Q3 2024 Sachem Capital Corp Earnings Call
[music].
Yeah.
Speaker Change: Greetings and welcome to say, Jim Capital Corp, third quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being at a contract. It is now my pleasure to introduce your host Mr. Stephen Swett Investor Relations. Thank you. Mr. Smith, you may begin.
Mr. Smith: Good morning, everyone and thank you for joining sage them capital Corp's third quarter 2024 earnings conference call.
Speaker Change: On the call from sanction capital today is Chief Executive Officer, John Bolano, CPA, and Chief Financial Officer, Nick Marcello.
Speaker Change: This morning, the company announced its operating results for the quarter ended September 32024, and its financial condition as of that date. The press release is posted on the company's website Www Dot Sacrum capital Corp Dotcom.
Speaker Change: As a reminder remarks made on today's conference call May include forward looking statements.
Speaker Change: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.
Speaker Change: We do not undertake any obligation to update our forward looking statements in light of new information or future events.
Speaker Change: For a more detailed discussion of the factors that may affect the Companys results. Please refer to our earnings release for this quarter and to our most recent SEC filings.
Speaker Change: During this call the company will be discussing certain non-GAAP financial measures more information about these non-GAAP financial measures and reconcile reconciliations to the most directly comparable GAAP financial measures are contained in the SEC filings.
Speaker Change: With that I'll turn the call over to John.
John Bolano: And thanks to everyone for joining us today.
John Bolano: As we previously noted the current macroeconomic environment has posed significant challenges for small balance lenders borrowers are facing substantial pressure from construction and labor costs that continue to rise elevated interest rates and stricter credit requirements imposed by banks.
John Bolano: These challenges amongst others have led to increased uncertainties around project completion.
John Bolano: Ultimately have made it difficult for our borrowers to secure long term financing.
John Bolano: As you know the federal reserve just reduce the interest rates by 25 basis points. Following a 50 basis point decrease in September of this year.
John Bolano: This trend is encouraging and positive for borrowers and lenders alike and consistency of rate cuts will spur a borrower optimism and opened the door for many to access the financing they need.
For the last two years <unk> has reduced originations as we uphold a diligent and prudent approach to our underwriting.
Speaker Change: Dilutive capital raises.
In this environment, we are taking the necessary measures to return to accretive growth, while continuing to navigate through this period of low origination activity.
Subsequent to quarter end, we began negotiations regarding a sale of mortgage loans of approximately $78 8 million with the anticipated recovery of approximately 70% of the unpaid principal balance.
This pool of loans with generally originated during the 2021 and 2022 period when rates were lower and costs were expected to stabilize sooner.
Speaker Change: Unfortunately, our borrowers were hit with the combination of an unprecedented rapid rise in interest rates and inflated material and labor costs all at once.
Speaker Change: This combination rendered many real estate projects unviable.
Speaker Change: While not the outcome, we prefer the sale of these loans is proactive and will reduce the amount of foreclosure and non accrual loans, allowing us to reinvest in accretive assets.
Further we expect a lower cost of capital as our loan book is cleared up most uncertainty and cashes reinvested into performing assets.
Speaker Change: Nick will provide further details later on the call.
Speaker Change: Also during the quarter say to invested in <unk> capital. The third party manager of Sham Creek private credit funds and acquired a 20% membership interest.
Speaker Change: We invested $2.5 million in the quarter with an additional 2.5 million due and payable on or before September of 2025.
Speaker Change: This strategic investment in the asset management gives us the flexibility to generate diversified cash flow and represents an initial step towards broadening our business model to remain resilient in any market environment.
Speaker Change: We strongly believe in Sham creeks investment thesis that workforce housing is a strong credit product, particularly in this high cost environment, which makes it extremely difficult to produce new supply.
Speaker Change: This quarter, we generated approximately $14 8 million in revenue, reflecting a change compared to the same quarter last year.
Similarly, due to a decrease in origination fees, which as mentioned have traditionally made up a significant portion of our income.
Speaker Change: Loan modification and extension fees remain a source of income for the company, but are only available to those borrowers that meet our rigorous re underwriting criteria and have sufficient capital reserves.
Speaker Change: This quarter, we earned 1.8 million in fee income from loans, primarily as a result of loan modifications and extensions.
Year to date, we added only point 9 million in Oreo, reflecting our ability to efficiently manage nonperforming loans are hands on approach coupled with a firsthand knowledge of our borrower increases the probability that we can move a loan from nonperforming to performing.
Speaker Change: Shifting to our pipeline opportunities within our sector remains strong, especially with banks still staying on the sidelines.
We are excited to turn the corner and leverage our expertise and experience to rebuild and returned to a strong dividend over time.
Speaker Change: With that I would like to hand, the call over to Nick to discuss our third quarter financials.
Speaker Change: Yes.
Nick Marcello: Thank you John.
Speaker Change: For the third quarter 2020 for Ctrip recorded revenue of $14 8 million compared to $17 8 million in the same quarter of the prior year.
As John previously mentioned the reduction is mainly attributable to the impact of reduced loan originations as we remain prudent short term debt coming due.
Speaker Change: Interest and fee income from loans declined compared to the same period in 2023, while income from partnership investments rose due to the recent investment in <unk> Creek during 2024.
Speaker Change: Over the past four years stateroom has invested approximately $47 million in sham, which has been delivering attractive double digit returns with no losses to date.
Speaker Change: Excited to leverage the many synergies. This partnership provides and appreciate the diversification it brings to our business model.
Speaker Change: It'll operating costs and expenses for the third quarter of 2024 were approximately $19 6 million compared to approximately $11 3 million in the prior year quarter.
Speaker Change: The increase was driven by multiple factors, including additional seasonal reserves totaling $8 1 million and approximately 2.3 million and G&A expenses.
Speaker Change: As a reminder, the provisions on the loan portfolio are noncash charges, reflecting the ongoing uncertainty within our industry and a broader economy.
Speaker Change: This puts our current allowance for credit losses for mortgage receivable at $20 2 million or approximately four 2% of unpaid principal balance.
Speaker Change: Are these reserves are held against commercial real estate assets as our residential mortgage portfolio continues to hold its value on a relative basis G&A expenses increased compared to the same quarter in 2023, primarily due to higher professional fees stemming from shareholder activism, which has now been resolved.
Speaker Change: Interest and amortization of deferred financing costs have decreased by approximately 11% since September 30th 20, twenty-three primarily due to the repayment of our unsecured notes payable that came due in June of 2024.
Speaker Change: As a result net loss attributable to common shareholders for the third quarter of 2024 was $6 1 million or negative <unk> 13 per diluted share compared to $5 2 million or 12 cents per diluted share in the comparing prior year period as discussed in prior quarters, Our board regularly evaluates our dividend.
Speaker Change: <unk> policy on an ongoing basis balancing our operational performance federal tax requirements and the importance of maintaining long term financial flexibility.
Speaker Change: On November seven the board declared a quarterly dividend of five <unk> per share for shareholders of record as of November 18th 2024.
Going forward. It is anticipated that the company will disclose future dividend declarations with respect to its first three fiscal quarters concurrently with the release of its quarterly earnings with respect to the first fourth quarter either at the end of the year and or concurrently with the release of year end financial information. This.
Timing will better align with our results.
Speaker Change: Turning to portfolio activities.
Speaker Change: As with previous quarters in 2020 for loan originations remains challenged however, with banks remaining on the sidelines and financing challenges persisting, we expect our pipeline to remain robust even as we stay highly selective due to the current capital markets environment.
Our primary focus continues to be on single family and small multifamily residential assets in growing markets, where the metrics remained favorable.
Speaker Change: For the quarter, we had net fundings of approximately $31 3 million for mortgage loans, including loan modifications and construction draws that were offset by approximately $55 6 million of principal paydowns.
Speaker Change: During the third quarter, the company modified or extended a total of 24 loans. These modifications resulted in gross fee income of point $9 million.
Speaker Change: As of September 30th 2020 for our portfolio was comprised of 226 loans with a total unpaid principal balance of approximately 477.1 million a weighted average interest rate of 13, 1% inclusive of default rates, but excluding fees.
Speaker Change: Our loan portfolio is geographically diverse covering 16 states with a focus on growth markets in the southeast balanced with more stable markets in the northeast.
Additionally, only 13, 3% of our investments are in office properties.
Speaker Change: At quarter end, we had loans with a principal balance of approximately $147 million in nonaccrual status, which includes 54 loans in foreclosure by the company, representing approximately $81 8 million of outstanding principal balance, including the accrued but unpaid interest in borrower charges.
Speaker Change: Real estate owned was $4 3 million as of September 30th 2024, including point 8 million held for rental and $3 5 million held for sale.
Speaker Change: Now, let's move onto our balance sheet and financial position, we're maintaining liquidity as a priority to stay prepared during a time when valuable opportunities are emerging capital remains expensive.
Speaker Change: As of September 30th 2024, we had total assets of 555.5 million, including $5 9 million of cash cash equivalents and $1 6 million in investment securities offset by $324 7 million of total debt outstanding.
Speaker Change: We will continue to utilize drawdowns from our existing credit facilities current cash on hand principal repayments from our mortgage loans proceeds from the sale of preferred stock under our ATM program and proceeds from the potential sale of mortgage loans to manage the upcoming debt maturities, notably the $34 5 million.
Speaker Change: Principal amount of unsecured on subordinated notes due on September 30th 'twenty 'twenty four.
Finally, as John mentioned, we are targeting to close on the sale of 41 loans of approximately $78 8 million of unpaid principal balance.
Speaker Change: These loans $41 5 million are considered non accrual loans or loans that are over 90 days past due on payment.
Speaker Change: Currently we are anticipating recovery of approximately 70% of unpaid principal balance from the sale of the loan pool.
Speaker Change: Selling these loans provides several advantages to stage them burst, we eliminate the risk of significant costs related to the foreclosure and bankruptcy process, including professional fees, providing capital to finish projects and other expenses relating to the Oreo.
Speaker Change: Second the process to reclaim our AST assets is often lengthy which constrains capital and limits resources that can be directed towards other areas of the business the.
Speaker Change: The opportunity cost of our capital is significant particularly when foreclosures regularly take over two years to complete and many judicial states that we landed.
Speaker Change: Lastly, these loans provide liquidity in a time where capital remains expensive.
Speaker Change: Selling these loans gives us the best chance to avoid Onboarding dilutive capital.
Speaker Change: And eliminates a significant drag on earnings as such we believe the sale is the most direct path to regain our staff and start to re grow our dividend.
Speaker Change: I will now turn the call back to John for closing remarks. Thanks.
John Bolano: Thanks, Nick.
John Bolano: We are excited to reposition states MSA market leader in small balance real estate finance, we look forward to refilling, our loan pipeline and funding accretive projects.
John Bolano: Our goal is to Derisk, our balance sheet restore our dividend and reward our shareholders. We.
John Bolano: We are grateful for the continued shareholder support through challenging industry specific and macroeconomic conditions.
John Bolano: Our transition is currently underway and we are excited to enhance our lending operations increase our dividend while protecting book value.
John Bolano: I want to extend my heartfelt gratitude to the entire <unk> team for their continuous hard work dedication and invaluable contributions to our performance.
And now we will turn the call over to the operator for questions. Thank you.
Speaker Change: Thank you 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 your line is in the question Q U S start to if you would like to move your questions from the queue for participants using speaker equipment.
Speaker Change: It may be necessary to pick up your handset before pressing the star keys, one moment please poll for questions.
Speaker Change: The first question comes from the line of Gaurav Mehta with Alliance Global Partners. Please go ahead.
Gaurav Mehta: Yeah. Thank you good morning.
I wanted to ask you on your nonaccrual loans and the mortgage loans that you're planning to sell.
Speaker Change: So I think in the prepared remarks, you said $147 million on nonaccrual.
Speaker Change: It seems to be higher than the number.
Speaker Change: Nonaccrual loans and in the last quarter or so hoping to get some more color on non accruals.
Speaker Change: And then the sale of mortgage loans.
Speaker Change: So wanted to get some more color on on that pool of mortgage loans that youre selling.
Speaker Change: And the expected timing of the sale.
Speaker Change: Yeah.
Speaker Change: Second I can take that one gaurav.
Speaker Change: So the nonaccrual.
I think the particular spike in the nonaccrual was related to a loan that where.
Speaker Change: We're actively working on it's a sizeable loan.
Speaker Change: Down in Naples, Florida.
Speaker Change: Theres been some litigation with one of the partners one of the sorry, the second mortgage holder and the deal that has slowed the.
Speaker Change: Jack.
But we're actively working through that and.
Speaker Change: And hope to have an outcome in that over the coming months.
Speaker Change: Assets are near completion with sales scheduled.
Speaker Change: There's just some.
Speaker Change: There's some issues with the second mortgage holder, that's been slowing that and that's what made up a sizeable portion of that spike between Q2 and Q3.
Speaker Change:
Speaker Change: Relating to the note sale as you mentioned it a little more than $41 million of the pool.
Speaker Change: Is non accrual which isn't that.
Speaker Change: Mm 140 plus million dollar number.
The majority of the pool and then the other sort of portion is probably has.
Speaker Change: Another nonperforming aspect I suppose the entire pool being sold because there's.
Speaker Change: There is either like a sponsorship issue.
Speaker Change: Perhaps another underlying asset issue, but loans that.
Speaker Change: We want to clear ourselves off to redeploy into.
Speaker Change: Better credit products as the general theme of the sale.
Speaker Change: So we're excited too.
Speaker Change: I'll get that get that process executed and get.
Get the capital back into a performing assets, we kicked that process off.
Speaker Change: After quarter close and.
Speaker Change: And anticipate a full closing on the sale prior to December 30th 2024.
Speaker Change: I would just add to that that I suppose if you go into the asset base. The majority of these loans were not there sort of the commercial projects.
Speaker Change: I would say generally speaking there are some small residential projects that we're selling but a majority of it is commercial assets.
Speaker Change: Okay. Thank you.
Speaker Change: To wrap up I'd like to add one other thing to that.
Speaker Change: Which kind of ties in the last few quarters of our performance.
Speaker Change: As we've all known our dividend has kind of tracked downward here to where it is today.
Speaker Change: These loans had been a drag on earnings.
Speaker Change: Non accrual it certainly doesn't help us.
Speaker Change: In an effort to restore our dividend to what it was and then some we need we need to close these loans out.
Speaker Change: And quite honestly, we do a very nice job of clearing these up.
Speaker Change: But the drag of non accruals.
Speaker Change: He is just hurting the dividend.
Speaker Change: And internally, we feel that it's best to eliminate these.
Speaker Change: Even though if we would've fight these to the end.
Speaker Change: We would probably get back most of our money, but we would have a reduced dividend for a prolonged period of time.
Okay.
Speaker Change: Just as a follow up so well.
$41 million or nonaccrual in that pool and about $41 million.
Speaker Change: Included in the 147 total number and so I guess when I think about it.
The remaining nonaccrual pool should we expect like similar outcome for what will remain in the nonaccrual after the sale of.
Speaker Change: The mortgage loan portfolio.
Speaker Change: At this point there is no secondary.
Speaker Change: Loan sale with respect to the additional non accrual.
Speaker Change: Okay.
Speaker Change: And lastly on the balance sheet.
Speaker Change: Talked about a few different sources.
Speaker Change: Capital that you may use to address that.
Speaker Change: $34 million debt maturity in December and so all of those sources.
Speaker Change: Any source that you prefer or another as you look to address the debt maturity.
Grab what what we're expecting from the culmination of the loan sale, we'll have options.
Speaker Change: Our loans that are due in December of 34, and a half million dollars.
Speaker Change: Most likely it would be a full pay down of those notes of course, a reduction of our credit facility with Needham Bank.
Speaker Change: And at that point.
Speaker Change: We can start to build our business again and putting loans on the books.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you that's all I had.
Speaker Change: Are you done with the question Mr Mehta.
Speaker Change: Yes. Thank you. Thank you.
Speaker Change: Our next question comes from the line of Matthew <unk> with Jones trading. Please go ahead.
Speaker Change: Hey, good morning, guys. Thanks for taking the question so with the $78 million in loan sales.
Speaker Change: That kind of gets me to around 400 million for the current portfolio size.
What percentage would be office. After this loan sale closes what remainder of that 400 would be commercial outside of office.
Speaker Change: And then I think you mentioned $41 million in non accruals, so that kind of brings it back down towards.
Speaker Change: $100 million give or take can you just let me know if I'm reading through this correctly.
Speaker Change: Oh, okay.
Speaker Change: Non accruals I, just Nick I'll, let you take this with respect to the office percentage, but the significant portion of non accruals.
Nick Marcello: Our residential condo.
Nick Marcello: So we don't we don't see much devaluation as we see with the the loan sale.
Nick Marcello: Okay.
Nick Marcello: Gotcha.
Nick Marcello: Regarding hiring in the office, there's yeah no problem.
Nick Marcello: 10 plus million of the.
Nick Marcello: The 78 going to going to the sale of our office properties. So certainly like there's a there's a sizable portion of that that our office assets that where we're going to be selling.
Nick Marcello: You have to continue to lower that exposure.
Speaker Change: Got it that's helpful and then turning to another question.
Speaker Change: With regard to capital allocation you know it looks like you guys repurchased almost half a million shares during the quarter.
Speaker Change: Made the investment in the <unk>.
Speaker Change: <unk> Creek capital, you know, where do you guys view.
Speaker Change: The best return on your capital at this point.
Speaker Change:
Speaker Change: First of all.
Speaker Change: Think our shares are depressed even in light of all of this.
Speaker Change: We feel that the shares.
Again, it's only my opinion.
Speaker Change: Feel the shares are cheap.
Speaker Change: With respect to book value.
Speaker Change: We think in the near future.
Speaker Change: The dividend will be restored.
Speaker Change:
Speaker Change: Look we're lending at 12 and to scale.
Speaker Change:
Speaker Change: Right now we're still through the end of the year we're.
Speaker Change: We're not we're not gonna land, we're not going to do anything we're still managing our business.
Speaker Change: Performing through the loan sale.
Speaker Change: Next year will be a you know starting in January we're gonna take take stock of what we have.
Speaker Change: We're going to look for new capital.
We began moving again so to answer your question, we think our stock is a great buy here.
Speaker Change: We still like.
Speaker Change: Residential lending.
It's just we're not seeing as many great projects.
Speaker Change: And.
So were just sitting tight for now and until we can find accretive capital.
Speaker Change: It's going to be a slow play.
Speaker Change: Got it that's helpful. Thank you guys.
Sorry go ahead.
Speaker Change: Thank you next question comes from the line of Tyler Battery with Oppenheimer <unk> co. Please go ahead.
Speaker Change: Good morning. This is Jonathan on for Tyler. Thanks for taking my questions first one for me John.
Speaker Change: It's somewhat of a follow up but now that we've moved past the election and the September rate cut I am curious if you can maybe update us on your latest thinking on how next year plays out you highlighted the strong deal flow so pairing.
Speaker Change: Kind of what do you need to see to step back on the pedal next year.
Speaker Change: Okay.
Speaker Change: Alright, so our loan sale is coming through we've talked about that we've cut our dividend.
Speaker Change: I wanted to just I'm not happy right see very clear I'm not happy I don't expect our shareholders to be happy.
Speaker Change: There could quite possibly be and this is again.
The board of director decision.
Speaker Change: But there could be another five cent dividend.
Speaker Change: And I, just don't want to mince words, it's quite possible.
Speaker Change: It's not a dividend in despair, it's just again, we're starting to see the light at the end of the tunnel.
Speaker Change: We're excited about moving forward.
Speaker Change: We're really looking to the second quarter and I think at that point, we're going to start looking at like the company we used to be.
Speaker Change: Okay. That's great I appreciate the color that you guys invested in Sugar Creek partnership in the quarter and in the past you've talked about satellite offices with local hard money lenders I'm curious if those conversations have become more active there changed at all in light of the environment and the moves we've seen in the interim.
Speaker Change: Rates over the past few months.
Speaker Change: The.
Speaker Change: It is a great opportunity for us however.
Speaker Change: Without capital, we have to kind of mind our business.
Speaker Change: And you know.
Speaker Change: We're a lender at heart, that's what we do.
Speaker Change: We're starting to step out a little bit more in the real estate development business through our Trs and our urbane unit, we're very excited.
Speaker Change: For what they can do and what they can bring to our bottom line. So what is very interesting in our business model. At this point is we have the opportunity for capital gains.
Speaker Change: Which we.
Speaker Change: Kind of stepped a little bit away from being normal vanilla way mortgage lender.
Speaker Change: We now have the ability to spin off capital gains and those will be tremendous benefits to our shareholders.
Speaker Change: He will come once we fill this pipeline they will come consistently.
And it's a new view, but.
Speaker Change: Let it be said here, we are a mortgage lender, we're not straying too far from the path, we feel a bit him Creek as great credibility in the workforce housing for us.
Speaker Change: We don't have the ability to attract that kind of investment with our rates the way they are.
Speaker Change: So we're very excited to have them as part of our team and we think that could be a huge part of our business going forward.
Speaker Change: Excellent I appreciate all the color today, that's all for me.
Speaker Change: Thank you next question comes from the line of Chris Muller with citizens JMP. Please go ahead.
Speaker Change: Hey, Jonathan Thanks for taking the questions.
Speaker Change: I guess on the lower fees from modifications. How are you guys feeling about where you're at a modification wise are you through the bulk of what you expect to come through or is there. Another I guess steady flow of small modifications comment over the coming quarters.
Speaker Change: Chris We continued a modification or at one point, we had 500 loans and we're now down to approximately 225.
Speaker Change: Just by the sheer number we get a bunch of these every single month.
Speaker Change: And what we have done through the last quarter is.
We have changed a significant portion of our underwriting process. It is it is greatly improved a lot of these modifications don't fit the guidelines any work.
Speaker Change: And those guys have been one off commission.
Speaker Change: We're foreclosing, if if they don't want to theirs.
Speaker Change: There's nowhere for them to go quite honestly.
Speaker Change: Which leads us to selling the notes of foreclosing. So this is part of a cleansing of our balance sheet.
Speaker Change: And they continue to come we do our very best to protect our borrowers and we've been going we've been known to go to the ninth inning for many.
Speaker Change: But if we can't get them to fit our guidelines.
Speaker Change: And a half to go.
Speaker Change: Got it so should we expect to see a pickup in <unk> over the next couple of orders.
Speaker Change: No.
Speaker Change: I don't really see it.
Speaker Change: A good portion of our loans in foreclosure resolved themselves right.
Speaker Change: It's either through a short sale.
Speaker Change: Another interested party refinance our RVO has not grown tremendously.
Speaker Change: Over this whole period right. This whole last two year.
Speaker Change: Struggle that we've been in.
Speaker Change: So I don't expect it to be and Ral but.
Speaker Change: I will add this little caveat.
Speaker Change: Yes, we have the ability to.
Pro forma cash for Key's transaction, we won't do it.
Speaker Change: Artificially inflating.
Speaker Change: It gives us control.
Speaker Change: But it's a quick sale I mean, this is not stuff we're keeping.
Speaker Change: Again, it's just trying to I think coal and some of the states, it's hard to get especially in New York and New Jersey, It's hard to get control.
Speaker Change: I'll actually I'll I'll clarify that I think what John saying too is that we are trying to take back some oreo before it goes to mission for sale you just get better execution in the secondary market. If you can convert its rel alleviates the risk. So what we're trying to do is be proactive with the with the loan pool to get in front of our borrowers to say okay.
Speaker Change: Here's a chance to hand us the keys, so youll see a subsequent disclosure.
Speaker Change: That discusses like the amount that we're taking into Oreo, but thats going to emission sale.
Speaker Change: But again that was done strategically to facilitate the sale that wasn't just us taking a bunch of Oreo through let's say foreclosure.
Nick Marcello: Got it that's very helpful. And then I guess my second question for you Nick.
Speaker Change: With that let's see so reserve in the quarter I think you said that most of that reserve was related to that the Naples asset.
Speaker Change: I want to make sure I got that correct first and then can you just break out for me I'm. The general and specific reserves that are in that $22 million total number is any of that systemic reserves I guess.
Speaker Change: Jim.
I would say.
Speaker Change: The general split is roughly.
Speaker Change: <unk> got about 14 million of indirect reserve, which is against.
Speaker Change: Assets that are in the noncore.
Speaker Change: All of which is against assets in the nonperforming bucket.
Speaker Change: The remainder is sort of general reserve that relates to the rest of the performing pool.
Speaker Change: Is that helpful.
Speaker Change: Very helpful. Thank you.
Speaker Change: I look forward to seeing you guys shift back to offense at some point in 2025.
Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Please go ahead.
Christopher Nolan: Hey, guys for the $78 million loan sale is that going to just be a realized loss in the fourth quarter or it's going to be part reserve recovery is that going to work accounting wise.
Christopher Nolan: Yes.
Christopher Nolan: Yes.
Christopher Nolan: Go ahead, you'll see a reserve recovery.
Christopher Nolan: You'll see a reserve recovery Chris.
Christopher Nolan: For loans that were reserved against in the pool, and then youll it'll be offset by to your point or a realized loss of where it's executed out.
Christopher Nolan: There is there's some math that.
Christopher Nolan: As in the or.
Christopher Nolan: Our filing that's coming out shortly.
Christopher Nolan: That goes into sort of a pro forma effect.
Christopher Nolan: <unk> of what the loan sale it looks like.
Christopher Nolan: Okay and then.
Christopher Nolan: I guess.
Speaker Change: If I heard you correctly the cash for the maturing December note do you have that cash on hand, now or is that still in process.
Speaker Change: Yeah.
Speaker Change: Chris So what we have is we've kept our availability at Needham relatively low.
Speaker Change: We do have some cash we don't have all of it.
Speaker Change: But we have the ability to draw from Needham if need be and then we also have the anticipated proceeds.
Speaker Change: From the sale of the notes.
Speaker Change: Okay. So your credit.
Speaker Change: Credit facility will covered if DB.
Speaker Change: Yes.
Speaker Change: Okay. The final question is on the <unk> capital investment.
Does that flow through the income statement at all or was that just sort of a capex separately.
Speaker Change: Balance sheet investments.
Speaker Change: That did not flow through the income statement yet.
Speaker Change: Did that transaction early in September P&L.
Speaker Change: P&L effects are still.
Speaker Change: It was it was too short lift during the quarter or for the year, let's say.
Speaker Change: Okay that was going to operate manage our investment yes.
Yes that was it's a third party manager as a third party manager investment that oversees the funds that we've done.
Speaker Change: And as majority of which was our capital is in a co invest vehicle with outsized economics to the rest of the limited partners in the fund.
Speaker Change: So does that expense be amortized over a period of time is that the way to look at.
That investment.
Speaker Change: Yeah.
Speaker Change: No.
Its an equity investment.
Okay.
Speaker Change: That's it for me thank you very much.
Speaker Change: Thanks, Chris.
Speaker Change: Thank him a reminder to all the participants that do my best Star one to ask a question.
Speaker Change: Ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to John Bolano for closing comments.
John Bolano: Thank you everyone for joining us today, we look forward to updating you with the filing of our K. Thanks again.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.