UBS Resumes Ares Commercial (ACRE) at Neutral

UBS analyst Marissa Lobo resumes coverage on Ares Commercial (NYSE: ACRE) with a Neutral rating and a price target of $5.50.

The analyst comments: “We assume coverage of ACRE with a Neutral rating and $5.50 price target. Inclusive of the dividend we see ~23% total return potential. ACRE's earnings power recovery is almost entirely a function of two loans: a Chicago office & Brooklyn condo with a total reserve equating to ~35% of UPB. These two loans represent 93% of the high risk population (4 loans in total). The remaining 31 out of 35 loans are risk rated 1-3 with no negative credit migrations in Q126. ACRE's co-investment alongside Ares-affiliated vehicles is an important structural advantage, allowing a $1.7b portfolio company to access the deal flow and underwriting of a platform committing $10b/year. ACRE currently trades at ~0.55x of Q126 book, reflecting uncertainty on the resolution timeframe for problem assets. At the current price, investors are being paid to wait (~12% yield), but the market is unlikely to re-rate meaningfully until dividend coverage is visible and credit volatility subsides.”

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 $4.93 yesterday.

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