Core Insights - The company experienced a transition year in 2025 for the commercial real estate market, with macroeconomic and geopolitical uncertainties impacting valuations and transaction activity [1] - The second half of 2025 saw improved conditions as the Federal Reserve eased monetary policy, leading to increased transaction volumes and stabilizing values [4] - The company achieved its goal of maintaining flexibility on its balance sheet with moderate leverage and over $100 million in liquidity [4] Financial Performance - For the full year 2025, the company reported a GAAP net loss of $1 million or $0.02 per diluted common share, and a distributable earnings loss of $7 million or $0.12 per diluted common share [13] - The company closed 13 new loan commitments totaling $486 million in 2025, with over 50% collateralized by residential and industrial properties [10] - The loan portfolio reached an outstanding principal balance of $1.6 billion, a 24% increase compared to 2025 [15] Loan Management - The company reduced office loans by 30% since year-end 2024 to $447 million, and office loans now represent 28% of the total loan portfolio, down from 38% at the end of 2025 [5][15] - There are five remaining risk-rated four and five loans, with the two largest comprising approximately 85% of the overall balance [6] - The largest risk-rated five loan is a Chicago office with a carrying value of $140 million, while the second largest is a Brooklyn residential condominium loan valued at $130 million [7] Strategic Focus - The company aims to resolve the remaining risk-rated four and five loans to support portfolio growth and earnings [11] - A regular cash dividend of $0.15 per common share was declared for 2026, reflecting confidence in the execution of the business plan [12] - The company has a flexible balance sheet with available capital of $110 million and increased borrowing capacity by $250 million [21] Market Outlook - The Ares real estate debt platform originated over $9 billion globally in new commitments in 2025, nearly double that of 2024 [11] - The company is focused on addressing risk-rated loans while also exploring new investment opportunities in various sectors, particularly avoiding office properties [30] - The origination activity is expected to continue, with a target debt-to-equity ratio of 3.0, supporting a loan portfolio size of approximately $2 billion [43]