Financial Position - As of December 31, 2023, the outstanding balance under the Financing Agreements was $894.8 million[33]. - The outstanding balance of CLO Securitizations as of December 31, 2023, was $723.9 million[34]. - The company had $150.0 million outstanding under its Secured Term Loan as of December 31, 2023[33]. - The company had $105.0 million outstanding under one recourse note agreement as of December 31, 2023[33]. - As of December 31, 2023, the company had approximately $894.8 million of outstanding borrowings under Financing Agreements and $723.9 million under CLO Securitizations[92]. Debt and Leverage Strategy - The company expects to maintain a debt-to-equity ratio not exceeding 4.5:1 to 10:1 for its leverage strategy[30]. - The company may incur significant additional debt through various financing arrangements, including bank credit facilities and public/private debt issuances, subject to market conditions[100]. - The company faces risks related to its leverage strategy, including the inability to refinance maturing debt on favorable terms and potential losses as a holder of subordinated classes of securitizations[93]. - The company may incur significant debt, increasing the risk of loss and reducing cash available for distributions to stockholders[91]. Investment Strategy and Market Conditions - The current market conditions are expected to provide attractive investment opportunities for floating rate loans on well-located commercial real estate properties[29]. - The company competes with various entities including public and private REITs, banks, and institutional investors, which may limit its ability to originate or acquire target investments on attractive terms[37]. - The company relies on Ares Management for investment advisory services, which includes a disciplined investment philosophy focused on strong risk-adjusted returns[25]. - The macroeconomic environment is characterized by persistent inflation, labor shortages, and high interest rates, which could adversely impact financial results[47]. - The Federal Reserve increased the target federal funds rate from the first quarter of 2022 through July 2023, with potential future increases indicated to combat inflation[60]. Credit and Economic Risks - The current expected credit loss reserve increased from $71.3 million on December 31, 2022, to $163.1 million on December 31, 2023, primarily due to macroeconomic pressures[56]. - Approximately 71% of the CECL Reserve is related to loans collateralized by office space, which constitutes 39% of the total loan portfolio based on outstanding principal balance[56]. - The company may face increased risks of loss due to prolonged economic downturns or recessions, particularly affecting real estate values[49]. - Fluctuations in interest rates and credit spreads could significantly impact financing costs and investment income, leading to potential operating losses[83]. Regulatory and Compliance Issues - The company has elected to be taxed as a REIT, which allows it to avoid federal income taxes if it distributes all REIT taxable income to stockholders[35]. - The company is required to maintain certain financial covenants, including tangible net worth and asset coverage ratios, which, if not met, could lead to defaults and restrictions on operations[96]. - Regulatory changes, including those from the Dodd-Frank Act, may affect the company's securitization practices and increase operational costs[107]. - The company is organized to avoid registration as an investment company under the 1940 Act, limiting its operational flexibility[199]. Risks Related to Investments - The company’s investments are subject to various risks, including economic downturns, changes in laws, and natural disasters, which may reduce returns and affect dividend payments[132]. - The company may invest in non-performing real estate loans, which involve a high degree of credit and market risk, especially during economic downturns[166]. - The company may incur losses from B-Notes due to their subordinated nature and the risks associated with borrower defaults[151]. - Investments in non-investment grade rated CRE loans involve a higher risk of default and loss, which could reduce distributions to stockholders and adversely affect stock value[149]. Shareholder and Stock Performance - The company has not established a minimum distribution payment level to shareholders, raising concerns about future cash flows for distributions[56]. - The market price of the company's common stock may fluctuate significantly due to various factors, including operating results and changes in business strategy[179]. - Future offerings of securities may dilute the value of existing stockholders' shares and adversely affect the market price of common stock[191]. - The company is required to distribute at least 90% of its REIT taxable income annually to maintain its REIT qualification[185]. Operational Risks - The company is highly dependent on Ares Management's information systems, and any failures could disrupt business operations and negatively impact stock price[72]. - Cybersecurity risks are increasing, with potential disruptions to operations and financial data integrity due to cyber-attacks[77]. - The company may face challenges in liquidating investments due to their illiquidity, which could adversely affect financial results if quick liquidation is required[125]. - The company may need to foreclose on loans in default, which could result in lengthy and expensive processes, potentially leading to losses[178].

Exhibit 99.1 ARES COMMERCIAL REAL ESTATE CORPORATION REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS Fourth quarter GAAP net income (loss) of $(39.4) million or $(0.73) per diluted common share and Distributable Earnings(1) of $10.8 million or $0.20 per diluted common share Full year GAAP net income (loss) of $(38.9) million or $(0.72) per diluted common share and Distributable Earnings(1) of $58.4 million or $1.06 per diluted common share - Subsequent to year ended December 31, 2023 - Declared first quar ...

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 ...

Financial Data and Key Metrics Changes - For Q3 2023, the company reported GAAP net income of $9.2 million or $0.17 per common share, impacted by a $3.2 million net increase in CECL provision [11] - Distributable earnings for the same period were $13.5 million or $0.25 per common share, affected by a $4.9 million realized loss on a defaulted hospitality loan [11] - The company maintained a net debt-to-equity ratio of 2.0 and had over $130 million in cash available [15] Business Line Data and Key Metrics Changes - The portfolio consisted of 49 loans with an outstanding principal balance of $2.2 billion, with 98% being senior loans [11] - Credit quality metrics improved, with 78% of the loan portfolio rated 3 or better, up from 74% in the previous quarter [12] - The company received $48 million in total loan repayments during the quarter, including $25 million from the hospitality loan [11] Market Data and Key Metrics Changes - The higher interest rate environment has led to greater economic uncertainty and headwinds for commercial real estate values, resulting in reduced new construction [6] - The company is focusing on financing strong-performing property classes such as industrial, multifamily, and self-storage [9] Company Strategy and Development Direction - The company aims to maintain strong liquidity and moderate leverage while selectively originating new loans to enhance earnings [5] - A deliberate approach to managing underperforming assets is emphasized, including foreclosures and strategic exits from certain loans [7][8] - The company plans to reduce exposure to office loans, targeting over $70 million in principal balance to be cleared out in Q4 2023 [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the current interest rate environment but sees potential investment opportunities arising from it [16] - The company remains optimistic about the long-term value of its assets and the overall commercial real estate market due to expected favorable supply dynamics [6] Other Important Information - The company declared a fourth-quarter dividend of $0.33 per share [15] - The total CECL reserve stands at $116 million, representing about 5.25% of the outstanding principal balance [13] Q&A Session Summary Question: Target for office loan clearances - The $70 million target includes the Chicago office loan and a California office loan, with resolutions expected in Q4 or Q1 [18][19] Question: Outlook for net portfolio growth - The company sees opportunities for new investments but acknowledges the volatility in rates makes it difficult to predict portfolio growth [20][21] Question: Comparison of levered returns today versus previous years - The bar for new investments is higher now, with levered yields expected to exceed those from 2021 and early 2022 [23][24] Question: Rescue capital opportunities - The company has not seen significant volume in mezzanine financing but remains open to exploring such opportunities [28] Question: Bid profile for loan sales - There is no clear trend in buyer profiles, but unique parties familiar with assets are participating in the market [30][31] Question: Impact of potential easing of yields - Stability in rates could lead to increased transaction volume and improved underwriting across the sector [32][33] Question: Dividend sustainability - The board considers various factors, including cash flow from operations and distributable earnings, when deciding on dividends [35][39] Question: Loan sales related to liability management - Decisions on loan sales are based on fundamental views of asset valuations and the specifics of liability structures [42][43] Question: Comfort with ratings of loans rated 1 to 3 - There has been no negative migration in loans rated 1 to 3, and the company remains focused on managing risks [45][46] Question: Transparency in reserves and REO management - The company is exploring various paths for managing REO assets, including potential sales or leveraging [50][52]

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 ...