Good morning, and thank you for joining the Lument Finance Trust First Quarter 2025 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the call over to Andrew Tsang with Investor Relations at Lument Investment Management. Please go ahead.

Good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust’s first quarter 2025 financial results. With me on the call today are Jim Flynn, our CEO; Jim Briggs, our CFO; Greg Calvert, our President; and Zachary Halpern, our Managing Director of Portfolio Management. On Monday, May 12, we filed our 10-Q with the SEC and issued a press release to provide details on our recent financial results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I’d like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements. These risks and uncertainties are discussed in the company’s reports filed with the SEC, in particular the Risk Factors section of our Form 10-K. It is not possible to predict or identify all such risks, and listeners are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to update any of these forward-looking statements. Further, certain non-GAAP financial measures will be discussed on this conference call. Presentation of this information is not intended to be considered in isolation nor as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC. For the first quarter of 2025, we reported a GAAP net loss of $0.03 per share and distributable earnings of $0.08 per share of common stock. In March, we declared a quarterly dividend of $0.08 per common share, respective first quarter in line with the prior quarter. I will now turn over the call to Jim Flynn. Please go ahead.

Thank you, Andrew. Good morning, everyone. Welcome to the Lument Finance Trust earnings call for the first quarter of 2025. We appreciate all of you joining us today. Before we begin with the market update, I would like to officially welcome Greg Calvert as our new President and newest member of our management team. I’ve personally worked with Greg for almost twenty years. He has extensive experience in multifamily credit and nearly a thirty year tenure at Lument and its predecessor entities, making him an exceptional addition to our leadership team. Welcome Greg. Turning to the economy and market. Despite ongoing uncertainty related to the pace and direction of interest rate policy, the broader US economy has continued to show somewhat surprising resilience. The labor market remains tight. Consumer spending has held up much better than anticipated and inflation, while easing from the peak, continues to be a focus for the Fed and frankly for investors and the economy. However, the topic of the day continues to be trade and tariffs. Any developments, whether real or projected, have had a significant impact on markets and sentiment as we saw yesterday and also are seeing this morning in pre-market. As we move through 2025, we are mindful of the potential for volatility for this and all economic issues, but we do remain cautiously optimistic that good opportunities for investment will be present in 2025. Stability and monetary policy would provide a constructive backdrop for the returning health of the commercial real estate finance market. The multifamily sector continues to demonstrate relative resilience amid evolving market dynamics. Although low rent growth remains muted, occupancy rates remain robust. On the supply side, multifamily construction starts have decelerated due to several contributing factors, including scarcity of attractive financing and increased construction costs. Looking ahead, the combination of steady demand, limited new supply, and the challenges faced by potential homebuyers due to mortgage rates suggest a favorable environment for multifamily investments over the medium to long-term. As a result of improving conditions, we have seen greater financing origination opportunities, albeit choppy over the past 45 days. And the capital markets appear to continue to be engaged relatively significantly. Throughout this environment, active asset management has been and continues to be our priority. We take a proactive approach to monitoring borrower performance, market trends, and collateral values. Our team is in constant dialogue with our borrowers, ensuring that we can identify issues early and respond strategically in order to maximize recovery values, including foreclosure and OREO strategies as prudent. As we have mentioned previously, we have executed several successful loan modifications and extensions that preserve value and enhance our downside protection. We remain committed to preserving capital and maximizing risk-adjusted returns across this cycle. Our credit risk ratings have remained largely stable quarter-over-quarter, and sequential increases to our specific reserves are in line with our expectations for portfolio performance. Given our focus on optimizing recovery from our existing investments, we have appropriately managed liquidity to maintain flexibility, holding a considerable amount of unrestricted cash on our balance sheet rather than deploying it into new loan assets. We have also elected to use principal repayments received on assets held within the LMS financing structure to partially pay down outstanding liabilities. This voluntary partial deleveraging of the portfolio provides us with additional cushion in meeting various collateralization and interest rate coverage covenants within that structure, which we believe is an acceptable trade-off as we continue to resolve the more challenged credits and seek to put more favorable secured financing in place later this year. We are currently reviewing options for new secured financing for that portfolio, and we expect to close in the coming months. We expect the new financing will provide us with adequate flexibility to manage our seasoned credits while putting us in a favorable position to viably access the CRE CLO market as a returning issuer. Following a lull in new deals post the Trump administration’s April 2nd tariff announcements, there’s been a flurry of new CRE CLO deals over the past several weeks, which has been encouraging and demonstrates the functioning capital markets. Pending market conditions, we would anticipate new issuance in the second half of 2025. We continue to leverage the origination, underwriting, and asset management expertise of our manager and its affiliates to identify and capitalize on compelling investment opportunities. Our ability to navigate the current environment, prudently manage our liquidity, optimize capital deployment on a levered basis, and manage our challenged assets will be key to delivering long-term value to our shareholders. With that, I’d like to turn the call over to Jim Briggs, who’ll provide details on our financial results. Jim?

Thanks, Jim. Good morning, everyone. Last evening, we filed our quarterly report on Form 10-Q and provided a supplemental investor presentation on our website, which we’ll be referencing during our remarks. The supplemental investor presentation has been uploaded to the webcast as well for your reference. In pages 4 through 7 of the presentation, you’ll find key updates and earnings summary for the quarter. For the first quarter of 2025, we reported a net loss to common stockholders of approximately $1.7 million or $0.03 per share. We also reported distributable earnings of approximately $4 million or $0.08 per share. A few items I’d like to highlight with regard to the Q1 P&L. Our Q1 net interest income was $7.7 million, a decline from $9.4 million recorded in Q4 of ‘24. The weighted average coupon and average outstanding UPB of the portfolio declined sequentially, largely due to declines in the SOFR benchmark rate and the deleveraging of our secured financings. Exit fees were also lower as payoffs during Q1 totaled $55 million, as compared to $144 million in Q4. The company recognized approximately $700,000 of exit fees during Q1, compared to approximately $1.1 million in the prior quarter. Our total operating expenses, including fees to managers, were largely flat quarter-on-quarter as we recognized expenses of $2.6 million in Q1 versus $2.8 million in Q4. Approximately $450,000 of the incentive fee that would have otherwise been incurred by the company in relation to Q1 was waived by the manager. The primary difference between reported net income and distributable earnings was a $5.7 million net increase in our allowance for credit losses. As of March 31, we had seven loans risk-rated at five, including three assets newly downgraded to five in Q1. All seven loans are collateralized. Six of the loans are collateralized by multifamily assets, one by seniors. Greg will provide a bit more detail in his remarks. We evaluated these seven five-rated loans individually to determine whether asset-specific reserves for credit losses were necessary, and after analysis of the underlying collateral, we increased our specific reserves to $11.1 million as of March 31, an increase of $7.3 million versus the prior quarter. The general reserve for credit losses decreased by $1.6 million during the period, primarily driven by payoffs of performing loans, loan modifications, and the move of certain assets to specific evaluation. We ended the first quarter with an unrestricted cash balance of $64 million, and our investment capacity through our two secured financings was fully deployed. The CRE CLO securitization transaction we issued in 2021 provided effective leverage of 75% to our loan assets at a weighted average cost of funds of SOFR plus 173 basis points. The LMS financing completed in 2023 provided the portfolio with effective leverage of 81% at a weighted average cost of funds of SOFR plus 314 basis points. On a combined basis, the two securitizations provided our portfolio with effective leverage of 77% and a weighted average cost of funds of SOFR plus 225 basis points as of quarter end. The company’s total equity at the end of the quarter was approximately $232 million. Total book value of common stock was approximately $172 million or $3.29 per share, decreasing sequentially from $3.40 as of December 31, driven primarily by the increase in the allowance for credit losses. I will now turn the call over to Greg Calvert to provide details on the company's investment activity and portfolio performance during the quarter. Greg?

Thank you, Jim. During the first quarter, LFT experienced a modest $55 million of loan payoffs. As referenced in Jim Flynn’s earlier remarks, approximately $31 million of these payoffs were within LMS. And although these principal repayments were eligible for reinvestment into new loan assets, after much deliberation and with the understanding that the portfolio is currently in a transitory phase as we work to line up new secured financing sources, our team made the prudent executive decision to intentionally partially pay down a portion of the LMF bond in order to provide us additional cushion in satisfying the overcollateralization test as required by the LMF indenture. As of March 31, our portfolio consisted of 61 floating rate note loans with an aggregate unpaid principal balance of approximately $1 billion. 100% of the portfolio was indexed to one-month SOFR and 92% of the portfolio was collateralized by multifamily properties. As of the end of the first quarter, our portfolio had a weighted average note floating rate of SOFR plus 355 basis points and an unamortized aggregate purchase discount of $3 million. The weighted average remaining term of our book as of quarter end was approximately 40 months, assuming all available extensions are executed by our borrowers. As of March 31, approximately 60% of the loans in our portfolio were risk-rated at three or better compared to 64% in the prior quarter. Our weighted average risk rating quarter-on-quarter remained flat at 3.5. We had seven loan assets risk-rated “5” with an aggregate principal amount of approximately $108 million or approximately 11% of the unpaid principal balance of our investment portfolio. One was a $15 million loan collateralized by two multifamily properties in Philadelphia, Pennsylvania. This loan asset was risk-rated “5” due to monetary default. During Q1, the company recognized approximately $300,000 of cash received from the borrower as a reduction in our carrying basis of this loan. Another “5” risk-rated asset was a $20 million loan collateralized by multifamily property in Orlando, Florida that was in monetary default. During Q1, the company recognized approximately $400,000 in interest from this loan. The third “5” risk-rated asset was a $15 million loan collateralized by a multifamily property in San Antonio, Texas that was in technical default. This asset was foreclosed on within the 2021 FL1 CLO structure subsequent to quarter end. The fourth “5” risk-rated asset was a $10.5 million loan collateralized by a multifamily property in Colorado Springs, Colorado that was in monetary default. The fifth “5” risk-rated asset was an $11.5 million loan collateralized by a multifamily property in Houston, Texas that was in monetary default. The sixth “5” risk-rated asset was a $24.5 million loan collateralized by a multifamily property in Clarkson, Georgia that was in monetary default. And finally, the seven “5” risk-rated asset was a $12 million loan collateralized by a multifamily property in Celanthe, Michigan that was in monetary default. During the first quarter, we were successful in achieving positive outcomes on two of the six assets that were “5” risk-rated as of December 31. These included a $32 million loan collateralized by a multifamily property in Dallas, Texas, and a $6 million loan collateralized by a multifamily property in Orlando, Florida. In one of these cases, our loan was assumed, and approximately $2 million of our loan principal was paid down by the new borrower sponsor. In the other case, we provided a three-month forbearance and agreed to extend the loan until November. Monthly debt service payments on our loan have since resumed as anticipated. We had not previously recorded any specific reserves on either of these two resolved assets. We diligently continue to engage with our loan borrowers and seek constructive resolutions regarding our more challenged credit. We expect to proactively explore all strategies available to us, and we remain confident that the deep experience of our asset management team and the broad capabilities of our manager and its affiliates will allow us to take whatever steps are necessary to preserve and recover value. We expect to leverage our experienced asset management team to maximize recovery through modifications, foreclosure, and potential OREO operations. As we move through these resolutions, we may provide non-market financing to experienced sponsors to maximize expectations for repayment. And with that, I will pass it back to Jim Flynn for closing remarks and questions.

Thank you, Greg. I'd like to thank everyone for joining and appreciate your time and interest in the platform. I look forward to answering some questions and we’ll ask the operator to open the line.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Jason Weaver with JonesTrading. Please go ahead.

Hi, guys. Good morning, and thanks for taking my question. First, can you talk about what you’re seeing? Can you characterize the pipeline today? As well as a follow-up, is there a level of net originations that you need to see through the rest of the year to maintain the current dividend capacity?

The second question, frankly, is related more to payoffs. There’s not, I wouldn’t put it as - we have assets that we could put into that have been recently originated at Lument and continue to originate. So, we’ll have assets to deploy into LFT when there’s capacity. So, there’s not - I’m not really concerned at an origination level. Now, if volatility continues in the way that we’ve seen over the past 45 to 60 days, that would likely reduce the opportunities from where we think they will be. But I don’t think it dries up like we’ve seen in various points over the last couple of years. So, from an origination standpoint, I think we’re in pretty good shape. Whether we need a couple hundred million or $500 million, I think we’ll be able to have the assets to replenish LFT as needed. In terms of the types of opportunities we’re seeing on the origination side, we’re continuing to see attractive assets on the lease-up level, new construction, newer assets; those are certainly most desirable. From a credit standpoint, they tend to be priced tighter as we’ve seen relatively high competition for those assets. I would say there’s a modest slowdown in recapping and bridge-to-bridge type of deals that we’ve seen a little bit more of over the last couple of quarters, and that largely tracks with kind of what we’ve seen in our loan portfolio. Those have - there’s some for the right sponsor in the right market, you can achieve a premium there. But we’re definitely seeing a little slowdown on that side on construction and lease-up; we continue to see those opportunities. But as I stated in my remarks, deliveries have been on the decline relative decline. And so over time, those opportunities will start to decrease. But I do think we’ll see some turnover in the wall of maturities that we’ve been talking about now for two or three years where we’re going to see some resolutions and I think, opportunities for reinvestment into assets by new sponsors.

All right. Thank you for that color.

Your next question comes from Steve Delaney with Citizens JMP. Please go ahead.

Good morning, Jim and team, and nice to meet you, Greg. I'm interested in your comments about financing. Now you mentioned, obviously, looking at the CLO market, which has been your traditional vehicle for your semi-permanent financing on the portfolio. But I picked up in your tone, Jim, that there are other financing options out there, whether it’s product credit or banks that might give you a more custom or flexible interim type of facility. Did I hear - am I on the right track there that there might be something to do before you do your next CLO?

Yes, I think yes, there are definitely opportunities in the market, really both from banks and private credit. Obviously, the bank providers are more closely structured like traditional warehouses with some different terms, duration, and some flexibility on how long assets can stay on the line, those types of things, which make them more attractive than a traditional kind of repo. So we’re definitely looking at both, as you say, potentially as an interim step and likely something that we would want to keep permanently to maintain flexibility if we can achieve the right flexibility there. The CLO market broadly still remains the most attractive financing in our opinion for floating rate multifamily assets. Occasionally, we’ve seen the capital markets being disrupted either through a lack of or no availability on the investor side or gapping on the bond spreads. But today, we’ve seen continued interest. I know you’ve seen several deals here in the market in the last couple of weeks that, in our opinion, have either priced kind of in line with where we might expect or in some cases, talks of maybe even better than we expected. And that suggests that there’s a lot of capital on the side looking to get into the - deploy into the CLO space. So, it’s hard to replace a permanent vehicle like a CLO securitization. So, that will continue to be our primary focus. But I do think there are not a lot of providers that are offering alternatives and flexibility. And look, this is a derivative of the market continuing to extend loans, business plans taking longer, and new sponsors stepping into older deals. Those types of things have provided an opportunity to lenders on the back leverage side to offer some competing financing to the traditional securitization market.

Okay. Understood. And I appreciate those comments. And just as far as your problem loans that are under asset management, seven loans at $180 million. Can you comment if there’s any? Those things take each one is a different story, different borrower. But as far as and you may have new fabricated loans or by the end of the year it’s a fluid process. But do you anticipate any near-term resolution, say between now and the next three to six months? Do you think some of these will be resolved and go away? Or is it more a matter of just incremental increases in the '5' rated bucket until we see a major – a larger turnaround in the market?

One, there’s certainly a possibility - and personally, I do see the potential there for there to be resolutions in the next three to six months. As we’ve seen over the past several quarters, we’ve continued to have those. So, do I think that that is a real possibility? Yes, I do. However, as you know, the market has been choppy, and sponsorship is really key. A common theme that we’ve seen among assets, obviously business plans didn’t pan out the way people thought. That’s clear. But in many cases due to what happened with the timing of acquisitions and expectations around rental growth, it’s not achieving those even if there was some positive growth. But what we’ve seen, regardless of these assets that we’re talking about or even in prior quarters, is typically a sponsor just coming to the conclusion either voluntarily or often involuntarily that they don’t have the capital to improve the asset in a way that is the most ideal situation. When that happens, the lack of investment into these assets, particularly those of older vintage, deterioration happens quickly. So, the way that we envision potential outcomes in those situations is for us to gain control of the asset either directly or bring in a new sponsor that is a known quantity of ours, who can potentially provide incremental capital, maybe non-market financing to a quality sponsor, which would allow for the asset to go from where it is today in this deteriorating property condition and general performance to something that has greater value. So, that’s really the strategy here. In terms of, as you know, our portfolio has generally been declining as we delever and maintain liquidity. So, what I’ll call the legacy portfolio, the number of opportunities for problem assets continues to decline as we work through those that are struggling. So, whether it’s this quarter or very soon, we feel like you could see the shift in the market where you’re going to start to see a lot more resolutions to some of these assets that have remained outstanding for longer than lenders or sponsors anticipated.

Got it. Interesting. Well, I appreciate those insights into market conditions that we can’t observe from ARC. Thank you, Jim.

Thanks, Steve.

Your next question comes from Christopher Nolan with Ladenburg Thalmann. Please go ahead.

Hi. Thank you. Following up on Steve’s questions on the rise in non-accruals, is this a cash flow issue for the sponsors where the property is simply not generating enough AFFO to cover the interest?

It is a cash flow broadly speaking, meaning I think it’s true at the asset, but it’s also true in the sponsor kind of investing in the property and that cycle - I won’t, and that’s not universal, but as a broad comment, that’s a bad cycle because as you don’t reinvest in the asset, your cash flow deteriorates even further, and your operations decline further. That is the challenge that many of these sponsors face, and as a lender, we have a very experienced and seasoned team around workout resolutions and also OREO management. But if we don’t control the asset, we continue to see that decline if there’s not reinvestment going into the property. So, it is some combination of cash flow and management. It’s - I won’t say it’s a chicken-and-egg exactly, but there’s certainly a correlation there. Obviously, the assets were generating significantly more cash flow; the management would likely be better, or certainly if it weren’t, it would be masked.

Okay. Well, on the March 20th call that you guys had for the fourth quarter, you used terms like strong sponsors, fundamentals remain strong, constrained supply, robust demand, resiliency, and rent trends. And given the rise in non-accruals, it doesn’t sound like that’s the case. Am I wrong or what?

No, I think that is true in the market, and I think on average it is true in our portfolio. On a couple of these assets, we’ve had sponsors not follow through on some of their stated goals and intentions at the asset. From our perspective, if sponsors decide that they’re going to not continue to support the asset in the way that they have historically, that deterioration can happen very quickly. We also feel that while the values today and the reserves are appropriate, we are looking at scenarios that we think should have been better managed by the sponsor, and we think that we or someone else could do a better job.

There are no further questions at this time. I would like to turn the call over to Jim Flynn for closing remarks.

I just want to thank everyone for their continued support of LFT and joining us today. We look forward to speaking again next quarter. Thank you all.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.