Claros Mortgage Trust, Inc. Reports First Quarter 2024 Results
Claros Mortgage Trust, Inc. (NYSE: CMTG) reported a first quarter 2024 GAAP net loss of ($52.8 million), Distributable Loss of ($16.8 million), and Distributable Earnings of $27.7 million. The company had a $6.7 billion loan portfolio with a 9.1% yield. Significant financial activities included $143 million in follow-on fundings, $146 million in loan repayment proceeds, and $262 million from loan sales. CECL reserves increased, and a cash dividend of $0.25 per share was paid.
Significant loan portfolio of $6.7 billion with a 9.1% yield.
Successful follow-on fundings and loan repayment proceeds of $143 million and $146 million, respectively.
Sold three loans for $262 million, contributing to net liquidity.
Increased CECL reserves and paid a cash dividend of $0.25 per share.
First quarter 2024 GAAP net loss of ($52.8 million) and Distributable Loss of ($16.8 million).
Reclassified loan to held-for-sale and subsequent sale for $175 million, generating net liquidity of $33 million.
Repaid $384 million in financings during the quarter, impacting liquidity.
CECL reserves increased, highlighting potential credit risks.
Insights
The first quarter financials of Claros Mortgage Trust, Inc. present a nuanced picture for investors. The GAAP net loss of $52.8 million is a stark figure that raises immediate concerns about the company's profitability. However, the concept of Distributable Loss at $16.8 million, which is more relevant for dividend considerations, offers a more relevant metric for the cash available for distribution to shareholders. It's important for stakeholders to discern the distinction between accounting losses and distributable cash flow, as the latter affects dividend payments and the company's ability to sustain shareholder returns.
The weighted average all-in yield of 9.1% on the loan portfolio is a key figure, suggesting the potential profitability of the loans. Nevertheless, the sales of loans at 96% and 80% of unpaid principal balance imply potential losses on the sales of assets, which is a point of concern. The increased CECL reserves—which are financial cushions for potential loan losses—indicate cautious risk assessment by management, mirroring broader economic uncertainty.
Investors should weigh the cash dividend of $0.25 per share against the net losses reported, evaluating the sustainability of such dividends in the future. The repayment of significant debt during the quarter is a positive move towards deleveraging, potentially lowering financial risk. The company's liquidity position appears robust, with $265 million in liquidity, which may provide some reassurance to investors about the company's ability to navigate short-term obligations.
The emphasis on asset management and balance sheet optimization by CEO Richard Mack highlights the company's strategic focus during uncertain economic times. For investors interested in the real estate sector, the stability of property fundamentals, with the notable exception of office space, could be indicative of a resilient income stream from certain asset types.
The company's representation of a loan marked as held-for-sale and subsequent sale below its unpaid principal balance is indicative of the pains the commercial real estate market is experiencing, particularly in segments that are transitioning or are distressed. Moreover, the external management structure of CMTG, advised by Claros REIT Management LP, may have implications on the trust's operational expenses, which investors should scrutinize for efficiency and alignment with shareholder interests.
First Quarter 2024 Highlights
-
$6.7 billion 9.1% . -
Funded approximately
$143 million -
Received loan repayment proceeds of
$146 million $136 million -
Sold three loans for
$262 million 96% of unpaid principal balance. As of December 31, 2023, these loans represented unpaid principal balance of$272 million $107 million -
Reclassified one loan to held-for-sale, representing an unpaid principal balance of
$216 million $45 million -
Subsequent to quarter end, the loan was sold for
$175 million 80% of unpaid principal balance; after the repayment of senior financing and closing costs, the loan sale generated net liquidity of$33 million
-
Subsequent to quarter end, the loan was sold for
-
Repaid
$384 million -
$261 million -
$82 million -
$41 million
-
-
Made incremental borrowings of
$157 million -
Total liquidity of
$265 million $233 million $32 million -
General CECL reserves increased by
$0.15 $0.72 $0.57 $0.03 $0.54 $0.51 -
Overall CECL reserves stand at
2.6% of overall unpaid principal balance, comprised of23% on the unpaid principal balance of 5 rated loans and1.6% on the unpaid principal balance of the remaining portfolio.
-
Overall CECL reserves stand at
-
Paid a cash dividend of
$0.25 -
Book value per share of
$15.55
“While underlying property fundamentals, excluding office, remain stable, dynamic macroeconomic factors continue to create uncertainty across our industry,” said Richard Mack, Chief Executive Officer and Chairman of CMTG. “Given these conditions, our focus is on proactive asset management, optimizing our balance sheet, and drawing upon our Sponsor’s experience and platform to drive results for the Company.”
Teleconference Details
A conference call to discuss CMTG’s financial results will be held on Tuesday, May 7, 2024, at 10:00 a.m. ET. The conference call may be accessed by dialing 1-833-470-1428 and referencing the Claros Mortgage Trust, Inc. teleconference call; access code 186136.
The conference call will also be broadcast live over the internet and may be accessed through the Investor Relations section of CMTG’s website at www.clarosmortgage.com.The earnings presentation accompanying this release and containing supplemental information about the Company’s financial results may also be accessed through this website in advance of the call.
For those unable to listen to the live broadcast, a webcast replay will be available on CMTG’s website or by dialing 1-866-813-9403, access code 568613, beginning approximately two hours after the event.
About Claros Mortgage Trust, Inc.
CMTG is a real estate investment trust that is focused primarily on originating senior and subordinate loans on transitional commercial real estate assets located in major markets across the
Forward-Looking Statements
Certain statements contained in this press release may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. CMTG intends for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such forward-looking statements can generally be identified by CMTG’s use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “seek,” “objective,” “goal,” “strategy,” “plan,” “focus,” “priority,” “should,” “could,” “potential,” “possible,” “look forward,” “optimistic,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Such statements are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of CMTG’s performance in future periods. Except as required by law, CMTG does not undertake any obligation to update or revise any forward-looking statements contained in this release.
Definitions
Distributable Earnings (Loss):
Distributable Earnings (Loss) is a non-GAAP measure used to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments, as determined by our Manager. Distributable Earnings (Loss) is a non-GAAP measure, which the Company defines as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss). Furthermore, the Company presents Distributable Earnings prior to realized gains and losses, which includes principal charge-offs, as the Company believes this more easily allows our Board, Manager, and investors to compare our operating performance to our peers, to assess our ability to declare and pay dividends, and to determine our compliance with certain financial covenants. Pursuant to the Management Agreement, we use Core Earnings, which is substantially the same as Distributable Earnings (Loss) excluding incentive fees, to determine the incentive fees we pay our Manager.
The Company believes that Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses provide meaningful information to consider in addition to our net income (loss) and cash flows from operating activities in accordance with GAAP. Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses do not represent net income (loss) or cash flows from operating activities in accordance with GAAP and should not be considered as an alternative to GAAP net income (loss), an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. In addition, the Company’s methodology for calculating these non-GAAP measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures and, accordingly, the Company’s reported Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses may not be comparable to the Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses reported by other companies.
In order to maintain the Company’s status as a REIT, the Company is required to distribute at least
While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, principal charge-offs are recognized through Distributable Earnings (Loss) when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e., when the loan is repaid, fully or partially, or when the Company acquires title in the case of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure), or (ii) with respect to any amount due under any loan, when such amount is determined to be uncollectible.
Claros Mortgage Trust, Inc.
Reconciliation of Distributable (Loss) Earnings to Net (Loss) Income
(Amounts in thousands, except share and per share data)
|
|
Three Months Ended |
|
|||||
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Net (loss) income: |
|
$ |
(52,795 |
) |
|
$ |
34,043 |
|
Adjustments: |
|
|
|
|
|
|
||
Non-cash stock-based compensation expense |
|
|
4,353 |
|
|
|
4,469 |
|
Provision for current expected credit loss reserve |
|
|
69,960 |
|
|
|
5,247 |
|
Depreciation and amortization expense |
|
|
2,599 |
|
|
|
2,579 |
|
Amortization of above and below market lease values, net |
|
|
354 |
|
|
|
354 |
|
Unrealized loss on interest rate cap |
|
|
998 |
|
|
|
1,835 |
|
Loss on extinguishment of debt |
|
|
2,244 |
|
|
|
- |
|
Gain on foreclosure of real estate owned |
|
|
- |
|
|
|
(4,162 |
) |
Distributable Earnings prior to realized losses |
|
$ |
27,713 |
|
|
$ |
44,365 |
|
Loss on extinguishment of debt |
|
|
(2,244 |
) |
|
|
- |
|
Principal charge-offs |
|
|
(42,266 |
) |
|
|
(7,468 |
) |
Distributable (Loss) Earnings |
|
$ |
(16,797 |
) |
|
$ |
36,897 |
|
Weighted average diluted shares - Distributable (Loss) Earnings |
|
|
141,403,825 |
|
|
|
141,321,572 |
|
Diluted Distributable Earnings per share prior to realized losses |
|
$ |
0.20 |
|
|
$ |
0.31 |
|
Diluted Distributable (Loss) Earnings per share |
|
$ |
(0.12 |
) |
|
$ |
(0.26 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240506019723/en/
Investor Relations:
Claros Mortgage Trust, Inc.
Anh Huynh
212-484-0090
cmtgIR@mackregroup.com
Media Relations:
Financial Profiles
Kelly McAndrew
203-613-1552
Kmcandrew@finprofiles.com
Source: Claros Mortgage Trust, Inc.
FAQ
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