ACR - Earnings call transcript Q1 2021 | ACRES Commercial Realty Corp.

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Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2021 ACRES Commercial Realty Corp. Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions to follow at that time. [Operator Instructions] As a reminder, this call is being recorded. to President. host like Kyle today's now Vice Brengel, would introduce for your conference, I

begin. may You

Kyle Brengel

Good afternoon you and thank call. for joining our

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

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

in quarter. are CFO. Fogel, Chairman of earnings CEO; Dave call President Mark call on turn our ACRES. Mark. as Q&A our Generally the isolation financial accordance comparable of Accounting intended substitute accordance prepared the me this with in non-GAAP of over presentation Fentress, be or With the contained are a Reconciliations Accepted the measures Bryant, now these presentation financial Our Andrew information will with I most for Principles not to presented for GAAP. does to and measures considered to and the available is Also past information in in to today

Mark Fogel

and our look Good afternoon, will our provide joining first end we questions results of and to on updates loan overview for Today forward everyone statements our discuss strategic originations. at operating Bryant of and I our prepared remarks. and call. And portfolio quarter. thank you the for course, your will initiatives the financial an our Dave of

We in origination are ongoing pleased with loan we since lending the restarted late XXXX.

importantly, and consistent and asset the perform, sound As management. has continued portfolio demonstrating to underwriting

$XX.XX XXXX. our progress in Our is results of as provide the efforts value reflect for as evident of first needs. with X.X% end These recent grew to results per over quarters borrowing borrowers of their we end the our one-stop book quarter to the share of from solution a our

solution work a our nationwide. estate continue goal middle as market an real being for We to of to achieve team borrowers end-to-end commercial

during $X.X repurchase authorized the with and additional and of Additionally, program the quarter. repurchased $X.X with common share loan we in million active across investments. the XX company stock quarter assets billion individual ended this were quarter The

a were the concentration presence of country, the contractual southern with of on March with well-diversified of believe United region performing the high payments. we loans and a across over a these As end three States. We growth of in portfolio have current the but

by the half a backed durable over addition, is estate real multifamily assets book particularly In loan segment.

new loan after continued towards XXXX. end our with the lending of pleased are We loan production restarting

collateralized the $XXX.X by six properties we All one quarter, borrowers. billion, with million from loans closed multifamily of are and Five quarter. were originated LIBOR During loan is collateralized X.XX% of pay payoffs and production floor hotel. two new six were of estate and for commercial by coupon LIBOR fourth the real average new month is these the with in the LTV Offsetting $XX home loans plus up several The the one and on a weighted loan is downs loans XX%. a X.XX% sales. loans these

first indicates of the repayment the we in elevated downs underlying of the loans. were to XX preferred a received resulted proceeds our and were the sponsors Furthermore, list, All ability levels quarter, these included and and pay-downs our quarter, from for loans in During of pay believe few the these portfolio. assets million a $XXX net of quality on watch loan the pay-offs investment. we equity negative production that one refinance

equity preferred April. in paid remaining Our in off full investment

portfolio, acceleration loans. ahead, to moderate multifamily. what that of new we we'll loan segments, anticipate To of also particularly production. in a from in discussed offset we offer quality fair spreads to current amount we seeing such as last look wider continued pay-downs are seen continue see competition there of our As is high the Similar by office. and we that that spread But we segment compression, hospitality have point, for target quarter, opportunities

unique solution markets selective beyond. originate we remain Furthermore, a value We place our from will for focus for We stabilization the lending and our includes for new portfolio. to service sponsors through and an priority and middle products. market a sponsors providing convenience we believe credit on proposition on quality the end-to-end of and customers. offer loans This construction

are enhancing Miami by we see origination We located loan in activity. in are operating presence our expanding platform the Dallas, and Los further all of continued regions Angeles, origination ACRES which where

underwriting and pipeline loans We through going we have our are encouraged process. the by currently our

commercial facilities originations. leverage terms term in up to to X.X X.X times liquidity primarily level. finance We first And utilization maintain total equity, of recourse the of to At and with loan leverage end year X.X solid of is increased of estate consistent total due times balance quarter, times, a debt, sheet end debt real position. the from to warehouse ratio the the continue

overall senior to ACRES facility, notes end capacity, warehousing commercial working of common $XXX million comprising secured of and target million a unsecured financing $XX As capital financing available. different senior of more and additional liquidity loans three April, quarter, than At net the a $XXX of the of term was had facilities, financing estate the real stock into end million repurchases. reserve of deploy

will now during discuss have CFO, Dave our first Bryant, statements the and our quarter. operating financial We results

Dave Bryant

good Thank and you, afternoon.

first I to took that reverse results on of our would all Our our completed positive reflect quarter effect that you continued And X-for-X like first split this. February a stock XX. results progress. remind reflect we

Our also in in in late contributions GAAP March the the three XXXX CECIL quarter, to reserve months was quarter increased million to for recoveries the $X.XX the of shares quarter a lower or allocable common $XX.X ended level income net exit results compared net the new fees share or by These XX, a $XX.X to share, quarter. of change to activity and The quarter. compared $X.XX originations per per result offset reflect the and the from first fourth as pay-off lower payoffs. interest from last fourth includes million quarter

and written First constructive it their prior note and in property was we loans broader million reflects portfolio item, One sold quarter the along the $X.XX loan includes sales outlook in income our had level be in to share that payoff earnings been of per vaccine This rollout. charge, to list, million $X.X of net our income as improved book bases. value to that share $X.XX of or like CECIL loss on certain the core $X.X factors market macroeconomic been would operations realized reserve quarters statement related values believe; prior alongside with improvements had probable GAAP down a is per as recovery positive movement a to more These continued the through recoveries. seen I they in CMBS. we watch or other securities on have our

However, since losses, had unrealized from these excluded been earnings. were they core

discussed. was million impact $X.XX share, the earnings. is portfolio. from core the sales income up $X.XX There per any Now increases share with CMBS being interest occurred, $X in that the assets recognized million no the or by driven or longer fourth for quarter, are have the in per value Net $XX just

year. back half loan the weighted the of X.XX%. of addition, the hotel first short loans contribution from full spread impact. average the But to quarter a will in last level deed expanded a foreclosure of results In towards contract same quarter. floating positive operators quarter have billion hotel we received $X.X our term into not again is a a which expected we lieu having The in reflect portfolio the rate The of where contribution of

at in the are average, month Over LIBOR XX floating floor for month weighted one floors the X.X%. our of rate one at points April. on of LIBOR X.XX% end, a quarter all gross of the money LIBOR end rate or approximately These basis with loans, an of

and loan on per resulted at to applies outstanding, to rates evaluate remain now continue March portfolio. X% meaningful in value million, data, to The billion including during driven book as of the well share, to and expect allowance the financial to see XXXX. life the Implementation losses over experts. which credit at the the net of estimate value institutions, reserves, and CECIL XX, us in March by impact relevant, along shares share In benefit repurchases type, loan expected rates mortgage that completed our GAAP X.X rose LIBOR historical provided available, we of to credit loan economic as future quarter. $XX.XX near our requires XX, to $X.XX total was losses increase expectations common other curve the interest a in property XX.X requested net related at December share loss expected loss projects calculated loan our forward XXXX represents of for a than term. losses, The determining warrants credit We $XX.XX from book economic by to low income which to with XX, all independent quarter, per $X.XX CECIL less were of income macro loans. by as current

net difference for income to net of quarter shares income $X.XX to As between shares for purposes. first average end utilizing outstanding income value the at a weighted $X.XX the in reminder, book and GAAP the share and account of quarter and value relates book statement the the contribution

price ACRES quarter first $XX.XX purchases an repurchased including share, in the approximately million. shares at were These commissions. for of per average During XXX,XXX aggregate $X.X

of of to the to X As shares. remaining repurchase XX, additional million outstanding authorization April current up company had an

on and end liquidity The equity company aggregated and availability remained million XX. projected target and million, available April availability assets, Our senior a growth. over GAAP facilities These enhanced unsecured million the on at by offset term, robust with and reserve our originations and $XXX including had on profile, notes. liquidity, financing notes financing million X.X our $XX $XX available you warehouse an leverage capital unrestricted March to updating of of the unlevered end times of pipeline, at million. company's With secured of $XXX forward to improved of we along our senior financial was $XX of working senior approximately unsecured including of $XX of were acceleration The debt components its March. look ongoing of the cash, ratio as on CRE at million

remarks. Andrew Now I to closing the turn Fentress will call for

Andrew Fentress

portfolio the turn those Thank remains when earnings company's operating and of course, power. operator engine continue In the and I'll has of to the that earnings, tax that capital optimize and company's into remarks, company largely company reinvest the And million we of compelling. closing of concludes shares leverage questions. grow our origination and loans new for its you, summary, with a approximately can Operator? to an call to Dave. over origination, and performing, ratio. those of are carryforwards, the sound retain actively sourcing $XX Through the use along is This loss back shares cost diversified as repurchase the opening price

Operator

question. time, Thank first Laws session. from with question-and-answer Raymond at And question is proceed we James. you. your will a Steven with Please conducting Our be this Instructions] [Operator

Steven Laws

Hi. Good afternoon.

investments? one kind sheet as as growth, as increase with As future now, the as dividend had the How the knew payouts. at increase see there? thoughts you have to ability retain you dividend about of, flexibility you to the for the my we'd look just far your of versus versus But question's accretion the what them think new to toggle look here. from buyback I like maybe of to on get think at the return you level kind far earnings do I want you

Andrew Fentress

Sure, for Thanks Steven. the This is question. Andrew.

So about as we optimizing within think capital the company.

equity of XX%. on a have return current to XX% approximately We

new And really respect bogey that of looking with we're allocation the so at to capital. that's

value really was per saw or first return direction, a greater share company, you know, presented on book part that a the to can as share as we we ownership the capital when of that, the shares has and on the And under allocated our a basis. the accretion see of repurchase helped and from program, numbers, than the opportunity you so,

what allocating structure And achieve seeing And really perhaps focused pull. generate is so is opportunity bogey the assets. ROEs. And today capital company that that's have new course, one company we loan out an that on into the of lever given even leverage can and then, is what the that higher to we're

And that's capital on forward directed the the of where most to that focus, basis. so be really area is of a going go

Steven Laws

That's helpful.

So you that framing I appreciate us. for

think talk you it about have off and can within coupon, As do to replaced XX think being expect you we the repayments new about, loans spread with as is roll know, wider new impact, net tighter floor you you say, investments, yield versus originations. months on paying the money or as forward, about, spreads, you say the

be going net the impact roll what's to as forward? will we Now,

Mark Fogel

to the The throughout is as end at know, you Mark, this of expect Well, production up year. started, the off, engine just quarter. again, We first back the we -- think our increase the fourth I by levels the way. origination

quarter, And the that is as compressing, you quarter, XX% far offset XX%. already that big last the that First on various quarter we Andrew that seen faster. the to will that continually our we we've think spreads, even second increase financing the we with of pipeline from of grow we as can know, ensure ROE mentioned levers a have in the where by a to indicates saw can goal impact side, and cost I the get capital quarter. lowering But we to pull second closings,

Steven Laws

questions. Thank my you. Great. taking Appreciate for

Operator

person is proceed next Securities. Chris your Please Our JMP with queued question. Instructions] [Operator up Muller with

Chris Muller

for a you this environment And year about in of thanks you quarter follow question. talk like of to classes. do that. with versus composition first taking just about guys, expect just to other What ask the the then change portfolio, the mix? multi-family of current the Hey, being bulk the can I forward wanted and asset classes up of of say asset at do compared the on a multi-family other you competitive Thanks. going much activity, end

Mark Fogel

range end. be We This to that be to would the the is end the expect change we in similar changes asset don't mix by XX% still here classes to But at within XX% Mark. on of that and be with see other composition, of would very expect multi-family. much may a some respect year there. current I There year

programs. we respect bridge do side lending property competitive we our statements to the to to stop this fill us the that on as to we far and to As get to country. come that and do for a solution. shepherd do on stabilize who what bit right we is multi-family a need business, allows lending the of is the us other landscape, of the good construction a the with build construction to one of What of in loan the an we side once those referring a sponsors reprogram into edge is what believe properties, all have other keep of across on that business our lot And in

So to leg organic we generation us have that it's I out right that up the groups expect some construction think, this of the through loans, these that are of on growth there a now. gives

Chris Muller

pretty multi-family drastically. you, originations quarter fourth just it Was Thank being looks coupon mix one big first on Thank on just like the type helpful. dropped driver one, in very quick from of quarter And loans new then the that you. XQ? with more, the

Mark Fogel

multi-family. dislocation fourth was That driver more at Yes. in time, the big the quarter. the same But was more there

sitting of to kind So lenders some get other of higher the sidelines. spreads, the on there were opportunities some were better when

Chris Muller

questions. Thank the you. for Thanks taking

Mark Fogel

Thank you.

Operator

And the the Fentress question-and-answer closing turn to session. over Andrew have I'll now reached we the remarks. call of And for end

Andrew Fentress

any thank quarter everybody And this call, interest. support, always you Operator. speaking for people quarter you, the follow-up first call. Thank joining you later forward for And questions have. the second We're may at our conference look to that the year. appreciate to again We available

Operator

And This today's this Thank at for you time. your conference. your disconnect you line concludes participation. may

ACRES Commercial Realty (ACR) 6 May 212021 Q1 Earnings call transcript