Q2 2020 Ladder Capital Corp Earnings Call
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Greetings and welcome to the ladder capital Corp. second quarter 2020 earnings call. At this time all participants are in listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Ms., Michelle Wallis Chief Compliance Officer Senior regulatory Council for ladder Capital Corp.
Can you may begin.
Thank you and good afternoon, everyone.
Before we begin ladder capital Corp. earnings calls for the second quarter 2020.
That's a pandemic persists.
There appear to wish that all of you listening Tonight and your families are well every me say.
Turning to our earnings calls with me this afternoon or Brian Harris.
The company's Chief Executive Officer.
Pamela Mccormack our precedent.
Embarked Fox, our Chief Financial Officer.
Ryan Hamilton more well share their comments about the second quarter, what they're currently sitting in the third quarter.
We will then open up the talk to question.
This afternoon, we released our finance to resell.
For the three and six months ended June Thirtyth 2020 <unk>.
The earnings release is available in the Investor Relations section of the company's website.
I know quarterly report on form 10-Q will be filed with the FCC later this week.
Before the call begins I'd like to remind everyone that this call may include forward looking statements.
Actual results may differ materially.
Those expressed or implied on this call.
We do not or to take any duty to update the statement.
I refer you to our most recent form 10-K and form 10-Q for a description of some of their breath that may affect our results.
Well also refer to certain non-GAAP measures on this call.
Additional information.
Quoting a reconciliation of these non-GAAP measures to the most comparable GAAP measures.
It is available on our website.
Yeah, our dot batter capital dotcom.
And in our earnings release.
With that.
I'll turn the call over to our president.
Pamela Mccormack.
Thank you Michelle and good afternoon, everyone for the second quarter lot of produce core earnings of $12.8 million or 12 cents per share.
As Mark will elaborate on further these amounts exclude a 16.9 million dollar covert related adjustment.
Our Undepreciated book value per share increased by 16 cents from the prior quarter to 14.
Knowledge and 17 cents per share.
Since the onset of covert 19, our primary focus has been on strengthening our balance sheet by increasing liquidity and reducing leverage.
Our access to the unsecured debt markets allowed us to finance, a large portion of our capital base with long term flexible capital and limit our use of the shorter term secured funding most commonly used in our industry.
During the second quarter, we reduced mark to market that by $1.1 billion for 39%.
On the net basis, we reduced our total debt outstanding by $727 million, while increasing our liquidity and unrestricted cash balance by $468 million.
Liquidity as an asset we value and we have a lot of it.
While we will continue to be prudent and thoughtful about the current economic climates.
We look forward to redeploying our substantial cash holdings.
The strength and flexibility of our multi cylinder business model will be evident as we commenced redeployment.
We have the ability to make commercial real estate investments throughout the capital stock and the right team experience and platform to provide the new Longtin rescue capital, we expect to be in high demand as a consequence of this crisis.
We expect conduit lending on high quality stabilized assets to return for us, which should add additional interest income and periodic station gains.
In addition, any new balance sheet, well originate should add to our current interest income on a nearly <unk> dollar for dollar basis since we're already flush with liquidity.
Turning to our balance sheet.
As a result of our recent efforts. We're pleased to further report that as of today, we have over $750 million unrestricted cash.
$2.6 billion or 40% of our total assets are comprised of unencumbered assets, including cash and $1.26 billion at first mortgage loans.
Over 75% of our capitalization is comprised of equity nonrecourse debt and long term unsecured debt, but staggered maturities extending through 2027.
And finally.
Total repo debt for both securities and loans accounts would just 25% of ladders total debt with only $375 million of long repo outstanding across our entire portfolio.
Turning to our balance sheet loan portfolio, which currently accounts for just 44% of our assets.
We have over 150 loads in the portfolio with an average loan size of $19 million.
Which provides significant credit enhancement through granularity and diversification across sponsors property types and geographic locations.
Performance of the portfolio remains strong with a 98% collection rate in July.
With a weighted average LTV of 68%.
Boris continue to have significant equity invested and we've been pleased with a strong level of commitment they have expressed in defending their assets.
No specific loan loss provisions were acquired in the second quarter.
Looking more closely at this portfolio, 76% of our balance sheet loans are lightly transitional where the assets or close to stabilization and require minimal capital improvements.
Our balance sheet loans have a weighted average seasoning of 18 months.
We just a little over 15 months remaining two initial maturity.
27 months remaining to final maturity.
Further reflective of the lightly transitional nature of our portfolio, we have less than $150 million a future funding obligations over the next 12 months.
And less than 250 million in total.
All of which we can comfortably meet with current cash on hand.
The majority of these future funding obligations are conditional and are subject to the achievement of predetermine. Good news events like tenant improvements in leasing commissions due upon the signing up new leases that enhance the cash flow in value with the underlying collateral.
We continue to have limited exposure to hotel in retail loans, which comprise only 14, an 8% of our balance sheet loan portfolio respectively.
Currently almost half of our loan portfolio remains fully on uncovered.
And our exposure to mark to market financing on hotel in retail loans.
It's just 1% of our total debt outstanding.
Turning next to our securities portfolio.
As of June Thirtyth, our securities portfolio stood at $1.5 billion.
We reduced the portfolio by 22% or $424 million in the quarter and we pay downs securities repo financing by $276 million.
Since quarter end, we pay down an additional $80 million securities financing as we further de Levered.
As Brian will elaborate on later, we've seen liquidity pricing and financing for our securities portfolio all steadily improve.
We continue to expect our portfolio of almost exclusively short duration AAA rated commercial mortgage backed securities to pay off at par given their super senior position.
Moving onto our real estate investments.
This portfolio continues to be a strong source of recurring earnings flatter.
Well 1 billion dollar real estate portfolio is predominately comprised of triple net lease properties.
With 12 year average remaining lease terms.
We're pleased to report, 100% collection rate on our Triple net lease portfolio in July and a 97% collection rate on the equity portfolio overall.
A triple net lease portfolio was almost entirely lease to necessity based businesses.
Including dollar stores grocery stores drugstores and wholesale clubs that have performed well over the long term and particularly so during this covert 19 crisis.
We expect net lease business to continue to be an important part of our strategy going forward.
In conclusion.
We look forward to benefiting from the competitive advantage, we expect to have as a result of the substantial liquidity we've built up.
We're using our in house origination capabilities and national footprint to monitor the macro environment and investment opportunities on the ground on or space as we seek situations with compelling risk reward dynamics.
We remain cautious but optimistic.
We are in the civil long term and while our hearts certainly with all of those who have been impacted by the spend downtick. We're also excited about the substantial opportunities that will likely rise from the crisis for the company and for our shareholders with whom we remain fully aligned with that I'll now turn the call over to Mark.
Thank you Graham law.
Business and market conditions steadily improved over the course of the second quarter.
Liquidity and capital strengthening actions taken in April allow bladder focus on managing a portfolio of investments and working to reduce its cost of funds.
And this part of todays presentation I'm going to follow up on some of them Will's comments regarding letters London.
Can provide further insight into our earnings results.
In response to a kobin related conditions.
That are moved to de leveraged balance sheet by June 30, the adjusted leverage ratio was reduced to 3.09 times and reflected over 800 million all cash on hand.
Net of unrestricted cash letters adjusted leverage ratio was 2.54 times.
During the course of the second quarter total debt was reduced by $727 million.
Paying down debt, we intentionally targeted secured borrowing that were subject to mark to market provisions.
We paid off $276 million of securities worried about that $156 million of long read about that and $647 million.
Hey, Joe Albi advances in doing so we achieved a major 2020 goal by paying down FHLB advances to below the 400 million Boe level mandated by FHLB rule.
The death was paid down with the proceeds from a combination of sources.
Loan repayments during the quarter totaled $331 million.
Sales of loans and securities generated an additional $590 million and the new Coke facility and COO provided a combined $517 million of non mark to market liquidity.
Finally, latter took advantage of the market disruption by repurchasing $139 million of our corporate bonds.
Looking at the Twoq you income statement in core earnings we're reporting $12.8 million of core earnings and core EPS of 12 cents.
There are a number of kobin related items, including specific expenses losses and gains that had a net $16.9 million unfavorable impact on Q2 GAAP income before taxes.
Those items have all been excluded from core earnings in the second core.
We excluded items include nonrecurring professional fees and severance costs.
Definitely prepayment penalties that were incurred in conjunction with the fundraising and refinancing activity discussed previously.
And if not then for the unprecedented market conditions latter would not have incurred these charges.
Our desire to raise liquidity in response to add growth market conditions also caused us to sell newly originated performing loans at discounts to par.
So.
AAA rated securities at substantially discounted prices and securitized conduit loans at a loss.
Partially offsetting these losses were 17 and a half million dollars of gains realized on the repurchase of our corporate bonds at discounted prices.
So the amount related to each item. Please refer to the core earnings computation note in the non-GAAP measures section of the press release and in the quarterly statistical supplement that has been posted to our websites.
With regard to shareholders equity our securities portfolio valuation marks steadily increased during the quarter, resulting in a $26.1 million credit to shareholders equity as liquidity returned to the CR race yellow and CMBS markets. We also paid a dividend of 20 cents per share in Q.
So.
Assemblon noted we did not record any specific loan loss provisions in the quarter with regard to see silver dollar amount of that general reserves decreased by zero point $7 million.
GAAP book value at June Thirtyth increased to $12.44 per share from 12 goals and 31 cents at the end of the prior quarter well on depreciated book value per share rose to 14 gold and 17 so.
Looking forward, we do our optimism from our strengthen capital base and solid liquidity position.
And an expectation that items of the nature I, just discussed will not adversely affect our future earnings.
In recent months, our loan and securities portfolios decrease in size and funding costs increase as we focus on liquidity and we shifted toward greater component of longer term non mark to market funded.
We are encouraged to see the substantial weve stabilization of the securities financing markets since mid April as borrowing spreads today are now less than half the levels experienced during the depth of the crisis.
I'll now turn the call over to our Chief Executive Officer, Brian Harris.
Thank you Mark.
As you've heard today, the second quarter was the rather noisy one with many transactions that rarely take place in our normal course of business, but these are unusual times to say, the least and while we've managed through numerous recessions, we certainly haven't seen one quite like this.
There are many factors to consider in managing risk as we entered the second half of 2020.
Well, we all saw the massive negative consequences that resulted from the sudden shutdown of the U.S. economy. The initial shocks to the economy were felt in late March in early April and the initial responses from the various governmental agencies to counter though shocks. We're also seeing over the last couple of months.
We now have to deal with the longer term and impacts of the recession on our economy, while trying to judge the longer term effects of many things that are just being witness for the very first time.
Items to consider include the November election, the opening or cancellation of schools in a month the persistent continuation of the lowest interest rates ever seen.
Unprecedented fed and treasury intervention the loss of 33 million jobs in just two months, a second wave of infection and the rollback of some business openings as a result.
Finally, when the research and science will catch up with this awful virus.
Let's face it we will not returned to what most of US consider normal until we can sit down next to a stranger without concern for our health and wellbeing.
No one knows how deep the recession will be or how long it will last but at ladder. We're assuming we're going to deal with a rather severe recession that will last for about a year and that's assuming some sort of vaccine or treatment of the virus can be found by then as conditions change in real time, we will adjust our risk management accordingly.
Under almost any recessionary scenario. The short term game plan is the same lower leverage and raise liquidity profile, we have effectively been managing this downturn since November of 2019, when we extended the term of our 266 million dollar unsecured revolver to five years.
And followed up with the issuance of a seven year unsecured corporate bond on January Thirtyth 2020, just six weeks before the markets were thrust into turmoil in mid March.
Our experience with past recessions has taught us that a little extra caution is warranted at the onset of any downturn.
Because of this liability management when market volatility spiked as the first quarter ended we had ready access to over $1 billion of unrestricted cash providing us with the necessary flexibility we used to further improve our balance sheet for the terrible downturn that was beginning in March.
When the pandemic hit markets in the Middle of March we identified five ways, we could further and enhance our liquidity profile first we look to our regularly scheduled mortgage payoffs and in the second quarter, we took $331 million of loan payoff.
Second we sold 172 million a principal amount of performing loans. This is no small feat considering our offices were closed and the properties could not be accessed but yet we were successful.
After financing and costs associated with the sales. These two items added $300 million in cash to our balance sheet.
Third we sold $439 million, a principal amount of securities at a loss of $15.4 million, which was more than offset by the hour purchase and retirement of $139 million of letters corporate bonds at a gain of 17 and a half million dollars after costs.
Our sales of Securities also allowed us to pay down securities repo financing in the quarter by $276 million.
The fourth action, we took what's the issue a private cielo with $481 million. The first mortgage loans as collateral a significant portion of which were unencumbered, adding to our growing pile of liquidity.
The first and last action, we took was to enter into a fully funded 206.5 million dollar nonrecourse non mark to market credit facility with Coke real estate investments.
Successfully raising that much cash and what may have been the most illiquid quarter I've ever seen was truly statement as to how versatile liability management allows us to be in a very short period of time.
Without reciting all those debt pay down that followed net net we paid off $727 million of debt in the quarter, while simultaneously raising our unrestricted cash on hand to $826 million at the end of the quarter.
I'm happy to report that we continue to receive schedule payoffs as the third quarter began and monthly mortgage payments are at 98% collections.
I'll now just briefly touch on our short maturity securities portfolio, which has rebounded in price as expected and today our leverage on that book of business is just 64% a par down from 79% at the end of March.
What is often times overlooked by the market is how short the securities are in duration. They just don't take a lot of price action in normal markets.
Perhaps a live example will help.
At the end of the first quarter, our single largest holding of a CUSIP was loan core 2018 dash CRT, hey for $106 million, which we owned at par.
This is a AAA rated class in a managed fellow that was becoming a static pool in June of 2020, when its reinvestment period ended.
In June we sold three separate 5 million dollar pieces of this bond as an average price of 99 and then after receiving pay downs in July to our most senior class of $9.6 million at 100 sense on a dollar our exposure dropped from 106 million to where it is today at $81 million.
True, we took a loss of $150000, but over a 30 day period, we received 24.4 or 5 million in proceeds from the disposition of $24.6 million over a most concentrated position.
We expect this position to pay off at par within the next 12 months well. This is only one line item. It is our largest and hopefully this clears up some of the market concerns that we and our stakeholders had to deal with in late March in early April.
I would add that since we last spoke on May 15, we had not received a single pricing related margin call on any of our security holdings as our portfolio has appreciated quarter over quarter.
So when do we going offense. That's a question we get a lot and understandably. So given we're holding an impressive $826 million in cash at the end of the second quarter and that cash isn't doing a lot for our earnings these days.
The answer is we believe soon but we need to be cautious we have to assess the risks out there at that if judge correctly should produce extraordinary opportunities in the next year or two.
Much of the low hanging fruit has been taken off the market over the last few months in the form of very oversold securities that were made available by forced sellers.
The next opportunities will come when borrowers exhaust the patients of their lenders and deplete their capital reserves, we don't know how far prices will fall for some property types, but we have to figure out some how some of these items play off each other in this new central bank driven market.
We will get the answer on school opening soon any election in November will soon be here and we may even see science make further advances in treating this virus.
But let's not overlook the loss of 33 million jobs this year.
Hundreds of millions of dollars are being raised by new phones to take advantage of the highly touted opportunities in commercial real estate.
We too have a lot of liquidity and plan to take advantage of those opportunities. If they do in fact arise, but things could get worse too and until we have more visibility into where the economy will shake out in the long term will bide, our time strengthen our balance sheet and stay ready for the Greenlight to go on for new deployment of capital in large size.
We expect someone to start resumed shortly mostly in the conduit to start but I think we'll have a better idea where to invest after September when schools are open or closed and the virus is either under control or it's not.
The election in November will give us much guidance also as to how to approach real estate investments.
Lot of currency has been printed around the world recently and rates or near or below zero in many cases gold hit a record price recently that all adds up to likely inflation in a few years and if that's the case it will be best to own hard assets like real estate and not long dated mortgages with low rates.
Let's move now to QNX and thanks for listening today.
Thank you at this time I'll be conducting a question and answer session. If he'd like to ask a question. Please press star one on your telephone keypad a confirmation tunable indicate your line is in the question Q you mean fresh start Q, if you'd like to remove your question from the Q for participants using speaker equipment he may be necessary.
Pick up your handset before passing the Starkey.
Our first question comes on line of Tim Hayes with B. Riley FBR. Please proceed with your question.
Hey, good good evening guys. Thanks for taking my questions have been doing well my first one just as it relates to the dividend here you know understanding it's a board decision, but Cory P.S. kinda came well below where the dividend is set and just wondering how you feel about where it is.
Right now and if you had any expectation of when you'll be able to cover it and I know you could go ahead and deploy your excess liquidity today and cover your dividend, but you increase your risking compromise your liquidity I know that's not something you got you're gonna do either so I was wondering if you're okay under earning the dividend for now where if you take it makes sense to further.
Right size, it given where core earnings are shaking out.
Oh This is Brian Tim I'll respond, we're pretty comfortable with the or what's the level, where it is right now and in fact, when we sat down with the board [laughter].
[laughter] and came up with that number.
We actually decided we only want to do this wants and we didn't want to go back to the well if there were further problems or what the understanding that you know interest rates are extremely low right. Now. So you know two to produce a 10% dividend you're gonna have to use some leverage and leverage pictures a little bit unclear right now we have.
Leverage or agreements with many banks, but those very same banks are taking very large reserves also so we want to be a little bit cautious there, but we don't think we're going to have problems, earning that dividend in a couple of quarters from them. So we're very like literally but where it is where we're not concerned and if you look at the earnings power of Ah up the balance sheet, given the amount of cash.
We have a you know we can continue to de lever ourselves and also save and interest expense there.
Got it.
Thanks, Brian that's helpful. And then you know the occupancy rate in the diversified real estate portfolio dropped and good amount this quarter and you know I assume that was the main driver for the NOI decline that portfolio can you just give us a little more context around what types of assets saw the most hardship and what steps if any are being take.
You can increase occupancy in those assets, what your outlook and maybe why no impairments taken.
Yeah, I'll start and then I'll, probably punch it over to Mark Fox or Pamela if they can respond we're going we're obviously in different locations are obviously, you know hotels are the ones getting hit the hardest typical hotel, let's take a hotel down in Miami hit on the mayor the city told them to empty their hotel out canceled their bookings and here's your property tax bill.
And there's your mortgage guy over there you have to make that payment. So I think in our last call. We mentioned that the commercial real estate is largely been left out of the aid associated from the government I don't know if that will continue I saw something in the Wall Street Journal today talking about a possible inclusion this time around with some scenarios around it but the highlight was a malls.
Hotels, but hotels are clearly getting hit the hardest followed by retail industrials doing very well apartments are doing very well apartments may suffer a little bit if they don't extend the unemployment benefits I heard that there were about 12 million people that might be on the door of eviction. If they don't extend those though there's benefits, but ah so much.
If you or Pamela have anything further from there I mean, it kind of follows the natural sequence of what you would think.
Yeah, Brian I think we're going to actually have Rob enslin focus on this.
Okay, Rob Perlman as our head of asset management.
Great.
Oh, I'm sorry, it because she's just repeat the question.
Yes, sure thing, Rob and you basically just asking about you know.
Turning to answered which types of assets in the diversified real estate portfolio are getting hit the hardest right now, but just wondering what steps are being taken or can be taken in this environment day increase occupancy and what your outlook is for you know for the assets that have lost in tenant and maybe why there was no impairment taken.
Well, we're we're seeing some occupancy and office extension because people are meeting more space to comply with the coated related rules.
So there are some backfill that's going on there in the office product.
We've also oh.
And incredibly good grade of collection on our rates.
So we haven't really seen a big occupancy drop.
Yeah, and also I I don't think there's much we can really do and the way of a increasing occupancy in this kind of an environment.
Obviously, if it helps of hotels are open and then then documents he goes up and we actually did see occupancy go from around 10% to 40% in the economies that did open in the hotel side or the retail side are easily well occupied there you know some of them are just not open again Ah office that remains to be seen a you know some places I I think.
Office is doing well in the suburbs right now as as people have left the cities and I don't know, how how a permanent that will be but I suspect some of it will be and you know the utility of living in inside the Big cities. You know I think the jury's out there we'll see what happens in a lot of that has to do with crime, which is on the increase and also the.
Services offered by those cities. So you know ladder capital is not going increase the occupancy in an office building in New York City, but yeah. So overall I think we're playing with a very fickle a set of circumstances right now that could change quickly, but I will say the I'm shocked at how well things are performing I thought they were going to be a little bit worse than this at this point even.
Properties that are closed down you know people are making payments and a two they I think it's been a good 10 year period. So a lot of people do have some cash around I don't know how long that a last but you know for the most part we've been in very constructive conversations and probably the least constructive conversations we've been in our those were the borrower is actually very well off.
As an enormous amount of capital a and just a you know wants to negotiate because the you know the situations happening, but it's not having to do with their own personal balance sheet. So it's funny. It's the it's the small borrower that's doing trying a lot harder than than the very wealthy borrower.
And I think that.
Part of what what you're saying is related so factor we sold a couple office buildings out of a portfolio last caught in the first quarter.
So you'd see a difference because of that.
Oh, Okay that makes sense.
Okay and I appreciate the insight there that's really helpful. And then just a you know another I guess high level question, Brian just your outlook for transaction activity in the second half a year I obviously.
No one has a crystal ball here and now a lot is gonna be dependent on and you mentioned Oh, yeah, well, if we get a vaccine and how Ah you know if we're if were kids are getting back in school people are able to get back to their jobs and attached but just wondering if you haven't outlook for per transaction activity in the back half of the year and you know what impact.
That would have on your appetite appetite, you that deploy capital and or flex repayments.
I I my instincts are telling me that it might be better to actually be the borrower in a market like this as opposed to about a lender.
Yeah, well occasionally we've talked about that on some of our calls you know conduit lending is back in a very soft kind of way and a lot of clean up from a inventory that was sitting on the shelf is getting done, but I would say the typical conduit loan today that is getting written is a 3.5% to 4% tenure instrument at 50.
<unk> percent LTV.
I think if we if we begin to deploy capital and I think we will will probably be a borrower a funds like that because I think we can find some some attractive situations, where perhaps somebody has to sell something a and in addition to that I I would say that the a stretch senior used to be I forgot bought a property.
For $100 million you know he could borrow 75 million I think 100 million dollar purchase today, you can probably bar about 60 million and ER. So a stretch senior now goes from maybe 60 to 70, 75% and I think or that is a sweet spot for risk reward right now on the debt side, a if you remember in two.
2008, when we open and we had quite a few mezzanine loans in our in our position because we felt that the capital markets were very fearful and maybe two fearful and so then once we got to around 2012 or 13 weeks, we stopped writing mezzanine loans, because we felt at that point markets, where price right and then around 2016, we felt that Ms.
Any money was too cheap so a I would imagine it'll it'll feeling smell like equity a in some cases or at least in some scenario where somebody is forced to transact. The other thing that you should keep in mind here, which I don't know if you're hearing from others, but a there's very little demand and despite the fact that rates are incredibly low and I think that has to do.
With buyers are hoping that yeah, there's a big adjustment lower in price when they buy something where sellers are hoping this whole cobot thing will go away and they'll find a cure and well snapped back to where we were before it happened. So a there's there's just a real low right now in activity. It seems and so that that's enabled us really together get to work on our balance sheet and do the things.
We need to do to get ready for when when transactions do begin to occur, but we think the competitive landscape is drastically reduced.
Mhm.
Got it that's that's helpful. Alright, I mean, I'll hop back into queue, but I. Appreciate you guys, taking my questions. Okay.
Thank you. Our next question comes from the line ever chain with JP Morgan. Please proceed with your question.
Hey, guys. Thanks for taking my question and I hope everybody as well when we when we look at sort of the linear or do you have the of the TNL and this is a fairly linear business.
Oh, that's spread net interest spread is now negative.
There will presumably be some continued pressure on leasing called.
What are we are in the leverage over the next three to six months in terms of driving profitability back towards that dividend and I realize Brian and your comments that you're not going to be in a rush on that but.
Just how do we think about the next quarter or two before you become more aggressive in terms of capital.
Yeah, there's if there's been improvement, let's say I mean, there was a hell of a shock at the end of the first quarter and the cost of funding. These businesses really took off and then a and it went you know at an extraordinarily high rate today that those spreads on those repo lines have been cut by about 50%, but they're still above you know where.
Where we would normally expect them to be a and their negative right now <unk> for instance, or in our securities portfolio. So we lowered our leverage in that from 79% to 64% of the portfolio has come back into the high Ninetys now a in price and and as more of these fellows become managed.
I'm sorry, as more of these sellers become static pools and as they run out of the reinvestment period they'll start to pay down. So the static pools are paying off as you know every time alone pays off it goes right to the AAA. So it's really a balancing act between you know how negative in the funding and how much do you want to hold those for price recovery and my guess.
This is we're getting sort of near equilibrium. So I would imagine will continue to sell.
Some of those positions and de lever, that's probably our highest leverage position anyway, even at 64% I think Mark mentioned that though if you just remove cash from our equation right now we're at about two and a half times on leverage side as far as leasing pressure goes we've got an that lease portfolio that has 12 years left on it though there will be no leasing pressure on.
Those assets, but you know to the extent that we have the office buildings or retail centers of course, that's things roll <unk>, there will be so, but I I think oh, well continue to lower our leverage as we go and I think that a lot of our new investments will be either organically levered, because we step into a rescue situation or them as an.
Mean loan or where borrowers maybe making payment also or if we go out and borrow money from somebody else regarding a a piece of real estate. The the real estate lending business is just not very attractive with you know LIBOR plus 150 175 financing when the two year treasuries at 12 basis points and so I suspect.
You'll continue to see pressure on those.
But but banks are obviously pressured by by profits also because of these this lending environment. So I I think the hard asset side of life is calling and I think the lending business is something that were innately familiar with and what it will weighed into it but we'll probably be more transaction older than a balance sheet driven on that.
That makes sense. What you guys are in a position now where you can buy the dip, but the mistake, we saw a lot of people making.
2008 2009 was.
And that did before the dip was double.
[laughter].
<unk> that he was it was actually interesting. My question was gonna be are you guys going to start to you know.
Conduit.
Execution isn't grade historically, that's a signal that you start buying securities. So I thought it was really interesting basically said, but we're still waiting.
When I think about you only.
Real estate the first thing that goes through my mind means condos in Vegas again, that's the historical experience. We have watching you guys as you think about that market.
Going for war, what is the condos in Vegas equivalent in 2020.
Oh.
It's a great question are there it's funny that my phone is ringing this whole week on condos and the one that I'm getting the call on more than any other places Miami and the second one is New York.
New York has its own problems right now largely brought on by a public decisions made by some of the governor and the mayor combined and I think was there.
It is they have literally shocked that market [laughter]. So I don't know if they'll still real back from that at all but a you know you throw on the mansion tax you get rid of deductibility in the Salt States and then you get you. They just and then you take away services on the street. So I think I don't know that were anywhere.
Near where we would wait into a new York condo at this point, but I think Miami in a different story.
Miami has its own issues regarding you know water and then how high it goes when Ah when there's a lot of rain, but I do think that Florida in general is an importer of wealthy people as the the baby boomers near retirement, so we could easily wind up in a in a situation.
In Miami I think however, I don't really think the banks are the sellers here the banks have done some construction loans they haven't been over their skis. There's a few mezzanine positions out there a you've seen some of them get sold in the market recently, a and a lot of those mezzanine positions or even first mortgages that are too high and the leverage fact <unk>.
Probably have to a either a break price and just take losses or else they'll just sell them and I think most of the real opportunities and I don't know what price, it's going to be at but I think a lot has to do with who's the president.
And what does the tax picture look like for real estate owners I mean Biden has already said he's planning on paying for a lot of things through commercial real estate. So I think you know I would expect to see really if I had to pick a city, where I think there'll be a great opportunity I would say its miami.
Got it and at the risk of annoying my peers, who are listening apartment house one last question.
Historically when he made when you taking that approach what he's been in a way and it sounds similar this time, where they are real estate.
Developments are projects, where you can sell all small pieces along the way.
Would that be the intention going forward so that you have.
The potential liquidity in smaller bites.
Yeah, I think so I I mean, we tend to in environment like this if there's going to be a seller, it's probably going to be a distressed seller. So there's no sense and getting overly aggressive in paying prices. In fact, if you I don't remember, but we both of the biggest condos, we did not by penthouses well, we probably should have but we felt that we weren't comfortable that.
We could sell pen houses in Las Vegas for you know $2 million turns out we could have but we we stuck to the very basic a small units you know one or two bedrooms, where there would be lots of buyers and <unk>. Yeah, we generally like to figure out a way to de lever quickly and get most of our money back in a short period of time and then we'll let the rest of the asset run you know for.
For the gains so we try to get as much of our money off the table in the first 12 to 18 months as possible and a you know I don't think where where when you say watch out for the dip because the other dips coming I think that could easily happening here I think a you know real estate prices got a little ahead of themselves a stock market was driving a lot of that but the low interest rates here.
If you can get alone maybe we'll hold that inventory of selling back a little bit because I think sellers can kick the can here a little a there's very few loans that we couldn't add an interest reserve of one year and just extend them the bar or would be happy to do that we don't do that quite quite chance, but the I suspect others will so yeah. We.
I would expect to try to have something that is sellable right now that we don't have to do anything to other than then then by it.
Got it thank you so much sure.
Thank you, ladies and gentlemen, I don't mind, if he'd like to join the question Keith. Please press star one on your telephone keypad.
Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.
[noise] very much nice to hear from everybody I, just looked like that Brian.
What are your thoughts on the viability of the commercial mortgage Riet business model, we've seen a lot of Ah rescue capital financings at a levered cost of capital that are in access of the typical returns. These businesses generate so in that environment. There's definitely seems to be a if you look at this.
<unk> market as a differentiator between viability and non viability, there's clearly a bifurcation or tried vacation. So you know with with the cost of capital where it is where do you think levered returns to common stockholders need to be can make this a viable.
Business going forward.
Oh, I think that will come down to the safety of the investment you know I for instance, a AAA cielo right now that has a two year maturity.
You'll it'll yield about 1.9% and that has that's on the recovery that was too to 70, probably three months ago. So call it 1.9% and it should pay you off in two years and yet the two year treasuries that 12 basis points. So I guess I do wonder how long will it take you know for the Guy who loans that two year treasury to sell it.
And by a AAA mortgage product of the same duration that yields 15 times, what he's making in the government bond market. So I think cost will continue to come down. Although obviously banks are gonna look to to try to stope their earnings with higher funding costs, but the universe has shrunk and a you know the remodel is a dangerous model if.
If you're not careful with it and I think through the years, you've heard us espousing or concerns about you know the funding model on repo and we've taken numerous steps over the last five or six years to get away from it.
And it right up until January when we borrowed $750 million unsecured and and I remember one of the questions. We got in that first quarter was why did you borrow that money why didn't you take repo because it's cheaper and I think we said because were a little afraid of that and so today, we have a very small amount of repo financing and some of the rescue trade.
I think those will be a blips on a screen I don't think they'll become and I think people thought there we're going to be a whole lot more of them than there were in fact, I remember the day I woke up and it was supposedly five rights going bankrupt and none of them ever did but I I do fear a little bit what I'm seeing and this is government cheese being thrown it. It's if you see the residential side of it.
Business.
Yeah, they are they're doing very well and they're all stacking up leverage and yeah. The government I guess has put a put in there. So the principal guarantee is a bit of a shiny object. The people like to go towards but if you own a 30 year mortgage at 3% in rates go up.
Now that shiny that shiny thing you've been following will turn around a bite you. So it's not just principle I think the mortgage Reits that followed their the red the residential government guaranteed space have interest rate risk, whereas I think the commercial rates have leverage risk as well as principal risk and you better be careful on which one you're playing at that point. So what does a lot.
Levered return required a I think it'll probably settle out at about it if the treasury curve stays where it is I think it'll settle out or about seven or 8%.
Because I just think with a 10 year. It at at 60 basis points, you know I mean, how you're the only way you're gonna get a lot higher than that is if you apply a lot more leverage and I think we've all kind of seen that movie, it's not a great idea.
The seven or 8% would be asked the corporate expenses Madison sees anything that some of these external managers vehicle require shareholders to absorb I think so yeah I think I think you can find.
I I mean, if 16 trillion dollars in the banking system right now and savings rates have gone up and they're going up every month.
Some point you know somebody is going to turn around and say well, maybe if it's safe to buy a read a seven or 8% dividend yield that's very safe uncovered might be something I could get comfortable with and I do think you can settle into an area like that for a market to two demand at 12 or 13 or 14% return that's pretty much what leads you to the problems that occur.
In March and for those who were over leveraged a you know they think they felt the the bite.
Okay. Second question is in terms of the asset sales that were consummated.
You know I think there's a perception that these types of entities that sell assets, where there's margin calls going on and they they sell their best [laughter]. So what do you think the implications of ladders asset sales at 96% apart our score the credit profile of what's on the balance sheet today.
Oh, well I'll I'll point, you, maybe they're different direction first of all I I think that we undertook some sales in the high Ninetys. We as I said, we went through those five steps right. So we had $300 million and pay off now I would also point out from a credit perspective. When you talk about you know what are your best assets, 10% of our loan book paid off in 90.
Dave.
So I you know that as an unusually high amount of payoffs and keep in mind the quarter that it took place and so I would say if there if we were selling our best assets. We had bids for many other assets and we had bids at higher prices, but we felt they were gonna paying off a we had a building in Minneapolis, Minnesota that we were offered 98 cents on a dollar we turned it down there.
It was we thought it was gonna pay off and that loan did pay off in the next 60 days. So Oh, that's one of the reasons I highlighted the our largest CUSIP because you know we had a book of securities that the market was a little bit frantic about so and I remember I go back to 2016, when the price of oil fell in our stock really got hammered and and people. So I know you have only secure.
Ladies and I told the market what our three biggest securities were and I told the market when they would pay off and they did a this is my version of that again, there's nothing to be afraid of here. These securities are not problematic. A these are the most senior bonds out there and as long as you don't play around with too much leverage you should be just fine and in fact, our largest security is paying down.
On right now it'll probably pay off very quickly so as far as a statement that we would sell what you could not what do you want.
I I don't think we had to sell anything I think we may have overdoing, it a bit but in the world of never let a crisis go.
Not be an opportunity you know our bonds also were suffering unnaturally because there was a view that there was some a credit problem in the security side. So we were able to pick up our bonds. It very cheap prices don't like doing that to our investors, but the i. I think a casual understanding a financial readings would've told people that we had 700 and fit.
The million dollar sent to us on January 31st and we had a $266 million revolver that was never drawn.
That's a billion dollars in cash so I don't know how a $2 billion Securities book puts a dent in that and so I think we got caught in a little bit of a brush and I'm sorry that happened I thought the world you know who was not going to get caught in that story because of the way our financials look.
And so I would count I would tell you there could easily be some credit problems. If we go into a depression and stay there about the concept that we sold our best assets. It is crazy and in fact, a I can tell you that the the best assets you can sell in the C. Yellow book is the.
Static <unk> static pools that are paying off and most of the bonds. We sold in the quarter. We're actually managed pools, we did not sell the easiest once in fact, we can probably figure out what or how much static pool. We have at this point and we figured we didn't want to sell that was because we wouldn't even sell those at 97, we want we figured they're going to pay off at par in the next 12 months and we.
I think that.
So we are we reject that concept [laughter] short story, hi, Brian if I may jump in with one factor now having having been involved in the south we weren't actively marketing loans, we had buyers who knew the assets and in the current environment of being unable to well to visit the assets. It was known the buyers to know assets where we.
We took advantage of the opportunity to raise indefinite <unk> quantity. So I just think in the context that just to be clear, we weren't marketing assets first.
And yeah, we were answering the phone and we were giving bids on about 10 or 12 assets and I think we sold six of them.
Okay.
That's good to hear lastly in terms of the bond repurchases that was done in the quarter is that an activity expected to continue to do and how do you feel about repurchasing the stock yeah. Overall I mean, the company is trading at around 60% of a net asset value you know the commercial mortgage riet those as I mentioned.
Well, there's an losers there's a lot of the smaller mortgage reach trading at below 60% and then there's larger ones trending at close to par wrote the book value of so what are your thoughts on the trade offs between securities repurchases.
Well I think that's a a balancing act we wound up buying where I think we bought more bounce back than we were planning to but the reason we did that was because more loans paid off than we were expecting so cash was piling up and I guess, if we hadn't bought any of our corporate bonds back, which we actually identified as we felt was cheap in our last earnings call, but if we had not.
Bought any of our corporate bonds back we would've been showing up with a billion dollars in cash on a on a market cap of $800 million. So I I think that is a rolling balancing act a I think that the you know the short term bonds have have snapped back there in the 90 899 area. There's you know not terribly and.
Interesting to us, but depending on how much cash we might have thought we might look at it the longer bonds because they are double bees and they do have duration our trading in the eighties and yeah. They may they may stay there that could get interesting, but that's just where a double b trays that has nothing to do what I don't think with with ladder itself and but I do think our stock is interesting we did buy some stock back recently.
We haven't really put our our back into that that column, yet, but at 60% book value with 800 million in cash and you know 22% of our security sold at a small loss that was offset by the gain.
98% collections I expect to have some noise in the hotel book in all likelihood and I don't know <unk> to the extent it'll it will cause a big losses, but you know they are out there and that's that's a business that we're we're spending a lot of time on but I think we will start weighing into the stock at some point here and will occasionally buy some bonds.
Back that we're very comfortable we don't really have to make a lot of loans at 60% of book value to make the stock go up.
Thank you taking questions.
Okay.
Thank you Hi next question comes from the line of charge bomb on days with Deutsche Bank. Please proceed with your question.
Hi, good afternoon, everyone I'm just wondering.
If you can maybe speak to any sort of modifications that you had to do during the quarter weather and you were executed or whether you've gotten some additional inbounds from some of your borrowers to date.
Sure. Yeah. This is pamela and Rob can elaborate if helpful. But we had a handful of modification and we we've taken the approach weve historically taken at ladder. If we have a sponsor who is willing to defend their equity and which usually and almost all cases requires writing a check we're working with them on general things like.
Deferring interest Oh, you know and maybe allowing a reallocation of B F and eat reserve, but generally speaking I'm a handful of modifications were stopped pay downs of equity.
On the principal balance to accommodate the ball.
And also Georgia, what I would add there is you know there the b.
More advanced hotel owners.
And that's really mostly what we're talking about here because the hotels literally were close I mean, it was the equivalent of the airline industry in the second quarter.
In the bridge loan portfolio most of our loans are nearing completion anyway for their various refurbishments or or or you know pip and new flag and but what the b experienced owners understand is you're not going to be able to refinance that loan until you've got some history and given the fact that the the occupancy was zero.
Road to 20% for four months, they're smart enough to know that we're going to need 12, 24 months. Some seasoning here even after the lights go back on and so we I think at our largest hotel portfolio. We had a sponsor who wrote a check for millions of dollars in principle.
For an extra 18 months or two years, which we did a comedy.
Great. Thanks for that there's no color, Brian I'm too.
Yeah. My second question is on them maybe to get through all the schools are just yet.
Interest expense of 68 million were there any onetime items included in that number.
Think about that and the second quarter and you know how does that likely compared to second half 20.
Yeah, It's smartbox I think the there are two things that you should bear in mind blow through about income income expense line. This quarter that are somewhat unusual one and one of them is part of the or the boat part of the adjustments that were co good related and so.
There are six and a half million dollars and prepayment fees.
On debt that was paid off as we were refinancing our liquidity moving away from Mark to market provisions that non mark to market provision that and then the second thing is that as we bought back because the $139 million a bonds there were a deferred fees.
Views on those bonds that have to be recorded as interest expense.
That was a million dollars. So those two together and increase the interest expense line as you see it on their consent.
Hi, Thanks, Thanks for that more and eat last one here.
Now looking at the the maturity profile UQM and maybe even an 18 million looks like to third quarter EPS of 20, I'm hearing minus of what will that are tied to.
See I don't know why I'm not familiar with that one [laughter] I suspect I will be if a one of these guys accuse me at all.
You're saying you're looking at if you could just repeat the question you're looking at third quarter of 2020, you're looking at a debt maturity.
Yeah.
Okay got <unk>, maybe something we can discuss offline I might be in trip in this incorrectly I I got hands as a note here I think its securities repo.
Well, yeah, which is we're just going well, we can roll that we haven't dot yet right, yeah, and I would also point out a little bit of a teaser into the next quarter Mark We weekend, Matt I don't know Mark we just paid down repo with excess cash again right in the for in the into July didn't we were at right then we pay down like $8 million we.
We did Brian we paid off $80 million ER and the that amount that you see what the $382 million in the third quarter, where in the process. So working our way through an extent, you know and extension or refinancing a bad what some of that they're going out into 2021.
Because we've seen an improvement in that market as Brian said, it's not just in terms of pricing. It's in terms of availability of longer term funding.
Oh, Yeah got it and we had some we had rolled summary, Bose George and ER in March when it was very problematic.
But we felt it was safer to pay the higher rate and roll it a little bit further and with those now coming due a we can roll them for less at this point, but one of the things that we always do with our lenders is if we've got a lot of securities that are tied to a longer term repo line. They hedge that so while we may want to sell something in that line.
What we do is what we always want to have a cash of things around that we can substitute and that $80 million pay down what that we just did I think last week would just freed up $80 million worth about leverage and it's we're probably 100 million and securities that we can use for for a substitution. If we want to sell some of the assets on those that turned out lines.
That's right it.
Great great well I've been to become today okay.
Thank you. Our next question comes from the line average Crescent Columbia Threadneedle. Please proceed with your question.
Isn't taking the time.
I think I heard you say, 98% payment for July with overall portfolio would you be willing to tell us about hotel and retail property for.
Oh I'm.
Hi, This is Pamela the hotel in retail properties I, Rob is on the call I believe we only really had in the second quarter. We had a 99 collection rate of 90, except in July and I believe it with you loans. It was one multifamily and on one hotel that was either late and payment or gonna default, which we're working through right.
Now.
Okay.
Look I know you guys have talked about how you do a really good job underwriting, which it looks like you do.
Any thoughts on when we just look at the broad data out there I'm just in terms of CMBS data and Ah delinquency rates on the hotel on the retail portfolio as.
Why you haven't been saying that.
I'm, sorry, why we haven't been seeing a default weighed on the hotel in retail portfolio.
Our delinquencies so why years are better than everyone else is.
Well I can answer on the part of this anyway I mean, they were in the bridge loan portfolio typically if you're doing a major refurbishment of a hotel there's interest reserves, so that wouldn't prove anything any great skill and underwriting there.
And as one of our lead underwriters always says no matter what the market as my interest reserve shows up so, but we don't fool ourselves into thinking that makes us good at this but a you know we do keep very short maturities, especially relative to yes. The average and that's why I think that will set our average loan is already a year and a half old and it matures and 15 months So a week.
We like to keep them on schedule and if they're gonna go off schedule, we like to know about it right away. So in many ways, we get into the the scrum early we think through 35 years of experience a if you're gonna get into a battle over capital you want to get in first when they have capital you don't want to get in when they owe you know $2 billion too.
19 different banks. So yeah, we have seen yeah with most of our hotel. We don't we don't generally even like hotels or we have been moving away from them recently anyway. So we had a lot of equity in the hotel portfolio. When we made loans and we have been moving away also so that may have something to do with it and but I'd only add also Brian I think the.
The only other items that are we are you know, 56% limited service and almost half isn't a drive to market, which I do think has allowed let's see what happens with the virus reinfection right, but we were seeing occupancy pick pick up pretty significantly across the portfolio. A we're watching closely now with some of these you know new data on.
Her infection, but I do think that drive to markets will recover much more quickly and you couldn't really see a few head fakes. There. So for instance student loans. A you know we have a student loan portfolio out in California on the coast, It's absolutely beautiful and you know it California is going fully online a you know we didn't know what was going to happen with that portfolio.
Okay 'cause it students weren't going to be attending classes in person, but the students are showing up anyway, because they want to live off campus with their friends and then they'll be online at their student housing area, a little surprised by that but I don't have any belief that those properties, even if they do take an interruption hearing cash flow that there's any any permanent impairment there.
So we have to be a little care for that hotels.
I will reopen malls may or may have a different story, there that may be a much more permanent situation going on there.
Okay. Thanks for sharing those comments.
On to asked about is I.
I mean look you guys bought a lot of bonds that you've got a good price on but when you kind of think of that through the lens of do you still have the some recourse secured borrowings.
And when you kind of debated between on a pay down the secured borrowings. So on yeah. The rest of the FHLB financing first repurchase than the bonds can you kind of talk us through that analysis.
Oh, It was a and analysis that really took place on a safety first.
Story, and our stock was suffering a little bit because of a perception of a a margin call that could hurt us on the securities portfolio I don't fully understand that to this day, but a it was written enough time for that a lot of lot of very smart people began to believe it in any event. So we did sell some securities I felt it would be helpful. Even though it into like selling.
At those prices I wanted to show to the Investor community, what we owned and in the height of the crisis, we were selling things at 90, and seven and 98 cents on a dollar we were not going to lose 300 million dollarss and that securities portfolio, and and eat and while we did take a margin call as you could imagine a it was not.
We could have taken five more at the same side. So one of the rating agencies for some reason has highlighted there the concern about a you know, possibly getting a margin call I don't know where they think it's coming from but a you know to the extent that your 64% leveraged on two year AAA bonds.
That doesn't despite the fact that a three course in it and it does have margin requirements. It doesn't feel that dangerous to me a historically now yeah March so hopefully that's a once in a lifetime thing, but even in those scenarios and today I believe we can sell those securities even in a march like scenario, which would bring cash choose a balance sheet and.
So we're not in any big rush, there, but I think we'll continue to do that because of mainly because of the funding costs not because we're afraid of a margin call.
On the Rasta Yeah, we had securities are our obligations on the debt side, we staggered them out we've handled that pretty Responsively and then as a result of that discussion around a margin calls our to our bonds that are due in two years traded into the seventies, a we weren't lets people said why didn't you buy them then.
We will will not able to buy them then because it was the ended the third quarter and we were in a in a M.P.I. period. So despite the fact that would've loved to brought to have bought them then and if anyone asked me I I thought that we were more than adequately prepared for a downturn I in fact, probably I. The funny thing is when I look at the at the the space.
Of commercial rates I believe were more liquid than anyone.
And I can't find anybody who can can test me on that argument.
Not to the extent that there's any leverage involved that means a couple of net lease rates that don't use any leverage whatsoever, but ER. So I think that we we were bordering on a point, where we had too much liquidity hard to say that in a crisis like that but when you've got a market cap of $800 million and you've got $1 billion in cash, yes, I do get concern.
During that at some point, you know somebody might walk through the door and say I guess I'd I'd like that cash so I'll pay 20% more than the market price right. Now. So a that was we were somewhat concerned about that and we were able to offset losses in the securities portfolio that both took place because of the pandemic.
The only thing I'll just add to that Brian is I think as we as we thought about paying down debt. We looked at a combination of things we look to de lever and we looked at upcoming near term maturities and mark to market that and our goal was to reduce both of those RASK and I think as you look at as Brian said in the past we took some extra insurance here with things like.
Okay ability, but what we did as me please ask position ourselves where flush with liquidity right now and I think we have two options right. We are well positioned with very flexible that and very limited long repo and very limited mark to market not in total I think it's less than 25% Alibaba total funding and we positioned ourselves so that if there is further downturn.
Where were fully ready for it we don't have to do anything else. If in fact, it looks like you know the virus is recovering and we can start reinvesting again, we're very well positioned to take advantage of all the rest of opportunities that everybody has been hoping well well start that so I think what we did was taken the pain early and and anyone is known and worked with brown.
<unk> for a long time knows very early just the recession very early to set up and we feel ready now for whatever.
And I would say the.
The actions, we took a I I never seen 33 million jobs lost than in a month. So I don't really know where we come out on this and the fed and the treasury or are desperately trying to bridge to the other side of the medical fix here and my suspicion is they will I think that they're gonna say, the hell with inflation and they're just going to keep throwing money.
Got it so that's kinda, where the theme was going today, but I I would just point out that in any recession doesn't even have to be a hard downturn a in any recession. You just want to lower leverage you want to you do not want anyone having a liquidity conversation with you and I I felt that we were in far too many of those for the wrong reason, so I wanted and we wanted to get rid of that first.
And now we'll protect principal and manage our assets and thirdly will go about or you know raising a earnings through through the lending business, but when you think about a company trading at 50 or 60% of book value I think the right thing to do there is to try to bring in a lot of capital into the company that you know you can't really argue with what eight.
Hundred million dollars is worth.
No. That's really helpful. And then last thing I wanted to ask knowledge and you still have the 361.
So I'll be financing.
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You think that you're more likely to pay that off but that's the past wonderful too.
Hearing some other financing transaction they feel that went up.
It does Panama I think I can after that I know that problem [laughter], sorry, we haven't been relationship with the FHLB and I think we there was maturities extend out through 2024, and we expect you know them to to be paid off in natural course.
It is our [laughter] and used to be our lowest cost of funding.
And then lastly, I had the what to finance.
Today, we are talking with yellow financing.
I would say the market's changed quite a bit those are put in place.
Are there opportunities do others someone that more cost the bay.
He has to do that.
There are opportunities to do them at lower cost ER and <unk>, we could do them, but the I don't think we need to I think that Oh, we actually did hit a point toward the end of the quarter, where we had too much cash and that's why we wanted to start getting ourselves de leveraged and we did pay down some things that you know some people would say maybe we could allow.
From outstanding, but I I think in the throws of that crisis in in March and April we may have overdone, it a little bit on the liquidity side as I said there were five things we were going to try to do and I remember sitting down with the management team thing is the five things are going to try to do to raise capital and enhanced liquidity and we didn't really think all five of.
And we're going to work in that market, but we were able at that point to run the table and all five of them did happen and another credit really is our partners in the call them partners over it Coke.
They did everything they said they were gonna do they didnt move the needle at all or they did exactly what they said they were gonna do and and when it came down to closing that last transaction. We were in my opinion already out of the woods, but I just felt like they were a very good ally in a very good partner and they've done everything they they said they would do when it wasn't so obvious that everything was fine.
And so we did keep going in the I remember, telling our management team I really hope that one day I look back on this and tell you. This was a mistake to if done this it was too expensive and it but it's a temporary situation and a you know we hope to do a lot more business with those people.
All right well, a nice job on managing through the situation and the button starting with.
Thank you.
Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Harris for any final comments.
Oh, just end here by saying, thanks, very much to our investors a and your patience with US I know, it's been a in a rough year. So far year to date, but I think that we've got ourselves in a position to be on offense or be prepared for defense, if necessary and I look forward to catching up with you again in another three months. Thank you.
Thank you. This concludes today's topic you may disconnect. Your lines at this time. Thank you for your participation.
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