Hello, everyone, and welcome to Claros Mortgage Trust Q3 2023 earnings conference call. My name is Nadia, and I'll be your conference facilitator today. All participants will be in a listen-only mode. After the speaker's remarks, there'll be a Q&A 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 MREC's Originations, and Priyanka Garg, Executive Vice President, who leads MREC's 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 meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those 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 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, Anh, and thank you everyone for joining us for CMTG's Q3 earnings call. At this time last year, the conversation among investors centered around the timing and depth of a 2023 recession, but it now looks like the U.S. may close this year without one. And while this appears to be positive news, there continues to be much capital market uncertainty as bond rates climb, especially in interest rate sensitive industries. So it's a confusing time, where good news about economic growth can be bad news for asset values and where headline economic data is subject to multiple interpretations. Add to this the elevated geopolitical risk unseen since the depths of the Cold War, punctuated by the ongoing Russia-Ukraine war and a renewed and rapidly evolving war in the Middle East, and you have the basis for persistent market volatility as investors struggle to price capital and underwrite future economic growth, corporate earnings, and inflation. Some in the professional investment space believe that we are nearing or at the end of interest rate hikes. Some are starting to discuss when and not if the Fed will begin to cut rates. However, it's difficult for us to predict the trajectory of interest rates given the multitude of indicators that may influence Fed actions and the numerous, and many cases, conflicting variables impacting inflation and economic growth. With this in mind, we at CMTG have been executing our business within the context of a higher for longer rate environment, and this is one of the main reasons we have been so proactive. We are managing our portfolio with a long-term investment perspective towards maximizing shareholder value while acknowledging the commercial real estate industry's challenges. COVID-related demand shifts have been disruptive, particularly in the office sector, but perhaps not nearly as jarring as the COVID stimulus-induced inflation we are dealing with today and the subsequent higher interest rate environment. The combination of these two factors has resulted in capital markets dislocation that we continue to see throughout the real estate sector. Not surprisingly, amidst these headwinds, sales and transaction volumes have been significantly down over the past several quarters. However, outside of the office market, we have yet to observe many truly distressed trades. What we are seeing is transaction volume around select high-quality assets at only modestly lower values in spite of the challenging environment. Turning past the economic climate, I'll now add a few high-level remarks on the Q3 for CMTG. We had an active and productive quarter overall, with portfolio management and strategic execution focused on liquidity and capital preservation. As mentioned on our last earnings call, we had anticipated significant loan repayments in our portfolio during the back half of the year, and we're pleased to report that we remained on track with four loans repaying during the Q3. Given the limited transaction activity in the broader real estate market, we believe this reflects positively on the institutional quality of the assets and the sponsors within our portfolio. During the quarter, we also executed two loan sales. The first loan was a Texas hospitality loan, which was sold at par with the intention of reducing our overall hospitality exposure and bolstering our liquidity. The second loan was collateralized by a San Francisco multifamily portfolio with a rent-regulated component. In the current environment, it's important to be vigilant, and as part of our asset management process, we evaluate our investments through the lens of optimizing long-term shareholder value, balanced against the time and capital required to achieve that value. So in select circumstances, we will consider selling a loan where we no longer have long-term conviction in the investment. This was the case with the San Francisco multifamily investment we decided to sell during the Q3. It was a difficult decision due to the resulting realized loss. But ultimately, we believe that this portfolio management decision was prudent, given the market and regulatory headwinds the investment was facing. Mike will provide a more comprehensive portfolio review later on in the call, including details of the loan sales. Lastly, as previously reported, CMTG declared a dividend of $0.25 per share for the Q3, which represents a reduction from prior quarterly dividend levels of $0.37 per share. We considered a number of factors in resetting the dividend, including acknowledging that the current market disruption was and is very likely to persist, and the desire to take advantage of potential opportunities that may arise within our portfolio. Given these factors, we look to establish the dividend at a level where we believe it will be sustainable and comfortably covered by distributable earnings before realized gains and losses and leave us prepared for future opportunities and potential unknowns. I would now like to turn the call over to Mike. Thanks, Richard, and good morning, everyone. The Q3 was a dynamic quarter, driven by strong repayment activity and two loan sales. Notwithstanding this activity, the portfolio composition remained relatively unchanged, although we had a modest decline in office exposure. To quickly recap, CMTG's primarily floating rate portfolio, based on carrying value, was $7.1 billion at September 30th, compared to $7.5 billion at June 30th. The quarter-over-quarter decrease was primarily due to loan repayment and loan sale activity during the period, partially offset by follow-on fundings on prior period loan commitments. During the Q3, we received an aggregate of $475 million in loan proceeds, which comprised $248 million of full loan repayments, about $39 million of partial loan repayments, and $188 million from loan sales that Richard mentioned earlier, which I'll touch upon in more detail later. In addition, we made follow-on fundings of $174 million. Turning to the composition of our portfolio, multifamily continues to represent our largest sector, representing 41% of the portfolio at September 30. While we are observing borrowers contending with higher interest rates, our long-term outlook for the asset class remains positive. We continue to believe that high-quality, well-located multifamily will perform well on a relative basis, given the strong long-term underlying supply-demand fundamentals favoring the sector, as well as the impact of higher interest rates on homeownership affordability. Hospitality, our second-largest allocation, represented 19% of the portfolio at September 30, relatively unchanged compared to the prior quarter. In terms of office, historically, we've been highly selective when it comes to office, and as a result, have maintained a low portfolio concentration in this asset class. During the Q3, we further reduced our office exposure to 13% of the portfolio. This was primarily a result of an office construction loan that repaid during the quarter as anticipated. The loan was a $141 million loan commitment and was secured by a newly built Class A high-rise office building located in Nashville, Tennessee. This loan is a good example of high-quality office continuing to be attractive and why we believe construction loans serve a valuable component of our portfolio, particularly when asset managed with discipline and built-in access to the broader perspective and resources of the Mack Real Estate Group. We believe that when a new asset is delivered, it will frequently represent one of the highest quality and most in-demand assets in its submarket. As Richard mentioned, we expected a meaningful number of loans to repay, and during the Q3, we received $248 million in full loan repayments, about $39 million in partial loan repayments, with additional loan repayments expected to occur over the near- to medium- term. We believe it's important to note how diverse the underlying collateral of these loans were. They represent a cross-section of collateral from various markets and property types, and primarily assets that were recently delivered to the market. We believe this suggests that there's still liquidity for high-quality assets and sponsors, validating the quality of the investments in our portfolio. Before turning the call over to Jai, I'd like to discuss the loan sales we completed during the quarter. The first loan was collateralized by a high-quality hospitality asset located in Austin, Texas, with a UPB of $123 million that had seen significant improvement in operating performance during the loan term. We took advantage of an opportunity to sell the investment at par, which we believe speaks to the credit quality of the asset and the investment, particularly in this capital markets environment. The transaction enabled us to enhance our liquidity, further bolstering our balance sheet while reducing our leverage and exposure to hospitality. The second loan was a $138 million loan originated in 2019, collateralized by a portfolio of multifamily properties with a rent-regulated component located throughout San Francisco. The borrower continued to support this asset through COVID-19 pandemic, but decided to stop making debt service payments in the Q4 of 2022 as a result of increasing interest rates and reduced NOI at the property, given San Francisco market challenges. Since the time of the payment default, the dynamics of the San Francisco real estate market have continued to deteriorate, which, coupled with the expectation of continued regulatory pressure, led us to the difficult but clear-sighted decision to sell the loan for gross proceeds of $65 million, representing a 53% discount to UPB. While this is a disappointing outcome for the San Francisco loan, it was driven by our belief that there are significantly better uses of this capital, and we were able to use proceeds from the loan sale to reduce leverage, which will be accretive to Distributable Earnings, given that the loan was on non-accrual. We also believe this demonstrates our commitment to strong and efficient portfolio management, even when it requires moving away from an investment thesis. I would now like to turn the call over to Jai. Thank you, Mike and Richard. For the Q3 of 2023, we reported distributable earnings excluding net realized losses of $0.35 per share, which comfortably covers our revised dividend of $0.25 per share. Distributable loss, including net realized losses, were $0.16 per share. The net realized loss of $73 million, or $0.52 per share, was primarily a result of the sale of the previously five-rated San Francisco multifamily investment that Mike mentioned. We reported GAAP net loss of $0.50 per share. Please refer to our earnings supplement for a reconciliation of non-GAAP financial measures. I would now like to discuss the overall credit profile of the portfolio and risk rating migration during the quarter. No new loans were added to the risk- rated four category. However, three, four-rated loans were migrated to a 5 rating. These are loans with an aggregate UPB of $335 million, against which we recorded a specific CECL reserve of $71 million. These include a land loan in Virginia and office loans in San Francisco and Atlanta. At September 30, our CECL reserve was $155 million, or 2.2% of UPB. This is comprised of $72 million of specific and $83 million of general CECL reserves. Specific CECL reserves represented 21.3% of the UPB of the underlying loans at quarter end. The general CECL reserve of 1.2% is comprised of 3.6% of the UPB on four-rated loans and 0.8% of the UPB on the remaining loans. The general CECL reserve increased during the quarter, primarily as a result of deteriorating macroeconomic conditions, offset by seasoning off and a reduction in our loan portfolio. In addition, we placed another $98 million four-rated loan secured by an office building in Irvine, California, on non-accrual status. Non-accrual loans represented 6.1% of our loan portfolio as of September 30. Turning to the balance sheet. As Richard mentioned, preserving liquidity continues to be a priority for the organization. At September 30, we reported $433 million in total liquidity, which includes cash and approved and undrawn credit capacity. Unencumbered loans comprised $438 million, which includes $407 million in senior loans, as well as $144 million mixed-use New York City REO property. In addition, future funding commitments decreased to $1.3 billion at September 30, compared to $1.9 billion at December 31, 2022. Our net debt-to-equity ratio remained consistent quarter-over-quarter, coming in at 2.3 x at September 30. I would now like to open the call for questions. Operator, please go ahead. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you choose to retract your question, please press star followed by two. When preparing to ask your question, please ensure your phone isn't muted locally. Our first question today goes to Sarah Barcomb of BTIG. Sarah, please go ahead. Your line is open. Hey, everyone. Thanks for taking the question. So on the equity side, we've been hearing that the multifamily supply issue is becoming more prevalent. Developers are perhaps more pressured to get to break even in order to effectuate a sale or more permanent financing. Could you comment on that and what you're seeing on the ground in your development portfolio and sponsor behavior there? Sure. Are we talking about merchant builders selling at a loss? Are we talking about fundamentals from a leasing and occupancy perspective? Just to make sure I get the question, and thank you for asking it. Yeah, yeah. You know, my question, I guess, is coming out of some comments we've been hearing with respect to merchant builders. And, you know, because of that and your concentration in development, just was curious to hear your comments on that and what you're seeing in your portfolio. Sure. Okay. So, as it relates to kind of the sales market, we are seeing merchant builders sell at modest losses in order to get off of guarantees that they have on their loans. That is one of the things that we like about our construction loans, especially in the multifamily space. The borrowers are incentivized to take losses because they are generally on the hook to pay the interest rate guarantees. And so, we are seeing merchant builders sell at discounts, but modest discounts. And generally, what we like about building the best product in the market is even when there is softness in fundamentals, which there are, these are the first assets to lease up, and there's always a level. Always is a big word, but I've never seen a market where there wasn't a level where you could lease the best asset in the market. And so, we feel comfortable, very comfortable with our multifamily development assets. Demand, as a general statement, is good in most markets, but we're still absorbing supply, and that absorption is what is dampening rents and bringing concessions back into the market. Having said that, almost every planned development in the multifamily space has been stopped. So anything that didn't begin more than six months ago really is not getting off the ground. We are also seeing a slowdown in home sales as mortgage rates climb. We believe that over time, that will be bullish for multifamily. So we think that the inflation of rents will come to the multifamily sector, but it is going to take some time to catch up with the supply. But we are long-term, quite bullish, given the lack of housing overall in the U.S. market. We are undersupply from a housing perspective. Hopefully, that addressed your questions. Yeah, I appreciate the color there. And then my follow-up is just related to the loan sales. It sounds like from the prepared remarks that you're open to pursuing more loan sales to support liquidity. You know, we saw a watchlist loan sale as well as a higher quality three-rated loan sale during the quarter. Can you speak to where else in your portfolio, either with respect to sector or geography or non-watchlist versus watchlist, where you see more opportunities to sell and bring in more liquidity? Hi, Sarah. It's Priyanka. Thank you for that question. I think it's gonna be very situational, very asset and borrower specific. So the watchlist loan that was sold, I think Mike did a great job of sharing our perspective and how we arrived at that conclusion. We're only gonna do that if, you know, if we really feel like we're not capable of stepping in and owning the asset. I think we've done that successfully twice now in our REO portfolio, and so we're not gonna shy away from that. But if we don't think the fundamentals are there, then, you know, if we wanna resolve the credit, then it's gonna be a loan sale. There's nothing that we're seeing on the horizon that we have slated for that right now, but it's a very dynamic environment, and, you know, that remains to be seen. The three-rated loan that we sold, that was, you know, just more opportunistic, right timing. We were able to sell it at par, created liquidity. We're not out in the market actively marketing it. That was also. That was not marketed. That was just kind of based on a conversation with a counterparty with whom we do a lot of business. So again, it was just opportunistic and situational, but there's no programmatic strategy here on loan sales. Okay. Appreciate the comment. Thank you. The next question goes to Rick Shane of JP Morgan. Rick, please go ahead. Your line is open. Thanks. Can you guys hear me this morning? Yes. Yes. Yes. Thanks, Rick. Okay, great. Sorry, this question won't really come as a surprise to anybody who's been listening to these calls, but would just love to hear a little bit about combination of dividend policy and appetite for repurchases. I'm assuming that the loan sales were contemplated when you reduced the dividend for the Q3 and going forward. But all things considered, and with the stock trading at such a huge discount, does that dividend policy make sense, or should you be more aggressive on the buyback? And I would just observe that you guys own, on a relative basis, a great deal of stock compared to many of your peer companies. So, you know, I think the incentives are pretty aligned. Sure, Rick, it's Mike. Thanks. Sure. Thanks for the question. I think from a, from a dividend perspective, in terms of the decision to reduce it, it wasn't so much, tied directly to the decision to sell this loan, but it was really looking at, looking at our portfolio, looking at distributable earnings profile on a go-forward basis, assuming there was gonna be some, potential deterioration, given a higher for longer rate environment. And we're trying to be proactive in making that dividend cut to reflect, where we thought distributable earnings before any net realized gains and losses would be on a forecasted basis and allow us to, to substantially cover that go-forward dividend, given, given the situation that we'd significantly overpaid our minimum distribution requirements under the REIT rules. So that, that was. Those were all critical elements of that decision. With respect to share buyback, I think right now, liquidity is key. We really are focused on preserving and maintaining liquidity and protecting the portfolio in this environment, even though we have the ability to buy back shares. I don't expect that we'd, not to say never, but I don't expect that we'd do it unless we were really, really comfortable that we had a lot of excess liquidity, and that was the best use of capital relative to redeploying into what we think is a very favorable market right now, but we're being very, I think, conservative. I think it's also to keep in mind, we do have, as Jai mentioned, significant future funding commitments in our existing loans, which we're very comfortable with the performance of that portfolio. It's important to highlight that those loans have a weighted average spread to SOFR of 473 basis points over SOFR. So, you know, in excess of a 10% current coupon, unleveraged. So, you know, that we feel like is a very, good use of excess liquidity as we have it. So, hopefully, that's responsive to your question. It is. That's helpful. And when we think about those undrawn commitments, the comment had been made that, you know, multifamily development in a lot of cases has really stopped. Does that suggest to you that in the near- term, the draws on against those commitments will be relatively modest, and so there's a little bit of a... liquidity won't be drawn until the environment improves a little bit? Is that the sort of check and balance there? Hi, Rick, it's Priyanka. I'm gonna jump in here. I think Richard's comment was more a general comment related to the market. In our portfolio, all construction is proceeding as expected, on schedule, generally on budget. So I wouldn't expect any change in our future funding commitments as it relates to our multifamily exposure or really across our construction loans. You know, I think we've mentioned in past quarters, we have milestones in our loan documents. We have, you know, effectively an estoppel right every month as we're funding draws, and so we want to keep funding draws, keep the project moving forward, and have borrowers continue to rebalance. So we're not seeing a slowdown inside of our portfolio. Projects that have started have continued. Got it. Priyanka, thank you. That's a very helpful clarification. Thanks, guys. Thank you, Rick. Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question goes to Jade Rahmani of KBW. Jade, please go ahead. Your line is open. Hi, this is Jason Sabshon. I'm for Jade. So my first question, we're seeing commercial mortgage rates take 30%-50% losses on loan sales in some cases, and these are on loans with 60%-70% reported LTVs. So what do you think is driving that magnitude of loss? How much of it is a look-through to price decline at the asset level? How much of it is a delayed business plan and a higher cost to carry? And how much of it is lack of ability to leverage what you're buying? Hi, it's Priyanka. Thanks, thanks for that question. I think it's a great question. I think that's something we're all trying to understand right now. But I think these loan sales, you know, obviously I can only speak for ourselves, but they're all very situational, and it really just depends on, you know, strength of borrower, what people think they can go after, in what jurisdiction it's occurring, because that impacts ability to foreclose. There's obviously underlying asset deterioration, like you just said. I think, you know, for our situation in particular, given our decision to go ahead and sell the loan, what we wanted to really focus on was very expedient and certain execution. And so we selected a strong buyer who could close quickly, which minimized both market and execution risk. So we, you know, I think it's just a very dependent situation. And in our case, we really wanted to ensure that we got it off our books quickly, just given the overall environment in San Francisco and as it related to the continued uncertain rate environment. So I think it's a great question, but I think there's just not a wholesale response. Let me, Richard, do you wanna jump in? Let me jump in here just a little bit. Yeah, yeah. So when you look at our the San Francisco sale, you know, for us, you know, we looked at what has occurred in San Francisco, regulated multi-housing as kind of a perfect storm. California and San Francisco in particular continues to stagnate and continues to be impacted by work from home, crime, homelessness, drug use, governance, high taxes. We can go on and on with and the prospect of increased regulation. I think we can go on and on with the issues as it relates to that asset. And so given all of that uncertainty, we decided to move on and take a very, very significant loss. As it relates to other losses like this, in the market, there have not been that many sales. I would imagine very few people want to transact at that type of a level unless they are in asset classes like office and in and in very weak markets, where they feel that the going-forward opportunity for that asset is vastly diminished. So this was a very unusual, and we hope, a one-off situation, in terms of just about everything that could go wrong, going wrong, wanting certainty, and wanting to move on. So there were multiple factors here, but I don't think other than that, that outside of office, we're going to continue to see people selling loans at at those type of significant discounts. Great. Thank you. As my follow-up question, the 10-Q provides some commentary around discount rates and terminal cap rates. So generally speaking, what do you think stabilized cap rates should be on office and multifamily? That's a very tough question. Go ahead, Priyanka. No, I was going to say the exact same thing actually. Again, I think it's just so market-specific, asset-specific. I mean, if you're talking about a leased-up asset, it depends on the quality of the rent roll to, you know, weighted average lease terms. There's so many things that go into that. I think the, you know, the reference you made to what's in the 10-Q, these are all related to transitional assets that are in our portfolio that have that lease-up and stabilization is going to take time, which is, you know, by definition, in the transitional asset arena. And so we have used cap rates that are indicative of a more normalized transaction environment rather than cap rates today, which is obviously a very capital-constrained environment. Great. Thank you very much. Thank you. We have no further questions, and I'll hand back to Richard for any closing comments. Well, thank you all for joining us. I think that this environment is difficult. It's going to continue to be difficult, and we are ready for it. It may not be fun every day, but we are set up for an environment like this and to work through problems and get to the other side. But it's going to be a very bumpy road for the next year, we think at least. We think we're very well set up to handle these problems and be ready for a capital market turnaround, hopefully by 2025. So thank you all for joining us, and we'll look forward to speaking to you again at our next earnings call. Thank you so much. Thank you. This now concludes today's call. Thank you for joining. You may now disconnect your lines.