Fourth Quarter 2012 Dividend Declared
CHICAGO--(BUSINESS WIRE)--
Ares Commercial Real Estate Corporation (NYSE: ACRE) announced that its
Board of Directors has declared a fourth quarter 2012 dividend of $0.25
per common share, an increase of $0.19 per common share over the third
quarter 2012 dividend. The fourth quarter 2012 dividend is payable on
January 10, 2013 to common stockholders of record as of December 31,
2012.
“Through our direct national origination platform we have found
increasing success in closing commercial real estate loans that meet our
investment criteria,” said John Bartling, Chief Executive Officer of
Ares Commercial Real Estate Corporation. “We are pleased with the nearly
$120 million in new loans that we closed in the third quarter, which has
significantly improved our run rate profitability as we head into the
fourth quarter. In addition, our positive momentum is continuing with
approximately $150 to $200 million of additional loans in the closing
process. As a result of continuing to build out our initial portfolio
and planned closings, we have increased our fourth quarter dividend to
$0.25 per common share.”
THIRD QUARTER 2012 FINANCIAL RESULTS
Ares Commercial Real Estate Corporation also announced its financial
results for the quarter ended September 30, 2012.
THIRD QUARTER 2012 HIGHLIGHTS
-
Closed four new loans totaling $119.5 million in commitments ($112.7
million in outstanding principal), including three senior loans
totaling $105.2 million in commitments ($98.4 million in outstanding
principal) and one $14.3 million mezzanine loan.
-
More than doubled the outstanding principal of loans held for
investment to $192.5 million at September 30, 2012 versus $79 million
at June 30, 2102.
-
Declared a third quarter 2012 dividend of $0.06 per common share,
which was paid on October 11, 2012.
SUMMARY OF THIRD QUARTER 2012 FINANCIAL RESULTS
Net income (loss) attributable to common shareholders was $(554)
thousand or $(0.06) per basic and diluted common share and $(895)
thousand or $(0.16) per basic and diluted common share for three and
nine months ended September 30, 2012, respectively. Core Earnings (loss)
for the three and nine months ended September 30, 2012 were $(418)
thousand or $(0.05) per basic and diluted share and approximately $(693)
thousand or $(0.12) per basic and diluted share, respectively.
Reconciliation of Core Earnings (loss) to the most directly comparable
GAAP financial measure, net income (loss), is set forth for the three
and nine month periods ended September 30, 2012 in a table at the end of
this presentation. As the Company commenced investment operations on
December 9, 2011, there are no prior periods for which to compare
financial results.
SUMMARY OF INVESTMENTS AT SEPTEMBER 30, 2012
At September 30, 2012, the Company had originated eight loans totaling
approximately $218.5 million in commitments with outstanding principal
of $192.5 million. At September 30, 2012, all loans were performing in
accordance with the terms of the respective loan agreements.
Portfolio at September 30, 2012:
|
Loan Type/Location
|
|
Square Footage/
Units
|
|
Origination
Date
|
|
Maturity
Date(1)
|
|
Remaining
Life
(Years)
|
|
Transitional Senior Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Complex in Austin, TX
|
|
270,000 sq. ft
|
|
Feb 2012
|
|
Mar 2015
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Denver, CO
|
|
173,000 sq. ft
|
|
Dec 2011
|
|
Jan 2015
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
Apartment Building in New York, NY
|
|
101 units
|
|
Sep 2012
|
|
Oct 2017
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
Apartment Building in Avondale, AZ
|
|
301 units
|
|
Aug 2012
|
|
Oct 2015
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
Stretch Senior Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Boston, MA
|
|
152,000 sq. ft
|
|
Feb 2012
|
|
Mar 2015
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Miami, FL
|
|
286,000 sq. ft
|
|
Sep 2012
|
|
Oct 2015
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Atlanta, GA
|
|
175,000 sq. ft
|
|
Aug 2012
|
|
Sep 2017
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Fort Lauderdale, FL
|
|
257,000 sq. ft
|
|
Jan 2012
|
|
Feb 2015
|
|
2.3
|
|
Average
|
|
|
|
|
|
|
|
3.2
|
(1) The Boston loan is subject to one 12-month extension option. The
Miami, Austin, Avondale, and Fort Lauderdale loans are subject to two
12-month extension options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in millions, except percentages)
|
|
Total
|
|
Outstanding
|
|
Carrying
|
|
LTV
|
|
Interest
|
|
Origination
|
|
Exit
|
|
LIBOR
|
|
Unleveraged
Effective
|
|
Loan Type/Location
|
|
Commitment
|
|
Principal
|
|
Amount
|
|
At Origination
|
|
Rate
|
|
Fee
|
|
Fee
|
|
Floor
|
|
Yield
|
|
Transitional Senior Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Complex in Austin, TX
|
|
|
|
|
|
|
|
|
|
L+5.75%
|
-
|
|
|
|
|
|
|
|
|
|
|
$
|
38.0
|
|
$
|
30.3
|
|
$
|
29.8
|
|
70
|
%
|
|
L+5.25%
|
|
1.0
|
%
|
|
0.5
|
%(2)
|
|
1.0
|
%
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Denver, CO
|
|
11.0
|
|
6.6
|
|
6.5
|
|
38
|
%
|
|
L+5.50%
|
|
1.0
|
%
|
|
1.0
|
%
|
|
1.0
|
%
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartment Building in New York, NY
|
|
36.1
|
|
30.8
|
|
30.5
|
|
65
|
%
|
|
L+5.00%
|
|
1.0
|
%
|
|
0.5
|
%
|
|
0.8
|
%
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartment Complex in Avondale, AZ
|
|
22.1
|
|
20.6
|
|
20.4
|
|
68
|
%
|
|
L+4.25%
|
|
1.0
|
%
|
|
0.8
|
%
|
|
1.0
|
%
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stretch Senior Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Boston, MA
|
|
34.9
|
|
34.9
|
|
34.6
|
|
88
|
%
|
|
L+5.65%
|
|
1.0
|
%
|
|
0.5
|
%
|
|
0.7
|
%
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Miami, FL
|
|
47.0
|
|
47.0
|
|
46.5
|
|
76
|
%
|
|
L+5.25%
|
|
1.0
|
%
|
|
—(1
|
)
|
|
1.0
|
%
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Atlanta, GA
|
|
14.3
|
|
14.3
|
|
14.3
|
|
75
|
%
|
|
10.5
|
%
|
|
1.0
|
%
|
|
—
|
|
|
—
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Building in Fort Lauderdale, FL
|
|
15.0
|
|
8.0
|
(3
|
)
|
7.9
|
|
51
|
%
|
|
L+10.75%-L+8.18%
|
|
1.0
|
%
|
|
0.5
|
%(4)
|
|
0.8
|
%
|
|
12.1
|
%
|
|
Total
|
|
$
|
218.4
|
|
$
|
192.5
|
|
$
|
190.5
|
|
|
|
|
|
|
|
|
|
|
|
7.2
|
%
|
(1) This loan was originated with a 0.25% exit fee payable to us upon
the earlier of repayment or the loan’s maturity. However, such exit fee
is not payable if the loan is repaid within 24 months of origination.
(2) The initial interest rate for this loan of L+5.75% steps down based
on performance hurdles to L+5.25%.
(3) The total commitment the Company co-originated was a $37 million
first mortgage, of which a $22 million A-Note was fully funded by
Citibank, N.A. The Company retained a $15 million B-Note.
(4) This loan was structured using an A-Note/B-Note structure which
priced at L+5.25% on a cumulative basis with the LIBOR component subject
to a minimum rate of 0.75%. The fully funded A-Note priced at L+3.25%
(with the LIBOR component of the rate subject to a minimum rate of
0.75%) resulting in an interest rate on our B-Note at initial funding of
$8 million of L+10.75% (with the LIBOR component subject to a minimum
rate of 0.75%). Upon the B-Note becoming fully funded at $15 million,
its effective interest rate will decrease to L+8.18% (with the LIBOR
component subject to a minimum rate of 0.75%).
RECENT DEVELOPMENTS
Subsequent to quarter end, on October 9, 2012, the Company originated a
senior loan collateralized by interests in an existing office building
located in Cincinnati, OH with a total commitment of $35.5 million
($26.9 million in outstanding principal). The loan has an interest rate
of L+5.35%, origination fee of 0.5%, exit fee of 0.5% and a term of 3
years. The initial unleveraged effective yield is 6.0%. In addition, on
November 5, 2012, the Company originated a $13.4 million senior loan
collateralized by an existing apartment complex located in Arlington,
VA. The loan has an interest rate of L+5.15%, origination fee of 1.0%,
exit fee of 0.5% and a term of 2 years. The initial unleveraged
effective yield is 6.2%.
INVESTMENT CAPACITY AND LIQUIDITY
As of November 6, 2012, the Company was in the closing process with
respect to approximately $150 million to $200 million of additional
loans pursuant to non-binding term sheets. In addition, the Company had
approximately $300 million of potential loans with soft quotes or
indicative terms provided, and approximately $550 million of potential
loans in other earlier stages of evaluation. Historically, the Company
has executed non-binding term sheets for a relatively small percentage
of evaluated loans. The Company operates in a competitive market for
investment opportunities and competition may limit its ability to
originate or acquire the investments in the pipeline. The consummation
of any of the loans in the pipeline depends upon, among other things,
one or more of the following: satisfactory completion of the Company’s
due diligence investigation and investment process, market conditions,
available liquidity, the Company’s agreement with the sponsor on the
terms and structure of such loan, and the execution and delivery of
satisfactory transaction documentation. In addition, the Company may
co-originate some of these loans with third parties. The Company cannot
provide any assurances that it will close or co-originate any of these
loans.
As of November 6, 2012, the Company had approximately $29.9 million in
cash and cash equivalents (excluding approximately $3.6 million of
restricted cash) and approximately $48.7 million available, subject to
the satisfaction of certain terms and conditions, in approved but
undrawn capacity under its secured funding facilities based on the
existing loans held for investment that have been pledged. Under the
secured funding facilities, the Company is required, among other
affirmative and negative covenants, to maintain a minimum liquidity of
$20.0 million, which the Company currently intends to meet by holding in
reserve cash or cash equivalents equal to such amount. Accordingly, as
of November 6, 2012, the Company had approximately $58.6 million of
capital available to fund additional investments, existing unfunded
commitments and other working capital items. Assuming that the Company
used such amount to make investments and was able to achieve a
debt-to-equity ratio of between 1-to-1 and 2-to-1, the Company had the
capacity to fund between approximately $100 million and approximately
$150 million of additional senior loans and its existing unfunded
commitments. As of November 6, 2012, the total unfunded commitments for
the Company’s existing loans held for investment were approximately
$34.1 million and borrowings under the Company’s secured funding
facilities were approximately $94.5 million.
THIRD QUARTER 2012 DIVIDEND
On September 21, 2012, the Company declared a dividend of $0.06 per
common share for the third quarter of 2012, which was paid on
October 11, 2012 to common shareholders of record as of October 2, 2012.
CONFERENCE CALL AND WEBCAST INFORMATION
The Company will host a webcast and conference call on Wednesday,
November 7, 2012, 9:00 AM Central Time (10:00 AM Eastern Time) to
discuss its financial results for the third quarter ended September 30,
2012.
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 our 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 (877)
883-0383. International callers can access the conference call by
dialing +1(412) 902-6506. All callers will need to enter the Participant
Elite Entry Number 9866246 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 November 20,
2012 to domestic callers by dialing (877) 344-7529 and to international
callers by dialing +1(412) 317-0088. For all replays, please reference
conference number 10018377. An archived replay will also be available on
a webcast link located on the Home page of the Investor Resources
section of our website.
ABOUT ARES COMMERCIAL REAL ESTATE CORPORATION
Ares Commercial Real Estate Corporation is a specialty finance company
that originates, invests in and manages middle-market commercial real
estate loans and other commercial real estate investments. Through its
national direct origination platform, Ares Commercial Real Estate
Corporation provides flexible financing solutions for middle-market
borrowers. Ares Commercial Real Estate Corporation intends to elect to
be taxed as a real estate investment trust commencing with its taxable
year ending December 31, 2012, and is externally managed by an affiliate
of Ares Management LLC, a global alternative asset manager with
approximately $56 billion in committed capital under management as of
September 30, 2012. For more information, please visit our website at 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, which relate to future
events or our 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 those described from time to
time in our filings with the Securities and Exchange Commission. Ares
Commercial Real Estate Corporation undertakes no duty to update any
forward-looking statements made herein or on the webcast/conference call.
AVAILABLE INFORMATION
Ares Commercial Real Estate Corporation’s filings with the Securities
and Exchange Commission, press releases, earnings releases and other
financial information are available on its website at www.arescre.com.
The contents of such website are not and should not be deemed to be
incorporated by reference herein.
|
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
|
|
|
As of
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,983
|
|
$
|
1,240
|
|
|
Restricted cash
|
|
1,922
|
|
—
|
|
|
Loans held for investment
|
|
190,539
|
|
4,945
|
|
|
Accrued interest receivable
|
|
871
|
|
3
|
|
|
Deferred financing costs, net
|
|
2,416
|
|
1,194
|
|
|
Other assets
|
|
522
|
|
205
|
|
|
Total assets
|
|
$
|
220,253
|
|
$
|
7,587
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Secured funding agreements
|
|
$
|
48,790
|
|
—
|
|
|
Escrow liability
|
|
1,922
|
|
—
|
|
|
Accrued expenses
|
|
812
|
|
123
|
|
|
Due to affiliate
|
|
1,284
|
|
827
|
|
|
Dividends payable
|
|
556
|
|
—
|
|
|
Refundable deposits
|
|
175
|
|
200
|
|
|
Interest payable
|
|
31
|
|
—
|
|
|
Total liabilities
|
|
53,570
|
|
1,150
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
Preferred stock, par value $0.01 per share, 50,000,000 and no shares
authorized at September 30, 2012 and December 31, 2011,
respectively, no shares issued and outstanding at September 30, 2012
and December 31, 2011
|
|
—
|
|
—
|
|
|
Common stock, par value $0.01 per share, 450,000,000 and 100,000
shares authorized at September 30, 2012 and December 31, 2011,
respectively, 9,267,162 and no shares issued and outstanding at
September 30, 2012 and December 31, 2011, respectively
|
|
92
|
|
—
|
|
|
Additional paid in capital — common stock
|
|
169,210
|
|
6,600
|
|
|
Accumulated deficit
|
|
(2,619
|
)
|
(163
|
)
|
|
Total stockholders’ equity
|
|
166,683
|
|
6,437
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
220,253
|
|
$
|
7,587
|
|
|
|
|
|
|
|
|
|
|
|
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
For the three
months ended
September 30,
2012
|
|
For the nine
months ended
September 30,
2012
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Net interest margin:
|
|
|
|
|
|
|
Interest income
|
|
$
|
1,889
|
|
$
|
4,397
|
|
|
Interest expense
|
|
(398
|
)
|
(1,090
|
)
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
1,491
|
|
3,307
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Management fees
|
|
625
|
|
1,044
|
|
|
Professional fees
|
|
292
|
|
706
|
|
|
General and administrative expenses
|
|
496
|
|
827
|
|
|
General and administrative expenses reimbursed to affiliate
|
|
632
|
|
951
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
2,045
|
|
3,528
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
(554
|
)
|
(221
|
)
|
|
|
|
|
|
|
|
|
Less income (loss) attributable to Series A convertible preferred
stock:
|
|
|
|
|
|
|
Quarterly preferred dividends
|
|
—
|
|
(102
|
)
|
|
Accretion of redemption premium
|
|
—
|
|
(572
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
(554
|
)
|
(895
|
)
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per common share
|
|
$
|
(0.06
|
)
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares of common stock outstanding
|
|
9,205,480
|
|
5,606,840
|
|
|
|
|
|
|
|
|
|
Basic and diluted dividends declared per share of common stock
|
|
$
|
0.06
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
Core Earnings is a non-GAAP financial measure that is used, among other
things, to compute incentive fees payable to the Company’s external
manager, Ares Commercial Real Estate Management LLC (“ACREM”). The
Company believes the disclosure of Core Earnings provides useful
information to investors regarding financial performance because it is
one method the Company uses to measure its financial conditions and
results of 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
defined as GAAP net income (loss) excluding non-cash equity compensation
expense, the incentive fee payable to ACREM, depreciation and
amortization (related to targeted investments that are structured as
debt to the extent 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). The amount will be also be adjusted to exclude one-time
events pursuant to changes in GAAP and certain other non-cash charges as
determined by ACREM and approved by a majority of the independent
directors of the Company. Core Earnings (loss) for the three and nine
months ended September 30, 2012 were approximately $(418) thousand or
$(0.05) per basic and diluted share and approximately $(693) thousand or
$(0.12) per basic and diluted share, respectively. Reconciliation of
Core Earnings (loss) to the most directly comparable GAAP financial
measure, net income (loss), is set forth in the table below for the
three and nine month periods ended September 30, 2012:
|
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2012
|
|
Nine Months Ended
September 30, 2012
|
|
|
|
|
Amount
|
|
Per share
|
|
Amount
|
|
Per Share
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(554
|
)
|
$
|
(0.06
|
)
|
$
|
(895
|
)
|
$
|
(0.16
|
)
|
|
Add back: non-cash stock-based compensation
|
|
136
|
|
0.01
|
|
202
|
|
0.04
|
|
|
Core Earnings (loss)
|
|
$
|
(418
|
)
|
$
|
(0.05
|
)
|
$
|
(693
|
)
|
$
|
(0.12
|
)
|
Ares Commercial Real Estate Corporation
Carl Drake, 404-814-5204
Source: Ares Commercial Real Estate Corporation
