Q4 2024 NexPoint Real Estate Finance Inc Earnings Call

Speaker Change: [music].

Thank you for standing by my name is Kate and I will be your conference operator today.

Kate: Thank you for standing by. My name is Kate, and I will be your conference operator today.

Kate: At this time, I would like to welcome everyone to the Nexpoint Real Estate Finance Q4 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.

At this time I would like to welcome everyone to the next point real estate Finance Q4, 'twenty 'twenty four earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again, thank you.

Kristen Griffith: I would now like to turn the call over to Kristen Griffith, Investor Relations. Please go ahead. Thank you.

Christian Griffith: I would now like to turn the call over to Christian Griffith Investor relation. Please go ahead.

Speaker Change: Thank you good day, everyone and welcome to next part real estate Finance Conference call to review the company's results for the fourth quarter ended December 31, 2024 on the call today are Paul Richard Executive Vice President and Chief Financial Officer, and Matt Mcgrew, Our executive Vice President and Chief Investment Officer as a reminder, this call.

Kristen Griffith: Good day, everyone, and welcome to Nexpoint Real Estate Finance Conference Call to review the company's results for the fourth quarter ended December 31, 2024.

Kristen Griffith: On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at nref.nexpoint.com.

Christian Griffith: It is being webcast through the company's website at <unk> Dot next wind dot com.

Kristen Griffith: Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risk and other factors that could affect forward-looking statements.

Christian Griffith: Before we begin I would like to remind everyone that this conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 that are based on management's current expectations assumptions and beliefs.

Christian Griffith: It's no should not place undue reliance on any forward looking statements and are encouraged to review the company's annual report on Form 10-K, and the company's other filings with the SEC bring more complete discussion of risks and other factors that could affect forward looking statements. The statements made during this conference call speak only as of today's date and except as.

Kristen Griffith: The statements made during this conference call speak only as of today's date, and except as required by law, NREF does not undertake any obligation to publicly update or revise any board looking For more information visit www.NREF.com This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's presentation that was filed earlier today.

Christian Griffith: As required by law in rap does not undertake any obligation to publicly update or revise any forward looking statements.

Speaker Change: This conference call also includes analysis of non-GAAP financial measures for a more complete discussion of these non-GAAP financial measures see the company's presentation that was filed earlier today I would now like to turn the call over to Matt I agree. Please go ahead.

Matt McGraner: I would now like to turn the call over to Matt McGraner. Please go ahead, Matt. Thank you, Kristen.

Matt: Thank you Christian and before we dive into our prepared remarks, I want to take a moment to congratulate Brian mitts on his well earned retirement, which officially took effect on December 31 2024.

Matt McGraner: And before we dive into our prepared remarks, I want to take a moment to congratulate Brian Mitts on his well-earned retirement, which officially took effect on December 31st of 2024. We're incredibly grateful for his years of dedication, the countless long days he put in, and the instrumental role he played in shaping NREF into what it is today. While Brian has stepped back from the day-to-day operations, we're fortunate that he remains a valued member of our board, continuing to provide guidance and insight as we move forward.

Speaker Change: We are incredibly grateful for his years of dedication to countless long days he put in and the instrumental role. He played in shaping <unk> into what it is today.

Speaker Change: Well, Brian to step back from the day to day operations. We're fortunate that he remains a valued member of our board continuing to provide guidance and insight as we move forward.

Matt McGraner: At the same time, I'm pleased to officially welcome Paul Richards as our new CFO. While most of you on the phone already know of his capabilities, having worked closely with Brian and me for over a decade, Paul deeply understands our strategy and our approach to execution. He's a strong leader, and I have full confidence in his ability to continue to drive sector-leading long-term results for NREF shareholders.

Speaker Change: But at the same time I am pleased to officially welcome Paul Richards as our new CFO, while most of you on the phone already know his capabilities, having worked closely with Brian and me for over a decade, all deeply understands our strategy and our approach to execution.

Speaker Change: He's a strong leader and I have full confidence in his ability to continue to drive sector, leading long term term results for <unk> shareholders.

Paul Richards: With that, I'll turn the call over to Paul to walk us through our fourth quarter and four-year 2024 financial results and to discuss the portfolio. Thanks, Matt. Thank you, Kristen. And welcome to everyone joining us this morning. I'm going to briefly discuss our quarterly and year-to-date results, move to our balance sheet, and lastly provide guidance for the next quarter before turning it over to Matt for a detailed commentary on the portfolio and the macro lending environment.

Speaker Change: I'll turn the call over to Paul to walk us through our fourth quarter and full year 2024 financial results and to discuss the portfolio.

Paul: Thanks, Matt Thank you Christian and welcome to everyone. Joining us this morning, I'm going to briefly discuss our quarterly and year to date results move to our balance sheet and lastly provide guidance for the next quarter before turning it over to Matt for a detailed commentary on the portfolio and the macro lending environment Q.

Paul Richards: Q4 results are as follows. For the fourth quarter, we reported a net income of 43 cents per diluted share compared to net income of 73 cents per diluted share for the fourth quarter of 2023. The decrease in net income for the quarter was due to unrealized loss on our common stock investments and a decrease in change in net assets on CMBS VIEs between the fourth quarter of 2024 and the fourth quarter of 2023. Interest income decreased by $15.4 million to $32.3 million in the fourth quarter of 2024 from $16.9 million in the fourth quarter of 2023.

Speaker Change: Q4 results are as follows.

Speaker Change: For the fourth quarter, we reported net income of 43 cents per diluted share compared to net income of 73 cents per.

Speaker Change: Our diluted share for the fourth quarter 2023, the decrease in net income for the quarter was due to unrealized loss on our common stock investments and a decrease in change in net assets on <unk> between the fourth quarter 2024 in the fourth quarter of 2023 interest income decreased by $15 4 million to $32 3 million.

Speaker Change: In the fourth quarter 2024 from $16 9 million in the fourth quarter 2023, the increase was driven by an increase in interest income driven by higher rates interest expense.

Paul Richards: The increase was driven by an increase in interest income driven by higher rates. Interest expense decreased $2.5 million in the fourth quarter 2024 compared to the same period in the prior year from the deleveraging that occurred in the first quarter of this year. Earnings available for distribution were $0.83 per diluted common share in Q4 compared to $0.44 per diluted common share in the same period of 2023. Cash available for distribution was $0.47 per diluted common share in Q4 compared to $0.51 per diluted common share in the same period of 2023. The increase in earnings available for distribution was driven by the increase in net income for the quarter.

Speaker Change: Decreased $2 5 million in the fourth quarter 2024, compared to the same period in the prior year from the deleveraging that occurred in the first quarter first quarter of this year earnings available for distribution or <unk> 83 per diluted common share in Q4 compared to <unk> 44 per diluted common share in the same period of 2023.

Speaker Change: Cash available for distribution was <unk> 47 per diluted common share in Q4 compared to 51 cents per diluted common share in the same period of 2023.

Speaker Change: The increase in earnings available for distribution was driven by the increase in net income for the quarter. We paid a regular dividend of <unk> 50 cents per share in the fourth quarter and the board has declared a dividend per share payable for the first quarter of 2025, our dividend in the fourth fourth quarter was <unk> 94 times covered by cash available for distribution.

Paul Richards: We paid a regular dividend of $0.50 per share in the fourth quarter and the board has declared a dividend of $0.50 per share payable for the first quarter 2025. Our dividend in the fourth quarter was 0.94 times covered by cash available for distribution. Book value per share increased full basis points from Q3 2024 to $16.97 per diluted common share with the increase being primarily due to unrealized gain on our preferred stock investments. During the quarter, we funded $16.7 million on a life science development property in Cambridge, Massachusetts, and we redeemed $9.5 million of mortgage-backed security.

Speaker Change: Book value per share increased 12 basis points from Q3, 2024 to $16.97 per diluted common share with the increase being primarily due to unrealized gains on our preferred stock investments during the quarter, we funded $16 7 million on our life Science development property in Cambridge, Massachusetts, and we redeemed.

Speaker Change: $9 5 million of mortgage backed security.

Paul Richards: During the fourth quarter, we sold 1.7 million shares of our Series B cumulative redeemable preferred for net proceeds of $38.8 million.

Speaker Change: During the fourth quarter, we sold one 7 million shares of our series B cumulative redeemable preferred for net proceeds of $38 8 million.

Paul Richards: Full year results are as follows. For the full year of 2024, we reported net income of $1.02 per diluted share compared to net income of $0.60 per diluted share for the year ended 2023. The increase in net income for the year was primarily due to an increase in net interest income. Interest income increased by $4.2 million to $72.5 million for the year ended 2024, from $68.4 million for the year ended 2023. The increase was driven by an increase in interest income driven by higher rates. Also, interest expense decreased during the year from the deleveraging event that occurred in the first quarter.

Speaker Change: Full year results. The results are as follows for the full year of 2024, we reported net income of $1 <unk> per diluted share compared to net income of 60 cents per diluted share for the year ended 2023. The increase in net income for the year was primarily due to an increase in net interest income into.

Speaker Change: Interest income increased by $4 2 million $72 5 million for the year ended 2024 from $68 4 million for the year ended 2023. The increase was driven by an increase in interest income driven by higher rates also interest expense decreased during the year from a deleveraging event that occurred in the first quarter earnings available for distribution.

Paul Richards: Earnings available for distribution was $1.78 per diluted share year-to-day compared to $1.88 per diluted share in the same period of 2023 for a decrease of 5.3%. Cash available for distribution was $2.42 per diluted share year-to-day compared to $2.05 per diluted share in the same period of 2023 for an increase of 18%.

Speaker Change: Was $1 78 per diluted share year to date compared to $1 88 per diluted share in the same period of 2023 for a decrease of five 3% cash.

Speaker Change: Cash available for distribution was $2 42 per diluted share year to date compared to $2 <unk> per diluted share in the same period of 2023, four and increased 18%.

Paul Richards: Moving to the portfolio and balance sheet. Our portfolio is comprised of 83 investments with an outstanding balance of $1.2 billion. Our investments are allocated across sectors as follows. 15.5% single-family rental, 49.7% multifamily, 31% life sciences, 1.5% self-storage, 1.8% specialty manufacturing, and lastly, 60 basis points marina.

Speaker Change: Moving to the portfolio and balance sheet. Our portfolio is comprised of 83 investments with an outstanding balance of $1 2 billion.

Speaker Change: Our investments are allocated across sectors as follows 15, 5% single family rental 49, 7% multifamily, 31% life Sciences, one 5% self storage, one 8% specialty manufacturing and lastly, it's like 60 basis points Marina our fixed income portfolio is allocated across investments as well.

Paul Richards: Our fixed income portfolio is allocated across investments as follows. 10.5% senior loans, 29.3% CMBSB pieces, 19.5% preferred equity investments, 23.7% mezzanine loans, 3.9% I.O. strips, 12.9% Roble and Credit facilities, and 30 basis points promissory notes.

Speaker Change: Rose 10, 5% senior loans 29, 3% <unk> B pieces 19, 5% preferred equity investments 23, 7% mezzanine was three 9% Io strips 12, 9% revolving credit facilities and 30 basis points commentary knows the assets collateralized our investments.

Paul Richards: The assets collateralizing our investments are allocated geographically as follows. 15% Texas, 25% Massachusetts, 8% California, 6% Georgia, 4% Florida, 4% Maryland, with the remaining across states less than 4% exposure, reflecting our heavy preference for Sunbelt markets, with the Massachusetts and California exposure heavily weighted towards a life science. The collateral on our portfolio is 76.5% stabilized with a 59.2% loan-to-value and a weighted average DSCR of 1.32 times.

Our allocated geographically as follows 15.

Speaker Change: 15%, Texas, 25%, Massachusetts, 8%, California, 6%, Georgia, 4%, Florida, 4%, Maryland with remaining across states, the less than 4% exposure, reflecting our heavy preference for sunbelt markets with the Massachusetts, and California exposure heavily weighted towards the life science.

Speaker Change: The collateral on a portfolio of 676, 5% stabilized with a 59, 2% loan to value and a weighted average <unk> of 132 times, we have $799 $3 million of debt outstanding of this $400 9 million or 52% of short term our weighted average cost of debt is 6%.

Paul Richards: We have $799.3 million of debt outstanding. Of this, $400.9 million, or 50.2%, is short-term. Our weighted average cost of debt is 6% and has a weighted average maturity of 1.4 years. Our debt is collateralized by $862.8 million of collateral with a weighted average maturity are dead. to equity ratios 1.39 times.

Speaker Change: And has a weighted average maturity of $1 four years, our debt is collateralized by $862 8 million of collateral with a weighted average maturity of one year.

Speaker Change: Our debt.

Speaker Change: To equity ratio was 139 times guidance moving to guidance for the first quarter. We are guiding to earnings available for distribution and cash available for distribution as follows earnings available for distribution of <unk> 45 per diluted common share at the midpoint with a range of <unk> 40 on the low end and the high end cash available for distribution of <unk> 50 per.

Paul Richards: Guidance, moving to guidance for the first quarter, we are guiding to earnings available for distribution and cash available for distribution as follows. Earnings available for distribution of $0.45 per diluted common share at the midpoint with a range of $0.40 on the low end and $0.50 on the high end. Cash available for distribution of $0.50 per diluted common share at the midpoint with a range of $0.45 on the low end and $0.55 on the high end.

Speaker Change: Our diluted common share at the midpoint with a range of 45 on the low end and 55 cents on the high end now I'd like to turn it over to Matt for a detailed discussion of the portfolio and markets.

Matt McGraner: Now I'd like to turn it over to Matt for a detailed discussion of the portfolio and market. Thank you, Paul. We continue to be pleased with our differentiated results for the quarter and in a year in which there were many challenges in the commercial real estate sector. Our underlying credit profile of the portfolio remains very strong and there is reason for more growth and optimism in 2025. For one, multifamily fundamentals continue to improve. Most industry participants, including us, are expecting an inflection as supply continues to wane. Q4 starts for just 37,000 units for the quarter, the lowest level since Q4 of 2011.

Matt: Thank you Paul we continue to be pleased with our differentiated results for the quarter and in a year in which there were many challenges in the commercial real estate sector.

Matt: Our underlying credit profile of the portfolio remains very strong and there is reason for more growth and optimism in 2025.

Matt: For one multifamily fundamentals continue to improve most industry participants, including us are expecting an inflection as supply continues to wane.

Matt: <unk> starts with just 37000 units for the quarter the lowest level. Since Q4 2011, we're expecting new lease growth to turn positive in the second half of the year, which should drive more transaction activity liquidity and opportunity to put capital to work. Indeed, you will likely see growth in our multifamily portfolio in the next couple of quarters across.

Matt McGraner: We're expecting new lease growth to turn positive in the second half of the year, which should drive more transaction activity, liquidity, and opportunity to put capital to work. Indeed, you will likely see growth in our multifamily portfolio in the next couple of quarters across construction financing, Freddie K deals, and high-quality MES opportunities. Our storage exposure also remains very compelling, with same-store NOIs flat to slightly positive. Like the multifamily market, we expect more growth in rates in the back half of the year. And here recently, we have built a quality pipeline of construction financing opportunities with attractive yields on costs and repeat sponsors from the Jernigan Capital Base.

Matt: Construction financing, Freddie K deals and high quality mezz opportunities.

Matt: Our storage exposure also remains very compelling with same store NOI NOI is flat to slightly positive like the multifamily market, we expect more growth in rates in the back half of the year and here recently, we have built a quality pipeline of construction financing opportunities with attractive yields on cost and repeat sponsors from the Jernigan capital base, we expect these.

Matt McGraner: We expect these opportunities to reach approximately $75 million over the next couple quarters. Life science tour activity and capital planning have also picked up, and we're seeing a flurry activity recently, especially on the advanced manufacturing and GMP side. We are actively underwriting $300 million of opportunities across infrastructure and pharmaceutical manufacturing today. We have liked the reshoring of supply chain story for a while now, and the recent tariff threats that may have sparked billions of reshoring by Apple, Lilly, and others should exacerbate this trend going forward. Finally, we're pleased with the capital options available to us to fund this growth.

Matt: Cities to reach approximately $75 million over the next couple of quarters.

Matt: Life Science tour activity and capital planning have also picked up and we're seeing a flurry of activity recently, especially on the advanced manufacturing and GMP sides.

Matt: We are actively underwriting $300 million of opportunities across infrastructure and pharmaceutical manufacturing today.

Matt: We'd like we'd like the re shoring of supply chain story for a while now on the recent tariff threats that may have sparked billions of restoring by Apple Lilly and others should should exacerbate this trend going forward.

Matt: Finally, we're pleased with the capital options available to us to fund this growth with where we are in the balance sheet and the success, we're having with the series B raise we have we still have multiple accretive avenues to fund growth, including a new warehouses and even a bond rate is deal a rated bond deal to.

Matt McGraner: With where we are in the balance sheet and the success we're having with the Series B raise, we still have multiple creative avenues to fund growth, including A-note warehouses and even a bond-rated deal, a rated bond deal.

Matt McGraner: To close, we are excited about the company's prospects in 2025 and the continued stability of our portfolio and, of course, the opportunity to go on offense in this environment.

Matt: To close we are excited about the companys prospects in 2025 and continuing in the continued stability of our portfolio and of course the opportunity to go on offense in this environment as always I want to thank the team here for the heart of their hard work and now we'd like to turn the call over to the operator for questions.

Kate: As always, I want to thank the team here for their hard work, and now we'd like to turn the call over to the operator for questions. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Speaker Change: At this time I would like to remind everyone in order to ask a question.

Matt: Star then the number one on your telephone keypad.

Speaker Change: We will pause for just a moment to compile the Q&A roster.

Speaker Change: Your first question comes from the line of Stephen Laws with Raymond James. Please go ahead.

Stephen Laws: Your first question comes from the line of Stephen Laws with Raymond James. Please go ahead. Hi, good morning. Morning, Matt, you may have touched on this. You did touch on it a second ago with your comment, construction, Freddie Kay are likely to be kind of new investments near term. Can you talk about the returns you're seeing on on those new investments, how that compares to other things in your pipeline?

Stephen Laws: Hi, good morning.

Speaker Change: Good morning, Matt you may have touched on this so you did touch on it a second ago with your comment on <unk>.

Construction, Freddie K are likely to be kind of new investments near term.

Speaker Change: Can you talk about the returns youre seeing on all those new investments how that compares to other things in your pipeline.

Matt McGraner: And, you know, and how you think about the how creative new investments are compared to the cost of the Series B capital issue as you raise Yeah, it's a good question. On the Freddie K, we're hearing from Freddie, we're most likely going to get a five-year fixed deal here in the second quarter, be anywhere from $30 million to $50 million in gross value. We would plan to lightly repo that, expect the yields to be in the 8% to 9% range. So, you know, getting with a little bit of accretive leverage, we're kind of, you know, low to mid-teens type of return.

Speaker Change: And how you think about the.

Speaker Change: How accretive new investments are compared to the cost of the series B capital as soon as you raise more.

Speaker Change: Yes, it's a good question on the Freddie K, we're hearing from Friday, we're most likely going to get a five year fixed deal here in the second quarter.

Speaker Change: Anywhere from $30 million to $50 million.

Speaker Change: Gross value, we would plan to to lightly repo that.

Speaker Change: Expect the yields to be in the 8% to 9% range, so getting with with a little bit of a accretive leverage were kind of.

Speaker Change: Low to mid teens type of returns so that still remains attractive, especially given the credit profile.

Matt McGraner: So, that still remains attractive, especially given the credit profile of Freddie K deals, and deals originated in 2025. So, the risk-reward there, we view as very, very attractive.

Speaker Change: Of Freddie K deals and deals originated in 2025.

Speaker Change: So the risk reward there we view as very.

Speaker Change: Very attractive.

Matt McGraner: On the construction side, we're seeing really high-quality assets and developments with well-heeled developers that we can, you know, do a 60% loan to cost, you know, $300 to $400 spread, and then we have accretive A-note lenders at the same time. So, that capital takes longer to put out, but we do have some attractive A-note opportunities against the Series B that we would use to fund. So, I like both of those investments. Great.

Speaker Change: On the construction side, we're seeing.

Speaker Change: Really high quality.

Speaker Change: Assets and developments with well heeled developers that we can.

Speaker Change: Do a 60% loan to cost $3 to 400 spread.

And then we have accretive Ain't no lenders at the same time so.

Speaker Change: That that capital it takes longer to put out but we do have some attractive a note.

Speaker Change: Opportunities against the against the series B that we would use to fund so like both of those.

Speaker Change: Those investments.

Speaker Change: Great and then can you touch maybe a little bit on the life Sciences investments in performance there are many key metrics or.

Stephen Laws: Can you touch maybe a little bit on the life sciences investments and performance there? I mean, any key metrics or, you know, attachment points, performance, you know, that's grown materially over the past year as a percentage or your mix of the portfolio.

Speaker Change: Attachment.

Speaker Change: Attachment points performance.

Speaker Change: That's grown materially over the past year as a percentage of your mix of the portfolio whats the best way for us to monitor that as we look at the the metrics that you release.

Matt McGraner: You know, what's the best way for us to monitor that as we look at the metrics that you release in your, you know, public filing? Yeah, it's a good question. Yeah, it's chunky in terms of the two main life science investments. Let me start with The Massachusetts Loan and Alewife, it's a $220 million commitment, of which we funded roughly $175 million. The detachment point on a loan-to-cost basis for that asset is roughly 25% loan-to-cost. Stabilized debt yield for rents in just the 80s for that deal would be 30-plus percent. More importantly, though, that development has three buildings, 395,000 square feet today.

Speaker Change: And your public.

Speaker Change: Public filings.

Speaker Change: Yes. Good question, Yeah, it's chunky in terms of.

Speaker Change: The two main.

Speaker Change: Life Science investments.

Speaker Change: Let me start with that.

Speaker Change: The Massachusetts alone and in <unk>, the $220 million commitment.

Speaker Change: Of which we funded 100 roughly $175 million.

Speaker Change: The detachment point on a loan to cost basis for that asset is.

Speaker Change: We're roughly 25% loan to cost stabilized debt yield for rents.

Speaker Change: The eighties.

Speaker Change: For that deal would be.

Speaker Change: 30 plus percent.

Speaker Change: More importantly, though we've the buildings are.

Speaker Change: The.

Speaker Change: That development.

Speaker Change: Has three buildings 395000 square <unk>.

Speaker Change: Where feed today all of them are topped out skins, and amenities and spec suites are going in there is like I said in the prepared comments a flurry of activity in that asset in particular.

Matt McGraner: All of them are topped out, skinned, and amenities and spec suites are going in. There's, like I said in the prepared comments, a flurry of activity on that asset in particular. And most importantly, I have a bid for that loan far south of where we have or where our interest rate is. It's over plus 900. So I feel really good about that exposure.

Speaker Change: Most importantly, I have a bid for that loan far south of where were.

Speaker Change: Where we have our.

Speaker Change: Where our interest rate is at so for post 900, so Phil.

Speaker Change: Feel really good about that exposure and then across the rest of the loan portfolio.

Matt McGraner: And then across the rest of the loan portfolio, we really haven't seen the type of leasing activity in quite some time, past 18 months or so. That the remainder of the facility are kind of detached reports in the I'd say 40 to 50% range, somewhere in the avenue of $800 to $900 a foot detachment point where these assets are $1,600, $1,700, $1,800 a foot to build, and these assets are first to fill. So I really think that what we're doing there is pretty smart, and I think we'll be proven right. Great.

Speaker Change: We really haven't seen the type of leasing activity.

Speaker Change: Quite some times in past 18 months or so.

Speaker Change: That said the remainder of the facility or kind of detached reports in the I'd.

Speaker Change: I'd say, 40% to 50% range somewhere in that Avenue of 800 to $900 a foot.

Speaker Change: Detachment point, where.

Speaker Change: These assets are 16 $17800 a foot to build in these assets are first to fill so I'm really really think that what we're doing there.

Speaker Change: It's pretty smart.

Speaker Change: And I think we'll be proven right.

Speaker Change: Great and finally.

Stephen Laws: And finally, you know, update on loan performance, any, you know, delinquent or defaulted loans or any watchlist loans? Very few of those, if any, historically curious for update at your end. Yeah.

Speaker Change: Update on loan performance any delinquent defaulted loans or any watch list loans I know you guys.

Speaker Change: Very few of those if any historically curious for update at year end.

Speaker Change: Yes.

Paul Richards: Hey, Steve, this is Paul. We have a few in our CMBS portfolio that we're keeping an eye on, but as you know, with these Freddie Kaye deals, we call them bulletproof paper, but we have our eye on a few watchlist loans. In terms of a few prep deals, there's refinancing activity for one of these package deals that we have in our backyard, and we're giving time for one of the sponsors to go through a refinancing. And so we expect that refinancing to happen, I would say Q2, maybe Q3, but I think it's probably going to be a Q2 event on a refinancing for a few of those prep deals.

Speaker Change: This fall.

Speaker Change: See you in our <unk> portfolio that were keeping an eye on but as you know with these Freddie K deals.

Speaker Change: We call them bulletproof paper, but we have our eye on.

Speaker Change: You watch list loans.

Speaker Change: In terms of a few <unk> deals there is refinancing activity for one of these package deals that we have in our backyard and we're giving time for one of the sponsors to go through a refinancing and so we expect that refinancing to happen I would say Q2, maybe Q3, but I think it's probably be a Q2 <unk>.

Speaker Change: On a refinancing for a few of those prep deals, but overall extremely strong portfolio performance and extremely happy with the results.

Paul Richards: But overall, extremely strong portfolio performance and extremely happy with the results.

Speaker Change: Great I appreciate the comments this morning. Thank you.

Stephen Laws: Great. Appreciate the comments this morning. Thank you. Thanks, Stephen.

Speaker Change: Thanks, David.

Speaker Change: Your next question comes from the line of Jade Rahmani with Keith BW. Please go ahead.

Jade Rahmani: Your next question comes from the line of Jade Rahmani with KBW, please go ahead. Thank you. On the Cambridge deal, is that purely spec since it's so large, wondering if there's an anchor tenant or any initial leasing? When do you expect to be able to provide an update as to how that's going? Yeah, we expect to have, or the developer expects to have the CFO in Q3. There is pre-leasing activity right now. Like I said, I think I mentioned upwards of 300,000 square feet on a total build of 395,000 square feet. You know, the developers seeing both, you know, 25 to 50,000 square foot chunks, but there is a couple of larger requirements in the west and east Cambridge areas floating around right now that are actively touring the asset and are looking for a Q3 or Q4 movement.

Jade Rahmani: Thank you on the Cambridge deal is that purely is back since it's so large wondering if there is an anchor tenant or any initial leasing.

Speaker Change: When do you expect to be able to provide an update as to how that's going.

Speaker Change: Yes, we expect to have or the developer expects to have the CFO in Q3, there is pre leasing activity.

Speaker Change: Right now like I said, I think I think I mentioned upwards of 300000 square feet square feet on a total build a 395000 square feet.

Speaker Change: The developers seeing both $25 to 50000 square foot chunks, but there is a couple of larger requirements in the us.

Speaker Change: The West and East, Cambridge area is floating around right now that are actively touring the asset.

Speaker Change: And are looking for Q3 or Q4.

Speaker Change:

Speaker Change: Q3, or Q4 movement so.

Matt McGraner: So, I would expect by then we will have some pretty good traction and some good news to report. And just to clarify, is it a spec development? Oh yeah, it is back. Okay, because, you know, all the data from the brokerage firms and also some of the mortgage REITs that have life science exposure has not been good in terms of leasing. I mean, I think in aggregate, the sector seems to be entering the beginnings of a stabilization. VC funding is picking up, and you're seeing some of the large, you know, pharma companies make some leasing decisions.

Speaker Change: I would expect by then we'll have.

Speaker Change: Some pretty good some pretty good traction and some good news to report.

Speaker Change: Sure.

Speaker Change: And just to clarify is it a spec development.

Speaker Change: Yeah. It is it is spec.

Speaker Change: Okay, because you know all the data from the brokerage firms and also some of the mortgage Reits that have life science exposure has not been good in terms of leasing I mean, I think in aggregate the sector seems to be entering the beginnings of a stabilization.

Speaker Change: VC funding is picking up and youre seeing some of the large pharma companies.

Speaker Change: Make some leasing decisions, but by and large we're still missing a lot of the.

Jade Rahmani: But by and large, we're still missing a lot of the, you know, nascent players in the space that drove some of the leasing and spec development.

Speaker Change: Nathan players in the space that drove some of the leasing and spec development. So.

Matt McGraner: So I guess what gives you confidence that this asset in particular will be able to buck the trend of oversupply that we're seeing? A couple things, because most of the literature written as far as supplies. is wrong. I think ARE put out the true competitive supply to a new purpose-built life science facility. In Boston, I think you would hear quotes, and maybe this is what you're referring to, of like 16 million square feet of new supply coming online. The reality is, in the core kind of three markets where you want to be, there's less than 2 million, and probably 50 percent of that isn't going to be delivered.

Speaker Change: I guess, what gives you confidence that this asset in particular will be able to buck the trend of oversupply that we're seeing.

Speaker Change: A couple of things because most of the the literature written as far as supply is.

Is wrong I think <unk>.

Speaker Change: Put out the true competitive supply to a new purpose built life science facility.

Speaker Change: In Boston I think you would hear quotes and maybe this is what were you referring to like 16 million square feet of new supply coming online, but the reality is in the.

Speaker Change: In the core kind of three markets, where you want to be there as there is less than $2 million in.

Probably 50% of that isn't going to be delivered at.

Matt McGraner: At the same time, you're having, and I'm seeing it, multiple requirements and tours for this facility in particular, and then notwithstanding any of the first two reasons that I think will be successful.

Speaker Change: At the same time, you are having and I am seeing at multiple requirements and tours for this facility in particular.

Speaker Change: And then notwithstanding any of the first two reasons that I think will be successful again I have a bid for the loan.

Matt McGraner: Again, I have a bid for the loan, and we're 25 percent loan-to-cost, which is less than land value and across 27.5 acres in Cambridge, so pretty comfortable. And who's the bid for the loan from? I mean, you don't have to name who, of course, but the type of entity. Is that private credit, like a debt fund, or some other entity of that kind? This is, it's a strategic read. Okay. I got it.

Speaker Change: We're 25%.

Speaker Change: Loan to cost, which is less in land value in across 27 five acres in Cambridge. So.

Speaker Change: Pretty comfortable.

Speaker Change: And who's the bid for the loan from I mean that you don't have to name who of course, but the type of type of entity is that private credit like a debt fund or some other entity of that kind.

Speaker Change: This is a strategic right.

Speaker Change: Okay.

Speaker Change: Got it.

Speaker Change: And then the language that says no you always say no loans in forbearance I guess, that's not true because of Paul's comments that there's a couple of deals on the watch list right now.

Matt McGraner: And then the language that says no, you always say no loans and forbearance. I guess that's not true because of Paul's comments that there's a couple deals on the watch list right now. Yeah, it's not necessarily they're on the watch list is the the borrowers refinancing into a into a recap loan, and we're just giving him a 90 day period in which we'll pick the interest so he can, yeah, so he doesn't have to pay it current so we can get paid off.

Speaker Change: Yes.

Speaker Change: Not necessarily as they are on the watch list is the borrowers refinancing into a.

Speaker Change: In a recap lone and we're just giving them.

Speaker Change: The 90 day period.

Speaker Change: In which we'll pick the interest so you can yeah. So he doesn't have to pay current so we can get paid off.

Speaker Change: Do you happen to know what the delinquency rate is in the Freddie Mac K series portfolio.

Jade Rahmani: Do you happen to know what the delinquency rate is in the Freddie Mac case years portfolio? Overall, the delinquency rate is extremely small. Off the top of my head, I couldn't tell you, but I'll tell you that, you know, there's probably, out of the seven B pieces that we have, or eight B pieces, there's maybe two loans that are 30 days or 60 days delinquent. So it's extremely small subset. Okay, that's great. Thanks so much. Thanks, Jared.

Speaker Change: Okay.

Speaker Change: Overall delinquency rates extremely small.

Speaker Change: Off the top of my head I couldn't tell you, but I will tell you that.

Speaker Change: There's probably out of the seven D pieces that we have are <unk>, maybe two loans that are 30 days or 60 days delinquent. So it's extremely small subset.

Speaker Change: Sure.

Speaker Change: Okay, that's great.

Speaker Change: Thanks, so much.

Speaker Change: Thanks, Ed.

Speaker Change: I will now turn the call back to the management team for closing remarks.

Paul Richards: I will now turn the call back to the management team for closing remarks. Yeah, thank you very much for dialing in and appreciate the opportunity to report our results and looking forward to, you know, the second quarter and the first quarter results here in a few months. Thank you very much.

Speaker Change: Yes. Thank you very much for dialing in and appreciate the opportunity to report our results and looking forward to this.

Speaker Change: The second quarter and the first quarter results here in a few months.

Speaker Change: Thank you very much.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you.

Kate: Ladies and gentlemen, that concludes today's call. Thank you and have a great day.

Speaker Change: And have a great day.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.