Lument Finance Trust, Inc.

Good morning and thank you for joining the Lumen Finance Trust third quarter 2024 earnings call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the call over to Andrew Sang at Lumen Investment Management. Please go ahead.

Good morning, everyone. Thank you for joining our call to discuss Lumen Finance Trust third quarter 2024 financial results. With me on the call today are Jim Flynn, our CEO, Jim Briggs, our CFO, Jim Henson, our president, and Zach Halpern, our managing director of portfolio management. On Tuesday, November 12th, we filed our 10Q with the SEC and issued a press release to provide details on our third quarter results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I'd 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. Such forward-looking statements to various risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements. These risks and uncertainties are discussed in the company's reported file, reports filed with the SEC, in particular, the risk factors section of our Form 10-K. It is not possible to predict or identify all such risks, and listeners are cautioned not to place undue reliance on those forward-looking statements. The company undertakes no obligation to update any of the forward-looking statements. Further, 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 for 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. For the third quarter of 2024, we reported GAAP net income of 10 cents and distributable earnings of 10 cents per share of common stock, respectively. In September, we also declared a dividend of 8 cents per common share with respect to the third quarter, in line with the prior. I will now turn the call over to Jim Flynn. Please go ahead.

Thank you, Andrew. Good morning, everyone. Welcome to the Lumen Finance Trust earnings call for the third quarter of 2024. We appreciate all of you joining us today. We'll start. On the U.S. economic outlook, we remain cautiously optimistic. Notwithstanding the new administration and uncertainties that come with that, recent cuts The short-term rate, continued signs of cooling inflation, relatively low unemployment figures, all point toward a likelihood of a soft landing. The long-term multifamily market fundamentals remain strong, and we were starting to see stability in asset cap rates, which translated into modest increase in property acquisition activity as investors came off the sidelines. As we transitioned to the new government We will continue to monitor each of these metrics, but continue to have confidence in the future of the multifamily market. We expect to continue to deliver a stable, sustainable dividend to our investors by continuing to focus on multifamily credit. We continue to see a steady ramp-up of the managers' origination pipeline and a trend that we expect to continue into the coming year. The ability of our manager and its affiliates to actively pursue and close unattractive lending opportunities, whether or not LFT currently has investment capacity, is a significant competitive advantage for the company. During the quarter, LFT experienced only $51 million of payoffs, and we were able to quickly and effectively redeploy this capital into two multifamily loan assets acquired from an affiliate of the manager. We rely on the deep experience and expertise of our manager's dedicated asset management team to continue to achieve positive outcomes for the company and to maximize shareholder value. During Q3, our portfolio continued to perform well on a relative basis. The weighted average risk rating of our book held steady versus prior quarter at 3.6. We had no new loans added to the five risk rating category during the period. We also determined no additions needed to our specific loss reserves were appropriate as of quarter end. We were also pleased to share that late last week, we achieved a positive resolution on one of our four five-rated assets that existed as of the end of the quarter on 9-30. We received full payment of all outstanding loan principal plus accrued interest from the borrower. As mentioned on our last call, we are actively evaluating alternatives to recap our 2021 CLL securitization transaction, which had a reinvestment period that ended in December 2023. As of quarter end, the CLO had a weighted average cost of funds of SOFR plus 164 with an effective advance rate of approximately 79%. We have observed relatively favorable new pricing on new theory CLO insurances over the last couple of months, which is an encouraging sign that investor demand may be returning to more normal levels. Securitization via CLO remains one of the potential paths in financing the portfolio. but we will carefully consider the alternatives to ensure our ultimate choice best aligns with our overall financing strategy and creates long-term value for our shareholders.