LFT - Earnings call transcript Q1 2021 | Lument Finance Trust, Inc.

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Operator

Good morning, and thank you for joining the Lument Finance Trust First Quarter 2021 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. [Operator Instructions] I would now like to turn the call over to Charles Duddy with Investor Relations at Lument Investment Management. Please go ahead.

Charles Duddy

Thank you, and good morning, everyone. our Financial discuss Results. joining First Finance for XXXX Quarter you call Lument to Trust's Thank and of With James Larsen, CFO; Flynn, on CEO; Torres, me the Michael President; call James Strategies. Estate Investment Real today are Precilla Head Briggs, our on On details SEC and which first quarter results. with issued Monday, XX-Q the press a we release, filed our provided

We on our also provided a supplemental earnings presentation, website. which can be found

meaning this to indicate, call during Securities of of Exchange within believes, remind intends to will, constitute Act such would are of in everyone the certain Securities the XXXX. the Jim, and may of over handing words on like of Before used anticipates, the based made When expects, XXXX Section that XXA Act this statements of course and historical evaluate, Section outlook, call not I information XXE statements conference, the as in and uncertainties results other statements in intended to forward-looking are those from statement. our company's subject risks various the in identify are could Such statements. discussed the contained and forward-looking and Form that section SEC, These to X-K, forward-looking similar differ reports the and XX-Q XX-K, the reports materially expressions filed Factors risks cause and particular, Risk Form including uncertainties are XX-K. to actual its of with forward-looking on

be in not statements, identify financial can future amplified most which presented in statements. of the to will discussed measures as is sec.gov. continue through comparable not and predict call the substitute Furthermore, or to are undertakes by to this update to forward-looking our GAAP. in pandemic. by place any filings of accordance by such many reliance considered all the date currently certain measures no I Additionally, risks. is GAAP these information will as go company to financial of undue cautioned only the over amplified or these non-GAAP intended turn risks to isolation Listeners at forward-looking obligation to and Please non-GAAP on speak may these a nor uncertainties conference hereof. these the in The of possible are be It with amplified call. presentation will now Reconciliation the information of this A accordance to be financial measures accessed be with on Flynn. James not ahead. prepared be with SEC COVID-XX

James Flynn

welcome I'd joining Trust on Thank you, of the first the like Charlie. begin, appreciate positive everyone, call We Finance developments provide today. earnings and To an to you company. for to Good for Lument morning, recent update quarter the XXXX. the

during our growing LFT will over months. scale, LFT.PRA. look these to investor symbol the authorized offering we million stock with that interest funded expect will million to to LFT strongly announced our $XX positive preferred I'm stated Stock term broad of amended audience, of breadth is in provided note a incremental The we previously price transaction May our via upon press and the story redeemable our an of challenging the A stock entire offering $XX X, yesterday, I loan, believe additional for capital which deploy to to approximately quarter. an offering deducting us the has the a received the that public what and but preferred for X.XXX% opportunity been and commenced capital New $X.X exhibit the the Lument the that accomplish a we public this offering, per Series expertise at which of offering of to great credit of will net platform preferred with provide we tell Together, stock be on A was successfully share. we we will this performance discounts institutional reflects to and cumulative highlight coming In execution year. all hope expenses. opportunity our of portfolio. preferred investment transactions underwriting produce consistent of discussions offering pleased the listing Simultaneous been offer X.X the net The the create benefit believe LFT's Exchange base about $XX investors. million proceeds shareholders. As able closed has shares trading with The And believe from and million Series release, May investors estimated York coming continue months, the to A participants LFT on We under after of offering preferred Series we goal we and educate underwritten quality before the XX. market

As we Lument although the is in our calls, is our and small previous LFT relatively manager platform have mentioned space, on not. larger

calendar of largest seniors transaction Our and year billion the with multifamily housing $XX manager providers is in one during in total the nation's XXXX. capital over volume space

XXX the and services over in our investment The investors scale billion benefits of this provides employees and execution nationwide. support manager a has great offices strategy. $XX in Our LFT of portfolio the platform XX of

strategy primarily focus Our bridge loans a in is to on floating with middle opportunities. market invest continue rate multifamily to

and investment Although have in particular, us increased provide opportunities. to for the compelling strength our with these of focus competition on we the investments, continues platform seen Lument multifamily,

dramatically investments our investment fact, of use seen make opportunities. to additional in months. over In types offering pipeline loan to increase preferred intend term we recent increased several last and We proceeds the our these net the have of

a our we high-yield grow, loans debt and As instruments. we mezzanine other as to such of investment also equity, identify preferred to CRE opportunities real commercial will continue capital, in invest debt other estate portion

portfolio also our Jim touch call the turning and briefly Mike, over like I to Before our on and would sources. financing to

the credit to prove Our focus performance lending portfolio. strength our itself asset of in multifamily and platform bridge management continues in and our the of

we management single experienced default have have single March no not Furthermore, a nor XX, forbearance. XXX% loan I needed performing with this believe defaults a to financing warehouse from as loan loan to the not subject credit As are assets portfolio currently we And is was With testament proactive lenders. to to loans of a grant rigorous no sources, we COVID facilities. therefore, of no our efforts. during to era. not regards asset of margin we and as repurchase utilize subject warehouse repo our do impairments, any calls our our our both standards on forbearance, well

as real well CLOs disruption, to over earnings last and portfolio. would our of January primary -- debt took finance a Our non-mark-to-market attractive to to way I non-mark-to-market match financings a return we clear as are loan. utilization goal source When management were LFT this that manager provided continue capital investment to multifamily team in the term of on corporate our our term that this year's during on focus of in X with note into our value market like we the to financing CRE support valuable proved commercial as as of an deploying and provide our order book investments estate of shareholders. stable see XXXX,

our also our then larger We shareholders. grow would scale, valuable desire felt indicated to which prove LFT a we to to

plan. financial I'd increase, who results. on as turn Jim our that, and make I'm continued offering preferred will provide With these progress we term about growth recent loan like business towards excited call Briggs, our to our the Jim? With goal, we're details to on over that continuing focus and executing to

James Briggs

find for everyone. website, filed remarks. as evening, has On reference. quarterly and supplemental XX-Q investor you, our the you well referencing presentation good Monday will to your uploaded Thank Jim, provided we our been earnings of and report webcast quarter. X, will Pages an investor the we Form presentation a The summary morning, be updates X our supplemental on key and X and the on presentation, for which On during

XXXX's quarter stockholders reported $X.X XXXX, $X.X $X.XX million net represents adjustments. not $X.XX by increase non-distributable common stockholders relative net share. meaningfully slight was For current per of to share, first we income to common the any The quarter or to impacted a earnings million of per or which income of QX

color XXXX This $X.X relative share. a attributable distributable QX $X.XX which in a the we transaction, net $X.X offering In stockholders represents our X.XXX%. earnings prior offering was approved during $X.XX a dividend that July to on shortly. resulted give increase slight higher decline preferred assets to of shareholders as result, loan dividend the the of X, amount result partially successful approximately tune Jim offset common payoffs opening approximately quarter the As level earnings proceeds to preferred net anticipate quarter or approximately per equity of $XX first more closing equity $X.XX to or million elevated Such some during his the distributable earning of per the $X.XX the mentioned the share the by in quarter, In a the fees of resulted impacted million at of documents to positively exit which on remarks, million of the quarter, share. in Mike Relative preferred May making our first on company of will payoffs of XX accordance benefit realized per for for was for with XXXX's our quarter. per share. rate from

term from income loan to the proceeds see shareholders expect short-term months. over to we and incremental million quarter, in earnings our and to this fund deploy distributable this work net the of we As declines $X.X offering the may common we coming

any anticipate be impact to transitory expect our negative long-term in outlook. medium-term nature, We and earnings to decline do not any or we such

However, to capital short-term during the in on some risk this net drag common income deployment does phase. stockholders the for initial exist

expected at quarters, book per share which remind to share recognize a SEC, per million not $XXX.X million prior a everyone we a value as March favorably of on CECL XX.As instruments. commonly I'd losses, discussed book I've December book by have value defined the adopted This in of XX per financial to $X.XX $X.XX a reporting or referred smaller amendment or or like losses XXXX-XX, $XXX.X of GAAP compares value as of credit as ASC how company current Our credit yet to that comprehensive to was share. is as --

Until statements January continue we basis. we an on smaller reporting incurred our a CECL X, to implement loss then, prepare As to financial company, are model scheduled on XXXX.

model, XX, have to the recorded the incurred any or of not for any in do loan loans consider we not quarter. As March and current of impaired be loss we our allowance losses impairments under

portfolio collateralize loan exists, recovery investments. uncertainty performance loan remains our current its and borrowers bridge the of our properties about commercial of our the including value COVID-XX the impact on healthy, on mortgage While that

portfolio any We for loan to and the will record we'll continue allowance as credit or evaluate incurred. losses, impairments

As common XXXX. accordance to declaration dividend with we note, course timing for a respect have quarter made and not our in of process, dividend a yet with second quick normal the

to over June, on our a Larsen, portfolio provide make turn call determination and our to with dividend who in now will expect normal activity. our on We We'll Board composition in Mike details after course. investment the discussing

Michael Larsen

Good Thank our you, briefly Jim. morning, first quarterly investment touch everyone. on I'll activity.

fundings loans During the new million. incremental acquired we with quarter, of $XX approximately X total

were on All of loans secured these assets. by fundings multifamily

As to the market have from recovery Jim surge requests increase which in multifamily the in has for we confidence FHA and investment has lease-up borrower in economic mentioned, that impacted acquisitions, bridges been general, commencement permanent In for seen during financings. a this driven activity, by properties positively and value COVID are bridge a loans year. constructed environment agency demand add of since an pipeline significant newly January, our

the The a capital dynamics And to had million in loan of during of deploying capital fully balance principal XXX million, $XX recent experienced payoffs investment of proceeds opportunities. an the short and confident pipeline, we We our for market to portfolio improved spread these weighted $XX With of about our loan we feel average LIBOR the points. The our basis the loans outstanding of consisted increase $XXX from remainder has which XXXX are asset ongoing. at portfolio a an diversity. significant average quarter-end, XX ability provides total in over term, loan quarter. positive with million. raise of keep size In our our the portfolio anticipate deployed and

spot current the of portfolio LIBOR average points. the our a have weighted All with basis floor floor a LIBOR of XXX in loans above

to we quarter-end portfolio is anticipate which multifamily, overall our XX% in at was to with our of continue loan strong portfolio loan with basis prior quarter. with be much average majority Due an Our assets. will At related our LIBOR X/XX, multifamily financed financing loan and plus CLO of CRE cost continued be activity securitizations XXX points. pretty in multifamily, the to line managers' focus X to

approximately this reinvestment before, specifically and period As year. experienced the we sequentially reinvestment has the runs ended, CLO have the that CLO mentioned of volumes. a regard payoffs we With down paying ended million our in loan of Since to August reinvestment CLO, our of in $XX first CLO begun quarter. our first the through XXXX in payoffs period securitization second that during has period February

of the that after and respectively. the impact remained leverage deleveraging, LIBOR our even points, of funds attractive CLO However, at plus XXX reasonably and within first XX.X% cost basis

Thank prior developments expect in far across and on pass filings, new With loan for are market to with refinance conditions CLOs are remarks. to our pursuing positive a and XXXX.We reported CRE calls existing you. are the believe the this Jim estate call we during conditions, for positive capital back the we market refinance this so year, of real And a CLO to portfolio. and CRE CRE that, commercial closing refinancing. our markets some I'll As actively we subject encouraged by CLO our

James Flynn

Mike. you, Thank

good plan, updating forward on mentioned, I'd you we're to interest. that, appreciate excited we the future very We LFT. to your business and our And to our the about all with your call I questions. time We like and of feel look As progress. about open

Operator

take JMP Securities. Instructions] which We today will our [Operator question, comes Delaney first Steve from at now

Steve Delaney

the busy. have the in Congrats. close. start preferred, but sure I'm was to done in quite did actually increase. guys been That not fact, in you loan April. like were the term Boy, you I'd about preferred discussions with

to we the So some reasonable facility XX size over $XX now have of to to next forward the further that of months? that think there's that upside X you capital, million it term as the loan is move additional

James Briggs

-- course loan facility, term normal know, subject as respect covenants the debt we -- and there. in we're to have you with governance certain to So corporate

plan, But their increasing -- of of our in So interested LFT. to were provider, business capital in size our were they been who's offering. discussions also, with supportive preferred the the ability and supportive do very go of the was at a

preferred conversation, really term loan the started they to and were offering. that that and one another, done the So in increase connected the

the is I other is, think in question -- as goal equity with in looked our in -- And past, offerings continue grow We've your we've to capital to and, we've particular, goal overall preferred talked so stated the we base answer past platform. offering. that and this of common to at. overall the done here base long-term the types the we've in about the stock our

base, do I focus toward at consider think continue focused with see base debt invite I us grow point, investors. grow and how market. to our But think look That we from increases. standpoint, doesn't grow we that just do leverage mean comfortable to more this equity you'll new than how on feel to where we and the continue we are wouldn't overall we to continuing a want the

in As we for hope very book that we offering, and certainly the a preferred to strong had institutional continue forward. going interest,

Steve Delaney

at we've Jim get structures about different about how Finance diversification Lument a Okay. the and consider And expertise, -- rather talk multifamily. how would Flynn; And respected And it clear sounds when curious like see you were REIT? than I the type, different into for the guess pretty that -- how appreciated profile. I'm property concentration multifamily in you we Jim, you fitting to with loan return possibly you just your loan construction to may product Trust,

James Flynn

Sure.

or seniors that's point And a as in not going multifamily to now we're out, you So housing future. change focused platform. certainly the

type, We concentration but in hopefully with more a will diversify, a in multifamily. heavy obviously bit product heavy,

kind potential we of we so being multifamily -- on books. the been well, loans, we've the construction have higher-yielding know typically for there construction we very terms our things nonrecourse -- and manager, varieties. In construction, non-LFT, done of doing the loans The manager,

something -- the that allocation having those being if doing saying at be -- fantastic financing, see REIT? something that small It's that's it's I for but Yes, a potential CLO of possible. could use has an we're would not So we're it, that we financing. example

have these to products other corporate structural leverage, is as it's know mark-to-mark asset out think termed some attractive. and You of we opposed would the which at leverage -- level non-mark-to-market

Operator

from [Operator Instructions] Jones Jason today Our next question comes Trading. of Stewart

Jason Stewart

where incremental loans, economics are, new we the could where floors talk on origination? there, about of sort striking you're LIBOR minute a for If spreads

James Flynn

Sure. Precilla, want one deal with that to you do for Jason?

Precilla Torres

Sure.

say all-in assets REIT of for. bid XXX are market type respect are loans would of kind the levels. pretty accretive in The market, the dispersed in I general, spread of in it, So to garner that still to instance, able we is to with, that, up terms of A to base are terms the with type of Class for the heavily multifamily, call

to multifamily spread. assets.So workforce, middle to consistent been or And to some of more contribute of to and are historical the Fairway infrastructure, commenced portfolio. do the assets, result months. a the given garner the still with be much larger assets middle able that that those originations have our we've our for infrastructure, the we expect tighter I'd And market, higher say of are we premium more that, those strength ilk, able our lease-up tighter able in the to -- have anchor few lease-up in of As of strategy relative is sized so which year been next since the

Jason Stewart

be people put and the to I at I what Okay. could trying the the REIT? helpful. REIT that in an advance via to lever facility guess rate the ROE of them So for get line hear accretive is, really you maybe helpful. the originate think credit That's to terms and loans means what that bottom if you can of to are facility would

Precilla Torres

of terms mentioned. We don't the the what the over and have part I'll or But bottom is as switch facilities, second now CLO, Jim the for then have question, with leverage, terms start right in first to in we Mike right? I'll Jim line. Okay. of obviously,

as advance extent leverage result available our of XX%. advance is then, publicly the to the going a reflected will based a to the refinance is be to CLOs, on will the the obviously, market. now right continue is base which hopefully spreads we better, So in or garner we're the seeing the we are provide about CLO, what rates accretive which that, rate from And as same returns

Mike, In to speak you want Jim to of or line, that? bottom terms do

James Flynn

Mike. ahead, Go

Michael Larsen

today. the you on that, a have as LFT pipeline, financing are of the do yes, strength opportunities the rate the as will. which is they're advance current We refinancing we mean, points CLO, capital mentioned, and with opportunities LIBOR based opportunities I seen on higher, Okay. and based XXX of simple significantly costs the for CLOs. accretive or basis CRE in increase of if And see our see mentioned, to you to markets or range, Precilla that answer XX% of financing

existing have new seeing opportunities. a and investment and we're place the are the pipeline do spreads with opportunities, accretive markets in financing we are So capital the seeing on and you quite of robust where

Jason Stewart

Okay.

guess than certainly appreciate it we nature funding to the I can less economic probably capital transitory So putting CLO you term. all could in market work, want the would to or at longer of this levels

sort think that impact it. we you short of nature going the I to aspect sort But that dividend about impact and understand all takes income. of long when is, conversation be? of and net Board together, when the on look define I financing the pull you could dividend noted think the of term, you Or think do everybody this you is how rate? what Can transitory through with we think the longer-term the think that we're appreciates that that you work to the through mean, the on I

Michael Larsen

Go ahead, Jim.

James Flynn

to And allows don't portfolio the not. external even make being deployed a when to to the us larger fully that to either build fully benefits of the deployed. we've manager, say, about going that loans. make is We of loans one the the loans by I whether pipeline REIT we, or of are closed to continue REIT or is a that close is Jason, -- to build Well, and was managed continue that already organization continued much a REIT

the Board, quickly And we bankers when to we work? could have can CLOs. our do sized within are a we that and put the consideration we money stated the in And past, process did this of our we in a talk so the deployment as with assets toward we this What how we've target so for existing deal, of potentially evaluating refinancing when we publicly REIT? also, to

drag, of we deploy we'll expect not but the that considerations, implications to considered coming certainly that's when this negative of capital deployed capital and over with it. sized that, all those be months of not hopefully, So combination the much we the we able too

Jason Stewart

things forward deal on come. to that to Congrats look and

Operator

from our And question at Ladenburg Nolan Christopher next today comes Thalmann.

Christopher Nolan

a question. Jason's Just follow-up on

X.X%. average X.XXX%. Looking for at And your investments the coupon coupon on preferred is the is Q, the weighted

So this carry. at that sort I of implies Am a negative looking wrong?

Michael Larsen

coupon leverage. the our the the The on combined investments debt which, levered we on piece CRE a missing loan loan CLOs, coupon leverage the That is recurring excess basis, deploy the do portfolio there is on finance non-mark-to-market in a preferred. through the of and produces

Christopher Nolan

What is on please? the leverage return basis, a

James Flynn

and LIBOR Well, our from just plus about look X and loans -- -- of amortizing. do average capital our about is It's come above looking at I'm XX%. your there. average leverage the -- because weighted the current math XX%. can been the weighted you've is spreads It's at down you Charlie, And of XXX. then cost

have As has leverage and and our pricing But and CLOs. was come currently spreads an return in Certainly, very it attractive earlier, has of Precilla mentioned a a to been in is termed the we -- did -- CLO robust, healthy kind leverage basis. close fairly when general on is what out still spreads, profile both market loan overall it's non-mark-to-market original bit.

Christopher Nolan

Okay. up I'll I this guess offline. follow

Operator

turn the back final to to Flynn this question-and-answer I'd Ladies conference and remarks. gentlemen, James session. the for concludes over like

James Flynn

Thank all Thank for for recent you. those offering. your our supported Thank you interest. you Yes. that

next be quarter. to look with in everyone. going and We forward. meeting out you again the more investors hope regularly we mentioned, Thanks, participants market we forward to to As speaking

Operator

presentation. call. attending today's you, Thank Thank This sir. concludes you. you all today's for conference Thank

now wonderful may have a lines, day. disconnect your You and

Lument Finance Trust (LFT) 11 May 212021 Q1 Earnings call transcript