XAN - Earnings call transcript Q2 2020 | ACRES Commercial Realty Corp.

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2020 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. to Director host of like Kyle today's now Managing Brengel, Capital would introduce for your conference, I Markets. Sir, you may begin.

Kyle Brengel

thank Good and you our joining morning call. for

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

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

now measures these Generally Capital opening with Exantas, release in is financial of the earnings the non-GAAP will acquired Accepted presented or a the as presentation There Reconciliations the With not has it information X, Farkas our the ACRES that was most measures with for Accounting over remarks. an to Andrew and accordance in that, Chairman isolation, in accordance quarter. Contract the I substitute Management of of intended Principles announcement comparable turn financial Our Exantas. this be to on August of contained prepared past are information considered for in to GAAP.

Andrew Farkas

Dave and our who acquisition the for as new from. of week. which over in heard joining Kyle. you, Mark President has from Kyle and the of I'm earlier the Fogel, was following Management my Senior CFO, over heard are Good to many morning everyone, announced speaking Thank and Contract, With Exantas years; and me pleased thank today Pierro, Exantas and new came of know you role Michael the CEO be you of just Chairman call. the today Exantas; you joined who Bryant, Director, ACRES; Managing Director, the who from Brengel, Managing have this

quarter or recent second today detail call provide we on transaction, going this the the exciting on and to behind Given our rational some focus the is will between combination, results.

expectations loan We forego origination the will forward-looking time. at this typical

commercial All our to complement end-to-end to that Manager as In estate us be well. for of excited short, ACRES portfolios other Exantas, believe Market each and borrowers the of at serve solution real we lending platforms goal are about our full the Middle a is and opportunity nationwide.

ACRES. share me some background on Let

providing We lender we across MSOs in are solutions the inception real successful capital by country. the our that million. market to middle that We balance sheet $X.X estate from top range a $XX short-term industry leading the loans traditional provides asset more all on overlooked by XXXX, billion first million in mortgage than XX sponsors transitional to in focus platform $XX lending loans, classes. highly Since commercial in in major debt lenders built size generally to strong

four in that company finance life of to financing. executives strengths the the focusing and the after continue were we experience. commercial on on size, phase to with meaningful of mortgage about similar of for last consists assets thinking veteran want loans next the build ACRES leadership by first Our In estate public years developed Exantas senior over real combination,

We or nature Exantas begin opportunity liquidity will want market, relationships order offer with in to deliver are liquidity potential margin again, a expect put towards into pipeline our critical the is ACRES provides we the I and the platform and complementary any is that. company of management to to our just network three, One and focus Exantas. aspects portfolio; current generate of mitigate lending unique to to on a within platforms value eye one-stop to lending commercial book for important new growing to that position do the transaction experience underwriting in then leverage of asset three business back risk; opportunities middle to intend of to The There focus on. two, and is to earnings. call an the

been about to read both our two Just has on capital Oaktree note the that working and over in ACRES two these with in you partnership companies MassMutual. recently, Each of providers transaction years, opportunity are several energized about in they the President to Fogel, the now front last Mark and that, CEO Exantas. call of the With all. us over and of turn equally I'll

Mark Fogel

good and everyone. morning Andrew, you, Thank

the us Andrew have are the benefit excited of to As of begin to at closed work managing important acquisition and of ACRES Exantas all all on highlighted, this for stakeholders.

former these are accounting business with critical company's of teams, relationships want continuity, to conjunction from maintain I functions. maintaining important these the professionals bench in continuity enhance ACRES of taken this several profile In the the strategic operating from bringing felt majority to to XX is in and the deep long-term the transition our experienced our steps to we it professionals which was and transaction, as to ACRES, finance community. borrower key estate made of platform. to already have decision ensure real The discuss management, We financial C-III individuals to XX. strength

earnings. book We have in the our to actively in origination are confident begin team portfolio, right value advance fuel we plan to and manage current place the to opportunities, grow

a secure these portfolio, capital provide Oaktree provided facility This Oaktree we believe of We business restart the facility million only drawdown with closing with provides $XX $XXX the not existing period and compelling Exantas's navigate optionality, reflect with then an we million warehouse up have growth a that identified. liquidity the through demonstrate on the capital portfolio, and the partnered quality strength with commitments $XXX Exantas to at financing class they additional the up an company's million million. will picking pace to as new million provide year. impact the needed get MassMutual to the non-mark-to-market the the We This Exantas a origination as facility cash the and access balance portfolio, anticipate those of landscape for can that stable and to to has we recapitalization, commitments us as and Turning billion these and opportunities limit initial access with through business. of of to approximately $X financing into the million. and pandemic this the with a but $XXX originations. aggregating Today, MassMutual Moreover, current with revolving has lending The the capital any through we asset $XX in years. times. to begin manage liquidity the reengage facility, will needed. quarter finance well-positioned of the fourth financing to as facility challenging capacity. to company have challenging two the $XX loan balance a move with company with first With source and current the we of Exantas

We to our and statements Bryant, CFO, discuss Dave. call will now that, second our the now during Dave With operating have over I'll financial quarter. the results turn

Dave Bryant

Exantas am seen quarter, carried we a some morning. eager good Thank pandemic I and on the Certainly, team platform. impact entire results ACRES into had shared while last to we growing quarter. Mark, impact improvement, as the you, the have and and second big Andrew COVID-XX with the on has and is over our the work solidifying

XX for Net $X.XX $XXX.X loss Our for ended income Year-to-date, earnings GAAP by second million $X.XX for per compared $X.XX per was the shares and interest first a Core of modestly declined XX. common months allocable incurred net or share second months. $XX $X.X XXX,XXX, net or three months share. three the the six the per million or loss were to share. or March as the $X.XX we $XX.X per June quarter quarter XXXX share million to for million ended

net constant and our loan in $X.X million million, $X.X the effect by more average our a the LIBOR resulting by benefit was The due increased floor is positive of the interest cost which X.XX%. portfolio. in from liabilities. loan the from yield interest offset assets income improvement but CMBS net has largely lowering of LIBOR Our disposition decline protection, portfolios Loan of a floor in of the weighted of the has to maintained had

March expected sale per of cents held or from million and and million million million, we of loss our allowance strategic into X.X% expected remaining of share loan specific historical funded the the billion these our we loan of increase million, impact two for on share secondly, credit for that at book $X.XX that to expected relevant at to fair institutions share quarter had losses that of note value estimate is June the loans. primarily by terms reserves plan a significant for $X.XX and a the on the earnings, of primarily $XX.X earnings. available the non-cash fair $X.XX our revaluation loss the allowance. data, compared all a by to We BP's as result the and sale was of property current applies other a from XXX,XXX was of recovery second a highlighted incremental an over quarter assets, as by which per loss resulted impacting this a $XX.X our In $X.XX charged the June have the our associated type, expenses from from $XX.X modeling, Last, a share, requires adjustments to increased June which reserve We of we $XX.X as loan total credit March approximately or loan The of reserves or terms reserves XX%. impact In property, of XX XX. as and I evaluate resulted GAAP CRE now and expect charge CECL per The life future to or And was and share, well important on $XX.X Is closed loan at in of value basis beginning items significant loss be XX was share. adjustments determining $X.X The million market adjustments XX to off operating the these the XXX,XXX GAAP comments. CECL not of $X.XX losses, share that $X.XX used second XX, losses reserves $X.XX decreased financial portfolio. potential on we when expectations. $X to our recorded per million asset in rates that the we the loss The per share incurred recorded of loan as balance net at value quarter by credit per settlement macro-economic items of at loans would of book are incorporated $XX.X of per upon revalued at we $X macroeconomic per CECL implementation had $X.XX CMBS. would us mortgage pandemic. impacted analysis. that items our loss my GAAP property assets which forward a or or XX. two provision COVID-XX forecast second value loan

or floor projects X.XX%. June, increased rate the are at a at continue five for billion with of $X.X loan a portfolio expect $X.X curve average LIBOR turn our I'll our a equity at billion for see LIBOR period, to the over par final approximately points of to end growth June had forward of With the that declined the LIBOR times XXXX. that, year to X.XX%. the our comments. as book CRE of basis XX, of benefit weighted the money. LIBOR spread in the to we Mark June we retained floors end At ratio XX at Fogel remain debt-to-equity for as of low loan back the floating end to average GAAP year. rate a XXXX LIBOR to rates At had XX, With weighted during XX-day income Our And X.XX% of XXX% interest call net balance since

Mark Fogel

want to I combination. about Dave. In excitement closing, highly Thanks, collective stress strategic our again this

With value, is especially We have significant time. that to strengthening shareholder leveraging portfolio leading opportunity management in sourcing the new like network financial opportunities, middle developed there We specific plan reviewed relationships our as and maximize to if the call have profile. each start questions. I'd for loan and asset to a market origination forward lender. believe for will enhanced We detail up look our position experience Operator? open a the take asset of company's to that,

Operator

[Operator first JMP with comes Delaney of Steve Your line Instructions] question from Securities. a

Steve Delaney

can now, on please? Good to world $XX REITs; the you those morning, in reserves, the so mentioned start to that of and all you increase like Andrew -- a general, was specific Thanks. there public interpreted million you $XX for and is you me, loans, I the be million you're Mark, clarify on two nice reserve welcome to I'd that this the could loans, about morning. with with that comment not probably mortgage

Dave Bryant

is hotel had other a and one strategic it's plan is one are, the of that the the issues, is some assets. center loans, Yes, closed, and actually has remaining retail Steven, that two a

Steve Delaney

Oh, okay.

Dave Bryant

So, could reviewed we that what probably are to is two of the decision them, some information the increase in second dispose large those XX% about a being of been the portfolio that those and if in market a the increase yet by total so, which neighborhood garner gotten of the asset for is basically management quarter. the we made. had yes, ACRES Obviously hasn't team, were quite loans part

Steve Delaney

Okay.

XX, and So, loans that there you that of there, as two they you $XX only same correlation? million were a the two being delinquent loans as report July that show, are the is

Dave Bryant

delinquent. not Actually one is them of one is

Steve Delaney

Okay.

Dave Bryant

one There the is. is hotel type, property another

Steve Delaney

Okay, great. we're about dividends. forward and and Obviously lending got REITs and about REITs, in that. That's about the people to comments when restarting fourth I mean, in financing you've guess I looking job just they your think on talking talk quarter, helpful, your place. about great

core possibility cash how EPS, So, strong the we cash think in of position, should Thanks. re-establishing at you your when the quarter? I look about a dividend your September

Andrew Farkas

is Andrew. this Yes,

Steve Delaney

Andrew. Hi,

Andrew Farkas

Hi.

happen dividend going understand of be what going by to I think that's think core at be we what about with and our a in it's to in to conjunction policy the of the we're a the quarters, derive coming the coming challenging dividend over for to to we're do. I asset the it's environment, can over plans it's a stage, the earnings function project to action and with what thinking got obviously work can little going determine economic board, is just is lot first be be this existing the and quarters. be. a to potential going trying is premature going and what We driven conversations We've that's and going it's to the earnings book, policy

in that -- on back just we'll to quarter. we So, one probably defer you to we're until come the third going

Mark Fogel

sends have comment. be a dividend nickel, a it I modest offer closing, It to fine. just signal. would I'd it think thrilled. just a was I In that doesn't is If be,

I as I and there, it leave great a said, just know you. welcome, job. and do Thank I'll So, you'll Okay? good luck.

Steve Delaney

Thank you.

Operator

the question James. line Raymond comes of Stephen Laws from Your of next

Stephen Laws

management, idea be that Hi, transaction; and more talked had to in it's talk the the Andrew, on to I on with continue talk and congratulations good release XX at that -- involved you the forbearance XX early, what's you type you work modified have guess don't I about you maybe an extension the modifications, had about you I but as morning. but I good Dave, again. from think Could just hours the two how through waiver you think hear you Mark, that some do loans about press many with you or in talk includes of -- loans, know company, less, can partial you an point, believe will this can going about, waiver, the talked CRE book, portfolio? you the asset gotten

Andrew Farkas

do one? to that want Mark, address you

Mark Fogel

Yes, I'll address that.

hotel-related the It's quite and XX effects were March. the that prior pandemic, So, assets of performing assets. to important that mostly those to well the revolve around were discussed forbearance loans mention retail-related type really

understand to on the until them. with our that and speak the afar, at the properties, in, assets somewhat surround those done issues we we've ultimate borrowers hard it's plan We on from what looked of what business basis, we've a situations those go-forward diligence tell get what and So, juncture but really might too ACRES, to dig outcome deep be. at this look at are potential a as like the might

multifamily-related a As good chunk well, type in and rest far those the as know, portfolio the most and are you and strong. have assets goes, self-storage, quite for is portfolio part, assets the been the collections as performing of of

or in don't certainly think enter might At look potential we imagine go-forward forbearance go-forward to this but on assets today, it what as basis is a other arise. difficult -- about see other could we basis, that stages. on forbearances it's possible juncture, at portfolio So, a the any into

Stephen Laws

Great, you of the the this a appreciate you the a strategies same there, cost jumped business information in you a new transitional Exantas, great different of pay-off about business focus Exantas be on a and different that talk maybe as lot complementary to thought business earlier to bullet give segment? us with there. really two assets, can about do up on thing that origination know, you you do pipeline, of where about have put this complementary sponsors ACRE view Can out able in lows construction more more the portfolios? deck you'll loan you talked I week, relationship, color with a lines that there's doing the higher talked that One guys and the construction it is given and

Andrew Farkas

is this Sure, Andrew.

the mutually little more that two and originate over successfully maybe it looking stage that businesses for asset pipeline earlier where for the you believe multifamily XX% some be look is and portfolio phase has Exantas. other the and of product, same for that been, question? to in scheduled The highlighted, relationships ACRES segments Did the way forward and has a look the between it those the to XX providing asset Exantas statistics, strong what project, space will some be of different next the those and allocated capital a is some that is Exantas cost having lower if you relationships for they that to is borrower continue exist. think the comfortably borrower of done going bit life sub about very ACRES be hospitality, reach into, when office, to or in think interested it can in Exantas some their a the today that maybe four I is that in your financing the we about two helping as maturity, the the point going mix gain of at get self-storage, consistent no as last develops. to exclusive and intend answer we lifecycle, including that segments, what going we some and We to of they complementary, in but access pipeline, we and think portion sponsor are ACRES origination been the they projects like Exantas into the years Exantas marketplace. with resides to sectors. it keep originating fairly the the you with portfolio remaining We segments So, but the to think some should overlap, has

Stephen Laws

It does. understood. I helpful, That's

think about two how the business I lines. the compare

those new seeing returns returns early think loan of the I be can Lastly, XX, investments; to new available cetera, property that portfolio are if to pace, those XXX returns? lack et you today plus existing what I but what's you you maybe difficulty] referenced, in about simply unwilling then, do the that ask most products on liquidity [technical might millions about visibility it's I was And attractive that talk you initially market classes underwriting, you're there potentially appear but limit how in compare too know XXX to and probably RV? existing and today that maybe any talk know, about to can know are will because in the retail it's of the asset of

Andrew Farkas

Mark, one? do you want to take that

Mark Fogel

months pandemic. of somewhat is multifamily suggest basis. the remained understand four It a the go-forward class this Sure. on asset focus the part Certainly lenders to the competition during be ours We market have There would lot which what spreads most of market well dynamics, space, last better studying pre-pandemic. difficult really five has a that were of is they in and quite I some or similar really for performed right trying will the to spent a and that now.

we a opportunities So, is and can always there out this there're through network. our existing identify sponsors that competitive but landscape, brokerage

the our bit past seem can of difficult make here at a many we that but opportunities go, hard, is going skeptical retail As through we classes portfolio. the far market we've underwrite done in determine them not the possibly or at deep on for very some, study will do a are and what on and as for assets, other they're asset and dig where those sense, are we in really the in to hotels little types determine good assets is time, to ACRES, always particular, same the whether them network, to fit which as origination as bring

our real asset same So, at ignore is, opportunity. time, we going assets, will but good other where residential-related answer classes focus the are not to the be potentially there's

Stephen Laws

look taking course. thanks forward months Thank Great, my to the additional in in morning, and questions in this for portfolio the details three you.

Andrew Farkas

Thank you.

Operator

turn to the management for closing call back remarks. I now will

Andrew Farkas

to working everybody We're front much. your everyone. coming very is years this and us Thank We ahead, and in for look you all to thank want Hello, with of enjoy excited quarters joining us that's today. opportunity you I about the the here. of forward in weekend Andrew.

Operator

conference Thank you. closes the call. That

may disconnect. You now

ACRES Commercial Realty (ACR) 6 Aug 202020 Q2 Earnings call transcript