Cornerstone Agrees to Buy a Mortgage Lender

James Henderson, chief investment officer of Cornerstone’s alternative investments group.

HARTFORD, CT—Real estate investment management firm Cornerstone Real Estate Advisers has agreed to purchase New York City-based Ares Commercial Real Estate Corp.’s subsidiary ACRE Capital Holdings in a deal valued at $93 million. ACRE Capital is the agency-lending subsidiary of Ares Commercial. Hartford, CT-based Cornerstone, a wholly owned subsidiary of Babson Capital Management, is a member of the MassMutual Financial Group. The deal is expected to close as early as the third quarter of this year, pending regulatory approvals. Scott Brown, global president and CEO of Cornerstone, says, “The acquisition of ACRE Capital expands Cornerstone’s national commercial lending platform, further strengthening our relationships with multifamily borrowers, while providing access to other sectors including senior housing and healthcare. We see significant growth in all of these sectors and will be uniquely positioned to deliver best in class executions for our clients.” He adds that the affordable housing lending segment is an underserved sector of the market and by purchasing ACRE Capital, the firm will  be able to “address the current and looming scarcity in affordable residential housing and increase lending to communities nationwide.” James Henderson, CIO of Cornerstone’s alternative investments group, will manage ACRE Capital within his group once the deal closes. Henderson says of the deal, “The acquisition of ACRE Capital is highly complementary to Cornerstone’s long-standing industry leadership in multifamily lending and investment. For multifamily owners, we can begin to provide a true end-to-end solution, including joint venture equity, preferred equity, mezzanine finance and a variety of bridge lending and first mortgage solutions. Furthermore, the growth prospects in healthcare and senior housing are compelling.” ACRE Capital originates and services multifamily residential mortgage loans, seniors housing and healthcare facility loans by utilizing programs overseen by governmental agencies and government- sponsored entities. The company is one of only 19 lenders that hold licenses with Fannie Mae, Freddie Mac and the Federal Housing Administration. “The sale of ACRE Capital allows us to monetize the value we have created after repositioning and improving the profitability of our mortgage banking subsidiary,” says Robert Rosen, chairman of the board and interim co-CEO of Ares Commercial Real Estate Corp. “We are pleased to have the opportunity to recognize a substantial gain and redeploy the proceeds accretively into our core principal lending business, which generates significant recurring income,” Headquartered in Plano, TX, and operating in seven offices, ACRE Capital has 106 employees, including 50 lending professionals. The company manages a servicing portfolio of approximately $4.4 billion of unpaid principal balance of GSE and HUD loans, and is an S&P-rated primary servicer. Kimberlite Group provided financial advice and Goodwin Procter provided legal advice to Cornerstone, and Proskauer Rose provided legal advice to Ares Commercial Real Estate Corp.