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Ares Commercial Real Estate Corp (NYSE:ACRE)
Q3 2020 Earnings Call
Oct 29, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Ares Commercial Real Estate Corporation's Conference Call to discuss the company's Third Quarter 2020 Financial Results. [Operator Instructions]

I will now turn the call over to Veronica Mayer from Investor Relations.

Veronica Mendiola Mayer -- Principal

Good afternoon and thank you for joining us on today's conference call. I am joined today by our CEO, Bryan Donohoe; David Roth, our President; Tae-Sik Yoon, our CFO; and Carl Drake, our Head of Public Company, Investor Relations. In addition to our press release and the 10-Q that we filed with the SEC, we have posted an earnings presentation under the Investor Resources section of our website at www.arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, and similar expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgment. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. The company's actual results could differ materially from those expressed in the forward-looking statements as a result of a number of factors, including those listed in its SEC filings. Ares Commercial Real Estate Corporation assumes no obligation to update any such forward-looking statements. During this conference call, we will refer to certain non-GAAP financial measures. We use these as measures of operating performance, and these measures should not be considered in isolation from or as a substitute for, measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like-titled measures used by other companies.

With that, I will now turn the call over to Bryan Donohoe.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Thanks, Veronica. And thanks everyone for joining today. As you can see from our earnings release, our business continues to perform well despite conditions brought on by the pandemic. In order to understand how we are positioned today, I think it's important to first remind everyone that since the inception of ACRE, we are focused on defensively positioning our portfolio to withstand market downturns. For example, we carefully structured our loans with meaningful covenant protections to make sure we can protect our rights. We held firm in our deal negotiations to ensure that we are protected from falling interest rates by getting LIBOR floors. We maintained the portfolio with a 94% allocation to senior mortgage loans, and we purposefully avoided marketable securities. We shied away from what we viewed as overpriced gateway markets and pivoted more and more to multi-family, office properties with long-term leases, and industrial properties and focused on areas with lower cost of living, lower state taxes, and growing demographics. We diversified our funding sources, especially with respect to more volatile asset classes such as hospitality, and structured our financing so that we do not have margin calls based on changes in market spreads. We believe our ability to successfully navigate this cycle is in part due to these strategic decisions. As a result, our portfolio quality, earnings, and dividends have all remained relatively stable. This stability can be seen through our third quarter core earnings per share of $0.31, which is consistent with our second quarter levels. It can also be seen in the credit performance of our portfolio in the quarter.

Our portfolio has a number of attributes that drive this stability. It is very well diversified across 49 different loans and is primarily collateralized by multi-family, office, and industrial properties. We have a total of five hotel loans, all of which are limited or operative select service models, and no loans that are collateralized by stand-alone retail centers. Our 49 loans are spread across 17 different markets with minimal exposure to gateway cities and with no full service lodging assets in any of these gateway cities. Within our multi-family and office portfolio, we focus on light transitional properties where there are generally increasing cash flows and growing tenancy, which we believe counteract some macro headwinds that may exist. Our office portfolio is primarily comprised of Class A properties and their respective markets with institutional quality tenants and long-term leases. In fact, the average remaining lease for our Top 30 tenants by the percentage of leased area is 5.5 years longer than the fully extended average term of our loans. We have less than 2% exposure to co-working tenants in our office portfolio. Similarly, in our multi-family portfolio, we have avoided major cities and luxury high rises. In both our multi-family and office properties, we are continuing to see positive trends in underlying tenant rent collections in the mid-90% range and the average occupancy rate for our multi-family portfolio is at approximately 90%. The work of our dedicated asset management team has been exceptional, and is also reflected in the performance of our portfolio. This is a real strength of our platform.

In the third quarter, there were no changes to the number of loans on non-accrual status. And 100% of our loans held for investment made their contractual debt service payments for the quarter and for the October payments date. Our internal loan risk ratings also remained steady. On a one to five rating scale, with one being the lowest risk and five being the highest, 91% of our loans were rated a three or better, with an average rating of 3.0. In addition, our liquidity position remains stable at approximately $91 million. We have also taken the initiative to further reduce our leverage. We now sit at 2.8 times debt-to-equity overall, and 1.8 times on a recourse basis, levels that we believe are appropriate for financing investment portfolio consisting of 94% senior loans. As we've navigated this time pandemic with improving liquidity, we believe we are in a position to begin selectively making new investments, albeit with a high bar for safety and appropriate returns. Our team's been active in other parts of our business and we're seeing a substantial pickup in both the quantity and quality of transactions. This is especially true in property types that have historically had less volatility like multi-family, industrial, self storage, and in states benefiting from tax migration. Our goal remains to rigorously preserve our credit quality, while having the optionality to go on offense based on the opportunity set, which we're really excited about. Overall, we're proud of our team and efforts to-date, which have resulted in ACRE's ability to pay a stable and consistent dividend to shareholders.

I'm going to now turn the call over to Tae-Sik for some additional details on our third quarter results and financial position.

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

Great. Thank you, Bryan. And good afternoon, everyone. Earlier today, we reported GAAP net income of $14.9 million or $0.44 per common share, and core earnings of $10.5 million or $0.31 per common share, largely consistent with our prior quarter results. Our earnings continue to benefit from LIBOR floors, with 95% of our loans having such built-in protection at a weighted average rate of 1.74%. As discussed in our last earnings call, during the second and third quarters, we sold or monetized five loans at an average of 97% of par, including one hotel loan. These transactions improved our cash position, reduced our hotel exposure, and lowered our overall leverage. The difference between our GAAP and core earnings in the third quarter reflects the $4 million or $0.12 per common share in loss associated with the sale of two of these loans. With respect to Westchester Marriott, performance continue to improve in the third quarter. We are seeing the positive impact of our plan to reduce expenses and rebuild our revenue base. Our sales and marketing team successfully solicited government and other central workers. And our hotel has benefited from less competition from other properties in the area that are either temporarily or permanently closed. As of September 30, 2020, we continued to build book value up to $14.03 per common share, versus $13.91 at the end of the second quarter of 2020.

Turning to our liquidity, as of yesterday's close, we had approximately $91 million in unrestricted cash. Given our earnings from operations outlook and current cash flow needs, we believe that our liquidity levels are appropriate. However, should the need for further liquidity arise, we have additional sources of cash available to us, including reinvestment capacity under the Ares warehouse. Now, let me discuss our liabilities and debt facilities. We continue to reduce our debt to equity ratio to 2.8 times versus three times at the end of the second quarter, and 3.2 times as of the end of the first quarter, all of which excludes CECL Reserves. On a recourse basis, our debt-to-equity leverage is 1.8 times. And as a reminder, none of our warehouse financing facilities contain mark-to-market remarketing provisions that are based on changes in market borrowing spreads. Finally, our CECL Reserve was at $27 million at the end of the third quarter, lower by approximately $1 million from the prior quarter. This reduction in the CECL Reserve was primarily attributable to contract reductions and loan commitments and pay downs, and the shorter average remaining term in the overall loan portfolio.

And with that, I will now turn the call back over to Bryan for some closing remarks.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Thanks, Tae-Sik. In conclusion, we believe we are very well positioned based on the differentiated actions we took to structure our portfolio defensively prior to the pandemic. All of the actions we have taken to defensively position our portfolio diversify our loans geographically and by market and spread out of our funding sources has positioned us to deliver consistent earnings and dividends. With our current liquidity position, we expect to be in a position to selectively take advantage of the more attractive investment opportunities, which we believe we will continue to see in the market going forward. We appreciate the support from our shareholders and employees. And thank you for the time today.

With that, I'll ask the operator to open the line for questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question will be from Doug Harter of Credit Suisse. Thanks. Can you just talk about your current liquidity holdings, kind of how you think that that progresses over the coming quarters? And, you know, assuming that that number comes down, how would you prioritize deploying that liquidity?

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

Sure, Doug. This is Tae-Sik. You know, liquidity is obviously a paramount importance and we have been building the amount of liquidity over the past few quarters. As you can see, as of even, you know, just the last couple of days, we're up to about 91 million, you know, which if you look at it as a percentage of our equity, look at it as a percentage of our overall loans and potential needs, you know, we think we're at a very appropriate level today. Obviously, we're also taking into consideration, you know, what we anticipate our cash flow from operations to be on a go-forward basis. I think having said all that, you know, we-you know, we remain cautious. You know, the markets are quite volatile, so we want to make sure that we continue to have, you know, appropriate levels of liquidity to support the business. At this point, you know, we do feel we're in a good position. So, we are evaluating the uses of that capital, including, you know, deploying that capital into new investments, but no firm decisions have been made on that. But, you know, we do believe that liquidity is at a good level, where, you know, we can start to look at some offense opportunities, while at the same time, making sure that we have the appropriate amount of defensive liquidity, and that we have other plans in place that we can move very quickly on to actually add additional cash onto the balance sheet if necessary.

Doug Harter -- Credit Suisse -- Analyst

Got it. And Tae-Sik, it looked like, you know, kind of the average asset yield ticked up during the quarter. You know, was there anything kind of that would-you would kind of call out in there that we should be aware of?

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

I mean, not really. I think, you know, you'll see a little bit of changes in asset yields, you know, based upon portfolio composition, based upon potentially some modifications, potentially on some partial repayments, or full repayments. But no, it's not really due to changes in, you know, big, big, significant changes in the portfolio, I think its fine tuning of the portfolio. You know, one of the nice things, again, about our portfolio is that, you know, 95%, 97% of our portfolio is either floating rate, you know, with a fixed LIBOR floor. We also mix in, you know, a small amount of fixed rate loans. So even with the sharp changes and drop in LIBOR that we've seen, you have not seen a change in our overall unleveraged effective yield. So, we do expect this to be relatively steady and whatever changes you see so far, sort of quarter-to-quarter are not due to any significant changes in the portfolio.

Doug Harter -- Credit Suisse -- Analyst

Great, thank you.

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

Thank you, Doug.

Operator

The next question is from Steve DeLaney of JMP Securities.

Steve DeLaney -- JMP Securities -- Analyst

Hi, everybody. Congratulations on the quarter. Wondering if you could give us an update on your Westchester hotel, any strategy, any changes there from a strategy standpoint? And if you could estimate sort of the quarterly cash drain that you're now seeing on the property? Thanks.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Yes. Thanks for the question. I think, you know, the strategy we took at the outset with the Westchester Marriott really mirrors a lot of the way we thought about the overall portfolio, which was to take a long-term view and I think that served us well in the portfolio and certainly with respect to Westchester Marriott. As Tae-Sik indicated in his remarks, we've benefited from the fact that a good portion of our competitive set has closed either temporarily or permanently. So, as you've seen this national uptick in demand and while it's certainly less than prior years, as you all know, we've been able to kind of harness more of that demand into our assets. So there's been some one-off events that have continued to benefit us. Obviously, it's still relatively opaque to book group business on a go-forward basis, but we are seeing the benefits of staying open, of containing our costs, and really of minimized any downsides with respect to that asset.

Steve DeLaney -- JMP Securities -- Analyst

And, Bryan, in terms of just quarter-to-quarter operating results, approximately what would you say the impact currently is on your earnings?

Bryan Donohoe -- Partner, Head of Real Estate Debt

Really relatively flat overall.

Steve DeLaney -- JMP Securities -- Analyst

Okay.

Bryan Donohoe -- Partner, Head of Real Estate Debt

And I think it's obviously the risk in lodging assets generally is the daily mark-to-market as of revenues.

Steve DeLaney -- JMP Securities -- Analyst

Sure.

Bryan Donohoe -- Partner, Head of Real Estate Debt

But-you know, so it's tough to say how consistent that will be. But we've been extremely pleased with the decisions that we've made at the asset. I mean, to have created this cost contained asset and still be able to successfully manage, and like I said, harness as much revenue as possible, given 40% reduction in our competitive set. We're really pleased with what we've done there.

Steve DeLaney -- JMP Securities -- Analyst

Thanks for that. And then, as a follow-up, we noticed this morning that Blackstone announced they had done $1 billion CLO in the fourth quarter. Your 2017 CLO, I think I believe that reinvestment expires in March. Just curious how you're seeing that market, that financing market these days, and if you have the flexibility to call your CLO either before or, you know, when it-when reinvestment expires, what your plan is, you know, next spring? Thanks.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Yes, we look at a lot of different options with respect to our financing, as we indicated earlier on the call. I think the fact that the capital markets have returned for CLOs and CMBS, generally, I think, are a couple of positives, right? First and foremost, that fluid really helps to allow for willing buyers and sellers to come back to the table. And so, I think over the long term, those types of markets being open should allow for more repayments over time, just in general, right, and allowing a more normal course of business. We evaluate on a constant basis, the most efficient way to finance our assets. And obviously, as we've said in prior quarters, our partners on the financing side have been extremely constructive. But certainly there's accretive solutions in the CLO market today, relative to certain financings, warehouse lines and the like, so it's something we're going to continue to look into like we do in the normal course.

Steve DeLaney -- JMP Securities -- Analyst

Okay, great. Thank you for the comments.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Thank you.

Operator

The next question will be from Stephen Laws of Raymond James.

Stephen Laws -- Raymond James -- Analyst

Hi, good morning. You noted in your remarks, leverage continues to decline, and you're certainly benefiting from LIBOR floors. You know, thinking about the valuation, you know, how do you evaluate potential stock repurchases against the leverage declines you've made? Is that something you consider here given the surprise to book? You know, and-you know, pretty small amount of unfunded commitments, I guess, relative to the total portfolio size, so can you maybe comment on valuation and how you think about returning capital to shareholders possibly through a stock repurchase?

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

Yes, [Speech Overlap]

Bryan Donohoe -- Partner, Head of Real Estate Debt

Yes, go ahead, Tae-Sik.

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

Yes. Great, great. Sure, Stephen. So, in terms of, you know, share repurchase, as you know, several years ago during a, sort of like capital markets timing, you know, we did go ahead and repurchase some shares. And, you know, we continue to evaluate, you know, the attractiveness of doing so, I mean, obviously, with our shares trading at current levels, you know, a significant discount to our book value. It would certainly be accretive from a book value per share perspective to do a meaningful share buyback. You know, at the same time, we obviously have other uses of capital, including some of the things that we just talked about, in terms of having some offense opportunities as well as making sure that we have enough cash and liquidity for defense purposes as well just given the great volatility of the market. So, you know, we haven't obviously done a share buyback recently, but it is certainly something that we will continue to evaluate. And the considerations that we will take into account is certainly, you know, accretion to book value per share. But also, you know, making sure that again, we sustain a sufficient level of liquidity, and also sustain a level of market capitalization that will continue to make our shares liquid in the market. You know, as one of the challenges we have at ACRE is just a small size of our overall balance sheet, including equity capital. And to the extent that we do share buybacks, that will obviously decrease that share capital further, which is something-again, it won't stop us from doing it, certainly, but it's certainly one of the factors that we would want to take into consideration.

Stephen Laws -- Raymond James -- Analyst

Great. And I guess, you know, you probably should have started with the leverage side, but you know, you brought leverage down almost half a turn over the last couple of quarters. You know where do you see that near term? Is there a level where you start to make new investments? You know, are you focused on-you know, is there a target that you'd like to get to 2.5 or somewhere else? Can you maybe talk about where, you know, you'd like to see leverage trend over the next six to 12 months?

Bryan Donohoe -- Partner, Head of Real Estate Debt

Sure. You know, great question. And, you know, we've been-we have been very focused on reducing our leverage and we're balancing our leverage with, you know, all of the other important factors, right, all the other important factors about, you know, generating attractive ROEs to our investors, you know, continuing to pay a consistent cash dividend to our investors. You know, it'd be so called easy enough for us to further delever and delever the balance sheet to make it more conservative and safe on a relative basis. But obviously, that has its knock on effect of reducing earnings and reducing our ability to pay dividends. And so, we're trying to find the right balance. And so, I would say, you know, we have been, you know, helped by the fact that we have our LIBOR floors so that we can continue to generate very attractive returns with, you know, $91 million of liquidity and with lower leverage. And so, we'll continue to evaluate it, you know, our leverage levels and the overall context. Having said all that, you know, I think we are still comfortable saying that, you know, the target leverage that we are looking at right now is right around, call it 2.75 plus or minus 25, so a range of 2.5 to three is kind of where we think given today's market conditions that we would want to target today, so we're right there. And, you know, again, it'll be fluid depending on what happens with market conditions, what happens with pipeline, what happens with, you know, our overall loan performance, and we're always looking to potentially change it. But for the snapshot right now, it's somewhere between that 2.5 to three with, you know, a midpoint of 2.75.

Stephen Laws -- Raymond James -- Analyst

Right, thanks a lot.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Thank you, Stephen.

Operator

The next question comes from Jade Rahmani of KBW.

Jade Rahmani -- KBW -- Analyst

Thank you very much. Ares' management participated through a fund in a single family rental transaction with [Indecipherable] partners, an active participant in that sector. And one of the other commercial mortgage REITs called [Indecipherable] that space has attractive on the debt side. Is that an area that potentially could be earmarked for a new investment?

David Roth -- Partner, Head of Ares U.S. Real Estate Private Equity, President of Ares Commercial Real Estate

Yes. Thanks for the...

Bryan Donohoe -- Partner, Head of Real Estate Debt

David, do you want to give a little bit of an intro there?

David Roth -- Partner, Head of Ares U.S. Real Estate Private Equity, President of Ares Commercial Real Estate

Yes, I was going to say-you know, I'm obviously involved with the equity side of business as well and we did announce the transaction. Obviously, it's a public company transaction, so I can't really comment on that, but needless to say, when you do something like that, you-it reflects that you find the cash flows and the sector attractive. I've spent a long time in the sector. I was, in my prior life, at Blackstone, was responsible for the initial investment in [Indecipherable] homes, so have a lot of expertise. Was on the public company board for a long time. And so, I would just say as a concept, we like to space, and obviously, work hand-in-hand with our partners on the debt side to help them understand opportunities that might exist in that space.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Yes. And Jade, I'll just add-I mean, obviously, David speaks to the collaboration between the groups and our own involvement in between debt equity and investments in different sectors like that. I think one of the phenomenon we're seeing, right, as you've kind of redlined retail and certainly at least temporarily, being extremely cautious on lodging assets today, with that reduction in the denominator of effectively makes you look outside the normal four or five food groups of our investment universe, right. And I think when you look around, what you see is extremely consistent rental collections despite this downturn in that sector. And so, I do think it's an attractive place to play and I think it's also an asset that becomes very leverageable by our counterparts. So, I think it is something that will see an increased share of the pie going forward.

Jade Rahmani -- KBW -- Analyst

Thank you. And can you give a flavor for some of the other types of transactions in the pipeline? You said, you're very excited about the potential to deploy capital.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Yes. I mean, what we've seen is, as certain banks have pulled back from the markets, we're seeing attractive opportunities in industrial that have typically been more well banked by the super regional banks and the like. And certainly in the multi-family space, the continued liquidity being provided by Fannie and Freddie has really been an anchor for that market. And so, we can step into assets that are in lease-up in the markets that we cited some of those tax migration areas, mid-rise buildings that have been just almost uniformly less affected by the virus or the fallout from the virus, and really attach at interesting levels, and create meaningfully higher spreads relative to where these same assets would have traded 12 months ago. Beyond that, I think there's certainly, you know, continue to be a smattering of more esoteric asset classes that you've seen become more incumbent in the real estate equity markets, but the primary focus is going to remain in cash flowing multi-family, industrial and the like.

Jade Rahmani -- KBW -- Analyst

Thanks. In terms of the non-accrual loans, what's the aggregate number of individual loans on non-accrual? And are there any additional loans targeted for sale?

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

Sure, Jade. So the number of loans in non-accrual status is three. You know, early this year, right at the onset of the pandemic, I think we had four loans. We have taken one off non-accrual status based upon some modifications that we were able to get done with the borrower, which resulted in both a partial pay down and some funding of reserves that really significantly increased the likelihood of, you know, interest payments, so we took the one loan off of non-accrual. So, as of 3Q we have three loans that are, that are on non-accrual. And in terms of loans for sale, now, as of 09/30, we had no loans held for sale. As of second quarter, as we mentioned, you know, we had a couple of loans that were held for sale. We took the marks through unrealized loss in the second quarter, and obviously reversed that in the third quarter, so you'll see some activities there, but as of third quarter, there is no loans available for sale.

Jade Rahmani -- KBW -- Analyst

And in terms of the outlook for those three loans, what do you anticipate happening?

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

I think with respect to those three loans, and really the entire portfolio, conversations have remained very constructive with our borrowers. And, you know, we've continued to maintain dialogue on a weekly basis with them and we're seeing increased collections throughout the portfolios we mentioned, right. If we look at the trend line, we've been picking up a point or two on rent collections underlying the portfolio throughout, you know, certainly for the last three, four months. And that progress and the fact that these borrowers, in most cases have continued to infuse equity into the assets, makes us feel pretty confident that resolution will be positive ultimately. And I think like a lot of borrowers today, I think they need more time to execute their business plan, but we still feel confident in the ultimate outcome.

Jade Rahmani -- KBW -- Analyst

Thank you very much.

Bryan Donohoe -- Partner, Head of Real Estate Debt

And just add to that, Jade.

Jade Rahmani -- KBW -- Analyst

Go on.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Just adds to that, I think, you know, again, it's important to note that the three loans that are on non-accrual are unique and that they continue to pay current interest, so they are not behind an interest, and yet, you know, I think we took steps to put them on non-accrual and start amortizing down our carrying value, you know, as we are receiving the interest payments. But again, I just want to make sure, you know, this is not the typical non-accrual situation where you're not accruing and you're not receiving the interest payments. In these all three situations, we're actually receiving the interest payments and yet we're still maintaining them on non-accrual status.

Jade Rahmani -- KBW -- Analyst

Thanks very much.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Thank you, Jade.

Operator

[Operator Instructions] The next question is from Charlie [Phonetic] JPMorgan.

Charlie -- JPMorgan -- Analyst

Hi, good afternoon, everybody. Thanks for taking the questions. I noticed in the Q there was four loan modifications that happened in the quarter. Can you talk to the nature of those modifications, and I'm wondering if those were all met with additional equity contributions from the sponsors?

Bryan Donohoe -- Partner, Head of Real Estate Debt

Yes, certainly. Good question. I think as a backdrop, given the types of assets we finance, and especially, if you compare what we do relative to CMBS, where it's really kind of a closed circuit, loan modifications can be done in the normal course as business plans progress, accelerate, decelerate and the like. And obviously, the impact of COVID has caused both acceleration in certain business plans and deceleration in others. In general, the things that we will tweak are going to be maturity date, certain deferral of covenants, and in almost every instance, we're getting something in return for that, that makes sense based on the specific business plan and situation. So-and in many cases, that does include an equity infusion. And as I indicated earlier, we think that equity infusion that has been made in the normal course by these borrowers speaks to their own belief in their equity investment, and I think, that speaks positively to ultimate outcome for the debt investment as well.

Charlie -- JPMorgan -- Analyst

Okay, got it. And then, if you could just specifically provide any additional color on the Alabama student housing loan, I think the maturity was extended to December of this year, just wondering how things are progressing on that asset?

Bryan Donohoe -- Partner, Head of Real Estate Debt

You know, that's an asset that certainly fits into that category of a business plan interrupted by COVID and the plan is for that asset to be sold by the current owner. And I think the extension just gives really a runway for that sale to occur.

Charlie -- JPMorgan -- Analyst

Got it. Okay, thanks very much for taking the question.

Operator

And this concludes our question-and-answer session. I'd now like to turn the conference back over to Bryan Donohoe for any closing remarks.

Bryan Donohoe -- Partner, Head of Real Estate Debt

Thank you. I just want to thank everybody for their time today. Certainly, appreciate the continued support of ACRE and look forward to speaking with you again on our next earnings call. And if you have any additional questions, please reach out to our IR team. Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available approximately one hour after the end of this call through November 5, 2020 to domestic callers, by dialing 1-877-344-7529 and to international callers by dialing 1-412-317-0088. For all replays, please reference conference number 10148188. An archived replay will also be available on our webcast link located on the homepage of the Investor Relations Resources section of our website.

Duration: 34 minutes

Call participants:

Veronica Mendiola Mayer -- Principal

Bryan Donohoe -- Partner, Head of Real Estate Debt

Tae-Sik Yoon -- Partner, Chief Financial Officer of Ares Real Estate Group and Chief Financial Officer and Treasurer

David Roth -- Partner, Head of Ares U.S. Real Estate Private Equity, President of Ares Commercial Real Estate

Doug Harter -- Credit Suisse -- Analyst

Steve DeLaney -- JMP Securities -- Analyst

Stephen Laws -- Raymond James -- Analyst

Jade Rahmani -- KBW -- Analyst

Charlie -- JPMorgan -- Analyst

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