Q3 2024 Granite Point Mortgage Trust Inc Earnings Call
Good morning, My name is Christine and I'll be your conference facilitator.
At this time I would like to welcome everyone to granite point mortgage Trust's third quarter 2024 financial results Conference call.
All participants will be on a listen only mode.
After the Speakers' remarks, there'll be a question and answer period.
Please note today's call is being recorded.
Speaker Change: I would now like to turn the call over to Chris Petta with Investor Relations for granite point.
Chris Petta: Thank you and good morning, everyone. Thank you for joining our call to discuss granite Point's third quarter 'twenty 'twenty four financial results with me on the call. This morning are Jack Taylor, our President and Chief Executive Officer, Marcia Neuropathic, our Chief Financial Officer, Steve Our part our Chief investment Officer, and co head of originations Peter morale cheap.
Element officer, and co head of originations, Steve Festa, our Chief operating Officer, and Blake Johnson, our Deputy Chief Financial Officer.
After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities.
Speaker Change: Steve I'll part will discuss our portfolio and Marcia will highlight key items from our financial results and capitalization.
Speaker Change: The press release financial tables and earnings supplemental associated with today's call were filed yesterday with the SEC and are available on the Investor Relations section of our website along with our Form 10-Q.
Speaker Change: I would like to remind you that remarks made by management during this call and the supporting slides may include forward looking statements.
Speaker Change: We are uncertain and outside of the company's control.
Speaker Change: Forward looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations.
Speaker Change: Please see our filings with the SEC for a discussion of some of the risks that could affect results. We do not undertake any obligations to update any forward looking statements.
Speaker Change: He will also refer to certain non-GAAP measures on this call.
Speaker Change: This information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
Speaker Change: A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release and slides, which are available on our website I will now turn the call over to Jack.
Jack Taylor: Thank you, Chris and good morning, everyone. We would like to welcome you and thank you for joining us for granite Point's third quarter 2024 earnings call.
Jack Taylor: Before discussing our third quarter results I'd like to take a moment to briefly discuss our upcoming CFO transition.
Speaker Change: As previously announced on December 1st Martian or bashing will depart granite point, Blake Johnson, who rejoined US early last month will take over as CFO.
Speaker Change: Like in March and had been hard at work with our team for the past month, ensuring a smooth transition.
Speaker Change: Okay.
Speaker Change: Having had the privilege to work closely with him since the inception of our business I've come to admire Marston greatly for his honesty character intelligence and dedication.
Speaker Change: Morrison has left an indelible mark on our company and we are grateful for his leadership and friendship.
Speaker Change: Marson, you'll be missed in all all of us at granite point wish you the very best in your next chapter.
Speaker Change: At the same time, we are also very excited to have Blake back at granite point.
Speaker Change: Blake played an integral role in establishing our finance accounting and tax functions. Most recently, serving as our controller.
Speaker Change: Both during that time and in the past months I've seen firsthand Blake's financial expertise industry acumen and leadership capabilities.
Speaker Change: I am confident that his deep understanding of our business and its extensive history with our team make Blake the perfect fit to advance our initiatives and drive shareholder returns as our next CFO.
Speaker Change: Now turning to our business activities.
Speaker Change: The third quarter marked a period of substantial progress for granite point, driven by our proactive approach to resolving nonperforming loans.
Speaker Change: And generally improving real estate market conditions.
Speaker Change: The Federal reserve began its long awaited interest rate cutting cycle, which along with improving liquidity and the overall market sentiment should.
Speaker Change: Should be supportive of real estate valuations in transaction activity going forward.
Speaker Change: We maintain our view that the commercial real estate market conditions in large part will be dependent on the forward path of interest rates, which remains somewhat uncertain.
Speaker Change: Given the fed's focus on the macroeconomic data that continues to point to the ongoing strength and resiliency of the broader economy.
Speaker Change: C N V S market has grown significantly stronger during the year, especially for larger commercial mortgage loans.
Speaker Change: Liquidity in the floating rate transitional middle market sector. So we're proving remains less robust.
Speaker Change: Particularly as regional and community banks are largely on the sidelines.
Speaker Change: But this will present attractive longer term opportunities for non bank lenders to grow.
Speaker Change: So their market share over time.
Speaker Change: So far this year through the third quarter, and we have resolved six loans totaling about $205 million and realized about 283 million of principal balance of loan repayments and pay downs, including office loves with most of this activity occurring during the third quarter.
Speaker Change: More importantly, we have maintained strong forward momentum for the rest of the year and beyond with a pipeline of over $280 million of loan resolutions across six assets, one of which closed in October at our carrying value and we expect most of the remainder to be completed during the fourth quarter or shortly thereafter.
Speaker Change: We are adequately reserved for these loans and don't anticipate a material book value impact as they resolve.
Speaker Change: We are pursuing resolutions of our remaining five rated loans most of which are in various stages of their respective processes and anticipate those transactions. When we finalize the first half of next year, though some may take a bit longer given their challenging local market dynamics.
Speaker Change: As we have addressed the credit issues within our portfolio, we have successfully executed on multiple different resolution strategies.
Speaker Change: Our portfolio management approach emphasizes the balance between timing potential profitability book value impacts liquidity needs and other factors with the goal of optimizing the economic outcomes for the company and our various stakeholders over the long term.
Speaker Change: We anticipate our seasonal reserve balance will decline significantly in the coming quarters, given the improving confidence in the commercial real estate market are picked up in the transaction activity and our momentum on loan resolutions.
Speaker Change: We believe we have reached a point, where the volume of nonperforming loan resolutions will meaningfully exceed any potential future credit events, although we may experience some idiosyncratic credit migration in the future.
Speaker Change: We expect this ongoing turnover and repositioned the portfolio to improve our run rate profitability overtime, driven by multiple factors, including turning those loans into earning assets by providing seller financing route.
Speaker Change: Paying expensive debt reinvesting capital returned from repayments and remaining opportunistic with respect to our capital structure.
Speaker Change: To that point and consistent with our capital allocation strategy of assessing all opportunities and executing on the ones that are most attractive.
Speaker Change: During the third quarter, we repurchased an additional 700000 common shares reflecting our strong belief that our stock continues to be significantly undervalued.
Speaker Change: Moreover, our board increased our repurchase authorization find the additional 3 million shares.
Speaker Change: The total to about $5 9 million shares available for buybacks, which further increases our capital return strategy flexibility by allowing us to remain opportunistic with respect to any potential buybacks.
Speaker Change: We have made meaningful progress over the last few quarters, improving the overall credit profile of our portfolio through the resolution of nonperforming loans.
Speaker Change: We believe our industry is getting closer to the end of this prolonged credit cycle and the period of extreme market stress and capital is gradually returning to the transitional lending space.
Speaker Change: In the near term, we will remain focused on maintaining higher liquidity and proactively managing our portfolio.
Speaker Change: As we look towards the next couple of quarters and beyond driving further turnover of our portfolio through resolutions and loan repayments will position us to return to our core lending business and take advantage of what we believe will be attractive investment opportunities in the future.
Speaker Change: Growing our portfolio, while improving our run rate profitability and driving attractive total shareholder returns.
Speaker Change: I would now like to turn the call over to Steve how part to discuss our portfolio activities in more detail.
Speaker Change: Thank you Jack and thank you all for joining our call. This morning.
Steve: We ended the third quarter with total loan portfolio commitments of $2 5 billion and then outstanding principal balance of about $2 3 billion with about $109 million of future fundings, which accounts for only about 4% of total commitments.
Speaker Change: Our loan portfolio remains well diversified across regions and property types and include 62 loan investments with an average size of about $38 million and a weighted average LTV of 64% at origination.
Speaker Change: Our realized loan portfolio yield for the third quarter was about 7% net of the impact of the non accrual loans, which we estimate to be about 210 basis points.
Speaker Change: During the quarter, we funded about $10 million of existing loan commitments and upsizing and.
Speaker Change: About 285 million of principal balance and loan repayments Paydowns and resolutions.
Speaker Change: So far in the fourth quarter, we have funded about $4 million of existing loan commitments and realized a 33 million dollar loan resolution.
Speaker Change: Given our emphasis on maintaining liquidity and resolving the nonperforming loans, we expect the loan portfolio balance to trend lower over the coming quarters before we began reinvesting our capital re leveraging and Regrowing later this year.
Speaker Change: We have been actively addressing the five rated loans in our portfolio and are happy to report significant tangible results and expect to resolve most of these assets over the next few quarters during the quarter, we successfully resolved three non accrual loans totaling over $120 million in <unk> through a variety of strategies.
Speaker Change: The mixed use office and retail property, securing a $37 million loan in Los Angeles with sulfur cash by the sponsor.
Speaker Change: We restructured the $51 million loan secured by a mixed use multifamily office and events based property in Pittsburgh into a $32 million senior mortgage and a $19 million mezzanine loan with the sponsor and investing additional capital into the property. Additionally.
Speaker Change: Additionally, the multifamily property located in Chicago.
Speaker Change: During our $34 million loans was sold without us providing financing to the new owner.
Speaker Change: Through the third quarter, our resolutions total about $205 million of principal balance across six loans. So we feel very good about our progress to date.
Speaker Change: Now we'd like to provide some color on resolving the balance of our risk rated five loans.
Speaker Change: In total out of nine such loans, we had a quarter end with a total U P. D of about $509 million, one has been resolved and seven of the eight remaining.
Speaker Change: Our inactive resolution processes.
Speaker Change: In October the $33 million loan secured by an office property in New Jersey was resolved at our carrying value as of September 30th.
Speaker Change: During the quarter, we received an unsolicited offer to buy the loan on an all cash basis with no staple or third party financing and a quick close transaction, which we decided to opportunistically pursue.
Speaker Change: Giving the pending resolution the lung was downgraded to a risk rating of five at quarter end.
Speaker Change: Going forward, we expect to resolve most of our remaining five rated loans through year end 2024 and into early to mid 2025.
Speaker Change: We have over $280 million of resolutions across six assets that are either already closed or are expected to close in the next few months and anticipate 1% to two more to follow in the first half of next year.
Speaker Change: As we disclosed previously the mixed use office and retail property, securing our $94 million loan in New York is under contract and the sale is anticipated to close during the fourth quarter.
Speaker Change: Additionally, in the coming months, we anticipate resolving the $81 million mixed use mixed use loan in Baton Rouge, the $29 million hotel loan in Minneapolis, the $26 million office loan in Boston, and the $20 million office loan in Denver.
Speaker Change: In addition to the 280 million, we just discussed the sale process for the office property, securing our $80 million alone in Chicago remains ongoing and May conclude in the first half of 2025.
Speaker Change: Given the persistent local office market challenges, we anticipate a longer resolution timeline for our $93 million loan in Minneapolis.
Speaker Change: During the third quarter, we also downgraded to a risk rating of five our $53 million loan secured by a hotel located in Minneapolis the.
Speaker Change: The collateral properties currently in the early stages of a sale process and the ultimate timing and outcome remains hard to predict.
Speaker Change: Turning to our Oreo assets, we continue to pursue a potential sale for the Phoenix office property and they were part of that process remains ongoing.
Speaker Change: The office property in suburban Boston continues to perform well with a strong cash flow profile.
Speaker Change: After we took title we extended the lease for the largest tenant in our current plan is to continue to operate a large portion of the property as office, while also creating additional value through several redevelopment opportunities on the site.
Speaker Change: Both Oreo properties remain unlevered as of quarter end and serve as a source of additional liquidity, which we may access in the coming months to further optimize the balance sheet and increase our financial flexibility.
Speaker Change: We have strong visibility for addressing most of our five rated loans market sentiment and transaction activity are improving debt and equity capital is available and looking to get invested and most of our strong and seasoned sponsors continue to support their assets.
Speaker Change: As a result, we are optimistic about the future of the business in the near term as we work through the remainder of our nonperforming assets, we intend to protect to prioritize maintaining higher liquidity for more optionality to address any credit issues, which in turn will allow us to start reinvesting capital and begin originating new loans during 2025.
Speaker Change: I will now turn the call over to Martin to discuss our financial results and our capitalization.
Speaker Change: Stephen Thank you Jack for your kind words earlier it has truly been an honor to serve as grounded points CFO since inception.
Stephen: It has been the highlight of my career and I've been very fortunate to work with an amazing and talented group of people along the way.
Speaker Change: Now turning to our financial results for the third quarter, we reported a GAAP net loss of $34 $6 million or <unk> 69 per basic share.
Speaker Change: Which includes a provision for credit losses of $28 million of 55 cents per basic share mainly related to certain risk weighted five loans.
Speaker Change: Distributable or loss for the quarter was $38 million or 75 cents per basic share, including write offs of $44 6 million and an $8 8 million dollar recovery of amounts previously written off.
Speaker Change: The write offs were related to the three non accrual loan resolutions Steve discussed earlier.
Speaker Change: Our book value at September 30th was $9.25 per common share a decline of about 59 per share from Q2, which was mainly due to the loan loss provision mentioned earlier, partially offset by the accretive share buybacks, we opportunistically executed during the quarter, which we estimate benefit.
Speaker Change: Book value by about 10 cents per common share.
Speaker Change: Our aggregate seasonal reserve at September 30 was about $259 million or $5 18 per share as compared to $267 million last quarter.
Speaker Change: The decline in our seasonal reserve was mainly driven by the write offs related to the resolutions, partially offset by an increase in the allowance on loans that were risk rated five.
Speaker Change: <unk>, reflecting some additional pressure on property values.
Speaker Change: Over 75%.
Speaker Change: Of our total allowance or $200 million is allocated to individually assessed loans, which implies an average estimated loss severity of about 39% on those assets.
Speaker Change: With the expected near term non accrual resolutions Jack discussed earlier, we anticipate incurring over $120 million of realized losses over the next couple of quarters.
Speaker Change: The actual timing of which will depend on the closing of specific transactions.
Speaker Change: We believe we are appropriately reserved for these losses as of quarter end and the resolution should meaningfully reduce our total seasonal reserve balance.
Speaker Change: As of September 30, we had about $629 million of loans on non accrual status.
Speaker Change: Certain of these loans on cost recovery and any incoming interest is applied to reduce loan principle, rather than being recognized in earnings which is estimated to be about three and a half million dollars into third quarter.
Speaker Change: We anticipate the run rate profitability of the company to improve as we continue to resolve non earning assets repay expensive debt and reinvest our capital over time.
Speaker Change: Though the exact timing and magnitude remain difficult to predict and will also be dependent on the volume of loan repayments and the level of short term interest rates.
Speaker Change: Everything else being equal we estimate that the $280 million of nonaccrual resolutions discussed earlier.
Speaker Change: Spector to improve run rate earnings per share by about five to six per quarter.
Speaker Change: Turning to liquidity and capitalization, we ended the quarter with about $113 million of unrestricted cash and.
Speaker Change: And total leverage modestly decreased to two two times in Q3 compared to two five times in Q2, mainly.
Speaker Change: Mainly due to loan repayments and Paydowns.
Speaker Change: During the quarter, we terminated a Goldman Sachs financing facility, which matured in mid July as we anticipated limited use in the near term.
Speaker Change: To enjoy strong support from our lenders highlighting our long standing relationships into market and we expect to expand our financing capacity once we return to originating new loans more actively.
Speaker Change: As of a few days ago, we carried about $94 million in cash that we expect to increase in the coming weeks due to some loan repayments and the potential financing of our unlevered assets.
Speaker Change: And now I'd like to open the call for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the jackie's one.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Steve Delaney with citizens JMP. Please proceed with your question.
Speaker Change: Yeah.
Speaker Change: Good morning, everyone. Thanks for taking the question I mean look.
Speaker Change: Congrats on the methodical.
Jason: Yes, Jason.
Jason: I think you guys have been very clear that this is Paul.
Jason: Hum.
Jason: We understand the market.
Speaker Change: We applaud the thoughtful efforts youre putting in to resolve these.
Speaker Change: Hello.
David: Yes, absolutely David.
Speaker Change: These things are complicated I know you can't be precise about that.
Speaker Change: Based on what I'm hearing.
Speaker Change: In terms of resolution.
Speaker Change: Would it be.
Speaker Change: Possible.
Speaker Change: In new lending.
Speaker Change: The middle of next year, I guess, what I'm trying to get at Jack.
Speaker Change: You want to fix all your problem loans in Europe.
Speaker Change: This performance.
Speaker Change: Performance coming off.
Speaker Change: It is the ball.
Speaker Change: Is it the bar to have virtually no nonperforming loans before you start lending or is there a way to.
Speaker Change: Thanks, Dan there are attractive opportunities out there if you could just sort of respond to that about.
Speaker Change: How we should think about the process.
Speaker Change: The analyst here for modeling.
Speaker Change: When should we begin to project some sort of new loan originations to offset repays. Thank you.
Speaker Change: Hi, Steve Thank you happy.
Speaker Change: You were able to join us today.
Speaker Change: So based on what we know today, we expect to return to our core lending business can start reinvesting capital during 2025.
Speaker Change: And that'll be to take advantage of the attractive investment opportunities, which we think will be quite significant.
Speaker Change: The demand side is not very large yet.
Speaker Change: From the borrowing community, but we expect that to grow significantly and as we do that we'll re grow our portfolio now.
Speaker Change: I will say that it won't necessarily occur during the first quarter and will assess the timing as we get into the new year based upon a variety of factors and I'll point out we have almost the entire originations and underwriting team intact from when we were doing a 1 billion and a half to $2 billion a year, so and to answer your question a little more specifically no I don't think we have to.
Speaker Change: Resolve every asset.
Speaker Change: Because some of those.
Speaker Change: Take longer so I would expect that for your modeling purposes, you could think of mid year and we can try to be more precise as we move forward.
Speaker Change: That's very helpful.
Speaker Change: Pretty much what I was hearing and I bet. It's helpful to hear you express it that clearly.
Speaker Change: Your buyback has been built to what.
Speaker Change: Little over between $15 million to $20 million I guess, maybe 18.
Speaker Change: Box.
Speaker Change: Here, it's three bucks.
Speaker Change: 37% of book I think.
Speaker Change: Should we expect that if the stock stays.
Speaker Change: Down here sub $5 versus your near $10 book value.
Speaker Change: If theres going to be a continued steady utilization of that authorization.
Speaker Change: Well, let me let me try.
Speaker Change: Try to piracy I wouldn't say continued steady because that's a real prediction. If you will okay I will say that we.
Speaker Change: Continue to believe that our stock price represent a really strong value opportunity for the investors given the fundamental value of our business.
Speaker Change: And the temporary market uncertainty, which we think we are all climbing out of.
Speaker Change: And.
Speaker Change: At a discount to book value is one of the main factors we've taken into consideration in assessing the best use of our capital and so we try to balance that against other factors like liquidity maintenance and other things. So we don't really comment specifically on potential buybacks I will point out that we think we're very cheap.
Speaker Change: We've been historically pretty active with respect to our buybacks and over the last couple of years, we've bought back something like $5 8 million of our common shares in the open market and we will continue to assess it in the context of what I just told you.
Speaker Change: Thank you for the comments this morning.
Speaker Change: Great. Thank you. Thank you for joining us.
Speaker Change: Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.
Speaker Change: Thanks, Ken.
Speaker Change: Okay.
Speaker Change: You've made progress on resolving some of the non accruals, but but it's kind of others have to kind of backfill and.
Speaker Change: Ken can you give us.
Speaker Change: How you're thinking about the current state of kind of the three rated loans or the four rated loans and.
Speaker Change: Your confidence that.
Speaker Change: We won't see continued migrations down to five.
Speaker Change: Okay.
Speaker Change: Hey, Doug It's Steve I'll Park good morning, Thanks for joining.
Speaker Change: So I would say on the four rated loans similar to the five as we just discussed.
Speaker Change: We're focused on resolving all these loans.
Speaker Change: In 2025 or as soon as possible.
Speaker Change: The four rated loans are generally office loans that are behind on business plan, where I think everyone knows there's limited liquidity right now all of that is improving our we're working with all of the sponsors on next steps.
Speaker Change: We feel that the ratings, we have obviously for the quarter are appropriate that doesn't mean that there can't be further migration. We're hoping to resolve these loans are hopefully have some of them migrate to three it's possible that some could migrate to five but at this point, we think we've really identified the law.
Speaker Change: Large majority of potential issues, but obviously you know, there's always upward and downward credit migration.
Speaker Change: Does that complete your question.
Speaker Change: Oh, sorry, no I was on mute if you think about the Steve the migrations that have happened kind of what.
Speaker Change: What what happened this quarter that kind of bled to the the migration.
Speaker Change: That kind of led to a worse performance than you had been thinking three months ago, when when those floors for those new five or four as you know just.
Speaker Change: Help us understand that.
Speaker Change: Sure well the my there was three there were three migrations and there were three resolutions during the quarter the third quarter.
Speaker Change: That were five rated loans. So those are all loans that we had previously identified and we've been working on those for a while we were happy to get those done.
Speaker Change: There was one migration that we resolved in the fourth quarter that did migrate that was the one that we mentioned that we resolved during the fourth quarter.
Speaker Change: That was the New Jersey office asset, we werent necessarily looking to sell it but that's the one that we referenced we were approached.
Speaker Change: By someone who kind of opportunistically decided to pursue it.
Speaker Change: And that one was really.
Speaker Change: As we kind of began to assess that asset during the quarter. We thought it was appropriate to migrate that one two or five.
Speaker Change: And we were happy to get that went down in the fourth quarter.
Speaker Change: Yeah.
Steve: Alright, Thank you Steve.
Steve: Thank you Doug.
Speaker Change: As a reminder, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Jade Rahmani with K VW. Please proceed with your question.
Jade Rahmani: Thank you very much.
Steve: Just starting with the higher treasury rates and.
Speaker Change: You know what that might imply.
Speaker Change: Do you think there'll be an impact on portfolio performance based on that.
Speaker Change: Hi, Jade.
Speaker Change: You for joining us and thank you for your question.
Speaker Change: I think not much and what I mean by that is there's been an.
Speaker Change: The increase in transaction volume that has occurred because of rates coming down and some of the refis became more.
Speaker Change: Achievable and we've seen some of that.
Speaker Change: In the regular way repayments, but I would say that our.
Speaker Change: Deals that we have in process for resolution or not really dependent upon.
Speaker Change: The tick up in rates that have occurred.
Speaker Change: Do think that for the industry with the.
Speaker Change: The election turning out.
Speaker Change: It fit with the backup in the 10 year, there will be some pressure.
Speaker Change: Got it.
Speaker Change: I think pressure, but I think that the general trend.
Speaker Change: Trend will continue to improve but there'll be some pressure on certain deals that were competitive part of fixed rate take out.
Speaker Change: But I don't think it's going to impact our portfolio because of the nature of the resolutions were working on currently.
Speaker Change: Thank you I appreciate that.
Speaker Change: Currently there are about one point <unk> 5 billion of office loans in the portfolio.
Speaker Change: Of which $250 million our watch list.
Speaker Change: Loans, so that implies about $840 million of remaining office loans.
Speaker Change: And when I look at the portfolio duration. It's one four years, which suggests clearly maturities will take place between now and year end 2025.
Speaker Change: And we all know that's where the rubber meets the road and maturity date.
Speaker Change: And an office what we're seeing from brokers is an uptick in office leasing activity. The problem is it's concentrated very much in class, a highly and monetize new vintage buildings and everything else, which is the predominance of inventory requires significant dollars to lease up.
Speaker Change: In order to attract tenants and so.
Speaker Change: $840 million of remaining office loans risk rated three or below.
Speaker Change: What is your viewpoint as to what happens when those maturities come up over the next one four years.
Speaker Change: Hey, Jade you ballpark. Good morning. Thank you for joining great question, that's obviously, a big focus of ours on our.
Speaker Change: Ongoing asset management.
Speaker Change: We look out into the fourth quarter and out into 2025 and this comment is on all of the loans coming up for maturity, including the office.
Speaker Change: Some of those are going to pay off in the normal course, some of them are actually in process to pay off including office notwithstanding the challenges in the sector.
Speaker Change: Some of them will extend as a REIT.
Speaker Change: Some of them will not pay off work stand as of right and we have a good playbook for working with those borrowers on a case by case basis.
Speaker Change: We'll go.
Speaker Change: To the extent of a borrower is committed to the asset doing a good job.
Speaker Change: Our playbook is being that in exchange for additional equity.
Speaker Change: Which can take the form of a principal pay down can be replenishing reserves, creating additional structure.
Speaker Change: We'll come up with a solution that will view as a win win.
Speaker Change: To buy more time.
Speaker Change: And there'll be and we've had it in a limited number of cases, where a borrower may decide that they don't want to put more equity in and we have a playbook for resolving in those as well.
Speaker Change: So the majority of these assets.
Speaker Change: Conversations are good borrowers are committed the office assets need more time, some will pay off some will extend some we'll modify.
Speaker Change: And again as I said earlier, we think we've identified.
Speaker Change: Majority of the problem assets.
Speaker Change: But we think we have a playbook for resolving this overtime.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you Mr. Taylor, we have no further questions at this time I would like to turn the floor back over to you for closing comments.
Jack Taylor: Thank you very much operator, and I want to say to everybody that's with us on the call today. Thank you for joining US we really appreciate your taking the time.
Speaker Change: And again, thank you to marson and two Blake for such a smooth transition and we wish you a very nice day. Thank you.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Speaker Change: [music].
Speaker Change: Yeah.
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