BrightSpire Capital, Inc.

Greetings. Welcome to the Colony Credit Real Estate Inc. Fourth Quarter 2020 Earnings Call. At this time, all participants are in 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. Please note this conference is being recorded. I will now turn the conference over to your host, David Palame. General Counsel, you may begin.

Good afternoon. and welcome to Colony Credit Real Estate Inc's fourth quarter and full year 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 Mazzi, chief operating officer, Andy Witt, and chief financial officer, Frank Saraceno. 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 can cause the company's business and financial results to differ materially, including the potential adverse effect of and heightened risks associated with COVID-19. For a discussion of risks that could affect results, please see the risk factors section of our most recent 10Q and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time. All information discussed on this call is as of today, February 24, 2021, 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 represents 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 gap measures and an explanation of why the company believes such non-gap financial measures are useful to investors. And now I'd like to turn the call over to Mike Mazze, President and Chief Executive Officer of Colony Credit Real Estate. Mike.

Thank you, David. Welcome to our fourth quarter earnings call. On behalf of the CLMC team, I would like to start by wishing everyone well, and I thank you for joining us today. I would also like to welcome Frank Saracino to his first earnings call as the company's chief financial officer. These past 12 months have been challenging for all of us, to say the least. We extend our thanks to those providing support and care on the many different front lines of the pandemic. I also thank our dedicated employees who are rising to meet the challenges they face both personally and professionally. That said, the CLC team has accomplished much during this time. First, solidifying the balance sheet by dramatically reducing debt and increasing liquidity, which stands at $689 million today. Specifically, we have substantially reduced our CMBS securities holdings and have fully paid off our CMBS securities repo lines, as well as our corporate revolver. Further, the legacy non-strategic portion of our portfolio has, for all intents and purposes, been resolved. L&S now accounts for an immaterial portion of the total portfolio at less than 1% of CL&C's at-share net book value. And finally, we have begun originating new loans and growing earnings. The culmination of all these accomplishments has resulted in the reinstatement of a quarterly dividend. With that, I'd like to now cover some of the key financial highlights for the fourth quarter. For the quarter, we had a gap in distributable loss per share of 41 cents and 20 cents, respectively. Excluding realized gains and losses and fair value and other adjustments, we generated total company adjusted distributable earnings of 20 cents per share. At year end, CLNC's unrestricted cash position was $473 million, or approximately $3.59 a share. Furthermore, our year-end GAAP and undepreciated book value per share were $12.96 and $14.14, respectively. Now, turning to the business. We are executing on our plan to transition our asset base toward floating rate first mortgages. As such, our mortgage origination activity has increased dramatically. Since recommencing with loan originations in mid-September, we have committed $690 million in new loans, of which nine loans have closed with a total commitment of $335 million, and an additional 13 loans are in the closing pipeline, representing total commitments of $355 million. We may utilize some of these new loans as replacements in our current CLO, should there be loan payoffs prior to the reinvestment period end date this October. Beyond that, we anticipate generating enough production in order to issue our second CLO later this year. At this time, we have deliberately focused our loan originations on multifamily and selective office properties. This has been driven both by market conditions created by COVID-19 and our desire to reshape our portfolio. In the last nine months, overall investment property sales have slowed considerably. There also continues to be a lack of visibility in the recovery timeline in a number of asset classes, most notably the hospitality sector. In addition, the retail property sector overall has incurred lasting damage from the pull forward of e-commerce, with malls and big box centers viewed less favorably than grocery anchored properties. For these reasons, while many commercial real estate lenders have reentered the market, there is a supply and demand imbalance for credit, as well as a capital mismatch across property sectors. Most lenders are focused on multifamily, industrial, and select office properties, while being especially hesitant on retail and hospitality. Over the near term, this imbalance could lead to an increasingly competitive lending market. But as a positive offset to this, we expect acquisition activity and long refinancings to increase in the second half of 2021 as the economy continues to reopen. Therefore, as we see economic conditions improve, CLNC will selectively expand its loan originations to other property types. Another positive is on the liability side of the balance sheet. Here, we see continued strengthening in demand for CLO securities driven by fixed income investors' increased preference for floating rate bonds. Also, our bank counterparties have been keeping abreast with the market by improving on both their funding costs and loan advance rates. This continued improvement in liability pricing coupled with the expected economic expansion should allow us to maintain satisfactory returns on equity. Overall, we are optimistic in 2021 about CL&C's business model in this type of operating environment. Finally, while our share price has improved in recent months, we recognize that CLMC continues to trade at a discount to our book value. Building earnings and growing dividends are obvious cornerstones to continuing to improve our valuation. In addition, we have sought to further enhance our disclosures to provide investors with more information. To this end, we have added some additional information on some of our loans and own real estate assets in this quarter's form 10-K filing. In summary, 2020 was a challenging year but the CLC team has made a number of key accomplishments. We have stabilized the company's balance sheet, put the legacy non-strategic portfolio behind us, commenced new loan origination, begun to build earnings, and reinstated our dividend. However, as I said in our third quarter earnings call, we are not yet out of the woods. The effects of COVID-19 will continue for many months. We also recognize that in many aspects of our lives, certain changes that have resulted from the pandemic may be permanent. Therefore, I want to again thank my colleagues and our counterparties for their teamwork and cooperation. We will continue to protect the balance sheet by remaining vigilant in our assets and liability management while prudently redeploying cash. The CLMC team has built great momentum this past year, which has continued into 2021. With that, I would like to turn the call over to our Chief Operating Officer, Andy Witt. Andy?