ACRES Commercial Realty (ACR) 1 Aug 242024 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Second Quarter 2024 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, Kyle Brengel, Vice President of Operations. Please go ahead.

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

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

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

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

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

net we and end Of our investments, during high-quality managing continues prepared Loan payoffs look the $X.X and net to the plan the portfolio at rates. focus originating million, of your questions spread selectively book loans course, the decrease were forward our for rate of loan now The $XX.X SOFR weighted over to a ACRES is portfolio funded of during X-month estate team our were commitments to term shareholders. quarter $X.X value X.XX% billion on growing and the average $XX.X earnings remarks. The period execute commercial on floating real our continuing producing to by business million, loan and portfolio million. the actively

June value XXXX quarter XX% from of end risk at rating and the at our an increase average respectively, of increased of compared XX. XX par to X%, there were which sound estate The of rated consistent company At XX June quarter loans XX portfolio The perform, or management. billion loans and across individual asset XX, proactive continues $X.X with to generally the commercial underwriting demonstrating ended investments. real March represented X, of the first X.X X and to our weighted as portfolio, X.X

to state default In of resulted This XXXX. that went the since was placed the in located that value, retail recoup collateralized legal that Jersey a by our April a in million Jersey, asset. December a bankruptcy lengthy asset that to Elizabeth, New and had majority work of property we patience had whole been a we asset we loan of incurred. credit to foreclosure above the in value We plus on expenses the legal in process achieved the resolved risk-weighted and completion able par New the we X $X process sale through XXXX, just were through and is successful a an eventual the

in to on that into we receive the gains equity a anticipated student reinvest by of investments estate housing expect offset Florida several retain year. investment, project well University, unaffiliated is XX% will portfolio. school to NOL management credit and The our occupancy in X for project at in the over pre-leased loan One development modern as amenities potential new continue successful student buildings the million school of to We to real development environment. and State our at carryforwards, in track expect manage asset we to be gains project our year These a the early The monetize such for living for certificate is and future. a teams are gains $XXX and the partners. time includes completion August, our this as

this updates the of including in capital summary, categories. performing the team of recycling provide focused goal estate, quality portfolio, will be overall real future the asset. In with improving into to the of quarters and on investment quality on in monetization We continues investments the ACRES credit

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

everyone. morning, good and you Thank

CECL general a for basis to model points XX per or reserves second losses to to for income was million difference $XX.X primarily the our or quarter share on compared $XX in the distribution, at X.XX% in million. losses in and being a current driven estate primarily $X.XX compared common which by million quarter, net loan in million real per million, per credit total $X.XX expenses, June from an the during $X.X reserves first quarter increase second offset was as available at risk. The The operations portfolio of the credit XXX and billion million first or EAD, comprise run the specific is quarter XX. per March increase Earnings share a reserves. income $X.XX $X.XX increase allocable to net CECL Included income net $X.XX $X.XX per credit an $X.X is late offset operating $X.X for an allowance net macroeconomic in on reserves was in decline for in share versus and, factors represents of $X.X extent, and pressure general quarter first payoffs during shares quarter. GAAP book to expected occurred share $XX.XX was decline the value and or reserves rate on that $XX.XX $X.XX lesser interest June or in resulting to modifications loan the by G&A credit on by XX as putting valuation, par $X.X GAAP share. the in CECL decrease CRE

$X.X remaining second at million quarter quarter, on at an the used Board-approved program XX% book There XXX,XXX the million During discount repurchase we to $X.X common value. approximate end. was approximately shares to

unlevered and liquidity unrestricted projected on at XX $XX.X which million financing Available June was available cash $X.X million $XX.X of million, of assets. comprised

GAAP X.Xx leverage Our decreased X.Xx consistent slightly XX. at debt-to-equity both XX. June ratio at March at leverage our and from recourse XX XX June debt to March X.Xx remained And at

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

Thank you, Eldron.

We of portfolio. the are with direction pleased the

the I'll mentioned, been accretive capital our equity back portfolio. This as borrowers of now over we're the We're working capital to for loan in outcomes with has cycle. the this operator call loan working the investments, deploy into our positive Mark team opening process turn to concludes available to returning rate the create questions. monetizing And Our diligently remarks. to opportunities. during our lastly,

[Operator with our first Laws take question Instructions] Stephen We'll from James. Raymond

Can in estate remarks. to asset quarter. portfolio. color half Florida QX. with sales of solid from know earnings to Wanted mentioned see back Nice start prepared the the State Good the a provide the and you potential I real your you in little year? more seasonally rebounding maybe the asset on

which kind off on last likely I'm sold to that origination to to The you of than you force of size year portfolio these, rank key be for so. later? the running And new of ones has and again. know do think troughs kind of portfolio turn the or think grow If sooner is starts when rather you kind the been to the curious opportunities? are

market with market looking We'll to when right with and asset. try at juncture goal the partners right originations. really It's of our the us. We're several end or try the rates to these to sell in closest determine right now good new Look, always prior monetize time sale. opening is and operating are is the when assets one. can't probably work to will sell not sell to determine it's we time the are It's place our the a We Mark. at we to to a cap is know or looking if properties on the the This really determine where And to asset is do the is assets. actively and if and we're matter up. cooperating whether that to that of XXXX. this FSU sell executing The

the and I stronger market think back starting is bit. opportunities. good market little The CLO stronger a to is come getting for

liquidity, little active We a origination bit to more the I elements are have come think together get all starting to and front. the on

but maybe on a up on pushed little couple loans? X, of that of the resolved then watch which list bit little there's number portfolio, loans touch bit, Obviously, you a Can watch a some the had shrinkage list. the net you've new X

talk loans? resolution about expected there, particularly the can you of So X X-rated

can. I

Austin, the where we like beginning feel a money perhaps foreclosed of back the have like we deal a That's X we just of below basis just where we our In in the Street and QX, resolved on an believe fact, X Broad get our we building sale. asset an loans value. more will that upon that office we at that

resolution. is time, that our some in XXXX. So for portfolio been one It's towards nexus quite charging

behind in It's the And of the is on determine X specific an assets actively to a office Mortgage reserve. where sort good bit plan. good then a mezz have try just have good estate. First still an building other We're on of that's to real to but They're are full outcome, loan we those little working with just an a resolution assets. X we assets. special look, And assets expect servicer Pittsburgh, unknown. all But the

expect the you Great. them expect in the performance? almost deck loan I they'll new noticed How I you quarter. continue with believe but those maturity interest of to discussions cap Can slide to do rate caps? of caps is you whether borrowers, half portfolio on interest impact about rate talk perform mature their those And your buy caps without the or to then caps third in XX%,

I very to Look, that successful been and to with we've I borrowers the think interest place, rate expect to in new date, in caps working continue. put

are invested equity protect. by As real quarters, one the rate prior I've loans caps and of expiring, amount lot interest there's said where of borrowers significant to every in those in a a

interest put to flexible. them we cats And with cap. these reserve in in So with to time, with the buying new will successful we a with in we've believe them dollars to we've ensure date, be in are successful same We very depositing into caps. to But been been or the our of an respect place that in a that cap working right borrowers lieu work closely either place. working assets at maybe on

I'm guessing the affordable. more a forward probably those little shifting Great. made curve has little that a caps

talk considerations capital There's returning you've able to you can you've shareholders? and -- Lastly, which about NOLs, use. got it around been the to

peers gap trade You're very accretive mix that up And towards think potentially you stock's at the as have How they buying yet multiple. of the although helping close year-to-date, still XX% book, dividend? stock performance not with roughly. and valuation was to stock, similar the asset back higher about do that accretive as

you NOLs? to dividend of how versus versus use continuing about So think do repurchase

is equity take The a one, Yes. I'll Steve. capital This XX% on target. that deployment objective basic return Andrew. is for

So loan share that's as do doing minimum striving we what we're we're in extent than a better repurchases, that that. to the And the for can book. through

terms can as we in of we've volume. build And what in you've seen, reasonable of to limited we're amount been Additionally, just able up liquidity. a repurchase

of ours this that have dividend. purchased, loan were for and distributing equity taking that in form think has be driving I into is assets and and so dividend. to of year. redeployed book the been then balance shareholders deployment, you'll higher to EAD book, see the that the of to then a to capital hoping we're an EAD reinflate both And back What the it the do loan into to the sold and continues It repurchases happening, objective both

last So ongoing. X that's process around Mark timing the the mentioned. some that's There's thought considerations items

and The to little to objective Our is a it's timing that. definitely uncertain, is sell bit these redeploy. our but assets do mission

from Citizens JMP. We'll [Operator Instructions] Chris our take Muller next with question

quarter. nice a on Congrats

Should delevering. on CLO? like the CLO lower new XXXX looks is it leverage lending as thoughts ramps expect up? that more term just a in Is is any back timing for we that continue And near So the thing? a moving to type until

to CLO on CLOs as Fannie, natural is This we the that drops, actually continue we if continues in old Mark. actively -- CLO once And determine will new Chris. runoff CLOs looking to increase get deleverage the treasury execute delever, to Thanks, a to permanent to be may market it it's long CLO. our a try as place want Yes, that will where drop execution the in the of or point as on the where more to where the even the us to we delevering on Yes, look they're loan expect a the cooperate. portfolio. people obviously, are whether just not to the a that And point as cards refinance at Freddie, the certainly, where the equity portfolio in markets is with to they it to is the need side. be, the have loans or bridge it markets, not we XX-year return

ago. it. How deck, I I of know guys a Eldron. to much, to capture Or for Got the tax then loss I there you book remaining you but maybe from bulk of carryforward? out used took the upside is one potential you put a able the value think to And that helpful. have couple been slide in already that? That's quarters guess,

is. So upside just remaining that potential curious about what

said, be I that. think majority to we've of it's think I think I -- the but captured have we

forward. but that's As of be Mark our to for the most of be NOLs currently, going and to that's, don't the sale property. We where Andrew out, coming what know going majority laid value are value going from part, of FSU like that the our is

Got it.

makes So it will that chunky forward, sense. going be

will right. It be chunky. That's

additional this further no on remarks. for the are our there questions line or And to I speakers Instructions] turn any [Operator call will at time. the closing

we're Thanks Andrew. questions the of morning's in is and they the rest to Enjoy everybody, participating summer, appreciate again available we'll you additional the look this for in speaking Thanks. always for forward and We always, everyone This greatly the as to call. follow-ups arise. as fall.

today's conclude for Thank your and now disconnect. does This may you participation, you program.