ARI's 2025 Q2 Earnings Call: Navigating Contradictions in Dividend Policy, Portfolio Growth, and Capital Strategy

Strong Financial Performance and Loan Portfolio Growth:
- Apollo Commercial Real Estate Finance (ARI) delivered strong performance in the second quarter of 2025, with a loan portfolio carrying value increasing by 12% from the previous quarter to approximately $8.6 billion.
- ARI committed $1.4 billion in new loans during the quarter, and year-to-date originations reached $2 billion.
- The growth was driven by ARI's ability to quickly redeploy capital received from repayments and focus assets, ensuring continued access to transaction flow and a diversified loan portfolio.

Residential Property Focus and European Market Momentum:
- Residential properties now comprise approximately 25% of ARI's portfolio, representing the largest property type concentration.
- Approximately 2/3 of residential loans in ARI's portfolio were originated over the past 24 months, benefiting from a valuation reset and enhanced credit quality.
- The European market, which represents approximately 50% of ARI's portfolio, is gaining momentum due to recent interest rate cuts, reenergizing acquisition activity.

Balance Sheet Optimization and Liability Management:
- ARI refinanced its outstanding Term Loan B facilities, securing a new 5-year floating rate $750 million loan to repay existing loans with pending maturities in 2026 and 2028.
- The company ended the quarter with $208 million in total liquidity, including cash on hand, committed undrawn credit capacity, and loan proceeds held by the servicer.
- These actions highlight ARI's ability to optimize its balance sheet and secure favorable financing terms, reflecting market confidence in the company.

Dividend Growth and Capital Strategy:
- ARI reported distributable earnings of $36 million or $0.26 per share for the second quarter, up 8% from the previous quarter.
- The company's leverage remains around 4x, considering non-earning assets, with plans to maintain leverage at this level while converting non-earning assets into earning assets.
- ARI plans to drive dividend growth through levered ROEs consistent with previous capital deployment, targeting meaningful earnings growth of 30% to 40%.