Q4 2023 Lument Finance Trust Inc Earnings Call

Operator: www.uncn.org.au Good morning, and thank you for joining the Lument Finance Trust fourth quarter 2023 earnings call. Today's call is being recorded and will be made available via webcast on the company's website. And I would like to turn the call over to Andrew Tseng with investor relations at Lument Investment Management. Please go ahead, sir.

Good morning, and thank you for joining Illumina Finance Trust fourth quarter 2023 earnings call. Today's call is being recorded and will be made available via webcast on the company's website and I would like to turn the call over to Andrew <unk> with Investor Relations at Bloom and investment management. Please go ahead Sir.

Andrew Tseng: Thank you and good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's fourth quarter 2023 financial results. With me on the call today are Jim Flynn, our CEO, Jim Briggs, our CFO, Jim Henson, our President, and Zachary Halpern, our Managing Director of Portfolio Management. On Friday, March 15th, we filed our draft with the SEC and issued a press release to provide details on our fourth quarter results.

Thank you and good morning, everyone.

Thank you for joining our call to discuss whether it's finance trust fourth quarter 2023 financial results.

With me on the call today are Jim Flynn, our CEO, Jim Briggs, our CFO, Jim Hansen, our president and.

Zachary Halliburton, our managing director of portfolio management.

On Friday March 15, we filed our 10-K with the SEC and issued a press release to provide details on our fourth quarter results.

Andrew Tseng: We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I'd like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this conference call, words like outlook, evaluate, indicate, believes, will, anticipates, expects, intends, and other similar expressions are intended to identify forward-looking statements.

We also provided a supplemental earnings presentation, which can be found on our website.

Before handing the call over to Jim Flynn I'd like to remind everyone that certain statements made during the course of this call are not based on historical information and May constitute forward looking statements within the meaning of section 27.

Of the Securities Act of 1933 and.

In section 21 E of the Securities Exchange Act of 1934.

When used in this conference call words like outlook evaluate indicate believes will anticipates expects intends and other similar expressions.

Are intended to identify forward looking statements.

Andrew Tseng: Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statement. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8K, 10Q, and 10K, and in particular, the risk factors section of our Form 10K. It is not possible to predict or identify all such risks.

Such forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the statement.

These risks and uncertainties are discussed in the Companys reports filed with the SEC, including its reports on forms 8-K, 10-Q, and 10-K and in particular the risk factors section of our Form 10-K.

It's not possible to predict or or identify all such risks.

Andrew Tseng: Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures will be discussed on this conference call. A presentation of this information is not intended to be considered in isolation, nor as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures, as well as the most comparable measures prepared in accordance with GAAP, can be accessed through our filings with the FCC at www.fcc.gov.

Listeners are cautioned not to place undue reliance on these forward looking statements.

Only as of the date hereof.

The company undertakes no obligation update any of these forward looking statements.

Furthermore, certain non-GAAP.

Financial measures will be discussed on this conference call.

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

Reconciliations of these non-GAAP financial measures the most comparable measures.

Were prepared in accordance with GAAP.

It can be accessed through our filings with the SEC at Www Dot set up though.

Andrew Tseng: For the fourth quarter and fiscal year 2023, we reported a gap net income of $0.07 per share and $0.29 per share of common stock, respectively. Additionally, for the fourth quarter and fiscal year 2023, we reported distributable earnings of $0.10 and $0.26 per share of common stock, respectively. This past December, we also declared a dividend of $0.07 per share with respect to the fourth quarter, bringing our cumulative declared dividends for the year to $0.26 per share. I will now turn the call over to Jim Flynn. Please go ahead. Thank you, Andrew. Good morning, everyone.

For the fourth quarter and fiscal year 2023, we reported GAAP net income.

Seven cents per share and 29 cents per share of common stock respectively.

For the fourth quarter and fiscal year 2023, we reported distributable earnings 10 cents and 26 cents per share of common stock respectively.

This past December.

A dividend of <unk> per share with respect to the fourth quarter, bringing our cumulative declared dividends for the year to 26 cents per share.

I will now turn the call over to Jim. Please go ahead.

Thank you Andrew good morning, everyone.

James Peter Flynn: Welcome to the Lumen Finance Trust earnings call for the fourth quarter of 2023. I appreciate everyone joining us this morning. I'll start with the macro perspective. We're viewing 2024 with cautious optimism. The consensus expectation is that further hikes are now behind us, and most economists believe a soft landing is more probable in 2024 than just six months ago. The U.S. economy has remained resilient, with unemployment rates remaining below 4%.

Welcome to the limited Finance Trust earnings call for the fourth quarter of 2023.

Be safe everyone joining us this morning.

I'll start with the macro perspective and.

Twice, what we were viewing 2024 with cautious optimism.

Consensus expectation is that further hikes.

Now behind Us and most economists believe a soft landing is more probable at 2024, then just six months ago.

U S economy has remained resilient.

Unemployment rates remaining below 4%.

James Peter Flynn: The translation, albeit a bit moving up and down, is moving closer to the Fed target rate of 2% with all the most recently seen available data. That being said, the risk of recession remains elevated, as geopolitical uncertainty persists, and it's yet to be seen how the Fed's current monetary policy, which operates on a lag, fully plays out across the economic landscape. Multifamily has its own set of opportunities and challenges. In the short term, the property sales market continues to be primarily driven by forced sellers, significantly limiting acquisition financing opportunities.

<unk>, albeit.

A bit a bit moving up and down is moving closer to the fed target rate of 2%.

The other most recently seen available data.

That being said the rest of the SASSA remains elevated as geopolitical uncertainty persists.

It's yet to be seen how the fed's current monetary policy, which operates on a lag fully plays out across the economic limit.

Okay.

Multifamily has its own set of opportunities and challenges in the short term. The property sales market continues to be continues to be primarily driven by force sellers significantly eliminated acquisition financing opportunities.

James Peter Flynn: In addition, the multifamily market is expected to experience slowed NOI growth, resulting from a short, softening of short-term supply in some markets. Sorry, supply and demand dynamics, I should say, in some markets, and higher property operating costs, including labor, insurance, and maintenance, in addition to the impact that higher rates have had across the industry. Despite the challenges, Multifamily remains a favored asset class among investors given its strong historical performance and constructive long-term fundamentals. A lower short-term rate environment in the latter half of 2024 could contribute to improved asset performance in our portfolio and perhaps a narrowing of the current bid-ask spread between property buyers and sellers, positively impacting valuations and, in turn, debt prospects. Further, we expect to see significant refinance opportunities on the horizon. The MBA and others in the industry are projecting well over $300 billion of multifamily loans expected to reach initial maturity by the end of 2025, and over $650 billion of multifamily loans are expected to mature within the next three years.

In addition in the multifamily market is expected to experience slowed NOI growth, resulting from short.

Softening of short term supply.

In some markets.

Sorry supply demand dynamics, I should say in some markets and higher property operating costs, including labor insurance and maintenance in addition to the impact.

The higher rates, we've had across the industry.

Despite the challenges multifamily remains a favorite asset class among investors given its strong historical performance and constructive long term fundamentals.

Lower short term rate environment in the latter half of 2024.

Contribute to improved asset performance at our portfolio and perhaps the narrowing of the current bid ask spread between property buyers and sellers.

Positively impacting valuation is that return that proceeds.

Further we expect to see significant refinance opportunity on the horizon.

The MBA and others in the industry, a projected well over 300 billion of multifamily loan is expected to reach initial maturity by the end of 2025.

And over $650 billion of multifamily loans are expected to mature over the next three years.

James Peter Flynn: As previously discussed on last quarter's call, the company had a busy and successful year, closing a $386 million secured financing in July that increased our levered investment capacity to approximately $1.4 billion. During the fourth quarter, we experienced 43 million loan payoffs and acquired or funded an additional 77 million of loan assets. As of year end, our capital was effectively fully deployed, with approximately 94% of our loan portfolio collateralized by multifamily assets, and more than 75% of the portfolio risk rated three, which is moderate risk or better. We had only two assets identified as risk rated five and recorded no asset specific reserves during that period, five being the highest.

As previously discussed on last quarter's call. The company had a busy and successful year closing of 386 million secured financing in July that increased our level of investment capacity to approximately $1 4 billion.

During the fourth quarter, we experienced $43 million of loan payoffs and acquired a funded an additional $77 million of loan assets.

As of year end, our capital was effectively fully deployed with approximately 94% of our loan portfolio collateralized by multifamily assets.

And more than 75% of the portfolio risk rated three just moderate risk or better so.

So we had only two assets identified as at risk rating five and recorded no asset specific reserves during that period.

The highest risk.

The company continued.

The company continues to maintain an attractive long dated liability liabilities rely primarily on two secured financing structures to leverage the western portfolio.

James Peter Flynn: Unknown Speaker 0, company continues to maintain an attractive long-dated liability liabilities relying primarily on two-spirited financing structures to leverage investment. The reinvestment period of 2021 CRE CLO transaction ended this past December with an 83% effective advance rate and a weighted average cost of silver plus $155. Even as the transaction begins to de-lever, we expect the structure to continue to provide an attractive cost of capital relative to current securitization and warehousing alternatives in the market. We do, however, expect to explore and carefully consider refinance opportunities for that CLL over the coming quarter. With deep experience and expertise in multifamily lending, LFC remains committed to its existing investment strategy.

The reinvestment period of 2021 CRE CLO transactions ended this past December with an 83% effective advance rate and a weighted average cost of sulfur plus 155 basis points each.

Even as the transaction begins to Delever. We expect this structure to continue to provide an attractive cost of capital relative to current securitization of warehouses Arthur alternatives in the market.

We do however expect to explore and carefully consider me, saying it refinance opportunity.

So that cielo over the coming quarters.

With deep experience and expertise in multifamily lending LSC remains committed to its existing investment strategy. We believe the company provided shareholders with a unique value proposition amongst comparable mortgage REIT, given our deliberate focus on middle market multifamily credit.

SaaS and active asset management and strong partnership from the broader <unk> platform.

Company has been able to maintain a stable dividend better than average credit performance within its investment portfolio.

James Peter Flynn: We believe the company provides its shareholders with a unique value proposition among comparable mortgage rates, given our deliberate focus on middle market multifamily credit. Through success in active asset management and strong partnership from the broader Oryx platform, the company has been able to maintain a stable dividend and better than average credit performance within its investment portfolio. And this is a superior dividend yield relative to many of... With that, I'd like to turn the call over to Jim Briggs, who will provide details on our financial... Jim. Morning, everyone.

Portfolio.

This is superior dividend yield relative to many of its peers.

With that I'd like to turn the call over to Jim Briggs, who will provide details on our financial results Jim.

Good morning, everyone, let's.

Black Friday evening, we filed our annual report on Form 10-K, and provided a supplemental investor presentation on our website.

We will be referencing during our remarks.

A supplemental investor presentation has been uploaded to the webcast as well for your reference on pages four through seven of the presentation you will find key updates in our earnings summary for the quarter.

For the fourth quarter of <unk> 23 reported net income to common stockholders of approximately $3 8 million or <unk> <unk> per share.

Also reported distributable earnings of approximately $5 2 million or <unk> 10 per share.

James Anthony Briggs: Last Friday evening, we filed our annual report on Form 10-K and provided a supplemental investor presentation on our website, which we will be referencing during our remarks. The supplemental investor presentation has been uploaded to the webcast as well. For your reference, on pages four through seven of the presentation, you will find key updates and an earnings summary. For the fourth quarter of 23, we reported net income to common stockholders of approximately 3.8 million, or seven cents per share. We also reported distributable earnings of approximately 5.2 million.

There are a few items I'd like to highlight with regard to the Q4 P&L.

Our Q4 net interest income was $9 1 million compared to $9 5 million in Q3.

While Q4 net income and net interest income benefited from a full quarter's worth of Levered earnings from the O M. F 2023 Dash one financing transaction that closed in July our sequential decline was primarily driven by fewer payoffs during the period.

Which resulted in lower exit fees.

Payoffs and pay downs during Q4 totaled $43 million.

As compared to $111 million in the prior quarter.

Associated Q4 exit fees of 210000 were down approximately 57% from the prior quarter.

James Anthony Briggs: A few items I'd like to highlight with regard to the Q4 P&L. Our Q4 net interest income was 9.1 million compared to 9.5 million in Q3. While Q4 net interest income benefited from a full quarter's worth of leveraged earnings from the LMF 2023-1 financing transaction that closed in July, sequential net decline was primarily driven by fewer payoffs during the period, which resulted in lower ag. Payoffs and paydowns during Q4 totaled $43 million, compared to $111 million in the prior quarter. Associated Q4 exit fees of $210,000 were down approximately 57% from the prior year.

Reduced Q4 payoffs also impacted our total operating expenses as well.

As a reminder, when one of our loans are paid off in agency refinancing provided by an affiliate of our manager the borrower exit fee is waived pursuant to the terms of our management agreement.

That incident, we do however receive a credit to expenses reimbursable to our manager of 50% of the waves to exit fee.

Our total operating expenses were $2 7 million in Q4 versus $2 4 million in Q3. The majority of that expense increase is driven by lower wafer exit fees and lower associated credit to expenses driven by overall lower payoffs relative to Q3.

Outside of that operating expenses were largely flat quarter on quarter.

The primary difference between reported net income and distributable earnings was the approximate $1 4 million in net increase in our allowance for credit losses, all with respect to our general reserves. The primary driver that General reserve increase was a modest uptick in average risk screening from 3435.

James Anthony Briggs: Reducing Q4 payoffs also impacted our total operating expenses as well. As a reminder, when one of our loans is paid off in agency refinancing, provided by an affiliate of our manager, the borrower exit fee is waived pursuant to the terms of our management. In that instance, we do, however, receive a credit to expenses reimbursable to our manager of 50% of the waived, and by overall lower payoffs, outside of that operating expenses were largely flat quarter, the primary difference between reported net income and distributable earnings. The Approximate $1.4 Million Net Increase in Our Allowance for Credit Losses, all with respect to our general reserves, the primary driver of that general reserve increase. A modest Uptick in Average Risk Rating from 3.4 to Five, changes in the macroeconomic forecast, and relative cautiousness in our estimate modeling as it relates to CRE pricing during this period where there have been very few transactions. We evaluate our five-rated loans individually to determine whether asset-specific reserves for credit losses are necessary and determine that none were necessary as of December.

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Changes in the macroeconomic forecast and relative cautiousness in our estimate modeling as it relates to CRE pricing. During this period, where there's been very little transaction activity.

We evaluate our five rated loans individually to determine whether asset specific reserves for credit losses are necessary and determined that none were necessary as of December 31 23.

In that context I'd like to note. Some subsequent events related to the two five rated loans, we had at year end.

With respect to the five rated loan on a multifamily property in Columbus, Ohio that has been non accrual with collections accounted for on a cost recovery basis, we receive proceeds related to the loan in both Q4 and Q1.

Our carrying value and the loan was reduced to $8 9 million as of year end from $12 8 million at the end of Q3 with a $13 5 million in proceeds received in Q1, our carrying value and the asset will be reduced to zero.

After taking into consideration certain legal and other cost in recoverable. We expect the net of the Q1 proceeds received result in a gain of approximately $1 9 million in Q1.

With respect to the $36 8 million vibrated loan on a multifamily property in Virginia Beach, Virginia that was on nonaccrual as of December 31, due to monetary default, we entered into a loan modification with the bar that among other things resulted in a $3 6 million principal paydown and all past dues being brought current which will result.

James Anthony Briggs: In that context, I'd like to note some subsequent events related to the two five-rated loans we had at year end. With respect to the five-rated loan on multifamily property in Columbus, Ohio, that has been non-accrual, with collections accounted for on a cost recovery basis. We receive proceeds related to the loan in both Q4 and. Our carrying value in the loan was reduced to $8.9 million as of year end, and $12.8 million at the end of Q3. With the $13.5 million in proceeds received in Q1, our carrying value of the asset will be reduced to zero.

<unk> and interest of approximately 500000 that was unpaid as of year end being recognized in Q1.

Jim will touch a bit more on this modification in his remarks.

As of year end, the company's total equity was approximately $241 million total common book value was approximately $181 million or $3 46 per share flat versus prior quarter.

We ended the fourth quarter with an unrestricted cash balance of $51 million and our investment capacity through our two secured financings were effectively what's effectively fully utilized.

James Anthony Briggs: After taking into consideration certain legal and other costs deemed recoverable, we expect the net of the Q1 proceeds received to result in a gain of approximately $1.9 million. With respect to the $36.8 million high-rated loan on a multifamily property in Virginia Beach, Virginia, that was on non-accrual as of December 31 due to monetary default, we entered into a loan modification with the borrower that, among other things, resulted in a $3.6 million principal paydown, and all past dues being brought current, which will result in interest of approximately $500,000 that was unpaid as of the year being Jim, we'll touch on that a bit more later. As of year end, the company's total equity was approximately $241 million. Total common book value was approximately $181 million or $3.46 per share, flat versus prior.

I will now turn the call over to Jim Henson.

Tales from the company's investment activity during the quarter and portfolio performance.

Thank you Jim Briggs I will now provide a brief summary of recent activity within our investment portfolio.

During the fourth quarter, we experienced a $34 million net increase in our loan portfolio after accounting for $43 million of loan payoffs and paydowns for the period.

For the full year, we experienced a $388 million net increase in our loan portfolio.

After accounting for $271 million of loan payoffs for the period.

The growth of the portfolio was driven primarily by our success in executing the LNR transaction in July as well as our managers diligent efforts to redeploy capital through reinvestment features in our secured financing vehicles.

Of the $77 million of loan investments acquired refunded during Q4, approximately 70% were collateralized by multifamily properties.

That would be $660 million of loan investments acquired are funded during the full year.

Approximately 95% were collateralized by multifamily properties.

James Anthony Briggs: We ended the fourth quarter with an unrestricted cash balance of $51 million, and our investment capacity through our two secured financings was effectively fully utilized. I will now turn the call over to Jim Henson to provide details on the company's investment activity during the quarter and portfolio.

And so if you're in our portfolio consisted of 88 floating rate loans with an aggregate unpaid principal balance of approximately $1 4 billion.

With 94% of the portfolio collateralized by multifamily properties.

100% of our floating rate portfolio is indexed to one month sulfur.

Our investment portfolio continued to perform well during the fourth quarter and we ended the period with a little more than 75% of our portfolio risk rated a three or better in.

James Joseph Henson: Thank you, Jim Briggs. I will now provide a brief summary of recent activity within our investment portfolio. During the fourth quarter, we experienced a $34 million net increase in our loan portfolio after accounting for $43 million of loan payoffs and paydowns for the period. For the full year, we experienced a $388 million net increase in our loan portfolio after accounting for $271 million of loan payoffs for the period.

An experienced only a modest quarter over quarter increase in the weighted average risk rating.

Going from three four to three five.

Primarily driven by a migration of some of our risk weighted assets to a risk rating of three.

A positive note our five rated aggregate loan exposure decreased from three to two wanted to assets during the quarter.

As previously stated as previously as we previously rated <unk>.

James Joseph Henson: The growth of the portfolio was driven primarily by our success in executing the LMF transaction in July, as well as our manager's diligent efforts to redeploy capital to reinvest. Unknown Speaker In our secured financing, we have, Of the $77 million of loan investments acquired or funded during Q4, approximately 70% were collateralized by multi-family property of the $660 million of loan investments acquired or funded during the full year. Approximately 95% of the loans were collateralized by multifamily property.

Five loans with an unpaid principal balance of $19 $6 million was brought current with respect to interest payments and restored to accrual status during the fourth quarter.

Jim touched on two five on the two five rated loans that remained at December 31 2023.

And were evaluated for specific reserves.

As noted based on proceeds received on the Columbus, Ohio Law, we have no remaining asset on the books coming out of Q1.

With respect to the modification on the $36 8 million five rated loan collateralized by a multifamily property in Virginia Beach, Virginia.

The modification of the loan increase the note rate two sofa.

James Joseph Henson: As of year end, our portfolio consisted of 88 floating rate loans with an aggregate unpaid principal balance of approximately $1.4 billion, with 94% of the portfolio collateralized by multifamily property. 100% of our floating rate portfolio is indexed to one month. So, our investment portfolio continued to perform well during the fourth quarter, and we ended the period with a little more than 75% of our portfolio risk rated three or better and experienced only a modest quarter-over-quarter increase in the weighted average risk rating, going from 3.4 to 3.5, primarily driven by a migration of some of our risk-rated two assets to a risk rating of three. On a positive note, our five-rated aggregate loan exposure decreased from three to two loan assets during the quarter.

400 <unk>.

Basis points.

Sofa, plus 327 basis points.

In addition to a principal pay down in there.

Bringing current all past due interest S grows in reserves.

The state of maturity of that loan has been amended to April five 2024.

The ability for the borrower to extend under certain conditions.

You may 3rd 2024.

Very positive developments and indicative of the success and active asset management that Jim mentioned in his opening remarks.

Despite the potential for further issues with specific loans, we remain confident in our ability to proactively manage panic repayments and achieve positive asset management outcomes within our portfolio.

Particularly in light of successful results in recent months.

With that I will pass it back to Jim for some closing remarks.

Thank you Jim.

Today's again to our all of our guests on the call. We appreciate your time and your interest.

I'd like to open the call up to questions.

Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad, you will hear from.

James Joseph Henson: As previously stated, as previously as a previously rated, Five Loan with an unpaid principal balance of $19.6 million was brought current with respect to interest payments and restored to accrual status during the fourth quarter. Jim touched on two five on the two five rated loans that remained at December 31, 2023, and were evaluated for specific reserve. As noted, based on proceeds received on the Columbus, Ohio loan, we have no remaining asset on the books coming out of Q1. With respect to the modification on the $36.8 million five-rated loan collateralized by a multifamily property in Virginia Beach, Virginia, The modification of the loan increased the note rate to SOFR plus 400 basis points from SOFR plus 327 base in addition to a principal paydown and a bringing current of all past due interest escrows and reserves.

Your hand has been raised and if you would like to withdraw from the question queue simply press star followed by two and if you're using a speaker phone. Please lift the handset before pressing any keys.

And your first question will be from Crispin Love with Piper Sandler. Please go ahead.

Thanks, Good morning, I appreciate you taking my questions. So just first on on the Q five rated loans I just want to make sure I got it right you expect to gain in the Columbus loan based on kind of where we are holding a write down in the first quarter first panel is that off road and then can you just go over the first quarter impact you expect on the Virginia each line.

Sure. So Phil this is Jim breaks here yeah. Thanks Kristen.

Yes, so on the Columbus loan.

We have been accounting that are accounting for that on a cost recovery basis. So we've got as we received proceeds when you've just been bringing the asset balance down.

As I mentioned in my remarks, we did some of that in Q4 with some proceeds that we received and then we brought that asset value down to zero.

James Peter Flynn: The stated maturity of that loan has been amended to April 5, 2024, with the ability for the borrower to extend, under certain conditions, to May 3, 2024. Very positive developments and indicative of the success in active asset management that Jim Flynn mentioned in his opening remarks. Despite the potential for further issues with specific loans, we remain confident in our ability to proactively manage repayments and achieve positive asset management outcomes within our portfolio, particularly in light of the successful results in recent months. With that, I will pass it back to Jim Flynn for some closing remarks. Thank you, Jim.

It will be brought down to zero in Q1, and we're expecting.

Based on those proceeds received $13 5 million to book a gain book income and.

In Q1, P&L that with $1 9 million.

For the on that Jim just to clarify for just those just to clarify that.

The.

The gain as a result of recovering.

All of the.

Deferred edge or deferred in truck.

Since it went on non accrual.

Yes, that's effectively what that $1 nine as Jim mentioned so.

That $1 nine will be booked in Q1.

James Peter Flynn: Thanks again to all of our guests on the call. We appreciate your time and your interest. I'd like to open the call up to questions. Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. You will hear a prompt that your hand has been raised. And if you would like to withdraw from the question queue, simply press star followed by two. And if you're using a speakerphone, please lift the handset before pressing any key.

Very likely for the reasons just described and the interest income line.

And for the Virginia Beach loan that had been on non accrual.

500000 that we mentioned is.

What was accrued went out of crude what was.

Do and unpaid and non accrued as of 12 31 a $500000.

That has been brought current.

And sort of the out of period impact.

Q4 interest coming into Q1 will be about 500000.

Okay. Thanks, that's helpful. And then just on multifamily bridge more generally we've seen scrap across the industry and some of your competitors portfolio on balance sheet as well as pre CLO.

Crispin Elliot Love: And your first question will be from Crispin Love at Piper Sandler. Please go ahead. Thanks, good morning. I appreciate you taking the time to answer my question. So just first on the two five-rated loans, I just want to make sure I got it right. You expect a gain on the Columbus loan based on kind of where you're holding it right now in the first quarter. First, is that accurate? And then, can you just go over the first quarter impact you expect on the Virginia Beach loan? Sure. So this is Jim Briggs here.

Can you just discuss how kind of your performance is trending kind of more broadly kind of across the whole portfolio and what characteristics. If any in your portfolio to make we're making that's different from some of the multifamily French peers that are experiencing more stress.

Sure I mean look I think that obviously.

James Anthony Briggs: Thanks, Crispin. Yeah, so on the Columbus loan, we have been accounting for that on a cost recovery basis. So, as we receive proceeds, we've just been bringing the asset balance down. As I mentioned in my remarks, we did some of that in Q4 with some proceeds that we received. And then we brought that asset value down to zero, and it will be brought down to zero in Q1.

We're virtually entirely multifamily.

So that helps there are others that are that are there are closed so that's certainly been.

A positive.

And while we have.

A.

Meaningful component of our of our portfolio was originated to go more towards the end of the.

James Anthony Briggs: And we're expecting they will fund those proceeds received a 13 and a half million to book again, book income, and Q1 P&L of 1. Unknown Speaker On that Jim, just to clarify for just one moment, I mean, the gain as a result of recovering all of the deferred interest since it went on. Yeah, that's effectively what that million nine is, as Jim mentioned, so that 1.9 will be booked in Q1, very likely for the reason just described, and for the Virginia Beach loan that had been on Nana Krull. The 500,000 that we mentioned is, do an unpaid and not accrued as a 1231 of $500,000 that has been brought current, sort of the out of period.

Of the peak of the cycle.

We still we've still got.

A number of assets.

Longer data that have been around for a longer period of time or perhaps not.

Valuations in.

Business plans are set prior to the peak.

Those two things are helping.

But I think probably.

One of the more critical aspects here or what's helped us in.

Doesn't necessarily relative to peers or not but.

We've got a very experienced asset management team.

That has.

That has worked out.

Assets have taken ownership of assets managed assets.

That has helped both in partnering with our sponsors and coming up with solutions, but it has also helped US to act quickly when we find ourselves in a position.

James Anthony Briggs: Q4 interest coming into Q1. Okay, thanks. That's helpful.

Not being able to find a solution with the sponsor.

James Peter Flynn: And then just on multifamily bridge, more generally, we've seen stress across the industry and some of your competitors' portfolios on the Balance Sheet as well as pre-CLOs. But can you just discuss how your performance is trending kind of more broadly across the whole portfolio and what characteristics, if any, in your portfolio make Lumet kind of different from some of your multifamily bridge peers that are experiencing more stress? Um, sure. I mean, look, I think that, obviously, we're, you know, virtually entirely multifamily.

I think that.

That reputation has helped.

Our sponsors to proactively work with us.

Had.

Two instances even across the broader platform of the sponsor.

<unk> is the sponsor.

Of of sponsors who.

Two.

I'll try to negotiate.

Maybe not.

The way that you would want them to do to say the least.

We have been able to kind of swap those pretty quickly.

<unk>.

James Peter Flynn: So that that helps, there are others that are that are close. So that's certainly been a positive thing. And while we have, you know, a, you know, meaningful component of our, of our portfolio was originated in the, Toward the end of the year, we still got a number of assets that are, you know, one of the more critical aspects here or what's helped us and, you know, those that have worked out assets and taken ownership of assets, managed assets, that has helped both in partnering with our sponsors and coming up with solutions, but it I think that that reputation has helped, you know, our sponsors to proactively work with us. We've had a few instances even across the broader platform of the sponsor Blumenth.

Us being reasonable with.

Sponsors coming in putting forward.

New consideration and legitimate plans to to make an exit.

Exchange for more time or some relief whatever it is that they're seeking.

And usually we've been able to.

To find an answer.

I think we have high quality sponsors.

Some sponsors get into.

Trouble in terms of liquidity and there is not.

There is not much that they can do about it at the time, it's too late so to speak.

Yes.

<unk>.

With the exception of that as well.

Got good sponsors low capitalized good managers with the plan.

We've got folks that can help.

<unk> worked with them to come up with.

Good plan and we've had.

Yes, great success rate.

James Peter Flynn: Sponsor of sponsors who Transcripts provided by Transcription Outsourcing, LLC. We've been able to kind of squash those pretty quickly. And it's resulted in us being reasonable with sponsors coming in, putting forward new considerations and legitimate plans to make an exit in exchange for more time or some relief, whatever it is that they're seeking. And usually, we've been able to find an answer. I think we have high-quality sponsors. Unknown Speaker Some sponsors get into trouble in terms of liquidity, and there's not you know, there's not much that they can do about it at the time, you know, it's too late, so to speak.

For LST Similarly in our <unk>.

Their company or sponsors.

Balance sheet as well so we'll just continue to focus on asset management.

We're regularly speaking to visiting assets, making sure we don't get too far.

Jaime CNS it physically struggling where.

Proactively out there either.

Yes.

Thinking about ways that we can step in or working with the sponsor and how we can resolve that issue immediately before things deteriorate. So active asset management was the number one.

Reason why any portfolio performing.

Vessel environment.

Perfect. Thanks, so much.

And then just one last quick one from me you had $20 million of self storage payoffs in the corner anything to call out there.

James Peter Flynn: But, with the exception of that, as long as we've got good sponsors, well-capitalized, good managers with a plan, you know, we've got folks that can help, you know, work with them to come up with a good plan. And we've had, you know, a great success rate for LFT. Similarly, in and our parent company, our sponsors, and balance sheet as well. So, you know, we'll just continue to focus on asset management. We're regularly speaking to and visiting assets, making sure we don't get too far behind when you see an asset physically struggling, you know, proactively out there and either think about ways that we can step in or work with the sponsor and how we can resolve that issue immediately before things deteriorate. So active asset management is number one. Perfect. And then just one last quick one for me.

Perhaps we're pretty thoughtful and that portfolio was that just the loan maturity or anything else at play there.

Yeah, there were longer it does vary some older assets. So it's not surprising that eventually we were able to.

See you.

Permanent.

Sure.

Absolutely not resolution.

Permanent financing of.

Are those assets.

The portfolio I don't think Theres anything, particularly.

Noteworthy those.

In fact, I don't know someone on the call could correct me, but I mean those are probably.

Maybe maybe three years old or close to three years old I'm not mistaken so there.

Okay.

<unk> been around a while.

Hey, I can jump in on this one.

Jack.

Yes that asset sold.

Well above our loan basis.

A quick resolution.

Okay, great. Thank you I appreciate you taking my questions.

Thank you next question will be from Steve Delaney at citizens.

Crispin Elliot Love: So you had 20 million in self-storage payoffs in the corner. Anything to call out there, because those payoffs were pretty sizable in that portfolio? Was that just a low maturity or anything else at play there?

Please go ahead.

Alright, Hey, good morning, everyone and look congratulations on a really solid quarter and the challenging environment that we that we have so look I know this is early.

Zachary Halpern: Yeah, they were longer. Those were some older assets. So it's not surprising they eventually were able to, you know, see, you know, permanent resolution, not resolution, but Permanent Financing and have those New Bonded Portfolio. I don't think there's anything particularly noteworthy. Those, In fact, I don't know, someone on the call directly, but I mean, those those are probably, They've, you know, they've been around a while. Hey, I can jump in on that one. This one, Zach. Yeah, that asset was sold. Followed by the R1B and Quick Resolution.

You are either you hike the dividend back in the third quarter.

But very solid coverage here and were hearing of some nice recoveries here in the first quarter.

Jim plan, what do you think would be in your mind and I guess more importantly, the board what do you want to see to have the confidence to make any further increase in the dividend during during 2024. Thank you.

Crispin Elliot Love: Okay, great. Thank you. I appreciate you taking my question. Thank you. The next question will be from Steve DeLaney at Citizens BNP. Please go ahead. Thanks. Good morning, everyone.

Thanks, Steve.

Do you hear from me.

Sure.

So there's a number there's a number of things that obviously, we're talking to the board we feel.

Steven Cole DeLaney: And look, congratulations on a really solid quarter and the challenging environment that we have. So look, I know, this is early. You raise the dividend back in the third quarter. But very solid coverage here.

We feel good about our liquidity position relative to our Si.

Including those recoveries as you noted.

We feel we feel confident and in the earnings.

So there's a lot of positives there.

I would say.

James Peter Flynn: And we're hearing of some nice recoveries here in the first quarter. James Flynn, what do you think would be, in your mind, and I guess more importantly, the board, what do you want to see to have the confidence to make any further increase in the dividend during 2024? Thank you. Thanks, Steve. Good to hear from you.

In discussion with the board, we're looking at the broader market.

Yes.

What we'd like to see is.

Let's see how the next quarter or two goes in terms of what's the macroeconomic environment looks like are we going to continue to see.

Improvement or more importantly stability.

That's really what I would say that the focus is is do we have stability.

James Peter Flynn: So there's a number there's a number of things there. Obviously, we're talking to the board, we feel we feel good about our liquidity position relative to our size, including those recoveries, as you noted. We feel we feel confident in the earnings. You know, so there are a lot of positives there. I would say, in discussions with the board, we're looking at the broader market. And what we'd like to see is, you know, see how the next quarter or two goes in terms of what the macroeconomic environment looks like. Are we going to continue to see improvement or, more importantly, stability? That's really what I would say that the focus is, do we have stability? The capital markets have been a bit spotty.

The capital markets have been.

A bit spotty.

We'd like to see.

Some more transactions than we are working.

So that and looking at our own.

Refinance activity and what we could.

At the corporate level and what we might be so all of those things as we.

Yes.

Expect that to play out.

Our view our base and you would be that thanks.

Thanks do continue on the on the trajectory.

Yes.

We get clarity on those issues I think that will help guide the dividend discussion with the board.

But I would say from a from a corporate standpoint.

Taking a look at the market as a whole.

Having some concern about some of the maturity issues, maybe less so on the on the multi side certainly there's a lot coming up I think a lot of loans will extend so just what kind of stress.

James Peter Flynn: You know, we'd like to see some more transactions done. We are working to that end, looking at our own refinance activity and what we could add at the corporate level and what we might do. So all those things as we, you know, expect them to play out or hope, you know, our view, our base view would be that things do continue on their trajectory. And as we get clarity on those issues, I think that will help guide the dividend discussion with the board. But I would say from a corporate standpoint.

The market see what kind of stress, we see from some of our peers.

Perhaps on some of the other asset classes and making sure that we are.

We're in a position to you.

Manage any of those issues or kind of macroeconomic stress that comes up.

And if things continue on the <unk>.

On the base paths that we.

Our our projecting then.

We're going to be looking at maybe using some of that incremental cash to make new investments.

There are ample opportunities to diversify a little bit for bridge loans in the multifamily space whether that's.

James Peter Flynn: Taking a look at the market as a whole, having some concern about some of the maturity issues, maybe less so on the multi-sided. Certainly, there's a lot coming up. I think a lot of loans will expand. So just what kind of stress the market sees what kind of stress we see from some of our peers, perhaps in some of the other asset classes, and making sure that we're in a position to manage any of those issues or any kind of macroeconomic stress that comes up.

And some of the Madison, perhaps capital available out there whether that's looking at.

Participating in some construction activity in there.

Yes.

Areas that are seeing.

But what youll be almost everywhere no deliveries over the next.

After 2025.

There is some opportunity there we could make some new investments as well, but right now we.

Think that it's prudent to maintain our liquidity position.

And ensure that the market is continues to move in the right direction.

James Peter Flynn: Uh, and if things continue on the base path that we are projecting, then, you know, we're going to be looking at, you know, maybe using some of that incremental cash to make new investments. There are ample opportunities to diversify a little bit from bridge loans in the multifamily space, whether that's, you know, some of the mezz and press capital available out there, whether that's looking at participating in some construction activity in those after 2025. So there's some opportunity there; we could make some new investments as well. But right now, you know, we think that it's prudent to maintain our liquidity position and ensure that the market continues to move in the right direction.

If it does I think we will be continuing to discuss with the board.

That's a very helpful overview, Jim and it looks like you guys do have a lot of Optionality moving forward, especially if we do in fact see lower rates sometime here in the next couple of quarters. Thank you Paul for the comments.

John.

Steve.

Thank you next question will be from Matthew Irma.

Jones trading please go ahead.

Hey, good morning, guys. Thanks for taking the question do you know what percentage of the loan portfolio extends.

Its fully extended through 2024.

Because the average weighted term is 13 months. So just what's your expectation for payoffs this year.

Steven Cole DeLaney: If it does, I think, you know, we'll be continuing to discuss it with the board. That's a very helpful overview, Jim, and it looks like you guys do have a lot of optionality moving forward, especially if we do, in fact, see lower rates sometime here in the next couple quarters. Thank you for the comments. Nice job.

So.

Very few in fact, we could call that one very.

Very few internet the extended maturity in 2024 fully extended.

We're still anticipating.

About 30%.

Pay off switch, which is frankly, a bit a bit high I think relative to where the market is but that is a function of.

Matthew Erdner: Thank you. The next question will be from Matthew Erdner at Jones Trading. Please go ahead. Hey, good morning, guys.

The portfolio being more season that span over the past.

Matthew Erdner: Thanks for taking the question. Do you know what percentage of the loan portfolio extends or is fully extended through 2024? Because the average weighted term is 13 months.

Several years as we've seen fewer payoffs so we've seen those move.

Further down.

Yes.

Further along their path on their business plan.

I think that the.

<unk> seen a lot more activity kind of.

James Peter Flynn: So just what's your expectation for payoffs this year? Unknown Speaker, Very few, and Zach, you can pull that while I'm talking, very few are at the extended maturity in 2024, fully extended. I mean, we're still anticipating about 30%, you know, several years as we've seen fewer payoffs. So we've seen loans move further down. We think we're going to be at, you know, that number 30% is kind of, it was kind of a normal number from, you know, 16, 17 through 2020 plus, some years even higher. So we do think we're going to end up in around that percentage.

Neutral or modest caching refinancing or per financing in the market overall and so we've.

We think we're going to be at.

That number 30% is kind of what was kind of a normal number for me.

16, 17 through 2020 plus.

As even higher.

So we do think we're going to end up.

In and around that.

Percentage, but again I think the reason is less about in the past it was kind of assets.

Basically being slipped into a new sale or new order because values will go so much.

So much higher so quickly.

I would say here, we are in an environment where.

A lot of a lot of owners are either looking to sell.

Youll recover some equity or to cash in refi, because they're they're relative optimism on.

James Peter Flynn: But again, I think the reason is less about in the past, it was kind of an asset basically being flipped into a new sale or a new owner because values were going so much, going so much higher so quickly. I think here we're in an environment where a lot of owners are either looking to sell at, you know, recover some equity or do a cash-in refi because, you know, their relative optimism about, you know, significant rate drops has become, and so there's a little bit more of a settling into the current environment. Zach Halpern, I don't know if you have this.

Significant rate jobs has become muted and so theres a little bit more of a settling into the current environment.

That account for and I don't know if you have that.

Yes.

Thank you.

Yes, I can jump in with a little context there.

We do have one asset.

He is near its.

Final maturity.

This is an asset that we previously addressed on the call.

I assume that you guys have access to.

CRA, Fiona datasets and such as you review those youll see that.

Zachary Halpern: Yeah, I can hear that. Yeah, I can jump in with a little context there. We do have one asset that is near its final maturity. This is an asset that we previously addressed on the call. I assume that you guys have access to a series of data sheets and such, you know, and as you review those, you would see that that asset has received a substantial paydown.

<unk> has received a substantial pay down.

And so we do expect that effort to refinance near term.

Aside from that we don't have.

Hey assets.

In that have their final maturity in 2024.

Keep in mind that.

Yes.

Past initial maturities or upcoming maturities. There are also extension fees, if the borrowers choose to extent of which limit trustful.

Zachary Halpern: And so we do expect that asset to refinance near term. Aside from that, we don't have any assets that have their final maturity in 2024. Keep in mind that, you know, have initial maturities or upcoming maturities. There are also extension fees if the borrowers choose to extend, of which Lument Finance Trust will benefit from that as well.

Benefit from that as well.

Okay.

Awesome. Thank you guys.

Thank you.

Next question will be from Stephen laws of Raymond James. Please go ahead.

Hi, Thanks for taking my questions. This is Clare Hall appeal on for Stephen laws.

Could you please talk about your new investment pipeline and the overall competitive landscape.

Claire Halapio: Thank you, guys. Thank you. The next question will be from Stephen Laws at Raymond James. Please go ahead. Hi, thanks for taking my questions. This is Claire Halapio on behalf of Stephen Laws.

And what where credit spreads on the new investments this quarter and how do you see credit spreads on your investments trending over the course of this year. Thanks.

Yeah, I'll, let Dan.

Give us some color I'll just.

James Peter Flynn: First, could you please talk about your new investment pipeline and the overall competitive landscape? And what were the credit spreads on the new investments this quarter? And how do you see credit spreads on new investments trending over the course of this year? Thank you. Yeah, I'll let Zach give some color on the specifics of that. Look, we've certainly seen an uptick in assets under review in recent months. Unknown Speaker 0, You know, they've been pretty wide, but you know, they've stayed, I'd say, roughly in the 300s. Unknown Speaker Depending on the location, you might get something closer to 400.

The specifics of that look we've seen it we've certainly seen an uptick in the recent months of assets under review.

Credit spreads.

They've been pretty wide, but they've stayed I'd say roughly in the three hundreds.

Depending on the location maybe you get.

Closer to 400.

I don't expect significant movement there.

That's probably about where we were.

We end up.

You're seeing some lower spreads for low levered.

Hi, Hi.

Quality sponsors, but thats kind of where it's been.

So I do see I think there is pick up for a couple of reasons one.

We have seen some sellers.

James Peter Flynn: I don't expect significant movement there; I think that's probably about where we end up. You've seen some lower spreads for low-leveraged, you know, high, significantly below, you know, any, any normal environment, forget about just 2021. We've also seen these recapitalization options where, Bridge Loans, whether ours or in more cases from other lenders or other places where either a new borrower or current borrower is coming in with capital to complete a business plan at what are now the current levels or new levels.

Needing to two.

Get out of their assets and so that's created some transaction momentum there still.

Significantly below.

Any any normal environment forget about just 2021.

We've also seen these.

These recap financing.

Available options were.

Bridge loans, where they are.

More cases for some other lenders or other places where either a new borrower borrowers coming in with capital.

To complete our business plan.

What are the now the current levels or new levels. So.

James Peter Flynn: So we have seen, anecdotally, some new opportunities. We're not near the point where I would say it's robust like it was a few years ago, but encouraging. Zach, would you like to add a little to that?

We have seen anecdotally some some new opportunities.

Near to the point, where I would say, it's robust, but it was a few years ago, but encouraging.

Jack you want to add.

Little to that.

Zachary Halpern: Sure. I mean, if I had to speak in generalizations about multifamily spreads, I would say in 2023, perhaps the wide multifamily bridge will be somewhere around 425 over SOFR. I think, as Jim Flynn alluded to, spreads are trending tighter. I think that baseline is somewhere between 350 and 375 over SOFR right now. I think we've all seen the graphs of multifamily acquisition activity on the property

Sure.

If I had to.

Speaking generalizations in multifamily spreads I would say in 2020 race tracks the wide.

Multifamily bridge with somewhere around 425 over sofa.

I think as Jim alluded to spreads are have trended tighter.

I think that baseline is somewhere between $3 $53 75 over so for right now.

I think we've all seen the graphs of multifamily acquisition activity on the property side, and we know that that remains substantially muted.

Zachary Halpern: And we know that that remains substantially muted, which has caused not a lot of supply and still enough lenders to keep the demand for loans elevated. I think that we will settle into this. Economics are still in line despite tighter spreads.

Which has caused a lot of supply.

And still enough lenders.

To keep the demand for loans escalated.

I think that we settle into this.

Spread range here keep in mind that things like warehouse lines CRE CLO spreads have also tightened in sympathy.

Claire Halapio: Great, thank you. And then, given the positive resolutions of the two five-rated loans since year end, how do you think about your CESO reserve? Do you think there'll be a reserve release in Q1?

And so.

Economics are still in mind, despite tighter spreads.

Great. Thank you.

And then my last question is just given the positive resolution of the two five rated loans with year end. How do you think about your seats or is there do you think there'll be a reserve release in Q1.

Unknown Speaker: Thanks. Unknown Speaker Yeah, I mean, from where you're gonna, you're gonna have a couple of things there. Jim talked about what the macroeconomic environment that we're going to see, right? You know, so we have a one year forecast period there. And the reserve is going to be driven by, by, by, by what we see there. Yeah, I think from the positive resolutions. You know, our feeling is there'll be some stability in our risk rating, so that shouldn't be a problem.

Yeah.

So Greg I mean, yes, I mean, youre going to have a couple of things there Jim talked about what is the macroeconomic environment that we're gonna see right. So we have a one year forecast period, there and the reserves are going to be driven by by by by what we see there.

Yeah, I think from the positive resolutions.

Our feeling is there'll be some stability in our risk ratings.

Unknown Speaker: I think it's gonna be driven more by macroeconomics. Interviews are about that and what. Did you have any further questions? No, that's it.

So that that shouldn't be a driver I think it is going to be driven more by the macroeconomic environment and what your views are of that and what.

Reality ends up being.

Please do you have any further questions.

No that's it thank you.

Christopher Whitbread Patrick Nolan: Thank you. Thank you. Once again, as a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. And your next question will be from Chris Nolan at Leidenberg Stallman. Please go ahead.

Thank you once again as a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.

And your next question will be from Chris Nolan at Ladenburg Thalmann. Please go ahead.

Zachary Halpern: Hi, given your comments in terms of landlords having narrower operating margins, can you give any color in terms of where the interest coverage is for your portfolio? Unknown Speaker, Let me try to step into that one.

Hi, given your comments in terms of landlords having narrower.

Operating margins can you give any color in terms of where the interest coverage is for your portfolio.

In the fourth quarter, where it is compared to where it might been in previous quarters.

Zachary Halpern: Keep in mind that all of our loans, well, the vast majority of our loans do have interest rate caps, meaning that the borrowers have, It's so far, increased, and the majority of those capturing money. Fourth quarter versus third quarter, interest coverage really hasn't changed all that much. So it's been pretty consistent. If I look at that yield, which is an easier sort of metric to speak to that y'all have been fairly consistent. These loans are generally transitional bridge loans. And so, yes, margins are, you know. Apple. All else equal, tighter.

Let me try to step into that one.

Keep in mind that all of our loans well the vast majority of our loans do you have interest rate caps, meaning that the borrowers have.

A lot of options.

So for.

Right.

The majority of those capturing the money.

Fourth quarter versus third quarter.

Interest coverage really hasnt changed all that much sector has been pretty consistent.

Sure.

If I look at that yield which is.

Then easier certain metrics to speak to that.

Ben.

Fairly consistent.

These loans are generally transitional bridge loans and so.

Yes margins are.

Yes.

Apple all else equal tighter however, these loans.

Are getting towards the point of there.

Zachary Halpern: However, these loans are getting towards the point of their business plans, where, Unknown Speaker You know, rents are picking up, and perhaps occupancies may be increasing as these units are leasing up post-renovation. And so I wouldn't say that we're seeing systematic stress quarter over quarter. Although, you know, just like any portfolio, there are heterogeneous things that pop up here and there. This is Jim Briggs.

There.

This is plans.

Where.

Rents are picking up and perhaps occupancies.

May be increasing as these units are leasing up post renovation.

And so I wouldn't say that we're seeing systematic stress quarter over quarter.

Although.

Like any portfolio there are.

Genius.

Things that pop up here.

This system Briggs I'll, just add on to that Jack mentioned interest rate caps, we disclosed in our MD&A at 12, 31, 97, 7% performing loans had interest rate caps and the weighted average strike was two 5%.

James Anthony Briggs: I'll just add on to that. Zach mentioned interest rate caps. We disclose in our MD&A at 1231 that 97.7% of performing loans had interest rate caps and the way that average strike. 2 12.

James Anthony Briggs: Okay, and then you. No, no, please go ahead. I was gonna go to another question, but go ahead. Well, no, I was just gonna say, I think Zach makes a good point that many of these assets have obviously gone through this stressful period that we've seen with rates increasing that was preceded with, you know, every other cost increasing. But many of them were in the middle or early parts of their business plan. So even those that are

Okay and then.

Yes.

Steve.

No no. Please go ahead I was going to go to another question, but go ahead.

Oh, no I was just going to say I think exactly what's a good point that many of these assets.

Obviously gone through this stressful period that we've seen with rates increasing that was preceded with.

Every other cost increasing.

But many of them were in the middle or early parts of their business plan. So even those that are.

It really is an asset by asset look meaning some assets are truly still.

James Peter Flynn: It really is an asset-by-asset look, meaning some assets are truly still, you know... Much of the portfolio is still positively progressing in terms of debt yield, in terms of coverage, but most are not progressing at the original rate of their business plan. It doesn't mean that They're not having success in many cases, but it does mean that the success, the increase in NOI, is less than anticipated. But, you know, from a business standpoint, it still makes sense. You know, the dollars being expended to increase the NOI are still accretive to us as lenders and to the sponsors. So, it is a difficult question to answer as a whole portfolio because you really have to individually look at each asset and determine, you know, is this asset just deteriorating in performance, which, in most cases, the answer is no.

Turning units, including including new tenants in and so.

<unk>.

Much of the portfolio is still positively.

Progressing in terms of debt yield in terms of coverage.

But most are not progressing at the.

At the original rate of.

Their business plan it doesn't mean that they're not having success in many cases, but it does mean.

That's the success is.

The increase in NOI is less than anticipated, but from a business standpoint, it still makes sense.

The dollars being expanded to increase the NOI are still accretive to us as lender and for the sponsors so.

It is it is a difficult question to answer as as the whole portfolio because you really have to individually look at each asset and determine.

And the fact that just deteriorating in performance, which in most cases the answer is no.

Christopher Whitbread Patrick Nolan: But you know, are they, how are they executing on the business? Right. Okay, I'm turning to capital management. Your stock is trading roughly 63% of your book value. Any considerations in terms of buybacks? And if not, at what point would you consider buying?

But are they how are they are executing on their business plan.

Alright, Okay, turning to capital management your stock is trading roughly 63% of your book value and considerations in terms of buybacks and if not at what point would you consider buybacks.

James Peter Flynn: So buybacks are something we do discuss with the board, you know, and there's, there's no kind of, if we're at this level, we would, we would do it. We do think that, you know, our stock trades at a discount to its value, particularly relative to the peers and to the discussion around buybacks has been one is that we're already undersized and underscale and reducing our flow even further. What impact would that have on the long term on the stock price, and also How Does That Impact Our Desire, which is to actually find ways to expand the common equity base? So that's always the push and pull; there isn't a... There isn't a specific answer that says, you know, if we're at 50% of book, we're going to do a buyback. But in terms of where our stock trades and relative to management's view and the board's view of value, it's a topic of discussion, broadly, every quarter. Well, on that point...

So buybacks are something we need to discuss with the board.

There's no kind of if were at this level, we would we would we.

We would do it we do think that.

You know our stock trades.

At a discount to fair value, particularly relative to the peers and to the.

Yes.

The full recovery of our of our portfolio.

The challenge that we've always had with.

With discussion around buyback has been.

One is we're already.

Undersized under scale and reduces our close even further.

What impact would that have on.

<unk>.

Long term on the stock price.

And also how does that impact our desire which is.

Two actually.

Find ways to expand the common equity base.

So those are always.

Push and pull there isn't.

There isn't a.

Specific answer that says we're at 50% of book, we're going to do a buyback.

But in terms of where our stock trades relative to two management for you and the board's view of value, it's a topic of discussion.

<unk>.

Every quarter.

Well on the point.

Christopher Whitbread Patrick Nolan: This talk is really... and Nose Dive, ever since you did the right scale, I totally get that. Unknown Speaker 0, to buy back your stock. I think that the board and I have discussed those alternatives and options and will continue to do so.

Your stock has really taken a nosedive ever since you did the rights offering.

A couple of years ago and.

I'm just trying to think in terms of your under scale I totally get that.

At some point it makes more sense just to buy back your stock as opposed to invest again.

Our new multifamily loans.

I think that certainly the board and we discuss those.

Those alternatives and options.

We will continue to do so.

James Peter Flynn: Thank you. And at this time, Mr. Flynn, we have no other questions registered. Please proceed. I want to thank you all for your time today and interest and look forward to speaking again next quarter. Thank you all. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.

Okay. That's it for me thank you.

Thank you and at this time Mr. Flynn, we have no other questions registered please proceed.

Okay I want to thank you all for your time today and interest and look forward.

To speaking again next quarter.

Thank you.

Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines enjoy the rest of your day.

Yes.

Okay.

Okay.

[music].