Claros Mortgage Trust, Inc.

Welcome to Claros Mortgage Trust First Quarter 2020 Earnings Conference Call. My name is Jordan, and I'll be your conference facilitator today. All participants will be in a listen-only mode. After the speaker's remarks, there will be a question and answer period. You may register a question by pressing star followed by 1 on your telephone keypad. I'd now like to hand the call over to Anh Nguyen, Vice President of Investment Relations for Claros Mortgage Trust. Please proceed.

Thank you, and good morning. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Claris Mortgage Trust, Mike McGillis, President and Director of Claris Mortgage Trust, and Jay Agarwal, CMT Chief Financial Officer. We also have Kevin Cullinan, Executive Vice President, who leads MREX Origination, and Priyanka Garg, Executive Vice President, who leads MREX Portfolio and Asset Management. Prior to this call, we distributed P&TG's earning supplements. We encourage you to reference these documents in conjunction with the information presented on today's call. If you have any questions following today's call, please contact me. I'd like to remind everyone that today's calls 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 represent our views 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 net distributable earnings, which we believe may be important to investors to assess our operating performance. For non-GAAP reconciliations, please refer to the earnings supplement. I would now like to turn the call over to Richard.

Good morning, everyone. Thank you for joining us today for CNTG's first quarter earnings call. I'm pleased to share that the first quarter and the beginning of the second quarter were excellent from an asset management and originations perspective. Our first quarter originations volume of $1.2 billion drove portfolio growth resulting in CMTG ending the quarter with an all-time portfolio high of $7.2 billion of total loans and $8.7 billion of loans and commitments. Our strong originations, however, come at a time of great market volatility. Today, we find ourselves at an intersection of events that individually and collectively have created significant financial uncertainty and volatility across the equity and credit markets. War, inflation, rising interest rates, a backed-up securitization market, and the possibility of an economic slowdown continue to make economic outcomes unpredictable, to say the least, but also create origination opportunities for the strongly positioned. Although there are a range of opinions about what may unfold in the coming year, we believe there will continue to be attractive investment opportunities in transitional real estate lending for well-capitalized and scaled lenders like CMTG. Short-term rates and lending spreads are rising, increasing our lending returns. And while this usually creates real estate value reduction, at this moment, rent inflation is also increasing, keeping asset values stable to up in the high growth markets and asset sectors that CMTG has the greatest exposure. In light of this environment, we are particularly pleased with the asset classes and markets that defined our origination activity in the first and second quarters. We've been focused on markets that continue to demonstrate strong growth, such as Dallas, Miami, Phoenix, Seattle, and Nashville, and it's been instructive to follow the lead of our equity business into many of these markets. Deploying capital in these markets has resulted in enhanced portfolio diversification with stable asset values in this rising interest rate environment. Additionally, we've been focused on sectors that we consider to be defensive, multi-family, and build-to-rent homes represented 76% of our first quarter originations. Those supply-demand dynamics and shortages in materials and labor should continue to create valuation tailwinds there. Further, the sector has historically benefited in an inflationary environment. Annual lease renewals provide operators with the opportunity to reprice rents on a yearly basis and make strong demands. and an inflationary backdrop to keep these asset values stable with potential upside. The single family for rent sector shares similar fundamental drivers to multifamily, but may benefit even more from the decrease in for sale single family affordability that we are seeing as a result of supply constraints and interest rate increases. We remain opportunistic as it relates to lending on out-of-favor asset classes such as office and hospitality. The reasons we are generally bearish on office are the same reasons why we like high-growth cities that offer high quality of life. Work is no longer a place. People are migrating and increasingly are working from home. That said, we are seeing certain class A office and select markets outperform on a relative basis. In the hospitality sector, we are finding attractive risk-adjusted returns in the luxury segment of the market. And besides hotels reliant on corporate travel, we are seeing the hospitality sector rebounding well. Given the economic backdrop today, we believe that an allocation to real estate credit continues to be prudent. However, not all real estate credit managers will perform equally well when stress tested. We believe that a platform like ours will outperform because of our deep experience and our equity ownership mindset and equity infrastructure. Our team at CNPG focuses on attracting experienced borrowers who have meaningful equity subordination and invest in high-quality institutional assets, leveraging our significant equity infrastructure and experience in many of today's strongest markets. The second quarter is so far shaping up to be another strong originations quarter for us, with approximately $400 million in originations executed through May 6th. Our asset management also continues to drive value for our stockholders, having made significant progress during the second quarter in resolving our non-accrual loans. Jay will touch on this in further detail later on the call. And while I don't want to steal his thunder, I would like to highlight that we will be recognizing a sizable gain on sale in the second quarter. We're reducing our non-accrual percentage to approximately 2%. I would now like to turn the call over to Mike. Thank you, Richard. And thank you all for joining us this morning. During the first quarter, we originated $1.2 billion of senior floating rate transitional loans across 14 investments. Multifamily comprised 64% of our first quarter origination activity, driving a 7% quarter-over-quarter increase in our multifamily exposure to 37% of the portfolio's UPB at March 31st. In addition, our New York exposure continues to decline and ended the quarter at 33% and has declined even further this quarter as a result of long repayments. The pullback in the CLO and securitization markets we observed late last year continued through the first quarter of 2022, which provided us an opportunity to step in and deploy capital in the multifamily sector that yields wide of what they would have been priced at in a more normal securitization market. Construction loans represented roughly a third of our first core multifamily originations. In addition to liking the fundamentals of the multifamily sector, we believe we're uniquely positioned to manage this asset class, given our sponsors' long history in multifamily development and management. During the quarter, we also originated several loans related to build-to-rent single-family home portfolios. Build-to-rent loan commitments represented more than $150 million, or 12% of our first quarter origination activity. As Richard mentioned, we have a positive outlook on the BTR sector, and we've been looking at the sector for some time now. The first quarter provided us an entry point to participate in the sector in size via portfolio financing format. In addition, we've been rounding out our portfolio over the past year by focusing on select asset types, such as life sciences and industrial. As an example, during the quarter, we originated a $130 million loan for life sciences development in the University City sub-market of Philadelphia. The sponsor is an institutional borrower with extensive development experience, and the investment represents an attractive risk-adjusted return at relatively low LTVs in a sector with strong demand and rent growth. Before turning the call over to Jay, I would like to highlight that we have significant available investment capacity in the form of cash on balance sheet, underleveraged or unlevered assets, available financing capacity on our lines, as well as a low leverage balance sheet. That collectively should provide us with capacity to originate loans in a period of market uncertainty, which should provide us the ability to originate new loans at favorable risk-adjusted returns due to spread widening and benchmark rate increases. I would now like to turn the call over to Jay to review our financial results. Jay.