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): February 28, 2012

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 February 28, 2012, Apollo Commercial Real Estate Finance, Inc. (the “Company”) issued an earnings release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2011. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

On February 28, 2012, 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 Item 2.02 of 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 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On February 28, 2012, the Company’s board of directors appointed Stuart A. Rothstein as Chief Executive Officer and President of the Company and as a Director, each effective March 15, 2012. The Company’s board of directors selected Mr. Rothstein to serve as a Director because of the strategic leadership and business judgment he has demonstrated in his role as Chief Financial Officer of the Company and his extensive managerial and executive experience.

Mr. Rothstein, age 46, will continue to serve as Chief Financial Officer, Treasurer and Secretary, roles he has held since joining the Company in September 2009. Mr. Rothstein also serves as Vice President of ACREFI Management, LLC, the Company’s external manager (the “Manager”) and is a member of the Manager’s Investment Committee. In March 2011, Mr. Rothstein became the Chief Financial Officer, Secretary and Treasurer of Apollo Residential Mortgage, Inc. (NYSE: AMTG). Prior to joining the Company, Mr. Rothstein was Co-Managing Partner of Four Corners Properties, a real estate investment company formed with a former colleague, which acquired over $200 million of real estate comprising approximately 1.2 million square feet in Silicon Valley.

In connection with the appointment of Mr. Rothstein, as Chief Executive Officer and President of the Company, on March 15, 2012, the Company intends to grant to Mr. Rothstein 20,000 restricted stock units (“RSU”) under the Company’s 2009 Equity Incentive Plan. Each RSU represents the contingent right to receive one share of the Company’s common stock for each vested RSU. The RSUs will vest in equal annual installments over a three year period, provided that Mr. Rothstein remains in service through the applicable vesting dates.

In addition, on February 28, 2012, the Company’s board of directors approved the appointment of Joseph F. Azrack as Chairman of the board of directors effective March 15, 2012, at which point Mr. Azrack will cease to be the President and Chief Executive Officer of the Company.

Mr. Azrack, age 64, has been one of our directors since June 2009. Mr. Azrack is the President and Chief Executive Officer of the Manager and the head of the Manager’s Investment Committee. Mr. Azrack is the managing partner of Apollo Global Real Estate Management, L.P., a position he has held since August 2008. He also serves as the Managing Director - Real Estate of Apollo Global Management, LLC, a position he has held since December 1, 2010. From 2004 to 2008, Mr. Azrack was President and Chief Executive Officer of Citi Property Investors where he chaired the firm’s Management Committee and Investment Committees, directing investment policy and strategy. Mr. Azrack was also a member of the Citigroup Alternative Investments Management Committee (May 2004 to July 2008) and Investment Committee (May 2004 to July 2008), and a member of Citi Infrastructure Investments’ Investment Committee (September 2006 to July 2008).

- 2 -

See the information disclosed under “Note 10 - Related Party Transactions” to the condensed consolidated financial statements included under Item 1 “ Financial Statements “ of the Company’s Form 10-Q for the quarter ended September 30, 2011 for a description of certain relationships between the Company and the Manager.

ITEM 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Earnings Release, dated February 28, 2012
99.2	Supplemental Financial Information for the quarter ended December 31, 2011

- 3 -

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: Chief Financial Officer

Date: February 28, 2012

- 4 -

Exhibit Index

Exhibit No.	Description
99.1	Earnings Release, dated February 28, 2012
99.2	Supplemental Financial Information for the quarter ended December 31, 2011

- 5 -

EX-99.1

Exhibit 99.1

		FOR IMMEDIATE RELEASE
CONTACT:	Stuart Rothstein	NYSE: ARI
	(212) 822-0722

Apollo Commercial Real Estate Finance, Inc. Announces

Fourth Quarter and Full Year 2011 Results

- 44% Increase in Operating Earnings Per Share -

- Declares a $0.40 Per Share Quarterly Dividend –

- Names Stuart A. Rothstein as Chief Executive Officer, President and Director -

New York, NY, February 28, 2012 — Apollo Commercial Real Estate Finance, Inc. (the “Company”) (NYSE:ARI) reported Operating Earnings (a non-GAAP financial measure) of $0.39 per share, or $8.3 million, for the three months ended December 31, 2011. This represents an increase of 44% per share as compared with Operating Earnings for the same period in 2010 of $0.27 per share, or $4.7 million. Net income available to common stockholders for the three months ended December 31, 2011 was $0.41 per share, or $8.7 million, as compared with $0.22 per share, or $4.0 million, for the same period in 2010.

For the full year ended December 31, 2011, Operating Earnings were $1.47 per share, or $28.1 million. This represents an increase of 35% per share as compared with Operating Earnings for the same period in 2010 of $1.09 per share, or $13.8 million.

The Company also announced that its Board of Directors declared a dividend of $0.40 per share of common stock, which is payable on April 12, 2012 to common stockholders of record on March 31, 2012.

The Board also set March 8, 2012 as the record date for its 2012 Annual Meeting of Stockholders. The 2012 Annual Meeting of Stockholders will be held on May 4, 2012 at the offices of Clifford Chance US LLP at 31 West 52nd Street, New York, New York.

All per share information discussed herein is presented on a diluted basis.

Business Highlights

• 44% year-over-year increase in Operating Earnings per share in the fourth quarter

• 50% year-over-year increase in net interest income in the fourth quarter

• Weighted average underwritten internal rate of return (“IRR”) across investment portfolio of 14.2%

• Over $137 million of new investments during 2011

• Refinancing of TALF debt during January 2012 generated $14 million of additional equity, lowered the current weighted average cost of funds by approximately 80 basis points and extended the term of the debt through August 2013.

Stuart Rothstein, Chief Financial Officer of the Company, commented, “Despite significant volatility in the commercial real estate credit markets, the Company delivered solid results in 2011, increasing its quarterly Operating Earnings by 44% year over year. With respect to its investments, during the year, it deployed approximately $137 million into new investments, resulting in a portfolio with a weighted average underwritten IRR of approximately 14.2%. The Company also proactively refinanced its TALF borrowings ahead of schedule, thereby reducing future borrowing costs significantly and freeing up approximately $14 million of additional equity capital for new investment.”

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Mr. Rothstein continued, “For 2012, the Company’s priority remains staying disciplined in monitoring the credit of the existing portfolio and focusing on identifying new potential investments. As existing CMBS investments come due, primarily beginning in the second half of this year, we will seek opportunities to make investments that will lengthen the portfolio duration while maintaining or increasing the average IRR of the portfolio.”

Fourth Quarter Activity

Subordinate Loan – During October 2011, the Company closed a $25.0 million subordinated financing structured as a preferred equity investment in a joint venture that owns a mixed-use grocery-anchored retail center in a northern Virginia suburb of Washington, D.C. The preferred equity investment is part of a $135.0 million financing comprised of a $110.0 million senior mortgage loan and the $25.0 million preferred equity financing, both with a term of three years and two one-year extension options. The preferred equity has a fixed coupon of 14.0% (10.0% current pay with a 4.0% accrual) and the appraised loan-to-value is approximately 74%. The Company’s preferred equity investment has an underwritten IRR of approximately 15.0%*.

Amended Facility – During December 2011, the Company amended its facility with Wells Fargo Bank, N.A. (the “Wells Facility”) to increase its maximum permitted borrowing under the facility from $250.0 million to $506.0 million in order to pay down its borrowings under the Term Asset-Backed Securities Loan Facility (“TALF”) program administered by the Federal Reserve Bank of New York and to finance the commercial mortgage-backed securities (“CMBS”) that had been financed under the TALF program. The TALF refinancing is described below under ‘Activity Subsequent to December 31, 2011.’

Quarter End Portfolio Summary

The following table sets forth certain information regarding the Company’s investments at December 31, 2011 ($ amounts in thousands):

Description	Adjusted Purchase Price		Weighted Average Yield			Debt		Cost of Funds			Equity at cost		Weighted Average IRR *
AAA CMBS - financed with TALF borrowings	$	301,980		4.8	%	$	251,327		2.8	%	$	50,653		13.5	%
AAA CMBS - financed with Wells Facility		252,736		3.7			221,980		2.2			30,756		11.6
Total first mortgages		109,006		8.3			68,720		3.3			40,286		17.7
Total subordinate loans		149,086		13.0			—		—			149,086		14.2
Total repurchase agreements		47,439		13.0			—		—			47,439		13.7
Total	$	860,247		6.8	%	$	542,027		2.6	%	$	318,220		14.2	%

* The IRRs 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. They are calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assumes extensions as well as the fully hedged cost of borrowings under the Wells Facility. We have also assumed that the cost of financing each investment will remain constant over the life of the investment. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in the table and elsewhere in this press release. See “Risk Factors” in the reports filed by the Company with the Securities and Exchange Commission 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.

Book Value

The Company’s GAAP book value per share at December 31, 2011 was $16.39, compared to $16.34 at September 30, 2011. The increase in the Company’s GAAP book value per share from September 30, 2011 to December 30, 2011 was primarily the result of net unrealized gains on the Company’s portfolio of AAA-rated CMBS and the interest rate swaps and caps used in conjunction with the financing of CMBS totaling $0.05 per share.

For purposes of GAAP accounting, the Company carries loans at amortized cost and its CMBS securities are marked to market. Management has estimated that the fair value of the Company’s financial assets at December 31, 2011 was approximately $8.0 million greater than the carrying value of the Company’s investment portfolio as of the same date. This represents a premium of $0.41 per share over the Company’s GAAP book value as of December 31, 2011, and results in an estimated market value per share of approximately $16.80 per share.

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Activity Subsequent to December 31, 2011

TALF Refinancing – As previously announced during January 2012, the Company refinanced $250.3 million of TALF debt with $264.4 million of borrowings under the Wells Facility described above. The refinancing generated $14.1 million of investable proceeds in addition to the $21.6 million of available cash at December 31, 2011 and reduced the future cost of funds. The term of the additional debt under the Wells Facility was extended to August 2013 and has a current weighted average cost of funds of approximately 1.9%, including the effect of interest rate swap agreements with an initial aggregate notional of $56.3 million, compared to the prior weighted average cost of 2.8% on the TALF borrowings.

Subordinate Loan – During January 2012, the Company closed a $15.0 million mezzanine loan secured by a pledge of equity interests in a borrower that purchased a 165-room hotel and related commercial space in midtown Manhattan. The mezzanine loan is part of a $80.0 million, three-year (two-year initial term with one one-year extension option) financing package split into a $65.0 million first mortgage loan and a $15.0 million mezzanine loan. The mezzanine loan is an interest-only fixed rate loan that bears interest at 12.00%, with a 1.00% origination fee, a 0.50% extension fee and a 1.50% exit fee. The mezzanine loan has an appraised loan-to-value of approximately 60% and is expected to generate an IRR of approximately 14.0%.

Corporate Governance - On February 28, 2012, the Company’s board of directors approved the appointment of Stuart A. Rothstein as Chief Executive Officer and President of the Company and as a Director, each effective March 15, 2012. In addition, on February 28, 2012, the Company’s board of directors approved the appointment of Joseph F. Azrack as Chairman of the board of directors effective March 15, 2012, at which point Mr. Azrack will cease to be the President and Chief Executive Officer of the Company.

Supplemental Information

The Company is providing a new supplemental information package to provide more transparency into its results and make its reporting more informative and easier to follow. The supplemental package is available on the investor relations section of the Company's website at www.apolloreit.com.

Definition of Operating Earnings

Operating Earnings is a non-GAAP financial measure that is used to approximate cash available for distribution and is defined by the Company as net income, computed in accordance with GAAP, adjusted for (i) non-cash equity compensation expense and (ii) any unrealized gains or losses or other non-cash items included in net income. The tables, provided below, reconcile Operating Earnings per share to net income per share available to common stockholders.

Reconciliation of Operating Earnings Per Share to Net Income Per Share Available to Common Stockholders

The table below reconciles Operating Earnings with net income available to common stockholders for the three months ended December 31, 2011 and 2010 ($ amounts in thousands):

	Three Months Ended December 31, 2011			Earnings Per Share (Diluted)			Three Months Ended December 31, 2010			Earnings Per Share (Diluted)
Operating Earnings:
Net income	$	8,669		$	0.41		$	3,966		$	0.22
Adjustments:
Unrealized (gain) loss on securities		(600	)		(0.03	)		1,480			0.09
Unrealized gain on derivative instruments		(426	)		(0.02	)		(1,077	)		(0.06	)
Non-cash stock-based compensation expense		634			0.03			354			0.02
Total adjustments:		(392	)		(0.02	)		757			0.05
Operating Earnings	$	8,277		$	0.39		$	4,723		$	0.27
Basic and diluted weighted average common shares outstanding:					20,561,032						17,670,468

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The table below reconciles Operating Earnings with net income available to common stockholders for the years ended December 31, 2011 and 2010 ($ amounts in thousands):

	Year Ended December 31, 2011			Earnings Per Share (Diluted)			Year Ended December 31, 2010			Earnings Per Share (Diluted)
Operating Earnings:
Net income	$	25,882		$	1.35		$	10,999		$	0.87
Adjustments:
Unrealized (gain) loss on securities		(481	)		(0.03	)		1,766			0.14
Unrealized (gain) loss on derivative instruments		865			0.05			(387	)		(0.03	)
Non-cash stock-based compensation expense		1,788			0.09			1,452			0.11
Total adjustments:		2,172			0.11			2,831			0.22
Operating Earnings	$	28,054		$	1.47		$	13,830		$	1.09
Basic and diluted weighted average common shares outstanding:					18,840,954						12,679,277

Teleconference Details

The Company will be hosting a conference call to discuss its financial results on Wednesday, February 29, 2012 at 8:00 a.m. Eastern Time. Members of the public who are interested in participating in the Company’s fourth quarter earnings teleconference call should dial from the U.S., (877) 263-2989, or from outside the U.S., (702) 928-7168, shortly before 8:00 a.m. and reference the Apollo Commercial Real Estate Finance, Inc. Teleconference Call (number 53403120). Please note that the teleconference call will be available for replay beginning at 10:00 a.m. on Wednesday, February 29, 2012, and ending at midnight on Wednesday, March 7, 2012. 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 53403120.

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.

About Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a commercial real estate finance company that originates, invests in, acquires and manages senior performing commercial real estate mortgage loans, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the U.S. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company, an indirect subsidiary of Apollo Global Management, LLC. Additional information can be found on the Company's website at www.apolloreit.com.

Dividend Reinvestment Plan

The Company has 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.

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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 availability of suitable investments; the ability to borrow to finance 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 most recent 10Q, 10K, and other 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.

5

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands – except share and per share data)

	December 31, 2011		December 31, 2010
Assets:
Cash and cash equivalents	$	21,568	$	37,894
Securities available-for-sale, at estimated fair value		302,543		363,660
Securities at estimated fair value		251,452		279,124
Commercial mortgage loans, held for investment		109,006		109,695
Subordinate loans, held for investment		149,086		58,985
Repurchase agreements, held for investment		47,439		—
Principal and interest receivable		8,075		5,553
Deferred financing costs, net		2,044		2,818
Derivative instruments, net		—		387
Other assets		17		31
Total Assets	$	891,230	$	858,147
Liabilities and Stockholders’ Equity
Liabilities:
TALF borrowings	$	251,327	$	297,334
Borrowings under repurchase agreements		290,700		242,728
Derivative instruments, net		478		—
Accounts payable and accrued expenses		1,746		2,375
Payable to related party		1,298		683
Dividends payable		8,703		7,189
Deferred underwriting fee ($8,000 of which was payable to the Manager)		—		10,000
Total Liabilities		554,252		560,309
Commitments and Contingencies
Stockholders’ Equity:
Common stock, $0.01 par value, 450,000,000 shares authorized, 20,561,032 and 17,551,828 shares issued and outstanding in 2011 and 2010, respectively		206		175
Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding		—		—
Additional paid-in-capital		336,209		291,304
Accumulated other comprehensive income		563		6,359
Total Stockholders’ Equity		336,978		297,838
Total Liabilities and Stockholders’ Equity	$	891,230	$	858,147

6

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

(in thousands – except share and per share data)

	Three months ended December 31,						Year ended December 31,
	2011			2010			2011			2010
Net interest income:
Interest income from securities	$	5,904		$	6,468		$	25,323		$	18,112
Interest income from commercial mortgage loans		2,267			2,313			9,153			7,035
Interest income from subordinate loans		4,817			1,952			13,678			7,338
Interest income from repurchase agreements		1,576			—			4,764			—
Interest expense		(3,618	)		(3,421	)		(14,454	)		(10,714	)
Net interest income		10,946			7,312			38,464			21,771
Operating expenses:
General and administrative expenses (includes $634 and $1,788 of non-cash stock based compensation in 2011 and $354 and $1,452 in 2010, respectively)		(1,563	)		(1,400	)		(5,652	)		(5,556	)
Management fees to related party		(1,297	)		(1,118	)		(4,728	)		(3,339	)
Total operating expenses		(2,860	)		(2,518	)		(10,380	)		(8,895	)
Interest income from cash balances		1			7			13			16
Realized loss on sale of security		—			—			—			(33	)
Unrealized gain (loss) on securities		600			(1,480	)		481			(1,766	)
Loss on derivative instruments (includes $426 and $(865) of unrealized gain (loss) for the three and twelve months ended 2011 and $1,077 and $387 for the three and nine months ended 2010, respectively)		(18	)		645			(2,696	)		(94	)
Net income	$	8,669		$	3,966		$	25,882		$	10,999
Basic and diluted net income per share of common stock	$	0.41		$	0.22		$	1.35		$	0.87
Basic and diluted weighted average common shares outstanding		20,561,032			17,670,468			18,840,954			12,679,277
Dividend declared per share of common stock	$	0.40		$	0.40		$	1.60		$	1.50

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EX-99.2

Commercial Real Estate Finance, Inc. (“ARI”)

Quarterly Supplemental Presentation –

December 2011

a

0602201

Information is as of December 31, 2011 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.

Exhibit 99.2

Legal Disclaimer

We make forward-looking statements in this presentation and other filings we make with the SEC 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 our control. These forward-looking statements include information about possible or assumed

future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,”

“expect,”

“anticipate,”

“estimate,”

“plan,”

“continue,”

“intend,”

“should,”

“may”

or similar expressions, we intend to identify forward-looking

statements. Statements regarding the following subjects, among others, may be forward-looking: our business and investment strategy; our

operating

results;

our

ability

to

obtain

and

maintain

financing

arrangements;

the

return

on

equity,

the

yield

on

investments

and

risks

associated

with investing in real estate assets, including changes in business conditions and the general economy.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all

information currently available to us. 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 us. Some of these factors are described

under

“Risk

Factors,”

and

“Management’s

Discussion

and

Analysis

of

Financial

Condition

and

Results

of

Operations”

as

included

in

ARI’s

Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and in ARI’s Quarterly Reports on Form 10-Q for the quarters ended

March 31, 2011, June 30, 2011 and September 30, 2011. If a change occurs, our business, financial condition, liquidity and results of operations

may vary materially from those expressed in our 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 us to predict those events or how they may affect us. Except as

required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new

information, future events or otherwise.

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.

1

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Investment Statement

2011

2010

% Change

2011

2010

% Change

14,564

$         

10,733

$         

35.7%

52,918

$         

32,485

$         

62.9%

(3,618)

$          

(3,421)

$          

5.8%

(14,454)

$       

(10,714)

$       

34.9%

Net interest income (in thousands)

10,946

$         

7,312

$           

49.7%

38,464

$         

21,771

$         

76.7%

0.39

$              

0.27

$              

44.4%

1.47

$              

1.09

$              

34.9%

20,561,032

17,670,468

16.4%

18,840,954

12,679,277

48.6%

Balance sheet

860,247

$       

806,870

$       

6.6%

336,978

$       

297,838

$       

13.1%

2.2 years

2.5 years

1.64x

1.88x

251,327

$       

297,334

$       

290,700

$       

242,728

$       

3.5x

3.0x

Three Months Ended December 31,

Year Ended December 31,

Interest income (in thousands)

Interest expense (in thousands)

Operating earnings per share

Basic and diluted weighted average common shares

outstanding

Investments at amortized cost (in thousands)

Net equity (in thousands)

Investments - Weighted average Duration

Debt to equity

Fixed rate debt(in thousands)

(1)

Debt service coverage

(2)

Floating rate debt (in thousands)

ARI –

Financial Summary

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

2

(1)

Fixed rate debt refers to the TALF borrowings which were refinanced with the Wells repurchase facility during January 2012.

(2)

The debt service coverage is interest expense as a percentage of EBITDA.

ARI Overview

Return on Equity Based on Operating Income

(1)

Net Interest Income ($000s)

Dividend per Share

Operating Earnings per Share

(1)

Return on equity is calculated as annualized operating income for the quarter as a percentage of average equity.

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

3

$491

$3,903

$5,056

$5,500

$7,313

$7,599

$9,684

$10,236

$10,946

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

3.4%

4.3%

6.7%

6.5%

6.3%

6.8%

9.6%

9.3%

9.8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

-$0.01

-

$0.16

$0.20

$0.31

$0.32

$0.27

$0.29

$0.40

$0.38

$0.39

-$0.20

-$0.10

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

$0.35

$0.35

$0.40

$0.40

$0.40

$0.40

$0.40

$0.40

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

-

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

4

ARI –

Q4 Financial Highlights

Financial Results & Earnings Per Share

Operating Earnings for the quarter ended December 31, 2011 of $8.3 million, or $0.39 per

diluted common share

(1)

–

An

increase

of

44%

per

share

as

compared

with

Operating

Earnings

for

the

same

period

in

2010

–

Net interest income of $10.9 million for Q4 2011

–

Total expenses of $2.9 million, comprised of management fees of $1.3 million and G&A of

$1.6

million

(2)

GAAP net income for the quarter ended December 31, 2011 of $8.7 million, or $0.41 per

diluted common share

Dividend

Declared dividend of $0.40 per share of common stock for the quarter ended December

31, 2011

–

Seven consecutive quarters of $0.40 per share dividend

10.6% annualized dividend yield based on closing price on February 27, 2012

(1)

Operating Earnings is a non-GAAP financial measure that is used to approximate cash available for distribution and is defined by the Company as net income, computed in accordance with GAAP, adjusted for (i) non-

cash equity compensation expense and (ii) any unrealized gains or losses or other non-cash items included in net income. Please see slide 15 for a reconciliation of operating earnings and operating earnings per diluted

common share to GAAP net income and GAAP net income per diluted common share.

(2) 

Total expenses includes $634,000 of non-cash stock based compensation for Q4 2011.

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

5

ARI –

Q4 Financial Highlights

Investment Portfolio

Total investments of $860 million at December 31, 2011

Weighted average

underwritten

IRR

of

approximately

14.2%

(1)

Book Value

GAAP book value of $16.39 per share as of December 31, 2011

–

ARI

closed

at

$15.14

on

February

27,

2012

or

at

a

7.6%

discount

to

book

value

(2)

Fair

value

of

$16.80

per

share

outstanding

as

of

December

31,

2011

(3)

Subsequent Events

TALF refinancing

–

January

2012

–

Refinanced

TALF

debt

with

Wells

Facility

Increased advance rate generated approximately $14 million of additional investable capital

Lowered

current

cost

of

funds

from

2.8%

to

1.9%

and

extended

the

maturity

to

August

2013

New Investment

–

January 2012 –

Closed a $15 million mezzanine loan on a 165-room hotel in New York, NY with an

underwritten IRR of approximately 14.0%

(1)

(1)

The internal rates of return (“IRR”) for the investments shown in the above table reflect the returns underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defa

but assumes extensions as well as the fully hedged cost of borrowings under the Company’s master repurchase agreement with Wells Fargo Bank (“Wells Facility”). The Company has also assumed that financing will

available through the maturity of the asset and reflect a cost of funds based on forward LIBOR curve. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in the table. See “Risk Factors”

the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments over time.

(2)

Based on GAAP Book Value of $16.39 per share as of December 31, 2011.

(3)

The Company carries loans at amortized cost and its CMBS securities are marked to market.  Management has estimated that the fair value of the Company’s financial assets at December 31, 2011 was approximately $8.0

million greater than the carrying value of the Company’s investment portfolio as of the same date.  This represents a premium of $0.41 per share over the Company's GAAP book value as of December 31, 2011.

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

6

Stable, In-Place Investments Offer Attractive Yields

Asset Type

($000s)

Amortized

Cost

Equity

at Cost

Remaining

Weighted

Average

Life

Weighted

Average

IRR

(1)(3)

First

Mortgage

Loans

(1)

$109,006

($ 68,720)

$ 40,286

2.6 years

17.7%

Mezzanine Loans

149,086

—

149,086

6.2 years

14.2%

Repurchase Agreements

47,439

—

47,439

0.8 years

13.7%

AAA

CMBS–(Financed

with

TALF

Borrowings)

(2)

301,980

(251,327)

50,653

1.4  years

13.5%

AAA

CMBS–(Financed

with

Wells

Repurchase

Facility)

(2)

252,736

(221,980)

30,756

0.9 years

11.6%

Investments at December 31, 2011

$ 860,247

($542,027)

$318,220

2.2 years

14.2%

As of December 31, 2011.

(1) 

Borrowings under the Company’s master repurchase facility with JPMorgan bear interest at LIBOR plus 300 basis points, or 3.3% at December 31, 2011. The IRR calculation further assumes that the JPM

repurchase facility will remain available over the life of these investments.

(2)

TALF borrowings are non-recourse and were refinanced with the Wells Facility during January 2012. The Company has agreed to provide a limited guarantee of up to 15% of the outstanding obligations of its

indirect wholly-owned subsidiary under the Wells Facility, or a maximum of $37,500.

(3)

The IRR for the investments shown in the above table reflect the returns underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but

assumes extensions as well as the fully hedged cost of borrowings under the Wells Facility. The Company has also assumed that financing will be available through the maturity of the asset and reflect a cost of

funds based on forward Libor curve. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in the table. See “Risk Factors” in the Company’s Annual Report on Form 10-K for

the year ended December 31, 2010 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.

Borrowings

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

7

ARI Overview

Diversified Investment Portfolio with Amortized Cost Basis of $860 million

Net Equity at Amortized Cost Basis ($000s)

Gross Assets at Amortized Cost Basis ($000s)

AAA CMBS (Financed

with TALF Borrowings)

$301,980

35%

AAA CMBS (Financed

with Wells Repurchase

Facility)

$252,736

29%

First Mortgages Loans

$109,006

13%

Mezzanine Loans

$149,086

17%

Repurchase Agreements

$47,439

6%

AAA CMBS

(Financed with TALF

Borrowings)

$50,653

16%

AAA CMBS

(Financed with Wells

Repurchase Facility)

$30,756

10%

First Mortgages Loans

$40,286

12%

Mezzanine Loans

$149,086

47%

Repurchase

Agreements

$47,439

15%

As of December 31, 2011.

(1)   The IRR for the investments shown in the above table reflect the returns underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assumes 

        extensions as well as the fully hedged cost of borrowings under the Wells Facility. The Company has also assumed that financing will be available through the maturity of the asset and reflect a cost of funds based on 

        forward Libor curve. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in the table. See “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended 

       December 31, 2010 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.

Weighted Average IRR of Approximately 14.2%

(1)

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

8

ARI Diversification

Net Equity Investments of $318 million as of December 31, 2011

Geographic Diversification by Net Equity

Property Type by Net Equity

(1)

See Form 10-Q and Form 10-K for property type and geographic location underlying CMBS portfolio.

(2)

Other category includes the repurchase agreement and the subordinate financing on a ski resort.

(3)

Other category includes the repurchase agreement as well as investments in asset portfolios that are geographically diversified.

(1)

(2)

(1)

(3)

North East

20%

South East

8%

Mid West

3%

West

13%

Other

31%

CMBS

25%

Hotel

17%

Office

6%

Retail

24%

Other

28%

CMBS

25%

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

9

Senior Loan Portfolio

Description ($000’s)

Date of

Investment

Maturity

Date

Original

Face

Amount

Current

Face

Amount

Coupon

Amortization

Schedule

Property

Size

Current

Loan

Amount

Appraised

LTV

(1)

Hotel

New York, NY

Jan-10

Feb-15

$32,000

$31,798

8.25%

30 year

151

rooms

$210/

key

40%

Office Condo (Headquarters)

New York, NY

Feb-10

Feb-15

28,000

27,644

8.00

30 year

73,419

sq. ft.

$377/

sq. ft.

54%

Hotel

Silver Spring, MD

Mar-10

Apr-15

26,000

25,564

9.00

25 year

263

rooms

$97/

key

58%

Hotel

New York, NY

Aug-10

Aug-12

24,000

24,000

8.00

Interest

only

155

rooms

$155/

key

40%

Total

.

.

$110,000

$109,006

8.31%

Description ($000’s)

Date of

Investment

Maturity

Date

Original

Face

Amount

Current

Face

Amount

Coupon

Amortization

Schedule

Property

Size

Current

Loan

Amount

Appraised

LTV

(1)

Repurchase Agreement

(2)

Sept-10

Sept-12

$47,439

$47,439

13.00%

Interest only

N/A

N/A

N/A

Total

$47,439

$ 47,439

13.00%

(1) 

Appraised loan-to-value (“LTV”) represents the LTV as of the date of investment for all loans except the $32,000 New York, NY hotel loan.  The LTV for the $32,000 New York, N.Y. hotel loan is as of March 2011.

(2)

Interest rate includes 10% current payment with a 3% accrual.

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

10

Subordinate Loan Portfolio

Description ($000’s)

Date of

Investment

Maturity

Date

Original

Face

Amount

Current

Face

Amount

Coupon

Amortization

Schedule

Current

Loan

Amount

Appraised

LTV

(1)

Senior

Mezz

–

Retail

Various

Dec-09

Dec-19

$30,000

$30,000

12.24%

Interest

only

(2)

$86/

sq. ft.

69%

Junior

Mezz

–

Retail

Various

Dec-09

Dec-19

20,000

20,000

14.00

Interest

only

(2)

$91/

sq. ft.

74%

Office

Michigan

May-10

Jun-20

9,000

8,950

13.00

25 year

$82/

sq. ft.

70%

Ski Resort

California

Apr-11

May-17

40,000

40,000

13.25

Interest

only

(2)

$356/

key

64%

Hotel Portfolio

New York

(3)

Aug-11

July-13

25,000

25,000

11.49

Interest

only

(4)

$339/

key

60%

Retail Center

Virginia

(5)

Oct-11

Oct-14

25,000

25,136

14.00

Interest

only

(5)

$281/

sq. ft.

60%

Total

.

.

$149,000

$149,086

13.00%

(1) Appraised LTV represents the LTV as of the date of investment.

(2) Prepayments are prohibited prior to the third year of the loan and any prepayments thereafter are subject to prepayment penalties ranging from 5% to 0%. 

(3) Includes a LIBOR floor of 1% and three one-year extension options subject to certain conditions.

(4) Prepayments are prohibited prior to February 2013 and any prepayments thereafter are subject to spread maintenance premiums.

(5) Interest rate of 14.0% includes a 10.0% current payment with a 4.0% accrual.  There are two one-year extension options subject to certain conditions.

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

11

CMBS Portfolio

Face

Amortized

Cost

Remaining Weighted

Average Life with

Extensions (months)

Estimated

Fair Value

Debt

Net

Equity

TOTAL CMBS

$546,807

$554,716

14

$553,995

$473,307

$  80,688

(1)

TALF borrowings were refinanced with an increase in the Wells repurchase facility during January 2012.

AAA CMBS–(Financed with TALF Borrowings) 

(1)

CUSIP

Description

07388YAB8

BSCMS 07-PW16 A2

07401DAB7

BSCMS 2007-PW18 A2

12513YAC4

CD 2007-CD4 A2B

46629MAB1

JPMCC 2006-LDP8 A2

46631BAB1

JPMCC 07-LD11 A2

46632HAB7

JPMCC 2007-LD12 A2

50180CAB6

LBUBS 06-C7 A2

52109PAB1

LBUBS 07-C6 A2

61754KAC9

MSC 07-IQ14 A2

92978NAB0

WBCMT 07-C33 A2

92978YAB6

WBCMT 07-C32 A2

AAA CMBS–(Financed with Wells Repurchase Facility)

CUSIP

Description

07401DAB7

BSCMS 2007-PW18 A2

36246LAB7

GSMS 2007-GG10 A2

46630JAK5

JPMCC 2007-LDPX A2S

46630VAB8

JPMCC 2007-CB19 A2

46631QAB8

JPMCC 2007-CB20 A2

61751NAD4

MSC 2007-HQ11 A31

92978TAB7

WBCMT 2007-C31 A2

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

12

Financials

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

13

(in thousands—except share and per share data)

December 31, 2011

December 31, 2010

Assets:

Cash and cash equivalents

21,568

$                        

37,894

$                        

Securities available-for-sale, at estimated fair value

302,543

363,660

Securities, at estimated fair value

251,452

279,124

Commercial mortgage loans, held for investment

109,006

109,695

Subordinate loans, held for investment

149,086

58,985

Repurchase agreements, held for investment

47,439

-

Principal and interest receivable

8,075

5,553

Deferred financing costs, net

2,044

2,818

Derivative instruments, net

-

387

Other assets

17

31

Total Assets

891,230

$                      

858,147

$                      

Liabilities and Stockholders' Equity

Liabilities:

TALF borrowings

251,327

$                      

297,334

$                      

Borrowings under repurchase agreements

290,700

242,728

Derivative instruments, net

478

-

Accounts payable and accrued expenses

1,746

2,375

Payable to related party

1,298

683

Dividends payable

8,703

7,189

Deferred underwriting fee ($8,000 of which was payable to the Manager)

-

10,000

Total Liabilities

554,252

560,309

Commitments and Contingencies (see Note 13)

Stockholders' Equity:

Common stock, $0.01 par value, 450,000,000 shares authorized, 20,561,032 and 17,551,828 shares issued and

outstanding in 2011 and 2010, respectively

206

175

Additional paid-in-capital

336,209

291,304

Accumulated other comprehensive income

563

6,359

Total Stockholders' Equity

336,978

297,838

Total Liabilities and Stockholders' Equity

891,230

$                      

858,147

$                      

Consolidated Balance Sheets

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

14

2011

2010

2011

2010

Net interest income:

Interest income from securities

5,904

$                   

6,468

$                   

25,323

$                 

18,112

$                 

Interest income from commercial mortgage loans

2,267

2,313

9,153

7,035

Interest income from subordinate loans

4,817

1,952

13,678

7,338

Interest income from repurchase agreements

1,576

-

4,764

-

Interest expense

(3,618)

(3,421)

(14,454)

(10,714)

Net interest income

10,946

7,312

38,464

21,771

Operating expenses:

General and administrative expenses (includes $634 and $1,788 of non-cash

stock based compensation in 2011 and $354 and $1,452 in 2010, respectively)

(1,563)

(1,400)

(5,652)

(5,556)

Management fees to related party

(1,297)

(1,118)

(4,728)

(3,339)

Total operating expenses

(2,860)

(2,518)

(10,380)

(8,895)

Interest income from cash balances

1

7

13

16

Realized loss on sale of security

-

-

-

(33)

Unrealized gain (loss) on securities

600

$                       

(1,480)

$                  

482

$                       

(1,766)

$                  

Loss on derivative instruments  (includes $426 and $(865) of unrealized gain

(loss) for the three and twelve months 2011 and $(387) and $(1,077) for the

three and nine months 2010, respectively)

(18)

$                        

645

$                       

(2,696)

$                  

(94)

$                        

Net income

8,669

$                   

3,966

$                   

25,882

$                 

10,999

$                 

Basic and diluted net income per share of common stock   

0.41

$                      

0.22

$                      

1.35

$                      

0.87

$                      

Basic and diluted weighted average common shares outstanding

20,561,032

17,670,468

18,840,954

12,679,277

Dividend declared per share of common stock

0.40

$                      

0.40

$                      

1.60

$                      

1.50

$                      

Year ended December 31,

Three months ended December 31,

Consolidated Statement of Operations

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

15

Reconciliation of Operating Earnings to Net Income

Three

Months Ended

December 31, 2011

Earnings Per Share

(Diluted)

Three

Months Ended

December 31, 2010

Earnings Per Share

(Diluted)

Operating Earnings:

Net income

$8,669

$0.41

$3,966

$0.22

Adjustments:

  Unrealized (gain) loss on securities

(600)

(0.03)

1,480

0.09

  Unrealized (gain) on derivative instruments

(426)

(0.02)

(1,077)

(0.06)

  Non-cash stock-based compensation expense

634

0.03

354

0.02

Total adjustments:

(392)

(0.02)

757

0.05

Operating Earnings

$8,277

$0.39

$4,723

$0.27

Basic and diluted weighted average common shares outstanding

20,561,032

17,670,468