Claros Mortgage Trust, Inc. Reports Fourth Quarter and Full Year 2023 Results
- Strong GAAP net income of $34.0 million for Q4 2023.
- Stable CECL reserves at 2.2% of unpaid principal balance.
- Successful origination of a $101 million hospitality loan.
- Execution of two loan sales generating $187 million.
- Proactive asset management execution by the CMTG team.
- None.
Insights
Claros Mortgage Trust, Inc.'s recent financial results reveal a stable performance with a GAAP net income of $34.0 million for the fourth quarter and $6.0 million for the full year. The disclosure of Distributable Earnings, a metric often used by real estate investment trusts (REITs) to better reflect cash available for distribution, indicates a slightly more positive picture at $36.9 million for the quarter and $39.9 million for the year. This figure is critical for investors as it directly impacts dividend payouts, which for this quarter was $0.25 per share.
The company's loan portfolio shows a healthy weighted average all-in yield of 9.1%, which is robust, especially in the current climate of elevated interest rates. However, the reclassification of three loans to held-for-sale and the subsequent sale at 96% of the unpaid principal balance could indicate potential asset quality concerns or a strategic shift in portfolio composition. The Total CECL reserves at 2.2% remain unchanged, suggesting a consistent approach to credit loss estimation. With total liquidity reported at $238 million, the company appears to be in a sound position to manage its short-term obligations and invest in new opportunities.
Claros Mortgage Trust, Inc. operates within the commercial real estate (CRE) lending sector, a space that is highly sensitive to interest rate fluctuations. The company's ability to sustain a loan portfolio yield of 9.1% is commendable amidst rising rates, which could compress margins for less efficient operators. The CRE lending market is competitive and Claros' performance, including the successful origination of a $101 million hospitality loan and the execution of loan sales, suggests that it is maintaining its market position.
Investors should note the company's proactive approach to asset management, as emphasized by the CEO. In volatile economic times, active management can be the difference between outperformance and underperformance. The mention of working with borrowers and leveraging the Sponsor's expertise implies a strategic advantage in managing through cycles. This could be a signal of resilience, an essential quality for stakeholders considering long-term investment.
The real estate investment sector is currently navigating a complex environment, with interest rate hikes posing challenges for financing and valuations. Claros Mortgage Trust's strategy of selling loans to generate liquidity is a prudent move that provides flexibility in an uncertain market. The CECL (Current Expected Credit Loss) reserves rate being stable is a positive sign, indicating that the company is not expecting a significant deterioration in loan quality.
The origination of a large hospitality loan suggests confidence in the travel and leisure sector's recovery post-pandemic. However, investors should be aware of the sector-specific risks, such as sensitivity to economic downturns and travel trends. Claros' focus on asset management and value creation for shareholders is essential, as the ability to adapt to changing market conditions is key in the real estate sector.
Fourth Quarter 2023 Highlights
-
$6.9 billion 9.1% . -
Received loan repayment proceeds of
$38 million -
Funded approximately
$168 million -
Reclassified three loans to held-for-sale, representing unpaid principal balance of
$272 million $107 million -
Subsequent to year-end, sold the three loans for
$262 million 96% of unpaid principal balance; after the repayment of senior financing and closing costs, the loan sales generated net liquidity of$77 million
-
Subsequent to year-end, sold the three loans for
-
Total CECL reserves stood at
2.2% of unpaid principal balance at December 31, 2023, unchanged from September 30, 2023. -
Total liquidity of
$238 million $190 million $48 million -
Paid a cash dividend of
$0.25
Full Year 2023 Loan Portfolio Highlights
-
Originated a
$101 million -
Follow-on fundings on existing loan commitments totaled
$730 million -
Received
$585 million -
Executed two loan sales generating proceeds of
$187 million
“Throughout 2023, the CMTG team maintained a strong focus on asset management execution,” said Richard Mack, Chief Executive Officer and Chairman of CMTG. “We have been proactive in working with our borrowers, bringing to bear our Sponsor’s decades of expertise in developing and managing commercial real estate assets across varied cycles. In this elevated interest rate environment, challenges are widespread. We embrace challenges as an opportunity to actively create value for our shareholders.”
Teleconference Details
A conference call to discuss CMTG’s financial results will be held on Wednesday, February 21, 2024, at 11:00 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 451993.
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 903272, 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 the Company’s 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 Net Income Attributable to Common Stock to Distributable Earnings (Loss) and Distributable Earnings Prior to Realized Gains and Principal Charge-Offs (Amounts in thousands, except share and per share data) |
||||||||
|
|
Three Months Ended |
|
Year Ended |
||||
|
|
December 31, 2023 |
|
December 31, 2023 |
||||
Net income attributable to common stock: |
|
$ |
34,043 |
|
|
$ |
6,027 |
|
Adjustments: |
|
|
|
|
|
|
||
Non-cash stock-based compensation expense |
|
|
4,469 |
|
|
|
16,599 |
|
Provision for current expected credit loss reserve |
|
|
5,247 |
|
|
|
153,683 |
|
Depreciation and amortization expense |
|
|
2,579 |
|
|
|
9,287 |
|
Amortization of above and below market lease values, net |
|
|
354 |
|
|
|
708 |
|
Unrealized loss on interest rate cap |
|
|
1,835 |
|
|
|
5,157 |
|
Gain on extinguishment of debt |
|
|
- |
|
|
|
(2,217 |
) |
Gain on sale of loan |
|
|
- |
|
|
|
(575 |
) |
Gain on foreclosure of real estate owned |
|
|
(4,162 |
) |
|
|
(4,162 |
) |
Distributable Earnings prior to realized gains and principal charge-offs |
|
$ |
44,365 |
|
|
$ |
184,507 |
|
Gain on sale of loan |
|
|
- |
|
|
|
575 |
|
Gain on extinguishment of debt |
|
|
- |
|
|
|
2,217 |
|
Principal charge-offs |
|
|
(7,468 |
) |
|
|
(147,361 |
) |
Distributable Earnings (Loss) |
|
$ |
36,897 |
|
|
$ |
39,938 |
|
Weighted average diluted shares - Distributable Earnings (Loss) |
|
|
141,321,572 |
|
|
|
141,254,760 |
|
Diluted Distributable Earnings per share prior to realized gains and principal charge-offs |
|
$ |
0.31 |
|
|
$ |
1.31 |
|
Diluted Distributable Earnings (Loss) per share |
|
$ |
0.26 |
|
|
$ |
0.28 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240220759294/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
What was Claros Mortgage Trust, Inc.'s (CMTG) GAAP net income for Q4 2023?
What were CMTG's Distributable Earnings for Q4 2023?
What was the total CECL reserves percentage for CMTG at the end of 2023?
What was the value of the hospitality loan originated by CMTG in 2023?
How much did CMTG generate from two loan sales in 2023?
