In This Article:
-
GAAP Net Loss: $5.9 million or $0.11 per common share for Q3 2024.
-
Distributable Earnings: $3.7 million or $0.07 per common share, including a $5.8 million realized loss.
-
Distributable Earnings Excluding Realized Loss: $9.5 million or $0.17 per common share.
-
CECL Reserve: Approximately $146 million, representing about 8% of the total outstanding principal balance of loans held for investment.
-
Available Capital: $134 million as of November 5, 2024, an 11% increase compared to the second quarter.
-
Financial Leverage: Reduced to $1.3 billion, down 8% from $1.5 billion last quarter.
-
Net Debt-to-Equity Ratio: Declined to 1.8 times at the end of Q3, down from 1.9 times in Q2.
-
Dividend Declaration: $0.25 per common share for Q4 2024, payable on January 15, 2025.
Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
-
Ares Commercial Real Estate Corp (NYSE:ACRE) reduced its risk-rated 4 and 5 loans by approximately 33% during the third quarter, indicating progress in managing high-risk assets.
-
The company reported a full repayment of a $98 million risk-rated 5 Texas multifamily loan, with net proceeds exceeding the carrying value by $6.5 million.
-
Ares Commercial Real Estate Corp (NYSE:ACRE) has seen encouraging signs of improvement in the commercial real estate market, with increasing transaction activity and stabilizing property values.
-
The company has built its available liquidity to $134 million, an increase of 11% compared to the second quarter, enhancing financial flexibility.
-
Ares Commercial Real Estate Corp (NYSE:ACRE) declared a regular cash dividend of $0.25 per common share for the fourth quarter of 2024, reflecting a commitment to shareholder returns.
Negative Points
-
Ares Commercial Real Estate Corp (NYSE:ACRE) reported a GAAP net loss of approximately $5.9 million or $0.11 per common share for the third quarter of 2024.
-
The company incurred a realized loss of $5.8 million upon taking title to a North Carolina office property, which was in line with the CECL reserve.
-
A $163 million Illinois office loan was downgraded from a risk-rated 4 to a risk-rated 5, indicating potential challenges in the office market.
-
The overall CECL reserve increased by $8 million to approximately $146 million, reflecting higher reserves on existing loans.
-
Despite improvements, the office market remains challenged, with business plans taking longer to achieve, leading to more credit extensions.
Q & A Highlights
Q: Can you help us think about how long it will take to work through the scope of defaults in the commercial real estate market? A: The cycle of asset development and stabilization has been interrupted, but we're seeing acceleration in many asset classes. The office market remains uncertain, leading to credit extensions. We're focusing on resolving assets expeditiously while maintaining priority in debt versus equity. Positive signs have emerged over the last few quarters.