Earnings call transcript Q2 2023

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Operator

Hello, everyone, and welcome to Claros Mortgage Trust Second Quarter 2023 Earnings Conference Call. My name is Bruno, and I’ll be your conference facilitator today. [Operator Instructions]

I will now hand over to your host, Anh Huynh, Vice President of Investor Relations for Claros Mortgage Trust. Please proceed.

Anh Huynh

you. Thank CMTG’s Richard Michael Officer of McGillis, Trust; Jai by Claros Chairman Claros Chief and Trust; Officer. Mortgage President Agarwal, Mack, joined and Executive of Mortgage I’m Financial Chief and Director

also and Garg, Portfolio Originations; and Kevin leads leads Management. President, Priyanka Executive President, Executive Vice We who have Emric Asset who Vice MREG Cullinan,

conjunction to today’s to reference you this We supplement. encourage on call, Prior presented documents we with in release call. information distributed CMTG’s earnings the these

factors, following today’s the in to of other we to represent questions Private today, please contact today’s If may by these forward-looking materially undertake like any you Any Reform statements statements XXXX. SEC. the call, our me. I’d of may obligation as differ on meaning important those from remind filings views our call including a Act this have with results Securities and Litigation of statements no that various result those made everyone forward-looking Actual as within call them. indicated include only discussed forward-looking update of the

referring performance. also we important to believe investors be non-GAAP our on today’s financial be call, earnings, such may will We to assess to which measures as operating distributable certain

For refer like supplement. GAAP I to non-GAAP to over to would turn equivalent, reconciliations of to their nearest Richard. now measures please the earnings the call

Richard Mack

recessionary everyone, us story. lending. have has CMTG’s continued a in for consistent unit an you, joining environment year credit been tight Second alike lenders Call. developers resulted sharply employment. and in in industry, of rate asset registered for broadly as increases. inflation month tell as transact and of reduced plans inflationary headlines the be rally. nearing are around estate the print the very strong reflecting These restock the a and suggest has and seen the real us and bonds valuations stance challenging commercial equity risk. exacerbated activity thank inflation operators, and rate this Most interpreted business long reset, and has well backdrop of that entire owners, and Earnings higher Thank volume recession This of data office you, surprisingly summer. conflicting economic sluggish rate value bank Many fundamentals Last lessened, conditions, end Huynh, interest signals at conditions XXXX adjust for decline, down not a Quarter interest by hike of against we They may

months readings determine plan will word will be economic year, rate several necessary. next the and the the the Fed the to hikes inflation Fed’s we of data for and the and react expect remainder incorporate and the of whether market the reports However, not critical volatility are as and watch to or more be to continue

will inflationary while the war, that term, will is view forces disputes trade Our with stimulus forces deflationary globalization long-term and us short eventually Rates and win be in will the out. normalize. technology of medium and of

where high we rates However, benchmark X more operating in seen in rates environment be need CMTG inflation prepared environment an for reached interest not we persist. where an Today, are levels have decades. peak and to than

is positioned. in rate When we we rates, environment operate for a believe short-term assume a higher our lower the to and our soft longer portfolio that While the hope of and market have or we higher constructed defensively business accordingly. we’re landing for rate context our would thoughtfully we office coveted longer facing and/or worsening and evaluate distress, environment portfolio recession

has rate As a primarily lender, floating in positively rates. impacted part, been, by interest CMTG rising

protect rise borrowers acknowledge and in the on put do and the are costs. our continuing their capital said, instances, them time, rapid same in We see that must so. are most historically That borrowers borrowing to extreme yield. to generally, all-in at high has generating rates we But we have stress significant

sector a is transactions industry the less had of Borrowers the to deep many plague what need regarding closing resolutions beginning see office value starting in assets are worked we work whom market continuing And downturn just back pandemic impact major have occurring. apparent to office Institutional difficult and an than is begun fees, to are debt distress real owners question make outstanding. their that also will home market to from We valuation. acknowledge of assets. giving have have to decisions few overall estate in that cases, on to that declines The free become markets see the are capital just as in the starting office sector. to is

tenants additional As it fully renovated, we office is of that are both state highly demand expect economy with given support. and office amenitized credit have to a office the loans were book resourcefulness office consider our of And exposure, low near exposure exposure. office all to creativity any of structured the Further, and if much portion lenders office positive portfolio, a the we as our and office this, the required to decline many significant loans borrowers. Furthermore, resolutions space is of portfolio need from office is too that of today, Despite office expect we we term. type to today. in our of intentionally the percentage constructed or

portfolio Multifamily to at asset even the of composition, broadly. one largest rates elevated our to multifamily relatively be continue reflecting of fundamentals In strong, class more allocation, conviction impact terms high be our continues themes.

the an our markets interest financial This optimistic and protect we driven fundamentals market also many sector the From their has rates. and of However, this with forward both wherewithal carry to favorable. of optimistic be assets of are perspective, experiencing, that to acceptance observing the we’ve for the San been very through by supply-demand as healthy today period curve the few yield such the by Francisco. we higher fundamentals lender’s demonstrate extremely motivation remain continue borrowers as been a

multifamily and how now a U.S. the is housing we it capitalize Additionally, shortage construction. new will difficult believe portfolio our of consideration a to one in boom fundamental for be is

rent, translate hospitality to detailed could assets on later ahead portfolio X on make which call, believe our valuable. discussion X our more exposures. higher in and supply that color will office multifamily historically including Looking years, and a existing Mike the low we provide into additional more should

we business management has believe early to identify our process, our concerns portfolio help the While pressure that us remain is in continue market environment that not well and asset the positioned to the immune been potential to in our is experiencing. confident proactive industry current approach will

in long assets with exit instances manage medium portfolio. will and of an In to decide the want their to not over rates some we take environment, will we will to long-term a continue we assets. loans In with an to anticipate may to instances performance of for We softening book that loans modify and we returns term. collateralizing these be in select building all maximizing expect we objective where our continue shareholders our our our landlords Consequently, and/or longer hire protect will to had assets asset value where will general, collaborate for some strong conviction ourselves. We interest for view stress and for portfolio where borrowers, and borrowers. need to want there our instances and such the underlying of

so. ready, organizational when of capabilities the willing Group, So to protect to are do able not Mack borrowers their we Real and our decide assets, broader Estate given

appropriate. owner, when experience as advantage expertise operator variety take Our that to scenarios. broader our developer to gives have platform execute market we a and weakness of This the confidence is of an us in necessary of type

our leaders The here of business before. have been

cycle. have out We the seen owning discounted of power the and assets riding

and capabilities as preservation intelligence and the environment. opportunistic us, and of and tension the over a market and actimize management capital. value to the dynamic we long business, will be will process to generation market of be all and to course available understanding have reviewing during turn of investment Mike. this And our shareholder the liquidity Board the team We opportunistic. over options of call Being I liquidity uncertainty, value the given a to have resources that when normal current they prudent appropriate term. come disciplined now to period being will requires continue Directors of Therefore,

Michael McGillis

summary, morning market, portfolio across on I’d and seeing the specifically remarks Richard. currently my you, color in a what Thank hospitality we’re start multifamily, this like prepared the to provide then with June sectors. floating rate primarily The and loans CMTG’s portfolio at was senior comprised XX% office of XX. is portfolio of portfolio value XX.X%. $X.X LTV based on a carrying billion as

million. the $XXX we follow-on fundings repayments partial and During $XX of received made of loan million quarter,

in we Looking types, relatively property to across composition remained loans of portfolio year CMTG construction including the expect an repay consistent the back office loans. a ahead, quarter-over-quarter. of number several half

portfolio concentration. I’ll as June REO However, asset type we largest on Multifamily bit. on touch a the additional which comprised representing in property XX, XX% added XX, of an June of our

nature, we positive in of Given though moderating involve that are transitional our lead rent highs rent and trade-outs, positive which we historical increases, renewals from a loans had been repositioning appreciation continuing has seeing. been the see are to assets,

position. million. loans impacted rating to to the the as borrowers instances Richard As are develop and negative risk our exercise portfolio’s multifamily continues same rating. if we’ll by I our to needed. value a carrying and and our of X% tax quarter, solutions we the rights assets from in we flowing struggling the leverage. Many of represent where dynamic of environment MREG with has been have capital our leverage loans been result, risk been with rate X stalling. operator borrowers has a negative located mentioned, be collateralized by Arizona current multifamily to, Texas borrower And anticipate that to X moved end, the these just a multifamily core carry feel while have aggregate, we base we with but spoke like during assets. the to and also the To In expertise contribute The free protecting remedies $XXX that collaborating

Turning to hospitality.

pressure hospitality June of industry XX, experiencing on line portfolio. the top of growth. is The downward As represented XX%

abated, by has European held, consumers leader strong for number has occupancy impacted opposed a demand has domestic traveling While domestically. has factors. post to COVID dollar been relatively to as of opt ADR motivated destinations the Pent-up

relative not travel stock prior has dynamics group light end. in quarter hospitality generally pandemic, steady during of the corporate assets our peers in great to The level market. are XX% portfolio overall Office performance in of their resulted these and our their holding the put hospitality portfolio expectations of has opportunities line as with been comprised and to compression performing the seen which has outperforming fewer of in Additionally, recovered period.

loan the mentioned, n As their headwinds. demonstrating for to business cases, most In Richard solutions face developing that are been bare to sector conviction Requiring borrowers contribute call. throughout discuss capital our and In additional later office portfolio, discussion placed in office loan. paramount. will creative to rostral office X-rated nonaccrual we our on loan our be their Dave the office are being intent of has in we plans on the continued modifications. quarter this managing part

over to call assignment to on foreclosure the like to the June moment to turning a take speak we I’d Before XX. and completed Jai, lower

Mix our in conduction towards working on the are we the the with New previous transaction, and we $XX a taking mentioned of we scharge-off reported June the As call, York an deep principal a lieu transfer XX, million. of loan completed that we assignment property On earnings And identified via of City dead. foreclosure.

the million. of on key developer that long-term and We in We sponsor at generating $XXX value sheet operator property carrying property. be basis our variant owner, our are now balance of will in a an this believe

I opportunities we through, like and great to position low-hanging to risk in on the NOI. consider execute believe where over there comfortable call taking we of what reposition to to we being strategic feel the would of improve maximize are A in property ownership the to terms example addition now value. and the turn shareholder In Jai.

Jai Agarwal

Mike and Richard. you, Thank

loans debt. loss of For realized the $X.XX realized million, loss per net was Again, Mike property quarter an at million a The assignment in venture X about, comprised $X.XX share. offset in per concluding lieu quarter. joint per XXXX. in REA [indiscernible] that was addition of extinguishment The $X.X distributable realized third and New held in on per share reported York GAAP net excluding face distributable per by by impacted as share million I mid-tier for share. $XX $X.XX some loan briefly is earnings, [Indiscernible] due gain of City X. the share. per and or retirement the $X.XX $XX spoke seasonal non-approval was XXXX, discount to of to of York a of way, second loss losses primarily portfolio New on of Including $X foreclosure net quarter-over-quarter, we to SomnB the grew losses, in the each under the for these reported earnings value set. August accounted surprised share due equity a of our of another method income We of performance hotel our

we or first XXX,XXX is reported equal which a by also The subordinate XXX,XXX for XXX% loan. secured

a The senior million loan secured second June San by a but is Francisco. the property of XX holding noncommodity in

million a last loans $XX hotel construction loan York of these third nonaccrual. is this X loan surbodinate City. by The on based secured in Non against was recorded loans specific New a

mentions, the to impact is CRE and rate reflects industry economic this higher to that environment continues the this For broader trend.

We also the we value in One, XX% previously representing investment specific loans. to San of multifamily XX $XXX loan. business reducing million, the to Francisco, our our under increased on X fibrated million added carrying UPB

$XX a the property, specific the the the New of million was $XXX,XXX the is a to represents and new mixed UPB loan key million a second foreclosure. of $XX [indiscernible]. upon million base assets The the addition REO of value at City XX% of [indiscernible]. the York of mixed-use on assignment REO subordibate time against of in reserve $XXX charged lastly, And under loss loan. of This carrying York the New off bringing in loan The in

Newmid-tier the without is the anytime. finite, is asset reminder, unlevered office-based, of submarket, the well and CPL and a comprised property As leased sell TimesSquare

at the X.X% $XX million remaining X.X% quarter Our stands end. on general of [Indiscernible] or X.X% on loan. piece dividend at to

sheet. to Turning the balance

loans average on of to We asset-specific XX. cash day. We to be and June credit continue multifamily maintain liquidity rate June into and approved on rate to X.Xx net conservative focused advance capacity. weighted remain [indiscenible] This million The and $XXX levels on [indiscernible] liquidity from in slightly increasing XX% leverage XX% XX%. every can project on economic reported advance levels, on consists This financing XX XX. to quater X.Xx quarter-over-quarter of

million senior have as as significant unencumbered $XXX loans also of $XXX We assets well the million property. in REO comprised mixed-use

the maturity questions. the under July of in ahead. extended we open the go would warehouse of like for late call our to quarter, now subsequent facility please Additionally, largest XXXX. I all to financing Operator,

Operator

have Instructions] from Fargo. coming comes We Don from our [Operator Wells first Fandetti question

Don Fandetti

talk moved properties from Yes. the were about to a more little Can multifamily that X bit you X.

mentioned negative are just and you up? and more how think in I leverage cap rates handling broadly borrowers higher multifamily, rates moving

Priyanka Garg

very transparent proactive for you approach question. We Yes. Don, it’s that took Priyanka. Thank a there. and

sponsors are is to borrowers rate loans the X, X to those So a relief moved going during us our book asked that we does that not for we in which only to quarter, agree These we’re rate where approached they loans downgraded them. relief. are it. have why It for mean where us the asking

to basis anticipate fact, don’t significant We very those but the In modifications provide transparency. loans, in made good opposite. about our and we the shift quite really feel

willing with the if basis. title forward, to on we’re to but work going at our We’re borrowers path also needed, take

they that is make capital, would borrowers but the approach service did I are debt point contributing other on are all current flowing cash The loans us.

to transparent dynamic in this we And wanted market. so very again, be

Don Fandetti

are in with pressure Okay. you higher borrower more rates? seeing And generally just multifamily,

Priyanka Garg

And a ratings course. X because on that’s that shift we we multifamily exposure. properties those credit huge of exactly absolutely, made Yes, have why in

in We additional making thing. are focused in are their capital. all that They’re and they those right very But being negative the sure in doing monitoring thesis. leverage. have an They are of environment putting on all where successful believe they borrowers

a in So lender. see we plans because cracks have yet transitional their we’re to business

across We’re still seeing the NOI increase generally board.

able the moved were of very again, that monitoring refinance this will it form. the reason that the optimistic to on but closely. migration And our out for we borrowers we time, we over loans So was handful that be the to are

Don Fandetti

other we’ve loans. that seen as office looking you at some quickly, selling companies it. then well? Got Are And option real

Priyanka Garg

Richard, might then and want here. start in I’ll to you jump

We’re going all to look to at options us. available

being plan. we a and we’re think the example where ownership said can took going today. of to an XX, we which component, on what, June sit where Richard? don’t basis. our think be to York we but loan. but look asset in like it. in as our we’re going nothing are that New other other, great business think there might add be We we we there, say, going Richard sense moments we to we makes But take specifically. don’t in office are to loans are our moments remarks, we value okay, to know has to say, here have say, exit to like might his That And to there you we the there it where case, exit which we loans, we on radar As try REO basis just to want going that going There be be

Richard Mack

me everything statement add kind that we sale. just that of as Let a for is general own

we better, we are going so create. think a or sell. we looking equity-like And And can we’re value if environment, taking returns create that think And we to forward can holding asset we we an constantly really what is the think value in we if at this then an is REO, sale going will.

Operator

next from Abraham comes Vilas Our UBS. question from

Vilas Abraham

Can trends. down about more Cash you also was the quarter-to-date. bit a liquidity little talk quarter-over-quarter,

the Just also financing the maybe that touch additional any that could driving specifically of context And liquidity you How about pressure? is color on how posting dividend you on in much what that collateral that? feel then of and to context counterparties. is it the maybe in

Michael McGillis

obviously, also the in our Sure, continued paid Vilas. of This quarter We’ve is reduce in to portfolio. we second leverage terms dividend Mike in liquidity the McGillis. trend, mid-July. Yes,

of those the primary liquidity. drivers the So are movement in

million market sheet. payoffs environment, $XXX would question, various over not loans $XXX a liquidity expected but always about excess whether excess of in of course is those of the balance repayment in or representing to generate year, they the million, happen current some have in do stages we the of remaining However, of whether significant

of terms on we’re with shareholder in everything stand with really make Board respect I reevaluating is quarterly other going we dividend to our your with a have a deployed maximize focus to to with basis where to long-term do. liquidity calls on management where respect earnings, as value. do team, See our of critical we Board we along So in any Directors, we mean, that. constantly and our question, stand liquidity be That’s

Vilas Abraham

the REO quality you basis keep you plan would And given financing on there? an collateral to or unlevered property, that of that that put any do on on the

Priyanka Garg

in I’ll there. It’s jump Priyanka.

We’re definitely putting creating we’re pricing, going optimistic financing. on It’s to and going leverage but depend to very really look levels at potentially also on value. about

question we do to the wait So or until is be, going there’s additional value now it encumber financing with created.

Vilas Abraham

And Okay. so, or unchanged, On kind nonaccrual one. and maturity you the of around of answer Priyanka that’s and think, defaults million maybe kind quarter-over-quarter. that’s could $XXX official of outside this bucket I

we Just and from do we here about how just that do think balance those? where go on

Priyanka Garg

internally. Yes, that’s one a that we about a question and lot great talk obviously,

we’re But basis in the when of is Of we monetize there is going Obviously, half environment. view monitor And We coming a borrowers our number interim, on million sort $XXX the and have transaction the those. can don’t in as good they those path plan various under referred will but of be of about of going loans term long we the some can. LOI as in terms that to as to to to business very mentioned, that where allow up where other part rent and uncertain to. know we’re plans, are and if we’re we Our we Mike feel execute back BC to with borrowers actually as D repayments it’s might with goal resolution. we under to their year. up, that half of end just in some you comfortable stepping see sheet the feel or patient our our and

about So all to or which we’re But on the end the yes. at highly of those answer all is the and are focused basis the it. then in day, comfortable stepping of it’s we not,

Vilas Abraham

for maybe last from one me you. Richard, And

there say, transaction rates? and, are the little any X been terms ago? more buyers place like feel this bid-ask sellers, on compression of the months just just posture has in a comments But spread interest still there volumes. opening between touched and in general of development terms Or in You in we’re bit your kind you of and people waiting in in do same now between for

Michael McGillis

on. for Mike. unfortunately, and is call This although be assets, Richard, demand, seen clearly, are the transaction from he’s there is yes, what But volumes down. continues dropped to got trying we’ve high-quality back to get

continue In of to visibility through lot terms transactions. see of our our business, we a equity

what obviously high-quality multifamily, to a pricing are buyer we lot very cetera. The as et on are We pools smaller. industrial, continue assets see think such reasonable

of the way because in markets the much being pushed So of continue to the hospitality volumes bidding. in as strong and see even and as parties the you’re bid-ask, seeing are we But terms not prices multiple down. multifamily up well, industrial but pricing

think into the some in That’s my of the filing markets kind I clearly marketplace. the think back call. Richard back bring capital is will of people I and on view

Richard Mack

we we valuations assets add are expected. buy Let we moved are few And competition the see have we’re still seeing values me higher active trying there multi-space, than especially assets. out and trade down, would have that a just at in assets that in in to tremendous while

there’s sideline capital while are of up. down, that values is showing on So the plenty still

I think to ongoing, and be but dynamic, going interesting pretty a price is discovery is it’s So liquidity. there

market. quite So interesting an it’s

Operator

Our from next from JPMorgan. comes Shane question Richard

Richard Shane

this question my taking for Thanks morning.

the I of first bit of if at apologize this a specific has It’s was we covered. some the a us. Sorry, end been morning quarter, $XX and chaotic look and million there If of a little for crazy reserve.

of execution realized the levels the were set. about a losses of $XX to associated quarter million. the during with Was sort versus of just all I sense reserve specific reserve. where get loss just you of the want quarter, This

term should happened come reserve And was million of is in a that that you that manifesting if overall replenished levels million. we the into $XX of specific general charge-offs. specific essentially bucks, by we of reserve down anticipate thing right? couple near it have reserves million sort look, the and about Is the $XX down, other reserve the what that The come appears

Jai Agarwal

take I’ll Yes, Jai. one first this first. is the

like mentioned, Francisco just Of that On I million and This like the quarter, to is $XX San Banque $X specific off mentioned. under to for million, the misuse $XX the for and charge The that. we multifamily $XX reserves. million comprised previously. reserved reserves, we did subordinate million million specific you $XX added for asset of was another loan, for is that’s the had under $XX TimeSquare the million property, $XX a million property, in

are down the correct reserves, On general slightly. that it you went

that’s One, Now a model. function the model of, is I’ll say CECL there. X things very duration-sensitive a

loan has been unchanged as our for part. the So portfolio most

are closer As XX the the closer down. CECL the should to we days to maturity date, come

on CECL some offset by of macroeconomic a worsening last reserves general disclose now X.X% are The actually between did materials. but store than XX the X.X%, a and of basis we X.X% once thing it’s and is component loans reserves, the loans three a rated broken little the dairy points out break X that do out I’d rated conditions, then bit. there X you loans So is reduce say on that better net-net, that

you about X.X% rated we store feel on released intellectually, the we So loans. get

Richard Shane

the has Got of an smaller impact the reserve? well, a which general it. little And obviously, as in terms also bit is portfolio

Jai Agarwal

Exactly.

Richard Shane

a look of losses, to the at turned back us use where not near on we the speaking, terms to term that looks for describe in is it of X have migration reserves quickly Should when next sort reserve into good losses, is we fairly had term? your of the And of work. help ton generally And losses? history as a of the as have see we it to should loss. perspective do realized specific like way realized sort million frankly could that you within pattern would recognition. times sort $XX And there’s X from news what But I data quarters again, which specific near

Jai Agarwal

I’ll very different. asset start it’s case-by-case is with a Every basis.

on specific hard parallel it’s some with add to Priyanka of where terms draw happened in atonal kind please assets. reserves But other could of more go So charge-offs. what to happen as a in

Priyanka Garg

Yes, sure. the for Thanks question. Richard

cap market. properties reserve relates no to We’re loan, Francisco that And think based we challenged. put that of and already loan gone determine of really not that’s up interim, whether has cash generating all migration as additional in should on this It’s San San and multifamily are enough own But we operating related or the was market we’ll to it has Francisco it it the on was our we in through. the to the that or just that framework ultimately we been Richard due end assets exiting to cover that, expenses. surprise the if exploring are options is rates a the flow

We’re entirely path determine right to value the the focused on asset as protecting here? we resolution

Richard Shane

guys. very helpful. Okay. That’s Thank you,

Operator

from [Operator Jade question Rahmani KBW. next from Instructions] Our comes

Jade Rahmani

all options Mike color And One dynamic said process today, reviewing your to eliminating and their reduced of when peers gave some I signal a that’s by dividend dividend the a X% impact. of assume around supplemental meant dividend and that, that’s you reduction. about

distributable you’ve some be carrying able going and talk is The New on to based probably for any you $X.XX. value about use. going was So might down earnings, items, to are example, the also identified, repayments to? associated framework that, in parameters or portfolio thinking there that costs be about all with excluding the there’s York For mixed

directionally, So It or reduce $X.XX also then more to lower the save to it than $X.XX. just by it you’re not $X.XX I And than be be would meaningful would that. going assume liquidity.

any would be appreciated. So commentary

Richard Mack

the about earnings the way a comment No, net $X.XX, benchmark form of quarter. at distributable future we these the to fundings losses which think dividend. I time. are in increase the no higher rates Jade, think gains distributable at there’s the form realized this existing higher were I excluding that on portfolio, portfolio There average mean this on are in weighted earnings of spread our than catalysts

events process, be can in redeployed existing liquidity a including distributable payoffs earnings. returns, to ways have i.e., in be that enhance accretive loans existing number the We of would on to deleveraging portfolio

the look has broader a And from liquidity could we’re I’ll that does that what to there’s extent And say management term with items long to of NOI. on earnings, we’re that asset maximizes a at New loans that York So team shareholders. and to it do for a mixed-use our going standpoint, and number think I would looking that enhance picture it generate and is then we at across board, constantly the will value in reduce the distributable just that. place. it added there’s nonaccrual are at over we additional that. our is medium the leave business that as leases

Michael McGillis

McGillis. Mike

everything we on things. add comments, own assets. the In me unlevered a few table, my is Let and

are We selling looking assets. at

trying are We we those And to at. be greatest was trying what and moves going opportunistic get create that’s I value. make that are the shareholder long-term think to to

Jade Rahmani

just rate wanted wanted ask mixed-use discount ask your to what I York X% believe, just X.X%, thoughts the the and rate, the New saw an XX-Q to basis the exit about those I for X% X.X%. about cap project. assumptions to in I I to were.

Priyanka Garg

Jade, Priyanka. in what those on the It’s Yes. certainly observe are mean market. there. I’ll based jump assumptions in we I

where forward But asset order assets But the suppose, we’re We the relationships our want it’s deep history given in highlight really kind here. in add very and third-party had we firm environment. were appraiser these and the rich and in the there, reposition ownership of a auditors. by to has involved, experience all it particularly our can backyard is building. in this to the all value vetted also a about We our of I optimistic path market just guess,

the We of had optimistic a owner asset. that low-hanging think NOI we’re about both was really the asset. strategic And attention former on operational. we here paying that’s a that not fruit so there’s growing lot to And and

REO hotel portfolio significantly we point, the And ownership, when that now to here are a that’s with we we close took Just data other NOI negative. have, was pre-Covid as NOI levels. very

a and we we’re similar we’re team If So and of experience why see seeing we have that of story, in the it is that see to chose take to we opportunity asset. which execute, that because we an opportunity, ownership take the asset. that going to

Jade Rahmani

land hospitality the And Virginia just asset. lastly,

Is that CECL still I basis it’s quarter, for there for. or bids the rated bid noticed last think no And I there above case? perhaps and you were debt the property. your for reserve the risk said there’s

commentary be some would on Just that appreciated.

Priyanka Garg

that. take I’ll course. of Yes,

So the to to was borrower the prior that bids were sorry, commentary or to there last the ownership been have prior quarter our provided default.

was capital those Obviously, so markets there. very out a environment. were different And that bids

value in this think We’ll long that’s to it’s site, That it very borrower. right said, with why path not term is the that makes rated maximizing development X. attractive the the think And not driven monetize the path going and continue or to time goal be evaluate there, this really the is to to moment our but right shareholder we the just sense, be the while is basis to monetize forward without by So a the continues investment. of opportunity. we

Operator

Our from question BTIG. Sarah next comes Barcomb from

Sarah Barcomb

feeling if you’re how a to Could environment. And amendment coming been on given answered. speak of Most rising look my look we’ve to to taken amending have from But you want the this of questions some make a those everyone. I some that of there. Hi, about covenants at they’ve did an covenants heard from your meeting you basis? mention that go-forward pressure their rate peers

Jai Agarwal

actively that the to Sarah, need And we rate our in do this are be to is the rising we to extent with some financing those, lenders we go Jay. ahead and interest that. we meet are dialogue with we Yes, are covenants, comfortable modifying and will about proactive we right active our of monitor you’re our going covenants. environment,

Sarah Barcomb

you’re on more projects thematically exposure. I the maybe is occupancy? the can hoping was get give ground-up construction market you certificates seeing ground Are you And on on of there? also more labor How color Any book. Okay. your could seeing speak the in you what

Priyanka Garg

that Priyanka. one. take it’s Sarah, I’ll Yes.

with We’re construction our happy exposure. really

this status a quarter, construction loans shifted operating number we certificates occupancy. of in light In achieving of fact, to from status their of

a so process on them has those And construction out exposure. others through right now. operating of the down X of and working assets assets, And have lease-up become going recently our X that sales brought that and are of refinancings really are

We reasons. So completion, uncertain really have One, And exposure performance. for better is always seeing to we’ve in X fare that been And creditworthy right as They’re liked to sold needed. refinanced. that get asset and really much going from with assets really equity to structure. real X being are monthly, reunderwrite with have are two, better we of the And have course, rebalancing environment. our our best-in-class completion estate now Certainly, contributing we’re sponsors happy are going monthly. we which we’ve that construction the this guarantees upon borrowers sponsors.

really we exposure, have would played So it’s that out we’ve with as happy expected. been and

Operator

questions. currently We no further have

remarks. back Mack hand Richard for Richard, go like I’d closing the to please ahead. So to call

Richard Mack

see and you, you to us every how I summarize be can business on would for joining creating day and we are be. value. we And do going staffed as we’re thank Thank today. opportunistic managing shareholder that, our we focusing long-term to to when all

versus the to dynamic of we we some already necessary, just some actions shareholder with value that them, over day. and the take think manage working the the is process that to are we’re refinance our process to we’ve borrowers and sell term. REO for liquidity of so going organized working term. on as speak, them if opportunity, dividends, we’re undergoing and every value be taken the something long increase to the created back, long a value pay around is And continue that opportunistic is creating we’ve assets and We in going to other That

joining, our for all thanks So will forward we look to and call. earnings next

Operator

concludes Ladies Thank you and for gentlemen, today’s this call. joining.

your disconnect lines. you. You may Thank now

Claros Mortgage Trust (CMTG) 2 Aug 232023 Q2 Earnings call transcript