XAN - Earnings call transcript Q2 2019 | 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 Q2 2019 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 is being recorded.

I would now like to introduce your host for today's conference, Steve Landgraber, Senior Vice President of Corporate Finance. begin. may you Sir,

Steve Landgraber

morning you Good call. joining and you. for thank our Thank

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

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

will Furthermore, conference call. certain on discussed measures non-GAAP financial this be

for these Accounting GAAP. release our of a with Generally or Our accordance the presentation Reconciliations contained of comparable Principles the this financial financial accordance past information measures are in to the be substitute most of as with in presented is in isolation measures intended Accepted quarter. earnings considered prepared not information to in non-GAAP

Chairman for remarks. it opening Andrew Capital turn Corp., Exantas now of will over to the I Farkas,

Andrew Farkas

With and Vice our Steve joining Paul Lieber, Hughson, Finance. Commercial of all. the you of are Bryant, Stern, Lending; Matt Head just from President me morning, Landgraber, Bob Good Real CFO; Senior our President; whom Dave hear, for today Thanks Corporate CEO; Estate our call.

dividends most productive most of our play to quarters, of achievements acquisition our numbers, completion our course allows quarter of our portfolio XX% XXXX march one was year CLO. to of all a increase our the forward our continue last and of of an second or expectations to demonstrate XXXX. over we're increase this $X.XX the of and cents from quarterly So recent going These closing quarter plan the the in articulated us plans business we've the consistent commitment third the over for and This or so. to you've with

Bob Lieber, With that, I'll our it over to CEO. turn

Robert Lieber

morning, of per and the Gross second of estate the quarter, includes commercial million. share during share $X.XX with XXXX. of share, per made per of $XXX.X second for of quarter the was here, everybody. into the we're We're to but which from you, for second earnings what up is little going of committed XXXX, And good real investment last XXXX. $X.XX a a Thank quarter quarter more quarter earnings balance portfolio a of reporting described dig during Andrew. acquisition loan the quarter $XXX.X quarter This details, but Andrew $X.XX million

more goal loan generated to or We're year pleased end during acquisition moving originations provide year substantial with our will quarter, on our of deployment details our end, that closer the previously. and full the combination to we've us of portfolio deployment articulated Matt that that shortly.

second net XXXX. to deployment compares quarter during $XXX which million, $XXX.X was the of of million deployment That

$XXX at our par we our loan to CMBS almost commercial grew million. billion portfolio the portfolio billion During quarter, to $X.XX at estate $X and real

portfolio XXXX. interest our the closed per benefit quarter full driven during continue and thirds Net will of million as activity, first quarter interest deployment of to the we the next including improved the income quarter. the receive roughly into of $XX.X the net This quarter way which primarily second net acquisition, income compared our $X.XX share $XX.X million two improve or $X.XX second to share, per during or was by investment

have future creatively to and capacity capital $XXX This ample our roughly net $XXX interest to $XXX income. liquidity million to million deploy million translates sheet. deployment grow We continue of to balance over of from

real remains We XXXX. believe and the impact deployment the to real estate portfolio environment billion economic the current guidance of in of million not $X does include this of acquisition. Note, market our previous supportive $XXX debt of commercial estate

in the allow to activity estate rates our The environment. real backup competitive our continue lending and us borrow supports in win a second relationships and to quarter deals

GAAP share. Economic moment. past the tight and value constant to has four at value to remained $XX.XX remain increased book Economic value range from Turning The to relatively to a the second $XX.XX last continued quarters. book compared last within quarter quarter, $XX.XX book book share $XX.XX per value quarter. over per a for $XX.XX of in

per We reported core And again, $X.X again have per earnings our dividend. net first income quarterly the or or million $X.XX share to during $X.X covered of million share $X.XX quarter. once compared

to With Stern for like details, that I'd Matt? more Matt call over to turn the

Matthew Stern

Bob. At loan to billion. increased morning, June XXXX, $X.XX XX, everyone. balances our And you, portfolio Thank good estate commercial real

$XX.X LIBOR. loans quarter, points originated over one XX senior loans with weighted totaling totaling average rate that $XXX have an and spread $XXX we of loans real originated million the equity of day acquire commitment XX a XXX During and million, commercial floating million. average a XX preferred estate investment we XX The basis

basis XX made million equity with XX%. commitment points average a loans of We acquired rate of $X.X LIBOR. XX floating rate fixed over of an day The preferred coupon have we also one spread XXX

and during XXXX. The X.XX% X.XX% second the originated quarter, second increased during weighted to the points new quarter basis compared loans by average of to XX yield acquired undelivered of

average the loan Total a with X.XX% XXXX. of was quarter ends CRE of quarter a asset $X.X spread financing compared X.XX%, at to during billion second a spread weighted

pay portfolio as downs. $XXX.X and and by payoffs Our origination grew loan second exceeded during quarter, million loan CRE the new acquisitions

Consistent portfolio diversification of XX.X% diversification Our toward progress to loans Multifamily comments we our largely expect increase evolves with quarter, as we due last our quarter, the during portfolio to portfolio. now aforementioned for deployment. slightly account our the full acquisition. loan

is allocation to highest followed XX.X% allocation XX.X% by an to hotels. next at Our office

want to York impacted portfolio legislation aware any the that New by rent we is passed of in make our regulation not Finally, recent State. you loan

to portfolio. this CMBS, market to On million. for acquisition resulting the Exantas, made like portfolio would of a capital turning with XXXX, loans and with a into Before from a was Mortgage. transaction $XXX presented loans a Exantas meaningful XX discuss to opportunity a this acquisition of XX, and meaningful I May million Along our business portfolio Commercial its the $XXX quarter, net originations exit deployment the strong committed diverse to portfolio deployment to acquisition was contributor quarter, acquired the the balance at in mortgage spreads. decision C-III its second of loan above divest of pool This C-III

with We full our Exantas, it as of are supports transaction happy deployment. very objective for achieving

towards Turning portfolio. now CMPS

During floating million bonds. a we coupon at $XXX bonds, million acquired of face for XXXX, carrying million rate XX.X CMBS partially $XXX pay net June the rate by of comprised in rate second bonds, quarter, and a acquisitions XX.X sales downs of fixed par, amount of has of which portfolio of was XX, and offset million At our million value million $XXX $XXX CMBS weighted X.XX%. average in a at of $XXX,XXX

to of including net This book value a quarter, increase impact swaps. the CMBS on rate our $X.XX from of we our portfolio, mark-to-market recognized interest

quarter. Net reminder, from approximately represents a increase billion As debt $XXX.X rate. XX.X% portfolio $X.X XX% is our for first the of CRE million floating production investment the quarter,

earnings achieved core we outlined million still deploy earnings incremental presentations highlighted, capital, illustrative This the quarter, low earnings our in at our provided of Bob and end of supporting the And between core million will current us liquidity profile. range as our investor $XXX allow deck. outlook in investor the $XXX to

of six dividend in pleased our We expectation quarter $X.XX for third per increase of a an the or increase quarterly to XX% of are also quarter the announce second share, consecutive to XXXX. over XXXX our

like discuss to over to our turn to With Bryant it that, Dave financials. I'd

David Bryant

and Matt, you, morning. Thank good

common XXXX for $X.XX net GAAP to six million $X.X $X.XX $X.XX common was the shares XX. per for Our ended six share $XX.X per and XXXX or per applicable QX million, share, XX. per $X.X June months ended or ended for June period June $X.XX or the month Core $XX.X or common million million earnings for the share was months and XX, were three share income

by paid out primarily in and over driven second dividends The we've first growth by our or $X.XXX. to increase quarter Accordingly, the quarter as million we XXXX. Year-to-date, share XXXX, X%, production. million, $X is common the earnings or XX% net of $X.X of of income by our interest being investment saw a compared net core

arrive to core were to quarter adjustments made income material earnings. following The at second net

cover for back the add $X.XX plan, included First, more in strategic a on I which share million $X.X a or adjustment will lone in per detail. evaluation

of non-cash our per $XXX,XXX or a Second, amortization borrowings. discounts the share associated back $X.XX with convertible add note for

a Forth, or Third, compensation. the share non-cash increase to $XXX,XXX add approximately or a equity And general non-cash back per our loss $XXX,XXX $X.XX add back $X.XX for approximately per for loan share reserve.

earnings adjustments, XQ dividend the to of paid. deduction our of release. one comfortably for the and are course of Furthermore, of earnings core listed schedule net balance The $X.XX our $X.XXX of $XX,XXX in XQ covers

is strategic the our to of marketed repairs the necessary it enhance plan underlying the before One some sold. remaining completing in is property loans value and

as a reserve place in are existing an prelude receiver taking into marketing Result the solicited is repairs account value several of brokers' appraisal the to opinions of While $XXX,XXX. new of the these opinions underway, and our brokers' asset. additional

have the which of we've million estimated total and costs revised additional taken we $X.X with $XXX,XXX fees, related Additionally, quarter. the this and evaluation closing coupled reserve,

GAAP share this XX income from per net represents a XX last $X.XX value $XX.XX share. year. of been have remained at would per March for December flat book $X.XX common GAAP from reserve adjusted and common

reporting for per shareholders to non-GAAP community. effort XX, an analyst economic improve GAAP value in book amortized per at an value of discounts the our of book $XX.XX, notes We the transparency of share less $X.XX XXXX convertible totaled began and per metric share economic at XX. which December book on in value value stock, adjustments an June for deals and preferred share $XX.XX our redemption our

stability. point $XX.XX a of comparison, reflects December was per economic value clearly this XX, As book at XXXX value our And the share. book

times Our ratio X.X GAAP at X.X from June XXth at to March XX. rose times debt-to-equity up

portfolio dividend as slightly comprehensive were the primarily Stockholders' bond our reflected of which and newest to incremental offset our and $XXX is – in improvement income. GAAP Exantas acquisition in our Assets quarter, leverage our rose the Corp from equity I'm sorry dividend million an CMBS the specific during issuance Capital were above from Mortgage our prices, flat by CLO remained bellow Commercial C-III due earnings – XXXX-ROSX. debt by

$X.X comprising during XXX. net XXXX had of of bonds discussed, of spread bonds, of strong over spread we quarter at loan fixed we million rate As also rate and CRE a bonds Matt XX.X and plus floating of LIBOR XXX X production million at the acquired swaps CMBS a second million

and payoffs of of $XXX.X with had the plus spread LIBOR XX were X.XX%. paydowns life And months. average million these an Loan loans

the includes of at acquisition course, And Our benefit positive from C-III the loan end earnings that production will in Mortgage net our of quarter Commercial see rate full May. loan run third from acquisition XXXX. portfolio the to profile we the of

After their as our the interest loan reduction months. over of minimum the approximately had advantage CRE a loans of market favorable terms We But last XXXX XX couple the we by our impacted month CLO was borrowers took refinanced CLOs of spreads X once the seen expired. rate lifespan recently and years, periods redeemed the the after average loan lifespan. floating out quarter, in XX

expect XXXX. when January mature X% its notes ahead, remaining million convertible of redeem Looking to they we XX

XXXX, liabilities. their or our protections. of largely billion have have minimum investment with interest originated lower to LIBOR a I decline floors. reiterate provide floors In LIBOR of asset floor cost And period returns still Lastly, these the of acquired our would be X.XX%. do X.X rate loans a corresponding start of we interest enhanced that protection. under in Since average On CRE some LIBOR also loans a all want weighted the are yield environment loans by of

the back for call With comments. that, to I’ll turn final Bob

Robert Lieber

track. as been has our on this long you Dave. said, quarters productive term our Andrew of And remains most operating and can you, see Thank one strategy

continue which We loans further will we call. board optimistic at a of the progress, the on strategically and value we capital, We of us grow portfolio XXXX. earnings. and from at that quality you on our last reach to core our XXXX. next to quarter, our Based Economic accretive deployment deploy keeping to to full look quarter our acquired increased book are dividends end third for portfolio be and $X.XX on high updating recommending of we raise forward our remain track

open I’d operator With the questions. ask to call any to to like up the that,

Operator

is Instructions] from first [Operator questions Delaney with Your JMP you. Thank Steve Securities.

Steve Delaney

noted, like to your morning, think and deployment, strength mentioned progress. of on the Good million the earnings congratulations everyone, looks I we the bridge going heavy like the also at repayments because in competitive all and it of investment activity on. continued categories. it to were $XXX Obviously, we Matt figure was things very attributed But of from type looking of are lot there’s a bridge seems how closely

we the on obviously as the $XXX originated I’ll in prepayments million quarter, guess So saw lower – it I which portfolio, X% the well. about helps call

for what year? with outlook see should second portfolio. one this the and But like So I’m the the us portfolio, color you consider give on now at curious we if your you of portfolio as I looking can repayment it guess, half combined some

Andrew Farkas

do Thanks, Steve. want you Paul, to?

Paul Hughson

as compressed Dave floors. with have have compressed with mean, as I mentioned, having I Okay. a a think this our spreads loans you LIBOR in mentioned

think those at at, very there We assets is term, And of prepayments repayments into The refinanced as permanent in by to in capital There of business the most either be have or of us categories. the fall that structure plan near kind the looking prepayments fruition has second I expect of near are are been we’re experienced where business loans the completed. the plans. so. our the few that think putting our that the bridge, half, we term of loans bridge that I gone place the come to will closer we’ve completion that generally have asset

Steve Delaney

it I’m it likely Okay, analyst would balance, another to be should But which you get XXX but the as the helpful. capacity. may conditions could net million repayments say by just you or that XXX and a assume the we’re trying that’s of to deployed seem impractical we fighting you year that kind will of make in be standpoint I’m trying that or capital end have we like to, of on from market how XXX know deployed our just to XXX basis?

Robert Lieber

deployment trend continue $XXX excluding down do and payoffs. this a was $XXX little even that it would that I about was acquisition, we is the aggregate would by general, quarter capital result, the rise. would was I that guided our deployment. quarter, expectation, our be as think it bit, I in bit But what net predict million payoffs we’ve you’ve But payoffs, of that the our we exactly expect to year, And our pursue deployment, This expect portfolio I will it’s to net quite very about around We to year think as see level general, play relative it that out that a obviously, slow as difficult inclusive continue net industry as end. to year approach of guided a think, last higher. think mean we of that was to expectation million, would activity occur. when in we’ve to would it last saw

Paul Hughson

also they have loans protection. seasoned of type C-III The are different and call

amount protection place the the they C-III how loans moving will you’re the then toward pretty and minimal. cost mostly refinancing a of is longer to unless term stalled. plan in drives, on Because refinancing to is those go your the frictional again of floater getting significant call has Right capital So that their along where what what cases structure place. decisions, unless your if put effects, on are in drive could far structure, to they is remaining

Steve Delaney

Got it.

itself senior does rate mentioned that floating to REIT lending? conduit you similar you Were the of assume if Okay. because would referring is lending helpful? what out to still the clarify be And So you I C-III loans, just business. that would that C-III or that Matt, is could doing

Matthew Stern

be competitive is has still could that maybe be the a that lending. doing tax to to the C-III in lending conduit exited. confusing And but the conceivably C-III REIT, bit was little deemed

loans. any is rate floating making it the making rate longer C-III So rate floating stripe. fixed loans conduit business is no C-III of

Steve Delaney

but the thought represented Appreciate we this that That I to that it. in was miss the thank great. so Well, much just comments. That’s all – wanted so our Okay, don’t for have morning. I clarify note. case you I

David Bryant

Thanks for your support. Steve.

Matthew Stern

Steve. Thanks,

Operator

with question Your Instructions] next from [Operator is James. Stephen Raymond Laws

Stephen Laws

morning. good Hi,

Robert Lieber

morning. Good

Stephen Laws

of should you be years decks commended. First, net executing assets X%. of plan, producing and over two at and and a guys have XX% legacy looking what’s your core you guys I really done job was nice back from return of one income, ago you strategic

there. nice it’s job a So been

Are As deployment in kind you’ll identified portfolio up flat weren’t Or to and the capital full size maybe Steve’s Following base? maybe end there about repayments about that expect you question, plan and see optimize? from strategic pickup of growing current that? you think look there, potential in of XXXX, the year. thinking there back year half close think in a result you’ll that growth you sometime market like net first will are guys on sheet kind Do think in assets that of options be to we the do it increasing balance will XXXX? of the a sounds

Robert Lieber

get to here. think about here. going into don’t talk this much we I forward too want We projections

our we’re And capital about we’re momentum that we’re constantly the that going choices optimistic market be. think evaluating I here. might what

We decisions that. haven’t made of any about any

on reported focus remaining deployment dividends. – our earnings and our have on on from we is the availability today, continued getting that the of Here to gone

Stephen Laws

full when quarter you above what term. I for Okay, see I the much from QX, so near impact in additional think can guess, we the model we’ll full that of in back looked at or start the And of fair our Dave, that your then about an enough. in things remarks impact more to was close spreads. portfolio, data commented QX bring What quarter think kind might be? about contributing we acquired which market benefit

David Bryant

it Bob was the through Yeah, two by the thirds quarter about as of May. said, end

it one third so an was only quarter. this impact particular And of in

Stephen Laws

you one Great. other, kind of But picture, allocating now, portfolio normal your do you’ve as investment was how business, invested kind that Bob. CMBS think That’s attractive When about you bigger is then off a between capital of Relative you you more got about, guys the each different clearly helpful. which find And your course of it acquisition think options? portfolio. the to investment.

Robert Lieber

were the risk real the we the space, where in on debt that in estate estate we that loans, best of adjusted CMBS looking rate real can But whether that or other kind returns floating find credit at be whether be whether investments. be

around and occasion I that we we returns. see the the where our up business, which risk rate, of made portfolio think plus, most attractive first XX% guided kind by mortgage be in we’ve would floating balance adjusted

David Bryant

we Consistent if know, long bond range XX% at represent portfolio to you with in the portfolio. expect XX% what of said, presentation, The our our Bob term. loan think is I investor that to in in, you is today look the balance

look markets see but to capital. XX.XX, I depending portfolio it the in opportunities we evolve, for closer to deploy look behave. other And continue does you how it's side think to opportunities our really upon if at today, just the and bond

Stephen Laws

can your favor leverage side put you're you you year, case? type that's of financing and rates lastly, changed if last Great. the that's the know, cost about over on advanced the know, able maybe of CMBS, and, to the financing, you CMBS what that talk And in the on securities, for how

David Bryant

bonds what It you're buying. we're certainly type and financing what of depends

down single fairway that assent buy, obviously, that you are bonds and decent know, a CMBS single oriented the there have agency We borrower oriented we variety, conduit but we pretty, buy. have we a other

side. financing is side. sits those depend, it the I attractive, you advanced terms are charged leverage But the same getting in that with side to tend will are – I'm we the obviously, would can a that normal the consistent general, bit And it of the So loan rates loan bonds repo, our but loan bond where say, remained in on has on see what we as lower we're repo on the is sorry and see on against – the stack. side, the quite rate in about on

Stephen Laws

Well, on questions. And taking Great. developments nice job last business the thank the you over couple again, years. my for

David Bryant

Great, thank you.

Robert Lieber

Steve. questions, your for Thanks

Operator

now There are questions closing this for turn to any no so it time, at management I'll further remarks. back

Robert Lieber

for all our we forward and Thank couple speaking for second again want all. updating to you earnings call We progress. the of a joining to months on thank us you look in and quarter you, quarter third

Operator

conference XXXX Exantas concludes call. This Capital QX earnings

You may disconnect. now

ACRES Commercial Realty (ACR) 1 Aug 192019 Q2 Earnings call transcript