Good morning and welcome to the Ares Commercial Real Estate Corporation's first quarter earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Thursday, May 9th, 2024. I will now turn the call over to Mr. John Stilmar, partner of Public Markets Investor Resources. Please go ahead. Good morning, and thank you for joining us on today's conference call. I'm joined today by our CEO, Bryan Donohoe, our CFO, Tae-Sik Yoon, and other members of the management team. In addition to our press release and 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, as well as the accompanying documents, contain forward-looking statements that 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 expectation of market conditions and management's judgment. The 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 filing. Ares Commercial Real Estate assumes no obligation to update any such forward-looking statements. During this call, we will refer to certain 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. Bryan? Thank you, John. During the first quarter, we made meaningful progress towards our goal of resolving underperforming loans, reducing the outstanding principal balance of non-accrual loans by $133 million, as well as reducing our exposure to the commercial office property sector by $70 million, or 8% of our total loans backed by office properties. By addressing a total of four non-accrual loans during the first quarter, we increased our distributable earnings, excluding losses, compared to the prior quarter by approximately $0.02 per common share and further delevered our balance sheet by $138 million to an outstanding balance of less than $1.5 billion at the end of the first quarter. Our focus remains on returning ACRE to its core business of originating loans and managing a portfolio of loans backed by commercial real estate properties in order to earn consistent income to support an attractive level of dividends for our shareholders. Let me now provide more details on the loans that were resolved during the first quarter. First, we sold a $38 million loan that we held for sale at year-end 2023 that was backed by a mixed-use property located in California that was on non-accrual. Second, we agreed to a discounted loan payoff of a $19 million loan backed by a multifamily property located in the state of Washington that was on non-accrual at the end of 2023. As a result of these initiatives, we realized a loss consistent with the fair value mark and loss reserves held on our balance sheet at year-end 2023 and paid down $54 million of debt in our FL4 securitization. Third, we exited a $57 million Chicago risk-rated 5 loan collateralized by a commercial office property that was also on non-accrual at year-end 2023. As a result of this disposition, we realized a loss that was $3 million higher than the loss reserve held against this loan at year-end 2023. And finally, we restructured a $74 million loan backed by a Class A newly rebuilt office building located in New York City. At closing of this restructure, the borrower paid down $5 million of principal, reducing the balance to $69 million, which was split between a $59 million A note and a $10 million B note. In addition, it is anticipated that the borrower will contribute additional capital into the building for additional new leasing costs, including tenant improvement allowances. To incentivize the contribution of additional capital, including the initial $5 million repayment of the loan, we have agreed to subordinate our $10 million B note to new equity contributed by the sponsor. This restructuring resulted in returning the $59 million A note to interest-earning status while the B note remains on non-accrual. As a result of addressing these four loans, the outstanding principal balance of loans on non-accrual was reduced by 31%, and our distributable earnings, excluding losses, increased by $0.02 per common share for the first quarter of 2024. Shifting now to our overall portfolio, we ended the quarter with $2 billion of outstanding principal balance across 44 loans. 36 loans totaling $1.5 billion, or 75% of our loan portfolio, had a risk rating of 3 or better. The majority of these loans are collateralized by multifamily, industrial, self-storage, and hospitality properties. As a reflection of the quality of our risk-rated 3 or better loans, borrowers continue to be committed to these underlying properties. Over the past 12 months, borrowers have contributed more than $130 million in additional capital relating to loans risk-rated 3 or better, and during the same time period, all interest rate caps have been renewed at their prior strike or economically equivalent amounts have been deposited into reserves. Going forward, we will continue to focus on resolving our remaining 4 and 5 risk-rated loans and to reduce our office exposure. During the second quarter, we expect to take a $33 million risk-rated 5 loan backed by an office building in California as REO that is currently on non-accrual. At this time, we believe that our loss reserve on this loan is substantially in line with our current estimate of a potential realized loss. Additionally, despite ongoing negotiations with the borrower, a $69 million loan to an office property located in North Carolina, currently on non-accrual, defaulted after quarter-end. We've begun the process of taking title of the office property, and importantly, this property is cash-flowing such that if and when the property becomes REO, property-level earnings will be recognized. With that, let me turn the call over to Tae-Sik to provide more details on our financial result and balance sheet positioning. Thank you, Bryan, and good morning, everyone. For the first quarter of 2024, we reported a GAAP net loss of $12.3 million, or $0.23 per common share. Our Distributable Earnings loss for the first quarter of 2024 was $33.5 million, or $0.62 per common share, and was driven by a realized loss of $45.7 million, or $0.84 per common share, due to exiting the three loans that Bryan mentioned earlier. Distributable Earnings, excluding these realized losses, were $12.2 million, or $0.22 per common share, for the first quarter. Our overall CECL reserve now stands at $141 million, which declined by $22 million versus the $163 million CECL reserve we held as of December 31st, 2023. This reduction was driven by a $42 million reversal of existing reserves associated with the realization of losses, partially offset by approximately $20 million of additional reserves on existing loans in the portfolio. The overall CECL reserve of $141 million at quarter-end represents 6.9% of the outstanding principal balance of our loans held for investment, which is down from 7.6% as of the prior quarter. 89% of our total CECL reserve, or $125 million, relates to our risk-rated 4 or 5 loans, including $31 million of loss reserves on our two risk-rated 5 loans and $94 million of loss reserves on our six risk-rated 4 loans. Overall, the $125 million of reserves on our risk-rated 4 or 5 loans represents 25% of the outstanding principal balance of such loans. Further, with respect to our loans that are risk-rated 4 or 5 at quarter-end, there were eight loans totaling $503 million in outstanding principal balance. 77% of the outstanding principal balance of our risk-rated 4 or 5 loans are collateralized by office and one residential condominium property. We did downgrade one $97.5 million Texas multifamily loan to a risk rating of 4 from 3 during the first quarter as the timeline and process of the sale of the underlying property by the borrower has been extended. Before concluding, I want to provide more background on managing our balance sheet. Consistent with our goals, we continue to maintain significant liquidity and further reduced our third-party debt. Driven by the loan exit activities during the first quarter, we reduced our outstanding borrowings by $138 million, resulting in total third-party debt of less than $1.5 billion at March 31st, 2024. Finally, we declared a regular cash dividend of $0.25 per common share for the second quarter of 2024. The second quarter dividend will be payable on July 16th, 2024, to common stockholders of record as of June 28th, 2024. With that, I will turn the call back over to Bryan for some closing remarks. Thank you, Tae-Sik Yoon. We are cautiously optimistic that the modest recovery we are seeing in the commercial real estate markets and tightening spreads in the CMBS capital markets will be supportive in the execution of our near-term goals. We are firmly focused on addressing our underperforming loans and further building liquidity in order to maximize outcomes as we seek to shift our focus from asset management to investing. The timing and path to resolving some of our current four and five risk-rated loans may make our quarterly earnings trajectory uneven this year, including in the second quarter due to loan resolutions. We remain focused on resolving a number of the identified risk-rated four and five loans in 2024, which we believe will enable us to achieve higher distributable earnings. As always, we appreciate you joining our call today, and we'd be happy to open the line for questions. Operator? Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. Our first question will come from Doug Harter with UBS. Please go ahead. Thanks and good morning. You talked about using the potentially going back to investing. This quarter, you used the resolution proceeds to pay down debt. Just how should we think about when you might pivot to investing versus continuing to delever the balance sheet? Yeah, I appreciate the question, Doug. Good to hear from you. I think the playbook remains fairly similar to what we've said in prior quarters, which is a multi-pronged path towards resolution where we're considering a lot of options with the pursuit of generating more liquidity, which will give us then the optionality as to when we see the opportunities which have started to present themselves, beginning in Q4 with some of the rate stability. We saw a bit of a pause with the rate movement of the past 6 or 8 weeks. But ultimately, we are seeing more liquidity, more acceptance of revised asset values. And ultimately, as we work through the coming quarters, we would intend to get back to that offensive side of the ledger once we've crystallized some more liquidity on the balance sheet. So the primary goal is to continue to resolve those risk-rated 4 and 5s, and the liquidity that should come with those types of resolutions will allow us that flexibility. I appreciate that, Bryan. Tae-Sik Yoon, can you give us some sense what sort of drag the four resolved loans, excluding the losses, had on earnings during the first quarter and kind of how to think about the path back towards the dividend? Sure. Thanks for your question, Doug. As we mentioned, the 4 loans that were either exited or restructured this quarter so really, the resolution of those 4 loans, either through, for example, the restructure loan, having the A note come back on earnings, and then the three exits of loans really paying down debt, the combination of that really added around $0.02 of distributable earnings during the first quarter. That run rate, if you want to call it that, the full quarter impact of that will be higher than the $0.02. But for the first quarter, I think it was roughly $0.02 positive impact that it had on our first quarter earnings. Great. Thank you, Tae-Sik Yoon. Thank you, Doug. Our next question will come from Jade Rahmani with KBW. Please go ahead. Excuse me. Hi. This is actually Jason Sabshon for Jade Rahmani. It would be helpful to hear an update on how things are going with your repo lenders and on the term loan. Sure. Good morning. Tae-Sik Yoon, do you want to kick off? Yeah. Yeah. No, thank you. Thanks for the question. Yeah, I think we've had and always maintain what we think is a very strong relationship with all of our lenders: warehouse lenders, term loan lenders, revolving credit facility lenders. And in fact, as you'll notice in our filing this morning, we have continued to work with them, and we greatly appreciate the partnership we have with all of our lenders. But you can see that we continue to, for example, amend our credit facilities so that we can again, as part of our overall goal to resolve underperforming loans, optimize the balance sheet with flexibility. So flexibility is very important to us. And again, we appreciate all the partnership we've had, our lenders who have been willing to work with us to create that additional flexibility on our balance sheet. Great. Thank you. Also, on the North Carolina office loan default, it would be helpful to hear more color on how you see that playing out. Yeah, I'll give that a shot. I think, look, we obviously were attempting to work with the borrower; however, the capital necessary for us to restructure that loan, in keeping with what we accomplished on the New York loan that we covered in the prepared remarks, didn't necessarily make it rational. It's also an asset, as we mentioned, that has positive cash flow, probably has some occupancy upside in a market that has seen some positive flows of corporate tenancy. So we think there's some value to be added with a functional ownership group. So I think the timeline for resolution there will be what it will be. I don't think it's a 1-2-quarter resolution necessarily. But when we look at situations like this, clearly, we want to see both expertise and capital come to bear on those assets. As you see in our earnings deck, we feel that we're in a position to bring both of those as a fallback position to having attempted to work with the borrower. Timeline will be determined over the next 60-90 days. I think when we chat with you all in 90 days, we'll have a more concrete plan there. Great. Thank you. And as a final question, understanding that each asset is unique, but generally, in your book, how have loss severities compared to your expectations, specifically for office and multifamily loans? And general commentary on what you're seeing in the market with respect to loss severities would be helpful as well. I'll start it. Look, I think what we've attempted to do over the prior quarters has been to give our best estimate of where we expect to resolve assets and really limit surprises on these calls or dramatic changes in our outlook. And I think we've had some success doing that. As an industry, I would put forth that what's gone on the office sector has surprised many to the downside in terms of resolutions. That said, we've been as transparent as possible as we've worked through those. I think the lack of transparency generally in the market has probably delayed some resolutions throughout the broader space. And I think, as I said earlier, we're starting to see that crystallize to some degree with stability in rates. So I think over the coming quarters, you'll see more resolutions in keeping with expectations. Great. Thank you. Our next question comes from Stephen Laws with Raymond James. Please go ahead. Hi. Good morning. At the risk of asking something you already mentioned, Bryan was a few minutes late. But can you talk about the non-accruals? I think it was I believe it's 292 remaining. I know you guys made a lot of progress. But is there a goal on a summer near-term resolution, summer longer-term? But maybe if you look to year-end, do you have, say, an idea of where you'd like to exit the year at that, on that number? Yeah, thanks for the question, Stephen. I'll start, and I'll let Tae-Sik chime in as well. I think part of the challenge of the industry is measuring a lot of what we do by quarter. But certainly, year-end is a good hallmark date to turn the page, so to speak, philosophically and financially. I think what we see is, especially with the offensive side of the market being so compelling, that while managing resolution price, we're going to balance that with resolution timing. So our conversations with borrowers, if you were to go back what feels like a long time ago, three-plus years, where extending duration of assets on the book was really the primary playbook. As we sit here today, we'd like to resolve assets and crystallize a lot of those resolutions and get back to the offensive side as soon as possible. So tough to put demarcation lines in terms of the calendar. However, certainly, when we look forward the three quarters to year-end, that's a pretty good place to plant a flag. But Tae-Sik Yoon, feel free to add some color there. Yeah, Bryan, I think you covered it well. Stephen, I mean, I think you probably heard from our opening remarks that resolving our underperforming loans, certainly including the non-accrual loans, is really one of our top, top, top priorities. We're hyper-focused on that effort. We think that'll bring a lot better clarity to our balance sheet as well as be accretive to our earnings, as we mentioned. But as Bryan said, I think it's very difficult to provide precise numbers. We did resolve, as we mentioned, about 4 loans this past quarter, and we hope to continue to report some news on further resolutions in the quarters coming ahead. Great. That was the main one I had today. So, appreciate your comments this morning. Great. Thank you so much, Stephen. Our next question will come from Steve Delaney with Citizens JMP. Please go ahead. Good morning, Bryan and Tae-Sik Yoon. Busy quarter for you, and it sounds like it's continuing. With the four non-accrual loans that you reworked, resolved in the first quarter, and then the two office REOs in the second quarter, having a little trouble, haven't had a chance to go to the deck and just roll all this through. But after these second quarter REOs, can you tell us what is left at this point in five rated loans after the two REOs? Sure. Steve, I can try to take a shot at that. Yeah, so as we mentioned, there are 8 loans that are risk-rated 4 and 5 as of quarter-end. And certainly, it includes the 2 office properties that you mentioned that we anticipate going REO in the future. We also mentioned a new 4-rated loan, a $97.5 million multifamily loan. And as we mentioned in our closing remarks, the reason it was downgraded from 3 to 4 is that the sale process of the underlying property, this multifamily property in Texas, is just taking a bit longer than we had originally anticipated. And so because of that, it was downgraded. So that's really, call it, 3 of the 8 loans, again, the 2 REO plus the one multifamily loan. And then when you really look at the remainder of the portfolio, what you have is you have some of the loans that have been kind of on our balance sheet for a while. We mentioned, for example, one of the mezzanine loans that we put on non-accrual. And then really, it is the condominium development that we have in New York. And then it's a large office loan out in Illinois. And it is an industrial asset out in California, the $20 million loan out in California. So I think that covers. I'm just trying to recollect. Are there others? But I think that makes up the remaining five loans that are in the 4 and 5 rated loan category. 5 loans as we sit today, left in 4 and 5. I understand this is fluid, and things are going to be coming and going. Nice to see some resolutions and some progress there. Bryan, I know this is a decision the board goes through probably every month or certainly every quarter. The issue of your current $0.25 dividend and working to maintain that and the opportunity for share buybacks, I would guess, even with the loss of book value, you're still probably a little below 70% of book. How are you thinking about that in this market where everybody's having problems, and you're looking at your stock with a mid-teens dividend yield? Just your thoughts, please, on how the company or shareholders are best served between paying out that cash or buying back your shares here. I didn't notice that you bought any shares in the first quarter. If I overlooked that, please let me know. Thank you. Appreciate the question, Stephen. As you said in your prior comment, the market is fairly fluid, and it is something that the board and management considers each quarter. As we characterized when we chatted 60, 90 days ago, what we established with the dividend at 25 was what we felt was attainable over the near to medium to long term, right? And I think that's something that we will continue to evaluate. And over the past 18 months, I think we, as an industry, have contemplated the best way to serve our shareholders. And that is the combination of dividend, which is the core charge, I think, of the mortgage REIT business, as well as the relative value of buying back shares, which we've done previously. So it's a balanced approach alongside managing liquidity and ultimately crystallizing the best returns possible for our investors. I would put forth that I think we'll continue to evaluate that in the coming quarters based on the results of that fluid market you mentioned. Got it. Glad to hear that it's going to remain on the table regardless of, and I know your board will make the right decision quarter by quarter. Thank you both for your comments. Thanks, Steve. Once again, that is star one if you would like to ask a question. Our next question will come from Rick Shane with J.P. Morgan. Please go ahead. Hey, guys. Thanks for taking my questions this morning. I apologize if some of this has been covered. First, as you sort of move from shrinking the balance sheet to moving back to offense, curious if there are any covenants that you need to be aware of or any limitations related to your debt that could make that more challenging? Yeah, Rick, thank you very much for your question, and good morning. As we mentioned in response to some of the prior questions, we have been actively in dialogue with our lenders. And as you'll notice in our filing this morning in the Q, that we are starting to make some amendments to those facilities to make sure that we have the flexibility to implement the strategy that we talked about, right? So if our strategy, as Bryan mentioned, is to focus on resolving our underperforming loans, and in order to do that, we want to make sure we optimize the balance sheet to provide that flexibility. De-leveraging has been certainly a big part of that strategy, as well as maintaining good levels of liquidity. And so we continue to focus on those two elements. Then again, we're proactively working with our lenders to make sure that the covenants and the loan facilities provide us that flexibility to attain the overall objective of resolving underperforming loans. The answer to your question is yes. We are definitely proactively working with our lenders on this. Got it. Yeah, I did a search of the queue for covenant and amendment, and I got 150 of each. So I wasn't able to find my answer. I'm sure it's in there. Second question, look, if we look at the forward curve and compare 1-month forward, so for 25 today versus where it was in January, expectations are rates are up 100-125 basis points from where expectations were in January. I am curious in your conversations with borrowers or what you're seeing if that expectation that rates are going to be so much higher for longer and again, it's the forward curve, so we have to take it with a grain of salt. But is that driving capitulation? Is it driving people's behaviors to change in a material way from what sentiment was even at the beginning of this year? Yeah, good question, Rick, and a few questions in there. I'd say summarily, yes. I think that the stability in rates in Q4 was catalytic in terms of causing some transactions to be consummated. I think we saw a good pop of activity in Q1, much of which was in the headlines in terms of apartment industrial trades and fairly sizable ones. I think that that started the process. I don't know. Maybe capitulation isn't a perfect word, but for the real estate market to get back to forward-looking and to consummate transactions. While the rise in rates since that period of time has not been accretive to values, right, it's clearly in the public and private markets. You'll see a strong correlation to rates in terms of the prints. I do think that the train started to leave the station to some degree. Therefore, we expect people to either realize that their assets are worth what they are worth and therefore move on. So there's a financial capitulation, but also the time allocation for legacy holders of assets may no longer be worthwhile. On the other side of that, more positive tone would be that that higher for longer means the yields available as a lender continue to be high. Widely publicized, when there is this level of duress in the market, it can be a generational opportunity to invest in equities, in structured debt, things like that. I think that the stability in rates and then the backing up is kind of either way going to lead to more resolutions, whether it's characterized as capitulation or great opportunities. I appreciate that, Bryan. Thank you so much, guys. Appreciate it, Rick. With no further questions, I would like to turn the conference back to Bryan Donohoe for any additional or closing remarks. Appreciate that, operator. Yeah, I just want to thank everyone for their time today. We appreciate the continued support of Ares Commercial Real Estate, and we look forward to speaking to you again on our next earnings call. Thank you. Ladies and gentlemen, this concludes our conference for today. If you missed any portion of today's call, an archived replay of this conference will be available approximately one hour after the end of this call through June 9th, 2024, to domestic callers by dialing 1-800-759-0728 and to international callers by dialing 1-402-220-7229. An archived replay will also be available on a webcast link located on the homepage of the Invest.