Q2 2023 Safehold Inc Earnings Call
Good afternoon, ladies and gentlemen, please continue to hold your conference will begin in a couple of minutes. Please continue to hold your conference will begin momentarily. Thank you.
Okay.
[music].
Good afternoon, and welcome to seafood second quarter 2023 earnings conference call.
If you need assistance during todays call. Please press star zero, if you'd like to ask a question. Please press star one.
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As a reminder, today's conference is being recorded.
At this time for opening remarks, and introductions I would like to turn the conference over to Pierce Huffman Senior Vice President of capital markets and Investor Relations. Please go ahead Sir.
Good afternoon.
Everyone. Thank you for joining us today for safe holds earnings call.
On the call today, we have Jay Sugarman, Chairman and Chief Executive Officer, Marcos Alvarado, President and Chief Investment Officer, and Brett <unk> Chief Financial Officer.
Afternoon, we plan to walk through a presentation that details our second quarter 2023 results presentation can be found on our website safe holding dot com by clicking on the investor slides.
There will be a replay of this conference call beginning at eight P. M. Eastern time today the dial in for the replay is 870 74814010 with the confirmation code 48759.
Before I turn the call over to Jay I'd like to remind everyone that statements in this earnings call, which are not historical facts may be forward looking our actual results may differ materially from these forward looking statements and the risk factors that could cause. These differences are detailed in our SEC reports.
<unk> disclaims any intent or obligation to update these forward looking statements, except as expressly required by law now with that I'd like to turn it over to chairman and CEO , Jay Sugarman, Jay. Thanks, Pearce, Thanks to everyone for joining us today.
With the merger now behind US the second quarter was an opportunity to begin focusing on the capital needs of our customers and begin building a deal pipeline and this higher rate environment.
The market remains tougher than normal with liquidity from banks still constrained and higher rates and higher cap rates, making transactions more difficult, but we continue to look for ways to help our customers access our modern ground lease capital across all our product lines.
With that short introduction, let's have markets and Brad take us through the quarter in more detail Marcos.
Thank you Jay and good afternoon, everyone, let's begin on slide three.
During the second quarter, we started to see a slight uptick in new investment activity and portfolio growth.
While overall, the real estate capital markets remained dislocated with volumes far off the highs, we're beginning to see pockets, where our ground lease is a constructive capital solution in this difficult environment.
And we're encouraged by the momentum in our pipeline.
We're also pleased to see positive developments broadly in the fed's fight against inflation, while we.
We'll continue to highlight the inflation capture in our lease structure.
The value of our long term liabilities and carrot our stock price has been hit hard over the past 18 months as investors respond to near term headwinds without regard to our long term value components of our portfolio.
We believe safe hold could be a beneficiary at the end of this historic tightening cycle and as we start to see stability in rates, we expect our customers will accelerate their delayed capital decisions.
The overall portfolio remained steady with significant amounts of subordinate leasehold debt and equity capital supporting our principle and income.
The tenants on top of our assets continue to perform.
And as of today, we're not engaged with our customers about any restructuring of our leases.
The key credit metrics that we track are well within our target criteria with a weighted average LTV of 42% and rent coverage of three seven times.
On the capital front, we ended the quarter with more than $800 million of liquidity.
And in addition have greater ability to invest capital through our previously announced $500 million joint venture, which we have started to deploy.
As a reminder, we own 55% of the venture with a leading sovereign wealth fund and in addition to our share of the ground lease economics will earn a management fee, but the potential for additional promote upside.
Slide four provides a snapshot of our portfolio growth for the quarter.
During the quarter, we originated three new ground leases totaling $129 million.
We funded $73 million during the quarter with $61 million of that associated with new and existing ground lease commitments and $12 million related to our 53% share of the leasehold loan fund, which we acquired in the merger.
The three new originations were all multifamily properties with three new customers across three unique markets.
<unk> 29 million $39 million consisted of two transactions closed into our aforementioned venture and the third deal for $90 million will be wholly owned by stapled.
These leases generate a seven 2% weighted average inflation adjusted yield or a seven 1% yield assuming zero percent inflation and no carrying value.
The wholly owned investment was a pre existing commitment to purchase the ground lease plus deal on a 32 storey 465 unit luxury apartment building in downtown Brooklyn.
Safe Oleds purchase was contingent upon the sponsor, reaching certain milestones, including including obtaining leasehold construction financing, which closed in the second quarter and triggered our commitment.
It was nice to see that product come full circle, despite the financing headwinds.
The credit metrics associated with these three deals are in line with our targets with a weighted average LTV of 31% and ground rent coverage of two five times.
As rates and spreads have moved up we have pushed pricing accordingly.
We'll continue to examine our pricing dynamics at work both for our customers and for our business and are pleased with the recent engagement in our pipeline.
At the end of the quarter, our aggregate portfolio stood at approximately $6 3 billion.
The estimated value of the unrealized capital appreciation sitting above our ground leases was approximately $10 1 billion, representing 23 times growth over the last six years.
In total the UCA portfolio is comprised of approximately 34 million square feet of institutional quality commercial real estate.
<unk> of approximately 17300 units of multifamily $12 6 million square feet of office over 5000 Hotel keys, and 2 million square feet of life science and other property types.
And with that let me turn it over to Brett to go through the financials.
Right.
Thank you Marcus and good afternoon, everyone.
Continuing on slide five let me detail our quarterly earnings results.
For the second quarter revenue was $85 7 million and net income was $22 1 million.
Earnings per share was 35 cents, both with or without one time merger costs.
Overall, the financials look similar to pre merger safe with a few differences I will highlight.
First I'll begin with the balance sheet changes, which now includes the $115 million term loan to start holdings accounted for as a loan receivable and presented net of an approximately $2 3 million since the reserve.
In the first quarter, we recorded an approximately 150 million goodwill asset, which represents the excess of purchase price over the fair value of the assets received and will be tested per GAAP rules moving forward.
The ground lease plus and leasehold loan fund interests are accounted for as equity method investments and had a balance of approximately 83 million at quarter end.
The approximately 100 million trust preferred unsecured debt assumed as part of the closing sits within consolidated net debt.
Now moving to the income statement revenue for the quarter included approximately $7 2 million in management fees earned from Star Holdings, which is an offset to the way we discuss G&A, though included in other income in the GAAP income statement.
As we previously disclosed the contract is structured to pay stapled $25 million in fees during year, one which will step down annually over the four year term.
In accordance with GAAP, we accrue income quarterly based on services provided which for Q2 included setup work post merger.
We anticipate a lower run rate based on our forecast and expect to recognize approximately $18 million over the next three quarters, which would approximate contractual cash we receive per the management agreement.
We earned approximately $2 4 million of interest income on the Star Holdings term loan, which pays a fixed 8% cash coupon.
Additionally, we saw a pick up within earnings from equity method investments related to the fund interests.
Are generally higher yielding than our core ground leases and expect it to be accretive to net income.
Looking at expenses, all management fees and other expenses related to our previous management contract with ice start had been replaced with a standalone internalized cost structure.
G&A, which includes items such as payroll occupancy costs in all overhead items was approximately $11 million for Q2.
Stock based compensation was approximately $8 million for Q2, which includes board grants bonus accrual and the for your employee outset plans put in place that merger closing.
In accordance with GAAP, the Altra brands will grade best which means we have a more frontloaded expense rather than straight lining over the four year vesting term.
Taken together, we projected annual G&A net of the management fee from Star Holdings will be approximately $50 million on a run rate basis for the next few years.
This year it could end up a touch higher due to accruing for certain items in Q1 associated with the merger and full year standalone items accrued for over three quarters instead of four since the merger closed on the last day of Q1.
Similar to other borrowers we have felt the effect of elevated short term borrowing rates on our revolving credit line, which is the primary driver of the year over year decline in EPS.
Early in the second quarter, we executed 500 million floating to fixed swaps fixing sofa to approximately 3%, which will mitigate much of the adverse near term earnings effects stemming from the substantial fed rate hikes that have occurred.
On slide six we detail our portfolio deals.
On a GAAP basis, the portfolio generates the cash yield of three 5% and an annualized yield of five 2% presuming a zero percent inflationary environment for the length of our ground leases.
It's important to point out the disconnect between economic returns and what we recognized for GAAP.
The majority of our portfolio consists of typical stapled structure ground leases with contractual compounding cash flows and periodic CPI look backs.
When we originate a new asset what we book for earnings aligns with economic returns of the cash flows given its IRR based.
For certain lease structures, there is a significant difference between GAAP treatment and economics.
This is an important topic that we wanted to explain further and be clear about moving moving forward.
Approximately 17% of our assets have variable rent that can exceed today's current rent for example, any legacy style ground leases that we acquired with percentage rent fair market value provisions or CPI linked escalators.
When we underwrite those investments we look closely at the lease structure and make a reasonable assumption on the key variable such as CPI to project the true economic yield on the asset.
GAAP does not allow assumptions on this variable go forward component no matter, how conservative and as a result, the 17% of the portfolio. We have referenced as earnings 3.0% for GAAP purposes accounting for no expected income increases over the term of beliefs, even though our underwriting expectation for these <unk>.
<unk> is closer to 6%.
This disconnect is why the yields on the right side of the page our more partner as they wind up much closer with our view of economic reality.
Inflation adjusted yield, which is IRR basis and use this today's federal reserve long term inflation expectation of two 2%, 3% produces a yield of five 8%.
We are also tracking our illustrative carried adjusted deal, which we introduced last quarter and believe as an effective way to demonstrate the impact of the potential value of the embedded capital appreciation in our portfolio.
We use the five 8% inflation adjusted yield as the starting point for this metric and simply subtract staples, 82% ownership of carrier using its latest 2 billion valuation from the current portfolio of ground lease spaces.
This increase is the inflation adjusted yield to approximately seven 3%.
Turning to slide seven we show a geographic breakdown of our portfolio.
This slide underscores the portfolio's diversification by location and underlying property type.
We highlight our top 10 markets on the right as we believe that our emphasis on originations in the top 30 Msas is fundamental to our thesis that well located institutional quality ground leases should benefit and appreciate in value over time.
Approximately 70% of gross book value is diversified across the top 10 markets listed on the slide.
The bottom section breaks down portfolio count in book value and further detail and highlights the progress made within the multifamily space, which has been the primary channel for new investments over the last few years and represents more than 50% of the portfolio by count.
Lastly on slide eight we provide an overview on our capital structure.
At the end of the second quarter, we had approximately $4 3 billion of debt comprised of $1 5 billion of unsecured notes $1 5 billion of non recourse secured debt 1 billion drawn on our unsecured revolver and $272 million of our pro rata share of debt on ground leases, which we own in joint ventures.
Our weighted average debt maturity is approximately 23 years and we have no corporate maturities due until 2026, which is our revolver.
At quarter end, we had approximately $816 million of cash and credit facility availability.
That's pretty easy as previously mentioned, we have taken meaningful steps to offset interest rate fluctuation through hedges that are currently in the money.
We have $500 million of swaps in place with so for locked at approximately 3% for five years, which is presently in the money based on current market rates.
We also have $400 million of 30 year Treasury hedges with a weighted average rate of 347% currently in a significant gain position, which will eventually be unwound and applied to long term financing as we reenter the debt markets.
We are levered, one nine times on a total debt to book equity basis.
The effective interest rate on permanent debt is three 8%, which is 135 basis points spread to the five 2% GAAP annualized yield on our portfolio.
Which again includes 17% of the portfolio being booked at 3.0% GAAP annualized yield with no credit given today to the future income that we described earlier.
The portfolio's cash interest rate on permanent debt is three 3%, which is a 15 basis point spread to the three 5% annualized cash yield.
We're on positive outlook at both Moody's and Fitch and have an active dialogue with both agencies.
Okay.
Overall, we believe that our existing capital structure is a valuable component of the company that has been underappreciated by the market.
We have a long term ladder debt profile with 23 years of weighted average term that are significantly below market cost with no near term maturities.
On a mark to market basis, similar to what our analysts describe there's potentially $500 million $2 billion to $1 billion of value and the sum of the parts analysis.
We believe that these attractive attributes, particularly in a time of market uncertainty should be viewed as an important asset by stakeholders when calculating staples overall intrinsic value.
So to conclude while it has been a very challenging year. So far in terms of stock performance. We have been encouraged by macro trends and selling real estate markets and remain focused on getting back to business expanding our leadership position in the ground lease industry.
And with that I'll turn it back to Jack.
Thanks for that detail Brian .
What's striking to me is as we enter this next phase of growth. It was really how early we still are in the development of the modern ground lease industry.
There's still a lot of work to do to accelerate adoption among customers and investors for ground leases have certainly begun to carve out our place in the mainstream real estate markets and we look forward to helping push that adoption even faster.
And operator with that why don't we go ahead and open it up for questions.
Absolutely. Thank you.
To ask a question. Please press star one at this time, we will take as many questions as time permits once again, please press star one to ask a question.
We will pause a moment to assemble the roster.
The first question is from Nate Crossett with B N P. Paraguay. Please proceed.
Hey, Thank you good evening.
Nice to see activity picking up a bit was just curious if you could speak to.
What does the pipeline look like right now have you closed anything so far and three Q.
And then just on some sectors it sounded like it was all multifamily this quarter.
What sectors are in the pipeline are there any other areas youre looking at I think at NAREIT. You May had mentioned subsidized housing this year.
Year to year comments there.
Hey, Nate.
So I think we've been pretty encouraged over the last six weeks or so.
So there's a handful of transactions that are in the closing process.
They're all in the housing space, So a mix of multifamily and student housing.
And we did get our first affordable deal under LOI as well.
So we're encouraged.
The recent momentum as I look kind of at the next leg of the pipeline, which isn't signed up today. It is predominantly housing as well so mostly multifamily and there is one hospitality asset but.
There seems to be assigning in some of these asset classes student housing as an example.
Is under supplied.
I think theres some conviction from owners about rent growth that they can underwrite and our capital solution is accretive is there.
Recapitalizing transactions are pursuing new acquisitions.
Okay. That's helpful. And then just the pricing on what's in the pipeline is it similar to that 7% to that you guys quoted this quarter.
How should we think about that yeah.
I would say this that the seven two where we're really excited about that overall yield.
We did better this quarter than I would say expected or target pricing today is still sort of in that six and a half range.
And I would say the pipeline sort of sits between the six and a half in the <unk>.
Okay. Thank you and then just.
One on the balance sheet, just down the revolver you know how.
How should we be thinking about when you may look to term that out like how long do the current hedges last I think you said the swaps are good for five years.
So just how should we think about that and then maybe where you could do 30 year money today.
Super I wanted to talk about just in terms of that what you are feeling.
As you know Nate.
The line has been drawn over the course of the merger discussions and since the merger's close.
Nice to get back out on the road and educate folks I think what we're encouraged by is meeting with a lot of new investors. That's both on the equity and debt side. So is this ground lease market continues to evolve and open up there.
There are definitely a lot more interested parties.
When we look at our leverage level and think about our rating.
Think about capital allocation or we're looking across the board at all of those opportunities on the equity side and debt side and.
And we will continue to try to figure out what the best cost of capital in that moment is as well as what can help us kind of get to that next slowly pad.
I would say the goal from our end.
Then the last pieces on the hedging, which I think is an important one that.
We're trying to make clear we put in our deck this quarter as well, which as you know half of the path of the line is already fixed.
And then the other half.
We have 30 year hedges that are today, you know 60 basis points plus in the money. So that is a significant gain that will.
That gain will be amortized over the life of any debt instrument that we are that we do.
Respective of if it's a 10 year deal a 30 year deal.
If it's in our different structures as we've talked about in the past. So we're continuing to try to be thoughtful about how to allocate capital and term out those borrowings.
Okay. Thank you.
The next question is from Handel St Joost.
Please proceed.
Hey, good evening.
First question is on I guess the investments in the quarter.
Can you help me get.
Discuss the process of how the new investments are allocated on a wholly owned versus.
Via your recent JV it looks like most of the activity was on balance sheet. Instead of J D. I think we were under the impression that the first 500 million or so would likely be through the JV given you Johan.
Higher cost of capital here.
So maybe some some elaboration on that please.
There was a preexisting commitments through our G L plus fund.
And so that predated the execution of the venture.
And so and that was a relatively large transaction for the quarter was $90 million.
And so that's why it was not closed in the venture.
The way we look at the venture going forward is it will most likely close all the transactions until we fill that $500 million bucket.
I would say forecasting there may be some smaller transactions, where friction costs for setting up individual rights within within the fund may fall out.
But the way you should think about it going forward now the next 500 billion will go in the metrics.
Thanks for that.
And remind us that this regarding the JV.
As your partner have veto rights I guess I'm curious if there are only interested multifamily here and if theres any asset classes that they bread lines.
Yeah. It's so it's a collaborative process. They they do have discretion over the capital we both do obviously, so it's a collaborative process as we start to build our pipeline.
I think most of the product we're seeing is in the residential space we.
We have shown them a few deals that ultimately didn't get to the finish line that were in other asset classes and as I mentioned theres something in the hospitality space that they're supportive of as well.
So we're not just going to do residential will do what the market sort of gives us and that happens to be a fair amount of resi, which we're excited about.
Okay. The next question is from Anthony <unk> with J P. Morgan. Please proceed.
Yes. Thanks first just a couple of clarifying ones just to make sure I understand in terms of safe holds cash out the door in <unk> is that the 73 million or does that include also some JV partner money.
Exact number.
73 <unk>.
73 is us and that includes $12 million.
From the leasehold loan funds, so 61 and ground leases for our share and $12 million and the <unk>.
Leasehold loan time.
Okay, and then in the 129, the new sort of commitments I guess some of that was funded and is in the 73 already but in that 129. Your share of that is the 112 and just trying to reconcile what youre committed what you spent at your share.
You got it.
Relative number.
Okay got it and do you in and what's kind of on spend but committed right now at safe holds share just to kind of understand like what could go out the rest of the year or just.
Baseline.
So on a gross basis is approximately $460 million, so we'd be 55% of that number.
55% of the 460 okay.
And then next year.
Yeah, and just you talked about the pipeline picking up.
Just I mean, what do you think the next few quarters could hold in terms of.
Pace do you think the 129 grosses is doable from what you can tell or.
Things still spotty.
Uh huh.
I would say things are spotty right. These markets are extremely volatile if I'm. If you give me a snapshot today, yes, I do think the 129 is doable.
But as we've seen over the past year, you wake up the next morning, and things dramatically change so I.
I don't want to put a number out there from a quarter to quarter basis, but we're very encouraged by the recent momentum.
Okay.
And then just one last one on the financials.
$6 8 million in JV income in the quarter I mean, you.
Talk about like why that's higher but is that like a good run rate or is it just a big move up given everything that's happened and just what I'm trying to understand if there was anything in there.
Yes, that's probably a good run rate Tony.
If you recall right.
Merger closing, we acquired those <unk> assets.
So there is our existing on consolidated JV assets that we've done in the past, but now.
The funds we go through this line item as well.
So it feels like that's probably a decent.
Decent run rate there was some initial costs in there so maybe maybe a touch higher going forward, but that's probably a good run rate.
Okay. Thank you.
The next question is from harsh having <unk> with Green Street. Please proceed.
Thank you.
So of course, the 71 is a great. You then it's nice to see their transaction market opens back up I think you mentioned you saw couple of hospitality and so in that disease that you've sort of provided six and a half to call. It 7172.
Would it be fair to say that hospitality shakes out on the higher end of vaccines.
Any guidance that you could give us that and then.
Have you seen any offices.
Type deals on the.
Marty.
You were pricing some of those back would you be comfortable acquiring an office galleries today.
Hey, harsh so yes on the hotel deals in our pipeline. They are at the wider end of the range so closer to 7%.
And we've seen a fair amount of office.
Given the capital constraints.
And to date, nothing has sort of fit our box.
I would say, it's not an issue with just our proceeds level I think a lot of those assets that we've seen.
Have a fair amount of existing leverage.
And us as a ground lease solution in isolation doesn't solve their problem.
And so we're continuing to monitor we'd like to own some of the office assets that we see in our pipeline, but we're being very selective.
Okay. That's helpful.
Then you know.
Spending two minutes on gathered I guess.
Sure.
Thank you Doug.
Got it.
Right.
Jerome investors wanted to.
Exercise that option to reinvest in the second zone have.
Have you gotten any more inbounds from these investor interest in that at all.
Do you think that would be more sort of today, but in the near term.
Any conversations around that would be adequate.
Yeah, No I think we've been more focused on the pipeline at this point harsh, but I would say.
We've had reverse inquiry on care, which has been.
Right along the lines, we had hoped which is the kind of long term.
Wealth, creating.
Thus investments seekers.
So but continues to be.
Something we will push it.
Once we've rebuilt the pipeline and can show that kind of growth again.
But I think the concept of care it is getting more and more familiar.
Which is what we hoped coming out of the merger.
Thank you.
Okay.
Okay next we have Kevin Kim with the Truest. Please proceed.
Thank you Quinn.
Quick question on the originations this quarter to seven 2% yield inflation adjusted.
Is seven 1% GAAP yield.
<unk> that youre booking deals at.
Yes, that's correct.
Oh, okay.
I would have thought there would have been a bigger gap between the two numbers.
Yeah.
Yeah, Theres, a little bit of rounding in that seven one in that $7 two.
And the long term fed assumption from quarter to quarter went down a little bit since a 2% to 3% so theres not that much lift up in the inflation adjusted yield.
Okay.
And can you remind us where your fixed charge coverage ratio is today per your covenant calculations.
The unsecured asset versus unsecured debt.
Where that is today versus the covenants.
Sure.
From our unencumbered asset to unsecured debt coverage standpoint.
<unk> touch under one five times.
So obviously as you know the as the numerator and denominator grow and we look to echo ties as well as raise debt in the future.
That cushion will grow.
And then from a F CCR standpoint.
We're in.
In the mid one twos.
And that's from an EBITDA cushion standpoint.
It's about $15 million of EBITDA cushion, which again as you know.
It's declined here over the past quarters, but as we echo ties and look to the long term debt markets that will go back up as well that will usually sit in a run rate of call. It one three to one four times and it's Super Super stable.
And as you know we also hedged some of our revolving line borrowings this past quarter or so.
I'd say on our FCC are one three to one four would be are you.
Run rate of where we typically are in from a <unk> perspective, I would call. It one five to one six staying within both of those corridors.
Okay. So given.
Given those hubs, where those covenants are today and that the covenants I mean, where you are in terms of the FCC are.
And at one nine times debt to equity.
It doesn't seem like there's a lot of cushion left on the equity side to do more deals.
And also I'm not sure exactly how much casually retaining each quarter.
So just high level, how are you thinking about equity needs over the next year or so and I know your stock prices and exactly where it needs to be where you want it to be but I guess what are the avenues that how you would address equity.
Okay, but I guess the things we've said in the past are typically tied to our pipeline and what we see in the future.
Just wanted to have sufficient liquidity and buying power to.
To be able to be aggressive in the markets, where we want to be.
You've seen us lean in on third party capital when it makes sense, that's certainly been part of the equation for us.
And we will look at the mix between primary and third party capital.
And make sure we're out ahead of the game so.
That's how we've been thinking about it over the last 12 months.
And certainly the market is finally, beginning to break a little bit so.
Got it.
Got it.
A very.
A large partner who.
It has been very helpful on the third party capital side.
And on your line of credit you have about $802 million of capacity, but.
But I'm curious can you actually from a practical standpoint use all of that.
Or would that actually pressure you're up against the covenants.
Yeah Scott.
Got headroom still.
Yes, we're being cognizant.
Markets are finally at least on the deal side.
Starting to present us with the kind of opportunities we think are accretive in.
We'll start looking at different choices here and get the mix right, but as Brett said.
We've got a dead play and we've got an equity plan over the next 12 months that will keep us out ahead of.
The capital needs we see.
Okay. Thank you.
Okay.
The next question is from Matthew Howlett with B Riley. Please proceed Matthew.
Yes. Thanks.
Thanks for taking my question just on the UCA went up obviously.
But the but the amount of the originations any whether there is any movement in between you and the appraisals you do on the properties any keeping the changes in the quarter.
Yeah look we're [laughter].
We're in that part of the cycle, where appraisers are starting to catch up to some of the cap rate expansion.
Some of the fundamentals, obviously and office in particular.
Our starting to bleed so we've seen a degradation in.
The appraisals on a number of the assets.
But.
That is.
Meant to be a long term indication of value. So.
<unk>.
Overtime, we expect that stuff to stabilize out but right now we're certainly in the downward slope.
Some of the multifamily has actually done better than expected.
So.
It's not all one way story, both I think the biggest piece of the puzzle.
Turning back on the origination machine.
And starting to add in that external growth.
To offset whatever weakness there is on just sort of a fundamental appraisal.
<unk> catch up that we're seeing.
Yes, Jana G L T V.
Stable at 42% and you were clear that there was there's no property that you are in discussion with in terms of any restructuring I mean, we see headlines everyday on the office market in major cities, but you are saying is your portfolio youre not seeing.
Anything that would suggest that.
It could be something on the horizon.
Okay.
Yes, it's at today.
That's an accurate statement.
Certainly offices is obviously under pressure and we're engaged with our with our tenants where there is.
Rollover of potentially some future cash flow.
Issues.
And.
Today, there is no conversation going up.
Gotcha.
Okay, and then Jay can talk about the you talked about it.
The new bank lending in Miami, They are all busy pulling back from commercial market.
You talk about the interplay between your ear.
Air ground lease solution to banks. They do they are pulling back or are we talking about theyre going to come in on Ltvs with Nike.
Product types, and you're going to be the solution for the real estate owners to do I mean, you could offer a product that could be the solution for them to to get the acquired leveraged anything you can just talk a little bit about the interplay between the banks pulling back in your ground and your modern ground lease.
Yes, it's a little bit of good news bad news in terms of.
Banks have been one of the sources of capital for the leasehold side of our business.
Yeah, we typically pair up with a third party capital source.
Sometimes it's bank, sometimes <unk>, sometimes it's a <unk>.
<unk> Centre Bank regional Bank.
We've probably worked with 156 the leasehold lenders at this point so.
There are still pockets of capital certainly the agencies in the multifamily space are still there.
But it definitely constrains our ability to help our customers put their capital stack together when the leasehold lending market is.
Is pulling back so that's not great news.
Positive side of that is.
Capital is more valuable than ever.
Long term low cost.
Capital from a ground lease helps stabilize capital structures and make them more resilient.
So we definitely think we are.
Part of the solution to a more volatile marketplace.
But we do need a functioning fine.
<unk> market.
To be at our best.
So our pullback as fine a you know.
Complete.
Yeah Red line of commercial real estate would not be good.
Got you.
Taking my questions Jay.
Mr. Hoffman, we have no further questions in queue.
Thanks.
You should have additional questions on today's release, please feel free to contact me directly.
John would you mind, giving me conference call replay instructions once more.
Absolutely.
There'll be a replay of this conference call beginning at eight P. M. Eastern time today the dial in for the replay is 8774814010 with the confirmation code of 48759.
This concludes today's conference and you may disconnect your lines at this time.
For your participation.