Claros Mortgage Trust, Inc.

Welcome to Claro's Mortgage Trust fourth quarter 2022 earnings conference call. My name is Bruno and I will be your conference facilitator today. All participants will be in listen-only mode. After the speaker's remarks, there will be a question and answer period. You will have the opportunity to ask a question by pressing star followed by one on your telephone keypad. I would now like to hand over the call to Ann Yuen, Vice President of Investor Relations for Clarus Mortgage Trust. Please proceed.

Thank you. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Clarus Mortgage Trust, Mike McGillis, President and Director of Clarus Mortgage Trust, and Jay Agarwal, CMTG's Chief Financial Officer. We also have Kevin Cullinan, Executive Vice President, who leads MREC's origination, and Priyanka Garg, Executive Vice President, who leads MREC's portfolio and asset management. Prior to this call, we distributed CMTG's earning supplement. We encourage you to reference these documents in conjunction with the information presented on today's call. If you have any questions following the call, 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 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'd now like to turn the call over to Richard.

Good morning, everyone, and thank you for joining us for the Claros Mortgage Trust fourth quarter earnings call. I do not have to remind everyone that 2022 was a volatile year. and today we remain in an economic environment of conflicting signals. The broader markets continue to wrestle with strong growth reports on the one hand and persistent inflation on the other. But signals do seem more bullish today than at year end. Deciphering the true economic impact of a sharply higher rate environment remains a central focus of investors as we attempt to anticipate how the Fed will interpret and respond to unfolding market data. This is probably the number one factor impacting non-office real estate assets, and it is our view that in the asset valuation race between rising rents and interest rates, rising rates seem to be winning at this moment. Still, there are so many factors in flux that may impact the economic outlook in the coming quarters. China's decision to end its zero COVID policies, continued volatility in global energy and food prices, and ongoing geopolitical risks are just a few. As a result, our perspective on the economy remains circumspect and is generally in line with consensus views of a mild recession occurring most likely during the second half of 2023. With all this in mind, CMTG is approaching this year with caution. Looking back to quickly recap 2022, it was a very productive year for CMTG. We delivered on the strategic priorities we outlined over the past year, including maintaining liquidity and taking advantage of what we believe were attractive risk-adjusted returns available to us. We concluded the year with total originations of $3.5 billion, This significantly outpaced the prior year and drove the portfolio to an all-time high of $7.4 billion of carrying value and $9.4 billion of total loan commitments. During the year, we primarily focused on senior floating rate loans collateralized by multifamily assets in addition to other select property types with strong supply-demand dynamics, such as industrial, life science, and build-to-rent homes. We also increased our presence in markets that continue to benefit from rapid economic and demographic growth, including Dallas, Nashville, and Miami. And we entered new high-growth markets, such as Phoenix and Salt Lake City. As noted previously in quarterly earnings calls, these are some of the asset types and markets where Mac Real Estate Group has been increasing its equity investments most rapidly and where we believe asset valuations are holding up best. In addition, during the year, we expanded and diversified our funding sources, which included entering into a $150 million acquisition facility and closing on a $1 billion financing facility. We believe our ability to diversify and grow our financing options in a difficult capital market environment speaks to the credibility of our platform, the strength of our portfolio, our management team, our institutional relationships, the fairly conservative leveraged position of our balance sheet we expect 2023 to be a challenging year for the real estate industry overall we expect that the impact of a higher interest rate and loan spread environment and potential slowing consumer demand will likely translate into continued pressure on real estate valuations and muted transaction volumes even if recent spread tightening accelerates in the high yield bond market, the CLO and CNBS markets. In addition to the challenges we have seen in the office asset class, we are beginning to see initial weakness in performance at the asset level across the industry, especially in blue states and cities. And while we expect this trend to continue, We believe that asset performance will be uneven and highly dependent on property type, asset quality, and market. As a general perspective, we feel our asset allocations and market selections position CMTG to withstand deteriorating conditions. And Mike will provide a more detailed discussion of our portfolio later in the call. Despite our confidence in our portfolio, we recognize that our business and borrowers are not immune from the current macroeconomic or interest rate environment. Therefore, we have employed a defensive and disciplined approach to how we manage our business during this time. Maintaining lower leverage today could allow us to expand our balance sheet to capitalize on opportunities that arise and to be prepared for unknown portfolio problems yet to unfold. Further, we believe that staying ahead of our borrowers through proactive asset management and maintaining a long-term investment perspective will be critical to delivering shareholder value. In addition, Mack Real Estate Group's experience in commercial real estate development, ownership, and property management provides us valuable and distinct market intelligence driven by boots on the ground and a large network of industry relationships. Our management team has extensive global real estate investment experience across multiple economic cycles. We understand that a period marked by challenging market conditions is an inherent aspect of managing a commercial real estate portfolio, and that this should provide us with an opportunity to distinguish our performance and to go on the offensive when the time is right. As I look ahead, I have much confidence in our team's expertise and ability to lead us through these times and to find the entry point to resume an opportunistic stance when the tides inevitably change. Thank you all for your time today. I will now turn the call over to Mike Michalis.