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): July 25, 2018

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On July 25, 2018, Apollo Commercial Real Estate Finance, Inc. (the “Company”) issued an earnings release announcing its financial results for the three and six months ended June 30, 2018. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

On July 25, 2018, 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 July 25, 2018
99.2	Supplemental Financial Information for the three and six months ended June 30, 2018

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: July 25, 2018

EX-99.1

Exhibit 99.1

CONTACT:     Hilary Ginsberg

                           (212) 822-0767

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC. REPORTS

SECOND QUARTER 2018 FINANCIAL RESULTS

New York, NY, July 25, 2018 – Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported financial results for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights

• Reported net income available to common stockholders of $48.5 million, or $0.39 per diluted share of common stock, for the three months ended June 30, 2018, as compared to $26.9 million, or $0.28 per diluted share of common stock, for the three months ended June 30, 2017;

• Reported Operating Earnings (a non-GAAP financial measure defined below) of $54.9 million, or $0.44 per diluted share of common stock, for the three months ended June 30, 2018, as compared to $44.6 million, or $0.46 per diluted share of common stock, for the three months ended June 30, 2017;

• Generated $70.8 million of net interest income during the quarter from the Company’s $4.9 billion commercial real estate loan portfolio;

• Committed $968.0 million to new commercial real estate loans ($961.7 million of which was funded at closing) and funded an additional $112.5 million for loans closed prior to the quarter;

• Subsequent to quarter end, committed $87.0 million to new commercial real estate loans (all of which was funded at closing), bringing year-to-date loan commitments to $2.0 billion;

• Amended and restated the Company’s master repurchase agreement with JPMorgan Chase Bank to extend the term through June 2021;

• Amended the Company’s master repurchase agreement with Deutsche Bank to increase the borrowing capacity to $855 million and extend the term through March 2021;

• Entered into a master repurchase agreement with Credit Suisse to finance a first mortgage; and

• Declared a $0.46 dividend per share of common stock for the three months ended June 30, 2018.

“ARI has committed to over $1.9 billion of commercial real estate loans in the first six months of 2018, our strongest period of originations to-date and just $100 million shy of our total 2017 originations,” said Stuart Rothstein, Chief Executive Officer and President of the Company. “ARI’s loan portfolio totaled $4.9 billion of amortized cost at quarter end, an increase of approximately 36% as compared to the end of the second quarter of 2017. We believe ARI’s performance demonstrates the benefits of the Company’s nine-year track record as a reliable, creative capital solutions provider to the commercial real estate industry.”

Second Quarter 2018 Investment Activity

New Investments – During the second quarter of 2018, ARI committed capital to the following commercial real estate debt investments:

• $783.9 million of first mortgage loans ($777.6 million of which were funded during the quarter); and

• $184.1 million of subordinate loans ($184.1 million of which were funded during the quarter).

Funding of Previously Closed Loans – During the second quarter of 2018, ARI funded $112.5 million for loans closed prior to the quarter.

Loan Repayments – During the second quarter of 2018, ARI received $237.8 million from loan repayments, comprised of $107.5 million from first mortgage loans and $130.3 million from subordinate loans.

Quarter End Commercial Real Estate Loan Portfolio Summary

The following table sets forth certain information regarding the Company’s commercial real estate loan portfolio at June 30, 2018 ($ amounts in thousands):

Description	Amortized Cost		Weighted Average Coupon(1)			Weighted Average All-in Yield(1)(2)			Secured Debt(3)		Cost of Funds			Equity at Cost(4)
Commercial mortgage loans, net		3,724,221		6.9	%		7.8	%		1,981,181		4.1	%		1,743,040
Subordinate loans, net		1,142,514		12.1	%		13.4	%		—		—			1,142,514
Total/Weighted Average		4,866,735		8.1	%		9.1	%		1,981,181		4.1	%		2,885,554

(1) Weighted-Average Coupon and Weighted Average All-in-Yield are based upon the applicable benchmark rates as of June 30, 2018 on the floating rate loans.

(2) Weighted-Average All-in-Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees.

(3) Gross of deferred financing of $20,307.

(4) Represents loan portfolio at amortized cost less secured debt outstanding.

Book Value

The Company’s book value per share of common stock was $16.26 at June 30, 2018 as compared to book value per share of common stock of $16.31 at March 31, 2018.

Subsequent Events

The following events occurred subsequent to quarter end:

New Investments – Subsequent to quarter end, ARI committed capital to the following commercial real estate loans:

• $87.0 million of first mortgage loans (all of which was funded during the quarter); and

Funding of Previously Closed Loans – Subsequent to quarter end, ARI funded $18.9 million for previously closed loans.

Loan Repayments – Subsequent to quarter end, ARI received $52.3 million from loan repayments, including $52.0 million from first mortgage loans and $0.3 million from subordinate loans.

Operating Earnings

Operating Earnings is a non-GAAP financial measure that is defined by the Company as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses) other than realized gains/(losses) related to interest income, (v) the non-cash amortization expense related to the reclassification of a portion of the convertible senior notes to stockholders’ equity in accordance with GAAP, and (vi) provision for loan losses and impairments. Beginning with the quarter ended September 30, 2016, the Company slightly modified its definition of Operating Earnings to include realized gains (losses) on currency swaps related to interest income on investments denominated in a currency other than U.S. dollars. Operating Earnings may also be adjusted to exclude certain other non-cash items, as determined by ACREFI Management, LLC, the Company’s external manager (the “Manager”) and approved by a majority of the Company’s independent directors.

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In order to evaluate the effective yield of the portfolio, the Company uses Operating Earnings to reflect the net investment income of the Company’s portfolio as adjusted to include the net interest expense related to the Company’s derivative instruments. Operating Earnings allows the Company to isolate the net interest expense associated with the Company’s swaps in order to monitor and project the Company’s full cost of borrowings. The Company also believes that its investors use Operating Earnings, or a comparable supplemental performance measure, to evaluate and compare the performance of the Company and its peers and, as such, the Company believes that the disclosure of Operating Earnings is useful to its investors. In addition, the Company has previously disclosed that it has disposed of all of its CMBS as of December 31, 2017. Accordingly, the Company has disclosed Operating Earnings excluding realized loss and costs from sale of CMBS because the Company believes it is useful to investors to present the results of the Company’s ongoing operations while excluding the effects associated with the disposal of its CMBS.

A significant limitation associated with Operating Earnings as a measure of the Company’s financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, the Company’s presentation of Operating Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, Operating Earnings should not be considered as a substitute for the Company’s GAAP net income as a measure of its financial performance or any measure of its liquidity under GAAP.

Reconciliation of Operating Earnings to Net Income Available to Common Stockholders

The table below reconciles Operating Earnings and Operating Earnings per share of common stock with net income available to common stockholders and net income available to common stockholders per share of common stock for the three and six months ended June 30, 2018 and June 30, 2017 ($ amounts in thousands, except per share data):

	Three Months Ended June 30, 2018			Earnings Per Share			Three Months Ended June 30, 2017			Earnings Per Share
Operating Earnings:
Net income available to common stockholders	$	48,512		$	0.39		$	26,925		$	0.28
Adjustments:
Equity-based compensation expense		4,014			0.03			3,461			0.04
Unrealized loss on securities		—			—			4,510			0.05
(Gain) loss on derivative instruments		(33,538	)		(0.27	)		7,389			0.08
Foreign currency (gain) loss, net		29,797			0.24			(6,958	)		(0.08	)
Amortization of the convertible senior notes related to equity reclassification		1,156			0.01			618			0.01
Loss from unconsolidated joint venture		—			—			3,305			0.03
Provision for loan losses and impairments		5,000			0.04			5,000			0.05
Realized gain from unconsolidated joint venture		—			—			346			—
Total adjustments:		6,429			0.05			17,671			0.18
Operating Earnings		54,941			0.44			44,596			0.46
Realized loss and costs from sale of CMBS		—			—			—			—
Operating Earnings excluding realized loss and costs from sale of CMBS	$	54,941		$	0.44		$	44,596		$	0.46
Basic weighted average shares of common stock outstanding:		123,019,993						95,428,134
Diluted weighted average shares of common stock outstanding:		124,629,317						96,796,289

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	Six Months Ended June 30, 2018			Earnings Per Share			Six Months Ended June 30, 2017			Earnings Per Share
Operating Earnings:
Net income available to common stockholders	$	91,110		$	0.78		$	64,739		$	0.68
Adjustments:
Equity-based compensation expense		7,356			0.06			7,252			0.08
Unrealized loss on securities		—			—			1,658			0.02
(Gain) loss on derivative instruments		(22,506	)		(0.19	)		10,434			0.12
Foreign currency (gain) loss, net		19,435			0.16			(10,284	)		(0.11	)
Amortization of the convertible senior notes related to equity reclassification		2,296			0.02			1,226			0.01
Loss from unconsolidated joint venture		—			—			2,847			0.03
Provision for loan losses and impairments		5,000			0.04			5,000			0.05
Realized gain from unconsolidated joint venture		—			—			346			—
Total adjustments:		11,581			0.09			18,479			0.20
Operating Earnings		102,691			0.87			83,218			0.88
Realized loss and costs from sale of CMBS		—			—			1,042			0.01
Operating Earnings excluding realized loss and costs from sale of CMBS	$	102,691		$	0.87		$	84,260		$	0.89
Basic weighted average shares of common stock outstanding:		116,651,305						93,530,831
Diluted weighted average shares of common stock outstanding:		118,281,153						94,907,762

Teleconference Details:

The Company will host a conference call to discuss its financial results on Thursday, July 26, 2018 at 10:00 a.m. Eastern Time. Members of the public who are interested in participating in the Company’s second quarter 2018 earnings teleconference call should dial from the U.S., (877) 331-6553, or from outside the U.S., (760) 666-3769, shortly before 10:00 a.m. and reference the Apollo Commercial Real Estate Finance, Inc. Teleconference Call (number 1376979). Please note the teleconference call will be available for replay beginning at 1:00 p.m. on Thursday, July 26, 2018 and ending at midnight on Thursday, August 2, 2018. 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 1376979.

Webcast:

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

Supplemental Information

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

About Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a real estate investment trust that primarily originates, acquires, invests in and manages performing commercial real estate mortgage loans, subordinate financings and other commercial real estate-related debt investments. The Company is externally managed and advised by

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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 $247 billion of assets under management as of March 31, 2018.    

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 Equiniti Trust Company (“Equiniti”). Stockholders and other persons may obtain a copy of the Plan prospectus and an enrollment form by contacting Equiniti at (800) 468-9716 or (651) 450-4064, if outside the United States, or visiting Equiniti’s website at www.shareowneronline.com.

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

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. When used in this release, the words believe, expect, anticipate, estimate, plan, continue, intend, should, may or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; the Company’s ability to deploy the proceeds of its capital raises or acquire its target assets; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. For a further list and description of such risks and uncertainties, see the reports filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (in thousands—except share data)

	June 30, 2018			December 31, 2017
	(Unaudited)
Assets:
Cash	$	76,384		$	77,671
Commercial mortgage loans, net (includes $3,115,916 and $2,148,368 pledged as collateral under secured debt arrangements in 2018 and 2017, respectively)		3,724,221			2,653,826
Subordinate loans, net		1,142,514			1,025,932
Loan proceeds held by servicer		—			302,756
Other assets		27,584			28,420
Derivative assets, net		10,297			—
Total Assets	$	4,981,000		$	4,088,605
Liabilities and Stockholders’ Equity
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $20,307 and $14,348 in 2018 and 2017, respectively)	$	1,960,874		$	1,330,847
Convertible senior notes, net		587,063			584,897
Derivative liabilities, net		—			5,644
Accounts payable, accrued expenses and other liabilities		81,397			70,906
Payable to related party		9,013			8,168
Total Liabilities		2,638,347			2,000,462
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 aggregate liquidation preference) in 2018 and 2017		68			68
Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2018 and 2017		69			69
Common stock, $0.01 par value, 450,000,000 shares authorized, 123,020,301 and 107,121,235 shares issued and outstanding in 2018 and 2017, respectively		1,230			1,071
Additional paid-in-capital		2,447,973			2,170,078
Accumulated deficit		(106,687	)		(83,143	)
Total Stockholders’ Equity		2,342,653			2,088,143
Total Liabilities and Stockholders’ Equity	$	4,981,000		$	4,088,605

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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 June 30,						Six months ended June 30,
	2018			2017			2018			2017
Net interest income:
Interest income from commercial mortgage loans	$	65,141		$	37,089		$	117,225		$	71,487
Interest income from subordinate loans		34,075			39,640			67,928			74,030
Interest income from securities		—			4,700			—			10,754
Interest expense		(28,437	)		(19,205	)		(51,177	)		(36,235	)
Net interest income		70,779			62,224			134,006			120,036
Operating expenses:
General and administrative expenses (includes equity-based compensation of $4,014 and $7,356 in 2018 and $3,461 and $7,252 in 2017, respectively)		(5,652	)		(5,200	)		(10,650	)		(10,958	)
Management fees to related party		(9,013	)		(7,742	)		(17,105	)		(15,175	)
Total operating expenses		(14,665	)		(12,942	)		(27,755	)		(26,133	)
Loss from unconsolidated joint venture		—			(3,305	)		—			(2,847	)
Other income		343			244			546			352
Provision for loan losses and impairments		(5,000	)		(5,000	)		(5,000	)		(5,000	)
Realized loss on sale of assets		—			—			—			(1,042	)
Unrealized loss on securities		—			(4,510	)		—			(1,658	)
Foreign currency gain (loss)		(29,649	)		6,913			(19,524	)		10,085
Gain (loss) on derivative instruments (includes unrealized gains/(losses) of $24,796 and $15,941 in 2018 and $(7,435) and $(10,324) in 2017, respectively)		33,538			(7,389	)		22,506			(10,434	)
Net income		55,346			36,235			104,779			83,359
Preferred dividend		(6,834	)		(9,310	)		(13,669	)		(18,620	)
Net income available to common stockholders	$	48,512		$	26,925		$	91,110		$	64,739
Net income per share of common stock	$	0.39		$	0.28		$	0.78		$	0.68
Basic weighted average shares of common stock outstanding		123,019,993			95,428,134			116,651,305			93,530,831
Diluted weighted average shares of common stock outstanding		124,629,317			96,796,289			118,281,153			94,907,762
Dividend declared per share of common stock	$	0.46		$	0.46		$	0.92		$	0.92

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EX-99.2

Supplemental Financial Information Q2 2018 July 25, 2018 Exhibit 99.2

Forward Looking Statements and Other Disclosures This presentation may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond management’s control. These forward-looking statements may include information about possible or assumed future results of Apollo Commercial Real Estate Finance, Inc.’s (“ARI” or the “Company”) business, financial condition, liquidity, results of operations, plans and objectives. When used in this presentation, the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: ARI’s business and investment strategy; ARI’s operating results; ARI’s ability to obtain and maintain financing arrangements; and 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 management’s beliefs, assumptions and expectations of future performance, taking into account all information currently available to ARI. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to ARI. Some of these factors are described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in ARI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other filings with the Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. If a change occurs, ARI’s business, financial condition, liquidity and results of operations may vary materially from those expressed in ARI’s forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for management to predict those events or how they may affect ARI. Except as required by law, ARI is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation contains information regarding ARI’s financial results that is calculated and presented on the basis of methodologies other than in accordance with accounting principles generally accepted in the United States (“GAAP”), including Operating Earnings and Operating Earnings per share. Please refer to slide 20 for a definition of “Operating Earnings” and the reconciliation of the applicable GAAP financial measures to non-GAAP financial measures set forth on slides 18 and 19. This presentation may contain statistics and other data that in some cases has been obtained from or compiled from information made available by third-party service providers. ARI makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness or completeness of such information. Past performance is not indicative nor a guarantee of future returns. Index performance and yield data are shown for illustrative purposes only and have limitations when used for comparison or for other purposes due to, among other matters, volatility, credit or other factors (such as number and types of securities). Indices are unmanaged, do not charge any fees or expenses, assume reinvestment of income and do not employ special investment techniques such as leveraging or short selling. No such index is indicative of the future results of any investment by ARI.

Q2 Highlights See footnotes on page 20 Earnings Net income available to common stockholders of $48.5 million, or $0.39 per diluted share of common stock Operating Earnings1 of $54.9 million, or $0.44 per diluted share of common stock Net interest income of $70.8 million Dividend Common stock dividend of $0.46 per share 9.8% annualized dividend yield based upon closing stock price on July 24, 2018 Loan Originations Committed capital to $968.0 million of commercial real estate loans, $961.7 million of which was funded during the quarter Total committed capital for six months ended June 30, 2018 - $1.9 billion Funded $112.5 million for loans closed prior to the quarter Loan Portfolio Total loan portfolio of $4.9 billion Weighted average remaining term2 of 2.8 years Weighted average unlevered all-in-yield3 of 9.1% 91% of loans have floating interest rates Capitalization Amended the Company’s master repurchase agreement with JPMorgan Chase Bank to extend the term through June 2021 Amended and restated the Company’s master repurchase agreement with Deutsche Bank to increase the borrowing capacity to $855 million and extend the term through March 2021 Entered into a master repurchase agreement with Credit Suisse to finance a first mortgage loan Total common equity market capitalization4 of $2.2 billion at June 30, 2018

Financial Summary See footnotes on page 20 1 1 6 7 8 5

Q2 Investment Activity See footnotes on page 20 2Q18 Investment Summary Outstanding Portfolio Loans Closed 12 Commitments to New Loans $968 Add-on Fundings9 $113 Weighted Average LTV10 64% Weighted Average Unlevered All-in-Yield3 8.2% $800 mm net portfolio growth ($ mm) 12 11 11

YTD Investment Activity See footnotes on page 20 YTD Investment Summary Outstanding Portfolio Loans Closed 19 Commitments to New Loans $1,890 Add-on Fundings13 $104 Weighted Average LTV10 59% Weighted Average Unlevered All-in-Yield3 8.3% $1,187 mm net portfolio growth ($ mm) 12 11 11

Q2 Investment Activity See footnotes on page 20 Summary of New Investments $154.0 million floating-rate senior mortgage loan ($151.5 million of which was funded at closing) secured by a 623-key resort hotel in Honolulu, Hawaii $140.0 million floating-rate senior mortgage loan (all of which was funded at closing) secured by a 218-key hotel in Miami Beach, Florida $114.5 million floating-rate senior mortgage condominium inventory loan (all of which was funded at closing) secured by 22 luxury units in the Flatiron submarket of New York City $110.0 million floating-rate senior mortgage loan (all of which was funded at closing) secured by a recently constructed 612-key hotel in the Times Square submarket of New York City. ARI previously held a $105.0 million investment in the property and the upsize brings ARI’s total investment to $215 million $95.0 million floating-rate mezzanine loan (all of which was funded at closing) secured by a portfolio of 51 independent living properties comprising 5,486 units located throughout the United States $79.4 million floating-rate senior mortgage condominium inventory loan ($75.5 million of which was funded at closing) secured by 70 units in the Red Hook submarket of Brooklyn, New York £54.7 million ($72.5 million)14 floating-rate senior mortgage condominium inventory loan (all of which was funded at closing) secured by 22 units and retail space in the Soho section of London, U.K. $63.5 million floating-rate senior mortgage hotel loan (all of which was funded at closing) secured by a 404-key resort hotel located in Scottsdale, Arizona $50.0 million floating-rate senior mortgage condominium inventory loan (all of which was funded at closing) secured by 19 units and retail space in the Chelsea submarket of New York City Other investments include two floating-rate hotel loans and one multifamily loan totaling $89.1 million

Loan Position by Invested Net Equity at Amortized Cost Commercial Real Estate Loan Portfolio Overview See footnotes on page 20 Loan Position at Amortized Cost ($ mm) 6/30/2018 3/31/2018 Number of Loans 70 Loans 63 Loans Amortized Cost $4,867 $4,067 Invested Net Equity at Cost5 $2,886 $2,885 Unfunded Loan Commitments11 $818 $853 Weighted Average Unlevered Yield on Floating-Rate Loans L+ 6.9% L+7.3% Weighted Average Unlevered All-in-Yield on Loan Portfolio3 9.1% 9.2% Weighted Average Remaining Term2 2.8 Years 2.7 Years

Commercial Real Estate Loan Portfolio Overview See footnotes on page 20 Geographic Diversification by Amortized Cost ($ mm) 15 16 Property Type by Amortized Cost

Weighted Average Yield on Loans with Floating Rate – L+5.7% - Weighted Average All-in Yield3 on All Senior Loans – 7.8% Senior Loan Portfolio Overview See footnotes on page 20 17 18 19 19

Subordinate Loan Portfolio Overview See footnotes on page 20 Weighted Average Yield on Loans with Floating Rate – L+11.6% - Weighted Average All-in Yield3 on All Subordinate Loans – 13.4% TOTAL PORTFOLIO WEIGHTED AVERAGE: Yield on Loans with Floating Rate – L+6.9% - All-in-Yield3 – 9.1% 17 18 20 20

Loan Portfolio Maturity Profile See footnotes on page 20 Fully Extended Loan Maturities and Estimated Future Fundings21,22,23 ($ mm)

Capital Structure Overview See footnotes on page 20 Debt to Common Equity Ratio7: 1.2x Fixed Charge Coverage8: 2.7x ~$5.2 Billion Total Market Capitalization Capital Structure Detail Capital Structure Composition 24 25 4 2 25 25

See footnotes on page 20 ~ ~ ~ ~ 26 Liquidity

Interest Rate Sensitivity See footnotes on page 20 Rate Profile of Loan Portfolio21 Net Interest Income Sensitivity to LIBOR27 Net Interest Income per Share Increases with LIBOR Increase

Financials

Consolidated Balance Sheets

Consolidated Statements of Operations

Reconciliation of GAAP Net Income to Operating Earnings1 See footnotes on page 20

Reconciliation of GAAP Net Income to Operating Earnings1 See footnotes on page 20

Footnotes Operating Earnings is a non-GAAP financial measure that is used by the Company to approximate cash available for distribution and is defined by the Company as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding); (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains/losses, other than realized gains/(losses) related to interest income; (v) the non-cash amortization expense related to the reclassification of a portion of the convertible senior notes to stockholders’ equity in accordance with GAAP; and (vi) provision for loan losses and impairments. Please see slide 18 and 19 for a reconciliation of GAAP net income and GAAP net income per share to Operating Earnings and Operating Earnings per Share. Operating Earnings may also be adjusted to exclude certain other non-cash items, as determined by ACREFI Management, LLC, the Company’s external manager (the “Manager”) and approved by a majority of the Company's independent directors. Assumes exercise of all extension options. Weighted Average Unlevered All-in-Yield on the loan portfolio is based on the applicable benchmark rates as of June 30, 2018 on the floating rate loans and includes accrual of origination, extension, and exit fees. Common equity market capitalization represents shares of common stock outstanding times the closing stock price on June 30, 2018. Invested Net Equity at Cost is the amortized cost of loans less principal balance of secured debt arrangements; does not include debt secured by proceeds held by servicer. Total debt balance less $20,307 and $14,348 at June 30, 2018 and December 31, 2017, respectively, in deferred financing costs. Represents total secured debt arrangements and convertible senior notes, less cash and loan proceeds held by servicer to common equity. Fixed charge coverage is EBITDA divided by interest expense and preferred stock dividends. For loans closed prior to Q2 2018. Reflects LTV as of date loans were originated or acquired. Unfunded loan commitments are for loans that have yet to be funded. Includes foreign currency appreciation/depreciation, PIK interest, loan loss reserves, and the accretion of loan costs and fees. For loans closed prior to 2018. Conversion to USD on the date of investment. Other includes a data center and water park resorts. Amounts and percentages may not foot due to rounding. Both loans are secured by the same property. Both loans are secured by the same property. Amortized cost for these loans is net of the recorded provisions for loan losses and impairments. Both loans are secured by the same property. Based upon face amount of loans. Maturities reflect the fully funded amounts of the loans. Future funding dates are based upon the Manager’s estimates based upon the best information available to the Manager at the time. There is no assurance that the payments will occur in accordance with these estimates or at all, which could affect the Company’s operating results. The debt balance as of June 30, 2018, includes asset specific borrowing: currently $132 million max capacity, all of which is drawn. Conversion to USD using applicable June 30, 2018 spot rate. Subject to availability of qualifying collateral assets, and approval of lenders. Any such hypothetical impact on interest rates on the Company’s variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising interest rate environment.  Further, in the event of a change in interest rates of that magnitude, the Company may take actions to further mitigate the Company’s exposure to such a change.  However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in the Company’s financial structure. The analysis incorporates movements in both USD LIBOR and GBP LIBOR.