Welcome to the Claros Mortgage Trust First Quarter 2025 Earnings Conference Call. My name is Becky, and I will be your conference facilitator today. [Operator Instructions] I would now like to hand the call over to Anh Huynh, Vice President of Investor Relations for Claros Mortgage Trust. Please proceed.

Thank you. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Claros Mortgage Trust; and Mike McGillis, President, Chief Financial Officer and Director of Claros Mortgage Trust. We also have Priyanka Garg, Executive Vice President, who leads MRECS Portfolio and Asset Management. Prior to this call, we distributed CMTG's earnings release and supplement. We encourage you to reference these documents in conjunction with the information presented on today's call. If you have any questions, please contact me. I'd like to remind everyone that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our other filings with the SEC. Any forward-looking statements made on this call represents our view only as of today, and we undertake no obligation to update them. We will also be referring to certain non-GAAP financial measures on today's call, such as distributable earnings, which we believe may be important to investors to assess our operating performance. For reconciliations of non-GAAP measures to their nearest GAAP equivalent, please refer to the earnings supplement. I would now like to turn the call over to Richard.

Thank you, Anh, and thank you, everyone, for joining us this morning for CMTG's first quarter earnings call. Reflecting on recent U.S. tariff and foreign policy volatility, there is now heightened uncertainty as to outcomes that has rippled across the globe. And while it's still unclear what the long-term implications will be for the U.S. economy, the global economy and commercial real estate broadly, we've been observing impacts on the real estate capital markets. We are seeing spreads widen slightly and some institutional participants pause before transacting as assessing and ascribing value to risk has become exceptionally difficult and will likely remain so until tariff and other economic policies are settled. All of this combined with the ongoing higher rate environment means that there are continuing headwinds to the broader real estate recovery. Notwithstanding this difficult backdrop, I am pleased to report that CMTG has made progress towards achieving the goals we outlined on our last earnings call, enhancing liquidity, reducing leverage and optimizing the outcomes on our watch list loans. As of April 30, we have fully realized five loans and have received $607 million in proceeds from repayments and resolutions. Through these transactions, we accomplished the following: First, we improved our liquidity position. Second, we continue to reduce leverage. Third, we resolved two watch list loans and reduced CMTG's land and office exposure, which are two property types that have experienced challenges in recent years and have been difficult to monetize. Finally, we reduced our hospitality exposure by an aggregate of $326 million, which we view as a positive sign given the potentially increasing economic headwinds and recessionary fears. Further, we have made progress on our multifamily REO strategy described last quarter. During the first quarter, we closed on a $214 million facility that will allow us to finance these non-performing loans through the REO stage. We continue to believe our path to optimizing outcomes on these cash flowing assets on behalf of shareholders is to assume title and manage these assets through disposition, given our sponsors' experience as an owner, operator and developer. As we look to the remainder of the year and the strategic priorities we set out to accomplish, our work continues every day. We also recognize the economic and political climate and its potential impact on capital markets, investor sentiment and our momentum in accomplishing these priorities. As we navigate this period of uncertainty and volatility, we will continue to consider various paths to loan resolutions. These may include divesting, extending, recapitalizing or taking assets over as REO, depending upon market conditions and our assessment of opportunity through our sponsors' lens as a value-add owner and developer of real estate assets. I would now like to turn the call over to Mike, and I thank you all for joining us today. Mike?

Thank you, Richard. We are highly focused on enhancing liquidity, thoughtfully redeploying capital to more accretive uses such as reducing higher cost leverage and reducing levels of watch list loans. In executing these priorities, we may consider strategies such as loan sales, discounted payoffs and/or foreclosures, among other actions to achieve our objectives. Our financial results and portfolio activity reflect our progress in the execution of these strategies. For the first quarter of 2025, CMTG reported a GAAP net loss of $0.56 per share and distributable loss of $0.25 per share. Distributable earnings prior to realized losses were $0.08 per share. Earnings from REO investments contributed a distributable loss of $0.03 per share, primarily due to the expected seasonality associated with the hotel portfolio. CMTG's held-for-investment loan portfolio decreased to $5.9 billion at March 31 compared to $6.1 billion at December 31. The quarter-over-quarter decrease was primarily the result of the resolution that occurred during the quarter. During the first quarter, we completed the sale of $101 million senior loan collateralized by a hotel in San Diego, which was sold at par. The loan was classified as held for sale at December 31. And as such, the transaction did not impact CMTG's first quarter held-for-investment portfolio UPB. We also executed on the discounted payoff of $183 million New York land loan at 90% of par. While the discounted payoff impacted our first quarter financial results, the transaction provided several benefits, including generating approximately $95 million of liquidity for CMTG. In addition, the discounted payoff reduced exposure to land in New York City and also mitigated capital markets risk associated with the repayment of this loan at maturity. This loan was ultimately exposed to the office sector and that the sponsor's business plan is a large-scale ground-up office development. Subsequent to…

Thank you.[Operator Instructions] Our first question comes from Doug Harter from UBS. Your line is now open. Please go ahead.

Thanks. For the last two quarters, you've talked about your two large multifamily loans that you would expect to kind of near-term payoff on. I was just hoping you can give us an update on that and kind of what your expectations of near-term are for those payoffs?

Yes. Hi Doug, thanks for the question. It's Priyanka. We are -- that's still in process. We are still anticipating that being the outcome. Both of those have maturities July 31 and August 1. So coming up and both are tracking well towards that. But I will say, just given the market volatility, particularly the West Coast loan, loan number one on our loan list, we are potentially going to have to evaluate other options. But we're -- like Mike said, we're going to be pragmatic. It's a very uncertain environment, and we'll evaluate as we get more information.

Great. And then as you just think about -- if you could update us on your current thoughts around the Term Loan B and kind of your timeline and expectations on that?

Sure, Doug. Well, the term loan has a maturity in August of 2026. So it goes current in August of 2025. We are sort of evaluating a couple of options there that include both an amend and extend of the existing Term Loan B. We would expect to make a meaningful principal paydown as part of that. The other option is evaluating various private credit solutions, which we think are becoming more attractive in the recent environment.

Great. Thank you Mike. Thank you Priyanka.

Thank you. Our next question comes from Rick Shane from JPMorgan. Your line is now open. Please go ahead.

Hey guys, thanks for taking my question this morning. Really just sort of a strategic question as we sit here today on, I guess, it's May 8, and we think about the path to resolution, are you guys -- do you think that the opportunities to maximize NPVs on resolution today have shifted more towards a longer, more managed process or are we still in a scenario where first loss is best loss and it's -- the way to optimize is just to move on as quickly. And with that question, the other part of it is, do you feel at this point that you have the liquidity and resources to, in each of those scenarios, optimize the outcome or do you feel like your options are more constrained because of the liquidity situation within the company?

Thanks, Rick. Thanks for the question. I'll start, and I'll let Richard and Priyanka tag on as appropriate. I think each one of these opportunities you've got to evaluate them on a case-by-case basis. So it's very much facts and circumstances driven at the loan and asset level. That's number one. I think we have fairly good visibility into some additional realizations that should further improve our liquidity position over the course of the second quarter and allow us to execute on asset level strategies that we think are appropriate and maximize our recoveries.

Mike, I wasn't sure if anybody else was going to pipe in on that.

Yes. No, I'll just pipe in. That was exactly what I was going to say. So I'm glad.

Great. I really appreciate it. Thank you very much.

Thank you. [Operator Instructions] Our next question comes from Jade Rahmani from KBW. Your line is now open. Please go ahead.

Thank you very much. Can you please give an update as to where things stand with your repo counterparties? We did see the most recent 8-K with Wells Fargo, reducing that facility's outstanding to $500 million. Just want to see what your repo lenders are looking for, what they're saying? And is the plan to really amortize down the repo balances as you receive proceeds from working out the loans in the portfolio?

Thanks, Jade. I'll take this one. So yes, we recently extended the Wells Fargo facility for another year with extension options out through 2028. We also recently extended the Goldman Sachs repo facility for another two years into 2027. So each repo facility is a little different, but I would say that the repo counterparties have been very constructive, very collaborative as we work through the environment. The reduction in the facility size of the Wells facility is really just a function of looking at what our real financing capacity needs are in the near-term and sort of sizing that at a level that is reflective of what's appropriate in the current environment where we're not originating a lot of loans. We'll continue to evaluate capacity size and as we've done in the past, increase capacity or decrease capacity based on what we're seeing within our portfolio.

Okay. When you say private credit regarding term loan, I mean, I'm not sure what that means. It could mean any host of things. Do you envision -- are you contemplating a facility that would look in all intents and purposes like the current facility, but perhaps at a higher rate or are we looking at potentially a mix of debt restructuring that would include various other things? And what do you think the all-in blended cost would be?

Too early to comment on that Jade. I think what we're seeing is those costs start to get closer together when you're talking about a unitranche facility versus a syndicated debt offering. I think in terms of what that might look like, it would probably look like a new term loan financing, but with probably greater operational flexibility would be the expectation, but too early to comment on specifics.

Mike, let me just add that. Thanks, Jade, sorry. I think that the private market is showing as much opportunity and appetite right now for what were previously better secured securitized executions, and so I think there are actually quite a few different routes to take on this.

Okay. High level, are there any other questions in the queue? I could come back.

We don't have any at the moment.

Jade, go ahead.

Okay. Yes, I was wondering if you could give some summary statistics for the overall portfolio, just so we know where things stand on occupancy, debt yield, perhaps. And if you could just characterize the portfolio in buckets ranging from projects that are light transition to projects that are a complete repositioning.

Yes. Jade, I'll take that. It's Priyanka, thanks. I'd say, look, we're obviously -- it's a transitional portfolio. So some of those metrics are perhaps less relevant. And also we have so many other tools that we use routinely in our toolbox where we have additional credit support in the event of a lower debt yield, lower coverage, right? So that's in the form of cash reserves, hard cash management, guarantees, etcetera, so the first question is a little bit hard to answer just in a vacuum. In terms of how to bucket the portfolio, we obviously have a much more seasoned portfolio than was initially anticipated when we had originated these loans, right? So repayments have been slower. So one way to think about that is our construction portfolio peaked at over a third of the portfolio, and now we're down to only 12% of the portfolio. And we view that as a good thing in the sense that it's much easier to manage liquidity on the go-forward future funding commitments, which have come down significantly. That was about $2 billion just a couple of years ago, and now we're down to just over $100 million of required equity over a 2-year period. And also, that speaks to the fact that a lot of our construction assets are the easiest -- best-in-class in their markets and easiest to refinance. So there's been some natural runoff on that as well. So I think as we sit here today, the heavy transitional and the ground-up construction has really waned. It's much more a lot of -- we have a lot of multifamily exposure, which is cash flowing. We have a couple of assets that have just come out of construction and have their CFO [ph] just in the first quarter. So we think -- portfolio composition is getting better, and I think it is important to point to some of the resolutions that we saw year-to-date. We took an office loan off the books. We took a land loan off the books. So all of that is improving and moving in the right direction.

Okay. And then just this would be helpful from a liquidity perspective. What's the sum total of REO you expect to take this year? And what are the liquidity implications of that? It looks like you do expect to take $330 million of multifamily. And then you mentioned the new facility that can fund REO. I'm not sure what the advance rate is on that. It's probably 55% to 60%. But if you could give a sense for total REO and liquidity implications.

Yes. Priyanka, why don't you cover the total REO and I've got the liquidity implications.

Sure. Okay. I'll start off here. I think, Jade, that's a really good question. We are talking about that internally all the time. It is quite fluid, as you might imagine, because we do have current REO that we think we are going to monetize in the near-term. Our mixed-use asset here in New York City, our business plan there had been to condominiumize commercial, condominiumize the different components, and we are -- we've gotten approvals to do all of that. It is in the process of being recorded, and that will result in us selling a majority of the office floors to a third party, which will result in a liquidity event and reduced REO exposure. So I use that as an example to say there is just going to be ins and outs and it's going to be very frequent. The multifamily assets you identified, those are the ones that we think are the near-term additions into the portfolio. There might be more, and we are not ready to say that we are done taking assets REO. If we think that's the right thing to do, we're going to do it. Just as a data point on the -- those five REO assets that we've identified potential REO, four of them we have been in the -- that's been the strategy for the better part of a year as we've been getting our ducks in a row to do that. And on those assets, we've been working side-by-side with the borrower over a long period of time and effective gross income is up 18% from the trough and occupancy is up 6 percentage points from the trough. So it just goes to show that we're going to -- when we're going to get involved, we're going to do it on assets where we think our broader platform can really bear the appropriate experience and create real value. Mike, do you want to jump in on the liquidity point?

Sure. Jade, with respect to liquidity, when we move these assets on to the new financing facility for NPLs and REOs we -- the advance rate that we currently have on those facilities is consistent with what we'll need when we foreclose on the asset. So there's going to be no liquidity outflow on that initial asset pool when we foreclose.

Okay. That's good to know. I guess this is a strategic question, but an idea just popped into my head. I've been covering this space since 2009. I'm very familiar with what iStar did. And I was wondering if you might contemplate given the development background that Matt has, splitting the company into a company that holds real estate development assets and really has capital that is long-term patient, not looking for a near-term dividend and would allow the greatest flexibility and potential upside. And then separating that from a mortgage REIT that would be generating more regular way income and focus on the performing part of the portfolio, and that would be positioned to eventually take advantage of the current environment and grow and you could bring in partners to do this. So just curious your thoughts on that.

Jade, that's an excellent idea and certainly something that we've had to think about. Right now, we don't have any plans to do that, but it's something we have to consider as we look at the opportunity in front of us in terms of how much REO we might want to own and reposition. So we're going to continue to evaluate all strategies, including that. But right now, we're trying to really think about REO as a medium-term opportunity to improve performance of the assets before liquidating them. But I think it is good to consider other ways to think about REO as we bring them on and we reposition them.

Thank you.

Thank you. We currently have no further questions. So I'll hand back to Richard for closing remarks.

So thank you all again for joining. Let me just make some observations that maybe we're all feeling as volatility in Washington from a policy perspective seems to be abating. But at the moment, it's slowing down the recovery in real estate. Having said that, fundamentals are still strong at the property level. And the REO assets that we are taking back, we're doing, I think, quite a good job in improving performance. Otherwise, we wouldn't be bringing them on balance sheet if we didn't think we can do that. As stated, in the last call, we've got $2 billion of realizations that we are seeking to create over the year. We've done $600 million so far, and we've got a number of additional realizations in the queue to help improve our liquidity. That's going to be our key to continue to do what it takes to manage the liquidity to delever and be ready for future liability maturities and to get back on offense. So that's what we're doing. And hopefully, the volatility will abate and allow the recovery in real estate that we've been experiencing over the last six months to a year to continue. So I thank you all for joining, and I look forward to speaking to you again on the next earnings call.

This concludes today's call. Thank you for joining us. You may now disconnect your lines.