Q1 2024 Ladder Capital Corp Earnings Call

Operator: Good morning, and welcome to Ladder Capital Corp.'s earnings call for the first quarter of 2024. As a reminder, today's call is being recorded.

Good morning, and welcome to ladder Capital Corp earnings call for the first quarter of 'twenty 'twenty four as a reminder, today's call is being recorded.

Operator: This morning, Ladder released its financial results for the quarter ended March 31st, 2024. Before the call begins, I'd like to call your attention to the customary safe harbor disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections, and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward-looking statements or projections unless required by law.

Morning lot of released its financial results for the quarter ended March 31st 2024 before the call begins I'd like to call your attention to the customary safe Harbor disclosure in our earnings release regarding forward looking statements. Today's call may include forward looking statements and projections and we refer you to our most recent Form 10-K for them.

Factors that could cause actual results to differ materially from these statements and projections we.

We do not undertake any obligation to update our forward looking statements or projections unless required by law.

Operator: In addition, Ladder will discuss certain non-GAAP financial measures on this call that management believes are relevant to assessing the company's financial performance. However, the company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to gap figures in our Earnings Supplement presentation, which is available in the Investor Relations section of our website. We also refer you to our Form 10-K and Earnings Supplement presentation for definitions of certain metrics, which we may cite on today's call. At this time, I'd like to turn the call over to the ladder's president, Pamela McCormack. Good morning.

In addition, later will discuss certain non-GAAP financial measures on this call, which management believes are relevant puts us on the company's financial performance.

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

These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available in the Investor Relations section of our website. We also refer you to our Form 10-K and earnings supplement presentation for definitions of certain metrics, which we made site on today's call.

Pamela Lynn McCormack: At this time I'd like to turn the call over to the lottery President Pamela Mccormack.

Pamela Lynn McCormack: Good morning. We are pleased to provide an overview of Ladder's performance for the first quarter of 2024, which generated distributable earnings of $42.3 million, or 33 cents per share, resulting in a 10.8% return on equity. As of March 31st, $1.2 billion, or 23% of our $5.3 billion balance sheet, was comprised of cash and cash equivalents. During the first quarter, we increased liquidity to over $1.5 billion, up from $950 million last year.

Pamela Lynn McCormack: Morning, we are pleased to provide an overview of flattish performance for the first quarter of 'twenty 'twenty four.

Pamela Lynn McCormack: That is generated distributable earnings of $42.3 million or 33 cents per share, resulting in a 10, 8% return on equity.

Pamela Lynn McCormack: As of March 31st $1.2 billion, or 23% of our $5 $3 billion balance sheet was comprised of cash and cash equivalent.

Pamela Lynn McCormack: During the first quarter, we increased liquidity of over $1 $5 billion up from $950 million last year, we reduced adjusted leverage to one five times down from one eight times a year ago.

Pamela Lynn McCormack: We reduced adjusted leverage to 1.5 times, down from 1.8 times a year ago, and received approximately $400 million of payoffs in our loan and securities portfolio, including the full payoff of 15 balance sheet loans totaling $320 million. These payoffs represent the highest dollar amount of payoffs received since the first quarter of 2022.

Pamela Lynn McCormack: We received approximately $400 million pay offs in our loan and securities portfolio, including.

Pamela Lynn McCormack: Including the full pay off of 15 balance sheet loans totaling $320 million piece.

Pamela Lynn McCormack: These payoffs represent the highest dollar amount of payoffs received since the first quarter of 2022.

Pamela Lynn McCormack: Following the end of the quarter, another five loans totaling $111 million were paid off, bringing Ladder's total loan payoffs over the last 12 months to over $1 billion across 48 loans. In February, we celebrated our 10th anniversary as a public company, and we are proud to note that we have not wavered from our commitment to our core objective, striving for the highest possible return on equity while prioritizing principal preservation and employing modest leverage.

Pamela Lynn McCormack: Following the end of the quarter, another five loans totaling $111 million paid off bring waters' total loan payoffs over the last 12 months to over $1 billion across 48 volt.

Pamela Lynn McCormack: In February we celebrated our 10th anniversary as a public company.

Pamela Lynn McCormack: And we are proud to note that we have not wavered from our commitment to our core objective.

Pamela Lynn McCormack: Driving for the highest possible return on equity, while prioritizing principal preservation and employing modest leverage.

Pamela Lynn McCormack: This disciplined strategy, supported by our diversified capital structure, has supported Ladder with stability and flexibility across market fluctuations. At the end of the first quarter, our balance sheet loan portfolio totaled $2.8 billion with a weighted average yield of 9.42% and limited future funding commitments totaling $128 million. Our earnings for the first quarter included a $1.5 million, or 3.7% gain, from contributing approximately $40 million of fixed-rate loans to a recent CMBS securitization and providing Ladder with 10-year non-recourse financing on five triple-net lease real estate assets. In addition, we've been pivoting back to offense.

Pamela Lynn McCormack: This disciplined strategy supported by our diversified capital structure.

Pamela Lynn McCormack: Ported ladder with stability and flexibility across market fluctuations.

Pamela Lynn McCormack: At the end of the first quarter.

Pamela Lynn McCormack: Our balance sheet loan portfolio totaled $2 8 billion with a weighted average yield of 9.42% and limited future funding commitments totaling $128 million.

Pamela Lynn McCormack: Our earnings for the first quarter included a $1 5 million or three 7% gain from contributing approximately $40 million of fixed rate loans to a recent C. M. B, a securitization and providing wider with 10 year nonrecourse financing on five triple net leased real estate assets.

Pamela Lynn McCormack: In addition, we've been pivoting back to offense.

Pamela Lynn McCormack: Originated are actively quoting new investments and we are pleased to be back in the process of closing new loans under application.

Pamela Lynn McCormack: Given the historically high returns on equity generated by why there's kind of a business.

Pamela Lynn McCormack: We're looking forward to capitalizing on opportunities presented by a steepening or at least uninvited yield curve, which is why this business works best.

Pamela Lynn McCormack: As forecasted during our fourth quarter earnings call. We successfully concluded foreclosure proceedings on a newly renovated class a multifamily portfolio in Los Angeles, California.

Pamela Lynn McCormack: Our originators are actively quoting new investments, and we are pleased to be back in the process of closing new loans under application. Given the historically high returns on equity generated by Ladder's conduit business, we are looking forward to capitalizing on opportunities presented by a steepening or at least uninverted yield curve, which is when this business works best. The first is a $60.8 million loan secured by a portfolio of recently constructed apartment buildings in Manhattan, New York.

Pamela Lynn McCormack: The only asset consisting of 28 units at a basis of $14 million or $500000 per unit.

Pamela Lynn McCormack: Since assuming ownership in February we successfully completed all renovations obtain the certificate of occupancy for the property and commence leasing.

Pamela Lynn McCormack: We expect to lease the property to stabilization by the fall.

Pamela Lynn McCormack: Also in the first quarter, we placed two multifamily loans totaling $72 $8 million on nonaccrual.

Pamela Lynn McCormack: The first is a $68 million loan secured by a portfolio of recently constructed apartment buildings in Manhattan, New York.

Pamela Lynn McCormack: So loan defaulted after the mezzanine lender, who made a $13 2 million dollar alone behind our position felt secure.

Pamela Lynn McCormack: Our current exposure for this loan stands at approximately $385000 per unit.

Pamela Lynn McCormack: The second loan is a $12 million loan collateralized by a 56-unit multifamily portfolio in the San Fernando Valley of California. Our current exposure for this loan stands at approximately $215,000 per unit. A receiver has been appointed as we pursue foreclosure to take title to the assets and complete the business plan for renovations and lease-up at the market rent. We continue to believe that we are adequately reserved for any potential losses.

Pamela Lynn McCormack: The second one is the $12 million loan collateralized by a 56 unit multifamily portfolio in the San Fernando Valley of California.

Pamela Lynn McCormack: Our current exposure for this loan stands at approximately $215000 per unit.

Pamela Lynn McCormack: A receiver has been appointed as we pursue foreclosure to take title to the assets and complete the business plan for renovation and lease up at the market rents.

Pamela Lynn McCormack: As Paul will address in more detail there were no specific impairments identified during the quarter, we modestly increased our general seasonal reserve to align with our assessment of current market conditions.

Pamela Lynn McCormack: We continue to believe that we are adequately reserved for any potential losses.

Pamela Lynn McCormack: We've often stated in the past that we distinguish between a default and a loss. In full alignment with our stakeholders, our goal is to protect our investments by promptly addressing defaults and seeking the best long-term value for the company. We remain committed to financing our operations through the corporate unsecured bond market and stand prepared to issue new unsecured bonds when we believe the cost of capital is favorable.

Pamela Lynn McCormack: We've often stated in the past that we distinguish between a default at a loss.

Pamela Lynn McCormack: Bladder senior management team and board collectively own over 11% of the company effectively making us ladders largest shareholder.

Pamela Lynn McCormack: In full alignment with our stakeholders. Our goal is to protect our investments by properly addressing the fault and seeking the best long term value for the company.

Pamela Lynn McCormack: With robust capitalization and extensive real estate experience, we remain well positioned to navigate challenges such as market downtime or asset depreciation while executing the necessary business plans to optimize the property's value.

Pamela Lynn McCormack: Regarding our securities and real estate portfolio. We ended the first quarter with a $467 million securities portfolio, primarily consisting of AAA securities, earning an unlevered yield of 684%.

Unknown Executive: As Pamela discussed, as of March 31st, 2024, Ladder remains highly liquid with $1.2 billion of cash and cash equivalents, or 23% of our balance. Our loan portfolio totaled $2.8 billion as a quarter end across 100 balance sheet loans. This skill set as a current owner and operator of real estate combined with the strength and flexibility of our balance sheet.

Pamela Lynn McCormack: Our $963 million real estate portfolio is mainly comprised of net lease properties with long term leases to investment grade credits and contributed $14 $4 million in net rental income in the first quarter.

Pamela Lynn McCormack: The strength of our balance sheet and stability of our dividend are consistently reflected in our credit ratings from all three rating agencies with two of the agencies reading ladder, just one notch below investment grade it.

Pamela Lynn McCormack: It is worth noting that last you longer dated unsecured bond issuances, which total one point to $4 billion and comprised approximately one third of our total debt outstanding.

Unknown Executive: As discussed in our prior call, in the first quarter of 2024, we extended our corporate revolver with our nine bank syndicate. We believe this enhancement demonstrates the strength of our capital structure, as well as Ladder's longstanding relationship with these financial institutions and an attractive six-figure coupon of 4.7%. In the first quarter of 2024, we repurchased $2 million in principal of our unsecured bonds at 90% of par, generating $0.2 million of gains from the retirement debt, as Pamela discussed. We remain committed to the corporate unsecured bond market as our primary source of financing. We're prepared to issue new unsecured bonds when we believe the cost of capital is favorable.

Pamela Lynn McCormack: I have an average remaining tenor of four years and a.

Pamela Lynn McCormack: Our weighted average coupon of four 5% a rate that is lower than the entire current U S Treasury curve.

Pamela Lynn McCormack: We remain committed to financing our operations through the corporate unsecured bond market and stand prepared to issue new unsecured bonds. When we believe the cost of capital is favorable.

Pamela Lynn McCormack: In conclusion armed with ample dry powder conservative leverage and a well covered dividend. We are prime to go on offense as 'twenty 'twenty four unfolds with that I'll turn the call over to Paul.

Paul: Thank you Pamela.

Paul: In the first quarter of 'twenty 'twenty four ladder generated $42 3 million of distributable earnings of 33 cents of distributable EPS.

Paul: Our return on average equity of 10, 8%.

Paul: Earnings in the first quarter continued to be driven by strong net interest income from our loan and securities portfolios and stable net operating income from our real estate portfolio.

Paul: Our balance sheet remains strong as the commercial real estate market continues to reset.

Unknown Executive: As of March 31st, our unencumbered asset pool stood at $3.0 billion, or 57% of our balance sheet. Ladder's underappreciated book value per share was $13.68 as of March 31st, 2024, with 127.9 million shares outstanding. Subsequent quarter end in April, Ladder's board of directors approved an increase in the ladder share buyback authorization to $75 million. For details on our first quarter 2020 operating results, please refer to our earnings supplement, which is available on our website.

Paul: As Tom will discuss as at March 31, 2024.

Paul: It remains highly liquid with $1.2 billion of cash and cash equivalents were 23% of our balance sheet.

Paul: Our cash position continued its increase since year end.

Paul: In addition, our $324 million unsecured revolver remains fully undrawn.

Paul: The increase in cash was primarily driven by a healthy rate of loan payoffs in the first quarter, which totaled $357 million.

Paul: Our loan portfolio totaled $2 8 billion as of quarter end across 100 balance sheet loans representing.

Paul: Representing 52% of our total assets.

Paul: We did not record any specific impairments in the first quarter. However, we did increase our reserve by $5 $8 million, bringing our general reserves of $49 million or approximately 175 basis points of our loan portfolio.

Pamela Lynn McCormack: With regard to interest rate changes, we have not been significantly impacted due to the nature of our fixed rate liabilities that are termed out for years and our general low leverage approach to managing our business. During the quarter, we were pleased to have reentered the loan securitization business, which we had been absent from for years. We are hopeful that we will continue to contribute loans to conduit deals in the quarters ahead, as this has historically been a high ROE business for us at Ladder.

Paul: The increase was driven by the continued uncertainty in the state of the U S commercial real estate market.

Paul: And overall global global market conditions.

Paul: Our $963 million real estate segment continues to generate stable net operating income and includes 156 net lease properties, representing approximately 70% of the segment.

Paul: Our net lease tenants are strong credits, primarily investment grade rated and committed to long term leases with an average remaining lease term of approximately nine years.

Paul: As we have historically demonstrated we have a long track record of ladder of maximizing the value of assets, we own and operate.

Pamela Lynn McCormack: We also restarted our loan origination business, and we expect if market volatility and interest rates improve even marginally, our pace of loan closings should pick up in the quarters ahead. Last week, the big banks reported that they were largely easing up on additional loan loss reserves because they believe that potential problems are limited and manageable. From Ladder's perspective, we generally feel the same way and believe we are adequately reserved for potential problems we foresee.

Paul: <unk> is a current owner and operator of real estate combined with the strength and flexibility of our balance sheet.

Paul: Provide ladder, a solid foundation from which to successfully manage our owned real estate assets.

Paul: As of March 31, the carrying value of our securities portfolio was $467 million.

Paul: 99% of the portfolio is investment grade rated with.

Paul: With 84% being AAA rated.

Paul: And over 76% of the portfolio was unencumbered and readily financeable finding an additional source of potential liquidity complementing the $1 5 billion sustained their liquidity, we had as of quarter end.

Paul: Bladder seem to have liquidity simply represents unrestricted cash and cash equivalents of over $1 $2 billion, plus our undrawn unsecured corporate revolver capacity of $324 million.

Pamela Lynn McCormack: While always cautious, we believe the lending market is thawing out, and borrowers are beginning to accept that rates will simply be higher for a while, and they will need to plan accordingly, as the era of free money seems to have come to an end. Armed with strong liquidity and a disciplined credit model, we look forward to the rest of 2024. We can now take some questions.

Paul: As discussed in our prior call. It in the first quarter of 2024, we extended our corporate revolver with our nine bank syndicate.

Paul: A new five year term out to 2029.

Paul: The facility carries an attractive interest rate of silver plus 250 basis points on an unsecured basis with.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key to allow for as many questions as possible. We ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Sarah Barcomb with BTIG. Please proceed with your question.

Paul: What's the potential with potential rate reductions upon achievement of investment grade ratings.

Paul: We believe this enhancement demonstrates the strength of our capital structure as well as ladders long standing relationship with financial institutions.

Paul: As of March 31st 2024, our adjusted leverage ratio was one five times, that's continue to trend down as we de Levered, our balance sheet, while producing steady earnings strong dividend coverage.

Paul: Tractive double digit return on equity in the first quarter was like LIBOR.

Paul: Unsecured corporate bonds remain the foundation of our capital structure with $1 6 billion outstanding of 43% of our total debt.

Paul: The weighted average remaining maturity of nearly four years.

Paul: In an attractive fixed rate coupon of four 7%.

Paul: In the first quarter of 2024, we repurchased two $2 million in principal of our unsecured bonds at 90% of par.

Sarah Barcomb: Hi, good morning, everyone. Thank you for taking the question. I was hoping we could dig into origins a little bit.

Paul: Generating zero point $2 million of gains from the retirement of debt.

Paul: As Tom will discuss.

Paul: We remain committed to the corporate unsecured bond market because our primary source of financing the prepared to issue new unsecured bonds. When we believe the cost of capital say favorable.

Brian Richard Harris: It sounds like you're out in the market looking at new deals. I was hoping you could talk about the deals that you're looking at, any color on the asset class or pricing. And could you maybe give us some of your expectations for volume, just given acquisitions might not pick up to the extent that we were expecting maybe six months ago, especially coming off this inflation print today? I'm just hoping you can give us some color there. Thank you.

Paul: As of March 31st our unencumbered asset pool stood at 3.0 billion or 57% of our balance sheet.

Paul: 81% of this unencumbered asset pool was comprised of first mortgage loans securities and unrestricted cash and cash equivalents.

Paul: Our significant liquidity position and large pool of high quality unencumbered assets continued to provide ladder with strong financial flexibility.

Paul: We believe this is reflected in our corporate credit ratings, which are one notch below investment grade from two or three rating agencies.

Brian Richard Harris: Thanks, Sarah. This is Brian.

Brian Richard Harris: I will answer the volume question, but I'm probably going to punt over to Adam Siper, if that's okay, regarding the originations that we're seeing. So we have seen originations pick up a little bit, but it was a pretty low bar going from zero. So we do have a couple of loans under application.

Paul: That is underappreciated book value per share was $13.68 as of March 31st 2024, with the $127 9 million shares outstanding.

Paul: In the first quarter of 2024, we repurchased $647000 of our common stock at a weighted average price of $10 78 per share.

Brian Richard Harris: We've been quoting a lot more. A lot of deals are falling apart, I think largely as a result of where rates are going. And recently, spreads began to move a little bit wider also. So I would say our volume will be fairly muted for the year, although we're hopeful that it won't be. I think it's a condition of the market, not a condition of Ladder. And so if I had to throw out an estimate now, I'd probably throw out $400 million for securitized instruments in 2024. But that has a wide left and right margin, I'll just warn you. And Adam, if you want to address what you're seeing, he's our head of originations and can fill you in.

Paul: Subsequent to quarter end in April.

Paul: There's board of directors approved an increase a lot of share buyback authorization to $75 million.

Paul: Finally, our dividend remains well covered and in the first quarter lot of declared a <unk> 23 per share dividend, which was paid on April 15 2024.

Paul: For details on our first quarter 2024 operating results. Please refer to our earnings supplement which is available on our website.

Paul: And our quarterly report on Form 10-Q, which we expect to file in the coming days with that I will turn the call over to Brian.

Brian: Thanks, Paul.

Brian: During the first quarter ladder continued to successfully navigate our business through the current credit cycle accompanied by continuing tension in the middle East rising interest rates persistent inflation and constant revisions to predictions of what the fed will do next.

Brian: With regard to interest rate changes, we have not been significantly impacted due to the nature of our fixed rate liabilities that are termed out for years and our general low leverage approach to managing our business.

Adam Siper: Sure. Craig, when we get to debt yields on multifamily, I'm going to probably hand it off to you, but the macro side of that is that I would expect to have more foreclosures. I've long said that the second half of 2021 and the first half of 22 were really the 12-month period in time where if you bought things, you might have some trouble. Usually, two years later is when that trouble arrives because the first year is usually already funded, and the second year revolves around some success. But

Brian: During the quarter, we were pleased to have reentered the loan securitization business, which we had been absent from for years. We are hopeful that we will continue to contribute loans to conduit deals in the quarters ahead. This has historically been a high ROE business for us at ladder.

Brian: We also restarted our loan origination business and we expect if market volatility and interest rates improve even marginally our pace of loan closings should pick up in the quarters ahead.

Brian: As 2024 began in just the first four months, we've received loan payoffs or paydowns totaling $468 million was another $76 million in securities payoffs. We've received return of principal of approximately $544 million year to date.

Adam Siper: So coming up to, I would say, the end of the third quarter this year is when I would expect perhaps that commentary to change, mainly as a result, not of what I'm seeing, but of the calendar, just late 21 into early 22. Multifamily, we switched in late 21 to newer properties. And the problem that they got into, if it wasn't a newer property, was if it was a rehab at the end of 21 or early 22, you had a lot of construction cost overruns, labor costs went up, and then you got hit with insurance and additional operating expenses. So kind of a double whammy hit the sector. And that's why I think that there's quite a bit of give and take.

Brian: That pace of pay offs and a rather low leverage company creates more liquidity at a time when new investments can be made at the highest interest rates in over a decade.

Brian: Last week, the big banks reported that they were largely easing up on additional loan loss reserves because they believed that potential problems are limited and manageable.

Brian: Ladders perspective, we generally feel the same way and believe we are adequately reserved for potential problems we foresee.

Brian: Well always cautious we believe the lending market is falling out and borrowers are beginning to accept that rates will simply be higher for a while and they will need to plan accordingly, as the ear of free money seems to have come to an end.

Brian: Armed with strong liquidity and a disciplined credit model when we look forward to the rest of 2024.

Adam Siper: We believed that we would do better with newer properties that could not have cost overruns and simply had to be leased, as evidenced by an $80 million loan that was paid off this quarter on a brand new property in Ohio. That's part of the calculations we've reported today. But, you know, facts are stubborn things; rates are quite a bit higher. I have never understood what the Fed is looking at when it says inflation is falling. And I don't see it now either.

Speaker Change: We can now take some questions.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.

Speaker Change: Before pressing the star keys to allow for as many questions as possible. We ask that you each keep to one question and one follow up thank you.

Adam Siper: And so I suspect that, you know, rents will continue to rise, and that'll be helpful. But the insurance side of the multifamily sector is particularly problematic. So I suspect it'll continue.

Speaker Change: Our first question comes from the line of.

Speaker Change: Sure Barcomb with BTG. Please proceed with your question.

Sarah Barcomb: Hi, Good morning, everyone and thank you for taking the question I was hoping we could dig into originations a little bit it sounds like you're out in the market I'm looking at new deals I was hoping you could talk about the deals that you're looking at any color on the asset class or pricing and.

Adam Siper: However, if you've got enough cushion built in as a REIT that is a hybrid REIT with mortgages and properties, I'm not overly concerned about owning some of these. Like the one Pamela, I think, addressed a little bit here out in California, where, you know, we took title to it very quickly. We finished light rehab of a few units and got a CFO, and now it's on the market. I think we're 50% leased already.

Speaker Change: And could you maybe give us some of your expectations for volume just given acquisitions might not pick up to the extent that we were expecting maybe six months ago, especially coming off this inflation print today, just hoping you can give us some color there. Thank you.

Speaker Change: Okay.

Speaker Change: Thanks, Sarah This is Brian I will answer the yes, the volume question, but I'm, probably going to punt over to Adam sniper. If that's okay regarding originations that we're seeing so we have seen originations pick up a little bit, but it was a pretty low bar.

Adam Siper: That does not appear to be a problem to us. We put into default in the quarter a $60 million New York City apartment complex, three buildings, ground up construction, brand new. I have never seen a new York City brand new apartment building being handed back to a lender, but in this case, it's not there yet. And the two loans that Pamela mentioned, one was that $60 million, and the other one was, I think, a $12 million property.

Brian: From zero. So we do have a couple of loans under application, we've been quoting a lot more.

Speaker Change: A lot of deals are falling apart.

Speaker Change: Largely as a result of where rates are going.

Speaker Change: And recently spreads began to move a little bit wider also so I would say our volume will be fairly muted.

Speaker Change: For the year, although we're hopeful that it's not a I think it's a condition of the market not a condition of bladder and so I would I would had to throw out an estimate now I'd, probably throw out $400 million for securitized lebel instruments in 2024, but that has a wide left and right margin I'll just warn you.

Adam Siper: You know, we do have a mezzanine lender in the big one, again showing a little bit of restraint on the part of Ladder because when the loan was made, obviously, we were asked for a bigger loan than we provided. We provided a $13 million, $12 or $13 million mezzanine loan, which has been wiped out.

Speaker Change: So and Adam if you want to address what youre seeing he's our head of originations and Oh can failure.

Adam: Sure. Thanks, Brian So we are definitely seeing a little bit of a slow down based on the recent rate.

Adam: The uptake, but there are still loans that need to be refinanced center.

Adam: The maturing construction loans for new multifamily property.

Speaker Change: And we also have a.

Adam: I'd say a handful of industrial.

Adam Siper: So in the world of thinking about losses, the equity looks like it could be wiped, and the mezzanine didn't defend it. So if we did take title to that property in the near term, it would be under $400,000 a unit on a brand new apartment building in Manhattan. Those are not bad numbers.

Speaker Change: Acquisitions that we're still pursuing.

Speaker Change: That tends to be off market and tougher to reproduce those opportunities, but with highly attractive for them. When we do find them, but we're also still seeing a benefit from the bank pull back which is contributing to both our balance sheet loan opportunities and conduit opportunities and I think that'll continue for.

Speaker Change: The next 12 months so.

Craig: And the rents in Manhattan have been continuously rising throughout the entire time, so we're not overly concerned about the word foreclosure. As oftentimes said on these calls, a default is not a loss. And that's why we've been increasing our CECL reserves, but we don't have specifics, because one, we don't want to indicate to anybody that we've got room in the payback amount when the loan comes due. But second of all, it's more of a macro conversation than an actual situation that we're observing.

Speaker Change: Like Brian said cautiously optimistic.

Speaker Change: Okay. Thank you and maybe switching gears to the in place portfolio.

Speaker Change: Also just keeping in mind as hot inflation print and and the uptick in rates would it be your expectation to foreclose on more multifamily or maybe office assets. Later this year if rates stay where they are and could you give us an update on recent sponsor decision thinking in this environment.

Speaker Change: Maybe some expansion.

Speaker Change: Yields on the multifamily assets, where you could close thank you.

Speaker Change: Sure.

Speaker Change: Craig when we get to that yields on multifamily probably will hand, it off to you, but the macro side of that is I would expect to have more foreclosures.

Craig: Whenever there's a problem in multifamily, every time we issue a foreclosure notice or a default notice, the phone rings, and somebody wants to buy it. A lot of times, it's the buyer that sells it to the party that we made the loan to. So I think there's going to be a lot of salad mixing going on here at the end of the year. I think there'll be quite a few properties handed back to lenders, but I think the cautious lenders will not really be absorbing particularly large problems as far as losses go.

Craig: You know I've long said that the second half of 2021 in the first half of 'twenty. Two was really the 12 month period in time, where if you bought things you might have some trouble.

Speaker Change: Usually two years later is when that trouble arrives because the first year is usually already funded in the second year.

Speaker Change: That's around some success, but.

Speaker Change: So coming up to I would say at the end of the third quarter. This year is what I would expect perhaps that that commentary to change mainly as a result, not of what I'm seeing but of the Cowen just a late 'twenty one into early 'twenty two.

Craig: And in fact, some of them may turn into very nice wins because they may be acquired. Again, newer property, always a good thing in a housing shortage. So that's where we've been comfortable. Craig, I think you've got some debt yields on assets we have taken back. Can you flesh those out?

Speaker Change: Multifamily we.

Speaker Change: Switched in late 'twenty, one two newer properties and the problem is they got into if it wasn't a newer property was if it were if it was a rehab and at the end of 'twenty. One early 'twenty. Two you had a lot of construction cost overruns labor costs went up and then you got hit with insurance and additional operating expenses.

Speaker Change: So kind of a double whammy hit the sector and that's why I think that there is quite a bit of give back. We believed that we would do better with newer properties that could not have cost overruns and simply has to be leased evidenced by an $80 million loan that paid off this quarter on a brand new property in Ohio.

Craig: Yeah, sure, Brian. When we look at the overall portfolio on our multi-portfolio, at about 85 percent occupancy portfolio-wide, we're in the high fives to low sixes on debt yield. We see that stabilizing in the mid-sevens. As Pamela mentioned, we've taken a significant amount of payoffs over the past 12 months, and over half of that's been in multifamily, and that's been at that same low sixes debt yield in place when those properties were paid off. So we feel very good about the debt yields we're seeing and the path to getting these assets stabilized and into that mid-sevens debt yield territory.

Speaker Change: Part of the calculations we've reported today.

Speaker Change: No facts are stubborn things rates are quite a bit higher.

Speaker Change: I have never understood what the fed is looking at when they say inflation is falling.

Speaker Change: I don't see it now either and so I suspect that.

Speaker Change: Rents continue to rise and that'll be helpful, but the insurance side of.

Speaker Change: The multifamily sector is particularly problematic so I suspect it'll it'll continue however, if you've got enough cushion built in.

Speaker Change: As I read that as a hybrid REIT with mortgages and properties I'm not overly concerned about owning some of these like.

Speaker Change: Like the one Pamela I think addressed a little bit here out in California, where we took title to it very quickly. We finished like a rehab a few units and got a CFO and now it's on the market I think we're 50% leased already.

Brian Richard Harris: And Sarah, I'll just finish the question you asked about borrower behavior and what our observations are. It's fairly consistent.

Brian Richard Harris: They're largely grumbling, not happy with interest rates. And obviously, if you move 500 basis points into the lender column and out of the equity column, that will cause grumbling. However, they're standing behind them for the most part.

Speaker Change: That does not appear to be a problem to us.

Speaker Change: We put into default in the quarter of $60 million in New York City.

Speaker Change: Apartment complex three buildings ground up construction brand new I have never seen a New York City brand new apartment building being handed back to a lender, but we may in this case, it's not there yet.

Brian Richard Harris: They're buying caps. We prefer not to have anybody guaranteeing caps. We prefer the actual cap because we want to rely on a third party as opposed to the rent role for those payments getting made. But they're standing behind them.

Speaker Change: And the two loans that Pamela mentioned, one was that $60 million and the other one was a I think a 12 million dollar.

Speaker Change: Property.

Speaker Change: We do have a mezzanine lender and the big one again, showing a little bit of restraint on the part of ladder.

Speaker Change: When the loan was made obviously we were asked for a bigger loan and then we provided a mezzanine lender provided a $13 million 12 or $13 million mezzanine loan, which has been wiped out so in the world of thinking about losses, the equity it looks like it could be wiped out the mezzanine didn't defend so if we did take.

Brian Richard Harris: And in particular, we've had some positive activity, I would say, on the office portfolio. We have a property out in California where it was requiring some additional reserves, and a very wealthy individual simply guaranteed the loan and the whole thing. So it wasn't, you know, put up the right reserves that he needed to finish it but also guaranteed the principal and interest really to get out of all the discussions around how to continue.

Speaker Change: Title to that property in the near term it would be I'd under $400000 a unit on a brand new apartment building in Manhattan.

Speaker Change: Those are not bad numbers and the rents in.

Speaker Change: In Manhattan have been continuously rising throughout the entire time, so we're not overly concerned about the word foreclosure.

Brian Richard Harris: And we have another property in Westchester where the sponsor sold a different property and paid us down partially as we had requested and posted a reserve of $17 million. So again, showing commitment to the asset. I wouldn't say in the best mood, but we are still protecting the asset. So we feel pretty good about it. So overall, if they have the ability, they will. A lot of the assets that are defaulting, the sponsor simply does not have any more capital.

Speaker Change: It's oftentimes said on these calls.

Brian Richard Harris: Default is not a loss and that's why we've been hiking, our seasonal reserves, but we don't have specifics because one we don't want to indicate to anybody that we've got room in the payback amount.

Speaker Change: Welcome to do but second of all it it's more of a macro conversation than an actual situation that we're observing we.

Speaker Change: Alright.

Speaker Change: There is a problem in multifamily.

Speaker Change: Every time, we issue a foreclosure notice or a default notice the phone rings and somebody wants to buy at a lot of times, it's the buyer.

Sarah Barcomb: Thanks for all the detail there. I really appreciate it. Sure.

Speaker Change: Sold it to the party that we made below two so I think there's going to be a lot of salad mixing going on here at the end of the year I think there'll be quite a few properties hand, it back to lenders, but I think the cautious lenders will not really be absorbing a particularly large problems.

Stephen Albert Laws: Thank you. Our next question comes from the line of Stephen Laws with Raymond James. Please proceed with your question.

Stephen Albert Laws: Um, I guess first off, congrats on your 10th anniversary that you mentioned, Pamela. It seems like yesterday we were all at dinner just ahead of your IPO, but a nice milestone for you guys. You touched on origination a lot, so I appreciate the color there.

Speaker Change: As far as losses go and in fact, some of them may turn into very nice wins, because they may be acquired again newer property always a good thing and a housing shortage. So that's where we've been comfortable Craig I think you've got some debt yields on assets. We have taken back can you.

Unknown Executive: You know, as I think back to, kind of, you know, almost 10 years ago, you guys did some other things that we don't really see in the portfolio; you bought some, some, you know, attractive assets through stress lenders. It seems like you may be getting some of those back from stress lenders. But as you think about the amount of capital deploy, you have to deploy if you think about looking at buying existing loan pools at some discount or looking to buy hard real estate assets. Can you talk about any investment opportunities you're seeing outside of, you know, newly originated loans and securities investments?

Speaker Change: Yes.

Craig: Yeah sure Brian when we look at the overall portfolio on a multi portfolio at about 85% of occupancy portfolio wide. We're in the high fives to low sixes on debt yield we see that stabilizing in the mid sevens.

Craig: Allen mentioned, we've taken a significant amount of payoffs over the past 12 months and over half of that has been in multifamily and that's been in that same low sixes that yield in place when that was paid off so we feel very good about the debt yields we're seeing in the path to getting these assets stabilized into that mid sevens that yield territory.

Speaker Change: And Sir I'll, just finish up on finishing.

Speaker Change: Finishing the question you asked about borrower behavior and what our observations are it's fairly consistent there largely grumbling not happy with interest rates and obviously, if you move 500 basis points into the lender column in and out of the equity column that will cause grumbling. However.

Unknown Speaker: Unknown Speaker

Unknown Executive: The Hard Part is the financing side of it. And then I think there's a further bifurcation in that: does the asset have cash flow, or does it not? And if it doesn't have cash flow, that doesn't fit comfortably into a dividend-paying REIT. But if it does have cash flow, with some even longer-term leases sometimes, that's really what we're focusing on. So if I would predict further, I suspect you'll probably see us buy a couple, and you might even see a couple of office buildings, because some of them are pretty attractive.

Speaker Change: However, they are they are standing behind them for the most part they are they are buying caps.

Unknown Executive: We prefer not to have anybody guarantee caps, we we prefer the actual cap.

Speaker Change: As are we.

Speaker Change: We want to rely on a third party.

Speaker Change: As opposed to the rent roll for those payments getting made.

Brian Harris: So.

Unknown Executive: We're standing behind them and in particular, we've had some positive.

Speaker Change: Activity I would say on the office portfolio.

Speaker Change: We have a property out in California, where was requiring some additional reserves in a very wealthy individuals simply guaranteed below.

Speaker Change: The whole thing so it wasn't.

Unknown Executive: We're not really an operator of office buildings, so we'll probably do that in conjunction with someone else. But we are starting to see opportunities there that we're drawn to and we think are beginning to look more attractive than CLO, AAAs, and Treasuries at five and a half.

Unknown Executive: Put up the right reserves that he needs to finish it but also guarantee the principal and interest really to get out of all the discussions around how to continue and we have another property.

Unknown Executive: In Westchester, where the sponsor sold a different property and paid us down partially as we had requested and posts in our reserve of $17 million.

Unknown Executive: Do you think that's a 24-hour event, or do you think those opportunities really are more early next year?

Speaker Change: So again showing commitment to the asset.

Unknown Executive: I think it'll be a 24. I mean, there isn't going to be a deluge of them, but you might see one or two before year end. We've got a couple in front of us right now. We are not under contract with anything, but we are, you know, staying up late and walking around buildings at midnight to see who's walking around them with us. So yeah, I suspect we'll do something before year end. But I will point out, don't misunderstand me, we do not have anything under contract right now.

Speaker Change: I wouldn't say in the best mood, but.

Speaker Change: So protecting the asset so we feel pretty good about there so overall and they have the ability they will a lot of the assets that are defaulting. The sponsor simply does not have any more capital.

Speaker Change: Thanks for all the detail there really appreciate it.

Speaker Change: Sure.

Speaker Change: Thank you. Our next question comes from the line of Stephen Laws with Raymond James. Please proceed with your question.

Stephen Albert Laws: Hi, good morning.

Stephen Albert Laws: I guess first off congrats on your 10th anniversary that she mentioned Panama. It seems like yesterday, we were all at a dinner just ahead of your IPO, but.

Stephen Albert Laws: A nice milestone for you guys.

Stephen Albert Laws:

Unknown Executive: You know you touched a lot on originations and I appreciate the color there.

Unknown Executive: As I think back to kind of you know.

Unknown Executive: I mean, if you just do the quick math calculation, if we're at one-and-a-half times adjusted leverage, could we go to two-and-a-half times? Sure. Easily.

Stephen Albert Laws: Almost 10 years ago, you guys did some other things that we don't really see in the portfolio you bought some some.

Unknown Executive: Attractive assets from distressed lenders it seems like you're maybe getting some of those back from stress lenders, but as you think about the amount of capital to deploy you have to deploy if you thought about looking at buying.

Unknown Executive: We've always said we like running our leverage between two and three times. We rarely say we like one-and-a-half times, but to go to the question of how much liquidity is enough, the answer is more. So we're very comfortable with our liquidity picture right now. As interest rates rise and markets deteriorate, and others get under stress, I mean, we do have a couple of levers we can pull to create earnings. One is buying stock back, and another is the bond side of the world, where on both of our bond issuances that mature in 27 and 29, we actually deliberately borrowed more than we thought we were going to need because we certainly didn't plan on having $750 million coming due on one day.

Unknown Executive: Existing loan pools at some discount or looking to buy hard real estate assets.

Unknown Executive: Talk about any investment opportunities you're seeing outside of new.

Stephen Albert Laws: Newly originated loans and debt securities investments.

Stephen Albert Laws: Sure.

Unknown Executive: I think in our last call somebody said to me, what's your favorite investment today, and I, probably said CLO AAA.

Stephen Albert Laws: Because one they are liquid to their safe and three you can sell them whenever you you can finance them pretty comfortably.

Stephen Albert Laws: As a company that's not terribly leveraged the last one it doesn't matter that much but I would tell you. This time around we're really beginning to see attractive equity opportunities, where our property is being sold.

Stephen Albert Laws: To somebody and the it might have seller financing or it might not and it's being sold at a fraction of what it was purchased for just two or three years ago and the harder part isn't really the.

Unknown Executive: So, you know, there's a lot of opportunities there, and we kind of look at that versus the rate of payoffs and what the actual price is. And I think I've said a few times on these calls that, you know, if the dividend and the yield on bonds are the same, yeah.

Unknown Executive: The purchase the hard part is the financing side of it.

Unknown Executive: And then I think there's a further bifurcation in that does the asset have cash flow or does it does it not and if it doesn't have cash flow that doesn't fit comfortably into a dividend paying REIT, but if it does have cash flow with some even longer term leases, sometimes oh, that's really what we're focusing on so if I would predict further I suspect.

Stephen Albert Laws: Great. I appreciate all the comments this morning, Brian.

Operator: Thank you....

Jade Joseph Rahmani: Thank you. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Stephen Albert Laws: You'll probably see us buy a couple might even see us buying a couple of office buildings.

Jade Joseph Rahmani: Thank you very much. In terms of the current origination environment, Could you give any color on your attitude today versus... I mean, clearly, the company is sitting on a very strong liquidity position. You know, earlier in the year at CREF-C, everyone was super bullish about volumes picking up. Would you say there was not an opportunity to ramp up originations in the quarter? You passed on a lot of deals you didn't like because the market was too competitive, and how does that compare with where things are today?

Jade Joseph Rahmani: I guess, because some of them are pretty attractive.

Jade Joseph Rahmani: We're not really an operator of office building, so, we'll probably do that in conjunction with someone else but.

Jade Joseph Rahmani: We are starting to see opportunities there that were drawn to and we think is beginning to look more attractive than cielo triple A's and treasuries at five and a half.

Jade Joseph Rahmani: Okay.

Jade Joseph Rahmani: For event or do you think those opportunities really are there more early next year.

Jade Joseph Rahmani: I think it'll be a 'twenty four but first I mean, that's not going to be a deluge of them, but you might see one or two before year end. We've got a couple in front of US right. Now we are not under contract with anything but we are staying.

Brian Richard Harris: Sure. Yeah, if you remember, Jade, back in January at PREFC, this is a world where people had decided the Fed was going to cut rates six or seven times. That was just four months ago, and all of that has changed at this point. We never thought that, and I wouldn't say that our attitude has changed at all. I think we'd like to originate more loans than we have so far, but that desire will not overwhelm our credit discipline.

Jade Joseph Rahmani: Staying up late and walking around buildings at midnight to see who is walking around them with us. So yeah I suspect, we'll do something before year end, but I will point out that don't Misunderstand me, we do not have anything under contract right now.

Brian Richard Harris: Sure.

Speaker Change: One other question if I may you know when you think about you know obviously a lot of liquidity a lot of excess liquidity, where do you want to operate but hard to say normal in this world, but are you know in normal times, what is the right amount of liquidity and when you think about returns available today as you deploy what you consider excess liquidity how much earnings.

Brian Richard Harris: And we have seen several quotes be accepted, transactions about to happen that fell apart. And I think one of the things that have happened, especially in the near term here, interest rates have moved very quickly higher on the part of the curve where most of those securitized exits take place. So some of it is just market conditions. It's very attractive right now.

Brian Richard Harris: <unk> can you get incremental earnings power can be generated once this money goes to work.

Brian Richard Harris: Uh huh.

Brian Richard Harris: If you just do the quick math calculation.

Brian Richard Harris: One five times adjusted leverage could.

Speaker Change: Could we go to two and a half times sure easily.

Speaker Change: <unk> always said, we like running our leverage between two and three times a week, we've rarely said, we like one five times, but to.

Brian Richard Harris: If you've I hesitate to buy longer-duration fixed-rate instruments because you have to hedge them, and with a flat interest rate curve, it's kind of difficult to do that and make money. So our attitude is a little bit what I would say is it's what we thought was going to happen. I think we said we thought rates would go up. And we don't think they're going much higher from here, but they could go a little higher.

Brian Richard Harris: To go to the question of how much liquidity is enough the answer is more.

Brian Richard Harris: So we're very comfortable with our liquidity picture right now as interest rates rise and markets deteriorate and others get under stress I mean, we do have a couple of levers we can pull to create earnings one is.

Brian Richard Harris: Buying the stock back and other is.

Brian Richard Harris: As the bond side of the world, where on both of our bond issuances that mature in 27% and 29, we actually deliberately borrowed more than we thought we were going to need so because we certainly didn't plan on having $750 million coming due on one day.

Brian Richard Harris: And volatility will continue throughout the year. And if we're talking about China or the U.S. economy, we'll probably be talking about a rally in rates because they're slowing down in the economies. If we talk about the lack of discipline in the fiscal side of the United States and their treasury, the way they borrow money, we'll probably be talking about higher rates. So I don't think it's going to just flatline between those two.

Brian Richard Harris: So you know theres a lot of opportunities there and we kind of look at that versus the rate of pay offs and what the actual price is and I think I've said a few times on these calls that.

Brian Richard Harris: If the dividend and the yield on bonds is the same.

Brian Richard Harris: You should probably by the bond because you're going to have to buy that one day anyway.

Brian Richard Harris: Currently our bonds are yielding between seven and seven 5% and our dividend is in the high eights. So.

Brian Richard Harris: I think it'll be down one day and up the next. So I think when I got on the call here, I was looking at about a $4.73 10-year. That's probably the top of that for a little while, and it'll probably head back down. But I think we'll see it again before year end.

Brian Richard Harris: I'd, probably lean more towards stock at this point, if we if we were to transact on latter instruments.

Brian Richard Harris: I think we have enough capital, it's a little could eat those words on a fork later on if you're not careful so.

Brian Richard Harris: Hesitate to say how much excess liquidity, we've got but we could easily turn this inventory.

Brian Richard Harris: Add another billion dollars $5 and you can pick the return levered or Unlevered you want on that and obviously, we can we can ramp up these earnings relatively quickly.

Jade Joseph Rahmani: So the desire is here. We think it's very hard to make a bad loan right now. But there is just a real problem with demand here. And it's because the commercial real estate sector seems to be getting worse. We concur with that thinking, although we do think it is near the end, and we think the worst has passed.

Jade Joseph Rahmani: I thought we would do it a little more quickly with securities, but they're really just hasnt been a lot of our new originations, creating new securities we have been buying them, but they're not coming out of pace that we were hoping for.

Brian Richard Harris: Did that answer you, or was it too vague? Um, well, clear is not overly clear, but I understand it's a mixed market. But it does sound like you're recognizing there's a borrower demand challenge. It's hard to get deals done. It's not that there isn't an appetite from lenders. Wanted to ask.

Speaker Change: Okay great.

Speaker Change: Great I appreciate all the comments this morning, Brian Thank you.

Brian Richard Harris: Sure.

Brian Richard Harris: Thank you. Our next question comes from the line of Jade Rahmani with key BW. Please proceed with your question.

Brian Richard Harris: Thank you very much in terms of the current origination environment.

Brian Richard Harris: Could you give any color on your attitude today versus.

Brian Richard Harris: One quarter ago.

Brian Richard Harris: Clearly the company is sitting on a very strong liquidity position.

Brian Richard Harris: Well, I'll give you further evidence of that. Yeah, I mean, if you take a look at conduit deals now, I mean, in the last cycle, there were, you know, a couple of labels out there that would have two or three names, you know, contributing to a deal. We now see conduit transactions with 10, 11, 12 originators, some of them with one loan in the pool. So that tells you all you really need to know about how you aggregate.

Brian Richard Harris: Earlier in the year at Kraft see everyone was super bullish about volumes picking up.

Brian Richard Harris: Would you say there was not an opportunity to ramp up originations in the quarter you passed on a lot of deals you didn't like or the market was too competitive and how does that compare with where things are today.

Speaker Change: Sure Yeah. If you remember back in January at Cressey, Oh. This is a world where people have decided that the fed was going to cut rates six or seven times that was just four months ago.

Brian Richard Harris: It's just not easy. And that has nothing to do with ladder. That has to do with, you know, conditions in the market. But when you see 12 originators get together, and they allow three or four of them to contribute one loan, that is indicative of a lack of supply.

Brian Richard Harris: All of that has been changed at this point, we never thought that.

Brian Richard Harris: I wouldn't say that our attitude has changed at all I think we'd like to originate more loans than we have originated but that desire will not overwhelm our credit discipline.

Brian Richard Harris: And we have seen several quotes.

Brian Richard Harris: And, putting on your fortune teller hat, do you think that ladder will do more balance sheet originations than conduit? Is conduit going to be a small part of the business, or do you see a big opportunity? I think

Brian Richard Harris: Quotes be accepted transactions about to happen that fell apart and I think one of the things that has happened, especially in the near term here interest rates have moved very quickly higher.

Brian Richard Harris: In the part of the curve where.

Brian Richard Harris: Most of those securitized, thanks, Thats, taking place so some of it is just market conditions.

Brian Richard Harris: I think the balance sheet side of the business will be bigger than conduit, but not because we want it to be. I just think as long as the yield curve is inverted, and I think it stays that way for a bit longer, the conduit business will have its own set of challenges. However, if the yield curve gets steeper and the two-year drops, and the ten-year rises, that's when that business will take off.

Brian Richard Harris: <unk> very attractive right now.

Brian Richard Harris: You can if you've got a five 3% sulfur and you've got a 475 year. Yeah that you can put on a lot of interest carry there.

Brian Richard Harris: I hesitate to buy longer duration fixed rate instruments, because you have to hedge them and where the fleet with a flat interest rate curve, it's kind of difficult to do that and then make money.

Jade Joseph Rahmani: And then lastly, if I could squeeze another one in on the net lease portfolio, just give your high-level thoughts on the portfolio, you know, how are you feeling about that space and the outlook? You know, there has been a little bit of pressure on the Dollar Tree retail store, in particular. I know you all have Dollar Generals, but just, you know, tenant demand and what you see about the overall portfolios, the lease duration. We have relatively long terms.

Jade Joseph Rahmani: Our attitude is a little bit what I would say is it's what where we thought it was going to happen. We I think we said we thought rates would go up and.

Jade Joseph Rahmani: And we don't think theyre going much higher from here, but they could go a little higher and volatility will continue throughout the year and then before talking about China or the U S economy will probably be talking about a rally in rates because theyre slowing down in the economy. If we talk about the lack of discipline in the physical side.

Jade Joseph Rahmani: The United States setting their treasury.

Jade Joseph Rahmani: They borrow money, we'll probably be talking about higher rates. So I don't think it's going to just flatlining between those two I think it'll be down one day and up the next so I think when I got on the call here I was looking at about a 470 310 year, that's probably the top of that for a little while and it'll probably head back down, but I think we'll see it again before year end.

Brian Richard Harris: We still have relatively long-term leases. Paul, you can start looking that up. I don't remember it right now, but I know we've got quite a bit of time.

Brian Richard Harris: We are, we have always been cautious around dollar stores in certain places where we felt like the dollar store model originally, I think coming out of Family Dollar, it was like a single employee in sometimes a tough part of town, and there was a certain amount of slippage, theft, if you will, that was accepted. However, in our Dollar General portfolio, that is a curated portfolio largely in rural areas around lakes and fishing areas where there is a wide, you know, geography and not tons of supermarkets around.

Brian Richard Harris: So the desire is here, we think it's very hard to make a bad loan right now, but there is just a real problem with demand here and and it's because the commercial real estate sector seems to be getting worse.

Speaker Change: We concur with that thinking.

Brian Richard Harris: Though we do think it is near the end and we think the worst has passed.

Brian Richard Harris: Yeah.

Brian Richard Harris: Did that answer your bank.

Brian Richard Harris: [laughter] well clears.

Brian Richard Harris: Not overly clear, but I understand it's a it's a mixed market.

Brian Richard Harris: But it does sound like Youre, recognizing there's a borrower demand challenge, it's hard to get deals done it's not that there isn't appetite from lenders wanted to ask him.

Brian Richard Harris: So we see a lot of sales of tobacco products and beer and very little theft. I just looked at three of our Dollar Generals in Florida; all three of them recently extended their leases for five years. I wouldn't call them in totally rural areas, but I certainly wouldn't call them inner-city either.

Brian Richard Harris: Further evidence of that.

Brian Richard Harris: I mean, if you take a look at conduit deals now I mean in the last cycle. There were a couple of labels out there would have two or three names. You know we are contributing into a deal. We now see condo transactions with 10, 11, 12 originators some of them with one loan.

Brian Richard Harris: In the pool. So that that tells you all you really need to know about how your aggregate. It's just not easy and that has nothing to do with ladder that has to do with you know conditions in the market, but when you see 12 originators get together and they allow three or four of them to contribute one loan that is indicative of a lack of supply.

Brian Richard Harris: But we've been very cautious around that, and when we bought our Dollar Generals, we tended to buy about two out of every ten we looked at. And so we think that that selection criteria will protect us through this. You know, we do worry about some inner-city retail. There are clearly a few problems in the drugstore chain area, but they're big companies that can probably make adjustments and figure out a way to get through this.

Brian Richard Harris: And putting on your fortune Teller hat do you think that ladder will do more balance sheet originations than conduit is kind of it going to be a small part of the business or do you see a big opportunity there.

Brian Richard Harris: I think the balance sheet side of the business will be bigger than conduit, but not because we want it to be I, just think as long as the yield curve is inverted kind of I think it stays that way for a bit longer.

Brian Richard Harris: But I think Amazon, for instance, just figured out how much the top 20 items are that CVS sells, and so they just went at it that way. But I suspect CVS will now open up a warehouse with those 20 items in it and deliver them to your home just as fast. So I'm going to let them fight and not get overly concerned about it. But I don't really feel like we've got too much trouble as far as the obsolescence part of this goes; we stuck to drugstores, supermarkets, and a couple of dollar stores. But by and large, they're doing very well.

Brian Richard Harris: The conduit business will have its own set of challenges. However, if the yield curve gets steeper in the two year drops and the 10 year rises that's when that business will take off.

Speaker Change: And then lastly, if I could squeeze another one in on the net lease portfolio could you just give your high level thoughts on the portfolio. How are you feeling about that space in the outlook. You know there has been a little bit of pressure and a dollar tree a.

Brian Richard Harris: Retail retailer in particular.

Brian Richard Harris: I know you all have dollar generals, but just you know tenant demand and what you see about the overall portfolio's lease duration.

Steven Cole DeLaney: Thank you. Our next question comes from the line of Steve Delaney with JMP Citizens. Please proceed with your question.

Brian Richard Harris: Yeah.

Steven Cole DeLaney: We have relatively long term leases still Paul you can start looking that up I don't remember it right now, but I know we've got quite a bit of time. We are we have always been cautious around dollar stores in certain places, where we felt like the dollar store model originally I think.

Steven Cole DeLaney: Yeah, good morning, everyone. And congrats on a strong start to 2024. Great to hear about the conduit business. Unknown Speaker 0, Circle that up a little bit. Pamela, did you mention that the gain on sale on that $1.5 billion loan was about 370 basis points?

Steven Cole DeLaney: Coming out of family dollar it was like a single employee in sometimes the tough part of town and.

Steven Cole DeLaney: And there was a certain amount of slippage theft. If you will that was accepted however in our dollar general portfolio that has a curated portfolio largely in rural areas around lakes and fishing areas.

Unknown Executive: Hello. She's on mute. And, yes, it is 3.6%.

Steven Cole DeLaney: Where there is why.

Unknown Executive: Geography, and not tons of supermarkets around so we see a lot of sales of tobacco products.

Unknown Executive: And it wasn't. It was on 40. I think 41 million.

Unknown Executive: Pamela, are you there? Oh, that's a gain. I apologize. $41 million in loan, $1.5 million gain. Got it, got it. And how about 400 million, you know, obviously a big number. I know historically that this has been your highest ROE business segment. And can you give us some sense of how that might ramp up in the first half of this year and back half, in terms of a very rough number. Just trying to get a sense, you know, how that might step up over the next three quarters of the year. It's pretty slow right now, Steve. I mean, I won't tell you if it's not.

Unknown Executive: Here.

Unknown Executive: And with very little theft, I, just looked at three of our dollar generals and Florida, all three of them recently extended their leases for five years.

Unknown Executive: I wouldn't call them and totally rural areas, but I, certainly wouldn't call them inner city, there, but so we've been very cautious around that and when we bought our dollar generals we tended to buy about two out of every 10, we looked at.

Unknown Executive: So yeah, we think that that selection criteria it will protect us through this.

Unknown Executive: Yeah, we do.

Unknown Executive: Worry about some inner city retail.

Unknown Executive: There is clearly a few problems in the drugstore chain area, but they are big companies that can probably make adjustments and figure out a way to get through it but.

Unknown Executive: I think Amazon for instance, just figuring out how much the top 20 items are that Cvs cells. So they just went out of it that way, but I suspect Cvs will now open up a warehouse with those 20 items in it and deliver it to your home just as fast so.

Unknown Executive: So, given the fact that we're almost in May, I'm going to have to tilt everything to the back half of the year. But that has a lot to do with things that don't impact us, that are not impacted by us. So, if you had asked me that question a month and a half ago, I would have told you the next quarter is going to be pretty aggressive. But the rate at which the tenure has moved higher has, more or less, always had that impact.

Unknown Executive: I'm going to let them fight and not get overly concerned about it but I don't really feel like we've got too much trouble as far as the.

Unknown Executive: Obsolescence part of this goes we stuck to drugstores supermarkets, and a couple of dollar stores, but by and large they are doing very well.

Speaker Change: Thank you.

Unknown Executive: Yeah.

Unknown Executive: Thank you. Our next question comes from the line of Steve Delaney with JMP citizens. Please proceed with your question.

Unknown Executive: It sort of destroys the new origination pipeline, and people sit on the fence thinking rates are going to go back where they were two months ago. And maybe they will, maybe they won't.

Speaker Change: Yes, good morning, everyone and congrats on a strong start to 2024.

Unknown Executive: But there's always this little pause that takes place when there's been a move. And we're in that pause right now. However, on the demand side of the conduit business, if you can produce the collateral and the bonds, there's plenty of demand. So, rates are high, spreads are not terribly wide, but rates are high. And so, there's a good bid out there. So, it's a good time to be in business. We just can't meet the...

Speaker Change: Great to hear about the conduit business.

Unknown Executive: I just wanted to circle.

Speaker Change: All of that up a little bit Pam.

Unknown Executive: Pamela did you mentioned that the gain on sale on that $1 5 billion loan was about 370 basis points.

Unknown Executive: Hello.

Unknown Executive: She's on mute and yes. It is three 6% and it wasn't it was on 45, I think 41 million.

Speaker Change: Okay, I'm glad you're there.

Unknown Executive: Okay.

Unknown Executive: Hello, Josh $41 million.

Unknown Executive: The raw material side of the business. I got it. Okay, well, that's helpful to the fact that just understanding. Our goal for the year is very much backend weighted, so we'll be careful on that. Lots of stuff has been covered, so I won't. [inaudible] out of a period of stress, and it's premature to start thinking about, turning to often.

Unknown Executive: One five got it.

Speaker Change: Got it and help for 400 million.

Unknown Executive: A big number I know historically this has been your highest ROE business segment.

Unknown Executive: You give us some sense of how that might ramp between first half of this year and back half.

Unknown Executive: Yeah, just in terms of we're very rough numbers.

Unknown Executive: Trying to get a sense, how that might step up over the next three quarters.

Unknown Executive: We discuss this all the time, and there's plenty of discussion about whether we should raise our dividend and the hell with what's going on everywhere else. Yeah, I think the reality is that to be more comfortable, we'd have to have a little bit broader situation going on in the stock market.

Speaker Change: It's pretty slow right now Steve.

Unknown Executive: Won't tell you or not.

Unknown Executive: So given the fact that we're almost in May I'm gonna have to tilt everything to the back half of the year.

Unknown Executive: But that has a lot to do with things that don't impact us that are not impacted by us. So.

Unknown Executive: I. If you had asked me that question a month a half ago I would've told you in the next quarter is going to be pretty aggressive, but the rate at which the 10 year has moved higher has more or less it always has that impacted at sort of slaughter the new.

Unknown Executive: Most of the stock market gains that have taken place, and I don't mean on the REIT side; I'm talking about just in general, are multiple expansion through falling earnings. And as you know, a few stocks are driving that train a little bit. So that doesn't feel like a healthy setup there.

Unknown Executive: <unk> pipeline and people sit on the fence thinking rates are going to go back where they were two months ago and maybe they will maybe they won't but there's always this little pause that takes place when there's been a move and that's where in that pause right now.

Unknown Executive: However, the demand side of the conduit business. If you can produce the collateral and the bonds. There's plenty of demand. So rates are high spreads are not terribly wide, but our rates are high and so there's a good bit out there. So it's a good time to be in the business. We just can't.

Unknown Executive: Interest rates continue to rise, and with a high eight dividend, which is very safe because we just have a lot of cash and very low leverage, and the amount of insider ownership that we have, we have every incentive to raise the dividend if we think it's helpful. Right now, we believe, and we have demonstrated that we can drive earnings at levels well in excess of our dividend, and that should be a formula for a rising stock price. So, but because of the volatility in the marketplace that exists, there's always opportunities that pop up suddenly. And you know, you don't really get a warning; they just sort of get there.

Unknown Executive: <unk>.

Unknown Executive: The raw material side of the business.

Speaker Change: Yeah got it okay, well that's helpful.

Unknown Executive: Just understanding that you or your goal for the year is very much backend weighted so we'll be careful on that.

Speaker Change: Lots of stuff has been covered so I won't.

Unknown Executive: The labor things, but.

Speaker Change: Just stepping back big picture for a minute.

Unknown Executive: Definitely obviously applaud the buyback and the reset there.

Unknown Executive: With respect to the dividend.

Unknown Executive: We're coming out of a period of stress and it's premature to start thinking about you know.

Unknown Executive:

Unknown Executive: Turning to offense from from defense or reducing your cash holdings, but what would what would it take for management and the board.

Unknown Executive: So there are lots of ways for us to drive earnings. But I think the overriding issue that probably would make us all feel better is if I could turn on the TV one morning and not hear about real estate. The amount of time and ink dedicated by the media to commercial real estate is saying the same thing over and over and over.

Unknown Executive: The increase was late.

Unknown Executive: Late 2022.

Unknown Executive: What would you want to see.

Unknown Executive: This year moves on or into next year.

Unknown Executive: To make you comfortable you got good dividend coverage based on this quarter's earnings what specific one or two things would you like to see the confidence to increase the dividend.

Unknown Executive: Oh, well, we discuss this all the time and there is plenty of discussion about should we raise our dividend.

Unknown Executive: It's we're at a point where it almost feels like the bottom because I was taught a long time ago when you can't hear another thing about something that makes you feel worse. You're probably at the bottom. I kind of feel like we're there at this point. Yeah, so I mean, I'm not uncomfortable. We raised our dividend now. I wouldn't be afraid of covering it. It's pretty easy to do, especially with all the cash. But what I'd like to say is that we're not holding on to our cash so that we can cover our dividend. We're holding on to our cash so that we can buy investments that last for an extended period of time and are sustainable. And we do think that option is there, and we think it's coming. We've seen it here

Unknown Executive: Hell with what's going on and everywhere else, but.

Unknown Executive: Yeah, I think the reality is to be more comfortable we'd have to be have a little bit broader situation going on in the stock market.

Unknown Executive: Most of the stock market gains that have taken place and I don't mean on the REIT side I'm talking about just in general as multiple expansion through falling earnings and as you know there are few stocks are driving that train a little bit. So that's that doesn't feel like a healthy setup there.

Unknown Executive: Interest rates continue to rise and as with the high a dividend, which is very safe because we just have a lot of cash and very low leverage.

Unknown Executive: And the amount of insider ownership that we have we have every incentive to raise the dividend. If if if we think it is helpful. Right now we believe and we have demonstrated that we can drive earnings at levels well in excess of our dividend and that should be a formula first rising stock price.

Unknown Executive: So but.

Unknown Executive: Most of the volatility in the marketplace that exists, there's always opportunities that pop up suddenly and.

Unknown Executive: Yep. Hard to push a road. If you do raise the dividend, you'd like to think the stock market would reward you for that. And with this sentiment in this market towards real estate, it probably wouldn't, or it certainly might not. Yeah, well, I don't think it would.

Unknown Executive: You don't really get a warning they just sort of get there. So there's lots of ways for us to drive earnings, but I think the overriding issue that probably would make us all feel better if I could turn on the TV, one morning, and not hear about real estate.

Unknown Executive: The amount of time, Inc. Dedicated by the media to commercial real estate is saying the same thing over and over and over.

Unknown Executive: We tend to try to reward our shareholders for taking the chance of holding this real estate company, too. But I think we're doing a good enough job with it right now. And I think we're demonstrating, you know, discipline in our returns. But just because a quarter or two went by where volumes were low, that doesn't mean we start popping capital out the door. And we've always had a pretty respectful relationship with our bondholders, also.

Unknown Executive: It's.

Unknown Executive: We're at a point, where it almost feels like the bottom because I was taught a long time ago. When you can't hear another thing about something that makes you feel worse you are probably at the bottom I kind of feel like we're there at this point.

Unknown Executive: So I I mean, I'm not uncomfortable raised our dividend now I wouldnt be afraid of cover and it's pretty easy to do especially with all the cash, but what I'd like to do that we're not holding on to our cash. So that we can cover our dividend we're holding onto our cash doesn't it we can buy investments that last for an extended period of time and are sustainable.

Unknown Executive: And we do think that option is there and we think it's coming we've seen it here and there, but it's not widespread and that won't happen until the last of the sellers have thrown in the towel on their real estate holdings.

Unknown Executive: So we usually, when we buy our stock back, raise our dividend, we also buy our bonds back too, at the same time to keep everybody, you know, aware of the fact that we're watching. Well, thank you, Brian. Thank you.

Unknown Executive: Yes hard to push a rope and if you do rate that you'd like if you do raise the dividend you'd like to think the market and stock market would reward you for that.

Unknown Executive: This sentiment in this market towards real estate, it probably would or might certainly might not.

Matthew Philip Howlett: Thank you. Our final question this morning comes from the line of Matt Howlett with B. Riley Securities. Please proceed with your question.

Matthew Philip Howlett: Yeah, well I don't think it would when we tend to try to reward our shareholders for taking the chance of holding this real estate company too, but I think we're doing a good enough job with it right now and I think we're demonstrating discipline in our returns, but just because a quarter or two went by where volumes were low and that doesn't mean, we start popping capital out there.

Matthew Philip Howlett: Thanks for taking my question. Hey, just a quick one, Brian.

Matthew Philip Howlett: I mean, I think it's a pretty bold statement to go and say we think the commercial real estate cycle is at the bottom or the worst is over. I think some of the banks have said that, but if that's true, my question to you is, how should we model this general seat sale reserve? I know it's not part of the distributable, but people do look at it. We look at it every quarter. And if there are onerous assumptions in it today, moving forward, if the worst is over, is that going to come down? Should we look at basically what you have in place as being maybe released at some point?

Matthew Philip Howlett: Door.

Matthew Philip Howlett: And we've always had a pretty respectful relationship with our bondholders also so we usually when we buy our stock back raise our dividend. We also buy our bonds back to at the same time to keep everybody.

Speaker Change: Aware of the fact that we're watching all of it we noticed that well. Thank you Brian for the comment.

Speaker Change: Thank you.

Matthew Philip Howlett: Final question. This morning comes from the line of Matt <unk> with B Riley Securities. Please proceed with your question.

Speaker Change: Thanks for taking my question just a quick one Brian.

Matthew Philip Howlett: It's a pretty a pretty bold statement just to go out and say, we think the commercial real estate cycles at the at a bottom or the worst is over I think some of the banks have said that but.

Matthew Philip Howlett: That is true my question to you how should we model. This general Cecil Reserve I know, it's not part of the script.

Brian Richard Harris: I think, as I said, the state of commercial real estate, when I say the worst is over, but, and I hope this doesn't sound contradictory, but we still believe it's getting worse, but we just think it's getting worse at a slower pace. So a lot of the time, you're not going to be surprised by anything commercial real estate now, if you own a loan, and it's on your books, you know, if it's going to be a problem or not.

Matthew Philip Howlett: Distributable but.

Brian Richard Harris: People do look at it we look at it every quarter and if there is a onerous assumptions in it today moving forward. If the worst is over is that going to come down to we look at basically what you have in place is being may be released at some point.

Speaker Change: Oh I see.

Brian Richard Harris: As I said in the state of commercial real estate when I say, the worst is over but I hope it doesn't sound contradictory, but we still believe it's getting worse, but we just think it's getting worse at a slower pace. So a lot of the youre not going to be surprised by anything in commercial real estate now if you aren't alone and its on your books, even know if it's going to be.

Brian Richard Harris: So it's, we feel like we've got a very good handle on what can and can't go wrong here. Having said that, you know, depending on what the government does, world events, and also technology, these things can and do change pretty quickly.

Brian Richard Harris: Some are not so it's a we feel like we've got a very good handle on what can and can't go wrong here.

Brian Richard Harris: Having said that you know depending on what the government does widen world events and also technology.

Brian Richard Harris: Things can and do change pretty quickly and have long maintained that would be effectively the absence of the.

Brian Richard Harris: And I've long maintained that with the effectively absence of the regional banks in the refi market, the opportunity set is huge for when you get comfortable that real estate values are no longer falling. But when we go to our CECL reserve, I, if I had to guess, and again, this is just a party of one here, I'll bet you we add a little more to it next quarter, but I don't think we'll add another $7 million to it. I, you know, it depends on what happens, but it gets easier when you take $500 million in principal payments.

Brian Richard Harris: Regional banks in the refi market the opportunity set is huge for when you get comfortable that real estate values and no longer falling.

Brian Richard Harris: When we go to our seasonal reserve I, if I had to guess and again. This is just a party of one here but.

Brian Richard Harris: But when we add a little more to it next quarter, but I don't think we'll add another $7 million to it I you know it depends what happens, but it gets easier when you take $500 million in principal payments and because we can debate all you want about what the office sector is doing or what our loan inventory looks like but we can't really debate too much about.

Brian Richard Harris: And because we can debate all we want about what the office sector is doing or what our loan inventory looks like, but we can't really debate too much about $500 million in payoffs. So, and with a one and a half times levered company, this drives liquidity, too. So it's, it's a little. I don't want to be glib about it, but it's kind of a good spot to be sitting in because we used to sit in the bank at zero with hundreds of millions of dollars every time we got payoffs. Now it's almost 5.5% you get. If you buy a AAA CLO, you get 7%.

Brian Richard Harris: What $500 million in payoffs means so and we're the one five times Levered company this drives liquidity too so.

Brian Richard Harris: It's it's a little.

Brian Richard Harris: I don't know I don't want to be glib about it but it's kind of a good spot to be sitting in because you know we used to sit in the bank at zero with hundreds of millions of dollars every time, we got pay off now its almost five 5% you get if you buy a AAA CLO you've got 7%. So these are reasonably comfortable times.

Brian Richard Harris: So these are reasonably comfortable times for highly liquid investors, and I think you're going to see that bear out. But I don't, when I say, I mean, commercial real estate, as long as you've still got people selling things for 25% of what they were sold at, purchased three years ago, you haven't really hit the sentimental bottom yet. But on the other hand, when you read all these stories about this stuff happening, when you look at the amount of real estate in the country, very little of it is doing that. It just makes a lot of headlines. A lot of famous people are involved.

Brian Richard Harris: For highly liquid.

Brian Richard Harris: Investors and I think you're going to see that bear out and but I I don't when I say.

Brian Richard Harris: Commercial real estate as long as you've still got people selling things for 25% of what they were sold at purchased at three years ago, you haven't really hit the sentimental bottom, yet, but but on the other hand for when you read all these stories about this stuff happening there when you look at the amount of real estate in the country. It has very little of it is doing that.

Brian Richard Harris: It's just catches a lot of headlines a lot of famous people are involved and so you have to let the flip that blow through and not get overly concerned about it.

Brian Richard Harris: So you have to let that blow through and not get overly concerned about it. This does look like a fairly normal real estate cycle to me, somewhat amplified in its impact by the fact that we had 10 years of zero interest rates. So we had plenty of time to gin up the leverage, although nothing compares to what we saw in late 21 and early 22.

Brian Richard Harris: This does look like <unk>.

Brian Richard Harris: Fairly normal real estate cycle to me somewhat amplified and its impact by the fact that we had 10 years of zero interest rates. So we had plenty of time to gin up the leverage.

Brian Richard Harris: Although nothing compares to what we saw in late 'twenty one in early 'twenty two once we get through 'twenty four.

Brian Richard Harris: Once we get through 24, there's just not a lot of new production after 2022. So, naturally, things will be slowing at that point. And people that are going to hang on to their assets are going to hold on to them, and those that are going to lose them are going to lose them. And I think you're seeing some pretty widespread damage in the mezzanine sector and in the multifamily sector, where people bought very tight cap rates, and now they have high expenses, even though rents have doubled. So we're not calling the bottom. We just don't. It's just not true.

Brian Richard Harris: Just not a lot of new production after 2022, so Ah and.

Brian Richard Harris: Naturally things will be slowing at that point and people that are going to hang on to their assets are going to hang onto them and those that are going to lose them are going to lose them and yeah, I think youre seeing some pretty widespread damage in the present.

Brian Richard Harris: <unk> sector and you know in the multifamily sector, where people bought very tight cap rates and now they have high expenses, even though rents have doubled so.

Brian Richard Harris: We're not calling the bottom we just don't it's just not I don't hear anything Thats shocks me anymore.

Brian Richard Harris: I don't hear anything that shocks me anymore. And when somebody puts up a big reserve or when somebody sells a building at a very low price, you'll see that. And with SOFR at 5.3 percent and you have to buy a cap, that gets a little expensive. And I understand why some people are just re-evaluating the investment decision there. So I think it'll pass, though. I don't think it's a giant corner of the earth that is going to default.

Brian Richard Harris: And you know when somebody puts up a big reserve when somebody to sell the building at a very low price.

Brian Richard Harris: Youre going to see that.

Brian Richard Harris: And with so far at 5.3 something percent and you'll have to buy a cap.

Brian Richard Harris: That gets a little expensive and and I understand why some people are just reevaluating the investment decision. There. So I think it'll pass, though I don't think it's a it's a giant corner of the Earth that a is it going to default I think theirs.

Brian Richard Harris: I think there are, you know, you've all heard the numbers. You don't need them from me as to what's coming due in the next few years. But things that were purchased five and six years ago, if they're not office buildings, they're probably fine.

Brian Richard Harris: <unk> all heard the numbers you don't need them for me as to what is coming due in the next few years, but things that were purchased five six years ago.

Brian Richard Harris: If theyre not office buildings, they're probably fine.

Matthew Philip Howlett: Well, certainly, your letter is certainly in an envious position with all the excess capital. I appreciate all the color and congratulations on what we've done.

Matthew Philip Howlett: Well well certainly your letter shortly in an envious position, where all of the excess capital I appreciate all the color and congrats on a really good quarter.

Matthew Philip Howlett: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Harris for any final questions.

Speaker Change: Thank you.

Matthew Philip Howlett: Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Harris for any final comments.

Brian Richard Harris: Just thank you for paying attention to us today. I know it's a difficult day in the market and we're getting a lot of mixed signals, but, you know, we feel pretty comfortable and, you know, we appreciate you taking the time to understand us. Thank you.

Brian Richard Harris: Just thank you for paying attention to us today I know, it's a difficult day in the market and getting a lot of mixed signals, but we feel pretty comfortable and we.

Brian Richard Harris: We appreciate you taking the time to understand us. Thank you.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

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