Ares Commercial Real Estate Corporation Reports Fourth Quarter and Full Year 2012 Financial Results
Apr 01, 2013 8:00 AM
FOURTH QUARTER 2012 HIGHLIGHTS
-
Closed seven new senior loans totaling approximately
$187.2 million in commitments (approximately$162.1 million in outstanding principal) collateralized by multi-family apartment and office buildings -
Issued
$69.0 million (gross) aggregate principal balance of 7.000% Convertible Senior Notes due 2015 -
For the fourth quarter of 2012, earned net income of
$1.1 million or$0.12 per basic and diluted common share and Core Earnings of$1.3 million or$0.14 per basic and diluted common share -
Declared a fourth quarter 2012 dividend of
$0.25 per common share, which was paid on January 10, 2013
FULL-YEAR 2012 HIGHLIGHTS
-
Ended 2012 with fifteen loans totaling approximately
$405.7 million in commitments (approximately$356.7 million in outstanding principal) -
For full-year 2012, earned net income of
$0.2 million or$0.03 per basic and diluted common share and Core Earnings of$0.6 million or$0.09 per basic and diluted common share
SUMMARY OF FOURTH QUARTER AND FULL-YEAR 2012 FINANCIAL RESULTS
Net income attributable to common stockholders was
“We are pleased to end our first year as a public company with a strong
fourth quarter. We closed seven new senior loan commitments totaling
approximately
SUMMARY OF INVESTMENTS AT
At December 31, 2012, the Company had originated fifteen loans totaling
approximately
Portfolio at |
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(amounts in millions, except percentages) |
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Loan Type | Location |
Total Commitment (at closing) |
Outstanding Principal |
Carrying Amount(1) |
LTV At Origination(2) |
Interest Rate |
LIBOR Floor |
Unleveraged Effective Yield(3) |
Maturity Date(4) |
Payment Terms(5) |
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Transitional Senior Mortgage Loans | ||||||||||||||||||||||||||||
Apartment |
|
$ | 49.6 | $ | 43.4 | $ | 42.9 | (6) | 71 | % | L+4.80% | 0.5 | % | 5.9 | % |
|
I/O | |||||||||||
Office |
|
38.0 | 30.8 | 30.5 | 69 | % |
L+5.75%- |
(7) | 1.0 | % | 7.5 | % |
|
I/O | ||||||||||||||
Apartment |
|
36.1 | 30.8 | 30.5 | 81 | % | L+5.00% | 0.8 | % | 6.1 | % |
|
I/O | |||||||||||||||
Office |
|
35.5 | 26.9 | 26.7 | 67 | % | L+5.35% | (8) | 0.3 | % | 6.0 | % |
|
I/O | ||||||||||||||
Apartment |
|
26.3 | 22.7 | 22.5 | 81 | % |
L+5.75%- |
(9) | 0.2 | % | 6.5 | % |
|
I/O | ||||||||||||||
Apartment |
|
21.9 | 18.4 | 18.3 | 72 | % |
L+5.75%- |
(9) | 0.2 | % | 6.5 | % |
|
I/O | ||||||||||||||
Apartment |
|
21.8 | 18.6 | 18.4 | 83 | % |
L+5.75%- |
(9) | 0.2 | % | 6.5 | % |
|
I/O | ||||||||||||||
Apartment |
|
22.1 | 20.6 | 20.4 | 74 | % | L+4.25% | 1.0 | % | 5.8 | % |
|
I/O | |||||||||||||||
Office |
|
11.0 | 8.3 | 8.2 | 38 | % | L+5.50% | 1.0 | % | 7.3 | % |
|
I/O | |||||||||||||||
Stretch Senior Mortgage Loans | ||||||||||||||||||||||||||||
Office |
|
47.0 | 47.0 | 46.6 | (6) | 76 | % | L+5.25% | 1.0 | % | 6.6 | % |
|
I/O | ||||||||||||||
Office |
|
35.0 | 34.8 | 34.6 | 88 | % | L+5.65% | 0.7 | % | 6.8 | % |
|
P&I | |||||||||||||||
Apartment |
|
13.4 | 13.4 | 13.3 | 80 | % | L+5.15% | 0.3 | % | 6.1 | % |
|
I/O | |||||||||||||||
Subordinated Debt Investments | ||||||||||||||||||||||||||||
Apartment |
|
18.7 | 18.7 | (10) | 18.5 | 72 | %(13) | L+6.40% | (11) | 1.0 | % | 10.0 | % |
|
I/O | |||||||||||||
Office |
|
15.0 | (12) | 8.0 | 7.9 | 51 | %(13) |
L+10.75%- |
(14) | 0.8 | % | 12.1 | % |
|
I/O | |||||||||||||
Office |
|
14.3 | 14.3 | 14.2 | 75 | %(13) | 10.50% | (15) | — | 11.0 | % |
|
I/O | |||||||||||||||
Total/Average | $ | 405.7 | $ | 356.7 | $ | 353.5 | 7.4 | % |
(1) | The difference between the carrying amount and the outstanding principal face amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. | |
(2) | LTV At Origination is calculated as the initial outstanding principal at closing divided by the valuation of the property underlying the loan based on an appraisal of the property based on market conditions at the time of origination. | |
(3) | Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premium or discount) and assumes no dispositions, early prepayments or defaults. | |
(4) |
The |
|
(5) | P&I=principal and interest; I/O=interest only. | |
(6) | The Carrying Amount of this loan is above 10%, but less than 20%, of total assets of the Company. | |
(7) | The initial interest rate for this loan of L+5.75% steps down based on performance hurdles to L+5.25%. | |
(8) | The initial interest rate for this loan of L+5.35% steps down based on performance hurdles to L+5.00%. | |
(9) | The initial rate for this loan of L+5.75% steps down based on performance hurdles to L+5.00%. | |
(10) |
This loan was co-originated with a third party using an A/B
structure, with a cumulative interest rate of L + 4.10% and a LIBOR
minimum rate (“LIBOR Floor”) of 1.00%. The fully funded A-Note (held
by a third party) has an interest rate of L + 2.75% with no LIBOR
Floor and the Company’s B-Note receives the full benefit of the
LIBOR Floor on the full |
|
(11) | The B-Note has an initial interest rate of L + 6.40% subject to a 1.00% LIBOR floor (with the benefit of any difference between actual LIBOR and the LIBOR floor on the A-Note and B-Note accruing to the B-Note). | |
(12) |
The total commitment the Company co-originated was a |
|
(13) | LTV At Origination for this subordinated debt investment is calculated as the sum of outstanding principal at closing for the senior interest (held by a third party) and the subordinated interest (held by us) divided by the valuation reflected in the property appraisal. See Note (2). | |
(14) |
This loan was co-originated with a third party using an A/B
structure, with a cumulative interest rate of L + 5.25% and a LIBOR
floor of 0.75%. The fully funded A-Note (held by a third party) has
an interest rate of L + 3.25% with the LIBOR Floor, resulting in an
initial interest rate on our B-Note of L + 10.75% with the LIBOR
Floor. As the Company funds additional proceeds on the B-Note, the
interest rate will decrease and the fully funded B-Note ( |
|
(15) |
The interest rate for this loan increases to 11.0% on |
RECENT DEVELOPMENTS
On March 8, 2013, the Company entered into a loan assumption transaction
with a new sponsor group to facilitate the purchase of a Class B office
building in
On
On March 28, 2013, the Company co-originated an approximately
In addition, on March 29, 2013, the Company originated an approximately
INVESTMENT CAPACITY AND LIQUIDITY
As of
Once a formal financing commitment is obtained (subject to the terms of
the Company’s applicable secured funding facility) for the approximately
FOURTH QUARTER 2012 DIVIDEND
On November 7, 2012, the Company declared a dividend of
CONFERENCE CALL AND WEBCAST INFORMATION
The Company will host a webcast and conference call on Monday, April 1,
2013,
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 (888)-317-6003. International callers can access the conference call by dialing +1(412)-317-6061. All callers will need to enter the Participant Elite Entry Number 2103813 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 April 15, 2013 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 10025354. 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
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
AVAILABLE INFORMATION
Ares Commercial Real Estate Corporation’s filings with 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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ASSETS | |||||||
Cash and cash equivalents | $ | 23,390 | $ | 1,240 | |||
Restricted cash | 3,210 | — | |||||
Loans held for investment | 353,500 | 4,945 | |||||
Accrued interest receivable | 1,746 | 3 | |||||
Deferred financing costs, net | 5,168 | 1,194 | |||||
Other assets | 845 | 205 | |||||
Total assets | $ | 387,859 | $ | 7,587 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
LIABILITIES | |||||||
Secured financing agreements | $ | 144,256 | $ | — | |||
Convertible notes | 67,289 | — | |||||
Derivative liability | 1,825 | — | |||||
Accounts payable and accrued expenses | 1,788 | 323 | |||||
Due to affiliate | 1,320 | 827 | |||||
Dividends payable | 2,316 | — | |||||
Other liabilities | 3,627 | — | |||||
Total liabilities | 222,421 | 1,150 | |||||
Commitments and contingencies (Note 5) | |||||||
STOCKHOLDERS’ EQUITY | |||||||
Preferred stock, par value |
— | — | |||||
Common stock, par value |
92 | — | |||||
Additional paid in capital | 169,200 | 6,600 | |||||
Accumulated deficit | (3,854 | ) | (163 | ) | |||
Total stockholders’ equity | 165,438 | 6,437 | |||||
Total liabilities and stockholders’ equity | $ | 387,859 | $ | 7,587 |
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 |
For the Three- Months Ended |
For the Twelve- Months Ended |
For the Period from (Inception) to |
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Net interest margin: | ||||||||||||||
Interest income | $ | 4,881 | $ | 3 | $ | 9,278 | $ | 3 | ||||||
Interest expense (from secured funding facilities) |
(1,252 | ) | (39 | ) | (2,342 | ) | (39 | ) | ||||||
Net interest margin (loss) | 3,629 | (36 | ) | 6,936 | (36 | ) | ||||||||
Expenses: | ||||||||||||||
Other interest expense | 313 | — | 313 | — | ||||||||||
Management fees to affiliate | 621 | — | 1,665 | — | ||||||||||
Professional fees | 488 | 58 | 1,194 | 58 | ||||||||||
General and administrative expenses | 458 | 69 | 1,285 | 69 | ||||||||||
General and administrative expenses reimbursed to affiliate |
668 | — | 1,619 | — | ||||||||||
Total expenses | 2,548 | 127 | 6,076 | 127 | ||||||||||
Net income (loss) | 1,081 | (163 | ) | 860 | (163 | ) | ||||||||
Less income (loss) attributable to Series A |
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Preferred dividends | — | 0 | (102 | ) | — | |||||||||
Accretion of redemption premium | — | 0 | (572 | ) | — | |||||||||
Net income (loss) attributable to common |
$ | 1,081 | $ | (163 | ) | $ | 186 | $ | (163 | ) | ||||
Net income (loss) per common share: | ||||||||||||||
Basic and diluted earnings (loss) per common share |
$ | 0.12 | $ | (8.56 | ) | $ | 0.03 | $ | (8.56 | ) | ||||
Weighted average number of common |
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Basic weighted average shares of |
9,212,566 | 19,052 | 6,532,706 | 19,052 | ||||||||||
Diluted weighted average shares of |
9,267,162 | 19,052 | 6,567,309 | 19,052 |
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,
(in thousands, except share and per share data) |
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Three Months Ended |
Year Ended |
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$ in thousands, except per share amounts (unaudited) | Amount | Per Share | Amount | Per Share | ||||||||
Net income (loss) attributable to common stockholders | $ | 1,082 | $ | 0.12 | $ | 186 | $ | 0.03 | ||||
Add back: non-cash stock-based compensation | 136 | 0.01 | 338 | 0.05 | ||||||||
Add back: unrealized (gain) loss on derivative | 97 | 0.01 | 97 | 0.01 | ||||||||
Core Earnings (loss) | $ | 1,315 | $ | 0.14 | $ | 621 | $ | 0.09 |
Source: