Lument Finance Trust, Inc.

Good morning and thank you for joining the Lumen Finance Trust second quarter 2022 earnings call. Today's call is being recorded and will be made available via webcast on the company's website. I would now turn the conference over to Charles Duddy with investor relations at Lumen Investment Management. Please go ahead, sir.

Thank you and good morning, everyone. Thank you for joining our call to discuss Lumen Finance Trust second quarter 2022 financial results. With me on the call today are James Flynn, CEO Michael Larson, President, and James Briggs, CFO. On Monday, we filed our 10-Q with the SEC and issued a press release which provided details on our first quarter results, excuse me, our second quarter results. We also provided a supplemental earnings presentation which can be found on our website. Before handing the call over to Jim, I would like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933. in Section 21E of the Securities Exchange Act of 1934. When used in this conference, words such as outlook, evaluate, indicate, believes, will, anticipates, expects, intends, and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statement. These risks and uncertainties are discussed in the company's reports filed with the SEC including its reports on Form 8K, 10Q, and 10K, and in particular, the risk factors section of our Form 10K. Additionally, many of these risks and uncertainties are currently amplified by and may continue to be amplified by the COVID-19 pandemic. It is not possible to predict or identify all such risks. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. the company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures will be discussed on this conference call. Presentation of this information is not intended to be considered in isolation nor as a substitute to the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at www.sec.gov. I will now turn the call over to James Flynn. Please go ahead.

Thank you, Charlie. Good morning, everyone. Welcome and thank you for joining the Lumen Finance Trust earnings call for the second quarter of 2022. During Q2, we continued to deploy our capital into commercial real estate debt investments with a focus in multifamily assets. Our manager is one of the nation's largest capital providers in the multifamily and seniors housing space, executing over $17 billion in transaction volume last year and servicing over a $50 billion portfolio, employing 600 employees and more than 30 offices nationwide. We believe the scale and expertise of this broad platform has and will continue to benefit the investors of LFT and provide strong support in the execution of our investment strategy. First, I'd like to begin by addressing the current economic environment. The multifamily market has experienced a period of transition over the last few quarters as lenders and investors react to inflationary pressures, geopolitical risks, capital markets volatility, and higher interest rates. Investment activity in the market has declined as asset buyers and sellers work towards reassessing financing costs and finding a new normal for levels of asset valuations, and financing structures. Despite technical recessionary indicators increasing, the strong employment market remains supportive of continued rent growth for multifamily assets, and we believe that the middle market workforce housing asset class remains extremely attractive. Despite rising debt service costs for borrowers, we believe that the supply-demand dynamics, demographics, and rent growth trends continue to support the asset class which creates an attractive investment opportunity for shareholders of LFT over the long term. Our multifamily investment portfolio has performed extremely well, and while we did book a one cent per share unrealized loss reserve against an office loan this quarter, which we will discuss in more detail later during the call, the remainder of our book continues to demonstrate very strong performance. More specifically, within the bridge lending market, lending standards have tightened, and spreads on new loans have increased industry-wide over the last few quarters. We are being more selective with regards to credit, and the average as-is appraised loan-to-value on new loans being offered by our manager has decreased meaningfully. Our manager is currently quoting new transactions at spreads above 4%, whereas a few months ago we were seeing loans prices spread in the low to mid threes and sometimes lower. We would expect that the average spread on LFT's investment portfolio will increase from today's average level as the portfolio grows. With this backdrop, the broader capital markets have remained volatile and dislocated. The CRA CLO market had a relatively strong start to the year, but market conditions have deteriorated considerably since March, and several transactions have been completed with increasing costs, with total spread on the investment-grade bonds growing to more than 300 basis points over silver. That compares to a spread of 143 basis points over LIBOR on LFT's $1 billion CRE CLO, which we financed in June of 2021. While the most recent new issue multifamily CRE CLO in the market priced above a 300 total spread above the investment grade bonds, it was a modest decrease to the prior transactions, which we have not seen in many months. In order to continue growing our portfolio on a leveraged basis to fully deploy the capital we raised in Q1 of this year and take advantage of our manager's significant pipeline of loans, we are actively focused on executing a loan financing transaction to leverage newly acquired loans. We have historically utilized CRE CLOs to finance our investments and continue to believe that market provides an attractive financing source due to the favorable leverage structure of non-recourse and non-market-to-market features. However, due to dislocated capital markets, we elected to delay our next CRO CLO financing effort. While we are prepared to execute a CLO quickly to the extent market conditions approve, we are also actively exploring alternative financing options, including note-on-note financings and AB node structures. In fact, we have received preliminary feedback from rating agencies suggesting the credit quality of our pool will be received well by the market. Overall, it is clear that the cost of liabilities have increased and market spreads on assets are also increasing. We believe it is likely that newly originated assets going forward will have wider spreads than existing assets in line with the increases in the cost of financing. We believe that the increase in short-term rates will also have a benefit to LFT over the short and long term. With regards to our dividend, we previously declared a quarterly common dividend of $0.06 per share for the first and second quarter of 2022. This level reflected a resetting of our dividend, taking into account our Q1 capital raise and increased share count. In addition, the dividend reflected the anticipated drag on net income to common shareholders as we worked to deploy the newly raised capital on a leveraged basis. We would expect our earnings to continue to be pressured during Q3 until such time as the capital market conditions normalize and we were able to execute a financing transaction. Overall, however, I would like to emphasize that once our capital is fully deployed on a leveraged basis, we expect to support a stable, consistent run rate market yield on a go-forward basis. We are cautiously optimistic of a return to a more stable capital markets environment in the near future. We continue to make progress toward our goals, and I'm excited about the continued growth as we focus on executing our business plan And with that, I'd like to turn the call over to Jim Briggs, who will provide details on our financial results. Jim?