Cornerstone Inks Deal to Buy ACRE Capital

The mortgage banking subsidiary of Ares Commercial Real Estate will go to Cornerstone Real Estate Advisers.

By Barbra Murray, Contributing Editor

Jamie Henderson, Cornerstone Real Estate Advisers
Jamie Henderson, Cornerstone Real Estate Advisers

Hartford, Conn.Cornerstone Real Estate Advisers just took a major step toward achieving a long-held expansion goal, with the signing of a definitive agreement to acquire ACRE Capital Holdings LLC, the mortgage banking subsidiary of Ares Commercial Real Estate Corp. Cornerstone will plunk down $93 million in cash to take ownership of ACRE Capital.

“Cornerstone has been studying the agency lending space for several years and has evaluated several potential acquisitions. We found ACRE Capital to be the most compelling opportunity that we evaluated and the timing for both parties was opportune,” Jamie Henderson, chief investment officer – Alternative Investments at Cornerstone Real Estate Advisers, told Commercial Property Executive.

The acquisition will both enhance and expand Cornerstone’s offerings. ACRE originates and services multifamily mortgage loans, working with programs spearheaded by Fannie Mae, Freddie Mac and the Federal Housing Administration. The company, which carries the distinction of being one of just 19 lenders holding licenses with the government housing agency trifecta, will add its $5 billion multifamily loan portfolio to Cornerstone’s $5 billion multifamily loan holdings. And ACRE Capital comes with management responsibilities for a $4.4 billion servicing portfolio of unpaid principal balance of government-sponsored enterprise and HUD loans.

“The ACRE Capital platform is very complementary to Cornerstone’s multifamily capital executions in terms of geography, sectors and the source of the capital,” Henderson said.

Additionally, the purchase will allow Cornerstone a smooth entrance into new territory, as ACRE also supplies loans in the seniors housing and health care facility sectors.

“This acquisition will round out Cornerstone’s offerings and allow us to deploy into every part of the capital stack and gain invaluable insight and data regarding multifamily trends. I anticipate significant growth in our multifamily vertical due to our ability to be a one-stop shop,” added Henderson.

The list of benefits of the merger goes on. In addition to a history of success—Ares Commercial has pocketed roughly $14.4 million in cumulative net income on its investment in the mortgage lending entity since buying it for $61 million in 2013—ACRE Capital brings talent to the table. The company has a 106-person staff that includes 50 dedicated lending agents.

If all goes as planned, Cornerstone will complete the acquisition of ACRE Capital in the third quarter of 2016.