JMP Securities Downgrades Ares Commercial (ACRE) to Market Perform

JMP Securities analyst Steven DeLaney downgraded Ares Commercial (NYSE: ACRE) from Market Outperform to Market Perform.

The analyst comments "We lower our rating on shares of Ares Commercial Real Estate Corporation (ACRE) to Market Perform from Market Outperform with a prior price target of $11.50 (0.91x prior BV, 11.5% required yield) following the release of 3Q results and our review of 3Q results and the Form 10-Q, followed by our working model update. Like most CMREITs, ACRE has some problem loans to work through and has said that it expects a realized loss on an office loan resolution of ~$41M, or $0.75 per share, in either 4Q23 or 1Q24. At market close on Dec. 1, ACRE shares were trading at 0.82x BV, equal to the peer median multiple of 0.82x, but well above several comparable market cap CMREIT peers that are trading in a range of 0.50x-0.70x BV. Given the expected realized losses and with shares trading at 0.82x BV compared to the CMREIT median of 0.82x, we view shares as fairly valued. While ACRE works through its current challenges, we prefer to take a more cautious view on the shares and monitor credit resolutions and the emergence of any new problem credits to gain more confidence as to how BV per share might hold up over the next 12-15 months."

For an analyst ratings summary and ratings history on Ares Commercial click here. For more ratings news on Ares Commercial click here.

Shares of Ares Commercial closed at $10.29 yesterday.

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