Ares Commercial Real Estate Corporation Reports Third Quarter 2024 Results
Nov 07, 2024 6:00 AM
Third quarter GAAP net income (loss) of
Distributable Earnings(1) of
- Subsequent to three months ended
Declared fourth quarter 2024 dividend of
“During the third quarter, we continued to make progress on our objective of further strengthening our balance sheet position and resolving our risk rated 4 and 5 loans, which declined by 33%,” said
“We believe our balance sheet positioning is paramount in our ability to drive successful outcomes resolving our remaining underperforming assets,” said
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(1) |
Distributable Earnings (Loss) is a non-GAAP financial measure. Refer to Schedule I for the definition and reconciliation of Distributable Earnings (Loss). |
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COMMON STOCK DIVIDEND
On
On
ADDITIONAL INFORMATION
The Company issued a presentation of its third quarter 2024 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 “Third Quarter 2024 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 (800) 225-9448. International callers can access the conference call by dialing +1 (203) 518-9708. Please provide passcode ACREQ324. 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 Exchange Act of 1934, as amended. These statements relate to future events or the Company’s future performance or financial condition and include, but are not limited to, statements about the resolution of underperforming loans, reduction or increase of CECL reserve, increase of available borrowings, the industry, and the loan market. 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 global economic trends and economic conditions, including high inflation, slower growth, changes to fiscal and monetary policy, higher interest rates and currency fluctuations, as well as geopolitical instability, including conflicts between
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
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(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 |
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$ |
68,881 |
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$ |
110,459 |
|
Restricted cash ( |
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|
3,466 |
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|
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— |
|
Loans held for investment ( |
|
|
1,812,773 |
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2,126,524 |
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Current expected credit loss reserve |
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(144,068 |
) |
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(159,885 |
) |
Loans held for investment, net of current expected credit loss reserve |
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1,668,705 |
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1,966,639 |
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Loans held for sale ( |
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— |
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38,981 |
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Investment in available-for-sale debt securities, at fair value |
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27,005 |
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28,060 |
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Real estate owned held for investment, net ( |
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140,912 |
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83,284 |
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Real estate owned held for sale ( |
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14,509 |
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|
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— |
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Other assets ( |
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17,125 |
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|
52,354 |
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Total assets |
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$ |
1,940,603 |
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$ |
2,279,777 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES |
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Secured funding agreements |
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$ |
640,610 |
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$ |
639,817 |
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Notes payable |
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— |
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104,662 |
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Secured term loan |
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127,828 |
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149,393 |
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Collateralized loan obligation securitization debt (consolidated VIEs) |
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574,896 |
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|
723,117 |
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Due to affiliate |
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4,106 |
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|
4,135 |
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Dividends payable |
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13,809 |
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18,220 |
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Other liabilities ( |
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15,601 |
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|
14,584 |
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Total liabilities |
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1,376,850 |
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1,653,928 |
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Commitments and contingencies |
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STOCKHOLDERS' EQUITY |
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Common stock, par value |
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532 |
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|
532 |
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Additional paid-in capital |
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815,802 |
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812,184 |
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Accumulated other comprehensive income |
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|
190 |
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|
153 |
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Accumulated earnings (deficit) |
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(252,771 |
) |
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(187,020 |
) |
Total stockholders' equity |
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563,753 |
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|
625,849 |
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Total liabilities and stockholders' equity |
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$ |
1,940,603 |
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$ |
2,279,777 |
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ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(in thousands, except share and per share data) |
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(unaudited) |
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For the Three Months Ended
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For the Nine Months Ended
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue: |
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Interest income |
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$ |
39,345 |
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$ |
52,819 |
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$ |
124,225 |
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$ |
154,260 |
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Interest expense |
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(27,401 |
) |
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(29,745 |
) |
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(83,703 |
) |
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(79,695 |
) |
Net interest margin |
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11,944 |
|
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|
23,074 |
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40,522 |
|
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|
74,565 |
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Revenue from real estate owned |
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4,709 |
|
|
|
809 |
|
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11,619 |
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|
|
809 |
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Total revenue |
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16,653 |
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23,883 |
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52,141 |
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75,374 |
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Expenses: |
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Management and incentive fees to affiliate |
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2,654 |
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2,974 |
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8,114 |
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9,317 |
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Professional fees |
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|
681 |
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|
682 |
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|
1,971 |
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|
2,080 |
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General and administrative expenses |
|
|
1,939 |
|
|
|
1,691 |
|
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5,978 |
|
|
|
5,414 |
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General and administrative expenses reimbursed to affiliate |
|
|
871 |
|
|
|
775 |
|
|
|
3,280 |
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|
2,617 |
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Expenses from real estate owned |
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3,164 |
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|
|
480 |
|
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|
7,426 |
|
|
|
480 |
|
Total expenses |
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|
9,309 |
|
|
|
6,602 |
|
|
|
26,769 |
|
|
|
19,908 |
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Provision for current expected credit losses |
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|
7,461 |
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|
3,227 |
|
|
|
(17,182 |
) |
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|
44,373 |
|
Realized losses on loans |
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|
5,766 |
|
|
|
4,886 |
|
|
|
67,879 |
|
|
|
10,499 |
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Change in unrealized losses on loans held for sale |
|
|
— |
|
|
|
— |
|
|
|
(995 |
) |
|
|
— |
|
Income (loss) before income taxes |
|
|
(5,883 |
) |
|
|
9,168 |
|
|
|
(24,330 |
) |
|
|
594 |
|
Income tax expense (benefit), including excise tax |
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|
(3 |
) |
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|
(16 |
) |
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(1 |
) |
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|
48 |
|
Net income (loss) attributable to common stockholders |
|
$ |
(5,880 |
) |
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$ |
9,184 |
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|
$ |
(24,329 |
) |
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$ |
546 |
|
Earnings (loss) per common share: |
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Basic earnings (loss) per common share |
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$ |
(0.11 |
) |
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$ |
0.17 |
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$ |
(0.45 |
) |
|
$ |
0.01 |
|
Diluted earnings (loss) per common share |
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$ |
(0.11 |
) |
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$ |
0.17 |
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|
$ |
(0.45 |
) |
|
$ |
0.01 |
|
Weighted average number of common shares outstanding: |
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Basic weighted average shares of common stock outstanding |
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54,464,147 |
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54,085,035 |
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54,429,014 |
|
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54,339,441 |
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Diluted weighted average shares of common stock outstanding |
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54,464,147 |
|
|
|
54,796,413 |
|
|
|
54,429,014 |
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|
|
55,043,206 |
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Dividends declared per share of common stock(1) |
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$ |
0.25 |
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|
$ |
0.33 |
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|
$ |
0.75 |
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|
$ |
1.03 |
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(1) |
There is no assurance dividends will continue at these levels or at all. |
SCHEDULE I
Reconciliation of Net Income (Loss) to Non-GAAP Distributable Earnings (Loss)
Distributable Earnings (Loss) 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 (Loss) 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 (Loss) is defined as net income (loss) attributable to common stockholders computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fees the Company pays to its Manager, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and 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), one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between the Company’s Manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. Loan balances that are deemed to be uncollectible are written off as a realized loss and are included in Distributable Earnings (Loss). Distributable Earnings (Loss) is aligned with the calculation of “Core Earnings,” which is defined in the Management Agreement and is used to calculate 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 (Loss) 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 |
$ |
(5,880 |
) |
|
$ |
(63,742 |
) |
|
Stock-based compensation |
|
1,182 |
|
|
|
4,658 |
|
|
Incentive fees to affiliate |
|
— |
|
|
|
— |
|
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Depreciation and amortization of real estate owned |
|
967 |
|
|
|
3,331 |
|
|
Provision for current expected credit losses |
|
7,461 |
|
|
|
30,271 |
|
|
Realized gain on termination of interest rate cap derivative (1) |
|
— |
|
|
|
(105 |
) |
|
Unrealized losses on loans held for sale |
|
— |
|
|
|
— |
|
|
Distributable Earnings (Loss) |
$ |
3,730 |
|
|
$ |
(25,587 |
) |
|
|
|
|
|
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Net income (loss) attributable to common stockholders |
$ |
(0.11 |
) |
|
$ |
(1.17 |
) |
|
Stock-based compensation |
|
0.02 |
|
|
|
0.09 |
|
|
Incentive fees to affiliate |
|
— |
|
|
|
— |
|
|
Depreciation and amortization of real estate owned |
|
0.02 |
|
|
|
0.06 |
|
|
Provision for current expected credit losses |
|
0.14 |
|
|
|
0.56 |
|
|
Realized gain on termination of interest rate cap derivative (1) |
|
— |
|
|
|
— |
|
|
Unrealized losses on loans held for sale |
|
— |
|
|
|
— |
|
|
Basic Distributable Earnings (Loss) per common share |
$ |
0.07 |
|
|
$ |
(0.47 |
) |
|
|
|
|
|
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Net income (loss) attributable to common stockholders |
$ |
(0.11 |
) |
|
$ |
(1.17 |
) |
|
Stock-based compensation |
|
0.02 |
|
|
|
0.09 |
|
|
Incentive fees to affiliate |
|
— |
|
|
|
— |
|
|
Depreciation and amortization of real estate owned |
|
0.02 |
|
|
|
0.06 |
|
|
Provision for current expected credit losses |
|
0.14 |
|
|
|
0.56 |
|
|
Realized gain on termination of interest rate cap derivative (1) |
|
— |
|
|
|
— |
|
|
Unrealized losses on loans held for sale |
|
— |
|
|
|
— |
|
|
Diluted Distributable Earnings (Loss) per common share |
$ |
0.07 |
|
|
$ |
(0.47 |
) |
|
(1) |
For the twelve months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20241107316756/en/
INVESTOR RELATIONS CONTACTS
(888) 818-5298
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