Good morning. Welcome to Ares Commercial Real Estate Corporation's Conference Call this morning to discuss the company’s First Quarter Earnings and its proposed transaction with Alliant Capital LLC. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Wednesday, May 15, 2013. 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 the words such as anticipates, believes, expects, intends, will, should, may and similar expressions. The company’s and Alliant Capital LLC’s actual results could differ materially from those expressed in the forward-looking statements for any reason included those listed in its SEC filings. Ares Commercial Real Estate Corporation assumes no obligation to update any such forward-looking statements. Please also note the past performance or market information is not a guarantee of future results. The accompanying documents and comments made during the course of this conference call may contain information in respect of each of the company and Alliant Capital LLC, neither company makes any representation as to the accuracy of the other company’s information. During this conference call, the company may discuss core earnings which is a non-GAAP financial measure as defined by SEC Regulation G. Core earnings is used among other things to compute incentive fees to the company's manager and the company believes it provides useful information to investors regarding financial performance, because it is one method the company uses to measure financial conditions and results of operations. Core earnings should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. For these purposes the company defines core earnings as GAAP net income/loss excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization, related to targeted investments that are structured as debt to the extent of the company forecloses on any properties underlying such debt, any unrealized gains, losses or other non-cash items reported in net income are loss for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income or loss. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges as determined by and approved by a majority of the independent directors of the company. A reconciliation of core earnings to net income/loss attributable to common shareholders to most directly comparable GAAP financial measure can be found in the company's earnings release issued earlier this morning and posted on the company's website at arescre.com. I will now turn the call over to Mr. Arougheti, Commercial Real Estate Corporate Chairman.

Great. Thank you, Operator, and good morning, everyone. Thanks for joining us for the call this morning. We are incredibly excited today to update you on several transformational events that we believe will advance our goal of building a world-class real estate platform here at Ares. First, let me highlight a few recent additions to our team. I’d like to formally introduce and welcome Todd Schuster, who has served and continues to serve as Director on Ares Board, and will join our executive management team as Co-CEO starting June 1st. For those of you who don't know Todd. He is the Founder and Former CEO of CW Financial Services, a leading diversified commercial real estate finance company. Over 18 years at CW, Todd built a market-leading originator and servicer. CW’s special servicing business, currently owned by Fortress Investment Group nomination second largest special servicer and CW’s multifamily business currently owned by another public company Walker & Dunlop provides GSE back loans. Todd’s experience should be particularly relevant as we integrate and grow Alliant Capital, the acquisition of which was disclosed this morning. We are so thrilled to have such an experienced and proven executive join our leadership team. In addition, I want to highlight the recent addition of Brett White, as an Independent Board Member. We believe that Brett’s past experience as the CEO of CBRE Group, the world’s largest commercial real estate services and investment firm will be instrumental in helping us build ACRE into a market-leading commercial real estate financial services company. His commitment and engagement provides management with invaluable counsel and perspective. Welcome Brett. With an extended leadership team in place, I’ll touch briefly on the proposed Alliant transaction leaving our management team to provide additional information a little bit later in the call. ACRE is building…

Thank you, Mike. Let me start out by echoing Mike’s comment. We are very excited about the steps Ares has taken to scale and enhance its real estate operation and broaden our market presence, and we look forward to the potential positive impact these enhancements will play and we believe will provide to ACRE. First, I would like discuss the proposed Alliant Capital LLC transaction in greater detail before I turn the call over to Bruce Cohen, our President; and Tae-Sik Yoon, our CFO to cover our first quarter. We have entered into a definitive agreement to acquire Alliant’s multifamily mortgage loan origination and service business for approximately $62.8 million to combination of cash and stock. Please note that Alliant Capital Limited, which is on a national scale provides tax credit equity for the financing and development of portable housing is not included in the acquisition. It will remain with the seller. We believe this transaction will benefit shareholders since we expect it will be accretive to our 2013 and 2014 earnings, and provide four significant strategic benefits. First, it increases scale, second, it broadens our product offering and offers revenue synergies, third, it diversifies our revenue and earnings, and finally, it provides entry into an attractive market segment. Before I address each of these benefits, let me first provide an overview of the platform we intend to acquire. With approximately 90 professional, Alliant operates a national multifamily origination asset management and servicing platform. Most for -- mostly for government sponsored entity insured loans. Alliant business is centered on origination and retaining the servicing of middle-market firstly in multifamily loans. Mostly, as Fannie Mae approved delegated underwriter service or otherwise known as DUS. Alliant is one of only 24 Fannie Mae DUS license lenders and the company was recently approved…

Thank you, John. I’ll cover our recent investment activity and our pipeline in the context of recent market condition. As you can see from our earnings release, we led the closings of two new loan commitments, totaling $132.6 million, with initial funding of approximately $51 million, which we also previously discussed on our fourth quarter earnings call on April 1st. As you may recall these loans closed on March 28th and 29th, so our first quarter results did not show any material economic benefit from these new loans. Collectively, these two loans provided an initial unlevered effective yield of 5.9% for the senior loan and 12.1% for the B-Note. Since the end of the first quarter, we’ve announced one additional loan closing a $15 million first mortgage loan commitment collateralized by an office property located in the Silicon Valley area in Mountain View, California. The loan carried an interest rate of LIBOR plus 475 subject to a 50 basis point LIBOR floor. Overall, the loan had a loan-to-value of only 64%, with an effective unleveraged yield of 5.7%. Our return expectation for this loan will exceed 10% on a levered basis. As we discussed on our fourth quarter and year-end call on April 1st, market conditions have improved from a property fundamental standpoint. Our performance remains somewhat spotty across property types and geographic locations. The multi-family segment is clearly the strongest from a rent and a price appreciation perspective. Equity capital is flowing more freely into secondary and tertiary markets, and across a wider variety of property types. In addition, transaction volumes appear to be slowly improving seasonally. We expect volume for the remainder of the year to be healthy and to likely exceed 2012 levels. On the other hand, accommodative monetary policies and a global search for yields have…

Great. Thank you, Bruce. I will now provide a short summary of the financial results of our company for the first quarter 2013. On our website arescre.com, we posted our first-quarter earnings announcement as well as our first-quarter 2013 10-Q, which was also filed this morning. During the first quarter 2013, our loans held for investment generated approximately $6.7 million of gross interest income. Our associated interest expense was $1.4 million, resulting in net interest margin of approximately $5.3 million for the quarter. Adjusting for our convertible interest expense of approximately $1.9 million, our net interest margin was been approximately $3.4 million. Other expenses for the first quarter totaled approximately $3 million, including base management fees, third-party professional fees, other general and administrative expenses and $640,000 expenses incurred in the first quarter associated with the Alliant Capital transaction. As we discussed in our prior earnings calls in April, our first quarter earnings were impacted by the temporary dilutive impact of the $69 million convertible note issuance that we completed late last year. Our first quarter net income attributable to common stockholders was $0.3 million or $0.04 per basic and diluted common share. And our core earnings for the first quarter was $9.9 million or $0.09 per basic and diluted common share after adding back approximately $398,000 of non-cash unrealized mark-to-market loss on the derivative relating to our convertible notes and $136,000 of non-cash stock-based compensation. Both the net income and the core earnings results that I just previously discussed includes the impact of the $640,000 or $0.07 per common share in transaction expenses that we incurred during the first quarter 2013 relating to the Alliant transaction. Without the impact of the transaction expenses, our core earnings per share would've been $1.5 million or $0.16 per basic and diluted common share.…

Thanks Tae-Sik. As Mike started out by saying in this earnings call, we are building a world-class real estate investment platform here at Ares. I'm very excited about adding Alliant to the ACRE strategy. We covered a lot of territory today. So let me close with a few key points. We’ve talked a lot about scale in our business and the Alliant transaction provides greater skill to our origination platform. And it significantly expands our market presence. Furthermore, it broadens our products into longer duration loans. And we believe that complementary products will drive revenue synergies across our two platforms. Upon closing, we believe we will be uniquely positioned as one of the only public mortgage REITs with a DUS lending business and a select group of non-bank mortgage companies with DUS and FHA, Ginnie Mae origination and servicing approved licenses and a balance sheet to carry those loans. From a financial point of view, as Tae-Sik stated, we believe this transaction will be accretive to our earnings. In addition, we believe the addition of a higher return fee-oriented business will improve the returns and the efficiency of our capital invested and provide some level of growth that is self funding. We have an excellent and experienced team in place to grow the combined platform and we are very fortunate, very fortunate to have Todd Schuster, very successful executive with a great deal of commercial real estate lending experience joining us here at Ares. Together with the area transaction, Ares management is now one of the unique largest real estate investment managers in the world. We believe it will be important to leverage that strength into our lending activities both in the U.S., Europe and India through the managed investment vehicles, which include ACRE. We hope you share our excitement for this transaction that continued growth for real estate platform. It’s very exciting. We’re bolstering our direct origination strategy. We’re creating more touch points in the industry and we’re positioning ourselves to be a leading capital provider with the broadest product offerings. Most importantly, we believe this will be very rewarding to all of our shareholders. On behalf of the entire management team and our dedicated team of investment professionals and those that are about to join us, we want to thank our shareholders for their continued support. We also look forward to working with the professionals at Alliant in the future. Operator, would you please open the line for Q&A.

(Operator Instructions) Our first question comes from Joel Houck of Wells Fargo. Please go ahead.

Good morning. First question around the investment capacity, in your commentary, you mentioned you have $40 million to $60 million of additional capacity for senior loan investments but $53.6 million of that is essentially spoken for in terms of commitment. So given that it would appear as capital raising need coming out of stocks book value. And your thoughts on what type of capital revenue you’d consider to kind of continue to leverage the portfolio without diluting shareholders at current stock price?

Hi, Joe. This is John. Thank you. As you know, we've been always diligent about raising capital at the end of last year when we didn't like the stock price, we offered to convert. And we thought that was a very smart and accretive transaction for our shareholders. We’re large shareholders ourselves. So whether it’s financing the transaction to our banking relationships, selling assets, using the capital markets, debt and equity, we’re going to continue to explore those opportunities as we get closer to this transaction timing. Obviously, we've also put our shelf out which gives us a lot of flexibility and will be opportunistic.

Okay. John, I think one of the challenges as you’ve got $0.25 dividend and certainly that’s higher than the quoting power, but that’s still represents less than 6% return on book equity. I mean, is there -- can you give us some sense in terms of what else maybe if the acquisition is going to drive core earnings in the dividend higher. So they kind of clear the market, if you will, so the stock could trade at a premium to book value?

Hi, Joe. It’s Mike Arougheti. Maybe I’ll take a stab at that one. Few things, I think many of the analysts on the call and many of the shareholders have known areas in the public markets for quite some time and have seen us navigate the growth of the specialty finance company through periods like the one we’re now. And obviously as John mentioned there is a lot of experience and thought that goes into all of our capital raising strategies. I’d also mention including you there are many people on the phone who understand the importance of scaling as you grow a finance company, such as ACRE. When you look at the value drivers within ACRE as we've talked about on our prior two calls, there's a significant amount of embedded earnings leverage that you get just from growing the portfolio, given the expense base of the company. So in many respects, when we talk about accretion and dilution, I think you have to focus on accretion and dilution of earnings as well accretion dilution to book value as we continue to grow. Secondly, as we mentioned in the prepared remarks, clearly the acquisition of Alliant is a big catalyst for earnings growth, the highly efficient return on capital business. It creates diversified revenue streams for the company and as Tae-Sik and John both mentioned, we expect the transaction will be accretive in 2013 and 2014. So we made no mistake. We’re no secret that we expect to build a large market-leading investment platform here at ACRE and part of that is predicated on scale. And I think the good news is given the structure of the balance sheet with scale comes earnings growth and with earnings growth, obviously comes dividend coverage and dividend growth.

Yeah. I completely understand, I guess, in terms of the Alliant deal, is there -- once that closes, there is going to be pro forma financial information available for our analyst and investors could maybe better get handle on the model and accretion?

Sure, Joel. This is Tae-Sik. Yeah, we do expect shortly to file information about the transaction in more detail including the financials of the target company as well as pro forma financials.

Okay. Thank you very much guys.

Thank you, Joel.

The next question comes from Steve Delaney of JMP Securities. Please go ahead.

Hey, good morning everyone. And congratulations on the additions to the team and the Alliant acquisition, you guys have been busy?

Thank you.

Joel hit on a couple of things that I think were good obvious questions, especially the request to the need for additional information. So I was concerned because it’s a private company, we might not see anything before closing but it sounds like we will. So thank you for that. With respect -- I'm going to focus little bit on $360 million of loans on term sheets. Obviously funding is one -- funding capacity is one question but could you comment just briefly on the nature of those loans. Are we going to see mostly transitional senior loans roughly the same size as the nature of which the existing portfolio looks like and maybe what are the current pricing trends versus the current portfolio. Thanks.

I will let Bruce answer the question but I’ll start it up, Steve. Thank you by the way. We have been busy and I’m excited about all this growth for the shareholders because I do think it’s transformational. I also think we have a pristine portfolio. One of the things that’s unique about our balance sheet today is the timing for which we’ve originated these assets and the market environment has really created a wonderful portfolio of assets. And what we’ve seen in the portfolio today, we’re not changing how we look at our risk adjusted returns. And we’re continuing to find great opportunities in the market, even though there has been rally in spreads. I think the quality of the assets and the opportunity has stayed intact. And with that, I’ll let Bruce get into little more detail.

Right. I think John captured it well. Clearly, there has been spread tightening in the market but the benefit of the growth and awareness of the brand and incumbency because we’re finding much of the business we’re doing is with repeat customers. We’re find that we’re able to hold pricing reasonably tight and we found that we are not changing our credit profile. We haven’t had strategy drift, the composition of the assets, the nature of the sponsorship, relatively modest business plan execution risk and the reasonably low advance rates seemingly is what we're able to retain. And again I think that there is sheer scope of the platform and size of the opportunity is allowing us to maintain asset collectivity and maintain both the credit profile and reasonable adherence to the pricing.

One thing I’d just add, it’s sort of -- it’s a great opportunity for me to do a little chest pumping on area as well. This is a team that with their addition to the Ares management platform has done over $65 billion of transactions and -- 570 transactions at $65 billion worth of real estate over time. They’ve been in business since 1993. We’re already seeing synergies cross-referencing cross-selling opportunities in the market. Our incumbencies depress on intermediaries where we might be in a tie with other providers of capital. Now, that you're also a buyer or a seller, you’re playing up and down the capital that gives you an enormous leverage point into the market. It makes you much more significant in terms of how you play in the market, what the opportunities set that you’re seeing is. And we think that that growth and that leverage will allow us to even better improve the quality of opportunity we’re seeing in our portfolio today.

Because it sounds like from a standpoint of the existing pipeline, the new additions to the firm, it sounds like loan pipeline and volume is not going to be the problem, it’s going to be more the issue that Joel touched on about capacity. And I guess one point I want to raise because John you mentioned the various sources of funds to fund this pipeline. Can we talk about the bank term facilities and your flexibility there? If I recall, your plan has been to use two turns of leverage on your senior loans and that’s what we've been modeling. We saw an offering yesterday recapitalization by Blackstone and they’re being pretty clear in their communication to the Street that on their senior loans which frankly sounds quite similar to what ACRE has been originating on transitional loans that their plan was to use three turns of leverage. Could you comment on whether you see the financing of your existing portfolio is providing some incremental funding that could help you either with Alliant or with this pipeline?

Clearly, we are active managers on both the left and the right-hand side of the balance sheet and as we’ve always said we target to two and half times leverage. We are in a unique rate environment where we’re seeing and will continue to see opportunities pressing to both the private debt market as well as the public debt markets and will explore how to, if you’ll optimize our right-hand side of the balance sheet. At this point, we’re not looking to increase leverage to drive the leverage far away but this being said we’re going to continue to pressing on our lenders in those market opportunities so that we can drive our ROE.

Okay. Great. Well, thanks for the comments guys. Good luck with everything.

Thank you, Steve.

The next question comes from Jade Rahmani of KBW. Please go ahead.

Thanks for taking the question. I believe you previously indicated you would expect 2013 originations to be similar to 2012 activity excluding the Alliant deal, is that still the case?

Based on the pipeline, we would envision being able to grow our origination fairly dramatically. And as John said, we have already benefited both from the building relationship with Alliant as well as Ares. So we’re pretty enthusiastic about the ability to build the pipeline, obviously subject to our ability to manage it. John noted the right side of the balance sheet.

Okay. Secondly, does your current investment capacity limit at all your ability to issue term sheets and enter into detailed negotiations in order to execute on your pipeline?

It might make some of the originators nervous but no.

Okay. And then turning to the Alliant transaction, does this represent a more permanent shift toward the multi-family sector and away from the other series sectors, or do you expect to be able to continue to originate CRE loans consistent with your prior expectations?

We’re seeing enormous opportunity with multi-family right now because it is one of the healthier sectors in the real estate market. We’re about 50% multifamily. I would say the combination of Alliant and Ares, one of the great attributes of having a broader group of professionals out in the market with even more sophisticated skills than we currently have today. You should expect us to have and to invest in different asset classes as we continue to scale the balance sheet. Ares gives us -- as Mike said in his prepared remarks, gives us enormous opportunity to look actively at the hospitality sector. For instance, residential, other areas for which we can take advantage of growing our balance sheet throughout change in Fannie Mae. It gives you the opportunity to expand into healthcare for instance. So, I think we -- not only and Todd has been a very active and successful lender in those areas. So you're going to see us continue to scale our balance sheet, but fully around the same metrics and credit opportunities that you’ve seen today with multi-family and office in particular. But expanding into other asset classes as well as we take advantage of the market.

The other thing, I would note is that finding the second and third transaction with the same sponsor, the cost of originating that is a fraction obviously of the first one. So if we’re doing a bridge loan on a multi-family project that’s short term in nature, the ability to deliver the permanent product really has virtually no incremental cost originations. So it allows us to grow without being a distraction or diversion for our ability to originate other products.

Okay. The Alliant Capital acquisition, I was wondering if you could discuss any of the earnings drivers in further details. For example, what would you expect for origination growth gain on sale margins and are there going to be fair value MSR gains taking through the income statement?

We will be putting out more detailed financials through that process, when we bring them out we will probably put together in other conference call in which case we can talk in more detail about that. So, I would defer that part of the conversation till then.

Okay. Thanks very much.

Thanks, Jade.

There are no further questions. I’d like to turn it back over to John Bartling for closing remarks.

Thank you everybody. Like I said, today is a transformational day for ACRE. We believe that we’ve put together at Ares. We’re putting together world-class real estate investments team and we’re very excited about the Alliant transaction. It gives us the scale, the breadth and the product that we've been looking to extend, both the quality of our earnings as well as the duration. And we’re excited about it and we appreciate you all being our shareholders and look forward to seeing you and talking to you soon.

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 May 30, 2013 to domestic callers by dialing 877-344-7529, and to international callers by dialing 412-317-0088. For all replays, please reference conference number 10027508. An archived replay will also be available on a webcast link located on the home page of the investor resources section of our website. Thank you for attending today’s presentation. You may now disconnect.