ACRE
Ares Commercial Real Estate Corporation
$3.60
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 27.6% below fair value
You pay
$3.60
Bear
$4.19
Fair
$4.98
Bull
$5.77
Bear
$4.19
+16.2%
$0.14 FFO × 14x
Fair
$4.98
+38.1%
$0.14 FFO × 17x
Bull
$5.77
+60.0%
$0.14 FFO × 20x
Adjust Assumptions
17.0x
$
Key Value Driver
FFO/share ($0.14) × default P/FFO multiple
Implied Market Multiple
26.4x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (14 analysts)
$5.50
Divergence from AlphaVal
9%
Summary
At $0.14 FFO/share with a 17x default REIT multiple, the base-case value is $4.98 per share. Dividend yield: 16.6%. DDM cross-check: $11.18.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 16.6% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $11.18 (125% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify