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Ares Commercial Real Estate Cor (ACRE)
NYSE:ACRE
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Ares Commercial
(NYSE:ACRE)
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Rating:51Neutral
Price Target:
$5.00
▼(-0.40% Downside)
Action:ReiteratedDate:02/11/26
The score is held back primarily by weakened earnings quality (recent losses) and concentrated credit-risk exposure highlighted in the latest earnings commentary, despite positive cash flow. Technicals are mildly constructive, and valuation is supported by a very high dividend yield, but the negative P/E and reliance on successful problem-loan resolutions temper the 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
$277.95M
Dividend Yield13.75%
Average Volume (3M)572.13K
Price to Earnings (P/E)―
Beta (1Y)0.87
Revenue Growth-30.60%
EPS Growth87.95%
CountryUS
Employees1,200
SectorReal Estate
Sector Strength53
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)0.15
Shares Outstanding55,367,672
10 Day Avg. Volume693,802
30 Day Avg. Volume572,129
Financial Highlights & Ratios
PEG Ratio2.99
Price to Book (P/B)0.51
Price to Sales (P/S)3.07
P/FCF Ratio12.29
Enterprise Value/Market Cap4.66
Enterprise Value/Revenue23.06
Enterprise Value/Gross Profit32.19
Enterprise Value/Ebitda32.24
Forecast
1Y Price Target
$5.33Price Target Upside6.18% Upside
Rating ConsensusHold
Number of Analyst Covering4
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
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:Feb 10, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 05, 2026
Earnings Call Sentiment Neutral
The call highlights meaningful progress: material reduction in office exposure, restarted originations and portfolio growth, improved liquidity and financing capacity, successful restructurings, and a declared dividend with an attractive yield. However, material credit‑concentration risk remains (five risk-rated 4/5 loans, with two loans comprising ~85% of that bucket), a significant CECL reserve concentrated in troubled assets, and mixed/uneven reported earnings. Management’s focus is on resolving the remaining problem loans which will drive earnings visibility going forward.Q4-2025 Updates
Positive Updates
Reshaping Portfolio and Reduced Office Exposure
Office loan exposure reduced to $447 million, down 30% since year-end 2024 and down 10% quarter-over-quarter; office loans now represent 28% of the total loan portfolio (down from 38%).
Restarted Origination Activity and Portfolio Growth
ACRE returned to investing in 2025 with 13 new loan commitments totaling $486 million for the year; in Q4 closed eight new loan commitments totaling $393 million. Outstanding principal balance reached $1.6 billion, an increase of 24% (as reported). New loans closed in 2025 comprise 29% of the total loan portfolio.
Strong Liquidity and Improved Financing Capacity
Available capital of $110 million at quarter end; increased borrowing capacity by $250 million via upsizing Wells Fargo facility to $600 million (+$150M) and Morgan Stanley facility by $100 million; redeemed FL4 CLO to reduce borrowing cost.
Balance Sheet Positioning and Moderate Leverage
Net debt to equity (excluding CECL) at 1.6x at quarter end (up from 1.1x prior quarter). Management expects near-term leverage may peak near ~2.0x and targets a long-term debt-to-equity of ~3.0x to achieve historical ROE.
Selective Asset Management Outcomes and Restructurings
Restructured an $81M senior risk-4 Arizona office loan into a $65M senior risk-3 tranche and an $8M subordinated risk-4 tranche; sponsor repaid principal and committed additional equity — this restructuring drove a 13% quarter-over-quarter reduction in risk-rated 4 and 5 loans.
Dividend Declaration and Attractive Yield
Board declared a regular cash dividend of $0.15 per common share for 2026. Based on the 02/05/2026 stock price, the annualized yield on the first quarter dividend is approximately 12%.
Ares Platform Leverages Scale
More than half of new loan dollars represented co-investment opportunities with Ares-affiliated vehicles. The broader Ares real estate debt platform originated over $9 billion globally in new commitments in 2025 — nearly double 2024 — expanding deal access for ACRE.
CECL Reserve Trend and Book Value
Total CECL reserve was $127 million at year-end 2025 (approximately 8% of loans held for investment). CECL decreased $18 million year-over-year from 12/31/2024, though it rose $10 million versus 09/30/2025. Book value was $9.26 per share (includes CECL reserve).
Negative Updates
Remaining Risk-Rated Four and Five Loans Concentration
Five risk-rated four and five loans remain. The two largest comprise ~85% of that sub-portfolio: a risk-rated five Chicago office loan with a carrying value of $140 million (~44% of the risk-rated 4/5 pool) currently on nonaccrual, and a risk-rated four Brooklyn residential condominium loan with a carrying value of $130 million (~41% of the pool).
Earnings and Distributable Results Mixed/Negative
Management reported mixed results: for the full year the call referenced a GAAP net loss ($1 million) and a distributable earnings loss ($7 million) in one part of the prepared remarks, while elsewhere cited a GAAP net loss of ~$4 million and distributable earnings of ~$8 million for 2025. Q4 distributable earnings excluding a $2 million realized gain were $6 million ($0.11 per diluted share). The commentary reflects modest/uneven earnings while resolutions progress.
High CECL Concentration in Problem Loans
92% of the $127 million CECL reserve (about $117M) is attributable to risk-rated four and five loans, and roughly half of that CECL is tied to the single risk-rated five office loan — indicating concentrated credit loss exposure.
Nonaccrual and Downgrade Activity
The Chicago office loan remains on nonaccrual. A $28 million Pennsylvania multifamily loan was downgraded from risk-rated four to risk-rated five in Q4 due to expectation of a potential sale and possible loss realization.
Earnings Volatility and Dependence on Asset Resolutions
Management noted that earnings trajectory may be uneven and dependent on timing and outcomes of remaining asset resolutions (not fully controllable by the lender), particularly the large Chicago and Brooklyn assets.
Office Sector Liquidity & Market Uncertainty
While office exposure has been reduced materially, management signaled continued limited interest in new office commitments and acknowledged the broader market has pockets of low liquidity for non–Class A office assets, which could impact realization/timing.
Modest Scale of Current Loan Book Relative to Targets
Current outstanding principal of $1.6 billion implies ACRE may need to grow the portfolio materially (management cited an illustrative ~$2.0 billion loan portfolio and ~$1.5 billion of debt at a 3.0x target) to reach historical ROE targets — growth dependent on repayments and origination cadence.
Company Guidance
Management guided that its near-term priorities are resolving the five remaining risk‑rated 4 and 5 loans and sustaining the Board‑declared regular 2026 cash dividend of $0.15 per common share (Q1 payable 04/15/2026; record 03/31/2026), which implies an approximate 12% annualized yield at the 02/05/2026 stock price; they reiterated confidence that execution can produce earnings to support that dividend even if earnings are lumpy. Financial targets and liquidity guidance include Q4 net debt/equity of 1.6x (ex‑CECL) with near‑term leverage likely to peak around 2.0x and a long‑term target of 3.0x, available capital of $110 million, and increased borrowing capacity of $250 million (Wells Fargo facility upsized to $600 million, Morgan Stanley facility +$100 million), plus lower funding cost via redemption of the FL4 CLO. Portfolio and reserve metrics cited: outstanding loan principal of $1.6 billion (new loans = 29% of the portfolio), 13 new commitments in 2025 totaling $486 million (8 in Q4 totaling $393 million), office loans reduced to $447 million (28% of the portfolio, ~30% decline since year‑end 2024), CECL reserve of $127 million (~8% of loans outstanding, $117 million or 92% attributed to risk‑rated 4/5 loans), book value $9.26 per share, and notable single‑loan concentrations of $140 million (Chicago risk‑rated 5, ~44% of the 4/5 bucket) and $130 million (Brooklyn risk‑rated 4, ~41% of the 4/5 bucket).Ares Commercial Financial Statement Overview
Summary
Financials are mixed: revenue rebounded recently, but profitability deteriorated versus 2020–2022 with losses in 2023–2025. Cash flow remained positive (a support), but it has trended down. Leverage has been historically high and equity has declined, adding risk despite some signs of balance-sheet improvement.Income Statement
Revenue has been volatile: strong growth in 2024–2025 (annual revenue up meaningfully), but profitability has deteriorated sharply versus the earlier profitable period (2020–2022). The company swung from solid profits in 2020–2022 to sizable losses in 2023–2024 and remained slightly negative in 2025, with net margins improving from very weak 2024 levels but still below break-even. Overall, the top-line rebound is a positive, but inconsistent earnings and negative net income in the most recent years weigh heavily on quality and stability.36
Negative
Balance Sheet
Leverage historically has been high (debt-to-equity around ~2–3x in 2020–2024), which is common in mortgage REITs but still increases sensitivity to credit and funding conditions. Equity has trended down from 2022–2025, and returns on equity have turned negative in recent years, reflecting the earnings pressure. The 2025 snapshot shows no reported debt and a much lower leverage profile, but given the sharp change versus prior years, the balance sheet picture appears less consistent across periods.52
Neutral
Cash Flow
Operating cash flow and free cash flow have stayed positive each year, which helps offset weaker reported earnings in 2023–2025. However, cash generation has been trending down over the last several years (free cash flow declines in 2023–2025), and in 2024 the cash coverage of obligations was modest. Overall: resilient positive cash flow is a strength, but the downward trajectory is a caution.58
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 85.35M | 87.80M | 1.10M | 109.05M | 102.07M |
| Gross Profit | 48.95M | 87.80M | 1.10M | 109.05M | 83.51M |
| EBITDA | 70.19M | 0.00 | 0.00 | 0.00 | 61.18M |
| Net Income | -902.00K | -34.99M | -38.87M | 29.79M | 60.46M |
Balance Sheet | |||||
| Total Assets | 1.62B | 1.75B | 2.28B | 2.52B | 2.63B |
| Cash, Cash Equivalents and Short-Term Investments | 29.29M | 63.80M | 138.52M | 169.21M | 50.62M |
| Total Debt | 1.05B | 1.17B | 1.62B | 1.74B | 1.90B |
| Total Liabilities | 1.11B | 1.21B | 1.65B | 1.78B | 1.95B |
| Stockholders Equity | 509.57M | 540.13M | 625.85M | 747.54M | 678.63M |
Cash Flow | |||||
| Free Cash Flow | 21.35M | 35.55M | 46.79M | 57.16M | 48.21M |
| Operating Cash Flow | 21.35M | 35.55M | 46.79M | 57.16M | 48.35M |
| Investing Cash Flow | 148.14M | 427.91M | 127.46M | 193.17M | -699.68M |
| Financing Cash Flow | -168.63M | -507.63M | -205.07M | -159.67M | 627.17M |
Ares Commercial Technical Analysis
Neutral
5.02
Price Trends
5.08
Negative
4.93
Positive
4.72
Positive
Market Momentum
<0.01
Positive
46.09
Neutral
8.22
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 5.02 is below the 20-day moving average (MA) of 5.19, below the 50-day MA of 5.08, and above the 200-day MA of 4.72, indicating a neutral trend. The MACD of <0.01 indicates Positive momentum. The RSI at 46.09 is Neutral, neither overbought nor oversold. The STOCH value of 8.22 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 103 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
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $260.69M | 5.05 | 27.37% | 14.36% | 15.51% | 210.91% | |
74 Outperform | $255.07M | 7.00 | 11.82% | 15.86% | -1.57% | -15.32% | |
65 Neutral | $2.17B | 12.19 | 3.79% | 4.94% | 3.15% | 1.96% | |
55 Neutral | $254.27M | 8.86 | 8.82% | 9.61% | 20.44% | -59.21% | |
51 Neutral | $277.95M | -247.29 | -0.17% | 13.75% | -30.60% | 87.95% | |
51 Neutral | $207.78M | 11.64 | 6.67% | 14.83% | 65.86% | -74.61% | |
47 Neutral | $135.44M | 19.37 | 6.58% | ― | -18.37% | 18.80% |
* Real Estate Sector Average
ACRE
Ares Commercial
5.02
0.59
13.19%
ACR
ACRES Commercial Realty
18.59
-1.64
-8.11%
MITT
AG Mortgage
8.01
1.17
17.17%
NREF
NexPoint Real Estate ate Finance
14.71
0.55
3.88%
AOMR
Angel Oak Mortgage
8.34
-0.32
-3.66%
REFI
Chicago Atlantic Real Estate ate Finance Inc
12.10
-2.41
-16.61%
Ares Commercial Corporate Events
Business Operations and StrategyDividendsFinancial DisclosuresShareholder Meetings
Ares Commercial Highlights 2025 Results and Dividend Declaration
Neutral
Feb 10, 2026
For the fourth quarter of 2025, Ares Commercial Real Estate Corporation reported a GAAP net loss of $3.9 million, or $0.07 per diluted share, but generated distributable earnings of $8.5 million, or $0.15 per diluted share. For full year 2025, the company posted a modest GAAP net loss of $0.9 million, or $0.02 per diluted share, and a distributable loss of $6.7 million, or $0.12 per diluted share, reflecting a year of portfolio repositioning and risk reduction.
Management highlighted that progress in resolving higher-risk loans, reducing office and REO exposures, and collecting $572 million in loan repayments during 2025 strengthened balance sheet flexibility and enabled a return to new investing in the second half of the year. Subsequent to year-end, the company closed $150 million of new loan commitments, declared a $0.15 per-share dividend for the first quarter of 2026 matching the fourth-quarter 2025 payout, and scheduled its 2026 annual shareholders meeting for May 27, 2026, underscoring a continued focus on stabilizing earnings and supporting shareholder returns.
The most recent analyst rating on (ACRE) stock is a Hold with a $5.00 price target. To see the full list of analyst forecasts on Ares Commercial stock, see the ACRE Stock Forecast page.
Business Operations and StrategyPrivate Placements and Financing
Ares Commercial Expands Wells Fargo Repurchase Lending Facility
Positive
Dec 19, 2025
On December 18, 2025, Ares Commercial Real Estate Corporation and several of its subsidiaries amended their existing master repurchase and securities contract with Wells Fargo Bank, National Association. The amendment increased the lending facility’s commitment amount from $450 million to $600 million in exchange for an upsize fee, expanding the company’s available financing capacity and potentially enhancing its ability to originate or hold a larger volume of commercial real estate loans.
The most recent analyst rating on (ACRE) stock is a Buy with a $5.50 price target. To see the full list of analyst forecasts on Ares Commercial stock, see the ACRE Stock Forecast page.
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.