Ares CRE Posts $10 Million Profit After Office REO Sale

The Tip Desk · November 6, 2026 · 3 min read

GAAP net income was $10.0 million, or $0.18 a share, after a $7.1 million gain on the North Carolina office property.

Ares Commercial Real Estate Corporation (ACRE), a specialty finance company that originates commercial real estate loans, reported GAAP net income of $10.0 million, or $0.18 a share, for the three months ended September 30, 2026, up from $4.4 million, or $0.08 a share, in the prior quarter.

The profit followed a $7.1 million realized gain on the sale of a North Carolina office property held as real estate owned, a transaction the company said produced proceeds above the property’s carrying amount. A year earlier the company recorded no such gain. Chief Executive Officer Bryan Donohoe said the sale was part of a strategic priority to reduce office and real estate owned investments.

Distributable Earnings, a non-GAAP measure, were $6.7 million, or $0.12 a share, compared with $6.9 million, or $0.12 a share, in the second quarter. Excluding a $0.3 million, or $0.01 a share, realized gain for Distributable Earnings purposes, the company said Distributable Earnings were $6.4 million, or $0.11 a share.

Total revenue was $13.5 million. Interest income was $26.9 million. Interest expense was $19.0 million, leaving net interest margin of $7.9 million. Revenue from real estate owned was $5.6 million. Expenses from real estate owned were $3.3 million. The company recorded a $1.8 million reversal of current expected credit losses, net, versus a $2.2 million provision a year earlier.

The remaining book of loans was largely unchanged. Loans held for investment totaled $1.8 billion at quarter-end, consistent with the prior quarter and up 42% from a year earlier. Office loans were $444 million, also consistent quarter-over-quarter and down 10% year-over-year.

The company said it adjusted the $200 million Brooklyn residential/condo loan to risk rated 5 from previously risk rated 4. Construction on that building is complete, and pre-sales activity is continuing, the company said. The other large problem credit, a Chicago office loan with a $135 million carrying value, is risk rated 5; occupancy is over 90% with an average remaining lease term of more than seven years, and the company said it is working to accelerate a resolution over the next few months, either through a potential sale or by acquiring title. Together those two loans represent 94% of the four risk rated 4 and 5 loans.

One REO property remains, with a 10% income yield. The company collected $35 million of loan repayments in the quarter, bringing year-to-date repayments to $146 million. Available capital was $116 million as of September 30.

Investment activity continued. The company closed one new senior co-investment loan on a portfolio of industrial properties with a $35 million commitment, of which $28 million was classified as held for investment and $7 million was classified as held for sale and sold in the quarter. Subsequent to quarter-end it closed one senior loan commitment totaling $11 million collateralized by a self-storage property.

Subsequent to the quarter, the company fully repaid and terminated a $90 million secured term loan. Book value was $492 million, or $8.86 a share, or $11.40 a share excluding the CECL reserve. The CECL reserve was $141 million, representing 8% of the outstanding principal balance of loans held for investment.

On November 6, 2026, the board declared a regular cash dividend of $0.15 a share for the fourth quarter of 2026, matching the third-quarter dividend. The company said the dividend equates to an annualized implied yield of approximately 18% to the stock price as of November 3, 2026.

Chief Financial Officer Jeff Gonzales said the company remains focused on addressing risk rated 4 and 5 loans, as resolving those investments will advance the repositioning of the portfolio and enhance future earnings.