The Synergies Behind the ACRES-Exantas Deal

In early August, ACRES Capital announced that it has acquired the management agreement of Exantas Capital Corp, which is a mortgage REIT.

In the process, ACRES Capital CEO Mark Fogel assumed the role of President, CEO and board member of Exantas. Exantas also entered into agreements with both Oaktree and Mass Mutual for new capital commitments aggregating up to $375 million.

Before the deal Exantas has been externally managed by C-III Capital Partners. “The opportunity came along for us to provide some liquidity and take over management Exantas,” Fogel says. “Essentially, we brought in some capital from both Oaktree and Mass Mutual, who are partners with us on our private side of the business, to provide the liquidity that Exantas was seeking without taking over control as external manager at the same time.”

Fogel says that Exantas mainly focuses on “scratch-and-dent” bridge loans and stabilizing bridge loans, which are typically three-year type deals to get the properties to a permanent loan. Fogel says Exantas’ loans generally range from $5 million to $50 million in size. While 70 percent of its portfolio is multifamily, the remaining 30 percent is in self-storage, hospitality, retail and office.

“Our goal is to continue exactly what Exantas was doing, which is to finance the middle market and bring the necessary capital to the table to ensure that they can continue to originate in this space on a go-forward basis,” Fogel says. “Aside from equity capital, the REIT is capitalized by warehouse lines and CLOs [collateralized loan obligations], like most of the other commercial mortgage REITs.”

For ACRES, the appeal of Exantas lies in how the two firms’ middle market lending strategies complement each other.

“ACRES generally is a little bit more opportunistic,” Fogel says. “We do very transitional value-add type situations that don’t necessarily fit commercial mortgage REITs. It’s the step before where a would play.” 

About 35 percent of the ACRES portfolio today is new construction, while the rest is a mix of adaptive reuse and heavy renovation. 

Now when ACRES is lending on a construction or major renovation, it can offer clients visibility into where their next loan could come from. 

“What it [the Exantas deal] really does is when we’re lending up front on a construction loan or major rehab loan on any asset class, we have the flexibility and power to say that we have another arm of our company that can eventually take out your loan,” Fogel says. 

In times of uncertainty, when borrowers don’t know where they’re going to get their next loan from, working with the same lender can provide comfort. 

“It reduces the friction on the refi,” Fogel says. “We know them and they know us. They know what they’re getting themselves into. It’s really just a change in interest rate.”