In the third quarter of 2025, ACRES Commercial Realty advanced its strategy of monetizing real estate and driving book value, selling one REO investment for a $13.1 million gross gain that lifted GAAP net income to common to $9.8 million, or $1.34 per share, and pushed earnings available for distribution to $1.01 per share (from $0.04 in Q2). GAAP book value per share rose to $29.63 from $27.93, closing in on the roughly $30 target management set when ACRES assumed the ACR management contract in 2020. The $1.4 billion CRE loan portfolio (46 investments, 3.63% weighted-average floating-rate spread over one-month SOFR) contracted a net $46.8 million as $153.2 million of payoffs, sales and paydowns outpaced $106.4 million of new fundings, but management expects a strong slate of Q4 closings to deliver positive full-year net growth and to build collateral for a new CRE CLO in the first quarter of 2026. Credit improved, with a $4.0 million CECL release taking the allowance to $26.4 million (189 bps of the loan book) and leverage falling to 2.7x from 3.0x, while ACRES repurchased 153,000 shares at a roughly 36% discount to book value. Chairman Andrew Fentress marked the fifth anniversary of ACRES managing ACR, citing 12.7% annual book-value growth and 41.8% annual stock appreciation, and reiterated that a common dividend would follow once book-value goals are met and the remaining one-to-three REO properties are sold.
Good morning and thank you for joining our call. I would like to highlight that we have posted the third quarter 2025 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the Company. Before we begin, I want to remind everyone that certain statements made during this call are not based on historical information and may constitute forward-looking statements. When used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. Although the Company believes these forward-looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to several trends, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.
These risks and uncertainties are discussed in the Company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q and 10-K and in particular the Risk Factors section of its Form 10-K. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures may be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most comparable measures prepared in accordance with Generally Accepted Accounting Principles are contained in the earnings presentation for the past quarter.
With me on the call today are Mark Fogel, President and CEO, and Eldron Blackwell, ACR's CFO. I will now turn the call over to Mark.
Good morning everyone and thank you for joining our call today. I will provide an overview of our loan operations, real estate investments, and the health of the investment portfolio, while Eldron Blackwell, our CFO, will discuss the financial statements, liquidity, condition, book value, and operating results for the third quarter 2025. Of course, we look forward to your questions at the end of our prepared remarks. The ACRES team remains focused on executing on our business strategy by building a pipeline of high quality investments, actively managing the portfolio, and focusing on growth in both earnings and book value for our shareholders. In the third quarter, we funded new commitments of $106.4 million, offset by loan payoffs, sales, and paydowns of $153.2 million, producing a net decrease to the loan portfolio of $46.8 million.
We expect a substantial number of new loan closings in the fourth quarter, which will produce positive growth in the portfolio for the full year. The weighted average spread of the floating rate loans in our $1.4 billion commercial real estate loan portfolio is now 3.63% over 1-month term SOFR rates. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1.4 billion of commercial real estate loans across 46 individual investments. At September 30th, our weighted average risk rating was 3.0, an increase from 2.9 at June 30th, and the number of loans rated 4 or 5 was 13 both at the end of last quarter and the end of this quarter. During the quarter, we sold one of our real estate investments, which resulted in a gross capital gain of $13.1 million.
This gain on sale represented a significant part of our strategic plan to use our capital loss carryforwards to maximize shareholder value. During the quarter, we also closed on a construction loan with a third party lender to convert an REO office property in Chicago into a Class A 252-unit multifamily property. The property had previously been contributed to a joint venture with a Chicago-based developer. We expect a grand opening of the property during Q3 2026. As we exit our real estate investments and the loan portfolio continues to amortize, we expect to redeploy capital into attractive CRE loans. As always, we will seek to optimize our portfolio leverage in order to drive equity returns.
In summary, the ACRES team continues to be focused on the overall quality of the investment portfolio, including investments in real estate, with the goal of improving credit quality and recycling capital into new investments to enhance shareholder value. We will now have ACRES CFO Eldron Blackwell discuss the financial statements and operating results during the third quarter.
Thank you and good morning everyone. GAAP net income allocable to common shares in the third quarter was $9.8 million or $1.34 per share. GAAP net income for the quarter included a $13.1 million gross gain on the sale of one of our real estate investments as Mark discussed. Net real estate operations declined by $2.7 million over the prior quarter due to a loss of $2.8 million. Of that loss, $2 million was due to exit fees on the construction and PACE financing and other accelerated costs on the balance sheet from the aforementioned real estate investment sale and to a lesser extent from the operating performance at our two hotels.
During the quarter we saw a decrease in current expected credit losses, or CECL, reserves of $4 million or $0.54 per share as compared to a decrease in CECL reserves during the second quarter of $780,000, which was primarily driven by improvements in the model credit risk of our commercial real estate loan portfolio and improvements in expected macroeconomic factors during the quarter. The total allowance for credit losses at September 30th was $26.4 million and represented 1.89% or 189 basis points on our $1.4 billion CRE loan portfolio at par and was composed of $4.7 million in specific reserves and $21.7 million in general credit reserves. Earnings available for distribution, or EAD, for the third quarter 2025 was $1.01 per share as compared to $0.04 per share for the second quarter.
Quarter-over-quarter EAD saw a net $1.30 increase due to the real estate investment gain on sale offset by a $0.37 decrease from real estate operations. The net EAD gain is our allocable portion of the gain based on our ownership percentage in the investment. GAAP book value per share was $29.63 on September 30th versus $27.93 on June 30th. Additionally, during the quarter we used $2.9 million to repurchase 153,000 common shares at an approximate 36% discount to book value. At September 30th there was approximately $2.5 million remaining on the board-approved program at quarter end. Available liquidity at September 30th was $64 million, which comprised $41 million of unrestricted cash and $23 million of projected financing available on unlevered assets. Our GAAP debt to equity leverage ratio decreased to 2.7x at September 30th from 3x at June 30.
From net repayments on our CRE loan portfolio and the payoff of asset specific financing on the sole real estate investment, at the end of the third quarter 2025, the company's net operating loss carryforward was $32.1 million or approximately $4.55 per share. With that, I will turn the call to Andrew Fentress for closing remarks.
Thank you, Eldron. The third quarter showed progress on our stated goals of selling assets, redeploying the gains into new loans. We're nearly complete on this mission and are excited about the next steps. We have a full pipeline that will soon be available for securitization and get the company on track to maximize income in EAD. This quarter marked the fifth anniversary since we assumed the role of manager for ACR. In this 5 year period, book value has increased 12.7% per year and the stock has increased 41.8% per year. We're excited for the next chapter in the company's evolution and look forward to your questions. I'll now turn the call back over to the operator.
Thank you.