Second quarter GAAP net income of $17.6 million
or $0.43 per diluted common share and Distributable
Earnings(1) of $15.1 million or $0.37 per diluted common
share
Closed $311 million of new loan commitments
- Subsequent to end of second quarter -
Declared third quarter 2021 dividend of $0.33
per diluted common share and a supplemental dividend of $0.02 per
diluted common share
Closed $254 million of new loan commitments
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 $17.6 million
or $0.43 per diluted common share and Distributable Earnings(1) of
$15.1 million or $0.37 per diluted common share for the second
quarter of 2021.
“We reported another strong quarter with Distributable Earnings
per share up 16% versus the same period a year ago,” said Bryan
Donohoe, Chief Executive Officer of Ares Commercial Real Estate
Corporation. “With our broad market coverage and increased capital
base, we are in a strong position to invest given our growing
pipeline of attractive opportunities. During the second quarter, we
closed $311 million of commitments and, subsequent to the end of
the quarter, another $254 million of commitments in July.”
“Our senior-oriented portfolio continues to perform well with
recovering real estate market fundamentals leading to a
corresponding lift in our weighted average portfolio risk rating,”
said Tae-Sik Yoon, Chief Financial Officer of Ares Commercial Real
Estate Corporation. “In addition, as we continue to see further
reductions in our CECL reserve due to improvements in our overall
loan performance and market environment outlook, combined with the
accretive impact of our recent common share offering, our book
value per share has now increased for the fourth consecutive
quarter.”
_________________________________
(1) Beginning in the fourth quarter of 2020, the non-GAAP
financial measure of Core Earnings was renamed to Distributable
Earnings. Refer to Schedule I for the definition and reconciliation
of Distributable Earnings.
COMMON STOCK DIVIDEND
On May 4, 2021, 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 2021. The second quarter
2021 dividend and supplemental cash dividend were paid on July 15,
2021 to common stockholders of record as of June 30, 2021. On July
30, 2021, 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 2021. The third quarter 2021
dividend and supplemental cash dividend will be payable on October
15, 2021 to common stockholders of record as of September 30,
2021.
ADDITIONAL INFORMATION
The Company issued a presentation of its second quarter 2021
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 2021 Earnings Presentation.” The Company
also filed its Quarterly Report on Form 10-Q for the quarter ended
June 30, 2021 with the U.S. Securities and Exchange Commission on
July 30, 2021.
CONFERENCE CALL AND WEBCAST INFORMATION
On Friday, July 30, 2021, the Company invites all interested
persons to attend its webcast/conference call at 12:00 p.m.
(Eastern Time) to discuss its second quarter 2021 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
9261682 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 August 13,
2021 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
10156566. An archived replay will also be available through August
13, 2021 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 18, 2021 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 30, 2021. 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, 2021
December 31, 2020
(unaudited)
ASSETS
Cash and cash equivalents
$
75,671
$
74,776
Loans held for investment ($1,118,269 and
$550,590 related to consolidated VIEs, respectively)
2,032,408
1,815,219
Current expected credit loss reserve
(16,893)
(23,604)
Loans held for investment, net of current
expected credit loss reserve
2,015,515
1,791,615
Real estate owned, net
36,860
37,283
Other assets ($2,467 and $1,079 of
interest receivable related to consolidated VIEs, respectively;
$105,990 and $6,410 of other receivables related to consolidated
VIEs, respectively)
128,789
25,823
Total assets
$
2,256,835
$
1,929,497
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
404,205
$
755,552
Notes payable
43,976
61,837
Secured term loan
60,000
110,000
Collateralized loan obligation
securitization debt (consolidated VIEs)
979,777
443,871
Secured borrowings
59,902
59,790
Due to affiliate
3,731
3,150
Dividends payable
16,528
11,124
Other liabilities ($599 and $391 of
interest payable related to consolidated VIEs, respectively)
9,679
11,158
Total liabilities
1,577,798
1,456,482
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at June 30, 2021 and December 31,
2020 and 47,001,121 and 33,442,332 shares issued and outstanding at
June 30, 2021 and December 31, 2020, respectively
464
329
Additional paid-in capital
700,994
497,803
Accumulated other comprehensive income
117
—
Accumulated earnings (deficit)
(22,538)
(25,117)
Total stockholders' equity
679,037
473,015
Total liabilities and stockholders'
equity
$
2,256,835
$
1,929,497
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,
2021
2020
2021
2020
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Interest income
$
30,859
$
29,835
$
61,564
$
61,283
Interest expense
(11,092)
(13,042)
(23,231)
(28,576)
Net interest margin
19,767
16,793
38,333
32,707
Revenue from real estate owned
3,764
1,189
6,421
6,409
Total revenue
23,531
17,982
44,754
39,116
Expenses:
Management and incentive fees to
affiliate
2,951
2,152
5,518
3,924
Professional fees
615
660
1,400
1,563
General and administrative expenses
1,195
959
2,351
1,827
General and administrative expenses
reimbursed to affiliate
788
1,038
1,540
2,089
Expenses from real estate owned
3,842
3,254
7,120
9,930
Total expenses
9,391
8,063
17,929
19,333
Provision for current expected credit
losses
(3,883)
(4,007)
(7,123)
23,111
Unrealized losses on loans held for
sale
—
3,998
—
3,998
Income (loss) before income
taxes
18,023
9,928
33,948
(7,326)
Income tax expense, including excise
tax
408
160
593
169
Net income (loss) attributable to
common stockholders
$
17,615
$
9,768
$
33,355
$
(7,495)
Earnings (loss) per common
share:
Basic earnings (loss) per common share
$
0.43
$
0.29
$
0.88
$
(0.23)
Diluted earnings (loss) per common
share
$
0.43
$
0.29
$
0.88
$
(0.23)
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
41,009,175
33,316,933
37,731,317
32,607,442
Diluted weighted average shares of common
stock outstanding
41,294,597
33,539,580
38,025,933
32,607,442
Dividends declared per share of common
stock(1)
$
0.35
$
0.33
$
0.70
$
0.66
(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
Beginning in the fourth quarter of 2020, the non-GAAP financial
measure of Core Earnings was renamed to Distributable Earnings to
more appropriately reflect the principal purpose of the measure.
Distributable Earnings 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 and twelve months ended June 30, 2021 ($ in thousands):
For the three months ended
June 30, 2021
For the twelve months ended
June 30, 2021
Net income attributable to common
stockholders
$
17,615
$
62,689
Stock-based compensation
497
1,767
Incentive fees to affiliate
693
1,884
Depreciation of real estate owned
225
897
Provision for current expected credit
losses
(3,883)
(10,048)
Change in unrealized losses on loans held
for sale
—
(3,998)
Distributable Earnings
$
15,147
$
53,191
Net income attributable to common
stockholders
$
0.43
$
1.76
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
0.02
0.05
Depreciation of real estate owned
0.01
0.03
Provision for current expected credit
losses
(0.09)
(0.28)
Change in unrealized losses on loans held
for sale
—
(0.11)
Basic Distributable Earnings per common
share
$
0.37
$
1.50
Net income attributable to common
stockholders
$
0.43
$
1.75
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
0.02
0.05
Depreciation of real estate owned
0.01
0.03
Provision for current expected credit
losses
(0.09)
(0.28)
Change in unrealized losses on loans held
for sale
—
(0.11)
Diluted Distributable Earnings per
common share
$
0.37
$
1.49
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210730005142/en/
INVESTOR RELATIONS
Ares Commercial Real Estate Corporation Carl Drake or John
Stilmar (888) 818-5298 iracre@aresmgmt.com
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