XAN - Earnings call transcript Q3 2018 | 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 the Third Quarter 2018 Exantas Capital Corp. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to host like Mr. today's now would introduce to you conference I Karr, Relations. of Andy Investor Head may you Sir, begin.

Andy Karr

and call today. morning Good thank you joining our

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

these XX-K section forward-looking such date uncertainties that are number update the and certain measures particular, risks to are statements, these the its based on Although current to assumptions, believes discussed the risks are beliefs that uncertainties a statements on reasonable actual company in XX-Q of results forward-looking with in subject on differ statements these management's the only the reports statements. which Listeners obligation no undertakes Furthermore, XX-K. and The and, any forward-looking reports Form forward-looking company will speak cause Factors conference of non-GAAP company's in filed trends, to based and materially as Risk These are could including be contained cautioned the and on undue from discussed this statements. our reliance of X-K, expectations and Form hereof. financial place are on to call. not of SEC, those

non-GAAP principles for the to to past isolation with Farkas, information for most with would accordance Our financial turn quarter. the as presentation earnings presented in over opening Exantas accordance of this our contained the Andrew are for prepared these measures intended it the Corp., remarks. Reconciliations generally considered is information financial measures of of I now comparable accepted Chairman Capital GAAP. the or accounting in be not a substitute to in in release

Andrew Farkas

Real increase during behind is dividend plan we established time. per supported third Company's to are period Lieber. and Head Commercial has That's fourth today for of approval complicated, in driving results Board earnings the from the for our for in strategic when share understand. real trajectory thus quarter you look portfolio additional our commercial heard. The that core Estate to quarterly the company CEO, forward CEO; Stern, portfolio estate we immediately XXX% increase joining of Andy our the Bob continued increase prospects continued that our Over those resulting of to our the billion with With last Bob to the CMBS it of plan earnings a year, XXXX. everyone. our Matt turn core Head Karr, We in already in brand announced always potential net be in consecutive future reporting on me making you've growth. to the the I the portfolio. when Bryant, the fourth quarter of our increase the Thank of over This Investor results President; calls. of pleased increase call. of will and earnings power operations quarter three in Relations, and investment of our at origination this to With Good gross. from transitional Thanks dividend am months Company shareholders the investment Since I to strategic for growth easier from is the would November our third the morning, core Hughson, is of course Dave Lieber, share activity in which quarter. Lending; overly of you, of the another has which loan earnings will acceleration May of $X.X sorry end the Andy. anticipated When our XX - recommend Paul growth announced CFO; $X whom per - new investment us, $X.XXX

Robert Lieber

morning, and everybody. Andrew, you, good Thank

third to the XXXX, quarter. $X.XX increased from adjusted quarter share, in up share the a a and from earnings quarter $X.XX common of second the $X.XX share per core in up first For

the environment As third is which several months investing Andrew reflection during positive core by quarter almost downs growth payoffs, investment This in adjusted This despite stability of group pay mentioned, driven and our million a investment growth from and Company's net pipeline, trajectory earnings September the nine million the XXX the and XXX of our is by factors. a ended of the XX, over and during portfolio is XXXX. competitive sales. the portfolio,

the estate a real opportunities, commercial local property The to creating desirable strength types is perspective, a from is which first the of generally as and estate volume lending economy. are driven continue well, real transaction remained by markets strong, U.S. and of operating across perform fundamentals domestic macro

opportunities. repeat and large derived our increasing marketplace, lending of is to This real estate management are evidenced ability by borrowers supplemented the lending and many our share XAN's by relationships from extensive its commercial function in platform as Secondly, capture C-III's relationships team. the presence an a relationships lending

securities, which leveraging core duration Company's the enhances of longer in sheet. the balance is third mortgage competency The provides in C-II's diversification commercial investing assets backed

consistent deployed, presented on August XXXX business outpace achieving continue XXXX. as move towards significantly XXXX was to balance and core lower in bolstered to will earnings expected referenced the to expected Once to on execute our compared full earnings profile in in Presentation. We be of of expect XXXX increase. deployment principal with and Page half XX the a were to earnings which full second be our by to we the core anticipate forward continue the loans, profile of XXXX of Investor payouts plan, we deployment fully As the substantially annual off pay

board We per board. making to for believe earnings dividend were continues As the you earnings third discuss to improve, we core visibility in our earnings our to fourth near value with evaluate and were core and $X.XXX will heard policy as recommendations we share different quarter. anticipated Andrew mentioned, the regularly to term as continue book dividend consider increase well consecutive the as quarterly outlook carefully

one, fact quarter, increased the quarter the for at $XX.XX end in at book the sheet, is at in of consecutive share of of which quarter third value the The the quarter second end $XX.XX XXXX. value to In and up looking book balance second per increase offset from the this $XX.XX $X.XX the first per in unrealized and market swaps share share our for dividend and of per of portfolio number net per to $X.XX our of the marking the payment third additional share, quarter. mainly related $X.XX attributed gains CMBS the is income an quarter to by it's been from

I'd As ahead growth like we we're potential. with Matt details. to And the turn to some about over it more XXXX, to that for look optimistic

Matthew Stern

September closer exceeded Thank taking whole floating third quarter's XX billion new At you, good I'd Bob, loans, commercial portfolio which by origination grew loan at XXXX, and real and downs. morning, a payoffs activity. look to loan X.X rate, estate self-originated as begin of origination quarter this our the comprised everyone. of by pay million XX, like which during

opportunities points which In XXX over weighted quarter, with team Our the commercial originated was loan platform. average spread million LIBOR. origination deal Company XXX CC-III third by is continue enhanced real pipeline, a in see basis resulting XX-day strong lending the of quality to of a the estate further CRE

for despite new earnings spread last two during competition, The compression As average XX average market the than of future months. weighted average unchanged spread unlettered during basis third of compress of originated summarized quarter September tighter at XX, entire our the was a the XXXX portfolio points on weighted spread for XXXX. has Similarly, been from year page the release, points whole XX XAN's loans quarter largely loan some XXXX CRE weighted the the basis yield originations weighted over when average comparing its ago. September to at XX, the same loans portfolio period during spread portfolio the the of originated

lender, during However from spread over spread we in as benefit last by our been has mitigated funds which rise has month period. point the the XXX same by floating rate cost on And of we this basis compression months. XX reduced XX the have XX increased basis points as the substantially LIBOR the

diversify XXXX, rate in where duration. of that see we Company's CMBS, $XXX September we floating attractive opportunities of million quarter, third to we of our offer $XXX investing fixed was the have and XX, bonds comprised CMBS at million million the During portfolio At by investment par rate hedged. bonds, continue portfolio $XXX which

bombs. to selectively the base of Similar invest to we quality. while XX million During on credit amount have continue and CMBS asset CMBS compressed, remain the loan yields focused class, we quarter, third acquired in

provided and quality XXXX so expect XXXX year current CMBS gains plus presented opportunity to to March guidance We $X September and exceed our with which quarter for through on the to loan we close Based XXXX commitments have CMBS been Company's opportunistically fourth we our investments. realize of on have also during of in investments XX, done call. XXXX our earnings pipeline, this volume total billion, sell

execution the new provides that only we Morgan. structuring structure asset for the This CLO our the facility Morgan firm attractive is regarded with terms its also facility of improve but it's with end the through the financing Not J.P. of market and quarter, new warehouse Following level is for a company. highly and several J.P. terms flexibility, benefits another capabilities.

add financing source highly for an company, As financing another partner. are and important CLO to regarded is attractive the financing structure pleased and we

the Finally, strategic turning plan. to

order We delay and be unfortunate. quarters the our in funding exiting have one longer assets up concluded in - to next this commitment holding to in an period advisable investment that match is over additional of remaining will few for

However, path maximize therefore and path of will accordingly. proceeds this is action course we the to believe we pursuit this best

earnings quarters it in I'd to discussing our this discuss We in like future to come. financials. value the progress over look Dave growth to Bryant forward continued and turn of the pleased to with the core are book quarter With and progress that

David Bryant

morning. Good you, Thank Matt.

September growth Our or X.X million was share $X.XX third per We are XXXX. million common net allocable shares for proximately of common ended XXXX or million income interest to quarter GAAP the X.X XXXX income common of QX for for share. earnings three million increase the driving XX, per $X.XX. months and interest an or was X XXXX items X as $X.XX core the adjusted in our earnings increases second share saw Three X% X.X million or had income. and Core net was of over in approximately or of quarter these XX% XXXX compared to QX

asset In months September in and XX, core the assets XXX trailing or XXXX million growth of was First is for core nine million XX% XXX net incremental value partner. respectably. investment and ended the in months or XX% par earning the our XX that growth

of the XX, X.X and As investment CMBS XXXX, of at September portfolio comprised floating XX% totaling core and CRE rate match of assets par billion. funded

Second is when lowering our asset of cost incorporates our based of capital the financing.

seen warehouse have points we factors. as have a to points. result spread One, September basis CLOs of the to quarter Although improved the basis XX loans, And several LIBOR XXX a XXXX during CRE we related of our the unwinding XX interest lower XXX decrease of for basis time points a basis XX outstanding the on of we self-originated facilities. of three, September with our points, negotiating of a decrease XXXX XXXX XXXX points XXX of and to our course of QX decrease on XXX financing costs. our borrowings compared decline factored Matt 'XX, This issuance XXXX, basis the as CRE in rates third points have at as basis basis increased XX, at at higher of our XXXX CLOs. payoff to Two, same Concurrently, from seen points. indicated, spread XXX

equity the core our rising Third to rate investments. from credit LIBOR is CRE benefit accretive floating on

per increase XXX proximately In $X.XX earnings fact, LIBOR our per to are or were that annual prospectively share. million would also we year basis points, increase estimate by core by X

Core sheet on The ratio lower share. and $X.XX going from earnings our vintage XXX,XXX loan - our operating non-core X.X times Our to rose net common annual commercial resulted to QX adjusted and share. of a or QX X.X adjustments load I'm from adjusting that quarter X.X the common as interest strategic Are total other new warehouse XXX simplification impaired XXXX earnings ratio to leverage XXXX, shareholders. reserve borrowings non-core million and income, a of increase a income estate for facility months results And income XXXX June held levels includes for reserve $X.XX per operations. share balance of our sorry million in increase the of commercial assets per X million. yielded net incremental an a increase net from of by $X.XX on of XXX,XXX from GAAP were facilities, XX. our CRE now the for that loss increased These for have equity loss income legacy we realized sale, offset at our October. estate our - for debt-to-equity plan. third in a of from this transformation XXXX capacity the of benefit three XXX the several our per of real quarter. After million net implementation continues ended in on was non-core including real on of per September discontinued $X.XX net costs core for times over closed The adjustments and We were core XXX,XXX share term reserved XX, net asset

was efficiently both off recycle CLO on our In loan component redeemed via our of key unable CLOs neutral we evented capital essentially due of recycling which existing liquidation these cash The loans course. is of XXXX, QX, line and in targeted a reinvestment capital CLOs to issuances payoffs. from after us of natural our XXXX, certain strategy. from During and paid financing

our assets redemption capital existing Secondly, plan. utilized capital priorities. year. legacy this to strategic or each in to collateral recycled third, have invest selling And respect of we the reduced portfolio our case, either with as term earlier cost on financing stock corporate accordance of our our In investment with our core such of loans, preferred return in

senior final to share for forward to call XXXX, per in I'll expense, convertible the nerves plan The of XXXX. X.X notes will with we approximately off beginning payoff where to X% mature December interest any pay available X% quarter look these year, As our $X.XX in With back cash a and eliminate fourth of senior the convertible are turn million of we early comments. that, liquidity. Bob

Andrew Farkas

a going This two. is highjack to Andrew just minute for Farkas. Bob, this you don't mind, I'm or

we just So Several with representations as success of this point specific grow we kept. of value had both a has to to properly that regard value implementation promises have now our place. to this plans redeploy a book series Every steps and that it they that and in those story, commend The turn to like one forward. continue have as entered I done, team I as we when story must ago estate we my the it to it successfully The been to out earnings. taken want our improvement of back manager, go a the new see our made businesses to of this real taken core work take waste I I program expect focus capital single we growth book be they doing With Bob, have for to to as you. will types had. implemented. turn in place. what business basically earnings has right this that size were enterprise, a was that and and of on terminate not lending, and to commercial it years

Robert Lieber

David, And thanks well. to Andrew. as Thanks, you

by of of per with to increasing Just have. do earnings out this for ask calls our just track Andrew takeaway we're said, will the portfolio per let two for core core efforts share of dividend any on you. followed look quarter quarters for the open we of may for our share an of updating a the ago, we to on and future is that, growth With up I'll the discussing the to achieve consecutive what that reiterate questions couple laid investment on years calls fourth and progress We what is to three to to acceleration and $X.XX board $X.XXX adjusted and you the meetings have operator approval all continued investment quarter. you be forward recommended might to in results to

Operator

question [Operator BTIG. Ben you. first Our Thank with from Instructions] comes Zucker

Your line is now open.

Ben Zucker

relative are dividend and certainly I'm deploy CMBS on easier business type right could and XXXX? and in in rise. between the senior loan you best and helps and the cash congrats into providing you my morning, Thanks Good color for with curious on capital returns of questions But the imagine CMBS investments seeing incremental product also it's where market CMBS the immediate taking reduce I made XQ, just proceeds drags. you bridge follow-up the some everyone. that to now

Robert Lieber

there think I in the tremendous lending is - value we see business. traditional

the the robust. you to market on of We warehouse markets loans. know focusing likely transitional the As today. remains with providers We what think think we've ability is those finance capital and both the in good been that is

really what borrower and revolves the portion, also single coordinate we've we've amount to focused a so see of three been bonds, of CMBS, guarantee we pretty As around C's bonds B's value. single on the where to it deals the asset, got number relates fair a in

we've X and say think XX the can take. XX, focused way much plus or other, alone CMBS points expectation shift one minus I or is I may So balance plus In pretty year. minus been the my or the pretty we that's for well would but just

Ben Zucker

And origination out recent always see. too. and We've say be also right keeping now? you're I borrower bit in Have nice I'm in starting heard of increased guys is if some about the wondering that markets they've you in which to be a seen throughout spreads the might like behavior with bottom presented that rates that peer now to a What are the that steadily their any market year. year equity seems change in that higher? to model feel earlier seeing think is allocation loan volumes, CRE Talking you

Matthew Stern

leverage natural where the That from just warehouse volume from been to C-III an the is why on think of competitive, financing alternatives is platforms and reason enhance given there origination quarter-over-quarter. able although we've CLO legacy origination examples remains capability, which able little providers grow I markets market capital been both said, think to the the market. the bit on floor I the are, a to we've spreads

I expectation remains continue to increase, think good our is stand we but you will we our pretty where to market. know feel that on capture rate comparative at as market as pretty the

Ben Zucker

definitely you in CRE mentioned lastly you investing borrower. remarks? that loan advancing prepared to me. your think you I talk for I you're that proceeds about for helpful. Can cited specific that And give That's plan kind the guess could the more you that there, of insight helpful? Any resolution, color around great or the going on just timelines be property would type, business what borrower property, be asset, would of kind legacy any

Matthew Stern

it's we more think of and process of that. Yeah, an point capital operational of to assets in can best through in resolution. the investment advance realize the order working we're we Obviously, where the the

into So giving at a little most a of operational variety challenge time. the paths capital this we've as is But feel maximize recovery. the real though asset point to in specifics is and a of evaluated we prudent thing the bit

Ben Zucker

Appreciate it Andrew, stats, that, higher that's the helpful Well thank hear guys definitely Dave LIBOR, kept you first and to promises story both. Matt. believe thanks guys. the that about you for I have provided that's it's on sensitive rate interest I for including your me and time you so

Matthew Stern

you. Thank

Operator

you. Thank

James. from Laws Our next with question comes Steven Raymond

line is Your now open.

Steven Laws

Ben's And you. comments, Thank increase. another dividend going congratulations that for Hi.

you've can assets? on legacy think versus of the a the I should that the resolution, how basket, you other loan the Following-up, to are but have the missed Any about on at thoughts and assets was stuff maybe your I may assets they're been this looking discussing identified life, but what remaining the strategic timeline some to of longer have other know we planning. identified maybe Matt part quantify -

Matthew Stern

Sure.

one press a bit the et through. and then are work that it. order If resolve release, a in just businesses quarters spoken that them themselves that three we've cash short a get one expect resolving loans over to of of continue legacy then of cetera refer million you breakdown the scheduled couple the little the potentially of the some next couple of and balance discussed $XX.X of other loan a are of We've the about. which them we them you in We'd to

we're capital expect the zero. point at resolve really and to small think acquire this down in to of couple But to close I time. a of component I get of So south it $XX would the to starting million them of will here that and $X.X take the quarters down aggregate balance billion

Steven Laws

else certainly progress about can bit two of XX% last yeah, what's addressed driving the follow-up, talk sourcing having any there? anything strategy yet or as Great, the there net investment lot identified as core little volumes, your investment look these then for a to are to repeat you've we look forward should any as other really sourcing years. classes a at a but same are portfolio, next think And or that or the When those borrowers investment that origination asset part of about we such the make there over year. lease we going have good you

Matthew Stern

say terms both our business the in a basis. as the also our of We've sponsor made examples side. well right group that a I lending, customers on four number amount the on intermediary side, clients, of from does the traditional So the would on C-III fair of

types equity Mezzanine look have horizon, - first kind as deals traditional to as a preferred transitional we As will those. on at CMBS, continue and done it done different the to of mortgage deal, well relates we we the have we've from more lending away product slightly the we

you As mentioned, net we lease. identified have

seen over last the quarter, the the all of comfortable we've were as for evaluate say opportunities profile don't that that. continually investments net we we those think with least we I return

expectations given over I opportunity a add meets seen we've our risk. and to will be the today, we product that time an think not but that return it, that

Steven Laws

yearend model until consider? like need think at our off appreciate prior regards to any or and should post-election people to as that with Great, seasonality, and really pushing there to both we anything just is is we loans you the as we about repayments, to question look trying look seasonality election My we originations the is last to or decisions color. I originate year-end know

Matthew Stern

to repayment Well, pipeline been fourth strong and quarter. expectation trend. one the can would and directly in which in that achieve to that primary continued the that aggregate imbedded volume the originations maintain year we that expect last into months, election. what core has contributor relative the of speak that and continue earnings in the we be of And the as strong profile we've I to wane continued the to that's portfolio comments existing our mentioned over impact representative strong see the allow to don't our will Traditionally, portfolio do quarter we is a the seen would to know us our We to aggregate the over what next XX net would our deployment anticipate be for origination really existing growth.

Steven Laws

Thanks taking questions. I you Great. my appreciate for color.

Matthew Stern

you. Thank

Operator

[Operator Thank with comes from Jade next Instructions] Our KBW. you. question Rahmani

open. now is line Your

Ryan Tomasello

Good This is for Jade. Thanks actually Tomasello taking morning. Ryan for guys. the question

maybe terms a in you in what just property type, color types property the know give of see size us a Just areas geography? types you then bit the those terms maybe And loans to lend? in million as most as follow-up attractive originations that, to you of the of in quarter, market can the of currently of XXX and

Matthew Stern

Sure.

deals there quarter bit There's out. loan, XX but that for actual about we levered So the cetera office round the a about et smattering million. deal hospitality, terms of were were the was saw it range X of so - in XXX of were average and of average size, to then XX. multi-family a was on in XX% a million the was them separate in XX multi-family,

the we So diversity and continues you up to little existing of multi-family quarter. a this toward we've portfolio, as large a incremental more little did be that diversity bit been a bit than substantially representation, know weighted pick

Ryan Tomasello

And And say as in what existing from of the the comments scheduled a the you amount in competition terms you've represented and on amount follow-up rather to your in than of greater portfolio? borrowers in quarter, the early this that wondering if a can is or all lower was then prepayment you know one heard market of some the maturities? that those cost other repayments we've seen liquidity requesting given or space, proceeds existing at loans players quantify in

Matthew Stern

right have maturities a not the I quarter or know I don't that specific at/ or now. were expedited I for prepayment, they if take repayments something confess know whether offhand just Yeah, to we look the on don't can

Ryan Tomasello

terms any just the of the seeing are of for in if fine. the greater so or a come to the in bars the you're competition the follow-up space? you maturity know Okay, that's spread procedures in just refinancing loan advance loan of amount And you given lower then requesting and on

David Bryant

about maturity on operators is asking. little coming It's the are not protection say not so proceeds I of And it's estate the much Borrowers like commented it our generalization. would really a bit shy before, of after tighter here real expiration spreads all this loan. call of and a more and commercial and

market you a too do and we will us. spread get know inquiry our refinancing that at the - have ourselves ability likely the lower if that it the or decide is to exists, opportunity So the away, price dear for either

Ryan Tomasello

that's yeah, color. good Okay,

Sorry, ahead. go

David Bryant

That's it.

Ryan Tomasello

if more one can. just And I

the rate creases forecasted purchase the interest borrowers rate your you business you Maybe in given just market the rate is expect level to can say over fed what that caps their the these if plans next of LIBOR start the you of require and bar terms year environment loans? off actually dissipating. impacting rates In to on

David Bryant

cooperates. rate the of activity. interest the do over loans next our going the What rate volatility to over I oftentimes talked know about increases a to that XX tends borrowers course loans, are we is caps have you think on All do makes that the are don't of borrower months it and, rate dramatic impact

than a add value fixed the in market, light of has because the of affects it business these is when not So transitional been the the even financing affects rate rate fixed the before transitional moderate borrowers. rate have consistent or plan more locking it floating completed, you market a with plan, idea business

a been X% know rate, looking to only only digit I we Rates, single know that long you around you and definitionally rate. the pretty deal. floating to who work. know And you know transactions, And borrowers mortgage you I've make a deal borrow value a at could make add - not rates you were normal. you if am almost So if you needed need when to rates historically, are still type are get enough old look

goes yes, XX, have if basis XX, have XX impact, So points, we'll up impact. some some LIBOR we'll

think I tend I a impact on will think dramatic our it So have to business, so.

Ryan Tomasello

questions. Thanks taking the for

Operator

at to this I'm not showing time. would call further turn remarks. Thank Andrew the over any questions Farkas for further you. to I any like now

Andrew Farkas

everybody calling as continue in. to of move provide we for Thanks this type forward. to hope We to continue news

We are it here, the reason time. come crew will have to about thanks to no us. about from you done who great talk this Thanks of we next Again optimistic the to optimistic the continue taking you plan. for not expect kinds And deliver believe have to and job we'll enterprise. quarter. We're business results to the

Robert Lieber

you. Thank

Matthew Stern

everyone. Thanks

Operator

great Ladies and disconnect. you gentlemen, a program Everyone thank today's and all conclude you have for This day. today's conference. does participating may in

ACRES Commercial Realty (ACR) 31 Oct 182018 Q3 Earnings call transcript