Q1 2020 Earnings Call
Thursday
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Good morning, and welcome to the KKR real estate Finance trust earnings call for the first quarter of 2020.
Conference or all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero after today's presentation will be an opportunity to ask questions to ask a question. You may press * then one on your telephone keypad to withdraw your question, please press * then two, please note. This is being recorded. I would now like to turn the conference over to Michael Shapiro head of investor relations, please go ahead.
Thank you operator. Welcome to the KKR real estate Finance trust earnings call for the first quarter of 2020. We recognize that these are unprecedented times. We hope that all of you and your families are safe and healthy as you could expect. We are hosting today's call from various locations. So please bear with us. Should we experience any technical difficulties today? I am joined on the phone number CEO not Salem our president and CEO. Oh Patrick Madison our CFO Mustafa, Makati and our recently appointed Vice chairman of the board Chrisley.
I would like to remind everyone that we will refer to certain non-gaap Financial measures on the call, which are reconciled to get figures in our earnings release and in the supplementary presentation, both of which are available on the investor relations portion of our website. This call will also contain certain forward-looking statements, which do not guarantee future events or performance. Please refer to our most recent 10-K precautionary factors related to these statements before I provide a brief recap of our results. I want to note two important items as quarter first as you may have seen them look to simplify our income statement reporting by re classifying our net core earnings as core earnings are quarter earnings this quarter and in quarters going forward is and will be comparable to the net quarter earnings numbers. We've presented in 2019 and prior second our financials reflect the adoption of the current expected credit losses or Cecil phone number.
It went into effect for us.
And similar-sized non-bank public companies on January 1st, 2020 Mustafa will share more information on Cecil during his prepared remarks.
For the first quarter of 2020. We had a net loss of 35.2 million or 61 cents per share which included a 55.3 million or $0.96 per share provision for six quarter earnings were 25.3 million or 44 cents per share book value per share as of March 31st, 2020 including the impact of a dollar $22 per month from Cecil was 1845. Finally. I would note that earlier this month. We paid a cash dividend of $0.43 per share with respect to the first quarter with that money. I would now like to turn the call over to Matt.
Thank you, Michael. Good morning, and thank you for joining us today.
Our first priority is the health and safety of all of our stakeholders while we have spoken to many of you recently our thoughts and prayers are with you and all those who have been impacted by the covid-19 pandemic.
Our entire team is working remotely and continues to be highly efficient. Give them a recent volatility. We have increased our level of communication with our board members shareholders borrowers and lenders to ensure transparency and proactively address potential issues.
What seems like many months ago now we announced this past quarter that my partner in the business Chrisley has joined our board of directors as vice-chairman.
I want to thank Chris for his leadership with carafe since its Inception.
We will continue to work closely with Chris on all of our investing and strategic initiatives.
Also as part of the board transition Craig Blanchard from McKenna recently stepped down from the board.
Want to thank Craig for his leadership since the IPO and to think McKenna for being one of our lead pre-ipo investors Craig. We wish you all the best.
It's r i p o almost three years ago. We have been focused on conservatively managing the company across both our assets and liabilities as of quarter in a company had approximately four hundred fifty million of liquidity including approximately 370 million of cash.
Well, we have been laser-focused on lowering the risk profile of our liabilities by diversifying and increasing our funding sources away from Traditional Bank repurchase facility to those that are non mark-to-market.
As of quarter in seventy 3% of our outstanding secured financing was completely non mark-to-market.
Well, none of us could have predicted this pandemic. Our portfolio was purpose built for the later stages of an economic and real estate cycle.
Or conservative investment strategy is primarily concentrated on the lighter transitional segment of the market.
Lending like institutional-quality real estate located in the most liquid real estate markets.
owned by well-capitalized high-quality sponsors
today or average loan size is 130 million and Approximately 80% of our loans are located in the top ten markets in the US.
Investment Portfolio is ninety-nine percent First Mortgage senior loans
Our two largest property type exposures are multi-family and office which represent 85% of the portfolio collectively.
In addition 88% of our multifamily loans and 75% of our office loans are secured by Class A Properties.
hotel and Retail properties represent only 8% of the portfolio
Also the company benefits from its affiliation and integration with KKR, not only through the shareholder alignment that comes from KPRC 36% ownership stake and Cara.
But through the integration with KQRS significant and growing real estate platform.
As of year-end pick yours Global real estate business head over ten billion dollars of assets under management and controlled approximately 8 billion of real estate throughout the US.
Our extensive portfolio across real estate equity and credit gives us a differentiated view of real estate fundamentals Trends and values across a broad range of markets and business plans.
Turning to our portfolio activity for the quarter. We originated three loans totaling just over three hundred fifty million.
All of these loans closed prior to March and were previewed during our fourth quarter earnings call.
As a market became more volatile. We began prioritizing the preservation of our high amount of liquidity.
Before I turn the call over to Patrick, let me spend a few minutes on our asset management.
Well, we remain confident in our underlying portfolios. We do not expect to be completely unaffected by the impact of covid-19.
It is more important than ever to have the experience and ability to manage assets.
As a reminder you hired Christine Patterson to oversee our asset management activities in 2018. Chris brought over 20 years of asset manager experience to our team is responsible for managing all of our sponsor discussions, which have been very active.
Given our focus on the larger loan segment of the market. We have a manageable portfolio of 40 loans.
This allows us to have very frequent conversations with all of our borrowers and manage our portfolio efficiently.
The experience of our team and that of our sponsors through many different economic Cycles is an invaluable asset in times like these.
All of our borrowers made required interest payments and built the first quarter and April.
And Analysis of our underlying property collections during April in our in our multifamily portfolio showed consistent Trends to that of March.
Well office portfolio, so the only minor decreases an underlying tenant collections consistent with our robust quarterly asset review process.
We evaluated every loan in portfolio to assign an updated list grading our portfolio, which total 5.2 billion at the end of the quarter has a weighted average wage of 3.0 on a five-point scale an increase from the 2.9 list rating at the end of the fourth quarter.
We did move 14% of the portfolio to a four rating give it our view of the environment and the properties underlying business plans.
The migration was driven by a more covid-19 of property types.
Such as Hospitality retail and for sale housing.
To which collectively you have very limited exposure.
And our supplemental you provided some incremental disclosure on our to hospitality loans.
Both phones are financed on on mark-to-market facilities and were previously cash flowing and stabilized properties.
Pelon's collectively represent approximately 4% of the overall portfolio.
We're working closely with both our hotel sponsors to help them navigate this environment.
And expect to modify those loans, which will include new sponsor equity in partial Debt Service deferral.
During the quarter. We received a hundred eighty million of repayments. It is always difficult to accurately predict repayment.
Even more so in this market.
But as a reminder, we have several loans in our portfolio near or at stabilization.
Responses are an active dialogue with lenders to refinance our loans.
We are taking the conservative posture today and will remain very selective and deploying our Capital. However should some of our more stabilized loans repay We believe We would be well positioned to take advantage of what should be an attractive lending environment.
finally
We believe that the actions we took coming into this environment have and will continue to position as well.
With that, let me turn the call over to Patrick.
Thank you, Matt and good morning, everyone following our IPO nearly three years ago. We devoted a considerable amount of time and resources working closely with our internal took a our Capital markets team is diversify or financing sources and increase our non mark-to-market financing capacity.
As of quarter-end 73% of our in place secured financing was completely non mark-to-market compared to 13% in 2017.
Growth of non mark-to-market financing has allowed us to lower the risk of our liabilities while maintaining Target leverage levels despite the recent volatility.
We continued to add capacity in the first quarter with the closing of a new $500 non mark-to-market Warehouse facility. In addition. We increase the size of our corporate revolver, which matures in December 2023 by 85 million to 335 million month or traditional repo financing represents 27% of our outstanding secured financing.
Unlike facilities prior to the global financial crisis are repo facilities are marked to credit only.
As you can see on page fifteen of the supplemental materials. The facilities are Diversified across three different lending partners with no individual exposure than 470 million.
In aggregate the facilities are secured by 11:00 loans with the principal balance of approximately 1.5 billion of which 71% is secured took dominantly by class a multi-family and office assets.
liquidity continues to be a primary focus across our industry
It's not mentioned. What we feel are relative position in the market is strong. We are cognizant of the environment and are focused on managing or liquidity appropriately.
A quarter end or liquidity a 450 million consisted of approximately $370 million of cash on the balance sheet.
Which reflects the full drawdown of our corporate revolver plus undrawn capacity for pledged and approved collateral of approximately eighty million.
Subsequent to quarter-end. We repaid hundred million on the revolver.
Or current liquidity just consisting of cash and the undrawn portion of the revolver only has increased approximately $65 million.
from 3
170 million a quarter end to over $435 million today.
We continue to manage our liquidity position for potential Capital needs on both our liabilities and future funding obligations.
And the liability side we are starting to engage in proactive discussions to selectively utilize our liquidity position and create mark-to-market holidays in exchange for partial be leveraging on our facilities.
On the opposite side or aggregate future funding obligations were approximately $590 million or 10% of our committed principal balance at home.
Remodel out or liquidity needs for future funding some of which require property level hurdles to be funded or or related to Capital expenditures, which may be delayed given a current environment.
We believe our recent run rate of approximately 25 million a month is a good proxy for near-term future funding projections.
Additionally we have access to corresponding financing facilities to match many of these funding obligations across our various financing lines.
The Highlight we utilized our financing facilities on more than 90% of our March future fundings.
We have used or liquidity to be proactive in this market.
Given the significant volatility in the broader Equity markets. We repurchased $25 million dollars of shares in March and early April.
an average price of $12.27 per share
representing a 14% dividend yield and a six three times or December 31st Book value.
The share repurchases were highly accretive and increased book value per share by approximately $0.22 all the which $0.19 was recognized in the first quarter off.
Finally 99.9% of the portfolio remains invested in libor-based floating rate loans.
As we discussed previously and with Spotlight work currently below fifty basis points Great Floors provide a net interest income benefit package has a 98% of the loan portfolio has a Libor floor of at least ninety five basis points and only 5% of our liabilities have more floor at a rate above zero.
Which allows us to continue to benefit from decreased financing cost in the declining rate environment?
Before we open the call for your questions today. I will turn it over to Mustafa to briefly touch on a results for 1 q and R Cecil implementation.
Thanks, Patrick and good morning. Everyone has a reminder prior to our it. Oh, we need an approximately $36 Equity investment in a private funding a cold reek upon was an underlying portfolio of cmbs V pieces which are held unlevered on a hold to maturity basis.
Our first quarter results include the C million dollar unrealized decline in the state of value of our recap one Equity investment as a result of the intake to the underlying portfolio from Boston Market disruption due to the covid-19 and send Em.
The fair market value of the recap investment could fluctuate over the next few quarters based on Market Market developments.
Now, let me spend a minute to go over our book value or call and book value per share with my 1845 compared to 1952 as a Q4.
In addition to the recall marks Market adjustments. We just discussed the two main drivers for the quarter-over-quarter change in our book value per share were one our community sees the reserve which should use our book value per share by a bar twenty two cents and to our exceeded resources of one point six million shares of old in stock in the first quarter, which contributed $0.19 to our book value per share.
Additional details regarding output value per share go forward can be found on page seven of our supplemental.
Finally, I will conclude my remarks with an overview of our seasonal approach and our thoughts on the seats are reserved in light of the current environment.
Our new see some standard became effective for us on January 1st at the scores and our form 10-q. We flies a probability of default lost given before tomorrow combined with a subset of historical long-lost data like from trip that most closely represents our focus on larger loans in major markets.
Certain loans that did not fit the model or evaluated using a probability waited expected cash flow approach concerning varying economic and market conditions.
In addition to the 15 million dollars or the 26 cents per share day one teaser Reserve recorded as a reduction to our January first book value. We recorded a nickname 55.3 million or $0.96 per share additional fees or provision in our first quarter income statement.
Resulting in a cumulative Book value of 70.3 million dollars or $1.22 per share.
The 7.3 million dollar yesterday. In fact of which 4.3 million is attributable to unfunded loan commitments represents hundred thirty-seven thousand points of our aggregate portfolio outstanding principal balance.
They
Using our sister Reserve during the quarter compared to our day one adjustment was primarily driven by changes in the Necronomicon Outlook resulting from the projected impact of the covid-19 and dammit.
In summary. We are taking a conservative posture today, and we remain very selective in deploying our Capital. We have a strong liquidity position. We have our service will be billed for the for you match with lower-risk not mark-to-market liabilities, and finally, we believe that the actions we took coming into this environment have them continue to position crafts. Well, thank you again for joining us today, and now we're happy to take your questions.
We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assist our roster.
The first question comes from Jade rahmani of KBW, please go ahead. Thank you very much and glad to hear from everyone in terms of the page magnitude of deleveraging. Can you put some parameters around that perhaps for example, should we expect credit facility borrowings outstanding to perhaps. Just by somewhere in the range of 10 to 20% over the next quarter or so.
Hey Jay, good morning. It's Patrick. I'll take that one. So a couple of things I guess first just to level set here. Obviously we're talking about the 27% of our facilities are are not not in order to Market and Within These facilities. There's no Capital markets. So anything that we would be doing would be proactive just to be clear. We haven't been margin called on on any of our facilities to date but to get your direct question. I think we would think about something more on the lines of sort of a 5 to 10% delivered chain as opposed to a you know, ten to 20%
Okay, it appears he had to I believe accidentally disconnected himself. Maybe he was unmuting himself. So in this case, what I'll do is go to the next question who is Steven laws of Raymond James, please go ahead sir.
All right. Thank you. Good morning, you know, can you talk about the buyback activity and and your considerations into liquidity and valuation of to book, you know at what point, you know, do you do you does the buyback become less attractive and it's it's more about maybe you know building up some liquidity and 1/8 powder to capitalize on opportunistic new investments from The Market opens back up. Uh, just you know any color kind of how you think about the economic return of those two options, you know from here as you age,
Yeah, I can take that one and thank you and thanks for joining us even it's Matt here. There is obviously an economic balance that we have to take versus pursuing capital and you know making new loans or just against preserving liquidity. I think some of the extraordinary price action that we saw in March. Um
Let us down the path to buy back stock and we had a lot of liquidity and I I hope that's what you and our shareholders would expect us to do is is is being on the offensive and off an active in the market trying to buy back stock. Obviously, you know, this environment makes sense. The environment makes us a little bit more cautious but it doesn't mean we aren't going to be opportunistic when we see our FAQ trading at those levels and I think you know, we gave you a sense of of how accretive it was, you know in total when you factor in a few of the shares that we bought post quarter of around twenty two cents of accretion overall to the balance sheet and we were buying those at about a
About a 14% dividend yield and so, you know you think about that versus you know, where you could potentially make new loans and the uncertainty around that, you know, we thought we thought it was the right thing to do to change so you got Capital to buy back stock.
Great. Yep, that's certainly is very creative to book value as we saw in the in the deck. You know, this may have went been at least somewhat down the path J was headed but can you you know leverage? Obviously, there's the accounting impact or math impact from the Cecil. You know, how should we think about those levels going forward, you know, we continue to add back that reserved and look at a leverage to an adjusted Equity G. And you know, as you mentioned I think a decline of five to 10% on the the funding balance, you know, we we view that new new level as more of where steady-state is or is it something goes back up in a year or two back to where we were previously?
Stevia morning, it's it's Patrick. So in terms of Leverage, I guess first, I would say, you know from a portfolio standpoint at this point. We're we're fully deployed. So that's the first thing I think the second thing as you saw reported that total leverage number which includes all of our non mark-to-market non-recourse financing in there, but presents it on to look through basis, um was was higher obviously when you back out for the Cecil reserve your see that we're more in line with, you know, three point seven times which was sort of marginally up from sort of year-end that feels the the sort of mid 3s mid-to-high 3s wage, which we have which we've talked about in the past feels like the right sort of near-term range for us. I'm not I'm not anticipating a significant move off of that the only thing dead
That could changes if we proactively take some steps to.
You know reduce some of our our leverage in in in certain facilities.
Great, and and lastly, you know looking at page nineteen loan 24 looks like the only one with the max remaining term of less than a year. It's a retail asset in in Portland map updates there and discussions you had with with that borrower given the near Term Loan maturity.
Right on on that facility. I guess you're talking about the the facility that's maturing later this year.
Well loan 24 to a retail asset and in Portland Oregon looks like it matures in about six months.
Right. So we're we're in active discussions with with that sponsor, you know regarding that loan and and and sort of that business plan. So that's obviously one of the ones that were working closely with the with the sponsor, you know through this crisis and and managing toward that maturity date.
Okay, great. Well, I appreciate the the color today. Thank you.
Thank you. The next questioner is Jade. Rahmani. I'm sorry your line had dropped before from KBW, please go ahead sir. Yes. Thanks very much. Sorry, I'm not sure how I got cut off. But, um, can you talk about the multifamily portfolio? I think there's somewhat of a healthy debate right now about how multifamily may perform you mentioned 88% of it is class say, you know, I assume the inference being that the underlying tenants in those, uh, apartments are better equipped to uh deal with the uh, economic shortfall that's being experienced right now. How do you expect multi-family to perform and can you give any update as to your multi-family loans?
Hey Jay, it's Matt. I guess I can I can take that you're right. And I think the reason we broke that out this quarter in our supplemental to provide that additional information off because I think you could see a different level of underlying tenant collections depending on you know, obviously the the quality of the real estate the rental level and the time you're the type of tenant and what kind of jobs they have. They're so, you know, I think when we looked at it said that's on our prepared remarks, but when you look at the collection in April versus March they were in line about a month and I think everybody's obviously going to look at Bay and check and see how those come through. But so far the performance has been strong and you know, these are predominantly obviously salaried employees right that are able to work from home.
This is going on and are still some obviously earning an income. So I think you know what we're we're always thinking about where they're in the portfolio and and clearly if you saw a very prolonged contraction and you know the US economy and that starts to filter through to you know, salaried White Collar jobs Etc. You know, that that's really what we're we're watching and trying to understand you know, how that could potentially come through an impact our assets, you know, most of that multi-family is is pretty well least so long it's about 74% on average lease. So it's it's a little bit less about the lease up for us right now and more about the underlying collections off at the property level, which is obviously a good thing. Um, so I think that that's how we're thinking about it. You know, I think we feel good about it today, but obviously in a month
Like this where we're closely monitoring.
And what has been generally the tone of the of the actual owners of those buildings.
You know, I think they I don't think anybody's business as usual right now, right? I think anybody that
On the company or a property is taking inventory and making looking around corners and making sure they understand you know what may happen but I would say the tone has been pretty positive and constructive and I wouldn't say any of them was thinking that there's going to be a big impact at this point. But again, you know, we've got May and June and there'll be other data points too long to look at but it's so far. The tone has been pretty positive. Can you also touch on the office portfolio? You mentioned 75% Class A you expect that take a more durable asset class. And also is there any either direct co-working exposure or buildings that are in lease up that have perhaps some competition from buildings that had been exposed to to co-working?
Yeah, let me take that one and I'll pull up the exact co-working number here right now. The direct co-working number is less than 1% of our office portfolio at least by co-working tenants and if you look at
You know, we're like for instance we work has their biggest Market exposure like New York City San Francisco and Los Angeles in the US. We don't have any office Assets in those.
Those top three markets. So obviously it's co-worker as a component of every Market but I don't think that we look at our portfolio today and say, you know, but we're particularly concerned about what's going on in the in the co-working space as it relates to existing tendency, obviously, but also in terms of just ability to lease up and you similar to my multi-family comment, you know, the office assets are about 75% least as well on average. So there is a base level of tenancy there a base level of cash flow. They're dead. Yeah that they could help obviously support the property and support support The Debt Service. So, you know, we'll consider to follow those closely. But you know for sure we sit today, I think if we feel good about that, you know overall exposure.
Okay, in terms of the earnings and dividends directory, are there any comments you can make high-level about some wage expectations? Do you think reasonable to think around? Um, you know, I think on blackstone's call be except he's called they said the board would you know make a decision regarding the dividend in June which obviously leaves open the potential for a reduction, although they didn't say that one went to hear how you guys thinking about things.
Sure, I'll touch on the dividend.
I would say our view on the dividend hasn't changed. It's it's our priority to pay to pay a cash dividend. We target minimum of 90% of our annual taxable income, you know, obviously, we just we just paid a dividend two weeks ago and I think if you look at the company today, we've got lots of liquidity and off.
Additional earnings power from Libor floors, but you know similar to what you commented on before like our board meets in mid-june and you know, they'll be able to incorporate whatever new information comes out from you know now until you know that moment and we'll make the decision at that point.
The next question comes from Rick Schoen of JPMorgan, please. Go ahead.
Hey guys. Thanks for taking my questions this morning. And I just want to say how much we appreciate your disclosure. I think it's it's very helpful. I did want to touch on a some comments. You guys made about draws on committed loans you're talking about a roughly twenty-five million dollars a month through year-end and compare that to what you might expect in terms of repayments. If we look at q1 repayments were about sixty million dollars a month though. I suspect that was probably very front-loaded life was a hundred and fifty million dollars a month on average. I'm curious what you would expect as we move through 2020 in terms of repayments.
Rick and Morty it's Patrick. I'll I'll take that one. So I guess first on the on the funding's as you can imagine. It's not a precise science. So we're booked up for casting out what we expect to pay and part of that a little bit based on what we paid historically but as I mentioned in the comments, there are a number of factors that could lead to a Slowdown in that trajectory including delays and capital capex spending, you know, a number of our fundings are are heard about a third of them are hurtled so that could cause sort of further delays. So we're doing our best to sort of map that out and then as I also indicate it we would suspect that a number of those payments. We will have financing against those and so that that will largely cover a good portion of of our expected fundings dead.
On the prepayment side, you know if it was difficult before it's obviously even more difficult now to assess what the repayment schedule could look like that said, there are a number of loans just that are near stabilization that are in active discussions with lenders to to refi those positions and given some of the month, you know, the the nature of the the profile of the assets the lower leverage. They're getting they're having dialogue with both sort of floating rate and fixed rate lenders, so it's difficult to predict but given the size of some of those loans. Some of those prepayments could be rather meaningful as we forecast out in the second half of this year.
Got it, and thanks.
For you know taking an attempt to sort of dimensional eyes that those fundings as we move through the year. Look you guys intimated to the idea that your sort of the portfolio is full right now and obviously it makes sense to preserve liquidity in order to meet those future those commitments. How do you have the conversation with borrowers about hey, we're going to be shut down for a little bit presumably there's not a lot of activity anyway, but how do you manage that in terms of relationships?
Yeah, it's not I can take that. I think it's hard to get everybody is in a similar place. And and so there's not an expectation that I open and actively lending today and and quite frankly, you know, obviously some of its capital and and being conservative and and some of it's just the logistics right? We're like, how do you go off-site inspect the property and how do you get an appraiser out there? And so I would say largely it's not it's not just the lending Community. It's it's also dead, you know on the equity side and the acquisition side everything is slowed down until we can you know, get Commerce going and the shelter-in-place starts to diminish. So I think everyone is very, you know, they understand that it's not a difficult conversation. I think you know, everybody's rooting for each other here and making sure that you know as economy recovers and and Thursday.
And you know leave our homes that you know, we can kind of get get things going again from the transactional perspective.
Got it. Okay. Thank you. Thank you very much guys, the next question. The next question comes from Steve Delaney of JMP Securities, please go ahead took morning everyone and just one question from me. I wanted to ask on your Cecil Reserve 70 million. Can you comment as to whether there's any meaningful specific reserve on a on a individual asset in that total figure?
Morning Stephen. This is Mustafa. Thanks for how much how are you? So our sister Reserve is basically for for most of all the same approach. We use this property the fall plug given the 4th model supported by historical mobile data from to project a low-level loss reserve for each single on that we have so there's not really anything outside of the ordinary other than you know, we're just running the model so there is not an increase the wage only. Oh, no, no, no. Nothing jumped out is one particular loan that required a a loss Reserve much greater than trap would have indicated.
that and that's correct, and the increase was probably
You driven by the macroeconomic forecasts giving the equivalent cuz I'm sure well, let me explain why I asked so you had seventy million you have five point two million of birth outstanding principal. So I get roughly 1:35. I think you might have mentioned 137 Mustafa, but we had bxmt call at 10 a.m. And you know, we had the press releases last night and I calculate 70 basis points for them on outstanding principals. So you're reserved is almost 2 x what bxmt put up and you have far less Hotel M chale at 11% combined versus their 20% not to mention their thirty percent foreign exposure. So not not at all trying to trash them or anything. This is new for all of us, but that was the reason for my question and I think over time it will be interesting. I'm sure all the analysts on this call, you know, this is the first quarter, but I think it will be interesting to track off.
Um the level of your Cecil Reserve versus the out your outstanding principal balances, and I'm sure we'll figure out how to find that but obviously dead and type is go ahead. I'm sorry. This is a very good question Steven this reservation here. I would just say that we have been very conservative on our estimates and we we we stayed away from making its objective adjustments on the back end to the results and we just kind of stuck with the model and just basically wage but changed was really driven by the network atomic forecast and we believe it's it's a very conservative reserve and as you said Bible cell phone
Well congrats to you for being conservative at this uncertain time and everyone stay. Well. Thank you for the comments. Thank you.
The next question comes from Aaron ciganovic of City, please go ahead. I apologize. If this has been asked my phone it's going to be going in and out but I have the have the repo lenders asked to change their the advanced rates at all or those expected to stay stable through the the the leveraging off.
Aaron good morning. It's it's Patrick. Let me let me address that I guess first. I would say that as it relates to kind of the landscape of a repo lenders if you look at our facilities, generally we're borrowing in kind of the seventy-two 75% range. I think from our discussions with them that's still a consistent area where they would be willing to offer to lend I think across the broader Market you'll see that there there is leverage that available at at a higher level but we have not availed ourselves to that page leverage one on sort of repo. So I think that that's uh, that's still sort of largely intact. I think we're we're looking to maybe be proactive here is that we've got liquidity position if we can as you've seen we've we've taken a lot of effort over the last few years to really bulk up the non mark-to-market financing and so yep.
can do that in our
Repo facilities by offering some amount of partial de leveraging in exchange for non mark-to-market holidays. We're going to look to Avail ourselves to that off, you know in this in this market and so I think that that's that is available out there. We're exploring that but as it relates to the existing wage sets on the line and and for future assets, um at the moment, I'm not expecting sort of a material change in in Leverage.
Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Michael Shapiro for any closing remarks.
Thank you. And thank you everybody for joining us today. We appreciate the time and hope that you stay well and healthy and if there's any follow-up questions, please feel free to reach out.
The conference has now concluded thank you for attending today's presentation. You may now disconnect.
Thursday
dead dead dead dead dead.
I'm home.