NYSE: ACR

Our investment strategy targets the following CRE credit investments, including:

•
Floating-rate first mortgage loans, which we refer to as whole loans;

•
First priority interests in first mortgage loans, which we refer to as A-notes;

•
Subordinated interests in first mortgage loans, which we refer to as B-notes;

•
Preferred equity investments related to CRE that are subordinate to first mortgage loans and are not collateralized by the property underlying the investment; and

•
CRE equity investments.

We generate our income primarily from the spread between the revenues we receive from our interest-bearing assets and the cost to finance our ownership of those assets, including corporate debt. We also derive rental income from our direct equity investments in commercial real estate property.

We typically target transitional floating-rate CRE loans between $10.0 million and $100.0 million. During the year ended December 31, 2025, we originated 15 CRE loans with total commitments of $757.3 million. At December 31, 2025, our CRE loan portfolio at par comprised $1.8 billion of CRE whole loans with a weighted average spread of 3.35% over the one-month benchmark interest rates utilized, which have a weighted average floor of 1.78%.

Our Business Strategy

The core components of our business strategy are:

Investment in CRE assets. We are currently invested in CRE whole loans and CRE equity investments. Our goal is to allocate 90% to 100% of our equity to our CRE assets.

Managing our investment portfolio. At December 31, 2025, we managed $2.2 billion of assets. The core of our management process is credit analysis, which our Manager, with the assistance of ACRES, uses to actively monitor our existing investments and as a basis for evaluating new investments. Senior management of ACRES has extensive experience in underwriting the credit risk associated with our targeted asset classes and conducts detailed due diligence on all investments. After we make investments, our Manager actively monitors them for early detection of trouble or deterioration. If a default occurs, we use our senior management team’s asset management experience in seeking to mitigate the severity of any loss and to optimize the recovery from assets collateralizing the investment.

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Managing our interest rate, pricing and liquidity risk. We engage in a number of business activities that are vulnerable to interest rate, pricing and liquidity risk and we seek to manage those risks. The risks on our long-term financing agreements, principally our term financing facilities, are managed by seeking to match the maturities and repricing dates of our financed investments with the maturities and repricing dates of our long-term financing facilities. Additionally, we seek to match investment and financing maturities and repricing dates using securitization vehicles structured by our Manager and, subject to the availability of markets for securitization financings, we expect to continue to use securitizations in the future to accomplish our long-term match funding financing strategy.

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

Outstanding Borrowings (1)

Value of Collateral

Equity at Risk (2)

At December 31, 2025:

CRE - Term Reinvestment Financing Facility

JPMorgan Chase Bank, N.A.

$

728,167

$

1,009,622

$

295,734

Senior Secured Financing Facility

Massachusetts Mutual Life Insurance Company

$

61,645

$

166,526

$

104,091

CRE -Term Warehouse Financing Facilities

JPMorgan Chase Bank, N.A.

$

116,488

$

149,000

$

32,570

Morgan Stanley Mortgage Capital Holdings LLC

$

417,374

$

544,937

$

130,295

Mortgage Payable

ReadyCap Commercial, LLC

$

20,185

$

26,964

$

6,695

Total

$

1,343,859

$

1,897,049

(1)
Includes deferred debt issuance costs.

(2)
The term reinvestment financing facility, senior secured financing facility and term warehouse financing facilities include accrued interest receivable and accrued interest payable, which are excluded from the value of collateral.

Our financing arrangements charge a floating rate of interest. For more information concerning our financing arrangements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” and Note 11 contained in “Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements” of this report. We continuously monitor our compliance with all of the financial covenants. We were in compliance with all financial covenants, as defined in the respective agreements, at December 31, 2025.

Diversification of investments. We manage our investment risk by maintaining a diversified portfolio of CRE mortgage loans and other CRE-related investments. As funds become available for investment or reinvestment, we seek to maintain diversification by property type or geographic location while allocating our capital to investment opportunities that we believe are the most economically attractive. The percentage of assets that we have invested in certain non-qualifying, non-core and other real estate-related investments is subject to the federal income tax requirements for REIT qualification and the requirements for exclusion from regulation under the Investment Company Act of 1940, or the Investment Company Act.

Our Operating Policies

Investment guidelines. We have established investment policies, procedures and guidelines that are reviewed and approved by our Manager’s investment committee and our Board. Our investment committee and/or our Board, as applicable, meets regularly to consider and approve proposed specific investments. Our Board monitors the execution of our overall investment strategies and targeted asset classes. We acquire our investments primarily for income. We do not have a policy that requires us to focus our investments in one or more particular geographic areas or industries.

Financing policies. We use leverage in order to increase potential returns to our stockholders and for financing our portfolio. We do not speculate on changes in interest rates. Although we have identified leverage targets for each of our targeted asset classes, our investment policies do not have any minimum or maximum leverage limits. Our Manager’s investment committee has the discretion, without the need for further approval by our Board, to increase the amount of leverage we incur above our targeted range for individual asset classes subject, however, to any leverage constraints that may be imposed by existing financing arrangements.

We use borrowing and securitization strategies to accomplish our long-term match funding financing strategy. Based upon current conditions in the credit markets for collateralized loan obligations (sometimes, collectively, referred to as CLOs), we expect to modestly increase leverage through new CRE debt securitizations and the continued use of our senior secured financing facility and term financing facilities. We may also seek other credit arrangements to finance new investments that we believe can generate attractive risk-adjusted returns, subject to availability.

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Credit and risk management policies. Our Manager focuses its attention on credit and risk assessment from the earliest stage of the investment selection process. In addition, our Manager screens and monitors all potential investments to determine their impact on maintaining our REIT qualification under federal income tax laws and our exclusion from investment company status under the Investment Company Act. Portfolio risks, including risks related to credit losses, interest rate volatility, liquidity and counterparty credit, are generally managed on an asset and portfolio type basis by our Manager.

Floating-Rate Loan Portfolio and Borrowings

As discussed in the “Managing our interest rate, pricing and liquidity risk” section above, our investments in floating-rate assets and utilization of floating-rate borrowings expose us to interest rate risk. In a business environment where benchmark interest rates are increasing, 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. The sponsors may need to fund additional equity into the properties to cover these costs as the property may not generate sufficient cash flow to pay these costs. At December 31, 2025, 76.5% of the par value of our CRE loan portfolio had interest rate caps with a weighted-average maturity of 15 months or funded debt service reserves in place.

Investment Portfolio

The table below summarizes the amortized costs and net carrying amounts of our investments at December 31, 2025, classified by asset type (dollars in thousands, except amounts in footnotes):

At December 31, 2025

Amortized Cost

Net Carrying Amount (1)

Percent of Portfolio

Weighted Average Coupon

Loans held for investment:

CRE whole loans

$

1,820,942

$

1,800,784

91.74

%

7.32%

CRE preferred equity investment

9,425

9,185

0.47

%

10.00%

1,830,367

1,809,969

92.21

%

Other investments:

Investments in unconsolidated entities

29,237

29,237

1.49

%

N/A(4)

Investments in real estate(2)

56,277

56,277

2.86

%

N/A(4)

Properties held for sale(3)

67,509

67,509

3.44

%

N/A(4)

153,023

153,023

7.79

%

Total investment portfolio

$

1,983,390

$

1,962,992

100.00

%

(1)
Net carrying amount includes an allowance for credit losses of $20.4 million.

(2)
Includes real estate-related right of use assets of $19.0 million, intangible assets of $6.2 million and lease liabilities of $45.3 million.

(3)
Includes property held for sale-related liabilities of $3.1 million, related right of use assets of $5.4 million, intangible assets of $2.7 million and mortgages payable of $20.2 million.

(4)
There are no stated rates associated with these investments.

The negative impact of COVID-19 on our commercial mortgage-backed securities, or CMBS, investments and 2020 results created net operating loss (“NOL”) carryforwards and net capital loss carryforwards (“CLCFs”). We have $32.1 million of NOL carryforwards, which was reported on our tax return filed in October 2025 for the 2024 tax year. Additionally, in our taxable REIT subsidiaries ("TRS"), we have NOL carryforwards of $62.0 million, of which $22.2 million have an indefinite carryforward period and $39.8 million begin to expire in 2044. We also have $20.8 million of CLCFs from prior years, which are set to expire on December 31, 2029.

In previous years we have acquired equity investments in CRE properties to utilize CLCFs in our REIT. These equity investments offer the opportunity for capital appreciation returns that may be reinvested into the loan origination pipeline when and if realized.

We hold investments in 100% of the common shares of two trusts, Resource Capital Trust I and RCC Trust II, that were formed for the purpose of providing us with unsecured junior subordinated debt financing and are accounted for as investments in unconsolidated entities.

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CRE Debt Investments

Floating-rate whole loans. We predominantly originate floating-rate first mortgage loans, or whole loans, directly to borrowers. The direct origination of whole loans enables us to better control the structure of the loans and to maintain direct lending relationships with borrowers. Additionally, we may acquire whole loans from third parties that conform to our investment strategy. We may create tranches of a loan we originate, consisting of an A-note (described below) and a B-note (described below), as well as mezzanine loans or other participations, which we may hold or sell to third parties. We do not obtain ratings on these investments. With respect to our portfolio at December 31, 2025, our whole loan investments had loan-to-collateral value, or LTV, ratios that typically do not exceed 85%. Typically, our whole loans are structured with an original term of up to three years, with two one-year extensions that bring the loan to a maximum term of five years. Substantially all of our CRE loans held at December 31, 2025 were whole loans. We expect to hold most of our whole loans to maturity.

Whole Loan Participations. We may opportunistically invest in participations of whole loans with third-parties or with related parties, whereby we purchase or otherwise share in the ownership interests of a whole loan made by another financial institution (the lead financial institution) to a borrower with whom we do not have a direct lending relationship on a pari passu basis. In this arrangement the lead financial institution fully maintains the lending relationship and all communications with the borrower; however, we re-underwrite the investment subject to our underwriting standards for whole loans prior to investing. This type of investment allows us to strategically diversify risk, share in the profits of the lead financial institution and further diversify our asset holdings. We expect our investments in participation loans to have LTV ratios not to exceed 85%. At December 31, 2025, our loan portfolio included two related-party whole loan participations with a par value of $45.2 million.

Whole Loan Syndications. We may also opportunistically invest in the syndications of whole loans with third-parties or with related parties, whereby we co-originate a whole loan to a borrower with another financial institution on a pari passu basis, as well as maintain a direct lending relationship with the borrower. In this arrangement each lender in the syndicate has a separate promissory note with the borrower, subject to a co-lender agreement. This type of investment allows us to strategically diversify risk, as well as further diversify our asset holdings and borrower base. We expect our investments in whole loan syndications to have LTV ratios not to exceed 85%. At December 31, 2025, our loan portfolio included two related-party whole loan syndications with a par value of $88.7 million.

Senior interests in whole loans (A-notes). We may invest in senior interests in whole loans, referred to as A-notes, either directly originated or purchased from third parties. We do not intend to obtain ratings on these investments. We expect our typical A-note investments to have LTV ratios not exceeding 70% and will generally be structured with an original term of up to three years, with one-year extensions that bring the loan to a maximum term of five years. We expect to hold any A-note investments to maturity. We did not hold any A-note investments at December 31, 2025.

Subordinate interests in whole loans (B-notes). To a lesser extent, we may invest in subordinate interests in whole loans, referred to as B-notes, which we will either directly originate or purchase from third parties. B-notes are loans secured by a first mortgage but are subordinated to an A-note. The subordination of a B-note is generally evidenced by an intercreditor or participation agreement between the holders of the A-note and the B-note. In some instances, the B-note lender may require a security interest in the stock or other equity interests of the borrower as part of the transaction. B-note lenders have the same obligations, collateral and borrower as the A-note lender, but typically are subordinated in recovery upon a default to the A-note lender. B-notes share certain credit characteristics with second mortgages in that both are subject to greater credit risk with respect to the underlying mortgage collateral than the corresponding first mortgage or A-note. We do not intend to obtain ratings on these investments. We expect our typical B-note investments to have LTV ratios between 55% and 80% and will generally be structured with an original term of up to three years, with one-year extensions that bring the loan to a maximum term of five years. We expect to hold any B-note investments to maturity. We did not hold any B-note investments at December 31, 2025.

In addition to the accrued interest receivable on a B-note, we may earn fees charged to the borrower under the note or additional income by receiving principal payments in excess of the discounted price (below par value) we paid to acquire the note. Our ownership of a B-note with controlling class rights may, in the event the financing fails to perform according to its terms, cause us to pursue our remedies as owner of the B-note, which may include foreclosure on, or modification of, the note. In some cases, the owner of the A-note may be able to foreclose or modify the note against our wishes as owner of the B-note. As a result, our economic and business interests may diverge from the interests of the owner of the A-note.

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Mezzanine financing. Historically, we have invested in mezzanine loans that are senior to the borrower’s equity in, and subordinate to the mortgage loan on, a property. A mezzanine loan is typically secured by a pledge of the ownership interests in the entity that directly owns the real property or by a second lien mortgage loan on the property. In addition, mezzanine loans typically include credit enhancements such as letters of credit, personal guarantees of the principals of the borrower, or collateral unrelated to the property. A mezzanine loan may be structured so that we receive a stated fixed or variable interest rate on the loan as well as a percentage of gross revenues and a percentage of the increase in the fair market value of the property securing the loan, payable upon maturity, refinancing or sale of the property. Mezzanine loans may also have prepayment lockouts, penalties, minimum profit hurdles and other mechanisms to protect and enhance returns in the event of premature repayment. At December 31, 2025, our loan portfolio did not hold any mezzanine loans.

Preferred equity investments. Historically, we have invested in preferred equity investments in entities that own or acquire CRE properties. These investments are subordinate to first mortgage loans and mezzanine debt and are typically structured to provide some credit enhancement differentiating it from the common equity. We expect our preferred equity investments to have LTV ratios between 65% and 90% with stated maturities from three to eight years. We expect to hold preferred equity investments to maturity. At December 31, 2025, our loan portfolio included one preferred equity investment with a par value of $9.5 million.

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The following charts describe the property type and the geographic breakdown, by National Council of Real Estate Investment Fiduciaries (“NCREIF”) region of our CRE loan portfolio at December 31, 2025 (based on carrying value):

The total CRE loan portfolio, at carrying value, was $1.8 billion at December 31, 2025. The Southwest region constituted 24.2% of our portfolio, of which 90.2% was in Texas, and its collateral comprised 100.0% multifamily properties. The Southeast region constituted 20.6% of our portfolio, of which 60.1% was in Florida, and its collateral comprised 89.1% multifamily properties. The Pacific region constituted 14.0% of our portfolio, of which 79.8% was in California, and its collateral comprised 73.0% multifamily properties. We view our investment and credit strategies as being adequately diversified across property types in the Southwest, Southeast and Pacific regions.

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Investments in Real Estate

We may invest directly in the ownership of CRE equity investments and we may acquire CRE equity investments through a joint venture or wholly-owned subsidiary and may classify these investments in real estate as held for investment or held for sale. At December 31, 2025, we held three investments in real estate acquired through direct equity investments and three investments in real estate acquired from lending activities (i.e. through the receipt of the deeds-in-lieu of foreclosure on the properties that collateralized former non-performing loans). At December 31, 2025, three of these investments were classified as held for sale.

The following table summarizes the investments in real estate at December 31, 2025 (in thousands, except amounts in footnotes):

December 31, 2025

Cost Basis

Accumulated Depreciation & Amortization

Carrying Value

Assets acquired:

Investments in real estate, equity:

Investments in real estate (1)

$

74,468

$

(7,797

)

$

66,671

Right of use assets (2)(3)

19,665

(1,024

)

18,641

Intangible assets (4)

9,469

(3,342

)

6,127

Subtotal

103,602

(12,163

)

91,439

Investments in real estate from lending activities:

Investments in real estate (1)

$

10,025

$

(281

)

$

9,744

Right of use assets (2)(3)

399

(63

)

336

Intangible assets (4)

364

(270

)

94

Subtotal

10,788

(614

)

10,174

Properties held for sale (5)

90,825

—

90,825

Total

205,215

(12,777

)

192,438

Liabilities assumed:

Investments in real estate, equity:

Mortgage payables

19,565

620

20,185

Other liabilities

—

—

—

Lease liabilities (3)(6)

44,958

—

44,958

Subtotal

64,523

620

65,143

Investments in real estate from lending activities:

Other liabilities

41

(41

)

—

Lease liabilities (3)(6)

378

—

378

Subtotal

419

(41

)

378

Liabilities held for sale (7)

3,131

—

3,131

Total

68,073

579

68,652

Total net investments in real estate and properties held for sale (8)

$

137,142

$

123,786

(1)
Investments in real estate includes $15.2 million of land, which is not depreciable. Also includes $3.7 million of construction in progress, which is also not depreciable until placed in service.

(2)
Primarily comprises a $18.4 million right of use asset, associated with a ground lease referenced in footnote (6). Amortization is booked to real estate expenses on the consolidated statements of operations. Additionally in December 2024, we entered into an operating lease associated with a parking lease at a newly acquired property. The associated right of use asset has a value of $322,000 at December 31, 2025.

(3)
Refer to Note 9 in the Notes to the Consolidated Financial Statements for additional information on our remaining operating leases.

(4)
Primarily comprises a franchise intangible of $3.5 million, a management contract intangible of $2.6 million, in-place lease intangible of $7,000 and a customer list intangible of $87,000.

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(5)
Properties held for sale included a hotel acquired via deed-in-lieu of foreclosure in November 2020, an office property acquired via deed-in-lieu of foreclosure in June 2023 and one student housing property acquired in April 2022.

(6)
Primarily comprises a $44.7 million ground lease with a remaining term of 91 years. Lease expenses for the year ended December 31, 2025 were $2.8 million.

(7)
Comprises an operating lease liability.

(8)
Excludes items of working capital, either acquired or assumed.

Competition

See “