LFT - Earnings call transcript Q2 2021 | Lument Finance Trust, Inc.

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Operator

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

Charles Duddy

Thank you, and good morning everyone. our financial discuss results. joining second Finance for XXXX quarter you call Lument to Trust 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 second 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 statements. 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

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

James Flynn

thank Good everyone. Finance morning Thank Trust second to the joining. for Charlie. Lument for you and earnings the you Welcome quarter of call all XXXX,

important was successful quarter quarter for Trust's and a growth This busy, Lument strategy. Finance

significant base. consistent asset to data several prior that specifically interest variant the and economic continued grow same unemployment, institutional and in investments, country health us observed with in marked maintained and respect throughout performance our made time, an uncertain rates, the with distributable capital earnings as all significant executed we transactions to capital as Delta data, now quarter, and incremental world. COVID-XX with well allowed strong the quarters. environment portfolio our This investor accomplished values, the variants, During At our the we appearing

perpetual preferred the that million our The $XX call first prior equity raising proceeds. of was net the discussed transactions of we major issuance our during in

a prior attractive and leverage billion provides match-term $X conjunction we pricing basis. June a non-recourse, In successfully with previously on CLO and CLO. our this redeemed with an we Secondly, us non-mark-to-market as XX, CRE closed two transaction, This announced and CLOs. on new

progression portfolio. year's of plans. grew of finance our In see the our growth last of in utilization to investment represents this, attractive an our CLO we during disruption valuable way Our largest milestone closing continue CRE as positive CLO another market this to significant and the

CLO $X.XX to deploy from X/XX as as quickly allowed allow still us and to preferred the providing growth. increase favorable from million offering, while equity allowed us portion features economic total XX% The of by assets proceeds transaction on sheet billion of balance to to June this structural of $XXX Importantly, a for LFT's our continued XX.

we allowed CLO in economies increased our We greater investors. with execution the scale diversification. term facilitates successful participants months, In discussions future. addition, market loan, investment reflect larger our educate market investors the to and of the prior investor in about continue our strong into in combining LFT two believe interest a along and and equity and this In and with coming hope and single noteworthy our for provide for CLOs opportunity preferred for offering company transaction the the our increase we

mortgage the relatively the are LFT and larger Although commercial in Lument is platform REIT manager our space, small not.

and XX employing provides LFT of and nearly benefits investment employees portfolio and in nationwide. this offices scale execution of Our the in space the largest $XX providers XXXX, of billion loan in XXX our of executing manager total over volume investors transaction over the and nation's strategy. the The platform housing $XX a support capital multifamily in one servicing is seniors billion great

As the our we to year. continued well three investments of bridge middle in the environment even multifamily to to our utilizing market challenging strength rate floating that are extremely perform have economic loans the very over years, continued in last last we focus show manager have

platform new debt us Lument's to Although in multifamily breadth the entering the the these opportunities. has increased provide in with been investment competition funds there investments compelling for and strength continues space, with particular of numerous

bridge our three $XXX newly capital. capabilities deploy This of since by our ability last over in quickly amounts deal our rate floating During to strong million preferred expansive offering, flow driven we raised manager. substantial origination the loans, of invested new showing is months the have

tremendous seen the have the the in around to albeit recovery, we recent increases seen the responds addition, cases COVID market of the tempered transaction year half as by first country. the activity in In

also opportunities to securities. diversify classes we As as loans portion grow, such mezz other high-yield preferred capital identify our and commercial of into continue we will estate to real debt invest in investment and equity debt a other asset

important in and to lending of bridge perform admirably. have platform the our in our management raising capital the is of proud deployment to that it quarter, and strength and are achievements asset our portfolio multifamily continue focus us to this we acknowledge led credit While

COVID our As is loan loan no efforts. credit we results. to and loan we ability loan portfolio a Furthermore, era. no business the I continue during not forbearance, forbearance. single proactive of importantly, well XX, believe this XXX% our management loans testament perhaps, is experienced a in as both as performing asset defaults granted most was nor with our impairments, have to our standards execute a subject plan no reflected our to default June to rigorous our single And

estate for consistent for of produced consistent over Inclusive over quarter per earnings capital as distributable four of real of dividend. took this with per into provides to this strong representing goal team a quarters we share have commercial stable our quarter. a multifamily quarter, deploying that the Lument investments Our our was that last management manager provide distributable focus Trust clear were When shareholders. earnings in $X.XX earnings of Finance share prior our to return in in market on with our support of January XXXX, debt earnings $X.XX support the we order

our to which we shareholders. grow We scale LFT would to a larger also value provide felt our to indicated desire

focus towards to With goals make I'd the With financial Briggs are continuing over on our details the I like recent call provide progress to am offering, to that, will and plan. refinance results. CLO executing these preferred we the as turn on continued about excited Jim? business and our Jim we growth who

James Briggs

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

approximately reported second common quarter to per net income represents or or per the net which relative share. of share, of we a stockholders of decline XXXX, $XXX,XXX, $X.XX $X.XX income For $X.X million to QX to common XXXX, stockholders

was share quarter stock of which, per the non-distributable impacted distributable mentioned, current meaningfully $X.XX non-distributable common these LFT's After was adjustments. as by earnings with the line in certain items, prior per adjusting However, is for Jim earnings share, quarter.

of yet the acceleration The these million an $X.X was of deferred Hunt This incurred CRE by during at loss the costs, $X.XX at debt to XXXX-FLX, of time amortized Hunt extinguishment loss not caused the of loss of which closing was financing extinguishment expense share were adjustments the represents of quarter. million of or $X.X on was unwind debt. first the on common XXXX-FLX, refinance. per The which interest refinanced CRE

and were non-distributable previous company today, As of additional with CRE other of either any as or There associated June during losses expect items experienced QX. not does two XX of to LFTs expenses CLOs. the

REIT on portfolio. legacy, remarks, meaningful XX, incurred carrying rights, we servicing a income during mortgage fees subsidiary. with opening on loss a by on asset I'd the taxable preferred his Jim any refinance The unrealized item this the note and $XX,XXX $XXX,XXX activity realized our a QX, as to was our of X In offering asset closing not May $XXX,XXX our future changes be was non-distributable than the XX. value successful that of these MSR in do higher MSR like of earnings. in and closing June the of of CLO driver was believe prepayments of therefore of first successful mentioned at was legacy tax to less our The which that driven final value associated equity benefit June residential,

earnings from months to in current deploy and distributable our these over transactions, short-term to net coming months. we see may proceeds common shareholders income work declines the the -- As we

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

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

quarter's by equity Our $XXX.X the increase a This stockholders' on million, equity June of as execution successful stockholders' offering which our at quarter, the increase equity million. $XXX.X represents was prior the previously call. was the driven $XX total relative preferred during discussed XX total to million of

decline of of represents value March book to value book or XX share net value book XX. referenced. stock previously decline, $X.XX negatively $X.XX. or $X.XX impacted this of of per $X.XX common share million million share $X.X also debt common was to incurred to of the common With I extinguishment quarter. was that, common offering loss June the on costs value the share would Our during a per Book the preferred per that share per stock share regards note is This as like stock by X.X% relative of per $X.X per I of

nonrecurring items, LFT's of $X.XX by stock per impact increased quarter-over-quarter. of share book value per the have Excluding common would these share

as that the yet Credit CECL, or I as have company, on reporting like prior smaller a by credit comprehensive adopted quarters, As amendment to discussed financial not commonly in ASU losses a defined XXXX-XX, instruments. GAAP is would we as Expected of remind which Current to recognize how referred Losses, everyone SEC, to

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

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

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

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

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

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

Michael Larsen

Jim, and Thank you, everyone. good morning,

months As from standpoint. have the Jim very an last mentioned, several been investment active

million. of self-storage by these $XXX.X with at of end, portfolio were significant provides total secured quarter UPB of of of payoffs XXX of of acquisitions million, of acquired of had weighted loans And assets, QX our XX The the and with LIBOR During average an million. manager, QX, of We at were LIBOR loan $XXX $XXX.X consisted outstanding an acquisitions average origination secured of an investments XX we loan with multifamily combined owned total $XXX weighted UPB basis $XX.X million. size our LFT, already $XX XX.X%. aggregate participations quarter UPB and XX% and LTV affiliate points, loan points, floor XX with by of had These the million quarter. acquisitions a loans were from experienced a to total spread of average assets, allowance a XX% million, XX during The X% consists weighted during average to portfolio which asset by principal XXX loans office. diversity. by secured for basis related a

spread portfolio Our portfolio XX% of XXX spot the basis average above of weighted have LIBOR of loans points, current LIBOR points. weighted LIBOR has with a XXX rate the basis to floor average in our floor

overall on Self-storage portfolio X% quarters, down portfolio Our quarter XX% will Meanwhile, focus due end represents this anticipate continue average multifamily, slightly with capita. national related QX. and in end our of self-storage related investments focus our the loan moderately by to increase decreased industrial that from storage. the XX% performance on be in the multifamily. exposure from markets that outside existing in at assets. at our managers of this to believe to generally portfolio. compared due our leveraged are below was portfolio. to assets to historical quarter self primarily multifamily, multifamily quarter of of in we to our in of per Furthermore, weighted LTV our Despite square we capita top least investment X% self-storage and prior operators investments, debt to the as per loan reflected X% volatility average seven Typically, X% supply feet self-storage the activity provide self-storage of national property majority our are retail strong types We

will strong with and multifamily relative asset to investments look multifamily. types quality However, profile our we supplement can portfolio offer to that a return other

our March XX.XXX%, interest favorably $XXX notes CLOs to issued related XX.X% XXXX weighted and were that over million be CLO $XXX repayments spread recent through with mortgage cost approximately subordinated XX. running The The the while excluding institutional the to of LIBOR, prior offered period which million. an Turning rate investment-grade approximately initial attractive one-month points XX-month notes an average a extremely to an costs, of basis of to investors, had and of retained sold advance consistent of In average of reinvestment principal CLO which on CLOs. aggregate, XXX new LFT's represents reinvested. in issuance. has CLO This very of assets as LFT from allows rate compares the advance transaction fees proceeds is of December prior

which additional will the XXX or participations days. of the be addition, includes for collateral over In initial used CLO to acquire approximately first million $XXX loans ramp, the

utilize general, Just rate we end warehouse or a These our confidence for facility weighted we economic floor repo loans recovery as million at a are bar an market LIBOR the a interest calls capital warehouse during positively during lenders. and a $XXX raised allowed basis loans of our facility of from therefore, slide reminder, year. acquired In not we financing not LIBOR of quarter to the from manager preferred plus the margin currently quarter at XXX any environment multifamily to or subject has XX, and an the CLO. LFT offering on of of XX company bridge on points. average impacted repo assets a an have weighted Subsequent additional basis to the points, incremental demand us deploy average COVID in portion acquisitions through of significant and from

our With and recent our the back pipeline Jim. we from anticipate the opportunities. With are proceeds pass we these of in ongoing. that in about keep remainder capital the capital improved investment In deployed our our fully deploying ability of and the dynamics, to call feel I'll the market short raises XXXX, term, our to increase positive confident

James Flynn

you, Mike. Thank

call We forward today. your all our earlier, great operator plan updating that I in the business you progress our ask to mentioned As of questions. about interest making and are growth and look on future and the we're the to excited LFT. time progress appreciate we and feel our I'll With for open

Operator

you. Thank

go now first ahead. will the Please will Instructions] the And Ladenburg Nolan [Operator We Christopher begin Thalmann. session with from question-and-answer question come

Christopher Nolan

catalyst that call. on what my comments decline rollout earnings, assets in near-term Thanks you in Jim third Hi. that be the decline? date, taking of quarter the the Briggs, for for would given the to the had

James Flynn

second on I'm decline The the be just in sorry, to clear that. Chris quarter earnings.

Christopher Nolan

he Yes. earnings in in coming a quarters No thought commenting see what was that decline near-term he talked I could about. we

James Briggs

Yes.

Yes And just So is comments Jim. my I deployed. drag. that mute to as could a still on I in of there was a be we that mentioned capital result see

Christopher Nolan

your anticipate And then a above questions. just Do sort you a the of Okay. guys of guess addition significant this levels? I we're part One two at stake follow-up currently self-storage. is of what on strategy becoming or

James Flynn

No.

rate management would management housing it is taking platform, describe had component. floating of that bridge over wouldn't been which I always as say We've a executing this significant program a focus. are I What LFT. has our multifamily since predates team So the

touch XX%, So business under And LFT. going XX% that's a been that periods. generally maybe in we XX%, certain the way the forward to viewed

well. balance is we And size we past yields REIT able by – from not But time. offering manager's capital large own multifamily one generally having – immediately were assets that to to would deploy something is in doing uptick housing This the or and put management think, in and continued our sheet about it bread I to or to butter to but expect general general and largely portfolio ability equity to since more. the the assets as levels we've we've the feel balance – the current maintained at raised taken it's a or is be of continue moving certainly I we that into so the sheet and related has was at for that of The know stated, our attract over self-storage limited on diversify. our LFT just just as over we something that like product

it the of classes looks the… bit it's think non-multi south at perhaps in at asset most stay XX%, stay at the I and general, for below So – of in to I – overstated a that. I meaning XX% think or expect But would the self-storage because levels somewhere that to

Christopher Nolan

ratio... question. Final Leverage Okay.

Michael Larsen

And I'll just...

Christopher Nolan

Please go ahead.

Michael Larsen

add I to that. So just going was to

at Jim mentioned I to multifamily end July. we to you additional subsequent July include that – of end Just million And of in did portion if quarter of – now is July, assets – at what in acquisitions add just portfolio and to X% $XXX those the acquired multifamily the said, self-storage investment was of as of at X% end or our the XX%.

was don't than said. Jim multifamily what So consistent significantly with supplement to more it We'll that you investments but be expect see. what

Christopher Nolan

question ratio. What's the leverage Great. part? going preferred stock And final target ratio And leverage equity in the that does the forward? include

James Flynn

Yes.

I at the So, equity want both look common. depending what -- and total to at we but for mean would you on leverage look total

that as market. the leverage The market are look grow seek side do and on and expectation middle to line ratios the We preferred high our non-recourse loan we're term to capital standard leverage rates. turndown, capital. of of because general, we our that In we and leverage -- expect put and continue to that new the our of the in continue raise for be believe size, that continue is, would reduce feel -- even to to and financing and no the we of more help equity with -- CLOs, favorable perpetual the utilize, general being ratio the we we're type think raise appropriate, in overall, to of leverage would we grow our

Christopher Nolan

Great. for you. Thank That’s me. it

Operator

ahead. The Please next from will go Muller with question JMP come Chris Securities.

Chris Muller

Hi. the two this question, congrats Thanks transactions quarter. for taking on and the

said have a fully following what the you guys little transactions, what maybe up about So, kind is bit. loan I deployed that on those Can talk different size? a guess following two portfolio way, or of size capacity you

James Flynn

$X size deployed fully loans billion be just of north. the Well, would portfolio Yes.

allows from to So loans, largely standpoint -- only transaction that's just cetera. of but general number of the the of us -- thing larger et only execute thing due of the geographic size, concentration, not diversification deals. benefits one the to And the larger

deploy the in billion. range But can we $X So assets. of wider capital roughly a it's

Chris Muller

then, little of repayments like the high with repayments what anything do looked this there for they Thank a the Was thoughts you behind then, any that? quarter. have of you. look will rest And And year?

James Flynn

magic some happened, notwithstanding there offer And few. elevated COVID don't Precilla other and around Delta variant think a what the of any I than the was to concerns that you again. had can are

of to and don't have could I a and had think and might concerned wanting and on because we not was thoughts couple some of they say, permanent economic generally some any in particular think this. there into probably People go performance more quarters. we you can said, are rates that last -- and need but these overall bit perhaps bit bit you holding to longer. people But guys catalyst health to hey, prepay think listen a a managers of of this I waiting the off for on your are probably clarity I But refinanced. to rising uncertainty facilitated calls, years those about many Precilla, don't get rates had financing general, offer about back go until have asset concerned

not I'm a that's real maybe other Precilla, narrative. true you thoughts if there. But So, sure have

Precilla Torres

of point or to was a year would on Sure. bit Jim's there say side. perhaps to -- that a prepayment with one I will last activity either wasn't much consider COVID, factor acquisition obviously the fairly consistent. I if is financing note the rates, there

prepayments And perspective there probably little year, were been a if will, might were off -- from last you should level bit. have so prepayment that of have a there bit delay of happened the pushed little a but --

there material that, say was amount. in of bit but would a I a So not

Chris Muller

the questions. for Thanks Great. taking

James Flynn

Thank you.

Operator

Flynn any remarks. James go like the Instructions] back This Please ahead, over I for closing sir. question-and-answer conclude turn [Operator will our session. would conference to to

James Flynn

again and all. reach I soon. quarter. any want interest for Thanks in to questions out please you your next LFT. you And thank speaking look if forward continued you. to everyone other just talk Thank we'll I have to

Operator

for conference concluded. has now The today's attending presentation. you Thank

disconnect. now You may

Lument Finance Trust (LFT) 10 Aug 212021 Q2 Earnings call transcript