ACRES Commercial Realty Corp.

Good day, ladies and gentlemen, and welcome to the Q4 and full year 2019 Exantus Capital Corp Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Steve Landgraber, Senior Vice President of Corporate Finance. Sir, you may begin.

Good morning, and thank you for joining the call. Before we begin, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. When used in this conference call, the words believes, anticipates, expects, and similar expressions are intended to identify forward-looking statements. While the company believes that these forward-looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to a number of trends, risks, and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8K, 10Q, and 10K, and in particular, the risk factor section of our form 10K. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company owner takes no obligation to upstate any of these forward-looking statements. Furthermore, certain non-GAF management measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation. or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with generally accepted accounting principles are contained in our earnings release for the past quarter. I will now turn it over to CEO of the Sanctus Capital Corp., Bob Lieber, for opening remarks.

Thanks, Dave, and good morning, everybody. Thanks for joining our call today. With me today are Matt Stern, our president, Dave Bryan, our chief financial officer, Paul Houston, who's the head of all the commercial real estate lending, and Steve Landgraber, from whom you've already heard. We also may be joined by Andrew Farkas, who's getting off an airplane imminently and may be joining into this call, but we didn't want to go any longer. So if Andrew joins, we'll welcome him as a part when he gets here. I'd like to start by reviewing the progress Exantus made in 2019. Our full-year dividend for 2019 was $0.95 versus $0.475 in 2018. an increase of 100%. We generated core earnings of $1.07, which was well in excess of our dividend. We originated or acquired nearly 1.1 billion of commercial real estate related debt investments. Economic book value began the year at 1354 and ended at 1361. Exansys continues to successfully execute the business plan articulated by our team. Needless to say, the commercial real estate finance markets are dynamic. As articulated in our calls through 2019, our traditional markets have seen a number of new entrants and risk-adjusted returns across products consistently evolve. To further differentiate Xantus from our competition and deliver value to our borrowers and our investors, we announced last week that Xantus will now offer a fixed-rate loan product, which expands our platform to provide a full suite of loan products to middle-market borrowers. We believe this differentiates Xantus from many of our competitors, and is expected to increase capital deployment as well as drive earnings. Full year 2019 core earnings were $1.07 versus $0.71 of adjusted core earnings in 2018. The growth in core earnings is attributable to $5.9 million or $0.19 improvement in net interest income and an improvement of $2.4 million or $0.08 per share in operating expenses. Deployment for the year was nearly $1.1 billion, with $730 million of loans originated and over $210 million of loans purchased from CM, including the 2011 loans purchased from C3 Commercial Mortgage, as well as $147 million of CMBS that was acquired. Excluding the portfolio purchased from C3, we deployed $878 million of capital, which falls within our original guidance of $850 to $1 billion, albeit at the lower end of the range. This compared to $862 million of loans originated and $252 million of CMBS purchased in 2018, totaling a little over $1.1 billion. Payoffs and paydowns were $740 million in 2019 versus $596 million for 2018 and So outsized payoffs did materially impact some of the things we did to increase our portfolio. It was in this context that Exantus announced that it's expanding its commercial real estate debt platform to include fixed-rate commercial real estate loans through the integration of C3 commercial mortgage platform. Matt will discuss later the benefits to our borrowers and our shareholders, but we feel this additional product will allow us to deploy more capital and at attractive yields and specifically capture some of the demand for permanent financing coming directly from our borrowers. XANTIS is now a one-stop solution for borrowers who borrow short-term on transitional assets and then can utilize the same lender to provide fixed-rate long-term loans once the business plan is completed. We feel this differentiates us from our competition at the loan size we most commonly originate. Turning to fourth quarter results, 2019 core earnings were $0.23 per share compared to $0.31 per share last quarter and $0.21 per share during the fourth quarter of 2018. This quarterly decline in core earnings from last quarter was driven primarily by the negative net production during the third quarter, which is consistent with our commentary provided on our third quarter earnings call. New commercial real estate originations of $203 million increased as expected in Q4 relative to the $105 million originating in Q3, but we continue to experience higher-than-usual paydown activity as our borrowers achieved their business plans and took advantage of the lower interest rate environment. Fourth quarter loan payoffs and paydowns were $204.8 million after $256.9 million in Q3. We do believe that the introduction of the fixed-rate business will allow us to capture some of this refinancing volume. Net deployment for the fourth quarter was $45.6 million, with gross real estate debt investments of $276 million, net of the $227.7 million of payoffs. As of December 31, 2019, our commercial real estate debt portfolio was $2.3 billion, which consists of $1.8 billion of commercial real estate loans and $556 million of CMBS at par. Net interest income during the fourth quarter was $14.4 million, or $0.45 per share, compared to $16.6 million, or $0.52 per share, during the third quarter of 2019. Gap net income for common share was $14, a $0.12 decrease from the third quarter, and economic book value decreased to $13.61 compared to $13.71 last quarter. Gap net income was $3.8 million, or $0.12 per share, compared to $10 million, or $0.31 per share, for the third quarter, Gap met income was negatively impacted by $0.07 of non-core activity, which Dave will highlight in his comments. Gap met income for the year was $0.81 versus $0.22 in 2018 prior to any one-time adjustments. In light of the integration of C3 commercial mortgage, we'd like to update our 2020 origination guidance. And I would characterize this under normalized market conditions. We now expect expenses to originate or acquire at least $1.1 billion of commercial real estate debt in 2020. Of this amount, we would expect about $200 million to come from fixed-rate originations. I want to emphasize, though, that this recent market activity has not been normal, and we may need to revisit this guidance later this year. Our current pipeline looks strong with over $350 million of term sheets returned and $87 million of loans closed this quarter to date. Some of the term sheets returned will close in the second quarter. We still have ample liquidity of $140 million to fund our pipeline and grow net interest income. This translates to roughly $300 to $350 million of incremental deployment capacity. Given most of our deployment will be at the end of the first quarter and then into the second quarter, we expect our net interest income in the first quarter to be relatively muted. However, the current pipeline and our competence in our deployment guidance gives us the comfort with our current dividend at 27.5 cents per share. With that, I'd like to turn it over to Matt.