ACRES Commercial Realty (ACR) Q4 2019 earnings summary

Executive summary

• 2019 net income allocable to common shares was $25.6M, or $0.82 basic EPS, versus $7.0M and $0.22 in 2018; core earnings were $1.07/share versus $0.30.

• Strategy remained focused on CRE credit; 95% of equity was allocated to core assets, with the legacy-asset disposal plan substantially completed.

Financial highlights

• Net interest income rose to $61.0M from $55.2M; interest income increased $22.1M and interest expense increased $16.2M YoY.

• Net income from continuing operations was $36.2M versus $27.3M; total net income was $36.0M versus $27.4M.

• Total assets were $2.45B at Dec. 31, 2019, versus $2.13B a year earlier; borrowings were $1.87B versus $1.55B.

• Operating expenses fell 10% to $21.7M; management fees declined $2.3M, partly offset by a $1.7M swing from loan-loss recovery to provision.

Outlook and guidance

• 2020 plans included modestly increasing leverage through CRE securitizations and continued use of term and short-term repurchase facilities, subject to credit-market availability.

• A March 2020-priced securitization is expected to finance $522.6M of CRE loans at LIBOR plus 1.43%; planned purchases include $26.1M of Class D and $16.3M of Class E notes.

• Fixed-rate CRE loan origination and sales were planned through a taxable REIT subsidiary, with loans intended for CMBS securitizations and pricing risk hedged using derivatives.

• Jan. 1, 2020 CECL adoption was expected to produce a ~$4.5M reserve, including a $3.0M retained-earnings charge, or $0.10/share.