Education
About Us
Working with TipRanks
Follow Us
Ares Commercial Real Estate Cor (ACRE)
NYSE:ACRE
Top Page
Ares Commercial
(NYSE:ACRE)
Select Model
Select Model
Rating:48Neutral
Price Target:―
Ares Commercial Real Estate faces significant profitability challenges and negative momentum. While strong efforts in reducing risk and improving liquidity are positives, the negative earnings, high-risk loans, and recent dividend cut are notable risks. The high dividend yield may offer some appeal, but overall, the stock presents a cautious investment outlook.
Positive Factors
Risk Reduction
Reducing high-risk loans enhances the company's risk profile, potentially leading to more stable returns and improved financial health over the long term.
Improved Liquidity
Improved liquidity and reduced leverage provide the company with greater financial flexibility to navigate market challenges and invest in growth opportunities.
High Cash Reserves
A strong cash position allows the company to capitalize on investment opportunities and manage liabilities, supporting long-term operational stability.
Negative Factors
GAAP Net Loss
Ongoing net losses indicate underlying profitability challenges, which could hinder the company's ability to sustain operations and fund future growth.
Dividend Cut
A reduced dividend may signal financial strain and could deter income-focused investors, impacting the company's attractiveness and stock performance.
Increase in Risk-Rated Loans
An increase in high-risk loans suggests potential future credit issues, which could lead to further financial instability and impact the company's earnings.
Ares Commercial (ACRE) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$262.93M
Dividend Yield16.84%
Average Volume (3M)416.27K
Price to Earnings (P/E)―
Beta (1Y)1.00
Revenue Growth-27.60%
EPS Growth62.75%
CountryUS
Employees1,200
SectorReal Estate
Sector Strength53
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)-0.51
Shares Outstanding55,005,352
10 Day Avg. Volume347,354
30 Day Avg. Volume416,273
Financial Highlights & Ratios
PEG Ratio0.82
Price to Book (P/B)0.59
Price to Sales (P/S)-21.05
P/FCF Ratio9.02
Enterprise Value/Market Cap4.02
Enterprise Value/Revenue50.25
Enterprise Value/Gross Profit75.66
Enterprise Value/Ebitda144.56
Forecast
1Y Price Target
$4.31Price Target Upside-9.26% Downside
Rating ConsensusModerate Sell
Number of Analyst Covering5
Ares Commercial Business Overview & Revenue Model
Company DescriptionAres 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. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Management LLC operates as the manager of the company. The company was incorporated in 2011 and is based in New York, New York.
How the Company Makes MoneyAres Commercial Real Estate Corporation generates revenue primarily through interest income from its portfolio of commercial real estate loans. The company invests in and originates senior mortgage loans, which are secured by commercial properties and provide a steady stream of interest payments. Additionally, ACRE may generate income through fees associated with loan origination and management. The company focuses on maintaining a diversified portfolio across different property types and geographical locations to mitigate risk and enhance returns. ACRE's alignment with Ares Management Corporation provides access to a broad network of industry relationships and expertise, which supports deal sourcing and investment opportunities.
Ares Commercial Earnings Call Summary
Earnings Call Date:Aug 05, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 29, 2025
Earnings Call Sentiment Neutral
The earnings call reflected both progress in strategic objectives and challenges in financial performance. While there were notable improvements in loan reductions, new investments, and balance sheet strength, the company also faced significant losses and challenges in the office sector. Distributable earnings fell short of the dividend level, but the company remains optimistic about future growth and stability.Q2-2025 Updates
Positive Updates
Reduction in Office Loans
Ares Commercial Real Estate reduced its office loans to $524 million, marking a 10% decrease quarter-over-quarter and a 30% decrease year-over-year, driven by repayments and active asset management.
Successful Loan Exits and Portfolio Stability
The company exited a $51 million office life sciences loan, taking a $33 million realized loss but contributing to a 50% decrease in future funding commitments. This move is seen as creating greater stability in the portfolio.
Strong Pipeline and New Loan Investments
Post second quarter, Ares executed its first investment commitments of the year, closing four senior loans totaling $43 million in loan commitments collateralized by self-storage properties. The team has originated over $6 billion of new investment commitments in the past 12 months.
Balance Sheet and Liquidity Improvements
The net debt-to-equity ratio was maintained at 1.2x, down from 1.9x year-over-year. Outstanding borrowings decreased by 6% quarter-over-quarter and 39% year-over-year. Liquidity position was $178 million as of June 30, 2025.
Negative Updates
GAAP Net Loss
A GAAP net loss of approximately $11 million or $0.20 per diluted common share was reported for the second quarter of 2025. This includes a realized loss of $33 million related to the exit of a Massachusetts office life sciences loan.
Distributable Earnings Below Dividend Level
Distributable earnings, excluding losses, were $0.09 per share, below the dividend level of $0.15 per share.
High Concentration in Risk-Rated Loans
Two of the largest risk-rated 4 and 5 loans comprised 75% of the outstanding principal balance, posing a risk to portfolio stability.
Continued Challenges in Office Sector
Challenges remain in the office sector with respect to investor demand, financing availability, and valuations for office properties.
Company Guidance
During the second quarter of 2025, Ares Commercial Real Estate Corporation made significant progress in managing its portfolio, notably reducing office loans by 10% quarter-over-quarter and 30% year-over-year to $524 million. The company successfully exited a $51 million office life sciences loan, taking a $33 million realized loss, which was in excess of the prior quarter's CECL reserve. This exit contributed to a 50% decrease in future funding commitments, from $73 million in Q1 to $36.5 million by June 30, 2025. Ares also upgraded a risk-rated 3 hotel loan to a risk-rated 2 due to improved occupancy and cash flows, while maintaining a risk rating of 4 for an $81 million Arizona office loan due to slower lease-up progress. The company's balance sheet showed strength with a net debt-to-equity ratio of 1.2x, a 6% reduction in borrowings to $889 million, and a 50% reduction in unfunded commitments. Despite reporting a GAAP net loss of $11 million or $0.20 per share and distributable earnings loss of $28 million or $0.51 per share, excluding a $33 million loss, the company remains confident in its earnings potential, supported by a robust pipeline of new loans, including $43 million in self-storage properties. The Board declared a $0.15 per share dividend for the third quarter, reflecting a yield of over 13% based on the July 31 stock price.Ares Commercial Financial Statement Overview
Summary
Ares Commercial shows a volatile income statement with fluctuating revenues and profit margins. Despite a strong revenue position, the net profit margin is negative due to significant net losses. The balance sheet is mixed, with no debt but declining equity. Cash flow is stable but overshadowed by profitability concerns.Income Statement
Ares Commercial shows a volatile income statement with fluctuating revenues and profit margins. While the revenue increased in 2024 compared to 2023, the net profit margin is negative due to significant net losses. The gross profit margin is strong as it matches total revenue, but the negative net income is concerning.45
Neutral
Balance Sheet
The balance sheet reflects a stable equity position with a debt-free status in 2024, which is positive. However, the significant decrease in stockholders' equity over recent years poses a risk. The equity ratio remains relatively healthy, indicating a decent asset coverage by equity.55
Neutral
Cash Flow
Ares Commercial demonstrates stable operating cash flow, albeit with a decreasing trend. Free cash flow remains positive, which is a strength. However, the company's negative net income affects the cash flow to net income ratios, highlighting potential profitability issues.60
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 21.01M | -15.23M | 1.10M | 109.05M | 102.07M | 78.69M |
| Gross Profit | 13.95M | -15.23M | -93.24M | 56.48M | 83.51M | 40.38M |
| EBITDA | 7.30M | 0.00 | 0.00 | 95.22M | 61.18M | 0.00 |
| Net Income | -18.23M | -34.99M | -38.87M | 29.79M | 60.46M | 21.84M |
Balance Sheet | ||||||
| Total Assets | 1.44B | 1.75B | 2.28B | 2.52B | 2.63B | 1.93B |
| Cash, Cash Equivalents and Short-Term Investments | 97.79M | 72.48M | 138.52M | 169.21M | 50.62M | 0.00 |
| Total Debt | 888.21M | 1.17B | 1.62B | 1.74B | 1.08B | 1.33B |
| Total Liabilities | 914.94M | 1.21B | 1.65B | 1.78B | 1.95B | 1.46B |
| Stockholders Equity | 523.70M | 540.13M | 625.85M | 747.54M | 678.63M | 473.01M |
Cash Flow | ||||||
| Free Cash Flow | 28.04M | 35.55M | 46.79M | 57.16M | 48.21M | 31.49M |
| Operating Cash Flow | 28.39M | 35.55M | 46.79M | 57.16M | 48.35M | 31.76M |
| Investing Cash Flow | 619.19M | 427.91M | 127.46M | 193.17M | -699.68M | -81.87M |
| Financing Cash Flow | -624.10M | -507.63M | -205.07M | -159.67M | 627.17M | 119.25M |
Ares Commercial Technical Analysis
Neutral
4.75
Price Trends
4.62
Positive
4.64
Positive
4.75
Positive
Market Momentum
0.04
Positive
50.35
Neutral
16.37
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ACRE, the sentiment is Neutral. The current price of 4.75 is below the 20-day moving average (MA) of 4.83, above the 50-day MA of 4.62, and above the 200-day MA of 4.75, indicating a neutral trend. The MACD of 0.04 indicates Positive momentum. The RSI at 50.35 is Neutral, neither overbought nor oversold. The STOCH value of 16.37 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ACRE.
Ares Commercial Risk Analysis
Ares Commercial disclosed 101 risk factors in its most recent earnings report. Ares Commercial reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ares Commercial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
67 Neutral | 248.15M | 9.05 | ― | 10.33% | 22.45% | -44.01% | |
66 Neutral | 160.18M | 10.20 | ― | 12.63% | -16.74% | -32.89% | |
63 Neutral | 227.20M | 6.18 | 12.03% | 13.52% | 75.08% | -21.03% | |
61 Neutral | 212.21M | 15.08 | 3.40% | 16.87% | 271.03% | 31.81% | |
61 Neutral | 249.70M | 5.74 | ― | 14.14% | 25.17% | ― | |
48 Neutral | $262.93M | ― | -3.30% | 16.84% | -27.60% | 62.75% | |
65 Neutral | $2.17B | 12.19 | 3.79% | 4.94% | 3.15% | 1.96% |
* Real Estate Sector Average
Performance Comparison
ACRE
Ares Commercial
4.75
-1.60
-25.20%
SEVN
Seven Hills Realty Trust
10.53
-1.82
-14.74%
MITT
AG Mortgage
7.65
0.65
9.29%
EARN
Ellington Residential Mortgage
5.69
-0.29
-4.85%
NREF
NexPoint Real Estate ate Finance
14.14
0.65
4.82%
AOMR
Angel Oak Mortgage
9.47
0.41
4.53%
Ares Commercial Corporate Events
DividendsFinancial Disclosures
Ares Commercial Real Estate Cuts Dividend Amid Losses
Negative
Feb 12, 2025
Ares Commercial Real Estate Corporation reported a GAAP net loss of $10.7 million for the fourth quarter of 2024 and $35.0 million for the full year. In response to the financial results and a more flexible balance sheet, the company has reduced its quarterly dividend to $0.15 per share for the first quarter of 2025. Additionally, the company has improved its liquidity position by collecting $166 million in repayments, increasing available capital to over $200 million. This increase is intended to enhance the company’s ability to address underperforming loans and optimize financial outcomes. Ares has also made progress in resolving risk-rated loans, reducing them by 34% over the past year.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.