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Operator: Good day, ladies and gentlemen and welcome to the First Quarter 2025 ACRES Commercial Realty Corp. Earnings Conference Call. [Operator Instructions] 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. You may go ahead.

Kyle Brengel: Good morning and thank you for joining our call. I would like to highlight that we have posted the first quarter 2025 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. 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 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. 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 Eldron Blackwell, ACR CFO. Also available for Q&A is Andrew Fentress, Chairman of ACR. I will now turn the call over to Mark.

Mark Fogel: Good morning, everyone and thank you for joining our call. Today, I will provide an overview of our loan operations, real estate investments and the health of the investment portfolio, while Eldron Blackwell will discuss the financial statements liquidity condition, book value and operating results for the first quarter of 2025. Of course, we look forward to your questions at the end of our prepared remarks. The ACRES team continues to execute on our business plan by developing a pipeline of high-quality investments, actively managing the portfolio and focusing on growing earnings and book value for our shareholders. Loan payoffs during the period were $115.9 million. We closed one new commitment of $15 million and funded existing loan commitments during the quarter of $12 million, producing a net reduction of the loan portfolio of $109.6 million.

In addition, we sold two loans during the period, including a loan reported as held for sale at December 31, 2024, for $31.7 million in proceeds. The weighted average spread of the floating rate loans and our $1.4 billion commercial real estate loan portfolio is now 3.67% over 1-month term SOFA rates. Portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1.4 billion of commercial real estate loans across 48 individual investments. Our weighted average risk rating was 2.9 at the end of both Q1 2025 and Q4 2024. And the number of loans rated 4 or 5, decreased by 1 from 12 at the end of last year to 11 at the end of this quarter. In March, we sold a $20.6 million loan at par on an underperforming self-storage facility in Miami that had a 4 risk rating.

This quarter, we also had a charge-off to EAD of $700,000 or $0.10 per share related to a loan we sold on an underperforming hotel in Orlando that was as held for sale at December 31. We continue to manage several investments in real estate that we expect to monetize at gains in the future. These anticipated gains will be offset by deferred tax assets. We will provide updates in future quarters on the monetization of these assets. As we exit our real estate investments and the loan portfolio continues to amortize, we expect to redeploy capital and include attractive CRE loans. As always, we will seek to optimize our portfolio leverage in order to drive equity returns. During the quarter, we closed a new $940 million financing facility with JPMorgan.

The facility includes a 2-year reinvestment period that will provide for reinvestment of principal proceeds from asset repayments into qualifying replacement assets. Facility allowed us to refinance collateral from our two 2021 CRE securitizations pay off a majority of the balance is on our warehouse lines. As a result of the financing, we incurred a nonrecurring charge of $1.5 million or $0.20 per share related to unamortized debt issuance cost at the two CRE securitizations. 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 new investments to enhance shareholder value. We will now have ACR CFO, Eldron Blackwell to discuss the financial statements and operating results during the quarter.

Eldron Blackwell: Thank you, and good morning, everyone. GAAP net loss allocable to common shares in the first quarter was $5.9 million or $0.80 per share diluted. GAAP net loss for the quarter included $5.6 million in net interest income and a net loss on real estate operations of $2 million, which included depreciation of $1 million. We saw a decrease in current expected credit losses or seasonal reserves of $1.7 million or $0.23 per share as compared to a decrease in CECL reserves during the fourth quarter of $1.2 million. The first quarter 2025 reversal in CECL of $1.7 million was primarily driven by loan payoffs. The total allowance for credit losses at March 31 was $31.1 million and represented 2.26% or 226 basis points on our $1.4 billion loan portfolio at par and comprised $4.7 million in specific reserves and $26.4 million in general reserves.

Earnings available for distribution or EAD for the quarter for the first quarter of 2025, was a loss of $0.86 per share as compared to earnings of $0.48 per share for the fourth quarter. Quarter-over-quarter, EAD saw a $0.41 decrease in net interest income, a $0.10 decrease from the realized loss on the loan held for sale and a $0.09 decrease from real estate operation. The decreases in net interest income were driven by loan payoffs, SOFR declines and the aforementioned DDI accelerations related to the refinancing of our two CRE securitization. The decreases in real estate operations are primarily due to seasonality and operations. GAAP book value per share was $28.50 on March 31 versus $28.87 on December 31. Additionally, during the quarter, we used $4.4 million to repurchase 220,000 common shares at an approximate 30% discount to book value on March 31st.

There were approximately $426,000 remaining on the Board-approved program at quarter end. Available liquidity at March 31st was $87 million, which comprised $66 million of unrestricted cash and $21 million of projected financing available on unlevered assets. Our GAAP debt to equity leverage ratio slightly decreased to 2.9x at March 31st from 3x at December 31st, primarily resulting from loan payoffs. And our recourse debt leverage ratio increased to 2.9x at March 31st from 1.1x at December 31st, primarily as a result of the liquidation of our two CRE securitizations and the closing of our new financing facility. At the end of Q1, the company’s net operating loss carry-forwards were $32.1 million or approximately $4.44 per share. And with that, I will now turn the call to Andrew Fentress for closing remarks.

Andrew Fentress: Thank you, Eldron. As previously discussed, the small portfolio of size, seasonal expenses, one-time DDI charges related to the recent refinancing of FL1, FL2 securitizations and seasonally slow hospitality drove negative performance in the quarter. We expect Q1 to represent a trough on the portfolio side. Our plan is to utilize capital from recent low repayments, proceeds from asset sales and available liquidity from our lending partners to ramp the securitization in the second half of the year. The investment landscape is attractive. We are actively closing new loans across the ACRES platform. As has been the foundation of our philosophy, credit quality of the current portfolio remains strong, and we continue to monitor each of the names for any changes to our underwriting.

We look forward to your questions and speaking with you over the coming weeks. This concludes our opening remarks. I will now turn the call back over to the operator for questions.

Operator: [Operator Instructions] Our first question will come from Matthew Erdner with Jones Trading. Your line is open.

Matthew Erdner: Hey. Good morning guys. Thanks for taking the question. Could you talk a little bit about more of the portfolio and the payoffs that occurred during the quarter? Were those expected to come through or some of them are early?

Mark Fogel: Hey Matt, this is Mark. No, those were expected to come through. We had five loan payoffs for through refinancing into permanent vehicles. One of them was an asset that was sold. And then as we indicated, we had one note that we sold – actually two notes that we sold during the quarter, and that really represents the entire amount of the payoffs, but none were not expected.

Matthew Erdner: Got it. And then as kind of a follow-up to that, fully extended, it looks like there is $101 million for the remainder of the year. Should we expect a little more kind of maybe towards the back half some early payments, I guess so to speak. And then as that occurs, what should we expect in terms of portfolio growth because spreads kind of tighten there in terms of I guess multifamily lending. So, I guess what are the opportunities you guys are seeing now, and just kind of talk about where you would like to see the portfolio to get that securitization off?

Mark Fogel: Yes. Great question. Look, I think payoffs are good. It shows that we have a healthy portfolio. And we do expect that there will be more payoffs throughout the year through refinancings or sales of assets. The multifamily market is very healthy. And I think because of that, you are going to see sales and refinancings across the board with all lenders. We expect to grow the portfolio though despite the payoffs. As I indicated last quarter, our expectation is that through the end of the year, we will have net growth in the portfolio somewhere between $300 million and $500 million. There is certainly opportunity in multifamily, but we don’t limit ourselves to just that asset class. We are looking across the board at assets like student housing and self-storage and retail, but multifamily will continue to be the bulk of what we do on a go-forward basis.

Matthew Erdner: Got it. That’s helpful. Thank you, guys.

Operator: Thank you. Our next question will come from Chris Muller with Citizens Capital Markets. Your line is open.

Chris Muller: Hey guys. Thanks for taking the questions. So, I wanted to start on the loan sales. And I think I heard Mark, I think you said that one of the loans was sold at par, but I didn’t catch the other loan. So, was that sold below par? And just any details you could give us would be helpful.

Mark Fogel: Yes. The one was sold at par during the quarter. The other one was on a non-performing hotel property, where we were offered $0.94 on the dollar. We took a $700,000 loss on that asset. And it was, in my view, the right thing to do as opposed to letting the asset continue to not perform within our portfolio.

Chris Muller: Got it. That’s helpful. And then I guess looking at the income statement, you guys touched on this a little bit in your prepared remarks. But it looks like the real estate expenses jumped and REO was kind of a drag on first quarter earnings. Can you talk us through that dynamic? Is it mostly seasonality? And then just a second part of that question, should we expect to see any REO sales in 2025, or is that looking too far ahead?

Mark Fogel: Yes. The drag is, in Q1, I think if you went back to last year, you see the same dynamic. It’s a seasonality issue with respect to the hotels that we own. You will see, I think as we go forward in Q2, Q3 and Q4 that, that will flip over to sort of a flat or positive number versus a loss on REO operations. As far as sales of assets go, we are actively in the market with several of our real estate investments. I don’t have anything to report right now, but my expectation is that the next quarter or maybe the following quarter, we will have something more to report.

Chris Muller: Got it. Very helpful. And if I could just squeeze one more just on your comments for the last question, so I guess with the expectation of $300 million to $500 million of growth in 2025. How is the pipeline looking? And have you seen any impacts on the pipeline given some of the recent market volatility?

Mark Fogel: No. In fact, the pipeline has been stronger than ever. I think there is a lot of opportunities out there. We are quoting deals more so than ever at this point. I think – in fact, the volatility has caused some of the lenders to move to the sidelines and weight, which is pushing a lot more deals, our way in the ways of those that are continuing to be active. So we see a lot of really good opportunities, and we are absolutely quoting three to four deals a day, and I expect that growth will not be a problem along the lines of what I mentioned earlier.

Chris Muller: Got it. That’s great to hear. Look forward to seeing the story play out this year and thanks for taking the questions.

Mark Fogel: Thank you.

Operator: [Operator Instructions] And it appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

Mark Fogel: Thank you everyone for joining our call. We look forward to gathering again in Q2.

Operator: Thank you. Ladies and gentlemen, this concludes today’s event. You may now disconnect.