Q3 2019 Earnings Call
Good day and welcome to the Great Ajax third quarter 2019 financial results conference call and webcast all participants will be in listen only mode. So you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one or your Touchtone phone.
To withdraw your question. Please press Star then too. Please note that this event is being recorded I would now like to turn the conference over to Laurans Mendelson CEO . Please go ahead Sir.
Thank you very much. Thank you everybody for joining us on our third quarter industrial I before we get started I want to point everybody to page to the safe Harbor disclosure in discussion of forward looking statements.
With that we get started on page three [laughter] in general Q3 was another good quarter, we bought loans from multiple sources, primarily a joint venture structures, which closed in very late September we continue to improve the rates in terms of our asset base financing, including closing our second rated long term securitize bonds structure.
The market value of our assets continues to increase in we'll see that when we look at loan performance migration later on this call and as a result intrinsic net asset value grew in Q3 and it continues to grow more so in Q4.
I want to give a wheel kind of high level business over he before we get into the quarter results on the next page its very important to understand where we got loans from you can see from somebody a data that our cost basis in loans in the types of loans, we buy is different than others and our sourcing network is very.
Important to our ability to acquire these loans at the prices, we want and the kinds of loans, we want our sellers are banks originators in funds a Andy a the yield curve environment at the last a few months is a increase supply a into the into our markets as well.
Our manager I'm is very important I understand the analytical approach we have a 11 people in the analytics group today analyzers large amounts of data to determine the target long characteristics and for the loans and also to develop pattern recognition algorithms for choosing what kinds of loans, we want what characteristics they should.
I have had a price them and also to drive the servicing platform.
Third parties in our joint venture partners rely on her managers analytics and oversight as a service now we own 20% of our manager a and we have a zero cost basis, whereas we sold our book value does not reflect any value right in the manager as we care to zero basis.
Uh huh.
So are we are affiliated servicer services, our loans asset by asset borrower by borrower. The Servicers performance has created significant net asset value increase it took a lot once we own and it's helped bring institutional investors to us as long purchase partners, we only 20% of our service or as well including warrants.
Since our investment in our service or its servicing portfolio has more than doubled during the 18 months we've been invested.
No we use a moderate mark to market leverage average level average leverage including corporate leverage for the third quarter was three times and asset base leverage was 2.7 times. This was approximately 6% lower than the second quarter and 10% lower than first quarter 2019.
On page four well.
Discussion about the quarter itself.
We acquired 241 million in new P.B. through joint ventures. Unfortunately, they closed in the last week in September . So we only received four days of interest from these investments so.
Timing does matter in that regard, but 241 million in joint venture investment in loans 43 million our share in the joint ventures, we acquired three multifamily rental properties for 16 million into single tenant Triple net lease commercial properties for another million five the two multifamily properties are and I too.
The multifamily properties are in Dallas, a one Morrison Baltimore and the to Triple net lease properties are in Boston.
Net interest income in Q3 2019 increased approximately 700000 versus Q2 2019, primarily driven by a 1.1 million decreasing interest expense and that was partially offset by a decrease in loan interest income you may remember that we sold loans in the second quarter of 2019.
And we didn't materially reinvest the proceeds until late September as we just discussed the into September and those purchases were primarily investments through joint ventures. As a result, we had less interest earning assets on our balance sheet in Q3 than we did in Q2, and therefore less loan interest income if we had person to ask it earlier in the quarter net interest income what does it.
Increased by a materially larger amount.
Another item to keep in mind is that interest income from our portion of joint ventures shows up as income from securities and not loans.
Oh, so since servicing fees for securities are paid out at the securities. The waterfall itself. Our interest income for securities is net of servicing fees. Unlike interest from loans, which is gross in search of servicing fees. As a result, as our JV isgro interest income will grow slow interest income will grow slower than if we directly purchase loans by the amounted to serve.
I think fees and the servicing fee expense will decrease by the corresponding offset.
In Q3, 2019 I'm most of our investments were made through joint ventures. However, since these closed in late September they had little revenue benefit.
Our overall cost of funds decreased by approximately 20 basis points during the third quarter due to issuance of R rated securitization Ajax mortgage loan Trust 2019 D as well as from lower interest rates on our repurchase lines of credit the advance rate on 2019 deep or a AAA through a rated securities.
81% of you PB with a weighted average coupon of 3.01% are amortized cost in the underlying assets was only 87% of you PB. So as a result, we effectively received 81 87 leverage at 3.1% fixed rate match funded non recourse.
Our amortized or as a result will get more leverage should securitization of these loans and our cost of funds versus a repurchase facilities support loans declined by approximately 120 basis points.
Also as LIBOR has decreased materially the cost of our repurchase lines of credits have decreased commensurately as well subsequent to September 32019, we put in place an additional repurchase line of credit for our joint venture Securities that is approximately 65 basis points cheaper and we expect our interest cost related to financing joint ventures.
Securities to decline as we rotate securities to that facility.
Net income attributable to common stockholders was 7.7 million or 39 cents per share we've already discussed the impact of having less interest earning assets on our balance sheet and as a result ups as a result of selling loans in the second quarter and not reinvesting until late in September 2019.
So a timing difference of receiving proceeds and putting them back to work. Additionally, the loan sale from second quarter 2019 triggered a 490000 dollar incentive fee payable under our management agreement due to the increase in book value that was triggered by the payment of dividends in September .
The one time fees, two and a half sense a share $490000. If we had reinvested the proceeds in the beginning of the quarter and had no incentive fee or we've had a effectively not having sold loans are per share income for the third quarter would've been about 45 cents.
[noise], we continue to have significant cash flow from our loans in our joint venture portfolio as our loans consider it continued to have very robust payment performance and we'll see more about that in a few slides.
The other thing is with the decline in rates prepayment has increased materially as well.
Our average daily cash balance for the quarter was 56 million and we can and continued to have approximately the same amount of cash on balance sheet.
Because of lung cash flow.
We continue to be primarily RPL re performing loan driven for our loan portfolio at quarter end September we were 97% re performing loans. If you look at property value you will see increase.
Quarter over quarter in our Oreo and rental portfolio.
Are you on rental did not increase because of an increase in Oreo it increased because of an increase in rental assets, we purchased urban multifamily properties in Dallas in Baltimore and Triple net lease properties in Boston as our property portfolio grows a bit we'll see an increase in noninterest income Oreo held for sale, which was which results from foreclosures can.
When you sit declines.
[noise] on page six you can see that we continue to buy lower LTV loans with our overall re performing loan purchase price of approximately 61.8% of property value and 87% of you PB.
And our NPL portfolio.
Well purchased NPL some in declining in absolute dollars invested our enforce our NPL portfolio purchase price the property value is 54.5%.
As you might expect higher loan to value npls become Oreo sooner and lower LTV npls become Oreo later, if it ever.
As lower LTV npls are much more likely to become paying loans.
Our markets keep going a couple of things to point out we've added to our Dallas and Houston investments as well as our local infrastructure in those markets.
Number two we're seeing that the new tax law is having material effects on higher end property values and four states more than others, New York, Connecticut, New Jersey, and Illinois, We're definitely seeing a decrease in value differences between the higher end and middle property desktop miles. So we're seeing a compacting of the higher.
Your end towards the middle So there's less difference between what I'll call desks, I'll six versus desktop, while eight or nine than there used to be.
California continues to represent the largest segment of our loan portfolio both in residential rpls as well as in small balance commercial loans, our California assets are primarily Los Angeles, Orange and San Diego counties were seeing consistent payment and performance patterns in these markets, particularly in the urban centers. We've also seen.
Consistent prepayment patterns, especially for certain borrow characteristic subsets and also prepayment related to.
Tax laws in different states.
One thing I do want to point out given the current events, we have not seen any impact on our California loan portfolio from the current wildfires.
Portfolio migration. This is kind of the most important part to me.
Is the improved performance of loans once we own them in our service or start servicing them a lot of that is driven by the analytics of what loans. We think we'll do better and a lot of its driven by the way our servicer performs and the analytics used by the servicer that are manager producers for it.
Right now we have are at quarter end, we had 1.04 billion of loans that were 12 of 12 and payments or better only 269 million of these were 12 of 12 or better when we bought them.
For the loans that we buy based on our analytics and the way our service or services Alones. Our data suggests that wants one of our loans gets to be seven of seven payments, there's a 93% chance that it's going to be 12 of 12.
The intrinsic value their loans as you might imagine increases materially when we buy them.
If you kind of look at less than four payments of 500 million and those all become are overwhelmingly become 12, 12, 20 424, the value increases materially on average over our ownership time.
In current markets and as evidenced by a Fannie Mae.
Loan sale today as well as loan sales over the past few months clean pay 12 month or better loans with Ltvs under about 90.
Trade to yields around 350% to 3.60% when you think about our loans within $87 price and an average weighted average grew by about 45% you can imagine there's a significant amount of built in value.
Migration due to the migration of our portfolio.
The other thing that this performance does is in addition to increasing cash flow and any be materially the significant cash flow velocity from these loans also lowers our asset base financing costs and it increases the securitized bonds senior class advance rates as well as you can see from our.
Securitization 2019, D. that we get in Q3, you know AAA Doubleline single a is 81.
81 divided by 87 or.
Over 90% of our cost in terms of single layer better advance rate clearly shows. This. Additionally, we're working on another rated securitization.
Currently have for Q4.
Subsequent events, we had a very busy late Q3 and has continued into Q4, we continue to buy low LTV loans as a purchase price to collateral values in the Fiftys and 16%.
We expect to both the bulk of these identify transactions to close in early December .
We also continue to grow our urban centers small balance commercial properties and triple net lease properties.
And.
As well.
Our board.
Most recent board meeting declared a 32 cents dividend to be paid on November 26 to common stockholders of record of November 16.
If we turn to the metrics slide Theres, a couple of things I want to point out on page 11.
Yield on but as I mentioned before yield on debt Securities is net of servicing of approximately 70 75 basis points.
So.
And on relative to underlying cost basis debt securities. Just how are the interest in Jvs are presented under GAAP as our Jamie's increase which we expect them to the GAAP reporting net of servicing unlike loan interest income distorts average asset yield lower and related ratios by the amount of that servicing fee. So.
It's important to keep that in mind when you see some small changes in yield much of it is related to the combination of what goes through joint ventures that is net of servicing fees and what goes to loans that is gross of servicing fees.
We continue to expect asset level debt cost a decrease even more both through securitization in the repurchase lines of credit you can see it came down from 4.7 to 4.5, and we would expect that number to come down as well in Q4.
Our leverage ratio with so many loans performing we're comfortable with a little more asset based leverage. However, the loans are paying so much arc leverage actually is has declined rather than increased from the cash flow from that leverage.
On page 13, and 14, our most recent income statement and balance sheets are those are also in our press release and with that I'm happy to take any questions anybody may have.
Thank you we will now begin the question and answer session.
To actually question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressing you would like to withdraw. Your question. Please press Star then to at this time, we'll pause momentarily to assemble roster.
And our first question will come from Tim Hayes of B. Riley FBR. Please go ahead.
Hey, good afternoon Larry.
Hey, My first question if you the first three quarters of the year Youve earned a dollar section taxable income versus the 96 cents of dividends you've paid out theres still another quarter to go we're we're almost halfway through but based on what you're seeing so far do you expect taxable income will exceed.
The annual dividend run rate, given where you know the dividend is now and if so how do you anticipate handling distributions to shareholders.
Sure.
Yeah.
I think we'd probably do expect taxable increased taxable income to exceed the dividend the four quarter dividend run rate as so far.
I think we do expect that I think that our board will decide.
Later in this quarter as to whether to deal with that either in a special dividend or in a dividend increase oh with a smaller special dividends and.
But as of now I think where we expect that the.
Taxable income will exceed the the combined dividend.
Cumulative.
Four quarter dividends.
Okay.
Makes sense and appreciate the commentary.
I think you might have answered this already but just on Cashel income might you know a bit low this quarter. It seems like most of that was due to the Oreo sales and some of those headwinds you mentioned that impacted our GAAP results and just looking at slide can you noted a little bit asset yield.
Crashing and kind of explain that but just wondering if there any impacts from interest rate movements or cash flows that impacted taxable income more asset yields and negative manner.
No not negative banner prepayment is good the number one a detriment to taxable income is selling Oreo yeah for a nonperforming loan when you for close you have it taxable gain equal to the gross value the property.
Minus your tax basis, and the gross value excludes all costs related to the Oreo itself. Once it becomes scenario so taxes insurance maintenance repairs. So when you when you sell the Oreo unless you sell it for more than its gross market value plus expenses.
Right you will have a tax loss at the time of sale. So as a result, we had 30 Oreo sales, but only seven newly created Argos, which meant that we had a 23 property deficit of sales that had tax losses as opposed to seven that had tax gains because only seven new ones were create.
Good. So it's really that was kind of the biggest driver in taxable income that so many areas being sold versus new oreos being created now keep in mind that because npls are becoming such as such a smaller percentage of our portfolio.
There won't be that much new Oreo created.
In our balance sheet, but on the flip side, we were selling arioso faster, there's only so long that we'll still have already even sell.
Right.
Okay.
Got it and then just.
Just quickly on the new credit facility as there are is there an interest rate floor on that credit facility or more now no. It's a it's a LIBOR plus almost nothing facility versus a LIBOR plus one something facility.
Basically it's a reduction of the spread by 65 basis points versus LIBOR.
On the new facility for our joint venture Securities, So that'll be and now as so as repo rolls off we will move them rotate them over to the new facility and.
And so that over the course of 12 months it will be kind of all moved but over the course of any month it will move kind of a.
A little bit more early then later, but I would expect a good chunk to be moved within the next two to four months over to the new facility and saves about 65 basis points.
Gotcha and spot LIBOR moves down your cost of like yes. Your house, yet, we'll get there yes absolutely.
You just look at LIBOR over the last three or four months, it's come down pretty significantly so our loan facilities have come down our repo facility is probably come down by 20 basis points, just because a LIBOR movements in the last three or four months, but then if you take the joint venture facility and use of crap. Another 65 basis points. It effectively means that the joint ventures are.
Our cheaper 20 to 30 basis points, just because of changes in LIBOR versus say late Q2 early Q3, and another 65 basis points from reduction in spreads.
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Got it.
Okay, and then just one more for me.
Yes.
Just wondering you know.
What your estimate you mentioned that the servicing portfolio for Gregory as doubled over the past 18 months. Just wondering you give an estimate for the value of that platform and any updated thoughts on that how to best maximizes value.
I think the expectation for Gregory is that it's going to continue to drive the revenue side of it servicing platform at the margin its new servicing is very profitable for it.
So it's.
It's executive Committee has become very focused on having a drive revenue over the next kind of 12 to 24 months, an increase third party servicing and joint venture servicing.
So as a result.
If thats accomplished I would expect its value to increase significantly I would say that from an investment perspective now.
Great HX invested a when it bought the equity it bought 8% at a 35 million dollar.
Pre money value and and also got warrants for another 12% a different prices marginally above that between 39 and 50 million.
I would guess that market values, probably closer to 50 than 35.
And its current structure, perhaps a little more.
Based on some.
Interest has been shown by third parties with regard to Gregory.
Okay. That's helpful. Thanks for taking my questions.
Absolutely.
Our next question from.
Kevin Barker of Piper Jaffray. Please go ahead.
Yeah.
Hey, Kevin.
So on the outlook for the interest income and the spread that you're generating right now obviously, you've seen quite a bit of.
Expansion and.
I appreciate the detail you gave.
Jim earlier.
When you look out when given the interest rate environment that we see today, where we're kind of Phoenix stabilization.
Yeah, maybe even like a steepening of a bit.
At what point do you feel like the the spreads will stabilize.
Given the outlook that you see today.
Obviously LIBOR floors.
We are starting to stabilize or at least came down quite a bit failure in fourth quarter right.
I will point do you feel like the asset yields and the liabilities will start to stabilize just given the current rate outlook.
I think we would expect our cost of funds to continue to decline.
I think that the lenders themselves.
Our.
We've had a lot of lenders prospective lenders reach out to us and.
Propose.
New lines of credit on loan on the loan repo side that are cheaper than our current ones and more aggressive I think banks.
Certainly the larger ones are looking for some spread income in there.
And also that they can get good capital treatment. So we're seeing banks, making pretty aggressive so pretty aggressive proposals to us.
The so I would anticipate that our cost of funds will continue coming down asset yields a lot. There's a lot of seasonality to where new assets where assets are prices assets are sold out.
There's a there's seasonality to supply, but there's also seasonality to demand, we see not not be for someone like us but in for other types of buyers of assets. There's a lot of seasonality to when they want to buy things and when they don't want to buy things Oh, So we do see a little bit difference in price.
We also see that very large pools like 500 million plus sell for much higher prices than say 50 million does or 20 million does and where aggregators and that's still a pretty inconvenient business for most competitors that we have.
But it's kind of our nuts and bolts of the way we operate.
So we havent seen any material impact in yield other than.
So many loans are paying it extends duration a bit.
But cash flow is off the charts as a result.
The what I will say is we're going to have to over the next if prices stay where they are for clean pay kind of 12 in 24 month loans.
We're going to continue to refinancing rated securitizations very cheaply, but also I think our board.
Would want to take advantage of the kind of the 10% a year exception is to selling.
10% of tax basis per year of selling assets.
Okay.
So are you thinking that maybe the asset yields.
Start to flatten out maybe.
Early next year or.
Well, if you look at our asset yields our loan yields a basically kind of been pretty stable somewhere between eight to happen eight and three quarters for most of the last 12 months and our security and our securities yields have been around kind of 6.5% to 7% and keep in mind that thats net of servicing so it's really about seven in three quarters.
I would anticipate that if the.
If there is no increase in default, which in a weird way, we actually increased yields because it was short in duration.
It would reduce total cash flow, but it would increase.
Rate of return increase Unlevered yield.
Apps and as material increase in default you'd probably see a small decrease in yields but it'd be more than offset by the.
Decrease in interest expense I mean that you're seeing in coming in lumps.
Got it okay.
And then as we look forward.
With some of that some of the profile you see out there I mean.
Across the board delinquency rates have come down quite a bit.
There are seeing some.
Instances, where there are some delinquency rates picking up and in certain pockets are you seeing any different opportunities for buying assets right now, yes, yes, yes.
Yep.
It's interesting one of the things we are seeing is that bank customers of ours, our loan sellers as a way of getting income in a flat TRV environment.
Okay. So so we're seeing we're seeing some of that we're seeing some.
Funds, particularly NPL buying funds that have loans that have become performing.
Looking to shorten duration of the portfolio returned money in earned carries other sellers of loans once they start to make payments because they don't want the longer duration.
So we're seeing that and supply you know the between the banks in the agencies and funds and also originators one of the things.
We were in a beneficiary in a small way so far in Q4 and very late Q3.
Was.
When rates rallied like crazy in mortgage rates dropped in MSR values went down theres a lot of small originators, who finance MSR ours, and MSR is or not that liquid. So they had to sell loans rather than MSR is to pay down MSR financing.
Okay.
And.
Thank you Larry.
Sure.
Our next question will come from Scott Valentin of Compass point. Please go ahead.
Hi, Thanks for taking my question.
With regard to the Jvs as you do more jvs going forward, how should we think about retention rates on those is.
Finally came about 20% of the JV or.
Should we think of yet we model, we we generate depending on the JV, we can retain anywhere between 10 and 50% in the choices up to us.
We generally retained about 20 or 25%.
Now keep in mind, we earn money other ways because the manager.
Yes, a fee from the JV partner and the service or gets and servicing fee and we owned 20% of each of the manager in the servicer.
And to the extent that those entities they the valuations and those change overtime and also some income we pick up from them from our ownership we get some.
So.
I don't want call invisible benefit, but we certainly get more benefit than just the rate of return on the assets inside the JV.
Okay.
Okay, and then in terms of JV partners I know you said you've been approached the pass by by multiple.
Yes, I think Blackrock and and double line of the two main entities right now its other plans to expand that would that help yes, yes, we have equity we have three others, who joined in with us as well.
And.
I.
I wish we could find enough loans to satisfy all the JV demand how about that.
Okay.
And in terms of but in terms of infrastructures and infrastructure constraints on you mentioned, you get new partners and yet the machine after crank out what product is that there's no infrastructure constraints you have right now theres theres no constraints in the and the good thing is that the constraints wouldn't be our expense would be the expenses are the manager in the service or is that being said, we own 20% of each.
But they spent a lot of money over the years on analytics and technology and I would expect that to continue even more so on the servicing side.
Given the or how many loans they get to perform and a way of even further streamlining streamlining that so there's so much analytics in predicting what a borrower is going to do that the service or doesn't have to waste time working on things that the borrowers not going to do.
So.
A lot of these kind of pattern recognition models that the analytics groups have built really help the servicer in terms of its a marginal cost.
But that being said as something gets bigger and bigger and bigger and bigger and bigger you still you know you get things that come up that you hadn't thought about until they actually can front you. So I'm sure there'll be some one off things here and there but for the most part I think they have a.
The service or especially has a pretty good Grand Master plan.
Okay and then one final question you see more active in a small balance commercial real estate slash multifamily area is that.
The conscious on contracts on your part of the effort the or you're seeing better deals there than what you're seeing elsewhere.
Well I don't want to say they are better deals.
We in our small balance commercial loan business have many times made a bridge loan to somebody who repositions the property and after they pay us off we say Holy Cow, we should have bought the property instead and made the bridge loan.
And.
So as a result.
We buy some and properties that we would have been willing to make the bridge loan on and provide repositioning money for the.
The other thing is we also we'd like to Triple net lease space, we have a relationship with a national.
Okay.
Credit tenant.
Whose expanding in a lot of our target markets and as they buy up businesses in those markets, we buy the real estate and they sign up 8% Triple net lease with us because they don't want to own the real estate they want to be operators and so we expect that that portfolio would will grow as well, especially in today's.
Market, where you can fans triple net lease.
Credit tricks credit tenant triple net leases.
For taking my questions.
Sure.
Again, if you have a question. Please press Star then one our next question will come from Stephen laws of Raymond James. Please go ahead.
Hi, good afternoon Larry.
I think.
You covered a good bit MCU and they already but I wanted to follow up on Scott's last question on the rental property portfolio and certain.
How big can cannot get how should we think about that growing forward I mean, I mean, clearly doubled I guess almost doubled with the the Threeq you investments but.
You know kind of whats your forecast there the pipeline of potential assets will add to that portfolio in the next.
Any anytime from you on 12 months.
Sure the the Triple net lease for the I'll, let me kind of split them into the two bucks is the triple net lease portfolio.
Those individually those transactions there anywhere between about 600000 about a million too.
And we would definitely like to expand that program materially that being said.
Realistically for that type of asset that we're doing away with the time to tenants we do it with.
Realistically can never be more than 150 or $200 million, you know and that's over three years not over one year.
Okay.
The.
The urban small multifamily in mixed use that we think is art, where our data suggests these markets are changing even though when you walk down the street you may not know that.
That's that's something that.
Has a lot of seasonality to it.
You don't see those properties sell in December for example.
So I wouldn't expect is much.
In Q3 for us as we Didnt acute I'm sorry in Q4 for US as we Didnt Q3 for us on the total purchase price of multifamily.
The but overtime that could be a pretty substantial business and it's a pretty good cash flowing business and ultimately could be bigger than the triple net leased particularly right. Now we are solely focused on the markets that we are already involved in in our resident.
So business, but to the extent that you expanded that to certain other markets that data suggests.
Are attractive for it we could expand that but that will be I think more so in 2000 and.
20, and 21, then in 2019.
Great to.
The follow up on the seasonality and maybe switched RPL NPL side I know you commented on some transaction is expected to close in early December but yes, we think about the holidays in the back after the quarter.
You know, which weighted that work to do things slow down just given fewer work days or does it go the other way people would rather not carry rpls or npls on their balance sheet over the over the year end and they look to sell though.
You know kind of what kind of seasonality you do expect in that business.
Sure we see we see the funds tend to be sellers earlier in the fourth quarter.
And.
Perhaps it depends it's determined by the date there carry is determined or something else as opposed to year end. We find that banks are very year end conscious, but don't want to be there. The last two weeks in December so kind of December 15th as year end.
For them so.
So we and it but on the flip side, the very small banks so.
For the the days left to two before December 31, the things close is directly proportional to the size of the bank. So a small bank is a fewer number of days before year end in a big bank is a larger number of days before year end.
Great that's helpful and and lastly.
You know it sounds like the opportunity seem pretty attractive across multiple business lines. It also seems like the jvs.
Gets you nice kind of embedded leverage given whats your retaining there.
Yep point can you talk about capital needs, you've got 60 million of cash Im sure Theres other assets.
Liquidity options you could look at how do you think about your capital needs from here, especially with the stock.
Right at book value or at least very close.
After the appreciation we've seen here recently.
Sure well kind of one fundamental theme that we have which is the most important thing is now for us to be bigger. The most important thing is for our balance sheet to be more valuable than it was the quarter before each quarter. So that we just keep growing kind of the NPV of the underlying business and we are believers in capital and whatnot.
I'll just in time basis, so that if you don't have a purpose to deploy the capital Theres No reason to go raise it you know, it's one of those things where.
I know they teach in business school haven't been a professor years and years and years ago that kind of price to book is what matters, but theres one more calculation, which is what are you going to do with the money. So that if you issue stock at one and a half times book and you invested zero, it's still dilutive.
So.
For us if we were to raise capital would be because there is an imminent transaction closing that we think is a good use of money as opposed to warehousing cash.
Great appreciate the color today, Larry Thanks very much.
This concludes our question and answer session I would like to turn the conference back over to Laurans Mendelson for any closing remarks. Please go ahead Sir.
Thank you very much everyone for joining us on our third quarter 2019, a investor call, we're happy to take other questions.
Over the next whatever period of time as you.
Have any and feel free to reach out to us and we love talking about our business and with that thanks again and.
Hope everybody has a good rest of the week.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.