Ares Commercial Real Estate Corporation (NYSE:ACRE) Q3 2019 Earnings Conference Call - Final Transcript

Nov 08, 2019 • 09:00 am ET


Ares Commercial Real Estate Corporation (NYSE:ACRE) Q3 2019 Earnings Conference Call - Final Transcript


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Jamie Henderson

executed on our strategic plan to expand our platform across the U.S. with new offices augment our talent improve our origination capabilities and broaden our product offering. These initiatives have enabled us to remain more fully invested with loans that generate attractive risk-adjusted returns.

As a result we have collectively improved our profitability and materially increased shareholder value. In addition we have increased our quarterly dividend 4x since the beginning of 2018 for a total increase of 22%. And we are very well positioned to exceed 100% core earnings coverage of our dividend for the fourth consecutive year. I would like to express my gratitude to the entire team and to all of our shareholders and constituents for their support and I look forward to continuing to contribute to the future success of ACRE as a Director for the foreseeable future. Let me now turn to our third quarter results. As you can see from our earnings results this morning the company continues to generate strong earnings with healthy investment activity and a well-positioned balance sheet. During the third quarter we generated GAAP and core earnings of $0.31 and $0.34 per share respectively. And as Tae-Sik will describe the fourth quarter looks potentially better from an earnings standpoint. During the third quarter we originated 5 new loan commitments totaling $193 million. Since quarter end we have closed an additional $126 million with 3 loans which brings our year-to-date commitments to $652 million a 38% increase from the same period in 2018.

Consistent with our current portfolio the new loans were all senior floating rate diversified across sectors and regions with anticipated gross levered returns in the low double digits. We're continuing to broaden our funnel of new investment opportunities. The amount that we are currently reviewing and have quoted or are in more advanced stages has increased over 30% versus the same period in 2018. At the same time we are remaining highly selective closing less than 5% of the transactions that we reviewed year-to-date. Looking ahead our forward pipeline reflects our focus on finding the best relative value across property types and products. We have executed term sheets on approximately $300 million of additional commitments that are expected to close in the fourth quarter and the pipeline behind those loans is deep. As a result of our strong deployment activity in the third and fourth quarters to date we currently expect our fourth quarter EPS to be higher than our third quarter.

Let me now turn the call over to Tae-Sik to discuss our third quarter results and forward outlook in more detail.

Tae-Sik Yoon

Terrific. Thank you Jamie and good morning everyone. Earlier today we reported GAAP net income of $9 million or $0.31 per common share and core earnings of $9.7 million or $0.34 per common share for the third quarter of 2019. So this brings us -- our total core earnings for the first nine months of the year to $1.04 per common share in excess of the