dabc8e1f0eed77476968d67cefd33c64b2e77aad8185a03abc9beb31ae7e4c6a

30fa6ea81bcde9f4dcb563a576e96977b343d3c89f0ac744d6062a98321f7277

da14ef0c44fb6d1027eac0bcc5192f0611d65060aaf4fc97e02fea6b70d3539d

| **Program Details**       | **Program 1**       | **Program 2**       |
|---------------------------|---------------------|---------------------|
| **Approval Date**         | **November 2020**  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  | **November 2023**  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  |
| **End Date/Duration**     | N/A                 | N/A                 |
| **Total Additional Amount** | **$20.0 million**  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  | **$10.0 million**  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  |
| **Remaining Authorization** | **$0.0 million**  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  | **$2.3 million**  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  |
| **Details**               | Authorized for repurchase of common and preferred stock  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  | Authorized for repurchase of common and preferred stock  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]**  |

**Notes:**
- The remaining authorization amount of **$2.3 million** as of **September 30, 2024**, is allocated entirely to **Program 2** since it is the newest program.  **[0000950170-24-122460_acr-20240930.htm:102]** **[0000950170-24-122460_acr-20240930.htm:31]** 
- Specific end dates or durations for the programs were not provided in the documents.

5b6e5e0744bcbf7e5b107d1ead155f9136b44be647d0d07dbec65bc8f3fe2d0e

| Name                  | Position                                              | Start Date         | Short Bio                                                                                                                                                                                                                     |
|-----------------------|-------------------------------------------------------|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Mark S. Fogel**     | President, Chief Executive Officer, and Director      | July 2020          | Co-founded ACRES Capital in 2012 and leads its executive management team. Previously held leadership roles at UC Funds, Arbor Realty Trust, and others, with nearly **30 years of experience** in commercial real estate.  **[0000950170-24-049129_acr-20240426.htm:9]** **[0001193125-22-106816_d291646ddef14a.htm:12]** **[0000950170-23-012885_acr-20230414.htm:8]**  |
| **Eldron C. Blackwell** | Senior Vice President, Chief Financial Officer, and Treasurer | January 1, 2024 (expected) | Previously served as Vice President and Chief Accounting Officer at ACR (March 2014–December 2023). Held roles at New Penn Financial and Grant Thornton LLP, with extensive experience in accounting and auditing.  **[0000950170-24-049129_acr-20240426.htm:12]** **[0000950170-23-057486_acr-ex99_3.htm:0]** **[0000950170-23-057486_acr-20231101.htm:2]**  |
| **Jaclyn A. Jesberger** | Chief Legal Officer, Senior Vice President, and Secretary | July 2020          | Joined ACRES Capital in June 2015 as General Counsel and Chief Compliance Officer. Previously worked at Arbor Commercial Mortgage and Credit Suisse, specializing in real estate finance and securitization.  **[0000950170-24-049129_acr-20240426.htm:12]** **[0000950170-23-012885_acr-20230414.htm:12]**              |
| **Linda M. Kilpatrick** | Vice President and Chief Accounting Officer         | January 1, 2024 (expected) | Previously served as Controller at ACR (October 2017–December 2023). Earlier roles include Accounting and Reporting Manager at Independence Blue Cross and Manager in audit practice at Grant Thornton LLP.  **[0000950170-24-049129_acr-20240426.htm:12]** **[0000950170-23-057486_acr-20231101.htm:2]**               |
| **Michael Pierro**     | Senior Vice President                                | June 2020          | Also serves as Managing Director and Chief Credit Officer of ACRES Capital. Previously held senior roles at C-III Capital Partners, Nomura Securities, and other firms in commercial real estate finance.  **[0000950170-24-049129_acr-20240426.htm:13]** **[0000950170-23-012885_acr-20230414.htm:13]** **[0001193125-22-106816_d291646ddef14a.htm:15]**            |
| **Kyle K. Brengel**    | Vice President – Operations                          | July 2020          | Also serves as Chief Operating Officer of ACRES Capital. Held various positions within ACRES since 2017 and previously worked at Napier Park Global Capital, Ares Management, and Duff & Phelps.  **[0000950170-24-049129_acr-20240426.htm:13]** **[0000950170-23-012885_acr-20230414.htm:13]** **[0001193125-22-106816_d291646ddef14a.htm:15]**                    |
| **Richard A. Persaud** | Vice President – Finance                             | September 2020     | Also serves as Chief Financial Officer of ACRES Capital. Previously worked at Ernst & Young LLP as a senior manager in real estate assurance practice. Certified Public Accountant and Certified Internal Auditor.  **[0000950170-24-049129_acr-20240426.htm:13]** **[0000950170-23-012885_acr-20230414.htm:13]** **[0001193125-22-106816_d291646ddef14a.htm:15]**  |

495b02aa85b5476d723a081a7d24fd43150b630edc87ebc9023a0c2cd16d7b9e

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

ACRES Commercial Realty Corp. (ACR) is a Maryland-based real estate investment trust (REIT) specializing in originating, holding, and managing commercial real estate (CRE) mortgage loans and equity investments in CRE properties. The company primarily targets the middle market segment of CRE lending across the United States, focusing on property types such as multifamily, student housing, hospitality, office, and industrial properties. ACR generates income through interest-bearing assets, rental income from equity investments, and other real estate-related activities.  **[0000950170-23-060179_acr-20230930.htm:46]** **[0000950170-23-038976_acr-20230630.htm:44]** **[0000950170-24-027462_acr-20231231.htm:5]** **[0000950170-24-027462_acr-20231231.htm:76]** 

1. **Commercial Real Estate (CRE) Loans** - Provides transitional floating-rate loans, including first mortgage loans, A-notes, B-notes, and mezzanine loans, secured by CRE properties.  **[0000950170-23-060179_acr-20230930.htm:46]** **[0000950170-23-038976_acr-20230630.htm:44]** **[0000950170-24-027462_acr-20231231.htm:5]** **[0000950170-24-027462_acr-20231231.htm:76]**   
2. **Real Estate Income** - Generates rental income from direct equity investments in commercial real estate properties.  **[0000950170-24-027462_acr-20231231.htm:5]**   
3. **Other Revenue** - Includes miscellaneous income sources related to real estate operations.  **[0000950170-24-122460_acr-20240930.htm:4]** **[0000950170-24-027462_acr-20231231.htm:137]**

4ebbfc1f544326f6a964bcfa476a92e9267ccfe4bbe6dffb9e074f0ddd9a4156

1. **With 11 loans rated 4 or 5, representing 23% of your loan portfolio, can you provide more detail on the specific challenges these assets are facing, and what strategies you're implementing to mitigate risks and improve credit quality?**

2. **Given the decrease in Earnings Available for Distribution (EAD) from $0.51 to $0.24 per share this quarter, can you elaborate on the factors contributing to this decline and how you plan to stabilize and grow EAD moving forward?**

3. **As your current CLOs are paying down and you're considering issuing new ones, how do you anticipate the changes in financing costs and market conditions will impact your ability to achieve target returns and ROEs on new investments?**

4. **Considering the significant net decrease of $134.4 million in your loan portfolio due to payoffs and foreclosures, how do you plan to effectively redeploy capital amidst current market conditions to prevent further portfolio contraction?**

5. **Regarding your monetization strategy for the REO assets, particularly the student housing asset near Florida State University, what risks do you foresee that could impact your ability to realize the expected gains, and how are you addressing them to ensure positive outcomes for shareholders?**

bc8644f00a893b1445c5509884e4ffae887d69aa27bf62d6323941ab26d57648

Interest Income

- CRE Loans

- Securities

- Other

Real Estate Income

Other Revenue

- Dividend Income

Commercial Real Estate Debt Investments

Commercial Finance

Residential Mortgage Lending

Corporate & Other

Total Revenue

bb593291c08bc660eefcc74cf5e85717a551e1ac9a201ac7c3ce158a11a14d06

Weighted-Average Maturity of Interest Rate Caps (Months)

% of CRE Loan Portfolio Earning Floating Rate of Interest (%)

Weighted-Average Benchmark Floor for Floating-Rate Loan Portfolio (%)

% Allocation of CRE Loan Portfolio to Multifamily Loans (%)

Maximum Principal Balance of Construction Loan for Student Housing ($M)

Maximum Principal Balance of Energy Efficiency Financing Agreement ($M)

Fixed Interest Rate on Energy Efficiency Financing (%)

Fair Value of Property Acquired Through Foreclosure ($M)

Internal Rate of Return (IRR) Used in Property Valuation (%)

Terminal Capitalization Rate Used in Property Valuation (%)

Allowance for Credit Losses ($M)

Unfunded Loan Commitments for CRE Whole Loans ($M)

cdb1941f993cbec2f17f0d6f2712b1ccb6d3e3a1440743a1c9f5601a6c2aa4e8

### Q3 2024 Earnings Call
   - **Issued Period**: Q3 2024
   - **Guided Period**: Q4 2024 and Q1 2025
   - **Guidance**:
     - **Monetization of Assets**: Expectation to complete much of the monetization work over the next two quarters, impacting book value per share to be flat or better than the current level.
     - **Dividend Strategy**: Plans to continue monetizing assets and driving earnings available for distribution (EAD) to support a growing dividend, considering issuing a new CLO.
     - **Asset Sales**: Expectations of incremental gains from asset sales, with three other assets in process for liquidation.
     - **Earnings Impact**: Unrealized gain from REO conversion to flow through EAD once monetized.
     - **CLO Market Strategy**: Considering collapsing existing CLOs and redeploying into new ones, aiming for mid- to high-teens return on equity (ROE).  **[ACR_3405160_3]** **[ACR_3405160_4]** **[ACR_3405160_10]** **[ACR_3405160_6]** **[ACR_3405160_11]** **[ACR_3405160_8]** 

### Q2 2024 Earnings Call
   - **Issued Period**: Q2 2024
   - **Guided Period**: N/A
   - **Guidance**: The documents do not include any information from the Q2 2024 earnings call for ACR. Therefore, no guidance or metrics are available for this period.

### Q1 2024 Earnings Call
   - **Issued Period**: Q1 2024
   - **Guided Period**: N/A
   - **Guidance**: The documents do not provide any information regarding guidance from the Q1 2024 earnings call for ACR.

### Q4 2023 Earnings Call
   - **Issued Period**: Q4 2023
   - **Guided Period**: Q4 2023 and FY 2023, with forward-looking commentary about 2024
   - **Guidance**:
     - **Dividend Timing**: No specific guidance on dividend reinstatement timing; dependent on monetizing investments and achieving EAD level supporting a 10% dividend at book value.
     - **Loan Book Deployment**: Aim for a **15% return on equity (ROE)** when deploying new dollars into the loan book.
     - **Monetization of Investments**: Plan to monetize certain real estate investments to offset NOLs and redeploy capital into the loan book.
     - **Interest Rate Cap Maturities**: Engaging with borrowers in advance of interest rate cap maturities, expecting most to replace caps without issues.  **[ACR_3376073_7]** **[ACR_3376073_8]** **[ACR_3376073_5]** **[ACR_3376073_1]** **[ACR_3376073_3]** 

b80af393b0458f34a6d43eec72c1499294229514947648938ad426310c66ec3b

- ACR achieved a **14% return on equity (ROE)** in the current quarter and is targeting mid-teens ROE, indicating strong performance and effective management.  **[ACR_3363986_7]**
- The company plans to **monetize existing properties** acquired to utilize net operating losses (NOLs), which will **increase book value per share** and benefit shareholders.  **[ACR_3363986_7]**
- ACR is considering issuing a **new collateralized loan obligation (CLO)** potentially by the end of 2024, leveraging improving market conditions to enhance returns while maintaining ROE neutrality.  **[ACR_3363986_6]**

865698833bcaf08aaecc629d0c97b79b21ec3af0b9694de1a7d626a72cceaad1

- **ACR plans to monetize several REO assets over the next two quarters, which is expected to improve book value per share and provide capital to reinvest into their loan portfolio.**  **[ACR_3405160_3]**
- **Management is focusing on growing earnings and reinstating dividends, indicating confidence in future profitability and commitment to shareholder returns.**  **[ACR_3405160_6]** **[ACR_3405160_4]**
- **Analysts have highlighted that ACR's stock has doubled over the last year, making it the best-performing mortgage REIT year-to-date, reflecting positive market sentiment towards the company.**  **[ACR_3405160_6]**

f8e453ecb969e406fc52b7c730342f1e9210d02b7100a884bbc91f989af9ec5f

- **ACR is not currently paying cash dividends**, and **timing for resuming dividends is uncertain**, which may concern income-focused investors.  **[ACR_3363986_7]**
- The company's plan to issue a new CLO is **not expected until the end of 2024**, potentially delaying efficient financing and impacting returns.  **[ACR_3363986_6]**
- ACR is **not pursuing new acquisitions** in the distressed commercial real estate market, possibly missing opportunities to acquire assets at attractive prices.  **[ACR_3363986_7]**

dedf8668c05051bdebacdbdc5aab36eeee8a266517217836032ec904e7ce3131

- **ACR is proactively managing upcoming interest rate cap maturities, with the majority of borrowers replacing caps without issues, reflecting strong borrower commitment and positive conversations.**  **[ACR_3376073_8]**
- **In Q4, the company repurchased 601,000 common shares at an approximate **71% discount** to book value, resulting in **$1.32 of book value per share accretion**, demonstrating effective capital management and focus on high return on equity.**  **[ACR_3376073_6]** **[ACR_3376073_7]**
- **ACR aims to redeploy capital into new loan originations targeting approximately **15% ROE**, and intends to establish earnings available for distribution that support a **10% dividend at book value**, highlighting a commitment to future shareholder returns.**  **[ACR_3376073_7]** **[ACR_3376073_5]**

16e796f2b1a16719676ef4a7c841d8279c554c94ba4725066e00c1451939bc54

- **Increase in higher-risk loans**: The company reported that **4 loans migrated into the 4 and 5 risk categories this quarter**, indicating a rise in higher-risk loans within its portfolio. This migration could suggest potential credit quality deterioration.  **[ACR_3376073_4]**
- **Uncertainty in asset monetization timing**: ACR has **no visibility on the timing** of monetizing certain assets, which may delay the recycling of capital into new loan investments and impact overall returns.  **[ACR_3376073_5]**
- **Lack of clear timeline for dividend reinstatement**: The company **has not given guidance** on when it will reinstate dividend payments, implying that shareholders may not receive dividends in the near future.  **[ACR_3376073_6]** **[ACR_3376073_7]**

bbf7853119e27bdcbad29e6aee69f3a125fa6fa075081bc7183d874a550ec002

- **ACRES is experiencing deleveraging due to paydowns on existing CLOs, negatively impacting Earnings Available for Distribution and hindering the company's ability to drive earnings and reinstate dividends.**  **[ACR_3405160_4]**
- **The company's liquidity is constrained, with only $80 million available, limiting its capacity to originate new loans and grow the loan portfolio, potentially affecting future earnings growth.**  **[ACR_3405160_7]**
- **Future financing costs may increase as current CLO market conditions are less favorable, potentially resulting in higher costs and lower returns for shareholders.**  **[ACR_3405160_8]**

ec7f3c850b52947e7946b9deb0bec94a7dd3a2f7eeb23ddfa2325450964955c7

1. **Asset Monetization and REO Sales**  
   **Q:** What REO assets are you selling in the next 6 months?  
   **A:** We are in the process of selling the student housing asset at FSU and have three other assets that we are highly certain will be executed over the next couple of quarters.  **[ACR_3405160_6]** 

2. **Dividend Resumption**  
   **Q:** What is needed to resume and grow the dividend?  
   **A:** We will continue to monetize assets and drive EAD, paying a dividend out of EAD that we believe will be growing as we re-lever the balance sheet and focus on driving earnings.  **[ACR_3405160_4]** 

3. **Loan Pipeline and Originations**  
   **Q:** How is the loan pipeline ramping up for new originations?  
   **A:** With about **$80 million** of liquidity, we plan to redeploy funds as assets repay, especially since many are not in a CLO and proceeds can be used for re-originations. ACRES is actively engaged in the marketplace, originating new loans weekly, and we expect to allocate some of this flow to the REIT when liquidity allows.  **[ACR_3405160_7]** 

4. **Financing Costs and CLOs**  
   **Q:** How do your current CLOs compare to today's market, and plans for new deals?  
   **A:** Our existing CLOs (FL1 and FL2) were executed in particularly attractive markets. While new CLOs might not match those terms due to wider spreads, we focus on the ROEs the structure can deliver. Based on current CRE CLO markets, we expect to drive **mid- to high-teens ROE** outcomes, assuming market conditions remain similar.  **[ACR_3405160_8]** 

5. **Loan Ratings and Foreclosure**  
   **Q:** What caused the decline in 4-rated loans this quarter?  
   **A:** The decline was due to a conversion to REO. The borrower had issues within his portfolio and couldn't keep the loan current, so we proceeded with foreclosure during the quarter.  **[ACR_3405160_12]** **[ACR_3405160_13]** 

6. **REO Asset Valuations and Gains**  
   **Q:** Have you appraised REO assets, and what gains are expected?  
   **A:** We hold REO assets at cost or depreciated value and don't mark them until monetized. While we won't provide specific projections, we expect incremental gains upon sale, which will be positive rather than losses. These gains will flow through EAD when realized.  **[ACR_3405160_9]** **[ACR_3405160_10]** **[ACR_3405160_11]** 

7. **Share Repurchase Program Update**  
   **Q:** How much was used for share repurchases, and what's left?  
   **A:** We used **$1.7 million** for share repurchases this quarter and have about **$2.3 million** remaining in the program.  **[ACR_3405160_5]** 

6d5a86589a138f19c010f83230c5760d88a3e0359053588d2e93a9fc71112cd6

Acres Commercial Realty Corp (ACR)

Financials