Thank you. Good day, ladies and gentlemen, and welcome to the First Quarter 2026 ACRES Commercial Realty Corp. Earnings Conference Call. As a reminder, this call is being recorded. I would now like to 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 first quarter 2026 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 for 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; Andrew Fentress, Chairman of ACR; 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 first quarter of 2026. Of course, we look forward to your questions at the end of our prepared remarks. Since acquiring the ACR management contract in 2020, we have executed on our strategy to drive book value by originating high-quality loans, aggressively managing the portfolio, repurchasing our stock and creatively using tax assets available to the company. As part of that strategy, this quarter, we sold another of our real estate investments and realized a $3.3 million GAAP and EAD gain. This sale, coupled with the sale of an office building in 2024 and our development and sale of the student housing project in Florida and other projects were key components to our real estate investment strategy. The gains on the real estate investments, stock repurchases and retained earnings raised our book value by 66% since 2020, $29.98 per share. We deployed the proceeds from sales back into our loan book, originating high-quality loans and this quarter closed on our new CRE securitization. ACRES 2026-FL4 is a $1 billion CRE securitization that has leverage of 86.5% at SOFR plus 1.68%, and includes a 30-month reinvestment period. We completed the ramp-up period investments during the first quarter of 2026, and we'll see the full run rate benefit of the transaction in the second quarter. This is the fourth securitization transaction that we have completed at the REIT. We were able to increase our GAAP leverage from 2.8x at December 31 to 3.4x at March 31, which was a stated objective we had last year to increase portfolio leverage and the size of the CRE loan portfolio. In the first quarter of 2026, we closed new commitments of $495.6 million, 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 is 3.09%. We have increased the loan portfolio to $2.2 billion and 60 investments as of March 31, and the spread is now 3.29% over 1-month term SOFR rates. We now have over half of the portfolio at SOFR floors of over 3%, so we have yield protection in a declining base rate environment. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. At March 31, our weighted average risk rating was 2.5, a decrease from 2.7 at December 31, and the number of loans rated 4 or 5 was 10, no change from the end of the fourth quarter. The portion of our CRE loan portfolio rated 4 or 5 based on the company's economic interest was 14% at March 31, down from 17% at December 31. As noted earlier, we are excited to announce that we sold one of our real estate investments in the Greater Philadelphia area this quarter, which resulted in a GAAP and EAD gain of $3.3 million. We will now have ACR's CFO, Eldron Blackwell, discuss the financial statements and operating results during the first quarter.

Thank you, and good morning, everyone. GAAP net loss allocable to common shares in the first quarter was $1 million or $0.16 per share. GAAP net loss for the quarter included $9.3 million in net interest income, which was a decrease of $1.4 million over the prior quarter. This decrease in net interest income was primarily driven by the ramp-up period of our new CRE securitization, combined with lower fee recognition from loan payoffs. As Mark noted, we'll see the run rate impact of the fully invested FL4 securitization during the second quarter. GAAP net loss for the quarter also included a $1.3 million net decrease in the performance of our net real estate operations to a net loss of $1.2 million and a $3.3 million net gain on the sale of the previously mentioned land sale in the Philadelphia area. We saw a decrease in current expected CECL losses or CECL reserves of $1 million or $0.15 per share as compared to a decrease in CECL reserves during the fourth quarter of $1.3 million, which was primarily driven by improvements in projected macroeconomic factors during the quarter, offset by an increase in the model credit risk of the company's loan portfolio. The total allowance for credit losses at March 31 was $19.4 million and represented 0.88% or 88 basis points on our $2.2 billion loan portfolio at par, and was composed entirely of general credit reserves. EAD for the first quarter of 2026 was $0.02 per share as compared to an EAD loss of $0.48 per share for the fourth quarter. GAAP book value per share was $29.98 on March 31 versus $30.01 on December 31. Available liquidity at March 31 was $87 million, which comprised $48 million of unrestricted cash and $38 million of projected financing available on unlevered assets. Our GAAP debt-to-equity leverage ratio increased to 3.4x at March 31 from 2.8x at December 31, primarily from the closing of the securitization. At the end of the first quarter 2026, the company's net operating loss carryforwards were $32.1 million or approximately $4.89 per share.

Thank you, Eldron. Along with the entire ACRES team and Board members of ACRES Commercial Realty, I'm thrilled to announce the internalization combination of these two companies. The logic for the combination is simple: to be the best resource possible for our middle market customers. To be the best partner, we have to offer creative solutions, competitive, flexible capital and exceptional customer experience. Today, ACRES provides a complete dirt-to-perm financing solution program. As we continue to grow this roughly $5 billion platform, our offering and service will only improve, further driving value for all of our stakeholders. Post the merger, the ACRES employees and board members will be the largest shareholders in the company with over a 40% interest. This will keep us directly aligned with our other shareholders and focused on credit, customers and costs. Over time, we want to deliver a sector-leading return profile defined by consistent above-market dividends while employing modest leverage with complete transparency. Management will remain in place. All the ACRES owners and employees received 100% of their consideration for this transaction in ACR shares at book value, signaling our belief in the long-term success of this company. While we humbly recognize the challenges in our market, ACRES is front-footed and growing. We love to compete each day and look forward to working with each of you in the coming years. In addition to our regular shareholder presentation for the Q1, we've also added a short presentation to help further explain the merit of the transaction. Both can be found on our website. This concludes our opening remarks. I'll now turn the call back to the operator for questions.

We'll take our first question from Matthew Erdner with JonesTrading.

Congrats on all the continued progress and on the internalization announcement. I'd like to touch on that first: the timing of it — why now and why you felt it was a good time? Then, the economic impact going forward if this were to be approved.

Sure. With respect to the timeline, the expectation is that this will be an item in our Annual Shareholder Meeting, which is scheduled for June 22, and then we would expect it to close shortly thereafter, most likely in the July time frame. With respect to why now, we feel there is a great market opportunity. We have positive momentum as a firm and as a team, and we felt the relative size of the two companies made sense to do it at this juncture in our trajectory. On economic impacts, we've outlined a lot of it in the deck that's available for shareholders. The punchline is we expect to be able to drive non-balance-sheet-related revenues from our asset management activities and other operations that exist inside of ACRES today that will all flow up and be available to pay higher and increasing EAD.

Got it. That's helpful, I appreciate that. As it relates to the $87 million in liquidity, would you say you're close to fully invested from a loan portfolio size? How should we think about that and capital deployment going forward?

Yes. Today, we would say that we're fully invested. Part of the strategy is that as we expect to drive a dividend, that will get us to a place where we hope to be able to issue and grow from there.

We'll move on to Chris Muller with Citizens Capital Markets.

Really great to see the merger and internalization announcement. Once the transaction closes, what will the combined company look like? Will it look like just a larger ACR with the servicing portfolio, or are there other complementary businesses that are part of ACRES that will be part of the combined company?

The company will have an asset management component. The public entity will be the registered investment adviser for an existing asset management business that resides inside funds and SMA structures. Those fees will flow up to the public company and be available to be included in the EAD calculation on a go-forward basis.

I see you mentioned that EAD supports a common dividend in the press release. Should we expect a dividend to be implemented quickly once the transaction closes, or will you get everything integrated and then address the dividend down the road?

Our general view on dividends is we will pay them as we earn them. Once the companies combine, we'll have a clearer picture on the earnings power of the company, and we expect to distribute those earnings through EAD as they are earned.

We'll move on to Gabe Poggi with Raymond James.

With the internalization happening at book value and management being aligned at book, is book value the benchmark for new capital as you grow the business?

Yes, Gabe, we believe in doing things accretively for shareholders. I think we've demonstrated that by repurchasing shares at a discount. As we expect to grow the company, we want to do it accretively as well. By definition, that means we're issuing at or above book value going forward.

A follow-up on leverage: where is your comfort level on total leverage to common? Or do you think about it as total leverageable capital inclusive of preferred and non-controlling interest?

We expect to be very comfortable at four turns. One of the advantages of the transaction is that we can target a higher dividend without increasing leverage. Over time, having non-balance-sheet-related earnings lets you increase earnings available for distribution without increasing balance-sheet leverage. We've shown three cases where we're basically all at 3.5x leverage with different assumptions for non-balance-sheet-related fees that drive dividends starting in the mid-single digits up into the mid-teens.

And it appears that we have no further questions at this time. I'd be happy to return the call to our hosts for any closing comments.

Great. Well, thank you all for attending the call this morning. We know there's a lot of information to digest in the presentation. Please follow up with us directly with any questions going forward, and we look forward to all the conversations. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.