FORWARD-LOOKING INFORMATION
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; and risks associated with the exact amount or timing of our sales of assets and liquidating 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 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 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.
Overview
We are a Maryland corporation and have elected to be taxed as a REIT for U.S. federal income tax purposes. We primarily originate, acquire, invest in and manage performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.
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 $1.05 trillion as of June 30, 2026.
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The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. We benefit from Apollo's global infrastructure and operating platform, through which we are able to source, evaluate and manage potential investments in our target assets.
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.
The Asset Sale
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 the Chicago Hotel Loan which was repaid 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. A portion of the proceeds from the Asset Sale were used to repay all secured credit facilities and other indebtedness and to pay transaction expenses.
Current Market Conditions
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" in our most recent Annual Report on Form 10-K.
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Results of Operations
Net Income Available to Common Stockholders
For the three months ended June 30, 2026 and 2025, our net income available to common stockholders was $22.7 million, or $0.11 per diluted share of common stock, and $17.7 million, or $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 $0.28 per diluted share of common stock, respectively.
Operating Results
The following table sets forth information regarding our condensed consolidated results of operations and certain key operating metrics compared to the most recently reported period ($ in thousands):
Three Months Ended
June 30, 2026 March 31, 2026 Change
Net interest income:
Interest income from commercial mortgage loans $ 41,726 $ 149,989 $ (108,263 )
Interest income from subordinate loans and other lending assets — — —
Interest expense (33,585 ) (113,922 ) 80,337
Net interest income 8,141 36,067 (27,926 )
Operations related to real estate owned:
Revenue from real estate owned operations 36,242 22,567 13,675
Operating expenses related to real estate owned (23,081 ) (18,218 ) (4,863 )
Depreciation and amortization on real estate owned (4,631 ) (3,981 ) (650 )
Net income related to real estate owned 8,530 368 8,162
Operating expenses:
General and administrative expenses (5,810 ) (5,952 ) 142
Management fees to related party (3,556 ) (8,118 ) 4,562
Total operating expenses (9,366 ) (14,070 ) 4,704
Other income, net 8,362 1,413 6,949
Loss from equity method investment (178 ) (274 ) 96
Net realized loss on investments (339,087 ) — (339,087 )
Loss on extinguishment of debt (30,714 ) — (30,714 )
Decrease in Specific CECL Allowance 338,000 — 338,000
Decrease in General CECL Allowance, net 41,224 3,289 37,935
Gain (loss) on foreign currency forward contracts (18,026 ) 16,812 (34,838 )
Foreign currency translation gain (loss) 18,920 (17,148 ) 36,068
Net income before taxes $ 25,806 $ 26,457 $ (651 )
Income tax provision (27 ) (230 ) 203
Net income $ 25,779 $ 26,227 $ (448 )
Net Interest Income
Net interest income decreased by $27.9 million during the three months ended June 30, 2026 compared to the three months ended March 31, 2026. The net decrease was attributable to the sale of our commercial real estate loan portfolio on April 24, 2026, resulting in two fewer months of interest income recorded during the three months ended June 30, 2026 compared to the three months ended March 31, 2026. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Operations Related to Real Estate Owned
For the three months ended June 30, 2026, we recorded net income related to real estate owned of $8.5 million compared to net income of $0.4 million for the three months ended March 31, 2026. The increase in net income was primarily due to the
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seasonality of hotel operations, which led to $6.4 million higher net income from operations, prior to depreciation, for the D.C. Hotel during the three months ended June 30, 2026 as compared to the three months ended March 31, 2026. Further, net income attributable to the 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.
Operating Expenses
General and administrative expenses remained relatively consistent for the three months ended June 30, 2026 compared to the three months ended March 31, 2026.
Management fees expense decreased by $4.6 million for the three months ended June 30, 2026 compared to the three months ended March 31, 2026. The decrease was primarily due to a reduction 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 June 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.
Decrease in Specific CECL Allowance
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.
Decrease in General CECL Allowance, net
During the three months ended June 30, 2026, we reversed our previously recorded $41.2 million General CECL Allowance as a result of the Asset Sale. Comparatively, during the three months ended March 31, 2026, our General CECL Allowance decreased by $3.3 million. The 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.
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Foreign currency translation gain and loss on derivative instruments
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the three months ended June 30, 2026 and the three months ended March 31, 2026 were a net gain of $0.9 million and a net loss of $0.3 million, respectively. The net loss for the three months ended March 31, 2026 compared to the net gain for the three months ended June 30, 2026 was predominantly due to higher forward point estimates for the three months ended March 31, 2026.
The following table sets forth information regarding our condensed consolidated results of operations and certain key operating metrics for the six months ended June 30, 2026 and 2025 ($ in thousands):
Six months ended
June 30, 2026 June 30, 2025 Change
Net interest income:
Interest income from commercial mortgage loans $ 191,715 $ 310,676 $ (118,961 )
Interest income from subordinate loans and other lending assets — 1,114 (1,114 )
Interest expense (147,507 ) (229,235 ) 81,728
Net interest income 44,208 82,555 (38,347 )
Operations related to real estate owned:
Revenue from real estate owned operations 58,809 54,163 4,646
Operating expenses related to real estate owned (41,299 ) (41,880 ) 581
Depreciation and amortization on real estate owned (8,612 ) (4,987 ) (3,625 )
Net income related to real estate owned 8,898 7,296 1,602
Operating expenses:
General and administrative expenses (11,762 ) (13,213 ) 1,451
Management fees to related party (11,674 ) (16,920 ) 5,246
Total operating expenses (23,436 ) (30,133 ) 6,697
Other income, net 9,775 3,826 5,949
Loss from equity method investment (452 ) (1,400 ) 948
Net realized loss on investments (339,087 ) — (339,087 )
Loss on extinguishment of debt (30,714 ) — (30,714 )
Valuation allowance, loans and other lending assets held for sale — (1,236 ) 1,236
Decrease in Specific CECL Allowance 338,000 — 338,000
Decrease (increase) in General CECL Allowance, net 44,513 (7,121 ) 51,634
Loss on foreign currency forward contracts (1,214 ) (121,111 ) 119,897
Foreign currency translation gain 1,772 114,263 (112,491 )
Gain on interest rate hedging instruments — 23 (23 )
Net income before taxes $ 52,263 $ 46,962 $ 5,301
Income tax provision (257 ) (232 ) (25 )
Net income $ 52,006 $ 46,730 $ 5,276
Net Interest Income
Net interest income decreased by $38.3 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The net decrease was attributable to the sale of our commercial real estate loan portfolio on April 24, 2026, resulting in two fewer months of interest income recorded during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Operations Related to Real Estate Owned
For the six months ended June 30, 2026, we recorded net income related to real estate owned of $8.9 million compared to net income of $7.3 million for the six months ended June 30, 2025. The increase was primarily due to 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 six months ended June 30, 2025 as the property was still under construction with no revenue streams generated
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and all expenses being capitalized. Refer to "Note 5 – Real Estate Owned" for full discussion of operations related to real estate owned.
Operating Expenses
General and administrative expenses decreased by $1.5 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to a decrease in amortization of RSUs as well as a decrease in legal expenses.
Management fees expense decreased by $5.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease was primarily due to a reduction 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 six months ended June 30, 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.
Decrease in Specific CECL Allowance
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
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ended June 30, 2025. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Decrease (increase) in General CECL Allowance, net
During the six months ended June 30, 2026, we recorded a net decrease in our General CECL Allowance of $44.5 million. The decrease was driven by the sale of our commercial real estate loan portfolio, resulting in a full reversal of our General CECL Allowance. Comparatively, during the six months ended June 30, 2025, we recorded a net increase in our General CECL Allowance of $7.1 million, primarily driven by the effect of loan originations. The increase was partially offset by the favorable impacts of portfolio seasoning.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Foreign currency translation gain and loss on derivative instruments
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the six months ended June 30, 2026 and six months ended June 30, 2025 was a net gain of $0.6 million and a net loss of $6.8 million, respectively. The net gain for the six months ended June 30, 2026 compared to the net loss for the six months ended June 30, 2025 was predominantly due to higher forward point estimates for the six months ended June 30, 2025.
Subsequent Events
Refer to "Note 20 – Subsequent Events" to the accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to June 30, 2026.
Non-GAAP Financial Measures
Distributable Earnings
Distributable Earnings, a non-GAAP financial measure, is defined as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items (including depreciation and amortization related to real estate owned) included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, and (v) provision for current expected credit losses. Distributable Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.
A significant limitation associated with Distributable Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Distributable Earnings may not be comparable to similarly-titled measures of other companies, that use different calculations. As a result, Distributable Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP. Distributable Earnings are reduced for realized losses and increased for realized gains.
For the three months ended June 30, 2026 and March 31, 2026, our Distributable Earnings were ($349.1) million, or $(2.62) per share, and $30.7 million, or $0.22 per share, respectively.
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The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Distributable Earnings:
Three Months Ended
June 30, 2026 March 31, 2026
Weighted-Averages Shares Shares
Diluted shares - GAAP 131,597,073 139,709,831
Unvested RSUs, net(1) 1,705,981 2,060,564
Diluted shares - Distributable Earnings 133,303,053 141,770,395
(1)Unvested RSUs are net of incremental shares assumed repurchased under the treasury stock method, if dilutive. For the three months ended June 30, 2026 and three months ended March 31, 2026, there were 574,742 and 599,484 incremental shares included, respectively.
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 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 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 $30.7 million during the three months ended June 30, 2026, relating to the repayment of debt in connection with the Asset Sale. The loss represented unamortized fees and deferred financing costs associated with our secured debt arrangements, senior secured term loan, and senior secured notes. Refer to "Note 7 – Secured Debt Arrangements, Net", "Note 8 – Senior Secured Term Loans, Net", and "Note 9 – Senior Secured Notes, Net" for additional detail.
During the three months ended March 31, 2026, there were no realized losses on investments or realized losses on extinguishment of debt.
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The table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to realized loss on investments and realized loss on extinguishment of debt ($ in thousands):
Three Months Ended
June 30, 2026 March 31, 2026
Net income available to common stockholders $ 22,711 $ 23,159
Adjustments:
Equity-based compensation expense 3,047 3,047
Loss (gain) on foreign currency forwards 18,026 (16,812 )
Foreign currency loss (gain), net (18,920 ) 17,148
Realized losses relating to interest income on foreign currency hedges, net (493 ) (416 )
Realized gains relating to forward points on foreign currency hedges, net 1,073 3,864
Depreciation and amortization on real estate owned 4,631 3,981
Decrease in current expected credit loss allowance, net (379,224 ) (3,289 )
Net realized loss on investments 339,087 —
Loss on extinguishment of debt 30,714 —
Total adjustments: (2,059 ) 7,523
Distributable Earnings prior to net realized loss on investments and loss on extinguishment of debt $ 20,652 $ 30,682
Net realized loss on investments $ (339,087 ) $ —
Loss on extinguishment of debt (30,714 ) —
Distributable Earnings $ (349,149 ) $ 30,682
Diluted Distributable Earnings per share prior to net realized loss on investments and loss on extinguishment of debt $ 0.15 $ 0.22
Diluted Distributable Earnings per share of common stock $ (2.62 ) $ 0.22
Weighted-average diluted shares - Distributable Earnings 133,303,053 141,770,395
Book Value Per Share
The following table calculates our book value per share ($ in thousands, except per share data):
June 30, 2026 December 31, 2025
Stockholders' Equity $ 1,254,860 $ 1,856,090
Series B-1 Preferred Stock (Liquidation Preference) (169,260 ) (169,260 )
Common Stockholders' Equity $ 1,085,600 $ 1,686,830
Common Stock 128,212,093 138,943,831
Book value per share $ 8.47 $ 12.14
Investment Guidelines
Our current investment guidelines, approved by our board of directors, are comprised of the following:
1.no investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;
2.no investment will be made that would cause us to register as an investment company under the 1940 Act;
3.investments will be predominantly in our target assets;
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
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.
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The board of directors must approve any change in or waiver to these investment guidelines.
Investment Activity
During the six months ended June 30, 2026, we committed $299.9 million of capital to a new loan (fully funded at closing), and provided $373.8 million of add-on fundings. During the six months ended June 30, 2026, we received $9.5 billion in loan repayments.
Loan Portfolio Overview
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.
Leverage Policies
We use leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. Our charter and bylaws do not limit the amount of indebtedness we can incur; however, we are subject to and carefully monitor the limits placed on us by our credit providers and those that assign ratings on our company. At June 30, 2026, our debt-to-equity ratio was 0.7 and our only outstanding debt was the construction financing on the Brooklyn Multifamily property.
Debt-to-Equity Ratio
The following table presents our debt-to-equity ratio:
June 30, 2026 December 31, 2025
Debt to Equity Ratio (1) 0.7 4.1
(1)Represents total debt less cash and net loan proceeds held by servicer (recorded with Other Assets, see "Note 6 – Other Assets" for more information) to total stockholders' equity.
Contractual Obligations, Liquidity, and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund and maintain our assets and operations, repay borrowings, make distributions to our stockholders and other general business needs. We utilize various sources of cash in order to meet our liquidity needs in the next twelve months, which is considered the short-term, and the longer term.
Our current debt obligations consist of $371.5 million of debt related to real estate owned, held for investment. Refer to "Note 5 – Real Estate Owned" of our condensed consolidated financial statements for additional disclosure regarding our debt related to real estate owned. During the three months ended June 30, 2026 all corporate debt and secured debt arrangements were fully repaid using proceeds from the Asset Sale. 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.
Our primary sources of liquidity as of June 30, 2026 were represented with $1.2 billion of cash on hand, and cash flows from operations. Additionally, we held $21.7 million of additional capacity on our construction financing secured by our Brooklyn Multifamily Development property which is available to fund remaining construction costs.
To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and replenish or increase capital for operations.
On June 15, 2026, 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 interest of the ARI stockholders. On July 14, 2026, we filed the Special Meeting Proxy with the SEC. The vote on the matters set forth in the Special Meeting Proxy will materially impact our long-term capital needs and our plan to meet those needs.
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Dividends
U.S. federal income tax law generally requires that a REIT 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. Any distributions we make are at the discretion of our board of directors and depend upon, among other things, our actual results of operations. These results and our ability to pay distributions are affected by various factors, including the net interest and other income from our portfolio, our operating expenses and any other expenditures.
On June 15, 2026, our board of directors declared a dividend of $3.75 per share of common stock, payable July 15, 2026 to stockholders of record as of June 30, 2026, a distribution that will be classified predominately as a return of capital rather than as a distribution of current or accumulated earnings and profits. This larger distribution reflects the board's determination, following its review of strategic alternatives, that returning of capital is in the best interests of the Company and our stockholders.
If our stockholders approve the Plan described in our Special Meeting Proxy, any distributions made following such approval are expected to be treated as liquidating distributions for U.S. federal income tax purposes, rather than as ordinary dividends. Liquidating distributions would generally be applied first against and reduce a stockholder's adjusted tax basis in its shares, with any amount in excess of basis treated as gain from the sale or exchange of such shares. Stockholders should refer to the Special Meeting Proxy, and any definitive proxy statement subsequently filed with the SEC, for a more complete description of the proposed Plan and its tax consequences, and should consult their own tax advisors regarding the treatment of any distributions received in connection therewith.
As of June 30, 2026 and December 31, 2025, we had 6,770,393 shares of our Series B-1 Preferred Stock outstanding. The Series B-1 Preferred Stock pay cumulative cash dividends, which are payable quarterly in equal amounts in arrears on the 15th day of each January, April, July and October: at a rate of 7.25% per annum of the $25.00 per share liquidation preference. On July 15, 2026, we redeemed the shares at a redemption price of $25.00, plus the accrued unpaid dividends of $3.1 million.
The following table details our dividend activity:
Three Months Ended June 30, Six Months Ended June 30,
Dividends declared per share of: 2026 2025 2026 2025
Common Stock $ 3.75 $ 0.25 $ 4.00 $ 0.50
Series B-1 Preferred Stock $ 0.45 $ 0.45 $ 0.90 $ 0.90
Repurchases of Equity Securities
During the three and six months ended June 30, 2026 we repurchased 8,579,855 and 11,453,999 shares, respectively, of our common stock at a weighted-average price of $10.85 and $10.76 per share, respectively. During the three and six months ended June 30, 2025, there was no common stock repurchase activity. Please refer to "Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" for further detail.
Critical Accounting Policies and Use of Estimates
Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. The most critical accounting policies involve decisions and assessments that affect our reported assets and liabilities, as well as reported revenues and expenses. We believe that all of the decisions and assessments upon which these financial statements are based are reasonable based upon information currently available to us. The accounting policies and estimates that we consider to be most critical to an investor's understanding of our financial results and condition and require complex management judgment are discussed below.
There have been no material changes to our Critical Accounting Policies described in our most recent Annual Report on Form 10-K under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Use of Estimates."
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For a complete listing and description of our significant accounting policies, refer to "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K.
Real Estate Owned (and Related Debt)
In order to maximize recovery against a defaulted loan, we may assume legal title or physical possession of the underlying collateral through foreclosure or deed-in-lieu of foreclosure. Foreclosed properties are classified as real estate owned and recognized at fair value on our condensed consolidated balance sheets in accordance with the acquisition method under ASC 805. Real estate assets acquired may include land, building, FF&E, and intangible assets. In accordance ASC 820, we may utilize the income, market, or cost approach (or combination thereof) to determine fair value.
When determining the fair value of a real estate asset under the income approach, we make 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 our estimate of a capitalization rate and discount rate.
When determining the fair value of real estate assets under the market or sales comparison approach, we compare the property to similar properties in the marketplace. Although we exercise significant judgment to identify similar properties, and may also consult independent third-party valuation experts to assist, our assessment of fair value is subject to uncertainty and sensitive to our selection of comparable properties.
When determining the fair value of real estate assets under the cost approach, we measure fair value as the replacement cost of these assets. This approach also requires significant judgment, and our estimate of replacement cost could vary from actual replacements costs.
At times we may classify real estate assets as held for sale in the period in which they meet the criteria under ASC 360 as discussed in "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K. Once a real estate asset is classified as held for sale, depreciation is no longer recorded, and the asset is reported at the lower of its carrying value or fair value less cost to sell. The fair value of real estate assets classified as held for sale is determined using the appropriate methodologies noted in the preceding paragraph and the real estate asset's fair value is subject to uncertainty, as the actual sales price of the real estate asset could differ from those assumed in our valuations.
Once real estate assets have been recorded at fair value, they are evaluated for impairment on a quarterly basis. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows to be generated by the real estate asset over the estimated remaining holding period is less than the carrying value of such 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 for the purpose of assessing impairment, we make certain assumptions including, but not limited to: consideration of projected operating cash flows, intended holding period of the real estate, comparable selling prices and projected cash flows from the eventual disposition of the real estate based upon our estimate of a capitalization rate and discount rate. While we exercise significant judgment in generating our assumptions, the asset's fair value is subject to uncertainty, as actual operating cash flows and disposition proceeds could differ from those assumed in our valuations. Additionally, the output is sensitive to the assumptions used in calculating any potential impairment.
Please refer to "Note 3 – Fair Value Disclosure" and "Note 5 – Real Estate Owned" for more information regarding real estate owned and our valuation methodology as well as "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K.
Current Expected Credit Losses
We measure and record potential expected credit losses related to our loan portfolio in accordance with the CECL Standard. The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. We have adopted the WARM method to determine a General CECL Allowance for the majority of loans in our portfolio, applied on a collective basis by assets with similar risk characteristics. If we determine that a borrower or sponsor is experiencing financial difficulty, we will record loan-specific allowances (our Specific CECL Allowance) in accordance with a practical expedient prescribed by the CECL Standard.
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On the Closing Date the Company sold its commercial real estate loan portfolio (other than loans that were repaid prior to closing and the Chicago Hotel Loan which repaid after the Closing Date). Accordingly, there were no outstanding loans and no CECL allowance as of June 30, 2026. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for further discussion regarding our General CECL Allowance. Refer to "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K for the complete listing and description of our significant accounting policies.
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