On Friday, Apollo Commercial Real Estate Finance (NYSE:ARI) stock received a Neutral rating as BTIG initiated its coverage on the company. The firm acknowledged the real estate investment trust's (REIT) active origination activities and its robust dividend yield as positive aspects of the business.
Apollo Commercial is focused on senior and subordinate commercial mortgage loans and debt securities and is managed by Apollo Global Management, Inc. (NYSE:APO, Not Rated).
Despite not having any new originations in the first quarter of 2024, Apollo Commercial has been recognized for its active participation in the past. The company's portfolio does not include any multifamily exposure from the era of easy money, which is considered advantageous. Additionally, Apollo Commercial's investments are more heavily weighted towards European office properties rather than domestic ones.
However, the REIT faces a significant hurdle with its involvement in the ultra-luxury residential Steinway Tower located in Midtown Manhattan. This exposure has been a longstanding concern for investors.
In the first quarter of 2024, Apollo Commercial had to set aside an additional $142 million in a specific CECL allowance for its subordinate loan on the property. Following the quarter's end, the senior loan on Steinway was refinanced by an unrelated third party, leading to a $108 million reduction in the loan's basis.
The firm's analysis suggests that while Apollo Commercial Real Estate Finance has solid ongoing operations, the outlook for investors to become more optimistic about the company's stock is hindered by the need for a substantial positive development or resolution regarding the Steinway Tower situation.
In other recent news, Apollo Commercial Real Estate Finance reported mixed Q1 results for 2024. The company saw improvements in the commercial real estate market, with increased transaction volumes and stable operating fundamentals.
However, a significant Current Expected Credit Loss (CECL) allowance on a subordinate loan impacted their net income. Despite this, Apollo Commercial maintained its dividend payout and expressed optimism for the remainder of the year.
In other developments, Keefe, Bruyette & Woods adjusted its price target on Apollo Commercial's shares, reducing it to $10.00 from the previous $11.00. This adjustment followed the company's recent announcement of an 8% decrease in its book value, attributed to a $147 million CECL provision related to the 111 West 57th Street project. Despite the reduction, the firm maintained a Market Perform rating on the stock, indicating a neutral stance towards Apollo Commercial.
These are among the recent developments concerning Apollo Commercial Real Estate Finance. Despite the challenges in the office property sector, the company's proactive approach to capital deployment and credit management, coupled with a steady dividend payout, suggests a hopeful outlook.
InvestingPro Insights
As Apollo Commercial Real Estate Finance (NYSE:ARI) navigates the complexities of the real estate market, including the challenges presented by the Steinway Tower, it's worth noting the company's financial health and investor returns. With a market capitalization of $1.55 billion, Apollo Commercial's stock price movements have been quite volatile, which could be of interest to investors looking for dynamic investment opportunities. Moreover, the company has managed to maintain dividend payments for 15 consecutive years, offering a substantial dividend yield of 12.83% as of the latest data, which is a significant draw for income-focused investors.
While the company has not been profitable over the last twelve months, analysts predict that Apollo Commercial will return to profitability this year. This optimism is reflected in the company's significant dividend payments, a testament to its commitment to shareholder returns. Additionally, Apollo Commercial's liquid assets exceed its short-term obligations, indicating a solid financial position for handling immediate liabilities. For a deeper dive into Apollo Commercial's financials and strategic outlook, including additional InvestingPro Tips, investors can visit: https://www.investing.com/pro/ARI. There are 6 more InvestingPro Tips available for Apollo Commercial, which can be accessed with an exclusive offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.