8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________________________________________ 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 8, 2020

ARES COMMERCIAL REAL ESTATE CORPORATION

(Exact Name of Registrant as Specified in Charter)

Maryland	001-35517	45-3148087
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

245 Park Avenue, 42nd Floor, New York, NY	10167
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (212) 750-7300

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	ACRE	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02 Results of Operations and Financial Condition.

On May 8, 2020, the registrant issued a press release announcing its financial results for the quarter ended March 31, 2020. A copy of the summary press release and the earnings presentation are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and incorporated herein by reference.

The information disclosed under this Item 2.02, including Exhibit 99.1 and Exhibit 99.2 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d)          Exhibits:

Exhibit Number	Description
99.1	Press Release, dated May 8, 2020
99.2	Presentation of Ares Commercial Real Estate Corporation, dated May 8, 2020

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			ARES COMMERCIAL REAL ESTATE CORPORATION
Date:	May 8, 2020	By:	/s/ Tae-Sik Yoon
		Name:	Tae-Sik Yoon
		Title:	Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

ARES COMMERCIAL REAL ESTATE CORPORATION REPORTS

FIRST QUARTER 2020 RESULTS

First quarter GAAP net loss of $17.3 million or $0.54 per diluted common share and Core Earnings⁽¹⁾ of $10.3 million or $0.32 per diluted common share

NEW YORK—(BUSINESS WIRE)—Ares Commercial Real Estate Corporation (the “Company”) (NYSE:ACRE), a specialty finance company engaged in originating and investing in commercial real estate assets, reported generally accepted accounting principles (“GAAP”) net loss of $17.3 million or $0.54 per diluted common share and Core Earnings⁽¹⁾ of $10.3 million or$0.32 per diluted common share for the first quarter of 2020.

“During this unprecedented economic disruption caused by the COVID-19 pandemic, we have relied on our seasoned team of professionals and rigorous, credit focused investment philosophy to manage our existing portfolio and liquidity position,” said Bryan Donohoe, Chief Executive Officer of ACRE. “We strategically structured our portfolio to be comprised of 95% senior loans with 62% collateralized by multifamily, office and industrial properties with limited exposure to hotel and retail properties. As of quarter end, our portfolio has performed relatively well with no impairments and we received all loan debt service payments for the April 2020 payment date.”

“Our funding structure is diversified across ten different sources of capital with relationship financial institutions that do not contain margin call provisions based on changes in market borrowing spreads,” said Tae-Sik Yoon, Chief Financial Officer of ACRE. “In addition, we have purposefully diversified the composition of senior loans that we finance with each of our lenders.”

_________________________________

(1) Core Earnings is a non-GAAP financial measure. Refer to Schedule I for further details.

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COMMON STOCK DIVIDEND

On February 20, 2020, the Company declared a cash dividend of $0.33 per common share for the first quarter of 2020. The first quarter 2020 dividend was paid on April 15, 2020 to common stockholders of record as of March 31, 2020.

ADDITIONAL INFORMATION

The Company issued a presentation of its first quarter 2020 results, which can be viewed at www.arescre.com on the Investor Resources section of our home page under Events and Presentations. The presentation is titled “First Quarter 2020 Earnings Presentation.” The Company also filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 with the U.S. Securities and Exchange Commission on May 8, 2020.

CONFERENCE CALL AND WEBCAST INFORMATION

On Friday, May 8, 2020, the Company invites all interested persons to attend its webcast/conference call at 1:00 p.m. (Eastern Time) to discuss its first quarter 2020 financial results.

All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Resources section of the Company’s website at http://www.arescre.com. Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing +1 (888) 317-6003. International callers can access the conference call by dialing +1 (412) 317-6061. All callers will need to enter the Participant Elite Entry Number 6127925 followed by the # sign and reference “Ares Commercial Real Estate Corporation” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected. For interested parties, an archived replay of the call will be available through May 21, 2020 at 5:00 p.m. (Eastern Time) to domestic callers by dialing +1 (877) 344-7529 and to international callers by dialing +1 (412) 317-0088. For all replays, please reference conference number 10141810. An archived replay will also be available through May 21, 2020 on a webcast link located on the Home page of the Investor Resources section of the Company’s website.

ABOUT ARES COMMERCIAL REAL ESTATE CORPORATION

Ares Commercial Real Estate Corporation is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. Through its national direct origination platform, the Company provides a broad offering of flexible and reliable financing solutions for commercial real estate owners and operators. The Company originates senior mortgage loans, as well as subordinate financings, mezzanine debt and preferred equity, with an emphasis on providing value added financing on a variety of properties located in liquid markets across the United States. Ares Commercial Real Estate Corporation elected and qualified to be taxed as a real estate investment trust and is externally managed by a subsidiary of Ares Management Corporation. For more information, please visit www.arescre.com. The contents of such website are not, and should not be deemed to be, incorporated by reference herein.

FORWARD-LOOKING STATEMENTS

Statements included herein or on the webcast / conference call may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which relate to future events or the Company’s future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including the returns on current and future investments, rates of repayments and prepayments on the Company’s mortgage loans, availability of investment opportunities, the Company’s ability to originate additional investments and completion of pending investments, the availability of capital, the availability and cost of financing, market trends and conditions in the Company’s industry and the general economy, the level of lending and borrowing spreads and interest rates, commercial real estate loan volumes, the impact of the COVID-19 pandemic and the pandemic's impact on the U.S. and global economy, and the risks described from time to time in the Company’s filings with the Securities and Exchange Commission (the "SEC"), including, but not limited to, the risk factors described in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K, filed with the SEC on February 20, 2020, and the risk factors described in Part II - Other Information, Item 1A. Risk Factors in the Company's Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Any forward-looking statement, including any contained herein, speaks only as of the time of this press release and Ares Commercial Real Estate Corporation undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call. Projections and forward-looking statements are based on management’s good faith and reasonable assumptions, including the assumptions described herein.

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INVESTOR RELATIONS CONTACTS

Ares Commercial Real Estate Corporation

Carl Drake or Veronica Mendiola Mayer

(888) 818-5298

iracre@aresmgmt.com

3

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	As of
	March 31, 2020			December 31, 2019
	(unaudited)
ASSETS
Cash and cash equivalents	$	74,498		$	5,256
Restricted cash	379			379
Loans held for investment ($425,817 and $515,896 related to consolidated VIEs, respectively)	1,870,639			1,682,498
Current expected credit loss reserve	(29,143		)	—
Loans held for investment, net of current expected credit loss reserve	1,841,496			1,682,498
Real estate owned, net	37,907			37,901
Other assets ($1,010 and $1,309 of interest receivable related to consolidated VIEs, respectively; $131,183 and $41,104 of other receivables related to consolidated VIEs, respectively)	147,075			58,100
Total assets	$	2,101,355		$	1,784,134
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Secured funding agreements	$	990,564		$	728,589
Notes payable and secured borrowings	65,047			54,708
Secured term loan	109,378			109,149
Collateralized loan obligation securitization debt (consolidated VIE)	443,558			443,177
Due to affiliate	2,836			2,761
Dividends payable	11,057			9,546
Other liabilities ($691 and $718 of interest payable related to consolidated VIEs, respectively)	12,850			9,865
Total liabilities	1,635,290			1,357,795
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share, 450,000,000 shares authorized at March 31, 2020 and December 31, 2019 and 33,398,952 and 28,865,610 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	329			283
Additional paid-in capital	496,689			423,619
Accumulated earnings (deficit)	(30,953		)	2,437
Total stockholders' equity	466,065			426,339
Total liabilities and stockholders' equity	$	2,101,355		$	1,784,134

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ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	For the three months ended March 31,
	2020			2019
	(unaudited)			(unaudited)
Revenue:
Interest income from loans held for investment	$	31,448		$	27,986
Interest expense	(15,534		)	(15,740		)
Net interest margin	15,914			12,246
Revenue from real estate owned	5,220			1,911
Total revenue	21,134			14,157
Expenses:
Management and incentive fees to affiliate	1,773			1,574
Professional fees	903			478
General and administrative expenses	868			1,120
General and administrative expenses reimbursed to affiliate	1,051			659
Expenses from real estate owned	6,676			1,687
Total expenses	11,271			5,518
Provision for current expected credit losses	27,117			—
Income (loss) before income taxes	(17,254		)	8,639
Income tax expense, including excise tax	9			96
Net income (loss) attributable to common stockholders	$	(17,263	)	$	8,543
Earnings (loss) per common share:
Basic and diluted earnings (loss) per common share	$	(0.54	)	$	0.30
Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding	31,897,952			28,561,827
Diluted weighted average shares of common stock outstanding	31,897,952			28,780,980
Dividends declared per share of common stock (1)	$	0.33		$	0.33

(1) There is no assurance dividends will continue at these levels or at all.

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SCHEDULE I

Reconciliation of Net Income (Loss) to Non-GAAP Core Earnings

The Company believes the disclosure of Core Earnings provides useful information to investors regarding the calculation of incentive fees the Company pays to its manager, Ares Commercial Real Estate Management LLC, and the Company’s financial performance. Core Earnings is an adjusted non-GAAP measure that helps the Company evaluate its financial performance excluding the effects of certain transactions and GAAP adjustments that it believes are not necessarily indicative of its current loan origination portfolio and operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Core Earnings is a non-GAAP measure and is defined as net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between the Company’s external manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors.

Reconciliation of net income (loss) attributable to common stockholders, the most directly comparable GAAP financial measure, to Core Earnings is set forth in the table below for the three and twelve months ended March 31, 2020 ($ in thousands):

	For the three months ended March 31, 2020			For the twelve months ended March 31, 2020
Net income (loss) attributable to common stockholders	$	(17,263	)	$	11,186
Stock-based compensation	225			1,613
Incentive fees to affiliate	—			1,052
Depreciation of real estate owned	221			834
Provision for current expected credit losses	27,117			27,117
Core Earnings	$	10,300		$	41,802
Net income (loss) attributable to common stockholders	$	(0.54	)	$	0.38
Stock-based compensation	0.01			0.05
Incentive fees to affiliate	—			0.04
Depreciation of real estate owned	0.01			0.03
Provision for current expected credit losses	0.85			0.92
Basic Core Earnings per common share	$	0.32		$	1.42
Net income (loss) attributable to common stockholders	$	(0.54	)	$	0.38
Stock-based compensation	0.01			0.05
Incentive fees to affiliate	—			0.04
Depreciation of real estate owned	0.01			0.03
Provision for current expected credit losses	0.84			0.91
Diluted Core Earnings per common share	$	0.32		$	1.41

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EX-99.2

Exhibit 99.2 First Quarter 2020 Earnings Presentation

Important Notice Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, which may relate to future events or the future performance or financial condition of Ares Commercial Real Estate Corporation ("ACRE" or the "Company"), its external manager, Ares Commercial Real Estate Management LLC ("ACREM"), a subsidiary of Ares Management Corporation ("Ares Corp."), Ares Corp., certain of their respective subsidiaries and certain funds and accounts managed by ACREM and/or their subsidiaries. These statements are not guarantees of future results or financial condition and involve a number of risks and uncertainties. Actual results and conditions may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in ACRE’s and/or Ares Corp.’s filings with the Securities and Exchange Commission ("SEC"). Any such forward-looking statements are made pursuant to the safe harbor provisions available under applicable securities laws. For a discussion regarding the potential risks and impact of the COVID-19 pandemic on ACRE, see Part I., Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operation" and Part II., Item 1A. "Risk Factors" in ACRE's Quarterly Report on Form 10-Q.   Ares Corp. is the parent to several registered investment advisers, including Ares Management LLC ("Ares Management") and ACREM. Collectively, Ares Corp., its affiliated entities, and all underlying subsidiary entities shall be referred to as “Ares” unless specifically noted otherwise.   The information contained in this presentation is summary information that is intended to be considered in the context of ACRE’s SEC filings and other public announcements that ACRE or Ares may make, by press release or otherwise, from time to time. ACRE and Ares undertake no duty or obligation to publicly update or revise the forward-looking statements or other information contained in this presentation. These materials contain information about ACRE and Ares, and certain of their respective personnel and affiliates, information about their respective historical performance and general information about the market. You should not view information related to the past performance of ACRE or Ares or information about the market, as indicative of future results, the achievement of which cannot be assured.   Nothing in these materials should be construed as a recommendation to invest in any securities that may be issued by ACRE or any other fund or account managed by Ares, or as legal, accounting or tax advice. None of ACRE or Ares makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein shall be relied upon as a promise or representation whether as to the past or future performance. Certain information set forth herein includes estimates and projections and involves significant elements of subjective judgment and analysis. Further, such information, unless otherwise stated, is before giving effect to management and incentive fees and deductions for taxes. No representations are made as to the accuracy of such estimates or projections or that all assumptions relating to such estimates or projections have been considered or stated or that such estimates or projections will be realized.   These materials may contain confidential and proprietary information, and their distribution or the divulgence of any of their contents to any person, other than the person to whom they were originally delivered and such person’s advisers, without the prior consent of ACRE or Ares, as applicable, is prohibited. You are advised that United States securities laws restrict any person who has material, non-public information about a company from purchasing or selling securities of such company (and options, warrants and rights relating thereto) and from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. You agree not to purchase or sell such securities in violation of any such laws.   These materials are not intended as an offer to sell, or the solicitation of an offer to purchase, any security, the offer and/or sale of which can only be made by definitive offering documentation. Any offer or solicitation with respect to any securities that may be issued by ACRE will be made only by means of definitive offering memoranda or prospectus, which will be provided to prospective investors and will contain material information that is not set forth herein, including risk factors relating to any such investment.   This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s. Such information has not been independently verified and, accordingly, ACRE makes no representation or warranty in respect of this information. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.   1

Business Highlights Attractive Portfolio Positioning Well Capitalized Balance Sheet Strong Credit Quality 95% senior loans Unrestricted cash as of No loan impairments May 7, 2020 of approximately since inception No liquid securities $50 million 100% debt service payments Multifamily, office and industrial Total borrowings across ten received for April 2020 properties comprise 62% of loan different sources payment date portfolio Primarily match funded We believe Ares Management 96% of the loan portfolio is either assets and liabilities sponsorship provides informational fixed rate or floating rate with a advantages and enhances asset LIBOR floor (weighted average No margin calls management capabilities LIBOR floor of 1.77%) based on changes in market borrowing spreads on credit facilities Note: As of March 31, 2020, unless otherwise noted. See footnotes on page 16. 2

First Quarter 2020 Results • GAAP loss of $17.3 million or $0.54 per diluted common share, inclusive of $27.1 million or $0.85 per Financial diluted common share CECL impact • Core Earnings(1) of $10.3 million or $0.32 per diluted common share Results • Book value per diluted common share of $13.95 or $14.92 excluding current expected credit losses ("CECL") reserve CECL • Cumulative CECL reserve of $32.2 million reflects macroeconomic environment from COVID-19 • Provision for current expected credit losses of $27.1 million or $0.85 per diluted common share for Q1-20 • Closed six senior loans and one subordinated loan totaling $355.8 million in commitments Originations and • $284.6 million in outstanding principal initially funded on new commitments Repayments • $12.7 million in outstanding principal funded on previously originated commitments • Repayments of $107.1 million from four loans • 53 loans held for investment • $2.2 billion in originated commitments at closing and $1.9 billion in outstanding principal Total Loan • Weighted average unleveraged effective yield of 6.2%(2) (including non-accrual loans) and 6.6% Portfolio (excluding non-accrual loans) • Based on March 31, 2020 ending spot one month LIBOR rate of 0.99%, approximately 88% of the Q1-20 portfolio is either fixed rate or floating rate with a LIBOR floor that is currently “in the money" Dividends • Common stock dividend of $0.33 per common share for Q1-20 paid in cash on April 15, 2020* * There is no assurance dividends will continue at these levels or at all. Note: As of March 31, 2020, unless otherwise noted. See footnotes on page 16. 3

Total Loans Held for Investment Portfolio Key Statistics Loan Portfolio Characteristics(4) ($ in millions) Total loan commitments $2,158.1 Mid-Atlantic/Northeast Outstanding principal balance $1,883.1 9% Weighted average unpaid principal balance of loan portfolio* $1,854.1 Total number of loans 53 Southwest Percentage of floating rate loans based on outstanding principal 14% Southeast balance 98% 38% Percentage of senior loans based on outstanding principal balance 95% Weighted average remaining life of loan portfolio 1.6 years Weighted average remaining life of senior loans 1.5 years West Weighted average remaining life of subordinated debt and preferred equity investments 2.5 years 19% (2) Unleveraged Effective Yield Midwest 20% Loan Portfolio 8% 7.2% 7.2% 6.9% 6.8% 6.6% ** Self Storage 1% 6% Residential/Condominium 2% Multifamily 27% 4% Industrial 9% 2% 0% Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Student Housing ** Senior loans 6.9% 6.9% 6.5% 6.5% 6.2% 10% Sub. debt and pref. equity investments 15.2% 14.7% 15.0% 15.1% 13.5% Office 26% Note: As of March 31, 2020, unless otherwise noted. Mixed-use 11% * During the quarter ended March 31, 2020. **Excludes impact of loans on non-accrual status as of March 31, 2020. Including non- Hotel 14% accrual loans, total weighted average Unleveraged Effective Yield for total portfolio and senior loans would be 6.2% and 5.9%, respectively. See footnotes on page 16. 4

First Quarter 2020 Investment Activity First Quarter 2020 Characteristics of Funded Loans(5) Loans Summary Office ($ in millions) 47% Number of loans closed 7 New loan commitments $355.8 Average size of loans closed $50.8 Mixed-use Percentage of floating rate loans 100% 7% Percentage of senior loans 91% Total fundings(6) $297.3 Industrial 15% Changes in Loan Portfolio(4) Multifamily $297.3 31% $2,000 $1,883.1 $1,692.9 Senior Loans $1,750 $(107.1) 91% $1,500 ) s n $1,250 o i l l i m $1,000 n i $ $750 ( $500 $250 $0 Q F R Q 4- un ep 1- 19 din ay 20 Subordinated Debt & gs (6) me nts Preferred Equity Investments 9% Note: As of March 31, 2020, unless otherwise noted. See footnotes on page 16. 5

Interest Rate Sensitivity(4) • 98% of the loan portfolio is floating rate and 2% is fixed rate • 96% of the loan portfolio is either floating rate with a LIBOR floor (94%) or fixed rate (2%) ◦ For the floating rate loans with LIBOR floors, the weighted average LIBOR floor is 1.77% • 88% of the loan portfolio is either fixed rate or floating rate with a LIBOR floor of 0.99% or higher • 100% of outstanding financing is floating rate ◦ 8% has a LIBOR floor with a weighted average LIBOR floor of 1.49% Total Loan Portfolio by LIBOR Floor Levels Net Income Sensitivity to USD LIBOR Changes(7) ($ in millions) $0.60 $0.42 Outstanding LIBOR Floor Range Principal % Total Cumulative % $0.40 $0.20 Fixed rate $ 42.9 2% 2% t c $0.20 a 2.25% - 2.50% 410.3 22% 24% p m I $0.00 2.00% - 2.24% 218.4 12% 36% S P 1.75% - 1.99% 403.7 21% 57% E -$0.20 $(0.19) 1.50% - 1.74% 360.7 19% 76% -$0.40 $(0.31) 1.25% - 1.49% 139.6 8% 84% -$0.60 1.00% - 1.24% 72.2 4% 88% -1.00% -0.50% 0.00% 0.50% 1.00% <1.00% 159.1 8% 96% No floor 76.2 4% 100% Change in LIBOR from March 31, 2020 Spot Rate Total $ 1,883.1 100% Annual estimated increase/(decrease) in net income (loss) (per diluted common share basis)* Note: As of March 31, 2020, unless otherwise noted. *Per diluted weighted average common shares of 31.9 million for the three months ended March 31, 2020. See footnotes on page 16. 6

Financing Sources Overview Financing Sources Composition(4) Financing Sources Detail Bank Facilities/Insurance 61% ($ in millions) Term Loan Total (3) Outstanding Financing Sources Commitments Interest Rate Balance Notes Payable Bank Facilities and Secured 2017-FL3 Securitization Wells Fargo Facility $ 500.0 LIBOR+1.45 to 2.25% $ 472.9 Borrowings 4% Citibank Facility 325.0 LIBOR+1.50 to 2.50% 122.5 Term Loan 7% BAML Facility 36.3 LIBOR+2.00 to 2.75% 36.3 CNB Facility 50.0 LIBOR+2.65% 50.0 Stockholders U.S. Bank Facility 186.0 LIBOR+1.65 to 2.25% 39.2 Equity Morgan Stanley Facility 150.0 LIBOR+1.75 to 2.85% 117.2 2017-FL3 Securitization Insurance 28% MetLife Facility 180.0 LIBOR+2.10 to 2.30% 152.5 Subtotal $ 1,427.3 $ 990.6 Primarily match-funded, asset-level financing Asset Level Financing Notes Payable and Secured Borrowings $ 108.6 LIBOR+2.50 to 3.75% $ 66.7 Debt to equity ratio excluding CECL reserve* 3.2x Loans held for investment weighted average remaining Capital Markets life 1.6 years Term Loan $ 110.0 LIBOR+5.00% $ 110.0 Weighted average remaining term of financing agreements** 3.2 years 2017-FL3 Securitization 445.6 LIBOR + 1.70% 445.6 Q1-20 weighted average borrowings*** $1,449.7 million Subtotal $ 555.6 $ 555.6 Total Debt $ 2,091.5 $ 1,612.9 Note: As of March 31, 2020, unless otherwise noted. * Debt to equity ratio of 3.5x including CECL reserve. ** Assumes exercise of extension options. *** During the quarter ended March 31, 2020. See footnotes on page 16. 7

Current Expected Credit Losses - Additional Information Current Expected Credit Loss Reserve Current Expected Credit Loss Reserve by Property Type ($ in thousands) Office 24% Self Storage 1% Balance at 12/31/19 $ — Initial reserve upon adoption 5,051 Provision for current expected credit losses 27,117 Industrial 5% Write-offs — Student Recoveries — Housing 9% Balance at 3/31/20 $ 32,168 Hotel 24% • CECL adoption impact on 1/1/20 of $5.1 million bifurcated between funded commitments of $4.4 million and unfunded commitments of Mixed-use 11% $0.6 million • Q1-20 provision for current expected credit losses of $27.1 million bifurcated between funded commitments of $24.7 million and unfunded commitments of $2.4 million Residential/Condominium 13% Multifamily 13% • No specific loan impairments on loan portfolio Current Expected Credit Loss Reserve • Increased reserve for current expected credit losses from initial adoption by Loan Type reflects associated economic impact of COVID-19 Senior Loans • Weighted average risk rating of 3.0 on a scale of 1.0 (lowest risk) to 5.0 78% (highest risk) Sub.Debt & Pref. Equity Note: As of March 31, 2020, unless otherwise noted. Investments See footnotes on page 16. 22% 8

Appendix 9

Loans Held for Investment Portfolio Details ($ in millions) Origination Current Loan Outstanding LIBOR Unleveraged Payment # Loan Type Location Date Commitment Principal Carrying Value Interest Rate Floor Effective Yield(2) Maturity Date Terms (8) Multifamily Loans: 1 Senior FL Sep 2016 $89.7 $89.7 $89.7 L+4.75% 0.5% 5.7% May 2020 I/O 2 Senior TX Sep 2019 75.0 75.0 74.7 L+2.85% 2.0% 5.0% Oct 2022 I/O 3 Senior FL Sep 2016 45.4 45.4 45.4 L+4.75% 0.5% 5.7% May 2020 I/O 4 Senior FL Dec 2018 43.5 42.8 42.5 L+2.60% 2.4% 5.5% Jan 2022 I/O 5 Senior NJ Mar 2020 41.0 41.0 40.7 L+3.05% 1.5% 4.9% Mar 2022 I/O 6 Senior IL Nov 2018 40.0 39.4 39.3 L+3.50% 2.3% 6.5% Nov 2020 I/O 7 Senior KS Oct 2019 35.8 35.8 35.5 L+3.25% 1.9% 5.5% Nov 2022 I/O 8 Senior NY Dec 2017 30.2 30.1 30.1 L+3.20% 1.4% 4.9% Dec 2020 I/O 9 Senior TX Jan 2020 29.6 29.6 29.3 L+3.25% 1.7% 5.5% Feb 2023 I/O 10 Senior PA Dec 2018 30.2 29.3 29.2 L+3.00% 2.4% 5.9% Dec 2021 I/O 11 Senior TX Sep 2017 27.5 27.5 27.5 L+3.20% 1.2% 4.9% Oct 2020 I/O 12 Senior WA Feb 2020 19.0 18.6 18.4 L+3.00% 1.7% 5.1% Mar 2023 I/O 13 Senior SC Aug 2019 34.6 2.1 1.7 L+6.50% 2.2% 10.2% Sep 2022 I/O Total Multifamily $541.5 $506.3 $504.0 Office Loans: 14 Senior Diversified Jan 2020 $132.6 $107.5 $106.9 L+3.65% 1.6% 5.7% Jan 2023 I/O 15 Senior IL Nov 2017 82.0 69.5 69.3 L+3.75% 1.3% 5.6% Dec 2020 I/O 16 Senior IL May 2018 59.6 57.2 57.0 L+3.95% 2.0% 6.3% June 2021 I/O 17 Senior NC Mar 2019 84.0 53.9 53.4 L+4.25% 2.4% 8.5% Mar 2021 I/O 18 Senior GA Nov 2019 56.2 37.2 36.7 L+3.05% 2.0% 5.8% Dec 2022 I/O 19 Senior CA Oct 2019 37.2 30.9 30.6 L+3.35% 2.0% 6.0% Nov 2022 I/O 20 Senior IL Dec 2019 41.9 27.5 27.2 L+3.80% 1.8% 6.2% Jan 2023 I/O 21 Subordinated IL Mar 2020 37.5 26.2 25.8 L+8.00% 1.5% 10.2% Mar 2023 I/O 22 Senior CA Nov 2018 22.8 17.8 17.7 L+3.40% 2.3% 6.3% Nov 2021 I/O 23 Subordinated NJ Mar 2016 17.0 17.0 16.4 12.00% N/A 12.8% Jan 2026 I/O 24 Senior TX Apr 2019 28.2 13.5 13.3 L+4.05% 2.5% 7.7% Nov 2021 I/O 25 Senior NC Apr 2019 30.5 13.3 12.6 L+3.53% 2.3% 7.7% May 2023 I/O 26 Senior NC Oct 2018 13.5 8.6 8.5 L+4.00% 2.1% 6.7% Nov 2022 I/O 27 Subordinated CA Nov 2017 3.1 2.9 2.9 L+8.25% 1.3% 9.7% Nov 2021 I/O Total Office $646.1 $483.0 $478.3 See footnotes on page 16. 10

Loans Held for Investment Portfolio Details ($ in millions) Origination Current Loan Outstanding LIBOR Unleveraged Payment # Loan Type Location Date Commitment Principal Carrying Value Interest Rate Floor Effective Yield(2) Maturity Date Terms(8) Hotel Loans: 28 Senior OR/WA May 2018 $68.1 $68.1 $67.8 L+3.45% 1.9% 4.6% (9) May 2021 I/O 29 Senior Diversified Sep 2018 64.3 60.3 60.0 L+3.60% 2.1% 6.2% Sep 2021 I/O 30 Senior CA Dec 2017 40.0 40.0 39.9 L+4.12% 1.4% 5.9% Jan 2021 I/O 31 Senior MI Nov 2015 35.2 35.2 35.2 L+4.40% N/A —% (10) July 2020 I/O 32 Senior IL Apr 2018 32.9 32.9 32.7 L+4.40% 1.9% —% (10) May 2021 I/O 33 Senior MN Aug 2018 31.5 31.5 31.4 L+3.55% 2.1% 6.0% Aug 2021 I/O Total Hotel $272.0 $268.0 $267.0 Mixed-Use Loans: 34 Senior FL Feb 2019 $100.6 $100.6 $100.0 L+4.25% 2.5% 7.8% Feb 2021 I/O 35 Senior CA Mar 2018 56.1 49.0 48.8 L+4.00% 1.9% 6.3% Apr 2021 I/O 36 Senior TX Sep 2019 42.2 34.3 34.0 L+3.75% 2.3% 6.7% Sep 2022 I/O 37 Senior CA Feb 2020 39.6 19.7 19.3 L+4.10% 1.7% 6.4% Mar 2023 I/O 38 Subordinated IL May 2018 15.3 14.9 14.8 L+12.25% 1.5% 14.6% Nov 2021 I/O Total Mixed-Use $253.8 $218.5 $216.9 Student Housing Loans: 39 Senior CA June 2017 $43.0 $41.7 $41.7 L+3.95% 1.2% 5.7% July 2020 I/O 40 Senior TX Dec 2017 41.0 41.0 40.9 L+4.75% N/A 6.3% Jan 2021 I/O 41 Senior NC Feb 2019 30.0 30.0 29.9 L+3.15% 2.3% 5.9% Feb 2022 I/O 42 Senior TX Dec 2017 25.1 24.6 24.3 L+3.45% 1.6% 5.5% Feb 2023 I/O 43 Senior AL Feb 2017 24.1 24.1 23.6 L+4.45% 0.8% —% (10) Aug 2020 I/O 44 Senior FL Jul 2019 22.0 22.0 21.8 L+3.25% 2.3% 5.9% Aug 2022 I/O Total Student Housing $185.2 $183.4 $182.2 See footnotes on page 16. 11

Loans Held for Investment Portfolio Details ($ in millions) Origination Current Loan Outstanding LIBOR Unleveraged Payment # Loan Type Location Date Commitment Principal Carrying Value Interest Rate Floor Effective Yield(2) Maturity Date Terms(8) Industrial Loans: 45 Senior FL Oct 2019 $52.5 $52.5 $52.0 L+6.10% 2.1% 8.8% Oct 2022 I/O 46 Senior NY Jan 2020 56.5 43.8 43.4 L+5.00% 1.6% 8.3% Feb 2021 I/O 47 Senior NC May 2019 40.5 34.8 34.6 L+4.05% 1.6% 5.9% Mar 2024 I/O 48 Senior CA Nov 2019 26.6 21.1 20.9 L+4.50% 1.9% 7.4% Dec 2021 I/O 49 Senior CA Aug 2019 19.6 13.0 12.8 L+3.75% 2.0% 6.3% Mar 2023 I/O Total Industrial $195.7 $165.2 $163.7 Residential/Condominium Loans: 50 Senior CA Jan 2018 $16.7 $12.2 $12.2 13.00% N/A 14.4% Aug 2020 I/O 51 Subordinated NY Oct 2018 16.1 15.5 15.4 L+14.00% 2.3% 19.1% May 2021 I/O 52 Subordinated HI Aug 2018 11.5 11.5 11.5 14.00% N/A 14.5% Oct 2020 I/O Total Residential/Condominium $44.3 $39.2 $39.1 Self Storage Loans: 53 Senior FL Feb 2019 $19.5 $19.5 $19.4 L+3.50% 2.0% 6.0% Mar 2022 I/O Total Self Storage $19.5 $19.5 $19.4 Loan Portfolio Total/Weighted Average $2,158.1 $1,883.1 $1,870.6 1.8%(11) 6.2% See footnotes on page 16. 12

Consolidated Balance Sheets As of March 31, 2020 December 31, 2019 ($ in thousands, except share and per share data) (unaudited) ASSETS Cash and cash equivalents $ 74,498 $ 5,256 Restricted cash 379 379 Loans held for investment ($425,817 and $515,896 related to consolidated VIEs, respectively) 1,870,639 1,682,498 Current expected credit loss reserve (29,143) — Loans held for investment, net of current expected credit loss reserve 1,841,496 1,682,498 Real estate owned, net 37,907 37,901 Other assets ($1,010 and $1,309 of interest receivable related to consolidated VIEs, respectively; $131,183 and $41,104 of other receivables related to consolidated VIEs, respectively) 147,075 58,100 Total assets $ 2,101,355 $ 1,784,134 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Secured funding agreements $ 990,564 $ 728,589 Notes payable and secured borrowings 65,047 54,708 Secured term loan 109,378 109,149 Collateralized loan obligation securitization debt (consolidated VIE) 443,558 443,177 Due to affiliate 2,836 2,761 Dividends payable 11,057 9,546 Other liabilities ($691 and $718 of interest payable related to consolidated VIEs, respectively) 12,850 9,865 Total liabilities 1,635,290 1,357,795 STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share, 450,000,000 shares authorized at March 31, 2020 and December 31, 2019 and 33,398,952 and 28,865,610 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively 329 283 Additional paid-in capital 496,689 423,619 Accumulated earnings (deficit) (30,953) 2,437 Total stockholders' equity 466,065 426,339 Total liabilities and stockholders' equity $ 2,101,355 $ 1,784,134 13

Consolidated Statements of Operations For the Three Months Ended ($ in thousands, except share and per share data) 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Revenue: Interest income from loans held for investment $ 31,448 $ 28,536 $ 28,269 $ 29,993 $ 27,986 Interest expense (15,534) (15,044) (15,124) (16,675) (15,740) Net interest margin 15,914 13,492 13,145 13,318 12,246 Revenue from real estate owned 5,220 8,088 6,702 8,357 1,911 Total revenue 21,134 21,580 19,847 21,675 14,157 Expenses: Management and incentive fees to affiliate 1,773 1,959 1,578 2,252 1,574 Professional fees 903 641 542 532 478 General and administrative expenses 868 1,035 1,005 1,029 1,120 General and administrative expenses reimbursed to affiliate 1,051 764 831 771 659 Expenses from real estate owned 6,676 7,338 6,838 7,118 1,687 Total expenses 11,271 11,737 10,794 11,702 5,518 Provision for current expected credit losses 27,117 — — — — Income (loss) before income taxes (17,254) 9,843 9,053 9,973 8,639 Income tax expense, including excise tax 9 183 19 218 96 Net income (loss) attributable to common stockholders $ (17,263) $ 9,660 $ 9,034 $ 9,755 $ 8,543 Earnings (loss) per common share: Basic earnings (loss) per common share $ (0.54) $ 0.34 $ 0.32 $ 0.34 $ 0.30 Diluted earnings (loss) per common share $ (0.54) $ 0.33 $ 0.31 $ 0.34 $ 0.30 Weighted average number of common shares outstanding: Basic weighted average shares of common stock outstanding 31,897,952 28,640,363 28,634,514 28,599,282 28,561,827 Diluted weighted average shares of common stock outstanding 31,897,952 28,872,975 28,867,603 28,863,765 28,780,980 Dividends declared per share of common stock* $ 0.33 $ 0.33 $ 0.33 $ 0.33 $ 0.33 * There is no assurance dividends will continue at these levels or at all. 14

Reconciliation of Net Income (Loss) to Non-GAAP Core Earnings(1) For the Three Months Ended ($ in thousands, except per share data) 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Net income (loss) attributable to common stockholders $ (17,263) $ 9,660 $ 9,034 $ 9,755 $ 8,543 Stock-based compensation 225 482 479 427 492 Incentive fees to affiliate — 378 — 674 — Depreciation of real estate owned 221 219 207 188 54 Provision for current expected credit losses 27,117 — — — — Core Earnings $ 10,300 $ 10,739 $ 9,720 $ 11,044 $ 9,089 Net income (loss) attributable to common stockholders $ (0.54) $ 0.34 $ 0.32 $ 0.34 $ 0.30 Stock-based compensation 0.01 0.02 0.02 0.01 0.02 Incentive fees to affiliate — 0.01 — 0.02 — Depreciation of real estate owned 0.01 0.01 0.01 0.01 — Provision for current expected credit losses 0.85 — — — — Basic Core Earnings per common share $ 0.32 $ 0.37 $ 0.34 $ 0.39 $ 0.32 Net income (loss) attributable to common stockholders $ (0.54) $ 0.33 $ 0.31 $ 0.34 $ 0.30 Stock-based compensation 0.01 0.02 0.02 0.01 0.02 Incentive fees to affiliate — 0.01 — 0.02 — Depreciation of real estate owned 0.01 0.01 0.01 0.01 — Provision for current expected credit losses 0.84 — — — — Diluted Core Earnings per common share $ 0.32 $ 0.37 $ 0.34 $ 0.38 $ 0.32 See footnotes on page 16. 15

Footnotes 1. The Company believes the disclosure of Core Earnings provides useful information to investors regarding the calculation of incentive fees the Company pays to its manager, Ares Commercial Real Estate Management LLC, and the Company’s financial performance. Core Earnings is an adjusted non-GAAP measure that helps the Company evaluate its financial performance excluding the effects of certain transactions and GAAP adjustments that it believes are not necessarily indicative of its current loan origination portfolio and operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Core Earnings is defined as net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), one- time events pursuant to changes in GAAP and certain non-cash charges after discussions between the Company’s manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. 2. Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as weighted by the outstanding principal balance of each loan. 3. Represents total commitments. Ability to draw on available capacity is subject to available collateral and lender approvals. 4. Based on outstanding principal balance. 5. Based on outstanding principal balance on new loans closed for the three months ended March 31, 2020. 6. Includes outstanding principal funded of $284.6 million on initial fundings on new commitments and $12.7 million on previously originated commitments. 7. Represents the estimated hypothetical increases/(decreases) in net income (loss) per diluted common share for a twelve month period, assuming (1) an immediate increase or decrease in 30-day LIBOR as of March 31, 2020 and (2) no change in the outstanding principal balance of the Company's loans held for investment portfolio and borrowings as of March 31, 2020. The analysis detailed herein represents the Company’s perspective and is merely a mathematical illustration. These metrics are shown for illustrative purposes only and the terms and characteristics of such transactions are not necessarily indicative of every type of transaction entered into or arranged by the Company. Any future results may differ from those discussed herein. Accordingly, no representation or warranty is made in respect of this information. 8. I/O = interest only, P/I = principal and interest. 9. At origination, the Oregon/Washington loan was structured as both a senior and mezzanine loan with the Company holding both positions. The mezzanine position of this loan, which had an outstanding principal balance of $13.1 million as of March 31, 2020, was on non-accrual status as of March 31, 2020 and therefore, the Unleveraged Effective Yield presented is for the senior position only as the mezzanine position is non-interest accruing. 10. Loan was on non-accrual status as of March 31, 2020 and therefore, there is no Unleveraged Effective Yield as the loan is non-interest accruing. 11. The weighted average floor is calculated based on loans with LIBOR floors. 16