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8-K - 8-K - Ares Commercial Real Estate Corp | a14-7627_28k.htm |
Exhibit 99.1
ARES COMMERCIAL REAL ESTATE CORPORATION REPORTS FOURTH QUARTER AND FULL YEAR 2013 RESULTS
Record quarterly originations of $359 million in commitments for principal lending; greater than $1 billion in outstanding principal at year-end 2013
Todd Schuster to become CEO and President; John Bartling to be Chairman of the Board
Net Income of $0.12 and $0.72 per common share
Declares first quarter 2014 dividend of $0.25 per common share
DECEMBER 31, 2013 FINANCIAL RESULTS
Chicago, IL March 17, 2014 - Ares Commercial Real Estate Corporation (the Company, we, and our) (NYSE:ACRE), a specialty finance company primarily engaged in principal lending and mortgage banking of commercial real estate (CRE) investments reported net income of $3.3 million or $0.12 per basic and diluted common share and $13.8 million or $0.72 per basic and diluted common share for the fourth quarter and full year of 2013, respectively. In addition, the Company announced that its Board of Directors has authorized a first quarter 2014 dividend of $0.25 per common share.
We ended 2013 with our strongest originations thus far with $359 million in new commitments for the fourth quarter and more than a $1 billion portfolio as of year-end, said Todd Schuster Co-CEO of Ares Commercial Real Estate Corporation. Among our many accomplishments, we are pleased with our increased scale and improved access to a variety of attractive funding sources to complement our experienced origination team. We now have two complementary businesses that provide us the ability to offer a broad array of financing products and the ability to extend and diversify our revenue streams. As we reposition and enhance our mortgage banking business at ACRE Capital, we believe we have the ability to add to our profitability over time. I am very optimistic for 2014 as we believe ACRE is well positioned to capitalize on the evolving opportunities in commercial real estate lending.
The fourth quarter was very active for us as we completed our first CMBS transaction and we closed a record volume of quarterly commitments, said Tae-Sik Yoon, Chief Financial Officer of Ares Commercial Real Estate Corporation. Given the timing of these loan closings, we will gain the full benefit of the additional interest income during the first quarter of 2014. We expect to deliver attractive returns to our shareholders as we benefit from our increased scale, investments in personnel and our efforts to optimize our capital structure going forward.
Today the Companys board of directors announced that Todd Schuster has been appointed the Chief Executive Officer and President of the Company and John Bartling will succeed Michael Arougheti as Chairman of the board of directors. Todds experience and proven ability to build leading real estate finance platforms makes him ideal to lead the future growth of ACRE as its President and CEO, said John Bartling Chairman of the Board. I also want to thank Michael Arougheti for his leadership as Chairman of the board and we look forward to his continued counsel as a board member.
FOURTH QUARTER 2013 FINANCIAL HIGHLIGHTS
Financial Results:
· For the fourth quarter of 2013, net income was $3.3 million or $0.12 per basic and diluted common share.
· Core Earnings (1) for the fourth quarter of 2013 were $4.2 million or $0.15 per basic and diluted common share.
Financial Activities:
· For the principal lending business, originations for the fourth quarter of 2013 included eight new loans totaling $359.0 million in commitments and $270.2 million in outstanding principal, including six senior loans and two subordinated loans; in addition, for the mortgage banking business, ACRE Capital rate-locked eight new senior loans totaling $30.2 million in unpaid principal balance during the fourth quarter of 2013.
· For the principal lending business, ended the fourth quarter with 33 loans totaling $1.2 billion in commitments and $1.05 billion in outstanding principal, including (a) 28 senior loans totaling $1.09 billion in commitments and $959.0 million in
(1) Core Earnings is a non-GAAP financial measure that is used, among other things, to compute incentive fees payable to the Companys external manager. The Company believes the disclosure of Core Earnings provides useful information to investors regarding financial performance because it is an alternative method the Company uses to measure its financial conditions and results of operations. Core Earnings is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee payable to our external manager, depreciation and amortization (related to targeted investments that are structured as debt to the extent 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). 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. Reconciliations of Core Earnings to the most directly comparable GAAP financial measure, net income, are set forth in a table at the end of this presentation.
outstanding principal and (b) five subordinated loans totaling $102.7 million in commitments and $91.7 million in outstanding principal.
· For the mortgage banking business (ACRE Capital), ended the fourth quarter with a servicing portfolio consisting of more than 1,000 loans with an unpaid principal balance of $3.7 billion and mortgage servicing rights with a carrying value of $59.6 million.
Capital and Other Activities:
· During the fourth quarter of 2013, a wholly owned indirect subsidiary of the Company issued approximately $493.8 million of commercial mortgage pass-through certificates (the Certificates), approximately $395.0 million of which were offered to third parties. The Certificates were backed by approximately $493.8 million outstanding principal balance of commercial real estate mortgage loans. The Company retained approximately $98.8 million principal balance of the non-investment grade tranches of the Certificates that were not offered to investors. The initial weighted average coupon of the Certificates offered to third parties was LIBOR plus 1.89%.
FULL-YEAR 2013 FINANCIAL HIGHLIGHTS
· For the full-year 2013, generated net income of $13.8 million or $0.72 per basic and diluted common share. Excluding a gain on the acquisition of ACRE Capital of $4.4 million or $0.23 per basic and diluted common share and transaction expenses associated with the closing of ACRE Capital of $4.1 million or $0.21 per basic and diluted common share, net income would have been $13.5 million or $0.71 per basic and diluted common share.
· Core Earnings were $8.6 million or $0.45 per basic and diluted common share for the year ended December 31, 2013.
· For the principal lending business, originations for the full year 2013 included 22 new loans totaling $875.5 million in commitments and $761.5 million in outstanding principal, including 19 senior loans and three subordinated loans; in addition, for the mortgage banking business, ACRE Capital rate locked 20 new senior loans totaling $131.3 million in unpaid principal balance for the period September 1, 2013 to December 31, 2013.
PRINCIPAL LENDING BUSINESS AS OF DECEMBER 31, 2013
During the fourth quarter of 2013, the Company originated eight new loans totaling $359.0 million in commitments in its principal lending business:
· a $105.8 million transitional mortgage loan collateralized by an office building located in Dallas, Texas;
· a $125.0 loan consisting of a $93.7 million transitional senior loan and a $31.3 million mezzanine loan collateralized by interests in an apartment building located in New York, New York;
· a $38.0 million transitional senior loan collateralized by an industrial portfolio located in Kansas City, Missouri;
· a $28.2 million transitional mortgage loan collateralized by an apartment building located in Richmond, Texas;
· a $25.4 million transitional mortgage loan collateralized by an apartment building located in Fort Worth, Texas;
· a $16.5 million transitional mortgage loan collateralized by an apartment building located in New York, New York;
· a $15.3 million mezzanine loan collateralized by interests in a proposed mixed use development located in Long Island, New York; and
· a $4.9 million subordinated loan collateralized by an apartment complex located in Houston, Texas.
At December 31, 2013, the Company had originated or co-originated 33 loans, excluding three loans that were repaid during the year ended December 31, 2013, totaling approximately $1.2 billion in commitments with outstanding principal of $1.05 billion. At December 31, 2013, all loans were performing in accordance with the terms of the respective loan agreements and no impairment charges have been recognized as of December 31, 2013.
The following tables provide summary information for the principal lending businesss investment portfolio as of December 31, 2013:
Portfolio Interest Rate and Duration Summary as of December 31, 2013:
(amounts in millions, except percentages)
|
|
Outstanding |
|
Weighted |
|
Weighted |
|
Weighted |
| |
Senior mortgage loans |
|
$ |
873.8 |
|
5.1 |
% |
5.6 |
% |
2.4 |
|
Subordinated and mezzanine loans |
|
91.7 |
|
9.8 |
% |
10.2 |
% |
3.6 |
| |
Total |
|
$ |
965.4 |
|
5.5 |
% |
6.0 |
% |
2.5 |
|
As of December 31, 2013, 94% of the investment portfolio consisted of floating rate loans (as measured by outstanding principal).
As of December 31, 2013, the aggregate outstanding principal for the Companys loans held for investment and loans held for sale in its principal lending business was approximately $1.05 billion and the outstanding principal under the Companys loans held for investment was $965.4 million. A summary of the difference between outstanding principal on loans originated and held for sale is as follows ($ in millions):
|
|
As of December 31, 2013 |
| |
Loans held for investment |
|
$ |
965.4 |
|
Loans held for sale |
|
85.2 |
(1) | |
Total outstanding principal |
|
$ |
1,050.6 |
|
(1) Represents the outstanding principal of an investment classified as loans held for sale within loans held for sale, at fair value in the Companys consolidated balance sheets.
Portfolio Diversification Summary as of December 31, 2013:
(amounts in millions, except percentages)
PROPERTY TYPE(1) |
| |||||
$ in millions |
|
Outstanding |
|
% of |
| |
Office |
|
$ |
389.3 |
|
40 |
% |
Multifamily |
|
449.1 |
|
47 |
% | |
Retail |
|
70.0 |
|
7 |
% | |
Industrial |
|
57.0 |
|
6 |
% | |
Total |
|
$ |
965.4 |
|
100 |
% |
GEOGRAPHIC MIX(1) |
| |||||
|
|
Outstanding |
|
% of |
| |
Southeast |
|
$ |
240.1 |
|
25 |
% |
West |
|
151.0 |
|
15 |
% | |
Mid-west |
|
198.9 |
|
21 |
% | |
Mid-Atlantic |
|
172.1 |
|
18 |
% | |
Southwest |
|
203.3 |
|
21 |
% | |
Total |
|
$ |
965.4 |
|
100 |
% |
(1) Excludes $85.2 million of a loan held for sale as of December 31, 2013.
As of December 31, 2013, the investment portfolio of loans was diversified by geography and was focused primarily on office and multifamily properties.
We believe our loan portfolio continues to be very well positioned with our predominantly floating rate, senior debt loan portfolio, said Tae-Sik Yoon. We continue to focus on self-originating our loans directly from our clients, which we believe provides us with credit and structuring advantages.
MORTGAGE BANKING BUSINESS (ACRE CAPITAL) AS OF DECEMBER 31, 2013
ACRE Capital represents the Companys mortgage banking operations, which began on September 1, 2013. For the quarter ended December 31, 2013, ACRE Capital rate-locked eight loans totaling $30.2 million in principal, including one Housing and Urban Development (HUD) loan totaling $15.5 million and seven Fannie Mae Delegated Underwriting and Servicing (DUS) loans totaling $14.7 million. For the period September 1, 2013 to December 31, 2013, ACRE Capital rate-locked 20 loans totaling $131.3 million in principal, including three HUD loans totaling $91.7 million and 17 Fannie Mae DUS loans totaling $39.6 million.
At the end of the fourth quarter, the Companys multifamily servicing portfolio consisted of more than 1,000 loans with an unpaid principal balance of $3.7 billion. The carrying value of the Companys mortgage servicing rights was $59.6 million at December 31, 2013.
Although our progress is not yet evident in our results, we have made great strides in repositioning ACRE Capital by expanding our origination and servicing teams, commented Todd Schuster. We are excited about ACRE Capital given our strong competitive position of being able to integrate flexible capital with longer duration financing and corresponding servicing income. We expect to improve the profitability of this business as our investments in people and infrastructure provide attractive returns in 2014 and beyond.
RECENT DEVELOPMENTS
On January 22, 2014, the Company originated a $11.7 million transitional first mortgage loan on an apartment complex located in Ft. Myers, Florida. At closing, the outstanding principal balance was approximately $9.7 million. The loan has an interest rate of LIBOR + 3.80% subject to a 0.25% LIBOR floor and a term of three years.
On January 22, 2014, the Company originated a $15.0 million transitional first mortgage loan on an apartment complex located in Ft. Myers, Florida. At closing, the outstanding principal balance was approximately $12.4 million. The loan has an interest rate of LIBOR + 3.80% subject to a 0.25% LIBOR floor and a term of three years.
On January 31, 2014, the agreement governing ACRE Capitals warehouse line of credit with Bank of America was amended to extend the maturity date to April 1, 2014.
On February 19, 2014, the Company increased the size of its board of directors from nine to eleven members. Caroline E. Blakely was appointed as an independent Class II director and William L. Browning was appointed as an independent Class I director to fill the vacancies created by such increase. In addition, Ms. Blakely joined the Nominating and Governance Committee of the board of directors and Mr. Browning joined the Audit Committee of the board of directors.
On February 20, 2014, the Company originated a $36.8 million transitional first mortgage loan on an apartment complex located in Orlando, Florida. At closing, the outstanding principal balance was approximately $33.2 million. The loan has an interest rate of LIBOR + 3.75% subject to a 0.25% LIBOR floor and a term of three years.
On March 12, 2014, the Company, through a wholly owned subsidiary, closed a $50 million secured revolving funding facility with City National Bank (the CNB Facility). The CNB Facility will be used to finance new investments and for other working capital and general corporate needs. Draws from the CNB Facility may be used as capital to allow us to obtain additional leverage under the Companys other funding facilities. The interest rate on the CNB Facility is LIBOR plus 3.0% or a base rate plus 1.25%, in each case, subject to a 3.0% all-in rate floor. The initial maturity date is March 11, 2016 subject to one 12 month extension option if certain conditions are met.
On March 14, 2014, the Company originated a $17.0 million transitional first mortgage loan on an apartment complex located in Charlotte, North Carolina. At closing, the outstanding principal balance was approximately $14.3 million. The loan has an interest rate of LIBOR + 4.00% subject to a 0.25% LIBOR floor and a term of three years.
On March 17, 2014, the Company declared a cash dividend of $0.25 per common share for the first quarter of 2014. The first quarter 2014 dividend is payable on April 16, 2014 to common stockholders of record as of March 31, 2014.
INVESTMENT CAPACITY AND LIQUIDITY
As of March 14, 2014, the Company expects to have approximately $84 million in remaining capital in cash and approved but undrawn capacity under the Companys funding facilities, including the proceeds from the CNB Facility. After holding in reserve $10 million in liquidity requirements, the Company expects to have approximately $74 million in capital available to fund additional loans, outstanding commitments on the Companys existing loans and for other working capital purposes. Assuming that the Company uses such amount as equity capital to make new investments and is able to achieve a debt-to-equity ratio of 2.5 to 1, the Company has the capacity to fund approximately $250 million of additional senior loan investments.
As of March 14, 2014, the total unfunded commitments for the Companys existing loans held for investment were approximately $138.1 million and borrowings under the Companys funding facilities and from the issuance of convertible senior notes were approximately $342.4 million and $69 million, respectively (excluding warehouse lines of credit in connection with the Companys mortgage banking business).
FOURTH QUARTER 2013 DIVIDEND
On November 13, 2013, the Company declared a dividend of $0.25 per common share for the fourth quarter of 2013, which was paid on January 22, 2014 to common stockholders of record as of December 31, 2013.
CONFERENCE CALL AND WEBCAST INFORMATION
The Company will host a webcast and conference call on Monday, March 17, 2014 to discuss its financial results for the fourth quarter and fiscal year ended December 31, 2013.
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 our 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 (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 8013647 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 31, 2014 to domestic callers by dialing (877)-344-7529 and to international callers by dialing +1(412)-317-0088. For all replays, please reference conference number 10039564. An archived replay will also be available on a webcast link located on the Home page of the Investor Resources section of our website.
ABOUT ARES COMMERCIAL REAL ESTATE CORPORATION
Ares Commercial Real Estate Corporation is a specialty finance company primarily engaged in principal lending and mortgage banking of CRE investments. Through its national direct origination platform, Ares Commercial Real Estate Corporation provides a broad offering of flexible financing solutions for commercial real estate owners and operators. Through ACRE Capital, its mortgage banking business, it originates and services multifamily residential mortgage loans, senior housing and healthcare facilities by utilizing the platforms of Fannie Mae and governmental agencies. Ares Commercial Real Estate Corporation elected and qualified to be taxed as a real estate investment trust and is externally managed by an affiliate of Ares Management LLC, a global alternative asset manager with approximately $74 billion in assets under management as of December 31, 2013. 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, which relate to future events or the Companys 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 those described from time to time in the Companys filings with the Securities and Exchange Commission. Ares Commercial Real Estate Corporation undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call.
AVAILABLE INFORMATION
Ares Commercial Real Estate Corporations filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available on its website at www.arescre.com. The contents of such website are not and should not be deemed to be incorporated by reference herein.
CONTACT
Carl Drake
Ares Commercial Real Estate Corporation
888-818-5298
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
As of |
| ||||
|
|
December 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
20,100 |
|
$ |
23,390 |
|
Restricted cash |
|
16,954 |
|
3,210 |
| ||
Loans held for investment ($493,783 related to consolidated VIE) |
|
958,495 |
|
353,500 |
| ||
Loans held for sale, at fair value |
|
89,233 |
|
|
| ||
Mortgage servicing rights, at fair value |
|
59,640 |
|
|
| ||
Other assets ($2,552 of interest receivable related to consolidated VIE) |
|
32,493 |
|
7,759 |
| ||
Total assets |
|
$ |
1,176,915 |
|
$ |
387,859 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
LIABILITIES |
|
|
|
|
| ||
Secured funding agreements |
|
$ |
264,419 |
|
$ |
144,256 |
|
Convertible notes |
|
67,815 |
|
67,289 |
| ||
Commercial mortgage-backed securitization debt (consolidated VIE) |
|
395,027 |
|
|
| ||
Allowance for loss sharing |
|
16,480 |
|
|
| ||
Due to affiliate |
|
2,796 |
|
1,320 |
| ||
Dividends payable |
|
7,127 |
|
2,316 |
| ||
Other liabilities ($384 of interest payable related to consolidated VIE) |
|
17,035 |
|
7,240 |
| ||
Total liabilities |
|
770,699 |
|
222,421 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
STOCKHOLDERS EQUITY |
|
|
|
|
| ||
Preferred stock, par value $0.01 per share, 50,000,000 shares authorized at December 31, 2013 and 2012, no shares issued and outstanding at December 31, 2013 and 2012 |
|
|
|
|
| ||
Common stock, par value $0.01 per share, 450,000,000 shares authorized at December 31, 2013 and 2012, 28,506,977 and 9,267,162 shares issued and outstanding at December 31, 2013 and 2012, respectively |
|
284 |
|
92 |
| ||
Additional paid in capital |
|
419,405 |
|
169,200 |
| ||
Accumulated deficit |
|
(13,473 |
) |
(3,854 |
) | ||
Total stockholders equity |
|
406,216 |
|
165,438 |
| ||
Total liabilities and stockholders equity |
|
$ |
1,176,915 |
|
$ |
387,859 |
|
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, |
|
For the year ended December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Net interest margin: |
|
|
|
|
|
|
|
|
| ||||
Interest income from loans held for investment |
|
$ |
12,107 |
|
$ |
4,881 |
|
$ |
37,600 |
|
$ |
9,278 |
|
Interest expense |
|
(3,514 |
) |
(1,252 |
) |
(8,774 |
) |
(2,342 |
) | ||||
Net interest margin |
|
8,593 |
|
3,629 |
|
28,826 |
|
6,936 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Mortgage banking revenue: |
|
|
|
|
|
|
|
|
| ||||
Servicing fees, net |
|
4,442 |
|
|
|
5,802 |
|
|
| ||||
Gains from mortgage banking activities |
|
2,001 |
|
|
|
5,328 |
|
|
| ||||
Provision for loss sharing |
|
(38 |
) |
|
|
(6 |
) |
|
| ||||
Changes in fair value of mortgage servicing rights |
|
(1,839 |
) |
|
|
(2,697 |
) |
|
| ||||
Mortgage banking revenue |
|
4,566 |
|
|
|
8,427 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income |
|
1,333 |
|
|
|
1,333 |
|
|
| ||||
Total revenue |
|
14,492 |
|
3,629 |
|
38,586 |
|
6,936 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
Other interest expense |
|
1,860 |
|
216 |
|
6,556 |
|
216 |
| ||||
Management fees to affiliate |
|
1,497 |
|
621 |
|
4,241 |
|
1,665 |
| ||||
Professional fees |
|
1,182 |
|
488 |
|
2,924 |
|
1,194 |
| ||||
Compensation and benefits |
|
3,691 |
|
|
|
5,456 |
|
|
| ||||
Acquisition and investment pursuit costs |
|
266 |
|
|
|
4,079 |
|
|
| ||||
General and administrative expenses |
|
2,012 |
|
458 |
|
3,955 |
|
1,285 |
| ||||
General and administrative expenses reimbursed to affiliate |
|
1,014 |
|
668 |
|
3,610 |
|
1,619 |
| ||||
Total expenses |
|
11,522 |
|
2,451 |
|
30,821 |
|
5,979 |
| ||||
Changes in fair value of derivatives |
|
|
|
(97 |
) |
1,739 |
|
(97 |
) | ||||
Income from operations before gain on acquisition and income taxes |
|
2,970 |
|
1,081 |
|
9,504 |
|
860 |
| ||||
Gain on acquisition |
|
|
|
|
|
4,438 |
|
|
| ||||
Income before income taxes |
|
2,970 |
|
1,081 |
|
13,942 |
|
860 |
| ||||
Income tax expense (benefit) |
|
(320 |
) |
|
|
176 |
|
|
| ||||
Net income |
|
3,290 |
|
1,081 |
|
13,766 |
|
860 |
| ||||
Less income (loss) attributable to Series A Convertible Preferred |
|
|
|
|
|
|
|
|
| ||||
Stock: |
|
|
|
|
|
|
|
|
| ||||
Preferred dividends |
|
|
|
|
|
|
|
(102 |
) | ||||
Accretion of redemption premium |
|
|
|
|
|
|
|
(572 |
) | ||||
Net income attributable to common stockholders |
|
$ |
3,290 |
|
$ |
1,081 |
|
$ |
13,766 |
|
$ |
186 |
|
Net income per common share: |
|
|
|
|
|
|
|
|
| ||||
Basic and diluted earnings per common share |
|
$ |
0.12 |
|
$ |
0.12 |
|
$ |
0.72 |
|
$ |
0.03 |
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares of common stock outstanding |
|
28,433,887 |
|
9,212,566 |
|
18,989,500 |
|
6,532,706 |
| ||||
Diluted weighted average shares of common stock outstanding |
|
28,488,484 |
|
9,268,162 |
|
19,038,152 |
|
6,567,309 |
| ||||
Dividends declared per share of common stock |
|
$ |
0.25 |
|
$ |
0.25 |
|
$ |
1.00 |
|
$ |
0.67 |
|
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
FULL YEAR 2013 SELECT BALANCE SHEET SEGMENT INFORMATION
(in thousands)
|
|
Principal |
|
Mortgage |
|
Total |
| |||
Cash and cash equivalents |
|
$ |
14,444 |
|
$ |
5,656 |
|
$ |
20,100 |
|
Restricted cash |
|
3,036 |
|
13,918 |
|
|
16,954 |
| ||
Loans held for investment |
|
958,495 |
|
|
|
|
958,495 |
| ||
Loans held for sale, at fair value |
|
84,769 |
|
4,464 |
|
|
89,233 |
| ||
Mortgage servicing rights |
|
|
|
59,640 |
|
|
59,640 |
| ||
Other assets |
|
16,632 |
|
15,861 |
|
|
32,493 |
| ||
Total Assets |
|
$ |
1,077,376 |
|
$ |
99,539 |
|
$ |
1,176,915 |
|
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
FOURTH QUARTER 2013 SEGMENT INCOME STATEMENT
(in thousands)
|
|
Principal Lending |
|
Mortgage |
|
Total |
| |||
Net interest margin: |
|
|
|
|
|
|
| |||
Interest income from loans held for investment |
|
$ |
12,107 |
|
$ |
|
|
$ |
12,107 |
|
Interest expense |
|
(3,514 |
) |
|
|
(3,514 |
) | |||
Net interest margin |
|
8,593 |
|
|
|
8,593 |
| |||
|
|
|
|
|
|
|
| |||
Mortgage banking revenue: |
|
|
|
|
|
|
| |||
Servicing fees, net |
|
|
|
4,442 |
|
4,442 |
| |||
Gains from mortgage banking activities |
|
|
|
2,001 |
|
2,001 |
| |||
Provision for loss sharing |
|
|
|
(38 |
) |
(38 |
) | |||
Change in fair value of mortgage servicing rights |
|
|
|
(1,839 |
) |
(1,839 |
) | |||
Mortgage banking revenue |
|
|
|
4,566 |
|
4,566 |
| |||
|
|
|
|
|
|
|
| |||
Other income |
|
|
|
1,333 |
|
1,333 |
| |||
Total revenue |
|
8,593 |
|
5,899 |
|
14,492 |
| |||
|
|
|
|
|
|
|
| |||
Expenses: |
|
|
|
|
|
|
| |||
Other interest expense |
|
1,579 |
|
281 |
(1) |
1,860 |
| |||
Management fees to affiliate |
|
1,381 |
|
116 |
|
1,497 |
| |||
Professional fees |
|
784 |
|
398 |
|
1,182 |
| |||
Compensation and benefits |
|
|
|
3,691 |
|
3,691 |
| |||
Acquisition and investment pursuit costs |
|
266 |
|
|
|
266 |
| |||
General and administrative expenses |
|
805 |
|
1,207 |
|
2,012 |
| |||
General and administrative expenses reimbursed to affiliate |
|
849 |
|
165 |
|
1,014 |
| |||
Total expenses |
|
5,664 |
|
5,858 |
|
11,522 |
| |||
Changes in fair value of derivatives |
|
|
|
|
|
|
| |||
Income from operations before income taxes |
|
2,929 |
|
41 |
|
2,970 |
| |||
Income tax expense (benefit) |
|
|
|
(320 |
) |
(320 |
) | |||
Net income |
|
$ |
2,929 |
|
$ |
361 |
|
$ |
3,290 |
|
(1) Other interest expense does not include interest expense related to the intercompany note between ACRE Capital Holdings LLC (as borrower) and the Company (as lender). If interest expense related to the intercompany note were included, other interest expense and net income would have been $1.2 million and $(539) thousand, respectively for Mortgage Banking.
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
FULL YEAR 2013 SEGMENT INCOME STATEMENT
(in thousands)
|
|
Principal |
|
Mortgage |
|
Total |
| |||
Net interest margin: |
|
|
|
|
|
|
| |||
Interest income from loans held for investment |
|
$ |
37,600 |
|
$ |
|
|
$ |
37,600 |
|
Interest expense |
|
(8,774 |
) |
|
|
|
(8,774 |
) | ||
Net interest margin |
|
28,826 |
|
|
|
28,826 |
| |||
|
|
|
|
|
|
|
| |||
Mortgage banking revenue: |
|
|
|
|
|
|
| |||
Servicing fees, net |
|
|
|
5,802 |
|
5,802 |
| |||
Gains from mortgage banking activities |
|
|
|
5,328 |
|
5,328 |
| |||
Provision for loss sharing |
|
|
|
(6 |
) |
(6 |
) | |||
Change in fair value of mortgage servicing rights |
|
|
|
(2,697 |
) |
(2,697 |
) | |||
Mortgage banking revenue |
|
|
|
8,427 |
|
8,427 |
| |||
|
|
|
|
|
|
|
| |||
Other income |
|
|
|
1,333 |
|
1,333 |
| |||
Total revenue |
|
28,826 |
|
9,760 |
|
38,586 |
| |||
|
|
|
|
|
|
|
| |||
Expenses: |
|
|
|
|
|
|
| |||
Other interest expense |
|
6,199 |
|
357 |
(2) |
6,556 |
| |||
Management fees to affiliate |
|
4,125 |
|
116 |
|
4,241 |
| |||
Professional fees |
|
2,447 |
|
477 |
|
2,924 |
| |||
Compensation and benefits |
|
|
|
5,456 |
|
5,456 |
| |||
Acquisition and investment pursuit costs |
|
4,079 |
|
|
|
4,079 |
| |||
General and administrative expenses |
|
2,430 |
|
1,525 |
|
3,955 |
| |||
General and administrative expenses reimbursed to affiliate |
|
3,394 |
|
216 |
|
3,610 |
| |||
Total expenses |
|
22,674 |
|
8,147 |
|
30,821 |
| |||
Changes in fair value of derivatives |
|
1,739 |
|
|
|
1,739 |
| |||
Income from operations before gain on acquisition and income taxes |
|
7,891 |
|
1,613 |
|
9,504 |
| |||
Gain on acquisition |
|
4,438 |
|
|
|
4,438 |
| |||
Income before income taxes |
|
12,329 |
|
1,613 |
|
13,942 |
| |||
Income tax expense |
|
|
|
176 |
|
176 |
| |||
Net income |
|
$ |
12,329 |
|
$ |
1,437 |
|
$ |
13,766 |
|
(1) For the period September 1, 2013 to December 31, 2013.
(2) Other interest expense does not include interest expense related to the intercompany note between ACRE Capital Holdings LLC (as borrower) and the Company (as lender). If interest expense related to the intercompany note were included, other interest expense and net income would have been $1.6 million and $244 thousand, respectively for Mortgage Banking.
December 31, 2013 and 2012 Reconciliation of Net Income to Core Earnings
The Company believes the disclosure of Core Earnings provides useful information to investors regarding financial performance because it is an alternative method the Company uses to measure its financial conditions and results of 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 defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee payable to our external manager, depreciation and amortization (related to targeted investments that are structured as debt to the extent 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). The amount will also be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges as determined by the Companys external manager and approved by a majority of the independent directors of the Company.
Core Earnings for the three months ended December 31, 2013 and 2012 were approximately $4.2 million or $0.15 per basic and diluted common share and approximately $1.3 million or $0.14 per basic and diluted common share, respectively. Core Earnings for the year ended December 31, 2013 and 2012 were approximately $8.6 million or $0.45 per basic and diluted common share and approximately $621 thousand or $0.09 per basic and diluted common share, respectively. Reconciliation of Core Earnings to the most directly comparable GAAP financial measure, net income attributable to common stockholders, is set forth in the table below for the three months and year ended December 31, 2013 and 2012:
|
|
For the three months ended December 31, |
|
For the year ended December 31, |
| ||||||||||||||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||||||||||||||
$ in thousands, except per share amounts |
|
Amount |
|
Per Share |
|
Amount |
|
Per Share |
|
Amount |
|
Per Share |
|
Amount |
|
Per Share |
| ||||||||
Net income attributable to common stockholders |
|
$ |
3,290 |
|
$ |
0.12 |
|
$ |
1,081 |
|
$ |
0.12 |
|
$ |
13,766 |
|
$ |
0.72 |
|
$ |
186 |
|
$ |
0.03 |
|
Adjustments relating to principal lending activities and other adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Non-cash stock-based compensation |
|
150 |
|
0.01 |
|
136 |
|
0.01 |
|
524 |
|
0.03 |
|
338 |
|
0.05 |
| ||||||||
Change in fair value of derivatives |
|
|
|
|
|
97 |
|
0.01 |
|
(1,739 |
) |
(0.09 |
) |
97 |
|
0.01 |
| ||||||||
Gain on acquisition |
|
|
|
|
|
|
|
|
|
(4,438 |
) |
(0.23 |
) |
|
|
|
| ||||||||
Adjustments relating to mortgage banking activities (ACRE Capital): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Change in fair value of mortgage servicing rights (1) |
|
1,839 |
|
0.06 |
|
|
|
|
|
2,697 |
|
0.14 |
|
|
|
|
| ||||||||
Allowance for loss sharing |
|
38 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
| ||||||||
Component of mortgage banking activities (2) |
|
(864 |
) |
(0.03 |
) |
|
|
|
|
(2,293 |
) |
(0.12 |
) |
|
|
|
| ||||||||
Deferred income tax items |
|
(240 |
) |
(0.01 |
) |
|
|
|
|
61 |
|
|
|
|
|
|
| ||||||||
Core Earnings |
|
$ |
4,213 |
|
$ |
0.15 |
|
$ |
1,314 |
|
$ |
0.14 |
|
$ |
8,584 |
|
$ |
0.45 |
|
$ |
621 |
|
$ |
0.09 |
|
(1) Represents net change (for the period indicated) in the carrying value of mortgage servicing rights, a finite life, depleting asset.
(2) Includes the fair value of newly originated mortgage servicing rights.