Lument Finance Trust, Inc.

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

Thank you, and good morning, everyone. Thank you for joining our call to discuss Lumen Finance Trust third quarter 2022 financial results. With me on the call today are James Flynn, CEO, Michael Larson, President, and James Briggs, CFO. On Tuesday, we filed our 10Q with the SEC and issued a press release which provided details on our quarterly results. We also provided a supplemental earnings presentation which can be found at 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 and Section 21E of the Securities Exchange Act of 1934. When using 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 FCC, including its reports on Form 8-K, 10-Q, and 10-K, and in particular, the risk factor section of our Form 10-K. 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. A 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 measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at www.sec.gov. So now I'll turn the call over to James Flynn. Please go ahead.

Thank you, Charlie. Good morning, everyone. Welcome to the Limited Finance Trust Earnings Call for the third quarter of 2022. Thank you for joining. 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 risk, capital markets volatility, and higher interest rates. In theory, 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 recessionary indicators increasing, the strong employment market remains supportive of continued rent growth for multifamily assets, although at a slower pace than we've seen over the previous two years. That being said, we continue to expect rents to outpace expenses and believe the credit quality of the middle market workforce housing asset class remains extremely attractive. While capital markets and rates remain challenging, the credit profile of the middle market housing market continues to be supported by favorable supply-demand dynamics, demographics, and long-term rent growth trends. and in our view, remaining an attractive investment opportunity for shareholders over the long term. Our multifamily investment portfolio has performed well, and while we did book an unrealized loss reserve against our sole office loan this quarter, which we'll discuss in more detail later during the call, the remainder of our book continues to demonstrate strong performance. More specifically, within the bridge lending market, lending standards have tightened and pricing on new loans has increased industry-wide over the last few quarters. Our manager is being more selective with regards to credit, and the average assets appraised to LTV on new loans being offered by our manager has decreased. Our manager is currently quoting new transactions at spreads well above 4%, whereas a year ago we were seeing loans price with spreads in the low to mid threes or lower. We would expect that the average spread on LFT's investment portfolio will continue to increase as the portfolio grows. With this backdrop, the broader capital markets have remained volatile and dislocated. Conditions in the CRE CLO market remain extremely challenging, and the market for new issuance is limited at this time. The last new issue CRE CLO to price in the market was in early October, with AAA spreads widening to SOFR plus 275. That's versus AAA spread of LIBOR plus 117 on LFT's existing CLO. Liquidity for the lower rated BBB bonds remains extremely limited, effectively reducing issuer advance rates. In order to continue our portfolio growth on a leveraged basis and fully deploy the capital we raised in Q1, we remain actively focused on executing a loan financing transaction to leverage newly originated loans from our manager. We have historically utilized the CRE-CLO market to finance our investments and continue to believe that long-term that market provides an attractive financing source due to favorable leverage as well as non-recourse, non-mark-to-market features. However, due to the dislocation just discussed, we have elected to continue the delay of our next CRE-CLO financing effort. We are prepared to execute a CLO quickly to the extent market conditions improve but we are also actively exploring alternative financing options, including note-on-note financing, A-note structures, and the Freddie Q program. Overall, it is clear that the cost of liabilities has increased, and the market spreads on assets are also increasing. We believe it likely that newly originated assets going forward will have wider spreads than existing assets in line with the increases in cost of financing. We've also seen increasing short-term interest rates, which over time will be a benefit to LFT. With regards to our dividend, we have previously declared a quarterly common dividend of 6 cents per share for the first three quarters of 2022. This level reflected resetting of our dividend, taking into account our Q1 capital raise and increased share count. In addition, this dividend reflected the anticipated drag on net income to common shareholders as we work to deploy the newly raised capital on a leveraged basis. We would expect our earnings to continue to be pressured in the current environment until such time as the capital markets normalize and we were able to execute an attractive loan financing transaction. In the meantime, we continue to focus on deploying our capital into commercial real estate debt investments with a focus on 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 total transaction volume last year, and servicing a $50 billion portfolio and employing over 600 employees in 30 offices nationwide. We believe that scale and expertise of this broad platform will continue to benefit the investors of LFT. With that, I'd like to turn the call over to Jim Briggs, who will provide details on our financial results. Jim?