Acres Commercial Realty Corp. · NYSE:ACR
Acres Commercial Realty — Q3 2022 Earnings Presentation
33 slides from Acres Commercial Realty's earnings presentation, Nov 3, 2022
Slide 1: Third Quarter 2022 Earnings Presentation
ACRES Commercial Realty Corp. Third Quarter 2022 Earnings Presentation November 3, 2022
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws. These forward-looking statements are not historical facts but rather are based on ACRES Commercial Realty Corp.’s (“ACR’s” or the “Company’s”) current beliefs, a
Slide 3: Disclaimer (continued)
Disclaimer (continued) Forward-Looking Statements (continued) In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur and actual results, performance or achievement could differ materially from those anticipated or implie
Slide 4: Third Quarter 2022 Highlights
Third Quarter 2022 Highlights Manager is focused on delivering shareholder value through earnings growth and share repurchases Earnings Available for Distribution or “EAD” and capital gains can be retained through tax asset to increase book value Multifamily-focused CRE GAAP Net Income / Liquidi
Slide 5: Results for Quarter Ended September 30, 2022
Results for Quarter Ended September 30, 2022
Slide 6: Results and Recent Developments
Results and Recent Developments GAAP net income: $0.08, and includes: $0.21 gain on the sale of a property previously held for sale Financial Results $(0.30) provision for CECL reserves, primarily attributable to the negative impact of macroeconomic factors focused on expected increases in inf
Slide 7: Manager Focus on Delivering Increased Book Value per Share
Manager Focus on Delivering Increased Book Value per Share Summary of Changes to GAAP Book Value per Share $0.11 $25.08 $0.36 $0.05 $0.08 $24.48 '22 GAAP Book Value - June ‘22 GAAP GAAPNet NetIncome Income Other Comprehensive OCI Repurchases (1) Equity Stock Repurchases Stock Compensation Equity and
Slide 8: CRE Loan Activity and CRE Portfolio
CRE Loan Activity and CRE Portfolio
Slide 9: Deployment Progress
Deployment Progress CRE Loan Production, at Par $ in Millions 12 Mos. Ended 3rd Quarter 2022 2nd Quarter 2022 1st Quarter 2022 4th Quarter 2021 Sep. 30, 2022 New CRE floating-rate loan commitments $181.3 $311.7 $99.9 $447.2 $1,040.1 Sales, payoffs and paydowns (83.5) (109.2) (92.3) (363.2) (648.2) F
Slide 10: Production, Payoff and Paydown Detail
Production, Payoff and Paydown Detail New Loan Production in the 3rd Qtr. Commitments 2022 (1) W. Avg. Coupon Rate ($ in Millions) Hotel (3 Loans) 1M BR (2.03% floor) + 6.25% $97.7 Office (2 Loans) 1M BR (2.46% floor) + 5.83% 74.0 Multifamily (1 Loan) 1M BR (2.38% floor) + 5.00% 9.6 W. Avg/Total (6
Slide 11: CRE Loan Portfolio Overview
CRE Loan Portfolio Overview $ in Millions Sep. 30, 2022 Jun. 30, 2022 Mar. 31, 2022 Dec. 31, 2021 CRE whole loans, floating-rate $2,125.9 $2,070.0 $1,891.7 $1,877.9 CRE mezzanine loan 4.7 4.7 4.7 4.7 Total loans held for investment amortized cost $2,130.6 $2,074.7 $1,896.4 $1,882.6 Allowance for cre
Slide 12: CRE Loan Portfolio Maturity Profile
CRE Loan Portfolio Maturity Profile Fully extended weighted average loan maturity of 3.7 years (1)(2) 88% of the portfolio has interest rate caps in place at September 30, 2022 (3) Fully Extended Loan and Interest Rate Cap Maturities ($ in millions) $1,200 $1,145 $1,000 $977 $800 $747 $600 $618
Slide 13: CRE Loan Portfolio LTV
CRE Loan Portfolio LTV 80% $2,200 $2,000 75% $1,800 72% 72% 72% 72% $1,600 70% Weighted Average LTV $1,400 Principal (in Millions) $1,200 65% $1,000 $800 60% $600 55% $400 $200 50% $- December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 Whole Loans, Floating-Rate Mezz. Loan W.A. LTV ACR
Slide 14: CRE Loan Portfolio Diversification
CRE Loan Portfolio Diversification Balance by Region (1) Property Type Office, 12.8% Multifamily, Hotel, Pacific 75.0% Northeast 9.0% 8.6% East 8.5% Self-Storage, West North North Central Central 2.8% Retail, Mountain 2.9% 6.1% Mid 0.4% 15.5% Atlantic 11.7% Southeast 22.8% Southwest 23.9% Interest R
Slide 15: CRE Loan Portfolio Risk Ratings
CRE Loan Portfolio Risk Ratings 94% of ACR’s loans have a risk rating of 2 or 3 that are performing in line or near underwritten expectations (1) All but two of ACR’s 88 loans are current on contractual payments through September 30, 2022 Percentage of Principal at September 30, 2022 vs. June 30
Slide 16: Benchmark Rate Floor Trend
Benchmark Rate Floor Trend BR Floor Trend by Weighted Average Floor Pool 100% 0.80% 0.75% 90% 0.66% 0.67% 0.70% Percentage of Total CRE Whole Loan Principal 0.62% 80% 0.60% 70% 74% 73% 72% Benchmark Rate Floor 67% 0.50% 60% 50% 0.40% 40% 0.30% 30% 33% 28% 0.20% 26% 27% 20% 0.10% 10% 0% 0.00% Decembe
Slide 17: Benchmark Sensitivity Analysis Trend
Benchmark Sensitivity Analysis Trend The recent increases to benchmark rates on net interest income has returned our match financed investment portfolio to have a direct correlation to the rise or fall in interest rates Quarterly Net Interest Income per Share Sensitivity to Changes in Quarterly Ne
Slide 18: Investments in Real Estate Properties
Investments in Real Estate Properties $132.8 million of investments in real estate (1)(2) Office $14.6M Student Housing $13.0M • 99K SF Class A office / life science/ lab space • Existing structure and development of adjacent lot • Equity investment in the northeast region • Equity investment in t
Slide 19: Capitalization and Liquidity
Capitalization and Liquidity
Slide 20: Summary Capitalization
Summary Capitalization $281.8 million of availability at September 30, 2022 (2) $ in Millions Capitalization (1) Maximum Leverage Amount Availability W. Avg. Coupon Capacity Ratio Term warehouse financing facilities (2) $500.0 $379.1 $118.6 5.38% 0.8x Senior secured financing facility (2) 250.0 85
Slide 21: Historical Leverage Ratios
Historical Leverage Ratios Historical Leverage Ratios 4.3x 4.2x 4.0x 3.7x 1.5x 1.4x 0.9x 0.8x December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 Recourse Debt Leverage Ratio Total Leverage Ratio ACRESREIT.COM 21
Slide 22: Liquidity at September 30, 2022
Liquidity at September 30, 2022 ($ in Millions) $14.9 $86.4 $10.5 $61.0 Unrestricted Cash CRE Term and CRE Senior Term andSecured Reinvestment Cash at CRE Total Liquidity Facilities Estimated Unfinanced Senior Secured Facilities Estimated Securitizations Proceeds Unfinanced (1) Proceeds (1) Includes
Slide 23: Appendix
ACRES COMMERCIAL REALTY Appendix
Slide 24: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands, except share and per share data) Sep. 30, 2022 Dec. 31, 2021 Assets (unaudited) Cash and cash equivalents $60,971 $35,500 Restricted cash 15,979 248,431 Accrued interest receivable 9,625 6,112 CRE loans 2,130,645 1,882,551 Less: allowance for credit losses
Slide 25: Consolidated Statements of Operations
Consolidated Statements of Operations (unaudited, in thousands, except share and per share data) For the Three Months Ended For the Nine Months Ended Sep. 30, 2022 Sep. 30, 2021 Sep. 30, 2022 Sep. 30, 2021 Revenues Interest income $34,065 $23,986 $83,760 $74,528 Interest expense 22,939 14,534 53,591
Slide 26: Earnings Available for Distribution
Earnings Available for Distribution (1) The following table provides a reconciliation from GAAP net income (loss) allocable to common shares to Earnings Available for Distribution (previously labeled Core Earnings) allocable to common shares, a non-GAAP measure, for the periods presented: (unaudit
Slide 27: CECL Trend Analysis Chart
CECL Trend Analysis Chart ACR’s CECL reserve as a percentage of the total CRE loan portfolio has declined as ACR (i) increased its percentage of multifamily loans and (ii) simultaneously reduced its portfolio percentage of loans originated prior to 4Q20 (“Pre-Covid Loans”) (1) 100% 3.50% 100% 95%
Slide 28: Illustrative Earnings Potential
Illustrative Earnings Potential (1) The chart below is meant to display the illustrative earnings potential of the Company. It is not meant to represent performance guidance for any period. (In millions, except percentages and per share data) Projected Maximum CRE Loan Portfolio Size & GAAP EPS &
Slide 29: Projected Book Value & Common Stock Growth
Projected Book Value & Common Stock Growth(1) ACR’s strategy is to drive book value (“BV”) growth over the coming years Projected OPERATING loss carryforwards of approx. $53.4M, expected to be fully utilized Projected CAPITAL loss carryforwards of approx. $121.9M, expected to be partially util
Slide 30: Key Definitions
Key Definitions Earnings Available for Distribution: Earnings Available for Distribution (“EAD”) (previously labeled Core Earnings) is a non-GAAP financial measure that the Company uses to evaluate its operating performance. EAD excludes the effects of certain transactions and GAAP adjustments that
Slide 31: Other Disclosures
Other Disclosures Commercial Real Estate Loans Risk Ratings CRE loans are collateralized by a diversified mix of real estate properties and are assessed for credit quality based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwri
Slide 32: Key Assumptions
Key Assumptions Illustrative Earnings Potential – page 28 Net deployable capital is calculated as the total current corporate capital of approximately $632.5 million, less total projected commitments for investments in real estate, excluding potential financing, of approximately $110.7 million and
Slide 33: Company Information
Company Information ACRES Commercial Realty Corp. is a real estate investment trust that is primarily focused on originating, holding and managing commercial real estate mortgage loans and equity investments in commercial real estate property through direct ownership and joint ventures. Additional i
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