ACRES Commercial Realty Corp. [ACR] Filings

10-Q 1 acr-20230630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number: 1-32733

ACRES COMMERCIAL REALTY CORP.

(Exact name of registrant as specified in its charter)


Maryland		20-2287134
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
390 RXR Plaza, Uniondale, New York 11556
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 516-535-0015
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ACR	New York Stock Exchange
8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock	ACRPrC	New York Stock Exchange
7.875% Series D Cumulative Redeemable Preferred Stock	ACRPrD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

The number of outstanding shares of the registrant’s common stock on August 4, 2023 was 8,491,979 shares.

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT

ON FORM 10-Q


		PAGE
PART I		3
Item 1:	Financial Statements	3
	Consolidated Balance Sheets – June 30, 2023 (unaudited) and December 31, 2022	3
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	5
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, 2023 and 2022 and June 30, 2023 and 2022	7
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2023 and 2022	9
	Notes to Consolidated Financial Statements – June 30, 2023 (unaudited)	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4:	Controls and Procedures	75
PART II		76
Item 1:	Legal Proceedings	76
Item 1A:	Risk Factors	76
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 5:	Other Information	76
Item 6:	Exhibits	77
SIGNATURES		81

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PART I

ITEM 1. FINANCIAL STATEMENTS

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2023			December 31, 2022
	(unaudited)
ASSETS (1)
Cash and cash equivalents	$	57,112		$	66,232
Restricted cash		15,251			38,579
Accrued interest receivable		12,615			11,969
CRE loans		1,963,740			2,057,590
Less: allowance for credit losses		(25,651	)		(18,803	)
CRE loans, net		1,938,089			2,038,787
Loan receivable - related party		11,125			11,275
Investments in unconsolidated entities		1,548			1,548
Properties held for sale		61,565			53,769
Investments in real estate		137,363			120,968
Right of use assets		20,061			20,281
Intangible assets		8,376			8,880
Other assets		3,551			4,364
Total assets	$	2,266,656		$	2,376,652
LIABILITIES (2)
Accounts payable and other liabilities	$	15,597		$	10,391
Management fee payable - related party		261			898
Accrued interest payable		7,181			6,921
Borrowings		1,749,199			1,867,033
Lease liabilities		43,988			43,695
Distributions payable		3,262			3,262
Accrued tax liability		142			113
Liabilities held for sale		3,025			3,025
Total liabilities		1,822,655			1,935,338
EQUITY
Preferred stock, par value $0.001: 10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,800,000 and 4,800,000 shares issued and outstanding		5			5
Preferred stock, par value $0.001: 6,800,000 shares authorized 7.875% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,607,857 and 4,607,857 shares issued and outstanding		5			5
Common stock, par value $0.001: 41,666,666 shares authorized; 8,517,595 and 8,708,100 shares issued and outstanding (including 416,675 and 583,333 unvested restricted shares)		9			9
Additional paid-in capital		1,174,094			1,174,202
Accumulated other comprehensive loss		(5,604	)		(6,394	)
Distributions in excess of earnings		(733,958	)		(732,359	)
Total stockholders’ equity		434,551			435,468
Non-controlling interests		9,450			5,846
Total equity		444,001			441,314
TOTAL LIABILITIES AND EQUITY	$	2,266,656		$	2,376,652

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

(in thousands, except share and per share data)


	June 30, 2023		December 31, 2022
	(unaudited)
(1) Assets of consolidated variable interest entities (“VIEs”) included in total assets above:
Restricted cash	$	14,483	$	38,180
Accrued interest receivable		9,144		8,184
CRE loans, pledged as collateral (3)		1,481,255		1,456,649
Other assets		83		119
Total assets of consolidated VIEs	$	1,504,965	$	1,503,132
(2) Liabilities of consolidated VIEs included in total liabilities above:
Accounts payable and other liabilities	$	122	$	93
Accrued interest payable		3,305		3,083
Borrowings		1,234,303		1,233,556
Total liabilities of consolidated VIEs	$	1,237,730	$	1,236,732

(3)

Excludes the allowance for credit losses.

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
REVENUES
Interest income:
CRE loans	$	46,351		$	26,964		$	90,821		$	49,621
Other		797			55			1,656			74
Total interest income		47,148			27,019			92,477			49,695
Interest expense		32,442			15,745			63,817			30,652
Net interest income		14,706			11,274			28,660			19,043
Real estate income		8,879			8,777			15,950			11,915
Other revenue		37			19			70			35
Total revenues		23,622			20,070			44,680			30,993
OPERATING EXPENSES
General and administrative		2,348			2,353			5,327			5,810
Real estate expenses		10,492			9,162			19,352			13,956
Management fees - related party		1,890			1,672			3,663			3,354
Equity compensation - related party		719			991			1,613			1,735
Corporate depreciation and amortization		23			21			46			43
Provision for (reversal of) credit losses, net		2,700			524			7,796			(1,278	)
Total operating expenses		18,172			14,723			37,797			23,620
		5,450			5,347			6,883			7,373
OTHER INCOME (EXPENSE)
Loss on extinguishment of debt		—			—			—			(460	)
Gain on sale of real estate		—			—			745			—
Other income		242			175			352			973
Total other income		242			175			1,097			513
INCOME BEFORE TAXES		5,692			5,522			7,980			7,886
Income tax expense		(134	)		—			(129	)		(280	)
NET INCOME		5,558			5,522			7,851			7,606
Net income allocated to preferred shares		(4,856	)		(4,856	)		(9,711	)		(9,711	)
Net loss allocable to non-controlling interest, net of taxes		115			24			261			24
NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES	$	817		$	690		$	(1,599	)	$	(2,081	)
NET INCOME (LOSS) PER COMMON SHARE - BASIC	$	0.10		$	0.08		$	(0.19	)	$	(0.23	)
NET INCOME (LOSS) PER COMMON SHARE - DILUTED	$	0.10		$	0.08		$	(0.19	)	$	(0.23	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		8,451,973			8,888,461			8,476,059			8,992,142
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		8,534,558			8,914,172			8,476,059			8,992,142

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Net income	$	5,558		$	5,522		$	7,851		$	7,606
Other comprehensive income:
Reclassification adjustments associated with net unrealized losses from interest rate swaps included in net income		397			461			790			917
Total other comprehensive income		397			461			790			917
Comprehensive income before allocation to preferred shares		5,955			5,983			8,641			8,523
Net loss allocated to non-controlling interests shares		115			24			261			24
Net income allocated to preferred shares		(4,856	)		(4,856	)		(9,711	)		(9,711	)
Comprehensive income (loss) allocable to common shares	$	1,214		$	1,151		$	(809	)	$	(1,164	)

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY

ACRES Commercial Realty Corp. [ACR] Filings
ACRES Commercial Realty Corp. [ACR-PC] Filings
ACRES Commercial Realty Corp. [ACR-PD] Filings
10-Q	[2023-08-07]
10-Q	[2023-05-08]
10-K	[2023-03-07]
10-Q	[2022-11-07]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-03-09]
10-Q	[2021-11-09]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-12]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-03-10]
10-Q	[2019-11-06]
10-Q	[2019-08-07]
10-Q	[2019-05-09]
10-K	[2019-03-11]
10-Q	[2018-11-07]
10-Q	[2018-08-08]
10-Q	[2018-05-10]
10-K	[2018-03-16]
10-Q	[2017-11-09]
10-Q	[2017-08-08]
10-Q	[2017-05-10]
10-K	[2017-03-16]
10-Q	[2016-11-14]
10-Q	[2016-08-09]
10-Q	[2016-05-10]
10-K	[2016-03-10]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-11]
10-K	[2015-03-02]
10-Q	[2014-11-10]
10-Q	[2014-08-08]
10-Q	[2014-05-09]
10-K	[2014-03-03]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-Q	[2013-05-10]
10-K	[2013-03-18]
10-Q	[2012-11-09]
10-Q	[2012-08-07]
10-Q	[2012-05-09]
10-K	[2012-03-15]

ACRES Commercial Realty Corp. [ACR] Filings

ACRES Commercial Realty Corp. [ACR-PC] Filings

ACRES Commercial Realty Corp. [ACR-PD] Filings