ACRES Commercial Realty Corp.

Thank you. Good day, ladies and gentlemen, and welcome to the fourth quarter 2020 Acres Commercial Realty Corp earnings conference call. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session with instructions to follow at that time. If anyone requires assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kyle Brengel, Vice President. You may begin.

Kyle Brengel Good afternoon, and thank you for joining our call. Before we begin, I want to remind everyone that certain statements made during 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 several trends, risks, and uncertainties that could cause actual results to differ materially from those contained in 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, 10-K, and in particular, the risk factor sections 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 generally accepted accounting principles are contained in our earnings presentation for the past quarter. With me on the call today are Mark Vogel, President and CEO, and Dave Bryant, our CFO. Also available for Q&A is Andrew Fentress, Chairman of Acres. I will now turn the call over to Mark.

Good afternoon, everyone, and thank you for joining our call. Today I will provide an overview of our strategic initiatives, updates on our portfolio, and our resumption of originating loans, while Dave Bryant will discuss our financial statements and operating results for the fourth quarter. And, of course, we look forward to your questions at the end of our prepared remarks. I want to begin by highlighting a significant post-year event. As of February 16th, Exantis Capital Corp became Acres Commercial Realty Corp and is listed on the New York Stock Exchange under the symbol ACR. This was the final step in the strategic transition of Exantis to the Acres network by bringing the platforms together under the Acres name. As discussed previously, Acres and Exantis' complementary platforms will help us to achieve our goal to be an end-to-end solution for the middle market commercial real estate borrowers nationwide and accelerate our loan originations over time. We marked a significant milestone during the fourth quarter when we began originating loans again, the first since March 2020. During this time, we closed five commercial real estate whole loans for $83.4 million. Significantly, two of these loans are refinanced acres capital development loans. These loans were collateralized by a mix of multifamily and selective hospitality properties and were issued relatively in line with the portfolio LTV at 71% and carry a weighted average coupon of one month LIBOR plus 6.19%. The company ended the quarter with $1.5 billion in loan assets across 98 individual investments. As of January 2021, 98% of the loans were performing, while only 2% were delinquent. Additionally, during the fourth quarter, 12 borrowers paid down or fully repaid $160 million of their loans. We continue to believe that the ability of our borrowers to refinance in this uncertain environment speaks to the health and quality of the sponsors and assets underlying our loan portfolio. Our portfolio is well diversified in terms of both geographic concentration and property type. Outside of Texas, no state comprises more than 10% of our loans. and approximately one-third of our portfolio is in the high-growth southern region of the United States. Multifamily, which has been one of the most resilient asset classes during the challenges of the pandemic, is 56% of the portfolio, while the remainder is split between office, hotel, self-storage, and other assets. As discussed last quarter, we took a deep dive into the entire portfolio and created a specific plan for each asset on our watch list. We sold our last remaining asset held for sale, a hotel asset in California. We also received the deed in lieu of foreclosure on a select service hotel valued at approximately $40 million upon acquisition, which was in excess of the loan's cost basis. As progress is made on the vaccine rollout, we will determine the optimal plan forward with this asset and will report accordingly. We have made sequential progress regarding our balance sheet and liquidity position. At year end, our total leverage ratio was 3.9 times debt to total equity, down from 4.6 times at the end of the third quarter. In terms of recourse debt, leverage was 0.8 times, down from 1.1 times. As of the end of February, Acres had $150 million of net liquidity over our working capital reserve target of $40 million to deploy into additional commercial real estate loans and common stock repurchases. At December 31st, 2020, $1 billion of financing capacity comprising three different term warehousing financing facilities, a senior secured financing facility, and senior unsecured notes was available. The Acres Network is now actively originating and underwriting new loan opportunities on behalf of the company, and we are focused on finding the ideal combination of location, assets, and sponsorship. As mentioned previously, we restarted loan originations in November 2020, closing $83.4 million of commercial real estate loans. Building on that momentum during the first quarter of 2021, our originations are already approaching $100 million to date. As we continue to execute our strategy, we are confident that we will continue to see opportunities to increase originations. In terms of the market dynamics, there is a fair amount of competition for high-quality loans, particularly in sectors that have been more resilient to COVID-related challenges. such as multifamily and industrial. To that point, we have seen moderate spread compression in these types of assets. But we are also seeing opportunities that offer wider spreads in segments such as hospitality and office. We will remain selective and focus on credit quality, markets and sponsors, and believe we will continue to source a mix of attractive opportunities. As we move through 2021, we are confident about the market to deploy capital using the ACRES network and the enhanced capitalization. Our priorities remain on actively managing the loans in our portfolio and continuing to pursue originations with focus on appropriate risk-adjusted returns. We have an experienced underwriting team and a highly disciplined approach, and I am encouraged by our pipeline and our progress closing loans year to date. In addition, we are exploring the possibility of structuring a CLO in the coming months, weighing the opportunity based upon market conditions. We will look forward to reporting to you on our on our activity going forward. We will now have our CFO, Dave Bryant, discuss our financial statements and operating results during the quarter. Thank you, Mark, and good afternoon.