Ares mercial Real Estate (US:ACRE)2023-11-03 10:23Financial 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].