Claros Mortgage Trust, Inc.

Hello everyone and welcome to Claros Mortgage Trust's third quarter 2023 earnings conference call. My name is Nadia and I'll be your conference facilitator today. All participants will be in a listen-only mode. After the speaker's remarks, there'll be a question and answer period. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to hand over the call to An Lin, 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 Claris Mortgage Trust, Mike McGillis, President and Director of Claris Mortgage Trust, and Jay Agarwal, CMTG's Chief Financial Officer. We also have Kevin Cullinan, Executive Vice President, who leads MREX Originations, and Priyanka Garg, Executive Vice President, who leads MREX 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 those 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 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 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, Ann, and thank you, everyone, for joining us for CMTG's third quarter earnings call. At this time last year, the conversation among investors centered around the timing and depth of a 2023 recession. But it now looks like the US may close this year without one. And while this appears to be positive news, there continues to be much capital market uncertainty as bond rates climb, especially in interest rate-sensitive industries. So it's a confusing time where good news about economic growth can be bad news for asset values, and where headline economic data is subject to multiple interpretations. Add to this the elevated geopolitical risk unseen since the depths of the Cold War, punctuated by the ongoing Russia-Ukraine war and a renewed and rapidly evolving war in the Middle East. you have the basis for persistent market volatility as investors struggle to price capital and underwrite future economic growth corporate earnings and inflation some in the professional investment space believe that we are nearing or at the end of interest rate hikes some are starting to discuss when and not if the fed will begin to cut rates however it's difficult for us to predict the trajectory of interest rates given the multitude of indicators that may influence Fed actions and the numerous and many cases conflicting variables impacting inflation and economic growth. With this in mind, we at CMTG have been executing our business within the context of a higher for longer rate environment. And this is one of the main reasons we have been so proactive. We are managing our portfolio with a long-term, investment perspective towards maximizing shareholder value while acknowledging the commercial real estate industry's challenges. COVID-related demand shifts have been disruptive, particularly in the office sector, but perhaps not nearly as jarring as the COVID stimulus-induced inflation we are dealing with today and the subsequent higher interest rate environment. The combination of these two factors has resulted in capital markets dislocation that we continue to see throughout the real estate sector. Not surprisingly, amidst these headwinds, sales and transaction volumes have been significantly down over the past several quarters. However, outside of the office market, we have yet to observe many truly distressed trades. What we are seeing is transaction volume around select high quality assets at only modestly lower values in spite of the challenging environment. Turning past the economic climate, I'll now add a few high level remarks on the third quarter for CMTG. We had an active and productive quarter overall. with portfolio management and strategic execution focused on liquidity and capital preservation. As mentioned on our last earnings call, we had anticipated significant loan repayments in our portfolio during the back half of the year, and we're pleased to report that we remained on track with four loans repaying during the third quarter. Given the limited transaction activity in the broader real estate market, We believe this reflects positively on the institutional quality of the assets and the sponsors within our portfolio. During the quarter, we also executed two loan sales. The first loan was a Texas hospitality loan, which was sold at par with the intention of reducing our overall hospitality exposure and bolstering our liquidity. The second loan, was collateralized by a San Francisco multifamily portfolio with a rent regulated component. In the current environment, it's important to be vigilant. And as part of our asset management process, we evaluate our investments through the lens of optimizing long-term shareholder value balanced against the time and capital required to achieve that value. So in select circumstances, we will consider selling a loan where we no longer have long-term conviction in the investment. This was the case with the San Francisco multi and family investment we decided to sell during the third quarter. It was a difficult decision due to the resulting realized loss. But ultimately, we believe that this portfolio management decision was prudent given the market and regulatory headwinds the investment was facing. Mike will provide a more comprehensive portfolio review later on in the call. including details of the loan sales. Lastly, as previously reported, CMTG declared a dividend of 25 cents per share for the third quarter, which represents a reduction from prior quarterly dividend levels of 37 cents per share. We considered a number of factors in resetting the dividend, including acknowledging that the current market disruption was and is very likely to persist. and the desire to take advantage of potential opportunities that may arise within our portfolio. Given these factors, we look to establish the dividend at a level where we believe it will be sustainable and comfortably covered by distributable earnings before realized gains and losses, and leave us prepared for future opportunities and potential unknowns. I would now like to turn the call over to Mike.