BrightSpire Capital, Inc.

Greetings and welcome to the Brightspire Capital's first quarter 2022 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 call over to David Palame, General Counsel. Thank you. You may begin.

Good morning. and welcome to Brightspire Capital's first quarter 2022 earnings conference call. We will refer to Brightspire Capital as Brightspire, BRSP, or the company throughout this call. Speaking on the call today are the company's Chief Executive Officer, Mike Mazzei, President and Chief Operating Officer, Andy Witt, and Chief Financial Officer, Frank Saracena. 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. 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, May 3, 2022, 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 morning and is available on the company's website, presents reconciliation to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Before I turn the call over to Mike, I will provide a brief recap on our results. The company reported first quarter 2022 GAAP net income attributable to common stockholders of $27.7 million or 21 cents per share. and distributable earnings of $28.8 million or 22 cents per share. There were no realized gains and losses and no provision for loan losses during the quarter. So adjusted distributable earnings for the first quarter of 2022 was also $28.8 million or 22 cents per share. The company reported GAAP net book value of $11.26 per share an undepreciated book value of $12.36 per share as of March 31, 2022. With that, I would now like to turn the call over to Mike.

Thank you, David. Welcome to our first quarter earnings call, and thank you for joining us today. Given the exceptional volatility over the past several months, I will focus my comments on market conditions while Andy will provide additional details regarding our deployment activity and balance sheet. And then Frank will discuss our first quarter financial performance. As a continuation of our momentum from Q4, loan originations during the first four months of 2022 remained very strong. This has given us a solid head start in meeting our origination goals for the year. On a year over year basis, our loan book has increased 36% to 3.8 billion and assets have grown 24% to $5.2 billion. On our fourth quarter call, I referenced the Fed's intentions to aggressively increase interest rates in response to 40-year high inflation rates. As the quarter progressed, the Fed's impact on interest rate and credit markets became more acute. The public equity markets also have been very volatile, and April was NASDAQ's worst month since 2008. Since our Q4 earnings call, we have seen short-term treasury yields rise about 150 basis points, along with a continued widening of credit spreads. We at Brightspire have been responding to these market dynamics by also widening our lending spreads. We also mentioned that property cap rates would need to adjust to reflect current interest rate expectations. And additionally, while multifamily rent growth may generally continue to increase due to housing supply constraints, We do, however, expect a deceleration of rent growth given the affordability impact from overall increases in the cost of living and negative wage growth. This confluence of factors has begun to manifest themselves across the commercial real estate debt market. For instance, the cost of a two-year interest rate cap, which is required for floating rate loans, has increased approximately five times in the past quarter. Further, commercial mortgage CLO credit spreads have widened about 45 basis points. A AAA-rated CLO at SOFR plus 175 today will probably have an all-in yield of 3.5 percent by July and over 4 percent in the fall. Therefore, we think CLO credit spreads should tighten over the coming months as the Fed's actions reduce the current differential between one-month SOFR and the two-year Treasury. The result of this overall increase in the cost of capital has caused current transaction metrics to become a bit more challenging. This is because there's been a lagging effect in the commercial real estate investment sales market. This is especially the case for multifamily assets that were recently brought to market and did not fully reflect these quickly changing market factors. We were still seeing some multifamily acquisition cap rates in the low mid to 3% range, along with an insufficient cap rate distinction between geographical markets and asset quality. But that has begun to change as lenders and property buyers push back on valuation metrics. And this reverse feedback loop works to reset pricing expectations over the coming months. This transitory period could temporarily taper origination volumes, but may also present some unique lending opportunities, especially for non-bank lenders. Concurrently, these volatile market conditions could also result in a slowdown of loan payoffs in our own portfolio, which we are monitoring closely. Also worth noting, there are tens of billions of CMBS conduit loans set to mature in 2023. Many of these loans may be open to prepayment later this year. Therefore, these upcoming maturities could provide bridge loan lending opportunities later in 2022 as well. In closing, I would like to emphasize that our origination head start in the first four months of the year allows us to be more selective as the market recalibrates. And finally, we continue to expect loan originations of about $2 billion for the full year, and we are planning to execute our third CLO financing during the third quarter. And with that, I would now like to turn the call over to our president, Andy Witt. Andy?