ACRES Commercial Realty Corp.

Good day, ladies and gentlemen, and welcome to the first quarter 2024 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, Operations, you may begin.

Good morning and thank you for joining our call. I would like to highlight that we have posted the first quarter 2024 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, 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 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 as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures, the most comparable measures prepared in accordance with generally accepted accounting principles, are contained in the earnings presentation for the past quarter. With me on the call today are Mark Vogel, President and CEO, and Eldren Blackwell, ACR's CFO. Also available for Q&A is Andrew Fentress, Chairman of ACR. I will now turn the call over to Mark.

good morning 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 elder and blackwell will discuss the financial statements liquidity condition book value and operating results for the first quarter 2024. 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. Loan payoffs during the period were $80.8 million and net funded commitments during the quarter were $11.4 million, producing a net decrease to the loan portfolio of $69.4 million. The weighted average spread of the floating rate loans in our $1.8 billion commercial real estate loan portfolio is now 3.78% over the one-month benchmark rates. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1.8 billion of commercial real estate loans across 66 individual investments. At March 31st, there were 11 loans rated 4 or 5, which represented 17% of the par value of our portfolio, an increase of 1%, respectively, as compared to the end of fourth quarter 2023, and our weighted average risk rating decreased from 2.7 at December 31st to 2.6 at March 31st. We acquired via deed in lieu of foreclosure an office property in Chicago with a basis of $14 million that was valued at $20.3 million upon acquisition. The loan was previously risk rated a 5 in our December 31st financials. We recognized a $5.8 million gain on conversion upon accepting the deed in lieu of foreclosure, and immediately contributed the asset to a joint venture, seeking to maximize its value through a multifamily conversion. We continue to manage 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 in our loan portfolio. In summary, The ACRES team continues to be focused on the overall quality of the investment portfolio, including investments in real estate, with the goal of improving credit quality and recycling capital into performing categories. We will now have ACR's CFO, Eldren Blackwell, discuss the financial statements and operating results during the first quarter.