ACRES Commercial Realty (ACR) Q4 2018 earnings summary

Executive summary

• Strategy centered on CRE debt; the non-core asset exit plan was substantially complete, with $29.8m of identified assets remaining at year-end.

• Common-share net income was $7.0m, or $0.22/share, versus $5.7m, or $0.18/share, in 2017; adjusted Core Earnings were $22.3m, or $0.71/share.

• CRE loan originations reached a record $861.6m in commitments; 2019 originations and investments were projected at $850m-$1.0bn.

Financial highlights

• Net interest income rose to $55.2m in 2018 from $41.7m in 2017; total interest income increased $23.5m and interest expense increased $10.0m.

• GAAP net income was $27.4m versus $33.3m in 2017; continuing-operations net income was $27.3m versus $47.5m.

• Total assets were $2.13bn at year-end, up from $1.91bn; stockholders’ equity was $553.8m, down from $671.5m.

• Total revenue was $55.3m, compared with $43.7m in 2017; operating expenses declined 29% to $24.0m, including a $1.6m loan-loss recovery.

• Adjusted Core Earnings excluded preferred-redemption charges, the sale loss on a previously impaired loan, and a CMBS impairment; adjusted Core Earnings were $22.3m versus an adjusted loss of $11.6m in 2017.

Outlook and guidance

• 2019 CRE originations and investments were expected to total $850m-$1.0bn, with continued CMBS investment to diversify and extend portfolio duration.

• Management expected to modestly increase leverage through new CLO securitizations and continued use of term and short-term repurchase facilities, subject to credit-market availability.

• Quarterly common distributions were intended to continue, subject to earnings, financial condition, capital requirements, debt service, and Board discretion.