Second quarter GAAP net loss of $2.2 million or
$0.04 per diluted common share and Distributable Earnings(1) of
$19.0 million or $0.35 per diluted common share
- Subsequent to end of second quarter -
Declared third quarter 2023 dividend of $0.33
per common share
Ares Commercial Real Estate Corporation (the “Company”)
(NYSE:ACRE), a specialty finance company engaged in originating and
investing in commercial real estate assets, reported generally
accepted accounting principles (“GAAP”) net loss of $2.2 million or
$0.04 per diluted common share and Distributable Earnings(1) of
$19.0 million or $0.35 per diluted common share for the second
quarter of 2023.
“Our second quarter 2023 results demonstrate that our portfolio
continues to benefit from higher interest, with our $0.35 of
Distributable Earnings per diluted common share fully covering our
regular and supplemental dividends for the quarter,” said Bryan
Donohoe, Chief Executive Officer of Ares Commercial Real Estate
Corporation. “Going forward, we believe that repurchasing our
common shares at meaningful discounts to book value and new loan
originations will be better uses of capital than the previously
distributed supplemental dividends. Given our strong liquidity
position, during the second quarter, we bought back approximately
1.0% of our outstanding common shares at an average price of $8.58
per common share.”
“We continued to operate with a healthy balance sheet and
significant available liquidity throughout the second quarter,”
said Tae-Sik Yoon, Chief Financial Officer of Ares Commercial Real
Estate Corporation. “With our non-spread based mark to market
financing and strong capital position with more than $140 million
in cash and $75 million of available financing proceeds as of June
30, 2023, we believe our balance sheet positions us to maximize
credit outcomes on our higher risk rated assets and make new
opportunistic investments with compelling risk adjusted
returns.”
_________________________________ (1) Distributable Earnings is
a non-GAAP financial measure. Refer to Schedule I for the
definition and reconciliation of Distributable Earnings.
COMMON STOCK DIVIDEND
On May 2, 2023, the Board of Directors of the Company declared a
regular cash dividend of $0.33 per common share and a supplemental
cash dividend of $0.02 per common share for the second quarter of
2023. The second quarter 2023 dividend and supplemental cash
dividend were paid on July 18, 2023 to common stockholders of
record as of June 30, 2023.
On August 2, 2023, the Board of Directors of the Company
declared a regular cash dividend of $0.33 per common share for the
third quarter of 2023. The third quarter 2023 dividend will be
payable on October 17, 2023 to common stockholders of record as of
September 29, 2023.
ADDITIONAL INFORMATION
The Company issued a presentation of its second quarter 2023
results, which can be viewed at www.arescre.com on the Investor
Resources section of our home page under Events and Presentations.
The presentation is titled “Second Quarter 2023 Earnings
Presentation.” The Company also filed its Quarterly Report on Form
10-Q for the quarter ended June 30, 2023 with the U.S. Securities
and Exchange Commission on August 2, 2023.
CONFERENCE CALL AND WEBCAST INFORMATION
On Wednesday, August 2, 2023, the Company invites all interested
persons to attend its webcast/conference call at 12:00 p.m.
(Eastern Time) to discuss its second quarter 2023 financial
results.
All interested parties are invited to participate via telephone
or the live webcast, which will be hosted on a webcast link located
on the Home page of the Investor Resources section of the Company’s
website at www.arescre.com. Please visit the website to test your
connection before the webcast. Domestic callers can access the
conference call by dialing +1 (877) 407-0312. International callers
can access the conference call by dialing +1 (201) 389-0899. All
callers are asked to dial in 10-15 minutes prior to the call so
that name and company information can be collected. For interested
parties, an archived replay of the call will be available through
September 2, 2023 at 5:00 p.m. (Eastern Time) to domestic callers
by dialing +1 (877) 660-6853 and to international callers by
dialing +1 201 612-7415. For all replays, please reference access
code 13738843. An archived replay will also be available through
September 2, 2023 on a webcast link located on the Home page of the
Investor Resources section of the Company’s website.
ABOUT ARES COMMERCIAL REAL ESTATE CORPORATION
Ares Commercial Real Estate Corporation (the “Company”) is a
specialty finance company primarily engaged in originating and
investing in commercial real estate loans and related investments.
Through its national direct origination platform, the Company
provides a broad offering of flexible and reliable financing
solutions for commercial real estate owners and operators. The
Company originates senior mortgage loans, as well as subordinate
financings, mezzanine debt and preferred equity, with an emphasis
on providing value added financing on a variety of properties
located in liquid markets across the United States. Ares Commercial
Real Estate Corporation elected and qualified to be taxed as a real
estate investment trust and is externally managed by a subsidiary
of Ares Management Corporation. For more information, please visit
www.arescre.com. The contents of such website are not, and should
not be deemed to be, incorporated by reference herein.
FORWARD-LOOKING STATEMENTS
Statements included herein or on the webcast / conference call
may constitute “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended, which relate to
future events or the Company’s future performance or financial
condition. These statements are not guarantees of future
performance, condition or results and involve a number of risks and
uncertainties. Actual results may differ materially from those in
the forward-looking statements as a result of a number of factors,
including the return or impact of current and future investments,
rates of prepayments on the Company’s mortgage loans and the effect
on the Company’s business of such prepayments, availability of
investment opportunities in mortgage-related and real
estate-related investments and securities, ACREM’s ability to
locate suitable investments for the Company, monitor, service and
administer the Company’s investments and execute its investment
strategy, the Company’s ability to obtain, maintain, repay or
refinance financing arrangements, including securitizations, global
economic trends and economic conditions, including heightened
inflation, slower growth or recession, changes to fiscal and
monetary policy, higher interest rates, currency fluctuations and
challenges in the supply chain, changes in interest rates, credit
spreads and the market value of the Company’s investments, the
demand for commercial real estate loans, and the risks described
from time to time in the Company’s filings with the Securities and
Exchange Commission (the “SEC”), including, but not limited to, the
risk factors described in Part I, Item 1A. Risk Factors in the
Company's Annual Report on Form 10-K, filed with the SEC on
February 15, 2023 and the risk factors described in Part II, Item
1A. Risk Factors in the Company's subsequent Quarterly Report on
Form 10-Q, filed with the SEC on May 2, 2023. Any forward-looking
statement, including any contained herein, speaks only as of the
time of this press release and Ares Commercial Real Estate
Corporation undertakes no duty to update any forward-looking
statements made herein or on the webcast/conference call.
Projections and forward-looking statements are based on
management’s good faith and reasonable assumptions, including the
assumptions described herein.
ARES COMMERCIAL REAL ESTATE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
and per share data)
As of
June 30, 2023
December 31, 2022
(unaudited)
ASSETS
Cash and cash equivalents
$
142,603
$
141,278
Loans held for investment ($886,343 and
$887,662 related to consolidated VIEs, respectively)
2,228,100
2,264,008
Current expected credit loss reserve
(108,114
)
(65,969
)
Loans held for investment, net of current
expected credit loss reserve
2,119,986
2,198,039
Investment in available-for-sale debt
securities, at fair value
27,970
27,936
Other assets ($4,207 and $2,980 of
interest receivable related to consolidated VIEs, respectively;
$87,950 and $129,495 of other receivables related to consolidated
VIEs, respectively)
109,452
155,749
Total assets
$
2,400,011
$
2,523,002
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
681,257
$
705,231
Notes payable
104,559
104,460
Secured term loan
149,295
149,200
Collateralized loan obligation
securitization debt (consolidated VIEs)
735,093
777,675
Due to affiliate
4,806
5,580
Dividends payable
19,180
19,347
Other liabilities ($1,952 and $1,913 of
interest payable related to consolidated VIEs, respectively)
14,630
13,969
Total liabilities
1,708,820
1,775,462
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at June 30, 2023 and December 31,
2022 and 54,136,273 and 54,443,983 shares issued and outstanding at
June 30, 2023 and December 31, 2022, respectively
532
537
Additional paid-in capital
810,161
812,788
Accumulated other comprehensive income
987
7,541
Accumulated earnings (deficit)
(120,489
)
(73,326
)
Total stockholders' equity
691,191
747,540
Total liabilities and stockholders'
equity
$
2,400,011
$
2,523,002
ARES COMMERCIAL REAL ESTATE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except share
and per share data)
For the three months ended
June 30,
For the six months ended June
30,
2023
2022
2023
2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Interest income
$
51,941
$
38,621
$
101,441
$
71,986
Interest expense
(26,951
)
(13,475
)
(49,950
)
(25,488
)
Net interest margin
24,990
25,146
51,491
46,498
Revenue from real estate owned
—
—
—
2,672
Total revenue
24,990
25,146
51,491
49,170
Expenses:
Management and incentive fees to
affiliate
3,334
3,766
6,344
6,740
Professional fees
626
1,100
1,397
1,878
General and administrative expenses
2,038
1,587
3,723
3,200
General and administrative expenses
reimbursed to affiliate
1,109
796
1,842
1,631
Expenses from real estate owned
—
—
—
4,309
Total expenses
7,107
7,249
13,306
17,758
Provision for current expected credit
losses
20,127
7,768
41,146
7,174
Realized losses on loans sold
—
—
5,613
—
Gain on sale of real estate owned
—
—
—
2,197
Income (loss) before income
taxes
(2,244
)
10,129
(8,574
)
26,435
Income tax expense (benefit), including
excise tax
(46
)
98
64
204
Net income (loss) attributable to
common stockholders
$
(2,198
)
$
10,031
$
(8,638
)
$
26,231
Earnings (loss) per common
share:
Basic earnings (loss) per common share
$
(0.04
)
$
0.20
$
(0.16
)
$
0.54
Diluted earnings (loss) per common
share
$
(0.04
)
$
0.20
$
(0.16
)
$
0.53
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
54,347,204
50,562,559
54,468,752
48,892,754
Diluted weighted average shares of common
stock outstanding
54,347,204
50,999,505
54,468,752
49,336,267
Dividends declared per share of common
stock(1)
$
0.35
$
0.35
$
0.70
$
0.70
(1)
There is no assurance dividends will
continue at these levels or at all.
SCHEDULE I
Reconciliation of Net Income to Non-GAAP
Distributable Earnings
Distributable Earnings is a non-GAAP financial measure that
helps the Company evaluate its financial performance excluding the
effects of certain transactions and GAAP adjustments that it
believes are not necessarily indicative of its current loan
origination portfolio and operations. To maintain the Company’s
REIT status, the Company is generally required to annually
distribute to its stockholders substantially all of its taxable
income. The Company believes the disclosure of Distributable
Earnings provides useful information to investors regarding the
Company's ability to pay dividends, which is one of the principal
reasons the Company believes investors invest in the Company. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for financial results
prepared in accordance with GAAP. Distributable Earnings is defined
as net income (loss) attributable to common stockholders computed
in accordance with GAAP, excluding non-cash equity compensation
expense, the incentive fees the Company pays to its Manager (Ares
Commercial Real Estate Management LLC), depreciation and
amortization (to the extent that any of the Company’s target
investments are structured as debt and the Company forecloses on
any properties underlying such debt), any unrealized gains, losses
or other non-cash items recorded in net income (loss) for the
period, regardless of whether such items are included in other
comprehensive income or loss, or in net income (loss), one-time
events pursuant to changes in GAAP and certain non-cash charges
after discussions between the Company’s Manager and the Company’s
independent directors and after approval by a majority of the
Company’s independent directors. Loan balances that are deemed to
be uncollectible are written off as a realized loss and are
included in Distributable Earnings. Distributable Earnings is
aligned with the calculation of “Core Earnings,” which is defined
in the Management Agreement and is used to calculate the incentive
fees the Company pays to its Manager.
Reconciliation of net income (loss) attributable to common
stockholders, the most directly comparable GAAP financial measure,
to Distributable Earnings is set forth in the table below for the
three months and twelve months ended June 30, 2023 ($ in
thousands):
For the three months ended
June 30, 2023
For the twelve months ended
June 30, 2023
Net income (loss) attributable to common
stockholders
$
(2,198
)
$
(5,084
)
Stock-based compensation
1,004
3,376
Incentive fees to affiliate
334
2,452
Provision for current expected credit
losses
20,127
80,033
Realized gain on termination of interest
rate cap derivative(1)
(266
)
(1,499
)
Distributable Earnings
$
19,001
$
79,278
Net income (loss) attributable to common
stockholders
$
(0.04
)
$
(0.09
)
Stock-based compensation
0.02
0.06
Incentive fees to affiliate
0.01
0.05
Provision for current expected credit
losses
0.37
1.47
Realized gain on termination of interest
rate cap derivative(1)
—
(0.03
)
Basic Distributable Earnings per common
share
$
0.35
$
1.46
Net income (loss) attributable to common
stockholders
$
(0.04
)
$
(0.09
)
Stock-based compensation
0.02
0.06
Incentive fees to affiliate
0.01
0.04
Provision for current expected credit
losses
0.37
1.45
Realized gain on termination of interest
rate cap derivative(1)
—
(0.03
)
Diluted Distributable Earnings per
common share
$
0.35
$
1.44
(1)
For the three and twelve months ended June
30, 2023, Distributable Earnings includes a $0.3 million and $1.5
million, respectively, adjustment to reverse the impact of the $2.0
million realized gain from the termination of the interest rate cap
derivative that was amortized into GAAP net income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230801931427/en/
INVESTOR RELATIONS Ares Commercial Real Estate
Corporation Carl Drake or John Stilmar (888) 818-5298
iracre@aresmgmt.com
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