Q2 2021 Blackstone Mortgage Trust Inc Earnings Call
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Hi, Good day and welcome to the Blackstone Mortgage Trust second quarter 2021, Investor call. My name is Debra on on your event manager.
At this time all lines are in listen only mode. If you do need any assistance at any time you can keystone.
So on a coordinator will be happy to assist you.
If you wish to queue for a question. Please simply Keystone a 1 I would advise you when you can ask any questions.
I would like to advise all parties the call is being recorded.
Now I'd like to hand on to Weston Tucker head of shareholder relations Weston. Thank.
Zero ahead.
Great. Thanks, Deborah and good morning, everyone and welcome to Blackstone Mortgage Trust second quarter Conference call I'm joined today by Mike Nash Executive Chairman, Katie Keenan, Chief Executive Officer, Jonathan Pollack Global head of Blackstone real estate debt strategies, Tony Marone, Chief Financial Officer and Doug.
<unk> Executive Vice President capital markets.
This morning, we filed our 10-Q and issued a press release with a presentation of our results which are available on our website and have been filed with the SEC.
I'd like to remind everyone that today's call may include forward looking statements, which are uncertain and outside of the company's control actual results may differ materially for a discussion of some of the risks that could.
It affect results. Please see the risk factors section of our 10-K, we do not undertake any duty to update these forward looking statements we.
We will also refer to certain non-GAAP measures on this call and for a reconciliations you should refer to the press release and our 10-Q.
This audiocast is copyrighted material of Blackstone mortgage trust and may not be duplicated without our consent.
So a quick recap.
<unk> results, we reported GAAP net income per share of <unk> 89 for the second quarter, while distributable earnings were <unk> 61 per share a.
A few weeks ago, we paid a dividend of <unk> 62 per share with respect to the second quarter.
If you have any questions. Following today's call. Please let me know and with that I'll now turn things over to Katy.
Thanks, Weston I'd like.
From a wrap the call today by thanking Steve Slaton for his exceptional leadership at <unk> day.
<unk> ran the company a CEO from its re IPO in 2013, driving 8 years of outstanding performance growth and returns for investors 11, 1% annualized over his tenure.
The premier position <unk> has.
To start range through its history is a testament to his vision and expertise and we are thrilled that he will be taking his talents over to London to manage our best in class European real estate debt business through its next phase of expansion.
I'd also like to express my gratitude to see a on a personal basis for his collaboration with me over the years as well as a part.
<unk> and ensuring a seamless transition to the next phase of leadership for <unk>. Thank you against you.
Turning to our second quarter results as.
As the economic reopening continues to take hold the SMT hit its stride with a strong activity across all aspects of the business. We had 1 of our most productive new origination quarters.
Quarters ever with $2.2 billion of loans across 21 transactions driving both portfolio and earnings growth in the period.
We ended June at a record portfolio size of $19.2 billion, reflecting positive net investment of nearly $1 billion. So far this year and our fourth consecutive quarter a portfolio.
Yes.
We continue to enjoy superior access to attractive sources of financing across asset level and corporate debt markets sustaining our low cost of capital.
And the recovery of economic activity drove ongoing business plan progress on our collateral assets supporting continued credit performance on a partial release of our seafood.
A full reserve.
Our business is generating a 9% yield from a portfolio a performing low leverage first mortgage loans.
And we have generated this yield consistently in a 7 years prior to the pandemic during COVID-19 and now into the next phase of growth.
Our yield a stable, but the relative value we.
<unk> growth has become even more compelling over time as rates spreads and returns for comparable products have compressed across the market.
And our credit strategy has shown its metal carrying through the COVID-19 cycle with near perfect performance.
The company today is exceptionally well positioned with strong tailwind for continued growth.
We offer our investment activity this quarter and indeed, the first half a year as a result of our unique vantage point in the commercial real estate space.
The scale of the Blackstone real estate debt and equity businesses with over $200 billion of Investor capital under management means we are transacting in the market every day.
Across our platform.
Platform Blackstone invested nearly $5 billion of equity in a second quarter alone.
Breath of the Blackstone real estate portfolio over 1 billion square feet of assets allows us to access allows us access to extensive performance data on a real time basis.
We therefore have the benefit of a tremendous information to develop insights.
Identify trends before others can allowing us to invest with confidence in an evolving market environment.
These dynamics drove attractive lending activity across sectors and markets this quarter.
As a significant player in the multifamily space, we observed with strength in asset performance through Covid and more recently a steep.
It's a nice ration in topline growth with leasing spreads in June across the top 40 markets hitting an impressive 9.7%.
We responded by acting with conviction on multifamily lending opportunities leading to 8 new loans in this space, including our largest loan this quarter, a $264 million financing on a portfolio.
Axon belt garden apartments and.
Unlike many of our best loans this transaction emanated from a deep relationship between Blackstone on our borrower putting us in pole position to structure, an attractive financing package for a high quality portfolio.
In the office sector transaction flow is rebounding with the reemergence of leasing activity.
A sudden many markets, creating an inflection point for fundamentals.
A major cities new tenant requirements reached 81%, a 2019 levels and new leasing reached 35 million square feet in a second quarter still below pre COVID-19, but the highest level since the onset of depends on there.
Our focus remains on well positioned high quality.
<unk> earnings with excellent sponsorship and in many cases strong in place cash flow mode.
Most of our office loans this quarter were from new acquisitions with sponsors including related Lasalle Pimco and Angelo Gordon investing very substantial new cash equity alongside our debt.
We saw the opportunity to lend on strong cash flowing assets and growth market.
With office loans in Atlanta, Nashville, and Austin, all at 7% to 8% in place debt yields with upside from there and.
And we continue to leverage our deep experience in the Boston Life Sciences market, where Blackstone owns over 6 million square feet to create outstanding Lab office lending opportunity is closing our second large deal a year in that sector.
Overall, we are seeing a meaningful increase in compelling lending opportunities for our business.
Rents on leasing are ticking up in our target markets leisure travel spending is outpacing pre COVID-19 levels. The lingering impact of last year's volatility combined with cost inflation should keep a lid on new supply low.
Low rates and the global search for yield.
Create a favorable dynamic for cap rates.
While we are mindful of the residual effects of Covid and the Delta variant, we think the potential impact will be felt in the slope of a recovery not a standpoint.
Today, we have over $3.5 billion of new loans closed during closing post quarter end in addition to the sectors, which drove.
Our first half activity, we are seeing increasing lending opportunities in Europe as those markets normalize and we are identifying attractive relative value on the hotel sector, well price loans at cyclically low leverage points.
The positive fundamentals driving our new lending activities are also manifest in the performance of our existing collateral.
We saw over 1 million square feet of leasing in our office and industrial assets 12 points of occupancy pickup in our multifamily properties and revpar above 2019 levels at many of our resort hotels.
We upgraded 15 loans, reflecting their improving performance and saw a partial reduction of our seasonal reserve in a quarter driving an increase.
Book value.
And we continue to see repayments in the portfolio a healthy part of our business as collateral assets progress on their business plan to stabilization.
The growth in new business activity this quarter it gave us the opportunity to develop creative efficient financing options on the right side of our balance sheet as well on.
Our ability to capitalize.
<unk> on a competitive market environment drove pricing to attractive levels on both our credit facility executions and our CLO.
And we completed an upsize on repricing of a tranche of our term loans driving significant interest savings going forward.
While spreads remained competitive and our target zone of high quality credits the scale and sophistication.
Occasion of our borrowing activities allow us to consistently maintain stable rois as we build our origination pipeline.
Looking forward the positive outlook for our business continues we have a strong pipeline of opportunities to execute our strategy of low leverage floating rate lending to top quality sponsors on institutional assets.
Continued portfolio growth should enhance the earnings power of our business.
Our portfolio credit quality, a strong any assets most affected by COVID-19 are regaining their footing as the economy strengthens.
While on earlier than expected rate move could create a short term headwind over time, our business benefits from higher rates as more of our portfolio comprises newer floating.
A rate originations and.
And we maintain our focus on generating stable durable current income for our shareholders, which we have successfully delivered through the pandemic in a softer math as well as for the many years before.
And with that I'll now hand, the call to Tony.
Thank you Katie and good morning, everyone.
As Katie noted <unk> posted.
Posted very strong performance this quarter.
Our GAAP net income increased 35 to 89 per share and a book value. Similarly increased 33 to $26.68 per share.
In both cases, driven by a 34 a reduction in our seasonal loan loss reserve during the quarter.
Distributable earnings which.
Impacted by unrealized items, such a seasonal increased to 61 per share.
From a <unk> as we continue to deploy our balance sheet capital into new loan originations during the quarter.
Similar to a commentary last quarter. Our <unk> results did not include meaningful prepayment income as a repayments remain concentrated more.
Seasoned loans.
We do however, expect this income to return to more typical levels over time as newer vintage loans become a larger portion of the portfolio and repayments continue to occur.
To provide more color on the change in our seats a reserve we ended the quarter with a reserve of $133 million from <unk> 90 per share which is.
Not if you're a $1 million from <unk> as we continue to see improvements in the performance of our collateral assets along with positive trends in the broader economy and real estate markets.
We believe our current level of reserves is appropriate at this time and reflects a return to more typical market fundamentals. However, we will continue to reassess and make any necessary adjustments to.
Down here as conditions evolve over time.
We also upgraded several of our loan risk ratings from the second quarter, a further reflection of a strong market and economic backdrop are.
Our weighted average portfolio risk rating improved to $2.9 from 3 point out and we notably took 5 loans off our 4 rated Washington, a 21% reduction.
<unk>.
These upgrades reflect improved performance of these assets to pre COVID-19 levels as well as a full par repayment of a previously for rate in New York City rent controlled multifamily loans.
We continue to receive a 100% interest collections in our portfolio with only 2% a our loans on non accrual status.
Same as the last several.
<unk> vs and as a final comment on credit performance, we collected $2 billion a repayments this quarter, including 15 loans that repaid in full which is aligned with a pre COVID-19 levels as borrowers have resumed a more regular way transaction activity.
Notwithstanding these repayments, we experienced net portfolio growth in <unk>, our second most active quarter in terms.
A deal count on our fifth largest originations total excluding the 2015 GE portfolio acquisition.
Our $2.2 billion of originations drove our total portfolio to a record $19.2 billion.
These new loans had a weighted average LTV of 65% consistent with the existing portfolio and a secured by high quality.
A quarter target markets with large scale institutional borrowers.
Alongside our active originations this quarter, we had several notable transactions on the right hand side of the balance sheet.
In April we closed a $1 billion F. L for CLO with a total cash cost of only LIBOR plus 1.7% a.
A portion of which refinanced the 4.
$435 million a securities outstanding in our 2017 CLO.
This transaction further cements it'd be S&P has an active issuer in the CLO market, which provides inherently term matched nonrecourse non mark to market financing for our assets at pricing comparables of our credit facilities.
In June we Upsized, our term loan B 2 tranche.
Tranche a $100 million.
And reduced pricing on the entire $423 million tranche by 250 basis points.
Increasing our total corporate level financings to $2 billion.
A 13% of our total financings outstanding.
Lastly, we closed a new $1.8 billion credit facility during the quarter with $2.5.
A billion dollars a finding across our secured credit facilities.
60% of which were price at spreads of 1.5 per cent or less.
These low rates are further validation of a high credit quality of our portfolio and a <unk> position as a premier borrower across various debt capital markets.
We closed a quarter with a low debt to equity ratio.
Only 2.7 times roughly in line with <unk> and liquidity of $1.4 billion.
A $266 million despite the growth in our portfolio as we refinance several of our assets Accretively this quarter.
Our earnings growth this quarter was driven by the incremental deployment a balance sheet capital and we look forward to continued growth as we.
Show, a $3.5 billion of loans in the pipeline a Katie mentioned.
In closing, we believe our business is exceptionally well positioned to continue to generate attractive returns for our stockholders with a current pay 9.1% yield on book equity and significant downside protection through our low leverage senior mortgage loans and diversified stable balance sheet.
Closed. Thank you for your support and with that I will ask the operator to open a follow up question.
Yes.
Thank you for everyone to ask a question. Please key star 1.
1 on your phone could you. Please try to limit your questions to 1 question on 1 follow up then if required re queue.
1 on your phone thanks, everyone.
And the first question, we do have from Jade Rahmani from K B W. Thank you Jay. Please go ahead.
Thank you very much and I appreciate the thorough comments.
I'm curious what you all think about current inflation rates and construction.
On materials costs, and what impact if any do you think that this inflation will have on.
Loans originated with a.
A a construction element a.
More of a heavy transition particular those originated pre COVID-19.
Sure. Thanks, Chad.
I think the main impact of inflation on construction costs, we're seeing is going to be lower new supply going forward as well as you know.
The benefit of the value of.
As a thing asset that's replacement cost increases when we go into a more transitional asset.
Especially a construction loan we have a guaranteed Max price contract when we close so and we also have a completion guarantees from our sponsors so from a lending perspective, we're really protected from the potential increase in construction costs, but I think the broad.
<unk> point is really the enhancement of value of our existing portfolio as a replacement cost increases and supply probably a slower.
So in terms of completion.
Or a probability of completion probability of lease up executing the business plan.
You don't believe that construction costs will have a material impact.
No no. These projects were priced in and put under a guaranteed Max price contract years ago. So what's going on today really isn't going to have a material impact on that.
Thank you very much secondly on repayment.
Payments do you anticipate a similar level as what was experienced during the second quarter or is there potentially an.
Increase in repayments, which is what some of the other Len.
A lending companies that have reported a shock.
Yeah, I don't think we anticipate an increase you know we are poor.
Portfolio, obviously is larger and you know while we have large loans just the overall scale of the portfolio means the repaint them in a any 1 loan is less lumpy than you know maybe.
If we didn't have such a large portfolio. So I think that pace is going to be what we've seen historically pre COVID-19 on a pretty smooth level.
Thanks for taking the questions.
Thank you. Thank you guys.
Thank you the next 1 day with Rick Shane Jpmorgan. Thank you Mike.
Good morning, everybody and thank you and Steve if I'm, assuming you're listening thank.
Thank you for all of your <unk>.
Time and attention over the years, we've really appreciate a bit.
When when we a.
Think about interest rates right now on an and.
Sort of.
The headwinds that you guys space in terms of a low.
Rolling off a floors can you give us an idea of how you're managing this obviously a low base.
For a longer period of time creates challenges.
But there's also the opportunity to pursue.
Perhaps pick something up in spread and I'm curious how price sensitive your borrowers are on this environment.
Yeah, I think that from the borrower perspective, what we've seen is very consistent.
Rois over time in different rate environments. So you know I think that you know obviously, depending on where base rates are and spreads are there's a little bit of a back and forth there, but it doesn't change. The overall return so much from a borrower perspective or from our perspective.
Hey, Rick its Doug.
I'll jump in for a minute I think youre touching on a on a very important point about our business model and that is how organically hedged.
The model is and the story in 2020 elevated liquidity on a slowdown in portfolio growth velocity created some earnings headwinds in the Florida kicked in.
That.
Related to lower rates, a floors kicked in and largely offset the earnings impact there.
Now a portfolio growth and velocity are returning unlocking the earnings power from the capital raising that we did in 2020.
Last year, the average floor was $1.43.
Now it's 112.
Only a minority.
I thought on floors at this point.
<unk> are a.
Above 25 basis points I think it's just over 40% so the increasing earnings power that we're seeing in the portfolio now is correlating naturally to a return of the asset sensitive position inherent in our floating rate business model and that upside.
Already a live to rates is something that it's really 1 of the favorite things about our floating rate business model for us.
And I think we're seeing that play out over time in 2021, more or less exactly as designed and putting together that business model back in 2013.
Got it and so the point being that low.
There is a trade off.
Floors roll off.
And your you are putting in place.
Lower floors, you're picking up that asset sensitivity.
That would've been locked if we if we'd looked at this 6 months ago.
That totally makes sense.
Go ahead sorry.
I think to your.
I'd rather than as Katie said, what we see is a lot a stability in yields in our business and that's a function of this organic hedging.
That's inherent in our business model and the other thing Thats inherent in our business model that we like a lot is that asset sensitivity and the upside relative to rates and a potential for increase.
Your point, a or in particular over time, and we feel very good about the way that we're positioned in that regard.
Okay, great. Thank you guys very much.
Thank you and then next 1 NAV Timothy Hayes.
Thank you Timothy.
Hey, good morning, guys.
And lot Congrats Kenny on your a first initial quarter at a head of the ship here.
First question on just a cap structure, obviously, you've done a lot there yet the CRE CLO, you upsize and refinance that term loan b tranche.
What else interest you or do you kind of a target right now in.
Markets World I know you have converts coming due in may of next year.
So you have a little bit a time before I assume you plan to address that but I'm. Just curious how you feel especially given what seems like to be a very strong pipeline and doing in other CRE CLO or maybe doing some unsecured debt or anything else youre entertaining.
Hey, Tim.
Doug I'll I'll take that 1.
I mean, I think the short answer is all of it.
To your point.
I think our stock is trading well our corporate debt is trading very well executing very well, we're executing very well in terms of asset level leverage across.
As a whole array of.
The capital actions available to us.
What's most important to us is that we.
Have the broadest array of options available to us so that we can maximize the efficiency of our cost of capital and also a minimized.
On the risk on the right hand side of our balance sheet and we've done a great job of that in 'twenty.
Ex money the markets are favorable I think for us to continue optimizing that going forward.
I think with regard to what's new.
I think high yield stands out.
As an opportunity for us.
That space has been active or an or.
Our issuers in our space have been active.
2000, and in high yields we have the rating I think we have a good following from the from our term loan.
So that's something that could certainly be a.
On alternative for us in the future.
Yeah. That's helpful. Doug you guys have obviously been a very successful on that front, so echo that and then.
Just on on warehouse lines, I know that costs had been.
Coming down a bit.
On repo and I'm, just curious if you're seeing that trend continue and how much room. You think there is free for spreads to come in on those financing line before.
The banks, a it's not really worth it to go any lower.
Lower.
Costs have come in as a.
A very competitive environment.
As Katy.
Alluded to.
I think there are 2 aspects to that.
On the relative spread so the net interest margin, we've been able to keep that.
And in a historical range between $1.50.
Gen 200.
That's edged up a little closer to 200 in 2021, just in terms of incremental borrowings.
And then there's also just the overall mixed a weighted average.
That continues to fluctuate and I think in this lower LIBOR environment there're.
And is something of a floor I don't think we're at it at this point.
But I do think we will we would approach a limit on that at some point and a different a LIBOR environment I think there's a lot more room for continued efficiency in terms of the spreads on those bank executions.
It also ties to the other business that we're doing with the banks.
Probably in terms of the CLO business in terms of the corporate capital markets business that we're doing in all of those working in concert together on.
Both increasing the competitive dynamic and also increasing the touch points between us and the market and the banks helps us drive that cost down significantly and you're seeing.
<unk> had a bit of that in 2021, and we expect that to increase as we increase the scale and diversification of our funding structure.
Yes that makes sense.
It there and thanks again for taking my questions.
I have a assignment.
Thank you now have Doug Harter from credit Suisse. Thank you Doug.
Some of the bank.
On your liquidity position.
<unk> continues to remain strong can you just talk about.
Now that the environment has continued to normalize.
What do you think the right level of liquidity is and therefore, how much more growth.
The balance sheet can support a current equity levels.
Hey, Doug.
I think I would I would answer that more in terms of your latter point I think what we think about in terms of our current capital structure can support significant portfolio growth.
I think in terms of our covenants, that's a high single digit billion dollar number I think in terms of.
What we would target relative to the way. We're currently capitalized that's some multiple number some multiple number of billions of dollars a growth.
That said you know the cash.
Capital markets alternatives available to us are accretive.
Scale is a big.
Advantage for us both technically on the capital market side and also in terms of.
Our portfolio construction and success breeds success growth breeds growth and low quality breeds quality. So.
We're not targeting a specific level of liquidity I think what we're targeting is the.
The maximum amount of high quality growth in our portfolio and we have a lot of latitude to do that.
And our current capital structure and also in terms of alternatives.
Alternatives for growing that capital structure, Yeah, I would just add we're really driven by ensuring that we're in a position to access the most high quality lending opportunities that we can and are in a really favorable position today, where we can really capture as many of those high quality.
Loans, if we see it because we have strong liquidity to support our growth.
Just a follow up on that I mean, I guess.
Obviously already relative to a lot of participants already have.
Scale.
I guess, how do you weigh that.
The size of the market opportunity.
Today versus.
The comfort in being able to deploy that run off you know 2 or 3 or 4 years from now when.
Obviously, no 1 has a crystal ball knows what a what the environment will look like a couple a years out.
Sure.
We've grown the portfolio every year and very consistent.
I have a credit I think we have a lot of runway to continue the momentum.
The thing to focus on is that our business in a lot of ways. It's fundamentally a unique we're backed by a scalable platform in terms of market access relationships ability to transact in different geographies that really is just on a different playing field from.
What we had before and it really just continues to grow and create a virtuous cycle.
You've seen that even this quarter at the more loans, we do a more familiarity we got with different markets. The deep red a borrower relationships in a more of a relationships. We have that translates in a very sort of a multiplying effect way into a.
Blending opportunities and just this quarter, we developed a new bar a relationship with 1 of our very strong sponsors on the multifamily side and did 3 or 4 follow on transaction. So.
It really just creates a very positive reinforcing cycle of having more scale and more touch points in the market that create more lending opportunities.
Great. Thank you.
Thank you very much so Stephen laws from Raymond James Thank you Stephen.
Hi, good morning.
First I wanted to.
From a little color more color on the <unk>. So it looks like the European reserve decline, a little bit more than a mix, but not that out of out of waiting.
I don't see on the Q a breakdown by property type, but can you talk about the domain.
Assumptions that drove the decrease.
In seasonal reserves.
And if you could remind us too.
Think maybe Blackstone doesn't use the same warm model that others can you talk about a model you guys.
As a C stores are trying to get some idea a potential GAAP book value volatility.
A if there's a.
The more exposure here.
Sure. This is a soon as Tony happy to talk Cecil.
So first.
First day at 1 of your last points, we do use a warm model.
His views on on which I do believe from others in this space to use a lot of other was in this space using more of a.
I'll say computerized a systemic approach sort of a warm model is actually less prevalent.
But there are others, who use it in addition to us.
It's a very judgmental standard C sold overall.
So when you look at what drives the change and I wouldn't speak of it in terms of a specific asset class or a geography per se I think what youre seeing is 2 things 1 very specifically changes in a risk ratings. So as we're upgrading the risk ratings and moving force to threes and trees twos that naturally helps.
Helps because Cecil is designed to capture a current risk in your portfolio seasonal is also designed to capture the future risk in your portfolio. So as we see the broader markets improved and we see a general performance of the properties underlying our loans improve and we're making new high quality loans that we think are very similar to loans.
Portfolio, we're feeling better and better about that macro point.
You're noting that we have a decent decrease on the reserve this quarter last quarter, we didn't really change our reserve much at all notwithstanding the improvements in the markets. If you look at some of the larger banks. They released a good chunk of their reserve last quarter on a good.
Chunk of their reserve this quarter I think last quarter, we were in a little bit more of a wait and see we see the market conditions, improving but we wanted to have a little more time for that as a season and get comfortable that that was really taking hold this quarter. When we went through a reserve process. We felt like this is really at a time to reflect that in our portfolio as we continue to see that that strong performance.
There's not a particular metric that I would point you to debt.
Debt.
As laid out in the table in the Q, but it's really that that feeling about the overall <unk>.
Quality of our loan portfolio and the improvements that we're seeing in a market to your question on volatility.
Seasonal will move around.
Designed to move around we think it'll mostly move around on the margins.
This quarter was us reflecting the resumption of more regular way market activity. So I wouldn't expect to see a 30, some odd cents moving up and down quarter over quarter.
I think the magnitude is going to be much smaller.
<unk>.
There may be in the future on other reassessment, where we think the market's really low.
Up again.
Or hopefully not if you ever have another COVID-19 situation right, where you would have to.
Increase your reserve as we did last year, but I would imagine it'll be pretty stable and moving on the margins otherwise.
That's very helpful color. Thank.
Thank you and 1 follow up I think a quick 1 but I think on page $25 a queue. It talks about 2 multifamily loans at $340 million going on non accrual on July 1.
How much interest income did those 2 loans contribute in Q2.
The non accrual loans did not contribute any interest income on Q2.
And then you'll have a great that's what I need a thank you very much.
Okay. Thank you. So a final question comes from Steven Delaney JMP Securities. Thank you. Stephen go ahead, yeah. Thank you Rob good morning, everyone in a congrats on a great quarter to kickoff Katie's tenure.
Tony you mentioned that the prepayments did.
From a meaningful impact.
In terms of acceleration of fee income is it possible you could give us a little a quantify that force in terms of cents per share.
Sure sure.
Maybe I, maybe I mumbled through it in my script, but it did not have a meaningful impact if they were not.
We did have a naked in there then and I apologize.
On my Bad I I heard the word meaningful and I jotted that down and I must have missed a not so my apologies there.
Then my out go straight to my follow up then.
Hotels 17 per cent of the portfolio about 3 billion. Katie you know you talk.
[noise] about robust activity and would that apply to the hotel sector as well in terms of occupancy and maybe more important in my mind, just a level of sponsor a commitment you were seeing a behind your hotels and maybe any update color on your loan number 14. Thanks.
So I think as far as the existing portfolio, what we're seeing on a hotel side is 1 very significant recovery in a number of our hotel assets, especially on the resort side and I think that's reflected on a risk rating that we upgraded this quarter you know as long as what we're seeing more generally for the assets that are a little.
Further behind you know whether Theyre urban center assets are where the recovery is a little bit you know a little bit behind.
We are seeing a recovery in the performance of those assets. It's just you know as I said, it's taking a bit longer and where necessary. We are continuing to see very strong sponsor a commitment yeah. A lot of our hotel assets have moved to a covering.
We've got service this quarter, which is great to see but the per the ones that are still lagging a bit and still earlier on the recovery. We're seeing continued sponsor commitment.
On the new hotel investment side, as I mentioned, especially in those areas. If a hotel space that are seeing strong recovery, we're seeing very attractive relative value opportunities.
Cary loans are at low leverage points in assets that are clearly benefiting from the recovery of travel spending from a delta of consumer savings.
And so you know what I don't think that we're going to you know our bar remains very high for hotels and of course, our underwriting is very detailed and taking into account everything we're seeing.
We feel good about the recovery.
To make mental and hotels, generally and especially in those more resort focused assets.
Got it and are you seeing some improvement in New York City as well, although maybe not.
Broad okay yeah.
You can look at the overall market statistics market occupancy in New York City was 63% in June that's certainly a very far.
Our off where it was a trough levels I think new York is going to take longer just given the dependence of New York on International travel, which obviously is still impacted by Covid travel restrictions, but I think if you look at.
What we've seen in fundamentals in other markets as travel restrictions have loosened over time, I think we'll see a similar dynamic.
In fundamental rationale travel as a restrictions loosen, which you know will happen at some point and that's the overall sort of desire for travel to have those experiences people building up savings in wanting to spend them on the ability to have a travel experience that will come but it will take longer given the international travel aspect.
Alright, thanks for the comments.
Yeah.
Thank you and now I'll hand back to Western for final comments. Thank you Austin.
Great. Thank you everyone for joining us today and I look forward to following up after the call.
Okay, everyone Western Goodbye.
Thank you that concludes.
<unk> on a conference call for today you may now disconnect. Thank you for joining and we will take care.
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