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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, 2026


☐	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 4, 2026 was 7,131,101 shares.

(Back to Index)

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, 2026 (unaudited) and December 31, 2025	3
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2026 and 2025	5
	Consolidated Statements of Comprehensive Loss (unaudited) for the Three Months Ended March 31, 2026 and 2025	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, 2026 and 2025	7
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2026 and 2025	9
	Notes to Consolidated Financial Statements – March 31, 2026 (unaudited)	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	75
Item 4:	Controls and Procedures	77
PART II		78
Item 1:	Legal Proceedings	78
Item 1A:	Risk Factors	78
Item 2:	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	79
Item 5:	Other Information	79
Item 6:	Exhibits	80
SIGNATURES		85

(Back to Index)

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, 2026			December 31, 2025
	(unaudited)
ASSETS (1)
Cash and cash equivalents	$	47,985		$	83,768
Restricted cash		1,835			2,190
Accrued interest receivable		30,042			27,259
CRE loans		2,202,837			1,830,367
Less: allowance for credit losses		(19,431	)		(20,398	)
CRE loans, net		2,183,406			1,809,969
Loan receivable - due from Manager		10,300			10,375
Investments in unconsolidated entities		29,722			29,237
Properties held for sale		90,851			90,825
Investments in real estate		59,382			76,415
Right of use assets		19,415			19,545
Intangible assets		6,000			6,221
Other assets		7,167			6,560
Total assets	$	2,486,105		$	2,162,364
LIABILITIES (2)
Accounts payable and other liabilities	$	7,631		$	7,482
Management fee payable - related party		1,037			—
Accrued interest payable		5,068			6,814
Borrowings		1,864,671			1,544,938
Lease liabilities		46,096			45,942
Distributions payable		3,423			3,457
Accrued tax liability		75			8
Liabilities held for sale		3,181			3,131
Total liabilities		1,931,182			1,611,772
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; 7,131,101 and 6,887,451 shares issued and outstanding (including 572,236 and 328,586 unvested restricted shares)		7			7
Additional paid-in capital		1,142,949			1,142,410
Accumulated other comprehensive loss		(1,277	)		(1,603	)
Distributions in excess of earnings		(721,051	)		(720,028	)
Total stockholders’ equity		420,638			420,796
Non-controlling interests		134,285			129,796
Total equity		554,923			550,592
TOTAL LIABILITIES AND EQUITY	$	2,486,105		$	2,162,364

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, 2026		December 31, 2025(3)
	(unaudited)
(1) Assets of consolidated variable interest entities ("VIEs") included in total assets above:
Restricted cash	$	765	$	—
Accrued interest receivable		4,048		—
CRE loans, pledged as collateral (4)		1,007,779		—
Other assets		30		—
Total assets of consolidated VIEs	$	1,012,622	$	—
(2) Liabilities of consolidated VIEs included in total liabilities above:
Accounts payable and other liabilities	$	243	$	—
Accrued interest payable		1,701		—
Borrowings		873,463		—
Total liabilities of consolidated VIEs	$	875,407	$	—

(3)

There were no consolidated VIEs at December 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,
	2026			2025
REVENUES
Interest income:
CRE loans	$	32,942		$	28,469
Other		1,418			257
Total interest income		34,360			28,726
Interest expense		25,114			23,123
Net interest income		9,246			5,603
Real estate income		8,547			11,366
Other revenue		31			33
Total revenues		17,824			17,002
OPERATING EXPENSES
General and administrative		3,036			3,159
Real estate expenses		9,710			13,342
Management fees - related party		1,561			1,631
Equity compensation - related party		540			815
Corporate depreciation and amortization		19			18
Reversal of credit losses, net		(967	)		(1,717	)
Total operating expenses		13,899			17,248
		3,925			(246	)
OTHER INCOME (EXPENSE)
Equity in earnings (losses) of unconsolidated subsidiaries		245			(492	)
Gain on sale of investment in real estate		3,336			—
Other income		23			84
Total other income (expense)		3,604			(408	)
INCOME (LOSS) BEFORE TAXES		7,529			(654	)
Income tax expense		(1	)		(76	)
NET INCOME (LOSS)		7,528			(730	)
Net income allocated to preferred shares		(5,114	)		(5,313	)
Net (income) loss allocable to non-controlling interests, net of taxes		(3,437	)		184
NET LOSS ALLOCABLE TO COMMON SHARES	$	(1,023	)	$	(5,859	)
NET LOSS PER COMMON SHARE - BASIC	$	(0.16	)	$	(0.80	)
NET LOSS PER COMMON SHARE - DILUTED	$	(0.16	)	$	(0.80	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		6,558,864			7,362,236
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		6,558,864			7,362,236

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

(in thousands)

(unaudited)


	For the Three Months Ended March 31,
	2026			2025
Net income (loss)	$	7,528		$	(730	)
Other comprehensive income (loss):
Reclassification adjustments associated with net unrealized losses from interest rate swaps included in interest expense		326			393
Total other comprehensive income		326			393
Comprehensive income (loss) before allocation to preferred shares		7,854			(337	)
Net (income) loss allocated to non-controlling interests		(3,437	)		184
Net income allocated to preferred shares		(5,114	)		(5,313	)
Comprehensive loss allocable to common shares	$	(697	)	$	(5,466	)

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, 2025		6,887,451	$	7	$	5	$	5	$	1,142,410	$	(1,603	)	$	(720,028	)	$	420,796		$	129,796	$	550,592
Stock-based compensation		243,650		—		—		—		—		—			—			—			—		—
Amortization of stock-based compensation		—		—		—		—		539		—			—			539			—		539
Contributions from non-controlling interests		—		—		—		—		—		—			—			—			1,052		1,052
Net income		—		—		—		—		—		—			4,091			4,091			3,437		7,528
Distributions and accrual of cumulative preferred stock dividends		—		—		—		—		—		—			(5,114	)		(5,114	)		—		(5,114	)
Amortization of terminated derivatives		—		—		—		—		—		326			—			326			—		326
Balance, March 31, 2026		7,131,101	$	7	$	5	$	5	$	1,142,949	$	(1,277	)	$	(721,051	)	$	420,638		$	134,285	$	554,923

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, 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	)
Amortization of stock-based compensation		—			—			—		—		815			—			—			815			—			815
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 CASH FLOWS

(in thousands)

(unaudited)


	For the Three Months Ended March 31,
	2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	7,528		$	(730	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Reversal of) provision for credit losses, net		(967	)		(1,717	)
Depreciation, amortization and accretion		1,788			4,321
Amortization of stock-based compensation		540			815
Gain on sale of investment in real estate		(3,336	)		—
Equity in (earnings) losses of unconsolidated subsidiaries		(245	)		492
Changes in operating assets and liabilities		(4,395	)		(7,745	)
Net cash provided by (used in) operating activities		913			(4,564	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal fundings of CRE loans		(481,899	)		(26,515	)
Principal payments received on CRE loans		81,451			115,940
Proceeds from sale of CRE loans		29,140			31,730
Investments in real estate		(192	)		(1,237	)
Proceeds from sale of investments in real estate		20,000			—
Investments in unconsolidated entities		(240	)		(2,204	)
Purchases of furniture and fixtures		—			(54	)
Principal payments received on loan - due from Manager		75			75
Net cash (used in) provided by investing activities		(351,665	)		117,735
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock		—			(4,377	)
Proceeds from borrowings:
Securitizations		879,499			—
CRE - term reinvestment financing facility		55,463			907,601
Payments on borrowings:
Securitizations		—			(865,078	)
Senior secured financing facility		(20,172	)		—
CRE - term warehouse financing facilities		(515,134	)		(116,986	)
Mortgages payable		(39	)		—
CRE - term reinvestment financing facility		(74,590	)		(16,504	)
Payment of debt issuance costs		(6,317	)		(3,363	)
Proceeds received from non-controlling interests		1,052			—
Distributions paid on preferred stock		(5,148	)		(5,373	)
Net cash provided by (used in) financing activities		314,614			(104,080	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(36,138	)		9,091
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		85,958			57,603
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	49,820		$	66,694

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, 2026

(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 investments in ACRES Realty Funding, Inc. ("ACRES RF"), a wholly-owned subsidiary, that holds CRE loans and CRE-related securities as well as special purpose subsidiaries established for securitization purposes, which are consolidated as variable interest entities ("VIEs"), as discussed in Note 3.

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, the Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure.

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

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ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(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,
	2026		2025
Cash and cash equivalents	$	47,985	$	66,037
Restricted cash		1,835		657
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	49,820	$	66,694

Income Taxes

The Company recorded a full valuation allowance against its net deferred tax assets (tax effected expense of $21.8 million) at March 31, 2026, 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 Pronouncements

Accounting Standards to be Adopted in Future Periods

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

NOTE 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 VIE (the Company is the primary beneficiary)

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

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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(unaudited)

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

Creditors of the Company’s Consolidated VIE have no recourse to the general credit of the Company. During the three months ended March 31, 2026 and 2025, the Company did not provide any financial support to its Consolidated VIE nor does it have any requirement to do so, although it may choose to do so in the future to maximize future cash flows on such investments by the Company. There are no explicit arrangements that obligate the Company to provide financial support to its Consolidated VIE.

CS-ACRES FSU Student Venture, LLC

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

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

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

CS-ACRES Osceola Student Joint Venture, LLC

In September 2025, the FSU Student Venture distributed one of its underlying properties to the FSU Osceola Student Venture at a carrying value of $27.0 million. The FSU Osceola Student Venture, a joint venture between the Company and two unrelated third parties, was formed for the purpose of operating a student housing project. The FSU Osceola Student Venture was determined not to be a VIE as there was sufficient equity at risk, it does not have disproportionate voting rights and its members all have the following characteristics: (1) the power to direct activities, (2) the obligation to absorb losses and (3) the right to receive residual returns. The Company consolidated the FSU Osceola 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.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(unaudited)

ACRES SPE 2025-1, LLC

ACRES SPE 2025-1, LLC ("SPE 2025-1") was formed in March 2025, to acquire and finance purchased assets. Subsequently, SPE 2025-1 entered into a master repurchase agreement with JPMorgan Chase ("JPMorgan Chase 2025 Facility") to finance existing vintage CRE loans and to potentially finance the origination of new CRE loans held by the Company. In the quarter ended December 31, 2025, AMF Levered II, LLC, a wholly owned subsidiary of ACRES Mortgage Fund, Ltd., purchased a $125.0 million, or 43.2%, non-controlling interest in SPE 2025-1 (See Note 17). SPE 2025-1 was determined not to be a VIE as there was sufficient equity at risk, it does not have disproportionate voting rights and its members all have the following characteristics: (1) the power to direct activities, (2) the obligation to absorb losses and (3) the right to receive residual returns. The Company consolidated SPE 2025-1 due to its 56.8% interest that provides the Company with control over all major decisions. AMF Levered II, LLC assumed its proportionate share of risk in the underlying assets and the liabilities, including the JPMorgan Chase 2025 Facility. The portion of SPE 2025-1 that the Company does not own is presented as non-controlling interest at and for the periods presented in the Company’s consolidated financial statements.

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

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

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, 2026 and December 31, 2025. RCT I and RCT II were formed for the purposes of providing debt financing to the Company. The Company completed a qualitative analysis to determine whether it is the primary beneficiary of each of the trusts and determined that it was not the primary beneficiary of either trust because it does not have the power to direct the activities most significant to the trusts, which include the collection of principal and interest through servicing rights. Accordingly, neither trust is consolidated into the Company’s consolidated financial statements.

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

65 E. Wacker Joint Venture, LLC

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

In September 2025, the Wacker JV completed a re-capitalization that included entering into a $62 million construction loan, an $11 million bridge loan and converting part of the Company's common equity into preferred equity. Also, in connection with the re-capitalization, the Company entered into guarantees related to the construction loan and bridge loan. The guarantees include a Guaranty of Completion, a Guaranty of Retail Space, a Guaranty of Recourse Obligations, a Guarantee of Interest and Carry Costs and an Environmental Indemnity Agreement.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(unaudited)

7720 McCallum JV, LLC

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

Upon formation of the McCallum JV, the McCallum JV took ownership of the multifamily property subject to a related CRE loan payable to the Company which was novated to allow the McCallum JV to replace the original obligor who was experiencing financial difficulty. The $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 $1.5 million was funded at March 31, 2026.

Pacmulti Affiliates, LLC

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

Upon formation of the Pacmulti JV, the Pacmulti JV took ownership of the multifamily property subject to a related CRE loan payable to the Company which was novated to allow the Pacmulti JV to replace the original obligor who was experiencing financial difficulty. The $70.8 million CRE loan has an initial maturity date of May 5, 2030 and bears interest at a rate 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 $13.2 million was funded at March 31, 2026.

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at March 31, 2026 (in thousands):


	Unsecured Junior Subordinated Debentures			65 E Wacker Joint Venture, LLC		7720 McCallum JV, LLC		Pacmulti Affiliates, LLC		FSU Preferred Equity Loan		Total			Maximum Exposure to Loss
ASSETS
Accrued interest receivable	$	10		$	—	$	—	$	—	$	—	$	10		$	—
CRE loans(1)		—			—		—		—		9,672		9,672			9,672
Investments in unconsolidated entities		1,548			28,174		—		—		—		29,722			29,722
Total assets		1,558			28,174		—		—		9,672		39,404

LIABILITIES
Accrued interest payable		344			—		—		—		—		344		N/A
Borrowings		51,548			—		—		—		—		51,548		N/A
Total liabilities		51,892			—		—		—		—		51,892
Net (liability) asset	$	(50,334	)	$	28,174	$	—	$	—	$	9,672	$	(12,488	)

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(unaudited)

(1)

The carrying values exclude the allowance for credit losses.

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,
	2026		2025
Supplemental cash flows:
Interest expense paid in cash	$	25,835	$	23,752
Income taxes paid in cash		1		178
Non-cash financing activities include the following:
Distributions on preferred stock accrued but not paid	$	3,423	$	3,547

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(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, 2026:
Whole loans (5)(6)(7)	60	$	2,202,675	$	(9,510	)	$	2,193,165	$	(19,220	)	$	2,173,945	1M Term SOFR + 2.50% to 1M Term SOFR + 7.00%	April 2026 to May 2030
Preferred equity investment (see Note 3) (8)			9,750		(78	)		9,672		(211	)		9,461	10.00%	October 2028
Total		$	2,212,425	$	(9,588	)	$	2,202,837	$	(19,431	)	$	2,183,406

At December 31, 2025:
Whole loans (5)(6)(7)	53	$	1,828,299	$	(7,357	)	$	1,820,942	$	(20,158	)	$	1,800,784	1M Term SOFR + 2.50% to 1M Term SOFR + 7.00%	January 2026 to May 2030
Preferred equity investment (see Note 3) (8)			9,511		(86	)		9,425		(240	)		9,185	10.00%	October 2028
Total		$	1,837,810	$	(7,443	)	$	1,830,367	$	(20,398	)	$	1,809,969

(1)

Amounts include unamortized loan origination fees of $8.9 million and $6.6 million and deferred amendment fees of $686,000 and $852,000 at March 31, 2026 and December 31, 2025, respectively.

(2)

References to ("1M Term SOFR") are one-month Term SOFR. Weighted-average one-month Term SOFR was 3.69% and 3.83% at March 31, 2026 and December 31, 2025, respectively. Additionally, the weighted-average benchmark rate floor was 2.13% and 1.78% at March 31, 2026 and December 31, 2025, respectively.

(3)

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

(4)

Maturity dates exclude three and two whole loans, with total amortized costs of $62.3 million and $37.9 million, in maturity default at March 31, 2026 and December 31, 2025, respectively.

(5)

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

(6)

CRE whole loans had $99.3 million and $88.6 million in unfunded loan commitments at March 31, 2026 and December 31, 2025, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreements, and any necessary approvals have been obtained.

(7)

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

(8)

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

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


	March 31, 2026					December 31, 2025
Property Type	Carrying Value		% of Loan Portfolio			Carrying Value		% of Loan Portfolio
Multifamily	$	1,781,521		81.5	%	$	1,482,268		81.9	%
Office		237,101		10.9	%		230,385		12.7	%
Hotel		101,992		4.7	%		57,426		3.2	%
Mixed-Use		47,449		2.2	%		24,614		1.4	%
Self-Storage		15,343		0.7	%		15,276		0.8	%
Total	$	2,183,406		100	%	$	1,809,969		100	%

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(unaudited)


	March 31, 2026					December 31, 2025
Geographic Location	Carrying Value		% of Loan Portfolio			Carrying Value		% of Loan Portfolio
Southeast	$	414,236		19.0	%	$	373,256		20.6	%
Southwest		370,019		16.9	%		437,113		24.2	%
East North Central		308,381		14.1	%		72,720		4.0	%
Mountain		283,172		13.0	%		223,247		12.3	%
Northeast		276,173		12.6	%		163,724		9.1	%
Mid Atlantic		226,171		10.4	%		222,958		12.3	%
Pacific		225,201		10.3	%		253,558		14.0	%
West North Central		80,053		3.7	%		63,393		3.5	%
Total	$	2,183,406		100	%	$	1,809,969		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	2026		2027		2028 and Thereafter		Total
At March 31, 2026:
Whole loans (1)(2)	$	467,397	$	511,493	$	1,152,001	$	2,130,891
Preferred equity investment		—		—		9,672		9,672
Total CRE loans	$	467,397	$	511,493	$	1,161,673	$	2,140,563

Description	2026		2027		2028 and Thereafter		Total
At December 31, 2025:
Whole loans (1)(2)	$	592,949	$	498,541	$	691,589	$	1,783,079
Preferred equity investment		—		—		9,425		9,425
Total CRE loans	$	592,949	$	498,541	$	701,014	$	1,792,504

(1)

Maturity dates exclude three and two whole loans with amortized costs of $62.3 million and $37.9 million, in maturity default at March 31, 2026 and December 31, 2025, respectively.

(2)

At March 31, 2026, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options were $307.9 million, $349.9 million, and $1.5 billion in 2026, 2027 and 2028 and thereafter, respectively. At December 31, 2025, the amortized costs of the CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $397.1 million, $384.7 million and $1.0 billion in 2026, 2027 and 2028 and thereafter, respectively.

At March 31, 2026 and December 31, 2025, no single loan or investment represented more than 10% of the Company's total assets, and one investment group generated 12% and 14% of the Company's revenue, respectively.

NOTE 6 - FINANCING RECEIVABLES

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


	Three Months Ended March 31, 2026			Year Ended December 31, 2025
Allowance for credit losses at beginning of period	$	20,398		$	32,847
(Reversal of) provision for credit losses		(967	)		(7,749	)
Charge-offs		—			(4,700	)
Allowance for credit losses at end of period	$	19,431		$	20,398

During the three months ended March 31, 2026, the Company recorded a reversal of expected credit losses of $967,000, primarily attributable to improvements in projected macroeconomic factors during the quarter, offset by an increase in modeled credit risk of the Company's loan portfolio.

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

March 31, 2026

(unaudited)

In addition to the Company’s general estimate of credit losses, the Company may also be required to individually evaluate collateral-dependent loans for credit losses if it has determined that foreclosure or sale of the loan or the underlying collateral is probable. At both March 31, 2026 and December 31, 2025, the Company was not required to individually evaluate any CRE loans for credit loss.

Credit quality indicators

Commercial Real Estate Loans

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

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




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.

ACRES Commercial Realty Corp. 10-Q