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RELATED PARTY TRANSACTIONS
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 16 - RELATED PARTY TRANSACTIONS

Relationship with ACRES Capital Corp. and certain of its Subsidiaries. The Manager is a subsidiary of ACRES Capital Corp., of which Andrew Fentress, the Company’s Chairman, serves as Managing Partner, and Mark Fogel, the Company’s President, Chief Executive Officer and Director, serves as Chief Executive Officer and President. Mr. Fentress and Mr. Fogel are also shareholders and board members of ACRES Capital Corp.

Effective on July 31, 2020, the Company has a Management Agreement with the Manager pursuant to which the Manager provides the day-to-day management of the Company’s operations and receives management fees. For the three and six months ended June 30, 2024, the Manager earned base management fees of $1.6 million and $3.2 million, respectively. For the three and six months ended June 30, 2023, the Manager earned base management fees of $1.7 million and $3.3 million, respectively.

For the three and six months ended June 30, 2024, the Manager did not earn an incentive management fee. For the three and six months ended June 30, 2023, the Manager earned incentive management fees of $255,000 and $384,000, respectively, of which 50% was paid in cash and 50% was paid in common stock.

At June 30, 2024 and December 31, 2023, $540,000 and $546,000, respectively, of base management fees were payable by the Company to the Manager. At June 30, 2024, there was no incentive management fee payable and at December 31, 2023, there was $38,000 of incentive management fees payable by the Company to the Manager.

The Manager and its affiliates provides the Company with a Chief Financial Officer and a sufficient number of additional accounting, finance, tax and investor relations professionals. The Company reimburses the Manager’s expenses for (a) the wages, salaries and benefits of the Chief Financial Officer, and (b) a portion of the wages, salaries and benefits of accounting, finance, tax, and investor relations professionals, in proportion to such personnel’s percentage of time allocated to the Company’s operations. The Company reimburses out-of-pocket expenses and certain other costs incurred by the Manager that related directly to the Company’s operations. These costs are recorded in general and administrative expenses on the consolidated statement of operations.

The Company reimbursed the Manager $1.1 million and $2.6 million, for the three and six months ended June 30, 2024, respectively, and $1.4 million and $2.3 million, for the three and six months ended June 30, 2023, respectively, for all such compensation and costs. At June 30, 2024 and December 31, 2023, the Company had payables to the Manager pursuant to the Management Agreement totaling $329,000 and $686,000, respectively, related to such compensation and costs. The Company’s base management fee payable and incentive management fee payable were recorded in management fee payable while expense reimbursement payables were recorded in accounts payable and other liabilities on the consolidated balance sheets, respectively.

On July 31, 2020, ACRES RF, a direct, wholly owned subsidiary of the Company, provided a $12.0 million loan (the "ACRES Loan") to ACRES Capital Corp. evidenced by the promissory note from ACRES Capital Corp.

The ACRES Loan accrues interest at 3.00% per annum payable monthly. The monthly amortization payment is $25,000. The ACRES Loan matures in July 2026, subject to two one-year extensions (at ACRES Capital Corp.’s option) subject to the payment of a 0.5% extension fee to ACRES RF on the outstanding principal amount of the ACRES Loan.

The Company recorded interest income of $82,000 and $166,000 for the three and six months ended June 30, 2024, respectively, and $85,000 and $169,000 for the three and six months ended June 30, 2023, respectively, on the ACRES Loan in other income (expense) on the consolidated statements of operations. At June 30, 2024 and December 31, 2023, the ACRES Loan had a principal balance of $10.9 million and $11.0 million, respectively, recorded in loan receivable - related party on the consolidated balance sheets. At June 30, 2024 and December 31, 2023, the ACRES Loan had $27,000 and no accrued interest receivable, respectively.

At June 30, 2024, the Company retained equity in two securitization entities that were structured for the Company by the Manager. Under the Management Agreement, the Manager was not separately compensated by the Company for executing this transaction and was not separately compensated for managing the securitization entity and its assets.

Relationship with ACRES Capital Servicing LLC. Under the MassMutual Loan Agreement, ACRES Capital Servicing LLC ("ACRES Capital Servicing"), an affiliate of ACRES Capital Corp. and the Manager, serves as the portfolio servicer. Additionally, ACRES Capital Servicing serves as special servicer of ACR 2021-FL1 and ACR 2021-FL2.

During the three and six months ended June 30, 2024 and 2023, ACRES Capital Servicing received no portfolio servicing fees and earned $11,000 and $26,000, and $20,000 and $65,000, respectively, in special servicing fees, of which $4,000 and $7,000 and $12,000 and $47,000, respectively, was recorded as a reduction to interest income in the consolidated statements of operations.

Relationship with ACRES Commercial Mortgage, LLC. During the year ended December 31, 2023, subsequent to approval from its Board, the Company purchased a participation for $22.5 million in one CRE whole loan from ACRES Commercial Mortgage, LLC, an affiliate of ACRES Capital Corp. and the Manager. There was no activity for the six months ended June 30, 2024.

Relationship with ACRES Collateral Manager, LLC. ACRES Collateral Manager, LLC, an affiliate of ACRES Capital Corp. and the Manager, serves as the collateral manager of ACR 2021-FL1 and ACR 2021-FL2, a role for which it waived its fee.

Relationship with ACRES Development Management, LLC. ACRES Development Management, LLC ("DevCo") is a wholly owned subsidiary of ACRES Capital Corp., the parent of the Manager. DevCo acts in various capacities as a co-developer or owner’s representative for direct equity investments within the Company’s portfolio. In November 2021, December 2021 and April 2022, the joint venture entities of the three CRE equity investments acquired through direct investment entered into development agreements with DevCo (the "Development Agreements").

Pursuant to the Development Agreements, DevCo agreed to manage the development of the projects associated with each equity investment in accordance with a development standard in exchange for fees equal to between 1.25% and 1.5% of all project costs. The Company incurred and paid fees for services rendered under these agreements of $82,000 and $206,000 for the three and six months ended June 30, 2024, respectively, and $91,000 and $145,000 for the three and six months ended June 30, 2023, respectively.

Relationship with ACRES Share Holdings, LLC. During the six months ended June 30, 2024, the Company issued 1,911 shares to ACRES Share Holdings, LLC in connection with the incentive compensation payable to the Manager under the Management Agreement. There was no activity for the three months ended June 30, 2024. The shares vested fully upon issuance pursuant to the Management Agreement.

During the three and six months ended June 30, 2024, the Company issued 295,237 restricted shares of common stock under the Manager Plan to ACRES Share Holdings, LLC after hitting the established per share book value hurdle. This grant vests 25% per year over four years. See Note 12 for further details.