Thank you. Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2021 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. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Kyle Brengel, Vice President. You may begin.

Good afternoon and thank you for joining our call. 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 word believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. Although 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 the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q and 10-K and in particular the Risk Factors section of its Form 10-K and Form 10-Q. 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. Our 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 the 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 Dave Bryant, ACR's CFO. Also available for Q&A is Andrew Fentress, Chairman of ACR. I will now turn the call over to Mark.

Good afternoon everyone and thank you for joining our call. Today, I will provide an overview of the company's loan originations, real estate investments, capitalization and the health of the investment portfolio while Dave Bryant will discuss the financial statements, liquidity condition and operating results for the fourth quarter. In addition, we have added two important disclosures for shareholders in our presentation; the first, a presentation on the earnings potential of the company based on certain assumptions around leverage and returns; and the second, a list of the REOs the company currently has along with our strategy for each. And of course, we look forward to your questions at the end of our prepared remarks. In the fourth quarter, we continued to grow and manage the loan portfolio. We closed two equity investments in real estate. We closed the company's 11th CLO, which will reduce its cost of capital and extend duration of the financing, all while continuing to offer our sponsors outstanding service. The ACRES origination team delivered $447 million of new loan commitments in the quarter. This brings loan production volume for 2021 to approximately $1.5 billion, a record year for the company. Additionally, the team completed $29 million of initial equity investments on two properties in the northeast region in the quarter, which we expect will deliver capital gains in future years. These results reflect the efforts of the entire ACRES team in identifying, processing and executing on opportunities nationwide with our unique financing solutions in target asset classes. From a capitalization standpoint, the company successfully executed its second managed CLO of 2021, bringing its total loan financing capacity to over $1.5 billion from the two CLOs. Additionally, after December 31, 2021, the company repurchased a portion of its convertible senior notes and executed the optional redemption…

Thank you, and good afternoon. GAAP net income allocable to common shares in the fourth quarter was $7.3 million or $0.76 per share compared to a GAAP net loss of $9.8 million or $1.03 per share in the third quarter. In the fourth quarter, we recorded a reversal of the CECL provision for credit losses, $5.8 million or $0.61 per share compared to a $537,000 increase in the CECL provision in the third quarter. The fourth quarter CECL reserve reversal was primarily due to continued improvements in property level operations of the underlying loan collateral, improvements in macroeconomic conditions and decreases in reserves on individually evaluated loans. Additionally, the company recorded $4.2 million of charge-offs against the CECL reserve from three loans that settled during the quarter or after quarter end. The impact of the CECL estimate and the charge-offs resulted in a total allowance for credit losses at December 31st of $8.8 million, which now represents 0.46% of the $1.9 billion loan portfolio at par. Net interest income was $11.9 million or $1.25 per share in the fourth quarter, up from $9.5 million or $0.99 per share in the third quarter. The fourth quarter results included $2.2 million of loan minimum interest payments, an increase of $1.5 million over the third quarter. The fourth quarter results also reflects $1.1 million of deferred fee income accelerated due to the increased loan payoffs, an increase of $849,000 over the third quarter. These increases helped offset the impact of loan payoffs that carried higher coupons compared with rates on new loan originations. The weighted average spread of floating rate loans in the company's $1.9 billion commercial real estate loan portfolio compressed slightly to 3.67% over the one-month benchmark rates, all but one of which had a floor with a weighted average of…

Thank you, David. As Mark discussed, we're proud to have achieved a record-setting year for the loan originations at ACR in our first full year as manager of the company. Equally as important, the asset management team has done an exceptional work to address the credit issues and the company has now a high-quality book. Additionally, the capital transactions that were closed during the year give the company the capacity to continue to build on the success and take advantage of the attractive financing rates in the years to come. Our mission is to deliver shareholders' value over the long-term. We are focused on maximizing earnings, investing in high-quality assets and strategically returning to capital through share repurchases and dividends over time. This concludes our opening remarks. I'll now turn the call back over to the operator and look forward to everyone's questions. Thank you.

Thank you. [Operator Instructions] Our first question comes from the line of Steve Delaney with JMP. Please proceed with your question.

Thanks. Good evening everyone and thank you for taking my questions. I'd like to probably – also the deck is great and especially the new pages 26 and 27. My first question is on 26. And Mark, the maximum portfolio size, you ended the year at $1.9 billion. So if we take the midpoint there at $2.3 million or call it $400,000, can you achieve that growth with your existing capital structure? I realize you'll need financing. But do you have the capital base to achieve, say, that midpoint $400,000 of loan growth to push the portfolio up to 2.3% by the end of this year 2022? Thanks.

Yes, Steve. Thanks for the question. Yes, we do have the capital base to grow the portfolio to that level between cash on hand and our financing sources.

Okay, good. So – and the – okay. Got it. So the other question ahead would be the CLO market. Your timing of your executions was excellent and I'm sure you've noticed weakness there. If CLOs – let's just say worst case with all – everything going on in the world, let's just say the CLOs, you looked at or this kind of locks up a little bit, can you – would you return to commercial bank financing? And I guess if you do, is there non-mark-to-market other than for credit – true credit available from the banks for financing lines? And if not that, I mean, is there even the thought of, at some point, you're back to the old school A note concept, where you don't really worry about borrowing money?

Yes, a couple of points on that. As we alluded to in our remarks, we have 24-month reinvestment periods in our two CLOs.

Sure.

There's a great opportunity to – as loans pay off to reinvest those proceeds back into new loans. We do have obviously a lot of capacity available on our lines. But outside of that, at this juncture, I can't point to any other non-mark-to-market situations, which we could access, but we do have the line capacity and the revolvers.

Right. And as you look at the market – at the CLO market today, if you had ample collateral and you just called an old CLO, do you feel the market is – the CLO market is viable for new issuance? It would just be maybe at a compressed return on equity compared to which you did – deals you did in 2021.

I think it's viable. I mean the spreads have widened while a little bit, but it's certainly viable. And it's – as you know, over the course of time, the CLO market changes, and you can't really time the market. And if you're a serial issuer, sometimes it's good, sometimes it's bad. And you just have to use that market while it's available to finance your business.

Yes, I hope it will average out over time.

That's right.

Thank you pretty much for your comments. That's it.

Thank you.

[Operator Instructions] Your next question comes from the line of Fred Bets [ph] with Private Investor. Please proceed with your question.

Yes. I was just wondering, does the company have a plan for the reinstatement of the common dividend?

Thank you, Fred. This is Andrew Fentress answering your question. Currently, the company does not have a plan to reinstate the common dividend. As we stated in our remarks, and hopefully, as you'll be able to see from the shareholder presentation, which was posted to the website this evening, that the capital of the company would otherwise pay a dividend that is being retained inside of the business and being used to grow book value. So as a shareholder, you're receiving the benefit of that capital, you're just receiving it in stock appreciation versus the receipt of a cash dividend. Does that answer your question?

Yes, and I have a second question. The book value, like you said, was like $23, and yet the share price is so low. Now, I'm not an accountant or anything, but is there a reason for that? The company sounds like it's doing well, but yet the share price seems to have been going down in the past few months. And can you give me an answer for why that is probably happening?

Fred, I'm not going to speculate on why the market is – has a disconnect between those – between the share price and the book value. But what I will say is that the company's actions of repurchasing shares, the company has an authorized repurchase program and has been active in that plan to repurchase shares, I should tell you, hopefully, what you need to know about what the company thinks about the share price at these levels.

I think it's great that you're buying it back. That's for sure. And – but I don't know. I said I'm not an accountant or an expert in this and – but I was just always wondering why if the common book is $23, that the price was so low, the daily price. But I know people got their reasons, I'm sure. Okay. Thank you very much. I appreciate it.

You're welcome.

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Mr. Andrew Fentress for closing remarks.

Thank you, everyone, for joining our call. As always, we look forward to any follow-up questions you have and to speaking with you again at the end of the next quarter. Thanks, everyone.

This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.