Claros Mortgage Trust Q3 Loss Narrows as Loan Resolutions Cut Debt

Claros Mortgage Trust reported a third-quarter GAAP net loss of $14.3 million, or $0.10 per share, as the commercial real estate lender continued to resolve troubled loans and reduce debt. The company’s watchlist declined from year-end, while post-quarter loan repayments supported further deleveraging, but sizable credit reserves and potential losses on pending loan sales continued to weigh on its balance sheet.

The GAAP loss narrowed from $255.4 million, or $1.81 per share, in the second quarter, when results included a $208.8 million provision for current expected credit losses and a $29.6 million valuation adjustment on real estate owned held for sale. The third-quarter CECL provision was $387,000.

CMTG recorded a distributable loss, a non-GAAP measure, of $12.1 million, or $0.08 per share. Distributable loss before realized gains and losses was $7.9 million, or $0.05 per share. Total net revenue was $32.6 million, including $1.2 million of net interest income and $31.4 million of revenue from real estate owned.

Book value was $8.49 per share at September 30, down from $8.58 at the end of June. Adjusted book value, which adds back the general CECL reserve and accumulated depreciation and amortization on real estate owned, was $9.00 per share. Total CECL reserves were $566.2 million, equal to 18.5% of unpaid principal balance, including $515.6 million of specific reserves.

Loan Resolutions and Watchlist Reduction

The held-for-investment loan portfolio stood at $2.5 billion by carrying value across 23 loans, compared with $2.8 billion across 26 loans at the end of the second quarter. The portfolio was 95% floating-rate and 95% senior loans, with a weighted-average risk rating of 3.8.

During the quarter, CMTG resolved four loans totaling $409.5 million of unpaid principal balance and received $8 million of partial repayments. The resolutions included two full repayments totaling $223.1 million, the sale of a watchlist loan at 63% of unpaid principal balance and a discounted payoff of another watchlist loan at a 94% recovery. After quarter-end, the company received two additional full repayments totaling $268.7 million and $600,000 of partial repayments.

Year-to-date loan resolutions reached $1.3 billion of unpaid principal balance, including six full repayments totaling $732.5 million. CMTG resolved seven watchlist loans totaling $646.8 million during the period, generating gross proceeds equal to 79% of unpaid principal balance.

At quarter-end, the watchlist contained 11 loans with a combined carrying value of $1.1 billion, down $547.2 million from the end of 2025. No loans were added to the watchlist or placed on non-accrual status during the quarter. The watchlist included 10 risk-rated 5 loans with $1.55 billion of unpaid principal balance and $1.03 billion of carrying value after specific CECL reserves equal to 33.4% of unpaid principal balance.

In October, binding agreements were reached to sell two risk-rated 5 loans for combined gross proceeds of $310.7 million, or 97% of their current combined carrying values. If completed in the fourth quarter, the transactions are expected to produce incremental combined losses of $10.4 million, or about $0.07 per share.

Lower Debt and REO Dispositions

Outstanding financing declined by $330.1 million during the quarter, including $99.9 million of deleveraging payments. CMTG ended September with $146.9 million of liquidity, including $133.8 million of cash. As of November 2, liquidity was $142.7 million, including $136.8 million of cash.

The non-GAAP net debt-to-equity ratio was 1.7 times and the total leverage ratio was 2.4 times at quarter-end. After reflecting $268.7 million of subsequent loan resolutions and deleveraging, those ratios would have been 1.5 times and 2.2 times, respectively. The company also reported $664.5 million of unencumbered assets and net unfunded commitments of $3 million where funding conditions were met.

CMTG’s real estate owned portfolio consisted of eight investments with a carrying value of $700.7 million and net equity of $287.1 million, or $1.99 per share. The company sold one multifamily REO investment for $22.5 million during the quarter. In October, a binding agreement was reached to sell two of the seven hotels in its REO hotel portfolio for $44.5 million, slightly above their allocated carrying value, with closing expected by the first quarter of 2027.

The company is pursuing sales or other monetization strategies across several REO assets while seeking to improve operating performance at others before eventual disposition. Outcomes remain subject to execution and market conditions. CMTG also identified borrower defaults, refinancing pressure, financing availability and costs, interest-rate changes, declining collateral values, reduced demand for commercial property and potentially lower recoveries or greater loss severity as material uncertainties affecting its portfolio and future results.