CLNC - Earnings call transcript Q2 2018 | BrightSpire Capital, Inc.

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Operator

Greeting, and welcome to the Colony Credit Real Estate Second Quarter 2018 Earnings Conference 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 reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lasse Glassen with Addo Investor Relations. Mr. you, Thank Glassen.

begin. You may

Lasse Glassen

everyone. Inc’s And Credit morning, to welcome Quarter XXXX Estate Second Real Earnings Good Colony Conference Call.

answer the the Real Patel. the Officer, Company, Kevin Traenkle We CLNC, Neale Company's President us Redington, refer Colony Chief line Executive Estate, the also questions. Real is will Officer, Chief Inc. today Colony are Credit Accounting this Financial Estate, Company's throughout the and to Chief and or on call. With Credit as Officer, Sujan

materially Before forward-looking hand and to Company on as financial statements these results filed please statements the this update the described I Potential are call the SEC Company's them, assumptions. discussed and certain or duty to based no and and the today, time-to-time. risks note of over cause call, for intend Company's forward-looking this uncertainties subject August business call with future to information circumstances. in that the uncertainties on periodic could to events All does management's XXXX, are information statements. and not reports from and on undertakes is current from differ are expectations presented risks, contains X, These that

measure Executive the Colony Company Kevin Company's information the the financial And Web In addition, Real to of Officer such call is released why site, investors. turn Chief now, was Kevin? financial are Credit President an and and reconciliation represents call to to and supplemental of Traenkle, which Estate. financial like explanation on believes non-GAAP The non-GAAP presents on measures I'd useful over the certain presented Company's this measures. presentation, release and GAAP appropriate earnings this available to morning

Kevin Traenkle

along I’ll the half priorities want our to highlights, a year. Colony everyone financial provide an earnings the you, brief call. conference Credit second update of Real for Lasse. and key joining of operational overview management Estate with recent on second quarter our Thank for I thank

Our second activity, discuss including the details liquidity CFO, our our then deployment portfolio, Sujan investment sheet of performance, and financial on quarter balance Patel, will specific position.

second are announcements comments Before make. our to that jumping about financial few into a performance, I’d company quarter like there

Inc. in name First, Colony Capital sponsor's our change, The connection with

the to Real Our effective our Board changing XXth. Colony of Credit authorized Estate June name similarly Directors Inc. of

Second, Index added that to during am the I also report June Credit the Colony on Estate pleased of annual Index’s Russell small-cap Real reconstitution XXXX the XXth. was U.S. to

support Russell a addition the public in As since CLNC the and XXXX has result the our for have made our increased established a the member was of breath affirms result, great Becoming and shareholders. Xth. June trading significantly we of volume stock on business

we was to as Now, has new been for to on Company, deployment financial invest the productive our front, let's focus quarter primary Overall, objectives, on one the quarter. to a liquidity. our of our operational second the turn results and particularly it corporate for continue excess which

$XX.X share. quarter, During $X.XX net per the share or reported second we or and income million $X.XX of of core earnings $XX GAAP million per

more of positive quarter, details have on of during to This the significant is not be discuss $XXX subsequent an that allocated to we believe capital capital factors, already $XXX full the will As shortly. been additional not deployed results rate. CLNC’s million of core Sujan run second of second do the normalized third these $XXX capital reporting impact deployment earnings in will impact earnings a committed quarters, are million their million approximately earnings further core mention during already additional future committed and include will notably, during not due discussed quarter. or to do which we call, be to quarter, the the of today number reflect Most deployed in

a facility. includes assets, $X does balance sheet million approximately asset, corporate asset and liquidity our additional earnings deploy our million resides considerable other equity, which hand remain growth As our that liquidity. period. mix drive Moreover, credit leverage and to not loans, available totals ability CMBS, generate our assets. future has net include between which $XXX continues of of revolving could classes, today, our million our posses within in and which real Ultimately, more in seasoned of availability non-core continue lease capacity total cash on share estate diversified to confident portfolio This and in under preferred liquidity, our at or in we $XXX under-levered targeted today to

of June. cash for Subsequent $X.XXX dividend for the common declared April, and July we quarter to month dividend of During and a quarter, share end, of paid per share the month per the August. we declared $X.XXX and monthly May also

remained dividend represents at stock of our Based price, since Our has this per annualized level of consistent reflects formation, this very dividend and X%. on an share. closing yesterday's current yield attractive annualized over $X.XX a

Colony allows attractive conditions economic Estate throughout and real healthy with for returns solid point, favorable macro various risk-adjusted and U.S. to regard employment and to which demand economy. flexible points of us with our figures diversified real profit. estate, From mandate, investment well cycles. corporate the quite remains to landscape are economic achieve is Credit aligned advantage Turning estate the the investment Real we and believe

driven and dynamics fundamentals supply and demand Within real liquidity, capital including for sector, transaction support level overall the have property markets market volumes. robust operating sustained commercial income, continued estate valuation

execute new property ability geographies advantage competitive asset long-term. over to across in will key types, and the the we believe continue and transactions to differentiate CLNC classes, that price, source, a marketplace is Our

to favorable markets fundamentals potential, transactions, we and growth barriers you and entry. sub-markets As we higher demand supply with strong favor typically evaluate

The in decade-long investment As deal competitive we we’re in best-in-class pressures cycle Europe is where we U.S. the franchise there we’ll the behind several record, county less enjoys also management current track infrastructure capabilities believe compelling shortly, discuss a seeing investment opportunities and significant years sourcing believe Europe. and is

business committed has that provide with investment. structures to our transactions of track are strong markets, plan sponsors executing and a we that protection have all for meaningful across always that As successful downside record

industrial rent of hospitality. to believe property terms office, in In we types, strongly continue housing, for

a right we creative circumstances, be other as for asset classes can the partner under Although well. capital

first We sourcing our have respect pleased are that affiliation the in with where in in are million. our on return capital continues an $X.X underwriting our yield consistent provide advantages or we allocated transactions Capital with European for the and is source our the allocation which Credit differentiate investment Year-to-date, to recent investment, recent continue to of with Colony marketplace. pace the investment remain double-digits, to level synergies which across by $XXX total competitive our we very execution, with Colony confident of have We to achieving stages to billion closed of approximately significant advanced including the clearly low equity investment. investments activity in that ability

ahead robust Looking of and liquidity to year. and transactions Sujan very explanation and quarter this by the transactions. the expect actionable and pipeline our of detailed And recent to to be financial a the current now, accretive invest of second end able our for we pipeline over remains results. of to $X the Based second deployment, billion pace half more available turn year, operational our call our includes I’ll over the current upon of

Sujan Patel

earnings good happy I and on call. speak today morning you Kevin with quarter am to our all everyone. you, XXXX Thank second

each draw which on over As the results supplemental I want for and believe report, data our available it Company of We to financial business segments. your site. will on granular to given the quarter, provides is analyst understand our this help attention financial our I’m supplement investors going Web research better, our

or per For CLNC or earnings reported the income of share share. $X.XX $X.XX of and per core million second quarter, GAAP $XX.X $XX million net

of to of investment As the do closings. Kevin noted, fully reflect our due portfolio not timing these run rate results the earnings

and another share not of quarterly draws expected run on and to of quarter, corporate total approximately net million XX% During already IRR to earnings and revolving funded $XXX future this a an expected To-date contribute capital. is current core Once the credit of under we deployed, rate investments. we our weighted have $X.XX invested these approximately second the repayments capital quarter, third yield expected of million any XX%. to allocated, any per but levered investment Together, existing activity investments facility. in $XXX of average million yet invested approximately identified basis, additional $XXX have fully a with anticipate

$X.XXX from We of continue rate or our per share on per historic our share liquidity maximizing we common per product available to basis, annualized remain focused and dividend sources. all of $X.XX month maintain an on deployment

of we totaled liquidity. sheet leverage revolving additional balance our our does assets, dry cash on capacity an mentioned, Kevin considerable expect facility. $XXX our corporate generate $XXX and availability million embedded of not additional million include which under This powder, hand to has many credit at As between

We as basis. and this coverage. our run with increase confident dividend are earnings be we and execute Overall, liquidity our expect dividend comfortable further to our our the fully deploy invested over are on plan steady-state will fully current covered business quarters available we on a rate we we and enhance coming

and/or quarterly XXXX unlevered approximately York believe non-core per hospitality the positive contribute by earnings. bottom asset several restructuring this this will $X.XX the emerges growth, this million run Hotel, positively on modification City oversupply as Ney $XXX has top investment Through first CLNC’s could including additional and from XX% rate includes we to exploring secured beginning the negatively also line earnings is from City year. Ney which status of market of potential year, which issues. and non-accrual six strategies, We’re and now already investment by and increased the approximately performance impacting monetizations asset mezzanine share. and the is mortgage our recent One the asset recapitalizations, Ultimately, of NOI York example core of months first seeing projected improve

noted, side, very investment the productive quarter. we as Kevin a had On

$XX of totaling we and loans million. new loans totaling four account funded investment, one investments end, initially Europe, two capital $XXX X% mix quarter, approximately is million including deployments second we investments. million, and European funded capital quarter billion into $XXX CMBS CMBS. million of $XXX senior initially two including mezzanine have respectively, property allocated one XX% leased, The and $X $X.X net Subsequent mezzanine lease equity to million Taking two CMBS six $XX investment, totaling capital including loans million one preferred million million. of bonds $XXX quarter over net equity, all respectively, $XXX $XXX million senior we XX% X% and bonds allocations $XXX year-to-date, equity events, one second these loans, and the million, million, of totaling senior to totaling allocated preferred preferred and total During XX% in allocated and subsequent and totaling $XXX an totaling

place our portfolio. in Turning to

of XX% our at the book loan loan approximately largest $X.X loan total end within at to floating portfolio portfolio. thus quarter on Our senior be of is stood exposed in to portfolio continues rate segment increases Over XX% and and positively our LIBOR. billion

two an $XXXmillion to lease the Our closed of previously un-depreciated end, office view X.X primarily of mentioned, new XXth with portfolio increased assets lease CLNC. years stable capital the lease years. net June on provide capital. the of subsequent had over pro core from of consists long-duration or as committed our as of And and tipple-net properties. lease transactions cash business has $XXX value portfolio nine net to average We million industrial carrying for And remaining acquisitions and we segment of quarter our appreciation. These potential these new weighted of totaling forma to flows term for

to debt Moving CRE securities.

of carrying $XXX portfolio predominantly quarter grade. and investment Our million at is value end had

our to criteria, continue CMBS including meet non-rated B-piece bonds underwriting opportunities. We that source

addition investment liquidity our borrowings. within and provides our with access portfolio efficient yields, CRE securities CLNC portfolio to attractive generating options In debt to

assets. non-core our to Turning

shareholders. repeating That assets non-traded these our this the cash quarter. were it asset We properties are with financing. before classes. an these look multifamily million. value level two while un-depreciated our carrying target real with this REITs and Within has These to contributed $XXX opportunistically and not value housing part with of long-term part stable portfolio and exit of non-recourse we asset other it’s performing office, consists have non-core long-term financed mentioned legacy maximize flows as estate investments for predominantly This and are but the of assets merger student will of said, assets,

plan in our interest total our equity into of average at end. approximately to with The these as of funds million value yielding excess quarter in weighted X.X $XXX of the the life this consists asset holding the positions non-core we private portfolio is other liquidated And classes. the real targeted higher years. redeploy carrying near-term, Our liquidity

make for value, X.X% our average carrying was the was which earnings our the second delays related, we periods. During own driven PE $X the shortfall asset Since we the funds difference largely interest quarter, the largely to below by which approximately contributed the quarter and in million expectations or core yield expect on interest. timing at to events in is and realization later timing underlying in up

to on Moving balance sheet. our

XXth, balance of approximately June at $X share with $X.X debt at assets of billion share total the As our was total billion.

Our at leverage the long-term have which our debt we XX% significant the quarter, growth to balance this can in was and we quarter, our sheet. significantly optimizing is our than expected peer the side of on uptick still capital the and Despite end ratio assets embedded of lower right an structure opportunities by realize under-leveraged target.

current in billion facility. our master our on borrowing of availability $X.X at million senior a originations ample between As discussed, access to Inclusive we our $X total hand facility, billion $XXX loan stands liquidity our cash provides current facilities XXX of approximately repurchase revolving liquidity new pipeline. and and credit capacity under have fund

on stabilized quarter. not second ahead the run the quarter represents a rest full of basis, for work Significant first While our remains rate of XXXX XXXX. earnings

we feel and operator your the operational objectives I’d for thank like strategic all year. to future However, positioned earnings. are capital the we’ll with questions. our the continuing on We front, attractive to to performance, time look now And our please achieve to for be pipeline, strong to our we pleased well quarters’ based And our portfolio ask we opportunities. for to today. the with which expand deployment our particularly are on open line you goals will additive forward overall

Operator

you. Thank

We now a question-and-answer conducting session Instructions]. [Operator be will

Our JMP from with the question. with Please Delaney comes Steve first Securities. of your question line proceed

Steve Delaney

wondering the you if little Kevin, that I color large a closed the quarter. was you provide transaction could on net European in lease

Kevin Traenkle

the So pretty transaction investments, stable corporation. cash is financing our attractive. for leased European for lease pretty with are all the we’re looking major that’s in things place It in net It mean, complex, long-term provides on so a attractive rate, that office headquarter multinational came net cash an flows. cash our I at actually lease levered yields it’s

center So down net of strategy. the lease the for net our investment

Steve Delaney

what is the and it country of Which investment? in, that size was based

Kevin Traenkle

and ultimate size million. It was in Norway, $XXX the

Steve Delaney

have transactions, these when indexed lease you protect up of do And that’s what there? net you inflation larger type to somewhat -- step to to lease you do

Kevin Traenkle

annual that. have reset in get, we in that into So this this particular every one platter but we lease the term basis, different. is we this a get bit for inflation leases lease, all a lease But little built where do do little an on but have an are bit different

Steve Delaney

And Sujan you. one for

dividend, we value pop You XX.XX XX.XX. the at went fair you depreciation. had a tangible under-earned a un-depreciated book standpoint, the bit a value you nice March little GAAP comment driving what to that’s that XX.XX? on How increase we in From so was marks could obviously incremental did had up from get

Sujan Patel

showing if about our a I were down have numbers were you it deduct why deducted from $X.XX. is think deferred and number. XX.XX, right I lower that goes asset now to your think by which the from I it, tax And

Steve Delaney

investors? At the think having for with would that least that guess and goals the on full my available be through Okay, or that's were earnings guidance, of bad the I reasonable suggesting would not on get -- you the Do for but is have without current that a of on by you of year. quarter you by expectation yourself year point, at goal second you time the apples-to-apples end asking would that which fully return coverage deployment. for last the half not be, question at fourth Kevin, my to the there. the you expect based cap, incremental that core you the be have largely you deployed would get for dividend you

Kevin Traenkle

by we if I and get un-levered. But have we have just hand of probably up coverage, full we’ll think credit be do of to leverage other the to some and we our are deploy end to of we’d think assets year. what the I the that the have the close some that lines that we’ll cash to current today have, on our cash

the coverage. dividend So which cost will through up to second of and to years of quarter following full the first get happens the

Steve Delaney

So to have have mid-XXXX maybe realistic all be -- the deployment to sure you confidence maybe realistically a done if fully make more -- would that the engineering, to would be will, and cover? you

Kevin Traenkle

the the the Yes, that up delivered I up. think balance Plus liquidity that’s mid-XXXX right. plus about fully deployed want we all sheet get to have minus way we levered or after it

we’ll showing when around that’s projections our time are Our dividend. be covering fully that

Operator

of question Stephen your comes James. the Our with proceed Please from next Laws with line question. [Operator Instructions] Raymond

Stephen Laws

a comments well investments the would -- core the I what think full guess you new follow-up, reference impact in XQ subsequent the quarter $X.XX as investments, to by earnings mentioned quarter benefit new $X.XX. earnings to? your I quick improvement really that exactly end? in Or it Sujan, of did was as Was the to earnings

Sujan Patel

full impact -- subsequent So year-to-date. of repayments in of number, as that’s the quarter that’s net that correct, third quarter, And well. clarification, well the referenced one the second as so as we a that’s that transactions net

Stephen Laws

you're in you the up assets cash Touching investments available a get year? base the following Is will more deployed of Steve's plan, non-core positive generating estate other and looking the there the Obviously, deployment, far solid are have real liquidity about real the reallocate question by as that estate and occupancy. focused capital capital? assets and equity. it really once end relation those Is and the something and flow to last to as on monetize how

we how the expect or reallocated XX months? comment to over should you about next be timeline can So maybe capital a that

Kevin Traenkle

I going immediate deploying yielding to the these fine what than to some think done business something model So but of other little we’re just we bit assets start our as is be at stable But liquidity on soon that might turning hand. that’s investments, investments are focused lower a suggesting.

we’re we more once of So That said, speak. I these to some fully assets. these deployed, going little start think non-core as to bit other turning selling we’re are we a assets,

opportunistic we’re We’re sale trying But executing we we’re buy getting our doing off them to just pulling out now. by and get it more means right our liquidity no even prices, the If while them. on or to in basis. mode are generate we’re putting great trigger sheet balance an cash

Stephen Laws

last I about five and the in on Sujan, remaining. this mentioned years, little And quarters duration think remarks think then quarter prepared question PE a my the was expectations. X.X your assets contribution really I you that below

Although, even Or out. maturing Is that from five the model? expect should quarters the think we we about its so five how contributions number timing rolls over interest the next over PE related far an that as through should there should our income that? next income as quarters

Sujan Patel

before, about As mean, think but it have a spoken as why I I oriented which vehicle, are non-core. yield these investments we tough is good identified in we’ve

how there average. for So from income that years, the we quarter-to-quarter the volatility investment. weighted a is And X.X account that’s in some

in some digits if X% X% to keep clearly as date. on that that prior But return assets identified look a because be quarter, there you will in mind our where those remarks, please approximately -- to double the investments at So able the payoff back we redeploy. generated low low well. we our are relative We beyond in that's yield that

of straight-line from receive little market cash people are and The a account bit the more But we require a we it's interests is low focused market how each basis. that return. we’re all the rates, quarter those and them. for more the in on So double-digit quarter-to-quarter

Stephen Laws

on that or look is it what's good the on there of funds -- average curve a those And maturity maturity mostly maturity what's that’s point around tail the if the weighted for at Is follow like X.X weighted the a average? a -- -- up, the that?

Sujan Patel

got a of it’s little year portion and bit tail. -- it then longer there Yes, most next a that’s a lot occurs small is

Operator

for I’d to further no management questions. call comments. closing the are to There like hand back

Kevin Traenkle

today. progress behalf We thank of when quarter results Credit Real November. updating at we Estate, report Colony you you. for third look On dialing forward entire early on to our in our in team Thank you the we

Operator

and today's conclude Ladies participation. this your does Thank gentlemen, teleconference. for you

time You disconnect have your wonderful day. and a lines this may at

BrightSpire Capital (BRSP) 7 Aug 182018 Q2 Earnings call transcript