Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2022 ACRES Commercial Realty Corporation 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.

I would now like to introduce your host for today's conference, Kyle Brengel, Vice President.

begin. may You

Kyle Brengel

summary thank like and QX joining call. of presentation our shareholder quarterly about Good year-to-date and highlight you that would results contains This website. to to company. the detailed we I information presentation the afternoon, the our for and have XXXX posted

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

particular, Although from X-K, forward-looking forward-looking on in in materially that reports company’s reports actual uncertainties results These reasonable management’s including XX-K. and with on and XX-Q believes on of XX-K, trends, are the based Risk and could assumptions, the cause risks expectations several its those company uncertainties contained and SEC, beliefs in that Factors statements are the and differ section the current filed its are Forms to Form subject these are such statements to discussed statements. based risks and

conference The to only statements. place are statements, undertakes speak Listeners on call. date non-GAAP financial as certain company Furthermore, discussed update obligation hereof. this these of be to reliance no any on which of the forward-looking forward-looking cautioned undue not these may measures

presentation or past as with financial principles comparable GAAP. to the most this is with accepted measures in be substitute information in not the a contained of prepared in accordance the presentation isolation financial to measures to Our non-GAAP earnings are in accounting information for intended the of quarter. Reconciliations accordance generally presented considered

Fentress, the Fogel, ACR’s of CEO; today Chairman call Dave Andrew ACR. for available President With Bryant, and Q&A Mark is on me CFO. Also and are

I to turn will call the Mark. now over

Mark Fogel

of the investments joining quarter everyone, update operating value health the investment and provide statements, the discuss book our of Dave Bryant on results Today, real our originations, estate you and I afternoon projected while call. and for Good will loan an will XXXX thank for results. financial and condition, provide the overview an liquidity portfolio, third

look remarks. Of to at our we forward the your prepared of end course, questions

team million three ACRES $XX.X comprised loans, loans commitments and two $XX.X million in unfunded quarter, weighted quarter originated the The multifamily payoffs of period commitments $XXX.X new third at of delivered million, producing net the during were loan average hotel the one a origination during loans loan. coupon net a Loan and the $XX.X comprising the SOFR, of million. plus increase spread X.XX%. newly which rates, were benchmark of pay interest The portfolio one-month office

average spread our portfolio of loan floating the and XX/XX/XX. rate weighted as to $X.X company fully one-month way capital increased further rate of commercial our benchmark real benchmark the rates. weighted the The are The to widening X.XX% mindful invested. billion is as deploy estate getting we observed on We loans period spread over the potential X.XX% widening average and in of

$X of we stated maintain XXXX. a billion As plan last balance book to billion our to call, on $X.X loan through

redeemed a $XX.X of the in estate real sale that included on gain in closing million remaining convertible company prior senior the million Also XXXX. in of during the of other sold asset quarter, the to basis by acquired the valued foreclosure, resulted notes At we million costs net the sold the $XX.X the of that a $X.X income. at the in we quarter, asset issued $XX.X X.X% loan $XX.XX Chicago company an at During and in that GAAP adjustments the by property [indiscernible] XXXX. We million. former time office secured was million

recent with performing of lines base financing and terms has current each. MassMutual market mind sheet has comments The Stanley, which an quarter. for on terms collateral top company collateral has in warehouse company The this given the The zero this topic by balance being with agreed profile. Morgan is few voluntarily The many its the is upsize volatility is items, on line principle and we improved liquidity to facility rate company has healthy on a quarter. opened being the and company JPMorgan also and documented know which a current as increases. investors, Finally, for closed Barclays in with

asset individual consistent of two and investments, sound billion The only with demonstrating perform, loans comprising the the across to real which continues X.X% proactive of were portfolio of XX ended company management. underwriting portfolio $X.X The and commercial quarter estate delinquent.

were As of representing of list portfolio. X.X% inclusive of two watch September loans, the six loans, there the XX, delinquent

discussed real have be we previously, the investments corresponding existing loan in expect future. gain for company will the portfolio. we NOL holds monetize to four and reinvested that gains estate offset into retained the and the a in As by cash These

in of to as being of during to formal process. a hospitality held will market as indications sale challenging the proceeds classified or at shareholder at us currently that assets team ACRES over the protect above here a hotel two asset who X.X value the work Early management are for there a comfort a last give par, testament years. work be diligently sale Lastly, result

profile along investment pleased balance team and originations estate, In the including with summary, going improved prospects the in is the real quality portfolio, forward. with for the sheet and capital the of new appreciation investments ACRES

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

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

Dave Bryant

quarter third included income shares available the $XXX,XXX Earnings to per and was approximately per afternoon. $X.XX the share $X.XX allocable share. common opposed GAAP. realized net net or in loss charge-off office or as losses approximately GAAP and distribution to you, as is sale were the required off the foreclosed per a transactions for share, by policy for of Thank good our third of charge $XXX,XXX $X.XX property of estimates EAD to upon quarter

and primarily for value of book share third the equity to the September XX, at increase $XX.X $XX.X June projected of expense per million reinvestment assets, XXXX was to Available XX increased income non-cash per common liquidity share book approximately share. million cash, from $XX.XX of quarter cash September on related on available which approximately $XX.XX unlevered from million on stock accretion by net CRE of per unrestricted available $X.XX driven share $X.XX $X.XX comprised value securitizations. million, and repurchases, XX. was The to GAAP $XX.X per $XX of in financing

XX. increased on times marginally X.X debt-to-equity XX times from ratio GAAP September X.X to on leverage June

marginally borrowings X.X times also XX September increased increase by and recourse XX. on primarily to The facilities, ratios bank notes. convertible times leverage on from leverage X.X our due term ratio Our to on increased offset recourse the debt to senior of was June repayment our leverage the X.X%

the points the recorded reserves approximately changes a $X.X reserves at represents loan losses increase in XX CECL was total X.XX% calculations. par. in second under to quarter. the calculations in under CECL loan quarter company million the third outlook increase $X.X reflects compared which credit macroeconomic continuing the to basis portfolio general or The on million XX allowance The of loss an $X.X billion September for the In of $XXX,XXX provision the

over loss investments. million at the quarter. $XXX,XXX third non-cash from $X.X operating accrued proceeds Included Also, the real in his $X.X Chicago. Turning amortization. received property office flat taxes. opening The the depreciation from basis, estate in a loss relatively well on company's to the in included in gain estate property remarks had quarter real was estate sale gain mentioned of and company as as real remains third as valuation the recovery results the realized Mark million of of the an Net investments property

versus quarter quarter G&A begin expense we see this to increase reflects the the the of see $X.X as expense. the slight Focusing third audit seasonality time typically quarterly second of year-end during on incur a fourth year. million G&A, seasonal quarter this procedures We'll for

Regarding at value a approved on $XX per approximately There share repurchase remaining $X.X used $X.X quarter, to XX. approximately plan approximately program quarter-end. share on the share shares company million September during at of the of XX% repurchases discount board XXX,XXX third redeem million to book the million is the

and GAAP calendar $X.XX XXXX. and that per for year forward, will $X.XX Looking share share we EAD between company of produce currently the project per $X.XX income

Our projection volume, increases, from in payoff may that months items remaining CECL unexpected subject or non-recurring rate of loan to arise three remains other reserve volatility year. adjustments the and the

future distribution $XXX.X steadily from to XXXX. periods. company in With remain of growth net for grow investments, gains and the the and XXXX, million in any capital we our to expect first the into income portfolio XXXX, positive the loan real its will earnings available and equity earnings Retained and generated balance loan estate of for grow allow of months nine

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

Andrew Fentress

David. you, Thank

of market the of We changes corresponding of own. over asset creates and volatility heightened wants possible rate are in mindful company sense Management with as the prices, these the regard anxiety many unknowns. to remove of the to unknowns that fear you the in a

book been their CEO, is has value assets liquidity team concludes vigilant and through during opening from term. by heard value produce This a mission have that this and the high-quality cycles careers. portfolio our you've shareholder's is Mark shareholders. in of our David, over will to do long CFO growing a managing who and several our in strong investing and As our remarks. remain company well the professionals, We performing a managed ample deliver by We for stable

questions. turn the the over call for to Thank back operator I'll now you.

Operator

Muller begin first We with Chris The comes question-and-answer from Instructions] [Operator will ahead. Please question session. JMP Securities. now go today

Chris Muller

the Steve taking for for question. I'm on today. Thanks guys. Hey,

of with this a office headwinds a of and So, jumped beginning, loans, peers late. few seen lot you I'm did couple other space guys two missed downgrading But I sorry, as the minutes a in if office in of quarter. the bunch I the loans on a at we've

the you in do look environment? for what office expect do near-term? guys guess, you to I office more And in this So in do loan loans Thanks. an

Mark Fogel

Yeah. in really a where sense the go This in focus good of two a our opportunities work the which a exist. lender really loans is very identifies Thanks question. at buying the been are borrowers our These particular went lot the sponsors But Mark. deals to We basis. it prices office purchased not well make It's they the good that strategy us. a to always structure at that a our good in and we've marketplace, of in markets company. and were LTC properties after loans for made low at

And office as So sponsors. looking to best with always. lot lenders trying we're a best of the the pick for imagine and for of in the the assets best you high-quality might there's availability sector,

Chris Muller

else just that component behind that? spreads from heavier in And jump the it. then Is on other Got anything helpful. construction is the loans, quarter-to-quarter. or big a I have That's there one just

Mark Fogel

a widening have No, just the I dictate to We of There's lending. out that ago a market. in lot that or there opportunity spreads we're is the lenders amongst XX don't think that that's on of giving to certainly construction really in groups ago. group a capital construction of function sitting compared of terms the seeing sideline what peer the really REIT. And do none lending months even is nine months our as

Chris Muller

unfunded are for? Okay. to like milestones on the that commitments And hit just have they the then projects? Is what

Mark Fogel

for hold not it's construction. improvements backs lease-up but for and It's capital ground-up

Chris Muller

Got today. Appreciate it. questions Thanks. the

Mark Fogel

you. Thank

Operator

next go James. The Raymond Please comes Laws from [Operator question with Stephen Instructions] ahead.

Stephen Laws

building themselves at estate Obviously, can at? more you something good ahead? maybe in between a you're or And looking talk of may the Mark, attractiveness or little finally, mentioned capital bit that repurchasing investments. simply present if originations relative Hi, you about think use stock your more over the liquidity afternoon. new real quarters opportunities XXX investments that's attractive you additional some for

Andrew Fentress

Hey, Steve, it's Andrew.

allocation. of part first the to capital with On respect the question

amount So open maximum the have ongoing repurchase on each which under -- trade able their the share as is average shares program day. And daily you is company volume the really available repurchase marketplace. that that are the rules to to we're we really governed repurchase know exchange an in the by

the doing in limited of terms of we're repurchases we're regard most So and share the the best company can. in that and

widen repay liquidity million first -- a on where to did there's now. we're $XX and of portfolio. will the as liquidity. mindful So to that levels sheet assets high-quality company over Spreads with balance to loan after certainly is And to amount over identified XXX originate as We then that go we're regard has healthy available think into with redeploy. up today obviously liquidity assets us more of cash of will we

So we three a good on think we're place those fronts. in

Stephen Laws

early it next CECL a on an where And there's you're doing to you statement, touch to take how through and color to or any book base releases Will that statement? income Great. the Thanks that's adoption years for give through Can the on similar run to year. overnight will that. can initial income us provisioning I you or Dave, adopt you think then ago write-down going work? few be all

Dave Bryant

to REITs we will in significant actually and result a are But there actually income would the recovery. what -- of be use, using it in a resulted that that us. significant changes a actually through change. be commercial all right look aware a statement the the if the mortgage a slight We've fact run model Yeah, that some we model of of it's most change model in at And I'm taken now don't an we it ones it for it think expect outsourced change anyway. don't proposed might

would I out modeling that think in and of that plays outlook macroeconomic recession what period is for be reserves a the outlook. the the inflation things the would our itself worsen bigger how a longer risk

Stephen Laws

Understood. color Yeah. the for there. Thanks it. Appreciate

Dave Bryant

Yeah.

Operator

concludes I This question-and-answer our Andrew like conference would back to over turn closing Fentress the any for to remarks. session.

Andrew Fentress

the joining over good questions forward everybody's you. We input coming the days any for participation everybody and weeks. and appreciate call. follow-up a Thank you look and Have to everyone. evening Thank

Operator

has attending for conference today's you Thank The presentation. concluded. now

disconnect. may You now

ACRES Commercial Realty (ACR) 3 Nov 222022 Q3 Earnings call transcript