NYSE:ACR ACRES Commercial Realty Q1 2024 Earnings Report $17.07 -0.49 (-2.79%) Closing price 04/17/2025 03:59 PM EasternExtended Trading$17.11 +0.04 (+0.23%) As of 04/17/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast ACRES Commercial Realty EPS ResultsActual EPS$0.10Consensus EPS $0.35Beat/MissMissed by -$0.25One Year Ago EPS$0.42ACRES Commercial Realty Revenue ResultsActual Revenue$18.77 millionExpected Revenue$13.00 millionBeat/MissBeat by +$5.77 millionYoY Revenue GrowthN/AACRES Commercial Realty Announcement DetailsQuarterQ1 2024Date5/1/2024TimeAfter Market ClosesConference Call DateThursday, May 2, 2024Conference Call Time10:00AM ETUpcoming EarningsACRES Commercial Realty's Q1 2025 earnings is scheduled for Tuesday, April 29, 2025, with a conference call scheduled on Thursday, May 1, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by ACRES Commercial Realty Q1 2024 Earnings Call TranscriptProvided by QuartrMay 2, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good day, ladies and gentlemen, and welcome to the First Quarter 2024 Acres Commercial Realty Corp Earnings Conference Call. Currently, all participants are in a listen only mode. Later, we will conduct a question and answer session with instructions to follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kyle Brengel, Vice President, Operations. Operator00:00:29You may begin. Speaker 100:00:32Good morning, and thank you for joining our call. I would to highlight that we have posted the Q1 2024 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the company. Before we begin, I want to remind everyone that certain statements made during this call are not based on historical information and may constitute forward looking statements. When used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward looking statements. Speaker 100:01:02Although the Company believes that these forward looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to several trends, risks and uncertainties that could cause actual results to differ materially from those contained in forward looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8 ks, 10Q and 10 ks and in particular the Risk Factors section of its Form 10 ks. Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward looking statements. Furthermore, certain non GAAP financial measures may be discussed on this conference call. Speaker 100:01:48Our presentation of this information is not intended to be considered in isolation or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non GAAP financial measures to most comparable measures prepared in accordance with generally accepted accounting principles are contained in the earnings presentation for the past quarter. With me on the call today are Mark Fogel, President and CEO and Eldryn Blackwell, ACR's CFO. Also available for Q and A is Andrew Fentress, Chairman of ACR. I will now turn the call over to Mark. Speaker 200:02:22Good morning, everyone, and thank you for joining our call. Today, I will provide an overview of our loan originations, real estate investments and the health of the investment portfolio, while Eldren Blackwell will discuss financial statements, liquidity condition, book value and operating results for the Q1 of 2024. Of course, we look forward to your questions at the end of our prepared remarks. The Akers team continues to execute on our business plan by selectively originating high quality investments, actively managing the portfolio and continuing to focus on growing earnings and book value for our shareholders. Loan payoffs during the period were $80,800,000 and net funded commitments during the quarter were $11,400,000 producing a net decrease to the loan portfolio of $69,400,000 The weighted average spread of the floating rate loans in our $1,800,000,000 commercial real estate loan portfolio is now 3.78 percent over the 1 month benchmark rate. Speaker 200:03:21The portfolio generally continues to perform demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1,800,000,000 of commercial real estate loans across 66 individual investments. At March 31, there were 11 loans rated 4 or 5, which represented 17% of the par value of our portfolio, an increase of 1% respectively as compared to the end of Q4 2023 and our weighted average risk rating decreased from 2.7 at December 31 to 2.6 at March 31. We acquired via deed in lieu of foreclosure an office property in Chicago with a basis of $14,000,000 that was valued at $20,300,000 upon acquisition. The loan was previously risk rated a 5% in our December 31 financials. Speaker 200:04:12We recognized a $5,800,000 gain on conversion upon accepting the deed in lieu of foreclosure and immediately contributed the asset to a joint venture seeking to maximize its value through a multifamily conversion. We continue to manage several investments in real estate that we expect to monetize our gains in the future. These anticipated gains will be offset by NOL carry forwards and we expect to retain the equity and reinvest potential gains in our loan portfolio. In summary, the Acres team continues to be focused on the overall quality of the investment portfolio, including investments in real estate with the goal of improving credit quality and recycling capital into performing categories. We will now have ACR's CFO, Eldren Blackwell, discuss the financial statements and operating results during the Q1. Speaker 300:05:02Thank you, and good morning, everyone. GAAP net income allocable to common shares in the Q1 was $556,000 or $0.07 per share. Included in net income is an increase to current expected credit losses or CECL reserves of $4,900,000 or $0.61 per share as compared to CECL reserves during the Q4 of $1,100,000 The increase to the general CECL reserves is primarily driven by worsening macroeconomic factors due to higher interest rates lasting longer than expected, compounded by an increase in modeled credit risk. The total allowance for credit losses at March 31 was $33,700,000 represents 1.89 percent or 189 basis points on our $1,800,000 loan portfolio at par and comprised $4,700,000 in specific reserves and $29,000,000 in general credit reserves. Earnings available for distribution or EAD for the Q1 was $0.16 per share as compared to $0.55 per share for the 4th quarter. Speaker 400:06:10The difference being Speaker 300:06:10a $0.25 run rate decline in net interest income resulting from net payoffs and to a lesser extent loan modifications that occurred during the quarter and late in Q4 as well as a $0.16 decline in real estate operations due to seasonality. GAAP book value per share was $27.25 on March 31st versus $26.65 at December 31st. This increase was primarily due to our buyback program, which generated $0.41 of book value per share for the Q1. During the quarter, we used $2,100,000 to repurchase 195,000 common shares at an approximate 61% discount to book value on March 30 1. In addition, we used $2,200,000 to repurchase 100,000 shares of our preferred Series B securities at an approximate 14% discount to the stated redemption value of $25 There was approximately 5 $600,000 remaining on the Board approved program at quarter end. Speaker 300:07:13Available liquidity at March 31 was 92 point $1,000,000 which comprised $84,600,000 of unrestricted cash and $7,500,000 of projected financing available on unlevered assets. Our GAAP debt to equity leverage ratio slightly decreased to 3.7 times at March 31 from 3.8 times at December 31. Our recourse debt leverage ratio remained consistent at 1.1 times at both March 31 December 31. And with that, I will now turn the call to Andrew Fentress for closing remarks. Speaker 500:07:50Thank you, Eldren. The Q1 of 2024 was a mix but net positive quarter for HCR shareholders. Our operating metrics at the 2 hotel properties were slightly below expectations and we don't you like to use the word seasonality because we also know that Q1 can typically be a slower part of the calendar, but that does in fact drive some of the results. There's been some deleveraging of the portfolio as loans have repaid, driving lower portfolio return on equity. We expect this will continue throughout the balance of the year as both of our CLOs are outside their reinvestment period. Speaker 500:08:24While there were some additional CECL reserves booked, they were largely in the macroeconomic category. Credit quality remains high. As you've heard from us in the past, Weed Acres are focused on protecting book value. The book is in good shape. We had a nice win in the Q1 as Mark described monetizing Chicago office for a gain. Speaker 500:08:43We'll continue to focus on our portfolio in 2024 and monetizing the assets that were acquired to utilize our NOL. We look forward to the Q and A discussion and answering your questions. Operator? Operator00:08:57Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Steven Laws with Raymond James. Your line is now open. Speaker 600:09:25Hi, good morning. I appreciate the comments so far and the disclosure and the supplement. One thing I noticed with regards to interest rate caps have been providing a lot of protection so far, but seems like a lot of them hit maturity or expiration in the next few quarters. Can you talk about your expectations on portfolio performance after those expire? What type of traction you're seeing with the existing sponsors and borrowers as far as buying new caps and supporting assets? Speaker 600:09:57And maybe any color on how you expect the cap expiration maturity wall to play out over the next few quarters? Speaker 700:10:06Stephen, this is Mark. Thank you for the question. It's a good question. Our asset management team stays very far ahead of these expiring caps. In most cases, those loans that have expiring caps, if they want to extend, they're required to buy a new cap. Speaker 700:10:24And many, many months before those extension options can essentially be executed on, our asset management team is working with the sponsors on acquiring new caps and or creating interest reserve deposits in lieu of the caps. So, we're very far ahead of it. We haven't had any issues to date and we don't expect to in that at least 3 to 6 months out, we have a pretty good sense of where we are with respect to those cap executions and interest reserve deposits. Speaker 200:11:00Great. Speaker 600:11:03We've spoken over the past quarters. I know the longer term target once you recycle some of the gains you're able to realize off real estate into new investments, likely senior loans. Can you talk about the outlook for maybe a return on book or EAD return on book? Do think 10% is achievable? When you think about the long term earnings power of the company, how do you guys think about quantifying that EAD level? Speaker 500:11:34That is our target. So our objective is to produce EAD that would pay an equivalent 10% yield at book value. The timing of the achievement of that outcome will be, as you pointed out, driven by the pace with which we can sell the assets and return the equity back into the loan book. And obviously, then getting the company or the portfolio levered at the appropriate level as well. So we're addressing both of those real time, some of which as I pointed out with respect to deleveraging is happening as the 2 CLOs run off and the repayment. Speaker 500:12:18So that's a deleveraging force. But certainly the objective and we believe our ability to do it is high that we're going to be able to deliver EAD at a 10% of book value. Speaker 600:12:32Great. And then my last question, the NOLs, there's some have no expiration, others I think had a 5 year life. Can you talk about how you expect the pace of asset sales to play out? What your thoughts are as far as the right time to reinstate the dividend and how you think about returning capital to shareholders between burning off NOLs or repurchasing stock and then at some point reinstating a dividend? Speaker 500:13:04Sure. We obviously want to be in a place at the endpoint where we are the dividend is reinstated and being distributed. In the meantime, we're returning capital to shareholders through stock buybacks That continues to be in place and we're in the market with that program daily. As it relates to the pace and timing of the sales and then ultimately the amount of NOLs, We're moving forward as we speak on all of the assets. We don't have exact visibility on the timing. Speaker 500:13:44The processes are underway. And that ultimately will drive the timing with which we can ramp back to a full dividend. But in the meantime, we continue to return capital shareholders for share repurchase. I'll just note that since the Q3 of 2020, when ACRES took over as the manager, the book value per share increase has been 14.4% annualized. So the that we think reflects that statement that we are in fact delivering value to shareholders at an attractive annual rate. Speaker 600:14:35Great. Appreciate the comments and appreciate you quantifying that the buybacks and other actions you've taken have certainly been quite beneficial to book value. So keep up the good work on that and thanks for your comments this morning. Speaker 500:14:47Thanks, Steve. Operator00:14:53Your next question comes from Chris Mueller with Citizens. Please go ahead. Speaker 400:15:02So looking at the real estate income line, it looks like there was a $1,700,000 drop from the 4th quarter in that line. Is that all seasonality there, probably with the hotels mostly or is there something else behind that decline quarter over quarter? Speaker 300:15:18Hey, Chris, this is Eldren. Yes, the majority of that has to do with seasonality of the hotels. We had a little bit of market softening at our HGI Hotel in Philadelphia, but other than that, it's seasonality. Speaker 400:15:32Got it. So we should expect that to pick back up in the second and third quarter? Speaker 300:15:36We do. Speaker 400:15:38Perfect. And then I guess with both of the CLOs, the reinvestment periods now expired. Do you think a CLO makes sense at some point, maybe in the back half of this year? Or do you think that will be more a 2025 type of that you'll look at? Speaker 700:15:54Chris, it's Mark. It's hard to say. It's really a function of how much product you can contribute into the CLO. So it's a function of production and obviously where the markets are for CLO execution. So I wouldn't expect anything, obviously, in the first half of this year. Speaker 700:16:12I think we'll start to look at it and gauge the market and our book and determine whether or not end of year Q1 or Q2 of next year makes sense. Speaker 400:16:25Got it. And if I can just squeeze one more in, a quick follow-up on Stephen Ma's question. So on the pace and timing of these real estate sales, would you guys be more inclined to maybe accelerate that process if you had the opportunity to quickly deploy capital into attractive investments? Or is that more of an independent process of selling those assets? Speaker 500:16:46Yes. We are not waiting, I guess, is the punch line. We think that the assets are now in a place that they can be monetized. And so the processes are underway. And we agree that the opportunity set in the marketplace is attractive and that's driving it as well as our desire to just normalize the operations of the company. Speaker 400:17:13Great. Thanks for taking the questions. Operator00:17:18There are no further questions at this time. I will now turn the call over to management for closing remarks. Speaker 500:17:25Thank you everyone for attending the Q1 call. We're always available for any follow-up questions that people have. We look forward to speaking to you again with our results for the Q2. Operator00:17:39Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallACRES Commercial Realty Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) ACRES Commercial Realty Earnings HeadlinesACRES Commercial Realty Corp. to Report Results for First Quarter 2025April 16, 2025 | gurufocus.comACRES Commercial Realty Corp. to Report Results for First Quarter 2025April 16, 2025 | prnewswire.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 20, 2025 | Porter & Company (Ad)Willow Ferrelli's real estate career began with 'pantyhose and pagers'March 29, 2025 | bizjournals.comAres Commercial (ACRE) Receives a Sell from Bank of America SecuritiesMarch 25, 2025 | markets.businessinsider.comACRES Commercial Realty - A Mortgage REITMarch 20, 2025 | msn.comSee More ACRES Commercial Realty Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like ACRES Commercial Realty? Sign up for Earnings360's daily newsletter to receive timely earnings updates on ACRES Commercial Realty and other key companies, straight to your email. Email Address About ACRES Commercial RealtyACRES Commercial Realty (NYSE:ACR), a real estate investment trust (REIT), focuses on the origination, holding, and management of commercial real estate mortgage loans and equity investments in commercial real estate property in the United States. It invests in commercial real estate-related assets, including floating-rate first mortgage loans, first priority interests in first mortgage loans, subordinated interests in first mortgage loans, mezzanine financing, preferred equity investments, and commercial mortgage-backed securities. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as Exantas Capital Corp. and changed its name to ACRES Commercial Realty Corp. in February 2021. ACRES Commercial Realty Corp. was incorporated in 2005 and is based in Uniondale, New York.View ACRES Commercial Realty ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 8 speakers on the call. Operator00:00:00Good day, ladies and gentlemen, and welcome to the First Quarter 2024 Acres Commercial Realty Corp Earnings Conference Call. Currently, all participants are in a listen only mode. Later, we will conduct a question and answer session with instructions to follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kyle Brengel, Vice President, Operations. Operator00:00:29You may begin. Speaker 100:00:32Good morning, and thank you for joining our call. I would to highlight that we have posted the Q1 2024 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the company. Before we begin, I want to remind everyone that certain statements made during this call are not based on historical information and may constitute forward looking statements. When used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward looking statements. Speaker 100:01:02Although the Company believes that these forward looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to several trends, risks and uncertainties that could cause actual results to differ materially from those contained in forward looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8 ks, 10Q and 10 ks and in particular the Risk Factors section of its Form 10 ks. Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward looking statements. Furthermore, certain non GAAP financial measures may be discussed on this conference call. Speaker 100:01:48Our presentation of this information is not intended to be considered in isolation or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non GAAP financial measures to most comparable measures prepared in accordance with generally accepted accounting principles are contained in the earnings presentation for the past quarter. With me on the call today are Mark Fogel, President and CEO and Eldryn Blackwell, ACR's CFO. Also available for Q and A is Andrew Fentress, Chairman of ACR. I will now turn the call over to Mark. Speaker 200:02:22Good morning, everyone, and thank you for joining our call. Today, I will provide an overview of our loan originations, real estate investments and the health of the investment portfolio, while Eldren Blackwell will discuss financial statements, liquidity condition, book value and operating results for the Q1 of 2024. Of course, we look forward to your questions at the end of our prepared remarks. The Akers team continues to execute on our business plan by selectively originating high quality investments, actively managing the portfolio and continuing to focus on growing earnings and book value for our shareholders. Loan payoffs during the period were $80,800,000 and net funded commitments during the quarter were $11,400,000 producing a net decrease to the loan portfolio of $69,400,000 The weighted average spread of the floating rate loans in our $1,800,000,000 commercial real estate loan portfolio is now 3.78 percent over the 1 month benchmark rate. Speaker 200:03:21The portfolio generally continues to perform demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1,800,000,000 of commercial real estate loans across 66 individual investments. At March 31, there were 11 loans rated 4 or 5, which represented 17% of the par value of our portfolio, an increase of 1% respectively as compared to the end of Q4 2023 and our weighted average risk rating decreased from 2.7 at December 31 to 2.6 at March 31. We acquired via deed in lieu of foreclosure an office property in Chicago with a basis of $14,000,000 that was valued at $20,300,000 upon acquisition. The loan was previously risk rated a 5% in our December 31 financials. Speaker 200:04:12We recognized a $5,800,000 gain on conversion upon accepting the deed in lieu of foreclosure and immediately contributed the asset to a joint venture seeking to maximize its value through a multifamily conversion. We continue to manage several investments in real estate that we expect to monetize our gains in the future. These anticipated gains will be offset by NOL carry forwards and we expect to retain the equity and reinvest potential gains in our loan portfolio. In summary, the Acres team continues to be focused on the overall quality of the investment portfolio, including investments in real estate with the goal of improving credit quality and recycling capital into performing categories. We will now have ACR's CFO, Eldren Blackwell, discuss the financial statements and operating results during the Q1. Speaker 300:05:02Thank you, and good morning, everyone. GAAP net income allocable to common shares in the Q1 was $556,000 or $0.07 per share. Included in net income is an increase to current expected credit losses or CECL reserves of $4,900,000 or $0.61 per share as compared to CECL reserves during the Q4 of $1,100,000 The increase to the general CECL reserves is primarily driven by worsening macroeconomic factors due to higher interest rates lasting longer than expected, compounded by an increase in modeled credit risk. The total allowance for credit losses at March 31 was $33,700,000 represents 1.89 percent or 189 basis points on our $1,800,000 loan portfolio at par and comprised $4,700,000 in specific reserves and $29,000,000 in general credit reserves. Earnings available for distribution or EAD for the Q1 was $0.16 per share as compared to $0.55 per share for the 4th quarter. Speaker 400:06:10The difference being Speaker 300:06:10a $0.25 run rate decline in net interest income resulting from net payoffs and to a lesser extent loan modifications that occurred during the quarter and late in Q4 as well as a $0.16 decline in real estate operations due to seasonality. GAAP book value per share was $27.25 on March 31st versus $26.65 at December 31st. This increase was primarily due to our buyback program, which generated $0.41 of book value per share for the Q1. During the quarter, we used $2,100,000 to repurchase 195,000 common shares at an approximate 61% discount to book value on March 30 1. In addition, we used $2,200,000 to repurchase 100,000 shares of our preferred Series B securities at an approximate 14% discount to the stated redemption value of $25 There was approximately 5 $600,000 remaining on the Board approved program at quarter end. Speaker 300:07:13Available liquidity at March 31 was 92 point $1,000,000 which comprised $84,600,000 of unrestricted cash and $7,500,000 of projected financing available on unlevered assets. Our GAAP debt to equity leverage ratio slightly decreased to 3.7 times at March 31 from 3.8 times at December 31. Our recourse debt leverage ratio remained consistent at 1.1 times at both March 31 December 31. And with that, I will now turn the call to Andrew Fentress for closing remarks. Speaker 500:07:50Thank you, Eldren. The Q1 of 2024 was a mix but net positive quarter for HCR shareholders. Our operating metrics at the 2 hotel properties were slightly below expectations and we don't you like to use the word seasonality because we also know that Q1 can typically be a slower part of the calendar, but that does in fact drive some of the results. There's been some deleveraging of the portfolio as loans have repaid, driving lower portfolio return on equity. We expect this will continue throughout the balance of the year as both of our CLOs are outside their reinvestment period. Speaker 500:08:24While there were some additional CECL reserves booked, they were largely in the macroeconomic category. Credit quality remains high. As you've heard from us in the past, Weed Acres are focused on protecting book value. The book is in good shape. We had a nice win in the Q1 as Mark described monetizing Chicago office for a gain. Speaker 500:08:43We'll continue to focus on our portfolio in 2024 and monetizing the assets that were acquired to utilize our NOL. We look forward to the Q and A discussion and answering your questions. Operator? Operator00:08:57Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Steven Laws with Raymond James. Your line is now open. Speaker 600:09:25Hi, good morning. I appreciate the comments so far and the disclosure and the supplement. One thing I noticed with regards to interest rate caps have been providing a lot of protection so far, but seems like a lot of them hit maturity or expiration in the next few quarters. Can you talk about your expectations on portfolio performance after those expire? What type of traction you're seeing with the existing sponsors and borrowers as far as buying new caps and supporting assets? Speaker 600:09:57And maybe any color on how you expect the cap expiration maturity wall to play out over the next few quarters? Speaker 700:10:06Stephen, this is Mark. Thank you for the question. It's a good question. Our asset management team stays very far ahead of these expiring caps. In most cases, those loans that have expiring caps, if they want to extend, they're required to buy a new cap. Speaker 700:10:24And many, many months before those extension options can essentially be executed on, our asset management team is working with the sponsors on acquiring new caps and or creating interest reserve deposits in lieu of the caps. So, we're very far ahead of it. We haven't had any issues to date and we don't expect to in that at least 3 to 6 months out, we have a pretty good sense of where we are with respect to those cap executions and interest reserve deposits. Speaker 200:11:00Great. Speaker 600:11:03We've spoken over the past quarters. I know the longer term target once you recycle some of the gains you're able to realize off real estate into new investments, likely senior loans. Can you talk about the outlook for maybe a return on book or EAD return on book? Do think 10% is achievable? When you think about the long term earnings power of the company, how do you guys think about quantifying that EAD level? Speaker 500:11:34That is our target. So our objective is to produce EAD that would pay an equivalent 10% yield at book value. The timing of the achievement of that outcome will be, as you pointed out, driven by the pace with which we can sell the assets and return the equity back into the loan book. And obviously, then getting the company or the portfolio levered at the appropriate level as well. So we're addressing both of those real time, some of which as I pointed out with respect to deleveraging is happening as the 2 CLOs run off and the repayment. Speaker 500:12:18So that's a deleveraging force. But certainly the objective and we believe our ability to do it is high that we're going to be able to deliver EAD at a 10% of book value. Speaker 600:12:32Great. And then my last question, the NOLs, there's some have no expiration, others I think had a 5 year life. Can you talk about how you expect the pace of asset sales to play out? What your thoughts are as far as the right time to reinstate the dividend and how you think about returning capital to shareholders between burning off NOLs or repurchasing stock and then at some point reinstating a dividend? Speaker 500:13:04Sure. We obviously want to be in a place at the endpoint where we are the dividend is reinstated and being distributed. In the meantime, we're returning capital to shareholders through stock buybacks That continues to be in place and we're in the market with that program daily. As it relates to the pace and timing of the sales and then ultimately the amount of NOLs, We're moving forward as we speak on all of the assets. We don't have exact visibility on the timing. Speaker 500:13:44The processes are underway. And that ultimately will drive the timing with which we can ramp back to a full dividend. But in the meantime, we continue to return capital shareholders for share repurchase. I'll just note that since the Q3 of 2020, when ACRES took over as the manager, the book value per share increase has been 14.4% annualized. So the that we think reflects that statement that we are in fact delivering value to shareholders at an attractive annual rate. Speaker 600:14:35Great. Appreciate the comments and appreciate you quantifying that the buybacks and other actions you've taken have certainly been quite beneficial to book value. So keep up the good work on that and thanks for your comments this morning. Speaker 500:14:47Thanks, Steve. Operator00:14:53Your next question comes from Chris Mueller with Citizens. Please go ahead. Speaker 400:15:02So looking at the real estate income line, it looks like there was a $1,700,000 drop from the 4th quarter in that line. Is that all seasonality there, probably with the hotels mostly or is there something else behind that decline quarter over quarter? Speaker 300:15:18Hey, Chris, this is Eldren. Yes, the majority of that has to do with seasonality of the hotels. We had a little bit of market softening at our HGI Hotel in Philadelphia, but other than that, it's seasonality. Speaker 400:15:32Got it. So we should expect that to pick back up in the second and third quarter? Speaker 300:15:36We do. Speaker 400:15:38Perfect. And then I guess with both of the CLOs, the reinvestment periods now expired. Do you think a CLO makes sense at some point, maybe in the back half of this year? Or do you think that will be more a 2025 type of that you'll look at? Speaker 700:15:54Chris, it's Mark. It's hard to say. It's really a function of how much product you can contribute into the CLO. So it's a function of production and obviously where the markets are for CLO execution. So I wouldn't expect anything, obviously, in the first half of this year. Speaker 700:16:12I think we'll start to look at it and gauge the market and our book and determine whether or not end of year Q1 or Q2 of next year makes sense. Speaker 400:16:25Got it. And if I can just squeeze one more in, a quick follow-up on Stephen Ma's question. So on the pace and timing of these real estate sales, would you guys be more inclined to maybe accelerate that process if you had the opportunity to quickly deploy capital into attractive investments? Or is that more of an independent process of selling those assets? Speaker 500:16:46Yes. We are not waiting, I guess, is the punch line. We think that the assets are now in a place that they can be monetized. And so the processes are underway. And we agree that the opportunity set in the marketplace is attractive and that's driving it as well as our desire to just normalize the operations of the company. Speaker 400:17:13Great. Thanks for taking the questions. Operator00:17:18There are no further questions at this time. I will now turn the call over to management for closing remarks. Speaker 500:17:25Thank you everyone for attending the Q1 call. We're always available for any follow-up questions that people have. We look forward to speaking to you again with our results for the Q2. Operator00:17:39Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by