Ares Commercial Real Estate : Annual ReportDec 31/2021

Expensive Fellow Stakeholders,

For Ares Industrial Actual Property Company (NYSE: ACRE), 2021 was a yr of serious progress and efficiency throughout many vital monetary metrics. We generated our greatest yr of annual originations which drove sturdy funding portfolio progress and earnings to new document ranges. Throughout 2021, we originated $1.4 billion of latest funding commitments, whereas specializing in our highest conviction property sectors. For the yr ended December 31, 2021, we continued to develop our GAAP Earnings to $1.42 per share and reported Distributable Earnings of $1.55 per share, nicely in extra of our mixed common and supplemental annual dividends of $1.40 per share.(1) For the fifth yr in a row, we out-earned our dividends on a per share foundation. We’re additionally happy to report our credit score high quality remained sturdy as loans on non-accrual decreased and no impairments had been recorded throughout 2021. Our sturdy efficiency resulted in a rewarding yr for our shareholders as we generated a complete stockholder return of 34%, which outperformed our benchmark indices.(2)

We proceed to learn from our sponsorship of Ares Administration Company (NYSE: ARES), one of many largest international various funding managers with $314 billion of belongings beneath administration.(3) Ares manages one of many largest international actual property platforms with $41 billion of belongings beneath administration, together with $10 billion of actual property debt belongings. As ACRE is managed throughout the Ares actual property platform, we consider ACRE advantages from Ares’s constant presence in the market, shopping for, promoting, borrowing, and lending towards top quality actual property all through the prime MSAs within the U.S. and Europe. The growth of Ares’s actual property platform resulted in broader and deeper relationships in our goal markets extending our pipeline of funding alternatives and offering larger market insights. We consider the top result’s additional enhancement of our funding selectivity by way of a broader funnel of alternatives and larger market intelligence that we will leverage in our underwriting as markets evolve.

With the expansion of the Ares actual property debt platform, we’ve got grow to be an much more engaging associate to our borrower shoppers. In 2021, we leveraged Ares’s nationwide direct origination platform to supply engaging funding alternatives with top quality institutional sponsors. We added many new institutional debtors to our portfolio, whereas remaining a trusted associate to our repeat shoppers, all of whom worth our capability to customise options in addition to our certainty of capital execution.

We ended the yr with a diversified portfolio of 72 loans, up from 50 on the finish of 2020, and with an excellent principal stability of $2.4 billion, up 33% year-over-year. Our portfolio was conservatively constructed with 99% of our portfolio in senior loans. At year-end, our portfolio remained targeted on multifamily, industrial, and self-storage properties which compromised 51% of 2021 commitments. Moreover, we consider our portfolio is nicely positioned to learn from adjustments briefly time period rates of interest. As of year-end, 98% of our portfolio as measured by unpaid principal stability was comprised of floating-rate loans which pays greater coupons as rates of interest improve as soon as they attain sure ranges. On the similar time, we’ve got hedged a good portion of our floating charge liabilities and glued the rate of interest on our $150 million time period mortgage in order that will increase in rates of interest wouldn’t have a foundation level by foundation level improve in our general legal responsibility funding prices. The online result’s that our earnings are set to learn ought to brief time period rates of interest improve.

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The laborious work of our devoted asset administration crew was mirrored within the sturdy credit score efficiency of our funding portfolio as credit score high quality remained comparatively steady with enchancment in our threat rankings all year long. Moreover, we lately bought our solely actual property owned property, the Westchester Marriott lodge.(4) We consider our capability to ship on the strategic plan that we outlined once we took over the property in 2019 demonstrates each our hospitality experience and our capability to work via tougher credit score conditions.

Throughout 2021, we continued to strengthen our capital construction by rising our entry to non-recourse debt, extending the maturities on sure credit score amenities, and lowering our general value of capital. We additional enhanced our company borrowings by rising the capability on our time period mortgage to $150 million. We additionally accretively scaled our frequent fairness capital base by greater than $200 million, primarily via two follow-on fairness capital raises, each of which had been achieved at premiums to e book worth within the first half of 2021. We now have additionally reasonably elevated our general leverage, ending 2021 with a debt-to-equity ratio of two.7x.(5)

On our fourth quarter 2021 earnings launch, we declared that we might distribute a daily first quarter dividend of $0.33 per share and proceed a supplemental quarterly dividend of $0.02 per share. The supplemental quarterly dividend was applied beginning in early 2021 to share a portion of the surplus earnings profit that we anticipate to generate from the LIBOR flooring on our loans and the associated rate of interest safety we put in place on our liabilities.

As we glance additional forward in 2022, we consider that ACRE is within the strongest place that it has been in our historical past as a public firm. We anticipate to proceed to supply engaging investments, profit ought to rates of interest improve and pursue alternatives to additional improve our stability sheet effectivity and funding prices. We consider we’re nicely positioned to proceed to develop and reward our shareholders from the numerous advantages of larger scale.

On behalf of the administration crew and our Board, we tremendously admire your continued help for the corporate.

Sincerely,

William Benjamin

Bryan Donohoe

Chairman of the Board of Administrators

Chief Govt Officer

All knowledge as of December 31, 2021 except in any other case indicated. Previous efficiency shouldn’t be indicative of future outcomes.

1. Distributable Earnings is an adjusted non-GAAP measure that helps the Firm consider its monetary efficiency excluding the results of sure transactions and GAAP changes that it believes will not be essentially indicative of its present mortgage origination portfolio and operations. Starting in This autumn 2020, the non-GAAP monetary measure of Core Earnings was renamed to Distributable Earnings to extra appropriately replicate the principal goal of the measure. For a reconciliation of web revenue attributable to frequent stockholders, probably the most immediately comparable GAAP monetary measure, to Distributable Earnings, please discuss with the reconciliation desk in Schedule I, on the finish of this annual report.

• 2. Complete return contains inventory value appreciation and dividends.

• 3. Ares had $306 billion of AUM as of December 31, 2021. Except in any other case specified, all AUM numbers and different info are offered as of December 31, 2021 for Credit score, Personal Fairness, Actual Property, Secondary Options and Strategic Initiatives, as adjusted for Ares Administration’s acquisition of AMP Capital’s Infrastructure Debt platform (“Infrastructure Debt“), which closed on February 10, 2022. Following this acquisition, Ares has mixed its Actual Property Group with its expanded infrastructure debt and fairness actions into the Actual Property Group. Actual Property consists of 4 methods: Actual Property Debt and Actual Property Fairness (collectively, $41.2 billion of AUM), Infrastructure Debt ($7.9 billion of AUM) and Infrastructure Alternatives ($4.8 billion of AUM). Infrastructure Alternatives was beforehand categorized as a part of the Personal Fairness Group as Infrastructure and Energy. AUM quantities embrace funds managed by Ivy Hill Asset Administration, L.P., an entirely owned portfolio firm of Ares Capital Company and registered funding adviser. AUM managed by Ares Insurance coverage Options excludes belongings that are sub-advised by different Ares funding teams or invested in Ares funds and funding autos.

Ref:RE-02554

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Desk of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 ____________________________________________________________________________

FORM 10-Okay

• ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the fiscal yr ended December 31, 2021

  OR

• ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition interval from _____ to _____

Fee File No. 001-35517 __________________________________________________________________________

ARES COMMERCIAL REAL ESTATE CORPORATION

(Precise title of registrant as laid out in its constitution)

(212) 750-7300

Securities registered pursuant to Part 12(b) of the Act:

Securities registered pursuant to Part 12(g) of the Act: None

Point out by test mark if the registrant is a widely known seasoned issuer, as outlined in Rule 405 of the Securities Act. Sure o No ý

Point out by test mark if the registrant shouldn’t be required to file reviews pursuant to Part 13 or Part 15(d) of the Act. Sure o No ý

Point out by test mark whether or not the registrant (1) has filed all reviews required to be filed by Part 13 or 15(d) of the Securities Trade Act of 1934 in the course of the previous 12 months (or for such shorter interval that the registrant was required to file such reviews), and (2) has been topic to such submitting necessities for the previous 90 days: Sure ý No o

Point out by test mark whether or not the registrant has submitted electronically each Interactive Knowledge File required to be submitted pursuant to Rule 405 of Regulation S-T (Part §232.405 of this chapter) in the course of the previous 12 months (or for such shorter interval that the registrant was required to submit such information). Sure ý No o

Point out by test mark whether or not the registrant is a big accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting firm, or an rising progress firm. See the definitions of “massive accelerated filer,” “accelerated filer,” “smaller reporting firm” and “rising progress firm” in Rule 12b-2 of the Trade Act:

Massive accelerated filer

ý

Non-accelerated filer

☐ Rising progress firm ☐

If an rising progress firm, point out by test mark if the registrant has elected to not use the prolonged transition interval complying with any new or revised monetary accounting requirements offered pursuant to Part 13(a) of the Trade Act. o

Point out by test mark whether or not the registrant has filed a report on and attestation to its administration’s evaluation of the effectiveness of its inner management over monetary reporting beneath Part 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting agency that ready or issued its audit report. Sure ☒ No o

Point out by test mark whether or not the registrant is a shell firm (as outlined in Rule 12b-2 of the Trade Act). Sure ☐

No ý

The combination market worth of the voting inventory held by non-affiliates of the registrant on June 30, 2021, primarily based on the closing value on that date of $14.63 on the New York Inventory Trade, was roughly $637,185,924. As of February 14, 2022, there have been 47,222,067 shares of the registrant’s frequent inventory excellent.

Parts of the registrant’s Proxy Assertion for its 2022 Annual Assembly of Stockholders to be filed not later than 120 days after the top of the fiscal yr lined by this annual report on Kind 10-Okay are integrated by reference into Half III of this Kind 10-Okay.

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