Acres Commercial Realty Corp. · NYSE:ACR
Acres Commercial Realty — Q1 2022 Earnings Presentation
34 slides from Acres Commercial Realty's earnings presentation, May 5, 2022
Slide 1: First Quarter 2022 Earnings Presentation
Exhibit 99.2 ACRES Commercial Realty Corp. First Quarter 2022 Earnings Presentation May 5, 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 our current beliefs, assumptions and expectations. These beliefs, assumptions 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: First Quarter 2022 Highlights
First Quarter 2022 Highlights1 $1.4 billion of asset‐specific financing, of which 89% comprises non‐recourse floating rate CLO2 notes with duration into 2023 and an attractive 1M L2 + 1.63% weighted average coupon rate Multifamily‐focused Robust Liquidity at GAAP Net Loss2 CRE2 Loan Portfolio Apri
Slide 5: Results for Quarter Ended March 31, 2022
Results for Quarter Ended March 31, 2022
Slide 6: Three Months Ended Mar. 31, 2022 Results and Recent Developments
Three Months Ended Mar. 31, 2022 Results and Recent Developments GAAP net loss4: $(0.30), and includes: $(0.12) of non‐recurring deferred debt issuance cost amortization expense from the redemption of two CLOs $(0.16) of depreciation and amortization expense on investments in real estate prope
Slide 7: First Quarter 2022 Book Value
First Quarter 2022 Book Value GAAP Book Value per Share Walk $1.43 accretive impact to Book Value per share since the ACRES Acquisition10 Impact of CECL9 Impact of CECL $0.95 $0.52 $0.41 $0.08 $0.31 $24.10 $23.87 $0.05 GAAPBook GAAP BookValue Value‐ ‐Dec. Dec.‘21 '2111 GAAP GAAPNet NetIncome Loss12
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 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 12 Mos. Ended 2022 2021 2021 2021 Mar. 31, 2022 New CRE floating‐rate loan commitments $99.9 $447.2 $468.2 $470.2 $1,485.5 Sales, payoffs and paydowns (92.3) (363.2) (120.3) (353.1) (928.9)
Slide 10: Production, Payoff and Paydown Detail
Production, Payoff and Paydown Detail $ in Millions New Loan Production in the 1st Qtr. 2022 W. Avg. Coupon Rate Commitments Multifamily (3 Loans) 1M BR (0.08% floor) + 3.37% $99.9 $ in Millions W. Avg. Loan Payoffs & Paydowns in the 1st Qtr. Months on Payoffs & 202217 Balance Sheet W. Avg. Flt. Cou
Slide 11: CRE Loan Portfolio Overview
CRE Loan Portfolio Overview $ in Millions Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 Jun. 30, 2021 (89 loans) (94 loans) (96 loans) (88 loans) CRE whole loans, floating‐rate18,19 $1,892 $1,878 $1,841 $1,559 CRE mezzanine loan 5 5 5 5 Total loans held for investment amortized cost $1,897 $1,883 $1,846
Slide 12: Weighted Average LTV
CRE Loan Portfolio LTV 80% $2,000 $1,800 75% $1,600 72% 72% 72% $1,400 70% 71% Weighted Average LTV Principal (in Millions) $1,200 65% $1,000 $800 60% $600 $400 55% $200 50% $‐ June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Whole Loans, Floating‐Rate Mezz. Loan W.A. LTV ACRESREIT.
Slide 13: CRE Loan Portfolio Diversification
CRE Loan Portfolio Diversification Balance by Region21,22 Property Type22 Office, 13.4% Hotel, Pacific Multifamily, 9.0% Self‐Storage, Northeast 72.7% 9.8% East 3.0% 6.9% West North North Retail, Central Central 1.6% Manufactured Mountain 2.7% 3.5% Mid Housing, 0.3% 13.8% Atlantic 14.2% Southeast 26
Slide 14: CRE Loan Portfolio Risk Ratings
CRE Loan Portfolio Risk Ratings23 93% of ACR’s loans have a risk rating of 2 or 3 that are performing in line or near underwritten expectations All but two of ACR’s 89 loans are current on contractual payments through March 2022 Percentage of Principal at March 31, 2022 vs. December 31, 2021 80%
Slide 15: Benchmark Rate Floor Percentage of Total CRE Whole Loan Principal
BR Floor Trend BR Floor Trend by Weighted Average Floor Pool 100% 1.40% 1.31% 90% Percentage of Total CRE Whole Loan Principal 1.20% 80% 1.03% 70% 1.00% 72% Benchmark Rate Floor 67% 60% 61% 0.75% 0.80% 0.66% 50% 53% 47% 0.60% 40% 39% 30% 33% 0.40% 28% 20% 0.20% 10% 0% 0.00% June 30, 2021 September 3
Slide 16: Investments in Real Estate Properties
Investments in Real Estate Properties $115.7 million of investments in real estate25, 26, 27 are being managed to generate a positive return for ACR’s shareholders Office Value Add $14.6M Hotel $39.8M • 99K SF Class A office / life science/ lab space • 279‐unit hotel next to a convention center •
Slide 17: Capitalization and Liquidity
Capitalization and Liquidity
Slide 18: Summary Capitalization
Summary Capitalization $919.1 million of availability28 on the term warehouse, senior secured financing facilities and 12.00% Senior Unsecured Notes $ in Millions Capitalization7 Wghtd. Avg. Leverage Maximum Capacity Amount Availability28 Coupon Ratio29 Term warehouse financing facilities30 $750.0
Slide 19: Historical Leverage Ratios
Historical Leverage Ratios Historical Leverage Ratio 4.0x 3.7x 3.6x 3.0x 1.4x 0.9x 0.8x 0.7x June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Recourse Debt Leverage Ratio Total Leverage Ratio ACRESREIT.COM 19
Slide 20: Liquidity at April 30, 2022
Liquidity at April 30, 2022 ($ in Millions) $75.0 $172.9 $(40.0) $107.9 $30.0 Unrestricted Cash CRE Term and Senior CRE Term Senior Unsecured Senior Unsecured Working Capital Net Liquidity Secured Facilities and Senior Notes Availability Notes Availability Reserve Estimated SecuredUnfinanced Facilit
Slide 21: Appendix
ACRES COMMERCIAL REALTY Appendix
Slide 22: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands, except share and per share data) Mar. 31, 2022 Dec. 31, 2021 Assets (unaudited) Cash and cash equivalents $79,561 $35,500 Restricted cash 5,734 248,431 Accrued interest receivable 6,282 6,112 CRE loans 1,896,425 1,882,551 Less: allowance for credit losses (
Slide 23: Consolidated Statements of Operations
Consolidated Statements of Operations (unaudited, in thousands, except share and per share data) For the Three Months Ended Mar. 31, 2022 Mar. 31, 2021 Revenues Interest income $22,676 $24,749 Interest expense 14,907 13,724 Net interest income 7,769 11,025 Real estate income 3,138 1,654 Other revenu
Slide 24: Earnings Available for Distribution
Earnings Available for Distribution40 The following table provides a reconciliation from GAAP net (loss) income 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: (unaudited
Slide 25: CECL Trend Analysis Chart
CECL Trend Analysis Chart We have seen our CECL reserve as a % of the total CRE loan portfolio decline as we have (i) increased our % of multifamily loans and (ii) simultaneously reduced our % of loans originated prior to 4Q20 (“Pre‐ Covid Loans”)60 100% 3.50% 100% 100% 95% 86% 3.00% 80% 73% 2.50%
Slide 26: Illustrative Earnings Potential
Illustrative Earnings Potential43 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 Size7 & (In millions,
Slide 27: Projected Book Value & Common Stock Growth
Projected Book Value & Common Stock Growth49 ACR’s strategy is to drive book value (“BV”) growth over the coming years Projected OPERATING loss carryforwards50 of approx. $63M, expected to be fully utilized Projected CAPITAL loss carryforwards51 of approx. $137M, expected to be partially utili
Slide 28: Summary of Tax Loss Carryforwards
Summary of Tax Loss Carryforwards The following table summarizes the expected tax assets and the conditions of the useful lives: $ in Millions Tax Year REIT (QRS) REIT (QRS) TRS TRS Tax Asset Item Recognized Ordinary Losses Capital Losses Ordinary Losses Capital Losses NOL Carryforwards55: Histori
Slide 29: Footnotes
Footnotes 1. “First quarter 2022 highlights” includes activity that occurred during the second using the weighted average diluted shares outstanding during the three months quarter of 2022 or balances at April 30, 2022, where specifically referenced. ended March 31, 2022. 2. “CLO” refers to collater
Slide 30: Footnotes (Continued)
Footnotes (Continued) 25. Investment in real estate is the depreciated/amortized cost basis of the real estate‐ 38. “WACC” refers to the weighted average cost of capital. The calculation of weighted related assets and liabilities on March 31, 2022 excluding the property held for sale average cost of
Slide 31: Footnotes (Continued)
Footnotes (Continued) 53. Calculated as the increase from the $12.47 price per share of ACR’s common stock to $27.00, which is an estimate of 90% of the projected common stock book value. 54. The “Min. Case” scenario assumes the partial utilization of the OPERATING loss carryforwards. The “Base Case
Slide 32: 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 33: Other Disclosures (continued)
Other Disclosures (continued) Earnings Available for Distribution Earnings Available for Distribution (“EAD”) (previously labeled Core Earnings) is a non‐GAAP financial measure that we use to evaluate our operating performance. EAD excludes the effects of certain transactions and GAAP adjustments th
Slide 34: 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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