10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number: 1-32733

ACRES COMMERCIAL REALTY CORP.

(Exact name of registrant as specified in its charter)


Maryland		20-2287134
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
390 RXR Plaza, Uniondale, New York 11556
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 516-535-0015
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ACR	New York Stock Exchange
8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock	ACRPrC	New York Stock Exchange
7.875% Series D Cumulative Redeemable Preferred Stock	ACRPrD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

The number of outstanding shares of the registrant’s common stock on May 5, 2025 was 7,394,194 shares.

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT

ON FORM 10-Q


		PAGE
PART I		3
Item 1:	Financial Statements	3
	Consolidated Balance Sheets – March 31, 2025 (unaudited) and December 31, 2024	3
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2025 and 2024	5
	Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Three Months Ended March 31, 2025 and 2024	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, 2025 and 2024	7
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2025 and 2024	9
	Notes to Consolidated Financial Statements – March 31, 2025 (unaudited)	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	72
Item 4:	Controls and Procedures	74
PART II		75
Item 1:	Legal Proceedings	75
Item 1A:	Risk Factors	75
Item 2:	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	75
Item 5:	Other Information	75
Item 6:	Exhibits	76
SIGNATURES		80

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PART I

ITEM 1. FINANCIAL STATEMENTS

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	March 31, 2025			December 31, 2024
	(unaudited)
ASSETS (1)
Cash and cash equivalents	$	66,037		$	56,713
Restricted cash		657			890
Accrued interest receivable		16,004			14,655
CRE loans		1,377,539			1,487,392
Less: allowance for credit losses		(31,130	)		(32,847	)
CRE loans, net		1,346,409			1,454,545
Loan receivable - due from Manager		10,600			10,675
Loan held for sale		—			11,100
Investments in unconsolidated entities		23,570			21,857
Properties held for sale		201,164			201,125
Investments in real estate		77,143			76,608
Right of use assets		19,803			19,911
Intangible assets		6,885			6,988
Other assets		11,674			6,400
Total assets	$	1,779,946		$	1,881,467
LIABILITIES (2)
Accounts payable and other liabilities	$	13,036		$	11,817
Management fee payable - related party		1,082			540
Accrued interest payable		2,221			6,958
Borrowings		1,271,070			1,360,371
Lease liabilities		45,415			45,259
Distributions payable		3,547			3,607
Accrued tax liability		1			27
Liabilities held for sale		3,125			3,226
Total liabilities		1,339,497			1,431,805
EQUITY
Preferred stock, par value $0.001: 10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,800,000 and 4,800,000 shares issued and outstanding		5			5
Preferred stock, par value $0.001: 6,800,000 shares authorized 7.875% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,507,857 and 4,507,857 shares issued and outstanding		5			5
Common stock, par value $0.001: 41,666,666 shares authorized; 7,413,816 and 7,634,004 shares issued and outstanding (including 574,538 and 574,538 unvested restricted shares)		7			8
Additional paid-in capital		1,159,019			1,162,581
Accumulated other comprehensive loss		(2,810	)		(3,203	)
Distributions in excess of earnings		(726,127	)		(720,268	)
Total stockholders’ equity		430,099			439,128
Non-controlling interests		10,350			10,534
Total equity		440,449			449,662
TOTAL LIABILITIES AND EQUITY	$	1,779,946		$	1,881,467

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

(in thousands, except share and per share data)


	March 31, 2025(3)		December 31, 2024
	(unaudited)
(1) Assets of consolidated variable interest entities ("VIEs") included in total assets above:
Restricted cash	$	—	$	190
Accrued interest receivable		—		10,733
CRE loans, pledged as collateral (4)		—		1,115,163
Loan held for sale		—		9,469
Other assets		—		117
Total assets of consolidated VIEs	$	—	$	1,135,672
(2) Liabilities of consolidated VIEs included in total liabilities above:
Accounts payable and other liabilities	$	—	$	73
Accrued interest payable		—		2,111
Borrowings		—		862,804
Total liabilities of consolidated VIEs	$	—	$	864,988

(3)

There were no consolidated VIEs at March 31, 2025.

(4)

Excludes the allowance for credit losses.

The accompanying notes are an integral part of these statements

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.ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)


	For the Three Months Ended March 31,
	2025			2024
REVENUES
Interest income:
CRE loans	$	28,469		$	41,866
Other		257			745
Total interest income		28,726			42,611
Interest expense		23,123			31,251
Net interest income		5,603			11,360
Real estate income		11,366			7,371
Other revenue		33			37
Total revenues		17,002			18,768
OPERATING EXPENSES
General and administrative		3,159			3,255
Real estate expenses		13,342			9,531
Management fees - related party		1,631			1,627
Equity compensation - related party		815			477
Corporate depreciation and amortization		18			8
(Reversal of) provision for credit losses, net		(1,717	)		4,896
Total operating expenses		17,248			19,794
		(246	)		(1,026	)
OTHER (EXPENSE) INCOME
Equity in losses of unconsolidated subsidiaries		(492	)		—
Gain on conversion of real estate		—			5,835
Other income		84			115
Total other (expense) income		(408	)		5,950
(LOSS) INCOME BEFORE TAXES		(654	)		4,924
Income tax expense		(76	)		—
NET (LOSS) INCOME		(730	)		4,924
Net income allocated to preferred shares		(5,313	)		(4,822	)
Carrying value in excess of consideration paid for preferred shares		—			242
Net loss allocable to non-controlling interest, net of taxes		184			212
NET (LOSS) INCOME ALLOCABLE TO COMMON SHARES	$	(5,859	)	$	556
NET (LOSS) INCOME PER COMMON SHARE - BASIC	$	(0.80	)	$	0.07
NET (LOSS) INCOME PER COMMON SHARE - DILUTED	$	(0.80	)	$	0.07
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		7,362,236			7,754,130
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		7,362,236			8,033,813

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(unaudited)


	For the Three Months Ended March 31,
	2025			2024
Net (loss) income	$	(730	)	$	4,924
Other comprehensive income:
Reclassification adjustments associated with net unrealized losses from interest rate swaps included in interest expense		393			397
Total other comprehensive income		393			397
Comprehensive (loss) income before allocation to preferred shares		(337	)		5,321
Net loss allocated to non-controlling interests shares		184			212
Carrying value in excess of consideration paid for preferred shares		—			242
Net income allocated to preferred shares		(5,313	)		(4,822	)
Comprehensive (loss) income allocable to common shares	$	(5,466	)	$	953

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share data)

(unaudited)


	Common Stock
	Shares			Amount			Series C Preferred Stock		Series D Preferred Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Distributions in Excess of Earnings)			Total Stockholders’ Equity			Non-Controlling Interest			Total Equity
Balance, December 31, 2024		7,634,004		$	8		$	5	$	5	$	1,162,581		$	(3,203	)	$	(720,268	)	$	439,128		$	10,534		$	449,662
Purchase and retirement of common stock		(220,188	)		(1	)		—		—		(4,377	)		—			—			(4,378	)		—			(4,378	)
Stock-based compensation		—			—			—		—		—			—			—			—			—			—
Amortization of stock-based compensation		—			—			—		—		815			—			—			815			—			815
Contributions from non-controlling interests		—			—			—		—		—			—			—			—			—			—
Net loss		—			—			—		—		—			—			(546	)		(546	)		(184	)		(730	)
Distributions and accrual of cumulative preferred stock dividends		—			—			—		—		—			—			(5,313	)		(5,313	)		—			(5,313	)
Amortization of terminated derivatives		—			—			—		—		—			393			—			393			—			393
Balance, March 31, 2025		7,413,816		$	7		$	5	$	5	$	1,159,019		$	(2,810	)	$	(726,127	)	$	430,099		$	10,350		$	440,449

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - (Continued)

(in thousands, except share data)

(unaudited)


	Common Stock
	Shares			Amount		Series C Preferred Stock		Series D Preferred Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Distributions in Excess of Earnings)			Total Stockholders’ Equity			Non-Controlling Interest			Total Equity
Balance, December 31, 2023		7,878,216		$	8	$	5	$	5	$	1,169,970		$	(4,801	)	$	(729,391	)	$	435,796		$	10,419		$	446,215
Purchase and retirement of common stock		(194,827	)		—		—		—		(2,068	)		—			—			(2,068	)		—			(2,068	)
Stock-based compensation		1,911			—		—		—		19			—			—			19			—			19
Amortization of stock-based compensation		—			—		—		—		477			—			—			477			—			477
Preferred stock redemption		—			—		—		—		(2,399	)					242			(2,157	)		—			(2,157	)
Contributions from non-controlling interests		—			—		—		—		—			—			—			—			180			180
Net income		—			—		—		—		—			—			5,136			5,136			(212	)		4,924
Distributions and accrual of cumulative preferred stock dividends		—			—		—		—		—			—			(4,822	)		(4,822	)		—			(4,822	)
Amortization of terminated derivatives		—			—		—		—		—			397			—			397			—			397
Balance, March 31, 2024		7,685,300		$	8	$	5	$	5	$	1,165,999		$	(4,404	)	$	(728,835	)	$	432,778		$	10,387		$	443,165

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	For the Three Months Ended March 31,
	2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(730	)	$	4,924
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
(Reversal of) provision for credit losses, net		(1,717	)		4,896
Depreciation, amortization and accretion		4,321			1,563
Amortization of stock-based compensation		815			477
Gain on conversion of real estate		—			(5,835	)
Equity in losses of unconsolidated subsidiaries		492			—
Changes in operating assets and liabilities		(7,745	)		(2,690	)
Net cash (used in) provided by operating activities		(4,564	)		3,335
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal fundings of CRE loans		(26,515	)		(11,406	)
Principal payments received on CRE loans		115,940			80,770
Proceeds from sale of CRE loans		31,730			—
Investments in real estate		(1,237	)		(14,543	)
Investments in unconsolidated entities		(2,204	)		—
Purchases of furniture and fixtures		(54	)		—
Principal payments received on loan - due from Manager		75			50
Net cash provided by investing activities		117,735			54,871
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock		(4,377	)		(2,068	)
Repurchase of preferred stock		—			(2,157	)
Proceeds from borrowings:
Warehouse financing facilities and repurchase agreements		—			19,260
Mortgages payable		—			9,130
Term reinvestment financing facility		907,601			—
Payments on borrowings:
Securitizations		(865,078	)		(58,556	)
Warehouse financing facilities and repurchase agreements		(116,986	)		(22,391	)
Term reinvestment financing facility		(16,504	)		—
Payment of debt issuance costs		(3,363	)		—
Proceeds received from non-controlling interests		—			180
Distributions paid on preferred stock		(5,373	)		(4,855	)
Net cash used in financing activities		(104,080	)		(61,457	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		9,091			(3,251	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		57,603			91,886
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	66,694		$	88,635

The accompanying notes are an integral part of these statements

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(unaudited)

NOTE 1 - ORGANIZATION

ACRES Commercial Realty Corp., a Maryland corporation, along with its subsidiaries (collectively, the "Company"), is a real estate investment trust ("REIT") that is primarily focused on originating, holding and managing commercial real estate ("CRE") mortgage loans and equity investments in commercial real estate properties through direct ownership and joint ventures. The Company’s manager is ACRES Capital, LLC (the "Manager"), a subsidiary of ACRES Capital Corp. (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 property in top United States ("U.S.") markets.

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

The Company conducts its operations through the use of subsidiaries that it consolidates into its financial statements. The Company’s core assets are consolidated through its investment in ACRES Realty Funding, Inc. ("ACRES RF"), a wholly-owned subsidiary that holds CRE loans, CRE-related securities and investments in CRE securitizations, which are consolidated as variable interest entities ("VIEs") as discussed in Note 3, and special purpose entities.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. ("GAAP"). In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments necessary to fairly present the Company’s financial position, results of operations and cash flows.

Principles of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

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

Restricted cash includes required account balance minimums primarily for the Company’s CRE debt securitizations, as well as cash held in various escrow and deposit accounts.

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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


	March 31,
	2025		2024
Cash and cash equivalents	$	66,037	$	84,600
Restricted cash		657		4,035
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	66,694	$	88,635

Investments in Real Estate

The Company depreciates investments in real estate and amortizes related intangible assets over the estimated useful lives of the assets as follows:


Category		Term
Building		35 to 40 years
Building improvements		1 to 39 years
Site improvements		10 years
Tenant improvements		Shorter of lease term or expected useful life
Furniture, fixtures and equipment		1 to 12 years
Right of use assets		3 to 99 years
Intangible assets		3 months to 18 years
Lease liabilities		Shorter of lease term or expected useful life

Income Taxes

The Company recorded a full valuation allowance against its net deferred tax assets (tax effected expense of $20.4 million) at March 31, 2025, as the Company believes it is more likely than not that the deferred tax assets will not be realized. This assessment was based on the Company’s cumulative historical losses and uncertainties as to the amount of taxable income that would be generated in future years by the Company’s taxable REIT subsidiaries.

Earnings per Share

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

Recent Accounting Standards

Accounting Standards to be Adopted in Future Periods

In December 2023, the Financial Accounting Standards Board (“FASB”) issued guidance to improve the transparency of income tax disclosures. 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. The Company is in the process of evaluating the impact of this guidance, however, the Company does not expect a material impact to its consolidated financial statements.

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

The Company is in the process of evaluating the impact of this guidance, however, the Company does not expect a material impact to its consolidated financial statements.

NOTE 3 - VARIABLE INTEREST ENTITIES

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

Consolidated VIEs (the Company is the primary beneficiary)

Based on management’s analysis, the Company was the primary beneficiary of two VIEs at December 31, 2024 (collectively, the "Consolidated VIEs"). In March 2025, the Company exercised the optional redemption on both VIEs.

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

The Company has exposure to losses on its securitizations to the extent of its investments in the subordinated debt and preferred equity of each securitization. The Company is entitled to receive payments of principal and interest on the debt securities it holds and, to the extent revenues exceed debt service requirements and other expenses of the securitizations, distributions with respect to its preferred equity interests. As a result of consolidation, the debt and equity interests the Company holds in these securitizations have been eliminated; and the Company’s consolidated balance sheets reflect the assets held, debt issued by the securitizations to third parties and any accrued payables to third parties. The Company’s operating results and cash flows include the gross amounts related to the securitizations’ assets and liabilities as opposed to the Company’s net economic interests in the securitizations. Assets and liabilities related to the securitizations are disclosed, in the aggregate, on the Company’s consolidated balance sheets. For a discussion of the debt issued through the securitizations, see Note 10.

Creditors of the Company’s Consolidated VIEs have no recourse to the general credit of the Company, nor to each other. During the three months ended March 31, 2025 and 2024, the Company did not provide any financial support to either of its Consolidated VIEs nor does it have any requirement to do so, although it may choose to do so in the future to maximize future cash flows on such investments by the Company. There are no explicit arrangements that obligate the Company to provide financial support to either of its Consolidated VIEs.

Charles Street-ACRES FSU Student Venture, LLC

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

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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

Based on management’s analysis, the Company is not the primary beneficiary of the VIEs discussed below since it does not have both (i) the power to direct the activities that most significantly impact the VIEs' economic performance and (ii) the obligation to absorb the losses of the VIEs or the right to receive the benefits from the VIEs, which could be significant to the VIEs. Accordingly, the following VIEs are not consolidated in the Company’s financial statements at March 31, 2025 and December 31, 2024. The Company continuously reassesses whether it is deemed to be the primary beneficiary of its unconsolidated VIEs. The Company’s maximum exposure to risk for each of these unconsolidated VIEs is set forth in the "Maximum Exposure to Loss" column in the table below.

Unsecured Junior Subordinated Debentures

The Company has a 100% interest in the common shares of both Resource Capital Trust I ("RCT I") and RCC Trust II ("RCT II"), with a value of $1.5 million in the aggregate, or 3.0% of each trust, at March 31, 2025 and December 31, 2024. RCT I and RCT II were formed for the purposes of providing debt financing to the Company. The Company completed a qualitative analysis to determine whether it is the primary beneficiary of each of the trusts and determined that it was not the primary beneficiary of either trust because it does not have the power to direct the activities most significant to the trusts, which include the collection of principal and interest through servicing rights. Accordingly, neither trust is consolidated into the Company’s consolidated financial statements.

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

65 E. Wacker Joint Venture, LLC

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

7720 McCallum JV, LLC

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

Upon formation of the McCallum JV, the McCallum JV took ownership of the multifamily property subject to a related CRE loan payable to the Company which was novated to allow the McCallum JV to replace the original obligor who was experiencing financial difficulty. The $31.5 million CRE loan has an initial maturity date of September 5, 2027 and bears interest at a rate of one-month Term Secured Overnight Financing Rate ("Term SOFR") and a spread of 2.75%. There were no other changes to the terms of the loan. The McCallum JV also entered into a $1.5 million mezzanine loan commitment with the Company, of which $94,000 was funded at March 31, 2025.

Pacmulti Affiliates, LLC

In March 2025, the Company contributed $200,000 as well as its net interest in a multifamily unit property located in the Mid-Atlantic region to form a joint venture (the "Pacmulti JV") with an unrelated third-party ("Pacmulti Managing Member"). The Pacmulti

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

Managing Member is responsible for the day-to-day operations of the Pacmulti JV. The Company determined the Pacmulti JV to be a VIE for which it was not the primary beneficiary because it did not have the power to direct the activities most significant to the Pacmulti JV, as the Company does not have unilateral kick-out rights or substantive participating rights. The Company accounts for its investment in the Pacmulti JV as an equity method investment within investments in unconsolidated entities in its consolidated financial statements.

Upon formation of the Pacmulti JV, the Pacmulti JV took ownership of the multifamily property subject to a related CRE loan payable to the Company which was novated to allow the Pacmulti JV to replace the original obligor who was experiencing financial difficulty. The $70.8 million CRE loan has an initial maturity date of May 5, 2030 and bears interest at a rate of one-month Term SOFR and a spread of 3.41%. There were no other changes to the terms of the loan. The Pacmulti JV also entered into a $13.5 million mezzanine loan commitment with the Company, of which $6.7 million was funded at March 31, 2025.

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at March 31, 2025 (in thousands):


	Unsecured Junior Subordinated Debentures			65 E Wacker Joint Venture, LLC		7720 McCallum JV, LLC			Pacmulti Affiliates, LLC		Total			Maximum Exposure to Loss
ASSETS
Accrued interest receivable	$	11		$	—	$	—		$	—	$	11		$	—
Investments in unconsolidated entities		1,548			21,974		(152	)		200		23,570			23,570
Total assets		1,559			21,974		(152	)		200		23,581

LIABILITIES
Accrued interest payable		371			—		—			—		371		N/A
Borrowings		51,548			—		—			—		51,548		N/A
Total liabilities		51,919			—		—			—		51,919
Net (liability) asset	$	(50,360	)	$	21,974	$	(152	)	$	200	$	(28,338	)

NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION

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


	For the Three Months Ended March 31,
	2025		2024
Supplemental cash flows:
Interest expense paid in cash	$	23,752	$	32,045
Income taxes paid in cash		178		83
Non-cash investing activities include the following:
Transfer of whole loans to investments in real estate	$	—	$	20,123
Transfer of investment in real estate to investment in unconsolidated entities		—		(20,123	)
Non-cash financing activities include the following:
Incentive compensation paid in common stock	$	—	$	19
Distributions on preferred stock accrued but not paid		3,547		3,229
Capitalized interest		—		643

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

NOTE 5 - LOANS

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


Description	Quantity	Principal		Unamortized (Discount) Premium, net (1)			Amortized Cost		Allowance for Credit Losses			Carrying Value		Contractual Interest Rates (2)	Maturity Dates (3)(4)
At March 31, 2025:
Whole loans (5)(6)(7)	46	$	1,360,391	$	(2,102	)	$	1,358,289	$	(26,098	)	$	1,332,191	1M Term SOFR + 2.50% to 1M Term SOFR + 7.00%	April 2025 to May 2030
Mezzanine loans (5)	2		19,700		(450	)		19,250		(5,032	)		14,218	10.00% to 15.00%	April 2026 to June 2028
Total		$	1,380,091	$	(2,552	)	$	1,377,539	$	(31,130	)	$	1,346,409

At December 31, 2024:
Whole loans (5)(6)(7)	52	$	1,484,997	$	(2,305	)	$	1,482,692	$	(28,147	)	$	1,454,545	1M Term SOFR + 2.50% to 1M Term SOFR + 7.00%	January 2025 to January 2030
Mezzanine loan (5)	1		4,700		—			4,700		(4,700	)		—	10.00%	June 2028
Total		$	1,489,697	$	(2,305	)	$	1,487,392	$	(32,847	)	$	1,454,545

(1)

Amounts include unamortized loan origination fees of $1.4 million and $1.3 million and deferred amendment fees of $1.1 million and $985,000 at March 31, 2025 and December 31, 2024, respectively.

(2)

References to ("1M Term SOFR") are one-month Term SOFR. Weighted-average one-month Term SOFR were 4.37% and 4.58% at March 31, 2025 and December 31, 2024, respectively. Additionally, weighted-average benchmark rate floors were 1.05% and 0.97% at March 31, 2025 and December 31, 2024, respectively.

(3)

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

(4)

Maturity dates exclude five and one whole loans, with amortized costs of $140.1 million and $5.6 million, in maturity default at March 31, 2025 and December 31, 2024, respectively.

(5)

Substantially all loans are pledged as collateral under various borrowings at March 31, 2025 and December 31, 2024.

(6)

CRE whole loans had $84.0 million and $94.0 million in unfunded loan commitments at March 31, 2025 and December 31, 2024, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreements, and any necessary approvals have been obtained.

(7)

Includes three mezzanine loans of $8.9 million, at amortized cost, with two having fixed interest rates of 15.0% and one having a fixed interest rate of 20.0% at March 31, 2025. Includes two mezzanine loans of $3.5 million, at amortized cost, that have fixed interest rates of 15.0% at December 31, 2024.

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


	March 31, 2025					December 31, 2024
Property Type	Carrying Value		% of Loan Portfolio			Carrying Value		% of Loan Portfolio
Multifamily	$	1,033,651		76.8	%	$	1,125,564		77.4	%
Office		241,082		17.9	%		236,409		16.2	%
Hotel		56,350		4.2	%		56,384		3.9	%
Self-Storage		15,326		1.1	%		36,188		2.5	%
Total	$	1,346,409		100	%	$	1,454,545		100	%

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)


	March 31, 2025					December 31, 2024
Geographic Location	Carrying Value		% of Loan Portfolio			Carrying Value		% of Loan Portfolio
Southwest	$	348,649		25.8	%	$	364,544		25.0	%
Mountain		251,944		18.7	%		278,654		19.2	%
Southeast		216,830		16.1	%		239,986		16.5	%
Northeast		158,524		11.8	%		155,352		10.7	%
Pacific		147,971		11.0	%		146,652		10.1	%
Mid Atlantic		135,347		10.1	%		183,075		12.6	%
East North Central		47,113		3.5	%		46,459		3.2	%
West North Central		40,031		3.0	%		39,823		2.7	%
Total	$	1,346,409		100	%	$	1,454,545		100	%

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


Description	2025		2026		2027 and Thereafter		Total
At March 31, 2025:
Whole loans (1)	$	595,635	$	322,675	$	299,888	$	1,218,198
Mezzanine loans		—		14,550		4,700		19,250
Total CRE loans (2)	$	595,635	$	337,225	$	304,588	$	1,237,448

Description	2025		2026		2027 and Thereafter		Total
At December 31, 2024:
Whole loans (1)	$	1,080,501	$	198,982	$	197,595	$	1,477,078
Mezzanine loan		—		—		4,700		4,700
Total CRE loans (2)	$	1,080,501	$	198,982	$	202,295	$	1,481,778

(1)

Maturity dates exclude five and one whole loans, with amortized costs of $140.1 million and $5.6 million, in maturity default at March 31, 2025 and December 31, 2024, respectively.

(2)

At March 31, 2025, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options were $100.9 million, $458.9 million, and $658.4 million in 2025, 2026 and 2027 and thereafter, respectively. At December 31, 2024, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $101.2 million, $555.5 million and $820.4 million in 2025, 2026 and 2027 and thereafter, respectively.

At March 31, 2025 and December 31, 2024, no single loan or investment represented more than 10% of the Company’s total assets, and no single investment group generated over 10% of the Company’s revenue.

Loan Held For Sale

At December 31, 2024, the Company had one CRE whole loan with a fair value of $11.1 million held for sale. The loan was transferred upon entering into a loan sale and assignment agreement in December 2024 and marked to the lower of cost or market. The loan had an outstanding par balance of $11.8 million and was written down by $700,000 through the allowance for credit losses immediately prior to the reclassification. The sale of the loan was completed in January 2025.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

NOTE 6 - FINANCING RECEIVABLES

The following table shows the activity in the allowance for credit losses for the three months ended March 31, 2025 and the year ended December 31, 2024 (in thousands):


	Three Months Ended March 31, 2025			Year Ended December 31, 2024
Allowance for credit losses at beginning of period	$	32,847		$	28,757
(Reversal of) provision for credit losses		(1,717	)		4,790
Charge-offs		—			(700	)
Allowance for credit losses at end of period	$	31,130		$	32,847

During the three months ended March 31, 2025, the Company recorded a reversal of expected credit losses of $1.7 million, primarily attributable to loan payoffs and qualitative adjustments to macroeconomic factors.

At both March 31, 2025 and December 31, 2024, the Company individually evaluated one mezzanine loan for impairment. The loan was collateralized by an office building in the Northeast region and had a principal balance of $4.7 million at both March 31, 2025 and December 31, 2024. The Company fully reserved this loan in the fourth quarter of 2022, and it continues to be fully reserved at March 31, 2025. The loan entered payment default in February 2023 and has been placed on nonaccrual status.

Credit quality indicators

Commercial Real Estate Loans

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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




Risk Rating		Risk Characteristics

1		• Property performance has surpassed underwritten expectations.
		• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high-quality tenant mix.

2		• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
		• Occupancy is stabilized, near stabilized or is on track with underwriting.

3		• Property performance lags behind underwritten expectations.
		• Occupancy is not stabilized and the property has some tenancy rollover.

4		• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
		• Occupancy is not stabilized and the property has a large amount of tenancy rollover.

5		• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.
		• The property has a material vacancy rate and significant rollover of remaining tenants.
		• An updated appraisal is required upon designation and updated on an as-needed basis.

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 may experience greater credit risks due to their nature as subordinated investments.

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

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


	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Total (1)
At March 31, 2025:
Whole loans	$	27,816	$	453,121	$	493,214	$	378,524	$	5,614	$	1,358,289
Mezzanine loans		—		14,550		—		—		4,700		19,250
Total	$	27,816	$	467,671	$	493,214	$	378,524	$	10,314	$	1,377,539


At December 31, 2024:
Whole loans	$	27,869	$	565,968	$	503,125	$	380,116	$	5,614	$	1,482,692
Mezzanine loan		—		—		—		—		4,700		4,700
Total	$	27,869	$	565,968	$	503,125	$	380,116	$	10,314	$	1,487,392

(1)

The total amortized cost of CRE loans excluded accrued interest receivable of $16.0 million and $14.6 million at March 31, 2025 and December 31, 2024, respectively.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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


	2025 (1)		2024 (2)		2023		2022			2021		Prior		Total (3)
At March 31, 2025:
Whole loans: (4)
Rating 1	$	—	$	—	$	—	$	—		$	27,816	$	—	$	27,816
Rating 2		—		19,527		48,607		—			315,115		69,872		453,121
Rating 3		—		—		—		298,749			183,430		11,035		493,214
Rating 4		77,412		83,734		15,825		85,750			70,914		44,889		378,524
Rating 5		—		—		—		—			—		5,614		5,614
Total whole loans		77,412		103,261		64,432		384,499			597,275		131,410		1,358,289
Mezzanine loans:
Rating 2		14,550		—		—		—			—		—		14,550
Rating 5		—		—		—		—			—		4,700		4,700
Total mezzanine loans		14,550		—		—		—			—		4,700		19,250
Total loans	$	91,962	$	103,261	$	64,432	$	384,499		$	597,275	$	136,110	$	1,377,539
Current Period Gross Write-Offs	$	—	$	—	$	—	$	—		$	—	$	—	$	—


	2024 (2)		2023		2022		2021			2020		Prior		Total (3)
At December 31, 2024:
Whole loans: (4)
Rating 1	$	—	$	—	$	—	$	27,869		$	—	$	—	$	27,869
Rating 2		19,023		48,106		46,416		382,195			56,284		13,944		565,968
Rating 3		—		—		249,907		242,155			—		11,063		503,125
Rating 4		80,672		15,811		85,004		153,740			—		44,889		380,116
Rating 5		—		—		—		—			—		5,614		5,614
Total whole loans		99,695		63,917		381,327		805,959			56,284		75,510		1,482,692
Mezzanine loan (rating 5)		—		—		—		—			—		4,700		4,700
Total	$	99,695	$	63,917	$	381,327	$	805,959		$	56,284	$	80,210	$	1,487,392
Current Period Gross Write-Offs	$	—	$	—	$	—	$	(700	)	$	—	$	—	$	(700	)

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

(1)

Includes one novated CRE whole loan that resulted from a loan workout.

(2)

Includes two novated CRE whole loans that resulted from loan workouts.

(3)

The total amortized cost of CRE whole loans excluded accrued interest receivable of $16.0 million and $14.6 million at March 31, 2025 and December 31, 2024, respectively.

(4)

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

The Company has one additional mezzanine loan that was included in other assets held for sale, and that loan had no carrying value at both March 31, 2025 and December 31, 2024.

Loan Portfolio Aging Analysis

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


	30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Current (1)		Total Loans Receivable (2)		Total Loans > 90 Days and Accruing
At March 31, 2025:
Whole loans	$	44,401	$	56,355	$	5,614	$	106,370	$	1,251,919	$	1,358,289	$	—
Mezzanine loans (3)		—		—		4,700		4,700		14,550		19,250		—
Total	$	44,401	$	56,355	$	10,314	$	111,070	$	1,266,469	$	1,377,539	$	—

At December 31, 2024:
Whole loans	$	—	$	70,760	$	5,614	$	76,374	$	1,406,318	$	1,482,692	$	—
Mezzanine loan (3)		—		—		4,700		4,700		—		4,700		—
Total	$	—	$	70,760	$	10,314	$	81,074	$	1,406,318	$	1,487,392	$	—

(1)

Includes one CRE whole loan with an amortized cost of $33.7 million in maturity default at March 31, 2025.

(2)

The total amortized cost of CRE whole loans excluded accrued interest receivable of $16.0 million and $14.6 million at March 31, 2025 and December 31, 2024, respectively.

(3)

Includes one loan, with a total amortized cost of $4.7 million, that was fully reserved at both March 31, 2025 and December 31, 2024.

At March 31, 2025 and December 31, 2024, the Company had five and two CRE whole loans, with total amortized costs of $140.1 million and $76.4 million, respectively, and one mezzanine loan, with a total amortized cost of $4.7 million, in payment default.

During the three months ended March 31, 2025, the Company did not recognize interest income on CRE whole loans that were placed on nonaccrual status. During the three months ended March 31, 2024, the Company recognized interest income of $134,000 on one CRE whole loan that was placed on nonaccrual status.

Loan Modifications

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

During the three months ended March 31, 2025, the Company did not enter into any loan modifications for borrowers that were experiencing financial difficulty.

During the three months ended March 31, 2024, the Company entered into the following two loan modifications that required disclosure:

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

•

A multifamily loan with an amortized cost of $53.6 million, representing 3.9% 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. In connection with the modification, the borrower funded additional capital into the project for interest reserves to cover debt service.

•

A multifamily loan with an amortized cost of $45.1 million, representing 3.3% of the total amortized cost of the portfolio, was modified to: (i) reduce its current pay interest rate from one-month Term SOFR plus a spread of 3.31% to a 5.00% fixed rate and (ii) defer the unpaid interest that will be due at loan payoff. In connection with the modification, the borrower funded additional capital into the project for interest reserves to cover debt service.

These loans were performing in accordance with the modified contractual terms as of March 31, 2025. At March 31, 2025, one of these loans, with an amortized cost of $53.6 million, had a risk rating of "4" and the other loan, with an amortized cost of $45.1 million, had a risk rating of "3". Loans with a risk rating of "3" and "4" are included in the determination of the Company's general CECL reserves.

NOTE 7 - INVESTMENTS IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES

At March 31, 2025, the Company 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 sheet.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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


	March 31, 2025							December 31, 2024
	Cost Basis		Accumulated Depreciation & Amortization			Carrying Value		Cost Basis		Accumulated Depreciation & Amortization			Carrying Value
Assets acquired:
Investments in real estate, equity:
Investments in real estate (1)	$	83,351	$	(6,208	)	$	77,143	$	82,265	$	(5,657	)	$	76,608
Right of use assets (2)(3)		20,064		(841	)		19,223		20,064		(759	)		19,305
Intangible assets (4)		9,833		(2,948	)		6,885		9,833		(2,845	)		6,988
Subtotal		113,248		(9,997	)		103,251		112,162		(9,261	)		102,901

Investments in real estate from lending activities:
Properties held for sale (5)		201,164		—			201,164		201,125		—			201,125
Total		314,412		(9,997	)		304,415		313,287		(9,261	)		304,026

Liabilities assumed:
Investments in real estate, equity:
Mortgage payables		76,391		3,121			79,512		76,631		2,925			79,556
Other liabilities		41		(41	)		—		41		(29	)		12
Lease liabilities (3)(6)		44,788		—			44,788		44,606		—			44,606
Subtotal		121,220		3,080			124,300		121,278		2,896			124,174

Investments in real estate from lending activities:
Liabilities held for sale (7)		3,125		—			3,125		3,226		—			3,226
Total		124,345		3,080			127,425		124,504		2,896			127,400

Total net investments in real estate and properties held for sale (8)	$	190,067				$	176,990	$	188,783				$	176,626

(1)

Includes $15.2 million of land, which is not depreciable, at both March 31, 2025 and December 31, 2024. Also includes $3.9 million and $3.2 million of construction in progress, which is also not depreciable until placed in service, at March 31, 2025 and December 31, 2024, respectively.

(2)

Primarily comprised an $18.6 million right of use asset, at both March 31, 2025 and December 31, 2024, associated with the ground lease disclosed at footnote (6) below as an operating lease. Amortization is booked to real estate expenses on the consolidated statements of operations. Additionally, the Company has an operating lease with a value of $355,000 and $367,000 at March 31, 2025 and December 31, 2024, respectively, associated with a parking lease.

(3)

Refer to Note 8 for additional information on the Company’s remaining operating leases.

(4)

Primarily comprised of a franchise intangible of $4.0 million and $4.1 million, a management contract intangible of $2.7 million and $2.8 million, in-place leases of $197,000 and $68,000 and a customer list intangible of $186,000 and $371,000, at March 31, 2025 and December 31, 2024, respectively.

(5)

At March 31, 2025 and December 31, 2024, 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, a newly constructed multi-family property placed in service in September 2024 and an office complex acquired in July 2024.

(6)

Primarily comprised of a $44.1 million ground lease with a remaining term of 91 years at March 31, 2025. Lease expense was $700,000 and $680,000 for the three months ended March 31, 2025 and 2024, respectively.

(7)

Comprised of an operating lease liability.

(8)

Excludes items of working capital, either acquired or assumed.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

The Company acquired a ground lease with its equity investment in a hotel property in April 2022. This ground lease has an associated above-market lease intangible liability. The ground lease confers to the Company the right to use the land on which its hotel operates, and the ground lease payments increase 3.00% per year until 2116. The Company acquired the original 99-year lease with 94 years remaining. At March 31, 2025, 91 years remain in its term.

In December 2024, the Company entered into a parking lease at an asset acquired by the Company in August 2024. The parking lease allows the Company to have access to a designated amount of parking spots adjacent to the building which the Company operates. The lease payments increase 2.00% per year until 2123, or a 99-year lease. At March 31, 2025, 99 years remain in its term.

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


	For the Three Months Ended March 31,
	2025		2024
Assets:
Amortization related to intangible assets	$	103,000	$	243,000
Amortization related to right of use assets		80,000		51,000
Liabilities:
Accretion related to ground lease liability	$	651,000	$	629,000
Lease payments		532,000		439,000

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


	Amortization Expense
Remainder of 2025	$	664,000
2026		835,000
2027		756,000
2028		748,000
2029		748,000
2030		748,000
Total	$	4,499,000

NOTE 8 - LEASES

In addition to the ground lease discussed in Note 7, the Company has operating leases for office space and office equipment. The leases have terms that expire between February 2029 and September 2029. The leases on the office space and office equipment contain options for early termination granted to the Company and the lessor. Lease payments are determined as follows:

•

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

•

Office equipment: payments are made on a fixed schedule.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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


	March 31, 2025			December 31, 2024
Operating Leases:
Right of use assets	$	580		$	606
Lease liabilities	$	(627	)	$	(653	)

Weighted average remaining lease term:	4.5 years			4.7 years
Weighted average discount rate (1):		8.70	%		8.70	%

(1)

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

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


	Three Months Ended March 31, 2025		Three Months Ended March 31, 2024
Lease Cost:
Operating lease cost	$	40	$	40

Other Information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	39	$	38

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


	Operating Leases
2025	$	162
2026		166
2027		170
2028		174
2029		131
Thereafter		—
Subtotal		803
Less: impact of discount		(176	)
Total	$	627

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

NOTE 9 - INVESTMENTS IN UNCONSOLIDATED ENTITIES

The following table summarizes the Company's investments in unconsolidated entities at March 31, 2025 and December 31, 2024 and equity in earnings of unconsolidated entities for the three months ended March 31, 2025 and 2024 (dollars in thousands, except in the footnotes):


							Earnings (Losses) of Unconsolidated Entities
	Ownership %						For the Three Months Ended March 31,
	at March 31, 2025	March 31, 2025			December 31, 2024		2025			2024
Investments in RCT I and II (1)	3%	$	1,548		$	1,548	$	—		$	—
65 E. Wacker Joint Venture, LLC (2)	90%		21,974			20,157		(188	)		—
7720 McCallum JV, LLC (3)	50%		(152	)		152		(304	)		—
Pacmulti Affiliates JV, LLC (4)	50%		200			—		—			—
Total		$	23,570		$	21,857	$	(492	)	$	—

(1)

During the three months ended March 31, 2025 and 2024, dividends from the investments in RCT I's and RCT II's common shares in the amounts of $33,000 and $37,000 , respectively, are recorded in other revenue on the Company's consolidated statements of operations.

(2)

Refer to Note 3 for details regarding the Wacker JV.

(3)

Refer to Note 3 for details regarding the McCallum JV.

(4)

Refer to Note 3 for details regarding the Pacmulti JV.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

NOTE 10 - BORROWINGS

The Company historically has financed the acquisition of its investments, including investment securities and loans, through the use of secured and unsecured borrowings. Certain information with respect to the Company’s borrowings is summarized in the following table (dollars in thousands, except amounts in the footnotes):


	Principal Outstanding	Unamortized Issuance Costs and Discounts	Outstanding Borrowings	Weighted Average Borrowing Rate	Weighted Average Remaining Maturity	Value of Collateral
At March 31, 2025
CRE - term reinvestment financing facility (1)	$893,200	$3,339	$889,861	6.07%	5.1 years	$1,194,899
Senior secured financing facility	63,099	2,008	61,091	8.10%	2.8 years	164,565
CRE - term warehouse financing facilities (2)	41,281	1,212	40,069	7.45%	0.6 years	62,322
Mortgages payable	80,113	601	79,512	9.17%	5.7 years	119,501
5.75% Senior Unsecured Notes	150,000	1,011	148,989	5.75%	1.4 years	—
Unsecured junior subordinated debentures	51,548	—	51,548	8.50%	11.4 years	—
Total	$1,279,241	$8,171	$1,271,070	6.47%	4.7 years	$1,541,287


	Principal Outstanding	Unamortized Issuance Costs and Discounts	Outstanding Borrowings	Weighted Average Borrowing Rate	Weighted Average Remaining Maturity	Value of Collateral
At December 31, 2024
ACR 2021-FL1 Senior Notes	$472,507	$660	$471,847	6.11%	11.5 years	$599,927
ACR 2021-FL2 Senior Notes	392,571	1,614	390,957	6.47%	12.1 years	525,571
Senior secured financing facility	63,099	2,189	60,910	8.22%	3.1 years	162,578
CRE - term warehouse financing facilities (2)	158,266	1,527	156,739	7.02%	1.3 years	257,012
Mortgages payable	80,113	557	79,556	9.25%	5.7 years	119,509
5.75% Senior Unsecured Notes	150,000	1,186	148,814	5.75%	1.6 years	—
Unsecured junior subordinated debentures	51,548	—	51,548	8.67%	11.7 years	—
Total	$1,368,104	$7,733	$1,360,371	6.66%	8.7 years	$1,664,597

(1)

Principal outstanding includes accrued interest payable of $2.1 million at March 31, 2025.

(2)

Principal outstanding includes accrued interest payable of $111,000 and $435,000 at March 31, 2025 and December 31, 2024, respectively.

Securitizations

The investments held by the Company’s securitizations collateralize the securitizations’ borrowings and, as a result, are not available to the Company, its creditors, or stockholders. All senior notes of the securitizations held by the Company at December 31, 2024 were eliminated in consolidation. In March 2025, the Company exercised the optional redemption on ACR 2021-FL1 and ACR 2021-FL2 in conjunction with the closing of the CRE reinvestment facility (see below).

ACR 2021-FL1

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

ACR 2021-FL2

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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

Financing Arrangements

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


	March 31, 2025							December 31, 2024
	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate
CRE - Term Reinvestment Financing Facility (1)
JPMorgan Chase Bank, N.A. (2)	$	889,861	$	1,194,899		39	6.07%	$	—	$	—		—	—%

Senior Secured Financing Facility
Massachusetts Mutual Life Insurance Company (3)		61,091		164,565		6	8.10%		60,910		162,578		6	8.22%

CRE - Term Warehouse Financing Facilities (1)
JPMorgan Chase Bank, N.A. (4)		—		—		—	—%		90,995		158,639		5	6.87%
Morgan Stanley Mortgage Capital Holdings LLC (5)		40,069		62,322		3	7.45%		65,744		98,373		5	7.22%

Mortgages Payable
ReadyCap Commercial, LLC (6)		20,292		26,969		1	8.12%		20,240		26,960		1	8.28%
Oceanview Life and Annuity Company (7)(8)		44,111		92,532		1	10.32%		44,211		92,549		1	10.40%
Florida Pace Funding Agency (7)(9)		15,109		—		—	7.26%		15,105		—		—	7.26%
Total	$	1,070,533	$	1,541,287				$	297,205	$	539,099

(1)

Outstanding borrowings include accrued interest payable.

(2)

Includes $3.3 million of deferred debt issuance costs at March 31, 2025.

(3)

Includes $2.0 million and $2.2 million of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.

(4)

Includes $988,000 of deferred debt issuance costs at December 31, 2024.

(5)

Includes $1.2 million and $539,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively, which includes $831,000 of deferred debt issuance costs at March 31, 2025 from another term warehouse financing facility with no balance.

(6)

There were no deferred debt issuance costs at March 31, 2025. Includes $52,000 of deferred debt issuance costs at December 31, 2024.

(7)

Outstanding borrowings are collateralized by a student housing construction project. Value of collateral and number of positions as collateral related to Oceanview Life and Annuity Company also applies to Florida Pace Funding Agency.

(8)

Includes $200,000 and $101,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.

(9)

Includes $401,000 and $405,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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


	Amount at Risk		Weighted Average Remaining Maturity		Weighted Average Interest Rate
At March 31, 2025
CRE - Term Reinvestment Financing Facility (1)(2)
JPMorgan Chase Bank, N. A.	$	314,573	5.1 years		6.07%
Senior Secured Financing Facility (1)
Massachusetts Mutual Life Insurance Company	$	101,944	2.8 years		8.10%
CRE - Term Warehouse Financing Facilities (1)(2)
JPMorgan Chase Bank, N. A.	$	—	1.3 years		—%
Morgan Stanley Mortgage Capital Holdings LLC	$	22,263	0.6 years		7.45%
Mortgages Payable
ReadyCap Commercial, LLC (3)	$	6,593		—	8.12%
Oceanview Life and Annuity Company (4)(5)(6)	$	32,318	0.4 years		10.32%
Florida Pace Funding Agency (4)(5)	$	—	28.3 years		7.26%

(1)

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

(2)

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

(3)

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

(4)

Equal to the total of the estimated fair value of real estate property investment financed, minus the total of the construction loans agreement liabilities and accrued interest payable. Amount at risk related to Oceanview Life and Annuity Company also applies to Florida Pace Funding Agency.

(5)

Outstanding borrowings are collateralized by a student housing construction project.

(6)

In February 2025, the Company extended Oceanview Life and Annuity Company to September 2025.

The Company was in compliance with all financial covenants in each of the respective agreements at March 31, 2025 and December 31, 2024.

CRE - Term Reinvestment Financing Facility

In March 2025, an indirect wholly-owned subsidiary of the Company entered into a master repurchase agreement (the “JPMorgan Chase 2025 Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) to finance existing CRE loans and the origination of new CRE loans. The JPMorgan Chase 2025 Facility has a maximum facility amount of $939.9 million, provides match term funding, charges interest of one-month Term SOFR plus a 1.75% spread and matures as of the latest maturity date of any purchased asset. The JPMorgan Chase 2025 Facility includes a two-year reinvestment period enabling the reinvestment of principal proceeds from asset repayments into qualifying replacement assets. The reinvestment period for the JPMorgan Chase 2025 Facility ends in March 2027.

In connection with the JPMorgan Chase 2025 Facility, the Company provided "bad act" guaranties pursuant to a guarantee agreement (the "2025 JPMorgan Chase Guarantee") where the Company is liable for 100% of the repurchase price of the purchase assets and JPMorgan Chase’s losses, costs and expenses only upon the occurrence of certain customary bad acts. The JPMorgan Chase 2025 Guarantee includes certain financial covenants required of the Company, including required liquidity, required capital, ratios of total indebtedness to equity and EBITDA requirements. The JPMorgan Chase 2025 Facility also includes minimum interest coverage requirements and maximum look through LTV requirements. Also, ACRES RF, the direct owner of the wholly-owned subsidiary borrower, executed a pledge agreement with JPMorgan Chase pursuant to which it pledged and granted to JPMorgan Chase a continuing security interest in any and all of its right, title and interest in and to the wholly-owned subsidiary, including all distributions, proceeds, payments, income and profits from its interests in the wholly-owned subsidiary.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

The JPMorgan Chase 2025 Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement, including but not limited to: payment defaults; bankruptcy or insolvency proceedings; a change of control of the ACRES SPE 2025-1, LLC, ("Seller SPE") or the Company; breaches of covenants and/or certain representations and warranties; and a judgment in an amount greater than $250,000 against the Seller SPE or ACRES RF or $10.0 million against the Company. The remedies for such events of default are also customary for this type of financing arrangement and include the acceleration of the principal amount outstanding under the JPMorgan Chase 2025 Facility and the liquidation by JPMorgan Chase of purchased assets then subject to the JPMorgan Chase 2025 Facility.

Senior Secured Financing Facility

On July 31, 2020, an indirect, wholly owned subsidiary ("Holdings"), along with its direct wholly owned subsidiary (the "Borrower"), of the Company entered into a $250.0 million Loan and Servicing Agreement (the "MassMutual Loan Agreement") with MassMutual and the other lenders party thereto (the "Lenders"). The asset-based revolving loan facility (the "MassMutual Facility") provided under the MassMutual Loan Agreement has been used to finance the Company’s core CRE lending business. The MassMutual Facility initially had an interest rate of 5.75% per annum payable monthly and initially matured on July 31, 2027.

In December 2022, Holdings, the Borrower and the Lenders entered into an 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. 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 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. Each loan series will have its own mutually agreed upon interest rate equal to one-month Term SOFR plus the applicable spread.

CRE - Term Warehouse Financing Facilities

In October 2018, an indirect, wholly-owned subsidiary of the Company entered into a master repurchase agreement (the "JPMorgan Chase Facility") with JP Morgan Chase to finance the origination of CRE loans. As amended, the JPMorgan Chase Facility has a maximum facility amount of $250.0 million, charges interest of one-month Term SOFR plus market spreads and matures in July 2026. In March 2025, the Company entered into Amendment No. 6 to Guarantee, by and between the Company and JPMorgan Chase, which makes certain amendments and modifications to the Guaranty, dated October 26, 2018 between the Company and JPMorgan Chase, as amended (the "JPM Guarantee") including but not limited to amending (capitalized terms each as defined in the JPM Guarantee) (i) minimum unencumbered Liquidity requirement, (ii) the ratio of Total Indebtedness to Total Equity, (iii) ratio of Adjusted Total Indebtedness to Total Equity, and (iv) EBITDA to Interest Expense ratio.

In November 2021, an indirect, wholly-owned subsidiary of the Company entered into a master repurchase and securities contract agreement (the "Morgan Stanley Facility") with Morgan Stanley Mortgage Capital Holdings LLC ("Morgan Stanley") to finance the origination of CRE loans. As amended, the Morgan Stanley Facility has a maximum facility amount of $250.0 million, charges interest of one-month Term SOFR plus market spreads and matures in November 2025. The Company also has the right to request a one-year extension. In March 2025, the Company entered into Amendment No. 4 to Guaranty (the “Morgan Stanley Amendment”) by and between the Company and Morgan Stanley, which makes certain amendments and modifications to the amended Guaranty between the Company and Morgan Stanley (the "MS Guaranty"), including but not limited to (capitalized terms each as defined in the MS Guaranty) (i) minimum unencumbered Liquidity requirement, (ii) the ratio of Total Indebtedness to Total Equity, (iii) ratio of Adjusted Total Indebtedness to Total Equity, and (iv) EBITDA to Interest Expense ratio.

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

Mortgages Payable

In April 2022, Chapel Drive West, LLC, a wholly owned subsidiary of the FSU Student Venture, entered into a Loan Agreement (the "Mortgage") with ReadyCap Commercial, LLC ("ReadyCap") to finance the acquisition of a student housing complex. The Mortgage is interest only and has a maximum principal balance of $20.4 million, of which, $18.7 million was advanced in the initial funding. Initially, the Mortgage charged interest of 30-day average Secured Overnight Financing Rate plus a spread of 3.80%. In October 2022, the Mortgage was amended to charge interest of one-month Term SOFR plus a spread of 3.80%. The Mortgage matures in April 2025, subject to two one-year extension options.

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.

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. 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 matures in September 2025, subject to one five month extension, then two one-year extension options.

In addition to the Construction Loan, Chapel Drive East, LLC, entered into a financing agreement with Florida Pace Funding Agency to fund energy efficient building improvements and has a maximum principal balance of $15.5 million. This agreement charges fixed interest of 7.26% and matures in July 2053. The Company does not guarantee this financing agreement.

In connection with the Company's investment in the student housing complex, ACRES RF entered into guarantees related to the Construction Loan. Pursuant to the guarantees, Jason Pollack, Frank Dellaglio and ACRES RF (collectively, the "Guarantors"), for the benefit of Oceanview, provided limited "bad boy" guaranties to Oceanview pursuant to the Construction Loan Agreement until the earlier of the payment in full of the indebtedness or the date of a sale of the property pursuant to a foreclosure of the mortgage or deed or other transfer in lieu of foreclosure is accepted by Oceanview. The Guarantors also entered into a Completion Guaranty Agreement for the benefit of Oceanview to guaranty the timely completion of the project in accordance with the Construction Loan Agreement, as well as a Carry Guaranty Agreement, for the benefit of Oceanview to guaranty unconditional payment by Chapel Drive East, LLC of all customary or necessary costs and expenses incurred in connection with the operation, maintenance and management of the property and an Environmental Indemnity Agreement jointly and severally in favor of Oceanview whereby the Guarantors provided environmental representations and warranties, covenants and indemnifications (collectively the "Guaranties"). The Guaranties include certain financial covenants required of ACRES RF, including required net worth and liquidity requirements.

Corporate Debt

5.75% Senior Unsecured Notes Due 2026

On August 16, 2021, the Company issued $150.0 million of its 5.75% senior unsecured notes due 2026 (the "5.75% Senior Unsecured Notes") pursuant to its Indenture dated August 16, 2021 (the "Base Indenture"), between it and Wells Fargo, now Computershare Trust Company, N.A. ("CTC"), as trustee (the "Trustee"), as supplemented by the First Supplemental Indenture, dated August 16, 2021, between it and Wells Fargo (now CTC) (the "Supplemental Indenture" and, together with the Base Indenture, the "Indenture"). Prior to May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, and (ii) a make-whole premium. On or after May 15, 2026, the Company may at its 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.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

Unsecured Junior Subordinated Debentures

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

There were no unamortized debt issuance costs associated with the junior subordinated debentures for RCT I and RCT II outstanding at March 31, 2025 and December 31, 2024. The interest rates for RCT I and RCT II, at March 31, 2025, were 8.51% and 8.50%, respectively. The interest rates for RCT I and RCT II, at December 31, 2024, were 8.54% and 8.80%, respectively.

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


	Total		2025		2026		2027		2028		2029 and Thereafter(1)
At March 31, 2025
CRE - term reinvestment financing facility (2)	$	893,200	$	—	$	—	$	—	$	—	$	893,200
Senior Secured Financing Facility		63,099		—		—		50,996		12,103		—
CRE - term warehouse financing facilities (2)		41,281		41,281		—		—		—		—
Mortgages payable		80,113		64,603		—		—		—		15,510
5.75% Senior Unsecured Notes		150,000		—		150,000		—		—		—
Unsecured junior subordinated debentures		51,548		—		—		—		—		51,548
Total	$	1,279,241	$	105,884	$	150,000	$	50,996	$	12,103	$	960,258

(1)

There are no contractual maturities due in 2029.

(2)

Includes accrued interest payable in the balances of principal outstanding.

NOTE 11 - SHARE ISSUANCE AND REPURCHASE

On October 4, 2021, the Company and the Manager entered into an Equity Distribution Agreement with JonesTrading Institutional Services LLC, as placement agent ("JonesTrading"), pursuant to which the Company may issue and sell from time to time up to 2.2 million shares of the 7.875% Series D Cumulative Redeemable Preferred Stock ("Series D Preferred Stock"). Sales of the Series D Preferred Stock may be made in transactions that are deemed to be "at the market" offerings, as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation, sales made directly on the New York Stock Exchange, on any other existing trading market for the shares or to or through a market maker. Subject to the terms of the Company’s notice, JonesTrading may also sell the shares by any other method permitted by law, including but not limited to in privately negotiated transactions. The Company will pay JonesTrading a commission up to 3.0% of the gross proceeds from the sales of the Series D Preferred Stock pursuant to the agreement. The terms and conditions of the agreement include various representations and warranties, conditions to closing, indemnification rights and obligations of the parties and termination provisions. During the three months ended March 31, 2025 and the year ended December 31, 2024, the Company did not issue any Series D Preferred Stock through this agreement.

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

At March 31, 2025, the Company had 4.8 million shares of Series C Preferred Stock and 4.5 million shares of Series D Preferred Stock outstanding, with weighted average issuance prices, excluding offering costs, of $25.00.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

In November 2021, the board of directors, (the "Board"), authorized and approved the continued use of its existing share repurchase program to repurchase an additional $20.0 million of the outstanding shares of the Company's common stock. Under the share repurchase program, the Company intends to repurchase shares through open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act. In November 2023, the Board authorized and approved the repurchase of an additional $10.0 million of outstanding shares of both common and preferred stock. In December 2024, the Board authorized and approved the repurchase of an additional $5.0 million of outstanding shares of both common and preferred stock and in April 2025, the Board authorized and approved the repurchase of an additional $10.0 million of outstanding shares of both common and preferred stock.

During the three months ended March 31, 2025 and 2024, the Company repurchased $4.4 million and $2.1 million, respectively, of its common stock, representing 220,188 and 194,827 shares, respectively. During the three months ended March 31, 2024, the Company repurchased $2.2 million, or 100,000 shares, of its Series D Preferred Stock. At March 31, 2025, $426,000 of common and preferred stock remains available under this repurchase plan.

In connection with the Note and Warrant Purchase Agreement with Oaktree Capital Management, L.P. ("Oaktree") and Massachusetts Mutual Life Insurance Company ("MassMutual") dated July 31, 2020, the Company issued to Oaktree warrants to purchase 391,995 shares of common stock for an aggregate purchase price of $42.0 million, and issued to MassMutual warrants to purchase 74,666 shares of common stock for an aggregate purchase price of $8.0 million. The warrants are classified as equity and recorded in additional paid-in capital on the consolidated balance sheets at their fair value of $3.1 million at issuance. The warrants are immediately exercisable on issuance at an exercise price of $0.03 per share, subject to certain potential adjustments, and expire seven years from the issuance date. The holder of the warrants can exercise with cash or as a net exercise. In July 2022, MassMutual exercised their warrants to purchase 74,666 shares. At March 31, 2025, the Oaktree warrants have not been exercised.

NOTE 12 - SHARE-BASED COMPENSATION

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

The Omnibus Plan and the Manager Plan are administered by the compensation committee of the Company's Board (the "Compensation Committee"). In 2020, the Compensation Committee and the Board created parameters for equity awards, whereby they are no longer discretionary but are now based upon the Company’s achievement of performance parameters using book value of the common stock as the appropriate benchmark. See Note 16 for a description of awards made under the Manager Plan.

The Company recognized stock-based compensation expense of $815,000 and $477,000 during the three months ended March 31, 2025 and 2024, respectively, related to restricted stock.

In May 2024, the Company issued 295,237 shares of common stock to the Manager and 38,096 shares of common stock to the Company’s directors (with the exception of Messrs. Fentress and Fogel) under the Plans after the Company reached the established per share book value target of $27.00 per share. Each grant vests 25% per year over four years. No shares of common stock were issued to the Manager or the Company’s directors during the three months ended March 31, 2025.

Under the Company’s Fourth Amended and Restated Management Agreement, as amended ("Management Agreement"), incentive compensation is paid quarterly. Up to 75% of the incentive compensation may be paid in cash and at least 25% must be paid in the form of an award of common stock, recorded in management fees on the consolidated statements of operations. During the three months ended March 31, 2025 and 2024, the Company incurred no incentive compensation payable to the Manager. At March 31, 2025, there was no amount included in Management fee payable - related party on the consolidated balance sheets.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

The Company did not issue shares of common stock to the Manager during the three months ended March 31, 2025. During the three months ended March 31, 2024, the Company issued 1,911 shares of common stock to the Manager pertaining to the portion of the fourth quarter 2023 incentive compensation that was payable in shares. Shares of common stock issued under the Management Agreement for incentive compensation vest immediately upon issuance.

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


	Manager		Directors		Total Number of Shares		Weighted-Average Grant-Date Fair Value
Unvested shares at January 1, 2025		520,240		54,298		574,538	$	13.83
Issued		—		—		—		—
Vested		—		—		—		—
Unvested shares at March 31, 2025		520,240		54,298		574,538	$	13.83

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


	Shares
2025		245,952
2026		164,293
2027		82,139
2028		82,154
Total		574,538

At March 31, 2025, total unrecognized compensation costs relating to unvested restricted stock was $2.8 million based on the grant date fair value of shares granted. The cost is expected to be recognized over a weighted average period of 2.9 years.

NOTE 13 - EARNINGS PER SHARE

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


	For the Three Months Ended March 31,
	2025			2024
Net (loss) income	$	(730	)	$	4,924
Net income allocated to preferred shares		(5,313	)		(4,822	)
Carrying value in excess of consideration paid for preferred shares		—			242
Net loss allocable to non-controlling interest, net of taxes		184			212
Net (loss) income allocable to common shares	$	(5,859	)	$	556

Weighted average number of common shares outstanding:
Weighted average number of common shares outstanding - basic		6,970,241			7,362,135
Weighted average number of warrants outstanding (1)		391,995			391,995
Total weighted average number of common shares outstanding - basic		7,362,236			7,754,130
Effect of dilutive securities - unvested restricted stock(2)		—			279,683
Weighted average number of common shares outstanding - diluted		7,362,236			8,033,813

Net (loss) income per common share - basic	$	(0.80	)	$	0.07
Net (loss) income per common share - diluted	$	(0.80	)	$	0.07

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

(1)

See Note 11 for further details regarding the warrants.

(2)

Excludes 431,552 shares of common stock as they were anti-dilutive for the three months ended March 31, 2025.

NOTE 14 - DISTRIBUTIONS

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

The Company’s 2025 distributions are, and will be, determined by the Company's Board, which will also consider the composition of any distributions declared, including the option of paying a portion in cash and the balance in additional shares of common stock.

For the three months ended March 31, 2025 and 2024, the Company did not pay any common share distributions.

The following table presents distributions declared (on a per share basis) for the three months ended March 31, 2025 and the year ended December 31, 2024 with respect to the Company's Series C Preferred Stock and Series D Preferred Stock:


	Series C Preferred Stock					Series D Preferred Stock
	Date Paid	Total Distribution Paid		Distribution Per Share		Date Paid	Total Distribution Paid		Distribution Per Share
		(in thousands)					(in thousands)
2025
March 31	April 30	$	3,064	$	0.6383681	April 30	$	2,219	$	0.4921875
2024
December 31	January 30, 2025	$	3,155	$	0.6572606	January 30, 2025	$	2,219	$	0.4921875
September 30	October 30		3,355		0.6988981	October 30		2,219		0.4921875
June 30	July 30		2,587		0.5390625	July 30		2,219		0.4921875
March 31	April 30		2,588		0.5390625	April 30		2,219		0.4921875

NOTE 15 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in net unrealized loss on derivatives, the sole component of accumulated other comprehensive loss, for the three months ended March 31, 2025 (in thousands):


	Accumulated Other Comprehensive Loss - Net Unrealized Loss on Derivatives
Balance at January 1, 2025	$	(3,203	)
Amounts reclassified from accumulated other comprehensive loss (1)		393
Balance at March 31, 2025	$	(2,810	)

(1)

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

NOTE 16 - RELATED PARTY TRANSACTIONS

Relationship with ACRES Capital Corp. and certain of its Subsidiaries. The Manager is a subsidiary of ACRES Capital Corp., of which Andrew Fentress, the Company’s Chairman, serves as Managing Partner, and Mark Fogel, the Company’s President, Chief Executive Officer and Director, serves as Chief Executive Officer and President. Mr. Fentress and Mr. Fogel are also shareholders and board members of ACRES Capital Corp.

Effective on July 31, 2020, the Company has a Management Agreement with the Manager pursuant to which the Manager provides the day-to-day management of the Company’s operations and receives management fees. For the three months ended March 31, 2025 and 2024, the Manager earned base management fees of $1.6 million, respectively.

For the three months ended March 31, 2025 and 2024, the Manager did not earn an incentive management fee.

At March 31, 2025 and December 31, 2024, $1.1 million and $540,000, respectively, of base management fees were payable by the Company to the Manager. At March 31, 2025 and December 31, 2024, there was no incentive management fee payable.

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

The Company reimbursed the Manager $1.1 million and $1.5 million, for the three months ended March 31, 2025 and 2024, respectively, for all such compensation and costs. At March 31, 2025 and December 31, 2024, the Company had payables to the Manager pursuant to the Management Agreement totaling $791,000 and $353,000, respectively, related to such compensation and costs. The Company’s base management fee payable and incentive management fee payable were recorded in management fee payable while expense reimbursement payables were recorded in accounts payable and other liabilities on the consolidated balance sheets, respectively.

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

The ACRES Loan accrues interest at 3.00% per annum payable monthly. The monthly amortization payment is $25,000. The ACRES Loan matures in July 2026, subject to two one-year extensions (at ACRES Capital Corp.’s option) subject to the payment of a 0.5% extension fee to ACRES RF on the outstanding principal amount of the ACRES Loan.

In March 2025, the Company amended and restated the promissory note in connection with the ACRES Loan. The ACRES Loan was amended and restated 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 5.00% and (c) increase the monthly amortization to $50,000.

The Company recorded interest income of $80,000 and $83,000 for the three months ended March 31, 2025 and 2024, respectively, on the ACRES Loan in other income (expense) on the consolidated statements of operations. At March 31, 2025 and December 31, 2024, the ACRES Loan had a principal balance of $10.6 million and $10.7 million, respectively, recorded in loan receivable - due from Manager on the consolidated balance sheets. At March 31, 2025 and December 31, 2024, the ACRES Loan had no accrued interest receivable.

The Company retained equity in two securitization entities that were structured for the Company by the Manager. Under the Management Agreement, the Manager was not separately compensated by the Company for executing this transaction and was not separately compensated for managing the securitization entity and its assets. The two securitizations were liquidated during March 2025.

Relationship with ACRES Capital Servicing LLC. Under the MassMutual Loan Agreement, ACRES Capital Servicing LLC ("ACRES Capital Servicing"), an affiliate of ACRES Capital Corp. and the Manager, serves as the portfolio servicer. Additionally, ACRES Capital Servicing served as special servicer of ACR 2021-FL1 and ACR 2021-FL2 prior to the liquidation in March 2025.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

During the three months ended March 31, 2025 and 2024, ACRES Capital Servicing received no portfolio servicing fees, and received $182,000 and $16,000, respectively, in special servicing fees, of which $4,000, was recorded as a reduction to interest income in the consolidated statements of operations during the three months ended March 31, 2024. No special servicing fees were recorded as a reduction to interest income in the consolidated statements of operations during the three months ended March 31, 2025.

Relationship with ACRES Collateral Manager, LLC. ACRES Collateral Manager, LLC, an affiliate of ACRES Capital Corp. and the Manager, served as the collateral manager of ACR 2021-FL1 and ACR 2021-FL2, a role for which it waived its fee. In March 2025, ACR 2021-FL1 and ACR 2021-FL2 were liquidated.

Relationship with ACRES Development Management, LLC. ACRES Development Management, LLC ("DevCo") is a wholly owned subsidiary of ACRES Capital Corp., the parent of the Manager. DevCo acts in various capacities as a co-developer or owner’s representative for direct equity investments within the Company’s portfolio. In November 2021, December 2021 and April 2022, the joint venture entities of the three CRE equity investments acquired through direct investment entered into development agreements with DevCo (the "Development Agreements").

Pursuant to the Development Agreements, DevCo agreed to manage the development of the projects associated with each equity investment in accordance with a development standard in exchange for fees equal to between 1.25% and 1.5% of all project costs. The Company did not incur nor pay fees for services rendered under these agreements for the three months ended March 31, 2025. During the three months ended March 31, 2024, the Company incurred and paid $82,000 in fees for services rendered under the Development Agreements.

Relationship with ACRES Share Holdings, LLC. During the three months ended March 31, 2024, the Company issued 1,911 shares to ACRES Share Holdings, LLC in connection with the incentive compensation payable to the Manager under the Management Agreement. There was no activity for the three months ended March 31, 2025. The shares vested fully upon issuance pursuant to the Management Agreement.

Under the Manager Plan, the Company can issue restricted shares of common stock to ACRES Share Holdings, LLC after meeting the established per share book value hurdle. The grants vest 25% per year over four years. There was no activity for the three months ended March 31, 2025 and 2024.

Relationship with McCallum JV. In September 2024, ACRES RF, a direct, wholly owned subsidiary, entered into a $33.7 million senior loan commitment and a $1.5 million mezzanine loan commitment with McCallum JV in which the Company holds a 50% interest. The loans have an initial maturity date of September 5, 2027. The senior loan has a rate of one-month Term SOFR plus a spread of 2.75%, while the mezzanine loan has a fixed rate of 20.00%. At March 31, 2025, the outstanding balance on the senior loan was $33.4 million, with $2.2 million funded since origination, while the mezzanine loan had an outstanding balance of $94,000. During the three months ended March 31, 2025, the Company recognized $588,000 of revenue related to the McCallum JV loans, with $408,000 of accrued interest outstanding.

Relationship with Pacmulti JV. In March 2025, ACRES RF, a direct, wholly owned subsidiary, entered into a $70.8 million senior loan commitment and a $13.5 million mezzanine loan commitment with Pacmulti JV in which the Company holds a 50% interest. The loans have an initial maturity date of May 5, 2030. The senior loan has a rate of one-month Term SOFR plus a spread of 3.41%, while the mezzanine loan has a fixed 15.00%. At March 31, 2025, the senior loan has been fully funded, while the mezzanine loan had an outstanding balance of $6.7 million. During the three months ended March 31, 2025, the Company recognized $54,000 of revenue related to the loans, with $2.4 million of accrued interest outstanding.

NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company had no financial instruments carried at fair value on a recurring basis at either March 31, 2025 and December 31, 2024.

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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

CRE whole loans. The fair values of the Company’s loans held for investment are measured by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Par values of loans with variable interest rates are expected to approximate fair value unless evidence of credit deterioration exists, in which case the fair value approximates the par value less the loan’s allowance estimated through individual evaluation. The Company’s floating-rate CRE loans had interest rates from 6.13% to 11.38% and 7.13% to 11.63% at March 31, 2025 and December 31, 2024, respectively.

CRE mezzanine loans. The fair value of the Company's mezzanine loans are measured by discounting the expected remaining cash flows using the current interest rates at which similar instruments would be originated for the same remaining maturity. One of the Company's mezzanine loans was fully reserved and had no carrying or fair value at March 31, 2025 or December 31, 2024. Additionally, during three months ended March 31, 2025, the Company originated a mezzanine loan discounted at a rate of 15.00%.

Loan receivable- due from Manager. Fair value is estimated using a discounted cash flow model.

Senior notes in CRE securitizations, 5.75% Senior Unsecured Notes and junior subordinated notes. Fair values are estimated using a discounted cash flow model with implied yields based on trades for similar securities.

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

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


			Fair Value Measurements
	Carrying Value		Fair Value(1)		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2025:
Assets:
CRE whole loans	$	1,332,191	$	1,360,392	$	—	$	—	$	1,360,392
CRE mezzanine loan		14,218		15,000		—		—		15,000
Loan receivable - due from Manager		10,600		9,141		—		—		9,141
Liabilities:
CRE term reinvestment facility		889,861		893,200		—		—		893,200
Senior secured financing facility		61,091		63,099		—		—		63,099
Warehouse financing facilities		40,069		41,281		—		—		41,281
Mortgages payable		79,512		80,507		—		—		80,507
5.75% Senior Unsecured Notes		148,989		147,570		—		—		147,570
Junior subordinated notes		51,548		41,996		—		—		41,996
At December 31, 2024:
Assets:
CRE whole loans	$	1,454,545	$	1,484,997	$	—	$	—	$	1,484,997
Loan receivable - due from Manager		10,675		8,969		—		—		8,969
Loan held for sale		11,100		11,100		—		—		11,100
Liabilities:
Senior notes in CRE securitizations		862,804		857,437		—		—		857,437
Senior secured financing facility		60,910		63,099		—		—		63,099
Warehouse financing facilities		156,739		158,266		—		—		158,266
Mortgages payable		79,556		80,113		—		—		80,113
5.75% Senior Unsecured Notes		148,814		145,485		—		—		145,485
Junior subordinated notes		51,548		40,852		—		—		40,852

(1)

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

NOTE 18 - MARKET RISK AND DERIVATIVE INSTRUMENTS

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

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

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

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

The Company terminated all of its interest rate swap positions associated with its financed CMBS portfolio in April 2020. At termination, the Company realized a loss of $11.8 million. At March 31, 2025 and December 31, 2024, the Company had losses of $2.9 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. During the three months ended March 31, 2025 and 2024, the Company recorded amortization expense of $415,000 and $420,000, respectively, reported in interest expense on the consolidated statements of operations.

At March 31, 2025 and December 31, 2024, the Company had an unrealized gain of $50,000 and $73,000, respectively, attributable to two terminated interest rate swaps in accumulated other comprehensive loss on the consolidated balance sheets, to be accreted into earnings over the remaining life of the debt. For each of the three months ended March 31, 2025 and 2024, the Company recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 to accrete the accumulated other comprehensive income on the terminated swap agreements.

The following table presents the effect of the derivative instruments on the consolidated statements of operations for the three months ended March 31, 2025 and 2024 (in thousands):


		Realized and Unrealized Gain (Loss) (1)
	Consolidated Statements of Operations Location	Three Months Ended March 31, 2025			Three Months Ended March 31, 2024
Interest rate swap contracts, hedging	Interest expense	$	(393	)	$	(397	)

(1)

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

NOTE 19 - OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

The following table presents a summary of the Company’s offsetting of financial liabilities (in thousands, except amounts in footnotes):


	(i) Gross Amounts		(ii) Gross Amounts Offset on the		(iii) = (i) - (ii) Net Amounts of Liabilities Presented on the		(iv) Gross Amounts Not Offset on the Consolidated Balance Sheets
	of Recognized Liabilities		Consolidated Balance Sheets		Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Pledged		(v) = (iii) - (iv) Net Amount
At March 31, 2025:
Warehouse financing facilities (2)	$	40,069	$	—	$	40,069	$	40,069	$	—	$	—
At December 31, 2024:
Warehouse financing facilities (2)	$	156,739	$	—	$	156,739	$	156,739	$	—	$	—

(1)

Amounts represent financial instruments pledged that are available to be offset against liability balances associated with warehouse financing facilities and repurchase agreements.

(2)

The combined fair value of securities and loans pledged against the Company’s various warehouse financing facilities and repurchase agreements was $62.3 million and $257.0 million at March 31, 2025 and December 31, 2024, respectively.

All balances associated with warehouse financing facilities are presented on a gross basis on the Company’s consolidated balance sheets.

Certain of the Company’s warehouse financing facilities are governed by underlying agreements that generally provide for a right of offset in the event of default or in the event of a bankruptcy of either party to the transaction.

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2025

(unaudited)

NOTE 20 - COMMITMENTS AND CONTINGENCIES

The Company may become involved in litigation on various matters due to the nature of the Company’s business activities. The resolution of these matters may result in adverse judgments, fines, penalties, injunctions and other relief against the Company as well as monetary payments or other agreements and obligations. In addition, the Company may enter into settlements on certain matters in order to avoid the additional costs of engaging in litigation. The Company is unaware of any contingencies arising from such litigation that would require accrual or disclosure in the consolidated financial statements at March 31, 2025.

The Company did not have any general litigation reserve at March 31, 2025 or December 31, 2024.

Other Guarantees

See description of Mortgages Payable in Note 10.

Unfunded Commitments

Unfunded commitments on the Company’s originated CRE loans generally fall into two categories: (1) pre-approved capital improvement projects and (2) new or additional construction costs subject, in each case, to the borrower meeting specified criteria. Upon completion of the improvements or construction, the Company would receive additional interest income on the advanced amount. The Company had $84.0 million and $94.0 million in unfunded loan commitments at March 31, 2025 and December 31, 2024, respectively.

NOTE 21 - SEGMENT INFORMATION

The Company's management directs operations on a consolidated basis as a single operating segment, CRE lending operations. The CRE lending operations segment derives its revenues in the United States by originating, holding and managing CRE mortgage loans and related assets. Additionally, the Company may find it in its best interests to foreclose or to accept the deed-in-lieu of foreclosure on certain loans; and if the Company cannot sell the related property, the Company operates the property as real estate owned. The accounting policies of the CRE lending operations segment are the same as those described in the summary of significant accounting policies.

The chief operating decision maker ("CODM") is the ACRES management committee that includes the principals of the Manager, including the Company's President & Chief Executive Officer. The CODM uses net income, as reported on the Company's consolidated statements of operations, in evaluating performance for the CRE lending operations segment and determining how to allocate resources. Net income is used to monitor budget versus actual results. The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors. The Company's net income is primarily derived through the difference between the interest income earned on our loans and the cost at which the Company is able to finance them. Accordingly, interest expense, as reported on the Company's consolidated statements of operations, is the Company's most significant segment expense. The other significant expenses are general and administrative expenses and provision for credit losses. The measure of segment assets is reported on the consolidated balance sheets as total assets.

NOTE 22 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events, other than those described in Notes 10 and 11 that have occurred that would require adjustments to or disclosures in the consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this quarterly report to "we," "us" or the "Company" refer to ACRES Commercial Realty Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "continue," "expect," "intend," "anticipate," "estimate," "believe," "look forward" or other similar words or terms. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, including, without limitation, factors impacting whether we will be able to maintain our sources of liquidity and whether we will be able to identify sufficient suitable investments to increase our originations, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (the "SEC"). Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

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. (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. Our longer term objective is to provide our stockholders with total returns over time, including quarterly distributions and capital appreciation, while seeking to manage the risks associated with our investment strategies as well as to maximize long-term stockholder value by maintaining stability through our available liquidity and diversified CRE loan portfolio. Our short-term strategy is to drive book value ("BV") growth by utilizing both our NOL carryforwards of $32.1 million, which may be used over the coming years, and a portion of our net capital loss carryforwards of $121.9 million, which expire on December 31, 2025 (each balance as of March 31, 2025). By retaining future earnings, we can grow our investable base and selectively deploy the anticipated capital growth into new whole loan originations at attractive yields, which we expect will grow our earnings available for distribution.

Currently, markets are grappling with trade tensions, geopolitical tensions, the risk of increased tariffs, inflation and elevated interest rates. These market pressures have caused continued disruption in many market segments, including the financial services, real estate and credit markets and these disruptions have affected the availability and the cost of capital. The increase in the cost of capital is expected to cause dislocations in various investment and financing markets in which we participate as we and other market participants adjust to the new financing environment.

The U.S. Federal Reserve raised the Federal Funds rate by 5.25% in 11 rate hikes between March 2022 and July 2023 to combat inflation. While the U.S Federal Reserve has lowered rates in September, November and December 2024, there is no certainty with respect to the timing and pace of potential future decreases or if such decreases will continue to occur. Interest rates may remain at or near recent highs, which creates further uncertainty for the economy and our borrowers. A rising interest rate environment generally correlates to increases in our net income. However, increases in interest rates may adversely affect our existing borrowers and could lead to nonperformance, i.e. the borrower’s inability to pay debt service. Lowering rates and decreasing costs may encourage consumer spending and accelerate corporate profit growth, which may positively impact the collateral underlying our loans and positively impact our borrowers' ability to sell or refinance in the current market; however, lower rates would also correlate to decreases in our net income.

Furthermore, the office property market continues to experience high vacancies, slower leasing activity and current tenants reevaluating their needs for physical office space due to remote-work trends across the country. These factors, coupled with inflation, 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

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investments in their office properties, their abilities to sell or refinance their positions in the current market and ultimately our financial results.

In response, we continue to manage corporate liquidity actively and responsibly, manage our CRE assets through a solutions-based approach with our borrowers and manage our daily operations in light of changing macroeconomic circumstances. Our Manager also continuously monitors for new capital opportunities and selectively executes on agreements that are expected to enhance our returns.

We originate transitional floating-rate CRE loans with a target size between $10.0 million and $100.0 million. During the three months ended March 31, 2025, we originated one new $15.0 million CRE mezzanine loan. Loan payoffs during the three months ended March 31, 2025 were $147.7 million, offset by net funded commitments of $12.0 million, producing a net decrease to the portfolio of $120.7 million. During the year ended December 31, 2024, we selectively originated one floating-rate CRE loan, with a total commitment of $47.9 million. Loan payoffs during the year ended December 31, 2024 were $377.6 million, along with loan foreclosures of $37.7 million, partially offset by net funded commitments of $5.9 million, producing a net decrease to the portfolio of $361.5 million.

Our CRE loan portfolio, which had carrying values of $1.3 billion and $1.5 billion at March 31, 2025 and December 31, 2024, respectively, comprised:

•

First mortgage loans, which we refer to as whole loans. These loans are typically secured by first liens on CRE property, including the following property types: multifamily, student housing, hospitality, office, self-storage and retail. All but five of our CRE whole loans were current on contractual payments at March 31, 2025.

•

Mezzanine debt that is senior to borrower’s equity but is subordinated to other third-party debt. These loans are subordinated CRE loans, usually secured by a pledge of the borrower’s equity ownership in the entity that owns the property or by a second lien mortgage on the property. At March 31, 2025, we had two mezzanine loans included in CRE loans held for investment with a carrying value of $14.2 million. At December 31, 2024, we had one mezzanine loan included in CRE loans held for investment that had no carrying value. This mezzanine loan was not current on contractual payments at both March 31, 2025 and December 31, 2024.

We generate our income primarily from the spread between the revenues we receive from our assets and the cost to finance our ownership of those assets, including corporate debt.

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. Our benchmark floors provide asset yield protection when the benchmark rate falls below an in-place benchmark floor. Our net investment returns are enhanced by a decline in the cost of our floating-rate liabilities that do not have benchmark floors. Our net investment returns will be negatively impacted by the rising cost of our floating-rate liabilities that do not have floors until the benchmark rate is above the benchmark floor, at which point our floating-rate loans and floating-rate liabilities will be match-funded, effectively locking in our net interest margin until the benchmark floor rate is activated again or the floating-rate loan is paid off or refinanced.

In a business environment where benchmark rates are increasing significantly, cash flows of the CRE assets underlying our loans may not be sufficient to pay debt service on our loans, which could result in non-performance or default. We partially mitigate this risk by generally requiring our borrowers to purchase interest rate cap agreements with non-affiliated, well-capitalized third parties and by selectively requiring our borrowers to have and maintain debt service reserves. These interest rate caps generally mature prior to the maturity date of the loan and the borrowers are required to pay to extend them. In certain cases, the sponsors will need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At March 31, 2025, 79% 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 four months.

At March 31, 2025, our par-value $1.4 billion floating-rate CRE loan portfolio had a weighted average benchmark floor of 1.05%. At December 31, 2024, our par value $1.5 billion floating rate CRE loan portfolio had a weighted average benchmark floor of 0.97%. With the historical trend of rising benchmark rates, we have seen the coupons on all of our floating-rate assets and debt rise accordingly. Because we have equity invested in each floating-rate loan, and because in all instances the benchmark interest rates are above our loan floors, the rise in interest rates resulted in an increase in our net interest income, which was offset due to the decrease in our floating-rate CRE loan portfolio. See "Interest Rate Risk" in "Item 3: Quantitative and Qualitative Disclosures About Market Risk."

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Our portfolio comprises loans with a diverse array of collateral types and locations. Multifamily continues to comprise the majority of our portfolio, with 76.8% of our portfolio allocated to multifamily at March 31, 2025 and 77.4% at December 31, 2024. The following charts show our portfolio allocation by property type at March 31, 2025 and December 31, 2024:

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From time to time, we may acquire real estate property through direct equity investments or as a result of our lending activities. We did not acquire any real estate property in the three months ended March 31, 2025.

At March 31, 2025, the net carrying value of our net real estate-related assets and liabilities was $177.0 million on seven properties owned, three of which are included in investments in real estate and four of which are included in properties held for sale on our consolidated balance sheets. The existence of net capital loss carryforwards available until December 31, 2025 allows for potential future capital gains on certain of these investments to be shielded from income taxes or there is a requirement to distribute under the REIT tax regulations.

We use leverage to enhance our returns. The cost of borrowings to finance our investments is a significant part of our expenses. Our net interest income depends on our ability to control these expenses relative to our revenue. Our CRE loans may initially be financed with term facilities, such as CRE loan warehouse financing facilities, in anticipation of their ultimate securitization. We ultimately seek to finance our CRE loans through the use of non-recourse long-term, match-funded CRE debt securitizations.

At March 31, 2025 and December 31, 2024, our financing arrangements were as follows (dollars in thousands):


	Outstanding Borrowings		Percentage of Borrowings
At March 31, 2025
CRE - term reinvestment financing facility (1)(2)	$	889,861		70.0	%
CRE - term warehouse financing facilities(1)		40,069		3.2	%
Senior secured financing facility(1)		61,091		4.8	%
Mortgages payable(1)		79,512		6.3	%
5.75% Senior Unsecured Notes		148,989		11.7	%
Unsecured junior subordinated debentures		51,548		4.0	%
Total	$	1,271,070		100.0	%

	Outstanding Borrowings		Percentage of Borrowings
At December 31, 2024:
CRE debt securitizations(1)(3)	$	862,804		63.4	%
CRE - term warehouse financing facilities(1)		156,739		11.6	%
Senior secured financing facility(1)		60,910		4.5	%
Mortgages payable(1)		79,556		5.8	%
5.75% Senior Unsecured Notes		148,814		10.9	%
Unsecured junior subordinated debentures		51,548		3.8	%
Total	$	1,360,371		100.0	%

(1)

Represents an asset-specific borrowing.

(2)

Our CRE - term reinvestment financing facility provides for a two-year reinvestment period that allows us to reinvest CRE loan payoffs and principal paydown proceeds into the reinvestment facility and pending certain eligibility criteria are met.

(3)

Each of our CRE debt securitizations initially provided for a two-year reinvestment period that allowed us to reinvest CRE loan payoffs and principal paydown proceeds into the securitizations, pending certain eligibility criteria are met and rating agency approval is obtained. The reinvestment periods on both our securitizations ended in May 2023 and December 2023, respectively.

We reevaluate our current expected credit losses ("CECL") allowance quarterly, incorporating our current expectations of macroeconomic factors considered in the determination of our CECL reserves. At March 31, 2025, the CECL allowance on our CRE loan portfolio was $31.1 million, or 2.3% of our $1.4 billion loan portfolio. During the three months ended March 31, 2025, we recorded a reversal of credit losses primarily attributable to loan payoffs.

At December 31, 2024, the CECL allowance on our CRE loan portfolio was $32.8 million or 2.2% of our $1.5 billion loan portfolio. 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.

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Additionally, the decline in our CECL reserves from our highest reserve balance at June 30, 2020 of $61.1 million, or 3.4% of the par balance of our CRE loan portfolio, to our current reserve balance at March 31, 2025 of $31.1 million, or 2.3% of the par balance of our CRE loan portfolio, has been due to the following: the successful resolution of our individually evaluated loans with specific reserves, the overall newer vintage of our CRE loan portfolio (with only 9.9% of the portfolio, at March 31, 2025, being originated prior to the fourth quarter of 2020) as well as the increased percentage allocation of our CRE loan portfolio to multifamily loans over time. Multifamily loans have historically had the lowest credit losses of any asset class, and our percentage allocation of our CRE loan portfolio to multifamily has grown from 58.4% at June 30, 2020 to 76.8% at March 31, 2025.

Common stock book value was $28.50 per share at March 31, 2025, a $0.37 per share decrease from December 31, 2024.

Results of Operations

Our net loss allocable to common shares for the three months ended March 31, 2025 was $5.9 million or $(0.80) per share-basic ($(0.80) per share-diluted) as compared to net income allocable to common shares for the three months ended March 31, 2024 of $556,000 or $0.07 per share-basic ($0.07 per share-diluted).

Net Interest Income

The following tables analyze the change in interest income and interest expense for the comparative three months ended March 31, 2025 and 2024 by changes in volume and changes in rates. The changes attributable to the combined changes in volume and rate have been allocated proportionately, based on absolute values, to the changes due to volume and changes due to rates (dollars in thousands, except amounts in footnotes):


	Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
							Due to Changes in
	Net Change			Percent Change (1)			Volume			Rate
(Decrease) increase in interest income:
CRE whole loans (2)	$	(13,460	)		(32	)%	$	(8,980	)	$	(4,480	)
CRE mezzanine loan		63			100	%		63			—
Other		(488	)		(66	)%		(293	)		(195	)
Total decrease in interest income		(13,885	)		(33	)%		(9,210	)		(4,675	)

(Decrease) increase in interest expense:
Securitized borrowings:
ACR 2021-FL1 Senior Notes		(4,673	)		(42	)%		(2,602	)		(2,071	)
ACR 2021-FL2 Senior Notes		(3,938	)		(38	)%		(2,075	)		(1,863	)
Senior secured financing facility		(208	)		(12	)%		(46	)		(162	)
CRE - term warehouse financing facilities		(1,339	)		(34	)%		(890	)		(449	)
CRE - term reinvestment financing facility		2,157			100	%		2,157			—
5.75% Senior Unsecured Notes (3)		10			—	%		10			—
Unsecured junior subordinated debentures		(133	)		(11	)%		—			(133	)
Hedging (3)		(4	)		(1	)%		(4	)		—
Total (decrease) in interest expense		(8,128	)		(26	)%		(3,450	)		(4,678	)
Net (decrease) increase in net interest income	$	(5,757	)				$	(5,760	)	$	3

(1)

Percent change is calculated as the net change divided by the respective interest income or interest expense for the three months ended March 31, 2024.

(2)

Includes a decrease in fee income of $961,000 recognized on our CRE whole loans that was due to changes in volume.

(3)

Net change pertains to amortization expense and is reflected in the change in volume.

Net Change in Interest Income for the Comparative three months ended March 31, 2025 and 2024:

Aggregate interest income decreased by $13.9 million for the comparative three months ended March 31, 2025 and 2024. We attribute the change to the following:

CRE whole loans. The decrease of $13.5 million for the comparative three months ended March 31, 2025 and 2024 was primarily attributable to a decrease in (i) total par value of our CRE portfolio resulting from loan payoffs and foreclosures and (ii) the benchmark rate over the comparative period.

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Other. The decrease of $488,000 for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to a decrease in (i) restricted cash in our CRE securitizations and (ii) yields on our interest earning money market accounts.

Net Change in Interest Expense for the Comparative three months ended March 31, 2025 and 2024:

Aggregate interest expense decreased by $8.1 million for the comparative three months ended March 31, 2025 and 2024, We attribute the change to the following:

Securitized borrowings. The net decrease of $8.6 million for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to the redemptions of our ACR 2021-FL1 and ACR 2021-FL2 securitizations and a decrease in the benchmark rate over the comparative periods.

Senior secured financing facility. The decrease of $208,000 for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to a decrease in the benchmark rate over the comparative periods.

CRE - term warehouse financing facilities. The decrease of $1.3 million for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to paydowns on our borrowings and a decrease in the benchmark rate over the comparative periods.

CRE - term reinvestment financing facility. The increase of $2.2 million was attributable to the close of our new CRE term reinvestment financing facility.

Unsecured junior subordinated debentures. The decrease of $133,000 for the comparative three months ended March 31, 2025 and 2024, was primarily attributable to a decrease in the benchmark rate over the comparative periods.

Average Net Yield and Average Cost of Funds:

The following tables present the average net yield and average cost of funds for the three months ended March 31, 2025 and 2024 (dollars in thousands, except amounts in footnotes):


	Three Months Ended March 31, 2025								Three Months Ended March 31, 2024
	Average Amortized Cost		Interest Income (Expense)			Average Net Yield (Cost of Funds) (1)			Average Amortized Cost		Interest Income (Expense)			Average Net Yield (Cost of Funds) (1)
Interest-earning assets
CRE whole loans, floating-rate (2)	$	1,408,582	$	28,406			8.18	%	$	1,800,747	$	41,866			9.33	%
CRE mezzanine loans		6,367		63			3.93	%		4,700		—			—	%
Other		37,834		257			2.76	%		73,651		745			4.06	%
Total interest income/average net yield		1,452,783		28,726			8.02	%		1,879,098		42,611			9.10	%
Interest-bearing liabilities
Collateralized by:
CRE whole loans (3)		1,019,882		(19,295	)		(7.67	)%		1,396,158		(27,296	)		(7.84	)%
General corporate debt:
5.75% Senior Unsecured Notes (4)		148,902		(2,331	)		(6.35	)%		148,223		(2,321	)		(6.28	)%
Unsecured junior subordinated debentures		51,548		(1,104	)		(8.57	)%		51,548		(1,237	)		(9.49	)%
Hedging (5)		—		(393	)		—	%		—		(397	)		—	%
Total interest expense/average cost of funds		1,220,332		(23,123	)		(7.55	)%		1,595,929		(31,251	)		(7.75	)%
Total net interest income			$	5,603							$	11,360

(1)

Average net yield includes net amortization/accretion and fee income and is computed based on average amortized cost.

(2)

Includes fee income of $777,000 and $1.7 million recognized on our floating-rate CRE whole loans for the three months ended March 31, 2025 and 2024, respectively.

(3)

Includes amortization expense of $2.8 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.

(4)

Includes amortization expense of $175,000 and $164,000 for the three months ended March 31, 2025 and 2024, respectively.

(5)

Includes net amortization expense of $393,000 and $397,000 for the three months ended March 31, 2025 and 2024, respectively, 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 accreted over the remaining life of the debt.

Real Estate Income and Other Revenue

The following table sets forth information relating to our real estate income and other revenue for the periods presented (dollars in thousands):

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	For the Three Months Ended March 31,
	2025		2024		Dollar Change			Percent Change
Real estate income and other revenue:
Real estate income	$	11,366	$	7,371	$	3,995			54	%
Other revenue		33		37		(4	)		—	%
Total	$	11,399	$	7,408	$	3,991			54	%

Aggregate real estate income and other revenue increased by $4.0 million for the comparative three months ended March 31, 2025 and 2024. The increase in the comparative three months was attributed to: (i) incremental increase in revenue 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 through foreclosures, and (iii) increased revenues from two hotel properties that had increased occupancy and rental rates for both the comparative three month periods.

Operating Expenses

The following tables set forth information relating to our operating expenses for the periods presented (dollars in thousands):


	For the Three Months Ended March 31,
	2025			2024		Dollar Change			Percent Change
Operating expenses:
General and administrative	$	3,159		$	3,255	$	(96	)		(3	)%
Real estate expenses		13,342			9,531		3,811			40	%
Management fees - related party		1,631			1,627		4			0	%
Equity compensation - related party		815			477		338			71	%
Corporate depreciation and amortization		18			8		10			125	%
(Reversal of) provision for credit losses, net		(1,717	)		4,896		(6,613	)		(135	)%
Total	$	17,248		$	19,794	$	(2,546	)		(13	)%

Aggregate operating expenses decreased by $2.5 million for the comparative three months ended March 31, 2025 and 2024. We attribute the changes to the following:

General and administrative. General and administrative expenses decreased by $96,000 for the comparative three months ended March 31, 2025 and 2024. The following table summarizes the information relating to our general and administrative expenses for the periods presented (dollars in thousands):


	For the Three Months Ended March 31,
	2025		2024		Dollar Change			Percent Change
General and administrative
Professional services	$	1,707	$	1,880	$	(173	)		(9	)%
Wages and benefits		427		361		66			18	%
D&O insurance		242		248		(6	)		(2	)%
Operating expenses		254		225		29			13	%
Dues and subscriptions		217		207		10			5	%
Director fees		204		231		(27	)		(12	)%
Tax penalties, interest & franchise tax		88		78		10			13	%
Travel		20		25		(5	)		—	%
Total	$	3,159	$	3,255	$	(96	)		(3	)%

The decrease in general and administrative expense for the comparative three months ended March 31, 2025 and 2024 was primarily attributable to decreased professional services related to audit expenses being accrued monthly and a decrease in legal expenses related to CRE loan assets, partially offset by (i) an increase in allocated percentages of wages and benefits from the Manager, (ii) consent fees paid to prior auditors to reissue their prior year opinion and (iii) an increase in construction consulting fees paid to third parties.

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Real estate expenses. The increase of $3.8 million for the comparative three months ended March 31, 2025 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 through deed-in-lieu of foreclosure and (iii) an increase in expenses at a hotel property that had an incremental increase in operating expenses and an increase in one time expenses related to various operating costs.

Provision for credit losses. The decrease in the provision for credit losses of $6.6 million for the comparative three months ended March 31, 2025 was primarily driven by a decrease in modeled credit risk for improved property performance, qualitative adjustments to macroeconomic factors and loan payoffs. Please refer to the "Financing Receivables" section for more information on our provision for credit losses.

Other Income (Expense)

The following table sets forth information relating to our other income (expense) incurred for the periods presented (dollars in thousands):


	For the Three Months Ended March 31,
	2025			2024		Dollar Change			Percent Change
Other income (expense):
Equity in losses of unconsolidated subsidiaries	$	(492	)	$	—	$	(492	)		(100	)%
Gain on conversion of real estate		—			5,835		(5,835	)		(100	)%
Other income		84			115		(31	)		(27	)%
Total	$	(408	)	$	5,950	$	(6,358	)		(107	)%

Aggregate other income decreased $6.4 million for the comparative three months ended March 31, 2025 and 2024. We attribute the change to the following:

Gain on conversion of real estate. The decrease of $5.8 million during the comparative three months ended March 31, 2025 and 2024, was primarily attributed to the completion of one deed-in-lieu of foreclosure that generated a non-recurring gain of $5.8 million, in the first quarter of 2024, as the fair value of the property exceeded the amortized cost basis of the loans.

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Financial Condition

Summary

Our total assets were $1.8 billion and $1.9 billion at March 31, 2025 and December 31, 2024, respectively.

Investment Portfolio

The tables below summarize the amortized cost and net carrying amount of our investment portfolio, classified by asset type, at March 31, 2025 and December 31, 2024 as follows (dollars in thousands, except amounts in footnotes):


At March 31, 2025	Amortized Cost		Net Carrying Amount (1)		Percent of Portfolio			Weighted Average Coupon
Loans held for investment:
CRE whole loans	$	1,358,289	$	1,332,191		86.12	%	8.08%
CRE mezzanine loans(2)		19,250		14,218		0.92	%	13.81%
		1,377,539		1,346,409		87.04	%
Other investments:
Investments in unconsolidated entities		23,570		23,570		1.52	%	N/A(5)
Investments in real estate(3)		58,463		58,463		3.78	%	N/A(5)
Property held for sale(4)		118,527		118,527		7.66	%	N/A(5)
		200,560		200,560		12.96	%

Total investment portfolio	$	1,578,099	$	1,546,969		100.00	%


At December 31, 2024	Amortized Cost		Net Carrying Amount (1)		Percent of Portfolio			Weighted Average Coupon
Loans held for investment:
CRE whole loans	$	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(5)
Investments in real estate(3)		58,283		58,283		3.50	%	N/A(5)
Property held for sale(4)		118,344		118,344		7.11	%	N/A(5)
		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 $31.1 million and $32.8 million at March 31, 2025 and December 31, 2024, respectively.

(2)

Includes one mezzanine loan with a coupon rate of 10% that is non-accrual and one mezzanine loan with a coupon rate of 15%.

(3)

Includes real estate related right of use assets of $19.2 million and $19.3 million, intangible assets of $6.9 million and $7.0 million, lease liabilities of $44.8 million and $44.6 million, and mortgages payable of $79.5 million and $79.6 million at March 31, 2025 and December 31, 2024, respectively. There were no other liabilities at March 31, 2025 compared to $12,000 of other liabilities at December 31, 2024.

(4)

Includes property held for sale-related liabilities of $3.1 million and $3.2 million at March 31, 2025 and December 31, 2024, respectively.

(5)

There are no stated rates associated with these investments.

CRE loans. During the three months ended March 31, 2025, we originated one new $15.0 million CRE mezzanine loan. We received $147.7 million in proceeds from loan payoffs, offset by funding of $12.0 million of previously unfunded loan commitments, producing a net reduction of $120.7 million in the par balance of the portfolio.

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The following is a summary of our loans (dollars in thousands, except amounts in footnotes):


Description	Quantity	Principal		Unamortized (Discount) Premium, net (1)			Amortized Cost		Allowance for Credit Losses			Carrying Value		Contractual Interest Rates (2)	Maturity Dates (3)(4)
At March 31, 2025:
Whole loans (5)(6)(7)	46	$	1,360,391	$	(2,102	)	$	1,358,289	$	(26,098	)	$	1,332,191	1M Term SOFR + 2.50% to 1M Term SOFR + 7.00%	April 2025 to May 2030
Mezzanine loans (5)	2		19,700		(450	)		19,250		(5,032	)		14,218	10.00% to 15.00%	April 2026 to June 2028
Total		$	1,380,091	$	(2,552	)	$	1,377,539	$	(31,130	)	$	1,346,409

At December 31, 2024:
Whole loans (5)(6)(7)	52	$	1,484,997	$	(2,305	)	$	1,482,692	$	(28,147	)	$	1,454,545	1M Term SOFR + 2.50% to 1M Term SOFR + 7.00%	January 2025 to January 2030
Mezzanine loan (5)	1		4,700		—			4,700		(4,700	)		—	10.00%	June 2028
Total		$	1,489,697	$	(2,305	)	$	1,487,392	$	(32,847	)	$	1,454,545

(1)

Amounts include unamortized loan origination fees of $1.4 million and $1.3 million and deferred amendment fees of $1.1 million and $985,000 at March 31, 2025 and December 31, 2024, respectively.

(2)

References to "1M Term SOFR" comprise one-month Term SOFR. Weighted-average one-month Term SOFR rates were 4.37% and 4.58% at March 31, 2025 and December 31, 2024, respectively. Additionally, weighted-average benchmark rate floors were 1.05% and 0.97% at March 31, 2025 and December 31, 2024, respectively.

(3)

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

(4)

Maturity dates exclude five and one whole loans, with amortized costs of $140.1 million and $5.6 million, in maturity default at March 31, 2025 and December 31, 2024, respectively.

(5)

Substantially all loans are pledged as collateral under various borrowings at March 31, 2025 and December 31, 2024.

(6)

(7)

At March 31, 2025, 25.8%, 18.7% and 16.1% of our CRE loan portfolio based on carrying value was concentrated in the Southwest, Mountain and Southeast regions, respectively, as defined by the NCREIF. At December 31, 2024, 25.0%, 19.2% and 16.5% of our CRE loan portfolio based on carrying value was concentrated in the Southwest, Mountain, and Southeast regions, respectively. At March 31, 2025 and December 31, 2024, no single loan or investment represented more than 10% of our total assets and no single investment group generated over 10% of our total revenue.

Investments in unconsolidated entities. Our investments in unconsolidated entities at March 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 value of $1.5 million in the aggregate, or 3.0% of each trust, our investment in 65 E. Wacker Joint Venture, LLC (the " Wacker JV"), representing a 90% interest in a joint venture formed for the purpose of converting an office property in the East North Central region to multifamily units with a value of $22.0 million, our investment in 7720 McCallum JV, LLC (the "McCallum JV"), representing a 50% interest in a joint venture for a multifamily unit property in the Southwest region with a value of ($152,000), and our investment in Pacmulti Affiliates, LLC (the "Pacmulti JV"), representing a 50% interest in a joint venture for a multifamily unit property in the Mid Atlantic region with a value of $200,000. Our investments in unconsolidated entities at December 31, 2024 comprised our investments in RCT I and RCT II, the 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 record our investment in the Wacker JV, the McCallum JV and the Pacmulti JV as equity method investments.

Investments in real estate and properties held for sale. At March 31, 2025, 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.

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The following table summarizes the book value of our investments in real estate and related intangible assets at March 31, 2025 and December 31, 2024 (in thousands, except amounts in the footnotes):


	March 31, 2025							December 31, 2024
	Cost Basis		Accumulated Depreciation & Amortization			Carrying Value		Cost Basis		Accumulated Depreciation & Amortization			Carrying Value
Assets acquired:
Investments in real estate, equity:
Investments in real estate (1)	$	83,351	$	(6,208	)	$	77,143	$	82,265	$	(5,657	)	$	76,608
Right of use assets (2)(3)		20,064		(841	)		19,223		20,064		(759	)		19,305
Intangible assets (4)		9,833		(2,948	)		6,885		9,833		(2,845	)		6,988
Subtotal		113,248		(9,997	)		103,251		112,162		(9,261	)		102,901

Investments in real estate from lending activities:
Properties held for sale (5)		201,164		—			201,164		201,125		—			201,125
Total		314,412		(9,997	)		304,415		313,287		(9,261	)		304,026

Liabilities assumed:
Investments in real estate, equity:
Mortgage payables		76,391		3,121			79,512		76,631		2,925			79,556
Other liabilities		41		(41	)		—		41		(29	)		12
Lease liabilities (3)(6)		44,788		—			44,788		44,606		—			44,606
Subtotal		121,220		3,080			124,300		121,278		2,896			124,174

Investments in real estate from lending activities:
Liabilities held for sale (7)		3,125		—			3,125		3,226		—			3,226
Total		124,345		3,080			127,425		124,504		2,896			127,400

Total net investments in real estate and properties held for sale (8)	$	190,067				$	176,990	$	188,783				$	176,626

(1)

(2)

Primarily comprised an $18.6 million right of use asset, at both March 31, 2025 and December 31, 2024, associated with the ground lease disclosed at footnote (6) below as an operating lease. Amortization is booked to real estate expenses on the consolidated statements of operations. Additionally, we have an operating lease with a value of $355,000 and $367,000 at March 31, 2025 and December 31, 2024, respectively, associated with a parking lease.

(3)

Refer to Note 8 in the Notes to the Consolidated Financial Statements for additional information on our remaining operating leases.

(4)

(5)

(6)

(7)

Comprised an operating lease liability.

(8)

Excludes items of working capital, either acquired or assumed.

Financing Receivables

Current market conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes and increased delinquencies and defaults, resulting in increased loan modifications, increased allowances for credit losses and an increased risk to borrowers of foreclosure actions. We routinely employ rigorous risk management and underwriting practices to proactively evaluate and maintain the credit quality of our CRE loan portfolio and work closely with our borrowers to mitigate potential losses.

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The following tables show the activity in the allowance for credit losses for the three months ended March 31, 2025 and year ended December 31, 2024 (in thousands):


	Three Months Ended March 31, 2025			Year Ended December 31, 2024
Allowance for credit losses at beginning of period	$	32,847		$	28,757
(Reversal of) provision for credit losses		(1,717	)		4,790
Charge-offs		—			(700	)
Allowance for credit losses at end of period	$	31,130		$	32,847

During the three months ended March 31, 2025, we recorded a reversal of expected credit losses of $1.7 million, primarily attributable to loan payoffs and qualitative adjustments to macroeconomic factors.

At both March 31, 2025 and December 31, 2024, we individually evaluated one mezzanine loan for impairment. The loan was collateralized by an office building in the Northeast region and had a principal balance of $4.7 million at both March 31, 2025 and December 31, 2024. We fully reserved this loan in the fourth quarter of 2022, and it continues to be fully reserved at March 31, 2025. The loan entered payment default in February 2023 and has been placed on nonaccrual status.

Credit quality indicators

Commercial Real Estate Loans

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

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


Risk Rating		Risk Characteristics

1		• Property performance has surpassed underwritten expectations.
		• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.

2		• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
		• Occupancy is stabilized, near stabilized or is on track with underwriting.

3		• Property performance lags behind underwritten expectations.
		• Occupancy is not stabilized and the property has some tenancy rollover.

4		• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
		• Occupancy is not stabilized and the property has a large amount of tenancy rollover.

5		• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.
		• The property has a material vacancy rate and significant rollover of remaining tenants.
		• An updated appraisal is required upon designation and updated on an as-needed basis.

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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 may have experienced greater credit risks due to their nature as subordinated investments.

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

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


	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Total (1)
At March 31, 2025:
Whole loans	$	27,816	$	453,121	$	493,214	$	378,524	$	5,614	$	1,358,289
Mezzanine loans		—		14,550		—		—		4,700		19,250
Total	$	27,816	$	467,671	$	493,214	$	378,524	$	10,314	$	1,377,539


At December 31, 2024:
Whole loans	$	27,869	$	565,968	$	503,125	$	380,116	$	5,614	$	1,482,692
Mezzanine loan		—		—		—		—		4,700		4,700
Total	$	27,869	$	565,968	$	503,125	$	380,116	$	10,314	$	1,487,392

(1)

The total amortized cost of CRE loans excluded accrued interest receivable of $16.0 million and $14.6 million at March 31, 2025 and December 31, 2024, respectively.

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


	2025 (1)		2024 (2)		2023		2022			2021		Prior		Total (3)
At March 31, 2025:
Whole loans: (4)
Rating 1	$	—	$	—	$	—	$	—		$	27,816	$	—	$	27,816
Rating 2		—		19,527		48,607		—			315,115		69,872		453,121
Rating 3		—		—		—		298,749			183,430		11,035		493,214
Rating 4		77,412		83,734		15,825		85,750			70,914		44,889		378,524
Rating 5		—		—		—		—			—		5,614		5,614
Total whole loans		77,412		103,261		64,432		384,499			597,275		131,410		1,358,289
Mezzanine loans:
Rating 2		14,550		—		—		—			—		—		14,550
Rating 5		—		—		—		—			—		4,700		4,700
Total mezzanine loans		14,550		—		—		—			—		4,700		19,250
Total loans	$	91,962	$	103,261	$	64,432	$	384,499		$	597,275	$	136,110	$	1,377,539
Current Period Gross Write-Offs	$	—	$	—	$	—	$	—		$	—	$	—	$	—


	2024 (2)		2023		2022		2021			2020		Prior		Total (3)
At December 31, 2024:
Whole loans: (4)
Rating 1	$	—	$	—	$	—	$	27,869		$	—	$	—	$	27,869
Rating 2		19,023		48,106		46,416		382,195			56,284		13,944		565,968
Rating 3		—		—		249,907		242,155			—		11,063		503,125
Rating 4		80,672		15,811		85,004		153,740			—		44,889		380,116
Rating 5		—		—		—		—			—		5,614		5,614
Total whole loans		99,695		63,917		381,327		805,959			56,284		75,510		1,482,692
Mezzanine loan (rating 5)		—		—		—		—			—		4,700		4,700
Total	$	99,695	$	63,917	$	381,327	$	805,959		$	56,284	$	80,210	$	1,487,392
Current Period Gross Write-Offs	$	—	$	—	$	—	$	(700	)	$	—	$	—	$	(700	)

(1)

Includes one novated CRE whole loan that resulted from a loan workout.

(2)

Includes two novated CRE whole loans that resulted from loan workouts.

(3)

The total amortized cost of CRE loans excluded accrued interest receivable of $16.0 million and $14.6 million at March 31, 2025 and December 31, 2024, respectively.

(4)

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

At both March 31, 2025 and December 31, 2024, we had one additional mezzanine loan included in other assets held for sale that had no carrying value.

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Loan Portfolio Aging Analysis

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


	30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Current (1)		Total Loans Receivable (2)		Total Loans > 90 Days and Accruing
At March 31, 2025:
Whole loans	$	44,401	$	56,355	$	5,614	$	106,370	$	1,251,919	$	1,358,289	$	—
Mezzanine loans (3)		—		—		4,700		4,700		14,550		19,250		—
Total	$	44,401	$	56,355	$	10,314	$	111,070	$	1,266,469	$	1,377,539	$	—

At December 31, 2024:
Whole loans	$	—	$	70,760	$	5,614	$	76,374	$	1,406,318	$	1,482,692	$	—
Mezzanine loan (3)		—		—		4,700		4,700		—		4,700		—
Total	$	—	$	70,760	$	10,314	$	81,074	$	1,406,318	$	1,487,392	$	—

(1)

Includes one CRE whole loan with an amortized cost of $33.7 million in maturity default at March 31, 2025.

(2)

The total amortized cost of CRE loans excluded accrued interest receivable of $16.0 million and $14.6 million at March 31, 2025 and December 31, 2024, respectively.

(3)

Includes one loan, with a total amortized cost of $4.7 million, that was fully reserved at both March 31, 2025 and December 31, 2024.

At March 31, 2025 and December 31, 2024, we had five and two CRE whole loans, with total amortized costs of $140.1 million and $76.4 million, respectively, and one mezzanine loan, with a total amortized cost of $4.7 million, in payment default.

During the three months ended March 31, 2025, we did not recognize any interest income on CRE whole loans that were placed on nonaccrual status. During the three months ended March 31, 2024, we recognized interest income of $134,000 on one CRE whole loan that was placed on nonaccrual status.

Loan Modifications

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

During the three months ended March 31, 2025, we did not enter into any loan modifications for borrowers that were experiencing financial difficulty.

During the three months ended March 31, 2024, we entered into the following two loan modifications that required disclosure:

•

These loans were performing in accordance with the modified contractual terms as of March 31, 2025. At March 31, 2025, the loan with an amortized cost of $53.6 million, had a risk rating of "4" and the other loan with an amortized cost of $45.1 million, had a risk rating of "3". Loans with a risk rating of "3" and "4" are included in the determination of our general CECL reserves.

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Restricted Cash

At March 31, 2025, we had restricted cash of $657,000 held in escrow for deposits or tax payments at our real estate properties or pledged with minimum reserve balance requirements. At December 31, 2024, we had restricted cash of $890,000 held in escrow for deposits or tax payments at our real estate properties or pledged with minimum reserve balance requirements. The decrease of $233,000 was primarily attributable to a decrease in restricted cash held in escrow for tax payments.

Accrued Interest Receivable

The following table summarizes our accrued interest receivable at March 31, 2025 and December 31, 2024 (in thousands):


	March 31, 2025		December 31, 2024		Net Change
Accrued interest receivable from loans	$	15,993	$	14,642	$	1,351
Accrued interest receivable from promissory note, escrow, sweep and reserve accounts		11		13		(2	)
Total	$	16,004	$	14,655	$	1,349

The increase of $1.3 million in accrued interest receivable was primarily attributable to accrued deferred interest on modified loans offset by loan payoffs.

Other Assets

The following table summarizes our other assets at March 31, 2025 and December 31, 2024 (in thousands):


	March 31, 2025		December 31, 2024		Net Change
Tax receivables and prepaid taxes	$	197	$	201	$	(4	)
Other receivables		6,247		2,087		4,160
Prepaid expenses		4,133		3,027		1,106
Fixed assets - non real estate		274		232		42
Other assets, miscellaneous		823		853		(30	)
Total	$	11,674	$	6,400	$	5,274

The increase of $5.3 million in other assets was primarily attributable to increases in other receivables due to a receivable from one of our financing counterparties and various prepaid assets held at our real estate properties, offset by amortization.

Deferred Tax Assets

At both March 31, 2025 and December 31, 2024, our net deferred tax asset was zero, resulting from a full valuation allowance of $20.4 million and $20.6 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. We will continue to evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing forecasted taxable income using both historical and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry back years (if permitted) and the availability of tax planning strategies.

Derivative Instruments

Historically, we sought to mitigate the potential impact on net income (loss) of adverse fluctuations in interest rates incurred on our borrowings by entering into hedging agreements. We classified our interest rate hedges as cash flow hedges, which are hedges that eliminate the risk of changes in the cash flows of a financial asset or liability.

We terminated all of our interest rate swap positions associated with our prior financed CMBS portfolio in April 2020. At termination, we realized a loss of $11.8 million. At March 31, 2025 and December 31, 2024, we had a loss of $2.9 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. During the three months ended March 31, 2025 and 2024, we recorded amortization expense of $415,000 and $420,000, respectively, reported in interest expense on the consolidated statements of operations.

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At March 31, 2025 and December 31, 2024, we had unrealized gains of $50,000 and $73,000, respectively, attributable to two terminated interest rate swaps, in accumulated other comprehensive loss on the consolidated balance sheets, to be accreted into earnings over the remaining life of the debt. For each of the three months ended March 31, 2025 and 2024, we recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 to accrete the accumulated other comprehensive income on the terminated swap agreements.

The following table presents the effect of derivative instruments on our consolidated statements of operations for the three months ended March 31, 2025 and 2024 (in thousands):


		Realized and Unrealized Gain (Loss) (1)
	Consolidated Statements of Operations Location	Three Months Ended March 31, 2025			Three Months Ended March 31, 2024
Interest rate swap contracts, hedging	Interest expense	$	(393	)	$	(397	)

(1)

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

Financing Arrangements

Borrowings under our financing arrangements are guaranteed by us or one or more of our subsidiaries. The following table sets forth certain information with respect to our borrowings (dollars in thousands, except amounts in footnotes):


	March 31, 2025							December 31, 2024
	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate
CRE - Term Reinvestment Financing Facility (1)
JPMorgan Chase Bank, N.A. (2)	$	889,861	$	1,194,899		39	6.07%	$	—	$	—		—	—%

Senior Secured Financing Facility
Massachusetts Mutual Life Insurance Company (3)		61,091		164,565		6	8.10%		60,910		162,578		6	8.22%

CRE - Term Warehouse Financing Facilities (1)
JPMorgan Chase Bank, N.A. (4)		—		—		—	—%		90,995		158,639		5	6.87%
Morgan Stanley Mortgage Capital Holdings LLC (5)		40,069		62,322		3	7.45%		65,744		98,373		5	7.22%

Mortgages Payable
ReadyCap Commercial, LLC (6)		20,292		26,969		1	8.12%		20,240		26,960		1	8.28%
Oceanview Life and Annuity Company (7)(8)		44,111		92,532		1	10.32%		44,211		92,549		1	10.40%
Florida Pace Funding Agency (7)(9)		15,109		—		—	7.26%		15,105		—		—	7.26%
Total	$	1,070,533	$	1,541,287				$	297,205	$	539,099

(1)

Outstanding borrowings include accrued interest payable.

(2)

Includes $3.3 million of deferred debt issuance costs at March 31, 2025.

(3)

Includes $2.0 million and $2.2 million of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.

(4)

Includes $988,000 of deferred debt issuance costs at December 31, 2024.

(5)

(6)

There were no deferred debt issuance costs at March 31, 2025. Includes $52,000 of deferred debt issuance costs at December 31, 2024.

(7)

(8)

Includes $200,000 and $101,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.

(9)

Includes $401,000 and $405,000 of deferred debt issuance costs at March 31, 2025 and December 31, 2024, respectively.

We were in compliance with all covenants in the respective agreements at March 31, 2025 and December 31, 2024.

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CRE - Term Reinvestment Financing Facility

In March 2025, an indirect wholly-owned subsidiary of ours entered into a master repurchase agreement (the “JPMorgan Chase 2025 Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) to finance existing CRE loans and the origination of CRE loans. The JPMorgan Chase 2025 Facility has a maximum facility amount of $939.9 million, provides match term funding, charges interest of one-month benchmark plus a 1.75% spread and matures as of the latest maturity date of any purchased asset. The JPMorgan Chase 2025 Facility includes a two-year reinvestment period enabling the reinvestment of principal proceeds from asset repayments into qualifying replacement assets.

In connection with the JPMorgan Chase 2025 Facility, we provided "bad act" guaranties pursuant to a guarantee agreement (the "2025 JPMorgan Chase Guarantee") where we are liable for 100% of the repurchase price of the purchase assets and JPMorgan Chase’s losses, costs and expenses only upon the occurrence of certain customary bad acts. The JPMorgan Chase 2025 Guarantee includes certain financial covenants required of us, including required liquidity, required capital, ratios of total indebtedness to equity and EBITDA requirements. The JPMorgan Chase 2025 Facility also includes minimum interest coverage requirements and maximum look through LTV requirements. Also, ACRES Realty Funding, Inc. ("ACRES RF"), the direct owner of the wholly-owned subsidiary borrower, executed a pledge agreement with JPMorgan Chase pursuant to which it pledged and granted to JPMorgan Chase a continuing security interest in any and all of its right, title and interest in and to the wholly-owned subsidiary, including all distributions, proceeds, payments, income and profits from its interests in the wholly-owned subsidiary.

The JPMorgan Chase 2025 Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement, including but not limited to: payment defaults; bankruptcy or insolvency proceedings; a change of control of the ACRES SPE 2025-1, LLC, ("Seller SPE") or of us; breaches of covenants and/or certain representations and warranties; and a judgment in an amount greater than $250,000 against the Seller SPE or ACRES RF or $10.0 million against us. The remedies for such events of default are also customary for this type of financing arrangement and include the acceleration of the principal amount outstanding under the JPMorgan Chase 2025 Facility and the liquidation by JPMorgan Chase of purchased assets then subject to the JPMorgan Chase 2025 Facility.

Senior Secured Financing Facility

In July 2020, an indirect, wholly-owned subsidiary of ours ("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") to form an asset-based revolving loan facility ("MassMutual Facility") to finance our core CRE lending business. The MassMutual Facility initially had an interest rate of 5.75% per annum payable monthly and initially matured on July 31, 2027.

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CRE - Term Warehouse Financing Facilities

In October 2018, an indirect, wholly-owned subsidiary of ours entered into a master repurchase agreement (the "JPMorgan Chase Facility") with JP Morgan Chase to finance the origination of CRE loans. As amended, the JPMorgan Chase Facility has a maximum facility amount of $250.0 million, charges interest of one-month benchmark plus market spreads and has a maturity date of July 2026. In March 2025, we entered into Amendment No. 6 to Guarantee, by and between us and JPMorgan Chase, which makes certain amendments and modifications to the Guaranty, dated October 26, 2018 between us and JPMorgan Chase, as amended (the "JPM Guarantee") including but not limited to amending (capitalized terms each as defined in the JPM Guarantee) (i) minimum unencumbered Liquidity requirement, (ii) the ratio of Total Indebtedness to Total Equity, (iii) ratio of Adjusted Total Indebtedness to Total Equity, and (iv) EBITDA to Interest Expense ratio.

In November 2021, an indirect, wholly-owned subsidiary of ours entered into a master repurchase and securities contract agreement (the "Morgan Stanley Facility") with Morgan Stanley Mortgage Capital Holdings LLC ("Morgan Stanley") to finance the origination of CRE loans. As amended, the Morgan Stanley Facility has a maximum facility amount of $250.0 million, charges interest of one-month Term SOFR plus market spreads and matures in November 2025. We also have the right to request a one-year extension. In March 2025, we entered into Amendment No. 4 to Guaranty (the “Morgan Stanley Amendment”) by and between us and Morgan Stanley, which makes certain amendments and modifications to the Guaranty between us and Morgan Stanley as amended (the “MS Guaranty”), including but not limited to (capitalized terms each as defined in the MS Guaranty) (i) minimum unencumbered Liquidity requirement, (ii) the ratio of Total Indebtedness to Total Equity, (iii) ratio of Adjusted Total Indebtedness to Total Equity, and (iv) EBITDA to Interest Expense ratio.

Mortgages Payable

In April 2022, Chapel Drive West, LLC, a wholly owned subsidiary of Charles Street – ACRES FSU Student Venture, LLC entered into a Loan Agreement (the "Mortgage") with Readycap Commercial, LLC ("Readycap") to finance the acquisition of a student housing complex. The Mortgage is interest only and has a maximum principal balance of $20.4 million, of which, $18.7 million was advanced in the initial funding. The Mortgage charges interest of one-month Term SOFR plus a spread of 3.80% and matures in April 2025, subject to two one-year extension options.

In addition to the Construction Loan, Chapel Drive East, LLC entered into a financing agreement with Florida Pace Funding Agency to fund energy efficient building improvements and has a maximum principal balance of $15.5 million. This agreement charges fixed interest of 7.26% and matures in July 2053. We do not guarantee this financing agreement.

In connection with our investment in the student housing complex, ACRES RF entered into guarantees related to the Construction Loan made to Chapel Drive East, LLC. Pursuant to the guarantees, Jason Pollack, Frank Dellaglio and ACRES RF (collectively, the "Guarantors"), for the benefit of Oceanview, provided limited "bad boy" guaranties to Oceanview pursuant to the Construction Loan Agreement until the earlier of the payment in full of the indebtedness or the date of a sale of the property pursuant to a foreclosure of the mortgage or deed or other transfer in lieu of foreclosure is accepted by Oceanview. The Guarantors also entered into a Completion Guaranty Agreement for the benefit of Oceanview to guaranty the timely completion of the project in accordance with the Construction Loan Agreement, as well as a Carry Guaranty Agreement, for the benefit of Oceanview to guaranty and the unconditional payment by Chapel Drive East, LLC of all customary or necessary costs and expenses incurred in connection with the operation, maintenance and management of the property and an Environmental Indemnity Agreement jointly and severally in favor of Oceanview whereby the Guarantors serving as Indemnitors provided environmental representations and warranties, covenants and indemnifications (collectively the "Guaranties"). The Guaranties include certain financial covenants required of ACRES RF, including required net worth and liquidity requirements.

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Securitizations

ACR 2021-FL1

In May 2021, we closed ACR 2021-FL1, an $802.6 million CRE debt securitization transaction that provided financing for CRE loans. In March 2025, we exercised the optional redemption on ACR 2021-FL1 in conjunction with the closing of the JPMorgan Chase 2025 Facility.

ACR 2021-FL2

In December 2021, we closed ACR 2021-FL2, a $700.0 million CRE debt securitization transaction that provided financing for CRE loans. In March 2025, we exercised the optional redemption on ACR 2021-FL2 in conjunction with the closing of the JPMorgan Chase 2025 Facility.

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. ("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"). Prior to May 15, 2026, we may at our option redeem the 5.75% Senior Unsecured Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, and (ii) a make-whole premium. 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.

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. In connection with the issuance and sale of the capital securities, we issued junior subordinated debentures to RCT I and RCT II of $25.8 million each, representing our maximum exposure to loss. The debt issuance costs associated with the junior subordinated debentures for RCT I and RCT II were included in borrowings and were amortized into interest expense on the consolidated statements of operations using the effective yield method over a ten year period.

Equity

Total equity at March 31, 2025 was $440.4 million compared to total equity at December 31, 2024 of $449.7 million. The decrease in equity during the three months ended March 31, 2025 was primarily attributable to current losses, common stock repurchases and dividends on preferred stock for the three months ended March 31, 2025.

Our preferred equity is composed of the following at March 31, 2025:

•

4.8 million shares of 8.625% fixed to floating rate Series C cumulative redeemable preferred stock with a $25.00 per share liquidation preference ("Series C Preferred Stock"). The Series C Preferred Stock has no maturity date and we are not required to redeem them at any time. However, we may redeem them at our election, in whole or in apart, on or after July 30, 2024. Effective July 30, 2024, the Series C Preferred Stock converted from its fixed rate of 8.625% to a floating rate equal to three-month Term SOFR plus a spread of 5.927%, but at no time shall the floating rate be less than 8.625%. Dividends are payable quarterly in arrears.

•

4.5 million shares of fixed 7.875% Series D cumulative redeemable preferred stock with a $25.00 per share liquidation preference ("Series D Preferred Stock"). The Series D Preferred Stock has no maturity and we are not required to redeem

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them at any time. However, we may redeem them at our election, in whole or in apart, on or after May 21, 2026. Dividends are payable quarterly in arrears.

Balance Sheet - Book Value Reconciliation

The following table rolls forward our common stock book value for the three months ended March 31, 2025 (in thousands, except per share data and amounts in footnotes):


	Three Months Ended March 31, 2025
	Total Amount			Per Share Amount
Common stock book value at beginning of period (1)	$	215,137		$	28.87
Net loss allocable to common shares (2)		(5,859	)		(0.81	)
Change in other comprehensive income on derivatives		393			0.05
Repurchase of common stock (3)		(4,378	)		0.28
Impact to equity of share-based compensation		815			0.11
Total net decrease		(9,029	)		(0.37	)
Common stock book value at end of period (4)	$	206,108		$	28.50

(1)

Per share calculations exclude unvested restricted stock, as disclosed on our consolidated balance sheets, of 574,538 at both March 31, 2025 and December 31, 2024, and include warrants to purchase up to 391,995 shares of common stock at both March 31, 2025 and December 31, 2024. The denominators for the calculations were 7,231,273 and 7,451,461 shares at March 31, 2025 and December 31, 2024, respectively.

(2)

The per share amounts are calculated with the denominator referenced in footnote (1) at March 31, 2025. We calculated net loss per common share-diluted of $(0.80) using the weighted average diluted shares outstanding during the three months ended March 31, 2025.

(3)

In November 2021, our Board authorized and approved the continued use of our existing share repurchase program to repurchase up to $20.0 million of our outstanding common stock. In November 2023, an additional $10.0 million of outstanding shares of both common and preferred stock was authorized. 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. In April 2025, our Board authorized and approved the repurchase of an additional $10.0 million of outstanding shares of both common and preferred stock. We purchased 2.8 million common shares for $32.4 million and 100,000 preferred shares for $2.2 million through March 31, 2025. Because we repurchased our common stock at significant discounts to book value, these repurchases were accretive to per share book value since the inception of the program.

(4)

We calculated common stock book value as total stockholders’ equity of $430.1 million less preferred stock equity of $224.0 million at March 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.

The following table summarizes the calculation of equity, as defined in the Management Agreement (in thousands):


	Amount
At March 31, 2025:
Proceeds from capital stock issuances, net (1)	$	1,330,472
Retained earnings, net (2)		(638,806	)
Payments for repurchases of capital stock		(259,536	)
Total	$	432,130

(1)

Deducts underwriting discounts and commissions and other expenses and costs relating to such issuances.

(2)

Excludes non-cash equity compensation expense incurred to date.

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.

EAD excludes the effects of certain transactions and adjustments in accordance with GAAP that we believe are not necessarily indicative of our current CRE loan portfolio and other CRE-related investments and operations. EAD excludes income (loss) from all non-core assets such as commercial finance, residential mortgage lending, certain legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date of December 31, 2016.

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EAD, for reporting purposes, is defined as GAAP net income (loss) allocable to common shares, excluding (i) non-cash equity compensation expense, (ii) unrealized gains and losses, (iii) non-cash provisions for credit losses, (iv) non-cash impairments on securities, (v) non-cash amortization of discounts or premiums associated with borrowings, (vi) net income or loss from a limited partnership interest owned at the initial measurement date, (vii) net income or loss from non-core assets, (viii) real estate depreciation and amortization, (ix) foreign currency gains or losses and (x) income or loss from discontinued operations. EAD may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.

Although pursuant to the Management Agreement we calculate incentive compensation using EAD that excludes incentive compensation payable to our Manager, we include incentive compensation payable to our Manager in calculating EAD for reporting purposes.

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 (in thousands, except per share data):


	For the Three Months Ended March 31,
	2025			Per Share Data			2024			Per Share Data
Net (loss) income allocable to common shares - GAAP	$	(5,859	)	$	(0.80	)	$	556			0.07
Gain on sale of real estate		—			—			—			—
Net (loss) income allocable to common shares - GAAP, adjusted	$	(5,859	)	$	(0.80	)	$	556		$	0.07

Reconciling Items from Continuing Operations:
Non-cash equity compensation expense		815			0.11			477			0.06
Non-cash (reversal of) provision for CRE loan losses		(1,717	)		(0.23	)		4,896			0.61
Realized loss on core activities		(700	)		(0.10	)		—			—
Unrealized gain on core activities		—			—			(5,835	)		(0.73	)
Real estate depreciation and amortization		1,155			0.16			1,238			0.16
Net income from non-core assets (1)		—			—			(50	)		(0.01	)
Earnings Available for Distribution allocable to common shares	$	(6,306	)	$	(0.86	)	$	1,282		$	0.16

Weighted average common shares - diluted on Earnings Available for Distribution allocable to common shares		7,362						8,034

Earnings Available for Distribution per common share - diluted	$	(0.86	)				$	0.16

(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.

For the three months ended March 31, 2025 and 2024, EAD in accordance with the Management Agreement, which excludes incentive compensation payable, was a loss of $6.3 million and earnings of $1.3 million, respectively, or ($0.86) and $0.16, respectively, per common share outstanding. There was no incentive compensation payable incurred by us for the three months ended March 31, 2025.

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

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(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.

The following table summarizes the calculation of the Incentive Compensation Hurdle for the three months ended March 31, 2025 (dollars in thousands, except per share data):


Book Value Equity	Amount
Stockholders' equity less equity attributable to any outstanding preferred stock at September 30, 2022	$	216,026
Total amount of net proceeds from any issuance of common stock after October 1, 2022		4,182
Cumulative EAD from and after October 1, 2022 to the end of the most recently completed calendar quarter		31,417
Amount paid to repurchase common stock after October 1, 2022 (1)		(14,217	)
Incentive Compensation paid after October 1, 2022 (1)		(1,234	)
Book value equity at March 31, 2025	$	236,174
Incentive Compensation Hurdle (2)(3)	$	16,532

Average closing price of 30 day period ending three days prior to issuance date	$	18.54

(1)

Calculated on a daily weighted average basis for the 12-month period ended March 31, 2025.

(2)

Calculated as book value equity at March 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.

For the three months ended March 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. Our ability to meet our on-going liquidity needs is subject to our ability to generate cash from operating activities, which was $(4.6) million for the three months ended March 31, 2025, and our ability to maintain and/or obtain additional debt financing and equity capital together with the funds referred to below.

At March 31, 2025, our liquidity consisted of $66.0 million of unrestricted cash and cash equivalents, and $21.4 million of potential proceeds from unlevered financeable CRE loans.

During the three months ended March 31, 2025, our principal sources of liquidity were: (i) gross financing proceeds of $907.6 million from our term reinvestment financing facility; (ii) proceeds of $31.7 million on CRE loan sales; and (iii) net proceeds of $3.6 million from repayments on our CRE portfolio.

These sources of liquidity were offset by the liquidation of our two CRE securitizations, paydowns on our term warehouse facilities, deployments in CRE loan portfolio and real estate investments, repurchases of common stock, distributions on our preferred stock and ongoing operating expenses and substantially resulted in the $66.0 million of unrestricted cash we held at March 31, 2025.

The outstanding balance of our loan to ACRES Capital Corp., the parent of our Manager, was $10.6 million and $10.7 million at March 31, 2025 and December 31, 2024, respectively. The note bears interest at 3.00% per annum, payable monthly, and matures in July 2026, subject to two one-year extensions, at ACRES Capital Corp.’s option, and amortizes at a rate of $25,000 per month.

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.

Cash Flows

For the three months ended March 31, 2025, our restricted and unrestricted cash and cash equivalents balance increased from $57.6 million to $66.7 million. The cash movements can be summarized by the following:

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Cash flows from operating activities. For the three months ended March 31, 2025, operating activities decreased our cash balances by $4.6 million, primarily driven by changes in operating assets and liabilities, non-cash provision for loan losses, and non-cash amortization and depreciation.

Cash flows from investing activities. For the three months ended March 31, 2025, investing activities increased our cash balances by $117.7 million, primarily driven by repayments of CRE loans and proceeds from sales of CRE loans, partially offset by deployments in a CRE mezzanine loan, funding of existing commitments on CRE whole loans and deployments in our investment in real estate and investments in unconsolidated entities with underlying real estate collateral.

Cash flows from financing activities. For the three months ended March 31, 2025, financing activities decreased our cash balances by $104.1 million, primarily driven by repayments on our CRE securitization notes and term warehouse financing facilities, distributions on our preferred stock, repurchases of our common stock, partially offset by proceeds from our CRE term reinvestment financing facility.

Financing Availability

We utilize a variety of financing arrangements to finance certain assets. We generally utilize the following types of financing arrangements:

CRE - Term Reinvestment Financing Facility: Our term reinvestment financing facility effectively allows us to borrow against loans that we own. Under this agreement, we transfer loans to a counterparty and agree to purchase the same loans from the counterparty at a price equal to the transfer price plus interest. The counterparty retains the sole discretion over whether to purchase the loan from us. The facility includes a two-year reinvestment period enabling the reinvestment of principal proceeds from asset repayments into qualifying assets, provided the proceeds are reinvested within 90 days of the payoff. We also can acquire and finance the future funding participations of the portfolio collateral, subject to the discretion of the counterparty.

Senior Secured Financing Facility: Our senior secured financing facility allows us to borrow against loans and real estate investments that we own. This facility has an individual floating rate loan series structure that have a three month commitment period after the financing is approved by the lender, subject to the maximum dollar amount agreed upon for the series. Each floating rate loan series will have mutually agreed upon terms including (i) total commitment, including the capacity to fund future funding commitments, where applicable; (ii) advance rate on portfolio assets; (iii) interest rate composed of one-month Term SOFR plus a market rate spread; and (iv) maturity date of five years from the issuance date for the loan series unless an additional time is mutually agreed upon by the parties. 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.

Term Warehouse Financing Facilities (CRE loans): Term warehouse financing facilities effectively allow us to borrow against loans that we own. Under these agreements, we transfer loans to a counterparty and agree to purchase the same loans from the counterparty at a price equal to the transfer price plus interest. The counterparty retains the sole discretion over both whether to purchase the loan from us and, subject to certain conditions, the collateral value of such loan for purposes of determining whether we are required to pay margin to the counterparty. Generally, if the lender determines (subject to certain conditions) that the value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, we would be required to repay any amounts borrowed in excess of the product of (i) the revised collateral or market value multiplied by (ii) the applicable advance rate. During the term of these agreements, we receive the principal and interest on the related loans and pay interest to the counterparty.

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. Securitization generally involves transferring notes to a special purpose vehicle (or the issuing entity), which then issues one or more classes of non-recourse notes pursuant to the terms of an indenture. The notes are secured by the pool of assets. In exchange for the transfer of assets to the issuing entity, we receive cash proceeds from the sale of non-recourse notes. 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.

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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. The remedies for such events of default are also customary for this type of transaction.

Construction loans: We have entered into a loan agreement to finance the construction of a student housing complex. This loan is interest only and has a maximum principal balance of $48.0 million. 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. Additionally, we have entered into a financing agreement to fund energy efficient building improvements at this student housing complex, with a maximum principal balance of $15.5 million.

In March 2025, we exercised the optional redemption of both ACR 2021-FL1 and ACR 2021-FL2. We also entered into a master repurchase agreement with JPMorgan Chase to finance existing CRE loans as well as the origination of new CRE loans. 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. We recognized a charge of $1.5 million upon the redemption of the ACR 2021-FL1 and ACR 2021-FL2 securitizations from the recognition of unamortized deferred debt issuance costs associated with those securitizations.

We were in compliance with all of our covenants at March 31, 2025 in accordance with the terms provided in agreements with our lenders.

At March 31, 2025, we had financing arrangements as summarized below (in thousands, except amounts in footnotes):


	Execution Date	Maturity Date	Maximum Capacity		Facility Principal Outstanding		Availability
CRE - Term Reinvestment Financing Facility (1)
JPMorgan Chase Bank, N.A.	March 2025	May 2030	$	939,862	$	891,098	$	48,764
Senior Secured Financing Facility (2)
Massachusetts Mutual Life Insurance Company	July 2020	June 2028		500,000		63,099		436,901
CRE - Term Warehouse Financing Facilities (3)
JPMorgan Chase Bank, N.A.	October 2018	July 2026		250,000		-		250,000
Morgan Stanley Mortgage Capital Holdings LLC	November 2021	November 2025		250,000		41,171		208,829
Mortgages Payable
ReadyCap Commercial, LLC	April 2022	April 2025		20,375		20,292		83
Oceanview Life and Annuity Company (4)	January 2023	September 2025		48,000		44,311		3,689
Florida Pace Funding Agency (5)	January 2023	January 2053		15,510		15,510		—
Total					$	1,075,481

(1)

Excludes accrued interest payable of $2.1 million and deferred debt issuance costs of $3.3 million.

(2)

Excludes deferred debt issuance costs of $2.0 million.

(3)

Excludes accrued interest payable of $111,000 and deferred debt issuance costs of $1.2 million

(4)

Excludes deferred debt issuance costs of $200,000.

(5)

Excludes deferred debt issuance costs of $401,000.

The following table summarizes the average principal outstanding during the three months ended March 31, 2025 and December 31, 2024 and the principal outstanding on our financing arrangements at March 31, 2025 and December 31, 2024 (in thousands, except amounts in footnotes):

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	Three Months Ended March 31, 2025		March 31, 2025		Three Months Ended December 31, 2024		December 31, 2024
	Average Principal Outstanding		Principal Outstanding		Average Principal Outstanding		Principal Outstanding
Financing Arrangement
Term reinvestment financing facility - CRE loans(1)	$	150,350	$	891,098	$	—	$	—
Senior secured financing facility (2)		63,099		63,099		63,099		63,099
Term warehouse financing facilities - CRE loans (3)		127,660		41,171		158,126		157,832
Total	$	341,109	$	995,368	$	221,225	$	220,931

(1)

Principal outstanding excludes accrued interest payable of $2.1 million and deferred debt issuance costs of $3.3 million at March 31, 2025.

(2)

Principal outstanding excludes accrued interest payable of $270,000 and $274,000 and deferred debt issuance costs of $2.0 million and $2.2 million at March 31, 2025 and December 31, 2024, respectively.

(3)

Principal outstanding excludes accrued interest payable of $111,000 and $435,000 and deferred debt issuance costs of $1.2 million and $1.5 million at March 31, 2025 and December 31, 2024, respectively.

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
	Three Months Ended March 31, 2025		Three Months Ended March 31, 2024
Financing Arrangement
Term reinvestment financing facility - CRE loans	$	891,098	$	—
Senior secured financing facility		63,099		64,495
Term warehouse financing facilities - CRE loans		143,632		189,563

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. In the past, we have derived substantial operating cash from our equity investments in our CLOs and securitizations, which will cease if the CLOs and securitizations fail to meet certain tests. Through optional redemption of our securitizations in March 2025, we did not experience difficulty in maintaining our existing CLO and securitization financing and passed all of the critical tests required by these financings. Our securitizations collectively had balances of $865.1 million at December 31, 2024.

Our leverage ratio, defined as the ratio of borrowings to total equity, may vary as a result of the various funding strategies we use. At March 31, 2025 and December 31, 2024, our leverage ratio under GAAP was 2.9 and 3.0 times, respectively. The leverage ratio decreased during the period primarily due to the net decrease in borrowings offset by the net decrease to total equity.

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Contractual Obligations and Commitments


	Contractual Commitments
	(dollars in thousands, except amounts in footnotes)
	Payments due by Period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
At March 31, 2025:
CRE - term reinvestment financing facility (1)	$	893,200	$	—	$	—	$	—	$	893,200
Senior secured financing facility (2)		63,099		—		50,996		12,103		—
CRE - term warehouse financing facilities (3)		41,281		41,281		—		—		—
Mortgages payable (4)		80,113		64,603		—		—		15,510
5.75% Senior Unsecured Notes (5)		150,000		—		150,000		—		—
Unsecured junior subordinated debentures (6)		51,548		—		—		—		51,548
Lease liabilities (7)		859,699		1,720		5,961		6,511		845,507
Unfunded commitments on CRE loans (8)		83,995		50,533		33,462		—		—
Base management fees (9)		6,482		6,482		—		—		—
Total	$	2,229,417	$	164,619	$	240,419	$	18,614	$	1,805,765

(1)

Includes $2.1 million of accrued interest payable.

(2)

Excludes $270,000 of accrued interest payable.

(3)

Includes $111,000 of accrued interest payable.

(4)

Excludes $478,000 of accrued interest payable.

(5)

Excludes $13.0 million of interest expense payable through maturity in August 2026.

(6)

Excludes $22.7 million and $23.8 million of estimated interest expense payable through maturity, in June 2036 and October 2036, respectively.

(7)

Lease liabilities include a ground rent lease for a hotel property with a remaining term of 91 years and an annual growth rate of 3%.

(8)

Unfunded commitments on our originated CRE loans generally fall into two categories: (i) pre-approved capital improvement projects and (ii) new or additional construction costs subject, in each case, to the borrower meeting specified criteria. Upon completion of the improvements or construction, we would receive additional interest income on the advanced amount. At March 31, 2025, we had unfunded commitments on 20 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. The incentive compensation is not a fixed and determinable amount, and therefore it is not included in this table.

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 March 31, 2025, we had $32.1 million of cumulative net operating losses ("NOL") to carry forward to future years. 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. Additionally, we have cumulative total net capital losses of $121.9 million, which are set to expire at 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. At March 31, 2025, our TRSs 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.

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Distributions

We did not pay distributions on our common shares during the three months ended March 31, 2025 as we were focused on prudently retaining and managing sufficient excess liquidity. As a result of losses during 2020, we received significant NOL carryforwards and net capital loss carryforwards, as finalized in our 2020 tax return. We intend to retain taxable income by utilizing our NOL carryforwards and expect to generate capital gains to use a portion of our net capital loss carryforwards, thereby growing book value and our investable equity base. As we continue to take steps necessary to stabilize our earnings available for distribution, our Board expects to establish a plan for the prudent resumption of the payment of common share distributions. No assurance, however, can be given as to the amounts or timing of future distributions as such distributions are subject to our earnings, financial condition, capital requirements and such other factors as our Board deems relevant.

We intend to continue to make regular quarterly distributions to holders of our preferred stock.

U.S. federal income tax law generally requires that a REIT distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements on our repurchase agreements and other debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

Off-Balance Sheet Arrangements

General

At March 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 not established for those purposes. At March 31, 2025, we had not guaranteed obligations of any unconsolidated entities or entered into any commitment or letter of intent to provide additional funding to any such entities.

Unfunded Commitments

In the ordinary course of business, we make commitments to borrowers whose loans are in our CRE loan portfolio to provide additional loan funding in the future. 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. Whole loans had $84.0 million and $94.0 million in unfunded loan commitments at March 31, 2025 and December 31, 2024, respectively. Unfunded commitments are not considered in the CECL reserve if they are unconditionally cancellable.

Guarantees and Indemnifications

In the ordinary course of business, we may provide guarantees and indemnifications that contingently obligate us to make payments to the guaranteed or indemnified party based on changes in the value of an asset, liability or equity security of the guaranteed or indemnified party. As such, we may be obligated to make payments to a guaranteed party based on another entity’s failure to perform or achieve specified performance criteria, or we may have an indirect guarantee of the indebtedness of others.

In connection with our investment in the student housing complex, ACRES RF entered into guarantees related to the Construction Loan. Pursuant to the guarantees, Jason Pollack, Frank Dellaglio and ACRES RF (collectively, the "Guarantors"), for the benefit of Oceanview, provided limited "bad boy" guaranties to Oceanview pursuant to the Construction Loan Agreement until the earlier of the payment in full of the indebtedness or the date of a sale of the property pursuant to a foreclosure of the mortgage or deed or other transfer in lieu of foreclosure is accepted by Oceanview. The Guarantors also entered into a Completion Guaranty Agreement for the benefit of Oceanview to guaranty the timely completion of the project in accordance with the Construction Loan Agreement, as well as a Carry Guaranty Agreement, for the benefit of Oceanview to guaranty unconditional payment by Chapel Drive East, LLC of all customary or necessary costs and expenses incurred in connection with the operation, maintenance and management of the property

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and an Environmental Indemnity Agreement jointly and severally in favor of Oceanview whereby the Guarantors provided environmental representations and warranties, covenants and indemnifications (collectively the "Guaranties"). The Guaranties include certain financial covenants required of ACRES RF, including required net worth and liquidity requirements.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared by management in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that may affect the value of our assets or liabilities and disclosure of contingent assets and liabilities at the date of our financial statements and our financial results. 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, accounting for derivative financial instruments and hedging activities, income taxes, allowance for credit losses and variable interest entities (“VIEs”). We have reviewed these accounting policies with our Board and believe that all of the decisions and assessments upon which our financial statements are based were reasonable at the time made based upon information available to us at the time.

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. 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. We utilize a probability of default and loss given default methodology over a reasonable and supportable forecast period after which we revert to the historical mean loss ratio, utilizing a blended approach sourced from our own historical losses and the market losses from an engaged third-party’s database, to be applied for the remaining estimable period. The CECL model requires us to make significant judgments, including: (i) the selection of a reasonable and supportable forecast period, (ii) the selection and weighting of appropriate macroeconomic forecast scenarios, (iii) the determination of the risk characteristics in which to pool financial assets, and (iv) the appropriate historical loss data to use in the model. Unfunded commitments are not considered in the CECL reserve if they are unconditionally cancellable by us.

We measure the loan portfolio’s credit losses by grouping loans based on similar risk characteristics under CECL, which is typically based on the loan’s collateral type. We regularly evaluate the risk characteristics of our loan portfolio to determine whether a different pooling methodology is more accurate. Further, if we determine that foreclosure of a loan’s collateral is probable or repayment of the loan is expected through sale or operation of the collateral and the borrower is experiencing financial difficulty, expected credit losses are measured as the difference between the current fair value of the collateral and the amortized cost of the loan. Fair value may be determined based on (i) the present value of estimated cash flows; (ii) the market price, if available; or (iii) the fair value of the collateral less estimated disposition costs.

While a loan exhibiting credit quality deterioration may remain on accrual status, the loan is placed on nonaccrual status at such time as (i) management believes that scheduled debt service payments will not be met within the coming 12 months; (ii) the loan becomes 90 days past due; (iii) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the credit deterioration; or (iv) the net realizable value of the loan’s underlying collateral approximates our carrying value for such loan. While on nonaccrual status, we recognize interest income only when an actual payment is received if a credit analysis supports the borrower’s principal repayment capacity. When a loan is placed on nonaccrual, previously accrued interest is reversed from interest income.

We utilize the contractual life of our loans to estimate the period over which we measure expected credit losses. Estimates for prepayments and extensions are incorporated into the inputs for our CECL model. Modifications to loan terms, such as a modification in connection with a troubled debt restructuring ("TDR"), where a concession is granted to a borrower experiencing financial difficulty, may result in the extension of the loan’s life and an increase in the allowance for credit losses.

In order to calculate the historical mean loss ratio applied to the loan portfolio, we utilize historical losses from our full underwriting history, along with the market loss history of a selected population of loans from a third-party’s database that are similar to our loan types, loan sizes, durations, interest rate structure and general LTV profiles. We may make adjustments to the historical loss history for qualitative or environmental factors if we believe there is evidence that the estimate for expected credit losses should be increased or decreased.

We record write-offs against the allowance for credit losses if we deem that all or a portion of a loan’s balance is uncollectible. If we receive cash in excess of some or all of the amounts we previously wrote off, we record a recovery to increase the allowance for credit losses.

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As part of the evaluation of the loan portfolio, we assess the performance of each loan and assign a risk rating 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 LTV ratios, risk inherent in the loan structure and exit plan. Loans are rated “1” through “5,” from least risk to greatest risk, in connection with this review.

Investments in Real Estate

We acquire investments in real estate through direct equity investments and as a result of our lending activities (i.e. through foreclosure or the receipt of the deed-in-lieu of foreclosure on a property). Acquired investments in real estate assets are recorded initially at fair value in accordance with U.S. GAAP. We allocate the purchase price of our acquired assets and assumed liabilities based on the relative fair values of the assets acquired and liabilities assumed.

We evaluate whether property obtained as a result of our lending activities should be identified as held for sale. If a property is determined to be held for sale, all of the acquired assets and assumed liabilities will be recorded in property held for sale on the consolidated balance sheets and recorded at the lower of cost or fair value. Once a property is classified as held for sale, depreciation expense is no longer recorded.

Investments in real estate are carried net of accumulated depreciation. We depreciate real property, building and tenant improvements and furniture, fixtures, and equipment using the straight-line method over the estimated useful lives of the assets. We amortize any acquired intangible assets using the straight-line method over the estimated useful lives of the intangible assets. We amortize the value allocated to lease right of use assets and related in-place lease liabilities, when determined to be operating leases, using the straight-line method over the remaining lease term. The value allocated to any associated above or below market lease intangible asset or liability is amortized to lease expense over the remaining lease term.

Ordinary repairs and maintenance are expensed as incurred. Costs related to the improvement of the real property are capitalized and depreciated over their useful lives. Costs related to the development and construction of real property are capitalized to construction in progress during the period beginning with the commencement of development and ending with the completion of construction.

We depreciate investments in real estate and amortize intangible assets over the estimated useful lives of the assets as follows:


Category		Term
Building		35 to 40 years
Building improvements		1 to 39 years
Site improvements		10 years
Tenant improvements		Shorter of lease term or expected useful life
Furniture, fixtures and equipment		1 to 12 years
Right of use assets		3 to 99 years
Intangible assets		3 months to 18 years
Lease liabilities		Shorter of lease term or expected useful life

Revenue Recognition

Interest income from our loan portfolio is recognized over the life of each loan using the effective interest method and is recorded on the accrual basis. Premiums and discounts are amortized or accreted into income using the effective yield method. If a loan with a premium or discount is prepaid, we immediately recognize the unamortized portion as a decrease or increase to interest income. In addition, we defer loan origination and extension fees and loan origination costs and recognize them over the life of the related loan with interest income using the straight-line method, which approximates the effective yield method. Income recognition is suspended for loans at the earlier of the date at which payments become 90 days past due or when, in our opinion, a full recovery of principal and income becomes doubtful. When the ultimate collectability of the principal is in doubt, all payments received are applied to principal under the cost recovery method. When the ultimate collectability of the principal is not in doubt, contractual interest is recorded as interest income when received, under the cash method, until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed.

Through our investments in real estate, we earn revenue associated with rental operations and hospitality operations, which are presented in real estate income on the consolidated statements of operations.

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Rental operating revenue consists of fixed contractual base rent arising from tenant leases at our office properties under operating leases. Revenue is recognized on a straight-line basis over the non-cancelable terms of the related leases. For leases that have fixed and measurable rent escalations, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded in our consolidated balance sheets. 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 recognize hospitality operating revenue when guest rooms are occupied, services have been provided or fees have been earned. Revenues are recorded net of any sales, occupancy or other taxes collected from customers on behalf of third parties. The following provides additional detail on room revenue and other operating revenue:

•

Room revenue is recognized when our hotel satisfies its performance obligation of providing a hotel room. The hotel reservation defines the terms of the agreement including an agreed-upon rate and length of stay. Payment is typically due and paid in full at the end of the stay with some customers prepaying for their rooms prior to the stay. Payments received from a customer prior to arrival are recorded as an advance deposit and are recognized as revenue at the time of occupancy.

•

Other operating revenue is recognized at the time when the goods or services are provided to the customer or when the performance obligation is satisfied. 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. Once it is determined that we hold a variable interest in a VIE, management performs a qualitative analysis to determine (i) if we have the power to direct the matters that most significantly impact the VIE’s financial performance; and (ii) if we have the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. 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 March 31, 2025, we determined that there are no VIEs to be consolidated.

Recent Accounting Standards

Accounting Standards to be Adopted in Future Periods

In December 2023, the Financial Accounting Standards Board (“FASB”) issued guidance to improve the transparency of income tax disclosures. 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.

In November 2024, the FASB issued guidance to improve transparency on certain costs and expenses. This guidance is effective for fiscal years beginning after December 15, 2026 and is to be adopted on a prospective basis with the option to apply retrospectively. 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.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our consolidated financial statements are prepared in accordance with GAAP and our distributions are determined by our Board based primarily on our maintaining our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At March 31, 2025, the primary components of our market risk were credit risk, counterparty risk, financing risk, and interest rate risk, as described below. While we do not seek to avoid risk completely, we do seek to assume risk that can be quantified from historical experience, to actively manage that risk, to earn sufficient compensation to justify assuming that risk and to maintain capital levels consistent with the risk we undertake or to which we are exposed. Additionally, refer to Item 1A, "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information on risks we face.

Credit Risks

Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, ACRES Capital, LLC’s asset management team reviews our investment portfolios and in certain instances is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

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.

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. We partially mitigate this risk by generally requiring our borrowers to purchase interest rate cap agreements with non-affiliated, well-capitalized third parties and by selectively requiring our borrowers to have and maintain debt service reserves. These interest rate caps generally mature prior to the maturity date of the loan and the borrowers are required to pay to extend them. In 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 March 31, 2025, 78.8% of the par value of our CRE loan portfolio had interest rate caps or debt service reserves in place with a weighted-average maturity of four months.

Macroeconomic conditions may persist into the future and impair our borrowers’ ability to comply with the terms under our loan agreements. 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. 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. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain investments. In order to mitigate that risk, we have proactively engaged with our borrowers, particularly with those with near-term maturities, in order to maximize recovery.

Counterparty Risk

The nature of our business requires us to hold our cash and cash equivalents and obtain financing with various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. 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, mortgage payable and construction loans. Over time, as market conditions change, we may use other forms of leverage in addition to these methods of financing. Weakness or volatility in the financial markets, the CRE and mortgage markets or the economy generally could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, or to decrease the amount of our available financing, or to increase the costs of that financing.

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Interest Rate Risk

Our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income, subject to the impact of interest rate floors. At March 31, 2025, 97.9% 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. The remaining 2.1% 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. Our floating-rate loan portfolio of $1.4 billion had a weighted-average benchmark floor of 1.05% at March 31, 2025.

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):


		Three Months Ended March 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
$	304,625	$	(2,676	)	$	(0.08	)	$	3,060	$	0.10

(1)

Includes our floating-rate CRE loans at March 31, 2025.

(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%.

Risk Management

To the extent consistent with maintaining our status as a REIT, we seek to manage our interest rate risk exposure to protect our variable rate debt against the effects of major interest rate changes. We generally seek to manage our interest rate risk by monitoring and adjusting, if necessary, the reset index and interest rate related to our borrowings.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended, or the Exchange Act, reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

We may become involved in litigation on various matters due to the nature of our business activities. The resolution of these matters may result in adverse judgments, fines, penalties, injunctions and other relief against us as well as monetary payments or other agreements and obligations. In addition, we may enter into settlements on certain matters in order to avoid the additional costs of engaging in litigation. We are unaware of any contingencies arising from such litigation that would require accrual or disclosure in the consolidated financial statements at March 31, 2025.

ITEM 1A. RISK FACTORS

As of the date of this report, there have been no material changes to the risk factors disclosed under Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC"), except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Issuer Purchases of Equity Securities

In March 2016, our Board approved a securities repurchase program. In November 2020, our Board authorized and approved the continued use of our existing share repurchase program in order to repurchase up to $20.0 million of our outstanding shares of 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 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 March 31, 2025, $426,000 remained available under this repurchase program. In April 2025, our Board authorized and approved the repurchase of an additional $10.0 million of outstanding shares of both common and preferred stock.

The following table presents information about our common and preferred stock repurchases made during the three months ended March 31, 2025 in accordance with our repurchase program (dollars in thousands, except per share data):


	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	$	4,029,866
February 3, 2025 - February 28, 2025		72,858		19.31		72,858		2,624,225
March 3, 2024 - March 31, 2025		103,024		21.35		103,024		425,860

(1)

The average price paid per share as reflected above includes broker fees and commissions.

ITEM 5. OTHER INFORMATION

During the three months ended March 31, 2025, no director or officer of the Company adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS




Exhibit No.		Description
3.1(a)		Amended and Restated Articles of Incorporation of Resource Capital Corp. (Filed previously as an exhibit to the Company’s Registration Statement on Form S-11, Registration No. 333-126517.)
3.1(b)		Articles of Amendment to Restated Certificate of Incorporation of Resource Capital Corp. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 1, 2015.)
3.1(c)		Articles Supplementary 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock. (Filed previously as an exhibit to the Company’s Registration Statement on Form 8-A filed on June 9, 2014.)
3.1(d)		Articles Supplementary 7.875% Series D Cumulative Redeemable Preferred Stock, as corrected. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on May 21, 2021.)
3.1(e)		Articles of Amendment, effective May 25, 2018. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on May 25, 2018.)
3.1(f)		Articles of Amendment, effective February 16, 2021. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on February 18, 2021.)
3.1(g)		Articles of Amendment, effective May 28, 2021. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 1, 2021.)
3.2		Fourth Amended and Restated Bylaws of ACRES Commercial Realty Corp. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on February 18, 2021.)
4.1(a)		Form of Certificate for Common Stock for Resource Capital Corp. (Filed previously as an exhibit to the Company’s Registration Statement on Form S-11, Registration No. 333-126517.)
4.1(b)		Form of Certificate for 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock. (Filed previously as an exhibit to the Company’s Registration Statement on Form 8-A filed on June 9, 2014.)
4.1(c)		Form of Certificate for 7.875% Series D Cumulative Redeemable Preferred Stock. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on May 21, 2021.)
4.2(a)		Junior Subordinated Indenture between Resource Capital Corp. and Wells Fargo Bank, N.A., dated May 25, 2006. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
4.2(b)		Amendment to Junior Subordinated Indenture and Junior Subordinated Note due 2036 between Resource Capital Corp. and Wells Fargo Bank, N.A., dated October 26, 2009 and effective September 30, 2009. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.)
4.3(a)		Amended and Restated Trust Agreement among Resource Capital Corp., Wells Fargo Bank, N.A., Wells Fargo Delaware Trust Company and the Administrative Trustees named therein, dated May 25, 2006. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
4.3(b)		Amendment to Amended and Restated Trust Agreement and Preferred Securities Certificate among Resource Capital Corp., Wells Fargo Bank, N.A. and the Administrative Trustees named therein, dated October 26, 2009 and effective September 30, 2009. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.)
4.4		Junior Subordinated Note due 2036 in the principal amount of $25,774,000, dated October 26, 2009. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.)
4.5(a)		Junior Subordinated Indenture between Resource Capital Corp. and Wells Fargo Bank, N.A., dated September 29, 2006. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
4.5(b)		Amendment to Junior Subordinated Indenture and Junior Subordinated Note due 2036 between Resource Capital Corp. and Wells Fargo Bank, N.A., dated October 26, 2009 and effective September 30, 2009. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.)
4.6(a)		Amended and Restated Trust Agreement among Resource Capital Corp., Wells Fargo Bank, N.A., Wells Fargo Delaware Trust Company and the Administrative Trustees named therein, dated September 29, 2006. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
4.6(b)		Amendment to Amended and Restated Trust Agreement and Preferred Securities Certificate among Resource Capital Corp., Wells Fargo Bank, N.A. and the Administrative Trustees named therein, dated October 26, 2009 and effective September 30, 2009. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.)
4.7		Amended Junior Subordinated Note due 2036 in the principal amount of $25,774,000, dated October 26, 2009. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.)
4.8		Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.)
4.9(a)		Base Indenture, dated August 16, 2021, between the Company and the Trustee. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2021.)
4.9(b)		First Supplemental Indenture, dated August 16, 2021, between the Company and the Trustee. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2021.)
4.9(c)		Form of 5.75% Senior Note due 2026 (included in Exhibit 4.9(b))
10.1(a)*		Fourth Amended and Restated Management Agreement, dated as of July 31, 2020, by and among Exantas Capital Corp., ACRES Capital, LLC and ACRES Capital Corp. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 4, 2020.)

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10.1(b)*		First Amendment to Fourth Amended and Restated Management Agreement, dated as of February 16, 2021, by and among ACRES Commercial Realty Corp. f/k/a Exantas Capital Corp., ACRES Capital, LLC and ACRES Capital Corp. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.)
10.1(c)*		Second Amendment to Fourth Amended and Restated Management Agreement, dated as of May 6, 2022, by and among ACRES Commercial Realty Corp. f/k/a Exantas Capital Corp., ACRES Capital, LLC and ACRES Capital Corp. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)
10.1 (d)*		Third Amendment to Fourth Amended and Restated Management Agreement, dated February 15, 2024, by and among ACRES Commercial Realty Corp., ACRES Capital, LLC and ACRES Capital Corp. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.)
10.2(a)*		Second Amended and Restated Omnibus Equity Compensation Plan. (Filed previously as an exhibit to the Company’s Proxy Statement filed on April 18, 2019.)
10.2(b)*		Amendment No. 1 to the Exantas Capital Corp. Second Amended and Restated Omnibus Equity Compensation Plan. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.)
10.2(c)*		Third Amended and Restated Omnibus Equity Compensation Plan. (Filed previously as an exhibit to the Company’s Proxy Statement filed on April 12, 2021.)
10.2(d)*		Form of Stock Award Agreement. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)
10.2(e)*		Form of Stock Award Agreement (for employees with Resource America, Inc. employment agreements). (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)
10.3		Form of Indemnification Agreement. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.)
10.4(a)		Loan and Servicing Agreement, dated as of July 31, 2020, among RCC Real Estate SPE Holdings LLC, as Holdings, RCC Real Estate SPE 9 LLC, as the Borrower, Massachusetts Mutual Life Insurance Company and the other Lenders from time to time party thereto, Wells Fargo Bank, National Association, as the Administrative Agent, Massachusetts Mutual Life Insurance Company, as the Facility Servicer, ACRES Capital Servicing LLC, as the Portfolio Asset Servicer, and Wells Fargo Bank, National Association, as the Collateral Custodian. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 4, 2020.)
10.4(b)		First Amendment to Loan and Servicing Agreement, dated as of September 16, 2020, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association, as the Administrative Agent. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 22, 2020.)
10.4(c)		Second Amendment to Loan and Servicing Agreement, dated as of May 25, 2021, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.)
10.4(d)		Third Amendment to Loan and Servicing Agreement, dated as of August 16, 2021, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, the Lenders party thereto and Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.)
10.4(e)		Fourth Amendment to Loan and Servicing Agreement, dated as of April 12, 2022, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, the Lenders party thereto and Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)
10.4(f)		Fifth Amendment to Loan and Servicing Agreement, dated as of July 26, 2022, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, the Lenders party thereto and Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on July 27, 2022.)
10.4(g)		Sixth Amendment to Loan and Servicing Agreement, dated as of August 29, 2022, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, the Lenders party thereto and Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 30, 2022.)
10.4(h)		Guaranty, dated as of July 31, 2020, by Exantas Capital Corp., and each of Exantas Real Estate Funding 2018-RSO6 Investor, LLC, Exantas Real Estate Funding 2019-RSO7 Investor, LLC, and Exantas Real Estate Funding 2020-RSO8 Investor, LLC, in favor of the Secured Parties. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 4, 2020.)
10.4(i)		Amended and Restated Loan and Servicing Agreement, dated as of December 22, 2022, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, Plymouth Meeting Holdings, LLC, Exantas Phili Holdings, LLC, ACRES Real Estate TRS 9 LLC, Massachusetts Mutual Life Insurance Company and ACRES Capital Servicing (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on December 22, 2022.)
10.4(j)		Guaranty, dated May 25, 2021 between Exantas Phili Holdings, LLC in favor of the Secured Parties. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)
10.4(k)		Guaranty, dated May 25, 2021 between 65 E. Wacker Holdings, LLC in favor of the Secured Parties. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)

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10.4(l)		Guaranty, dated May 25, 2021 between Plymouth Meeting Holdings, LLC in favor of the Secured Parties. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)
10.4(m)		Pledge and Guaranty Agreement, dated August 16, 2021 between ACRES Real Estate TRS 9 LLC in favor of the Secured Parties. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)
10.4(n)		Guaranty, dated April 12, 2022 between Appleton Hotel Holdings, LLC and Appleton Hotel Leasing, LLC in favor of the Secured Parties. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.)
10.5(a)		Note and Warrant Purchase Agreement, dated as of July 31, 2020, by and among Exantas Capital Corp. and the Purchasers signatory thereto. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 4, 2020.)
10.5(b)		Agreement between the Company, OCM XAN Holdings PT, LLC and the Massachusetts Mutual Life Insurance Company, dated August 18, 2021. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 20, 2021.)
10.5(c)		Amendment No. 1 to Note and Warrant Purchase Agreement, dated January 31, 2022, between ACRES Commercial Realty Corp. and the Purchasers signatory thereto. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on February 3, 2022.)
10.6(a)		Promissory Note, dated as of July 31, 2020, issued by ACRES Capital Corp. to RCC Real Estate, Inc. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 4, 2020.)
10.6(b)		Amendment No.1 to Promissory Note, dated March 13, 2025, between ACRES Holdings, LLC to ACRES Realty Funding, Inc. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
10.7(a)*		Manager Incentive Plan. (Filed previously as an exhibit to the Company’s Proxy Statement filed on April 12, 2021.)
10.7(b)*		Form of Stock Award Agreement Under the Manager Incentive Plan. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 9, 2021.)
10.8*		Equity Distribution Agreement, dated October 4, 2021, by and among ACRES Commercial Realty Corp., ACRES Capital, LLC and JonesTrading Institutional Services LLC. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 7, 2021.)
10.9(a)		Building Loan Agreement, dated as of January 24, 2023 between Chapel Drive East, LLC and Oceanview Life and Annuity Company. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.)
10.9(b)		Amendment No. 1 to Building Loan Agreement, dated March 11, 2025, between Chapel Drive East, LLC and Oceanview Life and Annuity Company. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
10.9(c)		Guaranty Agreement executed January 24, 2023 by Jason Pollack, Frank Dellaglio and ACRES Realty Funding, Inc. for the benefit of Oceanview Life and Annuity Company. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on January 25, 2023.)
10.9(d)		Completion Guaranty Agreement executed January 24, 2023 by Jason Pollack, Frank Dellaglio and ACRES Realty Funding, Inc. for the benefit of Oceanview Life and Annuity Company. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on January 25, 2023.)
10.9(e)		Carry Guaranty Agreement executed January 24, 2023 by Jason Pollack, Frank Dellaglio and ACRES Realty Funding, Inc. for the benefit of Oceanview Life and Annuity Company. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on January 25, 2023.)
10.9(f)		Environmental Indemnity Agreement executed January 24, 2023 by Jason Pollack, Frank Dellaglio and ACRES Realty Funding, Inc. in favor of Oceanview Life and Annuity Company. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on January 25, 2023.)
31.1		Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.
31.2		Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer.
32.1		Certification Pursuant to 18 U.S.C. Section 1350.
32.2		Certification Pursuant to 18 U.S.C. Section 1350.
97.1		Policy for the Recovery of Erroneously Awarded Compensation. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.)
99.1(a)		Master Repurchase Agreement for $250,000,000 between RCC Real Estate SPE 8, LLC, as Seller, and JPMorgan Chase Bank, National Association, as Buyer, dated October 26, 2018. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 30, 2018.)
99.1(b)		First Amendment to Uncommitted Master Repurchase Agreement dated as of August 14, 2020 between RCC Real Estate SPE 8, LLC and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.)
99.1(c)		Amendment No. 2 to Master Repurchase Agreement, dated September 1, 2021 between RCC Real Estate SPE 8, LLC and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 2, 2021.)
99.1(d)		Amendment No. 3 to Master Repurchase Agreement and Guarantee Agreement, dated October 26, 2021 between RCC Real Estate SPE 8, LLC, JPMorgan Chase Bank, National Association and ACRES Commercial Realty Corp., as guarantor (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 29, 2021.)
99.1(e)		Amendment No. 4 to Master Repurchase Agreement, dated July 21, 2023, between RCC Real Estate SPE 8, LLC and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on July 25, 2023.)

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99.1(f)		Guarantee made by Exantas Capital Corp., as guarantor, in favor of JPMorgan Chase Bank, National Association, dated October 26, 2018. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 30, 2018.)
99.1(g)		First Amendment to Guarantee Agreement, dated May 6, 2020, between Exantas Capital Corp. and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.)
99.1(h)		Amendment No. 2 To Guarantee Agreement, dated October 2, 2020 between Exantas Capital Corp. and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 7, 2020.)
99.1(i)		Amendment No. 4 To Guarantee Agreement, dated November 17, 2022 between ACRES Commercial Realty Corp. and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on November 18, 2022.)
99.1(j)		Amendment No. 5 to Guarantee Agreement, dated July 21, 2023, between ACRES Commercial Realty Corp. and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on July 25, 2023.)
99.1(k)		Amendment No. 6 to Guarantee Agreement, dated March 14, 2025, between ACRES Commercial Realty Corp. and JPMorgan Chase Bank, National Association. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
99.2(a)		Master Repurchase and Securities Contract Agreement between ACRES Real Estate SPE 10, LLC, as Seller, and Morgan Stanley Mortgage Capital Holdings LLC, as Administrative Agent, dated November 3, 2021. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.)
99.2(b)		First Amendment to Master Repurchase and Securities Contract Agreement, dated January 28, 2022, between ACRES Real Estate SPE 10, LLC and Morgan Stanley Mortgage Capital Holdings LLC, as Administrative Agent. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on February 3, 2022.)
99.2(c)		Guaranty made by ACRES Commercial Realty Corp., as Guarantor, in favor of Morgan Stanley Mortgage Capital Holdings LLC, dated November 3, 2021. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.)
99.2(d)		Amendment No. 1 to Guaranty, dated November 18, 2022 between ACRES Commercial Realty Corp. and Morgan Stanley Mortgage Capital Holdings LLC. (Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on November 18, 2022.)
99.2(e)		Amendment No. 2 to Guaranty, dated November 3, 2023 between ACRES Commercial Realty Corp. and Morgan Stanley Mortgage Capital Holdings LLC. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.)
99.2(f)		Amendment No. 3 to Guaranty, dated November 1, 2024 between ACRES Commercial Realty Corp. and Morgan Stanley Mortgage Capital Holdings LLC. (Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.)
99.2(g)		Amendment No. 4 to Guaranty, dated March 14, 2025 between ACRES Commercial Realty Corp. and Morgan Stanley Mortgage Capital Holdings LLC. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
99.3(a)		Master Repurchase Agreement between ACRES SPE 2025-1, LLC, as Seller, and JPMorgan Chase Bank, National Association, as Buyer, dated March 14, 2025. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
99.3(b)		Guarantee made by ACRES Commercial Realty Corp., as Guarantor, in favor of JPMorgan Chase Bank, National Association, dated March 14, 2025. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
99.4		Federal Income Tax Consequences of our Qualification as a REIT. (Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.)
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document.
104		Cover Page Interactive Data File.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ACRES COMMERCIAL REALTY CORP.
		(Registrant)

May 7, 2025	By:	/s/ Mark Fogel
		Mark Fogel
		President & Chief Executive Officer

May 7, 2025	By:	/s/ Eldron C. Blackwell
		Eldron C. Blackwell
		Senior Vice President
		Chief Financial Officer

May 7, 2025	By:	/s/ Linda M. Kilpatrick
		Linda M. Kilpatrick
		Vice President
		Chief Accounting Officer and Controller

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