ACRES Commercial Realty Corp.

NOTE 1 - ORGANIZATION

ACRES Commercial Realty Corp., a Maryland corporation, along with its subsidiaries (collectively, the "Company"), is a 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. Prior to August 6, 2026, the Company was externally managed by ACRES Capital, LLC ("the Manager"), a subsidiary of ACRES Capital Corp. ("ACC"). Effective as of August 6, 2026, the Company completed the merger and internalization with ACC, as further discussed below in Note 2, and the management agreement was terminated at that time.

The Company has qualified, and expects to qualify in the current fiscal year, as a REIT.

The Company conducts its operations through the use of subsidiaries that it consolidates into its financial statements. The Company’s core assets are consolidated through its investments in ACRES Realty Funding, Inc. ("ACRES RF"), a wholly-owned subsidiary, that holds CRE loans and CRE-related securities as well as special purpose subsidiaries established for securitization purposes, which are consolidated as variable interest entities ("VIEs") as discussed in Note 4.

Post merger, the Company provides investment management servicing through the Company's taxable REIT subsidiary, ACRES Capital, LLC, that is registered with the Securities and Exchange Commission as an investment adviser. ACRES Capital, LLC serves as the investment manager of ACRES Mortgage Fund, Ltd. ("AMF"), an exempted company under the laws of the Cayman Islands formed for the purpose of investing in CRE mortgage loans, as well as third-party separately managed accounts.

The Company consolidates AMF in the accompanying financial statements (the "Consolidated Fund"). Including the results of the Consolidated Fund significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows within the accompanying consolidated financial statements. Net income attributable to the Company includes only its proportionate share of the Consolidated Fund’s results, which reflects the Company’s 13.38% indirect economic interest at September 30, 2026. The Company’s share arises from its investment in the Consolidated Fund and from fees and other amounts earned from the Consolidated Fund. The Consolidated Fund’s remaining net income or loss is allocated to third-party investors and presented as net income or loss attributable to noncontrolling interests. Further, cash flows allocable to non-controlling interests in the Consolidated Fund are specifically identifiable within the consolidated statements of cash flows.

NOTE 2 - MERGER OF ACRES CAPITAL CORP. AND INTERNALIZATION OF MANAGEMENT

Overview of the Transaction

On August 6, 2026 (the "Merger Effective Time"), the Company completed the Merger (as defined below) and Internalization (as defined below) transactions pursuant to the terms of the Agreement and Plan of Merger, dated April 29, 2026, by and among the Company and ACRES Holdings Sub LLC ("Merger Sub"), a subsidiary of the Company, on the one hand, and ACC and ACRES Capital LLC, a subsidiary of ACC and the former external manager of the Company (the "Manager"), on the other hand.

The Company completed the Merger to internalize its management platform, align the interests of management and stockholders, eliminate future external management fees and related-party reimbursements, and provide the Company with direct control over personnel, infrastructure and operating capabilities used to manage its commercial real estate investment activities. Along with the Manager's CRE lending platform, the Merger provides the Company with increased third-party fee income earned from an evergreen fund vehicle, separately managed accounts and a growing insurance platform that will enhance Company’s financial profile. The Company obtained control of ACC upon the closing of the Merger through the acquisition of 100% of the outstanding voting equity interests of ACC.

At the Merger Effective Time, pursuant to the terms of the Merger Agreement, ACC merged with and into Merger Sub, with Merger Sub continuing as the surviving company and a wholly-owned subsidiary of the Company (the "Merger"). A special committee (the "Special Committee") of the Company’s board of directors (the "Board") consisting solely of independent directors considered, reviewed and negotiated the terms of the Merger and Internalization on behalf of the Board.

As a result of the Merger, among other things, (i) the Company acquired the Manager, (ii) the Manager ceased to perform any outside management services for the Company, (iii) the Company and the Manager terminated the existing Fourth Amended and

Restated Management Agreement, dated as of July 31, 2020, as amended, by and among the Company, the Manager and ACC (the "Management Agreement"), for no additional consideration, and (iv) the Company became internally managed (the "Internalization").

At the Merger Effective Time, each outstanding share of ACC common stock, par value $0.0001 per share, was converted into the right to receive 2.61882 shares of Company common stock, par value $0.001 per share (the "ACR Common Stock"). As a result, the Company issued 7,478,462 shares of ACR Common Stock as consideration for the Merger.

The Company accounted for the Merger 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 the consideration transferred over the estimated fair value of identifiable net assets acquired recognized as goodwill. The results of operations of ACC have been included in the Company’s unaudited condensed consolidated financial statements beginning on August 6, 2026.

Fair Value of Consideration Transferred

The following table presents the fair value of the consideration transferred to effect the Merger (in thousands, except share and per share data):

(1)

Settlement of preexisting relationships pertains to the promissory note receivable and payables between the Company and ACC that were settled upon completion of the Merger and included in the consideration transferred above.

(2)

Represents the fair value of fully vested ACC stock options that were accelerated and converted into the Company's common stock at the Merger Effective Time, reflecting the value attributable to post-combination services. ACC's stock options are included in ACC's outstanding common stock as of the date of the Merger. The fair value attributable to post-combination services of $13.7 million was excluded from the consideration transferred above and recognized in merger and internalization costs on the consolidated statements of operations.

Purchase Price Allocation

The Merger and Internalization were conditioned upon each other and accordingly are considered “related” and treated as a single transaction for accounting and reporting purposes. The Merger is accounted for under the acquisition method for business combinations pursuant to GAAP, with the Company as the accounting acquirer of ACC. The consideration transferred by the Company in the Merger establishes a new accounting basis for the assets acquired, liabilities assumed and any non-controlling interests, measured at their respective fair value as of the Merger Effective Time. To the extent fair value of the consideration paid exceeds fair value of net assets acquired, any such excess represents goodwill. Adjustments to estimated fair value of identifiable assets and liabilities acquired in the Merger, as well as adjustments to the consideration paid may change the determination and amount of goodwill and may impact depreciation, amortization and accretion based on revised fair value of assets acquired and liabilities assumed.

The following table summarizes the provisional recording of the assets acquired and liabilities assumed as of the Merger Effective Time (in thousands):

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the Merger includes the expected synergies and other benefits that the Company believes will result from the Internalization. Goodwill is not amortized and the Company has allocated the goodwill to its segments.

Pro Forma Impact of Acquisition

The following table presents unaudited supplemental pro forma information as if the Merger had occurred on January 1, 2025 for thethree and nine months ended September 30, 2026 and 2025 (in thousands). The unaudited supplemental pro forma financial information is not necessarily indicative of what the actual results of operations of the Company would have been assuming the Merger had taken place on January 1, 2025, nor is it indicative of the results of operations for future periods.

Our consolidated results of operations for both the three and nine months ended September 30, 2026 include $1.9 million of net loss allocable to common shares associated with the results of operations of ACC from the merger closing date of August 6, 2026 to September 30, 2026.

Other Details

In addition, various other impacts to the Company’s financial statements occurred in connection with the Merger, which are discussed throughout these financial statements, including:

•

Goodwill recorded as part of the Merger, see Note 21.

•

The assumption of ACC’s borrowing facilities, see Note 12.

•

The issuance of ACR Common Stock, see Note 13.

•

The termination of the Fourth Amended and Restated Management Agreement, see Note 19.

•

The Company has concluded that, as of September 30, 2026, it operates inthree reportable segments consistent with its current management internal financial reporting purposes: (1) Principal Investing, (2) Investment Management, and (3) Strategic Holdings, see Note 24.

Merger and Internalization Costs

In conjunction with the Merger, the Company incurred $38.3 million and $43.4 million of merger-related transaction costs during the three and nine months ended September 30, 2026, respectively, primarily consisting of post-combination share-based compensation of $13.7 million and $23.8 million in payroll taxes associated with previously existing stock options to ACC executives and various professional fees directly attributable to the Merger.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. ("GAAP"). In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments necessary to fairly state the Company’s financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Certain prior period presentations were reclassified to ensure comparability with current period classifications.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, majority-owned or controlled subsidiaries and VIEs for which the Company is considered the primary beneficiary. All inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and within the period of financial results. Actual results could differ from those estimates. Estimates affecting the accompanying consolidated financial statements include, but are not limited to, the net realizable and fair values of the Company’s investments, the estimated useful lives used to calculate depreciation, the expected lives over which to amortize premiums and accrete discounts, reversals of or provisions for expected credit losses and the disclosure of contingent liabilities.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with original maturities of three months or less at the time of purchase. From time to time, the Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure.

Restricted cash includes required account balance minimums in the Company's various escrow and deposit accounts and the Company's consolidated CRE debt securitization has an expense reserve and reinvestment cash that is collateral to the senior notes.

The following table provides a reconciliation of cash, cash equivalents and restricted cash for the Consolidated Company Entities on the consolidated balance sheets to the total amount shown on the consolidated statements of cash flows (in thousands):

(1) The Consolidated Fund's cash balances are included in the changes in operating assets and liabilities of the Consolidated Fund on the statement of cash flows.

Income Taxes

The Company previously recorded a full valuation allowance against its net deferred tax assets (tax effected expense of$21.8 million) at September 30, 2026, as the Company believes it is more likely than not that the deferred tax assets will not be realized at this time. This assessment was based on the Company’s cumulative historical losses and uncertainties as to the amount of taxable income that would be generated in future years by the Company’s taxable REIT subsidiaries.

Earnings per Share

The Company presents both basic and diluted earnings per share ("EPS"). Basic EPS excludes dilution and is computed by dividing net income (loss) allocable to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Income Earned from Fee-Based Services

Income from fee-based services includes asset management fees, development fees, servicing fees, and incentive fees and is included in fee and other income on the consolidated statements of operations. Incentive fees are earned when specified financial hurdles are met for certain separately managed accounts. Revenues from fee-based services that the Company provides are recognized as earned over time in accordance with contractual agreements. The services the Company provides represent performance obligations that are satisfied over time.

Accounting for Investment Company Activities

The Company’s Consolidated Fund is an investment company under GAAP based on the following characteristics: the Consolidated Fund obtains funds from one or more investors and the Consolidated Fund’s business purpose and substantive activities are investing funds for returns from investment income. Therefore, investments of the Consolidated Fund are recorded at fair value and the unrealized gain (loss) in an investment’s fair value is recognized on a current basis within the consolidated statements of operations. In the preparation of these consolidated financial statements, the Company has retained the investment company accounting for the Consolidated Fund under GAAP.

All of the investments held by the Consolidated Fund are presented at their estimated fair values within the Company’s consolidated balance sheets. Net income attributable to the economic ownership interest of the third-party investors in the Consolidated Fund are presented within net income attributable to non-controlling interest in Consolidated Fund within the consolidated statements of operations.

Goodwill represents the costs of business acquisitions in excess of the fair value of identifiable net assets acquired. The Company evaluates the recoverability of goodwill annually on the first day of the Company’s fiscal fourth quarter of each fiscal year, or more frequently, if events or changes in circumstances indicate that goodwill might be impaired. If the Company’s review indicates that the carrying amount of goodwill exceeds its fair value, the Company will reduce the carrying amount of goodwill to fair value. The annual impairment test will be performedas of October 1st each year. While we have not yet completed this analysis for 2026, we donot anticipate that goodwill will be impaired, nor were there events or changes in circumstances indi cating impairment at September 30, 2026.

Recent Accounting Pronouncements

Accounting Standards to be Adopted in Future Periods

In November 2024, the Financial Accounting Standards Board ("FASB") issued guidance to improve transparency on certain costs and expenses. This guidance is effective for fiscal years beginning after December 15, 2026 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is in the process of evaluating the impact of this guidance, however, the Company does not expect a material impact to its consolidated financial statements.

NOTE 4 - VARIABLE INTEREST ENTITIES

The Company has evaluated its loans, investments in unconsolidated entities, liabilities to subsidiary trusts issuing preferred securities (consisting of unsecured junior subordinated notes), securitizations, guarantees and other financial contracts in order to determine if they are variable interests in variable interest entities ("VIEs"). The Company regularly monitors these legal interests and contracts and, to the extent it has determined that it has a variable interest, analyzes the related entity for potential consolidation.

Consolidated VIEs (the Company is the primary beneficiary)

Based on management’s analysis, the Company was the primary beneficiary oftwo VIEs, ACRES Commercial Realty 2026-FL4 Issuer, LLC ("ACR 2026-FL4") and AMF, at September 30, 2026 (the "Consolidated VIEs"). At December 31, 2025, the Company was not the primary beneficiary of any VIEs.

ACR 2026-FL4 is a CRE securitization that was formed on behalf of the Company to invest in CRE whole loans that were financed by the issuance of debt securities. By financing these assets with long-term borrowings through the issuance of debt securities, the Company seeks to generate attractive risk-adjusted equity returns and to match the term of its assets and liabilities. The primary beneficiary determination for the VIE was made at the VIE’s inception and is continually assessed. ACR 2026-FL4 is accounted for as a secured borrowing in accordance with GAAP.

The Company has exposure to losses on its securitization to the extent of its investments in the subordinated debt and preferred equity of the securitization. The Company is entitled to receive payments of principal and interest on the debt securities it holds and, to the extent revenues exceed debt service requirements and other expenses of the securitization, distributions with respect to its preferred equity interests. As a result of consolidation, the debt and equity interests the Company holds in its securitization have been eliminated; and the Company’s consolidated balance sheets reflect the assets held, debt issued by the securitization to third parties and any accrued payables to third parties. The Company’s operating results and cash flows include the gross amounts related to the securitization’s assets and liabilities as opposed to the Company’s net economic interests in the securitization. Assets and liabilities related to the securitization are disclosed, in the aggregate, on the Company’s consolidated balance sheets. For a discussion of the debt issued through the securitization, see Note 12.

AMF is considered and treated as a VIE because the investors of AMF, who are unaffiliated with the Company, do not have substantive rights to impact the ongoing governance and operating activities of AMF, including the ability to remove the Company as the investment manager without cause. The Company concluded its interest in AMF represented a potentially significant economic interest and the Company represented the primary beneficiary of AMF. As a result, the Company consolidated AMF as of September 30, 2026. As of September 30, 2026, the Company owns 13.38% of AMF.

Creditors of the Company’s Consolidated VIEs haveno recourse to the general credit of the Company. During thenine months ended September 30, 2026 and 2025, the Company did not provide any financial support to its Consolidated VIEs nor does it have any requirement to do so, although it may choose to do so in the future to maximize future cash flows on such investments by the Company. There are no explicit arrangements that obligate the Company to provide financial support to its Consolidated VIEs.

CS-ACRES FSU Student Venture, LLC

In April 2022, the Company contributed an initial investment of $13.0 million for a 72.1% interest in CS-ACRES FSU Student Venture, LLC (the "FSU Student Venture"). The FSU Student Venture, a joint venture between the Company and two unrelated third parties, was formed for the purpose of developing a student housing project. The FSU Student Venture was determined not to be a VIE as there was sufficient equity at risk, it does not have disproportionate voting rights and its members all have the following characteristics: (1) the power to direct activities, (2) the obligation to absorb losses and (3) the right to receive residual returns. However, the Company consolidated the FSU Student Venture due to its 72.1% interest that provides the Company with control over all major decisions of the joint venture. The portion of the joint venture that the Company does not own is presented as non-controlling interest at and for the periods presented in the Company’s consolidated financial statements.

In September 2025, the Company distributed one of the underlying properties held by FSU Student Venture to a newly formed joint venture, CS-ACRES Osceola Student Joint Venture, LLC (the "FSU Osceola Student Venture"). See additional details below. Subsequent to this distribution, the Company sold its interest in the FSU Student Venture for $106.8 million, which resulted in a gain on the sale of investment in real estate.

As part of the transaction, the Company provided seller financing in the form of a $90.0 million CRE whole loan commitment and a $9.3 million preferred equity loan (the "FSU Preferred Equity Loan") to the new FSU Student Venture partners. The Company determined that although its investment in the FSU Preferred Equity Loan represented a variable interest, it did not provide the Company with a controlling financial interest. The Company accounts for its investment in the FSU Preferred Equity Loan as a CRE loan on its consolidated financial statements.

CS-ACRES Osceola Student Joint Venture, LLC

In September 2025, the FSU Student Venture distributed one of its underlying properties to the FSU Osceola Student Venture at a carrying value of $27.0 million. The FSU Osceola Student Venture, a joint venture between the Company and two unrelated third parties, was formed for the purpose of operating a student housing project. The FSU Osceola Student Venture was determined not to be a VIE as there was sufficient equity at risk, it does not have disproportionate voting rights and its members all have the following characteristics: (1) the power to direct activities, (2) the obligation to absorb losses and (3) the right to receive residual returns. The Company applied the voting interest model and consolidated the FSU Osceola Student Venture based on its 72.1% controlling ownership interest and control over the major decisions of the joint venture. The portion of the joint venture that the Company does not own is presented as non-controlling interest at and for the periods presented in the Company’s consolidated financial statements.

ACRES SPE 2025-1, LLC

ACRES SPE 2025-1, LLC ("SPE 2025-1") was formed in March 2025, to acquire and finance purchased assets. Subsequently, SPE 2025-1 entered into a master repurchase agreement with JPMorgan Chase ("JPMorgan Chase 2025 Facility") to finance existing vintage CRE loans and to potentially finance the origination of new CRE loans held by the Company. In the quarter ended December 31, 2025, ACRES Mortgage Fund Levered II, LLC ("AMF Levered II, LLC"), a wholly-owned subsidiary of AMF, purchased a $125.0 million, or 43.2%, non-controlling interest in SPE 2025-1 (See Note 19). SPE 2025-1 was determined not to be a VIE as there was sufficient equity at risk, it does not have disproportionate voting rights and its members all have the following characteristics: (1) the power to direct activities, (2) the obligation to absorb losses and (3) the right to receive residual returns. The Company applied the voting interest model and consolidated SPE 2025-1 based on its 56.8% controlling ownership interest and control over all major decisions. AMF Levered II, LLC assumed its proportionate share of risk in the underlying assets and the liabilities, including the JPMorgan Chase 2025 Facility. The portion of SPE 2025-1 that the Company does not own is presented as non-controlling interest at and for the periods presented in the Company’s consolidated financial statements.

Investments in Unconsolidated Entities (the Company is not the primary beneficiary, but has a variable interest)

Based on management’s analysis, the Company is not the primary beneficiary of the VIEs discussed below since it does not have both (i) the power to direct the activities that most significantly impact the VIEs' economic performance and (ii) the obligation to absorb the losses of the VIEs or the right to receive the benefits from the VIEs, which could be significant to the VIEs. Accordingly, the following VIEs are not consolidated in the Company’s financial statements at September 30, 2026 and December 31, 2025. The Company continuously reassesses whether it is deemed to be the primary beneficiary of its unconsolidated VIEs. The Company’s maximum exposure to risk for each of these unconsolidated VIEs is set forth in the "Maximum Exposure to Loss" column in the table below.

The Company has a 100% interest in the common shares of both Resource Capital Trust I ("RCT I") and RCC Trust II ("RCT II"), with a value of $1.5 million in the aggregate, or 3.0% of each trust, at September 30, 2026 and December 31, 2025. RCT I and RCT II were formed for the purposes of providing debt financing to the Company. The Company completed a qualitative analysis to determine whether it is the primary beneficiary of each of the trusts and determined that it was not the primary beneficiary of either trust because it does not have the power to direct the activities most significant to the trusts, which include the collection of principal and interest through servicing rights. Accordingly, neither trust is consolidated into the Company’s consolidated financial statements.

The Company records its investments in RCT I and RCT II’s common shares of $774,000 each as investments in unconsolidated entities using the cost method, recording dividend income when declared by RCT I and RCT II. The trusts each hold subordinated debentures for which the Company is the obligor in the amount of $25.8 million for each of RCT I and RCT II. The debentures were funded by the issuance of trust preferred securities of RCT I and RCT II.

65 E. Wacker Joint Venture, LLC

In March 2024, the Company contributed its interest in an East North Central office property to form a joint venture (the "Wacker JV") with an unrelated third-party (the "Wacker Managing Member") for the purpose of converting the office property to multifamily units. At the date of contribution, the office property had a fair value of $20.3 million. The Wacker Managing Member is responsible for the day-to-day operations of the Wacker JV, but the Company and the Wacker Managing Member must each approve all major decisions related to the operations, financing or disposition of the Wacker JV before any major decision can be taken. The Company accounts for its investment in the Wacker JV as an equity method investment within investments in unconsolidated entities in its consolidated financial statements.

In September 2025, the Wacker JV completed a re-capitalization that included entering into a $62.4 million construction loan, a $10.9 million bridge loan and converting part of the Company's common equity into preferred equity. Also, in connection with the re-capitalization, the Company entered into guarantees related to the construction loan and bridge loan. The guarantees include a Guaranty of Completion, a Guaranty of Retail Space, a Guaranty of Recourse Obligations, a Guarantee of Interest and Carry Costs and an Environmental Indemnity Agreement.

7720 McCallum JV, LLC

In September 2024, the Company contributed $574,000 as well as its net interest in a multifamily unit property located in the Southwest region to form a joint venture (the "McCallum JV") with an unrelated third-party (the "McCallum Managing Member"). The McCallum Managing Member is responsible for the day-to-day operations of the McCallum JV. The Company determined the McCallum JV to be a VIE for which it was not the primary beneficiary because it did not have the power to direct the activities most significant to the McCallum JV, as the Company does not have unilateral kick-out rights or substantive participating rights. The Company accounts for its investment in the McCallum JV as an equity method investment within investments in unconsolidated entities in its consolidated financial statements.

Upon formation of the McCallum JV, the McCallum JV took ownership of the multifamily property subject to a related CRE loan payable to the Company which was novated to allow the McCallum JV to replace the original obligor who was experiencing financial difficulty. The $33.7 million CRE loan has an initial maturity date of September 5, 2027 and bears interest at a rate ofone-month Term Secured Overnight Financing Rate ("Term SOFR") and a spread of 2.75%. There were no other changes to the terms of the loan. The McCallum JV also entered into a $1.5 million mezzanine loan commitment with the Company, which was fully funded at June 30, 2026.

Pacmulti Affiliates, LLC

In March 2025, the Company contributed$200,000 as well as its net interest in a multifamily unit property located in the Mid-Atlantic region to form a joint venture (the "Pacmulti JV") with an unrelated third-party (the "Pacmulti Managing Member"). The Pacmulti Managing Member is responsible for the day-to-day operations of the Pacmulti JV. The Company determined the Pacmulti JV to be a VIE for which it was not the primary beneficiary because it did not have the power to direct the activities most significant to the Pacmulti JV, as the Company does not have unilateral kick-out rights or substantive participating rights. The Company accounts for its investment in the Pacmulti JV as an equity method investment within investments in unconsolidated entities in its consolidated financial statements.

Upon formation of the Pacmulti JV, the Pacmulti JV took ownership of the multifamily property subject to a related CRE loan payable to the Company which was novated to allow the Pacmulti JV to replace the original obligor who was experiencing financial difficulty. The $70.8 million CRE loan has an initial maturity date of May 5, 2030 and bears interest at a rate ofone-month Term SOFR and a spread of 3.41%. There were no other changes to the terms of the loan. The Pacmulti JV also entered into a$13.5 million mezzanine loan commitment with the Company, which was fully funded at June 30, 2026.

ACRES SPV LLC

ACRES SPV LLC, was a wholly-owned subsidiary of ACC and merged into the Company as part of the Merger discussed in Note 2. The Company completed a qualitative analysis to determine whether it is the primary beneficiary of ACRES SPV LLC, and determined that it was not the primary beneficiary as of September 30, 2026. ACRES SPV LLC is considered and treated as a VIE due to a lack of sufficient equity. The Company (including related parties) is not deemed to be the primary beneficiary of the VIE as the Company does not have the power to direct the activities most significant to ACRES SPV LLC which include the management of current investments and operating activity. Accordingly, ACRES SPV LLC is not consolidated into the Company’s consolidated financial statements as of September 30, 2026. The Company has no investment at risk as of September 30, 2026.

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at September 30, 2026 (in thousands):

(1)

For McCallum JV and Pacmulti JV, the maximum exposure to loss is equal to the fair value of the underlying collateral, minus the total CRE loans and accrued interest receivable.

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table summarizes the Company’s supplemental disclosure of cash flow information (in thousands):

NOTE 6 - LOANS

The following is a summary of the Company’s CRE loans held for investment by asset type (dollars in thousands, except amounts in footnotes):

(1)

Amounts include unamortized loan origination fees of$7.6 million and $6.6 million and deferred amendment fees of$275,000 and $852,000 at September 30, 2026 and December 31, 2025, respectively.

(2)

References to ("1M Term SOFR") are one-month Term SOFR. Weighted-average one-month Term SOFR was 3.77% and 3.83% at September 30, 2026 and December 31, 2025, respectively. Additionally, the weighted-average benchmark rate floor was 2.33% and 1.78% at September 30, 2026 and December 31, 2025, respectively.

(3)

Maturity dates exclude contractual extension options, subject to the satisfaction of certain terms that may be available to the borrowers.

(4)

Maturity dates excludetwo whole loans, with total amortized costs of$43.9 million and $37.9 million, in maturity default at September 30, 2026 and December 31, 2025, respectively.

(5)

Substantially all loans are pledged as collateral under various borrowings at September 30, 2026 and December 31, 2025.

(6)

CRE whole loans had$78.2 million and $88.6 million in unfunded loan commitments at September 30, 2026 and December 31, 2025, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreements, and any necessary approvals have been obtained.

(7)

Includes five mezzanine loans, with total amortized costs of $22.8 million, with four having fixed interest rates of 15.0% and one having a fixed interest rate of 20.0% at September 30, 2026. Includes four mezzanine loans, with total amortized costs of $17.8 million, with three having fixed interest rates of 15.0% and one having a fixed interest rate of 20.0% at December 31, 2025. Because the Company is also the first mortgage lender on these loans, it considers the first mortgage and mezzanine loans together as one whole loan.

(8)

The Company had one preferred equity investment associated with a CRE whole loan at September 30, 2026 and December 31, 2025, respectively. The preferred equity investment has a fixed interest rate of 10%, of which 4.0% interest is deferred until maturity.

The following is a summary of the Company’s CRE loans held for investment by property type and geographic location (dollars in thousands):

The following is a summary of the contractual maturities of the Company’s CRE loans held for investment, at amortized cost (in thousands, except amounts in the footnotes):

(1)

Maturity dates excludetwo whole loans, with total amortized costs of$43.9 million and $37.9 million, in maturity default at September 30, 2026 and December 31, 2025, respectively.

(2)

At September 30, 2026, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options were $248.7 million, $139.2 million and $1.7 billion in 2026, 2027 and 2028 and thereafter, respectively. At December 31, 2025, the amortized costs of the CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $397.1 million, $384.7 million and $1.0 billion in 2026, 2027 and 2028 and thereafter, respectively.

At September 30, 2026 and December 31, 2025, no single loan or investment represented more than 10% of the Company's total assets, and one investor group representing five CRE loans generated 11% and 14% of the Company's revenue, respectively.

NOTE 7 - FINANCING RECEIVABLES

The following table shows the activity in the allowance for credit losses for thenine months ended September 30, 2026 and the year ended December 31, 2025 (in thousands):

During the three months ended September 30, 2026, the Company recorded a provision for expected credit losses of$8.3 million, primarily attributable to a decline in macroeconomic factors both generally and locally as they relate to our CRE loans. During the nine months ended September 30, 2026, the Company recorded a net provision for expected credit losses of$9.0 million, primarily attributable to a decline in macroeconomic factors both generally and locally as they relate to the Company's CRE loans, compounded by increased modeled credit risk in the Company's loan portfolio.

In addition to the Company’s general estimate of credit losses, the Company may also be required to individually evaluate collateral-dependent loans for credit losses if it has determined that foreclosure or sale of the loan or the underlying collateral is probable. At both September 30, 2026 and December 31, 2025, based on the Company's evaluation no loans were identified for individual evaluation.

Credit quality indicators

Commercial Real Estate Loans

CRE loans are collateralized by a diversified mix of real estate properties and are assessed for credit quality based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwritten plan, time since origination, current implied and/or re-underwritten loan-to-collateral value ("LTV") ratios, loan structure and exit plan. Depending on the loan’s performance against these various factors, loans are rated on a scale from 1 to 5, with loans rated 1 representing loans with the highest credit quality and loans rated 5 representing loans with the lowest credit quality. Loans are typically rated a 2 at origination. The factors evaluated provide general criteria to monitor credit migration in the Company’s loan portfolio; as such, a loan’s rating may improve or worsen, depending on new information received.

The criteria set forth below should be used as general guidelines and, therefore, not every loan will have all of the characteristics described in each category below.

All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans and preferred equity investments may experience greater credit risks due to their nature as subordinated investments.

For the purpose of calculating the quarterly provision for credit losses under CECL, the Company pools CRE loans based on the underlying collateral property type and utilizes a probability of default and loss given default methodology for approximately one year after which it immediately reverts to a historical mean loss ratio.

Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnote):

(1)

Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in the footnotes):

(1)

Includesone novated CRE whole loan that resulted from a loan workout.

(2)

Includestwo novated CRE whole loans that resulted from loan workouts.

(3)

Includestwo novated CRE whole loans that resulted from loan workouts.

(4)

(5)

Acquired CRE whole loans are grouped within each loan’s year of origination.

Loan Portfolio Aging Analysis

The following table presents the CRE loan portfolio aging analysis at the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):

(1)

During the three and nine months ended September 30, 2026, the Company recognized interest income of $1.0 million and $3.1 million, respectively, on one CRE loan with a principal payment past due greater than 90 days at September 30, 2026.

(2)

Includesone CRE loan with an amortized cost of $32.3 million in maturity default at December 31, 2025.

(3)

At September 30, 2026 and December 31, 2025, the Company hadfour andthree CRE whole loans, with total amortized costs of$94.9 million and $59.1 million, respectively, in payment default.

During the three and nine months ended September 30, 2026 and 2025, the Company didnot recognize interest income on CRE whole loans that were placed on nonaccrual status.

Loan Modifications

The Company is required to disclose modifications where it determined the borrower is experiencing financial difficulty and modified the agreement to: (i) forgive principal, (ii) reduce the interest rate, (iii) cause an other-than-insignificant payment delay, (iv) extend the loan term or (v) any combination thereof.

During the nine months ended September 30, 2026 and 2025, the Companydidnot enter into any loan modifications for borrowers that were experiencing financial difficulty.

NOTE 8 - INVESTMENTS IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES

At September 30, 2026, the Company held investments infive real estate properties, four of which are included in investments in real estate, andone of which is included in properties held for sale on the consolidated balance sheets. The Company reclassified two properties in the third quarter of 2026 to real estate held for investment.

In March 2026, the Company sold unimproved land located in the Northeast region for $20.0 million. This sale generated a gain of $3.3 million, net of selling costs.

The following table summarizes the book value of the Company’s acquired assets and assumed liabilities (in thousands, except amounts in the footnotes):

(1)

Investments in real estate include$7.0 million and $15.2 million of land, which is not depreciable, at September 30, 2026 and December 31, 2025, respectively. Also includes$382,000 and $3.7 million of construction in progress, which is also not depreciable until placed in service, at September 30, 2026 and December 31, 2025, respectively. During the third quarter of 2026, the Company reclassifiedtwo properties from real estate held for sale to real estate held for investment. Upon reclassification, the Company recorded a catch-up adjustment for depreciation and amortization that would have been recognized had the properties been classified as held for investment. Depreciation expense for the three and nine months ended September 30, 2026, was$7.1 million and$8.4 million, respectively. Depreciation expense for the three and nine months ended September 30, 2025, was $636,000 and $1.8 million, respectively.

(2)

Primarily comprises an$18.3 million and a $18.4 million right of use asset, at September 30, 2026 and December 31, 2025, respectively, associated with an acquired ground lease disclosed in footnote (6) below accounted for as an operating lease. Amortization is booked to real estate expenses on the consolidated statements of operations. Additionally, the Company entered into an operating lease associated with a parking lease at a newly acquired property. The associated right of use asset has a value of$289,000 and $322,000 at September 30, 2026 and December 31, 2025, respectively.

(3)

Refer to Note 9 for additional information on the Company’s remaining operating leases.

(4)

Primarily comprises a franchise intangible of$5.1 million and $3.5 million, a management contract intangible of$2.4 million and $2.6 million, in-place leases of$4,000 and $7,000 and a customer list intangible of$8,000 and $87,000, at September 30, 2026 and December 31, 2025, respectively.

(5)

At September 30, 2026, properties held for sale include an office property acquired via deed-in-lieu of foreclosure in June 2023 and at December 31, 2025, properties held for sale additionally included a hotel acquired via deed-in-lieu of foreclosure in November 2020 and a student housing property acquired in April 2022.

(6)

Primarily comprised of a$45.3 million and $44.7 million ground lease at September 30, 2026 and December 31, 2025, respectively. The ground lease has a remaining term of 90 years. Lease expense was$2.2 million and $2.1 million for thenine months ended September 30, 2026 and 2025, respectively, and$731,000 and $710,000 for thethree months ended September 30, 2026 and 2025, respectively.

(7)

Comprised of an operating lease liability.

(8)

Excludes items of working capital, either acquired or assumed.

The Company acquired a ground lease with its equity investment in a hotel property in April 2022. This ground lease has an associated above-market lease intangible liability. The ground lease confers to the Company the right to use the land on which its hotel operates, and the ground lease payments increase 3.00% per year until 2116. The Company acquired the original 99-year lease with 94 years remaining. At September 30, 2026,90 years remain in its term.

In December 2024, the Company entered into a parking lease at an asset acquired in August 2024. The parking lease allows the Company to have access to a designated amount of parking spots adjacent to the building which the Company operates. The lease payments increase 2.00% per year until 2123, or a 99-year lease. At September 30, 2026,97 years remain in its term.

As part of the reclassification of assets held for investment, the Company holds a ground lease associated with a hotel property acquired through lending activities. This ground lease has an associated below-market lease intangible asset. The payments on the ground lease consist of air rights rent, retail rent and parking rent, the amounts of which are specifically determined in the executed lease agreement and subsequently increased based on the increase of the consumer price index over a specified number of periods. The Company acquired the original 99-year lease with 66 years remaining. At September 30, 2026,60 years remain in its term. Lease payments related to the ground lease still occurred while the asset was held for sale.

The following table summarizes the expenses of intangible assets, right of use assets and leases related to investments in real estate and other acquired assets and assumed liabilities (in thousands):

The following table summarizes the Company's expected fiscal year amortization expense on its intangible lease assets (in thousands):

NOTE 9 - LEASES

In addition to the leases discussed in Note 8, the Company has operating leases for office space and office equipment. The leases have terms that expire between February 2029 and September 2029. The leases on the office space and office equipment contain options for early termination granted to the Company and the lessor. Lease payments are determined as follows:

•

Office space: payments are made on a fixed schedule, escalating annually, and also include the Company’s responsibility for a percentage of increases in the building’s property taxes and operating expenses over the base year.

•

Office equipment: payments are made on a fixed schedule.

The following table summarizes the Company’s operating leases (dollars in thousands):

(1)

The market discount rate is used, when readily determinable, in calculating the present value of lease payments for the operating lease liability. Otherwise, the incremental borrowing rate on the commencement date is used.

The following table summarizes the Company’s operating lease costs and cash payments during the periods indicated (in thousands):

The following table summarizes the Company’s operating leases cash flow obligations on an undiscounted, annual basis (in thousands):

NOTE 10 - INVESTMENTS IN UNCONSOLIDATED ENTITIES

The following table summarizes the Company's investments in unconsolidated entities at September 30, 2026 and December 31, 2025 and equity in earnings (losses) of unconsolidated entities for the three and nine months ended September 30, 2026 and 2025 (dollars in thousands, except in the footnotes):

(1)

During the three and nine months ended September 30, 2026 and 2025, dividends from the investments in RCT I's and RCT II's common shares in the amounts of $31,000 and $34,000 and $93,000 and $100,000, respectively, are recorded in other revenue on the Company's consolidated statements of operations.

(2)

Refer to Note 4 for details regarding the Wacker JV.

(3)

Refer to Note 4 for details regarding the McCallum JV.

(4)

Refer to Note 4 for details regarding the Pacmulti JV.

NOTE 11 - INVESTMENTS OF CONSOLIDATED FUND

The following tables summarize investments held in the Consolidated Fund (dollars in thousands):

NOTE 12 - BORROWINGS

The Company finances its investments, including CRE loans and real estate investments, through the use of secured and unsecured borrowings. Certain information with respect to the Company’s borrowings is summarized in the following table (dollars in thousands, except amounts in the footnotes):

(1)

See "Corporate Credit Facility" and "8.625 Senior Secured Notes Due 2031" sections below discussing the collateral pledged.

Securitizations

The following table sets forth certain information with respect to the Company’s consolidated securitization at September 30, 2026 (in thousands):

(1)

The reinvestment period is the period in which principal proceeds may be used to acquire CRE loans for reinvestment into the securitization.

The investments held by the Company’s securitization collateralize the securitization’s borrowings and, as a result, are not available to the Company, its creditors, or stockholders. All senior notes of the securitization held by the Company at September 30, 2026 were eliminated in consolidation. The Company didnot have any securitizations outstanding at December 31, 2025. In March 2025, the Company exercised the optional redemption on ACR 2021-FL1 and ACR 2021-FL2 in conjunction with the closing of the CRE term reinvestment facility (see below).

ACR 2026-FL4

In February 2026, the Company closed ACR 2026-FL4, a CRE debt securitization transaction that can finance up to $1.0 billion of CRE loans. ACR 2026-FL4 issued a total of $879.5 million of non-recourse, floating-rate notes to third parties at par. Additionally, the Company retained 100% of the Class F notes, Class G notes and Income notes. ACR 2026-FL4 includes a 180-day ramp up acquisition period that allows it to acquire CRE loans using unused proceeds from the issuance of the non-recourse floating-rate notes, which the Company fully utilized for new loan originations as of March 31, 2026. Additionally, ACR 2026-FL4 includes a reinvestment period, which ends in August 2028, that allows it to acquire CRE loans for reinvestment into the securitization using uninvested principal proceeds.

At closing, the offered notes issued to investors consisted of the following classes: (i) $589.7 million of Class A notes bearing interest at one-month SOFR plus 1.45%, increasing to 1.70% in August 2031; (ii) $104.2 million of Class A-S notes bearing interest at one-month SOFR plus 1.70%, increasing to 1.95% in August 2031; (iii) $72.4 million of Class B notes bearing interest at one-month SOFR plus 1.95%, increasing to 2.45% in August 2031; (iv) $58.5 million of Class C notes bearing interest at one-month SOFR plus 2.25%, increasing to 2.75% in August 2031; (v) $36.9 million of Class D notes bearing interest at one-month SOFR plus 2.85%, increasing to 3.35% in August 2031; and (vi) $17.8 million of Class E notes bearing interest at one-month SOFR plus 3.60%, increasing to 4.10% in August 2031.

All of the notes issued mature in August 2044, although the Company has the right to call the notes beginning on the payment date in August 2028 and thereafter.

ACR 2021-FL1

In May 2021, the Company closed ACRES Commercial Realty 2021-FL1 Issuer, Ltd. ("ACR 2021-FL1"), an $802.6 million CRE debt securitization transaction that provided financing for CRE loans. In March 2025, the Company exercised the optional redemption on ACR 2021-FL1 in conjunction with the closing of the CRE term reinvestment facility (see below).

ACR 2021-FL2

In December 2021, the Company closed ACRES Commercial Realty 2021-FL2 Issuer, Ltd. ("ACR 2021-FL2"), a $700.0 million CRE debt securitization transaction that provided financing for CRE loans. In March 2025, the Company exercised the optional redemption on ACR 2021-FL2 in conjunction with the closing of the CRE term reinvestment facility (see below).

Financing Arrangements

Borrowings under the Company’s financing arrangements are guaranteed by the Company or one or more of its subsidiaries. The following table sets forth certain information with respect to these arrangements (dollars in thousands, except amounts in the footnotes):

(1)

Includes$2.3 million and $2.8 million of deferred debt issuance costs at September 30, 2026 and December 31, 2025, respectively.

(2)

Includes $1.5 million of deferred debt issuance costs at December 31, 2025.

(3)

Includes $352,000 of deferred debt issuance costs at December 31, 2025.

(4)

Includes$1.2 million and $546,000 of deferred debt issuance costs at September 30, 2026 and December 31, 2025, respectively, which includes$1.1 million of deferred debt issuance costs at September 30, 2026 from another term warehouse financing facility with no balance.

(5)

Collateral is also composed of seven future funding participations that are components of assets held by ACR 2026-FL4 at September 30, 2026.

(6)

Includes $699,000 of deferred debt issuance costs at September 30, 2026.

The following table shows information about the amount at risk under the Company's financing arrangements (dollars in thousands, except amounts in footnotes):

(1)

Equal to the total of the estimated fair value of securities or loans sold and accrued interest receivable, minus the total of the financing agreement liabilities and accrued interest payable.

(2)

The Company is required to maintain a total minimum unencumbered liquidity balance of $20.0 million.

(3)

Equal to the total of the estimated fair value of real estate property investment financed, minus the total of the mortgage payable agreement liabilities and accrued interest payable.

The Company was in compliance with all financial covenants in each of the respective agreements at September 30, 2026 and December 31, 2025.

CRE - Term Reinvestment Financing Facility

In March 2025, an indirect wholly-owned subsidiary of the Company 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 new CRE loans. The JPMorgan Chase 2025 Facility had an initial maximum facility amount of $939.9 million, provides match term funding, charges interest of one-month Term SOFR 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. The reinvestment period for the JPMorgan Chase 2025 Facility ends in March 2027.

In connection with the JPMorgan Chase 2025 Facility, the Company provided "bad act" guaranties pursuant to a Guarantee Agreement, dated March 14, 2025 between the Company and JPMorgan Chase (the "2025 JPMorgan Chase Guarantee") where the Company is liable for 100% of the repurchase price of the purchased 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 the Company, 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 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. In November 2026, the Company entered into Amendment No. 1 to 2025 JPMorgan Chase Guarantee, by and between the Company and JPMorgan Chase, which makes certain amendments and modifications to the 2025 JPMorgan Chase Guarantee to amend certain financial covenants.

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 ACRES SPE 2025-1, LLC, (the "Seller SPE") or the Company; 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 the Company. 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. In October 2025, the JPMorgan Chase 2025 Facility was amended to allow AMF Levered II, LLC, a wholly-owned subsidiary of AMF, to purchase a non-controlling interest in the Seller SPE. At September 30, 2026, AMF Levered II, LLC owned $116.8 million non-controlling interest, or 43.2%, of the Seller SPE and assumed a proportionate share of risk in the portfolio.

Senior Secured Financing Facility

On July 31, 2020, an indirect, wholly-owned subsidiary ("Holdings"), along with its direct wholly-owned subsidiary (the "Borrower"), of the Company entered into a $250.0 million Loan and Servicing Agreement (the "MassMutual Loan Agreement") with MassMutual and the other lenders party thereto (the "Lenders"). The asset-based revolving loan facility (the "MassMutual Facility") provided under the MassMutual Loan Agreement had been used to finance the Company’s core CRE lending business.

In December 2022, Holdings, the Borrower and the Lenders entered into an Amended and Restated Loan and Servicing Agreement (the "Amended and Restated Loan and Servicing Agreement"), which amended and restated the MassMutual Loan Agreement, and reflected a senior secured term loan facility, not to exceed $500.0 million, composed of individual loan series issued upon mutual agreement of the Borrower and Lenders. Each loan series was available forthree months after the closing date agreed upon by the Borrower and Lender ("Commitment Period"), subject to the maximum dollar amount agreed upon for that series. The Commitment Period was subject to immediate termination upon the occurrence of an event of default. Each loan series had a final maturity offive years fromthe issuance date for the loan series unless an additional time was mutually agreed upon by the Lenders and

Borrower. The advance rate on portfolio assets was mutually agreed upon by the Lenders and Borrower. Each loan series had its own mutually agreed upon interest rate equal to one-month Term SOFR plus the applicable spread. In August 2026, the Company paid off the MassMutual Facility and terminated the MassMutual Loan Agreement.

CRE - Term Warehouse Financing Facilities

In October 2018, an indirect, wholly-owned subsidiary of the Company entered into a master repurchase agreement (the "JPMorgan Chase Facility") with JPMorgan Chase to finance the origination of CRE loans. As amended, the JPMorgan Chase Facility has a maximum facility amount of $250.0 million, charges interest of one-month Term SOFR plus market spreads and was set to mature in July 2026. In March 2025, the Company entered into Amendment No. 6 to Guarantee, by and between the Company and JPMorgan Chase, which makes certain amendments and modifications to the Guarantee, dated October 26, 2018 between the Company and JPMorgan Chase, as amended (the "JPM Guarantee") including but not limited to amending (capitalized terms each as defined in the JPM Guarantee) (i) minimum unencumbered Liquidity requirement, (ii) the ratio of Total Indebtedness to Total Equity, (iii) ratio of Adjusted Total Indebtedness to Total Equity, and (iv) EBITDA to Interest Expense ratio. In August 2025, the Company entered into Amendment No. 7 to Guarantee, by and between the Company and JPMorgan Chase, which makes certain amendments and modifications to the Guarantee, dated October 26, 2018 between the Company and JPMorgan Chase, as amended the JPM Guarantee, to amend the terms of the debt service coverage period. In July 2026, the Company entered into Amendment No. 5 to the JPMorgan Chase Facility, extending its maturity to July 2028. The Company also has the right to request two one-year extensions. In November 2026, the Company entered into Amendment No. 8 to Guarantee, by and between the Company and JPMorgan Chase, which makes certain amendments and modifications to the JPM Guarantee to amend certain financial covenants.

In November 2021, an indirect, wholly-owned subsidiary of the Company entered into a Master Repurchase and Securities Contract Agreement (the "Morgan Stanley Facility") with Morgan Stanley Mortgage Capital Holdings LLC ("Morgan Stanley") to finance the origination of CRE loans. As amended, the Morgan Stanley Facility had a maximum facility amount of $250.0 million, charges interest of one-month Term SOFR plus market spreads and was scheduled to mature in November 2025. The Company also has the right to request aone-year extension. In March 2025, the Company entered into Amendment No. 4 to Guaranty by and between the Company and Morgan Stanley, which makes certain amendments and modifications to the amended Guaranty between the Company and Morgan Stanley (the "MS Guaranty"), including but not limited to (capitalized terms each as defined in the MS Guaranty) (i) minimum unencumbered Liquidity requirement, (ii) the ratio of Total Indebtedness to Total Equity, (iii) ratio of Adjusted Total Indebtedness to Total Equity, and (iv) EBITDA to Interest Expense ratio. In November 2025, the Company entered into Amendment No. 3 to the Morgan Stanley Facility extending its maturity to November 2026 and entered into Amendment No. 4 to the Morgan Stanley Facility to increase the facility amount to $400.0 million, as increased from time to time, provided the amount shall be automatically reduced to $250.0 million on the earlier of May 2026 or when the Company sends a request for a reduction in the facility amount. In December 2025, the Company entered into Amendment No. 5 to the Morgan Stanley Facility to increase the facility amount to $500.0 million provided certain conditions are met. In March 2026, the Company entered into Amendment No. 6 to the Morgan Stanley Facility to decrease the facility amount to $250.0 million. In November 2026, the Company entered into Amendment No. 7 to the Morgan Stanley Facility and Amendment No. 5 to the MS Guaranty extending its maturity to November 2027 and to amend certain financial covenants.

The Term Warehouse Financing Facilities are accounted for as secured borrowings in accordance with GAAP.

Mortgage Payable

In April 2022, Chapel Drive West, LLC, a wholly-owned subsidiary of the FSU Student Venture, entered into a Loan Agreement (the "Mortgage") with ReadyCap Commercial, LLC ("ReadyCap") to finance the acquisition of a student housing complex. The Mortgage was interest only and had a maximum principal balance of $20.4 million, of which, $18.7 million was advanced in the initial funding. Initially, the Mortgage charged interest of 30-day average SOFR plus a spread of 3.80%. The Mortgage was amended in October 2022, to charge interest of one-month Term SOFR plus a spread of 3.80%. The Mortgage was paid off in May 2026.

In May 2026, Chapel Drive West, LLC, entered into a Loan Agreement (the "HGM Mortgage") with HGM CRE LP ("HGM") to finance an existing student housing complex. The HGM Mortgage is interest only and has a maximum principal balance of $23.8 million, of which $21.7 million was advanced in the initial funding. The HGM Mortgage charges interest of one-month Term SOFR plus a spread of 3.50%. The HGMMortgage is scheduled to mature in June 2029, subject totwo one-year extension options.

The HGM Mortgage contains events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. The remedies for such events of default are also customary for this type of transaction.

In January 2023, Chapel Drive East, LLC, a wholly-owned subsidiary of the FSU Student Venture, entered into a loan agreement (the "Construction Loan Agreement") with Oceanview Life and Annuity Company ("Oceanview") to finance the construction of a student housing complex (the "Construction Loan"). The Construction Loan was interest only and had a maximum principal balance of $48.0 million. The Construction Loan charged one-month Term SOFR plus a spread of 6.00%. In February 2025, the Construction Loan was amended to bifurcate the firstone-year extension option into two separate extension options and periods: aseven-month extension period ended September 2025 and afive-month extension ended February 2026. The Construction Loan had a maturity of September 2025.

In addition to the Construction Loan, Chapel Drive East, LLC, entered into a financing agreement with Florida Pace Funding Agency to fund energy efficient building improvements and had a maximum principal balance of $15.5 million. This agreement charged fixed interest of 7.26% and was scheduled to mature in July 2053.

Both the Construction Loan and the financing agreement with Florida Pace Funding Agency were paid off in connection with the sale of the student housing complex in September 2025.

Corporate Debt

Corporate Credit Facility

On August 6, 2026, immediately before the Merger Effective Time, certain indirectly wholly-owned subsidiaries of the Company entered into a First Amendment and Joinder to Loan and Servicing Agreement (the "First Amendment") with the administrative agent and Massachusetts Mutual Life Insurance Company and other lenders, pursuant to which ACRES Holdings, LLC, ACRES Capital, LLC and ACRES Insurance Agency, LLC became borrowers under a senior secured credit facility with an aggregate principal amount of $185.0 million (the "Corporate Credit Facility"). The Company accounted for the First Amendment as a new borrowing, resulting inno gain or loss recognized during the three months ended September 30, 2026.

The Corporate Credit Facility matures in July 2033 and advances under the facility bear interest at a fixed rate of 8.749% per annum. Scheduled principal payments of $46.3 million are required in each of July 2030, July 2031, July 2032 and July 2033.

The obligations under the facility are unconditionally guaranteed, jointly and severally, by certain indirectly wholly-owned subsidiaries of the Company. The facility contains customary affirmative and negative covenants, including minimum asset value, maximum loan-to-value, interest coverage, minimum gross revenue and minimum fund share value requirements, and limitations on additional indebtedness, liens, investments, capital expenditures (including a limitation on capital expenditures of $1.0 million per calendar year) and dispositions, subject to specified exceptions. As of September 30, 2026, the Company was in compliance with all applicable covenants.

8.625% Senior Secured Notes Due 2031

On August 6, 2026, following the Merger Effective Time, the Company 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") pursuant to a Note Purchase Agreement, by and among the Company, the purchasers named therein and UMB Bank, N.A., as collateral agent. The 8.625% Senior Secured Notes mature on July 31, 2031 and bear interest at a fixed rate of 8.625% per annum, payable semi-annually. The 8.625% Senior Secured Notes are secured on a first lien basis by a pledge of certain capital stock of the Company's subsidiaries, residual equity interests in certain securitized financing vehicles and other CRE assets, and are guaranteed by certain of the Company's subsidiaries.

Prior to July 31, 2028, the 8.625% Senior Secured Notes will be redeemable at 100% of the principal amount plus a "make-whole" premium, plus any accrued and unpaid interest on the principal amount being redeemed, fees, expenses, indemnities and other amounts to, but excluding, the redemption date. On or after July 31, 2028, the 8.625% Senior Secured Notes will be redeemable at the following prepayment prices (expressed as a percentage of the principal amount of the Notes redeemed), plus any accrued and unpaid interest on the principal amount being redeemed, fees, expenses, indemnities and other amounts to, but excluding, the redemption date), if redeemed during the 12-month period beginning on July 31 of the year set forth below:

The Company used a portion of the net proceeds from the 8.625% Senior Secured Notes to repay in full its 5.75% Senior Unsecured Notes at their August 2026 maturity, with the remaining net proceeds used for general corporate purposes.

5.75% Senior Unsecured Notes Due 2026

On August 16, 2021, the Company issued $150.0 million of its 5.75% senior unsecured notes due 2026 (the "5.75% Senior Unsecured Notes") pursuant to its Indenture dated August 16, 2021 (the "Base Indenture"), between it and Wells Fargo, now Computershare Trust Company, N.A. ("CTC"), as trustee (the "Trustee"), as supplemented by the First Supplemental Indenture, dated August 16, 2021, between it and Wells Fargo (now CTC) (the "Supplemental Indenture" and, together with the Base Indenture, the "Indenture"). The 5.75% Senior Unsecured Notes were repaid in full at their scheduled maturity in August 2026.

During 2006, the Company formed RCT I and RCT II for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. RCT I and RCT II are not consolidated into the Company’s consolidated financial statements because the Company is not deemed to be the primary beneficiary of these entities. In connection with the issuance and sale of the capital securities, the Company issued junior subordinated debentures to RCT I and RCT II of $25.8 million each, representing the Company’s maximum exposure to loss. The debt issuance costs associated with the junior subordinated debentures for RCT I and RCT II were included in borrowings and were amortized into interest expense on the consolidated statements of operations using the effective yield method over aten-year period.

There were no unamortized debt issuance costs associated with the junior subordinated debentures for RCT I and RCT II outstanding at September 30, 2026 and December 31, 2025. The interest rates for RCT I and RCT II, at September 30, 2026, were 7.94% and 8.05%, respectively. The interest rates for RCT I and RCT II, at December 31, 2025, were 7.90% and 8.05%, respectively.

Contractual maturity dates of the Company’s borrowings' principal outstanding by category and year are presented in the table below (in thousands):

(1)

There are no contractual maturities due in 2027 and 2028.

(2)

In November 2026, the Company extended the Morgan Stanley Facility to November 2027

Borrowings of the Consolidated Fund

The Consolidated Fund finances the acquisition of its investments through the use of secured borrowings. The facility providers maintain security interests in the investments that serve as collateral under the applicable facility. Certain facilities bear a commitment fee based on unfunded commitments, a facility servicing fee based on average advances outstanding, agent fees, and/or commitment unused line fees. The facilities contain various affirmative and negative covenants and reporting obligations. As of September 30, 2026, the Consolidated Fund was in compliance with all covenants under such borrowings.

The Consolidated Fund had the following borrowings outstanding (in thousands):

NOTE 13 - SHARE ISSUANCE AND REPURCHASE

Common Shares

In July 2025, the Company issued 391,380 common shares as a result of the cashless exercise of 391,955 outstanding warrants held by Oaktree Capital Management, L.P., at an exercise price of $0.03 per common share. The warrants were originally issued under the terms of a 2020 note and purchase agreement, which was paid off in August 2021.

On August 6, 2026, the Company issued 7,478,462 shares of common stock as consideration for the Merger pursuant to the Merger Agreement. The fair value of the shares issued was $109.2 million, based on the closing price of the Company’s common stock on the acquisition date, which was included in the consideration transferred for the Merger. The Company also repurchased and retired 1,171,112 shares of common stock held by ACRES Share Holdings, LLC prior to the close of the Merger and was included in the consideration transferred. See Note 2 - Merger of ACRES Capital Corp. and Internalization of Management.

Preferred Stock

On or after July 30, 2024, the Company may, at its option, redeem its 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock"), in whole or in part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date. Effective July 30, 2024 and thereafter, the Company pays cumulative distributions on the Series C Preferred Stock at a floating rate equal to three-month Term SOFR plus a spread of 5.927% per annum based on the $25.00 liquidation preference, provided that such floating rate shall not be less than the initial rate of 8.625% at any date of determination.

On August 10, 2026, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company sold, in a registered direct offering an aggregate of 2,220,000 shares of its Series C Preferred Stock at a purchase price of $23.75 per share. Aggregate gross proceeds from the offering were approximately $52.75 million before fees and expenses. The offering closed and settled on August 12, 2026. The shares were offered pursuant to a registration statement on Form S-3, File No. 333-278433, including the base prospectus dated April 1, 2024, as supplemented by the prospectus supplement dated August 10, 2026. The Company intends to use the net proceeds from the offering for loan originations consistent with its investment policies and for general corporate purposes, which may include repurchase or repayment of outstanding obligations, capital expenditures and working capital.

At September 30, 2026, the Company had 7.0 million shares of Series C Preferred Stock with weighted average issuance prices, excluding offering costs, of $24.60 and 4.5 million shares of Series D Preferred Stock outstanding, with weighted average issuance prices, excluding offering costs, of $25.00.

Equity Distribution Agreements

On September 3, 2026, the Company entered into an Equity Distribution Agreement with Raymond James & Associates, Inc., as sales agent, pursuant to which the Company may offer and sell, from time to time, shares of the Company’s common stock, par value $0.001 per share, having an aggregate offering price of up to $50.0 million. Sales under the agreement may be made in “at-the-market” offerings as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made directly on or through the New York Stock Exchange or any other existing trading market for the common stock, in negotiated transactions, in block transactions, or by any other method permitted by law. The sales agent is entitled to compensation of up to 2.0% of the gross sales price per share of common stock sold under the agreement. The shares of common stock, if sold, will be issued pursuant to the Company’s registration statement on Form S-3, File No. 333-278433, including the base prospectus dated April 1, 2024, as supplemented by the prospectus supplement dated September 3, 2026.

Also on September 3, 2026, the Company entered into a separate Equity Distribution Agreement with Seaport Global Securities LLC, as sales agent, pursuant to which the Company may offer and sell, from time to time, up to 2,980,000 shares of the Company’s 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock("Series C Preferred Stock")and up to 2,192,143 shares of the Company’s 7.875% Series D Cumulative Redeemable Preferred Stock("Series D Preferred Stock"). Sales under the preferred stock agreement may be made in “at-the-market” offerings as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made directly on or through the New York Stock Exchange or any other existing trading market for the preferred stock, in negotiated transactions, in block transactions, or by any other method permitted by law. The sales agent is entitled to compensation ofup to 2.0% of the gross sales price per share of preferred stock sold under the agreement. The shares of preferred stock, if sold, will be issued pursuant to the Company’s registration statement on Form S-3, File No. 333-278433, including the base prospectus dated April 1, 2024, as supplemented by the prospectus supplement dated September 3, 2026.

The Company intends to use the net proceeds from sales under the at-the-market offering programs for general corporate purposes, which may include the origination or acquisition of CRE loans and other target assets, repurchase or repayment of outstanding obligations, capital expenditures and working capital, and other purposes consistent with the Company’s investment strategy.

During the three and nine months ended September 30, 2026, the Company didnot sell any shares of common stock, Series C Preferred Stock or Series D Preferred Stock under the equity distribution agreements entered into on September 3, 2026. At September 30, 2026, $50.0 million of common stock remained available for issuance under the common stock at-the-market offering program, and 2,980,000 shares of Series C Preferred Stock and 2,192,143 shares of Series D Preferred Stock remained available for issuance under the preferred stock at-the-market offering program.

On October 4, 2021, the Company and the Manager entered into an Equity Distribution Agreement with JonesTrading Institutional Services LLC, as placement agent ("JonesTrading"), pursuant to which the Company may issue and sell from time to time up to 2.2 million shares of the 7.875% Series D Cumulative Redeemable Preferred Stock ("Series D Preferred Stock"). Sales of the Series D Preferred Stock may be made in transactions that are deemed to be "at the market" offerings, as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation, sales made directly on the New York Stock Exchange, on any other existing trading market for the shares or to or through a market maker. Subject to the terms of the Company’s notice, JonesTrading may also sell the shares by any other method permitted by law, including but not limited to in privately negotiated transactions. The Company will pay JonesTrading a commission up to 3.0% of the gross proceeds from the sales of the Series D Preferred Stock pursuant to the agreement. The terms and conditions of the agreement include various representations and warranties, conditions to closing, indemnification rights and obligations of the parties and termination provisions. During thenine months ended September 30, 2026 and the year ended December 31, 2025, the Company didnot issue any Series D Preferred Stock through this agreement. The Company terminated its Equity Distribution Agreement with JonesTrading effective on September 1, 2026.

Share Repurchase Program

In November 2021, the Board authorized and approved the continued use of its existing share repurchase program to repurchase an additional $20.0 million of the outstanding shares of the Company's common stock. Under the share repurchase program, the Company intends to repurchase shares through open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act. From November 2023 through October 2025, the Board authorized and approved the repurchase of an additional $32.5 million of outstanding shares of both common and preferred stock. In December 2025, the authorized amount was fully utilized. During thenine months ended September 30, 2025, the Company repurchased $12.3 million of its common stock, representing 644,843 shares.

In September 2026, the Board authorized and approved the repurchase of an additional $5.0 million of outstanding shares of common stock. During thethree and nine months ended September 30, 2026, the Company didnot repurchase any common stock. At September 30, 2026, $5.0 million of common stock remains available under this repurchase plan.

NOTE 14 - SHARE-BASED COMPENSATION

In June 2021, the Company’s shareholders approved the ACRES Commercial Realty Corp. Third Amended and Restated Omnibus Equity Compensation Plan (the "Omnibus Plan") and the ACRES Commercial Realty Corp. Manager Incentive Plan (the "Manager Plan" and together with the Omnibus Plan, the "Plans"). The Omnibus Plan was amended to (i) increase the number of shares authorized for issuance by an additional 1,100,000 shares of common stock, less any shares of common stock issued or subject to awards granted under the Manager Plan; and (ii) extend the expiration date of the Omnibus Plan from June 2029 to June 2031. The maximum number of shares that may be subject to awards granted under the Plans, determined on a combined basis, was 1,700,817 shares of common stock.

The Omnibus Plan and the Manager Plan were administered by the compensation committee of the Company's Board (the "Compensation Committee"). In 2020, the Compensation Committee and the Board created parameters for equity awards, whereby they are no longer discretionary but based upon the Company’s achievement of performance parameters using book value of the common stock as the appropriate benchmark. See Note 19 for a description of awards made under the Manager Plan.

The Company recognized stock-based compensation expense of $115,000 and $5.5 million, respectively, during thethree and nine months ended September 30, 2026 and $374,000 and $1.8 million, respectively, during thethree and nine months ended September 30, 2025 related to restricted stock. Included in the nine months ended September 30, 2026, is $4.0 million of stock-based compensation expense the Company recognized in the second quarter related to the accelerated vesting of the Manager's outstanding unvested shares in connection with the Merger (discussed in Note 2). Additionally, members of the Board, who comprised the Special Committee or advised on the Merger and Internalization, were granted an aggregate 14,038 shares that were issued and vested immediately on August 6, 2026 as part of their compensation. As part of the issuance and vesting, the Company recognized $205,000 of stock compensation through the merger and internalization costs expense line.

In March 2026, the Company issued a total of 243,650 shares of common stock under its Manager Plan to ACRES Share Holdings, LLC, a subsidiary of the Manager, and under the Omnibus Plan to the Company’s directors (with the exception of Messrs. Fentress and Fogel), after the Company reached the established per share book value target of $30.00 per share. Each grant vested 25% per year over four years. Of this amount, ACRES Share Holdings, LLC was granted 204,765 shares of common stock, which were retired in connection with the Merger. Additionally, in March 2026, the Company granted ACRES Share Holdings, LLC a stock ownership waiver allowing it to exceed the 9.8% ownership limitations set forth in the Company's charter. The stock ownership waiver allowed ACRES Share Holdings, LLC to hold up to 18% of the Company's outstanding shares of common stock. Upon close of the Merger, the Company repurchased and retired all of the shares previously granted to the Manager and the Manager Plan was terminated. There wereno shares of common stock issued under its Manager Plan for thethree months ended September 30, 2026. No shares of common stock were issued to the Manager or the Company’s directors under this plan during the three and nine months ended September 30, 2025.

On June 22, 2026, the Company’s shareholders approved the adoption of the ACRES Commercial Realty Corp. 2026 Omnibus Equity Incentive Plan (the “2026 EIP”). The number of shares of common stock that may be issued under the 2026 EIP is 975,000 shares, plus 457,172 shares that remain available for issuance under the Omnibus Plan as of September 30, 2026, plus any lapsed awards under the Omnibus Plan. The 2026 EIP is administered by the Compensation Committee and shall extend to June 2036.

Under the Company’s Fourth Amended and Restated Management Agreement, as amended ("Management Agreement"), incentive compensation was paid quarterly. Up to 75% of the incentive compensation could be paid in cash and at least 25% must be paid in the form of an award of common stock, recorded in management fees on the consolidated statements of operations. During thethree and nine months ended September 30, 2026 and 2025, the Company incurredno incentive compensation payable to the Manager. The Management Agreement was terminated on August 6, 2026 as a result of the Merger.

The Company didnot issue shares of common stock to the Manager under the Management Agreement during the period in 2026 when the Management Agreement was active or during thenine months ended September 30, 2025.

The following table summarizes the Company’s restricted common stock transactions:

The unvested shares of restricted common stock that are expected to vest during the following years:

At September 30, 2026, total unrecognized compensation costs relating to unvested restricted stock was $592,000 based on the grant date fair value of shares granted. The cost is expected to be recognized over a weighted average period of 3.3 years.

NOTE 15 - EMPLOYEE BENEFIT PLAN

401k Plan

As part of the Merger, the Company assumed ACC's defined contribution plan. The Company's employees participate in a 401(k) plan and all eligible employees may elect to contribute to the plan. Participants are entitled, upon termination or retirement, to their vested portions of the assets held by a trustee. The Company matches a portion of the employees’ 401(k) plan contributions, which vest immediately. For each of the three and nine months ended September 30, 2026, the plan expense for the Company was $27,000 and is recorded in compensation and benefits on the consolidated statements of operations.

NOTE 16 - EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings (losses) per common share for the periods presented (dollars in thousands, except per share amounts):

(1)

Excludes 207,822 and 319,687 shares of common stock as they were anti-dilutive for the three and nine months ended September 30, 2025, respectively.

NOTE 17 - DISTRIBUTIONS

In order to qualify as a REIT, the Company must distribute at least 90% of its taxable income. In addition, the Company must distribute 100% of its taxable income in order to not be subject to corporate federal income taxes on retained income. The Company anticipates it will distribute substantially all of its taxable income to its stockholders, after accounting for the net usage of its deferred tax assets. Because taxable income differs from cash flow from operations due to non-cash revenues or expenses (such as provisions for loan and lease losses and depreciation) and tax loss carryforwards, in certain circumstances the Company may generate operating cash flow in excess of its distributions or, alternatively, the Company may be required to borrow funds to make sufficient distribution payments.

The Company’s 2026 distributions are, and will be, determined by the Company's Board, which will also consider the composition of any distributions declared, including the option of paying a portion in cash and the balance in additional shares of common stock.

For the three and nine months ended September 30, 2026 and 2025, the Company didnot pay any common share distributions.

The following table presents distributions declared (on a per share basis) for thenine months ended September 30, 2026 and the year ended December 31, 2025 with respect to the Company's Series C Preferred Stock and Series D Preferred Stock:

NOTE 18 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in net unrealized loss on derivatives, the sole component of accumulated other comprehensive loss, for thenine months ended September 30, 2026 (in thousands):

(1)

Amounts reclassified from accumulated other comprehensive loss are reclassified to interest expense on the Company’s consolidated statements of operations.

NOTE 19 - RELATED PARTY TRANSACTIONS

Relationship with McCallum JV. In September 2024, ACRES RF, a direct, wholly-owned subsidiary, entered into a $33.7 million senior loan commitment and a $1.5 million mezzanine loan commitment (the "McCallum JV loans") with McCallum JV in which the Company holds a 50% interest. The McCallum JV loans have an initial maturity date of September 5, 2027. The senior loan has a rate ofone-month Term SOFR plus a spread of 2.75%, while the mezzanine loan has a fixed rate of 20.00%. At September 30,

2026, the McCallum JV loans were fully funded. The Company recorded interest income of $635,000 and $1.9 million for thethree and nine months ended September 30, 2026 and $659,000 and $1.9 million for thethree and nine months ended September 30, 2025, respectively, on the McCallum JV loans. At September 30, 2026 and December 31, 2025, the Company had $1.5 million and $916,000, respectively, of accrued interest outstanding.

Relationship with Pacmulti JV. In March 2025, ACRES RF, a direct, wholly-owned subsidiary, entered into a $70.8 million senior loan commitment and a $13.5 million mezzanine loan commitment (the "Pacmulti JV loans") with Pacmulti JV in which the Company holds a 50% interest. The Pacmulti JV loans have an initial maturity date of May 5, 2030. The senior loan has a rate ofone-month Term SOFR plus a spread of 3.41%, while the mezzanine loan has a fixed rate of 15.00%. At September 30, 2026, the Pacmulti JV loans were fully funded. The Company recorded interest income of $1.3 million and $3.8 million for thethree and nine months ended September 30, 2026, respectively, and $1.7 million and $3.4 million for thethree and nine months ended September 30, 2025, respectively, on the Pacmulti JV loans. At September 30, 2026 and December 31, 2025, the Company had $6.0 million and $4.8 million, respectively, of accrued interest outstanding.

Relationship with ACRES Capital Corp. and certain of its Subsidiaries

Relationship with ACRES Capital Corp. and certain of its Subsidiaries. Prior to the Merger and Internalization, the Company was externally managed by the Manager, pursuant to the Management Agreement. The Manager was a subsidiary of ACC, of which Andrew Fentress, the Company’s Chairman and Managing Director - Capital Markets, served as Managing Partner, and Mark Fogel, the Company’s President and Director, served as Chief Executive Officer and President. Prior to the Merger and Internalization, the Company had a Management Agreement with the Manager pursuant to which the Manager provided the day-to-day management of the Company’s operations and received management fees.

Prior to the Merger and Internalization, the Manager and its affiliates provided the Company with a Chief Financial Officer and a sufficient number of additional accounting, finance, tax and investor relations professionals. The Company reimbursed the Manager’s expenses for (a) the wages, salaries and benefits of the Chief Financial Officer, and (b) a portion of the wages, salaries and benefits of accounting, finance, tax, and investor relations professionals, in proportion to such personnel’s percentage of time allocated to the Company’s operations. The Company reimbursed out-of-pocket expenses and certain other costs incurred by the Manager that related directly to the Company’s operations. The costs were recorded in general and administrative expenses on the consolidated statements of operations.

On April 29, 2026, the Company entered into an Agreement and Plan of Merger with Merger Sub, ACC and the Manager. At the Merger Effective Time, the Merger and Internalization were completed and ACC merged with and into Merger Sub, with Merger Sub surviving as a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the Manager, the Management Agreement terminated effective August 6, 2026 for no additional consideration, and the Company became internally managed. See Note 2— Merger of ACRES Capital Corp. and Internalization of Management.

Pursuant to the Merger Agreement, each share of ACC common stock outstanding immediately prior to the Merger Effective Time of the Merger was converted into the right to receive 2.61882 shares of the Company’s common stock. The Company issued approximately 7.5 million shares of Company common stock in the Merger. In addition,1.2 million shares previously issued to and held by ACRES Share Holdings, LLC, were retired upon closing.

The Company’s related party transactions with the Manager and its affiliates described in this section relate only to the period prior to termination of the Management Agreement on August 6, 2026. The Company did not incur external management fees under the Management Agreement after August 6, 2026.

For the three and nine months ended September 30, 2026, the Manager earned base management fees of $613,000 and $3.7 million, respectively, and $1.6 million and $4.8 million, respectively, for thethree and nine months ended September 30, 2025.

For the three and nine months ended September 30, 2026 and 2025, the Manager didnot earn an incentive management fee.

At September 30, 2026 and December 31, 2025, there wasno base management fee payablenor incentive management fee payable by the Company to the Manager.

The Company reimbursed the Manager $1.8 million and $3.8 million, for thethree and nine months ended September 30, 2026, respectively, and $1.1 million and $3.4 million, for thethree and nine months ended September 30, 2025, respectively, for all such compensation and costs. At September 30, 2026 there wereno payables to the Manager pursuant to the Management Agreement and at December 31, 2025, the Company had payables to the Manager pursuant to the Management Agreement totaling $466,000 related to such compensation and costs. The Company’s base management fee payable was recorded in management fee payable while expense reimbursement payables were recorded in accounts payable and other liabilities on the consolidated balance sheets.

On July 31, 2020, ACRES RF, a direct, wholly-owned subsidiary of the Company, provided a $12.0 million loan (the "ACRES Loan") to ACC evidenced by the promissory note from ACC.

The ACRES Loan accrued interest at 3.00% per annum payable monthly. The monthly amortization payment was $25,000. The ACRES Loan was scheduled to mature in July 2026, subject totwo one-year extensions (at ACC’s option) subject to the payment of a 0.5% extension fee to ACRES RF on the outstanding principal amount of the ACRES Loan.

In March 2025, ACRES RF amended and restated the promissory note in connection with the ACRES Loan to provide for a six-month option for ACRES Holdings, LLC to draw an additional balance of $7.0 million. The six-month option period ended and ACRES Holdings, LLC did not draw the additional balance.

On July 31, 2026, ACRES RF entered into a letter agreement (the "Letter Agreement") with ACC in connection with the ACRES Loan to extend the maturity date of the ACRES Loan to August 30, 2026 and waive the extension fee.

The Company recorded interest income of $31,000 and $186,000 for thethree and nine months ended September 30, 2026 and $81,000 and $241,000 for thethree and nine months ended September 30, 2025, respectively, on the ACRES Loan in other income (expense) on the consolidated statements of operations. At December 31, 2025, the ACRES Loan had a principal balance of $10.4 million, recorded in loan receivable - due from Manager on the consolidated balance sheets. As part of the Merger and Internalization, the ACRES Loan was settled as part of the Merger consideration and is no longer outstanding.

The Company retained equity in one securitization entity that was structured for the Company by the Manager. Under the Management Agreement, the Manager was not separately compensated by the Company for executing this transaction and was not separately compensated for managing the securitization entity and its assets.

Relationship with ACRES Mortgage Loan Funding, LLC. In July 2025, the Company sold $45.8 million of a $72.0 million CRE whole loan commitment that originated in the second quarter of 2025 to ACRES Mortgage Loan Funding, LLC. The Company transferred $344,000 of the origination fee related to the portion of this CRE whole loan to ACRES Capital, LLC. No loans were co-originated during the nine months ended September 30, 2026.

Relationship with ACRES Capital Servicing LLC. Under the MassMutual Loan Agreement, ACRES Capital Servicing LLC ("ACRES Capital Servicing"), an affiliate of ACC and the Manager, served as the portfolio servicer. Additionally, ACRES Capital Servicing served as special servicer of ACR 2021-FL1 and ACR 2021-FL2 prior to their liquidation in March 2025. In February 2026, the Company closed the 2026-FL4 securitization transaction and ACRES Capital Servicing served as special servicer.

During the three and nine months ended September 30, 2026, ACRES Capital Servicing receivedno portfolio servicing fees nor any special servicing fees. During thethree months ended September 30, 2025, ACRES Capital Servicing receivedno portfolio servicing fees nor any special servicing fees. During thenine months ended September 30, 2025, ACRES Capital Servicing receivedno portfolio servicing fees and earned $182,000 in special servicing fees with no reduction to interest income.

Relationship with ACRES Collateral Manager, LLC. ACRES Collateral Manager, LLC, an affiliate of ACC and the Manager, served as the collateral manager of ACR 2021-FL1 and ACR 2021-FL2, a role for which it waived its fee. In March 2025, ACR 2021-FL1 and ACR 2021-FL2 were liquidated. In February 2026, the Company closed the 2026-FL4 securitization transaction and ACRES Collateral Manager, LLC served as collateral manager, a role for which it waived its fee.

Relationship with ACRES Development Management, LLC. ACRES Development Management, LLC ("DevCo") is a wholly-owned subsidiary of ACC, the parent of the Manager. DevCo acted in various capacities as a co-developer or owner’s representative for direct equity investments within the Company’s portfolio. The Company entered into three development agreements with DevCo (the "Development Agreements") between November 2021 and April 2022, between the joint venture entity of the CRE equity investments acquired through direct investment. At September 30, 2026, no development agreement remains active.

Pursuant to the Development Agreements, DevCo agreed to manage the development of the projects associated with each equity investment in accordance with a development standard in exchange for fees equal to between 1.25% and 1.5% of all project costs. The Company didnot incur nor pay fees for services rendered under these agreements for thethree and nine months ended September 30, 2026 and 2025.

Relationship with ACRES Share Holdings, LLC. During the three and nine months ended September 30, 2026 and 2025, the Company did not issue any shares to ACRES Share Holdings, LLC in connection with the incentive compensation payable to the Manager under the Management Agreement.

Under the Manager Plan, the Company could issue restricted shares of common stock to ACRES Share Holdings, LLC after meeting the established per share book value hurdle. The grants would vest 25% per year over four years.

In March 2026, the Company issued a total of 204,765 shares of common stock under its Manager Incentive Plan to ACRES Share Holdings, LLC, a subsidiary of the Manager after the Company reached the established per share book value target of $30.00 per share. Each grant vested 25% per year over four years. Additionally, in March 2026, the Company granted ACRES Share Holdings, LLC a stock ownership waiver allowing it to exceed the 9.8% ownership limitations set forth in the Company's charter. The stock ownership waiver allowed ACRES Share Holdings, LLC to hold up to 18% of the Company's outstanding shares of common stock. There wasno activity for thethree months ended September 30, 2026 and nine months ended September 30, 2025.

In April 2026, the Board approved the acceleration of the Manager's outstanding unvested shares upon shareholder approval of the share issuance in connection with the Merger. The Company's shareholders approved the issuance on June 22, 2026 and the 352,384 outstanding unvested shares were accelerated at that time. Upon close of the Merger, the Company repurchased and retired all of the shares previously granted to the Manager and the Manager Plan was terminated.

Relationship with AMF Levered II, LLC. During the year ended December 31, 2025, AMF Levered II, LLC, a wholly-owned subsidiary of ACRES Mortgage Fund, Ltd., purchased a $125.0 million non-controlling interest in SPE 2025-1, LLC. In March 2026, AMF Levered II, LLC purchased an additional $1.1 million non-controlling interest in SPE 2025-1. During thethree and nine months ended September 30, 2026, the Company allocated $541,000 of losses and $5.4 million in earnings, respectively, related to operations and did not distribute any income, net of expenses to AMF Levered II, LLC. During thethree and nine months ended September 30, 2025, the Company did not allocate any earnings related to operations and did not distribute any income to AMF Levered II, LLC. At September 30, 2026, AMF Levered II, LLC owns 43.2% of SPE 2025-1 and assumed its proportionate share of risk in the underlying assets and the liabilities, including the JPMorgan Chase 2025 Facility. Additionally, at each of September 30, 2026 and December 31, 2025, the Company had a distribution payable balance of $516,000. During the nine months ended September 30, 2026, the Company purchasedtwo CRE whole loan commitments totaling $61.4 million from AMF Levered II, LLC.

Relationship with AMF Levered 3, LLC. In March 2026, the Company sold$29.1 million par and the remaining unfunded commitments of a $120.0 million CRE whole loan commitment that originated in the fourth quarter of 2025 to AMF Levered 3, LLC, a wholly-owned subsidiary of ACRES Mortgage Fund, Ltd.

NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company hadno financial instruments carried at fair value on a recurring basis at December 31, 2025. At September 30, 2026, the Company measures fair value of financial instruments held in the Consolidated Fund.

The Company measures the fair value of certain assets on a non-recurring basis when events or changes in circumstances indicate that the carrying value of the assets may be impaired. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or write-downs of an asset's value due to impairment.

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of the Company’s short-term financial instruments such as cash and cash equivalents, restricted cash, accrued interest receivable, accounts payable and other liabilities, accrued interest payable and distributions payable approximate their carrying values on the consolidated balance sheets. The fair values of the Company’s other financial assets and liabilities are estimated as follows:

CRE whole loans. The fair values of the Company’s loans held for investment are measured by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Par values of loans with variable interest rates are expected to approximate fair value unless evidence of credit deterioration exists, in which case the fair value approximates the par value less the loan’s allowance estimated through individual evaluation. The Company’s floating-rate CRE loans had interest rates from 3.88% to 10.75% and 4.63% to 10.88% at September 30, 2026 and December 31, 2025, respectively.

Preferred equity investments. The fair value of the Company's preferred equity investment is measured by discounting the expected cash flows using the future expected coupon rates. The Company's preferred equity investment is discounted at a rate of 10.00%.

Senior notes in CRE securitizations and junior subordinated notes. Fair values are estimated using a discounted cash flow model with implied yields based on trades for similar securities.

CRE term reinvestment financing facility, Senior secured financing facility, warehouse financing facilities and mortgage payable. These are variable rate debt instruments that are indexed to one-month Term SOFR that reset periodically and, as a result, their carrying value approximates their fair value, excluding deferred debt issuance costs.

The fair values of the Company’s financial and non-financial assets that are not reported at fair value on the consolidated balance sheets are reported in the following table (in thousands):

(1)

The fair values reflected in the table above represent management's best estimate of the fair value of the financial instruments and have no impact on the Company's performance or cash flows.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 for the Consolidated Fund (in thousands):

Generally, increases in discount rates and capitalization rates result in lower fair value measurements, while increases in comparable sales values and estimated recoveries result in higher fair value measurements. Conversely, decreases in these assumptions would generally have the opposite effect. Changes in certain significant unobservable inputs may be interrelated and could either magnify or mitigate the overall impact on fair value.

The following tables summarize the quantitative inputs and assumptions used for the Consolidated Fund’s Level 3 measurements (in thousands):

The following tables set forth a summary of changes in the fair value of the Level 3 measurements (in thousands):

(1)

Purchases include purchases and fundings of loan notes, participations and equity interests.

(2)

Sales/settlements include sales proceeds and principal payments received on loan notes and participations.

(3)

Changes in net unrealized appreciation are included in earnings and relate to financial assets.

NOTE 21 - GOODWILL AND INTANGIBLE ASSETS

On August 6, 2026, the Company completed its previously disclosed Merger and Internalization. The Internalization and Merger are accounted for as a business combination under the acquisition method of accounting, with the Company treated as the accounting acquirer.

The Company’s acquisition accounting is preliminary. The final purchase price allocation may differ materially from the preliminary estimates as additional information becomes available, including changes in the fair value allocations to identifiable intangible assets and goodwill.

Goodwill represents the excess of consideration transferred over the fair values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized. Based on the Company’s preliminary purchase price allocation, preliminary goodwill recognized in connection with the Internalization and Merger was $175.1 million.

The Company evaluates goodwill for impairment at least annually or upon the occurrence of a triggering event. A triggering event is an event or circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The annual impairment test will be performedas of October 1st each year. While we have not yet completed this analysis for 2026, we donot anticipate that goodwill will be impaired, nor were there events or changes in circumstances indi cating impairment at September 30, 2026. There were no material changes to this assessment as of September 30, 2026.

NOTE 22 - MARKET RISK AND DERIVATIVE INSTRUMENTS

The Company is affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as "market risks." When deemed appropriate, the Company may use derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments were interest rate risk and market price risk.

The Company historically managed its interest rate risk with interest rate swaps. Interest rate swaps are contracts between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices.

The Company seeks to manage the extent to which net income changes as a function of changes in interest rates by matching adjustable-rate assets with variable-rate borrowings.

The Company classified its interest rate swap contracts as cash flow hedges, which are hedges that eliminate the risk of changes in the cash flows of a financial asset or liability.

The Company terminated all of its interest rate swap positions associated with its financed CMBS portfolio in April 2020. At termination, the Company realized a loss of $11.8 million. At September 30, 2026 and December 31, 2025, the Company had losses of$717,000 and $1.6 million, respectively, recorded in accumulated other comprehensive loss, which will be amortized into earnings over the remaining life of the debt. During thethree and nine months ended September 30, 2026, the Company recorded amortization expense of$248,000 and$886,000, respectively, reported in interest expense on the consolidated statements of operations. During the three and nine months ended September 30, 2025, the Company recorded amortization expense of $425,000 and $1.3 million, respectively, reported in interest expense on the consolidated statements of operations.

For the three and nine months ended September 30, 2025, the Company recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 and $68,000, respectively, to accrete the accumulated other comprehensive income on the terminated swap agreements. At December 31, 2025, the Company fully accreted the unrealized balance from the gain attributable to two terminated interest rate swaps, and thereforeno accretion income was recorded for thethree and nine months ended September 30, 2026.

The following table presents the effect of the derivative instruments on the consolidated statements of operations during thenine months ended September 30, 2026 and 2025 (in thousands):

(1)

Negative values indicate a decrease to the associated consolidated statements of operations line items.

NOTE 23 - COMMITMENTS AND CONTINGENCIES

The Company may become involved in litigation on various matters due to the nature of the Company’s business activities. The resolution of these matters may result in adverse judgments, fines, penalties, injunctions and other relief against the Company as well as monetary payments or other agreements and obligations. In addition, the Company may enter into settlements on certain matters in order to avoid the additional costs of engaging in litigation. The Company is unaware of any contingencies arising from such litigation that would require accrual or disclosure in the consolidated financial statements at September 30, 2026.

The Company didnot have any general litigation reserve at September 30, 2026 or December 31, 2025.

Other Guarantees

See description of 65 E. Wacker Joint Venture, LLC in Note 4.

Unfunded Commitments

The Company's CRE loans had$78.2 million and $88.6 million in unfunded loan commitments at September 30, 2026 and December 31, 2025, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreements, and any necessary approvals have been obtained.

NOTE 24 - SEGMENT INFORMATION

On August 6, 2026, the Company completed the previously disclosed Merger and Internalization and as a result of the transaction, the Company acquired its Manager, the management agreement was terminated for no additional consideration and the Company became internally managed. The Current Report on Form 8-K filed on August 6, 2026 did not disclose segment information.

The Company now evaluates its business through three reportable segments: Principal Investing, Investment Management and Strategic Holdings. The Company’s reportable segments reflect the manner in which the chief operating decision maker (the “CODM”) reviews financial information to assess performance and allocate resources.

Prior to the Merger and Internalization, the Company reportedone operating segment, CRE lending operations. The Company previously disclosed that management directed operations on a consolidated basis as a single segment that generated revenues in the United States by originating, holding and managing commercial real estate mortgage loans and related assets. The Company also previously disclosed that, in certain circumstances, it may foreclose or accept a deed-in-lieu of foreclosure on loans and, if it cannot sell the related property, it may operate the property as real estate owned. The Company’s accounting policies for its prior CRE lending operations segment were the same as those described in the Company’s summary of significant accounting policies.

Beginning after the Merger and Internalization, the Company’s reportable segments are as follows:

•

Principal Investing — The segment originates, holds and manages commercial real estate mortgage loans and related assets. The segment also includes activities related to real estate owned when the Company forecloses or accepts a deed-in-lieu of foreclosure and does not sell the related property.

•

Investment Management — The segment includes the management, servicing and related activities acquired in the Merger and Internalization and includes management services to the Company's institutional and individual investors who entrust the Company with their capital.

•

Strategic Holdings — The segment includes equity method investments, minority investments, or other strategic investments. The Company currently expects its Strategic Holdings segment primarily to generate income from the receipt of dividends from its ownership stakes in these businesses and, upon the sale of any ownership stake, realized investment income from such sale.

The accounting policies of the reportable segments are the same as those described in the Company’s summary of significant accounting policies included elsewhere in these condensed consolidated financial statements. Intersegment revenues and expenses are eliminated in consolidation. Corporate-level items that are not allocated to segments are included in the reconciliation of total reportable segment amounts to consolidated amounts.

The CODM is the ACRES management committee that includes the Company's President and the Company's Principal Executive Officer. The CODM usesnet income for each reportable segment to evaluate segment performance and allocate resources. The Company previously disclosed that its CODM was the ACRES management committee, which included the principals of the former Manager, including the Company’s President and Chief Executive Officer, and that the CODM used consolidated net income, as reported in the consolidated statements of operations, to evaluate performance and determine resource allocation. The measure of segment assets is total assets for each reportable segment. The Company previously disclosed that its measure of segment assets was total assets as reported on the consolidated balance sheets.

Net income is used to monitor budget versus actual results. The CODM also uses net income in competitive analysis by benchmarking to the reportable segment's competitors.

The Company discloses significant segment expenses that are regularly provided to the CODM and included in the reported measure of segment profit or loss. In determining significant expense categories, the Company considers both quantitative and qualitative factors, including expenses that are easily computable from the information regularly provided to the CODM.

Prior to the Merger and Internalization, the Company identified interest expense, general and administrative expenses and provision for credit losses as significant segment expenses for its single CRE lending operations segment. Following the Merger and Internalization, the Company’s significant expense categories by reportable segment are interest expense, general and administrative expenses, and provision for credit losses.

The following tables present segment revenues, significant segment expenses, other segment items and reported segment profit or loss for the periods presented (in thousands):

(1)

To eliminate the revenue earned from the Consolidated Fund for management fees and reimbursable expenses in accordance with the management agreement.

(2)

To eliminate the net income distributed to the Company from the Consolidated Fund.

(3)

To eliminate the allocated net realized and unrealized gains to the Company from the Consolidated Fund.

(1)

To eliminate the revenue earned from the Consolidated Fund for management fees and reimbursable expenses in accordance with the management agreement.

(2)

To eliminate the net income distributed to the Company from the Consolidated Fund.

(3)

To eliminate the allocated net realized and unrealized gains to the Company from the Consolidated Fund.

The following table presents total assets by reportable segment as of the dates presented (in thousands):

NOTE 25 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events, other than those described in Note 12 that have occurred that would require adjustments to or disclosures in the consolidated financial statements.