Second quarter GAAP net income of $10.0
million or $0.20 per diluted common share and Distributable
Earnings(1) of $19.2 million or $0.38 per diluted common
share
-Subsequent to end of second
quarter-
Declared third 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 $10.0 million
or $0.20 per diluted common share and Distributable Earnings(1) of
$19.2 million or $0.38 per diluted common share for the second
quarter of 2022.
“We generated another strong quarter of earnings that were
driven by incremental investment activity and positive sensitivity
of our floating rate loans to rising interest rates,” said Bryan
Donohoe, Chief Executive Officer of Ares Commercial Real Estate
Corporation. “We continue to expect to fully cover our regular and
supplemental dividends from our Distributable Earnings for the full
year.”
“With a 2.4x debt-to-equity leverage ratio as of the second
quarter of 2022 combined with a strong liquidity position, we
believe we are well positioned to navigate the current capital
market environment,” said Tae-Sik Yoon, Chief Financial Officer of
Ares Commercial Real Estate Corporation. “Our net interest income
should continue to benefit from rising interest rates as 98% of our
loans are floating rate while 36% of our liabilities are fixed rate
or hedged.”
_________________________________ (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 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 were paid on July 15, 2022 to common stockholders of
record as of June 30, 2022.
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 will be payable on October 17, 2022 to common
stockholders of record as of September 30, 2022.
ADDITIONAL INFORMATION
The Company issued a presentation of its second 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 “Second Quarter 2022 Earnings
Presentation.” The Company also filed its Quarterly Report on Form
10-Q for the quarter ended June 30, 2022 with the U.S. Securities
and Exchange Commission on July 29, 2022.
CONFERENCE CALL AND WEBCAST INFORMATION
On Friday, July 29, 2022, the Company invites all interested
persons to attend its webcast/conference call at 12:00 p.m.
(Eastern Time) to discuss its second 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 326916. 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 August 26,
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 984066. An
archived replay will also be available through August 26, 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, 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 Quarterly Report on Form 10-Q, filed with the SEC on July
29, 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
June 30, 2022
December 31, 2021
(unaudited)
ASSETS
Cash and cash equivalents
$
25,625
$
50,615
Loans held for investment ($1,026,784 and
$974,424 related to consolidated VIEs, respectively)
2,605,893
2,414,383
Current expected credit loss reserve
(27,613
)
(23,939
)
Loans held for investment, net of current
expected credit loss reserve
2,578,280
2,390,444
Real estate owned held for sale, net
—
36,602
Other assets ($2,428 and $2,592 of
interest receivable related to consolidated VIEs, respectively;
$65,229 and $128,589 of other receivables related to consolidated
VIEs, respectively)
92,429
154,177
Total assets
$
2,696,334
$
2,631,838
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
853,059
$
840,047
Notes payable
—
50,358
Secured term loan
149,107
149,016
Collateralized loan obligation
securitization debt (consolidated VIEs)
851,337
861,188
Secured borrowings
22,635
22,589
Due to affiliate
4,562
4,156
Dividends payable
19,198
16,674
Other liabilities ($875 and $570 of
interest payable related to consolidated VIEs, respectively)
10,436
9,182
Total liabilities
1,910,334
1,953,210
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at June 30, 2022 and December 31,
2021 and 54,438,363 and 47,144,058 shares issued and outstanding at
June 30, 2022 and December 31, 2021, respectively
537
465
Additional paid-in capital
811,411
703,950
Accumulated other comprehensive income
12,389
2,844
Accumulated earnings (deficit)
(38,337
)
(28,631
)
Total stockholders' equity
786,000
678,628
Total liabilities and stockholders'
equity
$
2,696,334
$
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
June 30,
For the six months ended June
30,
2022
2021
2022
2021
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Interest income
$
38,621
$
30,859
$
71,986
$
61,564
Interest expense
(13,475
)
(11,092
)
(25,488
)
(23,231
)
Net interest margin
25,146
19,767
46,498
38,333
Revenue from real estate owned
—
3,764
2,672
6,421
Total revenue
25,146
23,531
49,170
44,754
Expenses:
Management and incentive fees to
affiliate
3,766
2,951
6,740
5,518
Professional fees
1,100
615
1,878
1,400
General and administrative expenses
1,587
1,195
3,200
2,351
General and administrative expenses
reimbursed to affiliate
796
788
1,631
1,540
Expenses from real estate owned
—
3,842
4,309
7,120
Total expenses
7,249
9,391
17,758
17,929
Provision for current expected credit
losses
7,768
(3,883
)
7,174
(7,123
)
Gain on sale of real estate owned
—
—
2,197
—
Income before income taxes
10,129
18,023
26,435
33,948
Income tax expense, including excise
tax
98
408
204
593
Net income attributable to common
stockholders
$
10,031
$
17,615
$
26,231
$
33,355
Earnings per common share:
Basic earnings per common share
$
0.20
$
0.43
$
0.54
$
0.88
Diluted earnings per common share
$
0.20
$
0.43
$
0.53
$
0.88
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
50,562,559
41,009,175
48,892,754
37,731,317
Diluted weighted average shares of common
stock outstanding
50,999,505
41,294,597
49,336,267
38,025,933
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) 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 June 30, 2022 ($ in
thousands):
For the three months ended
June 30, 2022
For the twelve months ended
June 30, 2022
Net income attributable to common
stockholders
$
10,031
$
53,336
Stock-based compensation
699
2,386
Incentive fees to affiliate
965
2,724
Depreciation of real estate owned
—
(2,009
)
Provision for current expected credit
losses
7,768
14,307
Realized gain on termination of interest
rate cap derivative(1)
(264
)
1,697
Distributable Earnings
$
19,199
$
72,441
Net income attributable to common
stockholders
$
0.20
$
1.11
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
0.15
0.30
Realized gain on termination of interest
rate cap derivative(1)
(0.01
)
0.04
Basic Distributable Earnings per common
share
$
0.38
$
1.51
Net income attributable to common
stockholders
$
0.20
$
1.10
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
0.15
0.30
Realized gain on termination of interest
rate cap derivative(1)
(0.01
)
0.04
Diluted Distributable Earnings per
common share
$
0.38
$
1.50
(1)
For the three months ended June 30, 2022, Distributable Earnings
includes a $0.3 million adjustment to reverse the impact of the
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/20220728006094/en/
INVESTOR RELATIONS CONTACTS Ares Commercial Real Estate
Corporation Carl Drake or John Stilmar (888) 818-5298
iracre@aresmgmt.com
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