Acres Commercial Realty Corp. · NYSE:ACR
Acres Commercial Realty — Exantas Capital — Investor Presentation (October 2019)
34 slides from Acres Commercial Realty's investor presentation, Oct 10, 2019
Slide 1: October 2019 Investor Presentation
October 2019 Investor Presentation Exhibit 99.1
Slide 2: Forward Looking Statements and Other Disclosures
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 and expectations can change as a result
Slide 3: Disclosures and Core Earnings definition
Past performance is not indicative of future results. There is no guarantee that any investment strategy referenced herein will work under all market conditions. Prior to making any investment decision, you should evaluate your ability to invest for the long-term, especially during periods of downtu
Slide 4: Exantas Capital Corp. Overview
Exantas Capital Corp. Overview 1 CRE Credit Expertise Extensive multi-cycle investment expertise. Access to C-III’s differentiated data and local contacts. Ability to source and underwrite in non-primary markets. Sponsor Experience Extensive multi-cycle track record. Full scale platform. Management
Slide 5: Investment Philosophy
Investment Philosophy 2 XAN leverages C-III’s capabilities and expertise to invest in CRE credit investments. Identify opportunities across the capital stack of multiple asset classes. Source through a network of borrower and broker relationships and manager sourced deal flow. Underwrite using exten
Slide 6: XAN Senior Leadership
XAN Senior Leadership 3 Andrew L. Farkas Robert C. Lieber Matthew J. Stern David J. Bryant Paul A. Hughson George E. Carleton Chairman Chief Executive Officer President Chief Financial Officer Head of Commercial Real Estate Lending Head of CMBS Investing C-III Founder, Chairman and CEO. Served as Ch
Slide 7: Investment in XAN
Investment in XAN 4 XAN common stock return excludes declared common stock dividend of $0.25 per share for the third quarter of 2019. If you invested $100 in XAN on January 2, 2018, including reinvestment of dividends, the total return at September 26, 2019 would be $134.39.1
Slide 8: Manager Overview
& EXANTAS Manager Overview
Slide 9: Leading CRE Manager
Leading CRE Manager 6 Since inception. As a named special servicer of CMBS trusts and CRE-CDO issuers. “AUM” stands for assets under management. As of March 31, 2019, including C-III’s investments. Refer to page 8 for more information. Includes 218 NAI Member offices and satellite locations. Over 40
Slide 10: National Footprint
National Footprint 7 C-III’s network of commercial real estate companies provides it with granular underwriting data in primary, secondary and tertiary markets throughout the U.S. As of December 31, 2018. Reflects all investments acquired to date, including realized investments. NAI office locations
Slide 11: C-III's Investment Management Platform
C-III’s Investment Management Platform 8 C-III is a leading commercial real estate asset management firm with $9.6 billion of AUM.1 Real Estate Debt Real Estate Equity Exantas Private/Public Funds2 Balance Sheet Private Funds Non-Traded REITS Assets Under Management1 $2.2 Billion $1.5 Billion $0.2 B
Slide 12: Path Forward
& EXANTAS Path Forward
Slide 13: Investment Portfolio Transformation
Investment Portfolio Transformation 10 Quarter in which Strategic Plan was initiated. The target asset base set forth herein is for illustrative and informational purposes only and has been presented based on various assumptions made by Exantas in relation to its investment strategy, any of which ma
Slide 14: Strategic Plan Execution
Strategic Plan Execution 11 The Strategic Plan executed by C-III beginning in November 2016 has transformed XAN into a stable CRE credit investment vehicle. Before Strategic Plan1 After Strategic Plan1 Annual G&A (2016 vs. Post Plan) $63M ~$21M-$24M Non-CRE Employees 169 0 Corp. Debt Balance & Rate2
Slide 15: Target Returns by Asset Class
Target Returns by Asset Class 12 Asset Class Targeted Unlevered Yields1 Targeted Levered Yields1 CRE Whole Loans 5.0%-6.0% 9.0%-12.0% CMBS 4.0%-12.0% 9.0%-14.0% Mezzanine Debt 8.0%-11.0% 9.0%-11.0% Net Lease 5.5%-7.0% 8.0%-12.0% XAN Portfolio Total 10.0%-12.0% The targeted yields set forth herein ar
Slide 16: Illustrative Return on Equity and Earnings Profile
Illustrative Return on Equity 10.5% 11.5% Commercial Real Estate Net Interest Income $73.5 $80.5 Less: General and Administrative (10.5) (10.5) Less: Base Management Fee4 (8.3) (8.3) Less: Corporate Interest2,5 (10.4) (10.4) Less: Preferred Dividends (10.4) (10.4) Core Earnings $33.9 $40.9 Fully Dil
Slide 17: Deployment Progress
Deployment Progress 14 Summary of 2Q’19 CRE Investment Portfolio1 Loans 45 Commitment $463 Million Wtd. Avg. Spread 3.59% Bonds 3 Face Amount $13 Million Wtd. Avg. Coupon 5.84% $1,496 $1,628 $1,839 $1,959 +59.2% ($ in Millions) CRE Loans Other CRE Investments CRE investment portfolio excludes legacy
Slide 18: Economic Book Value
Economic Book Value 15 Economic Book Value (“EBV”) is a non-GAAP measure that provides a more accurate metric for the economic position of our common shareholders. EBV adjusts for certain capital markets transactions where discounts and options are recognized as equity (book value) and therefore car
Slide 19: CRE Loan Origination
<* EXANTAS CRE Loan Origination
Slide 20: Leveraging Platform to Find Good Risk-Adjusted Returns
Leveraging Platform to Find Good Risk-Adjusted Returns 17 XAN’s core investment strategy is to originate transitional CRE loans, which C-III enhances by: Expanding XAN’s product type and structuring capabilities. Broadening XAN’s spectrum of borrower relationships. 30+ year industry history of C-III
Slide 21: XAN's CRE Loan Portfolio Diversification
XAN’s CRE Loan Portfolio Diversification 18 XAN Loan Balance by Property Type1,2 XAN CRE Loan Balance by NCREIF U.S. Region1 Pacific 13.5% Mountain 21.6% West North Central 0.9% Southwest 23.8% Southeast 13.0% East North Central 4.6% Mid Atlantic 12.3% Northeast 10.3% Multifamily 57.6% Office 13.5%
Slide 22: XAN's Origination Platform
XAN’s Origination Platform 19 Comprehensive origination, underwriting, due diligence and vetting process. Deals Screened1 Reviewed and Quoted1 Underwritten1 Deals Closed ~$21.9B ~$5.5B ~$2.2B $862M % of loans screened 100% 25% 10% 4% Values are approximate and represent all calendar year 2018 activi
Slide 23: Real Estate Credit Investment Opportunities
Real Estate Credit Investment Opportunities 20
Slide 24: Benefits of Longer Duration Investments
Benefits of Longer Duration Investments 21 Transitional CRE lending remains XAN’s primary investment strategy. As an open-ended, stable income-oriented investment vehicle, supplementing XAN’s loan portfolio with longer duration investments can enhance return on equity and could provide increased: Ea
Slide 25: CMBS Investing
CMBS Investing 22 Improved DSCR Improved LTV Improved Credit CMBS investments improve XAN’s portfolio diversification. CMBS collateral pools consist of numerous fixed-rate, stable income producing properties. In-house CMBS expertise and trading flow position XAN to invest throughout the CMBS capital
Slide 26: Applying Competitive Advantages to CMBS
Applying Competitive Advantages to CMBS 23 Property photos are representative of generic commercial real estate assets. The properties pictured are not owned by XAN or any of its affiliates and may not be representative of the assets underlying the CMBS trusts in which XAN may invest in the future.
Slide 27: Net Lease Investment Opportunity
Net lease investments provide a long duration supplement to XAN’s asset portfolio. Single tenant office, industrial and retail properties. Rated and unrated credit tenants. Broad platform provides sourcing, due diligence, underwriting and credit capabilities necessary to identify attractive risk-adj
Slide 28: Conclusion
& EXANTAS Conclusion
Slide 29: Creating Shareholder Value
Creating Shareholder Value 26 1 2 Executed Strategic Plan Leverage C-III’s Sponsorship 3 4 XAN’s Investment Capabilities Generate Long Term Shareholder Value Refocused Investment Strategy Rejuvenated Business Plan Created Path to Deliver Core Earnings Full Scale Platform Differentiated Data and Netw
Slide 30: Appendix
<> EXANTAS Appendix
Slide 31: Consolidated Statements of Operations
Consolidated Statements of Operations 28 For the Three Months Ended For the Six Months Ended Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Revenues Interest income $37,138 $29,660 $71,070 $55,617 Interest expense 21,581 16,159 40,976 30,543 Net interest income 15,557 13,501 30,094 25,074 O
Slide 32: Consolidated Balance Sheets
Consolidated Balance Sheets 29 Jun. 30, 2019 Dec. 31, 2018 Assets (Unaudited) Cash and cash equivalents $47,154 $82,816 Restricted cash 14,062 12,658 Accrued interest receivable 9,155 8,198 CRE loans, net of allowances of $2,597 and $1,401 1,948,492 1,551,967 Investment securities available-for-sale
Slide 33: Core Earnings
Core Earnings1 30 For the Three Months Ended Last Twelve Months Ended Jun. 30, 2019 Mar. 31, 2019 Dec. 31, 2018 Sept. 30, 2018 Jun. 30, 2019 Net income allocable to common shares - GAAP $6,304 $5,545 $7,367 $6,036 $25,252 Adjustment for realized gains on CRE assets - - (70) (450) (520) Net income al
Slide 34: Capitalization and Liquidity at June 30, 2019
Capitalization and Liquidity at June 30, 2019 31 Leverage ratio of 3.5x debt to equity. “L” refers to LIBOR Face amount of convertible notes and preferred equity are $165 million and $120 million, respectively. XAN has approximately $154 million of cash and available liquidity from the financing of
Exantas Capital — Investor Presentation (October 2019) on 6ix