Good day, ladies and gentlemen, and welcome to the Third Quarter 2025 ACRES Commercial Realty Corp. Earnings Conference Call. As a reminder, this call is being recorded. I would like to now introduce your host for today's conference, Kyle Brengel, Vice President, Operations. You may begin.

Good morning, and thank you for joining our call. I would like to highlight that we have posted the third quarter 2025 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the company. Before we begin, I want to remind everyone that certain statements made during this call are not based on historical information and may constitute forward-looking statements. When used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. Although the company believes these forward-looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to several trends, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q and 10-K, and in particular, the Risk Factors section of its Form 10-K. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures may be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most comparable measures, prepared in accordance with generally accepted accounting principles, are contained in the earnings presentation for the past quarter. With me on the call today are Mark Fogel, President and CEO; and Eldron Blackwell, ACR's CFO. I will now turn the call over to Mark.

Good morning, everyone, and thank you for joining our call. Today, I will provide an overview of our loan operations, real estate investments and the health of the investment portfolio, while Eldron Blackwell, our CFO, will discuss the financial statements, liquidity condition, book value and operating results for the third quarter 2025. Of course, we look forward to your questions at the end of our prepared remarks. The ACRES team remains focused on executing on our business strategy by building a pipeline of high-quality investments, actively managing the portfolio and focusing on growth in both earnings and book value for our shareholders. In the third quarter, we funded new commitments of $106.4 million, offset by loan payoffs, sales and paydowns of $153.2 million, producing a net decrease to the loan portfolio of $46.8 million. We expect a substantial number of new loan closings in the fourth quarter, which will produce positive growth in the portfolio for the full year. The weighted average spread of the floating rate loans in our $1.4 billion commercial real estate loan portfolio is now 3.63% over 1-month term SOFR rates. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1.4 billion of commercial real estate loans across 46 individual investments. At September 30, our weighted average risk rating was 3.0, an increase from 2.9 at June 30, and the number of loans rated 4 or 5 was 13, both at the end of last quarter and the end of this quarter. During the quarter, we sold one of our real estate investments, which resulted in a gross capital gain of $13.1 million. This gain on sale represented a significant part of our strategic plan to use our capital loss carryforward to maximize shareholder value. During the quarter, we also closed on a construction loan with a third-party lender to convert an REO office property in Chicago to a Class A 252-unit multifamily property. The property had previously been contributed to a joint venture with a Chicago-based developer. We expect the grand opening of the property during Q3 2026. As we exit our real estate investments and the loan portfolio continues to amortize, we expect to redeploy capital into attractive CRE loans. As always, we will seek to optimize our portfolio leverage in order to drive equity returns. In summary, the ACRES team continues to be focused on the overall quality of the investment portfolio, including investments in real estate with the goal of improving credit quality and recycling capital into new investments to enhance shareholder value. We will now have ACR's CFO, Eldron Blackwell, discuss the financial statements and operating results during the third quarter.

Thank you, and good morning, everyone. GAAP net income allocable to common shares in the third quarter was $9.8 million or $1.34 per share diluted. GAAP net income for the quarter included a $13.1 million gross gain on the sale of one of our real estate investments, as Mark discussed. Net real estate operations declined by $2.7 million over the prior quarter due to a loss of $2.8 million. Of that loss, $2 million was due to exit fees on the construction and Pace financing and other accelerated costs on the balance sheet from the aforementioned real estate investment sale and to a lesser extent, from the operating performance at our two hotels. During the quarter, we saw a decrease in current expected credit losses or CECL reserves of $4 million or $0.54 per share as compared to a decrease in CECL reserves during the second quarter of $780,000, which was primarily driven by improvements in the modeled credit risk of our CRE loan portfolio and improvements in expected macroeconomic factors during the quarter. The total allowance for credit losses at September 30 was $26.4 million and represented 1.89% or 189 basis points on our $1.4 billion CRE loan portfolio at par and was composed of $4.7 million in specific reserves and $21.7 million in general credit reserves. Earnings available for distribution, or EAD, for the third quarter 2025 was $1.01 per share as compared to $0.04 per share for the second quarter. Quarter-over-quarter, EAD saw a net $1.30 increase due to the real estate investment gain on sale, offset by a $0.37 decrease from real estate operations. The net EAD gain is our allocable portion of the gain based on our ownership percentage in the investment. GAAP book value per share was $29.63 on September 30 versus $27.93 on June 30. Additionally, during the quarter, we used $2.9 million to repurchase 153,000 common shares at an approximate 36% discount to book value at September 30. There was approximately $2.5 million remaining on the Board-approved program at quarter end. Available liquidity at September 30 was $64 million, which comprised $41 million of unrestricted cash and $23 million of projected financing available on unlevered assets. Our GAAP debt-to-equity leverage ratio decreased to 2.7x at September 30 from 3x at June 30 from net repayments on our CRE loan portfolio and the payoff of asset-specific financing on the sold real estate investment. At the end of the third quarter 2025, the company's net operating loss carryforward was $32.1 million or approximately $4.55 per share. With that, I will turn the call to Andrew Fentress for closing remarks.

Thank you, Eldron. The third quarter showed progress on our stated goals of selling assets and redeploying the gains into new loans. We're nearly complete on this mission and are excited about the next steps. We have a full pipeline that will soon be available for securitization and get the company on track to maximize income in EAD. This quarter marked the fifth anniversary since we assumed the role of manager for ACR. In this 5-year period, book value has increased 12.7% per year, and the stock has increased 41.8% per year. We're excited for the next chapter in the company's evolution and look forward to your questions. I'll now turn the call back over to the operator. Thank you.

Operator Instructions. And we'll take our first question from Matthew Erdner with JonesTrading.

Congrats on a solid quarter there. As it relates to the asset-specific financing or the reinvestment there, what are you guys looking for in the market to kind of go out with a CLO? Or is it just a matter of getting some originations out the door in the fourth quarter, get the portfolio a little bit bigger and then go into the market?

Yes. Thanks, Matt. It's really what you just said in the latter part of your question, which is we're in the marketplace, originating new loans currently. We expect by the end of the fourth quarter, beginning of the first quarter to have sufficient collateral on warehouse to execute a transaction sometime in Q1.

Got it. And then as a follow-up to that, it looks like there's no fully extended maturities for the remainder of the year. Are you guys expecting any loans to pay off early? And if not, have you guys committed any capital loans quarter-to-date just to try and target kind of that 1.5 to 1.7 year-end target that you guys have laid out in the past?

Yes. We don't see anything significant with respect to payoffs at this juncture. And yes, we're still on the same target for net growth that we've laid out in the past.

Got it. That's helpful. And then as it relates to those loans, do you expect to be more active on the construction side or as a part of the bridge that you guys have done in the past also?

In the REIT, we do not typically provide construction financing. On the other side of our business, within our fund business, we do provide construction loans, which actually is a help to the REIT eventually as we provide bridge loans to those construction loans to take those out. So we are active on the construction financing side, but on the fund part of our business, which will eventually benefit the REIT as those loans migrate into bridge loans.

We'll put some numbers on that real quick. So right now, in the portfolio on the fund side, there's about $650 million to $700 million of construction that's underway. And as Mark said, we expect some percentage of that over time to migrate into the REIT through the reinvestment periods of the CRE CLO.

Operator Instructions. We'll take our next question from Chris Muller with Citizens Capital Markets.

Nice to see the market rewarding you guys with your stock up 10% this morning. Also, great to see the REO sale and growth in book value. And kudos to you guys for being patient and sticking to your strategy. Do you have any thoughts of where book value could settle once the remaining properties get sold? Or maybe asked a little bit differently, should we expect further chunky increases to book value as those properties get sold?

This is Andrew. I think we've said our target when we took over was approximately $30 a share. So we're creeping up on that objective. I don't want to give guidance really too much ahead or above that. There are really three properties that are remaining, and I think with what we know about those, the $30 is a reasonable objective.

Got it. And then I guess on property sales, following up on that a little bit. With the Fed now back on an easing cycle, have you guys seen a pickup in interest in those properties? And is there anything that you could share on potential timing of future sales? Is that like a 1Q type event? Or is it going to come later in the back half of '26?

I think on one of them, we've got reasonable visibility sometime in the next couple of quarters. And the other are operating businesses that will probably benefit from a valuation as the Fed eases a little bit, but we'll really rely more heavily on the operating metrics of the properties themselves, less so on multiples.

Got it. And just one more, if I could throw it out there. And you guys get asked this question a lot, but I'm going to throw it out there anyway. Is there anything that you can share on potential dividend and any timing around that?

Yes. We've stated pretty clearly that once we hit our book value objectives, and we think we've gone through the exercise of monetizing the assets and utilizing the tax gains or the tax losses of the gains we have that, that would be an appropriate time to begin paying a dividend again. And as I said, we're getting close. We really only got one or two more to sell.

Congrats again on a really great quarter.

Operator Instructions. And it looks like we have no additional questions at this time. I'd like to now turn it back over to our speakers for any closing or additional remarks.

Great. Thank you so much, operator, for hosting the call. We appreciate everybody's participation. If anybody has questions or follow-ups, we're always available. We look forward to talking to you again soon, one-on-one or at our next quarterly call. Thank you so much. Have a great holiday season, everybody.

Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.