Good morning, and welcome to Ares Commercial Real Estate Corporation's Third Quarter Earnings Conference Call. As a reminder, this conference is being recorded on Friday, November 7, 2025. I will now turn the call over to Mr. John Stilmar, Partner of Public Markets Investor Relations.

Thank you, and good morning, everybody. We appreciate you for joining us on today's conference call. In addition to our press release and the 10-Q that we filed with the SEC, we've posted an earnings presentation under the Investor Resources section of our website at www.arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast as well as the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipate, believe, expect, intend, will, should, may and similar expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgment. These statements are not guarantees of future performance, conditions or results and involve a number of risks and uncertainties. The company's actual results could differ materially from those expressed in the forward-looking statements as a result of a number of factors, including those listed in its SEC filings. Ares Commercial Real Estate assumes no obligation to update any such forward-looking statements. During this conference call, we'll refer to certain non-GAAP financial measures. We use these as measures of operating performance, and these measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like-titled measures used by other companies. Now I'd like to turn the call over to our CEO, Bryan Donohoe. Bryan?

Thanks, John. Good morning, everyone, and thanks for joining us today. I'm here today with Jeff Gonzalez, our Chief Financial Officer; Tae-Sik Yoon, our Chief Operating Officer; as well as other members of the management and Investor Relations teams. In the third quarter, we continued to execute against our strategic objectives of maintaining a strong balance sheet, addressing our risk-rated 4 and 5 loans, and further reducing our office loans. Our execution against these goals drove increased sequential quarterly earnings, stable CECL reserves, and consistent book value per share while reducing our net debt-to-equity ratio as compared to the prior quarter. Supported by the strength of our balance sheet and the progress within our risk-rated 4 and 5 loan portfolio, we broadened the company's strategic objectives to include more active capital deployment. We believe the collective execution against these goals will ultimately result in a larger and more diversified loan portfolio and drive long-term earnings growth for our investors. Let me now walk you through the specifics of our progress this quarter and outline the framework for how we expect these initiatives to evolve. Across the Office portfolio, we saw improved leasing and market fundamentals supported by a more positive demand environment. During the third quarter, we reduced the Office portfolio to $495 million, a decrease of 6% quarter-over-quarter and 26% year-over-year. This decrease was driven by both normal course repayments and the strategic restructuring of a risk-rated 4 loan collateralized by a well-leased New York City office property. At the end of the third quarter, 5 of our 7 remaining office loans were risk-rated 3 or better. Shifting now towards our progress in addressing our risk-rated 4 and 5 loans. During the third quarter, we had a $28 million loan collateralized by a multifamily property migrate though we expect an expeditious resolution. Discussions are ongoing, but we view the potential loss severity, if any, as low as the occupancy of the property now exceeds 95%. The other movement across our risk-rated 4 and 5 loans in the quarter came from the resolution of an $11 million previously risk-rated 4, subordinated loan collateralized by an office property in Manhattan. The underlying property has had strong leasing over the past 6 months, achieving over 80% occupancy. With the progress of the property and a strong borrower relationship, we amended the capital structure to combine a $59 million risk-rated 3 senior loan and a portion of the $11 million risk-rated 4 subordinate loan into a single larger $65 million senior loan secured by the same property. In exchange, we extended the final maturity of the loan by 2 years to provide for further market stabilization. Although the restructuring resulted in a realized loss of $1.6 million, the CECL reserve was reduced by approximately $7 million. Furthermore, following the end of the quarter, we completed a restructuring of an $81 million senior loan collateralized by an office property in Arizona that was lowered to a risk-rated 4 during the second quarter. Since then, we've seen positive leasing momentum at the property and continued sponsor support in the form of additional equity capital. In response to these positive developments, in the fourth quarter, we restructured the loan to provide greater flexibility for the sponsor to complete the business plan. When looking at our risk-rated 4 and 5 loans in aggregate, 2 loans comprise more than 70% of the outstanding principal balance. The first of these 2 loans is our risk-rated 5 Chicago office loan, which has a carrying value of $141 million and remains on non-accrual. Fundamentals at this property remain sound with occupancy above 90% and a weighted average lease term of more than 8 years. Discussions with the borrower are ongoing, and among the options we are exploring with the borrower is a potential sale of the asset. The second of the 2 is a risk-rated 4 Brooklyn, New York residential condominium loan with a carrying value of $120 million. During the quarter, construction continued, and we anticipate the formal marketing process for the sale of the underlying condominium units to begin later in the fourth quarter of this year. We're proud of the progress we've made on the risk-rated 4 and 5 loans and remain committed to driving continued improvement in the portfolio. Our risk-rated 1-3 loans continue to perform well and are primarily collateralized by multifamily, industrial, and self-storage properties. As we continue to make improvements across the portfolio and collect repayments that further bolster our balance sheet, we are able to accelerate our investment activity into what we see as an accretive market opportunity given the market presence and capabilities of the Ares Real Estate Group. Through continuous investment, Ares now operates one of the largest vertically integrated Real Estate platforms globally, which supports broader sourcing and credit capabilities. The Ares Real Estate Group has grown to over 740 Real Estate professionals. Consistent with the expansion of the Ares Real Estate Group, the Ares Real Estate Debt Strategy has experienced meaningful growth and incremental scale. In the last 12 months, the Real Estate Debt Group has originated more than $6 billion in new loan commitments, a meaningful step function change in terms of scale and capital deployment as compared to 5 or 6 years ago. We believe ACRE is well positioned to capitalize on this expanded scale of the Ares Real Estate Platform. During the third quarter, we closed 5 new loan commitments totaling $93 million across multifamily and self-storage properties. Our investing momentum has continued into the fourth quarter, closing over $270 million of loans across 5 new loan commitments collateralized by industrial, multifamily, hotel, and self-storage properties. One important, but maybe less obvious way ACRE is benefiting from the investment scale of the Ares platform is through the ability to co-invest with other Ares Real Estate funds. Beginning in the third quarter, more than half of ACRE's new commitments were co-investments with other Ares Real Estate vehicles. We believe the ability for ACRE to co-invest results in a more granular and diversified portfolio while also allowing ACRE to transcend its capital base to invest in larger institutional quality Real Estate. An additional benefit from the Ares platform, which underscores the attractiveness of our recent originations, is our ability to obtain accretive financing terms with advance rates between 75% and 80%. Importantly, we believe the types of loans closed in the third and fourth quarter with favorable financing profiles could provide a window into what ACRE's reshaped portfolio and financial profile could look like in the future. As we look ahead, we remain confident in ACRE's long-term earnings potential. We believe the path to achieving earnings growth will ultimately depend on our continued resolutions on our non-accrual loans, which total approximately $170 million of carrying value, net of applicable CECL reserves as well as reinvesting the proceeds to expand our loan portfolio. Although we expect the current pace of repayments to continue in the near term, we're focused on redeploying the capital from repayments efficiently to minimize the earnings drag. That being said, our goal is to return to portfolio growth in the first half of 2026. Let me now turn the call over to Jeff, who will provide more details on our third quarter results.

Thank you, Bryan. For the third quarter of 2025, we reported GAAP net income of approximately $5 million or $0.08 per diluted common share. Our distributable earnings for the third quarter of 2025 was approximately $6 million or $0.10 per diluted common share. This includes the impact of the realized loss of $1.6 million or $0.03 per diluted common share related to the restructuring of the risk-rated 4 loan collateralized by an office property. Distributable earnings for the third quarter, excluding this loss, was approximately $7 million or $0.13 per diluted common share. Additionally, during the third quarter, we collected $2 million or $0.03 per diluted common share of cash interest on loans that were on non-accrual and was accounted for as a reduction in our loan basis. We continue to strengthen our financial flexibility and balance sheet positioning. We lowered our net debt-to-equity ratio, excluding CECL, to 1.1x at the end of the third quarter, a decrease from 1.2x quarter-over-quarter and 1.8x year-over-year. We further reduced our outstanding borrowings to $811 million at the end of the quarter, a decrease of 9% quarter-over-quarter and a decrease of 40% year-over-year. We collected an additional repayment during the quarter, bringing the year-to-date total repayments to $498 million, more than double the amount we collected at this time last year. These repayments further bolstered our liquidity position and financial flexibility, allowing us to focus on both of our objectives of accelerating resolutions on risk rated 4 and 5 loans and now accelerating investment activity. We expect current market conditions to result in a continued pace of repayments across our portfolio. Bolstered by the amount of repayments received during the third quarter, we maintained our strong liquidity position. As of September 30, 2025, our available capital was $173 million, including $88 million of cash. Turning to our CECL reserve. The total CECL reserve declined to $117 million as of September 30, 2025, a decrease of approximately $2 million from the CECL reserve as of June 30, 2025. This reduction was primarily due to the restructuring of the risk-rated 4 office loan previously mentioned and other loan-specific attributes. The total CECL reserve at the end of the third quarter of $117 million represents approximately 9% of the total outstanding principal balance of our loans held for investment. 95% of our total $117 million CECL reserve or $112 million relates to our risk-rated 4 and 5 loans, and approximately half of this is attributed to the only risk-rated 5 loan in the portfolio. Overall, the $112 million of reserves attributable to our risk-rated 4 and 5 loans represents approximately 25% of the outstanding principal balance of those risk-rated 4 and 5 loans. Both CECL and our book value remained relatively stable quarter-over-quarter. Our book value is $9.47 per share, which includes the $117 million CECL reserve. Our goal remains to prove out book value over time while advancing our efforts to rebuild earnings and reestablish full dividend coverage. We believe the progress we have achieved thus far is a clear reflection of our commitment, and we remain confident that our continued deliberate action will further crystallize these results. To conclude, the Board declared a regular cash dividend for the fourth quarter of 2025. The fourth quarter dividend will be payable on January 15, 2026, to common stockholders of record as of December 31, 2025. At our current stock price on November 4, 2025, the annualized dividend yield on our third quarter dividend is approximately 14%. With that, I will turn the call back over to Bryan for some closing remarks.

Thank you, Jeff. We believe our financial position and results continue to demonstrate meaningful progress against our goals. The overall portfolio is exhibiting stable to improving underlying fundamentals, and the more active Real Estate market is providing a firm backdrop for repayments and transaction activity. We have a strong conviction that the power of the Ares platform and the expanded presence of the overall Ares Real Estate team provides us with the right people, deep capabilities, and robust Real Estate footprint to further execute upon our expanded goals. Through consistent execution, we are confident that ACRE is on the right track to drive shareholder value and benefit from the secular growth of the Commercial Real Estate lending opportunity. As always, we appreciate you joining our call today, and we'd be happy to open the line for questions.

We'll take our first question from Steve Delaney with Citizens Capital Markets.

Congratulations on a very solid quarter. Just a couple of pennies below full dividend coverage. As you explained to us, it’s interesting to look at the mix of your new loans in the third quarter versus what you shared with us about the loans originated post 9/30. So, 5 loans in the third quarter with an average loan size of $19 million, and that strikes me as middle market. And then when we look at the 5 loans in the fourth quarter, the average is $54 million, which looks more like it's beginning to creep into the large loan. Now I know averages can be misleading. But could you just comment on sort of your focus in the market, your niche Ares, your parent Ares can do pretty much anything they want. But for ACRE, for your mortgage REIT, your public mortgage REIT, where is your sweet spot? And sort of what should we expect in terms of average loan sizes? And is it safe to say that do you see yourself as primarily a middle market lender? So just a little bit about that portfolio strategy, if you could.

Yes, Steve, I appreciate the question, and it's a good one. The first thing I'd offer up is that we have a little bit of a denominator issue that we shouldn't read too much into in that the dataset we're extrapolating off of remains pretty small at this point. So, it's an absolutely fair question about where we're going to take it. And the first example of that would be in the loans closed in the quarter, that contained a good bit of self-storage assets, which by their nature, are going to have smaller tickets associated with them. And the notional balance will, as you say, look more like a middle market lender. We really, really like that asset class. We've created a few different approaches with which to participate in it despite the underlying assets remaining at least subjectively from an outsider viewpoint, subscale. So, when we kind of move the playbook forward and think about further repayments and then what does this portfolio theoretically look like going forward. We mentioned the ability to share in larger transactions with the broader Ares Real Estate platform, and we believe that to be an advantage in that we will be able to participate in larger institutional assets while taking a share that while continuing to be selective, will also allow for proper portfolio management or concentration, if you want to look at it from a different way. So when we think about the asset classes in which we've been most active across debt and equity here, our core competencies remain in industrial, we're the third largest owner in the world today, multifamily, where we've got a vertically integrated equity team sourcing and managing those opportunities, as well as student housing to some degree and self-storage to as much of a degree as we can find. So, we feel in those asset classes, we have more of a right to win given our equity background and orientation. And our view is that that would be a great portfolio to focus on for ACRE and its shareholders as well.

Those are great defensive property types. And what you're telling us is you might see an occasional office loan, but you're not, you don't see yourself as primarily as an office lender. That's what I'm taking away from your comments. And I think that's a positive characteristic. Just one final thing. This is big picture. We're a couple of years into this for the 20-some commercial mortgage REITs, we're a couple of years into kind of a rougher market. When you look back now, Bryan, at the loans that we're seeing today and the loans that you're booking today, what is the biggest difference you think between these today's loans and the 2021, '22 vintage, which has broadly performed pretty poorly. I'm just curious if there's 1 or 2 things that you see in today's market that are different.

Well, I think there's certainly supply and demand fundamentals has shifted. I think the office market, which has been well publicized broadly and the headwinds there. But those asset classes that are higher in CapEx have struggled more in an inflationary environment. So even when you look at strong performing office assets out there in the world today, generally, you're seeing TI packages that are higher than what would have been underwritten in 2020, '21, '22. So that's a pretty interesting shift. I think in terms of the broad-based change in the Real Estate market, we're now investing in an asset class that has reset materially lower in value. So, your attachment point as a lender has come down from a basis perspective while lesser competition is also allowing for lenders to dictate terms, the most significant of which will be the Loan-To-Value attachment point. So, the L in the equation is coming down, but the V has come down as well.

Our next question will come from Jade Rahmani with KBW.

It looks like a strong quarter and a big turning point. Just in terms of duration of timeline to work out the remaining risk 4 or 5 loans, noting that you mentioned 2 of those, Chicago and Brooklyn comprised 70%. But over what time period do you expect that to transpire?

Yes. It's a good question, Jade. Obviously, we have insights, but certain things that we can control there. We've got certainly progress toward each that we spoke of in our prepared remarks and market fundamentals around these assets generally either remain strong or trending in the right direction. I think for the last few quarters, we've talked about expediting resolutions where we saw it to be the best net outcome. Sometimes given our balance sheet flexibility, putting us in a position to accelerate those resolutions without it being overly punitive to the remaining balance sheet. I think we're constantly balancing the velocity plus the principal resolution of principal recovery in certain cases, and we'll continue to do so. But I think we're sitting in a more transparent seat than we were certainly 2 years ago. And there is no bigger focus for us than resolving these assets. So, we're going to continue to balance the ultimate price resolution with the velocity.

Can you comment on what drove the multifamily downgrade? I note that it has a December '25 maturity date. always looking at maturity dates. And I do see that 2 Texas multifamily have near-term maturity dates. One was in October. If you could comment on those. And just generally, multifamily, I know the Ares foothold in that sector, but we have seen pockets of credit issues this quarter in multifamily. So, a comment would be helpful.

Sure, Jade. I think with respect to the downgrade, obviously, you mentioned the upcoming maturity date. This is an asset that has seen, as we mentioned, an uptick in performance. But given that near-term maturity and probably a revenue and expense alignment that I think we're hoping to see continued progress on, but really driven just by that maturity date and working with the sponsor to make sure that we have adequate coverage and can create a flight path, I would say, for the proper resolution of the property in the near term. But clearly, the maturity date was the driver there. What we're seeing in multifamily generally, and then I'll come back to your question on the Texas asset is that demand continues to surprise to the upside in terms of absorption. But that absorption number of, I think it was close to 500,000 units nationally over the last 12 months is about 30% or thereabouts higher, maybe a little bit more than that, higher than a consistent yearly average. So, I think that speaks to the go-forward plan, but you're also seeing relatively stagnant rent growth over the last, call it, 90 to 180 days. So, a little bit of cross current there. But clearly, as a market, you're seeing digestion of a huge amount of supply and certainly differentiation amongst markets and amongst assets within those markets. So, what that leads to, I think, is a pretty positive outlook for the next 3 to 4 years, given the falloff in supply, but business plans that in certain markets are taking longer to materialize. So, the takeaway, what that leads to for us is potentially longer duration of investments, which in certain asset classes might not be reflective of strength. In this case, I think it's reflective of a more positive forward outlook. And bringing it back to your specific question on the Texas asset, that loan was extended for a short period of time for those purposes, to just allow that continued progress.

And that would be both of the Texas loans? $23 million?

Yes. I think it's, let me come back to you, Jade, but I think it's going to be a 1-year extension there. But really in the normal course for this one.

At this time, there are no further questions. So, I'd like to turn the call back over to Bryan for any additional or closing remarks.

Appreciate it. I just want to thank everyone for their time and attention today. We appreciate the continued support of Ares Commercial Real Estate, and we all look forward to speaking with you again on our next earnings call. Thanks, everybody.

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available approximately 1 hour after the end of this call through December 7, 2025, to domestic callers by dialing 1 (800) 723-0479 and to international callers by dialing 1 (402) 220-2650. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website. Thank you all, and you may now disconnect.