Q2 2024 Blackstone Mortgage Trust Inc Earnings Call

[inaudible]

Operator: Good day and welcome to the Blackstone Mortgage Trust 2nd quarter 2024 investor call. Today's call is being recorded. At this time, all participants are in a listen-only mode.

Operator: I asked if there was a fire. Good day, and welcome to the Blackstone Mortgage Trust second quarter 2024 investor call. Today's call is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance at any time, please press star zero. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

I asked if there was a fire.

Operator: If you require operator assistance at any time, please press star zero. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Tim Hayes: At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

Tim Hayes: Good morning and welcome, everyone, to Blackstone Mortgage Trust 2nd quarter 2024 earnings conference call. I am joined today by Tim Johnson, Chair of the Board of Directors; Katie Keenan, Chief Executive Officer; Tony Marone, Chief Financial Officer; and Austin Pena, Executive Vice President of Investments. This morning, we filed our 10-Q and issued a press release for the presentation of our results, which are available on our website and have been filed with the SEC.

Timothy Paul Hayes: Good morning, and welcome, everyone, to Blackstone Mortgage Trust's second quarter 2024 earnings conference call. I am joined today by Tim Johnson, Chair of the Board of Directors, Katie Keenan, Chief Executive Officer, Tony Marone, Chief Financial Officer, and Austin Pena, Executive Vice President of Investments.

Speaker Change: Good morning, and welcome everyone to Blackstone mortgage trusts second quarter 2024 earnings call earnings Conference call I'm joined today by Tim Johnson Chair of the board of Directors, Katie Keenan, Chief Executive Officer, Tony Marone, Chief Financial Officer, and often opinion executive Vice President of investments.

Speaker Change: This morning, we filed our 10-Q and issued a press release with a presentation of our results which are available on our website and have been filed with the SEC.

Tim Hayes: I'd like to remind everyone that today's call may include forward-looking statements, which are subject to risks. There's uncertainties and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the risk factor section of our most recent 10-K. We do not undertake any duty to update forward-looking statements.

Timothy Paul Hayes: This morning, we filed our 10-Q and issued a press release for the presentation of our results, which are available on our website and have been filed with the SEC. I'd like to remind everyone that today's call may include forward-looking statements that are subject to risks, uncertainties, and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the risk factor section of our most recent 10-K. We do not undertake any duty to update or look at, We will also refer to certain non-GAAP measures on this call, and for reconciliations, you should refer to the press release in 10 The audio cast is copyrighted material of Blackstone Mortgage Trust. It may not be duplicated without our consent.

Speaker Change: I'd like to remind everyone that today's call may include forward looking statements, which are subject to risks uncertainties and other factors outside of the company's control actual results may differ materially.

Speaker Change: For a discussion of some of the risks that could affect results. Please see the risk factors section of our most recent 10-K.

Speaker Change: We do not undertake any duty to update forward looking statements.

Tim Hayes: We will also refer to certain non-get measures on this call. And for reconciliation, you should refer to the press release and 10-Q.

Speaker Change: We will also refer to certain non-GAAP measures on this call and for reconciliations you should refer to the press release and 10-Q.

Tim Hayes: This audio cast is copyrighted material from Blackstone Mortgage Trust. I may not be duplicated without our consent. For the second quarter, we reported a gap net loss of $0.35 per share, while distributed earnings and distributed earnings prior to charge-offs were $0.49 and $0.56 per share respectively. A few weeks ago, we paid a dividend of $0.62 per share with respect to the second quarter. Additionally, the Board of Directors declared a dividend of $0.47 per share with respect to the third quarter and authorized a $150 million common stock repurchase program. The dividend is payable on October 15th, 2024, to stockholders of record on September 30th, 2024.

Speaker Change: This audiocast is copyrighted material of Blackstone mortgage trust.

Speaker Change: Be duplicated without our consent.

Anthony Francis Marone: For the second quarter, we reported a gap net loss of $0.35 per share, while distributable earnings and distributable earnings prior to charge-offs were $0.49 and $0.56 per share, respectively. A few weeks ago, we paid a dividend of $0.62 per share with respect to the second quarter. Additionally, our board of directors declared a dividend of $0.47 per share with respect to the third quarter and authorized a $150 million common stock repurchase program.

Speaker Change: For the second quarter, we reported a GAAP net loss of 35 per share of distributable earnings and distributable earnings prior to charge offs were 49, and 56 cents per share respectively.

A few weeks ago, we paid a dividend of <unk> 62 per share with respect to the second quarter.

Speaker Change: Additionally, our board of directors declared a dividend of <unk> 47 per share with respect to the third quarter and authorized a $150 million common stock repurchase program.

Anthony Francis Marone: The dividend is payable on October 15th, 2024 to stockholders of record on September 30th, 2024. Please let me know if you have any other questions following today's call. With that, I'll now turn things over to Katie.

Speaker Change: And is payable on October 15th 2024 to stockholders of record on September 32024.

Tim Hayes: Please let me know if you have any other questions following today's call, but that I will outrun things over to Katie.

Speaker Change: Let me know if you have any other questions. Following today's call with that I'll now turn things over to Katy.

Katharine Keenan: Thanks, Tim. Since the onset of this credit cycle, we have strategically positioned the SMT to navigate a volatile period that's driven by the steep rise in interest rates and a spectacular shift in office demands. Entering 2024, we saw the pillars of the recovery taking shape with the stabilization of rates and following of capital markets. Greater transaction flow has created greater liquidity and greater transparency on reset values, accelerating repayment, resolutions, and, in some cases, reserves, all of which we saw this quarter. Portfolio resolutions, of course, impact earning, but are a necessary transition point to move through the cycle and free up capital for reinvestment and rebuilding of earnings power.

Katy: Thanks, Tim.

Katharine A. Keenan: Since the onset of this credit cycle, we have strategically positioned BXMT to navigate a volatile period driven by the steep rise in interest rates and a secular shift in office demand. Entering 2024, we saw the pillars of the recovery taking shape with the stabilization of rates and thawing of capital markets. Greater transaction flow has created greater liquidity and greater transparency on reset values, accelerating repayments, resolutions, and, in some cases, reserves, all of which we saw this quarter.

Katy: Since the onset of this credit cycle, we are strategically position <unk> to navigate a volatile period driven by the steep rise in interest rates and a secular shifts in market demand.

Katy: Entering 2024, we filed the pillars of the recovery, taking shape with the stabilization of rates and by a capital market.

Katy: Greater transaction flow has created greater liquidity and greater transparency on reset volume.

Katy: <unk> repayment resolutions and in some cases reserves all of which we saw this quarter.

Katharine A. Keenan: Portfolio resolutions, of course, impact earnings but are a necessary transition point to move through the cycle and free up capital for reinvestment and rebuilding earnings power. This remains our primary focus as we position BXMT to maximize stockholder value over the long term. This quarter, we made significant progress.

Katy: Portfolio resolutions of course impact earnings, but are unnecessary transition point to move through the cycle and free up capital for reinvestment and rebuilding of earnings power.

Katharine Keenan: This remains our primary focus as we position the SMT to maximize stockholder value over the long.

Katy: This remains our primary focus as we position <unk> to maximize stockholder value over the long term.

Katharine Keenan: This quarter, we made significant progress. With a 90% performing portfolio at quarter end, and the continued healing of the capital market, much of our portfolio is well positioned for refinancing. Through the first half of the year, we've collected $1.7 billion of repayments through a variety of takeout lender profiles. We see increased acquisition and financing activity broadly across the market. And while office liquidity remains challenged, it is re-emerging. With over $700 million of office repayments year to date. And repayment momentum is accelerating. We've collected more repayments so far in July, over $700 million, than we did for the entire second quarter.

Katy: This quarter, we made significant progress.

Katharine A. Keenan: With a 90% performing portfolio at quarter end and the continued healing of the capital markets, much of our portfolio is well positioned for refinancing. Through the first half of the year, we've collected $1.7 billion in repayments through a variety of takeout lender profiles. We see increased acquisition and financing activity broadly across the market, and while office liquidity remains challenged, it is reemerging, with over $700 million of office repayments year-to-date. And repayment momentum is accelerating. We've collected more repayments so far in July, over $700 million, than we did for the entire second quarter.

Katy: With a 90% performing portfolio at quarter end and the continued healing of the capital markets much of our portfolio is well positioned for refinancing.

Through the first half of the year, we've collected $1 $7 billion of repayments through a variety of take out lender profile.

Katy: We see increased acquisition and financing activity broadly across the market and while office liquidity remains challenged it is re emerging with over $700 million of office repayments year to date.

Katharine A. Keenan: And we are tracking over $1 billion of incremental repayments across nearly 20 individual loans. And we see ongoing commitment from borrowers, supporting their assets where they continue to have equity value, even at today's reset valuation. To that end, in the last several months, we have closed on three major office modifications in London and West L.A., bringing in significant borrower equity commitments totaling over $100 million subordinate to our basis. We had nine upgrades this quarter, mostly hospitality, industrial, and multifamily loans on the way to refinancing.

Katy: And repayment momentum is accelerating we have collected more repayments so far in July over $700 million.

Katy: Then we did for the entire second quarter, and we are tracking over $1 billion of incremental repayments across nearly 20 individual alone.

Katharine Keenan: And we are tracking over $1 billion of incremental repayments across nearly 20 individual loans. And we see ongoing commitments from borrowers supporting their assets where they continue to have equity value, even at today's reset valuation. To that end, in the last several months, we have closed on three major office modifications in London and West LA, bringing in significant borrower equity commitments totaling over $100 million to our basis. We had nine upgrades this quarter, mostly hospitality, industrial, and multifamily loans on the way to refinancing. And of the $5.1 billion of performing loans that reached a maturity or extension test in the first half, $4.6 billion either repaid, satisfied their extension tests, or were extended with new equity commitments or economics.

Katy: And we see ongoing commitment from borrowers supporting their assets, where they continue to have equity value even at todays reset valuation.

Katy: To that end in the last several months, we have closed on three major office modification in London in West L. A bringing in significant borrower equity commitments totaling over 100 million subordinate to our basis.

Katy: We had nine upgrades this quarter, mostly hospitality industrial and multifamily loans on the way to refinancing.

Katharine A. Keenan: And of the $5.1 billion of performing loans that reached a maturity or extension test in the first half, $4.6 billion either repaid, satisfied their extension test, or were extended with new equity commitments or economic incentives. Multifamily and industrial loans are 99% performing, given favorable sector fundamentals. Credit issues remain concentrated in U.S. office, which, away from three pre-COVID hotel loans, represent virtually all of the considerable specific reserves we carry in book value All together, we have specific reserves representing 29% of our impaired office assets, implying asset values down more than 50% from origination. And despite the substantial challenges in office, we are in a different environment today than we were last year.

Katy: The $5 1 billion of performing loans that reached a maturity or extension tests in the first half.

Katy: $4 6 billion either repaid satisfy their extension tests are were extended with new equity commitments or economics.

Katharine Keenan: Multi-family and industrial loans are 99% performing, given favorable sector fundamentals. Credit issues remain concentrated in U.S. office, which, away from three pre-COVID hotel loans, represent virtually all of the considerable specific reserves we carry in book value. Altogether, we have specific reserves representing 29% of our impaired office assets, implying asset values down more than 50% from origination. And despite the substantial challenges in office, we are in a different environment today than we were last year. Our risk-graded 1-2 office assets, 26% of our U.S. office portfolio, are well-positioned for takeout with several assets currently in the market for RE-5.

Katy: Multifamily and industrial loans are 99% performing given favorable sector fundamentals.

Katy: Credit issues remain concentrated in U S office, which away from three pre Covid hotel alone represent virtually all of the considerable specific reserves, we carry in book value.

Katy: Altogether, we have specific reserves, representing 29% of our impaired often thought that implying asset values down more than 50% from origination.

Katy: And despite the substantial challenges in office, we are in a different environment today than we were last year.

Katharine A. Keenan: Our risk-graded 1 to 2 office assets, 26% of our U.S. office portfolio, are well-positioned for takeout with several assets currently in the market for refi. Across most major U.S. markets, availability levels are stabilizing, and leasing activity is up this quarter. In the U.S., in New York City, our largest market, and within our own portfolio.

Speaker Change: Our risk weighted once two office assets, 26% of our U S office portfolio are well positioned for takeout with several assets currently in the market for refi.

Katharine Keenan: Across most major U.S. markets, availability levels are stabilizing, leasing activity is up to this quarter, in the U.S., in New York City, our largest market, and within our own portfolio. These dynamics do not preclude the need for capital structure resets to reflect today's values, but they do lay the groundwork for more transparency, liquidity, and therefore expedited resolution. Resolving challenged assets remains a key priority for the business. We provide no free options and exercise remedies when it is in the best interest of our shareholders. This approach brings forward decision points, resulting in periods of loan non-performance, and in some cases, reserves.

Speaker Change: Across most major U S markets availability levels are stabilizing leasing activity is up this quarter in the U S. In New York City, our largest market and within our own portfolio.

Katharine A. Keenan: These dynamics do not preclude the need for capital structure resets to reflect today's values, but they do lay the groundwork for more transparency, liquidity, and therefore expedited resolution. Resolving challenged assets remains a key priority for the business. We provide no free options and exercise remedies only when it is in the best interest of our shareholders.

Speaker Change: These dynamics do not preclude the need for capital structure resets to reflect today's values, but they do lay the groundwork for more transparency liquidity and therefore expedited resolution.

Speaker Change: Resolving challenged assets remains a key priority for the business, we provide no free options and exercise remedies. When it is in the best interest of our shareholders.

Katharine A. Keenan: This approach brings forward decision points, resulting in periods of low non-performance, and in some cases, restrictions. But it also allows us to utilize our deep real estate expertise to maximize value and exit outcomes. This quarter, we sold a Brooklyn office building with no seller financing, 14% above our mark. We impaired this asset last year, collected on a guarantee, facilitated the execution of a detenanting plan we determined would maximize exit value, and ultimately completed a sale to recover 85% of our pre-impairment OPP.

Speaker Change: This approach brings forward decision points, resulting in periods of low nonperformance and in some cases reserves.

Katharine Keenan: But it also allows us to utilize our deep real estate expertise to maximize value and exit outcomes. This quarter, we sold a Brooklyn office building with no seller financing, 14% above our mark. We impaired this asset last year, collected on a guarantee, facilitated the execution of a deteniting plan we determined with maximize exit value, and ultimately completed a sale to recover 85% of our pre-imperman OPB. Through the first half of the year, we resolved five non-performing assets altogether, and we are on track for several more in the coming quarters. While we have made significant progress, we expect near-term earnings to continue to be encumbered by assets on non-accrual as we work to maximize recovery.

Speaker Change: But it also allows us to utilize our deep real estate expertise to maximize value and exit outcome.

Speaker Change: This quarter, we sold the Brooklyn office building with no seller financing, 14% above our mark.

Speaker Change: We impaired this asset last year collected on a guarantee facilitated the execution of a D. Tenancy plan, we determined would maximize exit value and ultimately completed the sale to recover 85% of our pre impairment OPB.

Katharine A. Keenan: Through the first half of the year, we resolved five non-performing assets altogether, and we are on track for several more in the coming quarters. While we have made significant progress, we expect near-term earnings to continue to be encumbered by assets on non-accrual as we work to maximize recovery. At the same time, we are highly focused on allocating capital to capture the historically attractive investment environment before us. Values have reset lower, affording a more attractive entry point. Emerging transaction activity is creating demand for new loans, while a pullback in bank capital has created a structural shift in the competitive landscape. Lending standards are, therefore, more conservative, and spreads are wider.

Speaker Change: Through the first half of the year, we resolved five nonperforming assets altogether and we are on track for several more in the coming quarters.

Speaker Change: Well, we have made significant progress we expect near term earnings to continue to be encumbered by assets on non accrual as we work to maximize recovery.

Katharine Keenan: At the same time, we are highly focused on allocating capital to capture the historically attractive investment environment before us. Values have reset lower, affording a more attractive entry point. Emerging transaction activity is creating demand for new loans, while a pullback in bank capital has created a structural shift in the competitive landscape. Lending standards are therefore more conservative and spreader wider. And of course, base rates remain high, supporting strong all-in returns for lenders.

At the same time, we are highly focused on allocating capital to capture the historically attractive investment environment before us.

Speaker Change: Values have reset lower affording a more attractive entry point.

Speaker Change: Emerging transaction activity is creating demand for new loan while a pull back in bank capital has created a structural shift in the competitive landscape.

Speaker Change: Lending standards are therefore, more conservative and spreads are wider.

Katharine A. Keenan: And, of course, base rates remain high, supporting strong all-in returns for lenders. We also see compelling valuations in our own capital structure, effectively buying into a largely performing loan portfolio at a significant discount, which our board has recently authorized through a $150 million stock buyback. Delivering current income continues to be an important priority for BXM, but stockholder return is also well served by balancing current payout with optimization of book value and long-term earnings potential through our capital allocation decisions.

Speaker Change: And of course base rates remain high supporting strong all in returns for lenders.

Katharine Keenan: We also seek compelling valuations in our own capital structure, effectively buying into a largely performing loan portfolio at a significant discount, which our board has recently authorized through a $150 million stock buyback plan. Delivering current income continues to be an important priority for BXMT, but stockholder return is also well served by balancing current payout with optimization of book value and long-term earnings potential. As we've commented previously, our board evaluates the dividend each quarter, focused on the longer-term earnings power of the business, considering a variety of factors, including interest rates, a range of credit outcomes, and the market environment.

Speaker Change: We also see compelling valuations in our own capital structure effectively buying into a largely performing loan portfolio at a significant discount which our board has recently authorized through a $150 million stock buyback plan.

Speaker Change: Delivering current income continues to be an important priority for bx empty.

Speaker Change: But stockholder return is also well served by balancing current payout with optimization of book value and long term earnings potential.

Speaker Change: Our capital allocation decision.

Katharine A. Keenan: As we've commented previously, our board evaluates the dividend each quarter, focused on the longer-term earnings power of the business. Considering a variety of factors, including interest rates, a range of credit outcomes, and the market environment, our board has declared a third-quarter dividend of $0.47 per share, which we believe reflects a sustainable level relative to long-term earnings power.

Speaker Change: As we've commented previously our board evaluates the dividend each quarter focused on the longer term earnings power of the business.

Speaker Change: During a variety of factors, including interest rates are range of credit outcomes and the market environment.

Katharine Keenan: With this in mind, our board has declared a third quarter dividend of $0.47 per share, which we believe reflects a sustainable level relative to long-term earnings power. While we are likely to have quarters where distributable earnings vary from this level, depending on the timing of asset impairments and resolutions, we also see many upside scenarios over time. This adjustment allows us to strategically deploy more capital, generating incremental earnings while still delivering continued current income yields, which at our recent dividend remains a favorable 10% on our closing crisis yesterday.

Speaker Change: With this in mind, our board has declared a third quarter dividend of 47 per share, which we believe reflects a sustainable level relative to long term earnings power.

Katharine A. Keenan: While we are likely to have quarters where distributable earnings vary from this level depending on the timing of asset impairments and resolutions, we also see many upside scenarios over time. This adjustment allows us to strategically deploy more capital, generating incremental earnings while still delivering continued current income yields, which at our recent dividend remains a favorable 10% on our closing price yesterday. With green shoots emerging in the market, a more predictable macro outlook, and increasing transaction flow, coupled with our capital allocation strategy, we expect the second half of 2024 to be more active on the investment front. We've already gotten started with our recent new origination and capital structure buyback activities. And more broadly, within the Blackstone Real Estate Debt Platform, we have originated or acquired over $8 billion in the last six months.

Speaker Change: While we are likely to have quarters, where distributable earnings vary from this level, depending on the timing of asset impairments and resolution. We also see many upside scenarios over time.

Speaker Change: This adjustment allows us to strategically deploy more capital generating incremental earnings while still delivering continued current income yields which at our recent dividend remains a favorable 10% on our closing price yesterday.

Katharine Keenan: With green juice emerging in the market, a more predictable macro outlook and increasing transaction flow, coupled with our capital allocation strategy, we expect the second half of 2024 to be more active on the investment front. We've already gotten started with our recent new origination and capital structure buyback activity. And more broadly within the black to and real estate debt platform, we have originated or acquired over $8 billion in the last six months. Our continued position as a market leader affords us differentiated insight and access to new loan opportunities across products and geographies. With the SMT's strong balance sheet position and continued repayment, we expect to capitalize on these dynamics more actively going forward, planting the seeds to enhance our overall earnings generation.

Speaker Change: With green shoots emerging in the market are more predictable macro outlook and increasing transaction flow coupled with our capital allocation strategy. We expect the second half of 2020 for it to be more active on the investment front.

Speaker Change: We've already gotten started with our recent new origination and capital structure buyback activity.

Speaker Change: And more broadly within the Blackstone real estate that platform, we've originated or acquired over $8 billion in the last six months.

Katharine A. Keenan: Our continued position as a market leader affords us differentiated insight and access to new loan opportunities across products and geographies. With BSMT's strong balance sheet position and continued repayment, we expect to capitalize on these dynamics more actively going forward, planting the seeds to enhance our overall earnings generation. To that end, we are also constantly evaluating ways to innovate our business model and leverage our market presence to benefit our investors and clients. This quarter, we announced a partnership with M&T Realty Capital to provide borrowers access to multi-family agency loan execution through M&T's Fannie Mae Dust and Freddie Mac Optico lending platform.

Speaker Change: Our continued position as a market leader affords us differentiated insight and access to new loan opportunities across products and geographies.

Speaker Change: With <unk> strong balance sheet position and continued repayments, we expect to capitalize on these dynamics more actively going forward planting the seeds to enhance our overall earnings generation.

Katharine Keenan: To that end, we are also constantly evaluating ways to innovate our business model and leverage our market presence to benefit our investors and clients. This quarter, we announced a partnership with M&T Realty Capital to provide borrowers access to multi-family agency loan execution through M&T's Fannie Mae DUS and Freddie Mac Optigo lending platform. This is an important evolution in BXMT's business model, adding a potential for capital-like long duration income over time, with essentially no incremental cost. And at the same time, it is a natural compliment to our bridge multi-family lending business. Many of BXMT's $10 billion of bridge multi-loans have been refinanced by Fannie Mae and Freddie Mac over the years.

Speaker Change: To that end, we're also constantly evaluating ways to innovate our business model and leverage our market presence to benefit our investors and clients.

Speaker Change: This quarter, we announced a partnership with M and T Realty capital to provide borrowers access to multifamily agency loan execution through M and T as Fannie Mae and Freddie Mac optical lending platform.

Katharine A. Keenan: This is an important evolution in BXMT's business model, adding the potential for capital-light, long-duration income over time, with essentially no incremental cost. And at the same time, it is a natural complement to our bridge multifamily lending business. Many of BXMT's $10 billion in bridge multi-loans have been refinanced by Fannie Mae and Freddie Mac over the years. We had six in July alone.

Speaker Change: This is an important evolution in <unk> business model, adding a potential for capital light long duration income overtime with essentially no incremental cost.

Speaker Change: And at the same time it is a natural complement to our bridge multifamily lending business.

Speaker Change: Many of the SMT is $10 billion of bridge multi loans have been refinanced by Fannie Mae and Freddie Mac over the years, we had six in July alone and given blackstone's vast multifamily portfolio, we have deep knowledge of market fundamentals.

Katharine Keenan: We had six in July alone. And given Blackstone's vast multi-family portfolio, we have deep knowledge of market fundamentals. This partnership affords BXMT the ability to capitalize on our multi-family market presence and generate fee and servicing income while partnering with the highly experienced team at M&T. While it will take time to accumulate a portfolio that drives meaningful earnings impact, we are excited about this investment in the long-term positioning of the BXMT business.

Katharine A. Keenan: And given Blackstone's vast multifamily portfolio, we have deep knowledge of market fundamentals. This partnership affords BXMT the ability to capitalize on its multifamily market presence and generate fee and servicing income while partnering with the highly experienced team at M&T. While it will take time to accumulate a portfolio that drives meaningful earnings impact, we are excited about this investment in the long-term positioning of the BXMT business. Looking out to the back half of the year, we are encouraged by the direction of travel.

Speaker Change: This partnership affords <unk> the ability to capitalize on our multifamily market presence and generate fee in servicing income while partnering with a highly experienced team at <unk>.

Speaker Change: Well it will take time to accumulate a portfolio that drives meaningful earnings impact. We are excited about this investment in the long term positioning of the <unk> business.

Katharine Keenan: Looking out to the back half of the year, we are encouraged by the direction of travel. Inflation is decelerating with lower rates to the base case. Markets continue to heal, with corporate debt and CNBS issuance both up meaningfully year-over-year. And the steep drop-off in new supply across real estate sectors is a strong catalyst for long-term fundamental performance. With these tailwinds in place and the competitive advantages of our platform as strong as ever, BXMT is well-positioned to continue navigating the cycle and capturing the market opportunity going forward.

Speaker Change: Looking out to the back half of the year. We are encouraged by the direction of travel inflation is decelerating with lower rates the base case.

Katharine A. Keenan: Inflation is decelerating, with lower rates the base case. Markets continue to heal, with corporate debt and CMBS issuance both up meaningfully year over year. And the steep drop-off in new supply across real estate sectors is a strong catalyst for long-term fundamental performance. With these tailwinds in place and the competitive advantages of our platform as strong as ever, BXMT is well positioned to continue navigating the cycle and capturing the market opportunity going forward. Thank you, and with that, I'll turn things over to you. Thank you, Katie.

Speaker Change: Markets continue to heal with corporate that and see MBS issuance, both up meaningfully year over year.

Speaker Change: And the steep drop off in new supply across real estate sectors as a strong catalyst for long term fundamental performance.

Speaker Change: With this tailwind is in place and the competitive advantages of our platform is strong as ever TSMC is well positioned to continue navigating the cycle and capturing the market opportunity going forward.

Katharine Keenan: Thank you.

Tim Hayes: And with that, I'll turn things over to Tony. Thank you. Thank you, KB.

Speaker Change: Thank you and with that I'll turn things over to Tony.

Timothy Paul Hayes: Thank you. Thank you, Katie. Good morning, everyone.

Tony: Thank you. Thank you <unk> good morning, everyone.

Anthony Marone: In second quarter, BXMT reported a gap net loss of 35 cents per share and distributable earnings of a 49 cents per share. We also reported distributable earnings prior to charge loss of 56 cents per share, which excludes realized losses related to non-performing loan resolution. Our earnings continue to be encountered by the interest expense from our financing of non-performing loans. 20 cents per share of this quarter, with no related interest income recognized. Many of these loans are, in fact, generating current income. This quarter, we collected 11 cents per share of cash interest related to loans on cost recovery, which was instead applied against our loan basics.

Anthony Francis Marone: In the second quarter, BXMT reported a gap net loss of $0.35 per share and distributable earnings of $0.49 per share. We also reported distributable earnings prior to charge-offs of $0.56 per share, which excludes realized losses related to non-performing loan risk. Our earnings continue to be encumbered by the interest expense from our financings of non-performing loans, which was $0.20 per share this quarter with no related interest income recognized.

Speaker Change: In the second quarter <unk> reported a GAAP net loss of <unk> 35 per share and distributable earnings of 49 cents per share.

Speaker Change: We also reported distributable earnings prior to charge offs of 56 cents per share, which excludes realized losses related to nonperforming loan resolution.

Speaker Change: Our earnings continue to be encumbered by the interest expense from our financings of nonperforming loans 20 per share this quarter with no related interest income recognized.

Anthony Francis Marone: Many of these loans are, in fact, generating current income. This quarter, we collected 11 cents per share of cash interest related to loans on cost recovery, which was instead applied against our loans. And over time, we expect to generate incremental earnings as non-performing loans are resolved and this capital is redeployed at our target return. In the near term, however, our earnings will face the headwind of incremental loans placed on cost recovery.

Speaker Change: Many of these loans are in fact generating current income.

Speaker Change: This quarter, we collected 11 per share of cash interest related to loans on cost recovery, which was instead applied against our loan basis.

Anthony Marone: And over time, we expect to generate incremental earnings as non-performing loans are resolved and as capital is redeployed at our target returns. In the near term, however, our earnings will face the headwind of incremental loans placed on cost recovery. These generated nearly seven cents per share of revenue in 2Q, as well as portfolio contraction following the elevated repayment that Katie mentioned earlier. We continue to make progress on non-performing loan resolutions, which will ultimately grow our earnings to more stabilized levels over time. Katie mentioned, we resolved an $84 million Brooklyn office loan during the quarter at an exit price above our carrying value.

Speaker Change: And over time, we expect to generate incremental earnings as nonperforming loans are resolved and as capital is redeployed at our target returns.

Speaker Change: In the near term however, our earnings will face the headwind of incremental loans placed on cost recovery.

Anthony Francis Marone: He's generated nearly seven cents per share of revenue in two, as well as portfolio contraction following the elevated repayments Katie mentioned earlier. We continue to make progress on non-performing loan resolutions, which will ultimately grow our earnings to more stabilized levels over time. He mentioned we resolved an $84 million Brooklyn office loan during the quarter at an exit price above our carrying guy. Across our collective NPL resolutions to date, we have realized values at a modest premium to our basis, validating the accuracy of our CESA reserve process, and subsequent quarter end, we took title to the collateral assets backing two small crossed San Antonio multifamily. We have not booked CESA reserves on these loans, as we expect that with proper management, Taking Assets, REO, and Situations Where We See Upside Potential. We will continue to provide periodic updates as we make further progress on this important initiative for BX.

Speaker Change: These generated nearly <unk> <unk> per share revenue in <unk>.

Speaker Change: As well as portfolio contraction following the elevated repayments Katie mentioned earlier.

We continue to make progress on nonperforming loan resolutions, which will ultimately grow earnings to more stabilized levels overtime.

Speaker Change: Judy mentioned, we resolved an $84 million Brooklyn office loan during the quarter at an exit price above our carrying value.

Anthony Marone: Across our collective NPL resolutions to date, we have realized values at a modest premium to our basis, validating the accuracy of our cease-reserved process. And subsequent quarter end, we took title to the collateral assets backing two small crossed San Antonio multi-family loans. We have not booked cease-reserves on these loans, as we expect that with proper management, the asset value can be maximized and sold at or above our loan basis. Looking out to the back half of the year, we have over $500 million of non-performing loans. Your mark for near-term resolution. We expect these will be executed through a combination of market itself processes and taking assets, RIO, and situations where we see upside potential over time.

Judy: Across our collective NPL resolutions to date, we have realized values at a modest premium to our basis validating the accuracy of our reserve process.

Judy: And subsequent to quarter end, we took title to the collateral assets backing to small cros, San Antonio multifamily loans.

Judy: We have not booked seasonal reserves on these loans as we expect that with proper management of the asset value can be maximized and sold at or above our loan basis.

Judy: Looking out to the back half of the year, we have over $500 million of nonperforming loans earmarked for near term resolution.

Judy: We expect these will be executed through a combination of marketed sale processes.

Judy: Taking assets Oreo in situations, where we see upside potential over time.

Anthony Marone: We will continue to provide periodic updates as we make further progress on this important initiative for BXMT.

Judy: We will continue to provide periodic updates as we make further progress on this important initiative.

Judy: Yeah.

Anthony Marone: Another initiative for BXMT, as Katie mentioned earlier, is our recently announced partnership with M&T Realty Capital to provide our multifamily borrowers access to agency loan execution through their agency platform. While it will take time for this venture to grow in scale, it requires virtually no capital investment or expense outlay from BXMT, protecting against downside considerations. And with the majority of our revenue share recognized up front on the sale loans through M&T to the agency, BXMT will be able to retain earnings and generate book value from these transactions. Upwardfully, it was 90% performing as of June 30th, with nine upgrades to this quarter and strong repayment activity demonstrating continued business plan execution and the refinanceability of our institutional collateral.

Anthony Francis Marone: Another initiative for BXMT, as Katie mentioned earlier, is our recently announced partnership with M&T Realty Capital to provide our multifamily borrowers access to agency loan execution through their agency platform. While it will take time for this venture to grow in scale, it requires virtually no capital investment or expense outlay from BXMT, protecting against downside considerations, and with the majority of our revenue share recognized up front upon the sale of loans through M&T to the agency. BXMT will be able to retain earnings and generate book value from these transactions.

Speaker Change: Another initiative for <unk>.

Speaker Change: You mentioned earlier is our recently announced partnership with <unk> Realty capital to provide our multifamily borrowers access to agency loan execution through their agency platform.

Speaker Change: Well it will take time for this venture to growing scale requires virtually no capital investment or expense outlay from <unk> protecting against downside considerations.

Speaker Change: And with the majority of our revenue share recognized upfront on the sale of loans through <unk> to the agency's <unk> will be able to retain earnings and generate book value from these transactions.

Anthony Francis Marone: Our portfolio is 90% performing as of June 30th, with nine upgrades this quarter and strong repayment activity demonstrating continued business plan execution and the refinance ability of our institutional collateral. We also downgraded 12 loans, including three impairments. Virtually all of our incremental impairments relate to two New York City office properties.

Speaker Change: Our portfolio was 90% performing as of June 30th with nine upgrades for this quarter and strong repayment activity demonstrating continued business plan execution and the refinance ability of our institutional collateral.

Anthony Marone: We also downgraded 12 loans, including three impairments. Virtually, all of our incremental impairments relate to two New York City office properties, assets that have been impacted by sector headwinds and a re-rating of office values. We are actively working on resolutions for both of these assets, capitalizing on the more positive capital markets backdrop we see today. The third impairment is a small multi-family asset currently in the market for sale, representing just 0.1% of our portfolio. Across the multi-family sector more broadly, we see healthy fundamentals and valuation trends, with increasing liquidity driving positive outcomes in our portfolio, including three upgrades with quarter and eight full loan repayments during the second quarter and July today.

Speaker Change: We also downgraded 12 loans, including three impairments.

Speaker Change: Virtually all of our incremental impairments relate to two New York City office property.

Anthony Francis Marone: Assets that have been impacted by sector headwinds and a re-rating of office values. We are actively working on resolutions for both of these assets, capitalizing on the more positive capital markets backdrop we see today. The third impairment is a small multifamily asset currently in the market for sale, representing just 0.1% of our portfolio.

Speaker Change: Assets that have been impacted by sector headwinds and a re rating of office values.

Speaker Change: We are actively working on resolutions for both of these assets capitalizing on the more positive capital markets backdrop, we see today.

Speaker Change: The third impairment as a small multifamily asset currently in the market for sale, representing just <unk>, 1% of our portfolio.

Anthony Francis Marone: Across the multifamily sector more broadly, we see healthy fundamentals and valuation trends, with increasing liquidity driving positive outcomes in our portfolio. Including three upgrades this quarter and eight full loan repayments during the second quarter and July to date, our CESA reserves stood at $906 million at quarter end, up $130 million from the prior quarter, largely reflecting the impairments of a new non-performing office loan.

Speaker Change: Across the multi family sector more broadly, we see healthy fundamentals and valuation trends.

Speaker Change: Increasing liquidity driving positive outcomes in our portfolio.

Speaker Change: Including three upgrades this quarter and eight full loan repayments during the second quarter in July to date.

Anthony Marone: Our SESA reserves stood at $906 million at quarter-end, up $130 million from the prior quarter, largely reflecting the impairments of new, non-performing office loans, somewhat offset by two key resolutions and repayments. As we have mentioned on prior calls, we determine our SESA reserves through a robust quarterly process, informed by the real-time data and experience from across the Blackstone Real Estate platform. These aggregate reserves of $5.21 per share are embedded in our book value, which was $22.90 per share as of June 30th.

Speaker Change: Our <unk> reserves stood at $906 million at quarter end up $130 million from the prior quarter, largely reflecting the impairment of a few nonperforming office loans.

Anthony Francis Marone: Somewhat offset by two key resolutions and repayments. As we mentioned on prior calls, we determine our CSER reserves through a robust quarterly process informed by real-time data and experience from across the Blackstone real estate platform. These aggregate reserves of $5.21 per share are embedded in our book value, which was $22.90 per share.

Speaker Change: But offset by <unk> resolutions and repayments.

Speaker Change: As we've mentioned on prior calls we determine our reserves through a robust quarterly process informed by the real time data and experience from across the Blackstone real estate platform.

Speaker Change: These aggregate reserves of $5 21 per share are embedded in our book value, which was $22 90 per share as of June 30.

Anthony Marone: Turning to the balance sheet, we continue to maintain a best-in-class liability structure with term-matched financing and zero capital markets marked-to-market provisions. Death to equity was 3.9 times at quarter-end, up slightly from $331, but that was largely due to the timing of loan repayments. If you apply the repayments received in just the first few days following quarter-end to the June 30 debt balance, our debt to equity ratio would have been flat quarter-over-quarter. Importantly, our balance sheet is supported by substantial liquidity, $1.6 billion at June 30th, or about 40% of book equity, in line with the historically high levels maintained throughout this cycle.

Anthony Francis Marone: Turning to the balance sheet, we continue to maintain a best-in-class liability structure with term-matched financing and zero-capital markets mark-to-market. Debt-to-equity was 3.9 times at quarter end, up slightly from 331, but that was largely due to the timing of the loan. If you apply the repayments received in just the first few days following quarter end to the June 30 debt balance, our debt-to-e Importantly, our balance sheet is supported by substantial liquidity, $1.6 billion at June 30th, or about 40% of book equity, in line with the historically high levels maintained throughout this cycle, and we see additional liquidity sources via the acceleration of repayments Katie mentioned earlier.

Speaker Change: Turning to the balance sheet, we continue to maintain a best in class liability structure with term match financing zero capital markets Mark to market provisions.

Speaker Change: Debt to equity was three nine times at quarter end.

Speaker Change: Up slightly from $3 31, but that was largely due to the timing of loan repayments.

Speaker Change: If you apply the repayments received in just the first few days following quarter end June 30 debt balance.

Speaker Change: Debt to equity ratio would have been flat quarter over quarter.

Speaker Change: Importantly, our balance sheet supported by substantial liquidity $1 6 billion at June 30, or about 40% of book equity.

Speaker Change: In line with the historically high levels maintained throughout this cycle.

Anthony Marone: And we see additional liquidity sources be the acceleration of repayments Katie mentioned earlier. Here to date, we have deployed over $700 million of capital, largely towards existing loan commitments in our portfolio, but also selectively towards new investments and discounted repurchases of our scene. and your secured notes. We have maintained elevated liquidity while repaying debt and funding loan commitments, which we have seen come down over time, and now stand at only $1 billion in debt of committed financing. Importantly, these funding are scheduled to occur over an average term of 2.3 years, a very manageable commitment for BXMT.

Speaker Change: And we see additional liquidity sources PD acceleration of repayments Katie mentioned earlier.

Anthony Francis Marone: Year-to-date, we have deployed over $700 million of capital, largely towards existing loan commitments in our portfolio but also selectively towards new investments and discounted repurchases of our senior secured notes. We have maintained elevated liquidity while repaying debt and funding loans, which we have seen come down over time, and now stand at only $1 billion net of committed finance. Importantly, these fundings are scheduled to occur over an average term of 2.3 years, a very manageable commitment for BX.

Katie: Year to date, we have deployed over $700 million of capital largely towards existing loan commitments in our portfolio, but also selectively towards new investments and discounted repurchases of our senior secured notes.

We have maintained elevated liquidity, while repaying debt funding loan commitments, which we've seen come down over time and now stand at only 1 billion net of committed financing.

Katie: Importantly, these fundings are scheduled to occur over an average term of two three years, a very manageable commitment for that company.

Anthony Marone: As we progress further through the credit cycle and move into a more attractive investment environment, we would naturally expect our liquidity to settle at a more normalized level.

Anthony Francis Marone: As we progress further through the credit cycle and move into a more attractive investment environment, we would naturally expect our liquidity to settle at a more normalized level. Throughout the history of BXMT, we have consistently strengthened our capital structure as our business and markets have evolved. And with our platform's strong track record and unique relationship with our counterparties, we have maintained market-leading terms. As another example of this dynamic, we improved the uniform covenant package under our credit facilities to more appropriately reflect the current rate environment and provide incremental flexibility for our, based on our strong balance sheet and with visibility into near-term loan repayments and resolution.

Katie: As we progress further through the credit cycle and move into a more attractive investment environment, we would naturally expect our liquidity to settle at a more normalized level.

Anthony Marone: Throughout the history of BXMT, we have consistently strengthened our capital structure as our business and market type of all. And with our platform's strong track record and unique relationship with our counterparties, we have maintained market-leading terms. As another example of this dynamic, we improve the uniform covenant package under our credit facilities to more appropriately reflect the current rate environment and provide incremental flexibility for our business. Reflecting our strong balance sheet and with visibility into near-term loan repayments and resolutions, we have plenty of capital to strategically deploy with accelerating investment momentum across our platform, or to selectively execute on further repurchases across our capital structure.

Speaker Change: Throughout the history of <unk>, we've consistently strengthen our capital structure as our business and markets have evolved.

Speaker Change: And with our platform strong track record and unique relationship with our Counterparties, we have maintain market leading terms.

Speaker Change: As another example of this dynamic we improved the uniform covenant package under our credit facilities to more appropriately reflect the current rate environment and provide incremental flexibility for our business.

Speaker Change: Reflecting our strong balance sheet and with visibility into near term loan repayments and the resolutions.

Anthony Francis Marone: We have plenty of capital to strategically deploy with accelerating investment momentum across our platform or to selectively execute on further repurchases across our capital structure. Thank you for joining the call. I will now ask the operator to open the line for questions.

Speaker Change: Plenty of capital to strategically deploy with accelerating investment momentum across our platform.

Speaker Change: Or to selectively execute on further repurchases across our capital structure.

Anthony Marone: Thank you for joining the call.

Speaker Change: Thank you for joining the call I will now ask the operator to open the line for question.

Operator: I will now have the operator to open the line of questions. Thank you.

Operator: Thank you. As a reminder, Star 1, if you would like to ask a question, we ask you limit yourself to one question and one follow-up to allow as many callers to join the queue. We'll take our first question from Steve DeLaney with JMC.

Speaker Change: Thank you as a reminder, star one if you would like to ask a question. We ask you limit yourself to one question and one follow up to allow as many callers to join the queue.

Operator: As a reminder, Star 1, if you would like to ask a question, we ask you to limit yourself to one question and one follow-up to allow as many colors to join the queue.

Steve DeLaney: We'll take our first question from Steve Delaney with JMP. Good morning, everyone, and thank you very much for taking the question. Hey, the portfolio now about 21 billion has come off about 16% from the recent high in late 2022, given what seems to be a slightly more balanced view towards obvious runoff, but some new lending, green shoot lending opportunities.

Speaker Change: We'll take our first question from Steve Delaney with JMP.

Speaker Change: Okay.

Steven Cole DeLaney: Good morning, everyone. And thank you very much for taking the time to answer the question.

Steven Cole DeLaney: Good morning, everyone and thank you very much for taking the question.

Speaker Change: The portfolio now is about $21 billion has come off about 16% from the recent high in late 2022.

Katharine A. Keenan: Katie, the portfolio, now about $21 billion, has come off about 16% from the recent high in late 2022. Given what seems to be a slightly more balanced, we have a few towards obvious runoff, but some new lending, and green shoot lending opportunities. Can you give us some sense of, on a net basis, how much additional shrinkage we might see? I realize it's just a rough range, but are we nearing the bottom of the size of the portfolio? Thank you very much.

Speaker Change: What seems to be a slightly more balanced.

Speaker Change: You towards obvious runoffs.

Speaker Change: But some new lending green sheet blending opportunities could you give us some sense on a net basis, how much additional shrinkage, we might see I realized just a rough range, but are we nearing the bottom of the.

Steve DeLaney: Can you give us some sense of, on a net basis, how much additional shrinkage we might see? I realize just a rough range, but are we nearing the bottom of the size of the portfolio? Thank you very much.

Speaker Change: The size of the portfolio. Thank you very much.

Katharine Keenan: Thanks, Steve. I think it really comes down to relative value in terms of our capital allocation. If you think about buying into our capital structure at a discount, that obviously has one impact. New originations would have a different impact, and we're really going to be allocating our capital where we see the best potential for risk-adjusted returns. So I think that's really the primary driver. The result will be where the portfolio ultimately settles out. I think we're getting, as I mentioned on the call, script, very significantly elevated repayments, which is obviously a very positive sign about the refinance ability and credit quality of the portfolio.

Katharine A. Keenan: Thanks, Steve. You know, I think it really comes down to relative value in terms of our capital allocation. So, if you think about buying into our capital structure at a discount, that obviously has one impact. New originations would have a different impact.

Speaker Change: Thanks, Steve I think it really comes down to relative value in terms of our capital allocation. So if you think about <unk>.

Speaker Change: Going into our capital structure at a discount that obviously has one impact new originations would have a different impact and we're really going to be allocating our capital where we see the best potential for risk adjusted returns.

Katharine A. Keenan: And we're really going to be allocating our capital where we see the best potential for risk-adjusted returns. So, I think, you know, that's really the primary driver. The result will be where the portfolio ultimately settles out. I think we're getting, you know, as I mentioned on the call script, very significantly elevated repayments, which is obviously a very positive sign about the refinanceability and credit quality of the portfolio. And so, I think you could see sort of a local decline in the size of the portfolio as we get those repayments and position that capital for reinvestment.

Speaker Change: I think that's really the primary driver of the result will be where the portfolio ultimately settles out I think we're getting as I mentioned on the call script very significantly elevated repayments, which is obviously a very positive sign about the refinance ability and credit quality of the portfolio and so I think you could see sort of a local.

Katharine Keenan: And so I think you could see sort of a local decline in the size of the portfolio as we get those repayments and position that capital for reinvestment.

Speaker Change: Decline in the size of the portfolio as we get those repayments and position that capital for reinvestment.

Katharine Keenan: So I think that there is a possibility that we'll see that trend continue a bit over time, but as you picked up on it, as we mentioned, we're really focused on redeploying that capital in an accretive way, and certainly new loans are going to be part of that. Thank you.

Speaker Change: That there is a possibility that we'll see that trend continue a bit over time, but as you know as you picked up on and as we mentioned, we're really focused on redeploying that capital in an accretive way and certainly new loans are going to be part of that.

Katharine A. Keenan: So, I think that there is a possibility that we'll see that trend continue a bit over time. But, as you picked up on and as we mentioned, we're really focused on redeploying that capital in an accretive way, and certainly, new loans are going to be part of that.

Steven Cole DeLaney: Thank you. And a quick follow-up from me.

Speaker Change: Great. Thank you and a quick follow up for me.

Steve DeLaney: And a quick follow-up from me on your recent M&T Realty acquisition. Some of us on the call are familiar with that to Arbor and Walker and Dunlop. It's an excellent business model.

Speaker Change: On your recent MNT Realty acquisition.

Speaker Change: Some of US on the call are familiar with that to Arbor, and Walker and Dunlop, It's an excellent business model.

Katharine Keenan: Can you comment on whether, at some point, Blacks.bx. S&T might acquire the entire business? I don't know if you have an option to do that or is it, do you think it'll just say it's sort of a JD for, you know, for the next five years or whatever, but do you have any optionality there to acquire that and build it out to make it a, you know, a much larger business. Yeah, no, I mean, this is really a partnership with M&C Realty Capital. They have a fantastic business, a great team, a lot of business away from this.

Steven Cole DeLaney: On your recent M&T realty acquisition, you know, some of us on the call are familiar with that, too, Arbor and Walker & Dunlop. It's an excellent business model. Can you comment on whether, at some point, BXMT might acquire the entire business? I don't know if you have an option to do that, or is it – do you think it will just stay as sort of a JD for, you know, for the next five years or whatever? But do you have any option there to acquire that and build it out to make it, you know, a much larger business?

Speaker Change: Can you comment on whether at some point.

Speaker Change: Blackstone.

Speaker Change: He might acquire the entire business I don't know if you have an option to do that or is it.

Speaker Change: Do you think it will just stay as sort of a JV for for the next five years or whatever but do you have any optionality there to acquire that and build build it out to make it up.

Speaker Change: A much larger business.

Katharine A. Keenan: Yeah, no, I mean, this is really a partnership with M&T Realty Capital. They have a fantastic business, a great team, and a lot of business away from this. You know, we've looked at this business for a long time, and we agree that it's a very interesting and complementary business for our transitional lending platform in many ways. And we really think that this partnership is the best way at this time for BXMT to participate in the market.

Speaker Change: Yeah, No I mean, this is really a partnership with <unk> Realty capital they have a fantastic business a great team a lot of business away from that.

Katharine Keenan: You know, we've looked at this business for a long time, and we agree that, you know, it's a very interesting and complimentary business for our transitional lending platform and evaluated different ways. And we really think that this partnership is the best way at this time for BXMT to participate in the market. And, you know, as we mentioned, gives us the optionality to provide agency execution via our partnership with M&T, think creatively about, you know, those loans and benefit, you know, economically in an appropriate way without any initial or overtime incremental expense. So, you know, we like this model.

We've looked at this business for a long time and we agree that it's.

Speaker Change: It's a very interesting and complementary business for our transitional lending platform and evaluated different ways and we really think that this partnership is the best way at this time for <unk>.

Speaker Change: To participate in the market and you know as.

Katharine A. Keenan: And, you know, as we mentioned, it gives us the option to provide agency execution via our partnership with M&T, think creatively about, you know, those loans, and benefit economically in an appropriate way without any initial or over-time incremental expense. So, you know, we like this model. We think the M&T platform is phenomenal, and the partnership is really the most creative way to pursue this. We appreciate the comments.

Speaker Change: As we mentioned gives us the.

Speaker Change: Optionality to provide agency execution via our partnership with <unk> think creatively about those loans.

Speaker Change: And benefit economically in an appropriate way without any.

Speaker Change: Initial or over time incremental expense. So we like this model we think the <unk> platform is phenomenal and the partnership we think is really the most accretive way to pursue that.

Katharine Keenan: We think the M&T platform is phenomenal and the partnership. We think it's really the most creative way to pursue this business.

Steve DeLaney: Appreciate the comments. Thanks.

Speaker Change: I appreciate the comments thanks.

Stephen Laws: Thank you. We'll go next to Stephen Laws with Raymond James.

Stephen Albert Laws: Thank you. We'll go next to Stephen Laws with Raymond James.

Speaker Change: Thank you we'll go next to Stephen laws with Raymond James.

Stephen Laws: Hi, good morning. Katie wanted to talk about the first, the new dividend level. I think Tony mentioned about seven cents per share in Q2 of interest income from new, not a cruel loans, and then some run off in the portfolio, especially given the July repayment. I mean, it seems like, you know, those two things would point to earnings next quarter around the current dividend level. So, kind of what gives you confidence earnings stay there? Are we going below the new dividend level?

Stephen Albert Laws: Good morning, Katie. First, I want to talk about the new dividend level. I think Tony mentioned about $0.07 per share in Q2 of interest income from new non-accrual loans and then some runoff in the portfolio, especially given the dry repayments. It seems like those two things would point to earnings next quarter around the current dividend level. What gives you confidence earnings will stay there? Are we going below the new dividend level? What were the considerations that you guys used to decide that $0.47 was the right place to be?

Stephen Albert Laws: Hi, good morning.

Speaker Change: Can he wanted to.

Speaker Change: Talk about the first the new dividend level I think as Tony mentioned about <unk> <unk> per share in Q2 of.

Speaker Change: Interest income from new non accrual loans and then some some runoff.

Speaker Change: Runoff in the portfolio, especially given the dry repayments I mean, it seems like.

Speaker Change:

Speaker Change: Two things would point to earnings next quarter around the current dividend level. So kind of what gives you confidence earnings stay. There are we are we going below the new dividend level kind of what were the considerations that you guys used to decide that 47 is the right place to be.

Katharine Keenan: What were the considerations that you guys used to decide that 47 cents is the right place to be? Yeah, so, you know, I think as we talked about in the past, we're always very focused on the sustainable long-term earnings level of the business. And, you know, we're obviously moving through a relatively solidal period in terms of the market and sort of ins and outs within the portfolio. And as a result, you know, as we mentioned, we think that individual quarters might vary from the dividend level, but this level really is based on what we think is sustainable over time.

Katharine A. Keenan: Yeah, so, you know, I think as we've talked about in the past, we're always very focused on the sustainable long-term earnings level of the business, and, you know, we're obviously moving through a relatively volatile period in terms of the market and sort of ins and outs within the portfolio, and as a result, you know, as we mentioned, we think that individual quarters might vary from the dividend level, but this level really is based on what we think is sustainable over time, and also, very importantly, focused on continuing to balance near-term current income for our shareholders with the ability to allocate capital to new investments that we think will ultimately enhance and drive better long-term earnings over time.

Speaker Change: Yeah. So I think as we talked about in the past, we're always very focused on the sustainable long term earnings level of the business and we're obviously moving through a relatively.

Speaker Change: Volatile period in terms of the market and sort of ins and outs within the portfolio and as a result, as we mentioned we think that individual quarters may vary from the dividend level, but this level really.

Speaker Change: If based on what we think are sustainable over time and also very importantly focused on continuing to balance near term current income for our shareholders with the ability to allocate capital to new investments that we think will ultimately enhance and drive better long term earnings overtime.

Katharine Keenan: And also very importantly, focused on continuing to balance near-term current income for our shareholders with the ability to allocate capital to new investments that we think will ultimately enhance and drive better long-term earnings over time.

Stephen Laws: Okay, and then as a follow-up, I want to touch on the reserve level. You know, we've seen kind of four pretty big increases in a row, especially the last two quarters. You know, kind of what gives you comfort in the current level, you know, when I look at four and five rated loans, you know, even adjusting for repayments, the absolute amounts of 25% in the first half of the year. You know, backing into the general is one to three is about a hundred basis points or one percent. The total of fours and five is about 15%.

Stephen Albert Laws: Okay, and then as a follow-up, I want to touch on the reserve level. You know, we've seen kind of four pretty big increases in a row, especially the last two quarters. What gives you comfort at the current level?

Speaker Change: Okay, and then is it.

Speaker Change: A follow up I wanted to touch on the reserve level.

Speaker Change: For pretty big increases in a row, especially the last few quarters.

Katharine A. Keenan: You know, when I look at four and five-rated loans, even adjusting for repayments, the absolute amount is up 25% in the first half of the year. Backing into the general, one to threes is about 100 basis points or 1%. The total of fours and fives is about 15%. So, we see a really big reserve increase when something moves out of the three bucket. You know, can you talk about your expectations in the back half of the year for additional negative, you know, loan rating migration and what your expectations are for the reserve build going forward?

Speaker Change: You've kind of what gives you comfort in the current level when I look at four and five rated loans.

Speaker Change: <unk>.

Speaker Change: Even adjusting for repayments the absolute amounts up 25% in the first half of the year backing into the general as one to three years is about 100 basis points or 1%.

Speaker Change: Total of fours and fives is about 15%. So we see a really big reserve increase when something moves out of the three buckets.

Stephen Laws: So we see a really big reserve increase when something moves out of the three bucket.

Stephen Laws: You know, can you talk about your expectations in the back half of the year for additional negative, you know, loan rating migration and what your expectations are for the reserve bill going forward? Sure, so I think that we've really tried to be ahead of what we see in the credit markets. Obviously, moving a lot of loans to our washlists to transparently identify what we're seeing in that part of the market. And I think importantly, this is really concentrated in U.S. Office, that's where we're seeing the challenges. You know, I think when we look at our U.S.

Speaker Change: Can you talk about your expectations in the back half of the year fruit for additional negative rating migration and what your expectations are for the reserve build going forward.

Katharine A. Keenan: Sure. So, you know, I think that we've really tried to be ahead of what we see in the credit markets, obviously moving, you know, a lot of loans to our watch list to transparently identify what we're seeing in that part of the market. And I think importantly, you know, this is really concentrated in U.S. office space. That's where we're seeing the challenges.

Speaker Change: Sure. So I think that we've really tried to be ahead of what we see in the credit markets, obviously, moving a lot of loans to our watch list to transparently identify what we're seeing in that part of the market and I think importantly, this is really concentrated in U S office, that's where we're seeing.

Speaker Change: The challenge as you know I think when we look at our U S office at this point, we have 55% of our U S office loans watch lists that are impaired we have significant reserves against our impaired assets and against that portfolio of loans and the rest of that is about $2 4 billion of that 60% is risk rated one and two.

Katharine Keenan: office. At this point, we have 55% of our U.S. office loans, washlists that are impaired. We have significant reserves, you know, against our impaired assets and against that portfolio of loans. And the rest of that is about 2.4 billion. Of that, 60% is risk graded 1-2. Those are new construction loans, primarily very low LTV. As I mentioned on the call, a number of them are looking at Reef, but we feel very good about the 1-2s. And the other 40% is risk graded 3 U.S. office, which is about a billion dollars. That's also about 50% new construction and 50% Son Belt, where we're seeing it with like pretty well-least and good cash flow.

Katharine A. Keenan: You know, I think when we look at our U.S. office at this point, we have 55% of our U.S. office loans on watch or impaired. We have significant reserves, you know, against our impaired assets and against that portfolio of loans. And the rest of that is about $2.4 billion. Of that, 60% is risk rated one and two. Those are new construction loans, primarily with very low LTV. As I mentioned on the call, a number of them are looking to refinance. We feel very good about the ones and twos.

Speaker Change: Those are new construction loans, primarily very low LTV as I mentioned on the call a number of them are looking at refi, we feel very good about the ones and twos and the other 40% is risk rated three U S office, which is about $1 billion. That's also about 50%, new construction and 50% Sunbelt, where we're seeing it with like pretty well leased and good cash.

Katharine A. Keenan: And the other 40% is risk-rated three U.S. offices, which is about a billion dollars. That's also about 50% new construction and 50% Sunbelt, where we're seeing it with pretty well leased and good cash flow. So, you know, I think that the best way to think about it is, you know, we've tried to proactively move things into the watch list and into impairment. As we mentioned on past calls, a lot of the impaired loans and, obviously, all of the watch list loans are performing and paying current interest. You know, we're really trying to get ahead of this.

Katharine Keenan: So, you know, I think the best way to think about it is, you know, we've tried to proactively move things into the watch list and into impairment. We've mentioned on past calls, a lot of the impaired loans, and obviously all of the watch lists are performing, paying current interest. You know, we're really trying to get ahead of this. And there's really, you know, a diminishing amount sort of left in that three bucket in terms of our U.S. office exposure, which is where we're really seeing the credit pressures.

Speaker Change: Hello, So I think the best way to think about it is we've tried to proactively move things into the watch list and into impairment. We've mentioned on past calls a lot of the impaired loans and obviously all of the watch list that are performing paying current interest.

Katharine A. Keenan: And there's really, you know, a diminishing amount sort of left in that three bucket in terms of our U.S. office exposure, which is where we're really seeing the credit pressures. Away from that, obviously, you know, we're really seeing the market turn for the rest of the asset classes. Values are recovering much more liquidity than repayments, and that is a very direct crystallization of that. And so, you know, we think away from the U.S. office, the credit quality of the portfolio is doing well and improving, given the tailwinds that we see in the capital markets and in valuations with rates coming down and with liquidity returning.

Speaker Change: Trying to get ahead of this and there's really a diminishing amount sort of left in that three bucket in terms of our U S office of Burger, which is where we're really seeing the credit pressures away from that obviously, we're really seeing the market turn for the rest of the asset classes values are recovering much more liquidity.

Katharine Keenan: Away from that, obviously, you know, we're really seeing the market turn for the rest of the asset classes. But values are recovering much more liquidity; the repayments are a very direct crystallization of that. And so, you know, we think away from U.S. office, the credit quality of the portfolio is doing well and improving, given the tailwinds that we see in the capital markets and evaluations with rates coming down and with liquidity returning.

Speaker Change: Repayments are very <unk>.

Speaker Change: Direct crystallization of that and so we think away from U S office, the credit quality of the portfolio is doing well and improving given the tailwind that we see in the capital markets and evaluations with rates coming down and with liquidity returning.

Stephen Laws: Great, appreciate the comments.

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

Speaker Change: Great I appreciate the comments this morning Katy.

Doug Carter: Thank you. We'll go next to Doug Carter with UBS. Thanks. You know, as you think about the ability to redeploy, you know, how should we think about the level of liquidity that you're going to hold. How much does, you know, future credit migration sort of play into that, you know, if we see more credit migration to slow that down. You know, just how are you thinking about the pace of deployment? Sure, you know, I think it's Tony mentioned, you know, we have maintained near record levels of liquidity really over the last, you know, year, more than a year, as we've, the position, the business to be really well fortified in the face of volatility.

Douglas Michael Harter: Thank you. We'll go next to Doug Carter with UBS.

Speaker Change: Thank you we'll go next to Doug Harter with UBS.

Douglas Michael Harter: Thanks. As you think about the ability to redeploy, how should we think about the level of liquidity that you're going to hold? How much does future credit migration sort of play into that? If we see more credit migration, do you slow that down? Just how are you thinking about the pace of deployment?

Speaker Change: Thanks.

Speaker Change: As you think about the ability to redeploy.

Speaker Change: Redeploy.

Douglas Michael Harter: How should we think about the level of liquidity.

Speaker Change: That youre going to hold.

Speaker Change: How much does future credit migration sort of play into that if we see more credit migration do you slow that down.

Speaker Change: Just how are you thinking about the pace of deployment.

Katharine A. Keenan: Sure, you know, I think, as Tony mentioned, we have maintained near record levels of liquidity really over the last year or more than a year as we've positioned the business to be really well fortified in the face of volatility. Now, you know, we feel like we have more visibility on what's going on in the capital markets, obviously more repayments, and future funding have come way down.

Speaker Change: Sure I think as Tony mentioned, we have maintained near record levels of liquidity really over the last year or more than a year as we've positioned the business to be really well fortified in the face of volatility now we feel like we have more.

Katharine Keenan: Now, you know, we feel like we have more visibility and what's going on in the capital markets. Obviously, more repayments, future funding to come way down. And so, you know, maintaining that very significantly elevated level of liquidity feels like not the best use of the liquidity. We were sort of trading optionality against investment opportunities. Obviously, also over the last 12 months, 18 months, there really weren't a lot of investment opportunities. Transaction volumes were down, you know, 40, 50, 70% depending on what you looked at. We kept the pipeline very active, and obviously we're active across our business.

Speaker Change: Visibility on what's going on in the capital markets, obviously more repayments future fundings have come way down and so maintaining that very significantly elevated level of liquidity.

Katharine A. Keenan: And so, you know, maintaining that very significantly elevated level of liquidity feels like not the best use of the liquidity. We were sort of trading optionality against investment opportunities. Obviously, also over the last 12 months, 18 months, there really weren't a lot of investment opportunities; transaction volumes were down, you know, 40, 50, 70%, depending on what you looked at. But we kept the pipeline very active. And obviously, we're active across our business. But we really didn't see a ton of very interesting opportunities.

Speaker Change: Like not the best use of the liquidity, we were sort of trading optionality against investment opportunities.

Katharine A. Keenan: Now, both of those dynamics have shifted. And so, you know, maintaining the optionality of the liquidity was really meant to position us to be able to capture the opportunity that we're seeing now, in terms of a better pipeline and a bunch of different investment opportunities that we see across the capital structure and across the market. So, you know, I think that we wouldn't necessarily expect liquidity to stay at these sort of record levels because we think liquidity is better served by investing.

Speaker Change: Obviously also over the last 12 months 18 months, there really werent a lot of investment opportunity as transaction volumes were down $40 $50, 70%, depending on what you love that we kept the pipeline very active and obviously, we're active across our business. We really didn't see a ton of very interesting opportunity now both of those dynamics have shifted and so.

Katharine Keenan: We really didn't see a ton of very interesting opportunities. Now, both of those dynamics have shifted. And so, you know, maintaining the optionality of the liquidity was really meant to position us to be able to capture the opportunity that we're seeing now in terms of a better pipeline. And a bunch of different investment opportunities that we see across the capital structure and across the market. So, you know, I think that, you know, we wouldn't necessarily expect liquidity to stay at these sort of record levels because we think the liquidity is better served by investing. You know, we'll have to see how that tracks quarter to quarter.

Speaker Change: Winning the Optionality of the liquidity was really meant to position us to be able to capture the opportunity that we're seeing now in terms of a better pipeline and a bunch of different investment opportunities that we see across the capital structure and across the market. So I think that we wouldn't necessarily expect liquidity to stay at these sort of record levels, because we think.

Katharine A. Keenan: You know, we'll have to see how that tracks quarter to quarter. Again, obviously, there's lumpiness with repayments, redeployment, etc. But you know, we think we have a very comfortable sort of excess level of liquidity today. And, obviously, we look forward and look at all the potential scenarios around credit migration and others you mentioned. And you know, even with that, we think that it's the right time to be reinvesting some of that liquidity.

Speaker Change: The liquidity is better served by investing you know, we'll have to see how that tax quarter to quarter again, it's obviously, there's lumpiness with repayments redeployment et cetera, but we think we have a very comfortable sort of access level of liquidity today, and obviously, we look forward and look at all the potential scenarios around.

Katharine Keenan: Again, it's obvious there's lumpiness with repayments, redeployment, et cetera. But, you know, we think we have a very comfortable sort of access level of liquidity today. And obviously we look forward and look at all of the potential scenarios around credit migration and others, as you mentioned. And, you know, even with that, we think that it's the right time to be reinvesting some of that liquidity.

Speaker Change: Credit migration and others as you mentioned in and even with that we think that it's the right time to be reinvesting some of that liquidity.

Jade Ramani: Thank you. We'll go next to Jade Ramani with KBW. Thank you very much. Securitization markets are pretty wide open, and there's been a healthy amount of issuance.

Douglas Michael Harter: Thank you. We'll go next to Jade Rahmani with KBW.

Speaker Change: Thank you we'll go next to Jade Rahmani with K B W.

Jade Joseph Rahmani: Thank you very much. Securitization markets are pretty wide open, and there's been a healthy amount of issuance. Coming out of distress cycles, there typically is access to securitization as a way to bifurcate risk and therefore creatively unlock capital. Do you see that market providing any potential opportunity for such a strategy?

Speaker Change: Thank you very much securitization markets are pretty wide open and there's been a healthy amount of issuance.

Katharine Keenan: Coming out of distress cycles, there typically is access to securitization as a way to, you know, bifurcate risk and therefore, a creatively unlawed capital to see that market providing any potential opportunity for such a strategy. Yeah, I think it's a great point. I mean, we are a very active player all around this curitization market as an issuer, as a buyer, you know, as obviously looking at what's going on across, you know, various geographies and, you know, CNBS, CLO, etc. So I think that the resurgence of the various securitized markets has a lot of positive impacts on our business.

Speaker Change: Coming out of distress cycles. There typically is access to securitization as a way to bifurcate risk and therefore accretively unlock capital did you see there.

Speaker Change: That market, providing any potential opportunity for such a strategy.

Speaker Change: Yeah.

Katharine A. Keenan: Yeah, I think it's a great point. I mean, we are a very active player all around the securitization markets as an issuer, as a buyer, you know, and obviously looking at what's going on across, you know, various geographies and, you know, CMBS, CLO, etc. So I think that the resurgence of the various securitized markets has a lot of positive impacts on our business. Obviously, the most direct one is repayment; a lot of the loans that were getting repaid are getting refinanced in the CMBS market.

Yeah, I think it's a great point I mean, we are a very active player all around the securitization market as an issuer as a buyer.

Speaker Change: Obviously looking at what's going on across various geographies and see MBS cielo et cetera. So I think that the the resurgence of the various securitize market has a lot of positive impacts on our business. Obviously, the most direct one as repayment a lot of the laws were getting repaid are getting refinanced in the MBS.

Katharine Keenan: Obviously, the most direct one is repayments. A lot of the laws we're getting repaid are getting refinanced in the CNBS market. That is where a lot of capital is coming in, including for office. Beyond that, I think in terms of CLO issuance or other ways, we can directly continue to improve our balance sheet. You know, we've obviously been an innovator and done a lot of that over time, and I think it's something that will continue to monitor very closely in terms of strategically using all of the financing options we have to put our balance sheet in the best position.

Speaker Change: That is where a lot of capital is coming in including for office.

Katharine A. Keenan: That is where a lot of capital is coming in, including for office. Beyond that, I think in terms of CLO issuance or other ways we can directly continue to improve our balance sheet, we've obviously been an innovator and done a lot of that over time. And I think it's something that we'll continue to monitor very closely, in terms of strategically using all the financing options we have to put our balance sheet in the best position. So I do think it's a really important trend for our business in a lot of ways and something that we spend a lot of time thinking about how to maximize the impact of.

And that I think in terms of CLO issuance or other ways. We can directly continue to improve our balance sheet. You know, we've obviously been an innovator and done a lot of that over time and I think it's something that we'll continue to monitor very closely in terms of strategically using all of the financing options. We have to put our balance sheet in the best position. So I do think.

Katharine Keenan: So I do think it's a really relevant trend for our business in a lot of ways and something that we spent a lot of time thinking about how to maximize the impact up.

Speaker Change: It's a really relevant trend for our business and a lot of ways and something that we spend a lot of time thinking about how to maximize the impact up.

Katharine A. Keenan: In terms of new investment, do you see doing anything differently for BXMT coming out of this? For example, could you take smaller pieces of large transactions and really hone in on the risk crunch you want to take, which would allow the company to be very targeted with its use of capital? Also, are you seeing a pickup in loan portfolio sales from banks and other legacy asset holders?

Katharine Keenan: In terms of new investment, do you see doing anything differently for BX&T coming out of this? And, for example, could you take smaller pieces of large transactions and really hone in on the risk crunch you want to take, which would allow the company to be very targeted with its use of capital. Also, are you seeing a pickup in loan portfolio sales from banks and other legacy asset holders? Sure, so on your first question, you know, I think that what we're always very focused on as our North Star is the credit profile of the assets we're investing in.

Speaker Change: In terms of new investments do you see doing anything differently for bx empty coming out of this.

Speaker Change: For example, could you take smaller pieces of large transactions and really hone in on the risk tranche, you want to take which would allow the company to be.

Speaker Change: Very targeted with its use of capital also are you seeing a pickup in our loan portfolio sales from banks and other legacy asset holders.

Speaker Change: Yeah.

Katharine A. Keenan: Sure. So on your first question, you know, I think that what we're always very focused on as our North Star is the credit profile of the assets we're investing in. So leverage, institutional quality, borrowers, that will not change. But I think in terms of looking at, you know, how to access that tranche of risk return, you know, we have a very diversified business here; we have really great people across the spectrum looking at various parts of the capital markets.

Speaker Change: Sure. So on your first question I think that what we're always very focused on is our north star is the credit profile of the assets. We're investing in so leverage institutional quality borrowers that will not change, but I think in terms of looking at.

Katharine Keenan: So leverage institutional quality borrowers. That will not change. But I think in terms of looking at, you know, how to access that trudge of risk return. You know, we have a very diversified business here. We have really great people across the spectrum looking at various parts of the capital markets. And I think we're going to be very strategic about accessing that risk-return trunch of lending. However, we think best benefits to the balance sheet in the company. So, you know, I do think that that's something that we're obviously thinking about. We've talked about preferred equity behind multi in the past.

Speaker Change: Access that tranche of risk return.

Speaker Change: Have a very diversified business here, we have really great people across the spectrum of looking at various parts of the capital markets and I think we're going to be very strategic about accessing that risk return tranche of lending. However, we think that benefits the balance sheet in the company. So I do think that that's something that we're obviously thinking.

Katharine A. Keenan: And I think we're going to be very strategic about accessing that risk return tranche of lending. However, we think it best benefits the balance sheet of the company. So, you know, I do think that that's something that we're obviously thinking about. We've talked about preferred equity behind multi-family housing in the past; we've talked about other aspects of the business. And I think that, you know, innovating on the origination side and also on the capital market side, which is really how you get to the ultimate equity investment in these deals.

Speaker Change: [noise] about we've talked about preferred equity behind multi in the past you talked about other aspects of the business and I think that.

Katharine Keenan: We've talked about other aspects of the business. And I think that, you know, innovating on the origination side and also on the capital market side, which is really how you get to the ultimate equity investment in these deals. You know, that's something that, you know, we constantly look at to try and optimize for where the business is at a given moment in time. And in terms of bank sales and loan portfolios, you know, that's something that is episodic, obviously. We've obviously been a very big participant in that market across our business. We think it's something that, you know, Blackstone, our real estate debt platform as a whole, has a real competitive advantage in because we're able to have a lot of these touch points underwrite portfolios quickly.

Speaker Change: On the origination side and also on the capital market side, which is really how you get to the ultimate equity investment in these deals that's something that we constantly look at to try and optimize for where the business is at a given moment in time.

Speaker Change: In terms of bank sales and loan portfolios. That's something that is episodic obviously, we've obviously been a very big participant in that market across our business we.

Speaker Change: We think it's something that you know Blackstone or real estate that platform as a whole has a real competitive advantage and because we're able to have a lot of these touch points underwrite portfolios quickly have a very specific view on credit obviously, we have the scale capital to invest in them and so I think it's a really attractive investment opportunity in terms of volume I think it is.

Katharine Keenan: Have a very specific view on credit. Obviously, we have the scale capital to invest in them. And so I think it's a really attractive investment opportunity in terms of volume. I think it's really going to be, you know, episodic. And there's a lot of sort of individual things that drive, you know, whether those deals come to market. But I think that to the extent we see them, you know, that's obviously something that we'll be out in that again.

Katharine A. Keenan: You know, that's something that we constantly look at to try and optimize for where the business is at a given moment in time, in terms of volume. I think it's really going to be, you know, episodic. And there's a lot of sort of individual things that drive, you know, whether those deals come to market. But I think that to the extent we see them, that's obviously something that we'll be looking at.

Speaker Change: Really going to be episodic and theres a lot of sort of individual things that drive you know whether those deals come to market, but I think that to the extent, we see them. That's obviously something that we'll be looking at investing in.

Katharine Keenan: Thank you.

Speaker Change: Thank you.

Don Fandetti: We'll go next to Don Fandetti with Wells Fargo.

Donald James Fandetti: We'll go next to Don Fandetti with Wells Fargo.

Donald James Fandetti: We'll go next to Don <unk> with Wells Fargo.

Don Fandetti: Yes, Katie, can you talk about that? How do you think the markets, the theory of finance markets are going to and equity markets will respond to Fed cut? Is that going to potentially drive some more liquidity, make it easier for a refinancing? I guess maybe not so much for our office, but can you talk about whether or not you think that's kind of priced in? Or do you think that's material of that? So I think that the timing and pace of rate cuts is clearly a very material. We'll have a very material impact on the financing markets and capital markets liquidity.

Donald James Fandetti: I guess can you talk.

Katharine A. Keenan: Can you talk a bit about how the markets, the CRE finance markets, and equity markets will respond to FedCut. Is that going to potentially drive some more liquidity, make it easier for refinancing? I guess maybe not so much for our office, but can you talk a bit about whether or not you think that's kind of priced in, or do you think that's a material event?

Donald James Fandetti: On how you think.

Speaker Change: The markets. The series can add some markets are going to and equity markets will respond to a fed cut.

That's going to potentially drive some more liquidity make it easier for refinancing I guess, maybe not so much where office, but can you talk about whether or not you think that's kind of priced in or do you think that's a material event.

Speaker Change: So I think that the timing and pace of rate cuts is clearly a very material.

Speaker Change: We will have a very material impact on the financing markets and sort of capital markets liquidity I think that obviously, the expectation and really looking at the macro indicators of inflation that is already driving.

Donald James Fandetti: So I think that the timing and pace of rate cuts is clearly very material and will have a very material impact on the financing markets and sort of capital markets liquidity. I think that obviously the expectation and really looking at the macro indicators of inflation, you know, that is already driving the five-year, the 10-year, and those rates are pretty impactful in terms of refinancing and in terms of capital markets, more so than sort of 30 days over.

Katharine Keenan: I think that obviously the expectation and really looking at the macro indicators of inflation. And that is already driving. The five year or the ten year and those rates are pretty impactful in terms of refinancing, in terms of capital markets, more so than 30 days over. So we're already starting to see that. But I think that as it really comes to fruition over time, of course it's going to have an impact. And I would say, by the way, including on office, I think that when we observed over the turn of the year, really the start of 2024, it was a narrowing range of outcomes about rates.

Speaker Change: You know the five year, the 10 year and those rates are are pretty impactful in terms of refinancing and in terms of capital markets more so than sort of 30 days or so we're already starting to see that but I think that as it really comes to fruition over time, you know of course, it's going to have an impact and I would say by the way, including an office you know I think that when we.

Donald James Fandetti: So we're already starting to see that, but I think that as it really comes to fruition over time, you know, of course, it's going to have an impact. And I would say, by the way, including on office, I think that when we observed at the turn of the year, really at the start of 2024, there was a narrowing range of outcomes about rates. It was pretty clear that we were sort of at peak rates and that the next direction was sort of flat to down.

Speaker Change: Observed over the turn of the year really the start of 2024. It was a narrowing range of outcomes about rates. It was pretty clear that we were sort of at peak rates and that the next direction was sort of flat to down and the result of that was a resurgence in capital markets activity in the MBS market and in the transaction market and we're seeing sort of a continuation and acceleration of that.

Katharine Keenan: It was pretty clear that we were sort of at peak rates and that the next direction was sort of flat to down. And the results of that was a resurgence in capital market activity in the CNBS market and in the transaction market. And we're seeing sort of a continuation and acceleration of that. Rates coming down more is just, I think, more tailwind to that dynamic. And I think the thing that's also really important is, you know, spreads continue to be attractive and wider on a relative level. But the cost of capital is really most materially impacted by base rates.

Katharine A. Keenan: And the result of that was a resurgence in capital markets activity in the CMBS market and in the transaction market. And we're seeing sort of a continuation and acceleration of that rates coming down more. It's just, I think, more tailwind to that dynamic. And, you know, I think the thing that's also really important is that spreads continue to be attractive and wider on a relative level. But the cost of capital is really most materially impacted by base rates.

Speaker Change: Rates coming down more it's just I think more tailwind to that dynamic.

Speaker Change: And you know I think the thing that's also really important as you know spreads continue to be attractive and wider on a relative level, but the cost of capital. It's really most materially impacted by base rates and so that's why I say that you know as the base rates sort of move in and if they do come down.

Katharine A. Keenan: And so, you know, that's all I can say that, you know, as the base rates sort of move and if they do come down, you know, in the back half of the year or on a faster trajectory than, you know, perhaps we were expecting a while ago, I think that's going to have a very positive impact. And I do think we're already seeing that, but I don't think it's all about price

Katharine Keenan: And so, you know, that's something to say that, you know, as the base rates sort of move. And if they do come down, you know, in the back half of the year or in a faster trajectory than, you know, perhaps we were expecting a while ago, I think that's going to have a very positive impact. And I do think we're already seeing that, but I don't think it's all priced in. Thank you.

Speaker Change: In the back half of beer and are in a faster trajectory than you know, perhaps we were expecting a while ago I think that's going to have a very positive impact and I do think we're already seeing that but I don't think it's all priced them.

Donald James Fandetti: Thank you. As a reminder, use star 1 for questions. We'll go next to Tom Catherwood with BTIG.

Tom Catherwood: As a reminder, star one for questions. We'll go next to Tom Catherwood with BTIG.

Tom Catherwood: Thank you as a reminder, star one for questions well go next to Tom Catherwood with <unk>.

William Thomas Catherwood: Thank you and good morning, everyone. Katie, you mentioned $700 million in office repayments year-to-date. Outside of the Brooklyn loan sale that you detailed, what was the makeup of the remaining resolutions, and how much office is included in the $1 billion of incremental repayments that you're currently tracking?

Tom Catherwood: Thank you, and good morning, everyone. Katie, you mentioned 700 million of office repayments year to date outside of the Brooklyn loan sale that you detailed. What was the makeup of the remaining resolutions? And how much office is included in the $1 billion of incremental repayments that you're currently tracking? So the office repayments today have been a mix. We've had definite activity in the CMBS market. We've obviously had some sales. We've also had some, you know, balance sheet repayments. We had an office construction loan that leased up, and you know, our sponsor just kind of took us out.

Tom Catherwood: Thank you and good morning, everyone.

Tom Catherwood: You had mentioned $700 million of office repayments year to date outside of the Brooklyn loan sale that you detailed what was the makeup of the remaining resolutions and how much office is included in the $1 billion of incremental repayments that you're currently tracking.

Katharine A. Keenan: So the office repayments to date have been a mix. We've definitely had activity in the CMBS market, we've obviously had some sales, we've also had some, you know, balance sheet repayments, we had an office construction loan that was leased up, and, you know, our sponsor just kind of took us out. So it's a pretty good mix.

Speaker Change: So the office repayments to date have been a mix we've had definitely activity in the MBS market. We've obviously had some sales. We've also had some balance sheet repayments. We had an office construction loan that leased up and our sponsor just kind of took us out so it's a pretty good mix I mean, obviously.

Katharine Keenan: So it's a pretty good mix. I mean, obviously, you know, we've talked about how banks have pulled back from real estate lending generally. And they're certainly, you know, similarly pulled back from office. But I think when we look across, you know, CMBS debt funds, you know, some of the, those parts of the market, you know, we are seeing some liquidity. And even, you know, to some degree from, you know, smaller relationship banks. And, you know, a lot of the liquidity for the small office today is coming from, you know, long-term owners, high net worth. And that's sort of a different part of the capital markets.

Speaker Change: We've talked about how banks have pulled back from real estate lending generally and there are certainly similarly pulled back from office.

William Thomas Catherwood: I mean, obviously, you know, we've talked about how banks have pulled back from real estate lending generally, and they're certainly, you know, similarly pulled back from office. But I think when we look across, you know, CMBS debt funds, you know, some of those parts of the market, you know, we are seeing some liquidity and even, you know, to some degree from, you know, smaller relationship banks. A lot of the liquidity for the small office today is coming from, you know, long-term owners, and high net worth, and that's sort of a different part of the capital markets.

Speaker Change: But I think when we look across you know see MBS that funds.

Speaker Change: Some of that those parts of the market you know we are seeing some liquidity and even to some degree from smaller relationship banks and a lot of the liquidity for the small office today is coming from.

Speaker Change: Long term owners high net worth and that sort of a different part of the capital markets were also seeing you know office liquidity in Europe, where we have that funds and even some banks are coming back into the market. There. So it's them.

William Thomas Catherwood: We're also seeing, you know, office liquidity in Europe, where we have debt funds, and, you know, even some banks are coming back into the market there. So, you know, office liquidity, in general, is certainly less prevalent than across other parts of the market. And the liquidity we're seeing is obviously either in, you know, the highest quality assets, ones and twos, as we mentioned, or, you know, situations where, you know, people are coming in at what they perceive as a big discount in the case of, you know, the impaired assets that we're selling.

Katharine Keenan: We're also seeing, you know, office liquidity in Europe, where we have debt funds. And, you know, even, you know, some banks are coming back into the market there. So, you know, it's, you know, office liquidity in general is certainly less prevalent than across other parts of the market. And the liquidity we're seeing is obviously either in, you know, the highest quality assets. Once and two, as we mentioned, or, you know, situations where, you know, people are coming in at what they perceive as a big discount, in the case of, you know, the entire assets that we're selling.

Speaker Change: Office liquidity in general is certainly less prevalent than across other parts of the market and the liquidity. We're seeing is obviously either in the highest quality assets ones and twos as we mentioned.

Speaker Change: Or you know situations, where people are coming in at what they perceived as a big discount in the case of the impaired assets that were selling them, but I think it is it's more than just one source I don't have the number in the $1 billion exactly of office, but theres a couple of larger ones in there that we're tracking for refi obviously the capital.

Katharine Keenan: But I think it is, you know, it's more than just one source.

William Thomas Catherwood: But I think it is, you know, it's more than just one source. You don't have the number and the billion dollars exactly of offices, but there are a couple of larger ones in there that, you know, we're tracking for refi. Obviously, the capital markets have been volatile over the last, you know, year. And so, you know, we'll be watching closely to see how those come to bear. But, you know, the trend in repayments is very clear. And obviously, you know, seeing another $700 million in repayments just this far in July is, you know, a very specific indicator of what we're seeing in the portfolio.

Tom Catherwood: You know, don't have the, the number in the billion dollars exactly of office. But there's a couple of larger ones in there that, you know, we're tracking for ReFi. You know, obviously the capital market has been volatile over the last, you know, year. And so, you know, we'll be watching closely to see how those come to bear. But, you know, the trend in repayments is very clear. And obviously, you know, seeing another $700 million repayments just as far in July is, you know, a very specific indicator of what we're seeing in the portfolio. Thank you.

Speaker Change: Markets have been volatile over the last year and so you know well, we'll be watching closely to see how those come to bear but the trend in repayments is very clear and obviously you know seeing another $700 million in repayments just thus far in July is a very specific indicator of what we're seeing in the <unk>.

Speaker Change: Yeah.

Tom Catherwood: Appreciate those details, Katie, and then maybe as a follow-up, Tony, you had previously noted expectations for 70 to 80 million of realized losses in the first half of the year, and you performed within that range with the, you know, 500 million-ish of challenge loans that are earmarked for near-term resolution.

William Thomas Catherwood: Appreciate those details, Katie. And then maybe as a follow-up, Tony, you had previously noted expectations for $70 to $80 million of realized losses in the first half of the year, and you performed within that range with the $500 million-ish of challenge loans that are earmarked for near-term resolution. What are your expectations for realized losses through the balance of the year?

Speaker Change: I appreciate those details Katie and then maybe as a follow up Tony you had previously noted expectations for $70 million to $80 million of realized losses in the first half of the year and you performed within that range with the 500 million ish of challenged loans that are earmarked.

Mark: Mark for near term resolution what are your expectations for realized losses for the balance of the year.

Anthony Marone: What are your expectations for realized losses to the balance of the year? I don't have a specific number that I would guide you towards it at this time. I'd say, when we provided that, that metric previously, we had a pretty clear line of slight to specific resolutions for those assets; whereas this 500 million, there's a little more variability. I would say, you know, most importantly, is if you look at our history, our resolutions being, you know, slightly above our marks, you could assume that the realized losses that we take would be in line with our sea sources.

Anthony Francis Marone: I don't have a specific number that I would guide you towards at this time. I'd say when we provided that metric previously, we had a pretty clear line of sight to specific resolutions for those assets, whereas with $500 million, there's a little more variability. I would say, most importantly, if you look at our history of resolutions being slightly above our marks, you could assume that the realized losses that we take would be in line with our spending.

I don't have a specific number that I would guide you towards that at this time I'd say.

Speaker Change: When we provided that that metric previously we had a pretty clear line of sight to specific resolutions for those assets.

Whereas this $500 million, there's a little more variability I would say most importantly is if you look at our history of <unk>.

<unk> being slightly above our marks.

Speaker Change: I assume that the realized losses that we take would be in line with our seasonal reserves.

Tom Catherwood: Understood.

William Thomas Catherwood: I understand. Thanks, everyone.

Tom Catherwood: Thanks, everyone.

Speaker Change: Understood. Thanks, everyone.

Rick Shane: We'll take our next question from Rick Shane with JP Morgan. Hey guys, thanks for taking my questions this morning. I don't think this is going to be a surprise given it's been a topic we've discussed a lot, but can you delve in a little bit more to the $150 million repurchase authorization? The dividend reduction equates to about $100 million a year; stocks now trading at a 20 plus percent discount to book. How aggressively should we expect to see you repurchase shares given where stocks trading?

Richard Barry Shane: We'll take our next question from Rick Shane with J.P. Morgan.

Speaker Change: We'll take our next question from Rick Shane with J P. Morgan.

Richard Barry Shane: Hey guys, thanks for taking my questions this morning.

Richard Barry Shane: Hey, guys. Thanks for taking my questions. This morning.

Speaker Change: I don't think this is going to be a surprise given.

Richard Barry Shane: It's been a topic, we've discussed a lot, but can you delve in a little bit more to the $150 million repurchase.

Rick Shane: Authorization.

Speaker Change: Dividend reduction equates to about $100 million a year.

Speaker Change: Stock's now trading at a 20 plus percent discount to book.

Katharine A. Keenan: I don't think this is going to be a surprise given it's been a topic we've discussed a lot, but can you delve in a little bit more on the $150 million repurchase authorization? The dividend reduction equates to about $100 million a year. Stocks are now trading at a 20-plus percent discount to books. How aggressively should we expect to see you repurchase shares given we're in the stock trading business? Is this sort of a reallocation from dividend to repurchase, and you'll do it systemically or systematically, I should say? Or how should we think about it?

Speaker Change: How aggressively should we expect to see you repurchase shares given where stocks trading is this sort of a reallocation from dividend to repurchase and you'll do it systemically or systematically I should say or how should we think about it.

Rick Shane: Is this sort of a reallocation from dividend to repurchase, and you'll do it systemically or systematically, I should say, or how should we think about it? Yeah, I think it's, I wouldn't say it's one for one in any way. I think it's really cute, separate things that are, you know, somewhat related in that, you know, our dividend decision is really about balancing continued current income with capital allocation. And the incremental capital, obviously, that, you know, we are, you know, going to be able to invest, we're going to direct that to where we see the best relative value.

Katharine A. Keenan: Yeah, I think it's, I wouldn't, I wouldn't say it's one for one in any way. I think it's really two separate things that are, you know, somewhat related in that, you know, our dividend decision is really about balancing continued current income with capital allocation and the incremental capital, obviously, that we are going to be able to invest. We're going to direct that to where we see the best relative value.

Speaker Change: Yeah, I think it's I wouldn't I wouldn't say its one for one in anyway, I think it's really cute.

Speaker Change: Two separate things that are somewhat related in that you know our dividend decision is really about balancing continued current income with capital allocation and the incremental capital. Obviously that we are going to be able to invest we're going to direct that to where we see the best relative value. We want to have all the tools in the tool.

Katharine Keenan: We want to have all the tools in the toolkit in terms of being able to access wherever we see the best relative value. And obviously buying into, you know, what we are largely performing low and portfolio, which is producing strong current income, you know, even at the adjusted dividend level, where we have visibility, where, you know, we're seeing a resurgence of repayments and credit performance at a big discount. It's one of the tools we want to have in the toolkit in terms of investment, but we're going to balance that against, you know, debt buyback, which we've been active in and obviously new investments.

Kit in terms of being able to access wherever we see the best relative value and obviously buying into what we are largely performing loan portfolio, which is producing strong current income even at the adjusted dividend level, where we have visibility, where we're seeing a resurgence of repayments and credit performance.

Katharine A. Keenan: We want to have all the tools in the toolkit in terms of being able to access wherever we see the best relative value and obviously buying into, you know, what we are a largely performing loan portfolio, which is producing strong current income, even at the adjusted dividend level where we have visibility, where we're seeing a resurgence of repayments and credit performance at a big discount is one of the tools we want to have in the toolkit in terms But we're going to balance that against, you know, debt buyback, which we've been active in, and obviously new investments.

Speaker Change: Formats at a big discount is one of the tools, we want to have in the toolkit in terms of investment, but we're going to balance that against debt buyback, which we've been active in and obviously new investment. So I think it's gonna be a very dynamic decision.

Katharine Keenan: So I think it's going to be a very dynamic decision. I think it's really going to come down to what we see as the best balance for, you know, long-term earnings power of the company and our balance sheet composition. And again, it's really about making sure that we have max optionality to make the best investment decision. Got it.

Katharine A. Keenan: So I think it's going to be a very dynamic decision. I think it's really going to come down to what we see as the best balance for the long-term earnings power of the company and our balance sheet composition. And again, it's really about making sure that we have the maximum optionality to make the best investment.

Speaker Change: It's really going to come down to what we see as the best balance for.

Speaker Change: Our long term earnings power of the company and our balance sheet competition and again, it's really about making sure that we have Max optionality to make the best investment decisions.

Richard Barry Shane: Got it. Now, understanding that deploying $100 million of capital into your lending investment business generates a levered return, and repurchasing shares doesn't necessarily-I guess in some ways, it does, but what types of hurdle rates would you need to see on loans to make them compelling in the context of where the stock's trading versus books?

Katharine Keenan: Now, understanding that deploying a hundred million dollars of capital into your lending investment business generates a levered return and repurchasing shares doesn't necessarily, I guess in some ways it does, but what types of rental rates would you need to see on loans to make them compelling in the context of where the stock is trading. Versus book. Yeah, I mean, I think that, you know, it's, it's hard to give a specific number because, again, it really comes down to relative value and what is the profile of the loans we're looking at relative to the return and then the profile of the, you know, if the new lending opportunity, the values, and, as I mentioned, you know, I do think we are in a very attractive lending environment.

Speaker Change: Got it no understanding that deploying a $100 million of capital into your lending investment business generates a levered return.

Speaker Change: And repurchasing shares doesn't necessarily I guess in some ways. It does but what types of hurdle rates would you need to see on loans.

Speaker Change: To make them compelling in the context of where the stock's trading.

Speaker Change: Versus book.

Katharine A. Keenan: Yeah, I mean, I think that, you know, it's hard to give a specific number because, again, it really comes down to relative value and what is the profile of the loans we're looking at relative to the return and then the profile of the new lending opportunity, and as I mentioned, I do think we are in a very attractive lending environment. Values have come down significantly, but generally, now that we're on the upswing, we're coming in at better attachment points.

Speaker Change: Yeah, I mean, I think that you know.

Speaker Change: It is hard to give a specific number because again it really comes down to relative value and what is the profile of the loans. We're looking at relative to the return and then the profile of the you know if the new lending opportunity the values and as I mentioned I do think we are in a very attractive lending environment values have come down.

Katharine Keenan: Values have come down significantly, but generally now on the upside. We're coming in a better attachment point, lending standards are better, spreads remain wide. You know, we have a very strong competitive positioning and obviously absolute return is, you know, a lot higher than it has been historically. You know, so with all of that, you know, the new loans we're looking at are probably in that sort of mid-teens return level on sort of a levered basis, which is where our business has performed, you know, through cycles on sort of a net interest margin basis. So, you know, that's kind of a benchmark.

Speaker Change: Significantly, but generally now on the upswing, we're coming in at better attachment points lending standards or better spreads remain wide. We have a very strong competitive positioning and obviously absolute return is a lot higher than it has been historically so with all of that the new loans. We're looking at are probably in that sort of mid.

Katharine A. Keenan: Lending standards are better, spreads remain wide, you know, we have a very strong competitive position, and obviously, absolute return is a lot higher than it has been historically. You know, so with all of that, the new loans we're looking at are probably in that sort of mid-teens return level on sort of a levered basis, which is where our business has performed through cycles on sort of a net interest margin basis.

Speaker Change: Teens return level on on sort of a levered basis, which is where our business has performed through cycles on sort of a net interest margin basis. So that's kind of a benchmark we would start from them and then we would really be looking at a lot of different considerations around how to balance that against buying into our capital structure.

Katharine A. Keenan: So, you know, that's kind of a benchmark we would start from. And then, you know, we would really be looking at a lot of different considerations around how to balance that against buying into our capital structure from a return and relative value perspective.

Rick Shane: We would start from, and then, you know, we would really be looking at a lot of different considerations around how to balance that again, spying into our capital structure from a return and relative value perspective. Okay, great. Thank you.

<unk> from a return and relative value perspective.

Speaker Change: Okay, great. Thank you.

Richard Barry Shane: Great, thank you. Thank you. We'll take our final question from Eric Dre with Bank of America. Hi, Katie. Good morning. Just wanted to stick with the office real quick. Do you guys think that

Eric Michael Dray: Thank you. We'll take our final question from Eric Dre with Bank of America.

Eric Dray: We'll take our final question from Eric Drey with Bank of America.

Speaker Change: Thank you we'll take our final question from Eric <unk> with Bank of America.

Eric Dray: Hi, Katie. Good morning.

Eric: Hi, good morning.

Katharine Keenan: Just wanted to stick with office real quick. Do you guys think that, you know, if we get 50 basis points of Fed cuts in the back half here, even if it's a hundred basis points of cuts in the next 12 months, does that really change things for office loans and kind of what do you guys think it'll take to see that sector stabilize and improve? Yeah, you know, I don't think I'm obviously lower rates are helpful on the margin, but I think that what we're seeing in office is really a secular reset that is not really rate related.

Eric: Just wanted to stick with office real quick do you guys think that if we get 50 basis points of a fed cuts in the back half here, even if it's 100 basis points of cuts in the next 12 months.

Speaker Change: Does that really change things for her office loans and kind of what do you guys think it will take to see that sector stabilize and improve.

Katharine A. Keenan: Yeah, you know, I don't think, and obviously, lower rates are helpful on the margin. But I think that what we're seeing in office is really a secular reset that is not really rate related. And, you know, obviously, rates obviously have an impact. But, you know, I don't think that 100 bits lower rates are going to, you know, significantly change what's generally going on in the office market.

Speaker Change: Yeah, you know I don't think I'm, obviously lower rates are helpful. On the margin, but I think that what we're seeing in office is really a secular <unk> that is not really rate related and you know obviously I cannot rates, obviously have an impact, but I don't think that 100 bed.

Katharine Keenan: And, you know, obviously, again, race obviously haven't impact, but, you know, I don't think that a hundred bit slower rates are going to, you know, significantly change what's generally going on in the office market. You know, I think that the things to watch are really, you know, where rents settle out, where cap rates settle out, and liquidity coming back in in the form of new capital. And, you know, I think that where we've gone from a year ago to today in terms of office, you know, it's really about increasing transparency, values settling out, and people feeling a level of conviction to come back in and invest in office at reset values.

Speaker Change: Slower rates are going to add.

Speaker Change: Significantly change, what's generally going on in the office market I think.

Speaker Change: That the things to watch are really where rents settle out where cap rates settle out and liquidity coming back in in the form of new capital.

Eric Michael Dray: You know, I think that the things to watch are really where rents settle out, where cap rates settle out, and liquidity coming back in in the form of new capital. And, you know, I think that where we've gone from a year ago to today in terms of office, it's really about increasing transparency, values settling out, and people feeling a level of conviction to come back in and invest in office at reset values.

Speaker Change: And I think that where we've gone from a year ago to today in terms of office.

Speaker Change: It's really about increasing transparency values settling out and people feeling a level of conviction to come back in and invest in office at reset values and you know there's sort of a third derivative impact of rates on that I think because I think more certainty about where rates are going just creates.

Katharine Keenan: And, you know, there's sort of a third derivative impact of race on that, I think, because I think more certainty about where rates are going just creates a stronger level of conviction about investing in real estate as a general matter. But I think that the challenges impacting office are really about, you know, demand and kind of a reset in demand and a reconfiguration of where that demand is going. And I think, you know, what we've seen in markets is that where the demand is going is to high quality office in the right locations, and the assets that aren't that are obviously having a very material shift in sort of their viability in the market.

Eric Michael Dray: And, you know, there's sort of a third derivative impact of rates on that, I think, because I think more certainty about where rates are going just creates a stronger level of conviction about investing in real estate as a general matter. But I think that the challenges impacting office are really about demand and kind of a reset in demand and a reconfiguration of where that demand is going. And I think, you know, what we've seen in markets is that where the demand is going is for high-quality office space in the right locations.

Speaker Change: A stronger level of conviction about investing in real estate as a general matter, but I think that the challenge is impacting office are really about you know demand in kind of a reset.

Speaker Change: Reset and demand and a.

Speaker Change: Reconfiguration of where that demand is going and I think what we've seen in markets is that where the demand is going is too high quality office in the right location and the assets that arent that are obviously, having a very material shift in sort of their viability in the market and so you know for those office assets.

Eric Michael Dray: And the assets that aren't that are obviously having a very material shift in sort of their viability in the market. And so, you know, for those office assets, the more challenged older office assets, the ones that were in sort of second tier compression locations, if that's not a rate story, that's sort of a fundamental story. And so I think that, you know, the impact of race on that sort of segment of the office market is probably not the main driver.

Katharine Keenan: And so, you know, for those office assets, the more challenged older office assets, the ones that were in sort of second tier compression locations, if that's not a rate story, that's sort of a fundamental story. And so, I think that, you know, the impact of rates on that sort of segment of the office market is probably not the main driver. Thank you.

Speaker Change: Challenged older office assets the ones that we're in sort of second tier compression locations. If that's not a rate story that sort of a fundamental story.

And so I think that you know.

Speaker Change: The.

Speaker Change: Impact of rates on that sort of segment of the office market is is probably not the main driver.

Timothy Paul Hayes: Thank you. That will conclude our question and answer session. At this time, I'd like to turn the call back over to Mr. Hayes for any additional or closing remarks.

Tim Hayes: That will conclude our question-and-answer session.

Speaker Change: Thank you that will conclude our question and answer session. At this time I'd like to turn the call back over to Mr. Holmes for any additional or closing remarks.

Tim Hayes: At this time, I'd like to turn the call back over to Mr. Hayes for any additional or closing remarks. Thank you, Katie, and to everyone joining today's call. Please reach out with any questions. Thank you.

Timothy Paul Hayes: Thank you, Katie, and to everyone joining today's call. Please reach out with any questions.

Mr. Holmes: Thank you Katie and to everyone joining today's call. Please reach out with any questions.

Mr. Holmes: Yeah.

Mr. Holmes: [music].