Ares Commercial Real Estate Returns to GAAP Profit

The Tip Desk · August 4, 2026 · 4 min read

GAAP net income was $4.4 million, or $0.08 a share, after a first-quarter loss of $9.6 million, or $0.17 a share.

Ares Commercial Real Estate Corporation (ACRE), a specialty finance company that originates commercial real estate loans, reported GAAP net income of $4.4 million, or $0.08 a diluted share, for the three months ended June 30, 2026, reversing a first-quarter loss of $9.6 million, or $0.17 a share.

Distributable Earnings, the non-GAAP measure the company uses to gauge dividend capacity, were $6.9 million, or $0.12 a diluted share. A year earlier, the company had recorded a $20.2 million current expected credit loss provision; in the latest quarter, it booked a $0.9 million CECL reversal, net. Income before taxes was $4.5 million.

Total revenue rose to $14.4 million from $12.6 million a year earlier. Net interest margin was $8.6 million. Revenue from real estate owned was $5.8 million. Total expenses fell to $9.0 million from $10.8 million a year earlier, including expenses from real estate owned of $3.3 million.

Chief Executive Officer Bryan Donohoe said the company continued to reposition the portfolio, address risk-rated 4 and 5 loans, and reduce office loans and REO properties while investing in new loans. Chief Financial Officer Jeff Gonzales said the company maintained balance-sheet flexibility with moderate leverage and available capital of over $100 million.

In the second quarter, the company closed $130 million of new loan commitments, bringing total new loan commitments to over $900 million in the last twelve months. Those three senior loans spanned multifamily, self-storage, and hotel properties, and all new commitments originated in the quarter were co-investments with other Ares-managed funds. The loans held for investment portfolio increased to $1.8 billion, up $129 million from March 31.

Office loans were reduced to $442 million, down $5 million from the prior quarter and $82 million from a year earlier. The number of risk-rated 4 or 5 loans remained consistent quarter over quarter. The company continued to make progress resolving the four such loans and adjusted a $13 million subordinated California industrial loan from risk-rated 4 to risk-rated 5.

The total portfolio was $1.9 billion of loans held for investment and two REO properties: 29 risk-rated 1–3 loans excluding office at $1.19 billion, or 63% of the total; five risk-rated 1–3 office loans at $264 million; four risk-rated 4 and 5 loans at $296 million; and two REO properties at $130 million. The two largest problem loans represented 93% of the four: a $136 million Chicago office loan, risk-rated 5, with occupancy over 90% and a weighted average lease term over seven years, and a $140 million Brooklyn residential/condo loan, risk-rated 4, with construction substantially complete.

On the balance sheet, loans held for investment were $1.75 billion at June 30, compared with $1.53 billion at year-end 2025. The CECL reserve was $137.8 million, or 8% of outstanding principal. Real estate owned held for investment declined to $76.2 million from $130.2 million at year-end, while $53.9 million of REO was classified as held for sale versus none at year-end. Secured funding agreements increased to $1.17 billion from $858.2 million at year-end; CLO securitization debt was zero versus $99.9 million.

The company collected $16 million of repayments in the second quarter, bringing total repayments to $111 million year to date. Available capital was $106 million. It sold a $69 million portion of a $144 million senior retail loan commitment that had been classified as held for sale in the first quarter.

The board declared a third-quarter 2026 cash dividend of $0.15 a common share, payable October 15 to holders of record September 30. The payout equated to an annualized implied dividend yield of approximately 14% to the stock price as of July 30, 2026. Gonzales said the company continues to execute the goals it has outlined, which it believes will allow it to rebuild earnings to levels expected to meet or exceed the current dividend.