Claros Mortgage Trust NYSE: CMTG executives said the company made “meaningful” progress in 2025 and into early 2026 as it worked to resolve watch list loans, generate liquidity, and deleverage the balance sheet, while acknowledging that earnings power has been pressured as the loan portfolio shrinks.
Management frames 2025 as a year of accelerated resolutions
Chief Executive Officer and Chairman Richard Mack said the company executed on the priorities it laid out at the start of 2025, including resolving watch list loans, enhancing liquidity, and further deleveraging. Mack highlighted that Claros set a $2 billion total resolution target for 2025 and “meaningfully exceeded” it, finishing the year with $2.5 billion of total resolutions.
According to Mack, the 2025 activity included the resolution of 11 watch list loans representing an aggregate unpaid principal balance (UPB) of $1.3 billion. He also noted that momentum carried into the new year, citing $389 million of full loan repayments, including a New York City land loan that had been on non-accrual since 2021.
Looking ahead, Mack said management does not expect a single catalyst to drive an “overnight recovery” in real estate. Instead, he anticipated gradual improvement supported by reduced new supply, tightening credit spreads, and improving financing costs for new originations, while calling out increased demand for industrial space and investment tied to artificial intelligence and domestic manufacturing. For 2026, he said the company’s focus will remain on asset management and “decisive execution” as it continues to resolve watch list loans and work through REO, with the goal of being positioned to evaluate new lending opportunities toward the end of 2026.
Fourth-quarter results reflect losses and a shrinking loan book
President, CFO, and Director Mike McGillis reported a fourth-quarter 2025 GAAP net loss of $1.56 per share and a distributable loss of $0.71 per share. Distributable earnings prior to realized gains and losses were $0.02 per share, he said.
McGillis said the held-for-investment loan portfolio continued to decline, ending 2025 at $3.7 billion at December 31 compared with $4.3 billion at September 30 and $6.1 billion at year-end 2024. He attributed the UPB decline over the past year to the company’s strategy to “turn over the portfolio and prepare for an eventual return to originations,” while also noting reduced exposure to certain asset types facing secular headwinds.
- Standalone life science exposure was eliminated by year-end 2025, McGillis said.
- Office exposure decreased to $589 million from $859 million.
- Land exposure decreased to $187 million from $489 million.
In the fourth quarter, McGillis said the quarter-over-quarter UPB decrease was driven primarily by four loan resolutions: two “regular way” repayments (on a multifamily asset and a life science asset in Pennsylvania), plus two additional resolutions via a discounted payoff and a foreclosure.
Loan-by-loan actions: discounted payoff, foreclosure, and early-2026 resolutions
McGillis provided detail on a discounted payoff tied to a $150 million, previously four-rated office loan in Connecticut. Given the collateral valuation, the company agreed to repayment at about 70% of par, which management described as a “good outcome” in a challenging submarket. The transaction generated about $35 million in net liquidity that was used to reduce debt, and it resulted in a $46 million principal charge-off; however, McGillis said the book-value impact was “marginal” because the loss had been contemplated in the company’s general CECL reserve.
He also discussed the foreclosure of an $88 million New York City watch list and non-accrual land loan. The collateral is an undeveloped parcel adjacent to Hudson Yards that allows for mixed-use development, McGillis said. Upon foreclosure, the company assigned a $94 million carrying value based on a third-party appraisal—about $6 million above UPB—and said it expects to market the land for sale with an exit “sometime in 2026.”
Management said resolutions continued after year-end. McGillis cited $389 million of UPB resolved across four loans in early 2026, including:
- A $67 million New York City land loan repayment that had been non-accrual since 2021.
- A $174 million Salt Lake City newly built multifamily loan repayment that generated about $52 million of net cash proceeds.
- A foreclosure on a Dallas multifamily loan with $77 million of UPB; the carrying value was written down from $49 million to $37 million upon foreclosure.
- Resolution of a $71 million Seattle office loan, where the company transferred its rights and interests in the loan and underlying collateral to the financing counterparty given the collateral value relative to its position net of non-recourse note-on-note financing.
Credit marks and CECL reserve build
On credit, McGillis said the quarter included upgrades and downgrades. The company downgraded a $220 million luxury hotel loan in Northern California to a four risk rating, citing the loan’s August 2025 maturity and the lack of modification terms, despite what he called meaningful year-over-year improvement in operating performance. McGillis said the company has also commenced foreclosure proceedings to provide additional optionality.
McGillis also said three loans were downgraded to a five risk rating, reflecting a more aggressive portfolio turnover approach. He identified:
- A $170 million Denver multifamily loan, where management is pursuing a near-term resolution and adjusted the carrying value as of year-end to reflect expectations for the anticipated resolution.
- A $225 million Atlanta office loan maturing in March, where the company is evaluating options amid continued sector challenges.
- The Seattle office loan, which was resolved after quarter-end.
The company recorded a $212 million provision for current expected credit losses (CECL) in the fourth quarter. McGillis said this primarily consisted of a $283 million provision to specific CECL reserves (before principal charge-offs) and a $62 million decrease in the general CECL reserve. Total CECL reserves on held-for-investment loans increased to $443 million, or 10.9% of UPB at year-end, from $308 million, or 6.8% of UPB at September 30.
REO progress, refinancing, and balance-sheet positioning
On REO, McGillis said Claros made “significant progress” on a mixed-use New York City asset. As of year-end, the company sold all office floors and a signage component, generating $67 million of gross proceeds that were generally in line with carrying value. Management said it now intends to run a sale process for the fully leased retail component.
McGillis said the New York REO hotel portfolio continues to perform well, with results exceeding expectations and annual net operating income (NOI) growth of about 14%. He said the asset has been accretive to earnings and, after refinancing executed last year, the company will monitor the market for an opportune time to sell.
McGillis said the company reduced leverage by $1.7 billion during 2025 and by an additional $300 million into early 2026. Net debt-to-equity declined to 1.9x at December 31, 2025 from 2.4x at December 31, 2024.
A major corporate financing milestone came in January 2026, when the company retired its Term Loan B and replaced it with a $500 million senior secured term loan from HPS maturing in January 2030. The new loan is priced at SOFR plus 675 basis points, McGillis said. In connection with the financing, Claros issued 10-year detachable warrants to purchase about 7.5 million common shares at an exercise price of $4 per share, which management said represented a 46% premium to the closing price on January 30, 2026. McGillis also said financial covenants were aligned and relaxed across financing facilities to provide additional flexibility.
Following the new term loan, McGillis said liquidity stood at $153 million, up $51 million from prior year-end “despite the significant deleveraging” completed in 2025.
During Q&A, management also cautioned that net interest income could remain under pressure as the portfolio continues to pay down. McGillis said it was a “fair assumption” that net interest income could be lower in early 2026 because interest income will compress as loans are resolved and the portfolio is delevered, though lower debt levels should reduce interest expense. Executives said the company remains focused on cleaning up and simplifying the portfolio, while evaluating capital allocation options over time, including additional deleveraging and potentially returning to originations.
About Claros Mortgage Trust NYSE: CMTG
Claros Mortgage Trust is a specialty finance company structured as a real estate investment trust that acquires and manages a portfolio of newly originated, conventional residential mortgage loans guaranteed or insured by U.S. government‐sponsored enterprises. The company concentrates on Agency collateral, including loans backed by Ginnie Mae, Fannie Mae and Freddie Mac, aiming to generate current income while preserving capital through high‐quality, credit‐enhanced assets.
Under an external management agreement with Claros Mortgage Capital Advisors LLC, the firm leverages a seasoned team to source, underwrite and service mortgage assets.
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