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): February 20, 2020
 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 February 20, 2020, the registrant issued a press release declaring its first quarter 2020 dividend and announcing its financial results for the quarter and year ended December 31, 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 February 20, 2020
 
Presentation of Ares Commercial Real Estate Corporation, dated February 20, 2020






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: February 20, 2020
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
FOURTH QUARTER AND FULL-YEAR 2019 RESULTS

Fourth quarter GAAP net income of $9.7 million or $0.33 per diluted common share and
Core Earnings(1) of $10.7 million or $0.37 per diluted common share

Full-year 2019 GAAP net income of $37.0 million or $1.28 per diluted common share and
Core Earnings(1) of $40.6 million or $1.41 per diluted common share

- Subsequent to year ended December 31, 2019 -

Raised approximately $73 million of equity

Closed $238 million of new loans year to date

Declared first quarter 2020 dividend of $0.33 per diluted common share

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 $9.7 million or $0.33 per diluted common share and Core Earnings(1) of $10.7 million or $0.37 per diluted common share for the fourth quarter of 2019. The Company reported GAAP net income of $37.0 million or $1.28 per diluted common share and Core Earnings(1) of $40.6 million or $1.41 per diluted common share for full-year 2019. In addition, the Company announced that its Board of Directors declared a first quarter 2020 dividend of $0.33 per diluted common share payable on April 15, 2020 to common stockholders of record on March 31, 2020.

“We delivered strong earnings in both the fourth quarter and full year 2019 due to higher investment activity at attractive spreads and continued strong performance of our portfolio,” said Bryan Donohoe, Chief Executive Officer of ACRE. “Looking forward, we believe we are well positioned to grow our company accretively on behalf of our stakeholders.”
 
“ACRE is already off to a strong start in the first quarter of 2020. Year to date, we have completed a $73 million equity offering, secured a $150 million new financing facility, closed $238 million of new loans and have an attractive pipeline of investments,” said Tae-Sik Yoon, Chief Financial Officer of ACRE. “We remain focused on further enhancing our earnings through our investment activities and optimizing our borrowing facilities.”


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



1



2020 ANNUAL STOCKHOLDERS MEETING

The Board of Directors set February 26, 2020 as the record date for the Company’s 2020 Annual Meeting of Stockholders. The 2020 Annual Meeting of Stockholders will be held on April 23, 2020.

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 fourth quarter 2019 dividend was paid on January 15, 2020 to common stockholders of record as of December 30, 2019.

ADDITIONAL INFORMATION

The Company issued a presentation of its fourth quarter and full-year 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 “Fourth Quarter and Full-Year 2019 Earnings Presentation.” The Company also filed its Annual Report on Form 10-K for the year ended December 31, 2019 with the U.S. Securities and Exchange Commission on February 20, 2020.


CONFERENCE CALL AND WEBCAST INFORMATION
 
On Thursday, February 20, 2020, the Company invites all interested persons to attend its webcast/conference call at 11:00 a.m. (Eastern Time) to discuss its fourth quarter and full-year 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 8615348 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 March 5, 2020 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 10137628. An archived replay will also be available through March 5, 2020 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

2



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.


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 December 31,
 
2019
 
2018
ASSETS
 
 
 
Cash and cash equivalents
$
5,256

 
$
11,089

Restricted cash
379

 
379

Loans held for investment ($515,896 and $289,576 related to consolidated VIEs, respectively)
1,682,498

 
1,524,873

Real estate owned, net
37,901

 

Other assets ($1,309 and $843 of interest receivable related to consolidated VIEs, respectively; $41,104 and $51,582 of other receivables related to consolidated VIEs, respectively)
58,100

 
66,983

Total assets
$
1,784,134

 
$
1,603,324

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
LIABILITIES
 
 
 
Secured funding agreements
$
728,589

 
$
777,974

Notes payable
54,708

 

Secured term loan
109,149

 
108,345

Collateralized loan obligation securitization debt (consolidated VIE)
443,177

 
270,737

Due to affiliate
2,761

 
3,163

Dividends payable
9,546

 
8,914

Other liabilities ($718 and $541 of interest payable related to consolidated VIEs, respectively)
9,865

 
8,604

Total liabilities
1,357,795

 
1,177,737

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

 
283

Additional paid-in capital
423,619

 
421,739

Accumulated earnings
2,437

 
3,565

Total stockholders’ equity
426,339

 
425,587

Total liabilities and stockholders’ equity
$
1,784,134

 
$
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 December 31, 2019
 
For the year ended December 31, 2019
Revenue:
 
 
 
Interest income from loans held for investment
$
28,536

 
$
114,784

Interest expense
(15,044
)
 
(62,583
)
Net interest margin
13,492

 
52,201

Revenue from real estate owned
8,088

 
25,058

Total revenue
21,580

 
77,259

Expenses:
 
 
 
Management and incentive fees to affiliate
1,959

 
7,363

Professional fees
641

 
2,194

General and administrative expenses
1,035

 
4,188

General and administrative expenses reimbursed to affiliate
764

 
3,026

Expenses from real estate owned
7,338

 
22,982

Total expenses
11,737

 
39,753

Income before income taxes
9,843

 
37,506

Income tax expense, including excise tax
183

 
515

Net income attributable to common stockholders
$
9,660

 
$
36,991

Earnings per common share:
 
 
 
Basic earnings per common share
$
0.34

 
$
1.29

Diluted earnings per common share
$
0.33

 
$
1.28

Weighted average number of common shares outstanding:
 
 
 
Basic weighted average shares of common stock outstanding
28,640,363

 
28,609,282

Diluted weighted average shares of common stock outstanding
28,872,975

 
28,846,641

Dividends declared per share of common stock
$
0.33

 
$
1.32




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 months and year ended December 31, 2019 ($ in thousands):
 
For the three months ended December 31, 2019
 
For the year ended December 31, 2019
Net income attributable to common stockholders
$
9,660

 
$
36,991

Stock-based compensation
482

 
1,880

Incentive fees to affiliate
378

 
1,052

Depreciation of real estate owned
219

 
667

Core Earnings
$
10,739

 
$
40,590

Net income attributable to common stockholders
$
0.34

 
$
1.29

Stock-based compensation
0.02

 
0.07

Incentive fees to affiliate
0.01

 
0.04

Depreciation of real estate owned
0.01

 
0.02

Basic Core Earnings per common share
$
0.37

 
$
1.42

Net income attributable to common stockholders
$
0.33

 
$
1.28

Stock-based compensation
0.02

 
0.07

Incentive fees to affiliate
0.01

 
0.04

Depreciation of real estate owned
0.01

 
0.02

Diluted Core Earnings per common share
$
0.37

 
$
1.41




6
q419exhibit9927
Exhibit 99.2 Fourth Quarter and Full-Year 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, Ares Corp. 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 could differ materially from the returns on current and future investments, rates of repayments and prepayments on ACRE’s mortgage loans, availability of investment opportunities, ACRE’s ability to originate additional investments and completion of pending investments, the availability of capital, the availability of cost financing, market trends and conditions in ACRE’s industry and the general economy, the level of lending and borrowing spreads, commercial real estate loan volumes, government-sponsored enterprise activity and other risks described from time to time in ACRE’s and Ares Corp.’s filings with the Securities and Exchange Commission (“SEC”). Any forward-looking statement, including any contained herein, speaks only as of the time of this presentation and none of ACRE, ARES Corp. nor ACREM undertakes any duty to update any forward-looking statements made herein. 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, ACREM or Ares may make, by press release or otherwise, from time to time. ACRE, ACREM 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, ACREM 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, ACREM 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 ACREM or Ares, or as legal, accounting or tax advice. None of ACRE, ACREM, Ares or any affiliates of ACRE, ACREM 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, ACREM 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


 
Fourth Quarter and Full-Year 2019 Highlights • GAAP Earnings of $9.7 million or $0.33 per diluted common share and $37.0 million or $1.28 per diluted common share for the 2019 Financial fourth quarter and full-year, respectively • Core Earnings(1) of $10.7 million or $0.37 per diluted common share and $40.6 million or $1.41 per diluted common share for the Results fourth quarter and full-year, respectively • Book value per diluted common share of $14.77 Q4-2019: • Closed six senior loans totaling $250.3 million in commitments • $204.6 million in outstanding principal funded on new commitments and $55.4 million in outstanding principal funded on Loan Originations previously originated commitments & Repayments • Repayments of $115.4 million from three loans and a partial principal paydown on one loan Full-Year 2019: • Closed 18 senior loans totaling $776.9 million in commitments • Repayments of $482.4 million from eleven loans and a partial principal paydown on one loan • 50 loans held for investment • $1.9 billion in originated commitments at closing and $1.7 billion in outstanding principal • 98% of loans have floating interest rates based on outstanding principal balance Total Loan • 96% of loans are senior loans based on outstanding principal balance Portfolio • Weighted average unleveraged effective yield of 6.8%(2) • 95% of the loan portfolio is either fixed rate or floating rate with a weighted average LIBOR floor of 1.76% • Based on December 31, 2019 ending spot one month LIBOR rate of 1.76%, approximately 61% of the Q4-19 portfolio is either fixed rate or floating rate with a LIBOR floor that is currently “in the money” Capital and • Diverse financing sources with total borrowing capacity of $1.9 billion(3) and $1.3 billion in outstanding principal Liquidity • Common stock dividend of $0.33 per common share paid for Q4-19 Dividends (4) • 8.3% annualized dividend yield based upon closing share price on December 31, 2019 • Raised approximately $73 million of equity Subsequent • Established new $150.0 million facility with Morgan Stanley Bank N.A. Events • Closed four loans with a total commitment amount of $237.6 million and $197.7 million funded at closing • Declared Q1-20 dividend of $0.33 per diluted common share on February 20, 2020 Note: As of December 31, 2019, unless otherwise noted. See footnotes on page 16. 2


 
Q4-2019 Investment Activity Q4-2019 Characteristics of Funded Loans(6) Loans Summary ($ in millions) Number of loans closed 6 Multifamily New loan commitments $250.3 17% Average size of loans closed $41.7 Industrial Percentage of floating rate loans 100% 36% Percentage of senior loans 100% Total fundings(7) $260.1 Changes in Loan Portfolio(5) Office 47% $2,000 $260.1 $1,692.9 $1,750 $1,548.2 $1,500 $(115.4) ) s n $1,250 o i l l i m $1,000 n i $ $750 ( $500 $250 $0 Q F R Q 3-1 und epa 4-1 9 ing ym 9 Senior Loans s (7) ent s 100% Note: As of December 31, 2019, unless otherwise noted. See footnotes on page 16. 3


 
Full-Year 2019 Investment Activity Full-Year 2019 Characteristics of Funded Loans(6) Loans Summary ($ in millions) Multifamily Student Housing Number of loans closed 18 18% 9% New loan commitments $776.9 Self Storage Average size of loans closed $43.2 3% Percentage of floating rate loans 100% Percentage of senior loans 100% Industrial (7) Total fundings $679.2 20% Office 28% Changes in Loan Portfolio(5) Mixed-use $679.2 22% $2,000 $1,692.9 $1,750 $1,534.7 $1,500 ) s $(482.4) $(38.6) n o $1,250 i l l i m $1,000 n i $750 $ ( $500 $250 $0 Q Fu R C Q 4-1 nd epa onv 4-1 8 ing ym ert 9 s (7) ent ed s to R EO Senior Loans 100% Note: As of December 31, 2019, unless otherwise noted. See footnotes on page 16. 4


 
Total Loans Held for Investment Portfolio Key Statistics Loan Portfolio Characteristics(5) ($ in millions) Total loan commitments $1,909.1 Mid-Atlantic/Northeast Outstanding principal balance $1,692.9 5% Weighted average unpaid principal balance of loan portfolio* $1,601.0 Southwest 16% Total number of loans 50 Southeast Percentage of floating rate loans based on outstanding principal balance 98% 37% 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 1.5 years Midwest 21% Weighted average remaining life of subordinated debt and 2.6 years preferred equity investments (2) West Unleveraged Effective Yield 21% Loan Portfolio Self Storage 1% 8% 7.1% 7.2% 7.2% 6.9% 6.8% Residential/Condominium 2% 6% Multifamily 30% 4% Industrial 7% 2% 0% Student Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Housing 11% Senior loans 7.0% 6.9% 6.9% 6.5% 6.5% Sub. debt and pref. equity Mixed-use investments 14.9% 15.2% 14.7% 15.0% 15.1% 12% Office 21% Note: As of December 31, 2019, unless otherwise noted. Hotel 16% * During the quarter ended December 31, 2019. See footnotes on page 16. 5


 
Interest Rate Sensitivity(5) • 98% of the loan portfolio is floating rate and 2% is fixed rate • 95% of the loan portfolio is either floating rate with a LIBOR floor (93%) or fixed rate (2%) ◦ For the floating rate loans with LIBOR floors, the weighted average LIBOR floor is 1.76% • 61% of the loan portfolio is either fixed rate or floating rate with a LIBOR floor of 1.76% or higher • 100% of outstanding financing is floating rate ◦ Less than 5% has a LIBOR floor with a weighted average LIBOR floor of 1.90% Total Loan Portfolio by LIBOR Floor Levels Net Income Sensitivity to USD LIBOR Changes(8) ($ in millions) $0.40 $0.30 Outstanding LIBOR Floor Range Principal % Total Cumulative % $0.30 Fixed rate $ 42.3 2% 2% t c $0.20 a $0.13 2.25% - 2.50% 403.7 24% 26% p m I $0.10 2.00% - 2.24% 216.7 13% 39% S P 1.75% - 1.99% 403.2 24% 63% E $0.00 $(0.02) 1.50% - 1.74% 73.3 4% 67% -$0.10 $(0.06) <1.50% 477.6 28% 95% -$0.20 No floor 76.1 5% 100% -1.00% -0.50% 0.00% 0.50% 1.00% Total $ 1,692.9 100% Change in LIBOR from December 31, 2019 Spot Rate Annual increase/(decrease) in net income (per diluted common share basis)* Note: As of December 31, 2019, unless otherwise noted. *Per diluted common share is based on 28.866 million shares. See footnotes on page 16. 6


 
Financing Sources Overview Financing Sources Composition(5) Financing Sources Detail Bank Facilities/Insurance ($ in millions) Term Loan55% 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% $ 360.4 Citibank Facility 325.0 LIBOR+1.50 to 2.50% 126.6 BAML Facility 36.3 LIBOR+2.00% 36.3 Notes Payable CNB Facility 50.0 LIBOR+2.65% 30.5 4% Stockholders U.S. Bank Facility 186.0 LIBOR+1.65 to 2.25% 43.0 Equity Term Loan 8% Insurance MetLife Facility 180.0 LIBOR+2.30% 131.8 Subtotal $ 1,277.3 $ 728.6 2017-FL3 Securitization 33% Asset Level Financing Notes Payable $ 84.2 LIBOR+2.50 to 3.75% $ 56.2 Financing Facilities Capital Markets Debt to equity ratio 3.1x 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 3.3 years Total Debt $ 1,917.1 $ 1,340.4 Q4-19 weighted average borrowings* $1,260.1 million Note: As of December 31, 2019, unless otherwise noted. * During the quarter ended December 31, 2019. See footnotes on page 16. 7


 
Dividend Summary Quarterly Dividend Since Q1-16 $0.35 $0.33 $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 Q1-20* *Declared a first quarter 2020 dividend of $0.33 per common share payable on April 15, 2020 to common stockholders of record as of March 31, 2020. There is no assurance dividends will continue at these levels or at all. 8


 
Appendix 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) Multifamily Loans: 1 Senior FL Sep 2016 $89.7 $89.7 $89.6 L+4.75% 0.5% 6.8% Feb 2020 I/O 2 Senior TX Sep 2019 75.0 75.0 74.7 L+2.85% 2.0% 5.0% Oct 2022 I/O 3 Senior FL Sep 2016 45.4 45.4 45.3 L+4.75% 0.5% 6.8% Feb 2020 I/O 4 Senior TX Dec 2017 42.7 42.7 42.6 L+3.30% 1.0% 5.4% Dec 2020 I/O 5 Senior FL Dec 2018 43.5 42.4 42.1 L+2.60% 2.4% 5.5% Jan 2022 I/O 6 Senior IL Nov 2018 40.0 39.2 39.0 L+3.50% 2.3% 6.5% Nov 2020 I/O 7 Senior KS Oct 2019 35.8 35.8 35.5 L+3.25% 1.9% 5.5% Nov 2022 I/O 8 Senior NY Dec 2017 30.2 30.2 30.1 L+3.20% 1.4% 5.3% Dec 2020 I/O 9 Senior PA Dec 2018 30.2 29.3 29.2 L+3.00% 2.4% 5.9% Dec 2021 I/O 10 Senior TX Sep 2017 27.5 27.5 27.4 L+3.20% 1.2% 5.5% Oct 2020 I/O 11 Senior CA June 2017 27.0 26.8 26.7 L+3.85% 1.2% 6.1% July 2020 I/O 12 Senior FL Oct 2017 19.2 19.2 19.1 L+4.00% 1.2% 6.1% Nov 2020 I/O 13 Senior SC Aug 2019 34.6 2.0 1.7 L+6.50% 2.2% 10.1% Sep 2022 I/O Total Multifamily $540.8 $505.2 $503.0 Office Loans: 14 Senior IL Nov 2017 $82.0 $69.2 $69.0 L+3.75% 1.3% 6.1% Dec 2020 I/O 15 Senior IL May 2018 59.6 57.0 56.8 L+3.95% 2.0% 6.3% June 2021 I/O 16 Senior NC Mar 2019 84.0 49.6 49.0 L+4.25% 2.4% 8.6% Mar 2021 I/O 17 Senior GA Nov 2019 56.2 36.9 36.3 L+3.05% 2.0% 5.8% Dec 2022 I/O 18 Senior CA Oct 2019 37.2 30.9 30.6 L+3.35% 2.0% 6.0% Nov 2022 I/O 19 Senior IL Dec 2019 41.9 27.5 27.2 L+3.80% 1.8% 6.2% Jan 2023 I/O 20 Senior FL Apr 2017 19.0 18.4 18.4 L+4.30% 1.0% 6.6% Apr 2020 I/O 21 Senior CA Nov 2018 22.8 17.7 17.6 L+3.40% 2.3% 6.3% Nov 2021 I/O 22 Subordinated NJ Mar 2016 17.0 17.0 16.4 12.00% N/A 12.8% Jan 2026 I/O 23 Senior NC Apr 2019 30.5 13.2 13.0 L+3.51% 2.3% 6.7% May 2023 I/O 24 Senior TX Apr 2019 28.2 13.1 12.8 L+4.05% 2.5% 7.5% Nov 2021 I/O 25 Senior NC Oct 2018 13.5 8.6 8.5 L+4.00% 2.1% 6.7% Nov 2022 I/O 26 Subordinated CA Nov 2017 3.1 2.8 2.8 L+8.25% 1.3% 10.2% Nov 2021 I/O Total Office $495.0 $361.9 $358.4 See footnotes on page 16. 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) Hotel Loans: 27 Senior OR/WA May 2018 $68.1 $68.1 $67.7 L+3.45% 1.9% 5.9% May 2021 I/O 28 Senior Diversified Sep 2018 64.3 58.9 58.6 L+3.60% 2.1% 6.2% Sep 2021 I/O 29 Senior CA Dec 2017 40.0 40.0 39.9 L+4.12% 1.4% 6.2% Jan 2021 I/O 30 Senior MI Nov 2015 35.2 35.2 35.2 L+4.40% N/A 6.2% July 2020 I/O 31 Senior IL Apr 2018 32.9 32.9 32.7 L+4.40% 1.9% 6.8% May 2021 I/O 32 Senior MN Aug 2018 31.5 31.5 31.3 L+3.55% 2.1% 6.0% Aug 2021 I/O Total Hotel $272.0 $266.6 $265.4 Mixed-Use Loans: 33 Senior FL Feb 2019 $100.6 $100.6 $99.9 L+4.25% 2.5% 7.8% Feb 2021 I/O 34 Senior CA Mar 2018 56.1 49.0 48.8 L+4.00% 1.9% 6.3% Apr 2021 I/O 35 Senior TX Sep 2019 42.2 33.8 33.4 L+3.75% 2.3% 6.7% Sep 2022 I/O 36 Subordinated IL May 2018 15.3 14.5 14.3 L+12.25% 1.5% 14.9% Nov 2021 I/O Total Mixed-Use $214.2 $197.9 $196.4 Student Housing Loans: 37 Senior CA June 2017 $43.0 $41.7 $41.7 L+3.95% 1.2% 6.3% July 2020 I/O 38 Senior TX Dec 2017 41.0 41.0 40.8 L+4.75% N/A 7.1% Jan 2021 I/O 39 Senior NC Feb 2019 30.0 30.0 29.8 L+3.15% 2.3% 5.9% Feb 2022 I/O 40 Senior AL Feb 2017 24.1 24.1 24.1 L+4.45% 0.8% 6.8% Feb 2020 I/O 41 Senior TX Dec 2017 24.0 24.0 23.9 L+4.10% 1.6% 6.4% Jan 2021 I/O 42 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 $182.1 See footnotes on page 16. 11


 
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) Industrial Loans: 43 Senior FL Oct 2019 $52.5 $52.5 $52.0 L+6.10% 2.1% 8.8% Oct 2022 I/O 44 Senior NC May 2019 40.5 34.8 34.6 L+4.05% 1.6% 6.1% Mar 2024 I/O 45 Senior CA Nov 2019 26.6 21.0 20.8 L+4.50% 1.9% 7.4% Dec 2021 I/O 46 Senior CA Aug 2019 19.6 12.7 12.6 L+3.75% 2.0% 6.3% Mar 2023 I/O Total Industrial $139.2 $121.0 $120.0 Residential/Condominium Loans: 47 Senior CA Jan 2018 $16.7 $11.6 $11.5 13.00% N/A 22.5% Feb 2020 I/O 48 Subordinated NY Oct 2018 16.1 14.9 14.8 L+14.00%(11) 2.3% 19.1% May 2021(11) I/O 49 Subordinated HI Aug 2018 11.5 11.5 11.5 14.00% N/A 14.5% Mar 2020 I/O Total Residential/Condominium $44.3 $38.0 $37.8 Self Storage Loans: 50 Senior FL Feb 2019 $19.5 $19.5 $19.4 3.50% 2.0% 6.0% Mar 2022 I/O Total Self Storage $19.5 $19.5 $19.4 Loan Portfolio Total/Weighted Average $1,909.1 $1,692.9 $1,682.5 1.8% (10) 6.8% See footnotes on page 16. 12


 
Consolidated Balance Sheets As of ($ in thousands, except share and per share data) 12/31/2019 12/31/2018 ASSETS Cash and cash equivalents $ 5,256 $ 11,089 Restricted cash 379 379 Loans held for investment ($515,896 and $289,576 related to consolidated VIEs, respectively) 1,682,498 1,524,873 Real estate owned, net 37,901 — Other assets ($1,309 and $843 of interest receivable related to consolidated VIEs, respectively; $41,104 and $51,582 of other receivables related to consolidated VIEs, respectively) 58,100 66,983 Total assets $ 1,784,134 $ 1,603,324 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Secured funding agreements $ 728,589 $ 777,974 Notes payable 54,708 — Secured term loan 109,149 108,345 Collateralized loan obligation securitization debt (consolidated VIE) 443,177 270,737 Due to affiliate 2,761 3,163 Dividends payable 9,546 8,914 Other liabilities ($718 and $541 of interest payable related to consolidated VIEs, respectively) 9,865 8,604 Total liabilities 1,357,795 1,177,737 STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share, 450,000,000 shares authorized at December 31, 2019 and 2018 and 28,865,610 and 28,755,665 shares issued and outstanding at December 31, 2019 and 2018, respectively 283 283 Additional paid-in capital 423,619 421,739 Accumulated earnings 2,437 3,565 Total stockholders' equity 426,339 425,587 Total liabilities and stockholders' equity $ 1,784,134 $ 1,603,324 13


 
Consolidated Statements of Operations For the Three Months Ended ($ in thousands, except share and per share data) 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Revenue: Interest income from loans held for investment $ 28,536 $ 28,269 $ 29,993 $ 27,986 $ 30,882 Interest expense (15,044) (15,124) (16,675) (15,740) (16,357) Net interest margin 13,492 13,145 13,318 12,246 14,525 Revenue from real estate owned 8,088 6,702 8,357 1,911 — Total revenue 21,580 19,847 21,675 14,157 14,525 Expenses: Management and incentive fees to affiliate 1,959 1,578 2,252 1,574 2,116 Professional fees 641 542 532 478 510 General and administrative expenses 1,035 1,005 1,029 1,120 892 General and administrative expenses reimbursed to affiliate 764 831 771 659 946 Expenses from real estate owned 7,338 6,838 7,118 1,687 — Total expenses 11,737 10,794 11,702 5,518 4,464 Income before income taxes 9,843 9,053 9,973 8,639 10,061 Income tax expense, including excise tax 183 19 218 96 43 Net income attributable to common stockholders $ 9,660 $ 9,034 $ 9,755 $ 8,543 $ 10,018 Earnings per common share: Basic earnings per common share $ 0.34 $ 0.32 $ 0.34 $ 0.30 $ 0.35 Diluted earnings per common share $ 0.33 $ 0.31 $ 0.34 $ 0.30 $ 0.35 Weighted average number of common shares outstanding: Basic weighted average shares of common stock outstanding 28,640,363 28,634,514 28,599,282 28,561,827 28,553,540 Diluted weighted average shares of common stock outstanding 28,872,975 28,867,603 28,863,765 28,780,980 28,709,145 Dividends declared per share of common stock $ 0.33 $ 0.33 $ 0.33 $ 0.33 $ 0.31 14


 
Reconciliation of Net Income to Non-GAAP Core Earnings(1) For the Three Months Ended ($ in thousands, except per share data) 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Net income attributable to common stockholders $ 9,660 $ 9,034 $ 9,755 $ 8,543 $ 10,018 Stock-based compensation 482 479 427 492 324 Incentive fees to affiliate 378 — 674 — 540 Depreciation of real estate owned 219 207 188 54 — Core Earnings $ 10,739 $ 9,720 $ 11,044 $ 9,089 $ 10,882 Net income attributable to common stockholders $ 0.34 $ 0.32 $ 0.34 $ 0.30 $ 0.35 Stock-based compensation 0.02 0.02 0.01 0.02 0.01 Incentive fees to affiliate 0.01 — 0.02 — 0.02 Depreciation of real estate owned 0.01 0.01 0.01 — — Basic Core Earnings per common share $ 0.37 $ 0.34 $ 0.39 $ 0.32 $ 0.38 Net income attributable to common stockholders $ 0.33 $ 0.31 $ 0.34 $ 0.30 $ 0.35 Stock-based compensation 0.02 0.02 0.01 0.02 0.01 Incentive fees to affiliate 0.01 — 0.02 — 0.02 Depreciation of real estate owned 0.01 0.01 0.01 — — Diluted Core Earnings per common share $ 0.37 $ 0.34 $ 0.38 $ 0.32 $ 0.38 See footnotes on page 16. 15


 
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 $15.84 per share as of December 31, 2019 and based on annualized Q4-19 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 fourth quarter and full-year ended December 31, 2019, respectively. 7. Includes outstanding principal funded of $204.6 million and $493.9 million, respectively, on new commitments and $55.4 million and $185.3 million, respectively, on previously originated commitments for the fourth quarter and full-year 2019. 8. Represents the hypothetical increases/(decreases) 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 December 31, 2019 of 1.76% and (2) no change in the outstanding principal balance of the Company's loans held for investment portfolio and borrowings as of December 31, 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. 11. In September 2019, the Company and the borrower entered into a modification agreement to, among other things, loan an additional $2.1 million to the borrower on the subordinated New York loan, for which such amount accrues interest at a per annum rate of 20.00% and has an initial maturity date of April 2020. The remaining outstanding principal balance of the subordinated New York loan continues to accrue interest at L + 14.00% and has an initial maturity date of May 2021. 16