Scott Kennedy’s mREIT Earnings Series: Assessing Ares Commercial’s Performance For Q4 2023
Introduction section by Colorado Wealth Management Fund.
Article section by Scott Kennedy.
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Disclosures
Related to the stocks in this article:
CWMF is long: RITM-D, GPMT-A, DX-C, EFC-A, RITM-C, EFC-B, PMT-C, AGNCP, CIM-D, RITM-B, RITM, SLRC, GPMT, RC.
Scott Kennedy is long: RITM, RC, SLRC, GPMT, ARCC, GBDC, RITM-D, MITT-B, MITT-C, GAINL, ECCC.
The rest of this post is from Scott Kennedy.
Summary
This 18th earnings assessment article reviews ACRE’s BV and adjusted core earnings performance during Q4 2023.
ACRE’s BV and adjusted core earnings were a notable underperformance. ACRE placed 6 new loans on non-accrual status during the quarter versus my expectations of 3 smaller loans.
A VERY disappointing/underperforming quarter for ACRE. ACRE received a (12.5%) recommendation range “downgrade”. This resulted in a risk/performance rating downgrade from 4 to 5.
That said, ACRE has a bit of value (hence deemed slightly undervalued). However, I cannot stress this enough, with a risk/performance rating of 5, I/we consider ACRE “very speculative”.
Subscribers may want to wait until market participants believe it’s safer to invest in commercial real estate as a whole (no rush).
Introduction:
Hi subscribers. For new members, my name is Scott Kennedy and currently I fully cover 20 mortgage real estate investment trust (mREIT) and 15 business development company (“BDC”) common stocks within this Investing Group regarding research/data, subscriber questions, weekly projected book values/net asset values (BV/NAV), and common stock recommendation ranges. Colorado (“CO”) Wealth Management handles the mREIT preferred stocks and he and his team handles all other applicable REIT sectors outside the mREIT sector. CO also provides some mREIT common stock and BDC articles from time-to-time which are more of an “overview/introduction” discussion; typically based either on my or our combined research/data. This also includes some macroeconomic trends and data. My name is always attached to all Investing Group articles I personally wrote so there is no confusion for subscribers.
This REIT Forum article is part of a series of articles over a span of 6-7 weeks which will analyze my previously projected BV/NAV and core earnings (or core earnings equivalent)/net investment income (“NII”) figures and compare these metrics to each mREIT’s and BDC’s actual reported results, respectively. For readers who are familiar with my public mREIT and/or BDC articles, these types of articles are beneficial to readers who desire to pursue a more active investing strategy and/or want more “real time” thoughts/analysis.
I hope my services/contributions ultimately help enhance a subscriber’s total investment returns or minimize their total investment losses within the mREIT and BDC sectors. At the very least, I hope subscribers will gain more insight into the mREIT and BDC sectors by reading my/our exclusive REIT Forum articles.
1) ACRE’s BV and Adjusted Core Earnings Q4 2023 Performance (Projected Versus Actual Results):
On 2/22/2024, Ares Commercial Real Estate Corp. ACRE 0.00%↑ reported the company’s earnings results for the fourth quarter of 2023. Table 1 below provides ACRE’s BV and earnings summary.
Table 1 – ACRE Q4 2023 BV and Earnings Summary
Source: Taken Directly from the REIT Forum’s © Analytical Spreadsheets/Data
I provided the following commentary in regards to ACRE’s results for the fourth quarter of 2023: