BrightSpire Capital(BRSP)2022-02-22 18:00Financial Data and Key Metrics Changes - The company reported fourth quarter 2021 GAAP net income attributable to common stockholders of $81 million, or $0.63 per share, and distributable earnings of $22.9 million or $0.17 per share [6][35] - Adjusted distributable earnings for the fourth quarter of 2021 was $36.1 million or $0.27 per share, while full year adjusted distributable earnings was $0.87 per share [34][35] - GAAP net book value increased to $11.22 from $11.04 per share, and undepreciated book value increased to $12.37 from $12 per share [37] Business Line Data and Key Metrics Changes - The company originated 64 loans totaling $1.9 billion in 2021, growing the loan book to $3.5 billion and reducing average loan size from $48 million to $36 million [11][25] - Multi-family exposure increased from 34% to 52%, while development exposure decreased from 16% to 4% [26] - Non-performing loans were reduced from 6% to 0%, with new loans now constituting 96% of the loan portfolio, up from 86% a year ago [26] Market Data and Key Metrics Changes - The overall commercial property markets have continued to stabilize, with notable performance variations by property type and region [15] - Multi-family properties have shown strong performance, particularly in states like Florida, Texas, and Arizona, which are experiencing population migration [15][16] - The company is mindful of inflation rates at their highest levels in 40 years, which may lead to decelerating rent growth and adjustments in cap rates [17] Company Strategy and Development Direction - The company has transitioned to a pure-play commercial mortgage REIT, focusing on first mortgages backed by high-quality assets and sponsors [13] - The primary mission for 2022 is to net deploy capital and grow assets while closing the gap between current stock price and undepreciated book value [14] - The company aims to simplify its portfolio by focusing on senior mortgages with in-place cash flow, generating current and predictable earnings [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to increase loan originations by 10% to 20% while maintaining credit quality [56] - The company anticipates repayments of $300 million to $400 million each quarter, indicating strong borrower performance [62] - Management is cautious about the impact of rising interest rates on economic slowdown and potential deceleration in rents [70][74] Other Important Information - The company has successfully internalized its management structure, resulting in annualized G&A cost savings of $16 million or $0.12 per share [8] - The company has a total at-share underappreciated assets of approximately $5 billion as of December 31, 2021, with a debt-to-assets ratio of 63% [45] - The CECL provision was $35.8 million, a reduction from previous quarters, reflecting improved borrower performance [48] Q&A Session Summary Question: Dividend trajectory and growth expectations - Management expects to increase the dividend in 2022 based on run rate earnings and new originations [52] Question: Confidence in loan origination capacity - Management is confident in the platform's ability to originate more loans while maintaining credit quality [56] Question: Impact of Fed rate increases on borrowers - Rising rates may lead to economic slowdown and deceleration in rents, but the company is focused on value-add sectors [70] Question: Portfolio mix and asset class focus - The company has increased exposure to multi-family properties due to transaction volume and CLO market preferences [86] Question: Capital capacity and preferred market outlook - Management does not expect to issue preferred shares in the near term due to sufficient cash on hand [103] Question: Operating expense guidance - The expected run rate for operating expenses is around $9 million per quarter, with no significant hiring planned [104]