Second quarter GAAP net income of $9.8
million or $0.29 per diluted common share and Core Earnings(1) of
$10.7 million or $0.32 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 $9.8 million
or $0.29 per diluted common share and Core Earnings(1) of $10.7
million or $0.32 per diluted common share for the second quarter of
2020.
“Despite overall volatile market conditions, our Core Earnings
remained consistent and our credit quality showed further
improvement through active asset management during the second
quarter,” said Bryan Donohoe, Chief Executive Officer of ACRE. “Our
portfolio, which is focused on multifamily, office and industrial
properties, remains well positioned for the current low interest
rate environment with 95% of our portfolio in senior loans and 96%
with LIBOR floors or are fixed rate.”
“Our portfolio continues to perform well with 100% of our loans
held for investment making their contractual debt service payments
through the July 2020 payment date,” said Tae-Sik Yoon, Chief
Financial Officer of ACRE. “We also further enhanced our liquidity
by recently selling or partly monetizing five loans totaling $238
million in outstanding principal balance.”
_________________________________ (1) Core Earnings is a
non-GAAP financial measure. Refer to Schedule I for further
details.
COMMON STOCK DIVIDEND
On June 19, 2020, the Company declared a cash dividend of $0.33
per common share for the second quarter of 2020. The second quarter
2020 dividend was paid on July 15, 2020 to common stockholders of
record as of June 30, 2020.
ADDITIONAL INFORMATION
The Company issued a presentation of its second 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 “Second Quarter 2020 Earnings
Presentation.” The Company also filed its Quarterly Report on Form
10-Q for the quarter ended June 30, 2020 with the U.S. Securities
and Exchange Commission on August 6, 2020.
CONFERENCE CALL AND WEBCAST INFORMATION
On Thursday, August 6, 2020, the Company invites all interested
persons to attend its webcast/conference call at 12:00 p.m.
(Eastern Time) to discuss its second 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
2260614 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 20,
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
10146422. An archived replay will also be available through August
20, 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 guaranteeing 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 August 6, 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
June 30, 2020
December 31, 2019
(unaudited)
ASSETS
Cash and cash equivalents
$
72,987
$
5,256
Restricted cash
—
379
Loans held for investment ($525,817 and
$515,896 related to consolidated VIEs, respectively)
1,794,049
1,682,498
Current expected credit loss reserve
(26,063
)
—
Loans held for investment, net of current
expected credit loss reserve
1,767,986
1,682,498
Loans held for sale, at fair value
96,404
—
Real estate owned, net
37,693
37,901
Other assets ($996 and $1,309 of interest
receivable related to consolidated VIEs, respectively; $31,183 and
$41,104 of other receivables related to consolidated VIEs,
respectively)
46,163
58,100
Total assets
$
2,021,233
$
1,784,134
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Secured funding agreements
$
876,842
$
728,589
Notes payable
54,819
54,708
Secured term loan
109,588
109,149
Collateralized loan obligation
securitization debt (consolidated VIE)
443,467
443,177
Secured borrowings
47,533
—
Due to affiliate
3,217
2,761
Dividends payable
11,072
9,546
Other liabilities ($371 and $718 of
interest payable related to consolidated VIEs, respectively)
9,569
9,865
Total liabilities
1,556,107
1,357,795
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share,
450,000,000 shares authorized at June 30, 2020 and December 31,
2019 and 33,441,937 and 28,865,610 shares issued and outstanding at
June 30, 2020 and December 31, 2019, respectively
329
283
Additional paid-in capital
497,054
423,619
Accumulated earnings (deficit)
(32,257
)
2,437
Total stockholders' equity
465,126
426,339
Total liabilities and stockholders'
equity
$
2,021,233
$
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
June 30,
For the six months ended June
30,
2020
2019
2020
2019
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Interest income from loans held for
investment
$
29,835
$
29,993
$
61,283
$
57,979
Interest expense
(13,042
)
(16,675
)
(28,576
)
(32,415
)
Net interest margin
16,793
13,318
32,707
25,564
Revenue from real estate owned
1,189
8,357
6,409
10,267
Total revenue
17,982
21,675
39,116
35,831
Expenses:
Management and incentive fees to
affiliate
2,152
2,252
3,924
3,826
Professional fees
660
532
1,563
1,011
General and administrative expenses
959
1,029
1,827
2,148
General and administrative expenses
reimbursed to affiliate
1,038
771
2,089
1,430
Expenses from real estate owned
3,254
7,118
9,930
8,806
Total expenses
8,063
11,702
19,333
17,221
Provision for current expected credit
losses
(4,007
)
—
23,111
—
Unrealized losses on loans held for
sale
3,998
—
3,998
—
Income (loss) before income
taxes
9,928
9,973
(7,326
)
18,610
Income tax expense, including excise
tax
160
218
169
314
Net income (loss) attributable to
common stockholders
$
9,768
$
9,755
$
(7,495
)
$
18,296
Earnings (loss) per common
share:
Basic earnings (loss) per common share
$
0.29
$
0.34
$
(0.23
)
$
0.64
Diluted earnings (loss) per common
share
$
0.29
$
0.34
$
(0.23
)
$
0.63
Weighted average number of common
shares outstanding:
Basic weighted average shares of common
stock outstanding
33,316,933
28,599,282
32,607,442
28,580,658
Diluted weighted average shares of common
stock outstanding
33,539,580
28,863,765
32,607,442
28,822,601
Dividends declared per share of common
stock (1)
$
0.33
$
0.33
$
0.66
$
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
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 June 30, 2020 ($ in thousands):
For the three months ended
June 30, 2020
For the twelve months ended
June 30, 2020
Net income attributable to common
stockholders
$
9,768
$
11,199
Stock-based compensation
365
1,551
Incentive fees to affiliate
303
680
Depreciation of real estate owned
224
870
Provision for current expected credit
losses
(4,007
)
23,111
Unrealized losses on loans held for
sale
3,998
3,998
Core Earnings
$
10,651
$
41,409
Net income attributable to common
stockholders
$
0.29
$
0.37
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
0.01
0.02
Depreciation of real estate owned
0.01
0.03
Provision for current expected credit
losses
(0.12
)
0.75
Unrealized losses on loans held for
sale
0.12
0.13
Basic Core Earnings per common
share
$
0.32
$
1.35
Net income attributable to common
stockholders
$
0.29
$
0.36
Stock-based compensation
0.01
0.05
Incentive fees to affiliate
0.01
0.02
Depreciation of real estate owned
0.01
0.03
Provision for current expected credit
losses
(0.12
)
0.75
Unrealized losses on loans held for
sale
0.12
0.13
Diluted Core Earnings per common
share
$
0.32
$
1.34
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005288/en/
INVESTOR RELATIONS Ares Commercial Real Estate
Corporation Carl Drake or Veronica Mendiola Mayer (888) 818-5298
iracre@aresmgmt.com
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