Q4 2024 Franklin BSP Realty Trust Inc Earnings Call
Hello and welcome to the Franklin VFP Realty Trust fourth quarter 2024 earnings conference call. All participants will be in listen-only mode. Did you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: Some of which are available on our website at www Dot FBR T Rieck dot com and we will refer to the supplementary slide deck on today's call with that I'll turn it over to rich Barton.
Speaker Change: Great. Thanks, Lindsay and good morning, everyone and thank you for joining US today as Lindsey mentioned, our earnings release and supplemental deck, where published to our website yesterday, we're going to begin todays call on slide four.
Speaker Change: We're going to review our fourth quarter results and then we'll open up the call as always to your questions.
Speaker Change: Jerry will cover our financial results and Mike will discuss market conditions, Our watch list and our Oreo portfolio I'm going to highlight key developments from both the fourth quarter and full year of 2024.
Speaker Change: With that maybe just to start we continue to view our portfolio in three buckets loans originated post interest rate hikes loans originated three interest rate hikes and office loves.
Speaker Change: First let's discuss post interest rate hike lunch in 2024, we originated 2 billion.
Speaker Change: In new loan commitments, including 441 in the fourth quarter.
Speaker Change: Last quarter, we began tracking the percentage of our portfolio that has been originated since January 2023.
Speaker Change: Reflecting current interest rates and valuations, including originations through January 2025, 52% of our portfolio as loans originated post interest rate hikes. We believe this is a very important statistic. Because these are some of the most attractive loans that we've originated in years, we are originating in the current vintage.
Speaker Change: With relatively low competition. This has enabled us to add high quality borrowers and loans with low ltvs to our book.
Speaker Change: Okay as for free.
Speaker Change: Rate hike loans are high quality predominantly multifamily legacy portfolio provides us with a lot of flexibility in negotiating leverage as borrowers approach maturity. Many of our 2021 and 2022 vintage loans have been repaid in fact, we've received $1 1 billion of full payoffs from this.
Speaker Change: Vintage in this past year in 2024, and other cases, we are actively pursuing modifications with borrowers who improve our debt position and some cases of course, we must take properties as real estate owned stabilize the asset and still we are confident that we will achieve better outcomes even.
Speaker Change: If we need to endure some near term earnings drag while waiting to maximize recovery.
Speaker Change: Lastly, regarding the office sector. After two office loan payoffs in Q4, both were at par and excluding our largest office alone, which is a triple net leased headquarters and distribution facility. Our traditional multi tenant office exposure at year end was only two 3%.
Speaker Change: Of our total portfolio importantly, this remaining exposure has been significantly marked down in previous quarters to reflect current market conditions.
Speaker Change: While we did not reach dividend coverage. This quarter, we believe that our current dividend level is appropriate given the future earnings potential embedded in our Oreo and nonperforming loans.
Speaker Change: Despite a very active origination year, our portfolio remained flat to 2023, ending the year at 5.0 billion principal balance.
Speaker Change: Our 2024 originators originations were offset by 1.6 billion in repayments. These repayments of course are a blessing and a curse, but we are always happy to see pre rate.
Speaker Change: Pre rate hike.
Speaker Change: Loans repay in full.
Speaker Change: We ended the year with $535 million in liquidity, including $184 million in unrestricted cash we continue to strategically invest our liquidity new assets to further enhance FBR cheese earnings.
Speaker Change: Firstly 151 of our 155 positions our risk weighted two or three resulting in an overall risk rating of 2.3.
Speaker Change: As of quarter end, our watch list makes up 3.8% of our portfolio and consists of four names a net increase of one name during the quarter.
Speaker Change: A specific seasonal charge was taken on the five rated loan that was added however, the new five rated loan was foreclosed on in Q1 in 2025 and has already sold above our debt basis. This reduces the watch list to 2.3% of our portfolio.
Speaker Change: We will cover this in more detail and Mike will provide more detailed update on the remaining watch list assets as well as our our E O portfolio.
Mike: Lastly for me, we remain confident in FBR cheese portfolio. In 2025, we are focusing on really two things actively managing our legacy loan portfolio and pursuing portfolio originations, we see significant opportunities in new originations as demonstrated by the 3.6 billion we have originated.
Mike: Nate is across our real estate platform in 2024, and with that I'll hand, it over to Gerry.
Gerry: Great. Thanks, rich and thanks for everybody for being on the call today.
Gerry: Moving on to our results, let's start on slide five.
Gerry: <unk> reported GAAP earnings of 29 cents and 82 cents per diluted common share for the fourth quarter and year ended 2024.
Gerry: Distributable earnings were <unk>, 30, and 92 per diluted common share for the fourth quarter and the year ended 2024.
Gerry: Earnings were negatively affected by our non accrual loans and Oreo positions.
Gerry: We did make progress in increasing the book value attributable to our Oreo portfolio, which declined by approximately $63 million through asset sales in the fourth quarter.
Gerry: In addition, after the quarter end, we sold another Oreo asset for $63 8 million. This is the asset Rich mentioned, we had an asset specific reserve in Q4 of <unk> per common share related to that asset.
Gerry: Our sale ended up being above our debt basis.
Gerry: Our Oreo and nonperforming loans will continue to impact distributable earnings in the short term as.
As we continue to resolve Oreo and put that equity back to work. We believe we could generate an additional 25 to 30.
Gerry: So our distributable earnings on an annual basis.
Gerry: While that May take a few more quarters to fully resolved we are confident that our earnings power is within range of our current dividend level.
Gerry: Our book value was $15 19 per fully converted common share.
Gerry: At year end.
Gerry: <unk> to our general and asset specific reserves combined combined with dividends exceeding other earnings led to a slight decrease in book value in the fourth quarter.
Gerry: Turning to slide seven this is an overview of our original origination activity for the quarter.
Gerry: We originated $441 million in new loan commitments during the quarter, primarily in the multifamily sector, which comprise 68% of our fourth quarter activity.
We received 641 billion in loan repayments during the quarter with 18 loans paid off in full.
Gerry: Of these $578 million from loans originated in 2021 and 2022.
Gerry: In multifamily loans made up the majority of the Paydowns Importantly, two office loans were also fully repaid further reducing our exposure to that sector.
Gerry: Turning to slide eight our average cost of debt on our core core portfolio with the.
Gerry: Cooper, plus two 1% 2%.
Gerry: Our financings continue to benefit from our close.
Gerry: At quarter end, 89% of our financing was non mark to market and we have reinvestment capacity available in two of our deals the.
Gerry: The nonrecourse non mark to market structure of CLO financing makes it our preferred method for funding our portfolio.
Gerry: We anticipate returning to the CLO market sometime in 2022 and 2025.
Gerry: We continue to add meaningful space on our warehouse lines and have unrestricted cash we would like to deploy.
Gerry: Combined with our CLO reinvest available liquidity at quarter end totaled $535 million of which 184 million is unrestricted cash.
Gerry: Our net leverage position was two six times with our recourse leverage standing at <unk> at the end of the quarter.
With that I'll turn it over to Mike give you an update on our portfolio.
Mike: Thanks, Gerry and good morning, everyone. Thanks for joining us I'm going to start on slide 12.
Mike: Our core portfolio stands at 5 billion comprised of 155 loans, averaging $32 million each.
Mike: Portfolio is 99% senior mortgages with 93% being floating rate loans multi.
Mike: Multifamily remains our preferred sector, securing 71% of the portfolio.
Mike: Our core portfolio decreased again this quarter given significant repayments.
Mike: Jerry and rich both noted we have available liquidity that we plan to deploy into the core portfolio.
Mike: We will also reinvest any equity generated from Oreo sales.
Mike: During the quarter, we originated 18 loans at a weighted average spread of 344 basis points.
Mike: We have seen spreads continue to tighten across most asset classes, but still find this vintage of loans to be extremely compelling from a risk return perspective.
Mike: Borrowers continue to adjust to the higher for longer rate environment, which we anticipate will continue to create constraints with supply from traditional credit providers.
Mike: That said, we've seen a moderate return of competition across the space, but I do not believe there is enough credit capital available today to address the approximately $3 four trillion of a commercial real estate debt coming maturing in the next 36 months.
Mike: Legacy loans, specifically office will remain a problem and we will continue to be a problem until lenders finally address the inevitable.
<unk> continues to take the acknowledge and address approach when it comes to our legacy loan portfolio.
Mike: As both rich and Jerry have discussed we are actively identifying the loans that may be problematic and our asset management team continues to proactively address these issues.
Mike: Slide 14 is a summary of our watch list.
Mike: Our watch list consisted of four properties at quarter end, what is both Jerry and Rich mentioned this has been reduced to three positions given the Q1 2025 asset sale.
Mike: Took title to the 376 unit Dallas apartment complex in January 2025, and have subsequently sold the property above our basis.
Mike: Of the three remaining positions one of the Denver Office building that we anticipate taking title to in Q1 or Q2 of 'twenty five.
Mike: The next is a Georgia office loan.
Mike: Qualified for extension in January 2025.
Mike: Not only does the borrower continue to keep that loan current what they pay down the principal balance in conjunction with the extension.
Mike: The final property on our watch list. The 307 unit student housing student housing property in Norfolk, Virginia. It is risk rated a four.
Mike: We are in active dialogue with the borrower and have reached terms on a loan modification, which are being papered currently.
Mike: This is an incredibly well capitalized borrower and we recently, we recently received positive feedback about our property operations.
Mike: The experience we had on the 376 unit Dallas apartment project is another example of strength in the multifamily sector as well as well as the massive amount of liquidity looking for opportunities.
Mike: We foreclose that asset on January 7th.
Mike: Word of the foreclosure spread very quickly and within 72 hours, we had approximately a dozen written and verbal offers to buy the property.
Mike: One buyer called US and said I live three miles away or drove the asset. This weekend and we will go nonrefundable with 1 million dollar deposit and no due diligence period.
Mike: Our PSA was signed on January 27th and closing was only 16 days later.
Mike: That experience simply would not happen in any other asset class in commercial real estate and is one of the reasons. We are so confident in our portfolio.
Mike: On the other end of the spectrum, we have the office sector.
Mike: The damage continues to be staggering, but it appears that we have come off the bottom from a sentiment perspective, and we're seeing a hint more liquidity in the space.
Speaker Change: As rich mentioned, our traditional multi tenant office portfolio is down to two 3% of our total portfolio and our goal is to get to zero as soon as possible.
Speaker Change: While we consider new office in originations the credit bar is incredibly high and the return bar might be higher.
Speaker Change: We originated one office loan in 2024, and it has already been repaid in full.
Speaker Change: Moving to slide 15, our foreclosure Oreo portfolio decreased to 11 positions at quarter end, having sold four properties narrow basis in the fourth quarter.
Speaker Change: We closed an additional sale after quarter end and as a person and have purchase and sale agreements in place for two additional properties at or above our basis would you expect it to close in the first and second quarters of this year.
Speaker Change: In total in 2024, our team sold $159 million of Oreo properties in the aggregate.
Speaker Change: Excluding the remaining Walgreens stores and the office building in Portland. The Oreo portfolio consists of all multifamily properties. Our goal is to liquidate the entire Oreo portfolio as quickly as possible. However, we continue to believe that stabilizing means assets first will lead to higher recovery prices.
Speaker Change: As Jerry pointed out converting this oreo back to performing loans has the ability to move our earnings by 25 to <unk> 30 per share annually. So it is absolutely our primary focus.
We've already had a very active first quarter closing just under $200 million of loan commitments as.
Speaker Change: As we completed our first C N D S execution of the year and in Q1 as well, resulting in approximately a $4 million gross gain on sale, which will be realized in Q1 figures.
Speaker Change: We remain confident in after your team's ability to perform well in the current market environment.
Speaker Change: And with that I'd like to turn it back to the operator to begin the Q&A session.
Speaker Change: Thank you very much.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Asked a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: Draw. Your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble a roster.
Matthew: Today's first question comes from Matthew <unk> with Jones trading. Please go ahead.
Matthew: Hey, good morning, guys. Thanks for taking the question.
Matthew: Could you talk a little bit about spreads.
Matthew: Come in kind of from the highs over the cycle.
Matthew: Kind of in that 8% range, where do you expect them to settle out and I guess.
Matthew: Is it tightening due to competition increased credit quality increased asset quality or kind of a combination of all the above.
Speaker Change: Thanks, Matt Yeah, I mean, the spread tightening and I think has been a phenomenon, we're seeing not only in real estate, but also other credit our credit positions.
Speaker Change: I think the floating rate credit spreads have probably come in.
Speaker Change: As tight as they can reasonably get I mean, it would seem pretty unlikely to tightened materially from here I am not going to call. The last five basis points, obviously, but it would it would be hard to see them tightened another 50, so to speak.
Speaker Change: C N B S remains incredibly liquid CRE CLO market remains incredibly liquid.
Speaker Change: Spreads on the liability side are tightening in lockstep with the asset side tightening. So we're seeing that phenomenon on warehouse lines CRE CLO and see MBS. So I think we're we're well inside the types of kind of peak valuations Q4, 'twenty, one Q1 of 'twenty two.
Speaker Change: Probably by 20% to 50 25 to 50 basis points, but obviously the differences we continue to have sofa still four four and a half.
Speaker Change: <unk>, 4.45% higher than it was at those peak valuations as well so I think were there.
Speaker Change: It was a very long way of me, saying I think the spread tightening in the floating rate world is probably close to it then.
Speaker Change: But hold dollar coupons.
Speaker Change: To have seven handles on them.
Speaker Change: Got it that's helpful color there and then Gerry a quick kind of modeling question for you other expenses. It rose about 5 million bucks give or take quarter over quarter.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Number two about $12 4 million what should we expect the run rate there and you know is there any material change kind of expense side.
Yes.
Speaker Change: Let me tell you to think about this in two ways, that's mostly to Oreo blow through expenses. They don't all go through there, but the vast majority do.
Speaker Change: So a little hard to predict based on how quickly we sell down some of this stuff but.
Speaker Change: Right.
Speaker Change: The easiest way to think about it is it's kind of offsetting with the Oreo income that we have up above on the income statement.
Speaker Change: Two are close to a wash, but like I mentioned on the last earning calls it is not.
Speaker Change: Much of a net contributor overall to the book.
Speaker Change: So you heard the upside but in terms of kind of how it comes off through the course of next year, It's really just dependent on timing of asset sales.
Speaker Change: <unk>.
Speaker Change: So I think you know.
Speaker Change: The easiest way to model us too.
Speaker Change: Make some estimate in terms of how the pace of sell downs might occur.
Speaker Change: Heard me say it could take a few quarters or more for us to work all that out.
Speaker Change: Yeah.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Next question comes from Tom Catherwood with D. P. I G. Please go ahead.
Speaker Change: Thank you and good morning, everybody, maybe Mike starting with you I. Appreciate your comments on kind of the wave of CRE loan maturities and have that creates opportunity despite new capital coming into the market, but it seems like every lender is.
Just following your playbook and jumping into multifamily.
Speaker Change: Having to shift your approach or underwriting to maintain origination levels in the multifamily front.
Tom Catherwood: Hey, Tom Good morning, Thanks for the question.
Speaker Change: Obviously.
Speaker Change: One we're discussing internally all the time.
Speaker Change: I think.
Speaker Change: We have a huge benefit of the fact that well all the people that are actively originating right now none of them were originating in 2024.
Speaker Change: We were able to put on $2 billion of commitments in 2024 at some of the best spreads we've seen on some of the best long as you've seen in years.
Speaker Change: So we don't have to compete at these levels, we don't have to chase at these levels.
Speaker Change: I would also say the great thing about our platform is the breadth of our product offering right. We've got so many different things that we can do that are a wider spread business. So construction lending.
Speaker Change: Our little cottage industry of condo inventory loans, our hospitality book.
Speaker Change: So we're not really chasing to the tight here because we put on $2 billion last year that no. One else did and I think we're focusing our new originations on stuff, where we can get pricing that is still wider than what we're seeing kind of the very highly competed for spar.
Speaker Change: Space So.
Speaker Change: Fully acknowledge that everybody's kind of looking for that easy 88 mile an hour fastball over the fat part of the plate, but we've got the ability to swing at pitches and hit them that other guys don't.
Speaker Change: I appreciate those answers Mike.
Speaker Change: Maybe pivoting over to a rich too.
Speaker Change: You get repayments and I know the timing of repayments can be lumpy and hard to predict but do you have an internal target for when originations and fundings could outpace repayments to the point in time that the loan book and start growing again.
Speaker Change: I would definitely say, it's the art more than science right.
Speaker Change: And a lot of that is also driven by interest rates.
Speaker Change: My view is very different at 4% 10 year versus a five and a quarter tenure.
Speaker Change: We're doing this delicate dance.
Speaker Change: How much legacy stuff still has to be worked out or are we going to have to take back a little more Oreo how fast are we going to sell the existing Oreo what are the repayments I mean theres just so many variables in there that it's hard to model.
With any sort of real certainty.
Speaker Change: When we can originate repayments. So it's clearly our goal is clearly where we want to be.
Speaker Change: Rich mentioned in his opening remarks that you have 52% of the portfolio is post rate hike originations clearly are.
Speaker Change: Question goal is to get this completely recycled out of the legacy portfolio and introduce new vintage of loans. So we're doing it as fast as we can I think there's just too many variables that I can count on the table and say by Q4. This year we've done it.
Speaker Change: But we're actively working towards that goal on literally a daily basis.
Speaker Change: Understood.
Speaker Change: Then last one for me.
Speaker Change: The remaining Oreo assets, obviously made great progress.
Speaker Change: Selling what you've stabilized and the ones that you recently took title on for the ones that remain on your books, where are they in terms of executing the business plan and how much capital or time do you think they have until you can get them to stabilization.
Speaker Change: So, it's obviously case by case to the asset of.
Speaker Change: Of course, we're just about to get into leasing season across the board.
Speaker Change: The majority of our Oreo is in fund belt. So we're hoping to see a meaningful increase in leasing in the coming months.
As I mentioned in the prepared remarks, we've already got two assets under contract.
Speaker Change: We are actively in the market with another two assets that we hope to have acceptable bid done in short order and then the rest are at various different stages of occupancy.
Speaker Change: And again I think that we'll see a pretty healthy occupancy pop as we get into leasing season.
Speaker Change: And I would say our goal is to have the bulk of this in the market for sale.
Speaker Change: Late Q2 early Q3, I think that should be enough time for us to stabilize.
Speaker Change: The vast majority of what's what's left in the book are there going to be some stragglers that theyre going to be some.
Speaker Change: Unexpected twists returns of course welcome to real estate.
Speaker Change: The goal again is to get through to SaaS as we can and there appears to be a pretty clear path.
Mike: Great I appreciate all the answers Mike Thanks, everyone.
Speaker Change: Thank you. The next question comes from Randy Binner with B Riley. Please go ahead.
Randy Binner: Hey, good morning, Thanks, I had a couple just looking to slide 10 of the deck on liquidity.
Randy Binner: I was wondering if you could just dig down a little bit on the change in available liquidity this quarter versus last and I think it's that financing available and in progress category.
Randy Binner: Just wondering what the detail is on the on the lower.
Randy Binner: Level of available liquidity.
Randy Binner: Yes, most of the changes from where Paydowns come back to us in terms of.
Randy Binner: Does it hit a CLO with reinvest or does it hit a CLO thats in the amortization base got it.
Randy Binner: It just so happened we had more amortization on the amortizing closed and the non amortizing cielo is the reinvest ones. So that just takes down or delays when you can unlock some of that equity.
Randy Binner: So if you think back to my comment on the fact that we probably launched another CLO later this year.
Randy Binner: That's the recapture of the equity on those deals that start to amortize down.
Randy Binner: It just delays the liquidity, but for the way, we kind of lay it out it comes out for my purpose of how we calculate that.
Randy Binner: Okay got it that's helpful and then.
Randy Binner: I think the first set of questions had to do with other expenses I.
Randy Binner: I just didn't hear the full.
Randy Binner: Exchange, but the specific question is.
Randy Binner: I think other expenses were elevated to prepare properties for sale that are in Oreo did you did you break out how much of the $10 2 million of other expense was that versus other stuff.
Randy Binner: No we didn't break it out but I mean, if you just look at our historical levels. It is a pretty decent portion of it and yes.
Randy Binner: If you look at the real estate income I mentioned this before in my earlier answer, but those two roughly offset that's kind of the best way to think about it other in other expense for US generally is not that large of a line item.
Randy Binner: So it's really just.
Randy Binner: I think it's more of a net zero basis between those two line items in terms of how it RVO is actually coming through the books are flowing through from a cash perspective right. It's almost a net neutral in the entirety of context.
Randy Binner: And we hold so it's going to be elevated.
Until we start to take down those assets it start and stops flowing through there.
Randy Binner: Okay. That's great. That's all I had thank you.
Randy Binner: Sure.
Randy Binner: Thank you.
Speaker Change: Next question is from Stephen laws with Raymond James. Please go ahead.
Stephen Laws: Hi, good morning.
Stephen Laws: Wanted to follow up on question earlier on the.
Stephen Laws: Outlook for portfolio growth I guess, you know repays or.
Stephen Laws: In a more uncertain, but on the origination front.
Stephen Laws: 450 ish million of fundings last quarter I believe you said that.
Stephen Laws: Prepared remarks around $200 million year to date is that kind of 4% to $500 million of quarterly originations is that a good run rate as far as when you look at your pipeline or.
Stephen Laws: How much volatility do you expect to see on the origination side.
Mike: Hey, Stephen Good morning, it's Mike Thanks.
Speaker Change: Thanks for the question, Yes, I mean look.
Mike: There is.
Mike: There is.
Mike: Seemingly almost unlimited requests for financing right now.
Mike: If we wanted to.
Mike: Jake application, we can probably signed $6 million to $800 million of new applications.
Mike: Next week.
Mike: There is just a massive massive massive ask for credit right now.
Mike: We're just trying to be patient because of the unknown unknowns.
Mike: Just as I mentioned on one of the last questions of where we just don't know when we're going to get.
Mike: Certain Oreo sold when we're getting certain repayments I've spoken to all of you guys over the past several quarters about one of the hardest things for us to manage right now as borrower behavior borrower behavior continues to be really really difficult with.
Mike: Posturing This way and then going the complete opposite direction are posturing that way and going to complete opposite direction. So.
Mike: We're doing the best we can to forecast.
Mike: Cash and future problems in future Oreo.
Mike: It's just a it's a pretty difficult endeavor. So.
Mike: The opportunities to originate is there in spades.
Mike: It's really just getting comfortable with the legacy book and cash and repayments.
Mike: To figure out how much we could take on.
Mike: I appreciate the color Mike.
Mike: Two quick loan questions. Thank you guys mentioned, the Georgia office was modified and included some pay down of principal.
Speaker Change: Well that loan be upgraded given those actions can come off the watch list really intend to leave it as five rated.
Speaker Change: For the moment, we're going to leave it as five rated.
Speaker Change: It's it's still an office asset.
Speaker Change: And while I said liquidity has improved in that space.
Speaker Change: Don't think we have it at a level, where we think it is a it is re financeable.
Speaker Change: Obviously, we're incredibly encouraged by the fact that the borrower has continued to write checks continue to pay us down.
Speaker Change: But I don't think we're in a spot currently where we're comfortable to say that thats risk rated four.
Speaker Change: Makes sense.
Speaker Change: Denver Office. So I think you commented should moved to Oreo sometime in the first half of this year or do you have.
Speaker Change: Preliminary playbook of kind of how are you.
Speaker Change: A handle that asset once it scenario.
Speaker Change: I think the I think the idea is similar to our multifamily book, albeit meaningfully meaningfully harder try to stabilize it and see what we can get them on a liquidation.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Just a tough market right now and then office almost anywhere so.
Speaker Change: A lot of people are getting appraisals for office buildings unable to refinance them.
Speaker Change: What the real bid is for an office building today I'm I'm not sure so.
Speaker Change:
Speaker Change: It's certainly the most illiquid asset class in commercial real estate. So I think there's I think there is some price discovery that we have to do on that asset I think there was some market and operational discovery that we need to do on that asset.
Speaker Change: We're laser focused on it and will be but it is certainly much harder to predict the outcome on an office asset today versus multifamily so.
Speaker Change: Probably.
Speaker Change: Probably can give you more fulsome answer Steven in a quarter or two after we've actually had our hands on the operation and understand the building and the leasing in the market a little bit better.
Speaker Change: Yes.
Speaker Change: We already wrote down the asset pretty significantly as well so.
Speaker Change: Yeah, Yeah, I know you guys have taken.
Speaker Change: Reserves on that asset for sure.
Speaker Change: A big part of your reserves actually.
Speaker Change: Last question on the CLO side I know you mentioned you were going to return to the market probably at some point in 'twenty five can you talk about.
Speaker Change: Where those spreads are relative to.
Speaker Change: You know the asset yields are able to put on in and Additionally, how did the spreads on new CLO as compare to where F. L. Six says in and how much would that need to pay down from here.
Speaker Change: To become something you'd look at collapsing enrolling that collateral into your to your next deal.
Speaker Change: Gerry and I and the team talk about it seemingly weekly.
Almost daily capacity of weeks.
Speaker Change: Yeah. We're looking at are constantly it's a the market is very liquid the cost of financing is very very attractive at the moment.
Speaker Change: If we could tap it sooner rather than later.
Speaker Change: Wood, but we're yeah, we're looking to maximize a bunch of different things.
Speaker Change: So I think we will we will definitely be in the market again at some point in 2025.
Speaker Change: And if markets stay even close to where they are right now it would be a very accretive liability for us to add I mean, we have the benefit as I mentioned before we originated $2 billion in 2024 at the widest spreads that we've seen in years if were.
Speaker Change: Able to time, it where we can issue a liability at the tightest spreads after that tightening obviously, that's just kind of like having your cake and eating it too so.
Speaker Change: We want to get there I think we will get there I Couldnt give you an exact timing, but it's something that Jerry and I work on quite a bit.
Speaker Change: And the last deal you're able to get was it a three year replenishment period on that.
Speaker Change: We were I think we I think we helped the market kind of reset to that level.
Speaker Change: Want to get in the weeds there it causes some weighted average life issues and whatnot, but it's definitely a a very net positive for us to have additional optionality on the liability side and I think we do a good job.
Speaker Change: Originating tenors and credit tenor that we will be able to use that in the future. So I think it's important but overall the macro on CRE CLO is the advance rate and the cost of funds and if you get those two things where they currently are it's a wildly accretive liability.
Speaker Change: Great Great color. Thanks, Thanks for the comments this morning appreciate it.
Speaker Change: Thanks, David.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn the call back over to management for any closing remarks.
Speaker Change: We appreciate you joining us at all please reach out if you have any further questions. We look forward to speaking with you soon have a great deal.
Speaker Change: Thanks, everyone.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Okay.
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