Broadmark Realty Capital Inc.

Greetings and welcome to Broadmark Realty Capital's first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Nevin Bhoparai, Chief Legal Officer. Please go ahead, sir.

Good afternoon. Thank you for joining us today for Broadmark Realty Capital's first quarter 2021 earnings conference call. In addition to the press release issued this afternoon, we filed a supplemental package with additional detail on our results, which is available in the investors section on our website at www.broadmark.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will also be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filing. This afternoon's conference call is hosted by Broadmark's Chief Executive Officer, Jeff Pyatt, and Chief Financial Officer, David Schneider. Management will make some prepared comments after which we will open up the call to your questions. Now, I will turn the call over to Jeff.

Thank you, Nevin, and welcome to our first quarter earnings call. This afternoon, I'll begin with a market overview and a discussion of our first quarter performance, and then I'll turn the call over to David to provide additional detail on our financial results and loan portfolio. We will then open up the call for your questions. We've completed another quarter with strong originations. We continue to be encouraged by the exceptional strength we see in the housing and construction markets. Fundamentally, it is one of the best markets we've seen in years. Housing availability remains near multi-decade lows. Home price appreciation in the past year alone has been in the double digits across much of the country. We are experiencing a Goldilocks environment of low interest rates, combined with expectations for stable economic growth as we continue to navigate through COVID-19. The fact is we are in the middle of a long-term housing shortage that is the result of many years of undersupply, and our current pace of building is not even enough to keep up with existing demand. Even with a heightened pace of activity, this housing shortage will take many years to resolve, particularly in markets that are experiencing strong in-migration This implies there are meaningful sustained growth opportunities for Broadmark as we move ahead. All else equal, we are expecting these market conditions to remain highly supportive of our lending activities for the foreseeable future. While we lend across a variety of property types, our focus is predominantly on residential construction, which represented most of our first quarter originations. In the first quarter, we generated $149 million of originations and amendments. This was shy of our fourth quarter volume, which was truly an exceptionally productive quarter. But this first quarter rate is one that we feel we can maintain and improve on over time. Importantly, our pace of originations accelerated over the course of the first quarter, with the bulk of our activity occurring in March. This strength carried over into the second quarter. The environment remains competitive, but we remain confident in our ability to further grow our business and expand market share given our extensive borrower relationships and deep market expertise. Last quarter, we noted significant capital inflows into construction lending, resulting from the low interest rate environment and strong fundamentals. We also saw a high level of institutional investor interest in single-family rental housing, as certain operators have demonstrated that rental homes can be run profitably at scale. Broadmark has had many years of experience with build-to-rent projects, and we expect they will continue to be a large part of the housing market going forward. But we are not rental operators, and it is important to remember that we only finance the construction phase of these projects, and so we do not incur the expenses and operational risk associated with maintaining and leasing those houses over time. We are not competing with institutional owners and operators of rental homes. but their success is helping to drive further demand for the types of projects we finance. The end buyer of our projects might be a mom-and-pop investor, or it may be a private equity fund that is buying up houses by the hundreds. In either case, the influx of investor capital is helping to ensure that our borrowers have good exit opportunities, which is ultimately good for Broadmark. In general, we view this intense investor interest as a validation of our business model and is the source of market liquidity. However, it is also a competitive force, and it will require us to remain disciplined and evaluate our pricing relative to appropriate risk levels across our markets and project types. Over the years, we've seen even sophisticated investors try to enter this lending market and fail because they lack the appropriate experience to manage the construction process, estimate costs that can change rapidly, respond to the needs of the borrower base, and properly understand local market and even neighborhood conditions. While we have seen increased competitive pricing pressures across our markets, we remain confident in our business model, which has served us well for over 10 years in a variety of markets and interest rate environments. We can also be flexible with certain elements of our loan structure without sacrificing pricing or our maximum 65% LTV. We see our strong recent origination volumes validation that we can compete in a competitive market on the basis of borrower relationships, loan structure, terms, and service rather than on price. As always, we remind you that we are internally managed and fully aligned with our fellow shareholders' interests. With that, I'll turn it over to David to review the financials.