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J. Michael Mcgillis

Thank you, Richard. For the fourth quarter of 2024, CMTG reported a GAAP net loss of $0.72 per share and a distributable loss of $0.59 per share. Distributable earnings prior to realized gains and losses were $0.18 per share.
CMTG's health for investment loan portfolio decreased to $6.1 billion at December 31 compared to $6.3 billion at September 30. The quarter over quarter decrease was primarily the result of loan repayments and loan sales. During the fourth quarter we received a total of $99 million in loan repayments, including the full repayment of three loans totaling $80 million in UPB, offsetting these total repayments with $75 million in funding on existing loan commitments.
We also executed three loan sales with an aggregate UPB of $205 million during the quarter. The first two loans were previously reported as third quarter subsequent events and were classified as held for sale on the balance sheet at third quarter end.
The first loan was a $30 million subordinate loan secured by to be developed land in Miami sold for 99.5% of the UPB. The second loan was $115 million senior loan collateralized by a multi-family property located in Colorado sold at $111 million.
We sold the third loan, a $60 million loan secured by a multi-family property located in Las Vegas at 99% of UPB. In addition, we also completed a loan sale that was executed subsequent to year end, $101 million senior loans collateralized by a hotel in San Diego. This loan was classified as held for sale at December 31 because the loan sale was completed in early January at par.
2024 was an active year with regard to transaction activity. During the year, CMTG executed an aggregate of $1.3 billion of realizations, which is split evenly between repayments and loan sales. We do loan sales as positive for the portfolio and that we accelerated loan repayment activity while removing the risk of the borrower being unable to secure refinancing at maturity during a period of capital markets volatility.
During 2024, five of seven loan sales were executed at a level at or above 97% of par, which speaks to the credit quality of these loans. The two exceptions relate to loans with future funding commitments and construction risks that were not deemed to be the most accretive use of CMTG's capital.
During the quarter, we also reclassified the REO New York hotel portfolio to held for sale and we marked the asset to a value based on where we believe it could trade in the market. As a reminder, the portfolio is comprised of seven limited-service hotels located throughout Manhattan, and back in 2021, we foreclosed on the mezzanine borrower. Since foreclosure, we have seen the portfolio's revenue rebound to all-time highs.
As mentioned on prior calls, we have regularly explored a sale of the portfolio, launching a process last summer. Our process was temporarily delayed due to what ultimately became the New York City Safe Hotels Act legislation, which was passed during the fourth quarter of 2024.
With this behind us, we have made progress towards executing a sale of the portfolio and look forward to providing an update on our progress. We have a similar perspective on the five multi-family loans currently risk rated 5.
These five multi-family loans collectively represent 50% of our 5 rated loans. We believe that these multi-family loans have experienced temporary valuation pressure due to the elevated rate environment and our borrowers not having access to capital or other resources to effectively manage these assets.
From our vantage point, we believe these loans have substantial upside under our management and with a modest capital injection. As a result, we plan to foreclose on these assets in the coming quarters.
In anticipation of these foreclosures, these loans are now all risk graded 5, and we've recorded specific CEO reserves at an average of 12% of the UPB, which correspond to their estimated fare values and will be charged off upon foreclosure.
There are, however, other scenarios where we have determined that foreclosure is not the optimal path due to prioritizing our best uses of capital, despite believing in the long-term underlying asset value.
One example is a $390 million loan we originated in 2019 secured by a multi-family building in Manhattan. The loan is performed in accordance with its terms throughout its five year term. In November, this loan reached its maturity, and following extensive conversations with the borrower, we agreed to permit the borrower to satisfy its principal repayment obligation with a discounted payoff option if certain conditions are met, including continuing to pay debt service.
While we continue to believe the long-term collateral value supports the loan, we believe that the incentive to monetize our investment, generating approximately $100 million of net liquidity, strengthens our position to take advantage of accretive capital allocation opportunities heading into the second half of 2025.
Given the contingencies associated with the modification, this loan was downgraded to a risk rating of 4, and we reserve for this potential loss within our general reserve. Looking ahead, we expect to continue to pursue loan sales, foreclosures, and or discounted payoffs. However, before doing so, we will first seek to maximize value through loan modifications and credit support.
For example, in the third quarter, we modified a loan on a New York City mixed use asset that included a $7.2 million principal repayment and bifurcation of the loan into two loans, one of which is secured by a retail property and the other a well-structured personal loan to individuals with significant net worth.
Subsequent to this modification, the office component of the original collateral was recently foreclosed on by a ground lessor, resulting in our sponsor losing its collateral. In other words, the third quarter modification provided for an exchange of collateral to avoid losses on the now foreclosed office component. CMTG's foresight helped to avoid a difficult situation where a significant loss of protracted legal battle would have been likely.
And more broadly, as part of our ongoing asset management efforts, we are actively pursuing guarantees on defaulted loans, particularly when the guarantor has meaningful net worth, and the guarantee can be pursued in a short form litigation process.
Turning to liquidity. At December 31, we reported $102 million in total liquidity, which includes cash and approved and undrawn credit capacity based on existing collateral. As Richard mentioned, enhancing our liquidity position, reducing the levels of our watch list loans, non-earning or sub optimal earning assets, and deleveraging the balance sheet will be a focus area for our team throughout 2025.
And to that point, we expect the pace of resolutions to accelerate, including the remaining health for sale loans, the hotel portfolio, and anticipated loan repayments. There are sales and refinancing transactions underway which could result in just under $2 billion of gross realization proceeds.
We anticipate between one-third and two-third of this total will be finalized in the coming quarters with approximately 40% of such proceeds increasing our liquidity, which we anticipate accretively redeploying.
I would now like to turn the call over to the operator.

Question and Answer Session

Operator

(Operator Instructions) Rick Shane, JPMorgan.

Rick Shane

Hey guys. Thanks for taking my questions this morning. Look, you guys just referenced the third quarter modification of the New York City mixed use. We've had a lot of questions on that. I believe that that is related to loan 33 that's listed in your disclosures as a land loan, and I think that perhaps given that restructuring. That land loan designation may be confusing. Is that actually accurate? How should we think about loan 33 in the context of modifications you just described?

Priyanka Garg

Hi Rick, it's Priyanka. I'll take that question. Loan number 33 is totally unrelated to the modification that Mike spoke about or to the mixed use asset that has always been a land loan and has been a land loan since origination. I can comment on the modification that Mike referred to if that's helpful.

Rick Shane

Yeah. That would be great because again that that's a high profile situation and there been a lot of questions on it.

Priyanka Garg

Yeah. And exactly for that reason we ordinarily do not comment on specific loans, but in this instance, given all the reasons that you just highlighted, we will clarify that we have zero exposure to the Chrysler building. We did previously have exposure to that asset, but we modified the loan in the third quarter, as Mike mentioned.
As part of that modification, we received a paydown of 15%. And we improved the collateral package which now excludes the leasehold interest on the Chrysler building or anything related to the Chrysler building and maybe more importantly that modification created an accelerated path to get paid off. This now modified loan benefits from amortization payments and is current on all obligations.

Operator

Doug Harter, UBS.

Doug Harter

Thanks. On page 11 where you list your risk rated for assets you talk about the near term repayment of two multi-family assets. You talked about the New York one, hoping you could talk about the the California asset and the outlook for repayment there.

Priyanka Garg

Yeah. Hi Doug, it's Priyanka. I'll take that. We are working with the borrower on a near term resolution process there. So it is a cooperative discussion it's ongoing you know I prefer not to get into any more detail but it's very -- it's on a good path I will say that.

Doug Harter

And then just on those two -- can you just talk about how you set the reserve levels against those two assets and you know how much the near-term resolution and visibility into that factors into that reserve level?

Priyanka Garg

Yeah. So on the one that Mike discussed in a little more detail in his prepared remarks that has a -- we added to the general reserve to match what is the discounted payoff that is agreed upon with the borrower, so that is the path that we expect to occur.
And so that is fully in the general reserve. It is based on a number of contingencies that need to occur, which is why there's not a specific reserve. And as we mentioned, we think asset value does exceed that level, but it's really a liquidity decision that we made.
On the second one, we think that process that we're discussing with the borrower to create liquidity does not require any additional reserves beyond what's in the general reserve. This is a very well located asset. It has benefited from a tremendous amount of leasing in recent months, and it should be very well positioned to be liquid in this market, particularly given the improving capital markets and flows in the multi-family sector.

Operator

(Operator Instructions) Jade Ramani, KBW.

Jade Rehmani

Thank you. On the financing side, is it the company's plan to further reduce leverage in 2025? Will there be financing attached to any of the taking of REO? And also, can you address any plans for the secured term loan?

J. Michael Mcgillis

Sure, Jay. This is Mike. And the answer with respect to deleveraging is yes, we do intend to continue to deleverage the portfolio, particularly repaying some of our higher cost. With respect to the assets that we plan to take REO, we are working on finalizing a Financing that will allow us to accomplish that at financing levels very consistent with where they're currently financed on repo lines. So hopefully that's responsive to that.
And that is a facility that will allow us to coring that up and down as we resolve REO assets or bring on more REO assets in the future. So we think that's a very effective financing solution for what we are looking to achieve there. And then with respect to the term loan B that has an August 2026 maturity. We are and -- so we get within one year of maturity in August of 2025. And we expect to work on either an A&E transaction or a replacement financing transaction on that during middle quarters of this year. I can't really talk about specifics at this time, but that is the plan.

Jade Rehmani

And then with regards to the leveraging, with $100 million in cash on hand and unfunded commitments, can you just talk about the moving parts? What's the magnitude of the leveraging? How much of the unfunded commitments will be funded in 2025, and are there any plans or contemplation of issuing some sort of additional equity-like instrument such as a preferred something else that could bolster the liquidity profile as well as capital buffer.

J. Michael Mcgillis

Sure. So first and foremost, we do have -- with respect to our liquidity position, we have minimum liquidity requirements under our financing. So first of all, we got to maintain compliance with those and we continue to comply with those, but we'd like to have a little more liquidity on hand for obvious reasons.
Let's see with respect to raising capital, I think, we will continue to look at what we believe is the best way to generate liquidity, and that's resolving some of these 4 and 5 rated loans and converting that to cash, we have a fairly Under a low leverage balance sheet. So we have a fair amount of liquidity tied up in certain loans that we think we can release by working through a number of these situations. With respect to additional equity capital raise activity, obviously, that is something that we think about a lot, but we have no plans right now.

Priyanka Garg

And if I could just jump in --

Jade Rehmani

Go ahead, thank you.

Priyanka Garg

Sorry, Jade, I was just going to also highlight in addition to everything Mike said, I just want to reiterate what Mike said in his prepared remarks, which is that we have there are a number of transactions that are already underway, that are, would be $2 billion of gross realization proceeds, and we think a good chunk of that's going to happen in the coming quarters which will certainly change liquidity profile, which is what we're very focused on and also resolve some non-earning and lower earning assets so that will be in addition to everything I just said.

Jade Rehmani

In terms of the evaluation you mentioned, stop being attractive or not reflecting fair value, how do you think about that? Is there some kind of a trough book value or NAV number in mind?

J. Michael Mcgillis

Sure, I'll take this one. So if you look at our GAAP book value, we are -- it's roughly $14 a share. We've got reserves on our loan portfolio that are about 4.3%. We've obviously monetizing a number of these loans we think results in recoveries significantly in excess of where the stock is trading today.
And I think as we generate liquidity work through the deleveraging process, including the TLB over the upcoming quarters, work out of the 4, 5 rated loans to continue to reduce those and monetize REO as well as improve operating performance of two assets that will become REO, we think that should ultimately elevate the share price to a level that more proximates value.

Operator

Chris Muller, Citizens JMP.

Chris Muller

Thanks for taking the questions. I want to compliment you guys on your transparency. You give a lot of really good detail on your deck, and it's very helpful from our seat. So looking at the watch list, and Mike touched on this a little bit in his comments, but I guess how aggressive do you guys plan to be on resolving those loans?
Will it be more of your patient approach you've done historically, or can we see some big resolution numbers start to come through in the near term? And then just the second part of that, should we expect to see more loan sales as part of that strategy?

Richard Mack

So I want to turn, this is Richard. I want to turn it up to Chris. Thank you for that question. I want to turn it over to Priyanka, but I think you know we have been very tough in trying to maximize every dollar, and I think given a refocus on liquidity, we are going to have to be more aggressive in creating liquidity over 2025.
I think that's really our plan. We've got multiple levers to pull on that, but we're focused on liquidity. And we know that solving liquidity will elevate our stock, and that's really why we're thinking about the world in terms of liquidity right now.

Priyanka Garg

Yeah. And I would just add to that. Thank you, Chris, for the question. I would just add that, given that we're starting to see transaction volume increase, capital markets are becoming a lot more accessible. We think that this improving transaction environment there's a real opportunity to use this discounted payoffs and short sales as a tool and that that goes to our more aggressive view to resolve those watch list loans, Chris, to your point.
And I think you know the first of that that you're seeing is the one that Mike discussed during his prepared remarks, and we're going to continually balance what we can get from a liquidity standpoint with timing and certainty and accelerating resolution so I think you can continue to see more of that from us.

Chris Muller

Yeah. Very helpful. And then just a clarifying question on the REO fair value marks. Was this the second time that that hotel portfolio was written down since REO gets marked a fair value when you guys take the asset back? And if so, can you just talk about what changed since you took it back? I guess it's been almost four years at this point, but just any changes that drove those write downs.

J. Michael Mcgillis

Sure. I'll start and I'll let Priyanka finish. Thank you, Chris. When we foreclosed on the asset back in 2021, we marked it to fair value. Our original loan was a MES loan. And it had a securitized senior financing associated with it when we When we foreclosed on the asset, we marked the fair value which resulted in a modest gain as part of a foreclosure.
And probably the big driver of change in the market is primarily driven by the safe hotel legislation that was recently passed by New York City. And Which is, I think, sort of created a little bit of uncertainty on hotel pricing, particularly around non-union hotels. Priyanka, if you want to maybe expand on that would be helpful.

Priyanka Garg

Yeah. I think, look, underlying performance, particularly topline but even flow through, has been very strong. 2024, the assets resulted in greater EBITDA than in 2019 pre-pandemic. So we continue to feel very good about the underlying performance. We've all read all the information around beneficial demand supply dynamic as well as new supply dynamics, which is all favorable in New York City.
The issue has really been the New York City Safe Hotels Act, which was first raised by New York City council in August of 2024, which was right in the middle of our sales process which caused us to temporarily paused that process and then it was ultimately passed into legislation in October.
And so that has really is what has caused the adjustment in value. But again just focusing, Chris, on the first question you asked from a liquidity standpoint and freeing up capital, we're committed to the sale. That said, we are tracking a dual track process to execute on a CMBS refinancing should a sale not occur.

Operator

(Operator Instructions) Tom Catherwood, BTIG.

Tom Catherwood

Thank you. And just one question for me for the 5 rated multi-family loans that you're planning to take REO, is the 12% reserve a reflection of where you could sell the assets as is today, or does that reflect the value you're expecting once you invest incremental capital and stabilize the assets?

Priyanka Garg

Thanks, Tom, great question. It's a combination of both. We triangulate around values in terms of what we think the sell price might be right now versus where we think stabilized value is. It's very hard to say where something would sell today, particularly as a loan with a borrower who has in many cases starved the asset of capital, so we don't think that, relying on that alone makes a tremendous amount of sense, but we do have, third party appraisals as well to support the values that result in those reserves.

Tom Catherwood

Got it. And then do you have a sense of the kind of aggregate amount of incremental capital that you might have to put into those assets?

Priyanka Garg

It's a moving target, as you might imagine, and it'll depend on the timing of bringing those assets, REO when we can control more of the decision making, but it's one of the reasons that we've identified these assets to be REO versus some of the others is because they are cash flowing and the capital requirement is not enormous.
A lot of the capital that would be required would be as it relates to renovating units as residents vacate the units, but one thing that we're seeing in this current economic environment is higher renewal rates and people staying in units for longer.
So I think there's going to be a lot of factors that impact that. But we don't think it's going to be a tremendous amount of capital. We think there's just a little money is going to go a long way given how the assets have performed to date.

Operator

We currently have no further questions. So I will hand back to Richard Mack for closing remarks.

Richard Mack

So thank you all again for joining us. I think just to be very clear and to summarize our path for 2025, we're going to be focused on improving our balance sheet and increasing liquidity. It's going to be less about maximizing value, although we are selectively ready to maximize value in terms of REO.
The market recovery is going to continue to be slow, it's going to continue to be choppy, and we need to respond to that and meet the market. And so, in an elevated rate environment, even with spreads coming in, we are not going to hope that that valuations are going to move meaningfully, although we expect over 2025, given what the capital markets are doing, they will, but we're going to meet the market as a general statement and try to move assets on and off and improve liquidity.
Having said that, we're not going to be afraid to take assets back when we need to. And so, this is going to be the balance, but we're going to lean a little bit more toward liquidity and away from REO or being very difficult in 2025 with a real focus on liquidity because we believe that once we can fix liquidity, our valuation of our stock is going to be a lot better.
So we thank you all for joining and we're looking forward to speaking to you all later and thank you again. Take care.

Operator

This concludes today's call. Thank you for joining. You may now disconnect your lines.