Closes $416 Million in Loan Commitments during the Fourth Quarter and $956 Million For 2017
Amends Secured Term Loan to Reduce Pricing, Extend Maturity and Prepay a Portion of Commitment
NEW YORK, NY — January 8, 2018 — Ares Commercial Real Estate Corporation (NYSE:ACRE) announced today that it closed $416 million in new loan commitments (with $387 million of initial fundings on these commitments) during the fourth quarter of 2017. The eleven new loan commitments included five multifamily loans, two commercial office loans, two student housing loans, a hospitality loan and an industrial loan. Ten of the eleven commitments were senior, floating rate loans and all loans were located in primary and secondary markets across the U.S.
During 2017, new loan commitments totaled $956 million, setting a new annual record for ACRE. In addition, ACRE exited $211 million of loan commitments in the fourth quarter of 2017, bringing the full year total of exited loan commitments to $475 million.
“We are very pleased with the breadth and quality of our strong fourth quarter investment activity, which concluded a record year of originations for our company,” said Jamie Henderson, President and Chief Executive Officer of ACRE. “Our strong finish to the year and our promising current investment pipeline reflect the recent actions that we have taken to expand our market coverage and broaden the product expertise of our direct origination loan platform.”
Amendment to Secured Term Loan
On December 22, 2017, ACRE amended its $155 million secured term loan primarily to reduce all-in pricing from LIBOR plus 6.0% to LIBOR plus 5.0%, eliminate the 1.0% LIBOR floor, and extend the initial maturity by approximately two years to December 22, 2020 (plus a one-year extension option exercisable by the company subject to certain conditions). In addition, ACRE elected to prepay $45 million of the secured term loan reducing the outstanding principal balance from $155 million to $110 million, which will result in a one-time, non-cash charge of approximately $0.03 per share in the fourth quarter of 2017 related to a partial write-off of deferred financing expenses. Going forward, the amendment and extension of the secured term loan is expected to result in a meaningful reduction of interest expense for the company based on the reduction in borrowing spread and amortization of deferred financing expenses over the longer newly extended three-year remaining term.
“Two of our important strategic objectives have been to improve the efficiency and cost of our funding and to prudently invest our excess capital,” said Tae-Sik Yoon, Chief Financial Officer of ACRE. “We have now executed on both goals as we significantly improved the all-in pricing on our term loan and we have now invested our excess capital into attractive investments. Given the timing of these activities, we expect to begin to receive the full earnings benefit starting in the first quarter of 2018.”
Mr. Henderson continued, “With the enhancement of our origination platform, the investment of our excess capital into attractively earning assets and the favorable modification of our term loan, we expect a meaningful improvement in our earnings and to be better positioned to achieve our long-term profitability objectives in the future.”
About Ares Commercial Real Estate Corporation
Ares Commercial Real Estate Corporation is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. Through its national direct origination platform, the Company provides a broad offering of flexible and reliable financing solutions for commercial real estate owners and operators. The Company originates senior mortgage loans, as well as subordinate financings, mezzanine debt and preferred equity, with an emphasis on providing value added financing on a variety of properties located in liquid markets across the United States. Ares Commercial Real Estate Corporation elected and qualified to be taxed as a real estate investment trust and is externally managed by a subsidiary of Ares Management, L.P. For more information, please visit www.arescre.com. The contents of such website are not, and should not be deemed to be, incorporated by reference herein.
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in each of Ares Management’s and Ares Commercial Real Estate Corporation’s filings with the Securities and Exchange Commission. Neither Ares Management nor Ares Commercial Real Estate Corporation undertakes any duty to update any forward-looking statements made herein.
Carl Drake or Veronica Mendiola
+1 212 397-1030