Ares Commercial Real Estate Corporation Reports Fourth Quarter and Full Year 2012 Financial Results

  Ares Commercial Real Estate Corporation Reports Fourth Quarter and Full Year
  2012 Financial Results

Business Wire

CHICAGO -- April 01, 2013

Ares Commercial Real Estate Corporation (NYSE:ACRE) announced its financial
results for the quarter and full-year ended December31, 2012.

FOURTH QUARTER 2012 HIGHLIGHTS

  *Closed seven new senior loans totaling approximately $187.2 million in
    commitments (approximately $162.1 million in outstanding principal)
    collateralized by multi-family apartment and office buildings
  *Issued $69.0 million (gross) aggregate principal balance of 7.000%
    Convertible Senior Notes due 2015
  *For the fourth quarter of 2012, earned net income of $1.1 million or $0.12
    per basic and diluted common share and Core Earnings of $1.3 million or
    $0.14 per basic and diluted common share
  *Declared a fourth quarter 2012 dividend of $0.25 per common share, which
    was paid on January10, 2013

FULL-YEAR 2012 HIGHLIGHTS

  *Ended 2012 with fifteen loans totaling approximately $405.7 million in
    commitments (approximately $356.7 million in outstanding principal)
  *For full-year 2012, earned net income of $0.2 million or $0.03 per basic
    and diluted common share and Core Earnings of $0.6 million or $0.09 per
    basic and diluted common share

SUMMARY OF FOURTH QUARTER AND FULL-YEAR 2012 FINANCIAL RESULTS

Net income attributable to common stockholders was $1.1 million or $0.12 per
basic and diluted common share and $186 thousand or $0.03 per basic and
diluted common share for the three months and year ended December31, 2012,
respectively. Core Earnings for the three months and year ended December31,
2012 were $1.3 million or $0.14 per basic and diluted common share and
approximately $621 thousand or $0.09 per basic and diluted common share,
respectively. Reconciliation of Core Earnings to the most directly comparable
GAAP financial measure, net income, is set forth for the three months and year
ended December31, 2012 in a table at the end of this presentation. Although
we have presented prior periods, we commenced investment operations on
December9, 2011; therefore, we do not believe that a comparison of our
results of operations to these prior periods is meaningful.

“We are pleased to end our first year as a public company with a strong fourth
quarter. We closed seven new senior loan commitments totaling approximately
$187 million, bringing our total portfolio to fifteen loans with approximately
$406 million in commitments,” said John B. Bartling, CEO of Ares Commercial
Real Estate Corporation. “Through the issuance of $69 million in convertible
senior notes in the fourth quarter, we raised additional capital that we can
leverage to make new loans and further scale our company. While market
transaction activity has been seasonally slow at the start of this year, we
led the closing of $132.6 million of new loan commitments collateralized by
five properties at the end of the first quarter of 2013. We believe that we
will see a stronger market for the remainder of the year.”

SUMMARY OF INVESTMENTS AT DECEMBER 31, 2012

At December31, 2012, the Company had originated fifteen loans totaling
approximately $405.7 million in commitments with outstanding principal of
$356.7 million. At December31, 2012, all loans were performing in accordance
with the terms of the respective loan agreements.

Portfolio at December 31, 2012:
                                                                                                                                         
(amounts in millions, except percentages)
                                                                                                                                                  
                              Total                                                                                            Unleveraged
Loan Type       Location      Commitment      Outstanding      Carrying        LTV At                 Interest         LIBOR   Effective     Maturity   Payment
                              (at             Principal        Amount(1)       Origination(2)         Rate             Floor   Yield(3)      Date(4)    Terms(5)
                              closing)
Transitional
Senior
Mortgage
Loans
Apartment       Brandon, FL   $   49.6        $   43.4         $  42.9   (6)   71             %       L+4.80%          0.5 %   5.9     %     Jan 2016   I/O
Office          Austin, TX    38.0            30.8             30.5            69             %       L+5.75%-  (7)    1.0 %   7.5     %     Mar 2015   I/O
                                                                                                      L+5.25%
Apartment       New York,     36.1            30.8             30.5            81             %       L+5.00%          0.8 %   6.1     %     Oct 2017   I/O
                NY
Office          Cincinnati,   35.5            26.9             26.7            67             %       L+5.35%   (8)    0.3 %   6.0     %     Nov 2015   I/O
                OH
Apartment       New York,     26.3            22.7             22.5            81             %       L+5.75%-  (9)    0.2 %   6.5     %     Dec 2015   I/O
                NY                                                                                    L+5.00%
Apartment       New York,     21.9            18.4             18.3            72             %       L+5.75%-  (9)    0.2 %   6.5     %     Dec 2015   I/O
                NY                                                                                    L+5.00%
Apartment       New York,     21.8            18.6             18.4            83             %       L+5.75%-  (9)    0.2 %   6.5     %     Dec 2015   I/O
                NY                                                                                    L+5.00%
Apartment       Avondale,     22.1            20.6             20.4            74             %       L+4.25%          1.0 %   5.8     %     Sep 2015   I/O
                AZ
Office          Denver, CO    11.0            8.3              8.2             38             %       L+5.50%          1.0 %   7.3     %     Jan 2015   I/O
Stretch
Senior
Mortgage
Loans
Office          Miami, FL     47.0            47.0             46.6      (6)   76             %       L+5.25%          1.0 %   6.6     %     Oct 2015   I/O
Office          Boston, MA    35.0            34.8             34.6            88             %       L+5.65%          0.7 %   6.8     %     Mar 2015   P&I
Apartment       Arlington,    13.4            13.4             13.3            80             %       L+5.15%          0.3 %   6.1     %     Dec 2014   I/O
                VA
Subordinated
Debt
Investments
Apartment       Rocklin, CA   18.7            18.7        (10) 18.5            72             %(13)   L+6.40%   (11)   1.0 %   10.0    %     Dec 2013   I/O
                Fort                                                                                  L+10.75%-
Office          Lauderdale,   15.0       (12) 8.0              7.9             51             %(13)   L+8.18%   (14)   0.8 %   12.1    %     Feb 2015   I/O
                FL
Office          Atlanta, GA   14.3            14.3             14.2            75             %(13)   10.50%    (15)   —       11.0    %     Aug 2017   I/O
Total/Average                 $   405.7       $   356.7        $  353.5                                                        7.4     %

       The difference between the carrying amount and the outstanding
(1)   principal face amount of the loans held for investment consists of
       unamortized purchase discount, deferred loan fees and loan origination
       costs.
       
       LTV At Origination is calculated as the initial outstanding principal
(2)    at closing divided by the valuation of the property underlying the loan
       based on an appraisal of the property based on market conditions at the
       time of origination.
       
       Unleveraged Effective Yield is the compounded effective rate of return
       that would be earned over the life of the investment based on the
(3)    contractual interest rate (adjusted for any deferred loan fees, costs,
       premium or discount) and assumes no dispositions, early prepayments or
       defaults.
       
       The Boston and Arlington loans are subject to one 12-month extension
       option. The Miami, Austin, Avondale, Brandon, Cincinnati, New York (the
(4)    loans with a Maturity Date of December 2015) and Fort Lauderdale loans
       are subject to two 12-month extension options. The Rocklin loan is
       subject to one 6-month extension option.
       
(5)    P&I=principal and interest; I/O=interest only.
       
(6)    The Carrying Amount of this loan is above 10%, but less than 20%, of
       total assets of the Company.
       
(7)    The initial interest rate for this loan of L+5.75% steps down based on
       performance hurdles to L+5.25%.
       
(8)    The initial interest rate for this loan of L+5.35% steps down based on
       performance hurdles to L+5.00%.
       
(9)    The initial rate for this loan of L+5.75% steps down based on
       performance hurdles to L+5.00%.
       
       This loan was co-originated with a third party using an A/B structure,
       with a cumulative interest rate of L + 4.10% and a LIBOR minimum rate
       (“LIBOR Floor”) of 1.00%. The fully funded A-Note (held by a third
       party) has an interest rate of L + 2.75% with no LIBOR Floor and the
(10)   Company’s B-Note receives the full benefit of the LIBOR Floor on the
       full $50.5 million balance of the loan, which would result in an
       interest rate on the Company’s B-Note of 9.10% if LIBOR was equal to
       0.0% and 7.40% if LIBOR was equal to 1.0%, with the interest rate on
       the B-Note equal to L + 6.40% if LIBOR is greater than 1.0%.
       
       The B-Note has an initial interest rate of L + 6.40% subject to a 1.00%
(11)   LIBOR floor (with the benefit of any difference between actual LIBOR
       and the LIBOR floor on the A-Note and B-Note accruing to the B-Note).
       
       The total commitment the Company co-originated was a $37.0 million
(12)   first mortgage, of which a $22.0 million A-Note was fully funded by
       Citibank, N.A. The Company funded a $15.0 million B-Note.
       
       LTV At Origination for this subordinated debt investment is calculated
       as the sum of outstanding principal at closing for the senior interest
(13)   (held by a third party) and the subordinated interest (held by us)
       divided by the valuation reflected in the property appraisal. See Note
       (2).
       
       This loan was co-originated with a third party using an A/B structure,
       with a cumulative interest rate of L + 5.25% and a LIBOR floor of
       0.75%. The fully funded A-Note (held by a third party) has an interest
(14)   rate of L + 3.25% with the LIBOR Floor, resulting in an initial
       interest rate on our B-Note of L + 10.75% with the LIBOR Floor. As the
       Company funds additional proceeds on the B-Note, the interest rate will
       decrease and the fully funded B-Note ($15.0 million) will have an
       interest rate of LIBOR + 8.18% with the LIBOR Floor.
       
(15)   The interest rate for this loan increases to 11.0% on September 1,
       2014.

RECENT DEVELOPMENTS

On March8, 2013, the Company entered into a loan assumption transaction with
a new sponsor group to facilitate the purchase of a ClassB office building in
Miami, FL that was collateralized by the Company’s existing $47.0 million
first mortgage loan. The interest rate on the Company’s existing loan did not
change. The new maturity date of the loan is April2014 and is subject to a
one 12-month extension option.

On March 14, 2013, the Company declared a cash dividend of $0.25 per common
share for the first quarter of 2013. The first quarter 2013 dividend is
payable on April 18, 2013 to common stockholders of record as of April 8,
2013.

On March28, 2013, the Company co-originated an approximately $107.1 million
transitional first mortgage loan on three properties located in Atlanta, GA.
At closing the outstanding principal was approximately $94.7 million. As part
of the transaction, the Company funded an approximately $26.7 million B-Note,
while the approximately $68.1 million A-Note was funded by a commercial bank.
The B-Note has an initial interest rate of L + 10.75% subject to a 0.50% LIBOR
floor (with the benefit of any difference between actual LIBOR and the LIBOR
floor on the A-Note and B-Note accruing to the B-Note; as the B-Note funds
additional loan proceeds, the interest rate on the B-Note may decrease) and an
initial term of 3 years.

In addition, on March29, 2013, the Company originated an approximately $25.5
million transitional first mortgage loan on a property located in Overland
Park, KS. At closing the outstanding principal was approximately $24.4
million. The loan has an interest rate of L + 5.00% subject to a 0.25% LIBOR
floor and term of 3 years.

INVESTMENT CAPACITY AND LIQUIDITY

As of March 29, 2013, the Company had approximately $126 million in potential
loans with non-binding term sheets issued, approximately $316.0 million of
potential loans with soft quotes or indicative terms provided and
approximately $1.2 billion of potential loans in other stages of earlier
evaluation. Historically, the Company has executed non-binding term sheets for
a relatively small percentage of evaluated loans. The Company operates in a
competitive market for investment opportunities and competition may limit its
ability to originate or acquire the investments in the pipeline. The
consummation of any of the loans in the pipeline depends upon, among other
things, one or more or the following: satisfactory completion of the Company’s
due diligence investigation and investment process, market conditions,
available liquidity, the Company’s agreement with the sponsor on the terms and
structure of such loan, and the execution and delivery of satisfactory
transaction documentation. In addition, the Company may co-originate some of
these loans with third parties. The Company cannot provide any assurances that
it will close or co-originate any of these loans.

Once a formal financing commitment is obtained (subject to the terms of the
Company’s applicable secured funding facility) for the approximately $25.5
million transitional first mortgage loan originated on March29, 2013, the
Company expects to have approximately $48 million of remaining capital, either
in cash or in approved but undrawn capacity under the Company’s secured
funding facilities. After holding in reserve $20.0 million in liquidity
requirements, the Company has approximately $28 million in capital available
to fund additional commitments, the Company’s existing outstanding commitments
and for other working capital purposes. Assuming that the Company uses such
amount as equity capital to make new investments and is able to achieve a
debt-to-equity ratio of 1-to-1 to 2-to-1, the Company has the capacity to fund
approximately $55 million to approximately $85 million of additional
investments. As of March29, 2013, the total unfunded commitments for the
Company’s existing loans held for investment was approximately $57 million and
borrowings under the Company’s secured funding facilities and from the
issuance of convertible senior notes were approximately $199 million and $69.0
million, respectively.

FOURTH QUARTER 2012 DIVIDEND

On November7, 2012, the Company declared a dividend of $0.25 per common share
for the fourth quarter of 2012, which was paid on January10, 2013 to common
stockholders of record as of December31, 2012.

CONFERENCE CALL AND WEBCAST INFORMATION

The Company will host a webcast and conference call on Monday, April1, 2013,
10:00 AM Central Time (11:00 AM Eastern Time) to discuss its financial results
for the fourth quarter and year ended December31, 2012.

All interested parties are invited to participate via telephone or the live
webcast, which will be hosted on a webcast link located on the Home pageof
the Investor Resources section of our website at http://www.arescre.com.
Please visit the website to test your connection before the webcast. Domestic
callers can access the conference call by dialing (888)-317-6003.
International callers can access the conference call by dialing
+1(412)-317-6061. All callers will need to enter the Participant Elite Entry
Number 2103813 followed by the # sign and reference “Ares Commercial Real
Estate Corporation” once connected with the operator. All callers are asked to
dial in 10-15 minutes prior to the call so that name and company information
can be collected. For interested parties, an archived replay of the call will
be available through April15, 2013 to domestic callers by dialing
(877)-344-7529 and to international callers by dialing +1(412)-317-0088. For
all replays, please reference conference number 10025354. An archived replay
will also be available on a webcast link located on the Home pageof the
Investor Resources section of our website.

ABOUT ARES COMMERCIAL REAL ESTATE CORPORATION

Ares Commercial Real Estate Corporation is a specialty finance company that
originates, invests in and manages middle-market commercial real estate loans
and other commercial real estate investments. Through its national direct
origination platform, Ares Commercial Real Estate Corporation provides
flexible financing solutions for middle-market borrowers. Ares Commercial Real
Estate Corporation intends to elect to be taxed as a real estate investment
trust commencing with its taxable year ended December31, 2012, and is
externally managed by an affiliate of Ares Management LLC, a global
alternative asset manager with approximately $59 billion in committed capital
under management as of December31, 2012. For more information, please visit
our website at www.arescre.com. The contents of such website are not and
should not be deemed to be incorporated by reference herein.

FORWARD LOOKING STATEMENTS

Statements included herein or on the webcast / conference call may constitute
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, which relate to future events or our future
performance or financial condition. These statements are not guarantees of
future performance, condition or results and involve a number of risks and
uncertainties. Actual results may differ materially from those in the
forward-looking statements as a result of a number of factors, including those
described from time to time in our filings with the Securities and Exchange
Commission. Ares Commercial Real Estate Corporation undertakes no duty to
update any forward-looking statements made herein or on the webcast/conference
call.

AVAILABLE INFORMATION

Ares Commercial Real Estate Corporation’s filings with the Securities and
Exchange Commission, press releases, earnings releases and other financial
information are available on its website at www.arescre.com. The contents of
such website are not and should not be deemed to be incorporated by reference
herein.

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)
                                     
                                       As of
                                       December 31, 2012   December 31, 2011
                                                                             
ASSETS
Cash and cash equivalents              $     23,390        $      1,240
Restricted cash                        3,210               —
Loans held for investment              353,500             4,945
Accrued interest receivable            1,746               3
Deferred financing costs, net          5,168               1,194
Other assets                           845                 205
                                                                             
Total assets                           $     387,859       $      7,587
                                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                                             
LIABILITIES
Secured financing agreements           $     144,256       $      —
Convertible notes                      67,289              —
Derivative liability                   1,825               —
Accounts payable and accrued           1,788               323
expenses
Due to affiliate                       1,320               827
Dividends payable                      2,316               —
Other liabilities                      3,627               —
Total liabilities                      222,421             1,150
                                                                             
Commitments and contingencies (Note
5)
                                                                             
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.01 per
share, 50,000,000 and no shares
authorized at
December 31, 2012 and December 31,     —                   —
2011, respectively, no shares issued
and
outstanding at December 31, 2012 and
December 31, 2011
Common stock, par value $0.01 per
share, 450,000,000 and 100,000
shares
authorized at December 31, 2012 and
December 31, 2011, respectively,       92                  —
9,267,162
and no shares issued and outstanding
at December 31, 2012 and December
31,
2011, respectively
Additional paid in capital             169,200             6,600
Accumulated deficit                    (3,854            ) (163              )
Total stockholders’ equity             165,438             6,437
Total liabilities and stockholders’    $     387,859       $      7,587
equity

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)
                      
                                                                For the
                        For the        For the     For the      Period from
                        Three-         Three-      Twelve-      September 1,
                        Months Ended   Months      Months       2011
                        December 31,   Ended       Ended        (Inception)
                        2012           December    December     to
                                       31, 2011    31, 2012     December 31,
                                                                2011
                                                                             
Net interest margin:
Interest income         $    4,881    $  3        $   9,278    $    3
Interest expense
(from secured funding   (1,252       ) (39       ) (2,342     ) (39          )
facilities)
Net interest margin     3,629          (36       ) 6,936        (36          )
(loss)
                                                                             
Expenses:
Other interest          313            —           313          —
expense
Management fees to      621            —           1,665        —
affiliate
Professional fees       488            58          1,194        58
General and
administrative          458            69          1,285        69
expenses
General and
administrative
expenses                668            —           1,619        —
reimbursed to
affiliate
Total expenses          2,548          127         6,076        127
Net income (loss)       1,081          (163      ) 860          (163         )
                                                                             
Less income (loss)
attributable to
Series A
Convertible Preferred
Stock:
Preferred dividends     —              0           (102       ) —
Accretion of            —              0           (572       ) —
redemption premium
Net income (loss)
attributable to         $    1,081    $  (163   ) $   186      $    (163    )
common
stockholders
Net income (loss) per
common share:
Basic and diluted
earnings (loss) per     $     0.12     $  (8.56  ) $   0.03     $    (8.56   )
common share
Weighted average
number of common
shares outstanding:
Basic weighted
average shares of       9,212,566      19,052      6,532,706    19,052
common stock
outstanding
Diluted weighted
average shares of       9,267,162      19,052      6,567,309    19,052
common stock
outstanding

Core Earnings is a non-GAAP financial measure that is used, among other
things, to compute incentive fees payable to the Company’s external manager,
Ares Commercial Real Estate Management LLC (“ACREM”). The Company believes the
disclosure of Core Earnings provides useful information to investors regarding
financial performance because it is one method the Company uses to measure its
financial conditions and results of operations. The presentation of this
additional information is not meant to be considered in isolation or as a
substitute for financial results prepared in accordance with GAAP. Core
Earnings is defined as GAAP net income (loss) excluding non-cash equity
compensation expense, the incentive fee payable to ACREM, depreciation and
amortization (related to targeted investments that are structured as debt to
the extent the Company forecloses on any properties underlying such debt), any
unrealized gains, losses or other non-cash items recorded in net income (loss)
for the period, regardless of whether such items are included in other
comprehensive income or loss, or in net income (loss). The amount will be also
be adjusted to exclude one-time events pursuant to changes in GAAP and certain
other non-cash charges as determined by ACREM and approved by a majority of
the independent directors of the Company. Core Earnings (loss) for the three
months and year ended December31, 2013 were approximately $1.3 million or
$0.14 per basic and diluted common share and approximately $621 thousand or
$0.09 per basic and diluted common share, respectively. Reconciliation of Core
Earnings (loss) to the most directly comparable GAAP financial measure, net
income (loss), is set forth in the table below for the three months and year
ended December31, 2012:

(in thousands, except share and per share data)
                                                         
                                      Three Months Ended    Year Ended
                                      December 31, 2012     December 31, 2012
$ in thousands, except per share      Amount   Per Share   Amount  Per Share
amounts (unaudited)
Net income (loss) attributable to     $ 1,082   $   0.12    $  186   $   0.03
common stockholders
Add back: non-cash stock-based        136       0.01        338      0.05
compensation
Add back: unrealized (gain) loss on   97        0.01        97       0.01
derivative
Core Earnings (loss)                  $ 1,315   $   0.14    $  621   $   0.09

Contact:

Ares Commercial Real Estate Corporation
Carl Drake, 404-814-5204