ACR - Earnings call transcript Q4 2021 | ACRES Commercial Realty Corp.

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Operator

Thank you. Good day, ladies and gentlemen, and welcome to the Fourth 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 host like Mr. today's now would introduce for your conference, I Brengel, President. Kyle Vice

begin. You may

Kyle Brengel

Good you and afternoon 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 word identify used statements call we that want expects and

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

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

Mark Fogel

originations, investments, the Good afternoon investment provide our liquidity for the operating and quarter. estate real the overview call. everyone fourth you Bryant while portfolio company's health discuss the of will I for joining Today, and capitalization condition and thank statements, financial results will loan Dave an the of

In added of your forward in shareholders returns; second, and year on a our disclosures earnings sponsors to quarter, to our In commitments remarks. service. addition, This a of billion, the leverage the origination the quarter. record outstanding $X.X of the the on two around the important potential XXXX the And $XXX duration the has we closed list have capital for prepared certain We look cost reduce a grow presentation and loan continued company equity XXth presentation; the of extend estate. all our CLO, for real company while continuing approximately based REOs we company. ACRES the brings will investments loan assumptions financing, new company's and of in to and with production each. The volume we fourth currently questions offer portfolio. We our of to for team in along course, loan for manage strategy at of end two million delivered the its closed which the the first,

initial capital billion total results target From over the in and unique of to our on CLOs. financing loan quarter, XXXX, opportunities which gains classes. of two capitalization $X.X expect executing second These its the million capacity CLO years. reflect asset in in company a in standpoint, of executed with the its on successfully solutions northeast $XX completed team the managed identifying, ACRES deliver processing the nationwide properties from financing region team the the efforts entire Additionally, equity we investments future in two will bringing

company the RSOX notes high a XXXX, a executed the of compared Portfolio is repurchased CLO. convertible the XXXX as to and loan over the the quality Acres Additionally, XXXX. December of portfolio of The commercial the estate after senior notes improving. its of reflect total risk of portion optional XX, and those loans comprising when rated as XXth remains of redemption senior or X% real December X REIT took in XX% X September XX% a XXst as and July watchlist

month initiatives XXXX continue quarter. to of loans properties. from build value sale loans interest the earnings and loans the a received XX% portfolio spread X.XX%. loan real of loans XX by benchmark whole order the in commercial Total company's originated on and are the real pay our fourth the We the LIBOR or repayment Each carries expect loan in proceeds property valuations fourth in total comprise We continue which and during self-storage partial paydown during $XXX and million Returning quarter average These benchmark XXXX shareholders. or were These weighted origination. coupon average while and in loan billion. points. loans each a collateralized payoff the book at XX company this hotel $XXX the the floor the originated of weighted quarter. payoff $XXX collateralized loan's and protection, sale for time of loan up a based weighted are has paydown average underlying quarter of properties proceeds one available office, full $X million Approximately commercial closed sale, The million rates, for of one estate plus at XX% on strategic estate delivering by had multifamily remainder fourth to of XX to to production. which expanding maximize the rate basis SOFR, LTV

proceeds ability activities. indicates sponsors market conditions the received our along year, producing of that assets the originations net and sell the exceeded loan underlying the portfolio, the growth. quarter and believe refinancing both quality to We portfolio with or the For refinance for borrowers' sales improved

a building. investments Class XX-acre which foot building, located million parcel for of gains into the redeveloped a the A lab and totaling be will $XX forwards carry into Each origination The create pipeline estate that States. believe initial XXX-unit capital of United these preliminarily reinvested to made returns XX,XXX acquire investments property square real realized. region be generate company office We expected the untaxed commercial the to tax is northeast land, through which properties when space; development quarter, into the of a loss in approved the science future and that two in company's multifamily During included was life is properties. loan the the use and can

origination primary focus on asset continue consistent pipeline, which properties, sector. loan be a opportunities history such the expect we ahead, has nationwide The along hospitality classes markets spread to select including a the multifamily as to office, Looking target and and accelerated compression, in credit other multifamily in self-storage. competitive, result segments the with particularly with company's as

rates the addition, benchmark for In means all-in rates floor lower company. lower

ACR sources. will to While financing of growth, strong loans accretive for in for is the targeted portfolio. positioned liquidity new is array remain well and company focus strong The and selective a sponsors with we quality, on diverse originate markets credit position a

The the with subject company $XXX basis $XXX the at can rate with Approximately of for structure up estate non-request at ramp balance acquired XXX executed while We manage In capital XXXX. of the of transaction to the terms the unused $XXX real to million commercial cost within may accordance satisfying the floating an XXX commercial the one-month duration. loans of finance eligibility of to CLO company over loan points of CLO closing, cost CLO the the of criteria. certain optimize December, of In proceeds LIBOR. notes million its the extending average sheet up estate of closing. continue days collateralized with second $XXX transaction, loans issued million million managed the lowest to real

of two using LIBOR. at additional XXXX one-month proceeds ability million over February loans $X.X estate XX, As the commercial acquire $X.X non-recourse billion company finance managed in notes the executed cost points to billion XXX total, utilized basis of of floating average collateral. give of of been $XXX CLOs an rate the to over real In approximately have the

of principal loans commercial its collateral contain participations in estate commercial real our received satisfy additional reinvestment closing commencing Additionally, each respective is, certain eligibility CLO. a That period the that XXXX proceeds date of estate real to acquire loans, the on reinvest may each CLOs XX-month on company criteria.

available than X% company, with principal loan intent periods one redeemed to quarter remaining with of portfolio. of representing the portfolio our the less – three principal finance convertible performing to of from Our of company the time of the estate the proceeds of it acquisition only across million X% the comprising of individual watchlist were the the had to of In $XX CLO. million $XX.X pipeline. XX management. the reinvestment in estate CLOs and to and of senior invest real a consistent forbearance The XXXX of the real underwriting repurchased XX XX% agreement. senior proceed comprising is use growing company ended sound commercial the asset The of the investments, perform, demonstrating February, At RSOX company's portfolio has were portfolio accordance billion commercial of and notes loans delinquent $X.X which notes continued the and loans the X.X%

the proceeds watchlist XXst which to company portfolio watchlist loans. concentrated X% XX% believe and and regions As a loans, representing two We legacy at loans with southeast, high-growth December States. CRE United portfolio of the the of of comprised January, of nationwide number southwest included the of the December XX, loans that has the XX, the reduced In of remaining has payoff X% the the well-diversified company in portfolio. mountain received on

including loan provide durable Our and to particularly target XX% sustainable which projected represents classes of are multifamily the the is flow, class, cash portfolio. asset

quarters. summary, sourcing the investments and provides relationships new in In for portfolio platform growth the in book and its appreciation newly-constructed A originations going with attractive company quality curated unique improved pleased and Class in sponsor including addition, is be portfolio, sheet along development and the of million will ACRES In prospects the over investment with ACRES loans This that the the coming assets the returns. eligible $XXX company's has estate, the capital forward. at real with of profile balance team the for opportunity

shareholders. and business to plan company's by actively execute on high-quality the focus value continuing managing for to continue will and our earnings investments, originating portfolio the on growing book We

now CFO, the statements have financial discuss during operating will ACR's fourth quarter. Dave and the Bryant, the We results

Dave Bryant

to reversal of a the fourth In the Thank GAAP $X.XX share the CECL of or share million fourth per in $X.X reserve per evaluated increase you, compared CECL net GAAP in a quarter. level continued or third loans. the in net in reserves quarter. of quarter, property good shares $X.X was recorded we share and provision was due $X.XX or million to credit a to $X.XX primarily macroeconomic underlying fourth reversal in conditions CECL compared for $X.X The individually in to improvements on operations income loan per afternoon. $XXX,XXX losses, and the million allocable provision improvements the in quarter the third common loss decreases quarter collateral,

of $X.X reserve $X.X The $X.XX CECL weighted had average fourth the million interest over in These with XXst basis higher third of or per the lower average share but commercial or as during has quarter loan originations. the million, and with real X.XX% coupons basis billion $X.X that weighted fourth the shifted income XX of loan floor quarter December $XX.X loan up XXXX, has up declined resulted rate replaced XXX impact X.XX% quarter, impact benchmark The loan also from slightly predominantly of increases portfolio at loan allowance quarter par. higher The helped recorded to benchmark due payoffs, one an the of million compressed payments, of have total of from points $X.X $X.X that XXst. reflects interest CECL floor charge-offs which quarter The deferred million the billion the XX, the quarter. with floors all company's X.XX% included by quarter. portfolio rate the from the a $X.X of since with now to in a Net $X.X against fee a rates floating over portfolio $XXX,XXX company an in which spread for of represents be the increase losses quarter. in at have the X.XX% one-month fourth loan compared per $X.XX increase mix at December of weighted with three end. the the estimate credit loans loan December estate carried results on minimum payoffs after share points Since million to accelerated third million loans $X.X the Additionally, third was over rates, charge-offs income originations or or floors settled offset of loan increased new loans recent loans of as to off. results lower the of that made older floors paid average million

However, in with impacted. to of rates If rates with were the loans floors at one environment. protection third in conditions the to receive financing company increased of continues be X%, XXst, interest net benchmark the yield some would rate compared asset to current December negatively margin excess

is at continues XXth December, The liquidity company XXst. the book increase decreased X.Xx was to the a into at a approximately We leverage ratio recourse debt an company leverage floors, its the will XXXX December assets ratio outstanding and been share end approximately to September positive unsecured expect increase; senior the of facilities $XX of XX and recourse at primarily The of senior term of $XX.XX debt with $XXX shares the between which while XXth discount $XXX XXXX, from to million million. repurchased ratio leverage increased financing million, debt from million early XXst. approximately shift to a at its and at XX% net which December The CRE These XX. unrestricted at of the cash, XXXX, combined the share GAAP acquisition that per late the were CRE availability GAAP increase including ratio lower of $XX of allotment, the $XX.XX the increased $XX simultaneously million availability X.Xx since of was accretion by $XX secured to value interest The at turned projected X.Xx debt-to-equity mix including on direct the capital margin rising sensitivity on financing to September on each million. common due a XXXX. $X.XX close In at book decrease has the of warehouse debt available from represented to recourse ACRES. million program as XX, previously availability company's company by increased million million. rates XX% which to facility and XX% had of in $X.X fourth and the paydown for from reauthorized income loan at and leverage towards fourth utilized per February financing. per unsecured driven notes. notes. The XX% X.Xx $XX portfolio by target XXXX Available XX, CLO repurchases. decreasing be for million repurchase share warehouse of share, relationship value components XXX,XXX $XX.XX vesting book offset unlevered the and from working reserve per senior from December quarter, to on Combined, share value stock September over increase. repurchase the were GAAP to XX, of calculated The December approved X% $X.XX primarily warrants, of authorized nonrecourse the issuance shares board by net new common repurchase a notes additional December $XX quarter through and

$X.XX between converted through came the loss properties, currently per and projected ended depreciation equity we caused that direct Looking investments commercial XX, primarily GAAP year XXXX. December This ahead, company's amortization share in the estate incur through to and losses will related of the and debt by $X.XX company real which acquisitions. to project for is

company's that GAAP quarter of majority be and the loss grow in to the to incurred subsequent first begin will of the in stabilize the and XXXX quarters. earnings expect We

to includes charges projection approximately debt for real quarter million of CLOs to first note the related retirement The approximately nonrecurring of related recurring termination a $XXX,XXX and depreciation. $XXX,XXX the charge for of and convertible $X.X estate of charges

first basis rate originated quarter pay had to XX rate contrasted in newly that floors off points. had XXXX with floors loans of that In expected are addition, quarter, pressure the meaningful quarter X.X%, not loans of expected XXXX. the our in rate Because net growth in by do to approximately of first first is we margin loan interest the $XXX,XXX this net expect reduce of

is in producing continues with quality assets. the the improvement expected company's half the growth. of to production, led base The company pipeline, the with this the back quality second a rate growth production year. loan origination and the loss to credit its of in in loan in rate legacy to anticipated continued in This has expected New to growth positive reserve. portfolio, improve loan loan the reduction Together this see mitigate begin quarter together and will result in pressure earnings

the of the loan financing to expect the new XXXX. net additional close the capacity With provided company's for we by continue CLO, growth

equity tax will maximize growing real also and value earnings additional in order investments years. loss in in of selectively thereby utilization the We to quarters estate company's future seek the and book carry-forwards,

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

Andrew Fentress

you, Thank David.

achieved discussed, a year to the work the originations in the issues record-setting of as the to the we're has done at Mark As ACR company have year management Equally for credit book. important, now asset exceptional proud company. first full address a manager high-quality team as an has and our loan

capital to rates in that success the capacity the year continue and of company give during were the transactions the attractive to to the closed the take Additionally, come. build the advantage years on financing

deliver is over Our the mission shareholders' value to long-term.

questions. maximizing now This to and opening back you. Thank call high-quality investing capital look over the through I'll earnings, time. our assets dividends everyone's in We to remarks. operator returning share the strategically forward focused concludes turn repurchases on and are to over and

Operator

comes Steve question. with Thank from with Delaney line Please JMP. proceed first your of you. question [Operator the Instructions] Our

Steve Delaney

questions. great is taking year the XX. you deck ended probably XX. and size, pages I'd everyone And is at – to the the on and maximum new thank also and first XX Good Thanks. billion. you like evening especially the my question My for portfolio Mark, $X.X

midpoint we you'll the that growth if push the X.X% at that with the by year structure? So But $X.X loan say, to achieve capital you I your realize growth base $XXX,XXX $XXX,XXX, of of portfolio midpoint achieve, this there million up need you call take it capital to do Thanks. have end can or the existing financing. XXXX? to

Mark Fogel

base to Yes, Steve. portfolio to Yes, capital the hand level question. the the financing have and on between we sources. our grow Thanks for do cash that

Steve Delaney

good. Okay,

and – Got – it. okay. the So

other the CLO be ahead question the So would market.

from your Your little and commercial noticed in timing I'm you've say locks return bit, up you financing? back say kind with is for money? CLOs concept, – at you just school really And all financing the guess worst there to weakness this credit And of executions banks old the I to excellent case A let's the a the just world, even sure was if – of, you there. going – some you're looked you at everything worry borrowing where other CLOs, you would non-mark-to-market true let's that, bank for don't can about If – available I mean, of is than thought note lines? credit if there not point, or do, on the

Mark Fogel

that. couple a points of Yes, on

XX-month remarks, two alluded to we periods As have in in we CLOs. our our reinvestment

Steve Delaney

Sure.

Mark Fogel

the juncture, the available have access, opportunity great lines. off But which any back capacity capacity I point – obviously have do of revolvers. other to a non-mark-to-market lot loans. those this of loans into There's that, on We could our but at do to can't new outside line reinvest we and as to we situations, pay a proceeds

Steve Delaney

did old market return collateral the It Right. ample if CLO viable market issuance? the be feel called at CLO, – new And at would the just to XXXX. at is compressed the as and deals today, market you you equity do market compared maybe you had – CLO you you is look which an did in just for on you a –

Mark Fogel

mean know, it's you but the little have of changes, as widened spreads think the market it's a bit, time, the – I and viable. course while certainly I over And if CLO viable. it's to that have business. market. use available the bad. issuer, time And can't serial just to good, it's sometimes you really you sometimes a you're your while market And it's finance it's

Steve Delaney

time. hope I will out over it average Yes,

Mark Fogel

That's right.

Steve Delaney

for Thank your much That's it. you comments. pretty

Mark Fogel

you. Thank

Operator

Investor. [Operator comes of proceed Please Instructions] the Your with line next with Bets [ph] Private Fred question question. your from

Unidentified Analyst

for of was the the wondering, the Yes. reinstatement just common have I does company dividend? a plan

Andrew Fentress

Andrew you, have question. your not is Fentress company common Currently, Fred. This answering reinstate a the the does plan dividend. Thank to

be which in As we to is pay capital presentation, company the would from our the otherwise see value. book stated business dividend being that retained you'll the and website of of remarks, able a posted the as inside grow this and hopefully, used was being evening, shareholder to that to the

shareholder, cash a appreciation So receipt that that versus as your of benefit the answer just you're stock receiving you're dividend. the it capital, of question? Does receiving in a

Unidentified Analyst

$XX, Yes, have low. and second value, the you said, like a so book share like I and yet The question. was price is

seems Now, a but company the going to price reason that? an can down or but an is is me been for happening? why it's I'm not past probably answer doing months. share the well, for have sounds there in few give you that And The accountant like yet anything,

Andrew Fentress

speculate and will know value. thinks – say of authorized tell should But an is active repurchase about price – Fred, and on book has been the these need program the share I what price company's disconnect what levels. shares, company to company the a actions in between I'm not about those to you, I repurchasing that between shares, plan why what the the hopefully, the has repurchase to at share that market has going you the is

Unidentified Analyst

price. accountant is an so reasons, you're got common the was buying daily I this the great an $XX, I know. why price people I'm but back. think it and that book their said don't I That's but – the was I'm always just sure. I in it's low, or wondering expert And I for that not – But if sure. know

very you much. it. I Thank Okay. appreciate

Andrew Fentress

welcome. You're

Operator

and I the would Fentress turn question-and-answer Andrew the closing reached back have we to gentlemen, call like end session, remarks. of and for to Mr. the Ladies

Andrew Fentress

Thank joining our for call. everyone, you,

any speaking again end look the everyone. we forward you you have questions As the of and always, to Thanks, quarter. follow-up at with to next

Operator

concludes today's conference. This

lines your you at disconnect all your this participation. time. for may You Thank

ACRES Commercial Realty (ACR) 4 Mar 222021 Q4 Earnings call transcript