Q1 2024 Apollo Commercial Real Estate Finance Inc Earnings Call
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Operator: I'd like to remind everyone that today's call and webcasts are being recorded. Please note that they are the property of Apollo Commercial Real Estate Finance Inc. and that any unauthorized broadcast in any form is strictly prohibited.
I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo commercial real estate Finance, Inc, and that any unauthorized broadcast in any form is strictly prohibited information about the audio replay of this call is available in our earnings press release.
Operator: Information about the audio replay of this call is available in our earnings press release. I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections.
Operator: I'd also like to call your attention to the customary safe Harbor disclosure in our press release regarding forward looking statements today's conference call and webcast may include forward looking statements and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections in them.
Operator: In addition, we will be discussing certain non-GAAP measures on this call, which management believes are relevant to assessing the company's financial performance. These measures are reconciled to GAAP figures in our earnings presentation, which is available in the Stockholders section of our website. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. To obtain copies of our latest filings, please visit our website at www.apollocreft.com or call us at 212-515-3200. At this time, I'd like to turn the call over to the company's Chief Executive Officer, Stuart Rothstein.
Operator: We will be discussing certain non-GAAP measures on this call, which management believes are relevant to assessing the company's financial performance. These measures are reconciled to GAAP figures in our earnings presentation, which is available in our in the stockholders' section of our website, we do not undertake any obligation to update our forward looking statements or projections.
Operator: Unless required by law to obtain copies of our latest SEC filings. Please visit our website at www Dot Apollo crafts dot com or call us at 2125153200 at this time I'd like to turn the call over to the company's Chief Executive Officer Stuart Rothstein.
Stuart A. Rothstein: Thank you, Operator, and good morning, and thank you to those of you joining us this morning on the Apollo Commercial Real Estate Finance first quarter 2024 earnings call. As usual, I am joined by Scott Weiner, our Chief Investment Officer, and Anastasia Mironova, our Chief Financial Officer.
Stuart A. Rothstein: Thank you operator, and good morning, and thank you to those of you joining us. This morning on the Apollo commercial real estate Finance first quarter 2024 earnings call as usual I am joined by Scott Weiner, Our Chief investment Officer.
Stuart A. Rothstein: Anesthesia meron of our our Chief Financial Officer.
Stuart A. Rothstein: In the first quarter, we began to see signs of life in the commercial real estate market with transaction volumes ticking up. The increase in deal flow is supported by a combination of significant dry powder in existing funds that needs to be put to work, more borrowers having reached a point where they must deal with pending loan maturities, and an increase in consensus around property-level valuations. In addition to increased transaction activity, operating fundamentals remain stable to positive across most property types, supported by the continued strength in the economy, with the one notable exception being office properties in certain markets.
Stuart A. Rothstein: In the first quarter, we began to see signs of life in the commercial real estate market with transaction volumes picking up.
Stuart A. Rothstein: The increase in deal flow is supported by a combination of significant dry powder and existing funds that needs to be put to work more borrowers having reached a point, where they must deal with pending loan maturities and an increase in consensus around property level evaluations.
Stuart A. Rothstein: In addition to increased transaction activity operating fundamentals remained stable to positive across most property types supported by the continued strength in the economy with the one notable exception being office properties in certain markets.
Stuart A. Rothstein: This operating environment continues to benefit ARI, and its floating rate loan portfolio produced another quarter in which ARI's distributable earnings covered the dividends. With the exception of the loans secured by the Steinway Building, which I will address later in my remarks, ARI's portfolio continues to perform well. Notably, there has been a pickup in actual and indicated repayment activity.
Stuart A. Rothstein: This operating environment continues to benefit Rai and its floating rate loan portfolio produced another quarter in which our eyes to trip distributable earnings covered the dividend.
Stuart A. Rothstein: With the exception of the loans secured by the Steinway building, which I will address later in my remarks, Ari's portfolio continues to perform well, notably there has been a pick up in actual and indicated repayment activity during the quarter <unk> received $176 million of total repayments.
Stuart A. Rothstein: During the quarter, ARI received $176 million in total repayments, and the current forecast model is tracking another $1 billion of expected repayments over the remainder of the year. Given the increased repayment activity, we anticipate ARI will be more active in deploying capital during the year, and there is an active pipeline of potential transactions. In determining how to deploy available capital, we will continue to assess both potential new investment transactions as well as opportunities to repurchase pieces of ARI's capital structure.
Stuart A. Rothstein: And the current forecast model is tracking another $1 billion of expected repayments over the remainder of the year.
Stuart A. Rothstein: Given the increased repayment activity, we anticipate <unk> will be more active in deploying capital during the year and there is an active pipeline of potential transactions and determining how to deploy available capital. We will continue to a SaaS both potential new investment transactions as well as opera.
Stuart A. Rothstein: <unk> to repurchase pieces of Ari's capital structure.
Stuart A. Rothstein: Turning now to Steinway, during the quarter, we recorded a $142 million specific CECL allowance on a subordinate loan secured by the property, reflecting both the impact of a reduction in pricing expectations and a delay in timing with respect to the sale of the remaining unit. As a result of the increased reserve, ARI's net exposure on the asset, comprised of a portion of the senior loan and two mezzanine loans, was reduced from approximately $594 million at year-end 2023 to $457 million at quarter-end.
Stuart A. Rothstein: Turning now to sign way during the quarter, we recorded a $142 million specific seasonal allowance on a subordinate loan secured by the property, reflecting both the impact of a reduction in pricing expectations.
Stuart A. Rothstein: A delay in timing with respect to the sale of the remaining units.
Stuart A. Rothstein: As a result of the increased reserve Ari's net exposure on the asset comprised of a portion of the senior loan and two mezzanine loans was reduced from approximately $594 million at year end 2023 to 457 million at quarter end.
Stuart A. Rothstein: Subsequent to Quarter End, in an effort to further reduce ARI's net exposure, the property was refinanced with a new senior loan provided by a third party, thereby reducing ARI's net exposure by $108 million. Post the refinancing, ARI's net exposure is now comprised of approximately $357 million of mezzanine loans subordinate to a $200 million senior loan held by a third party. Before I turn the call over to Anastasia, I want to highlight that ARI has now paid a $0.35 dividend per share of common stock for 16 consecutive quarters, and we believe ARI's floating rate portfolio will continue producing distributable earnings sufficient to cover the quarterly distribution for the remainder of 2024. With that, I will turn the call over to Anastasia to review ARI's financial results for the quarter.
Stuart A. Rothstein: Subsequent to quarter end in an effort to further reduce <unk> net exposure. The property was refinanced with a new senior loan provided by a third party, thereby reducing ari's net exposure by $108 million post the refinancing Ari's net exposure is now comprised of approximately three <unk>.
Anastasia: <unk> $57 million of mezzanine loans subordinate to a $200 million senior loan held by a third party.
Stuart A. Rothstein: Before I turn the call over to Anastasia I wanted to highlight that <unk> has now paid a <unk> 35 dividend per share of common stock for 16 consecutive quarters, and we believe ari's floating rate portfolio will continue producing distributable earnings sufficient to cover the quarterly distribution for the remainder of <unk>.
Stuart A. Rothstein: 24 with that I will turn the call over to Anastasia to review <unk> financial results for the quarter.
Anastasia Mironova: Thank you, Stuart, and good morning, everyone. In the first quarter, ARI reported distributable earnings of $0.35 per share of common stock. Gap net loss attributable to common stockholders was $108 million or $0.76 per diluted share of common stock, reflecting the $142 million CECL allowance recorded for the subordinate loan secured by 111 West 57th Street, also known as the Steinway Building. As a reminder, this loan was already in non-accrual status, and the additional allowance does not impact distributable earnings.
Anastasia: Thank you Stuart and good morning, everyone.
Anastasia Mironova: In the first quarter AMRI reported distributable earnings of <unk> 35 per share of common stock.
Anastasia Mironova: GAAP net loss attributable to common stockholders was $108 million or 76 cents per diluted share of common stock.
Anastasia Mironova: Reflecting the 142 million recorded for the subordinate loan secured by 111 with 57 Street.
Anastasia Mironova: When you sign with duty.
Anastasia Mironova: As a reminder, this loan was already on non accrual status and the additional allowance does not impact distributable earnings.
Anastasia Mironova: The Weighted Average Risk Rating of the portfolio was 3.0, and other than $111.57 straight allowance, there was no additional specific CECL allowance taken during the quarter. The general CECL allowance stood at 42 basis points of the loan portfolio's amortized cost at March 31, a six basis points increase as compared to the end of 2023. This change was primarily driven by an increase in the historical loss rate which we obtained from the TRAP database for the purposes of determining the general CECL allowance for our portfolio.
Anastasia Mironova: The weighted average risk rating the portfolio was three <unk>.
Anastasia Mironova: And other than 111, West 57th Street, and lottery clear with no additional specifics diesel, allowing taken during the quarter.
Anastasia Mironova: The January with visa allowance stood at 42 basis points over the loan portfolio amortized cost at March 31st.
Anastasia Mironova: Basis points increase as compared to the end of 2023.
Anastasia Mironova: This change was primarily driven by an increase in the historical loss rate, which you have gained from trip database for the purposes of determining generally seek to allowance for outbreaks Lillian.
Anastasia Mironova: The increase was also attributable to extended expected loan pay-off dates. ARI Portfolio ended the quarter with a carrying value of $8.3 billion, with a weighted average and leveraged yield of 9.1%, 40 basis points higher than at the end of 2023.
Anastasia Mironova: The increase was also attributable to extended expected loan PLD.
Anastasia Mironova: <unk> ended the quarter with a carrying value of $8 3 billion with a weighted average unlevered yield of nine 1%.
Anastasia Mironova: 40 basis points higher than at the end of 2023.
Anastasia Mironova: During the quarter, we completed $322 million of add-on funding from previously closed loans, including $213 million funded for the UK POP transaction, which will close at the end of the Q4. As Stuart mentioned, we received $176 million of total repayments during the quarter. Subsequent to Quarter End, we received $135 million in proceeds from the sale of her first mortgage secured by a hotel in Honolulu to a third party at 99.5% of par.
Anastasia Mironova: During the quarter, we completed 322 million of Adam fundings from previously closed loans.
Anastasia Mironova: Including $213 million funded for the UK type transaction, which we closed at the end of Q4.
Anastasia Mironova: As Stuart mentioned, we received $176 million of total repayments during the quarter.
Anastasia Mironova: Subsequent to quarter end, we received 135 million in proceeds from the sale of for first mortgage secured by a hotel and Honolulu.
Anastasia Mironova: Third party at 99, 5% of Scott.
Anastasia Mironova: With regard to real estate owned, the above-grade work continues for the multi-family development in Brooklyn, and both of the hotels generate positive cash flow for ARI. The classification of the Atlanta Hotel on the balance sheet was changed during the quarter from held for sale to held for investment due to the sale of the respective buyer no longer being probable. In conjunction with the reclassification, we recorded a catch-up depreciation of $3.6 million, representing the amount that would have been recorded had the asset remained a healthy investment throughout the whole period to date. As a reminder, depreciation expense does not impact our distributable earnings.
Anastasia Mironova: With regards to real estate owned the bomb grade work continues with the multifamily development in brewery and those are the hotels generated positive cash flow for AMRI.
Anastasia Mironova: The classification of the Atlanta Hotel on the balance sheet was changed during the quarter from held for sale to held for investment due to the sale of the prospective buyer no longer deemed probable.
Anastasia Mironova: In conjunction with reckless deification, we recorded a catch up depreciation.
Anastasia Mironova: <unk> 6 million, representing the amount that would have been recorded had the asset remainder held for investment throughout the whole period to date.
Anastasia Mironova: As a reminder, depreciation expense.
Anastasia Mironova: That impact our distributable earnings.
Anastasia Mironova: Moving to the right side of the balance sheet, during the quarter, ARI closed a new secured credit facility with Goldman Sachs in connection with the funding of the UK Pubs loan. The total capacity of the facility is 159 million.
Anastasia Mironova: Shifting to the right side of the balance sheet.
Anastasia Mironova: During the quarter closing new secured credit facility with Goldman Sachs in connection with the funding of the UK product alone.
Anastasia Mironova: The total capacity of this facility is $159 million.
Anastasia Mironova: We also amended and upsized our secured credit facility with ART, providing $114 million of additional capacity and amending the term of the facility to two years with an additional one-year extension option. Our debt-to-equity ratio at quarter end was 3.3 times. And as a reminder, we have no corporate debt maturities until May 2026. ARI is in compliance with all covenants with respect to our borrowing. Our book value per share, excluding general CECL reserves and depreciation, was $13.59 as compared to $14.73 at the end of Q4.
Anastasia Mironova: We also amended and Upsized, our secured credit facility with Atlas provide.
Anastasia Mironova: Provided 140 million of additional capacity and amendment the term of the facility to two years with an additional one year extension option.
Anastasia Mironova: Our debt to equity ratio at quarter end.
Anastasia Mironova: Three three times.
Anastasia Mironova: And as a reminder, we have no corporate debt maturities until May 2026.
Anastasia Mironova: And Ray is in compliance with all covenants with respect to our borrowing.
Anastasia Mironova: Yeah.
Anastasia Mironova: Our book value per share, excluding general reserves and depreciation was $13 59.
Anastasia Mironova: As compared to $14 73 at the end of Q4.
Anastasia Mironova: $1 of the decline is attributable to the specific CECL allowance on 111 West 57th Street, with the balance also reflecting $0.12 attributed to the vesting and delivery of restricted stock units and $0.07 reflecting the change in the general CECO allowance and depreciation.
Anastasia Mironova: One dollar of the decline is attributable to the specific seasonal island 111 with 57th Street.
Anastasia Mironova: With the balance also reflects in 12 cents attributed to the zest and delivery of restricted stock units and seven reflecting the change in the general seasonal allowance in depreciation.
Operator: And with that, we'd like to open the line for questions. Operator, please go ahead. Thank you.
Speaker Change: And with that we'd like to open the lines for questions.
Speaker Change: Operator, Please go ahead.
Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions. Our first question comes from Jade Rahmani with KVW. You may proceed.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Operator: One moment for questions.
Operator: Okay.
Operator: Our first question comes from Jade Rahmani with K VW you May proceed.
Jade Joseph Rahmani: As you evaluate the outlook, could you give an overview or a summary of, you know, your target returns at this point, if those have changed at all, you know, underwriting criteria? Seems like there's probably an opportunity to hit pretty consistent returns to the past with, you know, lower LTVs, and maybe finance some in-place cash flow, but if you could just give an overview of that, that would be helpful.
Jade Joseph Rahmani: Thank you very much.
Jade Joseph Rahmani: As you evaluate the outlook could you give an overview or summary of.
Jade Joseph Rahmani: Your target returns at this point, if those have changed at all.
Jade Joseph Rahmani: Underwriting criteria it seems like there's probably an opportunity to hit.
Jade Joseph Rahmani: Pretty consistent returns to the past with lower Ltvs maybe.
Jade Joseph Rahmani: Maybe finance some in place cash flow.
Jade Joseph Rahmani: But if you could just give an overview on that that'd be helpful.
Stuart A. Rothstein: Yeah, hey, Jade. Look, I think from our perspective to where you sort of implied in your question, the business model still works in that high level. I think we can deploy our equity in low to mid-teens returns, and I agree with your premise that we could probably do that at lower LTVs today, which for us are probably high 50s, low 60s today as we think about deploying new capital at, you know, again, super high level spreads above SOFR in the U.S. at, call it, something with a three handle and finance, as we've done historically at, you know, again, ballpark 70% to 80% against our position at something today, call it.., high ones.
Speaker Change: Yeah, Hey, Jade look I think from our perspective to where you sort of implied in your question the business the business model still works and that high level I think we can deploy our equity.
Stuart A. Rothstein: Low to mid teens returns.
Stuart A. Rothstein: And I agree with your premise that we could probably do that at lower Ltvs today, which for us are probably high <unk> low <unk> today, as we think about deploying new capital at.
Stuart A. Rothstein: Again Super high level.
Stuart A. Rothstein: Spreads above so for in the U S at call it something with a three handle.
Stuart A. Rothstein: And finance.
Stuart A. Rothstein: As we've done historically at again ballpark, 70% to 80% against our position.
Stuart A. Rothstein: At something today call it.
Stuart A. Rothstein: So again, the ROEs work as we're deploying capital; we're definitely seeing things in the market that are interesting from a deployment perspective. And as I indicated in my remarks, I think there will be things for us to do with our capital as it comes back from repayment, but as we're thinking about deploying capital, we will look both at new transactions as well as our own capital structure, which may, from time to time, offer an interesting ROE as well.
Stuart A. Rothstein: Hi ones.
Stuart A. Rothstein: So again the ROE work as we are deploying capital we're definitely seeing things in the market that are interesting from a deployment perspective and as I indicated.
Stuart A. Rothstein: In my remarks, I think there will be things for us to deal with our capital as it comes back from repayment, but as we're thinking about deploying capital. We will look both at new transactions as well as our own capital structure that may from time to time offer an interesting Roe.
Stuart A. Rothstein: As well.
Stuart A. Rothstein: Thanks. Can you discuss expected credit outcomes on upcoming loan maturities? For example, the Hawaii hotel loan, I think, had a fully extended maturity in April. The decision was made to sell that at close to par. How are you thinking about upcoming maturities? I mean, look, as I indicated in my
Speaker Change: Can you discuss.
Stuart A. Rothstein: Back to credit outcomes on upcoming loan maturities for example, the Hawaii Hotel loan I think catapult extended maturity in April the decision was made to sell that at close to par how are you thinking about.
Stuart A. Rothstein: Upcoming maturities.
Stuart A. Rothstein: I mean, look, as I indicated in my remarks, we're expecting about a billion dollars worth of repayments this year. And when I say expect, that is based on sort of ongoing dialogue with borrowers who have reached out and have indicated either through refinance or sale that they expect to pay us off this year. So I would say at a high level that we expect, in a positive way, much of what takes place this year for things that we expect to mature or, certainly, are within a repayment window to actually repay us.
Stuart A. Rothstein: As I indicated in my remarks, we're expecting about $1 billion worth of repayments this year and when I say expecting.
Stuart A. Rothstein: That is based on sort of ongoing dialogue with borrowers who have reached out and have indicated either through refinance or sale. They expect to pay us off this year. So I would say high level, we expect in a positive way.
Stuart A. Rothstein: Much of what takes place this year for things that we expected to mature or certainly are within a repayment window to actually repay us.
Stuart A. Rothstein: So, you know, again, based on the first quarter, I would say the overall tone has been somewhat more optimistic in terms of just overall transaction activity and people seeing a path in the financing markets to just repay us at loan maturity.
Stuart A. Rothstein: So.
Stuart A. Rothstein: Again based on the first quarter I would say the overall tone has been somewhat more optimistic in terms of just overall transaction activity and people seeing a path and.
Stuart A. Rothstein: In the financing markets suggest repay us at loan maturity.
Stuart A. Rothstein: Sure.
Speaker Change: Thank you very much.
Operator: Thank you. And as a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. One moment for questions. Our next question comes from Rick Shane with J.P. Morgan. You may proceed.
Stuart A. Rothstein: Sure.
Stuart A. Rothstein: Thank you and as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced one moment for questions.
Operator: Our next question comes from Rick Rick Shane with Jpmorgan you May proceed.
Richard Barry Shane: Good morning, guys. Thanks for taking my question. Can you just tell us, in dollars and on a per share basis, the drag from non-accruals? I'm a little bit confused when I compare the weighted average cash coupon in the Q, which is 8.4%, and that zeroes out the non-accruals, and slide six, which has a weighted average unlevered all-in yield on the loan portfolio of 6.5%.
Speaker Change: Hi, Good morning, guys. Thanks for taking my question.
Richard Barry Shane: Can you just tell us.
Richard Barry Shane: In dollars and on a per share basis the draw.
Richard Barry Shane: Drag from non accruals I'm, a little bit confused when I compare.
Richard Barry Shane: Weighted average cash coupon in the Q, which is eight 4%.
Richard Barry Shane: And that zeroes, the non accruals and <unk>.
Richard Barry Shane: Slide six that has a.
Richard Barry Shane: Weighted average unlevered all in yield on the loan portfolio of six 5%.
Stuart A. Rothstein: Look, I think at a high level, Rick, the way we think about it is sort of net of reserves there. 550 to 600 million dollars worth of loans that are on non-accrual at the end of the quarter. Some of that is financed, even though it's on non-accrual, so on an equity basis. It's about $375 million of net equity that is on non-accrual. And then that amount was reduced again in April in light of what I referenced with respect to the Steinway transaction. If it's easier post call just for you and Anastasia to go through, sort of the details and the math, happy to do that as well.
Speaker Change: Look I think at a high level Rick.
Stuart A. Rothstein: The way, we think about it is.
Stuart A. Rothstein: Sort of net of reserves theirs.
Stuart A. Rothstein: $550 to $600 million worth of loans that are on non accrual at the end of the quarter. Some of that is financed even though its on non accrual. So on an equity basis. It's about 375 ish million of net equity that is on non accrual.
Speaker Change: And then that amount.
Stuart A. Rothstein: Was reduced again.
Stuart A. Rothstein: In April in light of what I referenced with respect to.
Stuart A. Rothstein: The Steinway transaction, if it's easier post call just first sort of year and Anastasia to go through.
Speaker Change: The details and the mass happy to do that as well.
Richard Barry Shane: Perfect. And again, what am I missing connecting the 6.5% all-in yield on slide 6 with the 8.4% weighted average cash coupon, which, like I said, I would have thought the difference was non-accruals, but the footnote on page 12 of the Q says that non-accruals are reported at a zero coupon.
Richard Barry Shane: Perfect.
Richard Barry Shane: And again.
Richard Barry Shane: What am I missing connecting a six 5% all in yield on slide six with the eight 4%.
Richard Barry Shane: <unk> average cash coupon, which like I said I would have thought the difference was non accruals, but the footnote on page 12 the Q.
Richard Barry Shane: Says that non accruals are recorded at a zero coupon.
Stuart A. Rothstein: Yeah, we can take it offline and walk you through the match there. Okay, terrific. Thank you guys.
Speaker Change: Yes, we can take it offline.
Speaker Change: And walk you through the math there.
Operator: Okay. Terrific.
Speaker Change: Terrific. Thank you guys.
Stuart A. Rothstein: Sure.
Speaker Change: Thank you.
Operator: One moment for questions. Our next question comes from Jade Rahmani with KBW. You may proceed.
Speaker Change: One moment for questions.
Operator: Our next question comes from Jade Rahmani with K VW you May proceed.
Jade Joseph Rahmani: Thanks for taking the follow up on 111 West 57. Could you give a rough number of what the quantity of remaining units is?
Jade Joseph Rahmani: Thanks for taking the follow up.
Jade Joseph Rahmani: 111, West 57 did you give a rough number of what the quantity of remaining units are.
Stuart A. Rothstein: If you think about what is under contract or out for signature at this point, Jade, there's still plus or minus 25 units that still need to be sold, so a little bit less than half the project.
Jade Joseph Rahmani: A little if you think about what is under contract or out for signature at this point Jade.
Stuart A. Rothstein: They're still.
Jade: Pleasure, plus or minus 25 units that still need to be sold so a little bit a little bit less than half the project.
Stuart A. Rothstein: And how many units are under contract?
Stuart A. Rothstein: And how many units are under contract.
Stuart A. Rothstein: Today, between what's under contract and what we expect to sign, there are about a handful—call it five or six.
Stuart A. Rothstein: Today between what's under contract and what we expect to sign.
Stuart A. Rothstein: About a handful of call it five or six.
Jade Joseph Rahmani: Okay, so the total that there would generate proceeds on would be probably 30, 31 units?
Jade: Okay. So total.
Jade Joseph Rahmani: That there would generate proceeds on would be probably 30% 31 units.
Stuart A. Rothstein: Post what's, say that again, post what's in the process right now, we'd get, you know, you'd have sort of low 30s sold, and you'd still have 26, 27 still to be sold.
Jade Joseph Rahmani: Okay.
Jade Joseph Rahmani: Post.
Stuart A. Rothstein: Say that again post what's in process right now we've got you know you'd have sort of low 30 sold and you would still have 26 27 still to be sold.
Jade Joseph Rahmani: Yeah, I was just looking at expected net proceeds and... I was getting to around $500 million, and I believe there's more indebtedness than that outstanding.
Stuart A. Rothstein: Okay.
Jade Joseph Rahmani: Yes, I was just looking at expected net proceeds and.
Jade Joseph Rahmani: I was getting to around $500 million and I believe there is more indebtedness and that outstanding and then there is also a discounting factor I might be using pricing thats too low I know that there is quite a range on the units but.
Stuart A. Rothstein: And then there's also a discounting factor. I might be using, you know, pricing that's too low. I know that there's quite a range of units, but are those, you know, rough numbers reasonable?
Stuart A. Rothstein: Are those you know rough numbers.
Stuart A. Rothstein: I think you're on the light side, and from our perspective, I would say we still view there being nominal value over and above. So, this is sort of your estimate of what Debt Outstanding is today, and that's a combination of the, you know, to-be-sold condos. They're also a retail condo that has some value, and then there's also some other cash flows that will come our way as well, but, you know, I would say at this point, right, in light of where we've got it marked, which is that there is a $200 million senior loan, refinance. We're now at 357 MES loans, so call it 500.
Stuart A. Rothstein: Reasonable.
Speaker Change: I think you are light and from our perspective, I would say, we still view their big nominal value over and above.
Stuart A. Rothstein: Sort of your estimate of what debt outstanding is today and that's a combination of the.
Stuart A. Rothstein: To be sold the condos there also a retail condo that has some value and there is also.
Stuart A. Rothstein: Some other cash flows that will come our way as well but.
Stuart A. Rothstein: I would say at this point.
Stuart A. Rothstein: In light of where we've got it marked which is there is a $200 million senior loan and then as I indicated on our call post the <unk>.
Stuart A. Rothstein: Refinance we're now at $3 57 of Mezz loans, so call. It 500.
Stuart A. Rothstein: $60 million in round numbers in total debt for us to get, you know, we're the last dollar of debt, and for us to get paid back, we see a nominal value in excess of that today, including some discounting on units.
Stuart A. Rothstein: $60 million in round numbers in total debt for us to get whereas last dollar of debt and for us to get paid back we see nominal value.
Stuart A. Rothstein: Excess of that today, including some discounting on units to be sold.
Jade Joseph Rahmani: Okay, fair enough. And then on the, you know, office portfolio, we are still seeing a lot of pressure on the office sector. I think you noted that in your opening remarks, but definitely, the liability structure of the lender is a big driver of how much, you know, wiggle room there is for modifications and flexibility to work with borrowers. So what are you seeing in the office portfolio?
Stuart A. Rothstein: Okay.
Jade Joseph Rahmani: Fair enough and then on the office portfolio.
Jade Joseph Rahmani: Still seeing a lot of pressure in the office sector. I think you noted that in your opening remarks.
Jade Joseph Rahmani: But definitely the liability structure of the lender is.
Jade Joseph Rahmani: There is a big driver of how much.
Jade Joseph Rahmani: Wiggle room, there is and modifications and flexibility to work with borrowers.
Stuart A. Rothstein: I know the predominance is also in Europe, but if you could give a comment there, that'd be helpful.
Jade Joseph Rahmani: So what are you seeing in the office portfolio I know the predominance also is in Europe, but if you could give a comment there that'd be helpful. Thanks.
Stuart A. Rothstein: Yeah, look, I think like most people, I think our expectations, first of all, for our biggest office exposure, which is an office redevelopment in London. Obviously, that one is 100% leased by a major financial institution.
Stuart A. Rothstein: Yes look I think like most people.
Stuart A. Rothstein: Our expectation first of all with our biggest office exposure, which is.
Stuart A. Rothstein: An office redevelopment in London, obviously that one is 100% leased by.
Stuart A. Rothstein: And at this point, we're just in that deal because we're continuing to fund the completion of the work that needs to be done. But obviously, I feel very positive with respect to the exit on that loan at the finish line. In terms of the broader portfolio, last year, we had a handful of transactions where sponsors stepped up and put more capital into transactions to play for time, and obviously, the capital coming in is for a mix of some principal paydowns, some funding of reserves for TI and LC as needed, and then obviously any necessary interest rate protection as well.
Stuart A. Rothstein: A major financial institution and at this point, we're just in that deal because we're continuing to fund the completion.
Stuart A. Rothstein: The work that needs to be done, but obviously feel very positive with respect to the exit.
Stuart A. Rothstein: On that loan.
Stuart A. Rothstein: Finish line in terms of the broader portfolio.
Stuart A. Rothstein: Last year, we had a handful of transactions where sponsorship.
Stuart A. Rothstein: Stepped up and put more capital into transactions to play for time, and obviously the capital coming in is for a mix of.
Stuart A. Rothstein: Some principal pay downs funding.
Stuart A. Rothstein: Reserves for Ti and LC as needed.
Stuart A. Rothstein: And then obviously any necessary interest rate protection as well I would say RV.
Stuart A. Rothstein: I would say our view of most of the office portfolio is that we will be in the transactions for a period of time. We continue to have productive dialogue with sponsors across the portfolio, which for us is, I think, 10 deals at this point. And that product, which has been newly created either ground up or redevelopment, we're actually seeing decent leasing activity, not great leasing activity, but definitely some interest levels from tenants for newly created products. So I think they'll continue to be in active dialogue with borrowers, but obviously nothing has risen to the level of individual deal commentary on this particular deal.
Stuart A. Rothstein: Our view of most of the office portfolio is that we will be in their transactions for.
Stuart A. Rothstein: A period of time.
Stuart A. Rothstein: We continue to have productive dialogue with sponsorship across the portfolio, which for US is I think 10 deals.
Stuart A. Rothstein: At this point and that product, which has been newly.
Stuart A. Rothstein: Newly created.
Stuart A. Rothstein: Either ground up or three redevelopment, we're actually seeing.
Stuart A. Rothstein: Decent leasing activity not great leasing activity, but definitely some.
Stuart A. Rothstein: Interest level from tenants for newly created product so.
Stuart A. Rothstein: I think they'll continue to be active dialogue with borrowers, but obviously.
Stuart A. Rothstein: Nothing has risen to the level of individual deal commentary this particular quarter.
Operator: Thank you. I would now like to turn the call back over to Mr. Rothstein for any closing remarks.
Speaker Change: Thanks, a lot.
Operator: Sure.
Stuart A. Rothstein: Thank you.
Stuart A. Rothstein: I would now like to turn the call back over to Mr. ROTC and for any closing remarks.
Stuart A. Rothstein: I appreciate everybody participating this morning, and, as always, Hilary and Anastasia are reachable and available if people have follow-up questions. Thank you.
Stuart A. Rothstein: I appreciate everybody participating this morning, and as always on Hillary Ananastasia are reachable and available if people have follow up questions. Thank you.
Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Rothstein: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
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