Q1 2023 KKR Real Estate Finance Trust Inc. Earnings Call
Okay.
Good morning, and welcome to the KKR Real estate Finance Trust, Inc. First quarter 2023 financial results Conference call.
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I would now like to turn the conference over to Jacks with Taylor. Please go ahead great.
Great. Thanks, operator, and welcome to the KKR Real estate Finance Trust earnings call for the first quarter of 2023.
As the operator mentioned this is Jack Switala.
Today I'm joined on the call by our CEO , Matt Salem, Our President and C O O Patrick Mattson and our CFO Kendra Decius.
I would like to remind everyone that we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in our earnings release and in the supplementary presentation, both of which are available on the Investor relations portion of our website.
This call will also contain certain forward looking statements, which do not guarantee future events or performance.
Please refer to our most recently filed 10-Q for cautionary factors related to these statements.
Before I turn the call over to Matt I'll provide a brief recap of our results.
For the first quarter of 2023, we reported a GAAP net loss of $38 million or negative <unk> 45 cents per diluted share, including a seasonal provision of $65 million or 88 cents per diluted share.
Distributable earnings this quarter were $33 $1 million or <unk> 48 per share.
Book value per share as of March 31, 2023 was $17.16 a decline of four 7% quarter over quarter.
Our Cecil allowance increased to $2 48 per share from $1 61 per share last quarter.
The increase was primarily due to additional reserves for two five risk rated office loans, where the sponsors have commenced sales processes for the properties as well as heightened market volatility uncertainty and reduced liquidity, particularly in the office sector.
Finally in March we paid a cash dividend of 43 per common share with respect to the first quarter.
Based on yesterday's closing price the dividend reflects an annualized yield of 15, 5%.
With that I would now like to turn the call over to Matt.
Thanks, Jack and good morning, and thank you for joining us today.
Hey, Ross generated strong distributable earnings this quarter of <unk> 48 per share relative to our 43 cents per share dividend.
Our 100% floating rate portfolio.
The benefit from the high interest rate environment.
As you have heard us say for the last few years.
We have been hyper focused on our liability structure and liquidity.
This focus has created best in class non mark to market financing and very high levels of liquidity.
Maintaining K Ras defensive posture remains our primary focus today given current market dynamics.
Rising interest rates and recession risks continue to weigh on real estate transaction volumes and valuations.
Beginning in the summer of last year, the largest money center banks were largely inactive.
And since our last earnings call, we have seen two large regional bank failures.
While <unk> does not have any financing or direct exposure to regional banks.
We do expect this to cause tightening credit conditions.
As regional banks take a more conservative posture.
And regulators increased their oversight.
The expectation of tightening credit conditions is weighed heavily on nonbank financial institutions and created a narrative around already declining real estate valuations.
In our own portfolio.
Our asset management focus is on our loans secured by office properties.
We have increased reserves this quarter.
It took two more office loans on our watch list with the risk rating of four.
The office sector continues to be challenged with limited liquidity and values down significantly.
Given the high levels of liquidity, we have taken a proactive approach in working through resolutions on our identified loans with our sponsors.
Our approach has been direct.
And we are leveraging the full resources of KKR.
Optimize outcomes.
But to be clear, we're not looking to kick the can down the road.
Well, we find reasonable liquidity and valuations we will transact.
However, we're not forced sellers.
So where there is little liquidity.
We will take title and manage the property at our lower basis.
Patrick will discuss updates to our watch list in detail later in the call.
As we signaled last quarter, we expect to turn off the portfolio turnover modestly throughout 2023.
In the first quarter, we received loan repayments of $87 million and funded 204 billion.
For loans previously closed.
In previous quarters, or a net increase of $117 million.
Our portfolio was built defensively.
With focus on resilient property segments of the market.
Nearly 60% of our portfolio at quarter end was comprised of multifamily and industrial properties.
We had no new loan originations this quarter as we look to maintain a robust liquidity position.
Our partnership with our manager KKR and the strength of our real estate platform.
Allow us to maintain a sophisticated view of the current operating environment.
We have a dedicated team.
Of approximately 60 real estate credit investment professionals.
Beyond <unk>, we are actively lending for a bank and insurance SMA as well as our private debt funds.
This diversified capital base.
Allows us to stay active in the market and service our strong client relationships.
As a result of our defensive posturing.
Eric was one of the first mortgage Reits to begin lending during COVID-19.
And we feel we are well equipped to utilize a similar playbook when the market stabilizes.
Also worth noting is our managers long term hold position of 10 million shares in the company.
Were approximately 14%, okay rough shares outstanding today.
We believe this is the highest ownership percentage held by a manager in the mortgage REIT sector.
And demonstrates meaningful alignment between KKR.
Hey, Ralph.
As I mentioned earlier.
We were operating with a high level of liquidity.
With nearly $1 billion as of March 31.
Including.
$254 million of cash and our $610 million corporate revolver.
Which was undrawn at quarter end.
As we have discussed in prior quarters, we added over $4 billion of additional non mark to market capacity over the past two years with the support of the KKR capital markets team.
Approximately $2 5 billion was added in 2022 to.
Two thirds of which was done on a truly bespoke basis with financing providers, such as foreign banks and insurance companies and away from public capital market sources.
76 of our secured financing at the end of the first quarter of 2023 was completely non mark to market.
And diverse across diversified across a number of facilities.
And the remaining 24% is only mark to credit.
With that I'll turn the call over to Patrick.
Thank you Matt good morning, everyone.
I'll focus today on our efforts on the liquidity and capital front, but first let me provide an update around our seasonal reserve and watch list loans.
This quarter, we recorded a $60 million increase in our seasonal reserve for a total reserve of $172 million.
224 basis points of our loan principal bounds.
Slightly more than half our total seasonal reserve remains held against the two five rated office loans.
We have a total of seven loans on the watch list as of quarter end.
As we detailed previously we executed a modification of our Philadelphia office loan earlier this year.
And subsequently removed it from the watch list this quarter as anticipated.
During the quarter, we downgraded to office loans to a risk rating of four.
And consistent with past quarters.
I like those loans in our earnings supplemental.
Touching on our two five rated office loans in Minneapolis in Philadelphia.
The respective sponsors have commenced sales processes for the properties and we increased our reserves this quarter to reflect further weakness in the office sector.
As Matt mentioned, we will evaluate the prices and determine the appropriate path forward with the option to sell.
Or own and manage the properties ourselves.
In either case, we anticipate some resolution in the coming months on both assets.
The two new watch list loans are secured by properties in two of the more challenged office markets.
Washington D C and Chicago.
That said both properties have experienced positive leasing momentum recently.
The D C loan, which is the larger of the two is backed by a well located class a office near Dupont Circle.
And following two recent leases is 84% leased.
The Chicago property is also a class a asset is located in the central loop Submarket.
Following some known Vacates, along with 83000 square feet of recent leasing.
The property is currently 70% leased.
Of the 14 office loans.
Eight loans in our portfolio equating to half of the outstanding principal of about principal balance our risk rated three.
This segment of our office loan portfolio.
Is 89% class a and.
And 91% leased.
With a weighted average debt yield of eight 3%.
And our mediant 8.8 years of weighted average lease term remaining.
Yeah.
The average risk rating of the company's broader portfolio was three two.
Consistent with yearend.
87% of our portfolio is risk rated three and we collected 100% of scheduled interest payments across the entire portfolio in <unk>.
And through the April payment date.
An important differentiator for K RAF, particularly in times of capital markets volatility is how we finance our senior loan portfolio.
At quarter end, our diversified financing sources totaled $9 billion.
With $2 7 billion of Undrawn capacity.
76%, our outstanding financing is fully non mark to market and the remaining balance is marked to credit only.
K breakfast differentiate it.
The diversity and resiliency of these sources.
Which includes not only to manage CRE clo's.
But also multiple bespoke financing facilities supported by a number of financing partners.
We are not reliant on a single type of financing.
With no outsized exposure across any of these categories.
Additionally, in the first quarter, we extended our 600 million dollar repurchase facility by two years to December 2025.
And a 500 million dollar warehouse facility to March 2026.
In a challenging macro and banking environment, we were able to extend an aggregate $1 1 billion in financing by roughly 2.5 years between the two facilities.
Okay Rep as well capitalized.
With a debt to equity ratio of 2.2 times and a total look through leverage ratio of four times as of quarter end.
As of March 31, we had $254 million of cash and $610 million of Undrawn corporate revolver capacity.
In addition to this.
We had $100 million of unencumbered and Unpledged senior loans.
Plus undrawn capacity on our credit facilities.
Bringing our total liquidity position to nearly $1 billion.
As noted we have cash on the balance sheet.
Plus ample capacity on the revolver to retire our may 20, twenty-three convertible notes maturing next month.
Following the convertible note maturity in.
And excluding matched term secured financing KBR.
<unk> has no debt maturities for nearly two and a half years.
Thank you for joining us today.
Now we're happy to take your questions.
Okay.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
The speaker phone please pick up your handset before pressing the keys.
To withdraw your question Chris Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Don and Debbie from Wells Fargo. Please go ahead.
Hi, can you talk a little bit about the new four rated loans and what sort of drove you to move those and then I guess are we looking at you know we're just in a scenario where every quarter youre getting migration into the fours and fives why not just build more reserves today, just given the back the.
Economic environment and the pressures in office.
Okay.
Yeah, Dan its Matt. Thank you for joining and I can start by.
Addressing that first question around the.
The new loans that we moved to a risk rating of four mm when.
When you think about the overall office exposure certainly its not our expectation that.
We will continue to see all those loans migrate and I think Patrick did a nice job summarizing why some of the loans that remain are three within our office portfolio well leased long term leases.
And some of which are in extremely strong markets as well for them from a oh from an office perspective. So just as you start to think about the transition and certainly not our expectation when we look at it every quarter and are kind of evaluating all the loans in the portfolio for for any changes, but there's a big component.
About half of that currently that we still feel very comfortable with on the office side.
In terms of the ones, we did transition over.
I think that those two in particular in some of the softer markets for office, obviously D C. You've got the impact of GSA.
And from a work from home policies out of those tenants.
And Chicago is a particularly weak market as well and so that was a lot of the reason why those were and those were transferred in them at that time.
Even despite some of the leasing momentum we've seen them at those assets.
Thank you.
Thanks, Dan.
And the next question will be from Stephen laws from Raymond James. Please go ahead.
Hi, good morning.
I'm not can you.
A matter of Patrick can you talk about the reserve and kind of how we should think about that allocated across the.
The fives and fours versus you know maybe a general for the remainder of the portfolio and then as you know if we read into that kind of new read into kind of that rough allocation look valuation does that imply for the five rated.
Assets versus or the valuation of the origination.
David Good morning, it's Patrick I'll take that question.
So yes, if you think about our fives, what we'd indicated it was about half of our total reserve a little bit more than half of our total reserve is allocated to those and then if you just sort of apply the math there that implies a loss on those loans in the kind of magnitude of 25% to 30% against those five <unk>.
Loans.
If you remove those loans from the portfolio and look at our remaining seats all it's about a 1%.
All of our remaining assets now Theres, obviously, some concentration with our for us because those are attracting a you know a higher reserve than than our three assets, but hopefully that gives you some sense of direction clearly when the assets move from a four to five we're seeing sort of.
Jump in our reserve and sort of loss expectation and you know that.
That's reflected in our reserve analysis.
That's helpful.
I appreciate that Patrick's comments there.
You know what the many asset specifically you know next month maturing I believe.
And maybe even kind of apply this broader across the watch list loans, but you know how.
Can you walk us through the process of how you determined what makes more sense as in Oreo.
How you go about finding a new sponsor maybe to recap one of these deals and provide seller financing. How early can you start those discussions ahead of these watchlists problem maturity dates and then maybe some color on how that process will play out on the sample volumes in the coming months.
Sure.
It's Matt I can take that thanks again for the question Stephen.
Yeah, So specifically on Minneapolis in the two five rated loans.
Our affiliate asset as well.
Those are instances, where the existing sponsor is running a full the.
Full sales process, and we're able to obviously modify and give short term extensions to help effectuate.
Those transactions and we're also able to provide the market with information.
Information around where we'd be willing to provide financing on the potential acquisition. So theres a lot of flexibility there.
Terms of how we think about owning them versus potentially a sale.
And it's where we're running.
Very detailed analysis similar to what the real estate equity team on within picture I would run in terms of what is the go forward look like from a return perspective factoring in the current market environment for leases and tenant improvement cost and leasing commissions and and cap rates obviously.
So.
We're just evaluating all that information to make a buy or effectively a buy or sell decision at this point in time.
Yes.
Great I appreciate the color on that thank you.
And the next question is from Sarah Park Home D. T. G. Please go ahead.
Hey, thanks, everyone. So as we've talked about earlier, both the payback periods are sort of playing defense right now with respect to maintain liquidity and while you're executing on some prior quarter funding looks like there werent any new originations in the quarter can you talk about npls that you might.
It's taken them, but that didn't cross the finish line and why those maybe doesn't look as attractive even with spreads where they are now or was it mostly just a function of preserving liquidity either watch list migration.
Oh sure mismatch I can take that thanks for the question.
I think for for K wrapped in particular.
It's more of the latter two point of your question, it's really about preserving liquidity until we get into a more normal market environment. So we.
We weren't looking at you know a lot of new fundings for the quarter of course, as we mentioned on the call.
Away from <unk>, we have a larger real estate credit business, you're a kick we lend on behalf of banks. We went on behalf of insurance companies, we have private debt funds that we lend them on behalf of and all three of those are actively in the market lending today, we do like the market, we think it's attractive.
I think despite some of the headlines you may see.
It is a you know a.
Fair and competitive market instead of the insurance companies are very active foreign banks are very active regional banks, where active so I'd say almost everyone. All the lending types are still actively lending in the market, albeit at a lower a lower basis because values have come down and the market is just a little bit more conservatively postured. So ltvs have come down so.
We find it to be a pretty attractive.
Overall in the market right now and obviously as things stabilize we hope the UK ref will be one of the first to come out and lend within the mortgage segment again.
Yeah.
Great. Thank you Linda just one more quick one so you talked about how the remaining office at three rated segment, you know, 90% class a 90% leased.
Are there any indicators.
Upcoming lease expirations that investor should know about or any other signs where you think there could be incremental Rex okay. I know I have to.
Property level for that bucket.
I mean these are just given the I think we called the median Walt on those which so for the most part these are very well leased for a pretty long time, but some of them are multi tenant and do have.
I'm sure, there's some near term lease expiration, but nothing not one that comes to mind in terms of like one we're particularly focused on from a re leasing.
Re leasing perspective.
Okay. Thanks, that's it for me.
Yeah.
And the next question is from Jade Rahmani from <unk>. Please go ahead.
Yeah.
Thank you very much.
Starting with the cease of reserve.
It seems you've taken substantial reserves on clearly the risk five rated loans.
The risk four rated loans some math I was doing just assuming.
50% to 75% of this quarter's $60 million provision would imply something like a 10% to 15% loss I was surprised by that given those are ltvs.
Below 60%.
But then addressing your comment about the 1% remaining six a reserve I mean, that's far below the banks reserve levels on their CRE portfolio. Just two examples of USB at 2.5% and Wells Fargo at 176%.
So could you comment on the overall reserve adequacy and how youre thinking about it.
Yeah.
Hey, Jay Good morning, It's Patrick I'll I'll take that so yeah in terms of I guess, the the latter part of your question I think it's really a reflection of kind of where we would sort of view ourselves in this progression clearly with the asset.
Earlier this year we.
Had a realized loss we've got as you noted heavier losses against these five rated loans.
When we start to clean up that book, we would expect that we would get to a more.
Normalized loss number think about what that portfolio. It looks like also when do you start to remove some of those office assets, we're already 60% multifamily and industrial remove the office component or a heavy part of it and that's a pretty significant percentage of our overall.
Book.
I think in terms of the change this quarter clearly bulk of that as we said was was in these five rated assets, but across both the three US three rated assets info rated assets. We saw an increase and I think it's just a reflection of market. That's further deteriorated since the fourth quarter and so.
Losses or loss reserves.
Carried through so at the moment, we feel like we are adequately reserved across the portfolio. Obviously, we'll continue to evaluate.
Next quarter, and we'll you know we'll adjust.
As appropriate but at the moment, we feel like we're at the right level.
Looking at the office portfolio.
You mentioned some statistics on the eight loans rated risk three.
Uh huh.
You know those seem pretty fully occupied with the fully leased with the market where it is today.
The debt yields do seem somewhat close to office cap rates.
Given the uncertainty around secular changes there so.
You know what's the outlook for performance on those deals are you expecting further deterioration I just wanted to mentioned there's another D. C office loan in that portfolio rated risk three.
The Plano, Texas deal was also originated right before Covid and lastly, if you could touch on Bellevue, Washington that looks like a.
You know a large construction loan I I believe Amazon is the anchor tenant there.
What would be the prospects there are Seattle does have quite a lot of supply.
Sure Jade, it's Matt I can take that one.
So it's just work backwards I think of you throw out a couple of a couple of those deals but no.
So when you think about like that construction loan you mentioned that's in Bellevue Washington.
You identified the tenant there.
As Amazon, obviously, a very strong credit.
And that they have a lease signed lease for 16 years for that asset.
So we feel I think good about.
The prospects of that particular deal just given the long.
The long lease term and the strength of the tenant there theyre going to actively build out that space and we expect them to occupy it.
That would be the you know the Amazon deal Plano.
That's an asset that's done extremely well.
We liked the Dallas market a lot we've got actually a couple of other assets in the portfolio that are in Dallas, there little bit more closer read in Uptown and Preston center, but but all three I would say have experienced very strong leasing momentum.
And leasing rates.
And so that's why and that deal has some long term leases as well. So I think that's why we remain.
We remain that remains at three and remain confident in that asset.
The D C office market is definitely a tough market.
It's two of our two of our loans.
Loans are four rated loans are located in D. C again, I've mentioned the GSA.
<unk> comment earlier.
But that particular asset that youre highlighting remains a three because we have a very long weighted average remaining lease term to the U S government.
So we feel good about the credit and we've got.
A lot of a lot of like they're at a decent debt yield as well so.
Each deal is going to be a little bit different but a lot of how we are factoring. This in is honestly, what's the cash flow and how durable is that for how long and those I think in all three of those we've got pretty long very long lease terms.
And just with the debt yield close to office cap rates what are your thoughts on that.
Well I mean, certainly we've seen leverage.
Our our implied leveraging increase on these loans right as we've seen the widening.
As you mentioned of these cap rates not just for office, but costs across everything given the interest rate environment, obviously more more acute in office for sure.
But when we're looking at values.
Of our when we revalue the assets and we do a lot of work on it on a quarterly basis to understand where we think the value is on on each individual deal.
Certainly when we're looking at these three rated loans, we don't think that.
We're above the value of the asset by any stretch.
Yeah.
Thank you.
Thanks Jade.
Is from Steve Delaney from JMP Securities.
Thanks, Good morning, everyone and thank you for taking my questions. So I think I'll give you a break from talking about office the West Hollywood multifamily.
2.8 million per unit that that's obviously, a nice property could you just give us some color as to.
What's going on on the ground there in terms of the you know the appeal of the project or the units and are there any conditions going on there with respect to homelessness or crime did or did it could possibly impact that property. Thanks.
Yeah.
I can touch on that and Steve. Thank you for the questions Matt again.
So that you're right.
It's a relatively high per pound.
Loan amount.
And that's because it's effectively best in class a trophy.
The asset in the market it was built for condo.
For condo sales so it is very.
Very nice project.
It's well located not concerned about crime or homelessness at all.
It's extremely well located.
And we had moved that to afore, because we read some modification discussions around them around a interest rate cap with that particular sponsors so.
It's not really a necessarily an asset or value issue.
And we hope to resolve that here shortly.
It sounds like more of a more technical than than fundamental so thanks for that color.
Just on your workout on the Philly office loan just to confirm your your junior Mezz or I guess, we'd like to call them Hope notes, there's no carrying value associated with that on your books at this time is it.
Are you pairing back.
Hi, Steve its Kendra, that's correct that was fully written off the $25 million on the senior Mezz.
Okay got it so you would be you obviously below the.
The senior Mezz that the the sponsors has put up.
That's right.
That's coming in is ahead of that I hope not.
Yep, Okay, Great and then if you could on the four rated loans or should we assume that all four of those loans. The fact that they they are still four and not five that you are.
Accruing interest or there is interest being paid by the borrower on those loans each month and quarter.
Yeah, So hi, Steve Kendra again, the on the five rated loans. We are still current the sponsors are still current on paying us interest each quarter as you'll notice in our financial statements. We have put both of those loans on cost recovery.
So as you know that means the interest is not running through the interest income line, it's actually being held against the carrying amount of the lawn and garden.
There's a resolution or until we think it that there are indicators that we can go ahead and start recording that interest income again.
I can tell you that our run rate on the two five rated loans interesting comments about $7 million a quarter.
And in terms of quarter over quarter because we.
Kind of staggered when the two loans went on nonrecurring went on nonaccrual.
The difference and interest income quarter over quarter from Q4 to Q1 was about $3 million and you'll see another $3 million go into cost recovery in Q2, and then it's at that point it stabilized on that.
Okay. Thank you I apologize kindred and not because I was actually asking about the four rated loans and the no no I probably didn't make it clear no problem at all but I just wanted to convert I assume there were five rated loans would each would be a special situation, but on the four rated.
Just wanted to confirm that those are all accruing interest or borrowers paying interests, one one way or another that is both things are correct.
Suzanne.
Okay. Thank you all very much I appreciate the conversation.
Thanks, Steve.
Thank you and once again, if you have a question. Please press Star then one.
The next question is from Rick Shane from Jpmorgan. Please go ahead.
Thanks, everybody for taking my questions. This morning.
Can you talk a little bit about capital allocation dividend yield is mid teens now in order to support the dividend.
On a book basis, you need to generate an Roe.
North of 10%, which is a pretty high.
Return, even in this environment with high rates.
At the same time, the stock's trading at a substantial discount to book value.
Does it make sense to reallocate some of the distribution a return of capital to shareholders.
The dividend and be more aggressive in terms of repurchasing shares.
Thanks, Mike appreciate the question, it's Matt I can I can take that one.
Just as it relates to the.
The dividend and the coverage I think Hugh you had asked about there.
Obviously this quarter.
As we've seen over the last few quarters and as we look ahead a little bit.
We're really benefiting from the current interest rate environment and so we're we're you know easily cover the dividend this quarter at 48 cents a share of distributable earnings versus the 43 cents pay out and I think so I think we feel good about the earnings power of the company just on a you know come on ops.
<unk> learning on operating earnings basis.
And so that's you know that's probably the biggest consideration when we start to think about it we start to think about the dividend.
But yeah, I mean, I understand that but when we think about the reserves and the implication that the reserves will manifest into charge offs and so there's this.
There is an accounting narrative of distributable earnings that distributable earnings as the basis for dividend and that it doesn't and it is impacted by charge offs not provision, but overtime accounting also suggests that distributable earnings in GAAP earnings should.
<unk> and presumably that's going to happen in the second half of this year and so that youre going to wind up in a situation potentially where distributable earnings is below dividend.
Why not get ahead of that and also give yourself the opportunity to.
To buy the stock at this discount.
I mean, let me just touch on it but the share buybacks I think we've been pretty consistent in terms of certainly versus the peer set in terms of buying back stock. When we thought it was attractive I certainly think the stock's attractive now.
Been weighing liquidity, a little bit more heavily given what's going on in the banking sector and the overall volatility in the market and I think we'll continue to prioritize liquidity here in the you know.
In the near term.
And I understand the you know the math that you're thinking through as it relates to the what's the sustainable earnings power of the company and certainly if we thought that that was going to decline significantly and we couldn't sustain the dividend then we would we would evaluate that and obviously.
The dividend is a board.
Ford level decision, but right now from what we're looking at with the existing portfolio with the current interest rate environment, and even thinking through the forward curve, which obviously is.
A little bit downward sloping towards the end of the year.
We don't see what you're describing in terms of.
The earnings power of the company right now so.
Again, if it starts to happen or manifest itself and it would be something we'd have to we'd have to evaluate but not not in our current projections not what we're seeing.
Got it totally fair and then look at the end of the day, having too much liquidity is a situation that you can.
Remedied quickly as you choose to having not enough liquidity.
Lot harder to fixed fast.
100% agree with that.
Thanks, guys. Thank you Rick.
Thank you.
The next question is a follow up question from Jade Rahmani from <unk>. Please go ahead.
Thank you for taking the follow up as it relates to liquidity.
How are you thinking about the dynamics there post the convert repayment that will clearly reduce your cash on hand.
Are there good news items in the portfolio in terms of.
Deals that have really executed well on their business plan that you expect.
To be paid off or to be sold things of that nature refinance that would create liquidity or perhaps they become those deals become more leveraged level.
Yes, Jay this is Matt I can I can take that like we I would say.
We fully expect to get repayments.
On our on our portfolio this year, even though Q1 was a light year light quarter.
<unk> of repayments.
When you look at what we have in the portfolio, obviously, our largest property type of multifamily and as those stabilize I can guarantee you. We are not the most efficient financing for stabilized multifamily property, especially given what the agencies are lending at in today's market and where we see insurance.
He is lending as we compete against them with our insurance capital et cetera. So there's a lot of liquidity for the favorite asset classes right now it really is a tale of two cities in terms of the have and the have nots.
Office, obviously being in the have nots side, but I think we're gonna get a fair amount of repayments over the course of the next couple of quarters, which will increase liquidity and of course.
There is also capital markets opportunities for us as well, so but you know right now with the convert into small obviously, a very it's only $144 million a small piece of the overall capital structure. So like you said, we've got cash to pay that down.
And what kind of capital markets opportunities do you think would be interesting is there possibility to issue a CLO on very low leverage very high performing collateral.
Or is there the possibility to be.
Taking your best assets selling a notes to the insurance company doing affiliate transactions participations and things of that nature.
Yeah.
I mean, the securitization market has opened so if we wanted to go that route I think we certainly could I don't think that would be a route that we would explore right now because.
We have our existing CLO facilities that are.
Still in reinvestment period, and priced like quite attractive lease I don't I don't think we need like a new one of those I think it would be more along the lines of.
Corporate for some type of corporate finance opportunity for us are more option for us.
And we could definitely think about selling some of the existing loan portfolio I don't think we need to cut a notes on most of it I think something that we could get to sell the whole loan.
And but you know again were not I don't think were in the in this scenario right now, where we're where we need that that level liquidity. So right now we're kind of enjoying the higher earnings we have a lot of liquidity, we have almost a billion dollars of liquidity. So it's not something that we're actively pursuing them, but if the mark.
We're open in.
And had we had an option that was attractive you know clearly we could go down that path.
Just to follow up that.
Presumably would be a preferred or perhaps another convert.
Yeah.
Yeah, I mean, you've seen what we've done in the past right. So we've done preferreds, we've done converts we've done term loan BS. So those one of those three options.
We would look at.
Yeah.
Thank you.
Thank you Jim.
And ladies and.
Gentlemen, this concludes our question and answer session I would like to turn the conference back over to Jackson Pollock for any closing remarks.
Great. Thanks, operator, and thanks, everyone for joining us. This morning, please reach out to me or the team here. If you have any questions take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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