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): May 1, 2013

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 May 1, 2013, Apollo Commercial Real Estate Finance, Inc. (the “Company”) issued an earnings release announcing its financial results for the quarter ended March 31, 2013. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

On May 2, 2013, 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 May 1, 2013
99.2	Supplemental Financial Information for the quarter ended March 31, 2013

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: May 1, 2013

Exhibit Index

Exhibit No.	Description
99.1	Earnings Release dated May 1, 2013
99.2	Supplemental Financial Information for the quarter ended March 31, 2013

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

FIRST QUARTER 2013 FINANCIAL RESULTS AND DECLARES

A $0.40 PER COMMON SHARE QUARTERLY DIVIDEND

New York, NY, May 1, 2013 – Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported financial results for the quarter ended March 31, 2013.

First Quarter 2013 Highlights

• Generated $17.1 million of net interest income from the Company’s $688 million investment portfolio, which had a current weighted average underwritten internal rate of return (“IRR”) of approximately 12.9% and a levered weighted average underwritten IRR of approximately 14.2% at March 31, 2013;

• Closed three loan transactions totaling $103 million;

• Received a $2.5 million yield maintenance payment in connection with the repayment of two mezzanine loans totaling $50 million;

• Amended the Company’s repurchase facility with JPMorgan Chase Bank, N.A. (the “JPMorgan Facility”) to extend the term for two years;

• Amended the Company’s master repurchase agreement with Wells Fargo Bank, N.A. (the “Wells Facility”) to reduce the interest rate on commercial mortgage backed securities (“CMBS”) borrowings; and

• Completed an underwritten public offering of 8,805,000 shares of common stock at a price of $16.90 per share, raising net proceeds of $148.4 million.

“ARI experienced a strong start in 2013 from both a capital deployment and a capital formation perspective,” said Stuart Rothstein, Chief Executive Officer of the Company. “The Company continues to identify compelling, value-added investment opportunities with attractive risk-adjusted returns and our investment pipeline is robust. Importantly, the credit quality of ARI’s existing portfolio remains stable. We are actively engaged in deploying the equity from the first quarter capital raise into new commercial real estate debt investments that will expand and diversify ARI’s portfolio.”

First Quarter 2013 Operating Results

The Company reported Operating Earnings (a non-GAAP financial measure as defined below) of $12.0 million, or $0.39 per share, for the three months ended March 31, 2013, as compared to Operating Earnings of $8.8 million, or $0.42 per share, for the three months ended March 31, 2012. Net income available to common stockholders for the three months ended March 31, 2013 was $10.1 million, or $0.33 per share, as compared to net income available to common stockholders of $9.1 million, or $0.43 per share, for the three months ended March 31, 2012.

First Quarter Investment and Portfolio Activity

New Investments – During the first quarter of 2013, ARI closed three transactions totaling $103 million. The transactions include the following:

• $60 million mezzanine loan commitment ($49 million of which has been funded) secured by a pledge of preferred equity interests in the owner of a to-be-developed 352,624 net saleable square foot, 57-story, 146-unit condominium tower located in the TriBeCa neighborhood of New York City. When fully funded and based upon the current rate and pricing of presales of units, the Company’s loan basis is expected to represent an underwritten loan-to-net sellout of approximately 48%. The mezzanine loan has been underwritten to generate an IRR of approximately 16%;

• $18 million mezzanine loan secured by a pledge of the equity interests in the owner of two buildings in midtown Manhattan. The buildings contain a total of 181,637 rentable square feet that is being converted into 215 multifamily rental units. The mezzanine loan has an appraised loan to value (“LTV”) of approximately 60% and has been underwritten to generate an IRR of approximately 13%; and

• $25 million mezzanine loan secured by a pledge of the equity interests in the owner of a portfolio of four hotels totaling 1,231 keys located in Rochester, Minnesota. The mezzanine loan has an appraised LTV of approximately 69% and has been underwritten to generate an IRR of approximately 12%.

Repayment of Investments – During the first quarter, ARI received principal repayment from the following investments:

• The repurchase agreement secured by CDO bonds was repaid in full. Upon the repayment, the Company realized a 17% IRR on this investment; and

• Two mezzanine loans totaling $50 million secured by a portfolio of retail shopping centers located throughout the United States were fully repaid. In connection with the repayment, the Company received a yield maintenance payment totaling $2.5 million. Including the yield maintenance payment, the Company realized a 15% IRR on this mezzanine loan investment.

Amendment to JP Morgan Facility – In February 2013, the Company amended its JPMorgan Facility to extend the term for two years (one year initial term with a 364 day extension option, at ARI’s option). Pricing on the JPMorgan Facility will remain at LIBOR+2.5% and ARI paid a 0.5% extension fee for the first year and will pay a 0.25% extension fee for the second year if the Company elects to exercise the extension option. The Company primarily uses the JPMorgan Facility to finance ARI’s first mortgage loan investments.

Amendment to Wells Facility – In February 2013, the Company amended its Wells Facility to reduce the interest rate as follows: (i.) with respect to the outstanding borrowings used to provide financing for the AAA CMBS, the interest rate was reduced to LIBOR+1.05% from LIBOR+1.25% - 1.50% (depending on the collateral pledged); and (ii.) with respect to the outstanding borrowings used to provide financing for the Hilton CMBS, the interest rate was reduced to LIBOR+1.75% from LIBOR+2.35%. In addition, the maturity date of the Wells Facility with respect to the outstanding borrowings used to provide financing for the AAA CMBS was extended to March 2014.

Corporate Governance – In February 2013, the Board of Directors appointed Megan Gaul as Chief Financial Officer, Secretary and Treasurer of the Company, effective April 1, 2013. Ms. Gaul assumed these titles from Mr. Rothstein, who held these titles in addition to his existing titles of Chief Executive Officer and President. Ms. Gaul previously served as the Controller of the Manager, a position she has held since she joined Apollo Global Management, the indirect owner of the Manager, in 2009.

Quarter End Portfolio Summary

The following table sets forth certain information regarding the Company’s investments at March 31, 2013 ($ amounts in thousands):

Description	Amortized Cost		Weighted Average Yield			Debt		Cost of Funds			Equity at cost		Current Weighted Average IRR (1)			Levered Weighted Average IRR(2)
First mortgage loans	$	142,833		10.6	%	$	3		2.7	%	$	142,830		10.9	%		15.7	%
Subordinate loans		286,569		12.9			—		—			286,569		13.6			13.6
CMBS – AAA		188,824		4.6			164,204		1.4			24,620		16.2			16.2
CMBS – Hilton		69,912		5.5			47,737		2.0			22,175		12.5			12.5
Total	$	688,138		9.4	%	$	211,944		1.5	%	$	476,194		12.9	%		14.2	%

(1) 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 do assume that extension options are exercised and that the cost of borrowings and derivative instruments under the Wells Facility remain constant over the remaining terms and extension terms under the facility. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised. With respect to the mezzanine loan for the New York City multifamily condominium conversion that closed in December 2012 and the mezzanine loan for the New York City condominium construction that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, as well as assuming 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 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.

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(2) Substantially all of the Company’s borrowings under the JPMorgan Facility were repaid upon the closing of the Company’s Series A Preferred Stock offering in August 2012. The Company’s ability to achieve its underwritten levered weighted average IRR with regard to its portfolio of first mortgage loans is additionally dependent upon the Company re-borrowing approximately $53,000 under the JPMorgan Facility or any replacement facility. Without such re-borrowing, the levered weighted average IRRs will be as indicated in the current weighted average IRR column above.

Book Value

The Company’s GAAP book value per share at March 31, 2013 was $16.41 as compared to $16.43 at December 31, 2012. 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 March 31, 2013 was approximately $11.1 million greater than the carrying value of the Company’s investment portfolio as of the same date. This represents a premium of $0.30 per share over the Company’s GAAP book value as of March 31, 2013, and results in an estimated market value per share of approximately $16.71.

Subsequent Events

Dividend – The Board of Directors declared a dividend of $0.40 per share of common stock, which is payable on July 12, 2013 to common stockholders of record on June 28, 2013. This is the twelfth consecutive quarter the Company has paid a $0.40 per common share dividend.

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 available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity 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) and (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders. The table provided below reconciles Operating Earnings to net income available to common stockholders.

Reconciliation of Operating Earnings to Net Income Available to Common Stockholders

The tables below reconcile Operating Earnings and Operating Earnings per share with net income available to common stockholders and net income available to common stockholders per share for the three months ended March 31, 2013 ($ amounts in thousands):

	Three Months Ended March 31, 2013			Earnings Per Share (Diluted)		Three Months Ended March 31, 2012			Earnings Per Share (Diluted)
Operating Earnings:
Net income available to common stockholders	$	10,072		$	0.33	$	9,093		$	0.43
Adjustments:
Unrealized (gain)/loss on securities		1,080			0.04		(1,385	)		(0.06	)
Unrealized (gain)/loss on derivative instruments		(72	)		—		5			—
Equity-based compensation expense		883			0.02		1,083			0.05
Total adjustments:		1,891			0.06		(297	)		(0.01	)
Operating Earnings	$	11,963		$	0.39	$	8,796		$	0.42
Basic and diluted weighted average Common shares outstanding:		30,105,939					20,966,426

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Teleconference Details:

Members of the public who are interested in participating in the Company’s first quarter 2013 earnings teleconference call should dial from the U.S., (877) 263-2989, or from outside the U.S., (702) 928-7168, shortly before 10:00 a.m. on Thursday, May 2, 2013 and reference the Apollo Commercial Real Estate Finance, Inc. Teleconference Call (number 32713157). Please note the teleconference call will be available for replay beginning at 12:00 p.m. on Thursday, May 2, 2013, and ending at midnight on Thursday, May 9, 2013. 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 32713157.

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 also will 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 commercial mortgage real estate investment trust that primarily 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 throughout the U.S. 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 $113 billion of assets under management at December 31, 2012.

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.

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

4

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 it’s 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

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands—except share and per share data)

	March 31, 2013			December 31, 2012
Assets:
Cash	$	225,723		$	108,619
Securities available-for-sale, at estimated fair value		64,216			67,079
Securities, at estimated fair value		198,457			211,809
Commercial mortgage loans, held for investment		142,833			142,921
Subordinate loans, held for investment		286,569			246,246
Repurchase agreements, held for investment		—			6,598
Interest receivable		4,475			4,277
Deferred financing costs, net		1,239			678
Other assets		—			203
Total Assets	$	923,512		$	788,430
Liabilities and Stockholders’ Equity
Liabilities:
Borrowings under repurchase agreements	$	211,944		$	225,158
Derivative instruments, net		83			155
Accounts payable and accrued expenses		1,524			1,265
Payable to related party		2,160			2,037
Dividends payable		16,616			12,891
Total Liabilities		232,327			241,506
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and 3,450,000 shares issued and outstanding in 2013 and 2012		35			35
Common stock, $0.01 par value, 450,000,000 shares authorized, 36,869,106 and 28,044,106 shares issued and outstanding in 2013 and 2012, respectively		369			280
Additional paid-in-capital		695,266			546,065
Retained Earnings		(4,297	)		574
Accumulated other comprehensive income (loss)		(188	)		(30	)
Total Stockholders’ Equity		691,185			546,924
Total Liabilities and Stockholders’ Equity	$	923,512		$	788,430

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 March 31, 2013			Three months ended March 31, 2012
Net interest income:
Interest income from securities	$	3,087		$	5,323
Interest income from commercial mortgage loans		3,592			2,234
Interest income from subordinate loans		11,454			5,313
Interest income from repurchase agreements		2			1,559
Interest expense		(1,068	)		(3,242	)
Net interest income		17,067			11,187
Operating expenses:
General and administrative expenses (includes $883 and $1,083 of non-cash stock based compensation in 2013 and 2012, respectively)		(1,895	)		(2,036	)
Management fees to related party		(2,160	)		(1,289	)
Total operating expenses		(4,055	)		(3,325	)
Interest income from cash balances		—			1
Realized gain on sale of securities		—			262
Unrealized gain/(loss) on securities		(1,080	)		1,385
Gain (loss) on derivative instruments (includes $72 and $(5) of unrealized gains (losses) in 2013 and 2012, respectively)		—			(417	)
Net income		11,932			9,093
Preferred dividends		(1,860	)		—
Net income available to common stockholders	$	10,072		$	9,093
Basic and diluted net income per share of common stock	$	0.33		$	0.43
Basic and diluted weighted average shares of common stock outstanding		30,105,939			20,966,426
Dividend declared per share of common stock	$	0.40		$	0.40

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EX-99.2

May 2, 2013

Supplemental Financial Information Presentation

Q1 2013

Information is as of March 31, 2013 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

1

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

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,

2012

and

other

periodic

reports filed with the Securities and Exchange

Commission. 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.

2

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

Apollo Commercial Real Estate Finance, Inc.

2013 First Quarter Earnings Call

May 2, 2013

Stuart Rothstein

Chief Executive Officer and President

Scott Weiner

Chief Investment Officer of the Manager

Megan Gaul

Chief Financial Officer

Hilary Ginsberg

Investor Relations Manager

3

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

ARI –

Financial Summary

Income Statement

March 31, 2013

March 31, 2012

% Change

18,135

$      

14,429

$           

25.7%

(1,068)

$      

(3,242)

$             

-67.1%

Net interest income (in thousands)

17,067

$      

11,187

$           

52.6%

0.39

$         

0.42

$                

-7.1%

30,105,939

20,966,426

43.6%

Balance sheet

March 31, 2013

December 31, 2012

% Change

688,138

$    

669,478

$          

2.8%

476,194

$    

444,320

$          

7.2%

Common stockholders equity

604,935

$    

460,674

$          

31.3%

86,250

$      

86,250

$           

-

211,944

$    

225,158

$          

-5.9%

0.4x

0.5x

5.1x

3.3x

Three Months Ended

Interest income (in thousands)

Interest expense (in thousands)

Operating earnings per share

(1)

Basic and diluted weighted average common

shares outstanding

Investments at amortized cost (in thousands)

Net equity in investments at cost (in thousands)

Preferred stockholders equity

Debt to common equity

Floating rate debt

(in thousands)

Fixed charge coverage

(2)

(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) equity 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) and (ii) any unrealized gains or losses or other non-cash items included in

net income.  Please see slide 22 for a reconciliation of Operating Earnings and Operating Earnings per Share to GAAP net income and GAAP net income per share.

(2)

Fixed charge coverage is EBITDA divided by interest expense plus the preferred stock dividends.

4

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

ARI –

Annual Historical Overview

Operating Earnings per Share

(1)

Dividends per Common Share

Net Interest Income ($000s)

Return

on

Common

Equity

Based

on

Operating

Earnings

(2)

$1.09

$1.47

$1.50

$0.39

$0.00

$0.40

$0.80

$1.20

$1.60

2010

2011

2012

Q1 2013

$1.50

$1.60

$1.60

$0.40

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

2010

2011

2012

Q1 2013

$21,771

$38,464

$48,677

$17,067

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

2010

2011

2012

Q1 2013

10.0%

10.8%

6.9%

9.6%

0.0%

3.0%

6.0%

9.0%

12.0%

Q2 2012

Q3 2012

Q4 2012

Q1 2013

(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) equity 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) and (ii) any unrealized gains or losses or other non-cash items included in net income.  Please see slide 22 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.

5

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

ARI –

Quarterly Historical Overview

Operating Earnings ($000s)

(1)

Net Interest Income ($000s)

$11,187

$11,951

$13,326

$12,303

$17,067

$0

$3,000

$6,000

$9,000

$12,000

$15,000

$18,000

$21,000

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

$8,795

$8,526

$9,218

$7,375

$11,963

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

(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) equity 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) and (ii) any unrealized gains or losses or other non-cash items included in net income.  Please see slide 22 for a reconciliation of Operating

Earnings and Operating Earnings per Share to GAAP net income and GAAP net income per share.

6

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

ARI –

Q1 Highlights

Financial Results & Earnings Per Share

Operating

Earnings

for

the

quarter

ended

March

31,

2013

of

$12.0

million, or $0.39 per diluted

common share

(1)

–

Net interest income of $17.1 million for Q1 2013

–

Total expenses of $4.1 million, comprised of management fees of $2.2 million, G&A of

$1.0 million and non-cash stock based compensation of $0.9 million

–

GAAP

net

income

available

to

common

stockholders

for

the

quarter

ended March 31, 2013 of $10.1 million, or

$0.33 per diluted common share

Dividends

Declared a dividend of $0.40 per share of common stock for the quarter ended June 30, 2013

–

Twelfth consecutive quarter of maintaining consistent dividend level

–

9.0% annualized dividend yield based on $17.74 closing price on April 30, 2013

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 March 28, 2013

(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) equity

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) and (ii) any unrealized gains or

losses or other non-cash items included in net income.  Please see slide 22 for a reconciliation of Operating Earnings and Operating Earnings per Share to GAAP net income and GAAP net income per share.

7

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

ARI –

Q1 Highlights

Investment and Portfolio Activity

Mezzanine

Loan

–

Multifamily

Conversion,

New

York,

NY

$18 million

mezzanine

loan

commitment

secured

by

a

pledge

of

the

equity

interests

in

the

owner of

two buildings in Midtown Manhattan which contain a total of 181,637 rentable square feet that is being

converted into 215 multifamily units

Part of a $90 million, three year, interest only, floating rate financing comprised of the $18 million

mezzanine loan

and a $72 million first mortgage loan

Underwritten

LTV

(assuming

first

mortgage

loan

is

fully

funded)

–

60%

Underwritten  IRR

(1)

~ 13%

Mezzanine

Loan

–

Hotel

Portfolio,

Rochester,

MN

$25 million mezzanine loan secured by a pledge of the equity interests in the owner of a portfolio of

four hotels totaling 1,231 keys located in Rochester, Minnesota

Part of a $145 million, five-year, fixed-rate financing comprised of a $120 million first mortgage loan

and the $25 million mezzanine loan provided in connection with the acquisition of the portfolio

Appraised

LTV

–

69%

Underwritten IRR

(1)

~ 12%

(1)

The internal rates of return (“IRR”) for the investments listed 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 cost of

borrowings and derivative instruments under the Company’s master repurchase agreement with Wells Fargo Bank, N.A. (“Wells Facility”). There can be no assurance the actual IRRs will equal the underwritten IRRs shown. See “Risk Factors” in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments over time.

8

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

ARI –

Q1 Highlights

Investment and Portfolio Activity

Mezzanine

Loan

–

Condominium

Development,

New

York,

NY

$60 million mezzanine loan commitment

($49 million of which has been funded) secured by a pledge of

preferred equity interests in the owner of a to-be-developed 352,624 net saleable square foot, 57-story, 146-

unit condominium tower located in the TriBeCa neighborhood of New York City

Initial term of 54 months, with one extension option for 12-months

Underwritten

loan-to-net

sellout

(assuming

loan

is

fully

funded

and

based

upon

current

unit

presales)

–

48%

Underwritten  IRR

(1)

~ 16%

Repayments

Principal repayment on two mezzanine loans totaling $50 million secured by a portfolio of shopping centers

Received

$2.5

million

yield

maintenance

payment;

Total

realized

IRR

on

investment

–

15%

Full principal repayment on repurchase agreement secured by CDO bonds

Total

realized

IRR

on

investment

–

17%

(1)

The IRR for the investment listed reflects 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

cost of borrowings and derivative instruments under the Wells Facility. With respect to the mezzanine loan for the New York City condominium development that closed in January 2013, the IRR calculation assumes

certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, as well as assuming 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 the actual IRRs will

equal the underwritten IRRs shown. See “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of some of the factors that could adversely impact the returns

received by the Company from the investments over time. 

9

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

ARI –

Q1 Highlights

Capital Markets Activity

Common Stock Offering

Completed

an

underwritten

public

offering

of

8,805,000

shares

of

common

stock,

raising

net

proceeds

of

approximately

$148.4 million

Portfolio Summary

Total investments with an amortized cost of $688 million at March 31, 2013

Current

weighted

average

underwritten

IRR

of

approximately

12.9%

and

levered

weighted

average

underwritten

IRR

of

approximately

14.2%

at

March

31,

2013

(1)

Book Value

GAAP book value of $16.41 per share as of March 31, 2013

Fair

value

of

$16.71

per

share

as

of

March

31,

2013

(2)

ARI closed at $17.74 on April 30, 2013, a 8.1% premium to GAAP book value per share

(1)

The IRR  for the investments listed 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 cost of borrowings and derivative

instruments under the Wells Facility. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised. With respect to the mezzanine loan for the New York City multifamily condominium conversion that closed

in December 2012 and the mezzanine loan for the New York City condominium construction that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments

and associated loan repayments, as well as assuming 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. See “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31,

2012 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments over time.  Substantially all of the Company’s borrowings under the Company's master repurchase facility with JPMorgan Chase

Bank, N.A. (the "JPMorgan Facility") were repaid upon the closing of the Company’s Series A Preferred Stock offering in August 2012.  The Company's ability to achieve its levered weighted average underwritten IRR is additionally dependent upon the

Company re-borrowing approximately $53 million under the JPMorgan Facility or any replacement facility.  Without such re-borrowing, the levered weighted average IRR with regard to its portfolio of first mortgage loan will be significantly lower than the

amount shown above, as indicated by the current weighted average underwritten IRR above.

(2)

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 March 31, 2013 was approximately $11.1 million greater than the carrying value of

the Company’s investment portfolio as of the same date.  This represents a premium of $0.30 per share over the Company's GAAP book value as of March 31, 2013.

10

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

ARI –

Q1 Highlights

Financing Activity

Amendment to JP Morgan Facility

Extended the term of the facility for two years (one-year term with one, 364 day extension)

Pricing to remain at LIBOR+2.50%

ARI paid a 0.5% fee for the first year and will pay a 0.25% extension fee for the 364 day extension

Amendment to Wells Facility

Reduced

interest

rate

for

outstanding

borrowings

used

to

finance

AAA

CMBS

to

LIBOR+1.05%

from

LIBOR+1.25% -

1.50%

Reduced

interest

rate

for

outstanding

borrowings

used

to

finance

Hilton

CMBS

to

LIBOR+1.75%

from

LIBOR+2.35%

Extended

the

term

for

the

outstanding

borrowings

used

to

finance

the

AAA

CMBS

until

March

2014

Corporate Governance

Chief Financial Officer

Board of Directors appointed Megan Gaul to the positions of Chief Financial Officer, Treasurer and

Secretary, effective April 1, 2013

11

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

ARI –

Portfolio Overview

Asset Type

($000s)

Amortized

Cost

Borrowings

Equity

at Cost

Remaining

Weighted

Average Life    

(years )

(1)

Current

Weighted

Average

IRR

(2)(3)

Levered

Weighted

Average

IRR

(4)

First Mortgage Loans

(2)

$142,833

$3

$142,830

2.3

10.9%

15.7%

Subordinate Loans

286,569

-

286,569

4.1

13.6%

13.6%

CMBS -

AAA

188,824

164,204

24,620

1.8

16.2%

16.2%

CMBS -

Hilton

69,912

47,737

22,175

2.6

12.5%

12.5%

Investments at March 31, 2013

$688,138

$211,944

$476,194

3.0 Years

12.9%

14.2%

As of March 31, 2013.

(1) 

Remaining Weighted Average Life assumes all extension options are exercised.

(2)

Borrowings under the Company’s master repurchase facility with JPMorgan (the “JPMorgan Facility”) bear interest at LIBOR plus 250 basis points, or 2.7% at March 31, 2013. The IRR calculation further assumes the JPMorgan Facility or any replacement

facility will remain available over the life of these investments.

(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 cost of borrowings and

derivative instruments under the Wells Facility. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised. With respect to the mezzanine loan for the New York City multifamily condominium conversion

that closed in December 2012 and the mezzanine loan for the New York City condominium construction that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining

commitments and associated loan repayments, as well as assuming 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 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, 2012 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)

Substantially all of the Company’s borrowings under the JPMorgan Facility were repaid.  The Company's ability to achieve its underwritten levered weighted average IRR with regard to its portfolio of first mortgage loans is additionally dependent upon the

Company re-borrowing approximately $53,000 under the JPMorgan Facility or any replacement facility.   Without such re-borrowing, the levered weighted average IRRs will be as indicated in the current weighted average IRR column above.  

12

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

ARI –

Portfolio Overview

Diversified Investment Portfolio with Amortized Cost Basis of $688 million

Net Invested Equity at Amortized Cost Basis

Gross Assets at Amortized Cost Basis

CMBS -

AAA

27%

CMBS -

Hilton

10%

First Mortgages

21%

Subordinate

Loans

42%

CMBS -

AAA

5%

CMBS -

Hilton

5%

First Mortgages

30%

Subordinate

Loans

60%

13

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

ARI –

Portfolio Diversification

The portfolio is diversified by property type and geographic location

Geographic Diversification by Net Equity

Property Type by Net Equity

(1)

Other category includes the subordinate financing on a ski resort and a first mortgage loan on a development site with income producing parking lots.

Securities

10%

Residential

23%

Hotel

39%

Office

11%

Retail

5%

Mixed

Use/Other(1)

14%

New York City

47%

Northeast

(excluding NYC)

3%

Securities

10%

Southeast

1%

Mid-Atlantic

10%

Midwest

11%

West

13%

Southwest

5%

14

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

ARI

–

Loan

Portfolio

-

Maturity

and

Type

Fully Extended Loan Maturity Schedule ($000s)

(1)(2)

(1)

Based upon Face Amount of Loans; Does not include CMBS (AAA or Hilton).

(2)

For the NYC condominium conversion loan and the NYC condominium development loan, the maturities reflect the fully funded amounts of the loans. 

Loan Position and Rate Type

(1)

Senior Loan

Fixed

19%

Subordinate 

Loan Fixed

42%

Subordinate

Loan Floating

25%

Senior Loan

Floating

14%

$16.9

$-

$117.0

$114.1

$120.0

$85.0

$-

$8.9

$-

$16.5

$0

$20

$40

$60

$80

$100

$120

$140

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

15

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

ARI –

Loan Portfolio –

Loan Level LTV (Through Last Invested Dollar)

First Mortgage Loans

Subordinate Financings

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Description ($ in thousands)

Location

Balance at

March  31, 2013

Starting

LTV

Ending

LTV

(1)

First Mortgage -

Condo Conversion

(2)

New York

45,000

$             

0%

31%

First Mortgage -

Hotel

New York 

31,501

$             

0%

40%

First Mortgage -

Office

New York

27,351

$             

0%

53%

First Mortgage -

Hotel

Maryland

25,186

$             

0%

56%

First Mortgage -

Parking/Development Site

(3)

Massachusetts

16,890

$             

0%

21%

Total

145,928

$          

Description ($ in thousands)

Location

Balance at

March 31, 2013

Starting

LTV

Ending

LTV

(1)

Subordinate -

Condo Development

New York

50,009

$             

35%

48%

Subordinate -

Hotel Portfolio

Various

49,799

$             

53%

60%

Subordinate -

Ski Resort

California

40,000

$             

35%

54%

Subordinate -

Hotel Portfolio

New York

25,000

$             

56%

60%

Subordinate -

Hotel Portfolio

Minnesota

24,968

$             

57%

69%

Subordinate -

Retail

Virginia

24,442

$             

60%

74%

Subordinate -

Multifamily Conversion

New York

18,000

$             

48%

60%

Subordinate -

Hotel 

New York

15,000

$             

51%

63%

Subordinate -

Hotel

New York

15,000

$             

51%

65%

Subordinate -

Office

Missouri

9,945

$               

61%

71%

Subordinate -

Office

Michigan

8,897

$               

52%

67%

Subordinate -

Mixed Use

North Carolina

6,525

$               

64%

77%

Subordinate -

Condo Conversion

(2)

New York

350

$                  

31%

55%

Total

287,935

$          

(1)

Ending LTV represents the current loan balance as a percentage of the value as of the date of investment for all loans except the $31,633 New York, NY hotel loan, which is as of March 2011.

(2)

Both loans are for the same property; Ending LTV for the Condominium Conversion mezzanine loan is based upon the committed amount of $35 million. 

(3)

Ending LTV is based upon the aggregate face value ($23.8 million) of the senior sub-participation interests at the date of investment; ARI purchased the senior sub-participation interests for $17.8 million

(75% of face value).

16

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

ARI –

CMBS Portfolio

Face

Amortized

Cost

Remaining Weighted

Average Life with

Extensions (years)

Estimated

Fair Value

Debt

Net

Equity at

Cost

CMBS –

AAA

$185,974

$188,824

1.8

$189,554

$164,204

$24,620

CMBS –

Hilton

72,395

69,912

2.6

73,119

47,737

22,175

CMBS –

Total

$258,369

$258,736

2.0

$262,673

$211,941

$46,795

CMBS

-

AAA

CUSIP

Description

07388YAB8

BSCMS 07-PW16 A2

07401DAB7

BSCMS 2007-PW18 A2

12513YAC4

CD 2007-CD4 A2B

61754KAC9

MSC 07-IQ14 A2

92978YAB6

WBCMT 07-C32 A2

CMBS

-

AAA

CUSIP

Description

36246LAB7

GSMS 2007-GG10 A2

46630JAK5

JPMCC 2007-LDPX A2S

61751NAD4

MSC 2007-HQ11 A31

92978TAB7

WBCMT 2007-C31 A2

CMBS

–

Hilton

CUSIP

Description

05956KAA6

BALL 2010-HLTN

17

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

Portfolio Metrics –

Quarterly Migration Summary

(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 cost of borrowings and

derivative instruments under the Wells Facility. The calculation

also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised. With respect to the mezzanine loan for the New York City multifamily condominium conversion

that closed in December 2012 and the mezzanine loan for the New York City condominium construction that closed in January 2013, the IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining

commitments and associated loan repayments, as well as assuming 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 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, 2012 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.

(2)

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 approximately $53,000 under the JPMorgan Facility or any

replacement facility with regard to its portfolio of first mortgage loans.

Without such re-borrowing, the levered weighted average IRR will be significantly lower than the amount shown above, as indicated in the weighted average IRR column on page 10.

(3)

Does not include CMBS (AAA or Hilton).

Portfolio Metrics ($ in thousands)

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

(Investment balances represent amortized cost)

First Mortgage Loans

142,833

$        

142,921

$        

104,101

$        

103,320

$        

108,817

$        

Subordinate Loans

286,569

246,246

196,177

179,602

179,336

Repurchase Agreement

-

6,598

10,975

41,696

47,439

CMBS -

AAA

188,824

203,463

223,781

280,697

330,413

CMBS -

Hilton

69,912

70,250

70,521

70,719

-

Total Investments

688,138

$        

669,478

$        

605,555

$        

676,034

$        

666,005

$        

(Investment balances represent net equity, at cost)

First Mortgage Loans

142,830

$        

142,918

$        

104,098

$        

50,260

$         

40,210

$         

Subordinate Loans

286,569

246,246

196,177

179,602

179,336

Repurchase Agreement

-

6,598

10,975

41,696

47,439

CMBS -

AAA

24,620

26,636

29,712

32,520

43,763

CMBS -

Hilton

22,175

21,922

21,623

21,260

-

Net Equity in Investments at Cost

476,194

$        

444,320

$        

362,585

$        

325,338

$        

310,748

$        

Weighted Average IRR

(1)

14.2%

(2)

14.1%

(2)

14.9%

(2)

15.0%

14.7%

Weighted Average Duration

3.0 Years

3.1 Years

3.3 Years

2.9 Years

2.8 Years

Loan Portfolio Weighted Average Ending LTV

(3)

53.6%

55.6%

58.0%

57.1%

59.3%

Borrowings

211,944

$        

225,158

$        

242,970

$        

350,696

$        

355,257

$        

18

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

ARI had total borrowings outstanding of $211.9 million at March 31, 2013

ARI’s

borrowings

had

the

following

remaining

maturities

at

March

31,

2013:

Financing Overview

Facility ($000s)

Debt Balance

Weighted

Average

Remaining

Maturity

(1)

Cost of

Funds

Hedged

Cost of

Funds

Wells Facility

(1)

$211,941

1.3 Years

1.4%

1.5%

JP Morgan Facility

3

1.8 Years

2.7%

2.7%

Total Borrowings at March 31, 2013

$211,944

1.3 Years

1.4%

1.5%

Facility ($000s)

Less than 1 year

1 to 3 years

3 to 5 years

Total

Wells Facility

(1)

$166,467

$45,474

$-

$211,941

JP Morgan Facility

-

3

-

3

Total Borrowings at March 31, 2013

$166,467

$45,477

$-

$211,944

(1)

Assumes extension options on Wells Facility are exercised. At March 31, 2013, the interest rate with respect to outstanding borrowings used to finance AAA CMBS was LIBOR plus 105bps and the interest rate with respect

to outstanding borrowings used to finance the Hilton CMBS was LIBOR plus 175bps.

19

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

Financials

20

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

Consolidated Balance Sheets

(in thousands—except share and per share data)

March 31, 2013

December 31, 2012

Assets:

Cash

225,723

$                 

108,619

$                 

Securities available-for-sale, at estimated fair value

64,216

67,079

Securities, at estimated fair value

198,457

211,809

Commercial mortgage loans, held for investment

142,833

142,921

Subordinate loans, held for investment

286,569

246,246

Repurchase agreements, held for investment

-

6,598

Interest receivable

4,475

4,277

Deferred financing costs, net

1,239

678

Other assets

-

203

Total Assets

923,512

$                 

788,430

$                 

Liabilities and Stockholders' Equity

Liabilities:

Borrowings under repurchase agreements

211,944

$                 

225,158

$                 

Derivative instruments, net

83

155

Accounts payable and accrued expenses

1,524

1,265

Payable to related party

2,160

2,037

Dividends payable

16,616

12,891

Total Liabilities

232,327

241,506

Stockholders' Equity:

Preferred stock, $0.01 par value, 50,000,000 shares authorized and 3,450,000 shares issued and outstanding in 2013

and 2012

35

35

Common stock, $0.01 par value, 450,000,000 shares authorized 36,869,106 and 28,044,106 shares issued and

outstanding in 2013 and 2012, respectively

369

280

Additional paid-in-capital

695,266

546,065

Retained earnings (accumulated deficit)

(4,297)

574

Accumulated other comprehensive (loss)

(188)

(30)

Total Stockholders' Equity

691,185

546,924

Total Liabilities and Stockholders' Equity

923,512

$                 

788,430

$                 

21

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

Consolidated Statement of Operations

March 31, 2013

March 31, 2012

Net interest income:

Interest income from securities

3,087

$               

5,323

$               

Interest income from commercial mortgage loans

3,592

2,234

Interest income from subordinate loans

11,454

5,313

Interest income from repurchase agreements

2

1,559

Interest expense

(1,068)

(3,242)

Net interest income

17,067

11,187

Operating expenses:

General and administrative expenses (includes $883 and $1,083 of

non-cash stock based compensation in 2013 and  2012, respectively)

(1,895)

(2,036)

Management fees to related party

(2,160)

(1,289)

Total operating expenses

(4,055)

(3,325)

Interest income from cash balances

-

1

Realized gain on sale of securities

-

262

Unrealized gain (loss) on securities

(1,080)

1,385

Gain (loss) on derivative instruments (includes unrealized gains

(losses) of $72 and $(5) in 2013 and  2012, respectively)

-

(417)

Net income

11,932

$          

9,093

$            

Preferred dividends

(1,860)

-

Net Income available to common shareholders

10,072

$          

9,093

$            

Basic and diluted net income per share of common stock   

0.33

$                

0.43

$                

Basic and diluted weighted average shares of common stock outstanding

30,105,939

20,966,426

Dividend declared per share of common stock

0.40

$                

0.40

$                

Three months ended

22

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

Reconciliation of Operating Earnings to Net Income

March 31, 2013

Earnings Per Share

(Diluted)

March 31, 2012

Earnings Per Share

(Diluted)

Operating Earnings:

Net income available to common stockholders

$10,072

$0.33

$9,093

$0.43

Adjustments:

Unrealized (gain)/loss on securities

1,080

0.04

(1,385)

(0.06)

Unrealized (gain)/loss on derivative instruments

(72)

-

5

-

Equity based compensation expense

883

0.02

1,083

0.05

Total adjustments:

1,891

0.06

(297)

(0.01)

Operating Earnings

11,963

$0.39

$8,796

$0.42

Basic and diluted weighted average common shares outstanding

30,105,939

20,966,426

Three Months Ended

23

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

Financial Metrics –

Quarterly Migration Summary

Financial Metrics

($ in thousands, except per share data)

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Net Interest Income

17,067

$         

12,303

$         

13,236

$         

11,951

$         

11,187

$         

Management Fee

2,160

2,040

1,518

1,292

1,289

General and Administrative Costs

1,012

935

1,154

1,876

953

Non-Cash Stock Based Compensation

883

380

1,276

886

1,083

Net Income Available to Common Stockholders

10,072

$         

7,108

$           

10,992

$         

9,910

$           

9,093

$           

GAAP Diluted EPS

0.33

$              

0.26

$              

0.52

$              

0.47

$              

0.43

$              

Operating Earnings

(1)

11,963

$         

7,375

$           

9,218

$           

8,526

$           

8,795

$           

Operating EPS

(1)

0.39

$              

0.27

$              

0.44

$              

0.41

$              

0.42

$              

Distributions Declared to Common Stockholders

0.40

$              

0.40

$              

0.40

$              

0.40

$              

0.40

$              

GAAP Book Value per Common Share

16.41

$           

16.43

$           

16.58

$           

16.59

$           

16.46

$           

Fair Value per Common Share

(2)

16.71

$           

16.84

$           

17.16

$           

17.22

$           

17.04

$           

Total Stockholders' Equity

691,185

$        

546,924

$        

427,421

$        

341,518

$        

338,377

$        

Basic and diluted weighted average common shares

outstanding

30,105,939

27,297,600

20,992,312

20,991,450

20,966,426

Return on Common Equity Based on Operating Earnings

(3)

9.6%

6.8%

10.8%

10.0%

10.4%

(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) equity 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)and (ii) any unrealized gains or losses or other non-cash items included in

net income.  Please see slide 22 for a reconciliation of Operating Earnings and Operating Earnings per Share to GAAP net income and GAAP net income per share.

(2)

The Company carries loans at amortized cost and its CMBS securities are marked to market.  Management estimates the fair value of the Company’s financial assets.

(3)

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