Investor Presentation

Transcription

1 A P O L L O C O M M E R C I A L R E A L E S T A T E F I N A N C E, I N C. Investor Presentation May 2018 Information is as of March 31, 2018, except as otherwise noted. It should not be assumed that investments made in the future will be profitable or will equal the performance of the investments in this document.

2 Forward Looking Statements and Other Disclosures This presentation may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond management s control. These forward-looking statements may include information about possible or assumed future results of Apollo Commercial Real Estate Finance, Inc. s ( ARI or the Company ) business, financial condition, liquidity, results of operations, plans and objectives. When used in this presentation, the words believe, expect, anticipate, estimate, plan, continue, intend, should, may or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forwardlooking: ARI s business and investment strategy; ARI s operating results; ARI s ability to obtain and maintain financing arrangements; the return on equity, the yield on investments and risks associated with investing in realestate assets; and changes in business conditions and the general economy. The forward-looking statements are based on management s beliefs, assumptions and expectations of future performance, taking into account all information currently available to ARI. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to ARI. Some of these factors are described under Risk Factors, and Management s Discussion and Analysis of Financial Condition and Results of Operations included in ARI s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other periodic reports filed with the Securities and Exchange Commission ( SEC ), which are accessible on the SEC s website at If a change occurs, ARI s business, financial condition, liquidity and results of operations may vary materially from those expressed in ARI s forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for management to predict those events or how they may affect ARI. Except as required by law, ARI is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation contains information regarding ARI s financial results that is calculated and presented on the basis of methodologies other than in accordance with accounting principles generally accepted in the United States ( GAAP ), including Operating Earnings and Operating Earnings per share. Please refer to footnote 23 on slide 24 for a definition of Operating Earnings and the reconciliation of the applicable GAAP financial measure to Operating Earnings set forth on slide 21. This presentation may contain statistics and other data that in some cases has been obtained from or compiled from information made available by third-party service providers. ARI makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness or completeness of such information. Past performance is not indicative nor a guarantee of future returns. Index performance and yield data are shown for illustrative purposes only and have limitations when used for comparison or for other purposes due to, among other matters, volatility, credit or other factors (such as number and types of securities). Indices are unmanaged, do not charge any fees or expenses, assume reinvestment of income and do not employ special investment techniques such as leveraging or short selling. No such index is indicative of the future results of any investment by ARI. Additional Information and Where to Find It Copies of the documents filed by ARI with the SEC are available free of charge from the website of the SEC at as well as on ARI s website at This document is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. 2

3 ARI at a Glance $8.7bn Total Capital Deployed since 2009 $4.1bn Portfolio of Senior and Subordinate Loans $2.0bn/$0.9bn Loan Commitments made in 2017/1Q18 89% Floating Rate Exposure 9.2% 1 Weighted Average Unlevered All-in Yield 0.8x Debt 2 / Common Equity ratio ARI is a leading commercial mortgage REIT with a reputation as a creative, reliable and responsible capital solutions provider 3

4 ARI Key Highlights Nine-Year History as an Innovative, Creative Global CRE Credit Provider Apollo Affiliation Leading global alternative investment manager with $247bn AUM Apollo s 3 private equity, real estate and credit platforms provide an exceptional understanding of the markets and sectors in which ARI operates Experienced Team with Proven Track Record Apollo s full-scale investment platform focusing on real estate credit $22.5 billion of total capital deployed through Apollo s broader commercial real estate credit platform since 2009, $8.7 billion deployed through ARI Differentiated Origination and Underwriting Capabilities Stable and Diverse Loan Portfolio with Attractive In-Place Yield First-Call relationships with real estate owners and operators, brokers and senior lenders Employ credit-first methodology when examining investment opportunities Diligent loan structuring with protections designed to withstand variability $4.1 billion portfolio of first mortgage and subordinate loans secured by institutional quality commercial real estate Broadly diversified by property type and geography All-in yield of 9.2% 1 Prudent Balance Sheet Management Conservative leverage at 0.8x debt 2 to common equity Ample liquidity with over $600 million of capacity from existing credit facilities 4

5 Integrated Apollo CRE Credit Platform ARI Benefits from Apollo s 3 Full-Scale CRE Credit Platform $22.5bn of capital deployed into first mortgages, mezzanine loans, preferred equity and CMBS $9.7bn of AUM 4 across ARI, private investment funds and managed accounts $5.3bn hotel loans 222 transactions completed $3.8bn office loans $4.0bn condominium and multifamily loans First-call relationships with owners, operators and brokers Market intelligence and diligence Apollo CRE Credit Platform 17 Investment Professionals in NY, London and San Francisco Underwriting and structuring expertise Capacity to provide onestop shopping for borrowers Banking and financing relationships 5

6 Investment Strategy ARI s Investment Strategy Focuses on Finding Attractive Relative Value Investment Process Directly Originate with Borrower or Co-Originate with Senior Lender Underwrite and Structure Pro-Actively Asset Manage Target Investments Investment Sourcing Channels First mortgage and subordinate loans on transitional and/or stabilized properties Direct relationships with real estate owners and operators Major markets throughout the United States and Western Europe Institutional sponsorship with significant borrower equity First-call relationships with CRE brokers Like-minded senior lenders Repeat borrowers Underwriting focused on credit-first philosophy and capital preservation Apollo s global real estate platform Ability to pursue complexity in execution or operations 6

7 Illustrative Transaction Economics Low Double-Digit ROEs that are Positively Correlated to Increases in LIBOR Illustrative First Mortgage Loan Illustrative Subordinate Loan LTV Illustrative $250mm Capital Stack Total $ LTV Illustrative $250mm Capital Stack Total $ 45% 65% Repo Facility Advance: $112.5 million ARI Investment: $50 million $112.5 mm $162.5 mm $162.5mm ARI First Mortgage (2.3x leverage) L+10.6% ROE 45% 65% Third-Party Senior Loan $112.5 million ARI Subordinate Loan: $50 million $112.5 mm $162.5 mm $50.0mm ARI Unencumbered Sub Loan L+10.5% ROE Borrower s Equity: $87.5 million Borrower s Equity: $87.5 million 100% $250 mm 100% $250 mm Gross yield: 5 L+4.8% Cost of funds: Net spread Repo leverage Levered net spread (L+2.3%) L+2.5% ~2.3x L+5.8% Total ROE: L+10.6% Total ROE 5 : L+10.5% (Unencumbered) For illustrative purposes only. Data is based on estimates and assumptions and represents hypothetical transactions. Actual investments and results may differ materially from those discussed herein. 7

8 Portfolio Evolution Expanding Portfolio with an Increased Emphasis on Floating-Rate First Mortgage Loans Annual Loan Originations $ (millions) $2,000 $2,045 $1,500 $1,000 $987 $1,263 $1,216 $922 $500 $0 $394 $119 $99 $ Q18 Mortgage Subordinate loan ARI Investment Portfolio Evolution By Gross Assets at Amortized Cost $ (millions) $3,680 $4,067 $3,121 $2,465 79% CMBS $811 $860 $669 $849 $1,619 74% first mortgage Q18 6 First Mortgages Subordinate Loans Other CMBS 8

9 Loan Portfolio Overview ($ in millions) 1Q18 Number of Loans 63 Amortized Cost $4,067 Net Equity at Cost $2,885 Unfunded Loan Commitments 7 $853 Property Type By Amortized Cost Office 14% Mixed Use 9% Pre-development 17% Industrial 2% Weighted Average Unlevered Yield on Floating-Rate Loans 8 L+7.3% Healthcare 4% Hotel 16% Weighted Average Unlevered All-in-Yield 1 9.2% Weighted Average Remaining Term Years Unencumbered Assets $2,020 Residential - for sale 17% Retail Center 5% Other 4% Residential - for rent 12% 10 Loan Position at Amortized Cost Loan Position by Net Equity at Amortized Cost Subordinate Loan 26% Subordinate Loan 36% First Mortgage 74% First Mortgage 64% 9

10 Loan Portfolio Geographic Distribution ($ in millions) Property Type Manhattan, NY Brooklyn, NY Northeast Midwest Southeast West Southwest Mid Atlantic United Kingdom Other International Total Predevelopment $65 / 2% $128 / 3% - - $221 / 5% $60 / 1% - - $236 / 6% - $711 / 17% Residential-for sale 408 / 10% / 1% - 34 / 1% 236 / 6% / 17% Hotel 313 / 8% - 38 / 1% 57 / 1% 132 / 3% 28 / 1% 25 / 1% 20 / 0% - 42 / 1% 655 / 16% Office 134 / 3% 75 / 2% 0 / 0% 253 / 6% - 42 / 1% / 2% / 14% Residential Rental 115 / 3% 155 / 4% 1 / 0% 40 / 1% 10 / 0% 63 / 2% 5 / 0% - 46 / 1% 33 / 1% 468 / 12% Mixed Use 175 / 4% / 4% 7 / 0% / 9% Retail Center / 4% 31 / 1% / 5% Healthcare / 0% 12 / 0% 30 / 1% 31 / 1% - 30 / 1% 47 / 1% / 4% 10 Other / 0% 22 / 1% 13 / 0% 7 / 0% - 96 / 2% / 4% Industrial / 1% 10 / 0% 4 / 0% 13 / 0% 3 / 0% 2 / 0% / 2% 11 Total $1,210 / 29% $358 / 9% $108 / 3% $738 / 18% $447 / 11% $270 / 7% $33 / 1% $182 / 4% $645 / 16% $75 / 2% $4,067 / 100% Northeast 3% West 7% Midwest 18% Brooklyn 9% Mid- Atlantic 4% Manhattan 29% United Kingdom 16% South -west 1% Southeast 11% Other International 2% 10

11 Capital Structure ~$4.6 Billion Total Market Capitalization Capital Structure Composition Capital Structure Detail Convertible Notes 13% Preferred Stock 8% Equity Market Cap 51% ($mm, except per share data) Amount ($) Cash and cash equivalents $ Credit Facilities Capacity W/A Rate Maturity Outstanding 13 J.P. Morgan $1,382 L+2.30% Mar-20 $801 Deutsche Bank (USD) 402 L+2.48% Mar Deutsche Bank (GBP) 166 L+2.60% Mar Goldman Sachs 328 L+2.57% Nov Total Credit Facilities $2,278 Apr-20 $1,227 Convertible Notes 5.50% Notes Mar-19 $ % Notes Aug Total Convertible Debt Mar-21 $600 Total Debt Aug-20 $1,827 Preferred Stock 8.0% Series B Preferred $ % Series C Preferred (currently callable) 173 Total Preferred Stock $342 Repo Facilities 28% Equity Market Capitalization 15 Stock price as of 5/25/18 $18.58 Shares outstanding (mm) 123 Equity Market Capitalization $2,285 Total Market Capitalization $4,552 11

12 Prudent Balance Sheet Management ARI s financial management is centered around the following principles: Finance first mortgages ( x leverage) using repurchase facilities Keep subordinate loans unencumbered Maintain adequate cash liquidity at all times Match fund floating rate assets to minimize interest rate risk Actively manage the duration of leverage to keep maturities of liabilities well staggered Carefully evaluate and monitor pro forma coverage metrics when making capital structure decisions Summary of Credit Metrics as of 3/31/2018 Debt 2 to Common Equity at Book Value 0.8x Debt 2 to Total Equity at Book Value 0.7x Debt 2 to Common Equity Market Capitalization 0.8x Debt 2 to Total Equity Market Capitalization 0.7x Debt 2 as a % of Total Enterprise Value 43% Unencumbered Assets to Unsecured Debt x Debt Service Coverage 3.4x Fixed Charge Coverage x 12

13 Growth in Capital Base Since 2014, total equity has grown ~2.6x ($ in millions) $4,018 $3,623 $3,059 $1,670 $1,535 $2,444 $1,126 $342 $1,646 $1,069 $459 $342 $800 $855 $663 $502 $518 $116 $193 $(2) $195 $298 $337 $461 $86 $834 $151 $597 $86 $790 $769 $86 $286 $1,089 $1,473 $1,746 $2, Q18 BV Common Equity Preferred Equity Debt 2 Debt 2 to Common Equity 0.6x 1.7x 1.5x 0.5x 0.3x 1.1x 1.0x 0.9x 1.1x 0.8x Note: Total capital base does not tie to total portfolio due to inclusion of net other assets and liabilities in NAV 13

14 Ample Liquidity ARI has more than sufficient liquidity to meet unexpected demands ~ ~ ~ ~

15 Net Interest Income Per Share Interest Rate Sensitivity ARI s Portfolio Income and Operating Earnings are Positively Correlated to an Increase in LIBOR Rate Profile of Loan Portfolio 20 Net Interest Income Sensitivity to LIBOR 21 $ % $0.15 $ % $0.05 Floating Rate Fixed Rate $ % 0.50% 0.75% 1.00% Increase in LIBOR 15

16 Dividend Overview ARI Offers an Attractive Dividend Yield and Trades at a Premium to Book Value Cumulative Dividends per Share of Common Stock $16.00 $14.00 $13.36 $13.82 $12.00 $11.52 $10.00 $9.68 $8.00 $6.00 $4.70 $6.30 $7.90 $4.00 $3.10 $2.00 $1.50 $ Q Dividend Yields and Price/Book Multiples % % 8.0% 6.0% 9.9% % 8.8% % 8.3% 8.2% 8.2% 8.4% 7.8% % 2.0% % ARI CLNC STWD KREF GPMT TRTX LADR ACRE BXMT

17 Investment Highlights Nine-Year Track Record as an Innovative, Creative Global CRE Debt Provider First-Call Relationship with Real Estate Owners and Operators, Senior Lenders and Brokers Stable and Diverse $4.0 Billion Loan Portfolio Demonstrated Ability to Access Attractively Priced Capital Well Positioned for Rising Interest Rates 9.9% Dividend Yield 23 17

18 Appendix 18

19 Consolidated Balance Sheet (in thousands - except share data) March 31, 2018 December 31, 2017 Assets: Cash $98,310 $77,671 Commercial mortgage loans, net (includes $2,176,126 and $2,148,368 pledged as collateral under secured debt arrangements in 2018 and 2017, respectively) 3,029,240 2,653,826 Subordinate loans, net 1,038,254 1,025,932 Loan proceeds held by servicer 30, ,756 Other assets 46,087 28,420 Total Assets $4,242,172 $4,088,605 Liabilities and Stockholders Equity Liabilities: Secured debt arrangements, net (net of deferred financing costs of $14,037 and $14,348 in 2018 and 2017, respectively) $1,212,749 $1,330,847 Convertible senior notes, net 585, ,897 Derivative liabilities, net 14,499 5,644 Accounts payable, accrued expenses and other liabilities 73,330 70,906 Payable to related party 8,092 8,168 Total Liabilities 1,894,642 2,000,462 Stockholders Equity: Preferred stock, $0.01 par value, 50,000,000 shares authorized: Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 aggregate liquidation preference) in 2018 and Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2018 and Common stock, $0.01 par value, 450,000,000 shares authorized, 122,992,231 and 107,121,235 shares issued and outstanding in 2018 and 2017, respectively 1,230 1,071 Additional paid-in-capital 2,444,036 2,170,078 Accumulated deficit (97,873) (83,143) Total Stockholders Equity 2,347,530 2,088,143 Total Liabilities and Stockholders Equity $4,242,172 $4,088,605 19

20 Consolidated Statement of Operations (in thousands - except share data and per share data) Three months ended March 31, 2018 March 31, 2017 Net interest income: Interest income from commercial mortgage loans $52,114 $34,398 Interest income from subordinate loans 33,853 34,390 Interest income from securities - 6,054 Interest expense (22,740) (17,030) Net interest income 63,227 57,812 Operating expenses: General and administrative expenses (includes equity-based compensation of $3,342 and $3,791 in 2018 and 2017, respectively) (4,998) (5,758) Management fees to related party (8,092) (7,432) Total operating expenses (13,090) (13,190) Income from unconsolidated joint venture Other income Realized loss on sale of assets - (1,042) Unrealized gain on securities - 2,852 Foreign currency gain 10,125 3,172 Loss on derivative instruments (includes unrealized losses of $(8,855) and $(2,889) in 2018 and 2017, respectively) (11,032) (3,045) Net income 49,433 47,125 Preferred dividends (6,835) (9,310) Net income available to common stockholders $42,598 $37,815 Net income per share of common stock $0.38 $0.41 Basic weighted average shares of common stock outstanding 110,211,853 91,612,447 Diluted weighted average shares of common stock outstanding 111,871,429 92,998,250 Dividend declared per share of common stock $0.46 $

21 Reconciliation of Net Income to Operating Earnings (24) (in thousands - except share and per share data) March 31, 2018 Three months ended Earnings Per Share (Diluted) March 31, 2017 Earnings Per Share (Diluted) Operating Earnings : 24 Net income available to common stockholders $42,598 $0.38 $37,815 $0.41 Adjustments: Equity-based compensation expense 3, , Unrealized gain on securities - - (2,852) (0.03) Unrealized loss on derivative instruments 11, , Foreign currency gain, net Amortization of Convertible Senior Notes related to equity reclassification Income from unconsolidated joint venture (10,362) (0.09) (3,326) (0.04) 1, (458) (0.01) Total Adjustments 5, Operating Earnings 24 $47,750 $0.43 $38,623 $0.41 Realized loss and costs from sale of CMBS - - 1, Operating Earnings excluding realized loss and costs from sale of CMBS $47,750 $0.43 $39,665 $0.42 Basic weighted average shares of common stock outstanding Diluted weighted average shares of common stock outstanding 110,211,853 91,612, ,871,429 92,998,250 21

22 Senior Loan Portfolio Property Type Risk Rating Origination Date Amortized Cost ($MM) Unfunded Commitment ($MM) Fully-extended Maturity Location Residential-for sale 3 3/2018 $236-3/2021 London, UK Predevelopment 3 1/ /2019 Miami, FL Office 3 11/ /2023 Chicago, IL Predevelopment 3 4/ /2019 London, UK Retail Center 4 11/ /2020 Cincinnati, OH 25 Hotel 3 9/ /2020 Manhattan, NY Mixed Use 3 9/ /2020 Chicago, IL Predevelopment 3 3/ /2018 Brooklyn, NY Mixed Use 2 7/ /2019 Manhattan, NY Office 3 11/ /2022 Manhattan, NY Hotel 3 9/ /2021 Manhattan, NY Office 3 12/ /2022 London, UK Other 2 10/ /2019 Manassas, VA Residential-for rent 2 4/ /2019 Various Hotel 3 3/ /2022 Atlanta, GA Residential-for rent 3 10/ /2021 Brooklyn, NY Predevelopment 3 11/ /2018 Manhattan, NY Predevelopment 3 7/ /2019 London, UK Predevelopment 3 12/ /2020 Los Angeles, CA Hotel 2 1/ /2022 Miami, FL Residential-for rent 3 11/ /2021 Various Office 3 3/ /2023 Chicago, IL Hotel 2 1/ /2022 St. Louis, MO Hotel 3 12/ /2022 Manhattan, NY Residential-for rent 3 10/ /2022 London, UK Residential-for rent 3 11/ /2018 Brooklyn, NY Residential-for rent 3 5/ /2018 Brooklyn, NY Hotel 3 12/ /2020 St. Thomas, USVI 26 Residential-for rent 5 11/ /2019 Williston, ND Hotel 3 2/ /2023 Pittsburgh, PA Mixed Use 3 7/ /2019 Manhattan, NY Residential-for rent 3 12/ /2020 Manhattan, NY Office / /2022 Renton, WA Residential-for sale / /2019 Bethesda, MD Retail Center 3 2/ /2020 Miami, FL Residential-for sale 3 1/ /2023 Manhattan, NY Mixed Use 3 7/ /2019 Manhattan, NY Residential-for sale 2 3/2018 (1) 115 3/2023 San Francisco, CA Sub Total - Senior Loans $3,029 $ Years Weighted Average Yield 8 on Loans with Floating Rate L+5.8% - Weighted Average All-in Yield 1 on All Senior Loans 7.7% 22

23 Subordinate Loan Portfolio Overview Property Type Risk Rating Origination Date Amortized Cost ($MM) Unfunded Commitment ($MM) Fully-extended Maturity Location Residential-for sale /2015 $138-7/2020 Manhattan, NY Healthcare 3 10/ /2021 Various Residential-for sale 3 2/ /2021 Manhattan, NY Office 3 3/ /2018 Brooklyn, NY Other 3 9/ /2022 Various Residential-for sale 3 7/ /2020 Manhattan, NY Residential-for rent 3 10/ /2019 Manhattan, NY 28 Residential-for sale 3 11/ /2020 Manhattan, NY Industrial 3 6/ /2020 Long Island, NY Healthcare 3 1/ /2019 Various Mixed Use 3 1/ /2027 Cleveland, OH Residential-for sale 3 10/ /2020 Manhattan, NY Industrial 3 5/ /2023 Various Hotel 3 6/ /2025 Phoenix, AZ Residential-for sale 3 12/ /2023 Los Angeles, CA Residential-for sale 3 6/ /2020 Manhattan, NY Hotel 3 6/ /2019 Washington, DC Hotel 3 2/ /2020 Burbank, CA Hotel / /2020 Manhattan, NY Office 3 7/ /2022 Manhattan, NY Office 3 9/ /2022 Kansas City, MO Hotel 3 5/ /2027 Anaheim, CA Office 3 8/ /2024 Troy, MI Mixed Use 3 7/ /2022 Chapel Hill, NC 27 Office 3 1/ /2022 Renton, WA Residential-for sale 3 12/ /2022 Manhattan, NY Sub Total - Subordinate Loans $1,038 $ Years Total Loans $4,067 $ Years Weighted Average Yield 8 on Loans with Floating Rate L+12.2% - Weighted Average All-in Yield 1 on All Subordinate Loans 13.7% TOTAL PORTFOLIO WEIGHTED AVERAGE: Yield on Loans with Floating Rate 8 L+7.3% - All-in-Yield 1 9.2% 23

24 Footnotes (1) Weighted Average Unlevered All-in-Yield on the loan portfolio is based upon the applicable benchmark rates as of March 31, 2018 on the floating rate loans. Weighted Average All-in-Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. (2) Debt represents total secured debt arrangements and convertible senior notes, less cash and proceeds held by servicer. (3) Apollo refers to Apollo Global Management, LLC and its consolidated subsidiaries. (4) CRE Credit Platform AUM or Assets Under Management is as of March 31, 2018 and is defined as the amortized cost of the CRE debt investments held by ARI and other investment funds and accounts managed by Apollo that invest in commercial real estate debt. (5) Includes origination and exit fees in the spread. (6) Other includes a repurchase agreement investment secured by collateralized debt obligation or CDO bonds and equity investment in Bremer Kreditbank AG ( BKB Bank ). (7) Unfunded loan commitments are for loans that were previously closed but have yet to be funded. (8) Average floating rate spread is calculated as the weighted average yield with applicable floating benchmark rates minus USD one month LIBOR as of March 31, (9) Weighted Average Remaining Term assumes all extension options are exercised. (10) Other includes a data center and water park resorts. (11) Amounts and percentages may not foot due to rounding. (12) Assumes extension options are exercised. (13) The debt balance as of March 31, 2018, includes asset specific borrowing: currently $80 million drawn out of $132 million max capacity. (14) As of March 31, 2018 the Company s secured debt arrangements with Goldman Sachs Bank USA provided for maximum total borrowings comprised of a $300 million repurchase facility and $27.8 million of an asset specific financing. The asset specific financing has a maturity of April (15) Equity market capitalization based upon shares of common stock outstanding as of March 31, 2018 and closing stock price on May 25, (16) Unencumbered assets to unsecured debt is defined as all assets (including cash) without asset-specific financing divided by unsecured debt. (17) Fixed charge coverage is EBITDA divided by interest expense and the preferred stock dividends. (18) Includes ~$30 million of cash held by servicer (19) Subject to (i) availability of qualifying collateral assets and (ii) approval of lenders. (20) Based upon face amount. (21) Any such hypothetical impact on interest rates on the Company s variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising interest rate environment. Further, in the event of a change in interest rates of that magnitude, the Company may take actions to further mitigate the Company s exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in the Company s financial structure. The analysis incorporates movements in both USD LIBOR and GBP LIBOR. (22) Dividend yields are based upon closing stock price as of May 29, 2018 and the most recently declared quarterly dividend per share of common stock, annualized. Price/book is based upon the closing stock price on May 29, 2018 and the reported book value per share of common stock on March 31, (23) Based upon the $1.84 annual dividend per share of common stock and the closing stock price on May 29, (23) Operating Earnings is a non-gaap financial measure that is used by the Company to approximate cash available for distribution and is defined by the Company as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding); (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains/losses, other than realized gains/(losses) related to interest income; (v) the non-cash amortization expense related to the reclassification of a portion of the convertible senior notes to stockholders equity in accordance with GAAP; and (vi) provision for loan losses and impairments. Please see slide 21 for a reconciliation of GAAP net income and GAAP net income per share to Operating Earnings and Operating Earnings per Share. Operating Earnings may also be adjusted to exclude certain other noncash items, as determined by ACREFI Management, LLC, the Company s external manager, and approved by a majority of the Company's independent directors. (24) Both loans are secured by the same property. (25) Amortized cost for these loans is net of the recorded provisions for loan losses and impairments. (26) Both loans are secured by the same property. (27) Both loans are secured by the same property. 24