ACRES Commercial Realty Corp.

Good day, ladies and gentlemen, and welcome to the Q3 2020 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 zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Brian Brengel, Vice President. Thank you. You may begin.

Good afternoon, and thank you for joining our 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 word believes, anticipates, expects, and similar expressions are intended to identify forward-looking statements. Although 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 Form 8-K, 10-Q, and 10-K, and in particular, the risk factors section of our Form 10-K and Form 10-Q. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial 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 the generally accepted accounting principles are contained in our earnings release for the past quarter. With me on the call today is Mark Vogel, President and CEO, and Dave Bryant, our CFO. Also available for Q&A is Andrew Fentress, Chairman of Exantus. I'd now like to turn over the call to Mark.

Good afternoon, everyone, and thank you for joining our call. Today, I will provide an update on the transition of the Exantus Management Contract to Acres Capital and discuss our key accomplishments to date. And Dave Bryant will then discuss our financial statements and operating results for the quarter. I am pleased to report that the integration associated with the July 31st acquisition of the Exantus Management Contract is complete. Since closing, our work has focused on enhancing the company's financial profile stabilizing the existing loan portfolio, and positioning the company to restart originating loans. I'd like to highlight a few key accomplishments. First, the integration has gone very smoothly. Acres brought over 18 individuals from the prior management, and the combined team is working together seamlessly. Second, the Acres team has continued our work on the underlying loans in the portfolio during this challenging environment. We have taken a deep dive into the entire portfolio and have created a specific plan for each loan asset on our watch list. We are working closely with every borrower where we have executed a forbearance agreement or provided an extension to ensure their payments remain on track. Of the total portfolio of 105 commercial real estate loans, 18 have received some form of relief since the onset of COVID to reduce the credit risk, primarily due to pandemic-related financial difficulties. With the exception of two loans representing approximately 4% of the total portfolio, all of our loans were current on debt service payments through October 2020. While we believe we have proactively addressed the loans currently at risk, given the ongoing uncertainty, additional borrowers could face challenges in complying with the terms of their loans in the months and quarters ahead. Additionally, several borrowers, including many with multifamily and retail collateral, paid down or fully repaid a total of $124 million of their loans during the quarter. We believe that the ability to refinance in this uncertain environment speaks to the health and quality of the assets underlying our loan portfolio. Third, in September, the company closed a CLO backed by $297 million of floating rate commercial real estate first mortgage loan commitments originated or acquired by Exantis. With the proceeds from this CLO issuance and the liquidity from the senior secured facility, the company was able to pay off its existing warehouse lines, which further reduced exposure to margin call risk. As of the end of October, the company had a cash balance of approximately $150 million and access to approximately $1 billion of financing capacity with which to restart loan originations. Fourth, with improved liquidity, the company resumed payment of cash dividends on its Series C preferred stock, including all the accrued payments. In terms of the common dividend, the company is taking all the steps necessary towards stabilizing the business and its capital position. The Board evaluates dividend policy on a quarterly basis. ACRES is now actively originating and underwriting new loan opportunities on behalf of the company. Quality of opportunities has improved over the course of the quarter and into the current fourth quarter. We believe this presents a compelling opportunity, and we will remain highly disciplined in our approach. With our experienced underwriting team, we are focused on finding the ideal combination of location, assets, and sponsorship. We look forward to reporting to you on our activity going forward. A key driver for the acquisition of the Exantis Management Contract is the complementary nature of the platforms. Over the past eight years, Acres has been a successful and growing balance sheet lender focused on transitional loans to strong middle market sponsors in all major asset classes within the top 25 MSAs across the country. The focus is on short-term first mortgage loans in the $10 to $80 million range. We believe many of these loans are potential candidates for the Exantus platform, which focuses on longer-term loans. The market and our borrowers have validated our thinking and are increasing the volume of business they seek to execute with Acres. We are confident that Acres Network will provide access to additional originations for Exantus as we work towards our goal of being a full end-to-end solution for middle market commercial real estate borrowers nationwide. We will now have our CFO, Dave Bryant, discuss our financial statements and operating results during the third quarter.