Good morning, and welcome to Tremont Mortgage Trust's Second Quarter Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Christopher Ranjitkar, Senior Director of Marketing and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thanks for joining us today. With me on the call are President and Chief Executive Officer, David Blackman; and Chief Financial Officer and Treasurer, Doug Lanois. In just a moment, they will provide details about our business and our performance for the second quarter of 2019. First, I would like to note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Tremont's beliefs and expectations as of today, August 6, 2019, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revisions to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, or SEC, which can be accessed from our Web site trmtreit.com or the SEC's Web site. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we'll be discussing non-GAAP numbers during this call, including core earnings. For a reconciliation of net income determined in accordance with GAAP to core earnings, please see this morning's quarterly earnings release, which is available on our Web site. And now, I'll turn the call over to David.

Thank you, Christopher. Good morning, and welcome to the second quarter earnings call for Tremont Mortgage Trust or Tremont. On today's call, I will provide an update on capital deployment, discuss our recent capital raise and outline our near-term business strategy. I will then turn the call over to Doug to review our financial results and balance sheet. During the quarter, we closed three transitional group loans for $80.1 million, of which $75.4 million was funded. These loans are secured by a recently completed apartment community, an industrial property, and a neighborhood shopping center. One of the loans was to a repeat borrower with whom we have had opportunities to expand our relationship. At the end of the second quarter, our total gross loan commitments were $282.4 million. Tremont Realty Advisors or our manager has steadily improved its ability to source a high volume of quality loan investments and has been operating efficiently for the past few quarters. In the second quarter of 2019, year-over-year outstanding loans increased by $249.1 million and the second quarter of 2019 was the largest loan closing quarter by commitments since Tremont's inception in September 2017. In fact, our ability to grow and scale this business is limited only by our ability to raise accretive capital not by our ability to source quality loan investments. With that in mind, management and the Board made the decision to pursue a capital raise in the public equity markets and raise $26.1 million of net proceeds in May. This was well below our expectations in both the size of equity raise and the price under which the offering was executed. As this is our first call since that event, I will take this opportunity to discuss our rationale. Early in the second quarter, Tremont had fully invested its…

Thank you, David, and good morning, everyone. As David mentioned, during the quarter, we executed a common equity follow-on offering, selling $5 million TRMT common shares for total net proceeds of approximately $26.1 million. That includes our manager purchasing 1 million shares and maintaining an approximate 20% ownership of the REIT. Note, this increased our common shares outstanding to approximately 8.2 million shares and resulted in a weighted average fully diluted share count of 5.4 million shares for the quarter. Now let's review the income statement. Our second quarter net income was $894,000 or $0.16 per weighted average diluted share. This compares with a net loss of $0.25 per weighted average diluted share for the same period last year. The year-over-year improvement is the result of the full deployment of capital and the waiver of management fees, which began in the third quarter of 2018. Interest income from investments for the quarter was $3.9 million, which reflects interest earned on the 9 loans closed prior to the quarter and the 3 loans closed during the second quarter of 2019. Interest and related expenses incurred from borrowings on our master repurchase facility and our note payable was approximately $2 million. Our expenses in the second quarter totaled approximately $988,000 and include G&A expenses of $618,000, of which $185,000 was non-cash stock compensation expense. Shared services expense reimbursement amounted to $370,000. The G&A expense excluding non-cash stock compensation and shared services expense levels are consistent with our expected levels for the remainder of 2019. We announced last June that our manager agreed to waive its management fee for the period July 1, 2018, through June 30, 2020, which amounted to savings of $267,000 for the quarter. Core earnings for the quarter was $1.1 million or $0.20 per weighted average diluted share. In…

Operator, we may open the line for questions.

Okay. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Steve Delaney with JMP Securities. Please go ahead.

Thank you for taking my questions. I wanted to touch on the topic of capacity, total portfolio capacity. When we think about a CM REIT, we normally think 3x of leverage. And at your $86 million of equity that would put us in the $340 million range. What I heard, I think in Doug's comments was that while maybe you have equity that could support $340 million, it sounds as if maybe the Citi line at $213 million might be a constraint. So, if you could maybe just comment big picture on how much incremental lending capacity you have and where the maximum committed portfolio might be? Thank you.

Sure. Good question, Steve. So our total commitments at the end of the quarter were roughly $282 million. We think with our existing equity, we have capacity for -- call it, $22 million in additional loans, so little over $300 million. The difference between what you would expect and where we think we have capacity is that we have financial covenants under the master repurchase facility, one of which requires us to maintain liquidity equal to 5% of our outstanding recourse debt. And so, we have to keep a certain level of cash on balance sheet to meet that liquidity test and that impacts the maximum amount of loans we can make.

Got it. That makes perfect sense. Are there any efforts underway to attempt to seek other financings versus -- other than Citi, in addition to Citi?

Ye. We have a relationship with Texas Capital Bank with a note-on-note financing and we have pursued other note-on-note financings. And so I think that's probably a more likely approach for additional leverage than seeking another repo facility at this time. If we had been more successful with our capital raise, we had intended to bring in another repo lender, but with the $26 million raise, it just didn't make sense to bring in another repo lender.

Got it. And David, do you feel that given the size of your loans, which are more middle-market loans, do you think that A notes have any possibility with maybe some regional or community banks or are your loans -- do you feel your loans maybe are just too small to attract an A note investor?

It's an interesting idea, Steve, and I suspect that we probably have some loans that could attract A notes. I know on a couple of the loans in our portfolio we have competed with some of the sponsor's relationship banks. So, that would certainly indicate that there might be some A notes available for those types of loans.

Okay. Thank you. And then, my final thing is, obviously, commend you for getting the actual operational side of the business and the pipeline building. And RMR does, I understand your comment about private capital because the most important thing for a bridge lender is to stay in the flow with the borrowers in the loan brokerage community. So, longer term, on growth capital, I think you sort of for now set aside the option of another follow-on. Is it possible to consider any strategic alternatives, such as possibly merging with a non-traded REIT that is seeking a liquidity event and you could do sort of a stock-for-stock, given that you do have a public security or is that too far thinking for -- just your thoughts on a transaction along those lines that could boost your capital?

No, I think that's an excellent comment and an excellent question. I think probably the most frustrating thing for us is the fact that we really feel like operations are performing incredibly well. We clearly have the ability to originate at a high volume. We have a very high-quality loan portfolio, the market hasn't embraced our stock and that's the frustrating component for us. As an answer to your question, I think, yes, if we could figure out a way to use our stock as currency at book value to maybe merge with a non-traded REIT that needs a liquidity event that would certainly be something we would consider. But, we're certainly very focused on making sure that we keep an eye on book value of our equity in any type of strategic transaction.

That's all from me. And thank you for your comments.

Yes. Thank you, Steve.

This concludes our question-and-answer session. I would like to turn the conference back over to David Blackman for any closing remarks. Please go ahead.

Thank you, operator, and thank you for joining us this morning on our call. That concludes the call. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.