Apollo Commercial Real Estate Finance (ARI)
As of 10/15/2017
Apollo Commercial Real Estate Finance, Inc. is a real estate investment trust. The Company primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, commercial mortgage-backed securities (CMBS) and other commercial real estate-related debt investments. The Company targets investments that are secured by institutional quality real estate. The Company's principal business objective is to make investments in its target assets in order to provide attractive risk adjusted returns to its stockholders over the long term, primarily through dividends and secondarily through capital appreciation. The Company is externally managed and advised by ACREFI Management, LLC, a subsidiary of Apollo Global Management. They own real estate all over the United States, with 44% of their equity in NYC. They have 9% of their equity in the United Kingdom and 2% in other international countries.
Current Stock Price: $18.32
Market Cap: $1.93B
Dividends paid quarterly: $0.46
The commercial real estate market is stable and is companies such as ARI have more power than in 2007, when large banks had more control on commercial real estate; now some banks stay away from that market. Companies such as ARI now are bound to perform better with more assets and the fact that commercial real estate is strong.
Analysts are mostly in on buying stock for ARI right now. Ford Equity Research, The Street, and Market Edge are all strongly suggesting buying; however, there are a few analysts that are saying to hold. None have suggested selling.
On top of this, ARI has a well-diversified portfolio ranging across the country and very different sectors of real estate. The management team is very solid, with 3 of the 5 executives on board for 7+ years. Also, ARI is part of Apollo Global Management, which is a major alternative investments company that has a history of success.
Income has almost quadrupled in last 5 years, and I think it will continue to do so due to its strong growth in profits and its conservative balance sheet.
Went from $101M in 2015 to $155M in 2016
Assets went from $2.71B to $3.48B
Free cash flow went up 34.91%
2016 Sales Growth: 50.7%
Operating earnings are positively correlated to USD LIBOR, so if the interest rates go up (which they are heavily expected to do), the operating earnings of ARI will as well. This is because ARI provides a “double hedge” against inflation and rate hikes, which protects the portfolio from inflation and future rates hikes. The fed funds futures recently jumped, showing odds of a rate hike at 64%, up from 50%. Analysts are predicting a 100 point basis increase in LIBOR will translate into $0.18/share higher operating earnings going forward, which should lead to solid dividend raise.
Virtu KCG Holdings, LLC bought 40,443 shares, valued at $750,000
Vanguard Group Inc. raised its holdings by 100.9% in the 2nd quarter, equating to 7,216,049 shares of the real estate investment trust’s stock worth $133,857,000
Principal Financial Group Inc. now owns 835,802 shares of the real estate investment trust’s stock valued at $15,504,000
Bank of New York Mellon Corp raised its holdings in shares by 142.0% during the second quarter, now owning 1,255,972 shares of the real estate investment trust’s stock valued at $23,297,000
Ameriprise Financial Inc. acquired a new position in shares during the second quarter valued at approximately $10,140,000
Asset Management One Co. Ltd. acquired a new position in shares during the first quarter valued at approximately $6,428,000
Hedge funds and institutional investors own 64.90% of the company’s stock now
2016 → Completed the acquisition of Apollo Residential Mortgage, Inc. (“AMTG”), originated and funded over $1.4 billion of commercial real estate debt investments and successfully grew the equity market capitalization to over $2.0 billion