Q3 2024 Ladder Capital Corp Earnings Call
Unknown Executive: Good morning and welcome to Ladder Capital Corp's earnings call for the third quarter of 2024. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended September 30 of 2024.
Good morning, and welcome to the ladder Capital Corp earnings call for the third quarter of 2024 as a reminder, today's call is being recorded. This morning later released its financial results for the quarter ended September 30th 24 before the call begins I'd like to call your attention to the customer.
Unknown Executive: Before the call begins, I'd like to call your attention to the customer's safe hardware disclosure in our earnings release regarding four looking statements. Today's call may include four looking statements and projections, and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligations to update our fourth statement or projections unless required by law.
Our safe Harbor disclosure in our earnings release regarding forward looking statements.
Today's call May include forward looking statements and projections and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projection.
Do not undertake any obligation to update our statements or projections unless required by law.
Unknown Executive: In addition, Ladder will discuss certain non-GAAP financial measures on this call, which men and women believe are relevant to assessing the company's financial performance. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available in the Investor Relations section of our website. We also refer you to our Form 10-K and earnings supplement presentation for definitions of certain metrics which we may cite on today's call.
Later, we will discuss certain non-GAAP financial measures on this call, which management believes are relevant to assessing the company's financial performance the company's presentation.
Presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available in the Investor Relations section of our website.
We also refer you to our Form 10-K and earnings supplement presentation for definitions of certain metrics, which we made on today's call.
Pamela McCormack: At this time, I'd like to turn the call over to Ladder's president, Pamela Kwamex. Good morning. We're pleased with Ladder's results in the third quarter of 2024. During this period, Ladder generated distributable earnings of $37.7 million or $0.30 for share, resulting in a return on equity of 9.8 percent supported by modest adjusted leverage of 1.6 times. Ladder has maintained steady book value throughout the broader volatile commercial real estate market, and our balance sheet remains robust with significant liquidity to pursue new investments. As of September 30, 2024, Ladder had $1.9 billion in liquidity, with $1.6 billion, or approximately 30 percent of our balance sheet, comprised of cash and cash equivalents.
Speaker Change: This time I'd like to turn the call over to Waters' President Pamela Mccormack.
Pamela McCormack: Good morning.
Pamela McCormack: Pleased with flattish results in the third quarter of 2024.
Speaker Change: During this period ladder generated distributable earnings of $37 7 million or <unk> 30 per share.
Speaker Change: Resulting in a return on equity of nine 8% supported by modest adjusted leverage of one six times.
Speaker Change: Blatter has maintained steady book values throughout the broader volatile commercial real estate market and our balance sheet remains robust with significant liquidity to pursue new investments.
Speaker Change: Yeah.
Speaker Change: As of September 32020 for bladder had $1 9 billion in liquidity with $1 6 billion or.
Speaker Change: Or approximately 30% of our balance sheet comprised of cash and cash equivalents.
Pamela McCormack: We successfully closed a $500 million seven-year unsecured corporate bond offering in the third quarter. As of September 30, 57 percent of our total debt consisted of unsecured corporate bonds, and $3.7 billion, or 68 percent of our total assets, were unencumbered. Both Moody's and Stitch rate Ladder just one notch below investment grade, and in conjunction with our latest bond offering, S&P upgraded our corporate credit rating by a notch, and both Moody's and Stitch revised Ladder's outlook to positive. We're optimistic about achieving investment grade status, which we will enhance our market position and attract a broader range of investors.
Speaker Change: We successfully closed a $500 million seven year unsecured corporate bond offering in the third quarter.
Speaker Change: As of September 30th.
Speaker Change: 57% of our total debt consisted of unsecured corporate bonds.
Speaker Change: And $3 7 billion or 68% of our total assets were unencumbered.
Speaker Change: Both Moody's and Fitch rate later, just one notch below investment grade.
Speaker Change: And in conjunction with our latest bond offering S&P upgraded our corporate credit rating by a notch.
Speaker Change: And both Moody's and Fitch revised water's outlook to positive.
Speaker Change: We are optimistic about achieving investment grade status, which we believe will enhance our market position and attract a broader range of investors.
Pamela McCormack: Our loan portfolio continues to pay down, and as of quarter end total, $2 billion or 38 percent of our total assets were the weighted average yield of 9.33 percent and limited future funding commitments of $58 million. We've begun transitioning from Q-Sypselones, a typical approach at the start of our recovery, while remaining selective enough.
Speaker Change: Our loan portfolio continued to pay down and as of quarter end totaled $2 billion or 38% of our total assets with a weighted average yield of 933% and limited future funding commitments.
Speaker Change: $58 million.
Speaker Change: We began transitioning from Q sits alone.
Speaker Change: Typical approach at the start of a recovery while remaining selective in our pursuit.
Pamela McCormack: Institute. In bridge lending, we're focused on two areas. First, new acquisitions with basis resets and attractive dollars per square foot for any asset class across the U.S. And second, on refinances or recapitalizations for new vintage properties in lease-ups. Acquisition activity has increased significantly, and we are actively issuing term sheets and closing loans. While it will take time to gradually close these transactions and enhance earnings in the coming quarters, we are well capitalized to pursue these new investments, and our transition back to making new loans has begun. Additionally, we are quoting five- and ten-year CNBS loans and special situation opportunities, including note-on-own financing and triple net acquisitions.
Speaker Change: Enbridge lending we're focused on two areas.
Speaker Change: First new acquisitions with basis resets and attractive dollars per square foot for any asset class across the U S.
Speaker Change: And second.
Speaker Change: On refinancing or recapitalization for newer vintage properties in lease up.
Speaker Change: Acquisition activity has increased significantly and we are actively issuing term sheets and closing loans.
Speaker Change: While it will take time to gradually close these transactions and enhanced earnings in the coming quarters, we are well capitalized to pursue these new investments and our transition back to making new loans has begun.
Speaker Change: Additionally, we are quoting five and 10 year see MBS loans and special situation opportunities.
Speaker Change: No no no financing and triple net acquisitions.
Pamela McCormack: Given the increased transaction levels, improved clarity around valuation and underwriting, and reduced competition in the middle market, we are optimistic about the investment landscape. In the third quarter, we received $492 million of pay-downs in our loan portfolio, representing the second highest quarterly payoff level in the company's history. After quarter-end, we received an additional $64 million loan repayment, and we originated a $24 million first mortgage loan secured by a multi-family property in Phoenix, Arizona. Year-to-date, we received $1.1 billion in total loan pay-downs, including the full repayment of 50 loans, reflecting the credit enhancement and liquidity provided by our middle market lending strategy.
Speaker Change: Given the increased transaction levels improved clarity around valuation and underwriting and reduce competition in the middle market. We are optimistic about the investment landscape.
Speaker Change: In the third quarter, we received $492 million of Paydowns in our loan portfolio, representing the second highest quarterly payoff level in the company's history.
Speaker Change: After quarter end.
Speaker Change: We received an additional $64 million in loan repayments.
Speaker Change: We originated a $24 million first mortgage loan secured by a multifamily property in Phoenix, Arizona.
Speaker Change: Year to date, we've received $1 $1 billion in total loan pay downs, including the full repayment of 50 loans.
Speaker Change: Selecting the credit enhancement and liquidity provided by our middle market lending strategy.
Pamela McCormack: In the third quarter, we took title to an office property in Oakland, California, with a carrying value of $7.5 million or $132 per square foot, representing 37% of the basis of our institutional sponsor. Before assuming title to the house, we wrote off $5 million of the loan balance due to a specific loan impairment. As of September 30, 2024, our remaining General Cecil reserves stood at $52 million, which we believe is adequate to cover any potential loan losses. We continued to monetize own real estate. During the third quarter, we sold a multi-family property in Texas, with a carrying value of $11.5 million for a $300,000 gain above our basis.
Speaker Change: In the third quarter, we took title to an office property in Oakland, California, with a carrying value of $7 $5 million or $132 per square foot.
Speaker Change: Representing 37% of the basis of our institutional sponsor.
Speaker Change: Before assuming titles of the asset we wrote off $5 million of the loan balance due to a specific loan impairment.
Speaker Change: As of September 32020 for our remaining general seasonal reserves stood at $52 million, which we believe is adequate to cover any potential loan losses.
Speaker Change: We continue to monetize the own real estate.
Speaker Change: During the third quarter, we sold the multifamily property in Texas with a carrying value of about $11 $5 million for a $300000 gain above our basis.
Pamela McCormack: In addition, we placed another $9.7 million multi-family property under contract for sale at a price above our basis that is expected to close in the fourth quarter. Turning to our securities and real estate segments, we continued to purchase AAA securities in the third quarter, acquiring $422 million with a weighted average yield of 7.1%. We ended the quarter with an $853 million of securities portfolio, primarily consisting of AAA rated securities earning an unlevered yield of 6.8%. We further continued to add to this portfolio on the fourth quarter, purchasing an additional $57 million of AAA securities. As of September 30, the portfolio was entirely unlevered.
Speaker Change: In addition, we placed another $9 7 million dollar multifamily property under contract for sale at a price above our basis that is expected to close in the fourth quarter.
Speaker Change: Turning to our securities and real estate segments.
Speaker Change: We continue to purchase AAA securities in the third quarter before I $422 million with a weighted average yield of seven 1%.
We ended the quarter with an $853 million securities portfolio.
Speaker Change: Merrily, consisting of AAA rated securities, earning an unlevered yield of six 8%.
Speaker Change: We further continue to add to this portfolio in the fourth quarter.
Speaker Change: Just any additional $57 million of AAA securities.
Speaker Change: As of September 30, the portfolio was entirely unlevered.
Pamela McCormack: Our $946 million real estate portfolio generated $14.1 million in net rental income during the third quarter, mainly consisting of net lease properties with long-term leases to investment-grade rated tenants. In conclusion, with significant liquidity, a strong balance sheet, conservative leverage, and a revitalized originally-Foundation team. We believe we are well positioned to capitalize on the opportunities ahead.
Speaker Change: Our $946 million real estate portfolio generated $14 $1 million in net rental income during the third quarter.
Speaker Change: Mainly consisting of net lease properties with long term leases to investment grade rated tenants.
Speaker Change: In conclusion with significant liquidity, a strong balance sheet conservative leverage and a revitalized origination team. We believe we are well positioned to capitalize on the opportunities ahead.
Paul Miceli: With that, I'll turn the call over to Paul. Thank you, Pamela. In the third quarter of 2024, Ladder generated 37.7 million of distributable earnings or 30 cents per share of the triple EPS for a return on average equity of 9.8%. Our earnings in the third quarter continue to be driven by net interest income, with stable net operating income from our real estate portfolio. Generating a strong return on equity while holding a significant cash balance. As of September 30th, 2024, Ladder's balance sheet was comprised of 30% cash and cash equivalents, or $1.6 billion. With $1.9 billion total liquidity, including our $324 million unsecured revolver, which remains fully ungrown.
Speaker Change: With that I'll turn the call over to Paul.
Speaker Change: Okay.
Paul: Thank you Pamela in the third quarter of 2020 for ladder generated $37 7 million of distributable earnings or <unk> 30 per share of the civil EPS.
Speaker Change: Core return on average equity of nine eight.
Speaker Change: Yeah.
Paul: Our earnings in the third quarter continued to be driven by net interest income was stable net operating income from our real estate portfolio generating a strong return on equity while holding a significant cash balance.
Paul: As of September 32024, ladders balance sheet was comprised of 30% cash and cash equivalents or $1 6 billion with $1 $9 billion of total liquidity, including our $324 million unsecured revolver, which remains fully undrawn.
Paul Miceli: As of September 30th, 2024, our adjusted leverage ratio was 1.6 times with total gross leverage of 2.3 times, which has printed down over the last 12 months as we've delivered our balance sheet and a massive large liquidity position. Our loan portfolio totaled $2 billion at the quarter end across 62 balance sheet loans. The portfolio received meaningful paydowns during the quarter to $492 million, and included the collection of deferred interest of $7.5 million upon the payoff of a loan collateralized by a mixed-use property. Separately distributable earnings in the third quarter included the write-offs of an allowance for loan loss of $5 million allocated to a loan on an office property we took title to during the quarter in Oakland, California, with a carrying value of $7.5 million.
Paul: As of September 32024, our adjusted leverage ratio was one six times with total gross leverage of two three times, which has trended down over the last 12 months as we de Levered, our balance sheet and a master of large liquidity position.
Our loan portfolio totaled $2 billion as of quarter end across 62 balance sheet loans.
Paul: The portfolio receive meaningful pay downs during the quarter totaling $492 million.
Paul: And included the collection of deferred interest of $7 5 million upon the payoff of a loan collateralized by a mixed use property.
Paul: Separately distributable earnings in the third quarter included the write off of an allowance for loan loss of $5 million allocated to a loan on an office property. We took title to during the quarter in Oakland, California, with a carrying value of $7 $5 million.
Paul Miceli: Additionally, in the third quarter, we increased our fee for reserve by $3 million to a fee for general reserve allowance of $52 million or approximate 256 basis point reserve on our loan portfolio as of September 30th, 2024. The carrying value of our securities portfolio was $853 million at quarter end, with net growth of 77% in the third quarter. 98% of the portfolio was investment grade rated, with 91% being triple-A rated. The entire portfolio of predominantly triple-A securities was unencumbered and readily financeable, providing an additional source of potential liquidity, complementing the $1.9 billion of staying-day liquidity as of quarter ends.
Paul: Additionally, in the third quarter, we increased our sequel reserve by $3 million to a seasonal general reserve allowance of $52 million.
Paul: Proximate 256 basis point reserve on our loan portfolio as of September 32024.
Paul: The carrying value of our securities portfolio with 853 million at quarter end with net growth of 77% in the third quarter.
Paul: 98% of the portfolio was investment grade rated with 91%.
Paul: The entire portfolio of predominantly AAA securities unencumbered and readily financeable, providing an additional source of potential liquidity complementing the $1 $9 billion of same day and liquidity as of quarter end.
Paul Miceli: Our $946 million real estate segment continued to generate stable net operating income in the third quarter. The portfolio includes 155 net lease properties, over 70% of which are investment grade rated tenants, committed to long-term leases with an average remaining lease term of 8 years. As Pam was discussed, the latter issued $500 million on secured corporate bonds that closed in the third quarter. And as of September 30th, 2024, 57% of our total debt was comprised of unsecured corporate bonds with a weighted average maturity of approximately four years at an attractive weighted average $6 coupon rate of 5.2%.
Our $946 million real estate segment continued to generate stable net operating income in the third quarter.
Paul: The portfolio includes 155 net leased properties over 70.
Paul: Percent of which are investment grade rated tenants committed to long term leases with an average remaining lease term of eight years.
Speaker Change: As Pamela discussed ladder issued $500 million of unsecured corporate bonds that closed in the third quarter.
Speaker Change: And as of September 32024, 57% of our total debt was comprised of unsecured corporate bonds with a weighted average maturity of approximately four years.
Speaker Change: At an attractive weighted average fixed coupon rate of five 2%.
Paul Miceli: With the closing of this capital rate, both Moody's and Fitch place ladder on positive outlook. The Moody's upgraded and unnotched the rating on our bonds to BA1, aligning our bonds with our corporate credit rating, one notch from investment grade. We believe the rating agency that appreciates the proven capital management ladder as exhibited during the post-COVID inflationary period. With these actions, ladder is closer to our long-held goals of achieving an investment-grade credit rating, which we believe will open ladder up to broader opportunities, along with access to the investment-grade bond market, with a goal of achieving a more attractive cost of capital and enhanced return on equity for shareholders over time.
Speaker Change: With the closing of this capital raise both Moody's and Fitch placed later on positive outlook.
Speaker Change: Moodys upgraded and unmatched the rating on our bonds to be a one aligning our bonds with our corporate credit rating one notch from investment grade.
Speaker Change: We believe the rating agencies appreciate the prudent capital management ladder has exhibited during the post COVID-19 inflationary periods.
Speaker Change: With these actions.
Speaker Change: That is closer to our long held goal of achieving an investment grade credit rating, which we believe will open letter up to broader opportunities along with the access to the investment grade bond market.
Speaker Change: With the goal of achieving a more attractive cost of capital and enhanced return on equity shareholders overtime.
Paul Miceli: As of September 30th, our unencoupled asset pool stood at $3.7 billion, for 68% of total assets. 85% of this unencoupled asset pool was comprised of first mortgage loans, securities, and unrestricted cash and cash equivalents. Overall, we believe our significant liquidity position, large pooled high-quality unencumbered assets, the best-in-class capital structure, one notch with investment-grade, provide ladder with strong financial flexibility, and meaningful access to capital to allow for focus on deployment of capital within our three segments based on the best risk-adjusted returns. As of September 30th, 2024, Ladder's unappreciated book value for share was $13.81, which is net of $0.41 per share. Cecil Generals are established.
Speaker Change: As of September 30th our unencumbered asset pool stood at $3 $7 billion.
Speaker Change: Or 68% of total assets.
Speaker Change: 85% of this unencumbered asset pool was comprised of first mortgage loans securities.
Speaker Change: Unrestricted cash and cash equivalents.
Speaker Change: Overall.
We believe our significant liquidity position large pool of high quality unencumbered asset best in class capital structure. One offs are investment grade provide letter with strong financial flexibility and meaningful access to capital to allow for focus on deployment of capital within our three segments based on the best risk adjusted returns.
As of September 32024 letters on depreciated book value per share was $13.81, which is net of 41 cents per share sequel generals are established.
Paul Miceli: In the third quarter of 2024, we repurchased $1.2 million of our common stock at a weighted average price of $11.91 per share. Finally, our dividend remains well covered, and in the third quarter, Ladder declared a 23 cent per share dividend, which was paid on October 15th, 2024. For details on our third quarter of 2024 operating results, please refer to our earnings supplements, which are available on our website, and Ladder's quarterly report on Form. Thank you, which we expect to find in the coming days.
In the third quarter 2024, we repurchased $1 $2 million of our common stock at a weighted average price of $11 91 per share.
Speaker Change: Year to date through September 30 of 2024.
Speaker Change: We have repurchased $2 million of our common stock at a weighted average price of $11.41 per share.
Speaker Change: Finally, our dividend remains well covered and in the third quarter ladder declared at <unk> 23 per share dividend, which was paid on October 15 2024.
Speaker Change: For details on our third quarter 2024 operating results. Please refer to our earnings supplement.
Speaker Change: Available on our website <unk> quarterly report on Form 10-Q, which we expect to file in the coming days with that I will turn the call over to Brian.
Brian Harris: With that, I will turn the call over to Brian. Thanks, Paul. Ladder delivered another strong quarter, with credit holding up nicely, and having issued another $500 million corporate unsecured bond, we now head towards year end with ample liquidity, well-positioned Q4 and 2025. There's been a noticeable error of optimism in the capital markets, with stocks recently reaching all time highs and credits reds tightening in the bond market, after the Fed began its great cutting cycle. This environment boasts well for our diversified product mix and commercial real estate. Few sectors were hit harder by the one-two punch of a global pandemic and rapidly rising interest rates, as the Fed fought to tame inflation.
Thanks, Paul.
Brian: Ladder delivered another strong quarter with credit holding up nicely and having issued another $500 million corporate unsecured bond, we now head towards year end with ample liquidity well positioned Q4 and 2025.
Brian: Theres been a noticeable Arab optimism in the capital markets with stocks recently, reaching all time highs and credit spreads tightening in the bond market. After the fed began its rate cutting cycle.
Brian: This environment bodes well for our diversified product mix and commercial real estate.
Brian: A few sectors were hit harder by the one two punch of a global pandemic and rapidly rising interest rates as the fed fought attainment placement.
Brian Harris: However, the worst seems to be behind us, with significant reserves for potential losses already established and stabilizing real estate values, albeit mostly at lower prices. There were certainly winners and losers as the Fed raised rates and operating costs swelled, but the future is looking brighter now. Ladder plans to press its advantage of being well capitalized by capturing market share previously held by regional banks and highly leveraged non-bank competitors, many of whom are still addressing credit issues and the need to shore up their balance sheets before proactively returning to their lending activities. As previously indicated, we are beginning to deploy our liquidity by first investing in attractively priced securities, then shifting our focus to loan origination as securities spread.
Brian: However, the worst seems to be behind us with significant reserves for potential losses already established as stabilizing real estate values, albeit mostly at lower prices.
Brian: There were certainly winners and losers as the fed raised rates and operating costs well, but the future is looking brighter now.
Brian: Latter plans to press its advantage of being well capitalized by capturing market share previously held by regional banks and highly leveraged nonbank competitors, many of whom are still addressing credit issues and the need to shore up their balance sheets before proactively returning to their lending activities.
Brian: As previously indicated we are beginning to deploy our liquidity by first investing in attractively priced Securities then shifting our focus to loan origination as securities spreads tightened.
Brian Harris: Steyton. In the third quarter, we executed this plan by acquiring approximately 431 million of securities. As we enter the fourth quarter, we are seeing an uptick in loan applications while maintaining only a slightly reduced appetite for acquiring additional securities. We expect the pace of new loan originations to increase as we approach year-end. By reallocating cash out of T-bills and into security and loans, we believe we can add to our distributable earnings in 2025. We believe the diminished lending capacity of regulated banks, coupled with sideline competitors in the mortgage rate space, positions us well to deliver attractive returns as the real estate market recovers.
Brian: In the third quarter, we executed this plan by acquiring approximately $431 million of securities.
Brian: As we enter the fourth quarter, we are seeing an uptick in loan applications, while maintaining only a slightly reduced appetite for acquiring additional securities.
Brian: We expect the pace of new loan originations to increase as we approach year end.
By reallocating cash out of T bills and into Securities and loans. We believe we can add to our distributable earnings and 2025.
Brian: We believe the diminished lending capacity of regulated banks, coupled with sidelines competitors in the mortgage REIT space positions us well to deliver attractive returns as the real estate market recovers.
Brian Harris: While new private capital may answer the lending space, simply having capital does not guarantee success.
Brian: Well, new private capital May answer the lending space.
Brian: We have <unk> capital does not guarantee success staffing up with anything less than the 18.
Brian Harris: Staffing up with anything less than the 18 is likely to lead to this appointment. Loan origination may be relatively straightforward, but financing those loans safely and creatively, and getting paid back at par is what will define who the winners are in the end. I'll reiterate again that in the third quarter, Ladder received the second highest amount of loan payoffs in its history at $492 million, despite challenging overall market conditions. We believe our strong credit culture and disciplined lending approach will continue to help differentiate Ladder. Furthermore, the time and investments we have made over the past decade in the unsecured corporate bond market have created a uniquely strong capital structure, one that takes years; it's not decades to develop in gaining the confidence of discerning investors.
Brian: Likely to lead to disappointment.
Brian: Loan origination may be relatively straightforward, but financing those loans safely and accretively and getting paid back at par is what will define who the winners are in the end.
Brian: I'll reiterate again that in the third quarter ladder received the second highest amount of loan payoffs in its history at $492 million, despite challenging overall market conditions.
Brian: We believe our strong credit culture, and disciplined lending approach will continue to help differentiate ladder.
Brian: Furthermore, the time and investments we have made over the past decade in the unsecured corporate bond market have created a uniquely strong capital structure, one that take years, if not decades to develop in gaining the confidence.
Brian: Of discerning investors.
Brian Harris: Overall, we believe our fortress-like balance sheet combined with a favorable competitive landscape positions Ladder well for the future.
Brian: Overall, we believe our fortress like balance sheet combined with a favorable competitive landscape position flatter well for the future.
Unknown Executive: Thanks for tuning in today, and we can now take some questions.
Brian: Thanks for tuning in today, and we can now take some questions.
Brian: Yeah.
Unknown Executive: Thank you.
Unknown Executive: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing in a star key. One moment, please, while we pull for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Please while we poll for questions.
Stephen Laws: Our first question comes from Stephen Laws with Raymond Jean. Please proceed with your question. Hi, good morning. I want to start maybe what's the originations. Pamela, you gave us a little bit of color on your extra hosting at things. And I think to Brian's point about some competitors' dealing with portfolio issues and banks' constraints. Can you talk about where you see the best opportunities in the market given your target kind of smaller amounts of market loans. You know, are you looking at anything maybe on the construction side, where banks are active? Those are more, you know, transitional play loans that are going into the pipeline currently.
Our first question comes from Stephen Laws with Raymond James. Please proceed with your question.
Stephen Laws: Hi, good morning.
Stephen Laws: I want to start maybe.
Stephen Laws: What's the originations Pamela you talked you gave us a little bit of color on your editor looking at things and then I.
Speaker Change: To Brian's point about some smaller competitors construction dealing with portfolio of shoes and bags constrains and he can talk about where you see the.
Speaker Change: The opportunities in the market you know given given your target kind of smaller middle market loans are you looking at anything maybe on the construction side where were banks.
Speaker Change: All right.
Speaker Change: [noise] transitional colleague.
Speaker Change: Loans that are going into the pipeline currently.
Pamela McCormack: Thank you, and good morning. Yes, so we are looking at more opportunities.
Speaker Change: Yes.
Speaker Change: Thank you and good morning, Yeah. So we are we are you know looking at more opportunities. We are still focused on our core products, which does not include construction loans. We are primarily right now in our pipeline, we're primarily looking at multifamily with some industrial we just signed up a retail deal were looking mostly at noon.
Pamela McCormack: We are still focused on our core products, which does not include construction loans. We are primarily right now in our pipeline. We are primarily looking at multifamily, some industrial. We just find up a retail deal. We're looking mostly at new acquisitions, as I mentioned in the call, with basis reset, attractive dollars for foot. We've always been a dollars per foot basis lender. And we're seeing a lot of opportunities, you know, for recapitalized. We'll do refinances on newer vintage stuff, where there's a good story and properties are in lease up.
Speaker Change: Acquisitions as I mentioned in the call with basis resets attractive.
Speaker Change: We've always been a dollar per foot basis lender.
Speaker Change: And we're seeing a lot of opportunities for recapitalizing, it well do refinances on newer vintage stock, where there's a good story on our properties are in lease up.
Brian Harris: So I think the lesson learned for us is we like our strategy of middle market lending, and we are looking to do more of the same. Wonderful. Switching side on the other side on the repayments, Pamela, you know, pretty high number. Can you talk about what's driving that, or are they refinancing elsewhere, or are they going into the agency system on some multi? Can you talk about what's causing that pickup and what's enabling these borrowers to refinance these loans?
Speaker Change: So I I think the lesson learned for US is we like our strategy of middle market lending and we are looking to do more of the same.
Speaker Change: Wonderful and then switching side to the other side on the repayments Pamela you know pretty high number can you talk about what's driving that or are they are they refinancing elsewhere or are they going into the agency system on some multi year can you talk about what's causing that pickup and what's enabling these borrowers to to refinance these.
Speaker Change: These loans.
Brian Harris: I'll take that once, Steven, Ms. Brian. There are the smaller ones, especially apartment-related, tend to be getting refinanced, although very few of them actually refinance on time. Meaning, they go under application; they're supposed to close 60 days later, and we usually have to give a short extension in order to accommodate. So there's a lot of laborious detail being put into due diligence at this point for new lenders, but the apartment side of things seems to be doing just fine. The warehouse also, the larger loans are the ones that some of these have been getting not extended a couple of months here and there for the last six months.
Speaker Change: I'll take that one Steven it's Brian.
Brian: There are the smaller ones, especially apartment related tend to be getting refinanced, although very few of them actually refinance on time, meaning. They go under application is supposed to close 60 days later than we usually have to give us a short extension.
Brian: Order to accommodate some very there's a lot of laborious detail being put into due diligence at this point for new lenders, but the apartment side of things seems to be doing just fine warehouse also are the larger loans are the ones that are that are some of these have been getting extended a couple of months here and there for the last six months.
Brian Harris: So if there's no real pattern I can give you here, I wouldn't tell you that the refinances are suddenly booming, nor would I tell you that loans that have been extended a couple of times are suddenly getting done. It's just a lot of effort, and for the most part, basis we took a $60 million loan last quarter that paid off, and it had very little cash flow. It was effectively a slowed business plan; I wouldn't say a belt business plan, but then it was purchased on land value by somebody who wants to build something else on site.
Brian: So there's no real pattern I can give you here I wouldn't tell you that the refinances are suddenly booming.
Brian: Nor would I tell you that loans that had been extended a couple of times our yes.
Brian: Suddenly getting done it's just a lot of effort and for the most part basis, we took a 60 million dollar loan.
Brian: Loan last quarter that paid off and it had very little cash flow. It was effectively a slowed business plan I wouldn't say a failed business plan, but then it was purchased on land value by somebody who.
Brian: Who wants to build something else on the site. So that all throw you off a little bit, but we also took the numbers a little overstated because some of the sizes are a little bit bigger we did take $119 million payoff on an industrial deal in Puerto Rico.
Brian Harris: So that'll throw you off a little bit, but we also took the number a little overstated because some of the sizes are a little bit bigger. We did take a $19 million pay off on an industrial deal in Puerto Rico. There was nothing wrong at all with that. They did great with that asset, and that's just either sold or paid off; I don't remember. But so that one probably skewed the pay off to the higher end, and as the fourth quarter has begun, I believe we've taken another $60 million in pay off, mostly mixed use stuff.
Brian: There's nothing wrong at all with that they did great with that asset and that's just I think it was either sold or paid off I don't remember, but so that one probably skewed the payoffs to the to the higher end and as the fourth quarter has begun and I believe we've taken another $60 million in payoffs, mostly mixed used stuff.
Brian Harris: Great, appreciate the color on that, Ryan, and thanks for the comments this morning. Sure.
Speaker Change: Great appreciate the color on that Brian enough. Thanks for the comments this morning.
Brian: Sure.
Brian: Okay.
Tom Katherinewood: Our next question comes from Tom, Katherinewood, with BTIG. See you with your question. Thanks so much, and good morning, everybody. Paul, maybe you mentioned shifting to originations as spreads tighten on the securities investments. I guess what has us worried is that the weighted average extended maturity in your loan book is just over one year, and as you mentioned, payments are already accelerating. So, kind of what's giving you confidence that lending can come back fast enough to allow you to backfill your loan book without a material hit to distribute a little earnings.
Speaker Change: Our next question comes from Tom Catherwood with B P. I G feed with your question.
Thanks, So much and good morning, everybody, Paul maybe you mentioned shifting to originations as spreads tightened on the securities investments.
I guess what has us worried is that the weighted average extended maturity in your loan book is just over one year and as you mentioned payments are already accelerating so kind of what's giving you confidence that the lending can come back fast enough to allow you to backfill your loan book without a material.
Speaker Change: Cereal hit to distributable earnings.
Brian Harris: James. This is Brian. I'll take the question; although, if you want specifics from Paul, you're welcome to ask them there too. The lending business is definitely picking up. We are just sending out more applications. We're getting more signed up so that what you're going to see in the quarters ahead as loans close is going to look like we threw the lights on, but the reality is it's happening right now. I'm not sure it'll look way different in the fourth quarter, although I suspect it will look materially higher than originations closing than the third quarter. The security side of this, as we've said, all along, is really the informing product because if securities are still very widespread, you have to stay wide really on the loan side.
Speaker Change: Oh, Hi, this is Brian I'll take the question, although if you want specifics from Paul you're you're welcome to ask them there too.
Speaker Change: The lending business is definitely picking up we are just sending out more applications.
Speaker Change: Getting more signed up so that's what you're going to see in the quarters ahead as loans close is going to look like we threw the lights on but the reality is it's happening right now I'm not sure it'll look way different in the fourth quarter, although I suspect it will look materially higher than originations closing.
Speaker Change: Then the third quarter.
The security side of this as we've said all along is really the <unk>.
Speaker Change: Informing product because of its securities are still very wide spread you have to stay wide really on the loan side also if youre planning to securitize those loans, but when we saw what were extraordinarily cheap securities. When we bought $430 million of them I believe we picked up another 20.
Brian Harris: Also, if you're planning to securitize those loans, but what we saw where we're extraordinarily cheap securities, and we bought 430 million of them. I believe we picked up another 20 or 30 million dollars just this week in securities, and they're still cheap, but they've gotten much less cheap. So the will that would naturally cue us to slide over to more originations, and that's exactly what we're seeing. There is nothing at all unusual about this. This is exactly what it looks like. As I said, a few times on these calls, it kind of looks like a run of the military recovery to us.
Speaker Change: $30 million just this week.
Speaker Change: In securities and they are still cheap, but they've gotten much less cheap.
Speaker Change: So the well that would naturally Q us to slide over to more originations and that's exactly what we're seeing there is nothing at all unusual about this this is exactly what it looks like as I said, a few times on these calls it kind of looks like a run of the mill recovery to us and so while we'll always purchase AAA.
Brian Harris: And so, while we'll always purchase AAA securities that are rather inexpensive, I believe the 430 million we purchased had an unleveraged yield of over 7%. That's pretty unusual over the last 10, 15 years. So we'll keep buying those. They've gotten a lot tighter, but we're now moving squarely into the lending side of the business. And we're happy with it. We're still kissing a lot of frogs. A lot of stuff gets looked at, and ultimately we find out something that we've got. We don't like. If you're dealing with a refinance from 2021 or 22, there's a very good chance that the sponsor is asking you for a loan that's probably too big.
Is that a RASM rather inexpensive.
Speaker Change: Hum.
Speaker Change: I believe the $430 million, we purchased had an unlevered yield of over 7%.
Speaker Change: It's pretty unusual yeah over the last 10 15 years, so we'll keep buying those they've gotten a lot tighter, but we're now moving squarely into the the lending side of the business and we're happy with it. So you know we're still kissing a lot of frogs a lot of the stuff gets looked at and ultimately we find out something that.
Speaker Change: We don't like if youre dealing with a refinance from 2021 or 'twenty two there's a very good chance that the sponsor is asking you for alone that's probably too big.
Brian Harris: And we're a little surprised that how many of them are actually being accommodated with those higher loan requests. They're nearly always accommodated by a lender who's a name we're not familiar with. So I would caution taking too much of a cue from the prior loan amount because most real estate, let's face it, is worth less than it was worth in 2021 and 22. So I think long story short, very confident that lending picks up here. It will probably be very light on office. But we think hotel cash flows are quite high also right now, but apartments, industrial and other are doing just fine.
Speaker Change: And we're a little surprised that how many of them are actually being accommodated with those higher loan request there nearly always accommodated by a lender who's a name we were not familiar with.
Speaker Change: I would caution taking too much of a queue from the prior loan amount.
Speaker Change: Because most real estate, let's face it is worth less than it was worst in 2021 and 'twenty two so I think long story short.
Speaker Change: Very confident that lending picks up here it will probably be very light on office, but and we think hotel cash flows are quite high also right now, but apartments industrial and other are doing just fine. So we're we're very confident we're in the right place now when you talk about earnings.
Brian Harris: So we're very confident we're in the right place now. When you talk about earnings, as payoffs pick up, obviously these are 19, 10% loans that are paying off. So you might have a dip in earnings, but if that dip in earnings is accompanied by an increase in cash, that's a temporary stop on the train towards higher earnings.
As payoffs pick up obviously these are 90, 10% loans that are paying off so you might have a dip in earnings but if that dip in earnings is accompanied by an increase in cash.
Speaker Change: That's a temporary stop on the train towards higher earnings.
Tom Katherinewood: Got to appreciate those thoughts, Brian, but follow up to that. How does the origination pipeline I guess right now compare to a typical quarterly level that you would have normally seen in a more regular period.
Speaker Change: Got it I appreciate those thoughts, Brian but follow up to that.
Speaker Change: How does the origination pipeline I guess right now compare to a you know a typical quarterly level that you would have normally seen in in a more regular period.
Adam Siper: We have Adam here, so Adam runs origination, so if you want to take that at him, go right ahead. Make sure you unmute your line. Yeah, it's ramping up. I mean, it's let us Brian and Pamela mention it's going to be a slow build, but I tell you the volume of new acquisitions has picked up materially. The volume of term sheets that we are competing on to win those opportunities. These has picked up materially, and it'll continue to build very comfortably from here, in my opinion, and with the backdrop that we're always focused again on the opportunities where we're going to get our principal back.
Speaker Change: We have Adam here, so Adam runs origination. So if you want to take that Adam go right ahead make sure you're on mute your line.
Adam: Yes, it's ramping up I mean, its weight as Brian mentioned, it's going to be a slow build but I would tell you. The volume of new acquisitions has picked up materially the volume of term sheets that we are competing on to win those opportunities.
Adam: Has picked up materially.
Adam: It will continue to build very comfortably from here in my opinion.
Adam: With the backdrop that we're always focused again.
Adam: The opportunities, where we're gonna get our principal back so we're continuing to be discerning, but the pure volume of transactions that fit our credit box.
Adam Siper: So we're continuing to be discerning, but the pure volume of transactions that fits our credit box has picked up really significantly in the last 60 days. And I would just add, relative to what we call our average run rate, which I guess that's somewhere between 250 and 400 million a quarter. We're going to be below that in the fourth quarter, but we're going to be moving towards it. And I suspect in the first or second quarter next year, we'll probably be at that run rate. Assuming interest rates don't go in an odd direction.
Adam: Picked up really significantly in the last 60 days.
Speaker Change: And I would just add relative to what we call our average run rate, which I guess, that's somewhere between 250 and $400 million a quarter, we're going to be below that in the fourth quarter, but we're gonna be moving towards it and I suspect in the first or second quarter next year, we'll probably be at that run rate.
Speaker Change: Sumit interest rates don't go.
Brian Harris: I really appreciate those answers. And the last one for me to shift into another side of your business with equity investments, we're obviously seeing more transactions in the market; values seem to have stabilized, if not somewhat improved. That said, there's still lots of assets that need recapitalizations. How are you viewing CRE equity investments as a potential use for your capital at this point in the cycle? We think it's very attractive right now. Having said that, I think our, when we pencil out a return on an equity investment, it's probably a lot higher return required than what I would call most institutional equity guys.
Speaker Change: And in all direction.
Speaker Change: Yeah.
Speaker Change: Really appreciate those answers and then last one for me just shifting to another side of your business with our equity investments were obviously seeing more transactions in the market values seem to have stabilized if not kind of somewhat improved that said theres still a lot of assets that need recapitalization, how are you viewing CRE.
Speaker Change: QWERTY investments as a potential use for your capital at this point in the cycle.
Speaker Change: We think it is very attractive right now having said that our I think our when we pencil out a return on an equity investment, it's probably a lot higher.
Speaker Change: Return required then what I would call most institutional equity guys.
Brian Harris: So, yeah, we do think they're attractive here. And we'll continue to buy them when we see them. But I don't think, given our orientation towards equity. And we're not trying to make 10 or 11 or 12 percent. We're trying to double our money. And so that's kind of the guidepost we use. So, again, I don't think equity will ever be a giant part of our business. But during any period where banks are cleaning up their balance sheet due to regulators, marking things down, that's something you could easily see us in. Our equity position should be going up, not down in 2025.
Speaker Change: So.
Speaker Change: Yes, we just think they're attractive here.
Speaker Change: And we'll continue to buy them when we see them, but I don't think given our our orientation towards equity and in that we're not trying to make 10 or 11 or 12%, we're trying to double our money and so that's kind of the guidepost. We use so again I don't think equity will ever be a giant part of our business.
Speaker Change: But during any period, where banks are cleaning up their balance sheet do the regulators, marking things down that's something you could easily see us earn our equity position should be going up not down in 2025.
Unknown Executive: Got it.
Unknown Executive: That's it for me. Thanks, everyone.
Speaker Change: Got it that's it for me thanks, everyone.
Steve DeLaney: Our next question comes from Steve Delaney with Citizens JMP. Please proceed with your question. Thanks. Good morning, everyone. Can you hear me clearly? I can. Can you hear me? Hello. We can hear you, Steve. Okay. Great. I was getting static on my and I just want to make sure that I was clear. I'm glad to see the buyback. Obviously, in 3Q, a little under $12 a share. Now the stock is probably about 90 cents lower now.
Speaker Change: Our next question comes from Steve Delaney with citizens T. P. Please proceed with your question.
Steve DeLaney: Thanks. Good morning, everyone can you hear me clearly.
Speaker Change: Hi Cat.
Steve DeLaney: Can you hear me.
Hello.
Speaker Change: We can hear you see.
Speaker Change: Okay, Great I was getting static environment and.
Speaker Change: And I just want to make sure that I was I was clear.
Speaker Change: I'm glad to see the buyback, obviously and three Q.
Speaker Change: A little under $12, a share and the stock probably about 90 cents lower now would it be safe to assume that you've been continue to be active with your buyback here in the fourth quarter and if you could you remind me with the remaining authorization might be thank you.
Brian Harris: Would it be safe to assume that you've been continue to be active with your buyback here in the fourth quarter? And if you could, you remind me what the remaining authorization might be. Thanks. Thank you. The answer is yes; we will probably continue. I think the remaining authorization, and I don't know the exact number; Paul probably does, but it's over 40 million, so that's probably good enough for my math. So yeah, it has backed off a little bit here, but we're pretty comfortable with all these payoffs and the amount of cash that we're holding. Keep it, but also our securities book, the AAAs, they're unlevered.
Speaker Change: Oh the answer is yes, we will probably continue.
Speaker Change: I think the remaining authorization and I don't know the exact number Paul probably does but it's over 40 million. So that's probably good enough for from my mouth and Gras. So.
Speaker Change: So yeah. It has backed off a little bit here, but we're pretty comfortable with all of these pay offs in the amount of cash that we're holding keep in mind, we're holding.
Speaker Change: And enormous amount of liquidity, but also our securities books, the triple as their unlevered. So we can easily find additional capital. There. So we've got an embarrassment of riches right now as far as liquidity goes largely augmented by the $500 million issuance, we did in the quarter and so I think we take a cautious.
Brian Harris: So, yeah, we can easily find additional capital there. So we've got an embarrassment of riches right now as far as liquidity goes, largely augmented by the $500 million we did in the quarter. And so I think we take a cautious approach towards liquidity, and that we will. A lot of people say, why would you go borrow another $500 million? We'd like to have the cash available before we go shopping. So there's always this little low in deployment, but with 500 coming in in early July and 430 going out into securities, we're catching up quickly. But I don't think it'll be any gigantic purchases or anything that approaches that authorization. But I do think you can count on us to have a steady eye on the ball there.
Speaker Change: Approach towards liquidity and that we will make a lot of people say why would you go borrow another $500 million, we'd like to have the cash available before we go shopping so there's always this little lull in deployment, but with 500 coming in in early July and 430 going out into securities were catching up quickly.
Speaker Change: But I I don't think it'll be any gigantic purchases or anything that approaches that that that authorization, but I do think you can count on us to have a steady eye on the ball there and if we see openings.
Brian Harris: And if we see openings, we will step into them and continue to acquire our stock and our bonds. Thanks, Brian.
Speaker Change: We will step into them and continue to acquire our stock and our bonds.
Thanks, Brian let me switch over to the dividend for a moment twenty-three set you covered it.
Steve DeLaney: Let me switch over to the dividend for a moment. 23 cent, you covered it 130% with distributable EPS in the third quarter. It was last raised in the first quarter of '23. And I realized you've been playing defense, if you will, focusing on liquidity. You're obviously shifting now that the market is sort of healing a low array environment. You definitely sound like you're shifting to offense, certainly with the loan portfolio. With the next logical time frame for the board to revisit the dividend beef in the first quarter of 2025, that's part of the question. And in your mind, this may sound like nonsensical, but could you see a scenario where you are repurchasing your shares, but also the board makes a modest increase to the cash dividend?
Speaker Change: 130% with distributable EPS in the third quarter.
Speaker Change: It was last raised in the FERC raised in the first quarter of 'twenty, three and I realize you've been playing defense. If you will focusing on liquidity, you're obviously shifting now.
Speaker Change: But the market is sort of healing a lower rate environment definitely sounds like you're shifting to offense certainly with.
Speaker Change: With the loan portfolio is it would.
Speaker Change: The next logical time frame for the board to revisit the dividend be in the first quarter of 2025.
Speaker Change: That's part of the question and in your mind I know this may sound like a <unk>.
Speaker Change: Non sensical, but.
Speaker Change: Could you see a scenario where you were repurchasing your shares but also the board makes a modest increase to the cash dividend could both of those things kind of coexist.
Brian Harris: Could both of those things kind of co-exist just in your mind as far as your capital allocation? Thank you.
Speaker Change: In your mind as far as your capital allocation. Thank you.
Brian Harris: Okay, I unfortunately didn't write all that down, but I'll try to take that in the two parts it was sent in. So I think the first question was dividend timing if we're to raise it. I won't get in front of my board, or convey our dividend policy on an earnings call, but I can speak for the CEO. And I suspect, you know, out towards first or second quarter that could happen, or at least I would be more open to it than I've been recently. But I would also point out that we have to see this: the loan portfolio start picking up that we believe is going to be consistent.
Speaker Change: Okay. Unfortunately, didnt write all that down, but I'll try to take that in the too far to say what's that then.
I think the first question was dividend timing if we're if we're at a range that I won't get in front of my board or convey our dividend policy on an earnings call, but I can speak for the CEO and I suspect and out towards first or second quarter that could happen or at least I would be more open to it than.
Speaker Change: And then I've been recently, but I would also point out that you know we have to see this.
Speaker Change: The loan portfolio start picking up that we believe is going to be consistent are there. This fed endless economy has thrown us off the rocks a couple of times.
Brian Harris: This Fed and this economy has thrown us off the rocks a couple of times. You know, we're the head fake, but this one looks a little bit more sincere, and we'll see what happens at the end of the election period. So we no longer say Election Day, we say election period. But so I think that it will take a little while till we're convinced that. Keep in mind, we just still have some loans that we're discussing with sponsors as to, are they having difficulty or can they refinance? The probabilities of them being able to get out of the difficulties they've been in have gone up.
Speaker Change: Where the head fake, but this one looks a little bit more sincere and we'll see what happens at the end of the election period. So.
Speaker Change: We no longer say election day, we say election period, but so I think that it will take a little while until we're convinced that keep in mind, we do still have I'm sorry.
Speaker Change: Some loans that were discussing with with sponsors as to are they having difficulty or can they refinanced the probabilities of them being able to get out of the difficulties they've been in it have gone up so for the most part I think the damages understood on anything that could be potentially coming our way, but you know that can all change too yeah and especially.
Brian Harris: So, for the most part, I think the damage is understood on anything that could be potentially coming our way. But that, you know, that can all change too. Yeah, and especially if something is not terribly high in cash flow, carrot costs are huge. So some people just tap out at some point. So we, you know, we may still see a little bit more noise in the portfolio, but nothing that we don't see right now. So we're not overly concerned with it. Well, we're not concerned with it. We'll probably start to look to allocate capital into either, you know, additional areas.
Speaker Change: If something is not terribly high and cash flow.
Speaker Change: Carry costs are huge so some people it just tap out at some point, so well yeah, we may still see a little bit more noise in the in the portfolio, but nothing that we don't see right now so we're not overly concerned with it well we're not concerned with it will probably start to look to allocate capital into either you know additional areas.
Brian Harris: But if we're able to keep buying securities where we're buying them the way leverage works and right now they're 13 14% RO East. And to the extent that our lending portfolio does in fact continue, as opposed to, you know, just have a nascent recovery at this point. Yeah, I suspect we're shareholders. As you know, the management team here owns a lot of stock, and our dividend is in the mid eights. That's attractive. We like it. And what, but there's a couple of ways to return cash to shareholders. One is through the dividend, and the other is through stock purchases.
Speaker Change: If we're able to keep buying securities, where we're buying them the way leverage works and right now there are 13, 14% Roe.
And to the extent that our lending portfolio does in fact continue as opposed to.
Just have a nascent recovery at this point.
Speaker Change: I suspect we were shareholders as you know the management team here a lot of our stock and our dividend is in the mid eights, that's attractive we like it and but Theres a couple of ways to return cash to shareholders. One is through the dividend and the other is through stock purchases. So the second part of your question could we do both at the same time absolutely.
Brian Harris: So the second part of your question. Could we do both at the same time? Absolutely.
Steve DeLaney: Okay, great. Thanks so much for the comments, everyone. Appreciate it.
Speaker Change: Okay great.
Speaker Change: Thanks, so much for the comments everyone I appreciate it.
Jade Rahmani: Our next question comes from Jade Ramami with KBW. Please, please do your question. Thank you very much. Just wanted to hone in on, you know, the quarters dynamics that played out. CBRE, the largest commercial real estate broker, reported this morning, and their brokerage debt volume surged 53% year on year. KKR and alternative asset manager active in commercial real estate debt also noted a surge in their pipeline. And Sam Vets volumes are really strong so far this year, up over 150%.
Speaker Change: Our next question comes from Jade Rahmani with K B W. Please proceed with your question.
Jade Rahmani: Thank you very much I just wanted to hone in on the quarters dynamics that plays out CBRE the largest commercial real estate broker reported this morning, and their brokerage that volume surged, 53% year on year.
Jade Rahmani: KKR and alternative asset manager active in commercial real estate debt also noted a surge in their pipeline and Sam bass volumes are really strong so far this year up over 150% or.
Brian Harris: So when you look out as being active in the space, what do you think were the factors that weighed on ladder's origination volumes? Just looking to get some color as to how you think about the market? Well, again, it's a lagging business origination. So loans go under application, and then 60 days later, sometimes 90 days later, they close. So anything that you're going to see in what I view as our origination volume is probably going to show up in the first or second quarter. So I feel pretty good about that, but what's weighing on that decision to make a loan really has to do with valuations.
So when you look at as being active in the space. What do you think were the factors that weighed on ladders origination volumes, just looking to get some color as to how you think about the market.
Speaker Change: Well again I, it's a lagging business origination so loans under application and then 60 days later, sometimes 90 days later, they close so anything that you're going to see and what I view as our origination volume is probably going to show up in the first or second quarter.
Speaker Change: So I feel pretty good about that but what's weighing on.
Speaker Change: That decision to make alone really has to do with valuations are if if anyone who comes in with the <unk>.
Brian Harris: If anyone who comes in with an asset that appears to be properly evaluated in today's terms instead of when they bought it in 2022, yeah, where there's no hold back at all. There's nothing stopping us. We're looking at loans by the way of up to $150 million to those a few of those. We don't really see individual loans like that unless there's six assets in their cross-collateralized. But for the most part, there's a sobriety taking over the ownership space. People have a general understanding of what's going on and what they can expect to get from a lender versus where they were six months ago.
Speaker Change: That appears to be properly evaluated in today's terms instead of when they bought it in 2022, Yeah, where there's no hold back at all there's nothing stopping us we're looking at loans by the way of up to 100 $150 million to there's a few of those.
Speaker Change: We don't really see individual loans like that unless theres six assets in their cross collateralized Oh, but for the most part theres a sobriety taking over the ownership space people have a general understanding of what's going on.
Speaker Change: And what they can expect to get from a lender versus where they were six months ago and I'll just point to one example, there was a security securitization from Blackstone on some I think it was industrial properties that they ultimately widened out a month and a half ago to 190 over and now it's.
Brian Harris: I'll just point to one example: there was a security, a securitization from Blackstone on some industrial properties that they ultimately widened out a month and a half ago to 190 over. And now it's 100 tighter than that. So the move in on credit spreads has been rather dramatic and rather quick. That can't really happen again. It just realistically hit a point of diminishing returns. So I would say there's nothing weighing on it other than appropriate leverage levels being requested. Even when we think sometimes we're getting loans signed up, all of a sudden somebody will step in with an extra $2 million.
Speaker Change: 100 tighter than that so.
Speaker Change: The move in on credit spreads has been rather dramatic and rather quick that can't really happen again.
Speaker Change: Just realistically you hit a point of diminishing returns. So I would say, there's nothing weighing on it other than a appropriate leverage levels being requested even when we think sometimes we're getting loans signed up all of a sudden somebody will step in with an extra $2 million.
Brian Harris: And we tend to not do that. But we're dealing with cap rates that are we're reasonably wide, and we may be just a bit too wide there. So we'll take our cues from the securitization market and see what's getting securitized comfortably, but as much as we can point to a few names that you just mentioned there as to how they're doing well and things are picking up, there's also foreclosures taking place at phenomenally low prices. So I don't think it's all good news, but it's not all bad. It was never all bad news.
Speaker Change: And we tend to not do that but where we're dealing with cap rates that are.
Speaker Change: Reasonably wide and we may be just a bit too wide. There. So we'll keep we'll take our cues from the securitization market and see what's getting securitized comfortably, but as much as we can point to a few names that you just mentioned there as to how they are doing well and things are picking up.
Speaker Change: Theres also foreclosures, taking place at phenomenally low prices and so I don't think it's all good news, but it's not all but it was never all bad news like a weed.
Brian Harris: We've said this over and over that it's not as bad as you think, and I would dare say it probably won't be as good as you think either when it does straighten itself out. But, you know, from a lender's standpoint, in a niche business like ours, with what's going on in the regional banking sector with regulators, and just in New York, with New York Community Bank and Signature Bank, that can't help but expand the canvas that we paint on. And so we're very optimistic about that, but we don't have any rules about, you know, how much volume we have to do.
Speaker Change: Said this over and over that it's not as bad as you think and I I would dare say it probably won't be as good as you think either one it does straighten itself out but.
Speaker Change: From a lender standpoint, and in a niche business like ours with the with what's going on in the regional banking sector with regulators.
Speaker Change: In New York, with New York Community Bank, and our signature bank.
Speaker Change: That can't help but expand the canvas that we paint on it and so what we're very optimistic about that but we don't have any rules about how how much volume we have to do.
Pamela McCormack: Almost every investment we make is easily clearing the dividend levels, you know, that we pay out along with our expenses. I would just add, I don't think it should be surprising at all that our loan activity is picking up with the uptick in new acquisitions. We have avoided a lot of the bridge to bridge, unless it was really, you know, a lot of fresh equity coming in. So I think that is a large driver for our volume increasing today. That seems like it.
Speaker Change: Almost every investment we make is easily clearing the dividend levels.
Speaker Change: That we pay out along with our expenses.
Speaker Change: I would just add I don't think it should be up at all or anything at all that our that our loan activity is picking up with that.
Speaker Change: TIK in new acquisitions, we have avoided a lot of the bridge to bridge unless there is really you know a lot of fresh equity coming in so I think that is a large driver for our volume increasing today.
Speaker Change: That seems like it.
Brian Harris: On other opportunities, are you seeing loan portfolio sales from banks? It sounded like, in their comments, you alluded to this, and are you interested in actively pursuing that business? Going backwards on the question, we are, we are interested in actively pursuing that business. Got a few phone calls in the last month from people I haven't heard from in five, six years that are working with some banks, so perhaps. But I would tell you, prior to those calls over the last month or so, nobody was contacting us to purchase portfolios of loans. And I think that there is a general optimism out there right now, so that may slow some of those portfolios from going out the door, because I think some of them are going to be able to get refinanced.
Speaker Change: On other opportunities are you seeing loan portfolio sales from banks it sounded like in your comments you alluded to this.
Speaker Change: And are you interested and actively pursuing that business.
Speaker Change: Going backwards on the question. We are we are interested and actively pursuing that business.
Speaker Change: I've got a few phone calls in the last month from people I haven't heard from in five six years.
Speaker Change: That are working with some banks, so perhaps but I would tell you prior to those calls over the last month or so.
Speaker Change: Nobody was contacting us to purchase portfolios of loans.
Speaker Change: And I think that there is a general optimism out there right now so that may slow some of those portfolios from going out the door because I think some of them are going to be able to get refinanced and there's probably less of a.
Unknown Executive: And there's probably less of urgency around, you know, some of those duration books in the banks that are not marked to market, but they're underwater. So, yeah, we're interested, but I'm not going to forecast that next time we talk, we're going to have purchased one. We just don't see too many. Thanks a lot. Sure. As a reminder, if you would like to ask a question, please press star one on your telephone keypad.
Speaker Change: Urgency around again, some of those duration books and the banks that are not mark to market, but they're underwater.
Speaker Change: Yeah, we're interested but I'm not going to forecast that next time, we talk we're gonna have purchased one we just don't see too many.
Speaker Change: Thanks, a lot sure.
Speaker Change: Sure.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Matthew Howlett: Our next question comes from Matthews Hallett with D.
Speaker Change: Our next question comes from Matthew Howlett with B Riley. Please proceed with your question.
Matthew Howlett: Riley. Please proceed with your question.
Matthew Howlett: The morning, Hi everybody. My question is I'm pricing. You did the, could you tell me to reward the loan you did this quarter went off? And then just in general, I mean, we're hearing multi-families come in inside 300 over. I'd love to hear where you're quoting other property types. And then, I mean, I know you don't do CLOs, but does that work? I mean, those sound very tight for you to work in a CLO. I just love to hear your thoughts on pricing and where you're quoting the...
Matthew Howlett: Oh, Good morning, Hi, everybody. My question is on pricing you did you can you tell me sort of where that loan you did this quarter went off and then just in general I mean, we're hearing multifamily has come in inside inside 300 over I'd love to hear where you are quoting other property types and then I mean, I know you don't do CLO does that.
Matthew Howlett: Work I mean, those sounds very tight great to work with cielo here.
Here your thoughts on pricing and where your according to exempt.
Adam Siper: Adam, if you take the first part of that, I'll take the second one. I don't know where the long week was. Yeah, in general, including the long week, we’re quoting fresh acquisition on really high quality real estate and the high 200s to low 300s range on spread. And when you say does it work, yeah, it does work, but it's, you know, there's a point where, as you know, we've been buying a lot of securities because we think the lenders are taking more risk than they should by selling us triple A's that leverage of 14 and 15.
Speaker Change: Adam if you take the first part of that I'll take the second one I don't know where the loan we closed FY <unk>.
Speaker Change: In general, including the loan we closed were quoting fresh acquisition, a really high quality real estate in the high two hundreds to low three hundreds range on spread.
Speaker Change: Okay.
Speaker Change: When you.
Speaker Change: When you say it doesn't work out it does work, but it's it's you know there's a point where as you know we've been buying a lot of securities. Because we think the lenders are taking more risk than they should buy selling us triple a is that a lever to 14 and 15, but and so I will tell you in or around 275 on multifamily as Ron.
Brian Harris: But and so I will tell you at around 275 on multi families, run of the mill stuff in the CLO market, the leverage point to the triple A buyers around a 13, 14 and the leverage to the equity holder, the issuer is probably about 15. So they're almost around a break-even push here. And so the little court of the still is way more attractive in the security side of it. However, the franchise building effort, as people oftentimes tell us, you're not going to get paid a lot of money to buy triple A securities. And, you know, yeah, okay, I get that.
Speaker Change: The mill stuff in the CLO market.
Speaker Change: The leverage point to the AAA buyers around 13, 14, and the leverage to the the equity holder or the issuer is probably about 15, so they're almost around a breakeven push here and.
Speaker Change: So the liquidity still is way more attractive in the.
Speaker Change: In the security side of it however, the franchise building effort as people oftentimes tell us.
Speaker Change: Not going to get paid a lot of money to buy AAA securities and Yeah. I got you, Okay, I get that but we're not dependent upon any one selling no security Suez, we just happen to think on a relative value basis, sometimes we'd rather own triple A's then then right for loans.
Brian Harris: But we're not dependent upon anyone selling those securities to us. We just happen to think on a relative value basis. Sometimes we'd rather own triple A's than then write the loans at 275, especially if the credit is a little dicey. But when you say, "inside 300," we're inside 300. Yeah, and it does work for us. So we're probably about 275 on multi snout. And keep in mind that the answer is also targeting shorter term, shorter duration with points, typically one percent origination fee and something on the exit. So would you say 15% of what type of advance you check an over 80% advance rate in the COO?
Speaker Change: At $2 75, especially if the credit is a little dicey, but what when you say inside 300 were inside 300, yeah and it does work for US. So we're probably about 275 on a multi Smith and keep your times I've answered also targeting shorter term shorter duration with points.
Speaker Change: 1% origination fee.
Speaker Change: On the access.
Speaker Change: Who did you say, 15% is what type of as you're taking over 80% advance rate on the CLO.
Brian Harris: Yeah, about 85. Okay, so that works. I didn't realize you're getting the tech leverage in the COO.
Yeah about 85.
Speaker Change: Okay. So that so that works its just I didnt realize youre getting to take on leverage in the CLO.
Brian Harris: Are you coding like, go ahead. Yeah, I've said a few times that what you get if sometimes people say, well, you know, when you lever a triple A, you're using 90% leverage. And my response to them is always, and when I'm writing loans and issuing a COO, my leverage is 85%. So it's not a discussion about leverage. And I think the liquidity on the triple A side is much more attractive than on the loan side.
Speaker Change: Good morning, Mike.
Speaker Change: Oh go ahead.
Speaker Change: Yeah, I just had a few times that are.
Speaker Change: Sometimes people say well you know when you lever, a AAA or using 90% leverage and my response to them is always and when I'm, writing loans and issuing a CLO my leverages, 85%. So it's it's it's not a discussion about leverage and I think the liquidity on the AAA side is much more attractive than on the loan side. However, we're kind of in as.
Brian Harris: However, we're kind of in, as I think as my words in the opening remarks, we're kind of in both businesses now. And this is really the first time I've said, I think we're equally interested in lending as we are in securities. Securities have tightened. Loads have tightened too, but that's not what got us interested in it. What got us interested in it was the sobriety of the principal column that people are not asking for quite as much leverage as they were just six months ago.
Speaker Change: I guess my words in the in the opening remarks, we're kind of in both businesses now and this is really the first time I've said I think we're equally interested in lending as we are in securities Securities have tightened.
Those have tightened too, but that's not what got us interested in at what got US interested in it was the sobriety of the principal column that people are not asking for quite as much leverage as they were just six months ago.
Brian Harris: If you like securities, will you do double A's or single A's? You've got really comfortable with the deal. Let me just sort of move down a little bit and get sure there's a huge pickup. It's not huge, but yes, we would. I think when we really like credit, we jump right to the triple B. And we don't apply a lot of leverage to that. But they're attractive also. Securities in general, I think, are relatively good buys. The yield on a double A, leverage is about the same as on a triple A, because you have a lower advance rate.
Speaker Change: If you'd like securities or would you do double as a single agent, we got really comfortable with the deal. Let me just sort of move down a little bit and get I'm sure. There's a huge pickup.
Speaker Change: It's not huge but yes, we would yeah I think when we really like credit we jump right to the triple B, but.
Speaker Change: And we don't apply a lot of leverage to that but yeah. They're they're attractive also securities in general I think are relatively goodbyes.
Speaker Change: The yield on a double a levered is about the same as on a AAA because you have a lower advance rate.
Brian Harris: Okay. So that's why we tend to stay in the triple A. Now we don't have any allergies to double A. Yes. Gotcha.
Speaker Change: Okay. So so that's why we tend to stay in the AAA now we don't have any allergies to double ice.
Brian Harris: Okay, and then I'm assuming you're the other property types like it's retail, you're courting well above 300, right? Is that the hotel of retail? Yeah, over 300, well above that subjective, you know, 325. Once you get north to 350, I think you're in the part of the pool where maybe you got to be careful because maybe you shouldn't be looking at that loan balance if that's comfortable, but up to 350, it's okay. And if the Fed continues cutting Fed funds rates and so forth falls, you'll see the spreads widen. It isn't like it's going to be one for one going to the benefit of the borrower, you know, 275 actually think is relatively tight for 50% leaf anything.
Speaker Change: Gotcha, Okay, and then I'm, assuming the other property types like its retail you accordingly, well above 300, right is that does that hotels retail.
Speaker Change: Yeah over 300, well above that is subjective three.
Speaker Change: 325, once you get north of $3 50, I think you are in the part of the pool, where maybe you got to be careful because maybe you shouldn't be.
Speaker Change: Looking at that loan balance hip that's comfortable but up to up to $3 50, it's okay and if the fed continues cutting fed funds rates and so for false you'll see those spreads widen.
Speaker Change: It isn't like it's gonna be one for one go into the benefit of the borrower.
Speaker Change: 275, actually think is relatively tight.
Speaker Change: Four.
Speaker Change: 50% leased anything however.
Brian Harris: However, the rate is actually pretty high when you look at us all in with so far at around 475, but if so for drops to 4%, those spreads will widen out. It'll probably get north with 300. Well, that would be very beneficial to your balance sheet for, you know, the person. Yeah, yeah, that's a great point. It would.
Speaker Change: However, the rate is actually pretty high when you look at it all in with so far at around 475, but if if so for drops to 4% those spreads will widen out it'll probably get north of 300.
Speaker Change: That would be very beneficial to your balance sheet for you know yeah, Yeah, that's a great point what.
Matthew Howlett: Okay, I appreciate the color. And the other question is, you know, I'd love to hear your touch print as always, and you've made a lot of comments in the macro, but the Financial Times in an article this morning, but commercial property moment of truth, and you're sort of saying, I think you're down probably 20%. But no one really knows if people really mark things down on their books like the banks yet, or if things obviously have further to go. But what's your sense of the banks, you know, and the reads that they've revalued stuff to where clearing levels are?
Speaker Change: Okay I appreciate the color.
Speaker Change: And the other question is you know I'd love to hear your thoughts as always and you've made a lot of comments on the macro but the financial times in an article this morning about commercial property, a moment of truth sort of saying that things are down probably 20%, but nobody really knows if people really mark things down on your books like the banks, yet or things obviously have further to go but what's your sense of the banks.
Speaker Change: And the rates that they are revalued stuff. We're clearing levels are just I'd love to hear your thoughts. So do we have more to go here.
Brian Harris: I'd love to hear your thoughts. So do we have more to go here? I think the banks are paying the price with their regulators for the indiscretions of Silicon Valley Bank and a couple of others. I don't think the banks really have a big problem in commercial real estate except to the extent that they're deep in the office column. But if they've been in the multi-family sector, I don't think they're really in trouble. You just have regulators who've decided to wake up after falling asleep on Silicon Valley and a couple of other names. But that was, you know, there was really no need for additional regulation in the banks.
Speaker Change: Uh huh.
Speaker Change: I think the banks.
Speaker Change: Are paying the price with their regulators for the indiscretions of Silicon Valley Bank and a couple of others I don't think the banks really have a big problem in commercial real estate, except to the extent that they are deep in the office column.
Speaker Change: They've been in the multifamily sector.
I think they are really in trouble you just have regulators who've decided to wake up after falling asleep.
On Silicon Valley and in a couple of other names, but that was yeah, there's really no need for additional regulation and the banks. It was just a dish that there was a need for normal regulation inside of a couple of banks that just wasn't done so there's a little bit of an over <unk>.
Brian Harris: There was just there was a need for normal regulation inside of a couple of banks that just wasn't done. So there's a little bit of an over swing the other way now towards conservatism. But I don't think the banks are in a lot of trouble. The factors are all a little different.
Speaker Change: The other way now towards conservativism, but I don't think the banks are in a lot of trouble.
Speaker Change: The the sectors are all a little different I would say in.
Brian Harris: I would say when in 2021, when the CLO investor group decided they wanted nothing but multi-families, I think I even said that's a recipe for disaster. And so everybody was seeking multi-family properties to put into their CLOs, and people were buying three caps, and they thought they were going to double their rents, which a lot of them did, but their expenses doubled also. So they didn't really catch up. So I would argue that when we talk about current levels of valuation in real estate, the real question is: were they ever worth what people paid for them in 2021 and 22?
Speaker Change: In 2021, when the CLO Investor Group decided they wanted nothing but multifamily and so I think I, even said that's a recipe for disaster.
Speaker Change: And so everybody was seeking.
Speaker Change: Multifamily properties to put into their sellers and people who are buying three caps and they thought they were going to double their rents, which a lot of them did but there are expenses doubled also so they didnt really catch up so I would argue that when we talk about current levels of valuation in real estate. The real question is what are they ever were.
Speaker Change: Worse, what people pay for them in 2021, and 'twenty two and I would argue that answer is no then wouldn't never worth that.
Brian Harris: And I would argue that answers no, they would never worth that. So they're now coming back to a more normalized, you know, kind of analysis rates that they should follow rates. But, as I said, when so-for-falls spreads will widen because you're just getting too tight on the absolute rate, the multi-family sector didn't do that when LIBOR went to 20 basis points. You know, they just kept chasing it lower and lower. And as a result, they built themselves a difficult situation. So I don't think the banks are in a lot of trouble. Probably a couple are, but a couple are always in trouble.
Speaker Change: So they're now coming back to a more normalized.
Speaker Change: Kind of analysis on rates, they should follow rates, but as I said, one so for falls spreads will widen because you're just getting too tight on the absolute rate the multifamily sector didn't do that well when LIBOR went to 20 basis points.
Speaker Change: Kept chasing at lower and lower and as a result, they bought themselves a difficult situations.
Speaker Change: I don't think the banks are in a lot of trouble.
Speaker Change: Probably a couple are but a couple are always in trouble and and so are we near the end I think the Reits have taken.
Brian Harris: And so we near the end, I think the REITs have taken a couple of approaches towards kicking the can in one case and in that, why don't we in one case as a name? I mean, just one avenue. And those are going to take a while, and I suspect ultimately, they'll bleed out over time at smaller and smaller losses on a regular. The other path is the kitchen sink path where let's just dump everything that doesn't look good right now. We'll start over at a lower capital base. And I think when you foreclose on a proper, for instance, we took back a property in Oakland and the prior owner had a $22 million cost associated with it.
Speaker Change: A couple of approaches towards kicking the can in one case and in that I don't mean, one case as the name I mean, just one Avenue.
Speaker Change: Those are going to take a while and I suspect ultimately they'll bleed out over time at smaller and smaller losses on a regular basis.
Speaker Change: The other path is the kitchen sink path, where let's just dump everything that doesn't look good right now will start over at a lower capital base and I think.
Speaker Change: When you foreclose on a property for instance, we took back a property in Oakland and the prior owner had a $22 million cost associated with it we now own it at $7 $5 million at $130 a foot.
Brian Harris: We now own it at $7.5 million at $130 a foot. I think Oakland is a difficult place right now, as are a few other cities, and I really don't think it's always a great idea unless you need capital. I don't think it's a great idea to dump that into the market at whatever the market will pay you, knowing it's bank owned and you're getting drilled by it. So I think it's a different. I think the experience of Ladder, first of all, being well capitalized. So we never really need money to, and that's why we would do a kitchen sink transaction.
Speaker Change: I I you know I think Oakland is.
Speaker Change: It's a difficult place right now as are a few other cities and I I really don't think it's always a great idea unless you need capital I don't think it's a great idea to dump that into the market at whatever the market will pay you knowing its bank on then and Youre getting drilled by it. So I think it's a different I think the experience of ladder first of all being well capitalized so we'd never.
Speaker Change: Really need money to it and that's why we would do a kitchen sink transaction Oh it is.
Brian Harris: It's not; I don't love the fact that we own an empty building in Oakland, but I'm not terribly bothered by it either because I do believe we own it relatively cheap. There are not a lot of new refurbished buildings at $130 a foot in big cities in California. And if they would just get their crime situation straightened out, there's not even a lot of crime in Oakland. It's something the politicians there are talking about. Crime has gone down because everyone left. There's no people there. So that's going to take a little while, but I don't think I want to just stop talking about it because we made a mistake there.
Speaker Change: I don't love, the fact that we own an empty building an old one, but not terribly bothered by it either because I do believe we own at relatively cheap there is not a lot of new refurbished buildings at $130 a foot in big cities in California.
Speaker Change: And if they would just get their crime situation straightened out there there's not even a lot of crime in Oakland, It's something that politicians and they were talking about crime has gone down because everyone left there's still people there so.
Speaker Change: Yeah, that's going to take a little while but I don't think I want to just stopped talking about it because you know when.
Speaker Change: We made a mistake there I think we'll take our time, it's real estate I think we've rounded out a good basis, it's an attractive asset and I don't think the city of Oakland is going to stay in the condition. It's in for long how long will we wait.
Brian Harris: I think we'll take our time. It's real estate. I think we own it at a good basis. It's an attractive asset. And I don't think the city of Oakland is going to stay in the condition it's in for long.
Brian Harris: How long will we wait? Easily a year. That's no problem. So, yeah, I think that that's the difference. Some of the highly levered reeds are just throwing things out with the kitchen sink. And I just don't know why you would want to sell an office building today unless you had to.
Speaker Change: Really a year that's no problem. So yeah, I think that that's the different some of the highly levered Reits are just throwing things out with the kitchen sink and and I. Just don't know why you would want to sell them off as filling today unless you had.
Matthew Howlett: Right. Well, I mean, that just sort of brings my last point in a commercial property rates and mortgage rates. And they've seen their book values decimated. I know, no, no, no, not for latter, but for others. And the expenses are still very elevated, yet they're working on much lower book values, and maybe there's more room to go. But do you expect a massive consolidation when this is all over mortgage rates, property rates?
Speaker Change: Great.
Speaker Change: Well I mean, they're just sort of brings to my last point commercial property rates and mortgage rates and what they've seen their book that has decimated I know, it's not an all out for later, but for others in the expenses are still very elevated yet they're working on much lower book values and maybe there's more room to go but do you expect a massive consolidation. When this is all over mortgage rates.
Brian Harris: And would you get involved? Would love to get involved in something that we don't think will happen. But the reason we don't think it will happen is a lot of externally managed REITs are really due lack transparency. You don't quite know what's in there. And they're also under no obligation, in their mind, to sell their company to a better steward of capital. So you don't traditionally see a lot of consolidation in the reeds.
Speaker Change: Property rates and would you get involved.
Speaker Change: Would love to get involved in something that we don't think will happen.
Speaker Change: But the reason we don't think it will happen. There's a lot of externally managed Reits are really do lack transparency you don't you don't quite right. What's in there and they're also under no obligation and their mind to to sell their company to a better steward of capital. So you don't traditionally see a lot of our consolidate.
Brian Harris: In fact, some of the famous ones that you've seen have been taken by force in difficult situations. The opportunity set is attractive right now. So I don't want to get caught up in all kinds of litigation and arguing in newspapers with people. So I would, you know, somebody calls us up and says, you know, I'm a certain age and I'd like to get out. Sure. I would love to do that.
Speaker Change: And the rates in fact, some of the famous ones that <unk> seen have been taken by force.
Speaker Change: In difficult situations the opportunity set as attractive right now so I don't want to get caught up in all kinds of litigation and arguing in newspapers with people. So I I wouldn't know if somebody calls us up and says.
Speaker Change: I'm, a certain age and I'd like to get out sure would love to do that what one of the afflictions letter I think our company is a little too small I wish it was a little bigger and that's one way to make it bigger but in our desire to be slightly bigger. So we're more investable for some of the bigger.
Brian Harris: One of the afflictions at latter, I think our company is a little too small. I wish it was a little bigger. And that's one way to make it bigger. But in our desire to be slightly bigger so we're more investible for some of the bigger money managers. I don't think we should start buying other people's headaches. And, you know, I do believe there are some companies that have gotten to the bottom of their problems. But I think most of them have not.
Speaker Change: Money managers I don't think we should start buying other people's headaches and.
Speaker Change: I do believe there are some companies that have gotten to the bottom of their problems.
Speaker Change: But I think most of them have not.
Unknown Executive: Right, well, look forward to seeing it all shakes out. Thanks for the answers.
Speaker Change: Right well look forward to seeing it all shakes out thanks for the answers.
Brian Harris: Sure. There are no further questions at this time.
Speaker Change: Sure.
Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Brian Harris for closing comments.
Brian Harris: I would now like to turn the floor back over to Brian Harris for comments. Just less comment from me today. Thanks for staying with us. Things are going well here, and we won't be talking again for a few months because of the year-end audit and announcement in the fourth quarter. So we look forward to the quarters ahead. We think 2025 is going to be a very bright year, and we're happy with our performance in 2024 so far. So far, but for the most part, as we said, a little bit of defense, a lot of capital acquisition that we wanted to have.
Speaker Change: Just last comment from me today, thanks for staying with US things are going well here and we won't be talking again for a few months because of the yearend audit and an announcement in fourth quarter. So we look forward to the quarters ahead. We think that 2025 is gonna be a very bright ear and.
Speaker Change: We're happy with our performance in 2024, so for so far but for the most part as we said a little bit of defense a lot of capital acquisition that we wanted to have and we're getting ready here. We're on offense, we're not talking about it anymore and I think youll start seeing those results in the quarters ahead and thanks again.
Unknown Executive: And we're getting ready here. We're on offense. We're not talking about it anymore. And I think you'll start seeing those results in the quarters ahead. And thanks again.
Unknown Executive: This concludes today's teleconference.
Speaker Change: This.
Speaker Change: Alludes todays teleconference. You may disconnect your lines at this time, thank you for your participation.
Unknown Executive: You may disconnect your lines at this time. Thank you for your presentation.
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