Claros Mortgage Trust, Inc.

Welcome to Clara's Mortgage Trust fourth quarter 2024 earnings conference call. My name is Marie and I will 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. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. Now, if you change your mind, please press star followed by two. I would now like to hand over the call to Ann Nguyen, 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, and Mike McGillis, President, Chief Financial Officer and Director of Clarus Mortgage Trust. We also have Priyanka Garg, Executive Vice President who leads MREC 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 meeting 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 to assess our operating performance. For reconciliations of non-GAAP measures to their nearest GAAP equivalents, please refer to the earnings supplement. I'll now like to turn the call over to Richard.

Thank you, Ann, and thank you everyone for joining us this morning for CMTG's fourth quarter earnings call. Commercial real estate continues to undergo a significant transition period. While the underlying fundamentals are generally strong and the capital markets have been demonstrating signs of healing, the recovery has been slow and progress has not been linear nor universal. Interest rate driven valuation concerns and the higher for longer rate environment continue to be key things weighing on commercial real estate investors. For the fourth quarter of 2024, CMTG had $300 million in transaction activity, which included repayment proceeds from borrowers in addition to loan sales that we successfully executed at or close to par. Mike will provide additional color later on the call. We also experienced credit migration in the portfolio as borrowers continue to be impacted by the challenging real estate environment. While we have been working towards resolving watch list loans, certain pending loan and asset sales that we had forecasted for the fourth quarter did not materialize due to circumstances unique to each situation. As such, our objectives of achieving resolutions while also enhancing overall liquidity were pushed into 2025. Additionally, as many of you are aware, back in November, the interest rate outlook once again became uncertain and less optimistic when the Fed signaled fewer rate cuts than the market was forecasting at the time. Given this and the understanding that the industry collectively will continue to navigate an elevated rate environment, we believe that adopting conservative stance in managing our available capital was prudent. In line with this, Back in December, our Board of Directors, after taking into consideration that CMTG had already fulfilled its retaxable income distribution requirements for 2024, decided to pause the quarterly dividend to preserve capital and enhance financial flexibility. As we look out to 2025, we are encouraged by the industry momentum we are seeing. Commercial real estate is commencing the year on the heels of quarterly growth in transaction volumes. In the CMBS market, spreads have tightened meaningfully over the past several quarters, despite increasing primary issuance levels. Against this backdrop, we believe that this will be a pivotal year for CMTG as we execute on our 2025 strategic priorities. Today, we have a subset of loans in our portfolio that are risk-rated four or five and non-accrual loans in addition to REO assets. Accelerating the resolution of these watch list loans will enable us to accomplish the following objectives. first reduce the drag on earnings second enhance our overall portfolio credit metrics and liquidity and third utilize the additional liquidity to strategically deploy capital to more accretive uses this may include de-levering the portfolio and investing in opportunities we have previously identified within the existing portfolio such as foreclosing on select multi-family assets mike will speak to this in more detail later on the call our approach as an asset manager has been to fight for full value on every asset as our executive team has experienced from prior cycles patiently working out problem loans and seeing asset values recover dramatically. This approach has meant being willing to work with borrowers to help them execute while also being willing and able to take assets REO. However, at times our approach to maximizing value has required difficult trade-offs on liquidity. Looking forward into 2025, while these continue to be uncertain times, our base case expectation is that refinancing and demand for real estate assets will continue at levels that will allow us to transition out of a meaningful level of our non-earning or lower-earning assets. As for CMTG stock, we do not believe that the recent trading levels appropriately reflect the inherent value of our portfolio. Therefore, we will continue to execute and be prepared to take actions designed to improve credit matrix and liquidity, reduce leverage, and accretively redeploy capital. If we are successful, we believe this will translate into a valuation for CMTG stock that is more reflective of our inherent business and portfolio. I would now like to turn the call over to Mike.