Ares Commercial Real Estate Corp. Files Q3 2024 10-Q

TL;DR

**ACRE Q3 10-Q FILED: Check financials for CRE exposure.**

AI Summary

Ares Commercial Real Estate Corp. filed its 10-Q for the period ending September 30, 2024. The filing details the company's financial performance and position, including its real estate investments and loan portfolio. Key financial data and operational updates are provided for the third quarter of 2024.

Why It Matters

This filing provides investors with a detailed look at Ares Commercial Real Estate Corp.'s financial health and strategic direction in the commercial real estate market.

Risk Assessment

Risk Level: medium — Commercial real estate is subject to market fluctuations, interest rate sensitivity, and economic downturns, posing inherent risks.

Key Numbers

• 2024-09-30 — Reporting Period End Date (Indicates the end of the financial quarter being reported.)
• 2024-11-07 — Filing Date (The date the 10-Q was officially submitted to the SEC.)
• 2024-01-01 to 2024-09-30 — Year-to-Date Period (Covers the financial activity for the first nine months of 2024.)

Key Players & Entities

• Ares Commercial Real Estate Corp. (company) — Filer of the 10-Q
• 2024-09-30 (date) — End of reporting period
• 2024-11-07 (date) — Filing date
• 245 PARK AVENUE, NEW YORK, NY 10167 (address) — Company's business and mailing address

FAQ

Key Financial Figures

• $0.01 — ange on which registered Common stock, $0.01 par value per share ACRE New York Stock

Filing Documents

• acre-20240930.htm (10-Q) — 1822KB
• acreq3-24exhibit101.htm (EX-10.1) — 789KB
• acreq3-24exhibit102.htm (EX-10.2) — 38KB
• acreq3-24exhibit103.htm (EX-10.3) — 1495KB
• acreq3-24ex104msfifthamend.htm (EX-10.4) — 44KB
• acreq3-24exhibit311.htm (EX-31.1) — 10KB
• acreq3-24exhibit312.htm (EX-31.2) — 10KB
• acreq3-24exhibit321.htm (EX-32.1) — 7KB
• acre-20240930_g1.jpg (GRAPHIC) — 195KB
• 0001628280-24-045922.txt ( ) — 13977KB
• acre-20240930.xsd (EX-101.SCH) — 81KB
• acre-20240930_cal.xml (EX-101.CAL) — 77KB
• acre-20240930_def.xml (EX-101.DEF) — 451KB
• acre-20240930_lab.xml (EX-101.LAB) — 884KB
• acre-20240930_pre.xml (EX-101.PRE) — 637KB
• acre-20240930_htm.xml (XML) — 1816KB

Financial Information

Part I. Financial Information

Consolidated Financial Statements

Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 5 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited) 6 Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited) 7 Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2024 (unaudited) and the Year Ended December 31, 2023 8 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (unaudited) 9

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 11

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 41

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 53

Controls and Procedures

Item 4. Controls and Procedures 56

Other Information

Part II. Other Information

Legal Proceedings

Item 1. Legal Proceedings 56

Risk Factors

Item 1A. Risk Factors 57

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 57

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 57

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 57

Other Information

Item 5. Other Information 57

Exhibits

Item 6. Exhibits 58

Signatures

Signatures 59 2 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Some of the statements contained in this quarterly 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 quarterly report on Form 10-Q. In addition, some of the statements in this quarterly 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 in the Middle East; 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 investmen

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

: Consolidated Financial Statements

Item 1: Consolidated Financial Statements ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) As of September 30, 2024 December 31, 2023 (unaudited) ASSETS Cash and cash equivalents $ 68,881 $ 110,459 Restricted cash ($ 3,466 related to consolidated VIEs as of September 30, 2024) 3,466 — Loans held for investment ($ 658,956 and $ 892,166 related to consolidated VIEs, respectively) 1,812,773 2,126,524 Current expected credit loss reserve ( 144,068 ) ( 159,885 ) Loans held for investment, net of current expected credit loss reserve 1,668,705 1,966,639 Loans held for sale ($ 38,981 related to consolidated VIEs as of December 31, 2023) — 38,981 Investment in available-for-sale debt securities, at fair value 27,005 28,060 Real estate owned held for investment, net ($ 59,953 related to consolidated VIEs as of September 30, 2024) 140,912 83,284 Real estate owned held for sale ($ 14,509 related to consolidated VIEs as of September 30, 2024) 14,509 — Other assets ($ 2,094 and $ 3,690 of interest receivable related to consolidated VIEs, respectively; $ 32,002 of other receivables related to consolidated VIEs as of December 31, 2023) 17,125 52,354 Total assets $ 1,940,603 $ 2,279,777 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Secured funding agreements $ 640,610 $ 639,817 Notes payable — 104,662 Secured term loan 127,828 149,393 Collateralized loan obligation securitization debt (consolidated VIEs) 574,896 723,117 Due to affiliate 4,106 4,135 Dividends payable 13,809 18,220 Other liabilities ($ 1,686 and $ 2,263 of interest payable related to consolidated VIEs, respectively) 15,601 14,584 Total liabilities 1,376,850 1,653,928 Commitments and contingencies (Note 8) STOCKHOLDERS' EQUITY Common stock, par value $ 0.01 per share, 450,000,000 shares authorized at September 30, 2024 and December 31, 2023 and 54,532,393 and 54,149,225 shares issued and out

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2024 (in thousands, except share and per share data, percentages and as otherwise indicated) (unaudited) 1. ORGANIZATION Ares Commercial Real Estate Corporation (together with its consolidated subsidiaries, the "Company" or "ACRE") is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. Through Ares Commercial Real Estate Management LLC ("ACREM" or the Company's "Manager"), a Securities and Exchange Commission ("SEC") registered investment adviser and a subsidiary of Ares Management Corporation (NYSE: ARES) ("Ares Management" or "Ares"), a publicly traded, leading global alternative investment manager, it has investment professionals strategically located across the United States and Europe who directly source new loan opportunities for the Company with owners, operators and sponsors of commercial real estate ("CRE") properties. The Company was formed and commenced operations in late 2011. The Company is a Maryland corporation and completed its initial public offering (the "IPO") in May 2012. The Company is externally managed by its Manager, pursuant to the terms of a management agreement (the "Management Agreement"). The Company operates as one operating segment and is primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for the Company's own account. The Company's target investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investments, including commercial mortgage-backed securities. These investments are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, self storage, student housing, residential and other commercial real estate properties, or by ownership interests therein. The Company has elected and qualified to be taxed as a