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DATE

Thursday, May 7, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — Richard Mack
  • President — John McGillis
  • Chief Financial Officer — Priyanka Garg

TAKEAWAYS

  • GAAP Net Loss -- $0.39 per share, as directly reported by management.
  • Distributable Loss -- $0.52 per share, reflecting all realized items.
  • Distributable Loss Before Realized Losses -- $0.05 per share, separating out reported realized losses.
  • Loan Resolutions -- $609 million resolved across 5 loans, including 4 on watch list status.
  • New Senior Secured Term Loan -- $500 million facility priced at SOFR plus 675 basis points, with a 4-year term maturing January 2030.
  • Loan Portfolio Size -- Declined to $3.2 billion at quarter-end from $3.7 billion, driven by loan resolutions.
  • Hospitality Exposure -- Reduced from $807 million to $592 million within the quarter.
  • Land Exposure -- Lowered from $187 million to $120 million.
  • Watch List Loans -- 8 active lender-driven sale processes underway, representing about $861 million of loans at UPB and REO at carrying value.
  • Portfolio Credit Migration -- Only 2 loans changed risk status: 1 multifamily loan downgraded from 3 to 4 risk rating, and 1 multifamily loan placed on nonaccrual.
  • Nonaccrual Exposure -- $1.55 billion on 11 loans, constituting around 44% of the portfolio, per question response.
  • Credit Risk Ratings -- At quarter-end, portfolio included 13 loans rated 4 or 5, down from 24 a year ago.
  • CECL Provisions -- Provision of $31 million recorded, with general CECL reserve decreasing by $28 million offsetting loan-specific increases.
  • Total CECL Reserve -- Decreased to $399 million or 11.4% of unpaid principal balance (UPB), from $443 million or 10.9% of UPB at year-end.
  • Deleveraging -- Outstanding financings reduced by $489 million, including $142 million of deleveraging payments.
  • Net Debt-to-Equity Ratio -- Improved to 1.7x at quarter-end, down from 1.9x at the previous quarter and 2.4x a year ago.
  • Liquidity -- $132 million in available liquidity at the end of the quarter.
  • Watch List Loans Reduction -- Down from $2.7 billion in January 2025 to $1.4 billion at present, according to management.

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RISKS

  • Jade Rahmani stated, "non-accruals currently totaled $1.55 billion on 11 loans, around 44% of the portfolio."
  • The company recorded a GAAP net loss of $0.39 per share and a distributable loss of $0.52 per share.
  • Portfolio continues to include loans rated 4 or 5, and management confirmed that portions remain on nonaccrual status, implying heightened credit risk.
  • Chief Financial Officer Garg refrained from providing a concrete reduction target for risk 4 and 5 loans or nonaccruals, stating "it's really hard to pin ourselves down to a number." This signals uncertainty in timing of troubled asset resolution.

SUMMARY

Management highlighted significant portfolio turnover, resolving $609 million in primarily watch list loans, and refinancing its maturity wall with a $500 million term loan, signaling focus on balance sheet repositioning. The quarter concluded with further risk migration containment, reducing both general and specific CECL reserves, yet maintained a large proportion of nonaccrual and watch list assets subject to ongoing sale processes. New loan sale efforts and deleveraging actions have improved the liquidity and net leverage profiles, laying groundwork for future portfolio redeployment later in the year.

  • Chairman Mack said, "we believe our stock is undervalued," indicating management sees market price dislocation but provided no buyback commitments.
  • John McGillis emphasized that the ongoing 8 sale processes "could result in additional resolutions of about $860 million" in troubled loans and REO assets.
  • Chief Financial Officer Garg noted progress over 5 quarters reducing watch list loans from $2.7 billion to $1.4 billion, with multiple assets actively marketed for sale.

INDUSTRY GLOSSARY

  • CECL (Current Expected Credit Loss): An accounting standard requiring lenders to estimate and recognize expected lifetime credit losses on loans and other financial assets.
  • REO (Real Estate Owned): Assets acquired by a lender, usually through foreclosure, and held for sale or repositioning.
  • UPB (Unpaid Principal Balance): The outstanding principal amount owed on a loan, exclusive of interest or fees.
  • Watch List Loan: A loan identified by management as having elevated credit risk and subject to enhanced monitoring or resolution strategies.

Full Conference Call Transcript

Richard Mack: Thank you, Anh, and thank you all for joining us this morning for CMTG's first quarter earnings call. As we look ahead to the coming year, we believe that despite record highs in the equity markets, uncertainty will remain a defining theme across the broader financial markets as investors continue to navigate concerns around the impact of monetary policy and geopolitical events on the economy. In particular, real estate capital markets appear to be relatively resilient amid heightened geopolitical risks and renewed concerns around inflation. We continue to see encouraging signals. Transaction volume has improved modestly as compared to a year ago and real estate credit spreads remain tight.

At the asset level, multifamily deliveries and building permits have dropped dramatically nationwide. In the industrial sector, we continue to observe strong tenant demand in many markets. Office is also beginning to emerge from the shadows as fundamentals recover in many markets and reset valuations have started to attract renewed investor interest. As we look to the broader capital markets, we have been observing the recent repricing in the private credit markets and considering the potential implications of this for real estate. One view is that the pullback in private credit will spill over into real estate. However, real estate has already absorbed a meaningful reset in asset values because of the prolonged high interest rate environment.

This should provide some protection against further declines in asset values. Perhaps at this moment, real estate represents a compelling relative value opportunity. We might even see institutional investors rotating back into real assets as a protection against devaluations in private credit and the stock market generally. Regardless of how these market dynamics ultimately play out, we intend to build on the progress and momentum we established in 2025. Our strategic priorities continue to be centered on turning over the portfolio, resolving watch list loans, repositioning our REO assets and deleveraging the balance sheet. Successful execution on these priorities will position CMTG to evaluate new capital deployment opportunities towards the end of the year.

This may include new originations, additional deleveraging, reinvestment in select REO assets and share repurchases. I'm pleased to report that we had a strong start to the year in meeting our goals. For the first quarter, we reported $609 million in loan resolutions, representing 5 loans, including 4 watch list loans. In addition, as previously reported, we retired the Term Loan B that was scheduled to mature later this year with a new $500 million senior secured term loan from HPS with 4 years of duration. Mike will provide additional color on our financial and operating results later on the call. We believe that 2026 will be a pivotal year for CMTG.

Our first quarter results have built on the progress we made last year. While uncertainty remains on the horizon, our team has demonstrated our ability to execute and drive outcomes in this environment. In 2026, we will continue to progress the cleanup of our balance sheet while selectively and opportunistically holding and improving REO assets. While generally not something we speak about, we believe our stock is undervalued. We expect that with time, the continued execution of our strategic priorities will ultimately be recognized by the market. Towards that end, we look forward to updating you on our progress throughout the year as we continue to deliver on our stated priorities. I will now turn the call over to Mike.

Mike?

John McGillis: Thank you, Richard. For the first quarter of 2026, CMTG reported a GAAP net loss of $0.39 per share and a distributable loss of $0.52 per share. Distributable loss prior to realized losses was $0.05 per share. CMTG had an active first quarter and continued to execute our strategic priorities, completing approximately $600 million of loan resolutions related to 5 investments, 4 of which were watch list loans. As discussed on our fourth quarter earnings call, we resolved 2 loans via regular way repayment. The first was a 2-rated $174 million multifamily construction loan in Salt Lake City, which we originated in 2022.

The second was a 4-rated watch list loan, a $67 million New York City land loan originated in 2019. We also resolved 2 5-rated loans during the quarter, a $77 million Dallas multifamily loan resolved through foreclosure and a $71 million Seattle office loan resolved by transferring our rights and interest to the financing counterparty. Our fifth loan resolution in the quarter occurred in March. We completed the sale of a $220 million loan secured by a luxury hotel property located in Northern California. Our loan had matured in August 2025. As of year-end 2025, we had not agreed to modification terms with the borrower, resulting in a downgrade to a 4 risk rating.

This is a unique irreplaceable asset located in a highly desirable submarket, which we believe may be worth in excess of our basis over time. However, given our stated 2026 goals, we ultimately negotiated a quick off-market sale of our loan at 90% of par, which accounting for general reserves we had allocated to the loan at year-end, approximated our carrying value and allowed us to significantly delever one of our financing facilities. We view this as a positive and efficient resolution aligned with our strategic priorities. Subsequent to quarter end, we resolved one additional watch list loan through foreclosure. The $25 million loan was collateralized by a multifamily property in Dallas, Texas and was previously 5 rated.

We believe we can create more value for our shareholders as owners of this asset rather than selling the loan. As a result of the resolution activity during the quarter, CMTG's held-for-investment loan portfolio continued to decline, decreasing to $3.2 billion at March 31, compared to $3.7 billion at December 31. We reduced our hospitality exposure from $807 million to $592 million and also reduced our land exposure from $187 million to $120 million. With our continued goal of turning over the book, we currently have 8 lender-driven sale processes in various stages across our watch list loan and REO portfolios.

These collective measures could result in additional resolutions of approximately $861 million of loans at UPB and REO assets at carrying value and allow us to accretively redeploy repatriated capital. Turning to portfolio credit. The pace of credit migration has significantly slowed with only 2 loans moving this quarter. During the first quarter, we downgraded 1 multifamily loan from a 3 to a 4 risk rating and placed another 4-rated multifamily loan on nonaccrual. The downgrade is related to $127 million loan collateralized by a portfolio of Texas multifamily assets and is due to the borrower being unwilling to invest additional equity ahead of the loan's June 2026 maturity date.

The loan that was moved to non-accrual status is a $155 million loan collateralized by a Phoenix multifamily property and is related to continued loan delinquency and a lack of progress made on modification terms with the sponsor. CMTG is evaluating a variety of paths to resolution of both of these loans. As of March 31, 2026, our portfolio consisted of 13 4- and 5-rated loans, down from 24 4- and 5-rated loans at March 31, 2025, demonstrating our commitment to resolving watch list loans. During the first quarter, we recorded a provision for CECL of $31 million.

This consisted of a $32 million provision to our specific CECL reserve prior to charge-offs and a $27 million increase in CECL reserves and accrued interest receivable prior to charge-offs, primarily attributable to the previously mentioned loan sale at 90% of par. These items were offset in part by a $28 million decrease in our general CECL reserves, primarily attributable to first quarter loan resolutions. As a result, our total CECL reserve on loans receivable held for investment decreased from $443 million or 10.9% of UPB at December 31, to $399 million or 11.4% of UPB.

Our general CECL reserve decreased from $78 million at December 31, or 2.9% of loans subject to our general CECL reserve to $50 million at March 31, or 2.3% of UPB of loans subject to our general CECL reserves. As discussed in our prior earnings call, in January, we retired our existing Term Loan B, which was scheduled to mature in August 2026 and replaced it with a $500 million senior secured term loan from HPS. The new term loan is a 4-year term with prepayment flexibility maturing in January 2030 and is priced at SOFR plus 675 basis points.

We concurrently align financial covenants across all of our financing facilities, which allows for enhanced flexibility to execute our business plan. We remain focused on deleveraging the portfolio. During the first quarter, we reduced outstanding financings by $489 million, including $142 million of deleveraging payments. As a result, our net debt-to-equity ratio has decreased meaningfully. At March 31, 2026, our net debt-to-equity ratio was 1.7x compared to 1.9x at December 31, 2025, and 2.4x at March 31, 2025. At quarter end, we had $132 million in liquidity. In 2026, we continue to prioritize turning over the portfolio, resolving watch list loans, repositioning our REO assets and deleveraging our balance sheet.

We look forward to sharing our progress towards the goal of being in a position to make capital allocation decisions later this year. I would now like to open up the call to Q&A. Operator?

Operator: [Operator Instructions]. Your first question comes from the line of Jade Rahmani with KBW.

Jade Rahmani: I was wondering the non-accruals currently totaled $1.55 billion on 11 loans, around 44% of the portfolio. Where do you expect that to trend over the next few quarters? Or is there a year-end target?

John McGillis: Jade, why don't I start and Priyanka can add to that. The expectation -- we have a number of sale processes in process that I mentioned on the call earlier, and that includes a number of these non-accrual loans. We expect to continue to chip away at that. It's hard to give a precise number as to where we're going to be at various points of the year. The overriding objective is to get these non-earning assets as well as sub-earning assets off the books, use proceeds to pay down existing leverage and reduce our interest expense and also generate incremental liquidity. We are actively looking at moving out of a number of these right now.

Jade Rahmani: Okay. I don't know if Priyanka wants to chime in, but maybe if you could just quantify the range of dollars of sale processes that are underway.

John McGillis: I mentioned on the call, there's 8 active sale processes going on as well as other activity. Those 8 active sale processes involve about $860 million of asset value, either UPB with respect to loans or carrying value with respect to REO.

Priyanka Garg: Yes. Jade, it's Priyanka. Just to add to that, half of those, 4 out of 8 are loans, and it's about 3/4 of the $860 million that relates to loans. All 4 are on the watch list and all 4 are on non-accrual. It's a good chunk of the non-accrual number.

Jade Rahmani: I mean, is there a target -- when I look at risk 4, 5 loans, $1.75 billion and then REO $765 million. Is there a target that you want that to get to by, say, year-end or over the next 12 months, that all adds up to about $2.5 billion. How much of that do you think is line of sight into somehow exiting in the next few quarters?

Priyanka Garg: Yes. I mean, as Richard and Mike both said, we're very, very focused on turning over the book. Our watch list loans at January 2025 was at $2.7 billion. We're now down to $1.4 billion on the watch list. I think we've demonstrated over 5 quarters that we're very committed to bringing that number down. Like I said, we have a number of those loans already on the market in various stages of sale processes. We've been really positively encouraged by the amount of activity, particularly given all the uncertainty going on in the world right now. Hard to handicap how that occurs, but we're very focused on those resolutions.

We had the hospitality loan that was on the watch list come off at the end of the first quarter. Again, I think it's really hard to pin ourselves down to a number, but I would say the progress that we made over the last 5 quarters we intend to keep pushing forward in the same way.

Operator: [Operator Instructions] It appears we have no further questions at this time. I would now like to turn the call back over to Richard Mack for closing remarks.

Richard Mack: Thank you. Again, thank you all for joining us. I will just reiterate that 2026 is going to be a year of continued execution on our priorities. We've already had a first quarter of quite strong resolutions, and we're going to continue to sell into the market to the extent that we can, make sure that we push borrowers to refinance us now that the financing markets are stronger so that we can clear troubled loans in REO, pay down debt, begin to increase cash and pivot to offense, hopefully by the end of the year. Again, thank you all for joining, and we look forward to speaking to you all again next quarter. Thank you.

Operator: This concludes today's call. Thank you all for attending. You may now disconnect.