ACRES Commercial Realty (NYSE:ACR) highlighted strong loan growth and improving portfolio credit trends during its fourth-quarter 2025 earnings call, while also detailing the impact of a legacy mezzanine loan charge-off on distributable results. Management said the quarter’s origination activity, along with early 2026 production, enabled the company to complete a new commercial real estate securitization in January and close the transaction in February.
Origination surge and securitization execution
President and CEO Mark Fogel said the company closed $571 million of new loan commitments in the fourth quarter, which was partially offset by loan payoffs and net unfunded commitments totaling $127.2 million. The activity produced a net increase of $443.8 million in the loan portfolio during the quarter. The weighted average spread on newly originated loans was 2.83%, management said.
On February 12, the company closed ACRES 2026-FL4, described as a $1 billion securitization with 86.5% leverage and a weighted average debt spread of 1.68%. Fogel said the weighted average spread on the company’s floating-rate loans across its $1.8 billion commercial real estate loan portfolio was 3.35% over one-month term SOFR.
Portfolio size, credit metrics, and asset management commentary
Management said the company ended the quarter with $1.8 billion of commercial real estate loans across 53 individual investments. The weighted average risk rating was 2.7 at December 31, down from 3.0 at September 30. Loans rated four or five totaled 10, down from 13 at the end of the third quarter.
Fogel said the portion of the CRE loan portfolio rated four or five, based on the company’s economic interest, fell to 17% at December 31 from 32% at September 30. During the quarter, another four-rated loan paid off at par, which management said reinforced its view that “the vast majority” of four- and five-rated loans do not suffer principal losses.
Looking back to 2020, when ACRES assumed the management contract, Fogel said the company had 23 loans with a par balance of $411 million, or 24% of the portfolio, risk-rated four or five. As of December 31, 2025, he said only two of those four- or five-rated loans remained unresolved. Management said it resolved 21 of those loans, or $368 million of par value, with recognized losses of $4.8 million, which it characterized as 1.3% of the par balance of those loans.
Real estate activity and legacy mezzanine loan charge-off
Fogel said the company sold a real estate owned (REO) asset collateralized by an office property in Austin, Texas, during the quarter. He said the sale produced an earnings available for distribution (EAD) gain of $1.3 million. However, CFO Eldron Blackwell noted that GAAP results for the quarter included a $1.5 million net loss on the sale of the office property.
In addition, the company charged off a legacy $4.7 million mezzanine loan originated prior to ACRES management in 2018. Management said the loss was fully reserved and recognized in GAAP and book value in 2022, with the EAD impact recognized in the fourth quarter of 2025 in connection with settlement of that loan.
Financial results, reserves, book value, and capital actions
Blackwell reported a GAAP net loss allocable to common shares of $3 million, or $0.43 per share, for the fourth quarter. Net interest income totaled $10.7 million, up $2.3 million from the prior quarter, which he attributed to the quarter’s net loan originations and corresponding facility draws.
The quarter included a $3 million improvement in net real estate operations to net income of $156,000. The company also reported a $1.3 million decrease in current expected credit losses (CECL) reserves, compared with a $4 million decrease in the third quarter. Blackwell said the CECL reserve movement was driven by loan payoffs and net improvements in model credit risk, offset by a general decline in projected macroeconomic factors.
Total allowance for credit losses at December 31 was $20.4 million, representing 1.11% (111 basis points) of the $1.8 billion loan portfolio at par, and was composed entirely of general credit reserves.
On distributable performance, Blackwell said that excluding the mezzanine loan loss that had been fully reserved in 2022, EAD for the quarter was $0.20 per share. Including the mezzanine loan, the company reported an EAD loss of $0.48 per share, compared with EAD of $1.01 per share in the third quarter.
GAAP book value per share was $30.01 at December 31, up from $29.63 at September 30. During the quarter, the company used $10 million to repurchase 493,000 common shares at an approximate 33% discount to book value at December 31. Blackwell said the authorization was fully utilized in December 2025 and that since November 2020 the company has repurchased 5.3 million shares at an average discount to book value of 49%.
Available liquidity at December 31 was $108 million, comprising $84 million of unrestricted cash and $24 million of projected financing available on unlevered assets. The GAAP debt-to-equity leverage ratio increased to 2.8x from 2.7x due to net originations. Blackwell also cited a $32.1 million net operating loss carryforward, or approximately $4.89 per share, at quarter end.
2026 outlook items discussed on the call
In the Q&A portion of the call, management discussed expectations for portfolio activity and mix in 2026:
- Fogel said the company expects additional deployment and projected net portfolio growth of $500 million to $700 million in 2026.
- Management said originations in early 2026 remained mostly multifamily, while noting that multifamily spreads have been coming down and that the company expects more mix into other asset classes over the course of 2026.
- Fogel said the company’s CLO includes a reinvestment feature allowing up to 40% of assets outside multifamily, with a reinvestment period of 30 months.
- Management projected about $500 million of repayments in 2026, “mostly older vintage assets,” and said that would reduce 2023-and-older assets to about 15% of the portfolio when combined with new originations.
- Chairman Andrew Fentress said the company was inside its comfort level on leverage “inside of four turns” and said he did not expect leverage to go above that level.
Fentress also said the company was “positioned…to resume paying a dividend to common shareholders,” while emphasizing continued execution on shareholder value initiatives including originations, share repurchases, REO sales, and credit improvement. During Q&A, he explained that a jump in non-controlling interest reflected the company selling “a portion of its previously issued financing arrangement with JPMorgan,” with that interest recorded as an NCI.
About ACRES Commercial Realty (NYSE:ACR)
ACRES Commercial Realty Corp., a real estate investment trust (REIT), focuses on the origination, holding, and management of commercial real estate mortgage loans and equity investments in commercial real estate property in the United States. It invests in commercial real estate-related assets, including floating-rate first mortgage loans, first priority interests in first mortgage loans, subordinated interests in first mortgage loans, mezzanine financing, preferred equity investments, and commercial mortgage-backed securities.
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