Acres Commercial Realty Corp. · NYSE:ACR
Acres Commercial Realty — Q4 2021 Earnings Presentation
34 slides from Acres Commercial Realty's earnings presentation, Mar 3, 2022
Slide 1: ACRES Commercial Realty Corp. Fourth Quarter 2021 Earnings Presentation
ACRES Commercial Realty Corp. Fourth Quarter 2021 Earnings Presentation March 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 our current beliefs, assumptions and expectations. These beliefs, assumptions a
Slide 3: Disclaimer (continued)
Disclaimer (continued) Forward-Looking Statements (continued) We undertake no obligation, and specifically disclaim any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of
Slide 4: Fourth Quarter 2021 Highlights
Fourth Quarter 2021 Highlights1 Over $1.5 billion of CRE2 loan originations in 2021, a record year in the Company’s history The close of two managed CLOs2 in 2021 provided over $1.5 billion of financing capacity that can be reinvested into the vehicles for two years each from the respective date
Slide 5: Results for Quarter and Year Ended December 31, 2021
Results for Quarter and Year Ended December 31, 2021
Slide 6: Results and Recent Developments
Three Months and Year Ended Dec. 31, 2021 Results and Recent Developments GAAP net income3: $0.76 and $1.85, respectively GAAP net income includes a $0.61 and $2.18 reversal of CECL5 reserves3, respectively, primarily from: Improved macroeconomic conditions Financial Results Improved collate
Slide 7: Fourth Quarter 2021 Book Value
Fourth Quarter 2021 Book Value GAAP Book Value per Share Walk $1.17 accretive impact to Book Value per share since the ACRES Acquisition11 Impact of CECL $0.95 Impact of CECL $0.27 $0.08 $1.97 $0.79 $0.05 $23.87 $22.68 GAAPBook GAAP BookValue Value- -Sep. Sep.‘21 '2112 GAAP Net Income13 OCI14 OCI St
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 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Year Ended 2021 2021 2021 2021 Dec. 31, 2021 New CRE floating-rate loan commitments $447.2 $468.2 $470.2 $144.3 $1,529.9 Sales, payoffs and paydowns (363.2) (120.3) (353.1) (197.2) (1,033.8)
Slide 10: Production, Payoff and Paydown Detail
Production, Payoff and Paydown Detail $ in Millions New Loan Production in the 4th Qtr. 2021 W. Avg. Coupon Rate Commitments Multifamily (12 Loans) 1M BR (0.10% floor) + 3.39% $375.1 Office (1 Loan) 1M BR (0.10% floor) + 3.50% 31.7 Self-Storage (1 Loan) 1M BR (0.10% floor) + 3.85% 21.4 Hotel (1 Loan
Slide 11: CRE Loan Portfolio Overview
CRE Loan Portfolio Overview $ in Millions Dec. 31, 2021 Sep. 30, 2021 Jun. 30, 2021 Mar. 31, 2021 (94 loans) (96 loans) (88 loans) (92 loans) CRE whole loans, floating-rate21,22 $1,878 $1,841 $1,559 $1,456 CRE mezzanine loan 5 5 5 5 CRE preferred equity investments23 - - - 22 Total loans held for in
Slide 12: CRE Loan Portfolio LTV
CRE Loan Portfolio LTV24 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% $- March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 Whole Loans, Floating-Rate Mezz. Loan Pref. Equity Inve
Slide 13: CRE Loan Portfolio Diversification
CRE Loan Portfolio Diversification Balance by Region25,26 Property Type26 Office, 14.4% Hotel27, 9.5% Self-Storage, Pacific Northeast Multifamily, 3.0% 11.6% East 6.9% 69.7% Retail27, West North North 2.6% Central Central Manufactured Mountain 2.7% 2.9% Mid Housing, 0.8% 13.9% Atlantic 15.2% Southea
Slide 14: CRE Loan Portfolio Risk Ratings
CRE Loan Portfolio Risk Ratings28 92% of ACR’s loans have a risk rating of 2 or 3 that are performing in line or near underwritten expectations All but three29 of ACR’s 94 loans are current on contractual payments through December 202127 Percentage of Principal at December 31, 2021 vs. September
Slide 15: BR Floor Trend
BR Floor Trend All but one of ACR’s floating-rate CRE whole loans had benchmark rate floors, which provide asset yield protection to the changes in the benchmark rates BR Floor Trend by Weighted Average Floor Pool 100% 2.00% 90% 1.72% 1.80% Percentage of Total CRE Whole Loan Principal 80% 85% 1.60
Slide 16: BR Sensitivity Analysis Trend
BR Sensitivity Analysis Trend The potential impact of increases to benchmark rates on net interest income has compressed as the weighted average benchmark rate floors have declined Quarterly Net Interest Income per Share Sensitivity to Changes in Quarterly Net Interest Income per Share Sensitivity
Slide 17: Investments in Real Estate Properties
Investments in Real Estate Properties $83.3 million of investments in real estate are being managed to generate a positive return for ACR’s shareholders KOP Office KOP Land Center City Hotel33,34 Downtown Office33,34 Development31,32 Development31,32 Investment amount9,35 $13.5M $14.2M $37.8M $17.
Slide 18: Capitalization and Liquidity
Capitalization and Liquidity
Slide 19: Summary Capitalization
Summary Capitalization $1.0 billion of availability37 on the term warehouse and senior secured financing facilities and 12.00% Senior Unsecured Notes $ in Millions Capitalization9 Maximum Wghtd. Avg. Leverage Amount Availability37 Capacity Coupon Ratio38 Term warehouse financing facilities39 $750.
Slide 20: Historical Leverage Ratios
Historical Leverage Ratios Historical Leverage Ratio38 4.0x 3.9x 3.6x 3.0x 1.4x 1.2x 0.8x 0.7x March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 Recourse RecourseDebt DebtLeverage Ratio 41 Leverage Ratio Total Leverage Ratio ACRESREIT.COM 20
Slide 21: Liquidity at February 28, 2022
Liquidity at February 28, 2022 ($ in Millions) $75.0 $177.5 $(40.0) $65.2 $77.3 Unrestricted Cash CRE Term CRE Term and Senior Senior Unsecured Working Capital Net Liquidity and Senior Secured Facilities NotesAvailability Notes Availability37 Reserve Secured Facilities Estimated Unfinanced Unfinance
Slide 22: Appendix
ACRES COMMERCIAL REALTY Appendix
Slide 23: Consolidated Balance Sheets
Consolidated Balance Sheets (In Thousands, except share and per share data) Dec. 31, 2021 Dec. 31, 2020 Assets (Unaudited) Cash and cash equivalents $35,500 $29,355 Restricted cash 248,431 38,386 Accrued interest receivable 6,112 7,372 CRE loans 1,882,551 1,541,992 Less: allowance for credit losses
Slide 24: Consolidated Statements of Operations
Consolidated Statements of Operations (Unaudited, in thousands, except share and per share data) For the Three Months Ended For the Year Ended Dec. 31, 2021 Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2020 Revenues Interest income $26,504 $23,072 $101,032 $108,243 Interest expense 14,615 14,034 61,575 58,0
Slide 25: Core Earnings
Core Earnings51 The following table provides a reconciliation from GAAP net income (loss) allocable to common shares to Core Earnings allocable to common shares, a non-GAAP measure, for the periods presented: (Unaudited, In Thousands, except share and per share data) For the Three Months Ended For
Slide 26: Illustrative Earnings Potential
Illustrative Earnings Potential55 ACR targets GAAP EPS56 loss of $(0.30) - $(0.45) in FY 2022 driven in part by projected depreciation and amortization on investments in real estate57 (In millions, except percentages and per share data) ACR intends to fully invest available capital, optimize cap
Slide 27: Projected Book Value & Common Stock Growth
Projected Book Value & Common Stock Growth62 ACR’s strategy is to drive book value (“BV”) growth over the coming years Projected OPERATING loss carryforwards63 of approx. $63M, expected to be fully utilized Projected CAPITAL loss carryforwards64 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 NOL64 Carryforwards68: Histo
Slide 29: Footnotes
Footnotes 1. “Fourth quarter 2021 highlights” includes activity that occurred during the first 15. ACR’s board of directors (“Board”) authorized and approved the continued use of quarter of 2022 or balances at February 28, 2022, where specifically referenced. the share repurchase program to repurcha
Slide 30: Footnotes (Continued)
Footnotes (Continued) 27. In January 2022, two whole loans paid off, including a hotel loan with a carrying value 42. Amount includes $3.4 million of deferred debt costs that is amortized until the of $8.4 million performing in accordance with a forbearance agreement at December facility’s maturity.
Slide 31: Footnotes (Continued)
Footnotes (Continued) 57. The majority of ACR’s projected GAAP net losses in 2022 are expected to be in the 68. In general, net operating loss (“NOL”) carryforwards can be used to offset both first quarter of 2022, including a recurring depreciation and amortization expense of ordinary taxable incom
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) Core Earnings Core Earnings is a non-GAAP financial measure that we use to evaluate our operating performance. Core Earnings exclude the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current CRE loan portfolio
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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