Good day, ladies and gentlemen and welcome to the Real Estate Finance Incorporated Apollo Commercial's Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will follow at that time. [Operator Instructions] I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo Commercial Real Estate Finance Incorporated and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release. I'd like to also call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking statements. Today's conference call and webcast include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apolloreit.com, or call us at 212-515-3200. At this time, I'd like to turn the call over to the Company's Chief Executive Officer, Stuart Rothstein. Sir, please begin.

Thank you. Good morning and thank you for joining us on the Apollo Commercial Real Estate Finance First Quarter 2016 Earnings Call. Joining me this morning are, Scott Weiner, the Chief Investment Officer of our Manager and Megan Gaul, our Chief Financial Officer who will review ARI's financial results after my remarks. Despite widespread capital markets volatility in the first quarter of the year, ARI had a strong start to the year. The first quarter was highlighted by the closing of new transactions totaling $328 million and our announcement of the acquisition of Apollo Residential Mortgage Inc. which we view as a cost-effective and accretive way to raise incremental capital for ARI. From a financial perspective, we announced operating earnings per-share excluding expenses related to the AMTG transaction of $0.51 per share a 16% increase over the first quarter of last year. These numbers reflect an adjustment to exclude approximately $5 million of transaction expenses recorded during the quarter. We believe the strength of ARI's operating earnings is reflective of our success in keeping the company's capital invested. Given ARI's robust investment activity in the first quarter as well as known future funding commitments on previously closed transactions, we end of the quarter effectively fully invested. We enter the second quarter with a limited amount of dry powder and based upon our current pipeline we expect that available capital to be invested during the quarter as we continue to see attractive opportunities in the market. Overall, commercial real estate transaction volume in the first quarter took a brief pause due to the uncertainty and volatility in the broader capital markets. However, there continues to be significant transaction flow for ARI driven by the pending maturity wall, ongoing healthy transaction levels, continued low interest rates and the uncertainty surrounding the CMBS…

Thank you, Stuart and good morning everyone. For the first quarter of 2016 the company announced operating earnings of $29.8 million or $0.44 per share. Excluding one-time expenses associated with the pending acquisition of AMTG, which totaled approximately $5.1 million, ARI reported operating earnings of $34.9 million or $0.51 per diluted common stock, representing a per share increase of 16% as compared to operating earnings of $22.2 million or $0.44 per diluted share of common stock for the three months ended March 31, 2015. Net income available to common stockholders for the same period was $12.8 million in 2016 or $.18 per share as compared to $23.7 million or $0.47 per share for 2015. A reconciliation of operating earnings to GAAP net income can be found in our earnings release contained in the investor relations section of our website, apolloreit.com. GAAP book value per share on March 31, 2016 was $15.89 a 2% decline from last quarter driven as Stuart mentioned by unrealized mark-to-market losses on our CMBS portfolio. At March 31, 84% of the loans in our portfolio have floating interest rates and we continue position the portfolio to benefit from an increase in short-term rates. We anticipate that if LIBOR were to increase 50 basis points, our portfolio would generate an additional $0.09 per year in operating earnings. With respect to ARI's leveraged, ARI ended the quarter with $1.3 debt-to-equity ratio. Finally, I wanted to highlight our attractive dividend yields. Based on Monday's closing price, ARI's stock offers an attractive 11.6% yield. Given the strength of our results today and our previously stated goal to establish a consisting quarterly dividend that is covered by operating earnings, and meets the redistribution requirement, we are confident in ARI's ability to earn the quarterly dividend in 2016. The board will meet in mid June to discuss the Q2 dividend and we will make an announcement shortly thereafter. And with that, we'd like to open the line for questions. Operator?

[Operator Instructions] Our first question will come from the line of Steve DeLaney from JMP Securities. Your line is open.

Thanks, good morning everyone and thank you for taking the question. Stuart, you have a slide in your deck, your supplemental on page six about the $328 million, but I'm – and you know at least it gives us the terms and the average terms et cetera, but could you just give us a little color about these three new investments in terms of property type and location? That will be helpful, thanks.

Yes, I'll let Scott do that.

Sure, I think we've disclosed that there will be a largest of the investments of the first mortgage loans done in Miami secured by existing retail property; I mean what's known as the Miami Design District as well as 65% loans across first mortgage. I mean we underwrote it based on the existing buildings and structures. I think the sponsor thinks that there is some higher and better uses there just in terms of repositioning the properties maybe some of the buildings aren't fully built out. They think there might be some other uses that could be appealing to that market. So that was the first thing. Our deal to be clear does not allow any demolition, redevelopment. We are a loan that gives them time to figure out their plan, but there are tenants in place. It is a current pay loan. The second first mortgage loan that we did was up in Boston. Again, circa 65% loans across existing office buildings, currently leased and not-for-profit. The sponsor thinks there is upside from retailing the property with more for profit companies and upgrading the buildings and they are looking potentially at a change and use down the road maybe of condos or something, but we and they underwrote it as office, so again a cash flowing first mortgage. And then our last deal was a mezzanine loan in the Tribeca neighborhood of Manhattan to convert an existing office building to condos. As you might remember, we've had two other condo deals in that market, both have been paid off, one was a conversion actually across the street from this deal and one was ground up down the street. This one is about a 60% loan to net sell out deal where we partnered with a bank. This was a repeat borrower, as was the deal in Miami, were repeat borrowers.

The color is helpful, thank you, Scott. And guys, are you seeing given all the disruption that we had late last year and early this year in CMBS, frankly I think the flow, but it seems that borrowers are continuing, they are still in the game and that's nice to see, and the reports that have come out so far, so I'm just curious if you are and from your seat if you believe that you have some degree of incremental pricing power in terms of negotiating loan terms given what's happed at CMBS, et cetera?

I would say we do feel we have a little bit more of strong position, but I don’t know which really tie directly to CMBS. I mean, what's going on in CMBS condo market, but that's really never been our market. I would say they are focused on kind of smaller secondary tertiary and obviously longer term picture, that's not where we played, but obviously that gets a lot of news as does other things. So I think just like anything, kind of sentiment and whether it be borrowers and lenders, we kind of feel that maybe lenders have lot more of advantage and so we can use that, but I don't know, again that's directly tied to that. I think the absence of coordinated CMBS market clearly helpful, but at the same time we still do see a very active bank market and there are deals again where we partner with banks. So it is obviously helpful in a sense what we're doing for other markets not to be as robust, but not directly high.

Understood, that's about it, that I have guys. Stuart your comments on AMTG and on the CMBS mark were very thorough. So those questions I had have already been covered. So thank you, Scott for the comments.

Thanks Steve.

Thank you. Our next question will come from the line of Rick Shane from JP Morgan. Your line is open.

Hey guys, thanks for taking my questions this morning. I want to just sort of dive in a little bit Stuart in terms of your comments that at this point you are fully invested in that you're essentially waiting for the AMTG deal to close to you that next slug of capital and I think it is a very creative way to increase your capital in a tough market. But I am curious sort of how you approach the second quarter in building that pipeline given the uncertainty of when loans will close and ultimately at least a modest degree of risk related to the AMTG closing?

Yes, we've got a couple things that we will likely get done in the second quarter just with a little bit of capital going into the quarter and to that I alluded to in my mark, so yes, we will stay somewhat active during the quarter and I think the challenge you reference is sort of the daily dialogue that goes on between Scott and I in terms of confidence around the merger getting to the finish line which at a high level we're pretty confident about that right now. What we think truly looks interesting for our next slug of capital, I think this is one of those situations where ARI benefits tremendously from the fact that beyond ARI we manage other pools of capital in the credit space and while those tools of capital are not competitive with ARI, they allow Scott and his team to remain active in dialogue with counterparties, borrowers, intermediaries around transactions that will get done in our credit business regardless of whether the ARI can find additional capital or not. So it is important I think for us to continue to be out there and active. And look, a lot of what we do is somewhat long dated, right? We're not buying off a Bloomberg screen. There's much that we do that sometimes takes six to twelve weeks to close, even though it's signed up and we're also fortunate to be able to do things with either repeat borrowers or repeat co-investors in transaction. So, I think it's a juggling act, but I think it's one that we're comfortable with and in a lot of respects are benefiting from the fact that there's just a lot to look at in the market right now. So it's not as if we're sitting here today worried that things are going to dry up in the next couple months. If anything, I would say the market is moving towards us as people need to deal with the '06 and '07 vintage loans that need to be restructured, refinanced in one form or another.

And is there any potential backstop from your parent and the reason I say that is that we as you know cover a of companies with a lot of different sponsors or different parents and we have seen your parent step up in the past in certain situations in a, what I would describe as a very forthright way. Is that ultimately, if something big comes down the pipeline, another resource?

I don't think there, we have used the parent, so to speak and it wouldn’t be the parent, it is other pools of capital that we manage here at Apollo. I would say we've used the broader umbrella to help us with size in the past and have certainly used it, A, to manage ARI's exposure to any one deal to make sure that nothing gets too large, but just as importantly to allow ARI to potentially participate in things that would ordinarily be too big. Given the size of ARI, I would say we're not approaching the next few months just because we've got this pending merger going on any differently.

Yes, and I would also add, as you remember, we also have loans that are getting repaid. Right? So there always is money kind of coming and going and depending on what we're doing, we also have good relationships with other lender who might, we might partner with who might hold a piece and then when we have more capital sell it to us at a later date. There's a lot of different options, but as Stuart mentioned, yes we're definitely in the business. We're active. We will be making some new loans in the second quarter, but clearly assuming the merger happens that's a large sort of capital which we are proactively trying to line things up for. At the same time we don't want to commit to things until we know we're going to have capital.

Got it, okay, totally fair. Last comment, I just wanted to say thank you Megan. We've enjoyed working with you over the years and wish you good luck in whatever is next.

Thanks Rick.

Thank you. Our next question will come from the line of Jade Rahmani from KBW. Your line is open.

Hi yes, this is actually Ryan Thomas for Jade. Thanks for taking my questions. I was just wondering if you can talk about the loan repayment activity during the quarter. It seems that there was a sharp decline. Can you give any color on your expectations for repayments for the balance of the year and how that relates to your expectations for liquidity and investment capacity as you were talking about earlier?

Sure, I think by its nature it is somewhat lumpy and there are situations where we expect to get paid off and to our benefit someone wants to either extend or restructure and keep it out longer, we presented in our supplemental what the stated maturities are for the portfolio. And if you look at 2016 there's basically another $225 million expected to mature this year. I think that is good a number as any. It is quite possible that one or two loans that make up that $225 million might extend, but is also possible that something that is slated to pay off in the early part of '17 might prepay early and we'll get some incremental economics from that. So I think you are roughly looking at a number of a couple hundred million dollars between now and the end of the year.

Ryan and we also do have some future funding obligations and some deals to offset that.

Okay great and then, I appreciate the incremental color on the North Dakota multifamily loan, just hoping to dive a bit more into that, did the – can you disclose if the LTV is actually assessed every quarter? And did the lack of change in the LTV from 1Q to 4Q result from a decline in transaction volume as comps in the quarter, just any color you can give on the where the occupancy, the property is today? What the cap rate potentially is on the property given the 90% LTV, any color would be helpful?

Yes, look at a high level, we look at the loan every quarter we assess what we perceive the value to be, we have not previously disclosed cap rates and I am not going to get into an attempt to try and predict cap rate. What I tried to indicate in my remarks on, prepared remarks is, that not much has really happened between the end of the year to today. If you actually think about reporting in fourth quarter at the end of February and now we’re sitting here at the end of April, not a lot has happened and to be honest it was sort of expected that not a lot was going to happen, because if you look at leasing activity in January, February and March in Williston, North Dakota it tended not to be the peak leasing season. I think we are going to know a lot more about the assets when we see what happens over both the spring and summer leasing cycle as well as if there is any impact to the market over all from the mandatory shut down of some of the Man-Camps. But generally speaking, I think if you look at market data broadly and this is not our asset specifically about multifamily leasing in Williston you are somewhere in the 60% to 70% range in terms occupancy for comparable multifamily and I would say we’re performing with the market these days.

Okay thanks. and then just lastly on current spreads that you are seeing, I know you gave some color on the originations that took place during the quarter, but just broadly speaking, where are yields currently on the types of first mortgages and mezzanine loans that you are doing today and how does that compare quarter-over-quarter? And just given the rebound in the CMBS market that has taken place over the past few weeks, has that actually resulted in some potential spread tightening in the types of loans you are doing today?

Yes, I mean as I said, I mean we are not really directly impacted by CMBS. I mean I would say for the first mortgage loans are doing in particular are more impacted by available in cost or repo financing or available in cost of selling A Notes. There is a lot of what we are doing doesn’t fit, but yes, that’s the narrow box of maybe some other banks or certainly and we talked about the [indiscernible] CMBS market. So I mean like on the margin I think maybe spreads a little wider or maybe in cash in points a little greater, but I mean again depending on the type of first mortgages, the first mortgages that we do that are in the fours and some are in the fives and some are in the sixes. It can be very dependent on the type of deal that we are doing and I would say on the mezz side, high single digits to low double-digits, again very dependent on the type of deal that we are doing. But CMBS is not what's driving spreads in this market.

Okay and then that was helpful, just one, last one from me. Should we be expecting any incremental transaction costs from the AMTG deal prior to the closing in the second half of the year?

Yes you will, I mean, there is sort of ongoing legal expenses around the deal. There are some other expenses and then there are some fees that are contingent upon the deal closing. It’s tough to predict to be honest with you what’s going to happen in either Q2 or Q3 because I don’t know when the deal may or may not close until I get comments back from the SEC on the filings and as I think we indicated in our remarks we're still waiting for those comments. But I would say at this point, expenses are as we expected them to be and we certainly, when we agreed to pay 89 spot 20 [indiscernible] and were confident that we are doing something that was accretive to ARI on a capital raise bases that certainly assumed an amount of transaction or deal expenses and what we have incurred today is consistent with what we assumed as part of the deal.

Great thanks for taking my questions.

Yes.

Thank you again, ladies and gentlemen. [Operator Instructions] And it does look like we do have a follow up from Jade Rahmani from KBW. Your line is open.

Scott?

Hey, Ryan. Hello?

Sorry, this is Jade, can you hear me?

Yes, I can hear you Jade, go ahead.

Oh thanks. Just want to confirm are there additional transaction costs expected on the AMTG deal and with respect to the assets that you’ll be boarding over what time period do you expect to sell those assets?

So yes, there will be incremental expenses and as I stated earlier, everything we have incurred to date is sort of in line with what we assumed when we complete, announced the transaction. So timing is a little uncertain because you just don’t know when you are going to incur certain costs with respect to legal work around filings and proxy solicitation and those sorts of things. But I would say the expenses are tracking with what we expected. And then I think in terms of asset dispositions, as I have stated our desire is to get out of all of the AMTG assets as quickly as possible and convert the capital to credit, real estate credit investments, commercial real estate credit investments and I think we will be able to get out of the bulk of the investments in no worse than a quarter and hopefully sooner.

And can you just remind us or perhaps based on projections with respect to the repayment rate on that portfolio what the balance of assets will be that you will be putting on the ARI balance sheet?

Well it’s a mix of agency and non-agency securities and AMTG has certainly filed publically what their portfolio information is, so you could grab their 12/31 information for now and they will report in the coming weeks. The non-agencies, the bulk we’ve announced as part of the deal that are already pre-sold to Athene, an affiliate of Apollo and the agency securities for the most part are highly liquid, traditional agency securities that we think we will be able to sell very quickly, but prudently obviously just so we are not fire selling them into the market.

Thanks for taking the followup.

You got it.

Thank you. Our next question will come from the line of Rick Murray from Midwest Advisors. Your line is open.

Yes, good morning. I was hoping you might be able to provide a little bit more detail surrounding your investments in the UK and any commentary on activity in that market and your outlook? Thank you.

Sure, Scott?

Sure, so we have three investments in the UK. One is a portfolio of healthcare related properties throughout England that's [indiscernible] and acquisitions. I don’t think that at all impacted [indiscernible] these are English people who are aging and need a place to go. So that’s performing well. We have two loans in London, both kind of predevelopment loans where the ultimate plan is condos. One of those, we are in the process of being refinanced out. We have the option to do the ultimate construction financing and chose to pass for a variety of reasons. So we expect that loan to get paid off next month or two kind of right prior to maturity. The other loan is a prime site in Central London what they call the golden postcodes and that's also a predevelopment loan where the maturity is at the end of this year. That sponsor is commencing pre-sales and seeing very what we actually are getting very strong interest and again given that price point location of that property we don’t foresee it being hurt by any kind of price [ph] because it is not that again that type of buyer who might be impacted by that. So really those are the three deals that we have in London, so soon to be to. Did I answer the question?

Yes, yes, thank you.

I mean from an FX perspective, obviously we hedge our UK loans which is why you see some gains and some losses as we're rolling the hedges, but we do fully hedge our loan investments in the UK from the currency exposure.

Thank you. At this time I am showing no further questions. I would like to turn the call back over to Stuart Rothstein for any closing remarks.

Thank you, operator and thanks everybody for participating this morning.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.