10-Q 1 ari-20160930x10q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
(Mark One)

x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016

¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to
Commission File Number: 001-34452
__________________________________
Apollo Commercial Real Estate Finance, Inc.
(Exact name of registrant as specified in its charter)
__________________________________

Maryland |  | 27-0467113
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

Apollo Commercial Real Estate Finance, Inc.
c/o Apollo Global Management, LLC
9 West 57th Street, 43rd Floor,
New York, New York 10019
(Address of registrant’s principal executive offices)
(212) 515–3200
(Registrant’s telephone number, including area code)
__________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer |  | x |  | Accelerated filer |  | ¨
Non-accelerated filer |  | ¨ (Do not check if a smaller reporting company) |  | Smaller Reporting Company |  | ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
As of November 1, 2016, there were 80,841,530 shares, par value $0.01, of the registrant’s common stock issued and outstanding.

Table of Contents
Table of Contents

| Page
Part I — Financial Information |
ITEM 1. Financial Statements | 3
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk | 45
ITEM 4. Controls and Procedures | 46
Part II — Other Information |
ITEM 1. Legal Proceedings | 47
ITEM 1A. Risk Factors | 47
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds | 47
ITEM 3. Defaults Upon Senior Securities | 47
ITEM 4. Mine Safety Disclosures | 47
ITEM 5. Other Information | 47
ITEM 6. Exhibits | 48

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Part I — FINANCIAL INFORMATION
ITEM 1. Financial Statements
Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands—except share and per share data)

| September 30, 2016 |  | December 31, 2015
Assets: |  |  |
Cash | $ | 254,643 |  |  | $ | 67,415 |
Restricted cash | 62,324 |  |  | 30,127 |
Securities, at estimated fair value | 347,456 |  |  | 493,149 |
Securities, held-to-maturity | 147,190 |  |  | 153,193 |
Commercial mortgage loans, held for investment | 1,426,990 |  |  | 994,301 |
Subordinate loans, held for investment | 882,214 |  |  | 931,351 |
Investment in unconsolidated joint venture | 23,765 |  |  | 22,583 |
Derivative assets | 5,037 |  |  | 3,327 |
Interest receivable | 18,025 |  |  | 16,908 |
Other assets | 31,303 |  |  | 236 |
Total Assets | $ | 3,198,947 |  |  | $ | 2,712,590 |
Liabilities and Stockholders’ Equity |  |  |
Liabilities: |  |  |
Borrowings under repurchase agreements (net of deferred financing costs of $7,875 and $7,353 in 2016 and 2015, respectively) | $ | 1,013,162 |  |  | $ | 918,421 |
Convertible senior notes, net | 249,528 |  |  | 248,173 |
Participations sold | 110,924 |  |  | 118,201 |
Accounts payable and accrued expenses | 26,367 |  |  | 9,246 |
Payable to related party | 5,903 |  |  | 5,297 |
Dividends payable | 46,028 |  |  | 37,828 |
Total Liabilities | 1,451,912 |  |  | 1,337,166 |
Commitments and Contingencies (see Note 16) |  |  |
Stockholders’ Equity: |  |  |
Preferred stock, $0.01 par value, 50,000,000 shares authorized: |  |  |
Series A preferred stock, 3,450,000 shares issued and outstanding ($86,250 aggregate liquidation preference) in 2016 and 2015 | 35 |  |  | 35 |
Series B preferred stock, 8,000,000 shares issued and outstanding ($200,000 aggregate liquidation preference) in 2016 and 2015 | 80 |  |  | 80 |
Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2016 | 69 |  |  | — |
Common stock, $0.01 par value, 450,000,000 shares authorized, 80,826,566 and 67,195,252 shares issued and outstanding in 2016 and 2015, respectively | 808 |  |  | 672 |
Additional paid-in-capital | 1,803,667 |  |  | 1,410,138 |
Accumulated deficit | (54,950 | ) |  | (32,328 | )
Accumulated other comprehensive loss | (2,674 | ) |  | (3,173 | )
Total Stockholders’ Equity | 1,747,035 |  |  | 1,375,424 |
Total Liabilities and Stockholders’ Equity | $ | 3,198,947 |  |  | $ | 2,712,590 |

See notes to unaudited condensed consolidated financial statements.
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Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
(in thousands—except share and per share data)

| Three months ended September 30, |  | Nine months ended September 30,
| 2016 | 2015 |  | 2016 | 2015
Net interest income: |  |  |  |  |
Interest income from securities | $ | 8,029 |  | $ | 8,293 |  |  | $ | 23,685 |  | $ | 24,846 |
Interest income from securities, held to maturity | 2,875 |  | 2,956 |  |  | 8,597 |  | 9,050 |
Interest income from commercial mortgage loans | 27,460 |  | 15,184 |  |  | 72,727 |  | 37,246 |
Interest income from subordinate loans | 32,207 |  | 25,445 |  |  | 89,649 |  | 65,206 |
Interest expense | (17,256 | ) | (13,187 | ) |  | (47,620 | ) | (36,287 | )
Net interest income | 53,315 |  | 38,691 |  |  | 147,038 |  | 100,061 |
Operating expenses: |  |  |  |  |
General and administrative expenses (includes $1,828 and $5,434 of equity based compensation in 2016 and $756 and $2,695 in 2015, respectively) | (8,352 | ) | (2,099 | ) |  | (21,456 | ) | (6,512 | )
Management fees to related party | (5,903 | ) | (4,097 | ) |  | (16,374 | ) | (11,325 | )
Total operating expenses | (14,255 | ) | (6,196 | ) |  | (37,830 | ) | (17,837 | )
Income from unconsolidated joint venture | 80 |  | 108 |  |  | 207 |  | 495 |
Other income | 309 |  | 239 |  |  | 334 |  | 252 |
Provision for loan losses | — |  | — |  |  | (15,000 | ) | — |
Realized loss on sale of securities | (225 | ) | — |  |  | (225 | ) | (443 | )
Unrealized gain (loss) on securities | (9,798 | ) | (6,926 | ) |  | (36,601 | ) | (5,792 | )
Foreign currency gain (loss) | (4,369 | ) | (2,165 | ) |  | (21,926 | ) | 3,424 |
Bargain purchase gain | 40,021 |  | — |  |  | 40,021 |  | — |
Gain (loss) on derivative instruments (includes unrealized gains(losses) of ($10,297) and $1,731 in 2016 and $2,096 and $(4,144) in 2015, respectively) | 4,815 |  | 2,096 |  |  | 22,831 |  | (4,144 | )
Net income | 69,893 |  | 25,847 |  |  | 98,849 |  | 76,016 |
Preferred dividends | $ | (9,310 | ) | $ | (2,304 | ) |  | $ | (20,985 | ) | $ | (6,023 | )
Net income available to common stockholders | 60,583 |  | 23,543 |  |  | 77,864 |  | 69,993 |
Basic and diluted net income per share of common stock | $ | 0.83 |  | $ | 0.39 |  |  | $ | 1.11 |  | $ | 1.24 |
Basic weighted average shares of common stock outstanding | 71,919,549 |  | 59,355,613 |  |  | 68,913,362 |  | 55,818,731 |
Diluted weighted average shares of common stock outstanding | 72,861,611 |  | 59,934,008 |  |  | 69,865,603 |  | 56,415,082 |
Dividend declared per share of common stock | $ | 0.46 |  | $ | 0.44 |  |  | $ | 1.38 |  | $ | 1.32 |

See notes to unaudited condensed consolidated financial statements.
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Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
(in thousands)

| Three months ended September 30, |  | Nine months ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Net income available to common stockholders | $ | 60,583 |  |  | $ | 23,543 |  |  | $ | 77,864 |  |  | $ | 69,993 |
Change in net unrealized gain (loss) on securities available-for-sale | — |  |  | — |  |  | — |  |  | 678 |
Foreign currency translation adjustment | 73 |  |  | 53 |  |  | 499 |  |  | (307 | )
Comprehensive income | $ | 60,656 |  |  | $ | 23,596 |  |  | $ | 78,363 |  |  | $ | 70,364 |

See notes to unaudited condensed consolidated financial statements.
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Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
(in thousands—except share data)

| Preferred Stock |  | Common Stock |  | Additional Paid In Capital |  | Retained Earnings (Accumulated Deficit) |  | Accumulated Other Comprehensive Loss |  |
| Shares |  | Par |  | Shares |  | Par |  |  |  |  | Total
Balance at January 1, 2016 | 11,450,000 |  |  | $ | 115 |  |  | 67,195,252 |  |  | $ | 672 |  |  | $ | 1,410,138 |  |  | $ | (32,328 | ) |  | $ | (3,173 | ) |  | $ | 1,375,424 |
Capital increase related to Equity Incentive Plan | — |  |  | — |  |  | 215,672 |  |  | 2 |  |  | 2,804 |  |  | — |  |  | — |  |  | 2,806 |
Issuance of preferred stock - Merger | 6,900,000 |  |  | 69 |  |  | — |  |  | — |  |  | 172,431 |  |  | — |  |  | — |  |  | 172,500 |
Issuance of restricted common stock | — |  |  | — |  |  | 17,056 |  |  | * |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of common stock- Merger | — |  |  | — |  |  | 13,398,586 |  |  | 134 |  |  | 218,263 |  |  | — |  |  |  |  | 218,397 |
Offering costs | — |  |  | — |  |  | — |  |  | — |  |  | 31 |  |  | — |  |  | — |  |  | 31 |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 98,849 |  |  | — |  |  | 98,849 |
Change in other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 499 |  |  | 499 |
Dividends on common stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (100,485 | ) |  | — |  |  | (100,485 | )
Dividends on preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (20,986 | ) |  | — |  |  | (20,986 | )
Balance at September 30, 2016 | 18,350,000 |  |  | $ | 184 |  |  | 80,826,566 |  |  | $ | 808 |  |  | $ | 1,803,667 |  |  | $ | (54,950 | ) |  | $ | (2,674 | ) |  | $ | 1,747,035 |

* Rounds to zero
See notes to unaudited condensed consolidated financial statements.
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Apollo Commercial Real Estate Finance, Inc. and Consolidated Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands

| Nine months ended September 30, 2016 |  | Nine months ended September 30, 2015
Cash flows provided by operating activities: |  |  |
Net income | $ | 98,849 |  |  | $ | 76,016 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Premium amortization and (discount accretion) on assets, net | (7,443 | ) |  | (7,782 | )
Amortization of deferred financing costs | 3,199 |  |  | 2,219 |
Equity-based compensation | 2,808 |  |  | 2,573 |
Unrealized (gain) loss on securities | 36,601 |  |  | 5,916 |
Provision for loan losses | 15,000 |  |  | — |
Income from unconsolidated joint venture | (207 | ) |  | (511 | )
Foreign currency (gain) loss | 21,122 |  |  | 1,703 |
Realized (gain) loss on derivative instruments | (21,100 | ) |  | — |
Unrealized (gain) loss on derivative instruments | (1,731 | ) |  | 4,151 |
Realized (gain) loss on sale of security | 225 |  |  | 443 |
Bargain purchase gain | (40,021 | ) |  | — |
Changes in operating assets and liabilities: |  |  |
Accrued interest receivable, less purchased interest | (17,638 | ) |  | (20,711 | )
Other assets | (121 | ) |  | 396 |
Accounts payable and accrued expenses | (10,410 | ) |  | (3,202 | )
Payable to related party | 606 |  |  | 860 |
Net cash provided by operating activities | 79,739 |  |  | 62,071 |
Cash flows used in investing activities: |  |  |
Funding of commercial mortgage loans | (541,582 | ) |  | (483,090 | )
Funding of subordinate loans | (51,001 | ) |  | (483,480 | )
Funding of unconsolidated joint venture | (362 | ) |  | (3,929 | )
Funding of other assets | — |  |  | (8 | )
Funding of derivative instruments | — |  |  | (327 | )
Proceeds on settlements of derivative instruments | 21,100 |  |  | — |
Increase in collateral held related to derivative contracts | 13,110 |  |  | — |
Increase in restricted cash related to financing activities | (32,197 | ) |  | — |
Proceeds from sale of securities available-for-sale | — |  |  | 17,291 |
Proceeds from sale of securities at estimated fair value | 86,451 |  |  | 6,338 |
Proceeds from sale of investment in unconsolidated joint venture | — |  |  | 20,794 |
Principal payments received on securities at estimated fair value | 22,424 |  |  | 32 |
Principal payments received on securities, held-to-maturity | 5,970 |  |  | 1,000 |
Principal payments received on commercial mortgage loans | 118,120 |  |  | 41,479 |
Principal payments received on subordinate loans | 81,524 |  |  | 146,775 |
Principal payments received on other assets | 107 |  |  | 167 |
Proceeds from sale of AMTG assets, net | 1,474,111 |  |  | — |
ARI investment in AMTG, net of cash acquired | 189,795 |  |  | — |
Net cash used in investing activities | 1,387,570 |  |  | (736,958 | )
Cash flows from financing activities: |  |  |
Proceeds from issuance of common stock | — |  |  | 343,430 |
Payment of offering costs | (45 | ) |  | (956 | )
Proceeds from repurchase agreement borrowings | 448,177 |  |  | 553,214 |
Repayments of repurchase agreement borrowings | (352,914 | ) |  | (439,971 | )
Repayments of AMTG repurchase agreement borrowings | (1,254,517 | ) |  | — |
Proceeds from participations sold | — |  |  | 30,484 |
Repayments of participations sold | (3,770 | ) |  | (733 | )
Payment of deferred financing costs | (3,741 | ) |  | (2,900 | )
Dividends on common stock | (94,625 | ) |  | (71,135 | )
Dividends on preferred stock | (18,646 | ) |  | (5,580 | )
Net cash provided by financing activities | (1,280,081 | ) |  | 405,853 |
Net decrease in cash and cash equivalents | 187,228 |  |  | (20,483 | )
Cash and cash equivalents, beginning of period | 67,415 |  |  | 40,641 |
Cash and cash equivalents, end of period | $ | 254,643 |  |  | $ | 20,158 |
Supplemental disclosure of cash flow information: |  |  |
Interest paid | $ | 47,093 |  |  | $ | 36,563 |
Supplemental disclosure of non-cash investing and financing activities: |  |  |
Dividend declared, not yet paid | $ | 46,028 |  |  | $ | 32,060 |
Offering costs payable | $ | 220 |  |  | $ | 325 |
Fair value of assets acquired from AMTG | $ | 1,936,260 |  |  | $ | — |
Fair value of liabilities assumed from AMTG | $ | (1,285,183 | ) |  | $ | — |
Fair value of common stock issued to AMTG | $ | 218,397 |  |  | $ | — |
Fair value of preferred stock issued to AMTG | $ | 172,500 |  |  | $ | — |

See notes to unaudited condensed consolidated financial statements.
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Apollo Commercial Real Estate Finance Inc. and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(in thousands—except share and per share data)
Note 1 – Organization
Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the “Company,” “ARI,” “we,” “us” and “our”) is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. 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. These asset classes are referred to as the Company’s target assets.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include the Company’s accounts and those of its consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s most significant estimates include the fair value of financial instruments and loan loss reserve. Actual results could differ from those estimates.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been included. The Company's results of operations for the quarterly period ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year or any other future period.
On August 31, 2016, the Company, pursuant to the terms and conditions of the Agreement and Plan of Merger, dated February 26, 2016 (as amended, the “Merger Agreement”) acquired Apollo Residential Mortgage, Inc., a Maryland corporation (“AMTG”). AMTG merged with and into the Company (“Merger”) with the Company continuing as the surviving entity. As a result, all operations of AMTG and its former subsidiaries are consolidated with the operations of the Company. As of September 30, 2016, substantially all of the assets acquired from AMTG had been sold.
Under Financial Accounting Standards Board (the "FASB") ASC Topic 805, "Business Combinations", or ASC 805, the acquirer in a business combination must recognize, with certain exceptions, the fair values of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity. We applied the provisions of ASC 805 in accounting for our acquisition of AMTG. In doing so, we recorded provisional amounts for certain items as of the date of the acquisition, including the fair value of certain assets and liabilities. During the measurement period, a period which shall not exceed one year, we retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of such date that, if known, would have affected the measurement of the amounts recognized. See further discussion in Note 19 "Business Combination".
The Company currently operates in one business segment.
Recent Accounting Pronouncements
In May 2014, the FASB issued guidance which broadly amends the accounting guidance for revenue recognition. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The Company is currently assessing the impact that this accounting guidance will have on the Company's condensed consolidated financial statements when adopted.
In August 2014, the FASB issued guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires that management evaluate each annual and interim reporting period whether conditions exist that give rise to substantial doubt about the entity’s ability to continue as a going concern within one year from the financial statement issuance date, and if so, provide related disclosures. Disclosures are only required if conditions give rise to substantial doubt, whether or
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not the substantial doubt is alleviated by management’s plans. No disclosures are required specific to going concern uncertainties if an assessment of the conditions does not give rise to substantial doubt. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. If substantial doubt is alleviated as a result of the consideration of management’s plans, a company should disclose information that enables users of financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes): (1) principal conditions that initially give rise to substantial doubt, (2) management’s evaluation of the significance of those conditions in relation to the company’s ability to meet its obligations, and (3) management’s plans that alleviated substantial doubt. If substantial doubt is not alleviated after considering management’s plans, disclosures should enable investors to understand the underlying conditions, and include the following: (1) a statement indicating that there is substantial doubt about the company’s ability to continue as a going concern within one year after the issuance date, (2) the principal conditions that give rise to substantial doubt, (3) management’s evaluation of the significance of those conditions in relation to the company’s ability to meet its obligations, and (4) management's plans that are intended to mitigate the adverse conditions. The new guidance applies to all companies. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that the adoption of this guidance will have a material impact on the Company's condensed consolidated financial statements.
In February 2015, the FASB issued guidance which amends the guidance related to accounting for the consolidation of certain legal entities. The modifications impact limited partnerships and similar legal entities, the evaluation of (i) fees paid to a decision maker or a service provider as a variable interest, (ii) fee arrangements, and (iii) related parties on the primary beneficiary determination. The Company adopted this guidance and determined there was no material impact on the Company's condensed consolidated financial statements.
In April 2015, the FASB issued guidance that simplifies the presentation of debt issuance costs by amending the accounting guidance to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability. The amendments are consistent with the accounting guidance related to debt discounts. The Company adopted this guidance and applied its provisions retrospectively. This resulted in the reclassification of unamortized deferred financing costs from deferred financing costs, net to reductions in borrowings under repurchase agreements of $7,875 and $7,353 for the period ended September 30, 2016 and December 31, 2015, respectively. Other than this reclassification, the adoption of this guidance did not have an impact on the Company's condensed consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting (Topic 718),” or ASU 2016-09. ASU 2016-09 requires all income tax effects of share-based payment awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee’s shares for tax withholding purposes than is permitted under current guidance without triggering liability accounting. Finally, the guidance allows a policy election to account for employee forfeitures as they occur. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted for any entity in any interim or annual period. The Company is currently assessing the impact that this accounting guidance will have on the Company's condensed consolidated financial statements when adopted.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326),” or ASU 2016-13. ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance will replace the “incurred loss” approach under existing guidance with an “expected loss” model for instruments measured at amortized cost, and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently assessing the impact of the guidance will have on the Company's condensed consolidated financial statements when adopted.
In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230),” or ASU 2016-15. ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The new guidance addresses the classification of various transactions including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, distributions received from equity method investments, beneficial interests in securitization transactions, and others. The Company is currently assessing the impact that this guidance will have on the Company's condensed consolidated financial statements when adopted.
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Note 3 – Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on observable inputs utilized in measuring financial instruments at fair values. Market based or observable inputs are the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.
While the Company anticipates that its valuation methods will be appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
The estimated fair value of the CMBS portfolio is determined by reference to market prices provided by certain dealers who make a market in these financial instruments. The Company believes that these dealers who are usually market makers in these securities utilize various valuation techniques and inputs including, but not limited to, observable trades, discounted cash flow, market yield and duration to price these securities. Broker quotes are only indicative of fair value and may not necessarily represent what the Company would receive in an actual trade for the applicable instrument. Management performs additional analysis on prices received based on broker quotes to validate the prices and adjustments are made as deemed necessary by management to capture current market information. The estimated fair values of the Company’s securities are based on observable market parameters and are classified as Level II in the fair value hierarchy. In accordance with GAAP, the Company elects the fair value option for these securities at the date of purchase in order to allow the Company to measure these securities at fair value with the change in estimated fair value included as a component of earnings in order to reflect the performance of investment in a timely manner.
The estimated fair values of the Company’s derivative instruments are determined using a discounted cash flow analysis on the expected cash flows of each derivative. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected cash flows are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The fair values of foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. The Company’s derivative instruments are classified as Level II in the fair value hierarchy.
The following table summarizes the levels in the fair value hierarchy into which the Company’s financial instruments were categorized as of September 30, 2016 and December 31, 2015:

| Fair Value as of September 30, 2016 |  | Fair Value as of December 31, 2015
| Level I |  | Level II |  | Level III |  | Total |  | Level I |  | Level II |  | Level III |  | Total
CMBS (Fair Value Option) | $ | — |  |  | $ | 347,456 |  |  | $ | — |  |  | $ | 347,456 |  |  | $ | — |  |  | $ | 493,149 |  |  | $ | — |  |  | $ | 493,149 |
Derivative instruments | — |  |  | 5,037 |  |  | — |  |  | 5,037 |  |  | — |  |  | 3,327 |  |  | — |  |  | 3,327 |
Total | $ | — |  |  | $ | 352,493 |  |  | $ | — |  |  | $ | 352,493 |  |  | $ | — |  |  | $ | 496,476 |  |  | $ | — |  |  | $ | 496,476 |

Note 4 – Debt Securities
At September 30, 2016, all of the Company's CMBS (Fair Value Option) were pledged to secure borrowings under the Company’s master repurchase agreements with UBS AG, London Branch ("UBS") (the "UBS Facility") and Deutsche Bank AG ("DB") (the "DB Facility"). See "Note 8 - Borrowings Under Repurchase Agreements" for further information regarding these facilities.
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CMBS (Held-to-Maturity) represents a loan the Company closed during May 2014 that was subsequently contributed to a securitization during August 2014. During May 2014, the Company closed a $155,000 floating-rate whole loan secured by the first mortgage and equity interests in an entity that owns a resort hotel in Aruba. The property consists of 442 hotels rooms, 114 timeshare units, two casinos and approximately 131,500 square feet of retail space. During June 2014, the Company syndicated a $90,000 senior participation in the loan and retained a $65,000 junior participation. The Company evaluated this transaction and concluded due to its continuing involvement the transaction should not be accounted for as a sale. During August 2014, both the $90,000 senior participation and the Company's $65,000 junior participation were contributed to a CMBS securitization. In exchange for contributing its $65,000 junior participation, the Company received a CMBS secured solely by the $65,000 junior participation. The whole loan has a three-year term with two one-year extension options and an appraised loan-to-value ("LTV") of approximately 60%.
The amortized cost and estimated fair value of the Company’s debt securities at September 30, 2016 are summarized as follows:

Security Description | Face Amount |  | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Estimated Fair Value
CMBS (Fair Value Option) | $ | 402,392 |  |  | $ | 395,160 |  |  | $ | 116 |  |  | $ | (47,820 | ) |  | $ | 347,456 |
CMBS (Held-to-Maturity) | 147,280 |  |  | 147,190 |  |  | — |  |  | — |  |  | 147,190 |
Total | $ | 549,672 |  |  | $ | 542,350 |  |  | $ | 116 |  |  | $ | (47,820 | ) |  | $ | 494,646 |

During August 2016, the Company sold CMBS with an amortized cost of $86,676 resulting in a net realized loss of $225, which was comprised of realized gains of $90 and realized losses of $315. The sale generated proceeds of $16,222 after the repayment of $70,229 of borrowings under the Company's master repurchase agreement with Deutsche Bank AG ("DB") (the "DB Facility").
The amortized cost and estimated fair value of the Company’s debt securities at December 31, 2015 are summarized as follows:

Security Description | Face Amount |  | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Estimated Fair Value
CMBS (Fair Value Option) | $ | 511,482 |  |  | $ | 504,253 |  |  | $ | 2,614 |  |  | $ | (13,718 | ) |  | $ | 493,149 |
CMBS (Held-to-Maturity) | 153,250 |  |  | 153,193 |  |  | — |  |  | — |  |  | 153,193 |
Total | $ | 664,732 |  |  | $ | 657,446 |  |  | $ | 2,614 |  |  | $ | (13,718 | ) |  | $ | 646,342 |

During February 2015, the Company sold CMBS with an amortized cost of $24,038 resulting in a net realized loss of $443, which was comprised of realized gains of $43 and realized losses of $486. As a result of the sale, $678 was reclassified out of accumulated other comprehensive income. The sale generated proceeds of $1,341 after the repayment of $22,254 of borrowings under the Company's master repurchase agreement with Wells Fargo Bank, N.A. ("Wells Fargo") (the "Wells Facility").
The overall statistics for the Company’s CMBS (Fair Value Option) investments calculated on a weighted average basis assuming no early prepayments or defaults as of September 30, 2016 and December 31, 2015 are as follows:

| September 30, 2016 |  | December 31, 2015
Credit Ratings * | B+ - D |  |  | BB-D |
Coupon | 5.9 | % |  | 5.9 | %
Yield | 5.9 | % |  | 6.5 | %
RemainingWeighted Average Life | 2.0 years |  |  | 1.6 years |

* | Ratings per Fitch Ratings, Inc., Moody’s Investors Service, Inc. or Standard & Poor's Ratings Services.

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The percentage vintage, property type and location of the collateral securing the CMBS (Fair Value Option) investments calculated on a weighted average basis as of September 30, 2016 and December 31, 2015 are as follows:

Vintage | September 30, 2016 |  | December 31, 2015
2005 | 1.2 | % |  | 8.3 | %
2006 | 15.5 |  |  | 20.0 |
2007 | 71.6 |  |  | 62.4 |
2008 | 11.7 |  |  | 9.3 |
Total | 100.0 | % |  | 100.0 | %

Property Type | September 30, 2016 |  | December 31, 2015
Office | 34.6 | % |  | 32.0 | %
Retail | 27.8 |  |  | 30.2 |
Multifamily | 13.3 |  |  | 13.5 |
Other * | 24.3 |  |  | 24.3 |
Total | 100.0 | % |  | 100.0 | %

* No other individual category comprises more than 10% of the total.

Location | September 30, 2016 |  | December 31, 2015
South Atlantic | 23.0 | % |  | 23.0 | %
Middle Atlantic | 16.0 |  |  | 18.1 |
Pacific | 15.8 |  |  | 17.8 |
East North Central | 11.3 |  |  | 12.5 |
Other * | 33.9 |  |  | 28.6 |
Total | 100.0 | % |  | 100.0 | %

* No other individual category comprises more than 10% of the total.
Note 5 – Commercial Mortgage Loans
The Company’s commercial mortgage loan portfolio was comprised of the following at September 30, 2016:
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Description |  | Maturity Date |  |  | Current Principal Balance |  | Carrying Value |  | Fixed/Floating |  | Property Size
Condominium – New York, NY (1) |  | Nov-16 |  |  | 3,175 |  |  | 3,198 |  |  | Floating |  | 40,000 sq. ft.
Condominium – Bethesda, MD (1)(2) |  | Apr-17 |  |  | 49,893 |  |  | 50,337 |  |  | Floating |  | 50 units
Vacation Home Portfolio - Various (1) |  | Apr-19 |  |  | 91,015 |  |  | 90,270 |  |  | Fixed |  | 229 properties
Hotel - Philadelphia, PA (1)(3) |  | May-17 |  |  | 34,000 |  |  | 33,980 |  |  | Floating |  | 301 keys
Condo Construction - Bethesda, MD (4) |  | Dec-16 |  |  | 51,419 |  |  | 51,737 |  |  | Floating |  | 40 units
Multifamily - Brooklyn, NY (1)(5) |  | Oct-16 |  |  | 34,500 |  |  | 34,984 |  |  | Floating |  | 63 units
Mixed Use - Cincinnati, OH (1)(3) |  | May-18 |  |  | 165,000 |  |  | 163,517 |  |  | Floating |  | 65 acres
Multifamily - Williston, ND (1)(3) |  | Nov-17 |  |  | 49,706 |  |  | 39,715 |  |  | Floating |  | 366 units/homes
Vacation Home Portfolio - Various U.S. (1)(3) |  | Nov-19 |  |  | 59,500 |  |  | 59,167 |  |  | Fixed |  | 29 properties
Mixed Use - Brooklyn, NY (1)(8) |  | Mar-17 |  |  | 85,770 |  |  | 86,051 |  |  | Floating |  | 330,000 sq. ft.
Retail Redevelopment - Miami, FL (1)(7) |  | Jan-17 |  |  | 45,000 |  |  | 45,308 |  |  | Floating |  | 63,300 sq. ft.
Retail - Brooklyn, NY (1) |  | Mar-17 |  |  | 23,000 |  |  | 22,982 |  |  | Floating |  | 10,500 sq. ft.
Hotel - New York, NY (1)(9) |  | Sept-18 |  |  | 101,764 |  |  | 101,463 |  |  | Floating |  | 317 keys
Retail - Brooklyn, NY |  | Mar-17 |  |  | 5,910 |  |  | 5,904 |  |  | Floating |  | 5,500 sq. ft.
Hotel - U.S. Virgin Islands (1)(10) |  | Jan-18 |  |  | 42,000 |  |  | 41,747 |  |  | Floating |  | 180 keys
Office - Richmond, VA (1)(11) |  | Jan-18 |  |  | 54,000 |  |  | 53,750 |  |  | Floating |  | 262,000 sq. ft.
Retail Redevelopment - Miami, FL (1)(12) |  | Jan-18 |  |  | 220,000 |  |  | 218,173 |  |  | Floating |  | 113,000 sq. ft.
Office - Boston, MA (6)(1) |  | Mar-18 |  |  | 28,570 |  |  | 28,392 |  |  | Floating |  | 114,000 sq. ft.
Mixed Use - New York, NY (13)(1) |  | Jun-18 |  |  | 45,069 |  |  | 44,717 |  |  | Floating |  | 91,584 sq. ft.
Condo Conversion - Brooklyn, NY (14)(1) |  | Jun-18 |  |  | 40,600 |  |  | 40,295 |  |  | Floating |  | 133,550 sq. ft.
Hotel - New York, NY (15) |  | Aug-18 |  |  | 78,140 |  |  | 77,141 |  |  | Floating |  | 612 keys
Mixed Use - Chicago, IL (16) |  | Oct-18 |  |  | 128,000 |  |  | 126,721 |  |  | Floating |  | 737,382 sq. ft.
Retail - Brooklyn, NY |  | Mar-17 |  |  | 7,500 |  |  | 7,441 |  |  | Floating |  | 6,500 sq. ft.
Total |  |  |  |  | $ | 1,443,531 |  |  | $ | 1,426,990 |  |  |  |  |

(1) | At September 30, 2016, this loan was pledged to secure borrowings under the Company’s repurchase agreements entered into with JPMorgan Chase Bank, N.A. (the “JPMorgan Facility”) or Goldman Sachs Bank USA (the “Goldman Loan”). See "Note 8 – Borrowings Under Repurchase Agreements" for a description of these agreements.

(2) | This loan includes a six-month extension option subject to certain conditions and the payment of a fee.

(3) | This loan includes two one-year extension options subject to certain conditions and the payment of a fee.

(4) | This loan includes a six-month extension option subject to certain conditions and the payment of a fee.

(5) | This loan includes three one-year extension options subject to certain conditions and the payment of a fee.

(6) | This loan includes one six-month extension option subject to certain conditions and the payment of a fee. At September 30, 2016, the Company had $2,430 of unfunded loan commitments related to this loan.

(7) | This loan includes two six- month extension options subject to certain conditions and the payment of a fee for each extension.

(8) | At September 30, 2016, the Company had $6,730 of unfunded loan commitments related to this loan.

(9) | This loan includes two one-year extension options subject to certain conditions and the payment of a fee. At September 30, 2016, the Company had $36,643 of unfunded loan commitments related to this loan.

(10) | This loan includes three one-year extension options subject to certain conditions and the payment of a fee for such extension. At September 30, 2016, the Company had $1,500 of unfunded loan commitments related to this loan.

(11) | This loan includes two one-year extension options subject to certain conditions and the payment of a fee. At September 30, 2016, the Company had $1,000 of unfunded loan commitments related to this loan.

(12) | This loan includes a one-year extension option subject to certain conditions and the payment of a fee.

(13) | This loan includes a six-month extension option subject to certain conditions and the payment of a fee. At September 30, 2016, the Company had $4,931 of unfunded loan commitments related to this loan.

(14) | At September 30, 2016, the Company had $4,900 of unfunded loan commitments related to this loan.

(15) | This loan includes three one-year extension options subject to certain conditions and the payment of a fee. At September 30, 2016, the Company had $26,860 of unfunded loan commitments related to this loan.

(16) | This loan includes two one-year extension options subject to certain conditions and the payment of a fee. At September 30, 2016, the Company had $5,000 of unfunded loan commitments related to this loan.

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The Company’s commercial mortgage loan portfolio was comprised of the following at December 31, 2015:

Description |  | Maturity Date |  |  | Current Principal Balance |  | Carrying Value |  | Fixed/Floating |  | Property Size
Condominium – New York, NY (1) |  | Sept-16 |  |  | $ | 24,114 |  |  | $ | 24,289 |  |  | Floating |  | 40,000 sq. ft.
Condominium- Bethesda, MD (2) |  | Sept-16 |  |  | 65,125 |  |  | 65,087 |  |  | Floating |  | 50 units
Vacation Home Portfolio - Various (1) |  | Apr-19 |  |  | 94,147 |  |  | 93,277 |  |  | Fixed |  | 229 properties
Hotel - Philadelphia, PA (1)(3) |  | May-17 |  |  | 34,000 |  |  | 33,994 |  |  | Floating |  | 301 keys
Condo Construction - Bethesda, MD (4) |  | Dec-16 |  |  | 50,000 |  |  | 49,960 |  |  | Floating |  | 40 units
Multifamily - Brooklyn, NY (1)(5) |  | Aug-16 |  |  | 34,500 |  |  | 34,886 |  |  | Floating |  | 63 units
Mixed Use - Cincinnati, OH (1)(3) |  | May-18 |  |  | 165,000 |  |  | 163,173 |  |  | Floating |  | 65 acres
Condo Conversion - New York, NY (1) |  | Jun-16 |  |  | 67,300 |  |  | 67,038 |  |  | Floating |  | 86,000 sq. ft.
Multifamily - Williston, ND (1)(3) |  | Nov-17 |  |  | 49,691 |  |  | 49,665 |  |  | Floating |  | 366 units/homes
Vacation Home Portfolio - Various U.S. (1)(3) |  | Nov-19 |  |  | 50,000 |  |  | 49,595 |  |  | Fixed |  | 24 properties
Mixed Use - Brooklyn, NY (1)(6) |  | Mar-17 |  |  | 85,770 |  |  | 85,658 |  |  | Floating |  | 330,000 sq. ft.
Retail Redevelopment - Miami, FL (1)(7) |  | Jan-17 |  |  | 45,000 |  |  | 44,925 |  |  | Floating |  | 63,300 sq. ft.
Retail Redevelopment - Miami, FL (1) |  | Jul-17 |  |  | 33,000 |  |  | 32,804 |  |  | Floating |  | 16,600 sq. ft.
Retail - Brooklyn, NY (1)(8) |  | Mar-17 |  |  | 1,653 |  |  | 1,636 |  |  | Floating |  | 10,500 sq. ft.
Hotel - New York, NY (1)(9) |  | Sept-18 |  |  | 98,373 |  |  | 97,381 |  |  | Floating |  | 317 keys
Retail - Brooklyn, NY (1) |  | Mar-17 |  |  | 5,910 |  |  | 5,858 |  |  | Floating |  | 5,500 sq. ft.
Hotel - U.S. Virgin Islands (10) |  | Jan-18 |  |  | 42,000 |  |  | 41,600 |  |  | Floating |  | 180 keys
Office - Richmond, VA (11) |  | Jan-18 |  |  | 54,000 |  |  | 53,475 |  |  | Floating |  | 262,000 sq. ft.
Total/Weighted Average |  |  |  |  | $ | 999,583 |  |  | $ | 994,301 |  |  |  |  |

(1) | At December 31, 2015, this loan was pledged to secure borrowings under the JPMorgan Facility or the Goldman Loan. See "Note 8 – Borrowings Under Repurchase Agreements" for a description of these agreements.

(2) | This loan includes a six-month extension option subject to certain conditions and the payment of a fee.

(3) | This loan includes two one-year extension options subject to certain conditions and the payment of a fee.

(4) | This loan includes a six-month extension option subject to certain conditions and the payment of a fee. At December 31, 2015 , the Company had $15,100 of unfunded loan commitments related to this loan.

(5) | This loan includes three one-year extension options subject to certain conditions and the payment of a fee for each extension.

(6) | At December 31, 2015, the Company had $6,730 of unfunded loan commitments related to this loan.

(7) | This loan includes two six-month extension options subject to certain conditions and the payment of a fee.

(8) | At December 31, 2015, the Company had $9,000 of unfunded loan commitments related to this loan.

(9) | This loan includes two one-year extension options subject to certain conditions and the payment of a fee for each extension. At December 31, 2015, the Company had $40,034 of unfunded loan commitments related to this loan.

(10) | This loan includes three one-year extension options subject to certain conditions and the payment of a fee. At December 31, 2015, the Company had $1,500 of unfunded loan commitments related to this loan.

(11) | This loan includes a two one-year extension options subject to certain conditions and the payment of a fee. At December 31, 2015, the Company had $1,000 of unfunded loan commitments related to this loan.

The Company evaluates its loans for possible impairment on a quarterly basis. The Company regularly evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations are sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, the Company considers the overall economic environment,
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real estate sector and geographic sub-market in which the borrower operates. Such loan loss analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants. An allowance for loan loss is established when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan.
During the three and nine months ended September 30, 2016, respectively, the Company recorded a loan loss provision of $0 and $10,000 on a multifamily commercial mortgage loan in Williston, ND. As of September 30, 2016, the aggregate loan loss provision was $10,000. The Company has ceased accruing payment in kind ("PIK") interest associated with the loan. As of December 31, 2015, there was no provision for loan loss.
Note 6 – Subordinate Loans
The Company’s subordinate commercial loan portfolio was comprised of the following at September 30, 2016:
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Description |  | Maturity Date |  |  | Current Principal Balance |  | Carrying Value |  | Fixed/Floating |  | Property Size
Subordinate to the Company's commercial mortgage loans |  |  |  |  |  |  |  |  |
Hotel - New York, NY (1) |  | Sept-18 |  |  | $ | 6,374 |  |  | $ | 6,284 |  |  | Floating |  | 317 keys
Multifamily - Williston, ND (2) |  | Nov-17 |  |  | 5,000 |  |  | — |  |  | Floating |  | 366 units
Total - Subordinate to the Company's commercial mortgage loans |  |  | $ | 11,374 |  |  | $ | 6,284 |  |  |  |  |
Subordinate to third party commercial mortgage loans |  |  |  |  |  |  |  |  |
Mixed Use – North Carolina |  | Aug-22 |  |  | $ | 6,525 |  |  | $ | 6,525 |  |  | Fixed |  | 170,897 sq. ft.
Office Complex - Missouri |  | Oct-22 |  |  | 9,454 |  |  | 9,454 |  |  | Fixed |  | 845,241 sq. ft.
Hotel Portfolio – Rochester, MN |  | Feb-18 |  |  | 23,947 |  |  | 23,947 |  |  | Fixed |  | 1,222 keys
Warehouse Portfolio - Various |  | May-23 |  |  | 32,000 |  |  | 32,000 |  |  | Fixed |  | 2,767,047 sq. ft.
Office Condo - New York, NY |  | Jul-22 |  |  | 14,000 |  |  | 13,665 |  |  | Fixed |  | 436,598 sq. ft.
Healthcare Portfolio - Various (2) |  | Jun-17 |  |  | 38,858 |  |  | 38,858 |  |  | Floating |  | 18,403 beds
Ski Resort - Big Sky, MT |  | Sept-20 |  |  | 15,000 |  |  | 14,758 |  |  | Fixed |  | 632 keys
Mixed Use - New York, NY (2) |  | Dec-17 |  |  | 96,856 |  |  | 96,758 |  |  | Floating |  | 363 units
Senior Housing - United Kingdom (2) |  | Dec-17 |  |  | 69,400 |  |  | 69,400 |  |  | Floating |  | 2,128 beds
Hotel - Burbank, CA |  | Jan-20 |  |  | 20,000 |  |  | 20,000 |  |  | Fixed |  | 488 keys
Multifamily Portfolio - Florida (3) |  | May-17 |  |  | 22,000 |  |  | 21,947 |  |  | Floating |  | 621 units
Multifamily Portfolio - Florida (3) |  | May-17 |  |  | 15,500 |  |  | 15,462 |  |  | Floating |  | 621 units
Mixed Use - Various (3) |  | May-17 |  |  | 45,000 |  |  | 45,076 |  |  | Floating |  | 3,535,774 sq. ft.
Hotel - Phoenix, AZ |  | Jul-25 |  |  | 25,000 |  |  | 25,000 |  |  | Fixed |  | 744 keys
Hotel - Washington, DC (2) |  | Jul-17 |  |  | 20,000 |  |  | 19,968 |  |  | Floating |  | 581 keys
Condo Development - New York, NY (6) |  | Jul-19 |  |  | 50,616 |  |  | 50,266 |  |  | Floating |  | 60 units
Condo Conversion - New York, NY (2) |  | Aug-18 |  |  | 57,750 |  |  | 57,459 |  |  | Floating |  | 223 units
Mixed Use - New York, NY (7) |  | Oct-18 |  |  | 30,000 |  |  | 29,896 |  |  | Floating |  | 363 units
Destination Resort - Various (8) |  | May-18 |  |  | 75,000 |  |  | 72,502 |  |  | Floating |  | 5,243 keys
Multifamily - New York, NY (9)(10) |  | Nov-18 |  |  | 55,000 |  |  | 54,696 |  |  | Floating |  | 185,000 sq. ft.
Hotel - New York, NY (4)(10) |  | Mar-17 |  |  | 50,000 |  |  | 49,956 |  |  | Floating |  | 468 keys
Condo Pre-development - United Kingdom |  | Sep-17 |  |  | 71,346 |  |  | 71,346 |  |  | Floating |  | 41 units
Condo Conversion - New York, NY (5) |  | Jul-19 |  |  | 37,646 |  |  | 36,991 |  |  | Floating |  | 139 units
Total - Subordinate to third party commercial mortgage loans |  |  | $ | 880,898 |  |  | $ | 875,930 |  |  |  |  |
Total/Weighted Average |  |  |  |  | $ | 892,272 |  |  | $ | 882,214 |  |  |  |  |

(1) | Includes two one-year extension options subject to certain conditions and the payment of an extension fee. At September 30, 2016, the Company had $8,699 of unfunded loan commitments related to this loan.

(2) | Includes two one-year extension options subject to certain conditions and the payment of a fee for each extension.

(3) | Includes three one-year extension options subject to certain conditions and the payment of an extension fee.

(4) | Includes a three-month extension option subject to certain conditions and the payment of a fee.

(5) | Includes a one-year extension option subject to certain conditions and the payment of an extension fee. At September 30, 2016, the Company had $39,354 of unfunded loan commitments related to this loan.

(6) | Includes a one-year extension option subject to certain conditions and the payment of a fee for each extension. At September 30, 2016, the Company had $35,633 of unfunded loan commitments related to this loan.

(7) | Includes a one-year extension option subject to certain conditions and the payment of an extension fee.

(8) | Includes four one-year extension options subject to certain conditions and the payment of an extension fee.

(9) | Includes a six-month extension option subject to certain conditions and the payment of a fee.

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(10) | At September 30, 2016, this loan was pledged to secure borrowings under the JPMorgan Facility or the Goldman Loan. See "Note 8 - Borrowings Under Repurchase Agreements" for a description of these agreements.

The Company’s subordinate commercial loan portfolio was comprised of the following at December 31, 2015:
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Description |  | Maturity Date |  |  | Current Principal Balance |  | Carrying Value |  | Fixed/Floating |
Subordinate to the Company's commercial mortgage loans |  |  |  |  |  |  |  |
Condominium – New York, NY (1) |  | Sept-16 |  |  | $ | 6,386 |  |  | $ | 6,415 |  |  | Floating |
Mixed Use - Brooklyn, NY (1) |  | Mar-17 |  |  | 12,347 |  |  | 12,222 |  |  | Floating |
Hotel - New York, NY (1)(2) |  | Sept-18 |  |  | 2,595 |  |  | 2,458 |  |  | Floating |
Multifamily - Williston, ND (1)(3) |  | Nov-17 |  |  | 5,000 |  |  | 5,000 |  |  | Floating |
Total - Subordinate to the Company's commercial mortgage loans |  |  | $ | 26,328 |  |  | $ | 26,095 |  |  |  |
Subordinate to third party commercial mortgage loans |  |  |  |  |  |  |  |  |  |
Office - Michigan |  | Jun-20 |  |  | $ | 8,753 |  |  | $ | 8,753 |  |  | Fixed |
Mixed Use – North Carolina |  | Aug-22 |  |  | 6,525 |  |  | 6,525 |  |  | Fixed |
Office Complex - Missouri |  | Oct-22 |  |  | 9,566 |  |  | 9,566 |  |  | Fixed |
Hotel Portfolio – Rochester, MN |  | Feb-18 |  |  | 24,182 |  |  | 24,182 |  |  | Fixed |
Warehouse Portfolio - Various |  | May-23 |  |  | 32,000 |  |  | 32,000 |  |  | Fixed |
Office Condo - New York, NY |  | Jul-22 |  |  | 14,000 |  |  | 13,631 |  |  | Fixed |
Mixed Use - Various (3) |  | Dec-16 |  |  | 19,500 |  |  | 19,377 |  |  | Fixed |
Mixed Use - London, England |  | Jan-16 |  |  | 50,676 |  |  | 50,676 |  |  | Fixed |
Healthcare Portfolio - Various (4) |  | Jun-16 |  |  | 39,223 |  |  | 39,223 |  |  | Floating |
Ski Resort - Big Sky, MT |  | Sept-20 |  |  | 15,000 |  |  | 14,878 |  |  | Fixed |
Mixed Use - New York, NY (5) |  | Dec-17 |  |  | 88,368 |  |  | 87,818 |  |  | Floating |
Senior Housing - United Kingdom (3) |  | Dec-17 |  |  | 79,735 |  |  | 79,735 |  |  | Floating |
Hotel - Burbank, CA |  | Jan-20 |  |  | 20,000 |  |  | 20,000 |  |  | Fixed |
Multifamily Portfolio - Florida (4) |  | May-17 |  |  | 22,000 |  |  | 21,895 |  |  | Floating |
Multifamily Portfolio - Florida (4) |  | May-17 |  |  | 15,500 |  |  | 15,426 |  |  | Floating |
Mixed Use - Various (4) |  | May-17 |  |  | 45,000 |  |  | 44,854 |  |  | Floating |
Hotel - Phoenix, AZ |  | Jul-25 |  |  | 25,000 |  |  | 25,000 |  |  | Fixed |
Hotel - Washington, DC (3) |  | Jul-17 |  |  | 20,000 |  |  | 19,934 |  |  | Floating |
Condo Development - New York, NY (6) |  | Jul-19 |  |  | 34,184 |  |  | 33,567 |  |  | Floating |
Condo Conversion - New York, NY (3) |  | Aug-18 |  |  | 52,418 |  |  | 51,941 |  |  | Floating |
Mixed Use - New York, NY (7) |  | Oct-18 |  |  | 30,000 |  |  | 29,785 |  |  | Floating |
Destination Resort - Various (8) |  | May-18 |  |  | 75,000 |  |  | 71,362 |  |  | Floating |
Multifamily - New York, NY (9) |  | Nov-18 |  |  | 55,000 |  |  | 54,558 |  |  | Floating |
Hotel - New York, NY (10) |  | Mar-17 |  |  | 50,000 |  |  | 49,522 |  |  | Floating |
Condo Pre-development - United Kingdom (10) |  | Sept-16 |  |  | 81,048 |  |  | 81,048 |  |  | Floating |
Total - Subordinate to third party commercial mortgage loans |  |  | $ | 912,678 |  |  | $ | 905,256 |  |  |  |
Total/Weighted Average |  |  | $ | 939,006 |  |  | $ | 931,351 |  |  |  |

(1) | At December 31, 2015, this loan was pledged to secure borrowings under the JPMorgan Facility. See "Note 8 –Borrowings Under Repurchase Agreements" for a description of this facility.

(2) | Includes two one-year extension options subject to certain conditions and the payment of an extension fee. As of December 31, 2015, the Company had $12,478 of unfunded loan commitments related to this loan.

(3) | Includes two one-year extension options subject to certain conditions and the payment of an extension fee.

(4) | Includes three one-year extension options subject to certain conditions and the payment of an extension fee.

(5) | Includes two one-year extension options subject to certain conditions and the payment of an extension fee. As of December 31, 2015, the Company had $785 of unfunded loan commitments related to this loan.

(6) | Includes a one-year extension option subject to certain conditions and the payment of an extension fee. As of December 31, 2015, the Company had $41,160 of unfunded loan commitments related to this loan.

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(7) | Includes a one-year extension option subject to certain conditions and the payment of an extension fee.

(8) | Includes four one-year extension options subject to certain conditions and the payment of an extension fee.

(9) | Includes a six-month extension option subject to certain conditions and the payment of a fee.

(10) | Includes a three-month extension option subject to certain conditions and the payment of a fee.

The Company evaluates its loans for possible impairment on a quarterly basis. See “Note 5 – Commercial Mortgage Loans” for a summary of the metrics reviewed. During the three and nine months ended September 30, 2016, respectively, the Company recorded a loan loss provision of $0 and $5,000 on a multifamily subordinate loan in Williston, ND. As of September 30, 2016, the aggregate loan loss provision was $5,000. The Company has ceased accruing PIK interest associated with the loan. As of December 31, 2015, there was no provision for loan loss.
Note 7 – Unconsolidated Joint Venture
In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ Limited Partnership (“Champ LP”) following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in Bremer Kreditbank AG ("BKB"). The Company acquired its ownership interest in Champ LP for an initial purchase price paid at closing of approximately €30,724 (or $39,477). The Company committed to invest up to approximately €38,000 (or $50,000). The Company together with certain other affiliated investors and unaffiliated third party investors, in aggregate, own 100% of Champ LP. Champ LP together with certain unaffiliated third party investors, in aggregate, own 100% of BKB.
BKB specializes in corporate banking and financial services for medium-sized German companies. It also provides professional real estate financing, acquisition finance, institutional asset management and private wealth management services for German high-net-worth individuals.
In January 2015, the Company funded an additional investment of €3,331 (or $3,929) related to its investment in Champ LP. In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an investment fund managed by Apollo Global Management, LLC (together with its subsidiaries, "Apollo") for €16,314 (or $20,794) (of which $2,614 related to foreign exchange losses which were previously included in accumulated other comprehensive loss). In June 2016, the Company transferred €427 of its unfunded commitment to Apollo. As of September 30, 2016, the Company’s unfunded commitment to Champ LP was €2,802 (or $3,149). Through its interest in Champ LP, as of September 30, 2016, the Company held an indirect ownership interest of approximately 9.34% in BKB.
The Company determined that Champ LP met the definition of a variable interest entity ("VIE") and that it was not the primary beneficiary; therefore, the Company did not consolidate the assets and liabilities of the partnership. Additionally, Champ LP is an Investment Company under GAAP, and is therefore reflected at fair value. Our investment in Champ LP is accounted for as an equity method investment and therefore we record our proportionate share of the net asset value.
Note 8 – Borrowings Under Repurchase Agreements
At September 30, 2016 and December 31, 2015, the Company’s borrowings had the following outstanding balances, maturities and weighted average interest rates:
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| September 30, 2016 |  | December 31, 2015
Lender | Maximum Amount of Borrowings |  | Borrowings Outstanding |  | Maturity (1) |  | Weighted Average Rate (2) |  | Maximum Facility Size |  | Borrowings Outstanding |  | Maturity (1) |  | Weighted Average Rate (2)
JPMorgan Facility (3) | $ | 943,000 |  |  | $ | 648,086 |  |  | January 2019 |  | L+2.26% |  |  | $ | 600,000 |  |  | $ | 445,942 |  |  | January 2019 |  | L+2.25% |
DB Repurchase Facility | 300,000 |  |  | — |  |  | September 2019 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A |  | N/A |
Goldman Loan | N/A |  |  | 42,796 |  |  | April 2019 |  | L+3.50% |  |  | N/A |  |  | 45,928 |  |  | April 2019 |  | L+3.50% |
Sub-total |  |  |  | 690,882 |  |  |  |  | L+2.33% |  |  |  |  | 491,870 |  |  |  |  | L+2.37% |
UBS Facility | N/A |  |  | 133,899 |  |  | September 2018 |  | 2.79 | % |  | N/A |  |  | 133,899 |  |  | September 2018 |  | 2.79 | %
DB Facility (4) | N/A |  |  | 196,256 |  |  | April 2018 |  | 3.66 | % |  | N/A |  |  | 300,005 |  |  | April 2018 |  | 3.69 | %
Sub-total |  |  | 330,155 |  |  |  |  | 3.31 | % |  |  |  | 433,904 |  |  |  |  | 3.39 | %
less: deferred financing costs |  |  | (7,875 | ) |  |  |  |  |  |  |  | (7,353 | ) |  |  |  |
Total / Weighted Average |  |  |  | $ | 1,013,162 |  |  |  |  | 3.01 | % |  |  |  | $ | 918,421 |  |  |  |  | 2.92 | %

(1) Maturity date assumes all extensions are exercised.
(2) Assumes one-month LIBOR at September 30, 2016 and December 31, 2015 was 0.53% and 0.43%, respectively.
(3) As of September 30, 2016, the JP Morgan Facility provided for maximum total borrowings comprised of the$800.0 million repurchase facility and a $143.0 million asset specific financing.
(4) Advances under the DB Facility accrue interest at a per annum pricing rate based on the rate implied by the fixed rate bid under a fixed for floating interest rate swap for the receipt of payments indexed to three-month U.S. dollar LIBOR, plus a financing spread ranging from 1.80% to 2.32% based on the rating of the collateral pledged.
At September 30, 2016, the Company’s borrowings had the following remaining maturities:

| Less than 1 year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5 years |  | Total
JPMorgan Facility | $ | 313,547 |  |  | $ | 334,539 |  |  | $ | — |  |  | $ | — |  |  | $ | 648,086 |
DB Repurchase Facility | — |  |  | — |  |  | — |  |  | — |  |  | — |
Goldman Loan | 5,290 |  |  | 37,506 |  |  | — |  |  | — |  |  | 42,796 |
UBS Facility * | 260 |  |  | 133,639 |  |  | — |  |  | — |  |  | 133,899 |
DB Facility | 185 |  |  | 174,718 |  |  | 8,643 |  |  | 12,710 |  |  | 196,256 |
Total | $ | 319,282 |  |  | $ | 680,402 |  |  | $ | 8,643 |  |  | $ | 12,710 |  |  | $ | 1,021,037 |

*Assumes extension option is exercised.
At September 30, 2016, the Company’s collateralized financings were comprised of borrowings outstanding under the JPMorgan Facility, the Goldman Loan, the UBS Facility and the DB Facility. No borrowings were outstanding under the master repurchase agreement with Deutsche Bank AG (the "DB Repurchase Facility"), which the Company entered into on September 29, 2016. The table below summarizes the outstanding balances at September 30, 2016, as well as the maximum and average month-end balances for the nine months ended September 30, 2016 for the Company's borrowings under repurchase agreements.

|  |  | For the nine months ended September 30, 2016
| Balance at September 30, 2016 |  | Maximum Month-End Balance |  | Average Month-End Balance
JPMorgan Facility borrowings | $ | 648,086 |  |  | $ | 800,917 |  |  | $ | 675,061 |
DB Repurchase Facility | — |  |  | — |  |  | — |
Goldman Loan | 42,796 |  |  | 45,928 |  |  | 44,105 |
UBS Facility borrowings | 133,899 |  |  | 133,899 |  |  | 133,899 |
DB Facility borrowings | 196,256 |  |  | 300,005 |  |  | 266,056 |
Total | $ | 1,021,037 |  |  |  |  |

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The Company was in compliance with the financial covenants under its borrowing agreements at September 30, 2016 and December 31, 2015.
Note 9 – Convertible Senior Notes
On March 17, 2014, the Company issued $143,750 aggregate principal amount of 5.50% Convertible Senior Notes due 2019 (the "March 2019 Notes"), for which the Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company of approximately $139,037. At September 30, 2016, the March 2019 Notes had a carrying value of $141,299 and an unamortized discount of $2,451.
On August 18, 2014, the Company issued an additional $111,000 aggregate principal amount of 5.50% Convertible Senior Notes due 2019 (the "August 2019 Notes," and together with the March 2019 Notes, the "2019 Notes"), for which the Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company of approximately $109,615. At September 30, 2016, the August 2019 Notes had a carrying value of $108,229 and an unamortized discount of $2,771.
The following table summarizes the terms of the 2019 Notes.

| Principal Amount | Coupon Rate | Effective Rate (1) | Conversion Rate (2) | Maturity Date | Remaining Period of Amortization
March 2019 Notes | $143,750 | 5.50% | 6.25% | 56.5584 | 3/15/2019 | 2.46 years
August 2019 Notes | $111,000 | 5.50% | 6.50% | 56.5584 | 3/15/2019 | 2.46 years

(1) | Effective rate includes the effect of the adjustment for the conversion option (see footnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.

(2) | The Company has the option to settle any conversions in cash, shares of common stock or a combination thereof. The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of 2019 Notes converted, as adjusted as of October 11, 2016, in accordance with the applicable supplemental indenture as a result of cash dividend payments. The if-converted value of the 2019 Notes does not exceed their principal amount at September 28, 2016 since the closing market price of the Company’s common stock does not exceed the implicit conversion prices of $17.68 at September 30, 2016 for the 2019 Notes.

GAAP requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the 2019 Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. The Company measured the fair value of the debt components of the 2019 Notes as of their issuance date based on effective interest rates. As a result, the Company attributed approximately $11,445 of the proceeds to the equity component of the 2019 Notes, which represents the excess proceeds received over the fair value of the liability component of the 2019 Notes at the date of issuance. The equity component of the 2019 Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2016. The resulting debt discount is being amortized over the period during which the 2019 Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the 2019 Notes will increase in subsequent reporting periods through the maturity date as the 2019 Notes accrete to their par value over the same period.
The aggregate contractual interest expense was approximately $3,503 and $10,508 for the three and nine months ended September 30, 2016, respectively. The aggregate contractual interest expense was approximately $3,503 and $10,508 for the three and nine months ended September 30, 2015, respectively. With respect to the amortization of the discount on the liability component of the 2019 Notes as well as the amortization of deferred financing costs, the Company reported additional non-cash interest expense of approximately $895 and $2,654 for the three and nine months ended September 30, 2016, respectively. With respect to the amortization of the discount on the liability component of the 2019 Notes as well as the amortization of deferred financing costs, the Company reported additional non-cash interest expense of approximately $867 and $2,566 for the three and nine months ended September 30, 2015, respectively.
As of September 30, 2016, potential shares of common stock contingently issuable upon the conversion of the 2019 Notes were excluded from the calculation of diluted income per share of common stock because it is management's intent and the Company currently has the ability to settle the obligation in cash.
Note 10 - Federal Home Loan Bank of Indianapolis Membership
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In February 2015, the Company's wholly owned subsidiary, ACREFI Insurance Services, LLC, was accepted for membership in the Federal Home Loan Bank of Indianapolis (“FHLBI”). As a member of the FHLBI, ACREFI Insurance Services, LLC has access to a variety of products and services offered by the FHLBI, including secured advances. As of September 30, 2016, ACREFI Insurance Services, LLC had not requested any advances from the FHLBI.
On January 12, 2016, the Federal Housing Finance Agency (“FHFA”) adopted a final rule revising its regulations governing Federal Home Loan Bank membership. As a result, the FHLBI may not make any advances to ACREFI Insurance Services, LLC and is required to terminate the membership of ACREFI Insurance Services, LLC no later than February 19, 2017 (one year after the effective date of the final rule).
Upon termination of ACREFI Insurance Services, LLC's membership, FHLBI will be required to redeem at par value the FHLBI stock that had been purchased and held by ACREFI Insurance Services, LLC as a condition to membership in the FHLBI. At September 30, 2016, the Company had stock in the FHLBI totaling $8, which is included in other assets on the condensed consolidated balance sheet at September 30, 2016.
Note 11 – Participations Sold
Participations sold represent the interests in loans the Company originated and subsequently partially sold. The Company presents the participations sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to GAAP. The income earned on the participation sold is recorded as interest income and an identical amount is recorded as interest expense on the Company's condensed consolidated statements of operations.
During January 2015, the Company closed a £34,519 (or $51,996) floating-rate mezzanine loan secured by a portfolio of 44 senior housing facilities located throughout the United Kingdom. During February 2015, closed an additional £20,000 (or $30,672) and participated that balance to an investment fund affiliated with Apollo. At September 30, 2016, the participation had a face amount of £19,626 (or $25,459), a carrying amount of£19,626 (or $25,459) and a cash coupon of LIBOR plus 825 basis points.
During May 2014, the Company closed a $155,000 floating-rate whole loan secured by the first mortgage and equity interests in an entity that owns a resort hotel in Aruba. During June 2014, the Company syndicated a $90,000 senior participation in the loan and retained a $65,000 junior participation in the loan. During August 2014, both the $90,000 senior participation and the Company's $65,000 junior participation were contributed to a CMBS securitization. In exchange for contributing its $65,000 junior participation, the Company received a CMBS secured solely by the $65,000 junior participation and classified it as CMBS (Held-to-Maturity) on its condensed consolidated financial statements. At September 30, 2016, the participation had a face amount of $85,517, a carrying amount of $85,465 and a cash coupon of LIBOR plus 440 basis points.
Note 12 – Derivative Instruments
The Company uses forward currency contracts to economically hedge interest and principal payments due under its loans denominated in currencies other than U.S. dollars.
The Company has entered into a series of forward contracts to sell an amount of foreign currency (British pound ("GBP")) for an agreed upon amount of U.S. dollars at various dates through September 2017. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by the Company related to foreign denominated loan investments.
The following table summarizes our non-designated foreign exchange (“Fx”) forwards as of September 30, 2016:

Type of Derivative | September 30, 2016
| Number of Contracts |  | Aggregate Notional Amount |  | Notional Currency |  | Maturity
Fx Contracts - GBP | 5 |  | 97,732 |  |  | GBP |  | October 2016- September 2017

The following table summarizes our non-designated Fx forwards as of December 31, 2015:
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Type of Derivative | December 31, 2015
| Number of Contracts |  | Aggregate Notional Amount |  | Notional Currency |  | Maturity
Fx Contracts - GBP | 5 |  | 130,272 |  |  | GBP |  | January 2016- October 2016

The Company has not designated any of its derivative instruments as hedges under GAAP and therefore, changes in the fair value of the Company's derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to the Company’s derivative instruments for the three and nine months ended September 30, 2016 and 2015.

|  | Three months ended September 30, |  | Nine months ended September 30,
| Location of Loss Recognized in Income | 2016 |  | 2015 |  | 2016 |  | 2015
Forward currency contract | Gain (loss) on derivative instruments - unrealized | $ | (10,304 | ) |  | $ | 2,240 |  |  | $ | 1,812 |  |  | $ | (3,938 | )
Forward currency contract | Gain (loss) on derivative instruments - realized | 15,112 |  |  | — |  |  | 21,100 |  |  | — |
Interest rate caps | Loss on derivative instruments - unrealized | 7 |  |  | (144 | ) |  | (81 | ) |  | (206 | )
Total |  | $ | 4,815 |  |  | $ | 2,096 |  |  | $ | 22,831 |  |  | $ | (4,144 | )

The following table summarizes the gross asset amounts related to the Company's derivative instruments at September 30, 2016 and December 31, 2015.

| September 30, 2016 |  | December 31, 2015
| Gross Amount of Recognized Assets |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts of Assets Presented in the Consolidated Balance Sheet |  | Gross Amount of Recognized Assets |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts of Assets Presented in the Consolidated Balance Sheet
Interest rate caps | $ | 8 |  |  | $ | — |  |  | $ | 8 |  |  | $ | 106 |  |  | $ | — |  |  | $ | 106 |
Forward currency contract | 5,029 |  |  | — |  |  | 5,029 |  |  | 3,221 |  |  | — |  |  | 3,221 |
Total derivative instruments | $ | 5,037 |  |  | $ | — |  |  | $ | 5,037 |  |  | $ | 3,327 |  |  | $ | — |  |  | $ | 3,327 |

Note 13 – Related Party Transactions
Management Agreement
In connection with the Company’s initial public offering in September 2009, the Company entered into a management agreement (the “Management Agreement”) with ACREFI Management, LLC (the “Manager”), which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors.
Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.
The current term of the Management Agreement expires on September 29, 2017 and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of the Company’s independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of the Company’s independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base
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management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by the Company’s independent directors in February 2016, which included a discussion of the Manager’s performance and the level of the management fees thereunder, the Company determined not to seek termination of the Management Agreement. As described in "Note 16 - Commitments and Contingencies," the Company also made payments to the Manager in accordance with its letter agreement with the Manager.
For the three and nine months ended September 30, 2016, respectively, the Company incurred approximately $5,903 and $16,374 in base management fees under the Management Agreement. For the three and nine months ended September 30, 2015, respectively, the Company incurred approximately $4,097 and $11,325 in base management fees under the Management Agreement. In addition to the base management fee, the Company is also responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company or for certain services provided by the Manager to the Company. For the three and nine months ended September 30, 2016, respectively, the Company paid expenses totaling $517 and $1,359 related to reimbursements for certain expenses paid by the Manager on behalf of the Company under the Management Agreement. For the three and nine months ended September 30, 2015, respectively, the Company recorded expenses totaling $78 and $1,011 related to reimbursements for certain expenses paid by the Manager on behalf of the Company under the Management Agreement. Expenses incurred by the Manager and reimbursed by the Company are reflected in the respective condensed consolidated statement of operations expense category or the condensed consolidated balance sheet based on the nature of the item.
Included in payable to related party on the condensed consolidated balance sheet at September 30, 2016 and December 31, 2015, respectively, are approximately $5,903 and $4,100 for base management fees incurred but not yet paid under the Management Agreement.
Unconsolidated Joint Venture
In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ LP following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in BKB. The Company acquired its ownership interest in Champ LP for an initial purchase price paid at closing of approximately €30,724 (or $39,477). The Company committed to invest up to approximately €38,000 (or $50,000).
In January 2015, the Company funded an additional investment of €3,331 (or $3,929) related to its investment in Champ LP. In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an account managed by Apollo for approximately €16,314 (or $20,794). In June 2016, the Company transferred €427 of its unfunded commitment to Apollo, reducing its unfunded commitment to Champ LP to €2,802 (or $3,149). Through its interest in Champ LP, as of September 30, 2016, the Company, held an indirect ownership interest of approximately 9.34% in BKB. The Company together with certain other affiliated investors and unaffiliated third party investors, in aggregate, own 100% of BKB.
Note 14 – Share-Based Payments
On September 23, 2009, the Company’s board of directors approved the Apollo Commercial Real Estate Finance, Inc., 2009 Equity Incentive Plan (the “LTIP”). The LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7.5% of the issued and outstanding shares of the Company’s common stock (on a fully diluted basis). The LTIP is administered by the compensation committee of the Company’s board of directors (the “Compensation Committee”) and all grants under the LTIP must be approved by the Compensation Committee.
The Company recognized stock-based compensation expense of $1,828 and $5,434 for the three and nine months ended September 30, 2016, related to restricted stock and RSU vesting. The Company recognized stock-based compensation expense of $756 and $2,695 for the three and nine months ended September 30, 2015, related to restricted stock and RSU vesting. The following table summarizes the activity related to restricted common stock and RSUs during the nine months ended September 30, 2016:
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| Type | Date |  | Restricted Stock |  | RSUs |  | Estimate Fair Value on Grant Date |  | Initial Vesting |  | Final Vesting
Outstanding at December 31, 2015 |  | 340,064 |  |  | 1,242,810 |  |  |  |  |  |  |
| Cancelled upon delivery | January 2016 |  | — |  |  | (318,160 | ) |  | n/a |  | n/a |  | n/a
| Forfeiture | January 2016 |  | — |  |  | (1,667 | ) |  | n/a |  | n/a |  | n/a
| Grant | February 2016 |  | — |  |  | 47,028 |  |  | $729 |  | (1) |  | (1)
| Grant | March 2016 |  | — |  |  | 5,095 |  |  | $81 |  | December 2016 |  | December 2017
| Grant | April 2016 |  | 17,056 |  |  | — |  |  | $275 |  | July 2016 |  | April 2019
| Forfeiture | June 2016 |  | — |  |  | (14,972 | ) |  | n/a |  | n/a |  | n/a
| Cancelled upon delivery | July 2016 |  | — |  |  | (543 | ) |  | n/a |  | n/a |  | n/a
| Forfeiture | July 2016 |  | — |  |  | (12,792 | ) |  | n/a |  | n/a |  | n/a
| Grant | July 2016 |  | — |  |  | 1,528 |  |  | $25 |  | September 2016 |  | September 2016
| Forfeiture | August 2016 |  | — |  |  | (15,642 | ) |  | n/a |  | n/a |  | n/a
| Grant | September 2016 |  | — |  |  | 6,146 |  |  | $101 |  | October 2016 |  | October 2016
| Cancelled upon delivery | September 2016 |  | — |  |  | (41,281 | ) |  | n/a |  | n/a |  | n/a
Outstanding at September 30, 2016 |  | 357,120 |  |  | 897,550 |  |  |  |  |  |  |

(1) These awards vest based upon the achievement of certain conditions.
Below is a summary of expected restricted common stock and RSU vesting dates as of September 30, 2016.

Vesting Date | Shares Vesting |  | RSU Vesting |  | Total Awards
October 2016 | 5,578 |  |  | 37,046 |  |  | 42,624 |
December 2016 | 28,920 |  |  | 325,513 |  |  | 354,433 |
January 2017 | 5,161 |  |  | — |  |  | 5,161 |
April 2017 | 5,164 |  |  | — |  |  | 5,164 |
June 2017 | — |  |  | 544 |  |  | 544 |
July 2017 | 4,004 |  |  | — |  |  | 4,004 |
October 2017 | 3,997 |  |  | — |  |  | 3,997 |
December 2017 | 28,923 |  |  | 322,113 |  |  | 351,036 |
January 2018 | 2,749 |  |  | — |  |  | 2,749 |
April 2018 | 2,755 |  |  | — |  |  | 2,755 |
June 2018 | — |  |  | 544 |  |  | 544 |
July 2018 | 1,420 |  |  | — |  |  | 1,420 |
October 2018 | 1,424 |  |  | — |  |  | 1,424 |
December 2018 | 16,670 |  |  | 204,954 |  |  | 221,624 |
January 2019 | 1,419 |  |  | — |  |  | 1,419 |
April 2019 | 1,424 |  |  | — |  |  | 1,424 |
| 109,608 |  |  | 890,714 |  |  | 1,000,322 |

At September 30, 2016, the Company had unrecognized compensation expense of approximately $1,402 and $10,470, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.
RSU Deliveries
During the nine months ended September 30, 2016, the Company delivered 215,672 shares of common stock for 359,984 vested RSUs. The Company allows holders of RSUs to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the holder, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid-in-capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $2,626 for the nine months ended September 30, 2016, and is
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included as a component of the capital decrease related to the Company's equity incentive plan in the condensed consolidated statement of changes in stockholders’ equity.
Note 15 – Stockholders’ Equity
Common Stock Offerings. During the first quarter of 2015, the Company completed a follow-on public offering of 11,500,000 shares of its common stock, including the full exercise of the underwriters’ option to purchase additional shares, at a price of $16.82 per share. The aggregate net proceeds from the offering, including proceeds from the sale of the additional shares, were approximately $193,148 after deducting estimated offering expenses payable by the Company.
Dividends. For 2016, the Company declared the following dividends on its common stock:

Declaration Date | Record Date | Payment Date | Amount
March 15, 2016 | March 31, 2016 | April 15, 2016 | $ | 0.46 |
June 17, 2016 | June 30, 2016 | July 15, 2016 | $ | 0.46 |
September 14, 2016 | September 30, 2016 | October 17, 2016 | $ | 0.46 |

For 2016, the Company declared the following dividends on its 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”):

Declaration Date | Record Date | Payment Date | Amount
March 15, 2016 | March 31, 2016 | April 15, 2016 | $ | 0.5391 |
June 17, 2016 | June 30, 2016 | July 15, 2016 | $ | 0.5391 |
September 14, 2016 | September 30, 2016 | October 17, 2016 | $ | 0.5391 |

For 2016, the Company declared the following dividends on its 8.00% Fixed to Floating Series B Cumulative Redeemable Perpetual Preferred Stock (the “Series B Preferred Stock”):

Declaration Date | Record Date | Payment Date | Amount
March 15, 2016 | March 31, 2016 | April 15, 2016 | $ | 0.5000 |
June 17, 2016 | June 30, 2016 | July 15, 2016 | $ | 0.5000 |
September 14, 2016 | September 30, 2016 | October 17, 2016 | $ | 0.5000 |

For 2016, the Company declared the following dividends on its 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock (the “Series C Preferred Stock”):

Declaration Date | Record Date | Payment Date | Amount
September 14, 2016 | September 30, 2016 | October 31, 2016 | $ | 0.5000 |

Note 16 – Commitments and Contingencies
Legal Proceedings. From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business.
After the announcement of the execution of the Merger Agreement, two putative class action lawsuits challenging the proposed First Merger (as defined in the Merger Agreement), captioned Aivasian v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001532 and Wiener v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001837, were filed in the Circuit Court for Baltimore City, (the “Court”). A putative class and derivative lawsuit was later filed in the Court captioned Crago v. Apollo Residential Mortgage, Inc., No. 24-C-16-002610. Following a hearing on May 6, 2016, the Court entered orders among other things, consolidating the three actions under the caption In Re Apollo Residential Mortgage, Inc. Shareholder Litigation, Case No.: 24-C-16-002610. The plaintiffs have designated the Crago complaint as the operative complaint. The operative complaint includes both direct and derivative claims, names as defendants AMTG, the board of directors of AMTG (the “AMTG Board”), ARI, Merger Sub, Apollo and Athene and alleges, among other things, that the members of the AMTG Board breached their fiduciary duties to the AMTG stockholders and that the other corporate defendants aided and abetted such
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fiduciary breaches. The operative complaint further alleges, among other things, that the proposed First Merger involves inadequate consideration, was the result of an inadequate and conflicted sales process, and includes unreasonable deal protection devices that purportedly preclude competing offers. It also alleges that the transactions with Athene are unfair and that the registration statement on Form S-4 filed with the SEC on April 6, 2016 contains materially misleading disclosures and omits certain material information. The operative complaint seeks, among other things, certification of the proposed class, declaratory relief, preliminary and permanent injunctive relief, including enjoining or rescinding the First Merger, unspecified damages, and an award of other unspecified attorneys’ and other fees and costs. On May 6, 2016, counsel for the plaintiffs filed with the Court a stipulation seeking the appointment of interim co-lead counsel, which stipulation was approved by the Court on June 9, 2016. On August 18, 2016, the defendants filed motions to dismiss the consolidated action, and the plaintiffs filed an opposition brief on October 6, 2016. The Company believes that the claims asserted in the complaints are without merit and intend to vigorously defend the lawsuits.
Bremer Kreditbank AG. In September 2013, the Company, together with other affiliates of Apollo, reached an agreement to make an investment in an entity that agreed to acquire a minority participation in Bremer Kreditbank AG (“BKB”). The Company committed to invest up to approximately €38,000 (or $50,000), representing approximately 21% of the ownership in BKB. In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ LP following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in BKB.
In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an account managed by Apollo for approximately €16,314 (or $20,794). In June 2016, the Company transferred €427 of its unfunded commitment to Apollo, reducing its unfunded commitment to Champ LP to €2,802 (or $3,149). Through its interest in Champ LP, the Company now holds an indirect ownership interest of approximately 9.34% in BKB.
Loan Commitments. As described in "Note 5 - Commercial Mortgage Loans" and "Note 6 - Subordinate Loans," respectively, at September 30, 2016, the Company had $173,680 of unfunded commitments related to its commercial mortgage loan portfolio and subordinate loan portfolio.
Note 17 – Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of the Company’s financial instruments not carried at fair value on the condensed consolidated balance sheet at September 30, 2016 and December 31, 2015:

| September 30, 2016 |  | December 31, 2015
| Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Cash and cash equivalents | $ | 254,643 |  |  | $ | 254,643 |  |  | $ | 67,415 |  |  | $ | 67,415 |
Restricted cash | 62,324 |  |  | 62,324 |  |  | 30,127 |  |  | 30,127 |
Securities, held-to-maturity | 147,190 |  |  | 147,263 |  |  | 153,193 |  |  | 153,230 |
Commercial first mortgage loans | 1,426,990 |  |  | 1,433,349 |  |  | 994,301 |  |  | 999,517 |
Subordinate loans | 882,214 |  |  | 892,053 |  |  | 931,351 |  |  | 939,545 |
Borrowings under repurchase agreements | (1,021,037 | ) |  | (1,021,362 | ) |  | (925,774 | ) |  | (925,920 | )
Convertible senior notes, net | (249,528 | ) |  | (263,985 | ) |  | (248,173 | ) |  | (253,986 | )
Participations sold | (110,924 | ) |  | (110,967 | ) |  | (118,201 | ) |  | (118,226 | )

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount the Company could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. The Company’s securities, held-to-maturity, commercial first mortgage loans, subordinate loans, borrowings under repurchase agreements, convertible senior notes and participations sold are carried at amortized cost on the condensed consolidated financial statements and are classified as Level III in the fair value hierarchy.
Note 18 – Net Income per Share
GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities
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only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.
The table below presents basic and diluted net (loss) income per share of common stock using the two-class method for the three and nine months ended September 30, 2016 and 2015:

| For the three months ended September 30, |  | For the nine months ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Numerator: |  |  |  |  |  |  |
Net income | $ | 69,893 |  |  | $ | 25,847 |  |  | $ | 98,849 |  |  | $ | 76,016 |
Preferred dividends | (9,310 | ) |  | (2,304 | ) |  | (20,985 | ) |  | (6,023 | )
Net income available to common stockholders | 60,583 |  |  | 23,543 |  |  | 77,864 |  |  | 69,993 |
Dividends declared on common stock | (37,180 | ) |  | (29,544 | ) |  | (99,182 | ) |  | (80,955 | )
Dividends on participating securities | (413 | ) |  | (258 | ) |  | (1,298 | ) |  | (779 | )
Net income (loss) attributable to common stockholders | $ | 22,990 |  |  | $ | (6,259 | ) |  | $ | (22,616 | ) |  | $ | (11,741 | )
Denominator: |  |  |  |  |  |  |
Basic weighted average shares of common stock outstanding | 71,919,549 |  |  | 59,355,613 |  |  | 68,913,362 |  |  | 55,818,731 |
Diluted weighted average shares of common stock outstanding | 72,861,611 |  |  | 59,934,008 |  |  | 69,865,603 |  |  | 56,415,082 |
Basic and diluted net income per weighted average share of common stock |  |  |  |  |  |  |
Distributable Earnings | $ | 0.52 |  |  | $ | 0.50 |  |  | $ | 1.44 |  |  | $ | 1.45 |
Undistributed income (loss) | $ | 0.31 |  |  | $ | (0.11 | ) |  | $ | (0.33 | ) |  | $ | (0.21 | )
Basic and diluted net income per share of common stock | $ | 0.83 |  |  | $ | 0.39 |  |  | $ | 1.11 |  |  | $ | 1.24 |

For the three and nine months ended September 30, 2016 , respectively, 942,062 and 952,241 unvested RSUs were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three and nine months ended September 30, 2015, respectively, 578,395 and 596,351 unvested RSUs were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.
Note 19 – Business Combination
On August 31, 2016, the Company, pursuant to the terms and conditions of the Merger Agreement, acquired AMTG for consideration of common stock and preferred stock, as applicable and cash. AMTG merged with and into the Company with the Company continuing as the surviving entity. As a result, all operations of AMTG and its former subsidiaries are consolidated with the operations of the Company. In connection with financing the Merger, on August 31, 2016, the Company entered into a Loan Agreement (the “Athene Loan Agreement”) with Athene USA Corporation, a subsidiary of Athene Holding Ltd., as lender (“Athene USA”), pursuant to which the Company borrowed $175,000 in order to fund a portion of the Company’s obligations under the Merger Agreement. The Athene Loan Agreement was repaid in full and terminated on September 1, 2016. On August 31, 2016, pursuant to an Asset Purchase and Sale Agreement, dated February 26, 2016 (as amended, the “Asset Purchase Agreement”) by and among Athene Annuity & Life Assurance Company and Athene Annuity and Life Company (collectively, “Athene Annuity”) and the Company, the Company sold primarily non-agency residential mortgage backed securities previously held by AMTG to Athene Annuity for cash consideration of approximately $1,100,000. Proceeds from the sale were used to repay approximately $804,000 in associated financing, $175,000 to satisfy the Athene Loan Agreement and for general corporate purposes.
As of September 30, 2016, substantially all of the assets acquired from AMTG have been sold. This Merger provided the Company with the ability to expand the balance sheet in a cost effective and accretive manner at a time when ARI’s management believes there is significant opportunity to deploy capital into commercial real estate debt investments at attractive returns.
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The Merger was accounted for as a business combination in accordance with ASC 805. T he transactions pursuant to the Athene Loan Agreement and the Asset Purchase Agreement were contemporaneous with and contingent on the Merger, therefore the Company recorded the transaction net. The Company was designated as the accounting acquirer. The total purchase price has been allocated based upon management’s estimates of fair value. The difference between the fair value of net assets of AMTG and the consideration was recorded as a bargain purchase gain.
The bargain purchase gain was computed as follows:

Consideration Paid: | $ (in thousands)
| Cash | $ | 220,159 |
| Common stock issued | 218,397 |
| Preferred stock assumed | 172,500 |
| Total consideration paid | $ | 611,056 |
Assets acquired: |
| Cash and cash equivalents | 399,402 |
| Restricted cash | 10,552 |
| Investments | 1,491,484 |
| Other assets | 34,822 |
Liabilities assumed: |
| Borrowings under repurchase agreements | (1,254,518 | )
| Other liabilities | (30,665 | )
| Net assets acquired | 651,077 |
| Bargain purchase gain | $ | 40,021 |

The Company incurred $4,925 and $11,350 of transaction-related expenses related to the Merger during the three and nine months ended September 30, 2016. Transaction-related expenses are comprised primarily of transaction fees and Merger costs, including legal, finance, consulting, professional fees and other third-party costs.
The following table provides the pro forma consolidated operational data as if the Merger had occurred on January 1, 2016:

|  |  | Nine Months Ended
(in thousands, except per share data) |  | September 30, 2016
Total revenue |  |  | $ | 280,230 |
Net income attributable to common shareholders | 40,161 |
Common shares outstanding at September 30, 2016 | 80,826,566 |
Net income per common share, basic and diluted |  |  | $ | 0.50 |

The pro forma consolidated operational data is based on assumptions and estimates considered appropriate by our management; however, these pro forma results are not necessarily indicative of the results of operations that would have been obtained had the Merger occurred at the beginning of the period presented, nor do they purport to represent the consolidated results of operations for future periods. The pro forma consolidated operational data do not include the impact of any synergies that may be achieved from the Merger or any strategies that management may consider in order to continue to efficiently manage operations.
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Note 20 – Subsequent Events
Investment Activity. Subsequent to quarter end, the Company closed an $80,000 first mortgage loan (all of which is expected to be funded by year end) secured by a to-be-developed data center in Manassas, Virginia which has been substantially pre-leased on a long-term basis to a credit tenant.
The Company closed a$130,000 junior mezzanine loan secured by the equity interests in a portfolio of 155 healthcare properties representing 18,662 licensed beds across 20 states.
The Company closed a $30,000 preferred equity interest for the development of a 247,130 square foot 30-story condominium tower with ground-floor retail space on the Upper East Side of New York City.
The Company entered into a twelve month extension and upsized the Company’s outstanding loan amount through the acquisition of an additional £45,000 (or approximately $57,400) of pari passu interests in an existing pre-development mezzanine loan for the development of a luxury condominium project in Mayfair, London, bringing ARI’s total outstanding loan balance to £100,000.
During October 2016, the Company funded approximately $6,228 related to previously closed loans and received approximately $34,500 from loan repayments.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(in thousands—except share and per share data)
FORWARD-LOOKING INFORMATION
The Company makes forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in such Section. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. When the Company uses the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company’s industry, interest rates, real estate values, the debt securities markets or the general economy or the demand for commercial real estate loans; the Company’s business and investment strategy; the Company’s operating results; actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. economy generally or in specific geographic regions; economic trends and economic recoveries; the Company’s ability to obtain and maintain financing arrangements, including repurchase agreement financing, financing through the FHLBI and securitizations; the anticipated shortfall of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which the Company participates; changes in the value of the Company’s assets; the scope of the Company’s target assets; interest rate mismatches between the Company’s target assets and any borrowings used to fund such assets; changes in interest rates and the market value of the Company’s target assets; changes in prepayment rates on the Company’s target assets; effects of hedging instruments on the Company’s target assets; rates of default or decreased recovery rates on the Company’s target assets; the degree to which hedging strategies may or may not protect the Company from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; the Company’s continued maintenance of its qualification as a REIT for U.S. federal income tax purposes; the Company’s continued exclusion from registration under the Investment Company Act of 1940, as amended; the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to the Company’s ability to make distributions to its stockholders in the future; the Company’s present and potential future competition; the risk that the anticipated benefits from the Merger and related transactions may not be realized or may take longer to realize than expected; and unexpected costs or unexpected liabilities, including those related to litigation, that may arise from the Merger and related transactions.
The forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. 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 the Company. See “Item 1A - Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that the Company files with the SEC, could cause its actual results to differ materially from those included in any forward-looking statements the Company makes. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, the Company 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.
Overview
The Company is a Maryland corporation that has elected to be taxed as a REIT for U.S. federal income tax purposes. The Company primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, CMBS and other commercial real estate-related debt investments. These asset classes are referred to as the Company’s target assets.
The Company is externally managed and advised by the Manager, an indirect subsidiary of Apollo, a leading global alternative investment manager with a contrarian and value oriented investment approach in private equity, credit and real estate with assets under management of approximately $188.6 billion as of September 30, 2016.
The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. The Company benefits from Apollo’s global
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infrastructure and operating platform, through which the Company is able to source, evaluate and manage potential investments in the Company’s target assets.
Market Overview
The commercial real estate lending market has recovered from the downturn experienced as part of the correction in the global financial markets which began in mid-2007. Property values in many markets and across multiple property types have recovered and the lending market is functioning with both established and new entrants. Based on the current market dynamics, including significant upcoming commercial real estate debt maturities, there remains a compelling opportunity for the Company to invest capital in its target assets at attractive risk adjusted returns. The Company will continue to focus on underlying real estate value, and transactions that benefit from the Company’s ability to execute complex and sophisticated transactions.
During and immediately following the financial crisis, due to the prevalence of lenders granting extensions across the commercial mortgage loan industry, the demand for new capital to refinance maturing commercial mortgage debt was somewhat tempered. This trend has largely abated as many borrowers refinance legacy loans and pursue new acquisitions.
New-issue CMBS volume continued to grow in 2015 with total issuance in the United States of approximately $101 billion, a 7% increase from the approximately $94 billion issued during the prior year. Despite the robust issuance in 2015, current volumes of CMBS issuance are still moderate relative to the peak of the market, which saw more than $229 billion in CMBS issuance in 2007, creating significant opportunities for non-CMBS lenders such as the Company. Furthermore, the credit risk retention rule for CMBS lenders, which is scheduled to be implemented by the Dodd-Frank Wall Street Reform and Consumer Protection Act on December 24, 2016, will mandate that CMBS originators retain economic interests in the commercial property loans they securitize and sell to third-party investors. While the magnitude of the impact has yet to be seen, market participants and researchers expect the risk retention rule will likely raise the cost of borrowing via CMBS loans and decrease the number of market participants, creating additional opportunities for non-bank lenders. As a likely sign of this uncertainty, 2016 year-to-date CMBS issuance has been subdued. As of the end of the third quarter, year-to-date CMBS issuance in the United States was approximately $49 billion, a significant decrease over third quarter year-to-date CMBS issuance in the United States of approximately $81 billion in 2015.
While an active CMBS market can be viewed as an indicator of the active commercial real estate lending markets, we do not participate in the conduit lending market, and therefore the volatility in the CMBS market has minimal impact on our core lending business. We believe the challenges faced by conduit lenders and the general uncertainty around value and pricing could create attractive risk adjusted investment opportunities for the Company. As a result, we expect to continue to see opportunities to originate mezzanine and first mortgage financings in transactions which benefit from the Company’s ability to source, structure and execute complex transactions.
Critical Accounting Policies
A summary of the Company’s accounting policies is set forth in its Annual Report on Form 10-K for the year ended December 31, 2015 under “Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Use of Estimates.” There have been no material changes to the Company's critical accounting policies described in the Company's Annual Report on Form 10-K filed with the SEC on February 26, 2016.
Financial Condition and Results of Operations
All non-U.S. dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.
Investments
The following table sets forth certain information regarding the Company’s investments at September 30, 2016:
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Description |  | Amortized Cost |  | Debt |  | Equity at cost (1) |  | Remaining Weighted Average Life (years) (2) |  | Current Weighted Average Underwritten IRR (3) |  | Fully- Levered Weighted Average Underwritten IRR (3)(4) |  | CMBS IRR Since Investment Date(5) |
First mortgages |  | $ | 1,426,990 |  |  | $ | 690,882 |  |  | $ | 736,108 |  |  | 2.5 |  |  | 13.0 | % |  | 15.6 | % |  | N/A |  |
Subordinate loans (6)(7) |  | 918,480 |  |  | — |  |  | 918,480 |  |  | 3.4 |  |  | 12.4 |  |  | 12.4 |  |  | N/A |  |
CMBS |  | 395,160 |  |  | 330,155 |  |  | 127,329 |  |  | 2.0 |  |  | 6.2 |  |  | 6.2 |  |  | 10.7 |  |
Total/Weighted Average |  | $ | 2,740,630 |  |  | $ | 1,021,037 |  |  | $ | 1,781,917 |  |  | 2.7 |  |  | 12.2 | % |  | 13.3 | % |  | 10.7 | % |

(1) | CMBS includes $62,324 of restricted cash related to the UBS Facility and the DB Facility.

(2) | Remaining Weighted Average Life assumes all extension options are exercised.

(3) | Internal rate of return ("IRR") is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment. It is the discount rate that makes the net present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on investment). It is derived from the negative and positive cash flows resulting from or produced by each transaction (or for a transaction involving more than one investment, cash flows resulting from or produced by each of the investments), whether positive, such as investment returns, or negative, such as transaction expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected to occur, and compounding interest accordingly. The underwritten IRR for the investments shown in the above table reflect the returns underwritten by the Manager, taking into account leverage and calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assuming that extension options are exercised and that the cost of borrowings remains constant over the remaining term. With respect to certain loans, the underwritten IRR calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments, and assumes no defaults. IRR is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment. It is the discount rate that makes the net present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on investment). It is derived from the negative and positive cash flows resulting from or produced by each transaction (or for a transaction involving more than one investment, cash flows resulting from or produced by each of the investments), whether positive, such as investment returns, or negative, such as transaction expenses or other costs of investment, taking into account the dates on which such cash flows occurred or are expected to occur, and compounding interest accordingly. There can be no assurance that the actual IRRs will equal the underwritten IRRs shown in the table. See “Item 1A-Risk Factors-The Company may not achieve its underwritten internal rate of return on its investments which may lead to future returns that may be significantly lower than anticipated” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the table or elsewhere in this quarterly report over time.

(4) | Represents an underwritten levered weighted average IRR. The Company's ability to achieve the underwritten levered weighted average IRR additionally depends upon the availability of the JPMorgan Facility or any replacement facility with similar terms with regard to its portfolio of first mortgage loans. Without such availability, the levered weighted average underwritten IRR will be lower than the amount shown above.

(5) | IRR calculated from date of investment in 2015 through September 30, 2016 and includes the historical and projected cash flows for the CMBS held.

(6) | Subordinate loans are net of a participation sold during February 2015. The Company presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to GAAP. At September 30, 2016, the Company had one such participation sold with a carrying amount of £19,626 (or $25,459).

(7) | Subordinate loans also include CMBS (Held-to-Maturity) are net of a participation sold during June 2014. The Company presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to GAAP. At September 30, 2016, the Company had one such participation sold with a carrying amount of $85,465.

The Company's average asset and debt balances for the nine months ended September 30, 2016, were:
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| Average month-end balances for the nine-months ended September 30,2016
Description | Assets |  | Related debt
First mortgages | $ | 1,184,525 |  |  | $ | 650,047 |
Subordinate loans (1) | 1,090,185 |  |  | 18,888 |
CMBS | 444,783 |  |  | 399,956 |

(1) Subordinate loans also include CMBS (Held-to-Maturity).
Investment Activity
In January 2016, the Company closed a $220,000 first mortgage loan, $177,500 of which was funded, secured by 16 existing retail and office properties for redevelopment located in the Design District neighborhood of Miami, Florida. A portion of the first funding of the loan was used to refinance a $33,000 first mortgage loan the Company originated to the borrower in June 2015, and for the acquisition of two additional parcels. The floating-rate loan has a two-year initial term with a one-year extension option followed by a six-month extension option. The first mortgage loan has a loan-to-cost of 65% and has been underwritten to generate a levered IRR of approximately 15%.
In February 2016, the Company closed a $77,000 mezzanine loan, $21,888 of which was funded at closing, for the redevelopment and conversion of an existing commercial property into 139 luxury condominiums located in the Tribeca neighborhood of New York City. The floating-rate loan has a 42-month initial term with a one-year extension option followed by a six-month extension option and is part of a $411,000 financing consisting of a $334,000 first mortgage loan and the Company’s $77,000 mezzanine loan. The mezzanine loan has an appraised loan-to-net sellout of 57% and has been underwritten to generate an IRR of approximately 14%.
In March 2016, the Company closed a $31,000 first mortgage loan, $28,500 of which was funded at closing, for the predevelopment of an existing office property located in the South End neighborhood of Boston. The floating-rate loan has a two-year initial term with one six-month extension option. The first mortgage loan has a loan-to-cost of 60% and has been underwritten to generate a levered IRR of approximately 16%.
In May 2016, the Company closed a $50,000 first mortgage loan, $44,750 of which was funded at closing. The loan is secured by two cross-collateralized Class B retail and office buildings located in the Midtown South neighborhood within the Park Avenue South/Madison Square submarket in New York City. The floating-rate loan has a two-year initial term with one six-month extension option. The first mortgage loan has a loan-to-cost of 47% and has been underwritten to generate a levered IRR of approximately 15%.
In May 2016, the Company closed a $45,500 first mortgage loan, $40,600 of which was funded at closing for the predevelopment of an existing mixed used property located in the Williamsburg neighborhood of Brooklyn, New York. The floating-rate loan has a two-year term. The first mortgage loan has a loan-to-cost of 85% and has been underwritten to generate a levered IRR of approximately 17%.
In September 2016, the Company closed a $105,000 first mortgage loan, $78,140 of which was funded at closing for a newly- constructed, 612-key full service hotel located in the Times Square district of New York City. The floating rate loan has a two-year initial term with three one-year extension options and an appraised LTV of approximately 62% and has been underwritten to generate a levered IRR of approximately 14%.
In September 2016, the Company closed a $133,000 first mortgage loan, $128,000 of which was funded at closing. The loan is secured by a 735,382 square foot office building located in the North Michigan Avenue retail corridor of Chicago which will be redeveloped into a mixed use project. The floating rate loan has a two-year initial term with two one-year extension options and an appraised loan-to-cost of approximately 58%. The loan has been underwritten to generate a levered IRR of approximately 14%.
In September 2016, the Company closed a $7,500 first mortgage loan secured by a 6,500 square foot retail property. The loan is cross-collateralized and cross-defaulted with the $121.4 million of financing ARI has provided to the same borrower in connection with the aggregation of retail parcels for redevelopment in downtown Brooklyn, New York. The total floating rate financing has a remaining six month term and an appraised LTV of approximately 60%.
During 2016, the Company funded additional investments of $113,159 related to previously closed loans.
Net Income Available to Common Stockholders
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For the three and nine months ended September 30, 2016,respectively, the Company’s net income available to common stockholders was $60,583, or $0.83 per share, and $77,864, or $1.11 per share. For the three and nine months ended September 30, 2015, respectively, the Company’s net income available to common stockholders was $23,543, or $0.39 per share, and $69,993, or $1.24 per share.
Net Interest Income
The following table sets forth certain information regarding the Company’s net investment income for the three and nine months ended September 30, 2016 and 2015:

| Three months ended September 30, |  |  | Nine months ended September 30,
| 2016 |  | 2015 |  | Change $ |  | Change (%) |  |  | 2016 |  | 2015 |  | Change $ |  | Change (%)
Interest income from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities | $ | 8,029 |  |  | $ | 8,293 |  |  | $ | (264 | ) |  | (3.2 | )% |  |  | $ | 23,685 |  |  | $ | 24,846 |  |  | $ | (1,161 | ) |  | (4.7 | )%
Securities, held to maturity | 2,875 |  |  | 2,956 |  |  | (81 | ) |  | (2.7 | )% |  |  | 8,597 |  |  | 9,050 |  |  | (453 | ) |  | (5.0 | )%
Commercial mortgage loans | 27,460 |  |  | 15,184 |  |  | 12,276 |  |  | 80.8 | % |  |  | 72,727 |  |  | 37,246 |  |  | 35,481 |  |  | 95.3 | %
Subordinate loans | 32,207 |  |  | 25,445 |  |  | 6,762 |  |  | 26.6 | % |  |  | 89,649 |  |  | 65,206 |  |  | 24,443 |  |  | 37.5 | %
Interest expense | (17,256 | ) |  | (13,187 | ) |  | (4,069 | ) |  | 30.9 | % |  |  | (47,620 | ) |  | (36,287 | ) |  | (11,333 | ) |  | 31.2 | %
Net interest income | $ | 53,315 |  |  | $ | 38,691 |  |  | $ | 14,624 |  |  | 37.8 | % |  |  | $ | 147,038 |  |  | $ | 100,061 |  |  | $ | 46,977 |  |  | 46.9 | %

Net interest income for the three and nine months ended September 30, 2016, respectively, increased $14,624, or 37.8% and $46,977, or 46.9%, from the same periods in 2015.
Interest income related to securities for the three and nine months ended September 30, 2016, respectively, decreased $264 or 3.2%, and $1,161, or 4.7%, from the same periods in 2015. The decrease is attributable to the sale of CMBS with an amortized cost of $86,676 during 2016 and the repayment of $22,424 of CMBS during 2016. The Company did not purchase any CMBS during 2016 or 2015.
Interest income related to securities, held-to-maturity for the three and nine months ended September 30, 2016, respectively, decreased $81, or 2.7% ,and $453, or 5.0%, from the same periods in 2015. The decrease is attributable to the repayment of $5,970 of securities, held-to-maturity during 2016.
The increase in interest income related to commercial mortgage loans for the three and nine months ended September 30, 2016, respectively, of $12,276, or 80.8%, and $35,481, or 95.3%, from the same periods in 2015. This increase is primarily attributable to the funding of $541,582 of commercial mortgage loans during 2016 net of repayments of $118,120, as well as an increase in LIBOR.
The increase in interest income related to subordinate loans for the three and nine months ended September 30, 2016, respectively, of $6,762, or 26.6%, and $24,443, or 37.5%, from the same periods in 2015. This increase is primarily attributable to the funding of $51,001 of subordinate loans during 2016 net of repayments of $81,524 an increase in LIBOR, as well as a prepayment penalty of $3,985.
Interest expense for the three and nine months ended September 30, 2016, respectively, increased $4,069, or 30.9%, and $11,333, or 31.2%, from the same periods in 2015. The increase in interest expense was attributable to the increase in the average balance of the Company’s borrowings under repurchase agreements from $728,083 for the nine months ended September 30, 2015 to $1,104,708 for the nine months ended September 30, 2016.
Operating Expenses
The following table sets forth the Company’s operating expenses for the three and nine months ended September 30, 2016 and 2015:
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| Three months ended September 30, |  |  | Nine months ended September 30,
| 2016 |  | 2015 |  | Change (amount) |  | Change (%) |  |  | 2016 |  | 2015 |  | Change (amount) |  | Change (%)
General and administrative expense -Other | $ | 1,599 |  |  | $ | 1,343 |  |  | $ | 256 |  |  | 19.1 | % |  |  | $ | 4,672 |  |  | $ | 3,817 |  |  | $ | 855 |  |  | 22.4 | %
General and administrative expense - Merger related | 4,925 |  |  | — |  |  | 4,925 |  |  | 100.0 | % |  |  | 11,350 |  |  | — |  |  | 11,350 |  |  | 100.0 | %
Stock-based compensation expense | 1,828 |  |  | 756 |  |  | 1,072 |  |  | 141.8 | % |  |  | 5,434 |  |  | 2,695 |  |  | 2,739 |  |  | 101.6 | %
Management fee expense | 5,903 |  |  | 4,097 |  |  | 1,806 |  |  | 44.1 | % |  |  | 16,374 |  |  | 11,325 |  |  | 5,049 |  |  | 44.6 | %
Total operating expense | $ | 14,255 |  |  | $ | 6,196 |  |  | $ | 8,059 |  |  | 130.1 | % |  |  | $ | 37,830 |  |  | $ | 17,837 |  |  | $ | 19,993 |  |  | 112.1 | %

General and administrative expense - Other for the three and nine months ended September 30, 2016, respectively, increased $256, or 19.1% , and $855, or 22.4%, from the same periods in 2015. The increase is primarily attributable to higher operating expenses associated with growth and increase in assets under management.
General and administrative expense - Merger related for the three and nine months ended September 30, 2016, respectively, were $4,925 and $11,350. General and administrative expense - Merger related expenses related to the Merger and related transactions. There were no General and administrative expense - Merger related for the three and nine months ended September 30, 2015.
Stock-based compensation expense for the three and nine months ended September 30, 2016, respectively, increased $1,072 or 141.8%, and $2,739, or 101.6%, from the same periods in 2015. The increase is primarily attributable to the grant of 656,425 RSUs in December 2015. This was partially offset by the delivery of 318,160 RSUs in January 2016. Share-based payments are discussed further in the accompanying condensed consolidated financial statements, “Note 14—Share-Based Payments.”
Management fee expense for the three and nine months ended September 30, 2016, respectively, increased $1,806, or 44.1%, and $5,049, or 44.6%, from the same periods in 2015. The increase is primarily attributable to an increase in the Company’s stockholders’ equity (as defined in the Management Agreement) as a result of the Company’s follow-on common equity offerings completed in 2015 and issuance of common and preferred equity in conection with the Merger. Management fees and the relationship between the Company and the Manager under the Management Agreement are discussed further in the accompanying condensed consolidated financial statements, “Note 13—Related Party Transactions.”
Realized and Unrealized Gain/Loss
The following amounts related to realized and unrealized gains (losses) on the Company’s CMBS, U.S. dollar denominated loans, non U.S. dollar denominated loans and derivative instruments are included in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2016 and 2015:

|  | Three months ended September 30, |  |  | Nine months ended September 30,
| Location of Gain (Loss) Recognized in Income | 2016 |  | 2015 |  |  | 2016 |  | 2015
Securities | Realized gain on sale of securities | $ | (225 | ) |  | $ | — |  |  |  | $ | (225 | ) |  | $ | (443 | )
Securities | Unrealized gain (loss) on securities | (9,798 | ) |  | (6,926 | ) |  |  | (36,601 | ) |  | (5,792 | )
Loans | Provision for loan losses | — |  |  | — |  |  |  | (15,000 | ) |  | — |
Foreign currency | Foreign currency gain (loss) | (4,369 | ) |  | (2,165 | ) |  |  | (21,926 | ) |  | 3,424 |
Forward currency contract | Gain (Loss) on derivative instruments – realized | 15,112 |  | — |  |  |  | 21,100 |  | — |
Forward currency contract | Gain (loss) on derivative instruments - unrealized | (10,304) |  | 2,240 |  |  |  | 1,812 |  | (3,938 | )
Interest rate caps | Loss on derivative instruments - unrealized | 7 |  | (144 | ) |  |  | (81) |  | (206 | )
Total |  | $ | (9,577 | ) |  | $ | (6,995 | ) |  |  | $ | (50,921 | ) |  | $ | (6,955 | )

The Company uses forward currency contracts to economically hedge interest and principal payments due under its loans denominated in currencies other than U.S. dollars.
The Company has not designated any of its derivative instruments as hedges under GAAP and therefore, changes in the fair value of the Company's derivatives are recorded directly in earnings.
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For the three and nine months ended September 30, 2016, respectively, the Company recognized a realized loss on securities of $(225) and $(225). For the three and nine months ended September 30, 2015, respectively, the Company recognized a realized gain (loss) on securities of $0 and $(443).
For the three and nine months ended September 30, 2016, respectively, the Company recognized an unrealized gain (loss) on securities of $(9,798) and $(36,601). For the three and nine months ended September 30, 2015, respectively, the Company recognized an unrealized gain (loss) on securities of $(6,926) and $(5,792). These gains (losses) resulted from mark-to-market adjustments related to those securities for which the fair value option has been elected.
For the three and nine months ended September 30, 2016, respectively, the Company recorded a provision for loan loss on its loans of $0 and $15,000. There were no provisions for loan losses recorded in 2015.
For the three and nine months ended September 30, 2016, respectively, the Company recorded a bargain purchase gain of $40,021 and $40,021. There were no bargain purchase gain recorded in 2015.
Dividends
Dividends. For the nine months ended September 30, 2016, the Company declared the following dividends on its common stock:

Declaration Date | Record Date | Payment Date | Amount
March 15, 2016 | March 31, 2016 | April 15, 2016 | $ | 0.46 |
June 17, 2016 | June 30, 2016 | July 15, 2016 | $ | 0.46 |
September 14, 2016 | September 30, 2016 | October 17, 2016 | $ | 0.46 |

For the nine months ended September 30, 2016, the Company declared the following dividends on its Series A Preferred Stock:

Declaration Date | Record Date | Payment Date | Amount
March 15, 2016 | March 31, 2016 | April 15, 2016 | $ | 0.5391 |
June 17, 2016 | June 30, 2016 | July 15, 2016 | $ | 0.5391 |
September 14, 2016 | September 30, 2016 | October 17, 2016 | $ | 0.5391 |

For the nine months ended September 30, 2016, the Company declared the following dividends on its Series B Preferred Stock:

Declaration Date | Record Date | Payment Date | Amount
March 15, 2016 | March 31, 2016 | April 15, 2016 | $ | 0.5000 |
June 17, 2016 | June 30, 2016 | July 15, 2016 | $ | 0.5000 |
September 14, 2016 | September 30, 2016 | October 17, 2016 | $ | 0.5000 |

For the nine months ended September 30, 2016, the Company declared the following dividends on its Series C Preferred Stock:

Declaration Date | Record Date | Payment Date | Amount
September 14, 2016 | September 30, 2016 | October 31, 2016 | $ | 0.5000 |

Subsequent Events
Investment Activity. Subsequent to quarter end, the Company closed an $80,000 first mortgage loan (all of which is expected to be funded by year end) secured by a to-be-developed data center in Manassas, Virginia which has been substantially
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pre-leased on a long-term basis to a credit tenant. The loan is part of a $365,000 financing which consists of the Company's $80,000 loan and additional pari passu notes totaling $285,000. The fixed-rate loan has a three-year term and an underwritten, as-stabilized LTV of approximately 55%. The loan has been underwritten to generate a levered IRR of approximately 14%.
The Company closed a $130,000 junior mezzanine loan secured by the equity interests in a portfolio of 155 healthcare properties representing 18,662 licensed beds across 20 states. The loan is being used to refinance existing debt on the portfolio, which includes a $39,000 mezzanine loan provided by the Company in 2014, which was repaid. The floating rate junior mezzanine loan has a two-year initial term with three two-year extension options and an appraised LTV of approximately 62%. The junior mezzanine loan has been underwritten to generate an IRR of approximately 12%.
The Company closed a $30,000 preferred equity interest for the development of a 247,130 square foot 30-story condominium tower with ground-floor retail space on the Upper East Side of New York City. The preferred equity investment is part of a $289,000 financing which consists of the Company's $30,000 million preferred equity investment and a $259,000 construction loan. The floating-rate preferred equity interest has a three-year initial term with two six-month extension options and an appraised loan-to-net sell out of approximately 53%. The preferred equity investment has been underwritten to generate an IRR of approximately 15%.
The Company entered into a twelve month extension and upsized the Company’s outstanding loan amount through the acquisition of an additional £45,000 (or approximately $57,400) of pari passu interests in an existing pre-development mezzanine loan for the development of a luxury condominium project in Mayfair, London, bringing the Company's total outstanding loan balance to £100,000. The loan is part of a £220,000 financing which consists of a £120,000 first mortgage loan and the Company's £100,000 mezzanine loan. The first mortgage loan also was extended for an additional twelve months in connection with the extension of the Company's mezzanine loan. The floating rate mezzanine loan has an appraised LTV of approximately 63% and has been underwritten to generate an IRR of approximately 16%.
During October 2016, the Company funded approximately $6,228 related to previously closed loans and received approximately $34,500 from loan repayments.
Liquidity and Capital Resources
Liquidity is a measure of the Company’s ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain its assets and operations, make distributions to its stockholders and other general business needs. The Company’s cash is used to purchase or originate target assets, repay principal and interest on borrowings, make distributions to stockholders and fund operations. The Company’s liquidity position is closely monitored and the Company believes it has sufficient current liquidity and access to additional liquidity to meet financial obligations for at least the next 12 months. The Company’s primary sources of liquidity are as follows:
Cash Generated from Operations
Cash from operations is generally comprised of interest income from the Company’s investments, net of any associated financing expense, principal repayments from the Company’s investments, net of associated financing repayments, proceeds from the sale of investments and changes in working capital balances. See “—Financial Condition and Results of Operations—Investments” above for a summary of interest rates and weighted average lives related to the Company’s investment portfolio at September 30, 2016. While there are no contractual paydowns related to the Company’s CMBS, periodic paydowns do occur. Repayments on the debt secured by the Company’s CMBS occur in conjunction with the paydowns on the collateral pledged.
Borrowings Under Various Financing Arrangements
JPMorgan Facility
In January 2010, the Company, through two indirect wholly owned subsidiaries, entered into the JPMorgan Facility, which as amended in 2015 and 2016, currently provides for a maximum total borrowings of $943,000, comprised of the $800,000 repurchase facility and a $143,000 asset specific financing, and a three-year term expiring in January 2018 plus a one-year extension option. Amounts borrowed under the JPMorgan Facility bear interest at spreads ranging from 2.25% to 4.75% over one-month LIBOR. Maximum advance rates under the JPMorgan Facility range from 25% to 80% on the estimated fair value of the pledged collateral depending on its LTV. Margin calls may occur any time the aggregate repurchase price exceeds the agreed upon advance rate multiplied by the market value of the assets by more than $250. The JPMorgan Facility contains, among others, the following restrictive covenants: (1) continuing to operate in a manner that allows the Company to qualify as a REIT and (2) financial covenants, including (A) a minimum consolidated tangible net worth covenant ($750,000 plus 75% of the net cash proceeds of any equity issuance by the Company), (B) maximum total indebtedness to consolidated tangible net worth (3:1), or (C) minimum liquidity (the greater of 5% of the Company’s total recourse
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indebtedness or $15,000). The Company has agreed to provide a limited guarantee of the obligations of its indirect wholly-owned subsidiaries under the JPMorgan Facility.
As of September 30, 2016, the Company had $648,086 of borrowings outstanding under the JPMorgan Facility secured by certain of the Company's commercial mortgage and subordinate loans. The weighted average cost of borrowing at September 30, 2016, was one-month LIBOR plus 2.26%.
DB Repurchase Facility
On September 29, 2016, the Company, through an indirect wholly-owned subsidiary, entered into a master repurchase agreement with Deutsche Bank AG (the “DB Repurchase Facility”) to provide up to $300,000 of advances in connection with financing first mortgage loans secured by real estate. The DB Repurchase Facility matures in September 2019 with two one-year extension options and will accrue interest at per annum pricing equal to the sum of one-month LIBOR plus an applicable spread. Margin calls may occur any time at specified aggregate margin deficit thresholds. The DB Facility contains customary covenants, including continuing to operate in a manner that allows the Company to qualify as a real estate investment trust for federal income tax purposes and financial covenants with respect to minimum consolidated tangible net worth, maximum total indebtedness to consolidated tangible net worth, and minimum liquidity. The Company has agreed to provide a guarantee of the obligations its indirect wholly-owned subsidiaries under this facility.
As of September 30, 2016, the Company had no borrowings outstanding under the DB Repurchase Facility.
UBS Facility
In September 2013, the Company, through an indirect wholly-owned subsidiary, entered into the UBS Facility, which currently provides that the Company may borrow up to $133,899 in order to finance the acquisition of CMBS. The UBS Facility matures in September 2017, with a one-year extension available at the Company's option, subject to certain conditions. Advances under the UBS Facility accrue interest at a per annum pricing rate equal to a spread of 1.55% per annum over the rate implied by the fixed rate bid under a fixed-for-floating interest rate swap for the receipt of payments indexed to six-month U.S. dollar LIBOR. The Company borrows 100% of the estimated fair value of the collateral pledged and posts margin equal to 22.5% of that borrowing amount in cash. The margin posted is classified as restricted cash on the Company's condensed consolidated balance sheets. Additionally, depending on the utilization rate of the facility, a portion of the undrawn amount may be subject to non-use fees. The UBS Facility contains customary terms and conditions for repurchase facilities of this type and financial covenants to be met by the Company, including a minimum net asset value covenant (which shall not be less than an amount equal to $500,000 and a maximum total debt to consolidated tangible net worth covenant (3:1). The Company has agreed to provide a full guarantee of the obligations of its indirect wholly-owned subsidiary under the UBS Facility.
As of September 30, 2016, the Company had $133,899 of borrowings outstanding under the UBS Facility secured by CMBS held by the Company.
DB Facility
In April 2014, the Company, through an indirect wholly-owned subsidiary, entered into the DB Facility, which currently provides that the Company may borrow up to $300,005 in order to finance the acquisition of CMBS. The DB Facility matures in April 2018. Advances under the DB Facility accrue interest at a per annum pricing rate based on the rate implied by the fixed rate bid under a fixed for floating interest rate swap for the receipt of payments indexed to three-month U.S. dollar LIBOR, plus a financing spread ranging from 1.80% to 2.32% based on the rating of the collateral pledged.
Additionally, depending on the utilization rate of the facility, a portion of the undrawn amount may be subject to non-use fees. The DB Facility contains customary terms and conditions for repurchase facilities of this type and financial covenants to be met by the Company, including minimum shareholder's equity of 50% of the gross capital proceeds of its initial public offering and any subsequent public or private offerings. The weighted average cost of borrowing at September 30, 2016, was three-month LIBOR plus 2.83%.
As of September 30, 2016, the Company had $196,256 of borrowings outstanding under the DB Facility secured by CMBS held by the Company.
Goldman Loan
On January 26, 2015, the Company, through an indirect wholly-owned subsidiary, entered into the Goldman Loan. The Goldman Loan provides for a purchase price of $52,524 and a repurchase date of the earliest of: (1) April 30, 2019, (2) an early repurchase date as a result of repayment or sale of the purchased loan, or (3) an accelerated repurchase date as a result of certain events of default. Subject to the terms and conditions thereof, the Goldman Loan provides for the purchase and sale of certain participation interests in a mortgage loan secured by single-family and condominium properties. Prior to an event of default, amounts borrowed under the Goldman Loan bear interest at a spread of 3.5% plus one-month LIBOR. In addition, the Goldman Loan provides that margin calls may occur during the continuance of certain credit events if the market value of the
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mortgaged properties drop below an agreed upon percentage. The Goldman Loan contains affirmative and negative covenants and provisions regarding events of default that are normal and customary for similar repurchase agreements. The Company has agreed to the following restrictive covenants, among others: (1) continuing to operate in a manner that allows the Company to qualify as a REIT and (2) financial covenants, including (A) a minimum consolidated tangible net worth covenant ($750,000), (B) maximum total indebtedness to consolidated tangible net worth (3:1), (C) minimum liquidity ($15,000), (D) minimum sum of (i) cash liquidity and (ii) “near cash liquidity” (5.0% of the Company’s total recourse indebtedness), (E) minimum net income (one U.S. dollar during any four consecutive fiscal quarters) and (F) a minimum ratio of EBITDA to interest expense (1.5 to 1.0). The Company has also agreed to provide a guarantee of the obligations under the Goldman Loan.
As of September 30, 2016, the Company had $42,796 of borrowings outstanding under the Goldman Loan secured by one commercial mortgage loan held by the Company.
Convertible Senior Notes
In 2014, the Company issued, in two offerings with an aggregate principal amount of $254,750 in 5.50% Convertible Senior Notes due 2019, for which the Company received aggregate net proceeds, after deducting the underwriting discount and estimated offering expenses payable by the Company, of approximately $248,652.
Cash Generated from Offerings
During the first quarter of 2015, the Company completed a follow-on public offering of 11,500,000 shares of its common stock, including the full exercise of the underwriters’ option to purchase additional shares, at a price of $16.82 per share. The aggregate net proceeds from the offering, including proceeds from the sale of the additional shares, were approximately $193,148 after deducting estimated offering expenses payable by the Company.
On September 21, 2015, the Company completed a private placement of 8,823,529 shares of its common stock at a price of $17.00 per share and 8,000,000 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock (the "Series B Preferred Stock") with a liquidation preference of $25.00 per share at a price of $24.71 per share. The aggregate net proceeds from the common and Series B Preferred Stock private placement completed on September 21, 2015 were approximately $346,854 after deducting the $500 placement agent fee paid to Apollo Global Securities, LLC acting as placement agent in this transaction and estimated offering expenses payable by the Company.
On August 31, 2016, the Company consummated the Merger with AMTG and issued 13,398,586 shares of its common stock and 6,900,000 shares of Series C Preferred Stock. Subsequent to the transaction, the Company liquidated substantially all of the assets of AMTG and realized proceeds of approximately $400,000.
Other Potential Sources of Financing
The Company’s primary sources of cash currently consist of cash available, which was $254,643 as of September 30, 2016, principal and interest payments the Company receives on its portfolio of assets, and available borrowings under its repurchase agreements. The Company expects its other sources of cash to consist of cash generated from operations and the possible prepayments of principal received on the Company’s portfolio of assets. Such prepayments are difficult to estimate. At September 30, 2016, subject to certain conditions, the Company had $294,914 in unused capacity under its JP Morgan Facility. Depending on market conditions, the Company may utilize additional borrowings as a source of cash, which may also include additional repurchase agreements as well as other borrowings such as credit facilities, or conduct additional securities offerings.
The Company maintains policies relating to its borrowings and use of leverage. See “—Leverage Policies” below. In the future, the Company may seek to raise further equity or debt capital or engage in other forms of borrowings in order to fund future investments or to refinance expiring indebtedness.
The Company generally intends to hold its target assets as long-term investments, although it may sell certain of its investments in order to manage its interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.
To maintain its qualification as a REIT under the Internal Revenue Code of 1986, as amended, the Company must distribute annually at least 90% of its taxable income. These distribution requirements limit the Company’s ability to retain earnings and thereby replenish or increase capital for operations.
Leverage Policies
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The Company uses leverage for the sole purpose of financing its portfolio and not for the purpose of speculating on changes in interest rates. In addition to its repurchase agreements, in the future the Company may access additional sources of borrowings. The Company’s charter and bylaws do not limit the amount of indebtedness the Company can incur; however, the Company is limited by certain financial covenants under its repurchase agreements. Consistent with the Company’s strategy of keeping leverage within a conservative range, the Company expects that its total borrowings on loans will be in an amount that is approximately 35% of the value of its total loan portfolio.
Investment Guidelines
The Company's current investment guidelines, approved by the Company's board of directors, are comprised of the following:

• | no investment will be made that would cause the Company to fail to qualify as a REIT for U.S. federal income tax purposes;

• | no investment will be made that would cause the Company to register as an investment company under the Investment Company Act of 1940;

• | investments will be predominantly in the Company’s target assets;

• | no more than 20% of the Company’s cash equity (on a consolidated basis) will be invested in any single investment at the time of the investment;

• | until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with the Company’s intention to qualify as a REIT.

Contractual Obligations and Commitments
The Company’s contractual obligations including expected interest payments as of September 30, 2016 are summarized as follows:

| Less than 1 year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5 years |  | Total
JPMorgan Facility borrowings * | $ | 327,718 |  |  | $ | 345,585 |  |  | $ | — |  |  | $ | — |  |  | $ | 673,303 |
Goldman Loan * | 6,904 |  |  | 39,515 |  |  | — |  |  | — |  |  | 46,419 |
UBS Facility borrowings ** | 4,051 |  |  | 136,804 |  |  | — |  |  | — |  |  | 140,855 |
DB Facility borrowings | 7,466 |  |  | 181,948 |  |  | 9,809 |  |  | 13,106 |  |  | 212,329 |
Convertible Senior Notes | 14,011 |  |  | 274,599 |  |  | — |  |  | — |  |  | 288,610 |
Unfunded loan commitments*** | 154,798 |  |  | 18,882 |  |  | — |  |  | — |  |  | 173,680 |
Total | $ | 514,948 |  |  | $ | 997,333 |  |  | $ | 9,809 |  |  | $ | 13,106 |  |  | $ | 1,535,196 |

* | Assumes current LIBOR of 0.53% for interest payments due under the JPMorgan Facility and the Goldman Loan.

** Assumes extension options are exercised.
*** Based on the Company's expected funding schedule, which is based upon the Manager’s estimates based upon the best information available to the Manager at the time. There is no assurance that the payments will occur in accordance with these estimates or at all, which could affect the Company’s operating results.
Bremer Kreditbank AG. In September 2013, the Company, together with other affiliates of Apollo, reached an agreement to make an investment in an entity that agreed to acquire a minority participation in Bremer Kreditbank AG (“BKB”). The Company committed to invest up to approximately €38,000 (or $50,000), representing approximately 21% of the ownership in BKB. In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ LP following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in BKB.
In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an account managed by Apollo for approximately €16,314 (or $20,794), reducing its then unfunded commitment to Champ LP to €3,229 (or $3,675). In June 2016, the Company transferred €427 of its unfunded commitment to Apollo. reducing its unfunded commitment to Champ LP to €2,802 (or $3,149). Through its interest in Champ LP, the Company now holds an indirect ownership interest of approximately 9.34% in BKB.
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Loan Commitments. At September 30, 2016, the Company had $173,680 of unfunded commitments related to its commercial mortgage loan portfolio and subordinate loan portfolio.
Management Agreement. On September 23, 2009, the Company entered into the Management Agreement with the Manager pursuant to which the Manager is entitled to receive a management fee and the reimbursement of certain expenses. The table above does not include amounts due under the Management Agreement as those obligations do not have fixed and determinable payments. Pursuant to the Management Agreement, the Manager is entitled to a base management fee calculated and payable quarterly in arrears in an amount equal to 1.5% of the Company’s stockholders’ equity (as defined in the Management Agreement), per annum. The Manager will use the proceeds from its management fee in part to pay compensation to its officers and personnel. The Company does not reimburse its Manager or its affiliates for the salaries and other compensation of their personnel, except for the allocable share of the compensation of (1) the Company’s Chief Financial Officer based on the percentage of time spent on the Company’s affairs and (2) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of the Manager or its affiliates who spend all or a portion of their time managing the Company’s affairs based on the percentage of time devoted by such personnel to the Company’s affairs. The Company is also required to reimburse its Manager for operating expenses related to the Company incurred by its Manager, including expenses relating to legal, accounting, due diligence and other services. Expense reimbursements to the Manager are made in cash on a monthly basis following the end of each month. The Company’s reimbursement obligation is not subject to any dollar limitation.
The current term of the Management Agreement currently runs through September 29, 2017. Absent certain action by the independent directors of the Company’s board of directors, as described below, the Management Agreement will automatically renew on each anniversary for a one year term. The Management Agreement may be terminated upon expiration of the one-year term only upon the affirmative vote of at least two-thirds of the Company’s independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of the Company’s independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Amounts payable under the Company’s Management Agreement are not fixed and determinable. Following a meeting by the Company’s independent directors in February 2016, which included a discussion of the Manager’s performance and the level of the management fees thereunder, the Company determined not to terminate the Management Agreement.
Off-balance Sheet Arrangements
Except as disclosed in "Note 7 - Unconsolidated Joint Venture," the Company does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, the Company has not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide additional funding to any such entities.
Dividends
The Company intends to continue to make regular quarterly distributions to holders of its common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. The Company generally intends over time to pay dividends to its stockholders in an amount equal to its net taxable income, if and to the extent authorized by its board of directors. Any distributions the Company makes will be at the discretion of its board of directors and will depend upon, among other things, its actual results of operations. These results and the Company’s ability to pay distributions will be affected by various factors, including the net interest and other income from its portfolio, its operating expenses and any other expenditures. If the Company’s cash available for distribution is less than its net taxable income, the Company could be required to sell assets or borrow funds to make cash distributions or the Company may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.
The Company has 3,450,000 shares of Series A Preferred Stock outstanding, which entitles holders to receive dividends at the rate of 8.625% per annum of the $25.00 per share liquidation preference equivalent to $2.16 per annum, per share. The dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears. Except under certain limited circumstances, the Series A Preferred Stock is generally not convertible into or exchangeable for any other property or any
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other securities of the Company at the election of the holders. After August 1, 2017, the Company may, at its option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.
The Company has 8,000,000 shares of Series B Preferred Stock outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series B Preferred Stock will pay cumulative cash dividends: (i) from, and including, the original date of issuance of the Series B Preferred Stock to, but excluding, September 20, 2020, at an initial rate of 8.00% per annum of the $25.00 per share liquidation preference; and (ii) from, and including, September 20, 2020, at the rate per annum equal to the greater of (a) 8.00% and (b) a floating rate equal to the 3-month LIBOR rate as calculated on each applicable date of determination plus 6.46% of the $25.00 liquidation preference. Except under certain limited circumstances, the Series B Preferred Stock is generally not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders. On or after September 21, 2020, the Company may, at its option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.
The Company has 6,900,000 shares of Series C Preferred Stock outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series C Preferred Stock will pay cumulative cash dividends at the rate of 8.00% per annum of the $25.00 per share liquidation preference (equivalent to $2.00 per annum per share) from, and including July 29, 2016 (the “Series C Initial Dividend Date”) and shall be payable (i) for the period from the Series C Initial Dividend Date to, but excluding, October 31, 2016, on October 31, 2016, and (ii) for each subsequent quarterly dividend period commencing on the last day of each of January, April, July and October and ending on, and including, the day before the first day of the next succeeding dividend period, quarterly in equal amounts in arrears on the last day of each April, July, October and January, commencing on January 31, 2017 at the then applicable annual rate. Except under certain limited circumstances, the Series C Preferred Stock is generally not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders. On or after September 20, 2017, the Company may, at its option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.
Non-GAAP Financial Measures
Operating Earnings
For the three and nine months ended September 30, 2016, the Company’s Operating Earnings were $32,744, or $0.45 per share, and $96,002, or $1.38 per share. For the three and nine months ended September 30, 2015, the Company’s Operating Earnings were $31,742, or $0.53 per share, and $80,347, or $1.42 per share. Operating Earnings is a non-GAAP financial measure that 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.
In order to evaluate the effective yield of the portfolio, the Company uses Operating Earnings to reflect the net investment income of the Company’s portfolio as adjusted to include the net interest expense related to the Company’s derivative instruments. Operating Earnings allows the Company to isolate the net interest expense associated with the Company’s swaps in order to monitor and project the Company’s full cost of borrowings. The Company also believes that its investors use Operating Earnings or a comparable supplemental performance measure to evaluate and compare the performance of the Company and its peers and, as such, the Company believes that the disclosure of Operating Earnings is useful to its investors.
A significant limitation associated with Operating Earnings as a measure of the Company’s financial performance over any period is that it excludes net realized and unrealized gains (losses) from investments. In addition, the Company’s presentation of Operating Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, Operating Earnings should not be considered as a substitute for the Company’s GAAP net income as a measure of its financial performance or any measure of its liquidity under GAAP.
Beginning with the quarter ended September 30, 2016, the Company has slightly modified its definition of Operating Earnings to include realized gains/(losses) on currency swaps related to interest income on investments denominated in a currency other than U.S. dollars. The Company believes that including the effects of realized gains/(losses) on currency swaps related to interest income more accurately reflects the Company's investment income for a particular period and will allow investors to more easily compare its operating results over various periods. The effects of such unrealized gains/(losses) in prior periods were not material to the Company's financial results. The Company intends to apply this modified definition for Operating Earnings for all future periods.
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The table below summarizes the reconciliation from net income available to common stockholders to Operating Earnings:

| For the three months ended September 30, |  | For the nine months ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Net income available to common stockholders | $ | 60,583 |  |  | $ | 23,543 |  |  | $ | 77,864 |  |  | $ | 69,993 |
Adjustments: |  |  |  |  |  |  |
Income from unconsolidated joint venture | (80 | ) |  | (108 | ) |  | (207 | ) |  | (495 | )
Equity-based compensation expense | 1,828 |  |  | 756 |  |  | 5,434 |  |  | 2,695 |
Provision for loan losses | — |  |  | — |  |  | 15,000 |  |  | — |
Unrealized (gain) loss on securities | 9,798 |  |  | 6,926 |  |  | 36,601 |  |  | 5,792 |
Unrealized (gain) loss on derivative instruments | (4,815 | ) |  | (2,096 | ) |  | (22,831 | ) |  | 4,144 |
Foreign currency (gain) loss ,net | 4,861 |  |  | 2,165 |  |  | 22,417 |  |  | (3,424 | )
Bargain purchase gain | (40,021 | ) |  | — |  |  | (40,021 | ) |  | — |
Amortization of the 2019 Notes related to equity reclassification | 590 |  |  | 556 |  |  | 1,745 |  |  | 1,642 |
Total adjustments: | (27,839 | ) |  | 8,199 |  |  | 18,138 |  |  | 10,354 |
Operating Earnings | $ | 32,744 |  |  | $ | 31,742 |  |  | $ | 96,002 |  |  | $ | 80,347 |
Merger-related expenses | 4,925 |  |  | — |  |  | 11,350 |  |  | — |
Operating Earnings excluding merger-related expenses | $ | 37,669 |  |  | $ | 31,742 |  |  | $ | 107,353 |  |  | $ | 80,347 |
Basic and diluted Operating Earnings per share of common stock | $ | 0.45 |  |  | $ | 0.53 |  |  | $ | 1.38 |  |  | $ | 1.42 |
Basic and diluted Operating Earnings per Share of common stock (excluding merger related expenses) | $ | 0.52 |  |  | $ | 0.53 |  |  | $ | 1.54 |  |  | $ | 1.42 |
Basic weighted average shares of common stock outstanding | 71,919,549 |  |  | 59,355,613 |  |  | 68,913,362 |  |  | 55,818,731 |
Diluted weighted average shares of common stock outstanding | 72,861,611 |  |  | 59,934,008 |  |  | 69,865,603 |  |  | 56,415,082 |

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
The Company seeks to manage its risks related to the credit quality of its assets, interest rates, liquidity, prepayment speeds and market value, while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of its capital stock. While risks are inherent in any business enterprise, the Company seeks to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks the Company undertakes.
Credit Risk
One of the Company’s strategic focuses is acquiring assets that it believes to be of high credit quality. The Company believes this strategy will generally keep its credit losses and financing costs low. However, the Company is subject to varying degrees of credit risk in connection with its other target assets. The Company seeks to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses, and by deploying a value-driven approach to underwriting and diligence, consistent with the Manager’s historical investment strategy, with a focus on current cash flows and potential risks to cash flow. The Company enhances its due diligence and underwriting efforts by accessing the Manager’s knowledge base and industry contacts. Nevertheless, unanticipated credit losses could occur, which could adversely impact the Company’s operating results.
Interest Rate Risk
Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond the Company’s control. The Company is subject to interest rate risk in connection with its target assets and its related financing obligations.
To the extent consistent with maintaining the Company’s REIT qualification, the Company seeks to manage risk exposure to protect its portfolio of financial assets against the effects of major interest rate changes. The Company generally seeks to manage this risk by:

• | attempting to structure its financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;

• | using hedging instruments, interest rate swaps and interest rate caps; and

• | to the extent available, using securitization financing to better match the maturity of the Company’s financing with the duration of its assets.

At September 30, 2016, all of the Company’s borrowings outstanding under the Goldman Loan, the JPM Facility and participations sold were floating-rate borrowings. At September 30, 2016, the Company also had floating rate assets with a face amount of $2,184,182 resulting in net variable rate exposure of $776,399. A 50 basis point increase in LIBOR would increase the quarterly net interest income related to this variable rate exposure by approximately $1,492. 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.
Prepayment Risk
Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. The Company does not anticipate facing prepayment risk on most of its portfolio of assets since the Company anticipates that most of the commercial loans held directly by the Company or securing the Company’s CMBS assets will contain provisions preventing prepayment or imposing prepayment penalties in the event of loan prepayments.
Market Risk
Market value risk. The Company’s available-for-sale securities and securities at estimated fair value are reflected at their estimated fair value. The change in estimated fair value of securities available-for-sale is reflected in accumulated other comprehensive income while the change in estimated fair value of securities at estimated fair value is reflected as a component of net income. The estimated fair value of these securities fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease;
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conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of the Company’s assets may be adversely impacted.
Real estate risk. Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans or loans, as the case may be, which could also cause the Company to suffer losses.
Inflation
Virtually all of the Company’s assets and liabilities will be interest rate sensitive in nature. As a result, interest rates and other factors influence the Company’s performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. The Company’s financial statements are prepared in accordance with GAAP and distributions are declared in order to distribute at least 90% of its REIT taxable income on an annual basis in order to maintain the Company’s REIT qualification. In each case, the Company’s activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.
ITEM 4. Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder.
During the period ended September 30, 2016, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.
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PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business.
After the announcement of the execution of the Merger Agreement, two putative class action lawsuits challenging the proposed First Merger (as defined in the Merger Agreement), captioned Aivasian v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001532 and Wiener v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001837, were filed in the Circuit Court for Baltimore City (the “Court”). A putative class and derivative lawsuit was later filed in the Court captioned Crago v. Apollo Residential Mortgage, Inc., No. 24-C-16-002610. Following a hearing on May 6, 2016, the Court entered orders among other things, consolidating the three actions under the caption In Re Apollo Residential Mortgage, Inc. Shareholder Litigation, Case No.: 24-C-16-002610. The plaintiffs have designated the Crago complaint as the operative complaint. The operative complaint includes both direct and derivative claims, names as defendants AMTG, the board of directors of AMTG (the “AMTG Board”), ARI, Merger Sub, Apollo and Athene and alleges, among other things, that the members of the AMTG Board breached their fiduciary duties to the AMTG stockholders and that the other corporate defendants aided and abetted such fiduciary breaches. The operative complaint further alleges, among other things, that the proposed First Merger involves inadequate consideration, was the result of an inadequate and conflicted sales process, and includes unreasonable deal protection devices that purportedly preclude competing offers. It also alleges that the transactions with Athene are unfair and that the registration statement on Form S-4 filed with the SEC on April 6, 2016 contains materially misleading disclosures and omits certain material information. The operative complaint seeks, among other things, certification of the proposed class, declaratory relief, preliminary and permanent injunctive relief, including enjoining or rescinding the First Merger, unspecified damages, and an award of other unspecified attorneys’ and other fees and costs. On May 6, 2016, counsel for the plaintiffs filed with the Court a stipulation seeking the appointment of interim co-lead counsel, which stipulation was approved by the Court on June 9, 2016. On August 18, 2016, the defendants filed motions to dismiss the consolidated action, and the plaintiffs filed an opposition brief on October 6, 2016. The defendants believe that the claims asserted in the complaints are without merit and intend to vigorously defend the lawsuits.
On May 13, 2016, AMTG and ARM Manager, LLC, AMTG’s manager prior to the Merger, each received a subpoena from the New York Department of Financial Services, requesting that they provide certain specified documents related to an investigation and inquiry being undertaken by the New York Department of Financial Services relating to seller-financed real estate contracts. According to published news reports, this subpoena is part of a broader inquiry by the New York Department of Financial Services into the seller-financed home sale industry and a number of other investment firms were reported to have received similar inquiries. As AMTG’s successor in the Merger, the Company intends to cooperate fully with the subpoenas. The Company believes that AMTG’s seller finance program was operated in compliance with law.
ITEM 1A. Risk Factors
See the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and the Company's registration statement on Form S-4 (Registration No. 333-210632). There have been no material changes to the Company’s risk factors during the three months ended September 30, 2016 other than the risk factors disclosed in the Company's registration statement on Form S-4 (Registration No. 333-210632).
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
Not applicable.
ITEM 5. Other Information
None.
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ITEM 6. Exhibits
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Exhibit No. |  | Description
2.1 |  | Agreement and Plan of Merger, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Arrow Merger Sub, Inc. and Apollo Residential Mortgage, Inc., incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on February 26, 2016 (File No.: 001-34452).
2.2 |  | Asset Purchase and Sale Agreement, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Athene Annuity & Life Assurance Company and Athene Annuity and Life Company, incorporated by reference to Exhibit 2.2 of the Registrant’s Form 8-K filed on February 26, 2016 (File No.: 001-34452).
2.3 |  | Amendment No. 1, dated as of June 30, 2016, to the Agreement and Plan of Merger, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Arrow Merger Sub, Inc. and Apollo Residential Mortgage, Inc., incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on June 30, 2016 (File No.: 001-34452).
3.1 |  | Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).
3.2 |  | Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.3 of the Registrant’s Form 8-A filed on July 30, 2012 (File No.: 001-34452).
3.3 |  | Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).
3.4 |  | Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 1, 2016 (File No.: 001-34452).
3.5 |  | By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.2 of the Registrant’s Form S-4 (Registration No. 333-210632).
4.1 |  | Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).
4.2 |  | Form of stock certificate evidencing the 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock, liquidation reference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on July 30, 2012 (File No.: 001-34452).
4.3 |  | Form of stock certificate evidencing the 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation reference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).
4.4 |  | Form of stock certificate evidencing the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on August 26, 2016 (File No.: 001-34452).
4.5 |  | Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, 2014(File No.: 001-34452).
4.6 |  | First Supplemental Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee (including the form of 5.50% Convertible Senior Note due 2019), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).
31.1* |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* |  | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.

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Table of Contents

101.INS * |  | XBRL Instance Document
101.SCH* |  | XBRL Taxonomy Extension Schema
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase

* | Filed herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  | APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
November 1, 2016 |  |  |
| By: |  | /s/ Stuart A. Rothstein
|  |  | Stuart A. Rothstein
|  |  | President and Chief Executive Officer
|  |  | (Principal Executive Officer)
| By: |  | /s/ Jai Agarwal
|  |  | Jai Agarwal
|  |  | Chief Financial Officer, Treasurer and Secretary
|  |  | (Principal Financial Officer and Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No. |  | Description
2.1 |  | Agreement and Plan of Merger, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Arrow Merger Sub, Inc. and Apollo Residential Mortgage, Inc., incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on February 26, 2016 (File No.: 001-34452).
2.2 |  | Asset Purchase and Sale Agreement, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Athene Annuity & Life Assurance Company and Athene Annuity and Life Company, incorporated by reference to Exhibit 2.2 of the Registrant’s Form 8-K filed on February 26, 2016 (File No.: 001-34452).
2.3 |  | Amendment No. 1, dated as of June 30, 2016, to the Agreement and Plan of Merger, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Arrow Merger Sub, Inc. and Apollo Residential Mortgage, Inc., incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on June 30, 2016 (File No.: 001-34452).
3.1 |  | Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).
3.2 |  | Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.3 of the Registrant’s Form 8-A filed on July 30, 2012 (File No.: 001-34452).
3.3 |  | Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).
3.4 |  | Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 1, 2016 (File No.: 001-34452).
3.5 |  | By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.2 of the Registrant’s Form S-4 (Registration No. 333-210632).
4.1 |  | Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).
4.2 |  | Form of stock certificate evidencing the 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock, liquidation reference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on July 30, 2012 (File No.: 001-34452).
4.3 |  | Form of stock certificate evidencing the 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation reference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).
4.4 |  | Form of stock certificate evidencing the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on August 26, 2016 (File No.: 001-34452).
4.5 |  | Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).
4.6 |  | First Supplemental Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee (including the form of 5.50% Convertible Senior Note due 2019), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).
31.1* |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* |  | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.

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Table of Contents

101.INS* |  | XBRL Instance Document
101.SCH* |  | XBRL Taxonomy Extension Schema
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase

* | Filed herewith.

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