XAN - Earnings call transcript Q4 2017 | ACRES Commercial Realty Corp.

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Operator

Good morning and thank you for joining the Resource Capital Corp. Earnings Conference Call for the Fourth Quarter and Year-ended December 31, 2017.

Before we begin, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. When used in this call, the words beliefs, anticipates, expects and similar expressions are intended to identify forward-looking statements.

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

Andrew Farkas

today you is as joining cellphone. I to apologize of RSO; call Thank in Lending bit who Stern, of Dave is President RSO; Estate my RSO; of Matt CFO line me Bob at this I Commercial a scratchy. us Hughson, a little the Head CEO Paul had are Real Bryant, for RSO. from and of the Lieber, who morning. is With

competitive long Head real and originated I'd was vehicle as introduce earnings XXXX face like pleased plan into to Andy approximately value. investments non-core already with and [ph] amount XXX% we that Finally, who the capable loan compared million Karr, Relations. and this core than as are of RSO's volume of commercial solemnly shareholder sustainable XXXX CMBS delivering In report in greater we substantially XXXX. progression to positioning believe over $XXX I made to Capital by strategic to through were in Resource up assets. risky estate new XXXX, Investor producing early and XXXX term am significant progress

expect make earnings in these core meaningful to to XXXX. We investments contributions

preferred growth, earnings call, XXXX. we the year later full I this in XXXX. Series and significant and and Lieber. On in we've to our begin capitalization transition A progress position our improve year earnings our core we during first RSO adjusting to operations continue shares the of that that RSO in over efforts past about also be B As with for team's fruit company's CEO, made our to Bob turn redemption sorry, will With Bob. said XXXX we bear CFO it will a believe sorry that, early -

Bob Lieber

asset book and the value. everybody. equity Andrew our a and in shift allocated million, increased you. XX% strategic through result months implementation over I the our of as took a release in up to balance year-end excess to Thank million which from plan. strategic the sheet summarized the We to and of over under the XXXX compared significant well off want or of this of just sold Good proceeds base ago good XX of we've of press obviously as by the investments morning, of morning, schedule XX% XX% in ago. fee we highlighting realized year non-core assets $XXX to core about has start is plan $XXX $XXX The when million

to earnings over require few other the an this in initial Series a I'd I'd like impact first and so and a B will to the detail Dave investments a items strategic Core minus power. withstanding in quarter. exiting track. identified of earnings few the Bryant our excluding the on penny fourth remains shares may Our redemption get for expect X best proceeds to preferred redeeming more fourth assets for time guidance were timeframe. little the Series And in related our has on highlight completed discuss now more earnings But these but quarter his execution relating plan of next, be for the the like minutes. substantially the period shares maximize key certain That within to that that remaining we in comments to A XX-month and our charges to order included preferred our -

XXXX, $XXX be the As quarter. including function and of dividend per by core existing two strategic earnings expect the historically and approximately Series loans entire we the now requirement class B end of would the annum grow from sales last to our their redeemed is common up and those and are RSO's maturities lumpy extended. is the plan are capital of the our Series proceeds loans what will really A equity eliminating and years of origination assets. paid deploying all which million capital, of picks originated That initial of and incremental base shares plan and quarter the of and $XXX those Andrew the said, these per unpredictable strongest of including have maybe prudently strategic a equity mentioned million the we in approaching base, asset or remaining this the from our And timing first were or preferreds XXXX XXXX, off $X.XX the proceeds to in of $X.XX maybe earnings, goal by from this

earnings appropriate. XXXX, course all at share will We dividend expect core discuss first continue dividend that board of remain the over we our core generally to as by the will And quarter of $X.XX common update dividends will the with visibility informed future improves policy as for XXXX, you earnings. per the be and

fourth sheet Now we sheet down per charges. $XX.XX the we cost-of-capital. consequence this, and will book turning the was of balance certain quarter. And as a in which and a value recapitalize incurred the third of was of for to decrease right-hand continue to side the company's the the have second, as balance the to end from future the $XX.XX quarter, incur one-time accounting end share, slightly of at At the

with the we issued are closing, related to optimistic I around discount the charges as redeemed shares The of the at rise reporting, execution investment stabilize to are share and charges accounting book that results we've preferred strategic to our account not the balance even one-time the to at par, we GAAP reinforce plan redeemed be preferred were those the redemptions and Looking under a as changes that company. shareholders. about share of future and for which common accounting though gives value complete the performance. to plan the continue are related pleased the In one-time we I forward, favorable want these redemptions, discussed. of these such strategic the and expect or $XX to per operating to

result value to our are meaningfully reducing to $X.XX Capital on has the growth be basis negative of were decreased earnings core by trended are negative expensive capital back, nearly increasing the fourth continued in right components a for XXXX, of earnings. the capital estate share, corporate quarter. and structure. In C-III Looking book stabilized, adjusted has direction. earnings Partners negative second activity XXX our $X.XX have as cash is a a quarter the refocused were a CMBS and points or eliminating to of $X.XX of core Loan core cost the origination volumes of has credit, and this quarter commercial fuel which share, our real for Investment quarter we'll in third use a and core competency of XXXX

of pleased more behind trajectory to and long-term Matt very value. to are I'd to Matt. these company to And the and its over We the deliver some detail that, Thanks, about the this like shareholders ability with momentum turn components.

Matt Stern

origination our of $XXX Thank $XXX begin you, investment XXXX, million good In closed morning base amount commitments Bob everyone. and with we like loan and and acquired I'd activity. of CMBS. to on million

of of the alone, weighted XX-day transitional CRE million $XXX spread we fourth XXXX average XXX with loan basis originated LIBOR. points the For quarter of over commitments

flow earnings see of loans. the XXXX, and the of At origination recent our $XXX million loan we rate call. our am team that is will are guidance pleased home of volume million to comprised that billion origination floating XX, portfolio December CRE commercial estate half the report $XXX exceeded we $X.X provided the to during our our origination third of Our of loan market quarter growth self-originated of second that real continues I XXXX confident loan continue. deal volume to improved

is rate As believe benefit to we rate floating a portfolio in our well-positioned a lender, rising environment. interest

acquired real capital adjusted returns face of million Turning during $XX quarter. CMBS RSO amount and CMBS CMBS good trusts. competencies stack one we fourth portfolio, of identifying benefit to of C-III's the to from risk estate credit throughout the bonds our continues of core underwriting

subordinated credit and non-investment investments yields trust. low well bond RSO's fourth CMBS provide the CMBS while risk We subordinated the attractive tranches the a grade to meaningful RSO CMBS portfolio. yielding quarter, diversification and BPs acquired as duration grade investment more During adding particularly comprising of the CMBS a higher believe adjusted tranches as

annualized that level billion this compensation December that XXXX. these the To The commitments $XX for and commitments year. of new Going market goal forward, as more grow as our investments origination up CRE and reasonable core to strategic expect despite goal of at is plans September fee the time time light as than revert current to well approximately C-III XXXX, I the achievable significant and the our manager, annual rate earnings December management our incremental $X base and is RSO's equaled this of an was We run We RSO's the finalized, to or at have to to investments. required. in management XXXX, rate while sustainable and give to the this was discuss RSO the fee reestablish XXXX plan RSO's October X, at until asset investment acquired execute amended be The XX% and credit next loans fixed it $XX a make believe resources plan through item resources year at competitive also would a been make of to board incremental the are are equity. will like will manager million million agreement. approximately back functions. annualized of restated RSO's management would fee XXXX, and is be and strategic fee of for executed at Effective standards. X.X% greater this our to XXXX, In was which fixed required change, and maintaining agreed base management management $XX.XX XXth, XX, million some context

incentive of from issue amended XX% for hurdle impact an the like return over management RSO's of has return hurdle. analysis been for average raised hurdle future. of challenging calculated, following cost of resolving hurdle incentive base pre-amended per to the accretive thought and reason an the improving is appropriately of the capital RSO's will like earnings raised we amount by strategic capital raised which X% share. did equity is that capital was sheet. of Finding balance Amending hurdle capital pre-amended of adjusted any versus the resulted two would average equity calculation returned Consistent discuss been value weighted excess the agreed not the current agreement, fact The on to of based a raised via also changed base of marketplace return upon the provide I we the price half manager the management capital incentive the address The average of and in right to it request in right This IPO a book with approximately was board's fee terms, of Now, over calculation that comps, fee this has an capital since issue by manager the some actually is include RSO's XQ XX% To to changes previous a RSO's fee X% available I'd the since the since market management management. made the then our and by market equity the preferred of dividends interest for the value the context, deploy asset. in the aligns the the the and team calculation. progress side to to At discuss shareholders. assets account RSO's over and incentive incentive an $XX the fee at competitive weighted was hurdle of base IPO to times within the prior have in shareholders side remaining important issue that value sheet. company. with plan incentive the the balance the the expensive now the

level asset on preferred excludes By of simultaneous reducing for XX We points XX, to cost common capital issuance redemption and convertible to X.XX% redemption the and nearly and first and accretive corporate to redemption million to Series basis we of attributable September B February notes, XXXX. the corporate by scheduled XX, since in B in capital cost our a XX basis of have became capital, investment attributable the points cash points This $XXX XX convertible notes at meet XXXX. cash preferred completed on financing March XXXX partial RSO's company's end reduced better position to includes and XXX quarter in believe the to equity. This A a And occur basis we our XXXX. from trust Series our manager completed X.X% January XX in preferred beyond. announced cost August we objectives our points preferred will Series improvement of XXXX and equity million the attributable and includes of be XXXX. basis

ways improve come. to cost progress in the Dave the evaluate company's over turn you forward capital it our to to like that, our I to continue quarters to discuss of financials. to discussing to look with We would and With Bryant

Dave Bryant

morning. you, Matt, and Thank good

Our XXXX And was income per GAAP million December XXst, net for $XX.X months year $X.XX loss $X.X our was shares ended or ended to for the net million allocable common per XXst the December GAAP $X.XX share. three share. or

comprehensive per year-end. a XXXX loss share, a share A class also of legal book year-end to expense a attributed settlement related $X.XX loan XX, into $XX.XX a increased entered from consolidated September charge value and income at the the share value general our payout March strategic adjustments. $X.XX be stock the XX, loss wind significant $X.X million of Series decline charge our included $XX.XX GAAP results valuation the from or of preferred plan. and redeemed strategic of a preferred Series and other between includes the carrying price XXXX a related mark difference from our down following the market of in activity; Also, to net action The CRE and the of to in to shareholder stock, outstanding additional all for $X.XX on Series of value. the $XXX,XXX included B the the net and of $X.X adjustment per net $X.X from entities a charge $X.X primary the common and decrease net quarter to to loss Adjusting also loan B first XXXX sale unfortunate million stock. discontinued capital charge all loss can investments net with book fourth million Our represents million redemption of redemption million A after be per for $X.X provisions A at of mortgage, following. at from decrease the which the quarter to plan, in to dividend of book December value a operations $X.XX XXXX, of an of share the in primarily redemption the the and of from a a our held per in for $X.X million finally, remaining of incurred

quarter, plan balance cash With the netbook notable sale $X.X from assets strategic expect $XX PCMs that over Bob volatility in we a million execution million PCMs finalize in sheet. financial As of leverage. assets the down operating $XX.X in of value ratably approximately the primary $XX is investments plan. saw including the of new the credit represents net to the the months includes of plan We on in investment former total underperforming to discussed the during mortgage wind value strategic contract of past our and business million significant resolution $XXX,XXX. decrease his plan assets use remaining proceeds market under six all as within of million standard $XX by increase our of proceeds to CRE our received into and this and statement million the of decreased The for remarks, in strategic income our assets remaining we fourth capital

was on The year-end of lifespan, facilities at our leverage estate million of by least our which as XXst, paydowns liabilities liquidated offset result our times liquidate two similar recently Our approximate have available million a million XXXX. other GAAP is from of $XXX securitizations term deals. $XXX December of $XXX borrowings to our an commercial CLO anticipate at and real issued that XXXX capacity at of total of $XX in We XXXX million. the approximately and XXXX XXXX, We decline X.X one leverage during X.X XXXX. in and equity XX-month a will had stands and down times decrease net

also a in of permit. we conditions business market We back CRE facilities liquidity we leverage unlevered. ample to million believe our for as newer at investments target real a With go estate will to currently I'll a Bob hand over call on forward term $XXX XXXX the December held the XXXX that, XXst, issuance With turn on We that have cash CMBS fund in have comments. new are final basis. in access loans on and securitization that to CMBS

Bob Lieber

Thanks, have you Andrew, with. to Dave. did close you wanted anything

Andrew Farkas

the [indiscernible] the we well that course year from to management the the market this like the done improve truly months. the you're last I'd that I [indiscernible] in over over all and performance with I the of gotten will I think continues and work continued guidance the the of think from and of the course along balance as results derived job they've XX to enterprise the general to moving be congratulate following Yeah that on appreciate done,

I should that, we think with questions. take

Bob Lieber

up we'll Okay, operator, it please. questions, open for

Operator

Instructions]. [Operator

Securities. JMP with DeLaney Steve from is question first Our

now line is open. Your

Steve DeLaney

us my the went to the end origination on and I like of have that Could year. start Good platform of side, you terms for what remind morning, momentum your on of as obviously side country Matt, questions. office would number support taking and do into good the personnel around like how the you you business? many your in you with of looks Thanks. everyone. the originators loan And locations thank of you

Matt Stern

to the Sure. magnitude start? just as discuss Paul, you do want of platform a

Paul Hughson

Sure.

So, we the approximately two where bulk staffed origination RSO an has York of four coupled underwriting got office in from and platform. the staffed infrastructure with that's derives underwriting have the then with in folks, with the an infrastructure that's office where in New C-III people that's originations LA in XX Philly the we've support

Steve DeLaney

Paul. sometime meeting thanks you soon. Look to Great, forward

pay-offs, that, Following loans. in about new comments CRE hopefully billion pretty a of up but you've of your portfolio $X a new was set Matt vis-à-vis had XX% originations? that amount $XXX have CRE XXXX, do maybe originations, sense you that on million growth pay-offs some significant somewhat XXXX, in level Thanks. you what target in of the given of In XXXX muted, the the for

Matt Stern

Yeah, sure.

that clarify floor would to the loan on discussed, that for that XXX approximately expect Just it it, we was be upwards could side. be so billion of the the on

we of terms of analysis is a but taken. to the expect result difficult meaningful based predict see repayments comment through very originations. It repayments that our portfolio behavior In the aggregate growth precisely to expected well on terms of do in as XXXX loans, maturities portfolio on of borrower of growth, is we gave guidance your and

that that first it's think in just a in significant for now we expect to and portfolio more quarter origination growth XXXX Earnest to ramp I that RSO have in we are a began the do and note position the important XXXX. net we of build

Steve DeLaney

benefits of assets rationale why you also of CMBS. we Great. to the there something of loans, the be duration allocate involved longer capital those that you to in rates have about should is a senior should the mind keep And floating capability Is just the versus CMBS? in one as guys

Matt Stern

think precisely diversification something is type business, then underlying the that the on Yes, the investments the dividends company, an sits the increase for meaningful the touched of to reasons. it which benefits There one both asset is you've base, given well supportive paramount is as of are our that so that under investment think base company, of the duration is of longer investment future we earnings duration of asset credit a component in think the as longer we base to the critical. of we as it's and

Steve DeLaney

for Thanks. One thing quick may off. sign I'll and if Dave final Bryant I

what Looking off thought represent? entity left, at PCM from was this I is $XXX the cable is PCM the seeing carryover what million this not, of the wasn't I'm year-end and that - a that investment unconsolidated million. if $XX.X books non-core at Thanks. does in

Dave Bryant

investment liquidate of RSO further over PCM, the is it to we're not to rest hedge the and cycle. year-end a post it that an essentially Steve, looking liquidated of It participated that days fund in is coming XX XX in

Steve DeLaney

you Okay, for morning. comments your very this Thank good.

Bob Lieber

Thank you, Steve.

Matt Stern

you. Thank

Operator

Bob for no the And further I like Lieber now further remarks. showing would back turn am questions. I any to call to

Bob Lieber

you you hesitate quarterly Okay. on all questions the Karr, you Andy all. thank talking you if and we and look to participating, forward are more appropriate questions Well, our contact there next you, to to other don't call. Steve your for to Thank come get for thank response up, can who to

Operator

thank for in and gentlemen, today's you conference. Ladies participating

disconnect. You great have may Everyone, now day. a

ACRES Commercial Realty (ACR) 8 Mar 182017 Q4 Earnings call transcript