BrightSpire Capital, Inc.

Greetings and welcome to the Brightspire Capital Inc. Second Quarter 2023 Earnings Conference Call. At this time, all participants are in 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. And it is now my pleasure to introduce to you David Palame, General Counsel. Thank you, David. You may begin.

Good morning, and welcome to Brightspire Capital's second 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, which are based on management's current expectations, 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 the 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, August 2, 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 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 second quarter 2023 GAAP net loss attributable to common stockholders of $7.5 million, or $0.06 per share. In addition, the company reported second quarter 2023 distributable earnings of $21.1 million, or $0.16 per share, and adjusted distributable earnings of $32 million, or $0.25 per share. The company also reported GAAP net book value of $10.16 per share and undepreciated book value of $11.53 per share as of June 30, 2023. With that, I would now like to turn the call over to Mike.

Thank you, David. Welcome to our second quarter earnings call, and thank you for joining us this morning. As David mentioned, We are pleased to report adjusted distributable earnings of 25 cents per share, while our dividend coverage continues to remain strong. Current liquidity as of today stands at 347 million, of which 182 million is unrestricted cash. During the quarter, we again reduced our overall leverage to 1.9 times. This quarter, we recorded a 21 cent reduction in underappreciated book value. which currently stands at $1,153. This reduction was primarily driven by a net increase in our general CECL reserves in addition to a specific reserve on one office loan, which was already on our watch list. Andy will provide more details in his section. As everyone is well aware, throughout the first half of 2023, unprecedented market conditions have pressured commercial real estate borrowers across the board regardless of property type. These strains are unlikely to ease until the Fed begins reducing short-term interest rates, which is now expected to occur sometime in 2024. With another interest rate hike just last week, the Fed is very near the end. However, given the current strong economy, the Fed will maintain a higher for longer interest rate policy while continuing to reduce its balance sheet. This remains the primary risk factor for the commercial real estate markets over the next 12 months. Regarding our portfolio, the overall performance of our underlying office properties during the quarter has remained steady. We have, in fact, upgraded the risk ratings for two office loans and removed them from our watch list. This is the result of these borrowers making significant progress in their leasing plans. Given the increased focus on this property segment, And in an effort to provide investors more information, we have included in our second quarter supplement package a description of our five largest office loans, which represents 35% of our office loan portfolio. Multifamily, which represents 52% of the portfolio, has remained resilient. We have experienced top-line rent increases across the portfolio which have exceeded our underwriting projections. However, all property types, including multifamily, have not been immune from the rapid rise in inflation and corresponding interest rate increases. In some cases, the positive impact of higher rental rates is being muted by rising operating expenses such as utilities, payroll, and insurance. Additionally, in some select instances, we have seen increases in bad debt primarily due to legacy, tenant-friendly COVID policies in certain jurisdictions. Ultimately, we expect these conditions will improve in the coming quarters as we work with these borrowers to execute their value-add business plans. In the meantime, this quarter, we have identified and downgraded three multifamily loans, from a three to a four to reflect specific circumstances at the property and or the sponsor level. Importantly, all three of these loans as well as the entire multifamily book are current in debt service payments. As we look at the second half of the year, our focus remains on managing our portfolio while maintaining sufficient liquidity and lower leverage. We are of course eager to get back on offense and make new investments. especially as we expect many regional banks to shrink their balance sheets in the coming year. Last week's merger of two West Coast banks is a great example of this. This pullback by regional banks should create ample opportunities for private credit and non-bank lenders like Bryce Fire. However, in the near term, protecting the balance sheet continues to remain job number one. With that, I would now like to turn the call over to our president, Andy Witt. Andy?