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What changed in ACRES Commercial Realty Corp.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ACRES Commercial Realty Corp.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+424 added−445 removedSource: 10-K (2026-03-10) vs 10-K (2025-03-17)

Top changes in ACRES Commercial Realty Corp.'s 2025 10-K

424 paragraphs added · 445 removed · 341 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

44 edited+4 added−11 removed74 unchanged
Biggest changeThe following table summarizes the investments in real estate at December 31, 2024 (in thousands, except amounts in footnotes): December 31, 2024 Cost Basis Accumulated Depreciation & Amortization Carrying Value Assets acquired: Investments in real estate, equity: Investments in real estate (1) $ 82,265 $ (5,657 ) $ 76,608 Right of use assets (2)(3) 20,064 (759 ) 19,305 Intangible assets (4) 9,833 (2,845 ) 6,988 Subtotal 112,162 (9,261 ) 102,901 Investments in real estate from lending activities: Properties held for sale (5) 201,125 — 201,125 Total 313,287 (9,261 ) 304,026 Liabilities assumed: Investments in real estate, equity: Mortgage payables 76,631 2,925 79,556 Other liabilities 41 (29 ) 12 Lease liabilities (3)(6) 44,606 — 44,606 Subtotal 121,278 2,896 124,174 Investments in real estate from lending activities: Liabilities held for sale (7) 3,226 — 3,226 Total 124,504 2,896 127,400 Total net investments in real estate and properties held for sale (8) $ 188,783 $ 176,626 (1) Includes $15.2 million of land, which is not depreciable.
Biggest changeThe following table summarizes the investments in real estate at December 31, 2025 (in thousands, except amounts in footnotes): December 31, 2025 Cost Basis Accumulated Depreciation & Amortization Carrying Value Assets acquired: Investments in real estate, equity: Investments in real estate (1) $ 74,468 $ (7,797 ) $ 66,671 Right of use assets (2)(3) 19,665 (1,024 ) 18,641 Intangible assets (4) 9,469 (3,342 ) 6,127 Subtotal 103,602 (12,163 ) 91,439 Investments in real estate from lending activities: Investments in real estate (1) $ 10,025 $ (281 ) $ 9,744 Right of use assets (2)(3) 399 (63 ) 336 Intangible assets (4) 364 (270 ) 94 Subtotal 10,788 (614 ) 10,174 Properties held for sale (5) 90,825 — 90,825 Total 205,215 (12,777 ) 192,438 Liabilities assumed: Investments in real estate, equity: Mortgage payables 19,565 620 20,185 Other liabilities — — — Lease liabilities (3)(6) 44,958 — 44,958 Subtotal 64,523 620 65,143 Investments in real estate from lending activities: Other liabilities 41 (41 ) — Lease liabilities (3)(6) 378 — 378 Subtotal 419 (41 ) 378 Liabilities held for sale (7) 3,131 — 3,131 Total 68,073 579 68,652 Total net investments in real estate and properties held for sale (8) $ 137,142 $ 123,786 (1) Investments in real estate includes $15.2 million of land, which is not depreciable.
(Back to Index) 13 (Back to Index) We believe that ACRES Realty Funding, Inc., (“ACRES RF”) the subsidiary that at December 31, 2024 held substantially all of our CRE loan assets, is excluded from Investment Company Act regulation under Section 3(c)(5)(C), a provision designed for companies that do not issue redeemable securities and are primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.
(Back to Index) 13 (Back to Index) We believe that ACRES Realty Funding, Inc., (“ACRES RF”), the subsidiary that at December 31, 2025 held substantially all of our CRE loan assets, is excluded from Investment Company Act regulation under Section 3(c)(5)(C), a provision designed for companies that do not issue redeemable securities and are primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.
We did not hold any A-note investments at December 31, 2024. Subordinate interests in whole loans (B-notes ). To a lesser extent, we may invest in subordinate interests in whole loans, referred to as B-notes, which we will either directly originate or purchase from third parties. B-notes are loans secured by a first mortgage but are subordinated to an A-note.
We did not hold any A-note investments at December 31, 2025. Subordinate interests in whole loans (B-notes ). To a lesser extent, we may invest in subordinate interests in whole loans, referred to as B-notes, which we will either directly originate or purchase from third parties. B-notes are loans secured by a first mortgage but are subordinated to an A-note.
With respect to our portfolio at December 31, 2024, our whole loan investments had loan-to-collateral value, or LTV, ratios that typically do not exceed 85%. Typically, our whole loans are structured with an original term of up to three years, with two one-year extensions that bring the loan to a maximum term of five years.
With respect to our portfolio at December 31, 2025, our whole loan investments had loan-to-collateral value, or LTV, ratios that typically do not exceed 85%. Typically, our whole loans are structured with an original term of up to three years, with two one-year extensions that bring the loan to a maximum term of five years.
Historically, we have held “whole pool certificates” in mortgage loans, although, at December 31, 2024 and 2023, we had no whole pool certificates in our portfolios. Pursuant to existing SEC staff guidance, we consider whole pool certificates to be Qualifying Interests.
Historically, we have held “whole pool certificates” in mortgage loans, although, at December 31, 2025 and 2024, we had no whole pool certificates in our portfolios. Pursuant to existing SEC staff guidance, we consider whole pool certificates to be Qualifying Interests.
The Management Agreement’s current contract term ends on July 31, 2025, and the agreement provides for automatic one-year renewals on such date and on each July 31 thereafter until terminated. Our Board reviews our Manager’s performance annually.
The Management Agreement’s current contract term ends on July 31, 2026, and the agreement provides for automatic one-year renewals on such date and on each July 31 thereafter until terminated. Our Board reviews our Manager’s performance annually.
Risk Factors - Risks Related to Our Investments - We may face competition for suitable investments.” (Back to Index) 11 (Back to Index) Management Agreement We have a management agreement, amended and restated on July 31, 2020 and further amended on February 16, 2021, May 6, 2022 and February 15, 2024, or the “Management Agreement,” with our Manager pursuant to which our Manager provides the day-to-day management of our operations.
Risk Factors - Risks Related to Our Investments - We may face competition for suitable investments.” Management Agreement We have a management agreement, amended and restated on July 31, 2020 and further amended on February 16, 2021, May 6, 2022 and February 15, 2024, or the “Management Agreement,” with our Manager pursuant to which our Manager provides the day-to-day management of our operations.
At December 31, 2024, we held three investments in real estate acquired through direct equity investments and four investments in real estate acquired from lending activities (i.e. through the receipt of the deeds-in-lieu of foreclosure on the properties that collateralized former non-performing loans). At December 31, 2024, four of these investments were classified as held for sale.
At December 31, 2025, we held three investments in real estate acquired through direct equity investments and three investments in real estate acquired from lending activities (i.e. through the receipt of the deeds-in-lieu of foreclosure on the properties that collateralized former non-performing loans). At December 31, 2025, three of these investments were classified as held for sale.
We may also seek other credit arrangements to finance new investments that we believe can generate attractive risk-adjusted returns, subject to availability. Credit and risk management policies. Our Manager focuses its attention on credit and risk assessment from the earliest stage of the investment selection process.
We may also seek other credit arrangements to finance new investments that we believe can generate attractive risk-adjusted returns, subject to availability. (Back to Index) 6 (Back to Index) Credit and risk management policies. Our Manager focuses its attention on credit and risk assessment from the earliest stage of the investment selection process.
We do not have a policy that requires us to focus our investments in one or more particular geographic areas or industries. (Back to Index) 6 (Back to Index) Financing policies. We use leverage in order to increase potential returns to our stockholders and for financing our portfolio. We do not speculate on changes in interest rates.
We do not have a policy that requires us to focus our investments in one or more particular geographic areas or industries. Financing policies. We use leverage in order to increase potential returns to our stockholders and for financing our portfolio. We do not speculate on changes in interest rates.
(3) Refer to Note 9 in the Notes to the Consolidated Financial Statements for additional information on our remaining operating leases. Additionally, in December 2024 we 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 $367,000.
Additionally in December 2024, we 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 $322,000 at December 31, 2025. (3) Refer to Note 9 in the Notes to the Consolidated Financial Statements for additional information on our remaining operating leases.
We hold investments in 100% of the common shares of two trusts, Resource Capital Trust I and RCC Trust II, that were formed for the purpose of providing us with unsecured junior subordinated debt financing and are accounted for as investments in unconsolidated entities. CRE Debt Investments Floating-rate whole loans.
We hold investments in 100% of the common shares of two trusts, Resource Capital Trust I and RCC Trust II, that were formed for the purpose of providing us with unsecured junior subordinated debt financing and are accounted for as investments in unconsolidated entities. (Back to Index) 7 (Back to Index) CRE Debt Investments Floating-rate whole loans.
In some cases, the owner of the A-note may be able to foreclose or modify the note against our wishes as owner of the B-note. As a result, our economic and business interests may diverge from the interests of the owner of the A-note. Mezzanine financing .
In some cases, the owner of the A-note may be able to foreclose or modify the note against our wishes as owner of the B-note. As a result, our economic and business interests may diverge from the interests of the owner of the A-note. (Back to Index) 8 (Back to Index) Mezzanine financing .
(Back to Index) 9 (Back to Index) The following charts describe the property type and the geographic breakdown, by National Council of Real Estate Investment Fiduciaries (“NCREIF”) region of our CRE loan portfolio at December 31, 2024 (based on carrying value): The total CRE loan portfolio, at carrying value, was $1.5 billion at December 31, 2024.
(Back to Index) 9 (Back to Index) The following charts describe the property type and the geographic breakdown, by National Council of Real Estate Investment Fiduciaries (“NCREIF”) region of our CRE loan portfolio at December 31, 2025 (based on carrying value): The total CRE loan portfolio, at carrying value, was $1.8 billion at December 31, 2025.
Our interest in ACRES RF does not constitute an “investment security” for purposes of the 40% test, but our former interests in RSO Equity and our investments in the common shares of Resource Capital Trust I and RCC Trust II, both of which are held directly by ACRES Commercial Realty Corp., do.
Our interest in ACRES RF does not constitute an “investment security” for purposes of the 40% test, but our investments in the common shares of Resource Capital Trust I and RCC Trust II, both of which are held directly by ACRES Commercial Realty Corp., do.
(Back to Index) 14 (Back to Index) Moreover, we must ensure that ACRES Commercial Realty Corp. itself qualifies for an exclusion from regulation under the Investment Company Act. We do so by monitoring the value of our interests in our subsidiaries so that we can ensure that ACRES Commercial Realty Corp. satisfies the 40% test.
Moreover, we must ensure that ACRES Commercial Realty Corp. itself qualifies for an exclusion from regulation under the Investment Company Act. We do so by monitoring the value of our interests in our subsidiaries so that we can ensure that ACRES Commercial Realty Corp. satisfies the 40% test.
We expect to hold any B-note investments to maturity. We did not hold any B-note investments at December 31, 2024.
We expect to hold any B-note investments to maturity. We did not hold any B-note investments at December 31, 2025.
With respect to each fiscal quarter commencing with the quarter ending December 31, 2022, an incentive management fee calculated and payable in arrears in an amount, not less than zero, equal to: • for the first full calendar quarter ending December 31, 2022 , the product of (a) 20% and (b) the excess of (i) EAD of the Company for such calendar quarter, over (ii) the product of (A) the Company’s book value equity as of the end of such calendar quarter, and (B) 7% per annum; • for each of the second, third and fourth full calendar quarters following the calendar quarter ending December 31, 2022 , the excess of (1) the product of (a) 20% and (b) the excess of (i) EAD of the Company for the calendar quarter(s) following September 30, 2022, over (ii) the product of (A) the Company’s book value equity in the calendar quarter(s) following September 30, 2022, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to the Manager with respect to the prior calendar quarter(s) following September 30, 2022 (other than the most recent calendar quarter); and • for each calendar quarter thereafter , the excess of (1) the product of (a) 20% and (b) the excess of (i) EAD of the Company for the previous 12-month period, over (ii) the product of (A) the Company’s book value equity in the previous 12-month period, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive compensation shall be payable with respect to any calendar quarter unless EAD for the twelve most recently completed calendar quarters (or such lesser number of completed calendar quarters from September 30, 2022) in the aggregate is greater than zero. • Per-loan underwriting and review fees in connection with valuations of and potential investments in certain subordinate commercial mortgage pass-through certificates, in amounts approved by a majority of the independent directors. • Reimbursement of out-of-pocket expenses and certain other costs incurred by our Manager and its affiliates that relate directly to us and our operations. • Reimbursement of our Manager’s and its affiliates’ expenses for (A) the wages, salaries and benefits of our 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 our operations.
With respect to each fiscal quarter commencing with the quarter ending December 31, 2022, an incentive management fee calculated and payable in arrears in an amount, not less than zero, equal to: • for the first full calendar quarter ending December 31, 2022 , the product of (a) 20% and (b) the excess of (i) EAD of the Company for such calendar quarter, over (ii) the product of (A) the Company’s book value equity as of the end of such calendar quarter, and (B) 7% per annum; • for each of the second, third and fourth full calendar quarters following the calendar quarter ending December 31, 2022 , the excess of (1) the product of (a) 20% and (b) the excess of (i) EAD of the Company for the calendar quarter(s) following September 30, 2022, over (ii) the product of (A) the Company’s book value equity in the calendar quarter(s) following September 30, 2022, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to the Manager with respect to the prior calendar quarter(s) following September 30, 2022 (other than the most recent calendar quarter); and • for each calendar quarter thereafter , the excess of (1) the product of (a) 20% and (b) the excess of (i) EAD of the Company for the previous 12-month period, over (ii) the product of (A) the Company’s book value equity in the previous 12-month period, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive compensation shall be payable with respect to any calendar quarter unless EAD for the twelve most recently completed calendar quarters (or such lesser number of completed calendar quarters from September 30, 2022) in the aggregate is greater than zero. • Per-loan underwriting and review fees in connection with valuations of and potential investments in certain subordinate commercial mortgage pass-through certificates, in amounts approved by a majority of the independent directors. • Reimbursement of out-of-pocket expenses and certain other costs incurred by our Manager and its affiliates that relate directly to us and our operations.
We have not received, nor have we sought, a no-action letter from the SEC regarding how our investment strategy fits within the exclusions from regulation under the Investment Company Act.
(Back to Index) 14 (Back to Index) We have not received, nor have we sought, a no-action letter from the SEC regarding how our investment strategy fits within the exclusions from regulation under the Investment Company Act.
The sponsors may need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At December 31, 2024, 74.7% of the par value of our CRE loan portfolio had interest rate caps or funded debt service reserves in place with a weighted-average maturity of six months.
The sponsors may need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At December 31, 2025, 76.5% of the par value of our CRE loan portfolio had interest rate caps with a weighted-average maturity of 15 months or funded debt service reserves in place.
We expect our investments in participation loans to have LTV ratios not to exceed 85%. At December 31, 2024, our loan portfolio included two related-party whole loan participations with a par value of $57.4 million. Whole Loan Syndications.
We expect our investments in participation loans to have LTV ratios not to exceed 85%. At December 31, 2025, our loan portfolio included two related-party whole loan participations with a par value of $45.2 million. Whole Loan Syndications.
At December 31, 2024, our loan portfolio included one related-party whole loan syndication with a par value of $46.5 million. Senior interests in whole loans (A-notes ). We may invest in senior interests in whole loans, referred to as A-notes, either directly originated or purchased from third parties. We do not intend to obtain ratings on these investments.
At December 31, 2025, our loan portfolio included two related-party whole loan syndications with a par value of $88.7 million. Senior interests in whole loans (A-notes ). We may invest in senior interests in whole loans, referred to as A-notes, either directly originated or purchased from third parties. We do not intend to obtain ratings on these investments.
Substantially all of our CRE loans held at December 31, 2024 were whole loans. We expect to hold most of our whole loans to maturity. (Back to Index) 8 (Back to Index) Whole Loan Participations.
Substantially all of our CRE loans held at December 31, 2025 were whole loans. We expect to hold most of our whole loans to maturity. Whole Loan Participations.
Mezzanine loans may also have prepayment lockouts, penalties, minimum profit hurdles and other mechanisms to protect and enhance returns in the event of premature repayment. At December 31, 2024, our loan portfolio included one mezzanine loan with no carrying value. Preferred equity investments. Historically, we have invested in preferred equity investments in entities that own or acquire CRE properties.
Mezzanine loans may also have prepayment lockouts, penalties, minimum profit hurdles and other mechanisms to protect and enhance returns in the event of premature repayment. At December 31, 2025, our loan portfolio did not hold any mezzanine loans. Preferred equity investments. Historically, we have invested in preferred equity investments in entities that own or acquire CRE properties.
Also includes $3.2 million of construction in progress, which is also not depreciable until placed in service. (2) Primarily comprises a $18.6 million right of use asset, associated with a $43.9 million ground lease accounted for as an operating lease. Amortization is booked to real estate expenses on the consolidated statements of operations.
Also includes $3.7 million of construction in progress, which is also not depreciable until placed in service. (2) Primarily comprises a $18.4 million right of use asset, associated with a ground lease referenced in footnote (6). Amortization is booked to real estate expenses on the consolidated statements of operations.
However, we believe they qualify for exclusion under either Section 3(c)(1) or 3(c)(7). As required by these exclusions, we will not allow any of these entities to make, or propose to make, a public offering of its securities.
RCC TRS, LLC, 2901 Renaissance Holdings 1, LLC or 2901 Renaissance Holdings 2, LLC do not qualify for the Section 3(c)(5)(C) exclusion. However, we believe they qualify for exclusion under either Section 3(c)(1) or 3(c)(7). As required by these exclusions, we will not allow any of these entities to make, or propose to make, a public offering of its securities.
(Back to Index) 12 (Back to Index) Incentive compensation is calculated and payable quarterly to our Manager to the extent it is earned. Up to 75% of the incentive compensation is payable in cash and at least 25% is payable in the form of an award of common stock.
Incentive compensation is calculated and payable quarterly to our Manager to the extent it is earned. Up to 75% of the incentive compensation is payable in cash and at least 25% is payable in the form of an award of common stock. Our Manager may elect to receive more than 25% of its incentive compensation in common stock.
We may acquire CRE equity investments through a joint venture or wholly-owned subsidiary and may classify these investments in real estate as held for investment or held for sale.
(Back to Index) 10 (Back to Index) Investments in Real Estate We may invest directly in the ownership of CRE equity investments and we may acquire CRE equity investments through a joint venture or wholly-owned subsidiary and may classify these investments in real estate as held for investment or held for sale.
Our Manager may elect to receive more than 25% of its incentive compensation in common stock. All shares are fully vested upon issuance; however, our Manager may not sell such shares for one year after the incentive compensation becomes due and payable unless the Management Agreement is terminated.
All shares are fully vested upon issuance; however, our Manager may not sell such shares for one year after the incentive compensation becomes due and payable unless the Management Agreement is terminated.
During the year ended December 31, 2024, we selectively originated one CRE loan with a total commitment of $47.9 million. At December 31, 2024, our CRE loan portfolio at par comprised $1.5 billion of CRE whole loans with a weighted average spread of 3.73% over the one-month benchmark interest rates utilized, which have a weighted average floor of 0.97%.
During the year ended December 31, 2025, we originated 15 CRE loans with total commitments of $757.3 million. At December 31, 2025, our CRE loan portfolio at par comprised $1.8 billion of CRE whole loans with a weighted average spread of 3.35% over the one-month benchmark interest rates utilized, which have a weighted average floor of 1.78%.
In previous years we have acquired equity investments in CRE properties to utilize CLCFs in our REIT. These equity investments offer the opportunity for capital appreciation returns that may be reinvested into the loan origination pipeline when and if realized.
We also have $20.8 million of CLCFs from prior years, which are set to expire on December 31, 2029. In previous years we have acquired equity investments in CRE properties to utilize CLCFs in our REIT. These equity investments offer the opportunity for capital appreciation returns that may be reinvested into the loan origination pipeline when and if realized.
We manage our investment risk by maintaining a diversified portfolio of CRE mortgage loans and other CRE-related investments. As funds become available for investment or reinvestment, we seek to maintain diversification by property type or geographic location while allocating our capital to investment opportunities that we believe are the most economically attractive.
As funds become available for investment or reinvestment, we seek to maintain diversification by property type or geographic location while allocating our capital to investment opportunities that we believe are the most economically attractive.
The Southeast region constituted 16.5% of our portfolio, of which 58.3% was in Florida, and its collateral comprised 76.3% multifamily properties. We view our investment and credit strategies as being adequately diversified across property types in the Southwest, Southeast and Mountain regions.
The Pacific region constituted 14.0% of our portfolio, of which 79.8% was in California, and its collateral comprised 73.0% multifamily properties. We view our investment and credit strategies as being adequately diversified across property types in the Southwest, Southeast and Pacific regions.
(7) Comprises an operating lease liability. (8) Excludes items of working capital, either acquired or assumed. Competition See “Item 1A.
Lease expenses for the year ended December 31, 2025 were $2.8 million. (7) Comprises an operating lease liability. (8) Excludes items of working capital, either acquired or assumed. Competition See “Item 1A.
(2) Includes real estate-related right of use assets of $19.3 million, mortgages payable of $79.6 million, intangible assets of $7.0 million, lease liabilities of $44.6 million and other liabilities of $12,000. (3) Includes property held for sale-related liabilities of $3.2 million. (4) There are no stated rates associated with these investments.
(2) Includes real estate-related right of use assets of $19.0 million, intangible assets of $6.2 million and lease liabilities of $45.3 million. (3) Includes property held for sale-related liabilities of $3.1 million, related right of use assets of $5.4 million, intangible assets of $2.7 million and mortgages payable of $20.2 million.
The Southwest region constituted 25.0% of our portfolio, of which 100.0% was in Texas, and its collateral comprised 100.0% multifamily properties. The Mountain region constituted 19.2% of our portfolio, of which 62.1% was in Arizona, and its collateral comprised 92.4% multifamily properties.
The Southwest region constituted 24.2% of our portfolio, of which 90.2% was in Texas, and its collateral comprised 100.0% multifamily properties. The Southeast region constituted 20.6% of our portfolio, of which 60.1% was in Florida, and its collateral comprised 89.1% multifamily properties.
Additionally, our CRE loan portfolio included one fully reserved $4.7 million mezzanine loan at December 31, 2024. Our Business Strategy The core components of our business strategy are: Investment in CRE assets . We are currently invested in CRE whole loans, CRE mezzanine loans and CRE equity investments.
Our Business Strategy The core components of our business strategy are: Investment in CRE assets . We are currently invested in CRE whole loans and CRE equity investments. Our goal is to allocate 90% to 100% of our equity to our CRE assets. Managing our investment portfolio . At December 31, 2025, we managed $2.2 billion of assets.
(Back to Index) 7 (Back to Index) Investment Portfolio The table below summarizes the amortized costs and net carrying amounts of our investments at December 31, 2024, classified by asset type (dollars in thousands, except amounts in footnotes): At December 31, 2024 Amortized Cost Net Carrying Amount Percent of Portfolio Weighted Average Coupon Loans held for investment: CRE whole loans (1) $ 1,482,692 $ 1,454,545 87.41 % 8.31% CRE mezzanine loan 4,700 — 0.00 % 10.00% 1,487,392 1,454,545 87.41 % Loans held for sale: CRE whole loans 11,100 11,100 0.67 % 13.14% 11,100 11,100 0.67 % Other investments: Investments in unconsolidated entities 21,857 21,857 1.31 % N/A (4) Investments in real estate (2) 58,283 58,283 3.50 % N/A (4) Property held for sale (3) 118,344 118,344 7.11 % N/A (4) 198,484 198,484 11.92 % Total investment portfolio $ 1,696,976 $ 1,664,129 100.00 % (1) Net carrying amount includes an allowance for credit losses of $32.8 million.
Investment Portfolio The table below summarizes the amortized costs and net carrying amounts of our investments at December 31, 2025, classified by asset type (dollars in thousands, except amounts in footnotes): At December 31, 2025 Amortized Cost Net Carrying Amount (1) Percent of Portfolio Weighted Average Coupon Loans held for investment: CRE whole loans $ 1,820,942 $ 1,800,784 91.74 % 7.32% CRE preferred equity investment 9,425 9,185 0.47 % 10.00% 1,830,367 1,809,969 92.21 % Other investments: Investments in unconsolidated entities 29,237 29,237 1.49 % N/A (4) Investments in real estate (2) 56,277 56,277 2.86 % N/A (4) Properties held for sale (3) 67,509 67,509 3.44 % N/A (4) 153,023 153,023 7.79 % Total investment portfolio $ 1,983,390 $ 1,962,992 100.00 % (1) Net carrying amount includes an allowance for credit losses of $20.4 million.
The negative impact of COVID-19 on our commercial mortgage-backed securities, or CMBS, investments and 2020 results created net operating loss (“NOL”) carryforwards and net capital loss carryforwards (“CLCFs”). We have $32.1 million of NOL carryforwards, which was reported on our tax return filed in October 2024 for the 2023 tax year.
(4) There are no stated rates associated with these investments. The negative impact of COVID-19 on our commercial mortgage-backed securities, or CMBS, investments and 2020 results created net operating loss (“NOL”) carryforwards and net capital loss carryforwards (“CLCFs”).
Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements” of this report. We continuously monitor our compliance with all of the financial covenants. We were in compliance with all financial covenants, as defined in the respective agreements, at December 31, 2024. Diversification of investments .
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” and Note 11 contained in “Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements” of this report. We continuously monitor our compliance with all of the financial covenants.
Term warehouse financing facilities include accrued interest payable and deferred debt issuance costs. (2) The senior secured financing facility and term warehouse financing facilities include accrued interest receivable and accrued interest payable, which are excluded from the value of collateral. CRE securitizations reflect the par value of equity investments in retained notes.
(2) The term reinvestment financing facility, senior secured financing facility and term warehouse financing facilities include accrued interest receivable and accrued interest payable, which are excluded from the value of collateral. Our financing arrangements charge a floating rate of interest. For more information concerning our financing arrangements, see “Item 7.
(4) Primarily comprises a franchise intangible of $4.1 million, a management contract intangible of $2.8 million, in-place leases of $68,000 and a customer list intangible of $371,000. (5) Properties held for sale included a hotel acquired via deed-in-lieu of foreclosure in November 2020 as well as an office property acquired via deed-in-lieu of foreclosure in June 2023.
(Back to Index) 11 (Back to Index) (5) Properties held for sale included a hotel acquired via deed-in-lieu of foreclosure in November 2020, an office property acquired via deed-in-lieu of foreclosure in June 2023 and one student housing property acquired in April 2022. (6) Primarily comprises a $44.7 million ground lease with a remaining term of 91 years.
We also have $121.9 million of CLCFs from prior years, which are set to expire on December 31, 2025. Additionally, we have NOL carryforwards of $60.9 million, of which $21.1 million have an indefinite carryforward period and $39.8 million begin to expire in 2044.
We have $32.1 million of NOL carryforwards, which was reported on our tax return filed in October 2025 for the 2024 tax year. Additionally, in our taxable REIT subsidiaries ("TRS"), we have NOL carryforwards of $62.0 million, of which $22.2 million have an indefinite carryforward period and $39.8 million begin to expire in 2044.
At December 31, 2024, our financing arrangements were as follows (in thousands): Outstanding Borrowings (1) Value of Collateral Equity at Risk (2) At December 31, 2024: CRE Securitizations ACR 2021-FL1 $ 471,847 $ 599,927 $ 127,420 ACR 2021-FL2 390,957 525,571 133,000 Senior Secured Financing Facility Massachusetts Mutual Life Insurance Company $ 60,910 $ 162,578 $ 99,899 CRE -Term Warehouse Financing Facilities JPMorgan Chase Bank, N.A. $ 90,995 $ 158,639 $ 67,802 Morgan Stanley Mortgage Capital Holdings LLC 65,744 98,373 33,566 Mortgages Payable ReadyCap Commercial, LLC $ 20,240 $ 26,960 $ 6,566 Oceanview Life and Annuity Company (3) 44,211 92,549 31,809 Florida Pace Funding Agency (3) 15,105 — — Total $ 1,160,009 $ 1,664,597 (1) CRE securitizations, senior secured financing facility and mortgages payable include deferred debt issuance costs.
At December 31, 2025, our financing arrangements were as follows (in thousands): Outstanding Borrowings (1) Value of Collateral Equity at Risk (2) At December 31, 2025: CRE - Term Reinvestment Financing Facility JPMorgan Chase Bank, N.A. $ 728,167 $ 1,009,622 $ 295,734 Senior Secured Financing Facility Massachusetts Mutual Life Insurance Company $ 61,645 $ 166,526 $ 104,091 CRE -Term Warehouse Financing Facilities JPMorgan Chase Bank, N.A. $ 116,488 $ 149,000 $ 32,570 Morgan Stanley Mortgage Capital Holdings LLC $ 417,374 $ 544,937 $ 130,295 Mortgage Payable ReadyCap Commercial, LLC $ 20,185 $ 26,964 $ 6,695 Total $ 1,343,859 $ 1,897,049 (1) Includes deferred debt issuance costs.
Removed
Our goal is to allocate 90% to 100% of our equity to our CRE assets. Managing our investment portfolio . At December 31, 2024, we managed $1.9 billion of assets, including $1.1 billion of assets that were financed and held in variable interest entities.
Added
We were in compliance with all financial covenants, as defined in the respective agreements, at December 31, 2025. Diversification of investments . We manage our investment risk by maintaining a diversified portfolio of CRE mortgage loans and other CRE-related investments.
Removed
(3) Value of collateral and equity at risk related to Oceanview Life and Annuity Company also applies to Florida Pace Funding Agency. The CRE securitizations, senior secured financing facility, term warehouse financing facilities, mortgages payable with ReadyCap Commercial, LLC and Oceanview Life and Annuity Company charge a floating rate of interest.
Added
At December 31, 2025, our loan portfolio included one preferred equity investment with a par value of $9.5 million.
Removed
The mortgage payable with Florida Pace Funding Agency charges a fixed rate of interest. For more information concerning our financing arrangements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” and Note 11 contained in “Item 8.
Added
(4) Primarily comprises a franchise intangible of $3.5 million, a management contract intangible of $2.6 million, in-place lease intangible of $7,000 and a customer list intangible of $87,000.
Removed
Historically, we have used the London Interbank Offered Rate (“LIBOR”) as the benchmark interest rate for our floating-rate whole loans, and we have been exposed to LIBOR through our floating-rate borrowings.
Added
(Back to Index) 12 (Back to Index) • Reimbursement of our Manager’s and its affiliates’ expenses for (A) the wages, salaries and benefits of our 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 our operations.
Removed
In March 2021, the United Kingdom’s, or U.K.’s, Financial Conduct Authority (“FCA”) announced that it would cease publication of the one-week and the two-month USD LIBOR immediately after December 31, 2021, and cease publication of the remaining tenors immediately after June 30, 2023. In July 2021, the U.S.
Removed
Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprising large U.S. financial institutions, has identified Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. Following this announcement, we began to transition the contractual benchmark rates of existing floating-rate whole loans and borrowings to alternate rates.
Removed
At December 31, 2024, our entire portfolio of floating rate whole loans and floating rate borrowings have transitioned to SOFR.
Removed
We did not hold any preferred equity investments at December 31, 2024.
Removed
(Back to Index) 10 (Back to Index) Investments in Real Estate We may invest directly in the ownership of CRE equity investments by making direct investments where NOL carryforwards exist and can absorb the creation of REIT taxable income or by restructuring CRE loans and taking control of the properties where we believe we can protect capital and ultimately generate capital appreciation.
Removed
At September 30, 2024, two additional properties, a newly constructed multi-family property placed in service in September 2024 and an office complex acquired July 2024, were classified as properties held for sale. (6) Primarily comprises a $43.9 million ground lease with a remaining term of 92 years. Lease expenses for the year ended December 31, 2024 were $2.8 million.
Removed
RCC TRS, LLC, or RCC TRS, and our other former subsidiaries, RCC Commercial, Inc., or RCC Commercial, RCC Commercial II, Inc., or Commercial II, RCC Commercial III, Inc., or Commercial III, Resource TRS, LLC, or Resource TRS, and RSO EquityCo, LLC, or RSO Equity, do not qualify for the Section 3(c)(5)(C) exclusion.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

42 edited+3 added−5 removed336 unchanged
Biggest changeFurthermore, our Manager may use complex strategies, and transactions entered into by our Manager, which may be difficult or impossible to unwind by the time they are reviewed by the directors. Our Manager has great latitude within the broad investment guidelines in determining the types of investments it makes for us.
Biggest changeIn addition, in conducting periodic reviews, the directors may rely primarily on information provided to them by our Manager. Furthermore, our Manager may use complex strategies, and transactions entered into by our Manager, which may be difficult or impossible to unwind by the time they are reviewed by the directors.
Net operating income of an income producing property can be affected by, among other things: • tenant mix, success of tenant businesses, tenant bankruptcies and property management decisions; • property location and condition; • competition from comparable types of properties; • shifts in consumer habits or adoption of telework policies; • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination at the property; • the occurrence of any uninsured casualty at the property; • changes in national, regional or local economic conditions and/or the conditions of specific industry segments in which the lessees may operate; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • the availability of debt or equity financing; • increases in costs of construction material; (Back to Index) 26 (Back to Index) • changes in governmental rules, regulations and fiscal policies, including environmental legislation and zoning laws; and • acts of God, terrorism, pandemic, social unrest and civil disturbances.
Net operating income of an income producing property can be affected by, among other things: • tenant mix, success of tenant businesses, tenant bankruptcies and property management decisions; • property location and condition; • competition from comparable types of properties; • shifts in consumer habits or adoption of telework policies; • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination at the property; • the occurrence of any uninsured casualty at the property; • changes in national, regional or local economic conditions and/or the conditions of specific industry segments in which the lessees may operate; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • the availability of debt or equity financing; • increases in costs of construction material; • changes in governmental rules, regulations and fiscal policies, including environmental legislation and zoning laws; and • acts of God, terrorism, pandemic, social unrest and civil disturbances.
(Back to Index) 37 (Back to Index) Revenue Procedure 2011-16, as modified and superseded by Revenue Procedure 2014-51, provides a safe harbor pursuant to which we will not be required to redetermine the fair market value of the real property securing a loan for purposes of the REIT gross income and asset tests in connection with a loan modification that is: (1) occasioned by a borrower default; or (2) made at a time when we reasonably believe that the modification to the loan will substantially reduce a significant risk of default on the original loan.
Revenue Procedure 2011-16, as modified and superseded by Revenue Procedure 2014-51, provides a safe harbor pursuant to which we will not be required to redetermine the fair market value of the real property securing a loan for purposes of the REIT gross income and asset tests in connection with a loan modification that is: (1) occasioned by a borrower default; or (2) made at a time when we reasonably believe that the modification to the loan will substantially reduce a significant risk of default on the original loan.
While we believe that our allowance for credit losses at December 31, 2024 is adequate to cover our anticipated losses, we cannot assure you that it will not increase in the future. Any increase in our allowance for credit losses will reduce our income and, if sufficiently large, could cause us to incur significant losses.
While we believe that our allowance for credit losses at December 31, 2025 is adequate to cover our anticipated losses, we cannot assure you that it will not increase in the future. Any increase in our allowance for credit losses will reduce our income and, if sufficiently large, could cause us to incur significant losses.
Although at December 31, 2024, all of our CRE debt securitizations met their performance tests, we cannot assure you that our CRE debt securitizations will satisfy the performance tests in the future. For information concerning compliance by our CRE debt securitizations with their over-collateralization tests and interest coverage tests, see “Item 7.
Although at December 31, 2025, all of our CRE debt securitizations met their performance tests, we cannot assure you that our CRE debt securitizations will satisfy the performance tests in the future. For information concerning compliance by our CRE debt securitizations with their over-collateralization tests and interest coverage tests, see “Item 7.
In certain situations, we may: • acquire investments subject to rights of senior classes and servicers under inter-creditor or servicing agreements; • acquire only a minority and/or non-controlling participation in an underlying investment; • co-originate or participate in loans with third parties; (Back to Index) 25 (Back to Index) • co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third-party management or strategic partners with respect to the management of an asset.
In certain situations, we may: • acquire investments subject to rights of senior classes and servicers under inter-creditor or servicing agreements; • acquire only a minority and/or non-controlling participation in an underlying investment; • co-originate or participate in loans with third parties; • co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third-party management or strategic partners with respect to the management of an asset.
(Back to Index) 33 (Back to Index) If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC that we would be unable to enforce contracts with third parties, that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company, and that we would be subject to limitations on corporate leverage that would have an adverse impact on our investment returns.
If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC that we would be unable to enforce contracts with third parties, that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company, and that we would be subject to limitations on corporate leverage that would have an adverse impact on our investment returns.
We anticipate that the aggregate value of the securities we hold in our TRS will be less than 20% of the value of our total assets, including our TRS securities. We will monitor the compliance of our investments in TRSs with the rules relating to value of assets and transactions not on an arm’s-length basis.
We anticipate that the aggregate value of the securities we hold in our TRS will be less than 25% of the value of our total assets, including our TRS securities. We will monitor the compliance of our investments in TRSs with the rules relating to value of assets and transactions not on an arm’s-length basis.
For additional risks regarding real estate-related loans, see “Risks Related to Investments- Our commercial mortgage loans and mezzanine loans are subject to the risks inherent in owning the real estate securing or underlying those investments that could result in losses to us.” Our investments in preferred equity involve a greater risk of loss than traditional first mortgage debt investments we make.
For additional risks regarding real estate-related loans, see “Risks Related to Investments- Our (Back to Index) 24 (Back to Index) commercial mortgage loans and mezzanine loans are subject to the risks inherent in owning the real estate securing or underlying those investments that could result in losses to us.” Our investments in preferred equity involve a greater risk of loss than traditional first mortgage debt investments we make.
A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.
A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.
(Back to Index) 31 (Back to Index) If voting rights or control shares acquired in a control share acquisition are not approved at a stockholders’ meeting or if the acquiring person does not deliver an acquiring person statement as required by the Maryland Act then, subject to specific conditions and limitations, the issuer may redeem any or all of the control shares for fair value.
If voting rights or control shares acquired in a control share acquisition are not approved at a stockholders’ meeting or if the acquiring person does not deliver an acquiring person statement as required by the Maryland Act then, subject to specific conditions and limitations, the issuer may redeem any or all of the control shares for fair value.
Unless we qualified for relief under certain cure provisions in the Code, such failures could cause us to fail to qualify as a REIT. Our subsidiaries and we have invested and may invest in the future in distressed debt, including distressed mortgage loans, mezzanine loans, B-notes and MBS.
Unless we qualified for relief under certain cure provisions in the Code, such failures could cause us to fail to qualify as a REIT. (Back to Index) 37 (Back to Index) Our subsidiaries and we have invested and may invest in the future in distressed debt, including distressed mortgage loans, mezzanine loans, B-notes and MBS.
If we realize excess inclusion income and allocate it to stockholders, this income cannot be offset by net operating losses of the stockholders. If the stockholder is a tax-exempt entity, then this income would be fully taxable as unrelated business taxable income under Section 512 of the Code.
(Back to Index) 34 (Back to Index) If we realize excess inclusion income and allocate it to stockholders, this income cannot be offset by net operating losses of the stockholders. If the stockholder is a tax-exempt entity, then this income would be fully taxable as unrelated business taxable income under Section 512 of the Code.
If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations. (Back to Index) 27 (Back to Index) Our investment portfolio may have material geographic, sector, property-type and sponsor concentrations.
If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations. Our investment portfolio may have material geographic, sector, property-type and sponsor concentrations.
In addition, in certain circumstances we may be liable for the actions of our third-party partners or co-venturers. Many of our investments may be illiquid, which may result in our realizing less than their recorded value should we need to sell such investments quickly.
In addition, in certain circumstances we may be liable for the actions of our third-party partners or co-venturers. (Back to Index) 25 (Back to Index) Many of our investments may be illiquid, which may result in our realizing less than their recorded value should we need to sell such investments quickly.
Our Manager and ACRES will face conflicts of interest relating to the allocation of investment opportunities and such conflicts may not be resolved in our favor, which could limit our ability to acquire assets and, in turn, limit our ability to make distributions and reduce your overall investment return.
(Back to Index) 29 (Back to Index) Our Manager and ACRES will face conflicts of interest relating to the allocation of investment opportunities and such conflicts may not be resolved in our favor, which could limit our ability to acquire assets and, in turn, limit our ability to make distributions and reduce your overall investment return.
Further, the Federal Reserve has raised, and may continue to raise, interest rates in an effort to combat inflation, and so the interest payable on our existing fixed rate debt on our real estate portfolio becomes relatively cheaper, and the rates on our floating rate loans and financing adjust accordingly.
Further, the Federal Reserve may raise interest rates in an effort to combat inflation, and so the interest payable on our existing fixed rate debt on our real estate portfolio becomes relatively cheaper, and the rates on our floating rate loans and financing adjust accordingly.
In addition, we may be obligated to fund the defense costs incurred by our directors and officers. (Back to Index) 32 (Back to Index) Our right to take action against our Manager is limited. The obligation of our Manager under the Management Agreement is to render its services in good faith.
In addition, we may be obligated to fund the defense costs incurred by our directors and officers. Our right to take action against our Manager is limited. The obligation of our Manager under the Management Agreement is to render its services in good faith.
(Back to Index) 38 (Back to Index) Our qualification as a REIT could be jeopardized as a result of an interest in joint ventures. We hold and may continue to hold certain limited partner or non-managing member interests in partnerships or limited liability companies that are joint ventures.
Our qualification as a REIT could be jeopardized as a result of an interest in joint ventures. We hold and may continue to hold certain limited partner or non-managing member interests in partnerships or limited liability companies that are joint ventures.
Additionally, our co-lenders, servicers or joint venture partners may have financial difficulties and may not be able to perform their financial obligations in accordance with their respective agreements, in which case we may be obligated to perform on their behalf.
Additionally, our co-lenders, servicers or joint venture partners may have financial difficulties and may not be able to perform their (Back to Index) 28 (Back to Index) financial obligations in accordance with their respective agreements, in which case we may be obligated to perform on their behalf.
Our policies and procedures may not be sufficient to address any conflicts of interest that arise. (Back to Index) 30 (Back to Index) Our Manager’s liability is limited under the Management Agreement, and we have agreed to indemnify our Manager against certain liabilities.
Our policies and procedures may not be sufficient to address any conflicts of interest that arise. Our Manager’s liability is limited under the Management Agreement, and we have agreed to indemnify our Manager against certain liabilities.
Rapid changes in the values of our real estate-related investments may make it more difficult for us to maintain our qualification as a REIT or exclusion from regulation under the Investment Company Act.
(Back to Index) 33 (Back to Index) Rapid changes in the values of our real estate-related investments may make it more difficult for us to maintain our qualification as a REIT or exclusion from regulation under the Investment Company Act.
(Back to Index) 34 (Back to Index) We may realize excess inclusion income that would increase our tax liability and that of our stockholders. Excess inclusion income could result if we hold a residual interest in a REMIC or if we were to own an interest in a taxable mortgage pool.
We may realize excess inclusion income that would increase our tax liability and that of our stockholders. Excess inclusion income could result if we hold a residual interest in a REMIC or if we were to own an interest in a taxable mortgage pool.
We cannot assure you, however, that we will be able to comply with such rules. (Back to Index) 36 (Back to Index) Complying with REIT requirements may limit our ability to hedge effectively. The REIT provisions of the Code substantially limit our ability to hedge MBS and related borrowings.
We cannot assure you, however, that we will be able to comply with such rules. Complying with REIT requirements may limit our ability to hedge effectively. The REIT provisions of the Code substantially limit our ability to hedge MBS and related borrowings.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: • 85% of our ordinary income for that year; • 95% of our capital gain net income for that year; and (Back to Index) 35 (Back to Index) • 100% our undistributed taxable income from prior years.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: • 85% of our ordinary income for that year; • 95% of our capital gain net income for that year; and • 100% our undistributed taxable income from prior years.
An interested stockholder is defined as: • any person who beneficially owns ten percent or more of the voting power of the corporation’s shares; or • an affiliate or associate of the corporation who, at any time within the two-year period before the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting stock of the corporation.
An interested stockholder is defined as: • any person who beneficially owns ten percent or more of the voting power of the corporation’s shares; or (Back to Index) 31 (Back to Index) • an affiliate or associate of the corporation who, at any time within the two-year period before the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting stock of the corporation.
We may be obligated to fund a portion of the loan at one or more future dates. We may not have the funds available at such future date(s) to meet our funding obligation under the loan.
(Back to Index) 26 (Back to Index) We may be obligated to fund a portion of the loan at one or more future dates. We may not have the funds available at such future date(s) to meet our funding obligation under the loan.
The B-notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us. We may invest in B-notes.
(Back to Index) 27 (Back to Index) The B-notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us. We may invest in B-notes.
Our taxable income may substantially exceed our net income as determined by GAAP because, for example, realized capital losses will be deducted in determining our GAAP net income but may not be deductible in computing our taxable income.
(Back to Index) 35 (Back to Index) Our taxable income may substantially exceed our net income as determined by GAAP because, for example, realized capital losses will be deducted in determining our GAAP net income but may not be deductible in computing our taxable income.
However, for taxable years beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations.
However, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations.
In addition, we will indemnify our Manager, ACRES and their officers and affiliates for any actions taken by them in good faith. We have not established a minimum distribution payment level and we cannot assure you of our ability to make distributions in the future. In the future, we may use uninvested offering proceeds or borrowed funds to make distributions.
In addition, we will indemnify our Manager, ACRES and their officers and affiliates for any actions taken by them in good faith. (Back to Index) 32 (Back to Index) We have not established a minimum distribution payment level and we cannot assure you of our ability to make distributions in the future.
Subject to maintaining our qualification as a REIT and exclusion from regulation under the Investment Company Act, we may invest in mezzanine debt, preferred equity and mezzanine or other subordinated tranches of CMBS. We currently have investments in mezzanine debt.
Investing in mezzanine debt, preferred equity, mezzanine or other subordinated tranches of CMBS involves greater risks of loss than senior secured debt investments. Subject to maintaining our qualification as a REIT and exclusion from regulation under the Investment Company Act, we may invest in mezzanine debt, preferred equity and mezzanine or other subordinated tranches of CMBS.
Risks Related to Our Organization and Structure Our charter and bylaws contain provisions that may inhibit potential acquisition bids that you and other stockholders may consider favorable, and the market price of our common stock may be lower as a result. Our charter and bylaws contain provisions that may have an anti-takeover effect and inhibit a change in our Board.
(Back to Index) 30 (Back to Index) Risks Related to Our Organization and Structure Our charter and bylaws contain provisions that may inhibit potential acquisition bids that you and other stockholders may consider favorable, and the market price of our common stock may be lower as a result.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, but including mortgage loans, held primarily for sale to customers in the ordinary course of business.
In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, but including mortgage loans, held primarily for sale to customers in the ordinary course of business.
(Back to Index) 29 (Back to Index) Our Manager manages our portfolio pursuant to very broad investment guidelines and our Board does not approve each investment decision, which may result in our making riskier investments. Our Manager is authorized to follow very broad investment guidelines.
Our Manager manages our portfolio pursuant to very broad investment guidelines and our Board does not approve each investment decision, which may result in our making riskier investments. Our Manager is authorized to follow very broad investment guidelines. While our directors periodically review our investment guidelines and our investment portfolio, they do not review all of our proposed investments.
Poor investment decisions could impair our ability to make distributions to our stockholders. Termination of the Management Agreement by us without cause is difficult and could be costly. Termination of our Management Agreement without cause is difficult and could be costly.
Our Manager has great latitude within the broad investment guidelines in determining the types of investments it makes for us. Poor investment decisions could impair our ability to make distributions to our stockholders. Termination of the Management Agreement by us without cause is difficult and could be costly.
The statute permits exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder.
The statute permits exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder or the issuance of stock that resulted in the interested stockholder becoming subject to the statute if such issuance was approved by the board of directors or a committee of such board.
We expect to make quarterly distributions to our stockholders in amounts such that we distribute all or substantially all of our taxable income in each year, subject to certain adjustments. We have not established a minimum distribution payment level, and our ability to make distributions may be impaired by the risk factors described in this report.
We have not established a minimum distribution payment level, and our ability to make distributions may be impaired by the risk factors described in this report.
No assurances can be given that we will recognize full value, at a price and at terms that are acceptable to us, for any property that we are required to (Back to Index) 28 (Back to Index) sell for liquidity reasons.
No assurances can be given that we will recognize full value, at a price and at terms that are acceptable to us, for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations.
These provisions include the following: • There are ownership limits and restrictions on transferability and ownership in our charter.
Our charter and bylaws contain provisions that may have an anti-takeover effect and inhibit a change in our Board. These provisions include the following: • There are ownership limits and restrictions on transferability and ownership in our charter.
Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. We may not have control, or control may be limited, over certain of our loans and real estate equity investments.
We may not have control, or control may be limited, over certain of our loans and real estate equity investments.
This could increase the cost of our hedging activities or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans that would be treated as sales for federal income tax purposes.
This could increase the cost of our hedging activities or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.
Removed
(Back to Index) 24 (Back to Index) Investing in mezzanine debt, preferred equity, mezzanine or other subordinated tranches of CMBS involves greater risks of loss than senior secured debt investments.
Added
Termination of our Management Agreement without cause is difficult and could be costly.
Removed
While our directors periodically review our investment guidelines and our investment portfolio, they do not review all of our proposed investments. In addition, in conducting periodic reviews, the directors may rely primarily on information provided to them by our Manager.
Added
In the future, we may use uninvested offering proceeds or borrowed funds to make distributions. We expect to make quarterly distributions to our stockholders in amounts such that we distribute all or substantially all of our taxable income in each year, subject to certain adjustments.
Removed
We may not be able to generate future taxable income to fully utilize our net capital loss carryforwards. As of December 31, 2024, we had an CLCF of $121.9 million that expires on December 31, 2025.
Added
(Back to Index) 36 (Back to Index) The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans that would be treated as sales for federal income tax purposes. A REIT’s net income from prohibited transactions is subject to a 100% tax.
Removed
We can utilize our CLCF to reduce our net capital gain income that would be subject to income taxes to the extent it is not distributed to our shareholders. Utilizing our CLCF may allow us to reduce our required distributions to shareholders or income tax liability which would allow us to retain future taxable income as capital.
Removed
However, we may not generate sufficient taxable income of the appropriate tax character to fully utilize this carryforward prior to its expiration. To the extent that our CLCF expires unutilized, we may not fully realize the benefit of this tax attribute which could lead to higher annual distribution requirements or tax liabilities after 2025.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+1 added−0 removed8 unchanged
Biggest changeAdditionally, employees are regularly tested with phishing campaigns reinforcing their awareness of email threats. Cybersecurity threat risks have not materially affected our company, including our business strategy, results of operations or financial condition. For further discussion of the risks we face from cybersecurity threats, including those that could materially affect us, see “Item 1A.
Biggest changeAll employees are required to complete training that includes various topics on cybersecurity risk management best practices. Additionally, employees are regularly tested with phishing campaigns reinforcing their awareness of email threats. Cybersecurity threat risks have not materially affected our company, including our business strategy, results of operations or financial condition.
Our Company’s Board and the audit committee are jointly responsible for overseeing our overall risk assessment and risk management program as well as our Manager’s policies and practices related to our information technology systems, information security and cybersecurity risks. The Company’s Board and the audit committee reviews at least annually our enterprise risks and related risk management program.
Our Company’s Board and the audit committee are jointly responsible for overseeing our overall risk assessment and risk management program as well as our Manager’s policies and practices related to our information technology systems, information security and cybersecurity risks. The Company’s Board and the audit committee review at least annually our enterprise risks and related risk management program.
In addition, the Company’s Board receives periodic reports from our cybersecurity compliance firm on the (Back to Index) 39 (Back to Index) primary cybersecurity risks that we and our Manager face and the measures we are taking to mitigate such risks.
In addition, the Company’s Board receives periodic reports from our cybersecurity compliance firm on the primary cybersecurity risks that we and our Manager face and the measures we are taking to mitigate such risks.
ACRES employs a range of protective measures within its cybersecurity framework including physical and digital access controls, identity verification, mobile device management software, employee training programs emphasizing cybersecurity awareness and best practices, tools for identifying abnormal activities, and vigilant monitoring of data usage, hardware, and software. At least annually, ACRES’ third-party cybersecurity compliance consultant conducts a cybersecurity risk assessment.
ACRES employs a range of protective measures within its cybersecurity framework including physical and digital access controls, identity verification, mobile device management software, (Back to Index) 38 (Back to Index) employee training programs emphasizing cybersecurity awareness and best practices, tools for identifying abnormal activities, and vigilant monitoring of data usage, hardware, and software.
We periodically review reporting on these risks and our cybersecurity threats, the status of our security infrastructure, our risk management activities and the status of, and our responses to, any cybersecurity incidents. We also periodically perform simulations and tabletop exercises. All employees are required to complete training that includes various topics on cybersecurity risk management best practices.
At least annually, ACRES’ third-party cybersecurity compliance consultant conducts a cybersecurity risk assessment. We periodically review reporting on these risks and our cybersecurity threats, the status of our security infrastructure, our risk management activities and the status of, and our responses to, any cybersecurity incidents. We also periodically perform simulations and tabletop exercises.
Added
For further discussion of the risks we face from cybersecurity threats, including those that could materially affect us, see “Item 1A.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We maintain offices in Uniondale, New York and Philadelphia, Pennsylvania. Our principal office is located in leased space at 390 RXR Plaza, Uniondale, New York 11556. We do not own any material principal real property, other than certain investments in real estate properties.
Biggest changeITEM 2. PROPERTIES We maintain offices in Uniondale, New York; New York City, New York and Philadelphia, Pennsylvania. Our principal office is located in leased space at 390 RXR Plaza, Uniondale, New York 11556. We do not own any material principal real property, other than certain investments in real estate properties.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table presents information about our common stock repurchases made during the year ended December 31, 2024 in accordance with our repurchase program (dollars in thousands, except per share amounts): Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs January 2, 2024 - January 31, 2024 75,138 $ 9.86 75,138 $ 9,087,747 January 17, 2024 (2) 100,000 21.57 100,000 6,932,747 February 1, 2024 - February 29, 2024 52,195 10.14 52,195 6,404,704 March 1, 2024 - March 28, 2024 67,494 11.84 67,494 5,607,039 April 1, 2024 - April 30, 2024 52,812 13.83 52,812 4,877,655 May 1, 2024 - May 31, 2024 39,994 13.37 39,994 4,343,681 June 3, 2024 - June 28, 2024 22,652 12.80 22,652 4,054,292 July 1, 2024 - July 31, 2024 24,936 13.73 24,936 3,712,310 August 1, 2024 - August 30, 2024 47,682 15.52 47,682 2,973,466 September 3, 2024 - September 30, 2024 41,340 15.53 41,340 2,332,294 October 1, 2024 - October 31, 2024 47,846 15.51 47,846 1,591,322 November 1, 2024 - November 29, 2024 59,354 16.44 59,354 5,616,804 December 2, 2024 - December 31, 2024 48,013 17.05 48,013 4,799,117 (Back to Index) 42 (Back to Index) (1) The average price paid per share as reflected above includes broker fees and commissions.
Biggest changeThe following table presents information about our common stock repurchases made during the year ended December 31, 2025 in accordance with our repurchase program (dollars in thousands, except per share amounts): Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs January 2, 2025 - January 31, 2025 44,306 $ 17.38 44,306 $ 4,030 February 3, 2025 - February 28, 2025 72,858 19.31 72,858 2,624 March 3, 2025 - March 31, 2025 103,024 21.35 103,024 426 April 1, 2025 - April 30, 2025 19,622 21.70 19,622 - May 1, 2025 - May 30, 2025 111,192 18.88 111,192 7,903 June 2, 2025 - June 30, 2025 140,747 18.10 140,747 5,359 July 1, 2025 - July 31, 2025 106,874 18.10 106,874 3,427 August 1, 2025 - August 29, 2025 6,290 20.79 6,290 3,296 September 2, 2025 - September 30, 2025 39,930 21.10 39,930 2,454 October 1, 2025 - October 31, 2025 88,359 20.23 88,359 8,169 November 3, 2025 - November 28, 2025 404,281 20.20 404,281 12 December 1, 2025 - December 31, 2025 450 23.97 450 - (1) The average price paid per share as reflected above includes broker fees and commissions.
NOL can generally be carried forward to offset both ordinary taxable income and capital gains in future years. The Tax Cuts and Jobs Act (“TCJA”) along with revisions made by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act reduced the deduction for NOLs to 80% of taxable income and granted an indefinite carryforward period.
NOLs can generally be carried forward to offset both ordinary taxable income and capital gains in future years. The Tax Cuts and Jobs Act (“TCJA”) along with revisions made by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act reduced the deduction for NOLs to 80% of taxable income and granted an indefinite carryforward period.
Our 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, or Series C Preferred Stock, is listed on the NYSE and trades under the symbol “ACRPrC.” We have declared and paid dividends through January 2025. No dividends are currently in arrears on the Series C Preferred Stock.
Our 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, or Series C Preferred Stock, is listed on the NYSE and trades under the symbol “ACRPrC.” We have declared and paid dividends through January 2026. No dividends are currently in arrears on the Series C Preferred Stock.
The graph and table assume that $100 was invested in each of our common stock, the Russell 2000 Index and the FTSE NAREIT All REIT Index on December 31, 2019, and that all dividends were reinvested. This data is furnished by the Research Data Group.
The graph and table assume that $100 was invested in each of our common stock, the Russell 2000 Index and the FTSE NAREIT All REIT Index on December 31, 2020, and that all dividends were reinvested. This data is furnished by the Research Data Group.
We have declared and paid dividends through January 2025. No dividends are currently in arrears on the Series D Preferred Stock. Issuer Purchases of Equity Securities In March 2016, our Board approved a securities repurchase program.
We have declared and paid dividends through January 2026. No dividends are currently in arrears on the Series D Preferred Stock. Issuer Purchases of Equity Securities In March 2016, our Board approved a securities repurchase program.
The following table summarizes our current and estimated tax loss carryforwards (dollars in millions): Tax Year Recognized REIT (QRS) Tax Loss Carryforwards TRS Tax Loss Carryforwards Tax Asset Item Operating Capital Operating Capital Net Operating Loss Carryforwards: Cumulative as of 2023 2023 Return $ 32.1 $ — $ 60.9 $ — Net Capital Loss Carryforwards: Cumulative as of 2023 2023 Return — 121.9 — 1.0 Total tax asset estimates $ 32.1 $ 121.9 $ 60.9 $ 1.0 Useful life Unlimited 5 years Various 5 years At December 31, 2024, we had $32.1 million of cumulative NOL to carry forward to future years.
The following table summarizes our current and estimated tax loss carryforwards (dollars in millions): Tax Year Recognized REIT (QRS) Tax Loss Carryforwards TRS Tax Loss Carryforwards Tax Asset Item Operating Capital Operating Capital Net Operating Loss Carryforwards: Cumulative as of 2024 2024 Return $ 32.1 $ — $ 62.0 $ — Net Capital Loss Carryforwards: Cumulative as of 2024 2024 Return — 115.9 — 20.8 Total tax asset estimates $ 32.1 $ 115.9 $ 62.0 $ 20.8 Useful life Unlimited 5 years Various 5 years At December 31, 2025, we had $32.1 million of cumulative NOL to carry forward to future years.
Manager Incentive Plan at December 31, 2024: (a) (b) (c) Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans Excluding Securities Reflected in Column (a) Equity compensation approved by security holders: Restricted stock (1) 574,538 N/A Equity compensation plans not approved by security holders N/A N/A Total 574,538 700,822 (1) All restricted stock awards consist of unvested shares.
Manager Incentive Plan at December 31, 2025: (a) (b) (c) Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans Excluding Securities Reflected in Column (a) Equity compensation approved by security holders: Restricted stock (1) 328,586 N/A Equity compensation plans not approved by security holders N/A N/A Total 328,586 700,822 (Back to Index) 40 (Back to Index) (1) All restricted stock awards consist of unvested shares.
In November 2021, our Board authorized and approved the continued use of our existing share repurchase program to repurchase an additional $20.0 million of our outstanding common stock. In November 2023, our Board authorized and approved the repurchase of an additional $10.0 million of outstanding shares of both common and preferred stock.
In November 2021, our Board authorized and approved the continued use of our existing share repurchase program to repurchase an additional $20.0 million of our outstanding common stock. From November 2023 through October 2025, our Board authorized and approved the repurchase of an additional $32.5 million of outstanding shares of both common and preferred stock.
Additionally, we have cumulative total net capital losses of $121.9 million, which are set to expire on December 31, 2025. We also have tax assets in our taxable REIT subsidiaries (“TRS”). These tax assets are analyzed and disclosed quarterly in our financial statements.
Additionally, we have cumulative total net capital losses of $115.9 million, which expired on December 31, 2025, if not utilized on our tax return to be filed in October 2026. We also have tax assets in our taxable REIT subsidiaries (“TRS”). These tax assets are analyzed and disclosed quarterly in our financial statements.
(Back to Index) 41 (Back to Index) The following table summarizes certain information about our 2005 Stock Incentive Plan, Third Amended and Restated Omnibus Equity Compensation Plan and ACRES Commercial Realty Corp.
Such information was obtained through our registrar and transfer agent. The following table summarizes certain information about our 2005 Stock Incentive Plan, Third Amended and Restated Omnibus Equity Compensation Plan and ACRES Commercial Realty Corp.
(2) These repurchases pertain to our Series D Cumulative Preferred Stock. All other repurchases listed pertain to our common stock. Performance Graph The following line graph presentation compares cumulative total shareholder returns on our common stock with the Russell 2000 Index and the FTSE NAREIT All REIT Index for the period from December 31, 2019 to December 31, 2024.
(Back to Index) 41 (Back to Index) Performance Graph The following line graph presentation compares cumulative total shareholder returns on our common stock with the Russell 2000 Index and the FTSE NAREIT All REIT Index for the period from December 31, 2020 to December 31, 2025.
We are organized and conduct our operations to qualify as a real estate investment trust (“REIT”) which requires that we distribute at least 90% of our REIT taxable income.
We are organized and conduct our operations to qualify as a real estate investment trust (“REIT”) which requires that we distribute at least 90% of our REIT taxable income. During the year ended December 31, 2025, all taxable income was distributed to our preferred shareholders, and therefore, no common share distribution was required.
The 180 holders of record include Cede & Co., which holds shares as nominee for The Depository Trust Company, which itself holds shares on behalf of the beneficial owners of our common stock. Such information was obtained through our registrar and transfer agent.
At March 6, 2026, there were 7,131,101 shares of common stock outstanding held by 180 holders of record. The 180 holders of record include Cede & Co., which holds shares as nominee for The Depository Trust Company, which itself holds shares on behalf of the beneficial owners of our common stock.
At December 31, 2024, our TRS had $60.9 million of NOLs comprising: $39.8 million of pre-TCJA NOLs, some of which are set to expire beginning in 2044 and $21.1 million of NOLs with an indefinite carryforward period. At March 13, 2025, there were 7,456,150 shares of common stock outstanding held by 180 holders of record.
At December 31, 2025, our TRS had $62.0 million of NOLs comprising: $39.8 million of pre-TCJA NOLs, some of which are set to expire beginning in 2044 and $22.2 million of NOLs with an indefinite carryforward period. We also have $20.8 million of CLCFs from prior years, which are set to expire on December 31, 2029.
As we continue to take steps necessary to stabilize our earnings available for distribution ("EAD"), our board of directors, (our "Board"), will establish a plan for the prudent resumption of the payment of common share distributions.
Our board of directors, (our "Board"), is responsible for the establishment and evaluation of a plan for the prudent resumption of the payment of common share distributions.
Removed
As a result of losses incurred during the year ended December 31, 2020 in connection with the economic impact of the novel coronavirus (“COVID-19”) pandemic, we have significant net operating loss (“NOL”) carryforwards. NOLs are able to offset future taxable income, limiting the requirement for common share distributions.
Added
In December 2025, the authorized amount was fully utilized.
Removed
We also recognized net capital loss carryforwards as finalized in our 2020 tax return. During the year ended December 31, 2024, all taxable income was distributed to our preferred shareholders, and therefore, no common share distribution was required.
Removed
In December 2024, our Board authorized and approved the repurchase of an additional $5.0 million of outstanding shares of both common and preferred stock. At December 31, 2024, $4.8 million remains available under this repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(Back to Index) 68 (Back to Index) The following table provides a reconciliation from GAAP net (loss) income allocable to common shares to EAD allocable to common shares for the periods presented (dollars in thousands, except per share amounts): For the Year Ended December 31, 2024 Per Share Data 2023 Per Share Data Net income allocable to common shares - GAAP $ 9,123 $ 1.15 $ 2,968 0.35 Gain on sale of real estate (7,506 ) (0.95 ) (745 ) (0.09 ) Net income allocable to common shares - GAAP, adjusted $ 1,617 $ 0.20 $ 2,223 $ 0.26 Reconciling Items from Continuing Operations: Non-cash equity compensation expense 2,957 0.37 2,578 0.30 Non-cash provision for CRE credit losses 4,790 0.60 10,902 1.27 Gain on sale of real estate 5,261 0.66 745 0.09 Unrealized gain on core activities (8,637 ) (1.09 ) — — Real estate depreciation and amortization 6,056 0.77 4,013 0.47 Net income from non-core assets (1) (1,103 ) (0.13 ) 104 0.01 Earnings Available for Distribution allocable to common shares $ 10,941 $ 1.38 $ 20,565 $ 2.40 Weighted average common shares - diluted on Earnings Available for Distribution allocable to common shares 7,925 8,566 Earnings Available for Distribution per common share - diluted $ 1.38 $ 2.40 (1) Non-core assets are investments and securities owned by us at the initial measurement date in (i) commercial finance, (ii) residential mortgage lending, (iii) legacy CRE loans designated as held for sale and (iv) other non-CRE assets included in assets held for sale.
Biggest changeThe following table provides a reconciliation from GAAP net (loss) income allocable to common shares to EAD allocable to common shares for the periods presented (in thousands, except per share data): For the Year Ended December 31, 2025 Per Share Data 2024 Per Share Data Net income allocable to common shares - GAAP $ 239 $ 0.03 $ 9,123 $ 1.15 Adjustment for gain on sale of investment in real estate (1) (8,010 ) (1.12 ) (7,506 ) (0.95 ) Net income (loss) allocable to common shares - GAAP, adjusted $ (7,771 ) $ (1.09 ) $ 1,617 $ 0.20 Reconciling Items from Continuing Operations: Non-cash equity compensation expense 2,147 0.30 2,957 0.37 Non-cash (reversal of) provision for CRE loan losses (6,443 ) (0.90 ) 4,790 0.60 Realized net gain on core activities (1) 5,412 0.76 5,261 0.66 Unrealized gain on core activities — — (8,637 ) (1.09 ) Real estate depreciation and amortization 4,786 0.67 6,056 0.77 Net income from non-core assets (2) — — (1,103 ) (0.13 ) Earnings (Loss) Available for Distribution allocable to common shares $ (1,869 ) $ (0.26 ) $ 10,941 $ 1.38 Weighted average common shares - diluted on Earnings Available for Distribution allocable to common shares 7,129 7,925 Earnings (Loss) Available for Distribution per common share - diluted $ (0.26 ) $ 1.38 (1) Amount presented is net of the amount allocable to the non-controlling interest.
While the CRE whole loans included in the CRE loan portfolio are substantially composed of floating-rate loans benchmarked to the one-month Term Secured Overnight Financing Rate ("SOFR"), asset yields are protected through the use of benchmark floors and minimum interest periods that typically range from 12 to 18 months at the time of a loan’s origination.
While the CRE whole loans included in the CRE loan portfolio are substantially composed of floating-rate loans benchmarked to the one-month Term Secured Overnight Financing Rate ("Term SOFR"), asset yields are protected through the use of benchmark floors and minimum interest periods that typically range from 12 to 18 months at the time of a loan’s origination.
During the year ended December 31, 2024, we recorded a net provision for credit losses primarily driven by a general worsening macroeconomic factors over the year as well as an increase in modeled credit risk in our portfolio offset by loan payoffs. We also recorded a charge-off of $700,000 for one CRE whole loan held for sale.
During the year ended December 31, 2024, we recorded a net provision for credit losses primarily driven by a general worsening of macroeconomic factors over the year as well as an increase in modeled credit risk in our portfolio offset by loan payoffs. We also recorded a charge-off of $700,000 for one CRE whole loan held for sale.
In connection with the financing, we repaid (i) all of the outstanding senior notes at the ACR 2021-FL1 and ACR 2021-FL2 securitizations, (ii) all of the outstanding borrowings on the existing JPMorgan Chase facility and (iii) one borrowing from the Morgan Stanley facility, from the proceeds of the new financing facility.
In connection with the financing, from the proceeds of the new financing facility we repaid (i) all of the outstanding senior notes at the ACR 2021-FL1 and ACR 2021-FL2 securitizations, (ii) all of the outstanding borrowings on the existing JPMorgan Chase facility and (iii) one borrowing from the Morgan Stanley facility.
The Indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) non-payment of principal or interest, (ii) breach of certain covenants contained in the Indenture or the 5.75% Senior Unsecured Notes, (iii) an event of default or acceleration of certain other indebtedness of ours or a subsidiary in which we have invested at least $75 million in capital within the applicable grace period and (iv) certain events of bankruptcy or insolvency.
The Indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) non-payment of principal or interest, (ii) breach of certain covenants contained in the Indenture or the 5.75% Senior Unsecured Notes, (iii) an event of default or acceleration of certain other indebtedness of ours or a subsidiary in which we have invested at least $75.0 million in capital within the applicable grace period and (iv) certain events of bankruptcy or insolvency.
On or after May 15, 2026, we may at our option redeem the 5.75% Senior Unsecured Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the 5.75% Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.
On or after May 15, 2026, we may at our option redeem the 5.75% Senior Unsecured Notes, at any time, in whole or in part, on not less than 15 days nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the 5.75% Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.
These factors, coupled with inflation, historically higher interest rates and dislocations in market liquidity, have converged to create higher levels of uncertainty surrounding property values, which in turn, also negatively impact borrowers' ability and willingness to financially support and standby their investments in their office properties, their abilities to sell or refinance their positions in the current market and ultimately our financial results.
These factors, coupled with inflation, higher interest rates and dislocations in market liquidity, have converged to create higher levels of uncertainty surrounding property values, which in turn, also negatively impact borrowers' ability and willingness to financially support and standby their investments in their office properties, their abilities to sell or refinance their positions in the current market and ultimately our financial results.
All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Historically, mezzanine loans and preferred equity investments may have experienced greater credit risks due to their nature as subordinated investments.
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 have experienced greater credit risks due to their nature as subordinated investments.
Each loan series will have a final maturity of five years from the end of the issuance date for the loan series unless an additional time is mutually agreed upon by Lenders and Borrower. The advance rate on portfolio assets will be mutually agreed upon by Lenders and Borrower.
Each loan series will have a final maturity of five years from the issuance date for the loan series unless an additional time is mutually agreed upon by the Lenders and Borrower. The advance rate on portfolio assets will be mutually agreed upon by the Lenders and Borrower.
With respect to each fiscal quarter commencing with the quarter ended December 31, 2022, an incentive management fee calculated and payable in arrears in an amount, not less than zero, equal to: (i) for the first full calendar quarter ended December 31, 2022 , the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for such calendar quarter, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) as of the end of such calendar quarter, and (B) 7% per annum; (ii) for each of the second, third and fourth full calendar quarters following the calendar quarter ended December 31, 2022 , the excess of (1) the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for the calendar quarter(s) following September 30, 2022, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the calendar quarter(s) following September 30, 2022, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the prior calendar quarter(s) following September 30, 2022 (other than the most recent calendar quarter); and (Back to Index) 69 (Back to Index) (iii) for each calendar quarter thereafter , the excess of (1) the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for the previous 12-month period, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the previous 12-month period, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive compensation shall be payable with respect to any calendar quarter unless EAD (as defined in the Management Agreement) for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters from September 30, 2022) in the aggregate is greater than zero.
Incentive Compensation Hurdle With respect to each fiscal quarter commencing with the quarter ended December 31, 2022, an incentive management fee calculated and payable in arrears in an amount, not less than zero, equal to: (i) for the first full calendar quarter ended December 31, 2022 , the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for such calendar quarter, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) as of the end of such calendar quarter, and (B) 7% per annum; (ii) for each of the second, third and fourth full calendar quarters following the calendar quarter ended December 31, 2022 , the excess of (1) the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for the calendar quarter(s) following September 30, 2022, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the calendar quarter(s) following September 30, 2022, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the prior calendar quarter(s) following September 30, 2022 (other than the most recent calendar quarter); and (iii) for each calendar quarter thereafter , the excess of (1) the product of (a) 20% and (b) the excess of (i) our EAD (as defined in the Management Agreement) for the previous 12-month period, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the previous 12-month period, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive compensation shall be payable with respect to any calendar quarter unless EAD (as defined in the Management Agreement) for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters from September 30, 2022) in the aggregate is greater than zero.
For the year ended December 31, 2024, there was no incentive compensation payable to the Manager. Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repay borrowings and provide for other general business needs, including payment of our base management fee and incentive compensation.
For the year ended December 31, 2025, there was no incentive compensation payable to the Manager. Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repay borrowings and provide for other general business needs, including payment of our base management fee and incentive compensation.
Mortgages payable: We have entered into a loan agreement to finance the acquisition of a student housing complex. This loan is interest only and has a maximum principal balance, most of which was advanced in the initial funding. The loan agreement contains events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement.
Mortgage payable: We have entered into a loan agreement to finance the acquisition of a student housing complex. This loan is interest only and has a maximum principal balance, most of which was advanced in the initial funding. The loan agreement contains events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement.
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 is interest only and has a maximum principal balance of $48.0 million.
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 has a maximum principal balance of $48.0 million.
Corporate Debt Unsecured Junior Subordinated Debentures During 2006, we 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 our consolidated financial statements because we are not deemed to be the primary beneficiary of these entities.
Unsecured Junior Subordinated Debentures During 2006, we 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 our consolidated financial statements because we are not deemed to be the primary beneficiary of these entities.
Securitizations of our portfolio investments might magnify our exposure to losses on those portfolio investments because the retained subordinate interest in any particular overall loan would be subordinate to the loan components sold and we would, therefore, absorb all losses sustained with respect to the overall loan before the owners of the senior notes experience any losses with respect to the loan in question. 4.
Securitizations of our portfolio investments might magnify our exposure to losses on those portfolio investments because the retained subordinate interest in any particular overall loan would be subordinate to the loan components sold and we would, therefore, absorb all losses sustained with respect to the overall loan before the owners of the senior notes experience any losses with respect to the loan in question. 5.
This guidance is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. We are in the process of evaluating the impact of this guidance, however, we do not expect a material impact to our consolidated financial statements.
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. We are in the process of evaluating the impact of this guidance, however, we do not expect a material impact to our consolidated financial statements.
The facility has a maximum portfolio LTV of 85% and contains customary events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. 2. Term Warehouse Financing Facilities (CRE loans): Term warehouse financing facilities effectively allow us to borrow against loans that we own.
The facility has a maximum portfolio LTV of 85% and contains customary events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. 3. CRE - Term Warehouse Financing Facilities: Term warehouse financing facilities effectively allow us to borrow against loans that we own.
In December 2022, Holdings, the Borrower and the Lenders entered into an Amended and Restated Loan and Servicing Agreement, which amends and restates the existing loan and servicing agreement, and reflects 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.
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 amends and restates the MassMutual Loan Agreement, and reflects 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.
During the term of these agreements, we receive the principal and interest on the related loans and pay interest to the counterparty. 3. Securitizations: We seek non-recourse long-term financing from securitizations of our investments in CRE loans. The securitizations generally involve a senior portion of our loan but may involve the entire loan.
During the term of these agreements, we receive the principal and interest on the related loans and pay interest to the counterparty. 4. Securitizations: We seek non-recourse long-term financing from securitizations of our investments in CRE loans. The securitizations generally involve a senior portion of our loan but may involve the entire loan.
Each loan series will be available for three 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 is subject to immediate termination upon the occurrence of an event of default.
Each loan series will be available for three months after the closing date agreed upon by the Borrower and Lenders (“Commitment Period”), subject to the maximum dollar amount agreed upon for that series. The Commitment Period is subject to immediate termination upon the occurrence of an event of default.
On March 13, 2025, we amended and restated our loan to ACRES Capital Corp. to: (i) be issued by ACRES Holdings, LLC, (ii) provide for a six month option for ACRES Capital Corp. to draw an additional balance of $7.0 million, and (iii) if such option is exercised, (a) to extend the maturity to July 31, 2031, (b) increase the interest rate to 5% and (c) increase the monthly amortization to $50,000.
In March 2025, we amended and restated our loan to ACRES Capital Corp. to: (i) be issued by ACRES Holdings, LLC, (ii) provide for a six month option for ACRES Holdings, LLC to draw an additional balance of $7.0 million, and (iii) if such option is exercised, (a) to extend the maturity to July 31, 2031, (b) increase the interest rate to 5% and (c) increase the monthly amortization to $50,000.
(2) Calculated as book value equity at December 31, 2024 multiplied by 1.75% (7% per annum). (3) The amount by which EAD (as defined in the Management Agreement) exceeds the Incentive Compensation Hurdle is multiplied by 20% to arrive at incentive compensation for the quarter.
(2) Calculated as book value equity at December 31, 2025 multiplied by 1.75% (7% per annum). (3) The amount by which EAD (as defined in the Management Agreement) exceeds the Incentive Compensation Hurdle is multiplied by 20% to arrive at incentive compensation for the quarter.
The following charts shows our portfolio allocation by property type at December 31, 2024 and 2023: From time to time, we may acquire real estate property through direct equity investments or as a result of our lending activities.
The following charts shows our portfolio allocation by property type at December 31, 2025 and 2024: From time to time, we may acquire real estate property through direct equity investments or as a result of our lending activities.
The Indenture contains restrictive covenants that, among other things, require us to maintain certain financial ratios. The foregoing limitations are subject to exceptions as set forth in the Supplemental Indenture. At December 31, 2024, we were in compliance with these covenants.
The Indenture contains restrictive covenants that, among other things, require us to maintain certain financial ratios. The foregoing limitations are subject to exceptions as set forth in the Supplemental Indenture. At December 31, 2025, we were in compliance with these covenants.
We move to cash basis operating lease income recognition in the period in which collectability of all lease payments is no longer considered probable. At such time, any uncollectible receivable balance will be written off. Hospitality operating revenue consists of amounts derived from hotel operations, including room sales and other hotel revenues.
We move to cash basis operating lease income recognition in the period in which collectability of all lease payments is no longer considered probable. At such time, any uncollectible receivable balance will be written off. (Back to Index) 76 (Back to Index) Hospitality operating revenue consists of amounts derived from hotel operations, including room sales and other hotel revenues.
You are encouraged to reference the discussion and analysis of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2023 in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" within that report.
You are encouraged to reference the discussion and analysis of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2024 in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" within that report.
Overview We are a Maryland corporation and an externally managed REIT that is primarily focused on originating, holding and managing commercial real estate ("CRE") mortgage loans and equity investments in commercial real estate properties through direct ownership and joint ventures. Our manager is ACRES Capital, LLC (our “Manager”), a subsidiary of ACRES Capital Corp.
Overview We are a Maryland corporation and an externally-managed real estate investment trust ("REIT") that is primarily focused on originating, holding and managing commercial real estate ("CRE") mortgage loans and equity investments in commercial real estate properties through direct ownership and joint ventures. Our manager is ACRES Capital, LLC (our "Manager"), a subsidiary of ACRES Capital Corp.
See "Interest Rate Risk" in "Item 7A: Quantitative and Qualitative Disclosures About Market Risk." (Back to Index) 45 (Back to Index) Our portfolio comprises loans with a diverse array of collateral types and locations.
See "Interest Rate Risk" in "Item 7A: Quantitative and Qualitative Disclosures About Market Risk." (Back to Index) 44 (Back to Index) Our portfolio comprises loans with a diverse array of collateral types and locations.
Additionally, the office property market continues to experience high vacancies, slower leasing activity and current tenants reevaluating their needs for physical office space due to remote-work trends across the country.
Furthermore, the office property market continues to experience high vacancies, slower leasing activity and current tenants reevaluating their needs for physical office space due to remote-work trends across the country.
EAD is a non-GAAP financial measure intended to supplement our financial results computed in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and we believe EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends.
Earnings Available for Distribution Earnings Available for Distribution ("EAD") is a non-GAAP financial measure intended to supplement our financial results computed in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and we believe EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends.
(collectively, “ACRES”), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial properties in top United States (“U.S.”) markets. Our Manager draws upon the management team of ACRES and its collective investment experience to provide its services.
(collectively, "ACRES"), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial properties in top United States ("U.S.") markets. Our Manager draws upon the management team of ACRES and its collective investment experience to provide its services.
(Back to Index) 75 (Back to Index) Allowance for Credit Losses We maintain an allowance for credit loss on our loans held for investment. CRE loans that are held for investment are carried at cost, net of unamortized acquisition premiums or discounts, loan fees and origination costs as applicable.
(Back to Index) 74 (Back to Index) Allowance for Credit Losses We maintain an allowance for credit losses on our loans held for investment. CRE loans that are held for investment are carried at cost, net of unamortized acquisition premiums or discounts, loan fees and origination costs as applicable.
The following charts show our portfolio allocation by property type at December 31, 2024 and 2023: (Back to Index) 46 (Back to Index) Our properties are located throughout the U.S., with one and two National Council of Real Estate Investment Fiduciaries (“NCREIF”) regions, the Southwest at December 31, 2024 and Southwest and Southeast at December 31, 2023, in excess of 20% of the total portfolio carrying value.
The following charts show our portfolio allocation at carrying value by property type at December 31, 2025 and 2024: (Back to Index) 45 (Back to Index) Our properties are located throughout the U.S., with two and one National Council of Real Estate Investment Fiduciaries (“NCREIF”) regions, the Southwest and Southeast at December 31, 2025 and Southwest at December 31, 2024, in excess of 20% of the total portfolio carrying value.
Net Interest Income The following table analyzes the change in interest income and interest expense for the comparative years ended December 31, 2024 and 2023 by changes in volume and changes in rates.
Net Interest Income The following table analyzes the change in interest income and interest expense for the comparative years ended December 31, 2025 and 2024 by changes in volume and changes in rates.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report as that disclosure is included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission ("SEC") on March 7, 2024.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report as that disclosure is included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC") on March 17, 2025.
(Back to Index) 61 (Back to Index) Senior Secured Financing Facility On July 31, 2020, our indirect, wholly owned subsidiary ("Holdings"), along with its direct wholly owned subsidiary (the "Borrower"), entered into a $250.0 million Loan and Servicing Agreement (the “MassMutual Loan Agreement”) with Massachusetts Mutual Life Insurance Company ("MassMutual") and the other lenders party thereto (the "Lenders").
Senior Secured Financing Facility On July 31, 2020, our indirect, wholly owned subsidiary ("Holdings"), along with its direct wholly owned subsidiary (the "Borrower"), entered into a $250.0 million Loan and Servicing Agreement (the “MassMutual Loan Agreement”) with Massachusetts Mutual Life Insurance Company ("MassMutual") and the other lenders party thereto (the "Lenders").
(Back to Index) 56 (Back to Index) 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.
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.
The following table presents the effect of derivative instruments on our consolidated statements of operations for the years presented (in thousands): Realized and Unrealized Gain (Loss) (1) Consolidated Statements of Operations Location Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022 Interest rate swap contracts, hedging Interest expense $ (1,598 ) $ (1,593 ) $ (1,733 ) (1) Negative values indicate a decrease to the associated consolidated statements of operations line items.
The following table presents the effect of derivative instruments on our consolidated statements of operations for the years presented (in thousands): Realized and Unrealized Gain (Loss) (1) Consolidated Statements of Operations Location Year Ended December 31, 2025 Year Ended December 31, 2024 Year Ended December 31, 2023 Interest rate swap contracts, hedging Interest expense $ (1,600 ) $ (1,598 ) $ (1,593 ) (1) Negative values indicate a decrease to the associated consolidated statement of operations line items.
During the year ended December 31, 2024, we entered into the following three loan modifications that required disclosure: • A multifamily loan with an amortized cost of $53.1 million, representing 3.6% of the total amortized cost of the portfolio, was modified to: (i) extend its maturity from June 2025 to June 2026, (ii) reduce its current pay interest rate from one-month Term SOFR plus a spread of 3.70% to one-month Term SOFR plus a spread of 1.70%, and (iii) defer interest of 2.00% that will be due at maturity.
During the year ended December 31, 2024, we entered into the following three loan modifications that required disclosure: • A multifamily whole loan with an amortized cost of $54.9 million, representing 3.0% of the total amortized cost of the portfolio, was modified to: (i) extend its maturity from June 2025 to June 2026, (ii) reduce its current pay interest rate from one-month Term SOFR plus a spread of 3.70% to one-month Term SOFR plus a spread of 1.70%, and (iii) defer interest of 2.00% that will be due at payoff.
Deferred Tax Assets At both December 31, 2024 and 2023, our net deferred tax asset was zero, resulting from a full valuation allowance of $20.6 million and $21.1 million, respectively, on our gross deferred tax asset as we believed it was more likely than not that some or all of the deferred tax assets would not be realized.
Deferred Tax Assets At both December 31, 2025 and 2024, our net deferred tax asset was zero, resulting from a full valuation allowance of $20.3 million and $20.6 million, respectively, on our gross deferred tax assets as we believed it was more likely than not that some or all of the deferred tax assets would not be realized.
(4) We calculated common stock book value as total stockholders’ equity of $439.1 million less preferred stock equity of $224.0 million at December 31, 2024. Management Agreement Equity Our monthly base management fee, as defined in our Management Agreement, is equal to 1/12th of the amount of our equity multiplied by 1.50% and is calculated and paid monthly in arrears.
(4) We calculated common stock book value as total stockholders’ equity of $420.8 million less preferred stock equity of $224.0 million at December 31, 2025. Management Agreement Equity Our monthly base management fee, as defined in our Management Agreement, is equal to 1/12th of the amount of our equity multiplied by 1.50% and is calculated and paid monthly in arrears.
These loans are typically secured by first liens on CRE property, including the following property types: multifamily, student housing, hospitality, office, self-storage and retail. All but two of our CRE whole loans were current on contractual payments at December 31, 2024. • Mezzanine debt that is senior to borrower’s equity but is subordinated to other third-party debt.
These loans are typically secured by first liens on CRE property, including the following property types: multifamily, student housing, hospitality, office, self-storage, mixed-use and retail. All but three of our CRE whole loans were current on contractual payments at December 31, 2025. • Mezzanine debt that is senior to borrower’s equity but is subordinated to other third-party debt.
The loan agreement 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.
The 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.
Mortgages Payable In April 2022, Chapel Drive West, LLC, a wholly owned subsidiary of Charles Street – ACRES FSU Student Venture, LLC (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.
Mortgage Payable In April 2022, Chapel Drive West, LLC, a wholly owned subsidiary of CS – ACRES FSU Student Venture, LLC (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.
Our investments in unconsolidated entities at December 31, 2024 and 2023 comprised a 100% interest in the common shares of Resource Capital Trust I ("RCT I") and RCC Trust II ("RCT II"), respectively, with a value of $1.5 million in the aggregate, or 3.0% of each trust, our investment in 65 E.
Our investments in unconsolidated entities at December 31, 2025 comprised a 100% interest in the common shares of Resource Capital Trust I ("RCT I") and RCC Trust II ("RCT II"), with a carrying value of $1.5 million in the aggregate, or 3.0% of each trust, our investment in 65 E.
If our variable interest possesses both of these characteristics, we are deemed to be the primary beneficiary and would be required to consolidate the VIE. This assessment must be done on an ongoing basis. At December 31, 2024, we determined that we are the primary beneficiary of two VIEs that are consolidated.
If our variable interest possesses both of these characteristics, we are deemed to be the primary beneficiary and would be required to consolidate the VIE. This assessment must be done on an ongoing basis. At December 31, 2025, we determined that there are no VIEs to be consolidated.
The Construction Loan charges one-month Term SOFR plus a spread of 6.00%. In February 2025, the Construction Loan was amended to bifurcate the first one-year extension option into two separate extension options and periods: a seven month extension period ending September 2025 and a five month extension ending February 2026.
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 first one-year extension option into two separate extension options and periods: a seven month extension period ended September 2025 and a five month extension ending February 2026. The Construction Loan had a maturity of September 2025.
At December 31, 2024, we had unfunded commitments on 26 CRE whole loans. (8) Base management fees presented are based on an estimate of base management fees payable to our Manager over the next 12 months. Our Management Agreement also provides for an incentive compensation arrangement that is based on operating performance.
At December 31, 2025, we had unfunded commitments on 29 CRE whole loans. (9) Base management fees presented are based on an estimate of base management fees payable to our Manager over the next 12 months. Our Management Agreement also provides for an incentive compensation arrangement that is based on operating performance.
Payment is due at the time that goods or services are rendered or billed. (Back to Index) 77 (Back to Index) Variable Interest Entities We consolidate entities that are VIEs where we have determined that we are the primary beneficiary of such entities.
Payment is due at the time that goods or services are rendered or billed. Variable Interest Entities We consolidate entities that are VIEs where we have determined that we are the primary beneficiary of such entities.
Senior Unsecured Notes 5.75% Senior Unsecured Notes Due 2026 On August 16, 2021, we issued $150.0 million of our 5.75% Senior Unsecured Notes pursuant to our Indenture, dated August 16, 2021 (the “Base Indenture”), between Wells Fargo, now Computershare Trust Company, N.A.
Corporate Debt 5.75% Senior Unsecured Notes Due 2026 On August 16, 2021, we issued $150.0 million of our 5.75% senior unsecured notes due 2026 (the "5.75% Senior Unsecured Notes") pursuant to our Indenture, dated August 16, 2021 (the "Base Indenture"), between Wells Fargo, now Computershare Trust Company, N.A.
(Back to Index) 74 (Back to Index) Off-Balance Sheet Arrangements General At December 31, 2024, we did not maintain any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements or contractually narrow or limited purposes, although we do have interests in unconsolidated entities not established for those purposes.
Off-Balance Sheet Arrangements General At December 31, 2025, we did not maintain any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements or contractually narrow or limited purposes, although we do have interests in unconsolidated entities that were not established for those purposes.
NOL can generally be carried forward to offset both ordinary taxable income and capital gains in future years. The Tax Cuts and Jobs Act (“TCJA”) along with revisions made by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act reduced the deduction for NOLs to 80% of taxable income and granted an indefinite carryforward period.
NOL can generally be carried forward to offset both ordinary taxable income and capital gains in future years. The Tax Cuts and Jobs Act ("TCJA") along with revisions made by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act reduced the deduction for NOLs generated post 2017 to 80% of taxable income and granted an indefinite carryforward period.
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 the loans with the lowest credit quality.
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 the loans with the lowest credit quality. Loans are typically rated a 2 at origination.
(2) Principal outstanding excludes accrued interest payable of $435,000 and $539,000 and deferred debt issuance costs of $1.5 million and $2.3 million at December 31, 2024 and 2023, respectively.
(2) Principal outstanding excludes deferred debt issuance costs of $1.5 million and $2.2 million at December 31, 2025 and 2024, respectively. (3) Principal outstanding excludes accrued interest payable of $435,000 at December 31, 2024 and deferred debt issuance costs of $898,000 and $1.5 million at December 31, 2025 and 2024, respectively.
Our investments in unconsolidated entities at December 31, 2023 solely comprised our investments in RCT I and RCT II. We record our investments in RCT I’s and RCT II’s common shares as investments in unconsolidated entities using the cost method. We record our investment in the Wacker JV and the McCallum JV as equity method investments.
Our investments in unconsolidated entities at December 31, 2024 comprised our investments in RCT I and RCT II, Wacker JV and the McCallum JV. We record our investments in RCT I’s and RCT II’s common shares as investments in unconsolidated entities using the cost method.
We determine our allowance for credit losses, consistent with GAAP, by measuring CECL on the loan portfolio on a quarterly basis.
Effective January 1, 2020, we determine our allowance for credit losses, consistent with GAAP, by measuring CECL on the loan portfolio on a quarterly basis.
Our ability to meet our on-going liquidity needs is subject to our ability to generate cash from operating activities, which was $19.4 million for the year ended December 31, 2024, and our ability to maintain and/or obtain additional debt financing and equity capital together with the funds referred to below.
Our ability to meet our on-going liquidity needs is subject to our ability to generate cash from operating activities, which was a net source of $4.1 million for the year ended December 31, 2025, and our ability to maintain and/or obtain additional debt financing and equity capital together with the funds referred to below.
At December 31, 2024 and 2023, we had losses of $3.3 million and $5.0 million, respectively, recorded in accumulated other comprehensive loss, which will be amortized into earnings over the remaining life of the debt.
At December 31, 2025 and 2024, we had losses of $1.6 million and $3.3 million, respectively, recorded in accumulated other comprehensive loss, which will be amortized into earnings over the remaining life of the debt.
Net Operating Losses and Loss Carryforwards The following table sets forth the net operating losses and loss carryforwards for the periods presented (in millions): Tax Year Recognized REIT (QRS) Tax Loss Carryforwards TRS Tax Loss Carryforwards Tax Asset Item Operating Capital Operating Capital Net Operating Loss Carryforwards: Cumulative as of 2023 2023 Return $ 32.1 $ — $ 60.9 $ — Net Capital Loss Carryforwards: Cumulative as of 2023 2023 Return — 121.9 — 1.0 Total tax asset estimates $ 32.1 $ 121.9 $ 60.9 $ 1.0 Useful life Unlimited 5 years Various 5 years At December 31, 2024, we had $32.1 million of cumulative net operating losses ("NOL") to carry forward to future years.
Net Operating Losses and Loss Carryforwards The following table sets forth the net operating losses and loss carryforwards for the periods presented (in millions): (Back to Index) 72 (Back to Index) Tax Year Recognized REIT (QRS) Tax Loss Carryforwards TRS Tax Loss Carryforwards Tax Asset Item Operating Capital Operating Capital Net Operating Loss Carryforwards: Cumulative as of 2024 2024 Return $ 32.1 $ — $ 62.0 $ — Net Capital Loss Carryforwards: Cumulative as of 2024 2024 Return — 115.9 — 20.8 Total tax asset estimates $ 32.1 $ 115.9 $ 62.0 $ 20.8 Useful life Unlimited 5 years Various 5 years At December 31, 2025, we had $32.1 million of cumulative net operating losses ("NOL") to carry forward to future years.
The increase of $8.6 million during the twelve months ended December 31, 2024, was primarily attributed to the completion of two foreclosures that generated non-recurring unrealized gains of $5.8 million, in the first quarter of 2024, and $2.8 million, in the third quarter of 2024, as the fair value of both properties exceeded the amortized cost basis of the loans at the time of foreclosure.
The decrease of $8.6 million for the comparative years ended December 31, 2025 and 2024 was primarily attributed to the completion of two foreclosures that generated non-recurring unrealized gains of $5.8 million, in the first quarter of 2024, and $2.8 million, in the third quarter of 2024, as the fair value of both properties exceeded the amortized cost basis of the loans at the time of foreclosure.
Investments in real estate and properties held for sale. At December 31, 2024, we held investments in seven real estate properties, three of which are included in investments in real estate and four of which are included in properties held for sale on the consolidated balance sheets.
At December 31, 2025, we held investments in six real estate properties, three of which are included in investments in real estate and three of which are included in properties held for sale on the consolidated balance sheets.
During the years ended December 31, 2024 and 2023, we recognized interest income of $472,000 and $437,000 on two CRE whole loans that were placed on nonaccrual status.
During the year ended December 31, 2024, we recognized interest income of $472,000 on two CRE whole loans that were placed on nonaccrual status.
Multifamily loans have historically had the lowest credit losses of any asset class, and our percentage allocation of our CRE loan portfolio to multifamily has grown from 58.4% at June 30, 2020 to 77.4% at December 31, 2024.
Multifamily loans have historically had the lowest credit losses of any asset class, and our percentage allocation of our CRE loan portfolio to multifamily at carrying value has grown from 58.4% at June 30, 2020 to 81.9% at December 31, 2025.
Results of Operations Our net income allocable to common shares for the year ended December 31, 2024 was $9.1 million, or $1.19 per share-basic ($1.15 per share-diluted), as compared to net income allocable to common shares of $3.0 million, or $0.35 per share-basic ($0.35 per share-diluted), for the year ended December 31, 2023.
Results of Operations Our net income allocable to common shares for the year ended December 31, 2025 was $239,000, or $0.03 per share-basic ($0.03 per share-diluted), as compared to net income allocable to common shares of $9.1 million, or $1.19 per share-basic ($1.15 per share-diluted), for the year ended December 31, 2024.
(Back to Index) 65 (Back to Index) There were no unamortized debt issuance costs associated with the junior subordinated debentures for RCT I and RCT II outstanding at December 31, 2024 and 2023. The interest rates for RCT I and RCT II, at December 31, 2024, were 8.54% and 8.80%, respectively.
(Back to Index) 65 (Back to Index) There were no unamortized debt issuance costs associated with the junior subordinated debentures for RCT I and RCT II outstanding at December 31, 2025 and 2024. The interest rates for RCT I and RCT II, at December 31, 2025, were 7.90% and 8.05%, respectively.
(“CTC”), as trustee (the “Trustee”), and us as supplemented by the First Supplemental Indenture, dated August 16, 2021, between Wells Fargo, now CTC, and us (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”).
("CTC"), as trustee (the "Trustee"), and us as supplemented by the First Supplemental Indenture, dated August 16, 2021, between Wells Fargo, now CTC, and us (the "Supplemental Indenture" and, together with the Base Indenture, the "Indenture").
The outstanding balance of our loan to ACRES Capital Corp., the parent of our Manager, was $10.7 million and $11.0 million at December 31, 2024 and 2023, respectively.
The outstanding balance of our loan to ACRES Capital Corp., the parent of our Manager, was $10.4 million and $10.7 million at December 31, 2025 and 2024, respectively.
Whole loans had $94.0 million and $109.4 million in unfunded loan commitments at December 31, 2024 and 2023, respectively. Unfunded commitments are not considered in the CECL reserve if they are unconditionally cancellable.
Whole loans had $88.6 million and $94.0 million in unfunded loan commitments at December 31, 2025 and 2024, respectively. Unfunded commitments are not considered in the CECL reserve if they are unconditionally cancellable.
The increase year over year is attributed to: (i) incremental increase in revenues from the acquisition of an office building through deed-in-lieu of foreclosure in June 2023, and asset acquisitions in the third quarter of 2024 of a multifamily property and an office property through foreclosures, (ii) increased revenues from a hotel property that had increased occupancy and rental rates for the comparative periods and (iii) an increase in revenue related to a student housing property that completed construction and became operational in August 2024.
The increase year over year is attributed to: (i) incremental increase in revenues from the asset acquisitions in the third quarter of 2024 of a multifamily property and an office property through foreclosures, (ii) increased revenues from a hotel property that had increased average daily rates for the comparative periods and (iii) an increase in revenue related to a student housing property that completed construction and became operational in August 2024.
Net Change in Interest Expense for the Comparative Years Ended December 31, 2024 and 2023: Aggregate interest expense decreased by $14.7 million for the comparative years ended December 31, 2024 and 2023. We attribute the change to the following: Securitized borrowings.
Net Change in Interest Expense for the Comparative Years Ended December 31, 2025 and 2024: Aggregate interest expense decreased by $30.2 million for the comparative years ended December 31, 2025 and 2024. We attribute the change to the following: Securitized borrowings.
(6) Includes net amortization expense of $1.6 million for each of the years ended December 31, 2024 and 2023 on 20 terminated interest rate swap agreements that were in net loss positions at the time of termination.
(4) Includes amortization expense of $717,000 and $674,000 for the years ended December 31, 2025 and 2024, respectively. (5) Includes net amortization expense of $1.6 million for each of the years ended December 31, 2025 and 2024 on 20 terminated interest rate swap agreements that were in net loss positions at the time of termination.
The remaining net losses, reported in accumulated other comprehensive loss on the consolidated balance sheets, will be amortized as an expense over the remaining life of the debt.
The remaining net losses, reported in accumulated other comprehensive loss on the consolidated balance sheets, will be accreted over the remaining life of the debt.
Also includes $3.2 million of construction in progress, which is also not depreciable until placed in service. (2) Primarily comprises a $18.6 million right of use asset, associated with an acquired ground lease of $43.9 million (see below) accounted for as an operating lease. Amortization is booked to real estate expenses on the consolidated statements of operations.
Also includes $3.7 million of construction in progress, which is also not depreciable until placed in service. (2) Primarily comprised of an $18.4 million right of use asset, associated with the 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.
Disbursement of funds pursuant to these commitments is subject to the borrower meeting pre-specified criteria. These commitments are subject to the same underwriting requirements and ongoing portfolio maintenance as are the on-balance sheet financial investments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.
These commitments are subject to the same underwriting requirements and ongoing portfolio maintenance as are the on-balance sheet financial investments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.
The increase of $8.0 million for the comparative years ended December 31, 2024 and 2023 was primarily related to (i) an increase in expenses related to a student housing property that completed construction and became operational in August 2024, (ii) an incremental increase in expenses from the acquisition of an office building through deed-in-lieu of foreclosure in June 2023, and asset acquisitions in the third quarter of 2024 of a multifamily property and an office property each through deed-in-lieu of foreclosure and (iii) an increase in expenses at a hotel property that had increased taxes, lease amortization and an incremental increase in operating expenses.
The increase of $4.4 million for the comparative years ended December 31, 2025 and 2024 was primarily related to (i) an increase in expenses related to a student housing property that completed construction and became operational in August 2024, (ii) asset acquisitions in the third quarter of 2024 of a multifamily property and an office property each through deed-in-lieu of foreclosure and (iii) an increase in expenses at a hotel property that had an incremental increase in operating expenses.
We attribute the changes to the following: (Back to Index) 51 (Back to Index) General and administrative. General and administrative expenses increased by $179,000 for the comparative years ended December 31, 2024 and 2023.
We attribute the changes to the following: (Back to Index) 50 (Back to Index) General and administrative. General and administrative expenses increased by $613,000 for the comparative years ended December 31, 2025 and 2024.
(Back to Index) 72 (Back to Index) The following table summarizes the maximum month-end principal outstanding on our financing arrangements during the periods presented (in thousands, except amount in footnotes): Maximum Month-End Principal Outstanding During the Years Ended December 31, 2024 2023 Financing Arrangement Senior secured financing facility $ 64,495 $ 64,495 Term warehouse financing facilities - CRE loans 189,563 333,834 Historically, we have financed the acquisition of our investments through collateralized loan obligations ("CLO") and securitizations that essentially match the maturity and repricing dates of these financing vehicles with the maturities and repricing dates of our investments.
The following table summarizes the maximum month-end principal outstanding on our financing arrangements during the periods presented (in thousands): Maximum Month-End Principal Outstanding During the Years Ended December 31, 2025 2024 Financing Arrangement CRE - term reinvestment financing facility $ 891,098 $ — Senior secured financing facility 63,099 64,495 CRE - term warehouse financing facilities 534,760 189,563 (Back to Index) 71 (Back to Index) Historically, we have financed the acquisition of our investments through collateralized loan obligations ("CLO") and securitizations that essentially match the maturity and repricing dates of these financing vehicles with the maturities and repricing dates of our investments.
For the year ended December 31, 2024, EAD in accordance with the Management Agreement, which excludes incentive compensation payable, was $10.9 million, or $1.38 per common share outstanding. There was no incentive compensation payable incurred by us as of the year ended December 31, 2024.
For the year ended December 31, 2025, EAD in accordance with the Management Agreement, which excludes incentive compensation payable, was a loss of $1.9 million, or a loss of $0.26 per common share outstanding. There was no incentive compensation payable incurred by us for the year ended December 31, 2025.
(Back to Index) 44 (Back to Index) Our CRE loan portfolio, which had a $1.5 billion and $1.8 billion carrying value at December 31, 2024 and 2023, respectively, comprised: • First mortgage loans, which we refer to as whole loans.
Our CRE loan portfolio, which had carrying values of $1.8 billion and $1.5 billion at December 31, 2025 and 2024, respectively, comprised: (Back to Index) 43 (Back to Index) • First mortgage loans, which we refer to as whole loans.
We believe that certain of our policies are critical because they require us to make difficult, subjective and complex judgments about matters that are inherently uncertain. The critical policies summarized below relate to valuation of investment securities, income taxes, allowance for credit losses and variable interest entities (“VIEs”).
We believe that certain of our policies are critical because they require us to make difficult, subjective and complex judgments about matters that are inherently uncertain. The critical policies summarized below relate to allowance for credit losses, investments in real estate, revenue recognition and variable interest entities (“VIEs”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeMacroeconomic conditions may persist into the future and impair our borrowers’ ability to comply with the terms under our loan agreements.
Biggest changeAt December 31, 2025, 76.5% of the par value of our CRE loan portfolio had interest rate caps with a weighted-average maturity of 15 months or debt service reserves in place. Macroeconomic conditions may persist into the future and impair our borrowers’ ability to comply with the terms under our loan agreements.
(2) Includes amounts outstanding on our securitizations, CRE term warehouse financing facilities, senior secured financing facility and unsecured junior subordinated debentures. (3) Certain of our floating rate loans are subject to a benchmark rate floor. (4) Decrease in rates assumes the applicable benchmark rate does not fall below 0%.
(2) Includes amounts outstanding on our CRE term reinvestment financing facility, CRE term warehouse financing facilities, senior secured financing facility and unsecured junior subordinated debentures. (3) Certain of our floating rate loans are subject to a benchmark rate floor. (4) Decrease in rates assumes the applicable benchmark rate does not fall below 0%.
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK At December 31, 2024, the primary components of our market risk were credit risk, counterparty risk, financing risk and interest rate risk, as described below.
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK At December 31, 2025, the primary components of our market risk were credit risk, counterparty risk, financing risk, and interest rate risk, as described below.
(Back to Index) 78 (Back to Index) In a business environment where benchmark interest rates are increasing significantly, cash flows of the CRE assets underlying our loans may not be sufficient to pay debt service on our loans, which could result in non-performance or default.
In a business environment where benchmark interest rates are increasing significantly, cash flows of the CRE assets underlying our loans may not be sufficient to pay debt service on our loans, which could result in non-performance or default.
The remaining 0.3% of our CRE loan portfolio by par value has a contractual fixed rate of interest. To the extent that interest rate floors on our floating-rate CRE loans are in the money, our net interest will have a negative correlation with rising interest rates to the extent of those interest rate floors.
The remaining 1.4% of our CRE loan portfolio by par value has a contractual fixed rate of interest. To the extent that interest rate floors on our floating-rate CRE loans are in the money, our net interest will have a negative correlation with rising interest rates to the extent of those interest rate floors.
In addition, we are exposed to the risks generally associated with the commercial real estate (“CRE”) market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.
(Back to Index) 77 (Back to Index) In addition, we are exposed to the risks generally associated with the commercial real estate ("CRE") market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.
At December 31, 2024, 99.7% of our CRE loan portfolio by par value earned a floating rate of interest and may be financed with liabilities that both pay interest at floating rates and that are fixed. Floating-rate loans financed with fixed rate liabilities have a negative correlation with declining interest rates to the extent of our financing.
At December 31, 2025, 98.6% of our CRE loan portfolio by par value earned a floating rate of interest and may be financed with liabilities that both pay interest at floating rates and that are fixed. Floating-rate loans financed with fixed rate liabilities have a negative correlation with declining interest rates to the extent of our financing.
We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions. Financing Risk We finance our target assets using our CRE debt securitizations, a senior secured financing facility, warehouse financing facilities, mortgages payable and construction loans.
We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions. Financing Risk We finance our target assets using our CRE debt securitizations, a CRE-term reinvestment financing facility, a senior secured financing facility, warehouse financing facilities, and mortgage payable.
We maintain a robust asset management relationship with our borrowers and have utilized these relationships to address rising interest rates, lingering impacts of the COVID-19 pandemic, and other macroeconomic factors on our loans secured by properties experiencing cash flow pressure.
We maintain a robust asset management relationship with our borrowers and have utilized these relationships to address rising interest rates, and other macroeconomic factors on our loans secured by properties experiencing cash flow pressure.
The following table estimates the hypothetical impact on our net interest income assuming an immediate increase or decrease of 100 basis points in the applicable interest rate benchmark (in thousands, except per share data): Year Ended December 31, 2024 100 Basis Point Decrease (4) 100 Basis Point Increase Net Assets Subject to Interest Rate Sensitivity (1)(2)(3) Increase (Decrease) to Net Interest Income Increase (Decrease) to Net Interest Income Per Share Increase (Decrease) to Net Interest Income Increase (Decrease) to Net Interest Income Per Share $ 343,963 $ (3,195 ) $ (0.41 ) $ 3,487 $ 0.44 (1) Includes our floating-rate CRE loans at December 31, 2024.
The following table estimates the hypothetical impact on our net interest income assuming an immediate increase or decrease of 100 basis points in the applicable interest rate benchmark (in thousands, except per share data): Year Ended December 31, 2025 100 Basis Point Decrease (4) 100 Basis Point Increase Net Assets Subject to Interest Rate Sensitivity (1)(2)(3) Increase (Decrease) to Net Interest Income Increase (Decrease) to Net Interest Income Per Share Increase (Decrease) to Net Interest Income Increase (Decrease) to Net Interest Income Per Share $ 430,069 $ (2,891 ) $ (0.41 ) $ 4,222 $ 0.60 (Back to Index) 78 (Back to Index) (1) Includes our floating-rate CRE loans at December 31, 2025.
Our floating-rate loan portfolio of $1.5 billion has a weighted-average benchmark floor of 0.97% at December 31, 2024.
Our floating-rate loan portfolio of $1.8 billion had a weighted-average benchmark floor of 1.78% at December 31, 2025.
In most cases the sponsors will need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At December 31, 2024, 74.7% of the par value of our CRE loan portfolio had interest rate caps in place with a weighted-average maturity of six months.
In most cases the sponsors will need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs.
Added
These conditions may be exacerbated by recent changes in global tariff policies and escalating global trade tensions, which may introduce uncertainty in supply chains and contribute to market volatility.

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