ARI 10-K & 10-Q changes, risk factors and insider trading
Apollo Commercial Real Estate Finance, Inc. · NYSE · Real Estate Investment Trusts · CIK 1467760 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “RISKS RELATED TO THE ASSET SALE”
New heading “While the Asset Sale is pending, we are subject to uncertainty and contractual restrictions that could disrupt our business.”
New heading “The Purchase Agreement contains a termination fee and may discourage competing offers.”
New heading “The Purchase Agreement contains provisions that, after expiration of the go-shop period, could discourage a potential competing acquiror or could result in any competing proposal being at a lower price than it might otherwise be.”
New heading “Our management agreement with our Manager is difficult to terminate, which may discourage competing proposals from other bidders.”
New heading “The conditions under the Purchase Agreement to our consummation of the Asset Sale may not be satisfied in the anticipated timeframe or at all.”
New heading “In the event that the Asset Sale is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.”
New heading “We may face litigation filed against us over the Purchase Agreement.”
New heading “Our ability to adjourn the Special Meeting is limited, which could prevent us from obtaining the required stockholder approval of the Asset Sale.”
New heading “RISKS RELATED TO OUR FUTURE OPERATIONS”
New heading “The uncertainty regarding the use of proceeds from the Asset Sale and our future operations may negatively impact the value and liquidity of our common stock.”
Largest changes
“The uncertainty regarding the use of proceeds from the Asset Sale and our future operations may negatively impact the value and liquidity of our common stock.”see in full comparison
“We may face litigation filed against us over the Purchase Agreement.”see in full comparison
“The Purchase Agreement contains provisions that, after expiration of the go-shop period, could discourage a potential competing acquiror or could result in any competing proposal being at a lower price than it might otherwise be.”see in full comparison
“In the event that the Asset Sale is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.”see in full comparison
“Our ability to adjourn the Special Meeting is limited, which could prevent us from obtaining the required stockholder approval of the Asset Sale.”see in full comparison
“The conditions under the Purchase Agreement to our consummation of the Asset Sale may not be satisfied in the anticipated timeframe or at all.”see in full comparison
Full comparison: every changed paragraph (30)
So-called “"anti-ESG”" sentiment has also gained momentum across the U.S., with several states having enacted or proposed “anti-ESG” policies, legislation, or issued relatedexecutive orders and legal opinions. For example, boycottanti-boycott billslegislation in certain states target financial institutions that are perceived as “"boycotting”" or “"discriminating against”" companies in certain industries (e.g., energy and mining) and prohibit stategovernment entities from doing business with such institutions and/or investing the state’sgovernment's assets through such institutions. Similar policies have been implemented or are being proposed at the federal level. In addition, certain statesjurisdictions now require that relevant stategovernment entities or managers/administrators of stategovernment investments make investments based solely on pecuniary factors without consideration of non-pecuniary environmental, social and governance factors. If investors subject to such legislation viewed us, our policies, or our practices, as being in contradiction of such “"anti-ESG”" policies, legislation or legal opinions, such investors may not invest in us, which could negatively affect our financial performance.
We currently intend to continue to satisfy these tests and maintain our qualification as a REIT following the Asset Sale and after adopting any new asset strategy we decide to pursue. However, the composition of our assets and sources of income will change significantly following the Asset Sale and as a result of any such new asset strategy, and no assurance can be provided that we will satisfy the requirements for qualification as a REIT under all circumstances. Refer to "Note 20 - Subsequent Events" to the accompanying consolidated financial statements for further detail.
To qualify as a REIT, we must ensure that we meet the REIT gross income test annually and that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, shares in REITs and other qualifying real estate assets, including certain mortgage loans and certain kinds of mortgage-backed securities. The remainder of our investments in securities (other than government securities and REIT qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and securities that are qualifying real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total securities can be represented by securities of one or more taxable REIT subsidiaries ("TRSs") and not more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not secured by real property.property, and, for taxable years beginning on or after January 1, 2026, no more than 25% (20% for prior taxable years) of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries ("TRSs"). Following the Asset Sale, we will continue to hold certain of our assets through one or more TRSs. We believe that our interests in TRSs will satisfy the 25% TRS test, but no assurance can be provided that we will satisfy this test under all circumstances. In addition, the TRS test and other REIT requirements could impact our ability to pursue certain investments or asset strategies. For example, our ability to dispose of assets may be limited if the disposition of such assets would cause us to fail to satisfy the 25% TRS test, and our ability to invest in certain assets will be limited to the extent that such assets do not qualify for purposes of the REIT income and asset tests. Refer to "Note 20 - Subsequent Events" to the accompanying consolidated financial statements for further detail. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
The failure of a loan, including a mezzanine loan or modified loan, to qualify as a real estate assetasset, or the failure of certain arrangements relating to our hotels to satisfy the REIT requirements, could adversely affect our ability to qualify as a REIT.
Furthermore, for a period immediately following the Asset Sale, a substantial portion of our gross income will be rent pursuant to leases of hotels between us and our TRS. For rent paid pursuant to such leases to qualify for purposes of the REIT gross income tests, the lease must be respected as a true lease for U.S. federal income tax purposes and must not be treated as a service contract, joint venture or some other type of arrangement. Similarly, the hotel must be operated by a third party manager meeting certain requirements. We believe each of our leases will be respected as a true lease for U.S. federal income tax purposes, and we believe our arrangements with our managers meet the applicable requirements for REIT qualification. There can be no assurances, however, that the IRS will agree with this characterization. If the leases were not respected as true leases for U.S. federal income tax purposes, or our hotels are otherwise not treated as satisfying the REIT requirements, our ability to satisfy the REIT gross income and other requirements could be adversely affected.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, for taxable years beginning on or after January 1, 2026, no more than 25% (20% for prior taxable years) of the value of a REIT's assets may consist of stock or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm's-length basis.
RISKS RELATED TO THE ASSET SALE
While the Asset Sale is pending, we are subject to uncertainty and contractual restrictions that could disrupt our business.
On January 27, 2026, we entered into the Purchase Agreement. Refer to "Note 20 - Subsequent Events" to the accompanying consolidated financial statements for further detail. Whether or not the Asset Sale is consummated, the Asset Sale may disrupt our current plans and operations, which could have an adverse effect on our business, financial condition and results of operations. We may incur unexpected costs, charges, or expenses resulting from the Asset Sale. Furthermore, we cannot predict how our existing or future relationships will view or react to the Asset Sale during the pendency or upon consummation of the Asset Sale. If we are unable to continue our relationships or affiliations, our revenues, financial condition, and results of operations may be adversely affected.
Our management could experience uncertainty or face significant burdens from their commitment of substantial amounts of time and attention toward the completion of the Asset Sale. In addition, whether or not the Asset Sale is consummated, while it is pending, we will continue to incur costs, fees, expenses, and charges related to the Asset Sale, including legal, accounting, financial advisor, filing, printing, and mailing fees, which may materially and adversely affect our financial condition and results of operations. In addition, the Purchase Agreement generally requires the Company to conduct its business in the ordinary course of business and in a manner consistent with past practice and also restricts us from taking certain actions with respect to our business and financial affairs without the consent of Athene. Such restrictions will be in place until the Asset Sale is either consummated or terminated. Such restrictions could adversely affect our business and results of operations prior to completion of the Asset Sale.
The Purchase Agreement contains a termination fee and may discourage competing offers.
The Purchase Agreement contains termination rights for both us and Athene under certain circumstances, including the right of the Company to terminate the Purchase Agreement to accept a Superior Proposal (as defined in the Purchase Agreement), subject to and in accordance with the terms and conditions of the Purchase Agreement, and provides that, in connection with the termination of the Purchase Agreement by us to enter into an alternative acquisition agreement providing for a Superior Proposal, we will pay Athene a Termination Fee (as defined in the Purchase Agreement). These provisions could discourage a third party that may have an interest in acquiring all or a significant part of our business from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the consideration that will be paid by Athene pursuant to the Purchase Agreement.
The Purchase Agreement contains provisions that, after expiration of the go-shop period, could discourage a potential competing acquiror or could result in any competing proposal being at a lower price than it might otherwise be.
The Purchase Agreement contains "no shop" provisions that, subject to limited exceptions and the expiration of the 25-day "go-shop" period (which "go-shop" period will expire at 11:59 p.m. (Eastern time) on February 21, 2026), will restrict our ability to solicit, encourage, facilitate or discuss competing third-party acquisition proposals. In addition, before our board of directors may withdraw or qualify its recommendation, Athene generally has an opportunity to offer to modify the terms of the Purchase Agreement in response to any competing proposals.
Our management agreement with our Manager is difficult to terminate, which may discourage competing proposals from other bidders.
Our management agreement with our Manager can only be terminated in certain limited situations where two-thirds of the independent directors of our board of directors agree that (i) there has been unsatisfactory performance by our Manager that is materially detrimental to the Company and its subsidiaries or (ii) the compensation payable to our Manager thereunder is unfair, subject, in the case of clause (ii), to the right of the Manager to propose to reduce its fee to a level that two-thirds of such independent directors deem fair.
This could discourage a Superior Proposal from a potential competing acquiror, even if such third party were prepared to pay consideration with a higher value than the value of the consideration that will be paid by Athene pursuant to the Purchase Agreement.
The conditions under the Purchase Agreement to our consummation of the Asset Sale may not be satisfied in the anticipated timeframe or at all.
Under the terms of the Purchase Agreement, the consummation of the Asset Sale is subject to a number of closing conditions. There is no guarantee that all closing conditions will be satisfied (or waived, if permitted by the Purchase Agreement and applicable law). Many of the conditions to consummation of the Purchase Agreement are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, if permitted by the Purchase Agreement and applicable law). Difficulties in otherwise satisfying the conditions may prevent, delay, or otherwise materially adversely affect the consummation of the Asset Sale.
If an event occurs delaying or preventing the Asset Sale, such delay or failure to complete the Asset Sale may create uncertainty or otherwise have negative consequences, which may materially and adversely affect our revenue, financial condition and results of operations, as well as the price per share for our common stock, and could cause us not to realize some or all of the benefits that we expect to achieve if the Asset Sale is successfully completed within its expected timeframe.
In the event that the Asset Sale is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.
The conditions to the consummation of the Asset Sale may not be satisfied as noted above. If the Asset Sale is not consummated, we would remain liable for significant transaction costs and fees, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the Asset Sale.
For these and other reasons, not consummating the Asset Sale could adversely affect our results of operations. Furthermore, if we do not consummate the Asset Sale, the price of our common stock may decline significantly from the current market price, and you may not recover your investment. Certain costs associated with the Asset Sale have already been incurred or may be payable even if the Asset Sale is not consummated.
We may face litigation filed against us over the Purchase Agreement.
Currently, we are not aware of any complaints filed or litigation pending related to the Purchase Agreement. However, litigation is a common occurrence in connection with transactions similar to the proposed transaction, so we face potential for litigation or other disputes that relate to the Purchase Agreement, including claims related to our process or disclosures and investigatory demands under Maryland law. We can provide no assurance that such litigation, disputes, or demands will not arise in the future. Any such litigation, disputes, or demands, whether successful or not, could delay the closing of the Asset Sale or could have a material adverse effect on our results of operations and financial condition.
Our ability to adjourn the Special Meeting is limited, which could prevent us from obtaining the required stockholder approval of the Asset Sale.
Under the terms of the Purchase Agreement, our ability to postpone or adjourn the special meeting of our stockholders (the "Special Meeting") without consent of Athene is limited. As a result, if the requisite vote of our stockholders is not obtained at the Special Meeting or any permitted adjournment, we may be unable to secure approval of the Asset Sale, notwithstanding the time, effort, and expense incurred in connection with preparing for and holding the Special Meeting.
RISKS RELATED TO OUR FUTURE OPERATIONS
The uncertainty regarding the use of proceeds from the Asset Sale and our future operations may negatively impact the value and liquidity of our common stock.
Assuming the Asset Sale is consummated, we will have broad discretion regarding the use of proceeds from the Asset Sale. Although our board of directors will evaluate various alternatives regarding the use of the proceeds from the Asset Sale with a goal to maximize the value of our common stock, we cannot guarantee that the strategy determined by our board of directors will ultimately result in the maximization of the value of our common stock. This uncertainty may negatively impact the value and liquidity of our common stock.
Management's Discussion & Analysis (MD&A)
New heading “Proposed Transactions with Athene”
New heading “Operating Expenses”
New heading “Income from Equity Method Investment”
New heading “Increase in General CECL Allowance, net”
New heading “Distributable Earnings Prior to Realized Loss on Investments and Realized Gain from Litigation Settlement”
New heading “Supplemental U.S. Federal Income Tax Considerations”
Removed heading “Management Fees”
Removed heading “Gain on Extinguishment of Debt”
Removed heading “Increase in Specific CECL Allowance, net”
Removed heading “Gain (loss) on interest rate hedges”
Removed heading “Secured Credit Facilities”
Removed heading “Senior Secured Term Loans”
Removed heading “Debt Related to Real Estate Owned”
Removed heading “Repurchases of Equity Securities”
Largest changes
“Distributable Earnings Prior to Realized Loss on Investments and Realized Gain from Litigation Settlement”see in full comparison
see in full comparisonAsOur primary sources of liquidity as of December 31,2024,2025wewerehadrepresented$317.4with $139.8 million of cash on hand,$50.8$4.2 million of loan proceeds held byservicerservicer, $6.9 million of available borrowings under our financing arrangements based on existing collateral and cash flows from operations. Additionally, as of December 31, 2025, we held approximately$507.2$431.1 million of unencumberedassets. We also had $2.1 billion of undrawn capacity under our secured debt arrangementsassets and$134.5have $36.3 million of additional capacity on our construction financing secured by our Brooklyn Multifamily Development property(as defined in "Note 3 - Fair Value Disclosure"),which is available to fund future construction costs.
“During the year ended December 31, 2024, we recorded a net gain of $0.6 million on our interest rate caps. The net gain was primarily driven by a $1.9 million realized gain recorded in relation to our construction financing interest rate cap. The realized gain was attributable to SOFR exceeding the interest rate cap's strike rate throughout the year. Additionally, we recorded a partially offsetting unrealized loss of $1.3 million, driven by a decrease in the interest rate cap's fair value, as it approached its maturity.”see in full comparison
“During the year ended December 31, 2023, we recorded a net loss of $0.4 million primarily related to our 2026 Term Loan interest rate cap. Though we recorded a realized gain of $9.7 million driven by an increase in the applicable index rate above the interest rate cap's strike rate, this gain was offset by unrealized losses of $10.1 million, resulting from a decrease in the interest rate cap's fair value as it reached its June 2023 maturity.”see in full comparison
Full comparison: every changed paragraph (100)
Proposed Transactions with Athene
On January 27, 2026, we entered into the Purchase Agreement with Athene. In connection with the Asset Sale, we also entered into the Management Agreement Side Letter with Operating LLC and the Manager, and the Expense Reimbursement Letter Agreement with Apollo Management Holdings. The Company is externally managed and advised by the Manager, which is a subsidiary of Apollo, and each of Athene and Apollo Management Holdings is a subsidiary of Apollo. The Purchase Agreement provides that, upon the terms and subject to the conditions set forth in the Purchase Agreement, Athene will purchase from the Company, and the Company will sell to Athene, the Loans as of the Closing, other than two loans with a combined total principal balance of $146 million, as of December 31, 2025, currently held by the Company which are expected to be repaid prior to the Closing. Refer to "Note 20 - Subsequent Events" to the accompanying consolidated financial statements for further detail.
In March 2024, the SEC adopted amendments to its rules under the Securities Act and the Exchange Act that require disclosure of certain climate-related information in registration statements and annual reports, when material. In April 2024, the SEC chose to stay its newly adopted climate disclosure rules, pending the completion of judicial review. We are currently evaluating the impact of the new rule, if the stay is lifted, on our disclosures.
Certain external events such as public health issues, natural disasters, political and economic instability abroad, concerns regarding the stability of the sovereign debt of certain European countries, and other geopolitical issues, have adversely impacted the global economy and have contributed to significant volatility in financial markets. Due to various uncertainties caused by such external events and recent macroeconomic trends, including inflation and higher interest rates, further business risks could arise. Some of the factors that impacted us to date and may continue to affect us are outlined in Item 1A. "Risk Factors.Factors".
For the years ended December 31, 20242025 and 2023,2024, our net income (loss) available to common stockholders was $114.4 million, or $0.81 per diluted share of common stock, and ($131.9) million, or ($0.97) per diluted share of common stock, and $45.9 million, or $0.29 per diluted share of common stock, respectively.
Net interest income decreased by $53.2$32.3 million during the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. This net decrease was primarily attributable to a decrease in interest income from (i) higherlower average balanceindex ofrates loansduring onthe non-accrualyear inended 2024,December (ii)31, 2025, realization of a loss on investment during 2024,the third quarter of 2024 and (iii)modification modifyingof two of our commercial mortgage loans converting them from floating rate loans to fixed rate termsloans induring the second quarter of 2024. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
For the year ended December 31, 2025, we recorded net income related to real estate owned of $8.5 million, compared to net income of $11.3 million for the year ended December 31, 2024. The decrease in net income is primarily due to an increase in operating expenses related to the Brooklyn Multifamily Development, as the property reached substantial completion during the second half of 2025 and the lease-up of the property continues to ramp up. We recorded a net loss from the property's operations of $1.3 million during the year ended December 31, 2025. There was no such activity during the year ended December 31, 2024 as the property was still under construction with no revenue streams generated and all expenses being capitalized. Refer to "Note 5 – Real Estate Owned" for full discussion of operations related to real estate owned.
Operating Expenses
Net income related to real estate owned remained generally the same for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Management Fees
ManagementGeneral feesand expenseadministrative expenses decreased by $1.9$2.2 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023. The decrease was2024 primarily due to a decrease in stockholders' equity (as defined in the Management Agreement) as a resultamortization of increased Specific CECL Allowance and realized losses on investments recorded during the year ended December 31, 2024.RSUs.
Management fees expense decreased by $2.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily due to a decrease in Stockholders' Equity (as defined in the Management Agreement) during the year ended December 31, 2025.
Income from Equity Method Investment
During the year ended December 31, 2025, we recorded net income from equity method investment of $15.4 million. The increase in net income attributable to the Massachusetts Healthcare JV was due to a $17.4 million net gain on litigation settlement recorded during the year ended December 31, 2025. This income was partially offset with a net loss from operations of the Massachusetts Healthcare JV during the year ended December 31, 2025. There was no such activity during the year ended December 31, 2024, as the Massachusetts Healthcare JV did not take title of the two hospitals until the first quarter of 2025.
Refer to "Note 6 – Other Assets" and "Note 16 – Commitments and Contingencies" for additional information.
During the year ended December 31, 2025, we recorded a $7.4 million net realized loss on investments, consisting of (i) a $1.2 million realized loss on the sale of a promissory note previously recorded as Note receivable, held for sale and (ii) a $6.2 million realized loss related to the discounted payoff of the Michigan Office Loan.
DuringComparatively, during the year ended December 31, 2024, we recorded a $128.2 million net realized loss on investments, consisting of (i) a $127.5 million realized loss related to the extinguishment of the Massachusetts Healthcare Loan (as defined in "Note 4 - Commercial Mortgage Loans and Other Lending Assets, Net"),Loan, and (ii) a $0.7 million realized loss related to the sale of a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Comparatively, during the year ended December 31, 2023, we recorded a net realized loss on investments of $86.6 million, consisting of (i) a $4.8 million realized loss related to the acquisition of the Atlanta Hotel through a deed-in-lieu of foreclosure and (ii) a $82.0 million realized loss on investments representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY. These losses were partially offset by a $0.2 million gain on investments recorded in connection with the sale of our entire interest in three commercial loans secured by properties in Europe and a partial interest in one commercial loan secured by property located in London, UK.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 5 – Real Estate Owned" for additional detail.
Gain on Extinguishment of Debt
During the year ended December 31, 2023, we repurchased $53.9 million aggregate principal amount of the 5.375% Convertible Senior Notes due 2023 (the "2023 Notes" or "Convertible Notes") at a weighted average price of 99.1%. As a result of this transaction, we recognized a $0.5 million gain on extinguishment of debt. We fully repaid the remaining principal of the 2023 Notes in cash at par during the fourth quarter of 2023.
Increase in Specific CECL Allowance, net
During the year ended December 31, 2024, we recorded a net increase in our Specific CECL Allowance of $149.5 million, related to two of our subordinate loans. During the first quarter of 2024, we recorded a $142.0 million Specific CECL Allowance related to a mezzanine loan secured by an ultra-luxury residential property in Manhattan, NY, primarily attributable to a reduction in list pricing of remaining units and slower sales pace at the property. During the second quarter of 2024, we recorded a Specific CECL Allowance of $7.5 million on a subordinate loan secured by our interest in a Class A office building in Troy, MI, attributable to low occupancy and limited leasing activity in the property's submarket. Additionally, we recorded an increase and subsequent write-off of $127.5 million of our Specific CECL Allowance related to the Massachusetts Healthcare Loan. The $127.5 million write-off was recorded as a realized loss within net realized loss on investments in our consolidated statement of operations as discussed above.
During the year ended December 31, 2023, we recorded a net increase to our Specific CECL Allowance of $59.5 million. The net increase consisted of a $141.5 million Specific CECL Allowance related to two mezzanine loans secured by the same ultra-luxury residential property in Manhattan, NY with a subsequent write-off of $82.0 million during the same period related to the most junior mezzanine loan which was deemed unrecoverable. The $82.0 million write-off of Specific CECL Allowance was recorded as a realized loss within net realized loss on investments in our 2023 consolidated statement of operations as discussed above.
Refer to "Note 3 – Fair Value Disclosure" and "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Decrease (increase) in GeneralSpecific CECL Allowance, net
ForDuring the year ended December 31, 2024,2025, we recorded a net increasedecrease in our GeneralSpecific CECL Allowance of $6.3$4.5 million. TheThis increaseamount wasconsisted primarilyof: driven(i) bya loan$1.3 originationsmillion reversal and thea increase$6.2 inmillion our view of remaining expected term of certainwrite-off of our loans.allowance Therelated increaseto wasthe partiallydiscounted offsetpayoff of our Michigan Office Loan; and (ii) a $3.0 million allowance on a commercial mortgage loan secured by thea effectshotel ofin portfolioChicago, seasoning and earlier than expected loan repayments.IL.
Comparatively, during the year ended December 31, 2024, we recorded a net increase in our Specific CECL Allowance of $149.5 million related to two of our subordinate loans. This amount consisted of: (i) a $142.0 million allowance recorded in the first quarter of 2024 for a mezzanine loan secured by an ultra-luxury residential property in Manhattan, NY; and (ii) a $7.5 million allowance recorded during the second quarter of 2024 for the Michigan Office Loan. Additionally, we recorded an increase and subsequent write-off of $127.5 million of our Specific CECL Allowance related to the Massachusetts Healthcare Loan. The $127.5 million write-off was recorded as a realized loss within net realized loss on investments in our December 31, 2024 consolidated statement of operations.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 6 – Other Assets" for additional detail.
Increase in General CECL Allowance, net
The General CECL Allowance increased by $7.7 million and $6.3 million during the years ended December 31, 2025 and 2024, respectively. The increases were primarily related to loan originations and the impacts of extending our expected loan repayment dates.
During the year ended December 31, 2023, we recorded a net decrease in our General CECL Allowance of $0.1 million primarily driven by the effects of portfolio seasoning and loan repayments outpacing originations, which was partially offset by the increase in our view of remaining expected term of certain of our loans.
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the years ended December 31, 2025 and 2024 were net gains of $0.8 million and $15.1 million, respectively. The decrease in the net gain for the year ended December 31, 2025 compared to the year ended December 31, 2024 andwas predominantly due to higher forward point estimates for the year ended December 31, 2023 was a net gain of $15.1 million and $3.8 million, respectively.2025.
The net gain for the year ended December 31, 2024 was higher than the net gain for the year ended December 31, 2023 due to lower forward point estimates.
Gain (loss) on interest rate hedges
During the year ended December 31, 2024, we recorded a net gain of $0.6 million on our interest rate caps. The net gain was primarily driven by a $1.9 million realized gain recorded in relation to our construction financing interest rate cap. The realized gain was attributable to SOFR exceeding the interest rate cap's strike rate throughout the year. Additionally, we recorded a partially offsetting unrealized loss of $1.3 million, driven by a decrease in the interest rate cap's fair value, as it approached its maturity.
During the year ended December 31, 2023, we recorded a net loss of $0.4 million primarily related to our 2026 Term Loan interest rate cap. Though we recorded a realized gain of $9.7 million driven by an increase in the applicable index rate above the interest rate cap's strike rate, this gain was offset by unrealized losses of $10.1 million, resulting from a decrease in the interest rate cap's fair value as it reached its June 2023 maturity.
Refer to "Note 11 – Derivatives" for full discussion of interest rate caps.
The weighted-average diluted shares outstanding used for Distributable Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Convertible Notes. The Convertible Notes were fully repaid during the fourth quarter 2023, and as such, no adjustment was applied in 2024. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, these potentially issuable shares are excluded until a conversion occurs. We believe that excluding shares issued in connection with a potential conversion of the Convertible Notes from our computation of Distributable Earnings per weighted-average diluted share is useful to investors for various reasons, including the following: (i) conversion of Convertible Notes to shares requires both the holder of a note to elect to convert the Convertible Note and for us to elect to settle the conversion in the form of shares; (ii) future conversion decisions by note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Convertible Notes from the computation of Distributable Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Distributable Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Distributable Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future.
Unvested RSUs are net of incremental shares assumed repurchased under the treasury stock method, if dilutive. There were no incremental shares included in the year ended December 31, 2024. For 2023, the weighted-average diluted shares for GAAP were determined using the "if-converted" method.
Unvested RSUs are net of incremental shares assumed repurchased under the treasury stock method, if dilutive. There were no incremental shares included in the years ended December 31, 2025 and 2024 As a REIT, U.S. federal income tax law generally requires us to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons stockholders invest in a REIT, we generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Distributable Earnings is a key factor considered by the board of directors in setting the dividend and as such we believe Distributable Earnings is useful to investors.
Distributable Earnings Prior to Realized Loss on Investments and Realized Gain from Litigation Settlement
We believe it is useful to our investors to present Distributable Earnings prior to net realized loss on investments and realized gain onfrom extinguishmentlitigation of debtsettlement to reflect our operating results because (i) our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which comprise our ongoing operations and (ii) it has been a useful factor related to our dividend per share because it is one of the considerations when a dividend is determined. We believe that our investors use Distributable Earnings and Distributable Earnings prior to net realized loss on investments and realized gain onfrom extinguishmentlitigation of debt,settlement, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.
During the year ended December 31, 2025, we recorded a realized loss on investments of $7.4 million consisting of (i) a $1.2 million realized loss on the sale of a promissory note previously recorded as Note receivable, held for sale and (ii) a $6.2 million realized loss related to the discounted payoff of the Michigan Office Loan. We also recorded a realized gain of $17.4 million within Income from equity method investment on our consolidated statement of operations from a litigation settlement with the Commonwealth of Massachusetts relating to the Massachusetts Healthcare Loan. Refer to "Note 3 – Fair Value Disclosure," "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net," "Note 6 – Other Assets" and "Note 16 – Commitments and Contingencies" for further discussion.
During the year ended December 31, 2024, we recorded a realized loss on investments of $128.2 million consisting of (i) a $127.5 million realized loss related to the Massachusetts Healthcare Loan and (ii) a $0.7 million realized loss on the sale of a commercial mortgage loan. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 6 – Other Assets" for further discussion.
TheAccordingly, the table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to net realized loss on investments and realized gain on extinguishmentlitigation of debtsettlement ($ in thousands):
Net realized loss on investment for the year ended December 31, 2024 includes a realized loss of $127.5 million related to the Massachusetts Healthcare Loan and a $0.7 million loss on the sale of a commercial mortgage loan. Net realized loss on investment for the year ended December 31, 2023 includes (i) $4.8 million realized loss related to the acquisition of the hotel property in Atlanta, GA through a deed-in-lieu of foreclosure, (ii) $82.0 million realized loss representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY, (iii) $0.2 million net realized gain on loan sales. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for full discussion.
$0.5 million realized gains on extinguishment of debt was recorded during the year ended December 31, 2023 in connection with partial repurchases of our 2023 Notes. See "Note 10 – Convertible Senior Notes, Net" for full discussion.
The following table shows the changes in our book value per share:
Includes net unrealized loss on forward currency contracts and interest hedges, and realized loss on forward currency contracts related to principal outside impact of forward points.
We believe that presenting book value per share with sub-totals prior to the CECL Allowances and depreciation is useful for investors for various reasons, including, among other things, analyzing our compliance with financial covenants related to tangible net worth and debt-to-equity under our secured debt arrangements and senior secured term loan, which permit us to add the General CECL Allowance to our GAAP stockholders' equity. Given that our lenders consider book value per share prior to the General CECL Allowance as an important metric related to our debt covenants, we believe disclosing book value per share prior to the General CECL Allowance is important to investors such that they have the same visibility. We further believe that presenting book value before depreciation and amortization is useful to investors since it is a non-cash expense included in net income and is not representative of our core business and ongoing operations.
2.
3.
4.
no more than 20% of our net equity (on a consolidated basis) will be invested in any single investment at the time of the investment; in determining compliance with the investment guidelines, the amount of the investment is the net equity in the investment (gross investment less amount of third-party financing) plus the amount of any recourse on the financing secured by the investment; and until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.5.
until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.
During the year ended December 31, 2024,2025, we committed $1.9$4.4 billion of capital to new loans ($1.3$3.3 billion was funded at closing), and provided $627.4$899.4 million of add-on fundings, including £168 million ($213 million in USD) to a first mortgage loan secured by a portfolio of pubs across the United Kingdom, that was originated in December 2023.fundings. During the year ended December 31, 2024,2025, we received $2.5$2.9 billion in loan repayments and sales.sales of loans and other lending assets.
The following table provides additional details of our commercial mortgage loans,loan portfolio and subordinate loans, and other lending assetsloan portfolio as of December 31, 20242025 ($ in millions):
Modified loan treated as a new origination for accounting purposes.
Loan matured in September 2024. Negotiations with sponsor currently in process.
What changed in the latest 10-Q
Risk Factors
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in "Item 1A. Risk Factors" in our most recent Annual Report on Form 10-K and in "Risk Factors" in the Special Meeting Proxy.
Largest changes
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in "Item 1A. Risk Factors" in our most recent Annual Report on Formsee in full comparison10-K.10-K and in "Risk Factors" in the Special Meeting Proxy.
Full comparison: every changed paragraph (1)
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in "Item 1A. Risk Factors" in our most recent Annual Report on Form 10-K.10-K and in "Risk Factors" in the Special Meeting Proxy.
Management's Discussion & Analysis (MD&A)
New heading “Other Income, net”
New heading “Net Realized Loss on Investments”
New heading “Loss on Extinguishment of Debt”
New heading “Other Income, net”
New heading “Loss from Equity Method Investments”
New heading “Net Realized Loss on Investments”
New heading “Loss on Extinguishment of Debt”
New heading “Valuation Allowance, Loans and Other Lending Assets Held for Sale”
Removed heading “Increase in Specific CECL Allowance, net”
Removed heading “Loan Portfolio Details”
Removed heading “Portfolio Management”
Removed heading “Borrowings Under Various Financing Arrangements”
Largest changes
“We generally intend to hold our assets for investment, although we may sell certain of our investments in order to manage our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.”see in full comparison
Full comparison: every changed paragraph (107)
We make forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: higher interest rates and inflation; market trends in our industry, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; our business and investment strategy; our operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; the impact of a shutdown of the U.S. federal government; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the timing and amount of expected future fundings of unfunded commitments; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which we participate; changes in the value of our assets; the scope of our target assets; interest rate mismatches between our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of our target assets; changes in prepayment rates on our target assets; effects of hedging instruments on our target assets; rates of default or decreased recovery rates on our target assets; the degree to which hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; our continued maintenance of our qualification as a REIT for U.S. federal income tax purposes; our continued exclusion from registration under the Investment Company Act of 1940, as amended (the "1940 Act"); the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our present and potential future competition; unexpected costs or unexpected liabilities, including those related to litigation; potentialand benefitsrisks associated with the exact amount or timing of our sales of assets and effectsliquidating distributions; unexpected costs or unexpected liabilities that may arise from the transactions contemplated by the Plan and with our ability to realize the results of the Asset Sale; and the amount and use of proceeds from the Asset Sale.Plan.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. See Item 1A. "Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our most recent Annual Report on Form 10-K.10-K and "Risk Factors" in the Special Meeting Proxy. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC, could cause our actual results to differ materially from those included in any forward-looking statements we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a global, high-growth alternative asset manager with assets under management of approximately $938.4$1.05 billiontrillion as of DecemberJune 31,30, 2025.2026.
As previously disclosed, following the Asset Sale, our management team, in consultation with our board of directors, evaluated a range of commercial real estate–related strategies designed to reposition ARI. In assessing potential new asset strategies, we leveraged Apollo's broader investment platform and origination capabilities. We also considered strategic M&A opportunities and explored available strategic alternatives, including dissolution. On June 15, 2026, we announced that, following an extensive review of potential strategic alternatives for ARI, our board of directors determined that our dissolution, the liquidation of our assets and the winding up of our business and affairs are advisable and in our best interests and the best interests of the ARI stockholders.
On July 14, 2026, we filed the Special Meeting Proxy with the SEC related to the Special Meeting, for the following purposes: (i) to consider and vote on the Dissolution Proposal; (ii) to consider and vote on the Executive Compensation Proposal; and (iii) to consider and vote on the Adjournment Proposal. If the Plan is approved by our Stockholders, we will adopt the liquidation basis of accounting which requires our assets to be recognized at the estimated amounts expected to be collected and liabilities to be recognized at the estimated amounts at which they are expected to be settled.
On the Closing Date, pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, the Company sold its commercial real estate loan portfolio (other than loans that were repaid prior to closing and onethe loanChicago withHotel a principal balance of $46 millionLoan which iswas expected to repayrepaid after the Closing Date) to Athene for cash consideration of approximately $8.6 billion, which is based on 99.7% of the total commitment amount of such loans as of the Closing Date, subject to certain adjustments as provided in the Purchase Agreement. PleaseA referportion of the proceeds from the Asset Sale were used to "Noterepay 20all -secured Subsequentcredit Events"facilities and other indebtedness and to thepay accompanyingtransaction consolidated financial statements for further details.expenses.
For the three months ended MarchJune 31,30, 2026 and 2025, our net income available to common stockholders was $23.2$22.7 million, or $0.16$0.11 per diluted share of common stock, and $22.9$17.7 million, or $0.16$0.12 per diluted share of common stock, respectively.
For the six months ended June 30, 2026 and 2025, our net income available to common stockholders was $45.9 million, or $0.27 per diluted share of common stock, and $40.6 million, or $0.28 per diluted share of common stock, respectively.
Net interest income decreased by $8.0$27.9 million during the three months ended MarchJune 31,30, 2026 compared to the three months ended DecemberMarch 31, 2025.2026. The net decrease was primarily attributable to lowerthe averagesale indexof ratesour commercial real estate loan portfolio on April 24, 2026, resulting in two fewer months of interest income recorded during the three months ended MarchJune 31,30, 2026 compared to the three months ended December 31, 2025. Additionally, our commercial mortgage loan secured by a hotel in Chicago, IL was moved to nonaccrual status as of December 31, 2025, and no interest income was recorded on this loan during the three months ended March 31, 2026. Lastly, modifications to several of our loans resulted in interest rate decreases and further decreased interest income. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
For the three months ended MarchJune 31,30, 2026, we recorded net income related to real estate owned of $0.4$8.5 million compared to net income of $1.9$0.4 million for the three months ended DecemberMarch 31, 2025.2026. The decreaseincrease in net income was primarily due to the seasonality of hotel operations, which led to $2.1$6.4 million and $0.5 million lowerhigher net income from operations, prior to depreciation, for the D.C. Hotel and the Atlanta Hotel, respectively, during the three months ended MarchJune 31,30, 2026 as compared to the three months ended DecemberMarch 31, 2025.2026. TheFurther, decrease was partially offset by an increase in operatingnet income attributable to ourthe Brooklyn Multifamily Development increased $2.7 million during the three months ended June 30, 2026 as compared to the three months ended March 31, 2026 as the lease-up of the property continues to ramp up. Refer to "Note 5 – Real Estate Owned" for further discussion of operations related to real estate owned. at
General and administrative expenses remained relatively consistent for the three months ended June 30, 2026 compared to the three months ended March 31, 2026.
General and administrative expenses decreased by $1.6 million for the three months ended March 31, 2026 compared to the three months ended December 31, 2025. The decrease was primarily attributable to lower amortization of RSUs in the current quarter compared to prior quarter. Additionally, there were higher costs associated with reimbursements to the Manager and legal expenses during the three months ended December 31, 2025.
Management fees expense decreased by $0.5$4.6 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended DecemberMarch 31, 2025.2026. The decrease was primarily due to lowera Stockholders' Equity (as definedreduction in the base management fee rate under the A&R Management Agreement) entered into in connection with the Asset Sale and write-offs of previously recorded Specific CECL Allowances during the three months ended MarchJune 31,30, 2026. Refer to "Note 13 – Related Party Transactions" for additional information.
Other Income, net
Other income increased by $6.9 million for the three months ended June 30, 2026 compared to the three months ended March 31, 2026. The increase was primarily due to an increase in bank interest earned on our cash balance, which was significantly higher during the three months ended June 30, 2026 due to cash received from the Asset Sale.
Net Realized Loss on Investments
During the three months ended June 30, 2026, we recorded a net realized loss on investments of $339.1 million. The net realized loss consisted of the following: i) a $335.0 million write-off of a previously recorded Specific CECL Allowance relating to loans that were included in the Asset Sale; ii) a $2.6 million net realized loss resulting from the discount on the Asset Sale compared to our loan’s cost basis; and iii) a $1.5 million write-off of a previously recorded Specific CECL Allowance upon the discounted repayment of the Chicago Hotel Loan. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Loss on Extinguishment of Debt
During the three months ended June 30, 2026, we recorded a loss on extinguishment of debt of $30.7 million relating to the repayment of debt in connection with the Asset Sale. The loss represented unamortized fees and deferred financing costs associated with our secured debt arrangements, senior secured term loan, and senior secured notes. Refer to "Note 7 – Secured Debt Arrangements, Net", "Note 8 – Senior Secured Term Loans, Net", and "Note 9 – Senior Secured Notes, Net" for additional detail.
During the three months ended June 30, 2026, we wrote off $335.0 million of our Specific CECL Allowance in connection with the Asset Sale. The remaining $3.0 million of Specific CECL Allowance related to the Chicago Hotel Loan, which repaid at a discount during the three months ended June 30, 2026. Upon repayment, we reversed $1.5 million of the Specific CECL Allowance and wrote off the remaining $1.5 million. Comparatively, during the three months ended March 31, 2026, there was no change to our Specific CECL Allowance.
Increase in Specific CECL Allowance, net
During the three months ended March 31, 2026, there was no change to our Specific CECL Allowance. Comparatively, during the three months ended December 31, 2025, our Specific CECL Allowance increased by $3.0 million related to a commercial mortgage loan secured by a hotel in Chicago, IL.
OurDuring the three months ended June 30, 2026, we reversed our previously recorded $41.2 million General CECL Allowance decreasedas bya $3.3result millionof the Asset Sale. Comparatively, during the three months ended March 31, 20262026, comparedour toGeneral aCECL decreaseAllowance ofdecreased $0.5by million$3.3 duringmillion. the three months ended December 31, 2025. During both periods, theThe decrease was primarily due to the favorable impacts of portfolio seasoning, and partially offset by the effect of loan originations. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information related to our General CECL Allowance.
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the three months ended MarchJune 31,30, 2026 and the three months ended DecemberMarch 31, 20252026 were a net lossgain of $0.3$0.9 million and a net gainloss of $0.3 million, respectively. The net loss for the three months ended March 31, 2026 compared to the net gain for the three months ended DecemberJune 31,30, 20252026 was predominantly due to higher forward point estimates for the three months ended March 31, 2026.
The following table sets forth information regarding our condensed consolidated results of operations and certain key operating metrics for the threesix months ended MarchJune 31,30, 2026 and 2025 ($ in thousands):
Net interest income decreased by $3.4$38.3 million during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. ThisThe net decrease was primarily attributable to higherthe averagesale debtof balancesour ascommercial wellreal asestate lowerloan averageportfolio indexon ratesApril 24, 2026, resulting in two fewer months of interest income recorded during the threesix months ended MarchJune 31, 2026, and modifications to several of our loans, resulting in spread decreases. The effects of lower interest rates were partially offset by a higher average loan balance during the three months ended March 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
For the threesix months ended MarchJune 31,30, 2026, we recorded net income related to real estate owned of $0.4$8.9 million compared to net income of $3.1$7.3 million for the threesix months ended MarchJune 31,30, 2025. The decreaseincrease was primarily attributable to lower income from operations, prior to depreciation, due to demand impact from tariffs and lower international and business travel in 2026 compared to 2025. The decrease was partially offset by operating income attributable to our Brooklyn Multifamily Development as the lease-up of the property continues to ramp up. There was no such activity during the quartersix months ended MarchJune 31,30, 2025 as the property was still under construction with no revenue streams generated and all expenses being capitalized. Refer to "Note 5 – Real Estate Owned" for full discussion of operations related to real estate owned.
General and administrative expenses decreased by $0.7$1.5 million for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 primarily due to a decrease in amortization of RSUs as well as a decrease in legal expenses.
Management fees expense decreased by $0.4$5.2 million for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. The decrease was primarily due to lowera Stockholders' Equity (as definedreduction in the base management fee rate under the A&R Management Agreement) entered into in connection with the Asset Sale and write-offs of previously recorded Specific CECL Allowances during the threesix months ended MarchJune 31,30, 2026.2026 in connection with the Asset Sale. Refer to "Note 13 – Related Party Transactions" for additional information.
Other Income, net
Other income increased by $5.9 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily due to an increase in bank interest earned on our cash balance, which was significantly higher during the six months ended June 30, 2026 due to cash received from the Asset Sale.
Loss from Equity Method Investments
We recognized a loss from equity method investments of $0.5 million during the six months ended June 30, 2026 compared to a loss of $1.4 million during the six months ended June 30, 2025. The decrease in the loss is primarily due to greater legal costs incurred by the joint venture in 2025 compared to 2026.
Net Realized Loss on Investments
During the six months ended June 30, 2026, we recorded a net realized loss on investments of $339.1 million. The net realized loss consisted of the following: i) a $335.0 million write-off of a previously recorded Specific CECL Allowance relating to loans that were included in the Asset Sale; ii) a $2.6 million net realized loss resulting from the discount on the Asset Sale compared to our loan’s cost basis; and iii) a $1.5 million write-off of a previously recorded Specific CECL Allowance upon the discounted repayment of the Chicago Hotel Loan. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Loss on Extinguishment of Debt
During the six months ended June 30, 2026, we recorded a loss on extinguishment of debt of $30.7 million relating to the repayment of debt in connection with the Asset Sale. The loss represented unamortized fees and deferred financing costs associated with our secured debt arrangements, senior secured term loan, and senior secured notes. Refer to "Note 7 – Secured Debt Arrangements, Net", "Note 8 – Senior Secured Term Loans, Net", and "Note 9 – Senior Secured Notes, Net" for additional detail.
Valuation Allowance, Loans and Other Lending Assets Held for Sale
During the six months ended June 30, 2025, we recorded a fair value adjustment of $1.2 million on a promissory note classified as held for sale (representing the difference between the note's amortized cost and the note's fair value as of June 30, 2025). The promissory note was subsequently sold in July 2025 at a price of 97.0%, upon which we reversed the valuation allowance and recorded an equivalent realized loss.
During the six months ended June 30, 2026, we wrote off $335.0 million of our Specific CECL Allowance in connection with the Asset Sale. The remaining $3.0 million of Specific CECL Allowance related to the Chicago Hotel Loan, which repaid at a discount during the six months ended June 30, 2026. Upon repayment, we reversed $1.5 million of the Specific CECL Allowance and wrote off the remaining $1.5 million. There was no change to our Specific CECL Allowance during the six months ended June 30, 2025. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Refer to "Note 13 – Related Party Transactions" and "Note 16 – Commitments and Contingencies" for additional information.
During the threesix months ended MarchJune 31,30, 2026, we recorded a net decrease in our General CECL Allowance of $3.3$44.5 million. The decrease was primarily driven by the favorable impactssale of portfolioour seasoning,commercial whichreal wasestate partiallyloan offsetportfolio, byresulting thein effecta full reversal of loanour originations.General CECL Allowance. Comparatively, during the threesix months ended MarchJune 31,30, 2025, we recorded a net increase in our General CECL Allowance of $4.0$7.1 million, primarily driven by a more adverse macroeconomic outlook as well as the effectseffect of loan originations. The increase was partially offset by the favorable impacts of portfolio seasoning.
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the threesix months ended MarchJune 31,30, 2026 and threesix months ended MarchJune 31,30, 2025 was a net lossgain of $0.3$0.6 million and a net gainloss of $1.6$6.8 million, respectively. The net lossgain for the threesix months ended MarchJune 31,30, 2026 compared to the net gainloss for the threesix months ended MarchJune 31,30, 2025 was predominantly due to higher forward point estimates for the threesix months ended MarchJune 31,30, 2026.2025.
Refer to "Note 20 – Subsequent Events" to the accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to MarchJune 31,30, 2026.
For the three months ended MarchJune 31,30, 2026 and DecemberMarch 31, 2025,2026, our Distributable Earnings were ($349.1) million, or $(2.62) per share, and $30.7 million, or $0.22 per share, and $37.2 million, or $0.26 per share, respectively.
Unvested RSUs are net of incremental shares assumed repurchased under the treasury stock method, if dilutive. For the three months ended MarchJune 31,30, 2026 and three months ended DecemberMarch 31, 2025,2026, there were 599,484574,742 and 405,421599,484 incremental shares included, respectively.
Distributable Earnings Prior to Realized Loss on Investments and Realized Loss on Extinguishment of Debt
We believe it is useful to our investors to present Distributable Earnings prior to realized loss on investments and realized loss on extinguishment of debt to reflect our operating results because (i) our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which comprise our ongoing operations and (ii) it has been a useful factor related to our dividend per share because it is one of the considerations when a dividend is determined. We believe that our investors use Distributable Earnings and Distributable Earnings prior to realized loss on investments,investments and realized loss on extinguishment of debt, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.
During the three months ended June 30, 2026, we recorded a net realized loss on investments of $339.1 million in connection with the Asset Sale. The net realized loss consisted of the following: i) a $335.0 million write-off of a previously recorded Specific CECL Allowance relating to loans that were included in the Asset Sale; ii) a $2.6 million net realized loss resulting from the discount on the Asset Sale compared to our loan’s cost basis; and iii) a $1.5 million write-off of a previously recorded Specific CECL Allowance upon the discounted repayment of the Chicago Hotel Loan. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
We also recorded a realized loss on extinguishment of debt of $30.7 million during the three months ended June 30, 2026, relating to the repayment of debt in connection with the Asset Sale. The loss represented unamortized fees and deferred financing costs associated with our secured debt arrangements, senior secured term loan, and senior secured notes. Refer to "Note 7 – Secured Debt Arrangements, Net", "Note 8 – Senior Secured Term Loans, Net", and "Note 9 – Senior Secured Notes, Net" for additional detail.
During the three months ended March 31, 2026, there were no realized losses on investments or realized losses on extinguishment of debt.
There were no realized losses on investments for the three months ended March 31, 2026 or the three months ended December 31, 2025. Accordingly, theThe table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to realized loss on investments and realized loss on extinguishment of debt ($ in thousands):
During the threesix months ended MarchJune 31,30, 2026, we committed $299.9 million of capital to a new loan (fully funded at closing), and provided $338.9$373.8 million of add-on fundings. During the threesix months ended MarchJune 31,30, 2026, we received $468.6$9.5 millionbillion in loan repayments.
On the Closing Date, we sold our commercial real estate loan portfolio (other than loans that were repaid prior to closing and the Chicago Hotel Loan which was repaid after the Closing Date). Accordingly, there were no outstanding loans as of June 30, 2026.
Loan Portfolio Details
The following table sets forth certain information regarding our loan portfolio as of March 31, 2026 ($ in thousands):
Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of March 31, 2026 on the floating rate loans.
Weighted-Average All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. Weighted-Average All-in Yield excludes the benefit of forward points on currency hedges relating to loans denominated in currencies other than USD.
Gross of deferred financing costs of $10.9 million.
Cost of funds includes weighted-average spread and applicable benchmark rates as of March 31, 2026 on secured debt arrangements.
ARI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 2 filings (2 insiders, 2 trade dates, 5,534 shares, about $56.6K). Net open-market shares: -5,534 (purchases minus sales); net value about -$56.6K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-25 | Salvati Michael |
Open-market sale | 125 | $6.86 | $858 |
| 2026-08-25 | Salvati Michael |
Open-market sale | 835 | $6.86 | $5.7K |
| 2026-05-13 | Whonder Carmencita N.m. |
Open-market sale | 4,574 | $10.93 | $50.0K |
Well-known investors holding ARI (13F)
None of the 59 investors we track reported a position in their latest 13F.