Ares Commercial Real Estate Corporation provided a $159 million senior loan commitment collateralized primarily by self-storage properties across a multi-state area, bringing its total senior loan commitments for Q3 to approximately $605 million, with $577 million of initial funding.
The company benefited from loan repayments of approximately $250 million of senior loans during the quarter, “reflecting the execution of the value enhancement plans of our borrowers,” said John Jardine, president and co-CEO of Ares.
“For the $250 million of senior loans that repaid, the average cash flow growth on the underlying properties was in excess of 20 percent during our loan commitment period,” he said. “We believe this growth reflects the successful value creation on behalf of the sponsors, and the gradual de-risking of our investments that we seek in our value-added lending strategy.”
The loan repayments had a weighted average unleveraged effective yield of 4.9 percent, exceeding the 5.1 percent effective yield on the firm’s overall senior loan portfolio, as of 30 June.
“Even with this high level of originations, we continue to have substantial capital available to further expand our portfolio and grow future earnings as we are able to accretively reinvest the capital with new and existing sponsors,” added Robert Rosen, chairman and interim co-CEO of Ares.
Net loan growth of more than $325 million in Q3 resulted in an ending principal loan balance of approximately $1.4 billion as of 30 September and a weighted average loan balance of $1.16 billion for the third quarter, excluding non-controlling interests held by third parties.
Ares recently sold its GSE mortgage banking subsidiary, ACRE Capital, for $93 million to Barings Real Estate Advisers (formerly Cornerstone Real Estate Advisers). Along with the purchase, first first agreed in June, Barings acquired ACRE’s existing staff and has renamed the group Barings Multifamily Capital. A spokesperson confirmed that CRE lending remains Ares’ core business.
The firm did not respond to an additional request for comment on the $159 million self-storage loan.