• GAAP Net Loss: $0.72 per share for Q4 2024.
• Distributable Loss: $0.59 per share for Q4 2024.
• Distributable Earnings (pre-realized gains/losses): $0.18 per share.
• Investment Loan Portfolio: Decreased to $6.1 billion as of December 31, 2024, from $6.3 billion on September 30, 2024.
• Loan Repayments: $99 million received in Q4 2024, including full repayment of three loans totaling $80 million in UPB.
• Loan Sales: Executed three loan sales with an aggregate UPB of $205 million during Q4 2024.
• Total Liquidity: $102 million as of December 31, 2024.
• Transaction Activity for 2024: $1.3 billion in realizations, split evenly between repayments and loan sales.
• Loan Sales Execution: Five of seven loan sales in 2024 executed at or above 97% of par.
• REO New York Hotel Portfolio: Reclassified to held for sale, with revenue rebounding to all-time highs.
• Liquidity Enhancement Goal: Anticipated gross realization proceeds of just under $2 billion, with 40% expected to increase liquidity.

• Warning! GuruFocus has detected 4 Warning Signs with CMTG.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Claros Mortgage Trust Inc (NYSE:CMTG) reported $300 million in transaction activity for the fourth quarter of 2024, including successful loan sales at or close to par.
• The company executed an aggregate of $1.3 billion in realizations during 2024, split evenly between repayments and loan sales, indicating strong transaction activity.
• CMTG plans to accelerate the resolution of watch list loans, which is expected to enhance portfolio credit metrics and liquidity.
• The company is focused on deleveraging the portfolio and strategically deploying capital to more accretive uses, such as foreclosing on select multi-family assets.
• CMTG is actively pursuing guarantees on defaulted loans, particularly when the guarantor has significant net worth, to maximize value recovery.

Negative Points

• CMTG reported a GAAP net loss of $0.72 per share and a distributable loss of $0.59 per share for the fourth quarter of 2024.
• The company experienced credit migration in its portfolio as borrowers continue to be impacted by the challenging real estate environment.
• Certain pending loan and asset sales forecasted for the fourth quarter did not materialize, pushing objectives into 2025.
• The Board of Directors decided to pause the quarterly dividend to preserve capital and enhance financial flexibility.
• CMTG's stock trading levels are not believed to appropriately reflect the inherent value of the portfolio, indicating potential undervaluation concerns.

Q & A Highlights

Q: Can you clarify the status of Loan 33 and its relation to the New York City mixed-use asset modification? A: Loan 33 is unrelated to the modification discussed. It has always been a land loan. The modification involved a different asset, where we improved the collateral package and received a 15% paydown, excluding any interest in the Chrysler building.

Q: What is the outlook for the repayment of the California multi-family asset listed as a risk-rated 4? A: We are in cooperative discussions with the borrower for a near-term resolution. The process is on a positive path, and we do not anticipate needing additional reserves beyond the general reserve.

Q: Does Claros Mortgage Trust plan to reduce leverage in 2025, and what are the plans for financing REO assets? A: Yes, we plan to continue deleveraging, particularly repaying higher-cost debt. We are finalizing financing for REO assets at levels consistent with current repo lines. We also plan to address the term loan B maturity in 2025.

Q: How aggressive will you be in resolving watch list loans, and will loan sales be part of the strategy? A: We plan to be more aggressive in creating liquidity in 2025, focusing on discounted payoffs and short sales. The improving transaction environment supports this strategy, and we aim to balance liquidity with timing and certainty.

Q: Regarding the 5-rated multi-family loans, does the 12% reserve reflect current or stabilized asset values? A: The reserve reflects a combination of current and stabilized values. We consider potential sale prices and third-party appraisals. The capital requirement for these assets is not substantial, and we expect a modest investment to yield significant returns.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.