NEW YORK--(BUSINESS WIRE)--Ares Commercial Real Estate Corporation  (NYSE:ACRE), a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments, reported net income of $8.7 million or $0.31 per diluted common share for the second quarter of 2016. In addition, the Company announced that its board of directors declared a third quarter 2016 dividend of $0.26 per common share payable on October 17, 2016 to common stockholders of record on September 30, 2016.

“As expected, our second quarter earnings rebounded strongly as we benefited from increased loan originations,” commented Robert L. Rosen, Chairman of the Board and Interim Co-Chief Executive Officer of Ares Commercial Real Estate Corporation. “During the second quarter, we also reached an agreement to sell our mortgage banking business at an attractive gain, allowing us to realize the value we have created in repositioning this platform. We plan to reinvest these proceeds into our principal lending business and once fully vested, we believe we will be able to generate materially higher earnings on this capital with greater stability and predictability compared to the historical earnings from our mortgage banking operations.”

“We believe that market conditions remain favorable with attractive lending returns, stable competitive dynamics and strong commercial real estate fundamentals,” said John Jardine, President and Co-Chief Executive Officer of Ares Commercial Real Estate Corporation. “Our deal flow is accelerating and we are seeing a growing set of attractive opportunities as evidenced by $158 million in new commitments for the month of July 2016 alone.”

“We continue to demonstrate access to diverse and attractive sources of financing,” said Tae-Sik Yoon, Chief Financial Officer of Ares Commercial Real Estate Corporation. “So far in 2016, we have increased available sources of financing by more than $245 million, including a new $125 million facility with U.S. Bank and expanded our existing Wells Fargo facility by $100 million from $225 million to $325 million. Plus, in 2016, we have renewed or extended approximately $325 million of our existing funding facilities and we continue to have discussions for additional sources of attractive capital. Accordingly, we remain well positioned to expand our lending portfolio and realize the earnings efficiencies from further capital deployment.”

THREE MONTHS ENDED JUNE 30, 2016 FINANCIAL HIGHLIGHTS

Financial Results and Activities:

• For the three months ended June 30, 2016, net income was $8.7 million or $0.31 per diluted common share.
• For the three months ended June 30, 2016, new originations were $91.2 million in commitments and $80.5 million in outstanding principal and an additional $8.2 million of fundings on existing commitments. For the three months ended June 30, 2016, loan repayments totaled $156.2 million in outstanding principal.

Capital Activities:

• In May 2016, the Company amended the $50.0 million Bridge Loan Warehousing Credit and Security Agreement with Bank of America, N.A. to extend the initial maturity date to May 25, 2017 and the final maturity date to May 25, 2020.
• In June 2016, the Company amended the master repurchase funding facility with Wells Fargo Bank, National Association to, among other things, increase the size of the facility from $225.0 million to $325.0 million and extend the initial maturity date to December 14, 2017. The maturity date of the facility is subject to two one-year extension options, each of which may be exercised at the Company’s option subject to the satisfaction of certain conditions, including payment of an extension fee.
• In June 2016, the Company terminated the commercial mortgage-backed securities ("CMBS") securitization trust, and in connection therewith, exchanged its remaining certificates for the remaining mortgage loans held by the CMBS trust. All of the CMBS trust certificates held by third parties have been repaid in full.
• In June 2016, the global master repurchase agreement with UBS AG, which was entered into for purposes of financing the Company's CMBS certificates, was repaid in full.

Pending Sale of Mortgage Banking Subsidiary:

• On June 28, 2016, the Company entered into a purchase and sale agreement to sell ACRE Capital Holdings LLC ("ACRE Capital Holdings"), the holding company that owns the Company's mortgage banking subsidiary, ACRE Capital LLC ("ACRE Capital"), to Cornerstone Real Estate Advisers LLC for $93 million in cash, subject to certain adjustments. The transaction is subject to customary closing conditions, including approvals by applicable governmental agencies and government-sponsored enterprises ("GSEs"). Closing is expected to occur in the third or fourth quarter of 2016. The sale of ACRE Capital Holdings is expected to provide the Company with additional capital to reinvest in its principal lending business. As a result of the expected sale of ACRE Capital Holdings, the operations of the Mortgage Banking business have been reclassified as discontinued operations held for sale. After giving effect to the expected divestiture of ACRE Capital Holdings, the Company will no longer provide segment reporting. Through closing, the results of the Company's Mortgage Banking business will be provided as part of discontinued operations held for sale.

PORTFOLIO DETAIL AS OF JUNE 30, 2016

At June 30, 2016, the Company had originated or co-originated 33 loans held for investment (excluding 34 loans totaling approximately $992.1 million in outstanding principal that were repaid or sold since inception) totaling approximately $1.2 billion in commitments and $1.1 billion in outstanding principal, excluding non-controlling interests held by third parties.

RECENT DEVELOPMENTS, INVESTMENT CAPACITY AND LIQUIDITY

On July 12, 2016, ACRE Capital temporarily increased the ASAP Line of Credit limit from $80.0 million to $140.0 million through August 31, 2016.

On July 13, 2016, a subsidiary of the Company entered into an amendment agreement with Citibank, N.A. related to its existing $250 million master repurchase facility (the “Citibank Facility”), which contemplates that Citibank, N.A. may increase the commitment amount of the Citibank Facility, in its sole discretion, in order to fund approved mortgage loans.

On July 14, 2016, the Company originated a $72.0 million first mortgage loan on an office property located in Illinois. At closing, the outstanding principal balance was approximately $53.2 million. The loan has an interest rate of LIBOR plus 3.99% (plus fees) and an initial term of three years.

On July 15, 2016, the Company originated a $62.5 million first mortgage loan on an office property located in California. At closing, the outstanding principal balance was approximately $57.5 million. The loan has an interest rate of LIBOR plus 4.40% (plus fees) and an initial term of three years.

On July 21, 2016, the Company originated a $23.3 million first mortgage loan on a multifamily property located in Florida. At closing, the outstanding principal balance was approximately $19.8 million. The loan has an interest rate of LIBOR plus 4.25% (plus fees) and an initial term of 2.5 years.

On July 29, 2016, the Company amended the July 2014 CNB Facility to extend the maturity date to September 30, 2016.

On July 29, 2016, ACRE Capital temporarily increased its BAML Line of Credit from $135.0 million to $175.0 million from July 29, 2016 through August 8, 2016.

On August 1, 2016, a subsidiary of the Company, entered into a $125.0 million master repurchase and securities contract with U.S. Bank National Association to fund eligible commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing, manufactured housing or self-storage properties.

From July 1, 2016 through August 2, 2016, ACRE Capital originated $94.4 million in Fannie Mae, Freddie Mac or HUD loan commitments.

As of August 2, 2016, the Company had approximately $139 million in capital, either in cash or in approved but undrawn capacity under the Company’s borrowing facilities, excluding the anticipated proceeds from the pending sale of ACRE Capital Holdings, anticipated proceeds from repayments of existing loans and the anticipated expiration of the $75 million funding facility at City National Bank. After holding in reserve $10 million in liquidity requirements, the Company expects to have approximately $129 million in capital available to fund new loans, fund outstanding commitments on existing loans, repurchase its common shares and for other working capital and general corporate purposes. Assuming that the Company uses all such amount as capital to make new senior loans and the Company is able to leverage such amount under its financing agreements at a debt-to-equity ratio of 2.5:1, the Company would have the capacity to fund approximately $450 million of additional senior loans.

As of August 2, 2016, the total unfunded commitments for the Company’s existing loans held for investment were approximately $109 million. In addition, borrowings under the Company's secured funding agreements were approximately $729 million, borrowings under the Company's secured term loan was approximately $75 million and debt issued in the form of collateralized loan obligations was approximately $80 million.

On August 4, 2016, the Company declared a cash dividend of $0.26 per common share for the third quarter of 2016. The third quarter 2016 dividend is payable on October 17, 2016 to common stockholders of record as of September 30, 2016.

SECOND QUARTER 2016 DIVIDEND

On May 5, 2016, the Company declared a cash dividend of $0.26 per common share for the second quarter of 2016. The second quarter 2016 dividend was paid on July 15, 2016 to common stockholders of record as of June 30, 2016.

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 Ares Commercial Real Estate Corporation's national direct origination platform, it provides a broad offering of flexible financing solutions for commercial real estate owners and operators. 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. (NYSE:ARES), a publicly traded, leading global alternative asset manager with approximately $94.0 billion of assets under management as of March 31, 2016. 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.