Executive Summary

Q4 2024 delivered GAAP diluted EPS of $0.52 and EAD per diluted share of $0.48, with results aided by a $7.5M ($0.95/sh) gain on sale of an office property; book value per share rose to $28.87 and liquidity ended at $76.9M .
Credit quality remained stable-to-improving: CECL allowance decreased $1.2M q/q to $32.8M (2.2% of par), loans rated 4/5 increased to 27% (pro forma 25% after a January payoff), and 94.6% of loan par value is current on payments .
Management outlined 2025 objectives to re-leverage via CRE CLOs (target 3.5x–4.0x total leverage), grow the loan portfolio to ~$1.8–$2.0B, and drive mid-teens ROEs that support an 8–10% EAD run-rate at book value; expect EAD to trough early-2025 then trend higher as redeployment proceeds .
Capital allocation remained shareholder-friendly: $2.5M repurchases in Q4 at ~43% discount to BV; Board authorized an additional $5M buyback in Dec-2024, and preferred dividends were declared consistent with terms .

What Went Well and What Went Wrong

What Went Well
- Accretive asset monetization and buybacks: $7.5M gain from office sale increased EPS/EAD; repurchased 155K shares for $2.5M at ~43% discount to BV, boosting per-share book value .
- Portfolio quality actions: Post-quarter payoff of a 4-rated $30M loan reduced 4/5-rated share to ~25% pro forma; weighted average risk rating improved to 2.8 pro forma .
- Strong prepared remarks on strategy: “The ACRES team continues to proactively manage the investment portfolio. As always, our primary objective is to protect and enhance shareholder value” — CEO Mark Fogel .
What Went Wrong
- Lower net interest income and deleveraging: Q4 EAD was supported by gains, but underlying net interest income fell $0.24/sh q/q due to payoffs and SOFR decline; delevered CLOs pressured earnings capacity .
- Real estate expense volatility: Q4 real estate expenses increased due to one-time “cleanup items” and new managers; management said 4Q is not a run-rate .
- Higher share of risk-rated loans: 4/5-rated loans rose to 27% at year-end (from 23% in Q3), reflecting pockets of worsening property performance despite overall proactive management .

Financial Results

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Total Revenues ($USD Millions)	$22.445	$20.936	$22.353	$21.431
Net Interest Income ($USD Millions)	$13.362	$10.755	$10.459	$8.596
Real Estate Income ($USD Millions)	$9.045	$10.143	$11.857	$12.799
Net Income Allocable to Common ($USD Millions)	$1.697	$1.653	$2.824	$4.090
Diluted EPS ($USD)	$0.20	$0.21	$0.36	$0.52
EAD per Share – Diluted ($USD, Non-GAAP)	$0.55	$0.51	$0.24	$0.48
Book Value Per Share ($USD)	$26.65 (FY-end ref)	$27.20	$27.92	$28.87
Total Liquidity ($USD Millions)	N/A	$98.4	$79.7	$76.9

Margins vs prior periods and estimates:

Net income and EBIT margin percentages from SPGI were unavailable due to S&P Global request limits; margin comparisons to consensus cannot be provided at this time. Values that would be retrieved are from S&P Global.*

Segment/Portfolio Mix (by carrying value % of CRE loans)

Property Type	Q2 2024	Q3 2024	Q4 2024
Multifamily	79.4%	79.4%	77.4%
Office	13.7%	14.0%	16.2%
Self-storage	2.9%	2.3%	2.5%
Hotel	4.0%	4.3%	3.9%

Key Portfolio KPIs

KPI	Q2 2024	Q3 2024	Q4 2024
CRE Loans at Par ($USD Billions)	$1.7	$1.6	$1.5
Weighted Avg Spread over 1M SOFR	3.75%	3.73%	3.73%
Weighted Avg LTV	77%	78%	79%
% Loans Current (par)	94%	94%	94.6%
Loans Risk-Rated 4 or 5 (% of par)	21%	23%	27%
CECL Allowance ($USD Millions)	$35.0	$34.7	$32.8
Net CRE Loan Repayments ($USD Millions)	$61.9	$110.7	$81.8

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Loan Portfolio Size (par)	FY 2025	Not specified	~$1.8B–$2.0B target by YE 2025	Raised specificity
Total Leverage Target	FY 2025	~3.0x (Q4 actual)	3.5x–4.0x via new CRE CLOs	Raised
EAD Run-Rate Objective	Medium-term	Not specified	Mid-teens ROE supporting ~8–10% EAD run-rate at BV	New
EAD Near-Term Trajectory	Early 2025	Not specified	Trough in early-2025; trend up as redeployment/refi proceeds	New
CLO Structure	2025	Existing CLOs paying down	New CLOs with ≥24-month reinvestment periods	New
Dividend Policy	Next 12 months	Preferred dividends per terms	Aim to pay a “market-based” common dividend as earnings/leveraging normalize	Qualitative update
Share Repurchase Authorization	Current	+$5M authorized Dec-2024	~$4.8M remaining as of 12/31/24; ongoing buybacks	Maintained/extended

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2, Q3)	Current Period (Q4)	Trend
Portfolio deleveraging and CLO strategy	CLOs paying down; considering new issuance to restore ROEs	Plan to re-leverage to 3.5–4.0x; new CLOs with ≥24-month reinvestment	Positive execution visibility
REO monetization and gains	Initiated sale processes; unrealized/realized gains emerging	$7.5M realized gain; expect additional gains largely completed in 2025	Accretive to BV/EAD
EAD trajectory	Q2 EAD $0.51; Q3 EAD $0.24 pressured by payoffs; preferred dividend shift	Q4 EAD $0.48 aided by gains; expect near-term trough then uptrend	Near-term trough, improving later
Credit/CECL	CECL % rose through 2Q; modest reversal in Q3	$1.2M CECL reversal; allowance 2.2% of par; mix shows more 4/5-rated loans	Mixed: allowance down, risk mix up
Origination pipeline	Platform remains active; redeploy as liquidity frees	Strong market activity across multifamily, hospitality, self-storage	Improving opportunity set
Dividend outlook	Aspires to pay “market-based” dividend over next 12 months (as earnings normalize)	Reiterated medium-term dividend ambition; preferred dividends paid per terms	Contingent on re-leveraging

Management Commentary

Strategic focus: “We continue to execute on our business plan… actively managing the portfolio and… growing earnings and book value for our shareholders.” — CEO Mark Fogel .
Capital redeployment: “We expect to redeploy [equity gains] into the loan book… working on liquidation of our two CRE securitizations… will incur a charge with the acceleration.” — CEO Mark Fogel .
Financial detail: “GAAP net income allocable to common shares… $4.1M or $0.52 per diluted share… $0.95 per share resulting from the sale… CECL reserves decreased $1.2M to $32.8M (2.2%).” — CFO Eldron Blackwell .
Target model: “Re-leverage… to 3.5–4.0 turns… drive mid-teens ROEs that net down to an 8–10% EAD range at book value… some noise as we re-leverage.” — Chairman Andrew Fentress .
Commitment to shareholder value: “Our primary objective is to protect and enhance shareholder value.” — CEO Mark Fogel .

Q&A Highlights

Portfolio growth: Expect additional payoffs and net portfolio growth to ~$1.8–$2.0B by YE 2025, with rapid redeployment into new originations .
Market opportunity: Strong activity in multifamily (post-construction refis), hospitality, and self-storage; ability to “pick and choose” attractive assets .
CLO mechanics: New structures anticipated to include ≥24-month reinvestment periods to support future originations while locking attractive liabilities .
REO gains timing: Expect gains from REO monetizations to be “largely completed” in 2025; magnitude not specifically guided but expected positive .
Expense normalization: Q4 real estate expense increases were one-time “cleanup items”; management does not view Q4 as a forward run-rate .

Estimates Context

Wall Street consensus estimates (S&P Global) for Q4 2024 EPS and revenue were unavailable at time of request due to S&P Global daily request limits; as a result, we cannot provide beat/miss vs consensus at this time. Estimates would be retrieved from S&P Global.
Based on management’s commentary, near-term estimate revisions may reflect: lower underlying NII from payoffs/benchmark declines; non-recurring gains supporting EAD/GAAP in Q4; and an anticipated EAD recovery trajectory in mid/late-2025 as CLO re-leveraging and redeployment progress .

Key Takeaways for Investors

Book value accretion and buybacks are working: gains + discounted repurchases supported BV/share up to $28.87; expect further accretion as REO monetizations continue in 2025 .
Earnings capacity should improve with re-leveraging: plan to reissue CLOs with reinvestment periods and restore leverage to 3.5–4.0x, targeting mid-teens ROEs and an 8–10% EAD run-rate over time .
Near-term EAD caution: underlying NII headwinds from payoffs and lower SOFR led to Q4 reliance on gains; management guides to a trough early-2025 before improving; position sizing should consider this cadence .
Credit watch: allowance fell q/q but 4/5-rated loan share rose to 27%; proactive management and recent 4-rated payoff help, but monitor risk migration and CECL trends relative to macro/property-level performance .
Origination pipeline looks constructive: multifamily, hospitality, and self-storage flows are robust; redeployment into higher-ROE opportunities is a key 2025 driver .
Dividend path: management aims for a “market-based” common dividend over the next 12 months as earnings normalize; preferred dividends continue per terms; common dividend timing depends on re-leveraging progress .
Tactical catalysts: announcements on new CLO issuance, REO sale closings (especially student housing), and additional buybacks are likely stock narrative drivers in the next 1–3 quarters .

References:

Q4 2024 press release and 8-K (Item 2.02, exhibits including earnings presentation): .
Q4 2024 earnings call transcript: .
Q3 2024 press release/8-K/presentation and call: .
Q2 2024 8-K and presentation: .
Other relevant Q4 period press releases: $5M additional repurchase authorization (Dec 19, 2024) ; preferred dividends (Dec 19, 2024) .

Disclaimer: Margin metrics and consensus estimates from S&P Global were unavailable due to request limits; where applicable, comparisons to estimates are omitted. Values that would be retrieved are from S&P Global.*

ACRES Commercial Realty Corp. (ACR)·Q4 2024 Earnings Summary