10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________ 

FORM 10-Q

☒       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended March 31, 2023

 OR

 ☐       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from _____ to _____

Commission File No. 001-35517

 ARES COMMERCIAL REAL ESTATE CORPORATION

(Exact name of Registrant as specified in its charter) 

Maryland	45-3148087
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

245 Park Avenue, 42nd Floor, New York, NY 10167

(Address of principal executive offices) (Zip Code)

(212) 750-7300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	ACRE	New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes ý  No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ý  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at May 1, 2023
Common stock, $0.01 par value	54,672,238

TABLE OF CONTENTS

	Page
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	5
Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	6
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022 (unaudited)	7
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 (unaudited) and the year ended December 31, 2022	8
Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	9
Notes to Consolidated Financial Statements (unaudited)	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3. Quantitative and Qualitative Disclosures About Market Risk	47
Item 4. Controls and Procedures	49
Part II. Other Information
Item 1. Legal Proceedings	50
Item 1A. Risk Factors	50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3. Defaults Upon Senior Securities	50
Item 4. Mine Safety Disclosures	51
Item 5. Other Information	51
Item 6. Exhibits	52
Signatures	53

2

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this quarterly report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend such statements to be covered by the safe harbor provisions contained therein. The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. Forward-looking statements relate to future events or the future performance or financial condition of Ares Commercial Real Estate Corporation (“ACRE” and, together with its consolidated subsidiaries, the “Company,” “we,” “us” and “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

•global economic trends and economic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations and challenges in the supply chain;

•the failure of major financial institutions, namely banks, or sustained financial market illiquidity;

•changes in interest rates, credit spreads and the market value of our investments;

•our business and investment strategy;

•our projected operating results;

•the return or impact of current and future investments;

•management’s current estimate of expected credit losses and current expected credit loss reserve;

•the collectability and timing of cash flows, if any, from our investments;

•estimates relating to our ability to make distributions to our stockholders in the future;

•defaults by borrowers in paying amounts due on outstanding indebtedness and our ability to collect all amounts due according to the contractual terms of our investments;

•our ability to obtain, maintain, repay or refinance financing arrangements, including securitizations;

•market conditions and our ability to access alternative debt markets and additional debt and equity capital;

•the amount of commercial mortgage loans requiring refinancing;

•the demand for commercial real estate loans;

•our expected investment capacity and available capital;

•financing and advance rates for our target investments;

•our expected leverage;

•the impact of the replacement of the London Interbank Offered Rate (“LIBOR”) on our operating results;

•rates of default or decreased recovery rates on our target investments;

•rates of prepayments on our mortgage loans and the effect on our business of such prepayments;

•the degree to which our hedging strategies may or may not protect us from interest rate volatility;

•availability of investment opportunities in mortgage-related and real estate-related investments and securities;

3

•the ability of Ares Commercial Real Estate Management LLC (“ACREM” or our “Manager”) to locate suitable investments for us, monitor, service and administer our investments and execute our investment strategy;

•allocation of investment opportunities to us by our Manager;

•our ability to successfully identify, complete and integrate any acquisitions;

•our ability to maintain our qualification as a real estate investment trust (“REIT”) for United States federal income tax purposes;

•our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “1940 Act”);

•our understanding of our competition;

•health pandemics or epidemics, including the ongoing COVID-19 pandemic;

•general volatility of the securities markets in which we may invest;

•adverse changes in the real estate, real estate capital and credit markets and the impact of a protracted decline in the liquidity of credit markets on our business;

•changes in governmental regulations, tax law and rates, and similar matters (including interpretation thereof);

•authoritative or policy changes from standard-setting bodies such as the Financial Accounting Standards Board, the Securities and Exchange Commission, the Internal Revenue Service, the stock exchange where we list our common stock, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business;

•actions and initiatives of the United States government or governments outside of the United States, and changes to United States government policies; and

•market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “project,” “estimates,” “will,” “should,” “could,” “would,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and financial condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the risks, uncertainties and other factors set forth in Part I, Item 1A. “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Annual Report”) and the other information included in our 2022 Annual Report and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this quarterly report on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, registration statements on Form S-3, quarterly reports on Form 10-Q and current reports on Form 8-K.

4

PART I - FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	As of
	March 31, 2023		December 31, 2022
	(unaudited)
ASSETS
Cash and cash equivalents	$	153,764	$	141,278
Loans held for investment ($846,718 and $887,662 related to consolidated VIEs, respectively)	2,173,205		2,264,008
Current expected credit loss reserve	(87,502)		(65,969)
Loans held for investment, net of current expected credit loss reserve	2,085,703		2,198,039
Loans held for sale, at fair value	27,375		—
Investment in available-for-sale debt securities, at fair value	28,007		27,936
Other assets ($2,959 and $2,980 of interest receivable related to consolidated VIEs, respectively; $128,334 and $129,495 of other receivables related to consolidated VIEs, respectively)	149,471		155,749
Total assets	$	2,444,320	$	2,523,002
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Secured funding agreements	$	698,153	$	705,231
Notes payable	104,509		104,460
Secured term loan	149,247		149,200
Collateralized loan obligation securitization debt (consolidated VIEs)	735,839		777,675
Due to affiliate	3,899		5,580
Dividends payable	19,346		19,347
Other liabilities ($1,942 and $1,913 of interest payable related to consolidated VIEs, respectively)	15,024		13,969
Total liabilities	1,726,017		1,775,462
Commitments and contingencies (Note 9)
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share, 450,000,000 shares authorized at March 31, 2023 and December 31, 2022 and 54,606,826 and 54,443,983 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	537		537
Additional paid-in capital	813,748		812,788
Accumulated other comprehensive income	3,129		7,541
Accumulated earnings (deficit)	(99,111)		(73,326)
Total stockholders' equity	718,303		747,540
Total liabilities and stockholders' equity	$	2,444,320	$	2,523,002

   See accompanying notes to consolidated financial statements.

5

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	For the three months ended March 31,
	2023		2022
	(unaudited)		(unaudited)
Revenue:
Interest income	$	49,500	$	33,364
Interest expense	(22,999)		(12,013)
Net interest margin	26,501		21,351
Revenue from real estate owned	—		2,672
Total revenue	26,501		24,023
Expenses:
Management and incentive fees to affiliate	3,010		2,974
Professional fees	771		778
General and administrative expenses	1,685		1,613
General and administrative expenses reimbursed to affiliate	732		834
Expenses from real estate owned	—		4,309
Total expenses	6,198		10,508
Provision for current expected credit losses	21,019		(594)
Realized losses on loans sold	5,613		—
Gain on sale of real estate owned	—		2,197
Income (loss) before income taxes	(6,329)		16,306
Income tax expense, including excise tax	110		105
Net income (loss) attributable to common stockholders	$	(6,439)	$	16,201
Earnings per common share:
Basic and diluted earnings (loss) per common share	$	(0.12)	$	0.34
Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding	54,591,650		47,204,397
Diluted weighted average shares of common stock outstanding	54,591,650		47,654,549
Dividends declared per share of common stock	$	0.35	$	0.35

    

   See accompanying notes to consolidated financial statements.

6

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	For the three months ended March 31,
	2023		2022
	(unaudited)		(unaudited)
Net income (loss) attributable to common stockholders	$	(6,439)	$	16,201
Other comprehensive income:
Realized and unrealized gains (losses) on derivative financial instruments	(4,477)		7,614
Unrealized gains (losses) on available-for-sale debt securities	65		—
Comprehensive income (loss)	$	(10,851)	$	23,815

   See accompanying notes to consolidated financial statements.

7

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share and per share data)

(unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Earnings (Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2021	47,144,058	$	465	$	703,950	$	2,844	$	(28,631)	$	678,628
Sale of common stock	190,369	2		2,872		—		—		2,874
Offering costs	—	—		(9)		—		—		(9)
Stock‑based compensation	78,009	—		766		—		—		766
Other comprehensive income (loss)	—	—		—		7,614		—		7,614
Net income	—	—		—		—		16,201		16,201
Dividends declared	—	—		—		—		(16,740)		(16,740)
Balance at March 31, 2022	47,412,436	$	467	$	707,579	$	10,458	$	(29,170)	$	689,334
Sale of common stock	7,000,000	70		103,323		—		—		103,393
Offering costs	—	—		(190)		—		—		(190)
Stock‑based compensation	25,927	—		699		—		—		699
Other comprehensive income (loss)	—	—		—		1,931		—		1,931
Net income	—	—		—		—		10,031		10,031
Dividends declared	—	—		—		—		(19,198)		(19,198)
Balance at June 30, 2022	54,438,363	$	537	$	811,411	$	12,389	$	(38,337)	$	786,000
Offering costs	—	—		(34)		—		—		(34)
Stock‑based compensation	—	—		673		—		—		673
Other comprehensive income (loss)	—	—		—		(1,010)		—		(1,010)
Net income	—	—		—		—		644		644
Dividends declared	—	—		—		—		(19,196)		(19,196)
Balance at September 30, 2022	54,438,363	$	537	$	812,050	$	11,379	$	(56,889)	$	767,077
Stock‑based compensation	5,620	—		738		—		—		738
Other comprehensive income (loss)	—	—		—		(3,838)		—		(3,838)
Net income	—	—		—		—		2,909		2,909
Dividends declared	—	—		—		—		(19,346)		(19,346)
Balance at December 31, 2022	54,443,983	$	537	$	812,788	$	7,541	$	(73,326)	$	747,540
Stock‑based compensation	162,843	—		960		—		—		960
Other comprehensive income (loss)	—	—		—		(4,412)		—		(4,412)
Net loss	—	—		—		—		(6,439)		(6,439)
Dividends declared	—	—		—		—		(19,346)		(19,346)
Balance at March 31, 2023	54,606,826	$	537	$	813,748	$	3,129	$	(99,111)	$	718,303

See accompanying notes to consolidated financial statements.

8

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the three months ended March 31,
	2023		2022
	(unaudited)		(unaudited)
Operating activities:
Net income (loss)	$	(6,439)	$	16,201
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of deferred financing costs	979		2,220
Accretion of discounts, deferred loan origination fees and costs	(1,779)		(2,280)
Stock-based compensation	960		766
Provision for current expected credit losses	21,019		(594)
Realized losses on loans sold	5,613		—
Amortization of derivative financial instruments	(456)		—
Gain on sale of real estate owned	—		(2,197)
Changes in operating assets and liabilities:
Other assets	(8,617)		3,956
Due to affiliate	(1,681)		(333)
Other liabilities	1,657		(1,524)
Net cash provided by (used in) operating activities	11,256		16,215
Investing activities:
Issuance of and fundings on loans held for investment	(18,378)		(217,549)
Principal repayment of loans held for investment	78,198		266,574
Proceeds from sale of loans held for sale	9,825		—
Receipt of origination fees	413		2,428
Proceeds from sale of real estate owned	—		38,227
Net cash provided by (used in) investing activities	70,058		89,680
Financing activities:
Proceeds from secured funding agreements	12,662		37,892
Repayments of secured funding agreements	(19,740)		(137,917)
Repayments of notes payable	—		(28,275)
Payment of secured funding costs	(297)		(651)
Repayments of debt of consolidated VIEs	(42,106)		—
Dividends paid	(19,347)		(16,674)
Proceeds from sale of common stock	—		2,874
Net cash provided by (used in) financing activities	(68,828)		(142,751)
Change in cash and cash equivalents	12,486		(36,856)
Cash and cash equivalents, beginning of period	141,278		50,615
Cash and cash equivalents, end of period	$	153,764	$	13,759

See accompanying notes to consolidated financial statements.

9

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2023

(in thousands, except share and per share data, percentages and as otherwise indicated)

(unaudited)

1.   ORGANIZATION

Ares Commercial Real Estate Corporation (together with its consolidated subsidiaries, the “Company” or “ACRE”) is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. Through Ares Commercial Real Estate Management LLC (“ACREM” or the Company’s “Manager”), a Securities and Exchange Commission (“SEC”) registered investment adviser and a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management” or “Ares”), a publicly traded, leading global alternative investment manager, it has investment professionals strategically located across the United States and Europe who directly source new loan opportunities for the Company with owners, operators and sponsors of commercial real estate (“CRE”) properties. The Company was formed and commenced operations in late 2011. The Company is a Maryland corporation and completed its initial public offering in May 2012. The Company is externally managed by its Manager, pursuant to the terms of a management agreement (the “Management Agreement”).

The Company operates as one operating segment and is primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for the Company’s own account. The Company’s target investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investments, including commercial mortgage backed securities. These investments are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, self storage, student housing, residential and other commercial real estate properties, or by ownership interests therein.

    The Company has elected and qualified to be taxed as a real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year     ended December 31, 2012. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to stockholders and complies with various other requirements as a REIT.

2.   SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related management's discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a description of the Company’s recurring accounting policies. The Company has included disclosure below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly or (ii) the Company views as critical as of the date of this report.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company, the consolidated variable interest entities (“VIEs”) that the Company controls and of which the Company is the primary beneficiary, and the Company’s wholly-owned subsidiaries. The unaudited consolidated interim financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated.

The unaudited consolidated interim financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The current period’s results of operations will not necessarily be indicative of results for any other interim period or that ultimately may be achieved for the year ending December 31, 2023.

10

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Global macroeconomic conditions, including high inflation, changes to fiscal and monetary policy, high interest rates, potential market-wide liquidity problems, currency fluctuations, labor shortages and challenges in the supply chain, have the potential to negatively impact the Company and its borrowers. These current macroeconomic conditions may continue or aggravate and could cause the United States economy or other global economies to experience an economic slowdown or recession. We anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States or other major global economy.

The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2023, however, uncertainty over the global economy and the Company’s business, makes any estimates and assumptions as of March 31, 2023 inherently less certain than they would be absent the current and potential impacts of current macroeconomic conditions. Actual results could differ from those estimates.

Variable Interest Entities

The Company evaluates all of its interests in VIEs for consolidation. When the Company’s interests are determined to be variable interests, the Company assesses whether it is deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. The Company considers its variable interests, as well as any variable interests of its related parties in making this determination. Where both of these factors are present, the Company is deemed to be the primary beneficiary and it consolidates the VIE. Where either one of these factors is not present, the Company is not the primary beneficiary and it does not consolidate the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

For VIEs of which the Company is determined to be the primary beneficiary, all of the underlying assets, liabilities, equity, revenue and expenses of the structures are consolidated into the Company’s consolidated financial statements.

The Company performs an ongoing reassessment of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding its involvement with a VIE cause the Company’s consolidation conclusion regarding the VIE to change. See Note 16 included in these consolidated financial statements for further discussion of the Company’s VIEs.

Cash and Cash Equivalents

Cash and cash equivalents include funds on deposit with financial institutions, including demand deposits with financial institutions. Cash and short‑term investments with an original maturity of three months or less when acquired are considered cash and cash equivalents for the purpose of the consolidated balance sheets and statements of cash flows.

11

Loans Held for Investment

    The Company originates CRE debt and related instruments generally to be held for investment. Loans that are held for investment are carried at cost, net of unamortized loan fees and origination costs (the “carrying value”). Loans are generally collateralized by real estate. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its loans held for investment portfolio under the following methodology: (1) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation; (2) economic review, which considers underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, and the borrower’s exit plan, among other factors.

    Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

    Loan balances that are deemed to be uncollectible are written off as a realized loss and are deducted from the current expected credit loss reserve. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment.

Current Expected Credit Losses

FASB ASC Topic 326, Financial Instruments—Credit Losses (“ASC 326”), requires the Company to reflect current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broad range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve”). Increases and decreases to expected credit losses impact earnings and are recorded within provision for current expected credit losses in the Company’s consolidated statements of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASC 326 is a valuation account that is deducted from the amortized cost basis of the Company’s loans held for investment in the Company’s consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company's consolidated balance sheets. See Note 4 included in these consolidated financial statements for CECL related disclosures.

Loans Held for Sale

Although the Company generally holds its target investments as long-term investments, the Company occasionally classifies some of its investments as held for sale. Investments held for sale are carried at fair value within loans held for sale, at fair value in the Company’s consolidated balance sheets, with changes in fair value recorded through earnings.

Real Estate Owned

    Real estate assets are carried at their estimated fair value at acquisition and are presented net of accumulated depreciation and impairment charges. The Company allocates the purchase price of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment.

    Real estate assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred.

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    Real estate assets are evaluated for indicators of impairment on a quarterly basis. Factors that the Company may consider in its impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset, the Company makes certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon the Company’s estimate of a capitalization rate and discount rate.

    The Company reviews its real estate assets, from time to time, in order to determine whether to sell such assets. Real estate assets are classified as held for sale when the Company commits to a plan to sell the asset, when the asset is being actively marketed for sale at a reasonable price and the sale of the asset is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within one year. Real estate assets that are held for sale are carried at the lower of the asset’s carrying amount or its fair value less costs to sell.

Available-for-Sale Debt Securities

The Company acquires debt securities that are collateralized by mortgages on CRE properties primarily for short-term cash management and investment purposes. On the acquisition date, the Company designates investments in CRE debt securities as available-for-sale. Investments in CRE debt securities that are classified as available-for-sale are carried at fair value. Unrealized holding gains and losses for available-for-sale debt securities are recorded each period in other comprehensive income (“OCI”). The Company uses a specific identification method when determining the cost of a debt security sold and the amount of unrealized gain or loss reclassified from accumulated other comprehensive income (loss) into earnings.

Available-for-sale debt securities that are in an unrealized loss position are evaluated on a quarterly basis to determine whether declines in the fair value below the amortized cost basis qualify as other than temporary impairment (“OTTI”). The OTTI assessment is performed at the individual security level. In assessing whether the entire amortized cost basis of each security will be recovered, the Company will compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the entire amortized cost basis of the security will not be recovered and an OTTI shall be considered to have occurred.

Available-for-sale debt securities are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the debt security is placed on non-accrual status. Interest payments received on non-accrual securities may be recognized as income or applied to principal depending upon management’s judgment regarding collectability of the debt security. Non-accrual debt securities are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current.

Debt Issuance Costs

Debt issuance costs under the Company’s indebtedness are capitalized and amortized over the term of the respective debt instrument. Unamortized debt issuance costs are expensed when the associated debt is repaid prior to maturity. Debt issuance costs related to debt securitizations are capitalized and amortized over the term of the underlying loans using the effective interest method. When an underlying loan is prepaid in a debt securitization and the outstanding principal balance of the securitization debt is reduced, the related unamortized debt issuance costs are charged to expense based on a pro‑rata share of the debt issuance costs being allocated to the specific loans that were prepaid. Amortization of debt issuance costs is included within interest expense, except as noted below, in the Company’s consolidated statements of operations while the unamortized balance on the (i) Secured Funding Agreements (each individually defined in Note 6 included in these consolidated financial statements) is included within other assets and (ii) Notes Payable, the Secured Term Loan (each defined in Note 6 included in these consolidated financial statements) and secured borrowings (described in Note 7 included in these consolidated financial statements) and debt securitizations are each included as a reduction to the carrying amount of the liability in the Company’s consolidated balance sheets. Amortization of debt issuance costs for the note payable on the hotel property that was recognized as real estate owned in the Company’s consolidated balance sheets (see Note 6 included in these consolidated financial statements for additional information on the note payable) is included within expenses from real estate owned in the Company’s consolidated statements of operations.

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Derivative Financial Instruments

Derivative financial instruments are classified as either other assets (gain positions) or other liabilities (loss positions) in the Company’s consolidated balance sheets at fair value. These amounts may be offset to the extent that there is a legal right to offset and if elected by management.

On the date the Company enters into a derivative contract, the Company designates each contract as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability, or cash flow hedge, or as a derivative instrument not to be designated as a hedging derivative, or non-designated hedge. For all derivatives other than those designated as non-designated hedges, the Company formally documents the hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and an evaluation of the effectiveness of its hedged transaction.

The Company performs a formal assessment on a quarterly basis on whether the derivative designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. Changes in the fair value of derivative contracts are recorded each period in either current earnings or OCI, depending on whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the effective portion of the unrealized gains or losses on these contracts is recorded in OCI. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in current earnings prospectively. The Company does not enter into derivatives for trading or speculative purposes.

Revenue Recognition

    Interest income is accrued based on the outstanding principal amount and the contractual terms of each loan or debt security. For loans held for investment, the origination fees, contractual exit fees and direct loan origination costs are also recognized in interest income over the initial loan term as a yield adjustment using the effective interest method. For available-for-sale debt securities, premiums or discounts are amortized or accreted into interest income as a yield adjustment using the effective interest method.

    Revenue from real estate owned represents revenue associated with the operations of a hotel property classified as real estate owned that was sold in March 2022. Revenue from the operation of the hotel property was recognized when guestrooms were occupied, services had been rendered or fees had been earned. Revenues were recorded net of any discounts and sales and other taxes collected from customers. Revenues consisted of room sales, food and beverage sales and other hotel revenues.

Net Interest Margin and Interest Expense

    Net interest margin in the Company’s consolidated statements of operations serves to measure the performance of the Company’s loans and debt securities as compared to its use of debt leverage. The Company includes interest income from its loans and debt securities and interest expense related to its Secured Funding Agreements, Notes Payable, securitization debt, the Secured Term Loan (each individually defined in Note 6 included in these consolidated financial statements) and secured borrowings (described in Note 7 included in these consolidated financial statements) in net interest margin. For the three months ended March 31, 2023 and 2022, interest expense is comprised of the following ($ in thousands):

	For the three months ended March 31,
	2023		2022
Secured funding agreements	$	12,311	$	5,127
Notes payable (1)	1,759		453
Securitization debt	11,606		4,351
Secured term loan	1,734		1,732
Secured borrowings	—		292
Other (2)	(4,411)		58
Interest expense	$	22,999	$	12,013

____________________________

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(1)    Excludes interest expense on the $28.3 million note payable, which was secured by a hotel property that was recognized as real estate owned in the Company’s consolidated balance sheets (see Note 6 included in these consolidated financial statements for additional information on the note payable). Interest expense on the $28.3 million note payable is included within expenses from real estate owned in the Company’s consolidated statements of operations.

(2)    Represents the net interest expense recognized from the Company’s derivative financial instruments upon periodic settlement.

Comprehensive Income

Comprehensive income consists of net income and OCI that are excluded from net income.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the FASB. ASUs were assessed and determined either to be not applicable or expected to have minimal impact on its unaudited consolidated financial statements.

3.   LOANS HELD FOR INVESTMENT

As of March 31, 2023, the Company’s portfolio included 53 loans held for investment, excluding 157 loans that were repaid, sold, converted to real estate owned or transferred to held for sale since inception. The aggregate originated commitment under these loans at closing was approximately $2.5 billion and outstanding principal was $2.2 billion as of March 31, 2023. During the three months ended March 31, 2023, the Company funded approximately $26.4 million of outstanding principal, received repayments of $72.8 million of outstanding principal, sold one loan with outstanding principal of $14.3 million to a third party and transferred one loan to loans held for sale with outstanding principal of $27.4 million as described in more detail in the tables below. As of March 31, 2023, 80.8% of the Company’s loans have LIBOR or Secured Overnight Financing Rate (“SOFR”) floors, with a weighted average floor of 0.99%, calculated based on loans with LIBOR or SOFR floors. References to LIBOR or “L” are to 30-day LIBOR and references to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).

The Company’s investments in loans held for investment are accounted for at amortized cost. The following tables summarize the Company’s loans held for investment as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,135,368	$	2,155,816	8.5	%	(2)	9.2	%	(3)	1.4
Subordinated debt and preferred equity investments	37,837		39,098		7.8	%	(2)	14.7	%	(3)	2.6
Total loans held for investment portfolio	$	2,173,205	$	2,194,914	8.5	%	(2)	9.2	%	(3)	1.4

	As of December 31, 2022
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,225,725	$	2,243,818	8.4	%	(2)	8.8	%	(3)	1.3
Subordinated debt and preferred equity investments	38,283		39,003		14.0	%	(2)	14.0	%	(3)	2.8
Total loans held for investment portfolio	$	2,264,008	$	2,282,821	8.5	%	(2)	8.9	%	(3)	1.4

______________________________

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

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(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2023 and December 31, 2022 as weighted by the outstanding principal balance of each loan.

(3)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all interest accruing loans held by the Company as of March 31, 2023 and December 31, 2022 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2023 and December 31, 2022).

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A more detailed listing of the Company’s loans held for investment portfolio based on information available as of March 31, 2023 is as follows ($ in millions, except percentages):

Loan Type	Location	Outstanding Principal (1)	Carrying Amount (1)	Interest Rate	Unleveraged Effective Yield (2)		Maturity Date (3)		Payment Terms (4)
Senior Mortgage Loans:
Office	IL	$155.7	$154.0	(5)	7.1%	(5)	Mar 2025	(5)	I/O
Multifamily	NY	132.2	131.0	S+3.90%	9.2%		Jun 2025		I/O
Office	Diversified	120.4	120.2	S+3.75%	8.8%		Jan 2024		P/I	(7)
Multifamily	TX	100.0	99.2	S+3.50%	9.1%		Jul 2025		I/O
Industrial	IL	98.2	97.8	L+4.55%	9.8%		May 2024		I/O
Mixed-use	FL	82.7	82.7	L+4.25%	9.1%		Feb 2023	(9)	I/O
Office	AZ	78.0	77.6	L+3.50%	8.8%		Oct 2024		I/O
Residential Condominium	NY	76.2	75.9	S+8.95%	15.6%		Oct 2023	(6)	I/O
Mixed-use	NY	75.0	74.7	S+3.75%	8.9%		Jul 2024		I/O
Residential Condominium	FL	74.5	74.4	S+5.35%	10.7%		Jul 2023		I/O
Office	NY	70.2	69.6	L+3.85%	9.1%		Aug 2025		I/O
Office	NC	68.9	68.7	S+4.35%	9.5%		Mar 2024	(10)	P/I	(7)
Multifamily	TX	68.1	67.7	S+2.95%	8.1%		Dec 2024		I/O
Office	NC	67.3	66.9	S+3.65%	8.9%		Aug 2024		I/O
Multifamily/Office	SC	67.0	66.8	L+2.90%	8.0%		Nov 2024		I/O
Office	IL	56.9	53.8	S+3.95%	—%	(8)	Jun 2023		I/O
Office	IL	56.0	55.5	S+4.25%	9.6%		Jan 2025		I/O
Office	GA	48.6	48.5	S+3.15%	8.3%		Dec 2023		P/I	(7)
Hotel	CA	40.2	39.8	S+4.20%	9.5%		Mar 2025		I/O
Mixed-use	CA	37.9	37.9	L+4.10%	9.0%		Mar 2023	(12)	I/O
Hotel	NY	36.5	36.1	S+4.40%	9.6%		Mar 2026		I/O
Mixed-use	TX	35.3	35.2	S+3.85%	8.9%		Sep 2024		I/O
Hotel	IL	35.0	29.5	S+4.00%	—%	(11)	May 2024		I/O
Student Housing	CA	34.5	34.5	S+3.95%	8.8%		Jul 2023		I/O
Office	CA	33.2	32.6	S+3.45%	—%	(13)	Nov 2023	(13)	I/O
Multifamily	CA	31.7	31.5	S+3.00%	8.1%		Dec 2025		I/O
Multifamily	PA	29.4	29.3	S+4.00%	9.1%		Dec 2023		I/O
Office	MA	26.8	26.1	S+3.75%	9.9%		Apr 2025		I/O
Industrial	FL	25.5	25.4	L+2.90%	8.0%		Dec 2025		I/O
Industrial	NJ	24.6	24.4	L+3.75%	9.3%		May 2024		I/O
Industrial	CO	23.6	23.5	(15)	12.2%		Feb 2024	(15)	I/O
Multifamily	WA	23.1	23.0	S+3.00%	8.0%		Nov 2025		I/O
Office	CA	22.9	22.8	S+3.50%	8.6%		Nov 2023		I/O
Multifamily	TX	22.4	22.2	S+2.60%	7.8%		Oct 2024		I/O
Industrial	CA	19.6	19.5	S+3.85%	8.9%		Sep 2024	(14)	I/O
Student Housing	AL	19.5	19.4	S+3.95%	9.1%		May 2024		I/O
Multifamily	WA	18.8	18.7	S+3.10%	8.4%		Sep 2023	(16)	I/O
Self Storage	PA	18.2	18.1	L+2.90%	8.1%		Dec 2025		I/O
Self Storage	NJ	17.6	17.4	S+2.90%	8.5%		Apr 2025		I/O
Self Storage	WA	11.5	11.4	S+2.90%	8.4%		Mar 2025		I/O
Industrial	TX	10.0	9.9	S+5.35%	10.5%		Dec 2024		I/O
Self Storage	MA	8.5	8.5	L+2.90%	7.9%		Dec 2024		I/O
Self Storage	TX	8.0	8.0	L+2.90%	8.0%		Aug 2024		I/O
Self Storage	MA	7.7	7.7	L+2.90%	8.0%		Nov 2024		I/O
Self Storage	MA	6.6	6.6	L+2.90%	8.0%		Oct 2024		I/O
Self Storage	MO	6.5	6.5	L+3.00%	8.0%		Dec 2023		I/O
Industrial	TN	6.4	6.4	S+5.60%	10.8%		Nov 2024		I/O
Self Storage	NJ	5.9	5.9	L+2.90%	8.2%		Jul 2024		I/O
Self Storage	IL	5.6	5.6	S+3.10%	8.2%		Dec 2023		I/O
Industrial	FL	4.0	4.0	S+5.75%	11.0%		Mar 2025		I/O
Self Storage	TX	2.9	2.9	L+2.90%	7.9%		Sep 2024		I/O
Subordinated Debt and Preferred Equity Investments:
Multifamily	SC	20.6	20.5	S+9.53%	14.7%		Sep 2025		I/O
Office	NJ	18.5	17.4	12.00%	—%	(17)	Jan 2026		I/O
Total/Weighted Average		$2,194.9	$2,173.2		8.5%

_________________________

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(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. For the loans held for investment that represent co-investments with other investment vehicles managed by Ares Management (see Note 14 included in these consolidated financial statements for additional information on co-investments), only the portion of Carrying Amount and Outstanding Principal held by the Company is reflected.

(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. Unleveraged Effective Yield for each loan is calculated based on LIBOR or SOFR as of March 31, 2023 or the LIBOR or SOFR floor, as applicable. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2023 as weighted by the outstanding principal balance of each loan.

(3)Certain loans are subject to contractual extension options that generally vary between one and two 12-month extensions and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(4)I/O = interest only, P/I = principal and interest.

(5)The Illinois loan is structured as both a senior and mezzanine loan with the Company holding both positions. The senior position has a per annum interest rate of S + 2.25% and the mezzanine position has a fixed per annum interest rate of 10.00%. The mezzanine position of this loan, which had an outstanding principal balance of $41.8 million as of March 31, 2023, was on non-accrual status as of March 31, 2023 and therefore, the Unleveraged Effective Yield presented is for the senior position only as the mezzanine position is non-interest accruing. In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the Illinois loan from March 2023 to March 2025. For the three months ended March 31, 2023, the Company received $1.7 million of interest payments and other fees in cash on the mezzanine position of the Illinois loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(6)This senior mortgage loan refinanced the previously existing $53.3 million senior mortgage loan that was held by the Company. The senior New York loan is currently in default due to the failure of the borrower to reach certain construction milestones.

(7)In April 2022, amortization began on the senior North Carolina loan, which had an outstanding principal balance of $68.9 million as of March 31, 2023. In January 2023, amortization began on the senior Georgia loan, which had an outstanding principal balance of $48.6 million as of March 31, 2023. In February 2023, amortization began on the senior diversified loan, which had an outstanding principal balance of $120.4 million as of March 31, 2023. The remainder of the loans in the Company’s portfolio are non-amortizing through their primary terms.

(8)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $1.2 million of interest payments in cash on the senior Illinois loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(9)As of March 31, 2023, the senior Florida loan, which is collateralized by a mixed-use property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date.

(10)In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior North Carolina loan from March 2023 to March 2024.

(11)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $0.3 million of interest payments in cash on the senior Illinois loan that was recognized as a reduction to the carrying value of the loan. The senior Illinois loan is currently in default due to the failure of the borrower to make certain contractual reserve deposits by the May 2022 due date and due to the borrower not making its contractual interest payments due subsequent to the January 2023 interest payment date.

(12)As of March 31, 2023, the senior California loan, which is collateralized by a mixed-use property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the March 2023 maturity date.

(13)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2023 to November 2023. For the three months ended March 31, 2023, the Company received $0.5 million of interest payments in cash on the senior California loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

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(14)In February 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2023 to September 2024.

(15)At origination, the Colorado loan was structured as a senior loan and in January 2022, the Company also originated the mezzanine loan. The senior loan, which had an outstanding principal balance of $19.8 million as of March 31, 2023, accrues interest at a per annum rate of L + 6.75% and the mezzanine loan, which had an outstanding principal balance of $3.8 million as of March 31, 2023, accrues interest at a per annum rate of S + 8.50%. In February 2023, the borrower exercised a one-year extension option in accordance with the loan agreement, which extended the maturity date on the senior Colorado loan to February 2024.

(16)In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior Washington loan from March 2023 to September 2023.

(17)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $0.6 million of interest payments in cash on the mezzanine New Jersey loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

The Company has made, and may continue to make, modifications to loans, including loans that are in default. Loan terms that may be modified include interest rates, required prepayments, asset release prices, maturity dates, covenants, principal amounts and other loan terms. The terms and conditions of each modification vary based on individual circumstances and will be determined on a case by case basis. The Company’s Manager monitors and evaluates each of the Company’s loans held for investment and is maintaining regular communications with borrowers and sponsors regarding the potential impacts of current macroeconomic conditions on the Company’s loans.

For the three months ended March 31, 2023, the activity in the Company’s loan portfolio was as follows ($ in thousands):

Balance at December 31, 2022	$	2,264,008
Initial funding	—
Origination fees and discounts, net of costs	(413)
Additional funding	26,363
Amortizing payments	(4,671)
Loan payoffs	(72,366)
Loans sold to third parties (1)	(14,324)
Loans transferred to held for sale (2)	(27,165)
Origination fee and discount accretion	1,773
Balance at March 31, 2023	$	2,173,205

_________________________

(1)    In January 2023, the Company closed the sale of a senior mortgage loan with outstanding principal of $14.3 million, which was collateralized by a residential property located in California, to a third party. At the time of the sale, the senior mortgage loan was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2021 maturity date. For the three months ended March 31, 2023, the Company recognized a realized loss of $5.6 million in the Company's consolidated statements of operations upon the sale of the senior mortgage loan as the carrying value exceeded the sale price of the loan.

(2)    In March 2023, the Company entered into a sale agreement with a third party to sell a senior mortgage loan with outstanding principal of $27.4 million, which is collateralized by an office property located in Illinois. In January 2023, the senior mortgage loan was not repaid upon its contractual maturity, which triggered an event of default under the loan agreement and as of March 31, 2023, the loan remains in default. As of March 31, 2023, the sale had not yet closed and the loan was reclassified from held for investment to held for sale and is carried at fair value in the Company's consolidated balance sheets. The Company did not recognize any unrealized gain or loss in the Company's consolidated statements of operations upon reclassifying the loan to held for sale as the carrying value was equal to fair value as determined by the agreed upon sale price of the loan. See Note 17 included in these consolidated financial statements for a subsequent event related to the sale of the senior mortgage loan.

Except as described in the table above listing the Company’s loans held for investment portfolio, as of March 31, 2023, all loans held for investment were paying in accordance with their contractual terms. As of March 31, 2023, the Company had five loans held for investment on non-accrual status with a carrying value of $173.3 million. As of December 31, 2022, the Company had three loans held for investment on non-accrual status with a carrying value of $99.1 million.

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4.     CURRENT EXPECTED CREDIT LOSSES

    The Company estimates its CECL Reserve primarily using a probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan. Calculation of the CECL Reserve requires loan specific data, which includes capital senior to the Company when the Company is the subordinate lender, changes in net operating income, debt service coverage ratio, loan-to-value, occupancy, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s floating rate loan portfolio and (iv) the Company’s current and future view of the macroeconomic environment. The Company may consider loan-specific qualitative factors on certain loans to estimate its CECL Reserve. In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company utilizes historical market loan loss data licensed from a third party data service. The third party’s loan database includes historical loss data for commercial mortgage-backed securities, or CMBS, issued dating back to 1998, which the Company believes is a reasonably comparable and available data set to its type of loans. The Company utilized macroeconomic data that reflects a current recession given current macroeconomic conditions; however, the actual financial impact on the Company of the current environment is highly uncertain. For periods beyond the reasonable and supportable forecast period, the Company reverts back to historical loss data. Management's current estimate of expected credit losses as of March 31, 2023 increased compared to the current estimate of expected credit losses as of December 31, 2022 primarily due to specific CECL reserves that were assigned to two loans in the portfolio (as discussed below), changes to the loan portfolio and the impact of the current macroeconomic environment on certain assets, including high inflation and interest rates, partially offset by shorter average remaining loan term, loan sales and loan repayments during the three months ended March 31, 2023. The CECL Reserve also takes into consideration the assumed impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on the Company’s loans held for investment, unless the Company determines that a specific reserve is warranted for a select asset.

As of March 31, 2023, the Company’s CECL Reserve for its loans held for investment portfolio is $92.3 million or 387 basis points of the Company’s total loans held for investment commitment balance of $2.4 billion and is bifurcated between the CECL reserve (contra-asset) related to outstanding balances on loans held for investment of $87.5 million and a liability for unfunded commitments of $4.8 million. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion.

During the three months ended March 31, 2023, the senior mortgage loan on an office property located in Illinois with a principal balance of $56.9 million and the senior mortgage loan on a hotel property located in Illinois with a principal balance of $35.0 million were both downgraded to a risk rating of “5.” As of March 31, 2023, both loans were assessed individually and the Company elected to assign specific CECL reserves of $38.3 million on the Illinois office loan and $5.6 million on the Illinois hotel loan. These specific CECL reserves for both loans were based on the Company’s estimate of proceeds available from the anticipated sale of the collateral property less the estimated cost to sell the property and the specific CECL reserves are included in the Company’s total CECL Reserve.

Current Expected Credit Loss Reserve for Funded Loan Commitments    

    Activity related to the CECL Reserve for outstanding balances on the Company’s loans held for investment as of and for the three months ended March 31, 2023 was as follows ($ in thousands):

Balance at December 31, 2022 (1)	$	65,969
Provision for current expected credit losses	21,533
Write-offs	—
Recoveries	—
Balance at March 31, 2023 (1)	$	87,502

__________________________

(1)     The CECL Reserve related to outstanding balances on loans held for investment is recorded within current expected credit loss reserve in the Company's consolidated balance sheets.

Current Expected Credit Loss Reserve for Unfunded Loan Commitments    

    Activity related to the CECL Reserve for unfunded commitments on the Company’s loans held for investment as of and for the three months ended March 31, 2023 was as follows ($ in thousands):

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Balance at December 31, 2022 (1)	$	5,339
Provision for current expected credit losses	(514)
Write-offs	—
Recoveries	—
Balance at March 31, 2023 (1)	$	4,825

__________________________

(1)     The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company's consolidated balance sheets.

The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, loan structure and exit plan, loan-to-value ratio, debt service coverage ratio, project sponsorship, and other factors deemed necessary. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

Ratings	Definition
1	Very Low Risk
2	Low Risk
3	Medium Risk
4	High Risk/Potential for Loss: Asset performance is trailing underwritten expectations. Loan at risk of impairment without material improvement to performance
5	Impaired/Loss Likely: A loan that has a significantly increased probability of default and principal loss

    The risk ratings are primarily based on historical data as well as taking into account future economic conditions.

    As of March 31, 2023, the carrying value, excluding the CECL Reserve, of the Company’s loans held for investment within each risk rating by year of origination is as follows ($ in thousands):

	2023		2022		2021		2020		2019		Prior		Total
Risk rating:
1	$	—	$	13,545	$	5,588	$	—	$	—	$	—	$	19,133
2	—		34,863		348,017		—		—		57,275		440,155
3	—		450,076		439,815		138,920		171,983		29,299		1,230,093
4	—		75,898		—		191,910		115,272		17,385		400,465
5	—		—		—		—		—		83,359		83,359
Total	$	—	$	574,382	$	793,420	$	330,830	$	287,255	$	187,318	$	2,173,205

Accrued Interest Receivable

    The Company elected not to measure a CECL Reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. As of March 31, 2023 and December 31, 2022, interest receivable of $13.1 million and $14.0 million, respectively, is included within other assets in the Company's consolidated balance sheets and is excluded from the carrying value of loans held for investment. If the Company were to have uncollectible accrued interest receivable, it generally would reverse accrued and unpaid interest against interest income and no longer accrue for these amounts.

5.     REAL ESTATE OWNED

On March 8, 2019, the Company acquired legal title to a hotel property located in New York through a deed in lieu of foreclosure. Prior to March 8, 2019, the hotel property collateralized a $38.6 million senior mortgage loan held by the Company that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the December 2018 maturity date. In conjunction with the deed in lieu of foreclosure, the Company derecognized the $38.6 million senior mortgage loan and recognized the hotel property as real estate owned. As of the date of the deed in lieu of foreclosure, the Company did not expect to complete a sale of the hotel property within the next twelve months and thus, the hotel property

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was considered held for use, and was carried at its estimated fair value at acquisition and was presented net of accumulated depreciation and impairment charges. The Company did not recognize any gain or loss on the derecognition of the senior mortgage loan as the fair value of the hotel property of $36.9 million and the net assets held at the hotel property of $1.7 million at acquisition approximated the $38.6 million carrying value of the senior mortgage loan. 

On November 8, 2021, the Company entered into a Purchase and Sale Agreement to sell the hotel property to a third party for $40.0 million and the sale closed on March 1, 2022. For the three months ended March 31, 2022, the Company recognized a $2.2 million gain on the sale of the hotel property as the net carrying value of the hotel property as of the March 1, 2022 sale date was lower than the net sales proceeds received by the Company. The gain on the sale of the hotel property is included within gain on sale of real estate owned in the Company’s consolidated statements of operations. In connection with the sale of the hotel property, the Company provided a senior mortgage loan to the buyer of the hotel property. The initial advance funded under such loan was $30.7 million, with up to another $25.0 million of additional loan proceeds to be available for future advances to cover a portion of the anticipated property renovation plan costs, provided certain conditions are satisfied. At closing, the buyer contributed $12.9 million of equity into the purchase. Additionally, the buyer is required to fund an additional $8.7 million of equity associated with the anticipated property renovation plan costs.

6.   DEBT

Financing Agreements

The Company borrows funds, as applicable in a given period, under the Wells Fargo Facility, the Citibank Facility, the CNB Facility, the MetLife Facility and the Morgan Stanley Facility (individually defined below and collectively, the “Secured Funding Agreements”), Notes Payable (as defined below) and the Secured Term Loan (as defined below). The Company refers to the Secured Funding Agreements, Notes Payable and the Secured Term Loan as the “Financing Agreements.” The outstanding balance of the Financing Agreements in the table below are presented gross of debt issuance costs. As of March 31, 2023 and December 31, 2022, the outstanding balances and total commitments under the Financing Agreements consisted of the following ($ in thousands):

	March 31, 2023					December 31, 2022
	Outstanding Balance		Total Commitment			Outstanding Balance		Total Commitment
Secured Funding Agreements:
Wells Fargo Facility	$	261,039	$	450,000	(1)	$	270,798	$	450,000	(1)
Citibank Facility	236,240		325,000			236,240		325,000
CNB Facility	—		75,000			—		75,000
MetLife Facility	—		180,000			—		180,000
Morgan Stanley Facility	200,874		250,000			198,193		250,000
Subtotal	$	698,153	$	1,280,000		$	705,231	$	1,280,000
Notes Payable	$	105,000	$	105,000		$	105,000	$	105,000
Secured Term Loan	$	150,000	$	150,000		$	150,000	$	150,000
Total	$	953,153	$	1,535,000		$	960,231	$	1,535,000

______________________________

(1)The maximum commitment for the Wells Fargo Facility (as defined below) may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

Some of the Company’s Financing Agreements are collateralized by (i) assignments of specific loans, preferred equity or a pool of loans held for investment or loans held for sale owned by the Company, (ii) interests in the subordinated portion of the Company’s securitization debt, or (iii) interests in wholly-owned entity subsidiaries that hold the Company’s loans held for investment. The Company is the borrower or guarantor under each of the Financing Agreements. Generally, the Company partially offsets interest rate risk by matching the interest index of loans held for investment with the Secured Funding Agreements used to fund them. The Company’s Financing Agreements contain various affirmative and negative covenants,

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including negative pledges, and provisions regarding events of default that are normal and customary for similar financing arrangements.

Wells Fargo Facility

The Company is party to a master repurchase funding facility with Wells Fargo Bank, National Association (“Wells Fargo”) (the “Wells Fargo Facility”), which allows the Company to borrow up to $450.0 million. The maximum commitment may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee. Under the Wells Fargo Facility, the Company is permitted to sell, and later repurchase, certain qualifying senior commercial mortgage loans, A-Notes, pari-passu participations in commercial mortgage loans and mezzanine loans under certain circumstances, subject to available collateral approved by Wells Fargo in its sole discretion. The funding period of the Wells Fargo Facility expires on December 15, 2025. The initial maturity date of the Wells Fargo Facility is December 15, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would extend the maturity date of the Wells Fargo Facility to December 14, 2027. Advances under the Wells Fargo Facility accrue interest at a per annum rate equal to the sum of one-month LIBOR or SOFR plus a pricing margin range of 1.50% to 3.75%, subject to certain exceptions.

Citibank Facility

The Company is party to a $325.0 million master repurchase facility with Citibank, N.A. (“Citibank”) (the “Citibank Facility”). Under the Citibank Facility, the Company is permitted to sell and later repurchase certain qualifying senior commercial mortgage loans and A-Notes approved by Citibank in its sole discretion. The initial maturity date of the Citibank facility is January 13, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option assuming no existing defaults under the Citibank Facility and applicable extension fees being paid, which, if both were exercised, would extend the maturity date of the Citibank Facility to January 13, 2027. Advances under the Citibank Facility accrue interest at a per annum rate equal to the sum of one-month LIBOR or SOFR plus an indicative pricing margin range of 1.50% to 2.10%, subject to certain exceptions. Prior to the January 2022 amendment, the Company incurred a non-utilization fee of 25 basis points per annum on the average daily available balance of the Citibank Facility to the extent less than 75% of the Citibank Facility was utilized. Subsequent to the January 2022 amendment, the Company incurs a non-utilization fee of 25 basis points per annum on the average daily positive difference between the maximum advances approved by Citibank and the actual advances outstanding on the Citibank Facility. For the three months ended March 31, 2023, the Company did not incur a non-utilization fee. For the three months ended March 31, 2022, the Company incurred a non-utilization fee of $11 thousand. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

CNB Facility

    The Company is party to a $75.0 million secured revolving funding facility with City National Bank (the “CNB Facility”). The Company is permitted to borrow funds under the CNB Facility to finance investments and for other working capital and general corporate needs. In February 2023, the Company exercised a 12-month extension option on the CNB Facility to extend the maturity date to March 11, 2024. Advances under the CNB Facility accrue interest at a per annum rate equal to the sum of, at the Company’s option, either (a) SOFR (with a 0.35% floor) plus 2.65% or (b) a base rate (which is the highest of a prime rate, the federal funds rate plus 0.50%, or Daily Simple SOFR plus 1.00%) plus 1.00%; provided that in no event shall the interest rate be less than 2.65%. Unless at least 75% of the CNB Facility is used on average, unused commitments under the CNB Facility accrue non-utilization fees at the rate of 0.375% per annum. For both the three months ended March 31, 2023 and 2022, the Company incurred a non-utilization fee of $70 thousand. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

MetLife Facility    

The Company is party to a $180.0 million revolving master repurchase facility with Metropolitan Life Insurance Company (“MetLife”) (the “MetLife Facility”), pursuant to which the Company may sell, and later repurchase, commercial mortgage loans meeting defined eligibility criteria which are approved by MetLife in its sole discretion. The initial maturity date of the MetLife Facility is August 13, 2023, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the MetLife Facility to August 13, 2024. Advances under the MetLife Facility accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.50%, subject to certain exceptions. Unless at least 65% of the MetLife Facility is utilized, unused commitments under the MetLife Facility accrue non-utilization fees at the rate of 0.25% per annum on the average daily available balance. For the three months ended March 31, 2023 and 2022, the Company

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incurred a non-utilization fee of $73 thousand and $60 thousand, respectively. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

Morgan Stanley Facility

    The Company is party to a $250.0 million master repurchase and securities contract with Morgan Stanley Bank, N.A. (“Morgan Stanley”) (the “Morgan Stanley Facility”). Under the Morgan Stanley Facility, the Company is permitted to sell, and later repurchase, certain qualifying commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing or self-storage properties. Morgan Stanley may approve the mortgage loans that are subject to the Morgan Stanley Facility in its sole discretion. The initial maturity date of the Morgan Stanley Facility is January 16, 2024, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the Morgan Stanley Facility to January 16, 2025. Advances under the Morgan Stanley Facility generally accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread ranging from 1.75% to 2.25%, determined by Morgan Stanley, depending upon the mortgage loan sold to Morgan Stanley in the applicable transaction.

Notes Payable

Certain of the Company’s subsidiaries were party to two separate non-recourse note agreements with the lenders referred to therein, consisting of (1) a $28.3 million note that was closed in June 2019, which was secured by a hotel property located in New York that was recognized as real estate owned in the Company’s consolidated balance sheets and (2) a $23.5 million note that was closed in November 2019, which was secured by a $34.6 million senior mortgage loan held by the Company on a multifamily property located in South Carolina.

The $28.3 million note was repaid in full in conjunction with the sale of the hotel property that was recognized as real estate owned on March 1, 2022. See Note 5 for further details. The maturity date of the $28.3 million note was June 10, 2024, subject to one 6-month extension, which if exercised would have extended the maturity date to December 10, 2024. The loan was subject to prepayment at any time. Advances under the $28.3 million note accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 3.00%.

In June 2022, the Company repaid the $23.5 million note in full. The initial maturity date of the $23.5 million note was September 5, 2022, subject to two 12-month extensions, which if exercised would have extended the maturity date to September 5, 2024. Advances under the $23.5 million note accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 3.75%.

In July 2022, ACRC Lender CO LLC, a wholly owned subsidiary of the Company entered into a Credit and Security Agreement with Capital One, National Association, as administrative agent and collateral agent, and the lender referred to therein. The Credit and Security Agreement provides for a $105.0 million recourse note (together with the two non-recourse note agreements discussed above, the “Notes Payable”). The $105.0 million note is secured by a $133.0 million senior mortgage loan held by the Company on a multifamily property located in New York and is fully and unconditionally guaranteed by the Company pursuant to a Guaranty of Recourse Obligation. The initial maturity date of the $105.0 million note is July 28, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would extend the maturity date to July 28, 2027. The $105.0 million note accrues interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.00%. As of March 31, 2023, the total outstanding principal balance of the note was $105.0 million.

Secured Term Loan

The Company and certain of its subsidiaries are party to a $150.0 million Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”). The maturity date of the Secured Term Loan is November 12, 2026. Advances under the Secured Term Loan are subject to the following fixed rates: (i) 4.50% per annum until May 12, 2025, (ii) after May 12, 2025 through November 12, 2025, the interest rate increases 0.125% every three months and (iii) after November 12, 2025 through November 12, 2026, the interest rate increases 0.250% every three months. As of March 31, 2023, the total outstanding principal balance of the Secured Term Loan was $150.0 million.

The total original issue discount on the Secured Term Loan was equal to 0.50% of the commitment amount and represents a discount to the debt cost to be amortized into interest expense using the effective interest method over the term of the Secured Term Loan. For both the three months ended March 31, 2023 and 2022, the estimated per annum effective interest rate of the Secured Term Loan, which is equal to the fixed interest rate plus the accretion of the original issue discount and associated costs, was 4.6%.

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7.   SECURED BORROWINGS

    A subsidiary of the Company was party to a secured borrowing arrangement related to a transferred loan that was closed in February 2020. In April 2019, the Company originated a $30.5 million loan on an office property located in North Carolina, which was bifurcated between a $24.4 million senior mortgage loan and a $6.1 million mezzanine loan. In February 2020, the Company transferred its interest in the $24.4 million senior mortgage loan to a third party and retained the $6.1 million mezzanine loan. The Company evaluated whether the transfer of the $24.4 million senior mortgage loan met the criteria in FASB ASC Topic 860, Transfers and Servicing, for treatment as a sale – legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transfer of effective control – and determined that the transfer did not qualify as a sale and thus, was treated as a financing transaction. As such, the Company did not derecognize the $24.4 million senior mortgage loan asset and recorded a secured borrowing liability in the Company’s consolidated balance sheets. The initial maturity date of the $24.4 million secured borrowing was May 5, 2023, subject to one 12-month extension, which may have been exercised at the transferee’s option, which, if exercised, would have extended the maturity date to May 5, 2024. Advances under the $24.4 million secured borrowing accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 2.50%. In July 2022, the $30.5 million loan was fully repaid and thus, the $24.4 million secured borrowing liability was derecognized.

8.   DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments, which includes interest rate swaps and interest rate caps, on certain borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing. These derivatives may or may not qualify as cash flow hedges under the hedge accounting requirements of FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”). Derivatives not designated as cash flow hedges are not speculative and are used to manage our exposure to interest rate movements. See Note 2 included in these consolidated financial statements for additional discussion of the accounting for designated and non-designated hedges.

The use of derivative financial instruments involves certain risks, including the risk that the counterparties to these contractual arrangements do not perform as agreed. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties that have appropriate credit ratings and are major financial institutions with which the Company and its affiliates may also have other financial relationships.

The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of March 31, 2023 and December 31, 2022 (notional amount in thousands):

	As of
	March 31, 2023					December 31, 2022
Interest Rate Derivatives	Number of Instruments	Notional Amount	Rate(1)	Index	Weighted Average Maturity (Years)	Number of Instruments	Notional Amount	Rate(1)	Index	Weighted Average Maturity (Years)
Interest rate swaps	1	$190,000	0.2075%	LIBOR(2)	0.3	1	$410,000	0.2075%	LIBOR(2)	0.4
Interest rate caps	0(3)	—	—	—	—	0(3)	—	—	—	—

_______________________________

(1)    Represents fixed rate for interest rate swaps and strike rate for interest rate caps.

(2)    Subject to a 0.00% floor.

(3)    In March 2022, the Company re-calibrated its net exposure to interest rate changes by terminating its interest rate cap derivative, which had a notional amount of $170.0 million on the termination date and a strike rate of 0.50%. For the three months ended March 31, 2022, the Company recognized a $2.0 million realized gain within OCI in conjunction with the termination of the interest rate cap. In accordance with ASC 815, the realized gain is recognized within current earnings over the remaining original term of the interest rate cap derivative as it was designated as an effective hedge. For the three months ended March 31, 2023 and 2022, the Company recognized a realized gain of $457 thousand and $5 thousand, respectively, through a reduction in interest expense, on the termination of the interest rate cap within current earnings.

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The following table summarizes the fair value of our derivative financial instruments ($ in thousands):

	Fair Value of Derivatives in an Asset Position(1) as of				Fair Value of Derivatives in a Liability Position(2) as of
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Derivatives designated as hedging instruments:
Interest rate derivatives	$	2,545	$	6,565	$	—	$	—

____________________________

(1)    Included in other assets in the Company’s consolidated balance sheets.

(2)    Included in other liabilities in the Company’s consolidated balance sheets.

9.   COMMITMENTS AND CONTINGENCIES

    As of March 31, 2023, there were no contingencies recorded on the Company’s consolidated balance sheets as a result of such conditions, however, if global market conditions worsen, it could adversely affect the Company’s business, financial condition and results of operations.

    As of March 31, 2023 and December 31, 2022, the Company had the following commitments to fund various senior mortgage loans, subordinated debt investments, as well as preferred equity investments accounted for as loans held for investment ($ in thousands):

	As of
	March 31, 2023		December 31, 2022
Total commitments	$	2,388,338	$	2,510,308
Less: funded commitments	(2,194,914)		(2,282,821)
Total unfunded commitments	$	193,424	$	227,487

The Company from time to time may be a party to litigation relating to claims arising in the normal course of business. As of March 31, 2023, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

10.   STOCKHOLDERS’ EQUITY

At the Market Stock Offering Program

    On November 22, 2019, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”), governing an “at the market offering” program having an aggregate offering price of up to $100.0 million. During the three months ended March 31, 2023, no shares of the Company’s common stock under the Equity Distribution Agreement were sold. The “at the market offering” program is currently unavailable.

Stock Repurchase Program

On July 26, 2022, the Company’s Board of Directors approved a stock repurchase program of up to $50.0 million, which is expected to be in effect until July 26, 2023, or until the approved dollar amount has been used to repurchase shares (the “Repurchase Program”). Pursuant to the Repurchase Program, the Company may repurchase shares of its common stock in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate the Company to acquire any particular amount of shares of its common stock and may be modified or suspended at any time at its discretion. The Company did not conduct any repurchases under the Repurchase Program during the three months ended March 31, 2023.

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Common Stock

There were no shares of the Company’s common stock issued in public or private offerings for the three months ended March 31, 2023. See “Equity Incentive Plan” below for shares issued under the plan described below.

Equity Incentive Plan

On April 23, 2012, the Company adopted an equity incentive plan, which was amended and restated in June 2018 (as further amended, the “Amended and Restated 2012 Equity Incentive Plan”). In February 2022, the Company’s board of directors authorized, and in May 2022, the Company’s stockholders approved, the first amendment to the Amended and Restated 2012 Equity Incentive Plan, which among other things, increased the total number of shares of common stock the Company may grant thereunder to 2,490,000 shares. Pursuant to the Amended and Restated 2012 Equity Incentive Plan, as amended by the first amendment, the Company may grant awards consisting of restricted shares of the Company’s common stock, restricted stock units (“RSUs”) and/or other equity-based awards to the Company’s outside directors, employees of the Manager, officers, ACREM and other eligible awardees under the plan. Any restricted shares of the Company’s common stock and RSUs will be accounted for under FASB ASC Topic 718, Compensation—Stock Compensation, resulting in stock-based compensation expense equal to the grant date fair value of the underlying restricted shares of common stock or RSUs.

Restricted stock and RSU grants generally vest ratably over a one to three-year period from the vesting start date. The grantee receives additional compensation for each outstanding restricted stock or RSU grant, classified as dividends paid, equal to the per-share dividends received by the Company’s common stockholders.

The following tables summarize the (i) non-vested shares of restricted stock and RSUs and (ii) vesting schedule of shares of restricted stock and RSUs for the Company’s directors and officers and employees of the Manager as of March 31, 2023:

Schedule of Non-Vested Share and Share Equivalents

	Restricted Stock Grants—Directors	RSUs—Officers and Employees of the Manager	Total
Balance at December 31, 2022	16,137	832,472	848,609
Granted	—	—	—
Vested	(6,609)	(162,843)	(169,452)
Forfeited	—	(3,333)	(3,333)
Balance at March 31, 2023	9,528	666,296	675,824

Future Anticipated Vesting Schedule

	Restricted Stock Grants—Directors	RSUs—Officers and Employees of the Manager	Total
2023	7,443	5,431	12,874
2024	1,668	283,738	285,406
2025	417	232,431	232,848
2026	—	144,696	144,696
2027	—	—	—
Total	9,528	666,296	675,824

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11.   EARNINGS PER SHARE

The following information sets forth the computations of basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022 ($ in thousands, except share and per share data):

	For the three months ended March 31,
	2023		2022
Net income (loss) attributable to common stockholders	$	(6,439)	$	16,201
Divided by:
Basic weighted average shares of common stock outstanding:	54,591,650		47,204,397
Weighted average non-vested restricted stock and RSUs (1)	—		450,152
Diluted weighted average shares of common stock outstanding:	54,591,650		47,654,549
Basic and diluted earnings (loss) per common share	$	(0.12)	$	0.34

_______________________________

(1)    For the three months ended March 31, 2023, the weighted average non-vested restricted stock and RSUs of 682,620

shares were excluded from the computation of diluted earnings (loss) per common share as the impact of including

those shares would be anti-dilutive.

12.   INCOME TAX

    The Company wholly owns ACRC Lender W TRS LLC, which is a taxable REIT subsidiary (“TRS”) formed to issue and hold certain loans intended for sale. The Company also wholly owns ACRC 2017-FL3 TRS LLC, which is a TRS formed to hold a portion of the FL3 CLO Securitization and FL4 CLO Securitization (as defined below), including the portion that generates excess inclusion income. Additionally, the Company wholly owns ACRC WM Tenant LLC, which is a TRS formed to lease from an affiliate the hotel property classified as real estate owned acquired on March 8, 2019. ACRC WM Tenant LLC engaged a third-party hotel management company to operate the hotel under a management contract prior to the sale of the hotel on March 1, 2022.

The income tax provision for the Company and the TRSs consisted of the following for the three months ended March 31, 2023 and 2022 ($ in thousands):

	For the three months ended March 31,
	2023		2022
Current	$	10	$	15
Deferred	—		—
Excise tax	100		90
Total income tax expense, including excise tax	$	110	$	105

    For the three months ended March 31, 2023 and 2022, the Company incurred an expense of $100 thousand and $90 thousand, respectively, for U.S. federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the calendar year (including any distribution declared in the fourth quarter and paid following January) plus any prior year shortfall. If it is determined that an excise tax liability exists for the current tax year, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The quarterly expense is calculated in accordance with applicable tax regulations.

The TRSs recognize interest and penalties related to unrecognized tax benefits within income tax expense in the Company’s consolidated statements of operations. Accrued interest and penalties, if any, are included within other liabilities in the Company’s consolidated balance sheets.

As of March 31, 2023, tax years 2019 through 2023 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.

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13.   FAIR VALUE

The Company follows FASB ASC Topic 820-10, Fair Value Measurement (“ASC 820-10”), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure requirements for fair value measurements. ASC 820-10 determines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. ASC 820-10 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value.

In accordance with ASC 820-10, the inputs used to measure fair value are summarized in the three broad levels listed below:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

•Level 3—Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

GAAP requires disclosure of fair value information about financial and nonfinancial assets and liabilities, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and nonfinancial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Recurring Fair Value Measurements

Derivative Financial Instruments

The Company is required to record derivative financial instruments at fair value on a recurring basis in accordance with GAAP. The fair value of interest rate derivatives was estimated using a third-party specialist, based on contractual cash flows and observable inputs comprising credit spreads.

Loans Held for Sale

As of March 31, 2023, the Company had one loan held for sale. Loans held for sale are required to be recorded at fair value on a recurring basis in accordance with GAAP. The Company determined the fair value based on the anticipated transaction price to be received from the third party that is expected to purchase the loan. During the quarter, the loan was transferred into Level 3 with a total carrying value of $27.4 million. Upon transfer, the Company recorded the loan at fair value, which did not result in the recognition of any unrealized gain or loss as the carrying value was equal to fair value as determined by the anticipated transaction price for the sale of the loan.

Available-for-Sale Debt Securities

The Company designates investments in CRE debt securities as available-for-sale on the acquisition date of such CRE debt securities. The Company is required to record investments in available-for-sale debt securities at fair value on a recurring basis in accordance with GAAP. During the year ended December 31, 2022, the Company acquired three CRE debt securities for an aggregate purchase price of $27.9 million, which consisted of floating rate, investment grade rated debt securities that had a weighted average coupon of SOFR plus 2.47%. The Company’s available-for-sale debt securities have a contractual maturity greater than 10 years from the purchase date.

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As of both March 31, 2023 and December 31, 2022, the Company had three CRE debt security investments designated as available-for-sale debt securities. The following tables summarize the Company’s investments in available-for-sale debt securities as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Face Amount		Amortized Cost		Unamortized Discount		Unrealized Gain (Loss), Net
Available-for-sale debt securities	$	28,000	$	27,887	$	113	$	120

	As of December 31, 2022
	Face Amount		Amortized Cost		Unamortized Discount		Unrealized Gain (Loss), Net
Available-for-sale debt securities	$	28,000	$	27,881	$	119	$	55

The fair value of available-for-sale debt securities was estimated using third-party broker quotes, which provide valuation estimates based upon contractual cash flows, observable inputs comprising credit spreads and market liquidity.

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	2,545	$	—	$	2,545
Loans held for sale	$	—	$	—	$	27,375	$	27,375
Available-for-sale debt securities	$	—	$	28,007	$	—	$	28,007
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	6,565	$	—	$	6,565
Available-for-sale debt securities	$	—	$	27,936	$	—	$	27,936
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

As of March 31, 2023 and December 31, 2022, the Company did not have any nonfinancial assets or liabilities required to be recorded at fair value on a recurring basis.

Nonrecurring Fair Value Measurements

The Company was required to record real estate owned, a nonfinancial asset, at fair value on a nonrecurring basis in accordance with GAAP. Real estate owned consisted of a hotel property that was acquired by the Company on March 8, 2019 through a deed in lieu of foreclosure. See Note 5 included in these consolidated financial statements for more information on

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real estate owned. Real estate owned was recorded at fair value at acquisition using Level 3 inputs and is evaluated for indicators of impairment on a quarterly basis. Real estate owned was considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate owned over the estimated remaining holding period is less than the carrying amount of such real estate owned. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate owned. An impairment charge is recorded equal to the excess of the carrying value of the real estate owned over the fair value. The fair value of the hotel property at acquisition was estimated using a third-party appraisal, which utilized standard industry valuation techniques such as the income and market approach. When determining the fair value of a hotel, certain assumptions are made including, but not limited to: (1) projected operating cash flows, including factors such as booking pace, growth rates, occupancy, daily room rates, hotel specific operating costs and future capital expenditures; and (2) projected cash flows from the eventual disposition of the hotel based upon the Company’s estimation of a hotel specific capitalization rate, hotel specific discount rates and comparable selling prices in the market.

As of March 31, 2023 and December 31, 2022, the Company did not have any financial assets or liabilities or nonfinancial assets or liabilities required to be recorded at fair value on a nonrecurring basis.

Financial Assets and Liabilities Not Measured at Fair Value

As of March 31, 2023 and December 31, 2022, the carrying values and fair values of the Company’s financial assets and liabilities recorded at cost are as follows ($ in thousands):

		As of
		March 31, 2023				December 31, 2022
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Loans held for investment	3	$	2,173,205	$	2,089,704	$	2,264,008	$	2,233,319
Financial liabilities:
Secured funding agreements	2	$	698,153	$	698,153	$	705,231	$	705,231
Notes payable	3	104,509		103,425		104,460		103,635
Secured term loan	3	149,247		122,564		149,200		137,571
Collateralized loan obligation securitization debt (consolidated VIEs)	3	735,839		711,950		777,675		749,242

The carrying values of cash and cash equivalents, restricted cash, interest receivable, due to affiliate liability and accrued expenses, which are all categorized as Level 2 within the fair value hierarchy, approximate their fair values due to their short-term nature.

Loans held for investment are recorded at cost, net of unamortized loan fees and origination costs. To determine the fair value of the collateral, the Company may employ different approaches depending on the type of collateral. The Company determined the fair value of loans held for investment based on a discounted cash flow methodology, taking into consideration various factors including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and comparable selling prices in the market. The Secured Funding Agreements are recorded at outstanding principal, which is the Company’s best estimate of the fair value. The Company determined the fair value of the Notes Payable, Secured Term Loan, collateralized loan obligation (“CLO”) securitization debt and Secured Borrowings based on a discounted cash flow methodology, taking into consideration various factors including discount rates, actions of other lenders and comparable market quotes and recent trades for similar products.

14.   RELATED PARTY TRANSACTIONS

Management Agreement

The Company is party to an Amended and Restated Management Agreement under which ACREM, subject to the supervision and oversight of the Company’s board of directors, is responsible for, among other duties, (a) performing all of the Company’s day-to-day functions, (b) determining the Company’s investment strategy and guidelines in conjunction with the Company’s board of directors, (c) sourcing, analyzing and executing investments, asset sales and financing, and (d) performing portfolio management duties. In addition, ACREM has an Investment Committee that oversees compliance with the Company’s investment strategy and guidelines, loans held for investment portfolio holdings and financing strategy.

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In exchange for its services, ACREM is entitled to receive a base management fee, an incentive fee and expense reimbursements. In addition, ACREM and its personnel may receive grants of equity-based awards pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan and a termination fee, if applicable.

The base management fee is equal to 1.5% of the Company’s stockholders’ equity per annum, which is calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, stockholders’ equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro-rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter determined in accordance with GAAP (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) (x) any amount that the Company has paid to repurchase the Company’s common stock since inception, (y) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, and (z) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between ACREM and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown in the Company’s consolidated financial statements.

The incentive fee is an amount, not less than zero, equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) the Company’s Core Earnings (as defined below) for the previous 12-month period, and (B) the product of (1) the weighted average of the issue price per share of the Company’s common stock of all of the Company’s public offerings of common stock multiplied by the weighted average number of all shares of common stock outstanding including any restricted shares of the Company’s common stock, RSUs, or any shares of the Company’s common stock not yet issued, but underlying other awards granted under the Company’s Amended and Restated 2012 Equity Incentive Plan (see Note 10 included in these consolidated financial statements) in the previous 12-month period, and (2) 8%; and (b) the sum of any incentive fees earned by ACREM with respect to the first three fiscal quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any fiscal quarter unless cumulative Core Earnings for the 12 most recently completed fiscal quarters is greater than zero. “Core Earnings” is defined in the Management Agreement as GAAP net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), and one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between ACREM and the Company’s independent directors and after approval by a majority of the Company’s independent directors. On April 25, 2022, the Company and ACREM entered into an amendment to the Management Agreement to (a) exclude $2.4 million of net income associated with the sale of the real estate owned property for the three months ended March 31, 2022 and to (b) include $2.0 million of net income associated with the Company’s gain on the termination of its interest rate cap derivative for the three months ended March 31, 2022, in each case, with respect to Core Earnings for the three months ended March 31, 2022. Core Earnings is defined in the Management Agreement and is used to calculate the incentive fees the Company pays to ACREM. For the three months ended March 31, 2023, the Company did not incur any incentive fees. For the three months ended March 31, 2022, the Company incurred incentive fees of $358 thousand.

The Company reimburses ACREM at cost for operating expenses that ACREM incurs on the Company’s behalf, including expenses relating to legal, financial, accounting, servicing, due diligence and other services, expenses in connection with the origination and financing of the Company’s investments, communications with the Company’s stockholders, information technology systems, software and data services used for the Company, travel, complying with legal and regulatory requirements, taxes, insurance maintained for the benefit of the Company as well as all other expenses actually incurred by ACREM that are reasonably necessary for the performance by ACREM of its duties and functions under the Management Agreement. Ares Management, from time to time, incurs fees, costs and expenses on behalf of more than one investment vehicle. To the extent such fees, costs and expenses are incurred for the account or benefit of more than one fund, each such investment vehicle, including the Company, will typically bear an allocable portion of any such fees, costs and expenses in proportion to the size of its investment in the activity or entity to which such expense relates (subject to the terms of each fund’s governing documents) or in such other manner as Ares Management considers fair and equitable under the circumstances, such as the relative fund size or capital available to be invested by such investment vehicles. Where an investment vehicle’s governing documents do not permit the payment of a particular expense, Ares Management will generally pay such investment vehicle’s allocable portion of such expense. In addition, the Company is responsible for its proportionate share of certain fees and expenses, including due diligence costs, as determined by ACREM and Ares Management, including legal, accounting and financial advisor fees and related costs, incurred in connection with evaluating and consummating investment opportunities, regardless of whether such transactions are ultimately consummated by the parties thereto.

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The Company will not reimburse ACREM for the salaries and other compensation of its personnel, except for the allocable share of the salaries and other compensation of the Company’s (a) Chief Financial Officer, based on the percentage of his time spent on the Company’s affairs and (b) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of ACREM or its affiliates who spend all or a portion of their time managing the Company’s affairs based on the percentage of their time spent on the Company’s affairs. The Company is also required to pay its pro-rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of ACREM and its affiliates that are required for the Company’s operations.

Certain of the Company’s subsidiaries, along with the Company’s lenders under certain of the Company’s Secured Funding Agreements, as well as under the CLO transaction have entered into various servicing agreements with ACREM’s subsidiary servicer, Ares Commercial Real Estate Servicer LLC (“ACRES”). The Company’s Manager will specially service, as needed, certain of the Company’s investments. Effective May 1, 2012, ACRES agreed that no servicing fees pursuant to these servicing agreements would be charged to the Company or its subsidiaries by ACRES or the Manager for so long as the Management Agreement remains in effect, but that ACRES will continue to receive reimbursement for overhead related to servicing and operational activities pursuant to the terms of the Management Agreement.

The term of the Management Agreement ends on April 25, 2024, with automatic one-year renewal terms thereafter. Except under limited circumstances, upon a termination of the Management Agreement, the Company will pay ACREM a termination fee equal to three times the average annual base management fee and incentive fee received by ACREM during the 24-month period immediately preceding the most recently completed fiscal quarter prior to the date of termination, each as described above.

The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2023 and 2022 and amounts payable to the Company’s Manager as of March 31, 2023 and December 31, 2022 ($ in thousands):

	Incurred				Payable
	For the three months ended March 31,				As of
	2023		2022		March 31, 2023		December 31, 2022
Affiliate Payments
Management fees	$	3,010	$	2,616	$	3,010	$	3,026
Incentive fees	—		358		—		1,264
General and administrative expenses	732		834		885		1,232
Direct costs(1)	20		29		4		58
Total	$	3,762	$	3,837	$	3,899	$	5,580

_______________________________

(1)    For the three months ended March 31, 2023 and 2022, direct costs incurred are included within general and administrative expenses in the Company’s consolidated statements of operations.

Investments in Loans

From time to time, the Company may co-invest with other investment vehicles managed by Ares Management or its affiliates, including the Manager, and their portfolio companies, including by means of splitting investments, participating in investments or other means of syndication of investments. For such co-investments, the Company expects to act as the administrative agent for the holders of such investments provided that the Company maintains a majority of the aggregate investment. No fees will be received by the Company for performing such service. The Company will be responsible for its pro-rata share of costs and expenses for such co-investments, including due diligence costs for transactions which fail to close. The Company’s investment in such co-investments are made on a pari-passu basis with the other Ares managed investment vehicles and the Company is not obligated to provide, nor has it provided, any financial support to the other Ares managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment and the Company recognizes only the carrying value of its investment in its consolidated balance sheets. As of March 31, 2023 and December 31, 2022, the total outstanding principal balance for co-investments held by the Company was $218.6 million and $213.7 million, respectively.

Loan Purchases From Affiliate

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An affiliate of the Company’s Manager maintains a $200.0 million real estate debt warehouse investment vehicle (the “Ares Warehouse Vehicle”) that holds Ares Management originated commercial real estate loans, which are made available to purchase by other investment vehicles, including the Company and other Ares Management managed investment vehicles. From time to time, the Company may purchase loans from the Ares Warehouse Vehicle. The Company’s Manager will approve the purchase of such loans only on terms, including the consideration to be paid, that are determined by the Company’s Manager in good faith to be appropriate for the Company once the Company has sufficient liquidity. The Company is not obligated to purchase any loans originated by the Ares Warehouse Vehicle. In addition, from time to time, the Company may purchase loans, including participations in loans, from other Ares Management managed investment vehicles. Loans purchased by the Company from the Ares Warehouse Vehicle or other Ares Management managed investment vehicles are purchased at fair value as determined by an independent third-party valuation expert and are subject to approval by a majority of the Company’s independent directors. No loans were purchased by the Company from the Ares Warehouse Vehicle for the three months ended March 31, 2023.

15.   DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2023 and 2022 ($ in thousands, except per share data):

Date Declared	Record Date	Payment Date	Per Share Amount			Total Amount
February 15, 2023	March 31, 2023	April 18, 2023	$	0.35	(1)	$	19,346
Total cash dividends declared for the three months ended March 31, 2023			$	0.35		$	19,346
February 15, 2022	March 31, 2022	April 14, 2022	$	0.35	(1)	$	16,740
Total cash dividends declared for the three months ended March 31, 2022			$	0.35		$	16,740

(1) Consists of a regular cash dividend of $0.33 and a supplemental cash dividend of $0.02.

16.   VARIABLE INTEREST ENTITIES

Consolidated VIEs

As discussed in Note 2, the Company evaluates all of its investments and other interests in entities for consolidation, including its investments in the CLO Securitizations (as defined below), which are considered to be variable interests in VIEs.

CLO Securitizations

On January 11, 2019, ACRE Commercial Mortgage 2017-FL3 Ltd. (the “FL3 Issuer”) and ACRE Commercial Mortgage 2017-FL3 LLC (the “FL3 Co-Issuer”), both wholly-owned indirect subsidiaries of the Company, entered into an Amended and Restated Indenture (the “FL3 Amended Indenture”) with Wells Fargo Bank, National Association, as advancing agent and note administrator, and Wilmington Trust, National Association, as trustee, which governs the approximately $504.1 million principal balance of secured floating rate notes (the “FL3 Notes”) issued by the FL3 Issuer and $52.9 million of preferred equity in the FL3 Issuer (the “FL3 CLO Securitization”). The FL3 Amended Indenture amends and restates, and replaces in its entirety, the indenture for the CLO securitization issued in March 2017, which governed the issuance of approximately $308.8 million principal balance of secured floating rate notes and $32.4 million of preferred equity in the FL3 Issuer.

As of March 31, 2023, the FL3 Notes were collateralized by interests in a pool of 16 mortgage assets having a total principal balance of $428.7 million (the “FL3 Mortgage Assets”) that were closed by a wholly-owned subsidiary of the Company and approximately $128.3 million of receivables related to repayments of outstanding principal on previous mortgage assets. As of December 31, 2022, the FL3 Notes were collateralized by interests in a pool of 16 mortgage assets having a total principal balance of approximately $429.4 million that were closed by a wholly-owned subsidiary of the Company and approximately $127.6 million of receivables related to repayments of outstanding principal on previous mortgage assets. On April 13, 2021, the FL3 Issuer and the FL3 Co-Issuer entered into a First Supplement to Amended and Restated Indenture (the

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“2021 Amended Indenture”) with Wells Fargo Bank, National Association, as advancing agent and note administrator, and Wilmington Trust, National Association, as trustee, which governs the FL3 CLO Securitization. The purpose of the 2021 Amended Indenture was to, among other things, extend the reinvestment period to March 31, 2024. During the reinvestment period, the Company may direct the FL3 Issuer to acquire additional mortgage assets meeting applicable reinvestment criteria using the principal repayments from the FL3 Mortgage Assets, subject to the satisfaction of certain conditions, including receipt of a Rating Agency Confirmation and investor approval of the new mortgage assets.

The contribution of the FL3 Mortgage Assets to the Issuer is governed by a Mortgage Asset Purchase Agreement between the Seller and the FL3 Issuer, and acknowledged by the Company solely for purposes of confirming its status as a REIT, in which the Seller made certain customary representations, warranties and covenants.

In connection with the securitization, the FL3 Issuer and FL3 Co-Issuer offered and issued the following classes of Notes: Class A, Class A-S, Class B, Class C and Class D Notes (collectively, the “FL3 Offered Notes”) to a third party. The Company retained (through one of its wholly-owned subsidiaries) approximately $58.5 million of the FL3 Notes and all of the $52.9 million of preferred equity in the FL3 Issuer, which totaled $111.4 million. The Company, as the holder of the subordinated FL3 Notes and all of the preferred equity in the FL3 Issuer, has the obligation to absorb losses of the CLO, since the Company has a first loss position in the capital structure of the CLO.

On January 28, 2021, ACRE Commercial Mortgage 2021-FL4 Ltd. (the “FL4 Issuer”) and ACRE Commercial Mortgage 2021-FL4 LLC (the “FL4 Co-Issuer”), both wholly owned indirect subsidiaries of the Company, entered into an Indenture (the “FL4 Indenture”) with ACRC Lender LLC, a wholly owned subsidiary of the Company (the “Seller”), as advancing agent, Wells Fargo Bank, National Association, as note administrator, and Wilmington Trust, National Association, as trustee, which governs the issuance of approximately $603.0 million principal balance secured floating rate notes (the “FL4 Notes”) and $64.3 million of preferred equity in the FL4 Issuer (the “FL4 CLO Securitization”). For U.S. federal income tax purposes, the FL4 Issuer and FL4 Co-Issuer are disregarded entities.

As of March 31, 2023, the FL4 Notes were collateralized by interests in a pool of 11 mortgage assets having a total principal balance of approximately $418.1 million (the “FL4 Mortgage Assets”) that were closed by a wholly-owned subsidiary of the Company. As of December 31, 2022, the FL4 Notes were collateralized by interests in a pool of 12 mortgage assets having a total principal balance of approximately $458.3 million that were closed by a wholly-owned subsidiary of the Company and approximately $1.9 million of receivables related to repayments of outstanding principal on previous mortgage assets. During the period ending in April 2024 (the “Companion Participation Acquisition Period”), the FL4 Issuer may use certain principal proceeds from the FL4 Mortgage Assets to acquire additional funded pari-passu participations related to the FL4 Mortgage Assets that meet certain acquisition criteria.

The sale of the FL4 Mortgage Assets to the FL4 Issuer is governed by a FL4 Mortgage Asset Purchase Agreement between the Seller and the FL4 Issuer, and acknowledged by the Company solely for purposes of confirming its status as a REIT, in which the Seller made certain customary representations, warranties and covenants.

In connection with the FL4 CLO Securitization, the FL4 Issuer and FL4 Co-Issuer offered and issued the following classes of FL4 Notes to third party investors: Class A, Class A-S, Class B, Class C, Class D and Class E Notes (collectively, the “FL4 Offered Notes”). A wholly owned subsidiary of the Company retained approximately $62.5 million of the FL4 Notes and all of the $64.3 million of preferred equity in the FL4 Issuer, which totaled $126.8 million. The Company, as the holder of the subordinated FL4 Notes and all of the preferred equity in the FL4 Issuer, has the obligation to absorb losses of the FL4 CLO Securitization, since the Company has a first loss position in the capital structure of the FL4 CLO Securitization. During the three months ended March 31, 2023, the Company paid down $42.1 million of the FL4 Offered Notes.

The FL3 CLO Securitization and the FL4 CLO Securitization are collectively referred to as the “CLO Securitizations.” As the directing holder of the CLO Securitizations, the Company has the ability to direct activities that could significantly impact the CLO Securitizations’ economic performance. ACRES is designated as special servicer of the CLO Securitizations and has the power to direct activities during the loan workout process on defaulted and delinquent loans, which is the activity that most significantly impacts the CLO Securitizations’ economic performance. ACRES did not waive the special servicing fee, and the Company pays its overhead costs. If an unrelated third party had the right to unilaterally remove the special servicer, then the Company would not have the power to direct activities that most significantly impact the CLO Securitizations’ economic performance. In addition, there were no substantive kick-out rights of any unrelated third party to remove the special servicer without cause. The Company’s subsidiaries, as directing holders, have the ability to remove the special servicer without cause. Based on these factors, the Company is determined to be the primary beneficiary of each of the CLO Securitizations; thus, the CLO Securitizations are consolidated into the Company’s consolidated financial statements.

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The CLO Securitizations are consolidated in accordance with FASB ASC Topic 810 and are structured as pass through entities that receive principal and interest on the underlying collateral and distributes those payments to the note holders, as applicable. The assets and other instruments held by the CLO Securitizations are restricted and can only be used to fulfill the obligations of the respective CLO Securitizations. Additionally, the obligations of the CLO Securitizations do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary.

The inclusion of the assets and liabilities of the CLO Securitizations of which the Company is deemed the primary beneficiary has no economic effect on the Company. The Company’s exposure to the obligations of the CLO Securitizations are generally limited to its investment in the entity. The Company is not obligated to provide, nor has it provided, any financial support for the consolidated structures. As such, the risk associated with the Company’s involvement in the CLO Securitizations are limited to the carrying value of its investment in each of the entities. As of March 31, 2023, the Company’s maximum risk of loss was $238.2 million, which represents the carrying value of its investments in the CLO Securitizations.

17.   SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this quarterly report on Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the three months ended March 31, 2023, except as disclosed below.

In April 2023, the senior mortgage loan held by the Company on a multifamily property located in Washington received a partial April interest payment, which triggered an event of default under the loan agreement. As of May 1, 2023, the outstanding principal balance of the senior Washington loan is $18.8 million.

In April 2023, the Company closed the sale of the senior mortgage loan collateralized by an office property located in Illinois that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the maturity date. As of March 31, 2023, the loan was classified as held for sale and was carried at fair value of $27.4 million, which was equal to the final sale price.

The Company’s Board of Directors declared a regular cash dividend of $0.33 per common share and a supplemental cash dividend of $0.02 per common share for the second quarter of 2023. The second quarter 2023 and supplemental cash dividends will be payable on July 18, 2023 to common stockholders of record as of June 30, 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a specialty finance company primarily engaged in originating and investing in commercial real estate (“CRE”) loans and related investments. We are externally managed by ACREM, a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management”), a publicly traded, leading global alternative asset manager, pursuant to the terms of the amended and restated management agreement dated July 26, 2022, between us and our Manager (the “Management Agreement”). From the commencement of our operations in late 2011, we have been primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for our own account.

We were formed and commenced operations in late 2011. We are a Maryland corporation and completed our initial public offering in May 2012. We have elected and qualified to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended, commencing with our taxable year ended December 31, 2012. We generally will not be subject to United States federal income taxes on our REIT taxable income as long as we annually distribute to stockholders an amount at least equal to our REIT taxable income prior to the deduction for dividends paid and comply with various other requirements as a REIT. We also operate our business in a manner that is intended to permit us to maintain our exemption from registration under the 1940 Act.

Developments During the First Quarter of 2023:

•ACRE closed the sale of the senior mortgage loan collateralized by a residential property in California and was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2021 maturity date. ACRE recognized a realized loss of $5.6 million as the carrying value, not including the current expected credit losses (“CECL”) reserve, exceeded the sale price of the loan.

•ACRE entered into a sale agreement with a third party to sell a senior mortgage loan with outstanding principal of $27.4 million, which is collateralized by an office property located in Illinois and is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the January 2023 maturity date. As of March 31, 2023, the sale had not yet closed and the loan was reclassified from held for investment to held for sale and is carried at fair value. The sale closed in April 2023. ACRE did not recognize any unrealized gain or loss upon reclassifying the loan to held for sale as the carrying value was equal to fair value as determined by the agreed upon sale price of the loan.

Trends Affecting Our Business

Global markets continued to see volatility during the first quarter of 2023, fueled by continued high inflation and interest rates and geopolitical uncertainty. In response to heightened inflation, the Federal Reserve may continue to raise interest rates, which has continued to result in uncertainty for the economy and for our borrowers. In addition, during the first quarter of 2023, several financial institutions in the U.S. and abroad, sustained liquidity problems resulting in volatility in the financial markets and concerns with respect to market-wide liquidity problems. These current macroeconomic conditions may continue or aggravate and could cause the U.S. economy or other global economies to experience an economic slowdown or recession. We continue to monitor the uncertainty surrounding inflation, rising interest rates and market-wide liquidity problems; however, the full impact that these factors may have on our business remains uncertain.

Factors Impacting Our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply of, and demand for, commercial mortgage loans, CRE debt and other financial assets in the marketplace. Our net interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. Interest rates will vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.

Stock Repurchase Program

On July 26, 2022, our Board of Directors approved a stock repurchase program of up to $50.0 million, which is expected to be in effect until July 26, 2023, or until the approved dollar amount has been used to repurchase shares (the “Repurchase Program”). Pursuant to the Repurchase Program, we may repurchase shares of our common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations, including all applicable

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legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion. We did not conduct any repurchases under the Repurchase Program during the three months ended March 31, 2023.

Loans Held for Investment Portfolio

As of March 31, 2023, our portfolio included 53 loans held for investment, excluding 157 loans that were repaid, sold, converted to real estate owned or transferred to held for sale since inception. As of March 31, 2023, the aggregate originated commitment under these loans at closing was approximately $2.5 billion and outstanding principal was $2.2 billion. During the three months ended March 31, 2023, we funded approximately $26.4 million of outstanding principal, received repayments of $72.8 million of outstanding principal, sold one loan with outstanding principal of $14.3 million to a third party and transferred one loan to held for sale with outstanding principal of $27.4 million. As of March 31, 2023, 80.8% of our loans have LIBOR or SOFR floors, with a weighted average floor of 0.99%, calculated based on loans with LIBOR or SOFR floors. References to LIBOR or “L” are to 30-day LIBOR and references to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).

Other than as set forth in Note 3 to our consolidated financial statements included in this quarterly report on Form 10-Q, as of March 31, 2023, all loans held for investment were paying in accordance with their contractual terms.

Our loans held for investment are accounted for at amortized cost. The following table summarizes our loans held for investment as of March 31, 2023 ($ in thousands):

	As of March 31, 2023
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,135,368	$	2,155,816	8.5	%	(2)	9.2	%	(3)	1.4
Subordinated debt and preferred equity investments	37,837		39,098		7.8	%	(2)	14.7	%	(3)	2.6
Total loans held for investment portfolio	$	2,173,205	$	2,194,914	8.5	%	(2)	9.2	%	(3)	1.4

_______________________________

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by us as of March 31, 2023 as weighted by the outstanding principal balance of each loan.

(3)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all interest accruing loans held by us as of March 31, 2023 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2023).

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”), which require management to make estimates and assumptions that affect reported amounts. These estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions. There have been no significant changes to our critical accounting estimates as disclosed in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K. See Note 2 to our consolidated financial statements included in this quarterly report on Form 10-Q, which describes factors which may impact management’s estimates and assumptions and the recently issued accounting pronouncements that were adopted or not yet required to be adopted by us.

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RECENT DEVELOPMENTS

In April 2023, the senior mortgage loan held by us on a multifamily property located in Washington received a partial April interest payment, which triggered an event of default under the loan agreement. As of May 1, 2023, the outstanding principal balance of the senior Washington loan is $18.8 million.

In April 2023, we closed the sale of the senior mortgage loan collateralized by an office property located in Illinois that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the maturity date. As of March 31, 2023, the loan was classified as held for sale and was carried at fair value of $27.4 million, which was equal to the final sale price.

Our Board of Directors declared a regular cash dividend of $0.33 per common share and a supplemental cash dividend of $0.02 per common share for the second quarter of 2023. The second quarter 2023 and supplemental cash dividends will be payable on July 18, 2023 to common stockholders of record as of June 30, 2023.

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RESULTS OF OPERATIONS

The following table sets forth a summary of our consolidated results of operations for the three months ended March 31, 2023 and 2022 ($ in thousands):

	For the three months ended March 31,
	2023		2022
Total revenue	$	26,501	$	24,023
Total expenses	6,198		10,508
Provision for current expected credit losses	21,019		(594)
Realized losses on loans sold	5,613		—
Gain on sale of real estate owned	—		2,197
Income (loss) before income taxes	(6,329)		16,306
Income tax expense, including excise tax	110		105
Net income (loss) attributable to common stockholders	$	(6,439)	$	16,201

The following tables set forth select details of our consolidated results of operations for the three months ended March 31, 2023 and 2022 ($ in thousands):

Net Interest Margin

	For the three months ended March 31,
	2023		2022
Interest income	$	49,500	$	33,364
Interest expense	(22,999)		(12,013)
Net interest margin	$	26,501	$	21,351

For the three months ended March 31, 2023 and 2022, net interest margin was approximately $26.5 million and $21.4 million, respectively. For the three months ended March 31, 2023 and 2022, interest income of $49.5 million and $33.4 million, respectively, was generated by weighted average earning assets of $2.3 billion and $2.4 billion, respectively, offset by $23.0 million and $12.0 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Wells Fargo Facility, the Citibank Facility, the CNB Facility, the MetLife Facility and the Morgan Stanley Facility (individually defined below and collectively, the “Secured Funding Agreements”), Notes Payable (as defined below), the Secured Term Loan, Secured Borrowings and securitization debt (as defined below) were $1.7 billion for the three months ended March 31, 2023 and $1.8 billion for the three months ended March 31, 2022. The increase in net interest margin for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily relates to the benefit received from our interest rate hedging derivative contracts for the three months ended March 31, 2023 and the benefit received from the increase in LIBOR and SOFR rates on our loans held for investment for the three months ended March 31, 2023. This was partially offset by a decrease in our weighted average earning assets and weighted average borrowings for the three months ended March 31, 2023.

Revenue From Real Estate Owned

On March 8, 2019, we acquired legal title to a hotel property through a deed in lieu of foreclosure. Prior to March 8, 2019, the hotel property collateralized a $38.6 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the December 2018 maturity date. In conjunction with the deed in lieu of foreclosure, we derecognized the $38.6 million senior mortgage loan and recognized the hotel property as real estate owned. For the three months ended March 31, 2023, there was no revenue from real estate owned as we closed the sale of the hotel property to a third party on March 1, 2022. For the three months ended March 31, 2022, revenue from real estate owned was $2.7 million. Revenues consisted of room sales, food and beverage sales and other hotel revenues. In connection with the sale of the hotel property, we provided a senior mortgage loan to the buyer of the hotel property. The initial advance funded under such loan was $30.7 million, with up to another $25.0 million of additional loan proceeds to be available for future advances to cover a portion of the anticipated property renovation plan costs, provided certain conditions are satisfied. At closing, the buyer contributed $12.9 million of equity into the purchase. Additionally, the buyer is required to fund an additional $8.7 million of equity associated with the anticipated property renovation plan costs.

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Operating Expenses     

	For the three months ended March 31,
	2023		2022
Management and incentive fees to affiliate	$	3,010	$	2,974
Professional fees	771		778
General and administrative expenses	1,685		1,613
General and administrative expenses reimbursed to affiliate	732		834
Expenses from real estate owned	—		4,309
Total expenses	$	6,198	$	10,508

See the Related Party Expenses, Other Expenses and Expenses from Real Estate Owned discussions below for the cause of the decrease in operating expenses for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Related Party Expenses

For the three months ended March 31, 2023, related party expenses included $3.0 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended March 31, 2023. For the three months ended March 31, 2023, related party expenses also included $0.7 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the three months ended March 31, 2022, related party expenses included $3.0 million in management and incentive fees due to our Manager pursuant to the Management Agreement, which consisted of $2.6 million in management fees and $0.4 million in incentive fees. For the three months ended March 31, 2022, related party expenses also included $0.8 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. The increase in management fees for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily relates to an increase in our weighted average stockholders’ equity for the three months ended March 31, 2023 as a result of the public offering of 7,000,000 shares of our common stock in May 2022, which generated net proceeds of approximately $103.2 million. The decrease in incentive fees for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily relates to our Core Earnings (defined below) for the twelve months ended March 31, 2023 exceeding the 8% minimum return by a lower margin than the twelve months ended March 31, 2022. “Core Earnings” is defined in the Management Agreement as GAAP net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of our target investments are structured as debt and we foreclose on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), and one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between our Manager and our independent directors and after approval by a majority of our independent directors. On April 25, 2022, ACRE and ACREM entered into an amendment to the Management Agreement to (a) include a $2.4 million adjustment to reverse the impact of accumulated depreciation following the sale of the hotel real estate owned property for the three months ended March 31, 2022 and to (b) include a $2.0 million adjustment to include the realized gain from the termination of the interest rate cap derivative for the three months ended March 31, 2022, in each case, with respect to Core Earnings for the three months ended March 31, 2022. Core Earnings is defined in the Management Agreement and is used to calculate the incentive fees the Company pays to ACREM. The decrease in allocable general and administrative expenses due to our Manager for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily relates to a decrease in the percentage of time allocated to us by employees of our Manager due to changes in transaction activity year over year. This was partially offset by the inclusion of additional eligible expense reimbursements per the Amended and Restated Management Agreement for the three months ended March 31, 2023 that became effective during the three months ended September 30, 2022.

Other Expenses

For both the three months ended March 31, 2023 and 2022, professional fees were $0.8 million. For the three months ended March 31, 2023 and 2022, general and administrative expenses were $1.7 million and $1.6 million, respectively. The increase in general and administrative expenses for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily relates to an increase in stock-based compensation expense due to restricted stock and restricted stock unit awards granted after March 31, 2022.

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    Expenses From Real Estate Owned

For the three months ended March 31, 2023, there were no expenses from real estate owned as we closed the sale of the hotel property to a third party on March 1, 2022. For the three months ended March 31, 2022, expenses from real estate owned was comprised of the following ($ in thousands):

	For the three months ended March 31, 2022
Hotel operating expenses	$	3,631
Interest expense on note payable	678
Depreciation expense	—
Expenses from real estate owned	$	4,309

For the three months ended March 31, 2022, hotel operating expenses were $3.6 million. Hotel operating expenses consisted primarily of expenses incurred in the day-to-day operation of our hotel property, including room expense, food and beverage expense and other operating expenses. Room expense included housekeeping and front office wages and payroll taxes, reservation systems, room supplies, laundry services and other costs. Food and beverage expense primarily included the cost of food, the cost of beverages and associated labor costs. Other operating expenses included labor and other costs associated with administrative departments, sales and marketing, repairs and maintenance, real estate taxes, insurance, utility costs and management and incentive fees paid to the hotel property manager. For the three months ended March 31, 2022, interest expense on our note payable was $0.7 million. For the three months ended March 31, 2022, no depreciation expense was incurred as the hotel property was classified as real estate owned held for sale effective in November 2021.

Provision for Current Expected Credit Losses

For the three months ended March 31, 2023 and 2022, the provision for current expected credit losses was $21.0 million and $(0.6) million, respectively. The increase in the provision for current expected credit losses for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 is primarily due to specific CECL reserves that were assigned to two loans in the portfolio, changes to the loan portfolio and the impact of the current macroeconomic environment on certain assets, including high inflation and interest rates, partially offset by shorter average remaining loan term, loan sales and loan repayments during the three months ended March 31, 2023.

The current expected credit loss reserve (“CECL Reserve”) takes into consideration our estimates relating to the impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on our loans held for investment, unless the Company determines that a specific reserve is warranted for a select asset. Additionally, the CECL Reserve is not an indicator of what we expect our CECL Reserve would have been absent the current and potential future impacts of macroeconomic conditions.

Realized Losses on Loans Sold

In January 2023, we closed the sale of a senior mortgage loan with outstanding principal of $14.3 million, which was collateralized by a residential property located in California, to a third party. At the time of the sale, the senior mortgage loan was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2021 maturity date. For the three months ended March 31, 2023, we recognized a realized loss of $5.6 million in our consolidated statements of operations upon the sale of the senior mortgage loan as the carrying value exceeded the sale price of the loan.

Gain on Sale of Real Estate Owned

For the three months ended March 31, 2022, we recognized a $2.2 million gain on the sale of the hotel property that was recognized as real estate owned as the net carrying value of the hotel property as of the March 1, 2022 sale date was lower than the net sales proceeds received by the Company.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. We use significant cash to purchase our target investments, make principal and interest payments on our borrowings, make distributions to our stockholders and fund our operations.

Our primary sources of cash generally consist of unused borrowing capacity under our Secured Funding Agreements, the net proceeds of future equity offerings, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating activities. Principal repayments from mortgage loans in securitizations where we retain the subordinate securities are applied sequentially, first used to pay down the senior notes, and accordingly, we will not receive any proceeds from repayment of loans in the securitizations until all senior notes are repaid in full.

We expect our primary sources of cash to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future. As a result of the current macroeconomic environment, borrowers may be unable to make interest and principal payments timely, including at the maturity date of the borrower’s loan. We have increased our CECL Reserve to reflect this risk. Our Secured Funding Agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our Financing Agreements, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral. We are also subject to cross-default and acceleration rights with respect to our Financing Agreements. During the COVID-19 pandemic, to mitigate the risk of future margin calls, we proactively engaged in discussions with certain of our lenders to modify the terms of our borrowings on certain assets within these facilities, in order to, among other things, reduce the amounts we were borrowing against such assets and/or increase the borrowing spreads. If we experience borrower default as a result of the current macroeconomic conditions, we may not be able to negotiate modifications to our borrowings with our lenders, similar to those negotiated during COVID-19, or to receive financing from our Secured Funding Agreements with respect to our commitments to fund our loans held for investment in the future. See “Summary of Financing Agreements” below for a description of our Financing Agreements.

Subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we expect that our primary sources of liquidity will be financing, to the extent available to us, through credit, secured funding and other lending facilities, other sources of private financing, including warehouse and repurchase facilities, and public or private offerings of our equity or debt securities. Furthermore, we have sold, and may continue to sell certain of our mortgage loans, or interests therein, in order to manage liquidity needs. Subject to maintaining our qualification as a REIT, we may also change our dividend practice, including by reducing the amount of, or temporarily suspending, our future dividends or making dividends that are payable in cash and shares of our common stock for some period of time. We are also able to access additional liquidity through the (i) reinvestment provisions in our FL3 CLO Securitization, which allows us to replace mortgage assets in our FL3 CLO Securitization which have repaid and (ii) future funding acquisition provisions in our FL4 collateralized loan obligation securitization debt (“FL4 CLO Securitization”, together with our FL3 CLO Securitization, our “CLO Securitizations”), which allows us to use mortgage asset repayment funds to acquire additional funded pari-passu participations related to the mortgage assets then-remaining in our FL4 CLO Securitization; each subject to the satisfaction of certain reinvestment or acquisition conditions, which may include receipt of a Rating Agency Confirmation and investor approval. There can be no assurance that the conditions for reinvestment or acquisition will be satisfied and whether our CLO Securitizations will acquire any additional mortgage assets or funded pari-passu participations. In addition, our CLO Securitizations contain certain senior note overcollateralization ratio tests. To the extent we fail to meet these tests, amounts that would otherwise be used to make payments on the subordinate securities that we hold will be used to repay principal on the more senior securities to the extent necessary to satisfy any senior note overcollateralization ratio and we may incur significant losses. Our sources of liquidity may be impacted to the extent we do not receive cash payments that we would otherwise expect to receive from the CLO Securitizations if these tests were met.

Ares Management or one of its investment vehicles, including the Ares Warehouse Vehicle, may originate mortgage loans. We have had and may continue to have the opportunity to purchase such loans that are determined by our Manager in good faith to be appropriate for us, depending on our available liquidity. Ares Management or one of its investment vehicles may also acquire mortgage loans from us.

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We have commitments to fund various senior mortgage loans, as well as subordinated debt and preferred equity investments in our portfolio. Other than as set forth in this quarterly report on Form 10-Q, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment or intend to provide additional funding to any such entities.

As of May 1, 2023, we had approximately $220 million in liquidity including $145 million of unrestricted cash and $75 million of availability under our Secured Funding Agreements.

At the Market Stock Offering Program

On November 22, 2019, we entered into an equity distribution agreement (the “Equity Distribution Agreement”), governing an “at the market offering” program having an aggregate offering price of up to $100.0 million. During the three months ended March 31, 2023, no shares of our common stock under the Equity Distribution Agreement were sold. The “at the market offering” program is currently unavailable.

Cash Flows

The following table sets forth changes in cash and cash equivalents for the three months ended March 31, 2023 and 2022 ($ in thousands):

	For the three months ended March 31,
	2023		2022
Net income (loss)	$	(6,439)	$	16,201
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	17,695		14
Net cash provided by (used in) operating activities	11,256		16,215
Net cash provided by (used in) investing activities	70,058		89,680
Net cash provided by (used in) financing activities	(68,828)		(142,751)
Change in cash and cash equivalents	$	12,486	$	(36,856)

During the three months ended March 31, 2023 and 2022, cash and cash equivalents increased (decreased) by $12.5 million and $(36.9) million, respectively.

Operating Activities

For the three months ended March 31, 2023 and 2022, net cash provided by operating activities totaled $11.3 million and $16.2 million, respectively. For the three months ended March 31, 2023, adjustments to net loss related to operating activities primarily included the provision for current expected credit losses of $21.0 million, accretion of discounts, deferred loan origination fees and costs of $1.8 million, amortization of deferred financing costs of $1.0 million, change in other assets of $8.6 million and realized losses on loans sold of $5.6 million. For the three months ended March 31, 2022, adjustments to net income related to operating activities primarily included the provision for current expected credit losses of $0.6 million, accretion of discounts, deferred loan origination fees and costs of $2.3 million, amortization of deferred financing costs of $2.2 million, change in other assets of $4.0 million and gain on sale of real estate owned of $2.2 million.

Investing Activities

For the three months ended March 31, 2023 and 2022, net cash provided by investing activities totaled $70.1 million and $89.7 million, respectively. This change in net cash provided by investing activities was primarily as a result of the cash received from principal repayment of loans held for investment and from the sale of loans held for sale exceeding the cash used for the origination and funding of loans held for investment for the three months ended March 31, 2023.

Financing Activities

For the three months ended March 31, 2023, net cash used in financing activities totaled $68.8 million and primarily related to repayments of our Secured Funding Agreements of $19.7 million, repayments of debt of consolidated VIEs of $42.1 million and dividends paid of $19.3 million, partially offset by proceeds from our Secured Funding Agreements of $12.7

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million. For the three months ended March 31, 2022, net cash used in financing activities totaled $142.8 million and primarily related to repayments of our Secured Funding Agreements of $137.9 million, repayments of our Notes Payable of $28.3 million and dividends paid of $16.7 million, partially offset by proceeds from our Secured Funding Agreements of $37.9 million and proceeds from the sale of our common stock of $2.9 million.

Summary of Financing Agreements

The sources of financing, as applicable in a given period, under our Secured Funding Agreements, Notes Payable and the Secured Term Loan (collectively, the “Financing Agreements”) are described in the following table ($ in thousands):

	As of
	March 31, 2023							December 31, 2022
	Total Commitment		Outstanding Balance		Interest Rate	Maturity Date		Total Commitment		Outstanding Balance		Interest Rate	Maturity Date
Secured Funding Agreements:
Wells Fargo Facility	$	450,000	$	261,039	Base Rate(1)+1.50 to 3.75%	December 15, 2025	(2)	$	450,000	$	270,798	Base Rate(1)+1.50 to 3.75%	December 15, 2025	(2)
Citibank Facility	325,000		236,240		Base Rate(1)+1.50 to 2.10%	January 13, 2025	(3)	325,000		236,240		Base Rate(1)+1.50 to 2.10%	January 13, 2025	(3)
CNB Facility	75,000		—		SOFR+2.65%	March 11, 2024	(4)	75,000		—		SOFR+2.65%	March 10, 2023	(4)
MetLife Facility	180,000		—		Base Rate(1)+2.10 to 2.50%	August 13, 2023	(5)	180,000		—		Base Rate(1)+2.10 to 2.50%	August 13, 2023	(5)
Morgan Stanley Facility	250,000		200,874		SOFR+1.60 to 3.10%	January 16, 2024	(6)	250,000		198,193		Base Rate(1)+1.50 to 3.00%	January 16, 2024	(6)
Subtotal	$	1,280,000	$	698,153				$	1,280,000	$	705,231
Notes Payable	$	105,000	$	105,000	SOFR+2.00%	July 28, 2025	(7)	$	105,000	$	105,000	SOFR+2.00%	July 28, 2025	(7)
Secured Term Loan	$	150,000	$	150,000	4.50%	November 12, 2026	(8)	$	150,000	$	150,000	4.50%	November 12, 2026	(8)
Total	$	1,535,000	$	953,153				$	1,535,000	$	960,231

_____________________________

(1)The base rate is LIBOR for loans pledged prior to December 31, 2021 and SOFR for loans pledged subsequent to December 31, 2021.

(2)The maturity date of the master repurchase funding facility with Wells Fargo Bank, National Association (the “Wells Fargo Facility”) is subject to two 12-month extensions at our option, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid. The maximum commitment may be increased to up to $500.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

(3)The maturity date of the master repurchase facility with Citibank, N.A. (“Citibank”) (the “Citibank Facility”) is subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid.

(4)In February 2023, we exercised a 12-month extension option on the secured revolving funding facility with City National Bank (the "CNB Facility").

(5)The revolving master repurchase facility with Metropolitan Life Insurance Company (the “MetLife Facility”) is subject to one 12-month extension, which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid.

(6)The master repurchase and securities contract with Morgan Stanley (the “Morgan Stanley Facility”) is subject to one 12-month extension, which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid.

(7)A wholly owned subsidiary of ours is party to a Credit and Security Agreement with the lender referred to therein, which provides for a $105.0 million note (the "Notes Payable"). The $105.0 million note is subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid.

(8)The maturity date of the Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the "Secured Term Loan") is November 12, 2026 and the interest rate on advances under the Secured Term Loan are the following fixed rates: (i) 4.50% per annum until May 12, 2025, (ii) after May 12, 2025 through November 12, 2025, the interest rate increases 0.125% every three months and (iii) after November 12, 2025 through November 12, 2026, the interest rate increases 0.250% every three months.

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Our Financing Agreements contain various affirmative and negative covenants, including negative pledges, and provisions related to events of default that are normal and customary for similar financing agreements. As of March 31, 2023, we were in compliance with all financial covenants of each respective Financing Agreement. We may be required to fund commitments on our loans held for investment in the future and we may not receive funding from our Secured Funding Agreements with respect to these commitments. See Note 6 to our consolidated financial statements included in this quarterly report on Form 10-Q for more information on our Financing Agreements.

Securitizations

As of March 31, 2023, the carrying amount and outstanding principal of our CLO Securitizations was $735.8 million and $736.9 million, respectively. See Note 16 to our consolidated financial statements included in this quarterly report on Form 10-Q for additional terms and details of our CLO Securitizations.

Leverage Policies

We intend to use prudent amounts of leverage to increase potential returns to our stockholders. To that end, subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we intend to continue to use borrowings to fund the origination or acquisition of our target investments. Given current macroeconomic conditions and our focus on first or senior mortgages, we currently expect that such leverage would not exceed, on a debt-to-equity basis, a 4.5-to-1 ratio. Our charter and bylaws do not restrict the amount of leverage that we may use. The amount of leverage we will deploy for particular investments in our target investments will depend upon our Manager’s assessment of a variety of factors, which may include, among others, our liquidity position, the anticipated liquidity and price volatility of the assets in our loans held for investment portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, including hedges, the availability and cost of financing the assets, our opinion of the creditworthiness of our financing counterparties, the impact of the macroeconomic environment on the United States economy generally or in specific geographic regions and commercial mortgage markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our assets, the collateral underlying our assets, and our outlook for asset spreads relative to the LIBOR or SOFR curve or another alternative interest index rate commonly used for floating rate loans.

Dividends

We elected to be taxed as a REIT for United States federal income tax purposes and, as such, anticipate annually distributing to our stockholders at least 90% of our REIT taxable income, prior to the deduction for dividends paid. If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of 1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year and 3) any undistributed shortfall from our prior calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. Any of these taxes would decrease cash available for distribution to our stockholders. The 90% distribution requirement does not require the distribution of net capital gains. However, if we elect to retain any of our net capital gain for any tax year, we must notify our stockholders and pay tax at regular corporate rates on the retained net capital gain. The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If we determine that our estimated current year taxable income (including net capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

Before we make any distributions, whether for United States federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements under on our Financing Agreements and other debt payable. If our cash available for distribution is less than our REIT taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may elect to make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

As part of our risk management strategy, our Manager closely monitors our portfolio and actively manages the credit, interest rate, market, prepayment, financing, real estate and inflation risks associated with holding a portfolio of our target investments. We manage our portfolio through an interactive process with our Manager and Ares Management. Our Manager has an Investment Committee that oversees compliance with our investment strategy and guidelines, loans held for investment portfolio holdings and financing strategy. We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risks can be quantified from historical experience and seek to actively manage those risks, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

Credit Risk

We are subject to varying degrees of credit risk in connection with holding our target investments. We have exposure to credit risk on our CRE loans held for investment and available-for-sale debt securities. Our Manager seeks to manage credit risk by performing a due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. Credit risk is also addressed through our Manager’s ongoing review of our loans held for investment portfolio. In addition, with respect to any particular target investment, our Manager’s investment team evaluates, among other things, relative valuation, comparable analysis, supply and demand trends, shape of yield curves, delinquency and default rates, recovery of various sectors and vintage of collateral.

In the current macroeconomic environment, prepayments may slow down, borrowers may not be able to repay principal upon the loan maturity or qualify for loan extensions. Additionally, if tenants are not able to pay rent to their landlords, property owners may not be able to make payments to their lenders. We have continued regular dialogue with our borrowers and our financing providers to assess this credit risk. See Note 3 to our consolidated financial statements included in this quarterly report on Form 10-Q for a more detailed description of the potential impacts of macroeconomic conditions on our loan investments.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations, including our borrowings under the Financing Agreements. We primarily originate or acquire floating rate mortgage assets and finance those assets with index-matched floating rate liabilities. As a result, we significantly reduce our exposure to changes in portfolio value and cash flow variability related to changes in interest rates. However, we regularly measure our exposure to interest rate risk and assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not we should enter into hedging transactions and derivative financial instruments, such as forward sale commitments and interest rate floors in order to mitigate our exposure to changes in interest rates.

While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we have entered into or may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our investments. In addition, there can be no assurance that we will be able to effectively hedge our interest rate risk.

In addition to the risks discussed above, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the real estate assets underlying our mortgages and, potentially, contribute to non-performance or, in severe cases, default, which may be mitigated by borrower purchased interest rate caps.

Interest Rate Effect on Net Income

    Our interest income and expense will generally change directionally with index rates. The impact of declining interest rates may be mitigated by interest rate floors and the impact of rising or declining interest rates may be mitigated by certain hedging transactions that we have entered into or may enter into in the future. The following table estimates the hypothetical increases/(decreases) in net income for a twelve month period, assuming (1) an immediate increase or decrease in 30-day LIBOR or SOFR as of March 31, 2023, (2) no change in the outstanding principal balance of our loans held for investment

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portfolio, available-for-sale debt securities and borrowings as of March 31, 2023 and (3) no change in the notional amount of the interest rate swap agreement entered into as of March 31, 2023 ($ in millions):

Change in 30-Day LIBOR or SOFR	Increase/(Decrease) in Net Income
Up 100 basis points	$6.9
Up 50 basis points	$3.4
LIBOR or SOFR at 0 basis points	$(17.7)

The severity of any such impact depends on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase and any applicable floors or hedging transactions. If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.

Interest Rate Floor Risk

We primarily originate or acquire floating rate mortgage and mortgage-related assets. Some of these mortgage assets may be subject to interest rate floors. Similarly, some of our borrowing costs may be subject to interest rate floors. In a period of decreasing interest rates, the interest rate yields on our floating rate mortgage assets could decrease, while the interest rate costs on certain of our borrowings could be fixed at a higher floor. These factors could lower our net interest income or cause a net loss during periods of decreasing interest rates, which would harm our financial condition, cash flows and results of operations.

Market Risk

The estimated fair values of our investments fluctuate primarily due to changes in index rates, changes in credit spreads and other factors. In general, in a rising interest rate environment, whether due to increases in index rates or credit spreads, the estimated fair value of our fixed-rate investments would generally be expected to decrease; conversely, in a decreasing interest rate environment, whether due to decreases in index rates or credit spreads, the estimated fair value of our fixed-rate investments would generally be expected to increase. Also, in general, in a widening credit spread environment, the estimated fair value of our floating rate investments would generally be expected to decrease. However, in a compressing credit spread environment, the estimated fair value of our floating rate investments may not increase, particularly if prepayment restrictions are not in place and our floating rate investments are fully prepayable. As market volatility increases or liquidity decreases, the fair value of our investments and liabilities may be adversely impacted.

Prepayment and Securitizations Repayment Risk

Our net income and earnings may be affected by prepayment rates on our existing CRE loans. When we originate our CRE loans, we anticipate that we will generate an expected yield. When borrowers prepay their CRE loans faster than we expect, we may be unable to replace these CRE loans with new CRE loans that will generate yields which are as high as the prepaid CRE loans. If prepayment rates decrease in a rising interest rate environment, borrowers exercise extension options on CRE loans or we extend the term of CRE loans, the life of the loans could extend beyond the term of the Financing Agreements that we borrow on to fund our CRE loans. This could have a negative impact on our results of operations. In some situations, we may be forced to fund additional cash collateral in connection with the Financing Agreements or sell assets to maintain adequate liquidity, which could cause us to incur losses. Additionally, principal repayment proceeds from mortgage loans in the CLO Securitizations are applied sequentially, first used to pay down the senior notes in the CLO Securitizations. We will not receive any proceeds from the repayment of loans in the CLO Securitizations until all senior notes are repaid in full.

Financing Risk

We borrow funds under our Financing Agreements to finance our target assets. The financial markets recently have encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks. We may be subject to risk arising from a default by one of several large institutions that are dependent on one another to meet their liquidity or operational needs, so that a default by one institution may cause a series of defaults by the other institutions, and may impact the liquidity of our lenders and their willingness to provide us with borrowings to finance our target assets and other needs.

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In addition, our Secured Funding Agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our Financing Agreements, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral. We are also subject to cross-default and acceleration rights with respect to our Financing Agreements. In addition, our CLO Securitizations contain certain senior note overcollateralization ratio tests. To the extent we fail to meet these tests, amounts that would otherwise be used to make payments on the subordinate securities that we hold will be used to repay principal on the more senior securities to the extent necessary to satisfy any senior note overcollateralization ratio and we may incur significant losses. Our sources of liquidity may be impacted to the extent we do not receive cash payments that we would otherwise expect to receive from the CLO Securitizations if these tests were met.

Continued strain on the banking system, and weakness or volatility in the financial markets, the commercial real estate and mortgage markets and the economy generally could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.

Real Estate Risk

Our real estate investments are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; local markets with a significant exposure to the energy sector; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. High interest rates and inflation coupled with the COVID-19 pandemic have had, and continue to have, an adverse impact on industries whose properties serve as collateral for some of our portfolio investments. For example, increased demand for work-from-home arrangements, resulting from the COVID-19 pandemic, may adversely impact the operations of office properties. Decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, which could also cause us to suffer losses. We seek to manage these risks through our underwriting and asset management processes.

Inflation Risk

Virtually all of our assets and liabilities are sensitive to interest rates. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates but adverse changes in inflation or changes in inflation expectations can lead to lower returns on our investments than originally anticipated. Current record levels of inflation could exacerbate this possibility. In each case, in general, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

    We maintain disclosure controls and procedures (as that term is defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of March 31, 2023, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

    There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the quarter ended March 31, 2023 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, we may be subject to various legal proceedings from time to time. Furthermore, third parties may try to seek to impose liability on us in connection with our loans. As of March 31, 2023, we were not subject to any material pending legal proceedings. If the current macroeconomic and geopolitical conditions worsen, litigation may increase to the extent we find it necessary to foreclose or otherwise enforce remedies with respect to loans that are in default, which borrowers may seek to resist by asserting counterclaims and defenses against us.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors described below and in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which could materially affect our business, financial condition and/or operating results. The risks described below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Our business is dependent on bank relationships and the recent strain on the banking system may adversely impact us.

The financial markets recently have encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks who may have significant losses associated with investments that make it difficult to fund demands to withdraw deposits and other liquidity needs. Although the federal government has announced measures to assist these banks and protect depositors, some banks have already been impacted and others may be materially and adversely impacted. Our business is dependent on bank relationships and we are proactively monitoring the financial health of such bank relationships. Continued strain on the banking system may adversely impact our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) ($ in thousands)
January 1, 2023 - January 31, 2023	—	$—	—	$50,000
February 1, 2023 - February 28, 2023	—	—	—	50,000
March 1, 2023 - March 31, 2023	—	—	—	50,000
Total	—		—

(1)    On July 26, 2022, our Board of Directors approved the Repurchase Program of up to $50 million of our common stock which is expected to be in effect until July 26, 2023, or until the approved dollar amount has been used to repurchase shares. As of March 31, 2023, $50 million remained available for future purchases of our common stock under the Repurchase Program. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion.

Item 3. Defaults Upon Senior Securities

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None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit Number	Exhibit Description
3.1*	Articles of Amendment and Restatement of Ares Commercial Real Estate Corporation. (1)
3.2*	Second Amended and Restated Bylaws of Ares Commercial Real Estate Corporation. (2)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

______________________________________________________________________________

*	Previously filed
(1)	Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K (File No. 001-35517), filed on March 1, 2016.
(2)	Incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K (File No. 001-35517), filed on February 15, 2023.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		ARES COMMERCIAL REAL ESTATE CORPORATION
Date:	May 2, 2023	By:	/s/ Bryan Donohoe
			Bryan Donohoe
			Chief Executive Officer (Principal Executive Officer)
Date:	May 2, 2023	By:	/s/ Tae-Sik Yoon
			Tae-Sik Yoon
			Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

I, Bryan Donohoe, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2023

/s/ Bryan Donohoe

Bryan Donohoe

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

I, Tae-Sik Yoon, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2023

/s/ Tae-Sik Yoon

Tae-Sik Yoon

Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to

18 U.S.C Section 1350

In connection with the Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation (the “Company”) for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Bryan Donohoe, as Chief Executive Officer of the Company, and Tae-Sik Yoon, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

1.    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 2, 2023

/s/ Bryan Donohoe

Bryan Donohoe

Chief Executive Officer

/s/ Tae-Sik Yoon

Tae-Sik Yoon

Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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COVER PAGE - shares	3 Months Ended
	Mar. 31, 2023	May 01, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-35517
Entity Registrant Name	ARES COMMERCIAL REAL ESTATE CORPORATION
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	45-3148087
Entity Address, Address Line One	245 Park Avenue
Entity Address, Address Line Two	42nd Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10167
City Area Code	212
Local Phone Number	750-7300
Title of 12(b) Security	Common stock, $0.01 par value per share
Trading Symbol	ACRE
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		54,672,238
Entity Central Index Key	0001529377
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
ASSETS
Cash and cash equivalents	$ 153,764	$ 141,278
Loans held for investment ($846,718 and $887,662 related to consolidated VIEs, respectively)	2,173,205	2,264,008
Current expected credit loss reserve	(87,502)	(65,969)
Loans held for investment, net of current expected credit loss reserve	2,085,703	2,198,039
Loans held for sale, at fair value	27,375	0
Investment in available-for-sale debt securities, at fair value	28,007	27,936
Other assets ($2,959 and $2,980 of interest receivable related to consolidated VIEs, respectively; $128,334 and $129,495 of other receivables related to consolidated VIEs, respectively)	149,471	155,749
Total assets	2,444,320	2,523,002
LIABILITIES
Secured funding agreements	698,153	705,231
Notes payable	104,509	104,460
Secured term loan	149,247	149,200
Collateralized loan obligation securitization debt (consolidated VIEs)	735,839	777,675
Due to affiliate	3,899	5,580
Dividends payable	19,346	19,347
Other liabilities ($1,942 and $1,913 of interest payable related to consolidated VIEs, respectively)	15,024	13,969
Total liabilities	1,726,017	1,775,462
Commitments and contingencies (Note 9)
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share, 450,000,000 shares authorized at March 31, 2023 and December 31, 2022 and 54,606,826 and 54,443,983 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	537	537
Additional paid-in capital	813,748	812,788
Accumulated other comprehensive income	3,129	7,541
Accumulated earnings (deficit)	(99,111)	(73,326)
Total stockholders' equity	718,303	747,540
Total liabilities and stockholders' equity	$ 2,444,320	$ 2,523,002

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Loans held for investment	$ 2,173,205	$ 2,264,008
Other assets	149,471	155,749
Other liabilities	$ 15,024	$ 13,969
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	450,000,000	450,000,000
Common stock, shares issued (in shares)	54,606,826	54,443,983
Common stock, shares outstanding (in shares)	54,606,826	54,443,983
Variable Interest Entity, Primary Beneficiary
Loans held for investment	$ 846,718,000	$ 887,662,000
Interest receivable	2,959,000	2,980,000
Other assets	128,334,000	129,495,000
Other liabilities	$ 1,942,000	$ 1,913,000

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue:
Interest income	$ 49,500	$ 33,364
Interest expense	(22,999)	(12,013)
Net interest margin	26,501	21,351
Revenue from real estate owned	0	2,672
Total revenue	26,501	24,023
Expenses:
Management and incentive fees to affiliate	3,010	2,974
Professional fees	771	778
General and administrative expenses	1,685	1,613
General and administrative expenses reimbursed to affiliate	732	834
Expenses from real estate owned	0	4,309
Total expenses	6,198	10,508
Provision for current expected credit losses	21,019	(594)
Realized losses on loans sold	5,613	0
Gain on sale of real estate owned	0	2,197
Income (loss) before income taxes	(6,329)	16,306
Income tax expense, including excise tax	110	105
Net income (loss) attributable to common stockholders	$ (6,439)	$ 16,201
Earnings per common share:
Basic earnings per common share (in dollars per share)	$ (0.12)	$ 0.34
Diluted earnings per common share (in dollars per share)	$ (0.12)	$ 0.34
Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding (in shares)	54,591,650	47,204,397
Diluted weighted average shares of common stock outstanding (in shares)	54,591,650	47,654,549
Dividends per share amount declared (in dollars per share)	$ 0.35	$ 0.35

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income (loss) attributable to common stockholders	$ (6,439)	$ 16,201
Other comprehensive income:
Realized and unrealized gains (losses) on derivative financial instruments	(4,477)	7,614
Unrealized gains (losses) on available-for-sale debt securities	65	0
Comprehensive income (loss)	$ (10,851)	$ 23,815

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income	Accumulated Earnings (Deficit)
Beginning balance (in shares) at Dec. 31, 2021		47,144,058
Beginning balance at Dec. 31, 2021	$ 678,628	$ 465	$ 703,950	$ 2,844	$ (28,631)
Increase (Decrease) in Stockholders' Equity
Sale of common stock (in shares)		190,369
Sale of common stock	2,874	$ 2	2,872
Offering costs	(9)		(9)
Stock-based compensation (in shares)		78,009
Stock‑based compensation	766		766
Other comprehensive income (loss)	7,614			7,614
Net income (loss)	16,201				16,201
Dividends declared	(16,740)				(16,740)
Ending balance (in shares) at Mar. 31, 2022		47,412,436
Ending balance at Mar. 31, 2022	689,334	$ 467	707,579	10,458	(29,170)
Increase (Decrease) in Stockholders' Equity
Sale of common stock (in shares)		7,000,000
Sale of common stock	103,393	$ 70	103,323
Offering costs	(190)		(190)
Stock-based compensation (in shares)		25,927
Stock‑based compensation	699		699
Other comprehensive income (loss)	1,931			1,931
Net income (loss)	10,031				10,031
Dividends declared	(19,198)				(19,198)
Ending balance (in shares) at Jun. 30, 2022		54,438,363
Ending balance at Jun. 30, 2022	786,000	$ 537	811,411	12,389	(38,337)
Increase (Decrease) in Stockholders' Equity
Offering costs	(34)		(34)
Stock‑based compensation	673		673
Other comprehensive income (loss)	(1,010)			(1,010)
Net income (loss)	644				644
Dividends declared	(19,196)				(19,196)
Ending balance (in shares) at Sep. 30, 2022		54,438,363
Ending balance at Sep. 30, 2022	767,077	$ 537	812,050	11,379	(56,889)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation (in shares)		5,620
Stock‑based compensation	738		738
Other comprehensive income (loss)	(3,838)			(3,838)
Net income (loss)	2,909				2,909
Dividends declared	$ (19,346)				(19,346)
Ending balance (in shares) at Dec. 31, 2022	54,443,983	54,443,983
Ending balance at Dec. 31, 2022	$ 747,540	$ 537	812,788	7,541	(73,326)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation (in shares)		162,843
Stock‑based compensation	960		960
Other comprehensive income (loss)	(4,412)			(4,412)
Net income (loss)	(6,439)				(6,439)
Dividends declared	$ (19,346)				(19,346)
Ending balance (in shares) at Mar. 31, 2023	54,606,826	54,606,826
Ending balance at Mar. 31, 2023	$ 718,303	$ 537	$ 813,748	$ 3,129	$ (99,111)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022
Operating activities:
Net income (loss)	$ (6,439)	$ 2,909	$ 10,031	$ 16,201
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of deferred financing costs	979			2,220
Accretion of discounts, deferred loan origination fees and costs	(1,779)			(2,280)
Stock-based compensation	960			766
Provision for current expected credit losses	21,019			(594)
Realized losses on loans sold	5,613			0
Amortization of derivative financial instruments	(456)			0
Gain on sale of real estate owned	0			(2,197)
Changes in operating assets and liabilities:
Other assets	(8,617)			3,956
Due to affiliate	(1,681)			(333)
Other liabilities	1,657			(1,524)
Net cash provided by (used in) operating activities	11,256			16,215
Investing activities:
Issuance of and fundings on loans held for investment	(18,378)			(217,549)
Principal repayment of loans held for investment	78,198			266,574
Proceeds from sale of loans held for sale	9,825			0
Receipt of origination fees	413			2,428
Proceeds from sale of real estate owned	0			38,227
Net cash provided by (used in) investing activities	70,058			89,680
Financing activities:
Repayments of notes payable	0			(28,275)
Payment of secured funding costs	(297)			(651)
Repayments of debt of consolidated VIEs	(42,106)			0
Dividends paid	(19,347)			(16,674)
Proceeds from sale of common stock	0			2,874
Net cash provided by (used in) financing activities	(68,828)			(142,751)
Change in cash and cash equivalents	12,486			(36,856)
Cash and cash equivalents, beginning of period	141,278		$ 13,759	50,615
Cash and cash equivalents, end of period	153,764	$ 141,278		13,759
Secured funding agreements
Financing activities:
Proceeds from secured funding agreements	12,662			37,892
Repayments of secured funding agreements	$ (19,740)			$ (137,917)

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ORGANIZATION

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION

ORGANIZATION

Ares Commercial Real Estate Corporation (together with its consolidated subsidiaries, the “Company” or “ACRE”) is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. Through Ares Commercial Real Estate Management LLC (“ACREM” or the Company’s “Manager”), a Securities and Exchange Commission (“SEC”) registered investment adviser and a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management” or “Ares”), a publicly traded, leading global alternative investment manager, it has investment professionals strategically located across the United States and Europe who directly source new loan opportunities for the Company with owners, operators and sponsors of commercial real estate (“CRE”) properties. The Company was formed and commenced operations in late 2011. The Company is a Maryland corporation and completed its initial public offering in May 2012. The Company is externally managed by its Manager, pursuant to the terms of a management agreement (the “Management Agreement”).

The Company operates as one operating segment and is primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for the Company’s own account. The Company’s target investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investments, including commercial mortgage backed securities. These investments are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, self storage, student housing, residential and other commercial real estate properties, or by ownership interests therein.

    The Company has elected and qualified to be taxed as a real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year     ended December 31, 2012. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to stockholders and complies with various other requirements as a REIT.

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SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related management's discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a description of the Company’s recurring accounting policies. The Company has included disclosure below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly or (ii) the Company views as critical as of the date of this report.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company, the consolidated variable interest entities (“VIEs”) that the Company controls and of which the Company is the primary beneficiary, and the Company’s wholly-owned subsidiaries. The unaudited consolidated interim financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated.

The unaudited consolidated interim financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The current period’s results of operations will not necessarily be indicative of results for any other interim period or that ultimately may be achieved for the year ending December 31, 2023.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Global macroeconomic conditions, including high inflation, changes to fiscal and monetary policy, high interest rates, potential market-wide liquidity problems, currency fluctuations, labor shortages and challenges in the supply chain, have the potential to negatively impact the Company and its borrowers. These current macroeconomic conditions may continue or aggravate and could cause the United States economy or other global economies to experience an economic slowdown or recession. We anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States or other major global economy.

The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2023, however, uncertainty over the global economy and the Company’s business, makes any estimates and assumptions as of March 31, 2023 inherently less certain than they would be absent the current and potential impacts of current macroeconomic conditions. Actual results could differ from those estimates.

Variable Interest Entities

The Company evaluates all of its interests in VIEs for consolidation. When the Company’s interests are determined to be variable interests, the Company assesses whether it is deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. The Company considers its variable interests, as well as any variable interests of its related parties in making this determination. Where both of these factors are present, the Company is deemed to be the primary beneficiary and it consolidates the VIE. Where either one of these factors is not present, the Company is not the primary beneficiary and it does not consolidate the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

For VIEs of which the Company is determined to be the primary beneficiary, all of the underlying assets, liabilities, equity, revenue and expenses of the structures are consolidated into the Company’s consolidated financial statements.

The Company performs an ongoing reassessment of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding its involvement with a VIE cause the Company’s consolidation conclusion regarding the VIE to change. See Note 16 included in these consolidated financial statements for further discussion of the Company’s VIEs.

Cash and Cash Equivalents

Cash and cash equivalents include funds on deposit with financial institutions, including demand deposits with financial institutions. Cash and short‑term investments with an original maturity of three months or less when acquired are considered cash and cash equivalents for the purpose of the consolidated balance sheets and statements of cash flows.

Loans Held for Investment

    The Company originates CRE debt and related instruments generally to be held for investment. Loans that are held for investment are carried at cost, net of unamortized loan fees and origination costs (the “carrying value”). Loans are generally collateralized by real estate. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its loans held for investment portfolio under the following methodology: (1) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation; (2) economic review, which considers underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, and the borrower’s exit plan, among other factors.

    Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

    Loan balances that are deemed to be uncollectible are written off as a realized loss and are deducted from the current expected credit loss reserve. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment.

Current Expected Credit Losses

FASB ASC Topic 326, Financial Instruments—Credit Losses (“ASC 326”), requires the Company to reflect current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broad range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve”). Increases and decreases to expected credit losses impact earnings and are recorded within provision for current expected credit losses in the Company’s consolidated statements of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASC 326 is a valuation account that is deducted from the amortized cost basis of the Company’s loans held for investment in the Company’s consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company's consolidated balance sheets. See Note 4 included in these consolidated financial statements for CECL related disclosures.

Loans Held for Sale

Although the Company generally holds its target investments as long-term investments, the Company occasionally classifies some of its investments as held for sale. Investments held for sale are carried at fair value within loans held for sale, at fair value in the Company’s consolidated balance sheets, with changes in fair value recorded through earnings.

Real Estate Owned

    Real estate assets are carried at their estimated fair value at acquisition and are presented net of accumulated depreciation and impairment charges. The Company allocates the purchase price of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment.

    Real estate assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred.

    Real estate assets are evaluated for indicators of impairment on a quarterly basis. Factors that the Company may consider in its impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset, the Company makes certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon the Company’s estimate of a capitalization rate and discount rate.

    The Company reviews its real estate assets, from time to time, in order to determine whether to sell such assets. Real estate assets are classified as held for sale when the Company commits to a plan to sell the asset, when the asset is being actively marketed for sale at a reasonable price and the sale of the asset is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within one year. Real estate assets that are held for sale are carried at the lower of the asset’s carrying amount or its fair value less costs to sell.

Available-for-Sale Debt Securities

The Company acquires debt securities that are collateralized by mortgages on CRE properties primarily for short-term cash management and investment purposes. On the acquisition date, the Company designates investments in CRE debt securities as available-for-sale. Investments in CRE debt securities that are classified as available-for-sale are carried at fair value. Unrealized holding gains and losses for available-for-sale debt securities are recorded each period in other comprehensive income (“OCI”). The Company uses a specific identification method when determining the cost of a debt security sold and the amount of unrealized gain or loss reclassified from accumulated other comprehensive income (loss) into earnings.

Available-for-sale debt securities that are in an unrealized loss position are evaluated on a quarterly basis to determine whether declines in the fair value below the amortized cost basis qualify as other than temporary impairment (“OTTI”). The OTTI assessment is performed at the individual security level. In assessing whether the entire amortized cost basis of each security will be recovered, the Company will compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the entire amortized cost basis of the security will not be recovered and an OTTI shall be considered to have occurred.

Available-for-sale debt securities are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the debt security is placed on non-accrual status. Interest payments received on non-accrual securities may be recognized as income or applied to principal depending upon management’s judgment regarding collectability of the debt security. Non-accrual debt securities are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current.

Debt Issuance Costs

Debt issuance costs under the Company’s indebtedness are capitalized and amortized over the term of the respective debt instrument. Unamortized debt issuance costs are expensed when the associated debt is repaid prior to maturity. Debt issuance costs related to debt securitizations are capitalized and amortized over the term of the underlying loans using the effective interest method. When an underlying loan is prepaid in a debt securitization and the outstanding principal balance of the securitization debt is reduced, the related unamortized debt issuance costs are charged to expense based on a pro‑rata share of the debt issuance costs being allocated to the specific loans that were prepaid. Amortization of debt issuance costs is included within interest expense, except as noted below, in the Company’s consolidated statements of operations while the unamortized balance on the (i) Secured Funding Agreements (each individually defined in Note 6 included in these consolidated financial statements) is included within other assets and (ii) Notes Payable, the Secured Term Loan (each defined in Note 6 included in these consolidated financial statements) and secured borrowings (described in Note 7 included in these consolidated financial statements) and debt securitizations are each included as a reduction to the carrying amount of the liability in the Company’s consolidated balance sheets. Amortization of debt issuance costs for the note payable on the hotel property that was recognized as real estate owned in the Company’s consolidated balance sheets (see Note 6 included in these consolidated financial statements for additional information on the note payable) is included within expenses from real estate owned in the Company’s consolidated statements of operations.

Derivative Financial Instruments

Derivative financial instruments are classified as either other assets (gain positions) or other liabilities (loss positions) in the Company’s consolidated balance sheets at fair value. These amounts may be offset to the extent that there is a legal right to offset and if elected by management.

On the date the Company enters into a derivative contract, the Company designates each contract as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability, or cash flow hedge, or as a derivative instrument not to be designated as a hedging derivative, or non-designated hedge. For all derivatives other than those designated as non-designated hedges, the Company formally documents the hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and an evaluation of the effectiveness of its hedged transaction.

The Company performs a formal assessment on a quarterly basis on whether the derivative designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. Changes in the fair value of derivative contracts are recorded each period in either current earnings or OCI, depending on whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the effective portion of the unrealized gains or losses on these contracts is recorded in OCI. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in current earnings prospectively. The Company does not enter into derivatives for trading or speculative purposes.

Revenue Recognition

    Interest income is accrued based on the outstanding principal amount and the contractual terms of each loan or debt security. For loans held for investment, the origination fees, contractual exit fees and direct loan origination costs are also recognized in interest income over the initial loan term as a yield adjustment using the effective interest method. For available-for-sale debt securities, premiums or discounts are amortized or accreted into interest income as a yield adjustment using the effective interest method.

    Revenue from real estate owned represents revenue associated with the operations of a hotel property classified as real estate owned that was sold in March 2022. Revenue from the operation of the hotel property was recognized when guestrooms were occupied, services had been rendered or fees had been earned. Revenues were recorded net of any discounts and sales and other taxes collected from customers. Revenues consisted of room sales, food and beverage sales and other hotel revenues.

Net Interest Margin and Interest Expense

    Net interest margin in the Company’s consolidated statements of operations serves to measure the performance of the Company’s loans and debt securities as compared to its use of debt leverage. The Company includes interest income from its loans and debt securities and interest expense related to its Secured Funding Agreements, Notes Payable, securitization debt, the Secured Term Loan (each individually defined in Note 6 included in these consolidated financial statements) and secured borrowings (described in Note 7 included in these consolidated financial statements) in net interest margin. For the three months ended March 31, 2023 and 2022, interest expense is comprised of the following ($ in thousands):

	For the three months ended March 31,
	2023		2022
Secured funding agreements	$	12,311	$	5,127
Notes payable (1)	1,759		453
Securitization debt	11,606		4,351
Secured term loan	1,734		1,732
Secured borrowings	—		292
Other (2)	(4,411)		58
Interest expense	$	22,999	$	12,013

____________________________

(1)    Excludes interest expense on the $28.3 million note payable, which was secured by a hotel property that was recognized as real estate owned in the Company’s consolidated balance sheets (see Note 6 included in these consolidated financial statements for additional information on the note payable). Interest expense on the $28.3 million note payable is included within expenses from real estate owned in the Company’s consolidated statements of operations.

(2)    Represents the net interest expense recognized from the Company’s derivative financial instruments upon periodic settlement.

Comprehensive Income

Comprehensive income consists of net income and OCI that are excluded from net income.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the FASB. ASUs were assessed and determined either to be not applicable or expected to have minimal impact on its unaudited consolidated financial statements.

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LOANS HELD FOR INVESTMENT

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

LOANS HELD FOR INVESTMENT

LOANS HELD FOR INVESTMENT

As of March 31, 2023, the Company’s portfolio included 53 loans held for investment, excluding 157 loans that were repaid, sold, converted to real estate owned or transferred to held for sale since inception. The aggregate originated commitment under these loans at closing was approximately $2.5 billion and outstanding principal was $2.2 billion as of March 31, 2023. During the three months ended March 31, 2023, the Company funded approximately $26.4 million of outstanding principal, received repayments of $72.8 million of outstanding principal, sold one loan with outstanding principal of $14.3 million to a third party and transferred one loan to loans held for sale with outstanding principal of $27.4 million as described in more detail in the tables below. As of March 31, 2023, 80.8% of the Company’s loans have LIBOR or Secured Overnight Financing Rate (“SOFR”) floors, with a weighted average floor of 0.99%, calculated based on loans with LIBOR or SOFR floors. References to LIBOR or “L” are to 30-day LIBOR and references to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).

The Company’s investments in loans held for investment are accounted for at amortized cost. The following tables summarize the Company’s loans held for investment as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,135,368	$	2,155,816	8.5	%	(2)	9.2	%	(3)	1.4
Subordinated debt and preferred equity investments	37,837		39,098		7.8	%	(2)	14.7	%	(3)	2.6
Total loans held for investment portfolio	$	2,173,205	$	2,194,914	8.5	%	(2)	9.2	%	(3)	1.4

	As of December 31, 2022
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,225,725	$	2,243,818	8.4	%	(2)	8.8	%	(3)	1.3
Subordinated debt and preferred equity investments	38,283		39,003		14.0	%	(2)	14.0	%	(3)	2.8
Total loans held for investment portfolio	$	2,264,008	$	2,282,821	8.5	%	(2)	8.9	%	(3)	1.4

______________________________

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2023 and December 31, 2022 as weighted by the outstanding principal balance of each loan.

(3)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all interest accruing loans held by the Company as of March 31, 2023 and December 31, 2022 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2023 and December 31, 2022).

A more detailed listing of the Company’s loans held for investment portfolio based on information available as of March 31, 2023 is as follows ($ in millions, except percentages):

Loan Type	Location	Outstanding Principal (1)	Carrying Amount (1)	Interest Rate	Unleveraged Effective Yield (2)		Maturity Date (3)		Payment Terms (4)
Senior Mortgage Loans:
Office	IL	$155.7	$154.0	(5)	7.1%	(5)	Mar 2025	(5)	I/O
Multifamily	NY	132.2	131.0	S+3.90%	9.2%		Jun 2025		I/O
Office	Diversified	120.4	120.2	S+3.75%	8.8%		Jan 2024		P/I	(7)
Multifamily	TX	100.0	99.2	S+3.50%	9.1%		Jul 2025		I/O
Industrial	IL	98.2	97.8	L+4.55%	9.8%		May 2024		I/O
Mixed-use	FL	82.7	82.7	L+4.25%	9.1%		Feb 2023	(9)	I/O
Office	AZ	78.0	77.6	L+3.50%	8.8%		Oct 2024		I/O
Residential Condominium	NY	76.2	75.9	S+8.95%	15.6%		Oct 2023	(6)	I/O
Mixed-use	NY	75.0	74.7	S+3.75%	8.9%		Jul 2024		I/O
Residential Condominium	FL	74.5	74.4	S+5.35%	10.7%		Jul 2023		I/O
Office	NY	70.2	69.6	L+3.85%	9.1%		Aug 2025		I/O
Office	NC	68.9	68.7	S+4.35%	9.5%		Mar 2024	(10)	P/I	(7)
Multifamily	TX	68.1	67.7	S+2.95%	8.1%		Dec 2024		I/O
Office	NC	67.3	66.9	S+3.65%	8.9%		Aug 2024		I/O
Multifamily/Office	SC	67.0	66.8	L+2.90%	8.0%		Nov 2024		I/O
Office	IL	56.9	53.8	S+3.95%	—%	(8)	Jun 2023		I/O
Office	IL	56.0	55.5	S+4.25%	9.6%		Jan 2025		I/O
Office	GA	48.6	48.5	S+3.15%	8.3%		Dec 2023		P/I	(7)
Hotel	CA	40.2	39.8	S+4.20%	9.5%		Mar 2025		I/O
Mixed-use	CA	37.9	37.9	L+4.10%	9.0%		Mar 2023	(12)	I/O
Hotel	NY	36.5	36.1	S+4.40%	9.6%		Mar 2026		I/O
Mixed-use	TX	35.3	35.2	S+3.85%	8.9%		Sep 2024		I/O
Hotel	IL	35.0	29.5	S+4.00%	—%	(11)	May 2024		I/O
Student Housing	CA	34.5	34.5	S+3.95%	8.8%		Jul 2023		I/O
Office	CA	33.2	32.6	S+3.45%	—%	(13)	Nov 2023	(13)	I/O
Multifamily	CA	31.7	31.5	S+3.00%	8.1%		Dec 2025		I/O
Multifamily	PA	29.4	29.3	S+4.00%	9.1%		Dec 2023		I/O
Office	MA	26.8	26.1	S+3.75%	9.9%		Apr 2025		I/O
Industrial	FL	25.5	25.4	L+2.90%	8.0%		Dec 2025		I/O
Industrial	NJ	24.6	24.4	L+3.75%	9.3%		May 2024		I/O
Industrial	CO	23.6	23.5	(15)	12.2%		Feb 2024	(15)	I/O
Multifamily	WA	23.1	23.0	S+3.00%	8.0%		Nov 2025		I/O
Office	CA	22.9	22.8	S+3.50%	8.6%		Nov 2023		I/O
Multifamily	TX	22.4	22.2	S+2.60%	7.8%		Oct 2024		I/O
Industrial	CA	19.6	19.5	S+3.85%	8.9%		Sep 2024	(14)	I/O
Student Housing	AL	19.5	19.4	S+3.95%	9.1%		May 2024		I/O
Multifamily	WA	18.8	18.7	S+3.10%	8.4%		Sep 2023	(16)	I/O
Self Storage	PA	18.2	18.1	L+2.90%	8.1%		Dec 2025		I/O
Self Storage	NJ	17.6	17.4	S+2.90%	8.5%		Apr 2025		I/O
Self Storage	WA	11.5	11.4	S+2.90%	8.4%		Mar 2025		I/O
Industrial	TX	10.0	9.9	S+5.35%	10.5%		Dec 2024		I/O
Self Storage	MA	8.5	8.5	L+2.90%	7.9%		Dec 2024		I/O
Self Storage	TX	8.0	8.0	L+2.90%	8.0%		Aug 2024		I/O
Self Storage	MA	7.7	7.7	L+2.90%	8.0%		Nov 2024		I/O
Self Storage	MA	6.6	6.6	L+2.90%	8.0%		Oct 2024		I/O
Self Storage	MO	6.5	6.5	L+3.00%	8.0%		Dec 2023		I/O
Industrial	TN	6.4	6.4	S+5.60%	10.8%		Nov 2024		I/O
Self Storage	NJ	5.9	5.9	L+2.90%	8.2%		Jul 2024		I/O
Self Storage	IL	5.6	5.6	S+3.10%	8.2%		Dec 2023		I/O
Industrial	FL	4.0	4.0	S+5.75%	11.0%		Mar 2025		I/O
Self Storage	TX	2.9	2.9	L+2.90%	7.9%		Sep 2024		I/O
Subordinated Debt and Preferred Equity Investments:
Multifamily	SC	20.6	20.5	S+9.53%	14.7%		Sep 2025		I/O
Office	NJ	18.5	17.4	12.00%	—%	(17)	Jan 2026		I/O
Total/Weighted Average		$2,194.9	$2,173.2		8.5%

_________________________

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. For the loans held for investment that represent co-investments with other investment vehicles managed by Ares Management (see Note 14 included in these consolidated financial statements for additional information on co-investments), only the portion of Carrying Amount and Outstanding Principal held by the Company is reflected.

(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. Unleveraged Effective Yield for each loan is calculated based on LIBOR or SOFR as of March 31, 2023 or the LIBOR or SOFR floor, as applicable. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2023 as weighted by the outstanding principal balance of each loan.

(3)Certain loans are subject to contractual extension options that generally vary between one and two 12-month extensions and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(4)I/O = interest only, P/I = principal and interest.

(5)The Illinois loan is structured as both a senior and mezzanine loan with the Company holding both positions. The senior position has a per annum interest rate of S + 2.25% and the mezzanine position has a fixed per annum interest rate of 10.00%. The mezzanine position of this loan, which had an outstanding principal balance of $41.8 million as of March 31, 2023, was on non-accrual status as of March 31, 2023 and therefore, the Unleveraged Effective Yield presented is for the senior position only as the mezzanine position is non-interest accruing. In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the Illinois loan from March 2023 to March 2025. For the three months ended March 31, 2023, the Company received $1.7 million of interest payments and other fees in cash on the mezzanine position of the Illinois loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(6)This senior mortgage loan refinanced the previously existing $53.3 million senior mortgage loan that was held by the Company. The senior New York loan is currently in default due to the failure of the borrower to reach certain construction milestones.

(7)In April 2022, amortization began on the senior North Carolina loan, which had an outstanding principal balance of $68.9 million as of March 31, 2023. In January 2023, amortization began on the senior Georgia loan, which had an outstanding principal balance of $48.6 million as of March 31, 2023. In February 2023, amortization began on the senior diversified loan, which had an outstanding principal balance of $120.4 million as of March 31, 2023. The remainder of the loans in the Company’s portfolio are non-amortizing through their primary terms.

(8)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $1.2 million of interest payments in cash on the senior Illinois loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(9)As of March 31, 2023, the senior Florida loan, which is collateralized by a mixed-use property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date.

(10)In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior North Carolina loan from March 2023 to March 2024.

(11)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $0.3 million of interest payments in cash on the senior Illinois loan that was recognized as a reduction to the carrying value of the loan. The senior Illinois loan is currently in default due to the failure of the borrower to make certain contractual reserve deposits by the May 2022 due date and due to the borrower not making its contractual interest payments due subsequent to the January 2023 interest payment date.

(12)As of March 31, 2023, the senior California loan, which is collateralized by a mixed-use property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the March 2023 maturity date.

(13)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2023 to November 2023. For the three months ended March 31, 2023, the Company received $0.5 million of interest payments in cash on the senior California loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(14)In February 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2023 to September 2024.

(15)At origination, the Colorado loan was structured as a senior loan and in January 2022, the Company also originated the mezzanine loan. The senior loan, which had an outstanding principal balance of $19.8 million as of March 31, 2023, accrues interest at a per annum rate of L + 6.75% and the mezzanine loan, which had an outstanding principal balance of $3.8 million as of March 31, 2023, accrues interest at a per annum rate of S + 8.50%. In February 2023, the borrower exercised a one-year extension option in accordance with the loan agreement, which extended the maturity date on the senior Colorado loan to February 2024.

(16)In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior Washington loan from March 2023 to September 2023.

(17)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $0.6 million of interest payments in cash on the mezzanine New Jersey loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

The Company has made, and may continue to make, modifications to loans, including loans that are in default. Loan terms that may be modified include interest rates, required prepayments, asset release prices, maturity dates, covenants, principal amounts and other loan terms. The terms and conditions of each modification vary based on individual circumstances and will be determined on a case by case basis. The Company’s Manager monitors and evaluates each of the Company’s loans held for investment and is maintaining regular communications with borrowers and sponsors regarding the potential impacts of current macroeconomic conditions on the Company’s loans.

For the three months ended March 31, 2023, the activity in the Company’s loan portfolio was as follows ($ in thousands):

Balance at December 31, 2022	$	2,264,008
Initial funding	—
Origination fees and discounts, net of costs	(413)
Additional funding	26,363
Amortizing payments	(4,671)
Loan payoffs	(72,366)
Loans sold to third parties (1)	(14,324)
Loans transferred to held for sale (2)	(27,165)
Origination fee and discount accretion	1,773
Balance at March 31, 2023	$	2,173,205

_________________________

(1)    In January 2023, the Company closed the sale of a senior mortgage loan with outstanding principal of $14.3 million, which was collateralized by a residential property located in California, to a third party. At the time of the sale, the senior mortgage loan was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2021 maturity date. For the three months ended March 31, 2023, the Company recognized a realized loss of $5.6 million in the Company's consolidated statements of operations upon the sale of the senior mortgage loan as the carrying value exceeded the sale price of the loan.

(2)    In March 2023, the Company entered into a sale agreement with a third party to sell a senior mortgage loan with outstanding principal of $27.4 million, which is collateralized by an office property located in Illinois. In January 2023, the senior mortgage loan was not repaid upon its contractual maturity, which triggered an event of default under the loan agreement and as of March 31, 2023, the loan remains in default. As of March 31, 2023, the sale had not yet closed and the loan was reclassified from held for investment to held for sale and is carried at fair value in the Company's consolidated balance sheets. The Company did not recognize any unrealized gain or loss in the Company's consolidated statements of operations upon reclassifying the loan to held for sale as the carrying value was equal to fair value as determined by the agreed upon sale price of the loan. See Note 17 included in these consolidated financial statements for a subsequent event related to the sale of the senior mortgage loan.

Except as described in the table above listing the Company’s loans held for investment portfolio, as of March 31, 2023, all loans held for investment were paying in accordance with their contractual terms. As of March 31, 2023, the Company had five loans held for investment on non-accrual status with a carrying value of $173.3 million. As of December 31, 2022, the Company had three loans held for investment on non-accrual status with a carrying value of $99.1 million.

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CURRENT EXPECTED CREDIT LOSSES

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

CURRENT EXPECTED CREDIT LOSSES

CURRENT EXPECTED CREDIT LOSSES

    The Company estimates its CECL Reserve primarily using a probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan. Calculation of the CECL Reserve requires loan specific data, which includes capital senior to the Company when the Company is the subordinate lender, changes in net operating income, debt service coverage ratio, loan-to-value, occupancy, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s floating rate loan portfolio and (iv) the Company’s current and future view of the macroeconomic environment. The Company may consider loan-specific qualitative factors on certain loans to estimate its CECL Reserve. In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company utilizes historical market loan loss data licensed from a third party data service. The third party’s loan database includes historical loss data for commercial mortgage-backed securities, or CMBS, issued dating back to 1998, which the Company believes is a reasonably comparable and available data set to its type of loans. The Company utilized macroeconomic data that reflects a current recession given current macroeconomic conditions; however, the actual financial impact on the Company of the current environment is highly uncertain. For periods beyond the reasonable and supportable forecast period, the Company reverts back to historical loss data. Management's current estimate of expected credit losses as of March 31, 2023 increased compared to the current estimate of expected credit losses as of December 31, 2022 primarily due to specific CECL reserves that were assigned to two loans in the portfolio (as discussed below), changes to the loan portfolio and the impact of the current macroeconomic environment on certain assets, including high inflation and interest rates, partially offset by shorter average remaining loan term, loan sales and loan repayments during the three months ended March 31, 2023. The CECL Reserve also takes into consideration the assumed impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on the Company’s loans held for investment, unless the Company determines that a specific reserve is warranted for a select asset.

As of March 31, 2023, the Company’s CECL Reserve for its loans held for investment portfolio is $92.3 million or 387 basis points of the Company’s total loans held for investment commitment balance of $2.4 billion and is bifurcated between the CECL reserve (contra-asset) related to outstanding balances on loans held for investment of $87.5 million and a liability for unfunded commitments of $4.8 million. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion.

During the three months ended March 31, 2023, the senior mortgage loan on an office property located in Illinois with a principal balance of $56.9 million and the senior mortgage loan on a hotel property located in Illinois with a principal balance of $35.0 million were both downgraded to a risk rating of “5.” As of March 31, 2023, both loans were assessed individually and the Company elected to assign specific CECL reserves of $38.3 million on the Illinois office loan and $5.6 million on the Illinois hotel loan. These specific CECL reserves for both loans were based on the Company’s estimate of proceeds available from the anticipated sale of the collateral property less the estimated cost to sell the property and the specific CECL reserves are included in the Company’s total CECL Reserve.

Current Expected Credit Loss Reserve for Funded Loan Commitments    

    Activity related to the CECL Reserve for outstanding balances on the Company’s loans held for investment as of and for the three months ended March 31, 2023 was as follows ($ in thousands):

Balance at December 31, 2022 (1)	$	65,969
Provision for current expected credit losses	21,533
Write-offs	—
Recoveries	—
Balance at March 31, 2023 (1)	$	87,502

__________________________

(1)     The CECL Reserve related to outstanding balances on loans held for investment is recorded within current expected credit loss reserve in the Company's consolidated balance sheets.

Current Expected Credit Loss Reserve for Unfunded Loan Commitments    

    Activity related to the CECL Reserve for unfunded commitments on the Company’s loans held for investment as of and for the three months ended March 31, 2023 was as follows ($ in thousands):

Balance at December 31, 2022 (1)	$	5,339
Provision for current expected credit losses	(514)
Write-offs	—
Recoveries	—
Balance at March 31, 2023 (1)	$	4,825

__________________________

(1)     The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company's consolidated balance sheets.

The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, loan structure and exit plan, loan-to-value ratio, debt service coverage ratio, project sponsorship, and other factors deemed necessary. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

Ratings	Definition
1	Very Low Risk
2	Low Risk
3	Medium Risk
4	High Risk/Potential for Loss: Asset performance is trailing underwritten expectations. Loan at risk of impairment without material improvement to performance
5	Impaired/Loss Likely: A loan that has a significantly increased probability of default and principal loss

    The risk ratings are primarily based on historical data as well as taking into account future economic conditions.

    As of March 31, 2023, the carrying value, excluding the CECL Reserve, of the Company’s loans held for investment within each risk rating by year of origination is as follows ($ in thousands):

	2023		2022		2021		2020		2019		Prior		Total
Risk rating:
1	$	—	$	13,545	$	5,588	$	—	$	—	$	—	$	19,133
2	—		34,863		348,017		—		—		57,275		440,155
3	—		450,076		439,815		138,920		171,983		29,299		1,230,093
4	—		75,898		—		191,910		115,272		17,385		400,465
5	—		—		—		—		—		83,359		83,359
Total	$	—	$	574,382	$	793,420	$	330,830	$	287,255	$	187,318	$	2,173,205

Accrued Interest Receivable

    The Company elected not to measure a CECL Reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. As of March 31, 2023 and December 31, 2022, interest receivable of $13.1 million and $14.0 million, respectively, is included within other assets in the Company's consolidated balance sheets and is excluded from the carrying value of loans held for investment. If the Company were to have uncollectible accrued interest receivable, it generally would reverse accrued and unpaid interest against interest income and no longer accrue for these amounts.

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REAL ESTATE OWNED

3 Months Ended

Mar. 31, 2023

Real Estate Owned [Abstract]

REAL ESTATE OWNED

REAL ESTATE OWNEDOn March 8, 2019, the Company acquired legal title to a hotel property located in New York through a deed in lieu of foreclosure. Prior to March 8, 2019, the hotel property collateralized a $38.6 million senior mortgage loan held by the Company that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the December 2018 maturity date. In conjunction with the deed in lieu of foreclosure, the Company derecognized the $38.6 million senior mortgage loan and recognized the hotel property as real estate owned. As of the date of the deed in lieu of foreclosure, the Company did not expect to complete a sale of the hotel property within the next twelve months and thus, the hotel property

was considered held for use, and was carried at its estimated fair value at acquisition and was presented net of accumulated depreciation and impairment charges. The Company did not recognize any gain or loss on the derecognition of the senior mortgage loan as the fair value of the hotel property of $36.9 million and the net assets held at the hotel property of $1.7 million at acquisition approximated the $38.6 million carrying value of the senior mortgage loan. 

On November 8, 2021, the Company entered into a Purchase and Sale Agreement to sell the hotel property to a third party for $40.0 million and the sale closed on March 1, 2022. For the three months ended March 31, 2022, the Company recognized a $2.2 million gain on the sale of the hotel property as the net carrying value of the hotel property as of the March 1, 2022 sale date was lower than the net sales proceeds received by the Company. The gain on the sale of the hotel property is included within gain on sale of real estate owned in the Company’s consolidated statements of operations. In connection with the sale of the hotel property, the Company provided a senior mortgage loan to the buyer of the hotel property. The initial advance funded under such loan was $30.7 million, with up to another $25.0 million of additional loan proceeds to be available for future advances to cover a portion of the anticipated property renovation plan costs, provided certain conditions are satisfied. At closing, the buyer contributed $12.9 million of equity into the purchase. Additionally, the buyer is required to fund an additional $8.7 million of equity associated with the anticipated property renovation plan costs.

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DEBT

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

Financing Agreements

The Company borrows funds, as applicable in a given period, under the Wells Fargo Facility, the Citibank Facility, the CNB Facility, the MetLife Facility and the Morgan Stanley Facility (individually defined below and collectively, the “Secured Funding Agreements”), Notes Payable (as defined below) and the Secured Term Loan (as defined below). The Company refers to the Secured Funding Agreements, Notes Payable and the Secured Term Loan as the “Financing Agreements.” The outstanding balance of the Financing Agreements in the table below are presented gross of debt issuance costs. As of March 31, 2023 and December 31, 2022, the outstanding balances and total commitments under the Financing Agreements consisted of the following ($ in thousands):

	March 31, 2023					December 31, 2022
	Outstanding Balance		Total Commitment			Outstanding Balance		Total Commitment
Secured Funding Agreements:
Wells Fargo Facility	$	261,039	$	450,000	(1)	$	270,798	$	450,000	(1)
Citibank Facility	236,240		325,000			236,240		325,000
CNB Facility	—		75,000			—		75,000
MetLife Facility	—		180,000			—		180,000
Morgan Stanley Facility	200,874		250,000			198,193		250,000
Subtotal	$	698,153	$	1,280,000		$	705,231	$	1,280,000
Notes Payable	$	105,000	$	105,000		$	105,000	$	105,000
Secured Term Loan	$	150,000	$	150,000		$	150,000	$	150,000
Total	$	953,153	$	1,535,000		$	960,231	$	1,535,000

______________________________

(1)The maximum commitment for the Wells Fargo Facility (as defined below) may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

Some of the Company’s Financing Agreements are collateralized by (i) assignments of specific loans, preferred equity or a pool of loans held for investment or loans held for sale owned by the Company, (ii) interests in the subordinated portion of the Company’s securitization debt, or (iii) interests in wholly-owned entity subsidiaries that hold the Company’s loans held for investment. The Company is the borrower or guarantor under each of the Financing Agreements. Generally, the Company partially offsets interest rate risk by matching the interest index of loans held for investment with the Secured Funding Agreements used to fund them. The Company’s Financing Agreements contain various affirmative and negative covenants,

including negative pledges, and provisions regarding events of default that are normal and customary for similar financing arrangements.

Wells Fargo Facility

The Company is party to a master repurchase funding facility with Wells Fargo Bank, National Association (“Wells Fargo”) (the “Wells Fargo Facility”), which allows the Company to borrow up to $450.0 million. The maximum commitment may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee. Under the Wells Fargo Facility, the Company is permitted to sell, and later repurchase, certain qualifying senior commercial mortgage loans, A-Notes, pari-passu participations in commercial mortgage loans and mezzanine loans under certain circumstances, subject to available collateral approved by Wells Fargo in its sole discretion. The funding period of the Wells Fargo Facility expires on December 15, 2025. The initial maturity date of the Wells Fargo Facility is December 15, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would extend the maturity date of the Wells Fargo Facility to December 14, 2027. Advances under the Wells Fargo Facility accrue interest at a per annum rate equal to the sum of one-month LIBOR or SOFR plus a pricing margin range of 1.50% to 3.75%, subject to certain exceptions.

Citibank Facility

The Company is party to a $325.0 million master repurchase facility with Citibank, N.A. (“Citibank”) (the “Citibank Facility”). Under the Citibank Facility, the Company is permitted to sell and later repurchase certain qualifying senior commercial mortgage loans and A-Notes approved by Citibank in its sole discretion. The initial maturity date of the Citibank facility is January 13, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option assuming no existing defaults under the Citibank Facility and applicable extension fees being paid, which, if both were exercised, would extend the maturity date of the Citibank Facility to January 13, 2027. Advances under the Citibank Facility accrue interest at a per annum rate equal to the sum of one-month LIBOR or SOFR plus an indicative pricing margin range of 1.50% to 2.10%, subject to certain exceptions. Prior to the January 2022 amendment, the Company incurred a non-utilization fee of 25 basis points per annum on the average daily available balance of the Citibank Facility to the extent less than 75% of the Citibank Facility was utilized. Subsequent to the January 2022 amendment, the Company incurs a non-utilization fee of 25 basis points per annum on the average daily positive difference between the maximum advances approved by Citibank and the actual advances outstanding on the Citibank Facility. For the three months ended March 31, 2023, the Company did not incur a non-utilization fee. For the three months ended March 31, 2022, the Company incurred a non-utilization fee of $11 thousand. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

CNB Facility

    The Company is party to a $75.0 million secured revolving funding facility with City National Bank (the “CNB Facility”). The Company is permitted to borrow funds under the CNB Facility to finance investments and for other working capital and general corporate needs. In February 2023, the Company exercised a 12-month extension option on the CNB Facility to extend the maturity date to March 11, 2024. Advances under the CNB Facility accrue interest at a per annum rate equal to the sum of, at the Company’s option, either (a) SOFR (with a 0.35% floor) plus 2.65% or (b) a base rate (which is the highest of a prime rate, the federal funds rate plus 0.50%, or Daily Simple SOFR plus 1.00%) plus 1.00%; provided that in no event shall the interest rate be less than 2.65%. Unless at least 75% of the CNB Facility is used on average, unused commitments under the CNB Facility accrue non-utilization fees at the rate of 0.375% per annum. For both the three months ended March 31, 2023 and 2022, the Company incurred a non-utilization fee of $70 thousand. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

MetLife Facility    

The Company is party to a $180.0 million revolving master repurchase facility with Metropolitan Life Insurance Company (“MetLife”) (the “MetLife Facility”), pursuant to which the Company may sell, and later repurchase, commercial mortgage loans meeting defined eligibility criteria which are approved by MetLife in its sole discretion. The initial maturity date of the MetLife Facility is August 13, 2023, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the MetLife Facility to August 13, 2024. Advances under the MetLife Facility accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.50%, subject to certain exceptions. Unless at least 65% of the MetLife Facility is utilized, unused commitments under the MetLife Facility accrue non-utilization fees at the rate of 0.25% per annum on the average daily available balance. For the three months ended March 31, 2023 and 2022, the Company

incurred a non-utilization fee of $73 thousand and $60 thousand, respectively. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

Morgan Stanley Facility

    The Company is party to a $250.0 million master repurchase and securities contract with Morgan Stanley Bank, N.A. (“Morgan Stanley”) (the “Morgan Stanley Facility”). Under the Morgan Stanley Facility, the Company is permitted to sell, and later repurchase, certain qualifying commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing or self-storage properties. Morgan Stanley may approve the mortgage loans that are subject to the Morgan Stanley Facility in its sole discretion. The initial maturity date of the Morgan Stanley Facility is January 16, 2024, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the Morgan Stanley Facility to January 16, 2025. Advances under the Morgan Stanley Facility generally accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread ranging from 1.75% to 2.25%, determined by Morgan Stanley, depending upon the mortgage loan sold to Morgan Stanley in the applicable transaction.

Notes Payable

Certain of the Company’s subsidiaries were party to two separate non-recourse note agreements with the lenders referred to therein, consisting of (1) a $28.3 million note that was closed in June 2019, which was secured by a hotel property located in New York that was recognized as real estate owned in the Company’s consolidated balance sheets and (2) a $23.5 million note that was closed in November 2019, which was secured by a $34.6 million senior mortgage loan held by the Company on a multifamily property located in South Carolina.

The $28.3 million note was repaid in full in conjunction with the sale of the hotel property that was recognized as real estate owned on March 1, 2022. See Note 5 for further details. The maturity date of the $28.3 million note was June 10, 2024, subject to one 6-month extension, which if exercised would have extended the maturity date to December 10, 2024. The loan was subject to prepayment at any time. Advances under the $28.3 million note accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 3.00%.

In June 2022, the Company repaid the $23.5 million note in full. The initial maturity date of the $23.5 million note was September 5, 2022, subject to two 12-month extensions, which if exercised would have extended the maturity date to September 5, 2024. Advances under the $23.5 million note accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 3.75%.

In July 2022, ACRC Lender CO LLC, a wholly owned subsidiary of the Company entered into a Credit and Security Agreement with Capital One, National Association, as administrative agent and collateral agent, and the lender referred to therein. The Credit and Security Agreement provides for a $105.0 million recourse note (together with the two non-recourse note agreements discussed above, the “Notes Payable”). The $105.0 million note is secured by a $133.0 million senior mortgage loan held by the Company on a multifamily property located in New York and is fully and unconditionally guaranteed by the Company pursuant to a Guaranty of Recourse Obligation. The initial maturity date of the $105.0 million note is July 28, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would extend the maturity date to July 28, 2027. The $105.0 million note accrues interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.00%. As of March 31, 2023, the total outstanding principal balance of the note was $105.0 million.

Secured Term Loan

The Company and certain of its subsidiaries are party to a $150.0 million Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”). The maturity date of the Secured Term Loan is November 12, 2026. Advances under the Secured Term Loan are subject to the following fixed rates: (i) 4.50% per annum until May 12, 2025, (ii) after May 12, 2025 through November 12, 2025, the interest rate increases 0.125% every three months and (iii) after November 12, 2025 through November 12, 2026, the interest rate increases 0.250% every three months. As of March 31, 2023, the total outstanding principal balance of the Secured Term Loan was $150.0 million.

The total original issue discount on the Secured Term Loan was equal to 0.50% of the commitment amount and represents a discount to the debt cost to be amortized into interest expense using the effective interest method over the term of the Secured Term Loan. For both the three months ended March 31, 2023 and 2022, the estimated per annum effective interest rate of the Secured Term Loan, which is equal to the fixed interest rate plus the accretion of the original issue discount and associated costs, was 4.6%.

SECURED BORROWINGS    A subsidiary of the Company was party to a secured borrowing arrangement related to a transferred loan that was closed in February 2020. In April 2019, the Company originated a $30.5 million loan on an office property located in North Carolina, which was bifurcated between a $24.4 million senior mortgage loan and a $6.1 million mezzanine loan. In February 2020, the Company transferred its interest in the $24.4 million senior mortgage loan to a third party and retained the $6.1 million mezzanine loan. The Company evaluated whether the transfer of the $24.4 million senior mortgage loan met the criteria in FASB ASC Topic 860, Transfers and Servicing, for treatment as a sale – legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transfer of effective control – and determined that the transfer did not qualify as a sale and thus, was treated as a financing transaction. As such, the Company did not derecognize the $24.4 million senior mortgage loan asset and recorded a secured borrowing liability in the Company’s consolidated balance sheets. The initial maturity date of the $24.4 million secured borrowing was May 5, 2023, subject to one 12-month extension, which may have been exercised at the transferee’s option, which, if exercised, would have extended the maturity date to May 5, 2024. Advances under the $24.4 million secured borrowing accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 2.50%. In July 2022, the $30.5 million loan was fully repaid and thus, the $24.4 million secured borrowing liability was derecognized.

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SECURED BORROWINGS

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

SECURED BORROWINGS

DEBT

Financing Agreements

The Company borrows funds, as applicable in a given period, under the Wells Fargo Facility, the Citibank Facility, the CNB Facility, the MetLife Facility and the Morgan Stanley Facility (individually defined below and collectively, the “Secured Funding Agreements”), Notes Payable (as defined below) and the Secured Term Loan (as defined below). The Company refers to the Secured Funding Agreements, Notes Payable and the Secured Term Loan as the “Financing Agreements.” The outstanding balance of the Financing Agreements in the table below are presented gross of debt issuance costs. As of March 31, 2023 and December 31, 2022, the outstanding balances and total commitments under the Financing Agreements consisted of the following ($ in thousands):

	March 31, 2023					December 31, 2022
	Outstanding Balance		Total Commitment			Outstanding Balance		Total Commitment
Secured Funding Agreements:
Wells Fargo Facility	$	261,039	$	450,000	(1)	$	270,798	$	450,000	(1)
Citibank Facility	236,240		325,000			236,240		325,000
CNB Facility	—		75,000			—		75,000
MetLife Facility	—		180,000			—		180,000
Morgan Stanley Facility	200,874		250,000			198,193		250,000
Subtotal	$	698,153	$	1,280,000		$	705,231	$	1,280,000
Notes Payable	$	105,000	$	105,000		$	105,000	$	105,000
Secured Term Loan	$	150,000	$	150,000		$	150,000	$	150,000
Total	$	953,153	$	1,535,000		$	960,231	$	1,535,000

______________________________

(1)The maximum commitment for the Wells Fargo Facility (as defined below) may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

Some of the Company’s Financing Agreements are collateralized by (i) assignments of specific loans, preferred equity or a pool of loans held for investment or loans held for sale owned by the Company, (ii) interests in the subordinated portion of the Company’s securitization debt, or (iii) interests in wholly-owned entity subsidiaries that hold the Company’s loans held for investment. The Company is the borrower or guarantor under each of the Financing Agreements. Generally, the Company partially offsets interest rate risk by matching the interest index of loans held for investment with the Secured Funding Agreements used to fund them. The Company’s Financing Agreements contain various affirmative and negative covenants,

including negative pledges, and provisions regarding events of default that are normal and customary for similar financing arrangements.

Wells Fargo Facility

The Company is party to a master repurchase funding facility with Wells Fargo Bank, National Association (“Wells Fargo”) (the “Wells Fargo Facility”), which allows the Company to borrow up to $450.0 million. The maximum commitment may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee. Under the Wells Fargo Facility, the Company is permitted to sell, and later repurchase, certain qualifying senior commercial mortgage loans, A-Notes, pari-passu participations in commercial mortgage loans and mezzanine loans under certain circumstances, subject to available collateral approved by Wells Fargo in its sole discretion. The funding period of the Wells Fargo Facility expires on December 15, 2025. The initial maturity date of the Wells Fargo Facility is December 15, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would extend the maturity date of the Wells Fargo Facility to December 14, 2027. Advances under the Wells Fargo Facility accrue interest at a per annum rate equal to the sum of one-month LIBOR or SOFR plus a pricing margin range of 1.50% to 3.75%, subject to certain exceptions.

Citibank Facility

The Company is party to a $325.0 million master repurchase facility with Citibank, N.A. (“Citibank”) (the “Citibank Facility”). Under the Citibank Facility, the Company is permitted to sell and later repurchase certain qualifying senior commercial mortgage loans and A-Notes approved by Citibank in its sole discretion. The initial maturity date of the Citibank facility is January 13, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option assuming no existing defaults under the Citibank Facility and applicable extension fees being paid, which, if both were exercised, would extend the maturity date of the Citibank Facility to January 13, 2027. Advances under the Citibank Facility accrue interest at a per annum rate equal to the sum of one-month LIBOR or SOFR plus an indicative pricing margin range of 1.50% to 2.10%, subject to certain exceptions. Prior to the January 2022 amendment, the Company incurred a non-utilization fee of 25 basis points per annum on the average daily available balance of the Citibank Facility to the extent less than 75% of the Citibank Facility was utilized. Subsequent to the January 2022 amendment, the Company incurs a non-utilization fee of 25 basis points per annum on the average daily positive difference between the maximum advances approved by Citibank and the actual advances outstanding on the Citibank Facility. For the three months ended March 31, 2023, the Company did not incur a non-utilization fee. For the three months ended March 31, 2022, the Company incurred a non-utilization fee of $11 thousand. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

CNB Facility

    The Company is party to a $75.0 million secured revolving funding facility with City National Bank (the “CNB Facility”). The Company is permitted to borrow funds under the CNB Facility to finance investments and for other working capital and general corporate needs. In February 2023, the Company exercised a 12-month extension option on the CNB Facility to extend the maturity date to March 11, 2024. Advances under the CNB Facility accrue interest at a per annum rate equal to the sum of, at the Company’s option, either (a) SOFR (with a 0.35% floor) plus 2.65% or (b) a base rate (which is the highest of a prime rate, the federal funds rate plus 0.50%, or Daily Simple SOFR plus 1.00%) plus 1.00%; provided that in no event shall the interest rate be less than 2.65%. Unless at least 75% of the CNB Facility is used on average, unused commitments under the CNB Facility accrue non-utilization fees at the rate of 0.375% per annum. For both the three months ended March 31, 2023 and 2022, the Company incurred a non-utilization fee of $70 thousand. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

MetLife Facility    

The Company is party to a $180.0 million revolving master repurchase facility with Metropolitan Life Insurance Company (“MetLife”) (the “MetLife Facility”), pursuant to which the Company may sell, and later repurchase, commercial mortgage loans meeting defined eligibility criteria which are approved by MetLife in its sole discretion. The initial maturity date of the MetLife Facility is August 13, 2023, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the MetLife Facility to August 13, 2024. Advances under the MetLife Facility accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.50%, subject to certain exceptions. Unless at least 65% of the MetLife Facility is utilized, unused commitments under the MetLife Facility accrue non-utilization fees at the rate of 0.25% per annum on the average daily available balance. For the three months ended March 31, 2023 and 2022, the Company

incurred a non-utilization fee of $73 thousand and $60 thousand, respectively. The non-utilization fee is included within interest expense in the Company’s consolidated statements of operations.

Morgan Stanley Facility

    The Company is party to a $250.0 million master repurchase and securities contract with Morgan Stanley Bank, N.A. (“Morgan Stanley”) (the “Morgan Stanley Facility”). Under the Morgan Stanley Facility, the Company is permitted to sell, and later repurchase, certain qualifying commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing or self-storage properties. Morgan Stanley may approve the mortgage loans that are subject to the Morgan Stanley Facility in its sole discretion. The initial maturity date of the Morgan Stanley Facility is January 16, 2024, subject to one 12-month extension, which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if exercised, would extend the maturity date of the Morgan Stanley Facility to January 16, 2025. Advances under the Morgan Stanley Facility generally accrue interest at a per annum rate equal to the sum of one-month SOFR plus a spread ranging from 1.75% to 2.25%, determined by Morgan Stanley, depending upon the mortgage loan sold to Morgan Stanley in the applicable transaction.

Notes Payable

Certain of the Company’s subsidiaries were party to two separate non-recourse note agreements with the lenders referred to therein, consisting of (1) a $28.3 million note that was closed in June 2019, which was secured by a hotel property located in New York that was recognized as real estate owned in the Company’s consolidated balance sheets and (2) a $23.5 million note that was closed in November 2019, which was secured by a $34.6 million senior mortgage loan held by the Company on a multifamily property located in South Carolina.

The $28.3 million note was repaid in full in conjunction with the sale of the hotel property that was recognized as real estate owned on March 1, 2022. See Note 5 for further details. The maturity date of the $28.3 million note was June 10, 2024, subject to one 6-month extension, which if exercised would have extended the maturity date to December 10, 2024. The loan was subject to prepayment at any time. Advances under the $28.3 million note accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 3.00%.

In June 2022, the Company repaid the $23.5 million note in full. The initial maturity date of the $23.5 million note was September 5, 2022, subject to two 12-month extensions, which if exercised would have extended the maturity date to September 5, 2024. Advances under the $23.5 million note accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 3.75%.

In July 2022, ACRC Lender CO LLC, a wholly owned subsidiary of the Company entered into a Credit and Security Agreement with Capital One, National Association, as administrative agent and collateral agent, and the lender referred to therein. The Credit and Security Agreement provides for a $105.0 million recourse note (together with the two non-recourse note agreements discussed above, the “Notes Payable”). The $105.0 million note is secured by a $133.0 million senior mortgage loan held by the Company on a multifamily property located in New York and is fully and unconditionally guaranteed by the Company pursuant to a Guaranty of Recourse Obligation. The initial maturity date of the $105.0 million note is July 28, 2025, subject to two 12-month extensions, each of which may be exercised at the Company’s option, subject to the satisfaction of certain conditions, including payment of an extension fee, which, if both were exercised, would extend the maturity date to July 28, 2027. The $105.0 million note accrues interest at a per annum rate equal to the sum of one-month SOFR plus a spread of 2.00%. As of March 31, 2023, the total outstanding principal balance of the note was $105.0 million.

Secured Term Loan

The Company and certain of its subsidiaries are party to a $150.0 million Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”). The maturity date of the Secured Term Loan is November 12, 2026. Advances under the Secured Term Loan are subject to the following fixed rates: (i) 4.50% per annum until May 12, 2025, (ii) after May 12, 2025 through November 12, 2025, the interest rate increases 0.125% every three months and (iii) after November 12, 2025 through November 12, 2026, the interest rate increases 0.250% every three months. As of March 31, 2023, the total outstanding principal balance of the Secured Term Loan was $150.0 million.

The total original issue discount on the Secured Term Loan was equal to 0.50% of the commitment amount and represents a discount to the debt cost to be amortized into interest expense using the effective interest method over the term of the Secured Term Loan. For both the three months ended March 31, 2023 and 2022, the estimated per annum effective interest rate of the Secured Term Loan, which is equal to the fixed interest rate plus the accretion of the original issue discount and associated costs, was 4.6%.

SECURED BORROWINGS    A subsidiary of the Company was party to a secured borrowing arrangement related to a transferred loan that was closed in February 2020. In April 2019, the Company originated a $30.5 million loan on an office property located in North Carolina, which was bifurcated between a $24.4 million senior mortgage loan and a $6.1 million mezzanine loan. In February 2020, the Company transferred its interest in the $24.4 million senior mortgage loan to a third party and retained the $6.1 million mezzanine loan. The Company evaluated whether the transfer of the $24.4 million senior mortgage loan met the criteria in FASB ASC Topic 860, Transfers and Servicing, for treatment as a sale – legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transfer of effective control – and determined that the transfer did not qualify as a sale and thus, was treated as a financing transaction. As such, the Company did not derecognize the $24.4 million senior mortgage loan asset and recorded a secured borrowing liability in the Company’s consolidated balance sheets. The initial maturity date of the $24.4 million secured borrowing was May 5, 2023, subject to one 12-month extension, which may have been exercised at the transferee’s option, which, if exercised, would have extended the maturity date to May 5, 2024. Advances under the $24.4 million secured borrowing accrued interest at a per annum rate equal to the sum of one-month LIBOR plus a spread of 2.50%. In July 2022, the $30.5 million loan was fully repaid and thus, the $24.4 million secured borrowing liability was derecognized.

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DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments, which includes interest rate swaps and interest rate caps, on certain borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing. These derivatives may or may not qualify as cash flow hedges under the hedge accounting requirements of FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”). Derivatives not designated as cash flow hedges are not speculative and are used to manage our exposure to interest rate movements. See Note 2 included in these consolidated financial statements for additional discussion of the accounting for designated and non-designated hedges.

The use of derivative financial instruments involves certain risks, including the risk that the counterparties to these contractual arrangements do not perform as agreed. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties that have appropriate credit ratings and are major financial institutions with which the Company and its affiliates may also have other financial relationships.

The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of March 31, 2023 and December 31, 2022 (notional amount in thousands):

	As of
	March 31, 2023					December 31, 2022
Interest Rate Derivatives	Number of Instruments	Notional Amount	Rate(1)	Index	Weighted Average Maturity (Years)	Number of Instruments	Notional Amount	Rate(1)	Index	Weighted Average Maturity (Years)
Interest rate swaps	1	$190,000	0.2075%	LIBOR(2)	0.3	1	$410,000	0.2075%	LIBOR(2)	0.4
Interest rate caps	0(3)	—	—	—	—	0(3)	—	—	—	—

_______________________________

(1)    Represents fixed rate for interest rate swaps and strike rate for interest rate caps.

(2)    Subject to a 0.00% floor.

(3)    In March 2022, the Company re-calibrated its net exposure to interest rate changes by terminating its interest rate cap derivative, which had a notional amount of $170.0 million on the termination date and a strike rate of 0.50%. For the three months ended March 31, 2022, the Company recognized a $2.0 million realized gain within OCI in conjunction with the termination of the interest rate cap. In accordance with ASC 815, the realized gain is recognized within current earnings over the remaining original term of the interest rate cap derivative as it was designated as an effective hedge. For the three months ended March 31, 2023 and 2022, the Company recognized a realized gain of $457 thousand and $5 thousand, respectively, through a reduction in interest expense, on the termination of the interest rate cap within current earnings.

The following table summarizes the fair value of our derivative financial instruments ($ in thousands):

	Fair Value of Derivatives in an Asset Position(1) as of				Fair Value of Derivatives in a Liability Position(2) as of
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Derivatives designated as hedging instruments:
Interest rate derivatives	$	2,545	$	6,565	$	—	$	—

____________________________

(1)    Included in other assets in the Company’s consolidated balance sheets.

(2)    Included in other liabilities in the Company’s consolidated balance sheets.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

    As of March 31, 2023, there were no contingencies recorded on the Company’s consolidated balance sheets as a result of such conditions, however, if global market conditions worsen, it could adversely affect the Company’s business, financial condition and results of operations.

    As of March 31, 2023 and December 31, 2022, the Company had the following commitments to fund various senior mortgage loans, subordinated debt investments, as well as preferred equity investments accounted for as loans held for investment ($ in thousands):

	As of
	March 31, 2023		December 31, 2022
Total commitments	$	2,388,338	$	2,510,308
Less: funded commitments	(2,194,914)		(2,282,821)
Total unfunded commitments	$	193,424	$	227,487

The Company from time to time may be a party to litigation relating to claims arising in the normal course of business. As of March 31, 2023, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2023

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

At the Market Stock Offering Program

    On November 22, 2019, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”), governing an “at the market offering” program having an aggregate offering price of up to $100.0 million. During the three months ended March 31, 2023, no shares of the Company’s common stock under the Equity Distribution Agreement were sold. The “at the market offering” program is currently unavailable.

Stock Repurchase Program

On July 26, 2022, the Company’s Board of Directors approved a stock repurchase program of up to $50.0 million, which is expected to be in effect until July 26, 2023, or until the approved dollar amount has been used to repurchase shares (the “Repurchase Program”). Pursuant to the Repurchase Program, the Company may repurchase shares of its common stock in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate the Company to acquire any particular amount of shares of its common stock and may be modified or suspended at any time at its discretion. The Company did not conduct any repurchases under the Repurchase Program during the three months ended March 31, 2023.

Common Stock

There were no shares of the Company’s common stock issued in public or private offerings for the three months ended March 31, 2023. See “Equity Incentive Plan” below for shares issued under the plan described below.

Equity Incentive Plan

On April 23, 2012, the Company adopted an equity incentive plan, which was amended and restated in June 2018 (as further amended, the “Amended and Restated 2012 Equity Incentive Plan”). In February 2022, the Company’s board of directors authorized, and in May 2022, the Company’s stockholders approved, the first amendment to the Amended and Restated 2012 Equity Incentive Plan, which among other things, increased the total number of shares of common stock the Company may grant thereunder to 2,490,000 shares. Pursuant to the Amended and Restated 2012 Equity Incentive Plan, as amended by the first amendment, the Company may grant awards consisting of restricted shares of the Company’s common stock, restricted stock units (“RSUs”) and/or other equity-based awards to the Company’s outside directors, employees of the Manager, officers, ACREM and other eligible awardees under the plan. Any restricted shares of the Company’s common stock and RSUs will be accounted for under FASB ASC Topic 718, Compensation—Stock Compensation, resulting in stock-based compensation expense equal to the grant date fair value of the underlying restricted shares of common stock or RSUs.

Restricted stock and RSU grants generally vest ratably over a one to three-year period from the vesting start date. The grantee receives additional compensation for each outstanding restricted stock or RSU grant, classified as dividends paid, equal to the per-share dividends received by the Company’s common stockholders.

The following tables summarize the (i) non-vested shares of restricted stock and RSUs and (ii) vesting schedule of shares of restricted stock and RSUs for the Company’s directors and officers and employees of the Manager as of March 31, 2023:

Schedule of Non-Vested Share and Share Equivalents

	Restricted Stock Grants—Directors	RSUs—Officers and Employees of the Manager	Total
Balance at December 31, 2022	16,137	832,472	848,609
Granted	—	—	—
Vested	(6,609)	(162,843)	(169,452)
Forfeited	—	(3,333)	(3,333)
Balance at March 31, 2023	9,528	666,296	675,824

Future Anticipated Vesting Schedule

	Restricted Stock Grants—Directors	RSUs—Officers and Employees of the Manager	Total
2023	7,443	5,431	12,874
2024	1,668	283,738	285,406
2025	417	232,431	232,848
2026	—	144,696	144,696
2027	—	—	—
Total	9,528	666,296	675,824

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

The following information sets forth the computations of basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022 ($ in thousands, except share and per share data):

	For the three months ended March 31,
	2023		2022
Net income (loss) attributable to common stockholders	$	(6,439)	$	16,201
Divided by:
Basic weighted average shares of common stock outstanding:	54,591,650		47,204,397
Weighted average non-vested restricted stock and RSUs (1)	—		450,152
Diluted weighted average shares of common stock outstanding:	54,591,650		47,654,549
Basic and diluted earnings (loss) per common share	$	(0.12)	$	0.34

_______________________________

(1)    For the three months ended March 31, 2023, the weighted average non-vested restricted stock and RSUs of 682,620

shares were excluded from the computation of diluted earnings (loss) per common share as the impact of including

those shares would be anti-dilutive.

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INCOME TAX

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAX

INCOME TAX

    The Company wholly owns ACRC Lender W TRS LLC, which is a taxable REIT subsidiary (“TRS”) formed to issue and hold certain loans intended for sale. The Company also wholly owns ACRC 2017-FL3 TRS LLC, which is a TRS formed to hold a portion of the FL3 CLO Securitization and FL4 CLO Securitization (as defined below), including the portion that generates excess inclusion income. Additionally, the Company wholly owns ACRC WM Tenant LLC, which is a TRS formed to lease from an affiliate the hotel property classified as real estate owned acquired on March 8, 2019. ACRC WM Tenant LLC engaged a third-party hotel management company to operate the hotel under a management contract prior to the sale of the hotel on March 1, 2022.

The income tax provision for the Company and the TRSs consisted of the following for the three months ended March 31, 2023 and 2022 ($ in thousands):

	For the three months ended March 31,
	2023		2022
Current	$	10	$	15
Deferred	—		—
Excise tax	100		90
Total income tax expense, including excise tax	$	110	$	105

    For the three months ended March 31, 2023 and 2022, the Company incurred an expense of $100 thousand and $90 thousand, respectively, for U.S. federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the calendar year (including any distribution declared in the fourth quarter and paid following January) plus any prior year shortfall. If it is determined that an excise tax liability exists for the current tax year, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The quarterly expense is calculated in accordance with applicable tax regulations.

The TRSs recognize interest and penalties related to unrecognized tax benefits within income tax expense in the Company’s consolidated statements of operations. Accrued interest and penalties, if any, are included within other liabilities in the Company’s consolidated balance sheets.

As of March 31, 2023, tax years 2019 through 2023 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.

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FAIR VALUE

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

The Company follows FASB ASC Topic 820-10, Fair Value Measurement (“ASC 820-10”), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure requirements for fair value measurements. ASC 820-10 determines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. ASC 820-10 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value.

In accordance with ASC 820-10, the inputs used to measure fair value are summarized in the three broad levels listed below:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

•Level 3—Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

GAAP requires disclosure of fair value information about financial and nonfinancial assets and liabilities, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and nonfinancial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Recurring Fair Value Measurements

Derivative Financial Instruments

The Company is required to record derivative financial instruments at fair value on a recurring basis in accordance with GAAP. The fair value of interest rate derivatives was estimated using a third-party specialist, based on contractual cash flows and observable inputs comprising credit spreads.

Loans Held for Sale

As of March 31, 2023, the Company had one loan held for sale. Loans held for sale are required to be recorded at fair value on a recurring basis in accordance with GAAP. The Company determined the fair value based on the anticipated transaction price to be received from the third party that is expected to purchase the loan. During the quarter, the loan was transferred into Level 3 with a total carrying value of $27.4 million. Upon transfer, the Company recorded the loan at fair value, which did not result in the recognition of any unrealized gain or loss as the carrying value was equal to fair value as determined by the anticipated transaction price for the sale of the loan.

Available-for-Sale Debt Securities

The Company designates investments in CRE debt securities as available-for-sale on the acquisition date of such CRE debt securities. The Company is required to record investments in available-for-sale debt securities at fair value on a recurring basis in accordance with GAAP. During the year ended December 31, 2022, the Company acquired three CRE debt securities for an aggregate purchase price of $27.9 million, which consisted of floating rate, investment grade rated debt securities that had a weighted average coupon of SOFR plus 2.47%. The Company’s available-for-sale debt securities have a contractual maturity greater than 10 years from the purchase date.

As of both March 31, 2023 and December 31, 2022, the Company had three CRE debt security investments designated as available-for-sale debt securities. The following tables summarize the Company’s investments in available-for-sale debt securities as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Face Amount		Amortized Cost		Unamortized Discount		Unrealized Gain (Loss), Net
Available-for-sale debt securities	$	28,000	$	27,887	$	113	$	120

	As of December 31, 2022
	Face Amount		Amortized Cost		Unamortized Discount		Unrealized Gain (Loss), Net
Available-for-sale debt securities	$	28,000	$	27,881	$	119	$	55

The fair value of available-for-sale debt securities was estimated using third-party broker quotes, which provide valuation estimates based upon contractual cash flows, observable inputs comprising credit spreads and market liquidity.

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	2,545	$	—	$	2,545
Loans held for sale	$	—	$	—	$	27,375	$	27,375
Available-for-sale debt securities	$	—	$	28,007	$	—	$	28,007
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	6,565	$	—	$	6,565
Available-for-sale debt securities	$	—	$	27,936	$	—	$	27,936
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

As of March 31, 2023 and December 31, 2022, the Company did not have any nonfinancial assets or liabilities required to be recorded at fair value on a recurring basis.

Nonrecurring Fair Value Measurements

The Company was required to record real estate owned, a nonfinancial asset, at fair value on a nonrecurring basis in accordance with GAAP. Real estate owned consisted of a hotel property that was acquired by the Company on March 8, 2019 through a deed in lieu of foreclosure. See Note 5 included in these consolidated financial statements for more information on

real estate owned. Real estate owned was recorded at fair value at acquisition using Level 3 inputs and is evaluated for indicators of impairment on a quarterly basis. Real estate owned was considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate owned over the estimated remaining holding period is less than the carrying amount of such real estate owned. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate owned. An impairment charge is recorded equal to the excess of the carrying value of the real estate owned over the fair value. The fair value of the hotel property at acquisition was estimated using a third-party appraisal, which utilized standard industry valuation techniques such as the income and market approach. When determining the fair value of a hotel, certain assumptions are made including, but not limited to: (1) projected operating cash flows, including factors such as booking pace, growth rates, occupancy, daily room rates, hotel specific operating costs and future capital expenditures; and (2) projected cash flows from the eventual disposition of the hotel based upon the Company’s estimation of a hotel specific capitalization rate, hotel specific discount rates and comparable selling prices in the market.

As of March 31, 2023 and December 31, 2022, the Company did not have any financial assets or liabilities or nonfinancial assets or liabilities required to be recorded at fair value on a nonrecurring basis.

Financial Assets and Liabilities Not Measured at Fair Value

As of March 31, 2023 and December 31, 2022, the carrying values and fair values of the Company’s financial assets and liabilities recorded at cost are as follows ($ in thousands):

		As of
		March 31, 2023				December 31, 2022
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Loans held for investment	3	$	2,173,205	$	2,089,704	$	2,264,008	$	2,233,319
Financial liabilities:
Secured funding agreements	2	$	698,153	$	698,153	$	705,231	$	705,231
Notes payable	3	104,509		103,425		104,460		103,635
Secured term loan	3	149,247		122,564		149,200		137,571
Collateralized loan obligation securitization debt (consolidated VIEs)	3	735,839		711,950		777,675		749,242

The carrying values of cash and cash equivalents, restricted cash, interest receivable, due to affiliate liability and accrued expenses, which are all categorized as Level 2 within the fair value hierarchy, approximate their fair values due to their short-term nature.

Loans held for investment are recorded at cost, net of unamortized loan fees and origination costs. To determine the fair value of the collateral, the Company may employ different approaches depending on the type of collateral. The Company determined the fair value of loans held for investment based on a discounted cash flow methodology, taking into consideration various factors including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and comparable selling prices in the market. The Secured Funding Agreements are recorded at outstanding principal, which is the Company’s best estimate of the fair value. The Company determined the fair value of the Notes Payable, Secured Term Loan, collateralized loan obligation (“CLO”) securitization debt and Secured Borrowings based on a discounted cash flow methodology, taking into consideration various factors including discount rates, actions of other lenders and comparable market quotes and recent trades for similar products.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Management Agreement

The Company is party to an Amended and Restated Management Agreement under which ACREM, subject to the supervision and oversight of the Company’s board of directors, is responsible for, among other duties, (a) performing all of the Company’s day-to-day functions, (b) determining the Company’s investment strategy and guidelines in conjunction with the Company’s board of directors, (c) sourcing, analyzing and executing investments, asset sales and financing, and (d) performing portfolio management duties. In addition, ACREM has an Investment Committee that oversees compliance with the Company’s investment strategy and guidelines, loans held for investment portfolio holdings and financing strategy.

In exchange for its services, ACREM is entitled to receive a base management fee, an incentive fee and expense reimbursements. In addition, ACREM and its personnel may receive grants of equity-based awards pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan and a termination fee, if applicable.

The base management fee is equal to 1.5% of the Company’s stockholders’ equity per annum, which is calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, stockholders’ equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro-rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter determined in accordance with GAAP (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) (x) any amount that the Company has paid to repurchase the Company’s common stock since inception, (y) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, and (z) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between ACREM and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown in the Company’s consolidated financial statements.

The incentive fee is an amount, not less than zero, equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) the Company’s Core Earnings (as defined below) for the previous 12-month period, and (B) the product of (1) the weighted average of the issue price per share of the Company’s common stock of all of the Company’s public offerings of common stock multiplied by the weighted average number of all shares of common stock outstanding including any restricted shares of the Company’s common stock, RSUs, or any shares of the Company’s common stock not yet issued, but underlying other awards granted under the Company’s Amended and Restated 2012 Equity Incentive Plan (see Note 10 included in these consolidated financial statements) in the previous 12-month period, and (2) 8%; and (b) the sum of any incentive fees earned by ACREM with respect to the first three fiscal quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any fiscal quarter unless cumulative Core Earnings for the 12 most recently completed fiscal quarters is greater than zero. “Core Earnings” is defined in the Management Agreement as GAAP net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), and one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between ACREM and the Company’s independent directors and after approval by a majority of the Company’s independent directors. On April 25, 2022, the Company and ACREM entered into an amendment to the Management Agreement to (a) exclude $2.4 million of net income associated with the sale of the real estate owned property for the three months ended March 31, 2022 and to (b) include $2.0 million of net income associated with the Company’s gain on the termination of its interest rate cap derivative for the three months ended March 31, 2022, in each case, with respect to Core Earnings for the three months ended March 31, 2022. Core Earnings is defined in the Management Agreement and is used to calculate the incentive fees the Company pays to ACREM. For the three months ended March 31, 2023, the Company did not incur any incentive fees. For the three months ended March 31, 2022, the Company incurred incentive fees of $358 thousand.

The Company reimburses ACREM at cost for operating expenses that ACREM incurs on the Company’s behalf, including expenses relating to legal, financial, accounting, servicing, due diligence and other services, expenses in connection with the origination and financing of the Company’s investments, communications with the Company’s stockholders, information technology systems, software and data services used for the Company, travel, complying with legal and regulatory requirements, taxes, insurance maintained for the benefit of the Company as well as all other expenses actually incurred by ACREM that are reasonably necessary for the performance by ACREM of its duties and functions under the Management Agreement. Ares Management, from time to time, incurs fees, costs and expenses on behalf of more than one investment vehicle. To the extent such fees, costs and expenses are incurred for the account or benefit of more than one fund, each such investment vehicle, including the Company, will typically bear an allocable portion of any such fees, costs and expenses in proportion to the size of its investment in the activity or entity to which such expense relates (subject to the terms of each fund’s governing documents) or in such other manner as Ares Management considers fair and equitable under the circumstances, such as the relative fund size or capital available to be invested by such investment vehicles. Where an investment vehicle’s governing documents do not permit the payment of a particular expense, Ares Management will generally pay such investment vehicle’s allocable portion of such expense. In addition, the Company is responsible for its proportionate share of certain fees and expenses, including due diligence costs, as determined by ACREM and Ares Management, including legal, accounting and financial advisor fees and related costs, incurred in connection with evaluating and consummating investment opportunities, regardless of whether such transactions are ultimately consummated by the parties thereto.

The Company will not reimburse ACREM for the salaries and other compensation of its personnel, except for the allocable share of the salaries and other compensation of the Company’s (a) Chief Financial Officer, based on the percentage of his time spent on the Company’s affairs and (b) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of ACREM or its affiliates who spend all or a portion of their time managing the Company’s affairs based on the percentage of their time spent on the Company’s affairs. The Company is also required to pay its pro-rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of ACREM and its affiliates that are required for the Company’s operations.

Certain of the Company’s subsidiaries, along with the Company’s lenders under certain of the Company’s Secured Funding Agreements, as well as under the CLO transaction have entered into various servicing agreements with ACREM’s subsidiary servicer, Ares Commercial Real Estate Servicer LLC (“ACRES”). The Company’s Manager will specially service, as needed, certain of the Company’s investments. Effective May 1, 2012, ACRES agreed that no servicing fees pursuant to these servicing agreements would be charged to the Company or its subsidiaries by ACRES or the Manager for so long as the Management Agreement remains in effect, but that ACRES will continue to receive reimbursement for overhead related to servicing and operational activities pursuant to the terms of the Management Agreement.

The term of the Management Agreement ends on April 25, 2024, with automatic one-year renewal terms thereafter. Except under limited circumstances, upon a termination of the Management Agreement, the Company will pay ACREM a termination fee equal to three times the average annual base management fee and incentive fee received by ACREM during the 24-month period immediately preceding the most recently completed fiscal quarter prior to the date of termination, each as described above.

The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2023 and 2022 and amounts payable to the Company’s Manager as of March 31, 2023 and December 31, 2022 ($ in thousands):

	Incurred				Payable
	For the three months ended March 31,				As of
	2023		2022		March 31, 2023		December 31, 2022
Affiliate Payments
Management fees	$	3,010	$	2,616	$	3,010	$	3,026
Incentive fees	—		358		—		1,264
General and administrative expenses	732		834		885		1,232
Direct costs(1)	20		29		4		58
Total	$	3,762	$	3,837	$	3,899	$	5,580

_______________________________

(1)    For the three months ended March 31, 2023 and 2022, direct costs incurred are included within general and administrative expenses in the Company’s consolidated statements of operations.

Investments in Loans

From time to time, the Company may co-invest with other investment vehicles managed by Ares Management or its affiliates, including the Manager, and their portfolio companies, including by means of splitting investments, participating in investments or other means of syndication of investments. For such co-investments, the Company expects to act as the administrative agent for the holders of such investments provided that the Company maintains a majority of the aggregate investment. No fees will be received by the Company for performing such service. The Company will be responsible for its pro-rata share of costs and expenses for such co-investments, including due diligence costs for transactions which fail to close. The Company’s investment in such co-investments are made on a pari-passu basis with the other Ares managed investment vehicles and the Company is not obligated to provide, nor has it provided, any financial support to the other Ares managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment and the Company recognizes only the carrying value of its investment in its consolidated balance sheets. As of March 31, 2023 and December 31, 2022, the total outstanding principal balance for co-investments held by the Company was $218.6 million and $213.7 million, respectively.

Loan Purchases From Affiliate

An affiliate of the Company’s Manager maintains a $200.0 million real estate debt warehouse investment vehicle (the “Ares Warehouse Vehicle”) that holds Ares Management originated commercial real estate loans, which are made available to purchase by other investment vehicles, including the Company and other Ares Management managed investment vehicles. From time to time, the Company may purchase loans from the Ares Warehouse Vehicle. The Company’s Manager will approve the purchase of such loans only on terms, including the consideration to be paid, that are determined by the Company’s Manager in good faith to be appropriate for the Company once the Company has sufficient liquidity. The Company is not obligated to purchase any loans originated by the Ares Warehouse Vehicle. In addition, from time to time, the Company may purchase loans, including participations in loans, from other Ares Management managed investment vehicles. Loans purchased by the Company from the Ares Warehouse Vehicle or other Ares Management managed investment vehicles are purchased at fair value as determined by an independent third-party valuation expert and are subject to approval by a majority of the Company’s independent directors. No loans were purchased by the Company from the Ares Warehouse Vehicle for the three months ended March 31, 2023.

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DIVIDENDS AND DISTRIBUTIONS

3 Months Ended

Mar. 31, 2023

DIVIDENDS AND DISTRIBUTIONS

DIVIDENDS AND DISTRIBUTIONS

DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2023 and 2022 ($ in thousands, except per share data):

Date Declared	Record Date	Payment Date	Per Share Amount			Total Amount
February 15, 2023	March 31, 2023	April 18, 2023	$	0.35	(1)	$	19,346
Total cash dividends declared for the three months ended March 31, 2023			$	0.35		$	19,346
February 15, 2022	March 31, 2022	April 14, 2022	$	0.35	(1)	$	16,740
Total cash dividends declared for the three months ended March 31, 2022			$	0.35		$	16,740

(1) Consists of a regular cash dividend of $0.33 and a supplemental cash dividend of $0.02.

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VARIABLE INTEREST ENTITIES

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

Consolidated VIEs

As discussed in Note 2, the Company evaluates all of its investments and other interests in entities for consolidation, including its investments in the CLO Securitizations (as defined below), which are considered to be variable interests in VIEs.

CLO Securitizations

On January 11, 2019, ACRE Commercial Mortgage 2017-FL3 Ltd. (the “FL3 Issuer”) and ACRE Commercial Mortgage 2017-FL3 LLC (the “FL3 Co-Issuer”), both wholly-owned indirect subsidiaries of the Company, entered into an Amended and Restated Indenture (the “FL3 Amended Indenture”) with Wells Fargo Bank, National Association, as advancing agent and note administrator, and Wilmington Trust, National Association, as trustee, which governs the approximately $504.1 million principal balance of secured floating rate notes (the “FL3 Notes”) issued by the FL3 Issuer and $52.9 million of preferred equity in the FL3 Issuer (the “FL3 CLO Securitization”). The FL3 Amended Indenture amends and restates, and replaces in its entirety, the indenture for the CLO securitization issued in March 2017, which governed the issuance of approximately $308.8 million principal balance of secured floating rate notes and $32.4 million of preferred equity in the FL3 Issuer.

As of March 31, 2023, the FL3 Notes were collateralized by interests in a pool of 16 mortgage assets having a total principal balance of $428.7 million (the “FL3 Mortgage Assets”) that were closed by a wholly-owned subsidiary of the Company and approximately $128.3 million of receivables related to repayments of outstanding principal on previous mortgage assets. As of December 31, 2022, the FL3 Notes were collateralized by interests in a pool of 16 mortgage assets having a total principal balance of approximately $429.4 million that were closed by a wholly-owned subsidiary of the Company and approximately $127.6 million of receivables related to repayments of outstanding principal on previous mortgage assets. On April 13, 2021, the FL3 Issuer and the FL3 Co-Issuer entered into a First Supplement to Amended and Restated Indenture (the

“2021 Amended Indenture”) with Wells Fargo Bank, National Association, as advancing agent and note administrator, and Wilmington Trust, National Association, as trustee, which governs the FL3 CLO Securitization. The purpose of the 2021 Amended Indenture was to, among other things, extend the reinvestment period to March 31, 2024. During the reinvestment period, the Company may direct the FL3 Issuer to acquire additional mortgage assets meeting applicable reinvestment criteria using the principal repayments from the FL3 Mortgage Assets, subject to the satisfaction of certain conditions, including receipt of a Rating Agency Confirmation and investor approval of the new mortgage assets.

The contribution of the FL3 Mortgage Assets to the Issuer is governed by a Mortgage Asset Purchase Agreement between the Seller and the FL3 Issuer, and acknowledged by the Company solely for purposes of confirming its status as a REIT, in which the Seller made certain customary representations, warranties and covenants.

In connection with the securitization, the FL3 Issuer and FL3 Co-Issuer offered and issued the following classes of Notes: Class A, Class A-S, Class B, Class C and Class D Notes (collectively, the “FL3 Offered Notes”) to a third party. The Company retained (through one of its wholly-owned subsidiaries) approximately $58.5 million of the FL3 Notes and all of the $52.9 million of preferred equity in the FL3 Issuer, which totaled $111.4 million. The Company, as the holder of the subordinated FL3 Notes and all of the preferred equity in the FL3 Issuer, has the obligation to absorb losses of the CLO, since the Company has a first loss position in the capital structure of the CLO.

On January 28, 2021, ACRE Commercial Mortgage 2021-FL4 Ltd. (the “FL4 Issuer”) and ACRE Commercial Mortgage 2021-FL4 LLC (the “FL4 Co-Issuer”), both wholly owned indirect subsidiaries of the Company, entered into an Indenture (the “FL4 Indenture”) with ACRC Lender LLC, a wholly owned subsidiary of the Company (the “Seller”), as advancing agent, Wells Fargo Bank, National Association, as note administrator, and Wilmington Trust, National Association, as trustee, which governs the issuance of approximately $603.0 million principal balance secured floating rate notes (the “FL4 Notes”) and $64.3 million of preferred equity in the FL4 Issuer (the “FL4 CLO Securitization”). For U.S. federal income tax purposes, the FL4 Issuer and FL4 Co-Issuer are disregarded entities.

As of March 31, 2023, the FL4 Notes were collateralized by interests in a pool of 11 mortgage assets having a total principal balance of approximately $418.1 million (the “FL4 Mortgage Assets”) that were closed by a wholly-owned subsidiary of the Company. As of December 31, 2022, the FL4 Notes were collateralized by interests in a pool of 12 mortgage assets having a total principal balance of approximately $458.3 million that were closed by a wholly-owned subsidiary of the Company and approximately $1.9 million of receivables related to repayments of outstanding principal on previous mortgage assets. During the period ending in April 2024 (the “Companion Participation Acquisition Period”), the FL4 Issuer may use certain principal proceeds from the FL4 Mortgage Assets to acquire additional funded pari-passu participations related to the FL4 Mortgage Assets that meet certain acquisition criteria.

The sale of the FL4 Mortgage Assets to the FL4 Issuer is governed by a FL4 Mortgage Asset Purchase Agreement between the Seller and the FL4 Issuer, and acknowledged by the Company solely for purposes of confirming its status as a REIT, in which the Seller made certain customary representations, warranties and covenants.

In connection with the FL4 CLO Securitization, the FL4 Issuer and FL4 Co-Issuer offered and issued the following classes of FL4 Notes to third party investors: Class A, Class A-S, Class B, Class C, Class D and Class E Notes (collectively, the “FL4 Offered Notes”). A wholly owned subsidiary of the Company retained approximately $62.5 million of the FL4 Notes and all of the $64.3 million of preferred equity in the FL4 Issuer, which totaled $126.8 million. The Company, as the holder of the subordinated FL4 Notes and all of the preferred equity in the FL4 Issuer, has the obligation to absorb losses of the FL4 CLO Securitization, since the Company has a first loss position in the capital structure of the FL4 CLO Securitization. During the three months ended March 31, 2023, the Company paid down $42.1 million of the FL4 Offered Notes.

The FL3 CLO Securitization and the FL4 CLO Securitization are collectively referred to as the “CLO Securitizations.” As the directing holder of the CLO Securitizations, the Company has the ability to direct activities that could significantly impact the CLO Securitizations’ economic performance. ACRES is designated as special servicer of the CLO Securitizations and has the power to direct activities during the loan workout process on defaulted and delinquent loans, which is the activity that most significantly impacts the CLO Securitizations’ economic performance. ACRES did not waive the special servicing fee, and the Company pays its overhead costs. If an unrelated third party had the right to unilaterally remove the special servicer, then the Company would not have the power to direct activities that most significantly impact the CLO Securitizations’ economic performance. In addition, there were no substantive kick-out rights of any unrelated third party to remove the special servicer without cause. The Company’s subsidiaries, as directing holders, have the ability to remove the special servicer without cause. Based on these factors, the Company is determined to be the primary beneficiary of each of the CLO Securitizations; thus, the CLO Securitizations are consolidated into the Company’s consolidated financial statements.

The CLO Securitizations are consolidated in accordance with FASB ASC Topic 810 and are structured as pass through entities that receive principal and interest on the underlying collateral and distributes those payments to the note holders, as applicable. The assets and other instruments held by the CLO Securitizations are restricted and can only be used to fulfill the obligations of the respective CLO Securitizations. Additionally, the obligations of the CLO Securitizations do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary.The inclusion of the assets and liabilities of the CLO Securitizations of which the Company is deemed the primary beneficiary has no economic effect on the Company. The Company’s exposure to the obligations of the CLO Securitizations are generally limited to its investment in the entity. The Company is not obligated to provide, nor has it provided, any financial support for the consolidated structures. As such, the risk associated with the Company’s involvement in the CLO Securitizations are limited to the carrying value of its investment in each of the entities. As of March 31, 2023, the Company’s maximum risk of loss was $238.2 million, which represents the carrying value of its investments in the CLO Securitizations.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this quarterly report on Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the three months ended March 31, 2023, except as disclosed below.

In April 2023, the senior mortgage loan held by the Company on a multifamily property located in Washington received a partial April interest payment, which triggered an event of default under the loan agreement. As of May 1, 2023, the outstanding principal balance of the senior Washington loan is $18.8 million.

In April 2023, the Company closed the sale of the senior mortgage loan collateralized by an office property located in Illinois that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the maturity date. As of March 31, 2023, the loan was classified as held for sale and was carried at fair value of $27.4 million, which was equal to the final sale price.

The Company’s Board of Directors declared a regular cash dividend of $0.33 per common share and a supplemental cash dividend of $0.02 per common share for the second quarter of 2023. The second quarter 2023 and supplemental cash dividends will be payable on July 18, 2023 to common stockholders of record as of June 30, 2023.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company, the consolidated variable interest entities (“VIEs”) that the Company controls and of which the Company is the primary beneficiary, and the Company’s wholly-owned subsidiaries. The unaudited consolidated interim financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated.

The unaudited consolidated interim financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The current period’s results of operations will not necessarily be indicative of results for any other interim period or that ultimately may be achieved for the year ending December 31, 2023.

Use of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Global macroeconomic conditions, including high inflation, changes to fiscal and monetary policy, high interest rates, potential market-wide liquidity problems, currency fluctuations, labor shortages and challenges in the supply chain, have the potential to negatively impact the Company and its borrowers. These current macroeconomic conditions may continue or aggravate and could cause the United States economy or other global economies to experience an economic slowdown or recession. We anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States or other major global economy.

The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2023, however, uncertainty over the global economy and the Company’s business, makes any estimates and assumptions as of March 31, 2023 inherently less certain than they would be absent the current and potential impacts of current macroeconomic conditions. Actual results could differ from those estimates.

Variable Interest Entities

Variable Interest Entities

The Company evaluates all of its interests in VIEs for consolidation. When the Company’s interests are determined to be variable interests, the Company assesses whether it is deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. The Company considers its variable interests, as well as any variable interests of its related parties in making this determination. Where both of these factors are present, the Company is deemed to be the primary beneficiary and it consolidates the VIE. Where either one of these factors is not present, the Company is not the primary beneficiary and it does not consolidate the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

For VIEs of which the Company is determined to be the primary beneficiary, all of the underlying assets, liabilities, equity, revenue and expenses of the structures are consolidated into the Company’s consolidated financial statements.

The Company performs an ongoing reassessment of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding its involvement with a VIE cause the Company’s consolidation conclusion regarding the VIE to change. See Note 16 included in these consolidated financial statements for further discussion of the Company’s VIEs.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include funds on deposit with financial institutions, including demand deposits with financial institutions. Cash and short‑term investments with an original maturity of three months or less when acquired are considered cash and cash equivalents for the purpose of the consolidated balance sheets and statements of cash flows.

Loans Held for Investment

Loans Held for Investment

    The Company originates CRE debt and related instruments generally to be held for investment. Loans that are held for investment are carried at cost, net of unamortized loan fees and origination costs (the “carrying value”). Loans are generally collateralized by real estate. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its loans held for investment portfolio under the following methodology: (1) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation; (2) economic review, which considers underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, and the borrower’s exit plan, among other factors.

    Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

    Loan balances that are deemed to be uncollectible are written off as a realized loss and are deducted from the current expected credit loss reserve. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment.

Current Expected Credit Losses

Current Expected Credit Losses FASB ASC Topic 326, Financial Instruments—Credit Losses (“ASC 326”), requires the Company to reflect current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broad range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve”). Increases and decreases to expected credit losses impact earnings and are recorded within provision for current expected credit losses in the Company’s consolidated statements of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASC 326 is a valuation account that is deducted from the amortized cost basis of the Company’s loans held for investment in the Company’s consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company's consolidated balance sheets. See Note 4 included in these consolidated financial statements for CECL related disclosures.

Loans Held for Sale

Loans Held for Sale

Although the Company generally holds its target investments as long-term investments, the Company occasionally classifies some of its investments as held for sale. Investments held for sale are carried at fair value within loans held for sale, at fair value in the Company’s consolidated balance sheets, with changes in fair value recorded through earnings.

Real Estate Owned

Real Estate Owned

    Real estate assets are carried at their estimated fair value at acquisition and are presented net of accumulated depreciation and impairment charges. The Company allocates the purchase price of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment.

    Real estate assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred.

    Real estate assets are evaluated for indicators of impairment on a quarterly basis. Factors that the Company may consider in its impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset, the Company makes certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon the Company’s estimate of a capitalization rate and discount rate.

    The Company reviews its real estate assets, from time to time, in order to determine whether to sell such assets. Real estate assets are classified as held for sale when the Company commits to a plan to sell the asset, when the asset is being actively marketed for sale at a reasonable price and the sale of the asset is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within one year. Real estate assets that are held for sale are carried at the lower of the asset’s carrying amount or its fair value less costs to sell.

Available-for-Sale Debt Securities

Available-for-Sale Debt Securities

The Company acquires debt securities that are collateralized by mortgages on CRE properties primarily for short-term cash management and investment purposes. On the acquisition date, the Company designates investments in CRE debt securities as available-for-sale. Investments in CRE debt securities that are classified as available-for-sale are carried at fair value. Unrealized holding gains and losses for available-for-sale debt securities are recorded each period in other comprehensive income (“OCI”). The Company uses a specific identification method when determining the cost of a debt security sold and the amount of unrealized gain or loss reclassified from accumulated other comprehensive income (loss) into earnings.

Available-for-sale debt securities that are in an unrealized loss position are evaluated on a quarterly basis to determine whether declines in the fair value below the amortized cost basis qualify as other than temporary impairment (“OTTI”). The OTTI assessment is performed at the individual security level. In assessing whether the entire amortized cost basis of each security will be recovered, the Company will compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the entire amortized cost basis of the security will not be recovered and an OTTI shall be considered to have occurred.

Available-for-sale debt securities are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the debt security is placed on non-accrual status. Interest payments received on non-accrual securities may be recognized as income or applied to principal depending upon management’s judgment regarding collectability of the debt security. Non-accrual debt securities are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current.

Debt Issuance Costs

Debt Issuance Costs

Debt issuance costs under the Company’s indebtedness are capitalized and amortized over the term of the respective debt instrument. Unamortized debt issuance costs are expensed when the associated debt is repaid prior to maturity. Debt issuance costs related to debt securitizations are capitalized and amortized over the term of the underlying loans using the effective interest method. When an underlying loan is prepaid in a debt securitization and the outstanding principal balance of the securitization debt is reduced, the related unamortized debt issuance costs are charged to expense based on a pro‑rata share of the debt issuance costs being allocated to the specific loans that were prepaid. Amortization of debt issuance costs is included within interest expense, except as noted below, in the Company’s consolidated statements of operations while the unamortized balance on the (i) Secured Funding Agreements (each individually defined in Note 6 included in these consolidated financial statements) is included within other assets and (ii) Notes Payable, the Secured Term Loan (each defined in Note 6 included in these consolidated financial statements) and secured borrowings (described in Note 7 included in these consolidated financial statements) and debt securitizations are each included as a reduction to the carrying amount of the liability in the Company’s consolidated balance sheets. Amortization of debt issuance costs for the note payable on the hotel property that was recognized as real estate owned in the Company’s consolidated balance sheets (see Note 6 included in these consolidated financial statements for additional information on the note payable) is included within expenses from real estate owned in the Company’s consolidated statements of operations.

Derivative Financial Instruments

Derivative Financial Instruments

Derivative financial instruments are classified as either other assets (gain positions) or other liabilities (loss positions) in the Company’s consolidated balance sheets at fair value. These amounts may be offset to the extent that there is a legal right to offset and if elected by management.

On the date the Company enters into a derivative contract, the Company designates each contract as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability, or cash flow hedge, or as a derivative instrument not to be designated as a hedging derivative, or non-designated hedge. For all derivatives other than those designated as non-designated hedges, the Company formally documents the hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and an evaluation of the effectiveness of its hedged transaction.

The Company performs a formal assessment on a quarterly basis on whether the derivative designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. Changes in the fair value of derivative contracts are recorded each period in either current earnings or OCI, depending on whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the effective portion of the unrealized gains or losses on these contracts is recorded in OCI. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in current earnings prospectively. The Company does not enter into derivatives for trading or speculative purposes.

Revenue Recognition

Revenue Recognition

    Interest income is accrued based on the outstanding principal amount and the contractual terms of each loan or debt security. For loans held for investment, the origination fees, contractual exit fees and direct loan origination costs are also recognized in interest income over the initial loan term as a yield adjustment using the effective interest method. For available-for-sale debt securities, premiums or discounts are amortized or accreted into interest income as a yield adjustment using the effective interest method.

    Revenue from real estate owned represents revenue associated with the operations of a hotel property classified as real estate owned that was sold in March 2022. Revenue from the operation of the hotel property was recognized when guestrooms were occupied, services had been rendered or fees had been earned. Revenues were recorded net of any discounts and sales and other taxes collected from customers. Revenues consisted of room sales, food and beverage sales and other hotel revenues.

Net Interest Margin and Interest Expense

Net Interest Margin and Interest Expense    Net interest margin in the Company’s consolidated statements of operations serves to measure the performance of the Company’s loans and debt securities as compared to its use of debt leverage. The Company includes interest income from its loans and debt securities and interest expense related to its Secured Funding Agreements, Notes Payable, securitization debt, the Secured Term Loan (each individually defined in Note 6 included in these consolidated financial statements) and secured borrowings (described in Note 7 included in these consolidated financial statements) in net interest margin.

Comprehensive Income

Comprehensive Income Comprehensive income consists of net income and OCI that are excluded from net income.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the FASB. ASUs were assessed and determined either to be not applicable or expected to have minimal impact on its unaudited consolidated financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Schedule of interest expense

For the three months ended March 31, 2023 and 2022, interest expense is comprised of the following ($ in thousands):

	For the three months ended March 31,
	2023		2022
Secured funding agreements	$	12,311	$	5,127
Notes payable (1)	1,759		453
Securitization debt	11,606		4,351
Secured term loan	1,734		1,732
Secured borrowings	—		292
Other (2)	(4,411)		58
Interest expense	$	22,999	$	12,013

____________________________(1)    Excludes interest expense on the $28.3 million note payable, which was secured by a hotel property that was recognized as real estate owned in the Company’s consolidated balance sheets (see Note 6 included in these consolidated financial statements for additional information on the note payable). Interest expense on the $28.3 million note payable is included within expenses from real estate owned in the Company’s consolidated statements of operations.(2)    Represents the net interest expense recognized from the Company’s derivative financial instruments upon periodic settlement.

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LOANS HELD FOR INVESTMENT (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Schedule of loans held for investments

The Company’s investments in loans held for investment are accounted for at amortized cost. The following tables summarize the Company’s loans held for investment as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,135,368	$	2,155,816	8.5	%	(2)	9.2	%	(3)	1.4
Subordinated debt and preferred equity investments	37,837		39,098		7.8	%	(2)	14.7	%	(3)	2.6
Total loans held for investment portfolio	$	2,173,205	$	2,194,914	8.5	%	(2)	9.2	%	(3)	1.4

	As of December 31, 2022
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield						Weighted Average Remaining Life (Years)
Senior mortgage loans	$	2,225,725	$	2,243,818	8.4	%	(2)	8.8	%	(3)	1.3
Subordinated debt and preferred equity investments	38,283		39,003		14.0	%	(2)	14.0	%	(3)	2.8
Total loans held for investment portfolio	$	2,264,008	$	2,282,821	8.5	%	(2)	8.9	%	(3)	1.4

______________________________

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2023 and December 31, 2022 as weighted by the outstanding principal balance of each loan. (3)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all interest accruing loans held by the Company as of March 31, 2023 and December 31, 2022 as weighted by the total outstanding principal balance of each interest accruing loan (excludes loans on non-accrual status as of March 31, 2023 and December 31, 2022).

Schedule of current investment portfolio

A more detailed listing of the Company’s loans held for investment portfolio based on information available as of March 31, 2023 is as follows ($ in millions, except percentages):

Loan Type	Location	Outstanding Principal (1)	Carrying Amount (1)	Interest Rate	Unleveraged Effective Yield (2)		Maturity Date (3)		Payment Terms (4)
Senior Mortgage Loans:
Office	IL	$155.7	$154.0	(5)	7.1%	(5)	Mar 2025	(5)	I/O
Multifamily	NY	132.2	131.0	S+3.90%	9.2%		Jun 2025		I/O
Office	Diversified	120.4	120.2	S+3.75%	8.8%		Jan 2024		P/I	(7)
Multifamily	TX	100.0	99.2	S+3.50%	9.1%		Jul 2025		I/O
Industrial	IL	98.2	97.8	L+4.55%	9.8%		May 2024		I/O
Mixed-use	FL	82.7	82.7	L+4.25%	9.1%		Feb 2023	(9)	I/O
Office	AZ	78.0	77.6	L+3.50%	8.8%		Oct 2024		I/O
Residential Condominium	NY	76.2	75.9	S+8.95%	15.6%		Oct 2023	(6)	I/O
Mixed-use	NY	75.0	74.7	S+3.75%	8.9%		Jul 2024		I/O
Residential Condominium	FL	74.5	74.4	S+5.35%	10.7%		Jul 2023		I/O
Office	NY	70.2	69.6	L+3.85%	9.1%		Aug 2025		I/O
Office	NC	68.9	68.7	S+4.35%	9.5%		Mar 2024	(10)	P/I	(7)
Multifamily	TX	68.1	67.7	S+2.95%	8.1%		Dec 2024		I/O
Office	NC	67.3	66.9	S+3.65%	8.9%		Aug 2024		I/O
Multifamily/Office	SC	67.0	66.8	L+2.90%	8.0%		Nov 2024		I/O
Office	IL	56.9	53.8	S+3.95%	—%	(8)	Jun 2023		I/O
Office	IL	56.0	55.5	S+4.25%	9.6%		Jan 2025		I/O
Office	GA	48.6	48.5	S+3.15%	8.3%		Dec 2023		P/I	(7)
Hotel	CA	40.2	39.8	S+4.20%	9.5%		Mar 2025		I/O
Mixed-use	CA	37.9	37.9	L+4.10%	9.0%		Mar 2023	(12)	I/O
Hotel	NY	36.5	36.1	S+4.40%	9.6%		Mar 2026		I/O
Mixed-use	TX	35.3	35.2	S+3.85%	8.9%		Sep 2024		I/O
Hotel	IL	35.0	29.5	S+4.00%	—%	(11)	May 2024		I/O
Student Housing	CA	34.5	34.5	S+3.95%	8.8%		Jul 2023		I/O
Office	CA	33.2	32.6	S+3.45%	—%	(13)	Nov 2023	(13)	I/O
Multifamily	CA	31.7	31.5	S+3.00%	8.1%		Dec 2025		I/O
Multifamily	PA	29.4	29.3	S+4.00%	9.1%		Dec 2023		I/O
Office	MA	26.8	26.1	S+3.75%	9.9%		Apr 2025		I/O
Industrial	FL	25.5	25.4	L+2.90%	8.0%		Dec 2025		I/O
Industrial	NJ	24.6	24.4	L+3.75%	9.3%		May 2024		I/O
Industrial	CO	23.6	23.5	(15)	12.2%		Feb 2024	(15)	I/O
Multifamily	WA	23.1	23.0	S+3.00%	8.0%		Nov 2025		I/O
Office	CA	22.9	22.8	S+3.50%	8.6%		Nov 2023		I/O
Multifamily	TX	22.4	22.2	S+2.60%	7.8%		Oct 2024		I/O
Industrial	CA	19.6	19.5	S+3.85%	8.9%		Sep 2024	(14)	I/O
Student Housing	AL	19.5	19.4	S+3.95%	9.1%		May 2024		I/O
Multifamily	WA	18.8	18.7	S+3.10%	8.4%		Sep 2023	(16)	I/O
Self Storage	PA	18.2	18.1	L+2.90%	8.1%		Dec 2025		I/O
Self Storage	NJ	17.6	17.4	S+2.90%	8.5%		Apr 2025		I/O
Self Storage	WA	11.5	11.4	S+2.90%	8.4%		Mar 2025		I/O
Industrial	TX	10.0	9.9	S+5.35%	10.5%		Dec 2024		I/O
Self Storage	MA	8.5	8.5	L+2.90%	7.9%		Dec 2024		I/O
Self Storage	TX	8.0	8.0	L+2.90%	8.0%		Aug 2024		I/O
Self Storage	MA	7.7	7.7	L+2.90%	8.0%		Nov 2024		I/O
Self Storage	MA	6.6	6.6	L+2.90%	8.0%		Oct 2024		I/O
Self Storage	MO	6.5	6.5	L+3.00%	8.0%		Dec 2023		I/O
Industrial	TN	6.4	6.4	S+5.60%	10.8%		Nov 2024		I/O
Self Storage	NJ	5.9	5.9	L+2.90%	8.2%		Jul 2024		I/O
Self Storage	IL	5.6	5.6	S+3.10%	8.2%		Dec 2023		I/O
Industrial	FL	4.0	4.0	S+5.75%	11.0%		Mar 2025		I/O
Self Storage	TX	2.9	2.9	L+2.90%	7.9%		Sep 2024		I/O
Subordinated Debt and Preferred Equity Investments:
Multifamily	SC	20.6	20.5	S+9.53%	14.7%		Sep 2025		I/O
Office	NJ	18.5	17.4	12.00%	—%	(17)	Jan 2026		I/O
Total/Weighted Average		$2,194.9	$2,173.2		8.5%

_________________________

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. For the loans held for investment that represent co-investments with other investment vehicles managed by Ares Management (see Note 14 included in these consolidated financial statements for additional information on co-investments), only the portion of Carrying Amount and Outstanding Principal held by the Company is reflected.

(2)Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. Unleveraged Effective Yield for each loan is calculated based on LIBOR or SOFR as of March 31, 2023 or the LIBOR or SOFR floor, as applicable. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of March 31, 2023 as weighted by the outstanding principal balance of each loan.

(3)Certain loans are subject to contractual extension options that generally vary between one and two 12-month extensions and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(4)I/O = interest only, P/I = principal and interest.

(5)The Illinois loan is structured as both a senior and mezzanine loan with the Company holding both positions. The senior position has a per annum interest rate of S + 2.25% and the mezzanine position has a fixed per annum interest rate of 10.00%. The mezzanine position of this loan, which had an outstanding principal balance of $41.8 million as of March 31, 2023, was on non-accrual status as of March 31, 2023 and therefore, the Unleveraged Effective Yield presented is for the senior position only as the mezzanine position is non-interest accruing. In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the Illinois loan from March 2023 to March 2025. For the three months ended March 31, 2023, the Company received $1.7 million of interest payments and other fees in cash on the mezzanine position of the Illinois loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(6)This senior mortgage loan refinanced the previously existing $53.3 million senior mortgage loan that was held by the Company. The senior New York loan is currently in default due to the failure of the borrower to reach certain construction milestones.

(7)In April 2022, amortization began on the senior North Carolina loan, which had an outstanding principal balance of $68.9 million as of March 31, 2023. In January 2023, amortization began on the senior Georgia loan, which had an outstanding principal balance of $48.6 million as of March 31, 2023. In February 2023, amortization began on the senior diversified loan, which had an outstanding principal balance of $120.4 million as of March 31, 2023. The remainder of the loans in the Company’s portfolio are non-amortizing through their primary terms.

(8)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $1.2 million of interest payments in cash on the senior Illinois loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(9)As of March 31, 2023, the senior Florida loan, which is collateralized by a mixed-use property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date.

(10)In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior North Carolina loan from March 2023 to March 2024.

(11)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $0.3 million of interest payments in cash on the senior Illinois loan that was recognized as a reduction to the carrying value of the loan. The senior Illinois loan is currently in default due to the failure of the borrower to make certain contractual reserve deposits by the May 2022 due date and due to the borrower not making its contractual interest payments due subsequent to the January 2023 interest payment date.

(12)As of March 31, 2023, the senior California loan, which is collateralized by a mixed-use property, is in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the March 2023 maturity date.

(13)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2023 to November 2023. For the three months ended March 31, 2023, the Company received $0.5 million of interest payments in cash on the senior California loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

(14)In February 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior California loan from March 2023 to September 2024.

(15)At origination, the Colorado loan was structured as a senior loan and in January 2022, the Company also originated the mezzanine loan. The senior loan, which had an outstanding principal balance of $19.8 million as of March 31, 2023, accrues interest at a per annum rate of L + 6.75% and the mezzanine loan, which had an outstanding principal balance of $3.8 million as of March 31, 2023, accrues interest at a per annum rate of S + 8.50%. In February 2023, the borrower exercised a one-year extension option in accordance with the loan agreement, which extended the maturity date on the senior Colorado loan to February 2024.

(16)In March 2023, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the senior Washington loan from March 2023 to September 2023.

(17)Loan was on non-accrual status as of March 31, 2023 and the Unleveraged Effective Yield is not applicable. For the three months ended March 31, 2023, the Company received $0.6 million of interest payments in cash on the mezzanine New Jersey loan that was recognized as a reduction to the carrying value of the loan and the borrower is current on all contractual interest payments.

Schedule of activity in loan portfolio

For the three months ended March 31, 2023, the activity in the Company’s loan portfolio was as follows ($ in thousands):

Balance at December 31, 2022	$	2,264,008
Initial funding	—
Origination fees and discounts, net of costs	(413)
Additional funding	26,363
Amortizing payments	(4,671)
Loan payoffs	(72,366)
Loans sold to third parties (1)	(14,324)
Loans transferred to held for sale (2)	(27,165)
Origination fee and discount accretion	1,773
Balance at March 31, 2023	$	2,173,205

_________________________

(1)    In January 2023, the Company closed the sale of a senior mortgage loan with outstanding principal of $14.3 million, which was collateralized by a residential property located in California, to a third party. At the time of the sale, the senior mortgage loan was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2021 maturity date. For the three months ended March 31, 2023, the Company recognized a realized loss of $5.6 million in the Company's consolidated statements of operations upon the sale of the senior mortgage loan as the carrying value exceeded the sale price of the loan.

(2)    In March 2023, the Company entered into a sale agreement with a third party to sell a senior mortgage loan with outstanding principal of $27.4 million, which is collateralized by an office property located in Illinois. In January 2023, the senior mortgage loan was not repaid upon its contractual maturity, which triggered an event of default under the loan agreement and as of March 31, 2023, the loan remains in default. As of March 31, 2023, the sale had not yet closed and the loan was reclassified from held for investment to held for sale and is carried at fair value in the Company's consolidated balance sheets. The Company did not recognize any unrealized gain or loss in the Company's consolidated statements of operations upon reclassifying the loan to held for sale as the carrying value was equal to fair value as determined by the agreed upon sale price of the loan. See Note 17 included in these consolidated financial statements for a subsequent event related to the sale of the senior mortgage loan.

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CURRENT EXPECTED CREDIT LOSSES (Tables)

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

Schedule of financing receivable, allowance for credit loss

Activity related to the CECL Reserve for outstanding balances on the Company’s loans held for investment as of and for the three months ended March 31, 2023 was as follows ($ in thousands):

Balance at December 31, 2022 (1)	$	65,969
Provision for current expected credit losses	21,533
Write-offs	—
Recoveries	—
Balance at March 31, 2023 (1)	$	87,502

__________________________

(1)     The CECL Reserve related to outstanding balances on loans held for investment is recorded within current expected credit loss reserve in the Company's consolidated balance sheets.

Current Expected Credit Loss Reserve for Unfunded Loan Commitments    

    Activity related to the CECL Reserve for unfunded commitments on the Company’s loans held for investment as of and for the three months ended March 31, 2023 was as follows ($ in thousands):

Balance at December 31, 2022 (1)	$	5,339
Provision for current expected credit losses	(514)
Write-offs	—
Recoveries	—
Balance at March 31, 2023 (1)	$	4,825

__________________________

(1)     The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in the Company's consolidated balance sheets.

Schedule of company loan risk definitions

Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

Ratings	Definition
1	Very Low Risk
2	Low Risk
3	Medium Risk
4	High Risk/Potential for Loss: Asset performance is trailing underwritten expectations. Loan at risk of impairment without material improvement to performance
5	Impaired/Loss Likely: A loan that has a significantly increased probability of default and principal loss

Schedule of financing receivable credit quality indicators

As of March 31, 2023, the carrying value, excluding the CECL Reserve, of the Company’s loans held for investment within each risk rating by year of origination is as follows ($ in thousands):

	2023		2022		2021		2020		2019		Prior		Total
Risk rating:
1	$	—	$	13,545	$	5,588	$	—	$	—	$	—	$	19,133
2	—		34,863		348,017		—		—		57,275		440,155
3	—		450,076		439,815		138,920		171,983		29,299		1,230,093
4	—		75,898		—		191,910		115,272		17,385		400,465
5	—		—		—		—		—		83,359		83,359
Total	$	—	$	574,382	$	793,420	$	330,830	$	287,255	$	187,318	$	2,173,205

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DEBT (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of outstanding balances and total commitments under financing agreements

As of March 31, 2023 and December 31, 2022, the outstanding balances and total commitments under the Financing Agreements consisted of the following ($ in thousands):

	March 31, 2023					December 31, 2022
	Outstanding Balance		Total Commitment			Outstanding Balance		Total Commitment
Secured Funding Agreements:
Wells Fargo Facility	$	261,039	$	450,000	(1)	$	270,798	$	450,000	(1)
Citibank Facility	236,240		325,000			236,240		325,000
CNB Facility	—		75,000			—		75,000
MetLife Facility	—		180,000			—		180,000
Morgan Stanley Facility	200,874		250,000			198,193		250,000
Subtotal	$	698,153	$	1,280,000		$	705,231	$	1,280,000
Notes Payable	$	105,000	$	105,000		$	105,000	$	105,000
Secured Term Loan	$	150,000	$	150,000		$	150,000	$	150,000
Total	$	953,153	$	1,535,000		$	960,231	$	1,535,000

______________________________

(1)The maximum commitment for the Wells Fargo Facility (as defined below) may be increased to up to $500.0 million at the Company’s option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of interest rate derivatives

The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of March 31, 2023 and December 31, 2022 (notional amount in thousands):

	As of
	March 31, 2023					December 31, 2022
Interest Rate Derivatives	Number of Instruments	Notional Amount	Rate(1)	Index	Weighted Average Maturity (Years)	Number of Instruments	Notional Amount	Rate(1)	Index	Weighted Average Maturity (Years)
Interest rate swaps	1	$190,000	0.2075%	LIBOR(2)	0.3	1	$410,000	0.2075%	LIBOR(2)	0.4
Interest rate caps	0(3)	—	—	—	—	0(3)	—	—	—	—

_______________________________

(1)    Represents fixed rate for interest rate swaps and strike rate for interest rate caps.

(2)    Subject to a 0.00% floor.

(3)    In March 2022, the Company re-calibrated its net exposure to interest rate changes by terminating its interest rate cap derivative, which had a notional amount of $170.0 million on the termination date and a strike rate of 0.50%. For the three months ended March 31, 2022, the Company recognized a $2.0 million realized gain within OCI in conjunction with the termination of the interest rate cap. In accordance with ASC 815, the realized gain is recognized within current earnings over the remaining original term of the interest rate cap derivative as it was designated as an effective hedge. For the three months ended March 31, 2023 and 2022, the Company recognized a realized gain of $457 thousand and $5 thousand, respectively, through a reduction in interest expense, on the termination of the interest rate cap within current earnings.

Schedule of derivative assets at fair value

The following table summarizes the fair value of our derivative financial instruments ($ in thousands):

	Fair Value of Derivatives in an Asset Position(1) as of				Fair Value of Derivatives in a Liability Position(2) as of
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Derivatives designated as hedging instruments:
Interest rate derivatives	$	2,545	$	6,565	$	—	$	—

____________________________

(1)    Included in other assets in the Company’s consolidated balance sheets.

(2)    Included in other liabilities in the Company’s consolidated balance sheets.

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of loan commitments

As of March 31, 2023 and December 31, 2022, the Company had the following commitments to fund various senior mortgage loans, subordinated debt investments, as well as preferred equity investments accounted for as loans held for investment ($ in thousands):

	As of
	March 31, 2023		December 31, 2022
Total commitments	$	2,388,338	$	2,510,308
Less: funded commitments	(2,194,914)		(2,282,821)
Total unfunded commitments	$	193,424	$	227,487

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2023

Stockholders' Equity Note [Abstract]

Schedule of restricted stock award activity

The following tables summarize the (i) non-vested shares of restricted stock and RSUs and (ii) vesting schedule of shares of restricted stock and RSUs for the Company’s directors and officers and employees of the Manager as of March 31, 2023:

Schedule of Non-Vested Share and Share Equivalents

	Restricted Stock Grants—Directors	RSUs—Officers and Employees of the Manager	Total
Balance at December 31, 2022	16,137	832,472	848,609
Granted	—	—	—
Vested	(6,609)	(162,843)	(169,452)
Forfeited	—	(3,333)	(3,333)
Balance at March 31, 2023	9,528	666,296	675,824

Schedule of future anticipated vesting schedule of restricted stock awards

Future Anticipated Vesting Schedule

	Restricted Stock Grants—Directors	RSUs—Officers and Employees of the Manager	Total
2023	7,443	5,431	12,874
2024	1,668	283,738	285,406
2025	417	232,431	232,848
2026	—	144,696	144,696
2027	—	—	—
Total	9,528	666,296	675,824

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of computations of basic and diluted earnings per share

The following information sets forth the computations of basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022 ($ in thousands, except share and per share data):

	For the three months ended March 31,
	2023		2022
Net income (loss) attributable to common stockholders	$	(6,439)	$	16,201
Divided by:
Basic weighted average shares of common stock outstanding:	54,591,650		47,204,397
Weighted average non-vested restricted stock and RSUs (1)	—		450,152
Diluted weighted average shares of common stock outstanding:	54,591,650		47,654,549
Basic and diluted earnings (loss) per common share	$	(0.12)	$	0.34

_______________________________

(1)    For the three months ended March 31, 2023, the weighted average non-vested restricted stock and RSUs of 682,620

shares were excluded from the computation of diluted earnings (loss) per common share as the impact of including

those shares would be anti-dilutive.

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INCOME TAX (Tables)

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Schedule of components of the TRS's income tax provision

The income tax provision for the Company and the TRSs consisted of the following for the three months ended March 31, 2023 and 2022 ($ in thousands):

	For the three months ended March 31,
	2023		2022
Current	$	10	$	15
Deferred	—		—
Excise tax	100		90
Total income tax expense, including excise tax	$	110	$	105

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FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of debt securities, available-for-sale

The following tables summarize the Company’s investments in available-for-sale debt securities as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Face Amount		Amortized Cost		Unamortized Discount		Unrealized Gain (Loss), Net
Available-for-sale debt securities	$	28,000	$	27,887	$	113	$	120

	As of December 31, 2022
	Face Amount		Amortized Cost		Unamortized Discount		Unrealized Gain (Loss), Net
Available-for-sale debt securities	$	28,000	$	27,881	$	119	$	55

Schedule of fair value, assets measured on recurring basis

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	2,545	$	—	$	2,545
Loans held for sale	$	—	$	—	$	27,375	$	27,375
Available-for-sale debt securities	$	—	$	28,007	$	—	$	28,007
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	6,565	$	—	$	6,565
Available-for-sale debt securities	$	—	$	27,936	$	—	$	27,936
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

Schedule of fair value, liabilities measured on recurring basis

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 ($ in thousands):

	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	2,545	$	—	$	2,545
Loans held for sale	$	—	$	—	$	27,375	$	27,375
Available-for-sale debt securities	$	—	$	28,007	$	—	$	28,007
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Interest rate derivatives	$	—	$	6,565	$	—	$	6,565
Available-for-sale debt securities	$	—	$	27,936	$	—	$	27,936
Financial liabilities:
Interest rate derivatives	$	—	$	—	$	—	$	—

Schedule of carrying value and estimated fair value of the Company's financial instruments not carried at fair value on the consolidated balance sheet

As of March 31, 2023 and December 31, 2022, the carrying values and fair values of the Company’s financial assets and liabilities recorded at cost are as follows ($ in thousands):

		As of
		March 31, 2023				December 31, 2022
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Loans held for investment	3	$	2,173,205	$	2,089,704	$	2,264,008	$	2,233,319
Financial liabilities:
Secured funding agreements	2	$	698,153	$	698,153	$	705,231	$	705,231
Notes payable	3	104,509		103,425		104,460		103,635
Secured term loan	3	149,247		122,564		149,200		137,571
Collateralized loan obligation securitization debt (consolidated VIEs)	3	735,839		711,950		777,675		749,242

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RELATED PARTY TRANSACTIONS (Tables)

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Schedule of related-party costs incurred by the company and amounts payable to the Manager

The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2023 and 2022 and amounts payable to the Company’s Manager as of March 31, 2023 and December 31, 2022 ($ in thousands):

	Incurred				Payable
	For the three months ended March 31,				As of
	2023		2022		March 31, 2023		December 31, 2022
Affiliate Payments
Management fees	$	3,010	$	2,616	$	3,010	$	3,026
Incentive fees	—		358		—		1,264
General and administrative expenses	732		834		885		1,232
Direct costs(1)	20		29		4		58
Total	$	3,762	$	3,837	$	3,899	$	5,580

_______________________________

(1)    For the three months ended March 31, 2023 and 2022, direct costs incurred are included within general and administrative expenses in the Company’s consolidated statements of operations.

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DIVIDENDS AND DISTRIBUTIONS (Tables)

3 Months Ended

Mar. 31, 2023

DIVIDENDS AND DISTRIBUTIONS

Schedule of the company's dividends declared

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2023 and 2022 ($ in thousands, except per share data):

Date Declared	Record Date	Payment Date	Per Share Amount			Total Amount
February 15, 2023	March 31, 2023	April 18, 2023	$	0.35	(1)	$	19,346
Total cash dividends declared for the three months ended March 31, 2023			$	0.35		$	19,346
February 15, 2022	March 31, 2022	April 14, 2022	$	0.35	(1)	$	16,740
Total cash dividends declared for the three months ended March 31, 2022			$	0.35		$	16,740

(1) Consists of a regular cash dividend of $0.33 and a supplemental cash dividend of $0.02.

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ORGANIZATION (Details)	3 Months Ended
	Mar. 31, 2023 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	1

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SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details)	3 Months Ended
	Mar. 31, 2023
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Useful life (in years)	15 years
Maximum | Buildings and improvements
Property, Plant and Equipment [Line Items]
Useful life (in years)	40 years

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SIGNIFICANT ACCOUNTING POLICIES - Schedule of Interest Expense (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2023	Mar. 31, 2022
Debt Instrument [Line Items]
Interest expense		$ 22,999	$ 12,013
Secured funding agreements
Debt Instrument [Line Items]
Interest expense		12,311	5,127
Notes payable
Debt Instrument [Line Items]
Interest expense		1,759	453
Securitization debt
Debt Instrument [Line Items]
Interest expense		11,606	4,351
Secured term loan
Debt Instrument [Line Items]
Interest expense		1,734	1,732
Secured borrowings
Debt Instrument [Line Items]
Interest expense		0	292
Other
Debt Instrument [Line Items]
Other		$ (4,411)	$ 58
Notes Payable, Due June 10, 2024 | Notes payable | NEW YORK
Debt Instrument [Line Items]
Interest expense from real estate owned	$ 28,300

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LOANS HELD FOR INVESTMENT - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) loan	Dec. 31, 2022 USD ($) loan
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans originated or co-originated | loan	53
Number of loans repaid or sold, since inception | loan	157
Total commitment	$ 2,500.0
Loans held for investment	2,200.0
Amount funded	26.4
Amount of repayments	$ 72.8
Number of loans sold | loan	1
Principal amount outstanding	$ 14.3
Number of loans transferred | loan	1
Principal amount of loan held for sale	$ 27.4
Percentage of loans held for investment having LIBOR floors	80.80%
Weighted average floor (as a percent)	0.99%
Impact of COVID-19
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans in non-accrual status | loan	5	3
Financing receivable, nonaccrual	$ 173.3	$ 99.1

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LOANS HELD FOR INVESTMENT - Loans held for Investments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Loans held for investment	$ 2,173,205		$ 2,264,008
Outstanding principal	$ 2,194,914		2,282,821
Weighted Average Unleveraged Effective Yield, Including Non-accrual Loans	8.50%	8.50%
Weighted Average Unleveraged Effective Yield, Excluding Non-accrual Loans	9.20%	8.90%
Weighted Average Remaining Life (Years)	1 year 4 months 24 days	1 year 4 months 24 days
Senior mortgage loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Loans held for investment	$ 2,135,368		2,225,725
Outstanding principal	$ 2,155,816		2,243,818
Weighted Average Unleveraged Effective Yield, Including Non-accrual Loans	8.50%	8.40%
Weighted Average Unleveraged Effective Yield, Excluding Non-accrual Loans	9.20%	8.80%
Weighted Average Remaining Life (Years)	1 year 4 months 24 days	1 year 3 months 18 days
Subordinated debt and preferred equity investments
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Loans held for investment	$ 37,837		38,283
Outstanding principal	$ 39,098		$ 39,003
Weighted Average Unleveraged Effective Yield, Including Non-accrual Loans	7.80%	14.00%
Weighted Average Unleveraged Effective Yield, Excluding Non-accrual Loans	14.70%	14.00%
Weighted Average Remaining Life (Years)	2 years 7 months 6 days	2 years 9 months 18 days

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LOANS HELD FOR INVESTMENT - Investment Portfolio (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) option	Dec. 31, 2022 USD ($)	Jul. 31, 2022	Dec. 31, 2021 USD ($)	Mar. 08, 2019 USD ($)
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 2,194,914	$ 2,282,821
Loans held for investment	$ 2,173,205	$ 2,264,008
Unleveraged effective yield	8.50%
Borrower extension period exercised (in years)	1 year
Minimum
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of extension options | option	1
Maximum
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of extension options | option	2
Extension period of maturity date	12 months
SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest rate per annum			2.00%
Office | IL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 41,800
Fixed interest rate	10.00%
Interest income	$ 1,700
Office | CA | SOFR Plus 3.45% Due Nov 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest income	500
Office | NJ
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest income	600
Office | Senior Mortgage Loans | IL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	155,700
Loans held for investment	$ 154,000
Unleveraged effective yield	7.10%
Office | Senior Mortgage Loans | IL | SOFR Plus 3.95% Due Jun 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 56,900
Loans held for investment	$ 53,800
Interest rate per annum	3.95%
Unleveraged effective yield	0.00%
Interest income	$ 1,200
Office | Senior Mortgage Loans | IL | SOFR Plus 4.25%, Due Jan 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	56,000
Loans held for investment	$ 55,500
Interest rate per annum	4.25%
Unleveraged effective yield	9.60%
Office | Senior Mortgage Loans | NY | LIBOR Plus 3.85% Due Aug 2025 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 70,200
Loans held for investment	$ 69,600
Interest rate per annum	3.85%
Unleveraged effective yield	9.10%
Office | Senior Mortgage Loans | Diversified | SOFR Plus 3.75% Due Jan 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 120,400
Loans held for investment	$ 120,200
Interest rate per annum	3.75%
Unleveraged effective yield	8.80%
Office | Senior Mortgage Loans | AZ | LIBOR Plus 3.50% Due Oct 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 78,000
Loans held for investment	$ 77,600
Interest rate per annum	3.50%
Unleveraged effective yield	8.80%
Office | Senior Mortgage Loans | NC | SOFR Plus 4.35% Due Mar 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 68,900
Loans held for investment	$ 68,700
Interest rate per annum	4.35%
Unleveraged effective yield	9.50%
Office | Senior Mortgage Loans | NC | SOFR Plus 3.65% Due Aug 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 67,300
Loans held for investment	$ 66,900
Interest rate per annum	3.65%
Unleveraged effective yield	8.90%
Office | Senior Mortgage Loans | GA | SOFR Plus 3.15%, Due Dec 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 48,600
Loans held for investment	$ 48,500
Interest rate per annum	3.15%
Unleveraged effective yield	8.30%
Office | Senior Mortgage Loans | CA | SOFR Plus 3.45% Due Nov 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 33,200
Loans held for investment	$ 32,600
Interest rate per annum	3.45%
Unleveraged effective yield	0.00%
Office | Senior Mortgage Loans | CA | SOFR Plus 3.50% Due Nov 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 22,900
Loans held for investment	$ 22,800
Interest rate per annum	3.50%
Unleveraged effective yield	8.60%
Office | Senior Mortgage Loans | MA | SOFR Plus 3.75% Due Apr 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 26,800
Loans held for investment	$ 26,100
Interest rate per annum	3.75%
Unleveraged effective yield	9.90%
Office | Subordinated debt and preferred equity investments | NJ
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 18,500
Loans held for investment	$ 17,400
Fixed interest rate	12.00%
Unleveraged effective yield	0.00%
Multifamily | Senior Mortgage Loans | NY | SOFR Plus 3.90% Due Jun 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 132,200
Loans held for investment	$ 131,000
Interest rate per annum	3.90%
Unleveraged effective yield	9.20%
Multifamily | Senior Mortgage Loans | TX | SOFR Plus 3.50% Due Jul 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 100,000
Loans held for investment	$ 99,200
Interest rate per annum	3.50%
Unleveraged effective yield	9.10%
Multifamily | Senior Mortgage Loans | TX | SOFR Plus 2.95% Due Dec 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 68,100
Loans held for investment	$ 67,700
Interest rate per annum	2.95%
Unleveraged effective yield	8.10%
Multifamily | Senior Mortgage Loans | TX | SOFR Plus 2.60% Due Oct 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 22,400
Loans held for investment	$ 22,200
Interest rate per annum	2.60%
Unleveraged effective yield	7.80%
Multifamily | Senior Mortgage Loans | CA | SOFR Plus 3.00% Due Dec 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 31,700
Loans held for investment	$ 31,500
Interest rate per annum	3.00%
Unleveraged effective yield	8.10%
Multifamily | Senior Mortgage Loans | PA | SOFR Plus 4.00% Due Dec 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 29,400
Loans held for investment	$ 29,300
Interest rate per annum	4.00%
Unleveraged effective yield	9.10%
Multifamily | Senior Mortgage Loans | WA | SOFR Plus 3.00% Due Nov 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 23,100
Loans held for investment	$ 23,000
Interest rate per annum	3.00%
Unleveraged effective yield	8.00%
Multifamily | Senior Mortgage Loans | WA | SOFR Plus 3.10% Due Sep 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 18,800
Loans held for investment	$ 18,700
Interest rate per annum	3.10%
Unleveraged effective yield	8.40%
Multifamily | Subordinated debt and preferred equity investments | SC | SOFR Plus 9.53%, Due Sep 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 20,600
Loans held for investment	$ 20,500
Interest rate per annum	9.53%
Unleveraged effective yield	14.70%
Industrial | Senior Mortgage Loans | IL | LIBOR Plus 4.55% Due May 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 98,200
Loans held for investment	$ 97,800
Interest rate per annum	4.55%
Unleveraged effective yield	9.80%
Industrial | Senior Mortgage Loans | TX | SOFR Plus 5.35 Due Dec 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 10,000
Loans held for investment	$ 9,900
Interest rate per annum	5.35%
Unleveraged effective yield	10.50%
Industrial | Senior Mortgage Loans | FL | LIBOR Plus 2.90% Due Dec 2025 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 25,500
Loans held for investment	$ 25,400
Interest rate per annum	2.90%
Unleveraged effective yield	8.00%
Industrial | Senior Mortgage Loans | FL | SOFR Plus 5.75% Due Mar 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 4,000
Loans held for investment	$ 4,000
Interest rate per annum	5.75%
Unleveraged effective yield	11.00%
Industrial | Senior Mortgage Loans | CA | SOFR Plus 3.85%, Due Sep 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 19,600
Loans held for investment	$ 19,500
Interest rate per annum	3.85%
Unleveraged effective yield	8.90%
Industrial | Senior Mortgage Loans | CO
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 23,600
Loans held for investment	$ 23,500
Unleveraged effective yield	12.20%
Industrial | Senior Mortgage Loans | CO | LIBOR Plus 6.75% Due Feb 2023
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Loans held for investment	$ 19,800
Industrial | Senior Mortgage Loans | CO | LIBOR Plus 6.75% Due Feb 2023 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest rate per annum	6.75%
Industrial | Senior Mortgage Loans | CO | SOFR Plus 8.50% Due Feb 2023
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Loans held for investment	$ 3,800
Industrial | Senior Mortgage Loans | CO | SOFR Plus 8.50% Due Feb 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest rate per annum	8.50%
Industrial | Senior Mortgage Loans | NJ | LIBOR Plus 3.75%, Due May 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 24,600
Loans held for investment	$ 24,400
Interest rate per annum	3.75%
Unleveraged effective yield	9.30%
Industrial | Senior Mortgage Loans | TN | SOFR Plus 5.60 Due Nov 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 6,400
Loans held for investment	$ 6,400
Interest rate per annum	5.60%
Unleveraged effective yield	10.80%
Mixed-use | Senior Mortgage Loans | NY | SOFR Plus 3.75% Due Jul 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 75,000
Loans held for investment	$ 74,700
Interest rate per annum	3.75%
Unleveraged effective yield	8.90%
Mixed-use | Senior Mortgage Loans | TX | SOFR Plus 3.85%, Due Sep 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 35,300
Loans held for investment	$ 35,200
Interest rate per annum	3.85%
Unleveraged effective yield	8.90%
Mixed-use | Senior Mortgage Loans | FL | LIBOR Plus 4.25% Due Feb 2023 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 82,700
Loans held for investment	$ 82,700
Interest rate per annum	4.25%
Unleveraged effective yield	9.10%
Mixed-use | Senior Mortgage Loans | CA | LIBOR Plus 4.10% Due Mar 2023 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 37,900
Loans held for investment	$ 37,900
Interest rate per annum	4.10%
Unleveraged effective yield	9.00%
Residential Condominium | Senior Mortgage Loans | NY | SOFR Plus 8.95% Due Oct 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 76,200			$ 53,300
Loans held for investment	$ 75,900
Interest rate per annum	8.95%
Unleveraged effective yield	15.60%
Residential Condominium | Senior Mortgage Loans | FL | SOFR Plus 5.35% Due Jul 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 74,500
Loans held for investment	$ 74,400
Interest rate per annum	5.35%
Unleveraged effective yield	10.70%
Multifamily/Office | Senior Mortgage Loans | SC | LIBOR Plus 2.90% Due Nov 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 67,000
Loans held for investment	$ 66,800
Interest rate per annum	2.90%
Unleveraged effective yield	8.00%
Hotel | Senior Mortgage Loans | IL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest income	$ 300
Hotel | Senior Mortgage Loans | IL | SOFR Plus 4.00% Due May 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	35,000
Loans held for investment	$ 29,500
Interest rate per annum	4.00%
Unleveraged effective yield	0.00%
Hotel | Senior Mortgage Loans | NY
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal					$ 38,600
Hotel | Senior Mortgage Loans | NY | LIBOR Plus 4 .40% Due Mar 2026 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 36,500
Loans held for investment	$ 36,100
Interest rate per annum	4.40%
Unleveraged effective yield	9.60%
Hotel | Senior Mortgage Loans | CA | SOFR Plus 4.20% Due Mar 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 40,200
Loans held for investment	$ 39,800
Interest rate per annum	4.20%
Unleveraged effective yield	9.50%
Student Housing | Senior Mortgage Loans | CA | SOFR Plus 3.95% Due Jul 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 34,500
Loans held for investment	$ 34,500
Interest rate per annum	3.95%
Unleveraged effective yield	8.80%
Student Housing | Senior Mortgage Loans | AL | SOFR Plus 3.95 Due May 2024 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 19,500
Loans held for investment	$ 19,400
Interest rate per annum	3.95%
Unleveraged effective yield	9.10%
Self Storage | Senior Mortgage Loans | IL | SOFR Plus 3.10% Due Dec 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 5,600
Loans held for investment	$ 5,600
Interest rate per annum	3.10%
Unleveraged effective yield	8.20%
Self Storage | Senior Mortgage Loans | TX | LIBOR Plus 2.90% Due Aug 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 8,000
Loans held for investment	$ 8,000
Interest rate per annum	2.90%
Unleveraged effective yield	8.00%
Self Storage | Senior Mortgage Loans | TX | LIBOR Plus 2.90% Due Sep 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 2,900
Loans held for investment	$ 2,900
Interest rate per annum	2.90%
Unleveraged effective yield	7.90%
Self Storage | Senior Mortgage Loans | PA | LIBOR Plus 2.90% Due Dec 2025 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 18,200
Loans held for investment	$ 18,100
Interest rate per annum	2.90%
Unleveraged effective yield	8.10%
Self Storage | Senior Mortgage Loans | MA | LIBOR Plus 2.90% Due Nov 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 7,700
Loans held for investment	$ 7,700
Interest rate per annum	2.90%
Unleveraged effective yield	8.00%
Self Storage | Senior Mortgage Loans | MA | LIBOR Plus 2.90% Due Dec 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 8,500
Loans held for investment	$ 8,500
Interest rate per annum	2.90%
Unleveraged effective yield	7.90%
Self Storage | Senior Mortgage Loans | MA | LIBOR Plus 2.90% Due Oct 2024 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 6,600
Loans held for investment	$ 6,600
Interest rate per annum	2.90%
Unleveraged effective yield	8.00%
Self Storage | Senior Mortgage Loans | NJ | SOFR Plus 2.90% Due April 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 17,600
Loans held for investment	$ 17,400
Interest rate per annum	2.90%
Unleveraged effective yield	8.50%
Self Storage | Senior Mortgage Loans | NJ | LIBOR Plus 2.90% Due Dec 2023 | LIBOR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 5,900
Loans held for investment	$ 5,900
Interest rate per annum	2.90%
Unleveraged effective yield	8.20%
Self Storage | Senior Mortgage Loans | WA | SOFR Plus 2.90%, Due Mar 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 11,500
Loans held for investment	$ 11,400
Interest rate per annum	2.90%
Unleveraged effective yield	8.40%
Self Storage | Senior Mortgage Loans | MO | SOFR Plus 3.00% Due Dec 2023 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal	$ 6,500
Loans held for investment	$ 6,500
Interest rate per annum	3.00%
Unleveraged effective yield	8.00%

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LOANS HELD FOR INVESTMENT - Portfolio Activity (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Mar. 31, 2023	Jan. 31, 2023	Mar. 31, 2023	Mar. 31, 2022	Jul. 31, 2022
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Balance at the beginning of the period		$ 2,264,008	$ 2,264,008
Initial funding			0
Origination fees and discounts, net of costs			(413)
Additional funding			26,363
Amortizing payments			(4,671)
Loan payoffs			(72,366)
Loans sold to third parties			(14,324)
Origination fee and discount accretion			1,773
Balance at the end of the period	$ 2,173,205		2,173,205
Mortgage loans on real estate loan sold			14,324
Realized losses on loans sold			5,613	$ 0
Portfolio loans transferred to held-for-sale			$ 27,165
SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest rate per annum					2.00%
Residential | CA
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Loans sold to third parties		(14,300)
Mortgage loans on real estate loan sold		$ 14,300
Office | IL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Portfolio loans transferred to held-for-sale	$ 27,400
Office | IL | Senior Mortgage Loans | SOFR Plus 2 Point 25 Percent, Due Mar 2025 | SOFR
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Interest rate per annum	2.25%		2.25%

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CURRENT EXPECTED CREDIT LOSSES - Narrative (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) loan	Dec. 31, 2022 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Number of loans CECL Reserves assigned to | loan	2
Financing receivable, allowance for credit loss, excluding accrued interest	$ 92,300
Allowance for credit loss, basis points	38700.00%
Commitments	$ 2,388,338	$ 2,510,308
Outstanding principal	2,194,914	2,282,821
Office | IL
Financing Receivable, Allowance for Credit Loss [Line Items]
Outstanding principal	41,800
Office | Senior Mortgage Loans | IL
Financing Receivable, Allowance for Credit Loss [Line Items]
Outstanding principal	155,700
5 - Impaired/Loss Likely: A loan that has significantly increased probability of default or principal loss | Office | Senior Mortgage Loans | IL
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	38,300
Outstanding principal	56,900
5 - Impaired/Loss Likely: A loan that has significantly increased probability of default or principal loss | Hotel | Senior Mortgage Loans | IL
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	5,600
Outstanding principal	35,000
Other Assets
Financing Receivable, Allowance for Credit Loss [Line Items]
Interest receivable	13,100	14,000
Loans Held for Investment
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	87,502	65,969
Unfunded Loan Commitment
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	$ 4,825	$ 5,339

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CURRENT EXPECTED CREDIT LOSSES - Allowance for Credit Loss (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Provision for current expected credit losses	$ 21,019	$ (594)
Balance at the end of the period	92,300
Loans Held for Investment
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Balance at the beginning of the period	65,969
Provision for current expected credit losses	21,533
Write-offs	0
Recoveries	0
Balance at the end of the period	87,502
Unfunded Loan Commitment
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Balance at the beginning of the period	5,339
Provision for current expected credit losses	(514)
Write-offs	0
Recoveries	0
Balance at the end of the period	$ 4,825

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CURRENT EXPECTED CREDIT LOSSES - Internal Credit Risk Rating (Details) - Loans Held for Investment $ in Thousands	Mar. 31, 2023 USD ($)
Financing Receivable, Credit Quality Indicator [Line Items]
2023	$ 0
2022	574,382
2021	793,420
2020	330,830
2019	287,255
Prior	187,318
Total	2,173,205
1 - Very Low Risk
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	13,545
2021	5,588
2020	0
2019	0
Prior	0
Total	19,133
2 - Low Risk
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	34,863
2021	348,017
2020	0
2019	0
Prior	57,275
Total	440,155
3 - Medium Risk
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	450,076
2021	439,815
2020	138,920
2019	171,983
Prior	29,299
Total	1,230,093
4 - High Risk/Potential for Loss: Asset performance is trailing underwritten expectations. Loan at risk of impairment without material improvement to performance
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	75,898
2021	0
2020	191,910
2019	115,272
Prior	17,385
Total	400,465
5 - Impaired/Loss Likely: A loan that has significantly increased probability of default or principal loss
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	83,359
Total	$ 83,359

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REAL ESTATE OWNED - Narrative (Details) - USD ($) $ in Thousands			3 Months Ended
	Mar. 01, 2022	Nov. 08, 2021	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Mar. 08, 2019
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal			$ 2,194,914		$ 2,282,821
Gain on sale of real estate owned			0	$ 2,197
Senior Mortgage Loans | NEW YORK | Hotel
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Outstanding principal						$ 38,600
Debt derecognized						38,600
Loans held for sale, at fair value						36,900
Other repossessed hotel assets						1,700
Repossessed hotel property						$ 38,600
Proceeds from sale of hotel property		$ 40,000
Gain on sale of real estate owned				$ 2,200
Senior Mortgage Loans | NEW YORK | Hotel | Third Party Buyer of the Hotel Property
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Initial funding of loan receivable			30,700
Senior Mortgage Loans | NEW YORK | Hotel | Third Party Buyer of the Hotel Property | Unfunded Loan Commitment
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Additional loan proceeds to be available to fund future advances			$ 25,000
Contributed equity into purchase	$ 12,900
Additional equity associated with planned renovation costs	$ 8,700

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DEBT - Schedule of outstanding balances and total commitments under Financing Agreements (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Outstanding Balance	$ 953,153,000	$ 960,231,000
Total Commitment	1,535,000,000	1,535,000,000
Secured term loan
Debt Instrument [Line Items]
Outstanding Balance	150,000,000	150,000,000
Total Commitment	150,000,000	150,000,000
Wells Fargo Facility | Revolving credit facility, optional commitment amount
Debt Instrument [Line Items]
Total Commitment	500,000,000
Secured funding facility
Debt Instrument [Line Items]
Outstanding Balance	698,153,000	705,231,000
Total Commitment	1,280,000,000	1,280,000,000
Secured funding facility | Wells Fargo Facility
Debt Instrument [Line Items]
Outstanding Balance	261,039,000	270,798,000
Total Commitment	450,000,000	450,000,000
Secured funding facility | Citibank Facility
Debt Instrument [Line Items]
Outstanding Balance	236,240,000	236,240,000
Total Commitment	325,000,000	325,000,000
Secured funding facility | CNB Facility
Debt Instrument [Line Items]
Outstanding Balance	0	0
Total Commitment	75,000,000	75,000,000
Secured funding facility | MetLife Facility
Debt Instrument [Line Items]
Outstanding Balance	0	0
Total Commitment	180,000,000	180,000,000
Secured funding facility | Morgan Stanley Facility
Debt Instrument [Line Items]
Outstanding Balance	200,874,000	198,193,000
Total Commitment	250,000,000	250,000,000
Notes Payable
Debt Instrument [Line Items]
Outstanding Balance	105,000,000	105,000,000
Total Commitment	$ 105,000,000	$ 105,000,000

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DEBT - Disclosures (Details)		1 Months Ended			3 Months Ended		6 Months Ended	12 Months Ended	18 Months Ended
	Nov. 30, 2019 USD ($) loan extension	Feb. 28, 2023	Jul. 31, 2022 USD ($) loan	Jun. 30, 2019 USD ($)	Mar. 31, 2023 USD ($) extension option	Mar. 31, 2022 USD ($)	Nov. 12, 2025	Nov. 12, 2026	Nov. 12, 2026	Dec. 31, 2022 USD ($)
Funding agreements
Total Commitment					$ 1,535,000,000					$ 1,535,000,000
Number of non-recourse notes | loan	2
Outstanding Balance					953,153,000					960,231,000
Outstanding principal					$ 2,194,914,000					2,282,821,000
SOFR
Funding agreements
Interest rate per annum			2.00%
Minimum
Funding agreements
Number of extension options | option					1
Maximum
Funding agreements
Extension period of maturity date					12 months
Number of extension options | option					2
ACRC Lender CO LLC
Funding agreements
Outstanding Balance			$ 105,000,000		$ 105,000,000
ACRC Lender CO LLC | NY | Multifamily | Senior Mortgage Loans
Funding agreements
Outstanding Balance			105,000,000
Outstanding principal			$ 133,000,000
Secured revolving funding facility | Wells Fargo Facility
Funding agreements
Total Commitment					$ 450,000,000
Number of extension periods available for maturity date | extension					2
Extension period of maturity date					12 months
Secured revolving funding facility | Wells Fargo Facility | Minimum | One-month LIBOR
Funding agreements
Interest rate margin (as a percent)					1.50%
Secured revolving funding facility | Wells Fargo Facility | Maximum | One-month LIBOR
Funding agreements
Interest rate margin (as a percent)					3.75%
Secured revolving funding facility | Citibank Facility
Funding agreements
Total Commitment					$ 325,000,000
Number of extension periods available for maturity date | extension					2
Extension period of maturity date					12 months
Non-utilization fee on average available balance (basis points)					0.25%
Facility used on average (at least) (as a percent)					75.00%
Non-utilization fee					$ 0	$ 11,000
Secured revolving funding facility | Citibank Facility | Minimum | 30 day LIBOR
Funding agreements
Interest rate margin (as a percent)					1.50%
Secured revolving funding facility | Citibank Facility | Maximum | 30 day LIBOR
Funding agreements
Interest rate margin (as a percent)					2.10%
Revolving credit facility, optional commitment amount | Wells Fargo Facility
Funding agreements
Total Commitment					$ 500,000,000
CNB Facility | CNB Facility
Funding agreements
Total Commitment					75,000,000
Non-utilization fee					$ 70,000	70,000
CNB Facility | CNB Facility | SOFR
Funding agreements
Interest rate margin (as a percent)					1.00%
CNB Facility | CNB Facility | Federal funds rate
Funding agreements
Interest rate margin (as a percent)					0.50%
Non-utilization fee on average available balance (basis points)					0.375%
Facility used on average (at least) (as a percent)					75.00%
CNB Facility | CNB Facility | LIBOR
Funding agreements
Interest rate margin (as a percent)					2.65%
CNB Facility | CNB Facility | Minimum | SOFR
Funding agreements
Interest rate margin (as a percent)					0.35%
CNB Facility | CNB Facility | Maximum | SOFR
Funding agreements
Interest rate margin (as a percent)					2.65%
Revolving Credit Facility - Optional Funding Period | CNB Facility
Funding agreements
Extension period of maturity date		12 months
Revolving master repurchase facility | MetLife Facility
Funding agreements
Total Commitment					$ 180,000,000
Number of extension periods available for maturity date | extension					1
Extension period of maturity date					12 months
Non-utilization fee on average available balance (basis points)					0.25%
Non-utilization fee					$ 73,000	$ 60,000
Non-utilization threshold percentage (less than) (as a percent)					65.00%
Revolving master repurchase facility | MetLife Facility | 30 day LIBOR
Funding agreements
Interest rate margin (as a percent)					2.50%
Revolving master repurchase facility | Morgan Stanley Facility
Funding agreements
Total Commitment					$ 250,000,000
Number of extension periods available for maturity date | extension					1
Extension period of maturity date					12 months
Revolving master repurchase facility | Morgan Stanley Facility | 30 day LIBOR
Funding agreements
Interest rate margin (as a percent)					2.25%
Revolving master repurchase facility | Morgan Stanley Facility | Minimum | 30 day LIBOR
Funding agreements
Interest rate margin (as a percent)					1.75%
Notes Payable, Due June 10, 2024 | NY
Funding agreements
Interest rate margin (as a percent)					3.00%
Notes Payable, Due June 10, 2024 | Notes Payable | NY
Funding agreements
Number of extension periods available for maturity date | extension					1
Extension period of maturity date					6 months
Interest expense from real estate owned				$ 28,300,000
Notes Payable
Funding agreements
Number of extension periods available for maturity date | extension	2
Extension period of maturity date	12 months
Interest rate margin (as a percent)					3.75%
Outstanding Balance	$ 23,500,000
Notes Payable | SC
Funding agreements
Outstanding Balance	$ 34,600,000
Notes Payable | ACRC Lender CO LLC
Funding agreements
Extension period of maturity date			12 months
Number of extension options | loan			2
Secured term loan
Funding agreements
Total Commitment					$ 150,000,000					150,000,000
Interest rate margin (as a percent)					0.50%
Outstanding Balance					$ 150,000,000					$ 150,000,000
Aggregate principal amount					$ 150,000,000
Debt discount on initial draw down (as a percent)					4.60%	4.60%
Secured term loan | Forecast
Funding agreements
Interest rate during period							4.50%
Interest rate, increase (decrease)								0.125%
Interest rate, quarterly increase									0.25%

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SECURED BORROWINGS (Details) - USD ($)		1 Months Ended		3 Months Ended
	Nov. 30, 2019	Jul. 31, 2022	Apr. 30, 2019	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Outstanding Balance				$ 953,153,000	$ 960,231,000
Notes Payable
Debt Instrument [Line Items]
Outstanding Balance	$ 23,500,000
Extension period of maturity date	12 months
Interest rate margin (as a percent)				3.75%
NORTH CAROLINA | Multifamily
Debt Instrument [Line Items]
Repayments of debt		$ 30,500,000
NORTH CAROLINA | Notes Payable
Debt Instrument [Line Items]
Aggregate principal amount			$ 30,500,000
Outstanding Balance			24,400,000
NORTH CAROLINA | Notes Payable | Multifamily
Debt Instrument [Line Items]
Outstanding Balance			$ 6,100,000
NORTH CAROLINA | Notes Payable | Multifamily | Senior Mortgage Loan Purchased
Debt Instrument [Line Items]
Outstanding Balance		$ 24,400,000
NORTH CAROLINA | Senior Mortgage Loans
Debt Instrument [Line Items]
Extension period of maturity date			12 months
NORTH CAROLINA | Senior Mortgage Loan, Due May 5, 2023 | Office
Debt Instrument [Line Items]
Interest rate margin (as a percent)			2.50%

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DERIVATIVE FINANCIAL INSTRUMENTS - Schedule of Interest Rate Derivatives (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) derivative	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) derivative
Derivative [Line Items]
Floor rate (percent)	0.0000
Interest rate caps | LIBOR
Derivative [Line Items]
Notional Amount		$ 170,000
Other comprehensive income		2,000
Gain on derivative	$ 457	$ 5
Designated as Hedging Instrument | Interest rate swaps | LIBOR
Derivative [Line Items]
Number of Instruments | derivative	1		1
Notional Amount	$ 190,000		$ 410,000
Interest rate swaps, fixed rate (percent)	0.2075%		0.2075%
Weighted Average Maturity (Years)	3 months 18 days	4 months 24 days
Designated as Hedging Instrument | Interest rate caps | LIBOR
Derivative [Line Items]
Number of Instruments | derivative	0		0
Notional Amount	$ 0		$ 0
Interest rate caps, fixed rate (percent)		0.50%

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DERIVATIVE FINANCIAL INSTRUMENTS - Schedule of Fair Value of Derivative Instruments (Details) - Designated as Hedging Instrument - Interest rate derivatives - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Other Assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivatives in an Asset Position	$ 2,545	$ 6,565
Other Liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivatives in an Liability Position	$ 0	$ 0

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COMMITMENTS AND CONTINGENCIES - Commitments to Fund (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]
Total commitments	$ 2,388,338	$ 2,510,308
Less: funded commitments	(2,194,914)	(2,282,821)
Total unfunded commitments	$ 193,424	$ 227,487

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STOCKHOLDERS' EQUITY - Narrative (Details) - USD ($) $ in Millions		3 Months Ended
	Nov. 22, 2019	Mar. 31, 2023	Jul. 26, 2022	Jun. 30, 2018
Class of Stock [Line Items]
Share repurchase program, authorized amount.			$ 50.0
Restricted stock | Amended and Restated 2012 Equity Incentive Plan
Class of Stock [Line Items]
Shares available for grant (in shares)				2,490,000
Restricted Stock and Restricted Stock Units | Amended and Restated 2012 Equity Incentive Plan | Minimum
Class of Stock [Line Items]
Award vesting period (in years)		1 year
Restricted Stock and Restricted Stock Units | Amended and Restated 2012 Equity Incentive Plan | Maximum
Class of Stock [Line Items]
Award vesting period (in years)		3 years
Common Stock | At the Market Stock Offering Program
Class of Stock [Line Items]
Sale of stock, shares issued in transaction (in shares)		0
Common Stock | At the Market Stock Offering Program | Maximum
Class of Stock [Line Items]
Sale of stock, consideration received on transaction	$ 100.0

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STOCKHOLDERS' EQUITY - Disclosures (Details)	3 Months Ended
	Mar. 31, 2023 shares
Restricted stock activity
Balance at the beginning of the period (in shares)	848,609
Granted (in shares)	0
Vested (in shares)	(169,452)
Forfeited (in shares)	(3,333)
Balance at the end of the period (in shares)	675,824
Future Anticipated Vesting Schedule
2023 (in shares)	12,874
2024 (in shares)	285,406
2025 (in shares)	232,848
2026 (in shares)	144,696
2027 (in shares)	0
Total (in shares)	675,824
Restricted stock | Restricted Stock Grants—Directors
Restricted stock activity
Balance at the beginning of the period (in shares)	16,137
Granted (in shares)	0
Vested (in shares)	(6,609)
Forfeited (in shares)	0
Balance at the end of the period (in shares)	9,528
Future Anticipated Vesting Schedule
2023 (in shares)	7,443
2024 (in shares)	1,668
2025 (in shares)	417
2026 (in shares)	0
2027 (in shares)	0
Total (in shares)	9,528
Restricted Stock Units (RSUs) | Officer
Restricted stock activity
Balance at the beginning of the period (in shares)	832,472
Granted (in shares)	0
Vested (in shares)	(162,843)
Forfeited (in shares)	(3,333)
Balance at the end of the period (in shares)	666,296
Future Anticipated Vesting Schedule
2023 (in shares)	5,431
2024 (in shares)	283,738
2025 (in shares)	232,431
2026 (in shares)	144,696
2027 (in shares)	0
Total (in shares)	666,296

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Earnings Per Share [Abstract]
Net income (loss) attributable to common stockholders, basic	$ (6,439)	$ 16,201
Net income (loss) attributable to common stockholders, diluted	$ (6,439)	$ 16,201
Divided by:
Basic weighted average shares of common stock outstanding (in shares)	54,591,650	47,204,397
Weighted average non-vested restricted stock and RSUs (in shares)	0	450,152
Diluted weighted average shares of common stock outstanding (in shares)	54,591,650	47,654,549
Basic earnings per common share (in dollars per share)	$ (0.12)	$ 0.34
Diluted earnings per common share (in dollars per share)	$ (0.12)	$ 0.34
Shares excluded from computation of diluted earnings (loss) per common share as the impact of including those shares would be antidilutive	682,620

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INCOME TAX - Schedule of Components of Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Components of the company's income tax provision
Total income tax expense, including excise tax	$ 110	$ 105
Excise tax rate	4.00%
ACRE Capital Sale
Components of the company's income tax provision
Current	$ 10	15
Deferred	0	0
Excise tax	100	90
Total income tax expense, including excise tax	$ 110	$ 105

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FAIR VALUE - Available-For-Sale Debt Securities - Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) loan investment	Mar. 31, 2023 USD ($) loan investment
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items]
Number of loan held for sale | loan		1
Loans held for sale, at fair value	$ 0	$ 27,375
Number of debt securities for an aggregate purchase price | loan	3
Debt securities for an aggregate purchase price	$ 27,900
Debt securities, available-for-sale, term	10 years
Number of debt security investments | investment	3	3
Level 3
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items]
Loans held for sale, at fair value		$ 27,400
SOFR
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items]
Debt securities floating Rate, investment grade rated	247.00%

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FAIR VALUE - Available-For-Sale Debt Securities (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Fair Value Disclosures [Abstract]
Face Amount	$ 28,000	$ 28,000
Amortized Cost	27,887	27,881
Unamortized Discount	113	119
Unrealized Gain (Loss), Net	$ 120	$ 55

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FAIR VALUE - Derivative Assets and Liabilities, Recurring (Details) - Fair Value, Recurring - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Interest rate derivatives
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	$ 2,545	$ 6,565
Financial liabilities:	0	0
Interest rate derivatives | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	0	0
Financial liabilities:	0	0
Interest rate derivatives | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	2,545	6,565
Financial liabilities:	0	0
Interest rate derivatives | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	0	0
Financial liabilities:	0	0
Loans held for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	27,375
Loans held for sale | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	0
Loans held for sale | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	0
Loans held for sale | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	27,375
Available-for-sale debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	28,007	27,936
Available-for-sale debt securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	0	0
Available-for-sale debt securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	28,007	27,936
Available-for-sale debt securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets:	$ 0	$ 0

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FAIR VALUE - Carrying Value and Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financial assets:
Loans held for investment	$ 2,173,205	$ 2,264,008
Financial liabilities:
Collateralized loan obligation securitization debt (consolidated VIEs)	735,839	777,675
Carrying Value
Financial assets:
Loans held for investment	2,173,205	2,264,008
Financial liabilities:
Secured funding agreements	698,153	705,231
Notes payable	104,509	104,460
Secured term loan	149,247	149,200
Collateralized loan obligation securitization debt (consolidated VIEs)	735,839	777,675
Fair Value | Level 3
Financial assets:
Loans held for investment	2,089,704	2,233,319
Financial liabilities:
Notes payable	103,425	103,635
Secured term loan	122,564	137,571
Collateralized loan obligation securitization debt (consolidated VIEs)	711,950	749,242
Fair Value | Level 2
Financial liabilities:
Secured funding agreements	$ 698,153	$ 705,231

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RELATED PARTY TRANSACTIONS - Narrative (Details)	3 Months Ended
	Mar. 31, 2023 USD ($) quarter	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Related Party Transaction [Line Items]
Amended agreement to exclude real estate revenues from net income		$ 2,400,000
Amended agreement to include gain on termination of interest rate cap derivative		2,000,000
Incentive fees incurred	$ 0	$ 358,000
Management fee renewal term (in years)	1 year
Management agreement termination, termination fee times average annual base management free and incentive fees received	300.00%
Management fee look back period	24 months
Loans held for investment	$ 2,173,205,000		$ 2,264,008,000
Outstanding principal	2,194,914,000		2,282,821,000
Residential
Related Party Transaction [Line Items]
Loans held for investment	218,600,000		$ 213,700,000
Senior Mortgage Loans | Industrial | Loan Purchase Commitments
Related Party Transaction [Line Items]
Outstanding principal	$ 200,000,000
ACREM
Related Party Transaction [Line Items]
Base management fees as a percentage of stockholders' equity per annum	1.50%
Incentive fee payable (not less than)	$ 0
Percentage multiplied to arrive at first value affecting calculation of incentive fees	20.00%
Previous period for which core earnings are considered to arrive at first value affecting calculation of incentive fees	12 months
Previous period for product of weighted average price per share and weighted average number of shares of common stock and other shares	12 months
Percentage multiplied to arrive at difference of first value affecting calculation of incentive fees	8.00%
Period whose fiscal quarters are considered to arrive at first value affecting calculation of incentive fees	12 months
Minimum cumulative core earnings, number of quarters | quarter	12
Minimum cumulative core earnings for calculation of incentive fee	$ 0

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RELATED PARTY TRANSACTIONS - Related Party Costs Incurred (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Related Party Transaction [Line Items]
Payable	$ 3,899		$ 5,580
ACREM | Continuing Operations
Related Party Transaction [Line Items]
Incurred	3,762	$ 3,837
Payable	3,899		5,580
ACREM | Continuing Operations | Management fees
Related Party Transaction [Line Items]
Incurred	3,010	2,616
Payable	3,010		3,026
ACREM | Continuing Operations | Incentive fees
Related Party Transaction [Line Items]
Incurred	0	358
Payable	0		1,264
ACREM | Continuing Operations | General and administrative expenses
Related Party Transaction [Line Items]
Incurred	732	834
Payable	885		1,232
ACREM | Continuing Operations | Direct costs
Related Party Transaction [Line Items]
Incurred	20	$ 29
Payable	$ 4		$ 58

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DIVIDENDS AND DISTRIBUTIONS (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Feb. 15, 2023	Feb. 15, 2022	Mar. 31, 2023	Mar. 31, 2022
DIVIDENDS AND DISTRIBUTIONS
Dividends per share amount declared (in dollars per share)	$ 0.35	$ 0.35	$ 0.35	$ 0.35
Total cash dividends	$ 19,346	$ 16,740	$ 19,346	$ 16,740
Cash dividends payable (in dollars per share)			$ 0.33
Supplemental cash dividend payable (in dollars per share)			$ 0.02

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VARIABLE INTEREST ENTITIES - Narrative (Details) $ in Thousands		3 Months Ended			12 Months Ended
	Jan. 28, 2021 USD ($)	Mar. 31, 2023 USD ($) loan	Jun. 30, 2022 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) loan	Jan. 11, 2019 USD ($)	Mar. 30, 2017 USD ($)
Variable Interest Entity [Line Items]
Receivables related to repayments of outstanding principal on previous mortgage assets		$ 128,300			$ 127,600
Loans held for investment		2,173,205			$ 2,264,008
Sale of common stock			$ 103,393	$ 2,874
Credit risk, financial instrument, maximum exposure		238,200
ACRE Commercial Mortgage 2021-FL4 Ltd. and ACRE Commercial Mortgage 2021-FL4 LLC | Preferred Stock
Variable Interest Entity [Line Items]
Sale of common stock	$ 64,300
ACRE Commercial Mortgage 2021-FL4 Ltd. and ACRE Commercial Mortgage 2021-FL4 LLC | Preferred Stock | Wholly Owned Subsidiary To Parent Company
Variable Interest Entity [Line Items]
Sale of common stock		$ 64,300
Floating Rate Notes, Weighted Average Coupon Rate, LIBOR Plus 1.85%
Variable Interest Entity [Line Items]
Number of properties collateralized for mortgage loan | loan		16			16
Receivables related to repayments of outstanding principal		$ 428,700			$ 429,400
Mortgaged Assets | Holdco
Variable Interest Entity [Line Items]
Principal amount of certificates retained by wholly owned subsidiary of the entity		58,500
Offered Certificates | Parent Company
Variable Interest Entity [Line Items]
Preferred equity fully funded amount		52,900
Secured funding agreements | Parent Company
Variable Interest Entity [Line Items]
Loans held for investment		111,400
Secured, Floating Rate Notes | ACRE Commercial Mortgage 2021-FL4 Ltd. and ACRE Commercial Mortgage 2021-FL4 LLC
Variable Interest Entity [Line Items]
Aggregate principal amount	$ 603,000
Secured, Floating Rate Notes | ACRE Commercial Mortgage 2021-FL4 Ltd. and ACRE Commercial Mortgage 2021-FL4 LLC | Wholly Owned Subsidiary To Parent Company
Variable Interest Entity [Line Items]
Aggregate principal amount		62,500
Collateral amount		126,800
Repayments of debt		$ 42,100
FL4 Mortgage Assets
Variable Interest Entity [Line Items]
Number of properties collateralized for mortgage loan | loan		11			12
Receivables related to repayments of outstanding principal		$ 418,100			$ 458,300
Financing Receivable, Excluding Accrued Interest, Receivables Related to Repayments of Outstanding Principal on Mortgage Assets					$ 1,900
Wells Fargo Facility | Notes Payable
Variable Interest Entity [Line Items]
Debt commitment							$ 308,800
Wells Fargo Facility | Notes Payable | 2019 FL3 CLO Securitization
Variable Interest Entity [Line Items]
Debt commitment						$ 504,100
Wells Fargo Facility | Collateralized Loan Obligations
Variable Interest Entity [Line Items]
Debt commitment							$ 32,400
Wells Fargo Facility | Collateralized Loan Obligations | 2019 FL3 CLO Securitization
Variable Interest Entity [Line Items]
Debt commitment						$ 52,900

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SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Apr. 30, 2023	Mar. 31, 2023	Mar. 31, 2022	Jun. 30, 2023	May 01, 2023	Dec. 31, 2022
Subsequent Event [Line Items]
Outstanding principal		$ 2,194,914				$ 2,282,821
Proceeds from sale of loans held for sale		$ 9,825	$ 0
Cash dividends payable (in dollars per share)		$ 0.33
Supplemental cash dividend payable (in dollars per share)		$ 0.02
Multifamily | Senior Mortgage Loans | WA | Subsequent Event
Subsequent Event [Line Items]
Outstanding principal					$ 18,800
Office | IL
Subsequent Event [Line Items]
Outstanding principal		$ 41,800
Office | Senior Mortgage Loans | IL
Subsequent Event [Line Items]
Outstanding principal		$ 155,700
Office | Senior Mortgage Loans | IL | Subsequent Event
Subsequent Event [Line Items]
Proceeds from sale of loans held for sale	$ 27,400
Forecast
Subsequent Event [Line Items]
Cash dividends payable (in dollars per share)				$ 0.33
Supplemental cash dividend payable (in dollars per share)				$ 0.02