Claros Mortgage Trust, Inc. Q3 FY2025 earnings call

• Richard Mack noted the continued signs of stabilization and recovery in the real estate market, with liquidity returning and rate cuts improving the outlook. CMTG has exceeded the $2 billion total resolutions target with $2.3 billion, improved liquidity by $283 million to $385 million, resolved 9 watch list loans, reduced total borrowings by $1.4 billion, and increased unencumbered asset pool. - Michael McGillis reported a GAAP net loss of $0.07 per share and distributable loss of $0.15 per share, with distributable earnings prior to realized gains and losses at $0.04 per share. Discussed portfolio changes including loan resolutions, reclassification of loans, and liquidity enhancements through asset sales.

For the third quarter of 2025, CMTG's held-for-investment loan portfolio decreased to $4.3 billion at September 30 compared to $5 billion at June 30. Year-to-date, there have been $2.3 billion of total resolutions, including $81 million in partial repayments and 9 watch list loans totaling $1.1 billion of UPB. Earnings from REO investments contributed $0.01 per share to distributable earnings net of financing costs. The total CECL reserve on loans at September 30 was $308 million or 6.8% of UPB compared to $333 million or 6.4% of UPB at June 30.

• CMTG is focused on addressing the August 2026 Term Loan B maturity and evaluating options for refinancing or extension. - Entered into an amendment of the Term Loan B terms, including modifying financial covenants and using liquidity to make a $150 million principal repayment on the Term Loan B. - Anticipates providing additional details on refinancing solutions in the coming months.

• Uncertainty surrounding the slowing economy and market dynamics. - Impact of borrower decision-making and market conditions on loan performance. - Risks associated with the transition of the portfolio and monetizing assets.

Q: What was the impact in the third quarter of reversal of accruals on the loan placed on non-accrual?

A: It was about $4.5 million, the reversal of the accrued interest receivable on that particular loan.

Q: When do you think we will see a trough in NII? Are we there at this point?

A: We are in the process of transitioning the portfolio and aggressively moving out of 4 and 5-rated loans. It's going to be lumpy over the near term while working through that, and the market environment is more constructive but hard to say if we're at the trough yet.

Q: Can you give an update on the term loan?

A: Balance outstanding is about $712 million, with a $150 million paydown bringing cash to $230-235 million range. Anticipate additional monetizations to improve liquidity and expect a modest incremental paydown with a new or extended facility. No immediate plan for preferred equity but will monitor.

Q: Update on risk 5 and 4 loan buckets and REO?

A: REO portfolio is expected to increase with some assets being monetized. Actively negotiating with borrowers in risk 4 category for modifications. REO yield is mixed, with hotels having mid-teens return and multifamily in transition with lower yield.

Q: Impact of California multifamily loan moving to anticipated REO?

A: Change due to extensive discussions with borrower who is unwilling to support the asset. Process is in a non-judicial foreclosure state and expected to be clean, with opportunities to create value through improvements.

Q: Line of sight on significant repayments before end of year or early next year?

A: There is a possibility of significant repayments in the balance of the fourth quarter and early next year, with borrowers in various stages of refinancing plans on 3 and 4-rated loans, and other tools in the toolkit to resolve assets in the coming quarters.