Third quarter GAAP net income of $14.9
million or $0.44 per diluted common share and Core Earnings(1) of
$10.5 million or $0.31 per diluted 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 $14.9 million
or $0.44 per diluted common share and Core Earnings(1) of $10.5
million or $0.31 per diluted common share for the third quarter of
2020.
“This morning, we announced another quarter of consistent
earnings with continued stable credit performance and liquidity
position,” said Bryan Donohoe, Chief Executive Officer of ACRE.
“Since the inception of ACRE, our focus on defensively positioning
both our portfolio and our funding sources has enabled us to
successfully navigate market downturns like the one we have
experienced this year. We are now seeing an improvement in market
activity and the quality of investment opportunities.”
“Our continued strategic focus on defensive, senior loans in
growing, non-gateway markets continues to produce attractive
results as 100% of our loans made their contractual debt service
payments for the third quarter and October payment dates,” said
Tae-Sik Yoon, Chief Financial Officer of ACRE.
_________________________________ (1) Core Earnings is a
non-GAAP financial measure. Refer to Schedule I for further
details.
COMMON STOCK DIVIDEND
On September 16, 2020, the Company declared a cash dividend of
$0.33 per common share for the third quarter of 2020. The third
quarter 2020 dividend was paid on October 15, 2020 to common
stockholders of record as of September 30, 2020.
ADDITIONAL INFORMATION
The Company issued a presentation of its third quarter 2020
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 2020 Earnings
Presentation.” The Company also filed its Quarterly Report on Form
10-Q for the quarter ended September 30, 2020 with the U.S.
Securities and Exchange Commission on October 29, 2020.
CONFERENCE CALL AND WEBCAST INFORMATION
On Thursday, October 29, 2020, the Company invites all
interested persons to attend its webcast/conference call at 12:00
p.m. (Eastern Time) to discuss its third quarter 2020 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 http://www.arescre.com. Please visit the website to test
your connection before the webcast. Domestic callers can access the
conference call by dialing +1 (888) 317-6003. International callers
can access the conference call by dialing +1 (412) 317-6061. All
callers will need to enter the Participant Elite Entry Number
2414923 followed by the # sign and reference “Ares Commercial Real
Estate Corporation” once connected with the operator. 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
5, 2020 at 5:00 p.m. (Eastern Time) to domestic callers by dialing
+1 (877) 344-7529 and to international callers by dialing +1 (412)
317-0088. For all replays, please reference conference number
10148188. An archived replay will also be available through
November 5, 2020 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 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, the level of lending and
borrowing spreads and interest rates, commercial real estate loan
volumes, the impact of the COVID-19 pandemic and the pandemic's
impact on the U.S. and global economy, 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 20, 2020, and the risk factors described in Part II -
Other Information, Item 1A. Risk Factors in the Company's Quarterly
Report on Form 10-Q filed with the SEC on October 29, 2020. 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, 2020
December 31, 2019
(unaudited)
ASSETS
Cash and cash equivalents
$
81,295
$
5,256
Restricted cash
—
379
Loans held for investment ($495,167 and
$515,896 related to consolidated VIEs, respectively)
1,778,199
1,682,498
Current expected credit loss reserve
(25,454
)
—
Loans held for investment, net of current
expected credit loss reserve
1,752,745
1,682,498
Real estate owned, net
37,476
37,901
Other assets ($896 and $1,309 of interest
receivable related to consolidated VIEs, respectively; $61,833 and
$41,104 of other receivables related to consolidated VIEs,
respectively)
77,542
58,100
Total assets
$
1,949,058
$
1,784,134
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
791,136
$
728,589
Notes payable
57,848
54,708
Secured term loan
109,803
109,149
Collateralized loan obligation
securitization debt (consolidated VIE)
443,860
443,177
Secured borrowings
54,617
—
Due to affiliate
2,670
2,761
Dividends payable
11,072
9,546
Other liabilities ($368 and $718 of
interest payable related to consolidated VIEs, respectively)
8,703
9,865
Total liabilities
1,479,709
1,357,795
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at September 30, 2020 and December
31, 2019 and 33,441,937 and 28,865,610 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
329
283
Additional paid-in capital
497,421
423,619
Accumulated earnings (deficit)
(28,401
)
2,437
Total stockholders' equity
469,349
426,339
Total liabilities and stockholders'
equity
$
1,949,058
$
1,784,134
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,
2020
2019
2020
2019
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Interest income
$
30,626
$
28,269
$
91,908
$
86,248
Interest expense
(11,875
)
(15,124
)
(40,450
)
(47,539
)
Net interest margin
18,751
13,145
51,458
38,709
Revenue from real estate owned
3,623
6,702
10,032
16,970
Total revenue
22,374
19,847
61,490
55,679
Expenses:
Management and incentive fees to
affiliate
1,847
1,578
5,771
5,405
Professional fees
639
542
2,202
1,553
General and administrative expenses
969
1,005
2,797
3,153
General and administrative expenses
reimbursed to affiliate
802
831
2,890
2,261
Expenses from real estate owned
4,046
6,838
13,976
15,644
Total expenses
8,303
10,794
27,636
28,016
Provision for current expected credit
losses
(1,048
)
—
22,063
—
Realized losses on loans sold
4,008
—
4,008
—
Change in unrealized losses on loans held
for sale
(3,998
)
—
—
—
Income before income taxes
15,109
9,053
7,783
27,663
Income tax expense, including excise
tax
181
19
350
332
Net income attributable to common
stockholders
$
14,928
$
9,034
$
7,433
$
27,331
Earnings per common share:
Basic earnings per common share
$
0.45
$
0.32
$
0.23
$
0.96
Diluted earnings per common share
$
0.44
$
0.31
$
0.22
$
0.95
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
33,337,445
28,634,514
32,852,553
28,598,807
Diluted weighted average shares of common
stock outstanding
33,550,444
28,867,603
33,072,085
28,837,766
Dividends declared per share of common
stock (1)
$
0.33
$
0.33
$
0.99
$
0.99
(1) There is no assurance dividends will continue at these
levels or at all.
SCHEDULE I
Reconciliation of Net Income to Non-GAAP
Core Earnings
The Company believes the disclosure of Core Earnings provides
useful information to investors regarding the calculation of
incentive fees the Company pays to its manager, Ares Commercial
Real Estate Management LLC, and the Company’s financial
performance. Core Earnings is an adjusted non-GAAP 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. 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. Core Earnings is a non-GAAP measure and is defined as
net income (loss) computed in accordance with GAAP, excluding
non-cash equity compensation expense, the incentive fee,
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 external manager
and the Company’s independent directors and after approval by a
majority of the Company’s independent directors.
Reconciliation of net income attributable to common
stockholders, the most directly comparable GAAP financial measure,
to Core Earnings is set forth in the table below for the three and
twelve months ended September 30, 2020 ($ in thousands):
For the three months ended
September 30, 2020
For the twelve months ended
September 30, 2020
Net income attributable to common
stockholders
$
14,928
$
17,093
Stock-based compensation
367
1,438
Incentive fees to affiliate
—
680
Depreciation of real estate owned
224
887
Provision for current expected credit
losses
(1,048
)
22,063
Change in unrealized losses on loans held
for sale
(3,998
)
—
Core Earnings
$
10,473
$
42,161
Net income attributable to common
stockholders
$
0.45
$
0.54
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
—
0.02
Depreciation of real estate owned
0.01
0.03
Provision for current expected credit
losses
(0.03
)
0.69
Change in unrealized losses on loans held
for sale
(0.12
)
—
Basic Core Earnings per common
share
$
0.31
$
1.33
Net income attributable to common
stockholders
$
0.44
$
0.53
Stock-based compensation
0.01
0.04
Incentive fees to affiliate
—
0.02
Depreciation of real estate owned
0.01
0.03
Provision for current expected credit
losses
(0.03
)
0.69
Change in unrealized losses on loans held
for sale
(0.12
)
—
Diluted Core Earnings per common
share
$
0.31
$
1.32
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029005399/en/
INVESTOR RELATIONS CONTACTS Ares Commercial Real Estate
Corporation Carl Drake or Veronica Mendiola Mayer (888) 818-5298
iracre@aresmgmt.com
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