ACRES Commercial Realty (ACR) Q4 2022 earnings summary

Executive summary

• Originated 19 floating-rate CRE whole loans with $610.8M in commitments; the loan portfolio reached $2.0B carrying value at Dec. 31, 2022.

• Portfolio performance strengthened: 95% of loans performed in line or near underwriting expectations, versus 92% a year earlier; watch-list loans fell to 5% of the portfolio from 8%.

• Common book value rose 3% to $24.54 per share, supported in part by repurchases below book value.

Financial highlights

• Total revenue was $75.2M in 2022, up from $50.1M in 2021; net interest income increased to $44.0M from $39.5M.

• GAAP net income was $10.4M, versus $33.9M in 2021; net loss allocable to common shares was $8.8M, or $(1.00) per diluted share, versus income of $18.0M, or $1.85.

• Earnings Available for Distribution (EAD), a non-GAAP measure, was $10.4M, or $1.17 per diluted share, versus a loss of $457K, or $(0.05), in 2021.

• Net provision for credit losses was $12.3M, compared with a $21.3M reversal in 2021.

Outlook and guidance

• 2023 goal: become fully invested to generate meaningful earnings for reinvestment in loan originations.

• Expected to complete conversion of LIBOR-based loans and borrowings to applicable replacement benchmarks during 2023.

• Management expects to use tax loss carryforwards to retain taxable income and anticipates a plan for prudent resumption of common distributions as EAD stabilizes; timing and amounts remain subject to board decisions and conditions.