Apollo Commercial reports Q2 distributable EPS 35c, consensus 30c

The company said, “In March 2022, ARI and other Apollo-managed entities co-originated a 55% loan-to-cost first mortgage loan secured by eight hospitals in Massachusetts. At origination, ARI’s portion of the loan totaled $378.7 million. The loan was made in connection with the capitalization of a joint venture between two parties to own the hospitals. That joint venture – through its subsidiaries, which were the mortgage borrowers under ARI and the Apollo managed entities’ loan – then leased the properties to Steward Health Care (“Steward”), who served as the operator. ARI and the Apollo managed entities did not lend to Steward and do not have any involvement in Steward’s operation of the hospitals or performance under the lease. The structure and covenants in the loan have provided for cash collateral and amortization since origination that represents approximately 11% of the original loan balance, and ARI’s amortized cost basis was $341.9 million as of June 30, 2024. As of the date of this quarterly report, the loan remains current on all contractual interest payments. Steward filed for Chapter 11 bankruptcy in May 2024. During the three months ended June 30, 2024, ARI downgraded the loan’s risk rating from a three to a four. Subsequent to the date of ARI’s condensed consolidated financial statements but prior to the date of ARI’s quarterly report, bids for the hospitals were received and the bid process and negotiations are continuing to evolve with multiple constituencies. While there still is a high degree of uncertainty, based upon the information available as of the date of this quarterly report, and taking into account Steward’s bankruptcy court documents made publicly available on July 30, 2024, ARI anticipates recording a Specific CECL Allowance in a subsequent quarter, which the Company currently estimate to be approximately $90 million. The actual Specific CECL Allowance may differ materially based on continuing developments from the date of this quarterly report.”