Q4 2022 Apollo Commercial Real Estate Finance Inc Earnings Call
Speaker 2: Good day and welcome to the Q4 2022 Apollo Commercial Real Estate Finance Inc. Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Thank you.
Speaker 3: To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. 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.
Speaker 4: least regarding forward-looking statements.
Speaker 5: Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. In addition, we will be discussing certain non- GAAP measures on this.
Speaker 6: to update our forward-looking statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apolloecraft.com or call us at 212-515-3200. At this time, I'd like to turn the call over to the company's Chief Executive Officer,
Speaker 7: Stuart Rothstein. Please go ahead, sir. Thank you, operator, and good morning and thank you to those of us joining us on the Apollo Commercial Real Estate Finance Fourth Quarter 2022 Earnings Call. I am joined today by Scott Wiener, our Chief Investment Officer, and Anastasia Moronova, our Chief Financial Officer.
Speaker 8: The consistent credit performance of ARI's floating rate portfolio of loans produced strong operating results in 2022 as evidenced by substantial earnings growth and a well-covered common stock dividend. Our team originated over $3.7 billion of loans and grew the portfolio to $8.7 billion.
Speaker 9: focus assets, freeing up underperforming capital and redeploying it into newly originated loans underwritten to generate attractive risk-adjusted returns.
Speaker 10: Proactive steps also were taken to strengthen ARI's balance sheet, expanding and diversifying financing sources, and extending the term on several facilities. As a result of these efforts, ARI continued to demonstrate the resilience and earnings power of the company's business model.
Speaker 11: 2023 begins with the real estate markets continuing to face headwinds from elevated interest rates and concern over both additional fed rate increases and the potential for an economic recession, while historically inflation has been a positive for in place real estate.
Speaker 12: In the short term, the rise in rates is leading to a repricing of assets.
Speaker 13: Sellers and buyers as well as lenders continue to reconcile their views on value, and as a result, transaction volume has slowed.
Speaker 14: Importantly for ARI, given the robust level of loans originated over the past two years, ARI's portfolio remains well positioned to continue generating distributable earnings in excess of the common stock dividend while taking a measured and opportunistic approach with respect to new capital deployment.
Speaker 15: As always, ARI is fortunate to benefit from Apollo's broader commercial real estate debt platform, which originated over $13 billion of loan transactions last year. Apollo remains active, originating, and closing transactions in the marketplace, which enables ARI to access real-time market data.
Speaker 16: and information as we assess the use of the company's investible capital. While transaction velocity has slowed, the market remains open for assets to be refinanced and as evidenced by the $2.2 billion of repayments received in ARI's loan portfolio over the past year.
Speaker 17: ARI's repayments were across varied property types and geographies.
Speaker 18: In most instances, properties were refinanced as they achieved business plans.
Speaker 19: However, there were also situations in which other capital sources were willing to provide financing in order to put capital to work at attractive attachment points and yields, and AI was the beneficiary of a full or partial paydown.
Speaker 20: Notably, ARI had several office loans either fully or partially repay, totaling approximately $650 million during 2022. And as of year end, office exposure had decreased from a high of nearly 30 percent at the end of 2020 to just 19 percent of the current portfolio.
Speaker 21: That exposure was further reduced after quarter-end as ARI received full repayment of a loan on a London office building and partial repayment on loans secured by office buildings in Chicago.
Speaker 22: What we have seen with respect to repayments is the importance of working with both well-capitalized, high-quality institutional sponsors and subordinate lenders.
Speaker 23: In many instances, borrowers recognize the long-term value inherent in their underlying properties, and have the patience and capital to support properties until business plans are achieved and markets normalized.
Speaker 24: Shifting to the portfolio, at year end, ARI had 61 loans totaling $8.7 billion. Near quarter end, we sold the properties underlying ARI's Miami Design District loan to a sponsorship group with significant experience in the neighborhood.
Speaker 25: which freed up approximately $180 million of capital.
Speaker 26: As part of the transaction, AI provided 60% loan to cost seller financing.
Speaker 27: There has also been positive operating performance at ARI's Hotel in Washington, D.C. While we are still considering selling the asset, the hotel produced positive cash flow in 2022 and is rapidly approaching pre-pandemic performance levels.
Speaker 28: Work remains on the other focus assets, however we are extremely pleased with the positive outcomes achieved this past year, which we believe highlights the strength of Apollo's asset management capabilities in addition to the ongoing focus and commitment to the preservation of capital.
Speaker 29: Turning to the right side of the balance sheet, as we look ahead to 2023, ARI's only corporate maturity is the $230 million of convertible notes coming due during the fourth quarter of the year.
Speaker 30: Similar to the convertible notes that matured in 2022, ARI will closely monitor the credit capital markets as the year progresses and consider a capital markets transaction to repay the notes while also at all times being prepared to repay the notes using existing liquidity if needed.
Speaker 31: in which AI earned 48 cents per share while trading at approximately 75% of book value with earnings supported by a portfolio consisting of 98% floating rate predominantly senior loans.
Speaker 32: With that, I will turn the call over to Anastasia to review ARI's financial results for the quarter.
Thank you, Stuart, and good morning, everyone.
ARI produced strong financial results in T-4, with distributable earnings prior to the realized losses in impairment and investment of $69.3 million or $0.48 per year.
Gap net loss available to common stockholders was $7 million, or $0.06 per diluted share of common stock.
Aries portfolio remains well positioned for rising interest rates, as 98% of our loans are floating rate. And as of quarter-end, all our US and European floating rate loans were in access of their respective floors.
An additional increase of 50 basis points in the global floating rate interest benchmarks.
would lead to approximately a 9 cents per share increase in that interest increase.
First, folio credits also remains strong, with no additions to the list of focus assets during the quarter, and a resolution of one of the largest focus assets, the Miami Design District loan, as mentioned by Stuart.
The resolution of this asset freed up non-performing capital, a portion of which was immediately redeployed into seller financing.
As of December 31, the weighted average risk created of area-ized loan portfolio was 3, with less than 3% of the loans in the portfolio based on principal outstanding risk created 4 or 5.
During the quarter, there was an increase in the general sea cell allowance, of 5.7 million, bringing it to 36 days' point of the lone portfolio's amortized cost space as of December 31.
The increase is attributable to the more conservative macro outlook with respect to the economy, partially offset by the impact of virtualist reasoning. Also, year in the quarter, AI reported 36 when 5 million increase in the specific CISIL allowance.
for the mezzanine loan secured by the for sale residential project located at 111 West 55th Street.
In accordance with AI methodology, balloons that are individually assessed with specific Cecil allowance, we compare the fair value of the underlying collateral to the care and value of the loan.
The value of the underlying collateral is typically determined using the cash flow forecast model.
In the instance of 111 West 57th Street, cash outflows in the model, comprised, the expected remaining in cost to complete the project, including carry costs and borings.
capital inflows are based upon net sales proceeds driven by assumptions around the timing and price in a future unit sales which take into account a number of factors.
including prior sales activity, recent and expected closings, overall market activity, and current buy interest, as indicated by food traffic and broker inquiry.
For a counting purposes, within Calculate the net present value or MPD, we'll expect a cash flow and compare the MPD to the current carrying value of error either by the generate?"
In our most recent analysis, the forecast model still shows that the nominal projected cash flows, free A&E and PV discounting, exceed ARIA's fully funded basis, net of the prior 30 million reserves.
However, given the more conservative view on timing and net sales proceeds on an NPV basis, we took the additional 36.5 million reserves.
It is worth noting that to the extent that Oforca is realized and ARI's current basis proves to be covered by nominal precedes.
Any incremental reserves taken based upon the discounted cash flow analysis will be reversed over time.
We will continue to provide updates on the project as there may be future differences in the non-analyne discounted NPV view of the asset value, which may potentially result in further adjustments to the specific CIFIL reserve in the future.
It is worth noting that since the refinancing of the Steinway Capital structure in August of 2022, net proceeds from the sale of seven units have reduced the balance of ARI's senior loan by $111 million.
And the principal balance of the senior loan as a year end was 277 million.
From this point, proceeds from the future unit sales will be used to pay down the senior loan and the MESB loan on a pro-RATA basis until both are fully repaid.
Currently, there are two penthouse units in the tower and one unit in the historical Steinway building expected to close within the next few months.
Proceeds from the sale of these three units will further decrease the outstanding principal balance of ARI's senior loan and Medanin B loan by approximately $75 million.
With respect to realized events, during the fourth quarter, AI recorded a 24.9 million realized loss, in connection with the Miannian Design District loan and the loan secured by a hotel property in Atlanta, Georgia.
There was no impact to the book value for the year as the realized loss represented the write-off of previous allowances.
With respect to the Atlanta loan, we opted to realize the loss in the current quarter due to certain facts, structure and considerations.
Despite the additional reserves and realized losses taken during the quarter, area is book value per share excluding general seasonal reserves and depreciation with $15.78 at year end, an increase of 2% over last year.
Book value in 2022 benefited from the company's earnings in access to the common stock dividend and the gain realized on the acquisition of the multifamily development in Brooklyn, known as the BRUC.
With respect to eraized borings, eraize in compliance with all covenants and continue to maintain strong liquidity.
ARI ended the quarter with 232 million of total liquidity, which was a combination of cash and undrone credit capacity on existing facilities, and one billion upon unconverting loan support.
ARI's debt equity ratio at year end remained constant compared to the previous quarter end at 2.8. We're currently in discussions with several financial institutions to further expand and diversify our boring relationships.
And with that, we would like to open the line for questions. Operator, please go ahead.
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 1-1 again. One moment while we compile the Q&A roster.
Today's first question will come from the line of Steven Delaney with JMP Securities. Your line is open. Surex, thank you and goodbye.
Thanks. Good morning everyone and congratulations on the nice close to 2022, in terms of resolutions and strong, distributable EPS. Starting with the EPS 48 cent before real-ass losses, this is a nice increase over 37 cent in the prior quarter.
Can you comment if there were any one-time items or possibly significant prepayment fees that were included in the 48-cent and possibly quantify that for us as far as anything that we shouldn't expect to see again in the first quarter of this year? Thank you.
Yeah, the simple answer is no. Steve, it's really the benefit of obviously rising interest rates, but then also putting to work capital that heretofore has not been earning a return.
Yeah, so the more capital invested in you've got the LabWortail win.
invested and you've got the lab or tailwind so yeah okay well
We were 40 cent and probably it sounds like we got to step that up, but that's for another time. Stuart, the loan portfolio, you grew, I guess about 10 percent in 2022 to 8.7. Do you expect net growth in 2023 given your liquidity position?
There's not a lot we have to do in order to keep paying the dividend and I think that allows us to be somewhat more selective and thoughtful as we think about deploying capital. I think the increase in the portfolio overall was obviously very healthy.
So, um, originations during the first half of last year, but also as I alluded to in my opening remarks, I think it's sort of somewhat misappreciated that we've transferred not all, but just about all of the portfolio from, um, mes to first mortgage and obviously
First mortgages levered versus mezzloans unlevered just naturally leads to a larger portfolio size. It's an inexact science.
We certainly are open for business and expect keeping our capital working, but I think from a portfolio sizing perspective.
You know, modestly up, just as we continue to get paid back on some things and redeploy capital, we've got some excess liquidity going into the year, but probably inside of what took place last year vis-a-vis portfolio growth.
Thanks for the call. I appreciate it.
Thank you. One moment for our next question.
And that will come from the line of Stephen Laws with Raymond James. Your line is open.
Hi, good morning. Hey Stuart.
You know, we'd love to get some comments, you know, you guys do.
focus more on Europe than most of your peers, and I was kind of looking at your breakout and your deck.
You know, UK and Europe's about half of your office exposure. It's about 70% of your retail exposure is UK. Can you maybe talk about pros and cons or what you're seeing over there that maybe we don't hear as much being talked about as far as those exposures?
Yeah, look, at a high level, let me start by saying, right, as you think about what we've done over the last 12 to 18 months, these are the moving ratings around or taking assets, specific allowances, etc. Notable that none of that activity has been in Europe .
which should be certainly an indication that from our perspective we believe the portfolio is performing well. I think at a high level on the asset side, our strategy in Europe has really been two-fold. We found some situations where we've...
provided loans against things that are...
longer term lease and envisioned for redevelopment renovation at some point in the future, but feel perfectly comfortable with existing credit today. And then we've obviously done the traditional, you know, call it office renovation bridge type of lending.
We've had assets that have performed quite well and we've been paid off because of that and we've had other situations where
There was sub-get or other capital subordinate to us that as business plan was being achieved sought to take us out. I guess the high level commentary on office in Europe in general is that office usage in Europe hasn't gone through the fits and starts that we've seen in the US with...
though I would say the concerns in Europe are a little bit more concentrated, i.e. it's tied to for the most part energy prices. So I would say on the office side in Europe we've stuck to major cities and have generally been quite pleased with the performance of the portfolio.
On the retail side of things, the strategy in Europe has been more...
I'd say non-traditional retail and that we've done outlet center in Europe , and then we've also done Call it a bigger box concept both concepts which historically have proven to be much more recession resilient in terms of
their performance, given the price point which the tenants are selling goods, I would say...
Performance has been good on a debt yield basis. I think given that it's retail, we were able to strike some pretty attractive terms from our perspective. So as we look at
rent levels versus our loan basis. We feel very comfortable from a debt yield or cap rate perspective if you think about it at that level. But generally speaking, happy with the portfolio in Europe . As you've heard me say on prior calls,
a little bit more selective with Europe today, A, because of where Europe's gotten in terms of sizing of our overall portfolio, and I'm not sure we envision it being any bigger in terms of percentage, and then also given shifts in currency rates and the impacts of...
and I'd also say from a liquidity perspective.
Similar to the US, slow down in the market overall, but still plenty of capital available for deals that are ready to be sold or deals that are ripe for refinancing. Great, thanks for those comments, Stuart. Those are helpful. My follow-up question, I want to follow up on Steve's initial question.
You guys have transitioned the portfolio to almost entirely senior loans. And when I look at a leverage table versus peers, 2.8 is a little below most, maybe in the mid or high threes on a total leverage basis. Maybe it's not near term, but kind of as you think medium term.
On an all floating all senior loan portfolio kind of where do you envision? You know leverage moving do you think it gets to the mid threes or kind of how to how does that? Look on a median firm basis and how much does it depend on kind of your financing mix as you move forward?
Yeah, I think it gets roughly speaking to three, maybe a tick ahead of three on sort of an asset specific basis if you think about an all first loan portfolio, right? We eliminated 2
$350 million of corporate leverage with respect to the convertible notes last year. I think it's
Certainly, reasonable to expectable eliminate $230 million of corporate leverage with the convertible notes.
maturing in the fourth quarter of this year and unless there was a way to
attractively replace that corporate leverage at some point. I think
You run the book, you'd call it three to three one turns of leverage and maybe at some point if there was attractive Corporate level financing you might move you know towards the mid threes, but I think for now You know as we project out. It's sort of three three point one times
Great. Which makes sense if you think about most of our repo borrowings or call it 70-75 percent advance rates.
Yep, yep. Great. Thanks to our trip.
Thank you. One moment for our next question.
We'll come from the line of Jade Romani with KBW. Your line is open.
Thank you very much. Regarding the credit.
Can you hear me? Yep, there you find.
Okay, thank you. Regarding the broader credit outlook.
Can you just make any comments on what you're expecting and related to that?
You know, away from the focus list assets, which you've spent some time talking about, you know, the ones with specific Cecil reserves and also on which they've been some disclosure. Maybe talk about...
If you're expecting any further deterioration and performance elsewhere, I notice two loans move to risk-graded four. Maybe if we could just comment on the credit outlook.
Look at a high level.
You know, I guess I'd say from an accounting perspective if I was truly worried about something today Accounting doesn't let me decide when I want to reflect my concern. I would need to reflect it now So I would you know, I think you should interpret
our disclosure and what we've done from a rating perspective as indicative of what we're truly losing sleep over. Today, I think at a high level,
We've managed through a lot of what we would describe as the focus assets still work to be done on some of them.
I think we like everybody else or trying to figure out where the economy is ultimately headed. I would say...
The market, generally speaking, is functioning in the extent that if people need more time to execute their business plans, I think they recognize that they don't get more time for free and there are very productive discussions around...
extensions and exchange for partial pay downs, etc. But I would say...
I don't think our credit view has changed a lot over the last.
quarter or two other than I think we've gotten paid off on some things that we're happy to have gotten paid off you heard me reference in office building in London obviously resolving Miami design district made sense but yeah there's no obvious
warning lights other than beyond what we've addressed previously at this point. Okay, thanks. Technical question on the non-accrual loans. There's 581 million. There's Atlanta. 111 West 57th.
Cincinnati.
Are there any other loans because when I add up the specific Cecil reserves, it's around 345 million And then there's two hundred and thirty four million to get to that five hundred and eighty million of total non accrual loans I think it's probably pieces of 111 which West 57th, but are there any other loans?
that should be included in there in the non-acruel bucket. Nope, that's it. It's pieces of 111 by 57 Liberty Center, which is the Ohio asset in Atlanta.
Thanks for that. So, looking at upcoming maturities, how are you feeling about those?
You know, just going through the disclosure, you provide some of the, some of the deals would include the Cincinnati retail loan has a September maturity. I suspect performance there's been improving given the uptick in bricks and mortar retail. Chicago office.
I'm not sure about that one and a few others. Yeah, I think Liberty Center is
Definitely performing better occupancy levels are up. There's a few things on the edges. These would be adding some greater density, these would be potentially hotel or multi-family that will help as well, but Liberty Center.
while it's a maturity, right? The end game on Liberty Center at some point is we sell the asset, right? Because we are effectively...
It's a beneficiary of what economics remain. I would say...
Asset is performing better, getting close to the point where perhaps later this year, early next year, a sale could make sense. But I think it's also somewhat dependent on interest rate environment and what financing would be available for a purchaser of the asset, but definitely...
full or partial repayment in those situations. And obviously a partial repayment will be some sort of consensual discussion around incremental time for something that allows us to get to a basis level where we're comfortable remaining in the transaction. That includes the Chicago office assets that you referenced. Okay, thanks for commenting on that.
repayment in those situations and obviously a partial repayment will be some sort of consensual discussion around incremental time for something that allows us to get to a basis level where we're comfortable remaining in the transaction. That includes the Chicago office assets that you reference. Okay thanks for commenting on that. Sure.
Thank you. One moment for our next question. A line of Eric Hagen with BTIG. Your line is open.
Hey, thanks. Good morning. Maybe just following up a little bit more on the reserving and credit. How strong of a connection would you say there is between conditions in the CNBS market, financing markets more generally and the amount of reserving that you're doing? Like are there scenarios where the macro could...
maybe hold up okay, but the capital markets are more dislocated and how that maybe impacts the amount of reserving you're doing.
I just I'd say at a high level and without making it specific about the CMBS market, I think there's plenty of liquidity.
in the real estate credit environment in general.
Yep, okay. I mean, it's been, and then a separate question here. I mean, it's been typical.
You know, historically for the company to split loans with other lender-accounted parties, which I think can be a nice way to offer opportunities that you might not otherwise.
have the two questions there. I mean, how does the splitting of loans impact any negotiating power in the case of a loan?
Extension or recapitalization or modification is a more friction in a tougher environment as a result of splitting those loans. And then second, how available will that opportunity be going forward? Like is there going to be as much appetite from others to have that?
to take on that opportunity to split loans. Thank you.
Yeah, I guess I'd say at a high level, at a high level generally our splitting of loans has actually migrated away from splitting with other...
parties and more the para-pursuit splitting of ARI and other Apollo affiliated capital and to the extent we're talking about para-pursuit interests it's generally not a lot of
pressure or divergence of opinion vis-a-vis dialogue. Historically, we have done some senior-junior sharing of loans, and obviously in any instance where you're sharing a senior-junior piece or creating senior-junior structures.
The inner creditor agreement is pretty clear in terms of whose rights are what as you work through a situation. So I would say today, not overly concerned and there's one particular situation that comes to mind.
that worked for all three parties given that everybody held parapasoo interests and as a result you need to get to point where something works for everybody. So again, I appreciate the question and you know.
Nothing has come up on our radar screen in doing this for 14 years now that leaves us overly concerned about the ability to resolve things.
Yep.
Let's help. Thank you guys very much.
Thank you. One moment for our next question.
And that will come from the line of Rick Shane with JP Morgan. Your line is open.
Hey everybody, thanks for taking my question. Steve Delaney made an important observation in terms of spread income and frankly in some ways
wider spreads are offsetting some of the impact of credit. But when we think about that, to some extent that's been for borrowers so far relatively free because they've enjoyed rate caps on their loans, I'm wondering as we move into an environment where loans are extending.
and some of those caps are expiring, how you think about that and how you work with your borrowers to mitigate the risk from higher rates that will start to impact them now.
Good question, Rick. The short answer is there are no extensions without the purchase of a rate cap to cover the remaining term of a loan. I think you highlight an important issue which is...
Beyond potentially rebalancing the loan balance of a loan, the increased cost of CAPS is certainly another challenge for
Owners slash borrowers these days I would say in
Certain instances where you've heard me refer to pay downs in exchange for extensions in a consensual fashion, you should assume that when I say pay downs I am referring to both.
principal pay down and the purchase of additional caps as necessary and you can also infer from my comments that
At times, the capital necessary to do that might not come from the original borrower, but it might actually come from capital that's willing to...
Take a mezzanine piece or a preferred piece in between our original borrower and our senior position.
Got it. Okay, that's helpful. And again, remember, we're not in the market shopping for caps. Can you give us
Some context on you know take a hundred million dollars notional What a transaction would have caught what a cap might have cost three years ago and what it would look like versus what it might cost today
You know, not exact numbers, but I would say ballpark.
hundreds of thousands of dollars versus millions of dollars today.
Okay, that's helpful. Thank you guys. Thank you. One moment for our next question.
And we do have a follow up question from Jade Romani with KBW. Your line is open.
Thank you very much.
With the stock down around 5% today and the strong, distributable earnings, X credit items, it seems the market's not overly concerned or shouldn't be overly concerned about dividend coverage. That's not really the issue. However, book value did decline by around 2.5%. And there was a further reserve on one of ...
you know the junior mezzanine a position and the senior mezzanine position they're very large both north of 190 million
So, ignoring the junior mezzanine B position, which now has been written down to 15.5 million. What's the last dollar basis or what's a way to think about and get confidence with the approach to coverage on that position?
You're talking about the senior loan and the senior mezz position? Jade, I'm just on a per- Yeah, and the junior mezz position is $255 million, so that's also quite large. The three of those sum to $720.8 million. I mean, it would seem that the junior mezzanine B position of $55 million is $2.5 million.
about. I mean the way we think about it, Jade, if you look at the senior loan and the senior Mezz position, net of sort of what's you know, taken place to date already. You're talking about from from ARI's perspective.
You're talking about $430 million of basis. If you think about the fact that we actually have a partner in the senior loan with another financial institution, you're talking about $570 million of value in the remaining units to get those two pieces fully paid off.
Okay, and how many remaining units are there? Like something in the range of 40 or a little less than 40?
Okay, and they're going for around 20 million a piece.
I mean, you can have units of 10 million, you can have units of 50 million, just tell me what you and your family want to move into and we'll find the right unit for you. But what do you think?
I mean an average just to qualify that face is
Ah Aah Enough dead spirit I
Let's put it this way. I would say at $575 million of value, you are inside 60% on a loan to net sellout basis including selling costs etc.
Okay, so how much risk is there to the junior mezzanine? So it seems like you're suggesting.
that there's the 575 million that's your senior position plus the other senior senior mortgage. It's our mortgage right it's the full mortgage which is shared plus our senior MES position.
Okay, the 575 is ARI's senior loan and senior mezzanine position plus the other partner's senior loan.
is ARI Senior Lone and Senior Mezzanine Position plus the other partner Senior Lone.
So then the risk that you are suggesting is in the junior mezzanine A and B positions. Those collectively total 270.6 million. I mean would it be fair to haircut those two positions?
I think what Anastasia was trying to explain, and I don't want to be.
Cavalier about this.
The way we see the world now, even if you assume certain haircuts to get assets sold or a unit sold on a nominal basis, we still think everything is covered.
from an accounting perspective which requires a DCF analysis, not just a nominal basis. You could have a situation where there is some incremental allowance in the future based on pacing, not based on any changed view of what units will sell for, but then you'll actually recover that allowance when units are sold and you actually...
Great, well I appreciate the color. Thanks so much.
Sure.
I am showing no further questions in the queue at this time. I would now like to turn the call back to Mr. Rothstein for any closing remarks.
No comments at this point. Thanks, operator. Thank you all for participating. This concludes today's program. You may now disconnect.
Thank you all for participating. This concludes today's program. You may now disconnect.
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