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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 001-35517
ARES COMMERCIAL REAL ESTATE CORPORATION
(Exact name of Registrant as specified in its charter)

Maryland |  | 45-3148087
(State or other jurisdiction of |  | (I.R.S. Employer
incorporation or organization) |  | Identification Number)

245 Park Avenue, 42nd Floor, New York, NY 10167
(Address of principal executive offices) (Zip Code)
(212) 750-7300
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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, $0.01 par value per share | ACRE | 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 ý No o
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 ý No o
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class |  | Outstanding at May 2, 2025
Common stock, $0.01 par value |  | 55,005,353

Table of Contents
TABLE OF CONTENTS

|  | Page
Part I. Financial Information |  |
Item 1. Consolidated Financial Statements |  |
Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 202 4 |  | 5
Consolidated Statements of Operations for the Three Months Ended March 31, 202 5 and 2024 (unaudited) |  | 6
Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 202 5 and 202 4 (unaudited) |  | 7
Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2025 (unaudited) and the Year Ended December 31, 2 0 24 |  | 8
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (unaudited) |  | 9
Notes to Consolidated Financial Statements (unaudited) |  | 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 37
Item 3. Quantitative and Qualitative Disclosures About Market Risk |  | 47
Item 4. Controls and Procedures |  | 50
Part II. Other Information |  |
Item 1. Legal Proceedings |  | 50
Item 1A. Risk Factors |  | 50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |  | 51
Item 3. Defaults Upon Senior Securities |  | 51
Item 4. Mine Safety Disclosures |  | 51
Item 5. Other Information |  | 51
Item 6. Exhibits |  | 52
Signatures |  | 53

2

Table of Contents
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this quarterly report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein. The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In addition, some of the statements in this quarterly report (including in the following discussion) constitute forward-looking statements, which relate to future events or the future performance or financial condition of Ares Commercial Real Estate Corporation (“ACRE” and, together with its consolidated subsidiaries, the “Company,” “we,” “us” and “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including:
•global economic trends and economic conditions, including high inflation, slower growth, changes to fiscal and monetary policy, higher interest rates, currency fluctuations and changes caused by tariffs and trade disputes with other countries, as well as geopolitical instability, including conflicts between Russia and Ukraine and in the Middle East;
•changes in interest rates and credit spreads;
•management’s estimate of current expected credit losses (“CECL”) and current expected credit loss reserve (“CECL Reserve” or “CECL Reserves”);
•our ability to obtain, maintain, repay or refinance financing arrangements, including securitizations;
•market conditions and our ability to access alternative debt markets and additional debt and equity capital;
•the amount of commercial mortgage loans requiring refinancing;
•the demand for commercial real estate loans;
•our expected investment capacity and available capital;
•financing and advance rates for our target investments;
•our expected leverage;
•rates of default or decreased recovery rates on our target investments;
•our business and investment strategy;
•our projected operating results;
•the return or impact of current and future investments;
•the collectability and timing of cash flows, if any, from our investments;
•estimates relating to our ability to make distributions to our stockholders in the future;
•defaults by borrowers in paying amounts due on outstanding indebtedness and our ability to collect all amounts due according to the contractual terms of our investments;
•rates of prepayments on our mortgage loans and the effect on our business of such prepayments;
•the degree to which our hedging strategies may or may not protect us from interest rate volatility;
•availability of investment opportunities in mortgage-related and real estate-related investments and securities;
•security incidents or cyber-attacks that could adversely affect our business or the business of our borrowers;
3

Table of Contents
•the ability of Ares Commercial Real Estate Management LLC (“ACREM” or our “Manager”) to locate suitable investments for us, monitor, service and administer our investments and execute our investment strategy;
•allocation of investment opportunities to us by our Manager;
•the effect of requests for information or regulatory proceedings or investigations against us, our Manager or its affiliates, and the costs and expenses in connection therewith;
•our ability to successfully identify, complete and integrate any acquisitions;
•our ability to maintain our qualification as a real estate investment trust (“REIT”) for United States federal income tax purposes;
•our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “1940 Act”);
•our understanding of our competition;
•general volatility of the securities markets in which we may invest;
•adverse changes in the real estate, real estate capital and credit markets and the impact of a protracted decline in the liquidity of credit markets on our business;
•changes in governmental regulations, tax law and rates, and similar matters (including interpretation thereof);
•authoritative or policy changes from standard-setting bodies such as the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”), the Internal Revenue Service, the stock exchange where we list our common stock, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business;
•actions and initiatives of the United States government or governments outside of the United States, and changes to United States government policies; and
•market trends in our industry, real estate values or the debt securities markets.
We use words such as “anticipates,” “believes,” “expects,” “intends,” “project,” “estimates,” “will,” “should,” “could,” “would,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and financial condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the risks, uncertainties and other factors set forth in Part I, Item 1A, “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2024 (“2024 Annual Report”) and the other information included in our 2024 Annual Report and elsewhere in our subsequent quarterly reports on Form 10-Q.
We have based the forward-looking statements included in this quarterly report on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form S-3, quarterly reports on Form 10-Q and current reports on Form 8-K.
4

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

|  | As of |  |
|  | March 31, 2025 |  | December 31, 2024 |  |
|  | (unaudited) |  |  |  |
ASSETS |  |  |  |  |  |
Cash and cash equivalents |  | $ | 125,496 |  |  | $ | 63,799 |  |  |
Restricted cash ($3,587 and $2,495 related to consolidated VIEs, respectively) |  | 3,587 |  |  | 2,495 |  |  |
Loans held for investment ($182,370 and $551,955 related to consolidated VIEs, respectively) |  | 1,355,264 |  |  | 1,656,688 |  |  |
Current expected credit loss reserve |  | (131,433) |  |  | (136,224) |  |  |
Loans held for investment, net of current expected credit loss reserve |  | 1,223,831 |  |  | 1,520,464 |  |  |
Investment in available-for-sale debt securities, at fair value |  | 8,568 |  |  | 8,684 |  |  |
Real estate owned held for investment, net ($57,483 and $58,844 related to consolidated VIEs, respectively) |  | 136,864 |  |  | 139,032 |  |  |
Other assets ($359 and $1,991 of interest receivable related to consolidated VIEs, respectively; $4,262 of other receivables related to consolidated VIEs as of March 31, 2025) |  | 21,275 |  |  | 16,732 |  |  |
Total assets |  | $ | 1,519,621 |  |  | $ | 1,751,206 |  |  |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |
LIABILITIES |  |  |  |  |  |
Secured funding agreements |  | $ | 674,405 |  |  | $ | 588,468 |  |  |
Secured term loan |  | 118,437 |  |  | 128,062 |  |  |
Collateralized loan obligation securitization debt (consolidated VIEs) |  | 151,970 |  |  | 455,839 |  |  |
Due to affiliate |  | 4,194 |  |  | 3,790 |  |  |
Dividends payable |  | 8,353 |  |  | 13,924 |  |  |
Other liabilities ($387 and $1,309 of interest payable related to consolidated VIEs, respectively) |  | 20,118 |  |  | 20,991 |  |  |
Total liabilities |  | 977,477 |  |  | 1,211,074 |  |  |
Commitments and contingencies (Note 7) |  |  |  |  |  |
STOCKHOLDERS' EQUITY |  |  |  |  |  |
Common stock, par value $0.01 per share, 450,000,000 shares authorized at March 31, 2025 and December 31, 2024 and 54,856,977 and 54,542,178 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively |  | 532 |  |  | 532 |  |  |
Additional paid-in capital |  | 817,973 |  |  | 816,923 |  |  |
Accumulated other comprehensive income (loss) |  | 7 |  |  | 37 |  |  |
Accumulated earnings (deficit) |  | (276,368) |  |  | (277,360) |  |  |
Total stockholders' equity |  | 542,144 |  |  | 540,132 |  |  |
Total liabilities and stockholders' equity |  | $ | 1,519,621 |  |  | $ | 1,751,206 |  |  |

See accompanying notes to consolidated financial statements.
5

Table of Contents
ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |  |  |
Revenue: |  |  |  |  |  |  |  |  |  |
Interest income |  | $ | 27,480 |  |  | $ | 44,033 |  |  |  |  |  |  |
Interest expense |  | (18,189) |  |  | (28,819) |  |  |  |  |  |  |
Net interest margin |  | 9,291 |  |  | 15,214 |  |  |  |  |  |  |
Revenue from real estate owned |  | 5,657 |  |  | 3,478 |  |  |  |  |  |  |
Total revenue |  | 14,948 |  |  | 18,692 |  |  |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |  |  |
Management and incentive fees to affiliate |  | 2,567 |  |  | 2,768 |  |  |  |  |  |  |
Professional fees |  | 877 |  |  | 533 |  |  |  |  |  |  |
General and administrative expenses |  | 1,720 |  |  | 2,081 |  |  |  |  |  |  |
General and administrative expenses reimbursed to affiliate |  | 1,003 |  |  | 1,132 |  |  |  |  |  |  |
Expenses from real estate owned |  | 4,495 |  |  | 2,037 |  |  |  |  |  |  |
Total expenses |  | 10,662 |  |  | 8,551 |  |  |  |  |  |  |
(Provision for) reversal of current expected credit losses, net |  | 5,340 |  |  | 22,269 |  |  |  |  |  |  |
Realized losses on loans |  | — |  |  | (45,726) |  |  |  |  |  |  |
Change in unrealized losses on loans held for sale |  | — |  |  | 995 |  |  |  |  |  |  |
Income (loss) before income taxes |  | 9,626 |  |  | (12,321) |  |  |  |  |  |  |
Income tax expense (benefit), including excise tax |  | 281 |  |  | 2 |  |  |  |  |  |  |
Net income (loss) attributable to common stockholders |  | $ | 9,345 |  |  | $ | (12,323) |  |  |  |  |  |  |
Earnings (loss) per common share: |  |  |  |  |  |  |  |  |  |
Basic earnings (loss) per common share |  | $ | 0.17 |  |  | $ | (0.23) |  |  |  |  |  |  |
Diluted earnings (loss) per common share |  | $ | 0.17 |  |  | $ | (0.23) |  |  |  |  |  |  |
Weighted average number of common shares outstanding: |  |  |  |  |  |  |  |  |  |
Basic weighted average shares of common stock outstanding |  | 54,828,751 |  |  | 54,396,397 |  |  |  |  |  |  |
Diluted weighted average shares of common stock outstanding |  | 55,694,939 |  |  | 54,396,397 |  |  |  |  |  |  |
Dividends declared per share of common stock |  | $ | 0.15 |  |  | $ | 0.25 |  |  |  |  |  |  |

See accompanying notes to consolidated financial statements.
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ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |  |  |
Net income (loss) attributable to common stockholders |  | $ | 9,345 |  |  | $ | (12,323) |  |  |  |  |  |  |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |
Unrealized gains (losses) on available-for-sale debt securities |  | (30) |  |  | 81 |  |  |  |  |  |  |
Comprehensive income (loss) |  | $ | 9,315 |  |  | $ | (12,242) |  |  |  |  |  |  |

See accompanying notes to consolidated financial statements.
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ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
(unaudited)

| Common Stock |  | Additional Paid-in Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Accumulated Earnings (Deficit) |  | Total Stockholders’ Equity
| Shares |  | Amount |
Balance at December 31, 2023 | 54,149,225 |  |  | $ | 532 |  |  | $ | 812,184 |  |  | $ | 153 |  |  | $ | (187,020) |  |  | $ | 625,849 |
Stock‑based compensation | 273,388 |  |  | — |  |  | 1,284 |  |  | — |  |  | — |  |  | 1,284 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | 81 |  |  | — |  |  | 81 |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | (12,323) |  |  | (12,323) |
Dividends declared | — |  |  | — |  |  | — |  |  | — |  |  | (13,802) |  |  | (13,802) |
Balance at March 31, 2024 | 54,422,613 |  |  | $ | 532 |  |  | $ | 813,468 |  |  | $ | 234 |  |  | $ | (213,145) |  |  | $ | 601,089 |
Stock‑based compensation | 96,114 |  |  | — |  |  | 1,152 |  |  | — |  |  | — |  |  | 1,152 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | (41) |  |  | — |  |  | (41) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | (6,125) |  |  | (6,125) |
Dividends declared | — |  |  | — |  |  | — |  |  | — |  |  | (13,812) |  |  | (13,812) |
Balance at June 30, 2024 | 54,518,727 |  |  | $ | 532 |  |  | $ | 814,620 |  |  | $ | 193 |  |  | $ | (233,082) |  |  | $ | 582,263 |
Stock‑based compensation | 13,666 |  |  | — |  |  | 1,182 |  |  | — |  |  | — |  |  | 1,182 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | (3) |  |  | — |  |  | (3) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | (5,880) |  |  | (5,880) |
Dividends declared | — |  |  | — |  |  | — |  |  | — |  |  | (13,809) |  |  | (13,809) |
Balance at September 30, 2024 | 54,532,393 |  |  | $ | 532 |  |  | $ | 815,802 |  |  | $ | 190 |  |  | $ | (252,771) |  |  | $ | 563,753 |
Stock‑based compensation | 9,785 |  |  | — |  |  | 1,121 |  |  | — |  |  | — |  |  | 1,121 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | (153) |  |  | — |  |  | (153) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | (10,665) |  |  | (10,665) |
Dividends declared | — |  |  | — |  |  | — |  |  | — |  |  | (13,924) |  |  | (13,924) |
Balance at December 31, 2024 | 54,542,178 |  |  | $ | 532 |  |  | $ | 816,923 |  |  | $ | 37 |  |  | $ | (277,360) |  |  | $ | 540,132 |
Stock‑based compensation | 314,799 |  |  | — |  |  | 1,050 |  |  | — |  |  | — |  |  | 1,050 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | (30) |  |  | — |  |  | (30) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | 9,345 |  |  | 9,345 |
Dividends declared | — |  |  | — |  |  | — |  |  | — |  |  | (8,353) |  |  | (8,353) |
Balance at March 31, 2025 | 54,856,977 |  |  | $ | 532 |  |  | $ | 817,973 |  |  | $ | 7 |  |  | $ | (276,368) |  |  | $ | 542,144 |

See accompanying notes to consolidated financial statements.
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ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |
Operating activities: |  |  |  |  |  |
Net income (loss) |  | $ | 9,345 |  |  | $ | (12,323) |  |  |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |  |  |  |
Amortization of deferred financing costs |  | 1,198 |  |  | 1,118 |  |  |
Accretion of discounts, deferred loan origination fees and costs |  | (1,283) |  |  | (1,254) |  |  |
Stock-based compensation |  | 1,050 |  |  | 1,284 |  |  |
Depreciation and amortization of real estate owned |  | 2,182 |  |  | 786 |  |  |
Provision for (reversal of) current expected credit losses, net |  | (5,340) |  |  | (22,269) |  |  |
Realized losses on loans |  | — |  |  | 45,726 |  |  |
Change in unrealized losses on loans held for sale |  | — |  |  | (995) |  |  |
Changes in operating assets and liabilities: |  |  |  |  |  |
Other assets |  | 1,561 |  |  | (493) |  |  |
Due to affiliate |  | 404 |  |  | 146 |  |  |
Other liabilities |  | (1,107) |  |  | (348) |  |  |
Net cash provided by (used in) operating activities |  | 8,010 |  |  | 11,378 |  |  |
Investing activities: |  |  |  |  |  |
Issuance of and fundings on loans held for investment |  | (7,011) |  |  | (12,003) |  |  |
Principal collections and cost-recovery proceeds on loans held for investment |  | 305,443 |  |  | 106,806 |  |  |
Proceeds from sale of loans held for sale |  | — |  |  | 38,981 |  |  |
Receipt of origination and other loan fees |  | 234 |  |  | 232 |  |  |
Principal repayment of available-for-sale debt securities |  | 88 |  |  | — |  |  |
Purchases of capitalized additions to real estate owned |  | (15) |  |  | — |  |  |
Net cash provided by (used in) investing activities |  | 298,739 |  |  | 134,016 |  |  |
Financing activities: |  |  |  |  |  |
Proceeds from secured funding agreements |  | 114,797 |  |  | 12,781 |  |  |
Repayments of secured funding agreements |  | (28,860) |  |  | (22,299) |  |  |
Repayments of secured term loan |  | (10,000) |  |  | — |  |  |
Payment of secured funding costs |  | (1,924) |  |  | (370) |  |  |
Repayments of debt of consolidated VIEs |  | (304,049) |  |  | (128,226) |  |  |
Dividends paid |  | (13,924) |  |  | (18,221) |  |  |
Net cash provided by (used in) financing activities |  | (243,960) |  |  | (156,335) |  |  |
Change in cash, cash equivalents and restricted cash |  | 62,789 |  |  | (10,941) |  |  |
Cash, cash equivalents and restricted cash, beginning of period |  | 66,294 |  |  | 110,459 |  |  |
Cash, cash equivalents and restricted cash, end of period |  | $ | 129,083 |  |  | $ | 99,518 |  |  |
Reconciliation of cash, cash equivalents and restricted cash: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 125,496 |  |  | $ | 99,518 |  |  |
Restricted cash |  | 3,587 |  |  | — |  |  |
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows |  | $ | 129,083 |  |  | $ | 99,518 |  |  |
Supplemental disclosure of noncash investing and financing activities: |  |  |  |  |  |
Dividends declared, but not yet paid |  | $ | 8,353 |  |  | $ | 13,802 |  |  |
Other receivables related to consolidated VIEs |  | $ | 4,262 |  |  | $ | 6,539 |  |  |

See accompanying notes to consolidated financial statements.
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ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2025
(in thousands, except share and per share data, percentages and as otherwise indicated)
(unaudited)
1. ORGANIZATION
Ares Commercial Real Estate Corporation (together with its consolidated subsidiaries, the “Company” or “ACRE”) is a specialty finance company primarily engaged in directly originating and investing in commercial real estate loans and related investments. Through Ares Commercial Real Estate Management LLC (“ACREM” or the Company’s “Manager”), a Securities and Exchange Commission (“SEC”) registered investment adviser and a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management” or “Ares”), a publicly traded, leading global alternative investment manager, it has investment professionals strategically located across the United States and Europe who directly source new loan opportunities for the Company with owners, operators and sponsors of commercial real estate (“CRE”) properties. The Company was formed and commenced operations in late 2011. The Company is a Maryland corporation and completed its initial public offering (the “IPO”) in May 2012. The Company is externally managed by its Manager, pursuant to the terms of a management agreement (the “Management Agreement”).
The Company operates as one operating segment and is primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for the Company’s own account. The Company’s target investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investments, including commercial mortgage-backed securities. These investments are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, self storage, student housing, residential and other commercial real estate properties, or by ownership interests therein.
The Company has elected and qualified to be taxed as a real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2012. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to stockholders and complies with various other requirements as a REIT.
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2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related management's discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC.
Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a description of the Company’s recurring accounting policies. The Company has included disclosure below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly or (ii) the Company views as critical as of the date of this report.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company, the consolidated variable interest entities (“VIEs”) that the Company controls and of which the Company is the primary beneficiary, and the Company’s wholly-owned subsidiaries. The unaudited consolidated interim financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated.
The unaudited consolidated interim financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The current period’s results of operations will not necessarily be indicative of results for any other interim period or that ultimately may be achieved for the year ending December 31, 2025.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Global macroeconomic conditions, including high inflation, changes to fiscal and monetary policy, high interest rates, potential market-wide liquidity problems, currency fluctuations, labor shortages and challenges in the supply chain, have the potential to negatively impact the Company and its borrowers. These current macroeconomic conditions may continue or aggravate and could cause the United States economy or other global economies to experience an economic slowdown or recession. We anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States or other major global economy.
The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2025, however, uncertainty over the global economy and the Company’s business, makes any estimates and assumptions as of March 31, 2025 inherently less certain than they would be absent the current and potential impacts of current macroeconomic conditions. Actual results could differ from those estimates.
Variable Interest Entities
The Company evaluates all of its interests in VIEs for consolidation. When the Company’s interests are determined to be variable interests, the Company assesses whether it is deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. The Company considers its variable interests, as well as any variable interests of its related parties in making this determination. Where both of these factors are present, the Company is deemed to be the primary beneficiary and it consolidates the VIE. Where either one of these factors is not present, the Company is not the primary beneficiary and it does not consolidate the VIE.
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To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.
To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.
For VIEs of which the Company is determined to be the primary beneficiary, all of the underlying assets, liabilities, equity, revenue and expenses of the structures are consolidated into the Company’s consolidated financial statements.
The Company performs an ongoing reassessment of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding its involvement with a VIE cause the Company’s consolidation conclusion regarding the VIE to change. See Note 14 included in these consolidated financial statements for further discussion of the Company’s VIEs.
Restricted Cash
Restricted cash includes funds on deposit with financial institutions related to real estate owned properties that are held in the Company’s consolidated VIEs.
Loans Held for Investment
The Company originates CRE debt and related instruments generally to be held for investment. Loans that are held for investment are carried at cost, net of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds (the “carrying value”). Loans are generally collateralized by real estate. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its loans held for investment portfolio under the following methodology: (1) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation; (2) economic review, which considers underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, and the borrower’s exit plan, among other factors.
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to reduce loan carrying value depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Loan balances that are deemed to be uncollectible are written off as a realized loss and are deducted from the CECL Reserve (as defined below). The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment.
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Current Expected Credit Losses
FASB ASC Topic 326, Financial Instruments—Credit Losses (“ASC 326”), requires the Company to reflect current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broad range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve” or “CECL Reserves”). Increases and decreases to expected credit losses impact earnings and are recorded within (provision for) reversal of current expected credit losses, net in the Company’s consolidated statements of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASC 326 is a valuation account that is deducted from the amortized cost basis of the Company’s loans held for investment in the Company’s consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company’s consolidated balance sheets. See Note 4 included in these consolidated financial statements for CECL related disclosures.
Loans Held for Sale
Although the Company generally holds its target investments as long-term investments, the Company occasionally classifies some of its investments as held for sale if there is an intent to sell the investment prior to maturity or payoff. Investments held for sale are carried at the lower of carrying value or fair value within loans held for sale in the Company’s consolidated balance sheets, with changes in fair value recorded through earnings.
Real Estate Owned Held for Investment
Real estate assets held for investment are carried at their estimated fair value at acquisition and are presented net of accumulated depreciation or amortization and impairment charges. The Company allocates the purchase price of acquired real estate assets held for investment based on the fair value of the acquired land, buildings and improvements, furniture, fixtures and equipment, intangible assets and intangible liabilities, as applicable.
Real estate assets held for investment are depreciated or amortized using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements, up to 15 years for furniture, fixtures and equipment and over the lease terms for intangible assets and liabilities. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred. Other than amortization related to intangible assets and liabilities for above-market or below-market leases, depreciation or amortization expense related to real estate assets held for investment is included within expenses from real estate owned in the Company’s consolidated statements of operations. Amortization for above-market or below-market leases is recognized as an adjustment to rental revenue and is included within revenue from real estate owned in the Company’s consolidated statements of operations.
Real estate assets held for investment are evaluated for indicators of impairment on a quarterly basis. Factors that the Company may consider in its impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset, the Company makes certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon the Company’s estimate of a capitalization rate and discount rate.
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Debt Issuance Costs
Debt issuance costs under the Company’s indebtedness are capitalized and amortized over the term of the respective debt instrument. Unamortized debt issuance costs are expensed when the associated debt is repaid prior to maturity. Debt issuance costs related to debt securitizations are capitalized and amortized over the term of the underlying loans using the effective interest method. When an underlying loan is prepaid in a debt securitization and the outstanding principal balance of the securitization debt is reduced, the related unamortized debt issuance costs are charged to expense based on a pro‑rata share of the debt issuance costs being allocated to the specific loans that were prepaid. Amortization of debt issuance costs is included within interest expense, except as noted below, in the Company’s consolidated statements of operations while the unamortized balance on the (i) Secured Funding Agreements (each individually defined in Note 6 included in these consolidated financial statements) is included within other assets and (ii) the Secured Term Loan (defined in Note 6 included in these consolidated financial statements) and debt securitizations are each included as a reduction to the carrying amount of the liability, in the Company’s consolidated balance sheets.
Revenue Recognition
Interest income is accrued based on the outstanding principal amount and the contractual terms of each loan or debt security. For loans held for investment, the origination fees, contractual exit fees and direct origination costs are also recognized in interest income over the initial loan term as a yield adjustment using the effective interest method. For available-for-sale debt securities, premiums or discounts are amortized or accreted into interest income as a yield adjustment using the effective interest method.
Revenue from real estate owned represents revenue associated with the operations of an office property acquired in September 2024 and a mixed-use property acquired in September 2023.
Revenue from the operation of the office and mixed-use properties consists primarily of rental revenue from operating leases. For each operating lease with scheduled rent increases over the term of the lease, the Company recognizes rental revenue on a straight-line basis over the lease term when collectability of the lease payment is probable. Variable lease payments are recognized as rental revenue in the period when the changes in facts and circumstances on which the variable lease payments are based occur. Certain of the Company’s office and mixed-use property leases also contain provisions for tenants to reimburse the Company for property operating expenses. Such reimbursements are included in rental revenue on a gross basis. Rental revenue also includes amortization of intangible assets and liabilities related to above- and below-market leases.
Net Interest Margin and Interest Expense
Net interest margin in the Company’s consolidated statements of operations serves to measure the performance of the Company’s loans and debt securities as compared to its use of debt leverage. The Company includes interest income from its loans and debt securities and interest expense related to its Secured Funding Agreements, Notes Payable, securitization debt and the Secured Term Loan (each individually defined in Note 6 included in these consolidated financial statements) in net interest margin. For the three months ended March 31, 2025 and 2024, interest expense is comprised of the following ($ in thousands):

| For the Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |  |  |
Secured funding agreements | $ | 10,215 |  |  | $ | 12,877 |  |  |  |  |  |  |
Notes payable | — |  |  | 1,999 |  |  |  |  |  |  |
Securitization debt | 6,217 |  |  | 12,187 |  |  |  |  |  |  |
Secured term loan | 1,757 |  |  | 1,756 |  |  |  |  |  |  |
Interest expense | $ | 18,189 |  |  | $ | 28,819 |  |  |  |  |  |  |

Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and OCI that are excluded from net income (loss).
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3. LOANS HELD FOR INVESTMENT
As of March 31, 2025, the Company’s portfolio included 27 loans held for investment, excluding 188 loans that were repaid, sold, converted to real estate owned or written off since inception. The aggregate originated commitment under these loans at closing was approximately $1.5 billion and outstanding principal was $1.4 billion as of March 31, 2025. During the three months ended March 31, 2025, the Company funded approximately $7.2 million of outstanding principal and received repayments of $306.8 million of outstanding principal. As of March 31, 2025, 68.3% of the Company’s loans have Secured Overnight Financing Rate (“SOFR”) floors, with a weighted average floor of 0.96%, calculated based on loans with SOFR floors. References to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).
The Company’s investments in loans held for investment are accounted for at amortized cost. The following tables summarize the Company’s loans held for investment as of March 31, 2025 and December 31, 2024 ($ in thousands):

|  | As of March 31, 2025
|  | Carrying Amount (1) |  | Outstanding Principal (1) |  | Weighted Average Unleveraged Effective Yield |  | Weighted Average Remaining Life (Years) (4)
Senior mortgage loans |  | $ | 1,336,798 |  |  | $ | 1,381,528 |  |  | 6.2 | % | (2) | 8.3 | % | (3) |  | 1.0
Subordinated debt and preferred equity investments |  | 18,466 |  |  | 22,881 |  |  | — | % | (2) | — | % | (3) |  | 2.0
Total loans held for investment portfolio |  | $ | 1,355,264 |  |  | $ | 1,404,409 |  |  | 6.1 | % | (2) | 8.3 | % | (3) |  | 1.0

|  | As of December 31, 2024
|  | Carrying Amount (1) |  | Outstanding Principal (1) |  | Weighted Average Unleveraged Effective Yield |  | Weighted Average Remaining Life (Years) (4)
Senior mortgage loans |  | $ | 1,617,835 |  |  | $ | 1,655,141 |  |  | 6.8 | % | (2) | 8.6 | % | (3) |  | 0.9
Subordinated debt and preferred equity investments |  | 38,853 |  |  | 43,365 |  |  | 7.5 | % | (2) | 15.7 | % | (3) |  | 1.5
Total loans held for investment portfolio |  | $ | 1,656,688 |  |  | $ | 1,698,506 |  |  | 6.9 | % | (2) | 8.7 | % | (3) |  | 1.0

______________________________
(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds.
(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2025 and December 31, 2024 as weighted by the total outstanding principal balance of each loan.
(3)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all interest accruing loans held by the Company as of March 31, 2025 and December 31, 2024 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2025 and December 31, 2024).
(4)Remaining Life is based on contractual maturity date and does not include contractual extension options not yet exercised.
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A more detailed listing of the Company’s loans held for investment portfolio based on information available as of March 31, 2025 is as follows ($ in millions):

Loan Type |  | Location |  | Outstanding Principal (1) |  | Carrying Amount (1) |  | Interest Rate |  | Unleveraged Effective Yield (2) |  | Maturity Date (3) |  | Payment Terms (4) |
Senior Mortgage Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Office |  | IL |  | $165.1 |  | $148.2 |  | (5) |  | —% | (5) | Jul 2025 | (5) | I/O |
Multifamily |  | NY |  | 132.2 |  | 132.1 |  | S+3.90% |  | 8.7% |  | Jun 2025 |  | I/O |
Residential/Condo |  | NY |  | 129.1 |  | 105.7 |  | S+8.95% |  | —% | (6) | Dec 2025 |  | I/O |
Mixed-use |  | NY |  | 77.5 |  | 77.4 |  | S+3.75% |  | 8.3% |  | Jul 2025 |  | I/O |
Office |  | Diversified |  | 77.3 |  | 76.8 |  | S+3.75% |  | 8.6% |  | Jul 2026 |  | P/I | (7)
Office |  | AZ |  | 77.0 |  | 76.9 |  | S+3.61% |  | 8.3% |  | Oct 2025 |  | I/O |
Office |  | NC |  | 70.6 |  | 70.5 |  | S+3.65% |  | 8.0% |  | Aug 2028 |  | I/O |
Multifamily |  | TX |  | 68.5 |  | 68.4 |  | S+2.95% |  | 7.6% |  | Dec 2025 |  | I/O |
Hotel |  | CA |  | 60.8 |  | 60.6 |  | S+4.20% |  | 8.8% |  | Mar 2026 | (8) | I/O |
Office |  | NY |  | 59.0 |  | 59.0 |  | S+2.65% |  | 7.0% |  | Jul 2027 | (9) | I/O |
Multifamily |  | OH |  | 57.3 |  | 57.0 |  | S+3.05% |  | 7.7% |  | Oct 2026 |  | I/O |
Hotel |  | NY |  | 55.7 |  | 55.5 |  | S+4.40% |  | 9.0% |  | Mar 2026 |  | I/O |
Office |  | IL |  | 54.2 |  | 54.2 |  | S+4.25% |  | 8.7% |  | Jan 2027 | (10) | I/O |
Office (Life Sciences) |  | MA |  | 51.5 |  | 49.1 |  | S+3.75% |  | —% | (11) | Apr 2026 |  | I/O |
Industrial |  | MA |  | 47.4 |  | 47.3 |  | S+2.90% |  | 7.3% |  | Jun 2028 |  | I/O |
Multifamily |  | CA |  | 31.7 |  | 31.7 |  | S+3.00% |  | 7.6% |  | Dec 2025 |  | I/O |
Multifamily |  | PA |  | 28.2 |  | 28.2 |  | S+2.50% |  | 6.8% |  | Dec 2025 |  | I/O |
Industrial |  | NJ |  | 27.8 |  | 27.8 |  | S+8.85% |  | 13.2% |  | Nov 2024 | (12) | I/O |
Multifamily |  | WA |  | 23.1 |  | 23.1 |  | S+3.00% |  | 7.5% |  | Nov 2025 |  | I/O |
Multifamily |  | TX |  | 23.1 |  | 23.0 |  | S+2.60% |  | 7.4% |  | Oct 2025 |  | I/O |
Office |  | CA |  | 20.1 |  | 20.1 |  | S+3.50% |  | 8.1% |  | Nov 2025 |  | P/I | (7)
Self Storage |  | PA |  | 18.2 |  | 18.1 |  | S+3.00% |  | 7.6% |  | Dec 2025 |  | I/O |
Self Storage |  | IN |  | 11.4 |  | 11.4 |  | S+3.60% |  | 8.0% |  | Jun 2026 |  | I/O |
Self Storage |  | MA |  | 7.7 |  | 7.7 |  | S+3.00% |  | 7.6% |  | Nov 2025 |  | I/O |
Industrial |  | CA |  | 7.0 |  | 7.0 |  | S+3.85% |  | 8.2% |  | Jan 2027 | (13) | I/O |
Subordinated Debt and Preferred Equity Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Industrial |  | CA |  | 12.6 |  | 10.9 |  | S+3.85% |  | —% | (13) | Jan 2027 | (13) | I/O |
Office |  | NY |  | 10.3 |  | 7.6 |  | 5.50% |  | —% | (9) | Jul 2027 | (9) | I/O |
Total/Weighted Average |  |  |  | $1,404.4 |  | $1,355.3 |  |  |  | 6.1% |  |  |  |  |

_________________________
(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds. For the loans held for investment that represent co-investments with other investment vehicles managed by Ares Management (see Note 12 included in these consolidated financial statements for additional information on co-investments), only the portion of Carrying Amount and Outstanding Principal held by the Company is reflected.
(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. Unleveraged Effective Yield for each loan is calculated based on SOFR as of March 31, 2025 or the SOFR floor, as applicable. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2025 as weighted by the outstanding principal balance of each loan.
(3)Reflects the initial loan maturity date excluding any contractual extension options. Certain loans are subject to contractual extension options that generally vary between one and two 12-month extensions and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.
(4)I/O = interest only, P/I = principal and interest.
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(5)The Illinois loan is structured as both a senior and mezzanine loan with the Company holding both positions. The senior position has a per annum interest rate of S + 2.25% and the mezzanine position has a fixed per annum interest rate of 10.00%. The senior and mezzanine loans were both on non-accrual status as of March 31, 2025 and the Unleveraged Effective Yield is not applicable. In March 2025, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the Illinois loan from March 2025 to July 2025. For the three months ended March 31, 2025, the Company received $1.9 million of interest payments in cash on the senior loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.
(6)The New York loan is structured as both a senior and mezzanine loan with the Company holding both positions. The senior and mezzanine positions each have a per annum interest rate of S + 8.95%. The senior and mezzanine loans were both on non-accrual status as of March 31, 2025 and the Unleveraged Effective Yield is not applicable.
(7)In February 2023, amortization began on the senior diversified loan, which had an outstanding principal balance of $77.3 million as of March 31, 2025. In December 2023, amortization began on the senior California loan, which had an outstanding principal balance of $20.1 million as of March 31, 2025. The remainder of the loans in the Company’s portfolio are non-amortizing through their primary terms.
(8)In March 2025, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2025 to March 2026.
(9)The New York loan is structured as both a senior A-Note and a subordinated B-Note with the Company holding both positions. The subordinated B-Note is subordinate to new sponsor equity related to additional capital contributions. The senior A-Note, which had an outstanding principal balance of $59.0 million as of March 31, 2025, has a per annum interest rate of S + 2.65% and the subordinated B-Note, which had an outstanding principal balance of $10.3 million as of March 31, 2025, has a fixed per annum interest rate of 5.50%. As of March 31, 2025, the subordinated B-Note was on non-accrual status and therefore, the Unleveraged Effective Yield is not applicable. As of March 31, 2025, the borrower is current on all contractual interest payments for the senior A-Note and the subordinated B-Note.
(10)In January 2025, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior Illinois loan from January 2025 to January 2027.
(11)The senior Massachusetts loan was on non-accrual status as of March 31, 2025 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2025, the Company received $1.0 million of interest payments in cash on the senior Massachusetts loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.
(12)As of March 31, 2025, the senior New Jersey loan, which is collateralized by an industrial property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the November 2024 maturity date and the borrower is current on all contractual interest payments.
(13)The California loan is structured as a senior A-Note, with an outstanding principal balance of $7.0 million as of March 31, 2025, a subordinated B-Note with no outstanding principal balance and an unfunded commitment of $500 thousand for certain lender approved leasing costs and a subordinated C-Note, with an outstanding principal balance of $12.6 million as of March 31, 2025. The subordinated B-Note and C-Note are subordinate to new sponsor equity related to additional capital contributions. As of March 31, 2025, the subordinated C-Note was on non-accrual status and therefore, the Unleveraged Effective Yield is not applicable. As of March 31, 2025, the borrower is current on all contractual interest payments for the senior A-Note and the subordinated C-Note.
The Company has made, and may continue to make, modifications to loans, including loans that are in default. Loan terms that may be modified include interest rates, required prepayments, asset release prices, maturity dates, covenants, principal amounts and other loan terms. The terms and conditions of each modification vary based on individual circumstances and will be determined on a case by case basis. The Company’s Manager monitors and evaluates each of the Company’s loans held for investment and maintains regular communications with borrowers and sponsors regarding the potential impacts of current macroeconomic conditions on the Company’s loans.
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For the three months ended March 31, 2025, the activity in the Company’s loan portfolio was as follows ($ in thousands):

Balance at December 31, 2024 |  | $ | 1,656,688 |
Initial funding |  | — |
Origination and other loan fees and discounts, net of costs |  | (233) |
Additional funding |  | 7,234 |
Amortizing payments |  | (3,310) |
Loan payoffs |  | (306,396) |
Origination and other loan fees and discount accretion |  | 1,281 |
Balance at March 31, 2025 |  | $ | 1,355,264 |

Except as described in the table above listing the Company’s loans held for investment portfolio, as of March 31, 2025, all loans held for investment were paying in accordance with their contractual terms. As of March 31, 2025, the Company had five loans held for investment on non-accrual status with a carrying value of $321.5 million. As of December 31, 2024, the Company had five loans held for investment on non-accrual status with a carrying value of $318.4 million.
4. CURRENT EXPECTED CREDIT LOSSES
The Company estimates its CECL Reserve primarily using a probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan. Calculation of the CECL Reserve requires loan-specific data, which includes capital senior to the Company when the Company is the subordinate lender, changes in net operating income, debt service coverage ratio, loan-to-value, occupancy, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s floating rate loan portfolio and (iv) the Company’s current and future view of the macroeconomic environment. The Company may consider loan-specific qualitative factors on certain loans to estimate its CECL Reserve. In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company utilizes historical market loan loss data licensed from a third party data service. The third party’s loan database includes historical loss data for commercial mortgage-backed securities, or CMBS, issued dating back to 1998, which the Company believes is a reasonably comparable and available data set to its type of loans. The Company utilized macroeconomic forecasts and inputs that reflected a blend of a stable and a weaker economic outlook in the near term; however, the actual financial impact on the Company of the current environment is highly uncertain. For periods beyond the reasonable and supportable forecast period, the Company reverts back to historical loss data. Management’s current estimate of expected credit losses as of March 31, 2025 decreased compared to the estimate of expected credit losses as of December 31, 2024 primarily due to a relative improvement in the near-term macroeconomic forecasts, shorter average remaining loan term and loan repayments during the three months ended March 31, 2025. The CECL Reserve also takes into consideration the assumed impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on the Company’s loans held for investment, unless the Company determines that a specifically identifiable reserve is warranted for a select asset.
In certain instances, the Company may identify specific loans to be collateral dependent. The Company considers loans to be collateral dependent if both of the following criteria are met: (i) loan is expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) the borrower is experiencing financial difficulty. The determination of whether these criteria are met for an individual loan requires the use of significant judgment and can be based on several factors subject to uncertainty.
For such loans that the Company determines that foreclosure of the collateral is probable, the Company estimates the CECL Reserve based on the difference between the fair value of the collateral (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan as of the measurement date. For collateral dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate the CECL Reserve using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. To determine the fair value of the collateral, the Company may employ different approaches depending on the type of collateral, including methods such as the income approach, the market approach or the direct capitalization approach. These methods require the use of key unobservable inputs, which are inherently uncertain and subjective. Determining the appropriate valuation method and selecting the appropriate key unobservable inputs and assumptions requires significant judgment and consideration of factors specific to the underlying collateral being assessed. Additionally, the key unobservable inputs and assumptions used may vary depending on the information available and market conditions as of the valuation date. As such, the fair value that is used in calculating the CECL Reserve is subject to uncertainty and any actual losses, if incurred, could differ materially from the CECL Reserve.
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As of March 31, 2025, the Company’s CECL Reserve for its loans held for investment portfolio is $139.6 million or 945 basis points of the Company’s total loans held for investment commitment balance of $1.5 billion and is bifurcated between the CECL Reserve (contra-asset) related to outstanding balances on loans held for investment of $131.4 million and a liability for unfunded commitments of $8.2 million. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion.
As of March 31, 2025, the senior mortgage loan on an office property located in Illinois with a principal balance of $165.1 million had a risk rating of “5.” As of March 31, 2025, this loan was assessed individually and the Company elected to assign a CECL Reserve of $57.7 million on the Illinois office loan. The CECL Reserve for this loan was based on the Company’s estimate of net proceeds available from the potential sale of the collateral property and this CECL Reserve is included in the Company’s total CECL Reserve.
Current Expected Credit Loss Reserve for Funded Loan Commitments
Activity related to the CECL Reserve for outstanding balances on the Company’s loans held for investment as of and for the three months ended March 31, 2025 was as follows ($ in thousands):

Balance at December 31, 2024 (1) |  | $ | 136,224 |
Provision for (reversal of) current expected credit losses, net |  | (4,791) |
Balance at March 31, 2025 (1) |  | $ | 131,433 |

__________________________
(1) The CECL Reserve related to outstanding balances on loans held for investment is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.
Current Expected Credit Loss Reserve for Unfunded Loan Commitments
Activity related to the CECL Reserve for unfunded commitments on the Company’s loans held for investment as of and for the three months ended March 31, 2025 was as follows ($ in thousands):

Balance at December 31, 2024 (1) |  | $ | 8,757 |
Provision for (reversal of) current expected credit losses, net |  | (549) |
Balance at March 31, 2025 (1) |  | $ | 8,208 |

__________________________
(1) The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company’s consolidated balance sheets.
The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, loan structure and exit plan, loan-to-value ratio, debt service coverage ratio, project sponsorship, and other factors deemed necessary. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

Ratings |  | Definition
1 |  | Very Low Risk
2 |  | Low Risk
3 |  | Medium Risk
4 |  | High Risk/Potential for Loss: Asset performance is trailing underwritten expectations. Loan at risk of impairment without material improvement to performance
5 |  | Impaired/Loss Likely: A loan that has a significantly increased probability of default and principal loss

The risk ratings are primarily based on historical data as well as taking into account future economic conditions.
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As of March 31, 2025, the carrying value, excluding the CECL Reserve, of the Company’s loans held for investment within each risk rating by year of origination is as follows ($ in thousands):

|  | 2025 |  | 2024 |  | 2023 |  | 2022 |  | 2021 |  | Prior |  | Total
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |
1 |  | $ | — |  | $ | — |  | $ | — |  | $ | 7,668 |  | $ | — |  | $ | — |  | $ | 7,668
2 |  | — |  | — |  | 104,269 |  | — |  | 27,805 |  | 20,067 |  | 152,141
3 |  | — |  | — |  | 11,394 |  | 320,558 |  | 430,033 |  | 112,024 |  | 874,009
4 |  | — |  | — |  | — |  | 154,786 |  | 7,586 |  | 10,880 |  | 173,252
5 |  | — |  | — |  | — |  | — |  | — |  | 148,194 |  | 148,194
Total |  | $ | — |  | $ | — |  | $ | 115,663 |  | $ | 483,012 |  | $ | 465,424 |  | $ | 291,165 |  | $ | 1,355,264

Accrued Interest Receivable
The Company elected not to measure a CECL Reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. As of March 31, 2025 and December 31, 2024, interest receivable of $6.0 million and $8.1 million, respectively, is included within other assets in the Company’s consolidated balance sheets and is excluded from the carrying value of loans held for investment. If the Company were to have uncollectible accrued interest receivable, it generally would reverse accrued and unpaid interest against interest income and no longer accrue for these amounts.
5. REAL ESTATE OWNED
On September 19, 2024, the Company acquired legal title to a multi-building office property located in North Carolina through a deed in lieu of foreclosure. Prior to September 19, 2024, the office property collateralized a $68.6 million senior mortgage loan held by the Company that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2024 maturity date. In conjunction with the deed in lieu of foreclosure, the Company derecognized the $68.6 million senior mortgage loan and recognized the office property as real estate owned. As the Company does not expect to complete a sale of the office property within the next twelve months, the office property is considered held for investment, and is carried at its estimated fair value at acquisition and is presented net of accumulated depreciation or amortization and impairment charges. At acquisition, the Company recognized a realized loss of $5.8 million on the derecognition of the senior mortgage loan as the fair value of the office property at acquisition of $60.2 million and the net operating assets and liabilities held at the office property of $(201) thousand at acquisition was less than the $65.8 million cost basis of the senior mortgage loan. Certain operating assets and liabilities of the office property are included within other assets and other liabilities, respectively, in the Company’s consolidated balance sheets and include items such as prepaid expenses, rent receivables, straight-line rent receivables and payables and trade payables.
On September 8, 2023, the Company acquired legal title to a mixed-use property located in Florida through a consensual foreclosure. Prior to September 8, 2023, the mixed-use property collateralized an $82.9 million senior mortgage loan held by the Company that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date. In conjunction with the consensual foreclosure, the Company derecognized the $82.9 million senior mortgage loan and recognized the mixed-use property as real estate owned. As the Company does not expect to complete a sale of the mixed-use property within the next twelve months, the mixed-use property is considered held for investment, and is carried at its estimated fair value at acquisition and is presented net of accumulated depreciation or amortization and impairment charges. The Company did not recognize any gain or loss on the derecognition of the senior mortgage loan as the fair value of the mixed-use property of $84.3 million and the net operating assets and liabilities held at the mixed-use property of $(1.4) million at acquisition approximated the $82.9 million carrying value of the senior mortgage loan. Certain operating assets and liabilities of the mixed-use property are included within other assets and other liabilities, respectively, in the Company’s consolidated balance sheets and include items such as prepaid expenses, rent receivables, straight-line rent receivables and payables and trade payables.
The following table summarizes the Company’s real estate owned held for investment as of March 31, 2025 and December 31, 2024 ($ in thousands):
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|  | As of
|  | March 31, 2025 |  | December 31, 2024
Land |  | $ | 35,019 |  |  | $ | 35,019 |
Buildings and improvements |  | 81,433 |  |  | 81,434 |
In-place lease intangibles |  | 34,841 |  |  | 34,826 |
Above-market lease intangibles |  | 4,634 |  |  | 4,634 |
Below-market lease intangibles |  | (11,105) |  |  | (11,105) |
Total real estate owned held for investment |  | 144,822 |  |  | 144,808 |
Less: Accumulated depreciation and amortization |  | (7,958) |  |  | (5,776) |
Real estate owned held for investment, net |  | $ | 136,864 |  |  | $ | 139,032 |

As of March 31, 2025 and December 31, 2024, no impairment charges have been recognized for real estate owned held for investment.
For the three months ended March 31, 2025 and 2024, the Company incurred net depreciation and amortization expense of $2.2 million and $786 thousand, respectively. With the exception of amortization related to intangible assets and liabilities for above-market or below-market leases, depreciation and amortization expense is included within expenses from real estate owned in the Company’s consolidated statements of operations. Amortization related to intangible assets and liabilities for above-market or below-market leases is recognized as an adjustment to rental revenue and is included within revenue from real estate owned in the Company’s consolidated statements of operations.
Intangible Lease Assets and Liabilities
For the three months ended March 31, 2025, there were no property acquisitions. The weighted average amortization period for the intangible lease assets and liabilities acquired in connection with the Company’s real estate owned held for investment during the year ended December 31, 2024 was 5.0 years as of the acquisition date.
The following table summarizes the Company’s intangible lease assets and liabilities that are included within real estate owned held for investment as of March 31, 2025 and December 31, 2024 ($ in thousands):

|  | As of March 31, 2025 |  | As of December 31, 2024
|  | Gross |  | Accumulated Amortization |  | Net |  | Gross |  | Accumulated Amortization |  | Net
Assets: |  |  |  |  |  |  |  |  |  |  |  |
In-place lease intangibles |  | $ | 34,841 |  |  | $ | (5,748) |  |  | $ | 29,093 |  |  | $ | 34,826 |  |  | $ | (4,222) |  |  | $ | 30,604 |
Above-market lease intangibles |  | 4,634 |  |  | (693) |  |  | 3,941 |  |  | 4,634 |  |  | (421) |  |  | 4,213 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Below-market lease intangibles |  | (11,105) |  |  | 1,615 |  |  | (9,490) |  |  | (11,105) |  |  | 1,356 |  |  | (9,749) |

The following table summarizes the amortization of intangible lease assets and liabilities related to real estate owned held for investment for the three months ended March 31, 2025 and 2024 ($ in thousands):

|  | Consolidated Statement of Operations Location |  | For the Three Months Ended March 31, |  |  |
|  |  | 2025 |  | 2024 |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |
In-place lease intangibles |  | Expenses from real estate owned |  | $ | 1,527 |  |  | $ | 588 |  |  |  |  |  |
Above-market lease intangibles |  | Revenue from real estate owned |  | (271) |  |  | (28) |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Below-market lease intangibles |  | Revenue from real estate owned |  | 262 |  |  | 257 |  |  |  |  |  |

The following table summarizes the estimated net amortization schedule for the Company’s intangible lease assets and liabilities that are included within real estate owned held for investment as of March 31, 2025 ($ in thousands):
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|  | In-Place |  | Above-Market |  | Below-Market
|  | Lease Intangibles |  | Lease Intangibles |  | Lease Intangibles
Remainder of 2025 |  | $ | 4,142 |  |  | $ | 794 |  |  | $ | (782) |
2026 |  | 4,741 |  | 975 |  | (618) |
2027 |  | 3,781 |  | 705 |  | (571) |
2028 |  | 3,053 |  | 490 |  | (542) |
2029 |  | 2,647 |  | 384 |  | (539) |
Thereafter |  | 10,729 |  | 593 |  | (6,438) |
Total |  | $ | 29,093 |  |  | $ | 3,941 |  |  | $ | (9,490) |

Future Minimum Lease Payments
The following table summarizes the future minimum contractual lease payments to be collected by the Company under non-cancelable operating leases related to real estate owned held for investment, excluding tenant reimbursements of expenses and variable lease payments, as of March 31, 2025 ($ in thousands):

Remainder of 2025 |  | $ | 14,569 |
2026 |  | 19,329
2027 |  | 17,672
2028 |  | 16,177
2029 |  | 15,188
Thereafter |  | 31,944
Total |  | $ | 114,879 |

6. DEBT
Financing Agreements
The Company borrows funds, as applicable in a given period, under the Wells Fargo Facility, the Citibank Facility, the CNB Facility and the Morgan Stanley Facility (individually defined below and collectively, the “Secured Funding Agreements”), Notes Payable (as defined below) and the Secured Term Loan (as defined below). The Company refers to the Secured Funding Agreements, Notes Payable and the Secured Term Loan as the “Financing Agreements.” The outstanding balance of the Financing Agreements in the table below are presented gross of debt issuance costs. As of March 31, 2025 and December 31, 2024, the outstanding balances and total commitments under the Financing Agreements consisted of the following ($ in thousands):

|  | As of March 31, 2025 |  | As of December 31, 2024 |
|  | Outstanding Balance |  | Total Commitment |  | Outstanding Balance |  | Total Commitment |
Secured Funding Agreements: |  |  |  |  |  |  |  |  |
Wells Fargo Facility |  | $ | 230,385 |  |  | $ | 450,000 |  | (1) | $ | 210,216 |  |  | $ | 450,000 |  | (1)
Citibank Facility |  | 294,495 |  |  | 325,000 |  | (2) | 228,727 |  |  | 325,000 |  | (2)
CNB Facility |  | — |  |  | 75,000 |  | (3) | — |  |  | 75,000 |  | (3)
Morgan Stanley Facility |  | 149,525 |  |  | 250,000 |  |  | 149,525 |  |  | 250,000 |  |
Subtotal |  | $ | 674,405 |  |  | $ | 1,100,000 |  |  | $ | 588,468 |  |  | $ | 1,100,000 |  |
Secured Term Loan |  | $ | 120,000 |  |  | $ | 120,000 |  | (4) | $ | 130,000 |  |  | $ | 130,000 |  |
Total |  | $ | 794,405 |  |  | $ | 1,220,000 |  |  | $ | 718,468 |  |  | $ | 1,230,000 |  |

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(1)The maximum commitment for the Wells Fargo Facility (as defined below) may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee.
(2)The maximum commitment for the Citibank Facility (as defined below) may be increased to up to $425.0 million by up to two increments of $50.0 million with the consent of Citibank (defined below), subject to the satisfaction of certain conditions, including payment of an upsize fee.
(3)Amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of March 31, 2025, there was no immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time. The amount immediately available under the CNB Facility may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement.
(4)In January 2025, the Company elected to repay $10.0 million of outstanding principal on the Secured Term Loan at par prior to the scheduled maturity as permitted by the contractual terms of the Secured Term Loan. As of March 31, 2025, the Secured Term Loan has a total commitment of $120.0 million.
Some of the Company’s Financing Agreements are collateralized by (i) assignments of specific loans, preferred equity or a pool of loans held for investment or loans held for sale owned by the Company, (ii) interests in the subordinated portion of the Company’s securitization debt, (iii) interests in wholly-owned entity subsidiaries that hold the Company’s loans held for investment, or (iv) available-for-sale debt securities. The Company is the borrower or guarantor under each of the Financing Agreements. Generally, the Company partially offsets interest rate risk by matching the interest index of loans held for investment with the Secured Funding Agreements used to fund them. The Company’s Financing Agreements contain various affirmative and negative covenants, including negative pledges, and provisions regarding events of default that are normal and customary for similar financing arrangements.
Wells Fargo Facility
The Company is party to a master repurchase funding facility with Wells Fargo Bank, National Association (“Wells Fargo”) (the “Wells Fargo Facility”), which allows the Company to borrow up to $450.0 million. The maximum commitment may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee. Under the Wells Fargo Facility, the Company is permitted to sell, and later repurchase, certain qualifying senior commercial mortgage loans, A-Notes, pari-passu participations in commercial mortgage loans and mezzanine loans under certain circumstances, subject to available collateral approved by Wells Fargo in its sole discretion. In February 2025, the Company amended the Wells Fargo Facility to, among other things, extend the initial maturity date and funding period of the Wells Fargo Facility to February 10, 2028, subject to two 12-month extensions, each of which may be exercised at the Company’s option assuming no existing defaults under the Wells Fargo Facility and applicable extension fees being paid, which, if both were exercised, would extend the maturity date of the Wells Fargo Facility to February 10, 2030. Advances under the Wells Fargo Facility accrue interest at a per annum rate equal to the sum of one-month SOFR plus a pricing margin range of 1.50% to 3.75%, subject to certain exceptions.
Citibank Facility
The Company is party to a $325.0 million master repurchase facility with Citibank, N.A. (“Citibank”) (the “Citibank Facility”). Under the Citibank Facility, the Company is permitted to sell and later repurchase certain qualifying senior commercial mortgage loans and A-Notes approved by Citibank in its sole discretion. The initial maturity date of the Citibank Facility is January 13, 2027, subject to two 12-month extensions, each of which may be exercised at the Company’s option assuming no existing defaults under the Citibank Facility and applicable extension fees being paid, which, if both were exercised, would extend the maturity date of the Citibank Facility to January 13, 2029. The Citibank Facility includes an accordion provision such that the maximum commitment for the Citibank Facility may be increased to up to $425.0 million by up to two increments of $50.0 million with the consent of Citibank, subject to the satisfaction of certain conditions, including payment of an upsize fee. Advances under the Citibank Facility accrue interest at a per annum rate equal to the sum of one-month SOFR plus an indicative pricing margin range of 1.50% to 2.10%, subject to certain exceptions. The Company incurs a non-utilization fee of 25 basis points per annum on the average daily positive difference between the maximum advances approved by Citibank and the actual advances outstanding on the Citibank Facility. For the three months ended March 31, 2025, the Company incurred a non-utilization fee of $1 thousand. For the three months ended March 31, 2024, the Company did not incur a non-utilization fee. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.
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CNB Facility
The Company is party to a $75.0 million secured revolving funding facility with City National Bank (the “CNB Facility”). The Company is permitted to borrow funds under the CNB Facility to finance investments and for other working capital and general corporate needs. The amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of March 31, 2025, there was no immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time, which may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement. In February 2025, the Company exercised its 12-month extension option to extend the maturity date of the CNB Facility to March 10, 2026. The interest rate on advances under the CNB Facility is a per annum rate equal to the sum of, at the Company's option, either (a) a SOFR-based rate plus 3.25% or (b) a base rate plus 2.25%, in each case, subject to an interest rate floor. Unless at least 75% of the CNB Facility is used on average, unused commitments under the CNB Facility accrue non-utilization fees at the rate of 0.375% per annum. For the three months ended March 31, 2025 and 2024, the Company incurred a non-utilization fee of $70 thousand and $71 thousand, respectively. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.
Morgan Stanley Facility
The Company is party to a $250.0 million master repurchase and securities contract with Morgan Stanley Bank, N.A. (“Morgan Stanley”) (the “Morgan Stanley Facility”). Under the Morgan Stanley Facility, the Company is permitted to sell, and later repurchase, certain qualifying commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing or self storage properties. Morgan Stanley may approve the mortgage loans that are subject to the Morgan Stanley Facility in its sole discretion. The initial maturity date of the Morgan Stanley Facility is July 16, 2025, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the Morgan Stanley Facility to July 16, 2026. Advances under the Morgan Stanley Facility generally accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread ranging from 1.75% to 2.25%, determined by Morgan Stanley, depending upon the mortgage loan sold to Morgan Stanley in the applicable transaction.
Notes Payable
ACRC Lender CO LLC, a wholly owned subsidiary of the Company, was party to a Credit and Security Agreement with Capital One, National Association, as administrative agent and collateral agent, and the lender referred to therein. The Credit and Security Agreement provided for a $105.0 million recourse note (the “Notes Payable”). The $105.0 million note was secured by a $133.0 million senior mortgage loan held by the Company on a multifamily property located in New York and was fully and unconditionally guaranteed by the Company pursuant to a Guaranty of Recourse Obligation (the “CapOne Guaranty”). The initial maturity date of the $105.0 million note was July 28, 2025, subject to two 12-month extensions, each of which may have been exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would have extended the maturity date to July 28, 2027. On September 13, 2024, the Company elected to repay in full and terminate the $105.0 million note prior to its scheduled maturity on July 28, 2025. There were no prepayment penalties in connection with the early termination of the $105.0 million note. The $105.0 million note accrued interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.00%.
Secured Term Loan
The Company and certain of its subsidiaries are party to a $120.0 million Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”). The maturity date of the Secured Term Loan is November 12, 2026. The interest rate on advances under the Secured Term Loan are set to the following fixed rates: (i) 4.50% per annum until May 1, 2025 and (ii) after May 1, 2025 through November 12, 2026, the interest rate increases 0.25% every three months. There is a contingent interest rate increase of 4.00% if the outstanding principal amount of the Secured Term Loan is not paid down to the following amounts on specific dates as follows: (i) $120.0 million as of February 1, 2025, (ii) $110.0 million as of May 1, 2025, (iii) $100.0 million as of August 1, 2025 and (iv) $90.0 million as of November 1, 2025. On January 27, 2025, the Company elected to repay $10.0 million of outstanding principal on the Secured Term Loan at par. As of March 31, 2025, the total outstanding principal balance of the Secured Term Loan was $120.0 million.
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The total original issue discount and the modification fee on the Secured Term Loan represents a discount to the debt cost to be amortized into interest expense using the effective interest method over the term of the Secured Term Loan. For the three months ended March 31, 2025 and 2024, the per annum effective interest rate of the Secured Term Loan, which is equal to the fixed interest rate plus the accretion of the original issue discount and associated costs, was 5.7% and 4.6%, respectively.
7. COMMITMENTS AND CONTINGENCIES
As further discussed in Note 2 to our consolidated financial statements, the impact of the current macroeconomic conditions on the Company’s business is uncertain. As of March 31, 2025, there were no contingencies recorded on the Company’s consolidated balance sheets as a result of such conditions; however, if global market conditions worsen, it could adversely affect the Company’s business, financial condition and results of operations.
As of March 31, 2025 and December 31, 2024, the Company had the following commitments to fund various senior mortgage loans, subordinated debt investments, as well as preferred equity investments accounted for as loans held for investment ($ in thousands):

|  | As of
|  | March 31, 2025 |  | December 31, 2024
Total commitments |  | $ | 1,477,775 |  |  | $ | 1,773,083 |
Less: funded commitments |  | (1,404,409) |  |  | (1,698,506) |
Total unfunded commitments |  | $ | 73,366 |  |  | $ | 74,577 |

The Company from time to time may be a party to litigation relating to claims arising in the normal course of business. As of March 31, 2025, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.
8. STOCKHOLDERS’ EQUITY
Stock Repurchase Program
On July 31, 2024, the Company’s board of directors renewed its stock repurchase program of up to $50.0 million (the “Repurchase Program”), which is expected to be in effect until July 31, 2025, or until the approved dollar amount has been used to repurchase shares. Pursuant to the Repurchase Program, the Company may repurchase shares of its common stock in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate the Company to acquire any particular amount of shares of its common stock and may be modified or suspended at any time at its discretion. During the three months ended March 31, 2025 and 2024, the Company did not repurchase any shares through the Repurchase Program.
Common Stock
There were no shares of the Company’s common stock issued in public or private offerings for the three months ended March 31, 2025 and 2024. See “Equity Incentive Plan” below for shares issued under the Equity Incentive Plan described below.
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Equity Incentive Plan
On April 23, 2012, the Company adopted an equity incentive plan, which was amended and restated in June 2018 and further amended in May 2022 (as further amended, the “Amended and Restated 2012 Equity Incentive Plan”). In April 2024, the Company’s board of directors approved, and in May 2024, the Company’s stockholders approved, the second amendment to the Amended and Restated 2012 Equity Incentive Plan, which increased the total number of shares of common stock the Company may grant thereunder to 5,015,000 shares. Pursuant to the Amended and Restated 2012 Equity Incentive Plan, as amended by the second amendment, the Company may grant awards consisting of restricted shares of the Company’s common stock, restricted stock units (“RSUs”) and/or other equity-based awards to the Company’s outside directors, employees of the Manager, officers, ACREM and other eligible awardees under the plan. Any restricted shares of the Company’s common stock and RSUs will be accounted for under FASB ASC Topic 718, Compensation—Stock Compensation, resulting in stock-based compensation expense equal to the grant date fair value of the underlying restricted shares of common stock or RSUs.
Restricted stock and RSU grants generally vest ratably over a one to three-year period from the vesting start date. The grantee receives additional compensation for each outstanding restricted stock or RSU grant, classified as dividends paid, equal to the per-share dividends received by the Company’s common stockholders.
The following tables summarize the (i) non-vested shares of restricted stock and RSUs and (ii) vesting schedule of shares of restricted stock and RSUs for the Company’s directors and officers and employees of the Manager as of March 31, 2025:
Schedule of Non-Vested Share and Share Equivalents

| Restricted Stock Grants—Directors |  |  |  | RSUs—Officers and Employees of the Manager |  | Total
Balance at December 31, 2024 | 41,937 |  |  |  |  | 1,152,885 |  |  | 1,194,822 |
Granted | — |  |  |  |  | — |  |  | — |
Vested | (21,177) |  |  |  |  | (314,799) |  |  | (335,976) |
Forfeited | — |  |  |  |  | (5,399) |  |  | (5,399) |
Balance at March 31, 2025 | 20,760 |  |  |  |  | 832,687 |  |  | 853,447 |

Future Anticipated Vesting Schedule

| Restricted Stock Grants—Directors |  |  |  | RSUs—Officers and Employees of the Manager |  | Total
Remainder of 2025 | 20,760 |  |  |  |  | 10,001 |  |  | 30,761 |
2026 | — |  |  |  |  | 396,784 |  |  | 396,784 |
2027 | — |  |  |  |  | 281,685 |  |  | 281,685 |
2028 | — |  |  |  |  | 144,217 |  |  | 144,217 |
2029 | — |  |  |  |  | — |  |  | — |
Total | 20,760 |  |  |  |  | 832,687 |  |  | 853,447 |

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9. EARNINGS PER SHARE
The following information sets forth the computations of basic and diluted earnings (loss) per common share for the three months ended March 31, 2025 and 2024 ($ in thousands, except share and per share data):

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |  |  |
Net income (loss) attributable to common stockholders |  | $ | 9,345 |  |  | $ | (12,323) |  |  |  |  |  |  |
Divided by: |  |  |  |  |  |  |  |  |  |
Basic weighted average shares of common stock outstanding: |  | 54,828,751 |  |  | 54,396,397 |  |  |  |  |  |  |
Weighted average non-vested restricted stock and RSUs (1) |  | 866,188 |  |  | — |  |  |  |  |  |  |
Diluted weighted average shares of common stock outstanding: |  | 55,694,939 |  |  | 54,396,397 |  |  |  |  |  |  |
Basic earnings (loss) per common share |  | $ | 0.17 |  |  | $ | (0.23) |  |  |  |  |  |  |
Diluted earnings (loss) per common share |  | $ | 0.17 |  |  | $ | (0.23) |  |  |  |  |  |  |

_______________________________
(1)For the three months ended March 31, 2024, the weighted average non-vested restricted stock and RSUs of 813,763 shares were excluded from the computation of diluted earnings (loss) per common share as the impact of including those shares would be anti-dilutive.
10. INCOME TAX
The Company wholly owns ACRC Lender W TRS LLC, which is a taxable REIT subsidiary (“TRS”) formed to issue and hold certain loans intended for sale. The Company also wholly owns ACRC 2017-FL3 TRS LLC, which is a TRS formed to hold a portion of the FL3 CLO Securitization and FL4 CLO Securitization (as defined below), including the portion that generates excess inclusion income. Additionally, the Company wholly owns ACRC WM Tenant LLC, which is a TRS formed to lease from an affiliate the hotel property classified as real estate owned acquired on March 8, 2019. ACRC WM Tenant LLC engaged a third-party hotel management company to operate the hotel under a management contract prior to the sale of the hotel on March 1, 2022.
The income tax provision for the Company and the TRSs consisted of the following for the three months ended March 31, 2025 and 2024 ($ in thousands):

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |  |  |
Current |  | $ | 282 |  |  | $ | — |  |  |  |  |  |  |
Deferred |  | (1) |  |  | 2 |  |  |  |  |  |  |
Excise tax |  | — |  |  | — |  |  |  |  |  |  |
Total income tax expense (benefit), including excise tax |  | $ | 281 |  |  | $ | 2 |  |  |  |  |  |  |

For the three months ended March 31, 2025 and 2024, the Company did not incur any expense for U.S. federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the calendar year (including any distribution declared in the fourth quarter and paid the following January) plus any prior year shortfall. If it is determined that an excise tax liability exists for the current tax year, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The quarterly expense is calculated in accordance with applicable tax regulations.
The TRSs recognize interest and penalties related to unrecognized tax benefits within income tax expense in the Company’s consolidated statements of operations. Accrued interest and penalties, if any, are included within other liabilities in the Company’s consolidated balance sheets.
As of March 31, 2025, tax years 2021 through 2025 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.
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11. FAIR VALUE
The Company follows FASB ASC Topic 820-10, Fair Value Measurement (“ASC 820-10”), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure requirements for fair value measurements. ASC 820-10 determines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. ASC 820-10 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value.
In accordance with ASC 820-10, the inputs used to measure fair value are summarized in the three broad levels listed below:
•Level 1—Quoted prices in active markets for identical assets or liabilities.
•Level 2—Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment rates, credit risk and others.
•Level 3—Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.
GAAP requires disclosure of fair value information about financial and nonfinancial assets and liabilities, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and nonfinancial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.
Recurring Fair Value Measurements
Available-for-Sale Debt Securities
The Company designates investments in CRE debt securities as available-for-sale on the acquisition date of such CRE debt securities. The Company is required to record investments in available-for-sale debt securities at fair value on a recurring basis in accordance with GAAP. During the year ended December 31, 2022, the Company acquired three CRE debt securities for an aggregate purchase price of $27.9 million, which consisted of floating rate, investment grade rated debt securities that had a weighted average coupon of SOFR plus 2.47%. The Company’s available-for-sale debt securities have a contractual maturity greater than 10 years from the purchase date.
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During the year ended December 31, 2024, the Company had one CRE debt security fully repay at par. As of March 31, 2025 and December 31, 2024, the Company had two CRE debt security investments outstanding that were designated as available-for-sale debt securities. The following tables summarize the Company’s investments in available-for-sale debt securities as of March 31, 2025 and December 31, 2024 ($ in thousands):

|  | As of March 31, 2025
|  | Face Amount |  | Amortized Cost |  | Unamortized Discount |  | Unrealized Gain (Loss), Net
Available-for-sale debt securities |  | $ | 8,579 |  |  | $ | 8,561 |  |  | $ | 18 |  |  | $ | 7 |

|  | As of December 31, 2024
|  | Face Amount |  | Amortized Cost |  | Unamortized Discount |  | Unrealized Gain (Loss), Net
Available-for-sale debt securities |  | $ | 8,667 |  |  | $ | 8,647 |  |  | $ | 20 |  |  | $ | 37 |

The fair value of available-for-sale debt securities was estimated using third-party broker quotes, which provide valuation estimates based upon contractual cash flows, observable inputs comprising credit spreads and market liquidity.
The following tables summarize the financial assets measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 ($ in thousands):

| As of March 31, 2025
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets: |  |  |  |  |  |  |
Available-for-sale debt securities | $ | — |  |  | $ | 8,568 |  |  | $ | — |  |  | $ | 8,568 |

| As of December 31, 2024
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets: |  |  |  |  |  |  |
Available-for-sale debt securities | $ | — |  |  | $ | 8,684 |  |  | $ | — |  |  | $ | 8,684 |

As of March 31, 2025 and December 31, 2024, the Company did not have any financial liabilities or nonfinancial assets or liabilities required to be recorded at fair value on a recurring basis.
Nonrecurring Fair Value Measurements
Real Estate Owned
The Company is required to record real estate owned, a nonfinancial asset, at fair value on a nonrecurring basis in accordance with GAAP. Real estate owned consists of an office property and a mixed-use property that were acquired by the Company on September 19, 2024 and September 8, 2023 through a deed in lieu of foreclosure and a consensual foreclosure, respectively. See Note 5 included in these consolidated financial statements for more information on real estate owned. Real estate owned is recorded at fair value at acquisition using Level 3 inputs and is evaluated for indicators of impairment on a quarterly basis. Real estate owned is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate owned over the estimated remaining holding period is less than the carrying amount of such real estate owned. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate owned. An impairment charge is recorded equal to the excess of the carrying value of the real estate owned over the fair value.
The office property acquired on September 19, 2024 is classified as real estate owned held for investment in the Company’s consolidated balance sheets as of the acquisition date and is carried at its estimated fair value at acquisition and is presented net of accumulated depreciation or amortization and impairment charges. The fair value of the office property at acquisition was estimated using a third-party appraisal, which utilized standard industry valuation techniques such as the income and market approach. When determining the fair value of the office property, certain assumptions are made including, but not limited to: (1) projected operating cash flows, including factors such as property operating expenses and re-leasing
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assumptions that take into account the number of months to re-lease, market rental revenue and required tenant improvements; and (2) projected cash flows from the eventual disposition of the office property based upon the Company’s estimation of a capitalization rate, discount rates and comparable selling prices in the market. The fair value of the office property was estimated using significant unobservable inputs, which considered various comparable properties that were valued using capitalization rates ranging from 6.4% to 11.0% and discount rates ranging from 14.0% to 16.0%. No impairment charges have been recognized for the office property as of March 31, 2025.
The mixed-use property acquired on September 8, 2023 is classified as real estate owned held for investment in the Company’s consolidated balance sheets as of the acquisition date and is carried at its estimated fair value at acquisition and is presented net of accumulated depreciation or amortization and impairment charges. The fair value of the mixed-use property at acquisition was estimated using a third-party appraisal, which utilized standard industry valuation techniques such as the income and market approach. When determining the fair value of the mixed-use property, certain assumptions are made including, but not limited to: (1) projected operating cash flows, including factors such as property operating expenses and re-leasing assumptions that take into account the number of months to re-lease, market rental revenue and required tenant improvements; and (2) projected cash flows from the eventual disposition of the mixed-use property based upon the Company’s estimation of a capitalization rate, discount rates and comparable selling prices in the market. The fair value of the mixed-use property was estimated using significant unobservable inputs, which considered various comparable properties that were valued using capitalization rates ranging from 6.4% to 8.3% and discount rates ranging from 8.0% to 9.5%. No impairment charges have been recognized for the mixed-use property as of March 31, 2025.
As of March 31, 2025 and December 31, 2024, the Company did not have any financial or nonfinancial liabilities required to be recorded at fair value on a nonrecurring basis.
Financial Assets and Liabilities Not Measured at Fair Value
As of March 31, 2025 and December 31, 2024, the carrying values and fair values of the Company’s financial assets and liabilities recorded at cost are as follows ($ in thousands):

|  |  |  | As of
|  |  |  | March 31, 2025 |  | December 31, 2024
|  | Level in Fair Value Hierarchy |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Loans held for investment |  | 3 |  | $ | 1,355,264 |  |  | $ | 1,213,321 |  |  | $ | 1,656,688 |  |  | $ | 1,510,670 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Secured funding agreements |  | 2 |  | $ | 674,405 |  |  | $ | 674,405 |  |  | $ | 588,468 |  |  | $ | 588,468 |
Secured term loan |  | 3 |  | 118,437 |  |  | 115,945 |  |  | 128,062 |  |  | 125,260 |
Collateralized loan obligation securitization debt (consolidated VIEs) |  | 2 |  | 151,970 |  |  | 147,476 |  |  | 455,839 |  |  | 447,356 |

The carrying values of cash and cash equivalents, restricted cash, interest receivable, due to affiliate liability and accrued expenses, which are all categorized as Level 2 within the fair value hierarchy, approximate their fair values due to their short-term nature.
Loans held for investment are recorded at cost, net of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds. To determine the fair value of the collateral, the Company may employ different approaches depending on the type of collateral. The Company determined the fair value of loans held for investment based on a discounted cash flow methodology (1) for risk rated “1”, “2”, or “3” loans, on a portfolio basis and (b) for risk rated “4” or “5” loans, on an asset-by-asset basis, in each case taking into consideration various factors including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and comparable selling prices in the market. The Secured Funding Agreements are recorded at outstanding principal, which is the Company’s best estimate of the fair value. The Company determined the fair value of the Secured Term Loan and collateralized loan obligation (“CLO”) securitization debt based on a discounted cash flow methodology, taking into consideration various factors including discount rates, actions of other lenders and comparable market quotes and recent trades for similar products.
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12. RELATED PARTY TRANSACTIONS
Management Agreement
The Company is party to an Amended and Restated Management Agreement under which ACREM, subject to the supervision and oversight of the Company’s board of directors, is responsible for, among other duties, (a) performing all of the Company’s day-to-day functions, (b) determining the Company’s investment strategy and guidelines in conjunction with the Company’s board of directors, (c) sourcing, analyzing and executing investments, asset sales and financing, and (d) performing portfolio management duties. In addition, ACREM has an Investment Committee that oversees compliance with the Company’s investment strategy and guidelines, loans held for investment portfolio holdings and financing strategy.
In exchange for its services, ACREM is entitled to receive a base management fee, an incentive fee and expense reimbursements. In addition, ACREM and its personnel may receive grants of equity-based awards pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan and a termination fee, if applicable.
The base management fee is equal to 1.5% of the Company’s stockholders’ equity per annum, which is calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, stockholders’ equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro-rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter determined in accordance with GAAP (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) (x) any amount that the Company has paid to repurchase the Company’s common stock since inception, (y) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, and (z) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between ACREM and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown in the Company’s consolidated financial statements.
The incentive fee is an amount, not less than zero, equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) the Company’s Core Earnings (as defined below) for the previous 12-month period, and (B) the product of (1) the weighted average of the issue price per share of the Company’s common stock of all of the Company’s public offerings of common stock multiplied by the weighted average number of all shares of common stock outstanding including any restricted shares of the Company’s common stock, RSUs, or any shares of the Company’s common stock not yet issued, but underlying other awards granted under the Company’s Amended and Restated 2012 Equity Incentive Plan (see Note 8 included in these consolidated financial statements) in the previous 12-month period, and (2) 8%; and (b) the sum of any incentive fees earned by ACREM with respect to the first three fiscal quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any fiscal quarter unless cumulative Core Earnings for the 12 most recently completed fiscal quarters is greater than zero. “Core Earnings” is defined in the Management Agreement as net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income (loss), or in net income (loss), and one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between ACREM and the Company’s independent directors and after approval by a majority of the Company’s independent directors. Core Earnings is defined in the Management Agreement and is used to calculate the incentive fees the Company pays to ACREM. For the three months ended March 31, 2025 and 2024, the Company did not incur any incentive fees.
The Company reimburses ACREM at cost for operating expenses that ACREM incurs on the Company’s behalf, including expenses relating to legal, financial, accounting, servicing, due diligence and other services, expenses in connection with the origination and financing of the Company’s investments, communications with the Company’s stockholders, information technology systems, software and data services used for the Company, travel, complying with legal and regulatory requirements, taxes, insurance maintained for the benefit of the Company as well as all other expenses actually incurred by ACREM that are reasonably necessary for the performance by ACREM of its duties and functions under the Management Agreement. Ares Management, from time to time, incurs fees, costs and expenses on behalf of more than one investment vehicle. To the extent such fees, costs and expenses are incurred for the account or benefit of more than one fund, each such investment vehicle, including the Company, will typically bear an allocable portion of any such fees, costs and expenses in proportion to the size of its investment in the activity or entity to which such expense relates (subject to the terms of each fund’s governing documents) or in such other manner as Ares Management considers fair and equitable under the circumstances, such as the relative fund size or capital available to be invested by such investment vehicles. Where an investment vehicle’s
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governing documents do not permit the payment of a particular expense, Ares Management will generally pay such investment vehicle’s allocable portion of such expense. In addition, the Company is responsible for its proportionate share of certain fees and expenses, including due diligence costs, as determined by ACREM and Ares Management, including legal, accounting and financial advisor fees and related costs, incurred in connection with evaluating and consummating investment opportunities, regardless of whether such transactions are ultimately consummated by the parties thereto.
The Company will not reimburse ACREM for the salaries and other compensation of its personnel, except for the allocable share of the salaries and other compensation of the Company’s (a) Chief Financial Officer, based on the percentage of his time spent on the Company’s affairs and (b) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of ACREM or its affiliates who spend all or a portion of their time managing the Company’s affairs based on the percentage of their time spent on the Company’s affairs. The Company is also required to pay its pro-rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of ACREM and its affiliates that are required for the Company’s operations.
Certain of the Company’s subsidiaries, along with the Company’s lenders under certain of the Company’s Secured Funding Agreements, as well as under the CLO transaction have entered into various servicing agreements with ACREM’s subsidiary servicer, Ares Commercial Real Estate Servicer LLC (“ACRES”). The Company’s Manager will specially service, as needed, certain of the Company’s investments. ACRES has agreed that no servicing fees pursuant to these servicing agreements would be charged to the Company or its subsidiaries by ACRES or the Manager for so long as the Management Agreement remains in effect, but that ACRES will continue to receive reimbursement for overhead related to servicing and operational activities pursuant to the terms of the Management Agreement.
The term of the Management Agreement ends on April 25, 2026, with automatic one-year renewal terms thereafter. Except under limited circumstances, upon a termination of the Management Agreement, the Company will pay ACREM a termination fee equal to three times the average annual base management fee and incentive fee received by ACREM during the 24-month period immediately preceding the most recently completed fiscal quarter prior to the date of termination, each as described above.
The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2025 and 2024, and amounts payable to the Company’s Manager as of March 31, 2025 and December 31, 2024 ($ in thousands):

|  | Incurred |  |  |  |  |  |  |  |  | Payable
|  | For the Three Months Ended March 31, |  |  |  |  |  |  |  |  | As of
|  | 2025 |  | 2024 |  |  |  |  |  |  |  |  | March 31, 2025 |  | December 31, 2024
Affiliate Payments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Management fees |  | $ | 2,567 |  |  | $ | 2,768 |  |  |  |  |  |  |  |  |  | $ | 2,567 |  |  | $ | 2,571 |
Incentive fees |  | — |  |  | — |  |  |  |  |  |  |  |  |  | — |  |  | — |
General and administrative expenses |  | 1,003 |  |  | 1,132 |  |  |  |  |  |  |  |  |  | 1,627 |  |  | 1,178 |
Direct costs (1) |  | 28 |  |  | 44 |  |  |  |  |  |  |  |  |  | — |  |  | 41 |
Total |  | $ | 3,598 |  |  | $ | 3,944 |  |  |  |  |  |  |  |  |  | $ | 4,194 |  |  | $ | 3,790 |

_______________________________
(1) For the three months ended March 31, 2025 and 2024, direct costs incurred are included within general and administrative expenses in the Company’s consolidated statements of operations.
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Investments in Loans
From time to time, the Company may co-invest with other investment vehicles managed by Ares Management or its affiliates, including the Manager, and their portfolio companies, including by means of splitting investments, participating in investments or other means of syndication of investments. For such co-investments, the Company expects to act as the administrative agent for the holders of such investments provided that the Company maintains a majority of the aggregate investment. No fees will be received by the Company for performing such service. The Company will be responsible for its pro-rata share of costs and expenses for such co-investments, including due diligence costs for transactions which fail to close. The Company’s investment in such co-investments are made on a pari-passu basis with the other Ares managed investment vehicles and the Company is not obligated to provide, nor has it provided, any financial support to the other Ares managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment and the Company recognizes only the carrying value of its investment in its consolidated balance sheets. As of March 31, 2025 and December 31, 2024, the total outstanding principal balance for co-investments held by the Company was $277.1 million and $266.8 million, respectively.
Loan Purchases From Affiliate
One or more affiliates of the Company’s Manager may originate commercial real estate loans, which may be made available for purchase by other investment vehicles, including the Company and other Ares Management managed investment vehicles. From time to time, the Company may purchase such commercial real estate loans from affiliates of the Company’s Manager. The Company’s Manager will approve the purchase of such loans only on terms, including the consideration to be paid, that are determined by the Company’s Manager in good faith to be appropriate for the Company and provided that the Company has sufficient liquidity. The Company is not obligated to purchase any loans originated by affiliates of the Company’s Manager. In addition, from time to time, the Company may purchase loans, including participations in loans, from other Ares Management managed investment vehicles. Loans purchased by the Company from affiliates of the Company’s Manager or other Ares Management managed investment vehicles are purchased at fair value as determined by an independent third-party valuation expert and are subject to approval by a majority of the Company’s independent directors. No loans were purchased by the Company from affiliates of the Company’s Manager or other Ares Management managed investment vehicles for the three months ended March 31, 2025 and 2024.
13. DIVIDENDS AND DISTRIBUTIONS
The following table summarizes the Company’s dividends declared during the three months ended March 31, 2025 and 2024 ($ in thousands, except per share data):

Date Declared |  | Record Date |  | Payment Date |  | Per Share Amount |  | Total Amount
February 12, 2025 |  | March 31, 2025 |  | April 15, 2025 |  | $ | 0.15 |  |  | $ | 8,353 |
Total cash dividends declared for the three months ended March 31, 2025 |  |  |  | $ | 0.15 |  |  | $ | 8,353 |
February 22, 2024 |  | March 28, 2024 |  | April 16, 2024 |  | $ | 0.25 |  |  | $ | 13,802 |
Total cash dividends declared for the three months ended March 31, 2024 |  |  |  | $ | 0.25 |  |  | $ | 13,802 |

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14. VARIABLE INTEREST ENTITIES
Consolidated VIEs
As discussed in Note 2, the Company evaluates all of its investments and other interests in entities for consolidation, including its investments in the CLO Securitizations (as defined below), which are considered to be variable interests in VIEs.
CLO Securitizations
On January 11, 2019, ACRE Commercial Mortgage 2017-FL3 Ltd. (the “FL3 Issuer”) and ACRE Commercial Mortgage 2017-FL3 LLC (the “FL3 Co-Issuer”), both wholly-owned indirect subsidiaries of the Company, entered into an Amended and Restated Indenture with Wells Fargo Bank, National Association, as advancing agent and note administrator, and Wilmington Trust, National Association, as trustee, which governed the approximately $504.1 million principal balance of secured floating rate notes (the “FL3 Notes”) issued by the FL3 Issuer and $52.9 million of preferred equity in the FL3 Issuer (the “FL3 CLO Securitization”).
The contribution of the FL3 Mortgage Assets to the FL3 Issuer was governed by a Mortgage Asset Purchase Agreement between ACRC Lender LLC, a wholly owned subsidiary of the Company (the “Seller”) and the FL3 Issuer, and acknowledged by the Company solely for purposes of confirming its status as a REIT, in which the Seller made certain customary representations, warranties and covenants.
In connection with the securitization, the FL3 Issuer and FL3 Co-Issuer offered and issued the following classes of Notes: Class A, Class A-S, Class B, Class C and Class D Notes (collectively, the “FL3 Offered Notes”) to a third party. The Company retained (through one of its wholly-owned subsidiaries) approximately $58.5 million of the FL3 Notes and all of the $52.9 million of preferred equity in the FL3 Issuer, which totaled $111.4 million. The Company, as the holder of the subordinated FL3 Notes and all of the preferred equity in the FL3 Issuer, had the obligation to absorb losses of the CLO, since the Company had a first loss position in the capital structure of the CLO. On March 17, 2025, the Company terminated the FL3 Issuer, and in connection therewith, exchanged its remaining FL3 Notes and preferred equity in the FL3 Issuer for the remaining mortgage loans held by the FL3 Issuer. As of March 31, 2025, all of the FL3 Notes of the FL3 Issuer held by the third party have been repaid in full at par. As of December 31, 2024, the FL3 Notes were collateralized by interests in a pool of 12 mortgage assets having a total principal balance of $365.2 million that were closed by a wholly-owned subsidiary of the Company. During the three months ended March 31, 2025 and 2024, the Company paid down $303.9 million and $31.2 million of the FL3 Offered Notes, respectively.
On January 28, 2021, ACRE Commercial Mortgage 2021-FL4 Ltd. (the “FL4 Issuer”) and ACRE Commercial Mortgage 2021-FL4 LLC (the “FL4 Co-Issuer”), both wholly owned indirect subsidiaries of the Company, entered into an Indenture (the “FL4 Indenture”) with the Seller, as advancing agent, Wells Fargo Bank, National Association, as note administrator, and Wilmington Trust, National Association, as trustee, which governs the issuance of approximately $603.0 million principal balance secured floating rate notes (the “FL4 Notes”) and $64.3 million of preferred equity in the FL4 Issuer (the “FL4 CLO Securitization”). For U.S. federal income tax purposes, the FL4 Issuer and FL4 Co-Issuer are disregarded entities.
As of March 31, 2025, the FL4 Notes were collateralized by interests in a pool of four mortgage assets having a total principal balance of $182.4 million (the “FL4 Mortgage Assets”) that were closed by a wholly-owned subsidiary of the Company, $57.5 million of real estate owned related to an office property, which had collateralized a previous mortgage asset, and was acquired in September 2024 through a deed in lieu of foreclosure and $4.3 million of receivables related to repayments of outstanding principal on previous mortgage assets. As of December 31, 2024, the FL4 Notes were collateralized by interests in a pool of four mortgage assets having a total principal balance of $186.8 million that were closed by a wholly-owned subsidiary of the Company and $58.8 million of real estate owned related to an office property, which had collateralized a previous mortgage asset, and was acquired in September 2024 through a deed in lieu of foreclosure. During the period that ended in April 2024 (the “Companion Participation Acquisition Period”), the FL4 Issuer was able to use certain principal proceeds from the FL4 Mortgage Assets to acquire additional funded pari-passu participations related to the FL4 Mortgage Assets that met certain acquisition criteria. The Companion Participation Acquisition Period expired in April 2024 and was not renewed.
The sale of the FL4 Mortgage Assets to the FL4 Issuer is governed by a FL4 Mortgage Asset Purchase Agreement between the Seller and the FL4 Issuer, and acknowledged by the Company solely for purposes of confirming its status as a REIT, in which the Seller made certain customary representations, warranties and covenants.
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In connection with the FL4 CLO Securitization, the FL4 Issuer and FL4 Co-Issuer offered and issued the following classes of FL4 Notes to third party investors: Class A, Class A-S, Class B, Class C, Class D and Class E Notes (collectively, the “FL4 Offered Notes”). A wholly owned subsidiary of the Company retained approximately $62.5 million of the FL4 Notes and all of the $64.3 million of preferred equity in the FL4 Issuer, which totaled $126.8 million. The Company, as the holder of the subordinated FL4 Notes and all of the preferred equity in the FL4 Issuer, has the obligation to absorb losses of the FL4 CLO Securitization, since the Company has a first loss position in the capital structure of the FL4 CLO Securitization. During the three months ended March 31, 2025 and 2024, the Company paid down $135 thousand and $97.1 million of the FL4 Offered Notes, respectively.
The FL3 CLO Securitization and the FL4 CLO Securitization are collectively referred to as the “CLO Securitizations.” As the directing holder of the CLO Securitizations, the Company has or had, as applicable, the ability to direct activities that could significantly impact the CLO Securitizations’ economic performance. ACRES is designated as special servicer of the CLO Securitizations and has or had, as applicable, the power to direct activities during the loan workout process on defaulted and delinquent loans, which is the activity that most significantly impacts the CLO Securitizations’ economic performance. ACRES did not waive the special servicing fee, and the Company pays its overhead costs. If an unrelated third party had the right to unilaterally remove the special servicer, then the Company would not have the power to direct activities that most significantly impact the CLO Securitizations’ economic performance. In addition, there were no substantive kick-out rights of any unrelated third party to remove the special servicer without cause. The Company’s subsidiaries, as directing holders, have or had, as applicable, the ability to remove the special servicer without cause. Based on these factors, the Company is determined to be the primary beneficiary of each of the CLO Securitizations; thus, the CLO Securitizations are consolidated into the Company’s consolidated financial statements.
The CLO Securitizations are consolidated in accordance with FASB ASC Topic 810 and are structured as pass through entities that receive principal and interest on the underlying collateral and distributes those payments to the note holders, as applicable. The assets and other instruments held by the CLO Securitizations are restricted and can only be used to fulfill the obligations of the respective CLO Securitizations. Additionally, the obligations of the CLO Securitizations do not or did not, as applicable, have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary.
The inclusion of the assets and liabilities of the CLO Securitizations of which the Company is deemed the primary beneficiary has no economic effect on the Company. The Company’s exposure to the obligations of the CLO Securitizations are generally limited to its investment in the entity. The Company is not obligated to provide, nor has it provided, any financial support for the consolidated structures. As such, the risk associated with the Company’s involvement in the CLO Securitizations are limited to the carrying value of its investment in each of the entities. As of March 31, 2025, the Company’s maximum risk of loss was $95.2 million, which represents the carrying value of its investments in the CLO Securitizations.
Non-consolidated VIEs
The Company evaluated its senior mortgage loan investment that is collateralized by a residential condominium property located in New York, and it was determined to be an interest in a VIE. However, the Company was not deemed to be the primary beneficiary. The Company’s exposure to the obligations of the VIE is generally limited to its investment and the Company is not obligated to provide, nor has it provided, any financial support to the VIE. As such, the risk associated with the Company’s involvement in the VIE is limited to the carrying value of its investment. As of March 31, 2025, the Company’s maximum risk of loss was $105.7 million, which represents the carrying value of its investment in the VIE.
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15. SEGMENT INFORMATION
As described in Note 1 included in these consolidated financial statements, the Company operates as a single reportable segment, which derives its revenues by directly originating and managing a diversified portfolio of CRE debt-related investments. The Company manages its business activities on a consolidated basis and the accounting policies of the segment are the same as those described in Note 2 included in these consolidated financial statements. The Company’s Chief Operating Decision Maker (“CODM”) is the chief executive officer.
The CODM assesses performance for the segment and decides how to allocate resources based on net income (loss) attributable to common stockholders. The measure of segment assets is reported in the consolidated balance sheets as total assets.
The following table summarizes the information about segment net income (loss) and significant segment expenses for the three months ended March 31, 2025 and 2024 ($ in thousands):

|  |  |  |  |  | For the Three Months Ended March 31, |  |
|  |  |  |  |  | 2025 |  | 2024 |  |
Net interest margin |  |  |  |  |  | $ | 9,291 |  |  | $ | 15,214 |  |  |
Revenue from real estate owned |  |  |  |  |  | 5,657 |  |  | 3,478 |  |  |
Total revenue |  |  |  |  |  | 14,948 |  |  | 18,692 |  |  |
Expenses from real estate owned |  |  |  |  |  | (4,495) |  |  | (2,037) |  |  |
(Provision for) reversal of current expected credit losses, net |  |  |  |  |  | 5,340 |  |  | 22,269 |  |  |
Realized losses on loans |  |  |  |  |  | — |  |  | (45,726) |  |  |
Other segment items (1) |  |  |  |  |  | (6,448) |  |  | (5,521) |  |  |
Segment net income (loss) |  |  |  |  |  | 9,345 |  |  | (12,323) |  |  |
Adjustments and reconciling items |  |  |  |  |  | — |  |  | — |  |  |
Net income (loss) attributable to common stockholders |  |  |  |  |  | $ | 9,345 |  |  | $ | (12,323) |  |  |

______________________________
(1)Other segment items included in Segment net income (loss) includes management and incentive fees to affiliate, professional fees, general and administrative expenses, general and administrative expenses reimbursed to affiliate, change in unrealized losses on loans held for sale and income tax expense (benefit), including excise tax.
16. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this quarterly report on Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the three months ended March 31, 2025, except as disclosed below.
The Company’s board of directors declared a regular cash dividend of $0.15 per common share for the second quarter of 2025. The second quarter 2025 dividend will be payable on July 15, 2025 to common stockholders of record as of June 30, 2025.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a specialty finance company primarily engaged in directly originating and investing in commercial real estate (“CRE”) loans and related investments. We are externally managed by ACREM, a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management”), a publicly traded, leading global alternative asset manager, pursuant to the terms of the amended and restated management agreement dated July 26, 2022, between us and our Manager (the “Management Agreement”). From the commencement of our operations in late 2011, we have been primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for our own account.
We were formed and commenced operations in late 2011. We are a Maryland corporation and completed our initial public offering in May 2012. We have elected and qualified to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2012. We generally will not be subject to United States federal income taxes on our REIT taxable income as long as we annually distribute to stockholders an amount at least equal to our REIT taxable income prior to the deduction for dividends paid and comply with various other requirements as a REIT. We also operate our business in a manner that is intended to permit us to maintain our exemption from registration under the 1940 Act.
Developments During the First Quarter of 2025:
•We elected to terminate the FL3 collateralized loan obligation ("CLO") securitization on March 17, 2025 and in connection therewith, all of the outstanding notes of the FL3 CLO securitization held by a third party were repaid in full at par through a refinancing of certain remaining underlying loans held for investment under the Wells Fargo Facility and the Citibank Facility.
•We amended the Wells Fargo Facility to, among other things, extend the initial maturity date and funding period of the Wells Fargo Facility to February 10, 2028. The maturity date of the Wells Fargo Facility continues to be subject to two 12-month extensions, each of which may be exercised at our option, subject to the satisfaction of certain conditions and applicable extension fees being paid, which, if both were exercised, would extend the maturity date of the Wells Fargo Facility to February 10, 2030.
•We exercised our 12-month extension option to extend the maturity date of the CNB Facility to March 10, 2026.
Trends Affecting Our Business
During the first quarter of 2025, the commercial real estate market continued to demonstrate overall improvement. Evidencing this trend, commercial real estate property transaction volumes increased year over year across most major property types with enhanced liquidity from capital markets sources supporting market activity during the first quarter.
Continued rising operating costs, such as property insurance and raw material costs for property development and improvements, placed pressure on cash flow performance across many real estate property types in the first quarter of 2025. Office properties, in particular, continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose office properties. These factors have largely resulted in lower demand for office space and have driven elevated levels of vacancy rates and default rates. Offsetting some of these challenges, there has been a significant decline in new commercial real estate development that began in 2023 and has continued benefitting existing in-demand property types. Ultimately, this lack of new future inventory may result in a shortage of contemporary, in-demand properties in the years to come, furthering the disparity between supply and demand dynamics. In addition, there is a significant amount of unspent capital targeting commercial real estate properties that could support values and elevate transaction activities.
In April 2025, proposed U.S. trade and economic policies resulted in increased capital markets volatility and uncertainty, which may lead to lower expectations for future economic activity. Should these economic factors persist, the commercial real estate market we service may be adversely impacted.
Factors Impacting Our Operating Results
The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets, including the real estate collateralizing our investments, and the supply of, and demand for, commercial mortgage loans, CRE debt and other financial assets in the marketplace. Our net interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual rate and the
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outstanding principal balance of the loans we originate. Interest rates vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results are also impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.
Stock Repurchase Program
On July 31, 2024, our board of directors renewed the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2025, or until the approved dollar amount has been used to repurchase shares. Pursuant to the Repurchase Program, we may repurchase shares of our common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion. During the three months ended March 31, 2025, we did not repurchase any shares through the Repurchase Program.
Loans Held for Investment Portfolio
As of March 31, 2025, our portfolio included 27 loans held for investment, excluding 188 loans that were repaid, sold, converted to real estate owned or written off since inception. As of March 31, 2025, the aggregate originated commitment under these loans at closing was approximately $1.5 billion and outstanding principal was $1.4 billion. During the three months ended March 31, 2025, we funded approximately $7.2 million of outstanding principal and received repayments of $306.8 million of outstanding principal. As of March 31, 2025, 68.3% of our loans have SOFR floors, with a weighted average floor of 0.96%, calculated based on loans with SOFR floors. References to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).
Other than as set forth in Note 3 to our consolidated financial statements included in this quarterly report on Form 10-Q, as of March 31, 2025, all loans held for investment were paying in accordance with their contractual terms.
Our loans held for investment are accounted for at amortized cost. The following table summarizes our loans held for investment as of March 31, 2025 ($ in thousands):

|  | As of March 31, 2025
|  | Carrying Amount (1) |  | Outstanding Principal (1) |  | Weighted Average Unleveraged Effective Yield |  | Weighted Average Remaining Life (Years) (4)
Senior mortgage loans |  | $ | 1,336,798 |  |  | $ | 1,381,528 |  |  | 6.2 | % | (2) | 8.3 | % | (3) |  | 1.0
Subordinated debt and preferred equity investments |  | 18,466 |  |  | 22,881 |  |  | — | % | (2) | — | % | (3) |  | 2.0
Total loans held for investment portfolio |  | $ | 1,355,264 |  |  | $ | 1,404,409 |  |  | 6.1 | % | (2) | 8.3 | % | (3) |  | 1.0

_______________________________
(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds.
(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by us as of March 31, 2025 as weighted by the outstanding principal balance of each loan.
(3)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all interest accruing loans held by us as of March 31, 2025 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2025).
(4)Remaining Life is based on contractual maturity date and does not include contractual extension options not yet exercised.
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Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”), which require management to make estimates and assumptions that affect reported amounts. These estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions. For a description of our critical accounting estimates, please see Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on Form 10-K.
RECENT DEVELOPM ENTS
Our board of directors declared a regular cash dividend of $0.15 per common share for the second quarter of 2025. The second quarter 2025 dividend will be payable on July 15, 2025 to common stockholders of record as of June 30, 2025.
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RESULTS OF OPERATIONS
The following table sets forth a summary of our consolidated results of operations for the three months ended March 31, 2025 and 2024 ($ in thousands):

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Total revenue |  | $ | 14,948 |  |  | $ | 18,692 |  |  |  |  |
Total expenses |  | 10,662 |  |  | 8,551 |  |  |  |  |
(Provision for) reversal of current expected credit losses, net |  | 5,340 |  |  | 22,269 |  |  |  |  |
Realized losses on loans |  | — |  |  | (45,726) |  |  |  |  |
Change in unrealized losses on loans held for sale |  | — |  |  | 995 |  |  |  |  |
Income (loss) before income taxes |  | 9,626 |  |  | (12,321) |  |  |  |  |
Income tax expense (benefit), including excise tax |  | 281 |  |  | 2 |  |  |  |  |
Net income (loss) attributable to common stockholders |  | $ | 9,345 |  |  | $ | (12,323) |  |  |  |  |

The following tables set forth select details of our consolidated results of operations for the three months ended March 31, 2025 and 2024 ($ in thousands):
Net Interest Margin

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Interest income |  | $ | 27,480 |  |  | $ | 44,033 |  |  |  |  |
Interest expense |  | (18,189) |  |  | (28,819) |  |  |  |  |
Net interest margin |  | $ | 9,291 |  |  | $ | 15,214 |  |  |  |  |

For the three months ended March 31, 2025 and 2024, net interest margin was approximately $9.3 million and $15.2 million, respectively. For the three months ended March 31, 2025 and 2024, interest income of $27.5 million and $44.0 million, respectively, was generated by weighted average earning assets of $1.5 billion and $2.2 billion, respectively, offset by $18.2 million and $28.8 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, Notes Payable, the Secured Term Loan and securitization debt, as applicable, were $1.1 billion for the three months ended March 31, 2025 and $1.6 billion for the three months ended March 31, 2024. The decrease in net interest margin for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 relates to a decrease in our weighted average earning assets and weighted average borrowings for the three months ended March 31, 2025 and a decrease in SOFR rates on our loans held for investment for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.
Revenue From Real Estate Owned
On September 19, 2024, we acquired legal title to an office property located in North Carolina through a deed in lieu of foreclosure. Prior to September 19, 2024, the office property collateralized a $68.6 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2024 maturity date. In conjunction with the deed in lieu of foreclosure, we derecognized the $68.6 million senior mortgage loan and recognized the office property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three months ended March 31, 2025, revenue from real estate owned related to this property was $2.4 million.
On September 8, 2023, we acquired legal title to a mixed-use property located in Florida through a consensual foreclosure. Prior to September 8, 2023, the mixed-use property collateralized an $82.9 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date. In conjunction with the consensual foreclosure, we derecognized the $82.9 million senior mortgage loan and recognized the mixed-use property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three months ended March 31, 2025 and 2024, revenue from real estate owned related to this property was $3.3 million and $3.5 million, respectively.
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Operating Expenses

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Management and incentive fees to affiliate |  | $ | 2,567 |  |  | $ | 2,768 |  |  |  |  |
Professional fees |  | 877 |  |  | 533 |  |  |  |  |
General and administrative expenses |  | 1,720 |  |  | 2,081 |  |  |  |  |
General and administrative expenses reimbursed to affiliate |  | 1,003 |  |  | 1,132 |  |  |  |  |
Expenses from real estate owned |  | 4,495 |  |  | 2,037 |  |  |  |  |
Total expenses |  | $ | 10,662 |  |  | $ | 8,551 |  |  |  |  |

See the Related Party Expenses, Other Expenses and Expenses from Real Estate Owned discussions below for the cause of the changes in operating expenses for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
Related Party Expenses
For the three months ended March 31, 2025, related party expenses included $2.6 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended March 31, 2025. For the three months ended March 31, 2025, related party expenses also included $1.0 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the three months ended March 31, 2024, related party expenses included $2.8 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended March 31, 2024. For the three months ended March 31, 2024, related party expenses also included $1.1 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. The decrease in management fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily relates to a decrease in our weighted average stockholders’ equity for the three months ended March 31, 2025 as a result of realized losses on loans and the sale of real estate owned. The decrease in allocable general and administrative expenses due to our Manager for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 relates to changes in the mix of employees of our Manager that allocated time to us year over year.
Other Expenses
For the three months ended March 31, 2025 and 2024, professional fees were $0.9 million and $0.5 million, respectively. The increase in professional fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily relates to an increase in our use of third-party professionals due to changes in transaction activity year over year. For the three months ended March 31, 2025 and 2024, general and administrative expenses were $1.7 million and $2.1 million, respectively. The decrease in general and administrative expenses for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily relates to a decrease in stock-based compensation expense due to a reduction in the weighted average grant date fair value for restricted stock and restricted stock unit awards granted after March 31, 2024.
Expenses From Real Estate Owned
For the three months ended March 31, 2025 and 2024, expenses from real estate owned were comprised of the following ($ in thousands):

|  | For the Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Mixed-use property operating expenses |  | $ | 1,227 |  |  | $ | 1,022 |  |  |  |  |
Office property operating expenses |  | 1,095 |  |  | — |  |  |  |  |
Depreciation and amortization expense |  | 2,173 |  |  | 1,015 |  |  |  |  |
Expenses from real estate owned |  | $ | 4,495 |  |  | $ | 2,037 |  |  |  |  |

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For the three months ended March 31, 2025 and 2024, mixed-use property operating expenses were $1.2 million and $1.0 million, respectively. Mixed-use property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our mixed-use property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees. The increase in mixed-use property operating expenses for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily due to an increase in insurance costs and non-recurring repairs and maintenance.
For the three months ended March 31, 2025, office property operating expenses were $1.1 million, which consists of operating expenses for our office property, which was acquired on September 19, 2024. For the three months ended March 31, 2024, there were no office property operating expenses incurred as we did not acquire legal title to the office property until September 19, 2024. Office property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our office property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees.
For the three months ended March 31, 2025 and 2024, depreciation and amortization expense were $2.2 million and $1.0 million, respectively, and relates primarily to our mixed-use property that was acquired on September 8, 2023 and our office property acquired on September 19, 2024. The increase in depreciation and amortization expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily due to the three months ended March 31, 2024 only including depreciation and amortization expense related to the mixed-use property as we did not acquire legal title to the office property until September 19, 2024.
(Provision for) Reversal of Current Expected Credit Losses, Net
For the three months ended March 31, 2025 and 2024, the (provision for) reversal of current expected credit losses, net was $5.3 million and $22.3 million, respectively. For the three months ended March 31, 2025, the net reversal of current expected credit losses is primarily due to a relative improvement in the near-term macroeconomic forecasts, shorter average remaining loan term and loan repayments during the three months ended March 31, 2025. For the three months ended March 31, 2024, the net reversal of current expected credit losses was primarily due to realized losses on two risk rated “5” loans, resulting in a reversal of the associated CECL Reserves, shorter average remaining loan term and loan repayments during the three months ended March 31, 2024. These factors were partially offset by an increase in the CECL Reserves for risk rated “4” and “5” loans in the portfolio as a result of the impact of the current macroeconomic environment, including high inflation and interest rates, volatility and reduced liquidity in the office sector and other loan-specific factors during the three months ended March 31, 2024.
The CECL Reserve takes into consideration our estimates relating to the impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on our loans held for investment, unless the Company determines that a specifically identifiable reserve is warranted for a select asset. Additionally, the CECL Reserve is not an indicator of what we expect our CECL Reserve would have been absent the current and potential future impacts of macroeconomic conditions.
Realized Losses on Loans
In December 2023, we entered into a sale agreement with a third party to sell a senior mortgage loan with outstanding principal of $37.9 million, which was collateralized by a mixed-use property located in California. As of December 31, 2023, the sale had not yet closed and the loan was reclassified from held for investment to held for sale and was carried at the lower of carrying value or fair value in our consolidated balance sheets. We recognized an unrealized loss of $1.0 million in our consolidated statements of operations upon reclassifying the loan to held for sale as the carrying value of the senior mortgage loan exceeded fair value as determined by the agreed upon sale price of the loan and loan reserves. In January 2024, we closed the sale of the senior mortgage loan. At the time of the sale, the senior mortgage loan was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the March 2023 maturity date. This $1.0 million unrealized loss was realized during the three months ended March 31, 2024.
In February 2024, we received a discounted payoff on a senior mortgage loan with outstanding principal of $18.8 million, which was collateralized by a multifamily property located in Washington. The discounted payoff was received in conjunction with a short sale of the multifamily property by the borrower to a third party. At the time of the discounted payoff, the senior mortgage loan was in default due to the failure of the borrower to repay the outstanding principal balance of the loan by the September 2023 maturity date. For the three months ended March 31, 2024, we recognized a realized loss of $1.7 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the carrying value exceeded the net proceeds from the payoff of the loan.
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In March 2024, we received a discounted payoff on a senior mortgage loan with outstanding principal of $56.9 million, which was collateralized by an office property located in Illinois. The discounted payoff was received in conjunction with a short sale of the office property by the borrower to a third party. At the time of the discounted payoff, the senior mortgage loan was in default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2024 maturity date. For the three months ended March 31, 2024, we recognized a realized loss of $43.1 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the carrying value exceeded the net proceeds from the payoff of the loan.
Change in Unrealized Losses on Loans Held for Sale
As described above, the sale of the senior mortgage loan with outstanding principal of $37.9 million, which was collateralized by a mixed-use property located in California, had not yet closed as of December 31, 2023. As such, we recognized an unrealized loss of $1.0 million in our consolidated statements of operations upon reclassifying the loan to held for sale for the year ended December 31, 2023. In January 2024, we closed the sale of the senior mortgage loan and the $1.0 million unrealized loss related to this senior mortgage loan for the year ended December 31, 2023 was realized during the three months ended March 31, 2024.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders, repurchase shares and other general business needs. We use significant cash to purchase our target investments, make principal and interest payments on our borrowings, make distributions to our stockholders and fund our operations.
Our primary sources of cash generally consist of unused borrowing capacity under our Secured Funding Agreements, payments of principal and interest we receive on our portfolio of assets, cash generated from our operating activities and the net proceeds of future equity offerings, if any. Principal repayments from mortgage loans in securitizations where we retain the subordinate securities are applied sequentially, first used to pay down the senior notes, and accordingly, we will not receive any proceeds from repayment of loans in the securitizations until all senior notes are repaid in full.
We expect our primary sources of cash to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future. As a result of the current macroeconomic environment, certain borrowers have been unable to make interest and principal payments timely, including at the maturity date of the borrower’s loan. We increase our CECL Reserve from time to time, as necessary, to reflect this risk. Our Secured Funding Agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our Financing Agreements, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral. For example, certain of our Financing Agreements contain (i) negative covenants that limit, among other things, our ability to repurchase our common stock, make distributions to our stockholders, employ leverage beyond certain amounts, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates (including amending the Management Agreement in a material respect) and (ii) operating and financial covenants, including those requiring us to maintain a certain tangible net worth, asset coverage ratio, total net leverage ratio and loan concentration. We are also subject to cross-default and acceleration rights with respect to our Financing Agreements. If we experience borrower default as a result of the current macroeconomic conditions, we may not be able to negotiate modifications to our borrowings with our lenders or receive financing from our Secured Funding Agreements with respect to our commitments to fund our loans held for investment in the future. See “Summary of Financing Agreements” below for a description of our Financing Agreements.
Subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we expect that our primary sources of liquidity will be financing, to the extent available to us, through credit, secured funding and other lending facilities, other sources of private financing, including warehouse and repurchase facilities, and public or private offerings of our equity or debt securities. Macroeconomic conditions may impair our ability to access the financing and capital markets. Furthermore, we have sold, and may continue to sell certain of our mortgage loans, or interests therein, in order to manage liquidity needs. Subject to maintaining our qualification as a REIT, we may also change our dividend practice, including by reducing the amount of, or temporarily suspending, our future dividends or making dividends that are payable in cash and shares of our common stock for some period of time. We may also continue or discontinue share repurchases under the Repurchase Program. In addition, our FL4 CLO Securitization contains certain senior note overcollateralization ratio tests. To the extent we fail to meet these tests, amounts that would otherwise be used to make payments on the subordinate securities
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that we hold will be used to repay principal on the more senior securities to the extent necessary to satisfy any senior note overcollateralization ratio and we may incur significant losses. Our sources of liquidity may be impacted to the extent we do not receive cash payments that we would otherwise expect to receive from the FL4 CLO Securitization if these tests were met.
Ares Management or one of its investment vehicles may originate mortgage loans. We have had and may continue to have the opportunity to purchase such loans that are determined by our Manager in good faith to be appropriate for us, depending on our available liquidity. Ares Management or one of its investment vehicles may also acquire mortgage loans from us.
We have commitments to fund various senior mortgage loans, as well as subordinated debt and preferred equity investments in our portfolio. Other than as set forth in this quarterly report on Form 10-Q, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment or intend to provide additional funding to any such entities.
As of May 2, 2025, we had approximately $147 million in liquidity including $113 million of cash and $34 million of availability under our Secured Funding Agreements.
Cash Flows
The following table sets forth changes in cash, cash equivalents and restricted cash for the three months ended March 31, 2025 and 2024 ($ in thousands):

|  | For the Three Months Ended March 31,
|  | 2025 |  | 2024
Net income (loss) |  | $ | 9,345 |  |  | $ | (12,323) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities |  | (1,335) |  |  | 23,701 |
Net cash provided by (used in) operating activities |  | 8,010 |  |  | 11,378 |
Net cash provided by (used in) investing activities |  | 298,739 |  |  | 134,016 |
Net cash provided by (used in) financing activities |  | (243,960) |  |  | (156,335) |
Change in cash, cash equivalents and restricted cash |  | $ | 62,789 |  |  | $ | (10,941) |

During the three months ended March 31, 2025 and 2024, cash, cash equivalents and restricted cash increased (decreased) by $62.8 million and $(10.9) million, respectively.
Operating Activities
For the three months ended March 31, 2025 and 2024, net cash provided by operating activities totaled $8.0 million and $11.4 million, respectively. For the three months ended March 31, 2025, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $5.3 million, accretion of discounts, deferred loan origination fees and costs of $1.3 million, amortization of deferred financing costs of $1.2 million and change in other assets of $1.6 million. For the three months ended March 31, 2024, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $22.3 million, accretion of discounts, deferred loan origination fees and costs of $1.3 million, amortization of deferred financing costs of $1.1 million, change in other assets of $0.5 million and realized losses on loans of $45.7 million.
Investing Activities
For the three months ended March 31, 2025, net cash provided by investing activities totaled $298.7 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment exceeding the cash used for the origination and funding of loans held for investment for the three months ended March 31, 2025. For the three months ended March 31, 2024, net cash provided by investing activities totaled $134.0 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment and from the sale of loans held for sale exceeding the cash used for the origination and funding of loans held for investment.
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Financing Activities
For the three months ended March 31, 2025, net cash used in financing activities totaled $244.0 million and was primarily related to repayments of our Secured Funding Agreements of $28.9 million, repayments of debt of consolidated VIEs of $304.0 million, repayments of our Secured Term Loan of $10.0 million and dividends paid of $13.9 million, partially offset by proceeds from our Secured Funding Agreements of $114.8 million. For the three months ended March 31, 2024, net cash used in financing activities totaled $156.3 million and was primarily related to repayments of our Secured Funding Agreements of $22.3 million, repayments of debt of consolidated VIEs of $128.2 million and dividends paid of $18.2 million, partially offset by proceeds from our Secured Funding Agreements of $12.8 million.
Summary of Financing Agreements
The sources of financing, as applicable in a given period, under our Financing Agreements are described in the following table ($ in thousands):

|  | As of |
|  | March 31, 2025 |  | December 31, 2024 |
|  | Total Commitment |  | Outstanding Balance |  | Interest Rate |  | Maturity Date |  | Total Commitment |  | Outstanding Balance |  | Interest Rate |  | Maturity Date |
Secured Funding Agreements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wells Fargo Facility |  | $ | 450,000 |  |  | $ | 230,385 |  |  | SOFR+1.50 to 3.75% |  | February 10, 2028 | (1) | $ | 450,000 |  |  | $ | 210,216 |  |  | SOFR+1.50 to 3.75% |  | December 15, 2025 | (1)
Citibank Facility |  | 325,000 |  |  | 294,495 |  |  | SOFR+1.50 to 3.00% |  | January 13, 2027 | (2) | 325,000 |  |  | 228,727 |  |  | SOFR+1.50 to 2.60% |  | January 13, 2027 | (2)
CNB Facility |  | 75,000 |  |  | — |  |  | SOFR+3.25% |  | March 10, 2026 | (3) | 75,000 |  |  | — |  |  | SOFR+3.25% |  | March 10, 2025 | (3)
Morgan Stanley Facility |  | 250,000 |  |  | 149,525 |  |  | SOFR+1.60 to 3.50% |  | July 16, 2025 | (4) | 250,000 |  |  | 149,525 |  |  | SOFR+1.60 to 3.50% |  | July 16, 2025 | (4)
Subtotal |  | $ | 1,100,000 |  |  | $ | 674,405 |  |  |  |  |  |  | $ | 1,100,000 |  |  | $ | 588,468 |  |  |  |  |  |
Secured Term Loan |  | $ | 120,000 |  |  | $ | 120,000 |  |  | 4.50% |  | November 12, 2026 | (5) | $ | 130,000 |  |  | $ | 130,000 |  |  | 4.50% |  | November 12, 2026 | (5)
Total |  | $ | 1,220,000 |  |  | $ | 794,405 |  |  |  |  |  |  | $ | 1,230,000 |  |  | $ | 718,468 |  |  |  |  |  |

_____________________________
(1)In February 2025, we amended the master repurchase funding facility with Wells Fargo Bank, National Association (the “Wells Fargo Facility”) to, among other things, extend the initial maturity date and funding period of the Wells Fargo Facility to February 10, 2028, subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid. The maximum commitment may be increased to up to $500.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee.
(2)The maturity date of the master repurchase facility with Citibank, N.A. (the “Citibank Facility”) is subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid. The Citibank Facility has an accordion provision such that the maximum commitment may be increased to up to $425.0 million by up to two increments of $50.0 million with the consent of Citibank, subject to the satisfaction of certain conditions, including payment of an upsize fee.
(3)In February 2025, we exercised our 12-month extension option to extend the maturity date of the secured revolving funding facility with City National Bank (the "CNB Facility") to March 10, 2026. The interest rate on advances under the CNB Facility are a per annum rate equal to the sum of, at our option, either (a) a SOFR-based rate plus 3.25% or (b) a base rate plus 2.25%, in each case, subject to an interest rate floor. The amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of March 31, 2025, there was no immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time. The amount immediately available under the CNB Facility may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement.
(4)The master repurchase and securities contract with Morgan Stanley (the “Morgan Stanley Facility”) is subject to one 12-month extension, which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid.
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(5)The maturity date of the Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”) is November 12, 2026. Advances under the Secured Term Loan are set to the following fixed rates: (i) 4.50% per annum until May 1, 2025 and (ii) after May 1, 2025 through November 12, 2026, the interest rate increases 0.25% every three months. The Secured Term Loan has a contingent interest rate increase of 4.00% if the outstanding principal amount of the Secured Term Loan is not paid down to the following amounts on specific dates as follows: (i) $120.0 million as of February 1, 2025, (ii) $110.0 million as of May 1, 2025, (iii) $100.0 million as of August 1, 2025 and (iv) $90.0 million as of November 1, 2025. In January 2025, we elected to repay $10.0 million of outstanding principal on the Secured Term Loan at par.
Our Financing Agreements contain various affirmative and negative covenants, including negative pledges, and provisions related to events of default that are normal and customary for similar financing agreements. As of March 31, 2025, we were in compliance with all financial covenants of each respective Financing Agreement. We may be required to fund commitments on our loans held for investment in the future and we may not receive funding from our Secured Funding Agreements with respect to these commitments. See Note 6 to our consolidated financial statements included in this quarterly report on Form 10-Q for more information on our Financing Agreements.
Securitizations
As of March 31, 2025, both the carrying amount and outstanding principal of our FL4 CLO Securitization was $152.0 million. See Note 14 to our consolidated financial statements included in this quarterly report on Form 10-Q for additional terms and details of our FL4 CLO Securitization.
Leverage Policies
We intend to use prudent amounts of leverage to increase potential returns to our stockholders. To that end, subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we intend to continue to use borrowings to fund the origination or acquisition of our target investments. Given current macroeconomic conditions and our focus on first or senior mortgages, we currently expect that such leverage would not exceed, on a debt-to-equity basis, a 4.5-to-1 ratio. Our charter and bylaws do not restrict the amount of leverage that we may use. The amount of leverage we deploy for particular investments in our target investments depends upon our Manager’s assessment of a variety of factors, which includes, among others, our liquidity position, the anticipated liquidity and price volatility of the assets in our loans held for investment portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, including hedges, the availability and cost of financing the assets, our opinion of the creditworthiness of our financing counterparties, the impact of the macroeconomic environment on the United States economy generally or in specific geographic regions and commercial mortgage markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our assets, the collateral underlying our assets, and our outlook for asset spreads relative to the SOFR curve or another alternative interest index rate commonly used for floating rate loans.
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Dividends
We elected to be taxed as a REIT for United States federal income tax purposes and, as such, anticipate annually distributing to our stockholders at least 90% of our REIT taxable income, prior to the deduction for dividends paid. If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of 1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year and 3) any undistributed shortfall from our prior calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. Any of these taxes would decrease cash available for distribution to our stockholders. The 90% distribution requirement does not require the distribution of net capital gains. However, if we elect to retain any of our net capital gain for any tax year, we must notify our stockholders and pay tax at regular corporate rates on the retained net capital gain. The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, receive a credit for their share of the tax paid by such REIT, and are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If we determine that our estimated current year taxable income (including net capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.
Before we make any distributions, whether for United States federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements under on our Financing Agreements and other debt payable. If our cash available for distribution is less than our REIT taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may elect to make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As part of our risk management strategy, our Manager closely monitors our portfolio and actively manages the credit, interest rate, market, prepayment, financing, real estate and inflation risks associated with holding a portfolio of our target investments. We manage our portfolio through an interactive process with our Manager and Ares Management. Our Manager has an Investment Committee that oversees compliance with our investment strategy and guidelines, loans held for investment portfolio holdings and financing strategy. We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment rates and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risks can be quantified from historical experience and seek to actively manage those risks, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.
Credit Risk
We are subject to varying degrees of credit risk in connection with holding our target investments. We have exposure to credit risk on our CRE loans held for investment and available-for-sale debt securities. Our Manager seeks to manage credit risk by performing a due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. Credit risk is also addressed through our Manager’s ongoing review of our loans held for investment portfolio. In addition, with respect to any particular target investment, our Manager’s investment team evaluates, among other things, relative valuation, comparable analysis, supply and demand trends, shape of yield curves, delinquency and default rates, recovery of various sectors and vintage of collateral.
In the current macroeconomic environment, certain borrowers have not been able to repay principal upon the loan maturity and may not be able to qualify for loan extensions. Additionally, if tenants are not able to pay rent to their landlords, property owners may not be able to make payments to their lenders. We have continued regular dialogue with our borrowers and our financing providers to assess this credit risk.
Interest Rate Risk
Interest rates are highly sensitive to many factors, including fiscal, monetary and trade policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations, including our borrowings under the Financing
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Agreements. We primarily originate or acquire floating rate mortgage assets and finance those assets with index-matched floating rate liabilities. As a result, we significantly reduce our exposure to changes in portfolio value and cash flow variability related to changes in interest rates. However, we regularly measure our exposure to interest rate risk and assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not we should enter into hedging transactions and derivative financial instruments, such as forward sale commitments and interest rate floors in order to mitigate our exposure to changes in interest rates.
While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we have entered into or may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our investments. In addition, there can be no assurance that we will be able to effectively hedge our interest rate risk. As of March 31, 2025, we did not have hedging or derivative financial instruments in place.
In addition to the risks discussed above, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the real estate assets underlying our mortgages and, potentially, contribute to non-performance or, in severe cases, default, which may be mitigated by borrower purchased interest rate caps.
Interest Rate Effect on Net Income
Our interest income and expense will generally change directionally with index rates. The impact of declining interest rates may be mitigated by interest rate floors and the impact of rising or declining interest rates may be mitigated by certain hedging transactions that we have entered into or may enter into in the future. The following table estimates the hypothetical increases/(decreases) in net income for a twelve month period, assuming (1) an immediate increase or decrease in 30-day SOFR as of March 31, 2025 and (2) no change in the outstanding principal balance of our loans held for investment portfolio, available-for-sale debt securities and borrowings as of March 31, 2025 ($ in millions):

Change in 30-Day SOFR |  | Increase/(Decrease) in Net Income
Up 100 basis points |  | $2.2
Up 50 basis points |  | $1.1
Down 50 basis points |  | $(1.1)
Down 100 basis points |  | $(2.2)
SOFR at 0 basis points |  | $(2.8)

The severity of any such impact depends on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase and any applicable floors or hedging transactions. If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.
Interest Rate Floor Risk
We primarily originate or acquire floating rate mortgage and mortgage-related assets. Some of these mortgage assets may be subject to interest rate floors. Similarly, some of our borrowing costs may be subject to interest rate floors. In a period of decreasing interest rates, the interest rate yields on our floating rate mortgage assets could decrease, while the interest rate costs on certain of our borrowings could be fixed at a higher floor. In addition, a decrease in interest rates or tightening credit spreads increases the likelihood that certain of our investments will be refinanced at lower rates. These factors could lower our net interest income or cause a net loss during periods of decreasing interest rates, which would harm our financial condition, cash flows and results of operations.
Market Risk
The estimated fair values of our investments fluctuate primarily due to changes in index rates, changes in credit spreads and other factors. In general, in a rising interest rate environment, whether due to increases in index rates or credit spreads, the estimated fair value of our fixed-rate investments would generally be expected to decrease; conversely, in a decreasing interest rate environment, whether due to decreases in index rates or credit spreads, the estimated fair value of our fixed-rate investments would generally be expected to increase. Also, in general, in a widening credit spread environment, the
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estimated fair value of our floating rate investments would generally be expected to decrease. However, in a compressing credit spread environment, the estimated fair value of our floating rate investments may not increase, particularly if prepayment restrictions are not in place and our floating rate investments are fully prepayable. As market volatility increases or liquidity decreases, the fair value of our investments and liabilities may be adversely impacted.
Prepayment and Securitizations Repayment Risk
Our net income (loss) and earnings may be affected by prepayment rates on our existing CRE loans. When we originate our CRE loans, we anticipate that we will generate an expected yield. When borrowers prepay their CRE loans faster than we expect, we may be unable to replace these CRE loans with new CRE loans that will generate yields which are as high as the prepaid CRE loans. If prepayment rates decrease in a high interest rate environment, borrowers exercise extension options on CRE loans or we extend the term of CRE loans, the life of the loans could extend beyond the term of the Financing Agreements that we borrow on to fund our CRE loans. This could have a negative impact on our results of operations. In some situations, we may be forced to fund additional cash collateral in connection with the Financing Agreements or sell assets to maintain adequate liquidity, which could cause us to incur losses. Additionally, principal repayment proceeds from mortgage loans in the FL4 CLO Securitization are applied sequentially, first used to pay down the senior notes in the FL4 CLO Securitization. We will not receive any proceeds from the repayment of loans in the FL4 CLO Securitization until all senior notes are repaid in full.
Financing Risk
We borrow funds under our Financing Agreements to finance our target assets. We may be subject to risk arising from a default by one of several large banking institutions that are dependent on one another to meet their liquidity or operational needs, so that a default by one institution may cause a series of defaults by the other institutions, and may impact the liquidity of our lenders and their willingness to provide us with borrowings to finance our target assets and other needs.
In addition, our Secured Funding Agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our Financing Agreements, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral. For example, certain of our Financing Agreements contain (i) negative covenants that limit, among other things, our ability to repurchase our common stock, make distributions to our stockholders, employ leverage beyond certain amounts, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates (including amending the Management Agreement in a material respect) and (ii) operating and financial covenants, including those requiring us to maintain a certain tangible net worth, asset coverage ratio, total net leverage ratio and loan concentration. We are also subject to cross-default and acceleration rights with respect to our Financing Agreements. In addition, our FL4 CLO Securitization contains certain senior note overcollateralization ratio tests. To the extent we fail to meet these tests, amounts that would otherwise be used to make payments on the subordinate securities that we hold will be used to repay principal on the more senior securities to the extent necessary to satisfy any senior note overcollateralization ratio and we may incur significant losses. Our sources of liquidity may be impacted to the extent we do not receive cash payments that we would otherwise expect to receive from the FL4 CLO Securitization if these tests were met. Additionally, in such a case, interest income may continue to accrue for the holders of subordinate securities within the FL4 CLO Securitization notwithstanding the cash being used to repay principal on the more senior securities. This would cause us to recognize income but not have a corresponding amount of cash available for operations or for distribution to our stockholders.
Continued weakness or volatility in the financial markets, the commercial real estate and mortgage markets and the economy generally could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing. From time to time, capital markets may also experience periods of disruption and instability, which may adversely affect our ability to refinance our financing arrangements.
Real Estate Risk
Our real estate investments and the value of real estate owned are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; local markets with a significant exposure to the energy sector; construction quality, age and design; demographic factors; insurance costs; and retroactive changes to building or similar codes. Higher interest rates and persistent inflation have had, and continue to have, an adverse impact on industries whose properties serve as collateral for some of our portfolio investments. Similarly, increased demand for work-from-home arrangements and elevated costs to operate, improve or
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repurpose office properties have impacted the operations of office properties and rising operating costs, such as property insurance, have further pressured cash flow performance of commercial real estate. Decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, and reduce the value of properties that we own as a result of default on the underlying loan, each of which could cause us to suffer losses. We seek to manage these risks through our underwriting and asset management processes.
Inflation Risk
Virtually all of our assets and liabilities are sensitive to interest rates. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates but adverse changes in inflation or changes in inflation expectations can lead to lower returns on our investments than originally anticipated. Current levels of inflation could exacerbate this possibility. In each case, in general, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of March 31, 2025, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we, our executive officers, directors and our Manager, and its affiliates and/or any of their respective principals and employees are subject to legal proceedings, including those arising from our loans, and we and our Manager are also subject to extensive regulation, which, from time to time, results in requests for information from us or our Manager or legal or regulatory proceedings or investigations against us or our Manager, respectively. We incur significant costs and expenses in connection with any such proceedings, information requests and investigations.
Item 1A. Risk Factors
You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our 2024 Annual Report, which could materially affect our business, financial condition and/or operating results. The risks described in our 2024 Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Program (1) | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) ($ in thousands)
January 1, 2025 - January 31, 2025 | — | $— | — | $50,000
February 1, 2025 - February 28, 2025 | — | — | — | 50,000
March 1, 2025 - March 31, 2025 | — | — | — | 50,000
Total | — |  | — |

_____________________________
(1)On July 31, 2024, our board of directors renewed the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2025, or until the approved dollar amount has been used to repurchase shares. As of March 31, 2025, $50.0 million remained available for future purchases of our common stock under the Repurchase Program. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the fiscal quarter ended March 31, 2025, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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Item 6. Exhibits
EXHIBIT INDEX

Exhibit Number |  | Exhibit Description
3.1 |  | Articles of Amendment and Restatement of Ares Commercial Real Estate Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K (File No. 001-35517), filed on March 1, 2016).
3.2 |  | Second Amended and Restated Bylaws of Ares Commercial Real Estate Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K (File No.001-35517), filed on February 15, 2023).
10.1 | * | Amendment No. 4 to Third Amended and Restated Master Repurchase and Securities Contract, dated as of February 10, 2025, by and among ACRC Lender W LLC, as ACRC Seller, ACRC Lender W TRS LLC, as TRS Seller, Ares Commercial Real Estate Corporation, as Guarantor, and Wells Fargo Bank, National Association, a national banking association, as Buyer
31.1 | * | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 | * | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 | * | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS |  | XBRL Instance Document
101.SCH |  | XBRL Taxonomy Extension Schema Document
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document
104 |  | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

______________________________________________________________________________

* | Filed herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | ARES COMMERCIAL REAL ESTATE CORPORATION
Date: | May 7, 2025 | By: | /s/ Bryan P. Donohoe
|  |  | Bryan P. Donohoe
|  |  | Chief Executive Officer and Director (Principal Executive Officer)
Date: | May 7, 2025 | By: | /s/ Jeffrey M. Gonzales
|  |  | Jeffrey M. Gonzales
|  |  | Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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