SCHEDULE: ACRES Commercial Realty Ownership Rises to 13.26%

ACRES Share Holdings, LLC and affiliates report an increased beneficial ownership of ACRES Commercial Realty Corp. common stock to 13.26% due to a reduced total number of shares outstanding.

Summary

• ACRES Share Holdings, LLC and its affiliates (ACRES Capital, LLC, ACRES Holdings, LLC, and ACRES Capital Corp.) collectively beneficially own 966,347 shares of ACRES Commercial Realty Corp. common stock.
• This represents 13.26% of the outstanding common stock, calculated based on 7,285,680 shares outstanding as of September 30, 2025, as reported in the Issuer's Form 10-Q.
• The increase in percentage ownership is solely a result of a reduced total number of shares outstanding and not from any purchases or sales by the reporting persons.
• Previous grants of common stock to ACRES Share Holdings, LLC include 299,999 shares on May 6, 2022, and 295,237 shares on May 7, 2024, under the Manager Incentive Plan.
• Additional shares were issued for incentive compensation under the Management Agreement on various dates in 2023 and 2024, totaling 71,112 shares.

Sentiment

Score: 6

Explanation: The filing indicates a stable, long-term alignment of interests between management and shareholders through equity compensation tied to book value growth. The increase in percentage ownership due to reduced outstanding shares is a neutral event in itself, but the underlying incentive structure is positive.

Positives

• The reporting persons' increased percentage ownership aligns their interests more closely with the company's performance.
• The Manager Incentive Plan and Management Agreement provide ongoing incentives for management based on company performance and book value targets, including future grants for book values of $30.00, $33.00, and $36.00.

Negatives

• The increase in percentage ownership is not due to active purchases by the reporting persons, but rather a reduction in outstanding shares, which could imply share buybacks or other capital management activities that reduce the float.

Future Outlook

The Issuer plans to grant up to an additional 333,333 restricted shares to the Reporting Persons under equity compensation plans as specific book value targets of $30.00, $33.00, and $36.00 are met, indicating a long-term incentive structure tied to increasing shareholder equity.

Management Comments

• The increase in ownership is solely a result of a reduced total number of shares outstanding and not as a result of any purchases or sales.
• Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission that any of the Reporting Persons (other than ACRES Share Holdings, LLC which directly holds the shares of common stock reported on this Schedule 13D) is the beneficial owner of the common stock referred to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or for any other purpose, and such beneficial ownership is expressly disclaimed.

Industry Context

This filing reflects an internal ownership adjustment within ACRES Commercial Realty Corp., where the manager and its affiliates have increased their proportional stake. This is common in the REIT sector where management often holds significant equity, aligning their interests with long-term property value and shareholder returns. The incentive structure tied to book value targets is a typical mechanism to motivate management in real estate-focused companies.

Comparison to Industry Standards

• The use of book value targets for incentive compensation is a common practice in the REIT industry, aligning management incentives with the growth of underlying asset value.
• The 'rule of three' for shared voting and dispositive power among directors of ACRES Capital Corp. is a standard governance mechanism to avoid individual beneficial ownership attribution.
• The overall beneficial ownership percentage of 13.26% by the manager and its affiliates is a significant stake, comparable to other externally managed REITs where the manager often holds a substantial equity position.

Corporate Governance

Related Party Transactions

• Grants of common stock to ACRES Share Holdings, LLC (an affiliate of the Manager) under the ACRES Commercial Realty Corp. Manager Incentive Plan.
• Issuance of common stock to ACRES Share Holdings, LLC pursuant to the Management Agreement for incentive compensation.

Stakeholder Impact

• Shareholders: Increased alignment of interests with management due to higher beneficial ownership percentage and performance-based equity incentives.
• Management/Employees: Continued incentive through restricted share grants tied to book value targets, motivating long-term performance.

Next Steps

• Granting of up to 333,333 restricted shares to Reporting Persons upon achievement of book value targets of $30.00, $33.00, and $36.00.

Key Dates

Recommendation

This Schedule 13D filing primarily updates beneficial ownership percentages due to a reduction in outstanding shares, rather than new market purchases. While the increased percentage ownership by the manager and its affiliates suggests continued alignment of interests, it does not present new fundamental information that would warrant a change in investment thesis. The ongoing incentive structure tied to book value targets is a positive for long-term performance, but without additional financial or operational updates, a 'hold' recommendation is appropriate.

Keywords

ACRES Commercial Realty Corp., ACRES Share Holdings, Schedule 13D, beneficial ownership, common stock, equity compensation, manager incentive plan, shareholder percentage, real estate investment trust, REIT