ACRES Commercial Realty (ACR) 29 Feb 242023 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2023 ACRES Commercial Realty Corporation 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, Kyle Brengel, Vice President, Operations.

You may begin.

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

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

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

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

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

Q&A CEO; I Also and are Chairman today call CFO. Fogel, turn is Eldron for call will the to now Andrew ACR's Blackwell, ACR. over Mark. Fentress, the and President of available on me With Mark

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

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

million, on for selectively actively continues The value on continuing and X $XX.X execute during million, loans earnings the new and the net shareholders. rate net decrease is book and portfolio closed of were $X.X X.XX% payoffs managing ACRES growing funded loan Loan over $X.X to $XX.X of the to of million estate business high-quality now team floating our were originating million. during X-month loan focus plan the spread to investments, producing commitments benchmark The in period weighted real our billion portfolio we quarter commitment the the $XX.X average rates. portfolio a the commercial by

X which the represented third the rated value, compared par X X, loans of and XX X% portfolio of as end $X.X were across XX respectively, commercial of year or generally our par continues of of quarter portfolio, loans increase underwriting and ended value to the an of and proactive demonstrating XX% XXXX. At consistent XX, billion to The company with The investments. individual the perform, management. loans estate real December asset sound of there

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

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

real including categories. of quality recycling improving of quality focused with be investment the into ACRES the in performing investments and credit capital summary, on goal In to estate overall portfolio, team the continues the

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

you, sustained was per the or or basis $X.XX credit net specific in million credit Included and fourth total credit Thank affecting everyone. in credit points was income or at general in million quarter good increases $X.X income morning, rates, $X.X shares reserves expected XX $X in of the par million. losses to as which net share. current macroeconomic estate losses loan reserves during per compared and conditions general $X.X quarter general common or portfolio reserves GAAP quarter to general to of is of at is CECL allocable million and $X.X driven third and an offset $XX.X $X.XX by million the The The increase to $XX.X December by interest share XXX commercial X.XX% increase model comprised from portfolio primarily CECL expected in reserves allowance million, CECL risk the represents for elevated improvement billion model real benchmark market. reserves. fourth

in in the quarter Turning in $XXX,XXX primarily from of for and to Earnings in quarter loss to decline a impact distribution, This depreciation third of and and $X.XX or was in for the loss loans available net operating EAD nonperforming results increase management as Included in reduction $XXX,XXX interest from expenses, $X.XX a real approximately $X.XX property our X The investments. compared real third payoffs to the increased $X.X $X.XX the the amortization. per quarter being from estate approximately estate noncash quarter. from fourth offset income due by the $X.XX fees. of the share net was to was G&A fourth share investments operations. seasonality Net hotel per fourth for quarter. million difference

reinvestment fourth buyback This December to generated $X.X quarter. million primarily XX. $X.XX share value approximately was due XX. September at the At million our value per XX program, book versus XXX,XXX $X.X end, remaining redeem GAAP We at plan to there of an used share book the quarter of discount shares share repurchase approximate per XX% common December book for to was which increase $XX.X on on $XX.XX value the was at December million, Board completed unrestricted in the of our liquidity Any $XX will going on Available the million $XXX fourth was notes projected forward. comprised securitizations which $XX increased assets. $XX of XX on the securitizations been and of by Board-approved program, unlevered down which XXXX. by and window million quarter. payoffs now during loan has pay million financing We both cash available our CRE during

GAAP Our from September X.Xx slightly XX debt-to-equity leverage decreased at to XX. December ratio X.Xx at

reduction housing at leverage September Florida book, CRE ratio recourse at decreased to December debt offset our State to at student of loan by University. in XX our X.Xx borrowings Our project also primarily to X.Xx slightly XX, a a due related from development

to remarks. closing I With for that, Andrew the will now call Fentress turn

Eldron. you, Thank

XXXX are the for broadly. we reopening see markets all again. looking as know, was capital asset-level a transactions think improvements as But I year and beginning are challenging we markets mortgage XXXX, into

As on credit offset and the of serve company's to a the continuing to the NOLs, We're focused remain firm, portfolio. the maximizing of quality made clients. investments our the we're value borrower needs our we of

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

first question Stephen from James. comes Instructions] Laws Raymond with [Operator The

we What borrowers? about comments loan a of Can migration drove about loans? from I rated the normal should performance, as maturity And appreciate dates. we [indiscernible]? drove discussions more so nearing it the talk Is X move far. it think that increase? what past how Is with you little increase the maybe bit

This is Mark.

And mean property of does it's And operations. standards, the expect And X territory short-term about think just and our this credit not watch really property a X quality we our X and asset just those because We using list standards. X about that we less have the flows, I category into that into cash sort those good some pickup principal a and quarter, more feel in general. on about migrate really assets. loans the of on assets. loss deals level flow It's X

In resolved in with was of of the entire our recovery principal one fact, our this X QX year full balance. of assets

Mark, maybe then comments How up flow of investments. the that comments appreciate the monetizing on on you than at most cash do remarks and sooner that? a the rather investments about follow-up Any your that I [indiscernible] recycling prepared in the and timing do later? point, queued you and assets I had loan that. with think some around, of And

X sort now, those to certainty Stephen, expected which juncture, of But the have no that. at point have this those timing around we visibility monetize. assets. they're to at right some Yes, getting we on of visibility we the but of There's no on

or stock lastly, capital the their possibly remaining think possible the then during to versus the both, do of you doing talk continued returning were how reinstating And very that Can about quarter. kind dividend you why repurchases a appetite for Okay. you shareholders? accretive authorization. gave about But

Stephen, it's Andrew.

focused. I really as the said in So we've we're past, ROE think

ultimately and more a be the narrowed begin as deploy shareholders then capital to into stock gets capital continues So loan rally dividend. that the book will to favorable to returning through gap it

attractive. don't the There shareholder of fourth So plan to some some managing But those we return not. part that presented think with shareholders. that's just our we were to block us hopefully was took and levels, discounts. I those we again if volume took we're know significantly going see capital in about we at discount of were felt as quarter capital late to because that advantage of advantage the the meaningful pretty to

I nice a appreciate quarter. the on congrats and comments this morning,

Chris The from Instructions] Citizens Muller JMP comes [Operator next with Securities. question

nice echo see So great the It's and comments there. accretion. Stephen's to to I buybacks want those value book

guys you on new that versus books the environment? hit dividends the after -- the I I a deployment and picture get think off Or start dividend that coming capital of some viewing in new XXXX and guys a So little what's guess current originations loans you this is that's in getting be to going some loan just here. how you whole here. Do just event? bit more XXXX to wanted are the REO

Yes.

we're loan XX% objectives when equity. book, again, roughly our in dollars for -- So deploy the are return a new on we

as the that deployment goes And context that's repurchasing lens. think we that the of our shares in through So well. calculus about

you levels the do significantly can repurchasing were above quarter, math that number. ROE fourth in XX% we're the that at we that So the

shareholders that were QX. we that's the capital So did return through happy to we why the in repurchases to

not dividend, timing when have As it to will that of relates we to as occur. the specifically guidance given a

I be into be Mark occur, available earnings And offset objectives to for drive made as indicated, monetize those year. will the the are this monetizations tell back the the and would book company redeployed distribution. that, NOL or additional to EAD capital you our as to able loan the of investments that some

We EAD roughly dividend equates one our have value. peers. our the is at book XX% and to roughly of objectives a Another that market stated think with that dividend an competitive

are and dividend. common about we're monetizing that having using assets, those book And capital ultimately pay returning the metrics to then a into to EAD so internally loan think capacity

rate interest is context guys with you think guess, And then, helpful. cap That put and deck I I it. maturities, a very the Got helpful. in slide that's in so there

have are of the in looks I maturities expect And big it -- gaps to of current maturities cap like next So a interest clear, conversations be quarters. this you you replace guess, to able environment? how of couple chunk to rate coming rate in the borrowers with do going most the those borrowers? in broadly those be next

ahead months obviously. We're in of maturities. those advance conversations of getting X it, on, having early cap way We're rate interest

of most caps. have these think to borrowers lieu our and But issues. reserves of replacing there's potentially invested borrowers equity create of majority part, For wish no are related there's Obviously, assets, the a some I upside lot structure, speaking, some the assets. lot conversations in the our interest of to generally our around a caps, in

they're So of been caps the the that sticking would conversations assets, positive. majority in very say the their have I and they're by investing

Congrats on the finish to a year. strong

and question-and-answer earnings quarter fourth conference Thank concludes the year presentation. session you This Corp. full ACRES our Realty XXXX for Commercial attending call. today's and

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