Ares Commercial Real Estate Corporation

And welcome to ARIES Commercial Real Estate Corporation's conference call to discuss the company's fourth quarter and full year 2020 financial results. As a reminder, this conference is being recorded on February 18, 2021. I will now turn the call over to Veronica Mayer from Investor Relations.

Good afternoon, and thank you for joining us on today's conference call. I am joined today by our CEO, Brian Donahoe, David Roth, our president, Hasek Yoon, our CFO, and Carl Drake, our head of public company investor relations. In addition to our press release and the 10-K that we filed with the SEC, we have posted an earnings presentation under the investor resources section of our website at www.arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, and similar expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgment. These statements are not guarantees of future performance, condition, or results and involve a number of risks and uncertainties. The company's actual results could differ materially from those expressed in the forward-looking statements as a result of a number of factors, including those listed in its SEC filings. Aries Commercial Real Estate Corporation assumes no obligation to update any such forward-looking statements. During this conference call, we will refer to certain non-GAAP financial measures. We use these as measures of operating performance, and these measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like-titled measures used by other companies. With that, I will now turn the call over to Brian Donahoe.

Great. Thanks, Veronica, and thanks everybody for joining today. In 2020, the global pandemic had a severe impact on each of our lives and the economy as a whole. Despite these challenges, ACRE outperformed in 2020 and delivered strong distributable earnings that more than fully covered our dividends for the fourth consecutive year. While we are certainly proud of what we accomplished in 2020, I want to focus on what we did to put ourselves in a position for an even stronger year ahead in 2021. We outperformed during this volatile period because our business model is designed to be stable and resilient. Our playbook is to originate senior loans with strong covenant protections in defensive property sectors. We are highly selective with a credit-first approach, and we lend to experienced real estate sponsors seeking to add value to institutional quality properties. As a result, we built a highly diversified portfolio across sectors and markets. Throughout 2020, our business demonstrated that it was well-positioned to navigate volatile markets as we maintain consistently high interest collections and no losses related to credit performance. Our portfolio is well constructed with 94% in senior loans with the majority collateralized by multifamily, office, and industrial properties. As stated previously, we entered last year underweight hotels and had no loans collateralized by standalone retail centers. In addition, we never invested in real estate securities. Throughout the year, we also built strong excess liquidity and deleveraged the overall portfolio. Some of the underlying factors in our performance were our stable credit quality, the strong diversification of our funding, and structural benefit of the LIBOR floors in our loans. In fact, for the fourth quarter, we announced our strongest quarterly results of 2020 with distributable earnings of 41 cents per share. This was well in excess of our dividend levels and translates into an annualized return on equity of 11%. Our higher earnings have enabled us to grow book value per share by 11 cents and retain excess earnings for future investments. We are very proud of our performance during 2020 and believe that we are heading into the new year very well positioned to opportunistically grow our portfolio. Thus far in the first quarter of 2021, we closed a $667 million CLO that significantly increased our match term non-recourse financing that now represents about two-thirds of our overall debt funding. Concurrently with the closing of the securitization, we closed on seven new loans totaling $146 million in unpaid principal balance that were being held at the Aries warehouse. The loans were collateralized by one well-located office property with a strong sponsorship from a well-capitalized institution. and six institutionally managed self-storage assets managed by one of the largest players in the self-storage industry. Our ability to bring these loans on balance sheet from the ARIES warehouse speaks to the significant capital efficiency benefits we derive from this facility and the power of the ARIES platform. As Tasek will later discuss, this transaction is expected to be accretive to earnings and demonstrates the excellent capital markets execution capabilities of our team. As we look forward, we remain positive on the recovery of the real estate sector. Our team is active and seeing a substantial increase in both the quantity and quality of transactions in our pipeline. We are seeing loans with all-in spreads roughly in line or greater than pre-pandemic levels in our primary areas of focus. We continue to target loans to high-quality sponsors on multifamily, industrial, self-storage, and certain office properties and markets with attractive demographic trends. and healthy supply and demand dynamics. We are actively working on certain alternative asset classes like single-family home rentals and life sciences buildings for our portfolio. We also continue to leverage the extensive networks, deal flow, and infrastructure of ARRI's leading global investment platform to source investments and inform our investment decisions. As always, we will continue our rigorous emphasis on credit quality loan structure, and strong sponsorship. Before I turn the call over to Tasek for a more detailed financial review, I want to touch on our dividend announcement this morning. Based on our enhanced funding structure, along with our positive earnings outlook, we declared a first quarter regular dividend of 33 cents per share, and we are introducing an additional quarterly supplemental dividend of two cents per share beginning in the first quarter of 2021. This new supplemental dividend reflects a portion of the additional earnings that we would like to share with shareholders that is derived from the benefit of our LIBOR floors that we expect to remain in place throughout 2021. Let me turn the call over to Tasik to walk you through a detailed financial review and some of the dynamics behind our dividend decision.