XAN - Earnings call transcript Q3 2017 | ACRES Commercial Realty Corp.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to our Q3 2017 Resource Capital Corp. Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would like to turn the call over to Ms. Purvi Kamdar. begin. may you Ma'am,

Purvi Kamdar

you for the September the Kamdar, Relations. I'm Thank earnings XX, Capital conference Purvi Investor of call third Director for you. Resource joining Corp. XXXX. Thank quarter ended

intended would we the believe, in historical identify this When in this to information like As may of expressions expect I to you and forward statements course based that not are words used constitute statements. call, anticipate, remind similar call and the made certain on are forward-looking statements. begin, looking

Although, believes statements. uncertainties of through materially reasonable filings the to for would with opening the www.sec.gov. in at undertakes uncertainties, belief information and number and Company reliance comparable considered are most to and Furthermore, those to presented Risk substitute from call, risks to forward-looking SEC, with obligation our the current which intended of XX-K. Chairman based that the or our can hereof. accordance filed a including X-K, are these with certain statements, the the on and The risk presentation non-GAAP financial remarks. be not Company differ Form RSO of reports reports on isolation, Andrew call date Factor like and based Generally be assumptions, on in in with of these the statements. any SEC that only contained in Company's forward-looking be Principles of XX-Q Reconciliations conference could measures this in place on and expectations no on speak undue information particular, not the as to Farkas, These are GAAP. to to non-GAAP to Forms trends, statements the will turn these are prepared the of forward-looking cause subject XX-K, update discussed such forward-looking actual financial Accepted discussed over financial its measures now as these in statements the of to our management's this section Accounting accessed cautioned are accordance Listeners a I measures is results

Andrew Farkas

on With Thank of CEO me Dave of Matt approximately one RSO; out been Bryant, It's is are pleased morning vision. our announced since and I'm that progress. achieve Lieber, who everybody. of Bob update RSO. laid our Stern, provide Good RSO to you, today RSO; at We're Real vision and on we Commercial Head track Hughson, year RSO; Lending Estate Purvi. President the CFO strategic of for to Paul plan. an

this of estate deemed revitalizing estate of real by plan, and expand level We expertise both of X.X% trust RSO's give acquired in close for asset which favorable low-investment million the through This September investment comprising for recent CLO efforts have commercial year, yielding higher the BPs quarter, demonstrates We addressing XX, XXXX. the in under refocused the set $XXX in our or commercial quarter. XXXX, expansion which our bonds of the we result real C-III's comparable capabilities XX% RSO's just September with estate commercial assets level and million of corporate third loans CMBS the real-estate RSO you and the CMBS a add than We've pricing of deployed platform notes. the loan strategic our capital for And operations of sold $XXX RSO's is the of cost capital third opportunity the towards origination its $XXX proceeds new and manager. We've million issuance its To as million unrated progress period begun of over the also at commercial company's tranches coupon RSO CMBS through convertible the context in of further non-core million first XXX% the XXXX. the loan some loans originated CMBS real greater of volume origination investing. $XXX $XXX grade the XX, includes after lending the the debt. the and

RSO progress While With is work to our first-class Bob C-III to do, Lieber. further made we acknowledge there the to REIT. far commitment it has turn over I'll level that our speaks to thus of a CEO, transforming into

Bob Lieber

everybody. morning Thank you Andrew and good

strategic with third earnings, offering share. the connection charge the of details a but convertible GAAP per excluding of new million. and relates our negative our earnings. part to of lease one the one-time will Bryant Sale contributed $X.XX a repurchase X% convertible of million highlight to I'd core the from of as transaction it debt to of to Dave and items. quarter, core This For plan. extinguishment earnings of earnings the a share $XX.X like issuance related a excluded notes of $X.X The to had notes the earnings GAAP RSO our per led key $XX.X walk few our of charge net reported X% our business that a is in had of and million is $X.XX converts of through

our be improving, we cost earnings non-core by and the to impacted continue cash market favorable the are real going Importantly, needs schedule of executed estate that capital but of deployed transaction our have very maturity in be from to forward investments. was extends commercial still this debt lowers under amount Core conditions. our and capital

earnings in XXXX, core uncertain. turn positive expect to pace growth earning the but of remains We still

book. in the largest from sales and planned hurdles existing strategic asset previously, mentioned loan one the proceeds the our business managing from commercial real maturities the estate As anticipating is we the face we have of

maturities. loans For originated and strongest RSO's example, two of now the and XXXX in initial years XXXX, approaching their origination

still credit as transactions our continues Our cash lumpy as increase while maintaining flows LEAF team focus origination we deploy the possible sales asset on but to like – origination need to expeditiously which strict volumes, create expeditiously quality.

profitably will continue Board origination proceed cash to occur. real-estate deploy course our as earnings visibility lumpy inflows you discuss we investments XXXX, dividend visibility the CRE as – over CMBS with Our and appropriate. policy our Earnings improves of improves the as supplement efforts update to commercial

divest strategic resolve and change mentioned the end Andrew core notes. of than value the the we as the book the the have should The value represented the provide quarter at market when his assets. decline As And fluctuate that Today, a which per this time. the strategic end future to were earnings, assets comments, of at notes. used remaining XX% an share, share X% to we and we of reconciliation of value favorable per to in $XX.XX strategic outstanding we're the on of book complete the the quarter the including that total similar issue and a from monetization $XX.XX monetization. said, Book book was X% expensive from we'll second components convertible to time increase plan majority the be is the our ago, been in of acquire quarter. value structure plan at asset proceeds the could the of the third capital plan X.X% and year the That execution capitalized RSOs conditions at greater value convertible aggregate most during opening to some announced of pleased that expected

properties RSO the well. commercial have third employees Houston not only Florida, relates real it in properties nearby and the does hurricane but and organization these C-III and to activity, quarter in areas loans has as owns broader estate Finally throughout also manages as

broader respective and loans to go are that, thoughts financial and and employees, call put, and prayers C-III Florida the in Bryant is organization Matt. support and over the hurricanes collateralized future. aid by resident by further of but all to Dave our current of out I'd our like for remarks, his them turn families other properties business are behalf Houston that the interruption into assistance. to proud foreseeable in to place go were With insurance our impacted detail Our simply who will with and the is on in

Matt Stern

begin items investment our I'd Bob Expanding some activity. with and you and the origination everyone. Thank of highlighted, like hello Bob to on

For LIBOR. $XXX quarter, loans of average transitional XXX spread a a million third the CRE basis weighted XX-day over we originated with points

CMBS the digit. $XXX with low-double million We the in bonds deployed also targeted returns in

and origination in We to $XXX still volume. will yield quarterly we continue and flow confident half will that CRE CRE disciplined are on second industry-wide million. continues loan continue originations our credit CRE improved acquisition team be lower believe said, to remain loan approximately see be focused quality we approach. to our Our will XXXX grow despite origination That

the are including more find in to capital and a lower. opportunistic CMBS throughout bonds BBB rated side continue We pursue approach stuff, the selectively able to value on and

to Subsequent RSO CMBS has in prudently will platform a target a this track BP's C-III's buyer this acquisition expand we mid-teen investments returns yield its opportunity can Here, record investment and and how expertise set. further We yielding acquired to leverage respected that end, low are believe in buying BPs. underwriting higher CMBS. demonstrates our provide and BPs and able in rate. to first C-III RSO C-III a as its quarter

notes. to the X% The a new carry notes notes. coupon million share. These million and notes of favorable of repurchase convertible third item a the our cost X.X% X% the equivalent second were the The issuance and X% income $X.XX net notes issue X% of X.X% conversion issuance per market, senior in our ratio convertible XX by of address million I $XX.XX five-year would With notes initial and to have able reduced the we XX is our with an associated and deal debt quarter and of per conditions maturity like share. successful XXX our retire of

and book current has also is the the also initial the benefits than beneath price trading price is for conversion important Company. current approximately it XX% higher value, issuance several our our While

in our to cost We not First, credit and is lower therefore a a for and of lending for at having cost origination increasingly when CRE market it platform allows to reach competitive. accretively. continue our environment, transitional want lowers cash the of us capital this grow competitively yield time to capital do

time are profile convertible prudent opposed the a favorable quite thought when it Company to to available we debt at the Company's issuers, the to when transaction. and Second, market terms be was complete to as forced extend maturity could a

of RSO and notes confidence which of both fund. this the vote Company's issuance a yields of improved these the recent at period the all-in most cost completion our CLO market the of during transition, with greatly received from the Lastly, capital

balance of release, the less have value. achieved turning million aggregate we in of books assets initial $XXX of have proceeds than remaining excess to Finally, one-third III Schedule and press of our strategic plan our our book on

of balance $XX.X We million. market received amount $XX.X market As proceeds outstanding two discussed to million. compared loan this of book, payoffs reducing lending of closed the carrying our in million pre-tax generating part the middle middle lease sale quarter earlier, in loans $XX to a

progress proceeds asset remaining which We and finance just value. unwinding continue of of entities commercial We position. to in also on CLO $X.X in in class assets. make would also have only unconsolidated recognized add this our investments equity book, million consists our with I line to that our book similar like consist have primarily

guidance turn Bryant, it over identified strategic on over for XX the financials. remains initial in our I'd track. assets With to period Dave plan discuss substantially to Our month to that, exiting an like

Dave Bryant

Thank you, good Matt, and morning.

GAAP million $XX.X GAAP XXth for the And months $X.XX three allocable was September nine was the September $XX.X our share. share. income to for million $X.XX per common income per or or XX, months shares net Our ended XXXX ended net

X.X% per of $XXX.X following for Commercial debt of significant million $XX related investment X% measure become of due gauge convertible gain segment a the core of to strategic as in a income convertible the we notes $XX.X a the X% provide income share, view CRE investment evaluate per an with our to the at platform. in of GAAP and June primary one-time comprehensive term $X.XX million mark-to-market $X.X capital loss had our our September was $XX.X net a our $X.XX $X.X of divested; convertible adjustments, of Capital XXXX, the of increase to $X.XX was loss which of per stockholders' to that $XX $X.XX related a loss a includes in of focused convertible million notes of XXXX, the per and on the LEAF $XX.X more includes from issuance, in the increase will we operating of acquisition book of $X.XX and of release increase the net over plan in a an financial extinguishment approximately convertible and We book transition are At attributed expense share amortized value and share XXXX, XX, from a the a performance. XX. of down. balance following: of $X.XX common the notes, earnings We million in impact $X.XX finally issuance interest the We in net of or paid be dividend in our taxes; calculation to third from investors a The a retirement mortgage, use a that of to of offset increase of decrease allows of Our net by that of press the sale which progress note; inclusive the share net net a to note conjunction charge activity; quarterly a additional as on capital of $XX.XX, X.X% debt share earnings value option third million earnings million payout notes. can repurchase quarter net decrease quarter and winding million conversion share. to million to core the $XX.XX of of our which discontinued income equity; deficit the per of or operation realized to into value from $X.XX other shares be with plus partnership of from per ascribed core

of our will as approximately earnings XXXX. core of be charge, $X.XX loss to second Related going this core will quarter per each period share the Excluding per run provide savings will $X.XX interest X.X% the loss one-time quarter of net a of for the earnings of for forward. net convertible $X.X compared annum, notes which $XXX,XXX or new cash per million enhance issuance rate share

million of loan the at investment estate to in significant these increasing real loans and new of see liquidity composed of we purchases soon $XXX CRE a investments impact to deployed earnings. with $XXX new we the in core commercial $XXX accretive expect CMBS, quarter which the from additional we and pipeline opportunities volume And quarter. of originations, the benefit to be cost. investment a in million, million amount will Turning debt fourth third of We CMBS of full will invest

in is opening same mentioned his XXXX. CRE Andrew activity to year-to-date as As XXX% remarks, the origination up period nine-month in compared loan

compared significant cost period in $X basis In with of million addition, through we the September, have $XXX million bonds as during purchased CMBS same a a increase. to XXXX,

commercial Our rate floating $X.X hold portfolio self-originated real all estate is substantially loans. billion

XX, We approximately estate total commercial $XXX million capacity have available of our on of million $XXX real term facilities October have as XXXX. and

Our three real securitizations comfortably have passed. subject are collateralization estate only to over we newest which commercial test,

the of on Florida, continue With any has the process our the to XXXX summary I in and Florida, events two an on came being Hurricane and of similar Irma, liquidated apartment the well light is least Hurricane XX water flow. respect in which won about had damage securitizations aforementioned Houston, In lifespan, on two Harvey, wanted cash CLO of of our in through provide at to loan perform to in impact and sustained number issued Texas brief properties XXXX which of which a has loans months and recently respect damage. anticipate one without unit of minor greater XXXX of will assets produce we deals. to We to weather during With a of fully approximate RSO liquidate throughout Our XX% repaired. significant one collateral. all the reliable that loans our XXXX, to securitizations

to business XX all all other to potential by respect and of hurricanes. loans of also required months our independent to should require the carry a noted our the Houston insurance, generally collateralized period in as monthly that all insurance interruption we determined downtime. XX by debt for borrowers In required consultants, and of addition, Florida re properties current be payments with It to after service impounds insurance

loans quality. at loan our with highest of five our have loan commercial rating refined loans now one real general part Effective estate highlight implementation. the in we previous of a balance policy. of quality As having five from are the lowest not the provided approach. sheet allowance want refinement credit you September using the reserve as shift asset and a our the did XX, yield shift to our strategic in as rated significant policy rated and management, The I credit asset having we implementation categories result monitoring plan

from: in of plan is combined $XXX September our of comprised $XXX over to assets net a million pay XX, cash net in CRE of the core million assets our of XXXX, $XXX reduction total composition is real assets by other past total XX, increase offset earmarked the of investments. loans offs $XXX net CRE estate in September and and While strategic have divestments net XXXX million. year for decrease The declined approximately the in now of XX% the including of with and total primarily in a our commercial asset new by increase assets $XXX in changes million; liquidity CMBS million since

proceeds decrease million asset $XX quarter, from plan We the increase of standard capital a decreased execution strategic commercial $XXX with of $XX $XX plan and in the remaining in value so investments primary to million leverage. $XX strategic of during proceeds the our expect assets in use estate deploy million. net We real to by and million of our as received including our the finalize million mortgage market book net we total investment a the new

former our operating strategic sale, contract $X is cash primary net few includes significant down sheet. business capital's the next PCM's this of over million notable With plan. the remaining the milestone months, majority vast book in in that value represents of under assets it Winding financial for balance

We times of result from an a XXXX. our on $XXX at stands increase liabilities, The XX, our was and at common of X.X decline net and million GAAP Our times December leverage pay the downs X.X have on other of borrowings down book in on the the that hand ample execution business on October focused believe $XX $XXX over strategic of million. a basis, equity as remain million going forward with we XX. liquidity to plan. We fund of

risk to the open call We With produce question. I'll that and to liquidity debt expect securities in real returns. judiciously to any strong ask up the that, commercial operator this deploy debt adjusted

Operator

Riley B. Levi-Ribner [Operator line Instructions]. question comes of first And the from our with FBR. Jessica

You may begin.

Unidentified Analyst

is Tim morning. guys This Hey Jessica. good for

You origination what been with pretty we next us to far But of so received start and have fundings – type so payment or guys for idea you reiterated guidance, being expect can second quarter. in any have your a good XXXX half so your as quarter. give that of on update the originations, pipeline

Bob Lieber

Sorry, what the the going question what we've off go, you like looks quarter? want paid pipeline what in that to and forward

Unidentified Analyst

Yes.

So, quarter size help updates could just then you so so your originations forward fourth if on or in far us for to any the far? payments pipeline and

Bob Lieber

comment Okay. who ask pipeline. I'll debt Hughson runs the I'll investment Paul turn – our on business to

Paul Hughson

with think the the in or articulated from is I application bit little earlier we're a horizon return is kind plus XX the what days loan fairly until of The loans of is in close to fourth time ultimately the closes. terms quarter. what Matt looking minus consistent pipeline most for timing

closings likely working in we'll likely quarter than have on, that that we're been said of number first returned fourth be So, to-date the the a excess little you bit in know closings. the earlier more quarter Matt loans likely loans that then and application that are

Unidentified Analyst

the kind you competitive those Okay. seeing And talk geographies types asset you seeing down was about well? as hoping come I competition, are most opportunity could you the on bit. are a yield the you. originations the just landscape, new little the of and Thank most has

Paul Hughson

the little originations earlier think XX on new LIBOR. that a said just over I spread bit was or south the likely Matt

strength opportunity been I think apartments, we to see in which for origination continue RSO's value-add infrastructure. historically has

type. I as had cash mix supplement originators flow been bringing origination C-III sales a classes we returns housing been have had fair historic not returns. clients, certain focused in that, risk that able of as to traditional We've about of clients RSO talking RSO And manufactured with the the think have historically spreads adjusted reasonable the other although that compressed asset the bit force. amount stability on. They've into a available perhaps as like product of I'm and on certain well and still

So, the sector. we apartment storage housing the opportunities the continue and in to sector, see manufacturing sector

throughout think and Houston, Texas in California, in market, has origination predominantly like have do as presence a origination, infrastructure with California. and as well lending RSO I and of Austin Antonio lot San historically done places then the an we Dallas and

we've those and that Florida that, some the although C-III expanded the of the East given continue continue look we've to to like in the We throughout Carolinas expanded focus platform, Coast at and opportunities on markets, and Sunbelt.

think a we we kind in a So, that are the RSO too place equity Southwest invest and not to of of C-III from west throughout Midwest. terribly too I lend the not with like look places it's the in side the dissimilar the the like Coast down – less East we and focus from coast Carolinas in and and the to up

Unidentified Analyst

helpful. you. Got it. Thank That's

Operator

[Operator Instructions]. DeLaney from the line Steve question comes our JMP of from next Securities. And

begin. may You

Steve DeLaney

Thank you the morning continued everyone plan. good on progress congratulations on and

heard held other the is lens? but than know there assets are – those just unconsolidated joint nature, strategic for of $XXX we ventures So, under that remains held umbrella or that the sale, remaining for should sale that your anything I of does appear plan it you the comments at we else you million ones focusing on about anything these of – XX% looking – done, know

Matt Stern

press Schedule will I the turn the to parts. it some think component bifurcate if of you for release, you III in

investments balances in are in spoke then about talked PCM finance have we down which I and was my other that of spoke loans an the from to smaller about balance based to the we for middle non-core we of asset as have remaining remaining it In commercial $XX targeted we are that comments. being many about side. we that and investment legacy million divestiture. some opposed Specifically, about yield The as CRE in half cases the loans market then

loans middle divestment. PCM the the concentrated in majority estate commercial in then of just that the were of vast So and real market which balance is and process of

Steve DeLaney

you Exactly. made the And a big – in a had third quarter it appeared. in recovery big PCM that

So, sort I and of game as end on someone have you look left, plan. you at as comments XX as actual strategic the the think months your we what far hear the mentioned

So, were out balance if would of your would we to know that look sheet point moving with clean mid-XXXX, sort you time? substantially be that forward and at in hope to the be completed you it

Bob Lieber

Dave, would so it's yet the We in middle, kind timeframe just we a be very hard we're to we time like by through XX to these in know that. the place past to third is our things plan we'd direction months XXXX We this March have don't as that you well anticipate the know. quarter, about started by We still whether the that's of and this taking. that XXXX. would be visibility – enough expectation end – the that's pace there, and we from and strategic talked would really through in well we of

Steve DeLaney

of placeholder will Yes. see with see given strategy saw sort doing. along the BPs investment permanent this in the when and investments, $XXX that the be all investment might grade we Certainly, the you the CMBS, high expertise surprised think of as CMBS be area. over we giving to we part or think do that grade about forward we a progress – those that you a the your that grade in of quarter liquidity of should sure. C-III activity But Talking new the million switching not about investment CMBS at – for

Matt Stern

of that investments BBB balance which the we're our If we but CMBS stack. capital lower or are some on today, held portfolio their in you legacy look rated at about we've have many sheet, speaking, the CMBS highly in them

in for some than and but criteria And as think are held traditionally is duration diversification while to one that this so so different the assets. our little extra RSO are low needs us also yield a be gives a we portfolio and including grade, our investment slightly various

Steve DeLaney

understand. to That's helpful Okay.

are So, – or investment more BBB really sounds not be – a a if it's the investment really going highly like it's down. below than little levered you a to credit

it of way. that think we So,

Matt Stern

Yeah.

risk exclude wouldn't where returns think and the I the think up and to be down BB are I but level. correct have we most you tended stack, of depending in happening adjusted that and about the investments capital what's moving are upon here BBB

Steve DeLaney

despite had which a last That's CMBS, at some in this still the call your huge to XX, off you cash stock? a in to And consider of addition million X.X% some Okay. a $XXX Thanks. helpful. $XXX playing with An in October liquidity lending million. I'm just using question, position preferred you debts curious, my or high-cost just of investing redeem so

Bob Lieber

We at balance profitability the to the the of all improve looking that's and ways are always at looking of something sheet, to so business components the we continue consider.

Operator

Farkas, any the like And to I'm showing now for RSO closing to now would call Andrew of further back questions Chairman at I Mr. this time. turn remarks.

Andrew Farkas

for really progress to to Bob March, continuing like in making this year. began at of thank that plan would the said I in earnest, we're We as follow RSO. everybody this

the has that strategic to that considerable. progress plan is been be what the every started first think we addressed, articulate we made would category I in

has. while we like probably been at a CMBS reducing we're little commenced have this the point. of loans lot with getting We've liquidity is cost X.X% converts still organization associated and course a fact, and that non-core that In consistent addressed do there also where of the liquidated are would We've to out and put those with and redeeming are ahead of the have to deploying people of others the a cost of yield to assets. it We've the the real holders. are preferred of that to outstanding capital X% company's case-by-cash that liquidation who negotiation we're estate objectives that sort into commercial by

we be. way able getting to So, the opinion, to XXXX plan. We forward the more want we to where shareholders progress. continue to the we to being complete We to as shown show in to have the appreciate continue well my you that as support personal on our look are we shown make and you've patience during

have speaking in forward I and all to Thank look we think I say. that's calling for you. to you to

Operator

for Ladies This program. and thank you call. conclude gentlemen, participating today's does conference in the

Everyone may great You day. have all a disconnect.

ACRES Commercial Realty (ACR) 2 Nov 172017 Q3 Earnings call transcript