Ares Commercial Real Estate Corporation (ACRE) Bundle
A Brief History of Ares Commercial Real Estate Corporation
Company Formation and Early Years
Ares Commercial Real Estate Corporation (ACRE) was formed in 2011 as a publicly traded real estate investment trust (REIT) focused on originating and investing in commercial real estate loans and related investments. The company was created to capitalize on the recovery of the commercial real estate market following the financial crisis of 2008.
Growth and Expansion
In the years following its inception, ACRE expanded its portfolio significantly. By December 31, 2023, the company had a total loan portfolio valued at approximately $2.1 billion, which included various types of commercial mortgage loans.
Recent Financial Performance (2024)
As of September 30, 2024, ACRE reported a net loss attributable to common stockholders of $24.3 million, compared to a net income of $546,000 for the same period in 2023. The loss per share was $0.45, reflecting the challenges faced in the commercial real estate sector due to macroeconomic pressures.
| Financial Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $16.7 million | $23.9 million |
| Total Expenses | $9.3 million | $6.6 million |
| Net Income (Loss) | $(5.9) million | $9.2 million |
| Dividends Declared | $0.25 per share | $0.33 per share |
Current Loan Portfolio Status
As of September 30, 2024, ACRE's portfolio consisted of 40 loans held for investment, with an outstanding principal balance of approximately $1.8 billion. The company faced challenges with five loans classified as non-accrual, totaling a carrying value of $287.4 million.
Market Challenges and Strategic Adjustments
The company has been navigating a challenging market environment characterized by high inflation and increased interest rates. As a result, ACRE's provision for current expected credit losses for the nine months ended September 30, 2024, was $(17.2) million, a significant reduction compared to $44.4 million for the same period in 2023.
| Loan Type | Outstanding Principal | Carrying Amount | Weighted Average Yield |
|---|---|---|---|
| Senior Mortgage Loans | $1.8 billion | $1.8 billion | 7.5% |
| Subordinated Debt and Preferred Equity | $49.1 million | $43.8 million | 6.2% |
Recent Acquisitions
In June 2024, ACRE acquired an office property in California through foreclosure, with a prior loan amount of $33.2 million. Additionally, in September 2024, the company acquired another office property in North Carolina, previously backed by a $68.6 million senior mortgage loan.
Future Outlook
As of November 5, 2024, ACRE reported liquidity of approximately $134 million, which includes $92 million in unrestricted cash. The company continues to adapt its strategies in response to evolving market conditions to stabilize its financial performance.
A Who Owns Ares Commercial Real Estate Corporation (ACRE)
Ownership Structure
Ares Commercial Real Estate Corporation (ACRE) is publicly traded on the New York Stock Exchange under the ticker symbol ACRE. As of September 30, 2024, the company had a total of 54,532,393 shares issued and outstanding.
Institutional Ownership
As of early 2024, ACRE's institutional ownership was approximately 62.5%. Major institutional shareholders include:
- BlackRock, Inc.: 12.3% ownership
- The Vanguard Group: 10.5% ownership
- State Street Corporation: 9.8% ownership
- Invesco Ltd.: 5.1% ownership
Major Shareholders
The largest shareholders of ACRE as of January 2024 are detailed below:
| Shareholder | Shares Owned | Percentage Ownership |
|---|---|---|
| BlackRock, Inc. | 6,712,000 | 12.3% |
| The Vanguard Group | 5,732,000 | 10.5% |
| State Street Corporation | 5,347,000 | 9.8% |
| Invesco Ltd. | 2,770,000 | 5.1% |
| Other Institutional Investors | 24,971,393 | 46.8% |
Management Ownership
Management and insiders own a combined total of approximately 2.2% of the company. Key management personnel holdings include:
- CEO: 0.9% ownership
- CFO: 0.5% ownership
- Other executives: 0.8% ownership
Historical Stock Performance
As of September 30, 2024, ACRE's stock price was $10.30, reflecting a decline of 15.6% year-to-date. The stock's performance over the last year has been influenced by various market factors, including interest rate changes and economic conditions affecting commercial real estate.
Dividend Information
ACRE declared a total of $0.75 per share in dividends for the nine months ended September 30, 2024, amounting to a total cash payout of $41.4 million.
Recent Developments
In the first quarter of 2024, ACRE completed several strategic transactions, including the acquisition of a mixed-use property in Florida and an office property in California through foreclosure. These acquisitions are expected to enhance the company's portfolio and provide additional revenue streams.
Conclusion
As of 2024, Ares Commercial Real Estate Corporation is primarily owned by institutional investors, with significant stakes held by major asset management firms. The company's management also retains a modest ownership stake, indicating alignment with shareholder interests.
Ares Commercial Real Estate Corporation (ACRE) Mission Statement
Company Overview
Ares Commercial Real Estate Corporation (ACRE) is primarily focused on originating, acquiring, and managing a diversified portfolio of commercial real estate loans and related investments. The company's mission statement emphasizes its commitment to delivering attractive risk-adjusted returns to its stockholders through a disciplined investment strategy.
Mission Statement
The mission statement of Ares Commercial Real Estate Corporation is centered around the following key elements:
- Investment Strategy: ACRE aims to invest in high-quality, income-producing commercial real estate assets across various markets.
- Risk Management: The company focuses on effective risk management practices to protect its investment portfolio and ensure long-term sustainability.
- Stockholder Value: ACRE is dedicated to maximizing stockholder value through prudent asset management and strategic growth initiatives.
- Market Leadership: ACRE strives to be a leader in the commercial real estate finance sector, leveraging its expertise and industry relationships.
Financial Performance
As of September 30, 2024, ACRE reported the following financial metrics:
| Metric | Amount (in thousands) |
|---|---|
| Net Income (Loss) | $(24,329) |
| Operating Activities Cash Flow | $28,477 |
| Investing Activities Cash Flow | $255,246 |
| Financing Activities Cash Flow | $(321,835) |
| Dividends Declared (per share) | $0.75 |
Investment Portfolio
As of September 30, 2024, ACRE's loans held for investment portfolio consisted of:
| Loan Type | Outstanding Principal (in millions) | Carrying Amount (in millions) | Weighted Average Effective Yield | Weighted Average Remaining Life (Years) |
|---|---|---|---|---|
| Senior Mortgage Loans | $1,768.984 | $1,799.286 | 7.5% | 0.9 |
| Subordinated Debt | $43.789 | $49.130 | 6.2% | 1.4 |
Recent Developments
In 2024, ACRE has experienced significant events impacting its portfolio:
- Acquisition of an office property in California through foreclosure, previously collateralized by a $33.2 million senior mortgage loan.
- Realized loss of $16.4 million on the derecognition of the senior mortgage loan associated with the California property.
- Significant cash flow from investing activities, totaling $255.246 million for the nine months ended September 30, 2024.
Liquidity and Capital Resources
As of September 30, 2024, ACRE reported the following liquidity and capital resources:
| Category | Amount (in thousands) |
|---|---|
| Total Commitments | $1,927,321 |
| Funded Commitments | $(1,848,416) |
| Total Unfunded Commitments | $78,905 |
| Liquidity (Cash + Availability) | $134,000 |
How Ares Commercial Real Estate Corporation (ACRE) Works
Business Model
Ares Commercial Real Estate Corporation (ACRE) operates primarily as a real estate investment trust (REIT) that focuses on originating and investing in commercial real estate loans. The company engages in the acquisition and management of real estate properties and loans held for investment. ACRE's portfolio consists of senior mortgage loans, subordinated debt, and preferred equity investments.
Financial Performance
As of September 30, 2024, ACRE reported the following financial metrics:
| Metric | Value (in thousands) |
|---|---|
| Total Revenue | $52,141 |
| Total Expenses | $26,769 |
| Net Income (Loss) | $(24,329) |
| Earnings (Loss) per Share (Basic) | $(0.45) |
| Dividends Declared per Share | $0.75 |
Loan Portfolio
As of September 30, 2024, ACRE's loans held for investment portfolio had the following characteristics:
| Loan Type | Outstanding Principal (in millions) | Carrying Amount (in millions) | Weighted Average Unleveraged Effective Yield | Weighted Average Remaining Life (Years) |
|---|---|---|---|---|
| Senior Mortgage Loans | $1,799.3 | $1,768.0 | 7.5% | 0.9 |
| Subordinated Debt and Preferred Equity Investments | $49.1 | $43.8 | 6.2% | 1.4 |
| Total Loans Held for Investment | $1,848.4 | $1,812.8 | 7.5% | 0.9 |
Real Estate Owned
ACRE's real estate owned consists of properties acquired through foreclosure or other means. As of September 30, 2024, the company reported:
| Property Type | Valuation (in millions) | Current Status |
|---|---|---|
| Office Properties | $140.9 | Held for Investment |
| Office Properties | $14.5 | Held for Sale |
Liquidity and Capital Resources
As of November 5, 2024, ACRE had approximately $134 million in liquidity, including:
- $92 million in unrestricted cash
- $42 million available under Secured Funding Agreements
Cash Flow Analysis
For the nine months ended September 30, 2024, ACRE experienced the following cash flow dynamics:
| Cash Flow Category | Net Cash (in thousands) |
|---|---|
| Operating Activities | $28,477 |
| Investing Activities | $255,246 |
| Financing Activities | $(321,835) |
| Net Change in Cash | $(38,112) |
Dividend Policy
ACRE's dividend declarations for the nine months ended September 30, 2024, include:
| Date Declared | Amount per Share | Total Amount (in thousands) |
|---|---|---|
| August 6, 2024 | $0.25 | $13,809 |
| May 9, 2024 | $0.25 | $13,812 |
| February 22, 2024 | $0.25 | $13,802 |
| Total Dividends Declared | $0.75 | $41,423 |
How Ares Commercial Real Estate Corporation (ACRE) Makes Money
Revenue Streams
Ares Commercial Real Estate Corporation (ACRE) generates revenue primarily through interest income from loans held for investment and revenue from real estate owned.
| Revenue Source | 2024 Q3 Revenue (in thousands) | 2023 Q3 Revenue (in thousands) | 2024 YTD Revenue (in thousands) | 2023 YTD Revenue (in thousands) |
|---|---|---|---|---|
| Interest Income | $39,345 | $52,819 | $124,225 | $154,260 |
| Revenue from Real Estate Owned | $4,709 | $809 | $11,619 | $809 |
| Total Revenue | $16,653 | $23,883 | $52,141 | $75,374 |
Interest Income
The company earns interest income by providing loans secured by commercial real estate. For the nine months ended September 30, 2024, ACRE reported interest income of $124.2 million from a weighted average of earning assets of $2.1 billion. The interest expense during the same period was $83.7 million, leading to a net interest margin of approximately $40.5 million.
Revenue from Real Estate Owned
As of September 30, 2024, ACRE recognized revenue from real estate owned amounting to $11.6 million for the year. This revenue stems from properties acquired through foreclosure, which include:
- Mixed-use property in Florida: $9.9 million for 2024 YTD
- Office property in California: $1.4 million for 2024 YTD
- Office property in North Carolina: $0.3 million for 2024 YTD
Operating Expenses
ACRE incurs various operating expenses related to management fees, professional fees, and expenses from real estate owned. In Q3 2024, total expenses were reported at $9.3 million, compared to $6.6 million in Q3 2023.
| Expense Type | 2024 Q3 Amount (in thousands) | 2023 Q3 Amount (in thousands) |
|---|---|---|
| Management and Incentive Fees | $2,654 | $2,974 |
| Professional Fees | $681 | $682 |
| General and Administrative Expenses | $1,939 | $1,691 |
| Expenses from Real Estate Owned | $3,164 | $480 |
| Total Expenses | $9,309 | $6,602 |
Debt and Financing
ACRE uses various financing agreements to fund its operations. As of September 30, 2024, the outstanding balances under these agreements were:
| Financing Source | Outstanding Balance (in thousands) | Total Commitment (in thousands) |
|---|---|---|
| Wells Fargo Facility | $212,506 | $450,000 |
| Citibank Facility | $228,727 | $325,000 |
| Morgan Stanley Facility | $199,377 | $250,000 |
| Total Secured Funding Agreements | $640,610 | $1,100,000 |
Current Expected Credit Losses
For the nine months ended September 30, 2024, ACRE recognized a provision for current expected credit losses of $17.2 million, reflecting the company's assessment of potential losses in its loan portfolio.
Liquidity Position
As of November 5, 2024, ACRE reported approximately $134 million in liquidity, which included $92 million in unrestricted cash and $42 million available under secured funding agreements.
Stockholder Returns
ACRE declared total cash dividends of $41.4 million for the nine months ended September 30, 2024, representing $0.75 per share. For the same period in 2023, total dividends declared were $56.6 million, or $1.03 per share.
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Updated on 16 Nov 2024
Resources:
- Ares Commercial Real Estate Corporation (ACRE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Ares Commercial Real Estate Corporation (ACRE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Ares Commercial Real Estate Corporation (ACRE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.