Third quarter GAAP net income of $0.6
million or $0.01 per diluted common share and Distributable
Earnings(1) of $21.3 million or $0.39 per diluted common
share
-Subsequent to end of third quarter-
Declared fourth quarter 2022 dividend of
$0.33 per common share and a supplemental dividend of $0.02
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 income of $0.6 million
or $0.01 per diluted common share and Distributable Earnings(1) of
$21.3 million or $0.39 per diluted common share for the third
quarter of 2022.
“We generated another quarter of strong earnings that were
primarily driven by the benefits of higher interest rates on our
floating rate loan portfolio,” said Bryan Donohoe, Chief Executive
Officer of Ares Commercial Real Estate Corporation. “We are
approaching the current market by continuing to directly originate
senior loans backed by high quality commercial properties as well
as opportunistically acquiring investment grade commercial real
estate securities, in both cases at wider, attractive credit
spreads.”
“We believe our strong position of $156 million of available
liquidity and no credit spread based mark-to-market sources of
financing positions us well to navigate today’s market,” said
Tae-Sik Yoon, Chief Financial Officer of Ares Commercial Real
Estate Corporation.
_________________________________
(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 July 29, 2022, 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 third
quarter of 2022. The third quarter 2022 dividend and supplemental
cash dividend were paid on October 17, 2022 to common stockholders
of record as of September 30, 2022.
On November 2, 2022, 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 fourth
quarter of 2022. The fourth quarter 2022 dividend and supplemental
cash dividend will be payable on January 18, 2023 to common
stockholders of record as of December 30, 2022.
ADDITIONAL INFORMATION
The Company issued a presentation of its third quarter 2022
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 “Third Quarter 2022 Earnings Presentation.” The Company
also filed its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2022 with the U.S. Securities and Exchange Commission
on November 2, 2022.
CONFERENCE CALL AND WEBCAST INFORMATION
On Wednesday, November 2, 2022, the Company invites all
interested persons to attend its webcast/conference call at 12:00
p.m. (Eastern Time) to discuss its third quarter 2022 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 (844) 200-6205. International callers
can access the conference call by dialing +1 (929) 526-1599. All
callers will need to enter access code 951268. 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 November 30,
2022 at 5:00 p.m. (Eastern Time) to domestic callers by dialing +1
(866) 813-9403 and to international callers by dialing +44 204 525
0658. For all replays, please reference access code 933476. An
archived replay will also be available through November 30, 2022 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 returns on current and future investments, rates of
repayments and prepayments on the Company’s mortgage loans,
availability of investment opportunities, the Company’s ability to
originate additional investments and completion of pending
investments, the availability of capital, the availability and cost
of financing, market trends and conditions in the Company’s
industry and the general economy, including heightened inflation,
slower growth or recession, changes to fiscal and monetary policy,
currency fluctuations and challenges in the supply chain; the level
of lending and borrowing spreads and interest rates, commercial
real estate loan volumes, the ongoing impact of the COVID-19
pandemic and the pandemic's impact on the U.S. and global economy,
the impact of Russia's invasion of Ukraine and the international
community's response, which created, and may continue to create,
substantial political and economic disruption, uncertainty and
risk; the Company’s ability to pay future dividends at historical
levels or at all, 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, 2022 and the risk
factors described in Part II, Item 1A. Risk Factors in the
Company's subsequent Quarterly Reports on Form 10-Q. 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
September 30, 2022
December 31, 2021
(unaudited)
ASSETS
Cash and cash equivalents
$
77,297
$
50,615
Loans held for investment ($930,603 and
$974,424 related to consolidated VIEs, respectively)
2,508,609
2,414,383
Current expected credit loss reserve
(46,060
)
(23,939
)
Loans held for investment, net of current
expected credit loss reserve
2,462,549
2,390,444
Real estate owned held for sale, net
—
36,602
Investment in available-for-sale debt
securities, at fair value
27,730
—
Other assets ($2,539 and $2,592 of
interest receivable related to consolidated VIEs, respectively;
$131,662 and $128,589 of other receivables related to consolidated
VIEs, respectively)
159,610
154,177
Total assets
$
2,727,186
$
2,631,838
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
847,697
$
840,047
Notes payable
104,411
50,358
Secured term loan
149,153
149,016
Collateralized loan obligation
securitization debt (consolidated VIEs)
822,319
861,188
Secured borrowings
—
22,589
Due to affiliate
4,879
4,156
Dividends payable
19,196
16,674
Other liabilities ($1,387 and $570 of
interest payable related to consolidated VIEs, respectively)
12,454
9,182
Total liabilities
1,960,109
1,953,210
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at September 30, 2022 and December
31, 2021 and 54,438,363 and 47,144,058 shares issued and
outstanding at September 30, 2022 and December 31, 2021,
respectively
537
465
Additional paid-in capital
812,050
703,950
Accumulated other comprehensive income
11,379
2,844
Accumulated earnings (deficit)
(56,889
)
(28,631
)
Total stockholders' equity
767,077
678,628
Total liabilities and stockholders'
equity
$
2,727,186
$
2,631,838
ARES COMMERCIAL REAL ESTATE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except share
and per share data)
For the three months ended
September 30,
For the nine months ended
September 30,
2022
2021
2022
2021
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Interest income
$
45,633
$
34,023
$
117,619
$
95,587
Interest expense
(18,362
)
(12,669
)
(43,851
)
(35,900
)
Net interest margin
27,271
21,354
73,768
59,687
Revenue from real estate owned
—
5,850
2,672
12,271
Total revenue
27,271
27,204
76,440
71,958
Expenses:
Management and incentive fees to
affiliate
3,868
3,175
10,608
8,693
Professional fees
842
480
2,720
1,880
General and administrative expenses
1,416
1,119
4,617
3,470
General and administrative expenses
reimbursed to affiliate
1,011
773
2,641
2,313
Expenses from real estate owned
—
5,339
4,309
12,458
Total expenses
7,137
10,886
24,895
28,814
Provision for current expected credit
losses
19,485
6,367
26,659
(756
)
Gain on sale of real estate owned
—
—
2,197
—
Income before income taxes
649
9,951
27,083
43,900
Income tax expense, including excise
tax
5
—
208
593
Net income attributable to common
stockholders
$
644
$
9,951
$
26,875
$
43,307
Earnings per common share:
Basic earnings per common share
$
0.01
$
0.21
$
0.53
$
1.06
Diluted earnings per common share
$
0.01
$
0.21
$
0.52
$
1.05
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
54,415,545
46,957,339
50,753,915
40,840,453
Diluted weighted average shares of common
stock outstanding
54,846,756
47,209,469
51,193,238
41,120,751
Dividends declared per share of common
stock(1)
$
0.35
$
0.35
$
1.05
$
1.05
(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) 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 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 September 30, 2022 ($ in
thousands):
For the three months ended
September 30, 2022
For the twelve months ended
September 30, 2022
Net income attributable to common
stockholders
$
644
$
44,030
Stock-based compensation
673
2,632
Incentive fees to affiliate
855
3,007
Depreciation of real estate owned
—
(2,234
)
Provision for current expected credit
losses
19,485
27,425
Realized gain on termination of interest
rate cap derivative(1)
(354
)
1,342
Distributable Earnings
$
21,303
$
76,202
Net income attributable to common
stockholders
$
0.01
$
0.88
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
0.02
0.06
Depreciation of real estate owned
—
(0.04
)
Provision for current expected credit
losses
0.36
0.55
Realized gain on termination of interest
rate cap derivative(1)
(0.01
)
0.03
Basic Distributable Earnings per common
share
$
0.39
$
1.53
Net income attributable to common
stockholders
$
0.01
$
0.88
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
0.02
0.06
Depreciation of real estate owned
—
(0.04
)
Provision for current expected credit
losses
0.36
0.55
Realized gain on termination of interest
rate cap derivative(1)
(0.01
)
0.03
Diluted Distributable Earnings per
common share
$
0.39
$
1.52
- For the three months and twelve months ended September 30,
2022, Distributable Earnings includes a $0.4 million and $0.6
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/20221101006399/en/
INVESTOR RELATIONS
Ares Commercial Real Estate Corporation Carl Drake or John
Stilmar (888) 818-5298 iracre@aresmgmt.com
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