Ares Commercial Real Estate Corporation

Your meeting is about to begin. Good afternoon. Welcome to ARIES Commercial Real Estate Corporation's fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Tuesday, February 10, 2026. I will now turn the call over to Mr. John Stillmar, partner of Public Markets Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us on today's conference call. In addition to our press release and the 10-K 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 the accompanying webcast, as well as associated 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 anticipates, believes, expects, intends, will, should, and similar such expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgments. 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 the number of factors, including those listed in its SEC filings. ARIES Commercial Real Estate assumes no obligation to update any such forward-looking statements. During this conference call, we'll refer to several non-GAAP financial measures. We use these measures as a measure 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, Brian Donahoe. Brian?

Thank you, John. Good afternoon, everyone, and thank you for joining us. I'm here today with Jeff Gonzalez, our Chief Financial Officer, Taesik Yoon, our Chief Operating Officer, as well as other members of the management and investor relations teams. Today I'll start off with some market commentary, take a look back at all that we accomplished in 2025, and discuss where we're focused in 26 and beyond. Jeff will then take us through our fourth quarter and full year results in detail. 2025 marked a year of transition for the commercial real estate market. Early in the year, macroeconomic and geopolitical uncertainty weighed on valuations and transaction activity. Conditions improved in the second half as the Fed began easing monetary policy, leading to greater stability, a rebound in transaction volumes, and stabilizing values. Against this backdrop for commercial real estate and through deliberate and thoughtful action, we made meaningful progress towards our goals of further positioning the balance sheet to address risk-rated four and five loans, reducing office and REO assets, and more actively investing to reshape the portfolio. During 2025, we achieved our objective of creating and maintaining flexibility on our balance sheet through moderate leverage and ample liquidity in excess of $100 million. The positioning of our balance sheet has provided us the opportunity to drive outcomes on underperforming loans and more recently supported increased investment activity into new loans. Now let me walk through some of the specifics. To start, we reduced our office loans by 30% since year end 2024 to $447 million. Our active management approach and deep structuring capabilities led to increased repayments, as well as opportunities to selectively exit and restructure loans that we believe further reduced the risk from these office loans. To this end, we restructured two office loans in 2025, which brought in additional equity capital from the borrowers, de-risking our position and, in our view, enhancing the potential outcomes of the investment. We also exited the one loan collateralized by purpose-built life science properties in the portfolio and did not anticipate making new commitments to other office properties. Our proactive asset management focus on de-risking and stabilizing property fundamentals is also reflected in the progress of our risk-rated four and five loans. At a high level, there are five risk-rated four and five loans remaining. We continue to make meaningful progress on the majority of risk-rated 4 and 5 loans, including the two largest, which comprise approximately 85% of the balance of the overall risk-rated 4 and 5 loans. The largest of these loans is a risk-rated 5 Chicago office loan, which has a carrying value of $140 million, representing approximately 44% of the risk-rated 4 and 5 loan portfolio. While this loan remains on non-accrual, we've made progress on the loan. Fundamentals of this property remain stable, and occupancy remains above 90%, with a weighted average lease term of eight years. As we mentioned last quarter, discussions with the borrower are ongoing, and among the options the borrower is considering is the potential sale of the asset. The second largest is a risk-rated four Brooklyn, New York, residential condominium loan. which has a carrying value of $130 million, representing approximately 41% of the risk-rated four and five loan portfolio. Throughout the year, construction advanced at this property. Early in the year, nearly all of the necessary materials to complete construction were procured in order to mitigate supply chain and known tariff risks. Construction on the exterior was completed on time and on budget. Soft marketing was launched this past summer and formal marketing has been commenced. Construction continues to progress on plan with internal finishes underway. With the progress made at this property, sales are anticipated to begin in the first half of 2026. The progress in addressing our risk-rated four and five loans allowed Acre to return to investing in the second half of 2025. During this period, we closed 13 new loan commitments, totaling $486 million, with more than 50% of the new originations collateralized by residential and industrial properties. This increased loan activity resulted in loan portfolio growth in the fourth quarter. More than half of the dollars committed in new loans represented co-investment opportunities alongside other ARIES management affiliated vehicles. We believe co-investment opportunities are important for a few reasons. First, it expands ACRE's access to quality institutional opportunities of scale. Second, it allows ACRE to appropriately size its commitment to such opportunity based on available capital and suitability. Lastly, we believe it allows ACRE to enhance its diversification and more efficiently deploy its available capital over time. This strategy allows Acre to benefit from the depth, breadth, and extensive capabilities of the broader Aries real estate platform. Aries has built one of the largest real estate platforms in the world. As a reflection of the growing presence in the real estate market, the Aries real estate debt platform originated over $9 billion globally in new commitments in 2025, nearly double 2024. Looking out to 2026, we are focused on the resolutions of our remaining risk-rated 4 and 5 loans for the ultimate benefit of portfolio growth and earnings. While we recognize the trajectory of earnings may be uneven depending on the outcome of asset resolutions, we remain confident in ACRE's earnings potential. As a reflection of this confidence, the Board declared a regular cash dividend of $0.15 per common share for the first quarter of 2026. We believe that the execution of our business plan creates a path of earnings growth to meet the current dividend level. Let me now turn the call over to Jeff, who will provide more details on our fourth quarter and full year results.