Ares Commercial Real Estate (ACRE) reported $40.85 million in revenue for the quarter ended June 2024, representing a year-over-year decline of 21.4%. EPS of -$0.12 for the same period compares to $0.35 a year ago. The reported revenue represents a surprise of -2.34% over the Zacks Consensus Estimate of $41.83 million. With the consensus EPS estimate being $0.19, the EPS surprise was -163.16%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expect ...

Ares Commercial Real Estate (ACRE) came out with a quarterly loss of $0.12 per share versus the Zacks Consensus Estimate of $0.19. This compares to earnings of $0.35 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -163.16%. A quarter ago, it was expected that this real estate investment trust would post a loss of $0.30 per share when it actually produced a loss of $0.62, delivering a surprise of -106.67%.Over the last four qua ...

Financial Reporting - The unaudited consolidated interim financial statements are prepared in accordance with GAAP and reflect all necessary adjustments for fair presentation[28]. - The Company is required to reflect current expected credit losses (CECL) on outstanding balances and unfunded commitments on loans held for investment[40]. - Available-for-sale debt securities are evaluated quarterly for other than temporary impairment (OTTI) at the individual security level[47]. - The Company did not recognize any impairment charges for real estate owned held for investment as of June 30, 2024[94]. - The Company recognized no unrecognized tax benefits as of June 30, 2024, and does not expect this to change in the next 12 months[136]. Loan Portfolio Management - The Company monitors its loans held for investment portfolio through borrower review, economic review, property review, and market review[37]. - Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more, impacting interest income recognition[38]. - As of June 30, 2024, the Company has a portfolio of 42 loans held for investment with an outstanding principal of approximately $2.0 billion, down from $2.2 billion in aggregate originated commitments[60]. - The Company had seven loans on non-accrual status with a carrying value of $331.9 million as of June 30, 2024, a decrease from nine loans valued at $399.3 million as of December 31, 2023[73]. - The Company recognized a realized loss of $43.1 million on a senior mortgage loan with an outstanding principal of $56.9 million during the six months ended June 30, 2024, due to a discounted payoff[71]. - The CECL Reserve related to outstanding balances on loans held for investment decreased from $139.8 million on March 31, 2024, to $137.4 million on June 30, 2024, reflecting a provision for current expected credit losses of $2.36 million[79]. Revenue and Expenses - The net interest margin for the three months ended June 30, 2024, was $27.5 million, compared to $26.9 million for the same period in 2023, reflecting an increase of 2.2%[58]. - Interest expense for the three months ended June 30, 2024, totaled $27.5 million, slightly up from $26.9 million in the prior year[58]. - Total revenue for the three months ended June 30, 2024, was $16.8 million, compared to $25.0 million for the same period in 2023[211]. - Interest income for the six months ended June 30, 2024 was $84.9 million, down from $101.4 million in 2023, representing a decrease of 16.2%[213]. - Total expenses for the six months ended June 30, 2024 increased to $17.5 million from $13.3 million in 2023, marking a rise of 31.5%[215]. Real Estate Assets - Real estate assets held for investment are evaluated for impairment quarterly, considering factors like significant underperformance and economic trends[44]. - Real estate assets classified as held for sale are carried at the lower of carrying amount or fair value less costs to sell[45]. - Revenue from real estate owned includes operations from mixed-use and office properties acquired in September 2023 and June 2024[54]. - The Company expects to complete a sale of the office property acquired through foreclosure within the next twelve months, classifying it as real estate owned held for sale[91]. - Revenue from real estate owned related to a mixed-use property in Florida was $6.7 million for the six months ended June 30, 2024, with no revenue reported in the same period of 2023[217]. Debt and Financing - The outstanding balance of the Financing Agreements as of June 30, 2024, was $625.9 million, with total commitments of $1.1 billion[102]. - The Company has total commitments of $2,094,034 thousand as of June 30, 2024, down from $2,274,584 thousand as of December 31, 2023, indicating a decrease of approximately 7.9%[122]. - The Secured Term Loan has a commitment amount of $140.0 million, with an effective interest rate of 5.1% for the three months ended June 30, 2024, compared to 4.6% for the same period in 2023[117]. - The Company terminated the MetLife Facility in May 2024, which had a commitment of $180.0 million, prior to its scheduled maturity with no outstanding balance[111]. - The Company amended the Secured Term Loan, changing interest rates to 4.50% per annum until May 1, 2025, with subsequent increases of 0.25% every three months[189]. Stockholder Information - The Company renewed its stock repurchase program for up to $50.0 million, effective until July 31, 2025, with no shares repurchased during the three and six months ended June 30, 2024[123]. - The company declared a total cash dividend of $0.50 per share for the six months ended June 30, 2024, totaling $27,614[166]. - For the six months ended June 30, 2023, the total cash dividends declared were $0.70 per share, amounting to $38,525[166]. - The basic earnings per common share for the three months ended June 30, 2024, was $(0.11), compared to $(0.04) for the same period in 2023, indicating a decline of 175%[132]. - For the three months ended June 30, 2024, the net loss attributable to common stockholders was $6.125 million, compared to a net loss of $2.198 million for the same period in 2023, representing an increase in loss of approximately 178.5%[131]. Management and Operations - The Company incurred management fees of $2,692 thousand for the three months ended June 30, 2024, compared to $3,000 thousand for the same period in 2023[161]. - The Company’s management agreement includes a base management fee of 1.5% of stockholders' equity, calculated quarterly[154]. - The term of the Management Agreement ends on April 25, 2025, with automatic one-year renewal terms thereafter[159]. - The Company’s total related party costs for the six months ended June 30, 2024, were $7,984 thousand, compared to $8,226 thousand for the same period in 2023[161]. - The company appointed Tae-Sik Yoon as COO and Jeffrey Gonzales as CFO effective August 30, 2024[181]. Economic Environment - The U.S. macroeconomic environment shows signs of a moderate slowdown, with inflationary pressures easing and a stable banking system supporting improved investor demand[192]. - The Federal Reserve has indicated a potential decrease in interest rates in 2024, although uncertainty remains regarding the timing and magnitude of such changes[195].

Financial Performance - Second quarter 2024 GAAP net loss of $6.1 million, or $(0.11) per diluted common share, with Distributable Earnings loss of $6.6 million, or $(0.12) per diluted common share[1] - Total revenue for the second quarter 2024 was $16.8 million, a decrease from $24.9 million in the same quarter of 2023[14] - Net interest margin for the second quarter 2024 was $13.4 million, down from $24.9 million year-over-year[14] - The company reported realized losses on loans of $16.4 million for the second quarter 2024, compared to no realized losses in the same quarter of 2023[14] - Net income attributable to common stockholders for the three months ended June 30, 2024, was $(6,125) thousand, compared to $(48,678) thousand for the twelve months ended June 30, 2024[18] - Distributable Earnings (Loss) for the three months ended June 30, 2024, was $(6,577) thousand, while for the twelve months it was $(15,806) thousand[18] Credit Losses - Provision for current expected credit losses was $(2.4) million, compared to a provision of $20.1 million in the second quarter of 2023[14] - Provision for current expected credit losses was $(2,374) thousand for the three months ended June 30, 2024, and $26,036 thousand for the twelve months ended June 30, 2024[18] - Loan balances deemed uncollectible are written off as a realized loss and included in Distributable Earnings (Loss)[17] Asset Management - Total assets as of June 30, 2024, were $2.07 billion, down from $2.28 billion at the end of 2023[12] - Loans held for investment, net of current expected credit loss reserve, decreased to $1.84 billion from $1.97 billion at the end of 2023[12] Leadership Changes - Appointments of Tae-Sik Yoon as Chief Operating Officer and Jeff Gonzales as Chief Financial Officer effective August 30, 2024, aimed at enhancing strategic execution[1] Dividends - Declared a third quarter 2024 dividend of $0.25 per common share, consistent with the second quarter 2024 dividend[3] Non-GAAP Measures - Distributable Earnings (Loss) is a non-GAAP financial measure that excludes certain transactions and GAAP adjustments[17] - The company believes that Distributable Earnings (Loss) provides useful information regarding its ability to pay dividends[17] - The company aims to maintain its REIT status by distributing substantially all of its taxable income to stockholders annually[17] Depreciation and Amortization - Depreciation and amortization of real estate owned amounted to $770 thousand for the three months ended June 30, 2024, and $2,571 thousand for the twelve months ended June 30, 2024[18] Derivative Gains - The company reported a realized gain on termination of interest rate cap derivative of $(198) thousand for the twelve months ended June 30, 2024[18] Future Strategy - The company aims to resolve risk-rated 4 and 5 loans to position for future portfolio growth and earnings[1]

mladenbalinovac/E+ via Getty Images Welcome the weekend in the best possible way: with another article from Seeking Alpha’s most entertaining author. Don't think so? People say I am. Like my mom. She said so, and you don't disrespect your mom. Which REIT are we going to bash? Good question. Orchid Island Capital (ORC) gets the spotlight. ORC is one of the agency mortgage REITs. Their historical performance has been less than impressive. ORC offers investors a huge dividend yield that falls apart faster ...

Core Insights - The article emphasizes the importance of understanding accounting practices in evaluating investment opportunities, particularly in the context of mortgage REITs like Dynex Capital (DX) and AGNC Investment (AGNC) [1][2] - It highlights the differences between Total Economic Returns (TER) and Total Shareholder Returns (TSR) as critical metrics for investors [2][3] Dividend Analysis - DX and AGNC have different dividend payout levels, which must be factored into the analysis of their returns [3] - The article provides a detailed comparison of dividends and returns for both companies, indicating that while the differences are not dramatic, they are significant enough to impact investor decisions [3][4] Financial Metrics Comparison - The financial metrics for DX and AGNC show that as of July 25, 2024, DX's new price is $12.08 with a TSR of $4.75 (22.72%), while AGNC's new price is $10.91 with a TSR of $4.67 (22.72%) [4] - The TER for DX is $4.71 (21.87%), while AGNC's is $2.42 (11.24%), indicating a significant difference in management effectiveness [4] Valuation Discrepancies - There is a noted disconnect in the market valuation of AGNC despite its reported earnings, which are projected at $2.16 for 2024, leading to a low price-to-earnings ratio [5] - The article argues that this focus on earnings without considering the underlying financial statements can lead to misleading conclusions about a company's value [5][6] Hedging Strategies - DX employs Treasury futures for hedging, which allows for greater liquidity and lower margin requirements compared to AGNC's use of LIBOR swaps [8][9] - The article explains that both hedging strategies can yield similar total returns, but the accounting treatment differs, leading to market misconceptions about their performance [11][12] Correlation in Performance - The changes in book value for AGNC and DX are highly correlated, suggesting that both companies are affected similarly by market conditions despite their different accounting practices [13] - The article concludes that the market's perception of AGNC as a superior investment is largely based on accounting differences rather than actual performance metrics [14] Investment Strategy Recommendations - The article advocates for a focus on preferred shares in the mortgage REIT sector, as they typically offer better total shareholder returns with less volatility [16] - It encourages investors to consider trading strategies that capitalize on inefficiencies in share prices relative to book value [28]

Core Insights - The article discusses earnings projections for mortgage REITs and BDCs, highlighting preliminary results from several companies [1] Group 1: Main Street Capital - Main Street Capital (MAIN) has established a preliminary figure in the range of $29.77 to $29.83, with a midpoint of $29.80, which is close to the estimated $29.90 [2] - The projected net investment income for MAIN is between $1.00 and $1.02, slightly below previous projections and the last two quarters [2] - MAIN is favored by income investors due to its high yield and growing NAV per share, which allows for trading above NAV and issuing new shares at a premium [2] Group 2: Orchid Island Capital - Orchid Island Capital (ORC) has been criticized for consistently destroying shareholder capital while paying a high dividend [3] - The business strategy of ORC, which involves buying agency MBS and using repo financing, is similar to that of AGNC Investment, Annaly Capital, and Dynex Capital, but ORC has executed it poorly [4] Group 3: AGNC Investment - AGNC Investment is scheduled to announce earnings on July 22, 2024, with a projected tangible book value per share of approximately $8.55, down 3.3% from $8.84 at the end of Q1 2024 [5] Group 4: Sector Performance - The VanEck Mortgage REIT Income ETF (MORT) has shown a month-to-date return of 7.51%, a significant improvement from a year-to-date return of -2.67% at the end of June [6] - The performance of mortgage REITs has improved due to a sharp drop in Treasury rates, although rates remain elevated overall [6] Group 5: Investor Behavior and Market Dynamics - The increase in investor demand for returns has led to higher prices for financial assets and lower yields on bonds, despite the Federal Reserve's influence on short-term rates [7] - The article questions the effectiveness of the Federal Reserve's strategy of raising rates to combat inflation, suggesting it may lead to increased future interest expenses for the government [7] Group 6: Data and Metrics - There is a need for reliable sources that provide equity REIT metrics, such as same-property NOI and changes to guidance for Core FFO and AFFO [8] - The article mentions the importance of accurate data for preferred shares and common shares, emphasizing the need for comprehensive metrics in the REIT sector [8][18]

Market Overview - U.S. equity markets experienced their worst week since April, with the S&P 500 declining by 2.0% and the Nasdaq 100 dropping by 4% as political developments increased market volatility [1][3] - The Federal Reserve is expected to pivot towards rate cuts later this quarter, with a 98% probability of a rate cut in September [3][4] - The VIX index, which measures stock market volatility, reached its highest level since April [3] Real Estate Sector Performance - The Equity REIT Index rose by 1.5% this week, with 16 out of 18 property sectors showing positive performance, driven by strong earnings from REITs and homebuilders [1][10] - Homebuilders have seen a resurgence, with a nearly 20% increase over the past two weeks [1] - Small-Cap 600 index outperformed, gaining 2.3%, while Mid-Cap 400 declined by 0.3% [1] Economic Data Insights - Continuing jobless claims rose to 1.867 million, the highest since November 2021, while initial jobless claims reached 243,000, significantly above estimates [5][6] - Retail sales were flat month-over-month, but core retail sales (excluding auto and gas) increased by 0.8% from the previous month and 3.8% year-over-year [6][7] - Housing starts and building permits data showed a rebound in multifamily construction activity, offsetting softness in the single-family segment [6][10] REIT Earnings Season - The earnings season for real estate has begun, with REITs showing upside momentum after a challenging two-year period [10][12] - Prologis reported solid results, indicating a bottoming in fundamentals and a slight improvement in demand trends, with a full-year Core FFO growth outlook raised to 7.8% [14] - First Industrial raised its full-year NOI growth forecast to 8.75%, driven by strong leasing activity [15] IPO Activity - Lineage, the world's largest cold storage operator, is planning a $3.8 billion IPO, which would be the largest in the REIT sector this year [12] - The IPO is expected to raise funds to pay down debt and capitalize on the easing of rate-related headwinds in the real estate sector [12]

Core Insights - The article compares the performance of two high-yielding REITs, AGNC Investment (AGNC) and Dynex Capital (DX), highlighting that while both offer substantial dividends, their popularity and performance differ significantly [1][2]. Performance Comparison - DX has shown modest outperformance over AGNC from January 3, 2017, to July 9, 2024, particularly for investors who started positions in 2017, 2018, or 2019 [1][2]. - AGNC has recently outperformed DX for positions initiated between March 2022 and the present, attributed to AGNC trading at a premium to its projected book value [2][4]. - The article emphasizes that AGNC's inflated share price enhances its performance metrics, despite DX's better protection of book value during market fluctuations [2][4]. Book Value Analysis - A detailed analysis of share price and trailing book value (BV) indicates that DX's book value declined less than AGNC's during early 2022, showcasing DX's superior performance in protecting its book value [3][4]. - The article notes that while DX's book value has been more stable, AGNC's share price has been more resilient due to its ability to issue shares at a premium [4][5]. Price-to-Book Ratio Insights - The current price-to-book ratio gap between AGNC and DX is approximately 20%, suggesting that DX would need to increase by 20% or AGNC to decrease by 16% for their ratios to equalize [7]. - The author argues that the significant premium for AGNC is unwarranted, recommending investors consider shifting from AGNC to DX for better risk-reward dynamics [7]. Interest Rate Considerations - Both AGNC and DX reported negative net duration as of March 31, 2024, indicating potential vulnerabilities to interest rate movements [9]. - The article cautions that while lower interest rates may seem beneficial for mREITs, the inherent negative convexity of agency MBS could lead to losses when rates fluctuate significantly [9].

How is it Getty images has hundreds of thousands of images and zero hits for "snark dog"? JasonOndreicka/iStock via Getty ImagesTime for another run down on the mortgage REITs. We’re going with one of my favorite layouts. I call this one: Turn music on and mash on the keyboard until money comes out. In other words, I'm sharing a few random observations. Ready Capital First thing that stands out. I’m surprised Ready Capital (RC) has underperformed so much over the last couple years. I know I’ve brought thi ...