Acquisition of DUS® Lender with $3.9 Billion Servicing
Portfolio
Expands ACRE’s Product Offering Into Fannie Mae and FHA Loans
CHICAGO--(BUSINESS WIRE)--
Ares Commercial Real Estate Corporation (NYSE: ACRE) announced today
that it has entered into a definitive agreement to acquire EF&A Funding,
L.L.C, d/b/a Alliant Capital LLC from The Alliant Company, LLC and
Alliant, Inc., for approximately $62.8 million through a combination of
cash and stock. Under the terms of the transaction, Alliant Capital LLC
is expected to become a wholly owned taxable REIT subsidiary of ACRE.
Alliant Capital, Ltd., which on a national scale provides tax credit
equity for the financing and development of affordable housing, is not
included in the acquisition and will remain a part of The Alliant
Company.
With approximately 90 employees located across 15 offices throughout the
U.S., Alliant Capital LLC is a financial services company focused on
multi-family lending that has developed a significant origination, asset
management and servicing platform. Alliant Capital LLC has primarily
originated and serviced multi-family loans through the Fannie Mae
Delegated Underwriting and Servicing (DUS®) program.
As of March 31, 2013, Alliant Capital LLC had a servicing portfolio of
approximately $3.9 billion in multi-family loans with mortgage servicing
rights as of December 31, 2012 at a fair value of approximately $61.0
million. For the five-year period ending December 31, 2012, Alliant’s
loan originations have increased at a compound annual growth rate of
12.7%, and loan originations exceeded $600 million for 2012. Recently,
Alliant Capital LLC was approved to originate loans insured by the
Federal Housing Administration (FHA) and to securitize those loans
through the Government National Mortgage Association (Ginnie Mae).
“This highly strategic transaction with Alliant Capital LLC will enable
ACRE to better meet the short- and long-term financing needs of
multi-family owner/operators in an asset class that has performed well
over the long-term, especially in the past five years,” said John
Bartling, Chief Executive Officer of Ares Commercial Real Estate
Corporation. “We expect that the transaction will benefit shareholders
by being accretive to earnings as revenue synergies follow the
advancements of scale.”
ACRE expects the transaction to be accretive to its earnings per share
and provide several strategic benefits for shareholders:
-
Accelerates Scaling of ACRE and Enhances Market Presence: Alliant
Capital LLC’s national direct origination platform focused on Fannie
Mae and FHA/Ginnie Mae multi-family loans (Agency loans) will provide
further scale to ACRE’s platform and enhance its direct origination
capabilities. ACRE’s market capabilities will expand considerably
given the growth from 25 to 89 mortgage professionals for ACRE
resulting from the transaction.
-
Broadens Product Offerings to Unlock Revenue Opportunities:
Currently, ACRE provides transitional “bridge loans” to multi-family
owners/operators that ultimately seek permanent financing through U.S.
Department of Housing and Urban Development (HUD) or Fannie Mae loans.
Alliant Capital LLC’s focus on long-term multi-family Agency loans
will expand ACRE’s product offering and extend relationships with
borrowers. ACRE can now provide a complete turnkey financial solution
for multi-family owners/operators seeking short- and long-term
financing options. Alliant Capital LLC’s new approval to provide
FHA/Ginnie Mae loans could also provide incremental revenue growth.
-
Diversifies Revenues and Provides Predictable Servicing Cash Flows:
The addition of Alliant Capital LLC’s $3.9 billion servicing portfolio
consisting of approximately 1,000 loans diversifies ACRE’s revenue
stream by adding more predictable servicing income and extending the
duration of ACRE’s portfolio. The combination of ACRE’s direct lending
model with the fee-based origination and servicing revenues of Alliant
Capital LLC should result in improved balance sheet and cost
efficiencies. Equally as important, we believe the self-funding nature
of the Alliant Capital, LLC business provides a more durable growth
platform that minimizes capital markets volatility risk.
-
High Barriers to Entry Enhances Opportunity: There are high
barriers to entry into DUS lending due to the limited number of Fannie
Mae DUS® lenders. In addition, the strict
multi-family approval standards for other GSEs and FHA/Ginnie Mae
create further barriers. Therefore, the long-term competitive
landscape remains favorable, particularly for GSE-approved and
FHA/Ginnie Mae-approved providers, which collectively account for
approximately 60% of multi-family market.
Separately, the ACRE Board announced that Todd Schuster, current ACRE
Board Member, a board member of an affiliate of Alliant Capital LLC, and
the Founder and former Chief Executive Officer of CW Financial Services
from 1991 until 2009, has been appointed to join Mr. Bartling as Co-CEO
effective June 1, 2013.
“We are delighted to have Todd’s leadership in growing the ACRE
platform. As a leading commercial real estate finance CEO, Todd’s
significant insights in running GSE and FHA/Ginnie Mae platforms will be
invaluable to the success of this acquisition,” added Mr. Bartling.
“With the acquisition of Alliant Capital LLC, we believe that ACRE will
be well-positioned for significant growth as a non-bank lender with a
full service product suite and balance sheet capability in the $390
billion multi-family market,” said Mr. Schuster, Co-Chief Executive
Officer of Ares Commercial Real Estate Corporation effective June 1,
2013. “We expect that the higher return and less capital intensive
nature of Alliant Capital LLC’s origination and servicing platform will
benefit ACRE shareholders. We are also excited about bringing on
Alliant’s highly experienced management team led by industry veteran Ed
Hurley, with whom I look forward to working closely.”
The Alliant Company and Alliant, Inc. will receive 588,235 shares
currently valued at approximately $9.9 million, using Ares Commercial
Real Estate Corporation’s closing stock price on May 14, 2013, plus an
additional $52.9 million in cash, subject to certain adjustments. The
cash portion of the transaction may be financed through additional debt
financing, potential issuances of common or preferred stock and/or the
repayment or sale of certain assets.
ACRE’s acquisition of Alliant Capital LLC is subject to appropriate GSE
governmental and regulatory approvals, certain lender consents and other
customary closing conditions. The transaction is expected to close in
the second half of 2013. However, there can be no assurance that the
transaction will be completed during this period or at all.
Credit Suisse Securities (USA) LLC acted as financial advisor to Ares
Commercial Real Estate Corporation in connection with the transaction.
CONFERENCE CALL AND WEBCAST INFORMATION
The Company will host a webcast and conference call on Wednesday, May
15, 2013, 9:00 AM Central Time (10:00 AM Eastern Time) to discuss the
transaction during its regularly scheduled earnings for the quarter
ended March 31, 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 the
Company’s 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 4229219 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 May 30, 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 +1 (412)-317-0088. An archived replay
will also be available on a webcast link located on the Home page of the
Investor Resources section of the Company’s 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 and is externally managed by
an affiliate of Ares Management LLC, a global alternative asset manager
with approximately $59 billion in committed capital under management as
of March 31, 2013. For more information, please visit ACRE’s website at
arescre.com.
About Alliant Capital LLC
The Alliant Companies are a family of privately owned, fully integrated
national finance and investment firms with offices throughout the United
States. The companies are comprised of five independent companies with
assets under management in excess of $9.2 billion. The Alliant Company
offers a comprehensive range of products and services including tax
credit syndication for the development and financing of affordable
housing and distributed solar energy systems, multifamily debt,
development, management and real estate ownership. Alliant Capital LLC
is a member of the Alliant family and serves as a resource for
nationwide multifamily debt and equity financing utilizing the Fannie
Mae DUS® platform. Currently positioned as a leading financier to the
multifamily industry, the company provides integrated origination,
underwriting and loan servicing to its clients with convenience,
financial stability and flexibility.
Forward-Looking Statements
Statements included herein 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.
Ares Commercial Real Estate Corporation
Carl Drake, 888-818-5298
[email protected]
Source: Ares Commercial Real Estate Corporation