I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo Commercial Real Estate Finance, Inc. and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. In addition, we will be discussing certain non-GAAP measures on this call, which management believes are relevant to assessing the company's financial performance. These measures are reconciled to GAAP figures in our earnings presentation, which is available in the Stockholders section of our website. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apollocref.com or call us at (212) 515-3200. At this time, I'd like to turn the call over to the company's Chief Executive Officer, Stuart Rothstein.

Thank you, operator, and good morning, and thank you to those of you joining us this morning on the Apollo Commercial Real Estate Finance First Quarter 2024 Earnings Call. As usual, I am joined by Scott Weiner, our Chief Investment Officer; and Anastasia Mironova, our Chief Financial Officer. In the first quarter, we began to see signs of life in the commercial real estate market with transaction volumes ticking up. The increase in deal flow is supported by a combination of significant dry powder in existing funds that needs to be put to work, more borrowers having reached a point where they must deal with pending loan maturities and an increase in consensus around property level valuations. In addition to increased transaction activity, operating fundamentals remained stable to positive across most property types supported by the continued strength in the economy, with the one notable exception being office properties in certain markets. This operating environment continues to benefit ARI and its floating rate loan portfolio produced another quarter in which ARI's distributable earnings covered the dividend. With the exception of the loans secured by the Steinway Building, which I will address later in my remarks, ARI's portfolio continues to perform well. Notably, there has been a pickup in actual and indicated repayment activity. During the quarter, ARI received $176 million of total repayments and the current forecast model is tracking another $1 billion of expected repayments over the remainder of the year. Given the increased repayment activity, we anticipate ARI will be more active in deploying capital during the year, and there is an active pipeline of potential transactions. In determining how to deploy available capital, we will continue to assess both potential new investment transactions as well as opportunity to repurchase pieces of ARI's capital structure. Turning now to…

Thank you, Stuart, and good morning, everyone. In the first quarter, ARI reported distributable earnings of $0.35 per share of common stock. GAAP net loss attributable to common stockholders was $108 million or $0.76 per diluted share of common stock, reflecting the $142 million CECL allowance recorded for the subordinate loan secured by 111 West 57th Street, also known as Steinway Building. As a reminder, this loan was already on nonaccrual status and the additional allowance does not impact distributable earnings. The weighted average risk rating of the portfolio was 3.0 and other than 111 West 57th Street allowance, there was no additional specific CECL allowance taken during the quarter. The general CECL allowance stood at 42 basis points of the loan portfolio's amortized cost at March 31, a 6 basis point increase as compared to the end of 2023. This change was primarily driven by an increase in the historical loss rate, which we obtained from Trepp database for the purposes of determining general CECL allowance for our portfolio. The increase was also attributable to extended expected loan [ pay ] updates. ARI portfolio ended the quarter with a carrying value of $8.3 billion, with a weighted average unlevered yield of 9.1%, 40 basis points higher than at the end of 2023. During the quarter, we completed $322 million of add-on fundings from previously closed loans, including $213 million funded for the U.K. pub transaction, which we closed at the end of the Q4. As Stuart mentioned, we received $176 million of total repayments during the quarter. Subsequent to quarter end, we received $135 million in proceeds from the sale of our first mortgage secured via hotel in Honolulu through the third-party at 99.5% of par. With regard to real estate owned, the above-grade work continues with the multifamily…

[Operator Instructions] Our first question comes from Jade Rahmani with KBW.

As you evaluate the outlook, could you give an overview or summary of your target returns at this point if those have changed at all? Underwriting criteria, it seems like there's probably an opportunity to hit pretty consistent returns to the past with lower LTVs maybe finance some in-place cash flow. But if you could just give an overview on that, that would be helpful.

Yes. Jade, look, I think from our perspective to where you sort of implied in your question, the business model still works in that high level. I think we can deploy our equity in low to mid-teens returns. And I agree with your premise that we could probably do that at lower LTVs today, which for us are probably high 50s, low 60s today as we think about deploying new capital at, again, super high level spreads above SOFR in the U.S. at call it something with a 3-handle and finance as we've done historically at, again, ballpark 70% to 80% against our position at something today, call it, high 1s. So again, the ROEs work as we're deploying capital, we're definitely seeing things in the market that are interesting from a deployment perspective. And as I indicated in my remarks, I think there will be things for us to do with our capital as it comes back from repayment. But as we're thinking about deploying capital, we will look both at new transactions as well as our own capital structure that may from time to time offer an interesting ROE as well.

Can you discuss expected credit outcomes on upcoming loan maturities? For example, the Hawaii hotel loan, I think, had a fully extended maturity in April, the decision was made to sell that at close to par. How are you thinking about upcoming maturities?

Look, as I indicated in my remarks, we're expecting about $1 billion worth of repayments this year. And when I say expecting that is based on sort of ongoing dialogue with borrowers who have reached out and have indicated either through refinance or sale, they expect to pay us off this year. So I would say, high level, we expect in a positive way, much of what takes place this year for things that we expected to mature or certainly are within a repayment window to actually repay us. So again, based on the first quarter, I would say the overall tone has been somewhat more optimistic in terms of just overall transaction activity and people seeing a path in the financing markets to just repay us at loan maturity.

[Operator Instructions] Our next question comes from Rick Shane with JPMorgan.

Can you just tell us in dollars and on a per share basis, the drag from nonaccruals? I'm a little bit confused when I compare the weighted average cash coupon in the [ Q ], which is 8.4% and that 0s, the nonaccruals and Slide 6 that has a weighted average unlevered all-in yield on the loan portfolio of 6.5%.

Look, I think at a high level, Rick, the way we think about it is sort of net of reserves, there's $550 million to $600 million worth of loans that are on nonaccrual at the end of the quarter. Some of that is financed even though it's on nonaccrual. So on an equity basis, it's about $375-ish million of net equity that is on nonaccrual and then that amount was reduced again in April in light of what I referenced with respect to the Steinway transaction, if it's easier post call just for sort of you and Anastasia to go through sort of the details and the math, happy to do that as well.

Perfect. And again, what am I missing connecting the 6.5% all-in yield on Slide 6 with the 8.4% weighted average cash coupon, which, like I said, I would have thought the difference was nonaccruals, but the footnote on Page 12 of the [ Q ] says that nonaccruals are recorded at a 0 coupon?

Yes, we can take it offline and walk you through the math there after the call.

Our next question comes from Jade Rahmani with KBW.

On 111 West 57th, could you give a rough number of what the quantity of remaining units are?

A little. If you think about what is under contract or out for signature at this point, Jade, they're still plus or minus 25 units that still need to be sold. So a little bit less than half the project.

And how many units are under contract?

Today between what's under contract and what we expect to sign, it's about a handful, call it, 5 or 6.

Okay. So total that they would generate proceeds on would be probably 30, 31 units?

Post -- what -- say that again. Post what's in process right now? We get -- you'd have sort of low 30s sold and you'd still have 26, 27 still to be sold.

Okay. Yes, I was just looking at expected net proceeds and I was getting to around $500 million. And I believe there's more indebtedness in that outstanding and then there is also a discounting factor. I might be using pricing that's too low. I know that there's quite a range on the units. But are those rough numbers reasonable?

I think you're light. And from our perspective, I would say we still view there being nominal value over and above sort of your estimate of what debt outstanding is today, and that's a combination of the to-be-sold condos. They're also a retail condo that has some value, and there's also some other cash flows that will come our way as well. But I would say at this point, right, in light of where we've got it marked, which is that there's a $200 million senior loan. And then as I indicated on our call, post the refinance, we're now at $357 million of mezz loans, so call it $560 million in round numbers in total debt for us to get -- where last dollar of debt and for us to get paid back, we see nominal value in excess of that today, including some discounting on units to be sold.

Okay. Fair enough. And then on the office portfolio, we are still seeing a lot of pressure in the office sector. I think you noted that in your opening remarks, but definitely, the liability structure of the lender is a big driver of how much wiggle room there is in modifications and flexibility to work with borrower. So what are you seeing in the office portfolio? I know the predominance also is in Europe, but if you could give a comment there, that would be helpful.

Yes. Look, I think like most people, I think our expectation -- first of all, with our biggest office exposure, which is an office redevelopment in London, obviously, that one is 100% leased by a major financial institution. And at this point, we're just in that deal because we're continuing to fund the completion of the work that needs to be done, but obviously, feel very positive with respect to the exit on that loan at the finish line. In terms of the broader portfolio, last year, we had a handful of transactions where sponsorship stepped up and put more capital into transactions to play for time. And obviously, the capital coming in is for a mix of some principal paydowns, some funding of reserves for TI and LC as needed and then obviously any necessary interest rate protection as well. I would say our view of most of the office portfolio is that we will be in the transactions for a period of time. We continue to have productive dialogue with sponsorship across the portfolio, which for us is, I think, 10 deals at this point. And that product, which has been newly created, either ground-up or redevelopment, we're actually seeing decent leasing activity, not great leasing activity, but definitely some interest level from tenants for newly created products. So I think there'll continue to be active dialogue with borrowers. But obviously, nothing has risen to the level of individual deal commentary this particular quarter.

Thank you. I would now like to turn the call back over to Mr. Rothstein for any closing remarks.

I appreciate everybody participating this morning. And as always, I, Hilary and Anastasia are reachable and available if people have follow-up questions. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.