CLNC - Earnings call transcript Q1 2019 | BrightSpire Capital, Inc.

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Operator

Greeting, and welcome to the Colony Credit Real Estate First Quarter 2019 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]. Please note that this conference is being recorded. to Managing conference Director like host, to now Glassen, Lasse of would turn over the your I Investor Relations. sir. you, Thank

You begin. may

Lasse Glassen

afternoon, conference to first Good welcome Real and Inc.’s Estate Colony quarter call. Credit earnings XXXX everyone,

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

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

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

Kevin Traenkle

activity, XXXX. everyone our highlights, early of of low-yielding XXXX a Colony our portfolio update first last will sheet results highlighted and Redington, Neale to liquidity the I to rationalization discuss deployment quarter call a discuss and portfolio, Estate conference core other to Credit start early outlined XXXX, investment is our quarter strategy Real well on asset success joining Real performance, Thank Colony including quarter first first balance good our in position. our expansion in priorities by the of in provide interest specifics approximately brief of key and funds. highlighted including earnings. from during progress as the in quarter, for thanks our Most monetizations as overview CFO, our capital company’s made assets, that we notably, quarter, an XX% for estate Credit Estate’s to financial non-yielding and of results. real private the of on management you, sale the Lasse, non-core we recycle equity meaningful details efforts by will off

at deploy our to assets targeted continued We liquidity steadily approximate also into XX% on available an blended return our equity.

We prospective and continue collateral resolve to of a earnings. the In I addition tangible reshape strong type see portfolio capabilities and Furthermore, in our and diversify represents the and pipeline. have originations in robust believe investments performance. non-core in portfolio legacy execution our very core the to late execution all, company’s stages investments increasing while quarter to several we to our across grow geography, improvements

results. financial Turning to our and operational

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

quarter. core Neale per we describe which of generated from $X.XX $X.XX is earnings million, last shortly, will realized or share, up XX% losses, which Excluding diluted $XX.X

redeploying proceeds the returns with of on assets. inherited of core is $XX equity. equity our quarter. interest To overarching and estate the second portfolio date, we carrying earnings by into of non-core I’m million yield received investments $XX and The approximately very value. with the price mentioned such substantial to private On line to proceeds the lead this that earlier have the and early divesting objective strategic real this end, aggregate substantially portfolio comprehensive anticipated our $XXX success in front, be from is pleased asset focused sales the To approximately a in remaining portion on overall with during of rationalization to which million accretive our million proceeds, in is low-yielding on effort of will the return received strategy, increase sales our capital will certain

As interest company’s highly our to assets XXXX be did into of accretive core proceeds the will to contribute earnings. equity these the not targeted these private earnings, meaningfully reinvestment

is the we steps taking Hotel. contributing portfolio addition, overall by loans restructuring as our remain these of City loans secured status currently This not strategy, anything on New to a remain rationalization restructuring proactive non-accrual and key In on to focused with a earnings. therefore part of York are regard core

this time. While do to updates this ongoing, further process is at not we report have

repurchase amendments Along pounds, revenue, to restructuring billion, these capital with our billion initiatives, upsize investment end and the $X.X facilitate with to believe British European for strategy to investments than our earnings euro. to generating facilities this $XXX geographically into To diversify euros helped on we deployment the once available. significantly. our the This quarter, currently completed capacity, upsize. amendments million brings a we completed of approximately allow our benefit assist two and repurchase with portfolio our our to master master more further is further begins aggregate capacity denominated However, will concurrent total of in subsequent core our $X.X

and investments total year, March XX, XX% as of of As we our may substantial in second-half XXXX. approximately of you portfolio recall, during comprised last Europe European investments the made

our the the infrastructure Europe. capabilities Colony deal new global and best-in-class sourcing opportunities We benefit sponsor, continue as will evaluate of U.S., Capital, as we well to from as in

Before to like update management the a call I would our turning XXXX. key priorities provide over on brief to Neale, for

to asset remain to grow highly in our investment with as are double-digit, consistent targeted portfolio recent We deployment the we ability level pickup progresses. the with pace the of year in to activity the across confident we classes our expect continue our into remain source First, and is equity our the focused we investment investments. of which our yields on on an to transactions return low liquidity achieving

While more to and value our ability first earnings value. build call Through results. we And current I’ll of long-term trading execution deployment quarter to a to the operational explanation book outlook of over are turn discount generate a this executing to portfolio our for now, covers financial and Neale goals, and continued XXXX. detailed and for our Redington shareholder rate strategic expect the we narrow dividend initiatives, core long-term year-end CLNC rationalization that run confident in strategy our by our

Neale Redington

you, Kevin, Thank and everybody. good afternoon,

represents supplemental our first financial better, which GAAP we I core the the other or $X.XX common quarter for our or of website. results, discussed losses additional core quarter one-time million, per during is to per adjusting the Core believe on rate CLNC attention for losses quarter items, analysts our and share was given quarter excluding million, diluted data million, and As dividend. business first We realized coverage XX% $XX.X share. current your each first After understand $XX.X earnings on of the $X.XX earnings, this draw net our diluted earnings of research will income it of quarter first company to $X.XX report, provides share. run per financial supplemental help or diluted and share, $X.XX was want which $XX.X available realized reported investors our per segments.

until recorded loan first real we a losses million and loan impairment proactively from loan core a anticipation realization fourth earnings a the $XX.X XXXX, the In quarter. a foreclosure of excludes reminder, provision loss estate quarter As in reported in of for the provision event occurs. occurred impact mezzanine that of

in difference, quarter of probably income and quarter. issue last GAAP reduced during the reported will provision timing portfolio the strategy execute this reduced earnings on fourth timing during the future net This we this rationalization quarter. because as communicated So core recur first the

Turning to deployments.

$XXX of mortgage eight and $XXX first quarter and respectively, was funded solid allocated capital, and Our million activity million across initially loans. senior we

with XX% of for within capital All XX% the the of in Southeast quarter United in in West, was the allocated the States, Northeast, in the XX% the deployment and XX% Southwest. the the activity

quarter, in we in capital, coming realized the second quarters. which benefits addition, earnings core we $XXX our so of an in million funded full initially of far additional have In the

the for the During share XXXX, and we $X.XXX first of per month the common quarter, paid cash dividend February a per $X.XXX of share for January, and months March declared May. have and a of April dividend monthly we

represents this a approximately since level annualized at and per formation $X.XX annualized attractive our this remained reflects share, dividend XX%. dividend of yield and current of an Our very has consistent

quarter-end, XX% at properties for and the of portfolio size stable within unlevered approximately our on loan our segment return a our providing book collateral diversified with in-place and investment XX% the floating X.X real March be consists portfolio, cash XX, loan We with This portfolio. capital of $X.X as rate. million, the to in total estate weighted of our long-term lease our Net the term a of value view weighted loan a portfolio $X.X portfolio at core remains book has primarily of equity XXXX. yield with carrying an office of with billion $XX business and comprises average single XX% well lease carrying value portfolio segment geography. of billion being industrial type of of Looking the senior With net to appreciation. on size, The undepreciated a terms average is of and continues high potential lease loans largest digits years. CLNC an X.X%, flows average as

CRE to debt Moving securities.

value the million quarter-end, investment-grade Our majority portfolio at rated. carrying had is a of and $XXX

liquidity and to portfolio addition and CLNC also poised borrowing. securities In yields options efficient attractive portfolio provides debt our within to access growth, our with for CRE additional generating investment

estate value the the $XXX with flow quarter-end. to to mezzanine estate, real of other single Turning a This since a collateralized is increased real properties quarter by portfolio segment predominantly U.S. previously carrying to as and discussed due of predominantly loan borrower. million segment. fourth This our operating of cash diversified foreclosure of

which In and from reduced total private $XXX sales from at carrying million addition, non-core million closing quarter-end process. of equity prior value holdings estate distributions of ongoing quarter funds, in a real $XXX the have our

balance sheet. our to Moving

stood XXXX. XX, of March at approximately total as assets billion Our $X.X at-share

of is expected Our XX% target debt was the assets than the lower to and at our long-term XX%. ratio to quarter end XX% of

$XXX as our Our positions secondary stands our revolving monetize million we availability which certain private credit other cash will be lower-yielding under continue hand on facility, between and approximately liquidity at and current to equity enhanced assets.

We’re quarter repurchase to representation look pleased momentum tangible confident XXXX future to our diligently the as allow is of We’ll and $XXX of we our to facilities remainder we we I’d deployment time and for that open the $X.X portfolio amendments your on beyond. total for recent calls, to the and been to turn million walking for first you upsize, progress updating that our for remain thank with European can section results XXXX, the you capacity forward we quite on on bringing investments To master in success line have us [ph] also during pleased to the shareholder continues our our ask for strategies, the and we’re in were and operator CLNC like our please work. plan first early We value. questions. governing and quarter execute to today. now build rationalization billion.

Operator

Thank be we a question-and-answer One you. will while At moment session. poll please this [Operator conducting Instructions] questions. for time, we

Please of line proceed Stephen Our Laws with the first with James. your Raymond question. question from comes

Stephen Laws

Good afternoon, Kevin for Thanks my question. taking Neale. and

Kevin Traenkle

Hi, Stephen, thanks.

Neale Redington

Hi, Stephen.

Stephen Laws

Will did for why have got identified? big equity Do one buyer comment XX%? interest. talk But what majority entirety you about the and first. you to what Congratulations likely almost on can hit I remaining the the of runoff? that? kept outcome the that sale the guess, you on or you of on private the a Can I Yes. simply you – is

Kevin Traenkle

Yes, sure.

for were right So position. a joint is other liquid. within with way were to that that about those. speaking All our interests They We wholly-owned. got interest prices and actually actually attractive the liquidate we’re fairly good now venture partner picking our

that we sell did, around going longer have today. we a And remaining. we long it’s that even don’t it’s that around left think not XX% almost so be life if is to So you much what there, don’t even it there XX% that, of everything so, it’s

Stephen Laws

Yes.

out that actually we Well, and was $X.XX. to are a deployed I – Neale, capitals up we charge to I heard that you’ve some and backing made base of in the correctly. I run core rate core the there. from But large at have guess, related want make PE I makes was know is new is may your what consider Okay, the sure quarter remarks, sense accurate you I line this earnings as you make I partners $X.XX comment sale. think prepared think backing got EPS originated? grow great. that kind $X.XX should that sense investments

Neale Redington

That’s right.

QX, the base For that be line. should

heard written you’re quite areas out. $X.XX correct G&A were a what just our you [ph] So simple we and $X.XX had was is and reported little spelled recap fairly that rate. were of as that a about no you then and tax at run quick

up So we a rate. slightly terms where we of was had and we G&A bit run in a benefit end tax of our below expect

So little a to throwing that $X.XX. why bit back it $X.XX from

Stephen Laws

of running was a the right that’s now. right, $X.XX where model great. kind Okay, in bump had I

now, few that to lot acceleration non-core gone monetizing those. a non-core you down. would the you minutes, talking good in assets? the largely I debt of your certainly are about talking process Kind down, But on or time and that’s of the investment think how as last monetization you remaining asset of that PE of quarter estate the to spend you outlook can that thinking great? view of spent kind timing operating of know of maybe you talk Kevin, caused So And on about should where assets, what non-core? real a kind be either the wind maybe go non-core Can with – of about remaining we hear. about

Kevin Traenkle

focused and low-yielding at non-core on foremost, absolutely. assets our yielding. Yes, And no are and first we those

earlier, mentioned interest. earnings generated yet, $XXX equity our XXXX, on million. we no us we’re book actually private those carrying I They in are they as – them So, for for

So, big obviously, around anchor it’s net. a our

earnings. that, to then that capital So that repatriate see to that then subsequent in of result And through that back will capital was monetize and the you one priority quarters, increased our work. number to out put

that we’re to bogies category that of our that returns So of in terms other are going aren’t kind just – assets that down low-yielding then through falling the are equity. on hitting

that or now. of attractive for selling to those. sake lower-yielding liquidate biggest either equity the price at pending others, being them. long-term, buyer are They’re on we us for right those positions then, We generating announce and now. in We’re news those buyer as there in decent in not are buyer some but private of kind yields of them opportunistic the we sold the estate right of just right non-core we’ll It real for – of on the don’t hope some positions with that like in are couple the generating wait of be couple and extent so terms kind to want well. them. of be right We’ll non-core a big when to able sell bigger or they’re now. a of the sold But yields quarter some And right the those positions interest in good sell process positions that a good of process We’ll those the category. that coming

Stephen Laws

majority Great. addressed but of like, of linger, the – it this have or be looks the one non-core missed you And stuff if but timeframe… the that sorry, I two think, that, year kind I would

Kevin Traenkle

Yes.

definitely, will of be the So low addressed the Absolutely. non-core year. no this majority yielding and the of

Stephen Laws

Yes.

Kevin Traenkle

opportunistic more we’re don’t going little We is yielding, sale non-core, which other a think, just right bit price. and be a to the getting that sure date. I we’re The make have

ways kind of exploring maximize exit. We’re to our

on know, still lot are right you As of liquidity a we sitting now.

end sell assets this those no we lower the But capital to closer start we dates cash hand all we’ll definitely other getting now, addressed. of that assets. of have be of visit the by year, at yielding deploying that will and right non-core once the So, some all

Stephen Laws

you of balance the confidence about concerned Thinking book or book write-downs last value, Or about? can portfolio? or Great. talk current loans year. remain this that problem sheet about stable are about closely risks few quarter, any and value you’re watching how in and around additional your pretty the But on there problem you’re we update should kind the any assets think that

Neale Redington

Yes.

we certain all classes performing do classes, asset that sectors and so of So are assets right certain our in have that rank well. performing asset now aren’t assets. watchlist we classes are sectors and in do There better

the that particular exposure. of asset to attention is classes One paying retail we’re our

been reason of letting you a looking kind kind this we’ve ridding to quarter of why burn Another exposure we that riddle off. kind did good retail job of and that down, pretty ourselves

bar the The eager refinance pretty used retail too be. it what not that. a U.S., assets of high the increase there. to to to across lot is But places ability We’re is not in

something it’s that we’re So to. paying attention

for the book, we the focus as going but get it’s pretty date, the closer exposure we retail part a attention loans pay that huge to to, of Our do we’re performing, extensively. something are maturity but that part, not most to something on

Stephen Laws

Great. I I attractive like quarters. are got your at XX-year pretty stocks certainly you’ve flow to But in think, building a returns. mummy looks I discount, day, going the work, question, earnings off cash of appreciate that. And liquidity this have surely most guess, they’ll XX% last asked and the generating I a

stock repurchases, thoughts thinks So firm how just value. your on an and debt about XX% your believe of update stock book I your at around the

that to such a I the the that return XX% in opportunities new to you’re But mentioned pros you’re is think, and internally and at not look doing versus kind what’s with shareholders cons you investments? of so? buying guys deploy stock seeing to back And confidence QX provide capital weigh pros money how You stock of and the ROE. big repurchasing earnings book work, to and be accretive do putting cons would you discount at and

Kevin Traenkle

wish really formula number. and a just give question. it’s internally, simple It that It’s with on. a going things a multi-vary is you we and a I debate can great I equation discuss something many constantly. Yes, simple

just kind still capital looking several we to and month earnings, we not business, or the it’s dividend next where a seeing, good we’d just gets yields like a they capital, If investment it spreads that those below, it’s we that low a too investing to it’s into quarter quarters do. shareholder would the assets can upon getting value. – other outside over of that well. a in long-term those saw to think our put will is of would and yes, in better pipeline. pipeline better and benefit deploy our on yields coverage balance robust risk, of capital that into the something landscape you our have going it’s But investments, the transactions the where deploy our we doing how investment be, if of place which obviously, pipeline, something think yields, our pretty that is longer-term will next we love well and guess, we into of in and to our we what a we are start longer-term think the The deploy building with lot this with we We as company be to own for big upon deploy in – lot and the think is, our – authority if in the our work everything now just seeing, sheet interesting the based models, do kind terms be we we I do our kind where can to great of competitive stock out pipeline. and on that, right we are based in can side in think be and just – that stock better we investment low, of the rate the

Stephen Laws

me the guys your year, year-to-date. base put you in think actually, I some in origination doing have I’m with I Do QX, coverage, do at I dividend more point given or model, guys year-end. in right line, reaching you question, And are line appreciate QX XX there. you up the there. you around one comfortable almost million about comments think colors this comments I dividend so looking my coverage But off made by how with any still in $XXX mean, of that? coverage what dividend

Kevin Traenkle

do. we Yes,

So yes, are we’re going in earnings I quarter-over-quarter. the we growing right mean, direction.

rates kind capital that only out of that will putting at progression. attractive We’re continue

We’ve absent on that models and deploy deals just a end of happens I macro also anything lot covering business we’re got based So, upon right in going a of our dividend basis, that the – extraordinary, run the show on execution to are our by where rate we us now. a the capital. basis think year. mean, the

of of a we’re we are think by hopper, working on that lot the in others that end We the of hit relationships that that lot year. – have the will

Stephen Laws

– good certainly to appreciate but or there. guide one, hear I the comments and Fantastic the

I So questions. thanks for taking my it. appreciate

Kevin Traenkle

Thanks, Yes. Stephen.

Operator

in further queue, questions left remarks. I turn Since for to closing back there would call to the are no the management over like

Kevin Traenkle

All behalf updating Credit in forward right. on of August. entire Estate, today, and look progress results when Thank Colony dialing you early we quarter in our thank on we Real the second our you. report Well, at to team you for

Operator

This today’s teleconference. concludes

this may at Thank your disconnect a day. have for lines participation, wonderful your you You now and time.

BrightSpire Capital (BRSP) 8 May 192019 Q1 Earnings call transcript