Claros Mortgage Trust (NYSE:CMTG) reported a third-quarter loss and said it plans to continue selling troubled loans and real estate assets while reducing debt, as elevated interest rates weigh on commercial real estate values.
The company reported a GAAP net loss of $0.10 per share and a distributable loss of $0.08 per share for the third quarter of 2026. Its distributable loss before realized gains and losses was $0.05 per share, President and Chief Financial Officer Mike McGillis said on the earnings call.
CEO and Chairman Richard Mack said the company’s priorities remain resolving watchlist loans, preparing real estate owned, or REO, assets for sale and deleveraging. Those steps could eventually allow the company to repurchase stock, originate investments and reinstate its dividend, he said.
Loan sales and pending transactions
During the third quarter and through Nov. 2, Claros completed $702 million of loan and REO resolutions, including $492 million in full loan repayments, $186 million of watchlist loan resolutions before principal charge-offs and $24 million in REO sales, McGillis said.
After quarter-end, two hospitality loans in New York City and Nashville were repaid in full, totaling $269 million of unpaid principal balance. Since the beginning of 2025, the company has resolved 33 loans with $3.8 billion of unpaid principal balance, including 18 watchlist loans resolved at approximately 80% of par, McGillis said.
Following the post-quarter resolutions, the portfolio comprised 21 loans with $2.8 billion of unpaid principal balance and $2.3 billion of carrying value, as well as eight REO investments with a carrying value of $701 million.
Claros also has binding agreements to sell two risk-rated five loans—a multifamily loan and an unencumbered office loan—for approximately $311 million in combined gross proceeds. That is about 97% of their combined Sept. 30 carrying values. If completed, the sales are expected to result in approximately $10.4 million, or $0.07 per share, in additional fourth-quarter losses, McGillis said.
A separate agreement covers the sale of two of the company’s seven New York City REO hotels for approximately $45 million, a slight premium to their allocated carrying value. The company expects that transaction to close by the first quarter of 2027.
Debt reduction and book value
Claros reduced financing outstanding by approximately $330 million during the third quarter, bringing its net debt-to-equity ratio to 1.7 times from 2.0 times at June 30. Following post-quarter loan resolutions and financing repayments, the ratio fell to 1.5 times on a pro forma basis, McGillis said.
Liquidity was $147 million at quarter-end and $143 million as of Nov. 2. McGillis said proceeds from the pending loan sales would likely support further deleveraging in the near term, with the company’s secured term loan a priority because of its high cost.
The financing on non-accrual loans costs the company approximately $0.06 per share per quarter, while cash interest on the term loan costs about $0.10 per share per quarter, McGillis said. Reducing those costs would help move the company toward better than break-even core operating performance, he said.
Book value was $8.49 per share at Sept. 30. Mack argued that the company’s stock price did not reflect its progress in reducing risk, although McGillis acknowledged that further pressure on book value is possible as watchlist loans are resolved.
Credit reserves and multifamily exposure
The company reported no negative credit rating migration and no additional loans placed on non-accrual status during the third quarter. Its specific credit-loss reserve stood at $516 million, or 33% of the related loans’ unpaid principal balance, and was relatively unchanged from the prior quarter.
Executive Vice President Priyanka Garg said the remaining watchlist loans were carried at about 70% of unpaid principal balance, compared with the approximately 80% recovery rate on watchlist loans resolved since the start of 2025. She cautioned that past outcomes do not guarantee similar recoveries on the remaining loans.
Garg declined to estimate where the watchlist would stand by year-end or early 2027, citing an uncertain market. She said Claros would evaluate whether to hold individual assets for potential additional value or sell them at market prices.
On multifamily properties, Garg cited oversupply in certain markets, pressure on workforce-housing renters and elevated interest rates as challenges. She said only two multifamily loans remained in the company’s performing risk-rated two and three categories, and that Claros felt confident in its ability to receive full repayment on both.
About Claros Mortgage Trust (NYSE:CMTG)
Claros Mortgage Trust, Inc is a real estate investment trust focused on originating, acquiring and managing commercial real estate debt investments. The company primarily provides financing to owners and investors of commercial properties, with an emphasis on transitional assets that may require renovation, repositioning or lease-up before reaching stabilized operations.
Its investment portfolio has primarily consisted of senior and subordinate mortgage loans secured by commercial real estate, including multifamily, office, hotel, retail, industrial and mixed-use properties.
