Ares Commercial Real Estate Corporation Reports First Quarter 2023 Results
May 02, 2023 6:00 AM
First quarter GAAP net loss of
- Subsequent to end of first quarter -
Declared second quarter 2023 dividend of
“Our results this quarter demonstrated not only another period of healthy investment returns as we benefited from higher interest rates, but also solid progress with respect to resolving watch list assets,” said
“We continued to build liquidity and operate with strong capital levels throughout the quarter,” said
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(1) Distributable Earnings is a non-GAAP financial measure. Refer to Schedule I for the definition and reconciliation of Distributable Earnings.
COMMON STOCK DIVIDEND
On
On
ADDITIONAL INFORMATION
The Company issued a presentation of its first quarter 2023 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 “First Quarter 2023 Earnings Presentation.” The Company also filed its Quarterly Report on Form 10-Q for the quarter ended
CONFERENCE CALL AND WEBCAST INFORMATION
On
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 (877) 407-0312. International callers can access the conference call by dialing +1 (201) 389-0899. 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
ABOUT
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 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 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, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, currency fluctuations and challenges in the supply chain; the level of lending and borrowing spreads and interest rates, commercial real estate loan volumes, the ongoing impact of the COVID-19 pandemic on the
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) |
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As of |
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(unaudited) |
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ASSETS |
|
|
|
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Cash and cash equivalents |
$ |
153,764 |
|
|
$ |
141,278 |
|
Loans held for investment ( |
|
2,173,205 |
|
|
|
2,264,008 |
|
Current expected credit loss reserve |
|
(87,502 |
) |
|
|
(65,969 |
) |
Loans held for investment, net of current expected credit loss reserve |
|
2,085,703 |
|
|
|
2,198,039 |
|
Loans held for sale, at fair value |
|
27,375 |
|
|
|
— |
|
Investment in available-for-sale debt securities, at fair value |
|
28,007 |
|
|
|
27,936 |
|
Other assets ( |
|
149,471 |
|
|
|
155,749 |
|
Total assets |
$ |
2,444,320 |
|
|
$ |
2,523,002 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
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|
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LIABILITIES |
|
|
|
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Secured funding agreements |
$ |
698,153 |
|
|
$ |
705,231 |
|
Notes payable |
|
104,509 |
|
|
|
104,460 |
|
Secured term loan |
|
149,247 |
|
|
|
149,200 |
|
Collateralized loan obligation securitization debt (consolidated VIEs) |
|
735,839 |
|
|
|
777,675 |
|
Due to affiliate |
|
3,899 |
|
|
|
5,580 |
|
Dividends payable |
|
19,346 |
|
|
|
19,347 |
|
Other liabilities ( |
|
15,024 |
|
|
|
13,969 |
|
Total liabilities |
|
1,726,017 |
|
|
|
1,775,462 |
|
Commitments and contingencies |
|
|
|
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STOCKHOLDERS' EQUITY |
|
|
|
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Common stock, par value |
|
537 |
|
|
|
537 |
|
Additional paid-in capital |
|
813,748 |
|
|
|
812,788 |
|
Accumulated other comprehensive income |
|
3,129 |
|
|
|
7,541 |
|
Accumulated earnings (deficit) |
|
(99,111 |
) |
|
|
(73,326 |
) |
Total stockholders' equity |
|
718,303 |
|
|
|
747,540 |
|
Total liabilities and stockholders' equity |
$ |
2,444,320 |
|
|
$ |
2,523,002 |
|
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) |
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For the three months ended |
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2023 |
|
2022 |
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|
(unaudited) |
|
(unaudited) |
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Revenue: |
|
|
|
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Interest income |
$ |
49,500 |
|
|
$ |
33,364 |
|
Interest expense |
|
(22,999 |
) |
|
|
(12,013 |
) |
Net interest margin |
|
26,501 |
|
|
|
21,351 |
|
Revenue from real estate owned |
|
— |
|
|
|
2,672 |
|
Total revenue |
|
26,501 |
|
|
|
24,023 |
|
Expenses: |
|
|
|
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Management and incentive fees to affiliate |
|
3,010 |
|
|
|
2,974 |
|
Professional fees |
|
771 |
|
|
|
778 |
|
General and administrative expenses |
|
1,685 |
|
|
|
1,613 |
|
General and administrative expenses reimbursed to affiliate |
|
732 |
|
|
|
834 |
|
Expenses from real estate owned |
|
— |
|
|
|
4,309 |
|
Total expenses |
|
6,198 |
|
|
|
10,508 |
|
Provision for current expected credit losses |
|
21,019 |
|
|
|
(594 |
) |
Realized losses on loans sold |
|
5,613 |
|
|
|
— |
|
Gain on sale of real estate owned |
|
— |
|
|
|
2,197 |
|
Income (loss) before income taxes |
|
(6,329 |
) |
|
|
16,306 |
|
Income tax expense, including excise tax |
|
110 |
|
|
|
105 |
|
Net income (loss) attributable to common stockholders |
$ |
(6,439 |
) |
|
$ |
16,201 |
|
Earnings per common share: |
|
|
|
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Basic and diluted earnings (loss) per common share |
$ |
(0.12 |
) |
|
$ |
0.34 |
|
Weighted average number of common shares outstanding: |
|
|
|
||||
Basic weighted average shares of common stock outstanding |
|
54,591,650 |
|
|
|
47,204,397 |
|
Diluted weighted average shares of common stock outstanding |
|
54,591,650 |
|
|
|
47,654,549 |
|
Dividends declared per share of common stock(1) |
$ |
0.35 |
|
|
$ |
0.35 |
|
(1) |
There is no assurance dividends will continue at these levels or at all. |
SCHEDULE I
Reconciliation of Net Income to Non-GAAP Distributable Earnings
Distributable Earnings 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 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 is defined as net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, 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 is set forth in the table below for the three months and twelve months ended
|
For the three months ended |
|
For the twelve months ended |
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Net income (loss) attributable to common stockholders |
$ |
(6,439 |
) |
|
$ |
7,145 |
|
Stock-based compensation |
|
960 |
|
|
|
3,070 |
|
Incentive fees to affiliate |
|
— |
|
|
|
3,084 |
|
Provision for current expected credit losses |
|
21,019 |
|
|
|
67,673 |
|
Realized gain on termination of interest rate cap derivative(1) |
|
(457 |
) |
|
|
(1,496 |
) |
Distributable Earnings |
$ |
15,083 |
|
|
$ |
79,476 |
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders |
$ |
(0.12 |
) |
|
$ |
0.13 |
|
Stock-based compensation |
|
0.02 |
|
|
|
0.06 |
|
Incentive fees to affiliate |
|
— |
|
|
|
0.06 |
|
Provision for current expected credit losses |
|
0.39 |
|
|
|
1.26 |
|
Realized gain on termination of interest rate cap derivative(1) |
|
(0.01 |
) |
|
|
(0.03 |
) |
Basic Distributable Earnings per common share |
$ |
0.28 |
|
|
$ |
1.49 |
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders |
$ |
(0.12 |
) |
|
$ |
0.13 |
|
Stock-based compensation |
|
0.02 |
|
|
|
0.06 |
|
Incentive fees to affiliate |
|
— |
|
|
|
0.06 |
|
Provision for current expected credit losses |
|
0.38 |
|
|
|
1.25 |
|
Realized gain on termination of interest rate cap derivative(1) |
|
(0.01 |
) |
|
|
(0.03 |
) |
Diluted Distributable Earnings per common share |
$ |
0.27 |
|
|
$ |
1.47 |
(1) |
For the three and twelve months ended |
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