Q4 2023 Starwood Property Trust Inc Earnings Call - Q&A

February 22, 2024

Presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded at this time I'll hand, the conference over to Zach Tanenbaum head of Investor Relations Zac you may now begin.

Thank you operator, good morning, and welcome to Starwood property Trust's earnings call. This morning. The company released its financial results for the quarter and year ended December 31, 2023 filed its Form 10-K with the Securities and Exchange Commission and posted its earnings supplement to its website.

These documents are available on the Investor Relations section of the company's website at Www Dot Starwood property Trust dotcom.

Before the call begins I would like to remind everyone that certain statements made in the course of this call are not based on historical information and May constitute forward looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward looking statements.

I refer you to the company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today and.

The company undertakes no duty to update any forward looking statements that may be made during the course of this call.

Additionally, certain non-GAAP financial measures will be discussed on this conference call a.

The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Reconciliations of these non-GAAP financial measures most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at Www Dot SEC Gov joining.

Joining me on the call today are Barry Stern like the company's chairman and Chief Executive Officer, Jeff <unk>, The company's President and Rina <unk>, the company's Chief financial officer with that I'm now going to turn the call over to arena.

Thank you Zach and good morning, everyone.

Starting with our results, we reported distributable earnings or D E F $189 million or <unk> 58 per share for the quarter and $663 million or $2 five for the year.

Our quarter was highlighted by contributions across our businesses, although it likely does not constitute a run rate.

We had outsized performance from our conduit this quarter after a slow start to the year and also had four cents of earnings related to commercial lending repayment, including prepay penalties and foreign currency hedge online.

Greetings and welcome to Starwood property Trust's fourth quarter and full year 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero.

GAAP net income was $71 million or 22 per share for the quarter and $339 million or $1 seven per share for the year GAAP.

On your telephone keypad. Please note. This conference is being recorded at this time I'll hand, the conference over to Zach Tanenbaum head of Investor Relations Zac you may now begin.

GAAP book value per share ended the year at $19 95.

With unappreciated book value at $20 93.

These metrics were impacted by an increase in our commercial lending reserves.

Thank you operator, good morning, and welcome to Starwood property Trust's earnings call. This morning, The company released its financial results for the quarter and year ended December 31st 2023.

<unk> increases in our general seasonal reserve charge offs, and impairments related to Oreo properties totaling $129 million and $351 million for the quarter and year.

Filed its Form 10-K, with the Securities and Exchange Commission and posted its earnings supplement to its website.

These documents are available on the Investor Relations section of the company's website at Www Dot Starwood property Trust's dotcom.

I will begin my segment discussion with commercial and residential lending, which contributed day of $205 million for the quarter or <unk> 63 per share in commercial lending, we originated $707 million of loans, which brings our full year originations to $1 1 billion.

Repayments of $815 million in the quarter and $2 9 billion in the year outpaced fundings of $664 million and $1 7 billion.

Our portfolio of predominantly senior secured first mortgage loans ended the year at $15 9 billion with a weighted average risk rating of two nine this.

The company undertakes no duty to update any forward looking statements that may be made during the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call the.

This is consistent with last quarter, despite downgrades of four loans totaling $502 million to our four risk rating of which $450 million or U S office.

Presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Offsetting this were upgrades from our for two or three risk rating totaling $197 million, including a $159 million, formerly vacant office loan in Brooklyn that was converted to multifamily and brought current by the sponsor.

Reconciliations of these non-GAAP financial measures most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at Www Dot FCC Tucker joining.

Joining me on the call today are Barry starting like the company's chairman and Chief Executive Officer. After Monica, the company's President and Rina <unk>, the company's Chief financial officer with that I'm now going to turn the call over an arena.

In the quarter, we had one new foreclosure on a $61 million multifamily loan and one new non accrual related to a 124 million office loan both loans were five rated and will be covered in Jeff's remark.

Thank you Zach and good morning, everyone.

Last quarter, I mentioned that our seasonal balance doesn't tell the whole story of our asset reserve because some of our loans have been moved to Oreo and some loans that are still on our balance sheet have reported charge offs.

Starting with our results, we reported distributable earnings or D E F $189 million or 58 cents per share for the quarter and $663 million or $2.05 for the year.

Although these have already been taken out of GAAP book value. Neither of these appear NRC saw reserve. However, they are really no different than a specific reserve just on another financial statement line.

Wrong quarter was highlighted by contributions across our businesses, although it likely does not constitute a run rate.

In the quarter, our general seasonal reserve increased by $28 million to a balance of $307 million of which 74% relates to U S office, while Oreo impairments increased by $101 million to a balance of $172 million.

GAAP net income was 71 million or 22 cents per share for the quarter, and 339 million or $1 seven per share for the year GAAP.

Together these reserves represent 3% of our lending portfolio.

GAAP book value per share ended the year at $19.95 with underappreciated book value at $20.93.

To clarify the Oreo component of this I want to briefly discuss the GAAP accounting model once an asset is transferred into Oreo It follows property accounting.

These metrics were impacted by an increase in our commercial lending reserve.

This means it is held at amortized cost and less events or changes in circumstances indicate that its carrying amount may not be recoverable.

Increases in our general reserve charge offs, and impairments related to Oreo properties totaling $129 million and $351 million for the quarter and year.

We encountered these indicators on two previously foreclosed assets, which were either under written agreement are active discussion to be sold at our basis to unrelated third parties, both transactions failed to materialize.

I will begin my segment discussion with commercial and residential lending, which contributed D. E F $205 million for the quarter are 63 cents per share in commercial lending, we originated 707 million of loans, which brings our full year originations to 1.1 billion.

The first asset is our vacant building in downtown L. A that has a day basis of $245 million because our current quarter negotiations to sell this asset where ultimately unsuccessful. We commissioned an updated appraisal, which resulted in an incremental $71 million GAAP impairment.

Repayments of $815 million in the quarter and $2 9 billion in a year outpaced fundings of 664 million and $1 7 billion.

The second asset is our office building in Houston that has a day basis of $126 million.

Our portfolio of predominantly senior secured first mortgage loans ended the year at 15.9 billion with a weighted average risk rating of 2.9.

After an LOI at our basis with terminated last quarter, we engaged an updated appraisal.

This is consistent with last quarter. Despite downgrades of four loans totaling 502 million two of four risk rating of which 450 million or U S off at.

Shortly thereafter, we entered into an LOI with another unrelated third party to sell the property at a price lower than our basis.

That transaction was also unsuccessful, although the appraisal indicated full recovery of our basis, we conservatively utilized the value implied by the most recent LOI to determine our GAAP impairment of $30 million you.

Offsetting this were upgrades from our for two or three risk rating totaling $197 million, including a 159 million, formerly vacant office loan in Brooklyn that was converted to multifamily and brought current by the sponsor.

You will find these impairments presented in the other law common net line in our GAAP P&L and reflected as a reduction of the property's common net line in our balance sheet.

In the quarter, we had one new foreclosure on a 61 million multifamily long and one new non accrual related to a 124 million office loan both loans were five rated and will be covered in Jeff's remark.

Next I will discuss our residential lending business.

Our on balance sheet loan portfolio ended the year at $2 6 billion, including $916 million of agency loans.

Last quarter, I mentioned that our seafood balance doesn't tell the whole story about that reserve because some of our loans have been moved to Oreo and some loans that are still on our balance sheet have reported charge offs.

The loans in this portfolio continue to repay at par with $60 million of repayments during the quarter and $239 million year to date.

Although these have already been taken out of GAAP book value. Neither of these up here in our seasonal reserve. However, there are really no different than a specific reserve just on another financial statement line.

Given tighter spreads and a decline in longer rates the.

The mark to market on our portfolio improved by $152 million this quarter, partially offset by a negative hedge mark of $99 million.

In the quarter, our general seasonal reserve increased by $28 million to a balance of 307 million of which 74% relates to U S office, while Oreo impairments increased by $101 million to a balance of 172 million.

And our $450 million retained our MBS portfolio lower prepay speeds continue to benefit this book with tighter spreads contributing to a positive $6 million mark to market.

Next I will discuss our property segment, which contributed $22 million, a day or <unk> <unk> per share to the quarter.

Together these reserves represent 3% of our lending portfolio.

To clarify the Oreo component of that I want to briefly discuss the GAAP accounting model once an asset is transferred into Oreo It follows property accounting.

Of this amount 13 million came from our Florida Affordable housing fund for.

For GAAP purposes, we recorded an unrealized fair value increase related to this portfolio of $18 million in the quarter net of Noncontrolling interests.

This means it is held at amortized cost and less events or changes in circumstances indicate that its carrying amount may not be recoverable we.

<unk> was determined by an independent appraisal, which we are required to obtain annually.

We encountered these indicators on two previously foreclosed assets, which were either under a written agreement are active discussion to be sold at our basis.

Turning to investing and servicing this segment contributed <unk> of $33 million or <unk> 10 per share to the quarter.

Our conduit Starwood mortgage capital helped drive our outperformance in the quarter, completing five securitization totaling 467 million, which represented 61% of their securitization volume for the year, we expect.

Really the third party both transactions failed to materialize.

The first asset is our vacant building in downtown L. A that has a D E basis of $245 million because our current quarter negotiations to sell this asset where ultimately unsuccessful. We commissioned an updated appraisal, which resulted in an incremental $71 million GAAP impairment.

To continue seeing higher volumes from this business in 2024 as loan maturities and originations pick up.

The year is off to a good start with two securitizations totaling $118 million of loans completed in January.

The second asset is our office building in Houston that has a D E basis of $126 million. After an LOI at our basis was terminated last quarter, we engaged an updated appraisal.

And our special servicer fees increased to $14 million in the quarter due to $500 million of loan resolution. These resolutions were offset by $1 billion of new transfers into active servicing nearly two thirds of which were office or contained an office component.

Our named servicing portfolio ended the year at $98 7 billion driven by $1 8 billion of new servicing assignments in the quarter and $6 7 billion during the year.

And on this segment's property portfolio, we sold one asset in the quarter for $32 million since inception of this portfolio. We have fold 30 assets totaling $412 million for day gain of $144 million demonstrating our ability to successfully.

Acquire and repositioned transitional real estate.

Concluding my business segment discussion is our infrastructure lending segment, which contributed day of $23 million or <unk> <unk> per share to the quarter.

We continued to see strong investing this quarter with $425 million of new loan commitments, bringing our total for the year to $1 1 billion.

Hi, its level since we acquired this business in 2018.

Repayments totaled $182 million for the quarter and $905 million for the year with the portfolio ending the year at a balance of $2 6 billion.

And finally this morning, I will address our liquidity and capitalization our leverage continues to remain low with an adjusted debt to unappreciated equity ratio of just 247 times.

This reflects the fourth quarter repayment of our $300 million unsecured note, which leaves us with no corporate debt maturities until December 31, 2024, when our $400 million unsecured notes mature.

In addition to low leverage our liquidity position remains strong today at $1 $2 billion. This does not include liquidity that could be generated through sales of assets in our property segment or debt capacity that we have there the unsecured and term loan b market.

With that I'll turn the call over to Jeff.

Thanks Irina.

Our industry originated more loans from late 2020 through early 2022 than any other period in our history, thus, creating a significant amount of initial maturities in late 2024 and early 2025.

Fortunately the 10 year Treasury yields fell 100 basis points in the fourth quarter and forward sulfur made a similar move and is now pricing at a 175 basis point reduction to three 6% in 2025.

While this more optimistic interest rate environment has reduced tail risk for the 90% of our assets that are not loans on U S office. The right move to date has not been large enough.

Really change U S office market outcome as office pricing also has to deal with lower net effective rent the persistence of work from home and a lack of liquidity in the office lending markets.

Being managed by one of the largest real estate private equity firms in the World asset management has always been a hallmark of our company's outperformance and our entire team is focused on asset management today.

We have had net realized gains on Oreo to date, but with lenders continuing to move away from the office sector. We have had multiple asset sales fall out of contract at our basis in recent months and we are evaluating alternate disposition plan.

Rather than wait for a better option that may not come we are uniquely moved over $600 million of loans into Oreo to date.

These assets are now the focus of our asset management team and our goal is to maximize shareholder value.

We will continue to evaluate options, including adding capital and repositioning assets rather than quickly selling into a distressed market with seller financing that could put a longer term drag on earnings.

Rina mentioned, we placed a $124 million five rated office loan in Arlington, Virginia on non accrual in the quarter.

As you likely know greater D. C has been the hardest hit by work from home with the majority of government employees still at home for years. After Covid, taking this long term stable and consistent office market one of the most difficult to underwrite today.

This loan went into payment default in the quarter and we are evaluating for closing in the coming quarters to either reposition or sell the asset.

The property is operationally cash flow positive in it for five years of remaining work.

We will continue to look for accretive leasing while we decide on the right time to potentially sell the asset assuming we take title.

Rina also mentioned, we foreclosed on our first multifamily loan in the quarter was $61 million loan on a recently built multi in the Pacific northwest that had been slow to reach stabilized occupancy.

Did we choose to sell this asset we expect to see a return of our basis in 2024.

This asset is systemic of what we expect to see as the cycle moves through its next phase.

<unk> capitalized borrowers who lack the staying power to protect assets until stabilization will be replaced by large balance sheets with staying power like ours or we will move the assets to the substantial pools of third party capital that had been raised to recapitalize them.

The majority of our industries multifamily loans have stabilized debt yields above 6% and assuming today's forward curve is correct. We expect most of these will be able to refinance at our loan proceeds or sponsors who will see value in paying down their debt buying interest rate caps and replenishing reserves to qualify for extension.

Most of these borrowers, but new interest rate caps in 2022 or 2023 that were more expensive than they are today. So we expect them to do the same to qualify for extensions in 2024.

Should they choose not to protect what is essentially a six plus cap multifamily asset and should we choose to foreclose, we expect to recover our basis or more if interest rates and cap rates continue to normalize going forward.

As I just mentioned, we are profitably bridged assets to stabilization in the past.

We will be patient, where we see long term investment opportunities and believe there is significant liquidity out of neuro basis on lease up multifamily assets, where we don't choose to stay in the longer term.

Option that may not come we are uniquely moved over $600 million of loans into Oreo to date.

Looking at our broader CRE lending portfolio, we proactively cut our office exposure in half since 2019, while also reducing our construction and future funding exposure by half.

These assets are now the focus of our asset management team and our goal is to maximize shareholder value.

Pro forma for a data center loan that paid off in full last week, our future funding obligations fell to $800 million net of senior financing a fraction of our company's typical an historic level.

Less future funding obligations will allow us to maintain our significant liquidity as we look to pay off corporate debt maturities in December 2024, and March 2025.

Rina mentioned, we placed a $124 million five rated office loan in Arlington, Virginia on non accrual in the quarter.

As you likely know greater D. C has been the hardest hit by work from home with the majority of government employees still at home for years. After Covid, making this long term stable and consistent office market one of the most difficult to underwrite today.

While we expect to refinance these in the capital markets should we choose not to we have ample liquidity to repay them with cash while maintaining a significant liquidity cushion.

As Rina said, we received $4 $8 billion of repayments in 2023, and we funded $3 6 billion of loans.

This loan went into payment default in the quarter and we are evaluating for closing in the coming quarters to either reposition or sell the asset.

Our projected excess liquidity will allow us to continue to invest accretively in 2024, albeit still at a measured pace.

The property is operationally cash flow positive in it for five years of remaining Walt we.

We created this diversified company and have maintained low leverage over the years to the benefit of both our equity and debt investors.

We'll continue to look for accretive leasing while we decide on the right time to potentially sell the asset assuming we take title.

You've heard US say, we would like to be investment grade in the future and to do that we need to maintain our lower leverage and increase the amount of unsecured debt on our balance sheet as a percentage of total debt.

Rina also mentioned, we foreclosed on our first multifamily loan in the quarter of $61 million alone on a recently built multi in the Pacific northwest that had been slow to reach stabilized occupancy.

The high yield index hit 600 basis points over treasuries in the fall of 2022 and is that 355 basis points today.

If we choose to sell this asset we expect to see a return of our basis in 2024.

This asset is systemic of what we expect to see as the cycle moves through its next phase under.

Our borrowing spreads have followed that trend.

As we continued to lend in every quarter since Covid, we made many loans at higher asset spreads and finance them with nearly $2 billion of higher cost bank loans, while still creating accretive shareholder returns.

Undercapitalized borrowers, who lack the staying power to protect assets until stabilization will be replaced by large balance sheets with staying power like ours or we will move the assets to the substantial pools of third party capital that had been raised to recapitalize them.

Unsecured borrowing spreads continue to fall, we will be in position to replace these expensive really pre payable bank loans and the unsecured debt markets at little to no cost to us for the first time in our history.

The majority of our industries multifamily loans have stabilized debt yields above 6% and assuming today's forward curve is correct. We expect most of these will be able to refinance at our loan proceeds or have sponsors who will see value in paying down their debt buying interest rate cap and replenishing reserves to qualify for extension.

Pro forma for that replacement strategy, we would be in position to argue for a potential ratings upgrade as our unsecured debt percentage would increase substantially.

I will note that our double B and double B plus corporate ratings were affirmed by all three rating agencies in the higher rate environment, we faced in 2023.

Most of these borrowers, but new interest rate caps in 2022 or 2023 that were more expensive than they are today. So we expect them to do the same to qualify for extensions in 2024.

As I just mentioned the vast majority of our borrowings today are non corporate debt. Our focus has always been on maintaining significant covenant ratio cushion in those facilities.

We have a fixed charge covenant ratio defined as EBITDA over cash interest expense of one four times on our non corporate debt.

As I just mentioned, we are profitably bridged assets to stabilization in the past.

As do most of our peers.

We will be patient, where we see long term investment opportunities and believe there is significant liquidity at or near our basis on lease up multifamily assets, where we don't choose to stay in them longer term.

Our lower leverage model creates lower interest expense, which in turn gives us significant flexibility under this and our other debt covenants.

Our F. CCR today sits at one eight times, giving us billions of dollars of additional debt capacity should we choose to use it and over $100 million of EBITDA cushion, leaving us with tremendous flexibility on how to grow or further optimize the right side of our balance sheet going forward.

Looking at our broader CRE lending portfolio, we proactively cut our office exposure in half since 2019, while also reducing our construction and future funding exposure by half.

Pro forma for our datacenter loan that paid off in full last week, our future funding obligations fell to $800 million net of senior financing a fraction of our company's typical an historic level.

We are addressing two opportunities created by the noticeable pullback of regional banks in middle market CRE lending.

Less future funding obligations will allow us to maintain our significant liquidity as we look to pay off corporate debt maturities in December 2024, and March 2025.

Our storage solutions business is now up and running and we believe a significant portion of the demand for valuation of workout services will come from the regional banking system.

While we expect to refinance these in the capital markets should we choose not to we have ample liquidity to repay them with cash while maintaining a significant liquidity cushion.

We also hired a seasoned CRE professional to create a middle market lending vertical at FTW D. For the first time to focus on the $15 million to $50 million loan size that regional banks historically dominated than we have historically not participated in.

As Rina said, we received $4 8 billion repayments in 2023, and we funded $3 6 billion of loans.

The smaller balance loans segment offers premium unlevered yields and we believe this increased ROE will be very accretive to shareholders in the coming years, albeit on less equity than in our large loan business.

Our projected excess liquidity will allow us to continue to invest accretively in 2024, albeit still at a measured pace.

Yes.

Moving to our energy infrastructure lending business 2023 marks our highest origination volume year since we purchased the business from general electric in 2018.

We created this diversified company and have maintained low leverage over the years to the benefit of both our equity and debt investors.

We wrote $1 1 billion in loans in 2023, which is the same amount as we wrote in our core business CRE lending.

We continue to like the attractive risk reward of power and midstream assets and with funding costs remaining steady we were again able to earn above historic Levered returns in this segment in 2023, and we expect to continue to grow this segment in 2024.

The high yield index hit 600 basis points over treasuries in the fall of 2022 and is that 355 basis points today.

Our borrowing spreads have followed that trend.

As we continued to lend in every quarter since Covid, we made many loans at higher asset spreads and finance them with nearly $2 billion of higher cost bank lines.

Finally, our low leverage and uniquely diversified business model that was built to outperform in volatile markets to go out as TWD to earn the only positive total return on our sector since the beginning of Covid.

Still creating accretive shareholder returns.

Should unsecured borrowing spreads continue to fall, we will be in position to replace these expensive really pre payable bank lines and the unsecured debt markets at little to no cost to us for the first time in our history.

With that I will turn the call to Barry.

Thanks, Jeff, Thanks, Rina and thanks, Zach and good morning, everyone.

I wrote a coastal quote in our press release, but I do think it's worth noting that the real estate industry has the balance sheet crisis subjected nearly every asset class every asset class, maybe save data centers, but even their yields.

Pro forma for that replacement strategy, we would be in position to argue for a potential ratings upgrade as our unsecured debt percentage would increase substantially.

I will note that our double B and double B plus corporate ratings were affirmed by all three rating agencies in the higher rate environment, we faced in 2023.

On costs have to rise to reflect the increased cost of capital in the real estate industry as an cause this economic situation.

As I just mentioned the vast majority of our borrowings today are non corporate debt. Our focus has always been on maintaining significant covenant ratio cushion in those facilities.

Unintended consequence.

Material consequence for cities and municipalities as values drop.

Real estate values real estate taxes based on values will come down in cities and municipalities won't be able to fund their police environment.

We have a fixed charge covenant ratio defined as EBITDA over cash interest expense of one four times on our non corporate debt as do most of our peers.

Waste management in schools.

The fed has three.

Our lower leverage model creates lower interest expense, which in turn gives us significant flexibility under this and our other debt covenants.

Victims of their current policy and we're headed towards 300 basis point real rates unless they were land. So the first is the government themselves being 5% five 3% on 33 trillion dollars, a third of which rolls over this year. The second other regional banks, which cannot stay solvent with these current interest rates with $1 nine.

Trillions of dollars of real estate exposure.

Not to mention the mark to market or not required mark to market on the Securities book and the third would be probably the entire real estate industry in the in the complex.

We are addressing two opportunities created by the noticeable pullback of regional banks in middle market CRE lending.

We'll talk to me about the level of rates in this four <unk>.

Our Starwood solutions business is now up and running and we believe a significant portion of the demand for valuation of workout services will come from the regional banking system.

3% 10 years, not an issue we all could adjust.

Sure before we simply the pace of the increase the rapid increase and of course the statements that we were going to stay lower longer December of 'twenty, one and then.

We also hired a seasoned CRE professional to create a middle market lending vertical at S. TWD for the first time to focus on the $15 million to $50 million loan size that regional banks historically dominated than we have historically not participated in.

Actually easing into May of 'twenty, two and the fact that it relied on stale data were very delayed data for a third of its CPI. So when rents were flying ratios new installations and now that rents are falling there is still showing a significant increase in rents in the apartment residential sector.

This smaller balance loans segment offers premium unlevered yields and we believe this increased ROE will be very accretive to shareholders in the coming years, albeit unless equity then in our large loan business.

No.

Moving to our energy infrastructure lending business 2023 marks our highest origination volume year since we purchased the business from general electric in 2018.

It's not clear why we use data for residential that's not current when we use current data for energy and for food.

It would take a minute for the <unk>.

$1 1 billion in loans in 2023, which is the same amount as we wrote in our core business CRE lending.

To call, Fannie and Freddie and find out what's really happening in the apartment market in the residential markets.

They have more data than anyone on Earth.

And they would see that they are running the economy and the global markets and causing recession, both in Japan and now in parts of Europe.

Based on the other governments' needs to increase rates to defend their currencies because of the fed's actions.

Finally, our low leverage and uniquely diversified business model that was built to outperform in volatile markets has allowed as TWD to earn the only positive total return on our sector since the beginning of Covid.

People are laud the.

Current status for their policies, they don't pay attention to the fact that.

$600 million of stimulus was hit the shelves in his pocket books.

With that I will turn the call to Barry.

Things on the shelves disappeared.

Thanks, Jeff, Thanks, Gena and thanks, Zach and good morning, everyone.

So inflation was simply too much money chasing too few goods and that it was going to correct on its own which is has a supply chain largely fixed and consumers now running out of the six Julien.

I wrote a cultural quote in our press release, but I do think it's worth noting that the real estate industry. Just has a balance sheet crisis subjected nearly every asset class every asset class, maybe save data centers, but even their yields on costs have to rise serve select.

And the economies continues to be healthy healthier than most anyone thought because its physical spending.

<unk> cost of capital and real estate industries and cause this economic situation.

And they cannot impact the economy.

Or is the job market with interest rates anymore, when their half year labor forces in healthcare and education and local governments.

Unintended consequence, but a material consequence for cities and municipalities as values drop in.

Real estate values real estate taxes based on values will come down in cities and municipalities won't be able to fund their police environment.

As you saw last month 107000 health care jobs are created theyre going to continue to create and despite anything.

The government does other than crushing what's left of the economies would probably be the retail sector or the services sector and that would include layoffs stores in those hotels Airlines Goldman Sachs Global investment banks, all the banks.

Waste management in schools.

The fed has three.

Victims of their current policy and we're headed towards 300 basis point real rates unless they relent.

The first is the government themselves thing, 5% five 3% on 33 trillion dollars, a third of which rolls over this year. The second other regional banks, which cannot stay solvent with these current interest rates with $1 nine trillion dollars of real estate exposure.

What can we do with a real recession, that's going to have to be careful to land this plane softly and the government spending.

Changes of pace and we're not getting construction job losses that were expected now all the asset classes and real estate have been impacted differently.

Not to mention the mark to market or not required mark to market on the Securities book and the third would be probably the entire real estate industry and the complex people talk to me about the level of rates in this four point.

Youre going to see and we'll continue to see a wave of multifamily assets complete they are in the total number of units being completed is not out of line between single family and apartments, but it's shifted from 40 to 60 Department single-family to 60 40 apartments single salient.

3% 10 years, not an issue we all could adjust to we've adjusted to it before but simply the pace of the increase the rapid increase and of course the statements that we were going to stay lower longer December of 'twenty, one and then <unk>.

<unk>.

The good news is the markets are absorbing this split is causing market rents or existing rents to weekend.

Which is why we put some confidence inflation come down and we will show up eventually in the CPI numbers. It is a third of CPI.

Actually easing into May of 'twenty, two and the fact that the added relied on sale data were very delayed data for a third of its CPI. So when rents were flying ratio new installations, and now that rents are falling theres still showing a significant increase in rents in the apartment and residential sector.

That wave of new supply Fortunately will die at the end of middle of.

25, almost all those units will be complete and we would expect to see rent growth accelerating in the apartment markets I think for that reason and it was 40% of our lending book in the apartment space, we would like to get these assets back we will make more money. If we actually saw our borrowers give us these assets back our loans are 65.

No.

It's not clear why we use data for residential that's not current when we use current data for energy and for food.

It would take a minute for the <unk>.

Fed to call, Fannie and Freddie and find out what's really happening in the apartment market in the residential markets.

5% of typically of course, we are buying it.

Base would be super attractive.

They have more data than anyone on Earth.

And the best we can do what we learned is get our capital back in our coupons.

And they would see that they are running the economy and the global markets and causing recession, both in Japan and now in parts of Europe.

Vincent and opportunity with well positioned assets to make more money frankly.

If they were to fall into our into our lap with only had one default.

Based on the other governments' needs to increase rates to defend their currencies because of the fed's actions.

As mentioned in the call, we expect to sell it at that.

When people are laud, the current sets for their policies they don't pay attention to the fact that.

The basis of the loan very shortly.

While there is light at the end of the tunnel because all of US believe I believe I think all of us belief muscles.

$600 million of stimulus was hit the shelves of hip pocket books.

That the fed has been hiking.

Things on the shelves disappeared.

When they lower rates is going to be very interesting.

So inflation was simply too much money chasing too few goods and that it was going to correct on its own which is has the supply chains are largely fixed and consumers are now running out of the six Julien.

And <unk>.

Pretty sure they are aware of the consequences in the teetering.

Items regional banks, the losses that you cannot exactly track.

And the economies continues to be healthy healthier than most anyone thought because of physical spending.

Both in office and even in the industrial markets, which were being acquired at yields that are no longer.

And they cannot impact the economy.

Market passing yields so there's strain in the real estate markets. We are in the shifts we are in the boat. We are navigating these waters, we're going to take some losses, we're going to be okay.

With ortho job market with interest rates anymore, when their half year labor forces in healthcare and education and local governments. As you saw last month 107000 health care jobs are created they can continue to be created despite anything.

We have set for yourself the company up with a massive amount of liquidity.

Decline in future funding that Jeff mentioned $800 million of net funding of future funding calls on US is really 60% construction all of which is fine.

The government does other than crushing what's left of the economies would probably be the retail sector or the services sector and that would include layoffs stores in hotels Airlines Goldman Sachs Global investment banks, all the banks.

40% is called good news, it's you committed to do a tenant improvement or lease a building.

That can only do with a real recession, it's going to have to be careful to land. This plane software and the government spending continues.

And those will happen if they happen the borrower may not actually even call the capital because he is worried that the money that goes in for Ti.

Continues at pace and we're not getting construction job losses that were expected now all the asset classes in real estate I'd been impacted differently.

The building may not be worse.

Yeah.

When he.

Youre going to see and we'll continue to see a wave of multifamily assets complete there and the total number of units being completed is not out of line between single family and apartments, but it's shifted from 40 to 60 apartment single family to 60, 40 apartments Singles' day only in that.

If he goes and Hudson puts these tenants in these buildings so I think.

We're certainly got a very diversified business model.

We're delighted that we can invest incremental capital in the energy space right, now, which is providing a very attractive double digit yields.

The good news is the markets absorbing this split is causing market rents or existing rents to weekend.

We continue to build that book.

Actually the biggest it's ever been.

Which is why we've been some confidence inflation come down and it will show up eventually in the CPI numbers. It is a third of CPI.

Since we started and what that business from GE years ago I do it as.

Notable about the light at the end of the tunnel.

That wave of new supply Fortunately will die in the middle of.

The conduit markets are strong, but we've had a good <unk>.

25, almost all those units will be complete and we would expect to see rent growth decelerating in the apartment markets I think for that reason and it was 40% of our lending book in the apartment space, we would like to get these assets back we will make more money if we actually as our borrowers give us these assets backing our loans are 65.

<unk> this quarter.

Credit spreads are coming in the markets anticipating rates coming down and AAA has come in probably 60 70 basis points across the board just in the last three months. That's the first sign that the markets are healing and the <unk> market is a pretty wide open to act as the new exit strategy for borrowers who are China, we pay loans.

5% of typically of course, we're buying it at our basis would be super attractive.

Heretofore it was really just the existing lender, but now as the assets stable and secure and it's probably one of the favorite asset groups, but even office.

And the best we can do a land is in our capital back in our coupons.

Vincent and opportunity with well positioned assets to make more money frankly.

Finding its way into conduits, and Securitizations and now like 16% to 20% of the securitization might have offices in its portfolio. So you really are playing hand to hand combat and in our case partnering with our borrowers and figuring out workable solutions using our entire organization both year end.

If they were to fall into our into our lap with only had one default and as mentioned in the call we expect to sell it.

The basis of the loan very shortly.

While there is light at the end of the tunnel because all of US believe I believe I think all of us belief muscles.

In Europe.

That the fed is done hiking.

<unk>.

To get through what is a challenging period, but I think we feel pretty comfortable that our dividend will be secure very.

When they lower rates is going to be very interesting.

I'm pretty sure they are aware of the consequences.

Very comfortable our dividend will be secure for the foreseeable future.

Teetering ski side of regional banks, the losses that you cannot exactly track.

And we just had a fairly significant payoff of alone.

Both in office and even in the industrial markets, which were being acquired at yields that are no longer.

A very large loan in the book.

And there are some other things that are mentioned in Jeff's arenas comments, so that will provide additional liquidity to us and we're very cognizant of getting through.

Passenger yields so there's strain in the real estate markets. We are in the shifts we are in the boat. We are navigating these waters, we're going to take some losses, we're going to be okay.

Yes.

Sometimes you don't really know we'll be taking out visited recently announced that we took back in Washington DC.

We have set ourselves the company up with a massive amount of liquidity the decline in future funding that Jeff mentioned $800 million of net funding of future funding calls on US is really 60% construction all of which is fine.

In the case <unk> beautiful building.

It's an unnatural announced that equity our borrowers.

Of loss Unfortunately.

But in that case, we will reposition that office building is an apartment building, it's actually quite beautiful.

40% is called good news, it's you committed to do a tenant improvement or at least the building.

And we'll just take a little bit of capital, but it will come out of our book and I. When I look at the company, we have almost $1 billion of assets that arent, earning much if anything so that's.

And those will happen if they happen the borrower may not actually even call the capital because he's worried that the money that goes in for Ti.

<unk> earnings power as we rationalize and redeploy the capital into things.

The building may not be worse.

That was it.

Could earn a substantial return on an investment this is actually as good a time to be a lender maybe 2009, when we started the company.

When he.

If he goes and had some puts these tenants in these buildings so I think.

We're certainly got a very diversified business model.

But we have to be very careful how much offense. We go on we are still investing.

It's <unk>.

I'm delighted that we can invest incremental capital in the energy space right now just providing a very attractive double digit yields while we continue to build that book.

Like many of our peers, we are actually still finding opportunities in playing here and there.

Thinking through the opportunities of the team sees and it's.

Actually the biggest it's ever been.

Since we started and what that business from GE years ago I do it is.

That is good news for us.

And we have an office alone in Europe, 100% leased is going to repay.

Notable about the light at the end of the tunnel.

The conduit markets are strong and we've had a good.

We know it will repay so our office exposure will continue to drop do you think your biggest our.

<unk> launched this quarter.

Credit spreads are coming in the markets anticipating rates coming down and triple lasers come in probably 60 70 basis points across the board just in the last three months. That's the first sign that the markets are healing and the CMS market is a pretty wide open to act as a new exit strategy for borrowers who are China, we pay loans.

Our biggest office market in Europe, so the.

The complexion of the portfolio is solid we have a 15 billion into our loan book against the $25 billion 27 billion.

Our asset base. So we are not just the commercial mortgage lender today, we have other businesses, they're higher Roe businesses.

That are continuing to accelerate like the special servicer.

Heretofore it was really just the existing lender, but now if the assets stable and secure and it's probably one of the favorite asset groups, but even office.

And you just wonder how many of these office buildings and a lineup and LNR slabs.

I would say a lot of them.

Finding its way into conduit Securitizations and now I'd like 16% to 20% of the securitization might have offices in its portfolio. So you really are playing hand to hand combat and in our case partnering with our borrowers and figuring out workable solutions using our entire organization both here.

And do.

You will see a lot of people still have caps on their loans and they can cover debt service, but they cannot refinance if anybody thinks that the real estate markets of repair themselves.

That wouldn't be the case, just yet although we do believe that of course, if the fed lowers rates, where we expect to 150 basis points real rates instead of 300 basis points of real rates.

And in Europe.

<unk>.

To get through what is a challenging period, but I think we feel pretty comfortable that our dividend will be secure.

This will get much better faster in many asset classes that were exposed to the office market in the U S are unique they're not like the European office markets. I recently returned from Germany, where rents are up 5% to 15% last year and pretty much everything we've done and the construction is leased or pre leased from <unk>.

Very comfortable our dividend will be secure for the foreseeable future.

And we just had a really significant payoff of alone.

A very large loan in the book.

There are some other things that are mentioned in Jeff's arenas comments, so that will provide additional liquidity to us and we're very cognizant of getting through <unk>.

It is true in the Middle East and Asia. So this is a U S phenomenon really only in there in the U S. You have a bifurcation between the really good buildings, which actually remain full and are holding your tenants and the D&C. So I think U S office is going to look a lot like the mall market with best malls are all scrambling to get in them they have pricing power.

<unk>.

Sometimes you don't really know we will be taking out and visited recently an asset we took back in Washington D. C. Both under case streets beautiful building.

And the D&C malls are going the way of the Goto merger.

And the natural we announced that equity our borrowers.

Of loss Unfortunately.

Many of these.

But in that case, we will reposition that office building is an apartment building, it's actually quite beautiful.

Generic buildings.

We will probably have to find alternative use which might include tearing them down.

And we'll just take a little bit capital, but it will come out of our book and I. When I look at the company, we have almost $1 billion of assets that are earning much with.

So the team has dug in everyone's in their seats.

Sure.

<unk> is supportive and creative we started storage solutions and I hope it becomes a meaningful contributor to our earnings growth going forward.

Anything so that's.

Some additional earnings power as we rationalize and redeploy the capital and sort of things.

And we thank you for your support that we'll take any questions I guess.

Could earn a substantial return on an investment this is actually as good a time to be a lender maybe 2009, when we started the company.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

But we have to be very careful how much offense. We go on we are still investing unlike many of our peers. We are actually still finding opportunities in playing here and there.

Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Taking through the the opportunities.

First question comes from Sarah <unk> with BTG. Please go ahead.

Pmc's.

And it's.

That is good news for us.

Hey, good morning, everyone. Thanks for taking my question.

And we have an office loan in Europe that will 100% leased is going to repay.

You can talk more about your new focus middle market lending strategy, what's driving the competition to enter that market is it mostly a function of regional banks backing away or maybe reduce take out liquidity on the large balance side.

We know it will repay.

Our office exposure will continue to drop.

Our.

And would you consider looking at an existing middle market loan portfolio were primarily focused on new originations. Thank you.

We definitely look at existing books, if they work and that will be performing.

We're not really in the NPL business here.

Really hard to run a public company because you don't have any earnings until.

Infrastructure alone in that.

And may not be much return on capital.

As far as middle market, if you look at the pyramid.

Opportunities in the world.

The biggest deals over with over $1 billion deals, which we've written loans is largely being $800 million.

There are not that many of those.

And today, there are not many large transactions being done.

Or opportunities or <unk> $160 million multimode. These those are the kinds of things you see at the moment there are not any really giant transactions being financed but most of those will probably get them. The CBS markets right now.

So.

In terms of opportunity there are the best opportunities in the middle markets and the smaller loans, which have been cleared out.

By the regional banks, which are not lending.

Recently in two different situations.

Efficacy we own.

Not in the REIT, but in Starwood opportunity funds in.

One was an office building fully leased in Tennessee. The other one was a hotel.

In the Midwestern state and you send out a 128 books and you get four.

Letters of intent and they're often desk phones at 500 over so we want to play in those markets.

Gentlemen, we hired to do that is actually sitting to my left.

Hey, guys.

That's a barbell, Gary Bob and joined US from stellar he was at Citi and wells the banker before that and after Wharton. He spent nine years I guess its stellar running their investments on both the debt and equity side and we're super happy to have him join joining us this week.

This will be working hard just another cylinder. It's obviously in the same sector, but its a totally different scale asset if we can build a giant booking.

Couple of billion dollars of mid market loans.

I gave you the reasons why we are unlikely to buy a portfolio of loans. We like current loans, we don't want to bring in fours and fives and we like the current income so as we've looked at that we've also talked to probably three or four different middle market lenders about us buying a team partnering with the team we looked at a lot of different ways to do this and ultimately.

We decided with the data we have with the infrastructure we have made.

It made more sense to build this internally.

We realize that this is going to be smaller loans.

We're not going to have 75 page investment committee to Exxon smaller loans. So we're working on ways to scale. This business using India resources in other that will allow us to.

To scrape data and essentially asset manage and underwrite, but still go through our credit process at Starwood property Trust the hardest thing for us over the years on this has been deciding how can we put the same amount of credit attention. We have our chief credit officer. Many of our peers don't we have a separate underwriting function 18 people that do nothing but.

Underwriting loans and bring them through investment committee for Us our originators don't do that at most other shops, that's an originator does they take it through to fruition our credit process very bank like Barry said it up that way in 2009, we've never changed from that we don't intend to change from that.

We needed to find a way to be able to do this at the right cost, but we think it's a very large market and we think at prices better than the large loan business. So we will earn a higher return on less dollars and hope that we can build it then.

And then just the brokers anybody borrowers please give us a call.

Okay.

Yes.

Okay.

Marketing marketing company.

Okay.

Next question Stephen laws with Raymond James Please go ahead.

Hi, good morning.

Two questions. This morning first regarding Woodstock.

Rina I think in your prepared remarks, you mentioned that was a third party appraisal that drove the valuation increase but can you talk about the cap rate where that asset is today. What gives you comfort in that and any color on rent bumps that we expect to see in the second quarter.

We hired to do that is actually sitting to my left.

Okay.

Yes, Steven Thanks, a lot I'll Rina did mention that we're required to get an appraisal in the funds that that is in and so we got our required appraisal that came in a couple of months ago.

Okay.

Bob in Bulgaria.

<unk> joined us from stellar he was at Citi and wells the banker before that and afterwards. He spent nine years I guess its stellar running their investments on both the debt and equity side and we're super happy to have him join me joining us this week.

You asked about cap rate, it's basically a $4 five in place asset level cap rate.

Expect that forward income as we look to may when rents.

We'll be working hard just another cylinder, it's obviously in the same sector, but its a totally different.

Given to us by the state of Florida, again, we expect them to be higher there based on Formula Equion median income and CPI. Both were higher this year, we expect them to be not insignificantly higher if you remember last year, we had a three 8% hold back on our rents that we're allowed to put through its first time the state of Florida did that they wanted to make sure.

<unk> asset if we can build a giant book.

Couple of billions of harvest mid market loans.

Barry gave you the reasons why we are unlikely to buy a portfolio of loans. We like current loans, we don't want to bring in fours and fives and we like current income. So as we've looked at that we've also talked to probably three or four different middle market lenders about us buying a team partnering with the team we looked at a lot of different ways to do this and ultimately.

We werent, we werent, increasing rents at a pace that tenants couldn't keep up with we're okay with that we know we're going to get the money down. The line. So we expect to be able to add three 8% incremental onto the median income and CPI for this year. It will probably be another year that we will be a fairly high number and because of that we will probably get capped again.

We decided with the data we have with the infrastructure we have.

More sense to build this internally and we realize that this is going to be smaller loans.

Yes.

Clear that up.

Not going to have 75 page investment committee decks on smaller loans. So we're working on ways to scale. This business you'd think India resources and others that will allow us to two.

They allowed I think an 8% increase by Formula is 11, three and three eight or whatever.

Rolls over into the next year. So we would think the ramp.

To scrape data and essentially asset management underwrite, but still go through our credit process at Starwood property Trust that the hardest thing for us over the years on this has been deciding how can we put the same amount of credit attention. We have our chief credit officer. Many of our peers don't we have a separate underwriting function 18 people that do nothing but.

The rental growth of between five and 10%.

And again, if it's above 10, Mike I'll, let you take it so to enroll up to 25.

So.

As usual.

Usual ASIC.

Hold on a second this is a very unusual asset class, you're 100% full youre effectively Paul the only vacancy you havent churning of units because your rents are $30, 40% below market rents.

Underwrite loans and bring them through investment committee for US our originators don't do that at most other shops thats an originator it does they take it through to fruition.

97% actually we have one issue with squatters and what city Buffalo, but other than that you are full and rents can't go down so it's a totally different animal than market rate apartments, which are obviously softening in many markets in some cases rents are negative.

Very bank like Barry said, it up that way in 2009, we've never changed from that we don't intend to change from that.

New leases in some markets given the supplier.

So you can go read rig count those comments at Camden property Trust or <unk>.

And then just brokers anybody borrowers please give us a call.

If you are in you get a very good sense of what's going on maybe the fed through these reports just their numbers. They maybe they should buy our 400 phds and get to people with computer they can full rents.

Yes.

Okay can amortize as a marketing marketing company.

Yes.

Ill comment 1 billion data points.

Next question, Steven <unk> with Raymond James Please go ahead.

Yes, Stephen it's interesting.

We are more are rents, even though rents have gone up significantly and that's driven the value increase that you've seen on our financials, our rents or more below market today than they were when we bought the portfolio. Some market rents have gone up by more than to Barry's point to being 99% leased that sort of almost ensures it. So as we look to April may when we will get more.

Hi, good morning.

Two questions. This morning first regarding Woodstock.

Ryan I think in your prepared remarks, you mentioned that was a third party appraisal that drove the valuation increase but can you talk about the cap rate where that asset is today. What gives you comfort in that and any color on rent bumps that we expect to see in the second quarter.

Information on the forward rents as I look at that in place cap rate asset level cap rate that I quoted before you can almost think of that as a as a mid to high fours cap rate against where the forward income come in at.

Yes, Steven Thanks, a lot our arena did mention that we're required to get an appraisal in the funds that that is in and so we got our required appraisal that came in a couple of months ago.

I think you asked about cap rate, it's basically a $4 five in place asset level cap rate, we expect that forward income as we look to may when rents.

With the increases that we have coming.

But again Great Center.

Multi susan isn't impacted by new supply Sadly all the 80 20 like Tech deals I mean, there is no affordable housing being built so.

Given to us by the state of Florida, again, we expect them to be higher there based on Formula equity on median income and CPI. Both were higher this year, we expect them to be not insignificantly higher if you remember last year, we had a three 8% hold back on our rent that we're allowed to put through its first time the state of Florida did that they wanted to make sure that.

You have no issues with supply in affordable and that's one of the reasons for the differentiation to cap rate between let's say a market clearing price today would be from market multi unit affordable housing project.

Alright.

Awesome.

Yes, it's a follow up I wanted to touch on I heard recently bought an $80 million loan out of a CLO can you maybe talk about that.

We werent, we werent, increasing rents at a pace that tenants couldnt keep up with where we're okay with that we know we're going to get the money down. The line. So we expect to be able to add three 8% incremental onto the median income and CPI. So this year. It will probably be another year that we will be a fairly high number and because of that we will probably get capped again once too.

Do you think about managing collateral in your CLO and kind of what drove that decision.

Youre good that just came out deep.

Deep into the reports in the last week or two but I. Appreciate the call Cielo is for us have always been an opportunistic financing.

Through our favorite financing they have no recourse their term they have no credit marks and they have no crops cielo is our second favorite form of financing, we get rid of the mark to the ability to credit Mark and we get rid of the resource and we've issued three CLO to date 3.3 dollars $75 billion in total.

This is now clear that up.

They allowed I think an 8% increase by formulas 11, three and the three eight or whatever.

It rolls over to the next year. So we would think the ramp.

Certainly the rent growth of between five and 10%.

And again, if it's above 10%, Michael let you take it so it will roll into 2005.

CLO.

And they've come in general spreads slightly inside even even with our issuing cost slightly inside our where our bank repo financing costs were and it's slightly higher advance rates that makes them very accretive to returns in and one of the things that makes them continually accretive for a longer period of time is as loans pay off that you reinvest in those.

That's helpful.

Elastic.

Hold on a second this is a very unusual asset class, you're 100% fall youre effectively Paul the only vacancy you havent churning of units because your rents of $30, 40% below market rents.

97% actually we have one issue of squatters and home city Buffalo, but other than that you are full and rents can't go down so it's a totally different animal than market rate apartments, which are obviously softening in many markets in some cases rents are negative.

We've done that I think 1 billion one of Reinvestments on 53 or 56 different loans over the life of these <unk> that we have which has been very good for us, but we think of the CLO with a partnership with our bondholders, we intend to issue again, when it's accretive but again it will be opportunistic we have said before.

Both new leases and some markets given the supplier.

So you can go read rig camp those comments at Camden property Trust or <unk>.

That having a CLO financing only.

And if you are in you get a very good sense of what's going on maybe the sensor. These reports just their numbers. They maybe they should buy our 400 phds and get to people with computer they can pull rents on dot com.

Public company as a more of a trade and not a business. The CLO market does go away at times, we've seen it go away in the last year from being accretive to repo and when it is accretive again, we will be back in the market as part of being a partnership with our bondholders and they allow us to reinvest in that allows us to keep a lower cost of funds.

One data point.

Steven it's interesting.

We are more are rents, even though rents have gone up significantly and thats driven the value increase that you've seen on our financials, our rents or more below market today than they were when we bought the portfolio market rents have gone up by more than to Barry's point to being 99% leased that sort of almost ensures it. So as we look to April may when we will get more information.

Because we're not paying down the bonds sequentially, starting with AAA, which would increase our cost of funds. The reinvestment is good for us what's good for them as being.

Partnered with a.

With a partner like US who is willing and able to buy loans. When there is a default we don't want to have defaulted loans in there and have to work them out within within and we've said for a long time that everyone has the desire to buy loans out we'll see in difficult times, who has the ability to buy loans out. So yes, we did buy.

<unk> on the forward rents as I.

Look at that in place cap rate asset level cap rate that I quoted before you can almost think of that as a as a mid to high fours cap rate against where they see forward income come in at the at the with the increases that we have coming.

$81 million.

But again Great Center.

Loan out of the CLO that cielo is out of reinvestment. So that is costing us a higher cost of funds by virtue of that $81 million will pay off the senior bonds, but we want this to be a partnership with our with our bondholders, we want them to see that we're willing to step up and when we come back to the market, we expect better pricing than the market. Because we've continued to do that I think we bought.

Multi.

Isn't impacted by new supply badly all the 80 20 light Tech deals I mean, there is no affordable housing being built so you have no issues with supply in affordable and that's one of the reasons for the differentiation to cap rate between let's say a market clearing price today would be from market multi unit affordable housing project.

$260 million of loans out of CLO I'm.

Alright, and your second question.

Yes, it's a follow up I wanted to touch on I heard recently bought an $80 million loan out of a CLO can you maybe talk about that how you think about managing collateral in your CLO and kind of what drove that decision.

I'm getting away from the re investments now, but we bought $260 million of loans out of the CLO.

Which I think I think it's very good for our platform.

Youre good that just came out deep into the reports in the last week or two but I appreciate the call CLO for us have always been an opportunistic financing.

Thank you for this.

Question comes from Rick Shane with Jpmorgan. Please go ahead.

Hey, Jeff just one quick clarification, the $260 million that was in the fourth quarter or that was for 23.

A notes are our favorite financing they have no recourse their term they have no credit marks and they have no crops cielo is our second favorite form of financing, we get rid of the mark to the ability to credit Mark and we get rid of the resource and we've issued three CLO to date 3.3 dollars $75 billion in total of.

Life to date in the quarter.

If you go into trap you can see that we bought in $81 million senior office on them.

Got it okay. Thanks for the clarification.

I'd like to talk a little bit about two aspects of.

Clothes and they've come in general spreads slightly inside even even with our issuing costs slightly inside our where our bank repo financing costs were and it's slightly higher advance rates that makes them very accretive to returns and one of the things that makes them continually accretive for a longer period of time is as loans pay off that you reinvest.

<unk>.

So well first Oreo.

You guys have basically indicated that you are positioned to be long term holders of Oreo and think that you are good operators.

This mitigates to some extent the.

And in those CLO, we've done that I think 1 billion one of Reinvestments on 53 or 56 different loans over the life of these of these <unk> that we have which has been very good for us, but we think of the CLO with a partnership with our bondholders, we intend to issue again, when it's accretive but again it will be opportunistic.

Charge off risk associated with it as we think about distributable earnings is there enough cash flow off of those assets to come close to replacing what you were generating as lenders.

Yes.

Its really interesting question. So a lot of the things that youre seeing go into our higher risk rated buckets, even the office generally have four to six debt yields. They just don't have the seven or eight that you might need to escape.

We've said before that having a CLO financed only.

Public company is a more of a trade and not a business to the CLO market does go away at times, we've seen it go away in the last year from being accretive to repo and when it is accretive again, we will be back in the market as part of being a partnership with our bondholders and they allow us to reinvest in that allows us to keep a lower cost of funds because.

That means that there is cash after operating the after operating the office building there is cash to distribute its just not quite enough to distribute to cover a new interest full interest loans. So there is cash flow coming out. So the drag is less because of that Rick. So we will we will take that into account we certainly.

We're not paying down the bonds sequentially, starting with AAA, which would increase our cost of funds the reinvestment good for us what's good for them as being.

We've talked about a few assets that we would like to move on from because they don't pay current we do care a lot about current income. So if an asset is sort of too big of a drag and it's more of an opportunity fund play where it's not going to pay something for an awful long time.

Partnered with a.

With a partner like US who is willing and able to buy loans out when there is a default we don't want to have defaulted loans in there and have to work them out within within and we've said for a long time that everyone has the desire to buy loans out we will see in difficult times, who has the ability to buy loans. So yes, we did buy.

That will be difficult on GE in the shorter run you I think you would only see us doing that if we feel really comfortable with our ability to cover our dividend away from that if we start to feel like we were uncomfortable being able to cover it we would probably move on those assets more quickly.

$81 million.

Loan out of the CLO that cielo is out of reinvestment. So that is costing us a higher cost of funds by virtue of that $81 million will payoff senior bonds, but we want this to be a partnership with our with our bondholders, we want them to see that we're willing to step up and when we come back to the market, we expect better pricing than the market. Because we've continued to do that I think we bought.

We wouldn't have the room, but fortunately, we've had some cushion and earnings and we expect to have some cushion now is that we will be able to be flexible and choose what we want to keep longer than what we want to let go.

I think we've seen some numbers this week on percentages of assets in Oreo.

And you just add excuse me in non accrual and you just asked about Oreo between non accruals and Oreo, it's only three 4% of our assets.

$260 million of loans out of CLO I'm.

I'm getting away from the invest Reinvestments now, but we bought $260 million of loans out of the CLO, which I think I think it's very good for our platform.

Not a terrible burden yet if you think as long as you cover the dividend by one point over three four times and don't even kick off any cash flow youre going to be able to cover the dividend I just made a scenario where they do kick off from cash flow and we cover the dividend historically by more than three 4%. So we don't see it as a.

Next.

Question comes from Rick Shane with Jpmorgan. Please go ahead.

Hey, Jeff just one quick clarification, the $260 million that was in the fourth quarter or that was for 23.

As a major drag to distributable earnings, but it could become one if the cycle continues it could become one if rates don't follow the forward curve and.

Life to date.

Quarter.

We are aware and at our battle stations that could get more difficult, but today, we feel okay about it just just to quickly.

If you go into trap you can see that we bought in $81 million senior office on them.

Got it okay. Thanks for the clarification.

Quickly sum up on me.

Theyre all different.

Look I'd like to talk a little bit about two aspects of.

Some of these assets.

As we get a multi back it's probably yielding 6% or 76, 5%. So.

<unk>.

So well first Oreo.

That's kind of where we would expect to get assets back in.

You guys have basically indicated that you are positioned to be long term holders of Oreo and thank you or good operators.

The cap rates for mortgage not 65% today, so having said that if its a single asset partnership that borrowed against us. They may not have access to money. They may just don't have the capital or the investors don't want put the money up so again that we would love to get those back.

And that this mitigates to some extent the.

Charge off risk associated with it as we think about distributable earnings is there enough cash flow off of those assets to come close to replacing what you were generating as lenders.

Challenging assets would be the office billings, which Vulcan V K Street, which I think we have the capability and it's now unlevered on our books, we can borrow the money to renovate and turn into an apartment that will just take a couple of years.

To go through the development process or we bring in a partner he's advisor first we JV with whom he puts up the money to renovate it and we've just established base property value and we go 50, 50 or something like that.

Yes.

So we have a lot of flexibility I mean, one of our loans that we know it I believe is money good.

That means that there is cash after operating the after operating the office building, there's cash to distribute its just not quite enough to distribute to cover a new interest full interest loans. So there is cash flow coming out. So the drag is less because of that Rick. So we will we will take that into account we certainly.

The American Dream Mall, which.

Long history, but I think we're probably 25% to 30 with construction costs on that asset and it is ramping is burning through its free rent theme Park is doing really well I think it's maybe late $90 million of EBITDA. So just the theme and we just got paid.

90% of our original underwriting and we just got a $60 million of principal balance got paid down because we have cross collateralization with another asset. He has another major mall, which did seem desk transaction and funded $50 million to us so our basis of accounting like $69000 or something like that so I actually think we have a chance of getting it.

That will be difficult on de in the shorter run you I think you would only see us doing that if we feel really comfortable with our ability to cover our dividend away from that if we started to feel like we were uncomfortable being able to cover it we would probably move on those assets more quickly.

So.

There is upside to <unk> and it's going to be all over the place a little hard to figure out and one situations one of our borrowers at $400 million against the $400 million alone where half of their costs.

We wouldn't have the room, but fortunately, we've had some cushion and earnings and we expect to have some cushion now so we'll be able to be flexible and choose what we want to keep longer than what we want.

And we do think that we are expecting them to work.

And so as household name borrowers so.

I think I think we've seen some numbers this week on percentages of assets in Oreo.

That's a fairly significant hit to them.

And you just add excuse me in non accrual and you just asked about Oreo between non accruals and Oreo, it's only three 4% of our assets.

Don't want the building back and some of it's an office building, but if we get it back.

We'll be creating.

The good news is we will take the basis done appropriately and it'll be reflected in our book value.

Next question, Don <unk> with Wells Fargo. Please go ahead.

Jeff The carload volume was up this quarter can you talk a little bit about gain on sale margins on that production relative to normalized <unk>.

A one to two quarter type of opportunistic or could we see elevated levels for more of our many secular type.

As a major drag to distributable earnings, but it could become one if the cycle continues it could become one if rates don't follow the forward curve and.

Yes, Don Thanks.

We are aware and at our battle stations that could get more difficult, but today, we feel okay about it just just a.

Adam element in the room, who runs the LNR and runs the conduit business for us So I'll turn it over to him, but I would say that we are looking at this year as they as they come back a year I think 2024 will feel a lot better we had a great fourth quarter with the first quarter is starting off really well I'll, let Adam talk about it but we've been profitable in this business because Adam probably won't go.

Quickly sum up on me.

Theyre all different.

Some of these assets and we get a multi back it's probably yielding 6% or 76, 5%. So.

That's kind of where we would expect to get assets back in.

Here pretty much every quarter since we since we took the business.

The cap rates for mortgage notes six 5% today, so having said that if its a single asset partnership that borrowed against us. They may not have access to money than they just don't have the capital or the investors don't want that.

Over in the door since we took over LNR excuse me and Thats for a bunch of reasons one of them.

The money up so again that we would love to get those back.

Yes.

There's a lot of there's a lot of reasons for that and we don't tend to do the bigger investment grade tighter loans, we tend to do smaller sized loans, where you have a little bit more cushion and we hedge interest rates and we hedged 40% or so of the credit exposure in the loans and that's a very expensive thing to do but it creates consistency so.

Challenging assets would be the office buildings, which are 100, K Street, which I think we have the capability and it's now on Levered on our books, we can borrow the money to renovate and turned into an apartment that will just take a couple of years.

To go through the development process or we bring in a partner he's advisor for us with <unk> with whom he puts up the money to renovate it and we've just established base.

We've been really excited about having a consistent book that we think has some upside this year as we're seeing some green shoots and see MBS, but I'll turn it to Adam to discuss.

Property value, we go 50, 50 or something like that.

So we have a lot of flexibility I mean, one of our loans that we know is I believe is money good.

I think you can say, it's going to be a volume game.

The American Dream Mall, which has been.

Yes.

Long history, but I think we're probably 25 or 30 or construction costs on that asset and it is ramping it's burning through its free rent theme park is doing really well I think it's maybe late $90 million of EBITDA. So just the theme and we just got paid.

The new system.

We've over time throughout our business with an SFC.

The big problem you saw it in total.

We did $760 million of origination.

'twenty three.

We're happy to see that so much.

90% of our original underwriting and we just got a $50 million principal amount of debt paid down because we have cross collateralization with another asset. He has another major mall, which did seem desk transaction and funded $50 million to us Saar basis were $69 something like that so I actually think we have a chance of getting it.

Much earlier this year than I think.

Tighter spreads on CBS deals.

There was a little less opportunity for other lenders out there. We're just right at the MBA conference in.

CME has limited the golf ball.

Right.

The only good lifts the NDA.

It really isn't there is a lot of people who realize that many people at the ball Bryan. So it was it was good to see that.

So.

There is upsides to our marks and it's again a deal over the place a little hard to figure out when and one situations one of our borrowers at $400 million against the $400 million alone where half of their costs.

Seeing it where we're getting our head of creditors.

<unk>.

Gone home.

The early these days and the need to revise that.

And we do think that we are expecting them to work.

I think we you'd pursue them we used to do one two to one.

And so as household name borrowers so.

Yes.

That's a fairly significant hit to them.

I think it's.

I'm hopeful that we're certainly not going to see what we did last year definitely.

We don't want the building back it's an office building, but if we get it back.

Okay. Thank.

We will be creating.

Thank you.

The good news is we'll take the basis down appropriately and it will be flex in our book value.

So we don't really quote gain on sale, but I would say, it's consistent with historic levels.

One other thing in the MBS market that I find interesting.

Next question, Don <unk> with Wells Fargo. Please go ahead.

Pivoted to having a decent sized five year see MBS market and Thats, a new newest phenomenon, we needed to get bp's buyers comfortable because they.

Jeff The carload volume was up this quarter can you talk a little bit about gain on sale margins on that production relative to normalized.

They don't have as long of a period of time to accrete from a lower dollar price in the bps on a five years. So they have to buy a higher dollar prices.

A one to two quarter type of opportunistic or could we see elevated levels for more of a many secular type.

B piece of that that was a little bit difficult to digest at first but I think people are realizing there is a lot of value. There. So we look all the time at the MBS versus.

Correct, Yeah, Don Thanks.

That enrollment in the room, who runs LNR and runs the condo business for us So I'll turn it over to him, but I would say that we are looking at this year as they as they come back year, I think 2024 will feel a lot better we had a great fourth quarter with the first quarter is starting off really well I'll, let Adam talk about it but we've been profitable in this business because Adam probably won't go.

Sure.

And Mark's book of transitional floating rate lending and today I think the MBS market, we're quoting something like $2 75 over five year swaps on a fixed rate basis, we're sort of multi industrials et cetera, maybe $3 50 over four hotels in those numbers are really consistent with where we are quoting.

Here pretty much every quarter since we since we took the business.

Transitional floating rate, which are three year loans floating with two with two one year extension. So the pricing wise. If you can get the certainty of not having to deal with that role and you have cash flow that has that.

Over in the door since we took over LNR excuse me.

And thats for a bunch of reasons one of them.

And then on the network.

There's a lot of reasons, there's a lot of reasons for that and we don't tend to do the bigger investment grade tighter loans, we tend to do smaller sized loans, where you have a little bit more cushion and we hedge interest rates and we hedged 40% or so of the credit exposure in the loans and that is a very expensive thing to do but it creates.

That service coverage they can get units the MBS market, but the MBS market is very interesting for that for.

For that transitional borrower has a lot of it was a decent amount of cash flow to go into in five years, where historically, they probably would have all gone into the transitional floating market because they didn't want to take 10 year debt. So that will help volumes theyre not quite as profitable because the five year deal instead of a 10 year deal, but it'll help volumes in it and we think we can grow there.

<unk>. So we've been really excited about having a consistent book that we think has some upside this year as we're seeing some green shoots and see MBS, but I'll turn it to Adam to discuss.

We are part of February.

Yes, I mean, I think you could say.

Securitization it takes place on the Nonbanking, Bob in terms of your World and I will tell you. It's just right. It's almost 70% of individuals out there are really five year origination, which is taking place in wider eligible because we're trying to take the.

Can be a volume game.

Okay.

The new system.

Been doing overtime throughout our business with in essence.

The big problem you saw it in total.

Floating rate market.

We did $760 million of origination.

Market again, the floating rate side.

23.

And two on the mid market side, so hopefully that's going to allow us to really capture a lot of that business. Good for borrowers to have choices and we think they have more choices now it's good for everybody.

We're aiming to be that much.

Much earlier this year than I think.

Tighter spreads on CBS deals.

Thank you for the question Doug.

There was a little less opportunity for other lenders out there. We're just right at the MBA conference in.

Next question Jade Rahmani with <unk>. Please go ahead.

The CBS lengths of the golf ball.

Thank you very much.

Great.

Are you seeing any projects eligible for conversion to data centers as an alternative use this quarter. We saw a homebuilder agreed to sell a vacant piece of land carry that $5 million for a whopping $180 million. So I just thought I'd ask if youre seeing any alternative use cases there.

The only good standing.

It really isn't there is a lot of people, who really are not that many people at the Boston Bryan. So it was it was good to see that.

Seeing it where we're getting our head of creditors.

<unk>.

Gone home.

The early these days and neither revised.

I think we used to see you inbound we used to doing.

While we have one asset I'll speak to where this sort of made some sense.

Yes.

It's.

I'm hopeful we're certainly not going to see what we did last year definitely.

La <unk>.

I'm going to quote the megawatts wrong, because I'm out of my out of my area of expertise, but I think we thought that the size of the building we it would be accretive if we get something like 90 megawatts. Then we could only get 30 and the problem is there in a downtown environment you can't create power you can't put a power center next to Barry knows this.

Okay.

Thank you.

So we don't really quote gain on sale, but I would say, it's consistent with historic levels.

One other thing and that is the MBS market that I find interesting, we pivoted to having a decent sized five year see MBS market and that's a new newest phenomenon, we needed to get bp's buyers comfortable because.

Better than anybody and it's why you're seeing a lot of data centers in places like Virginia, where they can create more power. So we could only take the power that was available on the grid to us and there wasn't enough power available on the grid to Accretively turn this into a data center, which we had hoped to do so in areas that are infill I think it will be more difficult and power oriented in areas, where there's more land you can.

They don't have as long of a period of time to accrete from a lower dollar price in the bps on a five years. So they have to buy a higher dollar prices.

So that was a little bit difficult to digest that first but I think people are realizing there is a lot of value. There. So we look all the time at MBS versus.

Sure.

And Mark book of transitional floating rate lending and today I think the MBS market, we're quoting something like $2 75 over five year swaps on a fixed rate basis, we're sort of multi industrials et cetera, maybe $3 50 over four hotels in those numbers are really consistent with where we are quoting.

Right that if you create a large enough data center, but there is an expert that I'm going to turn out.

Substation.

Under utilized so to the extent that there are yes, it's possible.

We're the fourth largest owner.

Some data centers now in the world privately held.

So quite a little business.

There.

Probably have to do a $3 billion capital reason is GWG. These things require a lot of money. They are gigantic commitments of capital. So yes, if we got lucky that I was visiting a building that actually we did take back but not the REIT actually our opportunity fund.

Debt service coverage, they can get units the MBS market Thats. The MBS market is very interesting for that for.

Or that transitional borrower has a decent amount of cash flow to go into in five years, where historically, they probably would have all gone into the transitional floating market because they didn't want to take 10 year debt. So that will help volumes theyre not quite as profitable because the five year deal instead of a 10 year deal, but it'll help volumes and we think we can grow there.

And there is a substation right next to it and the fibers right. There. So we could get lucky, but not in the building the building will stay a building, but we actually own the land next to the substation. The MTO is going to be a multifamily site and maybe it will be a dataset someday.

Yes, I mean, it requires the power of the land isn't worth anything other than its original use unless the powers there and the power has to be available. So these are negotiations utility by utility and Theres a long queue.

Part of February.

Securitization it takes place on the non bank as part of a tender world and I will tell you. It's just right. It's almost 70% of individuals out there are really five your origination which is taking place and why were eligible because we're kind of taking the.

And to some extent the tenants can help break the Q move around the order of the queue, but.

Floating rate market water.

Market again to floating rates out here is open to on the mid market side. So hopefully that's going to allow us to really capture a lot of that business. Good for borrowers to have choices and we think they have more choices now it's good for everybody.

Some states have made datacenters are big business like Virginia.

And others are catching up like Texas, and California, Hasnt of excess power, So, California won't have any data centers for.

For a while but that's to the benefit of the places that do so.

Thank you for the question Doug.

It'd be great, we'd love to have it but it would be lucky than good.

Next question Jade Rahmani with <unk>. Please go ahead.

But.

I don't see in any of our current assets.

Thank you very much.

I actually haven't looked at there is extra power station next to the American Dream Walton shipping book.

But.

In Washington, The office building is one K Street.

Thanks.

Our tissue.

Leslie did a nice looking data center in the history of mankind.

While we have one asset I'll speak to where this sort of made some sense it's in la.

These are ugly.

So.

Most cities won't want them inside you just sit there inside the existing shell the la property would've work that we could get.

And I'm going to quote the megawatts wrong, because I'm out of my out of my area of expertise, but I think we thought that the size of the building we it would be accretive if we get something like 90 megawatts and we could only get 30 and the problem is there in a downtown environment you can't create power you can't put a power center next to Barry knows this.

The big box.

Load bearing floors, which you need for the equipment and the high level.

Internet was just that we may not get the original basis Thats the asset talked about though we had a $250 million.

$3 million down to 150 I think.

Better than anybody and it's why you're seeing a lot of data centers in place like Virginia, where they can create more power. So we can only take the power that was available on the grid to us and there wasn't enough power available on the grid to Accretively turn this into a data center, which we had hoped to do so in areas that are infill I think it will be more difficult empower oriented in areas, where there's more land you can creep.

Yes.

Florida the value is $30 million 30 megawatts somebody bought it for data centers doesn't have to be in.

Office building.

We're working on the rest of the conversion there so.

I actually think the beautiful building.

Austin downtown L. A.

Most of the worst market in United States right now so.

Right that if you create a large enough data center, but barrington expert that I'm going to turn out.

It's a race to the bottom, but that's certainly being contention with San Francisco and Austin those are two really tough market.

Substations.

<unk> utilized so to the extent that there are yes, it's possible.

We're the fourth largest owner.

Yes.

Some data centers now in the world privately held.

Jay.

And then operator any other questions. Yes. Our last question comes from Doug Harter with UBS. Please go ahead.

So quite a little business.

There.

Probably have to do a $3 billion capital reason is GWG. These things require a lot of money. They are gigantic commitments of capital. So yes, we got lucky and those visiting a building that actually we did take back but not the REIT actually are.

Hoping you could give us an update on on your casino loan in Australia, just given that there's been some news about.

About that and the recently in the news about Taylor Swift and the casino that one.

Opportunity funds.

So she was she was there last night it is in the papers today, So we're expecting a big income part.

And there is substation right next to it and the fibers right. There. So we could get lucky not in the building the building will stay a building, but we actually own the land next to the Substations that MTO is going to be a multifamily site and maybe it will be a data centre someday.

So the earnings for one quarter would be great actually we obviously don't own the casinos that are held by us.

And the firm and we think we're less than half of the.

Yes, I mean, it does it requires the power of the land isn't worth anything other than its original use unless the powers there and the power has to be available. So these are negotiations utility by utility and there is a long queue.

Capital stack and our basis.

She owns the other half of the mortgages that we own on those assets.

So there is sort of 75%.

And to some extent the tenants can help break Q move around the order of the queue.

The <unk> touch if you will there were 51% or 49 in the debt or the equity.

<unk>.

And.

Some states have made data centers, a big business like Virginia.

The.

They're continuing to support the property with the recent announcement of $1 billion.

And others are catching up like Texas, and California, Hasnt of excess power, So, California won't have any data centers.

Infusion the cap stack, it's a fairly significant.

For a while but that's to the benefit of the places that do have the power. So.

Second investment.

Firms. So we're comfortable that they have the expertise.

It'll straighten it out they are using some of this money to renovate properties, which they were.

I don't see in any of our current assets.

They intended to renovate them so they never finish that but they are major domo assets in these markets.

Actually haven't looked at there is extra power station next to the American Dream mortgage book.

But.

Zachary Tanenbaum: And in Washington.

We're comfortable right now with.

Office building is one.

This is credit's fine so we'll see if things change, but as you know theyre coming out of some licensing issues.

<unk> no I don't think.

Power station.

Zachary Tanenbaum: Plus it is a nice looking data center in the history of mankind. Most of these are ugly.

The prior owner had that has not been resolved as quickly as they hoped.

Zachary Tanenbaum: So.

Most cities won't want them inside you just buried inside existing shell the LNR property would've worked and we could get.

But they are there.

Very supportive of credit.

Big box.

So we'll see as they don't have the paper as well go to the equity.

Load bearing floors, which you need for the equipment.

And that had the high level.

Great. Thank you Doug.

Internet was just that we may not get the original basis, that's the asset talked about though we had a $250 million.

Thank you I would like to turn the call over to Barry for closing remarks.

Sure.

$3 million down.

Yes.

Thank you everyone for joining us.

<unk> hundred 50 I think.

Hope you have a continued reasonably good news.

Yes that that puts a floor under the value is $30 million 30 megawatts. If somebody bought it for data centers doesn't have to be an office building.

I look forward for this company go back on offense.

We're all chomping at the bit more offense.

Zachary Tanenbaum: And we're working on a resin conversion there so.

Not that we're not in the markets, but we are cherry picking.

I actually think the beautiful building.

Sitting on 1 billion liquidity.

Zachary Tanenbaum: And Austin downtown L. A.

And then having these non non accrual assets is not the greatest position, but to be able to easily cover your dividend is certainly a very comfortable position we have.

Closer of the worst market in United States right now so.

It's a race to the bottom, but that's certainly being contention with San Francisco and Austin those are two really tough market.

You are aware, we mentioned some of the things we are one of the things we're selling in the first quarter, which will close in it so.

Yes.

Zachary Tanenbaum: Yes.

Speaker Change: Thank you Jade.

Operator, any other questions. Yes, our last question comes from Doug Harter with UBS. Please go ahead.

We are in the recent repayment of $1 billion.

Senior loan does the equity in the loan.

Thanks, hoping you could give us an update on on your casino loan in Australia, just given that there's been some news about.

But just in really good shape through to combat. This this next eight months.

Relenting pressure from the fed on the on the complex. So thank you.

Speaker Change: About that and the recently in the news about Taylor Swift and the casino that one.

We're excited about the future of the company.

So she was she was there last night it is in the papers today. So we're expecting a big income pop yes.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Earnings for one quarter, it will be great actually we obviously don't own the casinos there.

And the firm and we think we're less than half of the.

Capital stack and our basis.

<unk> owns the other half of the mortgages that we own on those assets.

Are there sort of 75%.

Speaker Change: On the Capex, if you will there were 51% or 49 in the debt and the equity.

And.

The.

They are continuing to support the property with a recent announcement of $1 billion.

The cap stack.

Speaker Change: Fairly significant investment of the firms. So we're comfortable that they have the expertise.

Speaker Change: They will straighten it out they are using some of this money to renovate the properties, which they were.

Speaker Change: They intended to renovate them. So they never finished that but their major domo assets in these markets.

We're comfortable right now.

Credit's fine.

So we'll see if things change, but as you know theyre coming out of some licensing issues.

The prior owner had that has not been resolved as quickly as they hoped.

But they are.

They're very supportive of credit.

So we'll see as they do won't have the paper as well go to the equity.

Great. Thank you Doug.

Thank you I would like to turn the call over to Barry for closing remarks.

Thank you everyone for joining us we hope you have a continued reasonably good news.

Speaker Change: And I look forward for this company to go back on offense.

All chomping at the bit more offense not.

Not that we're not in the markets, but we are cherry picking.

Speaker Change: Sitting on 1 billion liquidity.

Speaker Change: And then having these.

Non accrual assets is not the greatest position, but to be able to easily cover your dividend is certainly a very comfortable position we have.

Yes.

You are aware, we mentioned some of the things we are one of the things we're selling in the first quarter, which is closing so.

We are in the recent repayment of $1 billion senior loan as the equity in the loan.

As puts us in really good shape through to combat. This this next eight months.

Relenting pressure from the fed on the on the complex. So thank you.

We're excited about the future of the company.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

[music].

Q4 2023 Starwood Property Trust Inc Earnings Call - Q&A

Request a DemoDemo

STWD

Starwood Property Trust

Earnings