First quarter GAAP net income of $16.2
million or $0.34 per diluted common share and Distributable
Earnings(1) of $16.3 million or $0.34 per diluted common
share
Closed $263 million of new loan
commitments
- Subsequent to end of first quarter
-
Closed $123 million of new loan
commitments
Declared second 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 $16.2 million
or $0.34 per diluted common share and Distributable Earnings(1) of
$16.3 million or $0.34 per diluted common share for the first
quarter of 2022.
“With respect to investment activity, we are off to a strong
start in 2022 with $263 million of new loans closed in the first
quarter and $123 million closed thus far in the second quarter with
more than $200 million of additional loans in the closing process,”
said Bryan Donohoe, Chief Executive Officer of Ares Commercial Real
Estate Corporation. “We expect that the accelerated pace of
investments coupled with increased credit spreads and higher
potential base interest rates will result in a pickup in our
Distributable Earnings for the second quarter. In addition, ACRE
continues to benefit from the significant scale and global reach of
Ares Management’s real estate platform which has more than doubled
in size within the last year.”
“Our credit quality remains stable and we continue to experience
positive credit migration across the portfolio,” said Tae-Sik Yoon,
Chief Financial Officer of Ares Commercial Real Estate Corporation.
“Looking forward, our earnings are positioned to continue to
benefit from potential increases in interest rates given our
floating rate loan portfolio combined with the interest rate hedges
on our liabilities.”
_________________________________
(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 February 15, 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 first
quarter of 2022. The first quarter 2022 dividend and supplemental
cash dividend were paid on April 14, 2022 to common stockholders of
record as of March 31, 2022.
On May 3, 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 second quarter of
2022. The second quarter 2022 dividend and supplemental cash
dividend will be payable on July 15, 2022 to common stockholders of
record as of June 30, 2022.
ADDITIONAL INFORMATION
The Company issued a presentation of its first 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 “First Quarter 2022
Earnings Presentation.” The Company also filed its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2022 with the U.S.
Securities and Exchange Commission on May 3, 2022.
CONFERENCE CALL AND WEBCAST INFORMATION
On Tuesday, May 3, 2022, the Company invites all interested
persons to attend its webcast/conference call at 12:00 p.m.
(Eastern Time) to discuss its first 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 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
4178416 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 June 3,
2022 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
7027178. An archived replay will also be available through June 3,
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 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, 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 Quarterly Report on Form
10-Q, filed with the SEC on May 3, 2022. 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
March 31, 2022
December 31, 2021
(unaudited)
ASSETS
Cash and cash equivalents
$
13,759
$
50,615
Loans held for investment ($1,028,398 and
$974,424 related to consolidated VIEs, respectively)
2,421,772
2,414,383
Current expected credit loss reserve
(20,452
)
(23,939
)
Loans held for investment, net of current
expected credit loss reserve
2,401,320
2,390,444
Real estate owned held for sale, net
—
36,602
Other assets ($2,267 and $2,592 of
interest receivable related to consolidated VIEs, respectively;
$74,615 and $128,589 of other receivables related to consolidated
VIEs, respectively)
100,726
154,177
Total assets
$
2,515,805
$
2,631,838
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
740,022
$
840,047
Notes payable
22,631
50,358
Secured term loan
149,061
149,016
Collateralized loan obligation
securitization debt (consolidated VIEs)
861,788
861,188
Secured borrowings
22,612
22,589
Due to affiliate
3,823
4,156
Dividends payable
16,740
16,674
Other liabilities ($689 and $570 of
interest payable related to consolidated VIEs, respectively)
9,794
9,182
Total liabilities
1,826,471
1,953,210
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at March 31, 2022 and December 31,
2021 and 47,412,436 and 47,144,058 shares issued and outstanding at
March 31, 2022 and December 31, 2021, respectively
467
465
Additional paid-in capital
707,579
703,950
Accumulated other comprehensive income
10,458
2,844
Accumulated earnings (deficit)
(29,170
)
(28,631
)
Total stockholders' equity
689,334
678,628
Total liabilities and stockholders'
equity
$
2,515,805
$
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
March 31,
2022
2021
(unaudited)
(unaudited)
Revenue:
Interest income
$
33,364
$
30,704
Interest expense
(12,013
)
(12,139
)
Net interest margin
21,351
18,565
Revenue from real estate owned
2,672
2,658
Total revenue
24,023
21,223
Expenses:
Management and incentive fees to
affiliate
2,974
2,567
Professional fees
778
785
General and administrative expenses
1,613
1,157
General and administrative expenses
reimbursed to affiliate
834
752
Expenses from real estate owned
4,309
3,277
Total expenses
10,508
8,538
Provision for current expected credit
losses
(594
)
(3,240
)
Gain on sale of real estate owned
2,197
—
Income before income taxes
16,306
15,925
Income tax expense, including excise
tax
105
185
Net income attributable to common
stockholders
$
16,201
$
15,740
Earnings per common share:
Basic earnings per common share
$
0.34
$
0.46
Diluted earnings per common share
$
0.34
$
0.45
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
47,204,397
34,417,040
Diluted weighted average shares of common
stock outstanding
47,654,549
34,720,950
Dividends declared per share of common
stock(1)
$
0.35
$
0.35
(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 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 March 31, 2022 ($ in
thousands):
For the three months ended
March 31, 2022
For the twelve months ended
March 31, 2022
Net income attributable to common
stockholders
$
16,201
$
60,921
Stock-based compensation
766
2,185
Incentive fees to affiliate
358
2,452
Depreciation of real estate owned(1)
(2,385
)
(1,784
)
Provision for current expected credit
losses
(594
)
2,656
Realized gain on termination of interest
rate cap derivative(2)
1,960
1,960
Distributable Earnings
$
16,306
$
68,390
Net income attributable to common
stockholders
$
0.34
$
1.34
Stock-based compensation
0.02
0.05
Incentive fees to affiliate
0.01
0.05
Depreciation of real estate owned(1)
(0.05
)
(0.04
)
Provision for current expected credit
losses
(0.01
)
0.06
Realized gain on termination of interest
rate cap derivative(2)
0.04
0.04
Basic Distributable Earnings per common
share
$
0.35
$
1.50
Net income attributable to common
stockholders
$
0.34
$
1.33
Stock-based compensation
0.02
0.05
Incentive fees to affiliate
—
0.05
Depreciation of real estate owned(1)
(0.05
)
(0.04
)
Provision for current expected credit
losses
(0.01
)
0.06
Realized gain on termination of interest
rate cap derivative(2)
0.04
0.04
Diluted Distributable Earnings per
common share
$
0.34
$
1.49
(1)
For the three months ended March 31, 2022, Distributable
Earnings include a $2.4 million adjustment to reverse the impact of
accumulated depreciation following the sale of the hotel property
that was recognized as real estate owned. For periods prior to the
sale, depreciation of real estate owned was an additive adjustment
to Distributable Earnings.
(2)
For the three months ended March 31, 2022, Distributable
Earnings include a $2.0 million adjustment to include the realized
gain from the termination of the interest rate cap derivative.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220502005972/en/
INVESTOR RELATIONS Ares Commercial Real Estate
Corporation Carl Drake or Veronica Mendiola Mayer (888) 818-5298
iracre@aresmgmt.com
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