ACRES Commercial Realty Corp.
For the period ended Mar 31, 2025. Filed May 8, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 8, 2025
ACR$12.05-8.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0000950170-24-122460
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0000950170-25-065958
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 326 previous paragraphs and 316 current paragraphs.
159 unchanged; 119 reworded; 35 added; 42 removed; 6 previous and 3 current paragraphs rearranged.
Tables are not compared: 36 previous and 29 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
At December 31, 2024, the CECL allowance on our CRE loan portfolio was $32.8 million or 2.2% of our $1.5 billion loan portfolio. During the year ended December 31, 2024, we recorded a net provision for credit losses primarily driven by a general worsening of macroeconomic factors over the year as well as an increase in modeled credit risk in our portfolio offset by loan payoffs. We also recorded a charge-off of $700,000 for one CRE whole loan held for sale.
Current report
Senior secured financing facility. The decrease of $208,000 for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to a decrease in the benchmark rate over the comparative periods.
Current report
CRE - term reinvestment financing facility. The increase of $2.2 million was attributable to the close of our new CRE term reinvestment financing facility.
Current report
Includes amortization expense of $175,000 and $164,000 for the three months ended March 31, 2025 and 2024, respectively.
Current report
The decrease in general and administrative expense for the comparative three months ended March 31, 2025 and 2024 was primarily attributable to decreased professional services related to audit expenses being accrued monthly and a decrease in legal expenses related to CRE loan assets, partially offset by (i) an increase in allocated percentages of wages and benefits from the Manager, (ii) consent fees paid to prior auditors to reissue their prior year opinion and (iii) an increase in construction consulting fees paid to third parties.
Current report
Aggregate other income decreased $6.4 million for the comparative three months ended March 31, 2025 and 2024. We attribute the change to the following:
Current report
Includes one mezzanine loan with a coupon rate of 10% that is non-accrual and one mezzanine loan with a coupon rate of 15%.
Current report
During the three months ended March 31, 2025, we recorded a reversal of expected credit losses of $1.7 million, primarily attributable to loan payoffs and qualitative adjustments to macroeconomic factors.
Current report
Includes two novated CRE whole loans that resulted from loan workouts.
Current report
Includes $3.3 million of deferred debt issuance costs at March 31, 2025.
Current report
Includes $2.0 million and $2.2 million of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.
Current report
Includes $988,000 of deferred debt issuance costs at December 31, 2024.
Current report
Includes $1.2 million and $539,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively, which includes $831,000 of deferred debt issuance costs at March 31, 2025 from another term warehouse financing facility with no balance.
Current report
There were no deferred debt issuance costs at March 31, 2025. Includes $52,000 of deferred debt issuance costs at December 31, 2024.
Current report
Includes $200,000 and $101,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.
Current report
Includes $401,000 and $405,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.
Current report
CRE - Term Reinvestment Financing Facility
Current report
In March 2025, an indirect wholly-owned subsidiary of ours entered into a master repurchase agreement (the “JPMorgan Chase 2025 Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) to finance existing CRE loans and the origination of CRE loans. The JPMorgan Chase 2025 Facility has a maximum facility amount of $939.9 million, provides match term funding, charges interest of one-month benchmark plus a 1.75% spread and matures as of the latest maturity date of any purchased asset. The JPMorgan Chase 2025 Facility includes a two-year reinvestment period enabling the reinvestment of principal proceeds from asset repayments into qualifying replacement assets.
Current report
In connection with the JPMorgan Chase 2025 Facility, we provided "bad act" guaranties pursuant to a guarantee agreement (the "2025 JPMorgan Chase Guarantee") where we are liable for 100% of the repurchase price of the purchase assets and JPMorgan Chase’s losses, costs and expenses only upon the occurrence of certain customary bad acts. The JPMorgan Chase 2025 Guarantee includes certain financial covenants required of us, including required liquidity, required capital, ratios of total indebtedness to equity and EBITDA requirements. The JPMorgan Chase 2025 Facility also includes minimum interest coverage requirements and maximum look through LTV requirements. Also, ACRES Realty Funding, Inc. ("ACRES RF"), the direct owner of the wholly-owned subsidiary borrower, executed a pledge agreement with JPMorgan Chase pursuant to which it pledged and granted to JPMorgan Chase a continuing security interest in any and all of its right, title and interest in and to the wholly-owned subsidiary, including all distributions, proceeds, payments, income and profits from its interests in the wholly-owned subsidiary.
Current report
The JPMorgan Chase 2025 Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement, including but not limited to: payment defaults; bankruptcy or insolvency proceedings; a change of control of the ACRES SPE 2025-1, LLC, ("Seller SPE") or of us; breaches of covenants and/or certain representations and warranties; and a judgment in an amount greater than $250,000 against the Seller SPE or ACRES RF or $10.0 million against us. The remedies for such events of default are also customary for this type of financing arrangement and include the acceleration of the principal amount outstanding under the JPMorgan Chase 2025 Facility and the liquidation by JPMorgan Chase of purchased assets then subject to the JPMorgan Chase 2025 Facility.
Current report
In March 2025, we amended and restated our loan to ACRES Capital Corp. to: (i) be issued by ACRES Holdings, LLC, (ii) provide for a six month option for ACRES Holdings, LLC to draw an additional balance of $7.0 million, and (iii) if such option is exercised, (a) to extend the maturity to July 31, 2031, (b) increase the interest rate to 5% and (c) increase the monthly amortization to $50,000.
Current report
CRE - Term Reinvestment Financing Facility: Our term reinvestment financing facility effectively allows us to borrow against loans that we own. Under this agreement, we transfer loans to a counterparty and agree to purchase the same loans from the counterparty at a price equal to the transfer price plus interest. The counterparty retains the sole discretion over whether to purchase the loan from us. The facility includes a two-year reinvestment period enabling the reinvestment of principal proceeds from asset repayments into qualifying assets, provided the proceeds are reinvested within 90 days of the payoff. We also can acquire and finance the future funding participations of the portfolio collateral, subject to the discretion of the counterparty.
Current report
In March 2025, we exercised the optional redemption of both ACR 2021-FL1 and ACR 2021-FL2. We also entered into a master repurchase agreement with JPMorgan Chase to finance existing CRE loans as well as the origination of new CRE loans. In connection with the financing, we repaid (i) all of the outstanding senior notes at the ACR 2021-FL1 and ACR 2021-FL2 securitizations, (ii) all of the outstanding borrowings on the existing JPMorgan Chase facility and (iii) one borrowing from the Morgan Stanley facility, from the proceeds of the new financing facility. We recognized a charge of $1.5 million upon the redemption of the ACR 2021-FL1 and ACR 2021-FL2 securitizations from the recognition of unamortized deferred debt issuance costs associated with those securitizations.
Current report
Excludes accrued interest payable of $2.1 million and deferred debt issuance costs of $3.3 million.
Current report
Excludes deferred debt issuance costs of $2.0 million.
Current report
Excludes accrued interest payable of $111,000 and deferred debt issuance costs of $1.2 million
Current report
Excludes deferred debt issuance costs of $200,000.
Current report
Excludes deferred debt issuance costs of $401,000.
Current report
Principal outstanding excludes accrued interest payable of $2.1 million and deferred debt issuance costs of $3.3 million at March 31, 2025.
Current report
Principal outstanding excludes accrued interest payable of $270,000 and $274,000 and deferred debt issuance costs of $2.0 million and $2.2 million at March 31, 2025 and December 31, 2024, respectively.
Current report
Includes $2.1 million of accrued interest payable.
Current report
Excludes $270,000 of accrued interest payable.
Current report
Includes $111,000 of accrued interest payable.
Current report
Excludes $478,000 of accrued interest payable.
Current report
At March 31, 2025, we determined that there are no VIEs to be consolidated.
Removed paragraphs (42)
Previous report
At December 31, 2023, the CECL allowance on our CRE loan portfolio was $28.8 million or 1.5% of our $1.9 billion loan portfolio. During the year ended December 31, 2023, we recorded a provision for credit losses primarily attributable to the modeled increases in general portfolio credit risk compounded by ongoing uncertainty around the commercial real estate market’s current macroeconomic outlook, which affected our borrowers’ business plan execution and general market liquidity. In June 2023, we received the deed-in-lieu of foreclosure to a property formerly collateralizing an office loan in the East North Central region with a principal balance of $22.8 million, which resulted in a charge off of $948,000 against the allowance for credit losses.
Previous report
Net Change in Interest Expense for the Comparative three and nine months ended September 30, 2024 and 2023:
Previous report
Senior secured financing facility. The increase of $258,000 and $669,000 for the comparative three and nine months ended September 30, 2024 and 2023, respectively, was primarily attributable to an increase in borrowings and the benchmark rate over the comparative periods.
Previous report
Includes amortization expense of $170,000 and $159,000 for the three months ended September 30, 2024 and 2023, respectively.
Previous report
Includes fee income of $5.1 million and $6.0 million on our floating-rate CRE whole loans for the nine months ended September 30, 2024 and 2023, respectively.
Previous report
Includes amortization expense of $501,000 and $471,000 for the nine months ended September 30, 2024 and 2023, respectively.
Previous report
The increase in general and administrative expense for the comparative three and nine months ended September 30, 2024 and 2023 was primarily attributable to an increase related to the increase in professional services due to timing of the audit expense accrual.
Previous report
Aggregate other income increased $2.8 million and $9.1 million for the comparative three and nine months ended September 30, 2024 and 2023, respectively. We attribute the change to the following:
Previous report
Gain on sale of real estate. The decrease of $745,000 during the comparative nine months ended September 30, 2024 and 2023 was primarily attributed to the sale of a hotel property in the Northeast region in February 2023 that generated a non-recurring gain of $745,000. No sales of real estate occurred in the nine months ended September 30, 2024.
Previous report
Other Income. The increase of $1.4 million during the comparative nine months ended September 30, 2024 and 2023 is primarily attributed to the reversal of warranty reserves and representations related to a discontinued residential lending business.
Previous report
During the three months ended September 30, 2024, we recorded a reversal of expected credit losses of $291,000, primarily attributable to a decrease in modeled credit risk resulting from payoffs and net improvements in property-level performance, offset by a minor worsening of macroeconomic factors. During the nine months ended September 30, 2024, provisions of expected credit losses in the first and second quarters of 2024 outpaced the reversal during the third quarter of 2024, resulting in a net provision of $5.9 million, primarily driven by worsening macroeconomic factors, including, but not limited to, higher interest rates lasting longer than expected pressuring CRE pricing, offset, in part, by a decrease in modeled credit risk resulting from payoffs and net improvements in property-level performance.
Previous report
At September 30, 2024 and December 31, 2023, we individually evaluated the following loan for impairment:
Previous report
In fiscal year 2024, we individually evaluated one additional loan for which a resolution was reached:
Previous report
A multifamily loan in the Southeast region, with a principal balance of $9.3 million for which foreclosure was determined to be probable. In August 2024, we foreclosed on the loan.
Previous report
At December 31, 2023, we individually evaluated three additional loans for which resolutions were reached in fiscal year 2024:
Previous report
A retail loan in the Northeast region, with a principal balance of $8.0 million at December 31, 2023, for which foreclosure was determined to be probable. The loan was modified in February 2021 to extend its maturity to December 2021. In December 2021, this loan entered payment default and was placed on nonaccrual status. The borrower filed for bankruptcy in 2023 and the property was sold to a third-party bidder at auction in February 2024. The sale closed in April 2024, at a purchase price of $8.3 million and the loan was paid off at par.
Previous report
An office loan in the East North Central region with a principal balance of $14.0 million at December 31, 2023. During the year ended December 31, 2023, the loan entered into payment default and was placed on nonaccrual status. The loan had an "as-is" appraised value in excess of its principal and interest balances, and, as such, had no allowance for CECL at December 31, 2023. In March 2024, we accepted the deed-in-lieu of foreclosure in full satisfaction of the loan and recognized a $5.8 million gain in the consolidated statement of operations upon conversion of the loan to real estate owned based on the property's fair value of $20.3 million as determined by a current appraisal. Upon receipt, the property was immediately contributed to a joint venture with an independent third party at its aforementioned fair value, and our investment in that joint venture is included in investments in unconsolidated entities on the consolidated balance sheet.
Previous report
An office loan in the Southwest region, with a principal balance of $19.1 million at December 31, 2023, for which foreclosure was determined to be probable. The loan had an initial maturity of March 2022 and was modified three times to extend its maturity to June 2022. The loan entered into payment default and was placed on nonaccrual status. However, in exchange for payments, comprising principal paydowns, interest payments and the reimbursement of certain legal fees, received between October 2022 and May 2024, we agreed to temporarily defer our right to foreclose on the property. In July 2024, we foreclosed on the loan. At the time of foreclosure, the loan had a principal balance of $14.4 million.
Previous report
A multifamily loan with an amortized cost of $70.7 million, representing 4.5% of the total amortized cost of the portfolio, was modified to: (i) extend its maturity from January 2025 to January 2026 and (ii) provide for 2.00% per annum of the interest rate to be deferred until payoff. We also entered into a mezzanine loan with a total commitment of $6.0 million, of which $3.0 million was funded as of September 30, 2024. The loan has a fixed rate of 15.00% that accrues and will be due at payoff in January 2026. In connection with the modification, the borrower renewed the interest rate cap.
Previous report
Includes $2.4 million and $2.9 million of deferred debt issuance costs at September 30, 2024 and December 31, 2023, respectively.
Previous report
Includes $1.1 million and $1.6 million of deferred debt issuance costs at September 30, 2024 and December 31, 2023, respectively.
Previous report
Includes $71,000 and $647,000 of deferred debt issuance costs at September 30, 2024 and December 31, 2023, respectively.
Previous report
Includes $121,000 and $259,000 of deferred debt issuance costs at September 30, 2024 and December 31, 2023, respectively.
Previous report
Includes $405,000 and $1.3 million of deferred debt issuance costs at September 30, 2024 and December 31, 2023, respectively.
Previous report
Includes $408,000 and $419,000 of deferred debt issuance costs at September 30, 2024 and December 31, 2023, respectively.
Previous report
At September 30, 2024, we retained equity in two CRE loan securitizations that we executed, as follows:
Previous report
Excludes deferred debt issuance costs of $2.4 million.
Previous report
Excludes accrued interest payable of $461,000 and deferred debt issuance costs of $1.2 million.
Previous report
In November 2024, the Morgan Stanley Facility was extended to November 2025.
Previous report
Excludes deferred debt issuance costs of $121,000.
Previous report
Excludes deferred debt issuance costs of $405,000.
Previous report
Excludes deferred debt issuance costs of $408,000.
Previous report
Principal outstanding excludes accrued interest payable of $280,000 and $311,000 and deferred debt issuance costs of $2.4 million and $2.9 million at September 30, 2024 and December 31, 2023, respectively.
Previous report
The following table sets forth the distributions received by us and coverage test summaries for our active securitizations for the periods presented (in thousands):
Previous report
Overcollateralization cushion represents the amount by which the collateral held by the securitization issuer exceeds the minimum amount required.
Previous report
Interest coverage includes annualized amounts based on the most recent trustee statements.
Previous report
Interest coverage cushion represents the amount by which annualized interest income expected exceeds the annualized amount payable on our active securitizations.
Previous report
The reinvestment period is the period in which principal proceeds received may be used to acquire CRE loans or the funded commitments of existing collateral for reinvestment into the securitization.
Previous report
Excludes $280,000 of accrued interest payable.
Previous report
Includes $461,000 of accrued interest payable.
Showing the first 40 of 42 passages. Open the source sections for the rest.
Reworded paragraphs (119)
Previous wording
We are a Maryland corporation and an externally managed real estate investment trust ("REIT") that is primarily focused on originating, holding and managing commercial real estate ("CRE") mortgage loans and equity investments in commercial real estate properties through direct ownership and joint ventures. Our manager is ACRES Capital, LLC (our "Manager"), a subsidiary of ACRES Capital Corp. (collectively, "ACRES"), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial properties in top United States ("U.S.") markets. Our Manager draws upon the management team of ACRES and its collective investment experience to provide its services. Our longer term objective is to provide our stockholders with total returns over time, including quarterly distributions and capital appreciation, while seeking to manage the risks associated with our investment strategies as well as to maximize long-term stockholder value by maintaining stability through our available liquidity and diversified CRE loan portfolio. Our short term strategy is to drive book value ("BV") growth over the coming years by utilizing our NOL carryforwards of $32.1 million and a portion of our net capital loss carryforwards of $121.9 million, each at September 30, 2024. By retaining future earnings, we can grow our investable base and selectively deploy the anticipated capital growth into new whole loan originations at attractive yields, which we expect will grow our earnings available for distribution.
Current wording
We are a Maryland corporation and an externally managed real estate investment trust ("REIT") that is primarily focused on originating, holding and managing commercial real estate ("CRE") mortgage loans and equity investments in commercial real estate properties through direct ownership and joint ventures. Our manager is ACRES Capital, LLC (our "Manager"), a subsidiary of ACRES Capital Corp. (collectively, "ACRES"), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial properties in top United States ("U.S.") markets. Our Manager draws upon the management team of ACRES and its collective investment experience to provide its services. Our longer term objective is to provide our stockholders with total returns over time, including quarterly distributions and capital appreciation, while seeking to manage the risks associated with our investment strategies as well as to maximize long-term stockholder value by maintaining stability through our available liquidity and diversified CRE loan portfolio. Our short-term strategy is to drive book value ("BV") growth by utilizing both our NOL carryforwards of $32.1 million, which may be used over the coming years, and a portion of our net capital loss carryforwards of $121.9 million, which expire on December 31, 2025 (each balance as of March 31, 2025). By retaining future earnings, we can grow our investable base and selectively deploy the anticipated capital growth into new whole loan originations at attractive yields, which we expect will grow our earnings available for distribution.
Previous wording
Currently, markets are grappling with inflation and the prospect of having higher interest rates for longer than originally forecasted. These market pressures have caused continued disruption in many market segments, including the financial services, real estate and credit markets and these disruptions have affected the availability and the cost of capital. The increase in the cost of capital is expected to cause dislocations in various investment and financing markets in which we participate as we and other market participants adjust to the new financing environment.
Current wording
Currently, markets are grappling with trade tensions, geopolitical tensions, the risk of increased tariffs, inflation and elevated interest rates. These market pressures have caused continued disruption in many market segments, including the financial services, real estate and credit markets and these disruptions have affected the availability and the cost of capital. The increase in the cost of capital is expected to cause dislocations in various investment and financing markets in which we participate as we and other market participants adjust to the new financing environment.
Previous wording
The U.S. Federal Reserve raised the Federal Funds rate by 5.25% in 11 rate hikes between March 2022 and July 2023 to combat inflation. While the U.S Federal Reserve has lowered rates in September 2024, there is no certainty with respect to the timing and pace of potential future decreases or if such decreases will continue to occur. Interest rates may remain at or near recent highs, which creates further uncertainty for the economy and our borrowers. A rising interest rate environment generally correlates to increases in our net income. However, increases in interest rates may adversely affect our existing borrowers and could lead to nonperformance, i.e. the borrower’s inability to pay debt service. Lowering rates and decreasing costs may encourage consumer spending and accelerate corporate profit growth, which may positively impact the collateral underlying our loans and positively impact our borrowers' ability to sell or refinance in the current market.
Current wording
The U.S. Federal Reserve raised the Federal Funds rate by 5.25% in 11 rate hikes between March 2022 and July 2023 to combat inflation. While the U.S Federal Reserve has lowered rates in September, November and December 2024, there is no certainty with respect to the timing and pace of potential future decreases or if such decreases will continue to occur. Interest rates may remain at or near recent highs, which creates further uncertainty for the economy and our borrowers. A rising interest rate environment generally correlates to increases in our net income. However, increases in interest rates may adversely affect our existing borrowers and could lead to nonperformance, i.e. the borrower’s inability to pay debt service. Lowering rates and decreasing costs may encourage consumer spending and accelerate corporate profit growth, which may positively impact the collateral underlying our loans and positively impact our borrowers' ability to sell or refinance in the current market; however, lower rates would also correlate to decreases in our net income.
Previous wording
Additionally, the office property market continues to experience high vacancies, slower leasing activity and current tenants reevaluating their needs for physical office space due to remote-work trends across the country. These factors, coupled with inflation, historically higher interest rates and dislocations in market liquidity, have converged to create higher levels of uncertainty surrounding property values, which in turn, also negatively impact borrowers' ability and willingness to financially support and standby their investments in their office properties, their abilities to sell or refinance their positions in the current market and ultimately our financial results.
Current wording
Furthermore, the office property market continues to experience high vacancies, slower leasing activity and current tenants reevaluating their needs for physical office space due to remote-work trends across the country. These factors, coupled with inflation, historically higher interest rates and dislocations in market liquidity, have converged to create higher levels of uncertainty surrounding property values, which in turn, also negatively impact borrowers' ability and willingness to financially support and standby their investments in their office properties, their abilities to sell or refinance their positions in the current market and ultimately our financial results.
Previous wording
We originate transitional floating-rate CRE loans with a target size between $10.0 million and $100.0 million. During the nine months ended September 30, 2024, we did not originate any new floating-rate CRE loans. Loan payoffs during the nine months ended September 30, 2024 were $270.1 million, along with loan foreclosures of $37.7 million, offset by net funded commitments of $28.1 million, producing a net decrease to the portfolio of $279.7 million. During the year ended December 31, 2023, we selectively originated three floating-rate CRE whole loans with total commitments of $68.2 million. Loan payoffs during the year ended December 31, 2023 were $293.1 million, offset by net funded commitments of $40.5 million, producing a net decrease to the portfolio of $184.4 million.
Current wording
We originate transitional floating-rate CRE loans with a target size between $10.0 million and $100.0 million. During the three months ended March 31, 2025, we originated one new $15.0 million CRE mezzanine loan. Loan payoffs during the three months ended March 31, 2025 were $147.7 million, offset by net funded commitments of $12.0 million, producing a net decrease to the portfolio of $120.7 million. During the year ended December 31, 2024, we selectively originated one floating-rate CRE loan, with a total commitment of $47.9 million. Loan payoffs during the year ended December 31, 2024 were $377.6 million, along with loan foreclosures of $37.7 million, partially offset by net funded commitments of $5.9 million, producing a net decrease to the portfolio of $361.5 million.
Previous wording
Our CRE loan portfolio, which had carrying values of $1.5 billion and $1.8 billion at September 30, 2024 and December 31, 2023, respectively, comprised:
Current wording
Our CRE loan portfolio, which had carrying values of $1.3 billion and $1.5 billion at March 31, 2025 and December 31, 2024, respectively, comprised:
Previous wording
First mortgage loans, which we refer to as whole loans. These loans are typically secured by first liens on CRE property, including the following property types: multifamily, student housing, hospitality, office, self-storage and retail. All but four of our CRE whole loans were current on contractual payments at September 30, 2024.
Current wording
First mortgage loans, which we refer to as whole loans. These loans are typically secured by first liens on CRE property, including the following property types: multifamily, student housing, hospitality, office, self-storage and retail. All but five of our CRE whole loans were current on contractual payments at March 31, 2025.
Previous wording
Mezzanine debt that is senior to borrower’s equity but is subordinated to other third-party debt. These loans are subordinated CRE loans, usually secured by a pledge of the borrower’s equity ownership in the entity that owns the property or by a second lien mortgage on the property. At both September 30, 2024 and December 31, 2023, we had one mezzanine loan included in CRE loans held for investment that had no carrying value. This mezzanine loan was not current on contractual payments at September 30, 2024.
Current wording
Mezzanine debt that is senior to borrower’s equity but is subordinated to other third-party debt. These loans are subordinated CRE loans, usually secured by a pledge of the borrower’s equity ownership in the entity that owns the property or by a second lien mortgage on the property. At March 31, 2025, we had two mezzanine loans included in CRE loans held for investment with a carrying value of $14.2 million. At December 31, 2024, we had one mezzanine loan included in CRE loans held for investment that had no carrying value. This mezzanine loan was not current on contractual payments at both March 31, 2025 and December 31, 2024.
Previous wording
In a business environment where benchmark rates are increasing significantly, cash flows of the CRE assets underlying our loans may not be sufficient to pay debt service on our loans, which could result in non-performance or default. We partially mitigate this risk by generally requiring our borrowers to purchase interest rate cap agreements with non-affiliated, well-capitalized third parties and by selectively requiring our borrowers to have and maintain debt service reserves. These interest rate caps generally mature prior to the maturity date of the loan and the borrowers are required to pay to extend them. In certain cases, the sponsors will need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At September 30, 2024, 76% of the par value of our CRE loan portfolio had interest rate caps or funded debt service reserves in place with a weighted-average maturity of six months.
Current wording
In a business environment where benchmark rates are increasing significantly, cash flows of the CRE assets underlying our loans may not be sufficient to pay debt service on our loans, which could result in non-performance or default. We partially mitigate this risk by generally requiring our borrowers to purchase interest rate cap agreements with non-affiliated, well-capitalized third parties and by selectively requiring our borrowers to have and maintain debt service reserves. These interest rate caps generally mature prior to the maturity date of the loan and the borrowers are required to pay to extend them. In certain cases, the sponsors will need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At March 31, 2025, 79% of the par value of our CRE loan portfolio had interest rate caps or funded debt service reserves in place with a weighted-average maturity of four months.
Previous wording
At September 30, 2024, our par-value $1.6 billion floating-rate CRE loan portfolio had a weighted average benchmark floor of 0.85%, while at December 31, 2023, this floor was 0.70%. With the historical trend of rising benchmark rates, we have seen the coupons on all of our floating-rate assets and debt rise accordingly. Because we have equity invested in each floating-rate loan, and because in all instances the benchmark interest rates are above our loan floors, the rise in interest rates resulted in an increase in our net interest income, which was offset due to the decrease in our floating-rate CRE loan portfolio. See "Interest Rate Risk" in "Item 3: Quantitative and Qualitative Disclosures About Market Risk."
Current wording
At March 31, 2025, our par-value $1.4 billion floating-rate CRE loan portfolio had a weighted average benchmark floor of 1.05%. At December 31, 2024, our par value $1.5 billion floating rate CRE loan portfolio had a weighted average benchmark floor of 0.97%. With the historical trend of rising benchmark rates, we have seen the coupons on all of our floating-rate assets and debt rise accordingly. Because we have equity invested in each floating-rate loan, and because in all instances the benchmark interest rates are above our loan floors, the rise in interest rates resulted in an increase in our net interest income, which was offset due to the decrease in our floating-rate CRE loan portfolio. See "Interest Rate Risk" in "Item 3: Quantitative and Qualitative Disclosures About Market Risk."
Previous wording
Our portfolio comprises loans with a diverse array of collateral types and locations. Multifamily continues to comprise the majority of our portfolio, with 79.4% of our portfolio allocated to multifamily at September 30, 2024 and 79.6% at December 31, 2023. The following charts show our portfolio allocation by property type at September 30, 2024 and December 31, 2023:
Current wording
Our portfolio comprises loans with a diverse array of collateral types and locations. Multifamily continues to comprise the majority of our portfolio, with 76.8% of our portfolio allocated to multifamily at March 31, 2025 and 77.4% at December 31, 2024. The following charts show our portfolio allocation by property type at March 31, 2025 and December 31, 2024:
Previous wording
From time to time, we may acquire real estate property through direct equity investments or as a result of our lending activities. During the first quarter of 2024, we acquired an office property located in the East North Central region via deed-in-lieu of foreclosure that, at acquisition, had a cost basis of $14.0 million and a fair value of $20.3 million. We recognized a $5.8 million gain upon converting the loan to real estate owned and immediately contributed the property into a joint venture with an unrelated third-party, seeking to maximize the property's value through a multifamily conversion. In the third quarter of 2024, we acquired a multifamily property in the Southwest region via foreclosure that, at acquisition, had a cost basis of $30.9 million. No gain or loss was recognized upon conversion of the CRE loan to real estate investment owned, and the property was immediately contributed to a joint venture with an unrelated third-party. We reported this investment as an investment in an unconsolidated entity on our consolidated balance sheet at September 30, 2024. Additionally, we acquired two properties via foreclosure in the third quarter of 2024 that are held as investments in real estate. The first is an office complex located in the Southwest region that, at acquisition, had a fair value of $17.5 million. We recognized a $2.8 million net unrealized gain upon converting the CRE loan to real estate owned. The second acquisition is a multi-family property located in the Southeast region with a cost basis of $9.4 million. No gain or loss occurred upon conversion of the CRE loan to real estate owned.
Current wording
From time to time, we may acquire real estate property through direct equity investments or as a result of our lending activities. We did not acquire any real estate property in the three months ended March 31, 2025.
Previous wording
At September 30, 2024, the net carrying value of our net real estate-related assets and liabilities was $194.5 million on eight properties owned, four of which are included in investments in real estate and four of which are included in properties held for sale on our consolidated balance sheets. The existence of net capital loss carryforwards available until December 31, 2025 allows for potential future capital gains on certain of these investments to be shielded from income taxes.
Current wording
At March 31, 2025, the net carrying value of our net real estate-related assets and liabilities was $177.0 million on seven properties owned, three of which are included in investments in real estate and four of which are included in properties held for sale on our consolidated balance sheets. The existence of net capital loss carryforwards available until December 31, 2025 allows for potential future capital gains on certain of these investments to be shielded from income taxes or there is a requirement to distribute under the REIT tax regulations.
Previous wording
Each of our CRE debt securitizations initially provided for a two-year reinvestment period that allowed us to reinvest CRE loan payoffs and principal paydown proceeds into the securitizations, pending certain eligibility criteria are met and rating agency approval is obtained. The reinvestment periods on our securitizations ended in May 2023 and December 2023, respectively.
Current wording
Each of our CRE debt securitizations initially provided for a two-year reinvestment period that allowed us to reinvest CRE loan payoffs and principal paydown proceeds into the securitizations, pending certain eligibility criteria are met and rating agency approval is obtained. The reinvestment periods on both our securitizations ended in May 2023 and December 2023, respectively.
Previous wording
We reevaluate our current expected credit losses ("CECL") allowance quarterly, incorporating our current expectations of macroeconomic factors considered in the determination of our CECL reserves. At September 30, 2024, the CECL allowance on our CRE loan portfolio was $34.7 million, or 2.2% of our $1.6 billion loan portfolio. During the nine months ended September 30, 2024, we recorded a net provision for credit losses primarily attributable to worsening macroeconomic factors, including, but not limited to, higher interest rates lasting longer than expected pressuring CRE pricing, offset, in part, by a decrease in modeled credit risk resulting from payoffs and net improvements in property-level performance.
Current wording
We reevaluate our current expected credit losses ("CECL") allowance quarterly, incorporating our current expectations of macroeconomic factors considered in the determination of our CECL reserves. At March 31, 2025, the CECL allowance on our CRE loan portfolio was $31.1 million, or 2.3% of our $1.4 billion loan portfolio. During the three months ended March 31, 2025, we recorded a reversal of credit losses primarily attributable to loan payoffs.
Previous wording
Additionally, the decline in our CECL reserves from our highest reserve balance at June 30, 2020 of $61.1 million, or 3.4% of the par balance of our CRE loan portfolio, to our current reserve balance at September 30, 2024 of $34.7 million, or 2.2% of the par balance of our CRE loan portfolio, has been due to the following: the successful resolution of our individually evaluated loans with specific reserves, the overall newer vintage of our CRE loan portfolio (with only 8.6% of the portfolio, at September 30, 2024, being originated prior to the fourth quarter of 2020) as well as the increased percentage allocation of our CRE loan portfolio to multifamily loans over time. Multifamily loans have historically had the lowest credit losses of any asset class, and our percentage allocation of our CRE loan portfolio to multifamily has grown from 58.4% at June 30, 2020 to 79.4% at September 30, 2024.
Current wording
Additionally, the decline in our CECL reserves from our highest reserve balance at June 30, 2020 of $61.1 million, or 3.4% of the par balance of our CRE loan portfolio, to our current reserve balance at March 31, 2025 of $31.1 million, or 2.3% of the par balance of our CRE loan portfolio, has been due to the following: the successful resolution of our individually evaluated loans with specific reserves, the overall newer vintage of our CRE loan portfolio (with only 9.9% of the portfolio, at March 31, 2025, being originated prior to the fourth quarter of 2020) as well as the increased percentage allocation of our CRE loan portfolio to multifamily loans over time. Multifamily loans have historically had the lowest credit losses of any asset class, and our percentage allocation of our CRE loan portfolio to multifamily has grown from 58.4% at June 30, 2020 to 76.8% at March 31, 2025.
Previous wording
Common stock book value was $27.92 per share at September 30, 2024, a $1.27 per share increase from December 31, 2023.
Current wording
Common stock book value was $28.50 per share at March 31, 2025, a $0.37 per share decrease from December 31, 2024.
Previous wording
Our net income allocable to common shares for the three months ended September 30, 2024 was $2.8 million or $0.37 per share-basic ($0.36 per share-diluted) as compared to net income allocable to common shares for the three months ended September 30, 2023 of $2.9 million or $0.34 per share-basic ($0.33 per share-diluted). Our net income allocable to common shares for the nine months ended September 30, 2024 was $5.0 million, or $0.65 per share-basic ($0.63 per share-diluted), as compared to net income allocable to common shares for the nine months ended September 30, 2023 of $1.3 million, or $0.15 per share-basic ($0.15 per share-diluted).
Current wording
Our net loss allocable to common shares for the three months ended March 31, 2025 was $5.9 million or $(0.80) per share-basic ($(0.80) per share-diluted) as compared to net income allocable to common shares for the three months ended March 31, 2024 of $556,000 or $0.07 per share-basic ($0.07 per share-diluted).
Previous wording
The following tables analyze the change in interest income and interest expense for the comparative three and nine months ended September 30, 2024 and 2023 by changes in volume and changes in rates. The changes attributable to the combined changes in volume and rate have been allocated proportionately, based on absolute values, to the changes due to volume and changes due to rates (dollars in thousands, except amounts in footnotes):
Current wording
The following tables analyze the change in interest income and interest expense for the comparative three months ended March 31, 2025 and 2024 by changes in volume and changes in rates. The changes attributable to the combined changes in volume and rate have been allocated proportionately, based on absolute values, to the changes due to volume and changes due to rates (dollars in thousands, except amounts in footnotes):
Previous wording
Includes a decrease in fee income of $146,000 recognized on our CRE whole loans that was due to changes in volume.
Current wording
Includes a decrease in fee income of $961,000 recognized on our CRE whole loans that was due to changes in volume.
Previous wording
Net Change in Interest Income for the Comparative three and nine months ended September 30, 2024 and 2023:
Current wording
Net Change in Interest Income for the Comparative three months ended March 31, 2025 and 2024:
Previous wording
Aggregate interest income decreased by $8.9 million and $17.7 million for the comparative three and nine months ended September 30, 2024 and 2023, respectively. We attribute the change to the following:
Current wording
Aggregate interest income decreased by $13.9 million for the comparative three months ended March 31, 2025 and 2024. We attribute the change to the following:
Previous wording
CRE whole loans. The decrease of $8.9 million for the comparative three months ended September 30, 2024 and 2023 was primarily attributable to a decrease in total par value of our CRE portfolio resulting from loan payoffs and foreclosures and the benchmark rate over the comparative period. The decrease of $17.5 million for the comparative nine months ended September 30, 2024 and 2023 was primarily attributable to a decrease in total par value of our CRE portfolio, offset, in part, by an increase in the benchmark rate over the comparative period.
Current wording
CRE whole loans. The decrease of $13.5 million for the comparative three months ended March 31, 2025 and 2024 was primarily attributable to a decrease in (i) total par value of our CRE portfolio resulting from loan payoffs and foreclosures and (ii) the benchmark rate over the comparative period.
Previous wording
Other. The decrease of $52,000 and $237,000 for the comparative three and nine months ended September 30, 2024 and 2023, respectively, was primarily attributable to a decrease in restricted cash in our CRE securitizations, offset, in part, by an increase in yields on our interest earning money market accounts.
Current wording
Other. The decrease of $488,000 for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to a decrease in (i) restricted cash in our CRE securitizations and (ii) yields on our interest earning money market accounts.
Previous wording
Aggregate interest expense decreased by $4.7 million and $7.0 million for the comparative three and nine months ended September 30, 2024 and 2023, respectively. We attribute the change to the following:
Current wording
Aggregate interest expense decreased by $8.1 million for the comparative three months ended March 31, 2025 and 2024, We attribute the change to the following:
Previous wording
Securitized borrowings. The net decrease of $3.2 million and $2.0 million for the comparative three and nine months ended September 30, 2024 and 2023, respectively, was primarily attributable to paydowns on our borrowings, offset, in part, by an increase in the benchmark rate over the comparative periods.
Current wording
Securitized borrowings. The net decrease of $8.6 million for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to the redemptions of our ACR 2021-FL1 and ACR 2021-FL2 securitizations and a decrease in the benchmark rate over the comparative periods.
Previous wording
CRE - term warehouse financing facilities. The decrease of $1.8 million and $5.9 million for the comparative three and nine months ended September 30, 2024 and 2023, respectively, were primarily attributable to paydowns on our borrowings.
Current wording
CRE - term warehouse financing facilities. The decrease of $1.3 million for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to paydowns on our borrowings and a decrease in the benchmark rate over the comparative periods.
Previous wording
Unsecured junior subordinated debentures. The increase of $5,000 and $189,000 for the comparative three and nine months ended September 30, 2024 and 2023, respectively, was primarily attributable to an increase in the benchmark rate over the comparative periods.
Current wording
Unsecured junior subordinated debentures. The decrease of $133,000 for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to a decrease in the benchmark rate over the comparative periods.
Previous wording
The following tables present the average net yield and average cost of funds for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands, except amounts in footnotes):
Current wording
The following tables present the average net yield and average cost of funds for the three months ended March 31, 2025 and 2024 (dollars in thousands, except amounts in footnotes):
Previous wording
Includes fee income of $1.9 million and $2.0 million recognized on our floating-rate CRE whole loans for the three months ended September 30, 2024 and 2023, respectively.
Current wording
Includes fee income of $777,000 and $1.7 million recognized on our floating-rate CRE whole loans for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Includes amortization expense of $1.3 million for the three months ended September 30, 2024 and 2023, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Current wording
Includes amortization expense of $2.8 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Previous wording
Includes net amortization expense of $402,000 for the three months ended September 30, 2024 and 2023, respectively, on 20 terminated interest rate swap agreements that were in net loss positions at the time of termination. The remaining net losses, reported in accumulated other comprehensive loss on the consolidated balance sheets, will be accreted over the remaining life of the debt.
Current wording
Includes net amortization expense of $393,000 and $397,000 for the three months ended March 31, 2025 and 2024, respectively, on 20 terminated interest rate swap agreements that were in net loss positions at the time of termination. The remaining net losses, reported in accumulated other comprehensive loss on the consolidated balance sheets, will be accreted over the remaining life of the debt.
Previous wording
Aggregate real estate income and other revenue increased by $2.5 million and $4.1 million for the comparative three and nine months ended September 30, 2024 and 2023. The increase in the comparative three and nine months was attributed to: (i) incremental increase in revenues from the acquisition of an office building through deed-in-lieu of foreclosure in June 2023, and asset acquisitions in the third quarter of 2024 of a multifamily property and an office property through foreclosures, (ii) increased revenues from a hotel property that had increased occupancy and rental rates for both the comparative three and nine month periods and (iii) an increase in revenue related to a student housing property that completed construction and became operational in August 2024.
Current wording
Aggregate real estate income and other revenue increased by $4.0 million for the comparative three months ended March 31, 2025 and 2024. The increase in the comparative three months was attributed to: (i) incremental increase in revenue related to a student housing property that completed construction and became operational in August 2024, (ii) asset acquisitions in the third quarter of 2024 of a multifamily property and an office property through foreclosures, and (iii) increased revenues from two hotel properties that had increased occupancy and rental rates for both the comparative three month periods.
Previous wording
Aggregate operating expenses increased by $584,000 for the comparative three months ended September 30, 2024 and 2023 and decreased by $1.5 million for the comparative nine months ended September 30, 2024 and 2023. We attribute the changes to the following:
Current wording
Aggregate operating expenses decreased by $2.5 million for the comparative three months ended March 31, 2025 and 2024. We attribute the changes to the following:
Previous wording
General and administrative. General and administrative expenses increased by $184,000 and $468,000 for the comparative three and nine months ended September 30, 2024 and 2023, respectively. The following table summarizes the information relating to our general and administrative expenses for the periods presented (dollars in thousands):
Current wording
General and administrative. General and administrative expenses decreased by $96,000 for the comparative three months ended March 31, 2025 and 2024. The following table summarizes the information relating to our general and administrative expenses for the periods presented (dollars in thousands):
Previous wording
Real estate expenses. The increase of $2.8 million for the three months ended September 30, 2024 and $2.7 million for the nine months ended September 30, 2024 was primarily related to (i) an increase in expenses related to a student housing property that completed construction and became operational in August 2024 and (ii) an incremental increase in expenses from the acquisition of an office building through deed-in-lieu of foreclosure in June 2023, and asset acquisitions in the third quarter of 2024 of a multifamily property and an office property through deed-in-lieu of foreclosure.
Current wording
Real estate expenses. The increase of $3.8 million for the comparative three months ended March 31, 2025 was primarily related to (i) an increase in expenses related to a student housing property that completed construction and became operational in August 2024, (ii) asset acquisitions in the third quarter of 2024 of a multifamily property and an office property through deed-in-lieu of foreclosure and (iii) an increase in expenses at a hotel property that had an incremental increase in operating expenses and an increase in one time expenses related to various operating costs.
Previous wording
Provision for credit losses. The decrease in the provision for credit losses of $2.3 million for the three months ended September 30, 2024 and $3.8 million for the nine months ended September 30, 2024 were primarily driven by a decrease in modeled credit risk for improved property performance and loan payoffs offset by an increase in reserves from macroeconomic factors this quarter. Please refer to the "Financing Receivables" section for more information on our provision for credit losses.
Current wording
Provision for credit losses. The decrease in the provision for credit losses of $6.6 million for the comparative three months ended March 31, 2025 was primarily driven by a decrease in modeled credit risk for improved property performance, qualitative adjustments to macroeconomic factors and loan payoffs. Please refer to the "Financing Receivables" section for more information on our provision for credit losses.
Previous wording
Gain on conversion of real estate. The increase of $2.8 million and $8.6 million during the comparative three and nine months ended September 30, 2024 and 2023, respectively, was primarily attributed to the completion of one deed-in-lieu of foreclosure that generated a non-recurring gain of $5.8 million, in the first quarter of 2024, and a foreclosure in the third quarter of 2024 that generated an unrealized gain of $2.8 million, as the fair value of the properties exceeded the amortized cost basis of the loans.
Current wording
Gain on conversion of real estate. The decrease of $5.8 million during the comparative three months ended March 31, 2025 and 2024, was primarily attributed to the completion of one deed-in-lieu of foreclosure that generated a non-recurring gain of $5.8 million, in the first quarter of 2024, as the fair value of the property exceeded the amortized cost basis of the loans.
Previous wording
Our total assets were $2.0 billion and $2.2 billion at September 30, 2024 and December 31, 2023, respectively.
Current wording
Our total assets were $1.8 billion and $1.9 billion at March 31, 2025 and December 31, 2024, respectively.
Previous wording
Net carrying amount includes an allowance for credit losses of $34.7 million and $28.8 million at September 30, 2024 and December 31, 2023, respectively.
Current wording
Net carrying amount includes an allowance for credit losses of $31.1 million and $32.8 million at March 31, 2025 and December 31, 2024, respectively.
Showing the first 40 of 119 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Our CRE - term reinvestment financing facility provides for a two-year reinvestment period that allows us to reinvest CRE loan payoffs and principal paydown proceeds into the reinvestment facility and pending certain eligibility criteria are met.
Current report — wording carried from elsewhere
Net Change in Interest Expense for the Comparative three months ended March 31, 2025 and 2024:
Current report — wording carried from elsewhere
Includes one CRE whole loan with an amortized cost of $33.7 million in maturity default at March 31, 2025.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
Percent change is calculated as the net change divided by the respective interest income or interest expense for the nine months ended September 30, 2023.
Previous report — wording carried elsewhere
Includes a decrease in fee income of $880,000 recognized on our CRE whole loans that was due to changes in volume.
Previous report — wording carried elsewhere
Net change pertains to amortization expense and is reflected in the change in volume.
Previous report — wording carried elsewhere
Average net yield includes net amortization/accretion and fee income and is computed based on average amortized cost.
Previous report — wording carried elsewhere
Includes amortization expense of $4.0 million for the nine months ended September 30, 2024 and 2023, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Previous report — wording carried elsewhere
Includes net amortization expense of $1.2 million for the nine months ended September 30, 2024 and 2023, respectively, on 20 terminated interest rate swap agreements that were in net loss positions at the time of termination. The remaining net losses, reported in accumulated other comprehensive loss on the consolidated balance sheets, will be accreted over the remaining life of the debt.