KBRA Publishes Ratings for ACRES Commercial Realty Corp.

KBRA publishes the issuer rating of BB, senior secured debt rating of BBB-, and preferred stock rating of BB- for ACRES Commercial Realty Corp. (NYSE: ACR, “ACRES”, or “the company”). The Outlook for the ratings is Stable. On August 5, 2026, these ratings were assigned on an unpublished basis.

Key Credit Considerations

On August 6, 2026, ACR, a real estate investment trust, acquired ACRES Capital Corp. (“ACC”), a commercial real estate (“CRE”) investment manager founded in 2012, as part of an internalization. Following the transaction, ACR operates an integrated CRE lending and investment management platform, encompassing its publicly traded REIT operations, ACRES Mortgage Fund, Ltd. (“AMF”), and separately managed accounts (“SMAs”).

The ratings consider ACRES’ comparatively small size and relatively narrow focus on CRE lending, while also acknowledging that the company's credit profile benefits from its focus on granting 1st lien mortgages at conservative LTVs to commercial properties generally owned by CRE-focused sponsors with long-term track records. While ACR's earnings have demonstrated volatility, post-internalization, the company benefits from a more diversified earnings and cash flow profile, incorporating management and origination fees generated by AMF and SMAs, as well as insurance-related revenue. Management’s track record of favorable investment returns at AMF reflects an experienced in-house team, involvement/oversight by top management at the origination stage and throughout the life of the investment, a granular portfolio, and “skin in the game” in the form of sizeable co-investments.

The internalization coincided with a $55 million upsize of an existing Barings senior secured term loan to $185 million total and the issuance of $200 million senior secured notes. Proceeds of the notes were intended to be used to refinance $150 million maturing senior notes, with the balance to be used for general corporate purposes. In addition, ACRES is authorized to issue up to $125 million of additional Series C preferred stock. The Barings facility is secured by a collateral package, including an all-assets lien on the borrowers/loan parties, gross revenue accounts, receivables, bank and securities accounts, management-related economics, AMF shares, and interests in specified eligible REO assets. The senior secured notes are secured by a first-lien pledge of residual equity interests in financing vehicles and individual assets, including pledged equity interests, CRE loans and related asset interests, and other pledged investments supporting the note collateral pool. Pro forma debt/equity assuming a $75 million incremental issuance of preferred stock and 50% debt treatment of the total preferred stock balance is expected to remain contained at or below 1x through 2030E. Pro forma debt/EBITDA, also reflecting 50% equity treatment for ACR’s preferred stock balance, is elevated at 10.5x in 2026E, but is expected to decline over the forecast period as EBITDA continues to grow. Considering the respective collateral packages and structural credit enhancements supporting the Barings facility and senior secured notes, the senior secured debt ratings incorporate a two-notch uplift from the issuer rating. The preferred stock rating is positioned one notch below the issuer rating, reflecting its subordinated ranking in the capital structure, partially mitigated by the absence of subordinated debt and the relatively uncomplicated capital structure.

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