Q1 2024 New York Mortgage Trust Inc Earnings Call

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Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust first quarter 2024 results conference call. During today's presentation, all parties will be in a listen-only mode.

Good morning, ladies and gentlemen, and thank you for standing by welcome to the New York Mortgage Trust first quarter 2024, It results conference call.

Operator: During todays presentation, all parties will be in a listen only mode. Following the presentation. The conference will be opened for questions.

Operator: Following the presentation, the conference will be open to questions. If you have a question, please press star 1. Please press star followed by 1-1 on your touch-tone phone. If you would like to withdraw your question, please press star 1-1 again. If you are using speaker equipment, we do ask that you please lift the handset before making your selection. This conference is being recorded on Thursday, May 2nd, 2024. I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead.

Kristi Mussallem: Have a question. Please press star one please press star followed by one one on your Touchtone phone.

Kristi Mussallem: He would like to withdraw your question. Please press star one again, if you are using speaker equipment. We do ask that you. Please lift the handset before making your selection. This conference is being recorded on Thursday may 2nd 'twenty 'twenty four.

Kristi Mussallem: Now I'd like to turn the call over to Christine you Salem Investor Relations. Please go ahead.

Kristi Mussallem: Thank you, operator. And good morning, everyone.

Kristi Mussallem: Thank you operator, and good morning, everyone. Thank you for joining us today for our first quarter 2024 earnings call.

Kristi Mussallem: Thank you for joining us today for our first quarter 2024 earnings call. A press release and supplemental financial presentation with New York Mortgage Trust's first quarter 2024 results were released yesterday. Both the press release and supplemental financial presentation are available on the company's website at www.nymtrust.com. Additionally, we are hosting a live webcast of today's call, which you can access in the events and presentations section of the company's website. At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1994.

Kristi Mussallem: A press release and supplemental financial presentation with New York Mortgage Trust first quarter 2024 results was released yesterday.

Kristi Mussallem: Both the press release and supplemental financial presentation are available on the company's website at www Dot and why I'm Truckstop com.

Kristi Mussallem: Additionally, we are hosting a live webcast of todays call, which you can access in the events and presentations section of the company's website.

Kristi Mussallem: At this time management would like me to inform you that certain statements made during the conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Kristi Mussallem: Although New York Mortgage Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be realized. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission. Now, at this time, I would like to introduce Jason Serrano, our Chief Executive Officer. Jason, please go ahead.

Kristi Mussallem: Although New York Mortgage Trust believes the expectations reflected in any forward looking statements are based on reasonable assumptions.

Jason T. Serrano: It can give no assurance that its expectations will be attained.

Jason T. Serrano: Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterdays press release and from time to time in the company's filings with the Securities and Exchange Commission.

Kristi Mussallem: Now at this time I would like to introduce Jason Serrano, Chief Executive Officer, Jason. Please go ahead.

Jason T. Serrano: Thank you for joining New York Mortgage Trust's first quarter earnings call. Joining me today is Nick Mah, President, and Kristine Nario, CFO.

Kristi Mussallem: Hi.

Jason T. Serrano: Thank you for joining New York mortgage Trust's first quarter earnings call.

Jason T. Serrano: Joining me today is Nick <unk>, President and Kristina <unk> CFO.

Jason T. Serrano: Starting with the first quarter activity, noted on page 7 of our Q1 Supplemental, the company incurred earnings per share of negative $0.75 or $0.68 on an undepreciated basis. Gap book value per share declined 9.73% or 9.08% on adjusted book value. As mentioned in my earlier statement, impairments to our JV equity positions are the primary driver of the book value and earnings decline. In the first quarter, the investments in the JV equity portfolio were a challenge in a higher rate environment alongside unfavorable market conditions impacting underlying property cash, both negatively impacting valuation.

Jason T. Serrano: Starting with the first quarter activity noted on page seven of our Q1 supplemental the company incurred earnings per share of negative 75 or.

Jason T. Serrano: <unk> 68 on an underappreciated basis, GAAP book value per share declined 973% or 9% on adjusted book value.

Jason T. Serrano: As mentioned in my earlier statement impairments to our JV equity positions are the primary driver of the book value and earnings decline.

Jason T. Serrano: In the first quarter divestments of the JV equity portfolio has been a challenge in a higher rate environment alongside unfavorable market conditions impacting underlying property cash flows both negatively impacting valuations.

Jason T. Serrano: We are focused on reducing our exposure to multifamily joint venture equity investments, which represent less than five percent of the company's cap allocation or less than one percent of portfolio assets at the end of the quarter. However, as exposure to JV equity approaches zero and allocations to agency RMBS increase, we expect book value volatilities to subside. With the company's current liquidity, we are focused on moving from the volatility caused by our JV equity book to prudently growing the company's balance sheet for income growth in the year. In the first quarter, we continue to favor short-duration residential credit in the form of BPL bridge loans and an agency RMBS with $608 million of acquisition.

Jason T. Serrano: We are focused on reducing our exposure to multifamily joint venture equity investments, which represent less than 5% of the company's capital allocation or less than 1% of portfolio assets at the end of the quarter.

Jason T. Serrano: However, as exposure to JV equity approaches zero and allocation to agency MBS increases, we expect book value volatility to subside.

Jason T. Serrano: With the company current liquidity, we are focused on moving from the volatility caused by our JV equity book to prudently grow the company's balance sheet for income growth in the year.

Jason T. Serrano: In the first quarter, we continue to favor short duration residential credit in the form of BPL bridge loans and in agency MBS with $608 million of acquisitions, Nick will touch more on this later, but we see excellent risk adjusted returns within these sectors and economy that could be potentially facing an inflection point.

Jason T. Serrano: Nick will touch more on this later, but we see excellent risk-adjusted returns within these sectors in an economy that could potentially be facing an inflection. The Fed Chair's surprise billboard comments late in Q4 are certainly now in the distant past. The market has repriced the rate curve in the first quarter. The five-year Treasury yield retraced some of the steady declines witnessed late last year by jumping from 3.9 percent to 4.2 percent in the first quarter.

Jason T. Serrano: The Feds chairs surprise Dover's comments late in Q4 is certainly now in the distant past the market has re priced the rate curve in the first quarter. The five year Treasury yield has retraced some of the steady declines witnessed late last year by jumping from three 9% to four 2% in the first quarter the market anticipated six rate cuts.

Jason T. Serrano: The market anticipated six rate cuts in 2024 starting in March, which has given way to less than two cuts now, with the first cut expected only later in the year. Competing with these assumptions was a surprisingly low first quarter GDU print.

Jason T. Serrano: 2024, starting in March which has given way to less than <unk> now with the first expected only later in the year.

Jason T. Serrano: Contending with these assumptions was surprisingly low first quarter GDP print.

Jason T. Serrano: U.S. growth has slowed from nearly 5% over six months ago to 1.6% today. The result would have been far worse if not for the U.S. economy dipping into personal savings. Holding the savings rate steady from the prior quarter of 3.6% would have resulted in a GDP print of approximately $50,000. Consumer expenditure drawing on savings coupled with record credit card debt utilization is not a sustainable method of continuing GDP growth. Also, I wanted to quickly point out that the BEA's release of the year-over-year core PCE, which is the Fed's preferred inflation measure, jumped up slightly in March. The story is not the magnitude, but the fact that it's going in the wrong direction.

Jason T. Serrano: U S growth has slowed from nearly 5% over six months ago. It's one 6% today. The result would have been far worse, if not for the U S economy dipping into personal savings.

Jason T. Serrano: Holding the savings rate steady from the prior quarter.

Jason T. Serrano: Three 6% would have resulted in a GDP print of approximately 50 basis points consumer expenditure drawing on savings coupled with record credit card debt utilization is not sustainable.

Jason T. Serrano: Continuing GDP growth.

Jason T. Serrano: Also I wanted to quickly point out that the <unk> release of the year over year core PC, which is the fed's preferred inflation measure jumped up slightly in March the story is not the magnitude, but the fact that it's going in the wrong direction wherever looking deeper into the result, the increase in price was predominant related to the service sector, which is an imputed.

Jason T. Serrano: However, looking deeper into the result, the increase in price was predominantly related to the service sector, which is an imputed number. Observable durable goods prices were lower in the month, which could provide better insight into the future core PCE expectation. In either case, the final 80 base points to meet the Fed's inflation target of 2% are proving to be sticky, and the market is adjusting to this issue. Meanwhile, we believe the economy is signaling potential late-stage cycle conditions.

Jason T. Serrano: Number observable direct.

Jason T. Serrano: Terrible goods prices were lower in the market, which could provide better insight into the future core PCE expectations.

Jason T. Serrano: In either case, the final 80 basis points to meet the fed's inflation target of 2% is proving to be sticky and the market is adjusting to this issue.

Jason T. Serrano: We believe the economy is signalling potential late stage cycle conditions, we expect slow to moderate growth for the rest of the year and increasing the risk of recession. In response, we continue to take a balanced approach to opportunities by intentionally lowering credit exposure or by avoiding identified the risks.

Jason T. Serrano: We expect slow to moderate growth for the rest of the year and an increase in the risk of recession. In response, we continue to take a balanced approach to opportunities by intentionally lowering credit exposure or by avoiding identifiable risk. We believe the fixed-income investments, particularly short-duration mortgage credit, agency RMBS, continue to provide compelling returns within this economic backdrop. Focusing on these assets has led to a 35% first quarter year over year increase in adjusted interest income at the company.

Jason T. Serrano: We believe the fixed income investments, particularly short duration mortgage credit AJ RBS.

Jason T. Serrano: Continuing to provide compelling returns within this economic backdrop.

Jason T. Serrano: Focusing on these assets have led to a 35% first quarter year over year increase in adjusted interest income at the company.

Jason T. Serrano: After seasonality effects, which typically depress market activity in Q1, we are focused on increasing interest income to portfolio growth to drive earnings. We expect to deploy the company's excess liquidity of $402 million into this higher rate environment. At this time, I will pass the call over to Kristine for additional comments on our financials and then to Nick for a portfolio management discussion.

Jason T. Serrano: After seasonality effects, which typically depress market activity in Q1, we are focused on increasing interest income to portfolio growth to drive earnings we expect to deploy the company's excess liquidity of $402 million into this higher rate environment. At this time I will pass the call over to Christine for additional comments on our financials and then to Nick.

Kristine: For portfolio management discussion.

Jason T. Serrano: Christine.

Jason T. Serrano: Yeah.

Kristine R. Nario: Thank you, Jason. Good morning. Today, I will focus my commentary on the main drivers of first quarter financial results. Our financial snapshot on slide 11 covers key portfolio metrics for the quarter, and slide 25 summarizes the financial results for the quarter. As Jason just covered, the company had an undepreciated loss per share of 68 cents in the first quarter, as compared to undepreciated earnings per share of 37 cents in the fourth quarter. Our earnings were impacted by our recognition of $0.56 per share of losses, primarily on certain multifamily real estate assets held by JV Equity Investments due to a decrease in the estimated fair value of the real estate as compared to the carrying cost, and the reclassification of one of our JV equity investments and multifamily properties from held for sale to held in use.

Kristine: Thank you Jason Good morning today, I will focus my commentary on the main drivers of first quarter financial results.

Kristine R. Nario: Our financial snapshot on slide 11 covers key portfolio metrics for the quarter and slide 25 summarizes the financial results for the quarter.

Kristine R. Nario: Thanks, Jason just covered the company had unappreciated and loss per share of <unk> 68 cents in the first quarter as compared to unappreciated earnings per share of 37 in the fourth quarter.

Kristine R. Nario: Our earnings were impacted by our recognition of <unk> 56 per share of Boston, primarily on certain multifamily real estate assets.

Kristine R. Nario: By JV equity investments due to a decrease in the estimated fair value of the real estate as compared to the carrying costs.

Kristine R. Nario: And the reclassification of one of our JV equity investments in multifamily properties from held for sale to held for news.

Kristine R. Nario: We had net interest income of $17.9 million, a contribution of $0.20 per share, up from $0.19 per share in the fourth quarter. Our quarterly adjusted interest income, a non-GAAP financial measure, increased by $5.6 million to $78.1 million in the first quarter from $72.5 million in the fourth quarter. The increase is due to the growth in our interest-earning assets resulting from $688 million in investments made in agency RMBS and short-duration business purpose loans.

Kristine R. Nario: We had net interest income of $17 9 million a contribution of <unk> 20 per share up from 1919 cents per share in the fourth quarter.

Kristine R. Nario: The increase in adjusted interest income was offset by a $2.9 million increase in adjusted interest expense due to the financing of investments made during the crisis. Rate swaps continue to benefit our portfolio, reducing our adjusted interest expense by $8.3 million during the quarter. Overall, the operations of our consolidated multifamily JV properties contributed a net loss of $0.18 per share during the quarter, an increase from a net loss of $0.08 per share in the fourth quarter.

Kristine R. Nario: Our quarterly adjusted interest income and non-GAAP financial measure.

Kristine R. Nario: Creased by $5 6 million to $78 1 million in the first quarter from $72 5 million in the fourth quarter.

Kristine R. Nario: The increase is due to the growth in our interest earning assets, resulting from <unk>.

Kristine R. Nario: $608 million in investments made in agency MBS and short duration business purpose loans.

Kristine R. Nario: The increase in adjusted interest income was offset by a $2 9 million increase in adjusted interest expense due to the financing of investments made during the quarter.

Kristine R. Nario: Our interest.

Kristine R. Nario: Great swaps continue to benefit our portfolio, reducing our adjusted interest expense by $8 3 million during the quarter.

Kristine R. Nario: Overall, the operations of our consolidated multifamily JV properties.

Kristine R. Nario: <unk> had a net loss of <unk> 18 per share during the quarter, an increase from our net loss.

Kristine R. Nario: <unk> per share in the <unk>.

Kristine R. Nario: The increase in net loss is a result of, first, an increase in depreciation expense related to operating real estate as a result of the reclassification of certain multifamily real estate assets owned by entities in which we have a JV equity investment from held for sale to held in use at the end of the fourth quarter. Second, an increase in lease intangible amortization due to a consolidation of a preferred equity investment at the end of the fourth quarter.

Kristine R. Nario: Fourth quarter.

Kristine R. Nario: The increase in net loss is a result of.

Kristine R. Nario: One is an increase in depreciation expense related to operating real estate as a result of the reclassification of certain multifamily real estate assets owned by entities in which we have a JV equity investments from held for sale to held in years at the end of the fourth quarter.

Kristine R. Nario: Second an increase in lease intangible amortization due to a consolidation of a preferred equity investment at the end of the fourth quarter and a decrease in income from real estate due to the full quarter impact of the deconsolidation of <unk> multifamily real estate assets and as a result of nonrecurring income.

Kristine R. Nario: And a decrease in income from real estate due to the full quarter impact of the deconsolidation of two multifamily real estate assets and as a result of non-recurring income recognized in the fourth quarter related to earnest money, or proceeds received from a cancelled sale.

Kristine R. Nario: Recognizing the fourth quarter related to earnest money.

Kristine R. Nario: Proceeds received from a cancelled sale.

Kristine R. Nario: As mentioned earlier, during the quarter, we recognized $50.8 million, or $0.56 per share, of losses related to the following. First, a $36.2 million, or $0.40 per share, loss from impairment charges on real estate due primarily to lower net operating income estimates and wider cap rates resulting in lower property valuations as compared to our carrying cost. And second, a $14.6 million or $0.16 per share loss related to the reclassification of our multifamily properties from held for sale to held in use as of March 31, as they no longer met the criteria to be held for sale in conformity with GAAP. We continue to market for sale our JV equity investments in three multifamily properties, but we can provide no assurance of the timing or success of our ultimate exit from these investments.

Kristine R. Nario: As mentioned earlier during the quarter, we recognized $15 8 million or <unk> 56 per share of losses related to the following.

Kristine R. Nario: First.

Kristine R. Nario: $36 2 million or <unk> 40 per share loss from impairment charges on real estate due primarily to lower net operating income estimates and wider cap rates, resulting in lower property valuation as compared to our carrying costs.

Kristine R. Nario: And second a $14 6 million or <unk> 16 per share loss related to the reclassification of our multifamily properties from the held for sale to held in years as of March 31.

Kristine R. Nario: It no longer met the criteria to be held for sale in conformity with GAAP.

Kristine R. Nario: We continue to market for sale or JV equity investments in three multifamily properties, but we can provide no assurance of the timing or success of our ultimate exit from these investments.

Kristine R. Nario: The fair value changes related to our investment portfolio continue to have a significant impact on our earnings. During the quarter, we recognized $39.4 million, or $0.43 per share, of unrealized losses due to lower asset prices, primarily in our agency RMBS portfolio, as a result of increases in interest rates. These losses were offset by $0.54 per share in gains recognized on our derivative instruments, primarily consisting of interest rates, swaps, and cash. We also recognize $10.5 million, or $0.12 per share of realized losses related to the sale of certain non-performing and performing residential loans and losses incurred on foreclosed properties due to lower valuations during the first quarter. We had total GNA of $13.1 million, up from $11.7 million in the previous quarter, primarily due to non-recurring professional fees and consulting fees incurred during the quarter. We had portfolio operating expenses of $11.3 million, which increased primarily Adjusted book value per share ended at 11.51, down 9% from year end.

Kristine R. Nario: The fair value changes related to our investment portfolio continued to have a significant impact on our earnings during.

Kristine R. Nario: During the quarter, we recognized $39 4 million or <unk> 43 per share of unrealized losses due to lower asset prices, primarily on our agency MBS portfolio.

Kristine R. Nario: As a result of increases in interest rates.

Kristine R. Nario: These losses were offset by <unk> 54 per share in gains recognized on our derivative instruments, primarily consisting of interest rate swaps and caps.

Kristine R. Nario: We also recognized $10 5 million or <unk> 12 per share of realized losses related to the sale of certain nonperforming and performing residential loans and losses incurred on foreclosed properties due to lower valuations during the first quarter.

Kristine R. Nario: We had total G&A of $13 1 million up from $11 7 million in the previous quarter, primarily due to nonrecurring professional fees and consulting fees incurred during the quarter.

Kristine R. Nario: We had portfolio operating expenses of $11 3 million, which increased primarily due to debt issuance cost related to securitization issued during the quarter. There were expenses incurred as a result of the fair value option of election.

Kristine R. Nario: The Cdos issued and increased expenses related to asset management of our BPL bridge portfolio.

Kristine R. Nario: Okay.

Kristine R. Nario: Adjusted book value per share ended at 11 15 one.

Kristine R. Nario: Down 9% from year end.

Kristine R. Nario: The main drivers of our adjusted book value change were $0.75 in basic loss per share, a reduction of $0.20 per share related to our declared dividend, and a negative $0.12 per share change in the estimated fair value of our amortized cost liability. As of quarter end, the company's recourse leverage ratio and portfolio recourse leverage ratio increased to 1.7 and 1.6, respectively, from 1.6 and 1.5, respectively, as of December 31. While our financing leverage remains low relative to historical levels, we would expect our leverage to move higher as we continue to expand our holdings of highly liquid agency R&B.

Kristine R. Nario: Main drivers of our adjusted book value change for 75 cents and basic loss per share a reduction of <unk> 20 per share related to our declared dividend and a negative <unk> 12 per share change in estimated fair value of our amortized cost liabilities.

Kristine R. Nario: As of quarter end.

Kristine R. Nario: <unk> recourse leverage ratio on portfolio recourse leverage ratio increased to one seven and $1 six respectively from one six and $1 five respectively as of December 31.

Kristine R. Nario: While our financing leverage remains low relative to historical levels. We would expect our leverage was higher as we continue to expand our holdings of highly liquid agency RMB.

Kristine R. Nario: Our portfolio recourse leverage on our credit book is down 0.3 times when compared to 0.4 times from the previous quarter. This was due to the completion of two securitizations this quarter, of which a portion of the proceeds were used to replace Recourse to Purchase Finance. Consequently, our debt subject to mark-to-market margin calls reduced to 56% from 58% the prior quarter. The remaining 44% of our debt, as of March 31, has no exposure to collateral repricing by account.

Kristine R. Nario: Our portfolio of recourse leverage on our credit book is down at three times when compared to 0.4 times from the previous quarter due to the completion of two securitization this quarter of which a portion of the proceeds were used to replace <unk>.

Kristine R. Nario: Recourse repurchase financeable.

Kristine R. Nario: Consequently, our debt subject to mark to market margin calls reduced to 56% from 58% the prior quarter. The remaining 44% of our debt as of March 31 has no exposure no exposure to collateral repricing by our Counterparties.

Kristine R. Nario: You paid a $0.20 per common share dividend, a change from the prior quarter. We continue to evaluate our dividend policy each quarter and look at the 12 to 18 month projection of not only our net interest income but also realized gains, and realized capital gains that can be generated from our portfolio. We remain committed to maintaining an attractive current yield for our shareholders. However, we expect undepreciated earnings per share to remain below the current dividend as we continue to rotate excess liquidity for reinvestment in a more attractively priced market. I will now turn it over to Nick to go over the market and strategy update.

Kristine R. Nario: You play in a 20 common per common share dividend unchanged from the prior quarter.

Nick: We continue to evaluate our dividend policy each quarter and look at the 12 to 18 months projections of not only our net interest income, but also realized gain realized capital gains that can be generated from our portfolio.

Nick: We remain committed to maintaining an attractive current yield for our shareholders. However, we expect on depreciate earnings per share to remain below the current dividend as we continue to rotate excess liquidity for reinvestment and the more attractively priced market.

Kristine R. Nario: I will now turn it over to Nick to go over the market and strategy update Nick.

Nick: Thank you Christine and.

Nicholas Mah: In the first quarter, we saw upside surprises in inflation data amidst a still resilient labor market. This showed just how challenging the last mile of the Fed's journey to tame inflation was going to be.

Nick: In the first quarter, we saw upside surprises and inflation data amidst a still resilient labor market.

Nick: This show just how challenging the last mile of the Fed's journey to tame inflation was going to be.

Nicholas Mah: On a positive note, the healthy economic environment and the strong real money demand for paper have allowed mortgage and residential credit spreads to remain stable in the quarter. Amidst this market backdrop, we continue to make inroads in our goal of generating more consistent earnings through growth in our investment portfolio. In the quarter, we acquired $608 million of assets, primarily concentrated in 298 million of agency RMBFs and 302 million of BPL loans.

Nick: On a positive note the healthy economic environment, and a strong real money demand for paper have allow for mortgage and residential credit spreads to remain stable in the quarter.

Nicholas Mah: Amidst this market backdrop, we continue to make inroads.

Nicholas Mah: Whole of generating more consistent earnings through growth in our investment portfolio.

Nicholas Mah: In the quarter, we acquired $608 million of assets, primarily concentrated in $298 million of agency MBS and $302 million of BPL loans.

Nicholas Mah: Investment activity this quarter has been more evenly balanced between Agency RMVS and DPL, with acquisitions of agencies decreasing and BPL increasing quarter over quarter. The relative value assessment of agency RMBS has tempered the pace of our agency RMBS acquisition due to the tightening of spreads over the past six months. The current coupon mortgage spread to interpolated five and ten-year treasuries was in the high 130s basis points at the end of

Nicholas Mah: Investment activity this quarter has been more evenly balanced between agency RBS and PPL.

Nicholas Mah: With acquisitions of agencies, decreasing and BPL increasing quarter over quarter.

Nicholas Mah: The relative value assessment of agency MBS has tempered the pace of our agency MBS acquisitions due to the tightening of spreads over the past six months.

Nicholas Mah: The current coupon mortgage spread to interpolated, five and 10 year treasuries plus in the high 130 basis points.

Nicholas Mah: In Q1.

Nicholas Mah: Even though this level was relatively unchanged quarter over quarter, there were more attractive opportunities for capital deployment in the prior year. For example, in agency RMBS, our average ZV spread of spec pool purchases in Q1 was 149 basis points compared to 176 basis points. Thank you for watching.

Nicholas Mah: Even though this level was relatively unchanged quarter over quarter, there were more attractive opportunities for capital deployment in the prior year for.

Nicholas Mah: For example.

Nicholas Mah: You can see our MBS, our average CEB spread of spec pool purchases in Q1 was 149 basis points compared to 176 basis points in Q4 of last year.

Nicholas Mah: Our agency R&D strategy remains unchanged, as we see the asset class as complementary to our overall residential credit portfolio. We are targeting current coupon spec pools with current coupons currently in the 5.5% to 6.0% coupon range. Over the quarter, our overall average coupon on the portfolio remained relatively unchanged at 5.84%.

Nicholas Mah: Our agency MBS strategy remains unchanged as.

Nicholas Mah: As we see the asset class as complementary to our overall residential credit portfolio.

Nicholas Mah: We are targeting current coupon spec pools with current coupons currently in the five 5% to 6.0% coupon range.

Nicholas Mah: Over the quarter, our overall average coupon on the portfolio remained relatively unchanged at $5, 84%.

Nicholas Mah: We also continue to prioritize lower pay-up spec pools, particularly in credit stories like high LVV and low FICO for some additional prepayment protection. Leverage in this agency strategy is at 8.1 times, which is higher than the last quarter's ratio of 6.7 times, primarily due to lower bond prices in the quarter. However, this is still within our acceptable leverage range to manage this strategy.

Nicholas Mah: We also continue to prioritize lower pay up spec pools, particularly in credit stories like high LTV and low FICO for some additional prepayment protection.

Nicholas Mah: Leverage in the agency strategy is at eight one times, which is higher than the last quarters ratio of six seven times, primarily due to lower bond prices in the quarter.

Nicholas Mah: This is still within our acceptable leverage range to manage the strategy.

Nicholas Mah: Overall, we believe that agency RMBS is an asset class that will outperform in this market environment. At these levels, agency RMBS spreads are anchored at a higher range of historical returns, so we aim to add to our agency RMBS positions every quarter. However, we will be opportunistic and continually adjust the pace of purchases based on market spread moves, as we did throughout 2023. We believe that uneven economic data and market fluctuations may create periods during the year where spreads move wider, and we can ramp up the pace of capital commitment into this sector. Relating to BPLs, we have had recent success in growing the acquisition pipeline from our origination partners. The 302 million in purchases this quarter represents a 30% increase from the prior quarter.

Nicholas Mah: Overall, we believe that agency MBS with an asset class that will outperform in this market environment.

Nicholas Mah: At these levels agency MBS spreads are anchored at the higher range of historical returns. So we aim to add to our agency MBS positions every quarter.

Nicholas Mah: However, we will be opportunistic.

Nicholas Mah: We continually adjust the pace of purchases based on market spread moves as we did throughout 2023.

Nicholas Mah: We believe that uneven economic data and market fluctuations may create periods during the year, where spreads move wider and we can ramp up the pace of capital commitment into this sector.

Nicholas Mah: These BPL purchases consist of $273 million of BPL bridge loans and $29 million of 30-year BPL rental loans. We have restarted our acquisitions of longer-term BPL rental loans to prudently add some duration to the portfolio. The BTL rental program is now also supported by a healthy securitization market for term funding. We are in an advantageous position to source PPL loans given our longstanding market position. We expect continued growth in future acquisitions in both BPL Bridge and BPL Rentals in the coming quarters as we refine pricing and credit guidelines with new and existing originations.

Nicholas Mah: Relating to BPL, we have had recent success in growing the acquisition pipeline from our origination partners.

Nicholas Mah: The $302 million of purchases this quarter represents a 30% increase from the prior quarter.

Nicholas Mah: <unk> purchases consist of $273 million of BPL bridge loans and $29 million of 30 year BPL rental loans.

Nicholas Mah: We have restarted our acquisitions of longer term detailed rental loans to prudently add some duration to the portfolio.

Nicholas Mah: The detailed rental program is now also supported by a healthy securitization market for term funding.

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Nicholas Mah: Just position to source BPL loans, given our long standing market position.

Nicholas Mah: We expect continued growth and future acquisitions, and both BPL bridge and BPL rentals in the coming quarters, as we refine pricing and credit guidelines with new and existing origination partners.

Nicholas Mah: On BPL Bridge, this remains a core strategy for us as the short duration profile and high carry are suitable for this uncertain market environment. Furthermore, total principal losses remain at a low level, currently below 15 basis points on total purchases to date of $3.8 billion as of the end of the first quarter.

Nicholas Mah: From BPL Bridge. This remains a core strategy for us as the short duration profile and hi, Terry are suitable for this uncertain market environment.

Nicholas Mah: Furthermore, total principal losses remain at a low level.

Nicholas Mah: Currently below 15 basis points on total purchases to date of $3 8 billion as of the end of the first quarter.

Nicholas Mah: We have chosen to pursue BPL bridge loans where the credit profile and the liquidity of the underlying assets are sound. We continue to limit exposure to fringe sectors of lending in ground-up construction loans and multifamily bridge loans, both combining to comprise only 5% of this quarter's BPL Bridge Purchase. As I mentioned last quarter, the introduction of weighted securitizations in the BPL bridge market now confers better financing execution on the more mainstream and credit-secure BPL bridge product.

Nicholas Mah: We have chosen to pursue detailed bridge loans, where the credit profile and the liquidity of the underlying assets are silent.

Nicholas Mah: We continue to limit exposure to finish sectors of lending and ground up construction loans and multifamily bridge loans, both combining to comprise only 5% of this quarter's PPL bridge purchases.

Nicholas Mah: As I mentioned last quarter, the introduction operator securitizations in the BPL breaks market now confers better financing execution to the more mainstream and credit secure BPL bridge product.

Nicholas Mah: We are exploring weighted securitization vehicles as another future means of funding our BPL-Bridge program. The securitization market has been more conducive to issuance in 2024 thus far. The limited supply of investable residential assets has met increasing demand for bonds from a broader investor base. We issued two securitizations in the first quarter, and we hope to be a more frequent issuer for the rest of the year. Our first securitization executed this year was a 225 million revolver securitization backed by DPL Bridge with an effective cost of 7.43%.

Nicholas Mah: We are exploring rated securitization vehicles.

Nicholas Mah: That's another future means of funding our BPL Bridge program.

Nicholas Mah: The securitization market has been more conducive to issuance in 2024, thus far.

Nicholas Mah: The limited supply and vegetable residential assets.

Nicholas Mah: An increasing demand for bonds from a broader investor base.

Nicholas Mah: We issued two securitizations in the first quarter and we hope to be a more frequent issuer for the rest of the year.

Nicholas Mah: Our first securitization executed this year with a $225 million revolver securitization backed by detailed bridge without an effective cost of 743%.

Nicholas Mah: We are utilizing the two-year revolver structure to finance our existing and future BPL bridge purchase. The second deal we did this year was a $276 million performing and re-performing loan rated securitization with a 5.75% effective cost issued in March. Although we have not been purchasing any meaningful amount of reforming or reperforming loans in the last couple of years, we use securitization to optimize the financing on some of our existing assets

Nicholas Mah: We are utilizing to your revolver structure to finance, our existing and future BPL bricks purchases.

Nicholas Mah: The second deal. We did this year was $276 million performing and re performing loan rated securitization with a 575% effective cost issued in March.

Nicholas Mah: Although we have not been purchasing any meaningful amounts are performing or re performing loans in the last couple of years, we use the securitization to optimize the financing.

Nicholas Mah: Some of our existing assets.

Nicholas Mah: This year, our increase in purchasing activity in whole loans will allow us to more consistently access the securitization market. Shifting our focus to multi-family mezzanine lending, we currently have $207 million of allocated investment. We are focused on recycling the return capital into similar assets or into our core strategies as the portfolio continues to pay off. Through Q1, a seasonally slow payoff period, the annualized payoff rate is at 11%, driven by the resolution of a $6 million loan at a 14% IRR. This annual payoff rate is lower than the historical average of 27%.

Nicholas Mah: This year, our increase in purchasing activity in whole loans.

Nicholas Mah: Now for us to more consistently.

Nicholas Mah: The securitization markets.

Nicholas Mah: Shifting our focus to multifamily mezzanine lending.

Nicholas Mah: We currently have $207 million of allocated investments we are focused on recycling the return capital into similar assets or into our core strategies as the portfolio continues to pay off.

Nicholas Mah: Through Q1 is seasonally slow payoff period, the annualized payoff rate is at 11%.

Nicholas Mah: Driven by the resolution of a $6 million loan at a 14% IRR.

Nicholas Mah: This annual pay off rate is lower than the historical average of 27%, but we do expect to pay off rate to increase over the year.

Nicholas Mah: But we do expect the payoff rate to increase over the year. We continue to see built-up equity below our mezzanine position due to the seizing of the portfolio, which creates an incentive for sponsors to unlock equity through a sale or recapitalization. Additionally, overall occupancy numbers at 90% point to a mature and stabilized portfolio. We experienced impairment losses totaling $36 million and additional reclassification losses of $15 million in the quarter, primarily in our JV equity portfolio.

Nicholas Mah: We continue to see both equity below our mezzanine position due to the seasoning of the portfolio, which creates an incentive for sponsors to unlock equity through a sale or recapitalization.

Nicholas Mah: Additionally, overall occupancy numbers at 90%.

Nicholas Mah: Two are mature and stabilized portfolio.

Nicholas Mah: We experienced impairment losses totaling $36 million and additional reclassification of losses of $15 million in the quarter, primarily in our JV equity portfolio the.

Nicholas Mah: The impairments on our JV equity portfolio in the quarter are driven by several factors. First, there is the expectation of lower current and future rents at the properties, reflecting supply pressure from competing new bills being delivered in the same market. This supply glut has the potential to resolve itself in the future, after which we can expect more normalized rent growth. Operating expenses, on average, have also been higher, driven by senior debt costs, insurance, and property tax. Finally, cap rates on the properties have also drifted slightly higher due to race.

Nicholas Mah: The impairments on our JV equity portfolio in the quarter are driven by several factors.

Nicholas Mah: If the expectation of lower current and future rates at the properties, reflecting supply pressure from competing new builds being delivered in the same markets.

Nicholas Mah: The supply glut has the potential to resolve in the future after which we can expect more normalized spread growth.

Nicholas Mah: Operating expenses on average have also been higher driven by senior debt costs insurance and property taxes.

Nicholas Mah: Finally cap rates on the properties have also drifted slightly higher due to rates.

Nicholas Mah: We do expect that being left with a remaining portfolio of $52 million means that any future losses within this portfolio should be range-bound given the size of the exposure. We continue to invest asset management resources to maintain and improve the underlying drivers of higher valuation, such as improving rent growth or value at rehab. At the same time, we are also continuing to pursue resolutions for assets that are held for sale and to maintain and improve NOI for our held and used assets. At this time, we will open the call for Q&A.

Nicholas Mah: We do expect that being left with the remaining portfolio of 52 million means that any future losses within this portfolio should be range bound given the size of the exposure.

Nicholas Mah: We continue to invest asset management resources to maintain and improve the underlying drivers of higher valuation.

Nicholas Mah: Improving rent growth or value add rehab.

Nicholas Mah: At the same time, we are also continuing to pursue resolutions for assets that are held for sale.

Nicholas Mah: And to maintain and improve NOI for our held and used assets.

Speaker Change: At this time, we will open the call for Q&A.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Bose George with KBW. Your line is now open.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A Rob.

Operator: Sure.

Operator: Our first question comes from the line of Bose George with <unk>. Your line is now open.

Bose Thomas George: Good morning. Actually, how big could agency MBS become as a part of your total capital, assuming spreads remain reasonably attractive?

Bose Thomas George: Good morning.

Bose Thomas George: How big could agency MBS become as a part of your total capital.

Bose Thomas George: Spreads remain reasonably attractive.

Nicholas Mah: Yeah, so I think this is Nick. We do expect to continue to grow the portfolio. The pace of investments, just given where and how much spreads have come in, the pace of that will decline somewhat, although we do expect that to continue to grow. So right now, we have approximately in the low two billions type exposure. I would not be surprised if this continued to grow to the end of the year or something under three billion, but we believe that market conditions have to meaningfully widen out for us to really hit that three billion.

Bose Thomas George: Yes. So I think this is Nick we do expect to continue to grow the portfolio.

Nicholas Mah: Pace of investments, just given where how much spreads have come in the piece of that will decline somewhat although we do expect that to continue to grow so right now we have approximately.

Nicholas Mah: Hello to billions type exposure I would not be surprised if this continue to grow to the end of year or something under $3 billion, but we believe that market conditions have to meaningfully widen out for us to really hit that $3 billion number.

Bose Thomas George: Okay, great. Thanks.

Speaker Change: Okay, great. Thanks, and then actually is there anything you can do on the cost side to help the ROE or will that require more until the disposition of the JV.

Bose Thomas George: Properties is that.

Speaker Change: On the expense side remained kind of harder to control just curious what levers you have to pull there.

Jason T. Serrano: Yeah, so on the expense side, this is Jason Serrano. On the expense side, we do see some opportunities. We're implementing those now and expect to see some relief on that side of the equation. That's going to be something that we're going to be implementing over the course of the year. So it won't show up in any one particular quarter in a meaningful way. But I think over the course of the year, you'll see our expenses come in, which is the current game plan. OK.

Jason T. Serrano: Is there anything you can do on the cost side to help the ROEs, or will that require more of the, until the disposition of the JV, you know, properties? Is that, is the expense side still kind of harder to control? Just curious, you know, what levers you have to pull there. Yeah, so on the expense side, this is...

Speaker Change: Yes, so on the expense side this Jason sorry, and on the expense side, we do see some opportunities.

Jason T. Serrano: <unk> knows now.

Jason T. Serrano: And expect to see some relief on that side of the equation, that's going to be something that were to be implementing through the course of the year.

Jason T. Serrano: So it won't show up in any one particular quarter or in a meaningful way, but I think over the course of the year Youll see.

Jason T. Serrano: Our expenses come in.

Jason T. Serrano: Which is now the current game plan today.

Speaker Change: Okay, great. Thanks.

Operator: As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. One moment for the next question. Our next question comes from Doug Harder with UBS. Your line is now open.

Jason T. Serrano: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced one moment for the next question.

Douglas Michael Harter: Our next question comes from Doug Harter with UBS. Your line is now open.

Douglas Michael Harter: Thanks. I know you touched on the dividend in the prepared remarks, but I was just hoping to get a little bit more clarity on kind of how you're thinking about the outlook. You know, kind of when we're looking at net interest income, less you're operating in portfolio expenses, less the preferred dividend. It seems like there is a long way to go to kind of get back to the dividend level. I'm just curious as to, you know, kind of how you're thinking about the right level, you know, kind of in that construct. Hi, this is Kristine Nario.

Douglas Michael Harter: Thanks, I know you touched on the dividend in the prepared remarks, but just hoping to get a little bit more.

Kristine R. Nario: Clarity on kind of how youre thinking about the outlook.

Kristine R. Nario: Kind of when we're looking at net interest income less you're operating and portfolio expenses less the preferred dividend.

Kristine R. Nario: It seems like there is a long way to go to kind of get back to the dividend level.

Kristine R. Nario: Just curious as to kind of how you're thinking about.

Kristine R. Nario: The right level kind of.

Kristine R. Nario: And that in that construct.

Kristine R. Nario: Hi, this is Kristine. So in our prepared comments, we did say that unappreciated earnings were expected to be a little bit below our dividend. And this is really a function of our conscious decision in 2022 to significantly curtail our investment activity after the Fed's first rate hike. And this allowed us to, essentially, we believe, preserve liquidity and limit our material risk if we were to underwrite investments at peak valuations in 2022.

Kristine R. Nario: Hi, This is Christine so.

Kristine R. Nario: In our prepared comments, we did say on depreciated earnings we expected could be a little bit below our dividend and this is really a function of our conscious decision in 2022 to significantly curtail our investment activity after the fed.

Kristine R. Nario: The first rate hike and this allowed us to essentially we believe preserve liquidity and limit our material risk. If we were to underwrite investments in the peak valuations in 2022, but we stabilized our portfolio holdings, adding about.

Kristine R. Nario: But we stabilized our portfolio holdings, adding about 50% and increasing our interest income by 50% if you compare it to the last quarter of 2023. And we will continue to opportunistically dispose of assets in our portfolio, and our goal is to generate high portfolio turnover to transition these investments into mid-type teens returns.

Kristine R. Nario: 50% are increasing our interest income by 50% if you compare it to last quarter of 2023 and <unk>.

Kristine R. Nario: We will continue to opportunistically dispose of assets in our portfolio and our goal is to generate.

Kristine R. Nario: Hi portfolio turnover to transition these investments into mid type teens return.

Douglas Michael Harter: Okay, thank you.

Speaker Change: Okay. Thank you.

Operator: Thank you. One moment for the next question. Our next question comes from the line of Eric Hagen with BTIG. Your line is now open. Hey, thanks, good morning.

Speaker Change: Thank you.

Speaker Change: One moment for the next question.

Operator: Our next question comes from the line of Eric Hagen with BT I G. Your line is now open hi.

Eric J. Hagen: Hey, thanks. Good morning. Hey, just for modeling purposes, I mean, what's the cost of financing now on the $1.7 billion of securitized debt, and how does that compare to the cost of financing for the mark-to-market repo on the credit portfolio?

Eric J. Hagen: Hi, Thanks, Good morning, Hey, just for modeling I mean, what's the cost of financing now on the $1 $7 billion of securitized debt, how does that compare to the cost of financing for the mark to market repo on the credit portfolio.

Eric J. Hagen: Yes.

Nicholas Mah: Yeah, so from a securitization perspective, it is a lower cost of debt relative to repo for the time being, which is one of the reasons why we are trying to move more of our assets into the securitization space. So just generally speaking, the... From a repo cost perspective, it's usually struck at SOFR anywhere between, let's call it 200 to 300 basis points. And depending on asset class and depending on the securitizations that you're doing, whether they're rated or unrated, you could achieve, let's call it, 25 to 50 basis points of savings, depending on where you are. But there is also a benefit of securitizations being executed at, you know, a tenor that is longer than what is implied by just SOFR, so you're also getting the benefit of the inverted U-curve.

Eric J. Hagen: Yes, so from a from a securitization perspective is it is.

Nicholas Mah: It is a lower cost of debt relative to repo for the time being which is one of the reasons. Why we are we are trying to move more of our assets into the securitization space. So just just generally speaking.

Nicholas Mah: <unk>.

Nicholas Mah: From a finance from a from a repo cost perspective, it's usually struck at sulphur anywhere between let's call. It 200 to 300 basis points.

Nicholas Mah: And depending on asset class and depending on the Securitizations that youre doing whether its rated are unrated.

Nicholas Mah: Could achieve probably let's call it.

Nicholas Mah: 25 to 50 basis points of savings, depending on where you are.

Nicholas Mah: But there is also a benefit of <unk>.

Nicholas Mah: <unk> is being executed.

Nicholas Mah:

Nicholas Mah: With.

Nicholas Mah: At a temporary that is longer than than than what is implied by just so first of all you are also getting the benefit of the inverted yield curve.

Speaker Change: Okay. That's helpful.

Eric J. Hagen: Any thoughts on delinquencies that we're seeing in the BPL bridge space and how your portfolio kind of compares to some of the trends that we've seen elsewhere in the market and how much appetite you might even have to extend loans in cases where the sponsor is struggling from higher interest rates? Yeah, so I'm

Nicholas Mah: Any perspectives on delinquencies that were seeing in the BPL bridge space and how your portfolio kind of compares to some of the trends that we've seen elsewhere in the market.

Eric J. Hagen: How much appetite you might even have to extend loans in cases, where the sponsor is struggling from higher interest rates.

Nicholas Mah: Yeah, so I mean, we do disclose our delinquency rates on our BPL bridge portfolio. You can see they've been relatively stable in the last few quarters. If you remember, our portfolio, given the fact that we slowed our purchases a couple years ago, we have seen those delinquencies numbers pick up as the portfolio approaches maturity. So now the dynamics are clearly different.

Speaker Change: Yes, so I mean, we do disclose our delinquency rates on our BPL bridge portfolio you can see that it's been relatively stable over the last few quarters. If you remember our portfolio given the fact that we have slowed our purchases a couple of years ago, we have seen those delinquencies numbers tick up.

Nicholas Mah: The portfolio purchase maturity. So now the dynamics are clearly different.

Nicholas Mah: We continue to buy assets, but even then, you know, just the dollar value of delinquencies has remained relatively stable. We're notably stable, and we expect that to continue to be the case as this goes on. So we've effectively already gone through one full cycle on the portfolio that we have already displayed in terms of public information. Relating to our propensity to pursue extensions, we do continue to look at that. That is a very common part of the BPL bridge portfolio.

Nicholas Mah: Continue to buy assets, but even then just the dollar value of delinquencies have remained relatively stable and we expect that to continue to be the case.

Nicholas Mah: As as this goes on so we have effective we've already gone through one full cycle on the portfolio that we have already displayed in terms of public information.

Nicholas Mah: Leading to our propensity to pursue extensions.

Nicholas Mah: We do continue to look at that that is that is a very common part of the BPL bridge portfolio I would say that we haven't really changed.

Nicholas Mah: I would say that we haven't really changed in terms of the frequency by which we approve extensions. But one thing to note is that we do hear that there are more borrowers who just need more time to refinance, either into another BPL bridge loan or into a longer-term investor loan. And that is something that we explore with them in terms of the feasibility of whether or not that is something that is likely to happen, or that is just a hope.

Nicholas Mah: In terms of the frequency by which we approve.

Nicholas Mah: Extensions.

Nicholas Mah: The one thing to notice that we do hear that.

Nicholas Mah: There are more borrowers, we just need more time to refinance either into another BPL bridge loan or into a longer term investor loan.

Nicholas Mah: And that is something that we explore with them in terms of the viability of whether or not that is that is something that is likely to happen or that is just a hope and to the extent that this is something that we believe is true and we have a very clearly a very good sense of the market given that we do by both those types of assets and we do talk to originate is all the time.

Nicholas Mah: And to the extent that this is something that we believe is true and we have clearly a very good sense in the market given that we do buy both those types of assets and we talk to originers all the time, to the extent that we do believe that there is a viable path for them to get refinanced in the near future, we will grant those agreements.

Nicholas Mah: To the extent that we do believe that there is a viable path for them to get refinanced in the near future. We will grant those extensions.

Speaker Change: Yes, that's helpful.

Eric J. Hagen: Last one from me. I mean, the three properties that you mentioned you're actively marketing and seeking a disposition on for the multifamily portfolio, any idea where that could shake out relative to your cost basis and where you're carrying it right now?

Speaker Change: Last one from me I mean.

Eric J. Hagen: The three properties that you mentioned, you're actively marketing and thinking of disposition on for the multifamily portfolio.

Eric J. Hagen: Any idea of where that could shake out relative to your cost basis, and what are you carrying it right now.

Nicholas Mah: Yeah, I mean, overall, I think it'd be helpful to just provide a little bit of a backdrop, you know, on the 13, I know you mentioned the three, and the entire portfolio is a portfolio that we are looking to monetize over time, but we just think there's different timelines related to the three versus the remainder. And, you know, this is a portfolio where, you know, these were mostly added value programs that we bought, you know, about three years ago.

Eric J. Hagen: Yes.

Eric J. Hagen: So I think overall I think.

Nicholas Mah: It'd be helpful. Just provide a little bit of backdrop.

Nicholas Mah: The <unk> I know you mentioned, the three and all of the entire portfolio.

Nicholas Mah: We are looking to monetize over time that we just think theres different timelines related to.

Nicholas Mah: The three versus the remainder.

Nicholas Mah: Yes. This is a portfolio where these were mostly that added value programs that we bought about three years ago and.

Nicholas Mah: And, unfortunately, the time of the, you know, lease up activity on these added values, which I've mentioned earlier, like there's this J curve phenomenon where you're, you know, fixing units up, putting back a market, getting the units to be released at higher rental rates is the goal. We faced in the markets, which is part of the impairment and unrealized losses we took in the quarter. You know, we faced a market where you have new supply in the market that's also going through absorption.

Nicholas Mah: Unfortunately, the timing of the lease up activity on those added value, which I've mentioned earlier that like this is J curve phenomenon, where you're fixing units up putting them back to market getting the units to be.

Nicholas Mah: To be released at higher rental rates is that all.

Nicholas Mah: We faced in the markets, which is part of the impairment and unrealized losses, we took in the quarter, we face the market where you have also new supply in the market. That's also going through absorption.

Nicholas Mah: And that depressed expected rents in the near term, we hold that basically it.

Nicholas Mah: And that depressed expected rents in the near term. We held that, basically, part of the impairment and unrealized losses was reflecting the weakness in rents we see in these markets. The absorption rate we expect to be, you know, to alleviate rental pressure over the course of the year. So we expect to see, hopefully, gains related to that in the rental rates, but overall, you know, the timing of it is very difficult.

Nicholas Mah: Part of the impairment.

Nicholas Mah: Those losses was reflecting the weakness in rents we see in these markets.

Nicholas Mah: Absorption rate, we expect to be.

Nicholas Mah: To alleviate.

Nicholas Mah: The rental pressure over the course of the year.

Nicholas Mah: So we expect to see hopefully gains related to that.

Nicholas Mah: And the rental rates, but overall.

Nicholas Mah: The timing of it is.

Nicholas Mah: It's been a really challenging experience here with respect to the market and our timing, which obviously was unknown back three years ago that we'd be facing this higher cap rate environment at this type of level and then the step back of demand in the multifamily market. So we're going through that. You know, we think we are appropriately marked on our assets using, you know, fair value analysis. And, you know, we're expecting our book to be stable, more stable over time than we've had.

Nicholas Mah: It's very difficult it's been a really challenging experience here with respect to the market and our timing, which obviously was unknown back three years ago, we'd be facing is.

Nicholas Mah: These higher cap rate environment.

Nicholas Mah: Type of level and then the the step back of demand in the multifamily market. So we're going through that we think we are appropriately marked on our assets using a fair value analysis and.

Nicholas Mah: And, you know, it is less than 5% of our capital, less than 1% of our portfolio. So, the impact on our earnings will be, is just less meaningful than it was, you know, nine and two quarters ago. So, you know, our asset management team is working hard to get these assets disposed of, but we have to take into account the fact that there are these, you know, kind of short-term pressures that have impacted valuations. And we're looking for, you know, some relief related to that.

Nicholas Mah: We're expecting our book to be stable more stable over time that we've had and it is less than 5% of our capital of less than 1% of our.

Nicholas Mah: Portfolio so.

Nicholas Mah: The impact to our earnings will be is just less meaningful than it was 92 quarters ago. So.

Nicholas Mah: Our asset management team is working hard to get these assets disposed, but we have to take in light. The fact that there is these.

Nicholas Mah: Kind of short term pressures that have impacted valuations and we're looking for some relief related to that.

Eric J. Hagen: That's helpful. Thanks for fleshing that out. I appreciate you guys.

Speaker Change: That's helpful. Thanks for Flushing that out I appreciate you guys.

Eric J. Hagen: Yeah.

Jason T. Serrano: This concludes the question and answer session. I would now like to turn it back to Jason Serenau for closing remarks.

Eric J. Hagen: This concludes the question and answer session I would now like to turn it back to Jason <unk> for closing remarks.

Jason T. Serrano: Yes, thank you for joining our first quarter earnings call. Our second quarter call will be conducted in August, and we look forward to talking to you. Thank you.

Jason T. Serrano: Yes, Thank you for joining our first quarter earnings call.

Jason T. Serrano: Our second quarter call will be done will be conducted in August and we look forward to talking to you. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Operator: Okay.

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: [music].