Ares Commercial Real Estate (NYSE:ACRE) Issues Earnings Results

Key Points

• ACRE reported $0.12 per share in quarterly earnings, beating analysts’ $0.04 estimate, but distributable earnings of $0.12 per share remained below its $0.15 quarterly dividend; management provided no timeline for restoring dividend coverage.
• Credit and workout risks remain concentrated: 94% of the $141 million CECL reserve is tied to risk-rated four- and five-rated loans, with nearly half related to a Chicago office loan.
• The company is working through troubled assets, including property sales and loan repayments, and cited $116 million in available capital to support its flexibility as it pursues resolutions.

Ares Commercial Real Estate (NYSE:ACRE - Get Free Report) posted its quarterly earnings data on Friday. The real estate investment trust reported $0.12 earnings per share for the quarter, beating analysts' consensus estimates of $0.04 by $0.08, FiscalAI reports. Ares Commercial Real Estate had a negative net margin of 8.04% and a positive return on equity of 4.08%.

Here are the key takeaways from Ares Commercial Real Estate's conference call:

• Third-quarter Distributable Earnings were $0.12 per share ($0.11 excluding a realized gain), below the $0.15 quarterly dividend. Management said resolving non-accrual investments is a key potential driver of earnings growth, but gave no timeline for dividend coverage.
• ACRE sold its Charlotte office REO for about $7 million above carrying value and was repaid on its only defaulted loan, including accrued default interest. It is pursuing title to the Chicago office property for greater control over resolution, while Brooklyn condo losses will be recognized as individual units sell.
• The $141 million CECL reserve was little changed, but 94% relates to risk-rated four and five loans, with nearly half tied to the Chicago office loan. These loans represent 10% of portfolio carrying value net of CECL.
• Management cited $116 million of available capital, moderate net debt-to-equity of 1.9x, and a portfolio largely matched with floating-rate financing. Risk-rated one-to-three loans account for 90% of loan carrying value net of CECL, and 94% of those loans have interest-rate caps.

Ares Commercial Real Estate Stock Performance

Shares of Ares Commercial Real Estate stock traded up $0.26 during trading hours on Friday, reaching $3.65. The company's stock had a trading volume of 1,360,513 shares, compared to its average volume of 654,659. The stock has a market cap of $202.78 million, a P/E ratio of -45.69 and a beta of 1.22. Ares Commercial Real Estate has a one year low of $3.16 and a one year high of $5.89. The company's 50 day simple moving average is $3.89 and its 200 day simple moving average is $4.63.

Ares Commercial Real Estate Announces Dividend

The firm also recently declared a quarterly dividend, which will be paid on Friday, January 15th. Stockholders of record on Thursday, December 31st will be given a $0.15 dividend. This represents a $0.60 dividend on an annualized basis and a dividend yield of 16.4%. The ex-dividend date is Thursday, December 31st. Ares Commercial Real Estate's dividend payout ratio (DPR) is presently -750.00%.

Analyst Ratings Changes

Several research firms recently commented on ACRE. Citizens Jmp reiterated a "market perform" rating on shares of Ares Commercial Real Estate in a research note on Thursday, July 9th. Zacks Research upgraded Ares Commercial Real Estate from a "strong sell" rating to a "hold" rating in a research note on Friday, July 10th. Keefe, Bruyette & Woods cut their target price on Ares Commercial Real Estate from $5.50 to $4.50 and set an "outperform" rating on the stock in a research report on Friday, October 9th. Weiss Ratings cut Ares Commercial Real Estate from a "sell (d+)" rating to a "sell (d)" rating in a research note on Wednesday, October 14th. Finally, JPMorgan Chase & Co. reduced their target price on Ares Commercial Real Estate from $5.50 to $5.00 and set a "neutral" rating for the company in a research note on Friday, July 17th. One equities research analyst has rated the stock with a Buy rating, four have given a Hold rating and two have issued a Sell rating to the stock. According to MarketBeat, the stock has an average rating of "Reduce" and a consensus price target of $5.00.

More Ares Commercial Real Estate News

Here are the key news stories impacting Ares Commercial Real Estate this week:

• Positive Sentiment: ACRE posted $10.0 million in GAAP net income, or $0.18 per diluted share, and distributable earnings of $6.7 million, or $0.12 per share. Distributable earnings exceeded analyst estimates and rose from $0.10 per share a year earlier. Third-quarter results
• Positive Sentiment: After quarter-end, the company fully repaid and terminated a $90 million secured term loan, reducing debt obligations. It also declared a fourth-quarter dividend of $0.15 per common share. Third-quarter results
• Positive Sentiment: Management said it continued to reduce office and real-estate-owned investments, including through an office-property sale that generated a gain. Third-quarter results
• Neutral Sentiment: Management cited $116 million in available capital and is pursuing resolutions for about $160 million of net nonaccrual carrying value. Available capital offers flexibility, but the focus on resolutions highlights continuing credit and asset-workout exposure. Available capital and asset resolutions

About Ares Commercial Real Estate

Ares Commercial Real Estate Corporation is a specialty finance company organized as a real estate investment trust (REIT). The company originates and invests in commercial real estate loans, with a primary focus on senior mortgage loans secured by properties in the United States.

Its investment portfolio may include loans backed by multifamily, office, industrial, retail, hotel and other commercial properties. Ares Commercial Real Estate generally targets transitional and other commercial real estate assets that require financing for acquisition, redevelopment, renovation or repositioning.

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