Profile: Ares Commercial Real Estate Corp (ACRE.N)
22 May 2015
Ares Commercial Real Estate Corporation (ACRE), incorporated on September 1, 2011, is a specialty finance company. The Company operates both as a principal lender and a mortgage banker (with respect to loans collateralized by multifamily and senior-living properties). The Company has two reportable business segments: principal lending and mortgage banking. Its principal lending segment includes all business activities of the Company, excluding the ACRE Capital business, which represents investments in real estate related loans and securities that are held for investment. The Company’s mortgage banking segment includes all business activities of the acquired ACRE Capital business. As of December 31, 2013, in its investment portfolio, the Company had originated or co-originated 33 loans secured by CRE middle-market properties, excluding three loans that were repaid during the year ended December 31, 2013. The aggregate originated commitment under these loans at closing was approximately $1.1 billion and outstanding principal was $965.4 million as of December 31, 2013. During the year ended December 31, 2013, the Company funded approximately $675.6 million and received repayments of $66.9 million on its net $965.4 million of outstanding principal. In addition to the $958.5 million of loans held for investment, the Company also has $84.8 million and $4.5 million of loans held for sale in its principal lending business and mortgage banking business, respectively.
Principal lending business
In the Company’s principal lending business, it is primarily focused on directly originating, managing and servicing a diversified portfolio of commercial real estate (CRE) debt-related investments for the Company’s own account. The Company’s target investments in its principal lending business include senior loans, bridge loans, subordinated mortgages and B-Notes, preferred equity and other CRE-related investments. The Company’s principal lending target investments, are held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, senior living and other commercial real estate properties, or by ownership interests therein and include transitional senior mortgage loans, stretch senior mortgage loans, bridge financing mortgage loans, subordinated real estate loans such as B-Notes, mezzanine loans, certain rated tranches of securitizations, and other select CRE debt and preferred equity investments.
Transitional senior mortgage loans provide strategic, flexible, short-term financing solutions for owners of transitional CRE middle-market assets that are the subject of a business plan that is expected to enhance the value of the property. Stretch senior mortgage loans provide flexible one stop financing for owners of CRE middle-market assets that are typically stabilized or near-stabilized properties with healthy balance sheets and steady cash flows. These mortgage loans typically have higher leverage (and thus higher loan-to-value ratios) than conventional mortgage loans provided by banks, insurance companies and other CRE lenders and are non-recourse to the borrower. Bridge loans provide short-term financing to borrowers ranging from six to 24 months in term and may be used to provide financing to borrowers seeking permanent loans from government and government-sponsored enterprises (collectively, GSEs) while they work through the application process or in the event the underlying properties need additional time to stabilize before locking in long-term debt.
Mortgage banking business
The Company is engaged in the mortgage banking business through its wholly owned subsidiary, ACRE Capital LLC (ACRE Capital), which the Company believes is complementary to its principal lending business. In this business segment, the Company primarily originates, sells and services multifamily and senior-living related loans under programs offered by GSEs, such as the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Government National Mortgage Association (Ginnie Mae) and the Federal Housing Administration, a division of the United States Department of Housing and Urban Development (together with Ginnie Mae, HUD). ACRE Capital is approved as a Fannie Mae Delegated Underwriting and Servicing (DUS) lender, a Freddie Mac Program Plus lender, a Multifamily Accelerated Processing (MAP).
Ares Commercial Real Estate Corp
1 N Wacker Dr Fl 48
CHICAGO IL 60606-2829