Q3 2022 Ready Capital Corp Earnings Call
Greetings and welcome to the ready Capital Corporation third quarter 2022 earnings conference call.
Yeah.
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I would now like to turn the conference over to your host Andrew Ahlborn Chief Financial Officer. Please go ahead Sir.
Thank you operator, and good morning to those of you on the call.
Some of our comments today will be forward looking statements within the meaning of the federal Securities laws.
Such statements are subject to numerous risks and uncertainties that could.
Cause actual results to differ materially from what we expect.
Therefore, you should exercise caution in interpreting and relying on them.
We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
During the call we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance.
These guys are not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.
A reconciliation of these measures the most directly comparable GAAP measure is available in our third quarter 2022 earnings release, and our supplemental information, which can be found in the investors section of the ready capital website.
In addition to Tom and myself on today's call. We are also joined by items outlined ready Capital's Chief credit Officer.
I will now turn it over to Chief Executive Officer, Tom capacity.
Thanks, Andrew Good morning, everyone and thank you for joining the call today.
Before we dive into the numbers a few observations on the macro backdrop since late first quarter 'twenty to the historic velocity of the fed rate increases has led ready capital to pivot to a defensive posture in the event of a recession. However, we believe ready capital's multifamily sector focus and diversified business model upwards strength and our liquidity.
Credit book value and earnings in a stressed economic environment first.
First in terms of liquidity as of 930 ready cap had $1 billion in unencumbered assets, including two.
$200 million in cash and an additional $2 4 billion in available warehouse capacity further recourse leverage of one six X is within our two to one target.
And critically short term repo at $392 million is only 4% of total debt and it's primarily secured by floating rate short duration assets subject to low price volatility.
Surely I only 16% of our debt is subject to mark to market and the average maturity of our warehouse lines is two years finally near term maturities and corporate debt are modest with 10% of the outstanding $1 1 billion due in August 2023, and the balance ladder. After April 2025.
Second is credit our historical sector focused on lower middle market multifamily, which comprises 72% of our current CRE portfolio will benefit from the shock and housing affordability, which has tilted the buy versus rent calculus to rent the doubling in mortgage rates to 7% has increased the U S mortgage to rent ratio from.
The 103% prior tenure average to 159% today.
This will support lower vacancy rates and positive rent growth, even in a recession, particularly in our affordable multifamily niche.
In terms of our small business segment, our credit team forecast an increase in delinquencies from one 5% currently to approximately three 5% for which we are adequately reserved. This segment represents four 5% of equity and as such net credit loss exposure would be modest.
In the event of a recession, a big differentiator versus the peer group is portfolio diverse diversification. The 10 largest loans equate to only 9% of the total loan portfolio and we notably have no exposure to CBD office. Our office allocation is only 5% of our portfolio with a $2 4 million.
Average balance.
Third as book value.
Given the first two factors a hallmark of ready cap since Covid has been stable book value.
Post the first quarter 2020 application of seasonal book value has actually increased 7% to $15 40 per share. This contrast, with the 15, 15% to 30% year to date book value declines in our residential REIT sector as well as write downs of seaweeds with significant CBD office exposure.
We view book value preservation and growth is a key metric in evaluating ready cap's return.
And given the strength of our liquidity, we repurchased three 6 million shares since September 30th resulting in approximately <unk> 16 per share accretion.
Finally dividend yield.
As we've been communicating for a few quarters, we expect earnings to normalize over the coming quarters due to the runoff of the Covid stimulus revenue from PPP and the decline in mortgage banking. These declines will be moderated by lending and acquisition activity with a three to 500 basis point increase in ROE.
In the current distressed environment for core commercial real estate.
Over the last two years ready cap is paid and covered a dividend yield of 11, 6% on average book value, which is in excess of the peer group average.
As we look forward, we expect our business model to be capable of continuing to deliver a peer group premium, albeit at levels more similar to pre COVID-19 quarters, Our board of directors plans to realign the dividend in the fourth quarter to ensure our go forward dividend is covered by normalized distributable earnings.
Now, we're reflecting industry trends CRE lending volume was down 34% quarter over quarter to $831 million. However.
However, this vintage features a significant yield premium with a more conservative underwriting compared to 2021.
In terms of pricing spreads on new production increased 80 basis points to sofa, plus 480, which even with the wider CLR CRE CLO spreads equates to a 15% Levered Roe.
These higher yields are despite a defensive pivot in credit 83% in volume was in cash flow in multifamily and 70% in tier one and tier two markets migrating to our strongest sponsors. Additionally, underwritten stabilized yield on new production increased 8% while loan to values decreased 65%.
Quarterly production in Europe increase was $75 million closed across five deals in the UK sourced via the three strategic European partnerships executed over the last year.
Loans have a similar credit profile profile as our U S bridge lending products, but feature a 200 basis point yield premium.
Our near term defensive strategy positioned CRE lending volumes to stabilize near third quarter levels as we harvest excess liquidity for higher ROE opportunities in the distressed secondary markets investment in distressed small balance commercial real estate loans is a differentiating factor in our business model, we were a top three buyer of distressed small balance.
Loans from banks post the Dfc acquiring $3 4 billion and we note a new supply in this recession from the post Dfc surfeit of 250, plus private credit funds.
In the quarter, the CRE portfolio increased 2% to $9 6 billion across 2300 loans, a number of credit metrics position the portfolio to outperform in a recession.
Weighted average ltvs of 66% with 84% of the portfolio concentrated in lower risk sectors cash flow in multifamily and mixed use in industrial versus office current 60 day delinquencies remain low at two 8%.
Lastly from an earnings perspective, 84% of the portfolio is floating rate.
And our small business lending segment 700 production increased to 134 million split 85% between our large loan and 15% in our emerging small loan segments pricing average prime plus 190 basis points on the volume side, we expect a cyclical decline in <unk> volume.
From 26 billion at F Y E 930, but are projecting continued growth in our volume due to market share gains, especially in our small loan segment.
As is evident in our money up pipeline of 225.
As of quarter end.
As discussed in prior quarters, we have leveraged our fintech rebranded as <unk> business to drive efficiencies and volume in the small business lending segment, particularly the SBA 700, small and micro loan sectors, which are a major policy acts the Biden administration in terms of reaching minority and women owned businesses.
Beyond application to our own production, we began marketing the technology as a separate lending as a service profit center.
Leading these technologies within our lending ecosystem and creating scale with a longer term potential spinoff provides another avenue for creating shareholder value.
Our residential mortgage banking business <unk> continues to be impacted by rising rates and lower refinancing volume with originations of $534 million for the quarter. Despite.
Despite compressed margins, averaging 74 basis points and volume declines of 28% <unk> G fast remains profitable due to its servicing retained strategy as.
As discussed in prior quarters, we continue to pursue and evaluate initiatives, which may include strategic transactions with that I'll turn it over to Andrew.
Thanks, Tom.
Quarterly GAAP earnings and distributable earnings per common share were 53, and <unk> 46, respectively.
Beautiful earnings of $58 2 million equates to a 12, 7% return on average stockholders equity.
Absent the effects of PPP quarterly interest income increased 28% to 172 million with net interest income increasing 5% to $57 million.
As of quarter end, 85% of the portfolio is floating rate.
With an average spread of 320 basis points.
And continued climb in short term rates increases profitability on our existing loan book with each 50 basis point movement in rates equating to an eight <unk> increase.
The increase in annual EPS.
The rise in interest expenses due to both an increase in average debt throughout the quarter and a seven basis point increase to warehouse financing spreads.
The provision for loan losses totaled $3 4 million with the majority of the increase due to a deterioration of macro assumptions used in modeling reserves on our performing loan book.
Included in the $3 4 million were specific reserves of 900000.
90 to two nonperforming office asset.
We expect to liquidate in the fourth quarter.
Realized gains from gain on sale production were off $3 5 million quarter over quarter to $12 1 million.
The change is due to both a $18 $6 million reduction in Freddie Mac SPL production as well as a 100 basis point reduction SBA seven premiums.
Averaged eight 6% in the quarter.
Net contribution from residential mortgage banking activities declined 60% to $3 million.
Other income items of note include the continued contribution from PPP, which totaled $11 8 million.
$7 million of fees related to the processing of employee retention credits for our small business customers.
And mark to market reduction of assets held within an consolidated joint ventures.
On the balance sheet, we continued to prioritize increasing liquidity levels limited mark to market debt and managing to prudent leverage ratios in.
In the quarter, we closed a $100 million seven and three eighths senior unsecured note and subsequent to quarter end completed our 10th CRE CLO.
860 million dollar deal with an expected retained yield in the low teens.
Total and recourse leverage ratio is equal to four nine times and one six times respectively.
<unk> to market debt totaled 16% of total debt.
In addition to normal items flowing through the balance sheet. We also completed an update from the business combination accounting related to the Mosaiq merger.
These changes included a $63 million reduction in the value of the asset portfolio offset by a corresponding reduction in the contingent equity REIT valuation.
These updates were primarily related to assets that were either liquidated.
Or where new information has provided clarity.
On the expected value of an asset.
Since the merger, we have reduced the mosaic portfolio by 19%.
Despite the reduction in 24% of the portfolio remains underperforming the broader business.
We estimate the reinvestment of capital at current levels to equate to earnings of <unk> 14 per share.
Liquidation of those assets.
The challenging market notwithstanding we continue to make good progress on these efforts and expect to have made considerable progress as we work through the first half of 2023.
With that we'll open up the line for questions.
Thank you.
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One moment, please one V fault for questions.
We have our first question from the line of Stephen laws with Raymond James. Please go ahead.
Yes, hi, good morning.
No.
First maybe on the resi side.
It gets a lot of attention in the media but.
Sorry, we saw a ship 80% purchase I believe now.
How is your outlook for volumes kind of where do you think we trough and get too.
A level there in that process.
Yes, it's a good question.
Obviously.
A big topic of conversation, but bottom line is the if you look at the refinance will re Financeable universe.
That is borrowed.
Borrowers that have mortgages that are in the money for an equity raise right.
Refinanced it was north upper <unk>.
Total mortgage universe in.
The summer of last year today, it's under 1%.
And even if rates rallied 150, it it wouldn't that number would get up to around 8% to 10%. So the bottom line is we're probably.
At the trial, but we're going to be in this kind of desert for quite some time, unless there's a major reversal in.
In the 10 year more to that kind of like below 3%.
Level.
Yes.
The lines of.
Realigning the dividend how much PPP income is remaining and when we think about that you know it was great opportunity and generate great returns.
As we look forward and you think about realigning that dividend how do you think about.
New investment returns available in this market repurchasing.
And your common stock or something in your own capital stack.
Versus setting that new payout ratio.
Andrew I'll touch on that.
So as of quarter end.
$20 million.
Remaining income to flow through.
The income statement the expectation is that the.
You already have that rolls off in the fourth quarter.
Hey, guys.
And the board thinking about the go forward dividend.
Certainly setting yet in line.
With our historical targeted return right.
Right around 10%.
And so when you look at.
The dividend level pre COVID-19 for the company it was right in line with those.
Return goals so.
I think.
That what we'll see is the dividend starts to triangulate to levels similar to pre Covid certainly wet.
Some thought around establishing a level.
It is.
Covered.
With consistency.
Okay.
It's helpful. Thanks for framing that.
And then I guess.
On a trade off.
Pink increase authorization, you've been quite active more active.
To date, I guess late last quarter, but on the share repurchases. How do you think about returns there versus.
New new deployment returns.
So our new investment returns.
Yes, as you know we the board did increase the <unk>.
Purchase program to $50 million.
Entirety of that was.
Billed in the fourth quarter.
When we think about repurchases its triangulating not only.
On the return.
Difference between where we can invest new money today and obviously the returns produced by the share repurchase but also the liquidity levels in the company.
Given where the shares were trading at the early part of the quarter and the liquidity levels in the company certainly thought.
The repurchase of the shares May have made a lot of sense I think as we look forward.
Maintaining significant liquidity levels.
Is important we're starting to see in half or last couple of months investment opportunities with Roe.
Typically higher than where.
Those opportunities existed at the beginning part of the year.
So it will be a balance between those those three items.
Great I appreciate the comments this morning.
Thanks, David.
Okay.
Thank you we have next question from the line of Steven Delaney with JMP Securities. Please go ahead.
Good morning, Tom and Andrew Congrats on a very solid quarter in these challenging times.
Excited to see that you were able to get <unk> 10 off.
I'm not seeing much in the CLO world.
Your average spread on those loans was 414 basis points.
Well, let's just say that as per the commercial mortgage alert table.
Data source.
I was curious and you said low teens on that.
Our pipeline of loans appears to be sofa plus.
About 550 559 basis points, how should we look at that I guess the question is would you learn from F. L. Tien has probably led to some repricing of your new originations.
I guess my comment is.
Would it be possible with your pipeline in this market do you think NFL 11 can be executed.
And with 550 ish basis points of average spread.
Could you, possibly beat low teens. Thanks.
Okay.
I'll defer to Adam could maybe comment on pricing in the.
The bridge transitional the lower middle market transitional loan market, but I think one of the hallmarks of ready cap is we're very supportive.
<unk> supported the external manager waterfall, we're very attuned to the capital markets. So we re priced daily.
Our retained yield based on the spread at which we can execute the AAA tranches for the CRE CLO those were pre Covid I'm, sorry pre <unk>.
Rate cycle they were.
Adam what was it probably around.
175 over.
Today, there are more in the $2 50 to 300 over for the for the industry, we've been printing at about $2 70.
With that in mind, we weave.
Repriced our spread.
On the production side to achieve an IRR, that's probably in the fifth for the bridge product probably in the 15 plus.
Zone.
As opposed to where we were.
In the first quarter.
Before the impact on credit spreads for it.
<unk> products, we were more in that 13%.
So good.
Widened on our core product to two to 300 basis points in terms of ROE.
Got it Adam.
Yes.
That's encouraging thank you and just one follow up a quick one.
92% of that collateral NFL Tin was multifamily we've been reading about Freddie trying to reactivate or crank up its Q series shelf.
Given your product mix and that program is there any fit there for you. Thank you. That's my last question Adam you want to.
Yes.
Yes, sure, we're certainly talking to the Freddie folks.
Guarding contributing.
Some of our product to the queue shelf.
And what's interesting about that shelf is that we can contribute new originations.
Across all of our multifamily products and then also through our acquisition strategy. So we think that that could be a nice alternative to the CLO space. We're certainly exploring both avenues in this market.
Great. Thank you all for your comments.
Thanks, Steve.
Thank you we have next question from the line of Christopher Nolan with Ladenburg Thalmann. Please go ahead.
Hey, guys, Andrew what was the PPP revenues in the quarter.
On a net basis it was $11 million.
Great.
And also on the dividend realignment is it going to be.
Understood Tom's comments.
We're targeting a lower.
Ro.
Given the absence of PPP and raise is a fair assessment of it.
I would say that the target return.
It's certainly lowered.
That where we are running just due to the magnitude of PPP, but is in line with.
Where the historical targets were pre all of the Covid stimulus programs, so right in that 10% range.
And then for fourth quarter, and so forth should we expect cash on balance sheet to continue to rise.
Yes, certainly.
One of the priorities here is to increase liquidity levels to make sure we're in a position to.
Take advantage of what we believe will be numerous opportunities in the secondary markets.
So the timing of those opportunities is a little bit in flux.
But in general the expectation is.
Liquidity is that that 5% or greater of stockholders' equity at any given.
Okay final question.
I think in the comments was the reduction in the.
Mark to market borrowings.
What areas of the balance sheet should we expect.
Borrowings to go down with that with respect to that.
Yes, it was certainly the majority.
Mark to market liabilities on the balance sheet there are limited.
The majority of our warehouse lines are either non mark Meyer or credit Mark only.
I'd say as.
As we move into our next CRE CLO is certainly not all helped.
Help to transfer some of our warehouse balances and term securitized debt.
And so it'll be it'll be those activities that really drive the reduction.
Okay. Thank you.
Okay.
Thank you.
We have a next question from the line of Crispin Love with Piper Sandler. Please go ahead.
Thanks, Good morning, Tom and Andrew So I actually have a follow up on the realigning the dividend as well. So I'm just curious if you could give just a little more detail there.
Looking forward or I guess in the fourth quarter does that mean, you expect a decrease in the dividend dividend here or are you confident in core earnings covering that 42% level, just considering some potential tailwind from loan acquisitions and rate increases flowing through interest income.
Yes.
You look at book value today.
Share repurchase right around $15 50, and at 10%, we target a 10% target setting a dividend around that that level.
It is the most likely scenario 42 cents on that $50 50, certainly implies a dividend yield in excess of that target.
So the expectation is that 10% targeted return is the driving factor of setting the dividend going forward.
Okay. Thanks, Thanks that makes sense and then.
Just a little bit more broadly.
What are you seeing in the multifamily market currently it's been a popular asset class over the last several quarters, but.
Do you expect that to continue given home affordability issues for single family homeownership or has demand or could demand pull back meaningfully just given the cap rates.
Compared to debt costs in the market here for borrowers.
Well I'll just make one observation and then Adam can comment on it.
But what we're seeing in the broader multifamily space.
Is it definitive reduction in transaction volume widening bid ask spreads, which is leading to the trades that do occur.
With.
Price reductions in the 5% to 15% zone now.
And a lot of that has to do with <unk>.
Called negative leverage.
I E. The cap rates are lower than the debt cost.
And that'll read that will reprice.
It has to do prices have to go down but the key thing here is it a lot of that pain is going to be on the larger balance.
Urban locations.
That.
That have much higher rent price points, our market is more of the lower.
Yes.
Workforce affordable.
Middle income.
Given our small balance focus and that also benefits suburban and better located more desirable locations post pandemic. So.
And then in those markets that they have been brutal highest by the port with the increasing affordability and affordability in residential housing, which we track the external manager has gapped out.
In terms of the time.
It took three.
Three four months is the biggest gap, adding out in 50 years, so anyway with that it is going to make the rent versus buy decision as we quoted.
Was running at about 103% mortgage to rent ratio today, it's at 159% anyway as long winded way of answering your question, but we think that the.
If there's a recession the impact on rent.
And therefore cap rates and returns will be a lot more muted in our sector versus the broader multifamily space.
Okay.
Thanks, Tom.
Hopefully I have just one last question for me just on lunar acquisitions.
However, the opportunities that you're seeing there whether it's is it banks selling core assets are noncore assets or other opportunities and loan acquisitions, just looking at your investment detail. It doesn't look like you've picked up activity in loan acquisitions, yet, but just curious how you're looking at the opportunities that.
In a recession or moving towards that.
Yes, it's a great question from the investment community just that was posted on that.
A few days ago, but we're we're definitely seeing is too.
Funnels for a potential distressed assets going into the to some extent the end of this year, but we are definitely into the first quarter of next year. One is not surprisingly banks that have in particular very large.
Where the ratio of CRE too.
Tier one capital exceeds $2 50, the regulators are starting to press him on that.
As we as they typically do entering a recession. So we're seeing banks approach us for.
Actual portfolio sales or are they getting more creative with credit risk transfers and.
Seller financing so.
We actually bid on a few of those.
And and and.
So thats the bank channel that will increase but the other interesting one is the <unk>.
Boom in private credit funds.
In the transitional loan market, we track over 250 funds in a lot of them aren't going to make it.
They were trying to do CRE CLO.
They're startups and in a way in the capital markets and Theres going to be opportunities to buy those those bridges assets at discounts. So those are the two things are trading desk is tracking that we think will provide ample investment capacity going into the first half of next year.
Thank you Tom I appreciate you taking my questions.
Okay.
Thank you we have next question from the line of Jade Rahmani with <unk>. Please go ahead.
Thanks, very much follow up on that last comment about transitional lending.
Are you seeing M&A opportunities in the mortgage REIT space Theres a number of.
Commercial mortgage Reits trading at.
Pretty low price to book values and could be in that category of needing.
I don't know rescue capital or some kind of financing to get loans off credit lines help with margin calls help with the distress that seems to be beginning to play out.
Yes, that's a good question. It's interesting. This this time, it's more of a.
Like.
It's a slow moving train wreck on credit in particular office.
In other other.
Potholes in the market like for example, Hi, Hi.
Hard money lending on.
Single family homes.
But we don't we arent seeing liquidity crunch and there's a few few of them we've seen there but at this time I think.
The mark the REIT sector and REIT sector learned its lesson.
But yes there is.
All that being said, it's really more of a credit bleed and we're seeing a lot of.
I don't know if capitulation driver, but preliminary conversations around accretive M&A transactions for their shareholders and for ready cap and as you know we look at things first strategically like mosaic and then secondarily in terms of capital.
Raising but yes, there is definitely going to be I would say material M&A.
The increase in the first half of next year.
And would you venture outside of the small loan CRE space or the foothold that.
Ready capital already has.
I think we're more of a turtle then the hair. So we stick to our knitting. So it'll step we might go up upstream a little bit middle market on the bridge side and consider for example, small small commercial lending in Europe , which we've been doing in.
Obviously the hole.
Theres a whole revitalization of.
Application of Fintech into the SBA space that we're ahead of the curve on so I think to answer your question.
We are more likely than not would stick to our core commercial real estate lending business.
What do you expect for home prices.
I know Theres a lot of media reports about home price declines, especially in the high growth markets. The most high velocity markets.
But there's also a lack of inventory on the existing home size not necessarily on the new home side.
At a seven 5% mortgage rate that could be a big limiting factor.
On the volume of transactions so in that kind of framework, what would you expect for home prices.
So actually the external manager has spent a lot of time on this that we have our own models and we buy a lot of.
Distressed residential in the bottom line is that I think you kind of hit the nail on the head affordability typically with this if you look historically.
<unk> at case shiller going back to the <unk>.
And increased gapping out and affordability like this normally would knock home prices down 10% to 15% from the peak.
But because of the what you'd pointed out the fact that supply in relation to demand inventory is so low.
And also.
The tail risk in the mortgage finance system has gone there because of post dfc non QM and other rules. There is no subprime tail and really what drives prices as distressed sales and finally, the mark over.
Roughly half of all U S homeowners have an LTV of less than 50.
And 85% of them are locked into a fixed rate mortgage three points below the.
Yeah.
Below the.
The current rate, so anyways long weighted way of saying our projection for home prices is down 4% to 5% in 2023, and then up to 3% for the three years thereafter, so given all those factors that that won't have a material impact on mortgage credit defaults that one caveat being depend the pandemic baby boom.
I'm sorry, the ones that benefited from the.
Pandemic boom of migration.
Boise, Idaho, those can experience price declines of upwards of 20%. So it is because it can be a lot of SKU and it's you've got to look at local markets, but thats, our more broader macro forecast.
Yeah.
Thank you very much and overall in terms of volumes are you expecting I think Stephen laws asked the question, but pretty late fourth quarter, and then perhaps a pickup maybe in the first or second quarter or what would you expect overall CRE lending volumes.
Adam you want to comment on your views there.
Sure. So we're we're certainly being more selective in this environment and maintaining credit discipline to focus on less volatile asset types.
Certainly taken advantage of the environment and deploying capital only into higher yielding opportunities.
We expect to close roughly $700 million to $900 million of commercial real estate.
In Q4.
Which is which is just just under what we executed in Q3.
Thank you very much.
Alright, Thanks, Ed.
Thank you.
Our final question comes from the line up Eric Hagen from <unk>. Please go ahead.
Hey, Thanks, Good morning, and thanks for taking my question, maybe just a couple of follow ups.
On conditions for Cielo as maybe you can comment on the stability you have.
For funding loans on balance sheet.
And whether you are anticipating any cost.
On the warehouse lines that you have changing in any meaningful way.
And then what are the target assets in Europe .
And how much capital do you think you can eventually see ourselves operating with there.
What is the snapshot of the targeted investments that youre, making in Europe look like relative to something like <unk>.
Target domestically in terms of cap rate and LTV borrower.
Borrower quality and such thank you very much for your question, Yeah, maybe I'm, sorry, Andrew maybe touch on the funding and Adam maybe touch on kind of.
The credit profile of our.
The bridge product, we're originating in the U K versus here.
Yes, so as Tom said in his remarks still roughly.
$2 billion.
And available capacity on warehouse lines today.
In the third quarter, you did see average spreads.
Kris roughly 10 basis points I think.
What we're finding is as lines are rolling.
Advance rates are staying fairly in line with previous levels and pricing is moving.
We're from 25 to 50 basis points. So do you think youre going to see a slight increase in cost is as those lines.
Those lines role.
But certainly think.
Given where we are pricing loans today.
Still very attractive returns.
And ample capacity to fund.
Our pipeline.
Okay.
And then Hey, this is Adam on the European question So sure.
Certainly focusing on deals in geographic.
Geographic areas within the legal framework is easier to navigate and when we can rely on the jurisdictional expertise of our local partners in Europe definitely interested in opportunities located in gateway cities like like Dublin, where there is really a material housing shortage similar too.
Two what we see in the U S.
So I would say.
We're certainly focused similarly on how we're lending in the U S. We're focused on less volatile asset classes that have shorter duration leases, which really serve as a hedge against inflation specifically in the multifamily sector, where there also tends to be a shortage of good quality affordable housing again similar to <unk>.
United States.
And with that said there there are other property type we focus on and are looking at opportunistically, such as industrial and self storage assets.
Got it that's helpful. Thank you guys very much.
Thanks.
Thank you ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call back over to Tom capacity CEO for closing remarks over to you Sir.
Okay, well, thanks, everybody for their continued support and look forward to the fourth quarter earnings call next year.
Thank you ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your thoughts.
Okay.
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Yes.
Okay.
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