Q1 2021 New York Mortgage Trust Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by.
Welcome to the New York Mortgage Trust first quarter 2021 results conference call.
During todays presentation, all parties will be in a listen only mode.
Following the presentation the conference will be open for questions.
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This conference is being recorded on Friday may seven 2021.
A press release and supplemental financial presentation, with New York Mortgage Trust first quarter 'twenty 'twenty. One results was released yesterday.
Both the press release and supplemental financial presentation are available on the company's website at Www Dot N Y M Trust Dot com.
Additionally, 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 for 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.
Although 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.
And 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 company's 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 of President will be speaking to our investment fully of the strategy today.
Christine the area of our CFO, who will be speaking of more T feel about our first quarter results.
We will be speaking to our supplemental financial presentation that was released yesterday after the market close and is available on our website.
We will allow questions following the conclusion of the presentation.
The company completed another successful quarter, delivering an economic return of two 1% with 11, <unk> GAAP earnings per share and 12 cents comprehensive earnings per share.
Our book value remained unchanged at $4 71.
Our portfolio net margin expanded by 12 basis points to 2.42%, but more importantly, our portfolio of net interest income increased by $4.4 million from the previous quarter or 17%.
We expect to see continued improvement in both of our net interest margin and net interest income in future periods as we transition out of our lower yielding CUSIP securities and focus increasingly on loans in both of our single family of multifamily strategies.
On the balance sheet side, we continue to focus on expanding our access to longer term non mark to market financing arrangements as a testament to the strengthening of our balance sheet. In recent quarters. We were pleased to close on our first rated unsecured bond deal in April of $100 million, 575% five year Phil.
Nancy.
It serves as an additional non mark to market financing option for the company as we continue to build out our credit portfolio.
Now go into the presentation I will start on slide six.
The investor portfolio totaled $3 $2 billion unchanged from the previous quarter.
Our market capitalization was $2 $2 million, an 18% increase from December 31.
Our capital is currently allocated 75 per cent of single family and 24 per cent to multifamily strategies.
Our portfolio of growth continues to be focus on loan investments as we believe it can generate a better risk adjusted returns from more stable funding.
Going over to slide seven we'll go through some key developments some of which I spoke to in the opening comments, we the clearly of Tencent common stock dividend, representing an eight 9% yield on our stock price as of March 31, and we had a total rate of return on the common stock of almost 24 per cent for the period.
We purchased $347 million in residential loans and closed on the $10 million multifamily joint venture investment our first since 2015.
We continue to opportunistically sell or CUSIP portfolio selling of $112 million during the period.
On our financing efforts during the period, we funded $160 million of business purpose loans on a non mark to market line and in April as I said before we closed on our first rated unsecured bond Mar bond offering of $100 million, giving us yet another another option to fund our credit portfolios specifically of multifamily investment opportunities.
Both financings continue to produce mark to market pressure back to the company.
On slide nine we cover key portfolio metrics on a quarter over quarter comparisons of our net interest margin for the quarter was 2.42% an increase of 12 basis points from the previous quarter of.
The portfolio weighted average yield was largely unchanged at six points here of 3%. However of funding costs improved by 14 basis points, mostly attributable to the payout for non agency securitization that we completed back in June of 2020.
Going forward, we expect to continue to improvement in the asset yields as as we start to see the full impact of recent loan investments that closed late in this quarter.
We expect to close at least one financing securitization of the second quarter implant several others by the end of the year.
Our recourse portfolio leverage remains low with point of 0.0 0.2 times as of March 31st as we continue the focus on ways of decrease our exposure to mark to market call risk back to the company.
Now of Christine the area of our CFO will go through the financial resorts the financial results in more detail Christine. Thank you Steve Good morning, everyone and thank you again for being on the call and discussing the financial results for the quarter I will be using some of the information from the quarterly comparative financial information section included in slides 23.
<unk> 30 of the supplemental presentation.
Slide 10 summarizes our activity in the first quarter, we acquired residential loans for $347 million closing of multifamily joint venture investment of $10 million and purchased $6 million of investment Securities. We sold non agency RMB S. N C M B S for proceeds totaling $112 million.
We also had total repayments of approximately 184 million primarily from our residential loans. Most of these residential loans were purchased at a discount and the early pay off off the loans resulted in additional income of approximately $3 $3 million, which is included in realized gains.
We also had three multifamily allowance of redeem which generated <unk> 6 million of redemption premium income.
We had net income of $42 million and comprehensive income of $45 million attributable to our common stockholders.
The value ended at 471 unchanged from the fourth quarter.
Yeah.
Slide 11 details our financial results, we had net interest income of $30 3 million, an increase of $4 4 million from the previous quarter. Our interest income increased by $4 1 million, primarily due to increased investment in higher yielding business purpose loans also interest expense decrease by.
300000, which can be attributed to the repayment of debt associated with our non agency RMB S re securitization that had a higher funding cost in the first quarter.
We had non interest income of $39 7 million, mostly from net unrealized gains of $26 2 million due to improved pricing across the majority of our asset classes.
Literally our residential loans and investment in consolidated epilepsy.
We also generated $7 1 million of net realized gains from sales of investment securities and residential loan prepayment activity.
In addition, our multifamily preferred equity investments accounted for as equity and our equity investments in entities that invest in residential properties and loans contributed $3 4 million of income during the quarter.
We had total G&A expenses of $11 4 million, an increase of approximately $1.8 million from the previous quarter. The increase can be attributed to stock based compensation expense related to the 2021 annual equity awards, an increase in incentive expense related to improvements improved performance.
In 2020 one we.
We would expect our G&A expense ratio to be approximately 2% of it to the company's stockholders equity going forward.
We had operating expenses of $7 8 million during the quarter, which included $4 8 million related to our portfolio of investments, which increased primarily due to growth of the business purpose loan portfolio and $2 9 million of operating expenses related to two multifamily apartment properties.
We consolidate in accordance with GAAP.
As I mentioned earlier included our results for the quarter is the net income activity related to multifamily apartment properties that we consolidate in our financial statements in accordance with GAAP.
These properties generated operating income of $1 5 million and incurred interest expense and operating expenses of <unk> 3 million and $2 9 million respectively.
After reflecting the share in the losses over the Noncontrolling interest of $1 4 million in total these multifamily apartment properties incurred a net loss of <unk> 3 million for the quarter. It should be noted that the net loss in these properties includes depreciation and amortization related to the real estate.
The graph on slide 11 illustrates the change in our book value from December 31, 2019, our book value remained flat at 471 during the quarter, but increased 21% from the end of March 'twenty 'twenty.
Our stock price has also recovered significantly increasing our price to book ratios ratio to 95% from 40% at the end of March 2020.
We continue to focus on growing in strength of Inc. Strengthening our balance sheet by investing in our core strategies of single family of multifamily investments.
And prudent liability management, but by placing greater emphasis on procuring longer term and are more committed financing arrangements such as securitizations of non mark to market financings.
Jason will now go over the market and strategy update Jason.
Thank you Christine speaking from page 13, we were able to continue the elevated pace of investments with $358 million of new assets added in Q1, despite the unusual.
The usual slowdowns due to year end activities at the end of the year in 2020, we're able to keep an elevated investment pipeline.
As discussed the discussed on previous calls we are excited to add these assets to our balance sheet, because we can generate a double digit return without application of recourse mark to market leverage.
In the case of EPS, we are aggregating loans on a non mark to market warehouse line for a term skus securitization takeout in the case of our direct multifamily jv's return on assets in the low teens.
Art in the low teens the leverages unnecessary.
Now, we only focus our capital allocation when the following of true first supply of investable opportunities need to be meaningful. This is very different than just saying market size the.
Secondly, we need to see favorable market pricing and market dynamics, which provide attractive risk adjusted returns and lastly, the opportunity fits within our core competency and have competitive and we have the competitive advantage that's.
Thus the three investments on the right hand side.
Of this of the slide you're all fit within the Venn diagram.
Which is why the air consider our core strategies.
Turning the page 14.
We added this slide this quarter.
To basically explain a why we invest in new strategies and using the market commentary isn't as the way to do that.
On top left side the supply of housing is depressed across many regions of the U S. Less the 1 million housing units are available to be purchased the U S has seen the decline in supply of 418th straight months, New single family construction is struggling to compete with the existing inventory price points for new construction in point in input cost.
Such as lumber not to mentioned labor costs have skyrocketed.
On the demand side Hauser selling of the fastest pace on record 43% of homes go into contract within one week at list price with very little no discount both are at record levels in.
In the BPL strategy, providing loans to local contractors crew model existing age inventory is one of the most compelling ways. We are ways to take advantage of the strong market trends today improved existing inventory selling extremely well across selective markets of the U S. We see a continued tailwind to funding these loans, where the transition plan for the house of.
Of the home purchase by the contractors not complicated at 73% LTV of purchase were 64% LTV. After the the improvement work is done in the home the loans have significant downside protection embedded to date, we've experienced zero credit losses with respect to the strategy. The proprietary channels were bolstered in 2020, a time when mark per.
<unk>, we're struggling with liquidity issues. These events provide an opportunity to lock in new challenge the buyer of consistent flow of loans, which meet our standards.
Now looking at the center column and row.
Switching over to the Middle section in 2020 home originators of home originations Rose 25 per cent year over year and finished with approximately two points of the $5 million of new loans produced wherever since the peak volumes in 2020 in late 2020 of the primary secondary market mortgage spread collapsed 23 per cent.
Lower volume, coupled with lower gain on sale of potential it means that the operating margins Force agency originators.
This describes the perfect storm for new scratch and Dent Intestable supply.
Many originators utilized over 20 times leveraged for agency loans funded before delivered to the Gse's in 2020 originators used their excess profit to manage scratch and dent loan warehouse buyouts today. The story is much different due to lower profit many originators needed instead find third party liquidity and sell loans.
Which is where we stepped in.
Over seven years, the team has evaluated and the scratch and dent issues from over 100, plus sellers and we can discern from technical versus credit issues, we buy of discounts and take advantage of refinance campaigns of shorten the duration of our investment to increase the total return.
The bottom row.
Now on the last part of the slide shows why we focus on the multifamily direct loan opportunity U S interest eat migration trends continue at a torrid pace, where many northeast residence of relocating to the southeast for obvious reasons lower taxes more jobs better weather and now a normalize the economy removed from Lockdowns.
With profit with population swings of property of approximately 5% in a single family market that offers little purchase options multifamily property values are on the rise in the south and southeast were <unk> 83 per cent of the underlying properties are located in our portfolio. We have witnessed cap rate compression of about 100 basis points due to the pandemic, which enhances our credit <unk>.
Port <unk>.
Since our multifamily origination tip looking typically contains certain early pay off minimum payment multiples, we have an opportunity for additional upside return with early payoffs. We have seen of recent spike of early payoffs in recent months, which which should continue to drive higher returns for the strategy and the market with very stable fundamental backdrop as discussed before we.
I've never taken of credit loss since funding these loans over seven years ago with respect to the strategy due to our our deep credit experience and default management capabilities.
Turning the page 15.
To obtain double digit returns within our core strategies, we limit utilization of recourse mark to market leverage our definition of portfolio of leverage on this page the company's portfolio Leverages 0.2 times, which is likely to stay at these ultra low levels and order purposely cap the company's liquidity risk.
We expect our securitization funding of your growing source of leverage for the company and in fact that will be rolling out a new securitization program series into the market shortly with $1 4 billion of unencumbered assets meaningful EPS growth can be gained by leveraging of component of this book.
Turning to page 16.
Diving deeper into our single family strategy.
This quarter, we broke out bpl's from performing loans, we thought this would be helpful to separately assess.
Both strategies given the growth in the BPL investment strategy on our balance sheet across the board, we look for high coupons at reasonable prices with loyalty low ltvs for strong borrower alignment.
The current environment is very supportive for the strategies. However in the case of our Pls, we do see meaningful market supply, but investable supply is low due to a very strong market prices I guess, the best way to explain is how one of our traders explain to me on the recent internal market claw in the RPM market par is the new 95 and one of them.
Five is the new par.
On the security side, we continue to monetize the remaining discount with respect to the non agency portfolio and continuing to look for favorable market to to divest with respect to agencies price took a slight hit with rate of with higher rates in the first quarter, but now with conforming coupons back below the 3% threshold agency prices have recovered we do not.
Favor the dynamics in the agency sector with the fed as the dominant buyer of alongside our walks out of other technical factors such as heavy treasury issuance calendar that may lead to crowding out of the agency guaranteed markets, especially from overseas accounts.
Turning to page 17.
We grew our single family loan book by $347 million and monetize 72 million of non agency MBS and the gain in the quarter as it relates to performance much of our expectation higher seasonal delinquency trends reversed.
In the first quarter with spread compression the RPM market, our assets were valued higher up to $96 of par.
We can monetize for points in average with respect to par payoffs and with nearly a 5% coupon until we are positioned to achieve of teens return with peripheral of leverage which is transitioning into term securitizations.
We added a state by state breakdown for a pill strategy.
The investments on this call state exposure was the question reason in recent calls I stayed in the past the portfolio of diversified at low Ltvs, but is less concentrated in northeast we took a purposeful tack to limit exposure to these markets.
At purchase of these loans.
The last column in the lower right table FICO score is depressed due to recent.
The delinquency history by the bar.
They're in line the upside opportunity for us frankly, and frankly for the Homer through service partners, we work to enhance the borrower's credit score. So the borrower can obtain lower rates through of refi, which allows us to recapture the discount faster.
Now turning to page 18.
The more in depth and from information on our VP of strategy overall market has has a wide array of loan types.
With underwriting that typically exposes the lender to either higher bar of credit risk typically called hard money loans or high property risk typically structure as well as a unsecured loan in both cases of the barn cost could be as high as 20 per cent.
We thought it would be helpful to further explain where we invest in that direction within the BPL markets, we prefer to give up some coupon for a stronger borrower and collateral of risk profile, we look for borrowers with credit score high credit scores 720 on average of our portfolio low ltvs to assure alignment, 65% after of per barrel value, 73% with.
The bar with respect to the borrower cost basis.
Our experience our borrowers have successfully complete or at least 10 or at least seven projects in recent past.
And rehab costs, we look for a project of simple business plans for two quick turnaround times. Thus the rehab projects are lower on the cost structure them with 20, 28% requiring no rehab budget at all.
Switching over to page 19.
Now I'll discuss our multifamily strategies, our multifamily loan business or direct originations is where we continue to focus as stated before our exposure is in the secondary and tertiary markets. The low mid rise properties multifamily properties.
As a mezzanine or preferred lender at an 81% LTV on average properties continue to have strong cash flows and high occupancy.
Thus the <unk> level has been very stable at 1.4 times, we price this debt or preposition, which is really interchangeable at around 11, 5% with the origination fees incurred in early prepayment benefits, we can generate of teens return without utilization of the leverage we have originated this debt for over seven plus years without ever taking of credit loss on any position.
And I've said before recently, we started underwriting and pricing joint venture investments, we do come across opportunities with our loan program, where we are all where the borrowers also of interest in taking equity position.
And the helping us help them with that equity position takeout.
So it really related to our management prudent monetization plan, which is where the borrower comes to us.
We funded our first $10 million of dust in the space in the first quarter and are excited to continue reviewing more opportunities in the sector. Additionally, we have experienced recently is equity capital offerings that we can offer generated simply more of demand for our multifamily loan portfolio, we're able to work with more sponsors that would not tip looking.
Typically consider our debt or get like instruments, but after discussing the program in more detail the sponsor flips to our depth of options.
Switching over to page 20.
In the corner in the quarter, we had three loan payoffs generating a 15, 3% IRR or 1.5 times life to date on those loans again with higher values in the market borrowers are looking to recap of our salt properties. After business plans have been fully executed we benefit from this minimum return multiples on top of our 11, 5% coupon.
The asset management team is actively working on two properties that have entered special servicing as stated on earlier calls we expect both loans the payoff at par after the execution of a change of control and sell the origination team is extremely busy with numerous proposals undervaluation, we expect robust robust origination volumes in the second quarter and through the third.
<unk>.
Yeah.
Now flipping over to page 21.
Thanks for taking the time to listen to and read through a portfolio of strategy update we are of nimble group with the.
Equipped to tube.
Find local and locate compelling risk adjusted returns across various markets and capital structures. We are looking forward to reported results of all of the hard work of our employees have put into generating a robust pipeline of high asset returns and further savings through our funding costs at this time.
Send it back to Steve.
Jason Thanks, Christine Operator, you can go ahead and open it up for questions now thank you.
As a reminder, if you'd like to ask a question you may do so by pressing Star then the number one on your telephone keypad again that is star one of you would like to ask a question.
Your first question is from Bose George of K B W.
Hey, guys. This is actually Mike Smith on for Bose.
Just on the Bpl's there seems to be a lot of interest just given the movement of rates in some of the dynamics in the housing market. So I was wondering if you could just talk a little bit more about how pricing works in your broader sourcing strategy.
Yeah for pricing wise I mean, we're funding these loans.
I mean, the flow on flow basis at par, but we do see some op opportunity in bulk portfolio of purchases, which would be slightly above par.
These are of shorter term duration portfolio, so theres not really high premium pricing on these types of loans.
The market is very robust as we talked about it in this call. The there is very little inventory for sale in many markets sort of contractors are finding an ability to squeeze out margins for profitability.
EBIT on properties that I have no work completed and just better.
Our marketing campaign with respect to Sonangol.
So in those cases, we are finding elevated origination volumes, we're able to to work with our partners that we've established early in 2002 of 22020 in 2019 and were continuing to basically fund those pipelines that are they are being delivered to us.
Great. That's all really helpful color and then a lot of peers of taking equity stakes or acquired originators. Just wondering if this is something youre looking at or consider doing.
When we have fielded.
Several calls with respect to originators, who would like to partner with the long term capital partner in that space.
We have.
At the end of day. This is a market that we're watching very closely.
There is time, where this market is attractive and there's times when it's not and the concern about going long term with an originator is that you're basically for us to continue funding the.
The supply in.
In the case, where the market is changing on US you see that in.
With supply volumes higher.
Each day flattening out I mean at the end of day. These are contractors of taking advantage of the of basically of technical squeeze on supply and we will continue funding. These loans as long as that continues to happen, but the you know that could change quickly and we want to be able to manage our costs for as a company of our and our overhead with respect to.
Not having the the significant overhang with the market if the market does change so at the end of the day, we see this as a trade versus the business in many cases I mean degrees now this is again the supply side listen around to net two months of more of housing supply in the market available to sell.
It shouldn't be we don't expect this to continue for multiple years I think when you buy into in a fixed and flip of region. In particular, you know that's something that you really need to see food of course. The next five years based on pricing of these originators and we're at this point we don't.
When I suppose of ourselves with that that overhead cost we.
We like where we are right now with respect the flow purchases, we have a good relationship with the originators were great liquidity provider for them, we had been in 2020.
During that market downturn, and we will continue to do so going forward.
That's helpful and then in the press release you mentioned.
The transition away from the securities and more towards loans I was just wondering if you could elaborate a little bit on the timeline of the transition and the optimal balance between revenue and multifamily and you know just what the transition could mean for our run rate earnings.
Right. So the transition in the security spaces. We currently we have.
As of the end of first quarter 491 million of of market value, we're seeing opportunities to monetize these assets are the.
The securitization market is a is the market where you know for US, particularly for re buyers is the market, where you're buying mezzanine or junior of parts of the security the structure of the.
The spreads on these assets don't provide for double digit to teens returns of the way you get there is through our repo leverage and in our repo leverage as the primary method to achieve those types of returns we've transitioned away from using given liquidity squeeze in last last March away from using quarterly rolling Mark to market leverage.
Which means that the securitization strategies are or are very difficult to fund two to achieve the double digit return. So at this point what we're doing is we're taking our portfolio the.
The assets, where we can achieve of double digit return without without leverage we will hold as long as we feel comfortable with the fundamentals there in the case of the other assets, we still have assets of our discounts that slight discounts we're monetizing.
You should expect us to see further monetization of that book every quarter, there's not a number as it relates to what the right.
Level of hold its really just a function with the market will give us an on the timing of the sales.
And with respect to the the end.
Of the kind of the compression we've seen in spreads in this market. So we feel very comfortable where we stand with these with the securities we sold.
Down a you know every quarter, we sold down a.
The number of physicians and we'll continue to do so with respect to the tighter spreads.
The transition is a function of the fact that we see better opportunity in the loan side.
It's.
It is of less liquid market on the loan side, we believe the securitization side is kind of overly overly liquid at this point, where you know you have prices that are continuing to ratchet in you have oversubscription levels on just about every securitization that's offered out there.
It's very very competitive environment, So we see better risk adjusted returns in the loan markets.
Steve Blum of speaking to.
I don't think we have a set percentage of what we want to be in terms of residential single family versus multifamily. It's just a matter of of the single family side requires some kind of securitization of the generates the double digit return the multifamily doesn't so in general of the asset size is going to be larger than the single family in terms of just raw dollars, but we continue to build out both.
Pipeline with opportunities and not really of focus on which one is going to generate what percentage. It's the total return of the portfolio and where the best opportunities lie as how it will go overtime.
Great I appreciate the detailed answer just one more can you just give some some thoughts on how book value has trended.
During the month of April into May.
Yeah, I mean the of.
The market continues to be very strong and we don't see you know as it relates to the credit assets, we're seeing an improving economy certainly as the as people get vaccinated and more things open up so we would anticipate better performance across credit assets in the short term for sure, especially with the amount of liquidity that's coming from the government into the.
And so we will continue to see credit assets performed very well the interest rate market is something that we have to get a sense for given the size of the government requirements in the second quarter. It remains to be seen where that takes us in rates over the next three to six months.
But we would say side of it.
Oh great.
Thank you for taking the questions.
Sure.
Your next question is from Doug Harter of Credit Suisse.
Thanks.
Looking at <unk>.
Slide 15.
Can you just.
Help us understand what what kind of what level of unencumbered assets.
You need to hold and whether the unsecured debt deal.
But you did recently.
I guess, how that plays into the kind of your need for unsecured sorry unencumbered assets.
Yes, I mean, there is no level of unsecured assets, we do hold on our portfolio. This is a purposeful tact.
And limiting our portfolio average as well as.
The assets that we have.
<unk> teed up for our Securitizations. So that there is there is no other requirement the hold.
Any any other assets in the unencumbered book.
The your question was on the our debt financing, we just did that right.
Correct.
Yeah. So the debt financing has a five year paper at actually.
Has the right tenor for our multifamily strategy and many.
May aspects.
Our multifamily strategy of an Unlevered strategy, we have.
The average duration of that expected duration is around three and a half the five years. So it pairs well with that it's true.
Also a cheaper way of funding without recourse leverage of a mark to market and have the term financing. So we there was a opening in the market for us to issue debt given some of their market prints and we saw an opportunity to take advantage of that we also thought it would be helpful and important for us to have a security.
The market that's rated.
It gives us another source of financing over time that which we could tap in later years or months.
We have our non core we ever of convertible debt coming due.
In January of 2022.
So this just gives us another option that we can consider as we go forward from what we want to do in terms of how we look to replace that if we want to replace that.
And overall liquidity, but certainly it takes a little more pressure of the company's capital stack when you can issue unsecured debt.
Track of levels relative where we can issue convertible debt today.
That makes sense.
And then I guess just.
Sticking kind of here obviously.
Obviously this will be dependent upon the kind of the ultimate mix of the portfolio, but I guess, if you were to hold.
Mixed constant today.
Level of leverage could this current mix.
Assets that you have today kind of support and you know I guess, how should we think about you know where the zero.
Zero point of two times leverage could kind of go over time.
Yes, I think the 0.2 I think there's two questions one leverage so we will be adding securitized leverage, which obviously doesn't move that 0.2 number. So the 0.2 will probably gravitate between 0.2 and 0.4, because we will be rotating those loans that are being financed on those lines into securitization and so we.
Really see the portfolio growing from three two to four to four to four to have billion dollars largely from securitization. Since so we don't really see the that the portfolio of point to changing significantly unless the market changes dramatically and where you have to where the CUSIP strategy does look like he comes back into <unk>.
We're now offers.
The interesting opportunity for us on a risk adjusted basis, but we don't see that in the near future.
For us or certainly not for the next 12 to 18 months that would be the only place where I would say you could see growth substantially but right now I think it's going to be fairly stable between point to the.
Max of 0.5.
Great. Thank you Steve.
Sure.
Your next question is from Eric Hagen of <unk>.
Yeah.
Hi, Thanks, Good morning, I've got two questions. The first is can you say how much taxable income.
The estimates that you had in the first quarter and how you see that trending.
And in the case that you do of taxable income are there any carry forwards to offset it.
The second question is the securitization you expect to do this quarter.
Assumed you were referring to seasoned re performing loans, then I think I heard you say you.
He might be introducing some new collateral into the market. So I just wanted to hear more.
But what you expect of finance and some of the deal economics, you expect there. Thanks.
Sure.
The from a tax standpoint, we don't really talk to the tax line.
As you look at the components of our income certainly as the net margin increases our taxable income goes up to.
To the extent that we're generating realized capital gains, which we did we are we certainly have realized capital losses from 2020 of that can offset and shelter those gains of significant amounts. So the there's certainly won't be any taxable distribution as it relates to realize the activity going forward for a decent amount of time from the net margin stack.
Endpoint, which does not get shielded from the realized capital losses, you know that.
That is something that will we look to but we don't we have not and currently are not disclosing what that number is I'll, let Jason speak to the on the securitization side of the you know we're looking at rolling out of New program with respect to a BPL securitization.
And that would be more of a program series, where we would expect the issue multiple deals in the future of.
Our first yellow, we're lining up for this quarter.
And I expect the issue that as it relates to <unk>. We are also working and have been looking at the IPO market as a way of accessing terms gears Asian leverage and.
Our continue working on that space and looking to see what is the most of optimal portfolio of for the securitization strategy.
And then looking to continue rolling out our appeal of loans into that framework in the future as well. So those those of the will be the primary sources of our funding strategies.
We as we talked about earlier, we did establish a non mark to market.
The warehouse line for our BPL loans, and we will continue utilizing that as an aggregation strategy education aggregation facility to the securitization market.
Got it can you say, what the advance rate and cost of funds that you expect on the securitization of the ZIP code that it might end up in a.
We know we have a pretty strong feeling that will it'll be lower than our current funding, but we're going to let the market speak to that and we're.
Emily are going to be issuing that so I don't want get in front of anybody who's looking at the senior part of the capital structure, just yet so we'll wait to see where the that comes out.
Thank you so much.
Sure.
Thanks, Eric.
As a reminder, if you'd like to ask the question. Please press star one.
The star one to ask a question.
Your next question is from Christopher Nolan of Ladenburg Thalmann.
Hey, guys.
Where do you see the capital allocation for single family increasing too.
Yes, I mean, it's at 75% right now we have the very we put a lot of the assets that we've put on the books.
This quarter. The first quarter were primarily focused on residential we are of very active pipeline of multifamily and I would I would expect that the multifamily percentage will probably start to grow relative to the residential as we go through the rest of the year, just because of where this the multifamily pipeline is building up too.
I'll also add in more of a technical differential is that our securitization that we're looking at has the higher advance rate than our current funding.
So that would technically lower our assets of our balance sheet with respect to the disc irritations of the just the equity position versus our current portfolio.
But you know that with a unlevered strategy of the multifamily and.
The more of a higher AR securitization of advance rate, we should see multifamily increasing as a percentage basis.
Of course on.
On equity.
Great and then I guess within the single family segment should we see BPL is taking more of a core.
Portion or percentage of the.
Portfolio there.
Yeah, I mean again the Pls we're.
Looking at our securitization and from a technical standpoint, it may lower initially lower our equity interest in the strategy of simply because we are availing ourselves to that term scutellation financing, we are continuing to see strong pipelines, there as well as scratch and Dent, which has really had kind of an inflection point this year as I described earlier.
For various reasons related to the originators profitability.
So that strategy was was a was a slower growth strategy in the.
The third and fourth quarter that is scratch and dent, which we're now seeing picking up quite a bit but where our flows in the business purpose loans are are still elevated and we're going to continue funding into the strategy with the short duration type of loans until we see it.
So the fundamentals and technicals of the market will continue to play out which they are in the south and southeast with the migration trends. So we you should expect us to continue are expected to continue seeing.
The decent allocations the B pillar strategy as we have in recent quarters.
Great of multifamily I know you guys the focus on the southeast of at what point.
Do you start looking at the northeast in terms of when valuations got cheaper or is there enough scenario, where if you look at the northeast.
Yeah, I mean right now, we're just not seeing the opportunity and the properties are in the sponsorship that we see.
From the supply standpoint.
Arent as attractive as what we're seeing in the south.
The.
There is cap rate compression I, just mentioned of about 100 basis points, but with the demand. There's a dynamic you know the transit.
Transitional.
That's happening with the migration of tapping in these markets and single family has a play in the multifamily side of the disgust. When you the bloat relocate to a market and you can't find available single family and at the timely manner, which is happening in many markets.
With bidding wars and houses et cetera, the multifamily.
Especially low rise and mid rise.
The concept is of.
It's very valuable alternatives. So we're seeing that play into these markets with the technical squeeze in housing.
And being able to continue.
Flattish to slightly higher rental rate increases as well as very very high occupancy trends. So.
We're going to continue focusing on that market foreseeable future and we.
Obviously, you need a.
The capitulation from the north east or north of type of properties that are there we haven't seen that yet either.
Eventually show of oil prices.
All of the sellers are obviously well funded and the.
On the multifamily side of it.
10 year kind of term leverage so we're not seeing value drop in those markets for an opportunity for our sponsors or for ourselves and the JV side.
Alright, Thanks, Jason.
There are no other questions in queue I'd like to turn the call back to Steve for any closing remarks.
Thank you operator, and thank you everyone for being on the call.
These remain safe and we look forward to talking about our second quarter results in early August thanks, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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