Ares Commercial Real Estate (ACRE) Q4 2024 earnings summary

Executive summary

• Reported Q4 2024 GAAP net loss of $10.7 million ($0.20 per share) and full year GAAP net loss of $35 million ($0.64 per share); distributable earnings loss was $8.3 million ($0.15 per share) for Q4 and $44.6 million ($0.82 per share) for the year, with realized losses impacting results.

• Risk-rated four and five loans declined 34% year-over-year, and office exposure was reduced by 18%, reflecting progress in resolving underperforming assets.

• Enhanced balance sheet flexibility with lower leverage and higher liquidity, positioning for further resolution of underperforming assets.

• Adjusted quarterly dividend to $0.15 per share for Q1 2025 to align with strategic objectives and current earnings profile.

• Book value per share at year-end 2024 was $9.90, or $12.56 excluding the CECL reserve.

Financial highlights

• Reduced outstanding borrowings by $444 million (27%) in 2024, with leverage at $1.2 billion at Q4 end.

• Net debt-to-equity ratio (excluding CECL) at year-end 2024 was 1.6x, down from 1.9x at YE 2023.

• Loan portfolio reduced by $460 million to $1.7 billion at YE 2024, down 21% year-over-year.

• Collected $350 million in repayments for 2024, nearly double 2023, with $147 million in Q4 alone.

• Available capital increased by $80 million to over $200 million, up 66% sequentially from Q3 2024.

Outlook and guidance

• Focus remains on further reducing risk-rated four and five loans, office loans, and REO properties in 2025.

• Expect continued acceleration of repayments and a return to a more normalized cadence for new originations as market conditions improve.

• Higher liquidity and lower leverage may impact near-term earnings but provide flexibility for future growth.