ACRES Commercial Realty(ACR) - 2024 Q3 - Quarterly Report

Financial Position - Total assets decreased to $2,010,336 thousand as of September 30, 2024, from$2,196,105 thousand as of December 31, 2023, representing a decline of approximately 8.5%[6] - Total liabilities decreased to $1,563,444 thousand from$1,749,890 thousand, reflecting a decline of about 10.6%[7] - Total stockholders' equity increased slightly to $436,340 thousand from$435,796 thousand, an increase of approximately 0.1%[7] - Cash and cash equivalents decreased to $70,074 thousand from$83,449 thousand, a reduction of about 16.0%[6] - Investments in real estate decreased to $89,379 thousand from$157,621 thousand, a significant decline of about 43.3%[6] - Properties held for sale increased to $200,194 thousand from$62,605 thousand, indicating a substantial increase of approximately 219.5%[6] Revenue and Income - Total revenues for the three months ended September 30, 2024, were $22,353, a decrease of 6.9$24,006 in the same period of 2023[9] - Net interest income for the nine months ended September 30, 2024, was $32,574, down 25.0$43,313 in the prior year[9] - Real estate income increased to $11,857 for the three months ended September 30, 2024, compared to$9,316 in the same period of 2023, reflecting a growth of 27.4%[9] - Net income for the three months ended September 30, 2024, was $8,054, up 6.4$7,567 in the same period of 2023[10] - Comprehensive income allocable to common shares for the three months ended September 30, 2024, was $3,225, slightly down from$3,272 in the same period of 2023[10] Expenses - Total operating expenses for the three months ended September 30, 2024, were $17,136, an increase of 3.5$16,552 in the same period of 2023[9] - The provision for credit losses showed a reversal of $(291) for the three months ended September 30, 2024, compared to a provision of$1,983 in the same period of 2023[9] - The company recorded a net provision for credit losses during the nine months ended September 30, 2024, primarily due to worsening macroeconomic factors[132] Borrowings and Debt - Borrowings decreased to $1,489,229 thousand from$1,676,200 thousand, a reduction of approximately 11.2%[7] - The total outstanding borrowings as of September 30, 2024, amounted to $1,498,189,000, with CRE securitizations accounting for$993,593,000[92] - The company has a senior secured financing facility with a maximum amount of $500 million, which was amended in December 2022 to reflect a senior secured term loan[84] - The company issued$150 million of 5.75% senior unsecured notes due 2026, with redemption options available prior to maturity[89] Investments and Real Estate - The company acquired investments in real estate totaling $28.1 million during the three months ended September 30, 2024, including$9.1 million in real estate investments and $18.3 million in properties held for sale[62] - The company foreclosed on a multifamily loan in August 2024, with a principal balance of$9.3 million, after determining foreclosure was probable[43] - The company recognized a $5.8 million gain upon converting a loan to real estate owned, based on a fair value appraisal of$20.3 million[44] Stockholder Equity and Compensation - The company repurchased $5.3 million of its common stock during the nine months ended September 30, 2024, compared to$2.7 million in the same period of 2023[92] - The company recognized stock-based compensation expense of $833,000 for the three months ended September 30, 2024, compared to$482,000 for the same period in 2023[95] - Total unrecognized compensation costs related to unvested restricted stock were $4.4 million as of September 30, 2024, expected to be recognized over a weighted average period of 3.2 years[97] Cash Flow and Liquidity - Cash provided by operating activities for the nine months ended September 30, 2023, was$18,628,000, down from $36,224,000 in the prior year, indicating a decrease of about 48.5$70.1 million in unrestricted cash and cash equivalents, and $9.6 million in potential proceeds from unlevered financeable CRE loans[201] - Financing activities decreased cash balances by$214.1 million, primarily due to repayments on CRE securitization notes and stock repurchases[204] Credit Quality and Risk Management - The allowance for credit losses increased to $34,699,000 as of September 30, 2024, up from$28,757,000 at the end of 2023, reflecting a provision for credit losses of $5,942,000 during the nine months ended September 30, 2024[42] - The company’s rigorous risk management practices are aimed at maintaining credit quality amid dislocated capital markets and increased delinquencies[151] - The aging analysis indicated that past due loans totaled$99.1 million as of September 30, 2024, with $94.4 million in the 30-59 days category[164] Market Conditions - The office property market continues to face high vacancies and slower leasing activity, impacting borrowers' ability to support their investments[125] - The U.S. Federal Reserve raised the Federal Funds rate by 5.25% in 11 rate hikes between March 2022 and July 2023, affecting the cost of capital and market conditions[124]