Ares Commercial Real Estate (ACRE) 30 Oct 182018 Q3 Earnings call transcript

Company Profile

Participants

John Stilmar	Investor Relations
Jamie Henderson	Chief Executive Officer
Tae-Sik Yoon	Chief Financial Officer
Carl Drake	Investor Relations
Cameron Rudd	Investor Relations
Steve Delaney	JMP Securities
Stephen Laws	Raymond James
Jade Rahmani	KBW
Benjamin Zucker	BTIG
Richard Shane	JPMorgan
Doug Harter	Credit Suisse
Ken Bruce	Bank of America Merrill Lynch

Call transcript

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Operator

Good morning, and welcome to Ares Commercial Real Estate Corporation Conference Call to discuss the Company's Third Quarter 2018 earnings results.

As a reminder, this conference is being recorded on October 30th, 2018. I will now turn the call over to John Stilmar from Investor Relations.

John Stilmar

Thank you, Denise. Good morning everyone and thank you for joining us on today's conference call. our Drake Henderson; our and Group. by Yoon; CFO, Investor today Carl and Cameron joined CEO, our Jamie Tae-Sik Relations I’m Rudd from

addition at earnings presentation XX-K the Investor and the In of we under press our section filed website SEC, an we with the posted have Resources our to www.arescre.com. that release

statements uncertainties. webcast made and market documents statements use of Many forward-looking from assumes conditions this involve course Before management's may I no of its to want results such the risks accompanying to we on subject Commercial or forward-looking not The Corporation the remind Estate of intends, Company's anticipates, the by these those could judgment. These a forward-looking Real performance, call SEC statements based are during should, can of as and believes, and current be identified to These begin, actual filings. contain and will, in as update as expressions. in are including risks uncertainties. management's forward-looking and factors as forward-looking future obligation of everyone and any and the listed those expressed similar statements results such guarantees of that Ares comments words well such statements expects, number result statements. a materially expectations are condition a of conference number of differ

will Jamie comparable over recent investment prepared other certain used Generally now We I as non-GAAP Accounting conference and or be these turn measures. for in our Jamie? the highlights who These these quarter not to companies. with be to to this titled measures will substitute performance financial like measures considered refer a accordance of may and begin third should During measures by Accepted Principles. measures call, activity. we measures as will call use operating Henderson, with in isolation, not

Jamie Henderson

today. everyone and our thanks Good for call joining John. you, morning Thank

with We benefit start high quarter our quarter on initiatives. results. continue me to recent Let from third improvement strong another we some reported profitability commentary level as

GAAP third For the earnings in and $X.XX core share quarter, we of respectively. generated per $X.XX

nine in and first the dividends of of were earnings $X.XX core year-over-year well paid. were up share the months XXXX, XX% excess $X.XX year-to-date For of our per

continue our from higher higher term greater capital, confidence higher long expected Our strong earnings drivers comparatively earnings and prospects. the of have we reduce of to XXXX invested in benefit rates. our to levels earnings costs, Since LIBOR continue, funding are in even

are per XX% result, a dividend increase a As we share, dividends year-end since $X.XX again in our increasing our which is quarterly to quarterly XXXX.

Another driver our product believe are coverage and view positive our leveraging our less by progress national is continued the expanding segments market that mix in of covered model competition. we our efficiently in

reviewed to selective terms amount months in year, of we and have allows period in pipeline increase that the both us Clearly, our the over that closed. the example, for XXX% we have this quoted XXXX. deals versus strong same in transactions preliminary remain with of increased For soft the first highly nine the

new quarter loan million $XX shortly with closing million originate end. commitments we quarter, totaling after third the During $XXX another

the a and Looking estate us rents fourth real remained to I'm growth, forward, to with robust is fundamentals levels. strong occupancy U.S. that very Transaction start activity GDP which quarter. say support picking and economic off we're strong commercial for up pleased to

sheets closed million executed the to addition expected we approximately loans, million are term commitments quarter. on of have close fourth of $XX In the to in $XXX that

Ares originations estate real for working by ACRE facility to warehouse capital an available better with new upon $XXX that mitigate party areas will announce a allow drawn to clients. of inventory management be matching debt loans a provider new the from repayments in with and made timing with pleased of other to a facility the to real debt can is in the what has originations. efficiently significant are repayments. we million estate warehouse This the initiative challenge order for Finally, our us originate establish benefit historical been to ACRE, of capital match ACRE timing third

results that facility expect the will support enhance the example has potential detail. stability Tae-Sik discuss further over We to now in this to business. to to another of call and it's Ares third I the and our earnings, our turn warehouse for provide yet quarter further ACRE

Tae-Sik Yoon

Jamie of and million the Great. share core common net $XX.X of morning reported income good or for everyone. GAAP Thank of $X.XX Earlier per quarter today, XXXX. earnings $X.XX million and common share you, $XX per we or third

as earnings more the from comparable remain million we evidenced assets to by average end $XXX the in more to primary benefit period continue last invested fully approximately having and first, third XXXX interest three Our quarter, earning the drivers; versus of year.

point Second, in million $XXX over rising And reduction borrowing term we we borrowing all-in to highlighted continue lower most term a third, benefited costs from the basis by short recently XXX spread loan. rates. our

assets As increases. when rate our we as previously, LIBOR of one floating XX% month have increases, are demonstrated our loans, income net

briefly me impact new repayments of originations now upon potential and events of have fourth timing and the in Let quarter may these the touch earnings.

to $XXX repayments more million. the for repayments than significant expecting $XXX will are million. we indicated, total approximately fourth This estimated in be we bring to XXXX As quarter,

earnings we proceeds, fourth XXXX have between a originations, quarterly therefore, the we to do do the on receive year-to-date in expect timing actual when as pipeline a and and timing depending we average. events, to temporary when compared robust reinvest some fund of we we modest expect new repayments our our outcome quarter differences While dip

of expect timing previously the just line, the warehouse better that match line forward, Jamie and warehouse the area's we repayments reinvestments discussed. Going to utilizing

XX-Q extensions we on New Finally, third that last loans as York our call. we full our the our you and service term from have may noticed quarter XXXX self-storage short provided quarterly discussed portfolio filing, hotel

continue at end recognized the of payments, monthly to I'll on quarter. the over to interest third regular back some closing call experience remarks property now for no was and these performance loans stable the Importantly, as turn Jamie level remain impairment current

Jamie Henderson

and earnings generated well. capital company. help We've have and of new warehouse our facility earnings quarters our and We this stability dividends consecutive strong times that future optimize performing outlook earnings Thanks, closing, believe and three can in a three for progress our us available increased enhance manage our is Tae-Sik. to strong helping we periods. our and reflect increased -- our portfolio to in future XXXX In provide

are with With now that, anticipate like perform line to that questions. for would loans a economic will forward, believe that Looking all floating over open different you middle I ask to environments. please we senior lender well-positioned rate we we nearly market of operator portfolio diversified the well

Operator

Steve Henderson. Mr. Delaney first JMP go you, question ahead. be of will your And Thank from Securities. Please [Operator Instructions]

Steve Delaney

bank they effective such you, When situation? another new this Thank become you might this on rates be advance facility it able contemplate that may on about improve warehouse higher, from to your be I'd do congratulations versus lenders that quarter. what you. Thank get would like strong leverage to and normally news the potentially your you overall facility. good you first ask the and on

Tae-Sik Yoon

very good morning your much for is This Sure, Thanks Tae-Sik. Steve. question.

Steve Delaney

Sure.

Tae-Sik Yoon

be place benefits will of term. begin facility that realize short again So will in the this next benefit in the term, hopefully facility, several weeks short is to and sponsored very we new that that warehouse the we in an the warehouse Ares believe and

its of on concerned, far and little this facility, advance facility because In will be be balance a the warehouse that loans. it's as less sponsored terms as again Ares so, discussed will holding rate, ACRE Ares really warehouse relevant Jamie is an sheet

already example, proceeds, leverage has to vehicles so a for And have a sponsored loans capital XX, we delay, have in ACRE goal down. its and is in will than so this that of when the loan, own reinvest loan, invest, warehouse to itself senior terms under has to then place in rather it that available can being the Ares a that existing then immediately to repayment facilities. And ACRE ACRE pull delay warehouse XX having

vehicle term ACRE. if loans, really So call want a use that as warehouse is it won't, available for warehouse long a capital Ares won't that, a vehicle, down you pull can it Ares becomes the financing ACRE warehouse when facility so to

Steve Delaney

and very because on time Thank have in It the time which you, loans sounds you capital. like like helpful, earning Tae-Sik. call it concept there's in into might put just I of portfolio. clearly get interest now just is That's to something that's your

Tae-Sik Yoon

exactly, right. That’s

Steve Delaney

mentioned that. residential or in, a for I Well October and you in a family thank clarifying originations market us that is single you Florida. the was whether is what in new My whether condo the tell second is Could October, property detached in it you that loan project? follow up noticed

Jamie Henderson

Henderson Jamie it's Hey Steve, calling.

Steve Delaney

Jamie. Hi,

Jamie Henderson

A you. respond to Thank call. your

a is think Southeast it’s small to a what market barrier we condo entry Florida. in in development high So super

Steve Delaney

ask are good. drop All Well lot covered questions, on call a of want and in there Okay. people very much. to now, later. back so the I'll off Thank you isn't for if something right, very you hop I'll know I that

Jamie Henderson

All Steve. right. Thank you,

Tae-Sik Yoon

Thanks Steve.

Operator

Stephen go of Please Raymond will Laws The question be James. from next ahead.

Stephen Laws

quarter provide provide Hi, increase the out regarding is first you there and be mark-to-market up that. on To original you take far of on on any more that? loans going Jamie, Congratulations as a in, facility. the or will it color the first some Can as at detail, a good down dividend be little morning. maybe a kind follow well. clearing on Will maybe nice like question, as new Steve's to those cost?

Jamie Henderson

this Again, thanks call, for very question your morning. much and Sure, Stephen.

because excited behoove question, is of about as really timing get So I ACRE do much for how it think We're be sort to and First is And detail on repayments ACRE. just in details to you we're work part,[Indiscernible] we final In, allow isn't very going a it response to Out, what better make First it again going mentioned, of will Steve's to all that the of probably to sure to discussing this basis. not questions Jamie a into yet. done working is maybe basis. this that very it's manage through mark-to-market is us reinvestment. this going would too to length arm's fair call ask, called Exactly the terms those to that all and going it

to it'll impact give work the repayments, of details, you very particularly ability we're this. So to those we about it if time here manage quarter. want much think the lumpiness on through that have excited we improve facility, of could if as you kind to fourth bit all warehouse This can just our that call discuss a little the more very us

a our ACRE excited to in aspects very time so we just for you for about, that that exactly to and the more working called, But give bit we're you to asked going of will invest details full give time, how of can So us for, so you explanation out have about final work. are we'll this some it's come the little capital. a be positive able if still us through and

Stephen Laws

guys the possible. [Indiscernible] look forward for quarter you markets, that like sounds to to way investments. going much to so in I maybe certainly not next read getting maybe deployed a new individual keep public to seeing larger days read. but asset fully address these level, about the a investments, you capital you're I'm too many what at update, on the nice as as time talk hate into on yields can

as the think other covenants yields, and investment on first but far appropriate maybe the pricing you're whatever and creeping a partition we compares here can that? loan, to as like months mezz yield what in you X competition's spreads new of investments towards you one any or how on both mortgages end, comment timing subsequent quarter also or to maybe seeing, LTV’s or anything ago, points did For XX new is the

Jamie Henderson

Jamie. this. Stephen, Sure

think I pipeline We're to a fourth start the great the really So, quarter. feels off good. to

terms have in value senior attractive XX% quarter, also originations, is senior and our and both we're still We great stabilize spread the relative that market loan subject environment is like small has spreads. returns look that. floating our the course entirely We in our amount an It returns. the -- rate. portfolio of feels over and to and of portfolio Our are consider of about across last started the feel very almost attractive we generating generating great what we competitive

we've selective and that that and of advantage and we office our significant less the community We've more quoting. number the there coverage the So community, with closing That have than doubled amount materially see. we’re brokerage Ares borrower of and market's is built pretty system get. increased platform estate debt is, the said, of are competitive. a we with way touches being We the X% think, we we're than what that the loans super regional have we the real in

Stephen Laws

guys that thanks you my Great, for color Thank the questions. Appreciate you. taking on Jamie.

Jamie Henderson

Stephen. Thanks,

Operator

KBW. go will question ahead. Jade next be The Rahmani Please from of

Jade Rahmani

not Thanks looked interest, leaving financial was aside wondering that have M&A the of to looked if the [saw sure could but very could on something I terms, an something as comment would is interesting but just whether you you at the been any strategically, I'm if opportunity of for much. Rialto] you if is and transaction, have that, you that that pursue. at if company

Jamie Henderson

privately. morning, that the Sure. being Thanks think your all deals just high interested referred we at of we part management. being are sort Jade. marketed the Again, level. of many a and to, Good deals much certainly brought in certainly of the Ares are question. of transaction a had specific very virtually you We do that without that look get for I about good M&A very are very opportunities and

can't comment interesting, on being very deal. of a do as do I rest there. for specifically transaction market good out the about find particularly any to that be particular ACRE. assured very at I really We again, just every Ares M&A So get think we part But look

mentioned, but as obviously our did years of a sold well. time acquire couple We and for ago, several looking a that announced lender recently. effort that GSE we amount anything significant ago do opportunity. of We obviously As years we spend haven't

to additive, your to question, search virtually to at every accretive itself. if do ACRE do obviously answer right at We it's if meaningful, only But to again, the shot opportunity get it's continue we a going it, We're opportunity. there. out looking for it's

Jade Rahmani

for Is the servicing of provide than complementary business is term terms And could the of could in assets it below the situations financing core the in capital say potentially price is longer types a is redeploy at, lines complementary at or might main case a example the mortgage would and trading, business. in that interesting characterizing value, business stabilized of to say look it’s thrust that where into is the re-trading higher or something is you of what liquidate book ACRE it, project once realm, lines? where you that you it

Jamie Henderson

both. So I really think the answer is

to would to we direct our as mentioned, you complementary at opportunities different provide a are of complementary, fit, our businesses add particularly the As across, ground, as strategic country, looking [imagining] that network allow ACRE. on fit for strategic that In have a we underwriting would be that us complementary across our to that the and boots experience. well origination, as

raise significant mortgage strategic we're So which services looking type including as are different There opportunity, way of the At a to a would are so-called certainly same are be value. mentioned. financial of to time, we book number trading firms a for really capital other rates you synthetic that at for opportunities. looking discounts

assets. ACRE represent to and essentially type potential do into assets them, of it redeployed So those opportunities liquidate then acquire their

way be So capital. that more to would of a raise synthetic

of So we're your question, really types both to opportunities. at looking answer

Jade Rahmani

the the million loan the fourth sorry repayment the XXX -- was of of modified? hotel of repayments. three, include anticipated quarter Does terms in that that loans self-storage the Just and

Jamie Henderson

It does. reiterate, minus We're into the Again, or plus to one three it's just hundred. quarter. month

does loan include there's or that terms the to repayment So as be a self-storage ago as But heavy hotel. XXX months very transaction. self-storage obviously minus the tends New two, quarter in facilities, of two month plus more heavy, of York facility fourth well

Jade Rahmani

guess taking confident And you place? is those are there, point, this I at in how repayments

Tae-Sik Yoon

say just this. me let Well

for current. and as we November. the are in borrower with know expenses well, as both most as the Obviously, current. case was perform underlie properties, operating the refinancing. all self-storage of properties are as understanding the of asset well continue In the term I lender very That York a October to think discussions to extended interest from the our the New short you in self-storage loan the is that period stably hotel all just payments is a regular mentioned of terms importantly, loans performance, that

from of maturity outlook. original in December. has bit extend longer think the that June We terms date a the did In hotel, that I little to

are in with regular We the borrower. obviously contact

seeking say we and/or we hotel. of I is that's to and repayments terms to Our both borrower refinancing the term when the hotel December. a extend is that the understanding in the why sale possibly would is one a expect occur, that longer self-storage November to of the

Jade Rahmani

for to bent deals equity the are them. preferred could Okay, explain trying then maybe in subordinate quarter, how terms that, or cited location have And terms just origination, is there pipeline a and to on those the capital specific the color quarter out way. in position am capital put commitments, originations seem that that or those push type if pipeline wondering for the of you in just property by fourth that to million I are mezz, of any you structure. the the of the it's XXX the you

Jamie Henderson

Good Jade. Sure. It's Jamie morning, Henderson.

that senior at west coast of diversified half stage. about like know is XX% of real as operator I byproduct they're we of that deals of kinds for equity QX, these that those us anticipate them conjunction platform. I we're multifamily. That in this the are being see say our great in the said, owner lot pretty were and of They're several in coast, And Ares very can side with these the deals. I subordinates deals well underwriting an the and great really of think smaller and a closing when are We had resource portfolio we're they're closed deals terms deals, our granular quarter because the of yields, a think east senior. attractive fourth kind had we deals, of entirely estate. you of in business, of the So geographically

small but mix, very of in the real we're about feel estate. our that is great a we adding subordinates. I And the think, overall not accretive, really So are book percentage are exposures only good

Jade Rahmani

how XXX shake and future commitments? the that initial million, just does fundings And up between

Jamie Henderson

I XX% in as if our it find but to capital committed to have deals, XX% the I of to So you in think we is of think for I be from pipeline loans everything is funding, at you to versus of funding. look commissions. notice, tenant at unfunded you too I think are think as about terms commitments XX% those future And think remain generally had balance funding. our initial something of XX% you'll similar specific, future expenditures I had to again. amount funding something Future percent and historically closing we've available leasing Not about committed allowances,

And about XX% so generally it's XX% to been

Jade Rahmani

Thanks for taking the questions.

Jamie Henderson

you, Jade. Thank Absolutely.

Operator

will question of Please next be Ben the BTIG. And from ahead Zucker go

Benjamin Zucker

Good morning speed congrats and and everyone, EPS on raises. dividend the

and commented Real familiar is you these understanding little kind loans loan term have I set loans a talk with subsequent of in As also little construction or a product. this just it. activity, better already. of not lieu I it. in bit. and that pop too the people have up XQ pre-construction out I'm quickly, about Are originations to your saw want of this financing, taken type of by in can

Jamie Henderson

morning, Jamie Ben. It’s Good Henderson.

projects, So out taken we be will these construction a lender. fully are entitled where by

financing So the construction phase. we won't be

Benjamin Zucker

higher you're maybe than balance And able would that with to you, Got loan? that understood. of a see construction we loan typical is a why fund

Jamie Henderson

Yes.

Benjamin Zucker

me. I calling you Okay. guys interesting. on That's appreciate Well

on these that The pretty and it answered. come positioning do area gave really really questions in asked All sponsored what just so a facility -- ACRE, platform guys we the were make to asking think analysts how you seeing my sounds you I this forward are this that's given for the point and in other that think beneficial I benefit. for new I kind look to they broader warehouse is want just last I final there. calls thing think areas through good comes of terms the answer that have them me.

Jamie Henderson

really much, you. very about thanks think we're is great development a excited it. this We Thank Ben. Yes, and

Operator

be go next will ahead. the JPMorgan. of question Rick And from Shane Please

Richard Shane

my taking for questions morning. thanks this guys, Hey

be the First, aware are the in XXX the are about anything third we million quarter any of that be should look fees thinking payments of, repayment and we forward quarter, when principal fourth to should there? there we significant in that

Jamie Henderson

Sure. question. Good for morning Rick. your Thanks

life we so-called charge we the over I what many amortization upfront an in exit experience we loan do third higher aren't of will of we amortize than cases These itself. did call repayment fees. some fee quarter, think have fee, in So accelerated that also normal, When fees. and originate generally the contractual I and an would we loans, the

repayment unamortized, of we an remaining experience remaining then we portion the what is ACRE, accelerate fees. course early has the of will those normal business been So for which

quarter. it And we such to $X.XX so, had on normal we some the the for quarter had some had for of example fourth higher. you for say to quarter sorry the XXXX I quarter it’s quarters would a $X.X million third zero, I I’m which quarter approximately quarters fourth believe equates approximately for in of – fees about, like was if talk we’ve where want where the

see plus most quarters, average sort of I think $X.XX per quarter. on I minus you and think

would And I what little average fees. need our than experience accelerated would higher so we be say

Richard Shane

around Ares that well. that opportunity Great. move a facility quarter in helpful. The envisioning loans I that series little I'm -- very the to Is on would the basically to way sheet to regular to this are is The and stores context to correct? your ACRE these you balance delve them that the there's bank sources more facilities. decide an like as And bit normal is until

Jamie Henderson

That is larger correct, Rick.

capital. little difficult uncertainty can invested the remain that versus when takes of occur repayments goal you terms you of timing bit a very of a to when invested as XX% our even reinvest in XXX% fully capital finite delay remain as So fully the timing possible, to challenge have as we and imagine to because and full a is it's

than of here capital reinvesting having XX, this down drag draw when those sponsor that wells. So into we that some we of loans terms can vehicle, ACRE rather can to immediately is so in that put replenishing the that goal have we XX-day have or Ares’ in repayments

pull the own So or equity that from its can that just in fund this we time less loans to capital, Warehouse Lines and Lines use more loan. bonds ACRE Warehouse Ares then new it’s and its

Richard Shane

who risk balance balance on ACRE’s that it’s Does owns or on And sheet sheet? transferred? that the until Ares is

Jamie Henderson

Ares. On

Richard Shane

and And warranties associated with are that? what the reps

Tae-Sik Yoon

that. to more we with of Yes. of have it as refer certainly all the going this all have of this do issues I’m all mechanism we once about can think out. of close there’s sure and explanation. term. understand provide details has sure details I been pricing, not that. of But if back a the that reps the And questions handful closing out I of a and you the be more come fulsome once through fully we timing, and through we’ll we not And the mechanism warranties, mechanism worked anticipate to and exactly in I'm near are we’ll think we other XXX% We the details worked thinking to and

Jamie Henderson

the is nice little just these elaborate the have a first short the for them intention Rick, warehouse And of amount very time. of bit, floating to to about loans, rate in

type six to a consequence mark-to-market not say tremendous is So There loans. three with months. of this

I is mark-to-market by market But of the virtue as will Tae-Sik So this that a would is for Ares extent a an – the warehouse transactions. we’re there Ares. hopeful that borne mentioned by be consequence be that these fact think to

Richard Shane

it. Got

fees ask origination question transfer. the and XX will will the of and the of Ares to and the there, follow-up fees of there of -- on example, fee, loans months How to to that And else ACRE will so get economics six the about I’d this if origination you that? that accretion obviously Okay. does get be intrigued it loan, basis beginning like I'm is transfer shared put origination like facility, be these during very this. originate life by for it how does time in take or everybody points

Jamie Henderson

and of the I Rick, work. fulsome back the are point mechanics think with ACRE sides. at arms-length obvious make this that we going both reasonable how So, again its mutually exactly if it’s both best approach make to explanation a a it’s we that and to it mean, to great question sides, and be to will between it's to probably fair and reasonable sure Ares and I all come beneficial sure fair

you’re good questions asking very questions. the very all think I are

all We’re think all you it of fulsome the details. best to if will working But through those a we details. I with back more explanation came

Richard Shane

take Ares could if I that going there up case moment appropriate. to able time facility realized as Got answer there where was you're loans? I’ll substantial in that loans, mind it actually example going in is time was again take challenge extreme capacity it that happen ask to know now, but an love really I If well? it the for this no we we XXXX but fees be ACRE extension it. to where related we queue additional this this And would question, not so And when to this freed you’re answer is were an the hear extreme to XXXX, those appropriate ACRE when in on it the get force of what saw with and that where the for of balance we would a to what not take to can sheet, to

Jamie Henderson

question Sure. And that’s we��ll we a very and make valid sure address that that.

Richard Shane

Got work can questions Thank we and in to realized them about there you, road. the just the so down And out again, guys. talk progress it’s get want it. a appropriately

Jamie Henderson

you, Thank Rick.

Operator

next And ahead. Suisse. of be Harter go Please will from the Credit Doug question

Doug Harter

Thanks.

changes other maturity or can extended, extra you fees there were in you any date? talk loans terms the the than the On any

Tae-Sik Yoon

Sure. Thanks Doug, is Tae-Sik. for this your question.

exactly we So, probably be about don't again, talk because such the these are economics loans in best extensions. process of still

we about the can pays best provide and open extensions. and retrospect the get to since loans too I into think we these maybe probably don't are off I details more loans details, think in once still outstanding little be but many those if bit

now required. right is are current, can As accommodate possibly self-storage too we other the selling our of assets to the what we a done all us But original current. time. loan. of loans in including example mentioned we the built into was extensions of Again borrowers very again will the And I interest a conditions regular and that properties in detail then modification extensions stable and/or refinancing portion is we terms unsuccessful terms the assets. are tell we not personal get more if to of much basis, get for interest probably performing these additional reevaluate the at the for example protections either for about some recourse options were that all request time when in you

there the is a smaller that to portion portfolio recourse remain for loan, So, place. example of in continue

up can you I we way we modify other rights did of us changes that not than economics with in probably give discussed and that share if the in against period. retrospect. not best of any did be But more in we certainly time any extending course certainly that terms in So other

Doug Harter

the And -- one were of be then around of it. kind kind just it this kind kind borrower and more grant kind initial of maturity extensions timing? optics of can you these done a just of make along how and philosophical, after defaults appropriate line, of Got of thoughts of kind that extensions but to the an the kind extension is when an of and about to the or think time timing

Jamie Henderson

these guess on extension. and an I no Hey, answer if is, we thumb Henderson. There’s how Jamie Doug, you of rule all really when of per that se one-offs. it’s grant had is are

plan, at repaid very sometimes part extension the take remedies, the us of we later the interest paid, on carefully Occasionally longer, feel early. we borrowers via well both that a is ACRE. of every in take outcome repaid To needed X to get oftentimes they of if of we business this optimal look in facilitate bit a and business of short-term get thought It’s we best we shorter, or sometimes we cases would. well than the extensions in point decided some I how business effectuation the to think these we Tae-Sik’s cases of and secured little somewhat nature business. I we mean single those plans deal, are achieving this order size secured we come odds were

Doug Harter

Jimmie. you, Thank

Jamie Henderson

welcome. You’re

Operator

And from Bruce question be Lynch. the America will go Bank of Ken Please Merrill ahead. next of

Ken Bruce

facility you ROE lift My course. that hoping morning. from think you to some Ares, of would question a get first kind vehicle? essentially making able Good that will the exciting at what very take stab together be more with providing maybe relates of you. sense a sheet development putting its you to this through you’re the to Thank I'm efficient balance

Tae-Sik Yoon

Ken. Sure

that That the is we it in such behind ROE earn for for ROE successful you have the in trying of we And dollar we’re being you net unvested of think the I we've that I equity. is all. set serving equity, each have average each X% to think ourselves this X% on with on as math at look call I at first mentioned and shared that, when target dollar been quarters three year zone. think

our of earnings. in So equity that’s having if capital uninvested, imagine XX% we drag of can of or a X% terms big our capital equity our obviously pretty

do the of we think all can kind math I there. So

more invested we’re XXX% is much invested So I fully think us remain to all it are I that so we and that we be this but at of because don’t can times. think more goal this we’re to today. promising the be than warehouse facility, of where I don't allows at certainly fully

that has XX drag it. loans have of XX million and with when loan from off XX So equity associated to for drag to to $XX this trying gets gives facility as that really warehouse reinvestment kind by of imagine, to a delusion that having of you when minimize we’re can that It's of XX coming some but you million XX trying you idea assumptions during us. available that think paid to to type XX the days, we due the that eliminate day driven have period. $XX anywhere I average million that’s we’re XX to

in about that facility Just -- that do mention warehouse to is one capacity we to warehouse that about loans thing of bonds facility, will mentioned, there’s over think quickly. turn warehouse going Ares be Jamie million again the pretty XXX other facility the as

vehicle of new I it be do sponsor helpful again and think that manage we will us and facility to investment [Ares entities, also but timing activities. think matching repayments that for of be warehouse debt] other will for used very

Ken Bruce

value, external to book with. of What dealt capital kind for necessary synthetic need those at discounts that of before contracts we of lot them raise? Jade’s of of regarding you then Great. for different on an lot the below of are are Thank a you. interesting trading rates kind look have but interesting mortgage some kind of question be topic some I look you think into M&A, gets that And reasons, do guess, target some purposes if would

Jamie Henderson

have or Again, very an themselves. but a things are of the impediments poses at. trading number with level here, at company I’ll company of issue of because illiquidity assets the the there One is just Sure. there of to because assets, look you is discount of structural the high

So frictional that cases to in mention the ask capital? foremost to first external be have cost we question question actually the that So second getting is are as the ourselves. And need the that's then you you some management and contracts what terminated.

of that then the Sometimes And including just sort legal, associate care always solicitation any generally expensive are costs the shareholder there to taken including deals pretty you public be votes. with is of in have frictional to including of expenses cost compensation arrangements banking, public execution need transaction of. all it, terms of

Ares Ares So inexpensive experience have at of those not M&A fully both of actually these team tremendous to processes a of types we dedicated real that at We have themselves, of effort. doing at estate. real I in but outside and are looking amount estate think

that that costs just opportunities sure with estate expertise, capital transactional at that. very Jamie can Ares team here that has very that associated the we’re we so of So that and extremely raise, look in-house in-house like capability, to but closely not helpful real with dedicated the worked underwriting also been but the all have synthetic make I at are

can payments well, and agreements, So to so they number quite payments terms agreements, very of substantial employment to sometimes you Transaction all and giving the are carefully. sometimes the mentioned. those without in interviewed costs tell that management atomic payments you expenses, of as all a I I credit relationship

Ken Bruce

Thank possibly. guess Right. that And I that detail. I that everything covers actually think -- you for could

that to again. thank So and Thanks. increase nice see dividend Good you. quarter

Jamie Henderson

Ken. you, Thank Perfect.

Operator

KBW. next ahead. Rahmani [Operator Instructions] of question Please will go from Jade follow-up The be

Jade Rahmani

on very all much. spread What on Thanks blended, think assumption you the first reasonable loan originations new mortgage the side? in

Jamie Henderson

It it’s wanders Jamie I target round in Jade, our Henderson. is a but high Hey Xs. think bit, the mid to

Jade Rahmani

Okay. pressures any Are compression, competitive on fees? seeing origination you

Jamie Henderson

De pretty minimis, held nicely. up those have

Jade Rahmani

getting Do and repayment you the on would sequential anticipate of XXX expect based timing you mentioned commitment million you quarter earnings dip? books earnings when fourth XQ the dip on a of these in

Tae-Sik Yoon

Yes.

further saying certainly the So I think the of of we not into originations just timing impact an both even originations the a is of timing being one of amount having activity, repayment there a activity repayment and the month activities you again significant fourth will quarter caveat have quarter. by and on pretty sense volume and and and will

at give the too business one give ROE to quarter So than trying basis maybe we quarter to read XXXX what clearly that the tell. our want for as quarter We’ll say, quarters want again sponsored numbers, a first we’re call lower little view this through for temporary into out months certainly next color. quarter goal an be ending, to if we really what will little an to hit little to for even call. that are months it's fourth I think But on three and just we results. I out I early annual some XXXX. really our to experienced volatility early execution and you would X% color too get is and example to but we've starting on quarter first vehicle smooth is Ares between give of would it’s from more to a we net differences again want the on to really an from And there much a when plan, two out that premature target solve way we our that considering five quarter way to is emphasize we annual mentioned some looking that basis view our is

from XXXX speaking increased than our dividend $X.XX I $X.XX, that’s for quarter of the very the any is rather XXXX. think far specifically for about talk little outlook too have we positive, that first again think us but that a particular to So it's reasons to quarter I about mentioned we Jamie one

Jade Rahmani

in think comment duration of you XXXX suggest which just make? excess side you if what reasonable curious the about XXXX something repayment a I well would maturities, And of scheduled average that? think assuming is for like assumption on can XXX to a do so million repayment three-year on is just

Jamie Henderson

Sure.

So, think a you it. of sense I have good

lower repayments we've X, portfolio Again last you as XXX self-storage more higher bit to than it something contractual little will experienced larger maturity. the these what some and little seven have say loans stated actually their mentioned have year. maturities, off. I With under of X, much paying than to experienced year I – a but billion typical per little do would forecast these there prepay be that loans is of is expect in be as call the years. majority We million a some that including that excess XXX, of loans than that. XXX bit some don’t the to to of several early would lumpiness the sort range the is we XXXX of earlier expect due that we just XXXX, the so something normally our of

Jade Rahmani

the Okay. comments. it. Thanks for Appreciate

Jamie Henderson

Jade. Thanks

Operator

ladies back gentlemen, the that And closing our and answer would will like Jamie I hand question and conclude remarks. his to session. Henderson to for over conference

Jamie Henderson

Thank want for our few And a to I everyone on to months look with earnings call. speaking next their in you. thank we again today. time forward you

Operator

this today. gentlemen, and Ladies you. our concludes conference Thank for

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