Q4 2020 New York Mortgage Trust Inc Earnings Call
Yes.
Good morning, ladies and gentlemen, and thank you for standing by welcome to the New York Mortgage Trust fourth quarter and full year 'twenty 'twenty results conference call.
During todays presentation, all parties will be in a listen only mode.
Following the presentation of the conference will be open for questions if.
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This conference is being recorded on Thursday February 25th 2021.
The press release and supplemental financial presentation on with New York Mortgage Trust fourth quarter and full year of 'twenty 'twenty results was released yesterday.
Both of the press release and supplemental financial presentation are available on the company's website at Www Dot N Y Amtrust Dot com.
We are hosting a live webcast of todays call, which you can access in the events and presentation section of the company's website.
At this time management would like me to inform you that certain statements made during the conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
The New York Mortgage Trust believes the expectations reflected in any forward looking statements are based on reasonable assumptions. It can give no assurance that its expectations will be attained.
With the risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the Companys filings with the Securities and Exchange Commission.
Now at this time I would like to introduce Steve Mumma, Chairman and CEO, Steve. Please go ahead.
Thank you operator.
Good morning, everyone and thank you for being on the call Jason Serrano, our president will be speaking to our investment portfolio strategy today, and Kristina <unk> CFO will be speaking more and.
In more detail about the fourth quarter results.
We will be speaking to our supplemental financial presentation that was released yesterday. After the market closed and is currently available on our website.
We will allow questions following the conclusion of the presentation.
The company had a solid fourth quarter results delivering 19 since GAAP earnings per share and 22 cents comprehended the earnings per share.
As of December 31st 2020 of the company's book value per common share was $4.71 up 3% from the prior quarter, resulting in an economic return of five per cent for the quarter.
During the fourth quarter of the company was able to build on positive momentum from the prior two quarters executing longer term financing through of residential securitization and expanding its investment portfolio to its highest level since March 2020.
The passenger was the difficult and challenging time for our company as well as many other mortgage REIT over a three week span in March we experienced unprecedented liquidity constraints on many of our credit asset classes as a direct result of the market disruption disruption caused by the COVID-19 pandemic.
These constraints across markets Cree the valuation gap that further drove down values and in many cases disconnected from the fundamentals of the underlying assets and generate the historic levels of margin calls from our financing counterparties.
Did the coordinated effort of our investment professionals, we were able to reposition the portfolio and stabilize the balance sheet, but not before incurring sizable losses.
Our book for as I said before was $4.71.
At the end of the period, an increase of approximately three per cent from the previous quarter. We declared of common stock dividends of 10 cents, an increase of two and a half cents per share for the previous quarter bringer of dividend yield to 10.8% at year end closing price and currently of 9.4% as yesterday's closing price.
We continue to strengthen our liabilities by.
Cleaning are third securitization of the year.
It was our second residential loan securitization for a total of $364 million, reducing our mark to market debt, releasing excess margin and adding some additional liquidity to the company.
We end of the year with the portfolio the leverage of 0.2 times down significantly from 1.4 times as of December 31st 2019.
On slide nine we cover key portfolio of metrics on a quarter over quarter of comparison.
Or no more of an error margin for the quarter was 2.3 per cent an increase of 12 basis points from the previous quarter R. As it yields increased 50 for basis points largely due to the continued rotation out of lower yielding fully value accused of securities into higher yielding residential multifamily loans.
The increase in ask the ear was partially offset by an increase of financing costs of 42 basis points. The.
The increase was due to the several factors. The addition of of non Mark to market residential repo line.
The previously mentioned third securitization and an increased cost from our residents alone warehouse lives that we need on the fourth quarter.
We would expect to see improved costs going forward as we looked at complete two additional securitizations in the coming months and spreads of tightened significantly since our fourthquarter securitization.
We will continue to focus on ways to extend maturities and dickie sort of exposure to mark to market call us back to the company.
Christine area of CFO will now go over of financial results of more detail Christine. Thank.
Thank you Steven good morning, everyone and thank you again for being on the call and discussing the financial results for the Porter, how will be using some of the information from the quarterly comparative financial information section included and slides 21 to the 28 of the presentation.
Slide 10 summarizes our activity in the fourth quarter, we purchase residential loans for approximately 320 million agency RMB S for approximately emigrate $39 million and closed on 31 million of multifamily alone investments.
We had net income of 70 million in comprehensive income of 83 million attributable to our common stockholders are book value ended up for 71, an increase of three per cent from the third quarter.
911 details of our financial results. We had net interest income of 26 million an increase of point $4 million from the previous square or interest income increase by 1 million, primarily due to increased investment the entire yielding business purpose loans offset by of point $6 million and.
Creates an interest expense, which can be attributed to higher borrowing costs in the fourth quarter associated with the non mark to market repurchase agreement and nonrecourse securitization transactions that we entered too to finance our residential lamps.
We had non interest income of 67 3 million, mostly from net unrealized gains of $52.5 million due to improve pricing on a residential loans multifamily loans and investments securities and $12.1 million of income generated from our multifamily in residential equity investment.
We had total G&A of nine 7 million of decrease of approximately $5 million from the previous quarter. The.
The decrease can be attributed to reduction an annual incentive compensation as the company did not achieve its annual quantitative performance targets. We would expect our G&A expenses to be between 11 to 11, and a half million dollars per quarter going for it.
We had operating expenses of three and a half million during the quarter, primarily you'll related to our investing activities in residential loans indirect multifamily lending.
The graph on flight 11 illustrates the change in our book value from December 31, 2019, or book value increase three per cent during the quarter and 21% from the end of the first quarter, Although we sold assets and delivered our portfolio in response of the COVID-19 related market disruption we avoided.
Some of the larger scale for selling that occurred during the first quarter.
Allowing us to retain assets who's pricing significantly improved throughout the remainder of the year and contributed to the increase in our book value.
Jason will now go over on the market and strategy update Jason.
Thank you Christine.
Now turning the page 13.
After the last year's funding reset the beginning in late March we fundamentally restructured how we build our asset pipeline and how we utilize our unrestricted cash prior to Q1 of 2020, we've targeted income generation opportunities with our unrestricted cash through bond markets, which were quite liquid after assessing cloud of risk quite a pool rescue you felt the spread genera.
From these holdings was attractive however, when the repo market's froze up in March we required rapidly reduced borrowings against some of these positions at this time of use repo funding opportunistically as we still carried over $1.6 billion of unencumbered assets on our balance sheet.
Our approach protect against unexpected volatility any associated margin calls was the post cloud of our of similar assets to meet any deficits.
To our surprise in the overall market, we experienced a period, where posting the additional power along with the additional cash was nowhere accepted it was of.
On the market at the time this was highly unusual and not seeing even during the peak of the housing crisis.
Without the confidence to continue rolling the financing on our security book, we focus on a full rotation into residential a multifamily loan programs the.
The beginning of Q2 was of wait and see approach on the beginning of Pandemics development and governmental response to the crisis.
But as shown in queue to our low investment activity nearly dropped to zero as the market was resetting from a period of significant distress at this time, many mark participants focused on recapitalization funding plans, which provided us an opportunity to foster new long term sourcing relationships without high pressure of competition until and late.
Q too we began to lockup attractive sourcing arrangements in both business purpose loans.
And multifamily directed origination.
Due to underwriting timelines the close these loans the fruit of the slaver became visible with investment growth witness in the fourth quarter.
Now turning the page 14.
With the elevated with the elevated right of ask the appointment we lowered our unrestricted.
And restricted cash to 293 million vs six $650 million.
Which will help to drive higher earnings now with $1.3 billion of the unencumbered loans. We are focused on incrementally adding term financing arrangements through the security issue market with our portfolio, we see an opportunity to generate 15% plus equity returns with selective use of term leverage we're excited about our opportunity to.
We're excited about our portfolio of the ability to generate a high economic return under low utilization of leverage. This is one metric we used to assess the quality of our risk adjusted returns. We believe it provides for sustainable growth path to growth of of the company's earnings.
Now turning the page 15, the housing market had an extraordinary year.
Supply of single family houses on the market for sale is approaching sub 1 million units for about two months of inventory of houses for sale. These are record low is going back to the beginning of this time series of record 50% of houses across the United States went to contract within two weeks of of lifting.
The recent in 2020.
The.
The we're both housing for.
Price growth continued support this market <unk> remained.
Just reported of $10 for percent year over year change of December our portfolio was designed to take advantage of of home price growth to unlock value, but was carefully constructed to minimize downside risk.
First and our our pillow strategy, we of nearly of $1 billion in assets with the note, but with the 75% LTV at a for eight per cent coupon.
The specifically targeted lower LTV loans provide additional down for protection HPA reinforces our alignment with the bar against delinquency as I said earlier, we are very focused on adding to our securitization program with new issues in the near term in the sector of.
Performing loam opportunity is really split between business purpose loans and scratching debt starting with business purpose loans, we're excited with the provider.
Providing short term high coupon loans the season contractors that rehabilitate properties and resell into a technique constrained market of housing supply, we ramped up our focus in the sector over the last nine months, given the expect HPA growth and additional security around business plan's success or.
Our portfolio had a 65 per cent LTV the completion of value 80% of the LTV the radiation with robust HVA. These properties can be efficiently sold of rented for investment purposes over the course of the year.
Which would pay off of our alone we believe we hit a sweet spot in the market with the accumulation of these loans at of six five to seven per cent on average coupon that presents and attractive way to play the technical housing supply squeeze, but with robust downside protection as of senior mortgage holder over the past year, we carve the niche strategy with proprietary flow and expect the benefit.
From this throughout 2021.
On the scratching the inside of the performing loan strategy performance has been great with respect to this portfolio, we are able to acquire at a deep discount. These.
Of these loans the recent refi way of helped the accrete or book value to a part of the faster paced on projected pipeline to purchase scratchy net loans at a steep discount are also increasing due to the seismic growth of new originations.
More on this point of minute on the security side of the equation as a buyer of debt.
We still hold certain <unk> of that provide for for near for an attractive near term Unlevered return considering the discount and increased probability of these trust being called the other agency nor non AG sector is a large focus considering the excess liquidity built in with the feds of port.
Now turn the page 16.
On single family performance, Covid forbearance, right certainly moderate over the past quarter.
We generally X.
Expect a slight uptick in delinquency rates at year end, which is the seasonal factor overall, our portfolio across our lowest range strategies has shown a strong reaction to high touch servicing efforts since March of last year performance related to our appeal of strategy generated great returns for us with converting nearly 50%.
Plus of loans and to our current status.
This allowed our book to gain over 8% of our price basis in a very tenuous period Lastly, I touch on this early on our civilization plans investment activity. Our team continues to be full engaged in similar asked opportunities.
In particular through the hour of scratching on strategy, we are seeing explosive growth to acquire pristine loans at deep discounts.
Which is not surprising given the record origination volume that we saw on 2020 more of loans originated equal more of alone opportunities to make mistakes for prisoners, which can become problematic for some loan originators with warehouse lines, commonly structured as a 360 364 day facility.
Now turning to page 17 are multi on business.
Over the multifamily sector contains 25% of our capital deployed today, our direct loan origination business continues to offer incredible value as we earn over over 11, 5% coupon against stable properties located primarily in the south southeast United States.
Our portfolio continues to benefit from recent Rate-cap compression of 50 basis points due to the stable casuals produce over 2020, I will touch on it more than a minute, but however, we see migration from the northeast.
Is accelerating due to locked on measures and mark cities and corporate acceptance of work from home environment. We also we also see consistent demand primarily due to sustain the employment and growth and tax minutes in these regions, which helped support the cash flows and the demand of these multi kind of properties.
Like our single family portfolio or multifamily agency Securities held is more of of near term pulled the power of opportunity to monetize in the near term while we do not currently have a joint venture multifamily investment listed here that will soon change as the the team recently value with numerous opportunities from sponsors with low long standing relationships with our company the bill.
The to earn of teens return an expanding market is one of the most compelling risk adjusted returns we see in this market.
Turn the page 18.
Or multifamily loan performance has been consistent as we have just a couple of of loans. There are under special service interview in each case. These loans are expected to pay off of par after change of control.
As mentioned for the company has never taken the loss in our direct multifamily origination business.
Are deep bench of asset managers and technology tie ins to each property reporting the general.
Ledger reporting has allowed us to quickly spot performance issues and resolve them through management correction or an asset sale.
A benefit that we have seen will regularly of late is the ability to earn an upside optionality with respect to our loan payoffs.
Our loan agreements are common structure with minimum return hurdles to capture upside return benefit after applicable return hurdle multiples, we earned a 14% or one four of five multiple on the life of alone.
In the quarter the loan payments, we expect to see more lone payoff to take advantage of this upside.
Now turn the page 19.
We are very much looking forward to successfully or in 2021, a lot of the groundwork in building our proprietary investment pipelines across the single family multifamily sector should continue to bring a high rate of top of employment, which is evident in our investment activity through the first two quarters of the first two months of this year with a robust securitization mark of that is offering financing of.
Fusion at better levels.
Prior to the the Covid period.
This is going to help drive or return assets from from portfolio of that we selectively finance, while keeping our portfolio of leverage low at this time I'll pass of back to Steve.
Thanks, Jason Operator, you can open it up for questions. Please thank you.
Ladies and gentlemen, if you have a question at this time please price the star of the the number one key on your Touchtone telephone. If of question has been answered are you wish to remove yourself from the queue press the pound key.
The first question comes from both George with K B W.
Hi, guys good morning, let's.
The first cyst on book value or the.
Their unrealized losses.
Think about in terms of.
For the book value of recoveries.
So just any comments just on book value trends quarter to day. Thanks.
Yeah, I mean clearly.
The first question. The first part of the question on unrealized losses, we certainly have some securities that's still of underwater relative to the March 31st price, which we think we will continue to recover.
The those amounts of probably in the neighborhood of 10 to 15 per share.
And then the as it relates to the current book value, we've had a pretty significant back up in rates. We don't have a tremendous amount of direct exposure to that range from of leverage standpoint, So our credit assets, we've seen significant spread tightening in the first couple of months. So we would expect our book value to be one of the 2% right now relative tour of the market.
Is.
Okay, Great and then just in terms of the earnings power of the portfolio can you just talk about it with you.
That's currently stands and where that goes as you continue to optimize for Ya.
That's right I mean.
Our total portfolio size still has a lot of room to grow given the current capital we have on the balance sheet. So as we do the continue to deploy out securitization. We continue to think that we will drive or we're going to continue to try to drive the net margin and what we would consider reoccurring revenues, which would include some aspects of of.
The income outside of the net margin because many of the mezzanine loans and multifamily that we have are accounted for as equity investments for accounting.
And so we'd like to thank the that earnings power is going to grow substantially above of our current dividend rate is today with the portfolio deeds has 15, we can grow of portfolio. Another five 700 million the $800 million in size without putting tremendous pressure on the capital structure of the company.
Okay, Great that's helpful. Thanks.
Your next question comes from Eric Hagen with B T I D.
Hey, good morning, guys.
Lots of different business purpose loans out there of sounds like fix of flip as what you are targeting can you give us some color on the proprietary pipeline that you mentioned like whether you guys sourcing the loans from and what are you paying for them.
And then on the two Securitizations you expect the complete can you say, which types of loans you expect of finance Sir.
Yeah. So on the first question on business purpose loans, yes, where where focus on the fixed on flip strategy. We like the short duration of these assets and the pick up on HPA to to convert for the contractors to convert these loans that the payoff for loans at maturity.
We have been.
There have been a number of.
The number of originators in the market that were supported by Mark participants that no longer was.
The funding their strategies because of the COVID-19 stress and stress on their balance sheets on liquidity.
In that time period, we were able to.
Foster relationships of these counterparties as originators that needed funding programs of new funding programs. So we were able to carve.
Either flow agreements or bulk purchases with these organs.
Organizations in the market did kind of reset at that time as well with Laura Ltvs.
And better experienced contractors that that would be funded so we saw an excellent opportunity to move in there and pick up market share.
Where before it was it well banked market plenty of liquidity.
And lots of demand and originators at that time.
Really had a hard time feeding the demand that was there so as I fell off the create a nice GAAP for us to move in and and and pick up loans of course of of of course of 2020 of attractive levels you.
You mentioned on on the costs.
Day for new findings new loan originations, it's it's a par market the the the.
The coupon or the the servicing fees family stripped off and paid over the life of alone to align the duration of that loan with the Investor Us.
So that the typically are.
Kind of parks fusion.
For for new loan for greater.
Helpful of color, how 'bout the Securitizations that you guys plan on doing the I think you mentioned two deals.
Yeah on the ills fair complaint before the end of the year of the quarter. Yeah. We have about a half a billion dollars circle for of securitization and that's growing are we had a very active first two months of the year as of described earlier.
And we are evaluating both the rated securitization and on.
On reading in the <unk> space and.
Any securitization related to the our BPL of strategy as well.
The the <unk> will be quite a little bit different than what's done in the <unk> space as it is the shortage recent loan and having to be able to recycle the cash in the stores Asian would be a.
A nice feature of add in those types of things, we're working on the moment.
Got it thanks, and then a couple of more of can you discuss the maturity schedule of the commercial loans.
And then on the scratching den are those loans delinquent on sept, performing or or have they been disqualified from the agency channel for some other reason.
Yeah, the the the commercial loans, which are almost all multifamily loan originations mezzanine our Prof on.
<unk> those are typically doctor destruction of 10 years.
And in the case of scratch and Dent we.
We are buying.
We think are technically.
Loans that were technically dropped off of.
Origination warehouse facilities because of some technical event on.
That could be related to.
A notice period that the bar was supposed to receive on their current coupon if it would of changed.
The items like that we took we do not fond of.
More of a loans at the follow up because of of heighten the consumer of risk or because of.
Evaluation change on the on the <unk> of itself. So we're focused on more of the.
The the nuanced origination criteria that the gse's require and fallouts related to that.
Further ache, the scratch and dead the gym.
Generally performing the almost all performing when we buy them.
They took out of the performing loans of year within a year of origination and it's related.
The function of timing between when it was originated when the scratching Dent item was noted and the the financing facility the hold that loan under a an agency delivery.
Got it from our document documentation related issues not.
Not related to the.
Delinquency got it thank you so much.
I appreciate it.
Your next question comes from Christopher Nolan with Ladenburg Thalmann.
Hey, guys on the dividend for 2021.
That you are of mortgage Street.
Should we assume that the dividend payout will go out.
Go ahead.
We continue to generate a large part of our earnings from unrealized. The it's obviously is not distributable required distributable income I mean, we will monitor our dividend and as we drive the portfolio size up and look at the what we would consider reoccurring revenue stream, that's really what will dictate the the dividend pay rate.
But.
So that's really what will dictate we don't really comment about what we're going to do the dividend going forward in the future of an absolute terms.
Okay, and then I didn't fit in the deck, but how much dry powder balance sheet dry powder do you think you have now.
Well.
Yes.
Flea $300 million of cash in our balance sheet as of and I'm speaking as of the of queue for.
Vast amounts of of activity of the top of on the first of months that I won't comment on directly but as of the end of the fourth quarter roughly $293 million. We just spoke about a securitization of upwards of about $500 million.
That would free up some cash they are most of those assets are unencumbered.
Mentioned, we of a billion dollars of unencumbered loans on on our.
And assets on our balance sheet. So when you think about dry powder. The way, we think about it is our unrestricted cash and financing range is that we believe of prudent to execute that go with our liquidity plan the company.
So we see upwards of over $1 billion of kind of that that dry powder to execute into the to the portfolios.
Great and then the follow up on Eric's question on the P. P. O loans are those loans made for the originators.
Or as a sort of selling off of their loan production to you guys.
Yes, the the originators are originate to distribute kind of model.
There were funding loans that they're originating directly for contractors in local markets that are.
Either flipping houses or.
Buying of portfolios for for a rental purposes, which is.
A trend that we see increasing.
So it would be for both of those purposes.
We're buying clothes loews yeah the.
Cover fix him flipper originator of my coverage.
And the yield on those loans are closer to 12% plus around 4% of fees and so forth.
And you are getting an average coupon roughly six seven per cent or something.
Yes. The market is there is a couple of ways fixing flip loans originated in a couple of different paths.
Without going to the very specific levels on on what you're seeing at the 12% range.
We can certainly structural loan out of 15% coupon and it would be more risk and higher.
Risk of the fault one.
The one of the things that we do to manage the risks on fixed on flipped is to focus on the amount of work is required to actually.
Go through the transitional plan for that contractor and in that area were focused on loans are gentlemen for the 10% to 15% type of cost.
Add to the act of the purchase price too then transition into a sale or to of rental.
We don't want to take a lot of construction risk in the space given the timelines that we've established for the opportunity of the fixed and flip market is not of market that you want to the.
Which would be bang for into perpetuity, but there are definitely pockets in the market, where it makes sense to to look at these type of these 12 month type of on bridge on arrangements and we're currently there. So for that reason, we're we're very.
Cognizant of the potential extension risk due to construction construction as we all know of.
We've we've all had experiences where it actually takes a little longer than suggested.
And on top of that the the cost of of labor and.
And other related materials for the houses also then it's gone up.
<unk>.
Quite a bit in the in the last year so for those reasons.
Try to keep it tight to a quick turnaround with operators that has the vast amounts of experience in in these markets and also we also constrain herself to certain markets, where we see that migration of demand helping out helping the cost of the the execution. So.
There's a variety of the fixed for the phones you can you can car on the market and we're just we're focused on the.
A short of duration part of that market.
Final question on the fixing flip.
What sort of return does a.
Contractor have to generate with your with your alone.
To make breakeven.
The contract the the so there's two types of of loans that were two types of business plans that we learned to one is a turnaround flip of of the house. The other is a.
The the.
More of a cap rate model, where the the.
It's the rental play.
And at times that changes over the course of the loan where the rental play becomes more.
Formidable given Calgary compression of the ability to sell of rented house on the market with.
The vast amounts of quantity of cash that is looking to car portfolios of rentals in certain markets. So these contractors of feeding both sides and also of feeding. The fact that there is a low of of.
Of housing construction in these in these markets, where this is a new upgraded product. That's there that would be typically sold to a new housing.
Liar.
So when we look at both of the return that we're focused on for the contractor is a bit different depending on the business plan, but depending on which mark you're looking at.
You can see cap rates in the in the 5% of the area and also.
As relates to the flip the definitely looking at the teens return of opportunities.
And again, if it's of flip that that is more of a.
Just bought cheap and more of the.
The superficial type of improvement.
Our focus is really on what the value of the home is with the potential opportunity for that sale is more so than the the contractors earnings.
We are aligned with them and the fact that we only funds for the.
Low LTV loans, the with real cash contribution we don't focus on refinance of fixing flip loans either purchase loans for the most of our only and in that area of the our line that comes from that perspective, the cash that they haven't of the political house.
Okay. Thank you for taking my questions.
Thanks, Chris.
And again, ladies and gentlemen, if you have a question at this time. Please press the star on the the number one key on your Touchtone telephone. If of question has been answered are you wish you remind me of stuff on the queue. Please press the pound key.
The next question comes from Jason Stuart was jealous trading.
Hi, good morning, Thank you.
Uhm.
Steve If we could just go back to your comments on in the mid teens ROE should we think about that split between net income spread or not spread as we do in the multifamily. It's two thirds one third.
One of leave the.
The legacy investments out and sort of think about it on of go forward basis.
So the the.
The two thirds, one third is asset allocation right and really that's because we're putting a lot of what we were pretty more leverage that a lot of.
Leverage on the residential side securitization the majority of our multifamily assets today are the mezzanine loans that we don't put financing on or secured financing on today, so that that asset balance will be a little different than the equity balance but.
We as we build on our pipeline.
Certainly our target return on anything that we're putting on the books is between 10 and 12%.
And so when we look at those returns, it's a balance of and the residential side. It's a combination of the asset with leverage on the on the multifamily side is generally the the coupon on alone and the opportunities of how long do you think that loans can that be outstanding and what other kinds of upside incentives. We have on this particular lending models.
I think it's important to note that in the single family strategy, particularly the assets were looking to leverage in the in the <unk>. The strategy. We're buying these loans obviously it of discount there loans that have been paying for a few months or have been delinquent for Ya a few months and our goals of creek those loans up so the first cycle of return and that opportunity is decretion value we get.
From the benefit you get from the borrowers.
Becoming consistent pairs, which obviously has been the Australia that.
Ah focus where we've had 46% of of the borrowers that we won't be purchased on where recurrent and as of 12 31 or bars, where 62% current.
Our of.
The the value of increase we received from there from 90 94 is that first set of return opportunity. Once the borrower goes to a current status. There's a phase too which is which is what we spoke of of just earlier. The phase two is taking those loans to a rated securitization market and when we do that we believe that these the securitization equity returns are are 15% plus on our porch.
Julio so.
We have basically book value accretion in the first stage and then more of an carry excess cash flow of stream on the new play on the <unk> just to be clear.
Multifamily just to be clear as in Unlevered strategy with respect to our direct originations.
Okay. So the strategy asset aside leverage aside is there a minimum cash on cash return hurdle or it's because the duration of so short that you look at this as a total return play and there's no minimum casual cash hurdle.
Yeah, we don't focus on a particular IRR target for any portfolio, it's all risk adjusted obviously.
We will look at assets that have a.
Kerry of of less than 10%.
But have a total of growth opportunity in greater than 10% that.
That is a of that is the appeal of strategy.
And there's other asset classes, where such as multifamily where it's on Levered double digit type of returned.
And that is more of a of.
Of a coupon.
Cash flow screenplay, so the it depends on what strategy, referring to but the.
We look at both.
And we do have.
There was questions earlier about recovery from the March declines part of our book value of growth also which we've had consistently over the last few years as a function of the fact that we body.
<unk> assets at a discount.
And the creek those assets through time, so our expectation is that we will continue on having book value.
Increases due to the fact that we were buying these assets of discounts and and using a operational strategy to extract value of the of those assets.
Kind of great. Thanks for taking the question.
<unk>.
And I am showing no further questions at this time of and I'd like to turn on the confidence of back to see low Montana.
Nancy.
Thank you operator, thank you everyone for being on the call today, we look forward to discussing our first quarter as we continue to build the company in the portfolio.
Have a have a good day thanks, everyone.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may I'll disconnect.
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