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ACRE

Ares Commercial Real Estate NYSE:ACRE Stock Report

Last Price

US$11.72

Market Cap

US$637.7m

7D

-7.6%

1Y

-24.5%

Updated

24 Sep, 2022

Data

Company Financials +
ACRE fundamental analysis
Snowflake Score
Valuation5/6
Future Growth3/6
Past Performance2/6
Financial Health3/6
Dividends4/6

ACRE Stock Overview

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States.

Ares Commercial Real Estate Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Ares Commercial Real Estate
Historical stock prices
Current Share PriceUS$11.72
52 Week HighUS$16.48
52 Week LowUS$11.18
Beta1.27
1 Month Change-15.62%
3 Month Change-9.15%
1 Year Change-24.53%
3 Year Change-23.30%
5 Year Change-11.95%
Change since IPO-34.89%

Recent News & Updates

Sep 15

Ares Commercial: A 10% Yield You Won't Want To Miss

Summary ACRE is a high-yielding commercial real estate finance company that's well-positioned for rising rates. It's out-earned its dividend every year for the past 5 years, and has sound operating fundamentals. Recent price volatility has pushed the dividend to an attractive level. It's not easy to see one's investments fall in value, especially if one isn't getting paid a dividend for holding onto them. Layering into non-dividend paying companies can also be tricky, as no one can predict an absolute bottom and when a turnaround may happen. That's why it pays to hold onto high-yielding stocks whose dividend can be of solace amidst market turmoil. This brings me to Ares Commercial Real Estate (ACRE), which now throws off a 10% yield after falling in sympathy with the rest of the market. This article highlights why now may be a great time to buy into this high yielding name, so let's get started. Why ACRE? ACRE is a leading REIT that is engaged in originating commercial real estate loans. It's externally managed by its "big brother" Ares Management (ARES), a well-known asset manager that also happens to manage Ares Capital (ARCC), the largest BDC by asset size. ACRE benefits from its affiliation Ares Management, as the latter has $50 billion in real estate assets under management, thereby giving deal flow and line of sight that it would not otherwise have. ACRE has a well-diversified loan portfolio that's secured by properties in different sectors including office, industrial, retail, multifamily, and hotel. ACRE's focus on middle-market lending enables it to avoid the competitive pressures that larger players face in the CRE lending space. This, combined with the company's strong underwriting standards, has resulted in ACRE delivering consistent and strong financial results, enabling over 100% dividend coverage over the past 5 years. As shown below, office and multifamily make up just over half of the loan portfolio, with the other segments comprising the remaining half. ACRE Portfolio Mix (Investor Presentation) At present, ACRE has 78 loan investments comprising a $2.6 billion principal balance. These loans generate an unlevered effective yield of 6.3%. Moreover, ACRE targets safety of principal, as 99% of its loans are senior loans with 98% of them being floating rate. This makes ACRE well-positioned for rising rates, especially considering the recent hot August inflation report, with the market now baking in a 100% chance of a 75 basis point rate hike by the Federal Reserve this month. Meanwhile, ACRE continues to generate strong fundamentals, collecting 99% of its contractual interest and generating distributable EPS of $0.38 during the second quarter, which more than covered the $0.33 regular and $0.02 supplemental dividends. Also encouraging, ACRE is shifting towards the healthier multifamily segment. This is reflected by the closing of $356 million worth of senior floating rate loan commitments across 8 transactions, 80% of which is collateralized by multifamily and self-storage properties. Just 2 loans are on nonaccrual status, representing less than 2% of the overall portfolio. Moreover, ACRE maintains a reasonable amount of leverage, with a 2.3x debt to equity ratio. It also carries 8 different sources of financing and 46% of its debt is non-recourse. ACRE is also well-positioned for rising rates, as more of its investments are interest rate sensitive compared to its debt. This was articulated by management during the recent conference call: Currently, over 90% of Ares' loans are sensitive to further increases interest rates as loans and LIBOR floors have paid off or current LIBOR rates are above most labor floors. However, as we have put in place fixed rate financing on our recent $150 million term loan and in 2021, entered into a hedge position that currently has a notional balance of over $500 million and locks in LIBOR at 21 basis points only about 2/3rd of our liabilities are sensitive to changes in LIBOR, putting the company in a very positive position to benefit from further increases in interest rate.

Aug 24

Ares Commercial: 9.8% Yield, Robust Portfolio Growth, 0.93x Book Value

Summary Ares Commercial is a well-managed, senior loan-focused REIT with a growing portfolio. The trust covered its 2Q-22 dividend with distributable earnings. Stock continues to have an attractive book valuation. Ares Commercial Real Estate Corporation (ACRE) remains an appealing investment for those seeking a consistent stream of passive income. In the second quarter, the commercial REIT continued to cover its dividend with distributable earnings because it is well-managed and has a healthy portfolio. Furthermore, the trust has significant floating rate exposure, shielding investors from rising inflation and interest rates. Since the central bank's stance on inflation has become much more aggressive in 2022, Ares Commercial Real Estate can be considered not only a passive income generator but also a top inflation hedge. Q2-22 Originations Driving Portfolio Growth Ares Commercial's loan portfolio is expanding and in good shape. As of June 30, 2022, the trust's loan portfolio was valued at $2.6 billion, representing an 8% QoQ increase amid strong demand for new loan originations in the commercial real estate market. Ares Commercial's loan composition has not changed significantly since the end of the first quarter, implying that office and multi-family properties accounted for roughly half of all loan investments. Portfolio Overview (Ares Commercial Real Estate Corp) As previously stated, Ares Commercial's portfolio increased by 8% QoQ in Q2-22, or approximately $200 million, as a result of $311 million in new funded loans minus $125 million in loan repayments. The multi-family sector received the majority of new loans (66%) in the second quarter. Ares Commercial's new loans in Q2-22 were all senior secured and, importantly, attached to floating rates. Loan Origination Composition (Ares Commercial Real Estate Corp) Because the central bank has shifted its monetary policy and is now determined to combat out-of-control inflation, the feature of floating rate loans has become significantly more important in 2022. Ares Commercial has positioned its loan portfolio to profit from interest rate increases. Loan portfolios weighted toward floating rate loans will generate higher net interest income if the central bank continues to raise interest rates, as we are seeing right now. In June and July, the central bank raised interest rates by 75 basis points in a row, and more are on the way. Ares Commercial investors can expect higher distributable earnings because the trust's agreed loan rates are resetting to higher market interest rates, resulting in a safer dividend (lower pay-out ratio) and more cash for the company to potentially increase its pay-out. According to Ares Commercial's most recent interest rate sensitivity table, a 100-basis-point increase in the benchmark interest rate index would result in $0.24 per share higher annual distributable earnings. Interest Rate Sensitivity Table (Ares Commercial Real Estate Corp) Ares Commercial's dividend has been fully covered by the trust's distributable earnings, which amounted to $0.38 per share in the second quarter, while the core dividend pay-out (excluding $0.02 per share supplemental dividends) remained at $0.33 per share. Since 2018, Ares Commercial has consistently covered its dividend with distributable earnings, with pay-out ratios ranging from 1.0 to 1.2x. Dividend Coverage From Distributable Earnings (Ares Commercial Real Estate Corp) 7% Discount To Book Value Given the performance of its portfolio and the interest rate upside attached to its floating rate-heavy senior loans, I believe Ares Commercial's stock should trade around book value. Ares Commercial's stock is currently trading at a 7% discount to book value, while competitors like Starwood Property Trust Inc. (STWD) and Blackstone Mortgage Trust Inc. (BXMT) trade at a premium. I don't see why Ares Commercial shouldn't trade at least at book value. Why Ares Commercial Could See A Lower Stock Price Ares Commercial is benefiting from strong loan origination demand, with new loan commitments exceeding repayments in the second quarter, resulting in an increasing portfolio value.

Shareholder Returns

ACREUS Mortgage REITsUS Market
7D-7.6%-8.5%-5.2%
1Y-24.5%-32.7%-23.0%

Return vs Industry: ACRE exceeded the US Mortgage REITs industry which returned -32.7% over the past year.

Return vs Market: ACRE underperformed the US Market which returned -23.1% over the past year.

Price Volatility

Is ACRE's price volatile compared to industry and market?
ACRE volatility
ACRE Average Weekly Movement4.2%
Mortgage REITs Industry Average Movement4.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.8%
10% least volatile stocks in US Market2.8%

Stable Share Price: ACRE is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: ACRE's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
2011n/aBryan Donohoehttps://www.arescre.com

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States. The company provides a range of financing solutions for the owners, operators, and sponsors of CRE properties. It originates senior mortgage loans, subordinate debt products, mezzanine loans, real estate preferred equity investments, and other CRE investments, including commercial mortgage backed securities.

Ares Commercial Real Estate Fundamentals Summary

How do Ares Commercial Real Estate's earnings and revenue compare to its market cap?
ACRE fundamental statistics
Market CapUS$637.67m
Earnings (TTM)US$53.34m
Revenue (TTM)US$90.66m

12.0x

P/E Ratio

7.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
ACRE income statement (TTM)
RevenueUS$90.66m
Cost of RevenueUS$0
Gross ProfitUS$90.66m
Other ExpensesUS$37.32m
EarningsUS$53.34m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)0.98
Gross Margin100.00%
Net Profit Margin58.83%
Debt/Equity Ratio238.7%

How did ACRE perform over the long term?

See historical performance and comparison

Dividends

11.6%

Current Dividend Yield

119%

Payout Ratio

Does ACRE pay a reliable dividends?

See ACRE dividend history and benchmarks
When do you need to buy ACRE by to receive an upcoming dividend?
Ares Commercial Real Estate dividend dates
Ex Dividend DateSep 29 2022
Dividend Pay DateOct 17 2022
Days until Ex dividend3 days
Days until Dividend pay date21 days

Does ACRE pay a reliable dividends?

See ACRE dividend history and benchmarks
We’ve recently updated our valuation analysis.

Valuation

Is ACRE undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ACRE?

Other financial metrics that can be useful for relative valuation.

ACRE key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenuen/a
Enterprise Value/EBITDAn/a
PEG Ratio0.7x

Price to Earnings Ratio vs Peers

How does ACRE's PE Ratio compare to its peers?

ACRE PE Ratio vs Peers
The above table shows the PE ratio for ACRE vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average19.6x
BRMK Broadmark Realty Capital
10x14.5%US$778.6m
TRTX TPG RE Finance Trust
8.1x25.5%US$643.2m
GPMT Granite Point Mortgage Trust
47.1x52.4%US$424.0m
RWT Redwood Trust
13.4x110.4%US$760.1m
ACRE Ares Commercial Real Estate
12x16.3%US$637.7m

Price-To-Earnings vs Peers: ACRE is good value based on its Price-To-Earnings Ratio (12x) compared to the peer average (19.6x).


Price to Earnings Ratio vs Industry

How does ACRE's PE Ratio compare vs other companies in the US Mortgage REITs Industry?

Price-To-Earnings vs Industry: ACRE is expensive based on its Price-To-Earnings Ratio (12x) compared to the US Mortgage REITs industry average (10.8x)


Price to Earnings Ratio vs Fair Ratio

What is ACRE's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ACRE PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio12x
Fair PE Ratio13.2x

Price-To-Earnings vs Fair Ratio: ACRE is good value based on its Price-To-Earnings Ratio (12x) compared to the estimated Fair Price-To-Earnings Ratio (13.2x).


Share Price vs Fair Value

What is the Fair Price of ACRE when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ACRE ($11.72) is trading below our estimate of fair value ($18.55)

Significantly Below Fair Value: ACRE is trading below fair value by more than 20%.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.


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Future Growth

How is Ares Commercial Real Estate forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


16.3%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ACRE's forecast earnings growth (16.3% per year) is above the savings rate (1.9%).

Earnings vs Market: ACRE's earnings (16.3% per year) are forecast to grow faster than the US market (14.7% per year).

High Growth Earnings: ACRE's earnings are forecast to grow, but not significantly.

Revenue vs Market: ACRE's revenue (11.3% per year) is forecast to grow faster than the US market (7.6% per year).

High Growth Revenue: ACRE's revenue (11.3% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if ACRE's Return on Equity is forecast to be high in 3 years time


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Past Performance

How has Ares Commercial Real Estate performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


13.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ACRE has high quality earnings.

Growing Profit Margin: ACRE's current net profit margins (58.8%) are lower than last year (64.8%).


Past Earnings Growth Analysis

Earnings Trend: ACRE's earnings have grown by 13.4% per year over the past 5 years.

Accelerating Growth: ACRE's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: ACRE had negative earnings growth (-14.9%) over the past year, making it difficult to compare to the Mortgage REITs industry average (-1.6%).


Return on Equity

High ROE: ACRE's Return on Equity (6.8%) is considered low.


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Financial Health

How is Ares Commercial Real Estate's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: ACRE's short term assets ($2.7B) exceed its short term liabilities ($604.4M).

Long Term Liabilities: ACRE's short term assets ($2.7B) exceed its long term liabilities ($1.3B).


Debt to Equity History and Analysis

Debt Level: ACRE's net debt to equity ratio (234.1%) is considered high.

Reducing Debt: ACRE's debt to equity ratio has reduced from 295.1% to 238.7% over the past 5 years.

Debt Coverage: ACRE's debt is not well covered by operating cash flow (3.1%).

Interest Coverage: Insufficient data to determine if ACRE's interest payments on its debt are well covered by EBIT.


Balance Sheet


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Dividend

What is Ares Commercial Real Estate current dividend yield, its reliability and sustainability?

Dividend Score

4/6

Dividend Score 4/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


11.60%

Current Dividend Yield

Upcoming Dividend Payment

TodaySep 25 2022Ex Dividend DateSep 29 2022Dividend Pay DateOct 17 202218 days from Ex DividendBuy in the next 3 days to receive the upcoming dividend

Dividend Yield vs Market

Notable Dividend: ACRE's dividend (11.6%) is higher than the bottom 25% of dividend payers in the US market (1.65%).

High Dividend: ACRE's dividend (11.6%) is in the top 25% of dividend payers in the US market (4.57%)


Stability and Growth of Payments

Stable Dividend: ACRE's dividends per share have been stable in the past 10 years.

Growing Dividend: ACRE's dividend payments have increased over the past 10 years.


Earnings Payout to Shareholders

Earnings Coverage: With its high payout ratio (118.7%), ACRE's dividend payments are not well covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (128.2%), ACRE's dividend payments are not well covered by cash flows.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

3.2yrs

Average management tenure


CEO

Bryan Donohoe (43 yo)

2.75yrs

Tenure

US$760,200

Compensation

Mr. Bryan Patrick Donohoe serves as Partner at Ares Management Corporation since 2019 and served as its Co-Head of Real Estate Debt - Real Estate Group since February 2022 until April 2022 and served as it...


Leadership Team

Experienced Management: ACRE's management team is considered experienced (3.2 years average tenure).


Board Members

Experienced Board: ACRE's board of directors are considered experienced (6.4 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

NYSE:ACRE Recent Insider Transactions by Companies or Individuals
DateValueNameEntityRoleSharesMax Price
08 Apr 22SellUS$14,563Anton FeingoldIndividual935US$15.58
23 Feb 22BuyUS$252,920William BenjaminIndividual18,000US$14.05
18 Jan 22SellUS$131,842Bryan DonohoeIndividual8,813US$14.96
18 Jan 22SellUS$21,239Anton FeingoldIndividual1,415US$15.01

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 15.9%.


Top Shareholders

Top 25 shareholders own 41.41% of the company
OwnershipNameSharesCurrent ValueChange %Portfolio %
7.27%
BlackRock, Inc.
3,955,431$46.4m-6.25%no data
4.67%
The Vanguard Group, Inc.
2,541,040$29.8m12.69%no data
3.33%
J.P. Morgan Asset Management, Inc.
1,812,127$21.2m61.11%no data
2.94%
Delphi Financial Group, Inc, Asset Management Arm
1,598,922$18.7m2.2%9.32%
2.65%
1832 Asset Management L.P.
1,443,986$16.9m7.46%0.03%
2.54%
Ressler/Gertz Family Foundation, Endowment Arm
1,380,000$16.2m0%100%
2.15%
State Street Global Advisors, Inc.
1,167,240$13.7m4.11%no data
1.75%
Mirae Asset Global Investments Co., Ltd
951,219$11.1m6.24%0.02%
1.56%
Boston Partners Global Investors, Inc.
848,809$9.9m1.63%0.01%
1.51%
Geode Capital Management, LLC
824,042$9.7m-1.66%no data
1.39%
Antony Ressler
756,010$8.9m0%no data
1.21%
Millennium Management LLC
655,900$7.7m0%0.01%
1.11%
Smith, Graham & Co. Investment Advisors, L.P.
601,236$7.0m-0.99%0.93%
0.87%
Morgan Stanley, Investment Banking and Brokerage Investments
475,937$5.6m4.74%no data
0.8%
Northern Trust Global Investments
435,928$5.1m0.95%no data
0.75%
Michael Arougheti
409,776$4.8m0%no data
0.74%
Nuveen Investments, Inc.
401,140$4.7m0%0.02%
0.73%
Citadel Advisors LLC
399,400$4.7m94.37%0.01%
0.7%
Marshall Wace LLP
383,363$4.5m0%0.01%
0.54%
Van Eck Associates Corporation
291,891$3.4m-10.59%0.01%
0.49%
Relative Value Partners Group, LLC
267,901$3.1m7.47%0.28%
0.47%
Merrion Investment Management Company, L.L.C
256,092$3.0m-6.27%3.04%
0.45%
LSV Asset Management
247,184$2.9m-2.75%0.01%
0.43%
Rockefeller & Co. LLC
235,900$2.8m140.1%0.02%
0.35%
Monarch Partners Asset Management LLC
192,568$2.3m0%0.68%

Company Information

Ares Commercial Real Estate Corporation's employee growth, exchange listings and data sources


Key Information

  • Name: Ares Commercial Real Estate Corporation
  • Ticker: ACRE
  • Exchange: NYSE
  • Founded: 2011
  • Industry: Mortgage REITs
  • Sector: Diversified Financials
  • Implied Market Cap: US$637.675m
  • Shares outstanding: 54.41m
  • Website: https://www.arescre.com

Location

  • Ares Commercial Real Estate Corporation
  • 245 Park Avenue
  • 42nd Floor
  • New York
  • New York
  • 10167
  • United States


Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
ACRENYSE (New York Stock Exchange)YesCommon StockUSUSDApr 2012
41IDB (Deutsche Boerse AG)YesCommon StockDEEURApr 2012

Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/09/24 00:00
End of Day Share Price2022/09/23 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.