Welcome to the Claros Mortgage Trust third quarter 2022 earnings conference call. My name is Elliot, 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. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to hand over the call to Anh Huynh, Vice President of Investor Relations for Claros Mortgage Trust. Please proceed. Thank you. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Claros Mortgage Trust, Mike McGillis, President and Director of Claros Mortgage Trust, and Jai Agarwal, CMTG's Chief Financial Officer. We also have Kevin Cullinan, Executive Vice President, who leads MRECS Origination, and Priyanka Garg, Executive Vice President, who leads MRECS Portfolio and Asset Management. Prior to this call, we distributed CMTG's earnings supplement. We encourage you to reference these documents in conjunction with the information presented on today's call. If you have any questions following today's call, please contact me. I'd like to remind everyone that today's call may include forward-looking statements within the meaning 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 represent our views only as of today, and we undertake no obligation to update them. We will also be referring to certain non-GAAP financial measures, such as distributable earnings, which we believe may be important to investors to assess our operating performance. For non-GAAP reconciliations, please refer to the earnings supplement. I would now like to turn the call over to Richard. Good morning, and thank you everyone for joining us for our third quarter earnings call. It may be an understatement to note that market volatility and uncertainty continue to be the prevailing themes as investors and borrowers grapple with high inflation, rising interest rates, supply chain disruptions, geopolitical risk overseas, and political division and uncertainty at home. Economic data remains mixed and valuations widely distributed as investors across all asset classes assess the Fed's interest rate policy and debate its ability to engineer a soft landing. Despite these factors, we believe that the U.S. economy is stronger and more resilient compared to prior recessions, that it is the healthiest major economy in the world, and that the U.S. property sector will be more resilient than international markets. However, it is now our view that a recession is likely to occur sometime in 2023 as the Fed attempts to resolve the current inflationary environment. Looking ahead over the near term, we anticipate more pressure on real estate valuations driven by higher interest rates and, in some cases, slower NOI growth. The impact will be uneven and highly dependent on property type, asset quality, and market. On a positive note, it is important to recognize that there are opportunities for well-capitalized and well-positioned lenders that have demonstrated the ability to manage through challenging economic conditions like CMTG. Our investment strategy is to focus on transitional lending opportunities secured by high-quality assets with institutional-grade sponsorship. We employ a disciplined approach to underwriting and portfolio construction and are just as focused, if not more so, on asset management. As a result, we believe that our portfolio is well positioned in today's evolving market environment. Our portfolio is comprised of nearly all floating rate loans and therefore has benefited from the current interest rate environment. All else remaining equal, additional benchmark rate increases could translate into further earnings growth based on the current portfolio. More than 90% of our floating rate loan portfolio have interest rate caps in place. With regard to asset allocation, we are heavily weighted toward multifamily, which accounts for more than 40% of our portfolio. We have relatively low office exposure and no standalone retail. Today, our portfolio is exclusively focused on U.S. investments, and we do not have any European exposure. For the last two years, we have been diversifying away from the coastal markets, capitalizing on the favorable demographic trends and underlying job and rent growth in select markets that we believe will prove to be more resilient in a scenario involving an economic downturn. To do this, we've leveraged the analysis and insights of the broader Mack Real Estate Group team, which has made recent equity investments in a number of these markets. Moreover, with an average portfolio LTV of 68% and low leverage on our balance sheet by design, we believe that we are well insulated against adjustments in real estate asset values. We have a conservative approach to managing our balance sheet and have consistently employed relatively low leverage since our formation. In uncertain economic times, our view is that a conservative approach to leverage, adequate liquidity, and access to capital are critical, and we would like to note that we had more than $500 million of liquidity at the end of the third quarter. We believe that our business and strategically constructed portfolio will continue to be resilient despite the uncertain market landscape. Our senior management team has several decades of global real estate investing experience through multiple economic cycles. While each market cycle is unique, our team is recognizing both similar and new factors in the current environment that are informing our focus areas. During the third quarter, we continued to execute on our strategic priorities. Those strategic priorities include targeted originations, proactive asset management, and balance sheet management. Demonstrably, we took advantage of our liquidity position and the market dislocation to originate $878 million of new loans at strong historical spreads while focusing on our high conviction themes in the residential sector, high growth markets, and in another drive to hospitality loan. We're pleased to share our non-accrual loans represented less than 1% of the portfolio at the end of the quarter, down from 4% at the beginning of the year. Additionally, despite a challenging capital market environment, we continue to have access to financing. Notably, we entered into a $1 billion non-mark-to-market matched term financing facility with JPMorgan. Jai will provide additional color on this exciting closing. In summary, we believe our achievements for the quarter speaks to the strength of our management team, portfolio, and institutional relationships. In addition to our sponsor's integrated real estate lender, owner, operator, developer, and property manager business model. Looking ahead, we expect to selectively target our originations volume to seek to seize upon only those we see as the best risk-adjusted return opportunities while remaining defensive. Our pace of deployment will depend on where we see prudent and accretive leverage, as well as the pace of repayments from the existing portfolio, which could slow due to the overall softening transaction volume and the challenging refinancing climate. It bears repeating that we believe we are well positioned for what lies ahead. There will likely be volatility, uncertainty, and persistent dislocations that come with economic disruptions, and we believe this environment will present many compelling CRE lending opportunities in the coming year, despite and due to the challenging capital markets. We believe CMTG has the scale, balance sheet, and team to pick and choose our investment opportunities and execute in today's environment. Now, before turning the call over to Mike, I'm pleased to share that our Board of Directors recently authorized the repurchase of $100 million of the company's common stock. We believe this decision reflects our conviction in our business strategy and long-term financial outlook, in addition to our commitment to enhance shareholder value. I would now like to turn the call over to Mike. Thanks, Richard. CMTG's portfolio, based on unpaid principal balance, increased 4% quarter-over-quarter to $7.4 billion as new originations and follow-on fundings outpaced loan repayments. Our cash balance of $461 million at the beginning of the third quarter, coupled with repayments of $559 million, positioned us well to capitalize on a number of attractive investment opportunities during the quarter. As Richard mentioned, we originated $878 million in total loan commitments across six investments. These had a weighted average credit spread of 530 basis points over SOFR, with a weighted average LTV of 67%. 60% of our originations by loan commitment represented multifamily investments, which we view as a defensive asset class. Multifamily continues to be our largest asset class concentration, representing over 40% of our portfolio. In addition, during the quarter, we continued our expansion into several high growth markets, with the third quarter marking our entry into the Salt Lake City, Utah, MSA. We originated two multifamily loans in Salt Lake City, representing aggregate loan commitments of $252 million at weighted average LTVs below 65%. The larger of the two loans is a $176 million construction loan for a high-rise tower to a well-known and respected sponsor. The second loan is for $76 million of acquisition financing for an existing multifamily asset. These transactions provided opportunities for us to execute at wider than normal credit spreads while further enhancing our portfolio's geographic diversification. The Salt Lake City MSA represents a target market for us as it is one of the fastest-growing MSAs in the country and has exhibited strong population, job, and wage growth. While the interest rate environment has benefited our portfolio yields, we recognize that borrowers and operators have been impacted by higher financing costs. In addition to our asset management team closely monitoring our borrower's ability to pay debt service, we have a number of structural protections in our loan documents designed to mitigate the impact of rising rates on the borrower's ability to pay debt service. These include interest rate caps, lender-controlled cash management accounts, and interest and carry reserves, among others. I would now like to turn the call over to Jai. Thank you, Mike, and thank you, Richard. For the third quarter of 2022, our distributable earnings were $47.1 million or $0.33 per share, and GAAP net income was $42.1 million or $0.30 per share. Our current quarterly dividend is $0.37 per share, which is an 8.2% yield to book value. Earnings this quarter benefited $3 million or $0.02 per share from acceleration of fees on two early repayments. Excluding these $0.02, as well as the impact of gains and losses last quarter, our quarter-over-quarter distributable earnings increased $0.09 per share, primarily due to the increase in benchmark rates and net portfolio growth. We stand to benefit from the steep forward curve and based on the static portfolio at quarter end, 100 basis points increase in rates would generate $0.04 of quarterly earnings. It is important to highlight that benchmark rates are already up 70 basis points since quarter end, and we are currently in a position to cover our dividend. Our general CECL reserve stands at just above 100 basis points of aggregate principal balance. Quarter-over-quarter, our CECL reserve increased by approximately $2.5 million due to net portfolio growth and worsening macroeconomic indicators. This was offset by seasoning as well as improvement in our credit profile. As a reminder, we have virtually zero specific CECL reserves. Turning to the balance sheet. We continue to maintain a conservative net leverage ratio of 2.0x, and our target leverage remains at 2.5x-3x equity. Despite a challenging capital market environment, we were able to access the secured financing market in the form of warehouse lines and note-on-note financing. Most notably, as Richard mentioned, subsequent to quarter end, we closed a financing facility of up to $1 billion with JPMorgan and simultaneously financed three loans on it with an aggregate maximum financing commitment of approximately $400 million. This financing is still matched in non-mark-to-market. At September 30th, we had $4 billion outstanding under our $5 billion of warehouse lines with six counterparties. It is worth noting that the weighted average advance rates under these facilities was a conservative 67%. This 67% can be bifurcated into one, 75% advance rate on multifamily loans, and two, 60% on all other property types, both weighted average numbers. Lastly, we continue to maintain strong liquidity. At quarter end, we had $507 million of liquidity, comprised of $230 million in cash and $277 million of approved and undrawn capacity on our warehouse lines. As of today, we have over half a billion dollars in liquidity. We believe this puts us in a strong position to be both offensive and defensive. I would now like to turn the call over to the operator for questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Don Fandetti from Wells Fargo. Your line is open. Hi. Good to hear the comments on the dividend coverage. Can you talk a little bit about what you're seeing in New York City in terms of office and hotel and how if that's continuing to improve? Sure. Let me take the question in general, and I'd like to turn it to Priyanka to talk a little bit about what we're seeing in our hotel portfolio. I think we continue to be surprised by the strength of the overall New York economy. Tourism appears to be back despite the fact that we aren't seeing as many foreigners. We see multifamily rents and occupancies at all-time highs. At the same point in time, I think that the office sector continues to underperform. What we are seeing and what we've called out many times in the past is continuing. The best buildings are doing well. Although I think that we're starting to see some pushback even at the best buildings on rents in terms of concessions. Weaker buildings are really struggling. It's a have and have not market. We are continuing to see utilization rates well below pre-pandemic levels, and well below utilization rates in the high-growth Sun Belt markets. I think we remain concerned about the office market in New York, and I think we feel that there are certain types of buildings that will work and certain types that will not. That the opportunity to and the need to convert a lot of obsolete buildings or tear them down in the office market is going to be ongoing, and that we're gonna have to that New York City as a whole is going to have to work with the government here to figure out how we create 24-hour collaborative communities across New York to make where people work as vibrant as where people live. That is something that is definitely going to be a long-term transformation that is gonna take time. There are gonna be stretches of New York where office is just not gonna make sense anymore. We are concerned about the office market in New York, and we're much more constructive around hotel. Priyanka, would you wanna talk a little bit about what you're seeing in our portfolio? Yeah. Thanks. Thanks, Richard. Hi, Don. In our REO hotel portfolio, I mean, the third quarter was very strong. I think we're seeing that across the hospitality sector in New York. We performed very well on the top line. You know, I think interestingly, hospitality has really reset a new level of ADR really above the 2019 level. Occupancy was also quite strong throughout the third quarter, being driven largely by leisure transient demand, but we're starting to see some group and corporate come back. We had a large financial institution retain a large block of rooms at one of our hotels during the fall period. You know, we're excited to see the compression is back and the last rooms are really selling at huge premiums. We're very encouraged by the underlying performance of the REO portfolio. Okay. Thank you. We turn to Rick Shane from JPMorgan. Your line is open. Thanks everybody for taking my questions this morning. Look, you know, I think you guys have highlighted that we're in some ways at a crossroads in terms of the market and fundamentals. Given your low leverage and how well positioned you are, you essentially have three choices. You can grow assets, you can repurchase shares, or you can hoard liquidity in light of, you know, potential extension of asset duration. How do you think about those three choices? Obviously, you increased the authorization on the buyback, and how do you think about, you know, increasing leverage on the business at this moment in time? Thanks, Rick. Let me take the last question first. Go ahead, Jai. Yeah. On the leverage side, we are conservatively leveraged today at 2.0x. Like we've said in the past, we do expect leverage to tick up to around 2.5x and a max of 3x. To your other question about assets, asset growth, buyback, liquidity, we have that conversation every single day internally, and it's a debate, honestly. In these times, whether we buy back shares, whether we hold liquidity or we invest in assets, we are being very selective in where we deploy capital because the returns are very strong today. But then we also recognize the importance of keeping liquidity. Richard, would you like to add? Yeah, Rick, I would just say that we're trying to be opportunistic around all three of these sectors. If the market opens up for us to increase our leverage in a manner that we deem accretive both for offense and defense, we're likely to do that. If the market gives us what we believe are outsized risk-adjusted returns, we'll put more money to work. But you know, it's also going to be dependent on how much capital we get from repayments and making sure that we're holding a little bit extra cash. As it relates to the shares, I think we wanna be opportunistic and prudent about where we buy back shares if we buy back shares. I think it's, you know, it's a constant day-to-day analysis and discussion among the team about how to be opportunistic in those three areas. It's a really great question. There's just no perfect answer to it. Thank you. Yeah. Look, it's hard. You know, think about what we've gone through looking at our screens the last 24 hours. Yesterday was so discouraging. Today, the markets are ebullient. I mean, I'm sure it's the same in managing it for you guys. When you think about your portfolio as it's constructed today and the opportunities that are out there currently, should the incremental dollar be invested in what you already have, or is the incremental opportunity in terms of what's out there so compelling that it just makes sense to put the next dollar back into the market? I mean, like, again, that's something we're debating every day. We're, you know, staying active in the market so that we can look at the risk-adjusted returns around what's in our portfolio and what looks like our portfolio, what diversifies our portfolio, and you know, what those returns look like. Again, it's a kind of an everyday job that we're seeking to maximize the value for shareholders. Okay, thanks. Again, look, we really appreciate the thematic clarity on the portfolio construction. It makes it a lot easier to understand the risk and sort of position you within the competitive landscape. Thank you for restating that. Well, thank you. Our next question comes from Steve DeLaney from JMP Securities. Your line is open. Good morning, everyone. Thank you for taking the question. Well, your stock buyback decision and allocation, your stock's up 10% this morning, so there may have to be a near-term revision in how you view that. I just said that in jest, but it's nice to see. I think the thing that struck me in your report was the new facility from JPMorgan, $1 billion in very favorable terms and structure to you. I'm thinking back to March of 2020. I mean, since March of 2020 or the spring of 2020, what we've gone through in the last couple of months is probably the most unstable and uncertain period. I'm curious on your thoughts about why the banks are hanging in there this time. It strikes me that maybe in 2020, I think people were concerned about a credit event due to the economic impact of the pandemic. Maybe this time, as you mentioned, Richard, about the New York City economy, people are looking at this as a rates event simply caused by the Fed's posture and tightening. The banks don't seem to be backing off. I would really appreciate views from you, Richard or Mike or Jai, whoever's been talking to the banks, and kind of what generally you see the banks' mindset to be about lending to real estate companies like yourself. Thank you very much. Thanks. Well, I think all three of us will have slightly different thoughts on this. I'll start by saying that, you know, the banks are being a lot more careful about how they're doing business. They're Mm-hmm. It does occur to me picking who they wanna do business with a lot more. Sure. You know, as it relates to JPMorgan, I think we've demonstrated to them that we are who they wanna be doing business with. They wanna put out capital at what are higher rates for them as well, but they only wanna do with a select group. I think that is a very healthy environment for a business like ours. A have and have-not environment in terms of who has access. Right. to capital. Understood. Jay and Mike, do you wanna add anything to that? Steve, I would also add that not all banks are open. Some banks are Oh. Some banks have said to us they're just not lending in the space anymore, so. Wow. Okay. That is also occurring, but we are in a favorable spot where we continue to have access to capital. Got it. Thank you for that clarity. Steve and Mike 's on as well. I mean, I would also add to that the sort of money center banks. I completely agree with Richard and Jai's sentiment, but we continue to see some of the regional banks for the right projects with the right size characteristics continue to be active financing counterparties for us across our business lines. There really is a difference between the money center banks and the regional banks, particularly those that are very sort of relationship-oriented and focused on who their borrower is. Like, that's. It's been an interesting development that we've seen in the last couple of years. Appreciate that. Just one final thing. $878 million is a big quarter, you know, to have given you had sort of a mid-$6 billion portfolio, I guess, going into or high six going into the quarter. Is there anything chunky in there about a maybe a large sort of portfolio opportunity? Looking at that, I mean, obviously opportunistic with wider spreads, this is a good time to be lending if you have the capital and find the quality deals. Should we expect over the next quarter or so that you could continue to have, you know, strong origination quarters? Was this third quarter just a little chunky? Thanks. Steve- Kevin, do you wanna- This is Kevin Cullinan. Yeah, why don't I take that? There's nothing particularly chunky in the third quarter, there. That was across, like six different investments. You know, we came into the quarter with a really strong balance sheet position and a really strong liquidity position. I think everyone has probably seen that the market or the transaction volume has pulled back a little bit, and we were set up to step up and fill a little bit of that void. We're very happy with the positions we put on during the third quarter. I do expect over the course of the fourth quarter for volume to slow down a little bit. That, you know, goes back to what we've been talking about throughout the course of this call, where we're balancing the various opportunities that our balance sheet has afforded us to invest, whether that's, you know, internally in the company, or continuing to take advantage of what we think is a very strong, but a little bit more opportunity to test the market. Thank you. Appreciate everyone's comments. As a reminder, to ask any further questions, please press star one on your telephone keypad now. We now turn to Jade Rahmani from KBW. Your line is open. Thank you very much. Can you talk about the upcoming loan maturities? The slide shows $576 million. Is that what you anticipate in 2023? I'm sure that's just a couple of chunky deals, but are you expecting those to pay off? Anything else you could touch on about, you know, credit risk in the portfolio? Yeah. Hi, Jade. It's Priyanka. I'll take that. Generally we have a fairly small slug of loans that are repaying or that have fully extended maturities in 2023. It's less than $500 million of UPB, and it's across six loans. So, we, you know, some of those I think are going to be in a position to pay off. Others are probably gonna be some sort of negotiation with the borrower. We were preparing for the worst but hoping for the best with all of our borrowers. Structurally, you know, Mike McGillis touched on this earlier, we have really good protections in place. We feel good about the exit risk and our basis and the capital that our borrowers are gonna want and need to defend at that point in time. As I look at the maturities that are upcoming, I don't have any kind of one-off concerns. Thanks. On the single-family for-rent and Build-to-Rent sectors where you've been active, how are you feeling about the outlook there? I know you're not engaged in this exact type of lending, but hard money lenders, not just Broadmark, which reported this week, but also some others are having difficulty in that space and have seen pretty dramatic deterioration in credit. Of course, home builders are reeling in terms of excess supply. At the same time, some of the Single-Family Rental names are showing some deterioration in NOI. Just wanna check in on how that portfolio is doing and also if you can just contextualize the size of it. If you wanna- It's Kevin again. Sorry. Go ahead. Yes, Kevin. Sure. Jade, it's Kevin. Very good question. We're obviously tracking you know, what you're noticing in the home builder space. I think that can cut both ways. I think that can actually create a little bit more opportunity for larger, well-capitalized and institutional Single-Family Rental owners. Home affordability is certainly on a downward trajectory throughout most of the country. That is leading to you know, fairly robust fundamentals in the SFR space in the markets that we've been trafficking in. Within the entire CMTG portfolio, it's a relatively small portion of our balance sheet that's invested in the SFR space. It's primarily throughout one portfolio that a lot of that portfolio is still under development. It's been pre-sold to a large institutional developer as well. There is a schedule of units that are delivering throughout the course of this year and next. We've been quite happy with the initial lease-up of some of the communities. We're also looking at a forward sale here that has materially de-risked our position as well. I would- Thanks. Oh, go ahead. Just one more thing that I think there's a distinction that has not yet been clear and will probably evolve over time between the SFR space and the Build-to-Rent SFR space. It's important to note that our loans are on Build-to-Rent SFR, which is much more closely tied to the multifamily market than I think people recognize. It's a little bit of an extension of the multifamily market, and we're building this in Phoenix, where we see a lot of demand for the product, and it effectively operates like horizontal multifamily. Some of the pitfalls and strengths of the multifamily market can clearly be exhibited, or more clearly be exhibited in these products. Yeah. Thank you. I was just gonna ask. Jade, just to clarify the Phoenix development Richard mentioned, that's in the equity side of our business. Just to be clear on that, it's not in the CMTG's portfolio. What's the dollar exposure in CMTG? It's on page 11. 200. It's around $200 million, Jade. We've disclosed that in our own page 11 of our earnings supplement. All right. Great. That's 2% of our total commitment. Our UPB right now is quite small, just given that these are all under construction. Okay, great. Well, thanks very much for taking the questions. Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the conference back over to Richard Mack for any closing remarks. Thank you, thanks everyone for joining. We feel really good about our last quarter. I think, you know, as per the questions going forward, it's going to be a challenge, one that we think we're up to manage the opportunities that present themselves in the market, and the difficulties that come with those challenges, with those opportunities. We're pretty excited about it. We think we're well-positioned going forward, with liquidity, the ability to increase our leverage, the ability to buy back stock, and, you know, great access to deal flow and the ability to work through issues as we've been able to demonstrate in our portfolio. We'll expect that we'll have a bit more of that to do as we continue to go through this fairly disrupted, dislocated market over the next probably year plus. Thanks everyone for joining, and we'll look forward to speaking to you all soon in our next quarterly call. Today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.