Business Context and Reporting Period
This Form 8-K Current Report, dated August 30, 2013, details the completion of a material acquisition by Ares Commercial Real Estate Corporation (ACRE). On this date, ACRE acquired all outstanding common units of EF&A Funding, L.L.C. (d/b/a Alliant Capital LLC) from Alliant, Inc. and The Alliant Company, LLC. Following the transaction, Alliant became an indirect wholly-owned subsidiary of ACRE and will be renamed ACRE Capital LLC.
Key Financial Metrics and Transaction Details
The acquisition consideration consisted of the following components:
- Cash Consideration: Approximately $53.4 million (specifically adjusted to $53,415,000 via Letter Agreements).
- Stock Consideration: 588,235 shares of ACRE common stock issued in a private placement exempt under Section 4(2) of the Securities Act of 1933.
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period. Financial statements for the acquired entity (EF&A Funding L.L.C.) for the years ended December 31, 2012 and 2011, were previously filed as Exhibit 99.1 to an earlier 8-K. Unaudited financial statements for the six months ended June 30, 2013, and pro forma consolidated financial information are scheduled to be filed within 71 calendar days of this report.
Material Changes and Operational Impact
The primary material change is the consolidation of Alliant Capital LLC into ACRE's corporate structure. Key operational changes include:
- Alliant will operate as a taxable REIT subsidiary (TRS) under ACRE Capital Holdings LLC.
- The acquired entity will retain two warehouse line debt facilities to finance multi-family loan origination activity.
- Letter Agreements executed on the closing date adjusted the proportion of the purchase price received by each seller and the calculation of Net Working Capital.
Outlook, Risks, and Contingencies
The filing focuses on the execution of the acquisition and does not contain forward-looking guidance, management commentary on future performance, or specific risk factors beyond standard transactional disclosures. The transaction was structured to expand ACRE's multi-family loan origination capabilities through the retained debt facilities of the acquired subsidiary.
Investor Verification Checklist
- Verify the final purchase price adjustments and Net Working Capital calculations detailed in the Letter Agreements (Exhibits 10.1 and 10.2).
- Review the unaudited financial statements of EF&A Funding L.L.C. for the six months ended June 30, 2013, once filed.
- Examine the unaudited pro forma consolidated financial information to understand the impact of the acquisition on ACRE's balance sheet and income statement.
- Confirm the terms of the two warehouse line debt facilities retained by the new subsidiary.