UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________________________________________ 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): November 8, 2019
ARES COMMERCIAL REAL ESTATE CORPORATION
(Exact Name of Registrant as Specified in Charter)
 
Maryland
 
001-35517
 
45-3148087
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
245 Park Avenue, 42nd Floor, New York, NY
 
10167
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code (212) 750-7300
 
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share

ACRE
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 




Item 2.02 Results of Operations and Financial Condition.
 
On November 8, 2019, the registrant issued a press release declaring its fourth quarter 2019 dividend and announcing its financial results for the quarter ended September 30, 2019. A copy of the summary press release and the earnings presentation are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and incorporated herein by reference.
 
The information disclosed under this Item 2.02, including Exhibit 99.1 and Exhibit 99.2 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.
 
(d)          Exhibits:
 

Exhibit Number
 
Description
 
Press Release, dated November 8, 2019
 
Presentation of Ares Commercial Real Estate Corporation, dated November 8, 2019





SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
ARES COMMERCIAL REAL ESTATE CORPORATION
 
 
 
 
Date:
November 8, 2019
By:
/s/ Tae-Sik Yoon
 
 
Name:
Tae-Sik Yoon
 
 
Title:
Chief Financial Officer and Treasurer




Exhibit

Exhibit 99.1

ARES COMMERCIAL REAL ESTATE CORPORATION REPORTS
THIRD QUARTER 2019 RESULTS

Third quarter GAAP net income of $9.0 million or $0.31 per diluted common share and Core Earnings(1) of $9.7 million or $0.34 per diluted common share

- Subsequent to end of third quarter -

Declared fourth quarter 2019 dividend of $0.33 per common share

Announced change in leadership effective December 5, 2019

NEW YORK—(BUSINESS WIRE)—Ares Commercial Real Estate Corporation (the “Company”) (NYSE:ACRE), a specialty finance company engaged in originating and investing in commercial real estate assets, reported generally accepted accounting principles (“GAAP”) net income of $9.0 million or $0.31 per diluted common share and Core Earnings(1) of $9.7 million or $0.34 per diluted common share for the third quarter of 2019. In addition, the Company announced that its Board of Directors declared a fourth quarter 2019 dividend of $0.33 per common share payable on January 15, 2020 to common stockholders of record as of December 30, 2019.

Additionally, the Company announced that the Board of Directors has appointed Bryan Donohoe as Chief Executive Officer, effective December 5, 2019. Mr. Donohoe will join ACRE’s senior management team alongside its President, David Roth, Chief Financial Officer, Tae-Sik Yoon, and Head of Originations, John Gerber. Jamie Henderson will be stepping down as Chief Executive Officer and Chief Investment Officer on December 5, 2019 and will continue as a Director of the Board of ACRE. 
 
“We generated another quarter of strong earnings driven by healthy new investment activity and our well positioned balance sheet,” said Jamie Henderson, Chief Executive Officer and Chief Investment Officer of ACRE.
“Based on the timing of our investment activity early in the fourth quarter and the positioning of our balance sheet to benefit from declining interest rates and other attributes of our company, we currently expect our fourth quarter earnings to exceed that of the third quarter and we remain confident that we will more than cover our annual dividend from Core Earnings for the fourth consecutive year,” said Tae-Sik Yoon, Chief Financial Officer of ACRE.




_________________________________
(1) Core Earnings is a non-GAAP financial measure. Refer to Schedule I for further details.


















1

COMMON STOCK DIVIDEND

On November 8, 2019, the Company declared a cash dividend of $0.33 per common share for the fourth quarter of 2019. The third quarter 2019 dividend was paid on October 15, 2019 to common stockholders of record as of September 30, 2019.

ADDITIONAL INFORMATION

The Company issued a presentation of its third quarter 2019 results, which can be viewed at www.arescre.com on the Investor Resources section of our home page under Events and Presentations. The presentation is titled “Third Quarter 2019 Earnings Presentation.” The Company also filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 with the U.S. Securities and Exchange Commission on November 8, 2019.

CONFERENCE CALL AND WEBCAST INFORMATION

On Friday, November 8, 2019, the Company invites all interested persons to attend its webcast/conference call at 9:00 a.m. (Eastern Time) to discuss its third quarter 2019 financial results.

All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Resources section of the Company’s website at http://www.arescre.com. Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing +1 (888) 317-6003. International callers can access the conference call by dialing +1 (412) 317-6061. All callers will need to enter the Participant Elite Entry Number 3706251 followed by the # sign and reference “Ares Commercial Real Estate Corporation” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected. For interested parties, an archived replay of the call will be available through November 22, 2019 at 5:00 p.m. (Eastern Time) to domestic callers by dialing +1 (877) 344-7529 and to international callers by dialing +1 (412) 317-0088. For all replays, please reference conference number 10134445. An archived replay will also be available through November 22, 2019 on a webcast link located on the Home page of the Investor Resources section of the Company’s website.

ABOUT ARES COMMERCIAL REAL ESTATE CORPORATION

Ares Commercial Real Estate Corporation is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. Through its national direct origination platform, the Company provides a broad offering of flexible and reliable financing solutions for commercial real estate owners and operators. The Company originates senior mortgage loans, as well as subordinate financings, mezzanine debt and preferred equity, with an emphasis on providing value added financing on a variety of properties located in liquid markets across the United States. Ares Commercial Real Estate Corporation elected and qualified to be taxed as a real estate investment trust and is externally managed by a subsidiary of Ares Management Corporation. For more information, please visit www.arescre.com. The contents of such website are not, and should not be deemed to be, incorporated by reference herein.

FORWARD-LOOKING STATEMENTS

Statements included herein or on the webcast / conference call may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which relate to future events or the Company’s future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including the returns on current and future investments, rates of repayments and prepayments on the Company’s mortgage loans, availability of investment opportunities, the Company’s ability to originate additional investments and completion of pending investments, the availability of capital, the availability and cost of financing, market trends and conditions in the Company’s industry and the general economy, the level of lending and borrowing spreads and interest rates, commercial real estate loan volumes and the risks described from time to time in the Company’s filings with the Securities and Exchange Commission. Any forward-looking statement, including any contained herein, speaks only as of the time of this press release and Ares Commercial Real Estate Corporation undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call. Projections and forward-looking statements are based on management’s good faith and reasonable assumptions, including the assumptions described herein.





2


INVESTOR RELATIONS CONTACTS
 
Ares Commercial Real Estate Corporation
Carl Drake or Veronica Mendiola Mayer
(888) 818-5298
iracre@aresmgmt.com


3

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
 
As of
 
September 30, 2019
 
December 31, 2018
 
(unaudited)
 
 
ASSETS
 
 
 
Cash and cash equivalents
$
5,952

 
$
11,089

Restricted cash
379

 
379

Loans held for investment ($521,489 and $289,576 related to consolidated VIEs, respectively)
1,538,393

 
1,524,873

Real estate owned, net
38,020

 
—

Other assets ($1,269 and $843 of interest receivable related to consolidated VIEs, respectively; $35,511 and $51,582 of other receivables related to consolidated VIEs, respectively)
91,953

 
66,983

Total assets
$
1,674,697

 
$
1,603,324

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
LIABILITIES
 
 
 
Secured funding agreements
$
620,030

 
$
777,974

Notes payable
55,014

 
—

Secured term loan
108,940

 
108,345

Collateralized loan obligation securitization debt (consolidated VIE)
442,916

 
270,737

Due to affiliate
2,627

 
3,163

Dividends payable
9,526

 
8,914

Other liabilities ($753 and $541 of interest payable related to consolidated VIEs, respectively)
9,900

 
8,604

Total liabilities
1,248,953

 
1,177,737

STOCKHOLDERS' EQUITY
 
 
 
Common stock, par value $0.01 per share, 450,000,000 shares authorized at September 30, 2019 and December 31, 2018 and 28,865,610 and 28,755,665 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
283

 
283

Additional paid-in capital
423,137

 
421,739

Accumulated earnings
2,324

 
3,565

Total stockholders' equity
425,744

 
425,587

Total liabilities and stockholders' equity
$
1,674,697

 
$
1,603,324



4

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)

 
For the three months ended September 30,
 
For the nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Revenue:

 

 

 

Interest income from loans held for investment
$
28,269

 
$
30,362

 
$
86,248

 
$
87,401

Interest expense
(15,124
)
 
(16,378
)
 
(47,539
)
 
(46,645
)
Net interest margin
13,145

 
13,984

 
38,709

 
40,756

Revenue from real estate owned
6,702

 
—

 
16,970

 
—

Total revenue
19,847

 
13,984

 
55,679

 
40,756

Expenses:


 

 


 

Management and incentive fees to affiliate
1,578

 
1,571

 
5,405

 
5,302

Professional fees
542

 
498

 
1,553

 
1,435

General and administrative expenses
1,005

 
852

 
3,153

 
2,415

General and administrative expenses reimbursed to affiliate
831

 
870

 
2,261

 
2,624

Expenses from real estate owned
6,838

 
—

 
15,644

 
—

Total expenses
10,794

 
3,791

 
28,016

 
11,776

Income before income taxes
9,053

 
10,193

 
27,663

 
28,980

Income tax expense, including excise tax
19

 
236

 
332

 
403

Net income attributable to common stockholders
$
9,034

 
$
9,957

 
$
27,331

 
$
28,577

Earnings per common share:
 
 
 
 
 
 
 
Basic earnings per common share
$
0.32

 
$
0.35

 
$
0.96

 
$
1.00

Diluted earnings per common share
$
0.31

 
$
0.35

 
$
0.95

 
$
1.00

Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic weighted average shares of common stock outstanding
28,634,514

 
28,542,828

 
28,598,807

 
28,521,317

Diluted weighted average shares of common stock outstanding
28,867,603

 
28,698,600

 
28,837,766

 
28,638,973

Dividends declared per share of common stock
$
0.33

 
$
0.29

 
$
0.99

 
$
0.85





5

SCHEDULE I

Reconciliation of Net Income to Non-GAAP Core Earnings

The Company believes the disclosure of Core Earnings provides useful information to investors regarding the calculation of incentive fees the Company pays to its manager, Ares Commercial Real Estate Management LLC, and the Company’s financial performance. Core Earnings is an adjusted non-GAAP measure that helps the Company evaluate its financial performance excluding the effects of certain transactions and GAAP adjustments that it believes are not necessarily indicative of its current loan origination portfolio and operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Core Earnings is a non-GAAP measure and is defined as net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between the Company’s external manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors.

Reconciliation of net income attributable to common stockholders, the most directly comparable GAAP financial measure, to Core Earnings is set forth in the table below for the three and twelve months ended September 30, 2019 ($ in thousands):
 
For the three months ended September 30, 2019
For the twelve months ended September 30, 2019
Net income attributable to common stockholders
$
9,034

 
$
37,350

Stock-based compensation
479

 
1,721

Incentive fees to affiliate
—

 
1,215

Depreciation of real estate owned
207

 
448

Core Earnings
$
9,720

 
$
40,734

Basic Core Earnings per common share
$
0.34

 
$
1.42

Diluted Core Earnings per common share
$
0.34

 
$
1.41




6
acreq319exhibit992
Exhibit 99.2 Third Quarter 2019 Earnings Presentation

 
Important Notice Statements included herein may 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, which may relate to future events or the future performance or financial condition of Ares Commercial Real Estate Corporation (“ACRE” or the “Company”), its external manager, Ares Commercial Real Estate Management LLC (“ACREM”), a subsidiary of Ares Management Corporation (“Ares Corp.”), Ares Corp., certain of their respective subsidiaries and certain funds and accounts managed by ACREM and/or their subsidiaries. These statements are not guarantees of future results or financial condition and involve a number of risks and uncertainties. Actual results and conditions may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in ACRE’s and/or Ares Corp.’s filings with the Securities and Exchange Commission (“SEC”). Any such forward-looking statements are made pursuant to the safe harbor provisions available under applicable securities laws.   Ares Corp. is the parent to several registered investment advisers, including Ares Management LLC (“Ares Management”) and ACREM. Collectively, Ares Corp., its affiliated entities, and all underlying subsidiary entities shall be referred to as “Ares” unless specifically noted otherwise.   The information contained in this presentation is summary information that is intended to be considered in the context of ACRE’s SEC filings and other public announcements that ACRE or Ares may make, by press release or otherwise, from time to time. ACRE and Ares undertake no duty or obligation to publicly update or revise the forward-looking statements or other information contained in this presentation. These materials contain information about ACRE and Ares, and certain of their respective personnel and affiliates, information about their respective historical performance and general information about the market. You should not view information related to the past performance of ACRE or Ares or information about the market, as indicative of future results, the achievement of which cannot be assured.   Nothing in these materials should be construed as a recommendation to invest in any securities that may be issued by ACRE or any other fund or account managed by Ares, or as legal, accounting or tax advice. None of ACRE or Ares makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein shall be relied upon as a promise or representation whether as to the past or future performance. Certain information set forth herein includes estimates and projections and involves significant elements of subjective judgment and analysis. Further, such information, unless otherwise stated, is before giving effect to management and incentive fees and deductions for taxes. No representations are made as to the accuracy of such estimates or projections or that all assumptions relating to such estimates or projections have been considered or stated or that such estimates or projections will be realized.   These materials may contain confidential and proprietary information, and their distribution or the divulgence of any of their contents to any person, other than the person to whom they were originally delivered and such person’s advisers, without the prior consent of ACRE or Ares, as applicable, is prohibited. You are advised that United States securities laws restrict any person who has material, non-public information about a company from purchasing or selling securities of such company (and options, warrants and rights relating thereto) and from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. You agree not to purchase or sell such securities in violation of any such laws.   These materials are not intended as an offer to sell, or the solicitation of an offer to purchase, any security, the offer and/or sale of which can only be made by definitive offering documentation. Any offer or solicitation with respect to any securities that may be issued by ACRE will be made only by means of definitive offering memoranda or prospectus, which will be provided to prospective investors and will contain material information that is not set forth herein, including risk factors relating to any such investment.   This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s. Such information has not been independently verified and, accordingly, ACRE makes no representation or warranty in respect of this information. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.   1

 
Third Quarter 2019 Highlights Financial • GAAP Earnings of $9.0 million or $0.31 per diluted common share • Core Earnings(1) of $9.7 million or $0.34 per diluted common share Results • Book value per diluted common share of $14.75 • Closed five senior loans totaling $193.4 million in commitments Loan Originations • $143.8 million in outstanding principal funded on new commitments & Repayments • $25.6 million in outstanding principal funded on previously originated commitments • Repayments of $118.7 million from three loans • 47 loans held for investment • $1.8 billion in originated commitments at closing and $1.5 billion in outstanding principal Total Loan • 97% of loans have floating interest rates based on outstanding principal balance • 96% of loans are senior loans based on outstanding principal balance Portfolio • Weighted average unleveraged effective yield of 6.9%(2) • 92% of the loan portfolio has a LIBOR floor with a weighted average floor of 1.69% • 54% of the loan portfolio is either fixed rate or floating rate with a LIBOR floor of 1.75% or higher Capital and (3) Liquidity • Diverse financing sources with total borrowing capacity of $1.9 billion and $1.2 billion in outstanding principal • Common stock dividend of $0.33 per common share paid for Q3-19 Dividends (4) • 8.7% annualized dividend yield based upon closing share price on September 30, 2019 Subsequent • Closed three loans with a total commitment amount of $125.5 million and $119.2 million funded at closing Events • Declared Q4-19 dividend of $0.33 per common share on November 8, 2019 Note: As of September 30, 2019, unless otherwise noted. See footnotes on page 15. 2

 
Third Quarter 2019 Investment Activity Third Quarter 2019 Characteristics of Funded Loans(6) Loans Summary Industrial ($ in millions) 8% Student Housing Number of loans closed 5 15% New loan commitments $193.4 Average size of loans closed $38.7 Percentage of floating rate loans 100% Percentage of senior loans 100% Multifamily 54% Mixed-use Changes in Loan Portfolio(5) 23% $2,000 $169.4 $1,750 $1,497.5 $1,548.2 $1,500 ) $(118.7) s n $1,250 o i l l i m $1,000 n i $ $750 ( $500 $250 $0 Q F R Q 2-1 und epa 3-1 9 ing ym 9 Senior Loans s (7) ent s 100% Note: As of September 30, 2019, unless otherwise noted. See footnotes on page 15. 3

 
Total Loans Held for Investment Portfolio Key Statistics Loan Portfolio Characteristics(5) ($ in millions) Total loan commitments at closing $1,775.5 Mid-Atlantic/Northeast Outstanding principal balance $1,548.2 6% Weighted average unpaid principal balance of loan portfolio* $1,512.6 Southwest Total number of loans 47 17% Southeast Percentage of floating rate loans based on outstanding principal 33% balance 97% Percentage of senior loans based on outstanding principal balance 96% Weighted average remaining life of loan portfolio 1.6 years Weighted average remaining life of senior loans 1.6 years Midwest Weighted average remaining life of subordinated debt and 2.8 years 19% preferred equity investments (2) West Unleveraged Effective Yield 25% Loan Portfolio 8% 6.9% 7.1% 7.2% 7.2% 6.9% Self Storage 1% Residential/Condominium 6% 3% Industrial 3% Multifamily 36% 4% 2% Mixed-use 10% 0% Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Senior loans 6.8% 7.0% 6.9% 6.9% 6.5% Student Subordinated Housing debt and 12% preferred equity investments 13.4% 14.9% 15.2% 14.7% 15.0% Office 17% Hotel 18% Note: As of September 30, 2019, unless otherwise noted. * During the quarter ended September 30, 2019. See footnotes on page 15. 4

 
Interest Rate Sensitivity(5) • 97% of the loan portfolio is floating rate and 3% is fixed rate • 95% of the loan portfolio is either floating rate with a LIBOR floor (92%) or fixed rate (3%) ◦ For the floating rate loans with LIBOR floors, the weighted average LIBOR floor is 1.69% • 54% of the loan portfolio is either fixed rate or floating rate with a LIBOR floor of 1.75% or higher • 100% of outstanding financing is floating rate ◦ Less than 5% has a LIBOR floor with a weighted average of 1.90% Total Loan Portfolio by LIBOR Floor Levels Net Income Sensitivity to USD LIBOR Changes(8) ($ in millions) $0.25 Outstanding $0.20 LIBOR Floor Range Principal % Total Cumulative % $0.20 Fixed rate $ 41.6 3% 3% t c 2.25% - 2.50% 374.2 24% 27% a $0.15 p m 2.00% - 2.24% 142.1 9% 36% I S 1.75% - 1.99% 281.5 18% 54% P $0.10 $0.08 E 1.50% - 1.74% 93.3 6% 60% $0.05 $0.05 <1.50% 539.3 35% 95% $0.00 No floor 76.2 5% 100% $0.00 Total $ 1,548.2 100% -1.00% -0.50% 0.00% 0.50% 1.00% Change in LIBOR from September 30, 2019 Spot Rate Annual increase in net income (per diluted common share basis)* Note: As of September 30, 2019, unless otherwise noted. *Per diluted common share is based on 28.866 million shares. See footnotes on page 15. 5

 
Financing Sources Overview Financing Sources Composition(5) Financing Sources Detail Bank Facilities/Insurance ($ in millions) 50% Term Loan Total (3) Outstanding Financing Sources Commitments Interest Rate Balance Bank Facilities 2017-FL3 Securitization Wells Fargo Facility $ 500.0 LIBOR+1.50 to 2.25% $ 225.0 Citibank Facility 325.0 LIBOR+1.50 to 2.50% 164.4 BAML Facility 36.3 LIBOR+2.00% 36.3 Notes Payable CNB Facility 50.0 LIBOR+2.65% 22.7 5% Stockholders U.S. Bank Facility 186.0 LIBOR+1.65 to 2.25% 43.0 Equity Insurance Term Loan 9% MetLife Facility 180.0 LIBOR+2.30% 128.6 Subtotal $ 1,277.3 $ 620.0 2017-FL3 Securitization 36% Asset Level Financing Notes Payable $ 60.7 LIBOR+2.50 to 3.00% $ 56.2 Financing Facilities Capital Markets Debt to equity ratio 2.9x Term Loan $ 110.0 LIBOR+5.00% $ 110.0 Loans held for investment weighted average 2017-FL3 Securitization 445.6 LIBOR + 1.70% 445.6 remaining life 1.6 years Subtotal $ 555.6 $ 555.6 Weighted average remaining term of financing agreements 3.5 years Total Debt $ 1,893.6 $ 1,231.8 Q3-19 weighted average borrowings* $1,140.3 million Note: As of September 30, 2019, unless otherwise noted. * During the quarter ended September 30, 2019. See footnotes on page 15. 6

 
Dividend Summary Quarterly Dividend Since Q1-16 $0.35 $0.33 $0.33 $0.33 $0.33 $0.33 $0.31 $0.31 $0.29 $0.29 $0.28 $0.28 $0.27 $0.27 $0.27 $0.27 $0.27 $0.26 $0.26 $0.26 $0.26 $0.25 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19* * Declared a fourth quarter 2019 dividend of $0.33 per common share payable on January 15, 2020 to common stockholders of record as of December 30, 2019 7

 
Appendix 8

 
Loans Held for Investment Portfolio Details ($ in millions) Origination Current Loan Outstanding LIBOR Unleveraged Payment # Loan Type Location Date Commitment Principal Carrying Value Interest Rate Floor Effective Yield(2) Maturity Date Terms(9) Multifamily Loans: 1 Senior FL Sep 2016 $89.7 $89.7 $89.6 L+4.75% 0.5% 7.0% Feb 2020 I/O 2 Senior TX Sep 2019 75.0 75.0 74.6 L+2.85% 2.0% 5.0% Oct 2022 I/O 3 Senior UT Nov 2017 63.7 63.6 63.4 L+3.25% 1.3% 5.5% Dec 2020 I/O 4 Senior FL Sep 2016 45.4 45.4 45.3 L+4.75% 0.5% 7.0% Feb 2020 I/O 5 Senior TX Dec 2017 42.7 42.7 42.6 L+3.30% 1.0% 5.7% Dec 2020 I/O 6 Senior FL Dec 2018 43.5 42.0 41.7 L+2.60% 2.4% 5.5% Jan 2022 I/O 7 Senior IL Nov 2018 40.0 38.7 38.5 L+3.50% 2.3% 6.4% Nov 2020 I/O 8 Senior NY Dec 2017 30.1 30.1 30.0 L+3.20% 1.4% 5.6% Dec 2020 I/O 9 Senior PA Dec 2018 30.2 29.4 29.1 L+3.00% 2.3% 5.9% Dec 2021 I/O 10 Senior TX Sep 2017 27.5 27.5 27.4 L+3.20% 1.2% 5.7% Oct 2020 I/O 11 Senior CA Jun 2017 27.0 26.8 26.7 L+3.85% 1.2% 6.3% July 2020 I/O 12 Senior CA Jan 2018 21.6 20.6 20.5 L+3.30% 1.6% 5.7% Feb 2021 I/O 13 Senior FL Oct 2017 19.2 19.2 19.1 L+4.00% 1.2% 6.4% Nov 2020 I/O 14 Senior SC Aug 2019 34.6 2.0 1.7 L+6.50% 2.2% 10.1% Sep 2022 I/O Total Multifamily $590.2 $552.7 $550.2 Hotel Loans: 15 Senior Diversified Sep 2018 $78.0 $68.5 $68.0 L+3.60% 2.1% 6.2% Sep 2021 I/O 16 Senior OR/WA May 2018 68.1 67.8 67.5 L+3.45% 1.9% 6.0% May 2021 I/O 17 Senior CA Dec 2017 40.0 40.0 39.8 L+4.12% 1.4% 6.5% Jan 2021 I/O 18 Senior MI Nov 2015 35.2 35.2 35.2 L+4.40% N/A 6.4% July 2020 I/O 19 Senior IL Apr 2018 32.9 32.8 32.7 L+4.40% 1.9% 6.9% May 2021 I/O 20 Senior MN Aug 2018 31.5 31.5 31.3 L+3.55% 2.1% 6.0% Aug 2021 I/O Total Hotel $285.7 $275.8 $274.5 See footnotes on page 15. 9

 
Loans Held for Investment Portfolio Details ($ in millions) Origination Current Loan Outstanding LIBOR Unleveraged Payment # Loan Type Location Date Commitment Principal Carrying Value Interest Rate Floor Effective Yield(2) Maturity Date Terms(9) Office Loans: 21 Senior IL Nov 2017 $82.0 $67.4 $67.1 L+3.75% 1.3% 6.3% Dec 2020 I/O 22 Senior IL May 2018 59.6 56.8 56.6 L+3.95% 2.0% 6.4% June 2021 I/O 23 Senior NC Mar 2019 84.0 44.9 44.3 L+4.25% 2.4% 8.6% Mar 2021 I/O 24 Senior FL Apr 2017 19.0 18.4 18.4 L+4.30% 1.0% 6.9% Apr 2020 I/O 25 Senior CA Nov 2018 22.9 17.5 17.3 L+3.40% 2.3% 6.3% Nov 2021 I/O 26 Subordinated NJ Mar 2016 17.0 17.0 16.4 12.00% N/A 12.8% Jan 2026 I/O 27 Senior NC Apr 2019 30.5 13.0 12.8 L+3.50% 2.3% 6.4% May 2023 I/O 28 Senior TX Apr 2019 28.2 12.4 12.1 L+4.05% 2.5% 7.6% Nov 2021 I/O 29 Senior NC Oct 2018 13.5 8.6 8.5 L+4.00% 2.1% 6.7% Nov 2022 I/O 30 Subordinated CA Nov 2017 3.1 2.8 2.8 L+8.25% 1.2% 10.4% Nov 2021 I/O Total Office $359.8 $258.8 $256.3 Student Housing Loans: 31 Senior CA Jun 2017 $43.0 $41.7 $41.6 L+3.95% 1.2% 6.5% July 2020 I/O 32 Senior TX Dec 2017 41.0 41.0 40.8 L+4.75% N/A 7.3% Jan 2021 I/O 33 Senior NC Feb 2019 30.0 30.0 29.8 L+3.15% 2.3% 5.9% Feb 2022 I/O 34 Senior AL Feb 2017 24.1 24.1 24.1 L+4.45% 0.8% 7.0% Feb 2020 I/O 35 Senior TX Dec 2017 24.0 24.0 23.9 L+4.10% 1.6% 6.7% Jan 2021 I/O 36 Senior FL Jul 2019 22.0 22.0 21.8 L+3.25% 2.3% 5.9% Aug 2022 I/O Total Student Housing $184.1 $182.8 $182.0 Mixed-Use Loans: 37 Senior FL Feb 2019 $100.6 $61.7 $60.9 L+4.25% 2.5% 7.8% Feb 2021 I/O 38 Senior CA Mar 2018 56.1 49.0 48.8 L+4.00% 1.9% 6.4% Apr 2021 I/O 39 Senior TX Sep 2019 42.2 32.8 32.3 L+3.75% 2.3% 6.7% Sep 2022 I/O 40 Subordinated IL May 2018 15.3 13.9 13.7 L+12.25% 1.5% 15.1% Nov 2021 I/O Total Mixed-Use $214.2 $157.4 $155.7 See footnotes on page 15. 10

 
Loans Held for Investment Portfolio Details ($ in millions) Origination Current Loan Outstanding LIBOR Unleveraged Payment # Loan Type Location Date Commitment Principal Carrying Value Interest Rate Floor Effective Yield(2) Maturity Date Terms (9) Residential/Condominium Loans: 41 Senior CA Jan 2018 $16.7 $10.9 $10.8 12.00% N/A 15.7% Feb 2020 I/O 42 Senior FL Oct 2018 17.5 17.5 17.4 L+8.00% 2.3% 11.7% Apr 2020 I/O 43 Subordinated NY Oct 2018 16.1 14.4 14.3 L+14.00% 2.3% 18.8% May 2021 I/O 44 Subordinated HI Aug 2018 11.6 11.6 11.5 14.00% N/A 14.5% Mar 2020 I/O Total Residential/Condominium $61.9 $54.4 $54.0 Industrial Loans: 45 Senior NC May 2019 $40.5 $34.8 $34.6 L+4.05% 1.6% 6.3% Mar 2024 I/O 46 Senior CA Aug 2019 19.6 12.0 11.8 L+3.75% 2.0% 6.3% Mar 2023 I/O Total Industrial $60.1 $46.8 $46.4 Self Storage Loans: 47 Senior FL Feb 2019 $19.5 $19.5 $19.3 L+3.50% 2.0% 6.1% Mar 2022 I/O Total Self Storage $19.5 $19.5 $19.3 Loan Portfolio Total/Weighted Average $1,775.5 $1,548.2 $1,538.4 1.7% (10) 6.9% See footnotes on page 15. 11

 
Consolidated Balance Sheets As of ($ in thousands, except share and per share data) 9/30/2019 12/31/2018 ASSETS Cash and cash equivalents $ 5,952 $ 11,089 Restricted cash 379 379 Loans held for investment ($521,489 and $289,576 related to consolidated VIEs, respectively) 1,538,393 1,524,873 Real estate owned, net 38,020 — Other assets ($1,269 and $843 of interest receivable related to consolidated VIEs, respectively; $35,511 and $51,582 of other receivables related to consolidated VIEs, respectively) 91,953 66,983 Total assets $ 1,674,697 $ 1,603,324 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Secured funding agreements $ 620,030 $ 777,974 Notes payable 55,014 — Secured term loan 108,940 108,345 Collateralized loan obligation securitization debt (consolidated VIE) 442,916 270,737 Due to affiliate 2,627 3,163 Dividends payable 9,526 8,914 Other liabilities ($753 and $541 of interest payable related to consolidated VIEs, respectively) 9,900 8,604 Total liabilities 1,248,953 1,177,737 STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share, 450,000,000 shares authorized at September 30, 2019 and December 31, 2018 and 28,865,610 and 28,755,665 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively 283 283 Additional paid-in capital 423,137 421,739 Accumulated earnings 2,324 3,565 Total stockholders' equity 425,744 425,587 Total liabilities and stockholders' equity $ 1,674,697 $ 1,603,324 12

 
Consolidated Statements of Operations For the Three Months Ended ($ in thousands, except share and per share data) 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Revenue: Interest income from loans held for investment $ 28,269 $ 29,993 $ 27,986 $ 30,882 $ 30,362 Interest expense (15,124) (16,675) (15,740) (16,357) (16,378) Net interest margin 13,145 13,318 12,246 14,525 13,984 Revenue from real estate owned 6,702 8,357 1,911 — — Total revenue 19,847 21,675 14,157 14,525 13,984 Expenses: Management and incentive fees to affiliate 1,578 2,252 1,574 2,116 1,571 Professional fees 542 532 478 510 498 General and administrative expenses 1,005 1,029 1,120 892 852 General and administrative expenses reimbursed to affiliate 831 771 659 946 870 Expenses from real estate owned 6,838 7,118 1,687 — — Total expenses 10,794 11,702 5,518 4,464 3,791 Income before income taxes 9,053 9,973 8,639 10,061 10,193 Income tax expense, including excise tax 19 218 96 43 236 Net income attributable to common stockholders $ 9,034 $ 9,755 $ 8,543 $ 10,018 $ 9,957 Earnings per common share: Basic earnings per common share $ 0.32 $ 0.34 $ 0.30 $ 0.35 $ 0.35 Diluted earnings per common share $ 0.31 $ 0.34 $ 0.30 $ 0.35 $ 0.35 Weighted average number of common shares outstanding: Basic weighted average shares of common stock outstanding 28,634,514 28,599,282 28,561,827 28,553,540 28,542,828 Diluted weighted average shares of common stock outstanding 28,867,603 28,863,765 28,780,980 28,709,145 28,698,600 Dividends declared per share of common stock $ 0.33 $ 0.33 $ 0.33 $ 0.31 $ 0.29 13

 
Reconciliation of Net Income to Non-GAAP Core Earnings(1) For the Three Months Ended ($ in thousands, except per share data) 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Net income attributable to common stockholders $ 9,034 $ 9,755 $ 8,543 $ 10,018 $ 9,957 Stock-based compensation 479 427 492 324 329 Incentive fees to affiliate — 674 — 540 — Depreciation of real estate owned 207 188 54 — — Core Earnings $ 9,720 $ 11,044 $ 9,089 $ 10,882 $ 10,286 Basic Core Earnings per common share $ 0.34 $ 0.39 $ 0.32 $ 0.38 $ 0.36 Diluted Core Earnings per common share $ 0.34 $ 0.38 $ 0.32 $ 0.38 $ 0.36 See footnotes on page 15. 14

 
Footnotes 1. The Company believes the disclosure of Core Earnings provides useful information to investors regarding the calculation of incentive fees the Company pays to its manager, Ares Commercial Real Estate Management LLC, and the Company’s financial performance. Core Earnings is an adjusted non-GAAP measure that helps the Company evaluate its financial performance excluding the effects of certain transactions and GAAP adjustments that it believes are not necessarily indicative of its current loan origination portfolio and operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Core Earnings is a non-GAAP measure and is defined as net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between the Company’s manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. 2. Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as weighted by the outstanding principal balance of each loan. 3. Represents total commitments. Ability to draw on available capacity is subject to available collateral and lender approvals. 4. There is no assurance that dividends will continue at these levels or at all. Represents closing price of $15.23 per share as of September 30, 2019 and based on annualized Q3-19 paid dividend of $0.33 per common share. 5. Based on outstanding principal balance. 6. Based on outstanding principal balance on new loans closed for the three months ended September 30, 2019. 7. Includes outstanding principal funded of $143.8 million on new commitments and $25.6 million on previously originated commitments. 8. Represents the hypothetical increases in net income per diluted common share for a twelve month period, assuming (1) an immediate increase or decrease in 30-day LIBOR as of September 30, 2019 versus 30-day LIBOR at September 30, 2019 of 2.02% and (2) no change in the outstanding principal balance of the Company's loans held for investment portfolio and borrowings as of September 30, 2019. The analysis detailed herein represents ACRE’s perspective and is merely a mathematical illustration. These metrics are shown for illustrative purposes only and the terms and characteristics of such transactions are not necessarily indicative of every type of transaction entered into or arranged by ACRE. Any future results may differ from those discussed herein. Accordingly, no representation or warranty is made in respect of this information. 9. I/O = interest only, P/I = principal and interest. 10. The weighted average floor is calculated based on loans with LIBOR floors. 15