Ares Commercial Real Estate Corporation

For Q2 2026, ACRE reported GAAP net income of approximately $4.4 million, or $0.08 per diluted common share, and distributable earnings of approximately $6.9 million, or $0.12 per diluted common share. There were no realized gains or losses in the quarter, and the company collected $1.7 million, or $0.03 per diluted share, of cash interest on loans that were on nonaccrual. Book value was relatively stable at $8.82 per share, and the net debt-to-equity ratio, excluding CECL, ended at 2.0x. The loan portfolio held for investment was $1.8 billion, up $129 million quarter over quarter and $484 million year over year; the CECL reserve was $139 million, up about $900,000 from March 31, and represented about 8% of outstanding principal balance. Looking ahead, management said repayment activity in the second half should be driven by natural portfolio turnover and further resolution, and it expects continued liquidity above $100 million; available capital was $106 million at quarter-end. The Board declared a Q3 2026 dividend of $0.15 per share, payable October 15, 2026, and reauthorized up to $50 million of common stock repurchases through July 31, 2027.

Bryan Donohoe emphasized that the commercial real estate market felt relatively stable, with modestly improving property prices, open financing markets and better liquidity, but still only in the “fourth, fifth inning” and in a “rain delay” because higher rates and geopolitics are still being digested. He stressed that ACRE is continuing to reduce office exposure and work through risk-rated 4 and 5 loans while selectively co-investing in newer, higher-quality originations through the broader Ares platform. His tone was cautiously constructive: he repeatedly framed the portfolio as materially improved, more diversified and better positioned for future earnings growth, while acknowledging that the remaining resolutions are idiosyncratic and may take time.

Jeffrey Gonzales highlighted stable financial metrics and a solid liquidity position, with GAAP net income of about $4.4 million, distributable earnings of about $6.9 million, book value of $8.82 per share and leverage of 2.0x net debt-to-equity excluding CECL. He noted the CECL reserve rose only marginally to $139 million, with 94% of it, or $130 million, tied to risk-rated 4 and 5 loans and nearly half attributed to the Chicago office loan; he also said the reserve increase was mainly from $1 million on new loans. On capital allocation, he said available capital was $106 million, liquidity remained over $100 million, the board reauthorized a $50 million buyback program through July 31, 2027, and the company declared a $0.15 quarterly dividend. He also said the company sold a $69 million loan tied to a larger retail loan originated as held for sale, and that future hold-for-sale transactions would typically be held 30 to 120 days.

Analysts focused on the timing and pace of recycling capital from the remaining nonaccrual and risk-rated 4/5 loans, especially the Chicago office loan and the Brooklyn condo. Management said the remaining problem assets are highly idiosyncratic, making a regular cadence hard to predict, but reiterated that resolving them should free capital and help earnings move back to the dividend level and eventually toward a historical ROE of about 9% to 10%. On the Chicago loan, management said the borrower’s sales process is still advancing, the 3-month extension was meant to support that process, and the asset’s 7-year-plus WALT and positive cash flow give comfort if a sale does not happen. On the Brooklyn condo, management said construction is substantially complete and the company has entered the typical presale period, with no issues today on velocity or price.