Fourth quarter GAAP net income of
$2.9 million or $0.05 per diluted common share and
Distributable Earnings(1) of $23.9 million or $0.44 per
diluted common share
Full year GAAP net income of
$29.8 million or $0.57 per diluted common share and
Distributable Earnings(1) of $80.7 million or $1.55 per
diluted common share
- Subsequent to year ended December 31, 2022
-
Declared first quarter 2023 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 $2.9 million
or $0.05 per diluted common share and Distributable Earnings(1) of
$23.9 million or $0.44 per diluted common share for the fourth
quarter of 2022. The Company reported GAAP net income of $29.8
million or $0.57 per diluted common share and Distributable
Earnings(1) of $80.7 million or $1.55 per diluted common share for
full year 2022.
“Our strong fourth quarter concludes a year in which we
delivered attractive earnings in a volatile market environment,”
said Bryan Donohoe, Chief Executive Officer of Ares Commercial Real
Estate Corporation. “During 2022, our nearly 100% floating rate
asset base and the partial hedging of our liabilities enabled us to
drive distributable earnings well in excess of our dividends paid
for the year. Looking forward, while there are headwinds in the
overall commercial real estate market, we are confident that our
credit capabilities, the resources of Ares Management and our
strong financial position will be distinct advantages for our
Company.”
“We continued to build liquidity and reduce leverage levels
during 2022,” said Tae-Sik Yoon, Chief Financial Officer of Ares
Commercial Real Estate Corporation. “Our strong liquidity position
was further enhanced by the $319 million of repayments we received
in the fourth quarter. Heading into 2023, we believe our moderate
debt to equity, strong liquidity position and focus on non-mark to
market financing puts us in position to maximize credit outcomes
and invest opportunistically in an evolving market.”
_________________________________ (1) Distributable Earnings is
a non-GAAP financial measure. Refer to Schedule I for the
definition and reconciliation of Distributable Earnings.
2023 ANNUAL STOCKHOLDERS MEETING
The Board of Directors set March 27, 2023 as the record date for
the Company’s 2023 Annual Meeting of Stockholders. The 2023 Annual
Meeting of Stockholders will be held on May 25, 2023.
COMMON STOCK DIVIDEND
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 were paid on January 18, 2023 to common stockholders
of record as of December 30, 2022.
On February 15, 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 first
quarter of 2023. The first quarter 2023 dividend and supplemental
cash dividend will be payable on April 18, 2023 to common
stockholders of record as of March 31, 2023.
ADDITIONAL INFORMATION
The Company issued a presentation of its fourth quarter and full
year 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 “Fourth Quarter and Full
Year 2022 Earnings Presentation.” The Company also filed its Annual
Report on Form 10-K for the year ended December 31, 2022 with the
U.S. Securities and Exchange Commission on February 15, 2023.
CONFERENCE CALL AND WEBCAST INFORMATION
On Wednesday, February 15, 2023, the Company invites all
interested persons to attend its webcast/conference call at 12:00
p.m. (Eastern Time) to discuss its fourth quarter and full year
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 057130. 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 March 15,
2023 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 934675. An
archived replay will also be available through March 15, 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 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 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, 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 December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
141,278
$
50,615
Loans held for investment ($887,662 and
$974,424 related to consolidated VIEs, respectively)
2,264,008
2,414,383
Current expected credit loss reserve
(65,969
)
(23,939
)
Loans held for investment, net of current
expected credit loss reserve
2,198,039
2,390,444
Real estate owned held for sale, net
—
36,602
Investment in available-for-sale debt
securities, at fair value
27,936
—
Other assets ($2,980 and $2,592 of
interest receivable related to consolidated VIEs, respectively;
$129,495 and $128,589 of other receivables related to consolidated
VIEs, respectively)
155,749
154,177
Total assets
$
2,523,002
$
2,631,838
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
705,231
$
840,047
Notes payable
104,460
50,358
Secured term loan
149,200
149,016
Collateralized loan obligation
securitization debt (consolidated VIEs)
777,675
861,188
Secured borrowings
—
22,589
Due to affiliate
5,580
4,156
Dividends payable
19,347
16,674
Other liabilities ($1,913 and $570 of
interest payable related to consolidated VIEs, respectively)
13,969
9,182
Total liabilities
1,775,462
1,953,210
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at December 31, 2022 and 2021 and
54,443,983 and 47,144,058 shares issued and outstanding at December
31, 2022 and 2021, respectively
537
465
Additional paid-in capital
812,788
703,950
Accumulated other comprehensive income
7,541
2,844
Accumulated earnings (deficit)
(73,326
)
(28,631
)
Total stockholders' equity
747,540
678,628
Total liabilities and stockholders'
equity
$
2,523,002
$
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 December 31, 2022
For the year ended December
31, 2022
Revenue:
Interest income
$
52,552
$
170,171
Interest expense
(22,144
)
(65,994
)
Net interest margin
30,408
104,177
Revenue from real estate owned
—
2,672
Total revenue
30,408
106,849
Expenses:
Management and incentive fees to
affiliate
4,290
14,898
Professional fees
630
3,350
General and administrative expenses
1,777
6,394
General and administrative expenses
reimbursed to affiliate
1,136
3,777
Expenses from real estate owned
—
4,309
Total expenses
7,833
32,728
Provision for current expected credit
losses
19,402
46,061
Gain on sale of real estate owned
—
2,197
Income before income taxes
3,173
30,257
Income tax expense, including excise
tax
264
472
Net income attributable to common
stockholders
$
2,909
$
29,785
Earnings per common share:
Basic earnings per common share
$
0.05
$
0.58
Diluted earnings per common share
$
0.05
$
0.57
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
54,427,041
51,679,744
Diluted weighted average shares of common
stock outstanding
54,894,888
52,126,256
Dividends declared per share of common
stock(1)
$
0.35
$
1.40
(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 year ended December 31, 2022 ($ in thousands):
For the three months ended
December 31, 2022
For the year ended December
31, 2022
Net income attributable to common
stockholders
$
2,909
$
29,785
Stock-based compensation
738
2,876
Incentive fees to affiliate
1,264
3,442
Depreciation of real estate owned
—
(2,385
)
Provision for current expected credit
losses
19,402
46,061
Realized gain on termination of interest
rate cap derivative(1)
(422
)
920
Distributable Earnings
$
23,891
$
80,699
Net income attributable to common
stockholders
$
0.05
$
0.58
Stock-based compensation
0.01
0.06
Incentive fees to affiliate
0.02
0.07
Depreciation of real estate owned
—
(0.05
)
Provision for current expected credit
losses
0.36
0.89
Realized gain on termination of interest
rate cap derivative(1)
(0.01
)
0.02
Basic Distributable Earnings per common
share
$
0.44
$
1.56
Net income attributable to common
stockholders
$
0.05
$
0.57
Stock-based compensation
0.01
0.06
Incentive fees to affiliate
0.02
0.07
Depreciation of real estate owned
—
(0.05
)
Provision for current expected credit
losses
0.35
0.88
Realized gain on termination of interest
rate cap derivative(1)
(0.01
)
0.02
Diluted Distributable Earnings per
common share
$
0.44
$
1.55
(1)
For the three months and year ended December 31, 2022,
Distributable Earnings includes a $0.4 million and $1.0 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/20230214005913/en/
INVESTOR RELATIONS Ares Commercial Real Estate
Corporation Carl Drake or John Stilmar (888) 818-5298
iracre@aresmgmt.com
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