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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.

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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's Strategic Progress and Financial Performance

Ares Commercial Real Estate Corporation reported a GAAP net income of $5 million, or $0.08 per diluted common share, and distributable earnings of $6 million, or $0.10 per diluted common share for the third quarter. The actual EPS came out at $0.1, beating estimates of -$0.09. The company's net debt-to-equity ratio decreased to 1.1x, indicating a strong balance sheet. The company collected $498 million in repayments year-to-date, more than double the amount collected at the same time last year.

Publication Date: Nov -23

📋 Highlights
  • Earnings Performance:: GAAP net income of $5M ($0.08/share) and distributable earnings of $6M ($0.10/share), reflecting solid operational efficiency.
  • Balance Sheet Strength:: Net debt-to-equity ratio reduced to 1.1x, with $498M in repayments year-to-date (up 100% YoY), enhancing liquidity.
  • Office Portfolio Reduction:: Office loans decreased to $495M (-6% QoQ, -26% YoY), with 71% of remaining loans risk-rated 3 or better, mitigating sector risk.
  • Risk Loan Resolution Progress:: Resolved $11M risk-rated 4 loan and restructured $81M senior loan, targeting principal recovery while managing non-accruals.
  • New Loan Growth Focus:: $93M in Q3 and $270M in Q4 new commitments in core markets (multifamily, self-storage), leveraging Ares’ $6B in 12-month loan commitments.

Portfolio Rebalancing and Risk Management

The company made significant progress in addressing its risk-rated 4 and 5 loans, including the resolution of an $11 million previously risk-rated 4 loan and the restructuring of an $81 million senior loan. The office portfolio was reduced to $495 million, a 6% decrease quarter-over-quarter and 26% year-over-year. Five of the seven remaining office loans were risk-rated 3 or better, indicating a manageable risk profile. As Bryan Donohoe mentioned, they have insights and some control over the process, with progress toward resolution and strong market fundamentals.

New Loan Commitments and Growth Prospects

Ares Commercial Real Estate Corporation closed five new loan commitments totaling $93 million in the third quarter and $270 million in the fourth quarter, primarily in multifamily and self-storage properties. The company is well-positioned to capitalize on the expanded scale of the Ares Real Estate Platform, with over 740 real estate professionals and $6 billion in new loan commitments in the last 12 months. The company's goal is to return to portfolio growth in the first half of 2026, driven by continued resolutions on non-accrual loans and reinvesting proceeds to expand the loan portfolio.

Valuation and Dividend Yield

The company's dividend yield is approximately 14% based on the current stock price, which is attractive for income-seeking investors. The P/B Ratio is 0.52, indicating that the stock may be undervalued relative to its book value. Analysts estimate next year's revenue growth at -6.1%, which may impact the stock's valuation. However, the company's strong balance sheet and progress in addressing risk-rated loans may mitigate this impact.

Outlook and Market Fundamentals

The company sees itself as a lender in the industrial, multifamily, and self-storage asset classes, where it has core competencies and a "right to win" due to its equity background and orientation. The Real Estate market has reset, with values materially lower, and lenders can dictate terms, including lower Loan-To-Value attachment points. Multifamily demand has surprised to the upside, with 500,000 units absorbed nationally over the last 12 months, indicating a positive outlook for the next 3 to 4 years.

3. NewsRoom

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

Dec -01

Source: defenseworld.net

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Ares Commercial Real Estate (ACRE) Upgraded to Buy: What Does It Mean for the Stock?

Nov -18

Source: zacks.com

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Ares Commercial: No Light At The End Of This Tunnel

Nov -16

Source: seekingalpha.com

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I Found 2 Deep Value Picks: Buy These Bargains Before Dividends Soar

Nov -15

Source: seekingalpha.com

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Winners And Losers Of REIT Earnings Season

Nov -14

Source: seekingalpha.com

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Ares Commercial Real Estate Corporation: Discount Without A Bargain

Nov -13

Source: seekingalpha.com

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Ares Commercial Real Estate Corporation (ACRE) Q3 2025 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

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Ares Commercial Real Estate (ACRE) Surpasses Q3 Earnings and Revenue Estimates

Nov -07

Source: zacks.com

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

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Ares Commercial Real Estate

A-Score: 4.6/10

Value: 5.2

Growth: 1.4

Quality: 3.8

Yield: 10.0

Momentum: 1.5

Volatility: 5.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

5.1$

Current Price

5.1$

Potential

-0.00%

Expected Cash-Flows