Earnings call transcript Q4 2022

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2022 ACRES Commercial Royalty 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 posted company. you presentation quarterly to earnings and and thank to contains highlight would call. presentation results information that like summary I year and we about website. end have our the detailed quarter for fourth This joining the our the of

may on during want forward-looking and Before everyone made are remind I constitute statements to this we historical not based begin, certain that call information statements.

used this conference call, forward-looking When and words similar identify the to expects, in believes, expressions anticipates, are statements. intended

the and are statements statements. are based uncertainties actual results that Although to materially beliefs based statements current these management's subject such and could those forward-looking expectations cause assumptions, believes the company differ contained in on and to that risks, on from trends, forward-looking are reasonable several

XX-K, its risk XX-K. SEC, uncertainties Forms X-K, These with filed risks in and the in reports and the its reports Form on section company's of and are particular, including discussed XX-Q, factors the

are reliance forward-looking only of undue speak forward-looking any which date to on of obligation not cautioned statements. the no statements, The as to hereof. these these update company Listeners undertakes place

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

information GAAP. to substitute isolation or to Our is as not presentation with be of a in presented the this intended considered accordance in financial information

most measures contained in prepared comparable the accordance Accepted to past measures earnings the in are financial presentation Accounting Generally non-GAAP Principles of for Reconciliations quarter. with the

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

turn now the to will call Mark. I over

Mark Fogel

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

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

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

one the were originated of million net period commitment loan million, multifamily commitments quarter the decrease the producing the payoffs $XXX.X during Loan to and a $XX.X million. We new fourth net during $XX $XX quarter. funded million were in portfolio

The loan spread average the at newly of coupon of originated loan interest one-month billion SOFR loans one-month $X.X portfolio a pays X.XX% rate to and floating weighted increased The over real plus benchmark our estate average the commercial weighted X.X%. spread rates.

through of expect $X We XXXX. portfolio billion $X.X billion maintain an to to investment

know and sheet few a comments rate of this on Finally, investors as items top mind base market the given recent volatility balance we many increases. topic for is

non-mark-to-market series, quarter, the each its During for issuance. terms the will provide to -- date for upsize to which company the commitment with term the individual agreement finalized loan the five-year have from under MassMutual of date

as performing company has Stanley lines JPMorgan each. open with well Morgan The collateral on and with

May XXXX. window In addition, and reinvestment the had available XXXX two we our ACR through securitizations December on have

and or of of portfolio the continues extended the originated par to generally and demonstrating of XXXX and maturities consistent current was initial bulk current comprising XX% The perform, The XXXX later. later and company's of balance in or asset XXXX portfolio sound have XXXX, maturities management. underwriting and proactive

estate across quarter loans We billion XX investments. commercial with ended individual real the of $X.X

representing of represents portfolio. representing were at XX This X.X% which the there five X.X% loans, delinquent a portfolio. XXst, As loans, watch-list of December loans there watch-list of the from XXXX, December decrease including three were XXst, XXXX,

which $XX.X In reduced off half loans watch-list par our January in year-end as a in portfolio of a hotel on region value of to paid compared million full, XXXX. XXXX, in the loan watch-list one Southwest with the was value

the remaining has from underlying region. a $X.X against credit event and is specific company our XXXX. one mezzanine of collateral the acquisition had of We mezzanine office the Northeast million value in an loan the reserved loan XXX% par in during the We The quarter. property

you this again. originate to As part not see mezzanine capital ACRES investments structure in the should loans, of expect does not

estate into to be expect hold investments by continue to anticipated These NOL the existing portfolio. equity gains the We four loan retained with in in at gains that and real we future. will monetize offset carryforwards reinvested the

we Pennsylvania, XXXX, In in XXXX. a foreclosure Plymouth in a Meeting, $XX hotel million February sold of with asset July located that we approximately received basis one through

We on in the sale XXXX. first expect to gain modest a record the quarter of

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

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

Dave Bryant

Thank common $X.X good was or quarter in you, Mark GAAP afternoon. and million loss applicable per net fourth to the share. shares $X.XX

income net recorded we Our year, result of fourth quarter. $X loss, guidance between and was the and share was a per in with XXXX the for share which largely $X.XX a for reserves ended CECL of of net per the GAAP $X.XX $X.XX

The with company fully of $XX macroeconomic mentioned $X.X reserves attributable and provision specific in includes fourth mezzanine million value the decline of primarily a loan to a a The recorded reserve outlook increase par $X.X to the CECL quarter million. a million. increase in previously

or December billion distribution fourth for at the $XX.X for $X.XX which or EAD basis XXst at XX per Earnings million, the portfolio losses loan represents X.XX% available quarter were The of for credit total points share. par. allowance $X.X was

at XXXX, $XX of of re-investable million approximately GAAP per share on comprised $XXX unrestricted and assets, approximately Available XXst, million on in $XX decreased available securitizations. which million, of on $XX.XX unlevered cash, CRE from available financing to $XX million book value December projected $XX.XX cash was liquidity XXth. XXst September December

equity Our on GAAP on December times decreased debt ratio times from marginally September XXth. to X.X to XXst X.X leverage

leverage and leverage term bank primarily decreased a from facilities recourse the on ratio to during recourse X.X net debt X.X were loan period. to the to times borrowings result times December leverage The Our marginally as XXth. ratios on September our decreased decreases of debt payoffs on also due XXst

flat from estate fourth fourth approximately investments was loss estate property real remained Turning of in the in quarter operating the Net Included results investments. noncash to relatively at quarter. $XXX,XXX from amortization. depreciation company's $XXX,XXX loss the and real

expense year $X.X G&A, the on third of the to million fourth versus expense. the quarterly audit Focusing $X.X due of quarter for the primarily quarter G&A, million incurrence reflects of seasonality end

program company There approximately redeem $X.X $XXX,XXX discount fourth per Regarding shares year end. remaining share to to the million share plan XXst. Board-approved on XX% on during value repurchases, repurchase the the is used an XX,XXX at approximate December book quarter, of share at the

in XXXX. loan million we expect and of to available growth calendar for year to grow $XXX in earnings and distribution XXXX, net have steadily positive net for remain income With our

expect with payoff hotel see expenses the anticipated EAD Of XXXX, loan operations, to during note, the quarter a in net of and first driven along primarily reduction activity. we in G&A seasonality by

We currently and income will $X.XX a EAD project the that $X.XX in of per per $X.XX produce share the range range in for to share GAAP a of calendar company XXXX. $X.XX to year

loan or remains and during Our that projection volatility, to may year. subject other payoff CECL nonrecurring reserve volume, items arise unexpected the adjustments benchmark rate

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

Andrew Fentress

you, Thank Dave.

entire team productive these a on the to quarter year that thank you recognize works to say at want and results. fourth the close everyone we extended ACRES, to we As deliver

time strategy. for available execute on for requests questions any We our remain recognize to us want also to committed and at trusting our and for shareholders We information.

previously, said of the market volatility corresponding mindful asset created of we a rate the sense I've prices in are As anxiety. and changes has in heightened

a company Dave, from performing you've during several managed the by Mark, is CEO, our have liquidity, CFO, cycles a has who heard and As been of their ample team careers. professionals, strong portfolio, and is through well,

do investing will term. and stable our high-quality in in We the mission by assets produce vigilant value our over growing this deliver and remain shareholders. value shareholders' that to book managing for long We

call now back opening This for the remarks to questions. I'll concludes and operator our the turn

Operator

you. Thank

will question-and-answer [Operator session. We begin the Instructions] now

And the from be Stephen Laws go will James. first Raymond ahead. question Please from

Stephen Laws

was than interest I looking I I a know nice solid but earnings afternoon. by distributable and on was really on looks the what for CECL, quarter. good Hi, off, first impacted portfolio smaller number. guess GAAP congratulations income solid net

So, nice to year. a close the

about, outstripped said repayments half net up, the How down, little can QX? that bit you outpaced versus little a flat, investments that, year? in your the out appetite as are talk near-term thinking we of Should first or Mark, you about expect originations repayments, a kind the about we new net Having of in next look over quarters? the size portfolio of bit couple

Mark Fogel

for Hey Steve, the thanks comments.

at the to year, -- this the half year least first production. through with expect respect relatively remain of flat the to probably net We throughout

Stephen Laws

today versus kind When there's assets but not you're you're turnover are paying with seeing you about spreads new know I you the at lot turnover, of a putting replenishment, there, of where looking the off? things talked

Mark Fogel

probably books that paying Today, most seeing between the are the you're part, we're X.X%. for spreads to of loans So, that on putting X.X% X.X%. spreads off and X.X% are

Stephen Laws

Okay.

So, a turnover? bit on pick little there of up the

Mark Fogel

Little bit.

Stephen Laws

a to I base, wanted And first. clarification touch maybe

the sold one prepared I to year same QX? was your mentions that you a going subsequent on to to Is lead think in that guess, gain in page real deck, I asset the in small, the an estate remarks the footnote end. referenced that's

Mark Fogel

correct, That's hotel small limited a it in Pennsylvania. was service

Stephen Laws

Great.

it you. sure the Great. make same the Appreciate to wanted was Thank comments. Just asset.

Mark Fogel

Thanks Steve.

Operator

is Instructions] from Securities. from next Please JMP ahead. Steve question [Operator Delaney The go

Steven Delaney

Nice Andrew. this Hello, to and you Mark, Dave, with be evening.

down reserve to a CECL $XX.X intended the of at year at million the jotted figure mentioned million? $X.X million. reserve and be that I end. specific You within the Was $XX.X

Mark Fogel

Dave. ahead, Go

Dave Bryant

Yes.

Mark. Sorry,

by Steve, reserve. that was caused primarily period the outlook. $XX a million general of million was reserve, macroeconomic worsened So, $X.X the and expense

Steven Delaney

-- was right. general,

Okay.

Dave Bryant

to million loan $X.X the a got $X.X other The full of mezzanine reserve million.

had of CECL and we but of million. that to added So, that full reserve loan it million model, the evaluating to done it $X.X I we $X.X a specifically, thousand previously the through got now are hundred couple

Steven Delaney

Got it.

-- sit today? now books gone, specific has your that as on there more we as So, reserves of any are that here

Dave Bryant

None here today. as we sit

Steven Delaney

Excellent.

Okay.

guidance-- Your

Dave Bryant

had books. the on was only we mezzanine our That loan

Steven Delaney

Understood.

got You've that.

first everything is now. speed that. So, Got

guidance the the So, for thank you full year. for

In CECL expectation is in the reserves trying that for to you reduce EAD, to EAD, the you year, which than occur Within might realized losses higher that to EAD? would is additional going GAAP. any your in I guess, then up. are your GAAP, reflect put any build have certainly which actually

Dave Bryant

expect in at. reserve -- amount we meaningful say point level particularly It's I may of ended basis that guidance that be a year is XX not a the that, Steve. small we assumption at number. we're There CECL the keeping that the that biggest that would

meaningfully that don't to know that change but during what we enough could course, Of now or accurately predict XXXX, be. might

Steven Delaney

understand. I

So, you've reserve point within be basis is got that a CECL say, XX you what I'm is constant sort will David. the hearing with the consensus of

Dave Bryant

Correct.

Steven Delaney

great. Okay,

just stepping X And thing. big picture back, Okay. kind of

today different terms maybe real months we than in certainly market months a commercial were six in of are ago. estate, We XX ago

the over hard the you year of that several with it class that speaking or is just is probably have, so, last real capital is gains. generate you carryforward that loss will estate asset capital The thought potential the

market, you're your capital carryforward? curious proactive you order in be how may utilize might attractively to in I'm in, that seeing valued estate you and invest less hopefully properties what commercial certain to real in decide loss Thanks. this

Mark Fogel

thanks for to too in Steve, expect investments. equity active additional be us wouldn't I question. after the going

what for I of what at remainder the we now have the for think least. is we'll year with stick

business and making mortgage not investments. Our making is commercial loans equity really

would something think after. opportunities distressed it's going there going that to is we're probably be I that out So, if there, not

Steven Delaney

you thank it. comments. Well, Got for the

Mark Fogel

you. Thank

Operator

any gentlemen, closing turn the back over our session. question-and-answer remarks. would I like to for Mark Ladies to concludes conference and Fogel this

Mark Fogel

us joining support, Well, having quarter we to We in forward hopefully, for Talk look the soon. thank first some XXXX you, again appreciate earnings discuss. and to of everybody, today. speaking and everybody's robust

Operator

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

disconnect. now may You

ACRES Commercial Realty (ACR) 2 Mar 232022 Q4 Earnings call transcript