sqback/iStock via Getty ImagesWe have covered commercial mortgage REITs previously including Blackstone Mortgage Trust, Inc. (BXMT) and Ladder Capital Corp (LADR). The general theme there has been that these are rather risky plays and investors might do better by going up the capital stack. Today, we look at Ares Commercial Real Estate Corporation (NYSE:ACRE) and whether this might have the right mix to actually support a buy rating on the equity. The Leverage In most cases, we have held rather negative ...

Core Thesis - The investment thesis for Ready Capital Corporation (RC) suggests that the price-to-book ratio is expected to increase, with the potential for modest declines in book value per share while collecting dividends during the waiting period [8][9]. Company Overview - Ready Capital is identified as a mortgage REIT (mREIT), which typically has a more complex portfolio compared to agency mortgage REITs, leading to less investor attraction in the current market [4][19]. - The company has historically traded at a higher price-to-book ratio than many peers, making the current situation unique as it is experiencing a decline [4][19]. Financial Metrics - Key metrics for evaluating mortgage REITs include book value per share, trends in book value over time, price-to-book ratio, and asset types owned [4]. - The current dividend yield for Ready Capital is approximately 13.5%, based on a quarterly dividend of $0.30 per share at a share price of $8.90 [9]. Market Position - Ready Capital's book value has not seen significant declines, especially compared to agency mortgage REITs, which have experienced substantial decreases in book value over the past two years [7][19]. - The company is expected to recover its price-to-book ratio, similar to Rithm Capital Corp. (RITM), which recently saw its price-to-book ratio recover to around 90% [19]. Debt Structure - Ready Capital utilizes securitized debt obligations, which provide non-recourse financing and eliminate the need for future negotiations, thus offering a more stable financing structure compared to traditional bank financing [21][22]. - The use of securitized debt allows Ready Capital to lock in financing, matching assets and debt, which mitigates risks associated with fluctuating market values [22]. Recent Transactions - The company has seen recent buying activity, with shares being purchased at $8.83, indicating a belief in the stock's potential upside [10][12]. Comparative Analysis - A comparison of Ready Capital's financial metrics with those of Rithm Capital Corp. shows that while RC has a lower price-to-book ratio, it is still positioned favorably within the sector [14][19]. Conclusion - Overall, Ready Capital presents a compelling investment opportunity due to its attractive dividend yield, stable book value, and potential for price recovery, despite current market challenges [8][9][19].

zimmytws/iStock via Getty Images When it comes to investing in real estate, there are myriad considerations around variables including geography, property types, tenancy, lease structures, and the list goes on. That said, we can boil down investment in real estate and other assets into two categories. Do you, as an investor, want to own or loan? Investments take one of two forms. Either one invests directly in target company or asset, purchasing equity. Or, one can invest by buying a financial obligation of ...

walik Mortgage REITs are getting hammered again. This reinforces why they are not buy-and-hold investments. There are times when you should hold onto shares for longer periods, but you still want to approach the position with a “total return” mindset. Investors who are only in this for the dividend are getting burned. If you’re focusing on income, look to the preferred shares. We regularly highlight preferred shares in our public articles on Seeking Alpha. The New Narrative Lately the narrative has been ...

TimAbramowitz I’ll admit this is a click-bait title. But before you turn away, the actual article is anything “butt.” No really. Let me explain… I’m sure many of you now have flatulence on the mind. In which case, here’s an excerpt from The Definitive Fart Book (1961): “Funny, everybody does it, but nobody wants anybody to know they're the somebody who: cut the cheese, passed the gas, let one rip, shot a bunny, copped a pop, popped a bubble, cranked a smoker, pinched an egg, etc.…” I don’t know about yo ...

8vFanIAres Commercial Real Estate Corporation (NYSE:ACRE) has been a core holding of mine in my passive income portfolio in the last two years. With that being said, though, I think that the most recent, negative change in the real estate investment trust’s dividend pay-out ratio is a warning sign for passive income investors. Risks, in my view, have increased to such an extent that a dividend cut in 2024 is not entirely improbable and with the stock selling at a much smaller discount to net asset value ...

Ares Commercial Real Estate Corporation (NYSE:ACRE) Q3 2023 Earnings Conference Call November 3, 2023 10:00 PM ET Company Participants John Stilmar - Managing Director, IR Bryan Donohoe - CEO Tae-Sik Yoon - CFO Conference Call Participants Sarah Barcomb - BTIG Steve DeLaney - JMP Securities Donald Fandetti - Wells Fargo Jade Rahmani - KBW Stephen Laws - Raymond James Richard Shane - JPMorgan Operator Good morning. Welcome to Ares Commercial Real Estate Corporation's Third Quarter September 30, 2023 Earnings ...

Exhibit 99.2 0 42 65 GENER 155 112 AL 42 PALET TE 4 94 109 127 127 127 Credit 0 42 65 Private Equit BUSINE y SS 2 87 133 SECTOR Real PALETT Estat E 71 126 e 163 Strategi c Initiat 120 163 ives 198 Third Quarter 2023 Earnings Presentation 0 42 65 Disclaimer GENER 155 112 ...

Financial Reporting - The unaudited consolidated interim financial statements are prepared in accordance with GAAP and reflect all necessary adjustments for fair presentation[29]. - The Company is required to reflect current expected credit losses (CECL) on outstanding balances and unfunded commitments on loans held for investment[41]. - The Company evaluates available-for-sale debt securities for other than temporary impairment (OTTI) on a quarterly basis[49]. - The effective portion of unrealized gains or losses on cash flow hedges is recorded in Other Comprehensive Income (OCI)[56]. - The Company did not recognize any impairment charges for real estate owned as of September 30, 2023, and incurred depreciation and amortization expense of $206 thousand for the three months ended September 30, 2023[94]. - The Company did not have any unrecognized tax benefits as of September 30, 2023, and does not expect this to change in the next 12 months[141]. Loan Portfolio Management - The Company monitors its loans held for investment portfolio through borrower review, economic review, property review, and market review[38]. - Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more, impacting interest income recognition[39]. - As of September 30, 2023, the company's portfolio included 49 loans held for investment with an outstanding principal of approximately $2.2 billion[65]. - The Company received $1.7 million in interest payments on the mezzanine position of the Illinois loan for the three months ended September 30, 2023, which was recognized as a reduction to the carrying value of the loan[5]. - As of September 30, 2023, five loans held for investment were on non-accrual status with a carrying value of $188.3 million, an increase from three loans with a carrying value of $99.1 million as of December 31, 2022[78]. - The CECL Reserve for outstanding balances on loans held for investment increased from $108.1 million as of June 30, 2023, to $112.4 million as of September 30, 2023[84]. Revenue and Income - For the three months ended September 30, 2023, the net income attributable to common stockholders was $9,184 thousand, compared to $644 thousand for the same period in 2022, representing a significant increase[138]. - The basic earnings per common share for the three months ended September 30, 2023, was $0.17, compared to $0.01 for the same period in 2022[138]. - Interest income for the three months ended September 30, 2023, was $52.8 million, compared to $45.6 million for the same period in 2022[207]. - For the nine months ended September 30, 2023, total revenue was $75.4 million, slightly down from $76.4 million in the same period of 2022[208]. - The provision for current expected credit losses for the nine months ended September 30, 2023, was $44.4 million, compared to $26.7 million for the same period in 2022[208]. Expenses and Fees - The company's interest expense for the three months ended September 30, 2023, was $29.745 million, compared to $18.362 million for the same period in 2022, representing an increase of 62.5%[61]. - Total expenses for the three months ended September 30, 2023, were $6.6 million, down from $7.1 million in the same period of 2022[213]. - For the nine months ended September 30, 2023, related party expenses included $9.3 million in management and incentive fees, a decrease from $10.6 million in the same period of 2022[217]. - The increase in management fees for the nine months ended September 30, 2023, was primarily due to a rise in weighted average stockholders' equity resulting from a public offering of 7,000,000 shares in May 2022, generating net proceeds of approximately $103.2 million[217]. - General and administrative expenses for the three months ended September 30, 2023, increased to $1.7 million from $1.4 million in the same period of 2022, mainly due to higher stock-based compensation expenses[218]. Investments and Securities - Available-for-sale debt securities are carried at fair value, with unrealized holding gains and losses recorded in other comprehensive income[48]. - The fair value of available-for-sale debt securities was estimated at $28,136 thousand, with an amortized cost of $27,900 thousand[149]. - The carrying value of loans held for investment as of September 30, 2023, was $2,180,412 thousand, with a fair value of $2,069,304 thousand[153]. - The Company has a master repurchase facility with Wells Fargo allowing borrowing up to $450 million, which can be increased to $500 million under certain conditions[107]. - The Company has a $250.0 million master repurchase and securities contract with Morgan Stanley, with an initial maturity date extended to July 16, 2025[113]. Shareholder Activities - The Company repurchased 535,965 shares of common stock for approximately $4.6 million at an average price of $8.58 per share during the nine months ended September 30, 2023[130]. - The Company declared total cash dividends of $1.03 per share for the nine months ended September 30, 2023, totaling $56.6 million[168]. - The Company declared a regular cash dividend of $0.33 per common share for the fourth quarter of 2023, payable on January 17, 2024[205]. Management and Governance - The term of the Management Agreement ends on April 25, 2024, with automatic one-year renewal terms thereafter[164]. - ACREM is responsible for the Company's day-to-day functions, investment strategy, and portfolio management duties under the Management Agreement[158]. - The base management fee is set at 1.5% of the Company's stockholders' equity per annum, calculated and payable quarterly in cash[158].

Exhibit 99.2 0 42 65 GENER 155 112 AL 42 PALET TE 4 94 109 127 127 127 Credit 0 42 65 Private Equit BUSINE y SS 2 87 133 SECTOR Real PALETT Estat E 71 126 e 163 Strategi c Initiat 120 163 ives 198 Second Quarter 2023 Earnings Presentation 0 42 65 Disclaimer GENER 155 112 ...