Ares Commercial Real Estate Corp (ACRE) 2023 Q3 法說會逐字稿

Good morning. Welcome to Ares Commercial Real Estate Corporation's Third Quarter September 30, 2023 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded on Friday, November 3, 2023.

早安.歡迎參加 Ares Commercial Real Estate Corporation 於 2023 年 9 月 30 日舉行的第三季財報電話會議。 （操作員說明）謹此提醒，本次會議將於 2023 年 11 月 3 日星期五錄製。

I will now turn the call over to your host, Mr. John Stilmar, Managing Director of Investor Relations. Thank you. You may begin.

現在我將把電話轉給東道主投資者關係董事總經理約翰‧史蒂爾馬先生。謝謝。你可以開始了。

Good morning, everyone, and thank you for joining us on today's conference call. I'm joined today by our CEO, Bryan Donohoe; our CFO, Tae-Sik Yoon and other members of the management team. In addition to our press release and the 10-Q that we filed with the SEC, we've posted an earnings presentation under the Investor Resources section of our website at www.arescre.com.

大家早安，感謝您參加今天的電話會議。今天我們的執行長布萊恩多諾霍 (Bryan Donohoe) 也加入了我的行列。我們的財務長 Tae-Sik Yoon 和管理團隊的其他成員。除了我們向 SEC 提交的新聞稿和 10-Q 報告之外，我們還在我們網站 www.arescre.com 的投資者資源部分發布了收益報告。

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

在開始之前，我想提醒大家，在本次電話會議和網路直播過程中發表的評論以及隨附文件包含前瞻性陳述，並存在風險和不確定性。許多前瞻性陳述可以透過使用「預期」、「相信」、「期望」、「打算」、「將」、「應該」和類似表達等字眼來識別。這些前瞻性陳述是基於管理階層目前對市場狀況的預期和管理階層的判斷。這些陳述不是對未來績效、狀況或結果的保證，並且涉及許多風險和不確定性。由於多種因素（包括其向美國證券交易委員會提交的文件中列出的因素），該公司的實際結果可能與前瞻性陳述中表達的結果有重大差異。 Ares Commercial Real Estate 不承擔更新任何此類前瞻性聲明的義務。

During this conference call, we will refer to certain non-GAAP financial measures. We use these measures of operating performance, and these measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like title measures by other companies.

在本次電話會議中，我們將提及某些非公認會計準則財務指標。我們使用這些經營績效衡量標準，而這些衡量標準不應孤立地考慮或取代根據公認會計原則制定的衡量標準。這些措施可能無法與其他公司的類似產權措施進行比較。

Now I'd like to turn the call over to our CEO, Bryan Donohoe.

現在我想將電話轉給我們的執行長布萊恩·多諾霍 (Bryan Donohoe)。

Thanks, and good morning, everyone. During the third quarter, we continued to execute on 3 primary goals we have discussed previously. First, we intended to maintain strong levels of liquidity and moderate leverage. Secondly, we wanted to take advantage of the lending market and our liability structure to selectively originate new loans that would be accretive to our earnings. And finally, we wanted to continue to maximize the value of our underperforming assets.

謝謝，大家早安。在第三季度，我們繼續執行之前討論過的 3 個主要目標。首先，我們打算保持強勁的流動性和適度的槓桿水平。其次，我們希望利用貸款市場和我們的負債結構，選擇性地發放新貸款，以增加我們的收入。最後，我們希望繼續最大化表現不佳的資產的價值。

In general, we are pleased with the progress we have made executing against these goals. With respect to the portfolio, we experienced general stability in credit performance as our level of defaults and the universe of risk rated 4 and 5 loans modestly declined quarter-over-quarter. While the benefit of today's rate environment has served to enhance our net interest income, the impact of the higher for longer interest rate environment has resulted in greater economic uncertainty and further headwinds to commercial real estate values. This higher cost of capital is also leading to dramatic reductions in new construction, which we ultimately believe will result in favorable supply dynamics and drive support for commercial real estate fundamentals and values in the future.

總的來說，我們對實現這些目標所取得的進展感到滿意。就投資組合而言，我們的信貸表現總體穩定，因為我們的違約水平以及風險評級為 4 級和 5 級的貸款總體環比略有下降。雖然當今利率環境的好處有助於提高我們的淨利息收入，但長期較高的利率環境的影響導致了更大的經濟不確定性，並對商業房地產價值造成了進一步的阻力。資本成本的上升也導致新建築的大幅減少，我們最終相信這將帶來有利的供應動態，並推動對未來商業房地產基本面和價值的支持。

Specific to ACRE, we believe our deliberate approach of operating with moderate leverage while still generating attractive earnings is the best strategy for navigating today's market. We believe the strength of our balance sheet and capabilities of the broader Ares platform gives us a distinct advantage in addressing our underperforming investments as well as selectively investing in today's attractive lending market.

具體到 ACRE，我們相信，我們審慎地以適度槓桿進行經營，同時仍能產生有吸引力的收益，這是駕馭當今市場的最佳策略。我們相信，我們的資產負債表實力和更廣泛的 Ares 平台的能力使我們在解決表現不佳的投資以及選擇性投資當今有吸引力的貸款市場方面具有明顯的優勢。

Now let me spend some time discussing some of the actions we took this quarter and our approach in maximizing value of our underperforming loans. This quarter, we foreclosed on the $83 million loan collateralized by a mixed-use facility located in Florida. This loan is now held as REO on our balance sheet.

現在讓我花一些時間討論我們本季採取的一些行動以及我們最大化不良貸款價值的方法。本季度，我們取消了由佛羅裡達州一家混合用途設施抵押的 8,300 萬美元貸款的贖回權。這筆貸款現在在我們的資產負債表上作為 REO 持有。

As a reminder, this is an office and retail mixed-use property in Tallahassee that is over 90% leased and continues to generate cash flow that is roughly equivalent to the interest income we earned as a loan. 100% of the office space is leased to a AAA-rated tenant that has approximately a 9-year weighted average lease term remaining. The retail space is also well leased with approximately 85% occupancy and a weighted average term of about 7 years. This is where we, at Ares, will continue to actively manage the property with the aim of pushing retail occupancy even higher.

提醒一下，這是塔拉哈西的一處辦公和零售混合用途物業，90% 以上已出租，並持續產生現金流，大致相當於我們透過貸款賺取的利息收入。 100%的辦公空間出租給AAA級租戶，加權平均剩餘租賃期約為9年。零售空間的租賃情​​況也良好，入住率約 85%，加權平均租約約 7 年。 Ares 將繼續積極管理該物業，旨在進一步提高零售入住率。

It's important to point out that we did not recognize an impairment when foreclosing on the property and currently hold the property unlevered. As one of the leading value add and opportunistic real estate managers, the capabilities at Ares support our ability to own and execute this business plan. Given our balance sheet position, strong operational capabilities and the cash flow profile of the property, we are optimistic about the long-term value of this asset.

需要指出的是，我們在取消該房產的贖回權時並沒有確認減值，並且目前該房產處於無槓桿狀態。作為領先的增值和機會主義房地產管理公司之一，Ares 的能力支持我們擁有和執行此業務計劃的能力。鑑於我們的資產負債表狀況、強大的營運能力以及該物業的現金流量狀況，我們對該資產的長期價值感到樂觀。

We also exited a $35 million hospitality loan through a discounted loan payoff this quarter. Given the volatile cash flow profile of this property, the capital required to complete the business plan as well as our view of the future value, we believe it was in ACRE's best interest to exit the loan and redeploy this capital into higher-earning investments. As both of these loans illustrate, our platform capabilities and balance sheet position allow us to take unique strategies to each asset with the goal of maximizing value.

本季我們也透過貼現貸款還款退出了 3,500 萬美元的飯店貸款。考慮到該物業不穩定的現金流狀況、完成業務計劃所需的資本以及我們對未來價值的看法，我們認為退出貸款並將這些資本重新部署到收益更高的投資中符合 ACRE 的最佳利益。正如這兩筆貸款所表明的那樣，我們的平台能力和資產負債表狀況使我們能夠對每項資產採取獨特的策略，以實現價值最大化。

Our balance sheet position also allows us to opportunistically invest in today's market. We remain focused on financing strong performing property classes with secular demand drivers, such as industrial, multifamily and self-storage. For example, this past quarter, we originated a $58 million senior loan backed by a newly built Class A multifamily property located in Cincinnati, Ohio that is 95% leased. This property is well located in an affluent part of the city with compelling local supply and demand dynamics. We financed this property at historically lower levels of loan-to-value, modestly wider spreads and reset property valuations.

我們的資產負債表狀況也使我們能夠在當今市場上進行機會主義投資。我們仍專注於為具有長期需求驅動力、表現強勁的房地產類別提供融資，例如工業、多戶住宅和自助倉儲。例如，上個季度，我們發放了一筆 5,800 萬美元的高級貸款，由位於俄亥俄州辛辛那提的新建 A 級多戶住宅提供支持，該房產 95% 已出租。該物業地理位置優越，位於城市的富裕地區，具有引人注目的當地供需動態。我們以歷史上較低的貸款價值比、適度擴大的利差和重置房產估值為該房產提供融資。

Looking forward into the fourth quarter and year-end, we expect to make further progress on reducing our exposure to office loans. Through a combination of principal paydowns and exits, we are targeting more than $70 million in outstanding principal balance of office loans to be cleared out in the fourth quarter, but that may well extend into the first quarter of next year.

展望第四季和年底，我們預計在減少辦公室貸款方面將取得進一步進展。透過本金償還和退出的結合，我們的目標是在第四季度清算超過 7000 萬美元的辦公貸款未償本金餘額，但這很可能會延續到明年第一季。

With that, Tae-Sik, let's walk through some of our financial highlights and further details on our portfolio and capital position.

接下來，Tae-Sik，讓我們來看看我們的一些財務亮點以及有關我們的投資組合和資本狀況的更多詳細資訊。

Thank you, Bryan, and good morning, everyone. For the third quarter of 2023, we reported GAAP net income of $9.2 million or $0.17 per common share. Our GAAP net income was impacted by a $3.2 million net increase in our CECL provision or about $0.06 per common share. Distributable earnings for the third quarter of 2023 was $13.5 million or $0.25 per common share, which was impacted by the $4.9 million or $0.09 per common share realized loss on the defaulted hospitality loan that was resolved in the third quarter.

謝謝布萊恩，大家早安。 2023 年第三季度，我們公佈的 GAAP 淨利潤為 920 萬美元，即每股普通股 0.17 美元。我們的 GAAP 淨利潤受到 CECL 撥備淨增加 320 萬美元或每股普通股約 0.06 美元的影響。 2023 年第三季的可分配收益為 1,350 萬美元，即每股普通股 0.25 美元，受到第三季解決的拖欠飯店貸款實現損失 490 萬美元，即每股普通股 0.09 美元的影響。

Turning to our portfolio. We ended the quarter with a diversified portfolio of 49 loans held for investment with an outstanding principal balance of $2.2 billion, 98% of which were senior loans. During the third quarter, we received $48 million of total loan repayments, including $25 million of proceeds from the hospitality loan as well as loans backed by self-storage and industrial properties that were repaid at par.

轉向我們的投資組合。本季末，我們擁有由 49 筆投資貸款組成的多元化投資組合，未償本金餘額為 22 億美元，其中 98% 為優先貸款。第三季度，我們收到了 4800 萬美元的貸款償還總額，其中包括 2500 萬美元的酒店貸款收益以及按面值償還的自倉儲和工業地產支持的貸款。

In terms of credit quality metrics, 78% of our loan portfolio had a risk rating of 3 or better, which improved from 74% in the second quarter. The improvement was driven by the reduction of our risk rated 4 and 5 rated loans as 2 such loans were either resolved or converted to REO.

就信貸品質指標而言，我們的貸款組合中有 78% 的風險評級為 3 或更高，較第二季的 74% 有所改善。這項改善是由於我們的風險評級為 4 和 5 的貸款減少所致，其中 2 筆此類貸款已解決或轉換為 REO。

During the third quarter, no new loans originated from a risk rating 3 to a risk rating of 4 or 5 in the quarter. We did downgrade 1 office loan from a 4 to a 5 risk rating with a total unpaid principal balance of $33 million and established a specific reserve of $14.4 million. Inclusive of this specific reserve, we increased our overall CECL reserve by net $3.2 million in the third quarter of 2023. Our total CECL reserve now stands at $116 million or about 5.25% of our outstanding principal balance.

第三季度，本季沒有新增風險評等為3級至4級或5級的貸款。我們將 1 筆辦公貸款的風險評級從 4 級下調至 5 級，未付本金餘額總額為 3,300 萬美元，並設立了 1,440 萬美元的專案準備金。包括該特定準備金在內，我們在 2023 年第三季將 CECL 準備金總額淨增加了 320 萬美元。我們的 CECL 準備金總額目前為 1.16 億美元，約佔未償本金餘額的 5.25%。

Let me provide some further details around the components of our $116 million CECL reserve, which equates to $2.14 per common share total reserve and impacted our book value per common share of $12.62 as of September 30, 2023. As previously mentioned, we have specific reserves of $55 million, representing 61% of the $90 million in outstanding principal balance on the 2 risk rated 5 loans. Of the remaining $61 million of reserves, $46 million is accrued against $388 million in outstanding principal balance of risk rated 4 loans, which equates to approximately 12% of the total risk rated 4 loan balance and compares to 10% in the quarter prior.

讓我提供有關我們1.16 億美元CECL 儲備金組成部分的更多詳細信息，該儲備金相當於每股普通股總儲備金2.14 美元，影響截至2023 年9 月30 日我們每股普通股賬面價值12.62美元。如前所述，我們有特定儲備金5500 萬美元，佔 2 項風險評級為 5 的貸款未償還本金餘額 9000 萬美元的 61%。在剩餘的6,100 萬美元準備金中，4,600 萬美元是針對風險評級4 級貸款的未償本金餘額3.88 億美元計提的，相當於風險評級4 級貸款餘額總額的約12%，而上一季度為10%。

The final [$15 million] of our total reserve is held against the $1.7 billion of loans rated 3 or better for an average reserve ratio of about 86 basis points of loans held for investment with a risk rating of 3 or better. While the market remains challenged, we believe that our CECL reserve level appropriately takes into account current market conditions and the macroeconomic outlook for our loans held for investment as of September 30, 2023.

我們總準備金的最終[1500萬美元]是針對風險評級為3或更高的17億美元貸款而持有的，風險評級為3或更高的投資貸款的平均準備金率約為86個基點。儘管市場仍然面臨挑戰，但我們認為，我們的 CECL 準備金水準適當考慮了當前市場狀況以及截至 2023 年 9 月 30 日我們持有的投資貸款的宏觀經濟前景。

With respect to the $57 million office loan that is risk rated 5, we continue to be on target to resolve this property, which will result in approximately a $41 million realized loss in the fourth quarter of 2023 or possibly first quarter of 2024.

對於風險評級為 5 的 5,700 萬美元辦公室貸款，我們繼續致力於解決該問題，這將導致 2023 年第四季度或可能在 2024 年第一季實現約 4,100 萬美元的損失。

As Bryan referenced earlier, we maintained significant liquidity and moderate net debt-to-equity ratio of 2.0 at quarter end. At quarter end, we had over $130 million in cash and amounts available for us to draw under our working capital facility. In addition, we are holding our REO unlevered, which we believe can be financed to further increase our liquidity. Finally, we declared our fourth quarter dividend of $0.33 per share.

正如 Bryan 之前提到的，我們在季度末保持了充足的流動性和 2.0 的適度淨負債股本比。截至季末，我們有超過 1.3 億美元的現金和可供我們根據營運資金安排提取的金額。此外，我們持有無槓桿 REO，我們相信可以為其融資以進一步增加我們的流動性。最後，我們宣布第四季股息為每股 0.33 美元。

So with that, let me turn the call back over to Bryan for some closing remarks.

因此，讓我將電話轉回給布萊恩做一些結束語。

Thank you, Tae-Sik. While a higher for longer rate environment will extend this cycle and will likely present unforeseen challenges, we believe it will also present some highly attractive investment opportunities. Our moderate leverage and healthy level of liquidity positions us well to navigate these dynamics and ultimately deliver attractive shareholder returns.

謝謝你，泰植。雖然長期利率較高的環境將延長這個週期，並可能帶來不可預見的挑戰，但我們相信這也將帶來一些極具吸引力的投資機會。我們適度的槓桿率和健康的流動性水平使我們能夠很好地駕馭這些動態，並最終為股東帶來有吸引力的回報。

As always, we appreciate you joining our call today, and we'd be happy to open the line for questions. Operator, could you please open up the line?

一如既往，我們感謝您今天加入我們的電話會議，我們很樂意開通提問熱線。接線員，您能開通線路嗎？

(Operator Instructions)

（操作員說明）

Our first question comes from Sarah Barcomb with BTIG.

我們的第一個問題來自 BTIG 的 Sarah Barcomb。

So you mentioned in the prepared remarks that you're targeting about $70 million of office principal to be cleared out between Q4 and Q1. And it sounds like that includes the 5 rated Chicago office loan. Does the balance of that include a potential resolution on the California office loan? Or is that mostly in the 1 to 3 rated book? And will those result from more asset sales or refinancings? Or how should we think about that?

因此，您在準備好的發言中提到，您的目標是在第四季度和第一季之間清算約 7000 萬美元的辦公室本金。聽起來這包括 5 級芝加哥辦公室貸款。剩下的部分是否包括加州辦公室貸款的潛在解決方案？還是這主要是在 1 到 3 級的書中？這些是更多資產出售或再融資的結果嗎？或者說我們該如何思考這個問題？

Yes. Thank you very much for your question. Yes, the $70 million does include the Chicago office loan that we mentioned we are targeting for resolution in the fourth quarter. Again, that may slip into the first quarter. But right now, we believe it is on target for fourth quarter. And then the other amount is made up of an office loan in California, as you said.

是的。非常感謝您的提問。是的，這 7000 萬美元確實包括我們提到的我們計劃在第四季度解決的芝加哥辦公室貸款。同樣，這可能會滑到第一季。但目前，我們相信第四季已達到目標。正如你所說，另一筆金額由加州的辦公室貸款組成。

Okay. Great. And then I was hoping you could talk about your outlook for net portfolio growth over the next few quarters. We saw the portfolio contract a bit due to the foreclosure in the loan sales, but new fundings actually, it looks like outpaced regular way repayments. So I'm just curious for any thoughts on your outlook for continuing to make new investments and how we should think about that net growth.

好的。偉大的。然後我希望您能談談您對未來幾季投資組合淨成長的展望。由於貸款銷售取消抵押品贖回權，我們看到投資組合略有收縮，但實際上，新資金看起來超過了常規還款速度。因此，我很好奇您對繼續進行新投資的前景有何想法，以及我們應該如何看待淨成長。

Yes. It's a good question, Sarah. I think tough to determine exactly what the cadence will be. As we said in the prepared remarks, we do see, and I think you're seeing us across the industry a good set of opportunities. But it's a little less rhythmic given the volatility in rates that we have surrounding us. So we'll continue to be opportunistic. And most specifically, we will continue to use the legacy liability structures that we have on the balance sheet to enhance the yields associated with those investments we do make. Tough to determine at this point whether that leads quarter-to-quarter to portfolio growth, but I think we'll still -- we'll continue to be opportunistic when situations arise.

是的。這是個好問題，莎拉。我認為很難確定確切的節奏。正如我們在準備好的演講中所說，我們確實看到了，而且我認為您在整個行業中看到了一系列很好的機會。但考慮到我們周圍利率的波動性，它的節奏有點不那麼規律。因此，我們將繼續機會主義。最具體地說，我們將繼續使用資產負債表上的遺留負債結構來提高與我們所做投資相關的收益率。目前很難確定這是否會導致投資組合逐季度成長，但我認為我們仍然會在出現情況時繼續保持機會主義。

Our next question is from Steve Delaney with JMP Securities.

我們的下一個問題來自 JMP 證券的 Steve Delaney。

Good to see you finding opportunities to deploy capital. I'm curious if you look at the terms of your new loans that you're setting, how would you compare the levered returns that you're able to obtain today versus sort of an average of if we were back in a 2021 first half 2022 type of environment, which I guess I'll call a more normal environment.

很高興看到您找到部署資本的機會。我很好奇，如果您查看您正在設定的新貸款條款，您會如何比較您今天能夠獲得的槓桿回報與 2021 年上半年的平均回報2022年類型的環境，我想我會稱之為更正常的環境。

It's a good question. I'd say that clearly, the bar is higher for new investments today. So you can expect to see those levered yields in excess of where they were at that point in time. One of the interesting factors right now is across the board, we're seeing more and more appetite for warehouse lending from some of our counterparts on the banking side and starting to see that net interest margin or the gap between the whole loan pricing and repo get back to more normalized levels, which I think is a tailwind to new investments. So there's some subtlety beyond that, though, as you'd expect, given the scarcity of capital in the space, those with capital can dictate terms to a better degree than maybe historically.

這是一個好問題。我想說的是，現在新投資的門檻更高了。因此，您可以預期看到這些槓桿收益率將超過當時的水平。目前有趣的因素之一是全面的，我們看到銀行方面的一些同行對倉庫貸款的興趣越來越大，並開始看到淨息差或整個貸款定價與回購之間的差距回到更加正常化的水平，我認為這對新投資是有利的。因此，除此之外還有一些微妙之處，正如你所期望的，考慮到該領域資本的稀缺，那些擁有資本的人可以比歷史上更好的程度來決定條款。

So that starts to impact covenants, leverage and certainly, as we said in the prepared remarks, Steve, the reset valuation just makes it a more attractive basis. So certainly an attractive time to invest in those circumstances that allow for it.

因此，這開始影響契約、槓桿，當然，正如我們在準備好的演講中所說，史蒂夫，重置估值只會使其成為更具吸引力的基礎。因此，在條件允許的情況下，這無疑是一個有吸引力的投資時機。

Interesting that those conditions with the lenders would evolve right ahead of the opportunity we may be seeing for an improved interest rate outlook over the next year or 2 as well. So it sounds like you're in a pretty good strategic position. One final one, and it's just I don't need a long answer at all, but there's a lot of distress out there. I mean you just had to take back a property, I think, was Chicago that you were talking about in your remarks. Some deals find a workout or -- and some end up going back to the first lender and the former area.

有趣的是，貸款人的這些條件將在我們可能看到未來一兩年利率前景改善的機會之前發生變化。所以聽起來你處於一個非常好的戰略地位。最後一個，只是我根本不需要長答案，但外面有很多痛苦。我的意思是，你只需要收回一處財產，我想，就是你在演講中談論的芝加哥。有些交易找到了解決辦法，有些交易最終回到了第一家貸款人和以前的地區。

I'm curious if you guys are seeing what I would call any rescue capital opportunities, higher yield opportunities where you may even you like the property, the loan is out of balance, et cetera, et cetera. You could come in with a mezz and I don't think you would do a mezz like that unless you could also get a nice slice of equity out of the deal. Is that to more merchant banking like as you see it for a senior bridge lender? Or is these unique times, would that encourage you to open your playbook up a little bit for that type of thing given the market?

我很好奇你們是否看到了我所說的任何救援資本機會、更高收益的機會，你甚至可能喜歡該房產、貸款失衡等等。你可以加入一個夾層，我認為你不會做這樣的夾層，除非你也能從交易中獲得很大一部分股權。這對於更多的商業銀行業務來說是不是就像您所看到的高級過橋貸款人一樣？或者說，在這些獨特的時期，這會鼓勵您在考慮到市場的情況下，針對此類事情稍微開放一下您的策略嗎？

Yes. It's a great point. And certainly, the uncertainty the opaque nature of the market keeps us really focused on the flexibility we outlined on the call. And that uncertainty, I think you've heard pretty widely throughout the industry. I'd say that for the most part, thus far, those -- that gap financing or mezzanine or pref type structures, we haven't seen it in any volume yet. So it's been idiosyncratic. I do think that in times like this, the playbook will open up although the charter that we consistently talk about is we want to remain a lender to the space and a high degree of conviction around being a first mortgage lender rather than focused on the mezzanine. But across the broader Ares platform, we'll continue to see and seek out opportunities for that GAAP financing for those best-in-class pieces of real estate throughout our core markets.

是的。這是一個很好的觀點。當然，市場的不透明性質的不確定性使我們真正關注我們在電話會議中概述的靈活性。我想您在整個行業中已經廣泛聽到了這種不確定性。我想說的是，到目前為止，在大多數情況下，那些缺口融資或夾層或優先類型的結構，我們還沒有看到任何數量。所以這很奇怪。我確實認為，在這樣的時期，劇本將會開放，儘管我們一直在談論的章程是我們希望繼續成為該領域的貸款人，並且對成為第一抵押貸款人而不是專注於夾層有高度的信念。但在更廣泛的 Ares 平台上，我們將繼續尋找並尋找針對我們核心市場中一流房地產的 GAAP 融資機會。

Our next question comes from Don Fandetti with Wells Fargo.

我們的下一個問題來自富國銀行的 Don Fandetti。

When you do go to sell alone, how is the bid? And what's the profile of the buyer? Is it offshore-type investors?

當你單獨出售時，出價如何？買家的個人資料如何？是離岸型投資者嗎？

Yes. Don, probably not enough of the data set to say that there's a trend one way or the other. Clearly, the investor base that's going to participate in this market is going to have some level of conviction on the sector or that location. So we don't have enough to point to you to say it's coming from one part of the world or another.

是的。唐，可能沒有足夠的數據集來說明存在一種趨勢。顯然，將參與該市場的投資者基礎將對該行業或該地區有一定程度的信念。所以我們沒有足夠的證據來告訴你它來自世界的某個地方或另一個地方。

In general, it's unique parties that are familiar with an asset and see the long-term trends of supply and demand, especially as we touched on with this reduction in supply that we expect to see kind of fast forwarding 12, 18 months. And that buyer is trying to take advantage of a reset basis going into that dynamic. But no consistency in terms of where the capital is coming from as of yet.

一般來說，只有熟悉資產並了解供需長期趨勢的獨特各方，特別是當我們談到供應減少時，我們預計在 12、18 個月內看到供應減少。該買家正試圖利用重置基礎進入這種動態。但到目前為止，資金來源方面還沒有一致的說法。

Got it. And then if the Fed is done and the 10-year yield eases a bit, how do you -- how does that impact your business over the next 6 to 12 months?

知道了。然後，如果聯準會採取行動，10 年期公債殖利率略有下降，這對您未來 6 到 12 個月的業務有何影響？

What I'd say is that I think if we can get that consistency with respect to rates, I think that clearly values are resetting based, at least in part on the impact of rates. If we can get stability, I think that assets become more underwritable across the sector, and I think we'll free up some capital and allow people to move forward. So I think you -- first and foremost, you'd be able to digest rates if they remain kind of range-bound, and I think you'll see transaction volume pick up.

我想說的是，我認為如果我們能夠在利率方面取得一致性，我認為顯然價值正在重置，至少部分是基於利率的影響。如果我們能夠實現穩定，我認為整個行業的資產變得更加可承保，我認為我們將釋放一些資本並允許人們繼續前進。因此，我認為，首先也是最重要的是，如果利率保持在一定範圍內，您將能夠消化利率，並且我認為您會看到交易量回升。

Our next question comes from Jade Rahmani with KBW.

我們的下一個問題來自 KBW 的 Jade Rahmani。

For me, one of the important pieces is cash flow from operations, and it's been running a little bit below the dividend. So what would be your thoughts as to dividend sustainability at this point?

對我來說，重要的部分之一是營運現金流，它的運作略低於股息。那麼此時您對股息可持續性有何看法？

Thank you for the question, Jade. Now that is an extremely important question. And obviously, we are monitoring our actual cash flow from operating activities very carefully. Jade, you probably are referring to our cash flow statement in our financials versus our dividend. Maybe I'll just point out a few things that may help reconcile maybe some of the differences that you're seeing.

謝謝你的提問，傑德。這是一個極為重要的問題。顯然，我們正在非常仔細地監控經營活動的實際現金流。傑德，您可能指的是我們財務中的現金流量表與股利。也許我會指出一些可能有助於協調您所看到的差異的事情。

So if you look at third quarter 2023, for example, I think our net cash provided by operating activities is around $13.5 million. And we think in addition to that $13.5 million, you would add, for example, $1.5 million of fees that we have already received, for example, as origination fees upfront, but we don't amortize it under the cash flow statement, obviously, because it's cash flow. But that is actual cash that we have already received as part of making a loan. And again, that adds about $1.5 million. So you're up to about $15 million from there.

例如，如果你看看 2023 年第三季度，我認為我們經營活動提供的淨現金約為 1350 萬美元。我們認為，除了這 1350 萬美元之外，您還可以添加我們已經收到的 150 萬美元費用，例如，作為預付費用，但顯然我們不會在現金流表下攤銷它，因為它是現金流。但這是我們作為貸款的一部分已經收到的實際現金。這又增加了約 150 萬美元。因此，您最多可獲得約 1500 萬美元。

And then the second thing just to -- again, to point out is if you kind of look at our dividends for the third quarter, I think what you'll see is in cash flow, again, you'll see that dividends paid in the third quarter was really the dividends declared for the second quarter, which included the $0.02 supplemental, which obviously was not declared and payable for the third quarter dividend. So I think the difference that you might be seeing is a little bit smaller than maybe where you started out with.

然後第二件事 - 再次指出，如果你看看我們第三季度的股息，我想你會看到現金流，再次，你會看到支付的股息第三季度實際上是第二季度宣派的股息，其中包括0.02美元的補充，這顯然不是第三季股息宣派和支付的。所以我認為你可能看到的差異比你一開始的差異要小一些。

But we do think that our distributable earnings is a very good measure of our actual cash flow. I think probably the biggest difference you'll see between those 2 measures, again, taking into account some of the timing differences of when you pay payables, receive receivables, there's probably some payment-in-kind loans. We think we have a fairly limited amount of that, but that would probably be the biggest difference between actual operating cash flow versus our distributable earnings.

但我們確實認為我們的可分配收益是衡量我們實際現金流的一個很好的指標。我認為這兩種措施之間可能會發現最大的區別，再次考慮到支付應付帳款、收到應收帳款時的一些時間差異，可能還有一些實物支付貸款。我們認為我們的現金流量相當有限，但這可能是實際營運現金流與可分配收益之間的最大差異。

Okay. That's a great answer. And so when the Board is thinking about the dividend, is it going to be based on the distributable earnings? And do they give any consideration to the cash flow from operations performance? And I do realize the accrual nature of the income statement, which also triggers REIT taxable earnings. So I appreciate your commentary around the origination piece.

好的。這是一個很好的答案。那麼，當董事會考慮股利時，是否會基於可分配收益？是否考慮經營業績所產生的現金流？我確實意識到損益表的應計性質，這也觸發了房地產投資信託基金的應稅收入。所以我很欣賞你對原創作品的評論。

Yes, that's a great question. Again, we present all this information to the Board. We discuss cash flow from operations, we discuss credit, we discuss outlook, we discuss balance sheet, we discuss liquidity. So there are a whole host of factors that are taken into account by the Board in setting and declaring dividend. One thing to just note about our PIK income is that for the quarter, I think it totaled around $2.2 million. And if you compare that against our total interest income for the quarter of around $53 million, it's around 4%. So we do think that is a manageable number. But again, all of those considerations are, we believe, taken into account by the Board in setting the dividend.

是的，這是一個很好的問題。我們再次向董事會提供所有這些資訊。我們討論營運現金流，我們討論信貸，我們討論前景，我們討論資產負債表，我們討論流動性。因此，董事會在設定和宣布股息時會考慮許多因素。關於我們的 PIK 收入，需要注意的一件事是，我認為該季度的總收入約為 220 萬美元。如果將其與本季約 5,300 萬美元的總利息收入進行比較，則約為 4%。所以我們確實認為這是一個可控的數字。但我們相信，董事會在設定股利時考慮了所有這些因素。

Okay. If I could ask another one. It would just be the decision on loan sales at this point, specifically on office, Tae-Sik said something similar. So I'm just wondering if it's related to liability management. Are your repo lenders or the CLO potential buydowns out of -- buyouts out of CLO prompting those decisions? Or is it just your asset management and deciding to be proactive?

好的。如果我可以再問一個。泰植也說了類似的話，目前只是關於貸款銷售的決定，特別是關於辦公室的決定。所以我只是想知道這是否與責任管理有關。你的回購貸款人或 CLO 的潛在買斷是否會促使這些決定？或只是您的資產管理和決定採取主動行動？

I think it starts from a fundamental perspective on kind of future values and certainly kind of out-earning any issues by redeploying that potential cash inbound with new investments going forward. But certainly, there's an overlay of whatever liability structure that asset may have resided in. So Jade, it really comes down to a fundamental view of office valuations or that specific asset valuations alongside the specifics around the liability structure. So it really remains on a case-by-case basis.

我認為它從對未來價值的基本角度出發，並且透過未來的新投資重新部署潛在的現金流入，當然可以超越任何問題。但可以肯定的是，資產可能存在的任何負債結構都有重疊。所以傑德，這實際上歸結為辦公室估值的基本觀點或特定資產估值以及負債結構的具體情況。所以這實際上仍然是根據具體情況而定。

Our next question comes from Stephen Laws with Raymond James.

我們的下一個問題來自史蒂芬·勞斯和雷蒙德·詹姆斯。

I think it was mentioned in the prepared remarks by Tae-Sik, no new downgrades, I think 3 to 4. I just wanted to confirm that. And also at a higher level, when you think about your portfolio and the 1 to 3 rated loans, how comfortable are you in those ratings that the concerning stress points during the past and you're not concerned about kind of more negative rating migration? Kind of what percentage of those 3 do you still think have, maybe a material stress point in the next 6 to 12 months that you're really focused on? Kind of any color on that would be great.

我認為 Tae-Sik 在準備好的演講中提到了這一點，沒有新的降級，我認為是 3 到 4。我只是想確認這一點。而且在更高的層面上，當您考慮您的投資組合和 1 至 3 級評級貸款時，您對過去所關注的壓力點的這些評級有多滿意，並且您不擔心更負面的評級遷移？在您認為這 3 個點中，您仍然認為有多少比例，也許是您真正關注的未來 6 到 12 個月內的物質壓力點？任何顏色都很棒。

Sure. Thanks for the question. I'll start and would love to have Bryan add to my comments. So correct, we do not have any negative migration from loans that were rated 1, 2 or 3 from second quarter to third quarter. We did mention the negative migration for 1 loan from 4 to a 5. In terms of outlook, I mean, I'll just start very briefly and really turn it over to Bryan. I think, again, we are assessing our loans very carefully each quarter. Obviously, the future forecast is taking into account, but with the volatile markets that we're all in today, it's hard to set an exact macroeconomic environment in which we would be assessing the loans. But I would tell you that we take into account what we do know and we do this every quarter. Bryan, did you want to add to that?

當然。謝謝你的提問。我將開始並希望布萊恩添加我的評論。正確的是，從第二季度到第三季度，評級為 1、2 或 3 的貸款沒有任何負遷移。我們確實提到了 1 筆貸款從 4 到 5 的負遷移。就前景而言，我的意思是，我將非常簡短地開始，然後將其真正交給 Bryan。我認為，我們每季都會非常仔細地評估我們的貸款。顯然，我們正在考慮未來的預測，但由於我們今天所處的市場波動很大，很難設定一個準確的宏觀經濟環境來評估貸款。但我想告訴你，我們會考慮我們所知道的情況，並且每個季度都會這樣做。布萊恩，你想補充嗎？

Yes. I'll just kind of echo that, but I think it is clearly a good bit of uncertainty out there. We're spending the vast majority of our time on the asset management side of the business in dialogue with sponsors and really taking in all the outside factors in real time that we're all collectively sharing. So when we see rate movements one way or the other, clearly, that impacts values. And to some of the earlier discussions, some of that stability will be seen as a positive for the commercial real estate industry. But we remain cognizant of risks in terms of supply dynamics in certain markets and really the impact of rates still being felt on the income statement and balance sheet of a lot of the borrower community. So I'd say risk aware and focused on each individual asset situation and resolving it as best we can throughout the next few quarters.

是的。我只是同意這一點，但我認為這顯然存在很大的不確定性。我們將絕大多數時間花在業務的資產管理方面，與贊助商進行對話，並真正即時吸收我們共同分享的所有外部因素。因此，當我們以某種方式看到利率變動時，很明顯，這會影響價值。對於先前的一些討論，這種穩定性將被視為對商業房地產行業的正面影響。但我們仍然認識到某些市場供應動態方面的風險，而且許多藉款人群體的損益表和資產負債表仍然感受到利率的影響。因此，我想說的是，要具有風險意識，專注於每項資產的情況，並在接下來的幾個季度中盡可能地解決它。

(Operator Instructions) Our next question comes from Rick Shane with JPMorgan.

（操作員指示）我們的下一個問題來自摩根大通的 Rick Shane。

I do want to say I appreciate the transparency, both in terms of highlighting or quantifying the potential loss in the fourth quarter and also being clear about what the specific reserves are against individual 5 graded loans. It's very helpful and it creates a much greater degree of transparency for analysts and investors, so thank you for that.

我確實想說，我很欣賞這種透明度，無論是在強調或量化第四季度的潛在損失方面，還是在明確針對個人 5 級貸款的具體準備金方面。這非常有幫助，並為分析師和投資者創造了更大程度的透明度，所以謝謝您。

I wanted to talk a little bit about the REO. And there were a couple of comments that this is an investment that is now unlevered. There's potential liquidity that can be unlocked there. What -- I guess there are really 3 courses that you can -- 3 paths here. You can continue to run this unlevered. And it sounds like the cash flow is roughly comparable to the yield, but that's somewhat inefficient. You could go out and lever this, own the property, that's not really your core business. And I'm curious in this environment where banks prefer to be lenders to lenders rather than be lenders on first lien, whether you would actually wind up going to a peer company in order to get that leverage. Or third, why not really kind of do what you guys do, sell the property, finance it and generate income in the way that you sort of more core to the ACRE business model?

我想談談 REO。有一些評論稱，這是一項現在無槓桿的投資。那裡可以釋放潛在的流動性。什麼——我想你確實可以選擇 3 門課程——這裡有 3 條路徑。您可以繼續無槓桿運作。聽起來現金流與收益率大致相當，但這有點低效。你可以出去利用這個，擁有財產，這不是你真正的核心業務。我很好奇，在這種環境下，銀行更願意成為貸方的貸方，而不是第一留置權的貸方，您是否真的會為了獲得這種槓桿而最終去同行公司。或者第三，為什麼不真正做你們所做的事情，出售房產，為其融資並以你們對 ACRE 商業模式更核心的方式產生收入？

Yes, it's a great question. And all of those avenues are available to us, and hopefully, that came through in the remarks just the balance sheet allows us that flexibility. I think with respect to this asset, there are some unique attributes, right? It has a fixed income like cash flow stream in terms of the credit quality of the tenants and the duration of the leases. But there is some upside that we think may be available through property management and leasing as we touched on. I think what we would -- if we think we're getting fair value, then absolutely, a sale would be part and parcel with what we have looked to do historically.

是的，這是一個很好的問題。所有這些途徑都可供我們使用，希望資產負債表能為我們帶來彈性。我認為這個資產有一些獨特的屬性，對嗎？就租戶的信用品質和租賃期限而言，它具有像現金流一樣的固定收入。但正如我們所提到的，我們認為透過物業管理和租賃可能會帶來一些好處。我認為我們會 - 如果我們認為我們得到了公平的價值，那麼絕對，出售將是我們歷史上所做的事情的重要組成部分。

And whether we participate in that from a mezzanine perspective, allowing longer-duration senior debt to go in front of us, right, because it does fit better into a fixed rate takeout rather than floating, which would be our core competency. So the point being, all these channels are available to us. But first and foremost, was getting our arms around the asset, hopefully enhancing the cash flow profile and resolving it in one of the ways that you put forth. So sorry, I don't have a more specific path. I think what we like about it is that it is all available to us right now, and we'll do what's best for the company.

我們是否從夾層的角度參與其中，允許長期優先債務出現在我們面前，對吧，因為它確實更適合固定利率而不是浮動利率，而浮動利率將是我們的核心競爭力。所以重點是，所有這些管道都可供我們使用。但首先也是最重要的是，我們要抓住資產，希望改善現金流狀況並以您提出的方式之一解決它。很抱歉，我沒有更具體的路徑。我認為我們喜歡它的原因在於，我們現在可以獲得所有這些，我們會做對公司最有利的事情。

Got it. No, actually, there is something interesting in there that I did not fully appreciate, which is that this is an asset that, in fact, may qualify or may fit better for a different type of financing. And in some ways, that makes more sense because probably, if you guys see value there, locking in long-term uncallable financing right now is probably not the way to maximize long-term value.

知道了。不，實際上，其中有一些有趣的東西我沒有完全理解，那就是這種資產實際上可能符合或可能更適合不同類型的融資。在某些方面，這更有意義，因為如果你們看到那裡的價值，現在鎖定長期無法贖回的融資可能不是長期價值最大化的方法。

Certainly, that's a key consideration, absolutely.

當然，這絕對是一個關鍵考慮因素。

Our next question is from Jade Rahmani with KBW.

我們的下一個問題來自 KBW 的 Jade Rahmani。

I know Ares does a lot on the equity side. So I wanted to ask your thoughts on multifamily. If you can give an update. Quite a few of the multifamily REITs have been citing a significant change in the market in September and October with respect to the Sunbelt signing new lease rent growth, negative 8% to 9%, attributing some of that behavior to so-called merchant developers who are making price concessions in order to lease up their projects, maybe they're under pressure from floating rate loans increasing or something else. But how are you viewing the overall multifamily markets? Are you nervous about credit there? Or do you view this more as an opportunity?

我知道阿瑞斯在股權方面做了很多工作。所以我想問您對多戶家庭的看法。如果您可以提供更新。相當多的多戶房地產投資信託基金都指出，9 月和10 月市場發生了重大變化，Sunbelt 簽署了新的租賃合同，租金增長為負8% 至9%，並將這種行為部分歸因於所謂的商業開發商，他們為了出租專案而做出價格讓步，也許他們面臨著浮動利率貸款增加或其他原因的壓力。但您如何看待整體多戶型市場？您對那裡的信用感到緊張嗎？或者您認為這更多是一個機會？

It's a great question. I think certainly a dynamic landscape out there, and the more acute reduction in rents that you're seeing in markets that were oversupplied, right, like a Phoenix, for instance, we are seeing that. We don't have a lot of exposure to those. There are assets that enjoyed outsized rent growth beyond what a lender would have underwritten for the past couple of years. And so we're a little bit in the digestion phase of the multifamily market, where you're seeing rents normalize, maybe dip where you've had that purposing of supply.

這是一個很好的問題。我認為肯定存在動態的景觀，以及在供應過剩的市場中看到的租金急劇下降，例如，我們正在看到像鳳凰城這樣的市場。我們對這些的接觸不多。有些資產的租金成長幅度超出了貸款機構過去幾年的承保水準。因此，我們正處於多戶住宅市場的消化階段，您會看到租金正常化，可能會在您有供應目的的地方下降。

I think long term though, we sit here with a patient approach to assets and valuations resetting. And if you look and you fast forward a little bit into the reduction in supply that you're going to see based on the capital markets interruption that we're seeing, right, if you're borrowing against the construction loan today, that's a low double-digit cost of funds.

但我認為，從長遠來看，我們會以耐心的態度重置資產和估值。如果你看一下，然後快轉一點，基於我們所看到的資本市場中斷，你將看到供應減少，對吧，如果你今天以建築貸款為抵押借款，那就是兩位數的低資金成本。

So as you see that supply shift and really go back to lower than historical levels based on that capital markets interruption, and we remain at a housing deficit throughout the country, the long-term fundamentals are supportive. But certainly, over the next 12 to 18 months, we're cognizant of the digestion phase of the supply that we are seeing in certain markets. So I think it's a little bit TBD, but we expect to participate in the relevering and the reequitization of this market for the foreseeable future.

因此，當你看到供應發生變化，並且由於資本市場中斷而真正回到低於歷史水平時，而且我們在全國範圍內仍然處於住房赤字，長期基本面是支撐性的。但可以肯定的是，在接下來的 12 到 18 個月內，我們認識到某些市場的供應處於消化階段。所以我認為這有點待定，但我們預計在可預見的未來參與這個市場的再槓桿化和再股權化。

And just while we have the mic, I just want to go back to a question that was first asked by Sarah Barcomb. This relates to the question about $70 million of office repayments that we expect in the fourth quarter. Just to clarify that a bit. So the $70 million of office that we expect to be repaid in the fourth quarter consists of our Chicago loan, the $57 million Chicago loan as well as a partial repayment of a larger loan on a different office complex. I think the $33 million office loan that Sarah was referring to in California, that loan, we don't expect to resolve until 2024. So I just want to clarify that comment in connection with Sarah's question.

就在我們拿起麥克風的時候，我只想回到莎拉·巴科姆首先提出的問題。這涉及到我們預計第四季度辦公室還款額為 7000 萬美元的問題。只是為了澄清一下。因此，我們預計在第四季度償還的 7000 萬美元辦公大樓貸款包括我們的芝加哥貸款、5700 萬美元的芝加哥貸款以及另一棟辦公大樓的較大貸款的部分償還。我認為 Sarah 提到的加州 3300 萬美元的辦公貸款，我們預計要到 2024 年才能解決。所以我只想澄清一下與 Sarah 的問題相關的評論。

We have reached the end of the question-and-answer session. I would now like to turn the call back to Bryan Donohoe for closing comments.

我們的問答環節已經結束。現在我想將電話轉回布萊恩·多諾霍（Bryan Donohoe）以徵求結束意見。

Great. Thank you. I just want to thank everybody for the time today. We certainly appreciate your continued support of Ares Commercial Real Estate and look forward to speaking with you again on our next earnings call. Thanks, everybody.

偉大的。謝謝。我只想感謝今天的大家。我們當然感謝您對阿瑞斯商業房地產的持續支持，並期待在我們的下一次財報電話會議上再次與您交談。謝謝大家。

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available approximately 1 hour after the end of this call through December 1, 2023, to domestic callers by dialing 1 (877) 660-6853 and to international callers by dialing 1 (201) 612-7415. For all replays, please reference conference ID number 13740719. An archived replay will also be available on a webcast link located on the homepage of the Investor Relations section of our website. Thank you for your participation today.

女士們先生們，我們今天的電話會議到此結束。如果您錯過了今天電話會議的任何部分，則可在本次電話會議結束後約 1 小時至 2023 年 12 月 1 日期間向國內來電者和國際來電者提供本次電話會議的存檔重播。撥打1 (201) 612-7415。對於所有重播，請參考會議 ID 號碼 13740719。存檔重播也可透過我們網站投資者關係部分主頁上的網路廣播連結取得。感謝您今天的參與。