ACRES Commercial Realty (ACR) 2 Nov 232023 Q3 Earnings call transcript

Good day, ladies, and gentlemen, and welcome to the Third Quarter 2023 Acres Commercial Realty Corp. Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Jaclyn Jesberger Chief Legal Officer.

You may begin.

you our thank and morning, for call. joining Good that posted to the would website. like quarter have highlight to presentation I third we XXXX our earnings This quarterly about presentation detailed of the company. contains the and summary results information

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

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

undue in speak Factors reports XX-K, Listeners reliance company obligation are Form of with Forms XX-K. to These filed of SEC, reports forward-looking to Risk uncertainties hereof. and X-K, update as these including XX-Q undertakes risks the section the only and statements, the particular, company's The its no any are date on these on its statements. in of forward-looking discussed and cautioned not place the which

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

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

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

over will to call Mark. the I turn now

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

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

plan The to by new continuing Acres team in and not business actively investments high-quality this to our chose the any And book the and growing current value shareholders. originating managing selectively we plan, on originate business earnings focus investments quarter. continues to execute for our following on portfolio

now Loan to $X.X were X-month rate commercial the million, net floating benchmark the payoffs The real period the the during rates. net in and a portfolio commitments of spread were decrease weighted $XX.X funded over of the billion million, is $XX.X estate X.XX% portfolio during producing $X.X quarter average million. the loans loan

real estate through We $X expect billion to estate maintain to $X.X XXXX. of real book loan a our commercial billion investment including properties portfolio, and

commercial proactive to contractual payments, investments. and quarter contractual current The individual of June loans X estate on which value of the also June sound X X X or rated portfolio these X X, were of at XX. ended rated our payments of September in or demonstrating At X generally loans loans perform, real asset $X.X loans not not and were continues XX these X billion represented of at XX. underwriting management. The the on portfolio. also Included par current were with X.X% there across loans XX, company consistent X which were

of rating business Additionally, behind underwritten implementing slightly a the increase This weighted average September weighted combination X.X X.X in risk to XX and/or some capital XX. is rating at market falling attributable properties increased at risk June from conditions. to plans average on

and and gains portfolio. real retain expect be estate that in reinvest at the loan to we by into to in potential future. continue we manage to several the equity gains offset monetize will carryforwards, These anticipated We investments gains NOL our expect

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

revamp feel highlights more our includes position released earnings earnings that presentation the expanded effective design, presentation presentation. risk updated hope financial We appreciated that ratings. a quarter, along financial an new on manner. in with This you communicates this we a We CECL increased and refresh disclosures

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

common CECL reserve $X Included income as are and compared GAAP or you, increases. third to net in $X.XX million per an share. the per or reserves reserves net quarter million. only CECL morning. quarter to was of the $X.X Thank quarter income good this second $X.XX reserves to allocable of comprised of shares million $X.X is share CECL during in general increase

the of $XXX,XXX of charge-off in office increases foreclosure in reserve deed quarter a comprised on million was $X.X upon general an plus property of second While the Chicago. lieu taking in

outlook, plan, The third business of by risk, portfolio billion in market's by credit basis $XX.X general which market commercial our comprised $X.X liquidity. or $X.X specific and affected increase increases general reserves loan allowance $XX.X losses general credit The to the quarter reserves at points compounded the represents XXX for primarily at uncertainty macroeconomic execution September portfolio total was CECL X.XX% million reserves. which XX real estate million credit driven and borrowers' in general has in modeled around and current ongoing million, par

share available CRE million XX XX. September comprised $X.XX value was available book June $X share, an in EAD GAAP million financing million $X.XX liquidity $XX $XX at to cash, which $XXX on which was was unrestricted unlevered X second reinvestment versus assets securitization. share favorably and September Available of XX or per of projected million, of cash per for quarter. the $XX.XX $XX.XX the in per third compared quarter for

debt-to-equity at XX. leverage ratio on steady September remains Our X.Xx GAAP

September leverage also steady X.Xx XX. remains debt ratio recourse at on Our

in to second from results due from of estate in was in to This of on approximately the real Turning arrearages second loss decrease from of loss estate lieu quarter. amortization. investments. we tax $XXX,XXX and primarily that to $X.X quarter real noncash $X third acquired depreciation was the million third foreclosure the quarter in property the Included Net via an quarter. in property operating investments $XXX,XXX million asset deed decreased

$X.X million point G&A. of of second G&A, million $X.X the quarterly expense low quarter Focusing third versus in seasonality the expense quarter reflects on

annual projection expense unchanged. Our G&A remains

Regarding third the redeem the quarter $XXX,XXX we an share quarter, shares plan approximately book on of at value There XX% $X.X at used during to to share discount program September approximate share XX,XXX was end. million the repurchase remaining XX. repurchases, Board approved per on

gets $X.XX of GAAP EPS to With the $X.XX EAD, in year $X.XX per now CECL respect the depends $X.XX, loan year-end We of expect expect a the to size XXXX. range on calendar we largely which reserves at book the for XXXX of which to to $X.XX line range X% quarter per in a at fourth XX, us approximately If to peer this XX% XXXX, of as XXXX. dividend, $X.XX for with share our to September value represent in cash would year-end share paid group.

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

He we of be the part morning, night names Good to normal made and the our Dave. that last quarter, its what that and the going David to of his of announcement announced to do been Instead everybody. a to as few Thanks, my reporting focus predecessor summarizing minutes like I'd Bryant, retirement. is just CFO going introduce we in has on X-K, who's Acres the role commentary personal who's take is some everybody. Eldron made want Officer initiatives, Eldron, Acres to him to that to of want you sure Financial to make as in to to Blackwell, announcement. Chief be we're them say we best I let take going can. was around not on going easily. assuming but keep go the to on also the moving We're do hi more too

everyone. Hello,

has worked for welcoming investor Eldron the years, many Dave and a and and to to calls transition, excited about group. very this will with be smooth the we're Eldron

over with to turn say it to know few to going pleasure a I But wanted a personally, I'm Dave. working it's Dave, So things. been he

new going to know the And time as appreciate energy bondholders him I All the wish the stakeholders, well. initiatives. along his Thank of your else are and system, seared and the well the shareholders, everybody you. all Acres in Acres

you, Thank Andrew.

I As value strategy Acres book ], provide to and good career the and help return strong [indiscernible] shareholders. them the the I Board end to grow my Capital to the the the thank and the CFO, wanted Marty Mark [ and a Andrew Acres opportunity here Acres at to for of implement near as

want as the real will also from work positioned a It's knowledge. say and Acres Eldron. And CFO that congratulate team space. Thank and believe estate the to deserved in I benefit very protect interest the shareholders' to talented you, He's well promotion interest. Acres I the the is him. would to for also that shareholders' very knowledgeable Andrew. truly entire I And

results. we will gladly have now any may guess our you I questions And that Operator? regarding take

comes [Operator Chris Instructions] first question JMP. from with Muller Our

today. I'm on for Steve

Eldron. And commercial challenging a on and quarter And nice to retirement. estate a on to Dave your congrats congrats So real environment. welcome

I to CLOs. on start wanted So some

get we is REITs CLOs? remind saw the sit, your how me you to I XXXX? can reinvestment CLO guess just you So market does possibility guys And done on look CLO CLO where recently. what CM X a the is by from a you of in remaining the period guys current

the can And of another that do period reinvestment timing have. extent the becomes do would perspective for that naturally call warehouse and natural different we It's And FLX probably deleveraging put to print an to period and assets at to ramping say puts occurred the I plans the a so amortize. it there to And respect XXXX. we think at want end that closes in one. CLO, of as some we're neutral. current where the lines lines Andrew. onto a quarter, point end the as names the the the us extent second at through process, our this we're amortization, obviously We want The With that from that FLX quarter. for the we math to that reinvestment ROE for our has additional CLO we new you you closed, point warehouse

than collateral are. the Or faster what earlier, dates if to of pay state begins maturity

I opening by head. in the was fact encouraged who the X a market of have that front there close that's touch the on we're certainly And of our issuing. We're peers. as point aggregating you be the line banks seems street that recently we the So the out, on think our are lines in and various completed transaction by time with to

of think our time attention close that's ROE we're answer your how what it But in terms we So paying from about and that standpoint. Does it. an plan -- question? to

helpful. just X here. other the I Very it. have then Got And

to have bought past guys help properties you tax utilize the So of those some in carryforwards. loss

some the there, guys you are estate conditional thinking are there real we're distress either you properties? out in commercial interested that? just or would about seeing guys opportunities how are acquiring of be seeing guess, in Given that I

of advantage The NOLs be NOLs we are in are place targeting will increase the take created the the equity. in that portfolio short answer be begin And believe now are to properties highlighted. value. where specifically through is no. return capital loan we additional very gains back it a and deploying to the to get we We book where those acquired to that you assets the then going to gains through book, get monetized we'll the those or on extent into amortization again mid-teens We're utilized

current we're bit were we good XX% doing our the quarter, types We job. think of better deliver than in ROE. think I can we a pretty returns think little a to those a if we shareholders,

question J. with [indiscernible]. next Our Instructions] [Operator Donald Polit from comes

to when Can you As to investor color some paying see might to dividends? start dividends. some like of I'd you an as able REIT, be give

question. Yes. have tied net tied to it's paying you, timing utilizing the loss is -- the operating on dividends for the we our in -- portfolio. that Thank Don, It's

actually all share. receiving shareholder should dividend, the a cash accruing and lieu the increasing of a as is of recognize value that per shareholders to same You cash book amount in

So the are of you rate as same a shareholder, receiving return.

increase receiving will to You're value the gotten delivered shareholders that we then the when be in of form a dividend. different book it a in But and that value. we in are a will there slightly believe appropriate return shifted we've to come form mindful the time through just the and book level,

the questions, thank further has As you for concluded, attending and we no today's presentation. now conference have

now disconnect. You may all