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What changed in Apollo Commercial Real Estate Finance, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Apollo Commercial Real Estate Finance, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+473 added−477 removedSource: 10-K (2025-02-10) vs 10-K (2024-02-06)

Top changes in Apollo Commercial Real Estate Finance, Inc.'s 2024 10-K

473 paragraphs added · 477 removed · 348 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

240 edited+110 added−81 removed114 unchanged
Biggest change(5) Includes $4,017 and $4,347 of General CECL Allowance related to unfunded commitments on commercial mortgage loans, subordinate loans and other lending assets, net in 2023 and 2022, respectively. 56 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Operations (in thousands—except share and per share data) Year ended December 31, 2023 2022 2021 Net interest income: Interest income from commercial mortgage loans $ 701,002 $ 456,513 $ 327,702 Interest income from subordinate loans and other lending assets 17,280 55,590 100,413 Interest expense (466,110) (270,525) (162,522) Net interest income $ 252,172 $ 241,578 $ 265,593 Revenue from real estate owned operations 92,419 62,062 18,917 Total net revenue $ 344,591 $ 303,640 $ 284,510 Operating expenses: General and administrative expenses (includes equity-based compensation of $17,444, $18,252 and $17,633 in 2023, 2022 and 2021, respectively) $ (29,520) $ (29,662) $ (28,845) Management fees to related party (37,978) (38,419) (38,160) Operating expenses related to real estate owned (72,759) (52,368) (19,923) Depreciation and amortization on real estate owned (8,248) (704) (2,645) Total operating expenses $ (148,505) $ (121,153) $ (89,573) Other income, net $ 4,616 $ 2,494 $ 3,821 Net realized gain (loss) on investments (86,604) 18,683 (20,767) Gain on extinguishment of debt 495 — — Decrease (increase) in current expected credit loss allowance, net (59,428) 17,623 34,773 Realized losses and impairments on real estate owned — — (550) Foreign currency translation gain (loss) 52,031 (116,399) (31,687) Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $(91,434), $104,159 and $46,714 in 2023, 2022 and 2021 respectively) (48,213) 146,981 41,674 Gain (loss) on interest rate hedging instruments (includes unrealized gains (losses) of $(10,098), $7,692 and $1,314 in 2023, 2022 and 2021, respectively) (414) 13,363 1,314 Net income before taxes $ 58,569 $ 265,232 $ 223,515 Income tax provision (442) — — Net income $ 58,127 $ 265,232 $ 223,515 Preferred dividends (12,272) (12,272) (12,964) Net income available to common stockholders $ 45,855 $ 252,960 $ 210,551 Net income per share of common stock: Basic $ 0.29 $ 1.77 $ 1.48 Diluted $ 0.29 $ 1.68 $ 1.46 Basic weighted-average shares of common stock outstanding 141,281,286 140,534,635 139,869,244 Diluted weighted-average shares of common stock outstanding 141,281,286 165,504,660 168,402,515 Dividend declared per share of common stock $ 1.40 $ 1.40 $ 1.40 57 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Changes in Stockholders’ Equity (in thousands—except share and per share data) Preferred Stock Common Stock Additional Paid-In-Capital Accumulated Deficit Total Shares Par Shares Par Balance at December 31, 2020 6,770,393 $ 68 139,295,867 $ 1,393 $ 2,707,792 $ (438,724) $ 2,270,529 Capital increase related to Equity Incentive Plan — — 598,193 6 13,349 — 13,355 Offering costs — — — — (99) — (99) Retirement of Series B Preferred Stock (6,770,393) (68) — — — — (68) Issuance of Series B-1 Preferred Stock 6,770,393 68 — — — — 68 Net income — — — — — 223,515 223,515 Dividends declared on preferred stock - $1.90 per share — — — — — (12,964) (12,964) Dividends declared on common stock and RSUs - $1.40 per share — — — — — (199,710) (199,710) Balance at December 31, 2021 6,770,393 $ 68 139,894,060 $ 1,399 $ 2,721,042 $ (427,883) $ 2,294,626 Adoption of ASU 2020-06, see Note 2 — — — — (15,408) 11,992 (3,416) Capital increase related to Equity Incentive Plan — — 701,935 7 11,273 — 11,280 Net income — — — — — 265,232 265,232 Dividends declared on preferred stock - $1.81 per share — — — — — (12,272) (12,272) Dividends declared on common stock and RSUs - $1.40 per share — — — — — (200,946) (200,946) Balance at December 31, 2022 6,770,393 $ 68 140,595,995 $ 1,406 $ 2,716,907 $ (363,877) $ 2,354,504 Capital increase related to Equity Incentive Plan — — 762,610 8 10,581 — 10,589 Net income — — — — — 58,127 58,127 Dividends declared on preferred stock - 1.81 per share — — — — — (12,272) (12,272) Dividends declared on common stock and RSUs - $1.40 per share — — — — — (202,215) (202,215) Balance at December 31, 2023 6,770,393 $ 68 141,358,605 $ 1,414 $ 2,727,488 $ (520,237) $ 2,208,733 See notes to consolidated financial statements. 58 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Cash Flows (in thousands) For the year ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 58,127 $ 265,232 $ 223,515 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of discount/premium and payment-in-kind interest (30,845) (50,966) (69,590) Amortization of deferred financing costs 15,962 12,034 13,740 Equity-based compensation 17,444 18,252 17,633 Increase (decrease) in current expected credit loss allowance, net 59,428 (17,623) (34,773) Foreign currency (gain) loss (40,922) 97,330 31,096 Unrealized loss (gain) on foreign currency contracts 91,434 (104,159) (46,714) Unrealized loss (gain) on interest rate hedging instruments 10,098 (7,692) (1,314) Depreciation and amortization on real estate owned 8,248 704 2,645 Loss from unconsolidated joint venture — — 161 Gain on extinguishment of debt (495) — — Net realized loss (gain) on investment 86,604 (18,683) 21,317 Changes in operating assets and liabilities: Proceeds received from payment-in-kind interest 15,407 83,731 35,400 Other assets (13,367) (22,910) 1,628 Payment for interest rate cap (2,317) — — Origination of subordinate loan, held for sale — — (31,200) Sale of subordinate loan, held for sale — — 31,200 Accounts payable, accrued expenses and other liabilities (769) 12,500 4,464 Payable to related party (175) (45) 175 Net cash provided by operating activities $ 273,862 $ 267,705 199,383 Cash flows from investing activities: New funding of commercial mortgage loans (456,167) (3,027,742) (2,780,887) Add-on funding of commercial mortgage loans (376,060) (483,795) (350,926) Increase (decrease) in collateral related to derivative contracts, net (112,800) 117,200 49,740 Add-on funding of subordinate loans and other lending assets (96,879) (113,124) (177,269) Capital expenditures on real estate assets (72,631) (33,035) (133) Proceeds received from the repayment and sale of commercial mortgage loans 1,093,181 1,874,933 1,509,428 Proceeds received from the repayment of subordinate loans and other lending assets 75,271 279,336 303,831 Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net 13,936 46,874 42,750 Cash received from hotel title assumption 569 — 4,148 Proceeds received from the sale of real estate owned, held for sale — — 42,356 Net cash provided by (used in) investing activities $ 68,420 $ (1,339,353) $ (1,356,962) Cash flows from financing activities: Payment of offering costs — — (99) Proceeds from secured debt arrangements 806,843 2,836,372 2,279,691 Repayments of secured debt arrangements (679,339) (1,453,921) (1,510,236) Repayments of senior secured term loan principal (8,000) (8,000) (7,250) Repayments and repurchases of convertible notes (229,506) (345,000) — Proceeds from issuance of senior secured term loan — — 297,000 Proceeds from issuance of senior secured notes — — 500,000 Proceeds related to financing on real estate owned — 164,835 — Repayment of debt related to real estate owned — — (143,073) Payment of deferred financing costs (12,212) (16,494) (23,958) Payment of withholding tax on RSU delivery (6,855) (6,972) (4,278) Dividends on common stock (202,019) (200,574) (199,646) Dividends on preferred stock (12,272) (12,272) (12,964) Net cash provided by (used in) financing activities $ (343,360) $ 957,974 $ 1,175,187 See notes to consolidated financial statements. 59 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Cash Flows (Continued) (in thousands) For the year ended December 31, 2023 2022 2021 Net increase (decrease) in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale $ (1,078) $ (113,674) 17,608 Decrease (increase) in cash classified within assets related to real estate owned, held for sale 5,100 (5,677) — Net increase (decrease) in cash and cash equivalents $ 4,022 $ (119,351) $ 17,608 Cash and cash equivalents beginning of period 222,030 343,106 325,498 Effects of foreign currency translation on cash and cash equivalents (614) (1,725) — Cash and cash equivalents end of period $ 225,438 $ 222,030 $ 343,106 Supplemental disclosure of cash flow information: Interest paid $ 443,626 $ 246,370 $ 137,671 Income tax paid 795 — — Supplemental disclosure of non-cash financing activities: Dividend declared, not yet paid $ 53,407 $ 53,711 $ 52,398 Change in participation sold (25,130) (1,934) 19,760 Repayments of payment-in-kind on participation sold — — (27,670) Change in loan proceeds held by servicer 2,900 (192) 3,179 Assumption of real estate 75,000 270,035 154,300 Assumption of other assets related to real estate owned 2,827 — 1,555 Assumption of accounts payable, accrued expenses and other liabilities related to real estate owned (3,396) — 4,641 Assumption of debt related to real estate owned — — (110,073) Transfer of assets to assets related to real estate owned, held for sale 79,021 155,542 — Transfer of assets related to real estate owned, held for sale to assets related to real estate owned held for investment, net 151,676 — — Transfer of assets related to real estate owned, held for sale to other assets 4,357 — — Transfer of liabilities to liabilities related to real estate owned, held for sale 1,438 7,156 — Transfer of liabilities related to real estate owned, held for sale to accounts payable, accrued expenses and other liabilities 7,163 — — Transfer of subordinate loan to subordinate loan, held for sale — — (45,289) Retirement of Series B Preferred Stock — — (169,260) Issuance of Series B-1 Preferred Stock — — 169,260 See notes to consolidated financial statements. 60 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 – Organization Apollo Commercial Real Estate Finance, Inc.
Biggest changeSee notes to consolidated financial statements. 63 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Operations (in thousands—except share and per share data) Year Ended December 31, 2024 2023 2022 Net interest income: Interest income from commercial mortgage loans $ 699,389 $ 701,002 $ 456,513 Interest income from subordinate loans and other lending assets 3,542 17,280 55,590 Interest expense ( 503,949 ) ( 466,110 ) ( 270,525 ) Net interest income $ 198,982 $ 252,172 $ 241,578 Revenue from real estate owned operations 104,689 92,419 62,062 Total net revenue $ 303,671 $ 344,591 $ 303,640 Operating expenses: General and administrative expenses (includes equity-based compensation of $ 16,468 , $ 17,444 and $ 18,252 in 2024, 2023 and 2022, respectively) $ ( 29,649 ) $ ( 29,520 ) $ ( 29,662 ) Management fees to related party ( 36,120 ) ( 37,978 ) ( 38,419 ) Operating expenses related to real estate owned ( 81,683 ) ( 72,759 ) ( 52,368 ) Depreciation and amortization on real estate owned ( 11,668 ) ( 8,248 ) ( 704 ) Total operating expenses $ ( 159,120 ) $ ( 148,505 ) $ ( 121,153 ) Other income, net $ 4,498 $ 4,616 $ 2,494 Decrease (increase) in current expected credit loss allowance, net ( 155,784 ) ( 59,428 ) 17,623 Foreign currency translation gain (loss) ( 37,476 ) 52,031 ( 116,399 ) Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $ 29,687 , ($ 91,434 ) and $ 104,159 in 2024, 2023 and 2022, respectively) 52,590 ( 48,213 ) 146,981 Gain (loss) on interest rate hedging instruments (includes unrealized gains (loss es) of ($ 1,373 ), ($ 10,098 ) and $ 7,692 in 2024, 2023 and 2022, respectively) 570 ( 414 ) 13,363 Net realized loss on investments ( 128,191 ) ( 86,604 ) 18,683 Gain on extinguishment of debt — 495 — Net income (loss) before taxes $ ( 119,242 ) $ 58,569 $ 265,232 Income tax provision ( 394 ) ( 442 ) — Net income (loss) $ ( 119,636 ) $ 58,127 $ 265,232 Preferred dividends ( 12,272 ) ( 12,272 ) ( 12,272 ) Net income (loss) available to common stockholders $ ( 131,908 ) $ 45,855 $ 252,960 Net income (loss) per share of common stock: Basic $ ( 0.97 ) $ 0.29 $ 1.77 Diluted $ ( 0.97 ) $ 0.29 $ 1.68 Basic weighted-average shares of common stock outstanding 139,674,140 141,281,286 140,534,635 Diluted weighted-average shares of common stock outstanding 139,674,140 141,281,286 165,504,660 Dividend declared per share of common stock $ 1.20 $ 1.40 $ 1.40 See notes to consolidated financial statements. 64 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Changes in Stockholders' Equity (in thousands—except share and per share data) Preferred Stock Common Stock Additional Paid-In- Accumulated Shares Par Shares Par Capital Deficit Total Balance at December 31, 2021 6,770,393 $ 68 139,894,060 $ 1,399 $ 2,721,042 $ ( 427,883 ) $ 2,294,626 Adoption of ASU 2020-06, see Note 2 — — — — ( 15,408 ) 11,992 ( 3,416 ) Capital increase related to Equity Incentive Plan — — 701,935 7 11,273 — 11,280 Net Income — — — — — 265,232 265,232 Dividends declared on preferred stock - $ 1.81 per share — — — — — ( 12,272 ) ( 12,272 ) Dividends declared on common stock and RSUs - $ 1.40 per share — — — — — ( 200,946 ) ( 200,946 ) Balance at December 31, 2022 6,770,393 $ 68 140,595,995 $ 1,406 $ 2,716,907 $ ( 363,877 ) $ 2,354,504 Capital increase related to Equity Incentive Plan — — 762,610 8 10,581 — 10,589 Net Income — — — — — 58,127 58,127 Dividends declared on preferred stock - $ 1.81 per share — — — — — ( 12,272 ) ( 12,272 ) Dividends declared on common stock and RSUs - $ 1.40 per share — — — — — ( 202,215 ) ( 202,215 ) Balance at December 31, 2023 6,770,393 $ 68 141,358,605 $ 1,414 $ 2,727,488 $ ( 520,237 ) $ 2,208,733 Capital increase related to Equity Incentive Plan — — 829,436 8 8,981 — 8,989 Repurchase of common stock — — ( 4,013,405 ) ( 40 ) ( 40,768 ) — ( 40,808 ) Net Loss — — — — — ( 119,636 ) ( 119,636 ) Dividends declared on preferred stock - $ 1.81 per share — — — — — ( 12,272 ) ( 12,272 ) Dividends declared on common stock and RSUs - $ 1.20 per share — — — — — ( 170,525 ) ( 170,525 ) Balance at December 31, 2024 6,770,393 $ 68 138,174,636 $ 1,382 $ 2,695,701 $ ( 822,670 ) $ 1,874,481 See notes to consolidated financial statements. 65 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ ( 119,636 ) $ 58,127 $ 265,232 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of discount/premium and payment-in-kind interest ( 29,969 ) ( 30,845 ) ( 50,966 ) Amortization of deferred financing costs 17,418 15,962 12,034 Equity-based compensation 16,468 17,444 18,252 Increase (decrease) in current expected credit loss allowance, net 155,784 59,428 ( 17,623 ) Foreign currency loss (gain) 110,430 ( 40,922 ) 97,330 Unrealized loss (gain) on foreign currency contracts ( 29,687 ) 91,434 ( 104,159 ) Unrealized loss (gain) on interest rate hedging instruments 1,373 10,098 ( 7,692 ) Depreciation and amortization on real estate owned 11,668 8,248 704 Gain on extinguishment of debt — ( 495 ) — Net realized loss (gain) on investment 128,191 86,604 ( 18,683 ) Changes in operating assets and liabilities: Proceeds received from payment-in-kind interest — 15,407 83,731 Other assets 14,954 ( 13,367 ) ( 22,910 ) Payment for interest rate cap ( 429 ) ( 2,317 ) — Accounts payable, accrued expenses and other liabilities ( 75,483 ) ( 769 ) 12,500 Payable to related party ( 825 ) ( 175 ) ( 45 ) Net cash provided by operating activities $ 200,257 $ 273,862 $ 267,705 Cash flows from investing activities: New funding of commercial mortgage loans ( 1,244,414 ) ( 456,167 ) ( 3,027,742 ) Add-on funding of commercial mortgage loans ( 573,076 ) ( 376,060 ) ( 483,795 ) Add-on funding of subordinate loans ( 54,302 ) ( 96,879 ) ( 113,124 ) Proceeds received from the repayment and sale of commercial mortgage loans 2,426,276 1,093,181 1,874,933 Proceeds received from the repayment of subordinate loans and other lending assets 23,122 75,271 279,336 Proceeds received from the sale of other assets (1) 91,892 — — Distributions from equity method investment (1) 9,023 — — Origination fees, other fees, and cost recovery proceeds received on commercial mortgage loans, and subordinate loans, net 39,554 13,936 46,874 Increase (decrease) in collateral related to derivative contracts, net 28,600 ( 112,800 ) 117,200 Capital expenditures on real estate owned assets ( 169,506 ) ( 72,631 ) ( 33,035 ) Cash received from hotel title assumption — 569 — Net cash provided by (used in) investing activities $ 577,169 $ 68,420 $ ( 1,339,353 ) Cash flows from financing activities: Proceeds from secured debt arrangements 1,998,197 806,843 2,836,372 Proceeds related to financing on real estate owned 162,827 — 164,835 Repayments of secured debt arrangements ( 2,584,949 ) ( 679,339 ) ( 1,453,921 ) Repayments of senior secured term loan principal ( 8,000 ) ( 8,000 ) ( 8,000 ) Repayments and repurchases of convertible notes — ( 229,506 ) ( 345,000 ) Payment of deferred financing costs ( 10,873 ) ( 12,212 ) ( 16,494 ) Payment of withholding tax on RSU delivery ( 7,479 ) ( 6,855 ) ( 6,972 ) Repurchase of common stock ( 40,810 ) — — Dividends on common stock ( 185,949 ) ( 202,019 ) ( 200,574 ) Dividends on preferred stock ( 12,272 ) ( 12,272 ) ( 12,272 ) Net cash provided by (used in) financing activities $ ( 689,308 ) $ ( 343,360 ) $ 957,974 See notes to consolidated financial statements. 66 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Consolidated Statement of Cash Flows (Continued) (in thousands) Year Ended December 31, 2024 2023 2022 Net increase (decrease) in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale $ 88,118 $ ( 1,078 ) $ ( 113,674 ) Decrease (increase) in cash classified within assets related to real estate owned, held for sale 577 5,100 ( 5,677 ) Net increase (decrease) in cash and cash equivalents $ 88,695 $ 4,022 $ ( 119,351 ) Cash and cash equivalents beginning of period 225,438 222,030 343,106 Effects of foreign currency translation on cash and cash equivalents 3,263 ( 614 ) ( 1,725 ) Cash and cash equivalents end of period $ 317,396 $ 225,438 $ 222,030 Supplemental disclosure of cash flow information: Interest paid $ 495,491 $ 443,626 $ 246,370 Income tax paid 34 795 — Change in loan proceeds held by servicer 44,572 2,900 ( 192 ) Supplemental disclosure of non-cash investing and financing activities: Dividend declared, not yet paid $ 38,484 $ 53,407 $ 53,711 Change in participation sold — ( 25,130 ) ( 1,934 ) Assumption of real estate — 75,000 270,035 Assumption of other assets related to real estate owned — 2,827 — Assumption of accounts payable, accrued expenses and other liabilities related to real estate owned — ( 3,396 ) — Transfer of assets to assets related to real estate owned, held for sale — 79,021 155,542 Transfer of assets related to real estate owned, held for sale to assets related to real estate owned held for investment, net 70,688 151,676 — Transfer of assets related to real estate owned, held for sale to other assets 2,280 4,357 — Transfer of liabilities to liabilities related to real estate owned, held for sale — 1,438 7,156 Transfer of liabilities related to real estate owned, held for sale to accounts payable, accrued expenses and other liabilities 3,937 7,163 — Transfer of commercial mortgage loan to other assets 20,073 — — Note receivable, held for sale (1) 41,200 — — Restructuring of commercial mortgage loan to subordinate loan 74,304 — — (1) Related to our former Massachusetts Healthcare Loan, as defined and discussed in "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net." See notes to consolidated financial statements. 67 Apollo Commercial Real Estate Finance, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 – Organization Apollo Commercial Real Estate Finance, Inc.
The non-recourse liability is recorded under "Participations Sold" and the income earned is recorded as interest income and an identical amount is recorded as interest expense on our consolidated statements of operations. Senior Secured Notes We include our senior secured notes in our consolidated balance sheets as a liability, net of original issue discount and deferred financing costs.
The non-recourse liability is recorded under "Participations Sold" and the income earned is recorded as interest income and an identical amount is recorded as interest expense on our consolidated statements of operations. Senior Secured Notes We include senior secured notes in our consolidated balance sheets as a liability, net of original issue discount and deferred financing costs.
Discount or transaction expenses are deferred and amortized through the maturity. Interest paid in accordance with our senior secured notes is recorded in interest expense. Senior Secured Term Loans We include our senior secured term loans (the "Term Loans") in our consolidated balance sheets as a liability, net of original issue discount and deferred financing costs.
Discount or transaction expenses are deferred and amortized through the maturity. Interest paid in accordance with senior secured notes is recorded in interest expense. Senior Secured Term Loans We include senior secured term loans (the "Term Loans") in our consolidated balance sheets as a liability, net of original issue discount and deferred financing costs.
Discount or transaction expenses are deferred and amortized through the maturity. Interest paid in accordance with our Term Loans is recorded in interest expense. Convertible Senior Notes We include our convertible senior notes in our consolidated balance sheets as a liability, net of original issue discount. Discounts are deferred and amortized through the maturity of the notes.
Discount or transaction expenses are deferred and amortized through the maturity. Interest paid in accordance with the Term Loans is recorded in interest expense. Convertible Senior Notes We include convertible senior notes in our consolidated balance sheets as a liability, net of original issue discount. Discounts are deferred and amortized through the maturity of the notes.
When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL pool.
When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL Allowance pool.
(2) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(2) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(3) The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.
(3) The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.
On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced a now-dismissed action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court (the "Apollo Action").
AmBase Corporation: On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced a now-dismissed action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court (the "Apollo Action").
For the year ended December 31, 2023, 2,932,284 weighted-average unvested RSUs were excluded in the calculation of diluted net income per share because the effect was anti-dilutive. For the year ended December 31, 2022, 2,655,833 weighted-average unvested RSUs, were included in the calculation of diluted net income per share because the effect was dilutive.
For year ended December 31, 2023 , 2,932,284 weighted-average unvested RSUs were excluded in the calculation of diluted net income per share because the effect was anti-dilutive. For the year ended December 31, 2022 , 2,655,833 weighted average unvested RSUs, were included in the calculation of diluted net income per share because the effect was dilutive.
See further discussion in "Note 7 - Secured Debt Arrangements, Net." Unconsolidated Joint Ventures 61 In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed 10% of the venture’s equity and we contributed 90%.
See further discussion in "Note 7 - Secured Debt Arrangements, Net." Unconsolidated Joint Ventures In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed 10 % of the venture’s equity and we contributed 90 %.
In addition to transferring the unfunded commitment, we also transferred a proportionate share of the origination fee associated with such unfunded commitment, resulting in a reduction to our amortized cost basis. We evaluated the transfer under ASC 860 and determined the transfer met the criteria for sale accounting. We recorded no gain or loss on the sale.
In addition to transferring the unfunded commitment, we also transferred a proportionate share of the origination fee associated with such unfunded commitment, resulting in a reduction to our amortized cost basis. We 85 evaluated the transfer under ASC 860 and determined the transfer met the criteria for sale accounting. We recorded no gain or loss on the sale.
The subordinate loans, by virtue of being the first loss position, are required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations.
The subordinate loans, by virtue of being the first loss position, are required to absorb losses prior to the senior position(s) being impacted, resulting in a higher 70 percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations.
Interest incurred in accordance with secured debt arrangements is recorded as interest expense. 65 Securitization/Sale and Financing Arrangements We periodically sell our financial assets, such as commercial mortgage loans, subordinate loans and other lending assets. In connection with these transactions, we may retain or acquire senior or subordinated interests in the related assets.
Interest incurred in accordance with secured debt arrangements is recorded as interest expense. Securitization/Sale and Financing Arrangements We periodically sell our financial assets, such as commercial mortgage loans, subordinate loans and other lending assets. In connection with these transactions, we may retain or acquire senior or subordinated interests in the related assets.
Specifically, a property’s operating results and any cash 73 reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral.
Specifically, a property's operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral.
The three levels of the hierarchy as noted in Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures " are described below: Level I — Quoted prices in active markets for identical assets or liabilities. Level II — Prices are determined using other significant observable inputs.
The three levels of the hierarchy as noted in Accounting Standards Codification ("ASC") Topic 820, "Fair Value Measurements and Disclosures " ("ASC 820"), are described below: Level I — Quoted prices in active markets for identical assets or liabilities. Level II — Prices are determined using other significant observable inputs.
We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period.
We applied various filters to arrive at a CMBS dataset analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period.
We have determined that the issuer of this securitization, ACRE Debt 2 PLC, is a VIE of which we were deemed to be the primary beneficiary, because we have the power to direct the activities of the VIE, and therefore, we consolidated the operations of this entity in accordance with GAAP.
We have determined that the issuer of this securitization, ACRE Debt 2 PLC, is a VIE of which we were deemed to be the primary beneficiary, because we have the power to direct the activities of the VIE, and therefore, we consolidated the operations of this entity in accordance 68 with GAAP.
Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others. 67 Level III — Prices are determined using significant unobservable inputs.
Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others. Level III — Prices are determined using significant unobservable inputs.
We recognized a realized gain of $43.6 million, recorded within realized gain (loss) on investments on our consolidated statement of operations, which reflects the difference between the fair value of the property and the 77 carrying value of the loan at the time of acquisition.
We recognized a realized gain of $ 43.6 million, recorded within realized gain (loss) on investments on our consolidated statement of operations, which reflects the difference between the fair value of the property and the carrying value of the loan at the time of acquisition.
Assets and liabilities denominated in currencies other than USD are translated to USD at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.
Assets and liabilities 72 denominated in currencies other than USD are translated to USD at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.
These transfers were made to entities managed by affiliates of the Manager. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure.
These 98 transfers were made to entities managed by affiliates of the Manager. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure.
Note 11 – Derivatives We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD. We have entered into a series of forward contracts to sell an amount of foreign currency (GBP, EUR and SEK) for an agreed upon amount of USD at various dates through February 2027.
Note 11 – Derivatives We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD. We have entered into a series of forward contracts to sell an amount of foreign currency (GBP, EUR and SEK) for an agreed upon amount of USD at various dates through August 2027.
The standard requires the use of significant judgment to arrive at an estimated credit loss. We derived an annual historical loss rate based on a CMBS database with historical losses from 1998 through the fourth quarter of 2023 provided by a third party, Trepp LLC.
The standard requires the use of significant judgment to arrive at an estimated credit loss. We derived an annual historical loss rate based on a CMBS database with historical losses from 1998 through the fourth quarter of 2024 provided by a third party, Trepp LLC.
Covenants The 2029 Notes include certain covenants including a requirement that we maintain a ratio of total unencumbered assets to total pari-passu indebtedness of at least 1.20:1. As of December 31, 2023 and December 31, 2022, we were in compliance with all covenants.
Covenants The 2029 Notes include certain covenants including a requirement that we maintain a ratio of total unencumbered assets to total pari-passu indebtedness of at least 1.20 :1. As of December 31, 2024 and December 31, 2023 , we were in compliance with all covenants.
During the third quarter of 2022, we transferred £293.4 million ($327.7 million assuming conversion into USD) of unfunded commitments related to a mixed-use development property located in London, United Kingdom to entities managed by affiliates of the Manager.
During 2022, we transferred £ 293.4 million ($ 327.7 million assuming conversion into USD) of unfunded commitments related to a mixed-use development property located in London, United Kingdom to entities managed by affiliates of the Manager.
GAAP requires an entity to recognize all derivatives as either assets or liabilities on the balance sheets and to measure those instruments at fair value. To the extent the instrument qualifies for hedge accounting, the fair value adjustments will be recorded as a component of other comprehensive income in stockholders’ equity until the hedged item is recognized in earnings.
GAAP requires an entity to recognize all derivatives as either assets or liabilities on the balance sheets and to measure those instruments at fair value. To the extent the instrument qualifies for hedge accounting, the fair value adjustments will be recorded as a component of other comprehensive income in stockholders ' equity until the hedged item is recognized in earnings.
A ny future change to the Specific CECL Allowance will be based upon a number of factors, including but not limited to the continued assessment of both the potential nominal value of remaining inventory as well as the expected sales velocity.
Any future change to the Specific CECL Allowance will be based upon a number of factors, including but not limited to the continued assessment of both the potential nominal value of remaining inventory as well as the expected sales velocity.
During the first quarter of 2023, we transferred interests in, (i) three commercial mortgage loans secured by various properties in Europe, with aggregate commitments of €205.7 million (of which €115.0 million was funded at the time of sale), and (ii) a partial interest of £15.0 million in a commercial mortgage loan secured by a mixed-use property located in London, United Kingdom.
Loans receivable During 2023, we transferred interests in, (i) three commercial mortgage loans secured by various properties in Europe, with aggregate commitments of € 205.7 million (of which € 115.0 million was funded at the time of sale), and (ii) a partial interest of £ 15.0 million in a commercial mortgage loan secured by a mixed-use property located in London, United Kingdom.
Therefore, we classify the fair value of real estate owned within Level III of the fair value hierarchy. On March 31, 2023, we acquired legal title of a hotel property in Atlanta, GA ("Atlanta Hotel") through a deed-in-lieu of foreclosure.
Therefore, we classify the fair value of real estate owned within Level III of the fair value hierarchy. In March 2023, we acquired legal title of a hotel property in Atlanta, GA ("Atlanta Hotel") through a deed-in-lieu of foreclosure.
The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. Our foreign exchange forwards are classified as Level II in the fair value hierarchy.
The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. Our Fx forwards are classified as Level II in the fair value hierarchy.
CECL In accordance with ASC Topic 326 “Financial Instruments – Credit Losses,” which we refer to as the "CECL Standard", we record allowances for loans and held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value of the amounts expected to be collected on the assets.
CECL In accordance with ASC Topic 326 "Financial Instruments – Credit Losses" ("ASC 326"), which we refer to as the "CECL Standard," we record allowances for loans and held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value of the amounts expected to be collected on the assets.
As of both December 31, 2023 and 2022, we were in a net asset position with all of our derivative counterparties and did not have any collateral posted under these derivative contracts.
As of both December 31, 2024 and 2023, we were in a net asset position with all of our derivative counterparties and did not have any collateral posted under these derivative contracts.
The variable interest rates used in the calculation of projected receipts on the interest rate cap are based on a third-party expert's expectation of future interest rates derived from observable market interest rate curves and volatility.
The variable interest rates used in the calculation of projected receipts on the interest rate caps are based on a third-party expert's expectation of future interest rates derived from observable market interest rate curves and volatility.
The table below summarizes the outstanding balances at December 31, 2023, as well as the maximum and average month-end balances for the year ended December 31, 2023 for our borrowings under secured debt arrangements ($ in thousands).
The table below summarizes the outstanding balances at December 31, 2024, as well as the maximum and average month-end balances for the year ended December 31, 2024 for our borrowings under secured debt arrangements ($ in thousands).
Following a meeting of our independent directors in February 2024, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.
Following a meeting of our independent directors in February 2025, which included a discussion of the Manager's performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.
Foreclosed properties are classified as real estate owned and recognized at fair value on our consolidated balance sheets in accordance with the acquisition method under Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.” When determining the fair value of real estate assets and liabilities, we make certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.
Foreclosed properties are classified as real estate owned and recognized at fair value on our consolidated balance sheets in accordance with the acquisition method under Accounting Standards Codification ("ASC") Topic 805, "Business Combinations." When determining the fair value of real estate assets and liabilities, we make certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.
The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.
The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE ' s economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.
General CECL Allowance In accordance with the WARM method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The WARM method requires consideration of the timing of expected future fundings of existing commitments and repayments over each asset’s remaining life.
General CECL Allowance In accordance with the WARM method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The WARM method requires consideration of the timing of expected future fundings of existing commitments and repayments over each asset ' s remaining life.
Such analyses are completed and reviewed by asset management and finance personnel, who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections, and (iii) current credit spreads and discussions with market participants.
Such analyses are completed and reviewed by asset management and finance personnel, who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower ' s exit plan, and capitalization and discount rates, (ii) site inspections, and (iii) current credit spreads and discussions with market participants.
Current Expected Credit Losses ("CECL") In accordance with ASC Topic 326 “Financial Instruments – Credit Losses,” which we refer to as the "CECL Standard", we record allowances for our commercial mortgage loans and subordinate loans and other lending assets that are held-to-maturity.
Current Expected Credit Losses ("CECL") In accordance with ASC Topic 326 "Financial Instruments – Credit Losses," which we refer to as the "CECL Standard", we record allowances for our commercial mortgage loans and subordinate loans and other lending assets that are held-to-maturity.
Included in payable to related party on our consolidated balance sheets at December 31, 2023 and 2022 is approximately $9.6 million and $9.7 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.
Included in payable to related party on our consolidated balance sheets at December 31, 2024 and 2023 is approximately $ 8.7 million and $ 9.6 million , respectively, for base management fees incurred but not yet paid under the Management Agreement.
We use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced. The fair values of foreign exchange ("Fx") forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate.
We use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced. Forward Currency Contracts The fair values of foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate.
Loans that are significantly past due may be placed on non-accrual if we determine it is probable that we will not collect all payments which are contractually due. When a loan is placed on non-accrual, interest is only recorded as interest income when it's received.
Loans that are significantly past due may be placed on nonaccrual if we determine it is probable that we will not collect all payments which are contractually due. When a loan is placed on nonaccrual, interest is only recorded as interest income when it's received.
We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates.
We also evaluate the financial wherewithal of any loan guarantors as well as the borrower ' s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates.
During the year ended December 31, 2022, we recorded a realized loss on investments 96 represented with a write-off of a previously recorded Specific CECL Allowance comprising of (i) a $17.9 million loss on a first mortgage loan secured by an urban predevelopment property following the sale of the underlying property, and (ii) a $7.0 million loss, related to a first mortgage secured by the Atlanta hotel in anticipation of consensual foreclosure in the first quarter of 2023.
During the year ended December 31, 2022, we recorded a $ 24.9 million realized loss on investments represented with a write-off of a previously recorded Specific CECL Allowance comprised of (i) a $ 17.9 million loss on a first mortgage loan secured by an urban predevelopment property following the sale of the underlying property, and (ii) a $ 7.0 million loss, related to a first mortgage secured by the Atlanta hotel in anticipation of consensual foreclosure in the first quarter of 2023. 2.
As of March 1, 2022, the hotel assets, comprised of land, building, furniture fixtures, and equipment, and accumulated depreciation (collectively "REO Fixed Assets"), and liabilities met the criteria to be classified as held for sale under ASC Topic 360, "Property, Plant, and Equipment." Accordingly, as of March 1, 2022, we ceased recording depreciation on the building and furniture, fixtures, and equipment on the consolidated statement of operations.
In March 2022, the hotel assets, comprised of land, building, furniture, fixtures, and equipment ("FF&E"), and accumulated depreciation (collectively "REO Fixed Assets"), and liabilities met the criteria to be classified as held for sale under ASC Topic 360, "Property, Plant, and Equipment" ("ASC 360"). Accordingly, we ceased recording depreciation on the building and FF&E on the consolidated statement of operations.
The aggregate contractual interest expense was approximately $8.6 million, $22.9 million, and $28.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The aggregate contractual interest expense was approximately $ 8.6 million and $ 22.9 million for the years ended December 31, 2023 and 2022 , respectively.
The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in our consolidated statement of changes in stockholders' equity.
The adjustment is a reduction of capital related to our Equity Incentive Plans and is presented net of increases of capital related to our Equity Incentive Plans in our consolidated statement of changes in stockholders' equity.
Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining 3.2 years weighted average tenor of these loans.
Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining 4.5 years weighted-average tenor of these loans.
Our major tax jurisdictions are U.S. federal, New York State and New York City and the statute of limitations is open for all jurisdictions for the years 2020 through 2023. We do not have any unrecognized tax benefits and do not expect a change in our position for unrecognized tax benefits in the next 12 months.
Our major tax jurisdictions are U.S. federal, New York State and New York City and the statute of limitations is open for all jurisdictions for the years 2021 through 2024. We do not have any unrecognized tax benefits and do not expect a change in our position for unrecognized tax benefits in the next 12 months.
We were in compliance with the covenants under each of our secured debt arrangements at December 31, 2023 and December 31, 2022.
We were in compliance with the covenants under each of our secured debt arrangements at December 31, 2024 and December 31, 2023 .
Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash flows from operations are sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan, and/or (iii) the property’s liquidation value.
Specifically, a property ' s operating results and any cash reserves are analyzed and used to assess (i) whether cash flows from operations are sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan, and/or (iii) the property ' s liquidation value.
(3) $4.0 million and $4.3 million of the General CECL Allowance for 2023 and 2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our consolidated balance sheets.
(4) $ 5.9 million and $ 4.0 million of the General CECL Allowance for 2024 and 2023, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our consolidated balance sheets.
The following table details our dividend activity: 91 Year ended December 31, Dividends declared per share of: 2023 2022 (1) 2021 Common Stock $1.40 $1.40 $1.40 Series B Preferred Stock N/A N/A $1.00 Series B-1 Preferred Stock $1.81 $1.81 $0.90 ——————— (1) As our aggregate 2022 distributions did not exceed our earnings and profits, $0.1185 of the January 2023 distribution declared in the fourth quarter of 2022, and payable to common stockholders of record as of December 31, 2022, was treated as a 2022 distribution for U.S. federal income tax purposes.
The following table details our dividend activity: Year Ended December 31, Dividends declared per share of: 2024 2023 2022 (1) Common Stock $ 1.20 $ 1.40 $ 1.40 Series B-1 Preferred Stock $ 1.81 $ 1.81 $ 1.81 ——————— (1) As our aggregate 2022 distributions did not exceed our earnings and profits, $ 0.1185 of the January 2023 distribution declared in the fourth quarter of 2022, and payable to common stockholders of record as of December 31, 2022, was treated as a 2022 distribution for U.S. federal income tax purposes.
(4) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses, as well as $2.5 million and $3.2 million in cost recovery proceeds in 2023 and 2022, respectively. 97 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses, as well as $ 9.1 million , $ 2.5 million , and $ 3.2 million in cost recovery proceeds in 2024, 2023 , and 2022, respectively. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 106
The following loan sales occurred in 2022: During the third quarter of 2022, we transferred a portion of our unfunded commitment of £293.4 million ($327.7 million assuming conversion into USD) in a commercial mortgage loan secured by a mixed use property located in London, United Kingdom to entities managed by affiliates of the Manager.
During 2022, we transferred a portion of our unfunded commitment of £ 293.4 million ($ 327.7 million assuming conversion into USD) in a commercial mortgage loan secured by a mixed use property located in London, United Kingdom to entities managed by affiliates of the Manager.
With respect to the amortization of the discount on the liability component of the Convertible Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately $1.2 million, $2.5 million, and $6.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.
With respect to the amortization of the discount on the liability component of the Convertible Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately $ 1.2 million and $ 2.5 million for the year ended December 31, 2023 and 2022 , respectively.
We derived an annual historical loss rate based on a commercial mortgage-backed securities ("CMBS") database with historical losses from 1998 through the fourth quarter of 2023 provided by a third party, Trepp LLC. We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate.
We derive an annual historical loss rate based on a commercial mortgage-backed securities ("CMBS") database with historical losses from 1998 through the fourth quarter of 2024 provided by a third party, Trepp LLC ("Trepp"). We apply various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate.
Italian Direct Lending Structure In the fourth quarter of 2021, we formed an Italian closed-end alternative investment fund (the "AIF"), managed by Apollo Investment Management Europe (Luxembourg) S.A R.L, a regulated alternative investment fund manager (the "AIFM"), an affiliate of the Manager. The fees incurred during the year ended December 31, 2023 were de minimis.
Italian Direct Lending Structure In the fourth quarter of 2021, we formed an Italian closed-end alternative investment fund (the "AIF"), managed by Apollo Investment Management Europe (Luxembourg) S.A R.L, a regulated alternative investment fund manager (the "AIFM"), an affiliate of the Manager. The management fees incurred during years ended December 31, 2024, 2023 and 2022, respectively, were de minimis.
The following loan sales occurred in 2023: During the first quarter of 2023, we sold our entire interests in three commercial mortgage loans secured by various properties in Europe, with aggregate commitments of €205.7 million ($219.0 million assuming conversion into USD, of which €115.0 million or $122.4 million assuming conversion into USD, was funded at the time of sale).
During 2023, we sold our entire interests in three commercial mortgage loans secured by various properties in Europe, with aggregate commitments of € 205.7 million ($ 219.0 million assuming conversion into USD, of which € 115.0 million or $ 122.4 million assuming conversion into USD, was funded at the time of sale).
As such we realized gains from the interest rate cap in amounts of $9.7 million and $5.7 million, which are included in gain (loss) on interest rate hedging instruments in our consolidated statement of operations during the years ended December 31, 2023 and December 31, 2022, respectively. There was no realized gain recorded during the year ended December 31, 2021.
As such, we realized gains from the interest rate cap in the amounts of $ 9.7 million and $ 5.7 million, which are included in gain (loss) on interest rate hedging instruments in our consolidated statement of operations during the years ended December 31, 2023 and December 31, 2022, respectively.
An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available information at the time the analyses are prepared.
An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Our impairment analyses can include current plans, intended holding periods and other relevant information available at the time the analyses are prepared.
(2) Refer to "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure related to the General CECL Allowance on unfunded commitments as of December 31, 2023 and 2022, respectively.
(2) Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure related to the General CECL Allowance on unfunded commitments as of December 31, 2024 and 2023, res pectively.
For the years ended December 31, 2023, 2022, and 2021 we paid expenses totaling $6.4 million, $5.5 million and $4.0 million respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement.
For the years ended December 31, 2024, 2023 and 2022, we paid expenses totaling $ 7.8 million , $ 6.4 million and $ 5.5 million , respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement.
As of December 31, 2023 and 2022, there were no material deferred tax assets or liabilities. As of December 31, 2023, we had net operating losses of $13.7 million and capital losses of $25.2 million that may be carried forward for use in subsequent periods.
As of December 31, 2024 and 2023, there were no material deferred tax assets or liabilities. As of December 31, 2024 , we had net operating losses of $ 9.3 million and capital losses of $ 25.2 million that may be carried forward for use in subsequent periods.
During the years ended December 31, 2023 and 2022, we repaid $5.0 million of principal related to the 2026 Term Loan. During the years ended December 31, 2023 and 2022, we repaid $3.0 million of principal respectively related to the 2028 Term Loan.
During both the years ended December 31, 2024 and 2023, we repaid $ 5.0 million of principal related to the 2026 Term Loan. During both the years ended December 31, 2024 and 2023, we repaid $ 3.0 million of principal related to the 2028 Term Loan.
As of December 31, 2023 and December 31, 2022, the carrying value of the construction financing included within debt related to real estate owned, held for investment, net on our consolidated balance sheets was $161.6 million, net of $3.2 million in deferred financing costs and $160.3 million, net of $4.5 million in deferred financing costs, respectively.
As of December 31, 2024 and December 31, 2023, the carrying value of the construction financing included within debt related to real estate owned, held for investment, net on our consolidated balance sheets was $ 252.0 million , net of $ 2.0 million in deferred financing costs and $ 161.6 million , net of $ 3.2 million in deferred financing costs, respectively.
Loan Commitments. As described in "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" at December 31, 2023, we had $869 million of unfunded commitments related to our commercial mortgage and subordinate loans.
Loan Commitments As described in "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" at December 31, 2024, we had $ 840.6 million of unfunded commitments related to our commercial mortgage and subordinate loans.
The term of the Management Agreement was automatically renewed for a successive one-year term on September 29, 2023 and will automatically renew on each anniversary thereafter.
The term of the Management Agreement was automatically renewed for a successive one-year term in September 2024 and will automatically renew on each anniversary thereafter.
Interest paid in accordance with our convertible senior notes is recorded in interest expense. Revenue Recognition Interest income on our lending assets is accrued based on the actual coupon rate adjusted for accretion of any purchase discounts, the amortization of any purchase premiums and the accretion of any deferred fees, in accordance with GAAP.
Revenue Recognition Interest income on our lending assets is accrued based on the actual coupon rate adjusted for accretion of any purchase discounts, the amortization of any purchase premiums and the accretion of any deferred fees, in accordance with GAAP.
Debt Covenants The guarantees related to our secured debt arrangements contain the following financial covenants: (i) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017; (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 3.75:1 (ratio is 4.00:1 for our Revolving Credit Facility); and (iii) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million.
Debt Covenants The guarantees related to our secured debt arrangements contain the following financial covenants: (i) tangible net worth must be greater than $ 1.25 billion plus 75 % of the net cash proceeds of any equity issuance after March 31, 2017; (ii) our ratio of total indebtedness to tangible net worth cannot be greate r than 3.75 :1, an d (iii) our liquidity cannot be less than an amount equal to the greater of 5 % of total recourse indebtedness or $ 30.0 million.
The unrecognized compensation expense related to the vesting of restricted awards and RSUs are expected to be recognized over a weighted average period of 1.6 years. RSU Deliveries During the years ended December 31, 2023, 2022 and 2021 we delivered 686,856, 652,501 and 553,008 shares of common stock for 1,264,352, 1,145,090 and 953,397 vested RSUs, respectively.
The unrecognized compensation expense related to the vesting of restricted awards and RSUs are expected to be recognized over a weighted-average period of 1.6 years. RSU Deliveries During the years ended December 31, 2024, 2023 and 2022, we delivered 765,456 , 686,856 and 652,501 shares of common stock for 1,405,134, 1,264,352 and 1,145,090 vested RSUs, respectively.
The unrealized gain or loss related to the interest rate cap was recorded under gain on interest rate hedging instruments in our consolidated statement of operations. During 2023, SOFR exceeded the cap rate of 4.00%.
The unrealized gain or loss related to the interest rate cap was recorded under gain (loss) on interest rate hedging instruments in our consolidated statement of operations. During the years ended December 31, 2024 and 2023 , SOFR exceeded the cap rate of 4.00 %.
In the fourth quarter of 2022, we sold our interest in a $100.0 million subordinate loan secured by an office building located in Manhattan, NY. We determined that this transaction qualifies as a sale and accounted for it as such. We recorded no gain or loss related to this sale.
Additionally, we sold our interest in a $ 100.0 million subordinate loan secured by an office building located in Manhattan, NY. We determined that this transaction qualified as a sale and accounted for it as such. We recorded no gain or loss related to this sale.
We incurred approximately $38.0 million, $38.4 million and $38.2 million in base management fees under the Management Agreement for the years ended December 31, 2023, 2022, and 2021 respectively.
We incurred approximately $ 36.1 million , $ 38.0 million and $ 38.4 million in base management fees under the Management Agreement for the years ended December 31, 2024, 2023 and 2022, respectively.
Refer to "Note 15 - Related Party Transactions" for further discussion regarding the transaction. Revolving Credit Facility On March 3, 2023, we entered into the Revolving Credit Facility administered by Bank of America, N.A. The Revolving Credit Facility provides up to $170.0 million of borrowings secured by qualifying commercial mortgage loans and real property owned assets.
For full discussion of this transaction, refer to "Note 15 – Related Party Transactions." Revolving Credit Facility In March 2023, we entered into the revolving credit facility (the "Revolving Credit Facility") administered by Bank of America, N.A. The Revolving Credit Facility provides up to $ 160.0 million of borrowings secured by qualifying commercial mortgage loans and real property owned assets.
Estimates of fair value for cash and cash equivalents, convertible senior notes, net, and Term Loans, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure." Note 20 – Net Income (Loss) per Share ASC 260, "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed.
Estimates of fair value for cash and cash equivalents, senior secured notes, net, and Term Loans, net are measured using observable Level I inputs as defined in "Note 3 – Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 – Fair Value Disclosure." Note 20 – Net Income (Loss) per Share ASC Topic 260, "Earnings Per Share" requires the use of the two-class method of computing both basic and diluted earnings (loss) per share for all periods presented for each class of common stock and participating securities.
Specific CECL Allowance For collateral-dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance.
Specific CECL Allowance For collateral-dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty and a more than moderate/average risk of realizing a principal loss, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance.
As of December 31, 2023, our net real estate assets included depreciable assets of $80.5 million, net of $6.6 million in accumulated depreciation, attributable to the building, and $6.1 million, net of $3.8 million in accumulated depreciation, attributable to FF&E.
As of December 31, 2024, our net real estate assets included depreciable assets of $ 44.7 million , net of $ 5.5 million in accumulated depreciation, attributable to the building, and $ 6.7 million , net of $ 3.1 million in accumulated depreciation, attributable to FF&E.
Compensation cost related to restricted common stock issued is measured at its fair value at the grant date and amortized into expense over the vesting period on a straight-line basis.
Compensation cost related to restricted common stock issued is measured at its fair value at the grant date and amortized into expense over the vesting period on a straight-line basis. We recognize forfeitures of restricted common stock as they occur.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCertain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock including: • "business combination" provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, impose fair price and/or supermajority stockholder voting requirements on these combinations; • "control share" provisions of the MGCL that provide that a holder of "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding "control shares") has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and personnel who are also directors; and • "unsolicited takeover" provisions of the MGCL that permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not yet have.
Biggest changeCertain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock including: • "business combination" provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, impose fair price and/or supermajority stockholder voting requirements on these combinations; • "control share" provisions of the MGCL that provide that a holder of "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding "control shares") has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and personnel who are also directors; and • "unsolicited takeover" provisions of the MGCL that permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not yet have. 14 As permitted by the MGCL, our board of directors has by resolution exempted from the "business combination" provision of the MGCL business combinations (1) between us and any other person, provided that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person) and (2) between us and Apollo and its affiliates and associates and persons acting in concert with any of the foregoing.
In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares.
In addition, our board of directors may, without common stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares.
In general, Rule 3a-7 excludes from the 1940 Act issuers that limit their activities as follows: • the issuer issues securities, the payment of which depends primarily on the cash flow from "eligible assets," which are assets that by their terms convert into cash within a finite time period; • the securities sold are fixed-income securities rated investment grade by at least one rating agency except that fixed- income securities which are unrated or rated below investment grade may be sold to institutional accredited investors and any securities may be sold to "qualified institutional buyers" and to persons involved in the organization or operation of the issuer; • the issuer acquires and disposes of eligible assets (1) only in accordance with the agreements pursuant to which the securities are issued and (2) so that the acquisition or disposition does not result in a downgrading of the issuer’s fixed-income securities and (3) the primary purpose of which is not recognizing gains or decreasing losses resulting from market value changes; and • unless the issuer is issuing only commercial paper, the issuer appoints an independent trustee, takes reasonable steps to transfer to the trustee an ownership or perfected security interest in the eligible assets, and meets rating agency requirements for commingling of cash flows.
In general, Rule 3a-7 excludes from the 1940 Act issuers that limit their activities as follows: • the issuer issues securities, the payment of which depends primarily on the cash flow from "eligible assets," which are assets that by their terms convert into cash within a finite time period; • the securities sold are fixed-income securities rated investment grade by at least one rating agency except that fixed- income securities which are unrated or rated below investment grade may be sold to institutional accredited investors and any securities may be sold to "qualified institutional buyers" and to persons involved in the organization 15 or operation of the issuer; • the issuer acquires and disposes of eligible assets (1) only in accordance with the agreements pursuant to which the securities are issued and (2) so that the acquisition or disposition does not result in a downgrading of the issuer's fixed-income securities and (3) the primary purpose of which is not recognizing gains or decreasing losses resulting from market value changes; and • unless the issuer is issuing only commercial paper, the issuer appoints an independent trustee, takes reasonable steps to transfer to the trustee an ownership or perfected security interest in the eligible assets, and meets rating agency requirements for commingling of cash flows.
Net operating income of an income- 20 producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties (including properties located in opportunity zones), changes in laws that increase operating expense or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, environmental, climate and other ESG-related legislation and tax legislation, acts of God, regional, national or global outbreaks, epidemics and pandemics, geopolitical events, terrorism, social unrest, civil disturbances or other calamities.
Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties (including properties located in opportunity zones), changes in laws that increase operating expense or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, environmental, climate and other ESG-related legislation and tax legislation, acts of God, regional, national or global outbreaks, epidemics and pandemics, geopolitical events, terrorism, social unrest, civil disturbances or other calamities.
In addition, we have agreed to indemnify the Manager, its officers, stockholders, members, managers, directors, personnel, any person controlling or controlled by the Manager and any 24 person providing services to the Manager (including Apollo) with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts of the Manager not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties, performed in good faith in accordance with and pursuant to the Management Agreement.
In addition, we have agreed to indemnify the Manager, its officers, stockholders, members, managers, directors, personnel, any person controlling or controlled by the Manager and any person providing services to the Manager (including Apollo) with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts of the Manager not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties, performed in good faith in accordance with and pursuant to the Management Agreement.
Under the terms of the Management Agreement, the Manager, its officers, members, managers, directors, personnel, any person controlling or controlled by the Manager and any person providing services to the Manager (including Apollo) are not liable to us, any of our subsidiaries, our stockholders or partners or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the Management Agreement, except by reason of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the Management Agreement.
Under the terms of the Management Agreement, the Manager, its officers, members, managers, directors, personnel, any person controlling or controlled by the Manager and any person providing services to the Manager (including 28 Apollo) are not liable to us, any of our subsidiaries, our stockholders or partners or any subsidiary's stockholders or partners for acts or omissions performed in accordance with and pursuant to the Management Agreement, except by reason of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the Management Agreement.
As a result, we could have "excess inclusion income." Certain categories of stockholders, such as non-U.S. 29 stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to any such excess inclusion income.
As a result, we could have "excess inclusion income." Certain categories of stockholders, such as non-U.S. stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to any such excess inclusion income.
We compete with other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, 8 institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. In addition, other REITs with similar asset acquisition objectives, including others that may be organized in the future, compete with us in acquiring assets and obtaining financing.
We compete with other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. In addition, other REITs with similar asset acquisition objectives, including others that may be organized in the future, compete with us in acquiring assets and obtaining financing.
B Notes reflect similar credit risks to comparably rated commercial mortgage-backed securities ("CMBS"). However, since each 21 transaction is privately negotiated, B Notes can vary in their structural characteristics and risks. For example, the rights of holders of B Notes to control the process following a borrower default may be limited in certain investments.
B Notes reflect similar credit risks to comparably rated commercial mortgage-backed securities ("CMBS"). However, since each transaction is privately negotiated, B Notes can vary in their structural characteristics and risks. For example, the rights of holders of B Notes to control the process following a borrower default may be limited in certain investments.
In the event we utilize such financing arrangements, they may involve the risk that the market value of our assets pledged or sold by us to the secured debt arrangements counterparty or provider of the credit facility may decline in value, in which case the lender may require us to provide additional collateral or to repay all or a portion of the funds advanced.
In the event we utilize such financing arrangements, they may involve the risk that the 19 market value of our assets pledged or sold by us to the secured debt arrangements counterparty or provider of the credit facility may decline in value, in which case the lender may require us to provide additional collateral or to repay all or a portion of the funds advanced.
Apollo’s approach to these barriers could prevent the Manager’s investment professionals from undertaking advantageous investments or dispositions that would be permissible for them otherwise. In addition, Apollo could in the future decide to establish information barriers within its asset management business, particularly as it expands and diversifies.
Apollo's approach to these barriers could prevent the Manager's investment professionals from undertaking advantageous investments or dispositions that would be permissible for them otherwise. In addition, Apollo could in the future decide to establish other information barriers within its asset management business, particularly as it expands and diversifies.
For additional information regarding our Specific CECL Allowance, refer to " Specific CECL Allowance " under "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" in our consolidated financial statements. In addition, we record a general reserve in accordance with the CECL Standard on the remainder of the loan portfolio ("General CECL Allowance").
For additional information regarding our Specific CECL Allowance, refer to " Specific CECL Allowance " under "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" in our consolidated financial statements. 23 In addition, we record a general reserve in accordance with the CECL Standard on the remainder of the loan portfolio ("General CECL Allowance").
Thus, while we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year.
Thus, while we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual 31 determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year.
Such systems may fail to operate properly or become disabled as a result of cyber incidents. Any failure or interruption of the 9 systems of Apollo or any other counterparties that we rely on could cause delays or other problems and could have a material adverse effect on our operating results.
Such systems may fail to operate properly or become disabled as a result of cyber incidents. Any failure or interruption of the systems of Apollo or any other counterparties that we rely on could cause delays or other problems and could have a material adverse effect on our operating results.
If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition.
If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in 22 losses upon disposition.
We expect any of our subsidiaries relying on Section 3(c)(5)(C) to rely on guidance published by the SEC staff to determine which assets are qualifying assets and which 12 assets are real estate related under this exclusion to the extent such guidance is available.
We expect any of our subsidiaries relying on Section 3(c)(5)(C) to rely on guidance published by the SEC staff to determine which assets are qualifying assets and which assets are real estate related under this exclusion to the extent such guidance is available.
Our charter provides that, subject to the rights of any series of preferred stock, a director may be removed with or without cause upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.
Our charter provides that, subject to the rights of any class or series of preferred stock, a director may be removed with or without cause upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.
Changes in interest rates will affect our operating results as such changes will affect the interest we receive on any floating rate interest (such as SOFR or SONIA) bearing assets and the financing cost of our floating rate debt, as well as our interest rate swap that we may utilize for hedging purposes.
Changes in interest rates will affect our operating results as such changes will affect the interest we receive on any floating rate interest (such as SOFR or SONIA) bearing assets and the financing cost of our floating rate debt, as well as our interest rate 20 swap that we may utilize for hedging purposes.
The Manager has great 25 latitude within the broad investment guidelines in determining the types of assets that are proper for us, and how such loans and investments are financed or hedged, which could result in returns that are substantially below expectations or that result in losses.
The Manager has great latitude within the broad investment guidelines in determining the types of assets that are proper for us, and how such loans and investments are financed or hedged, which could result in returns that are substantially below expectations or that result in losses.
In addition, in order to qualify as a REIT, we must distribute to our stockholders, each calendar year, at least 90% of our 27 REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain.
In addition, in order to qualify as a REIT, we must distribute to our stockholders, each calendar year, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain.
("ACREFI III TRS"), a Delaware corporation that is indirectly wholly owned by us, and ACRE Debt 2 PLC ("ACRE Debt TRS"), a UK public limited company that we own an interest in, to treat each of ACREFI TRS, ARM TRS, ACREFI II TRS, ACREFI III TRS, and ACRE Debt TRS as a TRS of ours.
("ACREFI III TRS"), a 32 Delaware corporation that is indirectly wholly owned by us, and ACRE Debt 2 PLC ("ACRE Debt TRS"), a UK public limited company that we own an interest in, to treat each of ACREFI TRS, ARM TRS, ACREFI II TRS, ACREFI III TRS, and ACRE Debt TRS as a TRS of ours.
If we cannot meet these 16 requirements, the lender could accelerate our indebtedness, increase the interest rate on advanced funds and terminate our ability to borrow funds from them, which could materially and adversely affect our financial condition and ability to implement our business plan.
If we cannot meet these requirements, the lender could accelerate our indebtedness, increase the interest rate on advanced funds and terminate our ability to borrow funds from them, which could materially and adversely affect our financial condition and ability to implement our business plan.
None of us, the Manager or Apollo have experienced any material breach of cybersecurity. However, we can provide no assurance that the networks and systems that we, the Manager, Apollo or our third-party service providers have established or use will be effective.
None of us, the Manager or Apollo have experienced any material breach of cybersecurity. However, we can provide no assurance that the networks and systems that we, the Manager, Apollo or our third-party service 11 providers have established, or use will be effective.
Further, we may face other restrictions 19 on our ability to liquidate an interest in a business entity to the extent that we or the Manager have or could be attributed with material, non-public information regarding such business entity.
Further, we may face other restrictions on our ability to liquidate an interest in a business entity to the extent that we or the Manager have or could be attributed with material, non-public information regarding such business entity.
Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning an asset secured by that property, which could result in losses that harm our results of operations and financial condition.
Owning and operating real property involves risks that are different (and in many ways more significant) than the risks 24 faced in owning an asset secured by that property, which could result in losses that harm our results of operations and financial condition.
Sales or other issuances of substantial amounts of our common stock or the perception that such sales or issuances could occur, may adversely affect the prevailing market price the common stock. Our authorized but unissued shares of common and preferred stock may prevent a change in control.
Sales or other issuances of substantial amounts of our common stock or the perception that such sales or issuances could occur, may adversely affect the prevailing market price the common stock. Our authorized but unissued shares of common or preferred stock may prevent a change in control.
When we engage in secured debt arrangements, we sell securities to lenders (i.e., secured debt arrangement counterparties) and receive cash from the lenders. The lenders are obligated to resell the same securities back to us at the end of 17 the term of the transaction.
When we engage in secured debt arrangements, we sell securities to lenders (i.e., secured debt arrangement counterparties) and receive cash from the lenders. The lenders are obligated to resell the same securities back to us at the end of the term of the transaction.
To the extent our borrowing costs increase faster than the interest income earned from our floating-rate loans, such increases may adversely affect our cash flows. Our real estate assets are subject to risks particular to real property.
To the extent our borrowing costs increase faster than the interest income earned from our floating-rate loans, such increases may adversely affect our cash flows. 26 Our real estate assets are subject to risks particular to real property.
Our business may be adversely affected if our reputation, the reputation of the Manager or Apollo, or the reputation of 26 counterparties with whom we associate is harmed. We may be harmed by reputational issues and adverse publicity relating to us, the Manager or Apollo.
Our business may be adversely affected if our reputation, the reputation of the Manager or Apollo, or the reputation of counterparties with whom we associate is harmed. We may be harmed by reputational issues and adverse publicity relating to us, the Manager or Apollo.
Our stockholders’ equity for the purposes of calculating the base management fee is not the same as, and could be greater than, the amount of stockholders’ equity shown on our consolidated financial statements.
Our stockholders' equity for the purposes of calculating the base management fee is not the same as, and could be greater than, the amount of stockholders' equity 29 shown on our consolidated financial statements.
The 1940 Act defines a majority- 13 owned subsidiary of a person as a company with 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person.
The 1940 Act defines a majority-owned subsidiary of a person as a company with 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person.
If we foreclose on an asset, we may take title to the property securing that asset, and if we do not or cannot sell the property, we would then come to own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning an asset secured by that property.
If we foreclose on an asset, we may take title to the property securing that asset, and if we do not or cannot sell the property, we would then come to own and operate it as "real estate owned." Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning an asset secured by that property.
In the event we own a mezzanine loan that does not meet the safe harbor, or a loan that has undergone a "significant modification," the IRS could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, or if such loan otherwise adversely impacted our REIT asset and income tests, we could fail to qualify as a REIT, unless we are able to qualify for a statutory REIT "savings" provision, which may require us to pay a significant penalty tax to maintain our REIT qualification.
In the event we own a mezzanine loan that does not meet the safe harbor, or a loan that has undergone a "significant modification," the IRS could challenge such loan ' s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, or if such loan otherwise adversely impacted our REIT asset and income tests, we could 33 fail to qualify as a REIT, unless we are able to qualify for a statutory REIT "savings" provision, which may require us to pay a significant penalty tax to maintain our REIT qualification.
Co-investors may have 23 economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives.
Co-investors may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position 27 to take actions contrary to our policies or objectives.
The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for U.S. federal income tax purposes. A REIT’s net income from prohibited transactions is subject to a 100% tax.
The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for U.S. federal income tax purposes. A REIT ' s net income from prohibited transactions is subject to a 100% tax.
The term of the Management Agreement was automatically renewed for a successive one-year term on September 29, 2023 and will automatically renew on each anniversary thereafter; provided, however, that either we, under the certain limited circumstances described above that would require us to pay the fee described above, or the Manager may terminate the Management Agreement annually upon 180 days prior notice.
The term of the Management Agreement was automatically renewed for a successive one-year term in September 2024 and will automatically renew on each anniversary thereafter; provided, however, that either we, under the certain limited circumstances described above that would require us to pay the fee described above, or the Manager may terminate the Management Agreement annually upon 180 days prior notice.
Additionally, our reputation and investor relationships could be damaged as a result of our involvement with certain industries or assets associated with activities perceived to be causing or exacerbating climate change, or other ESG-related issues, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change or other ESG-related issues.
Additionally, our reputation and investor relationships could be damaged as a result of our involvement with certain industries or assets associated with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
The Articles Supplementary for our preferred stock prohibits any stockholder from beneficially or constructively owning more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding preferred stock.
The Articles Supplementary for each series of our preferred stock prohibits any stockholder from beneficially or constructively owning more than 9.8% in value or in number of shares, whichever is more restrictive, of such series of our outstanding preferred stock.
A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.
A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT ' s assets may consist of stock or securities of one or more TRSs.
We also depend, to a significant extent, on the Manager’s access to the investment professionals and partners of Apollo and the information and deal flow generated by the Apollo investment professionals in the course of their investment and portfolio management activities.
We also depend, to a significant extent, on the Manager ' s access to the investment professionals and partners of Apollo and the information and deal flow generated by the Apollo investment professionals in the course of their investment and portfolio management activities.
Credit facilities and secured debt arrangements that we may use to finance our assets may require us to provide additional collateral or pay down debt. As of December 31, 2023, we had secured debt arrangements in place, with an aggregate borrowing capacity of approximately $7.0 billion.
Credit facilities and secured debt arrangements that we may use to finance our assets may require us to provide additional collateral or pay down debt. As of December 31, 2024, we had secured debt arrangements in place, with an aggregate borrowing capacity of approximately $6.9 billion.
In addition, we offer no assurance that the Manager will remain our investment manager, that we will continue to have access to the Manager’s or Apollo’s executive officers and other investment professionals, or that we will be able to find a suitable replacement for the Manager if the Management Agreement is terminated.
In addition, we offer no 30 assurance that the Manager will remain our investment manager, that we will continue to have access to the Manager ' s or Apollo ' s executive officers and other investment professionals, or that we will be able to find a suitable replacement for the Manager if the Management Agreement is terminated.
In response to inflationary pressure, the U.S. Federal Reserve and other global central banks raised interest rates in 2022 and 2023; however, we cannot predict with certainty 22 any future action that the U.S. Federal Reserve and/or any other global central bank may take with respect to interest rates.
In response to inflationary pressure, the U.S. Federal Reserve and other global central banks raised interest rates in 2022 and 2023. Although interest rates have begun to subside, we cannot predict with certainty any future action that the U.S. Federal Reserve and/or any other global central bank may take with respect to interest rates.
Our charter limits the liability of our present and former directors and officers to us and our stockholders for money damages to the maximum extent permitted under Maryland law. 14 Our charter authorizes us, and our bylaws and indemnification agreements entered into with each of our directors and executive officers require us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of their ultimate entitlement to indemnification, to pay or reimburse defense costs and other expenses of each of our directors and officers in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us.
Our charter authorizes us, and our bylaws and indemnification agreements entered into with each of our directors and executive officers require us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of their ultimate entitlement to indemnification, to pay or reimburse defense costs and other expenses of each of our directors and officers in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us.
In the event of the bankruptcy of a commercial mortgage loan borrower or other real estate-related loan borrower, the loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In the event of the bankruptcy of a borrower of a loan, or a tenant or an operator of a property, the loan to such borrower or the loan secured by such property will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
If our subsidiaries fail to maintain an exclusion or exemption from registration pursuant to the 1940 Act, we could, among other things, be required either to (a) change the manner in which we conduct our operations to avoid being required to register as an investment company, (b) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) register as an investment company, any of which could negatively affect the value of our common stock, the sustainability of our business model, and our ability to make distributions which could have an adverse effect on our business and the market price for shares of our common stock.
If we failed to maintain our excluded status under the 1940 Act and became regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in this annual report on Form 10-K. 16 If our subsidiaries fail to maintain an exclusion or exemption from registration pursuant to the 1940 Act, we could, among other things, be required either to (a) change the manner in which we conduct our operations to avoid being required to register as an investment company, (b) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) register as an investment company, any of which could negatively affect the value of our common stock, the sustainability of our business model, and our ability to make distributions which could have an adverse effect on our business and the market price for shares of our common stock.
The transition risks that could impact our company include those risks related to the impact of U.S. and foreign climate- and ESG-related legislation and regulation intended to reduce greenhouse gas emissions and potential climate change impacts, as well as risks arising from climate-and-ESG-related business trends. Moreover, we are subject to risks stemming from the physical impacts of climate change.
The transition risks that could impact our company include those risks related to the impact of U.S. and foreign climate-related legislation and regulation, as well as risks arising from climate-related business trends. Moreover, we and our real estate assets are subject to risks stemming from the physical impacts of climate change.
Our assets include loans that are denominated in currencies other than USD or are secured by assets located outside the United States. As of December 31, 2023, $4.4 billion, or 52.0%, of our assets (by carrying value) were comprised of such loans.
Our assets include loans that are denominated in currencies other than USD or are secured by assets located outside the United States. As of December 31, 2024, $3.7 billion, or 51.8%, of our assets (by carrying value) were comprised of such loans.
While we may enter into such transactions seeking to reduce currency or interest rate risks, unanticipated changes in currency or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions.
We may fail to recalculate, readjust and execute hedges in an efficient manner. 21 While we may enter into such transactions seeking to reduce currency or interest rate risks, unanticipated changes in currency or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions.
As a result, we and our stockholders have rights against our directors and officers that are more limited than might otherwise exist and, in the event that actions taken by any of our directors or officers impede the performance of our company, your and our ability to recover damages from such director or officer will be limited.
As a result, we and our stockholders have rights against our directors and officers that are more limited than might otherwise exist and, in the event that actions taken by any of our directors or officers impede the performance of our company, your and our ability to recover damages from such director or officer will be limited. 17 Our charter contains provisions that make removal of our directors difficult, which could make it difficult for stockholders to effect changes to our management.
Although our use of TRSs may be able to partially mitigate the impact of meeting the requirements necessary to maintain our qualification as a REIT, our ownership of and relationship with our TRSs is limited and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.
These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions. 34 Although our use of TRSs may be able to partially mitigate the impact of meeting the requirements necessary to maintain our qualification as a REIT, our ownership of and relationship with our TRSs is limited and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.
Our commercial real estate corporate debt assets and loans and debt securities of commercial real estate operating or finance companies will be subject to the specific risks relating to the particular company and to the general risks of investing in real estate-related loans and securities, which may result in significant losses.
Significant losses related to our B Notes or mezzanine loans would result in operating losses for us and may limit our ability to make distributions to our stockholders. 25 Our commercial real estate corporate debt assets and loans and debt securities of commercial real estate operating or finance companies will be subject to the specific risks relating to the particular company and to the general risks of investing in real estate-related loans and securities, which may result in significant losses.
We have no separate facilities and are completely reliant on the Manager, which has significant discretion as to the implementation of our operating policies and strategies. We depend on the diligence, skill and network of business contacts of the Manager. We benefit from the personnel, relationships and experience of the Manager’s executive team and other personnel and investors of Apollo.
We have no separate facilities and are completely reliant on the Manager, which has significant discretion as to the implementation of our operating policies and strategies. We depend on the diligence, skill and network of business contacts of the Manager.
In addition, subject to maintaining our qualification as a REIT, we pursue various hedging strategies to seek to reduce our exposure to adverse changes in currencies and interest rates. We may fail to recalculate, readjust and execute hedges in an efficient manner.
In addition, subject to maintaining our qualification as a REIT, we pursue various hedging strategies to seek to reduce our exposure to adverse changes in currencies and interest rates.
Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans, other than through a TRS, and we may be required to limit the structures we use for our securitization transactions, even though such sales or structures might otherwise 30 be beneficial for us.
Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans, other than through a TRS, and we may be required to limit the structures we use for our securitization transactions, even though such sales or structures might otherwise be beneficial for us. 35 We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of shares of our common stock.
RISKS RELATED TO OUR ASSETS We cannot assure stockholders that we will be successful in consummating additional opportunities we identify which would likely materially affect our business, financial condition, liquidity and results of operations. 18 We cannot assure stockholders that we will be able to continue to identify additional assets that meet our investment objectives, that the Manager’s due diligence processes will uncover all relevant facts regarding such assets, that we will be successful in consummating any additional opportunities we identify or that the assets we acquire in the future will yield attractive risk-adjusted returns.
We cannot assure stockholders that we will be able to continue to identify additional assets that meet our investment objectives, that the Manager's due diligence processes will uncover all relevant facts regarding such assets, that we will be successful in consummating any additional opportunities we identify or that the assets we acquire in the future will yield attractive risk-adjusted returns.
Our access to sources of financing depends upon a number of factors over which it has little or no control, including: • general market conditions; • the market’s view of the quality of our assets; • the market’s perception of our growth potential; • our eligibility to participate in and access capital from programs established by the U.S. government; • our current and potential future earnings and cash distributions; and 15 • the market price of the shares of our common stock.
Our access to sources of financing depends upon a number of factors over which it has little or no control, including: • general market conditions; • the market's view of the quality of our assets; • the market's perception of our growth potential; • our eligibility to participate in and access capital from programs established by the U.S. government; • our current and potential future earnings and cash distributions; and • the market price of the shares of our common stock. 18 Weakness in the capital and credit markets could adversely affect one or more lenders and could cause one or more lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.
During times of war and other major conflicts, we and the third-party service providers upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks.
During times of war and other major conflicts, we and the third-party service providers upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks. The rapid evolution and increasing prevalence of artificial intelligence technologies may also increase our cybersecurity risks.
Moreover, we could face limitations in selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.
Moreover, we could face limitations in selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes.
Investments in countries outside the United States may subject us to risks of multiple and conflicting tax laws and regulations, and other laws and regulations that may make foreclosure and the exercise of other remedies in the case of default more difficult or costly compared to U.S. assets as well as political and economic instability abroad, and concerns regarding the stability of the sovereign debt of certain European countries, and other geopolitical issues, including the ongoing conflicts between Israel and Hamas, as well as further escalation of tensions between Israel and various countries in the Middle East and North Africa, and among Russia, Belarus and Ukraine and the severe economic sanctions and export controls imposed by the U.S. and other governments against Russia, Belarus and Russian or Belarusian interests any of which factors could adversely affect our receipt of returns on and distributions from these assets.
Investments in countries outside the United States may subject us to risks of multiple and conflicting tax laws and regulations, and other laws and regulations that may make foreclosure and the exercise of other remedies in the case of default more difficult or costly compared to U.S. assets as well as political and economic instability abroad, and concerns regarding the stability of the sovereign debt of certain European countries, and other geopolitical issues, any of which factors could adversely affect our receipt of returns on and distributions from these assets.
Climate change and regulatory and other efforts to reduce potential climate change impacts and the increased focus on ESG issues could adversely affect our business. We face a number of risks associated with climate change including both transition and physical risks.
Climate change-related risks and regulatory and other efforts to address potential climate change impacts could adversely affect our business. We and our portfolio of real estate assets face a number of risks associated with climate change, including both transition and physical risks.
The executive officers and key personnel of the Manager evaluate, negotiate, close and monitor our investments; therefore, our success will depend on their continued service.
We benefit from the personnel, relationships and experience of the Manager ' s executive team and other personnel and investors of Apollo. The executive officers and key personnel of the Manager evaluate, negotiate, close and monitor our investments; therefore, our success will depend on their continued service.
The failure of a loan, including a mezzanine loan or modified loan, to qualify as a real estate asset could adversely affect our ability to qualify as a REIT. 28 We have and may continue to acquire and originate mezzanine loans, which are loans secured by equity interests in a partnership or limited liability company that directly or indirectly owns real property.
We have and may continue to acquire and originate mezzanine loans, which are loans secured by equity interests in a partnership or limited liability company that directly or indirectly owns real property.
In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.
In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation.
In December 2012, the Commodity Futures Trading Commission ("CFTC"), issued a no-action letter giving relief to operators of mortgage REITs from any applicable CPO registration requirement.
In addition, any investment fund that trades in swaps may be considered a "commodity pool," which would cause its operator to be regulated as a "commodity pool operator" (a "CPO"). In December 2012, the Commodity Futures Trading Commission ("CFTC"), issued a no-action letter giving relief to operators of mortgage REITs from any applicable CPO registration requirement.
In addition, because our secured debt arrangements are short-term commitments of capital, lenders may respond to market conditions making it more difficult for us to secure continued financing.
This could adversely affect the returns on our assets, which might reduce earnings and, in turn, cash available for distribution to our stockholders. In addition, because our secured debt arrangements are short-term commitments of capital, lenders may respond to market conditions making it more difficult for us to secure continued financing.
New climate change-related regulations or interpretations of existing laws may result in enhanced disclosure obligations that could negatively affect us and materially increase our regulatory burden. Increased regulations generally increase the costs to us, and those higher costs may continue to increase if new laws require additional resources, including spending more time, hiring additional personnel or investing in new technologies.
New climate change-related regulations or interpretations of existing laws may result in enhanced disclosure obligations that could negatively affect us and materially increase our regulatory burden.
We cannot predict the ultimate content, timing, or effect of legislative and regulatory actions under the Biden Administration, nor is it possible at this time to estimate the impact of any such actions which could have a dramatic impact on our business, results of operations and financial condition.
We cannot predict the ultimate content, timing, or effect of legislative, regulatory and other actions under the new U.S. administration, nor is it possible at this time to estimate the impact of any such actions which could have a dramatic impact on our business, results of operations and financial condition. 12 The Manager may be unable to operate us within the parameters that allow the Manager to be exempt from regulation as a commodity pool operator, which would subject us to additional regulation and compliance requirements, and could materially adversely affect our business and financial condition.
Also, as a result of this competition, we may not be able to take advantage of attractive opportunities from time to time, and we can offer no assurance that we will be able to identify and acquire assets that are consistent with our objectives.
Also, as a result of this competition, we may not be able to take advantage of attractive opportunities from time to time, and we can offer no assurance that we will be able to identify and acquire assets that are consistent with our objectives. 10 Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results.
The Dodd-Frank Act established a comprehensive regulatory framework for swaps and security-based swaps, including mandatory clearing, execution and reporting requirements, which may result in increased margin requirements and costs. In addition, any investment fund that trades in swaps may be considered a "commodity pool," which would cause its operator to be regulated as a "commodity pool operator" (a "CPO").
The Dodd-Frank Wall Street Reform and Consumer Protection Act established a comprehensive regulatory framework for swaps and security-based swaps, including mandatory clearing, execution and reporting requirements, which may result in increased margin requirements and costs.
This risk affects us more than it does investment vehicles that are not related to Apollo, as Apollo generally does not use information barriers within its asset management business that many firms implement to separate persons who make investment decisions from others who might possess material, non-public information that could influence such decisions.
However, Apollo generally operates without the permanent information barriers within its asset management business that some other investment management firms implement to separate business units and/or to separate persons who make investment decisions from others who might possess material non-public information that could influence such decisions.
The current regulatory environment may be impacted by recent and potential future legislative developments, such as amendments to key provisions of the Dodd-Frank Act, as well as future political developments, such as federal election outcomes.
The current regulatory environment may be impacted by recent and potential future legislative developments, as well as future political developments, such as federal election outcomes. In addition, the substance of regulatory supervision may be influenced through the appointment of individuals to the U.S. Federal Reserve Board and other financial regulatory bodies.
Additionally, both transition and physical risks associated with climate change could result in increased operating costs for our borrowers and could adversely impact our borrowers' ability to make regular payments of principal and interests. As the effects of climate change increase, we expect the frequency and impact of weather and climate related events and conditions to increase as well.
For example, nonseasonal or violent weather events can have a material impact to businesses or properties that focus on tourism or recreational travel. Both transition and physical risks associated with climate change could result in increased operating costs for our borrowers and could adversely impact our borrowers' ability to make regular payments of principal and interest.
Conversely, if we avoid involvement with such industries or activities, we may limit our capital deployment opportunities to an extent that adversely affects our business. 11 Further, significant physical effects of climate change including extreme weather events such as hurricanes or floods can also have an adverse impact on real estate assets that secure our loans or that we own.
Further, significant and extreme weather events, such as hurricanes or floods, can also have an adverse impact on real estate assets that secure our loans or that we own, and the frequency of certain extreme weather events may increase over time.
We also face climate-and ESG-related business trends. Investors are increasingly taking into account ESG factors, including climate risks, diversity, equity and inclusion policies, and corporate governance in determining whether to invest in companies.
Certain investors are increasingly taking into account climate-related factors in determining whether to invest in companies.
These risks may have resulted and may continue to result in a reduction or elimination of return from a loan secured by a particular property." Certain provisions of Maryland law could inhibit changes in control.
See also "—Risks Related to Our Assets—Our real estate assets are subject to risks particular to real property. These risks may have resulted and may continue to result in a reduction or elimination of return from a loan secured by a particular property." Evolving investor-related sentiment to environmental, social, and/or governance issues could adversely affect our business.
Possession of material, non-public information could prevent us from undertaking advantageous transactions; Apollo could decide to establish information barriers. Apollo generally follows an open architecture approach to information sharing within the larger Apollo organization and does not normally impose information barriers within its asset management business.
Possession of material, non-public information could prevent us from undertaking advantageous transactions; Apollo could decide to establish information barriers. Apollo has established certain one-way and/or two-way information barriers in respect of discrete investment strategies (based on established policies and procedures in respect of information barriers).
Removed
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results.
Added
As new technologies, including tools that harness generative artificial intelligence and other machine learning techniques, rapidly develop and become even more accessible, the use of such new technologies by us, our affiliates and our third party service providers will present additional known and unknown risks, including, among others, the risk that confidential information may be stolen, misappropriated or disclosed and the risk that we and/or third party service providers may rely on incorrect, unclear or biased outputs generated by such technologies, any of which could have an adverse impact on us and our business.
Removed
In 2010, former President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which has changed the regulation of financial institutions and the financial services industry, including the mortgage industry.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk Factors—Risks Related to Our Business and Structure— Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results. ” Cybersecurity Governance The AGM board of directors’ oversight of cybersecurity risk management is supported by the audit committee of the AGM board of directors (the “AGM audit committee”), the AAM Global Risk Committee (“AGRC”), the Operational Risk Forum (the “ORF”), the Cybersecurity Working Group and management.
Biggest changeRisk Factors—Risks Related to Our Business and Structure— Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results.
Apollo utilizes a cross-functional approach involving stakeholders across multiple departments, including Apollo Compliance, Legal, Technology, Operations, Risk and others, aimed at identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of potentially material cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management, in consultation with our management and our 31 board of directors, as applicable, in a timely manner. • Technical Safeguards.
Apollo utilizes a cross-functional approach involving stakeholders across multiple departments, including Apollo Compliance, Legal, Technology, Operations, Risk and others, aimed at identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that 36 provide for the prompt escalation of potentially material cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management, in consultation with our management and our board of directors, as applicable, in a timely manner. • Technical Safeguards.
Through ongoing communications with these teams, the CISO monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and reports such threats and incidents to the AGM audit committee or AGM board of directors, as appropriate.
Through ongoing communications with these teams, AGM's CISO monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and reports such threats and incidents to the AGM audit committee or AGM board of directors, as appropriate.
The CISO regularly reports to the ORF regarding cyber risk, and the ORF in turn reports to the AGRC on a quarterly basis, noting any cyber updates when necessary or appropriate.
AGM's CISO regularly reports to the ORF regarding cyber risk, and the ORF in turn reports to the AGRC on a quarterly basis, noting any cyber updates when necessary or appropriate.
He has over 25 years of cyber-related experience, having served in various roles in technology and cybersecurity, including as Head of IT Risk Management, Executive Director of IT & Risk Compliance, and Global IT Risk Evaluation Lead at large financial institutions and consulting firms. He was also previously AGM’s CISO for nearly eight years.
He has over 25 years of cyber-related experience, having served in various roles in technology and cybersecurity, including as Head of IT Risk Management, Executive Director of IT & Risk Compliance, and Global IT Risk Evaluation Lead at large financial institutions and consulting firms. He was also previously AGM ' s CISO for nearly eight years.
For further discussion of the risks we face from cybersecurity threats, including those that could materially affect us, see “Item 1A.
For further discussion of the risks we face from cybersecurity threats, including those that could materially affect us , see "Item 1A.
Additionally, Apollo and other service providers periodically report to management as it relates to our cybersecurity practices. Apollo’s cybersecurity incident response plan provides for proper escalation of identified cybersecurity threats and incidents, including, as appropriate, to our management.
Additionally, Apollo and other service providers periodically report to management as it relates to our cybersecurity practices. Apollo ' s cybersecurity incident response plan provides for proper escalation of identified cybersecurity threats and incidents, including, as appropriate, to our management.
In turn, AGM’s board of directors and/or the AGM audit committee receive quarterly risk updates from risk management professionals, as well as at least annual updates on cyber risk specifically.
In turn, AGM ' s board of directors and/or the AGM audit committee receive quarterly risk updates from risk management professionals, as well as at least annual updates on cyber risk specifically.
The results of such assessments, audits and reviews are reported to Apollo’s risk management function, and Apollo adjusts its cybersecurity policies and practices as necessary based on the information provided by these assessments, audits and reviews. Cybersecurity threat risks have not materially affected our company, including our business strategy, results of operations or financial condition.
The results of such assessments, audits and reviews are reported to Apollo ' s risk management function, and Apollo adjusts its cybersecurity policies and practices as necessary based on the information provided by these assessments, audits and reviews. C ybersecurity threat risks have not materially affected our company, including our business strategy, results of operations or financial condition.
The audit committee of our board of directors receives presentations and reports on cybersecurity risks from AGM’s CSO or CISO, at least annually, and they address a wide range of topics including recent developments, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to Apollo’s peers and third parties.
The audit committee of our board of directors receives presentations and reports on cybersecurity risks from AGM ' s CSO or CISO, at least annually, and they address a wide range of topics including recent developments, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to Apollo ' s peers and third parties.
To facilitate the success of Apollo’s cybersecurity risk management program, multidisciplinary teams throughout Apollo are deployed to address cybersecurity threats and to respond to cybersecurity incidents.
To facilitate the success of Apollo ' s cybersecurity risk management program, multidisciplinary teams throughout Apollo are deployed to address cybersecurity threats and to respond to cybersecurity incidents.
The Cyber Security Working Group is chaired by the CISO and has representation from Apollo’s Technology, Legal, Compliance, and ERM teams. The group meets at least once a quarter to discuss cybersecurity and risk mitigation activities, among other topics.
The Cyber Security Working Group is chaired by AGM's CISO and has representation from Apollo ' s Technology, Legal, Compliance, and ERM teams. The group meets at least once a quarter to discuss cybersecurity and risk mitigation activities, among other topics.
The AGM board of directors, the AGM audit committee, the AGRC, the ORF and the Cyber Security Working Group receive regular updates on Apollo’s information technology, cybersecurity risk profile and strategy, and risk mitigation plans from Apollo’s risk management professionals, the AGM's Chief Security Officer (“CSO”), CISO, other members of management and relevant management committees and working groups.
The AGM board of directors, the AGM audit committee, the AGRC, the ORF and the Cyber Security Working Group receive regular updates on Apollo ' s information technology, cybersecurity risk profile and strategy, and risk mitigation plans from Apollo ' s risk management professionals, the AGM's Chief Security Officer ("CSO"), AGM's CISO, other members of management and relevant management committees and working groups.
Apollo’s cybersecurity policies and practices are fully integrated into its ERM framework through its reporting, risk management and oversight channels and are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards.
Apollo ' s cybersecurity policies and practices are fully integrated into its ERM framework through its reporting, risk management and oversight channels and are based, in part, on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards.
AGM’s CISO holds a master’s degree in Business Information Systems and has served in various roles in information technology and information security for over 25 years across a number of large financial institutions, including as Director, Cybersecurity and Risk.
AGM ' s CISO holds a master ' s degree in Business Information Systems and has served in various roles in information technology and information security for over 25 years across a number of large financial institutions, including as Director, Cybersecurity and Risk.
Apollo’s Chief Information Security Officer (“CISO”) and the CISO of Athene Holding Ltd., a subsidiary of AGM, with support from the broader Apollo Technology team, are responsible for information security strategy, policies and practices, as well as, as appropriate, with our executive officers and other representatives of the Manager and its affiliates. • Collaborative Approach.
("AHL" ), a subsidiary of AGM, with support from the broader Apollo Technology team, are responsible for information security strategy, policies and practices , as well as, as appropriate, with our executive officers and other representatives of the Manager and its affiliates. • Collaborative Approach.
(“AGM”) board of directors is involved in overseeing Apollo’s risk management program, including with respect to cybersecurity, which is a critical component of Apollo’s overall approach to enterprise risk management (“ERM”).
("AGM") board of directors is involved in overseeing Apollo ' s risk management program, including with respect to cybersecurity, which is a critical component of Apollo ' s overall approach to enterprise risk management ("ERM").
The AGM CISO, in coordination with the Apollo Technology and ERM teams, works collaboratively across Apollo to implement a program designed to protect its information systems from cybersecurity threats and to promptly respond to any 32 cybersecurity incidents in accordance with its incident response and recovery plans.
The full AGM board of directors or the AGM audit committee receives presentations and reports on cybersecurity risks from AGM ' s CSO or CISO, as well as from AHL ' s CISO, at least annually . 37 AGM ' s CISO, in coordination with the Apollo Technology and ERM teams, works collaboratively across Apollo to implement a program designed to protect its information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with its incident response and recovery plans.
As one of the critical elements of Apollo’s overall ERM approach, Apollo’s cybersecurity program is focused on the following key areas: • Governance. As discussed further under the heading “Cybersecurity Governance,” the AGM board of directors has an oversight role, as a whole and also at the committee level, in overseeing management of Apollo’s risks, including its cybersecurity risks.
As discussed further under the heading "Cybersecurity Governance," the AGM board of directors has an oversight role, as a whole and also at the committee level, in overseeing management of Apollo ' s risks, including its cybersecurity risks. Apollo ' s Chief Information Security Officer ("CISO") and the CISO of Athene Holding Ltd.
The full AGM board of directors or the AGM audit committee receives presentations and reports on cybersecurity risks from AGM’s CSO or CISO, as well as from AHL’s CISO, at least annually . AGM’s CSO holds an undergraduate degree in Management Information Systems and Business Administration, which he received magna cum laude.
AGM ' s CSO holds an undergraduate degree in Management Information Systems and Business Administration, which he received magna cum laude.
Added
As one of the critical elements of Apollo ' s overall ERM approach, Apollo ' s cybersecurity program is focused on the following key areas: • Governance.
Added
" Cybersecurity Governance The AGM board of directors ' oversight of cybersecurity risk management is supported by the audit committee of the AGM board of directors (the "AGM audit committee"), the AAM Global Risk Committee ("AGRC"), the Operational Risk Forum (the "ORF"), the Cybersecurity Working Group and management.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Refer to "Note 18 - Commitments and Contingencies" for further detail regarding legal proceedings . Item 4. Mine Safety Disclosures Not Applicable. 33 PART II
Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Refer to "Note 18 - Commitments and Contingencies" for further detail regarding legal proceedings. Item 4. Mine Safety Disclosures Not Applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of February 5, 2024, we had 445 registered holders of our common stock. The 445 holders of record include Cede & Co., which holds shares as nominee for The Depository Trust Company, which itself holds shares on behalf of the beneficial owners of our common stock.
Biggest changeThe 420 holders of record include Cede & Co., which holds shares as nominee for The Depository Trust Company, which itself holds shares on behalf of the beneficial 38 owners of our common stock. Such information was obtained through our registrar and transfer agent, based on the results of a broker search.
The graph assumes that $100 was invested on December 31, 2018 in our common stock, the S&P 500 and the BBREMTG Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.
The graph assumes that $100 was invested on December 31, 2019 in our common stock, the S&P 500 and the FNMRC Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations," of this annual report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends.
"Management ' s Discussion and Analysis of Financial Condition and Results of Operations," of this annual report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends.
Stockholder Return Performance The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Standard & Poor's 500 (the "S&P 500"), and the Bloomberg REIT Mortgage Index (the "BBREMTG Index"), a published industry index, from December 31, 2018 to December 31, 2023.
Stockholder Return Performance The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Standard & Poor's 500 (the "S&P 500"), and the FTSE Nareit All Mortgage Capped Index (the "FNMRC Index"), a published industry index, from December 31, 2019 to December 31, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange, under the symbol "ARI." On February 5, 2024, the last sales price for our common stock on the New York Stock Exchange was $11.00 per share.
Item 5. Market for Registrant ' s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange, under the symbol "ARI." Holders As of February 7, 2025, we had 420 registered holders of our common stock.
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Such information was obtained through our registrar and transfer agent, based on the results of a broker search.
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Period Ending 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Apollo Commercial Real Estate Finance, Inc. 100.00 71.42 92.62 86.34 107.36 89.41 S&P 500 100.00 118.39 152.34 124.72 157.48 196.85 FTSE Nareit AMC Index 100.00 80.37 93.88 68.62 78.98 78.73 Recent Sales of Unregistered Securities None. 39 Recent Purchases of Equity Securities We did not repurchase any of our equity securities during the fourth quarter of 2024.
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Period Ending 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Apollo Commercial Real Estate Finance, Inc. 100.00 121.05 86.53 112.19 104.59 130.04 S&P 500 100.00 125.24 148.27 190.79 156.21 197.23 BBREMTG Index 100.00 120.03 93.38 109.82 83.05 95.08 34 Recent Sales of Unregistered Securities None.
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Recent Purchases of Equity Securities We did not repurchase any of our equity securities during the three months or year ended December 31, 2023. 35 Item 6. [Reserved] Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our financial statements and accompanying notes included in

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table estimates the hypothetical impact on our net interest income for the twelve-month period following December 31, 2023, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in thousands, except per share data): 50 basis point increase 50 basis point decrease Currency Net floating rate assets subject to interest rate sensitivity Increase to net interest income (1)(2) Increase to net interest income (per share) (1)(2) Decrease to net interest income (1)(2) Decrease to net interest income (per share) (1)(2) USD $ 207,063 $ 1,035 $ 0.01 $ (1,035) $ (0.01) GBP 836,192 2,347 0.02 (2,347) (0.02) EUR 140,688 2,083 0.01 (2,083) (0.01) SEK 49,618 248 — (248) — Total: $ 1,233,561 $ 5,713 $ 0.04 $ (5,713) $ (0.04) ——————— (1) Any such hypothetical impact on interest rates on our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment.
Biggest changeThe following table estimates the hypothetical impact on our net interest income for the twelve-month period following December 31, 2024, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in thousands, except per share data): 50 basis point increase 50 basis point decrease Currency Net floating rate assets subject to interest rate sensitivity (1) Increase to net interest income (2)(3) Increase to net interest income (per share) (2)(3) Decrease to net interest income (2)(3) Decrease to net interest income (per share) (2)(3) USD $ (217,959 ) $ (321 ) $ — $ 1,240 $ 0.01 GBP 607,838 3,039 0.02 (3,039 ) (0.02 ) EUR 318,155 1,591 0.01 (1,489 ) (0.01 ) SEK 44,798 224 — (224 ) — Total: $ 752,832 $ 4,533 $ 0.03 $ (3,512 ) $ (0.02 ) (1) Excludes floating rate loans on nonaccrual (2) Any such hypothetical impact on interest rates on our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment.
Market Risk 51 Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters and other acts of god.
Market Risk Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters and other acts of god.
We generally seek to manage this risk by: • attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods; • using hedging instruments and interest rate swaps, when we deem appropriate; and • to the extent available and appropriate, using securitization financing to better match the maturity of our financing with the duration of our assets.
We generally seek to manage this risk by: • attempting to structure our financing agreements to have a range of different maturities, terms, amortization and interest rate adjustment periods; • using hedging instruments and interest rate swaps, when we deem appropriate; and • to the extent available and appropriate, using securitization financing to better match the maturity of our financing with the duration of our assets.
(2) Certain of our floating rate loans are subject to index floors. Prepayment Risk Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, we adapt to prepayment risk by stating prepayment penalties in loan agreements.
(3) Certain of our floating rate loans are subject to index floors. 57 Prepayment Risk Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, we adapt to prepayment risk by stating prepayment penalties in loan agreements.
We seek to mitigate this exposure through foreign currency forward contracts, which match the net principal and interest of our foreign currency loans and secured debt arrangements. Item 8. Financial Statements and Supplementary Data.
We seek to mitigate this exposure through foreign currency forward contracts, which match the net principal and interest of our foreign currency loans and secured debt arrangements. 58
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Index to Consolidated Financial Statements and Schedule Report of Independent Registered Public Accounting Firm (PCAOB ID NO.34) 53 Consolidated Balance Sheets as of December 31, 2023 and 2022 56 Consolidated Statements of Operations for the years ended December 31, 202 3 , 202 2 , and 2021 57 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 202 3 , 202 2 , and 2021 58 Consolidated Statement of Cash Flows for the years ended December 31, 202 3 , 202 2 and 2021 59 Notes to Consolidated Financial Statements 61 Schedule Schedule IV—Mortgage Loans on Real Estate 95 All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto. 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Apollo Commercial Real Estate Finance, Inc.
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New York, New York Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Apollo Commercial Real Estate Finance, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 8 (collectively referred to as the "financial statements").
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We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
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In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
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Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
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Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.
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Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
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We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
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Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
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Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
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We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate 53 because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Current Expected Credit Losses (“CECL”) Allowance—Estimation of Economic Conditions—Refer to Notes 2 and 4 to the Financial Statements Critical Audit Matter Description The Company estimates its CECL allowance primarily using the Weighted Average Remaining Maturity (“WARM”) method, which has been identified as an acceptable approach for computing current expected credit losses.
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In determining the CECL allowance, the Company considers various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to the Company when they are the senior lender, (v) capital senior to the Company when they are the subordinate lender, and (vi) the Company’s current and future view of the macroeconomic environment.
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Management’s estimation of the current and future economic conditions that may impact the performance of the commercial real estate assets securing the Company’s assets include the unemployment rate, commercial real estate prices, and market liquidity. The Company uses projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on the loss rate.
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We identified the macroeconomic factors within the CECL allowance as a critical audit matter because of the subjectivity, complexity and estimation uncertainty in determining the impact of the factors on the Company’s loss rate.
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This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate whether the macroeconomic factors determined by management reasonably and appropriately quantify the current and future macroeconomic risks associated with the Company’s portfolio.
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How the Critical Audit Matter Was Addressed in the Audit Our audit procedures to assess the macroeconomic factors applied by management to the CECL allowance to account for current and future economic conditions included, among others: • We tested the operating effectiveness of controls over management’s review of the CECL allowance, including management’s judgments involved in the determination of the macroeconomic factors applied to the loss rate. • We evaluated the reasonableness of the methodology and significant assumptions used to develop the macroeconomic factors by considering relevant industry trends and economic conditions, including whether the methodology and significant assumptions were appropriate and consistent with what market participants would use. • We tested the accuracy and completeness of quantitative data used by management to estimate the current and future view of macroeconomic conditions.
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CECL Allowance—Estimation of Fair Value of Underlying Collateral of Loans Exhibiting Signs of Financial Difficulty — Refer to Notes 2 and 4 to the financial statements Critical Audit Matter Description For loans where the Company deems the borrower or sponsor to be experiencing financial difficulty, the Company has elected to apply a practical expedient in accordance with the CECL standard.
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In accordance with the practical expedient approach, the loan loss allowance is determined to be the difference between the fair value of the underlying collateral and the carrying value of the loan prior to the loan loss allowance.
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Significant judgments are required in determining the loan loss allowance, including estimates and assumptions regarding the value of the underlying collateral and other estimates. We identified the estimation of the fair value of the underlying collateral of loans as a critical audit matter because of the significant estimates and assumptions required by management to evaluate the Company’s fair value analysis.
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This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when 54 performing audit procedures to evaluate the reasonableness of management’s estimate of the allowance for loan loss.
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How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the determination of the fair value for those assets in which the borrower or sponsor exhibit signs of financial difficulty as part of estimation of the CECL allowance included the following, among others: • We tested the operating effectiveness of controls over management’s review of the fair value analysis including controls over management’s review of the assumptions used within the fair value analysis including, but not limited to, discount rate and capitalization rate and the inputs used within the fair value analysis.
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These inputs include, but are not limited to, debt service coverage ratio, occupancy, and microeconomic and macroeconomic conditions that could impact the property. • We evaluated the Company’s determination of fair value by performing the following: – With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology; (2) significant assumptions made, including whether the significant inputs used in the model were appropriate and consistent with what market participants would use to value the collateral; and (3) mathematical accuracy of the overall valuation model – We tested the underlying data used to develop the fair value to determine that the information used in the analysis was accurate and complete – We performed a sensitivity analysis when deemed necessary based on results of other audit procedures performed for comparison to the Company’s fair value analysis – We considered whether events or transactions that occurred after the balance sheet date but before the completion of the audit affect the conclusions reached on the fair value measures and disclosures /s/ DELOITTE & TOUCHE LLP New York, New York February 6, 2024 We have served as the Company's auditor since 2009. 55 PART I - FINANCIAL INFORMATION

Other ARI 10-K year-over-year comparisons