BrightSpire Capital, Inc.

Ladies and gentlemen, please stand by. Good day and welcome to the Colony Credit Real Estate Inc. First Quarter 2020 Earnings Call. Please note that today's conference is being recorded. And at this time, I'd like to turn the conference over to Mr. David Palame. Please go ahead, sir.

Good afternoon, and welcome to Colony Credit Real Estate Inc.' 's first quarter 2020 earnings conference call. We will refer to Colony Credit Real Estate Inc. as CLNC, Colony Credit Real Estate, Colony Credit, or the company throughout this call. Speaking on the call today are the company's President and Chief Executive Officer, Mike Mazzei, Chief Operating Officer, Andy Witt, and Chief Financial Officer, Neil Reddington. Chief Accounting Officer, Frank Cerasino, is also on the line to answer questions. Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties could cause the company's business and financial results to differ materially. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows, and performance of the company, its borrowers and tenants, the real estate market, and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts us, our borrowers and our tenants, will depend on future developments. which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. For a discussion of risk that could affect results, Please see the risk factor section of our most recent 10-K and other forward-looking statements in the company's current and periodic reports filed with the SEC from time to time, cautioning that an interpretation of many of the risks should be heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. All information discussed on this call is as of today, May 7, 2020. and the company does not intend and undertakes no duty to update for future events or circumstances. In addition, certain financial information presented on this call represent non-GAAP financial measures. The company's earnings release and supplemental presentation, which was released this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. And now, I'd like to turn the call over to Mike Mazzi, President and Chief Executive Officer of Colony Credit Real Estate. Mike.

Thank you, David. First, on behalf of the CLMC management team, we would like to begin by wishing everyone well as we navigate through these uncertain times. Our employees are safe in the remote working locations where, in many cases, their work lives and personal lives have fused together. I want to thank them for their warm virtual welcomes, work ethic, and positive energy, especially in these challenging times. I myself officially joined on April 1st and was able to promptly integrate remotely. In fact, the transition to a virtual workplace for the CLNC team and myself has been quite seamless with the help of technology. I have been fully engaged with all functional areas of the organization. The use of video meeting technology has allowed me to interact with all of my fellow colleagues. Our systems and controls are working well, including our treasury and banking functions, accounting and internal audit, asset management, and legal. While Andy Witt, our COO, will address certain current business actions, and Neil Weddington, our CFO, will address Q1 results shortly, I want to focus on what is happening today and the days ahead. Our asset managers continue to be in very close communication with our borrowers and tenants. In light of everything our borrowers and tenants were dealing with, April was a successful month with most borrowers and tenants paying on schedule while we worked with certain others to effectuate their payments. 99% of interest payments were made on our core loan portfolio. However, in certain cases, we agreed to utilize some portion of current reserves toward loan payments. On the tenant side, the overall performance was strong. We will continue to evaluate comprehensive and creative ways to help both borrowers and tenants through these unprecedented circumstances resulting from COVID-19. To provide further insights into April, the entire combined loan portfolio inclusive of legacy non-strategic, 90% of loans by unpaid principal balance or 50 loans paid current. Of this amount, there were four loans for 14% by unpaid principal balance, which required accessing existing reserves. Our owned real estate portfolio experienced 87% rent collections, and those tenants unable to pay rent were primarily confined to retail tenants in our legacy non-strategic portfolio. Across CLMC's core owned real estate portfolio, we remain current on all our investment level borrowings. With regard to our bank counterparties, we have worked closely with them in providing asset updates for the borrowing base and mastery purchase agreements. I'm happy to report that the dialogue has been productive and all of our banking partners have been constructive. We will continue to be actively engaged with our bank lenders in providing them asset updates. To be clear, maintaining and enhancing liquidity wherever possible has been and will remain a top priority as we navigate through this difficult time. Working cooperatively with our banking counterparties is essential to our ability to meet the challenges that we have faced and will continue to face. The capital markets continue to be volatile, and in some sectors we are witnessing unprecedented events. While the Fed's multi-trillion dollar market programs have helped stabilize bond and equity markets since March lows, we feel many of the economic effects of COVID-19 are still unknowable. This is especially the case in commercial real estate equity and debt markets. As such, the company is planning for a slower recovery with variation by region and property type, which we have incorporated into our business plans, in particular for our hospitality investment. The commercial mortgage REAP sector has too been under pressure. Except for the GSE entities, Commercial real estate lenders have generally taken a pause. Lenders of every type are focused on balance sheet and asset management. Therefore, we are also forecasting slower loan payoffs. It is within this context that we've been focused on preserving our capital. As we previously disclosed, we have taken a serious step of suspending our monthly dividend in an effort to maintain and preserve liquidity. We realize the importance of the dividend to our shareholders. However, given the unprecedented circumstances of COVID-19, this was a prudent, incremental step to support the balance sheet and to maximize the long-term value of the company and its assets. When the economic environment comes into focus and it is clear how liquidity needs are met with a meaningful margin for error, we will revisit the dividend policy. Looking ahead, given the impact of COVID-19 on the broader economy, there will be challenges for commercial real estate. In the coming months, our emphasis will continue to be on asset and liability management and liquidity. We will continue to be vigilant in maintaining controls and procedures as we gradually transition back to the workplace. We will continue to maintain an open dialogue with our shareholders, borrowers, tenants, and banking constituents. It is impossible right now to predict with any reasonable certainty the impact of COVID-19 on our industry and on our business. But we know it has been and will be substantial, and we come to work every day with that as a backdrop. Finally, in terms of our business model, the substantial majority of most of our recent origination activities have been in smaller to moderate-sized senior mortgages, which fit well within CLO structures as we experienced with our $1 billion CLL execution in late 2019. We are taking a conservative posture today, and when we together reach the other side of COVID-19, we look forward to growing this business model to take advantage of an attractive lending environment as owner-operators seek to recapitalize their assets. With that, I would now like to turn the call over to our Chief Operating Officer, Andy Witt. Andy?