Ares Commercial downgraded on valuation at Outperform at Raymond James

Raymond James analyst Stephen Laws downgraded Ares Commercial Real Estate to Market Perform from Outperform without a price target. The company’s larger than expected reserve expense in Q2 resulted in lower GAAP earnings and a 3% sequential book value decline, the analyst tells investors in a research note. The shares currently trade at 77% of book value, just above the peer group average of 74%, and the annualized yield of 13.4% is slightly above the peer group average of 12.7%, says the firm. With Ares Commercial’s portfolio having above-average exposure to office loans, the firm now believes a Market Perform rating is warranted.