Claros Mortgage Trust, Inc.

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 session. If you'd like to register for a question, please press star one on your telephone keypad. I would now like to hand over the call to Han Nguyen, 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 and Chief Financial Officer and Director of Claris Mortgage Trust. 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 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 following today's 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 distributable earnings, which we believe may be important to investors' success or operating performance. For reconciliations of non-GAAP measures through their nearest GAAP equivalent, please refer to the earnings supplement. I would now like to turn the call over to Richard.

Good morning and thank you for joining us for CMTG's fourth quarter earnings call. What a difference a year makes, or at least that's how it seemed as markets commenced 2024 with optimism. Even CMBS spreads rallied as investors enthusiastically purchased bonds in anticipation of imminent rate cuts and a CRE market bottom. But early optimism in the real estate market for rapid monetary easing have been tempered by the reality that the US economy continues to demonstrate resilience, strong employment, and moderate but persistent inflation. GDP is strong. Labor numbers beat expectations. And while inflation has declined significantly, marking meaningful progress towards the Fed's inflation target, it's still above the target. And if January and February are any guide Handicapping Fed movements will be very hard in 2024. Will there be a lag effect of monetary policy dampening growth? Will layoffs commence in earnest? Will ongoing geopolitical risks disrupt supply chains and reunite inflation? And what are the inherent complexities surrounding the election year? Cutting through the noise, most signals point to a soft landing unless you're in the property business and counting on rapid rate cuts. Consequently, good news can be bad news for commercial real estate. With the exception of January, real estate capital markets have been constrained for the last 18 months. Higher borrowing costs coupled with muted transaction volumes have driven up cap rates, and many operators are contending with negative leverage until and unless the Fed drops rates. As a result, not much happened in real estate in 2023, despite the extreme market volatility and negative sentiment and headlines. Most real estate investors assume a wait and see stance, with many postponing difficult decisions that will eventually need to be addressed. Looking ahead, we believe that 2024, and more certainly 2025, will unfold much differently. In 2024, the expectation of rate cuts, along with the availability or lack thereof of distressed asset trades, will likely become a critical inflection point for investors feeling the weight of capital available to deploy. This will bode well for the beginning of the inevitable rationalizing of the real estate market and some consensus as to values. However, our best guess now is that this happens slowly in 2024. with rate cuts remaining on the horizon but slow to materialize. As a result, it will likely take until 2025 for the industry to fully embrace refinancings and recapitalizations. Until rate cuts happen or there is conclusive evidence that they will not, the system is likely to be constrained. And right now it seems unlikely to be clear until the end of 2024 or 2025. Regardless of the exact timing, we need more consensus on CRE values and fundamentals and more visibility from the Fed on rate cuts or transaction volumes to escalate to a level where the capital markets will become constructive. That said, we do anticipate seeing more price discovery and a reduction of bid-ask spreads in 2024. We expect this will slowly lead to heightened transaction volumes and to more seller capitulation. which will in turn place pressure on certain banks and investors to come to terms with declining valuations and weakening fundamentals of certain asset classes. Therefore, we are anticipating a more active 2024, but also a more challenging year for the commercial real estate industry collectively. On a positive note, we can look to the substantial amount of capital sitting on the sidelines waiting to be deployed to act as a shock absorber. If you have capital to deploy, there are investment opportunities across various property types that are supported by strong long-term fundamentals. However, after a slow 2023, investor patience may be waning, and there is not likely to be a clear sign for an opportune entry point. As for CMTG, our borrowers have not been immune to the higher rate environment and resulting diminution in asset values. Generally speaking, our portfolio performance can primarily be attributed to the trends we are seeing in the broader market, namely higher interest rates and reduced capital markets activity. As we navigate through these times, it gives me much comfort to know that our executive team has extensive experience managing portfolios through real estate cycles, and we know that this too shall pass. We believe that our equity mindset approach will now prove to be even more critical. Real estate lending is no longer simply a spread game. This environment dictates that we are all equity investors now, which requires deep boots on the ground real estate expertise. This will be essential to applying a focused solutions driven approach to the inevitable problems. To a large extent, we were made for this. And as disconcerting as such a reordering may be, we are ready. I thank you all for this opportunity to demonstrate what we can do over the coming quarters. I will now turn the call over to Mike.