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Ares Commercial Real Estate Cor (ACRE)
NYSE:ACRE
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Ares Commercial
(NYSE:ACRE)
51Neutral
Positive Factors
Debt Management
They have reduced debt with elevated repayments.
Negative Factors
Dividend Reduction
ACRE reduced their dividend by 40% to $0.15 per quarter.
Loan Portfolio Concerns
Loans rated 4 and 5, considered problematic, constitute a significant portion of the portfolio, with five loans on non-accrual status.
Ares Commercial (ACRE) vs. S&P 500 (SPY)
Market Cap
$266.06M
Dividend Yield20.62%
Average Volume (3M)702.64K
Price to Earnings (P/E)―
Beta (1Y)1.22
Revenue Growth-52.08%
EPS Growth10.36%
CountryUS
Employees3,200
SectorReal Estate
Sector Strength72
IndustryREITs
Share Statistics
EPS (TTM)-0.64
Shares Outstanding54,856,976
10 Day Avg. Volume523,113
30 Day Avg. Volume702,644
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.82
Price to Cash Flow (P/CF)9.40
P/FCF Ratio2.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$5.44Price Target Upside12.16% Upside
Rating ConsensusHold
Number of Analyst Covering6
Ares Commercial Business Overview & Revenue Model
Company DescriptionAres Commercial Real Estate Corp. engages in originating and investing in commercial real estate loans and related investments. The Company's investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other commercial real estate investments, including commercial mortgage backed securities, which are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, senior-living, self storage, student housing and other commercial real estate properties, or by ownership interests. Ares Commercial Real Estate was founded in September 2011 and is headquartered in New York, NY.
How the Company Makes MoneyAres Commercial Real Estate Corporation generates revenue primarily through interest income from its portfolio of commercial real estate loans. The company invests in and originates senior mortgage loans, which are secured by commercial properties and provide a steady stream of interest payments. Additionally, ACRE may generate income through fees associated with loan origination and management. The company focuses on maintaining a diversified portfolio across different property types and geographical locations to mitigate risk and enhance returns. ACRE's alignment with Ares Management Corporation provides access to a broad network of industry relationships and expertise, which supports deal sourcing and investment opportunities.
Ares Commercial Financial Statement Overview
Summary
Ares Commercial's financial performance shows a volatile income statement with significant net losses, though revenue increased. The balance sheet is stable with no debt, but declining equity is a concern. Cash flow remains positive, but profitability issues persist.Income Statement
Ares Commercial shows a volatile income statement with fluctuating revenues and profit margins. While the revenue increased in 2024 compared to 2023, the net profit margin is negative due to significant net losses. The gross profit margin is strong as it matches total revenue, but the negative net income is concerning.45
Neutral
Balance Sheet
The balance sheet reflects a stable equity position with a debt-free status in 2024, which is positive. However, the significant decrease in stockholders' equity over recent years poses a risk. The equity ratio remains relatively healthy, indicating a decent asset coverage by equity.55
Neutral
Cash Flow
Ares Commercial demonstrates stable operating cash flow, albeit with a decreasing trend. Free cash flow remains positive, which is a strength. However, the company's negative net income affects the cash flow to net income ratios, highlighting potential profitability issues.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 69.65M | 1.10M | 109.05M | 102.07M | 78.69M | Gross Profit |
| 69.65M | -93.24M | 56.48M | 83.51M | 40.38M | EBIT |
| 59.19M | -11.71M | 96.25M | 61.18M | 22.19M | EBITDA |
| 0.00 | 0.00 | 95.22M | 61.18M | 0.00 | Net Income Common Stockholders |
| -34.99M | -38.87M | 29.79M | 60.46M | 21.84M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 72.48M | 110.46M | 2.41B | 50.62M | 74.78M | Total Assets |
| 1.75B | 2.28B | 2.52B | 2.63B | 1.93B | Total Debt |
| 1.17B | 1.62B | 1.74B | 1.08B | 1.33B | Net Debt |
| 1.11B | 1.51B | 1.60B | 1.03B | 1.25B | Total Liabilities |
| 1.21B | 1.65B | 1.78B | 1.95B | 1.46B | Stockholders Equity |
| 540.13M | 625.85M | 747.54M | 678.63M | 473.01M |
| Cash Flow | Free Cash Flow | |||
| 35.55M | 46.79M | 57.16M | 48.21M | 31.49M | Operating Cash Flow |
| 35.55M | 46.79M | 57.16M | 48.35M | 31.76M | Investing Cash Flow |
| 427.91M | 127.46M | 193.17M | -699.68M | -81.87M | Financing Cash Flow |
| -507.63M | -205.07M | -159.67M | 627.17M | 119.25M |
Ares Commercial Technical Analysis
Negative
4.85
Price Trends
5.41
Negative
5.95
Negative
6.23
Negative
Market Momentum
-0.20
Negative
42.02
Neutral
40.00
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ACRE, the sentiment is Negative. The current price of 4.85 is below the 20-day moving average (MA) of 4.86, below the 50-day MA of 5.41, and below the 200-day MA of 6.23, indicating a bearish trend. The MACD of -0.20 indicates Negative momentum. The RSI at 42.02 is Neutral, neither overbought nor oversold. The STOCH value of 40.00 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ACRE.
Ares Commercial Risk Analysis
Ares Commercial disclosed 101 risk factors in its most recent earnings report. Ares Commercial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ares Commercial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $6.72B | 17.77 | 5.55% | 9.63% | -0.97% | 3.75% | |
69 Neutral | $765.01M | 58.92 | 2.50% | 9.01% | -10.24% | ― | |
61 Neutral | $1.39B | ― | -6.02% | 12.02% | -9.71% | -426.57% | |
61 Neutral | $4.76B | 18.68 | -3.83% | 10.24% | 6.25% | -20.78% | |
60 Neutral | $3.54B | ― | -5.01% | 10.58% | -12.86% | -182.05% | |
60 Neutral | $691.77M | 11.43 | 6.45% | 11.24% | -10.05% | ― | |
51 Neutral | $266.06M | ― | -6.00% | 20.62% | -52.08% | 10.36% |
* Real Estate Sector Average
Performance Comparison
ACRE
Ares Commercial
4.85
-1.70
-25.95%
ARI
Apollo Real Estate
9.98
0.14
1.42%
BXMT
Blackstone Mortgage
20.61
2.63
14.63%
STWD
Starwood Property
19.93
1.59
8.67%
KREF
Kkr Real Estate Finance
11.10
2.04
22.52%
TRTX
Tpg Re Finance
8.54
1.70
24.85%
Ares Commercial Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -20.36% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a cautious optimism with significant progress in reducing risk-weighted loans and office exposure. Despite facing a GAAP net loss and increasing risk-rated loans, the company has improved its liquidity and leverage position, setting a strategic path for 2025. The sentiment is balanced with both strong highlights and notable lowlights.Highlights
Reduction in Risk-Weighted Loans
For the full year 2024, the company reduced its risk-rated 4 and 5 loans by approximately 34% or $182 million.
Decrease in Office Exposure
Ares reduced its office exposure, including REOs, by $151 million, representing a decline of 18% year-over-year.
Strong Loan Repayments
The company collected $137 million in repayments in Q4 2024 and $350 million for the full year, nearly doubling the repayments compared to 2023.
Improved Leverage and Liquidity
Ares reduced its outstanding borrowings by $444 million or 27% for the full year 2024, achieving a net debt-to-equity ratio of 1.6 times by year-end.
High Cash Reserves
The company's cash balance now represents approximately 40% of the current market value of the stock, positioning them with over $200 million of available capital.
Lowlights
GAAP Net Loss
Ares reported a GAAP net loss of $10.7 million or $0.20 per common share for Q4 2024 and a full year GAAP net loss of $35 million or $0.64 per common share.
Distributable Earnings Loss
For Q4 2024, the company reported a distributable earnings loss of $8.3 million or $0.15 per common share.
Increase in Risk-Rated Loans
The outstanding principal balance of loans with a risk rating of 4 or 5 increased by 12% or $37 million in Q4 2024.
Dividend Cut
The quarterly dividend was adjusted to $0.15 per share, aligning more closely with strategic objectives but potentially less than earnings in some quarters.
Impact of Wildfires
While the portfolio was not directly impacted, the wildfires in Los Angeles affected many clients and colleagues.
Company Guidance
During the fourth quarter earnings call for Ares Commercial Real Estate Corporation, guidance was provided on several key metrics and strategic objectives. The company reported a GAAP net loss of $10.7 million, or $0.20 per share, for the fourth quarter of 2024, with distributable earnings also reflecting a net loss of $8.3 million or $0.15 per share. For the full year, the GAAP net loss was $35 million, or $0.64 per share, and the distributable earnings loss was $44.6 million, or $0.82 per share. The company reduced its risk-rated 4 and 5 loans by approximately 34%, or $182 million, and office exposure by $151 million, representing an 18% decline year-over-year. In 2024, they collected $350 million in loan repayments, nearly double the 2023 figures, with $137 million collected in the fourth quarter alone. The net debt-to-equity ratio, excluding CECL, was reduced to 1.6 times by year-end, a 16% decrease from 2023. For 2025, Ares is focused on further reducing high-risk loans and maintaining liquidity, with a cash balance comprising about 40% of the current market value of the stock. The quarterly dividend was adjusted to $0.15 per share to align with strategic goals, despite potential earnings variability.Ares Commercial Corporate Events
DividendsFinancial Disclosures
Ares Commercial Real Estate Cuts Dividend Amid Losses
Negative
Feb 12, 2025
Ares Commercial Real Estate Corporation reported a GAAP net loss of $10.7 million for the fourth quarter of 2024 and $35.0 million for the full year. In response to the financial results and a more flexible balance sheet, the company has reduced its quarterly dividend to $0.15 per share for the first quarter of 2025. Additionally, the company has improved its liquidity position by collecting $166 million in repayments, increasing available capital to over $200 million. This increase is intended to enhance the company’s ability to address underperforming loans and optimize financial outcomes. Ares has also made progress in resolving risk-rated loans, reducing them by 34% over the past year.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.