ACRES Commercial Realty Corp.
For the period ended Sep 30, 2026. Filed Nov 9, 2026.
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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.
Sep 30, 2026 · Filed Nov 9, 2026
ACR$11.65-3.3%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-04.
0001193125-26-331463
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0001193125-26-453824
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 362 previous paragraphs and 386 current paragraphs.
196 unchanged; 129 reworded; 60 added; 37 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 37 previous and 37 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 (60)
Current report
•our ability to successfully operate as an internally managed company following the Internalization, including our ability to retain key personnel formerly employed by our Manager and to realize the anticipated benefits of internal management in a timely manner, or at all;
Current report
On August 6, 2026 (the "Closing"), we completed the Merger (as defined below) and Internalization (as defined below) transactions pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement") by and among us and ACRES Holdings Sub LLC ("Merger Sub"), our subsidiary, on the one hand, and ACC and ACRES Capital LLC, a subsidiary of ACC and our former external manager (the “Manager”), on the other hand. Pursuant to the terms of the Merger Agreement, ACC merged with and into Merger Sub, with Merger Sub continuing as the surviving company and our wholly-owned subsidiary (the "Merger"). As a result of the Merger, among other things, (i) we acquired the Manager, (ii) the Manager ceased to perform any outside management services for us, (iii) we and the Manager terminated the existing Fourth Amended and Restated Management Agreement, dated as of July 31, 2020, as amended, by and among us, the Manager and ACC (the "Management Agreement"), for no additional consideration, and (iv) we became internally managed (the "Internalization"). In connection with the Closing, we issued approximately 7.5 million shares of our common stock to former ACC stockholders as Merger consideration, resulting in a net increase of approximately 6.3 million shares of our common stock outstanding after giving effect to the elimination of shares held by ACC in consolidation. We also assumed ACC's credit facility, with $185.0 million outstanding at Closing, and completed a private placement of $200.0 million aggregate principal amount of 8.625% Senior Secured Notes due 2031 (the "8.625% Senior Secured Notes"), the proceeds of which were used in part to refinance $150.0 million of our previously outstanding 5.75% Senior Unsecured Notes due 2026 (the "5.75% Senior Unsecured Notes") and for general corporate purposes. Being internally managed further aligns the interests of our seasoned management team with those of our stockholders. Along with the Manager's CRE lending platform, the Merger is expected to enhance our financial profile through the recognition of third-party fee income earned from an evergreen fund vehicle, separately managed accounts and a growing insurance platform, diversifying our earnings and supporting greater stability in earnings available for distribution.
Current report
The Merger and Internalization materially affected the comparability of our results of operations, financial condition and cash flows for the three and nine months ended September 30, 2026 as compared to the corresponding periods in 2025. The results of operations of ACC have been included in our condensed consolidated financial statements only for the period beginning August 6, 2026, the closing date of the Merger and Internalization. Accordingly, our results for the three and nine months ended September 30, 2026 include only a partial period of activity from the acquired management, servicing and related businesses, while the comparable 2025 periods do not include such activity.
Current report
The consolidation of the Consolidated Fund significantly increases the reported amounts of consolidated assets, liabilities, revenues, expenses and cash flows; however, the economic ownership interests of third-party investors in the Consolidated Fund are reflected as non-controlling interests. Accordingly, the Consolidated Fund’s gross revenues, expenses and cash flows should not be viewed as having the same economic effect on our common stockholders as revenues, expenses and cash flows generated by wholly-owned operations.
Current report
Following the Closing, we became internally managed, the Manager became our wholly-owned subsidiary, and the Manager’s personnel became our employees. As a result, our post-closing results reflect changes in the nature and presentation of our revenues and expenses, including the elimination of external base management fees and incentive compensation payable to a third-party manager, the addition of employee compensation and other operating costs previously borne by the Manager, and the inclusion of third-party management, servicing and related fee income generated by the acquired platform.
Current report
In addition, after the Merger and Internalization, we evaluate our business through three reportable segments: Principal Investing, Investment Management and Strategic Holdings. Prior to the Merger and Internalization, we reported one operating segment, CRE operations. These changes should be considered when reviewing the period-to-period comparisons below, as our historical results may not be indicative of our future operating results or financial condition.
Current report
The discussion below is based on our historical results of operations and financial condition as presented in the unaudited condensed consolidated financial statements included in this Quarterly Report. The results of ACC are included beginning August 6, 2026, and our historical results for periods prior to that date do not include the acquired management, servicing and related activities. Accordingly, the discussion below should be read with the comparability considerations described above and the notes to the unaudited condensed consolidated financial statements.
Current report
Segment Results
Current report
Following the Merger and Internalization, we evaluate our business through three reportable segments: Principal Investing, Investment Management and Strategic Holdings. Prior to the Merger and Internalization, we reported one operating segment, CRE lending operations. Accordingly, segment results for the three and nine months ended September 30, 2026 include the Investment Management and Strategic Holdings segments only for the period beginning August 6, 2026, and comparable segment information for the prior-year period is limited.
Current report
Principal Investing. Our Principal Investing segment originates, holds and manages commercial real estate mortgage loans and related assets. Segment results for the three and nine months ended September 30, 2026 were primarily affected by net interest income, loan repayments, CECL provision and borrowing costs.
Current report
Investment Management. Our Investment Management segment includes the management, servicing and related activities acquired in the Merger and Internalization. Segment results for the post-closing period were driven primarily by management, servicing and related fee income, partially offset by other operating expenses associated with the internalized platform. Results for this segment may vary in future periods based on assets under management, servicing volumes, transaction activity, fund performance, capital raising and retention of key personnel.
Current report
Strategic Holdings. Our Strategic Holdings segment includes equity method investments. Segment results for the post-closing period were primarily affected by income/loss from strategic investments and fair value changes. Because this segment was added as part of the Merger and Internalization and was included only from August 6, 2026, results for the three and nine months ended September 30, 2026 are not necessarily indicative of future results.
Current report
Net Change in Interest Expense for the Comparative three and nine months ended September 30, 2026 and 2025:
Current report
Senior secured financing facility. The decrease of $944,000 and $494,000 for the comparative three and nine months ended September 30, 2026 and 2025, was primarily attributable to the payoff of our senior secured facility in August 2026.
Current report
5.75% Senior Unsecured Notes. The decrease of $1.2 million for the comparative three and nine months ended September 30, 2026 and 2025 was attributable to the payoff of the 5.75% Senior Unsecured Notes in conjunction with the close of the 8.625% Senior Secured Notes in August 2026.
Current report
Includes amortization expense of $94,000 and $180,000 for the three months ended September 30, 2026 and 2025, respectively.
Current report
Includes amortization expense of $469,000 and $533,000 for the nine months ended September 30, 2026 and 2025, respectively.
Current report
Aggregate real estate income and other revenue decreased by $1.2 million and $6.9 million for the comparative three and nine months ended September 30, 2026 and 2025
Current report
Fee and other income: The Merger and Internalization added management, servicing and related activities that were not included in our historical results prior to August 6, 2026. Beginning at the Closing, our results include fee income generated by the acquired ACC platform, including fees from third-party management and servicing arrangements, the management of ACRES Mortgage Fund, Ltd. ("AMF") and other accounts, and related insurance and strategic platform activities, to the extent such fees are earned from third parties and are not eliminated in consolidation.
Current report
For the period from August 6, 2026 through September 30, 2026, we recognized $2.0 million of fee and other income attributable to the acquired management, servicing and related activities, of which $1.8 million of such fees are related to AMF and are eliminated in consolidation to a net fee and other income of $152,000.
Current report
A portion of the fee income generated by the acquired platform is recurring in nature, including management fees and servicing fees, while other fee income may be transactional or performance-based and may vary based on assets under management, loan origination and repayment activity, capital raising, investment realizations, and market conditions. We expect fee income from these activities to be influenced by our ability to retain and grow third-party assets under management, maintain servicing relationships, and execute on our strategic initiatives following the Internalization. Because management, servicing and related activities was added as part of the Merger and Internalization and was included only from August 6, 2026, results for the three and nine months ended September 30, 2026 are not necessarily indicative of future results.
Current report
The increase in general and administrative expense for the comparative three and nine months ended September 30, 2026 and 2025 was primarily attributable to additions from the Merger and Internalization. Office rent, IT expenses, insurance expenses and other operating expenses and professional service expenses that used to be included in allocated expenses from the Manager are now fully expensed post Merger and Internalization. Additionally, servicing expenses are now included in our general and administrative expenses when they were not included as an expense category prior to the Merger and Internalization.
Current report
Compensation and benefits. The increase of $2.4 million for both the comparative three and nine months ended September 30, 2026 and 2025, respectively, was due to the completion of the Merger and Internalization which resulted in us now accounting for payroll. In prior periods, compensation and costs related to the Company were reimbursed to the Manager pursuant to the Management Agreement and were included in wages and benefits in the general and administrative expense line item.
Current report
Management fees - related party. The decrease of $968,000 and $1.1 million for the comparative three and nine months ended September 30, 2026 and 2025 was primarily related to the termination of the Management Agreement as part of the Merger and Internalization of the Manager on August 6, 2026.
Current report
Corporate interest expense. The increase of $5.2 million for the comparative three and nine months ended September 30, 2026 and 2025 was attributable to the assumption of the senior secured credit facility (the "Corporate Credit Facility") in connection with the Merger and the close of the 8.625% Senior Secured Notes due 2031 during the third quarter of 2026.
Current report
Aggregate other income (expense) decreased $7.2 million and $2.6 million for the comparative three and nine months ended September 30, 2026 and 2025. We attribute the change to the following:
Current report
Results of operations for the Consolidated Fund. As a result of the Merger and Internalization, ACRES Capital LLC (the "Capital LLC") serves as investment manager of AMF, and we consolidate AMF in our condensed consolidated financial statements as the “Consolidated Fund.” The Consolidated Fund’s results are included in our consolidated revenues, expenses, assets, liabilities and cash flows beginning August 6, 2026.
Current report
The consolidation of the Consolidated Fund significantly increases the reported amounts of consolidated assets, liabilities, revenues, expenses and cash flows; however, the economic ownership interests of third-party investors in the Consolidated Fund are reflected as non-controlling interests. Accordingly, the Consolidated Fund’s gross revenues, expenses and cash flows should not be viewed as having the same economic effect on our common stockholders as revenues, expenses and cash flows generated by wholly-owned operations. For the period from August 6, 2026 through September 30, 2026, the Consolidated Fund contributed $601,000 of expenses, $480,000 of net realized and unrealized losses, $20.9 million of interest income and $13.9 million of interest expense.
Current report
The Consolidated Fund finances the acquisition of its investments through secured borrowings, and as of September 30, 2026, the Consolidated Fund was in compliance with all covenants under such borrowings. Changes in the Consolidated Fund’s investment activity, financing costs, leverage and third-party ownership interests may affect our consolidated results and cash flows in future periods, although substantially all of the third-party investors’ economics will continue to be reflected through non-controlling interests.
Current report
Assets of Consolidated Fund.
Current report
The following table summarizes the investments held in the Consolidated Fund as of September 30, 2026. (dollars in thousands):
Current report
During the three and nine months ended September 30, 2026, we recorded a provision for expected credit losses of $8.3 million and $9.0 million, respectively, primarily attributable to a decline in macroeconomic factors both generally and locally as they relate to our CRE loans, compounded by increased modeled credit risk in the our loan portfolio.
Current report
The total amortized cost of CRE loans excluded accrued interest receivable of $37.0 million and $27.2 million at September 30, 2026 and December 31, 2025, respectively.
Current report
Includes one novated CRE whole loan that resulted from loan workouts.
Current report
The total amortized cost of CRE loans excluded accrued interest receivable of $37.0 million and $27.2 million at September 30, 2026 and December 31, 2025, respectively.
Current report
The increase of $4.5 million in other assets was primarily attributable to increases in prepaid expenses and other receivables related to prepaid insurance and other receivables acquired in the Merger.
Current report
We accounted for the Merger and Internalization as a business combination using the acquisition method of accounting. Accordingly, the identifiable assets acquired and liabilities assumed of ACC were recognized at their estimated acquisition-date fair values, with the excess of consideration transferred over the estimated fair value of identifiable net assets acquired recognized as goodwill. Based on our preliminary purchase price allocation, we recognized preliminary goodwill of $175.1 million in connection with the Internalization and Merger.
Current report
Goodwill represents the future economic benefits arising from assets acquired that could not be individually identified and separately recognized, including expected synergies and other benefits from the Internalization, and goodwill is not amortized. The purchase price allocation is preliminary and may change as additional information becomes available, including information related to the valuation of acquired assets, assumed liabilities, intangible assets, non-controlling interests and related tax effects. Any adjustments to the preliminary purchase price allocation could affect the amount of goodwill, intangible assets, amortization expense, deferred tax amounts, segment reporting and future impairment analyses.
Current report
As of September 30, 2026, we had allocated preliminary goodwill of $78.3 million to our CRE Lending segment and $96.8 million to our Investment Management segment. This allocation may change as the purchase price allocation is finalized. We will continue to evaluate the preliminary purchase accounting during the measurement period and will record adjustments, if any, in the period in which the amounts are determined.
Current report
Includes $699,000 of deferred debt issuance costs at September 30, 2026.
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Removed paragraphs (37)
Previous report
•if we fail to consummate the proposed Merger, our dependence on our Manager and ability to find a suitable replacement in a timely manner, or at all, if our Manager or we were to terminate the management agreement;
Previous report
As previously reported, on April 29, 2026, we entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which we will acquire ACC in an all-stock transaction (the "Merger"). As a result of the Merger, among other things, we will acquire our Manager, and transition from an externally-managed REIT to an internally-managed REIT (the "Internalization") which we expect will close in the third quarter. Being internally managed will further align the interest of our seasoned management team with its shareholders. Additionally, the Merger will enhance our financial profile through the recognition of third-party fee income earned from an evergreen fund vehicle, separately managed accounts and a growing insurance platform.
Previous report
Net change pertains to amortization expense and is reflected in the change in volume.
Previous report
Net change pertains to amortization expense and is reflected in the change in volume.
Previous report
Net Change in Interest Expense for the Comparative three and six months ended June 30, 2026 and 2025:
Previous report
Senior secured financing facility. The increase of $617,000 and $451,000 for the comparative three and six months ended June 30, 2026 and 2025 was primarily attributable to the acceleration of amortization of deferred debt issuance costs.
Previous report
Includes amortization expense of $189,000 and $178,000 for the three months ended June 30, 2026 and 2025, respectively.
Previous report
Includes amortization expense of $376,000 and $353,000 for the six months ended June 30, 2026 and 2025, respectively.
Previous report
The decrease in general and administrative expense for the comparative three and six months ended June 30, 2026 and 2025 was primarily attributable to decreased professional services related to consulting fees being paid in the first quarter of 2025 that related to prior year services and legal fees related to one-time sales and foreclosures that occurred during the three and six months ended June 30, 2025 but not 2026.
Previous report
Aggregate other income (expense) increased $543,000 and $4.6 million for the comparative three and six months ended June 30, 2026 and 2025. We attribute the change to the following:
Previous report
During the three months ended June 30, 2026, we recorded a provision for expected credit losses of $1.7 million, primarily attributable to a decline in macroeconomic factors. During the six months ended June 30, 2026, we recorded a net provision for expected credit losses of $716,000, primarily attributable to a decline in macroeconomic factors, offset by net improvements in the modeled credit risk of the Company's loan portfolio and loan payoffs.
Previous report
The total amortized cost of CRE loans excluded accrued interest receivable of $33.6 million and $27.2 million at June 30, 2026 and December 31, 2025, respectively.
Previous report
The total amortized cost of CRE loans excluded accrued interest receivable of $33.6 million and $27.2 million at June 30, 2026 and December 31, 2025, respectively.
Previous report
The increase of $1.3 million in other assets was primarily attributable to increases in other receivables due to a receivable from one of our financing counterparties and in various prepaid assets held at our real estate properties, offset by amortization.
Previous report
Includes $774,000 of deferred debt issuance costs at June 30, 2026.
Previous report
Total equity at June 30, 2026 was $550.2 million compared to total equity at December 31, 2025 of $550.6 million. The decrease in equity during the six months ended June 30, 2026 was primarily attributable to dividends on preferred stock partially offset by amortization of stock based compensation, net income and contributions from non-controlling interest.
Previous report
(i)
Previous report
for the first full calendar quarter ended December 31, 2022, the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for such calendar quarter, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) as of the end of such calendar quarter, and (B) 7% per annum;
Previous report
(ii)
Previous report
for each of the second, third and fourth full calendar quarters following the calendar quarter ended December 31, 2022, the excess of (1) the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for the calendar quarter(s) following September 30, 2022, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the calendar quarter(s) following September 30, 2022, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the prior calendar quarter(s) following September 30, 2022 (other than the most recent calendar quarter); and
Previous report
(iii)
Previous report
for each calendar quarter thereafter, the excess of (1) the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for the previous 12-month period, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the previous 12-month period, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive compensation shall be payable with respect to any calendar quarter unless EAD (as defined in the Management Agreement) for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters from September 30, 2022) in the aggregate is greater than zero.
Previous report
The following table summarizes the calculation of the Incentive Compensation Hurdle for the three months ended June 30, 2026 (dollars in thousands, except per share data):
Previous report
Calculated on a daily weighted average basis for the 12-month period ended June 30, 2026.
Previous report
Calculated as book value equity at June 30, 2026 multiplied by 1.75% (7% per annum).
Previous report
The amount by which EAD (as defined in the Management Agreement) exceeds the Incentive Compensation Hurdle is multiplied by 20% to arrive at incentive compensation for the quarter.
Previous report
For the three months ended June 30, 2026, there was no incentive compensation payable to the Manager.
Previous report
Excludes deferred debt issuance costs of $2.5 million.
Previous report
Excludes deferred debt issuance costs of $105,000.
Previous report
Excludes deferred debt issuance costs of $324,000.
Previous report
Excludes deferred debt issuance costs of $774,000.
Previous report
In July 2026, the JPMorgan Chase facility was extended to July 2028.
Previous report
Principal outstanding excludes deferred debt issuance costs of $105,000 and $1.5 million at June 30, 2026 and December 31, 2025, respectively.
Previous report
Excludes $188,000 of accrued interest payable.
Previous report
Excludes $15,000 of accrued interest payable.
Previous report
Excludes $131,000 of accrued interest payable.
Previous report
Base management fees presented are based on an estimate of base management fees payable to our Manager over the next 12 months. Our Management Agreement also provides for an incentive compensation arrangement that is based on operating performance. The incentive compensation is not a fixed and determinable amount, and therefore it is not included in this table.
Reworded paragraphs (129)
Previous wording
• our ability to consummate the proposed Merger (as defined below) and achieve the expected cost savings or other benefits therefrom;
Current wording
• our ability to successfully integrate the operations of ACRES Capital, LLC and ACRES Capital Corp. following the completion of the Merger and Internalization (each as defined below) and to achieve the expected cost savings or other benefits therefrom;
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. ("ACC," and collectively with our Manager, "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.
Current wording
We are a Maryland corporation and an internally-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. On August 6, 2026, we completed our acquisition of ACRES Capital Corp. ("ACC") and the internalization of the management function previously performed by ACRES Capital, LLC, our former external manager and a subsidiary of ACC (together with ACC, "ACRES"), a commercial real estate lender historically 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. We continue to draw upon the experience of the ACRES management team, who are now our direct employees, to provide these 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.
Previous wording
Since September 2024, the U.S. Federal Reserve lowered the Federal Funds rate by 1.75% in six rate cuts reaching its lowest levels since 2022. Lowering rates and decreasing costs may encourage consumer spending and accelerate corporate profit growth, which may positively impact the credit profile of 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. There is also no certainty with respect to the direction, timing, or pace of change for future interest rates.
Current wording
Between September 2024 and December 2025, the U.S. Federal Reserve lowered the Federal Funds rate by 1.75% in six rate cuts, reaching its lowest levels since 2022. However, the Federal Reserve reversed course in September 2026, raising the Federal Funds rate by 0.25% to a target range of 3.75% to 4.00%, its first increase since 2023, citing persistent inflationary pressures. The Federal Reserve's updated projections indicate the possibility of additional rate increases before the end of 2026 and into 2027. An increase in rates and borrowing costs may dampen consumer spending and corporate profit growth, which may negatively impact the credit profile of the collateral underlying our loans and our borrowers' ability to sell or refinance in the current market; higher rates would also correlate to an increase in our net income to the extent our floating rate assets exceed our floating rate liabilities. There is also no certainty with respect to the direction, timing, or pace of change for future interest rates.
Previous wording
The multifamily real estate market continues to be a competitive market, and as a result of investors' continued confidence in that asset class, the market for those assets continues to experience spread compression on newly originated deals. 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, 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
The multifamily real estate market continues to be a competitive and the market for those assets continues to experience spread compression on newly originated deals. 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, 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 stand by 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
In response, we continue to manage corporate liquidity actively and responsibly, manage our CRE assets through a solutions-based approach with our borrowers and manage our daily operations in light of changing macroeconomic circumstances. Our Manager also continuously monitors for new capital opportunities and selectively executes on agreements that are expected to enhance our returns.
Current wording
In response, we continue to manage corporate liquidity actively and responsibly, manage our CRE assets through a solutions-based approach with our borrowers and manage our daily operations in light of changing macroeconomic circumstances. Our management team also continuously monitors for new capital opportunities and selectively executes on agreements that are expected to enhance our returns.
Previous wording
We originate transitional floating-rate CRE loans with a target size between $10.0 million and $100.0 million. During the six months ended June 30, 2026, we originated nine new CRE floating-rate whole loans, purchased one new CRE floating-rate whole loan and purchased a participation in an existing CRE floating-rate whole loan, with total commitments of $495.6 million and funded $31.4 million of loan commitments. These increases were offset by loan payoffs and sales during the six months ended June 30, 2026 in the amount of $203.3 million and unfunded commitments of $24.2 million, producing a net increase to the portfolio of $299.5 million. During the year ended December 31, 2025, we originated 14 new CRE floating-rate whole loans, with total commitments of $733.0 million, one new $15.0 million CRE mezzanine loan, one new $9.3 million CRE preferred equity investment and net funded commitments of $3.1 million. Loan payoffs and sales during the year ended December 31, 2025 were $418.9 million, producing a net increase to the portfolio of $341.5 million.
Current 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, 2026, we originated ten new CRE floating-rate whole loans, purchased one new CRE floating-rate whole loan and purchased a participation in an existing CRE floating-rate whole loan, with total commitments of $530.9 million and funded $42.1 million of loan commitments. These increases were offset by loan payoffs and sales during the nine months ended September 30, 2026 in the amount of $239.1 million and unfunded commitments of $25.2 million, producing a net increase to the portfolio of $308.7 million. During the year ended December 31, 2025, we originated 14 new CRE floating-rate whole loans, with total commitments of $733.0 million, one new $15.0 million CRE mezzanine loan, one new $9.3 million CRE preferred equity investment and net funded commitments of $3.1 million. Loan payoffs and sales during the year ended December 31, 2025 were $418.9 million, producing a net increase to the portfolio of $341.5 million.
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, mixed-use and retail. All but five of our CRE whole loans were current on contractual payments at June 30, 2026.
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, mixed-use and retail. All but four of our CRE whole loans were current on contractual payments at September 30, 2026.
Previous wording
Preferred equity investments that are subordinate to first mortgage loans and mezzanine debt. These investments may be subject to more credit risk than subordinated debt but provide the potential for higher returns upon a liquidation of the underlying property and are typically structured to provide some credit enhancement differentiating it from the common equity in such investments. At June 30, 2026 and December 31, 2025, we had one preferred equity investment included in CRE loans held for investment with a carrying value of $9.7 million and $9.2 million, respectively. We also hold the first mortgage CRE whole loan on the underlying collateral for this investment.
Current wording
Preferred equity investments that are subordinate to first mortgage loans and mezzanine debt. These investments may be subject to more credit risk than subordinated debt but provide the potential for higher returns upon a liquidation of the underlying property and are typically structured to provide some credit enhancement differentiating it from the common equity in such investments. At September 30, 2026 and December 31, 2025, we had one preferred equity investment included in CRE loans held for investment with a carrying value of $9.9 million and $9.2 million, respectively. We also hold the first mortgage CRE whole loan on the underlying collateral for this investment.
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 June 30, 2026, 74% of the par value of our CRE loan portfolio had interest rate caps or funded debt service reserves in place. Our interest rate caps have a weighted-average maturity of 15 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 September 30, 2026, 62% of the par value of our CRE loan portfolio had interest rate caps or funded debt service reserves in place. Our interest rate caps have a weighted-average maturity of 15 months.
Previous wording
At June 30, 2026, our par-value $2.1 billion floating-rate CRE loan portfolio had a weighted average benchmark floor of 2.22%. At December 31, 2025, our par value $1.8 billion floating rate CRE loan portfolio had a weighted average benchmark floor of 1.78%. With the current trend of decreasing benchmark rates, we have seen the coupons on all of our floating-rate assets and debt decrease 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 decrease in interest rates resulted in a decrease in our net interest income. See "Interest Rate Risk" in "Item 3: Quantitative and Qualitative Disclosures About Market Risk."
Current wording
At September 30, 2026, our par-value $2.1 billion floating-rate CRE loan portfolio had a weighted average benchmark floor of 2.33%. At December 31, 2025, our par value $1.8 billion floating rate CRE loan portfolio had a weighted average benchmark floor of 1.78%. With the current trend of decreasing benchmark rates, we have seen the coupons on all of our floating-rate assets and debt decrease 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 decrease in interest rates resulted in a decrease in our net interest income. 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 80.8% of our portfolio allocated to multifamily at June 30, 2026 and 81.9% at December 31, 2025. The following charts show our portfolio allocation at carrying value by property type at June 30, 2026 and December 31, 2025:
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 80.9% of our portfolio allocated to multifamily at September 30, 2026 and 81.9% at December 31, 2025. The following charts show our portfolio allocation at carrying value by property type at September 30, 2026 and December 31, 2025:
Previous wording
At June 30, 2026, the net carrying value of our net real estate-related assets and liabilities was $104.6 million on five properties owned, two of which are included in investments in real estate and three of which are included in properties held for sale on our consolidated balance sheets.
Current wording
At September 30, 2026, the net carrying value of our net real estate-related assets and liabilities was $96.2 million on five properties owned, four of which are included in investments in real estate and one of which is included in properties held for sale on our consolidated balance sheets. We reclassified two properties in the third quarter of 2026 to properties held for investment.
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 June 30, 2026, the CECL allowance on our CRE loan portfolio was $21.1 million, or 1.0% of our $2.1 billion loan portfolio. During the six months ended June 30, 2026, we recorded a net provision for credit losses primarily attributable to a decline in macroeconomic factors, offset by improvements in the modeled credit risk of our loan portfolio and loan payoffs.
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 September 30, 2026, the CECL allowance on our CRE loan portfolio was $29.4 million, or 1.4% of our $2.1 billion loan portfolio. During the nine months ended September 30, 2026, we recorded a net provision for credit losses primarily attributable to a decline in macroeconomic factors both generally and locally as they relate to our CRE loans, compounded by increased modeled credit risk in our loan portfolio.
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 June 30, 2026 of $21.1 million, or 1.0% 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, except for the charge-off noted above, the overall newer vintage of our CRE loan portfolio (with only 6.7% of the portfolio, at June 30, 2026, 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 at carrying value has grown from 58.4% at June 30, 2020 to 80.8% at June 30, 2026.
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 September 30, 2026 of $29.4 million, or 1.4% of the par balance of our CRE loan portfolio, was attributable to the following: the successful resolution of our individually evaluated loans with specific reserves, except for the charge-off noted above, the overall newer vintage of our CRE loan portfolio (with only 6.5% of the portfolio, at September 30, 2026, 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 at carrying value has grown from 58.4% at June 30, 2020 to 80.9% at September 30, 2026.
Previous wording
Common stock book value was $26.76 per share at June 30, 2026, a $3.25 per share decrease from December 31, 2025.
Current wording
Common stock book value was $16.81 per share at September 30, 2026, a $13.20 per share decrease from December 31, 2025. (See "Balance Sheet - Book Value Reconciliation" section below for further discussion)
Previous wording
Our net loss allocable to common shares for the three months ended June 30, 2026 was $12.5 million, or ($1.87) per share-basic ($1.87) per share-diluted) as compared to net loss allocable to common shares for the three months ended June 30, 2025 of $732,000 or ($0.10) per share-basic ($0.10 per share-diluted). Our net loss allocable to common shares for the six months ended June 30, 2026 was $13.5 million, or ($2.04) per share-basic ($2.04) per share-diluted), as compared to net loss allocable to common shares for the six months ended June 30, 2025 of $6.6 million, or ($0.90) per share-basic ($0.90) per share-diluted).
Current wording
Our net loss allocable to common shares for the three months ended September 30, 2026 was $56.3 million, or ($5.16) per share-basic (($5.16) per share-diluted) as compared to net income allocable to common shares for the three months ended September 30, 2025 of $9.8 million or $1.38 per share-basic ($1.34 per share-diluted). Our net loss allocable to common shares for the nine months ended September 30, 2026 was $69.9 million, or ($8.65) per share-basic (($8.65) per share-diluted), as compared to net income allocable to common shares for the nine months ended September 30, 2025 of $3.2 million, or $0.44 per share-basic ($0.42 per share-diluted).
Previous wording
The following tables analyze the change in interest income and interest expense for the comparative three and six months ended June 30, 2026 and 2025 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 and nine months ended September 30, 2026 and 2025 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 an increase in fee income of $391,000 recognized on our CRE whole loans that was due to changes in volume.
Current wording
Includes an increase in fee income of $246,000 recognized on our CRE whole loans that was due to changes in volume.
Previous wording
Percent change is calculated as the net change divided by the respective interest income or interest expense for the six months ended June 30, 2025.
Current wording
Percent change is calculated as the net change divided by the respective interest income or interest expense for the nine months ended September 30, 2025.
Previous wording
Includes an increase in fee income of $781,000 recognized on our CRE whole loans that was due to changes in volume.
Current wording
Includes an increase in fee income of $1.0 million 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 six months ended June 30, 2026 and 2025:
Current wording
Net Change in Interest Income for the Comparative three and nine months ended September 30, 2026 and 2025:
Previous wording
Aggregate interest income increased by $9.6 million and $15.2 million for the comparative three and six months ended June 30, 2026 and 2025. We attribute the change to the following:
Current wording
Aggregate interest income increased by $9.4 million and $24.6 million for the comparative three and nine months ended September 30, 2026 and 2025. We attribute the change to the following:
Previous wording
CRE whole loans. The increase of $10.2 million and $14.5 million for the comparative three and six months ended June 30, 2026 and 2025 was primarily attributable to an increase in the daily average par value of our CRE portfolio resulting from loan production, offset by a decrease in the benchmark rate over the comparative period.
Current wording
CRE whole loans. The increase of $9.8 million and $24.3 million for the comparative three and nine months ended September 30, 2026 and 2025 was primarily attributable to an increase in the daily average par value of our CRE portfolio resulting from loan production, offset by a decrease in the benchmark rate over the comparative period.
Previous wording
CRE mezzanine loans. The decrease of $680,000 and $742,000 for the comparative three and six months ended June 30, 2026 and 2025 was attributable to the origination and payoff of a mezzanine loan during the fiscal year 2025.
Current wording
CRE mezzanine loans. The decrease of $687,000 and $1.4 million for the comparative three and nine months ended September 30, 2026 and 2025 was attributable to the origination and payoff of a mezzanine loan during the fiscal year 2025.
Previous wording
CRE preferred equity loan. The increase of $256,000 and $504,000 for the comparative three and six months ended June 30, 2026 and 2025 was attributable to the origination of a preferred equity loan in September 2025.
Current wording
CRE preferred equity loan. The increase of $266,000 and $770,000 for the comparative three and nine months ended September 30, 2026 and 2025 was attributable to the origination of a preferred equity loan in September 2025.
Previous wording
Other. The decrease of $196,000 for the comparative three months ended June 30, 2026 and 2025 was primarily attributable to a decrease in the daily average balance and yields on our interest earning money market accounts. The increase of $965,000 for the comparative six months ended June 30, 2026 and 2025 was primarily attributable to an increase in restricted cash from the close of our new CRE securitization, ACRES Commercial Realty 2026-FL4 Issuer, LLC ("ACR 2026-FL4"), and increase in yields on our interest earning money market accounts during the first quarter of fiscal year 2026.
Current wording
Other. The increase of $13,000 and $978,000 for the comparative three and nine months ended September 30, 2026 and 2025, was primarily attributable to an increase in restricted cash from the close of our new CRE securitization, ACRES Commercial Realty 2026-FL4 Issuer, LLC ("ACR 2026-FL4"), and increase in yields on our interest earning money market accounts during the first quarter of fiscal year 2026.
Previous wording
Aggregate interest expense increased by $7.6 million and $9.6 million for the comparative three and six months ended June 30, 2026 and 2025. We attribute the change to the following:
Current wording
Aggregate interest expense increased by $5.0 million and $14.6 million for the comparative three and nine months ended September 30, 2026 and 2025. We attribute the change to the following:
Previous wording
Securitized borrowings. The increase of $12.2 million and $5.4 million for the comparative three and six months ended June 30, 2026 and 2025 was primarily attributable to the issuance of our ACR 2026-FL4 securitization, offset by the redemptions of our ACR 2021-FL1 and ACR 2021-FL2 securitizations and a decrease in borrowings and the benchmark rate over the comparative periods.
Current wording
Securitized borrowings. The net increase of $12.5 million and $17.8 million for the comparative three and nine months ended September 30, 2026 and 2025 was primarily attributable to the issuance of our ACR 2026-FL4 securitization, offset by the redemptions of our ACR 2021-FL1 and ACR 2021-FL2 securitizations and a decrease in borrowings and the benchmark rate over the comparative periods.
Previous wording
CRE - term warehouse financing facilities. The decrease of $519,000 for the comparative three months ended June 30, 2026 and 2025 was primarily attributable to a decrease in the average borrowings balance and benchmark rate over the comparative periods. The increase of $1.0 million for the comparative six months ended June 30, 2026 and 2025 was primarily attributable to an increase in the average daily borrowings balance during the first quarter of fiscal year 2026, offset by a decrease in the benchmark rate over the comparative periods.
Current wording
CRE - term warehouse financing facilities. The decrease of $405,000 for the comparative three months ended September 30, 2026 and 2025 was primarily attributable to a decrease in the average daily borrowings balance and benchmark rate. The increase of $613,000 for the comparative nine months ended September 30, 2026 and 2025, was primarily attributable to an increase in the average daily borrowings balance during the first quarter of fiscal year 2026, offset by a decrease in the benchmark rate over the comparative periods.
Previous wording
CRE - term reinvestment financing facility. The decrease of $4.5 million for the comparative three months ended June 30, 2026 and 2025 was primarily attributable to a decrease in the average borrowings balance and benchmark rate over the comparative periods. The increase of $3.1 million for the comparative six months ended June 30, 2026 and 2025 was attributable to the March 2025 close and subsequent utilization of our CRE term reinvestment financing facility.
Current wording
CRE - term reinvestment financing facility. The decrease of $4.7 million and $1.7 million for the comparative three and nine months ended September 30, 2026 and 2025 was attributable to a decrease in borrowings and benchmark rate.
Previous wording
Unsecured junior subordinated debentures. The decrease of $79,000 and $163,000 for the comparative three and six months ended June 30, 2026 and 2025 was primarily attributable to a decrease in the benchmark rate over the comparative periods.
Current wording
Unsecured junior subordinated debentures. The decrease of $70,000 and $233,000 for the comparative three and nine months ended September 30, 2026 and 2025 was primarily attributable to a decrease in the benchmark rate over the comparative periods.
Previous wording
Hedging. The decrease of $85,000 and $152,000 for the comparative three and six months ended June 30, 2026 and 2025 was attributable to a portion of our terminated swaps being fully amortized.
Current wording
Hedging. The decrease of $154,000 and $305,000 for the comparative three and nine months ended September 30, 2026 and 2025 was attributable to a portion of our terminated swaps being fully amortized.
Previous wording
The following tables present the average net yield and average cost of funds for the three and six months ended June 30, 2026 and 2025 (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 and nine months ended September 30, 2026 and 2025 (dollars in thousands, except amounts in footnotes):
Previous wording
Includes fee income of $1.3 million and $895,000 recognized on our floating-rate CRE whole loans for the three months ended June 30, 2026 and 2025, respectively.
Current wording
Includes fee income of $1.2 million and $908,000 recognized on our floating-rate CRE whole loans for the three months ended September 30, 2026 and 2025, respectively.
Previous wording
Includes amortization expense of $2.0 million and $669,000 for the three months ended June 30, 2026 and 2025, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Current wording
Includes amortization expense of $955,000 and $677,000 for the three months ended September 30, 2026 and 2025, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Previous wording
Includes net amortization expense of $638,000 and $790,000 for the six months ended June 30, 2026 and 2025, respectively, on 17 and 20 terminated interest rate swap agreements, respectively, 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 $247,000 and $402,000 for the three months ended September 30, 2026 and 2025, respectively, on 17 and 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
Includes fee income of $2.5 million and $1.7 million recognized on our floating-rate CRE whole loans for the six months ended June 30, 2026 and 2025, respectively.
Current wording
Includes fee income of $3.6 million and $2.6 million recognized on our floating-rate CRE whole loans for the nine months ended September 30, 2026 and 2025, respectively.
Previous wording
Includes amortization expense of $2.9 million and $3.5 million for the six months ended June 30, 2026 and 2025, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Current wording
Includes amortization expense of $3.8 million and $4.1 million for the nine months ended September 30, 2026 and 2025, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.
Previous wording
Includes net amortization expense of $312,000 and $397,000 for both the three months ended June 30, 2026 and 2025, respectively, on 14 and 20 terminated interest rate swap agreements, respectively, 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 $886,000 and $1.2 million for the nine months ended September 30, 2026 and 2025, respectively, on 17 and 20 terminated interest rate swap agreements, respectively, 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 decreased by $2.8 million and $5.7 million for the comparative three and six months ended June 30, 2026 and 2025. The decrease in the comparative three and six months was attributed to: (i) a decrease in revenue related to a student housing property that was sold in September 2025, and (ii) a decrease in revenue at an office property that was sold in December 2025, partially offset by an increase in revenues at a hotel property in the northeast region that had increased occupancy and rates in the comparative period.
Current wording
Real estate income - hospitality and rental: The decrease in aggregate real estate income in the comparative three and nine months of $1.4 million and $7.0 million was attributed to: (i) a decrease in revenue related to a student housing property that was sold in September 2025 and (ii) a decrease in revenue at an office property that was sold in December 2025, partially offset by an increase in revenues at our hospitality properties that had increased occupancy and rates in the comparative period.
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Current report — wording carried from elsewhere
These sources of liquidity were offset by the paydowns on our term warehouse facilities and senior secured financing facility, deployments in CRE loan portfolio and real estate investments, repayment of senior unsecured notes, distributions on our preferred stock and ongoing operating expenses and substantially resulted in the $53.3 million of unrestricted cash we held at September 30, 2026.