ACRES Commercial Realty Corp.

Good day and welcome to the Acres Commercial Realty Corp first quarter 2023 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on the touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kyle Brangle. Please go ahead.

Good afternoon and thank you for joining our call. I would like to highlight that we have posted the first quarter 2023 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the company. 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 words believes, anticipates, and 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 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 its 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 undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures may be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or a substitute to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most comparable measures prepared in accordance with generally accepted accounting principles are are contained in the earnings presentation for the past quarter. With me on the call today are Mark Vogel, President and CEO, and Dave Bryant, ACR CFO. Also available for Q&A is Andrew Fentress, Chairman of ACR. 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 loan originations, real estate investments, and the health of the investment portfolio. while Dave Bryant will discuss the financial statements, liquidity condition, book value, and operating results for the first quarter. Of course, we look forward to your questions at the end of our prepared remarks. The Acres team continues to execute on our business plan by selectively originating high-quality investments, actively managing the portfolio, and continuing to focus on growing earnings and book value for our shareholders. We originated one $16 million new self-storage loan commitment in the first quarter. Loan payoffs during the period were $94.1 million, and net funded commitments during the quarter were $13.7 million, producing a net decrease to the portfolio of $64.4 million. The newly originated loan pays coupon interest at one month so far, plus a spread of 5.5%. The weighted average spread of the floating rate loans in our $2 billion commercial real estate loan portfolio increased to 3.89%, over the one-month benchmark rates. We expect to maintain a commercial real estate investment portfolio including our loan book and real estate properties of $2 billion to $2.3 billion throughout 2023. During the quarter, we executed the sale of a hotel in the Northeast region that we foreclosed on during July 2022. The loan had a basis of $14 million prior to foreclosure and we were able to exit the property with a $745,000 gain during the period that benefited both GAAP and earnings available for distribution, or EAD. This was an excellent job by our asset management team to work through the asset in a short window and maximize value in a challenging marketplace. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. We ended the quarter with $2 billion of commercial real estate loans across 79 individual investments. As of March 31st, 2023, there were five loans rated four or five, including four loans not current on contractual payments, representing 5% of the portfolio. This represents a slight decrease from December 31st, 2022, at which there were also five loans rated four or five, but represented 5.4% of the portfolio. In January, 2023, one watch list loan from December 31st, 2022 on a hotel portfolio in the Southwest region with a par value of $56.5 million was paid off in full. We continue to hold several investments in real estate that we expect to monetize at gains in the future. These anticipated gains will be offset by NOL carry forwards, and we expect to retain the equity and reinvest potential gains into our loan portfolio. In summary, the ACRES team is pleased with the quality of the investment portfolio, including investments in real estate, along with the improved balance sheet profile and the prospects for new originations and capital appreciation going forward. We will now have ACR's CFO, Dave Brine, discuss the financial statements and operating results during the first quarter of 2023.