Ares Commercial Real Estate Corporation (ACRE) reported significant financial changes in its third quarter of 2024, reflecting a challenging operating environment. For the three months ended September 30, 2024, total revenue decreased to $16.7 million from $23.9 million in the same period of 2023. For the nine months ended September 30, 2024, revenue was $52.1 million, down from $75.4 million year-over-year. This decline in revenue was attributed to lower interest income, which fell to $39.3 million from $52.8 million in Q3 2023, and a decrease in net interest margin, which dropped to approximately $11.9 million from $23.1 million.

Total expenses for the third quarter increased to $9.3 million, compared to $6.6 million in Q3 2023, and for the nine months, expenses rose to $26.8 million from $19.9 million. The company reported a net loss attributable to common stockholders of $5.9 million for Q3 2024, a stark contrast to a net income of $9.2 million in Q3 2023. For the nine months, the net loss was $24.3 million, compared to a modest profit of $546,000 in the prior year.

As of September 30, 2024, ACRE's total assets were reported at $1.94 billion, down from $2.28 billion at the end of 2023. Loans held for investment decreased to $1.67 billion from $1.97 billion, while real estate owned held for investment increased to $140.9 million from $83.3 million, reflecting strategic acquisitions through foreclosure. The company recognized realized losses of $67.9 million on loans during the nine months, primarily due to discounted payoffs.

The Current Expected Credit Loss (CECL) reserve increased to $146 million, reflecting heightened risk ratings influenced by macroeconomic factors such as inflation and interest rates. The company’s portfolio included 40 loans with an aggregate commitment of approximately $2 billion, with 66.1% of these loans having Secured Overnight Financing Rate (SOFR) floors.

Strategically, ACRE acquired several properties, including an office property in North Carolina and another in California, through foreclosure, which contributed to its real estate holdings. The company also repaid a $105 million note ahead of schedule and terminated the MetLife Facility in May 2024.

Despite these challenges, ACRE declared a regular cash dividend of $0.25 per common share for Q4 2024, indicating a commitment to returning value to shareholders. The company continues to navigate a complex market landscape, with ongoing adjustments to its financing agreements and operational strategies to enhance liquidity and manage risks.