W
e recently compiled a list of the 10 Worst Performing REITs in 2024, and we're taking a closer look at where Ares Commercial Real Estate Corporation (NYSE:ACRE) stands among them.
The real estate sector has been eagerly awaiting Fed rate cuts, which kicked off with a half-percentage point reduction on September 18. However, the probability of future rate cuts remains uncertain. Logan Mohtashami, HousingWire analyst, notes that consumers assume mortgage rates will drop with progress on inflation. If mortgage rates reach 6% and stay there, sales could grow despite being at historic lows.
Commercial real estate is also expected to benefit from the Fed's shift in policy, which Wells Fargo analysts call "the most notable green shoot." Willy Walker, Walker & Dunlop Chairman and CEO, believes that easing volumes in commercial real estate will drive growth as rates continue to decline. He also highlights the need for a comprehensive housing policy, citing Biden's proposed 5% rent control and Kamala Harris' plan for 3 million new homes over four years.
Warren Wachsberger of Eldridge Acre Partners sees short-term issues in US commercial real estate creating investment opportunities due to higher interest rates, less credit availability, and supply-demand imbalances.
To compile our list of the 10 worst performing REITs in 2024, we used a stock screener to find stocks with significant year-to-date declines. Ares Commercial Real Estate Corporation (NYSE:ACRE) ranks 6th on this list, with a year-to-date decline of 33.69% and 8 hedge fund holders as of Q2 2024.
Ares Commercial Real Estate Corporation is a REIT that primarily engages in originating and investing in commercial real estate loans and related investments. It offers flexible financing solutions through its national direct origination platform, which benefits from its scaled operations, quality diversified portfolio, and attractive dividend yield opportunity.
For the second quarter of 2024, ACRE reported a GAAP net loss of $6.1 million due to resolving risk-rated loans and maintaining financial flexibility. The REIT has total originated commitments of $2.2 billion across 42 loans as of June 30.
While we acknowledge ACRE's potential as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns within a shorter timeframe.
