Ares Commercial Real Estate Corporation

Good day, and welcome to the Aries Commercial Real Estate Company's first quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star, then one on a touch-tone phone. To withdraw your question, you can press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to John Stillmar of Investor Relations. Please go ahead.

Good afternoon, everybody, and thank you for joining us on today's conference call. I am joined today by our CEO, Brian Donahoe, Kasich Yoon, our CFO, and Carl Drake, our head of public company investor relations. In addition to our press release in the 10Q that were filed this morning with the SEC, we have posted an earnings presentation under the investor resources section of our website at www.arescre.com. Before I 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 such 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 these forward-looking statements, and as a result, a number of factors, including those listed in its SEC filing. ARIES Commercial Real Estate Corporation assumes no obligation to update such forward-looking statements. During this conference call, we'll refer to certain non-GAAP financial measures. We use these as measures of operating performance, and these measures should not only be considered an isolation 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'd like to turn it over to Brian.

Thanks, and good afternoon, everybody. This morning we announced another strong quarter with distributable earnings of 40 cents per share for the first quarter of 2021, up 25% year-over-year and well in excess of our combined regular and supplemental dividends. We're pleased with our performance, which was driven by our portfolio's strong credit quality, healthy level of high-quality new investment activity, the actions we have taken to reduce our financing costs, and the benefits from our LIBOR floors. Our portfolio and our real estate platform continue to benefit from an improving economy and a more active real estate market, which is enhancing our already strong competitive position as a reliable and stable capital provider. With some legacy market participants narrowing their underwriting criteria or not yet returning to the market, we are finding an attractive competitive landscape. As a result, we continue to see new loans with all-in spreads roughly in line with or greater than pre-pandemic levels in our primary areas of focus, with more attractive attachment points in addition to more friendly lender terms. These factors have led to an improved pipeline of attractive investment opportunities that are diverse across property types and geographies. We continue to target loans to high-quality sponsors, primarily secured by multifamily, industrial, self-storage, and select office properties and markets with strong demographics and favorable real estate fundamentals. Our playbook remains consistent to originate short-term, primarily senior loans with strong covenant protections in support of value-creating business plans. Against this backdrop, we closed $205 million in new commitments across multiple property types in the first quarter of 2021. As a reflection of our increased conviction in the future investment opportunities, we expanded our access to efficient financing and capital throughout the first quarter. In January, we closed our fourth CLO, which provided us with additional match-funded non-recourse financing. As previously discussed, this $667 million securitization reduced our funding cost, enhanced our non-recourse funding to more than two-thirds of our debt capital, and enabled us to purchase loans from the ARIES warehouse. Then in February, we issued 7 million common shares to raise more than 100 million of equity capital at a slight premium to book value to invest in the future growth opportunity we see unfolding. Underscoring the strength of the opportunity set, we have closed over 270 million of new loans between our balance sheet and into the ARIES warehouse already in the second quarter. Turning to the portfolio, our portfolio is well-constructed with 97% invested in senior loans and approximately two-thirds of our loans collateralized by multifamily, office, industrial, and self-storage properties. We continue to be underweight hotels and standalone retail centers. The backdrop of an improving economy has further supported the strength of our portfolio. 100% of our loans made their contractual debt service payments for the first quarter and our weighted average internal loan risk rating modestly improved to 2.9 versus 3.0 at year-end 2020. Additionally, there were no new loans on non-accrual status during the quarter. While the COVID-19 pandemic and all the resulting uncertainty and challenges it brought are not completely behind us, we remain optimistic about the future benefits that the economic recovery will have on our portfolio. Along these lines, in the second quarter, we resolved the senior loan collateralized by a student housing property that was on non-accrual as of March 31st, above our carrying value. This resulted in a return for this investment consistent with our overall portfolio. The successful outcome here underscores the strength of our upfront underwriting, the benefits of our conservative approach, our active asset management capabilities. Before I turn the call over to Tasek, I did want to point out that we declared our second quarter dividend of 33 cents per share, plus a two cent per share supplemental dividend, which is consistent with last quarter. For the full year 2021, we continue to believe that we will fully cover or exceed our dividends with our distributable earnings, inclusive of the two cents per quarter supplemental dividend. With that, I'll now turn the call over to Tasek to provide more details on our first quarter results and healthy financial position.