold of $30,104.

(7)

Mezzanine loan and preferred equity are secured by the same portfolio of properties.

(8)

Loan is for the same property as the $1.6 million NYC retail first mortgage loan listed on page 10.

(9)

Loan is for the same property as the $24.1 million NYC condo conversion first mortgage loan listed on page 10.  LTV for the mezzanine loan is based upon the fully committed amount of $29.4 million plus PIK interest.

(10)

Loan is for the same property as the $97.8 million NYC hotel first mortgage loan listed on page 10.

12

CMBS Portfolio

(1)

Face

Amortized Cost

Remaining Weighted

Average Life with

Extensions (years)

Estimated Fair

Value

Debt

Net Equity at

Cost

(2)

CMBS –

Total

$              520,883

$   512,107

1.7 Years

$                   512,485

$           433,904

$                    108,330

CUSIP

Description

92978PAJ8

WBCMT 2006-C29 AJ

07388QAH2

BSCMS 2007-PW17 AJ

07401DAH4

BSCMS 2007PW18 AJ

46625YVZ3

JPMCC 2005-CB13 AJ

50180CAG5

LBUBS 2006-C7 AJ

60688CAJ5

MLCFC 2007-9 AJ

05947US25

BACM 2005-3 AJ

61756UAJ0

MSC 2007-1Q16 AJ

46629YAH2

JPMCC 2007-CB18AJ

173311QAE0

CGCMT 2007-C6 AJFX

CUSIP

Description

59025KAG7

MLMT 2007-C1 AM

22546BAH3

CSMC 2007-C5 AM

36159XAH3

GECMC 2007-C1 AM

46627QBC1

JMPCC 2006-CB15 AM

46631BAJ4

JPMCC 2007-LD11 AM

14986DAJ9

CD 2006-CD3 AJ

17311QBN9

CGCMT 2007-C6 AJ

17313KAK7

CGCMT 2008-C7 AJ

20047QAH8

COMM 2006-C7 AJ

61755YAK0

MSC 2007-IQ15 AJ

(1)

Does

not

include

CMBS,

held-to-maturity.

(2)

Includes

$30.1

million

of

restricted

cash

related

to

the

UBS

Facility

Portfolio Metrics –

Quarterly Migration Summary

13

(1)

Subordinate

loans

include

CMBS,

held-to-maturity

and

are

net

of

participations

sold

of

$119,407.

ARI

presents

the

participations

sold

as

both

assets

and

non-recourse

liabilities

because

the

participation

does

not

qualify

as

a

sale

according

to

GAAP.

(2)

The

underwritten

IRR

for

the

investments

shown

in

this

presentation

reflect

the

returns

underwritten

by

the

Manager,

taking

into

account

leverage

and

calculated

on

a

weighted

average

basis

assuming

no

dispositions,

early

prepayments

or

defaults

but

assuming

that

extension

options

are

exercised

and

that

the

cost

of

borrowings

remains

constant

over

the

remaining

term.

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.

Therecan

be

no

assurance

that

the

actual

IRRs

will

equal

the

underwritten

IRRs

shown

in

the

table.

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,

2014

for

a

discussion

of

some

of

the

factors

that

could

adversely

impact

the

returns

received

by

the

Company

from

the

investments

shown

in

the

table

over

time

(3)

Does

not

include

CMBS.

(4)

Includes

$30.1

million

of

restricted

cash

related

to

the

UBS

Facility.

(5)

Represents

an

underwritten

levered

weighted

average

IRR.

The

Company's

ability

to

achieve

the

underwritten

levered

weighted

average

IRR

additionally

depends

upon

the

Company

re-borrowing

under

the

JPMorgan

Facility

or

any

replacement

facility

with

similar

terms

with

regard

to

its

portfolio

of

first

mortgage

loans.

Without

such

re-borrowing,

the

levered

weighted

average

underwritten

IRR

will

be

lower

than

the

amount

shown

above,

as

indicated

in

the

current

weighted

average

underwritten

IRR

column

on

slide

7.

(6)

Net

of

participations

sold.

Portfolio Metrics ($ in thousands)

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

(Investment balances represent amortized cost)

First Mortgage Loans

905,681

$        

704,040

$        

563,390

$        

458,520

$        

369,924

$        

Subordinate Loans

(1)

926,304

894,926

736,838

625,881

650,084

CMBS

512,107

511,412

510,740

534,222

511,445

Total Investments

2,344,092

$     

2,110,378

$     

1,810,968

$     

1,618,623

$     

1,531,453

$     

(Investment balances represent net equity, at cost)

First Mortgage Loans

604,148

$        

275,205

$        

421,862

$        

290,396

$        

247,202

$        

Subordinate Loans

(1)

896,200

847,968

707,201

625,881

650,084

CMBS

108,330

(4)

107,635

(4)

106,963

(4)

110,279

(4)

99,988

(4)

Net Equity in Investments at Cost

1,608,678

$     

1,230,808

$     

1,236,026

$     

1,026,556

$     

997,274

$        

Levered Weighted Average Underwritten IRR

(2)

13.9%

(5)

14.6%

(5)

14.2%

(5)

13.4%

(5)

13.7%

(5)

Weighted Average Duration

3.3 Years

3.1 Years

3.0 Years

3.2 Years

3.0 Years

Loan Portfolio Weighted Average Ending LTV

(3)

61.0%

62.0%

62.0%

62.0%

58.0%

Borrowings Under Repurchase Agreements

735,437

$        

878,352

$        

575,433

$        

622,194

$        

537,766

$        

Convertible Senior Notes

247,736

$        

247,305

$        

246,881

$        

246,464

$        

246,054

$        

Debt-to-Common Equity

0.9x

(6)

1.2x

(6)

0.9x

(6)

1.2x

(6)

1.1x

(6)

Financing Overview and Interest Rate Sensitivity

14

Facility ($000s)

Debt Balance

Weighted Average

Remaining

Maturity

(1)

Weighted

Average Rate

UBS Facility

$                   133,899

3.0 Years

2.8%

Deutsche Bank Facility

300,005

2.5 Years

3.7

JPMorgan Facility

253,481

2.3 Years

2.5

Goldman Sachs Loan

48,052

3.6 Years

3.7

Total Borrowings at September 30, 2015

$                  735,437

2.5 Years

3.0%

Variable Rate Investments & Liabilities

Variable Rate Liabilities

ARI anticipates a 0.5% increase in

LIBOR results in approximately a

$0.08 per diluted share of common

stock increase in Operating

Earnings annually

(2)

(1)

Assumes

extension

options

on

the

UBS

Facility

are

exercised.

(2)

Based

upon

the

Company’s

portfolio

as

of

September

30,

2015,

any

such

hypothetical

impact

on

interest

rates

on

the

Company’s

variable

rate

borrowings

does

not

consider

the

effect

of

any

change

in

overall

economic

activity

that

could

occur

in

a

rising

interest

rate

environment.

Further,

in

the

event

of

a

change

in

interest

rates

of

that

magnitude,

the

Company

may

take

actions

to

further

mitigate

the

Company’s

exposure

to

such

a

change.

However,

due

to

the

uncertainty

of

the

specific

actions

that

would

be

taken

and

their

possible

effects,

this

analysis

assumes

no

changes

in

the

Company’s

financial

structure.

$1,480,206

$(346,956)

$1,133,250

Variable Rate Assets

Net Equity

15

Financials

16

Consolidated Balance Sheets

(in thousands—except share and per share data)

September 30, 2015

December 31, 2014

Assets:

(Unaudited)

Cash

20,158

$                  

40,641

$                 

Restricted cash

30,127

30,127

Securities available-for-sale, at estimated fair value

-

17,105

Securities, at estimated fair value

512,485

522,730

Securities, held-to-maturity

153,799

154,283

Commercial mortgage loans, held for investment

905,681

458,520

Subordinate loans, held for investment

861,808

561,182

Investment in unconsolidated joint venture

20,183

37,016

Derivative assets

246

4,070

Interest receivable

14,424

10,829

Deferred financing costs, net

8,125

7,444

Other assets

767

1,200

Total Assets

2,527,803

$              

1,845,147

$              

Liabilities and Stockholders' Equity

Liabilities:

Borrowings under repurchase agreements

735,437

$                 

622,194

$                 

Convertible senior notes, net

247,736

246,464

Participations sold

119,407

89,584

Accounts payable and accrued expenses

4,668

7,578

Payable to related party

4,100

3,240

Dividends payable

32,060

21,018

Total Liabilities

1,143,408

990,078

Stockholders' Equity:

Preferred stock, $0.01 par value, 50,000,000 shares authorized:

Series A Preferred stock, 3,450,000 shares issued and outstanding ($86,250 aggregate liquidation

preference) in 2015 and 2014

35

35

Series B Preferred stock, 8,000,000 shares issued and outstanding ($200,000 aggregate liquidation

preference) in 2015

80

-

Common stock, $0.01 par value, 450,000,000 shares authorized 67,145,252 and 46,900,442 shares issued

and outstanding in 2015 and 2014, respectively

671

469

Additional paid-in-capital

1,408,448

868,035

Retained earnings (accumulated deficit)

(22,225)

(10,485)

Accumulated other comprehensive loss

(2,614)

(2,985)

Total Stockholders' Equity

1,384,395

855,069

Total Liabilities and Stockholders' Equity

2,527,803

$             

1,845,147

$              

17

Consolidated Statements of Operations

September 30,

2015

September 30,

2014

September 30,

2015

September 30,

2014

Net interest income:

Interest income from securities

8,293

$              

6,129

$               

24,846

$             

12,914

$             

Interest income from securities, held to maturity

2,956

2,219

9,050

2,219

Interest income from commercial mortgage loans

15,184

8,025

37,246

18,475

Interest income from subordinate loans

25,445

18,983

65,206

51,951

Interest expense

(13,187)

(8,786)

(36,287)

(15,802)

Net interest income

38,691

26,570

100,061

69,757

Operating expenses:

General and administrative expenses (includes $756 and $2,695 of

equity-based compensation in 2015 and $308 and $1,096 in 2014,

respectively)

(2,099)

(1,434)

(6,512)

(4,355)

Management fees to related party

(4,097)

(3,193)

(11,325)

(8,725)

Total operating expenses

(6,196)

(4,627)

(17,837)

(13,080)

Income from unconsolidated joint venture

108

(88)

495

(88)

Interest income from cash balances

239

21

252

26

Realized loss on sale of securities

-

-

(443)

-

Unrealized gain on securities

(6,926)

(2,147)

(5,792)

4,787

Foreign currency gain

(2,165)

(3,596)

3,424

(2,637)

Loss on derivative instruments

2,096

3,026

(4,144)

1,933

Net income

25,847

$           

19,159

$           

76,016

$           

60,698

$           

Preferred dividends

(2,304)

(1,860)

(6,023)

(5,580)

Net income available to common stockholders

23,543

$           

17,299

$           

69,993

$           

55,118

$           

Basic and diluted net income per share of common stock   

0.39

$                

0.37

$                

1.24

$                

1.30

$                

Basic weighted average shares of common stock outstanding

59,355,613

46,848,675

55,818,731

42,332,380

Diluted weighted average shares of common stock outstanding

59,934,008

47,068,929

56,415,082

42,538,744

Dividend declared per share of common stock

0.44

$                

0.40

$                

1.32

$                

1.20

$                

Three months ended

Nine months ended

18

Reconciliation of Operating Earnings to Net Income

September 30, 2015

Earnings Per Share

(Diluted)

September 30, 2014

Earnings Per Share

(Diluted)

Operating Earnings:

Net income available to common stockholders

23,543

$                    

0.39

$                         

$17,299

0.37

$                         

Adjustments:

  Equity-based compensation expense

756

0.01

308

0.01

  Unrealized loss on securities

6,926

0.12

2,147

0.04

  Unrealized (gain) on derivative instruments

(2,096)

(0.04)

(3,026)

(0.07)

  Foreign currency loss

2,165

0.04

3,596

0.08

  Amortization of convertible senior notes related to equity reclassification

556

0.01

356

0.01

  Income from unconsolidated joint venture

(108)

-

88

-

Total adjustments:

8,199

0.14

3,469

0.07

Operating Earnings

31,742

$                    

0.53

$                         

20,768

$                    

0.44

$                         

Basic weighted average shares of common stock outstanding

59,355,613

46,848,675

Diluted weighted average shares of common stock outstanding

59,934,008

47,068,929

Three Months Ended

September 30, 2015

Earnings Per Share

(Diluted)

September 30, 2014

Earnings Per Share

(Diluted)

Operating Earnings:

Net income available to common stockholders

69,993

$                    

1.24

$                         

55,118

$                    

1.30

$                         

Adjustments:

  Equity-based compensation expense

2,695

0.05

1,096

0.03

  Unrealized (gain)/loss on securities

5,792

0.10

(4,787)

(0.11)

  Unrealized (gain)/loss on derivative instruments

4,144

0.07

(1,933)

(0.05)

  Foreign currency (gain)/loss

(3,424)

(0.06)

2,637

0.06

  Amortization of convertible senior notes related to equity reclassification

1,642

0.03

586

0.01

  Income from unconsolidated joint venture

(495)

(0.01)

88

-

Total adjustments:

10,354

0.18

(2,313)

(0.06)

Operating Earnings

80,347

$                   

1.42

$                         

52,805

$                   

1.24

$                         

Basic weighted average shares of common stock outstanding

55,818,731

42,322,380

Diluted weighted average shares of common stock outstanding

56,415,082

42,538,744

Nine Months Ended

19

Financial Metrics –

Quarterly Migration Summary

Financial Metrics

($ in thousands, except per share data)

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Net Interest Income

38,691

$         

32,817

$         

28,554

$         

27,049

$         

26,570

$         

Management Fee

4,097

3,887

3,341

3,236

3,193

General and Administrative Costs

1,343

1,238

1,238

1,315

1,126

Non-Cash Stock Based Compensation

756

821

1,117

481

308

Net Income Available to Common Stockholders

23,543

$         

22,798

$         

23,653

$         

20,182

$         

17,299

$         

GAAP Diluted EPS

0.39

$              

0.39

$              

0.47

$              

0.43

$              

0.37

$             

Operating Earnings

(1)

31,742

$         

26,385

$         

22,222

$         

21,179

$         

20,768

$         

Operating Diluted EPS

(1)

0.53

$              

0.45

$              

0.44

$              

0.45

$              

0.44

$             

Distributions Declared to Common Stockholders

0.44

$              

0.44

$              

0.44

$              

0.40

$              

0.40

$             

GAAP Book Value per Share of Common Stock

16.35

$            

16.41

$            

16.44

$            

16.39

$            

16.42

$           

Total Stockholders' Equity

1,384,395

$     

1,044,844

$     

1,046,482

$     

855,069

$        

855,686

$       

Diluted weighted average shares of common stock outstanding

59,934,008

59,022,217

50,171,687

47,085,617

47,068,929

Return on Common Equity Based on Operating Earnings

(2)

12.8%

11.0%

10.9%

11.0%

10.8%

(1)

Operating Earnings is a non-GAAP financial measure that is used by the Company to approximate cash available for distribution and is defined by the Company as net income available to common stockholders,

computed in accordance with GAAP, adjusted for (i) equity-based  compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share

settlement to satisfy income tax withholding),  (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint

ventures, (iv) foreign currency gains/losses, and (v) the non-cash amortization expense related to the reclassification of a portion of the convertible senior notes to stockholders’ equity in accordance with GAAP. Please

see slide 18 for a reconciliation of Operating Earnings and Operating Earnings per Share to GAAP Net Income and GAAP Net Income per share.

(2)

Return on common equity is calculated as annualized Operating Earnings for the period as a percentage of average stockholders’ equity for the period.