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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 June 30, 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 July 31, 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 – June 30, 2026 (unaudited) and December 31, 2025	3
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2026 and 2025	5
	Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Three and Six Months Ended June 30, 2026 and 2025	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, 2026 and 2025 and June 30, 2026 and 2025	7
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2026 and 2025	9
	Notes to Consolidated Financial Statements – June 30, 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	77
Item 4:	Controls and Procedures	80
PART II		81
Item 1:	Legal Proceedings	81
Item 1A:	Risk Factors	81
Item 2:	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	81
Item 5:	Other Information	81
Item 6:	Exhibits	83
SIGNATURES		88

(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)


	June 30, 2026			December 31, 2025
	(unaudited)
ASSETS (1)
Cash and cash equivalents	$	41,098		$	83,768
Restricted cash		849			2,190
Accrued interest receivable		33,636			27,259
CRE loans		2,128,879			1,830,367
Less: allowance for credit losses		(21,114	)		(20,398	)
CRE loans, net		2,107,765			1,809,969
Loan receivable - due from Manager		10,250			10,375
Investments in unconsolidated entities		30,253			29,237
Properties held for sale		90,899			90,825
Investments in real estate, net		58,975			76,415
Right of use assets		19,298			19,545
Intangible assets		5,778			6,221
Other assets		7,877			6,560
Total assets	$	2,406,678		$	2,162,364
LIABILITIES (2)
Accounts payable and other liabilities	$	12,694		$	7,482
Management fee payable - related party		521			—
Accrued interest payable		6,911			6,814
Borrowings, net		1,783,346			1,544,938
Lease liabilities		46,253			45,942
Distributions payable		3,422			3,457
Accrued tax liability		67			8
Liabilities held for sale		3,233			3,131
Total liabilities		1,856,447			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 55,559 and 328,586 unvested restricted shares)		7			7
Additional paid-in capital		1,147,836			1,142,410
Accumulated other comprehensive loss		(965	)		(1,603	)
Distributions in excess of earnings		(733,570	)		(720,028	)
Total stockholders’ equity		413,318			420,796
Non-controlling interests		136,913			129,796
Total equity		550,231			550,592
TOTAL LIABILITIES AND EQUITY	$	2,406,678		$	2,162,364

The accompanying notes are an integral part of these statements

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

(in thousands, except share and per share data)


	June 30, 2026		December 31, 2025(3)
	(unaudited)
(1) Assets of consolidated variable interest entities ("VIEs") included in total assets above:
Restricted cash	$	150	$	—
Accrued interest receivable		4,665		—
CRE loans, pledged as collateral (4)		1,008,726		—
Total assets of consolidated VIEs	$	1,013,541	$	—
(2) Liabilities of consolidated VIEs included in total liabilities above:
Accounts payable and other liabilities	$	46	$	—
Accrued interest payable		1,558		—
Borrowings		873,701		—
Total liabilities of consolidated VIEs	$	875,305	$	—

(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

(Back to Index)

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
REVENUES
Interest income:
CRE loans	$	38,262		$	28,497		$	71,204		$	56,966
Other		138			334			1,556			591
Total interest income		38,400			28,831			72,760			57,557
Interest expense		27,881			20,264			52,995			43,387
Net interest income		10,519			8,567			19,765			14,170
Real estate income:
Hospitality		8,809			8,867			15,717			15,642
Rental		1,621			4,406			3,260			8,997
Total Real estate income		10,430			13,273			18,977			24,639
Other revenue		31			33			62			66
Total revenues		20,980			21,873			38,804			38,875
OPERATING EXPENSES
General and administrative		2,722			2,736			5,758			5,895
Real estate expenses
Hospitality		8,313			8,597			16,119			16,833
Rental		2,210			4,752			4,114			9,858
Total Real estate expenses		10,523			13,349			20,233			26,691
Management fees - related party		1,564			1,601			3,125			3,232
Equity compensation - related party		4,893			585			5,433			1,400
Corporate depreciation and amortization		18			20			37			38
Merger and internalization costs		5,111			—			5,111			—
Provision for (reversal of) credit losses, net		1,683			(780	)		716			(2,497	)
Total operating expenses		26,514			17,511			40,413			34,759
		(5,534	)		4,362			(1,609	)		4,116
OTHER INCOME (EXPENSE)
Equity in earnings (losses) of unconsolidated subsidiaries		430			(669	)		675			(1,161	)
Gain on sale of investment in real estate		—			—			3,336			—
Other income		82			638			105			722
Total other income (expense)		512			(31	)		4,116			(439	)
INCOME (LOSS) BEFORE TAXES		(5,022	)		4,331			2,507			3,677
Income tax expense		—			(7	)		(1	)		(83	)
NET INCOME (LOSS)		(5,022	)		4,324			2,506			3,594
Net income allocated to preferred shares		(5,096	)		(5,282	)		(10,210	)		(10,595	)
Net (income) loss allocable to non-controlling interests, net of taxes		(2,401	)		226			(5,838	)		410
NET LOSS ALLOCABLE TO COMMON SHARES	$	(12,519	)	$	(732	)	$	(13,542	)	$	(6,591	)
NET LOSS PER COMMON SHARE - BASIC	$	(1.87	)	$	(0.10	)	$	(2.04	)	$	(0.90	)
NET LOSS PER COMMON SHARE - DILUTED	$	(1.87	)	$	(0.10	)	$	(2.04	)	$	(0.90	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		6,693,915			7,250,624			6,626,763			7,306,123
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		6,693,915			7,250,624			6,626,763			7,306,123

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 June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
Net income (loss)	$	(5,022	)	$	4,324		$	2,506		$	3,594
Other comprehensive income (loss):
Reclassification adjustments associated with net unrealized losses from interest rate swaps included in interest expense		312			397			638			790
Total other comprehensive income		312			397			638			790
Comprehensive income (loss) before allocation to preferred shares		(4,710	)		4,721			3,144			4,384
Net (income) loss allocated to non-controlling interests		(2,401	)		226			(5,838	)		410
Net income allocated to preferred shares		(5,096	)		(5,282	)		(10,210	)		(10,595	)
Comprehensive loss allocable to common shares	$	(12,207	)	$	(335	)	$	(12,904	)	$	(5,801	)

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
Stock-based compensation		—		—		—		—		—			—			—			—			—		—
Offering costs		—		—		—		—		(6	)		—			—			(6	)		—		(6	)
Amortization of stock-based compensation		—		—		—		—		4,893			—			—			4,893			—		4,893
Contributions from non-controlling interests		—		—		—		—		—			—			—			—			227		227
Net income (loss)		—		—		—		—		—			—			(7,423	)		(7,423	)		2,401		(5,022	)
Distributions and accrual of cumulative preferred stock dividends		—		—		—		—		—			—			(5,096	)		(5,096	)		—		(5,096	)
Amortization of terminated derivatives		—		—		—		—		—			312			—			312			—		312
Balance, June 30, 2026		7,131,101	$	7	$	5	$	5	$	1,147,836		$	(965	)	$	(733,570	)	$	413,318		$	136,913	$	550,231

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
Purchase and retirement of common stock		(271,561	)		—			—		—		(5,072	)		—			—			(5,072	)		—			(5,072	)
Amortization of stock-based compensation		—			—			—		—		586			—			—			586			—			586
Net income		—			—			—		—		—			—			4,551			4,551			(227	)		4,324
Distributions and accrual of cumulative preferred stock dividends		—			—			—		—		—			—			(5,282	)		(5,282	)		—			(5,282	)
Amortization of terminated derivatives		—			—			—		—		—			397			—			397			—
Balance, June 30, 2025		7,142,255		$	7		$	5	$	5	$	1,154,533		$	(2,413	)	$	(726,858	)	$	425,279		$	10,123		$	435,005

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 Six Months Ended June 30,
	2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,506		$	3,594
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for (reversal of) credit losses, net		716			(2,497	)
Depreciation, amortization and accretion		4,582			7,119
Amortization of stock-based compensation		5,433			1,400
Gain on sale of investment in real estate		(3,336	)		—
Equity in (earnings) losses of unconsolidated subsidiaries		(675	)		1,161
Changes in operating assets and liabilities		(2,839	)		(3,574	)
Net cash provided by (used in) operating activities		6,387			7,203
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal fundings of CRE loans		(499,212	)		(103,934	)
Principal payments received on CRE loans		174,162			133,596
Proceeds from sale of CRE loans		29,140			31,730
Investments in real estate		(481	)		(2,227	)
Proceeds from sale of investment in real estate		20,000			—
Investments in unconsolidated entities		(320	)		(4,558	)
Purchases of furniture and fixtures		—			(106	)
Principal payments received on loan - due from Manager		125			125
Net cash (used in) provided by investing activities		(276,586	)		54,626
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock		—			(9,449	)
Offering costs		(6	)		—
Proceeds from borrowings:
Securitizations		879,499			—
Senior secured financing facility		13,576			—
CRE - term warehouse financing facilities		8,447			56,640
Mortgages payable		1,532			—
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		(534,761	)		(131,565	)
Mortgages payable		(39	)		—
CRE - term reinvestment financing facility		(161,197	)		(18,708	)
Payment of debt issuance costs		(7,188	)		(3,366	)
Contributions from non-controlling interests		1,279			—
Distributions paid on preferred stock		(10,245	)		(10,657	)
Net cash provided by (used in) financing activities		226,188			(74,582	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(44,011	)		(12,753	)
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	$	41,947		$	44,850

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

June 30, 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 state the Company’s financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Certain prior period presentations were reclassified to ensure comparability with current period classifications.

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)

June 30, 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):


	June 30,
	2026		2025
Cash and cash equivalents	$	41,098	$	42,747
Restricted cash		849		2,103
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	41,947	$	44,850

Income Taxes

The Company recorded a full valuation allowance against its net deferred tax assets (tax effected expense of $21.8 million) at June 30, 2026, as the Company believes it is more likely than not that the deferred tax assets will not be realized at this time. 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 June 30, 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)

June 30, 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 six months ended June 30, 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 applied the voting interest model and consolidated the FSU Osceola Student Venture based on its 72.1% controlling ownership interest and control over the 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)

June 30, 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, ACRES Mortgage Fund Levered II, LLC ("AMF Levered II, LLC"), a wholly owned subsidiary of ACRES Mortgage Fund, Ltd., a separate investment fund managed by the Company’s Manager in which the Company has no interest, 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 applied the voting interest model and consolidated SPE 2025-1 based on its 56.8% controlling ownership interest and 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 June 30, 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 June 30, 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 $62.4 million construction loan, an $10.9 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)

June 30, 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 $33.7 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, which was fully funded at June 30, 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, which was fully funded at June 30, 2026.

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at June 30, 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 (1)
ASSETS
Accrued interest receivable	$	10	$	—	$	—	$	—	$	—	$	10	$	—
CRE loans		—		—		—		—		9,691		9,691		9,691
Investments in unconsolidated entities		1,548		28,705		—		—		—		30,253		36,416
Total assets		1,558		28,705		—		—		9,691		39,954

LIABILITIES
Accrued interest payable		344		—		—		—		—		344	N/A
Borrowings		51,548		—		—		—		—		51,548	N/A
Total liabilities		51,892		—		—		—		—		51,892

ACRES Commercial Realty Corp. 10-Q