Q4 2023 Arbor Realty Trust Inc Earnings Call

Operator: Your program is about to begin. If you need any assistance during your conference call today, please press star zero. Good morning, ladies and gentlemen, and welcome to the fourth quarter and full year 2023 Arbor Realty Trust Earnings Conference Call. All participants are in a listen-only mode.

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Yeah.

Good morning, ladies and gentlemen, and welcome to the fourth quarter and full year 2023 Arbor Realty Trust earnings Conference call. All participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session, and to ask a question during this period, you will need to press star 1 on your telephone. If you want to remove yourself from the queue, please press star 2. Please be advised that today's conference is being recorded, and if you should need operator assistance, please press star zero. I would now like to turn your call over to your speaker today, Paul Alenio, Chief Financial Officer. Please go ahead.

After the speaker's presentation, there will be a question and answer session and you ask a question. During this period you will need to press star one on your telephone if you want to remove yourself from the queue. Please press star two.

Please be advised that today's conference is being recorded and if you should need operator assistance. Please press star Zero I would now like to turn your call over to your speaker today, Paul <unk> Chief Financial Officer. Please go ahead.

Paul Alenio: Okay, thank you, Savannah. And good morning, everyone. And welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter and year ended December 31, 2023. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer. Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risk and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events.

Okay. Thank you Savannah, and good morning, everyone.

Welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we will discuss the results for the quarter and year ended December 31, 2023 with me on the call today is Ivan Kaufman, our President and Chief Executive Officer before we begin I need to inform you that statements made in this earnings call maybe deemed forward looking statements that are subject to risks and uncertainties.

Including information about possible or assumed future results of our business financial condition liquidity results of operations plans and objectives. These statements are based on our beliefs assumptions and expectations of our future performance taking into account the information currently available to us.

Factors that could cause actual results to differ materially from arbor's expectations. In these forward looking statements are detailed in our SEC reports listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today.

<unk> undertakes no obligation to publicly update or revise these forward looking statements to reflect events or circumstances after today or the occurrences of unanticipated events.

Ivan Kaufman: I'll now turn the call over to Arbor's President and CEO, Ivan Kalfour. Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we had another outstanding quarter and closed out an exceptional 2023. In fact, 2023 was one of our best years as a public company, despite an extremely challenging environment. We managed to increase our dividend twice while maintaining one of the lowest payouts and dividend ratios in the industry and generated a total shareholder return of 28%, outperforming our peers. Additionally, and very significantly, we're able to maintain our book value while recording reserves for potential future losses, which clearly differentiates us from everyone in the space. In fact, as Paul will discuss in more detail later, we generated GAAP earnings in excess of our dividend in 2023, despite recording approximately 90 million reserves, and Distributable Earnings were also well in excess of our dividend, providing one of the best dividend coverage ratios in the industry. We're also very effective in refinancing loans off our balance sheet for our capitalized agency business.

Now I'll turn the call over to Arbor's, President and CEO Ivan Kaufman.

Thank you Paul and thanks to everyone for joining us on today's call.

As you can see from this morning's press release, we had another outstanding quarter.

Those out an exceptional 2023.

2023 was one of our best years as a public company.

Spite, an extremely challenging environment.

We managed to increase our dividend twice, while maintaining one of the lowest payout.

Dividend ratios in the industry and generated a total shareholder return of 28% outperforming our peers.

Additionally, and very significantly we were able to maintain our bauxite recorded reserves for potential future losses.

Which clearly differentiates us from everyone in the space.

In fact, as Paul will discuss in more detail later.

Generated GAAP earnings in excess of our dividend in 2023.

Despite recording approximately 90 million reserves and.

Distributable earnings were also well in excess of our dividend.

Providing one of the best dividend coverage ratios in the industry.

We're also very effective in refinancing loans off our balance sheet to a capital light agency business. We generated 3 billion of multifamily runoff in 2023, and recaptured 56% or $1 7 billion of loans loans into agency product.

Ivan Kaufman: We generated $3 billion of multifamily runoff in 2023 and recaptured 56%, or $1.7 billion, of those loans in new agency products. Our agency platform gives us a tremendous strategic advantage, allowing us to continue to de-lever our balance sheet and generate significant long-dated income streams, which is a key part of our business strategy. We have been a significant player in the agency business for almost 20 years and now have been a top 10 Fannie Mae dust lender for 17 years in a row, coming in at number six for 2023. And it's extremely important to emphasize that our agency business generates over 40% of our net revenues, the vast majority of which occur before we even open our doors every day. This is completely unique to our platform and is something we feel is not fully reflected in our valuation. On our last call, we gave guidance that the fourth quarter of last year and the first quarter and second quarters of this year would be the most challenging parts of the cycle. We are in a period of peak stress and expect the next two quarters to be challenging, if not more challenging than the fourth quarter.

Our agency platform gives us tremendous strategic advantage, allowing us to continue to delever our balance sheet.

And generate significant long dated income streams, which is a key part of our business strategy.

We have been a significant player in the agency business for almost 20 years now have been a top 10, Fannie Mae dust Linda for 17 years in a row coming.

Coming in at number six for 2023.

And it's extremely important to emphasize that our agency business generates over 40% of our net revenues the vast majority of which occur before we even opened doors every day.

This is completely unique to our platform and it's something we feel is not fully reflected in our valuation.

On our last call we gave guidance at the fourth quarter of last year in the first quarter and second quarters of this year would be the most challenging part of the cycle.

Yeah.

We are in a period of peak stress and expect the next two quarters to be challenging if not more challenging than the fourth quarter.

As a result of this environment, we're experiencing elevated delinquencies.

Ivan Kaufman: As a result of this environment, we are experiencing elevated delinquencies. One of the many reasons this is occurring is that certain borrowers are taking the position that they will default first and negotiate second, which is not a strategy that works well with us. Second, borrowers need to bring capital to the table to right-size their deals, and raising capital is a lengthy process in today's climate. Therefore, you will see defaults rise initially until lenders are able to raise additional capital, and then deals will often be recapped. We feel we have done a very good job to date in collecting payments and have been highly effective in refinancing deals for our agency businesses, as well as getting borrowers to recapitalize their deals and purchase interest rate caps where appropriate.

One of the many reasons. This is occurring is shortened bars I've taken the position that they will default first and negotiate checking which is not a strategy that works well with us.

Second borrowers need to bring capital to the table to rightsize that deals and raising capital is a lengthy process in today's climate.

Therefore, you will see defaults rise initially.

Until we are able to raise additional capital and then deals will often be recapped.

We feel we have done a very good job to date in collecting payments and they've been highly effective in refinancing deals from our agency business as well as getting borrowers to recapitalize their deals and purchase interest rate caps where appropriate.

Ivan Kaufman: In fact, we had $2.5 billion of loans with interest rate caps that were expiring over the last four months, of which 1.7 billion executed new rate caps or put cash up in lieu of caps, and we continue to work on getting new caps executed every day. We also have longstanding relationships with many quality sponsors that we've been working with to step in and take over assets that are underperforming and assume our debt and recapitalize these transactions, as we are constantly receiving reverse inquiries from the market to purchase our assets as well. Our goal is to maximize shareholder value, and we very often... It's not just the value of the collateral but the recourse provisions that we evaluate in determining how to approach each individual circumstance. The short-term nature of having a delinquent loan will not impact our decision-making process to achieve a correct economic result on a transaction.

In fact, we had $2 5 billion of loans with interest rate caps that were expiring over the last four months.

Of which 1.7 billion executed new rate caps or put cash up in lieu of cats, and we continue to work on getting new caps executed every day.

We also have long standing relationships with many quality sponsors that we've been working with to step in and take over assets that are underperforming and so my debt and recap these transactions.

As we are constantly receiving reverse inquiries from the market to purchase how our assets as well.

Our goal is to maximize shareholder value and very often.

It's not just the value of the collateral, but the recourse provisions that we evaluate in determining how to approach each individual circumstance.

The short term nature of having a delinquent loan will not impact our decision making process to achieve a correct economic result on a transaction.

Ivan Kaufman: With that said, we have received a lot of public criticism for what we consider to be an extremely successful transition of assets to new ownership through the legal process or even through cases consensually. This is very difficult and complicated work, and as I said earlier, we expect to be extremely busy in the first two quarters of this year managing through the most challenging part of this dislocation. Additionally, we continue to focus heavily on maintaining a very strong liquidity position. We currently have over $1.1 billion of cash, between $1 billion in corporate cash and $600 million of cash in our CLOs, which result in an additional cash equivalent of approximately $150 million. Having this level of liquidity is crucial in this environment, as it provides us with the flexibility needed to manage through the rest of the downturn and take advantage of opportunities that will exist in the market to generate superior returns We have also done an excellent job of reducing our exposure to short-term bank debt and have no significant pending maturity to deal with on any of our warehousing facilities. We are down to approximately $2.8 billion in outstandings with our commercial banks from a peak of nearly $4.2 billion.

With that said, we have received a lot of public criticism and what we consider to be an extremely successful transition of assets to new ownership through the legal process or even two cases consensually.

This is a very difficult and complicated work and I said earlier, we expect to be extremely busy in the first two quarters of this year managing through the most challenging part of this dislocation.

Yeah.

Additionally, we continue to focus heavily on maintaining a very strong liquidity position. We currently have over one point with 1 billion of cash between 1 billion and corporate cash and 600 million of cash not cielo has that resulted in an additional cash equivalent of approximately $150 million.

And having this level of liquidity is crucial in this environment.

Is it provides us the flexibility needed to manage through the rest of the downturn and take advantage of opportunities that will exist in the market to generate superior returns on our capital.

We have also done an excellent job and reduce our exposure to short term bank debt.

No significant pending maturity to deal with on any of our warehousing facilities. We are down to approximately $2 8 billion in outstandings without commercial banks from a peak of nearly $4 2 billion.

Ivan Kaufman: We have over 70% of us secured and debt-free in non-mark-to-market, non-recourse, low-cost CLO vehicles. As previously discussed, these vehicles provide a tremendous strategic advantage at times of distress and dislocation, like the environment we are in today, due to the nature of their non-mark-to-market, non-recourse elements. In addition, they contribute significantly to providing a low-cost alternative to warehouse banks, which in times like this have fluctuating pricing and leverage point parameters. Turning now to the fourth quarter performance, as Paul will discuss in more detail, our quarterly financial results were once again remarkable. We produce distributable earnings of $0.54 per share, excluding a one-time realized gain on an office property that we had previously reserved for.

And we have over 70% of our secured indebtedness and non mark to market nonrecourse low cost CLO vehicles.

As previously discussed these vehicles provide a tremendous strategic advantage advantage at times of distress and dislocation like the environment. We are in today due to the nature of that non mark to market nonrecourse elements. In addition, they contribute significantly to providing a low cost salt.

I don't have to warehouse banks, which in times like this have fluctuating price got a leverage point parameters.

Turning now to the fourth quarter performance as Paul will discuss in more detail our.

Our quarterly financial results once again remarkable.

We produced distributable earnings of 54 cents per share.

Excluding a onetime realized gain on an office property that we had previously reserved for.

The results were well in excess of our current dividend, representing a payout ratio of around 80%.

Ivan Kaufman: The results were well in excess of our current dividend, representing a payout ratio of around 80%. We are very pleased with the substantial cushion we have created between our earnings and dividends, which will serve us well through the balance of this dislocation. We believe our diverse business model uniquely positions us as one of the only companies in the space with the ability to continue to provide a sustainable dividend. And just as importantly, in a time of tremendous stress, we've managed to maintain our book value while recording reserves for potential future losses, which clearly differentiates us from our peers. In our balance sheet lending business, we continue to focus on working through our loan book and converting our multifamily bridge loans into agency products, allowing us to recapture a substantial amount of our invested capital and produce significant long-dated income streams.

We are very pleased with the substantial cushion we have been created between our earnings and dividends, which will serve us well through the balance of this dislocation we believe our diverse business model uniquely positions us as one of the only companies in this space.

With the ability to continue to provide a sustainable dividend.

And just as importantly in a time of tremendous stress, we've managed to maintain our book value rather according reserves for potential future losses, which clearly differentiates us from our peers.

And that balance sheet lending business, we continue to focus on working through our loan book and converting our multifamily bridge loans into edge agency product, allowing us to recapture a substantial amount of our invested capital and produced significant long dated income streams.

Ivan Kaufman: In the fourth quarter, we were able to, again, be highly effective with this strategy, producing another $800 million of balance sheet runoff, $465 million, or 58 percent of which was recaptured into new agency loan origination. As a result, we recouped over $100 million of capital and continued to build up our cash position, which currently sits at around $1.1 billion. With today's current interest rates, we will continue to chip away at converting loans to the agencies.

In the fourth quarter, we were able to again highly D. Highly effective with this strategy producing another 800 million of balance sheet run off 465 million or 58% of which was recaptured through agency loan originations.

As a result, we recouped over $100 million of capital.

And continue to build up our cash position, which again currently sits at around $1.1 billion.

With today's current interest rates, we will continue to chip away at converting the loans to the agencies, but if the 10 year goes below 4% again, it will become more meaningful in every quarter of a point drop in rates from here will be even more impactful.

Ivan Kaufman: But if the 10-year goes below 4% again, it will become more meaningful, and every quarter of a point drop in rates from here will be even more impactful, as we touched upon last quarter. We also believe we are well positioned to step back into the lending market and garner accretive opportunities to continue to grow our platform. We feel now is an appropriate time to originate some of the highest quality loans with attractive returns, allowing us to grow our balance sheet and build our pipeline of future agency deals. In our GFC agency business, we had another great quarter, in an exceptional 2023 despite elevated interest rates. We originated $1.3 billion in the fourth quarter and $4.8 billion for the full year, representing a 7% increase over our 2022 numbers.

As we touched upon last quarter. We also believe we are well positioned to step back into the lending market and gone are accretive opportunities continue to grow our platform. We feel now is an appropriate time to originate some of the highest quality loans with attractive returns, allowing us to grow our balance sheet and build a pipeline of future agency deals.

And I G. S. C agency business, we had another great quarter and an exceptional 20 twenty-three. Despite elevated interest rates, we originated $1 3 billion in fourth quarter and $4 8 billion for the full year, representing a 7% increase over our 2022 numbers. This is a tremendous accomplishment and lie.

Ivan Kaufman: This is a tremendous accomplishment in light of the fact that the agencies were down 25% to 30% in production year over year. We've done an excellent job gaining market share and converting our balance sheet loans into agency products, which has always been one of our key strategies and a significant differentiator from our peers. We also originated $300 million of 5--10-year fixed-rate GSE agency alternative products through our private label business, bringing our total agency volume to $5.1 billion for 2023. Additionally, January is a much slower month with the agencies, which resulted in us originating $250 million in loans.

The fact that the agencies were down 25% to 30% in production year over year.

We've done an excellent job in gaining market share in converting our balance sheet loans into agency product, which has always been one of our key strategies and a significant differentiator from our peers.

We also originated 300 million of five to 10 year fixed rates, yes. He agency alternative products through our private label business, bringing our total agency volume to $5 1 billion for 'twenty to 'twenty three.

Traditionally January is a much slower month, but the agencies, which resulted in us originating $250 million of loans.

Ivan Kaufman: February numbers are looking much stronger, and we have a large pipeline setting us up for what we believe will be another very solid year of agency originations for 2024. And again, this agency business offers a premium value as it requires limited capital, generates a significant, long-dated, predictable income stream, and produces significant annual cash flow. To this point, our $31 billion fee-based servicing loan portfolio, which grew another 4% in the fourth quarter and 11% year-over-year, generates approximately $121 million in reoccurring cash flow.

February numbers are looking much stronger than we were.

Large pipeline setting us up for what we believe will be another very solid year agency originations for 2024.

And again this agency business offices, a premium value as it requires limited capital.

They generate significant long dated predictable income stream and producing significant annual cash flow.

To this point, our 31 billion fee based servicing a loan portfolio, which grew another 4% in the fourth quarter and 11% year over year generates a profit of $121 million, a year and reoccurring cash flow.

Ivan Kaufman: It also generates significant earnings on our escrow and cash balances, which acts as a natural hedge against interest rates. In fact, we are now earning 5% on around $3 billion in balances, or roughly $150 million annually, which, combined with our servicing income annuity, totals approximately $270 million of annual gross earnings, or $1.30 a share. This is in addition to the strong gain on sale margins we generate from our Originations platform providing us a strategic advantage over our peers. In our single family rental business, we had a very strong fourth quarter and a full year 2023 as we continue to dominate the space and have become a lender of choice in the premium markets we traffic. We had $200 million of funding and another $470 million of commitments signed up in the fourth quarter, and we closed out 2023 with $1.2 billion of new commitments.

Also generate significant earnings on a basketball in cash balances, which acts as a natural hedge against interest rates. In fact, we are now earning 5% on around 3 billion in balances of roughly 150 million annually, which combined with our servicing income annuity totals approximately $270 million of annual grocer.

Earnings were $1 30, a share.

This is in addition to the strong gain on sale margins, we generate from our originations platform, providing us the strategic advantage over our peers.

And our single family rental business, we had a very strong fourth quarter and full and our full year 2023, as we continue to dominate the space and it would be.

Come a lender of choice and a premium off because of the traffic. We had 200 million of fundings and another $470 million of commitments signed up in the fourth quarter and closed out 2023 with 1.2 billion of new commitments.

Ivan Kaufman: We also have a large pipeline and remain committed to this business as it offers returns on our capital through construction, bridge, and permanent lending opportunities and generates strong levy returns in the short term while providing significant long-term benefits by further diversifying our income streams. We're also very excited about the opportunities we think we can garner from our newly added construction lending business, as we believe we can generate 10 to 12 percent unlevered returns on our capital and eventually leverage this business and produce mid- to high-teens returns. We continue to build up a pipeline of potential deals and now have roughly $44 million under application, another $400 million in our pipeline, and a significant number additional deals we are currently screening.

We also have a large pipeline remain committed to this business is roughly three times on a capital for construction bridge and permanent lending opportunities and generate strong levered returns in the short term, while providing significant long term benefits by further diversifying our income streams.

We're also very excited about the opportunities. We think we can garner from our newly added construction lending business as we believe we can generate 10% to 12% Unlevered returns on our capital and eventually Leverages business and produce mid to high teens returns we.

We continue to build up a pipeline of potential deals and now have roughly $43 million up 44 million under application.

Another $400 million in our lives and a significant number of.

Additional deals we are currently screening.

We'll leave this product is very appropriate for our platform as it offers a street turns on our capital through construction Virgin permanent agency lending opportunities.

Ivan Kaufman: We believe this product is very appropriate for our platform as it offers us three turns on our capital through construction, bridge, and permanent agency lending opportunities. Lastly, I would like to spend some time talking about the short reports that have been written about our company. We want our loyal investors to understand that these reports are written in a way that is purposely designed to drive down the company's stock price to achieve the desired goal of profit from a short position. As such, the facts, assumptions... Predicated future events and market conditions, as well as conclusions in these reports, are exaggerated.

Lastly, I would like to spend some time talking about the short reports that have been written on our company.

One our loyal investors base to understand that these reports are written in a way that is purposely designed to drive down the company stock price to achieve the desired goal of profit from a short position.

As such the facts assumptions predicated.

Predicated future events and market conditions as well as conclusions in these reports.

Are exaggerated.

Ivan Kaufman: Laced with incomplete and inaccurate data, it's slanted only to provide a negative view on Arbor and again purely for personal gain. And while we will not get into a back-and-forth on the information in these reports or have detailed discussions on any specific loans, what we will point out is that the short reports state that our CLO delinquencies were 16.5% in December. 26.6% in January, when in reality, the rates are 1.3% for December and 5.6% for this January and as of today. More importantly, the 30-day delinquency numbers are 0.9% for December and 1.2% for January as of today, which are the numbers the industry focuses on. This is a perfect example of using search select data as of a point in time, which does not contain the full picture or represent the industry's focus, only to inject fear into the market for personal gain.

This was incomplete and inaccurate data.

Wanted only to provide a negative view on offer and again truly for personal gain.

And while we will not get into a back and forth on information in these reports.

Or have detailed discussions at any specific loans, but we will point out is that the short report state that our CLO delinquencies were 16, 5% in December.

$26 six in January when in reality, the race fell one 3% for December and 5.6 for tissue anyway, and as of today as of today.

More importantly, the 30 day delinquency numbers are 0.9% for December one 2% for January as of today, which are the numbers the industry focuses on it.

This is a perfect example of using a shortage select data.

As of a point in time.

Not contained a full picture will represent the industry's focus only to inject fear into the market for personal gain.

Ivan Kaufman: We urge our long-term shareholders to ignore these one-sided, self-motivated reports and focus only on our results, public disclosures, and the fact that we've consistently outperformed our peers. It is also very important to emphasize that a significant portion of Arbor's lending is multifamily focused, specifically in the workforce housing part of the market. As we all know, Fannie Mae and Freddie Mac had a specific mandate to address the workforce-slash-affordable housing needs, which is a major issue in the United States, making Arbor a great partner. However, this product requires a high level of management. Extreme expertise, which we have been very effective at for decades, because this product may not have the same curb appeal as other multifamily product types.

We urge all long term shareholders to all of these one sided self motivated reports and focus only on our results and public disclosures and the fact that we have consistently outperformed our peers.

It is also very important to emphasize that a significant portion of August lending is multifamily focused specifically in the workforce housing part of the market.

As we all know Fannie Mae and Freddie Mac have had a specific mandate to address the workforce slash affordable housing needs, which is a major issue in the United States, making abra great partner.

This product requires a level of a high level of management tremendous expertise, which we have been very effective at for decades.

Because there's product may not have the same curb appeal as other multifamily product types. We've been criticized for a core part of our business.

Ivan Kaufman: We are being criticized for a core part of our business that we have been extremely effective at and will continue to fulfill a very important mandate for the federal agencies, as well as a social need for society. Again, we thank you for your continued support. And now I will turn the call over to Paul to take you through our financial results. Okay, thank you, Ivan.

We have been extremely effective at and will continue to fulfill a very important mandate for federal agencies.

As well as the social needs for society.

Again, we thank you for your continued support.

And now I will turn the call over to Paul to take you through our.

Financial results.

Okay. Thank you Ivan as Ivan mentioned, we had another very strong quarter, producing distributable earnings of $104 million or 51 cents per share and 54 cents a share excluding a $7 million onetime realized loss and an office property that we had previously reserved for.

Paul Alenio: As Ivan mentioned, we had another very strong quarter producing distributable earnings of $104 million, or $0.51 per share, and $0.54 per share, excluding a $7 million one-time realized loss on an office property that we had previously reserved for. These results translated into industry-high ROEs, again, of approximately 17 percent for the fourth quarter and 18 percent for the full year of 2023. Equally important, we closed out 2023 with GAAP EPS of $1.75 a share, which was in excess of our dividend, despite booking approximately $90 million in reserves for potential future losses. And, of course, with distributable earnings of $2.25 a share that easily beat our dividend run rate, we provided a very strong dividend-to-earnings coverage ratio for our investors.

These results transient it's translated into industry high <unk> again at approximately 17% for the fourth quarter and 18% for the full year of 2023 equally as important we closed out 2023 with GAAP EPS of $1 75, a share which was in excess of our dividend despite booking approximately $90 million of reserves.

For potential future losses.

And of course with distributable earnings of $2 25, a share that easily beat our dividend run rate, we provided a very strong dividend to earnings coverage ratio for our investors.

Paul Alenio: Our fourth-quarter results were positively affected by a $5 million distribution from our Lexford investment, which was recorded in income from equity affiliates. We also had higher gain on sale income, as our agency volumes are typically stronger in the fourth quarter, and we continue to benefit from strong earnings on our escrow and cash balances from elevated interest rates. As Ivan mentioned, we do expect to continue to experience stress as we manage through the most challenging part of the cycle. As a result, we continue to build our reserves, recording an additional $23 million in CECL reserves in our balance sheet loan book during the quarter, which was slightly offset by a $3 million recovery we had from a payoff of a non-performing loan that we had fully reserved for previously.

Fourth quarter results were positively affected by a $5 million distribution for all exit investment, which was recorded in income from equity affiliates. We also had higher gain on sale income as our agency volumes are typically stronger in the fourth quarter and we continue to benefit from strong earnings on our escrow and cash balances from elevated interest rates.

As Ivan mentioned, we do expect to continue to experience stress as we manage through the most challenging part of the cycle. As a result, we continue to build our reserves recording an additional $23 million in Cecil reserves on our balance sheet loan book during the quarter, which was slightly offset by a $3 million recovery had a payoff of a nonperforming loan that we had.

Fully reserved for previously.

Paul Alenio: As to be expected in this market, we also experienced a net increase in our delinquencies in the fourth quarter of approximately $115 million. And, as discussed earlier, we are expecting that we will experience additional delinquencies over the next few quarters. It is very important to emphasize that despite booking approximately $90 million in CECL reserves across our platform in 2023, $74 million of which was in our balance sheet business, we still grew our book value 2% to $12.80 a share from $12.50 a share last year. And we are one of the only companies in our space that has had significant book value appreciation over the last three years with roughly 30% growth from around $10 a share to nearly $13 In our agency business, we had a very strong fourth quarter with $1.4 billion in originations and $1.3 billion in loan sales. The margin on these loan sales came in at 1.32% this quarter compared to 1.46% last quarter, mainly due to some larger deals in the fourth quarter.

That's to be expected in this market. We also experienced a net increase in our delinquencies in the fourth quarter of approximately $115 million and as discussed earlier, we are expecting that we will experience additional delinquencies over the next few quarters.

Very important to emphasize that despite booking approximately $90 million in seasonal reserves across our platform in 2023 $74 million of which was in our balance sheet business. We still grew our book value of 2% to 12080 cents a share from $12.50 a share last year.

And we are one of the only companies in our space that has significant book value appreciation over the last three years with roughly 30% growth from around $10 a share to nearly $13 a share.

In our agency business, we had a very strong fourth quarter with $1 4 billion in originations and $1 3 billion in loan sales. The margin on these loan sales came in at 132% this quarter compared to 1.46% last quarter, mainly due to some larger deals in the fourth quarter. We were very we're incredibly pleased with the margins we.

Generated in 2023 of 1.48%, which exceeded 2020 twos pace of 134% by 10%. We also recorded $21 1 million of mortgage servicing rights income related to $1 4 billion of committed loans in the fourth quarter, representing an average MSR rate of around 1.55.

<unk> compared to 1.16% last quarter, mainly due to a higher percentage of Fannie Mae loan commitments in the fourth quarter, which contain higher servicing fees.

Paul Alenio: We were incredibly pleased with the margins we generated in 2023 of 1.48%, which exceeded 2022's pace of 1.34% by 10%. We also recorded $21.1 million of mortgage servicing rights income related to $1.4 billion of committed loans in the fourth quarter, representing an average MSR rate of around 1.55% compared to 1.16% last quarter, mainly due to a higher percentage of Fannie Mae loan commitments in the fourth quarter, which contain higher Our fee-based servicing portfolio also grew another 3.5% in the fourth quarter and 11% year-over-year to approximately $31 billion at December 31st, with a weighted average servicing fee of 39 basis points and an estimated remaining life of eight years. This portfolio will continue to generate a predictable annuity of income going forward, around $121 million gross annually.

Our fee based servicing portfolio also grew another three 5% in the fourth quarter and 11% year over year to approximately 31 billion at December 31, with a weighted average servicing fee of 39 basis points and an estimated remaining life of eight years. This portfolio will continue to generate a predictable annuity of income going forward of around 121 million.

Gross annually in this income stream combined with our earnings and our S grows and gain on sale margins represented over 40% of our 2023 net revenues.

And our balance sheet lending operation are $12 6 billion dollar investment portfolio had an all in yield of 898% at December 31, compared to $9 one 2% as of September 30th due to a combination of an increase in nonperforming loans and loans that had not made their full payments as of December 31 that we did not fully occur.

For the.

The average balance in our core investments was $13 billion this quarter compared to 13, four 4 billion last quarter due to run off exceeding originations in the third and fourth quarters.

Average yield on these assets increased slightly to 9.31% from $9 two 8% last quarter due to a slight increase in sulfur, which was offset by an increase in nonperforming loans in the fourth quarter.

Total debt on our core assets decreased again to approximately $11 6 billion at December 31.

Seven 9 billion at September 30th the all in cost of debt was relatively flat at 745% at 12 31 versus 741% at 930.

Paul Alenio: And this income stream, combined with our earnings on our escrows and gain on sale margins, will account for over 40% of our 2023 net revenue. In our balance sheet lending operation, our $12.6 billion investment portfolio had an all-in yield of 8.98% at December 31st compared to 9.12% at September 30th due to a combination of an increase in non-performing loans and loans that had not made their full payments as of December 31st that we did not fully accrue for. The average balance in our core investments was $13 billion this quarter compared to $13.44 billion last quarter due to runoff exceeding originations in the third and fourth quarters. The average yield on these assets increased slightly to 9.31% from 9.28% last quarter due to a slight increase in SOFR, which was offset by an increase in non-performing loans in the fourth quarter. Total debt on our core assets decreased again to approximately $11.6 billion on December 31st from $11.9 billion on September 30th. The only cost of debt was relatively flat at 7.45% at 1231 versus 7.41% at 930.

The average balance in our debt facilities was approximately $11 8 billion for the fourth quarter compared to $12 billion last quarter and the average cost of funds in our debt facilities was 7.48% for the fourth quarter compared to 737% for the third quarter, primarily due to increases in the benchmark index rates are.

Our overall net interest spreads in our core assets decreased to 123% this quarter compared to 191% last quarter and our overall spot net interest spreads were down to 153% at December 31 from $1 seven 1% at September 30th again due to an increase in delinquencies and non accrual loans during the quarter.

And then as I mentioned earlier, we are expecting to experience additional delinquencies over the next few quarters, which could further reduce these margins.

Lastly, as we continue to shrink our balance sheet loan book by moving loans to our agency business, we have de Levered, our business, 18% in 2023 to a leverage ratio of three three to one from around 4.0 to one last year equally as important our leverage consists of over 70% nonrecourse non mark to market CLO.

Debt with average pricing of $1 70 over which is well below the current market, providing strong levered returns on our capital that completes our prepared remarks for this morning, and I'll now turn it back to the operator take any questions you may have as time operator.

Thank you and as a reminder, please press star one on your telephone.

Your question Please press Star Q.

So others can hear you clearly we ask that you. Please pick up your handset for best town quality.

Our first question will come from Steve Delaney with citizens JMP.

Good morning, I have anymore.

Good morning, Ivan and Paul.

Start off if I may with a quick question for Paul Thanks for the details on the M. P else up to 16 assets.

Operator: The average balance on our debt facilities was approximately $11.8 billion for the fourth quarter, compared to $12 billion last quarter, and the average cost of funds on our debt facilities was 7.48% for the fourth quarter, compared to 7.37% for the third quarter, primarily due to increases in the benchmark index rate. Our overall net interest spreads in our core assets decreased to 1.83 percent this quarter compared to 1.91 percent last quarter, and our overall spot net interest spreads were down to 1.53 percent at December 31st from 1.71 percent at September 30th, again due to an increase in delinquencies and non-accrual loans during the quarter, and as I mentioned earlier, we are expecting to experience additional delinquencies over the next few quarters, which could further reduce these margins.

12.

Foreclosures is something we haven't.

It's certainly part of your tool kit, but not something we've seen a lot should we expect over the next several quarters as you attempt to maximize your outcome that we will see more actual you actually taken over properties and do you have you're confident you have the internal ability to operate these projects and resolve them.

Without the current borrower thanks Paul.

I'll take that as far as Steve Yes, sure. Some horrible we we have options to either go through you know the the legal process of foreclosure to do them Consensually.

It's always better to do things Consensually, if she can but sometimes you'll share a process as an alternative and certainly in certain jurisdictions, it's very easy to do so.

Operator: Lastly, as we continue to shrink our balance sheet loan book by moving loans to our agency business, we have delevered our business 18% in 2023 to a leverage ratio of 3.3 to 1 from around 4.0 to 1 last year. Equally as important, our leverage consists of over 70% non-recourse, non-mark-to-market CLO debt with average pricing of 170 basis points, which is well below the current market, providing strong leverage returns That completes our prepared remarks for this morning, and I'll now turn it back to the operator to take any questions you may have at this time. Thank you. And as a reminder, please press star 1 on your telephone. To withdraw your question, please press star 2. So others can hear you clearly, we ask that you please pick up your handset for best sound quality.

With respect to us taking over the management of the assets, we do have the capability, but that's not what's that's not what's taken place.

In fact, the demand from our borrowers to step into some of these assets is so strong that we've had to set up an internal process.

To limit the number of actual borrowers that we have because we're getting inundated with requests always set up an internal process that when we do have a <unk>.

Stressed asset or a stress bar or a borrower. We just don't think it's going to be able to bring the asset to the finish line to bring in a new borrower and whether it'd be through a consensual process or through the legal process. We have somebody lined up willing to step in and that's how we've done it so.

Ivan Kaufman: Our first question will come from Steve DeLaney with Citizens JMP. Good morning, Ivan. Thank you. Good morning, Ivan and Paul. Start off, if I may, with a quick question for Paul. Thanks for the details on the NPLs, up to 16 assets from 12, foreclosures is something we haven't seen. It's certainly part of your toolkit, but not something we've seen a lot. Should we expect over the next several quarters as you attempt to maximize your outcome that we will see more of you actually taking over properties, and are you confident you have the internal ability to operate those projects and resolve them without the current borrower? Thanks, Paul. So let me take that first, Steve.

Maybe six or nine months ago. When there was a lot of fear in the market of where where value is going to go and a lack of liquidity. It was much harder to get somebody to the table.

Got it clearly to get people to the table is very easy and as you can see people are raising distress funds and there's plenty of capital plenty of liquidity there to step in so we have that capability and we've set up the process.

Excellent.

Paul anything you want to add there.

No I think I've got enough.

Definitely took US took you through everything that we work through internally.

So yeah. It just sounds like the the opportunistic private capital and your relationships in the industry that you're going to have opportunities to resolve either working with the existing bar or bringing in a new player that we probably won't see a lot of dead.

Ivan Kaufman: Yeah, sure. We have options to either go through the legal process of foreclosure or do them consensually. It's always better to do things consensually if you can, but sometimes the long process is an option, certainly in certain jurisdictions.

Foreclosure Oreo properties on your balance sheet, where you know trying to figure out a plan sounds like you've got the plans in place periodically.

Yes, generally not generally by the time, we foreclose that thing has been you know a pre baked in pretty done and that's sure and you really get to see.

Ivan Kaufman: Very easy to do so, uh... with respect to us taking over the management of the assets, we do have the capability, but that's not what's taking place. In fact, the demand from our borrowers for us to step in is growing. Some of these assets are so strong that we've had to set up an internal process to limit the number of actual borrowers that we have because we're getting inundated with requests. So we've set up an internal process where when we do have a stressed asset or a stressed borrower or a borrowee doesn't, be able to bring the asset to the finish line, bring in a new borrower, and whether it be through So maybe six or nine months ago when there was a lot of fear in the market of where values were going to go in the lack of liquidity, it was much harder to get somebody to the table, not clearly.

Assets that haven't had the right management and that's why it's so important to us.

When an asset isn't performing.

To not just kick the can down the road because yes, it will deteriorate, but to really accelerate either a change in management or a change in ownership.

Yes, Steven Yeah, as I said, we don't have a lot of Oreo in our book as you know.

We did this quarter and we didn't put it in our commentary we did have an office asset that we had Richard.

Alone we took back that asset this quarter. It is in Oreo and we bought it in a very sophisticated partner, who has a lot of experience in converting that building to condo and so we're working through that process over the next couple of years. So that's an exception, where we will take an asset back and it's just not a big part of our businesses.

Having said that you will see that in our filings when we file our cat.

Paul Alenio: To get people to the table is very easy, and as you can see, people are... the stress funds, and there's plenty of capital, plenty of liquidity to step in. So we have that capability, and we've set up the process. Excellent. Paul, anything you want to add there?

Okay. Thanks, So I think on your point this is kind of a strategic and I am speaking directly to some of the short reports I think early on maybe the Houston asset someone used the term slumlord to describe your portfolio.

Paul Alenio: No, I think Ivan definitely took you through everything that we worked through internally. So yeah, it just sounds like, with opportunistic private capital and your relationships in the industry, that you're going to have opportunities to resolve either working with the existing borrower or bringing in a new player that we probably won't see a lot of dead, foreclosured REO properties on your balance sheet where, you know, trying to figure out a plan Sounds like you've got the plans in place very actively. I mean, yes, but generally not. Generally, by the time we foreclose, the thing's been, you know, pre-baked and pre-done in that sense.

Your three bites out of the Apple strategy that you've used forever.

Do you have any concern that the overall quality of your loans are borrowers and I don't mean, a large percentage, but do you think you have some.

Assets loans in your portfolio that are not of sufficient quality to be refinanced with permanent financing into Freddie Mac and Fannie Mae that's it for me. Thanks.

Yes.

Clearly our our our agenda is when we do a bridge loan for the sole purpose of creating an agency loan yes.

Paul Alenio: And you really get to see, you know, assets that haven't had the right management. That's why it's so important to us when an asset isn't performing, not just, you know, kick the can down the road because the asset will deteriorate, but to really accelerate either a change in management or a change in ownership. Steve, as Ivan said, we don't have a lot of REO in our book, as you know. But we did this quarter, and we did put it in our commentary.

Yes, you know you have to have a quality sponsor and you have to have a quality asset.

So you know our idea of course is that every sponsor that we take on is going to perform correctly not all sponsors do that in a lot of it is sometimes they'll be a sponsor.

Who couldn't hit his business plan or who had other problems or isn't what we thought and they don't qualify and that's just the way it goes and Nobody's perfect went up perfect with respect to the assets if you're improving an asset you got to prove that asset and you got to get it up to industry standards and the agency standards.

Paul Alenio: We did have an office asset that we had written down the loan on. We took back that asset this quarter. It is in REO, and we brought in a very sophisticated partner who has a lot of experience in converting that building into condos, and so we're working through that process over the next couple of years.

If it doesn't it won't meet that agency eligible. So you know if we have a $16 billion portfolio not all 16 is going to make that Mark I mean, I think if 70, 580% of them.

Paul Alenio: We're in a direction where we will take an asset back in REO. It's just not a big part of our business, as Ivan said, but you will see that in our filings when we file our CAC. Okay, thanks.

Get to agency status and convert that's pretty good in other cases, when they don't do that the assets will be sold.

Ivan Kaufman: So, Ivan, on your point, this is kind of strategic, and I am speaking directly to some of the short reports. I think early on, maybe it was a Houston asset, someone used the term slumlord to describe your portfolio. You're three bytes out of the Apple strategy that you've used forever. Do you have any concern about the overall quality of your loans or borrowers, and I don't mean a large percentage, but do you think you have some assets, loans in your portfolio that are not of sufficient quality to be refinanced with permanent financing into Freddie Mac and Fannie Mae? That's it for me.

Or put into new ownership, who will get that asset up to up to spec. So that's kind of the way we look at the world. It's not it's not a it's not a perfect situation, where every asset that we've taken ends up meeting our execution.

But you have other options to resolve it it sounds like product like we have other options and bringing into ownership very often they can get the assets up to speed and get them repaired and get them fixed and made it we've had many eyes, that's where on the 1111 form of ownership that couldn't get there you bring in.

Ivan Kaufman: Thanks. Clearly, our agenda is when we do a bridge loan, it's for the sole purpose of creating an agency. Yes. You know, you have to have a quality sponsor, and you have to have a quality asset. So, you know, our idea, of course, is that every sponsor that we take on is going to perform correctly. Not all sponsors do that, and a lot of times they'll be a failure.

Another form ownership it gets it very very quickly in fact, one of the assets that we transitioned in Atlanta.

We had four ownership and I think within nine months, yes, its almost ready to go agency, whereas with you all of the other ownership we had no chance between the owner and the way. It was operating in only took nine months attorney I sit around.

Ivan Kaufman: Who you know couldn't hit his business plan or who had other problems or isn't what we thought, and they don't qualify. That's just the way it goes. Nobody's perfect. With respect to the assets, if you're improving an asset, you've got to improve that asset, and you've got to get it up to industry standards and agency standards. If it doesn't, it won't meet that agency's

Thank you both for your comments this morning.

Thanks, Steve.

Our next question will come from Jay Mccanless with Wedbush. Please go ahead.

Hey, good morning. Thank you for taking my questions. So provisioning was a little less than what we were expecting this quarter.

But it sounds like things may get a little rockier heading into the to the beginning of 'twenty for work just could you maybe talk a little bit more about why some borrowers feel its better to default. The negotiate first that that seems to be a little backwards and given the environment that we're in right now.

Ivan Kaufman: So, you know, if we have a $16 billion portfolio, not all 16 are going to make that mark. I think 75-80% of all get to agency status and convert, that's pretty good. In other cases, when they don't do that, the assets will be sold or put into new ownership, who will get that asset up to spec. So that's kind of the way we look at the world. It's not a perfect situation where every asset that we take... ends up meeting our execution. But you have other options to resolve it, it sounds like, privately.

I can speak from experience as I deal with a lot and I'm pretty involved in the asset management side with them as a management group I think they're being counseled that.

If if you default the lenders will be more.

You know more easy to work with they don't want the faults on their books that's number one.

And that May work with other lenders it doesn't work with us we're not afraid of defaults defaults don't intimidate us and it.

Ivan Kaufman: We have other options, and bringing in new ownership, very often they can get the assets up to speed and get them repaired and get them fixed. Many assets were under one form of ownership that couldn't get there; you bring in another form of ownership, it gets there very, very quickly. In fact, one of the assets that we transitioned in Atlanta, For ownership, and I think within nine months, the asset was almost ready to go agency, whereas with the other ownership, you had no chance between the owner and the way he was operating, and it only took nine months to turn the asset around. Thank you both for your comments this morning. Thank you. Our next question will come from Jay McCandless with Wedbush. Please go ahead. Hey, good morning.

It may intimidated auto lenders that's number one number two for whatever reason and I'm not sure why initially people don't think that the recourse provisions on that alone are applicable.

And when they get notification of what Theyre, triggering they really wake up very very quickly.

I don't believe the other lenders in the prior years.

The structural enhancements are we at all but do have an all along they do know they've learned.

But we've always had the structural enhancements on our loans, which include in many cases, you know interest reserve replenishment recourse obligations on a rebalance and caps and very very significantly majority of default interest on all loans are 24%.

Ivan Kaufman: Thank you for taking my questions. Provisioning was a little less than what we're expecting this quarter, but it sounds like things may get a little rockier heading into the beginning of 24.

So you know I think it puts us in a different light maybe when they have loans for other lenders.

Ivan Kaufman: Just could you maybe talk a little bit more about why some borrowers feel it's better to default than negotiate first, which seems to be a little backwards and given the environment that we're in right now? I can speak from experience. I deal with it a lot.

Lenders act differently than we do but this is a course of conduct if a borrower has a problem we advise them, let us know what your issue is we're.

We're happy to figure out how to try and come up with a solution in a proper way and that's always the best attack and then we'll give you time to figure out how to recap and work with you.

Ivan Kaufman: I'm pretty involved in the asset management side with the asset management group. I think they're being counseled, blah blah blah, If you default, the lenders will be more easily to work with they don't want, box, and that may work with other lenders, but it doesn't work with us. We're not afraid of defaults. Defaults don't intimidate us. They may intimidate auto landers, number two, for whatever reason, and I'm not sure why. Initially, people don't think that the recourse provisions on their loan are out, and when they get notification of what they're triggering, They really wake up very, very quickly.

But we did definitely see a spike of a mentality of default and here are the keys and issue a problem and you know.

Immediately.

We let them know of their obligations.

It will bring you know that mentality and correct that mentality.

Great. Thank you I have been the the other question that I had when.

When we look at multifamily rents, especially in Texas, and Florida, We started to see some of the cities are holding up but some of the cities are starting to see year over year rent declines I guess could you maybe talk about what type of geographic risk, we should be monitoring right now and how you're feeling about that part of the country in terms of a potential delay.

Ivan Kaufman: I don't believe the other lenders in prior years had the structure all in hand; we at Arbor do have on our loans, they do now, but we've always had structural enhancements on our loans, which include, in many cases, request obligations and rebalance, caps, and very, very significant. The majority of our default interest on our loans is 24%. So, you know, I think it puts us in a different light, maybe when they have loans for all the lenders. Lenders act differently than we do, but this is our course of conduct. The borrower has a problem; we advise him, let us know what your issue is. We're happy to figure out how to try and come up with a solution the proper way. That's always the best tactic, will give you time to figure out how to recap, but we did definitely see a spike of a mentality of default, and here are the keys, and it's your problem, you know.

When season workouts youre going to have to address there.

Yeah, I think we're through the worst of it and I think in my prior calls I've talked a little bit about the economic vacancy that exists specifically in certain areas.

And I think there's a large economic vacancy which has been created from COVID-19 backlog and of course, a mentality with some of the renters that they can be.

Being an apartment not pay rent and not get evicted.

I also think that there was a period of time from Covid that people got rent subsidies.

And those rent subsidies ran out and that also accelerated a lot of it is delinquencies.

Ivan Kaufman: Media, We let them know of their obligation, all that mentality and correct it. Thank you, Ivan. The other question that I had. When we look at multifamily rent, especially in Texas and Florida, we've started to see some of the cities are holding up, but some of the cities are starting to see year-over-year rent declines. I guess could you maybe talk about what type of geographic risk we should be monitoring right now and how you feel about that part of the country in terms of potential delinquencies and workouts you're going to have to address there? Yeah, I think we're through the worst of it.

Courts are starting to be a little easier to work with tenants are being evicted at a much more rapid pace and I think that you'll see the economic vacancy start to diminish without a doubt.

I do want to differentiate between the product type that we have which is a lot of work force housing, which I think there's a huge shortage.

Versus the class a market, which I think is suffering from different headwinds.

I think if you look at the deliveries in 2023.

New construction and then the deliveries in 2024, I think you'll see continued headwinds for.

Ivan Kaufman: And I think in my prior calls, I talked a little bit about the economic vacancy that exists specifically in certain areas. I think there's a large economic vacancy which is... backloging across a mentality with some of the renters that they should be in an apartment, not pay rent, and not get evicted. I also think that there was a period of time from COVID when people got rent subsidies, and those rent subsidies ran out, and that also accelerated a lot of...

For class eight I think for US I think for the workforce housing there is a shortage. We all know there's a shortage I think when the court system thoughts being more efficient.

I think that the economic numbers will look a little better I also think there's another shadow issue, which we've talked about it internally.

Ivan Kaufman: The courts are starting to be a little easier to work with, and tenants are being evicted at a much more rapid pace. I think that you'll see the economic vacancy start to diminish without a doubt. I do want to differentiate the product type that we have, which is a lot of workforce housing, which I think is a huge shortage, versus the class A market, which I think is suffering from different headwinds. I think if you look at the deliveries in 2023 of new construction and then delivery in 2024. I think you'll see continued headwinds.

I mean, basically you have eight or 9 million you know people who have come across the border. We're all living in hotels. These people have to go live somewhere they can't live in hotels forever. We think they once they start to begin to get that work permits and starts to work I think that that'll have a positive impact on.

The vacancy factors in workforce housing.

Okay. That's great. Thank you I havent appreciate it.

Thanks Jay.

Our next question will come from Jade Rahmani with K B W. <unk>. Please go ahead.

Thank you very much delinquency statistics, you gave are much lower than the info.

Ivan Kaufman: I think for the workforce housing, there is a shortage. We all know there is a shortage. I think the court system will start being more efficient.

Eligible from the Clo's.

And I wanted to ask you know.

What the.

You know what the main discrepancy is there that you see.

Ivan Kaufman: I think that the economic numbers will look a little better. I also think there's another shadow issue, which we've talked about internally. I mean, basically, you have eight or nine million people who've come across the border who are living in hotels. These people have to go live somewhere.

Just so we're clear the numbers you gave are those the 30 day plus delinquency rates is that what you want us to focus on.

Yes, if you could just clarify that.

Sure Jade its Paul so yes, so the delinquency numbers that are reported with the Cielo is as we said in our commentary was 16, 5% and total delinquencies for December and 26, 6% in total delinquencies for January those numbers total delinquency numbers are down.

Ivan Kaufman: They can't live in hotels forever. We think once they start to begin to get their work permits, and seek to work, I think that that'll have a positive impact on the vacancy factors and the workforce. That's great. Thank you, Ivan.

To 1.3, as we said in our commentary today. So we've resolved a lot of those law.

Ivan Kaufman: I appreciate it. Thanks, Jay. Our next question will come from Jade Rahmani with KBW. Please go ahead.

And they're down to.

For the for the January numbers I have them right here.

Paul Alenio: Thank you very much. The delinquency statistics you gave are much lower than the info available from the CLOs. And I wanted to ask, you know, what the main discrepancy is there that you see? Um, just so we're clear, the numbers you gave, are those the 30-day plus delinquency rates? Is that what you want us to focus on? Um, if you could just clarify that. Sure. Jade, it's Paul.

Yeah.

They're down to five 6%. However, those are total delinquency numbers the industry normally looks at anything 30, plus and really more importantly, 60, plus so we're telling you is those total delinquency numbers that we reported on those days are down significantly from when those numbers were reported and even more importantly, the 30.

Plus day delinquent numbers okay.

Paul Alenio: So, the delinquency numbers that are reported with the CLOs, as we said in our commentary, were 16.5% in total delinquencies for December and 26.6% in total delinquencies for January. Those numbers, total delinquency numbers, are down to 1.3, as we said in our commentary today. So, we've resolved a lot of those loans, okay, and they're down to, for the January numbers, I have them right here. You know, they're down to 5.6%. However, those are total delinquency numbers. The industry normally looks at anything 30 plus and, really, more importantly, 60 plus.

Were six 3% on December so of that 16, 5% of total delinquencies six three with 30 days plus and that number is down to 0.9 today. Okay. So that's what we're telling you and 60 day delinquencies are down to <unk> eight so very very nominal on January.

Same same type of thesis the $26 six in total delinquencies is down to five six today as people have made their payments. The 30 day delinquencies on that day 30, plus day delinquencies were nine 1% and that's down to one 2% a day and a 60 day delinquencies appoint a so.

The way the industry look see MBS and all the other industries look at delinquencies. They look at 30, plus and 60 plus what we're telling you is the numbers that youre seeing those reports are total delinquencies most of which you can gather by the numbers. We're giving you are less than 30 days and are subsequently cured.

Paul Alenio: So, what we're telling you is that the total delinquency numbers that were reported on those days are down significantly from when those numbers were reported. And even more importantly, the 30 plus day delinquent numbers were 6.3% in December. So, of that 16.5% of total delinquencies, 6.3 were with 30 days plus, and that number is down to 0.9 today, okay? So, that's what we're telling you. And 60 day delinquencies are down to 0.8, so very, very nominal. In January...

What we're trying to give you the information on.

And what was the 60 day as of 12 31.

As of 12 31, the 60 day delinquency number.

Well, it's <unk> and it's still at 20, because those are some of our nonperforming loans.

And the 30 day is now one 2% down from nine 1%.

30, plus 30, plus day already one I'd point out is set for January down from nine 1%.

So in terms of moving it down by that I mean, this looks dramatic that it was that level of delinquency first of all I mean that level of delinquency is surprising to me understanding that some borrowers may just pay late cause you know different loans paid 15 versus at the end of the month, but.

Paul Alenio: Same type of thesis. The 26.6% of total delinquencies is down to 5.6% today, as people have made their payments. The 30-day delinquencies on that day, 30-plus-day delinquencies, were 9.1%, and that's down to 1.2% today. And the 60-day delinquencies are 0.8%. So the way the industry looks, CNBS and all the other industries look at delinquencies; they look at 30-plus and 60-plus. What we're telling you is the numbers that you're seeing in those reports are total delinquencies, most of which, you can gather from the numbers we're giving you, are less than 30 days and are subsequently cured. That's what we're trying to give you the information on. And what was the 60 day as of 1231?

That's a high delinquency rate, but it's down sharply what is the main means of getting it down sharply.

Then you want to talk to that.

As you know.

On on a lot of loans there is no grace period.

People pay late they collect rent slate.

You know, it's not a number that we.

I'll give a lot of credibility to what we'd give credibility is 30 plus days.

The bars are struggling these are you know.

More difficult times.

You know if there's a short fall between the rents that come in and.

And where the where the capital as they got to raise the capital they got to put it in.

Ivan Kaufman: As of 1231, the 60-day delinquent number was 0.8, and it's still at 0.8 because those are some of our non-performing loans, and the 30 day is now 1.2%, down from 9.1%. The 30 plus, the 30 plus day, 1.2% for January, down from 9.1%. So, in terms of moving it down by that, I mean, this looks dramatic that there was that level of delinquency. First of all, that level of delinquency is surprising to me, understanding that some borrowers may just pay late because, you know, different loans pay on the 15th versus at the end of the month. But that's a high delinquency rate, but it's down sharply. What is the main means of getting it down sharply?

But keep in mind, there's really no grace period on these loans that are due at a certain point in time. If they are late on their payments. They are late on their payments, what we focus on as Paul reiterate it is really the 30 plus days. So I would say, it's definitely more challenging times, but our focus is on the on the 30 plus days and weeks.

Work hard to make sure that the borrowers stay within that 30 days.

The other thing I'll point out Jay just quickly. It's it's it's just a little bit more granular we're not looking to change the way things are reported with the close but we are one of the only lenders left in the space that have replenishment vehicles with with cash in those vehicles. So as we said in our commentary we have $600 million of cash still ready to be deployed in those vehicles the way.

These numbers are calculated for those reports is based on the delinquencies over your total investable assets, but we can make the argument that that $600 million of cash is a performing asset and will be will be invested into a qualified performing asset. So if you if you up the denominator by.

Ivan Kaufman: Ivan, you want to talk about that? On a lot of loans, there's no grace period. People pay late, they collect rents late. You know, it's not a number that we... give a lot of credibility to. What we give credibility is 30 plus days. Bars are struggling, and there's a shortfall between the rents that come in and where the capital is. They've got to raise the capital, they've got to put it in. But keep in mind, there's really no grace period on these loans, so they're due at a certain point in time. If they're late on their payments, they're late on their payments. What we focus on, as Paul reiterated, is really the 30-plus days. So I would say it's definitely more challenging times, but our focus is on the 30-plus days, and we work hard. Make sure that the bars stay within that 30 days. The other thing I'll point out, Jade, just quickly, it's just a little bit more granular.

Using the cash as well just not the loans the numbers dropped by a point and a half I'm just telling you that there are ways. These things are reported ways. We look at it but more importantly, the 30, plus delinquencies are where we focus and the industry focuses and those numbers are significantly lower than those total delinquencies.

You mentioned peak stress is in the next two quarters.

Couple of things.

That 30 day number that's what you want us to focus on its one 2% where do you expect that to peak or what do you expect the cumulative delinquency will be.

But we don't we're not going to project on that but what we will say is that we expect this quarter and next quarter to have continuous stress.

I want to add one more commentary is that if rates stay at these levels a little bit longer we could've stressed strip into the third quarter as well.

Paul Alenio: We're not looking to change the way things are reported with the CLOs, but we are one of the only lenders left in the space that has replenishment vehicles with cash in those vehicles. As we said in our commentary, we have $600 million of cash still ready to be deployed in those vehicles. The way these numbers are calculated for those reports is based on the delinquencies over your total investable assets.

A little bit of an outlook that rates would begin to decline at a certain level, which would distressed environment.

We think if rates continue to rise a little bit.

They are in this area.

We may have continued distressed drip into the third quarter.

Okay. I appreciate that I was actually going to ask that and then finally just to clear out some other.

Paul Alenio: We can make the argument that that $600 million of cash is a performing asset and will be invested in a qualified performing asset. If you up the denominator by using the cash as well, just not the loans, the numbers drop by a point and a half. I'm just telling you that there are ways these things are reported, ways we look at them, but more importantly, the 30-plus delinquencies are where we focus, and the industry focuses, and those numbers are significantly lower than those total delinquencies.

Notions rent regulated New York multifamily, it's its own troubled asset class are first of all can you give me your views on that are there any opportunities you see emerging there and if you could quantify any arbor exposure, which I believe is minimal.

I'm glad you brought that up because you.

You know clearly signaled.

Signature New York Community Bank are loaded up with all these rent controlled rent stabilized and the.

Ivan Kaufman: You mentioned peak stress is in the next two quarters, a couple things. That 30-day number, that's what you want us to focus on. It's 1.2%.

The.

The impact on valuation I don't know as banks have been dramatic.

I think everybody's followed the sale of our signature portfolio in the hair cut that the rent controlled rent stabilized I think it was somewhere in the 58% level.

Ivan Kaufman: Where do you expect that to peak, or where do you expect the cumulative delinquency to be? We don't, and we're not going to project on that, but what we will say is that we expect this quarter and next quarter to have continued stress. I want to add one more commentary, which is that if rates stay at these levels a little bit longer, they could have stress drip into the third quarter as well. A little bit of an outlook that rates would begin to decline at a certain level, which would de-stress the environment. We think if rates continue to rise a little bit..., they are in this area. We may have continued stress driven to the third. Okay, I appreciate that. I was actually going to ask you that.

That's really had a dramatic impact on that asset class, we as a lender we're not a very active participant in that space.

We were not active because they were being acquired at a very low cap rate with the concept that they would be able to kick out these tenants and bring them to market and rehab them in the numbers going it didn't make sense, nor did we really liked the concept of kicking out rent controlled rent stabilized tenants.

That was inappropriate.

And therefore, we had very very little exposure to that asset class.

We think that in the long run.

A lot of that housing will be re spit out of discounts and come back to the market.

Ivan Kaufman: And then finally, just to clear some other notions, rent-regulated New York multifamily is its own troubled asset class. First of all, could you give your views on that? Are there any opportunities you see emerging there? And could you quantify any Arbor exposure, which I believe is minimal?

But we do not as a firm have any significant exposure to the rent controlled rent stabilized on the one hand.

On the other hand, there will be opportunities on the lending side at the right valuations with the right operators in that asset class and that will return an hour of your and it'll return once the assets got we spit out to the market at the right valuation with good operators. We do have some really good operators in trials that we do.

Ivan Kaufman: Yeah, I'm glad you brought that up because, You know, clearly, Signature, and New York Community Bank are loaded up with all these rent-controlled and rent-stabilized me, the impact on valuation and those banks has been dramatic. I think everybody followed the sale of, Somewhere in the 58 cent level. That's really had a dramatic impact on that asset class. We, as a lender..., are not a very active participant in that space. We were not active because they were acquired at a very low cap rate, the concept that they would be able to kick out these tenants and bring them to market and rehab them. The numbers going in didn't make sense. Nor did we really like the concept of kicking out rent-controlled or rent-stabilized tenants. We thought that was inappropriate.

Business with.

Very effective in those asset classes at the right basis right lending parameters.

Thank you very much.

Thanks Jay.

And our next question will come from Lee Cooperman with Omega family Office.

Please go ahead.

Thank you, let me just say Theres nobody's, giving you a shout out I've been an investor in that company for well over a decade.

And I speak with you periodically and I got to tell you a year ago.

You told me you were very pessimistic about the outlook and you were getting at.

Defensively, Postured, which was a brilliant cool and three years ago, you started moving to coming into multifamily.

Now looking at multifamily likely looking at office makes no sense to me you get all these immigrants coming over the border they have to live somewhere and they are employed and we seem to me that you're in a good sector. So that's an observation and I just want to give you a shout out. My question is as follows I have a lot of money with a guy that's done a sensational job for me.

Ivan Kaufman: And therefore, we had very, very little exposure to that ASHA class. We think that in the long run, a lot of that housing will be re-spit out at discounts and come back. We do not, as a firm, have any, for all the rents today. On the other hand, there will be opportunities on the lending side at the right valuations with the right operators for that asset class, and that will return in our. The assets get re-spout out to the market at the right valuations with good operators. We do have some really good operators internally that we do business with, and they are very effective in those asset classes on the right basis. Thank you very much.

And doing real estate lending.

I've noticed in many times when he has a foreclosure he makes a profit.

So I assume if the assets are well underwritten.

Yeah. You know you you may even be a beneficiary of foreclosures.

What is your you feel comfortable that the book value of 12, 80 or 250, whatever it is is accurate.

And how do you feel about the club you're underwriting given the environment and I congratulate you and be very correct in your assessment of the environment. Thank you.

Actually first of all the multifamily.

Ivan Kaufman: Thanks, Jade. And our next question will come from Lee Cooperman with the Omega Family Office. Please go ahead. Thank you. Let me just say this. Nobody's giving you a shout-out.

The market is still a great asset class a phenomenal asset class and in 2009 and 10, when we were 35% multi and we did all the other asset classes, we came to a quick conclusion.

Leon G. Cooperman: I've been investing in the company for well over a decade, and I speak with you periodically. And I've got to tell you, a year ago... You told me you were very pessimistic about the outlook and you were getting very defensive, which was a brilliant call. And three years ago, you started moving the company into multifamily. And everybody's now looking at multifamily like they're looking at office. It makes no sense to

That even though there were defaults and even though there were losses all the significant losses came on the other asset classes and eventually multifamily with the right management returns in every high is generally followed by another high just as long as you have good management and we.

We made a decision as a firm that we wanted it would be predominantly multifamily and we're glad we did.

Ivan Kaufman: You get all these immigrants coming over the border, they have to live somewhere, and they're employed. And it seems to me that you're in a good sector. So that's an observation. I just want to give you a shout out.

I'm not sure how and why you're comparing a multifamily to office due to losses on office could.

It could be extraordinarily significant and sure there were a car because of the office of the cities that are strong, but they're not the dominant part of the market and when you lose on an office you lose big multi your losses are.

Leon G. Cooperman: My question is as follows. I have a lot of money with a guy that's done a sensational job for me in doing real estate lending. I've noticed many times when he has a foreclosure, he makes a profit. So I assume if the assets are well underwritten, you may even be a beneficiary of foreclosures. Do you feel comfortable that the book value of $1280 or $1215, wherever it is, is accurate? And how do you feel about the quality of your underwriting given the environment? I congratulate you on being very correct in your assessment of the environment.

Your your losses are not that dramatic on a relative basis.

With respect to the foreclosure process do we when do we lose we lose do we win.

As we went on some we lose on a little while we think we're going to lose we put up reserves our reserves have been pretty accurate in the history of the firm, we're very comfortable with the reserves, we're very comfortable with our book value.

And we'll continue to put up reserves as we feel it's appropriate so.

So there are many times that will head towards a foreclosure and say okay. Theres a gain here there are many times will head towards a foreclosure and we have reserve and what probably reserves. So far we've done a great job. There are a lot of bars and it's funny. If somebody asked me you know wider borrowers default first I mean, we've had a few.

Ivan Kaufman: Thank you, the market is still a great asset class, a phenomenal asset class, www. FEMA.gov Natural Resources Is the Future in Our City This Is Our Future The Future in Our City This Is Our Future In Our City This Is Our Future In Our City This Is Our Future In Our City This Is Our Future We came to a quick conclusion that even though there were defaults and even though there were losses, all the significant losses came from the other asset classes, and eventually, multifamily was the right return. Every high is generally followed by another high.

Defaults recently, where the borrowers defaulted and your assets are worth significantly more than the debt and we're like we're not even going to talk to you guys right.

Ivan Kaufman: We made a decision as a firm to go ahead. I'm not sure how, why, or what the losses on office will be extraordinarily significant. And sure, there are corridors of office in cities that are strong, but they're... Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/, multiply your losses.

You're going to pay US, 24%, we're going to foreclose and by the way, we're going to get a default judgment against you too don't forget about that you know, we got four or five six borrowers with guarantees on alone and if I'm sure. It will go on after those borrowers and I promise you. We're hiring staff just to pursue the judgments and we're going to collect.

Ivan Kaufman: Your losses are not that dramatic, with respect to the foreclosure process. If we win, do we lose, do we lose, do we win? The fact is, we win on some, we lose on a little, but we think we are going to lose, so we put up reserves. The reserves have been pretty accurate in the history of the firm. We are very comfortable with the reserves.

A lot of money, so nothing's perfect, we feel really comfortable without book value, we really feel really comfortable about process make no mistake about it. This is not easy work it's hard work.

And it takes a lot of management and a lot of discipline.

Ivan Kaufman: I, and we'll continue to put up reserves as we feel it's appropriate. So there are many times that we'll head towards a foreclosure and say, okay, there's a gain here. There are many times we'll head towards a foreclosure, and we have a reserve, and we're probably too rich. So far, we've done a great job.

But we will achieve the best economic result, and we're doing a pretty good job and I can applaud my asset management and staff for the company as a whole for the amount of work they are putting it in the results are getting I. Just curious if you could come in and as I just got an email.

Ivan Kaufman: There are a lot of borrowers, and it's funny, somebody asked me, you know, why do borrowers default first? I mean, we've had a few defaults recently where the borrowers defaulted, and the assets are worth significantly more than the debt. We're like, we're not even going to talk to you guys, right? You're going to pay us 24%. We're going to foreclose. And by the way, we're going to get a default judgment against you, too. Don't forget about that.

You know from Peter Butler.

And the headline in the email is multifamily construction is collapsing I've been a great believer that excess returns brings within new competition and inadequate returns drives that competition. So are we heading is this headline reasonable but from what you're seeing is multifamily construction.

Turning down quite a bit in the next year.

Ivan Kaufman: You know, we can have four, five, six bars with guarantees on a loan. If I'm short, we're going after those borrowers, and I promise you, we're hiring staff just to pursue the judgments, and we're going to collect all our money. So nothing's perfect.

In response to the increased supply.

Too many deliveries to many deliveries I think that 670000 units being delivered in 2024.

Slide 370, you have way too many deliveries the costs were high due to COVID-19 sort of across the way out of line.

Ivan Kaufman: We feel really comfortable with our book value. We feel really comfortable with our process. But make no mistake about it; this is not easy work. It's hard work.

You can also listen to the economic reports these units should be being filled up hand over fist I don't believe that the employment is what people say they are otherwise we wouldn't be having the absorption issue, but there is an absorption issue without a question from what we see we're not very active in that side of the market.

Ivan Kaufman: It takes a lot of management and a lot of discipline, but we will achieve the best economic result, a pretty good job, and I can applaud my asset management staff and the company as a whole for the amount of work they're putting in. I'm just curious if you can comment on this. I just got an email from Peter Buckvar, and the headline on the email is, "multi-family construction is collapsing." I've been a great believer that excess returns bring with them new competition, and inadequate returns drive out competition. So are we heading, is this headline reasonable from what you're seeing? Is multifamily construction, you know, turning down quite a bit in connection? in response to the increased supply. Too many deliveries; too many deliveries. I think there's 670,000 delivered already, for more. Life 307: wait for many more deliveries.

As we say, we're workforce housing and there's a shortage of workforce housing you can't produce the housing after cost basis on which we're landing and I believe the workforce housing even if even as it goes through this period of difficulty.

<unk> will emerge in a very strong manner.

I congratulate you again on your very intelligent call about a year ago.

We've positioned the company. Thank you I appreciate actually.

Our next question will come from Rick Shane with J P. Morgan. Please go ahead.

Thanks for taking my questions. This afternoon or this morning guys.

Ivan Kaufman: The costs were high due to COVID, so the costs were way out of line. You know, if you listen to the economic reports, these units should be filled up hand over fist. I don't believe that employment is where people say it is. Otherwise, we wouldn't be having this absorption issue.

Ivan you talked in and Paul you'd referenced the delinquency data I believe that's related to the CLO.

Which I estimate represents about six that's about two thirds of the assets. If we look at if that's the correct.

Ivan Kaufman: But there is an absorption issue, without a question, from what we see. We're not very active in that side of the market. As we say, we're workforce housing, and there is a shortage of workforce housing. You can't produce the housing at the cost basis on which we're lending. I believe workforce housing, even as it goes through this period of difficulty, will emerge in a very strong way.

Description, if we look at the overall portfolio can you provide the delinquency statistics for the total portfolio not just the C L.

Okay. So Rick you are correct, what we what I was referring to was on the CLO because I thought that was the question that people were asking from the short report.

Well, we do have now we don't have it out yet and when we file our K. It will be there as we have the the 60 day plus delinquencies, which is my nonperforming loans, but there are some loans that I mentioned in my commentary that were 30 or inside of 30 days delinquent, we conservatively just chose not to.

Ivan Kaufman: Well, I congratulate you again on your very intelligent call about a year ago and the way you've positioned the company. Thank you. I appreciate it. Our next question will come from Rick Shane with J.P. Morgan. Please go ahead.

Crew at year end I don't have that number with me now, but that number will be in our filings I'd say you can take those numbers and extrapolate it to the overall portfolio to get the delinquency rate if that's what you're looking to do.

Rick Shane: Thanks for taking my questions this afternoon or this morning, guys. Ivan, you talked, and Paul, you referenced the delinquency data. I believe that's related to the CLO, which I estimate represents about two-thirds of the assets. If we look at, if that's the correct..., description, if we look at the overall portfolio, can you provide the delinquency statistics for the total portfolio, not just the CLO? Okay. So, Rick, you're correct.

Got it so is there a difference.

Between the 60 day delinquencies in the CLO that you cited in the 60 day delinquencies on I'm going to call. It the managed portfolio because that's how we would think about it is there a difference there.

So so that the nonperforming loans that are disclosed in our filing today of $262 million or all loans, whether theyre in the CLO are not that are over 60 days delinquent. So there is the cross sell of our what we gave you today with numbers on what 30 plus day delinquent in our.

Paul Alenio: What I was referring to was the CLOs because I thought that was the question that people were asking from the short reports. What we do have now, we don't have it out yet, and when we file our K, it will be there, is we have the 60-day plus delinquencies, which are my non-performing loans. But there are some loans that I mentioned in my commentary that were 30 or inside of 30 days delinquent that we conservatively just chose not to accrue at year end. I don't have that number with me now, but that number will be in our filings. And so, you can take those numbers and extrapolate them to the overall portfolio to get the delinquency rate if that's what you're looking to do. Got it. So is there a difference?

CLO, but we don't have is that 30, plus delinquent in the total portfolio, although it's not substantially different because as you said most of the loans are in the vehicles.

And can you talk about buyouts from the CLO book.

Both in the fourth quarter and quarter to date, because I suspect there'll be some questions about whether or not the.

CLO the decline in delinquencies in the CLO was related to buyouts.

Sure you have those numbers, so what I do but I.

And I can give some color.

Sure I'll give the numbers and then Ivan will give the color. So for the quarter. It was it was fairly light we only bought out one loan for 38 million out of the CLO in the fourth quarter, we did by $90 million of loans out of the vehicles in February but for the year just to give you some color Rick we bought out 400.

Paul Alenio: between the 60-day delinquencies in the CLO that you cited and the 60-day delinquencies. I'm going to call it the managed portfolio because that's how we would think about it. Is there a difference there? Now, the non-performing loans that are disclosed and filed today for $262 million are all our loans, whether they're in the CLO or not, that are over 60 days delinquent. So there's the crossover.

$53 million of loans out of our vehicles for all of 2023 $95 million of those loans subsequently paid off before the end of the year $290 million of those loans, we modified and restructured and got re levered on.

Paul Alenio: What we gave you today were numbers on what's 30-plus days delinquent in our CLOs, but what you don't have is the 30-plus days delinquent in the total portfolio, although it's not substantially different because, as you said, most of the loans are in the vehicle. Yeah. And can you talk about buyouts from the CLOs both in the fourth quarter and quarter to date? Because I suspect there'll be some questions about whether or not the CLOs, the decline in delinquencies in the CLOs related to buyouts. Well, you have those numbers, so why don't you give some credit to that, and I can give it. Sure, I'll give the numbers, and then Ivan will give the colors.

And another $69 million, we're holding on our balance sheet without leverage but on a bulk of those loans were very close to a satisfactory resolution through a sale in the market. So that's kind of the data points of how what the numbers are and on the $90 million that we bought out in February with very very close to finishing our mod on too.

Of those loans and actually re levering those loans again, so that's the data and then I'll, let Ivan talk about the strategy and how we look at things.

Yeah, I mean, it's an active part of our business not as active in terms of how we manage our assets are the amount that Paul.

Paul Alenio: So, for the quarter, it was fairly light. We only bought out one loan for $38 million out of the CLOs in the fourth quarter. We did buy $90 million of loans out of the vehicles in February. But for the year, just to give you some color, Rick, we bought $453 million of loans out of our vehicles for all of 2023. $95 million of those loans were subsequently paid off before the end of the year.

Mentioned is not a tremendous amount and it's kind of transitional.

You can either take alone out foreclose on them.

We can sell them they can bring in new ownership.

Our whole merit of different circumstance.

And generally you know.

How the process goes anywhere from you know 30.

30 to 90 days, we generally get leverage on those assets when we do them and then there were just some that you know need to be sold in go to market to be sold so it's a constant process.

Paul Alenio: $290 million of those loans, we modified and restructured and got re-levered on, and another $69 million we're holding on our balance sheet without leverage. But on the bulk of those loans, we're very close to a satisfactory resolution for sale in the market. So, that's kind of the data points of how, you know, what the numbers are.

Got it and when we think about that 19 million that was repurchased.

Purchased in February and you can hear me typing in the background I'm trying to figure this out how impactful was that the delta in the DQ rate.

Those loans I believe we're already in my nonperforming bucket at year end. So when the 262 million. We disclosed those are two loans that were already nonperforming.

Ivan Kaufman: And on the $90 million that we bought out in February, we're very, very close to finishing a mod on two of those loans and actually refinancing those loans again. So, that's the data, and then I'll let Ivan talk about the strategy and how we look at things. Yeah, I mean, it's an active part of our business, not a.., active in terms of how we manage our assets. The amount that Paul mentioned is not a tremendous amount, and it's kind of transitional, to take a loan out, foreclose on them, and so on, bring in new ownership. There are a whole myriad of different circumstances.

We bought out of the CLO.

If that's what you're asking.

No I'm trying to figure out you cited a decline in the delinquency rate, but if he bought out $90 million that were presumably delinquent.

And you're discussing the CLO not been managed portfolio that comes out of the numerator in terms that delinquency rate, that's what I'm trying to understand what it does.

It'll be it'll be in the overall number which will it will then it'll be in February not in the January numbers. We gave you it doesn't it doesn't disappear wreck it it's not like it falls off the chart its part of that total number.

Ivan Kaufman: And generally, you know, the process goes anywhere from, you know, 30 to 90 days. We generally get leverage on those assets when we do them. And then there are just some that need to be sold and go into the market to be sold. So it's a constant process.

Got it and then last question for me so when we look at the AR reserves.

And we look at the specific reserve there was a $70 million reserve related to a.

Rick Shane: And when we think about that $90 million that was repurchased in February, and you can hear me typing in the background trying to figure this out, how impactful was that on Delta and the DQ rate? Those loans, I believe, were already in my non-performing loans bucket at year-end. So, in the $262 million we disclosed, those are two loans that were already non-performing that we bought out of the CLF, if that's what you're asking. No, I'm trying to figure out. You cited a decline in the delinquency rate, but if you bought out $90 million that were presumably delinquent and you're discussing the CLO, not the managed portfolio, that comes out of the numerator in terms of that delinquency rate. That's what I'm trying to understand. It does indeed.

I'm very old loan.

<unk> 2008 I believe.

Vic reserves are I believe.

And the $120 million range, I mean, I get this a little bit wrong, but I correct General reserve is now about 57 or 58 basis points should we expect that to increase given your outlook over the next two to three quarters.

So here's how it works you you're exactly right, we have $120 million of specific reserves $78 million of that is actually on a very old legacy land development deal out in California, We've talked about it in the past and Havent put a reserve on additional reserve on that deal in a while the rest of the reserves throughout the asset classes, mostly multifamily we do.

Paul Alenio: It'll be in the overall number, which will be- It will, but it'll be in February, not in the January numbers we gave you. It doesn't disappear, Rick. It's not like it falls off the charts.

You have 75 million and general reserves on our books 73 of those at the multifamily as far as outlook, it's really hard to talk about the reserves because seasonal requires you obviously to build the reserve. When you think you having stress, which we do however, having said that we do think the next couple of quarters will be increase.

Paul Alenio: Okay. I got it. And then last question for me. So when we look at the reserves, and we look at the specific reserve, there's a $70 million reserve related to a very old loan, 2008, I believe. The specific reserves are, I believe, in the $120 million range. I'm going to get this a little bit wrong, but I think the general reserve is now about 57 or 58 basis points. Should we expect that to increase, given your outlook over the next two to three quarters? So here's how it works. You're exactly right.

Tingly challenging and as Ivan said, if rates stay elevated for longer that could leak into the third quarter and we will continue to look as we work through our deals and determine whether we need additional reserves, while I can't predict what the model is going to show my.

Two in Italy, I believe reserves will stay elevated for the next couple of quarters, that's what I think.

Hey, guys. Thank you for taking my questions. This morning.

Youre welcome.

And our next question will come from Stephen laws with Raymond James.

Paul Alenio: We have $120 million of specific reserves. $78 million of that is actually on a very old legacy land development deal out in California we've talked about in the past and haven't put an additional reserve on that deal in a while. The rest of the reserves are throughout the asset classes, mostly multifamily. We do have $75 million in general reserves on our book. Seventy-three of those are for multifamily.

Please go ahead.

Thanks, Good morning, and very nice quarter in a very difficult environment and now you're working through a lot.

Like all multifamily lenders are here.

You know I really wanted to circle back to a couple of your comments you know I think you know one of the the big misconceptions I think for the I hear from people as you know the assumption that all delinquencies lead to a loss.

Paul Alenio: As far as outlook is concerned, it's really hard to talk about the reserves because CECL requires you, obviously, to build the reserves when you think you're having stress, which we are. However, having said that, we do think the next couple of quarters will be increasingly challenging. And as Ivan said, if rates stay elevated for longer, that could leak into the third quarter. And we will continue to look as we work through our deals and determine whether we need additional reserves. While I can't predict what the model's going to show, intuitively, I believe reserves will stay elevated for the next couple of quarters. That's what I think.

Can you talk a little more about your process.

How the modifications and extensions work you know your gives and takes are you providing mezz how much medicine.

Provide are they finding that elsewhere and you know and again about the new equity sponsors stepping in you kind of mentioned that the that there's a lot of liquidity around multifamily, but can you maybe talk a little bit about the delinquency is like you.

How do you think about collateral values, how do you think about which what loans are subject to potential losses, and which ones. You know, we're just going to go through a process, where they worked out and come out as a performing on the new sponsor.

Rick Shane: Hey guys, thank you for taking my questions this morning. You're welcome. And our next question will come from Steven Laws with Raymond James, please go ahead. Thanks. Good morning and a very nice quarter in a very difficult environment. I know you're working through a lot, like all multifamily lenders are here. I really want to circle back to a couple of your comments.

Well I will say, it's it's it's an art not a science and there's no specific one that is the same.

Steven Cole DeLaney: I think one of the big misconceptions I think that I hear from people is the assumption that all delinquencies lead to a loss. Can you talk a little more about your process, how the modifications and extensions work, your gives and takes? Are you providing MES? How much MES do you guys provide? Are they finding that elsewhere?

You have different sponsors with different capabilities.

Different assets different basis as different ability to get capital.

And you have assets that you now need more capital less capital and we approach each one independently I mean, I would tell you that at all at one of our bars.

Ivan Kaufman: And again, about the new equity sponsor stepping in, you kind of mentioned that there is a lot of liquidity around multifamily. But can you maybe talk a little bit about the delinquencies; how do you think about collateral values? How do you think about which loans are subject to potential losses and which ones are just going to go through a process where they're worked out and come out as a performing loan with a new sponsor? Well, I would say it's an art, not a science. There's no specific one that is the same.

Oh.

Didn't want to make is payment and where deep deep.

And the money.

And we you know we have five sponsors who want to take over that asset.

We're going to collect penalty interest all the way through foreclosure transition that asset went to ownership.

The reduction in the loan amount get a nice performing alone.

And then produce you know you know for agency loans in the next nine months. When you asked it gets re stabilized that's a great situation. We have some of those we have all the ones where you know perhaps.

Ivan Kaufman: You have different sponsors with different capabilities, different assets, different backgrounds, different ability to raise capital. You have assets that... Need more capital, less capital; when we approach each one, individually, I will tell you that. You know, at one of our bars, who didn't want to make his payment.

I have to give some concessions to attract more capital.

And be a good partner because we will do all the business with the client and it's a fruitful relationship in the long run and we're willing to work with them.

Ivan Kaufman: We're deep, deep in the money, and we have five sponsors who want to take over that asset. We're going to collect penalty interest all the way through foreclosure, transition that asset to new ownership, get a reduction in the loan amount, get a nice performing loan, and then produce four agency loans in the next nine months when the asset gets re-stabilized. That's a great situation.

And you have certain circumstances, where we have.

That's well on the money with a crappy Barbara who's going to hold us up and we're going to have to fight through it and make it a non accrual alone. While he is still in the rents from us for a six or nine month period of time and then we're just not accrued alone and.

Ivan Kaufman: We have some of those. We have other ones where, perhaps, we have to give some concessions to attract more capital and be a good partner because we'll do our business with the client and it's a fruitful relationship in the long run, and we're willing to work. And you have certain circumstances where we have an asset that's well in the money with a crappy borrower who's going to hold us up, and we're going to have to fight through it and make it a non-accrual loan while he's stealing the rents from us for a six or nine month period of time, and then we're just not a crude loan, fight to fight and get to where we want So there's no particular circumstance.

And fight the fight and get to where we want to go. So there's no particular circumstance that's the same.

And you know, it's a detailed amount of work with a tremendous amount of focus we have sponsors who have personal guarantees on loans, where the assets under water, but their guarantees are worth.

Hundreds of millions of dollars right and we approach that one in a way where okay. You got to either pay down alone faith alone fixed alone, bringing a new partner recapitalized alone.

You signed on the guarantees we lend to you a little more than we would have based on your guarantees. So you know you've got to work with us otherwise, we're going to collect our money one way or the other and by the way when we collect our money you're going to be paying a 24% interest rate, which youre not going to want it.

Ivan Kaufman: You know, it's a detailed amount of work. We have sponsors who, Personal Guarantees on Loans with the Assets Underwater, their guarantees are worth hundreds of millions of dollars. Right. And we approach that one in a way where, okay, you got to either pay down a loan, feed the loan, fix the loan, bring in a new partner, recapitalize the loan. You signed on the guarantees.

So you know every single one of these circumstances different very intimate with a lot of it where the best asset management team in the nation, they're motivated they're.

Ivan Kaufman: We loaned you a little more than we would have based on your guarantees. So, you know, you had better work with us. Otherwise, we're going to collect our money one way or the other. And by the way, when we collect our money, you're going to be paying a 24% interest rate, which you're not going to want. So, you know, every single one of these circumstances is different, a very integrated approach top to bottom to achieve the best economic result that we can on each and every one. Appreciate the color on that.

Working hard we've.

Integrated our own teams and I want to add one more thing our originators who originated as loans there and it working it through as well, it's not like they originate alone they're walking away, they're part of the asset management process. So this is a fully integrated approach top to bottom to achieve the best economic result that we can on each and every level.

I appreciate the color on that and I wanted to touch base a follow up on the with regards to buying loan side of the fellows.

Steven Cole DeLaney: And I wanted to touch base or follow up on the buying loans out of the CLOs and just overall liquidity. You know, one thing I noticed is you guys did not use the ATM in the fourth quarter like you did in Q3. Maybe I'm over reading that, but you were in the mid-teens, comfortably above book.

And just overall liquidity now one thing I noticed since you guys did not use the ATM in the fourth quarter like you did in Q3, I mean, maybe I'm over reading that but you know you were in the mid teens will comfortably above book. So that kind of gives me signal you feel pretty good about your liquidity and capital to not hit your ATM. During the quarter. You know can you talk about.

Ivan Kaufman: So that kind of gives me a signal you feel pretty good about your liquidity and capital to not hit your ATM during the quarter. You know, can you talk about how you see your liquidity managing through over the next six months? And then just generally, when you do buy out a loan from CLOs, say the 90 million in February, you know, what is the impact on liquidity to move that to a bank line, which has a lower advance rate than a CLO?

You know how you see your liquidity.

Managing through over the next six months and then just generally when you do buy out alone from CLO se the $90 million in February you know what is the impact of liquidity to move that to a bank line, which has a lower advance rate the CLO.

Ivan Kaufman: You know, how does that process impact liquidity? I think that's a great question because, you know, moving loans out of CLOs for the benefit of being able to rework them or create the best economic result is certainly very important to us. And when we do buy them out, we're typically able to leverage them. Usually, it's a 10 to 20 point haircut difference.

How does that process impact liquidity.

I think that's a great question because.

Now moving from buying loans out of <unk> for the benefit of being able to rework them a great. It will create the best economic result.

Very important to us and when we do buy them out.

Well typically we leverage them, usually it's a 10 to 20 point haircut difference are we got to come up with another 10 or 20 points in equity that's how we'd look at it we have capacity with our banking relationships and it's mostly transitional it sounded like they sit out there forever. They sit out there for maybe three months six months nine months.

Ivan Kaufman: We've got to come up with another ten or so. We have capacity with our banking relationships, and it's mostly transitional. It's not like they sit out there forever. They sit out there for maybe three months, six months, nine months, not much longer.

Not much longer.

Paul Alenio: And very often, when we buy them out, they're restructured, recapitalized, and then they even re-leveraged back at the original leverage rate or very close to it. So, we're fairly comfortable with our banking partners. Team, good business, they get good rates for returns at a very low advance rate. And it's not as though we're buying them out, and they're going to be with us for 10

And very often when we buy them out that restructure recapitalize and then they've re levered back at the original leveraged freight or very close to it.

So we're fairly comfortable with our banking partners you know.

Its team good business they get good rates of returns with a low very low advance rate.

And it's not as though we're buying them out and they're going to be with us for 10 years, there's usually a timeline and a solution but.

Ivan Kaufman: There's usually a timeline and a solution, but you know, we forecasted in our cash projection, buying out a sharp amount at www. ArborRealtyTrust.com. And we do that, and we do it within the rules of this VLO, and we do it very... And Steven, I'll just add on the liquidity side, you know, excellent question and good point. I mean, one of the things we've been focused on, as Ivan said, in our models is maintaining as strong a liquidity position as we can. And we have a lot of dexterity, as Ivan said, in buying loans out and, you know, having our warehouse lenders be able to re-lever those deals at a slight discount on the leverage. But we've also been operating our business right now with – when rates tick down in the 10-year, we're being very opportunistic in bringing loans over from the balance sheet. And as you've seen in the last few quarters, our ROF has greatly exceeded our new originations.

We forecasted and our cash projections buying out a short amount the amount of traditional leverage and what the total outstanding will be at a certain time, so were pretty comfortable forecasting what our cash needs off for buying out by buying loans out of a CLO are very important to maximize economic value.

And we do that we do it within the rules of the CLO and we do it very effectively.

And Steven I'll, just add on the liquidity side excellent question and good point I mean, one of the things we've been focused on as Ivan said in our models is maintaining a strong liquidity position as we can and we have a lot of dexterity as Ivan said in buying loans out and.

Having a warehouse lenders to be able to re lever those deals at a slight discount and the leverage but we're also then operating our business right now with us when rates ticked down in the 10 year, we're being very opportunistic in bringing loans over from the balance sheet and as you've seen in the last few quarters. Our run off has greatly exceeded our newer.

Nations and in doing that we're recouping a lot of the capital we had invested in and if we can continue it does two things right when when rates ticked down we've got loans ready to be transitioned over to the agencies and we get our capital back and then we ended up generating a long dated income stream and compounded by the fact that.

Paul Alenio: And in doing that, we're recouping a lot of the capital we had invested in. If we can continue to do that, it does two things, right? When rates tick down, we've got loans ready to be transitioned over to the agencies, and we get our capital back. And then we end up generating a long-term income stream, compounded by the fact that when rates are down, the agency business just generally picks up as it is. That all helps our cash flow. So that's how we feel comfortable that our cash is in the right position. And as you said, it's a billion dollars one, which is a really nice position to be in. And it's something we constantly monitor.

When the rates are down the agency business, just generally picks up as it is that all helps our cash flow. So that's how we feel comfortable that our cash is the right position and as you said, it's 1 billion won which is a really nice position to be in and it's something we constantly monitor and having that dexterity to move loans and out of the vehicles and into our warehouse lines really.

Steven Cole DeLaney: And having that dexterity to move loans out of the vehicles and into our warehouse lines really helps us be able to maintain that cash position. Yeah, running a runoff was certainly a positive number, and press the liquidity, I think actually picked up a little eventually. So one last small one on the MES loans, you know, did you guys do MES or prep investments, people buy finding that capital elsewhere if it's something they're looking to add? Yeah, we like the mezzanine prep business, not only in health care, Bars, Repositions, some of their balance sheet loans into agency loans but originating new agency loans as well. So we're one of the few lenders who are very active with the agency, doing that kind of lending. We expect it to be a growing part of our business, with very stable returns. It's a great risk-adjusted return.

Alps us be able to maintain that cash position.

Yeah, Richard running on runoff was certainly a positive number.

Perhaps the liquidity I think actually ticked up a little sequentially. So.

Well one last small one on the on the Mezz loans did you guys do.

Rapid investments.

People buy a finding that capital elsewhere, if it's something they're looking to add.

Yeah, we we like them as impressed as not only on helping our borrowers repositioned some of their balance sheet loans into agency laws, but originating new agency loans as well.

So we're one of the few lenders who are very active with the agencies on.

I'm doing that kind of lending.

We expect it to be a growing part of our business and budget Accordingly, it's.

Very stable returns.

And it's a great risk adjusted return that we like that business. We've always been active in that business and where you think it is a great opportunity going forward.

Ivan Kaufman: We like that business. We've always been active in that business. We think this is a great opportunity.

Steven Cole DeLaney: And Steven, we're locking in that fixed rate spread for five to ten years too, which we really like. And then, I think you mentioned the CLO buyouts for Q4 in February. Were there any in January, or was that February your only number so far?

Great.

So that's part of what.

We're locking we're locking in that fixed rate spread for five to 10 years to which we really like.

Yeah.

And then I think you mentioned the CLO buyouts for Q4 February were there any in January or was that February year to date.

Paul Alenio: I think that's Jan and Feb, but I think both of those that I mentioned, the $90 million, actually happened in the beginning of Feb, but that's the total number to date for the quarter at $90 million right now. Thanks again, and I know it's a lot of hard work. I'll let you get back to it. Talk to you soon. Thanks. And our next question will come from Crispin Love with Piper Sandler.

I think that's fair, that's Dan and fab, but I think both of those that I mentioned, the 90 million actually happened at the beginning of fat, but that's the total number to date for the quarter was $90 million right now.

Thanks, again and I know.

It's a lot of hard work and let you get back to it toxin. Thanks.

Thanks, David.

And our next question will come from Crispin Love with Piper Sandler.

Please go ahead. Thanks. Thanks. Good morning appreciate taking my questions first on the servicing book how much of the servicing book are in programs with GSE risk retention such as the Fannie Das program and how are those loans performing credit quality credit quality wise any delinquency stats are expected losses to share there.

Crispin Love: Please go ahead. Thanks. Thanks. Good morning.

Paul Alenio: I appreciate you taking my questions. First, on the servicing book, how much of the servicing book is in programs with GSE risk retention, such as the Fannie Duff program? And how have those loans been performing credit quality-wise? Any delinquency stats or expected losses to share there? Sure.

Sure. So 21 3 billion of the 39% to 31 billion is in the Fannie Mae does a world. So that's probably you know about 80% of the book is Fannie Mae dust, which as you said has the risk share.

Paul Alenio: So, $21.3 billion of the $30.9 or $31 billion is in the Fannie Mae Dust world. So that's probably, you know, about 80% of the book is Fannie Mae Dust, which, as you said, has the risk share. Delinquencies have been fairly stable.

Delinquencies have been fairly stable, we did see a little bit of an uptick this quarter, we had $187 million of loans on the agency side that are delinquent, we had I think $12 million of specific reserves against those and those are in the foreclosure process. We booked another three $3 million of specific reserves. This quarter as you may have seen from the press release.

Paul Alenio: We did see a little bit of an uptick this quarter. We have $187 million of loans on the agency side that are delinquent. We have, I think, $12 million of specific reserves against those, and those are in the foreclosure process. We booked another $3 million of specific reserves this quarter, as you may have seen from the press release on the agency business. Freddie Mac delinquencies were flat quarter over quarter.

On the agency business.

Freddie Mac delinquencies were flat quarter over quarter, we did not see any real increase so a little bump up in agency on the on the Fannie Mae side, but but from a context standpoint, traditionally and through the history of the agencies and we've been at this more than 20 years loss levels on the agency business are very very miniscule as you know compare.

Paul Alenio: We did not see any real increase. So there was a little bump up in agency on the Fannie Mae side. But from a context standpoint, traditionally and through the history of the agencies, and we've been at this more than 20 years, loss levels on the agency business are very, very minuscule, as you know, compared to the rest of the world. So we're not expecting this number to be anything significant anytime soon, and it'll be what it'll be, but it'll never be real material. Okay, thanks, Paul. That makes sense. And then, can you share your current LTVs and DFCRs in the CLOs and the total portfolio? I don't have the information on the CLOs.

To the rest of the world. So we're not expecting this number to be any anything significant anytime soon and it will it'll be what it'll be but it'll never be real material.

Okay. Thanks, Paul It makes sense and then can you share your current Ltvs of D. S T ours in the CLO and the total portfolio.

I don't have the information on the CLO as we don't break it out that way for our disclosures, we do have the LTV, which youll see in our 10-K, when it's filed as about 78% on our book, our total book and that balance sheet and.

We're consolidating everything so we look at everything it's one where it's financed its just a different animal and.

So our whole book of $12 6 billion has a 78% LTV right now on an as is basis some higher some lower obviously, depending on certainly the asset for our business has a much lower LTV right now given the nature of that business, but that's the blended number I don't have the D C. Our figures because again.

Paul Alenio: We don't break it out that way for our disclosures. We do have the LTV, which you'll see in our 10-K when it's filed, is about 78 percent of our book, our total book, and that's the balance sheet. And remember, we're consolidating everything, so we look at everything as one, where it's financed as just a different animal. So our whole book of $12.6 billion has a 78 percent LTV right now on an as-is basis. Some higher, some lower, obviously, depending on, certainly, the SFR business is a much lower LTV right now, given the nature of that business, but that's the blended number. I don't have the DSCR figures because, again, the DSCR figures, you need to factor in your interest reserves, your caps, and all those things, but that's not something I think I have in front of me.

The D C. Our figures you need to factor in you know your interest reserves of caps and all of those things, but that's not something I think I have in front of me.

Okay.

And then just one last one last question for me kind of later in the year. There was a bunch of articles about potential fraud and the broker meridian can you size any exposure that you have there to meridian and any ramifications you would expect from that.

Yeah.

Yeah, we really can't speak to that and you know clearly what we can speak to is that the industry's changing and the broker or interaction.

Ivan Kaufman: One last question from me. Later in the year, there were a bunch of articles about potential fraud in the broker Meridian. Can you size any exposure that you have there to Meridian and any ramifications you would expect from that?

For agency lending is.

Ivan Kaufman: We really can't speak to that, and clearly, what we can speak to is that the industry is changing, the Brokaw interaction, and agency lending is changing dramatically. Brokers were very involved with borrowers, creating source documents and then forwarding them to lenders. That obviously resulted in a problem, and the agencies are now changing how source documents and the broker roles and disclosures are handled.

As being.

Modify dramatically brokers, we're very involved with borrowers.

Creating source documents and then forwarding them to lenders.

Obviously resulted in a in a problem and the agencies are now changing how source documents in the broker roles and disclosures.

Crispin Love: Quite frankly, we never fully understood, on an agency product, why people would go to a broker to pay a fee to get to us when they can come directly to us and get the same result. So, you know, we think that there's going to be a real benefit for bars to come directly to us rather than through a broker. Transcribed by https://otter.ai. We think that our business, the agency business, should be a very big beneficiary of that change. Thanks, Ivan. I appreciate you both taking the time to answer my questions. And our final question will be a follow-up from Lee Cooperman with the Omega Family Office. Please go ahead.

Quite frankly, we never.

Fully understood you know on an agency product why people would go to a broker pay a fee to get to us why they can come directly to us and get the same result.

So you know, we think that there's going to be a real benefit and a franchise for bars to come directly to us rather than for a broker.

And.

We think that all businesses can do.

The agency business should be a very big beneficiary of that change.

Okay. Thanks, and I appreciate you taking my questions.

Thanks, Chris.

And our final question will be a follow up from Lee Cooperman with Omega family Office. Please go ahead.

Leon G. Cooperman: Thank you. I would just observe, Ivan, that welcome to the world of short sellers. They're 64 million shares short, and these guys are smart, and they play a very vicious game.

Thank you I would just observe I mean.

Welcome to World, who short sellers.

64 million shares short and these guys are smart and they play a very vicious game.

Leon G. Cooperman: They put out information at times that is false, and you've got to deal with it. Now, I'm reminding you of the expression, "When the going gets tough, the tough get going." I think you're a very tough guy, and I don't think that they realize who they're dealing with.

He put out information at times as force.

Deal with it now I'm reminding, especially when it tough.

So it gets tough the tough get going.

He was very tough guy and I don't think.

They realize who they're dealing with and I wish you good luck.

Ivan Kaufman: But I wish you good luck, and you're going to be very active later on. Thank you, Lee. This is already four quarters. They've been four quarters wrong, and that has created an enormous amount of stress on the organization. Tremendous cost because the amount of extra work that has to be done has been very stressful.

Thank you Lee. This is this is.

This is already four quarters, they've been four quarters wrong.

It's created an enormous amount of fresh on the organization.

Tremendous cost because the amount of extra work that has to be done.

It has been very stressful.

Ivan Kaufman: But, you know, we will continue to work hard and provide numbers. Okay. Thank you, Lee. Thanks everybody. Do I have any closing remarks? Sure, it was a long call; we had a lot of data to go through. Clearly, you know, it's been in a sustained period of elevated interest rates and elevated distress. As I've mentioned previously, the fourth quarter was going to be a difficult quarter. The first and second quarters would continue to be similar to the first quarter, even maybe slightly more stressful. Rates remain somewhat elevated as they are right now. The stress can drip into the third quarter. Pay close attention to where, you know, the 10-year floats to and where short-term rates go because, you know, that'll have a significant impact, believing stress in the system.

But you know we will continue to work hard.

I would look for mining already enjoyed numbers, okay. Thank you Lee and.

I appreciate it.

Thanks to everybody, either new or closing remarks.

Sure. It was a long call we had a lot of data to go through.

Clearly you know it's been it's been a sustained period of elevated interest rates and elevated distress as I've mentioned previously.

Fourth quarter was going to be a difficult quarter.

First and second quarter will continue to be similar to the first quarter or even maybe slightly more stressful if rates remain somewhat elevated as they.

All right now.

The distress can drip into the third quarter I pay close attention to where.

The 10 year floats too and with short term rates go up because you know that'll have a significant impact on their level of stress in the system, but we really appreciate everybody's a commitment to the company.

Ivan Kaufman: But we really appreciate everybody's commitment to the company and their time on this call, and we look forward to next time's call. Everybody have a great weekend. Take care. Bye-bye. And thank you, ladies and gentlemen, this concludes today's teleconference, and you may now disconnect.

Time on this call and we look forward to next earnings call everybody have a great weekend take care Bye bye.

And thank you ladies and gentlemen, this concludes today's teleconference and you may now disconnect.

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