Download PDF

1. Company Snapshot

1.a. Company Description

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States.The company provides a range of financing solutions for the owners, operators, and sponsors of CRE properties.It originates senior mortgage loans, subordinate debt products, mezzanine loans, real estate preferred equity investments, and other CRE investments, including commercial mortgage backed securities.


The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986.Ares Commercial Real Estate Management LLC operates as the manager of the company.The company was incorporated in 2011 and is based in New York, New York.

Show Full description

1.b. Last Insights on ACRE

Ares Commercial Real Estate Corporation's recent performance was driven by several positive factors. The company's Q1 2025 earnings beat expectations, with a loss of $0.07 per share, compared to a loss of $0.62 per share a year ago. This improvement in earnings, combined with a stabilization of its loan portfolio, showing no new loan losses in Q1 and positive distributable profits, signals a potential turnaround. The dividend was also right-sized after two cuts, and payout metrics are improving, making a third cut unlikely. Additionally, the company's shares trade at a significant discount to book value, presenting a compelling rebound opportunity for 2025 as the business stabilizes. The upgrade to a Zacks Rank #1 (Strong Buy) also indicates growing optimism about its earnings prospects.

1.c. Company Highlights

2. Ares Commercial Real Estate Corporation's Earnings: A Closer Look

Ares Commercial Real Estate Corporation (ACRE) reported a GAAP net loss of $1 million or $0.02 per diluted common share and a distributable earnings loss of $7 million or $0.12 per diluted common share for full year 2025. However, the company's distributable earnings for the fourth quarter were $8 million or $0.15 per diluted common share, beating analyst estimates of $0.01. The actual EPS came out at $0.15, a significant improvement from the expected $0.01. ACRE's loan portfolio grew to an outstanding principal balance of $1.6 billion, a 24% increase from 2025, driven by 13 new loan commitments totaling $486 million in 2025, with more than 50% collateralized by residential and industrial properties.

Publication Date: Feb -16

📋 Highlights
  • GAAP Net Loss: Full year 2025 reported a $1 million GAAP net loss ($0.02/share), with distributable earnings loss of $7 million ($0.12/share).
  • Loan Portfolio Growth: Outstanding principal balance reached $1.6 billion, up 24% YoY, driven by $486 million in new loan commitments.
  • Portfolio Rebalancing: Office loans reduced by 30% to $447 million YoY, exiting a $140 million Chicago office loan and $130 million Brooklyn residential loan.
  • Leverage Strategy: Q4 leverage rose to 1.6x (vs. 1.1x prior), with plans to peak at 2.0x and reduce to a 3.0x long-term target.
  • Dividend Declaration: Board declared $0.15/share regular cash dividend for 2026, reflecting confidence in earnings recovery.

Leverage and Capital Structure

ACRE's leverage increased to 1.6x in the fourth quarter from 1.1x in the previous quarter, with the company expecting its leverage to peak at around 2.0x in the near term and then decrease to its long-term target of 3.0x debt-to-equity as they resolve four to five rate loans. The company's net debt to equity ratio excluding CECL was 1.6 times, and it maintained available capital of $110 million at the end of the fourth quarter. ACRE's management believes that they can maintain a durable capital structure and generate yields through a bottom-up approach to asset selection.

Portfolio Composition and Origination Activity

The company's portfolio includes a mix of loan types, with a reduced exposure to office loans, down 30% since year-end 2024 to $447 million. ACRE closed 13 new loan commitments totaling $486 million in 2025, and the company's origination activity picked up in the fourth quarter, although management does not expect this to be a consistent run rate going into 2026. Instead, originations will depend on repayments of existing assets. The company has the capacity to originate a significant volume of loans and has a facility with Ares that allows for warehousing assets.

Valuation and Outlook

Analysts estimate next year's revenue growth at 22.9%. With a P/B Ratio of 0.56 and a Dividend Yield of 11.61%, ACRE's valuation appears attractive. The company's goal is to prove out book value over time while advancing its efforts to rebuild earnings. ACRE's management remains focused on resolving their legacy assets and is optimistic about the current opportunity set in commercial real estate finance, targeting low to mid-double-digit returns on equity (ROE) for new originations.

Management's Confidence and Future Expectations

ACRE's CEO, Bryan Donohoe, expressed confidence in the company's earnings potential and its strategy to drive growth through active deployment and a strategic approach to leverage. The company is focused on resolving its remaining risk-rated four and five loans, including a Chicago office loan with a carrying value of $140 million and a Brooklyn, New York residential condominium loan with a carrying value of $130 million. As ACRE's management noted, "the opportunity set [in commercial real estate finance] is expected to expand over the coming months as volatility in the equity and fixed-income markets affects the origination side."

3. NewsRoom

Card image cap

Is Ares Commercial Real Estate (ACRE) Outperforming Other Finance Stocks This Year?

Mar -24

Source: zacks.com

Card image cap

Invesco Mortgage Capital (NYSE:IVR) & Ares Commercial Real Estate (NYSE:ACRE) Financial Contrast

Mar -19

Source: defenseworld.net

Card image cap

March Madness Dividends: Why We Are Betting On The Rebound

Mar -07

Source: seekingalpha.com

Card image cap

Are Finance Stocks Lagging Ares Commercial Real Estate (ACRE) This Year?

Mar -05

Source: zacks.com

Card image cap

Ares Commercial Real Estate (NYSE:ACRE) Stock Price Passes Above 200-Day Moving Average – Here’s What Happened

Mar -05

Source: defenseworld.net

Card image cap

Ares Commercial Real Estate (NYSE:ACRE) Stock Passes Above 200 Day Moving Average – What’s Next?

Feb -25

Source: defenseworld.net

Card image cap

Is Ares Commercial Real Estate (ACRE) Stock Outpacing Its Finance Peers This Year?

Feb -17

Source: zacks.com

Card image cap

Ares Commercial Real Estate Corporation (NYSE:ACRE) Receives Consensus Rating of “Reduce” from Analysts

Feb -14

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.93%)

6. Segments

Commercial Real Estate Loans and Related Investments

Expected Growth: 7.93%

Ares Commercial Real Estate Corporation's 7.93% growth in Commercial Real Estate Loans and Related Investments is driven by increasing demand for commercial properties, low interest rates, and a strong economy. Additionally, the company's diversified portfolio, strategic originations, and effective risk management contribute to its growth.

7. Detailed Products

Commercial Mortgage Loans

Ares Commercial Real Estate Corporation provides commercial mortgage loans for property owners and investors to acquire, refinance, or reposition commercial properties.

Bridge Loans

Ares Commercial Real Estate Corporation offers bridge loans for short-term financing needs, providing quick access to capital for commercial property acquisitions, renovations, or repositioning.

Construction Loans

Ares Commercial Real Estate Corporation provides construction loans for developers and builders to finance ground-up construction, renovation, or redevelopment projects.

Mezzanine Financing

Ares Commercial Real Estate Corporation offers mezzanine financing solutions to provide additional capital for commercial property acquisitions, renovations, or repositioning.

Preferred Equity

Ares Commercial Real Estate Corporation provides preferred equity investments for commercial property owners and developers seeking additional capital without diluting ownership.

Asset Management Services

Ares Commercial Real Estate Corporation offers asset management services to optimize property performance, reduce costs, and enhance value for commercial property owners and investors.

8. Ares Commercial Real Estate Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Ares Commercial Real Estate Corporation is moderate, as there are alternative options for customers, but they are not highly attractive.

Bargaining Power Of Customers

The bargaining power of customers for Ares Commercial Real Estate Corporation is low, as customers have limited options and the company has a strong market presence.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Ares Commercial Real Estate Corporation is moderate, as suppliers have some negotiating power, but the company has a diversified supply chain.

Threat Of New Entrants

The threat of new entrants for Ares Commercial Real Estate Corporation is high, as the industry has low barriers to entry and new companies can easily enter the market.

Intensity Of Rivalry

The intensity of rivalry for Ares Commercial Real Estate Corporation is high, as the industry is highly competitive and companies are constantly competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 72.10%
Debt Cost 6.79%
Equity Weight 27.90%
Equity Cost 11.20%
WACC 8.02%
Leverage 258.37%

11. Quality Control: Ares Commercial Real Estate Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
TPG RE Finance Trust

A-Score: 6.9/10

Value: 6.2

Growth: 5.1

Quality: 5.8

Yield: 10.0

Momentum: 6.0

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
New York Mortgage Trust

A-Score: 6.7/10

Value: 6.5

Growth: 2.4

Quality: 5.9

Yield: 10.0

Momentum: 7.5

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
Invesco Mortgage Capital

A-Score: 6.5/10

Value: 6.6

Growth: 3.2

Quality: 6.0

Yield: 10.0

Momentum: 5.0

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
NexPoint Real Estate Finance

A-Score: 5.9/10

Value: 6.5

Growth: 2.2

Quality: 6.5

Yield: 10.0

Momentum: 3.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Ares Commercial Real Estate

A-Score: 4.9/10

Value: 5.4

Growth: 1.8

Quality: 4.4

Yield: 10.0

Momentum: 2.5

Volatility: 5.3

1-Year Total Return ->

View Full Report
Stock-Card
Great Ajax

A-Score: 4.3/10

Value: 5.3

Growth: 0.2

Quality: 2.5

Yield: 10.0

Momentum: 6.0

Volatility: 2.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

4.76$

Current Price

4.76$

Potential

-0.00%

Expected Cash-Flows