Ares Commercial Real Estate Corporation Reports Second Quarter 2024 Results
Ares Commercial Real Estate (NYSE:ACRE) reported a GAAP net loss of $6.1 million or $(0.11) per diluted common share for Q2 2024. The company's Distributable Earnings Loss was $6.6 million or $(0.12) per diluted common share. ACRE declared a Q3 2024 dividend of $0.25 per common share, payable on October 15, 2024. The company made progress on resolving risk-rated loans and maintaining financial flexibility, which impacted Q2 results but is expected to position ACRE for future growth. Key management changes include Tae-Sik Yoon's appointment as COO and Jeff Gonzales as CFO & Treasurer, effective August 30, 2024.
Ares Commercial Real Estate (NYSE:ACRE) ha riportato una perdita netta GAAP di 6,1 milioni di dollari o $(0,11) per azione comune diluita per il secondo trimestre del 2024. La perdita degli utili distribuibili è stata di 6,6 milioni di dollari o $(0,12) per azione comune diluita. ACRE ha dichiarato un dividendo per il terzo trimestre del 2024 di 0,25 dollari per azione comune, pagabile il 15 ottobre 2024. L'azienda ha fatto progressi nella risoluzione di prestiti a rischio e nel mantenimento della flessibilità finanziaria, che hanno influenzato i risultati del secondo trimestre ma si prevede che posizioneranno ACRE per una crescita futura. I cambiamenti chiave nella gestione comprendono la nomina di Tae-Sik Yoon come COO e Jeff Gonzales come CFO e Tesoriere, con effetto dal 30 agosto 2024.
Ares Commercial Real Estate (NYSE:ACRE) reportó una pérdida neta GAAP de 6.1 millones de dólares o $(0.11) por acción común diluida para el segundo trimestre de 2024. La pérdida de utilidades distribuibles fue de 6.6 millones de dólares o $(0.12) por acción común diluida. ACRE declaró un dividendo del tercer trimestre de 2024 de 0.25 dólares por acción común, pagadero el 15 de octubre de 2024. La empresa avanzó en la resolución de préstamos con riesgo y en el mantenimiento de la flexibilidad financiera, lo que impactó los resultados del segundo trimestre, pero se espera que posicione a ACRE para un crecimiento futuro. Los cambios clave en la gestión incluyen el nombramiento de Tae-Sik Yoon como COO y Jeff Gonzales como CFO y Tesorero, a partir del 30 de agosto de 2024.
Ares Commercial Real Estate (NYSE:ACRE)는 2024년 2분기에 GAAP 순손실 610만 달러 또는 $(0.11) 희석된 보통주당 손실을 보고했습니다. 회사의 배당 가능 수익 손실은 660만 달러 또는 $(0.12) 희석된 보통주당 손실이었습니다. ACRE는 2024년 3분기 보통주 배당금 0.25달러를 발표했으며, 이는 2024년 10월 15일에 지급됩니다. 회사는 위험 등급 대출을 해결하고 재정적 유연성을 유지하는 데 진전을 보였으며, 이는 2분기 결과에 영향을 미쳤지만 ACRE가 향후 성장에 우위를 점할 것으로 예상됩니다. 주요 경영진 변화에는 2024년 8월 30일부터 COO로 Tae-Sik Yoon이, CFO 및 재무국장으로 Jeff Gonzales가 임명된 것이 포함됩니다.
Ares Commercial Real Estate (NYSE:ACRE) a annoncé une perte nette GAAP de 6,1 millions de dollars ou $(0,11) par action ordinaire diluée pour le deuxième trimestre de 2024. La perte des bénéfices distribuables s'élevait à 6,6 millions de dollars ou $(0,12) par action ordinaire diluée. ACRE a déclaré un dividende pour le 3ème trimestre 2024 de 0,25 dollar par action ordinaire, payable le 15 octobre 2024. L'entreprise a progressé dans la résolution des prêts à risque et le maintien de sa flexibilité financière, ce qui a eu un impact sur les résultats du deuxième trimestre, mais devrait positionner ACRE pour une croissance future. Les changements clés dans la direction incluent la nomination de Tae-Sik Yoon en tant que COO et de Jeff Gonzales en tant que CFO et trésorier, à compter du 30 août 2024.
Ares Commercial Real Estate (NYSE:ACRE) berichtete über einen GAAP-Nettoverlust von 6,1 Millionen US-Dollar oder $(0,11) pro verwässerter Stammaktie für das 2. Quartal 2024. Der verteilbare Ertragsverlust betrug 6,6 Millionen US-Dollar oder $(0,12) pro verwässerter Stammaktie. ACRE erklärte eine Dividende für das 3. Quartal 2024 von 0,25 US-Dollar pro Stammaktie, zahlbar am 15. Oktober 2024. Das Unternehmen hat Fortschritte bei der Lösung von risikobehafteten Krediten und der Aufrechterhaltung finanzieller Flexibilität erzielt, was die Ergebnisse des 2. Quartals beeinflusste, jedoch wird erwartet, dass dies ACRE in eine bessere Position für zukünftiges Wachstum versetzt. Wichtige Änderungen im Management umfassen die Ernennung von Tae-Sik Yoon zum COO und Jeff Gonzales zum CFO und Schatzmeister, wirksam ab dem 30. August 2024.
- Declared Q3 2024 dividend of $0.25 per common share
- Progress made on resolving risk-rated 4 and 5 loans
- Maintained financial flexibility
- Strategic management appointments to support future growth
- GAAP net loss of $6.1 million in Q2 2024
- Distributable Earnings Loss of $6.6 million in Q2 2024
- Negative impact on Q2 financial results due to risk mitigation measures
Insights
The Q2 2024 results for Ares Commercial Real Estate (ACRE) reveal significant challenges. With a GAAP net loss of
Despite maintaining its quarterly dividend at
ACRE's Q2 results reflect the broader challenges in the commercial real estate market. The company's efforts to resolve high-risk loans (rated 4 and 5) are prudent but come at a short-term cost to earnings. This strategy aligns with industry trends, as many REITs are grappling with similar issues amid rising interest rates and shifting property valuations.
The appointment of Tae-Sik Yoon as COO and Jeff Gonzales as CFO suggests a strategic shift towards operational efficiency and financial management. These internal promotions indicate continuity in leadership, which can be positive for implementing long-term strategies. However, investors should watch for concrete improvements in portfolio quality and earnings growth in the coming quarters to gauge the effectiveness of these changes and the company's ability to navigate the current real estate market challenges.
Second quarter GAAP net income (loss) of
- Subsequent to three months ended June 30, 2024 -
Tae-Sik Yoon appointed to Chief Operating Officer; Jeff Gonzales appointed to Chief Financial Officer & Treasurer
Declared third quarter 2024 dividend of
“We continued to make progress on resolving risk rated 4 and 5 loans and maintaining financial flexibility,” said Bryan Donohoe, CEO of Ares Commercial Real Estate Corporation. “While these measures impacted our second quarter financial results, we believe these actions better position the Company for higher levels of portfolio growth and earnings in the future.”
“I am also proud to announce the appointments of Tae-Sik Yoon to Chief Operating Officer and Jeff Gonzales to Chief Financial Officer and Treasurer, effective as of August 30, 2024,” Mr. Donohoe added. “Tae-Sik has been our Chief Financial Officer for the past twelve years and is a trusted member of our management team and a demonstrated leader within our organization. As Chief Operating Officer, we believe that he will be better positioned to help execute the Company’s strategic priorities. I am also pleased that Jeff will be our next Chief Financial Officer. Jeff is a seasoned professional, having worked with our team for the past eleven years and is the natural choice for the role. I have the utmost confidence in Tae-Sik and Jeff and look forward to our continued partnership as we seek to execute on behalf of our shareholders.”
COMMON STOCK DIVIDEND
On May 9, 2024, the Board of Directors of the Company declared a regular cash dividend of
On August 6, 2024, the Board of Directors of the Company declared a regular cash dividend of
ADDITIONAL INFORMATION
The Company issued a presentation of its second quarter 2024 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 2024 Earnings Presentation.” The Company also filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 with the
CONFERENCE CALL AND WEBCAST INFORMATION
On August 6, 2024, the Company invites all interested persons to attend its webcast/conference call at 12:00 p.m. (Eastern Time) to discuss its second quarter 2024 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 (800) 225-9448. International callers can access the conference call by dialing +1 (203) 518-9708. Please provide passcode ACREQ224. 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 September 6, 2024 at 5:00 p.m. (Eastern Time) to domestic callers by dialing +1 (800) 756-8809 and to international callers by dialing +1 (402) 220-7214. An archived replay will also be available through September 6, 2024 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 (the “Company”) 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
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. These statements relate to future events or the Company’s future performance or financial condition and include, but are not limited to, statements about the resolution of underperforming loans, reduction of CECL reserve, increase of available borrowings, the industry, loan market, and the benefits of the announced officer appointments. 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 global economic trends and economic conditions, including high inflation, slower growth, changes to fiscal and monetary policy, higher interest rates and currency fluctuations, as well as geopolitical instability, including conflicts between
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
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(in thousands, except share and per share data) |
||||||||
|
|
As of |
||||||
|
|
June 30, 2024 |
|
December 31, 2023 |
||||
|
|
(unaudited) |
|
|
||||
ASSETS |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
70,649 |
|
|
$ |
110,459 |
|
Loans held for investment ( |
|
|
1,972,551 |
|
|
|
2,126,524 |
|
Current expected credit loss reserve |
|
|
(137,403 |
) |
|
|
(159,885 |
) |
Loans held for investment, net of current expected credit loss reserve |
|
|
1,835,148 |
|
|
|
1,966,639 |
|
Loans held for sale ( |
|
|
20,534 |
|
|
|
38,981 |
|
Investment in available-for-sale debt securities, at fair value |
|
|
28,113 |
|
|
|
28,060 |
|
Real estate owned held for investment, net |
|
|
81,728 |
|
|
|
83,284 |
|
Real estate owned held for sale ( |
|
|
14,509 |
|
|
|
— |
|
Other assets ( |
|
|
19,074 |
|
|
|
52,354 |
|
Total assets |
|
$ |
2,069,755 |
|
|
$ |
2,279,777 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
||||
LIABILITIES |
|
|
|
|
||||
Secured funding agreements |
|
$ |
625,936 |
|
|
$ |
639,817 |
|
Notes payable |
|
|
104,751 |
|
|
|
104,662 |
|
Secured term loan |
|
|
137,409 |
|
|
|
149,393 |
|
Collateralized loan obligation securitization debt (consolidated VIEs) |
|
|
588,421 |
|
|
|
723,117 |
|
Due to affiliate |
|
|
4,526 |
|
|
|
4,135 |
|
Dividends payable |
|
|
13,812 |
|
|
|
18,220 |
|
Other liabilities ( |
|
|
12,637 |
|
|
|
14,584 |
|
Total liabilities |
|
|
1,487,492 |
|
|
|
1,653,928 |
|
Commitments and contingencies |
|
|
|
|
||||
STOCKHOLDERS' EQUITY |
|
|
|
|
||||
Common stock, par value |
|
|
532 |
|
|
|
532 |
|
Additional paid-in capital |
|
|
814,620 |
|
|
|
812,184 |
|
Accumulated other comprehensive income |
|
|
193 |
|
|
|
153 |
|
Accumulated earnings (deficit) |
|
|
(233,082 |
) |
|
|
(187,020 |
) |
Total stockholders' equity |
|
|
582,263 |
|
|
|
625,849 |
|
Total liabilities and stockholders' equity |
|
$ |
2,069,755 |
|
|
$ |
2,279,777 |
|
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(in thousands, except share and per share data) |
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(unaudited) |
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|
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For the Three Months
|
|
For the Six Months
|
||||||||||||
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Revenue: |
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
$ |
40,847 |
|
|
$ |
51,941 |
|
|
$ |
84,880 |
|
|
$ |
101,441 |
|
Interest expense |
|
|
(27,483 |
) |
|
|
(26,951 |
) |
|
|
(56,302 |
) |
|
|
(49,950 |
) |
Net interest margin |
|
|
13,364 |
|
|
|
24,990 |
|
|
|
28,578 |
|
|
|
51,491 |
|
Revenue from real estate owned |
|
|
3,433 |
|
|
|
— |
|
|
|
6,910 |
|
|
|
— |
|
Total revenue |
|
|
16,797 |
|
|
|
24,990 |
|
|
|
35,488 |
|
|
|
51,491 |
|
Expenses: |
|
|
|
|
|
|
|
|
||||||||
Management and incentive fees to affiliate |
|
|
2,692 |
|
|
|
3,334 |
|
|
|
5,460 |
|
|
|
6,344 |
|
Professional fees |
|
|
757 |
|
|
|
626 |
|
|
|
1,290 |
|
|
|
1,397 |
|
General and administrative expenses |
|
|
1,957 |
|
|
|
2,038 |
|
|
|
4,038 |
|
|
|
3,723 |
|
General and administrative expenses reimbursed to affiliate |
|
|
1,277 |
|
|
|
1,109 |
|
|
|
2,409 |
|
|
|
1,842 |
|
Expenses from real estate owned |
|
|
2,226 |
|
|
|
— |
|
|
|
4,262 |
|
|
|
— |
|
Total expenses |
|
|
8,909 |
|
|
|
7,107 |
|
|
|
17,459 |
|
|
|
13,306 |
|
Provision for current expected credit losses |
|
|
(2,374 |
) |
|
|
20,127 |
|
|
|
(24,643 |
) |
|
|
41,146 |
|
Realized losses on loans |
|
|
16,387 |
|
|
|
— |
|
|
|
62,113 |
|
|
|
5,613 |
|
Change in unrealized losses on loans held for sale |
|
|
— |
|
|
|
— |
|
|
|
(995 |
) |
|
|
— |
|
Income (loss) before income taxes |
|
|
(6,125 |
) |
|
|
(2,244 |
) |
|
|
(18,446 |
) |
|
|
(8,574 |
) |
Income tax expense (benefit), including excise tax |
|
|
— |
|
|
|
(46 |
) |
|
|
2 |
|
|
|
64 |
|
Net income (loss) attributable to common stockholders |
|
$ |
(6,125 |
) |
|
$ |
(2,198 |
) |
|
$ |
(18,448 |
) |
|
$ |
(8,638 |
) |
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per common share |
|
$ |
(0.11 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.16 |
) |
Diluted earnings (loss) per common share |
|
$ |
(0.11 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.16 |
) |
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares of common stock outstanding |
|
|
54,426,112 |
|
|
|
54,347,204 |
|
|
|
54,411,255 |
|
|
|
54,468,752 |
|
Diluted weighted average shares of common stock outstanding |
|
|
54,426,112 |
|
|
|
54,347,204 |
|
|
|
54,411,255 |
|
|
|
54,468,752 |
|
Dividends declared per share of common stock(1) |
|
$ |
0.25 |
|
|
$ |
0.35 |
|
|
$ |
0.50 |
|
|
$ |
0.70 |
|
(1) There is no assurance dividends will continue at these levels or at all. |
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SCHEDULE I
Reconciliation of Net Income (Loss) to Non-GAAP Distributable Earnings (Loss)
Distributable Earnings (Loss) 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 (Loss) 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 (Loss) is defined as net income (loss) attributable to common stockholders 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 (Loss). Distributable Earnings (Loss) 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 (loss) attributable to common stockholders, the most directly comparable GAAP financial measure, to Distributable Earnings (Loss) is set forth in the table below for the three months and twelve months ended June 30, 2024 ($ in thousands):
|
For the Three Months Ended June 30, 2024 |
|
For the Twelve Months Ended June 30, 2024 |
||||
Net income (loss) attributable to common stockholders |
$ |
(6,125 |
) |
|
$ |
(48,678 |
) |
Stock-based compensation |
|
1,152 |
|
|
|
4,463 |
|
Incentive fees to affiliate |
|
— |
|
|
|
— |
|
Depreciation and amortization of real estate owned |
|
770 |
|
|
|
2,571 |
|
Provision for current expected credit losses |
|
(2,374 |
) |
|
|
26,036 |
|
Realized gain on termination of interest rate cap derivative (1) |
|
— |
|
|
|
(198 |
) |
Unrealized losses on loans held for sale |
|
— |
|
|
|
— |
|
Distributable Earnings (Loss) |
$ |
(6,577 |
) |
|
$ |
(15,806 |
) |
|
|
|
|
||||
Net income (loss) attributable to common stockholders |
$ |
(0.11 |
) |
|
$ |
(0.90 |
) |
Stock-based compensation |
|
0.02 |
|
|
|
0.08 |
|
Incentive fees to affiliate |
|
— |
|
|
|
— |
|
Depreciation and amortization of real estate owned |
|
0.01 |
|
|
|
0.05 |
|
Provision for current expected credit losses |
|
(0.04 |
) |
|
|
0.48 |
|
Realized gain on termination of interest rate cap derivative (1) |
|
— |
|
|
|
— |
|
Unrealized losses on loans held for sale |
|
— |
|
|
|
— |
|
Basic Distributable Earnings (Loss) per common share |
$ |
(0.12 |
) |
|
$ |
(0.29 |
) |
|
|
|
|
||||
Net income (loss) attributable to common stockholders |
$ |
(0.11 |
) |
|
$ |
(0.90 |
) |
Stock-based compensation |
|
0.02 |
|
|
|
0.08 |
|
Incentive fees to affiliate |
|
— |
|
|
|
— |
|
Depreciation and amortization of real estate owned |
|
0.01 |
|
|
|
0.05 |
|
Provision for current expected credit losses |
|
(0.04 |
) |
|
|
0.48 |
|
Realized gain on termination of interest rate cap derivative (1) |
|
— |
|
|
|
— |
|
Unrealized losses on loans held for sale |
|
— |
|
|
|
— |
|
Diluted Distributable Earnings (Loss) per common share |
$ |
(0.12 |
) |
|
$ |
(0.29 |
) |
(1) For the twelve months ended June 30, 2024, Distributable Earnings (Loss) includes a |
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_________________________________
(1) Distributable Earnings (Loss) is a non-GAAP financial measure. Refer to Schedule I for the definition and reconciliation of Distributable Earnings (Loss).
View source version on businesswire.com: https://www.businesswire.com/news/home/20240805200743/en/
INVESTOR RELATIONS
Ares Commercial Real Estate Corporation
Carl Drake or John Stilmar
(888) 818-5298
iracre@aresmgmt.com
Source: Ares Commercial Real Estate Corporation
FAQ
What were ACRE's Q2 2024 earnings results?
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What management changes did ACRE announce?
How did ACRE's risk mitigation efforts affect its Q2 2024 results?
