Claros Mortgage Trust, Inc. Reports Second Quarter 2024 Results

Rhea-AI Summary

Claros Mortgage Trust, Inc. (NYSE: CMTG) reported its Q2 2024 financial results, showing a GAAP net loss of ($11.6 million), or ($0.09) per diluted share. The company's Distributable Earnings were $28.9 million, or $0.20 per diluted share. Key highlights include:

- $6.8 billion held-for-investment loan portfolio with a 9.0% weighted average all-in yield
- Funded $143 million in follow-on fundings
- Received $41 million in loan repayment proceeds
- Reduced outstanding financing by $128 million
- Total liquidity of $191 million
- Book value per share of $15.27

CMTG declared a Q3 2024 dividend of $0.10 per share, payable on October 15, 2024. The company also reported full repayments of three loans totaling $244 million after the quarter's end.

Positive

• Distributable Earnings of $28.9 million, or $0.20 per diluted share
• $6.8 billion held-for-investment loan portfolio with a 9.0% weighted average all-in yield
• Total liquidity of $191 million
• Received full loan repayments of $244 million after quarter end

Negative

• GAAP net loss of ($11.6 million), or ($0.09) per diluted share
• Provision for CECL reserves of $34 million, or ($0.24) per share
• Reduced quarterly dividend to $0.10 per share for Q3 2024

Insights

Financial Analyst

Claros Mortgage Trust's Q2 2024 results reveal a challenging quarter with a GAAP net loss of $11.6 million ($0.09 per diluted share). However, the company's Distributable Earnings of $28.9 million ($0.20 per diluted share) provide a more positive outlook. The significant provision for CECL reserves of $34 million ($0.24 per share) indicates ongoing credit concerns in the portfolio.

The reduction in outstanding financing by $128 million and subsequent loan repayments of $244 million suggest a focus on de-risking the balance sheet. The dividend cut to $0.10 per share for Q3 2024 reflects a prudent capital management strategy, allowing for potential book value preservation and portfolio repositioning.

Real Estate Market Analyst

The transitional commercial real estate market remains challenging, as evidenced by CMTG's results. The $6.8 billion held-for-investment loan portfolio with a 9.0% weighted average all-in yield suggests potential pressure on asset quality. The company's focus on resolving watch list loans and the CEO's expectation of improved capital markets due to potential Fed rate cuts indicate a cautiously optimistic outlook for the sector.

The full repayment of three loans totaling $244 million across different property types (build-to-rent, industrial and office) provides insight into varying market dynamics. The office loan repayment in New York is particularly noteworthy, given the ongoing challenges in the office sector post-pandemic.

NEW YORK--(BUSINESS WIRE)-- Claros Mortgage Trust, Inc. (NYSE: CMTG) (the “Company” or “CMTG”) today reported its financial results for the quarter ended June 30, 2024. The Company’s second quarter 2024 GAAP net loss was ($11.6 million), or ($0.09) per diluted share. Distributable Earnings (a non-GAAP financial measure defined below) was $28.9 million, or $0.20 per diluted share. Distributable Earnings prior to realized losses was $30.4 million, or $0.21 per diluted share.

Second Quarter 2024 Highlights

• $6.8 billion held-for-investment loan portfolio with a weighted average all-in yield of 9.0%.
  • Funded approximately $143 million of follow-on fundings related to the existing loan portfolio.
  • Received loan repayment proceeds of $41 million.
• Reduced outstanding financing by $128 million.
• Provision for CECL reserves approximated $34 million, or ($0.24) per share, for the second quarter; overall general CECL reserve per share of $0.95.
• Total liquidity of $191 million consisting of $148 million of cash and $43 million of approved and undrawn credit capacity.
• Book value per share of $15.27.

Subsequent Events

• The Company declared a dividend of $0.10 per share of common stock with respect to the third quarter of 2024. The dividend is payable on October 15, 2024 to stockholders of record as of the close of business on September 30, 2024.
• Subsequent to quarter end, received full loan repayments of three loans representing unpaid principal balance of $244 million:
  • $22 million loan secured by a build-to-rent property in Georgia.
  • $99 million loan secured by an industrial property in Nevada.
  • $123 million loan secured by an office building in New York.

“During the first half of 2024, we continued to make progress resolving watch list loans,” said Richard Mack, Chief Executive Officer and Chairman of CMTG. “Given a higher likelihood of the Federal Reserve reducing rates, we expect capital markets to continue to improve. This should allow for an environment that facilitates increased repayment activity and accelerated positive momentum in loan resolutions.”

Mack continued, “In light of this shifting macro environment, the Company declared a quarterly dividend of $0.10 per share for the third quarter 2024, in order to allow us to more opportunistically redirect capital into strategies to preserve and enhance book value, and better position our portfolio for long term earnings growth.”

Teleconference Details
A conference call to discuss CMTG’s financial results will be held on Tuesday, August 6, 2024, at 9:00 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 172243.

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. An earnings presentation accompanying the earnings 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 130740, 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 U.S. CMTG is externally managed and advised by Claros REIT Management LP, an affiliate of Mack Real Estate Credit Strategies, L.P. Additional information can be found on the Company’s website at www.clarosmortgage.com.

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 owned 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 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, as dividends. Distributable Earnings (Loss), Distributable Earnings prior to realized gains and losses, and other similar measures, have historically been a useful indicator over time of a mortgage REIT’s ability to cover its dividends, and to mortgage REITs themselves in determining the amount of any dividends to declare. Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are key factors, among others, considered by the Board in determining the dividend each quarter and as such the Company believes Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are also useful to investors.

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 Loss to Distributable Earnings (Loss) (Amounts in thousands, except share and per share data)
		Three Months Ended
		June 30, 2024				March 31, 2024
Net loss:		$	(11,554	)		$	(52,795	)
Adjustments:
Non-cash stock-based compensation expense			3,999				4,353
Provision for current expected credit loss reserve			33,928				69,960
Depreciation and amortization expense			2,623				2,599
Amortization of above and below market lease values, net			354				354
Unrealized loss on interest rate cap			94				998
Loss on extinguishment of debt			999				2,244
Distributable Earnings prior to realized losses		$	30,443			$	27,713
Loss on extinguishment of debt			(999	)			(2,244	)
Principal charge-offs			(561	)			(42,266	)
Distributable Earnings (Loss)		$	28,883			$	(16,797	)
Weighted average diluted shares - Distributable Earnings (Loss)			142,276,031				141,403,825
Diluted Distributable Earnings per share prior to realized losses		$	0.21			$	0.20
Diluted Distributable Earnings (Loss) per share		$	0.20			$	(0.12	)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805498592/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 CMTG's net income for Q2 2024?

CMTG reported a GAAP net loss of ($11.6 million), or ($0.09) per diluted share, for Q2 2024.

What is the size of CMTG's loan portfolio as of Q2 2024?

CMTG has a $6.8 billion held-for-investment loan portfolio with a weighted average all-in yield of 9.0%.

How much did CMTG declare in dividends for Q3 2024?

CMTG declared a dividend of $0.10 per share of common stock for Q3 2024, payable on October 15, 2024.

What was CMTG's book value per share at the end of Q2 2024?

CMTG's book value per share was $15.27 at the end of Q2 2024.