Michael McGillis

About Michael McGillis

Michael McGillis, 63, is President and Chief Financial Officer of Claros Mortgage Trust (CMTG) and has served as President and director since March 2022; he previously served as President, CFO and director of CMTG. He is President of Mack Real Estate Group (MREG), a member of the Investment Committees of MREG and Mack Real Estate Credit Strategies (MRECS), graduated magna cum laude from Northeastern University, and is a CPA (inactive) . CMTG is externally managed with no employees; NEO cash pay is set and paid by the Manager, with company-awarded compensation primarily via time-vested RSUs; the Manager considers Distributable Earnings, Net Income/Loss and TSR in its discretion (no fixed weights) . Company performance context: cumulative TSR fell to $35.72 (from a fixed $100 base since NYSE listing) in 2024 alongside Net Loss of $(221.27)m and Distributable Loss of $(95.65)m; 2023 saw modest gains; 2022 was positive on both GAAP and Distributable metrics .

Past Roles

External Roles

Fixed Compensation

Performance Compensation

• Structure and metrics

  • Manager used discretionary factors in 2024 (no fixed weights): Distributable Earnings (Loss), Net Income (Loss), and TSR; NEO equity awards are time-vested RSUs (no PSUs/options) .

• Annual equity grants and vesting | Grant | Grant date | Type | Shares granted | Vesting schedule | Notes | |---|---|---|---:|---|---| | 2024 award | 3/25/2024 | RSUs | 86,750 | 1/3 on 4/1/2025, 1/3 on 4/1/2026, 1/3 on 4/1/2027 (service-based) | Dividend equivalents on unvested RSUs | | 2023 award | 3/30/2023 | RSUs | Not disclosed | 1/3 vested 4/1/2024; remaining vest 4/1/2025 and 4/1/2026 (service-based) | Time-based; death/disability accelerates | | 2022 award | 6/14/2022 | RSUs | Not disclosed | 1/3 vested 7/1/2023; 1/3 vested 7/1/2024; remaining vests 7/1/2025 (service-based) | Time-based; death/disability accelerates |

• Pay versus performance context (company-level) | Year | Cumulative TSR ($) | Net Income (Loss) ($mm) | Distributable Earnings (Loss) ($mm) | |---|---:|---:|---:| | 2022 | 97.63 | 112.06 | 194.35 | | 2023 | 100.41 | 6.03 | 39.94 | | 2024 | 35.72 | (221.27) | (95.65) |

• Change in control and termination treatment

  • Equity accelerates on death/disability; upon a change in control, unassumed/substituted awards vest immediately (single-trigger if not assumed; otherwise continue) .

Equity Ownership & Alignment

• Upcoming vesting cadence (potential sell-to-cover supply)
  • 7/1/2025: final tranche from 2022 grant (service-based)
  • 4/1/2025 and 4/1/2026: remaining 2023 tranches
  • 4/1/2025, 4/1/2026, 4/1/2027: 2024 tranches

Implication: Time-based tranches through 2027 create recurring settlement events; historical 2024 net share settlement indicates tax withholdings rather than open-market selling, moderating direct selling pressure .

Employment Terms

Board Governance

• Role: Inside director (President & CFO); not independent due to executive and Manager affiliations .
• Committees: Audit, Compensation, and Nominating committees are fully independent; current members exclude executives .
• Board leadership: CEO Richard Mack is Chairman; Lead Independent Director (W. Edward Walter III) presides over independent sessions and agenda-setting .
• Attendance: In 2024, all directors then serving attended at least 75% of Board and committee meetings .
• Director pay: Executive directors (Mack, McGillis) receive no additional director compensation; independent director program includes cash retainers and annual RSU grant (raised to $125k value in 2025) .

Dual-role implications: McGillis holds an executive office and board seat (non-independent), while the CEO is also Chair; mitigants include a Lead Independent Director and independent key committees with active oversight .

Director Compensation (as applicable to McGillis)

Say-on-Pay & Shareholder Feedback

Compensation Committee & Consultants

• 2024 Compensation Committee: Vincent Tese (Chair), Derrick D. Cephas, Pamela Liebman; all independent .
• Consultant: Farient Advisors engaged to advise on 2025 equity pool sizing; committee assessed independence and found no conflicts .

Related Party & Management Agreement Considerations

• External management: Base fee 1.5% of stockholders’ equity (quarterly), plus quarterly incentive fee equal to 20% of Core Earnings over a 7% annualized hurdle, measured on rolling four quarters, floor at zero; incentive not payable unless 12-quarter Core Earnings > 0 .
• 2024 fees and reimbursements: ~$36.2m management/incentive fees; ~$4.3m reimbursed expenses; payables at year-end included ~$27.0m of fees and ~$3.1m reimbursables .
• Term and termination: Agreement through earlier of Aug 25, 2025 or complete disposition; termination by Manager after company default triggers termination fee equal to 3x average annual base + incentive fees over prior 24 months; company may terminate for specified “cause” events without fee .

Compensation Structure Analysis

• Mix shift and risk
  • Time-vested RSUs dominate company-awarded comp; no disclosed PSUs or options; reduces performance leverage but supports retention through multi-year vesting .
  • Manager used discretionary metrics rather than fixed targets or weightings; can weaken pay-for-performance transparency and tie .
• Discretionary outcomes vs results
  • 2024 saw significant TSR drawdown and losses, while RSUs continued to vest/grant; “compensation actually paid” to NEOs (average) was negative given stock price effects, indicating partial market alignment through mark-to-market valuation of equity .
• Repricing/modification
  • No disclosure of option repricing or award modifications; NEOs held no options in 2024 .

Risk Indicators & Red Flags

• Alignment and fee structure: External management with incentive fee over a 7% hurdle (20% share) and a sizable termination fee may create potential conflicts versus common shareholders; close monitoring of fee economics is warranted .
• Performance-linkage: No fixed performance metrics or PSUs; reliance on time-based RSUs and discretionary Manager judgments may dilute explicit pay-for-performance .
• Governance: CEO-Chair duality and an inside director (McGillis) reduce board independence at the top, though Lead Independent Director and independent committees provide mitigants .
• Hedging/pledging: Prohibited (reduces misalignment risk) .
• Related parties: Multiple large shareholders and affiliates represented historically; ongoing independence determinations disclosed -.

Investment Implications

• Retention and selling pressure: McGillis has 200,012 unvested RSUs with scheduled vesting through 2027; 2024 settlement behavior shows net share settlement with tax withholding rather than open-market sales, suggesting limited direct selling pressure but recurring supply around vest dates (notably 4/1 and 7/1 windows) .
• Alignment: Significant equity exposure via RSUs and company stock (302,589 beneficially owned) supports alignment, but absence of performance-vesting awards and the external fee structure reduce direct linkage to shareholder value creation .
• Governance: Inside director status and CEO-Chair combination merit ongoing scrutiny; mitigated by Lead Independent Director and independent committees with regular meetings and oversight -.
• Shareholder sentiment: 83% say-on-pay support in 2024 indicates moderate investor acceptance; however, 2024 TSR and losses heighten the importance of disciplined capital allocation and fee oversight .