Ares Commercial Real Estate Corp
For the period ended Sep 30, 2026. Filed Nov 9, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 9, 2026
ACRE$3.68+0.8%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-04.
0001628280-26-052072
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0001628280-26-072306
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 93 current paragraphs.
51 unchanged; 32 reworded; 10 added; 4 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•We entered into a Purchase and Sale Agreement and closed the sale of the multi-building office property located in North Carolina that was classified as real estate owned held for sale to a third party for $64.0 million. We recognized a $7.1 million realized gain on the sale of the property as the net sale proceeds exceeded the carrying amount of the property as of the sale closing date.
Current report
During the third quarter of 2026, the U.S. economy continued to expand, supported by resilient consumer spending and low levels of unemployment despite heightened geopolitical tensions and increased inflation measures. Against this backdrop, the Federal Reserve adopted a more restrictive monetary policy, raising the federal funds rate by 25 basis points in September 2026 and signaling the potential for additional future rate increases. Uncertainty remains regarding the timing, magnitude and pace of future monetary policy adjustments.
Current report
Amid evolving central bank policy, persistent inflation and continued economic expansion, market interest rates moved higher during the third quarter of 2026, with the 10-Year U.S. Treasury yield increasing by more than 80 basis points. The resulting increase in borrowing costs moderated commercial real estate transaction activity. Property valuations in the third quarter of 2026, however, remained relatively stable, supported by limited new supply and new construction starts at or near 10-year lows.
Current report
For commercial mortgage REITs, higher interest rates may create opportunities to generate higher lending yields and potentially more attractive risk-adjusted returns. At the same time, elevated interest rates may increase refinancing pressure on borrowers, raise debt service costs and create challenges for commercial real estate valuations.
Current report
On October 20, 2026, we fully repaid and terminated the Secured Term Loan.
Current report
On October 30, 2026, the senior mortgage loan collateralized by an industrial property located in New Jersey, which was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the November 2024 maturity date, was fully repaid.
Current report
On October 30, 2026, we closed an $11.4 million senior mortgage loan on a self storage property located in Pennsylvania. At closing, the outstanding principal balance was $11.1 million. The loan has a per annum interest rate of SOFR plus 3.00%.
Current report
We previously held a senior A-Note loan with an outstanding principal balance of $59.0 million and a subordinated B-Note loan with an outstanding principal balance of $10.6 million, which were both collateralized by an office property located in New York. The subordinated B-Note loan was subordinate to new borrower equity related to additional capital contributions. In September 2025, we entered into a modification and extension agreement with the borrower to, among other things, (1) transfer $6.0 million of the outstanding principal balance from the subordinated B-Note loan to the senior A-Note loan, which increased the outstanding principal balance of the senior A-Note loan from $59.0 million to $65.0 million and (2) extinguish the remaining $4.6 million of outstanding principal balance of the subordinated B-Note loan. Upon the transfer of the $6.0 million of outstanding principal balance from the subordinated B-Note loan to the senior A-Note loan, the remaining outstanding principal balance of the subordinated B-Note loan was $4.6 million and the remaining Carrying Value was $1.6 million. In conjunction with the extinguishment of the remaining subordinated B-Note loan, we recognized a realized loss of $1.6 million in our consolidated statements of operations for both the three and nine months ended September 30, 2025, which was equal to the remaining Carrying Value of the subordinated B-Note loan.
Current report
Realized Gain on Sale of Real Estate Owned
Current report
In September 2026, we sold our multi-building office property located in North Carolina that was classified as real estate owned held for sale to a third party for $64.0 million. For both the three and nine months ended September 30, 2026, we recognized a $7.1 million realized gain on the sale of the property as the net sale proceeds exceeded the carrying amount of the property as of the sale closing date.
Removed paragraphs (4)
Previous report
•We closed a $25.0 million senior mortgage loan as part of a co-investment on a multifamily property located in Tennessee.
Previous report
•We closed a $35.0 million senior mortgage loan as part of a co-investment on a hotel property located in California.
Previous report
During the second quarter of 2026, the U.S. economy continued to expand, supported by continued consumer spending with moderating expectations for U.S. gross domestic product growth and low levels of unemployment amidst heightened geopolitical tensions. During this time, the commercial real estate market exhibited stable to moderating conditions. Specifically, individual property transaction volumes slowed in the second quarter while broad market indices demonstrated flat to increasing commercial real estate values.
Previous report
Aiding valuations, new construction starts remained near or at 10-year lows across multifamily, industrial, retail and office property types and lending markets remained supportive given increased activity from capital markets and banks. During the quarter, the Federal Reserve held interest rates steady and restated its commitment towards its inflation goals, which may result in future monetary policy actions. There is no certainty that there will be a change in interest rates or of the magnitude or pace of potential changes.
Reworded paragraphs (32)
Previous wording
Developments During the Second Quarter of 2026:
Current wording
Developments During the Third Quarter of 2026:
Previous wording
•We sold a $68.5 million portion of a $143.5 million senior mortgage loan as part of a co-investment on a retail property located in California. At the time of the sale, the outstanding principal balance of the portion of the loan that was sold was $61.4 million, which was classified as held for sale in our consolidated balance sheets. The portion of the loan was sold at fair value, which was equal to our carrying amount, and no gain or loss was recognized on the sale. We continue to hold the remaining $75.0 million portion of the senior mortgage loan, which had an outstanding principal balance of $67.3 million as of June 30, 2026 and is classified as held for investment.
Current wording
•We closed a $35.3 million senior mortgage loan as part of a co-investment on a portfolio of industrial properties located in various states, of which $28.5 million is classified as held for investment and $6.8 million was classified as held for sale. During the three months ended September 30, 2026, we sold the $6.8 million portion of the $35.3 million senior mortgage loan. At the time of the sale, the outstanding principal balance of the portion of the loan that was sold was $2.5 million and the loan was sold at fair value, which was equal to our carrying amount, and no gain or loss was recognized on the sale. We continue to hold the remaining $28.5 million portion of the senior mortgage loan, which had an outstanding principal balance of $10.3 million as of September 30, 2026 and is classified as held for investment.
Previous wording
Rising operating costs, such as property insurance and raw material costs for property development and improvements, placed pressure on cash flow performance across many real estate property types. Although certain markets are showing a recovery, office properties nationally continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose these office properties. These factors have largely resulted in lower demand for office space and have driven elevated levels of vacancy rates and default rates. Offsetting some of these challenges, there has been a significant decline in new commercial real estate development that began in 2023 and has continued benefitting existing in-demand property types. Ultimately, this lack of new future inventory may result in a shortage of contemporary, in-demand properties in the years to come, furthering the disparity between supply and demand dynamics. In addition, there is a significant amount of unspent capital targeting commercial real estate properties that could support values and elevate transaction activities.
Current wording
Rising operating costs, such as property insurance and raw material costs for property development and improvements, continue to place pressure on cash flow performance across many real estate property types. Although certain markets are showing a recovery, office properties nationally continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose these office properties. These factors have largely resulted in lower demand for office space and have driven elevated levels of vacancy rates and default rates. Offsetting some of these challenges, there has been a significant decline in new commercial real estate development that began in 2023 and has continued benefitting existing in-demand property types. Ultimately, this lack of new future inventory may result in a shortage of contemporary, in-demand properties in the years to come, furthering the disparity between supply and demand dynamics. In addition, there is a significant amount of unspent capital targeting commercial real estate properties that could support values and elevate transaction activities.
Previous wording
Uncertainty around U.S. economic and foreign policies, international relations and their potential impact to the U.S. economy has increased risk. Should the risks from these factors become more acute, the commercial real estate market we service may be adversely impacted.
Current wording
Uncertainty around U.S. economic and foreign policies, international relations and their potential effect on the U.S. economy has increased risk. Should the risks from these factors become more acute, the commercial real estate market we service may be adversely affected.
Previous wording
The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets, including the real estate collateralizing our investments, and the supply of, and demand for, commercial mortgage loans, CRE debt and other financial assets in the marketplace. Our net interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. Interest rates vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results are also impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.
Current wording
The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets, including the real estate collateralizing our investments, and the supply of, and demand for, commercial mortgage loans, CRE debt and other financial assets in the marketplace. Our net interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual interest rate and the outstanding principal balance of the loans we originate. Interest rates vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results are also impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.
Previous wording
On July 30, 2025, our board of directors extended the Repurchase Program of up to $50.0 million, which was expected to be in effect until July 31, 2026, or until the approved dollar amount had been used to repurchase shares. On July 28, 2026, our board of directors further extended the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2027, or until the approved dollar amount has been used to repurchase shares. Pursuant to the Repurchase Program, we may repurchase shares of our common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion. During the three and six months ended June 30, 2026, we did not repurchase any shares through the Repurchase Program.
Current wording
On July 30, 2025, our board of directors extended the Repurchase Program of up to $50.0 million, which was expected to be in effect until July 31, 2026, or until the approved dollar amount had been used to repurchase shares. On July 28, 2026, our board of directors further extended the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2027, or until the approved dollar amount has been used to repurchase shares. Pursuant to the Repurchase Program, we may repurchase shares of our common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion. During the three and nine months ended September 30, 2026, we did not repurchase any shares through the Repurchase Program.
Previous wording
As of June 30, 2026, our portfolio included 38 loans held for investment, excluding 197 loans that were repaid, sold, converted to real estate owned or written-off since inception. As of June 30, 2026, the aggregate originated commitment under these loans at closing was approximately $2.0 billion and outstanding principal was $1.8 billion. During the six months ended June 30, 2026, we funded approximately $339.6 million of outstanding principal and received repayments of $110.7 million of outstanding principal. As of June 30, 2026, 89.2% of our loans have SOFR floors, with a weighted average floor of 1.71%, calculated based on loans with SOFR floors. References to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).
Current wording
As of September 30, 2026, our portfolio included 37 loans held for investment, excluding 199 loans that were repaid, sold, converted to real estate owned or written-off since inception. As of September 30, 2026, the aggregate originated commitment under these loans at closing was approximately $2.0 billion and outstanding principal was $1.8 billion. During the nine months ended September 30, 2026, we funded approximately $365.0 million of outstanding principal and received repayments of $146.0 million of outstanding principal. As of September 30, 2026, 90.2% of our loans have SOFR floors, with a weighted average floor of 1.71%, calculated based on loans with SOFR floors. References to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).
Previous wording
Our board of directors declared a regular cash dividend of $0.15 per common share for the third quarter of 2026. The third quarter 2026 dividend will be payable on October 15, 2026 to common stockholders of record as of September 30, 2026.
Current wording
Our board of directors declared a regular cash dividend of $0.15 per common share for the fourth quarter of 2026. The fourth quarter 2026 dividend will be payable on January 15, 2027 to common stockholders of record as of December 31, 2026.
Previous wording
The following table sets forth a summary of our consolidated results of operations for the three and six months ended June 30, 2026 and 2025 ($ in thousands):
Current wording
The following table sets forth a summary of our consolidated results of operations for the three and nine months ended September 30, 2026 and 2025 ($ in thousands):
Previous wording
The following tables set forth select details of our consolidated results of operations for the three and six months ended June 30, 2026 and 2025 ($ in thousands):
Current wording
The following tables set forth select details of our consolidated results of operations for the three and nine months ended September 30, 2026 and 2025 ($ in thousands):
Previous wording
For the six months ended June 30, 2026 and 2025, net interest margin was approximately $16.1 million and $16.3 million, respectively. For the six months ended June 30, 2026 and 2025, interest income of $52.7 million and $50.6 million, respectively, was generated by weighted average earning assets of $1.8 billion and $1.5 billion, respectively, offset by $36.5 million and $34.3 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, the Secured Term Loan and securitization debt, as applicable, for the six months ended June 30, 2026 and 2025 were $1.2 billion and $1.0 billion, respectively. The decrease in net interest margin for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 is primarily due to a decrease in SOFR rates on our loans held for investment and a decrease in the weighted average interest-bearing cash and cash equivalents balances held for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Current wording
For the three months ended September 30, 2026 and 2025, net interest margin was approximately $7.9 million and $8.5 million, respectively. For the three months ended September 30, 2026 and 2025, interest income of $26.9 million and $23.3 million, respectively, was generated by weighted average earning assets of $1.8 billion and $1.3 billion, respectively, offset by $19.0 million and $14.8 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, the Secured Term Loan and securitization debt, as applicable, for the three months ended September 30, 2026 and 2025 were $1.2 billion and $0.8 billion, respectively. The decrease in net interest margin for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 is primarily due to a decrease in SOFR rates on our loans held for investment and a decrease in the weighted average interest-bearing cash and cash equivalents balances held for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
Previous wording
For the three months ended June 30, 2026 and 2025, net interest margin was approximately $8.6 million and $7.0 million, respectively. For the three months ended June 30, 2026 and 2025, interest income of $27.8 million and $23.1 million, respectively, was generated by weighted average earning assets of $1.9 billion and $1.4 billion, respectively, offset by $19.2 million and $16.1 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, the Secured Term Loan and securitization debt, as applicable, for the three months ended June 30, 2026 and 2025 were $1.3 billion and $0.9 billion, respectively. The increase in net interest margin for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 is primarily due to an increase in the weighted average earning assets for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.
Current wording
For the nine months ended September 30, 2026 and 2025, net interest margin was approximately $24.1 million and $24.8 million, respectively. For the nine months ended September 30, 2026 and 2025, interest income of $79.6 million and $73.9 million, respectively, was generated by weighted average earning assets of $1.8 billion and $1.4 billion, respectively, offset by $55.5 million and $49.1 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, the Secured Term Loan and securitization debt, as applicable, for the nine months ended September 30, 2026 and 2025 were $1.2 billion and $0.9 billion, respectively. The decrease in net interest margin for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 is primarily due to a decrease in SOFR rates on our loans held for investment and a decrease in the weighted average interest-bearing cash and cash equivalents balances held for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Previous wording
On September 19, 2024, we acquired legal title to a multi-building office property located in North Carolina through a deed in lieu of foreclosure. Prior to September 19, 2024, the office property collateralized a $68.6 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2024 maturity date. In conjunction with the deed in lieu of foreclosure, we derecognized the $68.6 million senior mortgage loan and recognized the office property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three and six months ended June 30, 2026, revenue from real estate owned related to this property was $2.6 million and $5.3 million, respectively. For the three and six months ended June 30, 2025, revenue from real estate owned related to this property was $2.3 million and $4.7 million, respectively. The increase in revenue from real estate owned related to this property for both the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 is primarily due to an increase in rental revenue from new operating leases.
Current wording
On September 19, 2024, we acquired legal title to a multi-building office property located in North Carolina through a deed in lieu of foreclosure. Prior to September 19, 2024, the office property collateralized a $68.6 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2024 maturity date. In conjunction with the deed in lieu of foreclosure, we derecognized the $68.6 million senior mortgage loan and recognized the office property as real estate owned. Revenues from this property consisted primarily of rental revenue from operating leases. On September 18, 2026, we closed the sale of the multi-building office property to a third party. For the three and nine months ended September 30, 2026, revenue from real estate owned related to this property was $2.4 million and $7.7 million, respectively. For the three and nine months ended September 30, 2025, revenue from real estate owned related to this property was $2.4 million and $7.1 million, respectively.
Previous wording
On September 8, 2023, we acquired legal title to a mixed-use property located in Florida through a consensual foreclosure. Prior to September 8, 2023, the mixed-use property collateralized an $82.9 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date. In conjunction with the consensual foreclosure, we derecognized the $82.9 million senior mortgage loan and recognized the mixed-use property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three and six months ended June 30, 2026, revenue from real estate owned related to this property was $3.2 million and $6.4 million, respectively. For the three and six months ended June 30, 2025, revenue from real estate owned related to this property was $3.3 million and $6.5 million, respectively.
Current wording
On September 8, 2023, we acquired legal title to a mixed-use property located in Florida through a consensual foreclosure. Prior to September 8, 2023, the mixed-use property collateralized an $82.9 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date. In conjunction with the consensual foreclosure, we derecognized the $82.9 million senior mortgage loan and recognized the mixed-use property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three and nine months ended September 30, 2026, revenue from real estate owned related to this property was $3.2 million and $9.6 million, respectively. For the three and nine months ended September 30, 2025, revenue from real estate owned related to this property was $3.3 million and $9.8 million, respectively.
Previous wording
See the Related Party Expenses, Other Expenses and Expenses from Real Estate Owned discussions below for the cause of the changes in operating expenses for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025, respectively.
Current wording
Total expenses decreased by $1.3 million and $5.2 million for the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025, respectively. See Related Party Expenses, Other Expenses and Expenses from Real Estate Owned discussions below for further detail.
Previous wording
For the three months ended June 30, 2026, related party expenses included $2.4 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended June 30, 2026. For the three months ended June 30, 2026, related party expenses also included $0.9 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the three months ended June 30, 2025, related party expenses included $2.4 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended June 30, 2025. For the three months ended June 30, 2025, related party expenses also included $1.0 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. Management fees were relatively consistent for both the three months ended June 30, 2026 and 2025. The decrease in allocable general and administrative expenses due to our Manager for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 relates to changes in the mix of employees of our Manager that allocated time to us.
Current wording
For each of the three and nine months ended September 30, 2026 and 2025, management fees were relatively consistent and no incentive fees were incurred. General and administrative expenses reimbursed to affiliate represents our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. The decrease in allocable general and administrative expenses due to our Manager for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 relates to changes in the mix of employees of our Manager that allocated time to us.
Previous wording
For both the three months ended June 30, 2026 and 2025, professional fees were $0.7 million. For the three months ended June 30, 2026 and 2025, general and administrative expenses were $1.7 million and $2.0 million, respectively. The decrease in general and administrative expenses for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 primarily relates to a decrease in stock-based compensation expense due to a reduction in the weighted average grant date fair value for restricted stock and restricted stock unit awards granted after June 30, 2025 and a reduction in various operating expenses for the three months ended June 30, 2026.
Current wording
The decrease in general and administrative expenses for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily relates to a decrease in stock-based compensation expense due to a reduction in the weighted average grant date fair value for restricted stock and restricted stock unit awards granted after September 30, 2025 and a reduction in various operating expenses for the nine months ended September 30, 2026.
Previous wording
For thethree and six months ended June 30, 2026 and 2025, expenses from real estate owned were comprised of the following ($ in thousands):
Current wording
For thethree and nine months ended September 30, 2026 and 2025, expenses from real estate owned were comprised of the following ($ in thousands):
Previous wording
For both the three months ended June 30, 2026 and 2025, office property operating expenses were $1.3 million. For the six months ended June 30, 2026 and 2025, office property operating expenses were $2.3 million and $2.4 million, respectively. Office property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our multi-building office property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees.
Current wording
Property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our mixed-use and office properties, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees. The decreases in office property operating expenses for each of the three and nine months ended September 30, 2026 compared to three and nine months ended September 30, 2025 are primarily due to the three and nine months ended September 30, 2026 only including operating expenses related to the multi-building office property through September 17, 2026 as we completed the sale of the multi-building office property on September 18, 2026.
Previous wording
For the three and six months ended June 30, 2026, depreciation and amortization expense was $0.9 million and $1.8 million, respectively, and relates primarily to our mixed-use property acquired on September 8, 2023. For the three and six months ended June 30, 2026, no depreciation or amortization expense was incurred for our multi-building office property acquired on September 19, 2024 as the multi-building office property was classified as real estate owned held for sale. For the three and six months ended June 30, 2025, depreciation and amortization expense was $2.2 million and $4.4 million, respectively, and related primarily to our mixed-use property acquired on September 8, 2023 and our multi-building office property acquired on September 19, 2024.
Current wording
The decreases in depreciation and amortization expense for each of the three and nine months ended September 30, 2026 compared to three and nine months ended September 30, 2025 are primarily due to no depreciation and amortization expense being incurred on our multi-building office property during the three and nine months ended September 30, 2026 as the multi-building office property was classified as real estate owned held for sale and sold on September 18, 2026.
Previous wording
For the three months ended June 30, 2026 and 2025, the net (provision for) reversal of current expected credit losses was $(0.9) million and $20.2 million, respectively. For the three months ended June 30, 2026, the net provision for current expected credit losses is primarily due to changes in loan- and collateral-specific attributes, new loan closings and a relative decline in the near-term macroeconomic forecasts during the three months ended June 30, 2026. These factors were partially offset by shorter average remaining loan term and other changes in loan- and collateral-specific attributes during the three months ended June 30, 2026. For the three months ended June 30, 2025, the net reversal of current expected credit losses was primarily due to a realized loss on an office (life sciences) loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments and other loan- and collateral-specific attributes during the three months ended June 30, 2025. These factors were partially offset by a relative decline in the near-term macroeconomic forecasts, including higher tariffs, high inflation and interest rates, and other loan- and collateral-specific attributes during the three months ended June 30, 2025.
Current wording
For the three months ended September 30, 2026 and 2025, the net (provision for) reversal of current expected credit losses was $(1.8) million and $2.2 million, respectively. For the three months ended September 30, 2026, the net provision for current expected credit losses is primarily due to changes in loan- and collateral-specific attributes, new loan closings and a relative decline in the near-term macroeconomic forecasts during the three months ended September 30, 2026. These factors were partially offset by shorter average remaining loan term and other changes in loan- and collateral-specific attributes during the three months ended September 30, 2026. For the three months ended September 30, 2025, the net reversal of current expected credit losses was primarily due to a realized loss on an office loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments, a relative improvement in the near-term macroeconomic forecasts and other loan- and collateral-specific attributes during the three months ended September 30, 2025. These factors were partially offset by new loan closings and other loan- and collateral-specific attributes during the three months ended September 30, 2025.
Previous wording
For the six months ended June 30, 2026 and 2025, the net (provision for) reversal of current expected credit losses was $(12.0) million and $25.5 million, respectively. For the six months ended June 30, 2026, the net provision for current expected credit losses is primarily due to changes in loan- and collateral-specific attributes and new loan closings during the six months ended June 30, 2026. These factors were partially offset by a realized loss on a multifamily loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments and other changes in loan- and collateral-specific attributes during the six months ended June 30, 2026. For the six months ended June 30, 2025, the net reversal of current expected credit losses was primarily due to a realized loss on an office (life sciences) loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments and other loan- and collateral-specific attributes during the six months ended June 30, 2025. These factors were partially offset by a relative decline in the near-term macroeconomic forecasts, including higher tariffs, high inflation and interest rates, and other loan- and collateral-specific attributes during the six months ended June 30, 2025.
Current wording
For the nine months ended September 30, 2026 and 2025, the net (provision for) reversal of current expected credit losses was $(13.8) million and $27.7 million, respectively. For the nine months ended September 30, 2026, the net provision for current expected credit losses is primarily due to changes in loan- and collateral-specific attributes and new loan closings during the nine months ended September 30, 2026. These factors were partially offset by a realized loss on a multifamily loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments and other changes in loan- and collateral-specific attributes during the nine months ended September 30, 2026. For the nine months ended September 30, 2025, the net reversal of current expected credit losses was primarily due to realized losses on two office loans, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments, a relative improvement in the near-term macroeconomic forecasts and other loan- and collateral-specific attributes during the nine months ended September 30, 2025. These factors were partially offset by new loan closings and other loan- and collateral-specific attributes during the nine months ended September 30, 2025.
Previous wording
In June 2025, we received a discounted payoff on a senior mortgage loan with outstanding principal of $51.5 million, which was collateralized by an office (life sciences) property located in Massachusetts. The discounted payoff was received in conjunction with the sale of the office (life sciences) property by the borrower. For both the three and six months ended June 30, 2025, we recognized a realized loss of $33.0 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the Carrying Value exceeded the net proceeds from the payoff of the loan.
Current wording
In June 2025, we received a discounted payoff on a senior mortgage loan with outstanding principal of $51.5 million, which was collateralized by an office (life sciences) property located in Massachusetts. The discounted payoff was received in conjunction with the sale of the office (life sciences) property by the borrower. For the nine months ended September 30, 2025, we recognized a realized loss of $33.0 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the Carrying Value exceeded the net proceeds from the payoff of the loan.
Previous wording
In March 2026, we received a discounted payoff on a senior mortgage loan with outstanding principal of $28.2 million, which was collateralized by a multifamily property located in Pennsylvania. The discounted payoff was received in conjunction with the sale of the multifamily property by the borrower. For the six months ended June 30, 2026, we recognized a realized loss of $3.3 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the Carrying Value exceeded the net proceeds from the payoff of the loan.
Current wording
In March 2026, we received a discounted payoff on a senior mortgage loan with outstanding principal of $28.2 million, which was collateralized by a multifamily property located in Pennsylvania. The discounted payoff was received in conjunction with the sale of the multifamily property by the borrower. For the nine months ended September 30, 2026, we recognized a realized loss of $3.3 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the Carrying Value exceeded the net proceeds from the payoff of the loan.
Previous wording
As of July 30, 2026, we had approximately $105 million in liquidity including $16 million of cash and $89 million of availability under our Secured Funding Agreements.
Current wording
As of November 3, 2026, we had approximately $87 million in liquidity including $43 million of cash and $44 million of availability under our Secured Funding Agreements.
Previous wording
The following table sets forth changes in cash, cash equivalents and restricted cash for the six months ended June 30, 2026 and 2025 ($ in thousands):
Current wording
The following table sets forth changes in cash, cash equivalents and restricted cash for the nine months ended September 30, 2026 and 2025 ($ in thousands):
Previous wording
During the six months ended June 30, 2026 and 2025, cash, cash equivalents and restricted cash increased (decreased) by $(8.6) million and $27.8 million, respectively.
Current wording
During the nine months ended September 30, 2026 and 2025, cash, cash equivalents and restricted cash decreased by $5.5 million and increased by $57.6 million, respectively.
Previous wording
For the six months ended June 30, 2026 and 2025, net cash provided by operating activities totaled $6.9 million and $12.9 million, respectively. For the six months ended June 30, 2026, adjustments to net income (loss) related to operating activities primarily included the net provision for current expected credit losses of $12.0 million, accretion of discounts, deferred loan origination fees and costs of $2.6 million, amortization of deferred financing costs of $2.4 million, realized losses on loans of $3.3 million and change in other assets of $7.7 million. For the six months ended June 30, 2025, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $25.5 million, accretion of discounts, deferred loan origination fees and costs of $2.0 million, amortization of deferred financing costs of $2.4 million and realized losses on loans of $33.0 million.
Current wording
For the nine months ended September 30, 2026 and 2025, net cash provided by operating activities totaled $9.0 million and $16.7 million, respectively. For the nine months ended September 30, 2026, adjustments to net income (loss) related to operating activities primarily included the net provision for current expected credit losses of $13.8 million, accretion of discounts, deferred loan origination fees and costs of $3.8 million, amortization of deferred financing costs of $3.6 million, realized losses on loans of $3.3 million, a realized gain on sale of real estate owned of $7.1 million and change in other assets of $12.5 million. For the nine months ended September 30, 2025, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $27.7 million, accretion of discounts, deferred loan origination fees and costs of $3.2 million, amortization of deferred financing costs of $3.6 million, depreciation and amortization of real estate owned of $6.5 million and realized losses on loans of $34.6 million.
Previous wording
For the six months ended June 30, 2026, net cash used in investing activities totaled $211.3 million and was primarily related to cash used for the origination and funding of loans held for investment exceeding cash received from principal collections and cost-recovery proceeds on loans held for investment. For the six months ended June 30, 2025, net cash provided by investing activities totaled $325.0 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment exceeding the cash used for the origination and funding of loans held for investment.
Current wording
For the nine months ended September 30, 2026, net cash used in investing activities totaled $134.7 million and was primarily related to cash used for the origination and funding of loans held for investment of $353.3 million, partially offset by cash received from principal collections and cost-recovery proceeds on loans held for investment of $151.3 million and proceeds from the sale of real estate owned of $62.5 million. For the nine months ended September 30, 2025, net cash provided by investing activities totaled $438.2 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment exceeding the cash used for the origination and funding of loans held for investment.
Previous wording
For the six months ended June 30, 2026, net cash provided by financing activities totaled $195.8 million and was primarily related to proceeds from our Secured Funding Agreements of $430.6 million partially offset by repayments of our Secured Funding Agreements of $115.7 million, repayments of debt of consolidated VIEs of $99.9 million and dividends paid of $16.9 million. For the six months ended June 30, 2025, net cash used in financing activities totaled $310.0 million and was primarily related to repayments of our Secured Funding Agreements of $61.4 million, repayments of debt of consolidated VIEs of $318.4 million, repayments of our Secured Term Loan of $20.0 million and dividends paid of $22.3 million, partially offset by proceeds from our Secured Funding Agreements of $114.8 million.
Current wording
For the nine months ended September 30, 2026, net cash provided by financing activities totaled $120.1 million and was primarily related to proceeds from our Secured Funding Agreements of $440.1 million partially offset by repayments of our Secured Funding Agreements of $191.2 million, repayments of debt of consolidated VIEs of $99.9 million and dividends paid of $25.3 million. For the nine months ended September 30, 2025, net cash used in financing activities totaled $397.3 million and was primarily related to repayments of our Secured Funding Agreements of $195.6 million, repayments of debt of consolidated VIEs of $338.3 million, repayments of our Secured Term Loan of $30.0 million and dividends paid of $30.6 million, partially offset by proceeds from our Secured Funding Agreements of $200.1 million.
Previous wording
(3)In March 2026, we amended the secured revolving funding facility with City National Bank (the “CNB Facility”) to, among other things, extend the maturity date to December 31, 2026. The interest rate on advances under the CNB Facility is a per annum rate equal to the sum of, at our option, either (a) a SOFR-based rate plus 3.25% or (b) a base rate plus 2.25%, in each case, subject to an interest rate floor. The amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of June 30, 2026, there was $51.6 million of immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time. The amount immediately available under the CNB Facility may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement.
Current wording
(3)In March 2026, we amended the secured revolving funding facility with City National Bank (the “CNB Facility”) to, among other things, extend the maturity date to December 31, 2026. The interest rate on advances under the CNB Facility is a per annum interest rate equal to the sum of, at our option, either (a) a SOFR-based rate plus 3.25% or (b) a base rate plus 2.25%, in each case, subject to an interest rate floor. The amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of September 30, 2026, there was no immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time. The amount immediately available under the CNB Facility may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement.
Previous wording
(5)The maturity date of the Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”) is November 12, 2026. Advances under the Secured Term Loan are set to the following fixed rates: (i) 4.50% per annum until May 1, 2025 and (ii) after May 1, 2025 through November 12, 2026, the interest rate increases 0.25% every three months.
Current wording
(5)On October 20, 2026, we fully repaid the outstanding principal balance under the Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”) and the Secured Term Loan was terminated. Advances under the Secured Term Loan were set to the following fixed interest rates: (i) 4.50% per annum until May 1, 2025 and (ii) after May 1, 2025, the interest rate increased 0.25% every three months.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
•We closed a $69.7 million senior mortgage loan as part of a co-investment on a portfolio of self storage properties located in various states.
Previous report — wording carried elsewhere
For the six months ended June 30, 2026, related party expenses included $4.8 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the six months ended June 30, 2026. For the six months ended June 30, 2026, related party expenses also included $1.6 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the six months ended June 30, 2025, related party expenses included $5.0 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the six months ended June 30, 2025. For the six months ended June 30, 2025, related party expenses also included $2.0 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. The decrease in management fees for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily relates to a decrease in our weighted average stockholders’ equity for the six months ended June 30, 2026 as a result of realized losses on loans. The decrease in allocable general and administrative expenses due to our Manager for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 relates to changes in the mix of employees of our Manager that allocated time to us.
Previous report — wording carried elsewhere
For the six months ended June 30, 2026 and 2025, professional fees were $1.5 million and $1.6 million, respectively, which was relatively consistent for both periods. For the six months ended June 30, 2026 and 2025, general and administrative expenses were $3.1 million and $3.7 million, respectively. The decrease in general and administrative expenses for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily relates to a decrease in stock-based compensation expense due to a reduction in the weighted average grant date fair value for restricted stock and restricted stock unit awards granted after June 30, 2025 and a reduction in various operating expenses for the six months ended June 30, 2026.
Previous report — wording carried elsewhere
For both the three months ended June 30, 2026 and 2025, mixed-use property operating expenses were $1.1 million. For both the six months ended June 30, 2026 and 2025, mixed-use property operating expenses were $2.3 million. Mixed-use property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our mixed-use property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees.