Ares Commercial Real Estate Q3 Profit Doubles on Office REO Sale

Ares Commercial Real Estate earned $10.0 million, or $0.18 a diluted share, in the third quarter, more than double the $4.7 million, or $0.08 a share, it earned a year earlier, the commercial real estate lender reported after the market close on Thursday, Nov. 5. The quarter included a $7.1 million realized gain on the sale of a foreclosed office property, according to the results release and earnings presentation it furnished to the SEC with a Form 8-K.

Ares Commercial Real Estate (NYSE: ACRE) makes senior and subordinate commercial property loans and is externally managed by a subsidiary of Ares Management. Distributable earnings, a non-GAAP measure, were $6.7 million, or $0.12 a share. The board declared a fourth-quarter dividend of $0.15 a share, the same as the third quarter, payable Jan. 15.

What drove Ares Commercial Real Estate's third quarter?

The office sale. The company sold its North Carolina office property it had taken over, for proceeds above its carrying amount, its presentation says. Net interest margin slipped to $7.9 million from $8.5 million a year earlier, as interest income rose to $26.9 million and interest expense climbed to $19.0 million from $14.8 million. It recorded a $1.8 million provision for credit losses, against a $2.2 million reversal a year earlier.

Measure	Sept. 30, 2026	Dec. 31, 2025
Loans held for investment	$1.74 billion	$1.53 billion
CECL reserve	$139.3 million	$125.8 million
Real estate owned held for investment, net	$75.5 million	$130.2 million
Secured funding agreements	$1.11 billion	$858.2 million
Cash and cash equivalents	$21.7 million	$29.3 million
Stockholders' equity	$491.7 million	$509.6 million

Source: Ares Commercial Real Estate third-quarter 2026 results release, Exhibit 99.1 to Form 8-K.

Book value was $8.86 a share, or $11.40 excluding the CECL reserve, according to the presentation.

Which loans are troubled?

Four loans rated 4 or 5, carried at $299 million, or 16% of the portfolio. The company raised the risk rating on a $200 million Brooklyn residential and condominium loan to 5 from 4; construction on that building is complete and pre-sales are progressing, the presentation says. A Chicago office loan is also rated 5. Those two loans make up 94% of the four, and 94% of the total CECL reserve of $141 million, or 8% of loan principal, relates to loans rated 4 and 5. Office loans totaled $444 million, down 10% from a year earlier.

"We remain focused on addressing our risk rated 4 and 5 loans, as resolving these investments will advance the repositioning of our portfolio and enhance our future earnings," Chief Financial Officer Jeff Gonzales said in the release.

The $1.8 billion loan portfolio has 37 loans, 99% senior and 96% floating rate, with a weighted average risk rating of 3.2. Multifamily made up 25% and office 24%.

How is Ares Commercial Real Estate funded?

Mostly through secured funding agreements, which rose to $1.11 billion. After the quarter, it repaid and terminated its $90 million secured term loan. Available capital was $87 million on Nov. 3, including $43 million of cash, down from $116 million at Sept. 30, according to the presentation. Our warehouse line of credit guide explains how these facilities work, and hard money and private lending rates today tracks the benchmarks behind floating-rate loans.