Investor Presentation May 2018 Information is as of March 31, 2018, - - PowerPoint PPT Presentation
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
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 .
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.
May 2018
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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 forward- looking: 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 real estate 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 www.sec.gov. 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
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
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
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 www.sec.gov as well as on ARI’s website at www.apolloreit.com. 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.
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See footnotes on page 24
$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
ARI is a leading commercial mortgage REIT with a reputation as a creative, reliable and responsible capital solutions provider
89%
Floating Rate Exposure
9.2%1
Weighted Average Unlevered All-in Yield
0.8x
Debt2 / Common Equity ratio
4
Nine-Year History as an Innovative, Creative Global CRE Credit Provider
understanding of the markets and sectors in which ARI operates Apollo Affiliation Experienced Team with Proven Track Record
credit platform since 2009, $8.7 billion deployed through ARI Differentiated Origination and Underwriting Capabilities
lenders
Stable and Diverse Loan Portfolio with Attractive In-Place Yield
quality commercial real estate
Prudent Balance Sheet Management
See footnotes on page 24
5
ARI Benefits from Apollo’s3 Full-Scale CRE Credit Platform
See footnotes on page 24
Apollo CRE Credit Platform
17 Investment Professionals in NY, London and San Francisco
managed accounts
transactions completed
hotel loans
condominium and multifamily loans
First-call relationships with
and brokers Banking and financing relationships Underwriting and structuring expertise Market intelligence and diligence Capacity to provide “one- stop shopping” for borrowers
mezzanine loans, preferred equity and CMBS
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ARI’s Investment Strategy Focuses on Finding Attractive Relative Value
Directly Originate with Borrower
Underwrite and Structure Pro-Actively Asset Manage
Target Investments Investment Sourcing Channels
✓ First mortgage and subordinate loans on transitional and/or stabilized properties ✓ Major markets throughout the United States and Western Europe ✓ Institutional sponsorship with significant borrower equity ✓ Underwriting focused on “credit-first” philosophy and capital preservation ✓ Ability to pursue complexity in execution or
Investment Process
✓ Direct relationships with real estate owners and
✓ “First-call” relationships with CRE brokers ✓ Like-minded senior lenders ✓ Repeat borrowers ✓ Apollo’s global real estate platform
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Low Double-Digit ROEs that are Positively Correlated to Increases in LIBOR
For illustrative purposes only. Data is based upon estimates and assumptions and represents hypothetical transactions. Actual investments and results may differ materially from those discussed herein.
Illustrative Subordinate Loan Illustrative First Mortgage Loan
Repo Facility Advance: $105 Million ARI Investment: $45 Million Borrower’s Equity: $100 Million LTV Total $ 42% 60% 100% $105 mm $150 mm $250 mm Illustrative $250mm Capital Stack Third-party Senior Loan: $125 Million ARI Subordinate Loan: $37 Million Borrower’s Equity: $88 Million Total $ 100% $125 mm $162 mm $250 mm Illustrative $250 mm Capital Stack 65% 55%
$150mm ARI First Mortgage (2.3x leverage) L+12.5% ROE $37mm ARI Unencumbered Sub Loan L+11.5% ROE
Gross yield: L+5.5% Cost of funds: (L+2.5%) Net spread L+3.0% Repo leverage ~2.3x Levered net spread L+7.0% Total ROE: L+12.5% Total ROE: L+11.5%
$811 $860 $669 $849 $1,619 $2,465 $3,121 $3,680 $4,067 2010 2011 2012 2013 2014 2015 2016 2017 1Q18 First Mortgages Subordinate Loans Other CMBS
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Expanding Portfolio with an Increased Emphasis on Floating-Rate First Mortgage Loans
See footnotes on page 24
$ (millions)
ARI Investment Portfolio Evolution By Gross Assets at Amortized Cost Annual Loan Originations
$ (millions)
$119 $99 $201 $394 $987 $1,263 $1,216 $2,045 $922 $0 $500 $1,000 $1,500 $2,000 2010 2011 2012 2013 2014 2015 2016 2017 1Q18 Mortgage Subordinate loan
74% first mortgage 79% CMBS
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Pre-development 17% Industrial 2% Hotel 16% Other 4% Residential - for rent 12% Retail Center 5% Residential - for sale 17% Healthcare 4% Office 14% Mixed Use 9% First Mortgage 74% Subordinate Loan 26%
9
See footnotes on page 24
Property Type By Amortized Cost Loan Position at Amortized Cost Loan Position by Net Equity at Amortized Cost
First Mortgage 64% Subordinate Loan 36%
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($ in millions)
1Q18 Number of Loans 63 Amortized Cost $4,067 Net Equity at Cost $2,885 Unfunded Loan Commitments6 $853 Weighted Average Unlevered Yield on Floating-Rate Loans7 L+7.3% Weighted Average Unlevered All-in-Yield1 9.2% Weighted Average Remaining Term8 2.7 Years Unencumbered Assets $2,020
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See footnotes on page 24 ($ 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%
$60 / 1%
Residential-for sale 408 / 10%
236 / 6%
Hotel 313 / 8%
57 / 1% 132 / 3% 28 / 1% 25 / 1% 20 / 0%
655 / 16% Office 134 / 3% 75 / 2% 0 / 0% 253 / 6%
Residential Rental 115 / 3% 155 / 4% 1 / 0% 40 / 1% 10 / 0% 63 / 2% 5 / 0%
33 / 1% 468 / 12% Mixed Use 175 / 4%
7 / 0%
Retail Center
31 / 1%
Healthcare
12 / 0% 30 / 1% 31 / 1%
47 / 1%
Other
22 / 1% 13 / 0% 7 / 0%
Industrial
10 / 0% 4 / 0% 13 / 0% 3 / 0% 2 / 0%
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%
9 10
Manhattan 29%
Northeast 3% Brooklyn 9% United Kingdom 16% Southeast 11% Midwest 18% West 7% South
1%
Mid- Atlantic 4% Other Inter- national 2%
11
See footnotes on page 24
~$4.6 Billion Total Market Capitalization
($mm, except per share data) Amount ($)
Cash and cash equivalents $98 Credit Facilities Capacity W/A Rate Maturity Outstanding J.P. Morgan $1,382 L+2.30% Mar-20 $801 Deutsche Bank (USD) 402 L+2.48% Mar-20 157 Deutsche Bank (GBP) 166 L+2.60% Mar-20 166 Goldman Sachs 328 L+2.57% Nov-20 103 Total Credit Facilities $2,278 Apr-20 $1,227 Convertible Notes 5.50% Notes Mar-19 $255 4.75% Notes Aug-22 345 Total Convertible Debt Mar-21 $600 Total Debt Aug-20 $1,827 Preferred Stock 8.0% Series B Preferred $169 8.0% Series C Preferred (currently callable) 173 Total Preferred Stock $342 Equity Market Capitalization Stock price as of 5/25/18 $18.58 Shares outstanding (mm) 123 Equity Market Capitalization $2,285 Total Market Capitalization $4,552
Equity Market Cap 51% Repo Facilities 28% Convertible Notes 13% Preferred Stock 8%
Capital Structure Detail Capital Structure Composition
12 13 14 7 11
12
Summary of Credit Metrics as of 3/31/2018
Debt2 to Common Equity at Book Value
0.8x
Debt2 to Common Equity Market Capitalization
0.8x
Debt2 to Total Equity Market Capitalization
0.7x
Debt2 as a % of Total Enterprise Value
43%
Unencumbered Assets to Unsecured Debt15
3.4x
Debt Service Coverage
3.4x
Fixed Charge Coverage16
2.6x
Debt2 to Total Equity at Book Value
0.7x
See footnotes on page 24
$195 $298 $337 $461 $597 $769 $1,089 $1,473 $1,746 $2,006 $86 $86 $86 $286 $459 $342 $342 $(2) $502 $518 $116 $151 $790 $1,069 $1,126 $1,535 $1,670 $193 $800 $855 $663 $834 $1,646 $2,444 $3,059 $3,623 $4,018 2009 2010 2011 2012 2013 2014 2015 2016 2017 1Q18 BV Common Equity Preferred Equity Debt2
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Since 2014, total equity has grown ~2.6x
Debt2 to Common Equity 0.6x 1.7x 1.5x 0.5x 0.3x 1.1x 1.0x 0.9x 1.1x ($ in millions) 0.8x Note: Total capital base does not tie to total portfolio due to inclusion of net other assets and liabilities in NAV See footnotes on page 24
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ARI has more than sufficient liquidity to meet unexpected demands
See footnotes on page 24
~ ~ ~ ~
17 18
15
ARI’s Portfolio Income and Operating Earnings are Positively Correlated to an Increase in LIBOR
See footnotes on page 24
Rate Profile of Loan Portfolio19 Net Interest Income Sensitivity to LIBOR20
89% 11% Floating Rate Fixed Rate $0.00 $0.05 $0.10 $0.15 $0.20 0.25% 0.50% 0.75% 1.00% Net Interest Income Per Share Increase in LIBOR
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ARI Offers an Attractive Dividend Yield and Trades at a Premium to Book Value
See footnotes on page 24
Cumulative Dividends per Share of Common Stock Dividend Yields and Price/Book Multiples21
9.9% 9.1% 8.8% 8.4% 8.3% 8.2% 8.2% 8.4% 7.8% 1.14 0.77 1.23 1.03 0.96 1.03 1.03 0.94 1.17 0.75 0.85 0.95 1.05 1.15 1.25 1.35 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% ARI CLNC STWD KREF GPMT TRTX LADR ACRE BXMT $1.50 $3.10 $4.70 $6.30 $7.90 $9.68 $11.52 $13.36 $13.82 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018
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See footnotes on page 24
Nine-Year Track Record as an Innovative, Creative Global CRE Debt Provider Well Positioned for Rising Interest Rates 9.9% Dividend Yield(22) “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
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(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 30,281 302,756 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 585,972 584,897 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 2018 68 68 Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2018 and 2017 69 69 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
20 (in thousands - except share data and per share data) 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
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 203 108 Realized loss on sale of assets
Unrealized gain on securities
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 $0.46 Three months ended
21
See footnotes on page 24 (in thousands - except share and per share data)
Three months ended
March 31, 2018 Earnings Per Share (Diluted) March 31, 2017 Earnings Per Share (Diluted) Operating Earnings 23 : Net income available to common stockholders $42,598 $0.38 $37,815 $0.41 Adjustments: Equity-based compensation expense 3,342 0.03 3,791 0.04 Unrealized gain on securities
(0.03) Unrealized loss on derivative instruments 11,032 0.10 3,045 0.03 Foreign currency gain, net (10,362) (0.09) (3,326) (0.04) Amortization of Convertible Senior Notes related to equity reclassification 1,140 0.01 608 0.01 Income from unconsolidated joint venture
(0.01) Total Adjustments 5,152 0.05 808
$47,750 $0.43 $38,623 $0.41 Realized loss and costs from sale of CMBS
0.01 Operating Earnings excluding realized loss and costs from sale of CMBS $47,750 $0.43 $39,665 $0.42 Basic weighted average shares of common stock outstanding 110,211,853 91,612,447 Diluted weighted average shares of common stock outstanding 111,871,429 92,998,250
22
See footnotes on page 24
Property Type Risk Rating Origination Date Amortized Cost ($MM) Unfunded Commitment ($MM) Fully-extended Maturity Location Residential-for sale 3 3/2018 $236
London, UK Predevelopment 3 1/2016 221
Miami, FL Office 3 11/2017 178
Chicago, IL Predevelopment 3 4/2017 174
London, UK Retail Center 4 11/2014 169
Cincinnati, OH Hotel 3 9/2015 139
Manhattan, NY Mixed Use 3 9/2016 133
Chicago, IL Predevelopment 3 3/2017 128
Brooklyn, NY Mixed Use 2 7/2017 125
Manhattan, NY Office 3 11/2017 120 127 12/2022 Manhattan, NY Hotel 3 9/2016 105
Manhattan, NY Office 3 12/2017 81 62 3/2022 London, UK Other 2 10/2016 80
Manassas, VA Residential-for rent 2 4/2014 76
Various Hotel 3 3/2017 72 4 3/2022 Atlanta, GA Residential-for rent 3 10/2017 66
Brooklyn, NY Predevelopment 3 11/2016 65
Manhattan, NY Predevelopment 3 7/2017 62 21 4/2019 London, UK Predevelopment 3 12/2016 60 20 12/2020 Los Angeles, CA Hotel 2 1/2017 60
Miami, FL Residential-for rent 3 11/2014 59
Various Office 3 3/2018 58 29 4/2023 Chicago, IL Hotel 2 1/2017 57
Hotel 3 12/2017 53 36 12/2022 Manhattan, NY Residential-for rent 3 10/2017 46
London, UK Residential-for rent 3 11/2017 46
Brooklyn, NY Residential-for rent 3 5/2016 43 3 6/2018 Brooklyn, NY Hotel 3 12/2015 42 2 12/2020
Residential-for rent 5 11/2014 38
Williston, ND Hotel 3 2/2018 38
Pittsburgh, PA Mixed Use 3 7/2017 36
Manhattan, NY Residential-for rent 3 12/2017 35 5 1/2020 Manhattan, NY Office 3 1/2018 34 179 1/2022 Renton, WA Residential-for sale 5 2/2014 34
Bethesda, MD Retail Center 3 2/2017 31 3 9/2020 Miami, FL Residential-for sale 3 1/2018 15 64 1/2023 Manhattan, NY Mixed Use 3 7/2017 14
Manhattan, NY Residential-for sale 2 3/2018 (1) 115 3/2023 San Francisco, CA Sub Total - Senior Loans $3,029 $671 2.5 Years
Weighted Average Yield7 on Loans with Floating Rate – L+5.8% - Weighted Average All-in Yield1 on All Senior Loans – 7.7%
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See footnotes on page 24
Property Type Risk Rating Origination Date Amortized Cost ($MM) Unfunded Commitment ($MM) Fully-extended Maturity Location Residential-for sale 3 6/2015 $138
Manhattan, NY Healthcare 3 10/2016 112
Various Residential-for sale 3 2/2016 77
Manhattan, NY Office 3 3/2017 75
Brooklyn, NY Other 3 9/2017 74
Various Residential-for sale 3 7/2015 71
Manhattan, NY Residential-for rent 3 10/2015 58 5 7/2019 Manhattan, NY Residential-for sale 3 11/2017 49
Manhattan, NY Industrial 3 6/2015 45
Long Island, NY Healthcare 3 1/2015 47
Various Mixed Use 3 1/2017 42
Cleveland, OH Residential-for sale 3 10/2016 33
Manhattan, NY Industrial 3 5/2013 32
Various Hotel 3 6/2015 25
Phoenix, AZ Residential-for sale 3 12/2017 27 29 4/2023 Los Angeles, CA Residential-for sale 3 6/2017 22
Manhattan, NY Hotel 3 6/2015 20
Washington, DC Hotel 3 2/2015 20
Burbank, CA Hotel 3 9/2015 15
Manhattan, NY Office 3 7/2013 14
Manhattan, NY Office 3 9/2012 9
Kansas City, MO Hotel 3 5/2017 8
Anaheim, CA Office 3 8/2017 8
Troy, MI Mixed Use 3 7/2012 7
Chapel Hill, NC Office 3 1/2018 8 42 1/2022 Renton, WA Residential-for sale 3 12/2017 2 106 6/2022 Manhattan, NY Sub Total - Subordinate Loans $1,038 $182 3.1 Years Total Loans $4,067 $853 2.7 Years
Weighted Average Yield7 on Loans with Floating Rate – L+12.2% - Weighted Average All-in Yield1 on All Subordinate Loans – 13.7% TOTAL PORTFOLIO WEIGHTED AVERAGE: Yield on Loans with Floating Rate7 – L+7.3% - All-in-Yield1 – 9.2%
24 26 27 27
24 (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) Other includes a repurchase agreement investment secured by collateralized debt obligation or CDO bonds and equity investment in Bremer Kreditbank AG (“BKB Bank”). (6) Unfunded loan commitments are for loans that were previously closed but have yet to be funded. (7) 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, 2018. (8) Weighted Average Remaining Term assumes all extension options are exercised. (9) Other includes a data center and water park resorts. (10) Amounts and percentages may not foot due to rounding. (11) Assumes extension options are exercised. (12) The debt balance as of March 31, 2018, includes asset specific borrowing: currently $80 million drawn out of $132 million max capacity. (13) 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 2019. (14) Equity market capitalization based upon shares of common stock outstanding as of March 31, 2018 and closing stock price on May 25, 2018. (15) Unencumbered assets to unsecured debt is defined as all assets (including cash) without asset-specific financing divided by unsecured debt. (16) Fixed charge coverage is EBITDA divided by interest expense and the preferred stock dividends. (17) Includes ~$30 million of cash held by servicer (18) Subject to (i) availability of qualifying collateral assets and (ii) approval of lenders. (19) Based upon face amount. (20) 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. (21) 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, 2018. (22) Based upon the $1.84 annual dividend per share of common stock and the closing stock price on May 29, 2018. (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 non- cash 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.