Q3 2022 Altisource Asset Management Corp Earnings Call
Good day and welcome to the a M C investor call today's call is being recorded.
At this time I would like to turn the conference over to Mr. Kevin Sullivan. Please go ahead.
Good morning, everyone and welcome to our third quarter Investor call.
I'm, Kevin Sullivan General Counsel <unk> asset Management Corporation.
Today, we will update you on developments in our business during the third quarter and discuss the material referenced at our Investor presentation, which was issued earlier. This morning. They can be found on the stockholders page of our website at www <unk> AMC Dot com.
No information on forward looking statements appears on the Investor presentation, we direct your attention to that information.
This audiocast is copyrighted material of the AMC it may not be duplicated reproduced or rebroadcast without our consent I'm joined today by our Chief Executive Officer, Jason <unk>, and our Chief Financial Officer, Stephen Colbert.
Jason will update you on the company's business and that we'll be happy to answer any questions Jason over to you.
Thank you Kevin.
I would also like to welcome everyone to our call.
I'm excited to speak to you this morning and to update you on our progress.
We continued developing our private credit business in the third quarter.
We have produced over $123 million and private credit commitments through the end of the third quarter.
An increase of 175% for the second quarter.
More than 90% of those commitments have terms of one year or less.
Despite the federal reserve raising rates by 225 basis points over the last five months, our current portfolio still profitable.
We are dynamically raised our rates and are currently originating loans with a total yield of 12, 5% or greater and have lowered our advance rate on our bridge originations by 10 points.
We generated total revenue of over $1 9 million in the third quarter more than triple the net revenue earned in the second quarter.
Turning to other developments during the quarter, we entered into a warehouse line with Flagstar bank during the third quarter and have received approximately 53 million funding from flagged or by the end of the quarter.
We also have opened a new headquarters in Tampa and repurchased approximately 287000 shares of our common stock from putting them at a discount to the trading price.
Finally in arbitration filed against the company by its former CEO , Andrew Neil Chatterjee. The arbitrator recently dismissed all his claims sanction to him for his misconduct required him to payback is signing bonuses in accordance with his employment agreement.
Permitted all of our remaining claims to proceed.
We are pleased the arbitrator found Mr. Charities claims are meritless.
Now I would like to turn your attention to an overview of current market conditions.
Despite a material rise in interest rate environment over the past year, we are still seeing strong demand for housing that we believe is due to both the housing shortage as well as the modernization of existing housing stock in the United States.
We continue to see strong demand in the investment property space from borrowers and investors and we are increasing our focus.
In this space Accordingly.
And the bridge and rehab market for single family and multifamily homes and ground construction, we are dynamically adjusted our loan pricing to higher levels and implemented lower maximums of loan to cost and loan to value ratios to accommodate the headwinds that the market is experiencing.
We are aligning our business model to provide credit to build affordable housing and services to assist homeowners.
As a reminder, we are currently originating in acquiring business purpose loans, they're not yet actually providing mortgages in the consumer residential market.
While the interest rate increases no home price declines in many markets are affecting the entire real estate market, we continue to see opportunities in the residential transitional loan space.
In addition, the market conditions in the largest msas across the U S. Very widely for example, while a number of west coast markets have experienced significant declines other markets in the Midwest northeast and southeast have had different trajectories.
Now, let me spend some time discussing where we are headed.
We are creating alternative credit through two main areas directed borrower real estate developers and investors and wholesale originations.
We are primarily focused on originating private credit products, but we can also augment production due to the purchases of closed loans originations.
Originations allow us to better control the creation of the assets.
As well as being more creative in terms of yields through the <unk>.
Shareholders have been purchasing loans.
As I've said previously we do not plan on being an aggregator however, current volatility in the fixed income markets has delayed our forward flow initiatives, we're selling assets, we are making significant strides in bringing new capital to the bridge space takeout investors for alternative assets that we are creating and.
In addition, we believe utilizing technology data and analytics will be critical to our success. We have developed and are continuing to optimize a data driven proprietary system, which will dramatically allow us to increase our reach to the specialized demand in that market.
We are also creating an enterprise database management system to help us utilize information for purposes of understanding our markets clients needs and the overall customer experience in short we believe there still are opportunities in our residential transition market and we think our data driven analytics provide us an advantage over our competitors.
That concludes our prepared material for today I'm now happy to take questions.
Thank you.
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Yeah.
We will take our first question from Jeff Moore from four O capital. Please go ahead.
Okay.
Oh, Hey, Jason I was curious as to what.
What the the loan book looks like what's the general update on the sales process for it the sales process for it.
What kind of institutions are you talking to you for selling those loans and we do.
Do you have any ideas what the timeframe for closing should be.
Hey, Jeff good to connect again I appreciate the question it was a great great questions.
Talk initially about what institutions that are buying D. C. Our loans then we'll go into bridge loans.
So at a high level generally speaking insurance companies REIT money managers and some banks by D. SCR Slash investment property loans, we are fairly far along with several of the largest REIT and money managers insurance companies to sell on a forward flow basis, we expect to have these takeouts firmed up.
In the next two to three weeks were in ongoing conversations with them to get this wrapped up.
As I mentioned the goal is not to aggregate. These loans. The goal is to originate and sell on a weekly basis into these institutions by selling on a forward flow basis. The goal here is to minimize interest rate risk principal risk.
And create a velocity of business that capitalizes on the yield premium that you obtained when you sell loans. So once we get these takeouts firmed up the goal at that point will be to increase our marketing slash lead generation, which will increase the fact the revenue that we're not currently getting through the sales of loans, which effectively would be incremental.
Of our current revenue so that's that's where the <unk> investment property.
On the RTL side, the residential transitional lounge slash rich space, we're in a similar situation, where we're pretty far along with several counterparties to setup forward flow takeouts.
Step back a second traditionally speaking in the bridge space of RTL space, you have reach credit funds money managers hedge funds and a few insurance companies that buy this product.
Again, we're pretty far along that we expect in the next.
Two to three weeks to have these forward flow was set up and then the goal would be to sell on a weekly basis.
As I mentioned with DSC, our allowance the same things with RTL, we're not looking to aggregate. The goal is to originate to sell model again that keeps the interest rate exposure down keeps our principal risk exposure down.
So that's that's where that's at the same time once we get these forward flow relationships in place then we'll start turning up our marketing our lead generation to drive the creation of products into these entities clients. So again I think just to summarize as you can imagine as we sell on a programmatic basis.
We'll start obtaining what's are gaining revenue that we're not getting now through the sales of lounge pizza will receive premiums from selling the loans that we're not currently getting the touch on.
Thank you and I talked about in the past generally speaking from an earnings or spread standpoint, we're targeting right now in the current environment about 350 basis points per an origination. So the goal would be is as we originate loans to sell them to effectively earn about 350 basis points pretty origination per product and that's both for the SCR slashed investment.
The loans as well as the bridge product that's in the current current environment.
Okay.
Jeff.
Yeah, Yeah. So.
You previously said that you'd be doing you'd thought you could be doing about $600 million EPS.
Originations for sale to wherever institutions, who want to buy them right.
Do you still think that's a good number.
Given the market right now do you think that that's.
Can be reduced.
Things seem to be well.
Hello.
Yes.
That's a good question for 2023, we feel very confident we will get it will be at 600, if not greater as a current total of $600 million of total production.
For us to get those numbers, we have to have these takeouts lined up.
As I mentioned a minute ago, we're pretty far along in getting these takeouts lined up.
Once we get these take up lined up the marketing that we've talked about lead generation system.
We created we tested between September and October we feel very good even in the current environment.
We will have in excess of $600 million loan production. So yes, we feel good about it even though that there is volatility in the fixed income market there is still demand.
Still demand for both the rental and slash D C. Our product and for the bridge is just not as liquid as it once was 12 months ago.
There's still plenty of plenty of demand there.
Okay. So do you have some.
Back of the envelope math, if youre getting 350 basis point 350 basis points origination on $600 million.
You will be getting a spread on that $600 million.
Next calendar year about $21 million right.
And thats on a market cap of call it $29 million right now.
What I mean once you have this thing at scale like what kind of margins are you expecting and how much of that would.
B profit because I mean, that's not even taking into account the.
$100 million of loans you have on your books at.
At some point next year should be yielding.
Double digit interest as well.
Okay.
Again, it's a good question.
Look we have our model figured out where we think we're going to be for return on equity.
I don't want to we're still building out. So frankly, we are still building out we have the synergies in India, which makes us very competitive in terms of processing and creating these loans, we feel that we've already proved out internally our marketing and lead generation is very cost effective.
I don't want to get into specifics because we're still building it out I can say that.
We're not an aggregator we're not trying to compete with the rights we have a.
Originate to distribute model that we feel our return on equity is well north of what you see in the aggregation side of the business. So with that being said I don't want to state a return on equity just yet, but we feel pretty good that our model and where we think we're headed is going to prove out and we'll know next year, but it's going to be north of what you see at Reits and Aggregators.
I know, it's a general framework I'm trying to give you a framework.
Yes.
Yeah, and it seems like you guys are.
I guess, the strengthening your borrower requirements right.
<unk> by lowering the you said in the presentation, you're lowering your LTV in your loan to cost.
Okay.
General metrics are you using for borrowers like I mean.
Your average borrowers at like a seven.
700 credit score of 600 credit score at 800 credit score and then like how does that process work.
Again, Thats a great question, Jeff. So a couple of we got two of our products. You have then the rental investment property product again.
Again, neither of these are consumer products. These are business purpose loans. So on the <unk> rental product our criteria. It comes right from insurance companies right banks and money managers, who are very active in aggregating generally speaking we take their criteria and that's what we develop our marketing so.
Generally speaking you are 700, plus borrower your LTV on the investment property side is going to be 80 or less.
And as they typically look for experienced and debt service coverage, but thats, a pretty binary product what you're I think what you are looking for is more on that bridge sides on the bridge side.
We target borrowers with have a history of buying fixing flips.
Under constructions as well as Rehabs simply will not see people of 6% to 7%.
Transactions in the last two years. So we are looking for an experienced borrower base.
What we noticed in this current environment with rates going up and the cost of financing going up.
The less experienced borrowers less capital with getting weeded out and the very experienced borrowers the ones have done 567 projects in last two years, we have a recent history of being successful. They continue to operate business as usual what we've noticed is differences instead theyre, making a return on equity say $40 45.
They're making a return on equity in the high <unk> low <unk>.
There is still they still have demand for financing needs. They are still looking for leverage and we continue to see strong demand from the experienced market.
Touch on a couple of more points, Jeff we do look for fraud, we look for background issues. We look for experience and the last thing is we're very focused on valuation of the collateral so for us in that bridge RTL space.
It's important for us to be accurate on our value of the of the property.
At the end of the day, if if the opportunity does not go the way the bar where expect to go we have to take back the collateral.
We want to make sure the values there. So thats those are what were those are big drivers to what we're doing there Jeff.
The answer to your question.
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We have another question from Matthew Howlett from Brian Lee. Please go ahead.
Oh, Hey, Hey.
Jason Thanks for taking my question.
Hey, Matt Hey, Chad.
Yes, I think I heard you say, it but youll look at AMC.
Model origination model I just wanted to hear you talk about it again.
The ROE profile versus what we traditionally see on Aggregators REIT type models.
And how do you it looks like Youre going to generate a high ROE I appreciate youre not going to give guidance right now, but when we look at this model from a high level versus what we traditionally see in the space.
Originate the whole dividends.
How are you going to be differentiated and how is it superior.
Returning to the higher but will they be more stable over time could you go over a little bit about.
How are your degree of differentiation versus what's out there.
We've made those are again, great questions I think at the end of the day, we got to take a step back here. When you look at the amount of capital raised in the alternative asset space. It's trillions upon trillions, so theres a massive amount of capital that's been raised.
In years past a lot of this capital from the large money managers insurance companies have gone to the street that byproduct.
They can't anymore, they're going direct.
We look at this business as well.
Once we get our forward commitments lined up with these large reads with these large insurance companies with these large money managers they have incredible I mean they have.
Amongst them trillions of dollars in an alternative capital raised for alternative assets right. We're doing forward commits. So our goal is to originate on a forward flow basis and have volume set.
Set up by a forward flow so with that being said, we're not looking to do open market bidding and putting random pulls out there. We're looking to have a scheduled okay $250 million born here 500 managed one there so that way, we can ramp our volume up and have a much more fluid fluid process for a takeout you guys. What we want is not lumpy revenues.
But we want consistent volume targets, so that way we can.
Ascertain how much demand how much product, we can create and target where it's going so with that being said I expect once we have afford flows setup.
Our revenues will increase we will continue to look for additional capital partners that have again theres large insurance companies out there to have hundreds of billions of dollars. We will be looking for a continued improvement and our partners for size for strength.
And that will allow our our ROE to be much more stable and more.
Forward forward looking okay, a lot of people originate and they go by trade by trade our view is.
We know who has capital we're in talks with those partners. These are the largest money managers the large insurance companies out there and our goal is to originate into their into their portfolio and that should smooth out our earnings and effectively make it less cyclical.
Does that help Matt well that helps.
It helps it helps a lot, but youre going to be obviously, it sounds like a very robust growing origination platforms. The capital gets turned over quickly it's reoccurring fee income high cash flows.
And when you expect to retain investments.
The compounding impact of continue to grow the origination platform is that sort of how I think about the model exactly exactly yes. So when you look at an insurance company and maybe they have.
$30 billion in the mortgage space. Our goal is that lineup and be able to sell a half a billion $1 billion to that particular company that allows us to have the origination fees and upfront, we get a certain amount of spread or premium obtained from the sale, we potentially even have clients, who want us to use us for asset management because of our history and our strength in India. So the goal is to <unk>.
Create this product based on the demand from the fixed income markets that's massive.
<unk>.
Our job is to go out create to reaching that demand create the product distributed into these large fixed income accounts.
<unk>.
It sounds like the compelling opportunity, we will look for more color I mean, obviously without wafer more details, but just can you just give me a general overview as everything terms of cost originate and centralization of.
The origination platform the credit platform. How is that is it all going to be centralized just give me a sense on.
No.
The underwriting that credit.
Yes, that's a great question so.
Our underwriting our processing underwriting the fulfillment distribution everything that can be done out of India. We have a deep history. There. Our team has underwritten purchase an asset managed over 30000 nonperforming mortgages single family homes in Rio So it's all done out of there that we have an incredibly talented and experienced team very highly.
<unk>.
At the same time the cost effectiveness there relative to the U S is it's very material and I've been in.
My experience being on the street for the last 10 years I've been in a lot of shops.
Our advantage in the cost of the cost sides tremendous on that Brian than when you start looking at.
We're very data driven so we've tested our marketing and lead generation last 60 days, we found it even in an adverse market with rates going up in housing concerns around housing market going down we find are.
Our production has been very good so our lead generations and fantastic or demand for product is fantastic.
So the cost wise.
We think our numbers are very good.
And the demand is there so we feel good with our our lead generation cost.
Our cost structure, there so as a whole we feel that we're in talks with some of the TARP capital providers out there to buy product and so when you sell into the biggest capital Aggregators out. There. These reads. These insurance companies you have a very effective.
And use your cost of capital our India operation is very talented very experienced as well as very cost effective.
Our tax structure here in the USPI allows us.
It could be a competitive advantage because we have.
Yes, we have a corporate.
What's called at EDC tax structure that allows us to be more competitive in pricing and just execution. So overall, we feel between.
Our advantage in experience.
The expense structure in India, our tax structure and API as well as our partners on the end takeout.
We are very I think very best.
Best in class use of data and lead generation, we feel we're being very competitive in this space very very competitive across the different products that we originate.
Well I'll hop back in queue.
Look forward to hearing more disclosures I'll tell you, there's not a lot of comps out there in the public market.
Turn on blended basis grow bigger and bigger so.
Certainly look forward to.
Hearing more about the model on the differentiation relative to the REIT.
And I think Youre right I mean, I think when you look at it a lot of the there are a lot of the.
Early movers in their in their bridge transitional space got bought up quickly by again, the large money managers I'm not going to name names, but there is well known house.
Well known household accounts and went out and bought a lot of our peers because the opportunity they see the opportunity they have the demand in alternative assets and they've acquired them. So there aren't really any I don't know of any originate to distribute alternative asset originator out there. So we're very excited as we feel like we're in a good space that there's a lot of it has been.
<unk> has some very attractive earnings net.
Earnings and we felt that a public company, we have a lot of runway.
Just real quick what's the what do you put the ore.
<unk> market size I know, it's a broad question, but just curious when you look at the market I know clearly is that the size wise for products yes.
So look we're.
Looking at each product and when you look at single family.
Single family Bridge.
Fix and flip slash ground construction.
There is no one data source I think generally speaking and normalized years is between 60 and $80 billion. Generally speaking is that the numbers that are thrown out that just for the single family, Okay $60 billion to $80 billion. When you start looking at multifamily bridge and value adds another another $80 billion to $100 billion. When you look at the <unk> investment property space.
19 million rental properties out there $19 million thats by the census tracks. So that DSR space is massive and effectively everybody knows this but when you look at the GSE is in banks, they're their model is kind of dated when it comes to income documentation and how they evaluate credit and real estate.
It's another situation creates a great opportunity for us because the investment property slash business purpose space.
It doesn't really flow into the <unk> or bank so.
The size of the market pretty massive it's I think it's undervalued how big so hopefully does that help.
Yes.
It helps and it's just you hear if you pick up the newspaper every day you read about institutions.
Single family.
The industry. It just seems like it's good to be absolutely enormous so like I said nothing publicly traded in your model.
Yes, nothing probably traded at the same time.
He is well known that there is a housing shortage in the U S. The number is anywhere from 4 million to 6 million houses the shortage.
And that just affordable housing so affordable housing is definitely.
A key driver in what we're doing we have a.
A lot of millennials are starting to buy housing have families. So we just there is a tremendous growth opportunity we've seen it for the last 10 years. This space grow from nothing from a cottage industry to be in a much more institutional and frankly, there is demand demand by borrowers builders.
Builders real estate investors as well as Rocco property owners, but there's also a tremendous amount of demand.
Fixed income markets on both sides, we're seeing demand we think it's a great opportunity. It's a space that's not very institutional per se. So theres a lot of areas, where there is friction and ability for us to come in and take our experience and apply it and create something that is very special.
So we look forward I, certainly look forward to hearing more about <unk>.
Thanks, so much.
Thanks, Matt.
As a reminder to ask a question at this time. Please press star one please ensure the mute button on your telephone is switched off to allow your signal to reach our equipment.
We will take a follow up question from Jeff Moore from <unk> capital. Please go ahead.
Hey, Jason Okay. So the numbers that you were seeing to the last caller.
The total the Tam the total market size it sounds like Youre always yearly origination is going to be less than a half of a percent of that did I hear that right.
Yes, I mean look the numbers, we throw out $600 million is.
Do I think we can originate more than absolutely.
The amount that we put out there the $600 million.
Youre right its less than 5% so the ability to scale in the markets is there it's huge.
So that's why we're that's one of the reason we're very excited.
Okay, Yeah, Yeah, Yeah, and I mean, you guys really aren't even like advertising for furloughs and stuff, yet I mean, like on Instagram or or or whatever I mean, even Twitter I'll have like.
Core vester.
Lending home or people like advertise today since I do some real estate and like I haven't seen anything from you all feel like you. All think you can write it without really EBITDA.
That's right.
Exactly yes, so we've done it we've done that analysis, we had a third party who we feel very is very a very credible very institutional do analysis of the amount of marketing is getting done in the business purpose space, we feel one between their market analysis and to the testing that we've done over the last 60 days, we feel that our ability to scale is.
It's very material like we can scale.
In a massive way what were before we do that we're trying to get our takeout setup by getting our takeout separately different channels than we can get.
Getting our back office up and running which is up and running then we can go turn on the marketing go do what we need to do and create the product that we're going to distribute so we don't want to we feel one that we have a good handle on how big the market is and how quickly and how much. It is on a cost per loan to create each alone and each space.
We've done an analysis, we feel good about it.
Frankly, I want to.
I could spend the money yesterday I would have spent the money as we turn it up but we need to get the takeout setup and once we get to take out set up I think our volume numbers going to be more than proved out across the SCR across bridge fixed and flip as well as even multifamily.
There is a tremendous opportunity and that multifamily bridge and value add space between a one in $7 million.
Note size notional size.
Yes.
As a note I was unaware that the way you were setting these things up were basically.
Basically for pre determined amounts per for the buyers right. So you're not so like you said youre not subject to an auction model. It should make your cash flows much more predictable.
Which is.
I mean.
Reassuring for me I guess as an investor I mean that was already pretty we went pretty excited about what you guys are doing we want to be systemic the goal is to make it a systemic programmatic business not too it's not trade. So this is a business we feel like the opportunity is massive between.
Again, you have to look at it as papers not going the agencies. They are kind of archaic and the way they look at values and income documentation. So we feel there's a massive opportunity there when you look at the housing shortage. When you look at the housing shortage, but if that single family homes as well as multifamily as we see that there. So we feel very good that we create the right partners.
Shifts with.
And Takeouts.
We're going to able to scale. This very systemically and this is a business model. This is not a trade in.
We're very excited that our earnings will be lot more smoother than a.
Then going out and buying one off trades, so anyway, yes to answer your questions yes.
Oh, Okay, well, one more kind of a multipart question.
It looks like going through your Q that you.
Had about $13 2 million in principal repayments.
And you've repaid.
Call It $2 2 million of borrowed funds I'm, assuming that's on your warehouse.
And it looks like you and Mark down.
Like a $1 billion to $5 in loans.
Can you talk about the slight markdown you had in the value of the loans.
And then also the principal repayment I mean, if you got back $13 2 million in principal repayment last quarter. When you haven't had these things on your books very long it seems like over well well over 10% of your loans have already paid back.
You've only had on your books for a couple of months.
Is that accurate and kind of what are your thoughts going forward on them.
Thats pretty astute I think at the end of day.
We bought so look step back and you got a couple of different questions. There we bought some seasoned paper in the very beginning and when you buy season paper and bridge keep in mind. The paper that we're buying in originating is generally speaking 12 months or less and duration. Okay. In a rising rate environment in my view, that's very doable.
That's very good paper and that long term with that being said, we also bought some seasoned paper and when I say season, it might have been four or five months seasoned.
Yes, some of that paper is paid off and then we expected that and the goal was was to demonstrate that we are in this space create.
Create some income and we did that so those loans and some other ones are already paying off number one.
Number two this paper does payoff quick experienced borrowers do pay off quick.
Generally speaking in the bridge space Youre looking at 11 months is the average life expectancy of the bridge loan to one of the heartburn as you've constantly replenish your inventory on the flipside, we want that in a rising rate environment. So that so thats play to exactly how we thought it would play out number one.
Number two mark we try to startup of marking as rates go up.
<unk> market portfolio relative to the rates to the discount rate in the market. So.
We've taken some book losses on that Brian , but the stuff's paid off we are.
Effectively where we finance it at and where we bought or that we are still making money as a whole. Our book is very profitable we have about at the end of the quarter or approximately $50 million in cash that we have bought loans and originate loans into cash so not all of our portfolio is not as finance through the warehouse line, we have a fair amount of <unk>.
That was held in cash and a fair amount on the warehouse line. So that's why the Paydowns per 930 warrant.
Especially because it's not 100% as finance so again some of it's paid out in cash that was paid off in our warehouse line.
So.
Does that answer your question Jeff.
Yes.
That's awesome.
Super excited for you guys.
One more thing Jeff when we bought loans with cash part of the reason is to keep in mind is we're just getting the business growing the originations take time. So when you build an origination platform you don't just flip a switch and Utah originate tomorrow. It takes time and getting your underwriting your salespeople hired your marketing one so we had to go out and buy closed loans to slow down our cash burn to.
In fact, we get processes in place. So the goal originally we knew were going by closed loans, because we had different areas that we wanted to address but long term that was never the goal is to aggregate. So that definitely has helped us tremendously in create and revenues.
Just wanted to on our cash burn getting our processes in place allow us to get a warehouse line in place.
It has allowed us to look at other warehouse line. So by buying closed loans by originated with our cash held us a ton.
At the same time, our business model is not to hold loans. So going forward, we will originate to sell Thats. Our plan always has been and is going to be our plan.
Bill.
Hey, John and I say that only have alright, yes, I know I said I only have one more question, but I guess I lied because that.
You did such a good job of talking that you made me think of one other thing.
The warehouse line, you've got for 50 million bucks or whatever and it seems very obvious based on the partners youre getting to buy these loans and how they are saying hey, we want $20 million. These are $5 million of these or however, much they want on a weekly monthly yearly basis or whatever.
And given that you're only going to be take youre going to be thinking of less than half a percent of the market and the numbers you were throwing out.
When are you going to outgrow that warehouse facility because it seems like you could do that very easily and I mean anyone that looks at your resume.
You can figure out you know everybody in this space so like at what point does.
Million plus the 50 or so million 60 million you guys having cash.
And investments like.
When does that.
Become not enough for you all.
First off thanks for the compliment number one number two is well aware of it like we are already going down a path on a second line, but the reality is that getting these takeout set up if you do this properly we should be in an ideal world sweep loans every three days. So you could take $50 million and you really could do a lot with 50 million however, with.
The volumes that we have expectations with our ability to market with our back office operations. Our view is we're going to be a lot more warehouse line.
We are.
Working on that right now, but the fact that matters priority is selling loan to get our partnerships on these.
For the different product set up so in parallel yes, we're looking at other warehouse lines. Our current partner Flagstar is a great partner, though I'm sure that will increase our lines as we demonstrate velocity on.
On the flip side, we are very focused on selling loans and ideal rolled out want to sell loans. Every three days. So there is you can do the math $50 million returning loans every three to five days, there's a room to really turn it turn those lines.
Really leverage those lines so.
We don't need those today, just yet, but we're addressing it so and we see the need for warehouse lines.
To be.
It is a greater need.
Paul.
Good question Jonathan.
Yeah, Yeah, Yeah, I'm really looking forward to more updates from your yields are doing everything amazingly well.
Okay. Thanks for the time thanks, Jeff.
Okay.
As there are no other questions in the queue.
We will answer a couple of questions that came in prior to the call.
So a lot of which have been addressed already but there's a few that are still outstanding.
Jason how do you monitor the health of your loan book.
Some processes in place. So we have again, we have an extremely experienced estimates asset management team in India. We do weekly reviews of our portfolio any loaned it slow playing.
Payments due on say for example, the 10th.
If it has not been made we have our asset management teams at the top of the Servicers and they have the services reaching out to borrowers and these are again. These are real estate investors builders, we have them <unk> them to make their payments, we even have an aggressive door knock.
We send somebody out to tap the person I shouldnt make payments. So we're all over.
We are all over the servicing of these loans and to date, our books very healthy.
But at the same time, we are.
We're actively reviewing them on a weekly basis.
It's been very good has helped our proposed state.
A very let's say performing so.
Furthermore, just to kind of it.
I think I mentioned this earlier, but with the headwinds in the real estate market and the concerns around real estate market on the bridge space side, we lowered our ltc's ltvs by 10 points and the view was that the data market and housing should take a little longer we had historic historically short levels on data market a year ago from the historically low interest rates with rise.
<unk> rates and a slowing down of the housing we figured by lowering our LTE season, our ltvs, we would be cautious by entering into bridge loans that should make it more attractive projects and buyers to buy and it's worked out so far so.
Yes.
What is your average borrower will look like.
Our average borrower in the bridge side is effectively a builder or a real estate investor that we target I get as I mentioned earlier.
We want we want our borrowers done six to seven.
Slips or renovations in the last 24 months. So that's our target audience. We have we have people and they have done 30, 40, and we have people that have done for three or four so but our target is around 7%.
For the.
Lip bridge business and then when you look at the <unk> rental side ideal road, we'd like to see people that have at least a minimum of two to three rental properties, but if theres a lower LTV involved.
We will do some amount of first time rental but for most part we want to see a borrower with two to three properties that they have experienced renting out.
And why would someone use us AMC as opposed to another lender well again, I think and I think.
My question is why Wouldnt some may go to a bank.
First before us.
Speed experienced the access that we can customize product and distributed.
Typically when you're working with the bank.
That's another specialty that's not what they do this is what we do for living we have a lot of outlets, we understand what can get done and where it can go.
One to speed that we can close quick if it's a good opportunity and we like the opportunity. We can close quickly much quicker than a bank Ken. So that's just that's two main reasons and the other part is bespoke a lot of what we do is more customized so what youll find is <unk>.
If you go to a bank you either fit the credit box a provider or the real estate box. They provide otherwise you don't fit here, we look at it we try to figure out how to get it done and execute on a bespoke manner.
You talked about this a little bit earlier, but what are the companies in this space trade for in the market again.
Mentioned earlier too too Matt.
A lot of these companies are private so a lot of there's a lot of.
Our peers were private and got bought by larger money managers generally speaking the proven platforms have traded at a nine to 12 times net income multiple.
Again these are private transactions. So it's hard to go point of public but have been around in around the space for 10 years now.
Theres been quite a few trades were money manager hedge funds come in and bought a platform at a 9% to 12 times earnings net income earnings.
Have you considered using baby bonds for raising capital.
Look for us.
Ultimately if we if we use we have looked at different forms of debt because we're going to need to grow our warehouse book and there'll be some growth capital need at some point to grow their originations.
So we're definitely looking at it we haven't done anything yet.
But we are looking at that market and we are open.
Two gathering information, but we are focused on is our takeouts right now so.
Is the company looking to buy back any additional shares since the Putnam transaction okay.
Look I think at the end of the day once we started selling on a forward basis on a programmatic regular basis, because you are selling our originations.
That's the most important focuses that keeps saying throughout this call. Once we have that established the ability to go back buyback stock or do other accretive action.
Actions to benefit shareholders always always in front of us and we'll definitely consider it.
And then just a couple of questions on the general market.
How long do you think how long do you expect it to take for margins to rebound or be normalized in the sector.
I don't have a crystal ball I think.
I don't think anybody has a crystal ball. The view is we're in for a long longer process.
Fixed the economy with that being said.
Clarity on where rates are headed clarity on borrower behavior clarity on unemployment and housing are all major factors right now and so what we're seeing is the securitization market definitely froze up and thats, causing some limited liquidity, but insurance and banks have a ton of money and we see them actually participating I think.
A more normalization of stable environment will probably happen over the next six to nine months and that will just what that will do for us is it create more liquidity, which should effectively expand our margins.
Feel in the current environment, we still can.
We're in a very good return on equity very attracted to what we expect.
But when the market stabilizes our margins should widen out more so.
So.
Kevin that was I think thats the only questions. We have I appreciate <unk> time today.
We're very excited about the business, we're very happy with what we've gotten accomplished in the five or so months since I've been here, we have a tremendous team I want to thank my people in India, they're incredibly important to what we do as a team in Tampa has been nothing but a blessing in St. Croix St. Croix. These are good people so.
We thank all who have who we have and what we've accomplished in the last five five plus months. So look forward to continue the growth and push the business forward.
Kevin I think that's all I have is do the.
The question, we werent able to get to and the session or didn't get to submit please don't hesitate to reach out to our investor relations email or phone number.
Thanks, Thank you.
Yes.
That will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.
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