Good morning, and thank you for joining the Exantas Capital Corp. Earnings Conference Call for Quarter Ended June 30, 2018. Before we begin, I would like to remind everyone that certain statements made in the course of this call are not based on historical information, and we -- may constitute forward-looking statements. When used in this conference call, the words believe anticipates, expects and similar expressions are intended to identify forward-looking statements. Although the company believes that these forward-looking statements are based on reasonable assumptions, such statements are based on management’s current expectations and beliefs and are subject to a number of trends, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company’s reports filed with the SEC, including its reports on Form 8-K, 10-Q and 10-K and, in particular, the Risk Factors section of our Form 10-K. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with the generally accepted accounting principles can be accessed through our filings with the SEC at www.sec.gov. I would now like to turn it over to Chairman of Exantas Capital Corp., Andrew Farkas, for opening remarks.

Good morning. Thank you for joining our call today. I have Bob Lieber here as well as Matt Stern, Dave Bryant and Paul Hughson. Andrew Carr, who’s Head of Investor Relations, is also on with us. As we announced during our last call, we rebranded the company in the second quarter following the substantial completion of the strategic plan and transformation of the company into a commercial real estate credit-focused investment vehicle. In May, the company’s name changed to Exantas Capital Corp., and its common stock and Series C preferred stock began trading under the ticker symbol XAN and XAN. PRC, respectively. Along with the rebrand, we’ve increased awareness of the new Exantas by recently hosting an Analyst Day and attending investor conferences. We expect these investor relations efforts to continue throughout 2018 as we strive to provide greater transparency, increase our visibility and discuss our efforts to leverage C-III Capital Partners platform and to drive growth in core earnings. We are on track to achieve the results we set out to achieve 18 months ago to seek potential earnings for our company as we continue to execute our plan. In the last 12 months, we deployed over $1 billion of capital into XAN’s core investment strategies of making transitional commercial real estate loans and acquiring CMBS. New origination and investment activity have outpaced payoffs, resulting in continued net growth of the investment portfolio and increased net interest income. This, coupled with improved warehouse terms, attractive financings for our CLO insurances and our improved cost of capital fueled an increase in core earnings to $0.20 per share this quarter. The continued growth in core earnings has substantiated other anticipated increases in our dividends to $0.15 per share for the third quarter, for which we plan to seek board approval. This would be the second increase in our quarterly dividend after an increase in the second quarter to $0.10 per share, up from the quarterly dividend rate of $0.05 per share established when we announced the strategic plan in 2016. I’m personally very pleased with the results of the second quarter and the prospects for additional core earnings growth. We look forward to reporting those results to you on future calls. And with that, I’ll turn it over to our CEO, Bob Lieber.

Thank you, Andrew, and good morning, everybody. For the second quarter of 2018, core and adjusted core earnings increased to $0.20 per common share, which is up from $0.03 a share in the first quarter and up from a negative $0.10 per share a year ago when we were in the early stages of executing our strategic plan. As Andrew mentioned, the results from the past quarter are a better reflection of the true earnings potential for the common shareholder than prior quarters for the following reasons: first, net investments have increased by almost 250 million during the first half of 2018 and by over 425 million over the last 12 months; second, more than 97% of Exantas’ investments are in core investment strategies of commercial real estate loans and other commercial real estate credit, up from 81% a year ago; and third, this is the first quarter that our earnings reflect the full impact of the redemption of our Series A and B preferred shares, which has the positive impact of $0.11 per quarter to the common shareholder. I should also note that the second quarter 2018 core earnings exclude a realized gain of $1 million, which relates to the settlement of a legacy loan that was held for sale and resolved for more than book value. As a reminder, the results of discontinued operations and legacy loans that were identified in the strategic plan are excluded from our definition of core earnings. And this highlights the fact that the rise in our second quarter earnings were primarily the result of our core investment portfolio growing and yielding increased net interest income as we would expect mortgage REITs to do. From a cost of funds perspective, our June 2018 CLO execution was the largest CLO issuance in the company’s…

Thank you, Bob, and good morning, everyone. I’d like to begin by taking a closer look at this quarter’s origination and investment activity. In the second quarter of 2018, the company originated 195 million of CRE loans with the weighted average spread of 345 basis points over 30-day LIBOR. As a floating rate lender and like many of our competitors, our earnings benefit from increases in short-term interest rates. As summarized on Page 2 of our earnings release, despite some spread compression during the quarter from market competition, the weighted average unlevered yield of new originations has been largely unchanged over the last 12 months. New loan originations exceeded pay-offs and pay downs during the second quarter for net deployment of $41 million. The positive net growth in our core investment portfolio of $113 million this quarter and a total of $428 million over the last 12 months has helped increase the earnings power of our CRE book in the last few quarters. This capital deployment progress is a primary driver for our anticipated further increase in our dividend for the third quarter. At June 30, 2018, our commercial real estate loan portfolio was comprised of $1.4 billion of floating rate self-originated whole loans. Our CRE loan origination team continues to see quality deal flow, including from repeat borrowers and our diverse customer relationships. C-III and its management team have a long history of being an owner and operator of and lender to apartment communities throughout the United States. It, therefore, should come as no surprise that the company’s loan portfolio has a meaningful representation in this asset class, and we continue to have a favorable view of this property type, specifically apartment communities catering to workforce housing and communities in non-gateway cities. That said, our broader platform, credit team…

Thank you, Matt. Good morning. Our GAAP net income allocable to common shares for the three months ended June 30 was $6.2 million or $0.20 per share. Our GAAP net loss allocable to common shares for the six months ended June 30 was $6.4 million or $0.21 per share. Our net income for the second quarter includes the following significant items: a realized gain of $1 million from the settlement of a legacy loan, other income of $400,000 from noncore assets, a net loss of $0.5 million from discontinued operations. Each of these items were included in the strategic plan. These nonrecurring and/or noncore adjustments net to $900,000 or approximately $0.03 per share. As Andrew highlighted, our core asset production over the last year has been very strong. The net growth in the carrying value of core earning assets was $246 million or 16% and $428 million or 31% for the 6 and trailing 12 months ended June 30, 2018, respectively. This core asset growth has had a positive impact on our net interest income. We saw a growth of $1.9 million or approximately 17% in our net interest income for 2Q 2018 as compared to the first quarter of 2018 and had a net increase of $4.2 million or approximately 45% over the second quarter of 2017. These increases in interest income are being driven by 3 items: the incremental net asset growth on our core investment platform, lowering our cost of capital on our asset-based financing as well as redeeming the Series A and B preferred stock and the accretive benefit to equity from rising LIBOR on our floating rate core commercial real estate credits investments. Our core earnings for the 3 months ended June 30 were $6.3 million or $0.20 per share. The transformation and simplification of…

Thanks, Dave. As you can hear, we are on track to achieve what we laid out almost 18 months ago. Core earnings have increased from a negative $0.12 a share in the fourth quarter of 2016, which was the period in which we initiated the strategic plan, to a positive $0.20 per share this quarter. This -- the quarterly dividend has followed by rising from $0.05 per share to $0.15 per share we’re providing as guidance today for the third quarter. And I would note that with these financial results, we have been able to achieve another of our financial objection -- objectives for the company that’s covering our dividend from core earnings. We look forward to updating all of you on our continued progress and discussing the results of our investment efforts on future calls. With that, I’d like to ask the operator to open up to any questions anyone might have. Operator?

Thank you. [Operator Instructions] And our first question comes from the line of the Steve Delaney from JMP Securities. Your line is open.

Matt, if I could start with you. On the $195 million of new originations, you mentioned the weighted average spread over LIBOR on the coupon of 3.45%. Could you give us a little more color? How many loans, the number of loans, comments about property type and geo would be anything -- the color would be helpful.

Yes, it was 10 loans in total.

10?

Yes, there were 10. The substantial majority, as I mentioned, were in multifamily. And was one on the hotel side and maybe one other from an asset class perspective. But the substantial majority, I think 90% or more, were multi.

Okay, great. In the multi, I guess, what we hear, and we’re not directly involved in the CLO market, but we hear that multifamily finances better in CLOs. So, is your focus there, sort of connected to the concept? I know you want to make good loans, but is, in fact, the CLO financing for multifamily portfolios do you get a benefit there?

You got a marginal benefit in CLO execution. That’s not why we originate multifamily loans, though. That’s just the impacted originating loans. For us, we continue to see a lot of opportunity in work [indiscernible] where we do it with light transitional business plans. We’re doing that at C-III on the equity side. So we’re heavily invested in that product type. We have a lot of efforts around that product type. We traffic in it on both the debt and equity side. So it’s really just a natural extension of our overall product origination.

Got it. So you like the property type and the collateral regardless of the financing circumstances, it sounds like. And if you were financing those on bank lines, you’d be happy is what I’m hearing.

That’s right. It works just as well for us on our warehouse lines. You do originate multifamily at tighter spreads, obviously, than you do hospitality product, for example. But we continue to like the risk-adjusted returns of that origination strategy.

And then move into the two reclassified loans that are now back in the HFI portfolio. Can you say whether or not the borrowers are current on payments, and whether there’s a near-market yield on those loans?

The borrowers are current on payments in both cases. I would say, one of the loans might be slightly below market interest rate. It has been modified several times. But we do expect as Matt mentioned, a near-term resolution to both of those in approximately six to nine months.

Now it’s based on your belief that you feel the properties can be refinanced by the borrowers? Or I assume you’re not expecting that you’re going to have to take the property back if you’re putting it back in the regular portfolio.

Yes, one of the primary drivers for the original classification of those in the strategic plan was that while the loans were okay, they weren’t providing an ROE profile that we wanted to target long term. At the same time, as we evaluated the deals and they improved a bit operationally, we expect them to just resolve according to their normal terms.

And my last one, Matt, and sorry to pick on you, but these are the topics that jumped out at me. When you talked about the CMBS portfolio, I didn’t realize that there was a significant floating rate component as there is. And could you just maybe explain exactly what type of CMBS that is? I don’t know whether that’s a CLO structure or a single ball or floating rate. Just being curious, what you’re finding attractive on the floating side? And that’s my last one.

Sure. There are a series of opportunities in single-asset, single borrowers relative to some of the priority product that we have seen. Our CMBS team continues to evaluate not just straight conduit investment opportunity but other opportunities on the CMBS side, and so it is a combination of those.

And our next question comes from the line of Ben Zucker from BTIG.

Just to start off, could we talk about the market a little bit? I know that quarter-over-quarter, your spreads were down a little bit, but...

Could you speak up a little bit, please?

Yes, sorry. Can you hear me now?

Thank you. Yes.

Can you talk about the market environment a little bit? I know that your spreads were down about 50 basis points quarter-over-quarter, but you were also targeting multifamily loans. So I’m just curious how much competition you’re seeing out there right now.

Well, I think the market is competitive. I think we continue to originate, I think, our fair share of loans. I mean, I think the forward pipeline is reasonably robust. So while the competition continues to be out there, I think we’re proceeding, really, at pace according to our plan.

To add to that, Ben, I think one way to help frame it, as you correctly pointed out, new loan origination spreads have come in a little bit. I think that’s pretty consistent across the market. But at the same time, the cost of funds has moved as well. We’re seeing that both on the warehouse line side as well as on the CLO execution that we spoke to our comments. And the increase in LIBOR has also helped mitigate the impact that, that has on both our levered and unlevered yields.

I definitely hear you there. And I guess, also, since you’re redeeming those securitizations, there’s even an additional opportunity for you guys to improve your funding costs going forward. The CMBS portfolio, that continues to tick up also. And I know it’s a clear part of your investment strategy, but is there any higher-level thought to how much of your equity capital you’re willing to allocate to that part of the book? And as a quick follow-up to that, where do you see the best risk-adjusted returns right now between CRE bridge loans and CMBS?

On the portfolio allocation, in our Investor Presentation, we try to provide a framework for how we’re thinking about it. I don’t remember the specific page, but somewhere in the neighborhood of 65% to 75% of the portfolio, in the end, we would target for our traditional loan-type product. And then a combination of longer-duration investments would make up the balance. So I don’t know that we have precision, per se, with how much would be made up of CMBS. But there’s certainly, in our mind, at least as of now, a cap there with how much would be either CMBS or other long-duration product going forward.

That’s very helpful. And lastly, I know it’s hard to predict originations and repayments from quarter-to-quarter. So maybe to ask it from a different way, based on your pipeline and the repayments that you’re expecting, do you anticipate further growth in the CRE loan portfolio throughout the second half of this year?

We do see our loan origination pipeline building. I think we did $320-or-so million in the first half of this year in the aggregate, maybe $340 million in the first half of the year. We do expect to continue to see that grow in the second half of the year. As you pointed out, it’s difficult to predict with precision exactly where repayments will be, but we do expect to still see the net portfolio continue to grow.

And I’m not showing any further questions at this time. I would now like to turn the call back over to Bob Lieber for any closing remarks.

Thank you all for participating here today. Andrew, do would you want to close with anything?

Continuing to follow us and express the kind of confidence you've been expressing to support the company we know is a privilege we have to continue to earn. I think that we have been doing a good job at that over the course of the last several years. We expect to continue deserve that trust as we go forward. I'd like to commend my management team for an excellent job, and we hope that you'll continue to follow us as we progress through the next several years. Thank you.

Thank you all for participating today. Look forward to following up. Thank you, operator.

Thank you. And ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a nice day.