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Thank you for your continued patience. Your meeting will begin shortly. Press star-zero, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. A team member will be happy to help you. Thank you. Good day, ladies and gentlemen, and welcome to the fourth quarter 2025 ACRES Commercial Realty Corp. earnings conference call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions to follow at that time. If anyone requires assistance during the conference, please press the appropriate key. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kyle K. Brengel, Vice President, Operations. You may begin.

Good morning, and thank you for joining our call. I would like to highlight that we have posted the fourth quarter 2025 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the company. Before we begin, I want to remind everyone that certain statements made during this call are not based on historical information and may constitute forward-looking statements. When used in this conference call, the words “believes,” “anticipates,” “expects,” and similar expressions are intended to identify forward-looking statements. Although the company believes these forward-looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to several trends, risks, and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Form 8-K, 10-Q, and 10-K, and in particular, the risk factors of its Form 10-K. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures may be discussed on this conference call. A presentation of this information is not intended to be considered in isolation as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most comparable measures prepared in accordance with generally accepted accounting principles are contained in the earnings presentation for the past quarter. With me on the call today are Mark Steven Fogel, President and CEO; Andrew Dodd Fentress, Chairman of ACRES Commercial Realty Corp.; and Eldron C. Blackwell, ACRES Commercial Realty Corp.'s CFO. I will now turn the call over to Mark Steven Fogel.

Good morning, everyone, and thank you for joining our call. Today, I will provide an overview of our loan operations, real estate investments, and the health of the investment portfolio, while Eldron C. Blackwell, our CFO, will discuss the financial statements, liquidity condition, book value, and operating results for the fourth quarter 2025. Of course, we look forward to your questions at the end of our prepared remarks. The ACRES team remains focused on executing on our business strategy by investing in high-quality CRE loans, actively managing the portfolio, and growing earnings for our shareholders. In the fourth quarter 2025, we closed new commitments of $571,000,000, offset by loan payoffs and net unfunded commitments totaling $127,200,000, producing a net increase to the loan portfolio of $443,800,000. The weighted average spread on newly originated loans is 2.83%. New loan production in 2025 and in 2026 put us in a position to structure and price a new CRE securitization in January. On February 12, we closed ACRES 2026-FL4, a $1,000,000,000 deal that has leverage of 86.5% and a weighted average debt spread of 1.68%. The weighted average spread of the floating-rate loans in our $1,800,000,000 commercial real estate loan portfolio is now 3.35% over 1-month Term SOFR rates. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1,800,000,000 of commercial real estate loans across 53 individual investments. At December 31, our weighted average risk rating was 2.7, a decrease from 3.0 at September 30, and the number of loans rated 4 or 5 was 10, down from 13 at the end of the third quarter. The portion of our CRE loan portfolio rated 4 or 5, based on the company's economic interest, was 17% at December 31, down from 32% at September 30. During the quarter, another 4-rated loan paid off at par, highlighting again that the vast majority of our 4- and 5-rated loans do not suffer principal losses. Looking back through our history, when ACRES assumed the management contract of ACRES Commercial Realty Corp. in 2020, the company had 23 loans with a par balance of $411,000,000, or 24% of the portfolio, risk-rated either 4 or 5. As of 12/31/2025, only two of those 4 or 5 loans remain unresolved in the portfolio. Our exceptional asset management team created sponsor-specific solutions to successfully resolve 21 of those loans, $368,000,000 of par value, recognizing a loss of only $4,800,000 on those resolutions, or just 1.3% of the par balance of those loans. We expect the same or better results on the remaining 4- or 5-rated assets in our portfolio as we work actively and strategically with our sponsors to create positive resolutions. The majority of these assets have manageable stabilized LTVs of 80% or less. To further highlight this point, as a firm since inception twelve years ago, ACRES has incurred minimal realized losses on almost $8,000,000,000 of invested capital. We are also excited to announce that we sold one of our REO assets collateralized by an office property in Austin, Texas, this quarter, which resulted in an earnings available for distribution, or EAD, gain of $1,300,000. During the quarter, we charged off a legacy $4,700,000 mezzanine loan that was originated prior to ACRES Management in 2018 and whose loss was fully reserved for and recognized in both GAAP and book value in 2022. We recognized the EAD impact this quarter in connection with settlement of that loan. We will now have ACRES Commercial Realty Corp.'s CFO, Eldron C. Blackwell, discuss the financial statements and operating results during the fourth quarter.

Thank you, and good morning, everyone. GAAP net loss allocable to common shares in the fourth quarter was $3,000,000, or $0.43 per share. GAAP net loss for the quarter included $10,700,000 in net interest income, which was an increase of $2,300,000 over the prior quarter. This increase in net interest income was driven by net loan originations of $443,800,000 and corresponding facility draws during the quarter. GAAP net loss for the quarter also included a $3,000,000 net increase; the performance of our net real estate operations to net income of $156,000; and a $1,500,000 net loss on the sale of the previously mentioned office property in Austin, Texas. We saw a decrease in current expected credit losses, or CECL, reserves of $1,300,000, or $0.19 per share, as compared to a decrease in CECL reserves during the third quarter of $4,000,000, which was primarily driven by loan payoffs and net improvements in the model credit risk of our CRE portfolio, offset by a general decline in projected macroeconomic factors during the quarter. Also, as previously mentioned, ACRES Commercial Realty Corp. recorded a charge-off of $4,700,000 on a mezzanine loan that was fully reserved for in 2022. The total allowance for credit losses at December 31 was $20,400,000 and represented 1.11%, or 111 basis points, on our $1,800,000,000 loan portfolio at par, and was composed entirely of general credit reserves. Excluding the loss from the mezzanine loan that was fully reserved for in 2022, EAD for the fourth quarter 2025 was $0.20 per share. When the mezzanine loan is included, the company reported an EAD loss of $0.48 per share as compared to earnings of $1.01 per share for the third quarter. Book value per share was $30.01 on December 31 versus $29.63 on September 30. Additionally, during the quarter, we used $10,000,000 to repurchase 493,000 common shares at an approximate 33% discount to book value at December 31. In December 2025, the authorized amount was fully utilized, and since November 2020, the company has repurchased 5,300,000 shares at an average discount to book value of 49%. Available liquidity at December 31 was $108,000,000, which comprised $84,000,000 of unrestricted cash and $24,000,000 of projected financing available on unlevered assets. Our GAAP debt-to-equity leverage ratio increased to 2.8x at December 31 from 2.7x at September 30 from net originations on our CRE loan portfolio. At the end of the fourth quarter 2025, the company's net operating loss carryforward was $32,100,000, or approximately $4.89 per share. With that, I will now turn the call to Andrew Dodd Fentress for closing remarks.

Thank you, Eldron. We are pleased with continued execution of our plan to drive shareholder value. In the fourth quarter, we originated $571,000,000 of new loans, we repurchased shares at accretive levels, sold an REO asset, improved the credit quality of the portfolio, and positioned the company to resume paying a dividend to common shareholders.

Since assuming the role of manager in July 2020, ACRES Commercial Realty Corp. book value has increased a total of 66%.

All the team here at ACRES is energized by the opportunity that we see in front of us, both in the asset class and the competitive landscape. We will continue to deploy capital through careful underwriting, and then manage each investment to the optimal outcome for shareholders. We greatly appreciate your continued support and investment in ACRES Commercial Realty Corp., and we look forward to your questions. This concludes our opening remarks. I will now turn the call back to the operator for questions.

Thank you. Press star-one on your keypad. To leave the queue at any time, press 2. Once again, that is star-one to ask a question. We will pause for just a moment to allow everyone a chance to join the queue. Our first question comes from Matthew Erdner with JonesTrading. Please go ahead. Your line is now open.

You touched a little bit more on the loans that you guys completed this quarter. It is a really impressive number in terms of net loan growth. I heard you mention the 2.83% spread there, but could you give any additional kind of color on that? And then, as well, what the current pipeline looks like?

Sure, Matt. This is Mark. The color on that portfolio is it was mostly multifamily-type execution. The average loan size was probably about $40,000,000 to $50,000,000. Spreads range between 2.50% and 3.25%, and we purposely focused our origination effort on multifamily this quarter and the next quarter in that we were in the process of looking to execute a new CLO, and CLO execution was extremely dependent on a significant amount of multifamily. On the bright side, our CLO execution includes reinvestment opportunity to do up to 40% of our assets outside of multifamily.

Got it. And then how long is that reinvestment period? Is it 24 months?

Thirty months.

Got it. Awesome. And then, with the additional kind of equity investments—page 11 of the deck—what is your plan for that? Would we, or should we, expect an exit from any of those assets as we go through the year?

I think on one of them right now, you can expect an exit at one of the smaller land deals that we have. We are actually under LOI right now to sell that asset. One of the other assets is out on the market right now. We expect that we will get some offers during the year, and we will make a decision based on where those offers come in.

Got it. That is helpful. And then last one for me, I just noticed something on the balance sheet. Non-controlling interest jumped up to about $130,000,000, call it, from about $1,000,000. I was just curious what that was.

Sure. This is Andrew. The company sold a position, or a portion, of its previously issued financing arrangement with JPMorgan, and so that interest is recorded as an NCI.

Got it. That is helpful. Thank you, guys.

Thank you. We will now move on to Christopher Muller with Citizens Capital Markets. Your line is now open.

Hey, guys. Thanks for taking the questions. Nice to see originations come in really strong, and based on your illustrative earnings slide, it looks like there is some, at least, ability to grow the portfolio and push leverage a little bit. Could we see this pace of deployment we saw in the fourth quarter in the near term, or was that mostly due to the CLO execution in January?

No, Chris. We expect we will see a decent amount of additional deployment. A significant amount of it occurred in 2026. We are projecting net growth in the portfolio of $500,000,000 to $700,000,000 in 2026.

Got it. That is great to hear. And, I guess turning gears a little bit, I believe the capital loss carryforwards expired at the end of the year. So thinking about potential upside to book value, would any future gains on REO be fully taxed going forward, or are there any other offsets that would apply?

Hey. This is Eldron. No. We—well, let me start with—we still have remaining NOLs to reach $2,100,000 at the QRS, so that is available to us. That is a when, not an if. But as long as we continue to have depreciation and some of our normal operating expenses, I do not expect in the future that any gains on those capital items would be taxable.

Got it. That is helpful.

Yeah. We also have NOLs in our TRS, so any activity down there is also protected.

Got it. Got it. So there is still a little bit that will flow through. I guess just a quick clarifying one. The $3,400,000 of realized losses on core activities, was that just the mezzanine loan write-off that you guys talked about, or is there something else in there?

That was a big chunk of it. We recorded a $4,700,000 EAD loss attributable to this mezzanine loan that we inherited as part of our taking control of the REIT and recorded a specific reserve for that back in 2022.

And the specific, or the CECL, reserve release in the quarter, that was a specific reserve release related to this asset. Is that right?

Part of it was a specific reserve, the $4,700,000. The other $1,300,000 was just improvement in net credit of the portfolio on our general reserves.

Got it. Got it. Got it. I appreciate you guys taking the questions today, and great to see the capital deployment picking up.

Thanks, Chris.

And once again, if you would like to ask a question, please press star-one on your keypad now. Thank you. We will move on to Gabe Poggi with Raymond James. Your line is now open.

Hey, good morning, and thanks for taking the questions. I have got a couple. For year-to-date originations, has there been any change in spreads? Has there been any mix shift away from multifamily? Just anything you could provide there would be helpful. Pardon me.

In 2026, originations to date have mostly been multifamily. As said, we were geared towards ramping up for our CLO. Spreads overall in that portfolio are about 2.83%. We are seeing spreads come down on the multifamily side, for sure, across the board. But as I said, we are looking at other asset classes for reinvestment activity and, going forward, you will see a different type of mix within our portfolio. We are pretty heavily weighted towards multifamily right now and would expect that some of that will start to fall off over the course of 2026.

Got it. So is the goal there to kind of maintain that 2.83% spread while mixing out to other asset classes, or are you content to kind of have asset yields bleed a little bit lower just because of the competitive nature of the market?

No. Our intent is to be above and beyond 2.83%. There are certainly a lot of opportunities in other asset classes where spreads are better. There is more risk-reward opportunity in self-storage and office and retail. Historically, our portfolio has been only 60% to 65% multifamily, and that is where we expect it to get back to.

Okay. Thanks for that. Question on repayments in 2026. You have got about $400,000,000 update there. Obviously, the CECL reserve has come down. Do you expect just a normal cadence of repay activity for 2026? Anything in there that we should be aware of?

No. We expect that repayments in 2026 will be—we are projecting about $500,000,000 of repayments in 2026, mostly older vintage assets. And importantly, what that does for us, if you mix in new originations in 2026, is it brings down our older vintage, call it 2023 and older-type assets, down to about only 15% of the portfolio.

Thank you for that. And one more, and this is kind of a high-level question. But as you guys think about ramping the portfolio—right, in Slide 14 in the deck—and taking total leverage to three and a half, because of the capital structure and prefs versus common, you tilt more to a higher leverage ratio on the common level. Where is the comfort level as you think about leverage to the common? Where do you want to max out there in that ramp? I see the current state, the mid, and then the full tilt, but just how do you think about that in the bigger macro environment—where the comfort level is leveraged to the common equity? Thank you.

Yeah, Gabe. It is Andrew. I think what we show is we are inside of our comfort level at that—inside of four turns. And I do not think you will see us go above that.

Got it. So inside of four on total, my words, leverageable capital, which then could push the leverage on the common higher, but total leverageable capital inside of four.

Correct.

Okay. Helpful. Thank you, guys.

At this time, there are no further questions in queue. I will now turn the meeting back to our presenters.

Thank you, everyone. We appreciate your support, and we look forward to reconnecting with all of you in the coming weeks. If you have any questions, please reach out to myself or Eldron. Have a great day.