VARIABLE INTEREST ENTITIES	3 Months Ended
Mar. 31, 2014
VARIABLE INTEREST ENTITIES
VARIABLE INTEREST ENTITIES	16. VARIABLE INTEREST ENTITIES On November 19, 2013, ACRC 2013-FL1 Depositor LLC (the “Depositor”), a wholly owned subsidiary of the Company entered into a Pooling and Servicing Agreement, dated as of November 1, 2013, which was amended on March 28, 2014, (the “Pooling and Servicing Agreement”), with Wells Fargo Bank, National Association, as master servicer (“Wells Fargo”), Ares Commercial Real Estate Servicer LLC (“Ares Servicer”), U.S. Bank National Association, as trustee, certificate administrator, paying agent and custodian, and Trimont Real Estate Advisors, Inc., as trust advisor, in connection with forming ACRE Commercial Mortgage Trust 2013-FL1 (the “Trust”). The Pooling and Servicing Agreement governs the issuance of approximately $493.8 million aggregate principal balance commercial mortgage pass-through certificates (the “Certificates”) in a CMBS effected by the Depositor. In connection with the securitization, the Depositor contributed to the Trust a pool of 18 adjustable rate participation interests (the “Trust Assets”) in commercial mortgage loans secured by 27 commercial properties, which loans were originated or co-originated by the Company or its subsidiaries. The Certificates represent, in the aggregate, the entire beneficial ownership interest in, and the obligations of, the Trust. In connection with the securitization, the Company offered and sold the following classes of certificates: Class A, Class B, Class C and Class D Certificates (collectively, the “Offered Certificates”) to third parties pursuant to an offering made privately in transactions exempt from the registration requirements of the Securities Act. As of March 31, 2014 and December 31, 2013, the aggregate principal balance of the Offered Certificates was approximately $395.0 million and the weighted average coupon of the Offered Certificates was LIBOR plus 1.89%. In addition, a wholly owned subsidiary of the Company retained approximately $98.8 million of the Certificates. The proceeds from the sale of the Offered Certificates, net of expenses, were approximately $389.3 million. The Company used the net proceeds to repay outstanding amounts under its Funding Agreements and to acquire the A-Notes with respect to certain mortgage loans in which the Company held the related B-Notes. As discussed in Note 2, the Company evaluates all of its investments and other interests in entities for consolidation, including its investments in this CMBS transaction and the Company’s retained interests in the subordinated classes of the Trust it initiated, all of which are generally considered to be variable interests in a VIE. The primary and special servicer is designated to be Ares Servicer, which is a wholly owned subsidiary of Ares Commercial Real Estate Management LLC (the Manager of the Company and thus, a related party of the Company). Ares Servicer has the power to direct activities of the Trust during the loan workout process on defaulted and delinquent loans, which is the activity that most significantly impacts the economic performance of the Trust. Additionally, the Company, as the holder of the subordinated classes of the Trust, has the obligation to absorb losses of the Trust (the Company has a first loss position in the capital structure of the Trust). In addition, there are no substantive kick-out rights of any party to remove the special servicer without cause; however, the Company’s subsidiary, as directing holder, has the ability to remove the special servicer without cause. Based on these factors, the Company is determined to be the primary beneficiary of the VIE; thus, the VIE is consolidated into the Company’s financial statements. The VIE consolidated in accordance with FASB ASC Topic 810 is structured as a pass through entity that receives principal and interest on the underlying collateral and distributes those payments to the Certificate holders. The assets and other instruments held by this securitization entity are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the securitization entity do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary. The inclusion of the assets and liabilities of VIEs in which the Company is deemed the primary beneficiary has no economic effect on the Company. The Company’s exposure to the obligations of VIEs is generally limited to its investment in these entities. The Company is not obligated to provide, nor has it provided, any financial support for any of these consolidated structures. As such, the risk associated with the Company’s involvement in these VIEs is limited to the carrying value of its investment in the entity. As of March 31, 2014 and December 31, 2013, the Company’s maximum risk of loss was $98.8 million. For the three months ended March 31, 2014, the Company incurred interest expense of $2.0 million and is included within interest expense in the Company’s consolidated statements of operations.

16. VARIABLE INTEREST ENTITIES

On November 19, 2013, ACRC 2013-FL1 Depositor LLC (the “Depositor”), a wholly owned subsidiary of the Company entered into a Pooling and Servicing Agreement, dated as of November 1, 2013, which was amended on March 28, 2014, (the “Pooling and Servicing Agreement”), with Wells Fargo Bank, National Association, as master servicer (“Wells Fargo”), Ares Commercial Real Estate Servicer LLC (“Ares Servicer”), U.S. Bank National Association, as trustee, certificate administrator, paying agent and custodian, and Trimont Real Estate Advisors, Inc., as trust advisor, in connection with forming ACRE Commercial Mortgage Trust 2013-FL1 (the “Trust”). The Pooling and Servicing Agreement governs the issuance of approximately $493.8 million aggregate principal balance commercial mortgage pass-through certificates (the “Certificates”) in a CMBS effected by the Depositor.

In connection with the securitization, the Depositor contributed to the Trust a pool of 18 adjustable rate participation interests (the “Trust Assets”) in commercial mortgage loans secured by 27 commercial properties, which loans were originated or co-originated by the Company or its subsidiaries. The Certificates represent, in the aggregate, the entire beneficial ownership interest in, and the obligations of, the Trust.

In connection with the securitization, the Company offered and sold the following classes of certificates: Class A, Class B, Class C and Class D Certificates (collectively, the “Offered Certificates”) to third parties pursuant to an offering made privately in transactions exempt from the registration requirements of the Securities Act. As of March 31, 2014 and December 31, 2013, the aggregate principal balance of the Offered Certificates was approximately $395.0 million and the weighted average coupon of the Offered Certificates was LIBOR plus 1.89%. In addition, a wholly owned subsidiary of the Company retained approximately $98.8 million of the Certificates.

The proceeds from the sale of the Offered Certificates, net of expenses, were approximately $389.3 million. The Company used the net proceeds to repay outstanding amounts under its Funding Agreements and to acquire the A-Notes with respect to certain mortgage loans in which the Company held the related B-Notes.

As discussed in Note 2, the Company evaluates all of its investments and other interests in entities for consolidation, including its investments in this CMBS transaction and the Company’s retained interests in the subordinated classes of the Trust it initiated, all of which are generally considered to be variable interests in a VIE.

The primary and special servicer is designated to be Ares Servicer, which is a wholly owned subsidiary of Ares Commercial Real Estate Management LLC (the Manager of the Company and thus, a related party of the Company). Ares Servicer has the power to direct activities of the Trust during the loan workout process on defaulted and delinquent loans, which is the activity that most significantly impacts the economic performance of the Trust. Additionally, the Company, as the holder of the subordinated classes of the Trust, has the obligation to absorb losses of the Trust (the Company has a first loss position in the capital structure of the Trust). In addition, there are no substantive kick-out rights of any party to remove the special servicer without cause; however, the Company’s subsidiary, as directing holder, has the ability to remove the special servicer without cause. Based on these factors, the Company is determined to be the primary beneficiary of the VIE; thus, the VIE is consolidated into the Company’s financial statements.

The VIE consolidated in accordance with FASB ASC Topic 810 is structured as a pass through entity that receives principal and interest on the underlying collateral and distributes those payments to the Certificate holders. The assets and other instruments held by this securitization entity are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the securitization entity do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary.

The inclusion of the assets and liabilities of VIEs in which the Company is deemed the primary beneficiary has no economic effect on the Company. The Company’s exposure to the obligations of VIEs is generally limited to its investment in these entities. The Company is not obligated to provide, nor has it provided, any financial support for any of these consolidated structures. As such, the risk associated with the Company’s involvement in these VIEs is limited to the carrying value of its investment in the entity. As of March 31, 2014 and December 31, 2013, the Company’s maximum risk of loss was $98.8 million. For the three months ended March 31, 2014, the Company incurred interest expense of $2.0 million and is included within interest expense in the Company’s consolidated statements of operations.