Welcome to the Clarus Morgus Trust's first quarter 2025 earnings conference call. My name is Becky and I'll 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. To ask a question on today's call please press star followed by one on your telephone keypad. If you would like to remove your question please press star followed by T. I would now like to hand the call over to Anna Huynh, Vice President of Investor Relations for Clarice Mortgage Trust. Please proceed.

Thank you. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Clarice Mortgage Trust, and Mike McGillis, President, Chief Financial Officer and Director of Clarice Mortgage Trust. We also have Priyanka Gard, 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 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 represents our view 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 would now like to turn the call over to Richard.

Thank you, Ann, and thank you everyone for joining us this morning for CMTG's first quarter earnings call. Reflecting on recent U.S. tariff and foreign policy volatility, there is now heightened uncertainty as to outcomes that has rippled across the globe. And while it's still unclear what the long-term implications will be for the U.S. economy, the global economy, and commercial real estate broadly, we've been observing impacts on the real estate capital markets. We are seeing spreads widen slightly, and some institutional participants pause before transacting, as assessing and ascribing value to risk has become exceptionally difficult and will likely remain so until tariff and other economic policies are settled. All of this combined with the ongoing higher rate environment means that there are continuing headwinds to the broader real estate recovery. Notwithstanding this difficult backdrop, I am pleased to report that CMTG has made progress towards achieving the goals we outlined on our last earnings call. Enhancing liquidity, reducing leverage, and optimizing the outcomes on our watch list loans. As of April 30th, we have fully realized five loans and have received $607 million in proceeds from repayments and resolutions. Through these transactions, we accomplished the following. First, we improved our liquidity position. Second, we continue to reduce leverage. Third, we resolve two watch list loans and reduce CMTG's land and office exposure, which are two property types that have experienced challenges in recent years and have been difficult to monetize. Finally, we reduced our hospitality exposure by an aggregate of 326 million, which we view as a positive sign given the potentially increasing economic headwinds and recessionary fears. Further, we have made progress on our multifamily REO strategy described last quarter. During the first quarter, we closed on a $214 million facility that will allow us to finance these non-performing loans through the REO stage. We continue to believe our path to optimizing outcomes on these cash-flowing assets on behalf of shareholders is to assume title and manage these assets through disposition, given our sponsor's experience as an owner, operator, and developer. As we look to the remainder of the year and the strategic priorities we set out to accomplish, our work continues every day. We also recognize the economic and political climate and its potential impact on capital markets, investor sentiment, and our momentum in accomplishing these priorities. As we navigate this period of uncertainty and volatility, who will continue to consider various paths to loan resolutions. These may include divesting, extending, recapitalizing, or taking assets over as REO, depending upon market conditions and our assessment of opportunity through our sponsor's lens as a value-add owner and developer of real estate assets. I would now like to turn the call over to Mike, and I thank you all for joining us today.

Mike? Thank you, Richard. We are highly focused on enhancing liquidity, thoughtfully redeploying capital to more creative uses, such as reducing higher cost leverage and reducing levels of watch list loans. In executing these priorities, we may consider strategies such as loan sales, discounted payoffs, and or foreclosures, among other actions, to achieve our objectives. Our financial results and portfolio activity reflect our progress in the execution of these strategies. For the first quarter of 2025, CMTG reported a gap net loss of 56 cents per share and distributable loss of 25 cents per share. Distributable earnings prior to realized losses were 8 cents per share. Earnings from REO investments contributed a distributable loss of three cents per share primarily due to the expected seasonality so cmtg's held for investment loan portfolio decreased to 5.9 billion at march 31st compared to 6.1 billion at december 31st the quarter over quarter decrease was primarily the result of the resolution that occurred during the first quarter we completed the sale of 101 million dollar senior loan collateralized by a Hotel in San Diego, which was sold at par. The loan was classified as held for sale at December 31st, and as such, the transaction did not impact CMTG's first quarter held for NBPB. We also executed on the discounted payoff of a $183 million New York land loan at 90% of par. While the discounted payoff impacted our first quarter financial results, the transaction provided several benefits, including generating approximately $95 million of liquidity for CMTG. In addition, the discounted payoff reduced exposure to land in New York City and also mitigated capital markets risk associated with the repayment of this loan at maturity. This loan was ultimately exposed to the office sector in that the sponsor's business plan is a large-scale round-up office. Subsequent to quarter-end, three additional loans were repaid, which in aggregate comprised $314 million of UPB. First, we received a full repayment of a $225 million loan collateralized by a hotel located in Savannah, Georgia. Second, we executed a discounted payoff of an $88 million Houston office loan that was on the watch list, resulting in repayment proceeds equal to 72 percent of upb most recently we resolved another watch list loan a small eight hundred and eighty six thousand dollar loan that was the residual amount owed on a hundred twenty five million dollar loan that was largely repaid in 2020. turning to portfolio credit during the first quarter we downgraded one loan the texas office loan just mentioned. As Richard mentioned, we recently closed on a $214 million facility that will enable us to finance non-performing loans and hold the underlying collateral of these loans as REO assets upon foreclosure. We view the closing of this facility as an essential and positive step forward in executing our REO strategy. We expect to execute the foreclosure and conversion to reo of at least two of the loans and this turning to liquidity at march 31st we reported 136 million dollars in total liquidity which includes cash and approved and undrawn credit capacity based on existing collateral as richard mentioned we're entering a period of heightened uncertainty and market volatility that could impact the real estate capital markets and ultimately our timing and ability to execute in line with our expectations. We intend to remain pragmatic while proactive. I would now like to turn the call over to the Thank you.

If you wish to ask a question, please press star followed by one on your telephone keypad now. If for any reason you want to remove your question from the key, please press star followed by two.

When preparing to ask your question, please ensure your device is unmuted locally our first question comes from dub harter from ubs the line is now open please go ahead uh thanks um for the last two quarters you've talked about uh your two large multi-family loans that that you would expect a kind of near-term payoff on you know i was just hoping you could give us an update on that and you know and kind of what you what your expectations of near term are for those payoffs?

Yeah. Hi, Doug. Good morning. Thanks for the question. It's Priyanka. We are – that's still in process. We are still anticipating that being the outcome. Both of those have maturities July 31st and August 1st, so coming up, and both are tracking well towards that. But I will say just given the market volatility, particularly the West Coast loan, loan number one on our loan list, we are potentially going to have to evaluate other options. But we're, you know, like Mike said, we're going to be pragmatic. It's a very uncertain environment and we'll evaluate as we get more information.

Great.

And then as you just think about you know if you could update us on your current thoughts around the term loan b and you know kind of your your timeline and and expectations on that sure doug um well the term loan has a maturity in august of 2026 so it goes current in august of 2025. we are evaluating a couple of options there, amend and extend the existing term loan fee. We would expect to make a meaningful principal pay down as part of that. The other option, credit solutions.

Great. Thank you, Mike. Thank you, Peronk.

Thank you. Our next question comes from Rick Shane from JP Morgan. Your line is now open. Please go ahead.

Hey, guys. Thanks for taking my questions this morning. Really just sort of a strategic question. As we sit here today on, I guess it's May 8th, and we think about the path to resolution, are you guys, do you think that the opportunities to maximize NPVs on resolution today have shifted more towards a longer, more managed process, or are we still in a scenario where first loss is best loss and the way to optimize is just to move on as quickly? And with that question, the other part of it is, do you feel at this point that you have the liquidity and resources to, in each of those scenarios optimize the outcome, or do you feel like your options are more constrained because of the liquidity situation within the company?

Thanks, Rick. Thanks for the question. I'll start and I'll let Richard and Priyam. I think each one of these opportunities, you've got to evaluate them on a case-by-case basis. So it's very much back. That's number one. I think we have fairly good visibility into some additional liquidity position.

Mike, I wasn't sure if anybody else was going to pipe in on that.

Yeah, no, I'll just pipe in. That was exactly what I was going to say. So I'm glad Mike had it.

Really appreciate it, guys. Thank you very much.

Thank you. As a reminder, to ask a question, please press star followed by one on your telephone keypads.

Our next question comes from Jade Romani from KBW. your line is not open please go ahead thank you very much can you please give an update as to where things stand with your repo counterparties we did see the most recent eight pay with wells fargo reducing that facilities outstanding to 500 million um just want to see you know what what your repo lenders are looking for what they're saying and uh is the plan to really amortize down the repo balances as you receive proceeds from working out loans in the portfolio

um thanks jade i'll take this one um so yeah we recently extended the wells fargo facility for another year with extension options out through 2028 we also recently extended the goldman sachs repo facility for another two years into 2027. so um you know each repo facility is a little different but i would constructive very collaborative the size of the needs are in the

near term okay when you say private credit regarding term loan i mean i'm not sure what that means uh it could mean any host of things do you envision are you contemplating a facility that would look you know uh in all intensive purposes like the current facility but perhaps at a higher rate or are we looking at you know potentially a mix of uh you know debt restructuring that would include you know various other things and what do you think the all-in blended cost would be too too early to comment on that jade i think what we're seeing is those costs start to get closer together when you're talking about a unit tranche facility versus a syndicated debt offering.

I think in terms of what that might look like, it would probably look like a term loan financing, operational flexibility would be the expectation, but too early to comment.

Mike, let me just add that I think the private, thanks Jade, sorry. I think that the private market is showing as much opportunity and appetite right now for what were previously better secured securitized executions and so i think there are actually quite a few different um routes to take on this okay um high level are there any other questions in the queue i could i could come back uh we don't have any no jay you can go ahead at the moment okay thanks very much yeah i was wondering if you could give some summary statistics

for the overall portfolio, just so we know where things stand on occupancy, debt yield, perhaps. And if you could just characterize the portfolio in buckets, ranging from, you know, projects that are light transition to projects that are, you know, a complete repositioning.

Yeah, Jade, I'll take that. It's Priyanka. Thanks. I think we're obviously, it's a transitional portfolio. So some of those metrics are, you know, perhaps less relevant. And also we have so many other tools that we use routinely in our toolbox where we have additional credit support in the event of a lower debt yield, lower coverage, right? So that's in the form of cash reserves, hard cash management guarantees, et cetera. So the first question is a little bit hard to answer just in a vacuum. In terms of how to bucket the portfolio, we obviously have a much more seasoned portfolio than was initially anticipated when we had originated these loans, right? So repayments have been slower. So one way to think about that is our construction portfolio peaked at over a third of the portfolio, and now we're down to only 12% of the portfolio. And we view that as a good thing in the sense that it's much easier to manage liquidity on the go forward future funding commitments, which have come down significantly. That was, you know, about $2 billion just a couple of years ago, and now we're down to, you know, just over $100 million of required equity over two-year period. And also that speaks to the fact that a lot of our construction assets are the easiest, you know, best in class in their markets and easiest to refinance. So there's been some natural runoff on that as well. So I think as we sit here today, the heavy transitional and the ground up construction has really waned. It's much more, a lot of, we have a lot of multifamily exposure, which is cash flowing. We have a couple of assets that have just come out of construction and have their CFO just in the first quarter. So we think portfolio composition is getting better, and I think it is important to point to some of the resolutions that we saw year-to-date. We took an office loan off the books. We took a land loan off the books. So all of that is improving and moving in the right direction.

Okay. And then just this would be helpful from a liquidity perspective. What's the sum total of REO you expect to take this year, and what are the liquidity implications of that? It looks like you do expect to take $330 million of multifamily, and then you mentioned the new facility that can fund REO. I'm not sure what the advance rate is on that. It's probably, you know, 55% to 60%. But if you could give a sense for, you know, total REO and liquidity implications.

Yep. Priyanka, why don't you cover the total REO, but I've got the liquidity.

Sure. Okay. I'll start off here. I think, Jay, that's a really good question. We're talking about that internally all the time. It is quite fluid, as you might imagine, because we do have current REO that we think we're going to monetize in the near term. Our mixed use asset here in New York City, our business plan there had been to condominiumize, commercial condominiumize the different components. And we've gotten approvals to do all of that. It's in the process of being recorded and that will result in us selling a majority of the office floors to a third party which will result in a liquidity event reduced REO exposure. So I use that as an example to say there's just going to be ins and outs and it's going to be very frequent. The multifamily assets you identified those are the ones that we think are the near-term additions into the portfolio. there might be more. And we're not ready to say that we're done taking assets REO. If we think that's the right thing to do, we're going to do it. Just as a data point on those five REO assets that we've identified, potential REO, four of them, that's been the strategy for the better part of a year um as we've been you know getting our ducks in a row to do that and on those assets we've been working side by side with the borrower over a long period of time and effective gross income is up 18 from the trough and occupancy is up six percentage points from the trough so it just goes to show that we're going to you know when we're going to get involved we're going to do it on assets where we think our broader platform can really bear the appropriate experience and um

and create real value mike do you want to jump in on the liquidity point jade with respect to liquidity when we move these assets on to the the new financing facility for npls and reo the advance rate that we currently have on those no liquidity outflow okay that's good to know um i guess this is a strategic question but an idea just popped into my head

been covering the space since 2009. I'm very familiar with what iStar did and was wondering if you might contemplate, given the development background that Mac has, splitting the company into a company that holds real estate development assets and really has capital that is long-term patient not looking for near-term dividend and would allow the greatest flexibility and potential upside. And then separating that from a mortgage REIT that would be generating more regular way income and focused on the performing part of the portfolio. And that would be positioned to eventually take advantage of the current environment and grow. And you could bring in partners to do this. So, just curious your thoughts on that.

Jay, that's an excellent idea and certainly something that we've had to think about. Right now, we don't have any plans to do that, but it's something we have to consider as we look at the opportunity in front of us in terms of how much REO we might want to own and reposition. So, we're going to continue to evaluate all strategies, including that. But right now, we're trying to really think about REO as a medium-term opportunity to improve performance of the assets before liquidating them. But I think it is good to consider other ways to think about REO as we bring them on and we reposition them.

Thank you.

Thank you. We currently have no further questions, so I'll hand back to Richard for closing remarks.

Yeah, so thank you all again for joining. Let me just make some observations that maybe we're all feeling as volatility in Washington from a policy perspective seems to be abating, but at the moment it's slowing down the recovery in real estate. Having said that, fundamentals are still strong at the property level. And the REO assets that we are taking back, we're doing, I think, quite a good job in improving performance. Otherwise, we wouldn't be bringing them on balance sheet if we didn't think we can do that. As stated in the last call, we've got $2 billion of realizations that we are seeking to create over the year. We've done $600 million so far, And we've got a number of additional realizations in the queue to help improve our liquidity. That's going to be our key, to continue to do what it takes to manage the liquidity, to delever, and be ready for future liability maturities, and to get back on offense. So that's what we're doing. And hopefully the volatility will bait and allow the recovery in real estate that we've been experiencing over the last six months to a year to continue. So I thank you all for joining, and I look forward to speaking to you again on the next earnings call.

This concludes today's call. Thank you for joining us. You may now just connect your line.