Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including those discussed in Part I. Item 1A, “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.
Introduction
We are a CRE finance company focused primarily on originating senior and subordinate loans on transitional CRE assets located in major U.S. markets, including mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets, and subordinate loans including mezzanine loans secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly in the underlying commercial properties. These loans are subordinate to a mortgage loan but senior to the property owner’s equity ownership interests. Transitional CRE assets are properties that require repositioning, renovation, rehabilitation, leasing, development or redevelopment or other value-added elements in order to maximize value. We believe our Sponsor’s real estate development, ownership and operations experience, and infrastructure differentiates us in lending on these transitional CRE assets. Our objective is to be a premier provider of debt capital for transitional CRE assets and, in doing so, to generate attractive risk-adjusted returns for our stockholders over time, primarily through dividends. We strive to create a diversified investment portfolio of CRE loans that we generally intend to hold to maturity. We focus primarily on originating loans ranging from $50 million to $300 million on transitional CRE assets located in U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds.
Our loan origination and repayment volume may fluctuate based on market conditions or other conditions inherent in our portfolio. As such, we may modify our investment strategy from time to time by shifting focus to optimizing outcomes within our existing portfolio, which may include actions such as selling a loan or syndicating a portion of a loan, working with our borrowers to enhance the value of underlying properties that constitute our collateral, and in certain circumstances assuming legal title and/or physical possession of the collateral property of a defaulted loan.
We were organized as a Maryland corporation on April 29, 2015 and commenced operations on August 25, 2015, and our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG.” We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015. We are externally managed and advised by our Manager, an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to the Investment Advisers Act of 1940, as amended, (the “Advisers Act”). We operate our business in a manner that permits us to maintain our exclusion from registration under the 1940 Act.
I. Key Financial Measures and Indicators
As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which such gains and losses includes charge-offs of principal, accrued interest receivable, and/or exit fees, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio. During the year ended December 31, 2025, we had net loss per share of $3.49, Diluted Distributable Loss per share of $1.88, Diluted Distributable Earnings per share prior to realized gains and losses of $0.24, and our Board did not declare any dividends. As of December 31, 2025, our book value per share was $10.69, our adjusted book value per share was $11.33, our Net Debt-to-Equity Ratio was 1.9x, and our Total Leverage Ratio was 2.5x. We use Net Debt-to-Equity Ratio and Total Leverage Ratio, financial measures which are not prepared in accordance with GAAP, to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.
Net Loss Per Share and Dividends Declared Per Share
The following table sets forth the calculation of basic and diluted net loss per share and dividends declared per share ($ in thousands, except share and per share data):
Three Months Ended
Year Ended
December 31, 2025
December 31, 2025
December 31, 2024
Net loss
Weighted average shares of common stock outstanding,
basic and diluted
Basic and diluted net loss per share of common stock
Dividends declared per share of common stock
On December 16, 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter dividend that would have otherwise been paid in January 2025. Such action was taken to preserve capital and create added financial flexibility for capital allocation decisions, including to effectuate the refinancing of our prior secured term loan and reduce leverage on other financings, with the objective of enhancing stockholder value over the long-term. The timing and amount of any future dividends declared by our Board depend on a variety of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board deems relevant.
Distributable Earnings (Loss)
Distributable Earnings (Loss) is a non-GAAP measure used to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments, as determined by our Manager. Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate owned held-for-investment depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss). Furthermore, we present Distributable Earnings prior to realized gains and losses, which such gains and losses includes charge-offs of principal, accrued interest receivable, and/or exit fees, as we believe this more allows our Board, Manager, and investors to compare our operating performance to our peers, to assess our ability to declare and pay dividends, and to determine our compliance with certain financial covenants. Pursuant to the Management Agreement, we use Core Earnings, which is substantially the same as Distributable Earnings () excluding incentive fees, to determine the incentive fees we pay our Manager.
We believe that Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses provide meaningful information to consider in addition to our net income (loss) and cash flows from operating activities in accordance with GAAP. Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses do not represent net income (loss) or cash flows from operating activities in accordance with GAAP and should not be considered as an alternative to GAAP net income (loss), an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. In addition, our methodology for calculating these non-GAAP measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures and, accordingly, our reported Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and may not be comparable to the Distributable Earnings () and Distributable Earnings prior to realized and reported by other companies.
In order to maintain our status as a REIT, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, as dividends. Distributable Earnings (Loss), Distributable Earnings prior to realized gains and losses, and other similar measures, have historically been a useful indicator over time of a mortgage REIT’s ability to cover its dividends, and to mortgage REITs themselves in determining the amount of any dividends to declare. Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are key factors, among others, considered by our Board in determining the dividend each quarter and as such we believe Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are also useful to investors.
While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, charge-offs of principal, accrued interest receivable, and/or exit fees are recognized through Distributable Earnings (Loss) when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e., when the loan is repaid, fully or partially, when we acquire title in the case of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure, or when the loan is sold or
anticipated to be sold for an amount less than its carrying value), or (ii) with respect to any amount due under any loan, when such amount is determined to be uncollectible.
In determining Distributable Earnings (Loss) per share and Distributable Earnings per share prior to realized gains and losses, the dilutive effect of unvested RSUs is considered. The weighted average diluted shares outstanding used for Distributable Earnings (Loss) and Distributable Earnings per share prior to realized gains and losses have been adjusted from weighted average diluted shares under GAAP to include weighted average unvested RSUs.
The table below summarizes the reconciliation from weighted average diluted shares under GAAP to the weighted average diluted shares used for Distributable Loss and Distributable Earnings prior to realized gains and losses for the years ended December 31, 2025 and 2024:
Weighted Averages
December 31, 2025
December 31, 2024
Diluted Shares - GAAP
Unvested RSUs
Diluted Shares - Distributable Loss
The following table provides a reconciliation of net loss to Distributable Loss and Distributable Earnings prior to realized gains and losses ($ in thousands, except share and per share data):
Three Months Ended
Year Ended
December 31, 2025
December 31, 2025
December 31, 2024
Net loss
Adjustments:
Non-cash stock-based compensation expense
Provision for current expected credit loss reserve
Depreciation and amortization expense
Amortization of above and below market lease values, net
Unrealized loss on interest rate cap
Loss on extinguishment of debt
Valuation adjustment for loan receivable held-for-sale
Valuation adjustment for real estate owned held-for-sale
Loss on partial sales of real estate owned, net
Distributable Earnings prior to realized gains and losses
Loss on extinguishment of debt
Principal charge-offs (1)
Valuation adjustment for real estate owned held-for-sale
Loss on partial sales of real estate owned, net
Previously recognized depreciation and amortization on portion of
real estate owned (2)
Previously recognized gain on foreclosure of real estate owned
held-for-sale (3)
Distributable Loss
Weighted average diluted shares - Distributable Loss
Diluted Distributable Earnings per share prior to realized gains and
losses
Diluted Distributable Loss per share
For the three months ended December 31, 2025, amount includes a $16.9 million charge-off of accrued interest receivable related to the foreclosure on a land parcel in December 2025 and the mortgage foreclosure of a multifamily property in January 2026. For the year ended December 31, 2025, amount includes (i) a $23.3 million charge-off of accrued interest receivable related to the discounted payoff of a land loan in March 2025, the mortgage foreclosures on certain multifamily properties in July 2025, the foreclosure on a land parcel in December 2025, and the mortgage foreclosure of a multifamily property in January 2026, and (ii) a $0.5 million charge-off of an exit fee related to the discounted payoff of a land loan in March 2025. For the year ended December 31, 2024, amount includes a $23.2 million charge-off of accrued interest receivable related to the reclassification of a for sale condo loan to held-for-sale.
For the three months ended December 31, 2025 and year ended December 31, 2025, amounts reflect previously recognized depreciation and amortization on the portions of our mixed-use real estate owned asset that were sold. For the year ended December 31, 2024, amount reflects previously recognized depreciation on our hotel portfolio real estate owned asset upon reclassification to held-for-sale as of December 31, 2024. Amounts not previously recognized in Distributable (Loss) Earnings.
Reflects total gain on foreclosure of our hotel portfolio real estate owned asset, which was classified as held-for-sale as of December 31, 2024. Amount not previously recognized in Distributable (Loss) Earnings.
Book Value Per Share
We believe that presenting book value per share adjusted for our general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned held-for-investment is useful for investors as it enhances the comparability to our peers who may not hold real estate investments. Further, we believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.
The following table sets forth the calculation of our book value and our adjusted book value per share, a non-GAAP financial measure, as of December 31, 2025 and 2024 ($ in thousands, except share and per share data):
December 31, 2025
December 31, 2024
Total Equity
Number of shares of common stock outstanding and RSUs
Book Value per share (1)
Add back: accumulated depreciation and amortization on real estate
owned and related lease intangibles
Add back: general CECL reserve
Adjusted Book Value per share
Calculated as (i) total equity divided by (ii) number of shares of common stock outstanding and RSUs at period end.
II. Our Portfolio
The table below summarizes our loans receivable held-for-investment as of December 31, 2025 ($ in thousands):
Weighted Average (3)
Number
Loans
Loan
Commitment
Unpaid
Principal
Balance
Carrying
Value (2)
Yield to
Maturity
Term to
Initial
Maturity
Term to Fully
Extended
Maturity (5)
Weighted
Average
Origination
LTV (6)
Weighted
Average
Adjusted
LTV (7)
Senior and
subordinate loans
0.5 years
1.1 years
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Net of specific CECL reserves of $365.4 million.
Weighted averages are based on unpaid principal balance.
Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2025. For loans placed on non-accrual, the annualized yield to initial maturity used in calculating the weighted average annualized yield to initial maturity is 0%.
Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions.
Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics. Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. Weighted average origination LTV is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.
Adjusted LTV represents origination LTV updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment. Adjusted LTV should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of the most recent determination of LTV. Weighted average adjusted LTV is based on loan commitment, including non-consolidated senior interests, pari passu interests, and risk rated 5 loans. Loans with specific CECL reserves are reflected as 100% LTV.
Portfolio Activity and Overview
The following table details our individual loans receivable held-for-investment based on unpaid principal balances as of December 31, 2025 ($ in thousands):
Loan
Number
Loan
Type
Origination
Date
Loan
Commitment
Unpaid
Principal
Balance
Carrying
Value (2)
Origination
LTV (3)
Fully Extended Maturity (4)
Property
Type (5)
Construction
Location
Risk
Rating
Senior
Multifamily
Senior
Office
Senior
Hospitality
Senior
Hospitality
Senior
Hospitality
Senior
Multifamily
Senior
Multifamily
Senior
Multifamily
Senior
Land
Senior
Multifamily
Senior
Multifamily
Senior
Multifamily
Senior
Multifamily
Subordinate
Office
Senior
Mixed-use
Senior
Multifamily
Senior
Mixed-use
Senior
Office
Senior
Retail
Senior
Multifamily
Senior
Office
Senior
Mixed-use
Senior
Hospitality
Senior
Multifamily
Senior
Office
Senior
Office
Senior
Land
Senior
Hospitality
Senior
Retail
Senior
Multifamily
Senior
Other
Other
Senior
Multifamily
Senior
Other
Other
Total
General CECL reserve
Grand Total/Weighted Average
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Net of specific CECL reserves of $365.4 million.
Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics. Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. Weighted average origination LTV of 71.2% is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.
Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions.
Classification of property type and construction status reflect the state of collateral as of December 31, 2025.
Percent of total construction loans based on loan commitments as of December 31, 2025.
Weighted average risk rating weighted by carrying value net of specific CECL reserves.
In January 2026, this loan was repaid.
In January 2026, we acquired legal title to the collateral property through a mortgage foreclosure. In anticipation of such foreclosure, we recognized a principal charge-off of $39.1 million as of December 31, 2025.
In February 2026, we assigned our right, title, and interest in this loan and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing. See Note 3 - Loan Portfolio to our consolidated financial statements for further detail.
The following table summarizes changes in unpaid principal balance for our loans receivable held-for-investment ($ in thousands):
Three Months Ended December 31, 2025
Year Ended
December 31, 2025
Year Ended
December 31, 2024
Unpaid principal balance, beginning of period
Loan receivable acquired in connection with a full loan repayment
Advances on existing loans
Repayments of loans receivable
Sales of loans receivable
Transfer to real estate owned, held-for-investment (See Note 5)
Transfer to loans receivable held-for-sale
Principal charge-offs
Total fundings, net of repayments, sales and transfers
Unpaid principal balance, end of period
During the year ended December 31, 2025, we resolved $2.6 billion of unpaid principal balance prior to charge-offs, including $1.3 billion of watchlist loans and $324.6 million of loans classified as held-for-sale as of the prior year-end. Total 2025 resolutions include (i) $863.9 million of full loan repayments, (ii) $93.8 million of partial loan repayments, (iii) $101.1 million of loan sales at par, (iv) $333.9 million of loan sales below par, (v) $811.6 million of discounted payoffs prior to charge-offs, and (vi) $392.8 million of mortgage or Uniform Commercial Code (“UCC”) foreclosures prior to charge-offs. Subsequent to December 31, 2025, we resolved $388.7 million of unpaid principal balance prior to charge-offs, including $214.9 million of watchlist loans. Total 2026 resolutions to date include (i) $240.8 million of full loan repayments, (ii) $76.6 million of mortgage foreclosures prior to charge-offs, and (iii) $71.3 million related to the assignment of our right, title, and interest in a loan receivable and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing.
Real Estate Owned
To maximize recovery from certain defaulted loans, we have assumed legal title and/or physical possession of the collateral property underlying such loan receivables. As of December 31, 2025, our portfolio includes eight real estate owned assets with a total carrying value of $746.8 million (including related net lease intangible assets), of which six were acquired through mortgage or UCC foreclosures during the year ended December 31, 2025. Such real estate owned assets are not included in the summary of our loan portfolio table above. The following table details the carrying value of each of our real estate owned held-for-investment assets reflected on our consolidated balance sheet as of December 31, 2025 ($ in millions):
Carrying Value
Property Type
Location
Foreclosure Date
Real Estate, Net
Lease Intangibles, Net (1)
Deferred Leasing
Costs, Net (1)
Total
Hotel Portfolio
New York, NY
February 2021
Mixed-use
New York, NY
June 2023
Multifamily
Phoenix, AZ
May 2025
Multifamily
Henderson, NV
June 2025
Multifamily
Dallas, TX
July 2025
Multifamily (2)
Dallas, TX
July 2025
Land Parcel
New York, NY
December 2025
Total, December 31, 2025
Amounts included in other assets or other liabilities on our consolidated balance sheet.
Represents two multifamily properties which previously represented the collateral property for one senior loan.
The following table presents detail related to changes in our real estate owned held-for-investment, net, during the year ended December 31, 2025 ($ in thousands):
Gross Cost
Accumulated Depreciation
Real Estate Owned
Held-for-Investment, Net
Total, December 31, 2024
Reclassification of hotel portfolio to held-for-investment
Foreclosures of multifamily properties and land parcel, including capitalized
transaction costs
Partial sales of mixed-use property
Capital expenditures
Depreciation expense
Total, December 31, 2025
Fair values of collateral assets used to determine the initial estimated fair value of real estate owned are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine real estate owned upon acquisition may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates, market and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant. Estimates of fair values used to determine real estate owned upon acquisition during the year ended December 31, 2025 include assumptions of market capitalization rates ranging from 4.75% to 5.50% and, with respect to the land parcel, value per buildable square foot of $253.
See Note 5 - Real Estate Owned to our consolidated financial statements for further detail.
Asset Management
Our Manager proactively manages our portfolio from each investment’s closing to final resolution and our Sponsor has dedicated asset management employees to perform asset management services. Following the closing of an investment, the asset management team rigorously monitors the investment, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions. Through the final resolution, the asset management team maintains regular contact with borrowers, servicers, property managers, and local market experts while monitoring the performance of the asset, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Some of our borrowers may experience delays in the execution of their business plans, changes in their capital position and available liquidity, and/or changes in market conditions which may impact the performance of the collateral property, borrower, or sponsor. As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledges of additional collateral or other forms of credit support, additional guarantees, temporary deferrals of interest or principal, partial deferral of coupon interest as payment-in-kind interest, and/or a discounted loan payoff. To the extent warranted by ongoing conditions specific to our borrowers or overall market conditions, we may make additional modifications and/or in certain circumstances when and if appropriate, and depending on the business plans, financial condition, liquidity and results of operations of our borrowers, among other factors, (i) assume legal title and/or physical possession of the collateral property or (ii) assign our right, title, and interest in our loan and the collateral property to our financing counterparty in exchange for the extinguishment of amounts due under the related financing.
Our Manager evaluates the credit quality of each of our loans receivable on an individual basis and assigns a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale,
the loans are graded “1” through “5,” from less risk to greater risk, respectively. The weighted average risk rating of our loans receivable held-for-investment portfolio was 3.6 at December 31, 2025, weighted by carrying value net of specific CECL reserves.
Current Expected Credit Losses
The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan portfolio, which may fluctuate depending on market conditions and changes in our loan portfolio. See Note 2 to our consolidated financial statements for further detail of our current expected credit loss reserve methodology. The following table illustrates the changes in the current expected credit loss reserve for our loans receivable held-for-investment for the years ended December 31, 2025 and 2024, respectively ($ in thousands):
General CECL Reserve
Specific CECL Reserve
Loans Receivable Held-for-Investment
Unfunded Loan Commitments (2)
Total General CECL Reserve
Accrued Interest Receivable (1)
Total CECL Reserve
Total reserve, December 31, 2023
Provision (reversal)
Charge-offs
Total reserve, December 31, 2024
Provision (reversal)
Charge-offs
Total reserve, December 31, 2025
CECL reserves for accrued interest receivable, if any, are included in other assets on our consolidated balance sheets. In December 2025, $1.6 million of accrued interest previously reserved for was satisfied upon the foreclosure of a land parcel. See Note 5 - Real Estate Owned to our consolidated financial statements for further detail.
CECL reserves for unfunded commitments are included in other liabilities on our consolidated balance sheets.
The following table illustrates our specific and general CECL reserves as a percentage of total unpaid principal balance of loans receivable held-for-investment as of December 31, 2025 and 2024:
Specific CECL
Reserve (1)
General CECL
Reserve (2)
Total CECL
Reserve (3)
Reserve at December 31, 2024
Reserve at December 31, 2025
Represents specific CECL reserves on loans receivable held-for-investment as a percentage of unpaid principal balance of risk rated 5 loans.
Represents general CECL reserves on loans receivable held-for-investment and related unfunded loan commitments as a percentage of unpaid principal balance of loans subject to the general CECL reserve.
Represents total CECL reserves on loans receivable held-for-investment and related unfunded loan commitments as a percent of total unpaid principal balance of loans receivable held-for-investment.
Specific CECL Reserves
In certain circumstances, we may determine that a borrower is experiencing financial difficulty, and, if the repayment of the loan’s principal is collateral dependent, the loan is no longer suited for the WARM model. In these instances, there have been diminutions in the fair value and performance of the collateral property primarily as a result of reduced tenant and/or capital markets demand for such property types in the markets in which these assets and borrowers operate. For such loans, we seek resolutions through a variety of means including, but not limited to, foreclosures on the collateral asset, sales of our loan receivable, and discounted repayments. If we anticipate assuming legal title and/or physical possession of the collateral property and the fair value of the collateral property is determined to be below the carrying value of our loan, we may recognize a specific CECL reserve. Furthermore, in certain circumstances, we may recognize a specific CECL reserve based upon anticipated proceeds from the disposition of our loan. The following table presents a summary of our risk rated 5 loans receivable held-for-investment as of December 31, 2025 ($ in thousands):
Property Type
Location
Unpaid Principal Balance
Carrying Value
Before
Specific CECL Reserve
Specific CECL Reserve
Net Carrying Value
Multifamily
Multifamily
Multifamily
Multifamily (1)
Multifamily
Total Multifamily
Land
Total Land
Office
Office
Office (2)
Office
Total Office
Other (3)
Other
Total Other
Total
In January 2026, we acquired legal title to the collateral property through a mortgage foreclosure. In anticipation of such foreclosure, we recognized a principal charge-off of $39.1 million as of December 31, 2025.
In February 2026, we assigned our right, title, and interest in this loan receivable and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing. As of December 31, 2025, we determined a specific CECL reserve based upon our remaining equity in this investment and amounts due to our financing counterparty under the terms of our guarantee. See Note 6 - Debt Obligations - Notes Payable for further detail.
Amounts deemed uncollectible have been charged-off as of December 31, 2025.
Fair values of collateral assets used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine specific CECL reserves may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates, market and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant. Estimates of fair values used to determine specific CECL reserves as of December 31, 2025 include discount rates ranging from 6.0% to 9.5%, market and terminal capitalization rates ranging from 4.72% to 8.25%, and, with respect to the land loan, value per buildable square foot of $140 based on current entitlements.
Historical Originations and Realizations
The following table presents our loan commitment originations, loan commitment realizations, and the amount of principal charge-offs recognized for each origination vintage year as of December 31, 2025 by year of origination ($ in thousands):
Total by Origination Year as of December 31, 2025
Total
2018 and Prior
Loan Commitment
Originations (1)
Loan Commitment
Realizations
through Repayment
or Sale
Principal Charge-offs
from Repayment
or Sale
Loan Commitment
Realizations through
REO (3)
Principal Charge-offs
from REO (3)(4)
Loan commitment upsizes and protective advances subsequent to origination are reflected as increases in loan commitment in the year that the loan was originated.
Reflects a loan receivable acquired in connection with a full loan repayment.
Amounts include loan commitment and principal charge-offs related to a loan for which we acquired legal title to the collateral property through mortgage foreclosure in January 2026.
Excludes loss recognized in connection with the reclassification of our real estate owned hotel portfolio to held-for-sale and loss on partial sales of our mixed-use real estate owned asset, net.
Portfolio Financing
Our financing arrangements include repurchase arrangements, a term participation facility, asset-specific financings, debt related to real estate owned hotel portfolio and secured term loan borrowings.
The following table summarizes our secured financings ($ in thousands):
December 31, 2025
Capacity
Borrowings
Outstanding
Weighted
Average
Spread (1)
Repurchase agreements and term participation facility
Notes payable
Secured term loan (2)
Debt related to real estate owned hotel portfolio
Total/Weighted Average
Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. SOFR as of December 31, 2025 was 3.69%.
In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of $500.0 million and interest to accrue at a rate of SOFR plus 6.75%, subject to a floor of 2.50%. See Note 6 - Debt Obligations - Secured Term Loan to our consolidated financial statements for further detail.
See Note 6 - Debt Obligations to our consolidated financial statements for further details.
Repurchase Agreements and Term Participation Facility
We finance certain of our loans and multifamily real estate owned properties using repurchase agreements and a term participation facility. As of December 31, 2025, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $2.2 billion, with a weighted average spread of SOFR plus 2.92% per annum based on unpaid principal balance. As of December 31, 2025, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.5 years and 1.1 years, respectively, assuming all conditions to extend are met. Further, we have a repurchase agreement that specifically provides for the ability to finance (i) loans receivable, including those which may be
delinquent or in default, and (ii) real estate owned assets subsequent to assuming legal title and/or physical possession of the collateral property. As of December 31, 2025, $195.3 million of borrowings outstanding relate to our multifamily real estate owned assets.
Each repurchase agreement contains “margin maintenance” provisions, which are designed to allow the counterparty to require the delivery of cash or other assets to de-lever financings on assets that are determined to have experienced a diminution in value. Since inception through December 31, 2025, we have not received any margin calls under any of our repurchase agreements.
Notes Payable
We finance certain of our loans via secured financings that are term-matched to the underlying loan, some of which are partially recourse to us. We refer to such financings as notes payable and they are secured by the related loans receivable. As of December 31, 2025, two of our loans were financed with notes payable. Subsequent to December 31, 2025, our notes payable were fully extinguished.
Secured Term Loan
As of December 31, 2025, we had a secured term loan with an unpaid principal balance of $556.2 million and a carrying value of $549.4 million. Our prior secured term loan is presented net of any original issue discount and transaction expenses which were deferred and recognized as interest expense over the life of the prior secured term loan using the effective interest method. In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of $500.0 million and a maturity date of January 30, 2030. See Note 6 - Debt Obligations - Secured Term Loan to our consolidated financial statements for further detail.
Debt Related to Real Estate Owned Hotel Portfolio
On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a foreclosure on a hotel portfolio. Subsequently, we entered into modifications of our debt related to real estate owned hotel portfolio to provide for, among other things, total principal payments of $25.0 million, an extension of the contractual maturity date to February 9, 2025, and the designation of a portion of the loan becoming partial recourse to us. Concurrent with each modification, we acquired interest rate caps with notional amounts equal to the borrowing outstanding, strike rates ranging from 3.0% to 5.0%, and maturity dates matching the associated financing. Upon maturity in February 2025 and subsequent thereto, we entered into forbearance agreements with our lender through September 9, 2025 and concurrently repaid $5.0 million of the principal balance. During the forbearance period, interest accrued at additional rates ranging from 3.0% to 5.0% per annum. On June 9, 2025, we refinanced our debt related to real estate owned hotel portfolio with a non-recourse senior mortgage in the amount of $235.0 million. Such financing matures on June 9, 2027, and we may extend the maturity to June 9, 2030 pursuant to three one-year extension options, subject to meeting prescribed conditions. As of December 31, 2025, our debt related to real estate owned hotel portfolio has an unpaid principal balance of $235.0 million, a carrying value of $231.0 million and a stated rate of SOFR plus 3.18%. See Derivatives below for further detail of our interest rate cap.
Derivatives
On June 2, 2021 and in connection with our debt related to real estate owned hotel portfolio, we acquired an interest rate cap with a notional amount of $290.0 million, a strike rate of 3.00%, and a maturity date of February 15, 2024. Such interest rate cap effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 5.83% through its then maturity. Subsequent thereto and in connection with modifications of our debt related to real estate owned hotel portfolio, we acquired interest rate caps with maturity dates and notional amounts equal to that of the then maturity dates and outstanding principal balance of our debt related to real estate owned hotel portfolio, respectively, and strike rates of 5.00%. Through the contractual maturity of our debt related to real estate owned hotel portfolio, the interest rate caps effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 7.94%. Concurrent with refinancing our debt related to real estate owned hotel portfolio in June 2025, we acquired an interest rate cap for a price of $71,000 with a notional amount of $235.0 million, a strike rate of 6.79%, and a maturity date of June 2027, which effectively limits the maximum interest rate of our debt related to real estate owned hotel portfolio to 9.97%.
Changes in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap on our consolidated statements of operations and the fair value is recorded in other assets on our consolidated balance sheets. Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. As of December 31, 2025 and 2024, the fair values of our interest rate caps were de minimis. During the year ended December 31, 2025, we did not recognize any proceeds from our interest rate cap. During the years ended December 31, 2024 and 2023, we recognized $1.3 million and $6.1 million, respectively, of proceeds from interest rate cap.
Financial Covenants
Our financing agreements generally contain certain financial covenants. As of December 31, 2025, we are in compliance with all financial covenants under our financing agreements.
Future compliance with our financial covenants is dependent upon the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate. The impact of macroeconomic conditions on the commercial real estate and capital markets, including elevated benchmark interest rates compared to recent historical standards and the effects thereof on our and our borrowers’ operating performance, may make it more difficult for us to satisfy these financial covenants in the future. Non-compliance with financial covenants may result in our lenders exercising their rights and remedies as provided for in the respective agreements. As the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate evolve, we may continue to work with our counterparties on modifying financial covenants as needed; however, there is no assurance that our counterparties will agree to such modifications.
Prior Secured Term Loan
As calculated in accordance with our prior secured term loan agreement and as of December 31, 2025, (i) our tangible net worth, which may reflect certain adjustments for our current expected credit loss reserve, shall not be less than $1.4 billion and (ii) our indebtedness shall not exceed 77.8% of our total assets. For the quarter ended December 31, 2025, there was no measurement of our Interest Coverage Ratio. In January 2026, our prior secured term loan was repaid in full.
Repurchase Agreements and Term Participation Facility
As calculated in accordance with our repurchase agreements and our term participation facility and as of December 31, 2025, (i) our tangible net worth shall not be less than $1.0 billion plus 75% of the aggregate cash proceeds received by us after January 30, 2026 from any equity issuances, capital contributions, and/or subscriptions (net of any related costs), (ii) our indebtedness shall not exceed 77.8% of our total assets, and (iii) our cash liquidity shall not be less than the greater of (x) $20.0 million or (y) 5% of total recourse indebtedness (which includes our secured term loan). For the quarter ended December 31, 2025 and for the quarters ending March 31, 2026 to June 30, 2027, there is no measurement of our Interest Coverage Ratio. Commencing with the quarters ending September 30, 2027 and December 31, 2027, our Interest Coverage Ratio shall not be less than 1.10 to 1.00. Subsequent thereto, our Interest Coverage Ratio shall not be less than (i) 1.20 to 1.00 for the quarters ending March 31, 2028 and June 30, 2028 and (ii) 1.30 to 1.00 for the quarters ending September 30, 2028 and thereafter.
New Secured Term Loan
As calculated in accordance with our new secured term loan agreement and effective upon its closing, (i) our tangible net worth shall not be less than $1.0 billion plus 75% of the aggregate cash proceeds received by us after January 30, 2026 from any equity issuances, capital contributions, and/or subscriptions (net of any related costs) and (ii) our indebtedness shall not exceed 77.8% of our total assets. For the quarters ending March 31, 2026 to June 30, 2027, there is no measurement of our Interest Coverage Ratio. Commencing with the quarters ending September 30, 2027 and December 31, 2027, our Interest Coverage Ratio shall not be less than 1.10 to 1.00. Subsequent thereto, our Interest Coverage Ratio shall not be less than (i) 1.20 to 1.00 for the quarters ending March 31, 2028 and June 30, 2028 and (ii) 1.30 to 1.00 for the quarters ending September 30, 2028 and thereafter.
Non-Consolidated Senior Interests Sold and Non-Consolidated Senior Interests Held by Third Parties
In certain instances, we use structural leverage through the non-recourse syndication of a match-term senior loan interest to a third party which qualifies for sale accounting under GAAP, or through the acquisition of a subordinate loan for which a non-recourse senior interest is retained by a third party. In such instances, the senior loan is not included on our consolidated balance sheet.
The following table summarizes our non-consolidated senior interest and related retained subordinate interest as of December 31, 2025 ($ in thousands):
Loan
Count
Loan
Commitment
Unpaid
Principal
Balance
Carrying
Value
Weighted Average Interest Rate (1)
Term to
Initial
Maturity
(in years)
Term to
Fully
Extended
Maturity
(in years) (2)
Fixed rate non-consolidated senior loans
Retained fixed rate subordinate loans
Weighted average is based on unpaid principal balance.
Term to fully extended maturity is determined based on the maximum maturity of each of the corresponding loans, assuming all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
Floating and Fixed Rate Portfolio
Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and financing them with floating rate liabilities. Further, we seek to match the benchmark rate index in the floating rate loans we originate with the benchmark rate index used in the related floating rate financings. Generally, we use SOFR as the benchmark rate index in both our floating rate loans and floating rate financings. As of December 31, 2025, 96.9% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR. All of our financing is floating rate and indexed to SOFR, which resulted in approximately $774.5 million of net floating rate exposure.
The following table details our net floating rate exposure as of December 31, 2025 ($ in thousands):
Net Floating
Rate Exposure
Floating rate loans receivable
Floating rate liabilities secured by loans receivable
Net floating rate exposure - loan portfolio
Floating rate liabilities secured by real estate owned assets
Secured term loan
Net floating rate exposure
As of December 31, 2025 and aside from our interest rate cap on our debt related to real estate owned hotel portfolio, we do not employ interest rate derivatives (interest rate swaps, caps, collars or floors) to hedge our asset or liability portfolio, but we may do so in the future.
Results of Operations – Years Ended December 31, 2025 and 2024:
The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2025 and 2024 ($ in thousands, except per share data):
Year Ended
December 31,
December 31,
$ Change
Revenue
Interest and related income
Less: interest and related expense
Net interest income
Revenue from real estate owned
Total net revenue
Expenses
Management fees - affiliate
General and administrative expenses
Stock-based compensation expense
Real estate owned:
Operating expenses
Interest expense
Depreciation and amortization
Total expenses
Proceeds from interest rate cap
Unrealized loss on interest rate cap
Loss on partial sales of real estate owned, net
Loss from equity method investment
Loss on extinguishment of debt
Valuation adjustment for real estate owned held-for-sale
Provision for current expected credit loss reserve
Valuation adjustment for loan receivable held-for-sale
Net loss
Net loss per share of common stock:
Basic and diluted
Comparison of the Years Ended December 31, 2025 and 2024
Net Revenue
Total net revenue decreased $60.6 million during the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease is primarily due to a decrease in net interest income of $76.5 million, which was driven by a decrease in interest income of $211.9 million as a result of a reduction in the size of our loan portfolio and an increase in the portion of loans on non-accrual status during the year ended December 31, 2025 as compared to the year ended December 31, 2024, partially offset by a decrease in interest expense of $135.4 million primarily as a result of lower average borrowing levels. The decrease in total net revenue was partially offset by an increase in revenue from real estate owned of $16.0 million attributable to higher overall average occupancy, ADR, and RevPAR levels at our hotel portfolio compared to the year ended December 31, 2024 and revenue recognized from the multifamily properties we foreclosed on during the year ended December 31, 2025.
Expenses
Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from real estate owned, and depreciation and amortization on real estate owned and related in-place and other lease intangible values. Operating expenses from real estate owned primarily include real estate taxes, utilities, repairs and maintenance, personnel costs of third-party property managers, property management fees incurred to third-parties, insurance, marketing, and general and administrative expenses specific to our real estate owned properties. Expenses increased by $13.6 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to:
an increase in operating expenses from real estate owned of $10.6 million during the comparative period, due to operating expenses such as real estate taxes, utilities, and repairs and maintenance expenses incurred from the multifamily properties we
foreclosed on during the year ended December 31, 2025 and higher variable operating expenses, such as labor costs and marketing expenses in connection with higher occupancy levels at the hotel portfolio;
an increase in interest expense on real estate owned of $6.5 million during the comparative period, due to interest expense recognized on debt related to the multifamily properties we foreclosed on during the year ended December 31, 2025 and additional interest being incurred on our debt related to real estate owned hotel portfolio pursuant to the forbearance agreement prior to its refinancing on June 9, 2025, offset in part by lower borrowing levels of our debt related to real estate owned hotel portfolio subsequent to its refinancing;
(iii)
an increase in general and administrative expenses of $4.3 million primarily as a result of an increase in non-recurring costs incurred over the comparative period, generally related to legal and professional fees related to loan enforcement and financing related matters, including a non-recurring $2.7 million expense relating to the modification of our prior secured term loan in November 2025;
partially offset by a decrease in management fees of $4.1 million as a result of lower stockholders’ equity compared to the comparative period;
further offset by a decrease in stock-based compensation of $4.0 million due to the vesting period of previously issued restricted stock units ending on July 1, 2025 and the remaining unvested restricted stock unit grants having a grant date fair value less than that of the grant which vested.
Proceeds from Interest Rate Cap
Proceeds from interest rate cap decreased $1.3 million during the year ended December 31, 2025. During the year ended December 31, 2024, the strike rate on our interest rate cap was 5.00% as compared to the strike rate on our interest rate cap during the year ended December 31, 2025 which was 6.79%.
Unrealized Loss on Interest Rate Cap
During the year ended December 31, 2025, we recognized a $0.1 million unrealized loss on interest rate cap as the value of the interest rate cap was determined to be de minimis due to prevailing interest rates falling well below the cap’s strike rate. During the year ended December 31, 2024, we recognized a $1.4 million unrealized loss on the interest rate cap due to the remaining duration of the interest rate cap decreasing as well as prevailing interest rates declining.
Loss on Partial Sales of Real Estate Owned, Net
During the year ended December 31, 2025, we sold the office and signage components of our mixed-use property to unaffiliated purchasers in a series of transactions resulting in an aggregate loss on partial sales, net of $1.0 million. We did not sell any of our real estate owned assets during the year ended December 31, 2024.
Loss from Equity Method Investment
During the years ended December 31, 2025 and 2024, we recognized de minimis losses from our equity method investment as a result of the net losses recognized by our investee during each respective period.
Loss on Extinguishment of Debt
During the year ended December 31, 2025, we recognized a loss on extinguishment of debt of $1.4 million due to the recognition of unamortized deferred financing costs resulting from the repayment of financing balances prior to maturity. During the year ended December 31, 2024, we recognized a loss on extinguishment of debt of $4.1 million, inclusive of a $1.6 million spread maintenance payment and $2.7 million of unamortized deferred financing costs, resulting from the repayment of financing balances prior to maturity and following a refinancing or a sale of the associated loan, partially offset by the $0.2 million reversal of previously recognized financing costs that were ultimately not owed upon the payoff of a loan participation.
Valuation Adjustment for Real Estate Owned Held-for-Sale
As of December 31, 2024, we determined that our hotel portfolio real estate owned asset met the held-for-sale criteria and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell. In September 2025, we determined that a sale of the hotel portfolio was no longer advisable and thus determined that the hotel portfolio no longer met the held-for-sale criteria, and reclassified it to held-for-investment on our consolidated balance sheet, resulting in a $13.0 million reversal of a previously recognized valuation adjustment for real estate owned held-for-sale, related to previously estimated sale costs.
Provision for Current Expected Credit Loss Reserve
During the year ended December 31, 2025, we recorded a provision for current expected credit losses of $466.5 million, which consisted of a $484.2 million increase in our specific CECL reserves prior to principal and exit fee charge-offs, a $32.3 million increase in CECL reserves on accrued interest receivable prior to charge-offs, offset in part by a $50.0 million decrease in our general CECL reserves. The increase in our specific CECL reserves was primarily attributable to specific reserves determined on loans now classified as risk rated 5, changes to collateral values, and protective advances made, offset in part by principal charge-offs recognized. The increase in our CECL reserves on accrued interest receivable is attributable to reserving against outstanding interest due to us upon loans being placed on non-accrual status during the year ended December 31, 2025, offset in part by a reduction in reserves upon the receipt or satisfaction of past due interest and charge-offs recognized. The decrease in our general CECL reserves was primarily attributable to the reduction in the size of our loan portfolio subject to determination of the general CECL reserve and the resolution of a contingent discounted loan payoff, offset in part by changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio.
During the year ended December 31, 2024, we recorded a provision for current expected credit losses of $212.6 million, which consisted of a $47.6 million increase in our general CECL reserves, a $124.0 million increase in our specific CECL reserves prior to principal charge-offs, and a $41.0 million increase in CECL reserves on accrued interest receivable prior to charge-offs. The increase in our general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous data set, consideration of a contingent discounted loan payoff, and changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio, offset in part by the reduction in the size of our loan portfolio subject to determination of the general CECL reserve. The increase in our specific CECL reserves was primarily attributable to specific reserves determined on loans now classified as risk rated 5, changes in collateral values, protective advances made, the reclassification of a loan receivable to held-for-sale, offset in part by principal charge-offs recognized. The increase in our CECL reserves on accrued interest receivable is attributable to reserving against outstanding interest due to us upon loans being placed on non-accrual status during the year ended December 31, 2024, offset in part by charge-offs recognized.
Valuation Adjustment for Loan Receivable Held-for-Sale
During the year ended December 31, 2025, we recognized a valuation adjustment of $41.8 million for a loan receivable held-for-sale as a result of additional protective advances made and a decrease in proceeds ultimately received from the sale of the loan collateralized by a for sale condo project. During the year ended December 31, 2024, we recognized a valuation adjustment of $7.2 million for a loan receivable held-for sale as a result of additional protective advances made and a reduction in anticipated proceeds from the sale of such loan.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2024 and 2023” in our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025, which is accessible on the SEC’s website at www.sec.gov , for a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023.
Liquidity and Capital Resources
Capitalization
We have capitalized our business to date primarily through the issuance of shares of our common stock and borrowings under our secured financings and secured term loan. As of December 31, 2025, we had 140,218,764 shares of our common stock outstanding, representing $1.5 billion of equity, and also had $3.2 billion of outstanding borrowings under our secured financings, our prior secured term loan, and our debt related to real estate owned hotel portfolio. As of December 31, 2025, our secured financings consisted of four repurchase agreements with capacity of $3.8 billion and a combined outstanding balance of $1.9 billion, a term participation facility with a capacity of $349.8 million and an outstanding balance of $329.5 million, and two asset-specific financings with capacity of $195.8 million and an outstanding balance of $178.0 million. As of December 31, 2025, our debt related to real estate owned hotel portfolio had an outstanding balance of $235.0 million and our prior secured term loan had an outstanding balance of $556.2 million. In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of
$500.0 million and a maturity date of January 30, 2030. See Note 6 - Debt Obligations - Secured Term Loan to our consolidated financial statements for further detail.
Net Debt-to-Equity Ratio and Total Leverage Ratio
Net Debt-to-Equity Ratio and Total Leverage Ratio are non-GAAP measures that we use to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.
Net Debt-to-Equity Ratio is calculated as the ratio of asset-specific debt (repurchase agreements, term participation facility, notes payable, net, and debt related to real estate owned hotel portfolio, net) and secured term loan, less cash and cash equivalents to total equity.
Total Leverage Ratio is similar to Net Debt-to-Equity Ratio; however, it includes non-consolidated senior interests sold and non-consolidated senior interests held by third parties. Non-consolidated senior interests sold and non-consolidated senior interests held by third parties, as applicable, are secured by the same collateral as our loan and are structurally senior in repayment priority relative to our loan. We believe the inclusion of non-consolidated senior interests sold and non-consolidated senior interests held by third parties provides a meaningful measure of our financial leverage.
The following table presents our Net Debt-to-Equity Ratios and Total Leverage Ratios as of December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
December 31, 2024
Asset-specific debt
Secured term loan, net
Total debt
Less: cash and cash equivalents
Net Debt
Total Equity
Net Debt-to-Equity Ratio
Non-consolidated senior loans
Total Leverage
Total Leverage Ratio
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents, interest income from our loans, proceeds from loan repayments, available borrowings under our repurchase agreements based on existing collateral, available borrowing capacity related to our asset-specific financings based on existing collateral, proceeds from the issuance of incremental secured term loan or other corporate debt issuances, and proceeds from the issuance of our common stock. As circumstances warrant and to the extent permissible, we and our subsidiaries may also issue common equity, preferred equity, warrants, and/or debt, incur other debt, including term loans, or explore sales of certain of our loans receivable or real estate owned assets from time to time, dependent upon market conditions and available pricing.
Although we generally intend to hold our loans to maturity, sales of loans receivable, which may result in realized losses, discounted loan payoffs, and/or sales of real estate owned assets may occur in order to redeploy capital to more accretive opportunities, meet operating objectives, adapt to market conditions, and/or manage liquidity needs. Furthermore, we cannot predict the timing or impact of future asset sales or loan repayments, and, since many of our loans are financed, a portion, or in some cases all, of the net proceeds from the sales or repayments of our loans are expected to be used to de-lever our secured financings.
The following table sets forth, as of December 31, 2025 and 2024, our sources of available liquidity ($ in thousands):
December 31, 2025
December 31, 2024
Cash and cash equivalents
Approved and undrawn credit capacity (1)
Total sources of liquidity
Amounts based on existing collateral.
Under the terms of our loan agreements with certain of our borrowers, we require and have oversight of borrower funds held in reserve accounts with third-party loan servicers for our benefit which provide additional collateral support for our loans. Upon the occurrence of certain events or the borrower meeting prescribed conditions in accordance with the terms of the loan agreement, these funds may be transferred by the third-party loan servicers to the borrower or to other third parties, subject to our approval, to satisfy certain obligations. In instances where the borrower is in monetary default under the terms of the loan agreement, we have the ability to direct the third-party loan servicers to release such reserve funds to us to satisfy past due amounts. To date, funds held in such reserve accounts are not and have not been reflected on our consolidated balance sheets.
The following table presents a summary of our unencumbered loans receivable held-for-investment as of December 31, 2025 ($ in thousands):
Loan Type
Loan
Commitment
Unpaid
Principal
Balance (1)
Carrying
Value
Property
Type
Construction
Location
Risk
Rating
Subordinate
Office
Senior
Hospitality
Senior
Office
Senior
Office
Senior
Other
Other
Total
Reflects amounts net of specific CECL reserves of $28.3 million.
As of December 31, 2025, our mixed-use real estate owned asset with a carrying value of $80.8 million (including related net lease intangible assets) and our land parcel real estate owned asset with a carrying value of $94.3 million were unencumbered.
Our ability to finance or sell certain of these unencumbered assets is subject to one or more counterparties’ willingness to finance or purchase such loans or real estate owned assets.
To facilitate future offerings of equity, debt and other securities, we have in place an effective shelf registration statement (the “Shelf”) with the SEC. The securities covered by this Shelf include up to $250,000,000 in the aggregate of: (i) common stock, (ii) preferred stock, (iii) debt securities, (iv) depositary shares, (v) warrants, (vi) purchase contracts, and (vii) units, and up to 16,058,983 shares of common stock offered by the selling securityholders. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering material, at the time of any offering.
On May 10, 2024, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $150.0 million of our common stock pursuant to a continuous offering program (the “ATM Agreement”) under our in place effective shelf registration. Sales of our common stock made pursuant to the ATM Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors, including market conditions, the trading price of our common stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. During the year ended December 31, 2025, we did not issue any shares of our common stock pursuant to the ATM Agreement. As of December 31, 2025, the ATM Agreement has not been utilized, and $150.0 million of our common stock remained available for issuance pursuant to the ATM Agreement.
Liquidity Needs
Our primary liquidity needs generally include loan origination and acquisitions, future fundings to our borrowers on our unfunded loan commitments, interest payment and principal repayment obligations on outstanding borrowings under our financings, operating expenses, management fees, and dividend payments to our stockholders necessary to satisfy REIT dividend requirements. We currently maintain, and seek to maintain, cash and liquidity to i) comply with minimum liquidity covenants under certain of our financing agreements and ii) meet our above mentioned primary liquidity needs. Further, we seek to meet such liquidity needs through our sources of liquidity discussed above. In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of $500.0 million and a maturity date of January 30, 2030.
During the years ended December 31, 2025 and 2024, we made deleveraging payments to certain of our financing counterparties in the amounts of $579.7 million and $286.1 million, respectively. In January 2026, we further deleveraged certain of our financing counterparties in the amount of $89.7 million, including deleveraging upon the refinancing of our secured term loan, and expect to
continue to do so as agreed with our lenders. Our ability to make any future deleveraging payments or required principal repayments will depend upon the results of our operating activities, our total sources of liquidity, the timing, amount, and pace of resolutions of our loans and real estate owned assets, our financial condition, and the overall market conditions in which we operate, among other factors.
As of December 31, 2025, we had aggregate unfunded loan commitments of $271.9 million which is comprised of funding for capital expenditures and construction, leasing costs, and carry costs. The timing of these fundings will vary depending on the progress of capital projects, leasing, and cash flows at the properties securing our loans and equity contributions from our borrowers, if required. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the collateral property, but are expected to occur over the remaining loan term. In certain circumstances, conditions to funding may not be met by our borrowers and portions of our unfunded loan commitments may never become eligible to be drawn on.
We may from time to time use capital to retire, redeem, or repurchase our equity or debt securities, term loans or other debt instruments through open market purchases, privately negotiated transactions or otherwise. The execution of such retirements, redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and/or other factors deemed relevant.
Contractual Obligations and Commitments
Our contractual obligations and commitments as of December 31, 2025 were as follows ($ in thousands):
Payment Timing
Total
Obligations
Less than
1 year
3 years
5 years
More than
5 years
Unfunded loan commitments (1)
Unfunded loan commitments for non-accrual, maturity default,
risk rated 5 and/or delinquent loans
Secured financings, term loan agreement, and debt
related to real estate owned - principal (2) (3) (4)
Secured financings, term loan agreement, and debt
related to real estate owned - interest (2) (3)
Total
The estimated allocation of our unfunded loan commitments for loans receivable held-for-investment is based on the earlier of our expected funding date and the commitment expiration date. As of December 31, 2025, we have $139.8 million of in-place financings to fund our remaining commitments, excluding $11.4 million of approved and undrawn credit capacity based on existing collateral.
The allocation of our secured financings and prior secured term loan is based on the earlier of the fully extended maturity date (assuming conditions to extend are met) of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, and assumes nine loans with an aggregate unpaid principal balance of $1.4 billion that are in maturity default that represent collateral for aggregate borrowings outstanding of $779.7 million have a contractual obligation to pay in less than one year.
Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and SOFR in effect as of December 31, 2025 will remain constant into the future. Actual amounts borrowed and rates will vary over time. Our floating rate loans and related liabilities are indexed to SOFR. Totals exclude non-consolidated senior interests.
In January 2026, we refinanced our secured term loan due in less than 1 year with a new secured term loan which provides for a maturity date of January 30, 2030. See Note 6 - Debt Obligations - Secured Term loan to our consolidated financial statements for further detail.
In certain circumstances, conditions to funding may not be met by our borrowers and portions of our unfunded loan commitments may not become eligible to be or expected to be drawn on. Of the $271.9 million of unfunded loan commitments for our loans receivable held-for-investment as of December 31, 2025, the following table details the portion of unfunded loan commitments and in-place financings to fund our remaining commitments for loans receivable held-for-investment whereby conditions to funding are not currently being met, including loans on non-accrual status, in maturity default, risk rated 5, and/or which are delinquent in accordance with our revenue recognition policy ($ in thousands):
Unfunded Loan Commitments
In-place Financing Commitments
Net Loan Commitment
Gross total commitment
Non-accrual, maturity default, risk rated 5
and/or delinquent loans
Net loan commitment
Subject to borrowers meeting future funding conditions provided for in our loan agreements, we expect to fund our $12.4 million of net loan commitments over the remaining maximum term of the related loans.
We incur to our Manager, payable in cash, a base management fee and incentive fee (to the extent earned), which are generally paid quarterly, in arrears. The tables above do not include the amounts payable to our Manager under the Management Agreement which are reflected as management fee payable - affiliate on our consolidated balance sheet.
Loan Maturities
The following table summarizes the future scheduled repayments of principal for loans receivable held-for-investment as of December 31, 2025 ($ in thousands):
Initial Maturity
Fully Extended Maturity
Year
Unpaid
Principal
Balance (1)
Loan
Commitment (1)
Unpaid
Principal
Balance (1)
Loan
Commitment (1)
Thereafter
Total
Excludes $739.6 million in unpaid principal balance and $754.6 million in loan commitments of loans receivable held-for-investment that are in maturity default with no available extension options.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
December 31, 2024
Net cash flows (used in) provided by operating activities
Net cash flows provided by investing activities
Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
We experienced a net increase in cash, cash equivalents, and restricted cash of $57.3 million during the year ended December 31, 2025, compared to a net decrease of $81.4 million during the year ended December 31, 2024.
During the year ended December 31, 2025, we received $1.6 billion from loan repayments, received $332.1 million of loan sale proceeds, received $60.5 million from partial sales of our mixed-use real estate owned asset, and received $904.0 million of proceeds from borrowings under our financing arrangements, net of payments for deferred financing costs and exit fees. Additionally, we made $133.1 million of advances on loans and made repayments on financings arrangements of $2.7 billion (inclusive of $579.7 million of deleveraging repayments).
Income Taxes
We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2015. We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, to maintain our REIT status. To the extent that we satisfy this distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our real estate owned hotel portfolio is held in a TRS. Our TRS is not consolidated for U.S. federal income tax purposes and is taxed separately as a corporation. For financial reporting purposes, a provision or benefit for current and deferred taxes is established for the portion of earnings or expense recognized by us with respect to our TRS.
Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state and local income tax on our REIT taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of December 31, 2025, we were in compliance with all REIT requirements.
The following table details the income tax treatment for our common stock dividends for the years ended December 31, 2024 and 2023. The Board did not declare any dividends during the year ended December 31, 2025.
Year Ended
December 31, 2024
December 31, 2023
Ordinary dividends
Capital gain dividends
Nondividend distributions
Total
See Note 13 - Income Taxes to our consolidated financial statements for further detail.
Off-Balance Sheet Arrangements
As of December 31, 2025, we had no off-balance sheet arrangements aside from those discussed in Note 3 - Loan Portfolio, Note 4 - Equity Method Investment, and Note 14 - Commitments and Contingencies to our consolidated financial statements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our Manager to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We believe that all of the decisions and estimates are reasonable, based upon the information available to us. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. The assumptions within our accounting policies may vary from quarter to quarter as our portfolio changes and market and economic conditions evolve.
See Note 2 to our consolidated financial statements for a description of our significant accounting policies.
Current Expected Credit Losses
The CECL reserve required under ASC 326, Financial Instruments – Credit Losses , reflects our current estimate of potential credit losses related to our loan portfolio. Changes to the CECL reserve are recognized through a provision for or reversal of current expected credit loss reserve on our consolidated statements of operations. ASC 326 specifies the reserve should be based on relevant information about past events, including historical loss experience, current loan portfolio, market conditions and reasonable and supportable macroeconomic forecasts through each loan within our loan portfolio’s expected remaining duration.
For our loan portfolio, we perform a quantitative assessment of the impact of CECL primarily using the Weighted Average Remaining Maturity, or WARM, method. The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of our portfolio, and our expectations of performance and market conditions over the relevant time period.
The WARM method requires us to reference historical loan loss data from a comparable data set and apply such loss rate to each of our loans over their expected remaining duration, taking into consideration expected economic conditions over the forecasted timeframe. Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and each borrower’s ultimate ability to repay. These estimates include unemployment rates, price indices for commercial properties, and market liquidity, all of which may influence the likelihood and magnitude of potential credit losses for our loans during their expected remaining duration. Additionally, further adjustments may
be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan, timing of the loan’s initial maturity, or the economic conditions specific to the property type of a loan’s collateral property.
To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from the 1990s through December 31, 2025. We believe this CMBS data is the most relevant, available, and comparable dataset to our portfolio.
When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate credit losses in order to determine the relationship between the two variables. We use projections of each macroeconomic factor, obtained from a third party, to approximate the impact the macroeconomic outlook may have on our loss rate. Selections of these economic forecasts require judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately subjective and uncertain, and the actual economic conditions could vary significantly from the estimates we made. Following a reasonable and supportable forecast period, we use a straight-line method of reverting to the historical loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments through their expected remaining duration, adjusted for projected fundings from interest reserves, if applicable, which is considered in the estimate of the general CECL reserve. For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.
We evaluate the credit quality of each of our loans receivable on an individual basis and assign a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary.
In certain circumstances, we may determine that a loan is no longer suited for the WARM method because (i) it has unique risk characteristics, (ii) we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent, (iii) we anticipate assuming legal title and/or physical possession of the collateral property and the fair value of the collateral property is determined to be below the carrying value of our loan, and/or (iv) recovery of our loan may occur at an amount below our loan’s carrying value. We may instead elect to employ different methods to estimate credit losses that also conform to ASC 326 and related guidance.
For such loans, we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral. In certain circumstances, we may recognize a specific reserve based upon anticipated proceeds from the disposition of our loan. If the estimated fair value of the collateral or anticipated proceeds from the disposition of our loan is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve. Specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral or anticipated proceeds from the disposition of our loan. If recovery of our loan is expected from the sale of the collateral, specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral less estimated costs to sell.
Fair values of collateral assets used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine specific CECL reserves may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates, market and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant. Estimates of fair values used to determine specific CECL reserves as of December 31, 2025 include discount rates ranging from 6.0% to 9.5%, market and terminal capitalization rates ranging from 4.72% to 8.25%, and, with respect to the land loan, value per buildable square foot of $140 based on current entitlements.
Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates.
Real Estate Owned
To maximize recovery from certain defaulted loans, we may from time to time assume legal title and/or physical possession of the collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure. We account for acquisitions of real estate, including foreclosures, deed-in-lieu of foreclosures, or assignment-in-lieu of foreclosures, in accordance with ASC 805, Business Combinations , which first requires that we determine if the real estate investment is the acquisition of an asset or a business combination. Under this model, we identify and determine the estimated fair value of any assets acquired and liabilities assumed. This generally results in the allocation of the purchase price to the assets acquired and liabilities assumed based on the relative estimated fair values of each respective asset and liability. Debt related to real estate owned hotel portfolio is initially recorded at its estimated fair value at the time of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of .
Assets acquired and liabilities assumed generally include land, building, building improvements, tenant improvements, furniture, fixtures and equipment, mortgages payable, and identified intangible assets and liabilities, which generally consists of above or below market lease values, in-place lease values, and other lease-related values. In estimating fair values for allocating the purchase price of our real estate owned, we may utilize various methods, including a market approach, which considers recent sales of similar properties, adjusted for differences in location and state of the physical asset, or a replacement cost approach, which considers the composition of physical assets acquired, adjusted based on industry standard information and the remaining useful life of the acquired property. In estimating fair values of intangible assets acquired or liabilities assumed, we consider the estimated cost of leasing our real estate owned assuming the property was vacant, the value of the current lease agreements relative to market-rate leases, and the estimation of total lease-up time including lost rents.
Real estate assets held-for-investment are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in our impairment analysis include, among others: (i) significant underperformance relative to historical or anticipated operating results; (ii) significant negative industry or economic trends; (iii) costs necessary to extend the life or improve the real estate asset; (iv) significant increase in competition; and (v) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the sale of the real estate asset. If the sum of such estimated undiscounted cash flows is less than the carrying amount of the real estate asset, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over its estimated fair value.
Fair values of collateral assets used to determine the initial estimated fair value of real estate owned are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine real estate owned upon acquisition may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates, market and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant. Estimates of fair values used to determine real estate owned upon acquisition during the year ended December 31, 2025 include assumptions of market capitalization rates ranging from 4.75% to 5.50% and, with respect to the land parcel, value per buildable square foot of $253.
There were no impairments of our real estate owned held-for-investment assets through December 31, 2025.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
Interest Rate Risk
In early 2022, the U.S. Federal Reserve began a campaign to combat inflation by increasing interest rates, ultimately resulting in benchmark interest rates increasing by 5.25% by the end of 2023. Although the U.S. Federal Reserve has reduced benchmark interest rates between September 2024 and December 2025, such benchmark rates remain elevated relative to recent historical standards. Additionally, the U.S. Federal Reserve has indicated that further changes in benchmark interest rates are dependent upon changes in prices and employment markets. The timing, direction, and extent of any future adjustment to benchmark interest rates by the U.S. Federal Reserve is uncertain. Elevated benchmark interest rates imposed by the U.S. Federal Reserve may continue to increase our interest expense, negatively impact the ability of our borrowers to service their debt, and reduce the value of the CRE collateral underlying our loans. Conversely, in a period of declining interest rates, the interest income on floating rate investments would decline, while any decline in the interest we are charged on our floating rate debt may not equal or exceed the decrease in interest income and the interest expense we incur. Exclusive of the impact of non-accrual loans, rising interest rates will generally increase our net interest income, while interest rates will generally decrease our net interest income.
The following table illustrates as of December 31, 2025 the impact on our net interest income and net interest income per share for loans receivable held-for-investment for the twelve-month period following December 31, 2025, assuming a decrease in SOFR of 50 and 100 basis points and an increase in SOFR of 50 and 100 basis points in the applicable interest rate benchmark (based on SOFR of 3.69% as of December 31, 2025) ($ in thousands, except per share data):
Net Floating
Decrease
Increase
Rate Exposure
Change in
100 Basis Points
50 Basis Points
50 Basis Points
100 Basis Points
Net interest income
Net interest income per share
Risks related to fluctuations in cash flows and asset values associated with movements in interest rates may also contribute to the risk of nonperformance on floating rate assets. In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets to our loans may be insufficient to pay debt service due, which may contribute to nonperformance of our loans. We seek to manage this risk by, among other things, generally requiring our borrowers to acquire interest rate caps from an unaffiliated third-party.
Credit Risk
Our loans and other investments are also subject to credit risk, including the risk of default. In particular, changes in general economic conditions, including interest rates, will affect the creditworthiness of borrowers and/or the value of underlying real estate collateral relating to our investments. By its nature, our investment strategy emphasizes prudent risk management and capital preservation by primarily originating senior loans utilizing underwriting techniques requiring relatively conservative loan-to-value ratio levels to insulate us from credit losses absent a significant diminution in collateral value. In addition, we seek to manage credit risk by performing extensive due diligence on our collateral, borrower and guarantors, as applicable, evaluating, among other things, title, environmental and physical condition of collateral, comparable sales and leasing analysis of similar collateral, the quality of and alternative uses for the real estate collateral being underwritten, submarket trends, our borrower’s track record and the reasonableness of the borrower’s projections prior to originating a loan. Subsequent to origination, we also manage credit risk by proactively monitoring our investments and, whenever possible, limiting our own leverage to partial recourse or non-recourse, match-funding financing. Notwithstanding these efforts, there can be no assurance that we will be able to avoid in all circumstances. The performance and value of our loans and investments depend upon, among other things, the borrower’s ability to and operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our Sponsor’s asset management team rigorously monitors the performance of our loan portfolio and our Sponsor’s asset management and origination teams maintain regular contact with borrowers, property managers, co-lenders and local market experts to monitor the performance of the underlying loan collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as the lender.
In addition, we are exposed to the risks generally associated with the CRE market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control, including changes in benchmark interest rates, cost increases associated with construction materials, employment conditions, and supply chain and labor market disruptions. We seek to manage these risks through our underwriting, loan structuring, financing structuring, and asset management processes.
In the event that we are forced to foreclose, our broader Sponsor platform includes professionals experienced in CRE development, ownership, property management, and asset management which enables us to execute the workout of a troubled loan and protect investors’ capital in a way that we believe many non-traditional lenders cannot.
Capital Markets Risk
We are exposed to risks related to the equity and debt capital markets which impact our related ability to raise capital through the issuance of our common stock or other debt or equity-related instruments. As a REIT, we are required to distribute a significant portion of our REIT taxable income annually, which constrains our ability to retain and accumulate operating earnings and therefore requires us to utilize debt or equity capital to finance the growth of our business. We seek to mitigate these risks by constantly monitoring the debt and equity capital markets, the maturity profile of our in-place loan portfolio and financings, and other potential liquidity requirements to inform our decisions on the amount, timing, and terms of any capital we may raise.
Each of our repurchase agreements contain “margin maintenance” provisions, which allow the lender to require the delivery of cash or other assets to reduce the financing amount against loans that have been deemed to have experienced a diminution in value. A substantial deterioration in the commercial real estate capital markets, among other things, may negatively impact the value of assets financed with lenders that have margin maintenance provisions in their facilities. Certain of our repurchase agreements permit valuation adjustments solely as a result of collateral-specific credit events, while other repurchase agreements contain provisions also allowing our lenders to make margin calls upon the occurrence of adverse changes in the capital markets or as a result of interest rate or spread fluctuations, subject to minimum thresholds, among other factors. As of December 31, 2025, we have not received any margin calls under any of our repurchase agreements.
Financing Risk
We finance and have financed our business through a variety of means, including the syndication of non-consolidated senior interests, notes payable, borrowings under our repurchase and participation facilities, the syndication of senior participations in our originated senior loans, and secured term loan. Over time, as market conditions change, we may use other forms of financing in addition to these methods of financing. Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, geopolitical volatility, global trade tensions, and fluctuation in interest rates and the resulting market disruptions therefrom, among other things, could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, increase the costs of or reduce the advance rate on existing financing or otherwise offer unattractive terms for that financing. In addition, we may seek to finance our business through the issuance of our common stock or other equity or equity-related instruments, though there is no assurance that such financing will be available on a timely basis with terms, or at all.
Counterparty Risk
The nature of our business requires us to hold cash and cash equivalents with various financial institutions, as well as obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.
Our relationships with our lenders subject us to counterparty risks including the risk that a counterparty is unable to fund undrawn credit capacity, particularly if such counterparty enters bankruptcy, among other detrimental effects. We manage this risk by seeking diverse financing sources across counterparties and financing types and generally obtaining financing from high credit quality institutions.
The nature of our loans and other investments also exposes us to the risk that our borrowers are unable to execute their business plans, and as a result do not make required interest and principal payments on scheduled due dates, as well as the impact of our borrowers’ tenants not making scheduled rent payments when contractually due. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoring of our borrowers’ progress in executing their business plans as well as market conditions that may affect the collateral property, through our asset management process. Each loan is structured with various lender protections that are designed to discourage and deter fraudulent behavior and other bad acts by borrowers, as well as require borrowers to adhere to their stated business plans while the loan is outstanding. Such protections may include, without limitation: cash management accounts, “bad boy” carveout guarantees, completion guarantees, guarantor minimum net worth and liquidity requirements, partial or full recourse to sponsors and/or guarantors, approval rights over major decisions, and performance tests throughout the loan term.
Prepayment Risk
Prepayment risk is the risk that principal will be repaid prior to initial maturity, which may require us to identify new investment opportunities to deploy such capital at a similar rate of return in order to avoid an overall reduction in our net interest income. We may structure our loans with spread maintenance, minimum multiples and make-whole provisions to protect against early repayment. Typically, investments are structured with the equivalent of 12 to 24 months’ spread maintenance or a minimum level of income that an investment is contractually obligated to return. In general, an increase in prepayment rates accelerates the accretion of deferred income, including origination fees and exit fees, which increases interest income earned on the asset during the period of repayment. Conversely, if capital that is repaid is not subsequently redeployed into investment opportunities generating a similar return, future periods may experience reduced net interest income.
Repayment / Extension Risk
Loans are generally expected to be repaid at maturity, unless the borrower repays early or meets contractual conditions to qualify for a maturity extension. The granting of these extensions may cause a loan’s term to extend beyond the term of its related secured financing. Elevated interest rates recently imposed by the U.S. Federal Reserve relative to recent historical standards may lead to an increase in the number of our borrowers who exercise or request additional extension options, or who may become unwilling or unable to make contractual payments when due. Some of our borrowers may experience delays in the execution of their business plans, changes in their capital position and available liquidity, and/or changes in market conditions which may impact the performance of the collateral property, borrower, or sponsor. Accordingly, this may result in the borrower not meeting certain extension conditions such as minimum debt yield, maximum LTV, and/or the ability of the borrower to purchase replacement interest rate caps. Elevated interest rates may also increase the number of our borrowers who may default because, among other things, they may not be able to find replacement financing for our loan. Furthermore, there may be certain instances where, for loans which have been modified, we may not be to maintain the associated financing on its existing terms. This could have a impact on our results of operations, and in some situations, we may be to sell assets to maintain adequate liquidity, which could cause us to incur .
Currency Risk
To date, we have made no loans and hold no assets or liabilities denominated or payable in foreign currencies, although we may do so in the future.
We may in the future hold assets denominated or payable in foreign currencies, which would expose us to foreign currency risk. As a result, a change in foreign currency exchange rates may have a positive or an adverse impact on the valuation of our assets, as well as our income and dividends. Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends to our stockholders.
Although not required, if applicable, we may hedge any currency exposures. However, such currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments and/or unequal, inaccurate or unavailability of hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.
Real Estate Risk
The market values of loans secured directly or indirectly by CRE assets and CRE assets themselves are subject to volatility and may be adversely affected by a number of factors, including the interest rate environment; persistent inflation; increases in remote work trends; natural disasters or pandemics; national, regional, local and foreign economic conditions (which may be adversely affected by industry slowdowns, global trade tensions, and other factors); changes in government laws, regulations, and actions (such as tax, real estate, environmental and climate, rent control, zoning laws, bank reserve requirements, and changes in monetary policy); supply chain and labor market disruptions; changes in social conditions; changes in employment conditions; regional or local real estate conditions; geopolitical volatility; changes or continued weakness in specific industry segments; construction quality, age and design; changes to construction costs; demographic factors; changes to building or similar codes; and changes in real property tax rates. In addition, decreases in property values reduce the value of the loan collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to . We may realize related to , repayments of our loans at an amount below our carrying value, the sale of our loans, the of the loans in our investment portfolio on terms that may be more to borrowers than those underwritten at origination, or the sale of real estate owned assets. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes.
Item 8. Fin ancial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )
Consolidated Balance Sheets as of December 31, 2025 and 2024
Consolidated Statements of Operations for the Years Ended December 31, 2025, 2024 and 2023
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2025, 2024 and 2023
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2025
Schedule IV - Mortgage Loans on Real Estate as of December 31, 2025
Report of Independent Registe red Public Accounting Firm
To the Board of Directors and Stockholders of Claros Mortgage Trust, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Claros Mortgage Trust, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
General Current Expected Credit Loss Reserve - Loan Risk Ratings
As described in Notes 2 and 3 to the consolidated financial statements, the Company’s total general current expected credit loss (“CECL”) reserve was $77.7 million as of December 31, 2025, of which $73.3 million relates to loans receivable held-for-investment and $4.3 million relates to unfunded loan commitments. Management primarily arrives at their general CECL reserve using the Weighted Average Remaining Maturity, or WARM method. The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of the portfolio, and management’s expectations of performance and market conditions over the relevant time period. For both the funded and unfunded portions of the loans, management considers the internal risk rating of each loan as the primary credit quality indicator underlying management’s assessment. Management evaluates the credit quality of each of the loans on an individual basis and assigns a risk rating at least quarterly. Management developed a loan grading system for all outstanding loans that are collateralized directly or indirectly by real estate. In conjunction with the quarterly loan portfolio review, management assesses the risk factors of each loan and assigns a risk rating based on several factors including, but not limited to, as-is or as- debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow and other more subjective variables that include, but are not limited to, as-is or as- collateral value, market conditions, industry conditions, borrower/sponsor financial , and borrower/sponsor exit plan (collectively “risk factors”). Management utilizes the grading system to determine each loan’s risk of and to provide a determination as to whether an individual loan is and whether a specific CECL reserve is necessary.
The principal considerations for our determination that performing procedures relating to the loan risk ratings used when developing the general CECL reserve is a critical audit matter are (i) the significant judgment by management when developing the general CECL reserve; and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s risk factors, as applicable, used to evaluate credit quality and assign loan risk ratings.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls when developing the general CECL reserve, including controls over management’s risk factors used to evaluate credit quality and assign loan risk ratings. These procedures also included, among others, (i) testing management’s process for developing the general CECL reserve; (ii) evaluating the appropriateness of the loan grading system used by management; (iii) testing the completeness and accuracy of the underlying data used when evaluating credit quality and assigning the loan risk ratings; and (iv) for a sample of loans, evaluating the reasonableness of management’s risk factors, as applicable, used to evaluate credit quality and assign loan risk ratings. Evaluating the reasonableness of management’s risk factors involved (i) considering whether the risk factors used to evaluate credit quality and assign loan risk ratings were consistent with evidence obtained in other areas of the audit and (ii) evaluating management’s assessment over leasing trends, property financial data, and other evidence used by management to support their conclusions, as applicable.
Valuation of Collateral Related to the Specific CECL Reserve and Acquired Real Estate Owned Held-for-Investment
As described in Notes 2, 3 and 5 to the consolidated financial statements, the Company’s specific CECL reserve was $365.4 million on loans receivable held-for-investment as of December 31, 2025. During the year ended December 31, 2025, the Company acquired real estate owned held-for-investment through mortgage foreclosure for an estimated fair value of $351.7 million. In certain circumstances, management may determine that a loan is no longer suited for the WARM method because (i) it has unique risk characteristics, (ii) management has deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent, (iii) the Company anticipates assuming legal title/and or physical possession of the collateral property and the fair
value of the collateral asset is determined to be below the carrying value, and/or (iv) recovery of the loan may occur at an amount below the loan’s carrying value. For such loans, management separately measures the specific reserve for each loan by using the estimated fair value of the loan’s collateral. Specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral or anticipated proceeds from the disposition of the loan. If recovery of the loan is expected from the sale of the collateral, specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral less estimated costs to sell. Additionally, the Company may assume legal title and/or physical possession of the collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure. Real estate owned is initially recorded upon acquisition at its estimated fair value. The estimated fair values used to determine specific CECL reserves and to record real estate owned held-for-investment when acquired are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach (collectively “valuation methods”) and may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount, market capitalization and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which may be deemed relevant by management.
The principal considerations for our determination that performing procedures relating to the valuation of collateral related to the specific CECL reserve and acquired real estate owned held-for-investment is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the collateral used to (a) determine the specific CECL reserves and (b) record the acquired real estate owned held-for-investment; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to (a) the discount, market capitalization and terminal capitalization rates and value per buildable square foot for the collateral used to determine the specific CECL reserves using the valuation methods, as applicable, and (b) the market capitalization rates and value per buildable square foot for the collateral used to record the acquired real estate owned held-for-investment using the valuation methods, as applicable; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the collateral used to determine the specific CECL reserves and to record the acquired real estate owned held-for-investment. These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the collateral used to (a) determine the specific CECL reserves and (b) record the acquired real estate owned held-for-investment; and (ii) testing the completeness and accuracy of the underlying data used in the valuation methods. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the valuation methods and (ii) the reasonableness of (a) the discount, market capitalization and terminal capitalization rates and value per buildable square foot assumptions for the collateral used to determine the specific reserves and (b) the market capitalization and value per buildable square foot assumptions for the collateral used to record the acquired real estate owned held-for-investment.
/s/ PricewaterhouseCoopers LLP
New York, New Y ork
February 18, 2026
We have served as the Company’s auditor since 2015.
Claros Mortgage Trust, Inc.
Consolidated B alance Sheets
($ in thousands, except share data)
December 31, 2025
December 31, 2024
Assets
Cash and cash equivalents
Restricted cash
Loans receivable held-for-investment
Less: current expected credit loss reserve
Loans receivable held-for-investment, net
Loans receivable held-for-sale
Equity method investment
Real estate owned held-for-investment, net
Real estate owned held-for-sale
Other assets
Total assets
Liabilities and Equity
Repurchase agreements
Term participation facility
Notes payable, net
Secured term loan, net
Debt related to real estate owned hotel portfolio, net
Other liabilities
Management fee payable - affiliate
Total liabilities
Commitments and Contingencies - Note 14
Equity
Common stock, $ 0.01 par value, 500,000,000 shares authorized, 140,218,764 and
139,362,657 shares issued and 140,218,764 and 139,362,657 shares outstanding
at December 31, 2025 and 2024, respectively
Additional paid-in capital
Accumulated deficit
Total equity
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
Claros Mortgage Trust, Inc.
Consolidated Statem ents of Operations
($ in thousands, except share and per share data)
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Revenue
Interest and related income
Less: interest and related expense
Net interest income
Revenue from real estate owned
Total net revenue
Expenses
Management fees - affiliate
Incentive fees - affiliate
General and administrative expenses
Stock-based compensation expense
Real estate owned:
Operating expenses
Interest expense
Depreciation and amortization
Total expenses
Proceeds from interest rate cap
Unrealized loss on interest rate cap
Loss on partial sales of real estate owned, net
Gain on foreclosure of real estate owned
(Loss) income from equity method investment
(Loss) gain on extinguishment of debt
Valuation adjustment for real estate owned held-for-sale
Provision for current expected credit loss reserve
Valuation adjustment for loan receivable held-for-sale
Gain on sale of loan
Net (loss) income
Net (loss) income per share of common stock:
Basic and diluted
Weighted average shares of common stock outstanding:
Basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
Claros Mortgage Trust, Inc.
Consolidated Statem ents of Changes in Equity
($ in thousands, except share data)
Common Stock
Additional
Shares
Par
Value
Paid-In
Capital
Accumulated
Deficit
Total
Equity
Balance at December 31, 2022
Retirement of treasury shares
Stock-based compensation expense
Payments for withholding taxes upon delivery of
stock-based awards
Dividends declared
Net income
Balance at December 31, 2023
Stock-based compensation expense
Payments for withholding taxes upon delivery of
stock-based awards
Dividends declared
Net loss
Balance at December 31, 2024
Stock-based compensation expense
Payments for withholding taxes upon delivery of
stock-based awards
Net loss
Balance at December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
Claros Mortgage Trust, Inc.
Consolidated Statem ents of Cash Flows
($ in thousands)
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Cash flows from operating activities
Net (loss) income
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Accretion of fees and discounts on loans receivable
Amortization of deferred financing costs on secured financings
Amortization of deferred financing costs on debt related to real estate
owned hotel portfolio
Non-cash stock-based compensation expense
Depreciation and amortization on real estate owned, in-place lease
values, and deferred leasing costs
Amortization of above and below market lease values, net
Straight-line rent adjustment
Unrealized loss on interest rate cap
Loss on partial sales of real estate owned, net
Loss (income) from equity method investment
Loss (gain) on extinguishment of debt
Valuation adjustment for real estate owned held-for-sale
Gain on sale of loan
Gain on foreclosure of real estate owned
Non-cash advances on loans receivable in lieu of interest
Non-cash advances on secured financings in lieu of interest
Non-cash advances on debt related to real estate owned hotel portfolio
Repayment of non-cash advances on loans receivable in lieu of interest
Repayment of non-cash advances on debt related to real estate owned hotel
portfolio
Provision for current expected credit loss reserve
Valuation adjustment for loan receivable held-for-sale
Changes in operating assets and liabilities:
Other assets
Other liabilities
Management fee payable - affiliate
Net cash (used in) provided by operating activities
Cash flows from investing activities
Loan originations, acquisitions and advances, net of fees
Advances on loan receivable held-for-sale
Repayments of loans receivable
Proceeds from sales of loans receivable
Extension and exit fees received from loans receivable
Reserves and deposits held for loans receivable
Proceeds from partial sales of real estate owned
Capital expenditures on real estate owned
Capital expenditures on real estate owned held-for-sale
Payment of deferred leasing costs
Cash and restricted cash acquired from foreclosures on real estate owned
Payment of transaction costs from foreclosures on real estate owned
Net cash provided by (used in) investing activities
The accompanying notes are an integral part of these consolidated financial statements.
Claros Mortgage Trust, Inc.
Consolidated Statem ents of Cash Flows
($ in thousands)
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Cash flows from financing activities
Dividends paid
Payments for withholding taxes upon delivery of stock-based awards
Proceeds from secured financings
Proceeds from debt related to real estate owned hotel portfolio
Payment of deferred financing costs
Payment of exit fees on secured financing
Purchase of interest rate cap
Repayments of secured financings
Repayments of secured term loan
Repayments of debt related to real estate owned hotel portfolio
Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Cash and cash equivalents, end of period
Restricted cash, end of period
Cash, cash equivalents and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Supplemental disclosure of non-cash investing and financing activities:
Dividends accrued
Loan principal payments held by servicer
Accrued deferred financing costs
Accrued loan sale transaction costs
Accrued loans receivable held-for-investment extension fees
Real estate acquired in foreclosure
Lease intangibles, net acquired in foreclosures on real estate owned
Working capital acquired in foreclosures on real estate owned
Accrued real estate foreclosure costs
Settlement of loans receivable in foreclosures on real estate owned
Settlement of accrued interest receivable in foreclosures on real estate owned
The accompanying notes are an integral part of these consolidated financial statements.
Claros Mortgage Trust, Inc.
Note s to Consolidated Financial Statements
Note 1. Organ ization
Claros Mortgage Trust, Inc. (referred to throughout this report as the “Company,” “we,” “us” and “our”) is a Maryland Corporation formed on April 29, 2015 for the purpose of creating a diversified portfolio of income-producing loans collateralized by institutional quality commercial real estate. We commenced operations on August 25, 2015 (“Commencement of Operations”) and generally conduct our business through wholly-owned subsidiaries. Unless the context requires otherwise, any references to the Company refers to the Company and its consolidated subsidiaries. The Company is traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG”.
We elected and intend to maintain our qualification to be taxed as a real estate investment trust (“REIT”) under the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), for U.S. federal income tax purposes. As such, we generally are not subject to U.S. federal income tax on that portion of our income that we distribute to stockholders. See Note 13 – Income Taxes for further detail.
We are externally managed by Claros REIT Management LP (the “Manager”), our affiliate, through a management agreement (the “Management Agreement”) pursuant to which our Manager provides a management team and other professionals who are responsible for implementing our business strategy, subject to the supervision of our board of directors (the “Board”). In exchange for its services, our Manager is entitled to management fees and, upon the achievement of required performance hurdles, incentive fees. See Note 11 – Related Party Transactions for further detail.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
We consolidate all entities that are controlled either through majority ownership or voting rights. We also identify entities for which control is achieved through means other than through voting rights (a variable interest entity or “VIE”) using the analysis as set forth in Accounting Standards Codification (“ASC”) 810, Consolidation of Variable Interest Entities, and determine when and which variable interest holder, if any, should consolidate the VIE. We do not have any consolidated variable interest entities as of December 31, 2025 and 2024 . All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to our judgment include, but are not limited to, the adequacy of our current expected credit loss reserve, the determination of the fair value of real estate assets acquired and liabilities assumed, and the impairment of certain assets.
Loans Receivable Held-for-Investment
Loans that we have originated or acquired and have the intent and ability to hold to maturity or payoff are reported at their unpaid principal balances net of any unamortized deferred fees and discounts and expected credit loss reserves, if applicable. Loan origination, extension, and exit fees are deferred and recognized in interest income over the estimated life of the loans using the effective interest method, adjusted for actual prepayments.
Loans Receivable Held-for-Sale
Loans that we have originated or acquired and for which we have an intent and ability to sell are classified as loans receivable held-for-sale and are reflected on our consolidated balance sheet at the lower of (i) amortized cost and (ii) estimated fair value less estimated transaction costs. If the expected sale proceeds is below a loan’s amortized cost generally as a result of a diminution in the value of the collateral asset, a specific CECL reserve is recorded and subsequently charged-off in the period in which we have determined the loan meets the held-for-sale criteria, and the loan is subsequently reclassified to held-for-sale. Once a loan is classified as
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
held-for-sale, subsequent adjustments to the fair value of such loan are reflected within valuation adjustment for loan receivable held-for-sale on our consolidated statements of operations.
Non-cash Advances in Lieu of Interest
We hold certain loans whereby a portion of the loan’s unfunded commitment may be used to satisfy monthly debt service, so long as certain conditions are met. As a result, such loan’s unpaid principal balance increases on the interest payment date and we do not receive cash. This feature is referred to as non-cash advance in lieu of interest, and the increase in unpaid principal balance is reflected in the operating section of our consolidated statements of cash flows, as opposed to the investing section as if the cash had been directly advanced to a borrower. We also have certain financings that allow for non-cash advances in lieu of interest, and the increase in unpaid principal balance is reflected in the operating section of our consolidated statements of cash flows, as opposed to the financing section as if cash had been directly received by us. In either case, repayments of non-cash advances in lieu of interest for both our loans receivable and our financings are reflected in the operating section of our consolidated statements of cash flows, except if the loan receivable is sold, in which case all proceeds from the loan sale are reflected in the investing section of our consolidated statements of cash flows.
Current Expected Credit Losses
The current expected credit loss (“CECL”) reserve required under ASC 326, Financial Instruments – Credit Losses , reflects our current estimate of potential credit losses related to our loan portfolio. Changes to the CECL reserve are recognized through a provision for or reversal of current expected credit loss reserve on our consolidated statements of operations. ASC 326 specifies the reserve should be based on relevant information about past events, including historical loss experience, current loan portfolio, market conditions and reasonable and supportable macroeconomic forecasts through each loan within our loan portfolio’s expected remaining duration.
General CECL Reserve
Our loans are typically collateralized by real estate, or in the case of mezzanine loans, by an equity interest in an entity that owns real estate. We consider key credit quality indicators in underwriting loans and estimating credit losses, including: the capitalization of borrowers and sponsors; the expertise of the borrowers and sponsors in a particular real estate sector and geographic market; collateral type; geographic region; use and occupancy of the property; property market value; loan-to-value (“LTV”) ratio; loan amount and lien position; our risk ratings; and prior experience with the borrower/sponsor. This information is used to assess the financial and operating capability, experience and profitability of the borrower/sponsor. Ultimate repayment of our loans is sensitive to interest rate changes, general economic conditions, performance of the collateral asset, financial wherewithal of the borrower/sponsor, LTV ratio, existence of a liquid investment sales market for commercial properties, and availability of replacement financing.
We regularly evaluate on a loan-by-loan basis, the extent and impact of any credit deterioration associated with the performance and/or value of the collateral property, the financial and operating capability of the borrower/sponsor, the financial strength of loan guarantors, if any, and the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management personnel and evaluated by senior management on at least a quarterly basis, utilizing various data sources, including, to the extent available, (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections, (iii) sales and financing comparables, (iv) current credit spreads for refinancing and (v) other relevant market data.
We primarily arrive at our general CECL reserve using the Weighted Average Remaining Maturity, or WARM method, which is considered an acceptable loss-rate method for estimating CECL reserves by the Financial Accounting Standards Board (“FASB”). The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of our portfolio, and our expectations of performance and market conditions over the relevant time period.
The WARM method requires us to reference historical loan loss data from a comparable data set and apply such loss rate to each of our loans over their expected remaining duration, taking into consideration expected economic conditions over the forecasted timeframe. Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and each borrower’s ultimate ability to repay. These estimates include unemployment rates, price indices for commercial properties, and market liquidity, all of which may influence the likelihood and magnitude of potential credit losses for our loans during their expected remaining duration. Additionally, further adjustments may be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan, timing of the loan’s initial maturity, or the economic conditions specific to the property type of a loan’s collateral property.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from the 1990s through December 31, 2025. We believe this CMBS data is the most relevant, available, and comparable dataset to our portfolio.
When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate credit losses in order to determine the relationship between the two variables. We use projections of each macroeconomic factor, obtained from a third party, to approximate the impact the macroeconomic outlook may have on our loss rate. Selections of these economic forecasts require judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately subjective and uncertain, and the actual economic conditions could vary significantly from the estimates we made. Following a reasonable and supportable forecast period, we use a straight-line method of reverting to the historical loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments through their expected remaining duration, adjusted for projected fundings from interest reserves, if applicable, which is considered in the estimate of the general CECL reserve. For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.
We evaluate the credit quality of each of our loans receivable on an individual basis and assign a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale, the loans are graded “1” through “5,” from less risk to risk, which gradings are defined as follows:
Very Low Risk
Low Risk
Medium Risk
High Risk/Potential for Loss: A loan that has a risk of realizing a principal loss
Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss
Specific CECL Reserve
In certain circumstances, we may determine that a loan is no longer suited for the WARM method because (i) it has unique risk characteristics, (ii) we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent, (iii) we anticipate assuming legal title and/or physical possession of the collateral property and the fair value of the collateral asset is determined to be below the carrying value of our loan, and/or (iv) recovery of our loan may occur at an amount below our loan’s carrying value. We may instead elect to employ different methods to estimate credit losses that also conform to ASC 326 and related guidance. For such loans, we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral. In certain circumstances, we may recognize a specific reserve based upon anticipated proceeds from the disposition of our loan. If the estimated fair value of the collateral or anticipated proceeds from the disposition of our loan is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve. Specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral or anticipated proceeds from the disposition of our loan. If recovery of our loan is expected from the sale of the collateral, specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral less estimated costs to sell.
If we have determined that a loan or a portion of a loan is uncollectible, we will write off the amount deemed uncollectible through an adjustment to our CECL reserve. If we have determined that accrued interest receivable previously recognized under our revenue recognition policy is uncollectible, we will either reverse such amount against interest income or reserve for such amount through an adjustment to our CECL reserve. Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates.
See Note 3 - Loan Portfolio - Current Expected Credit Losses for further detail.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Financial Instruments
Financial instruments held by us generally include cash and cash equivalents, restricted cash, loans receivable held-for-investment, loans receivable held-for-sale, other assets, other liabilities, management fee payable - affiliate, repurchase agreements, term participations, notes payable, secured term loan and debt related to real estate owned hotel portfolio. The estimated fair value of cash and cash equivalents, restricted cash, other assets (excluding the fair value of our interest rate cap), other liabilities, and management fee payable - affiliate approximates their current carrying amount.
GAAP requires the categorization of the fair value of financial instruments into three broad levels that form a hierarchy based on the transparency of inputs to the valuation. See Note 8 – Fair Value Measurements for further detail.
Cash and Cash Equivalents
We consider all investments with original maturities of three months or less, at the time of acquisition, to be cash equivalents. We maintain cash accounts which from time to time exceed the insured maximum of $ 250,000 per account.
Restricted Cash
Restricted cash includes reserve balances for real estate taxes, insurance, capital improvements, and deferred maintenance for our real estate owned hotel portfolio and multifamily properties, as well as lockbox accounts held pursuant to the terms of certain financings.
Real Estate Owned (and Related Debt)
To maximize recovery from certain defaulted loans, we may from time to time assume legal title and/or physical possession of the collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure. We account for acquisitions of real estate, including foreclosures, deed-in-lieu of foreclosures, or assignment-in-lieu of foreclosures, in accordance with ASC 805, Business Combinations , which first requires that we determine if the real estate investment is the acquisition of an asset or a business combination. Under this model, we identify and determine the estimated fair value of any assets acquired and liabilities assumed. This generally results in the allocation of the purchase price to the assets acquired and liabilities assumed based on the relative estimated fair values of each respective asset and liability.
In such instances, the asset is classified as real estate owned held-for-investment, net on our consolidated balance sheets. Real estate owned is initially recorded at estimated fair value, plus acquisition costs in the instance of an asset acquisition, and is subsequently presented net of accumulated depreciation. Depreciation on real estate assets held-for-investment, except for land, is computed using a straight-line method over estimated useful lives ranging from 5 to 40 years and is recognized in depreciation and amortization expense on our consolidated statements of operations. If the held-for-sale criteria prescribed by ASC 360, Property, Plant, and Equipment , are met, the asset is classified as real estate owned held-for-sale and reflected at the lower of (i) amortized cost and (ii) estimated fair value less estimated transaction costs on our consolidated balance sheets. Once classified as real estate owned held-for-sale, we cease recognition of the related depreciation and amortization. If a real estate owned asset no longer meets the held-for-sale criteria, the asset is reclassified as real estate owned held-for-investment and reflected at the lower of (i) amortized cost prior to classification to held-for-sale with adjustments for depreciation during the held-for-sale period, if applicable, and (ii) estimated fair value.
Assets acquired and liabilities assumed generally include land, building, building improvements, tenant improvements, furniture, fixtures and equipment, mortgages payable, and identified intangible assets and liabilities, which generally consists of above or below market lease values, in-place lease values, and other lease-related values. In estimating fair values for allocating the purchase price of our real estate owned, we may utilize various methods, including a market approach, which considers recent sales of similar properties, adjusted for differences in location and state of the physical asset, or a replacement cost approach, which considers the composition of physical assets acquired, adjusted based on industry standard information and the remaining useful life of the acquired property. In estimating fair values of intangible assets acquired or liabilities assumed, we consider the estimated cost of leasing our real estate owned assuming the property was vacant, the value of the current lease agreements relative to market-rate leases, and the estimation of total lease-up time including lost rents. In-place, above market, and other lease values, net are included within other assets on our consolidated balance sheets. Below market lease values, net, are included within other liabilities on our consolidated balance sheets. Amortization of in-place and other lease values is recognized in depreciation and amortization expense on our consolidated statements of operations. Amortization of above and below market lease values is recognized in revenue from real estate owned on our consolidated statements of operations.
Real estate assets held-for-investment are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in our impairment analysis include, among others: (i) significant underperformance relative to historical or anticipated operating results;
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
(ii) significant negative industry or economic trends; (iii) costs necessary to extend the life or improve the real estate asset; (iv) significant increase in competition; and (v) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the sale of the real estate asset. If the sum of such estimated undiscounted cash flows is less than the carrying amount of the real estate asset, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over its estimated fair value. When determining the estimated fair value of a real estate asset, we make certain assumptions including consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate. There were no impairments of our real estate owned held-for-investment assets through December 31, 2025.
Debt assumed in a foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure of real estate is recorded at its estimated fair value at the time of the acquisition.
See Note 5 - Real Estate Owned for further detail.
Equity Method Investment
We account for our investments in entities in which we have the ability to significantly influence, but do not have a controlling interest, by using the equity method of accounting. Under the equity method for which we have not elected a fair value option, the investment, originally recorded at cost, is adjusted to recognize our share of earnings or losses as they occur and for additional contributions made or distributions received. We look at the nature of the cash distributions received to determine the proper character of cash flow distributions on the accompanying consolidated statements of cash flows as either returns on investment, which would be included in operating activities, or returns of investment, which would be included in investing activities.
At each reporting period we assess whether there are any indicators of other-than-temporary impairment of our equity investments. There were no other-than-temporary impairments of our equity method investment through December 31, 2025 .
Derivative Financial Instruments
In the normal course of business, we are exposed to the effect of interest rate changes and may undertake one or more strategies to limit these risks through the use of derivatives. We may use derivatives to reduce the impact that changes in interest rates will have on our floating rate assets and floating rate liabilities. Such derivatives may consist of interest rate swaps, caps, collars, and floors.
As of December 31, 2025 and 2024, our only derivative is our interest rate cap on our debt related to real estate owned hotel portfolio, which is recognized on our consolidated balance sheets at fair value within other assets. To determine the fair value of our interest rate cap, we use a variety of methods and assumptions that are based on market conditions as of the balance sheet date, such as discounted cash flows and option-pricing models.
We have not designated any derivatives as hedges to qualify for hedge accounting for financial reporting purposes and fluctuations in the fair value of derivatives have been recognized as an unrealized gain or loss on interest rate cap in our consolidated statements of operations. Payments received from our counterparties in connection with our interest rate cap are recognized as proceeds from interest rate cap on our consolidated statements of operations.
Other Assets
Other assets generally include interest receivable, net of CECL reserves related to interest receivable for loans on non-accrual status, miscellaneous receivables, prepaid expenses, deferred tax asset (net of any valuation allowance), deferred financing costs, net of accumulated amortization related to certain of our secured financings, interest rate cap at fair value, and certain lease intangible assets, net of accumulated amortization. As of December 31, 2025, we incurred $ 5.1 million of costs in connection with the January 2026 refinancing of our secured term loan and issuance of warr ants which, as of December 31, 2025, are included within other assets on our consolidated balance sheet, $ 0.6 million of which remains accrued and included within other liabilities on our consolidated balance sheet. See Note 6 - Debt Obligations - Secured Term Loan for further detail.
Deferred Financing Costs
Deferred financing costs include costs and discounts related to the establishment and ongoing operations of our secured financings, and may include fees paid to the financing counterparty when financing a specific asset and original issue discount, if any. Costs related
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
to our repurchase agreements and term participation facility are included within other assets on our consolidated balance sheets and are amortized as interest expense using the straight-line method over the contractual term of the repurchase agreement or the contractual term of the collateral asset for the term participation facility. Costs and discounts, if any, related to notes payable, secured term loan, and debt related to real estate owned hotel portfolio are presented on our consolidated balance sheets as direct deductions from the carrying amount of the respective obligation and are amortized as interest expense using the effective interest method over the contractual term of the obligation. When a secured financing is modified, costs incurred to our counterparty are accounted for as deferred financing costs, whereas costs incurred to third-parties are expensed to general and administrative expense on our consolidated statements of operations.
Secured Financings
We evaluate whether a financing transaction constitutes a sale based on whether (i) the financial asset was legally isolated, (ii) control of the financial asset has been transferred to the transferee, (iii) the transfer imposed any condition that would constrain the transferee from pledging the financial asset received, and (iv) we have continuing involvement with the transferred financial asset.
Repurchase Agreements
We finance certain of our loans receivable and real estate owned assets using repurchase agreements, whereby an asset is sold to a counterparty to be repurchased at a later date at a predetermined price. Such arrangements are accounted for as secured financings under GAAP and are presented as a liability on our consolidated balance sheets. Prior to repurchase, interest is incurred to the counterparty based upon the sales price and a predetermined interest rate. Borrowings under the repurchase agreements are partially recourse to us.
Term Participation Facility
We finance certain of our loans receivable using our term participation facility, which allows us to sell senior interests in such loans to our counterparty. Such arrangements are accounted for as secured financings under GAAP and are presented as a liability on our consolidated balance sheets. Borrowings under the term participation facility are partially recourse to us.
Notes Payable, Net
We finance certain of our loans receivable using direct financing, collateralized by the loans receivable, which are presented as liability net of any unamortized deferred financing costs and discounts, if any, on our consolidated balance sheets. Certain of our notes payable are partially recourse to us. Subsequent to December 31, 2025, our notes payable were fully extinguished. See Note 6 - Debt Obligations - Notes Payable for further detail.
Secured Term Loan, Net
Our prior secured term loan was collateralized by a pledge of equity in certain subsidiaries and their related assets and was presented on our consolidated balance sheets net of any unamortized deferred financing costs and discounts, if any. Our prior secured term loan was fully recourse to us. In January 2026, we refinanced our secured term loan. See Note 6 - Debt Obligations - Secured Term Loan for further detail.
Other Liabilities
Other liabilities generally includes interest payable, accrued expenses, general CECL reserves related to our unfunded loan commitments, and below market lease values, net.
Revenue Recognition
Interest income from loans receivable is recorded on the accrual basis based on the unpaid principal balance and the contractual terms of the loans. Fees, premiums, discounts and direct costs associated with these loans are initially deferred and recognized as an adjustment to unpaid principal balance until the loan is advanced and are then amortized or accreted into interest income over the term of the loan as an adjustment to yield using the effective interest method based on expected cash flows through the expected recovery period. Income accrual may be suspended for loans when we determine that the payment of income and/or principal is no longer probable. Once income accrual is suspended, any previously recognized interest income deemed uncollectible is either reversed against interest income or reserved for under our CECL reserve. Factors considered when making this determination include, but are not limited to, our assessment of the collateral value, delinquency in excess of 90 days, and overall market conditions. While on non-accrual status, based on our estimation as to collectability of principal, payments received from the borrower are either accounted for on a cash basis, where interest income is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loan’s
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
carrying value. If and when a loan is brought back into compliance with its contractual terms, and we have determined that the borrower has demonstrated an ability and willingness to continue to make contractually required payments related to the loan, we resume accrual of interest.
Revenue from real estate owned represents revenues associated with the operations of our hotel portfolio, mixed-use property, and multifamily properties classified as real estate owned.
Revenue from the operations of our hotel portfolio is recognized when guestrooms are occupied, services have been rendered or fees have been earned. Hotel revenues consist of room sales, food and beverage sales and other hotel revenues and are recorded net of any discounts, sales and other taxes collected from customers. In accordance with ASC 606, Revenue from Contracts with Customers , revenue from our hotel portfolio is recognized when we transfer promised services to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services. ASC 606 includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied. Our contracts generally have a single performance obligation, such as renting a hotel room to a customer, providing food and beverage to a customer, or providing a hotel property related good or service to a customer. Our performance obligations are generally at a point in time.
Revenue from operations of our mixed-use and multifamily properties is derived from lease agreements with tenants, which we account for under ASC 842, Leases. Such lease agreements generally provide for fixed rent payments, which we recognize on a straight-line basis over the lease term, and variable rent payments, including reimbursement of certain operating expenses and miscellaneous fees, which we recognize when earned. These reimbursements represent revenue attributable to non-lease components for which the timing and pattern of recognition is the same for lease components. We use the practical expedient, which allows us to account for lease and non-lease components as a single component for all classes of underlying assets. We periodically evaluate the collectability of tenant receivables required under the lease agreements. If we determine that collectability is not probable, we reverse any difference between revenue recognized to date and payments that have been collected from the tenant to date as a current period adjustment to revenue from real estate owned. Lease agreements with residential tenants are generally for one-year terms and lease agreements with commercial tenants are generally for terms ranging from ten to fifteen years , and customarily are renewable upon consent of both parties.
Stock-Based Compensation Expense
Stock-based compensation expense consists of time-based awards issued to persons employed by or otherwise associated with our Manager and/or its affiliates. Stock-based compensation expense is recognized in earnings on a straight-line basis over the applicable award’s vesting period. Forfeitures of stock-based compensation awards are recognized as they occur.
Common Stock
Common stock issued and outstanding excludes Restricted Stock Units (“RSUs”) which have not been delivered, regardless of vesting status. Fully vested RSUs are included in the calculation of basic and diluted weighted average shares outstanding and receive dividends declared on common stock.
Reportable Segments
We have determined that our Chief Operating Decision Maker (“CODM”) is J. Michael McGillis, our Chief Financial Officer, President, and Director. For the year ended December 31, 2023, as a result of obtaining title to our mixed-use property and the performance of our hotel portfolio, our CODM determined that we have two operating segments and two reporting segments, with activities related to investing in income-producing loans collateralized by institutional quality commercial real estate and activities related to the operations of our real estate owned assets. See Note 3 - Loan Portfolio for further detail of our loan portfolio, Note 5 - Real Estate Owned for further detail of our real estate owned assets, and Note 15 - Segment Reporting for further detail of segment profit and loss.
Recent Accounting Guidance
The FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements” (“ASU 2025-11”). The standard clarifies required form and content of interim financial statements and notes and requires entities issuing condensed financial statements to disclose certain events occurring since the end of the most recent fiscal year that have a material impact on the entity. ASU 2025-11
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Notes to Consolidated Financial Statements
is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2025-11 is not expected to have a material impact on our consolidated financial statements.
The FASB issued ASU 2025-08, “Financial Instruments - Credit Losses (Topic 326): Purchased Loans” (“ASU 2025-08”). The standard requires recognition of an initial CECL reserve upon the acquisition of a loan which has not experienced a more than insignificant credit deterioration since origination. The initial CECL reserve is amortized as an adjustment to interest income with subsequent changes to the CECL reserve recognized through earnings. ASU 2025-08 is effective for annual periods beginning after December 15, 2026 and interim periods within, with early adoption permitted. Effective October 1, 2025 , we adopted ASU 2025-08 on a prospective basis and such adoption did no t have a material impact on our consolidated financial statements.
The FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses” (“ASU 2024-03”). The standard provides improvements to disclosure of the nature of expenses included in the statement of operations via tabular disclosure in the footnotes that disaggregates relevant expenses into certain expense categories. Further, the FASB issued ASU 2025-01, “Clarifying the Effective Date,” which clarifies the effective date of ASU 2024-03. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on our consolidated financial statements.
The FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). The standard provides improvements to income tax disclosure requiring disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for annual periods beginning after December 15, 2024. As such, we have adopted ASU 2023-09 on a prospective basis and the adoption did no t have a material impact on our consolidated financial statements.
The FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The standard provides improvements to reportable segment disclosure requirements for annual and interim reporting, primarily through enhanced disclosures about significant segment expenses and measures of segment profit or loss. The standard is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. As such, we have adopted ASU 2023-07 retrospectively for all periods presented. See Note 15 - Segment Reporting for further detail.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Note 3. Loan Portfolio
Loans Receivable
Our loan receivable held-for-investment portfolio as of December 31, 2025 was comprised of the following loans ($ in thousands, except for number of loans):
Number
Loans
Loan
Commitment (1)
Unpaid Principal Balance
Carrying
Value (2)
Weighted Average Spread (3)
Weighted Average Interest Rate (4)
Loans receivable held-for-investment:
Variable :
Senior loans (5)
Fixed:
Senior loans (5)
Subordinate loans
Total/Weighted Average
General CECL reserve
Loans receivable held-for-investment, net
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Net of specific CECL reserves of $ 365.4 million .
The weighted average spread is expressed as a spread over the relevant floating benchmark rates. One-month term Secured Overnight Financing Rate (“ SOFR ”) as of December 31, 2025 was 3.69 % . Weighted average is based on unpaid principal balance as of December 31, 2025 . For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0 %.
Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on unpaid principal balance as of December 31, 2025 and includes loans on non-accrual status. For loans placed on non-accrual, the interest rate used in calculating the weighted average interest rate is 0 %.
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans (if any), and pari passu participations in senior mortgage loans.
Our loans receivable held-for-investment portfolio as of December 31, 2024 was comprised of the following loans ($ in thousands, except for number of loans):
Number
Loans
Loan
Commitment (1)
Unpaid Principal Balance
Carrying
Value (2)
Weighted Average Spread (3)
Weighted Average Interest Rate (4)
Loans receivable held-for-investment:
Variable :
Senior loans (5)
Fixed:
Senior loans (5)
Subordinate loans
Total/Weighted Average
General CECL reserve
Loans receivable held-for-investment, net
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Net of specific CECL reserves of $ 120.9 million .
The weighted average spread is expressed as a spread over the relevant floating benchmark rates. SOFR as of December 31, 2024 was 4.33 % . Weighted average is based on unpaid principal balance as of December 31, 2024 . For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0 %.
Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on unpaid principal balance as of December 31, 2024 and includes loans on non-accrual status. For loans placed on non-accrual, the interest rate used in calculating the weighted average interest rate is 0 %.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans (if any), and pari passu participations in senior mortgage loans.
Activity relating to our loans receivable held-for-investment portfolio for the years ended December 31, 2025 and 2024 ($ in thousands):
Unpaid Principal Balance
Deferred Fees and Discounts
Specific CECL Reserve
Carrying Value (1)
Balance at December 31, 2024
Advances on existing loans
Non-cash advances in lieu of interest
Origination fees, discounts, extension fees and exit fees
Repayments of loans receivable
Repayments of non-cash advances in lieu of interest
Accretion of fees and discounts
Sales of loans receivable
Transfer to real estate owned, held-for-investment (See Note 5)
Transfer to loans receivable held-for-sale
Provision for specific CECL reserve
Charge-offs
Balance at December 31, 2025
General CECL reserve
Carrying Value
Balance at December 31, 2024 does not include general CECL reserve.
Unpaid Principal Balance
Deferred Fees and Discounts
Specific CECL Reserve
Carrying Value (1)
Balance at December 31, 2023
Loan receivable acquired in connection with a full loan repayment
Advances on existing loans
Non-cash advances in lieu of interest
Origination fees, discounts, extension fees and exit fees
Repayments of loans receivable
Repayments of non-cash advances in lieu of interest
Accretion of fees and discounts
Sales of loans receivable
Transfer to loans held-for-sale
Provision for specific CECL reserve
Balance at December 31, 2024
General CECL reserve
Carrying Value
Balance at December 31, 2023 does not include general CECL reserve.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Sales of Loans Receivable
The following table summarizes our loans receivable sold during the year ended December 31, 2025 ($ in thousands):
Property
Type
Location
Loan Commitment
Unpaid Principal Balance Before Principal Charge-Off/ Valuation Allowance
Carrying Value Before Principal Charge-Off/ Valuation Allowance
Principal Charge-Off and Valuation Allowance
Sale Proceeds
Risk
Rating (2)
For Sale Condo (1) (3)
Hospitality (1)
Hospitality (1) (4)
Land (1) (5)
Total sold, year ended December 31, 2025
For each loan receivable sold, the financial asset was legally isolated, control of the financial asset was transferred to the transferee, the transfer imposed no condition that would constrain the transferee from pledging the financial asset received, and we have no continuing involvement with the transferred financial asset. As such, we have determined each transaction constituted a sale.
Reflects risk rating of the loan receivable prior to the loan sale or reclassification to held-for-sale.
Principal charge-off and valuation allowance attributable to the delinquency of the loan and its $ 23.8 million of remaining unfunded commitments. During the year ended December 31, 2025 , we recognized a $ 41.8 million valuation allowance as a result of additional protective advances made and a decrease in proceeds ultimately received. Effective October 1, 2024, this loan was placed on non-accrual status.
Principal charge-off attributable to the diminution in the value of the collateral asset, and prorations and transaction costs related to the sale.
Through a mortgage foreclosure auction of the collateral property, we sold our right, title, and interest in the collateral asset to an unaffiliated purchaser for a gross sales price of $ 28.1 million .
During the year ended December 31, 2023, we sold a senior loan collateralized by a portfolio of multifamily properties located in San Francisco, CA. We obtained a true-sale-at-law opinion and determined the transaction constituted a sale. Concurrent with the sale, we entered into an agreement with the transferee which provides for a share of cash flows from the senior loan upon the transferee achieving certain financial metrics. As of December 31, 2025, we have not recognized any value to this interest on our consolidated financial statements.
Loan Modification and Repayment Activity
In December 2025, we agreed to a discounted loan payoff of $ 104.0 million on an office loan with an unpaid principal balance of $ 150.0 million. As a result of this repayment, we recognized a $ 46.0 million charge-off through our provision for current expected credit loss rese rve. Such amount was previously contemplated within our general CECL reserve.
In July 2025, we received a discounted loan payoff of $ 350.0 million on a multifamily loan with an unpaid principal balance of $ 390.0 million. Retroactive to its initial maturity date of November 2024, we agreed to a modification of this loan which provided for (i) a discounted loan payoff of $ 350.0 million, contingent on the borrower meeting prescribed conditions within a certain timeframe, (ii) an extension of the maturity date from November 1, 2024 to August 1, 2025, (iii) a curtailment of existing maturity extension options, and (iv) partial deferral of monthly debt service payments until maturity. In July 2025, this loan was repaid in accordance with the terms of the modified loan agreement, and we recognized a principal charge-off equal to the agreed upon discount. This loan remained on accrual status through repayment as the borrower continued to perform in accordance with the terms of the modified loan agreement.
In June 2025, we sold a previously modified hospitality loan for a gross sales price of $ 59.25 million. After prorations and transaction costs, we recognized a $ 23.8 million principal charge-off thro ugh our provision for current expected credit loss reserve. Prior to this loan sale, the loan had an unpaid principal balance of $ 80.4 million, was in matu rity default, and was risk rated 4. Concurrent with this loan sale, we entered into an agreement with the guarantor of the loan receivable which provides for a partial repayment of such individual’s loan guarantee. As of December 31, 2025, we have not recognized any value to this agreement on our consolidated financial statements.
In April 2025, we agreed to a discounted loan payoff of $ 775,000 on a subordinate loan secured by an equity interest in a retail property in Brooklyn, NY with an unpaid principal balance of $ 886,000 . Prior to this repayment, the loan was risk rated 5, on non-accrual status, and fully reserved for as part of our specific CECL reserves. As a result of this repayment, we recognized a $ 109,000 charge-off through our provision for current expected credit loss reserve.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
In March 2025, we agreed to a loan repayment of a land loan with an unpaid principal balance of $ 183.0 million and deferred interest receivable of $ 6.4 million, which resulted in (i) a discounted loan payoff of $ 164.7 million, (ii) a discounted repayment of deferred interest receivable of $ 2.9 million, and (iii) a waiver of a $ 0.5 million exit fee. As a result of this repayment, we recognized a $ 22.3 million charge-off through our provision for current expected credit loss reserve.
In March 2025, we agreed to a discounted loan payoff of a previously modified office loan with an unpaid principal balance of $ 87.8 million prior to a principal charge-off following the borrower’s sale of the collateral asset in April 2025. After prorations and transaction costs, we recognized a $ 23.7 million charge-off through our provision for current expected credit loss reserve as a result of this discounted repayment. Prior to this loan repayment, the loan was in maturity default and risk rated 4. Effective March 31, 2025, this loan was placed on non-accrual status.
Concentration of Risk
The following table presents our loans receivable held-for-investment by loan type, as well as property type and geographic location of the properties collateralizing these loans as of December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
December 31, 2024
Loan Type
Carrying Value (1)
Percentage
Carrying Value (2)
Percentage
Senior loans (3)
Subordinate loans
General CECL reserve
Property Type
Carrying Value (1)
Percentage
Carrying Value (2)
Percentage
Multifamily
Hospitality
Office
Mixed-use (4)
Land
Retail
Other
General CECL reserve
Geographic Location
Carrying Value (1)
Percentage
Carrying Value (2)
Percentage
United States
West
Northeast
Midwest
Southeast
Southwest
Mid Atlantic
Other
General CECL reserve
Net of specific CECL reserves of $ 365.4 million at December 31, 2025 .
Net of specific CECL reserves of $ 120.9 million at December 31, 2024 .
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans .
At December 31, 2025, mixed-use consists of 2 % office, 2 % life science, 2 % hospitality, 1 % multifamily, and 1 % retail. At December 31, 2024 , mixed-use consists of 3 % office, 3 % multifamily, 2 % retail, 1 % hospitality, and immaterial amounts of for sale condo.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Interest Income and Accretion
The following table summarizes our interest and accretion income from our loan portfolio and interest on cash balances for the years ended December 31, 2025, 2024, and 2023 ($ in thousands):
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Coupon interest
Accretion of fees and discounts
Interest on cash, cash equivalents, and other income
Total interest and related income (1)
For the years ended December 31, 2025, 2024, and 2023, we recognized $ 1.2 million , $ 4.5 million , and $ 1.6 million , respectively, of default interest, late fees, pre-payment penalties, and/or accelerated fees following repayments prior to maturity.
Loan Risk Ratings
As further described in Note 2 – Summary of Significant Accounting Policies, we evaluate the credit quality of our loan portfolio on a quarterly basis. In conjunction with our quarterly loan portfolio review, we assess the risk factors of each loan and assign a risk rating based on several factors including, but not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the current market conditions, we may consider certain previously mentioned factors more or less relevant than others. Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2 – Summary of Significant Accounting Policies.
The following tables allocate the principal balance and carrying value of our loans receivable held-for-investment based on our internal risk ratings as of December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
Risk Rating
Number of Loans
Unpaid Principal Balance
Carrying Value (1)
% of Total of Carrying Value
General CECL reserve
Net of specific CECL reserves of $ 365.4 million .
December 31, 2024
Risk Rating
Number of Loans
Unpaid Principal Balance
Carrying Value (1)
% of Total of Carrying Value
General CECL reserve
Net of specific CECL reserves of $ 120.9 million .
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2025 and 2024, the average risk rating of our loans receivable held-for-investment portfolio was 3.6 and 3.5 , respectively, weighted by carrying value net of specific CECL reserves.
The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of December 31, 2025 ($ in thousands):
Property Type
Location
Risk
Rating
Unpaid Principal Balance
Carrying Value Before Specific CECL Reserve
Specific
CECL Reserve
Net Carrying Value
Interest Recognition Method /
as of Date
Multifamily
Cash Basis/ 6/30/2025
Office
Cost Recovery / 12/31/2025
Multifamily
Cash Basis/ 9/30/2025
Land
Cost Recovery / 1/1/2023
Multifamily
Cash Basis/ 7/1/2024
Office
Cost Recovery / 4/1/2023
Office
Cost Recovery / 9/1/2023
Multifamily (1) (2)
Cash Basis / 6/30/2025
Multifamily
Cash Basis / 7/1/2024
Other (2)
Other
Cost Recovery / 7/1/2020
Total risk rated 5 loans (3)
Office
Cost Recovery / 9/1/2023
Land (4)
Cash Basis / 11/1/2021
Total risk rated 4 loans
Total non-accrual
In January 2026, we acquired legal title to the collateral property through a mortgage foreclosure. In anticipation of such foreclosure, we recognized a principal charge-off of $ 39.1 million as of December 31, 2025 .
Amounts deemed uncollectible have been charged-off as of December 31, 2025 .
Amount excludes one risk rated 5 loan with an unpaid principal balance o f $ 71.3 million and a carrying value net of specific CECL reserves of $ 53.5 million that remained on accrual status as monthly debt service was satisfied through borrower funded reserves. In February 2026, w e assigned our right, title, and interest in this loan receivable and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing. See Note 6 - Debt Obligations - Notes Payable for further detail.
In January 2026, this loan was repaid in full. During the year ended December 31, 2025, we recognized $ 3.0 million of interest income on a cash basis from this loan, which is included in the $ 6.0 million of interest income recognized on a cash basis as discussed below for the year ended December 31, 2025 .
As of December 31, 2025, loans receivable classified as non-accrual represented 31.1 % of our total loans receivable held-for-investment, based on carrying value net of specific CECL reserves. During the year ended December 31, 2025, we (i) recognized $ 6.0 million of interest income on a cash basis for loans on non-accrual status and (ii) received $ 16.2 million of cost recovery proceeds for loans on non-accrual status, of which $ 13.6 million was applied against past due interest and reduced the related CECL reserve . Further, the above table excludes three loans with an aggregate carrying value of $ 453.8 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the collateral property’s value.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of December 31, 2024 ($ in thousands):
Property Type
Location
Risk
Rating
Unpaid Principal Balance
Carrying Value Before Specific CECL Reserve
Specific
CECL Reserve
Net Carrying Value
Interest Recognition Method /
as of Date
Land
Cost Recovery / 1/1/2023
Multifamily (1)
Cash Basis / 10/1/2024
Office
Cost Recovery / 4/1/2023
Multifamily (1)
Cash Basis / 1/1/2024
Office
Cost Recovery / 9/1/2023
Multifamily (1)
Cash Basis / 1/1/2024
Multifamily (1)
Cash Basis / 1/1/2024
Multifamily
Cash Basis / 7/1/2024
Other (2)
Other
Cost Recovery / 7/1/2020
Other (3)
Cost Recovery / 6/30/2023
Total risk rated 5 loans
Multifamily
Cash Basis / 7/1/2024
Office
Cost Recovery / 9/1/2023
Land (1)
Cash Basis / 4/1/2024
Land
Cash Basis / 11/1/2021
Total risk rated 4 loans
Total non-accrual
During the year ended December 31, 2025 , we acquired legal title to the collateral property through mortgage or UCC foreclosures. See Note 5 - Real Estate Owned for further detail.
Amounts deemed uncollectible have been charged-off as of December 31, 2024 .
In April 2025, we agreed to a loan repayment which resulted in a discounted loan payoff of $ 775,000 .
As of December 31, 2024, loans receivable classified as non-accrual represented 15.3 % of our total loans receivable held-for-investment, based on carrying value net of specific CECL reserves. During the year ended December 31, 2024, we (i) recognized $ 4.6 million of interest income on a cash basis for loans on non-accrual status and (ii) received $ 7.1 million of cost recovery proceeds for loans on non-accrual status . Further, the above table excludes (i) four loans with an aggregate carrying value of $ 394.8 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the collateral property’s value and (ii) three loans with an aggregate carrying value of $ 647.3 million that are delinquent in accordance with our revenue recognition policy but remain on accrual status as the interest is deemed collectible based on the collateral property’s value.
Current Expected Credit Losses
The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan commitments. See Note 2 for further detail of our current expected credit loss reserve methodology.
The following table illustrates the changes in the current expected credit loss reserve for our loans receivable held-for-investment for the years ended December 31, 2025 and 2024, respectively ($ in thousands):
General CECL Reserve
Specific CECL Reserve
Loans Receivable Held-for-Investment
Unfunded Loan Commitments (2)
Total General CECL Reserve
Accrued Interest Receivable (1)
Total CECL Reserve
Total reserve, December 31, 2023
Provision (reversal)
Charge-offs
Total reserve, December 31, 2024
Provision (reversal)
Charge-offs
Total reserve, December 31, 2025
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
CECL reserves for accrued interest receivable, if any, are included in other assets on our consolidated balance sheets. In December 2025, $1.6 million of accrued interest previously reserved for was satisfied upon the foreclosure of a land parcel. See Note 5 - Real Estate Owned for further detail.
CECL reserves for unfunded commitments are included in other liabilities on our consolidated balance sheets.
The following table illustrates our specific and general CECL reserves as a percentage of total unpaid principal balance of loans receivable held-for-investment as of December 31, 2025 and 2024:
Specific CECL
Reserve (1)
General CECL
Reserve (2)
Total CECL
Reserve (3)
Reserve at December 31, 2024
Reserve at December 31, 2025
Represents specific CECL reserves on loans receivable held-for-investment as a percentage of unpaid principal balance of risk rated 5 loans.
Represents general CECL reserves on loans receivable held-for-investment and related unfunded loan commitments as a percentage of unpaid principal balance of loans subject to the general CECL reserve.
Represents total CECL reserves on loans receivable held-for-investment and related unfunded loan commitments as a percent of total unpaid principal balance of loans receivable held-for-investment.
During the year ended December 31, 2025, we recorded a provision for current expected credit losses of $ 466.5 million , which consisted of a $ 484.2 million increase in our specific CECL reserves prior to principal and exit fee charge-offs, a $ 32.3 million increase in CECL reserves on accrued interest receivable prior to charge-offs, offset in part by a $ 50.0 million decrease in our general CECL reserves. The increase in our specific CECL reserves was primarily attributable to specific reserves determined on loans now classified as risk rated 5, changes to collateral values, and protective advances made, offset in part by principal charge-offs recognized. The increase in our CECL reserves on accrued interest receivable is attributable to reserving against outstanding interest due to us upon loans being placed on non-accrual status during the year ended December 31, 2025, offset in part by a reduction in reserves upon the receipt or satisfaction of past due interest and charge-offs recognized. The decrease in our general CECL reserves was primarily attributable to the reduction in the size of our loan portfolio subject to determination of the general CECL reserve and the resolution of a contingent discounted loan payoff, offset in part by changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio. As of December 31, 2025, our total current expected credit reserve was $ 469.9 million .
During the year ended December 31, 2024, we recorded a provision for current expected credit losses of $ 212.6 million , which consisted of a $ 47.6 million increase in our general CECL reserves, a $ 124.0 million increase in our specific CECL reserves prior to principal charge-offs, and a $ 41.0 million increase in CECL reserves on accrued interest receivable prior to charge-offs. The increase in our general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous data set, consideration of a contingent discounted loan payoff, and changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio, offset in part by the reduction in the size of our loan portfolio subject to determination of the general CECL reserve. The increase in our specific CECL reserves was primarily attributable to specific reserves determined on loans now classified as risk rated 5, changes in collateral values, protective advances made, the reclassification of a loan receivable to held-for-sale, offset in part by principal charge-offs recognized. The increase in our CECL reserves on accrued interest receivable is attributable to reserving against outstanding interest due to us upon loans being placed on non-accrual status during the year ended December 31, 2024, offset in part by charge-offs recognized. As of December 31, 2024, our total current expected credit reserve was $ 266.4 million .
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Specific CECL Reserves
In certain circumstances, we may determine that a borrower is experiencing financial difficulty, and, if the repayment of the loan’s principal is collateral dependent, the loan is no longer suited for the WARM model. In these instances, there have been diminutions in the fair value and performance of the collateral property primarily as a result of reduced tenant and/or capital markets demand for such property types in the markets in which these assets and borrowers operate. For such loans, we seek resolutions through a variety of means including, but not limited to, foreclosures on the collateral asset, sales of our loan receivable, and discounted repayments. If we anticipate assuming legal title and/or physical possession of the collateral property and the fair value of the collateral asset is determined to be below the carrying value of our loan, we may recognize a specific CECL reserve. Furthermore, in certain circumstances, we may recognize a specific CECL reserve based upon anticipated proceeds from the disposition of our loan. The following table presents a summary of our risk rated 5 loans receivable held-for-investment as of December 31, 2025 ($ in thousands):
Property Type
Location
Unpaid Principal Balance
Carrying Value
Before
Specific CECL Reserve
Specific CECL Reserve
Net Carrying Value
Multifamily
Multifamily
Multifamily
Multifamily (1)
Multifamily
Total Multifamily
Land
Total Land
Office
Office
Office (2)
Office
Total Office
Other (3)
Other
Total Other
Total
In January 2026, we acquired legal title to the collateral property through a mortgage foreclosure. In anticipation of such foreclosure, we recognized a principal charge-off of $ 39.1 million as of December 31, 2025 .
I n February 2026, we assigned our right, title, and interest in this loan receivable and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing. As of December 31, 2025 , we determined a specific CECL reserve based upon our remaining equity in this investment and amounts due to our financing counterparty under the terms of our guarantee. See Note 6 - Debt Obligations - Notes Payable for further detail.
Amounts deemed uncollectible have been charged-off as of December 31, 2025 .
Fair values of collateral assets used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine specific CECL reserves may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates, market and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant. Estimates of fair values used to determine specific CECL reserves as of December 31, 2025 include discount rates ranging from 6.0 % to 9.5 % , market and terminal capitalization rates ranging from 4.72 % to 8.25 % , and, with respect to the land loan, value per buildable square foot of $ 140 based on current entitlements.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Our primary credit quality indicator is our internal risk rating, which is further discussed above. The following table presents the carrying value of our loans receivable held-for-investment as of December 31, 2025 by year of origination and risk rating, and principal charge-offs recognized during the year ended December 31, 2025 ($ in thousands):
Carrying Value by Origination Year as of December 31, 2025
Risk Rating
Number of
Loans
Carrying
Value (1)
Principal Charge-offs (3)
Net of specific CECL reserves of $ 365.4 million .
Reflects a loan receivable acquired in connection with a full loan repayment in 2024.
Includes cumulative $ 49.0 million charge-off recognized through valuation adjustment for loans receivable held-for-sale on our consolidated statement of operations.
The following table details overall statistics for our loans receivable held-for-investment:
December 31, 2025
December 31, 2024
Weighted average yield to maturity (1)
Weighted average term to initial maturity
0.5 years
0.7 years
Weighted average term to fully extended maturity (2)
1.1 years
1.7 years
Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon and contractual fees, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2025 and 2024 . For loans placed on non-accrual, the annualized yield to initial maturity used in calculating the weighted average annualized yield to initial maturity is 0 %.
Term to fully extended maturity is determined based on the maximum maturity of each of the corresponding loans, assuming all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
Note 4. Equity Method Investment
As of December 31, 2025 and December 31, 2024 , we hold a 51 % interest in CMTG/TT Mortgage REIT LLC (“CMTG/TT”). We are not deemed to be the primary beneficiary of CMTG/TT in accordance with ASC 810, therefore we do not consolidate this joint venture. During its active investment period, CMTG/TT originated loans collateralized by institutional quality commercial real estate. As of December 31, 2025, the sole remaining loan held by CMTG/TT had an unpaid principal balance of $ 78.5 million and was placed on non-accrual status effective April 1, 2023. As of December 31, 2025 , the carrying value of our 51 % equity interest in CMTG/TT approximated $ 42.2 million .
The following tables present CMTG/TT’s consolidated balance sheets as of December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
December 31, 2024
Assets
Cash and cash equivalents
Loans receivable held-for-investment
Other assets
Total assets
Liabilities and Members' Capital
Other liabilities
Total liabilities
Members' capital
Total capital
Total liabilities and members' capital
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
The following tables present CMTG/TT’s consolidated statements of operations for the years ended December 31, 2025, 2024, and 2023 ($ in thousands):
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Revenue
Interest and related income
Total revenue
Expenses
Management fees - affiliate
Incentive fees - affiliate
General and administrative expenses
Total expenses
Net (loss) income
At each reporting period, we assess whether there are any indicators of other-than-temporary impairment of our equity investment. There were no other-than-temporary impairments of our equity method investment through December 31, 2025 .
Note 5. Real Estate Owned
The following table presents detail related to our real estate owned held-for-investment, net, as of December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
December 31, 2024
Land
Building, building improvements, and site improvements
Tenant improvements
Furniture, fixtures and equipment
Real estate owned held-for-investment
Less: accumulated depreciation
Real estate owned held-for-investment, net
Depreciation expense related to our real estate owned held-for-investment assets for the years ended December 31, 2025, 2024, and 2023 was $ 6.5 million , $ 9.7 million , and $ 8.9 million , respectively. At each reporting period, we assess whether there are any indicators of impairment of our real estate owned held-for-investment assets. There were no impairments of our real estate owned held-for-investment assets through December 31, 2025.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
The following table presents detail related to changes in our real estate owned held-for-investment, net, during the year ended December 31, 2025 ($ in thousands):
Gross Cost
Accumulated Depreciation
Real Estate Owned
Held-for-Investment, Net
Total, December 31, 2024
Reclassification of hotel portfolio to held-for-investment
Foreclosures of multifamily properties and land parcel, including capitalized
transaction costs
Partial sales of mixed-use property
Capital expenditures
Depreciation expense
Total, December 31, 2025
The following table presents additional detail related to the revenues and operating expenses of our real estate owned assets ($ in thousands):
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Revenue
Hotel portfolio
Mixed-use property fixed rents
Mixed-use property variable rents
Mixed-use property amortization of above and below market
leases, net
Mixed-use property straight-line rent adjustment
Multifamily properties fixed rents
Multifamily properties variable rents
Multifamily property amortization of below market leases, net
Total revenue from real estate owned
Operating expenses
Hotel portfolio
Mixed-use property
Multifamily properties
Land
Total operating expenses from real estate owned
Interest expense
Hotel portfolio
Mixed-use property
Multifamily properties (1)
Total interest expense from real estate owned
Such assets are pledged to certain of our repurchase agreements and, accordingly, excludes any allocation of amortization of deferred financing costs related to such repurchase agreement.
Hotel Portfolio
On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure and assumed the securitized senior mortgage. As of December 31, 2024, we determined that our hotel portfolio had met the held-for-sale criteria and, accordingly, we reflected this asset as real estate owned held-for-sale on our consolidated balance sheet. We determined the anticipated sale did not reflect a strategic shift and therefore did not qualify for presentation as a discontinued operation. Concurrent with this classification, we recognized an $ 80.5 million loss based upon the anticipated sales price, less estimated costs to sell, as a valuation adjustment f or real estate owned held-for-sale on our consolidated statement of operations. During the first nine months of 2025, we continued to pursue the sale of this asset and concurrently incurred $ 362,000 of capital expenditures at our hotel portfolio, which is included within valuation adjustment for real estate owned held-for-sale on our consolidated statement of operations.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
In September 2025, we determined that a sale was no longer advisable given current market conditions. Accordingly, we ceased the sale process, determined the hotel portfolio no longer met the held-for-sale criteria, and reclassified the hotel portfolio to real estate owned, held-for-investment on our consolidated balance sheet. As we determined the fair value of the hotel portfolio to be $ 320.0 million upon reclassification to held-for-investment, we did no t recognize depreciation expense for the period in which the hotel portfolio was classified as held-for-sale. Concurrent with the reclassification to held-for-investment, we recognized a $ 13.0 million reversal of a previously recognized valuation adjustment for real estate owned held-for-sale, representing previously estimated sale costs. During the year ended December 31, 2023, we recorded an out-of-period adjustment of $ 4.2 million, representing an over accrual of accounts payable assumed upon the foreclosure of our hotel portfolio and, accordingly, we recorded an adjustment to correct the prior period understatement of the gain on foreclosure of our hotel portfolio. This is reflected as an adjustment to gain on foreclosure on our consolidated statement of operations during the year ended December 31, 2023, and such amount was not deemed to be material to any periods presented.
Mixed-use Property
On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests in the borrower through an assignment-in-lieu of foreclosure and, upon acquiring legal title, was comprised of office, retail, and signage components. During the year ended December 31, 2025, we sold the office and signage components of the property to unaffiliated purchasers in a series of transactions for an aggregate gross sales price of $ 66.7 million , resulting in (i) an aggregate loss on partial sales, net of $ 1.0 million and (ii) proceeds, net of transaction costs and prorations, of $ 60.5 million . As of December 31, 2025, the mixed-use property appears as part of real estate owned held-for-investment, net and related lease intangibles appear within other assets and other liabilities on our consolidated balance sheet.
Multifamily Properties
On May 28, 2025, we acquired legal title to a multifamily property located in Phoenix, AZ through a mortgage foreclosure. Prior to such date, the multifamily property represented the collateral for a senior loan with an unpaid principal balance of $ 50.2 million. As a result of the mortgage foreclosure, we recognized a principal charge-off of $ 6.9 million based upon the multifamily property’s $ 42.8 million estimated fair value as determined by a third-party appraisal and assumption of $ 0.3 million of net working capital. In connection with the mortgage foreclosure, we incurred $ 0.1 million of transaction costs. As of December 31, 2025, the multifamily property appears as part of real estate owned held-for-investment, net and related lease intangibles appear within other assets on our consolidated balance sheet.
On June 12, 2025, we acquired legal title to a multifamily property located in Henderson, NV through a mortgage foreclosure. Prior to such date, the multifamily property represented the collateral for a senior loan with an unpaid principal balance of $ 96.5 million. As a result of the mortgage foreclosure, we recognized a principal charge-off of $ 16.5 million based upon the multifamily property’s $ 79.4 million estimated fair value as determined by a third-party appraisal and assumption of $ 0.1 million of net working capital. In connection with the mortgage foreclosure, we incurred $ 0.4 million of transaction costs. As of December 31, 2025, the multifamily property appears as part of real estate owned held-for-investment, net and related lease intangibles appear within other assets on our consolidated balance sheet.
On July 1, 2025, we acquired legal title to a multifamily property located in Dallas, TX through a mortgage foreclosure. Prior to such date, the multifamily property represented the collateral for a senior loan with an unpaid principal balance of $ 39.3 million prior to principal charge-offs. As a result of the mort gage foreclosure, we recognized principal and accrued interest receivable charge-offs of $ 13.5 million and $ 0.3 million, respectively, based upon the multifamily property’s $ 25.3 million estimated fair value as determined by a third-party appraisal and assumption of $ 0.3 million of net working capital. In connection with the mortgage foreclosure, we incurred $ 0.3 million of transaction costs. As of December 31, 2025, the multifamily property appears as part of real estate owned held-for-investment, net and related lease intangibles appear within other assets on our consolidated balance sheet.
On July 1, 2025, we acquired legal title to two multifamily properties located in Dallas, TX through a mortgage foreclosure. Prior to such date, the multifamily properties represented the collateral for a senior loan with an unpaid principal balance of $ 119.1 million prior to principal charge-offs. As a result of the mortgage foreclosures, we recognized principal and accrued interest receivable charge-offs of $ 9.0 million and $ 2.6 million, respectively, based upon the multifamily properties’ aggregate $ 110.2 million estimated fair value as determined by a third-party appraisal and assumption of $ 0.2 million of net liabilities assumed. In connection with the mortgage foreclosure, we incurred $ 0.5 million of transaction costs. As of December 31, 2025, the multifamily property appears as part of real estate owned held-for-investment, net, related lease intangibles appear within other assets, and below-market lease values related to a nominal retail component appear within other liabilities on our consolidated balance sheet.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Land Parcel
On December 18, 2025, we acquired legal title to a land parcel located in New York, NY through a foreclosure. Prior to such date, the land parcel represented the collateral for a senior loan with an unpaid principal balance of $ 87.7 million which was placed on non-accrual status effective April 1, 2024. As the land parcel’s estimated fair value of $ 94.0 million as determined by a third-party appraisal exceeded the carrying value of our loan, upon foreclosure we recognized (i) a $ 12.9 million charge-off of accrued interest receivable representing a portion of the previously reserved $ 14.5 million and (ii) $ 0.5 million related to enforcement costs. In connection with the foreclosure, we assumed $ 4.3 million of net liabilities and we incurred $ 0.3 million of transaction costs. As of December 31, 2025, the land parcel appears as part of real estate owned held-for-investment, net on our consolidated balance sheet.
Fair values of collateral assets used to determine the initial estimated fair value of real estate owned are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine real estate owned upon acquisition may include, among others, assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates, market and terminal capitalization rates, and, with respect to land, value per buildable square foot. These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant. Estimates of fair values used to determine real estate owned upon acquisition during the year ended December 31, 2025 include assumptions of market capitalization rates ranging from 4.75 % to 5.50 % and, with respect to the land parcel, value per buildable square foot of $ 253 .
In accordance with ASC 805, we allocated the fair value of assets acquired and liabilities assumed in connection with the above mortgage and UCC foreclosures during the year ended December 31, 2025 on the above mentioned multifamily properties and land parcel as follows ($ in thousands):
Phoenix,
Henderson ,
Dallas,
Dallas,
New York,
Total
Land
Building
Site improvements
Furniture, fixtures and equipment
In-place lease values (1)
Below market lease values (2)
Total
Included within other assets on our consolidated balance sheets.
Included within other liabilities on our consolidated balance sheets.
Represents two multifamily properties which previously represented the collateral property for one senior loan.
The following table presents additional detail of the assets acquired and liabilities assumed in connection with the mortgage and UCC foreclosures during the year ended December 31, 2025 on the above-mentioned multifamily properties and land parcel ($ in thousands):
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Phoenix,
Henderson ,
Dallas,
Dallas,
New York,
Total
Assets
Cash
Restricted cash
Real estate owned
In-place lease values (1)
Other assets
Total assets
Liabilities
Below market lease values (2)
Other liabilities
Total liabilities
Equity
Carrying value of loan prior to charge-offs (3)
Accrued interest receivable
Charge-off
Included within other assets on our consolidated balance sheets.
Included within other liabilities on our consolidated balance sheets.
Carrying values are net of a total $ 0.8 million of unamortized fees.
Represents two multifamily properties which previously represented the collateral property for one senior loan.
Leases
We have non-cancelable operating leases for space in our mixed-use and multifamily properties. These leases provide for fixed rent payments, which we recognize on a straight-line basis, and variable rent payments, including reimbursement of certain operating expenses and miscellaneous fees, which we recognize when earned. As of December 31, 2025 , the future minimum fixed rents under our non-cancellable leases for each of the next five years and thereafter are as follows ($ in thousands):
Year
Amount
Thereafter
Total
Lease Intangibles
As of December 31, 2025 and 2024, our lease intangibles are comprised of the following ($ in thousands):
Intangible
December 31, 2025
December 31, 2024
In-place, above market, and other lease values
Less: accumulated amortization
In-place, above market, and other lease values, net (1)
Below market lease values
Less: accumulated amortization
Below market lease values, net (2)
Included within other assets on our consolidated balance sheets.
Included within other liabilities on our consolidated balance sheets.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Amortization of our lease intangibles for the years ended December 31, 2025, 2024, and 2023 is as follows ($ in thousands):
Year Ended
Intangible
December 31, 2025
December 31, 2024
December 31, 2023
In-place and other lease values (1)
Above market lease values (2)
Below market lease values (2)
Amortization of in-place and other lease values is recognized in depreciation and amortization expense on our consolidated statements of operations.
Amortization of above and below market lease values, net is recognized in revenue from real estate owned on our consolidated statements of operations.
As of December 31, 2025, the estimated amortization of our lease intangibles is approximately as follows ($ in thousands):
In-place and Other
Lease Values (1)
Above Market
Lease Values (2)
Below Market
Lease Values (2)
Thereafter
Total
Amortization of in-place and other lease values is recognized in depreciation and amortization expense on our consolidated statements of operations.
Amortization of above and below market lease values, net is recognized in revenue from real estate owned on our consolidated statements of operations.
T he weighted average amortization period for in-place lease values and below market lease values acquired during the year ended December 31, 2025 was 1.3 years and 2.6 years, respectively.
Note 6. Debt Obligations
As of December 31, 2025 and 2024, we financed certain of our loans receivable using repurchase agreements, a term participation facility, and/or notes payable. Further, we have debt related to real estate owned hotel portfolio and a secured term loan. Our financings bear interest at a rate equal to SOFR plus a credit spread.
The following table summarizes our financings as of December 31, 2025 and 2024 ($ in thousands):
December 31, 2025
December 31, 2024
Capacity
Borrowings Outstanding
Weighted
Average
Spread (1)
Capacity
Borrowings Outstanding
Weighted
Average
Spread (1)
Repurchase agreements and term
participation facility (2)
Notes payable
Secured term loan
Debt related to real estate owned hotel
portfolio
Total/Weighted Average
Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. SOFR as of December 31, 2025 and 2024 was 3.69 % and 4.33 % , respectively.
The repurchase agreements and term participation facility are partially recourse to us. As of December 31, 2025 and 2024 , the weighted average recourse on our repurchase agreements and term participation facility w as 30 % and 29 % , respectively.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Repurchase Agreements and Term Participation Facility
Repurchase Agreements
The following table summarizes our repurchase agreements by lender as of December 31, 2025 ($ in thousands):
Lender
Initial Maturity
Fully
Extended
Maturity (1)
Maximum Capacity
Borrowings
Outstanding and Carrying Value
Undrawn
Capacity
Carrying
Value of
Collateral (2)
JP Morgan Chase Bank, N.A. (3)
JP Morgan Chase Bank, N.A. (4)
Morgan Stanley Bank, N.A. (5)
Wells Fargo Bank, N.A.
Total
Facility maturity dates may be extended, subject to meeting prescribed conditions.
Net of specific CECL reserves, if any.
In January 2026, this facility was modified to extend the fully extended maturity to July 28, 2030.
Repurchase agreement specifically provides for the ability to finance (i) loans receivable, including those which may be delinquent or in default, and (ii) real estate owned assets subsequent to assuming legal title and/or physical possession of the collateral property. As of December 31, 2025, (i) $ 195.3 million of borrowings outstanding on this repurchase agreement relate to our multifamily real estate owned assets, and (ii) the carrying value of collateral for this repurchase agreement includes our multifamily real estate owned assets included in real estate owned, held-for-investment, related lease intangibles included in other assets, and below market lease values included in other liabilities on our consolidated balance sheet.
In January 2026, we exercised our option to extend the initial maturity of this facility to January 26, 2027 and reduced the maximum capacity to $ 250.0 million.
During the year ended December 31, 2025 and upon reaching maturity, the Barclays Bank PLC repurchase agreement and the Goldman Sachs Bank USA repurchase agreements were terminated in accordance with the terms of their respective agreements.
The following table summarizes our repurchase agreements by lender as of December 31, 2024 ($ in thousands):
Lender
Initial Maturity
Fully
Extended
Maturity (1)
Maximum Capacity
Borrowings
Outstanding and Carrying Value
Undrawn
Capacity
Carrying
Value of
Collateral (2)
JP Morgan Chase Bank, N.A.
Morgan Stanley Bank, N.A.
Goldman Sachs Bank USA
Barclays Bank PLC
Wells Fargo Bank, N.A.
Total
Facility maturity dates may be extended, subject to meeting prescribed conditions.
Net of specific CECL reserves, if any.
Term Participation Facility
On November 4, 2022, we entered into a master participation and administration agreement to finance certain of our loans receivable.
Our term participation facility as of December 31, 2025 is summarized as follows ($ in thousands):
Contractual
Maturity Date
Total
Commitments
Borrowings Outstanding and Carrying Value
Carrying Value
of Collateral
Our term participation facility as of December 31, 2024 is summarized as follows ($ in thousands):
Contractual
Maturity Date
Total
Commitments
Borrowings Outstanding and Carrying Value
Carrying Value
of Collateral (1)
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Amount includes the carrying value of our mixed-use real estate owned asset, including related net lease intangible assets.
Notes Payable
Our notes payable as of December 31, 2025 are summarized as follows ($ in thousands):
Contractual
Maturity
Date
Maximum
Extension Date
Borrowing Outstanding
Carrying
Value
Carrying Value
of Collateral
Total
In January 2026, this note payable was repaid in full upon the repayment of the associated loan receivable.
I n February 2026, we assigned our right, title, and interest in this loan receivable and collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related note payable.
Our notes payable as of December 31, 2024 are summarized as follows ($ in thousands):
Contractual
Maturity
Date
Maximum
Extension Date
Borrowing Outstanding
Carrying
Value
Carrying Value
of Collateral
Total
Secured Term Loan
On August 9, 2019, we entered into a $ 450.0 million secured term loan which, during 2020 and 2021, was modified to provide for an increase in the aggregate principal amount of $ 325.0 million and a reduction in the interest rate to the greater of (i) SOFR plus a 0.10 % credit spread adjustment and (ii) 0.50 %, plus a credit spread of 4.50 %. In November 2025, we further modified our prior secured term loan to provide for, among other things, a $ 150.0 million repayment, requirements to prepay our prior secured term loan with a portion of net proceeds of certain asset dispositions, and modifications of certain of our financial covenants. In connection with this modification, we recognized a $ 0.8 million loss on extinguishment of debt and incurred (i) a $ 5.25 million fee to our lenders which is included as a deferred financing cost within other assets on our accompanying consolidated balance sheet as of December 31, 2025 and (ii) $ 2.7 million of legal and professional fees which are included in general and administrative expenses on our consolidated statement of operations for the year ended December 31, 2025 . In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of $ 500.0 million, a maturity date of January 30, 2030 , and interest to accrue at a rate of SOFR plus 6.75 %, subject to a floor of 2.50 %. Our new secured term loan is collateralized by a pledge of equity in certain subsidiaries and their related assets.
The prior secured term loan as of December 31, 2025 is summarized as follows ($ in thousands):
Contractual Maturity Date
Stated Rate (1)
Interest Rate
Borrowings
Outstanding
Carrying Value
SOFR at December 31, 2025 was 3.69 % .
The prior secured term loan as of December 31, 2024 is summarized as follows ($ in thousands):
Contractual Maturity Date
Stated Rate (1)
Interest Rate
Borrowings
Outstanding
Carrying Value
SOFR at December 31, 2024 was 4.33 % .
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Debt Related to Real Estate Owned Hotel Portfolio
On February 8, 2021 we assumed a $ 300.0 million securitized senior mortgage in connection with a foreclosure on a hotel portfolio. Subsequently, we entered into modifications of our debt related to real estate owned hotel portfolio to provide for, among other things, total principal payments of $ 25.0 million, an extension of the contractual maturity date to February 9, 2025 , and the designation of a portion of the loan becoming partial recourse to us. Concurrent with each modification, we acquired interest rate caps with notional amounts equal to the borrowing outstanding, strike rates ranging from 3.0 % to 5.0 %, and maturity dates matching the associated financing. Upon maturity in February 2025 and subsequent thereto, we entered into forbearance agreements with our lender through September 9, 2025 and concurrently repaid $ 5.0 million of the principal balance. During the forbearance period, interest accrued at additional rates ranging from 3.0 % to 5.0 % per annum. On June 9, 2025, we refinanced our debt related to real estate owned hotel portfolio with a non-recourse senior mortgage in the amount of $ 235.0 million. Such financing matures on June 9, 2027 , and we may extend the maturity to June 9, 2030 pursuant to three one-year extension options, subject to meeting prescribed conditions.
Our debt related to real estate owned hotel portfolio as of December 31, 2025 is summarized as follows ($ in thousands):
Contractual Maturity Date
Stated Rate (1)
Net Interest Rate (1)
Borrowings Outstanding
Carrying Value
SOFR at December 31, 2025 was 3.69 % which was below the 6.79 % strike rate provided by our interest rate cap. See Note 7 - Derivatives for further detail.
Our debt related to real estate owned hotel portfolio as of December 31, 2024 is summarized as follows ($ in thousands):
Contractual Maturity Date
Stated Rate (1)
Net Interest Rate (1)
Borrowings Outstanding
Carrying Value
SOFR at December 31, 2024 was 4.33 % , which was below the 5.00 % strike rate provided by our interest rate cap. See Note 7 - Derivatives for further detail.
Interest Expense and Amortization
The following table summarizes our interest and amortization expense on our secured financings, debt related to real estate owned hotel portfolio, and secured term loan for the years ended December 31, 2025, 2024, and 2023 ($ in thousands):
Year Ended
December 31,
December 31,
December 31,
Interest expense on secured financings
Interest expense on secured term loan
Amortization of deferred financing costs
Interest and related expense
Interest expense on debt related to real estate owned hotel portfolio (1)
Interest expense on multifamily real estate owned properties (2)
Total interest and related expense
For the years ended December 31, 2025, 2024, and 2023, interest expense on debt related to real estate owned hotel portfolio includes $ 2.3 million , $ 3.7 million , and $ 0.5 million , respectively, of amortization of deferred financing costs.
Our multifamily real estate owned assets are pledged to certain of our repurchase agreements. Thus, amount excludes any allocation of amortization of deferred financing costs related to such repurchase agreement.
Financial Covenants
Our financing agreements generally contain certain financial covenants. As of December 31, 2025, we are in compliance with all financial covenants under our financing agreements.
Future compliance with our financial covenants is dependent upon the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate. The impact of macroeconomic conditions on the commercial real estate and capital markets, including elevated benchmark interest rates compared to recent historical standards and the effects thereof on our and our borrowers’ operating performance, may make it more difficult for us to satisfy these financial covenants in the future. Non-compliance with financial covenants may result in our lenders exercising their rights and remedies as provided for in the respective
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
agreements. As the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate evolve, we may continue to work with our counterparties on modifying financial covenants as needed; however, there is no assurance that our counterparties will agree to such modifications.
Prior Secured Term Loan
As calculated in accordance with our prior secured term loan agreement and as of December 31, 2025 , (i) our tangible net worth, which may reflect certain adjustments for our current expected credit loss reserve, shall not be less than $ 1.4 billion and (ii) our indebtedness shall not exceed 77.8 % of our total assets. For the quarter ended December 31, 2025, there was no measurement of our Interest Coverage Ratio. In January 2026, our prior secured term loan was repaid in full.
Repurchase Agreements and Term Participation Facility
As calculated in accordance with our repurchase agreements and our term participation facility and as of December 31, 2025 , (i) our tangible net worth shall not be less than $ 1.0 billion plus 75 % of the aggregate cash proceeds received by us after January 30, 2026 from any equity issuances, capital contributions, and/or subscriptions (net of any related costs), (ii) our indebtedness shall not exceed 77.8 % of our total assets, and (iii) our cash liquidity shall not be less than the greater of (x) $ 20.0 million or (y) 5 % of total recourse indebtedness (which includes our secured term loan). For the quarter ended December 31, 2025 and for the quarters ending March 31, 2026 to June 30, 2027, there is no measurement of our Interest Coverage Ratio. Commencing with the quarters ending September 30, 2027 and December 31, 2027, our Interest Coverage Ratio shall not be less than 1.10 to 1.00. Subsequent thereto, our Interest Coverage Ratio shall not be less than (i) 1.20 to 1.00 for the quarters ending March 31, 2028 and June 30, 2028 and (ii) 1.30 to 1.00 for the quarters ending September 30, 2028 and thereafter.
New Secured Term Loan
As calculated in accordance with our new secured term loan agreement and effective upon its closing, (i) our tangible net worth shall not be less than $ 1.0 billion plus 75 % of the aggregate cash proceeds received by us after January 30, 2026 from any equity issuances, capital contributions, and/or subscriptions (net of any related costs) and (ii) our indebtedness shall not exceed 77.8 % of our total assets. For the quarters ending March 31, 2026 to June 30, 2027, there is no measurement of our Interest Coverage Ratio. Commencing with the quarters ending September 30, 2027 and December 31, 2027, our Interest Coverage Ratio shall not be less than 1.10 to 1.00. Subsequent thereto, our Interest Coverage Ratio shall not be less than (i) 1.20 to 1.00 for the quarters ending March 31, 2028 and June 30, 2028 and (ii) 1.30 to 1.00 for the quarters ending September 30, 2028 and thereafter.
Note 7. Derivatives
On June 2, 2021 and in connection with our debt related to real estate owned hotel portfolio, we acquired an interest rate cap with a notional amount of $ 290.0 million, a strike rate of 3.00 %, and a maturity date of February 15, 2024 . Such interest rate cap effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 5.83 % through its then maturity. Subsequent thereto and in connection with modifications of our debt related to real estate owned hotel portfolio, we acquired interest rate caps with maturity dates and notional amounts equal to that of the then maturity dates and outstanding principal balance of our debt related to real estate owned hotel portfolio, respectively, and strike rates of 5.00 % . Through the contractual maturity of our debt related to real estate owned hotel portfolio, the interest rate caps effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 7.94 % . Concurrent with refinancing our debt related to real estate owned hotel portfolio in June 2025, we acquired an interest rate cap for a price of $ 71,000 with a notional amount of $ 235.0 million , a strike rate of 6.79 % , and a maturity date of June 2027 , which effectively limits the maximum interest rate of our debt related to real estate owned hotel portfolio to 9.97 % .
Changes in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap on our consolidated statements of operations and the fair value is recorded in other assets on our consolidated balance sheets. Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. As of December 31, 2025 and 2024, the fair values of our interest rate caps were de minimis. During the year ended December 31, 2025, we did not recognize any proceeds from our interest rate cap. During the years ended December 31, 2024 and 2023, we recognized $ 1.3 million and $ 6.1 million , respectively, of proceeds from interest rate cap.
Note 8. Fair Value Measurements
ASC 820, “ Fair Value Measurements and Disclosures ” establishes a framework for measuring fair value as well as disclosures about fair value measurements. It emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use when pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, the standards establish a fair
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability other than quoted prices, such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Financial Instruments Reported at Fair Value
The fair value of our interest rate caps are determined by using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate caps. The variable interest rates used in the calculation of projected receipts on the interest rate caps are based on a third-party expert’s expectation of future interest rates derived from observable market interest rate curves and volatilities. Our interest rate caps are classified as Level 2 in the fair value hierarchy. As of December 31, 2025 and 2024, the fair values of our interest rate caps were de minimis.
Financial Instruments Not Reported at Fair Value
The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis but required to be disclosed at fair value were as follows ($ in thousands):
December 31, 2025
Carrying
Unpaid Principal
Fair Value Hierarchy Level
Value
Balance
Fair Value
Level 1
Level 2
Level 3
Loans receivable held-for-investment, net
Repurchase agreements
Term participation facility
Notes payable, net
Secured term loan, net
Debt related to real estate owned hotel
portfolio, net
December 31, 2024
Carrying
Unpaid Principal
Fair Value Hierarchy Level
Value
Balance
Fair Value
Level 1
Level 2
Level 3
Loans receivable held-for-investment, net
Loans receivable held-for-sale
Repurchase agreements
Term participation facility
Notes payable, net
Secured term loan, net
Debt related to real estate owned hotel
portfolio, net
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Note 9. Equity
Common Stock
Our charter provides for the issuance of up to 500,000,000 shares of common stock with a par value of $ 0.01 per share. As of December 31, 2025 and 2024, we had 140,218,764 and 139,362,657 shares of common stock issued and outstanding, respectively.
The following table provides a summary of the number of shares of common stock outstanding during the years ended December 31, 2025, 2024, and 2023:
Year Ended
Common Stock Outstanding
December 31,
December 31,
December 31,
Beginning balance
Issuance of common stock in exchange for fully vested RSUs
Ending balance
At the Market Stock Offering Program
On May 10, 2024, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $ 150.0 million of our common stock pursuant to a continuous offering program (the “ATM Agreement”) under our in place effective shelf registration. Sales of our common stock made pursuant to the ATM Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors, including market conditions, the trading price of our common stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. During the year ended December 31, 2025 , we did no t issue any shares of our common stock pursuant to the ATM Agreement. As of December 31, 2025 , the ATM Agreement has not been utilized, and $ 150.0 million of our common stock remained available for issuance pursuant to the ATM Agreement.
Dividends
The Board did not declare any dividends during the year ended December 31, 2025. The following table details our dividend activity for common stock during the year ended December 31, 2024($ in thousands, except per share data):
For the Quarter Ended
March 31, 2024
June 30, 2024
September 30, 2024
December 31, 2024
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Dividends declared - common
stock
Record Date - common stock
March 29, 2024
June 28, 2024
September 30, 2024
Payment Date - common stock
April 15, 2024
July 15, 2024
October 15, 2024
Note 10. Earnings Per Share
We calculate basic earnings per share (“EPS”) using the two-class method, which defines unvested share-based payment awards that contain nonforfeitable rights to dividends as participating securities. Under the two-class method, both distributed and undistributed earnings are allocated to common stock and participating securities based on their respective rights. Basic EPS is calculated by dividing our net income (loss) less participating securities’ share in earnings by the weighted average number of shares of common stock outstanding during each period.
Diluted EPS is calculated under the more dilutive of the treasury stock or the two-class method. Under the treasury stock method, diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding plus the incremental potential shares of common stock assumed issued during the period if they are dilutive.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2025, 2024 and 2023 we had no dilutive securities. As a result, basic and diluted EPS are the same. The calculation of basic and diluted EPS is as follows ($ in thousands, except for share and per share data):
Year Ended
December 31,
December 31,
December 31,
Net (loss) income
Dividends on participating securities (1)
Participating securities ʾ share in earnings
Basic (loss) earnings
Weighted average shares of common stock outstanding,
basic and diluted (2)
Net (loss) income per share of common stock,
basic and diluted
For the years ended December 31, 2025, 2024, and 2023, dividends on participating securities excludes $–, $ 42,000 , and $ 35,000 , respectively, of dividends on fully vested RSUs.
Amounts as of December 31, 2025, 2024, and 2023 include 220,728 , 102,063 , and 41,780 fully vested RSUs, respectively.
For the years ended December 31, 2025, 2024, and 2023, 2,641,770 , 2,689,202 , and 2,637,717 of weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive.
Note 11. Related Party Transactions
Our activities are managed by our Manager. Pursuant to the terms of the Management Agreement, our Manager is responsible for originating investment opportunities, providing asset management services and administering our day-to-day operations. Our Manager is entitled to receive a management fee, an incentive fee and a termination fee as defined below.
The following table summarizes our management and incentive fees ($ in thousands):
Year Ended
December 31,
December 31,
December 31,
Management fees
Incentive fees
Total
On January 30, 2026 and in connection with our new secured term loan, we amended our Management Agreement and our by-laws. Our new secured term loan provides the lenders with the right to appoint two non-voting observers to our Board, each of whom must qualify as independent under the standards of the New York Stock Exchange and be reasonably satisfactory to us. The new secured term loan also provides additional governance rights upon the occurrence and continuance of a material event of default (“MEOD”), including the right to have the two board observers be automatically appointed to our Board (the “Designated Directors”) and to have such Designated Directors, through a restructuring committee, participate in a review of our Manager and have such restructuring committee make a recommendation to the Board regarding whether or not to terminate our Manager. In such instances and prior to termination, only fees and expenses incurred subsequent to the MEOD necessary to cover our Manager’s operating costs may be paid by us. Such amendment is only effective until our new secured term loan is repaid in full.
Management Fees
Effective October 1, 2015, our Manager earns a base management fee in an amount equal to 1.50 % per annum of Stockholders’ Equity, as defined in the Management Agreement. Management fees are reduced by our pro rata share of any management fees and incentive fees (if incentive fees are not incurred by us) incurred to our Manager by CMTG/TT. Management fees are generally paid quarterly, in arrears, and $ 7.8 million and $ 27.0 million were accrued and were included in management fee payable - affiliate, on our consolidated balance sheets at December 31, 2025 and 2024 , respectively.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Incentive Fees
Our Manager is entitled to an incentive fee equal to 20 % of the excess of our Core Earnings on a rolling four-quarter basis, as defined in the Management Agreement, over a 7.00 % return on Stockholders’ Equity. Incentive fees are reduced by our pro rata share of any incentive fees incurred to our Manager by CMTG/TT.
Termination Fees
If we elect to terminate the Management Agreement aside from instances discussed above, we are required to pay our Manager a termination fee equal to three times the sum of the average total annual amount of management fees and the average annual incentive fee paid by us over the prior two years.
Reimbursable Expenses
Our Manager or its affiliates are entitled to reimbursement for certain documented costs and expenses incurred by them on our behalf, as set forth in the Management Agreement, excluding any expenses specifically required to be borne by our Manager under the Management Agreement. For the years ended December 31, 2025, 2024, and 2023, we incurred $ 4.2 million , $ 4.3 million , and $ 4.1 million , respectively, of reimbursable expenses incurred on our behalf by our Manager, which are included in general and administrative expenses on our consolidated statements of operations. As of December 31, 2025 and 2024, $ 1.0 million and $ 3.1 million , respectively, of reimbursable expenses incurred on our behalf and due to our Manager are included in other liabilities on our consolidated balance sheets.
Note 12. Stock-Based Compensation
Incentive Award Plan
We are externally managed and do not currently have any employees. On March 30, 2016, we adopted the 2016 Incentive Award Plan (the “Plan”) to promote the success and enhance the value of the Company by linking the individual interests of employees of our Manager and its affiliates to those of our stockholders. As of December 31, 2025, the maximum remaining number of shares that may be issued under the Plan is 2,073,456 shares. Awards granted under the Plan may be granted with the right to receive dividend equivalents and generally vest in equal installments on the specified anniversaries of the grant.
Deferred Compensation Plan
On May 24, 2022, we adopted the Deferred Compensation Plan to provide our directors and certain executives with an opportunity to defer payment of their stock-based compensation or RSUs and director cash fees, if applicable, pursuant to the terms of the Deferred Compensation Plan.
Under our Deferred Compensation Plan, certain of our Board members elected to receive the annual fees and/or time-based RSUs to which they are entitled under our Non-Employee Director Compensation Program in the form of deferred RSUs. Accordingly, during the years ended December 31, 2025, 2024, and 2023, we issued 59,189 , 21,259 , and 15,410 , respectively, of deferred RSUs in lieu of cash fees to such directors, and recognized an expense of approximately $ 212,000 , $ 192,000 , and $ 186,000 , respectively. Such expense is included in general and administrative expenses on our consolidated statements of operations.
Non-Employee Director Compensation Program
Our Board awards time-based RSUs to eligible non-employee Board members on an annual basis as part of such Board members’ annual compensation in accordance with the Non-Employee Director Compensation Program. The time-based awards are generally issued in the second quarter on the date of the annual meeting of our stockholders, in conjunction with the director’s election to our Board, and the awards vest on the earlier of (x) the one-year anniversary of the grant date and (y) the date of the next annual meeting of our stockholders following the grant date, subject to the applicable participants’ continued service through such vesting date. Effective January 1, 2024, our Non-Employee Director Compensation Program was amended to increase the value of the annual director grants and increase the annual retainer fees payable to the chair and members of the Nominating and Corporate Governance Committee, members of the Compensation Committee and the Lead Independent Director, as set forth in the Non-Employee Director Compensation Program. Effective January 1, 2025, to maintain competitiveness in our recruitment and retention of directors, our Non-Employee Director Compensation Program was amended to increase the value of the annual director grants and increase the annual retainer fees payable to the chairs and members of the Audit, Compensation and Nominating and Corporate Governance Committees, and the Lead Independent Director, as set forth in the amended Non-Employee Director Compensation Program.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Eligible non-executive members of our Board were granted the time-based RSUs under the Plan. Each RSU was granted with the right to receive dividend equivalents. Additionally, certain directors elected to defer their RSUs pursuant to the terms of the Deferred Compensation Plan. Such deferred awards will become payable on the earliest to occur of the participant’s separation from service or a change in control. The following table details the time-based RSUs granted to non-executive members of our Board during the years ended December 31, 2025, 2024, and 2023:
Date of Grant
Total RSU Grant
Grant Date Fair Value Per Share
Stock-Based Compensation Expense
For the years ended December 31, 2025, 2024, and 2023, we recognized $ 14.1 million , $ 18.1 million , and $ 16.6 million , respectively, of stock-based compensation expense related to the RSUs. As of December 31, 2025, total unrecognized compensation expense was $ 9.1 million based on the grant date fair value of RSUs granted. This expense is expected to be recognized over a remaining period of 1.6 years from December 31, 2025.
Certain participants of the Plan are required to settle their tax liabilities through a reduction of their vested RSU delivery. Such amount will result in a corresponding adjustment to additional paid-in capital and a cash payment to our Manager or its affiliates in order to remit the required statutory tax withholding to each respective taxing authority. The following table details the deliveries of shares of our common stock for vested RSUs and corresponding payments for withholding taxes upon delivery of such vested RSUs during the years ended December 31, 2025, 2024, and 2023, which are reflected as adjustments to additional paid-in capital on our consolidated statement of changes in equity ($ in thousands).
Year Ended
December 31,
December 31,
December 31,
Vested RSUs
Shares of common stock delivered
Payments for withholding taxes upon delivery of
stock-based awards
The following table details the time-based RSU activity during the years ended December 31, 2025 and 2024.
Year Ended December 31, 2025
Year Ended December 31, 2024
Number of Restricted
Share Units
Weighted Average Grant Date Fair Value Per Share
Number of Restricted
Share Units
Weighted Average Grant Date Fair Value Per Share
Unvested, beginning of period
Granted
Vested
Forfeited
Unvested, end of period
Note 13. Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with our taxable year ended December 31, 2015 and expect to continue to operate so as to qualify as a REIT. As a result, we will generally not be subject to federal and state income tax on that portion of our income that we distribute to stockholders if we (i) distribute at least 90 % of our taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains, and (ii) comply with certain other requirements to qualify as a REIT. Since Commencement of Operations, we have been in compliance with all REIT requirements and we plan to continue to operate so that we meet the requirements for taxation as a REIT. Therefore, other than amounts relating to our taxable REIT subsidiary (“TRS”), as described below, we have not provided for current income tax expense related to
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
our REIT taxable income for the years ended December 31, 2025, 2024, and 2023. Additionally, no provision has been made for federal or state income taxes in the accompanying financial statements, as we believe we have met the prescribed requisite requirements.
In December 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter 2024 dividend that would have otherwise been paid in January 2025. The timing and amount of any future dividends declared by our Board depend on a variety of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board deems relevant.
Our real estate owned hotel portfolio is held in a TRS. A TRS is a corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. Given the TRS’s history of generating taxable losses, we are not able to conclude that it is more likely than not that we will realize the future benefit of the TRS’s deferred tax assets and therefore recorded a full valuation allowance. Given the full valuation allowance, we did not record a provision or benefit for income taxes for the years ended December 31, 2025, 2024, and 2023 , and we did no t have any deferred tax assets, net of valuation allowances or deferred tax liabilities, net of any valuation allowances as of December 31, 2025 and 2024. Our gross deferred tax asset and valuation allowance as of December 31, 2025 were each $ 54.8 m illion. As of December 31, 2024 , our gross deferred tax asset and valuation allowance were each $ 56.6 million.
The components of the deferred tax asset at December 31, 2025 consisted of an investment basis difference in our real estate owned hotel portfolio of approximately $ 2.2 million , a net operating loss carryforward of approximately $ 28.3 million, and net unrealized loss (a deferred tax asset) of approximately $ 24.3 million. The components of the deferred tax asset at December 31, 2024 consisted of an investment basis difference in our real estate owned hotel portfolio of approximately $ 4.4 million, a net operating loss carryforward of approximately $ 23.5 million, and net unrealized gain (a deferred tax liability) of approximately $ 28.7 million.
We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions, if applicable, are included as a component of the provision for income taxes in our consolidated statements of operations. As of December 31, 2025 and 2024 , we have no t recorded any amounts for uncertain tax positions.
The federal statutory rate for the years ended December 31, 2025, 2024, and 2023 was 21 %. Our effective tax rate differs from its combined U.S. federal, state and local corporate statutory tax rate primarily due to income earned at the REIT, which is not subject to tax, due to the deduction for qualifying distributions made by us, and any change in the valuation allo wance.
Our tax returns are subject to audit by taxing authorities. As of the date of this filing, tax years 2022 and onward remain open to examination by major taxing jurisdictions in which we are subject to taxes.
The following table details the income tax treatment for our common stock dividends for the years ended December 31, 2024 and 2023. The Board did not declare any dividends during the year ended December 31, 2025.
Year Ended
December 31, 2024
December 31, 2023
Ordinary dividends
Capital gain dividends
Nondividend distributions
Total
On July 4, 2025, a budget reconciliation bill (the “Bill”) was signed into law in the United States. The Bill includes several significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017 and other changes to the Internal Revenue Code, that affect REITs and their investors. For instance, for taxable years beginning after December 31, 2025, the Bill modifies the REIT asset test requirement with respect to TRSs, providing that not more than 25 % (previously 20 %) of the gross value of a REIT’s assets may be represented by securities of one or more TRSs. Additionally, the Bill permanently extends the Internal Revenue Code Section 199A pass-through qualified business income deduction. This allows certain individuals, trusts, and estates to continue deducting up to 20 % of their qualified business income, including qualified REIT dividends. This deduction was set to expire for taxable years beginning after December 31, 2025. The Bill is not expected to have a material impact on our consolidated financial statements.
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
Note 14. Commitments and Contingencies
We hold a 51 % interest in CMTG/TT as a result of committing to invest $ 124.9 million in CMTG/TT. As of December 31, 2025 and 2024, we have contributed $ 163.1 million to CMTG/TT and have received return of capital distributions of $ 123.3 million, of which $ 111.1 million were recallable. As of December 31, 2025 and 2024, our remaining capital commitment to CMTG/TT was $ 72.9 million.
As of December 31, 2025 and 2024, we had aggregate unfunded loan commitments of $ 271.9 million and $ 498.3 million , respectively, which amounts will generally be funded to finance construction or leasing related expenditures by our borrowers, subject to them achieving certain conditions precedent to such funding. These future commitments will expire over the remaining term of the loans, none of which exceed five years .
To the extent a financing is expected to reach final maturity, we may seek replacement financings, extension of existing financings, or other capital solutions as deemed appropriate by management. Our contractual payments due under all financings were as follows as of December 31, 2025 ($ in thousands):
Year
Initial
Maturity (1)
Fully Extended
Maturity (2)
Total
Initial maturity is based on the earlier of the initial maturity date of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, assuming conditions to extend are met.
Fully extended maturity is based on the earlier of the fully extended maturity date of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, assuming conditions to extend are met.
Includes financings outstanding of $ 779.7 million related to nine loans in maturity default with aggregate unpaid principal balance of $ 1.4 billion .
In January 2026, we refinanced our secured term loan with a new secured term loan which provides for a maturity date of January 30, 2030 . See Note 6 - Debt Obligations - Secured Term loan for further detail.
In the normal course of business, we may enter into contracts that contain a variety of representations and provide for general indemnifications. Our maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against us that have not yet occurred. However, based on experience, we expect the risk of loss to be remote.
Note 15. Segment Reporting
We have determined that we have two operating segments and two reporting segments, with activities related to investing in income-producing loans collateralized by institutional quality commercial real estate and activities related to the operations of our real estate owned assets. Our Chief Operating Decision Maker is J. Michael McGillis, our Chief Financial Officer, President, and Directo r, who primarily utilizes Distributable Earnings (Loss) as described below.
Distributable Earnings (Loss) is a non-GAAP measure used to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments. Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate owned held-for-investment depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss).
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
The following table provides a calculation of Distributable (Loss) Earnings for our loan and REO portfolios, as well as a reconciliation to net (loss) income, for the years ended December 31, 2025, 2024, and 2023 ($ in thousands):
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
Loan
Portfolio
REO
Portfolio
Total
Loan
Portfolio
REO
Portfolio
Total
Loan
Portfolio
REO
Portfolio
Total
Interest and related income
Interest and related expense
Revenue from real estate owned
Amortization of above and below
market leases, net
Management fees - affiliate
Incentive fees - affiliate
General and administrative expenses
Real estate owned:
Operating expenses
Interest expense
Proceeds from interest rate cap
(Loss) income from equity method
investment
Gain on sale of loan
(Loss) gain on extinguishment of debt
Principal charge-offs (1)
Valuation adjustment for real estate
owned held-for-sale
Loss on partial sales of real estate
owned, net
Previously recognized depreciation and
amortization on portion of
real estate owned (2)
Previously recognized gain on foreclosure of real estate owned held-for-sale (3)
Distributable (Loss) Earnings
Reconciliation to net (loss) income
Principal charge-offs (1)
Previously recognized depreciation and amortization
on portion of real estate owned (2)
Previously recognized gain on foreclosure of
real estate owned held-for-sale (3)
Provision for current expected credit loss reserve
Valuation adjustment for loan receivable held-for-sale
Depreciation and amortization
Amortization of above and below market leases, net
Gain on foreclosure of real estate owned
Stock-based compensation expense
Unrealized loss on interest rate cap
Net (loss) income
For the year ended December 31, 2025, amount includes (i) a $ 23.3 million charge-off of accrued interest receivable related to the discounted payoff of a land loan in March 2025, the mortgage foreclosures on certain multifamily properties in July 2025, the foreclosure on a land parcel in December 2025, and the mortgage foreclosure of a multifamily property in January 2026, and (ii) a $ 0.5 million charge-off of an exit fee related to the discounted payoff of a land loan in March 2025. For the year ended December 31, 2024, amount includes a $ 23.2 million charge-off of accrued interest receivable related to the reclassification of a for sale condo loan to held-for-sale.
For the year ended December 31, 2025, amount reflects previously recognized depreciation and amortization on the portions of our mixed-use real estate owned asset that were sold. For the year ended December 31, 2024, amount reflects previously recognized depreciation on our hotel portfolio real estate owned asset upon reclassification to held-for-sale as of December 31, 2024. Amounts not previously recognized in Distributable (Loss) Earnings.
Reflects total gain on foreclosure of our hotel portfolio real estate owned asset, which was classified as held-for-sale as of December 31, 2024 . Amount not previously recognized in Distributable (Loss) Earnings.
Note 16. Subsequent Events
We have evaluated subsequent events through the filing of this Annual Report on Form 10-K and note the following transactions or events that have occurred:
Claros Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
In January 2026, we completed a mortgage foreclosure on a multifamily property located in Dallas, TX. As of December 31, 2025 , the multifamily property represented the collateral for a senior loan with an unpaid principal balance of $ 76.6 million prior to principal charge-offs of $ 39.1 million , was risk rated 5, and on non-accrual status. See Note 3 - Loan Portfolio for further detail.
In January 2026, we received the full repayment of a land loan. As of December 31, 2025, the loan had an unpaid principal balanc e of $ 67.0 million , was risk rated 4, and was on non-accrual status. Concurrently, the borrower paid $ 3.0 million of past due contractual interest which was not previously recognized. A portion of the repayment proceeds was used to repay the associated financing of $ 33.5 million.
In January 2026, we received the full repayment of a multifamily loan. As of December 31, 2025 , the loan had total commitments of $ 176.3 million, an unpaid principal balance of $ 173.8 million, and was risk rated 2. A portion of the repayment proceeds was used to repay the associated financing of $ 121.8 million.
In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of $ 500.0 million and a maturity date of January 30, 2030 . See Note 6 - Debt Obligations for further detail. A s consideration for entering into our new secured term loan, we issued detachable warrants to the lenders party thereto to purchase, in the aggregate, up to 7,542,227 shares of our common stock, at an exercise price of $ 4.00 per share, exercisable for ten years .
In January 2026, we modified our Management Agreement. See Note 11 - Related Party Transactions for further detail.
In February 2026, we assigned our right, title, and interest in an office loan and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing. As of December 31, 2025 , the loan had a total commitment of $ 90.0 million, an unpaid principal balance of $ 71.3 million, a risk rating of 5, and a secured financing balance of $ 56.2 million. See Note 3 - Loan Portfolio and Note 6 - Debt Obligations for further detail.
Claros Mortgage Trust, Inc.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 2025
($ in thousands)
Initial Costs
Costs Subsequent to Acquisition
As of December 31, 2025
Description
Location
Encumbrances
Land
Building and related improvements
Building and related improvements
Land
Building and related improvements
Total (1)
Accumulated Depreciation
Total, net of Accumulated Depreciation
Month of Acquisition
Useful Lifes (2)
Hotel Portfolio (3)
New York, NY
February 2021
years
Mixed-use (4)
New York, NY
June 2023
years
Multifamily
Phoenix, AZ
May 2025
years
Multifamily
Henderson, NV
June 2025
years
Multifamily
Dallas, TX
July 2025
years
Multifamily (5)
Dallas, TX
July 2025
years
Land Parcel
New York, NY
December 2025
Total
The aggregate cost of the real estate owned assets included above for Federal income tax purposes is $ 875.6 million as of December 31, 2025.
Represents the range of useful lives for building, building improvements, site improvements, tenant improvements, and furniture, fixtures, and equipment.
Amounts reflect the carrying value of the hotel portfolio subsequent to reclassification to held-for-investment during the year ended December 31, 2025
Reflects amounts net of partial sales during the year ended December 31, 2025.
Represents two multifamily properties which previously represented the collateral property for one senior loan.
Reconciliation of Real Estate ($ in thousands):
Balance at January 1,
Reclassification of hotel portfolio to held-for-investment (to held-for-sale)
Foreclosures, including capitalized transaction costs
Capital expenditures
Partial sales of mixed-use property
Balance at December 31,
Reconciliation of Accumulated Depreciation ($ in thousands):
Balance at January 1,
Additions charged to operating expenses
Partial sales of mixed-use property
Reclassification of hotel portfolio to held-for-sale
Balance at December 31,
Claros Mortgage Trust, Inc.
Schedule IV - Mort gage Loans on Real Estate
As of December 31, 2025
($ in thousands, except for number of loans)
Type of Loan
Description/Location
Number
Investments
Interest
Payment
Rates (1)
Maximum
Maturity
Date (2)
Periodic
Payment
Terms (3)
Prior
Liens (4)
Face Amount
Loans
Carrying
Amount
Loans (5) (6)
Principal
Amount of
Loans
Subject to
Delinquent
Principal
or Interest
Senior Mortgage Loans
Senior loans in excess of 3% of the carrying amount of total loans
Senior mortgage loan
Multifamily/West
Senior mortgage loan
Office/Southeast
Senior mortgage loan
Hospitality/West
Senior mortgage loan
Hospitality/Northeast
Senior mortgage loan
Hospitality/West
Senior mortgage loan
Multifamily/Midwest
Senior mortgage loan
Multifamily/West
Senior mortgage loan
Land/Mid Atlantic
Senior mortgage loan
Multifamily/West
Senior mortgage loan
Multifamily/Mid Atlantic
Senior mortgage loan
Multifamily/Southwest
Senior mortgage loan
Mixed-use/Northeast
Senior mortgage loan
Multifamily/Midwest
Senior mortgage loan
Mixed-use/Northeast
Senior loans less than 3% of the carrying amount of total loans
Senior mortgage loans
Various
Floating: + 2.86 % - 12.00 %
Subordinate Loans
Subordinate loans in excess of 3% of the carrying amount of total loans
Mezzanine loans
Office
Fixed: 8.50 %
Subordinate loans less than 3% of the carrying amount of total loans
Total loans
General CECL reserve
Total loans after general CECL reserves
As a spread over SOFR . SOFR as of December 31, 2025 was 3.69 % .
Maximum maturity date assumes all extension options are exercised.
I/O = int erest only until final maturity unless otherwise noted, which in certain instances may include the ability to satisfy such payments through non-cash advances on loans receivable in lieu of interest. P = Certain loans may be subject to spread maintenance premiums or other prepayment penalty if paid before date specified within the loan agreement.
Represents only third-party liens and is expressed as the total loan unpaid principal balance senior to our subordinated loan interest as of December 31, 2025 .
The aggregate cost of the loans included above for Federal income tax purposes is $ 4.1 billion as of December 31, 2025 .
Amounts net of specific CECL reserves of $ 365.4 million .
Reconciliation of Mortgage Loans on Real Estate ($ in thousands)
Balance at January 1,
Additions during period:
Fundings on loan receivables
Non-cash advances in lieu of interest
Loan receivable acquired in connection with a full loan repayment
Accretion of fees and discounts
Deductions during period:
Repayments of loans, including proceeds from sales of loans not previously classified as held-for-sale
Origination fees, extension fees, and exit fees received
Transfer to real estate owned, held-for-investment (2)
Transfer to loans held-for-sale
Provision for current expected credit losses (3)
Balance at December 31,
Includes Mortgage and Mezzanine loans.
See Note 5 – Real Estate Owned of our consolidated financial statements for further detail.
See Note 3 – Loan Portfolio of our consolidated financial statements for further detail.
