Ares Commercial Real Estate (ACRE) Q3 2024 earnings summary

Executive summary

• Reported GAAP net loss of $5.9 million, or $(0.11) per diluted share, for Q3 2024; Distributable Earnings were $3.7 million, or $0.07 per diluted share, with distributable earnings excluding realized losses at $0.17 per share.

• Focused on improving balance sheet flexibility, liquidity, and resolving higher risk-rated assets, with risk-rated four and five loans reduced by 33% during the quarter and now representing 17% of the portfolio, down over 40% since year-end 2023.

• Declared a regular cash dividend of $0.25 per share for Q4 2024, payable January 15, 2025.

• Book value per share was $10.34 as of September 30, 2024, or $13.01 excluding CECL reserve.

• Positive market sentiment and increased transaction activity are supporting deleveraging and liquidity goals.

Financial highlights

• Total revenue for Q3 2024 was $16.7 million, down from $23.9 million in Q3 2023; interest income was $39.3 million, and net interest margin was $11.9 million.

• Provision for current expected credit losses was $7.5 million in Q3 2024, up from $3.2 million in Q3 2023.

• Realized losses on loans were $5.8 million in Q3 2024; for the nine months, realized loan losses totaled $67.9 million.

• Received $4 million in cash interest from non-accrual loans, not reflected in Q3 earnings.

• Outstanding borrowings declined to $1.3 billion, down 8% from the prior quarter.

Outlook and guidance

• Expect to complete balance sheet deleveraging and liquidity strengthening by year-end 2024, with further repayments and accelerated resolution of risk-rated four and five loans into 2025.

• Origination pipeline is robust, with over $3 billion in platform originations in Q3, more than double the prior year.

• Management anticipates sufficient liquidity for operating and investing activities for at least the next 12 months, with $134 million in liquidity as of November 5, 2024.

• Continued focus on reducing debt, increasing liquidity, and resolving underperforming loans.