ACRES Commercial Realty(ACR)2025-03-14 22:23Loan Portfolio - As of December 31, 2024, the company's CRE loan portfolio at par comprised 47.9 million during the year ended December 31, 2024[17]. - The total CRE loan portfolio at carrying value was 10.0 million and 1.9 billion of assets, including 1.7 billion, with CRE whole loans representing 87.41% of the portfolio[33]. - The carrying value of investments in real estate was 201.125 million in properties held for sale[49]. - At December 31, 2024, the company held three investments in real estate acquired through direct equity investments and four from lending activities[48]. Financial Performance and Risks - The company has 121.9 million of net capital loss carryforwards, set to expire on December 31, 2025[35]. - Current economic conditions may limit the company's ability to obtain necessary capital and financing for growth, potentially affecting profitability and stock price[78]. - The company has financed a significant portion of its portfolio through leverage, which may reduce returns on investments and cash available for distribution[82]. - A prolonged economic slowdown could impair investments and harm operations, particularly if real estate values decline[79]. - The company may incur losses on repurchase transactions if counterparties default or if the value of underlying assets declines[88]. - The current expected credit losses model may require an increase in the allowance for credit losses, adversely affecting financial condition[77]. Management and Governance - The Management Agreement's current contract term ends on July 31, 2025, with automatic one-year renewals unless terminated[58]. - The Company has no direct employees; all management and support personnel are provided by its Manager under the Management Agreement[70]. - The management fee structure may incentivize the manager to recommend strategies that increase equity, potentially at the expense of optimizing returns for stockholders[137]. - Termination of the management agreement without cause is difficult and costly, requiring a two-thirds vote from independent directors or a majority vote from common stockholders[142]. Regulatory Compliance - The Company operates to be excluded from regulation under the Investment Company Act, ensuring that at least 55% of ACRES RF's assets consist of Qualifying Interests[63]. - ACRES RF must maintain that less than 40% of the value of its total assets consists of "investment securities" to comply with the Investment Company Act[65]. - The company relies on exclusions from registration as an investment company, which could be jeopardized by changes in asset composition or regulatory requirements[158][159]. - To maintain REIT status, the company must distribute at least 90% of its REIT taxable income, and failure to do so could result in corporate income tax and a 4% nondeductible excise tax[174]. Market and Economic Conditions - Increased interest rates could lead to reduced investment values, lower earnings, and decreased ability to pay distributions, particularly affecting CRE-related loans[108]. - Inflationary pressures in the U.S. economy, driven by heightened consumer demand and supply chain imbalances, could compromise property performance and mortgage loan performance[109]. - The transition to alternative reference rates may adversely affect the value of loans and investments, impacting results of operations and cash flows[111]. Cybersecurity and Operational Risks - The company has a robust cybersecurity risk management strategy overseen by its Manager, ACRES Capital Corp[192]. - Cybersecurity risks have not materially affected the company's business strategy or financial condition[195]. - The company relies heavily on information systems, and failures or cybersecurity incidents could disrupt operations and negatively impact stock price[103]. Shareholder and Stock Information - The company has 7,456,150 shares of common stock outstanding as of March 13, 2025, held by 180 holders of record[208]. - The Series D Cumulative Redeemable Preferred Stock has a dividend rate of 7.875% and is listed on the NYSE under the symbol "ACRPrD"[212]. - Dividends on the Series D Preferred Stock have been declared and paid through January 2025, with no dividends currently in arrears[212]. - The company has not established a minimum distribution payment level and may use uninvested offering proceeds or borrowed funds for future distributions[157].