2023-03-08 08:16:22 ET
- Ares Commercial Real Estate ( NYSE: ACRE ) stock drifted down 1.3% in Wednesday premarket trading after KBW analyst Jade Rahmani downgraded the mortgage REIT to Market Perform from Outperform on expectations that commercial real estate credit will undergo a hard landing as interest rates keep rising.
- Rahmani is calling for a more than 30% drop in office values due to lower cyclical demand and the rise in hybrid work, he wrote in a note, as well as a 10%-15% slump in multifamily in remote-heavy markets facing elevated supply (i.e., New York, San Francisco, California, and Austin, Texas). The time frames for those forecasts were not mentioned.
- As such, he warned that Ares ( ACRE ) has high exposure to the office space (at 37% of loans) "and proportion of non-accrual and risk rated 4-5 loans at 19.5%."
- The Market Perform rating diverges from the average Wall Street analyst rating of Buy.
- Seeking Alpha contributor On The Pulse last month viewed ACRE as a Buy, calling at a "high margin of safety."
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Ares Commercial Real Estate downgraded as KBW warns of its high office exposure