BrightSpire Capital, Inc.

Greetings and welcome to the Brightspire Capital, Inc. first quarter 2023 earnings call. At this time, all participants are on a listen-only mode. A brief 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. It is now my pleasure to introduce your host, David Palame. General Counsel, thank you. Please go ahead.

Good morning, and welcome to Brightspire Capital's first quarter 2023 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 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 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 10-K 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 3rd, 2023, 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 reconciliations 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 2023 GAAP net loss attributable to common stockholders of $4.1 million, or 3 cents per share. Distributable loss of $11.5 million, or 9 cents per share. and adjusted distributable earnings of $34.5 million, or 27 cents per share. The company also reported GAAP net book value of $10.41 per share and underappreciated book value of $11.74 per share as of March 31, 2023. With that, I would now like to turn the call over to Mike. Thank you, David.

Welcome to our first quarter 2023 earnings call, and thank you for joining us this morning. In my remarks today, I will focus on a few key financial highlights, market conditions, and our near-term objectives. Andy will provide an overview of our asset management development, and then Frank will discuss our first quarter financial results. Starting off with some financial highlights. For the first quarter, we reported adjusted distributable earnings of $0.27 per share. Importantly, our loan book, which is 97% floating rate, continues to benefit from higher base rates, and our dividend coverage is now at 1.35 times. Our dividend yield on current market pricing is approximately 14%. While share buybacks would be highly accretive, we continue to have a strong bias toward maintaining liquidity and reduced leverage during this uncertain period. Over the past 12 months, we have reduced leverage by approximately 15% from 2.3 times to the current level of just 2 times. Our current leverage is among the lowest in our public peer group. This quarter, we recorded a 32-cent reduction in undepreciated book value, primarily driven by net increases in our general CECL reserves, as well as several specific loan level reserves. Andy and Frank will provide more details on this. In terms of liquidity, as of today, we are at $424 million, of which $259 million is unrestricted cash. We expect to utilize a portion of this cash in the coming quarters as we shift certain loans from their current financing arrangements. In the coming quarters, we also expect to pick up liquidity as a result of certain asset payoffs and resolutions. During the quarter, Digital Bridge completed a secondary offering of their remaining holdings of our funds. We thank them for their support as shareholders and for their assistance and leadership in the internalization of management of the company. This sale not only removed a significant overhang, but was also very broadly distributed with over 50 institutional investors participating in the offering, many of whom are new to the Pricefire name. The transaction has also led to a substantial increase in our daily trading volumes. Now, turning to the capital markets. Since our last earnings call, market conditions have certainly gotten more complicated. While the credit markets continue to be challenging, we now have additional turbulence from the recent failures of three significant U.S. banks, as well as Credit Suisse. While most of us were more focused on the top money center banks, very few appreciated the extent of the uninsured deposit bubbles and asset liability mismatches that existed at some of the larger regional banks. Given these recent bank failures, it has become clear that the regional banking system had significant exposure to both deposit flight risk and long-term fixed rate assets. These issues have been exposed and exacerbated by much higher yielding U.S. pressures. we are witnessing hundreds of billions of bank deposits moving at record speed to higher yielding money market funds. Going forward, many regional banks will need to reinforce their liability and capital structures as uninsured deposits have proven to be an unreliable source of long-term funding. At the same time, Regulatory oversight is going to become more restrictive as bank examiners focus on what went wrong and how to prevent it going forward. The culmination of all this means that many regional banks will not be expanding credit lending but will rather be looking to shrink their balance sheets. The repercussions of this will be a meaningful pullback in credit. This will certainly be the case with commercial real estate lending. especially when you consider how regional banks have substantially increased their exposure in recent years along with deposit growth. For example, Signature Bank became one of the single largest lenders in New York City. And currently, there are local community banks which have some of the largest commercial real estate loan portfolios in the U.S. Therefore, as the year progresses, The next shoe to drop will be credit issues arising in these regional bank loan portfolios. This only further validates the more conservative approach we at Bright Spire adopted over a year ago to substantially reduce our loan origination and maintain higher levels of cash liquidity. In closing, I believe our prudent and conservative approach to managing our leverage and liquidity will position us well for when the tide turns. When the Fed starts to ease and the capital markets stabilize, we will be in a strong position to deploy capital in what will be an extraordinary lending environment. With that, I would now like to turn the call over to our president, Andy Witt. Andy?