CITI - Financials & REITS
Ares Commercial Real Estate Corp (ACRE, Buy, $14 PT) — Donald Fandetti reiterates his buy rating on ACRE, while increasing PT from $12 to $14. ACRE reported Q2’16 GAAP EPS of $0.31, above our estimate of $0.29 and consensus estimates of $0.27. The $0.31 EPS was comprised of $0.22 earnings from continuing operations and $0.09 from discontinued operations of selling its mortgage banking business. On June 28th, ACRE announced its agreement to sell its mortgage banking business to Cornerstone Real EstateAdvisors for $93M in cash. Mgt noted during the call that the deal was expected to close in Q3 or Q4 of this year and capital would be fully deployed by Q1’17. ACRE declared a Q3’16 dividend of $0.26, unchanged q/q, which equates to 8.1% yield on the current share price. Book value was up slightly to $14.28 from $14.24 q/q. Shares are currently trading at 0.9x P/B.