Q3 2022 Apollo Commercial Real Estate Finance Inc Earnings Call
Okay.
I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo commercial real estate Finance, Inc, and that day.
And that any unauthorized broadcast in any form is strictly prohibited information about the audio replay of this call is available in our earnings press release I'd also like to call your attention to the customary safe Harbor disclosure in our press release regarding forward looking statements today's conference call and webcast may include forward looking statements and <unk>.
Actions and we ask that you refer to our most recent filings with the SEC for important risk for important factors that could cause actual results to differ materially from these statements and projections in.
In addition, we will be discussing certain non-GAAP measures on this call, which management believes are relevant to assessing the company's financial performance. These measures measures are reconciled to GAAP figures in our earnings presentation, which is available on the stockholders section of our website, we do not undertake any obligation to undertake update our.
<unk> looking statements or projections unless required by law to obtain copies of our latest SEC filings. Please visit our website www dot Apollo, Chris Dot com or call us at 2125153200 at this time I'd like to turn the call over to the company's Chief Executive Officer Stuart.
<unk>.
Thank you operator, and good morning, and thank you to those of US joining us on the Apollo commercial real estate Finance, Inc. Third quarter 2022 earnings call I am joined this morning by anesthesia Myron over our Chief Financial Officer.
From a macro perspective, the dominant themes remain the same continued efforts by central banks to fight persistent inflation, resulting in additional interest rate increases continued capital markets volatility and an overall slowdown in capital transaction activity all of which are permeating the real estate market.
Right the somewhat challenging backdrop for the third quarter <unk> reported distributable earnings comfortably in excess of the common stock dividend and significant progress on several key asset management and balance sheet optimization initiatives.
It's worth noting that even with a positive move in the stock this morning.
<unk> current quarterly dividend run rate of 35 per share <unk> paying common stockholders of 13 plus percent annualized yield while trading at approximately 70% of book value with earnings supported by a portfolio consisting of 98% floating rate loans.
Fortunately, we expect ari's robust pace of originations over the past 18 months will enable the company to continue generating distributable earnings that support the common stock dividend, while maintaining a more selective approach to any incremental capital deployment consistent with a focus on maintaining.
<unk> liquidity and balance sheet flexibility.
In taking this approach <unk> is fortunate to benefit from apollo's broader commercial real estate debt platform, which originates over $10 billion of loan transactions per year Apollo remains active in the marketplace originating and closing transactions on behalf of other manage capital which enabled.
<unk> to access real time market data and information as we assess the use of the company's investable capital.
Shifting to capital management I would like to highlight a few key milestones with respect to the right side of Ari's balance sheet during.
During the quarter <unk> repaid $345 million of convertible notes that matured in August with existing liquidity and without the need to access the choppy capital markets also during the past year.
<unk> has entered new asset specific lending facilities with Banco Santander and <unk>, respectively, expanding roster of scalable capital relationships. In addition, the company sold down approximately $328 million of our future funding obligation.
For one of <unk> largest UK loans, which is financing the construction of our mixed use property in a prime central London location.
Ari ended the quarter with over $1 $1 billion of unencumbered assets and a debt to equity ratio of two eight times.
Turning to the portfolio there are several important updates with respect to the focus loans, we executed a contract to sell the properties underlying Ari's Miami design District loan the purchasing group has posted a substantial deposit and we expect the transaction to close prior to year end as such.
Such <unk> reversed $53 million of the previously recorded $68 million loan impairment and will retain some additional performance based economics that may result in additional recapture of the remaining impairment in connection with this transaction <unk> will provide seller financing.
<unk> consistent with current market terms, enabling IRI to redeploy a portion of the return capital into a new performing loan in.
In addition in connection with the closing of the construction financing provided by Bank of America, and <unk> Bank for Ari's multifamily development in Brooklyn, known as the breadth of.
The investment was transferred to Ari's balance sheet as real estate owned and IRI recognized a $44 million gains to book value, which reflects the difference between the prior loan balance and the current fair value of the development.
We are extremely pleased with the progress made on these focus loans, which highlights the strength of our asset management capabilities. In addition to our ongoing commitment to and focus on the preservation of capital.
Turning to the loan on 111 West at 111, West 57th Street, commonly known as the Steinway building. The property was recently recapitalized and the existing senior mortgage loan and a portion of the senior mezzanine loan were refinanced with a new senior loan provided by both IRI and a global money Center Bank.
The bank is also providing 75% financing to IRI for its portion of the senior alone and.
In connection with the recapitalization.
Ari funded a portion of the senior loan at approximately a 50% LTV with no change to <unk> existing junior mezzanine loan positions.
Based upon the units closed subsequent to quarter end as well as units under contract that are expected to close by year end, we anticipate ari's exposure will be reduced by approximately $150 million by the end of this year.
Before turning the call over to Anastasia I wanted to spend a few minutes on Ari's European portfolio. We added an additional page of disclosure to our supplemental information package this quarter to provide incremental color on the exposure as loans secured by properties in Europe now represents slightly more than 40.
<unk> of Ari's portfolio.
As a reminder, Apollo has been active in the European commercial real estate lending markets. Since 2014, when we moved one of the senior members of our team to London to oversee the expansion of Apollo's commercial real estate debt platform.
Today the team in Europe is comprised of 12 people all of whom have done an outstanding job contributing to our success in capturing market share and developing apollo's reputation as one of the leading non bank lenders to the commercial real estate sector throughout Western Europe Importantly.
As we have expanded our origination activity there the transaction types that quality of equity sponsorship and the deal structures have been consistent with Ari's U S loan originations.
I only transaction in countries with legal systems and structures that provide necessary lender protections further <unk> does not take currency risk when lending in Europe any asset specific financing used by IRI is transacted in local currency and we work with internal.
And external advisers to appropriately hedge expected principal and interest payments, we consistently review the effectiveness of the hedging strategies used which to date have proven to be highly effective.
With respect to Ari's European portfolio.
Operating performance at the asset level is very market and property specific and has generally been positive to date consistent with the post pandemic economic recovery at quarter end Ari's had 25 positions in Europe totaling $3 $8 billion approximately two thirds of <unk>.
Which are secured by properties in the United Kingdom, 99% of the portfolio consists of senior loans in the portfolio has a weighted average LTV of 62%. The equity sponsors are some of the most sophisticated real estate private equity owners and operators in the world with Blackstone.
Being our largest borrower in Europe . In addition, five loans totaling $900 million have debt subordinated to ari's senior mortgage position at present.
<unk> European portfolio entire European portfolio is risk rated three and there are no asset specific reserves.
In terms of property type exposures.
Non UK portion of the portfolio is over 50% comprised of industrial and hotel assets given the ongoing strength of the U S. Dollar European hospitality assets continue to perform very well in the assets under Lee underlying these loans continue to report positive Pos.
<unk> revpar metrics with respect to the UK assets. The portfolio is broadly diversified across multiple property types split between London and other major cities.
Approximately one third.
<unk> UK exposure is in retail assets, which include outlet centers and retail warehouse properties, both of which have typically outperformed traditional retail due to lower occupancy cost and a focus on discounted goods.
At present, we are comfortable with Ari's European portfolio, but we recognize that the market has challenges, including heightened recessionary risks from persistent inflation inflation rising interest rates and the added burden of increased uncertainty around energy supply given the reliance on Russia as.
A result, we will continue to monitor ari's European portfolio closely and where possible be proactive in managing and limiting any asset specific exposures with respect to new capital deployment in Europe . The bar has risen significantly given the economic uncertainty coupled with the dike.
Klein and relative value as compared to the U S primarily due to the impact of rising rates and its impact on currency hedging costs with that I will turn the call over to Anastasia to review <unk> financial results for the quarter.
Thank you Stuart and good morning, everyone.
<unk> reported another stable quarter of financial results in Q3 with distributable earnings strides as a realized gain on investments of $52 million or <unk> <unk> per share.
GAAP net income available to common stockholders was $180 million or $1 27 per share and diluted net income of $1 <unk> per share.
The progress with our focus loans positively impacted our book value per share this quarter, which prior to the general seasonal allowance and depreciation.
With 6% to $16 12.
As compared to $15 19.
At the end of the second quarter.
This includes 38 and that's reversals of specific seasonal alone.
One, hence and realized gain from the caito acquisition of the <unk> and 'twenty three.
In net unrealized gain will now currency and interest hedges, which continued to be beneficial in this volatile for its clients.
As Stuart mentioned, we take several steps to mitigate our foreign currency risk.
That's 42% of the loans in our portfolio are secured by properties in Europe .
Hedge our exposure and net equity basis for all foreign currency denominated transactions by entering into forward currency contracts at closing.
Eight point impact on foreign currency contracts resulted in $1 5 million of realized gains during the quarter, which also positively impact our distributable earnings.
Our portfolio remains well positioned for rising interest rates as 98% of our loans are floating rate.
As of quarter end, all of our U S and UK floating rate loans, well in excess of the respective Florida.
An additional increase of 50 basis points in the U S and the UK and Europe would lead to an incremental <unk> <unk> per share respectively.
Net interest income.
With respect to <unk> borrowings, we are in compliance with all covenants and continue to maintain strong liquidity. We ended the quarter with $361 million of total liquidity, which was a combination of cash and undrawn credit capacity on our existing facilities and $1 1 billion of unencumbered loan assets.
Our debt to equity ratio at quarter end decreased to two eight times.
Turning to our seasonal allowance for the quarter as Stuart mentioned, we had several positive developments in connection with our focused markets.
During the quarter 53 specific seasonal allowance was reversed.
It reversed and now Miami design district loan as the collateral, which secures alone is under contract to be sold in the near term at a higher value than the carrying value of the loan fee reversal.
In addition, <unk> junior Oc still allowance decreased by $2 6 million, primarily due to portfolio seasoning and the previously mentioned sale over the unfunded commitments and no loan secured with the mixed use asset in London.
This was partially offset by one new loan origination and the more adverse macroeconomic outlook.
And with that we'd like to open the line for questions.
Freighter. Please go ahead.
Thank you as a reminder to ask a question you will need to press star one one on your telephone please stand by we compile the Q&A roster.
Yes.
Our first question comes from Doug Harter with Credit Suisse. You May proceed.
Thanks.
Hoping you could talk about your.
Kind of how you are envisioning kind of the coming months quarters, playing out in terms of the level of liquidity you expect to hold cash.
<unk> deployment into new loans.
I guess also along that would you consider kind of various parts of the capital structure given the devaluation you mentioned at the beginning of the call.
Yes, Thanks, Doug look I think as I indicated in my remarks I think.
From the lens.
Of continuing to generate earnings that comfortably support the dividend.
Portfolio is at that level right now given sort of what we know on our side vis vis <unk>.
Future funding requirements as well as some expected repayments.
We're certainly still in the market.
Looking at transactions, but I would say at a high level biased.
More towards.
Liquidity and keeping powder dry verses feeling the need to be.
Fully invested at any one point in time.
We still look at things, we still underwrite things, we will still come across things that.
Fit from a portfolio perspective, but.
I would be biased towards keeping excess dry powder and deal flow to be pretty muted between now and the end of the year.
To the latter part of your question.
We certainly look at the all parts of the capital structure on.
On a daily basis freak.
Frequent dialogue, both internally and with external advisors about.
Opportunities to do something in the capital structure, we've got a.
Share repurchase plan in place with plenty of capacity.
But again I think in a period of.
Uncertainty.
For lack of a better phrase I think I think biased at this point towards.
Marshaling capital, keeping dry powder and last things.
You get to a level, where they're just.
Two compelling not to do anything given potential Roe from deploying the capital.
Thanks, and then.
Yes.
In your in your slide deck that says you don't have a lot of maturities final maturities kind of in the next year or two but can you just talk about kind of how you expect.
Your borrowers to be able to the impact of refinancing given the much higher rates that they would kind of be facing today.
Yes look I think obviously.
Very situation dependent.
And in those situations to date, despite higher costs were.
People have achieved or made progress on business plan.
Certainly getting paid off there's still capital available to people.
To pay us off but Conversely, we've had other situations, which has existed by the way for our entire.
14 year history, where people.
Either due to.
Wanting to make more progress in our business plan or a choppy financing market.
There might be situations, where things get extended in exchange for.
Additional subordinate capital either in the form.
<unk>.
<unk> equity or common equity coming into the deal and in those situations where people are willing to add more economic support to our transaction, we're certainly willing to consider.
Extending our loan to the extent, we feel like we continue to be well protected I think a lot of ulta.
Ultimately a lot of what plays out.
We'll depend on.
Uh huh.
Right or wrong. The forecasts are obviously the forecast right now by many.
Assume rates coming down.
Fairly significantly.
In the latter part of next year I think it remains to be seen whether that comes to fruition.
We're not.
Thank you.
Sure.
Yes.
Thank you one moment for questions.
Our next question comes from Stephen Laws with Raymond James You May proceed.
Hi, good morning good.
Good morning, Steve Hi, Stuart first of all I want to start kind of you mentioned a higher hurdle to clear I think with how you phrased it as far as deploying capital I think youll have within your Europe comment, but I'm guessing that applies across the board just kind of given the comments around liquidity, but.
So maybe how do you think about.
Europe versus the U S as far as new investments with where they are in their respective cycles or maybe you're going to be bifurcated, even further to the UK versus continental Europe .
How do you think about the relative attractiveness of each market right now.
Yes, it's a great question and yes, you could certainly assume my high level comment around Europe being a higher bar applies to the U S. As well as I think my my response to Doug sort of.
<unk> look I think.
As we look at the World right. There was a there was a period of time call. It early coming out of the pandemic through much of 'twenty, one where.
As you think about lending and underwriting deals for sponsorship real estate raise confidence in business plan et cetera.
There was an economic pick up or return pickup to doing things in Europe , both in terms of.
Call it like for like achievable return on the loans, we were making post financing as well as a positive pickup.
When hedging back to the U S. Just given interest rate differentials that has obviously.
Disappear given interest rate moves and the strength of the dollar as we think about.
Europe versus the U S and obviously, we spend a lot of time talking about it from a macro perspective.
A high level.
While Europe is suffering from high inflation as well interestingly enough. If you look at the underlying components of that inflation most of what's driving inflation in Europe is energy and food.
So it's fairly targeted fairly specific and.
One could argue that.
As new supplies are generated as alternative sources are created there's a chance to bring that inflation down perhaps.
Perhaps more quickly than in the U S where.
The areas of inflation in the U S are more diversified than in many respects are more driven by the service sectors than the good sectors, which are a little bit harder to get.
Handle on that being said.
I think looking over the next couple of quarters I would say in our mind there is a little bit more concerned over the European economies and there are in the U S economy and as a result.
I would say yes.
All things being equal bias towards doing things in the U S versus doing things in Europe .
<unk>.
If you wanted to get more granular vis vis the UK and other parts of Western Europe .
While certainly the.
Political machinations in in the UK has been somewhat interesting over the last three months to say the least I would say.
I think it does speak to our system that is.
Very transparent addressing what they need to address unclear where that when they get to the finish line but.
One who has been over in Europe .
Twice in the last six weeks.
There is still a lot of dry powder looking at the UK Theres still a lot of dry powder looking at other parts of Europe . The strength of the dollar in many respects has.
Attracted more capital to look at those markets. So the markets seem to be functioning.
We're a little bit more cautious just given where the economies are right now given the fact that Europe represents 40% of our portfolio.
And that sort of a.
A long winded way of saying there is a high bar for all deals that we look at right now, but on par where more bias towards trying to find things in the U S versus Europe .
So I appreciate the color on that Stuart and the additional dose.
In the deck.
<unk> I have one follow up on the Miami asset.
$2 million of specific reserve is remaining and I think you commented that that asset is under contract and expected to close maybe for Q or maybe it was just soon but when we do see that closed we see the remaining specific reserve run through distributable earnings as a realized loss or is the accounting going to be different given the situation.
Thank you, yes, I think the remainder of the reserves that you currently see on the books is probably a good indication for the realized loss that we expect to realize once the asset.
But just that's the technical answer, but just to be back to my comments, Stephen we will.
Potentially maintain some additional economics in the deal that while we'll be realizing the loss I would say theres an optimistic view that we may claw back more of those economics over time.
Great. Okay I appreciate the comments this morning take care. Thank you.
Thank you one moment for questions.
Okay.
Our next question comes from Jade Rahmani with <unk> you May proceed.
Hey, Jay.
Hey, How's it going.
Thanks for taking the questions on the Miami design District loan what is the size of the new loans.
We're not.
We'll announce it when the deals done, but if you think about value.
We will be a fairly conservative LTV and.
The loan will be.
Plus or minus $100 million to $125 million based on rough purchase price.
Okay. Thanks very much.
111, West 57th Street.
Can you give some details around number of unsold units.
What the revised maturity date is and if theres been any recent contracts over the last say six months.
Sure Hi level.
The building still has.
More than 50% to be sold at a 60 unit building so.
You can you can do the math there have been.
If you look at the last six months there has been.
Could you remind us a handful of units put under contract.
The maturity date of the new loan.
Off the top of my head I think as late 'twenty, four but I'll get it for you.
Before the call is over and I would say high level.
Foot traffic remains healthy.
Volatility in the capital markets overall is not a positive thing those units under contract.
Continuing to close.
I think are a positive as they create more life around the asset.
So we're continuing to grind through it and the maturity date on the new loan is September of next year. So September of 'twenty three.
That's the initial maturity and Theres extension options.
Yes.
Okay, because it seems unlikely that there'll be 30 units or maybe there is more and more unsold units in that to be sold by September of next year.
Yes.
Actually I might have just missed the actual maturity date.
That's what I thought it is $9 24.
September 24, okay great.
I believe Dave do you view the moves that were made as a derisking of the position because now you are in the first mortgage and you also received 50% financing from the two money center banks, thereby sort of validating the investment case.
Couple of things.
Partial.
I think a derisking.
I think it puts us more.
Partial derisking I think the de risking is really as you think about the wave dollars flow on units being sold and sort of what gets paid back over time, obviously, the senior position is still in the priority position, but it will allow us to start paying off hopefully some of the <unk>.
<unk> bottom parts of the structure a little sooner.
And you add 50% LTV given that the.
Original senior lender was looking for an exit and had certain rights, we were able to craft something at the senior level.
That worked a little bit better for the project on a go forward basis.
The London office alone, what's the update there since it mismatch maturity in October yes.
Yes, there is.
Yes.
<unk> lender subordinate to our position.
<unk>, which was intentional given that we originally created the whole loan and then sold our subordinate position to the mezzanine lender.
High level, we believe there is a path towards getting us refinanced out.
And if for whatever reason that didn't come to fruition.
Wait for the sale of the asset and we believe we are well protected and an asset sale, but at this point the expectation is that with the.
Providing a little bit more time, we'll end up getting refinanced out.
Just thinking about near term loan maturities in 2023, there's a few that jump out one of your peers had some risk rating downgrades on the office side. So for example, there is the Chicago office alone with the January maturity. How are you generally speaking thinking about the loans that are coming up for.
Maturity in 2023.
Yes, you should assume there has been dialogue with the borrowers already in some situations business plan has been achieved and there is a clear path to repayment and other situations as I alluded I think to Doug Harter.
Active dialogue around trading time for additional capital coming in subordinate to us.
But in everything.
That presents as a near term maturity.
Comfortable with our path to either get repaid or.
To get our leverage decreased through additional capital such that.
From an accounting perspective.
Obviously, no additional reserves or asset specific reserves were taken.
And lastly, the commentary around the dividend was that too.
Signal.
Maintenance of the current dividend policy and that with the rising rate environment.
Current liquidity the positive news in asset management that earnings would exceed the dividend.
It was meant to indicate that we see a path towards comfortably covering the dividend going forward.
Thank you.
Thanks Jade.
Yeah.
Thank you one moment for questions.
Our next question comes from Steve Delaney with JMP Securities You May proceed.
Good morning, everyone. So Stuart if I had senior report come out last night, and you had resolved one of Brooklyn, or Miami that would've been a fantastic.
I don't know how you pulled off to in one quarter, but you ought to buy a lottery ticket, while you're while you're on a roll here.
Graduations.
Okay.
On the Brooklyn property now.
You are now in an equity position right and all the financing be third party or are you going to.
Need to be provide some financing on it as well.
All of the financing will be third party, we will put.
Part of the financing, we will put additional equity into the project life.
Loan, where there is a balance between financing and equity.
That being said.
There are some very very.
Early stage discussions around potentially.
Bringing in someone to partner with us on the equity side I don't want to.
You don't want to bank on that yet.
While we like the risk of the investment we think multifamily in Brooklyn works all day long.
We recognize that.
<unk> is not an equity vehicle at the end of the day. So we're just trying to think through the right.
The right mix of <unk>.
Equity exposure and investment upside.
But as of this point.
We feel pretty comfortable with the way the deal is structured and what we're creating in Brooklyn.
Great and in Miami.
Youre not I did not.
You do not have a future.
Lending obligation as part of that.
<unk> action.
We're providing call it market.
Seller financing rate for someone's buying the deal from US we are providing.
Market based seller financing, which I indicated to Jade would be.
$100 million to $125 million based on where things shake out and then beyond that.
And it'll be a structured financing so like in anything we do where someone's buying something to create.
Yeah.
New assets there'll be an upfront funding and then they'll be.
Future fundings, but it will all be within that $100 million to $125 million envelope in total.
And Thats first lien obviously on that.
Property.
Firstly whats fit these west 57th it sounds like a situation where the project was structurally messed up and you simply you you you put more dollars on the table, but you went from a mezz position to a first lien position senior position is that the way to view that yes look our last dog.
<unk> of risk has not changed.
But to sort of the best way to structure. The top was for us in the bank that we worked with to take the top end.
We are very comfortable with the money we've put in at the top and obviously, we continue to be comfortable with.
With the money, we've got at the bottom, but nothing changed as you think about the last dollar of risk.
Got it okay. Thanks for the comments.
Sure.
Okay.
Thank you one moment for questions.
Our next question comes from Rick Shane with Jpmorgan you May proceed.
Hey, guys. Thanks for taking my question and we really appreciate the disclosure.
On Europe , both in terms of the assets and.
In terms of the hedging it's really helpful.
I did want to talk about one thing.
You have indicated sort of taking a conservative approach in terms of deploying capital and maintaining liquidity.
Obviously, there have been allowance reductions due to the successful resolution.
A couple of loans.
But I am curious, how we should be thinking about the general reserve in the context of your more cautious or more conservative outlook.
Look I would say from a macroeconomic perspective.
I would say the <unk>.
Inputs, we put into our seasonal reserve, whereas.
Pessimistic as we've been from a macroeconomic perspective the countervailing.
<unk> to that from a seasonal perspective is the influence of portfolio seasoning on the seasonal reserve right. So you've got factors going in both.
The directions.
I will refrain from making any broader editorial comments on seasonal in general, but I know I'm going to assume that based on your question seems odd to see a general seasonal reserve going down in a period, where collectively we're all seeing a little bit more uncertain about where the economy is headed.
Our seasonal assumptions agree with you that we're more uncertain about where the economy is headed but there are also factors in the seasonal analysis related to portfolio seasoning that allow less wiggle room I don't know Anastasia, if there's anything you'd add to that yes, that's correct and the reversal as you had mentioned its primarily that.
<unk> finally season in portfolio and.
The unfunded piece was also impacted by the CEO .
I'll file unfunded commitment one loan secured by a mixed use property in London, but generally yes. We did include the recessionary.
Macroeconomic outlook.
On that.
Go ahead Sir.
Sorry, I didn't mean to interrupt. Please go ahead.
So ultimately I would just echoing <unk> comments that our macroeconomic projections.
Alluded the recessionary sentiment in the market.
Got it Okay, that's helpful and Stuart yes.
Good reading between the lines and interesting.
Our response in terms of how youre thinking about it as well and I can sense a little bit of.
Maybe not frustration, but.
Cognitive dissonance.
In terms of how youre thinking about it also.
Yep.
Fair enough.
I think youre right. It gets you.
It is what it is but I think look from our perspective, and I think we've evidenced always being willing to be on our front foot with respect to asset specific reserves.
Seasonal is somewhat of a mechanical exercise most of our efforts each quarter are around spin.
Specific asset specific questions and trying to make sure. We are on our front foot with respect to necessary asset specific reserves, because I think that is the most meaningful disclosure vis vis the portfolio.
No I agree and again, the track record and particularly what we've seen in the last quarter.
<unk> validates that as well.
Okay.
Great. Thank you.
Thank you and as a reminder to ask a question you will need to press star one one on your telephone.
Our next question comes from Eric Hagen with BTG you May proceed.
Hey, Thanks, good morning.
The disclosure around Steinway was really helpful. But what would you say is the upside more broadly for the assets in New York City like fundamentally are there catalysts specific to New York that investors can maybe think about and then the second question is around the structure of the secured funding.
And just a general kind of question does the lender has the ability to change the financing terms of the haircut.
In the middle of the loan term.
Just maybe the conditions that you think about that could drive lenders to tightened terms and how much tightening of terms you've seen up to this point. Thank you.
Yes, working backwards Eric.
Yeah on any specific.
Repurchase facility, there sort of a regular way dialogue between us and the banks with respect to.
Haircuts and spreads et cetera, I think obviously the experience during the pandemic is the best indication of how.
Those things play out I think we have always.
Manage those relationships pretty comfortable comfortably I think we've also always maintained a.
Roster.
<unk>.
Relationships, which allows us to move assets around as need be I would say our experience has more been driven by.
What a particular banks appetite may be for specific types of assets given their overall portfolio as opposed to any specific asset so to date <unk>.
Not a lot taking place I think I think views on certain banks being more conservative or less conservative or being expressed through indicative terms on new deals.
But nothing of a material nature going on with respect to.
Any change in financing terms broadly.
I'm curious just to clarify your question on the New York.
Assets was that broadly on New York was it on specific types of assets I guess I'd just help clarify the question for me.
Sorry, I was really more broad.
Just to think about the catalysts for that portfolio, specifically and if there's any specific catalysts for New York that investors can think about relative to the other.
That might drive the portfolio.
Yes.
What we're seeing and look we look at the existing portfolio of AI deals for New York, We look at.
Many things away from what would work for <unk> in New York and then we also have.
Real estate opportunity funds that are looking at New York from an equity perspective.
Look I think the <unk>.
Macro drivers of New York continue to be.
Yes.
What they've always been whether it would be.
Liquidity.
<unk> capital.
Global Financial Center, 24 hour city, et cetera, which cuts across a lot of property types I think more specifically to the.
Condo market to the extent that.
111, West 57th Street was the.
Genesis of the question I think the.
Ultimately that is an asset geared towards.
Ultra high net worth client.
There is certainly.
More than enough wealth globally with respect to what we're trying to sell I think the.
Volatility and uncertainty in the capital markets.
Doesn't help and I would say a lessening of that volatility or a.
More confidence that inflation has peaked and is heading down.
Would be viewed favorably, but ultimately.
Our sense is the asset shows well foot traffic is a good thing as more people like what theyre seeing.
More international exposure coming out of the pandemic has been a good thing.
I think we're moving towards a point where in most condo projects.
You create momentum and I think the number of units closing both this year as well as what will close between now and the end of the year.
Continues to be viewed favorably by the marketplace as it creates.
More life at the asset.
The final piece of the puzzle was the completion of the amenity package at the at the property, which was displayed to plus or minus 150 brokers last week to.
Overwhelmingly favorable.
Reviews. So the asset itself is in as good a position as it's been in from a physical real estate perspective I think.
I think velocity of sales would benefit from at some point less volatility than the overall capital markets.
Yes. That's helpful did you guys say that you saw the loan participation in one of the UK loans can you talk about that.
What the terms of that.
We sold our future funding obligations. So we made a loan on a sizable mixed use project in London in Central London too.
Two five years ago give or take.
It was always expected that at some point in the future we would sell.
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A piece of the future funding obligation it's a.
<unk> construction projects, that's taking place over over multiple years.
We're plus or minus $300 million funded in our into our position. We did two things we financed in a typical financing our existing outstanding position and then we sold.
$328 million of the future funding obligations, so effectively removing.
Our liquidity need for us in the future and also removing.
Further growth of our UK portfolio into the future.
That's helpful. Thank you guys very much.
Sure.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mr. Robertson for any further remarks.
Thank you operator, and thanks to all of you that participated this morning, and as always Hilary myself anesthesia are available if people have questions post the call. Thanks, everybody.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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