Q4 2021 Ares Commercial Real Estate Corp Earnings Call
Good afternoon, and welcome to the Ares commercial real estate Corporation's conference call to discuss the company's fourth quarter and full year 2021 financial results.
As a reminder, this conference call is being recorded on February 15 2022.
I'll now turn the call over to Veronica Mayer from Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us on today's conference call I'm joined today by our CEO Bryan Donohoe Tae Sik, Yoon, our CFO and Carl Drake head of public company Investor Relations.
And to our press release and the 10-K that we filed with the SEC. We have posted an earnings presentation under the Investor resources section of our website at Www Dot Aries CR Dot com.
Before we begin I want to remind everyone that comments made during the course of this conference call and webcast and the accompanying documents contain forward looking statements and are subject to risks and uncertainties. Many.
Many of these forward looking statements can be identified by the use of words, such as anticipates believes expects intends will should may and similar expressions.
These forward looking statements are based on management's current expectations of market conditions and management's judgment. These statements are not guarantees of future performance condition or results and involve a number of risks and uncertainties.
The company's actual results could differ materially from those expressed in the forward looking statements as a result of a number of factors, including those listed in its SEC filings Ares.
Commercial real estate Corporation assumes no obligation to update any such forward looking statements during.
During this conference call, we will refer to certain non-GAAP financial measures. We use these as measures of operating performance and these measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like titled measures used by other companies.
Now I would like to turn the call over to our CEO Bryan Donohoe.
Thanks, and good afternoon, everyone.
We reported another strong quarter of results, which concluded a record year for our company.
In the fourth quarter, we reported distributable earnings of 41 per share.
And $1 55 per share for the full year up 14% compared to a year ago.
We had another active quarter with $365 million of new loan commitments.
Our total to a record $1 4 billion for the full year.
Our originations drove portfolio growth of 33% to $2 4 billion, which supported our increased earnings for the year.
Our credit quality continues to be relatively stable with a positive migration in our weighted average portfolio ratings and we continue to actively manage our assets.
To that end, we're pleased to announce that we've entered into an agreement to sell our one Oreo property the Westchester Marriott with an expected close at the end of the first quarter.
As we look back at 2021 were proud of many of our accomplishments.
We scaled our capital base Accretively.
Further diversified our portfolio and meaningfully strengthened our financial structure.
We increased our access to nonrecourse debt and our equity base is now 44% larger than one year ago.
We also generated distributable earnings well in excess of our dividend for the fifth year in a row and we believe we are well positioned for the year ahead.
In addition over the last year, the Ares real estate platform across the U S and Europe now stands at $41 billion of assets under management, including nearly $10 billion in real estate debt AUM.
The scaling of our debt has expanded our market coverage and access to transaction opportunities, which allowed us to increase our origination and our origination activity, while maintaining rigorous standards for credit quality.
We welcomed new institutional sponsors to the acre platform, while remaining a trusted partner to our legacy sponsors who value our ability to customize solutions, our certainty of capital and speed of execution.
In the fourth quarter, approximately 75% of our lung commitments were secured by multifamily and self storage properties, both of which benefit from strong rental trends.
The remaining 25% within the industrial sector, which certainly has its own merits and we are an active player in both debt and equity across the Ares platform.
We continue to see robust activity in our target markets of the south and mid Atlantic, where we see strong demographic growth drivers.
The returns on the new loans were consistent with our target levels commensurate with the risk profile of each asset class.
The portfolio continues to be well positioned for potential increases in interest rates with approximately 98% invested in floating rate loans.
Our portfolio is largely comprised of what we believe are more stable property types.
With our most recent originations focused on multifamily industrial and self storage assets.
Further and as I mentioned earlier in November of 2021, we entered into a purchase and sale agreement for the Westchester Marriott.
Since taking over the property in early 2019, we executed on our strategic plan, including improving operations and completing renovations.
By reducing the expense load and focusing on harvesting demand.
We were able to successfully manage the property throughout the pandemic.
Our ability to deliver on our strategic plan demonstrates the hospitality expertise and relationships of our team and throughout the Aries platform.
While this is the only Oreo and our 10 year history.
Taking ownership of the property is one of the tools that we can use to protect our investment outcomes.
Upon the sale of the property, we have elected to make a loan to the new owner.
Highly regarded sponsor who is bringing substantial new equity capital that is subordinate to our loan.
Looking ahead, we expect that 2022 will be another great year for our company and our shareholders.
By leveraging the growth of the Ares real estate platform our.
Our enhanced capital structure and diversified sources of liquidity, including the Ares warehouse, we expect to efficiently deploy our equity base to remain as fully invested as appropriate throughout the course of the year.
With that I'll turn the call over to pesos.
Great. Thank you, Brian and good afternoon, everyone earlier today for the fourth quarter of 2021, we reported GAAP net income of $17 2 million or 36 cents per common share and.
And distributable earnings of $19 4 million or <unk> 41 per common share.
For the fourth quarter of 2021, our earnings were bolstered the receipt of additional payments as well as acceleration of deferred fees in connection with the repayment of a number of loans.
We had expected a few of these repayments would occur in the first quarter of 2022.
With the repayment occurring before year end 2021.
Some of these fees and payments associated with these repayments were pulled forward into the fourth quarter of 2021.
For full year 2021, GAAP net income was 65 million or $1 42 per common share and.
Distributable earnings were $66 million or $1 55 per common share.
As a result for the fifth consecutive year acre fully covered dividends per common share through distributable earnings for common share.
Regular and supplemental.
Our earnings this year benefiting from strong momentum in originations.
Our portfolio grew to a record $2 4 billion in loans held for investments.
Year end 2021.
Bob at 33% increase versus $1 8 billion at year end 2020.
In addition, we continued to benefit from our LIBOR floors, which at year end 2021 at a weighted average rate of one 1%.
During 2021, we continue to improve our financial structure by increasing our access to nonrecourse debt.
Extending the maturities on certain facilities and reducing our overall cost of capital.
We also refined our corporate borrowings by increasing the size and lowering the interest rate on our $150 million term loan.
By utilizing the internal resources of our manager we were able to execute this transaction directly which resulted in significant cost savings to acre.
Most significantly we increased our common capital base by more than $200 million to the two follow on equity capital raises both of which were done at premiums to book value and the first half of 2021 .
As we indicated we've been increasing our overall leverage ending 2021 with a debt to equity ratio of two seven times, excluding PCI reserve.
At year end 2021, our <unk> reserve was at $25 $2 million, a small increase versus the amounts held at the end of the third quarter of 2021.
New origination activities in the fourth quarter of 2021.
Our weighted average portfolio risk rating was 2.8 with 93% of our loan portfolio rated a three or better on a five point scale.
Additionally, no new loans were put on non accrual and the total balance of the two loans that had been on non accrual representing less than 2% of our overall total portfolio.
We remain in active dialogue with these borrowers in order to bring these two loans to resolution.
Now, let me spend some time discussing our portfolio positioning in the context of changing short term interest rates.
As of year end, 98% of our portfolio as measured by unpaid principal balance.
Comprised of floating rate loans.
Our assets are currently positioned to benefit from increases in benchmark indices.
As of December 31.
32% of our loans have a LIBOR floor below 25 basis points, and 43% had LIBOR floors below 50 basis points.
At the same time, we hedged a significant portion of our floating rate liabilities and fix the interest rate on our $150 million term loan so that increases in benchmark indices won't have a basis point by basis point increase in our overall liability funding costs.
So for example on a pro forma basis, and using our fourth quarter 2021 portfolio and corresponding liabilities.
We estimate that a hypothetical 50 basis point increase in benchmark indices would not have materially impacted our earnings.
In comparison with.
Without our interest rate hedges in place on a pro forma basis.
The same 50 basis point hypothetical increase in short term rates would have reduced our earnings.
As you can see on our year end 2021 balance sheet.
Our interest rate hedges at a fair value mark of about $3 million.
And more recently as of February 11, 2022, with short term rates rising further since year end the fair value Mark of our interest rate hedges or about $7 8 million or about 16 cents per common share.
Before I turn it back to Brian for some closing remarks.
We would like to provide some additional details on our dividends.
This morning, we announced our first quarter 2022 regular dividend of 33 cents per common share as well as a continuation of a supplemental dividend of two cents per common share.
As a reminder, in 2020 , one we implemented a supplemental quarterly <unk> per common share dividend as a way of sharing a portion of the earnings benefit we are receiving from LIBOR floors.
Although we expect to see a declining benefit from LIBOR floors in 2022, and the impact may vary quarter to quarter.
At this point it is a goal of the company to continue sharing portion of the earnings benefit from LIBOR floors with shareholders through the <unk> quarterly supplemental dividend.
So with that let me turn the call back over to Brian for some closing remarks.
Okay.
That's great. Thank you Jason.
As we look ahead to 2022, we have a positive outlook on our strengthened position and the many levers we have to pull to continue generating strong returns for our shareholders.
We expect to continue to source attractive investments benefit from material increases in material increases in interest rates and pursue opportunities further enhance our balance sheet efficiency and funding costs.
I want to thank our team for all of their hard work last year.
As we continue to navigate the uncertainties and volatility surrounding the pandemic throughout the year.
I am proud of how the entire team rallied together to generate a record year of earnings.
With that operator will you. Please open the line for questions.
We will now begin the question and answer session.
At this time, if you'd like to ask a question. Please press Star then one on your Touchtone phone.
If you would like to withdraw your question. Please press Star then two.
Our first question today will come from.
Doug Harter with credit Suisse. Please go ahead.
Thanks.
I was hoping you could help size the.
Kind of the extra are payments that you received a restaurant company received in the fourth quarter with the repayment of some of the loans.
Sure. Good afternoon, Doug. Thanks for your question, Yes, no as we mentioned you know we benefited significantly from repayment activity in the fourth quarter, some of which were accompanied by either make whole fees or acceleration of deferred fees as I had mentioned.
In our opening remarks, so I think to answer your question. The total was about five cents distributable earnings per share equivalent of about five.
Of the 41 cents.
About <unk> was due to due to those repayments.
And I think it's worth repeating as I stated in the <unk>.
Opening remarks that we did expect some of these loans to repay in the first quarter of 2022.
And in fact, some of that five cents was pulled forward.
What we would have otherwise expected in the first quarter of 2022 into the fourth quarter of 2021.
And I guess just to help frame that I mean, I imagine you got some of those fees on a.
Regular basis, obviously, not not as predictable, but I guess, how would you size kind of you know.
Over a year.
Well maybe to put that in context, you know maybe what did you receive kind of over 2021, just to kind of help size the magnitude of that of that five cents.
Sure.
Good question, Doug I think 2020, obviously it was a bit of an anomaly because we had significantly lower repayments in 2020 for.
For obvious reasons 2021 started to return to a little bit of normal alright, but you can see many of the repayments happen really in the fourth quarter I would say.
Again, this is going to vary quite a bit as you can tell quarter to quarter, but I think particularly when you look back further into 2019 and even before that we generally had about call. It one and a half to two cents per quarter. Indeed, and these types of fees so call it six to eight.
Per year.
It's generally what we have had per distributable earnings per share impact.
In terms of accelerating deferred fees or other type of payments that we get in connection with repayments.
And do you think we're moving back you know again understanding that there will be.
Clearly volatility.
Do you think we're moving back to that type of environment or kind of over time, you could expect that type of acceleration of income.
I mean, that's certainly that's certainly the direction, it's headed right. Obviously, we had a bit of a pause in 2020.
We saw the we saw the change occurring in 2021, particularly the second half of 2021. So yes, I think our expectation is that 2022 will return to a little bit more of a normal pattern. If you want to call it that repayments.
<unk> said that I think it's important to point out that our loans are very much sort of one off situations right each each loan and the sponsors behind each of the properties.
Are completing their projects are completing their value add plans and what we're finding is that the repayment of loans are very much tied to the <unk>.
SaaS and timing of those of those plants. So it's hard to do this statistically.
And it is really sort of a loan by loan analysis as we mentioned before but I would say it's fair overall to think that so far I think what we're seeing is that the trend is getting back to more of a normalized repayment pattern versus what we've had for the past 18 months.
Great. Thank you.
Absolutely. Thank you Doug.
Our next question will come from Rick Shane with J P. Morgan. Please go ahead.
Hey, everybody. Thanks for taking my questions. This morning, and appreciate the transparency on the rate sensitivity. If we could take a look at slide eight I just wanted to ask a couple of clarifying questions.
When.
You showed the the bottom axis the X axis.
It says benchmark interest rate at zero, plus 50, plus 100.
The lap the benchmark interest rate index with zero not zero no change, but if benchmark rates were to go to zero just want to make sure I understand that.
Yes, no thats correct, not not no change, but if it was literally zero rather than the.
10, or so basis points that it actually was not a significant change but basically.
If if benchmark rates were to be zero, what would that impact had been correct.
Okay. So think of it as sort of a channel market.
That's helpful and then when we look at the swaps and the notional on the swaps you have just over at least as of the third quarter, just over a billion of swaps and caps.
The turnaround those was about one year.
Back then so the dynamics have changed fairly significantly since the third quarter or even since December 31st with expectations on forward rates going up significantly higher than we thought even a month ago.
Assuming the swaps roll off and you don't replace them at what level of rates do you become asset sensitive again, because here you show that you would be liability sensitive up 100 basis points, but where's the crossover point. So we can think down the road.
When the swaps aren't in placement rates are higher.
Sure Great question Rick.
There's a lot to cover in that question right and just by I think it's important to mention sort of the background of the reason we did the hedging right. So the reason we did the hedging a little bit more than you know.
About a year ago.
Is that again our goal at acre is to match fund assets and liabilities that is not to take a position on the direction of interest rates.
We may have a bias towards whatever direction is going but again the goal of hedging.
He has to match fund assets and liabilities and as we mentioned a year ago. When we put these hedges in place while we are 98% floating rate assets because of the floors and how deeply they were into the money on those floors. They were economically behaving like fixed rate loans, alright, and so therefore, we.
Felt it was in.
In keeping with our match funding principle to then fill.
Our floating rate liabilities, almost all of which again are floating rate into fixed rate liabilities to again match fund the economic fixed rate characteristics of the assets and so that was the objective and that continues to be the objective.
For our hedging program and the reason we have had a decline in the notional balance of our hedges is because those notional balances were designed to match.
Outstanding principal balance of the assets, we have with in the money floors and so we're trying to again match fund assets and liabilities.
Between those assets with LIBOR floors, and liabilities that we then had using swaps and caps.
Your question about asset sensitivity, even today, even though again.
Most of our loans have LIBOR floors, and the average LIBOR floor is over 100 basis points.
<unk> bar belled, meaning that the loans that we've booked a year or two years three years ago.
Have LIBOR floors that are well within the money and the loans that have more recently been booked since the onset of the pandemic. For example, those have been booked with much lower floors much lower than 50 basis points. So even as of December 31, 2021 year and 2021, 43% of our.
Loans had a floor of less than 50 basis points. So once rates go about 50 basis points or even up to that 50 basis points. You can tell we already have a decent amount of asset sensitivity to rising rising rates.
And one figure that's not on page eight that might also be helpful. In answering your question is that by end of 2022.
If you just look at the stated maturity of the loans.
And we're going to have about $660 million of loans that mature in 2022.
Have LIBOR floors that will also run off so that that 43% of loans will actually become more than 70% of our loans again, assuming that these loans with the state of maturity stay up in time, so 70% of our loans. We will have this asset sensitivities at 50 basis points. So we actually think.
We have.
Good asset sensitivity already and one that will grow.
Over the course of 2022.
And then as you said, we have designed our hedging program to then further decline in notional balance because of that expected.
Increase in the asset sensitivities. We then we will have greater liability sensitivity throughout the year as well to again match fund the increase in asset sensitivity.
Okay. So it is an incredibly that answer your question.
It absolutely does that's incredibly helpful and I'm sitting here.
With a modest history with ARCC and Carl on the phone.
Thinking about a few conversations in terms of hedging strategies along the way.
It's clearly worked out very well for you. So thank you guys.
No absolutely in so many ways we have had the.
The playbook as we've called it of ARCC to to work with so it's been it's been great to be able to to do that.
Our next question will come from Steve Delaney with JMP Securities. Please go ahead.
Thanks, Hello, everyone and congratulations on a strong close to the year.
Just picking up on on strong years.
Obviously loan portfolio growth of 33% is.
Kind of abnormal.
Strong market strong activity market, and you know and a lot of repays.
Brian as you look at the the marketplace today on the demand side and you also look at your portfolio and sort of the residual you know pre.
Pre COVID-19 loans that you might still have on a net net basis are you expecting.
Net portfolio growth in 2022.
Yes, certainly and tough to precisely predict when I'm aware, but if we look back on the past year throughout our industry. We all shared in this kind of record transaction volume for commercial real estate in the U S and I think we were all.
Beneficiaries of that I think specific to us with with our current scale I think we still have more room to run. So if we think about a loan being repaid.
Even just static state and think about deploying 1112 times, what we are repaid we've got ample scale personnel and capital wise to do that so that's really the philosophy behind it I think the ebbs and flows of when that occurs obviously, it's a little outside of our control, but we feel good about that.
<unk> growth.
Got it okay. Thanks, that's helpful.
<unk>.
The $317 million and repays the fourth quarters obviously.
Unusually high I guess, it's almost cover equal to the first three quarters of the year and we really appreciate phthisic with E comm and associated with that I'm curious something maybe a little more subtle your where your Ares warehouse facility.
All of those repayments coming in.
Did you utilize that facility and they did it contribute having that facility in place and the ability to quickly pull down alone. So that you'd be fully deployed did that come into play in the fourth quarter in a meaningful way. Thanks.
I wouldn't say in a meaningful way and as we touched on.
A little bit of a pull forward.
And so I think it indirectly continues indirectly and directly benefits us throughout the course of the year.
Can be a little bit unpredictable, but it is an asset for us obviously as we've discussed in prior quarters, but in this case it wasn't a significant driver of kind of dry powder. If you will.
Got it okay, and I assume part of that is because your demand for new loans and youre lending activity had been so strong as well, but you had you had quite a pipeline sitting in front of you.
One final little thing Tae sik I noticed.
One of your your Cielo is the 2017, if all three that's getting some age on it I assume it's in run off is.
Is there an opportunity coming up this year to call that and just improve the return there on that capital.
Sure Steve U S. L. Three has been around like you said for a long time and we've been a tremendous beneficiary of this because we have now.
A number of times actually renewed the revolving period of that's all three.
So this is a huge advantage for us as I mentioned F. L. Three was done with a single investor buying all of the investment grade notes.
And because of that direct private placement utilizing the resources of our manager we've been able to again, just keep extending the revolving period for two to three years at a time, so we actually have.
Couple of years of life left on that revolving period. So our goal is to keep alto <unk> III going so we now have our one.
One revolving F L. Three.
Supplemented that with <unk> for last year, as well, which is a static CLO. So.
So we have both in play right now, but our plan is to keep as all three going and not wanted off are not refinance it because of the continuation of the revolving period.
Thanks, My bad I I remember, specifically when you did extend that and but it was sort of a house account for for Aries to kind of help.
Work that out so my apologies on that so thats yet. Thank you all the best for your 10th anniversary year and 'twenty 2022.
Steve. Thank you so much for remembering it and I think partly the reason you remembered as you've been with US. This whole time. So thank you for thank you for being there the whole time as well and that's why my memory has gone yes.
[laughter].
Our next question will come from Jade Rahmani with <unk> W. Please go ahead.
Yes.
Thank you very much we've seen a big increase in originations from particularly the non bank lenders and I was wondering if you could provide your thoughts on what's driven.
Driven that just staggering level of price.
I think a couple of things mostly macro in nature I would say we're still.
The industry is just evolved a great deal from the GSE and Dodd, Frank and Basel over in Europe , and so I think there's just been this disintermediation of banks and to a degree insurance companies I think over the last 24 months one of the unique attributes we've seen is that the transactions that were occurring.
Had more of a time of the essence nature to them just given that those folks that wanted to exit equity positions wanted to do so with a degree of certainty.
So that meant that the equity and that had to come together in a relatively short period of time.
Companies like like ours were created to fill that void. So when you combine that macro over the last 12 years with the micro AV events post Covid I think that's where we've seen further growth in our space and it doesn't.
Like it's reversing anytime soon.
If there are elements.
Sustainable what would you think.
Those are I know that the mortgage rates have all talked about some favorite asset classes such as multifamily at the same time, we've seen the gse's meaningfully pulled back in 2021.
It had lower caps those caps have not been increased in addition to that CBS has had some challenges and has lost market share. Some folks are optimistic that CBS can increase so do you expect that those areas of capital could grow at the expense of the nonbank sector or not.
Totally.
I think with respect to the securitized market I think we are growing in concert right. I think if you look at CLO issuance over the first part of this year and certainly the latter part of last year Youre seeing some of the demand. If you will from see MBS historically be replaced by a.
<unk> of CLO, plus non bank lenders I think if there is a risk to your initial question I think it's.
Maybe it is just crowding in certain asset classes like multifamily.
And reliance to a degree on the Takeouts from the Gse's, but as we sit here today.
There is nothing that.
Would indicate outsized risk in any format.
And in terms of tone from real estate investors deploying capital.
<unk> been in change recently given capital market.
And the evolving interest rate outlook as well as inflation any change in tone from investors eagerness to deploy capital.
I really appreciate the way you characterize that as tone, because I think that is probably most appropriate where as we sit here today and look at rates and look at volatility in the CLO or see MBS market everybody's waiting for whole loans to change in price and to widen a little bit.
And to see some change in equity valuations, but from a historical context and cap rate gaps over treasuries still feels like a pretty healthy market and one that probably favors asset picker is a little bit more than that in macro players but.
We're looking out for that change in tone, but have yet to see it across the board.
And what are your thoughts around credit.
I believe the loan loss provision was attributable primarily to.
Growth in the portfolio and the regular way origination.
Originations, but.
Do you expect a continued improvement in credit trends or do you feel like that trend played out in 2021, and perhaps 2022 would be more of a normalization.
And looking at the statistics from a demand perspective from new business starts.
Our rent growth all of the inflation stuff, we're all sharing day to day, it's tough to see a change in the demand side and there are certainly pockets of supply that are that are going to get a little bit more attention.
Im.
But nothing nothing of any significance.
Thank you for taking the questions.
Again, if you'd like to ask a question today. It is star then one.
Star then one to ask a question.
Our next question will come from Tim Hayes with BTG. Please go ahead.
Hey, good afternoon, guys nice quarter.
Just on the originations.
Highlighted Brian .
We're across defensive asset classes, mostly multifamily industrial and self storage, where I imagine there's a good amount of capital chasing those asset classes given the tailwind to the.
Rentals, there and I'm just curious the spreads on new originations.
And including those so far in the first quarter seemed to be a bit wider than the portfolio average. So I'm just curious how you accomplish being able to achieve a little bit wider spread on defensive asset classes and curious how big you see those slices of the pie getting in your overall portfolio over time.
Yes.
That's a great question and good pick up there I think we.
We've invested at one we've been in these sectors, specifically self storage and have some unique relationships there.
That should provide a further pipeline and based on where that sector has gone from a maturity perspective, we would like to continue to add to it.
Yes, multifamily and industrial I think they're more unique circumstances as Tae sik mentioned in the beginning of Q&A. These are asset to asset not not index type plays in terms of how we find them, how they yield and how they perform.
So unique risk attributes that we found attractive to create some relative value.
But I don't know that they would necessarily fed.
And our clean box of multifamily loans and you'd say, they're all the same we had relationships we had specific insights into their performance and we were able to secure them at the at the coupons that you noticed.
What was there any I know that you don't go into too much detail on an asset by asset basis, but was there more kind of a heavier.
Lease up component or some construction risk you are taking on as too.
That kind of attributes to the wider spread or anything else you can kind of point to or is it really other kind of add more idiosyncratic.
Specific stuff.
I would say to two main attributes one was as you indicate where that asset sat in its lifecycle of of lease up and secondly, as I touched on a couple of minutes ago.
The timeline for closing that facility and the fact that it was a repeat.
Our ship for us allowed us to probably get some market premium.
Got it.
Makes sense and do you have a rough estimate whether its the fourth quarter or the full year, just what percentage of originations were from repeat sponsors.
Okay.
So I don't have that off the top of my head.
We can get that for you it was fair.
Fairly balanced I would say between new sponsors and repeats.
Okay, So let us pull that up real quick.
No I'm not looking for the exact number just trying to get a feel for how much of you know because if.
It's great to do new business with new folks, but at the same time when you have good relationships that obviously helps.
Achieved certain risk adjusted returns, you're probably looking for too so.
Yes, it's a balance on that yeah. Okay.
I think if we I would say just Tim.
If we think about it.
Got the number about 40% repeat sponsors last year, we've typically run a little bit higher than that.
It's just going to ebb and flow, but we certainly see a good bit of value by continuing to partner with the sponsors we have in house.
Got it.
Got it okay, well hopefully those are those new sponsors repeat sponsors in the upcoming year.
For years, but.
And then just last question for me investment activity, a little light so far in the first quarter is this just a timing thing where you have a few deals youre working on and they haven't quite closed yet, but just curious because it sounds like there seems to be opportunities for you to land the returns youre looking for there yet.
Pretty light so far so just curious if it's really just a timing thing or if competition has weighed on your ability to find good loans, if youre being a little bit more selective on a relative basis than you were three or four months ago or anything else that we could read into.
Yes.
Selectivity I think is a constant over the 10 year history of our company I think that selectivity is something that we take pride in I think it really is just a timing thing where we had a busy end to the fourth quarter. We had some repayments that delivered some liquidity and I think everybody from a.
Human nature perspective, quite a bit of a breath, but as we sit here looking at the pipeline. There is no change from our confidence interval in prior quarters.
Got it got it well thanks for the comments this afternoon and I appreciate it.
Alright, thank you.
Ladies and gentlemen, this will conclude our question and answer session.
I'd like to turn the conference back over to Bryan Donohoe for any closing remarks.
Thanks, so much and I just want to thank everybody for their time today. We certainly appreciate the continued support of acre and we look forward to speaking to you again on our next call. Thank you.
Ladies and gentlemen, this concludes our conference call for today, if you missed any part of today's call an archived replay of this conference call will be available approximately one hour. After the end of this call through March one 2020 to domestic callers by dialing one 870 734 475.
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