Good day, ladies and gentlemen and thank you for standing by. Welcome to the third quarter 2017 Apollo Commercial Real Estate Finance Earnings Conference Call. [Operator Instructions] I would like to remind everyone that today’s call and webcast are being recorded. Please note that they are property of Apollo Commercial Real Estate Finance, Inc. 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 also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking statements. Today’s conference call and webcast may 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. In addition, we will be discussing certain non-GAAP measures on this call which management believes are relevant to assessing the company's financial performance and are reconciled to GAAP figures in our earnings press release, which is available on the Investor Relations section of our website. 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. Please go ahead.

Thank you, operator. Good morning and thank you all for joining us on the ARI third quarter 2017 earnings call. As usual, joining me this morning are Scott Weiner, the Chief Investment Officer of our Manager and Jai Agarwal, our CFO. With ARI’s third quarter performance, we believe the company continues to demonstrate the depth of its originations platform and the strength of its capital markets capabilities. ARI originated over $420 million of new loans during the quarter, bringing total originations for the first nine months of the year to north of $900 million. Subsequent to quarter end, ARI committed to an additional $300 million of commercial real estate loans, bringing year-to-date originations and fundings to over $1.3 billion. We continue to find investments that meet our risk adjusted return expectations, while constructing a portfolio that is diversified, both geographically and across property sectors. At quarter end, ARI’s loan portfolio totaled $3.6 billion, with a weighted average unlevered all-in yelled of 9.5% and a weighted average LTV of 62%. At quarter end, 89% of the loans in the portfolio had floating interest rates and the portfolio had a remaining weighted average term of 2.5 years. At present, we believe ARI has a strong pipeline focused predominantly on floating rate first mortgage loans, consisting of both new opportunities as well as the option to participate in the refinancing of some existing transactions. Of note, two-thirds of our originations for the first nine months of the year were with repeat borrowers, including two transactions, which were refinancings of existing loans within the ARI portfolio. We believe ARI continues to benefit from the breadth of the broader Apollo commercial real estate platform and as such, ARI is on track for a record year of originations. ARI’s ability to co-originate loans with other investment…

Thank you, Stuart and good morning, everyone. For the third quarter of 2017, our operating earnings were 49.8 million or $0.47 per share. This compares to 32.7 million or $0.45 per share in 2016. GAAP net income for the same period in 2017 was 57.2 million or $0.54 per share. This compares to 60.6 million or $0.83 per share in 2016. As noted in the press release, both GAAP and operating earnings this quarter included 3.6 million repayment income received with the early repayment of a mezzanine loan. I wanted to highlight a few enhancements we made to our disclosure this quarter. We expanded our portfolio diversification chart to illustrate asset class exposure within each geography. This quarter, both the geographic diversification and property type charts are based on the amortized cost of our loan portfolio. Previously, these charts were based on net equity. Also, we've included a new loan chart in our supplemental with detailed information on each of our loans. We hope that you find these disclosures helpful and as always, appreciate any additional feedback. With respect to leverage, we ended the quarter with a 1.0 times debt to common equity ratio. During the quarter, we repaid the remaining outstanding balance on our UBS CMBS facility and now have one remaining CMBS facility with Deutsche Bank. As Stuart mentioned, subsequent to quarter end, we increased our borrowing capacity on our JP Morgan facility to 1.4 billion, which enables us to fund additional first mortgage loans. Our book value per common share increased to $16.36 at September 30 from $16.16 at June 30 and $15.94 at September 30 of last year. As Stuart mentioned, one factor contributing to the increase was the sale of CMBS during the quarter at prices above where they were previously marked. Finally, I wanted to highlight our dividend. Based on Tuesday closing price and our recent dividend run rate of $0.46 per quarter, our stock offers an attractive 10.2% yield. Our board will meet again in mid-December to discuss the Q4 dividend and we will make an announcement shortly thereafter. And with that, we’d like to open the lines for questions. Operator, please go ahead.

[Operator Instructions] And our first question is from the line of Rick Shane with JPMorgan.

Hi. This is Melissa Wedel for Rick Shane. I had a question about a comment you made regarding opportunities to refi some existing loans in the portfolio. I noticed that you guys had a prepayment fee in this quarter that you recognized. I'm wondering if the refi opportunities that are still in the pipeline also include prepayment penalties.

It’s deal by deal. Some certainly do. In any discussion with the borrower, I would say to the extent the prepayment penalty is due and is part of the overall discussion as to whether or not we [Technical Difficulty] structure of our new transaction will be, but I would say there are certainly other opportunities within the portfolio where prepayment penalties would be due, but it's tough to predict or project with any real accuracy as to whether or not we will receive those or not, just given sort of the fluid nature of discussions and sort of borrowers’ ability to control timing.

And then you mentioned that the pipeline, if I understood you correctly, the pipeline going forward is heavily first lien oriented, although the 3Q originations were I think more than half were mezz and so I'm wondering if this is a shift in the sort of risk reward profile between those different points in the capital structure or if you're trying to make an overall shift of cap for the whole portfolio?

I don't think there's an overall shift going on. I think somewhat is just sort of the lumpy nature of what we've been working on and sort of, as I've said many times before, it's always a little bit uncertain around timing. So it's tough to read too much into quarterly shifts. I would say we continue to be active in pursuing both first mortgage and mezzanine opportunities and whatever color we provided around what is likely to happen in Q4 wasn't meant to indicate any sort of broader strategic shift.

Thank you. And our next question is from the line of Steve Delaney with JMP Securities.

Stuart, could you comment generally on the -- you gave us an update on 111 West 57, we appreciate that and I think there was a news article yesterday that the real deal had to put an update, but beyond that highly visible project, just looking at the rest of the portfolio, could you comment if there were any material changes in any of the other assets you've commented on in the past. I would note that that's the condos, the multi-family in North Dakota and your retail project in Ohio. If you could just give us a general update on how things are going elsewhere in the portfolio. That would be great.

Yes. Sure. So just to directly answer your question and then I'll provide some additional color, I would say generally speaking, there have been no material changes. Things are progressing as we would have hoped, maybe going west to east geographically on the project in North Dakota, which I think by now everybody is aware is a mix of a garden style multifamily project that is 330 units, 36 single family homes and then some excess entitled land. I would say two positive developments on that front. I would say one on the garden style multifamily occupancy has increased from call it the mid-70s to now the mid 80s, so we're seeing good demand for the product, rents are still flat. So again to the extent we're playing for time on the multifamily, it's great to see the occupancy increase. I think what we would hope to see now is sustained higher occupancy, which ultimately leads to at some point a move up in rents. The other positive news around that project is we have undertaken a strategy to sell the single-family homes on a one-off basis to either existing renters or the market at large. Those homes have stayed virtually 95% to 100% occupied for their existence. So we're now strategically in the market trying to sell the homes. We have sold three to-date, I believe there is a fourth under contract, sort of we’re intentionally making sure we've always got two to three vacant so we have something to offer to the market, those home sales for broadly speaking $275,000 to $300,000 a home. So if we sold all 36 of them, you're talking about net of costs and fees probably $9 million to $10 million that would be generated that sort of continue to amortize down the…

And you indicated - are you needing to make some price concessions for the current market.

I would say nothing that's material. I think what we're trying to do is maintain a very active dialogue with the folks on the ground just to make sure that we don't miss an opportunity to get a deal done broadly speaking. But generally speaking at this point, I would say we've got it priced appropriately given what we're hearing from people coming in the door.

And one last if I could, you have a sort of a unique situation, I think you're an assemblage with a developer down in Miami for high-end retail, obviously with the Hurricane Irma. Any impact there that either affected the buildings or the plant for the developer.

No, I would say, look you know given the recent hurricane activity, there's been various things we've looked at. Miami specifically ended up being quite lucky vis-à-vis the hurricane. So, no impact on what's going on. And just to be clear the assemblage that's being created will ultimately be envisioned as a mix of office, hotel, high-end retail, a real mixed use asset. As we do in these assemblage we've created the options to participate on a go-forward basis. We will make that decision at the appropriate time. But as of now, I would say the activity around the site that's being assembled has been positive and we still feel very good about that investment.

[Operator Instructions] Our next question is from the line of Jade Rahmani with KBW. Your line is open.

Good morning, this is actually Ryan on for Jade. Can you state what drove the repayments in the quarter, which came in pretty strongly? And what you anticipate for the balance of the year?

I mean again, we try and predict out repayments and I think we show what is coming to you based on maturity date. I think oftentimes particularly given the nature of what we do things end up being a little longer dated that we would have envisioned either because something that the asset takes longer to affect or someone wants a little bit more time to find the spot on refinancing. Again, I think the nature of the business is lumpy. And as Jade and I have talked about many times before, it's tough to draw too many conclusions from quarterly activity. I think we've again provided what we expect to happen over the coming quarters from a modeling perspective. I think on par things to the extent they change, they move a little later, they rarely happen sooner. But what we provide is sort of best estimate based on current documents as they are written.

In the current environment with the amount of liquidity that we're seeing in the debt capital markets, do you worry about adverse selection if repayments continue to accelerate? Since presumably your highest quality assets would have the easiest time refinancing with a lower cost of capital provider.

No, I mean generally no. I appreciate the point, I think it's important to sort of think through our portfolio and recognize that a lot of what we do is sort of multiple stages to what's happening to the asset. And typically what we do is not a straightforward, hey, we're going to take an office building from 80% to 90% leased and once it gets to 90%, we’ll just go refinance it somewhere else. And ARI will be left with the ones that never got to the leasing. The stories and credits tend to be more complicated than that. So, as of today based on what we’ve seen in the portfolio, I appreciate the question, but I would say there's been nothing that indicates that sort of, we're being left with the ones you won’t want to hold and we’re being paid off on the ones you would want to hold. I think it’s sort of has played out as we would have expected based on original underwriting to be quite candid. There are some that, you know, we've done pre-development loans where people are then putting a construction loan in place, we've given ourselves the option to participate in the construction and have chosen not to participate in the constructions. There are others where the nature of a transitional asset has changed. It's still not ready for a more traditional financing and we have sort of been impressed with what's taken place at the asset. We’ve decided to stay in the transaction on a go-forward basis. But so far I would say nothing, no broader conclusions that I would draw vis-à-vis what's going on in the market right now.

And then just switching gears to credit, I appreciate the commentary on the North Dakota loan. Looking at the loan level disclosure looks like the amortized cost declined by about 10 million from 2Q. You mentioned some of the single-family sales, but just wondering what drove the reduction in the caring value.

That’s net of the provision that we had recorded last year in Q2, which is 10 million.

So there's been nothing significant from a principal side with respect to the North Dakota loans. It’s just the way we presented it and maybe Hilary or Jai could walk you through it post call, but certainly nothing significant has happened yet. If we succeed on the home sales, yes you'll see it come down, but nothing to-date.

And then, you gave some commentary on the exposure down in Miami, just wondering if you can give a bit more color on the retail exposure in the Miami design district loans in terms of how the overall project is proceeding with the sponsor. And how you see rents and cap rates trending in that market.

I mean keep in mind what we lend against today is still a bunch of somewhat dated single tenant for the most part street retail, which to be perfectly candid works as what it is today. The plans by the equity investor/developer obviously call for taking down what exists there today, putting up high end retail with hotel office. Above it, I'd say what's going on in a very positive way around the site that we lend against is the continued opening of other high-end stores, other restaurants, more foot traffic which sort of validates the design district as a location overall. And we continue to have very productive dialog with the existing investor who continues to evidence their support of the site by putting more equity in as needed to either acquire additional sites or pursuant to the loan. There will be ultimately be a conversation with the developer, once their plans are finalized in terms of what they want to do and based on whatever pre-leasing they've achieved as to whether or not we want to stay into the construction loan or not. But for now I would say our view of what they've assembled has only increased based on the activity that's taken place around the site thereby validating the design district overall as a location long term in Miami.

And just lastly, can you provide a similar update on the Brooklyn retail pre-development loan.

Yeah, similar story, I mean, I think what they've created in Brooklyn is an incredible location. I think the story in Brooklyn is, they've literally acquired, you know, I'll get the number wrong, but a significant number of parcels. There are literally two more parcels that they would hope to acquire that would allow them to literally create a completely solid block. They continue to work on that. Again what is envisioned for Brooklyn is a mixed use of some sort. Again, property types as I've described previously. Given their assemblage, given the basis they created, we and they both remain very optimistic about the future success of that project and I think credit to them as real estate investors/developers in their ability to in an exhaustive effort create an assemblage that is very valuable given what's going on in Brooklyn overall.

Thank you. And ladies and gentlemen this concludes our Q&A session for today. I would like to turn the call back to Stuart Rothstein for his final remarks.

Thank you operator and thanks for those of you for participating in this morning.

Ladies and gentlemen, with that we conclude our conference. You may all disconnect. Have a wonderful day.