ACRES Commercial Realty NYSE: ACR executives used the company’s first-quarter 2026 earnings call to highlight growth in its commercial real estate loan portfolio, the closing of a new $1 billion securitization, and a pending internalization transaction that management said could add non-balance-sheet earnings streams to support future dividends.
Management highlights portfolio growth and a new $1 billion securitization
President and CEO Mark Fogel said the company continued executing a strategy it has pursued since acquiring the ACR management contract in 2020, which he described as focusing on originating “high-quality loans,” aggressively managing the portfolio, repurchasing stock, and using tax assets.
Fogel said the company completed a new securitization during the quarter: ACRES 2026-FL4, a $1 billion CRE securitization with 86.5% leverage at SOFR plus 1.68% and a 30-month reinvestment period. He said the company completed ramp-up investments during the first quarter and expects to “see the full run rate benefit of the transaction in the second quarter.”
Fogel also said the securitization contributed to a higher leverage profile in line with prior objectives. The company’s GAAP leverage increased from 2.8x at December 31 to 3.4x at March 31, which he said was a stated objective “to increase portfolio leverage and the size of the CRE loan portfolio.”
On origination activity, Fogel said the company closed new commitments of $495.6 million during the quarter, which were partially offset by loan payoffs and net unfunded commitments totaling $121.2 million, producing a net increase to the loan portfolio of $374.4 million. The weighted average spread on newly originated loans was 3.09%, he said.
As of March 31, Fogel said the loan portfolio totaled $2.2 billion across 60 investments, with a spread of 3.29% over one-month Term SOFR. He added that more than half of the portfolio has SOFR floors above 3%, which he described as providing yield protection in a declining base-rate environment.
Credit metrics and portfolio health
Fogel said the portfolio “generally continues to perform,” attributing results to underwriting and “proactive asset management.” He noted the weighted average risk rating improved to 2.5 at March 31 from 2.7 at December 31. The number of loans rated four or five was 10, unchanged from the end of the fourth quarter.
He also said that, based on the company’s economic interest, the share of the CRE loan portfolio rated 4 or 5 was 14% at March 31, down from 17% at December 31.
Real estate sale produces a gain; net interest income dips during securitization ramp
Fogel said the company sold a real estate investment in the Greater Philadelphia area during the quarter, resulting in a $3.3 million GAAP and EAD gain. He framed the sale as part of the company’s broader real estate investment strategy, referencing prior transactions including “the sale of an office building in 2024” and a student housing development and sale in Florida.
Chief Financial Officer Eldron C. Blackwell reported that GAAP net loss allocable to common shares in the first quarter was $1 million, or $0.16 per share. Blackwell said results included $9.3 million in net interest income, down $1.4 million from the prior quarter. He attributed the decrease primarily to the ramp-up period for the new securitization and lower fee recognition from loan payoffs, reiterating the expectation for a full run-rate impact in the second quarter.
Blackwell said the quarter also included:
- A $1.3 million net decrease in the performance of net real estate operations, resulting in a net loss of $1.2 million
- A $3.3 million net gain on the previously mentioned land sale
On credit reserves, Blackwell said the company recorded a $1 million decrease in current expected credit loss (CECL) reserves, or $0.15 per share. He said the change was “primarily driven by improvements in projected macroeconomic factors,” partially offset by “an increase in the model credit risk of the company’s loan portfolio.”
At March 31, Blackwell said the total allowance for credit losses was $19.4 million, representing 0.88% (88 basis points) of the $2.2 billion loan portfolio at par, and was “composed entirely of general credit reserves.”
Blackwell reported earnings available for distribution (EAD) of $0.02 per share for the first quarter of 2026, compared with an EAD loss of $0.48 per share in the fourth quarter.
GAAP book value per share was $29.98 at March 31, compared with $30.01 at December 31, he said.
Liquidity, leverage, and tax attributes
Blackwell said available liquidity at March 31 totaled $87 million, consisting of $48 million of unrestricted cash and $38 million of projected financing available on unlevered assets. He also reiterated that the GAAP debt-to-equity leverage ratio rose to 3.4x, primarily due to the securitization closing.
Blackwell said the company ended the quarter with net operating loss carryforwards of $32.1 million, or approximately $4.89 per share.
Internalization transaction: timing, dividend framework, and pro forma questions
In prepared remarks, Andrew Fentress discussed what he described as an “internalization combination” and said the rationale was to “be the best resource possible for our middle-market customers.” Fentress said ACRES offers “a complete dirt-to-perm financing solution program” and described the business as a roughly $5 billion platform that management expects to continue growing.
Fentress said that after the merger, ACRES employees and board members are expected to be the largest shareholders in the company, with “over a 40% interest.” He also said “management will remain in place” and that owners and employees received 100% of their consideration in ACR shares “at book value.”
During Q&A, management said the internalization is expected to be presented at the annual shareholder meeting scheduled for June 22, with an anticipated closing “shortly thereafter,” most likely in July.
Management also told analysts the combined company will include an asset management component, with the public entity serving as the registered investment advisor for an existing asset management business in fund and separately managed account (SMA) structures. Management said those fees would “flow up to the public company” and be available to include in EAD going forward, adding that it expects to drive “non-balance sheet related revenues” that could support “higher and increasing EAD.”
On dividends, management said its general view is to “pay them as we earn them,” and that after the companies combine it expects to have a clearer view of earnings power and then distribute earnings through EAD “as they’re earned.”
When asked about issuing capital, management said it wants to grow “accretively,” and that issuing at or above book value would align with that approach. Management also said one advantage of the transaction is the potential to target a higher dividend “without increasing leverage,” because non-balance-sheet earnings could lift distributable earnings without additional balance-sheet leverage.
Asked for an estimated pro forma book value for the transaction, management said, “Not at this time.”
Separately, when asked about deploying liquidity and whether the company is close to fully invested, management said it considers the company “fully invested” today, adding that as it expects to drive a dividend, it hopes to eventually reach a point where it can “issue and grow from there.”
About ACRES Commercial Realty NYSE: ACR
ACRES Commercial Realty Corp., a real estate investment trust (REIT), focuses on the origination, holding, and management of commercial real estate mortgage loans and equity investments in commercial real estate property in the United States. It invests in commercial real estate-related assets, including floating-rate first mortgage loans, first priority interests in first mortgage loans, subordinated interests in first mortgage loans, mezzanine financing, preferred equity investments, and commercial mortgage-backed securities.
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