ACRES Commercial Realty Corp.
For the period ended Dec 31, 2025. Filed Mar 10, 2026.
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FY2025 · Filed Mar 10, 2026
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of ACRES Commercial Realty Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of ACRES Commercial Realty Corp. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for the years then ended, and the related notes and financial statement schedules (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 9, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Current Expected Credit Losses (CECL)
| Description of the Matter | As described in Note 2 and Note 7 to the consolidated financial statements, the Company determines an allowance for credit losses on its commercial real estate (CRE) loans by estimating the current expected credit losses (CECL) over the expected life of the CRE loans. The Company reassesses its estimate at each balance sheet date and recognizes changes in earnings. The allowance for credit losses includes a general estimate of credit losses. The general estimate of credit losses reflects the expected credit losses for all CRE loans that are not individually evaluated and specifically reserved. The general estimate of credit losses was $20.4 million as of December 31, 2025.To estimate the general credit losses, the Company utilizes a probability of default and loss given default methodology, which incorporates individual loan- and collateral-specific data and projects expected credit losses over a reasonable and supportable forecast period using historical loss data and macroeconomic forecast |
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| scenarios. This methodology requires the Company to make significant judgments about certain significant assumptions, specifically the fair value of collateral securing each CRE loan.Auditing the Company’s general estimate of credit losses was especially challenging and required the involvement of specialists due to the complexity of the methodology and the significant estimation uncertainty of the assumptions used in the model, specifically the fair value of collateral securing each CRE loan. | |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s review of the allowance for credit losses, including controls over the significant assumptions and the data inputs used in the model to develop the general estimate of credit losses. To test the general estimate of credit losses, we performed audit procedures that included, among others, evaluating the appropriateness of the methodology, model, and significant assumptions and testing the completeness and accuracy of the data inputs. We involved our credit risk valuation specialists to evaluate the conceptual soundness and performance of the model used in estimating the probability of defaults, and losses given default by comparing to independently obtained data and market observations. With the assistance of our real estate valuation specialists, for a sample of collateral-dependent loans, we assessed the reasonableness of current and as-stabilized fair values, including testing certain key assumptions used in the fair value measurements, such as capitalization rates and net operating income of the underlying collateral by comparing to independently obtained observable market data. We also evaluated the Company’s disclosures in its consolidated financial statements. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2024.
Philadelphia, Pennsylvania
March 9, 2026
Board of Directors and Shareholders
Opinion on the financial statements
We have audited the consolidated balance sheet of ACRES Commercial Realty Corp. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2023 (not presented herein), and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for the year ended December 31, 2023, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/Grant Thornton LLP
We served as the Company’s auditor from 2005 to 2024.
San Francisco, California
March 6, 2024 (except for Note 22, as to which the date is March 14, 2025).
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