CLNC - Earnings call transcript Q3 2019 | BrightSpire Capital, Inc.

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Operator

Greeting. Welcome to the Colony Credit Real Estate Third 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.

the of to Investor turn Glassen, host, now Director Managing Relations. will conference your over Lasse I Thank you.

You may begin.

Lasse Glassen

call. Good afternoon, third conference Inc.'s Real Credit and welcome quarter to XXXX Colony Estate earnings

Estate, will Inc. Estate We the this throughout Company, Colony the Credit or as Colony Credit refer CLNC, Real call. Real

on and Palame Saracino, Financial line on Redington. Officer, the President the Chief the are and Kevin Officer, Accounting are today Executive Speakers Frank General Neale David Counsel, Traenkle; also call Officer, questions. answer company's Chief and to Chief

I the see results XX-K could discussed undertake that filed risks, to statements expectations information the cause differ forward-looking Before hand management, current uncertainties to call please and and November for not of a uncertainties materially SEC subject and These on could presented call periodic XXXX, section some reports time-to-time. affect with factors forward-looking please uncertainties, of as and is company's circumstances. does over company's this business and the note X, discussion and statements. are to management's the are or no of certain that based information assumptions. All on this future other Potential intend the duty in update from to of risk for and company results financial current risk recent on the call, and and contains most these today, events our statements risks

afternoon the available appropriate and represents the release, financial such bifurcation presentation, investors. are that's explanation portfolio GAAP Because which useful released financial measures addition, supplemental believes information In the to this and of on an to The measures. plan certain financial is earnings why non-GAAP company's measure website. on this company non-GAAP company's reconciliations presented and call was

Executive I'd of Kevin? and to to Credit Traenkle, call turn Real Colony over the And Chief Kevin Officer now like Estate. President

Kevin Traenkle

Estate today's Credit XXXX well as for taking covering as And third you, events call other company. all Real results, Lasse. thank the you significant Colony joining Thank quarter at place

to draw and I adjunct financial available to prepared our to an comments, plan are report, bifurcation on our which also would website. like supplemental our attention As your portfolio

On we growth, CFO to provide those of portfolio, discuss deployment beyond our the investment today's will Redington, details incremental which and today Neale materials we the remarks. activity, will on will performance, specifics financial position. liquidity third refer earnings our call our balance sheet details including quarter

reported time to of legacy strategic real mezzanine the milestone which current strategy third commercial press which a portfolio. real a asset today Our of loans, address and together estate, of have order major a our debt estate core our and our balance one, quarter also the afternoon senior dislocation definitive bifurcation into: update, investments equity, in our sheet portfolio since in between the on inception. release value includes of comprised target and asset net will My preferred out loans, securities comments focus rotate one lease this announced price our been issued results to trading net

legacy consisting which core certain inconsistent our with prior portfolio, non-strategic are all of real operationally and intensive forward legacy a of two, of owned loans CLNC, all And other retail business. go the formation estate, to originated

advisors, in experts property is reassessment sheet performed of consultants. the valuation our and estate party The business, our with an conjunction segmentation third our balance strategic diligence financial of exhaustive of real result external

legacy strategy, our non-strategic our core have level business portfolio our many As of part focusing conviction in amended core plans of been a this business dispositions. and and result impairments our on process, reflect taking investment as of business accelerating

fair $X.XX $XX.XX will detail, market more September value XX, per reported discuss our net charges value underappreciated accounting quarter we now we on share. related as $X.XX that of place value process, third of current of monthly have is book core portfolio our dividend Also, our or $X.XX share, our the company. per Neil result to current by core of or this believe share earnings an our more share of in closely asset Following fully annual per in represents supported per reduced the a basis, which

grow portfolio in will and Our external be to will near-term come internally our capital legacy dividends. the core portfolio non-strategic core from the an to we be portfolio to to expect our access the for earnings, proceeds further equity. and Said differently, the orderly the fashion markets to available within earnings solely which grow reinvested our our generate will able liquidated resulting in be support capital core without core need

will we intrinsic as providing net value disclosure believe of be level into incremental they investment their useful depth investors the in asset of value We assets. Additionally, disclosure transparency non-strategic provide own to legacy our portfolios. will investment view core both this the and by the on form of

best of the on forward increase Directors to strategy support this business Board shareholder enhance grow the core of put support value. full investor the believes with path our and ultimately to Management CLNC

the how created. a January approximately XX, XXXX on On investments. with better XXXX. XXX company it significant value we asset three created February billion is was and listed CLNC the the perspective combination scale, on are discrete through important total was strategic pursuing, To of formed York portfolios, The on direction provide X, New $X to in the over Exchange across Stock combination understand

billion However, to were investments Colony approximately the investment $X Credit's portfolio over not combined strategy. that core carried of also

invested investment invest over since billion core accomplished key priority strategy. XX including into year-to-date. been has A We've Much has months. of billion, approximately deployment $X.X to $X.X formation just committed the our been capital or our target available

to period earnings, XX% have excluding first short total deployment and since in the operations. quarter annualized over our increase capital a Over contributed efforts gains of losses full

prudently leveraged. addition, In balance sheet our remains

core the million stands today. under at and remains master $X.X From at equity to drawn average the capacity to is our earnings. of repurchase which $XXX from debt liquidity X.X peer room assets, billion, facility grow and billion debt XX% standpoint, approximately or providing up to continue Our our $X.X group, ratio inception to our which a times below has invest total

CLL securitization Last closed CLO the totalling to our Institutional company. loan the strong market’s for we of our origination month, our which business. and billion, receptivity strength demonstrates was shows investor $X demand first the

accomplished, much operating While core been non-strategic even reason these in reporting of we performance from segment impairments previous away period. the to deterioration in has our series portfolio. assets experienced resulted more a certain which This provides legacy over positions,

disclosure announcing investments of greater embedded company are along understanding a will core value we Delineating Furthermore, we our story. the a portfolios the mission. facilitate and enhanced its legacy assets. core it non-strategic transformation between Today, within around and create believe clarity clear our with

earnings core of portfolio non-strategic core at GAAP or additional Our an per net implied of portfolio portfolio our today. portfolio annualized XX% of value assets core with totals total billion X.X% or share. book totals $X.X $X.XX $X core year-to-date of net The is at portfolio. the of portfolio and net share respectively, and earnings assets of The GAAP core underappreciated XX% total has yield share $XX.XX on our value. legacy book $XX.XX total share billion of per The

portfolio respectively. of portfolio Incremental book This plans, and legacy our non-strategic the $X.XX current portfolio it fully that means portfolio be inject core self-financed. cash share portfolio execute business Furthermore, to redeployed legacy non-strategic flow cash to net basis. cash the from but underappreciated have generates portfolio also flow non-strategic $X.XX the into a core legacy per positive means has value our we per legacy and is value do not flow positive core portfolio to share non-strategic and the the is GAAP on

$X.XX share, non-strategic coverage legacy earnings the annualized our annualized XXXX, of on together of meaningful which quarter support provides portfolio earnings third dividend. the the year-to-date further had per of and share, $X.XX As year-to-date to core per

our with In key focused of conclusion, will on core portfolio core growth concurrent assets. a legacy portfolio of non-strategic priorities and assets, the with disposition be this earnings bifurcation portfolio expanding of our

Our is in sales growth Available will engine non-strategic redeployed sustainable now by covered from for legacy portfolio providing portfolio our proceeds core be core annual of from our business. asset core earnings portfolio. dividend our fully an

segment enhanced and in better a our filings. -- disclosure investment foundation our shareholders assets, each available by disclosure, of for Showing our is by investment bifurcation company. The from supported which provides understand earnings now contribution the to detailed

in to investment programs confident non-core have assets to-date. transition led financing a inception, this team's am and successful who execute resolved certain I our opportunistically ability since and

the company's road ahead the between that will expect reflect value. book close We the the gap and results trading price current

third results. Neale explanation quarter operational With for that, financial the I'll our of call over now and more turn a to Redington detailed

Neale Redington

you, and everyone. Thank Kevin, afternoon, good

some at As new everyone details filed changes refer made operations plenty usual, and to core supplemental earnings our today, definition. also our financial regarding report our I to please describe of includes was would look earlier we've that financial

investments. earnings gains, loan separately. unconsolidated earnings, core ventures estate, legacy from from provisions will But joint on for while include solely will preferred come exclude and portfolio, and will definition non-strategic core Further real earnings report This we core will equity our losses including impairments losses.

highlighted, Also, investors. today's of Kevin added disclosure announcement the to transparency includes and as benefit

will bifurcation the XX-Q, we shortly. by be which presentation on presentation, filed supplemental providing details and which portfolio will in In posted Form addition holdings be followed our website, asset to are asset our by

transparency it our two company our segments. added the to provides We given data and our help research believe the on will of and understand additional better investors this value assets business analysts

are million, $XX.X or loss $X.XX a or million $X.XX reported portfolio per net earnings per core share CLNC's third $X.X core quarter share. and GAAP of

company's addition, per In of excluding million generated legacy earnings or $X.X portfolio share. $X.XX non-strategic legacy the non-strategic losses

is at from earnings requirements. of and dividend share core coverage share for Our dividend liquidity per reduced the additional annual other of annualized core covered portfolio. year-to-date fully a $X.XX than Legacy XXX% earnings non-strategic per of provides our more $X.XX

Now, of during a third discuss to to the quarter the I'd impairments take taken moment XXXX. like

hold in First, to estate strategy, divest the as assets. non-strategic and we're investments. equity of number operating resulted preferred real Kevin which accelerating a portfolio overall at mentioned, as That of bifurcation period pace our shortened we our legacy part impairments

of million As equity a on investments $XXX and recorded quarter. result, preferred the real owned impairments during we estate

for $XXX loans loan and per asset. These un-depreciated value. a we one or credit of value the losses million GAAP sector, related million of primarily hospitality the $XX.XX to in result book $XXX during book of quarter share Additionally, write-downs recorded retail have $XX.XX in deteriorating metrics on provisions

activity active property respectively. the seven had use, XX% consisted mix which hotel. XX% to industrial, allocated in deployment type we for senior mezzanine loans and of XX% quarter third The million of million within $XXX $XXX three capital United all and loans The initially approximately quarter is multifamily mixed Turning funded deployment, X% States. we office, an and and XX%

had and The an weighted a underwritten average equity return of IRR XX%. quarter on deployment of third XX%

of of month paid July, XXXX. August $X.XXXX of have of for month dividend share During dividend quarter, in part mentioned strategy, dividend core monthly for a to $X.XXXX cash we've is per the share fully declared $X.XX or and the $X.XX the share which his by we per Kevin reduced we third our remarks earnings. December October. as our portfolio share our common September covered annualized, per And per per and bifurcation November

the Looking million. for loan to billion approximately type at yield our be the The book of carrying an collateral our diversified loan remains quarter loan segment, our is value $XX largest end. with in unlevered of geography. portfolio, terms X.X%, of and size, portfolio on loan well Furthermore, continues the core book average at size $X.X

a end majority grade CRE our had million to investment value Moving at carrying quarter securities, is $XXX of portfolio rated. the and debt

access within our generating our provide options In yields, efficient CRE's portfolios borrowing. to securities addition debt and liquidity attractive with CLMC investment portfolio to additional

of of Net long-term consists and at with core and term high-single for the and capital The lease the digits portfolio office a of CLNC real weighted properties, weighted carrying stable a end on equity XX% cash quarter. with billion net core for of third value $X.X comprises a of portfolio a assets average appreciation. X.X providing lease primarily had industrial This lease estate flows the return average for years. potential business

billion segment impacts the impairments loans to of Turning end. the at to retail formation of $X share legacy of intensive non-strategic owned to this originated taken our due of total primarily certain during composed operationally anticipated legacy reflects value with accelerated assets real CLNC quarter, This predominantly and as is other portfolio, quarter prior the all of sales estate, dates.

our total stood sheet, Moving billion $X.X our of balance total September XX, asset approximately as share XXXX. at to

facility. $XXX the and our approximately the on hand was Our current assets credit stands and XX% our ratio of cash availability at at end to liquidity quarter million between under revolving debt

at with real to advance a LIBOR financed we weighted $X Subsequent an the collateralized closed commercial properties, CRE the end issuance initial rate quarter, XX.X% loans mortgage transaction costs. secured X.XX% at CLO estate loan interest manage XX of obligation. of XX floating The before average in rate by plus accretively billion coupon

hospitality and the business, the multifamily, outcome, Overall, loan with origination includes Columbia, pleased loan collateral The were features and which we District properties two the of and of states year capabilities period. a XX in extremely reinvestment capital across investor markets demonstrates our strengths relationships. office

advanced With a equity and and CLO CRE fortifies capital the higher expand funds, return to rate CLNC of retained cost its structure, continue to managed interest lower structure, our on the reinvestment on improves core company's the business. allow

our As disclosures, risk part our all portfolio. enhanced also of loans ratings we've introduced in on core

detail preferred loans, core profile on regarding Importantly senior equity more the mezzanine credit risk and of to and loans business. our investments provide

and indicative with all investments the our collateral, with and line Our is a business overall line end underlying originations our process rating of conservative Therefore, is risk in plans. X.X, rating our at of rating. in with performance that quarter X our policy starts operating critical overall

to portfolio book focused value today's our non-strategic sales the we see closing, portfolio, portfolio. within increase proceeds non-strategic as activities contributions accretively earnings deployment of our of portfolio. the strategy, a core dividends, growing Overtime, and announcement, In from reduced executing with our operations while we portfolio and our deploying and on continuing from core result legacy core our expect rationalization are legacy

like time I'd to back a to call for today. you will And the moment. thank for Kevin your turn

Kevin Traenkle

some XX-D. to internalizing may one on Colony's and of company's more include Colony of co-invested been and also are management CLNC. independent of management of Key that taking has possible filed CLNC transaction in estate mention. the Colony I the Colony components The non-binding company's the global Capital with from to extinguishing management management by Colony is There would a letter credit transfer the recently a The investments. internalization credit core commercial received co-investment Neale. credit and the like Capital you, such business directors its of vehicles, of real schedule Thank funds company management business, of Capital which publicly related that contracts, topic business to explore of letter several on seeks

can regarding to commitment and of questions information the regardless continuing and of to growth is possible to directed any internalization to further by legal management's not internalization discussions. we the a Importantly, provide no respond counsel, stated CLNC’s plan as or outcome any at related There time bifurcation the continuing position unwavering we're business, in this letter.

operator bifurcation questions the our results. plan ask open and to now for like quarterly I'd the floor regarding

Operator

this At a will you. conducting [Operator first time, with question Thank laws session. question-and-answer Raymond we James. Our be Instructions] comes from Stephen

Stephen Laws

Hi, off, process more good little a afternoon, these for you Neale. lot the to disclosure but on to good Kevin and of and financials to in these -- buckets. separate an assets wanted hour just it's appreciate see providing two A first each lot state

deck. legacy portfolio. monetize second, the to core for but will assets, capital kind analyzing I as kind capacity that a portfolio, your you reallocation leave leverage of that that we, considering does as times just far of about you very comprise investment was X.X think the core target I the just the of the the for thinking portfolio, be core helpful think where portfolio? potential now first. in put With What If that leverage your as said assets aside is portfolio that the think

Kevin Traenkle

we’re to So, relative yes, both portfolios peers. our think on I leverage, under the relatively leveraged in

leverage liquidity that be to portfolio. the been on that to that think be we the move room side, everything have will within So everything We doing up. we doing will still core have we and have I to Obviously, continue deploy.

of legacy, core we that have can at to with we we our addition and our availability we hand addition or add. net in those revolver, capacity either liquidity available our lot that, to facilities provide proceeds under portfolio be back will cash portfolio a have all liquidity repo monetize as the non-strategic funnelled of And continue under assets, core business. our to as In into the that more on even

a coming a have we continue lot with different So a the and of from core capacity on to lot business. places of of lot liquidity

Stephen Laws

maybe maybe that around can saw and or $XXX believe a quantify to somewhere time, the period take give I you'll in of pick that assets. will core be reinvested roughly I then to So, two an go up into say core one effort over million,

Kevin Traenkle

depend It's that if, mix past in But into or triple loans what preferred So more senior we've the correct. senior going yes, been on the the the are right. between assets. we senior to doing mortgages. if that's and the And the recent that -- continues future, the mezzanine generally those numbers we've been and focused on or assets do lease net equity

Stephen Laws

at to legacy the What by over giving year? be end think timeline Right, year asset and comfortable should I we How you can something this maybe from the next year Is monetization, a quarters or how so next legacy five of accomplished rough the trying with be of are then, year guess by think about resolved much this. will kind portfolio? about? maybe monetization you're timeline should know we accelerate next that end

Kevin Traenkle

Yes, be possible. projections basically plan, of the and to business practically accelerated timings. But terms single as to occur the as like this I want portfolio soon have through through disposition going cautiously dates mean, in we every optimistic we on reassessment

assets sold. right now right in some lifted Actually with actually firms are brokerage cases, ASAP. lot get in discussions the a now to on we're of some So to be these market

bit done, are that going those significant Some be assets There next significant that XX still up months. commissions that models invested to majority some be the value to over take, XX of but the TIs assets, to those to show the liquidated assets little need a a in longer, assets. of within are months. majority lease But XX some leasing there's some work add to be the needs some and paid

Stephen Laws

I portfolio, core all the XXXX. additional Noticed has appreciate maturity hotel one two extended from again, January months now the disclosure. four XX looks loan an of like a at Looking rated about

maybe Is update can it had a with that us off? to borrower? you one. Do loan? near-term an discussions that ask I wanted a to give you you've pay expect maturity rate So it on any on full about

Neale Redington

can Yes, one, I Stephen. that address

So they issued owner because to a performing Bloomington just company a loan Minnesota. a rating recently hotel move to this senior sale. listed in four it We is because on default is assurance management the quality hotel have it a in small the for

there intend the loan. that in the QX of closing we've that because a off But is additional had would continue to probably moved company situation. to expected of to that's that move to it and we pay hotel So XXXX why an this paper monitor issued four

Stephen Laws

Appreciate the million. disclosed that also had Have Is on hotel sale value sale color Subsequent color sale? hotel the $XX of recurring the you you the that belief sell Or gap price? any price? that there. events I a that provide can

Kevin Traenkle

to close very are sale. selling value that expect that the we and to carrying we from So do recover

Stephen Laws

good. That’s

I've think this about to stock every want I I asked buyback. touch call, on but the

still book there But plenty repurchase valuation tomorrow. willingness un-depreciated stock amount available we'll a and room given see the it appetite and and or consider authorization leverage a significant standpoint. given stock given you reacts place, today the a how in value can new liquidity of from closed think of at capital got discount XX% you've to about I talk the

Kevin Traenkle

sure. Yes,

a time it's real analyze and we we track on So basis. that, something

consider repurchasing stock. However, strongly we would

the something that going given we're the portfolio, we strongly that the consider. reassessment it's -- through will given Now and the and of through reset revaluation

Stephen Laws

going know, review play we around around curious off is Good, on timing, think year event, to not about that next to kind Kevin, there it kind of I'll I about should specifics And about about long of should any but we thought process how out? lastly, and specifically the and I'm Is ask numbers, but how the And, the ask seems review hold this, a of timing that? process? kind think said process buyback. in step like positive the of how a internalization, you the

Kevin Traenkle

Yes.

that And, are to Board with legal advisors working there's this the independent committee, is or Directors, independent So say committee be special up who going of more own its to has really advisors set have and regards time an timing also nothing that. through they to financial anything at else.

Stephen Laws

I all least for be I'm my taking enough. sure but have now. at later you Well, that's questions. thought back I more, ask. I appreciate with Fair I'll

Neale Redington

Thanks, Stephen.

Kevin Traenkle

Thank you, Stephen.

Operator

Randy Our from next with Riley. is question Binner B. the

Randy Binner

Hi.

to core line to that questioning, put Just do the business? a of for expect money you work yield few follow what expectation ups in

Kevin Traenkle

the Yes, since running we've of seen at marketplace, so consummated, has compression business, the XX. able advanced think in going the which of north ROEs. with in been we targeted that recently the be to we There in a financing throughout some been north slight continue attractive spread execution we've core very those going I actually in mean, rates we've got the $X.X that we kind CLO with on rates. been have just to billion returns, very XX to of that we attractive, XX% reach on call public, of the marketplace, the that the we're Even it question range invested plus

So, we're those happy of financing with can the there's reason that think our what XX% and on -- we we're our core that no business, with believe plus don't our get to kind we ROEs business. assets, happy we're

Randy Binner

levered are those return, And Okay. correct?

Kevin Traenkle

returns. levered Those are

Randy Binner

the book one continued more? we so on a strategy the that on And a -- that CLOs, it is core for be first then there or or could should expect the was is while just large the is

Kevin Traenkle

part of CLO first ability that But, off and part to within time executions financing years. a we certainly two our we will it replace our in forward. will base repertoire. we have the more, from executions collateral CLO, is be something will managed There so be strategy CLO the business our to do as any This of time that will base going as incorporate particular, do CLO pays

Randy Binner

ongoing to on the how of be month earnings I mean, the XX models kind non-core and going dividend you part plan. in most process that from be know to own of to But is I our one the last the coverage the have The contribution would for have on. there's we plan that just that have should to XX have non-core? potentially assume we going no conservative a it forward. I

Neale Redington

why We of portfolio, we differentiating from the Randy. earnings is earnings the legacy versus the -- frankly, core core from that are part portfolio that between non-strategic

on and I core I both mentioned, as the So earnings coverage generating. the focused we're think that dividend Kevin really is

the by $X.XX is of annualized covered year-to-date the So number $X.XX.

So frankly, more we're that's, what focused on.

We from that majority over non-strategic. more prefer will of to earning said, core. assets as time legacy including of XX do on we XX should But those would grow expect a that the next to be over months, over we And the factors number Kevin to side the moved the be of things. expect will core frankly, focused that

Kevin Traenkle

that require the like non-strategic It it the doesn't other even on to capital to execute to positive. is knows, additive. on everyone self-sufficient, And it people portfolio just earnings, just it’s portfolio coming add focus its legacy cash I'd so and business is plan. one thing don't we from flow core want though

Randy Binner

I have. you. all That's understood. Okay, Thank

Neale Redington

you, Thank Randy.

Kevin Traenkle

Randy. you, Thank

Operator

the Ladies question-and-answer I’d and to of call closing for turn gentlemen, we like to have the management session. back remark. reached end the

Kevin Traenkle

we on when us your support for you Credit next forward we results Well, in updating want year. Great. the to today's call. at of everyone Colony Thank progress thank And our XXXX today. you. Real and dialing thank entire behalf report you for early I joining for we team continuing On on to look Estate,

Operator

your participation. for Thank Thank This you you. today’s conference. concludes

lines time. your this at disconnect may You

BrightSpire Capital (BRSP) 7 Nov 192019 Q3 Earnings call transcript