NEW YORK - Ares Commercial (NYSE:ACRE) Real Estate Corporation (NYSE:ACRE) reported a larger-than-expected loss for the fourth quarter of 2023, with earnings per share (EPS) coming in at ($0.73), significantly below the analyst consensus estimate of ($0.43). Revenue for the quarter also fell short of expectations, totaling $17.55 million compared to the anticipated $24.63 million.
The specialty finance company's fourth-quarter performance was notably impacted by the ongoing challenges in the commercial office property sector. CEO Bryan Donohoe highlighted the company's efforts to navigate these difficulties, stating, "Our fourth quarter and full-year 2023 earnings were primarily impacted by the continuing deterioration of the commercial office property sector. However, based upon our experience and capabilities across the Ares Real Estate Group, our liquidity, and our level of loss reserves, we believe that we are well positioned to resolve many of our underperforming loans and redeploy recovered capital into new loans to enhance our earnings going forward."
CFO Tae-Sik Yoon added context to the company's balance sheet position, "We increased our CECL reserves in the fourth quarter largely due to the performance of our commercial office and residential condominium loan portfolio, which accounted for 87% of our total CECL reserves at year-end. In addition, we ended the year with $185 million of available capital which includes cash and undrawn availability under our working capital facility. Together with reducing our debt-to-equity ratio over the past few years, we believe that our balance sheet puts us in a flexible position to manage and resolve our underperforming loans."
The company also declared a first-quarter 2024 dividend of $0.25 per common share, which is payable on April 16, 2024, to stockholders of record as of March 28, 2024. This follows the fourth quarter 2023 dividend of $0.33 per common share, paid on January 17, 2024.
Ares Commercial Real Estate has elected and qualified to be taxed as a real estate investment trust and is externally managed by a subsidiary of Ares Management (NYSE:ARES) Corporation. The company's focus remains on originating and investing in commercial real estate loans and related investments across the United States.
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