Good afternoon, and welcome to Ares Commercial Real Estate Corporation's conference call to discuss the company's third quarter 2022 financial results. As a reminder, this conference call is being recorded on November 2, 2022. I will now turn the call over to John Stilmar from Investor Relations. Please go ahead. Good afternoon, and thank you for joining us on today's conference call. I'm joined by our CEO, Bryan Donohoe, Tae-Sik Yoon, our CFO, and other members of our team. In addition to our press release in the 10-Q that we filed with the SEC, we've 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 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 the forward-looking statements as a result of a number of factors, including those listed in its SEC documents. Ares Commercial Real Estate Corporation assumes no obligation to update any such forward-looking statements. During this conference call, we will likely refer to non-GAAP financial measures. We use these as a measure 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. Now I'd like to turn the call over to our CEO, Bryan Donohoe. Thanks, John, and good afternoon, everybody. This morning, we announced third quarter distributable earnings of $0.39 per share, an increase of 5% from the third quarter of last year, which exceeded our quarterly regular and supplemental dividends paid of $0.35 per share. The growth in our distributable earnings was driven primarily by the benefits of rising interest rates and some modest prepayment fees received. Looking forward, we expect that rising interest rates will continue to have a positive impact on our earnings potential due to our floating rate loan portfolio and the hedges we have in place on our liabilities. Now let me touch on a few macroeconomic factors influencing our market. The Federal Reserve is continuing to tighten monetary policy with an unexpected pace of increases in market rates to combat inflation, which we believe has increased the likelihood of a recession. These complex macro crosscurrents are driving volatility across most major asset classes, including commercial real estate. Additionally, these factors are impairing capital formation as both the capital markets and bank lending have meaningfully retrenched, resulting in significantly expanded risk premiums. We believe these conditions are likely to persist for the foreseeable future and will be challenges for our industry. Because of all this, the sourcing, informational benefits, and deep financing relationships that we derive as part of the Ares platform will be even more important for us in this type of environment. We have been focused on property types such as multifamily, industrial, and self-storage that have strong underlying rent growth dynamics, which have muted or outpaced the recent growth in market interest rates. This has been particularly true since we exited the COVID time period at the end of 2020. In terms of deployment during the third quarter, we were highly selective. We closed $50 million of floating rate investments across multifamily and self-storage properties and $28 million of AAA-rated, newly issued CRE liquid debt securities. Across both public and private market opportunities, we believe that our new investments are in property types and markets with strong underlying demand drivers to counteract higher rates and risk premiums while also possessing more conservative structures and wider spreads. By way of example, during the third quarter, we originated a senior whole loan secured by a portfolio of well-located multifamily properties in the Sun Belt with a well-regarded repeat sponsor. The all-in spread on the whole loan was 80 basis points higher than our post-pandemic average spreads for multifamily whole loans and with a greater equity subordination and enhanced structural terms further driving the attractiveness of the loan. Supported by these attributes and the breadth of Ares capital markets relationships, we were able to arrange highly efficient senior financing with an insurance company on this loan, with ACRE retaining a $20.6 million mezzanine investment. We view this mezzanine investment as similar in concept to underwriting and holding a first lien loan on our balance sheet and financing a portion of the loan with one of our non-recourse financing sources. We also took advantage of what we believe are compelling opportunities in the CMBS markets by purchasing $28 million of newly issued AAA-rated CRE securities backed by a pool of senior floating rate mortgages. We believe these securities are highly attractive investments with weighted average credit spreads of 245 basis points, resulting in unlevered yields today in excess of 6% at current SOFR rates, all backed by a diversified pool of underlying commercial real estate properties with LTVs of 30%-40%. Despite the slower market, we had $167 million of repayments during the third quarter. This level of repayments was in line with our six-quarter average and included a $30 million hospitality loan which a risk-rated four loan one year ago and was repaid at par during the third quarter. For the fourth quarter, we remain selective on new investments and expect to maintain a strong liquidity position. Now let me turn the call over to Tae-Sik Yoon to walk through our quarterly financial highlights and further details on our portfolio and capital position. Great. Thank you, Bryan, and good afternoon, everyone. This morning, we reported GAAP net income of $644,000 or $0.01 per share and distributable earnings of $21.3 million or $0.39 per share. The primary driver of the difference between our third quarter GAAP EPS and distributable EPS is approximately $19.5 million or about $0.36 per share in CECL provision we recorded during the quarter. This provision served to increase our overall CECL reserve to $51.9 million or approximately 1.9% of the total commitments of our loan portfolio, which I will cover shortly in more detail. Overall, our distributable earnings for the third quarter were supported by the positive benefits of rising interest rates and the continued contributions from our proactive approach to liability hedging that we put in place in early 2021 when market interest rates were materially lower than they are today and allowed us to lock in one-month LIBOR at 21 basis points. Turning to our portfolio, we ended the quarter with a loan portfolio consisting of 98% senior loans and an outstanding principal balance of $2.5 billion across 70 loans. During the third quarter, we collected 99% of our contractual interest due and added one new loan to non-accrual status. The three loans on non-accrual status represents about 4% of our overall portfolio as of September 30, 2022. In terms of our other credit quality metrics, 90% of our loan portfolio had a risk rating of three or better, which declined from 94% last quarter and primarily reflects the negative migration of four loans during the third quarter. More specifically, the risk ratings on three loans, each backed by office properties, were downgraded from three to four due to our outlook on their respective business plans and our macroeconomic viewpoint of their respective submarkets. In addition, the risk rating of one residential loan changed from four to five. Here, we expect a sale of the underlying property in the fourth quarter below our carrying value, resulting in a loss of approximately $2.4 million should the transaction be consummated. In terms of our overall CECL reserve, we increased our total reserve by $19.5 million as of the third quarter of 2022, and our total CECL reserve now stands at $51.9 million or 1.9% of our total loan commitments. Turning to our capitalization and liquidity, our borrowing base remains highly diversified across eight various financing sources. Importantly, none of these financing structures have spread-based mark-to-market provisions. We have received no margin calls on our liabilities. We are also in a very strong liquidity position with approximately $156 million of available capital as of November 1. This includes cash and amounts available for us to draw under various debt facilities. Additionally, we have $130 million of cash in our FL3 securitization that can be used to finance new transactions at borrowing spreads of L+170, a significant discount to today's market. This healthy level of available capital should benefit us as we selectively invest in an increasingly attractive spread environment while maintaining a significant level of liquidity due to uncertain market conditions. Let me now provide an update on our portfolio positioning and the potential earnings benefits from future increases in short-term interest rates. 98% of our portfolio, as measured by outstanding principal balance, is comprised of floating-rate loans indexed to either one-month LIBOR or SOFR, resulting in our portfolio being positioned to benefit from further increases in the respective indices. None of our LIBOR floors, which provided us with significant incremental revenues from the past two years, are currently in effect, which means that 98% of our assets are currently sensitive to further increases in base interest rates. In comparison, as we have hedged a meaningful portion of our floating-rate debt through interest rate swaps or borrowed on a fixed-rate basis in the case of our term loan, about 1/3 of our liabilities are not sensitive to increases in base interest rates. This means that ACRE is well positioned to benefit from today's rising rate environment. For example, on a pro forma basis, if LIBOR was 100 basis points higher than the actual September 30th, 2022 levels and all other aspects of our portfolio remained constant as of the same date, our annualized distributable earnings as of the third quarter of 2022 would have been higher by approximately $11 million or $0.20 per share on a pro forma basis. Finally, this morning, we announced a fourth quarter 2022 regular dividend of $0.33 per common share, as well as a continuation of our supplemental quarterly dividend of $0.02 per common share. With that, let me turn the call back over to Bryan for some closing remarks. Thanks, Tae-Sik. We recognize the challenges that rising interest rates and future economic uncertainty are expected to have on certain real estate properties. We believe Ares Commercial Real Estate remains well positioned to navigate the changing economic landscape. Our balance sheet continues to be in great shape with moderate leverage, no spread-based mark-to-market sources of financing, and a strong level of available capital. While the competitive landscape remains highly favorable, we are finding opportunities to invest in higher yielding opportunities with better structural terms. We expect to remain highly selective in order to preserve our strong liquidity position during what we expect could continue to be a volatile period. With that, I'll ask the operator to open the line for questions. Thank you. At this time, if you would like to ask a question, please press star then one on your touch-tone phone. If you would like to withdraw your question, please press star then two. The first question we have on the phone lines comes from Steve Delaney of JMP. Your line is now open. Thanks. Hello, everyone. Thanks for taking the question. I'm curious on the securities purchases. Do you, as you look at that market opportunity, are you looking at, obviously you mentioned CMBS. Are you also looking at CLOs given how those have been, have blown out and also the floating rate feature there? Just curious. Maybe just while I'm at it to make the response easy, also, you're buying those at an attractive rate, but are you using a bit of repo financing to get yourself to sort of a target low double-digit return? Thanks. Yeah, absolutely. Thanks for the question, Steve. I think we actually think there's some compelling structural features within the CLO market as well. Between the two, we're somewhat agnostic, and you can certainly see a little bit of both. Thus far we have not sought to leverage those. You— Okay. It's kind of a combination of both yield and liquidity thus far. There's some features in the market that we've been hesitant to utilize leverage against the, you know, effectively mark-to-market securities like this. That's something we've been somewhat hesitant to do with the volatility around us. You know, we're exploring various structures to mitigate some of that, but it's certainly an attractive period of time to be, you know, up in the stack where spreads have candidly widened more than some of the mezzanine bonds as well. Okay, great. One quick follow-up. I couldn't find the article, but I recall in looking at Commercial Mortgage Alert over the last four to five weeks that there was a mention of sort of a resurgence in Freddie Mac "Q" series. I believe in one of the articles it referenced ACRE specifically. I'm just curious, I know you like multifamily. Is that something you're looking at as a financing alternative to do a Q series deal with Freddie? Thanks. Yeah, I'm not familiar with the article. To date, we have not explored the space. In times of volatility that has been somewhat of a safe harbor and also an interesting yield play, that clearly tightened over the last five or so years to where it was less interesting to us as a broad platform, not even specific— Sure. —to ACRE. It's not outside the realm of possibility, but not something we've explored to date. Okay. Thank you, Bryan. Thank you. Thank you. Your next question comes from Jade Rahmani of KBW. Your line is now open, Jade. Thank you very much. Just broadly speaking in the office space, do you think that it's primarily an issue of liquidity or lack thereof driving these heightened, CECL reserves that the commercial mortgage REITs are taking, as well as in a few cases, loans at maturity default? Or do you think there's a more fundamental reassessment of the office going on and that's, you know, adding to the valuation multiple decline that we're seeing? It's a good question, Jade. I think there's some crosscurrent in the space clearly, where in certain markets and in certain assets, there's just less demand on the rental side. That's counteracted by certain assets where despite the volatility, you've got high degrees of cash flow or longer term leases. That are, you know, part of the attractive part of the office sector in times of more normal liquidity and a little bit more equilibrium. I think that, as I said, I think there's crosscurrents where there's some regulatory and other pressures to reduce office exposure in the banking sector, so that's flowing through, and all of that contributes as your question points to, towards how CECL treats this. Thank you very much. The CECL reserve, firstly, wanna confirm nearly all of it was a general reserve, only the $2.4 million was loan-specific. More broadly speaking, did you review every loan and near-term upcoming maturities and the risk of a maturity default there and take that into account? What are you expecting on the loan maturity side? Sure, Jade. Thanks for that question. Yes, this is Tae-Sik. To answer your first question, yes. Of the $19.5 million, you know, we mentioned that there was one loan that had the $2.5 million in terms of specific. Again, the change in the $19.5 million, just to clarify, was not all due to that $2.5 million. That $2.5 million already. I'm sorry, $2.4 million already had a $1.5 million general reserve prior quarter, so that specific net change was really just the $900,000. But the remainder of the $19.5 million that you mentioned, that is all due to sort of changes in the general reserve under CECL. To answer your second question, you know, clearly one of the, you know, one of the factors that go into the CECL model is the maturity date of the loan. When a loan is three years out versus three months out, it does have a different impact on the CECL model. It definitely also has an impact on, you know, our outlook of what that property will be performing at, you know, at the time of the maturity. Obviously the closer in you get to maturity, the more specific and the more precise, if you wanna call it, we can be about it. To answer your question, yes, the maturity date is definitely taken into consideration as part of the, you know, overall CECL reserve analysis. On the four-risk-graded four bucket, $234 million, how many loans is that, and over what period do you expect some kind of a resolution? Yeah. Again, you know, if you look at the four-rated loans, I believe there are six of them. In terms of, you know, when they will be resolved, you know, the good news is, you know, there's just a few that have sort of near-term maturities. Certainly all six are the focus of various intense asset management, you know, led by our team. You know, we are in very, very close dialogue with each of the borrowers about the progress of their business plan, you know, restructuring some of the loan terms if necessary. Again, I think they are all in various stages of, you know, completing their business plans. The good news is, you know, there are a couple with some near maturities. The others do not have near-term maturities, but they are all being, you know, very, very actively pursued in terms of working very close with the borrowers to make sure that, you know, we do everything we can to work with the borrowers to meet their business plans. Great. Thanks. Thank you. Great. Thank you, Jade. The next question comes from the line of Rick Shane of JPMorgan. Please go ahead when you're ready, Rick. Thanks for taking my questions, everybody. I think Jade is honed in on the same issue that I am, which is that when we look at the portfolio, there are obviously in the next three months some pretty significant maturities, and then when you extend that to six months, you know, an even greater percentage of the portfolio is maturing. One question, and I apologize, I should know this, but I just looking at the slide deck, can't remember off the top of my head. Is the maturity date that you're showing the original maturity date or the fully extended maturity date? The date we're showing is the initial maturity date. Okay. Now some, as we mentioned. Yes. We should assume— I'm sorry. Go ahead. —should we assume that for most loans that are shown there with what you can calculate pretty easily is a three-year initial maturity probably do have at least one, if not two, extensions available? Yeah. I would say our standard loans do have built-in extensions, generally, you know, one or two one-year extensions. Most often, you know, they are accompanied by, you know, some level of requirements that are necessary for them to be met, whether it's LTV, debt yield, you know, certainly, you know, no existence of default, potentially payment of fees, different interest rates. Generally, there are built-in requirements about debt yield or LTVs. Got it. Now, and understood that there is a toll that you can extract for those extensions, and that's frankly just part of the business. It is part of the business model, not to dismiss that. When you are looking specifically at those loans within the portfolio, what's noteworthy is given the changes in the market, and where you've been concentrating in terms of originations, disproportionately the pending maturities are in the office space, which I think is, generally speaking, of greater concern right now. Do you believe that these sponsors are in positions both financially in terms of the covenants and also from a willingness to extend, or do you think that there are going to be. You know, we saw recently a deed in lieu from a competitor of yours. Do you think that type of activity is just going to pick up? Yeah. I think, you know, we absolutely deal with, you know, each situation differently. I think if you look at our historical practice, you know, we have been very closely with each borrower to make sure we give them every opportunity to continue to meet their business plans. You know, I'd say most often, you know, we have asked for some level of concessions in order to provide an extension of their loans, right? Whether that is some sort of fee, whether that's an increase in interest rate, and probably most often, you know, some material contribution of additional equity capital to show their continued sponsorship in the deal. Again, you know, our goal is to continue to work with each of our borrowers to give them every opportunity for success. You know, we want them committed both from an effort perspective as well as capital perspective. You know, at this point I would say there are, you know, situations where again, it's ongoing discussions. You know, I don't think we have situations where, you know, we have, you know, borrowers ready to throw us the key, if you wanna call it that way. But certainly, you know, borrowers do behave as an economic animal and, you know, we do understand the situations in which they may be motivated to do so. We evaluate each of these situations very uniquely, individually. Depends on the borrower, depends on the building, depends on the sub-market, depends on so many different situations that it's hard to give, you know, a generic response. I do think we do work very closely with each borrower to make sure that we have the best solution for us and for them. Yeah, maybe I'll just add on to that, Tae-Sik, if I could, which is another avenue I kind of intimated is when we do have higher cash flowing assets, right? If you think about one of the benefits of office product is longer duration leases than you might see, for instance, in the apartment complex. You know, that additional cash flows to the extent we're working through a period of illiquidity in the space can be rerouted through our cash management structure and pay down the loan or used or held as additional collateral. I think Tae-Sik did a good job of covering all the different avenues in which we actively manage in the space. Certainly the macro overlay is a challenge, but one we're working through on an asset by asset basis. Got it. Look, I will make the observation that strategically over the decade that we've followed you, the behavior has always been to work with borrowers. I mean, I think there are ends of the continuum in terms of aggressive resolution versus really partnering with borrowers. I'm not opining which I think is better or worse. I think it depends upon the lender, but I think that the long history of your company is to really try to work with the sponsors and keep them in the properties. I think that's right. I obviously at Ares we have our DNA in credit, and we certainly have the ability across the spectrum to step into those situations in which there is value add that comes from the broader company expertise. At the end of the day, our charter, if you will, is to be a lender to these borrowers, to work with them through some of the cloudier times and get to a better environment and really maximize value at the asset level. That creates kind of some win-win situations and certainly some brand loyalty there. I think your take is correct. Yeah. You don't wanna be running a hotel in White Plains ever again. Not during COVID, at least. Fair enough. Thank you, guys. Thanks for the time. Thank you. We now have Douglas Harter from Credit Suisse. Please go ahead when you're ready. Thanks. Can you just talk about a little bit more about the decision to allocate capital to AAA CMBS and, you know, kind of accept, you know, obviously a lower risk, but lower return and you know, how that compares and how you're thinking about the timing of holding that capital versus deploying it into loans at likely higher returns? Yeah, it was really a balance of the risk spectrum, and clearly there's been a slowdown in transaction activity throughout the real estate space. We're coming off of a record transaction volume year last year. So, you know, still enough to do, and we actually are pretty happy with the lending environment. We're seeing great opportunities. So it's a fair question. We just felt the relative value to be able to print those tickets when we did with the additional upside, as we said on the first question about the potential to lever those if given the right structure into a pretty interesting overall yield. The combination of the unlevered yield plus the liquidity that is inherent in those securities made it something that was fairly compelling at the time. Again, we don't see it as changing the mandate here, right? We are going to be first mortgage lenders to commercial real estate borrowers in the top markets, et cetera, that you've heard us talk about previously. At the time, given the dearth of transactions and a few of the crosscurrents we've mentioned, we felt it was pretty compelling. Makes sense. Tae-Sik, I think you said that the CLO or one of the CLOs has had $130 million of cash. What is the timeframe for reinvestment? Or how much longer is there on the reinvestment rights for that CLO? Sure. Yeah. You know, we mentioned that we have about $130 million of capacity that we could put into the CLO. This is our FL3 securitization. Again, one of the benefits of that securitization is, you know, we've managed to extend that, revolving period for a number of times, again, really taking advantage of the fact that there's really one participant who holds all of the investment-grade notes in that CLO. We still have, you know, a decent amount of time to put in some, you know, additional collateral. You know, we're still also hopeful that even when that expires, we'll continue to be able to, you know, renew it. I think we are right now in our third, revolving period, and so we do anticipate and hope that we can continue to do it. You know, clearly, you know, we're hopeful that we can put the $130 million to work, you know, very soon, you know, well within the allotted time period of the replacement period. I guess what limitations would there be for deployment there? Or would we expect that, you know, kind of the first $130 million of loans you do would kind of go into that CLO? Yeah. One of the limitations, of course, is that, you know, the owner of the investment-grade notes, you know, has the right to approve. You know, we've obviously worked with them over the many years to make sure that the collateral we put in CLO in FL3 is consistent with our thesis and their thesis. We don't certainly anticipate having challenges of identifying the right type of assets that go into it. Bryan, did you wanna add? Yeah, I would just add that I think, you know, the reason we set up this partnership a few years back was because I think we are like-minded, and when we speak to that investor, which we do clearly regularly. First of all, I think you cite one of our true priorities is to use that liability structure given, you know, the in the money nature of it. We have a like-minded viewpoint on the market landscape, and when we think about the opportunity set in front of us as commercial real estate lenders, they share the view that it is a very compelling time to take advantage of the dislocation. One, it's a priority for us, and two, it's something that we will approach in concert with this partner that we've put in place for a number of years. Thank you. Thank you. As a reminder, if you would like to ask any further questions, please press star then one. We have our next question from Eric Hagen of BTIG. Please go ahead when you're ready. Hi, good afternoon. Hope you guys are well. How are you finding in your conversations, both with sponsors and in your underwriting, the impact of hedging interest rate risk against the backdrop of higher rates and volatility? How would you say the hedging of that risk is filtered into CRE values and the way that you guys reserve for credit? Yeah, it's a good question. It's been pretty amazingly dynamic. I think you saw in our commentary and some others the velocity of the rate change has been pretty significant. I would say as we converse with borrowers throughout our broad portfolio, it really is being handled both, I would say, systematically as well as taking into account the expected further duration of the asset. When you take the risk premium associated with rate caps plus the way they're functioning today, which is effectively just prepaying interest in certain ways, we're trying to be logical and reasonable about how we do that while making sure that we protect interest rates to the downside to the extent that the pivot we're all hearing about in real time doesn't necessarily come to be. It's a conversation we're having quite often. Our view clearly, as Tae-Sik has mentioned today and in prior quarters, we've generally taken advantage of rates in certain environments. Right now I think it's both defensive and really focusing on the underlying credit of the asset. Tae-Sik, I don't know if you have anything to add there. Yeah. Bryan, I think those are very consistent with my thoughts. You know, one of the other challenges obviously is, you know, a few years ago, it was very inexpensive for borrowers to buy interest rate protection. It is something that we have, you know, generally required. Sometimes it was met with a little bit of resistance, but I think even those counterparties, those borrowers. You know, obviously look back on it as having done the right thing. I think as Bryan mentioned, you know, today with the rate volatility and the absolute higher rates, it's obviously much more expensive to put in a, you know, a cap or any other types of interest rate protection. I think borrowers fortunately see the value of doing so. I think there's less resistance to doing it, but there is more of a monetary limitation to, you know, the cost of putting in interest rate protection. Right. That's helpful. In the case where a loan does get extended, does the borrower need to execute a new, call it, you know, at the market interest rate cap? Yeah. No, that's a great question. I mean, that is certainly, you know, very live question that, you know, that we face every day. And again, we do push it very hard. That is one of the things that we wanna make sure that, you know, we and the borrowers are protected against further increases in interest rates. And again, I don't think there is a resistance in terms of wanting to do so. But again, it may come down to affordability of what those interest rate caps and other protection mechanisms, you know, will cost, you know, to put in place. It is certainly something that we push very hard for. Again, it's all part of the overall negotiation of, you know, what we would seek to have in place in order for us to consent to a, you know, to an extension. Got it. Thank you guys very much. Great. Thank you, Eric. Thank you. We have no further questions, and I'd like to turn the call back over to Bryan Donohoe for any final remarks. Thank you very much. I just wanna express my gratitude to the team for their commitment this quarter and throughout. Certainly our thanks to our investors for their continued support. Thank you for the time today. Ladies and gentlemen, this concludes our conference call for today. If you missed any part, an archive replay of this conference call will be available approximately one hour after the call ends through November 30th, 2022. To domestic callers, by dialing 1-866-813-9403, and to international callers by dialing +44-20-4525-0658. For all replays, please reference the conference number 933-476. An archive replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website.