Greetings. Welcome to the BrightSpire Capital's First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a remainder, this conference is being recorded. I'd now like to turn the call over to David Palamé, General Counsel. Thank you. You may begin. David Palamé: Good morning, and welcome to BrightSpire Capital's first quarter 2022 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 Saracino. 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-Q 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 3, 2022, 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. And, before I turn the call over to Mike, I'll provide a brief recap on our results. The company reported first quarter 2022 GAAP net income attributable to common stockholders of $27.7 million, or $0.21 per share, and distributable earnings of $28.8 million or $0.22 per share. There were no realized gains and losses, and no provision for loan losses during the quarter. So adjusted distributable earnings for the first quarter of 2022 was $28.8 million or $0.22 per share. The company reported GAAP net book value of $11.26 per share and undepreciated book value of $12.36 per share as of March 31, 2022. With that, I'd now like to turn the call over to Mike.

Thank you, David. Welcome to our first quarter earnings call and thank you for joining us today. Given the exceptional volatility over the past several months, I will focus my comments on market conditions, while Andy will provide additional details regarding our deployment activity and balance sheet. And then Frank will discuss our first quarter financial performance. As a continuation of our momentum from Q4 loan origination is during the first four months of 2022 remained very strong. This has given us a solid head start in meeting our origination goals for the year. On a year-over-year basis, our loan book has increased 36% to $3.8 billion, and assets have grown 24% to $5.2 billion. On our fourth quarter call. I referenced the Feds intentions to aggressively increase interest rates in response to 40-year high inflation rates. As the quarter progress, the Feds impact on interest rate and credit markets became more acute. The public equity markets also have been very volatile, and April was NASDAQ's worst month since 2008. Since our Q4 earnings call we've seen short-term treasury yields rise about 150 basis points, along with a continued widening of credit spreads. We are BrightSpire had been responding to these market dynamics by also widening our lending spreads. We also mentioned that property cap rates would need to adjust to reflect current interest rate expectations. And additionally, while multi-family rent growth may generally continue to increase due to housing supply constraints. We do however, expect a deceleration of rent growth, given the affordability impact from overall increases in the cost of living and negative wage growth. This confluence of factors has begun to manifest themselves across the commercial real estate debt market. For instance, the cost of a two year interest rate cap, which is required for floating rate…

Thank you, Mike. And good morning, everyone. BrightSpire continues to execute its business plan focused on net deployment in middle market opportunities across high growth geographies. During the first quarter, the company committed to $589 million in aggregate loan commitments across 17 newly originated loans, with an initial funding of 481 million. All of these investments are floating rate first mortgages on cash flowing assets as well as one multi-family mezzanine loan with a repeat borrower relationship. During the first quarter, we also funded 20 million of advances on existing loans and received $224 million in repayments across five loans. This resulted in approximately $275 million a positive net deployment in our loan portfolio, growing the loan portfolio to $3.8 billion and total assets to $5.2 billion. Well, we made solid progress on net deployment in the first quarter. Our originations activity has tapered as a result of adjusting to the market conditions, Mike highlighted in his prepared remarks. Subsequent to the first quarter, we have closed four investments for an aggregate commitment amount of $128 million. Currently, there are an additional six loans in execution with an aggregate commitment amount of approximately $203 million, resulting in 10 loans totaling $331 million of aggregate commitments that have either closed or in execution so far, during the second quarter of 2022. The weighted average spread on closed and in execution senior loans during 2022 at SOFR plus 363. During the second quarter today, we have received $98 million in repayments, including the payoff of one mezzanine loan. As for the remainder of 2022, our primary focus is the net deployment of cash on balance sheet and staying ahead of prepayments. Year-to-date, we've seen approximately 900 investment opportunities totaling approximately $50 billion in investment value. Put that in context, it represents the…

Thank you, Andy and good morning everyone. Before discussing our first quarter results, I want to mention that we expect to file our Form 10-Q later this week. In addition, I would like to draw your attention to our supplemental financial report, which is available in the shareholder section of our website. The supplement continues to provide asset by asset details as our Form 10-Q. For the first quarter, our distributable earnings and adjusted distributable earnings were each $28.8 million or $0.22 per share. During the quarter, we did not record any realized gains or losses, and therefore distributable earnings and adjusted distributable earnings were equivalent. Additionally, for the first quarter, we reported total company GAAP net income attributable to common stockholders of $27.7 million or $0.21 per share. During the first quarter, total company GAAP net book value increased slightly by $0.04 to $11.26 from $11.22 per share, while undepreciated book value decreased by just $0.01 to $12.36 from $12.37 per share. I would like to quickly bridge the first quarter adjusted distributable earnings of $0.22 versus $0.27 reported in the fourth quarter. The decline primarily reflects the income and non-recurring profit participations related to the repayment of the mezzanine loan and a preferred equity investment respectively. Both investments were unlevered. Additionally, both repayments occurred during the last week of December, resulting in our ability to also recognize a full-quarter interest income related to these investments. As of March 31, the weighted average for in our portfolio was 70 basis points down from 159 Bps in March 2021. It is also worth noting that less than one month into the second quarter, one month LIBOR has already increased to approximately 80 basis points. With that, our earnings are now positively correlated to rising interest rates. We provide more data…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question was coming from the line of Eric Hagen with BTIG. Please proceed with your questions.

Hey, thanks. Good morning. Can you maybe go into some detail from the opening remarks when you say that CLO and commercial credit spreads could tighten as the Fed raises interest rates and maybe more generally, just how you expect CRE asset values to respond to Fed hikes going forward? Thanks.

Hi, welcome to the call. Eric. Thanks, its Mazzei. So generally speaking, when you look at short duration assets, where in fixed income investors want to be the CRE and CLO paper has widened considerably. But with the Fed hikes, you're going to see absolute yields on that paper increased dramatically over the next ensuing months. As I said in my prepared remarks, you could see overall yield on CLO paper getting to 3.5% what could be a two-year duration instrument or less, and then going out into the fall that could be over 4% and so. The short end of the curve leads to catch up. I think that a while there's a little bit of a risk off in the fixed income markets and you're seeing rates rising, as equities are falling, and which is not usually the case, I think you will see appetite for CRE/CLOs increase as the overall yield improves over the coming months. We think -- I personally think that CLO AAA's are among the cheapest fixed income instruments out there for investors. So we would expect appetite to increase. We're faced with a lot of supply coming in the next quarter, but we're looking at third quarter. So we think by then CLO spreads will tighten. But we'll make a decision at that point. With regard to real estate valuations. Again, in my prepared remarks, interest rates go up and affects valuations everywhere, whether it's equity markets or real estate. I appreciate that inflation is higher and replacement costs for assets are higher. And so from a replacement cost perspective, the value of real estate's improving. Well, from a cash flow perspective, interest rates are affecting that and cap rates need to move. And we -- there is a lag typically in the investment sales markets, as I said in my remarks, and we're starting to see that happen now. So we would expect cap rates to start to edge up. And otherwise investors who are buying properties are getting negative returns if this interest rate environment continues to go up and cap rate stay where they are.

Thank you for that. Very complete answer. That was really good. Liquidity on the balance sheet looks healthy, I guess, how can you -- how would you describe or how would you maybe frame thinking about new loan commitments versus the option to build some liquidity on the balance sheet going forward? Thanks.

Well, we've been operating with a lot of cash. We've had a lot of loans pay off some loans that were made post COVID had paid off right after their prepayment penalty lapse, because the owner operators were way ahead of their programs and their ability to increase rent. So we're still on a path, try to deploy as much capital as we can by the end of the year. And the plan is, as we always have said, is to hold about $100 million of cash on balance sheet. So that if we need to move assets in and out of financing vehicles that we have the wherewithal to do that. So the goal is to still get the cash down to about $100 million. We did have a lag in the pipeline, as Andy and I discussed as we were pushing back on deals over the past 30 days. Waiting for the market to kind of recalibrate. So given the head start we had, we need to pick it up again during the course of the late spring and the rest of the year. And the goal, again, is to get down to about $100 million. We also still have something that we do not control, which is our largest shareholder digital bridge, they have -- we have looked at examining doing something there with a potential share buyback. But again, this is in their hands, they own the stock. There's no timetable from them. Our expectations, as they've said on their own calls, that they will act responsibly and very deliberately, in what they do with our stock. They've been very supportive of the company thus far. But if there's an opportunity there should digital decide to come to the secondary markets and sell some of the BRSP stock. We could use some capital to that. But again, we don't control that outcome. And we're going to try to deploy capital into loans as best we can, and not anticipate that that happen.

That's great, Mike. Thanks. Appreciate it.

Thank you. [Operator Instructions] Our next question is coming from the line of Steve DeLaney with JMP. Please proceed with your questions.

Good morning, everyone. Thank you for taking my questions. I'd like to start off with a question to Frank. You mentioned the $12 million New York City Hotel loan that was moved to a five from a four, I'm curious if you have at this time, is there a specific reserve on that loan at this time?

Hey, Steve, it's Frank. No, there is not, that is still captured within our CECL, our CECL reserves.

Got it, and is the loan -- is the loan non-accrual or on cost recovery or are there payments being made?

The loan is not on cost recovery or non-accrual and payments are being made.

Payments are being made. Okay, great. That's good to hear.

Steve, it is Mazzei, that is given it is a -- it's a New York City asset and New York City Hotel, the CECL did capture those nuances and the calculation. So the CECL there is larger than a typical CECL for instance on a new loan. There is more of a substantial CECL against that, because of what the underlying asset is in the model, there is a government agency that does utilize the hotel at this time and has been supplying cash flow to the borrower to pay debt service. And there's been a lag in that payment. Our expectations are when that agency catches up, that the borrower will catch up and be able to meet its extension criteria. But that was not the case at quarter-end, we were still having.

Okay. All right. Thanks for that color on that. And my second question is, I'm just looking at the statement of operations on Page 24, the $10.3 million of other gains, can you break that down? I recall, you mentioned that was a net lease asset sold, and then one other real estate asset. So I'm curious whether that that $10.3 million includes both of those items? Thanks.

Yes, that line item $10.3 million includes the gains on the two real estate sales noted in the supplement.

Okay, and did you break those? Is that broken out anywhere, I guess net lease, we know what that is. I think something was described as an other real estate asset. Can you give us some clarity on what -- other than the net lease what the other asset, the nature of that asset?

Yes, that was a hotel asset, we sold during the quarter at the end of the program, and we realized the GAAP gain on both of those assets.

Okay, now the hotel that was -- had you taken that back, was that an REO property?

Yes.

Got it, okay. Okay, very good. Gosh, I think that's, I think that's it for me. We could talk about rates all day long. But I think Mazzei you summed it up pretty good that, I think the important takeaway from, what I heard you say was markets have to adjust to the reality of the new environment. And that means, CLOs et cetera, but also the actual underlying real estate market. So we appreciate that insight, and it'll be an interesting six months or so.

Great, thank you.

Thank you. Our next question come from the line of Derek Hewett, Bank of America. Please proceed with your questions.

Good morning, everyone. Could you talk a little more about your near-term funding plans? Are you just looking to issue your third CLO at this point or are you also potentially exploring other sources of funding, including unsecured debt?

At this point, we're not exploring unsecured debt, we're not exploring a pref. The game plan is to issue the third CLO that would pay down all warehouse facilities, we typically experience a slightly larger advance rate on the CLO by a couple of percent than what we're getting on the warehouse line. So if spreads cooperate, there would be some accretion there in the ROE, if we did a CLO issuance. Overall, there's a possibility that we issue a pref at the end of the year, this really depends largely on what happens with DBRG Stock Holdings and if there's an opportunity there for us to participate in that. But other than that, other than the CLO potentially increasing some of our warehouse facilities by a couple of $100 million to several million dollars, but that's it, no expectation of doing unsecured at this point.

Okay, great. And then I'm not sure if you mentioned it in your prepared remarks, but any update on that mixed use mezzanine loan, I think it's number 109.

The LA mix loan?

Yes.

Yes, no update there. We wrote that to zero several quarters ago. It's public record that we filed a complaint with the holder of the mezzanine lender position and that document is public. We are waiting to hear response from that complaint. And as far as I know, nothing really is happening at the asset level. The hotel was supposed to have been sold last summer, that did not get completed and I have no information about the hotel being on the market yet again, so time is not our friend or anyone's friend in that development, if assets are not getting sold, so I think things have been still moving slowly but I have no official color.

Okay, thank you.

Thank you, there are no further questions at this time. I would now like to turn the call back over to management for any closing comments.

Thank you for joining us today. We look forward to speaking to you for Q2 in early August. Have a good day.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.