Ares Commercial Real Estate Reports Revenue Decline and Increased Net Loss in Q2 2025

Ares Commercial Real Estate Corporation (ACRE) reported a decline in financial performance for the second quarter of 2025, with total revenue of $12.6 million, down from $16.8 million in the same period last year. For the first half of 2025, revenue totaled $27.5 million, compared to $35.5 million in the first half of 2024. The decrease in revenue was primarily attributed to a significant drop in interest income, which fell to $23.1 million from $40.8 million year-over-year. The company also experienced a net loss attributable to common stockholders of $11.0 million for the quarter, compared to a loss of $6.1 million in the prior year.

The company’s financial position showed notable changes, with total assets decreasing to $1.44 billion as of June 30, 2025, down from $1.75 billion at the end of 2024. Loans held for investment also saw a reduction, dropping to $1.3 billion from $1.7 billion. The current expected credit loss (CECL) reserve decreased to $117.7 million from $136.2 million, reflecting a reversal of credit losses due to a realized loss on a senior mortgage loan. The company’s total liabilities also decreased to $914.9 million from $1.2 billion, primarily due to repayments of secured funding agreements and debt of consolidated variable interest entities (VIEs).

Strategically, ACRE amended its Morgan Stanley Facility, reducing the commitment from $250 million to $150 million and extending the maturity date to July 16, 2026. The company also closed several senior mortgage loans in July 2025, totaling approximately $42.5 million, indicating ongoing activity in its lending operations. As of June 30, 2025, ACRE's portfolio included 26 loans held for investment, with an outstanding principal of $1.4 billion. The company funded approximately $19.3 million in loans during the first half of 2025 while receiving repayments of $336.9 million.

Operationally, ACRE's net interest margin decreased to $7.0 million for the second quarter, down from $13.4 million in the previous year, reflecting a decline in weighted average earning assets and higher interest expenses. The company’s engagement metrics showed that 70.8% of its loans had Secured Overnight Financing Rate (SOFR) floors, with a weighted average floor of 0.93%. The company’s employee headcount remained stable, with no significant changes reported.

Looking ahead, ACRE's management expressed caution regarding the macroeconomic environment, citing potential impacts from high inflation, interest rate fluctuations, and geopolitical instability. The company anticipates that these factors could affect its ability to access financing and manage credit risks. ACRE plans to continue monitoring its portfolio closely and may adjust its dividend practices or share repurchase program based on liquidity needs and market conditions. The board of directors declared a regular cash dividend of $0.15 per share for the third quarter of 2025, reflecting the company's commitment to returning value to shareholders despite the current challenges.