Ares Commercial Real Estate Corp. Files 2023 Annual Report (10-K)

TL;DR

<b>Ares Commercial Real Estate Corp. has filed its 2023 10-K annual report detailing financial performance and operational data.</b>

AI Summary

Ares Commercial Real Estate Corp (ACRE) filed a Annual Report (10-K) with the SEC on February 22, 2024. Filed 10-K for the fiscal year ended December 31, 2023. The filing covers the period from January 1, 2023, to December 31, 2023. Includes financial data for the fiscal years 2023, 2022, and 2021. Details on secured funding agreements, secured term loans, and secured borrowings are provided for 2023, 2022, and 2021. Information on building and building improvements, and furniture and fixtures as of December 31, 2023.

Why It Matters

For investors and stakeholders tracking Ares Commercial Real Estate Corp, this filing contains several important signals. This 10-K filing provides a comprehensive overview of Ares Commercial Real Estate Corp.'s financial health and operational activities for the fiscal year 2023, crucial for investors assessing the company's performance and future prospects. The detailed financial data, including segment information and various debt instruments, allows stakeholders to understand the company's asset base, liabilities, and funding strategies.

Risk Assessment

Risk Level: medium — Ares Commercial Real Estate Corp shows moderate risk based on this filing. The filing is a standard 10-K, which is a comprehensive annual report. While it contains detailed financial information, it does not inherently signal immediate positive or negative developments beyond the typical disclosure of a company's annual financial standing.

Analyst Insight

Review the detailed financial statements and risk factors within the 10-K to understand Ares Commercial Real Estate Corp.'s performance and potential risks for the 2023 fiscal year.

Key Numbers

• 2023-12-31 — Period End Date (Conformed period of report)
• 2024-02-22 — Filing Date (Date the 10-K was filed)
• 2023 — Fiscal Year (Primary fiscal year covered by the report)
• 2022 — Prior Fiscal Year (Financial data comparison)
• 2021 — Prior Fiscal Year (Financial data comparison)

Key Players & Entities

• Ares Commercial Real Estate Corp. (company) — Filer of the 10-K
• 2023-12-31 (date) — Conformed period of report
• 2024-02-22 (date) — Filed as of date
• 245 PARK AVENUE (address) — Business and mail address
• NEW YORK (location) — City for business and mail address
• MD (location) — State of incorporation

FAQ

Industry Context

Ares Commercial Real Estate Corp. operates within the Real Estate Investment Trusts (REITs) sector, focusing on commercial real estate debt and equity investments.

Regulatory Implications

The filing is made under the Securities Exchange Act of 1934, requiring public companies to submit annual reports detailing their financial condition.

What Investors Should Do

1. Analyze the financial statements for the fiscal year ended December 31, 2023, comparing them to prior years.
2. Review any disclosed risk factors related to the company's operations and market conditions.
3. Examine details on secured funding agreements, term loans, and borrowings to understand the company's leverage and financing structure.

Key Dates

• 2023-12-31: Fiscal Year End — End of the reporting period for the 10-K.
• 2024-02-22: Filing Date — Date the 10-K was officially submitted to the SEC.

Year-Over-Year Comparison

This filing is the 2023 annual report (10-K), providing a comprehensive update on the company's financial position and operations compared to previous filings.

Key Financial Figures

• $0.01 — nge on which registered Common Stock, $0.01 par value per share ACRE New York Stock
• $10.15 — ed on the closing price on that date of $10.15 on the New York Stock Exchange, was app
• $150.0 million — tents As of December 31, 2023, we had $150.0 million outstanding under our $150.0 million Cr
• $105.0 million — Loan"). As of December 31, 2023, we had $105.0 million outstanding under one recourse note agr
• $894.8 million — ance under the Financing Agreements was $894.8 million. See Item 7, "Management's Discussion
• $723.9 million — Securitizations (as defined below) was $723.9 million. TAXATION We have elected and quali

Filing Documents

• acre-20231231.htm (10-K) — 2618KB
• acreq4-23exhibit211.htm (EX-21.1) — 19KB
• acreq4-23exhibit231.htm (EX-23.1) — 4KB
• acreq4-23exhibit311.htm (EX-31.1) — 10KB
• acreq4-23exhibit312.htm (EX-31.2) — 10KB
• acreq4-23exhibit321.htm (EX-32.1) — 7KB
• acreq4-23exhibit971.htm (EX-97.1) — 25KB
• acre-20231231_g1.jpg (GRAPHIC) — 195KB
• acre-20231231_g2.jpg (GRAPHIC) — 136KB
• 0001628280-24-006105.txt (&nbsp;) — 13908KB
• acre-20231231.xsd (EX-101.SCH) — 90KB
• acre-20231231_cal.xml (EX-101.CAL) — 83KB
• acre-20231231_def.xml (EX-101.DEF) — 560KB
• acre-20231231_lab.xml (EX-101.LAB) — 1064KB
• acre-20231231_pre.xml (EX-101.PRE) — 734KB
• acre-20231231_htm.xml (XML) — 2103KB

Business

Item 1. Business 5

Risk Factors

Item 1A. Risk Factors 10

Unresolved Staff Comments

Item 1B. Unresolved Staff Comments 52

Cybersecurity

Item 1C. Cybersecurity 52

Properties

Item 2. Properties 54

Legal Proceedings

Item 3. Legal Proceedings 54

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 54 Part II

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 55

[Reserved]

Item 6. [Reserved] 53

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 58

Quantitative and Qualitative Disclosures about Market Risk

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 72

Financial Statements and Supplementary Data (included in F-pages)

Item 8. Financial Statements and Supplementary Data (included in F-pages) 75

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 75

Controls and Procedures

Item 9A. Controls and Procedures 75

Other Information

Item 9B. Other Information 77

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 77 Part III

Directors, Executive Officers and Corporate Governance

Item 10. Directors, Executive Officers and Corporate Governance 77

Executive Compensation

Item 11. Executive Compensation 77

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 77

Certain Relationships and Related Party Transactions, and Director Independence

Item 13. Certain Relationships and Related Party Transactions, and Director Independence 78

Principal Accountant Fees and Services

Item 14. Principal Accountant Fees and Services 78 Part IV

Exhibits and Financial Statement Schedules

Item 15. Exhibits and Financial Statement Schedules 79

Form 10-K Summary

Item 16. Form 10-K Summary 84

Signatures

Signatures 2 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Some of the statements contained in this annual report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and we intend such statements to be covered by the safe harbor provisions contained therein. The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K. In addition, some of the statements in this annual report (including in the following discussion) constitute forward-looking statements, which relate to future events or the future performance or financial condition of Ares Commercial Real Estate Corporation ("ACRE" and, together with its consolidated subsidiaries, the "Company," "we," "us" and "our"). The forward-looking statements contained in this report involve a number of risks and uncertainties, including: global economic trends and economic conditions, including high inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates and currency fluctuations, as well as geopolitical instability, including conflicts between Russia and Ukraine and between Israel and Hamas; changes in interest rates, credit spreads and the market value of our investments; our business and investment strategy; our projected operating results; the return or impact of current and future investments; management's current estimate of expected credit losses and current expected credit loss reserve; the collectability and timing of cash flows, if any, from our investments; estimates relating to our ability to make distributions to our stockholders in the future; defaults by borrowers in paying amounts due on outstanding indebtedness and our ability to collect all amounts due according to the contractual terms of our investments;

Business

Item 1. Business The following description of the business of Ares Commercial Real Estate Corporation ("ACRE") should be read in conjunction with the information included elsewhere in this annual report on Form 10-K for the year ended December 31, 2023. We refer to ACRE together with our consolidated subsidiaries as "we," "us," "Company," or "our," unless we specifically state otherwise or the context indicates otherwise. We refer to our manager, Ares Commercial Real Estate Management LLC, as our "Manager" or "ACREM," and the parent company of our Manager, Ares Management Corporation, together with its consolidated subsidiaries, as "Ares Management." GENERAL We are a specialty finance company primarily engaged in originating and investing in commercial real estate ("CRE") loans and related investments. We are externally managed by Ares Commercial Real Estate Management LLC ("ACREM" or our "Manager"), a subsidiary of Ares Management Corporation (NYSE: ARES) ("Ares Management"), a publicly traded, leading global alternative asset manager, pursuant to the terms of the Amended and Restated Management Agreement dated July 26, 2022, between us and our Manager (the "Management Agreement"). From the commencement of our operations in late 2011, we have been primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for our own account. We are a Maryland corporation and completed our initial public offering (the "IPO") in May 2012. We have elected and qualified to be taxed as a real estate investment trust ("REIT") for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with our taxable year ended December 31, 2012. We generally will not be subject to United States federal income taxes on our REIT taxable income, as long as we annually distribute to stockholders an amount at least equal to our REIT taxable income prior to the deduction for dividends p