ACRE
Ares Commercial Real Estate Corporation
$4.62
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Mild
·
Conviction
Fair Value
Trading 7.9% below fair value
You pay
$4.62
Bear
$4.23
Fair
$5.02
Bull
$5.82
Bear
$4.23
-8.5%
$0.14 FFO × 14x
Fair
$5.02
+8.6%
$0.14 FFO × 17x
Bull
$5.82
+25.9%
$0.14 FFO × 20x
Key Value Driver
FFO/share ($0.14) × default P/FFO multiple
Implied Market Multiple
34.2x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $5.25 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $5.02 per share.
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 13.0% 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