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ACRES Commercial Realty Corp. (ACR)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 was stable but soft: revenues fell 10.9% year over year to $18.77M and GAAP diluted EPS was $0.07, reflecting lower net interest income amid net loan repayments and higher real estate operating costs .
  • EAD per diluted share was $0.16; book value per share rose to $27.25 (+$0.60 q/q), supported by tax assets that can retain earnings/capital gains to accrete book value .
  • Liquidity remained solid at $92.1M, leverage at 3.7x; 92% of the CRE loan portfolio is current on payments; multifamily exposure ~79% supports credit quality despite sector volatility and rising CECL reserves to 1.89% of par .
  • No formal guidance was issued; management emphasized portfolio stability and opportunistic monetization of real estate investments to recycle capital into CRE loans—potential stock catalysts include continued book value accretion, asset sales, and disciplined portfolio recycling .

What Went Well and What Went Wrong

What Went Well

  • Book value per share increased to $27.25 (from $26.65 in Q4 2023), aided by the ability to retain earnings/capital gains through tax assets; management reiterated focus on EAD growth and share repurchases .
  • Credit performance resilient: 92% of the CRE loan portfolio (par) is current on payments; weighted average risk rating improved to 2.6 vs. 2.7 in Q4 2023 .
  • Strategic positioning: multifamily remains ~79% of loan portfolio, a defensive mix; CEO: “ensure that our portfolio remains stable… evaluate opportunities to enhance shareholder value” .

What Went Wrong

  • Revenues fell to $18.77M (-10.9% y/y) as net interest income declined (Q1 2024 NII $11.36M vs. $13.95M in Q1 2023) amid net loan repayments of $69.4M .
  • Operating expenses rose y/y (real estate expenses $9.53M vs. $8.86M), pressuring GAAP earnings and EAD despite an unrealized gain on conversion of real estate ($5.835M) excluded from EAD .
  • CECL reserves increased to 1.89% of par, reflecting continued CRE market volatility; % of loans rated 4 or 5 moved up vs. prior quarter (17% at Q1 2024 vs. 16% at Q4 2023) .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Total Revenues ($USD Millions)$24.01 $22.45 $18.77
Net Interest Income ($USD Millions)$14.65 $13.36 $11.36
GAAP Diluted EPS ($USD)$0.33 $0.20 $0.07
Net Income Allocable to Common ($USD Millions)$2.87 $1.70 $0.556
Net Income Margin (%)11.9% (2.87/24.01) 7.6% (1.70/22.45) 3.0% (0.556/18.77)
EAD per diluted share ($USD)$0.73 $0.55 $0.16

KPIs and Portfolio

KPIQ4 2023Q1 2024
Book Value per Share ($)$26.65 $27.25
Total Liquidity ($M)$107.7 $92.1
CRE Loan Portfolio (par, $B)$1.9 $1.8
Net CRE Loan Repayments ($M)$64.7 $69.4
% Current on Payments (par)98% 92%
% Loans Rated 4 or 5 (par)16% 17%
WA LTV (%)76% 77%
WA Spread (over 1M Term SOFR)3.77% 3.78%
WA Benchmark Rate / Floor5.39% / 0.70% 5.36% / 0.74%
CECL Reserve (% of par)1.54% 1.89%

Segment/Property-Type Mix (carrying value %)

Property TypeQ4 2023Q1 2024
Multifamily79.6% 79.1%
Office13.5% 13.5%
Hotel3.9% 4.1%
Self-Storage2.6% 2.8%
Retail0.4% 0.5%

Regional Mix (carrying value %)

RegionQ4 2023Q1 2024
Southwest26.6% 26.7%
Southeast22.0% 21.1%
Mountain15.0% 15.8%
Mid Atlantic12.9% 13.6%
Pacific9.3% 9.6%
Northeast8.8% 8.2%
East North Central3.3% 2.7%
West North Central2.1% 2.3%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Revenue/EPS GuidanceFY/Q2/Q3/Q4 2024NoneNoneMaintained (no guidance)
Portfolio Leverage/Capital Recycling Commentary2024N/AContinue monetizing real estate investments and recycle capital into new CRE loans; focus on growing EAD and book valueStrategic emphasis reiterated
Dividends (Common)2024NANA (no common dividend)Maintained

Note: ACR did not provide quantitative revenue/EPS/OpEx/Tax guidance in Q1 2024 materials; management reiterated strategic priorities rather than specific ranges .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
Credit quality/CECLEmphasis on asset management; CECL ~1.43% at 3Q23; 97% current on payments CECL ~1.54%; 98% current; 12 loans rated 4–5 at year-end CECL rose to 1.89%; 92% current; risk rating improved to 2.6 average Slight deterioration in “current” %, higher reserves; balanced by portfolio mix and risk rating stability
Portfolio mix (Multifamily focus)Multifamily ~76% ~80% ~79% Steady high multifamily concentration
Liquidity/leverageLiquidity $104M; leverage ~3.9x Liquidity $107.7M; leverage 3.8x Liquidity $92.1M; leverage 3.7x Liquidity down on repayments; leverage modestly lower
Real estate operations (REO)Ongoing investments (6 assets) Sold office property for $7.5M gain; seasonality noted in hotels (Q4 call) RE expenses up y/y; unrealized gain on conversion excluded from EAD Monetization progressing; near-term REO drag
Originations/pipelineActive pipeline; loan payoffs $45.3M Net reduction $81.8M; preparing to refinance securitizations Net loan repayments $69.4M; portfolio stability prioritized Portfolio recycling continues; measured growth emphasis

Management Commentary

  • “Our primary objective is to ensure that our portfolio remains stable. At the same time, we continually evaluate the commercial real estate market to identify opportunities to enhance shareholder value.” — Mark Fogel, President & CEO (Q1 2024 press release) .
  • “The ACRES team continues to focus on maintaining the credit quality of the investments in our portfolio. Ensuring and improving shareholder value remain our primary objectives.” — Mark Fogel (Q4 2023 press release) .
  • “The Company has always maintained a strong commitment to an asset management infrastructure that is conditioned for challenging environments. Safeguarding and enhancing shareholder value remain our top priorities.” — Mark Fogel (Q3 2023 press release) .

Q&A Highlights

  • Monetization of real estate investments and recycling capital into CRE loans discussed; near-term real estate operations can be a drag (seasonality) but expected to normalize over subsequent quarters (Q1 2024 call transcript) .
  • Management reiterated focus on portfolio stability and disciplined redeployment following loan repayments; active engagement with market opportunities (Q1 2024 call transcript) .
  • Call participants covered credit reserves, loan payoffs/refinancings, and timing of REO asset sales; slides and 10-Q referenced in the call materials (Q1 2024 call transcript) .

Estimates Context

  • S&P Global Wall Street consensus data could not be retrieved at time of analysis due to data access limits; therefore, explicit EPS/Revenue estimate comparisons are unavailable at this time. Values retrieved from S&P Global would normally anchor this section.
  • Given reported Q1 2024 revenues ($18.77M) and GAAP diluted EPS ($0.07), and EAD per diluted share ($0.16), we expect near-term models to adjust for lower net interest income from portfolio repayments and higher real estate operating expense, while incorporating CECL trend and book value accretion dynamics .
  • If you want, I can re-run SPGI when access resets and provide a beat/miss table versus consensus.

Key Takeaways for Investors

  • Book value per share increased sequentially to $27.25, supported by tax assets that allow retention of earnings/capital gains; continued accretion is a positive equity return lever .
  • Credit metrics remain resilient with 92% of par current and multifamily ~79% of exposure; however, CECL reserve ratio rose to 1.89% reflecting sector volatility—risk controls remain central .
  • Revenues and GAAP EPS were pressured by lower net interest income and higher real estate expenses; EAD ($0.16) excludes non-core/unrealized items, highlighting core earnings capacity .
  • Liquidity ($92.1M) and leverage (3.7x) provide flexibility to monetize real estate assets and redeploy into CRE loans—watch for asset sales and securitization/warehouse financing activity as catalysts .
  • Regional and property-type mix remained consistent; WA spread and benchmark dynamics indicate portfolio’s sensitivity to SOFR—presentation shows positive correlation of NII to rate increases .
  • With no formal guidance, narrative drivers are: credit stability, book value accretion, disciplined capital recycling, and potential share repurchases—near-term trading catalysts include asset monetizations and quarter-over-quarter EAD trajectory .