ACRE
Ares Commercial Real Estate Corporation
$4.78
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Mild
·
Conviction
Fair Value
Trading 3.8% below fair value
You pay
$4.78
Bear
$4.19
Fair
$4.97
Bull
$5.76
Bear
$4.19
-12.4%
$0.14 FFO × 14x
Fair
$4.97
+3.9%
$0.14 FFO × 17x
Bull
$5.76
+20.5%
$0.14 FFO × 20x
Key Value Driver
FFO/share ($0.14) × default P/FFO multiple
Implied Market Multiple
35.4x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $5.00 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $4.97 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 12.6% 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