Welcome to Ares Commercial Real Estate Corporation’s Conference Call to discuss the Company’s Second Quarter Earnings. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Wednesday August 7, 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 actual results could differ materially from those expressed in the forward-looking statements for any reason including 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. During this conference call, the company may discuss core earnings which is a non-GAAP financial measure as defined by SEC Regulations 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 compared 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 recorded 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 would now like to turn the call over to Mr. John Bartling, Ares Commercial Real Estate Corporation’s Co-CEO. Please go ahead.

Thank you, operator. Good morning and thank you for joining us for our Q2 earnings call. On the call with me today is Michael Arougheti, our Chairman; Todd Schuster, who is Co-CEO of the REIT with me; Bruce Cohen our President; and Tae-Sik Yoon, our CFO. Let me start with some opening remarks and then we will turn the call over to Todd and Tae-Sik for a discussion on market conditions, recent investment activity, and our second quarter financial results. We are excited to update you on the significant progress we have made towards our goal of building a world-class real estate platform at Ares, and a leading commercial real estate financial services company in ACRE. We have taken many important steps towards scaling the company and positioning us for future profitable growth, while at the same time directly originating a very high quality portfolio for investors. Let me highlight each of these steps and provide you with some updates. First, as many of you know, in the second quarter, we entered into an agreement to acquire Alliant Capital, a multi-family focused commercial real estate services company, originating and servicing loans for various Government and Government-sponsored entities. We believe Alliant which going forward will be known as ACRE capital, is an excellent platform that will strengthen our product suite and multi-family and also provide investment opportunities for balance sheet. Although no assurance can be provided, we expect the transaction to close within the next 45 days to 60 days, on the early side of the closing range, we previously provided. Next, on July 1, Ares management completed its acquisition of AREA Property Partners, a global real estate investment firm that has successfully invested approximately $14 billion real estate capital in a wide array of property types. The transaction scaled the…

As we discussed on our last earnings call real estate transaction activity in the first quarter was seasonally slow, but we indicated that we expected a pickup in activity as we progress through the year. This is played out as commercial property sales, increased 13% year-over-year in the second quarter according to the most recent data from Real Capital Analytics providing a healthy market for loan activity. Fundamentals in commercial real estate market continue to reflect the broadening recovery as capital flows increased outside of the gateway cities and into suburban areas and across a more diverse set of properties. This broadening of capital plays into our strength as a truly national originator since we can invest in assets with optimal relative value from a broader pool of opportunities and property types. This past quarter the real estate credit and equity markets experienced meaningful volatility from Fed commentary around QE programs as the 10-year jumps over 100 basis points and sharp increases in intermediate and long-term rates had material impacts on fixed rate credit markets and longer duration high yielding equities. In addition, lower rated investment grade securities in CMBS transactions widened 100 basis points or more during this period. However, in our core business this volatility ended up not having a material impact on lending spreads, transaction volumes or even property values to date. Our core business model of providing floating rate senior and subordinated loans is about capturing premium risk adjusted returns from a broad origination platform with a liability structure that is well match funded. In fact, the short-term rates do start rising. Our return on equity on both are levered and unlevered investments would correspondingly increase. As John highlighted, we believe our accomplishments over the past 90 days are already having a material positive impact. The…

Great, thanks Todd. Hopefully everyone has had the opportunity to review our earnings release and Form 10-K, both of which were filed early this morning. Let me cover in detail, a number of the items that were covered in those filings. First, I’ll be discussing a summary of our earnings for the quarter; second, going over a short review of our investment loan portfolio; third, we’ll outline some of the recent capital market activities that we had and finally a snapshot of our balance sheet and liquidity position. So let me begin with earnings for the quarter. Net income attributable to common stockholders was $3.3 million or $0.32 per basic and diluted common share for the second quarter 2013. Net income for the quarter was impacted by two material nonrecurring items. First we incurred $1.1 million in transaction expense related to the pending acquisition of Alliant Capital; and second, we recognized $2.1 million in non-cash unrealized mark-to-market gains and the derivative liability relating to our 2015 convertible notes. We will cover this in a little bit more detail little later in the discussion. Core earnings for the second quarter, which again excludes certain non-cash items were $1.2 million or $0.12 per basic and diluted common share. Adjustments made to net income to determine core earnings include non-cash items such as approximately $100,000 of non-cash stock-based compensation as well as the $2.1 million mark-to-market gain on the derivative liability. At the back of this morning’s earnings release and Form 8-K is a reconciliation between net income and core earnings. Also as stated in the earnings release, core earnings would have been $2.3 million or $0.23 per basic and diluted common shares when we add back the $1.1 million in nonrecurring expense related to the acquisition of Alliant Capital. Let me cover…

Thank you, Tae-Sik. Summary, we’ve been busy. The real estate team has executed well thus far on our pipeline, improved our financing, and began to realize real synergies from AREA and our other pending acquisition with Alliant. With an $8 billion global real estate platform, one of the largest direct origination teams in the specialty finance space, a stronger equity base, and greater scale at ACRE. We’re very well positioned for our future growth. Unlike many ways, we have an asset sensitive balance sheet and attractive portfolio of largely floating rate senior loans that positions us well and rising interest rate environment. On behalf of the entire management team and our dedicated group of investment professionals, we want to thank our existing and new shareholders for their support. We believe the future of our company is very bright and plan to continue to deliver on all of our goals. Operator, would you please open up the line for question and answers? Steve C. DeLaney – JMP Securities LLC: Thank you for taking my question, and congrats guys on the progress with the origination front, and also on the credit facilities. I guess a couple of housekeeping things, may be Tae-Sik, you could help on this. I recall when we had a special conference call to discuss the Alliant deal at least back in May, and some of the information provided there, there was a number of about $2.2 million that was put out for expected Alliant transaction expenses, and obviously you only had $1.1 million. So my question is if we still expect cumulative expenses of about $2.2 million and will the difference come in the third quarter?

Sure, Steve. That’s a good question, and we appreciate you participating in this morning’s call. Yeah, so for our pro forma balance sheet that we have put out with respect to the Alliant transaction, we had shown as part of that transaction about $2.2 million in remaining transaction expenses that we had incurred but not had already recognized in the first quarter, so the $1.1 million that you see that we incurred in the second quarter as part of that $2.2 million and we certainly do expect more transaction expenses that we are incurring in the third quarter towards the closing of the transaction. We think it’ll be probably slightly higher than $2.2 million overall, so in other words the remaining transaction expenses we would expect to be little bit higher than the remaining balance of $1.1 million, because when we put out the $2.2 million again under the rules about ProForma financials you only include expenses that you had already known about or heard at that point, so have now known and incurred more expenses beyond that $2.2 million original estimate but the $1.1 million, just to answer your question is part of that $2.2 million estimate. Steve C. DeLaney – JMP Securities LLC: Okay, that’s helpful. And John, you gave us a little more color or at least a more optimistic view I guess of the potential closing date sometime possibly in early October. Could you comment on just generally, is there a specific hurdle whether its regulatory approvals or the DUS program or whatever, what is the from a timing standpoint what could prevent from instead of closing in say October not closing until December or January and what would be the sort of the outside date you would sort of put on this?

Well, anytime. Thank you, Steve. By the way I too thank you for being here today. Anytime you are dealing with government entities or entity sponsored by the government I would never want to handicap an outside date, but this being said as we sit today it appears we have most of our approvals we are working to documentation hopefully this is something that will close at or around Labor Day maybe even slip into the middle part of September, but as we have said today, we are very optimistic about moving on expedited basis for closing. Steve C. DeLaney – JMP Securities LLC: Okay, great. Well, we had assumed that total 1 in our model, so I think sounds like that’s going to happen, so thank you for that. And just one final thing; you guys give us great details for modeling purposes and for the loan portfolio and you give us a 6.8% effective yield, which I assume you’re putting in fees expected administrational fees et cetera on the funding side though, even with the new lower rates we got kind of a wide range here I guess whether it’s the LTV loan or whatever and say Wells Fargo can charge you either LIBOR plus 200 or anywhere up to LIBOR 250 and I assume there is some fees on those facilities as well, so is there anyway to kind of since you don’t give us a like effective cost to funds for the prior period, is there some way to kind of tighten in just for modeling purposes, is there a tighter range you can give us or gives us some sense of what you expect your sort of blended cost to borrowing would be on these three facilities over the next couple of quarters with LIBOR sort of stable around say 18, 19 basis points?

Sure Steve. This is Tae-Sik. Each of the funding facilities are set up so that in fact there is a range of borrowing spreads and that’s based upon the bank’s perception of the risk of the loan itself, so higher LTV loans or different types of assets will demand a different pricing with immigrate and in fact that range has also provided and has also and really used as a guidance grid and we on occasion on sort of off the grid to get these a better pricing or to get different terms as well. So those are certainly ranges that we have stayed well within but on a occasions we even though outside of it and you are right, there is expenses associated with each of the alliance particularly in terms of what it costs for us to set it up in terms of transaction fees as well as origination fees. And then there is some fees related to unused fees and monitoring fees going forward and we have not included in our prior disclosures the weighted average cost of debt. We do include in our 10-Q if you notice there we do include the weighted average balance of the loans. So I think if you looked at the weighted average balance of loans and then you looked at the net interest costs that we have experienced during that time period, you could probably get a rough approximation of what our historical numbers have been.

I think the importance thing to note on that Steve is, as we continued to scale the balance sheet and now we are in a position with more diversification of assets and we continue to grow the business, our ability press them on the liability side to improve our net interest margin is an opportunity that sits in front of us and one that we are very focused on, so I’m not sure how much history is going to be a guidance as we continue to push on that part of our profitability if you will. But it is something that is very near and dear to all of us and one that we are very focused on as we go into the end of the year. Steve C. DeLaney – JMP Securities LLC: The comments are helpful and in case I had noticed that average outstanding debt balance that will be helpful to back into a number. So thank you all for your comments and the color.

Thanks Steve.

Thanks Steve.

The next question comes from the Jade Rahmani of KBW. Please go ahead. Jade J. Rahmani – Keefe, Bruyette & Woods Inc.: Hi, thanks for taking the question. Let’s clear the pace of originations has materially increased. I wondered if you could just provide a sense for what the internal sort of mindset is with respect to improved confidence and if you think that that the critical ingredient driving the acceleration has been the capital raise or is it the area deal and what mix of originations do you expect to be sourced out of area relationships?

Jade, thanks very much for participating, this is John. Great to have you on, great question. The great thing about having and I’m going to let (inaudible) this as well, but the great thing about having a larger platform and one that is able to invest up and down the capital stack, we are now in a position as a firm to be able to talk to the market about everything from senior financing to joint venture financing to mezzanine financing, whatever it may be we are in a position to really have a dialog to provide solutions into the market. But importantly it gives you enormous leverage within intermediaries, it gives you a lot of leverage with the borrower base that’s out there, capabilities. So we are seeing not only the former area partners out there, talking to the market and it gives them an opportunity to be more relevant as well as they talk to the market. We are just being able to leverage off those existing relationships that have been so prevalent over an extended period of time, equally with a portfolio that is very diversified as they are in the market harvesting their own games and selling assets. You are also in a position where you can staple financing on, opportunities for which they sell and that provides us great opportunity. So I think we are seeing the area, seeing the transaction become very relevant to us, just from a transactional deal flow of pipeline standpoint and deal sourcing, this is a relationship business in all ways and from a market intelligence standpoint it’s been extremely helpful. But I will also not take away one thing from the Alliant transaction which with 90 employees of their own and having the $6 billion portfolio with 1000 loans, the opportunity to go and the harvest to offer that portfolio is as equally relevant to us and so as the AREA transaction. (inaudible)I’m sorry.

Jade, this is Todd Schuster. Just really want to echo what John said. I think that both AREA and Alliant are really giving just additional leverage to our direct sales force in the marketplace and so we are just seeing better coverage, better flow, more interesting transactions and I think it is pretty much as simple as that. Jade J. Rahmani – Keefe, Bruyette & Woods Inc.: Great thanks. On your investment capacity discussion, I wanted to find out based on your existing available capital and capacity whether you expect – and the conversations you having around future credit facilities, whether you are still expecting to get to a target of 2 times to 2.5 times leverage?

Absolutely, we fully intend to – we’re now getting to that stage where we can start to optimize our portfolio and take advantage of leverage more effectively. We think that running a risk adjusted return is not the combination of investing in high-quality ROA which as you know from our portfolio we try to get a lot of detail around, we believe we’re continuing to originate with a lot of price discipline. And I would stay on top of that it’s just financing, it’s taking advantage of the leverage markets in the most efficient way. And when you’re targeting 2.5 times, there will be times when you are little above that and times you’re little bit below it, but we’re now at that stage in our life cycle where we are heading towards better utilization of our liability side of the balance sheet. Jade J. Rahmani – Keefe, Bruyette & Woods Inc.: Great, thanks a lot.

Thank you Jay. We all appreciate it.

The next question comes from Joel Houck of Wells Fargo. Please go ahead. Joel J. Houck – Wells Fargo Securities LLC: Thanks, and again nice to see the pace of origination picking up. Just to kind of continue on the last question or comment, if you look at the $160 million it’s been originated post Q2 and the $180 million available, that’s about $340 million of additional, assuming it’s financed on a debt basis, which you’ll put the leverage ratio at about 1.3 times. So I guess the question is, how will you get from there I’m assuming all of the existing facilities are kind of efficiently being used with respect to advance rates and other things related to availability. How you go from one 1.3 to two, 2.5 are you landing on unsecured financing overtime, or is there, as you get bigger does advance rates become more flexible, kind of walk us through that if you don’t mind.

Thanks Joel. Yeah great, thanks for being on the phone call today, too. Good question. Managing the liability side and how you balance is a combination as you know at this stage both asset-based financing, as well as you are also aware we did a convert last year at the end of the year. So it is the combination of as we continue to scale the balance sheet, and as we look at different ways to tap the market for how we best optimize our own financing side, it will be a combination of asset base financing there will be combination of securitized financing of the more in likely combination of corporate finance as well as in the form of either unsecured lines or secured line or other convert opportunities that may present themselves to us as we think about how the best manage that part of our business.

That we certainly targeted, Tae-Sik, which you add anything.

Sure, I think it’s great John, one thing that we’re positive that was in perfect clear just to – maybe just add little more color. As when we look at the $160 million or so, that we’ve closed sine June 30, begin all three of those were senior loans right so. If those get leverage once we do expect deleverage on that. We would have $50 million to $60 million of equity and $100 million to $110 million of debt. That’s how we are going to get to the 2% to 2.5% on leverage on that. And, when you look at the $180 million of remaining capital we’ve available again just theoretically if we were to use that to do just senior loans. That will give capacity to do three times that number of senior loan. So, we could do call it $540 million of transactions on senior loans using the $180 million of leveragable capital. So, that’s really the math, I hope that – that hopefully add some color into how dramatically we can just 2% to 2.5% on leverage based upon $160 million that we close in the third quarter so far. As well as the remaining $180 million capital we’re going-forward.

(inaudible) just not to overkill the point and Mike is on the phone as well, I think have done a very good job at accessing the capital markets, as witnessed with ARCC and over time how we’ve expanded our various facilities and the types of financing on ARCC, no different here. We will continue to pressing on our relationships in the capital markets to make sure we optimize how our financing and our capital stack is run with ACRE. Joel J. Houck – Wells Fargo Securities LLC: Yeah, that’s helpful. And again as I just misread the $180 million abd did not I thought that was just the amounts you could drafted, which you can lever that up, with senior loans three times and that gets you closer to two times. So I don’t know if you just kind of last question in terms of pipeline, and if you make comments and I missed earlier, but it would seem that there is lot of momentum on the origination side and given the current investment capacities well over the $180 million in total, what does the pipeline look like in terms of kind of where, and I appreciate that leverage is going to fluctuate around a number, but where do you kind of see the business that the timing of which is more of a kind of a run rate in terms of appropriate leverage, is it near the end of the year, or could it be quicker than that?

Obviously. It could be quicker than that, we are on pace, we have a very healthy pipeline, we are running into a very active time of the year, which is always the fourth quarter, and we are on a good position with the expanded balance sheet to really pick through the assets that we want to invest in. So our fairway continues to be that I’ll call it $30 million to a $125 million whole sized, and we are continuing to see robust opportunities in and around the sort of the investment target that we’re looking for. It’s if anything we’re really now in good position between now and end of the year to fully utilized the capital. Joel J. Houck – Wells Fargo Securities LLC: Okay. Now I appreciate the comments and in case again congratulations on the solid quarter and looking for even better things to come.

Thank you, Joel we are to appreciate the support.

The next question comes from Rich Shane of JPMorgan. Please go ahead. Richard B. Shane – JPMorgan Securities LLC: Hey, guys thanks for taking my question. I was primarily interested and understanding the liability structure and the capital that you just answered. But, why don’t you just on touch on one last thing, which is that when we look at the dividend now, it basically implies about 7% ROE in order to meet that dividend. As you layer in the acquisition developed a little bit of operating efficiency. And I actually I think the interesting element in this call is potentially the capital efficiency as well, where do you think ROE can go over the long-term. Should we look at ROE as scale to LIBOR given the asset sensitivity?

Rich thanks for joining. Without giving guidance kind of few questions in there. Really in a raising interest rate market, you heard us whether it was my comment preferred comments (inaudible) we’ve over emphasized probably the fact based on LIBOR, investments and LIBOR liabilities. We’re very well matched funded and to the extent that we rising interest rate market will actually be a beneficiary of that. So, I think earnings depending on your future interest rates, our ROE will only improve. I think what else is interesting about our business right now is we’re about to take in $4 billion of MSRs and as we continue to look at those opportunities and originate, which is a very efficient business by adding fee-based business and tune that to a balance sheet business and interest business. I think we’ll see depending on our origination pace with the ACRE capital transaction we’ll continue to see improved and enhanced ROE. So I really do think we’re in a great position to enjoy so that the sort of ROEs that are consistent with where we are today. My only concern about overly growing out a number is [free] to anything we do whether it’s projections or volumes or otherwise, because we’re less, we always focus on making solid investments, the best risk adjusted investments and we don’t want to be chasing risk and we don’t want to be chasing yield for the sake of taking on risk that’s inappropriate. We’re very disciplined about our pricing risk, and so my caution on going beyond that is just really doing something out there that might be mistaken. Richard B. Shane – JPMorgan Securities LLC: No, look I think that’s fair. That’s been a hallmark of the organization for a long time that you are willing in some environments to take lower absolute returns based on your view that it’s actually better risk.

Yeah, right now it’s benign credit market and it’s great origination market and we’re in a great place to really enhance ROE. I think we’re in great place to really meet and exceed expectations in that regard. Richard B. Shane – JPMorgan Securities LLC: Okay. Thank you, guys.

We have time for one more question. Our next question comes from Ken Bruce of Bank of America Merrill Lynch. Ken Bruce – Bank of America Merrill Lynch: Thank you good afternoon. I’d like to pickup the conversation where you left off around the discussion around leverage and capital. Obviously it’s very good to see that pick up in origination activity and that momentum looks very strong here for the near-term. And just in terms of to a degree that you are at an optimal leverage position and the stock continues to be let just stay at a significant discount to book, what might you consider in terms of alternatives to try to ensure that you got adequate capital to essentially fund the pipeline of loans that you’ve got in place and how do we think how that would play out in kind of current market backdrop.

Hi, Ken. Thanks for joining to. I appreciate the question. We continue to do the muscle building that we think makes a lot of sense for our shareholders. We’ve spend a lot this year to really build what I would like to think the best specialty finance company in this space. And if I step back for a second and answer your question, I would say – as I answer it, I want everyone to keep context. We have added significant strengthen in our board. We’ve brought in Brett White, who is the former CEO of CBRE to help strategies and build relationships in the intermediated market. We’ve obviously expanded our footprint as a manager to the area transaction which both adds relevance and opportunity in terms of sourcing deals and being able to lean into the market and find the best investment opportunities for investors. We’ve also brought in a company through Alliant, which I believe personally will have a lot of relevance to enhancing ROE whether it’s by adding the MSR’s or its been able to mine without the loans or it’s the ability to generate new fee income and help source new transactions and be more relevant in the multifamily market from beginning to end, whether its bridging in to GSE, construction to GSE or adding new product lines, new nursing homes, student housing, other areas where you really have more relevance. I think, we have done all of the muscle building more importantly even bringing Todd Schuster who built one of the largest specialty finance companies in this business, formally CWCapital. Hopefully, all of this along with the expanded balance sheet, I believe in part, your question on the discount to book is one of execution. And the three things I believe that we need to…

Now, clearly one of the nice attributes of having Ares as manager for this company as we access to a lot of capital marketed options. And I believe which is an unsecured line which could help bridge into an equity offering, so that you don’t have to drag. You’d otherwise have if you have to be sporadic about it. So we are looking at those opportunities and to the extent of that moves are sort of optimize leverage a little bit or not. We are very sensitive to how we best do any future rates as both in terms of what it is to book value, as well as how you time and you manage that into the market. Ken Bruce – Bank of America Merrill Lynch: Okay, thank you. And then maybe just lastly, there has been a – there’s a lot of things moving around in the market. And specifically, you’ve got the potential for if any to be less active in the multifamily market, there has been a number of participants from a lending standpoint that has discussed moving into the sector. Can you just give us maybe some thoughts as to how you see the market opportunity evolving in that particular area, knowing that you’ve got now, assume to be a franchise that’s directly looking at that part of the market?

Yeah, that’s a great question especially after Obama’s comments yesterday about what he would like to see with housing. We have a very active footprint in the multifamily sector, here at Ares, whether it’s direct investing through what was the AREA platform, or I believe we have something like 30,000 apartments that were invested in, whether it’s our own portfolio in ACRE where we’re very active in that space, Alliant obviously is the U.S. lender. And as I think we’ve said in previous comments, the government will be in our opinion slow to walk out of whatever they do and this isn’t going to happen over night. We didn’t pay anything for the franchise of Alliant. We bought in (inaudible) if you will. What we had is great option value on it. This being said, I can’t imagine personally a better time to want to be incumbent in that conversation. Have been the U.S. lender as your – to the extend that we move into the Freddie and with FHA, being at the table as they reorganize their businesses, as they go forward with those businesses and how they develop that. You want to be there and you want to be part of that dialogue and you want to have the incumbency around it. I think I would say, is while I do think it will take time for the government to actually decide what they are going to do and how to do it. You might also note in their comments one of things that they always focus on now is a shift away from over emphasizing direct home ownership and more into rental housing especially affordable housing and having that sort of prioritization and continued prioritization of supporting at the GSE level, affordable housing I think again because of the incumbency that will have at the table as a result of Alliant, we would look for our ability to support that part of the business as being unique too. Ken Bruce – Bank of America Merrill Lynch: Great, thank you for your comments today.

Thank you Ken. Really appreciate it.

Well, thank you everybody for joining us today.

And we want to again, Operator, I’ll let you close this off, but I want to thank everybody for joining us and all your continued support on behalf of all of the Ares team. Thank you.