Ares Commercial Real Estate Corp (ACRE)

CIK: 0001529377. SIC: 6798 Real Estate Investment Trusts. Latest 10-K as of: 2026-02-10.

SIC breadcrumb: Finance, Insurance, And Real Estate > Holding And Other Investment Offices > SIC 6798 Real Estate Investment Trusts

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1529377. Latest filing source: 0001628280-26-006635.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-10. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001529377.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001529377.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-031613.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

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 investment 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 2026:

•We closed a $100.0 million senior mortgage loan as part of a co-investment on a multifamily property located in New York.

•We closed a $50.0 million senior mortgage loan as part of a co-investment on a mixed-use property located in New York.

•We closed a $143.5 million senior mortgage loan as part of a co-investment on a retail property located in California, of which $75.0 million is classified as held for investment and $68.5 million is classified as held for sale.

•We exercised each of our two $50.0 million accordion options on the Citibank Facility to increase the maximum commitment from $325.0 million to $425.0 million with payment of an upsize fee.

•We amended the CNB Facility to, among other things, extend the maturity date to December 31, 2026.

•We exercised our $100.0 million accordion option on the Morgan Stanley Facility to increase the maximum commitment from $150.0 million to $250.0 million with payment of an upsize fee. Subsequently, we amended the Morgan Stanley Facility to, among other things, (1) increase the maximum commitment from $250.0 million to $350.0 million and include an accordion provision such that the maximum commitment may be increased to up to $400.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee and (2) extend the initial maturity date to July 16, 2029, subject to one 12-month extension, which may be exercised at the our option assuming no existing defaults under the Morgan Stanley Facility and the applicable extension fee being paid, which, if exercised, would extend the maturity date to July 16, 2030.

•We exercised our redemption option under the FL4 CLO Securitization and, in connection therewith, all of the outstanding notes of the FL4 CLO Securitization held by third parties were repaid in full at par through a refinancing of the remaining underlying loans held for investment and real estate owned under our existing Secured Funding Agreements.

•We received a discounted payoff of a $28.2 million senior mortgage loan, which was collateralized by a multifamily property in Pennsylvania, in conjunction with the sale of the multifamily property by the borrower. At the time of the discounted payoff, the senior mortgage loan was on non-accrual status. For the three months ended March 31, 2026, we received $0.4 million of interest payments in cash on the senior Pennsylvania loan that was recognized as a reduction to the Carrying Value of the loan and the borrower was current on all contractual interest payments. We recognized a realized loss of $3.3 million as the Carrying Value exceeded the net proceeds from the payoff of the loan.

Trends Affecting Our Business

During the first quarter of 2026, the U.S. economy continued to expand, supported by continued consumer spending with moderating expectations for U.S. gross domestic product growth and low levels of unemployment amidst heightened geopolitical tensions. During this time, the commercial real estate market exhibited stable to improving conditions. Specifically, individual property transaction volumes expanded while broad market indices demonstrated flat to increasing commercial real estate values on a year-over-year basis.

Aiding valuations, new construction starts remained near or at 10-year lows across multifamily, industrial, retail and office property types and lending markets remained supportive given increased activity from capital markets and banks.

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While the Federal Reserve has signaled a potential for interest rate reductions in 2026, there is no certainty that there will be a decrease in interest rates or of the magnitude or pace of potential decreases, especially if inflation accelerates.

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. Although certain markets are showing a recovery, office properties nationally continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose these 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.

Uncertainty around U.S. economic and foreign policies, international relations and their potential impact to the U.S. economy has increased risk. Should the risks from these factors become more acute, 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 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 30, 2025, our board of directors extended the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2026, 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, 2026, we did not repurchase any shares through the Repurchase Program.

Loans Held for Investment Portfolio

As of March 31, 2026, our portfolio included 35 loans held for investment, excluding 197 loans that were repaid, sold, converted to real estate owned or written-off since inception. As of March 31, 2026, the aggregate originated commitment under these loans at closing was approximately $1.9 billion and outstanding principal was $1.7 billion. During the three months ended March 31, 2026, we funded approximately $201.7 million of outstanding principal and received repayments of $94.3 million of outstanding principal. As of March 31, 2026, 88.5% of our loans have SOFR floors, with a weighted average floor of 1.64%, 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, 2026, all loans held for investment were paying in accordance with their contractual terms.

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Our loans held for investment are accounted for at amortized cost. The following table summarizes our loans held for investment as of March 31, 2026 ($ in thousands):

As of March 31, 2026

Carrying Value (1)

Outstanding Principal (1)

Weighted Average Unleveraged Effective Yield

Weighted Average Remaining Life (Years) (4)

Senior mortgage loans

$

1,610,092 

$

1,690,176 

5.8 

%

(2)

7.3 

%

(3)

1.4

Subordinated debt and preferred equity investments

19,274 

21,102 

2.7 

%

(2)

6.6 

%

(3)

1.1

Total loans held for investment portfolio

$

1,629,366 

$

1,711,278 

5.8 

%

(2)

7.3 

%

(3)

1.4

_______________________________

(1)The difference between the Carrying Value 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, 2026 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, 2026 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2026).

(4)Remaining Life is based on contractual maturity date and does not include contractual extension options not yet exercised.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in acc

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-02-10. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a specialty finance company primarily engaged in directly originating and investing in CRE loans and related investments. We are externally managed by ACREM, a subsidiary of Ares Management, a publicly traded, leading global alternative investment manager, pursuant to the terms of 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, 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.

Below are significant developments during the year ended December 31, 2025 presented by quarter:

Developments During the First Quarter of 2025:

•We exercised our redemption option under 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.

Developments During the Second Quarter of 2025:

•We amended the Morgan Stanley Facility to, among other things, (1) reduce the commitment from $250.0 million to $150.0 million and include an accordion provision such that the maximum commitment may be increased to up to $250.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee and (2) extend the initial maturity date to July 16, 2026, subject to one 12-month extension, which may be exercised at our option assuming no existing defaults under the Morgan Stanley Facility and the applicable extension fee being paid, which, if exercised, would extend the maturity date to July 16, 2027.

•We received a discounted payoff of a $51.5 million senior mortgage loan, which was collateralized by an office (life sciences) property in Massachusetts, in conjunction with a sale of the office (life sciences) property by the borrower. At the time of the discounted payoff, the senior mortgage loan was on non-accrual status. For the three and six months ended June 30, 2025, we received $1.1 million and $2.1 million, respectively, 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 was current on all contractual interest payments. We recognized a realized loss of $33.0 million as the carrying value, not including the CECL Reserve, exceeded the net proceeds from the payoff of the loan.

Developments During the Third Quarter of 2025:

•We closed a $12.3 million senior mortgage loan on a self storage property located in Florida.

•We closed an $11.2 million senior mortgage loan on a self storage property located in Arizona.

•We closed a $9.9 million senior mortgage loan on a self storage property located in Florida.

•We closed a $9.1 million senior mortgage loan on a self storage property located in Pennsylvania.

•We closed a $50.0 million senior mortgage loan as part of a co-investment on a multifamily property located in Massachusetts.

•We previously held a senior A-Note loan with an outstanding principal balance of $59.0 million and a subordinated B-Note loan with an outstanding principal balance of $10.6 million, which were both collateralized by an office property located in New York. The subordinated B-Note loan was subordinate to new borrower equity related to additional capital contributions. In September 2025, we entered into a modification and extension agreement with the borrower to, among other things, (1) transfer $6.0 million of the outstanding principal balance from the subordinated B-Note loan to the senior A-Note loan, which increased the outstanding principal balance of the senior A-Note loan from $59.0 million to $65.0 million and (2) extinguish the remaining $4.6 million of outstanding principal balance of the subordinated B-Note loan.

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Prior to entering into the modification and extension agreement with the borrower, the subordinated B-Note loan was on non-accrual status and had a carrying value of $7.6 million. Upon the transfer of the $6.0 million of outstanding principal balance from the subordinated B-Note loan to the senior A-Note loan, the remaining outstanding principal balance of the subordinated B-Note loan was $4.6 million and the remaining carrying value was $1.6 million. In conjunction with the extinguishment of the subordinated B-Note loan, we recognized a realized loss of $1.6 million, which was equal to the remaining carrying value of the subordinated B-Note loan.

Developments During the Fourth Quarter of 2025:

•We closed a $50.0 million senior mortgage loan as part of a co-investment on a multifamily property located in North Carolina.

•We closed a $7.3 million senior mortgage loan on a self storage property located in Florida.

•We closed a $58.0 million senior mortgage loan as part of a co-investment on a hotel property located in South Carolina.

•We closed a $100.5 million senior mortgage loan as part of a co-investment on a portfolio of industrial properties located in Georgia.

•We closed a $55.3 million senior mortgage loan on an industrial property located in California.

•We closed a $25.0 million senior mortgage loan as part of a co-investment on a portfolio of hotel properties located in Florida, California and Colorado.

•We closed a $25.0 million senior mortgage loan as part of a co-investment on a hotel property located in Florida.

•We closed a $72.5 million senior mortgage loan on a portfolio of self storage properties located in Texas, Colorado and Florida.

•We amended the Wells Fargo Facility to, among other things, increase the commitment from $450.0 million to $600.0 million with a payment of an upsize fee.

•We sold a building at our multi-building office property located in North Carolina that was classified as real estate owned held for investment to a third party for $5.3 million. We recognized a $2.8 million realized gain on the sale of the building as the net sale proceeds were greater than the allocated net carrying value of the building as of the sale closing date.

Trends Affecting Our Business

Throughout 2025, the U.S. economy continued to expand supported by persistent consumer spending and easing inflationary pressures. The year began with macroeconomic challenges amidst heightened geopolitical uncertainty, both of which continued to weigh on operating performance, property valuations and transaction activity across the commercial real estate sector. These challenges moderated later in the year aided by the Federal Reserve’s shift to a less restrictive monetary policy.

Reduced interest rate pressures and more supportive monetary policy led to individual property transaction volumes growth for the year and broad market indices demonstrated flat to increasing commercial real estate values on a year-over-year basis. Aiding valuations, new construction starts remained near or at 10-year lows across multifamily, industrial, retail and office property types. Lending markets also supported commercial real estate activity reflecting higher conduit and CMBS new-issue volumes quarter-over-quarter and year-over-year as well as a modest increase in bank participation.

While the Federal Reserve has signaled a potential willingness to further reduce interest rates in 2026, there is no certainty that there will be a decrease in interest rates or of the magnitude or pace of potential decreases, especially if inflation accelerates.

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 2025. Although certain markets are showing a recovery, office properties nationally continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose these 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.

While lower market rates and increased capital markets liquidity support commercial real estate property transactions and values, there is pronounced uncertainty around U.S. economic and foreign policies, international relations and their potential impact to the U.S. economy. Should the risks from these factors become more acute, the commercial real estate market we service may be further adversely impacted.

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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 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.

Changes in Fair Value of Our Assets.  We originate 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 repaid. We monitor the performance of our 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. We 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. Other than as set forth in Note 3 to our consolidated financial statements included in this annual report on Form 10-K, and as set forth below, as of December 31, 2025 and 2024, all loans held for investment were paying in accordance with their contractual terms. As of December 31, 2025, we had four loans held for investment on non-accrual status with a carrying value of $308.1 million. As of December 31, 2024, we had five loans held for investment on non-accrual status with a carrying value of $318.4 million.

Loan balances that are deemed to be uncollectible are written-off as a realized loss and are deducted from the CECL Reserve. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment. During the year ended December 31, 2025, we wrote-off a portion of a subordinated loan on an office property located in New York with outstanding principal of $4.6 million that was extinguished in conjunction with a modification and extension agreement that we entered into with the borrower. During the year ended December 31, 2024, we wrote-off a mezzanine loan on an office property located in New Jersey with outstanding principal of $18.5 million as we deemed the mezzanine loan to be uncollectible.

 Changes in Market Interest Rates. With respect to our business operations, decreases in interest rates, in general, may over time cause:

•the interest expense associated with our borrowings to decrease, subject to any applicable floors;

•the value of our mortgage loan portfolio to increase, for such mortgages with applicable floors;

•coupons on our floating rate mortgage loans to reset to lower interest rates, subject to any applicable floors; and

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•to the extent we enter into interest rate swap agreements as part of our hedging strategy where we pay fixed and receive floating interest rates, the value of these agreements to decrease.

Conversely, increases in interest rates, in general, may over time cause:

•the interest expense associated with our borrowings to increase, subject to any applicable ceilings;

•the value of our mortgage loan portfolio to decline;

•coupons on our floating rate mortgage loans to reset to higher interest rates; and

•to the extent we enter into interest rate swap agreements as part of our hedging strategy where we pay fixed and receive floating interest rates, the value of these agreements to increase.

Credit Risk. We are subject to varying degrees of credit risk in connection with our target investments. Our Manager seeks to mitigate this risk by seeking to originate or acquire investments of higher quality at appropriate prices with appropriate risk adjusted returns given anticipated and unanticipated losses, by employing a comprehensive review and selection process, by proactively monitoring originated or acquired investments (see the performance monitoring methodology above in Changes in Fair Value of Our Assets), and through the use of non-recourse financing, when and where available and appropriate. Nevertheless, unanticipated credit losses have occurred and could occur in the future, and such credit losses could adversely impact our operating results and stockholders’ equity.

Performance of Commercial Real Estate Related Markets. Our business is dependent on the general demand for, and value of, commercial real estate and related services, which are sensitive to economic conditions. Demand for commercial real estate generally increases during periods of stronger economic conditions, resulting in increased property values, transaction volumes and loan origination volumes. During periods of weaker economic conditions, commercial real estate may experience higher property vacancies, lower demand and reduced values. These conditions can result in lower property transaction volumes and loan originations. 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, which also cause us to suffer losses.

Availability of Leverage and Equity. We expect to use leverage to make additional investments. We may not be able to obtain the amount of leverage we desire and, consequently, the returns generated from our investments may be less than we currently expect. To grow our portfolio of investments, we also may determine to raise additional equity. Our access to additional equity will depend on many factors, and our ability to raise equity in the future cannot be predicted at this time.

Size of Portfolio. The size of our portfolio of investments, as measured both by the aggregate principal balance and the number of our CRE loans and our other investments, is also an important factor in determining our operating results. Generally, as the size of our portfolio grows, the amount of interest income we receive increases and, at such times, we may achieve certain economies of scale and can diversify risk within our portfolio investments. A larger portfolio, however, may result in increased expenses; for example, we may incur additional interest expense or other costs to finance our investments. Also, if the aggregate principal balance of our portfolio grows but the number of our loans or the number of our borrowers does not grow, we could face increased risk by reason of the concentration of our investments.

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Stock Repurchase Program

On July 30, 2025, our board of directors extended the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2026, 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 year ended December 31, 2025, we did not repurchase any shares through the Repurchase Program.

Loans Held for Investment Portfolio

As of December 31, 2025, our portfolio included 34 loans held for investment, excluding 195 loans that were repaid, sold, converted to real estate owned or written-off since inception. As of December 31, 2025, the aggregate originated commitment under these loans at closing was approximately $1.8 billion and outstanding principal was $1.6 billion. During the year ended December 31, 2025, we funded approximately $491.5 million of outstanding principal, received repayments of $572.3 million of outstanding principal and wrote-off a portion of one loan with outstanding principal of $4.6 million. As of December 31, 2025, 84.0% of our loans have SOFR floors, with a weighted average floor of 1.52%, 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 annual report on Form 10-K, as of December 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 December 31, 2025 ($ in thousands):

As of December 31, 2025

Carrying Amount (1)

Outstanding Principal (1)

Weighted Average Unleveraged Effective Yield

Weighted Average Remaining Life (Years) (4)

Senior mortgage loans

$

1,509,670 

$

1,580,074 

5.7 

%

(2)

7.4 

%

(3)

1.3

Subordinated debt and preferred equity investments

19,136 

20,985 

2.7 

%

(2)

6.7 

%

(3)

1.3

Total loans held for investment portfolio

$

1,528,806 

$

1,601,059 

5.7 

%

(2)

7.4 

%

(3)

1.3

_______________________________

(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 December 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 December 31, 2025 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of December 31, 2025).

(4)Remaining Life is based on contractual maturity date and does not include contractual extension options not yet exercised.

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

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differ from those estimates and assumptions. We believe the following critical accounting policies represent areas where more significant judgments and estimates are used in the preparation of our consolidated financial statements.

Current Expected Credit Losses

FASB ASC Topic 326, Financial Instruments—Credit Losses (“ASC 326”), requires us 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”). Increases and decreases to expected credit losses impact earnings and are recorded within (provision for) reversal of current expected credit losses, net in our 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 our loans held for investment in our consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in our consolidated balance sheets.

We estimate our 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 us when we are the subordinate lender, changes in net operating income, debt service coverage ratio, loan-to-value ratio, 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 our loan portfolio, (iv) the underlying collateral performance and its estimated current and stabilized market values, including projected cash flows and (v) our current and future view of the macroeconomic environment. We may consider loan-specific qualitative factors on certain loans to estimate our CECL Reserve. In order to estimate the future expected loan losses relevant to our portfolio, we utilize 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 we believe is a reasonably comparable and available data set to our type of loans.

In certain instances, we may identify specific loans to be collateral dependent. We consider 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 we determine that foreclosure of the collateral is probable, we estimate 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 we determine foreclosure is not probable, we may apply 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, we 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 that may be used could vary depending on the information available and market conditions as of the valuation date. As such, the fair value that may be used in calculating the CECL Reserve is subject to uncertainty and any actual losses could differ materially from our CECL Reserve.

See Note 4 to our consolidated financial statements included in this annual report on Form 10-K for more information regarding CECL.

Real Estate Owned

We may assume legal title or physical possession of the underlying collateral property as a result of a default of our mortgage or other real estate related loan investments. 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. We allocate 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.

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In accordance with FASB ASC Topic 820-10, Fair Value Measurement (“ASC 820-10”), we are required to record real estate owned, a nonfinancial asset, at fair value on a nonrecurring basis in accordance with GAAP. The fair value of real estate assets at acquisition is estimated using a third-party appraisal, which utilizes standard industry valuation techniques such as the income and market approach. When determining the fair value of acquired real estate assets, 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 property based upon our estimation of a capitalization rate, discount rates and comparable selling prices in the market.

Real estate assets held for investment are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in our 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.

See Notes 2, 5 and 12 included in these consolidated financial statements for additional information regarding real estate owned.

RECENT DEVELOPMENTS

On January 8, 2026, we exercised our $100.0 million accordion option on the Morgan Stanley Facility to increase the maximum commitment from $150.0 million to $250.0 million with payment of an upsize fee.

On January 20, 2026, we exercised our redemption option under the FL4 CLO Securitization, and in connection therewith, all of the outstanding notes of the FL4 CLO Securitization held by third parties were repaid in full at par through a refinancing of the remaining underlying loans held for investment and real estate owned held for investment under our existing Secured Funding Agreements.

On February 6, 2026, we closed a $100.0 million senior mortgage loan as part of a co-investment on a multifamily property located in New York. At closing, the outstanding principal balance was $76.7 million. The loan has a per annum interest rate of SOFR plus 2.45%.

On February 6, 2026, we closed a $50.0 million senior mortgage loan as part of a co-investment on a mixed-use property located in New York. At closing, the outstanding principal balance was $43.6 million. The loan has a per annum interest rate of SOFR plus 3.25%.

Our board of directors declared a regular cash dividend of $0.15 per common share for the first quarter of 2026. The first quarter 2026 dividend will be payable on April 15, 2026 to common stockholders of record as of March 31, 2026.

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RESULTS OF OPERATIONS

For the years ended December 31, 2025 and 2024

The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2025 and 2024 ($ in thousands):

For the Years Ended December 31,

2025

2024

Total revenue

$

54,833 

$

69,650 

Total expenses

(41,409)

(37,930)

(Provision for) reversal of current expected credit losses, net

17,845 

18,152 

Realized losses on loans

(34,643)

(83,591)

Change in unrealized losses on loans held for sale

— 

995 

Realized gain (loss) on sale of real estate owned

2,757 

(2,287)

Income (loss) before income taxes

(617)

(35,011)

Income tax expense (benefit), including excise tax

285 

(18)

Net income (loss) attributable to common stockholders

$

(902)

$

(34,993)

The following tables set forth select details of our consolidated results of operations for the years ended December 31, 2025 and 2024 ($ in thousands):

Net Interest Margin

For the Years Ended December 31,

2025

2024

Interest income

$

97,590 

$

157,717 

Interest expense

(65,159)

(105,985)

Net interest margin

$

32,431 

$

51,732 

For the years ended December 31, 2025 and 2024, net interest margin was approximately $32.4 million and $51.7 million, respectively. For the years ended December 31, 2025 and 2024, interest income of $97.6 million and $157.7 million, respectively, was generated by weighted average earning assets of $1.4 billion and $2.0 billion, respectively, offset by $65.2 million and $106.0 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, Note Payable (as defined in Note 6 to our consolidated financial statements included in this annual report on Form 10-K), the Secured Term Loan and securitization debt, as applicable, were $1.0 billion for the year ended December 31, 2025 and $1.4 billion for the year ended December 31, 2024. The decrease in net interest margin for the year ended December 31, 2025 compared to the year ended December 31, 2024 is due to a decrease in our weighted average earning assets partially offset by a decrease in our weighted average borrowings for the year ended December 31, 2025 and a decrease in SOFR rates on our loans held for investment for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Revenue From Real Estate Owned

On September 19, 2024, we 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 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 year ended December 31, 2025, revenue from real estate owned related to this property was $9.4 million. For the period from September 19, 2024 to December 31, 2024, revenue from real estate owned related to this property was $2.8 million.

On June 12, 2024, we acquired legal title to an office property located in California through a foreclosure. Prior to June 12, 2024, the office property collateralized a $33.2 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 December 2023 maturity date. In

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conjunction with the foreclosure, we derecognized the $33.2 million senior mortgage loan and recognized the office property as real estate owned. Revenues from this property consisted primarily of rental revenue from operating leases. On November 15, 2024, we closed the sale of the office property to a third party. For the period from June 12, 2024 to November 15, 2024, revenue from real estate owned related to this property was $1.9 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 years ended December 31, 2025 and 2024, revenue from real estate owned related to this property was $13.0 million and $13.2 million, respectively.

Operating Expenses     

For the Years Ended December 31,

2025

2024

Management and incentive fees to affiliate

$

9,837 

$

10,685 

Professional fees

2,755 

2,634 

General and administrative expenses

7,042 

7,822 

General and administrative expenses reimbursed to affiliate

3,618 

3,825 

Expenses from real estate owned

18,157 

12,964 

Total expenses

$

41,409 

$

37,930 

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 year ended December 31, 2025 compared to the year ended December 31, 2024.

Related Party Expenses

For the year ended December 31, 2025, related party expenses included $9.8 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the year ended December 31, 2025. For the year ended December 31, 2025, related party expenses also included $3.6 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 year ended December 31, 2024, related party expenses included $10.7 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the year ended December 31, 2024. For the year ended December 31, 2024, related party expenses also included $3.8 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 year ended December 31, 2025 compared to the year ended December 31, 2024 primarily relates to a decrease in our weighted average stockholders’ equity for the year ended December 31, 2025 as a result of realized losses on loans. The decrease in allocable general and administrative expenses due to our Manager for the year ended December 31, 2025 compared to the year ended December 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 years ended December 31, 2025 and 2024, professional fees were $2.8 million and $2.6 million, respectively, which was relatively consistent year-over-year. For the years ended December 31, 2025 and 2024, general and administrative expenses were $7.0 million and $7.8 million, respectively. The decrease in general and administrative expenses for the year ended December 31, 2025 compared to the year ended December 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 December 31, 2024.

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Expenses From Real Estate Owned

For the years ended December 31, 2025 and 2024, expenses from real estate owned were comprised of the following ($ in thousands):

For the Years Ended December 31,

2025

2024

Mixed-use property operating expenses

$

4,721 

$

4,672 

Office property operating expenses

5,034 

2,885 

Depreciation and amortization expense

8,402 

5,407 

Expenses from real estate owned

$

18,157 

$

12,964 

For both the years ended December 31, 2025 and 2024, mixed-use property operating expenses were $4.7 million. 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.

For the years ended December 31, 2025 and 2024, office property operating expenses were $5.0 million and $2.9 million, respectively, which consists of operating expenses for our office property that was acquired on June 12, 2024 and sold on November 15, 2024 and our multi-building office property that was acquired on September 19, 2024. Office property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our office properties, 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 office property operating expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 is primarily due to the year ended December 31, 2024 only including operating expenses related to the multi-building office property for the period September 19, 2024 to December 31, 2024 as we did not acquire legal title to the multi-building office property until September 19, 2024.

For the years ended December 31, 2025 and 2024, depreciation and amortization expense was $8.4 million and $5.4 million, respectively, and relate primarily to our mixed-use property acquired on September 8, 2023 and our multi-building office property acquired on September 19, 2024. The increase in depreciation and amortization expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 is primarily due to the year ended December 31, 2024 only including depreciation and amortization expense related to the multi-building office property for the period September 19, 2024 to December 31, 2024 as we did not acquire legal title to the multi-building office property until September 19, 2024.

(Provision for) Reversal of Current Expected Credit Losses, Net

For the years ended December 31, 2025 and 2024, the net reversal of current expected credit losses was $17.8 million and $18.2 million, respectively. For the year ended December 31, 2025, the net reversal of current expected credit losses is primarily due to a realized loss on an office (life sciences) loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments, a relative improvement in the near-term macroeconomic forecasts and other loan-specific attributes during the year ended December 31, 2025. These factors were partially offset by new loan closings and other loan-specific attributes during the year ended December 31, 2025. For the year ended December 31, 2024, the net reversal of current expected credit losses was primarily due to realized losses on five risk rated “5” loans, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term and loan repayments during the year ended December 31, 2024. These factors were partially offset by an increase in the CECL Reserve for risk rated “4” and “5” loans in the portfolio as a result of the impact of the macroeconomic environment, including higher inflation and interest rates, and more particularly, volatility and reduced liquidity in the office sector and other loan-specific attributes during the year ended December 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 we determine 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.

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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 for the year ended December 31, 2023 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 year ended December 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 sale of the multifamily property by the borrower. 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 year ended December 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.

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 sale of the office property by the borrower. 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 year ended December 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.

In June 2024, we acquired legal title to an office property located in California through a foreclosure. The office property previously collateralized a $33.2 million senior mortgage loan held by us that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the December 2023 maturity date. In conjunction with the foreclosure, we derecognized the $33.2 million senior mortgage loan and recognized the office property as real estate owned. As we expected to complete a sale of the office property within the next twelve months, the office property was classified as real estate owned held for sale and was carried at its estimated fair value at acquisition, less costs to sell. For the year ended December 31, 2024, we recognized a realized loss of $16.4 million in our consolidated statements of operations on the derecognition of the senior mortgage loan as the estimated fair value less costs to sell of the office property of $14.5 million and the net operating assets and liabilities held at the office property of $(0.1) million at acquisition was less than the $30.8 million cost basis of the senior mortgage loan.

In September 2024, we acquired legal title to a multi-building office property located in North Carolina through a deed in lieu of foreclosure. The office property previously collateralized a $68.6 million senior mortgage loan held by us 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. As we do not expect to complete a sale of the office property within the next twelve months, the office property is classified as 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. For the year ended December 31, 2024, we recognized a realized loss of $5.8 million in our consolidated statements of operations 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 $(0.2) million at acquisition was less than the $65.8 million cost basis of the senior mortgage loan.

In November 2024, we determined that a mezzanine loan with outstanding principal of $18.5 million, which was collateralized by an office property located in New Jersey, was no longer collectible and the loan was written-off. At the time of the write-off, the mezzanine loan was in default due to the borrower not making its contractual interest payments due subsequent to the December 2023 interest payment date. For the year ended December 31, 2024, we recognized a realized loss of $15.7 million in our consolidated statements of operations upon the write-off, which was equal to the carrying value of the mezzanine loan.

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In June 2025, we received a discounted payoff on a senior mortgage loan with outstanding principal of $51.5 million, which was collateralized by an office (life sciences) property located in Massachusetts. The discounted payoff was received in conjunction with a sale of the office (life sciences) property by the borrower. For the year ended December 31, 2025, we recognized a realized loss of $33.0 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.

We previously held a senior A-Note loan with an outstanding principal balance of $59.0 million and a subordinated B-Note loan with an outstanding principal balance of $10.6 million, which were both collateralized by an office property located in New York. The subordinated B-Note loan was subordinate to new borrower equity related to additional capital contributions. In September 2025, we entered into a modification and extension agreement with the borrower to, among other things, (1) transfer $6.0 million of the outstanding principal balance from the subordinated B-Note loan to the senior A-Note loan, which increased the outstanding principal balance of the senior A-Note loan from $59.0 million to $65.0 million and (2) extinguish the remaining $4.6 million of outstanding principal balance of the subordinated B-Note loan. Upon the transfer of the $6.0 million of outstanding principal balance from the subordinated B-Note loan to the senior A-Note loan, the remaining outstanding principal balance of the subordinated B-Note loan was $4.6 million and the remaining carrying value was $1.6 million. In conjunction with the extinguishment of the remaining subordinated B-Note loan, we recognized a realized loss of $1.6 million in our consolidated statements of operations for the year ended December 31, 2025, which was equal to the remaining carrying value of the subordinated B-Note 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 year ended December 31, 2024.

Realized Gain (Loss) on Sale of Real Estate Owned

For the year ended December 31, 2024, we recognized a $2.3 million realized loss on the sale of the office property that was recognized as real estate owned held for sale as the net sale proceeds were less than the net carrying value of the office property as of the sale closing date.

In December 2025, we sold a building at our multi-building office property located in North Carolina that was classified as real estate owned held for investment to a third party for $5.3 million. For the year ended December 31, 2025, we recognized a $2.8 million realized gain on the sale of the building as the net sale proceeds were greater than the allocated net carrying value of the building as of the sale closing date.

For the years ended December 31, 2024 and 2023

The comparison of our results of operations for the fiscal years ended December 31, 2024 and 2023 can be found in our annual report on Form 10-K for the fiscal year ended December 31, 2024 located within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein.

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.

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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 commercial real estate environment during 2025, 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 macroeconomic conditions or otherwise, 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.

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 annual report on Form 10-K, 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 February 5, 2026, we had approximately $148 million in liquidity including $32 million of cash and $116 million of availability under our Secured Funding Agreements.

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Cash Flows

The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, 2025 and 2024 ($ in thousands):

For the Years Ended December 31,

2025

2024

Net income (loss)

$

(902)

$

(34,993)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

22,256 

70,542 

Net cash provided by (used in) operating activities

21,354 

35,549 

Net cash provided by (used in) investing activities

148,144 

427,914 

Net cash provided by (used in) financing activities

(168,635)

(507,628)

Change in cash, cash equivalents and restricted cash

$

863 

$

(44,165)

During the years ended December 31, 2025 and 2024, cash, cash equivalents and restricted cash increased (decreased) by $0.9 million and $(44.2) million, respectively.

Operating Activities

For the years ended December 31, 2025 and 2024, net cash provided by operating activities totaled $21.4 million and $35.5 million, respectively. For the year ended December 31, 2025, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $17.8 million, accretion of discounts, deferred loan origination fees and costs of $4.3 million, amortization of deferred financing costs of $4.6 million, depreciation and amortization of real estate owned of $8.5 million and realized losses on loans of $34.6 million. For the year ended December 31, 2024, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $18.2 million, accretion of discounts, deferred loan origination fees and costs of $5.0 million, amortization of deferred financing costs of $5.1 million and realized losses on loans of $83.6 million.

Investing Activities

For the year ended December 31, 2025, net cash provided by investing activities totaled $148.1 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 year ended December 31, 2024, net cash provided by investing activities totaled $427.9 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.

Financing Activities

For the year ended December 31, 2025, net cash used in financing activities totaled $168.6 million and was primarily related to repayments of our Secured Funding Agreements of $217.8 million, repayments of debt of consolidated VIEs of $356.1 million, repayments of our Secured Term Loan of $40.0 million and dividends paid of $39.0 million, partially offset by proceeds from our Secured Funding Agreements of $487.6 million. For the year ended December 31, 2024, net cash used in financing activities totaled $507.6 million and was primarily related to repayments of our Secured Funding Agreements of $188.1 million, repayment in full and termination of our $105.0 million recourse note, repayments of debt of consolidated VIEs of $267.9 million, repayments of our Secured Term Loan of $20.0 million and dividends paid of $59.6 million, partially offset by proceeds from our Secured Funding Agreements of $136.8 million.

For the years ended December 31, 2024 and 2023

The comparison of our cash flows for the fiscal years ended December 31, 2024 and 2023 can be found in our annual report on Form 10-K for the fiscal year ended December 31, 2024 located within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein.

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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

December 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

$

600,000 

$

438,911 

SOFR+1.40 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 

269,265 

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

150,000 

150,000 

SOFR+1.75 to 3.50%

July 16, 2026

(4)

250,000 

149,525 

SOFR+1.60 to 3.50%

July 16, 2025

(4)

Subtotal

$

1,150,000 

$

858,176 

$

1,100,000 

$

588,468 

Secured Term Loan

$

90,000 

$

90,000 

5.25%

November 12, 2026

(5)

$

130,000 

$

130,000 

4.50%

November 12, 2026

(5)

Total

$

1,240,000 

$

948,176 

$

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. In December 2025, we amended the Wells Fargo Facility to, among other things, increase the commitment from $450.0 million to $600.0 million.

(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 is 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 December 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 June 2025, we amended the master repurchase and securities contract with Morgan Stanley (the “Morgan Stanley Facility”) to, among other things, (1) extend the initial maturity date to July 16, 2026, subject to one 12-month extension, which may be exercised at our option provided that certain conditions are met and the applicable extension fee is paid and (2) reduce the commitment from $250.0 million to $150.0 million, which includes an accordion provision such that the maximum commitment may be increased to up to $250.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

(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 each of January 2025, April 2025, July 2025 and October 2025, we elected to repay $10.0 million of outstanding principal on the Secured Term Loan at par.

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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 December 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 annual report on Form 10-K for more information on our Financing Agreements.

Securitizations

As of December 31, 2025, both the carrying amount and outstanding principal of our FL4 CLO Securitization was $99.9 million. See Note 15 to our consolidated financial statements included in this annual report on Form 10-K for additional terms and details of our FL4 CLO Securitization. On January 20, 2026, we exercised our redemption option under the FL4 CLO Securitization, and in connection therewith, exchanged our remaining FL4 Notes and preferred equity in the FL4 Issuer for the remaining mortgage loans held by the FL4 Issuer and all of the FL4 Notes held by third parties were repaid in full at par.

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.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Our contractual obligations as of December 31, 2025 are described in the following table ($ in thousands):

Total

Less than

1 year

1 to 3 years

3 to 5 years

More than

5 years

Wells Fargo Facility

$

438,911 

$

— 

$

438,911 

$

— 

$

— 

Citibank Facility

269,265 

— 

269,265 

— 

— 

CNB Facility

— 

— 

— 

— 

— 

Morgan Stanley Facility

150,000 

150,000 

— 

— 

— 

Secured Term Loan

90,000 

90,000 

— 

— 

— 

Future Loan Funding Commitments

59,876 

858 

59,018 

— 

— 

Total

$

1,008,052 

$

240,858 

$

767,194 

$

— 

$

— 

The table above does not include the related interest expense or extension options, as applicable, under the Secured Funding Agreements and the Secured Term Loan.

We may enter into certain contracts that may contain a variety of indemnification obligations, principally with underwriters and counterparties to repurchase agreements. The maximum potential future payment amount we could be required to pay under these indemnification obligations may be unlimited.

Other than as set forth in this annual report on Form 10-K, 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.

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Management Agreement

We are also required to pay our Manager a base management fee of 1.5% of our stockholders' equity per year, an incentive fee and expense reimbursements pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. See Note 13 to our consolidated financial statements included in this annual report on Form 10-K for additional terms and details of the fees payable under our Management Agreement.

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 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.