Q4 2024 Arbor Realty Trust Inc Earnings Call
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Speaker Change: Condition quantity of operations plans and objectives. These statements are based on our beliefs assumptions and expectations of our future performance taking into account. The information currently available to us factors that could cause actual results to differ materially from arbor's expectations. In these forward looking statements are detailed.
Speaker Change: And in our SEC reports listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today.
Undertakes no obligation to publicly update or revise these forward looking statements to reflect events or circumstances. After today or the occurrences of unanticipated events I'll now turn the call over to Arbor's, President and CEO Ivan Kaufman.
Speaker Change: Yeah.
Thank you Paul and thanks to everyone for joining us on today's call as you can see from this morning's press release, we had a solid fourth quarter on a sound.
Speaker Change: 'twenty 'twenty four is another very strong year, despite extremely challenging environment.
Speaker Change: We are executing our business plan very effectively and in line with our expectation.
Speaker Change: Despite merger sleep.
Speaker Change: The volatile an elevated interest rate environment, almost three years now with Madison.
Speaker Change: All my peers.
Speaker Change: Major financial category.
Shareholder return and book value preservation.
Speaker Change: We're well positioned for this.
Going into the cycle, we had a large cushion between our earnings and dividends well capitalized arent that sit in the REIT asset class with the appropriate liability structures.
Speaker Change: It's allowed us to outperform our peers and continue to pay out dividend, mostly all of our peers have to cut the dividend substantially some multiple times during the cycle and also experienced significant book value erosion.
Speaker Change: One on the guidance we have consistently discussed on our calls is how we felt that this dislocation will persist resolve much slower recovery rates remained higher for longer which is something we will welcome past work. However rates have not just remained elevated if actually increased significantly with the tenure rise.
Speaker Change: We used 60 as ever to as high as four <unk> in January and now is running around what 50 with the current outlook suggestion will remain at these levels for the near term.
Speaker Change: This is a material change in the market, resulting in significant headwinds that will affect everybody in the space.
Speaker Change: These elevated rates are creating very challenging environment as it relates to the agency origination volumes and what we have experienced success over the last few years getting bars and transition to fixed rate loans and the captive deals. When you expect this environment will create a deceleration in this area as well.
Speaker Change: <unk> also seen a 100 basis point decrease and solve a problem for the last 12 months, which is reducing the Arkansas that RASK growth in cash balances. Additionally, we expect there will be a temporary drag on earnings from the Oreo assets, we repositioning over the next 12 to 24 months.
Speaker Change: I will discuss in later detail.
Speaker Change: However, this will partially be offset by efficiencies, we expect to generate from reducing borrowing costs, the securitization market and without commercial banks as well as growth in our servicing portfolio.
As a result of these changing macroeconomic events, we have revised our army dialogue for the foreseeable future until we see improvements in the rate environment based on these factors. We are now estimating our earnings for 2025 will be in the range of 30 to 35 cents a quarter and will likely we set our dividend.
Speaker Change: Starting in the first quarter of this year in accordance with this new guidance.
Speaker Change: Outlook is reflective of the newly elevated rate environment. However, there is a material change in short term or long term rates in the future we will revise our outlook accordingly.
Speaker Change: $10 that will be the only firm and <unk> set our dividend.
Speaker Change: Our dividend over the last five years by 43%.
Speaker Change: Every other company in our space has cut their dividend multiple times by 40% on average with only one company keeping the dividend flat in the last five years and.
Speaker Change: And we assume that we set our dividend to the midpoint of our new earnings guidance, our dividend will be up approximately 8%, which is again, which again as compared to our peers, who write down and an average 40%. Additionally over the last five years. We have also grown our book value by 26% while recording significant reserve.
Speaker Change: <unk>, which is an incredible accomplishment, especially considering that appears actually experienced a 25% erosion.
Speaker Change: Yes.
Speaker Change: We've done a very effective job despite elevated rates working through our loan portfolio by getting bars recap the deals and purchase interest rate caps. In 2024, we were able to successfully modified $4 1 billion bonds with bars committing to inject $130 million of additional capital into the deals we also.
Speaker Change: Modified another $600 million of laws in 2023.
Speaker Change: Total loan modifications over the last two years to $4 7 billion or roughly 60% of remaining legacy.
Speaker Change: This is tremendous progress, especially in light of the elevated rate environment and as a result.
Speaker Change: A large portion of our loan book being successfully repositioned.
Speaker Change: On the access with enhanced collateral buyers.
Speaker Change: We've also done an exceptional job in bringing in new sponsors to take over assets either consensually foreclosure.
Speaker Change: In fact in the last two years, we've brought in who sponsored recap deals with substantial new equity on approximately $900 million of Wallace. This is a very important strategy that again successfully repositioned assets with appropriate capital, putting our loans and a much more secure positions with experienced sponsors and creates more predictable future income.
Speaker Change: Stripes.
Speaker Change: And again are reflective of us recording the appropriate level of reserves on these distressed assets and despite.
Elevated rates also generated strong run off over the last two years with three point at four.
Speaker Change: $4 billion of runoff in 2023, and $2 7 billion of 2024 amazing.
Speaker Change: We also continue to make strong progress despite the unprecedented precedented move up in rates.
Speaker Change: On the on the approximately $1 billion of loans that were past due at September 30th.
Speaker Change: Fourth quarter, we successfully modified $140 million of these wells generated $151 million of payoffs and took back of approximately $120 million of barrio assets all of which we were able to bring a new sponsors to operate but death. This is strong progress in one quarter and has reduced to 940.
Speaker Change: Millions of delinquency.
Speaker Change: At September 30 is down from 534 million at December 30, or 44% decrease.
Speaker Change: We did experience additional delinquencies during the quarter of approximately $286 million, bringing our total delinquencies at December 31 to approximately $819 million, which is down 13% quarter and down 22% come up tick, which is in line with our previous guidance even in the.
Speaker Change: Base comprising interest rates.
Speaker Change: And our plans for resolving our remaining delinquencies APAC has already held including bringing in loose plus approximately 40% 50% of this.
Speaker Change: With the other 40% of 40% to 50% to be paying off or be modified in the future. This should put our oreo assets on our balance sheet in a range of $100 million to $500 million with another roughly 150 to 290 $200 million that we will have brought a new sponsorship to operate in.
Speaker Change: This $400 million to $500 million of borrowing no assets.
Speaker Change: The heavy lifting portion of our loan book.
Speaker Change: Estimate will take approximately 12 to 24 months to reposition the performance of these assets has been greatly affected by poor management and from being on the capitalized today. These properties have an average occupancy of 35% estimated NOI of around $7 million, which is very low and will temporarily affect.
Speaker Change: We believe there is greater economic occupancy for us to step in repositioning these assets and significantly grow the occupancy to about 90% NOI to approximately $30 million over the next 12 to 24 months, which will increase our future earnings.
Speaker Change: We are working exceptionally hard are resolved not delinquencies.
Speaker Change: As I mentioned has been significantly affected by the current rate environment, if rates come down sooner than we expect it will have a positive impact our ability.
Speaker Change: Non interest, earning assets the income producing investments earlier.
Speaker Change: Accretive cost future earnings. This is a challenging Madden works and despite these increasing headwinds I am very pleased with the progress we have made to date.
Speaker Change: And our balance sheet lending platform, we have had an active fourth quarter originated $371 billion of new brakes loss at $36 million of preferred equity investments behind our agency originations as.
Speaker Change: As we said in our last call. We have started to ramp up our bridge lending program to take advantage of the opportunities. We're seeing in today's market to originate high quality short time based loans and generate strong levered returns on our capital in the short term.
Speaker Change: To build up a significant pipeline of future agency deals, which is a critical part of our strategy.
Speaker Change: Pending on the rate environment. We believe we can originate one $5 billion to $2 billion bridge lost product in 2025, and enhance our unleveraged returns, which speaks to patients. We are seeing in the securitization market with Oxnard for banks.
Speaker Change: Another major component of our unique business model is our capital Light agency platform.
Speaker Change: <unk> advantage, allowing us to continue to delever, our balance sheet and generate significant long dated income streams, which is a key part of our business strategy. We have been a significant player in the agency business for 20 years now been a top 10, Fannie Mae dust lender for 18 years neurology coming in at number six in 2023.
Speaker Change: And at 8% to 2024, we had a very strong fourth quarter originated $1 $35 billion of new agencies loss, which as Youll remember was towards the top end of the range that we guided on the last quarter's call.
Speaker Change: We explained that our origination targets with one point to one 5 billion Q O Q4, depending on the rate environment and despite a significant uptick in rates in the fourth quarter well above what we had anticipated we still matters.
Speaker Change: Volumes.
Speaker Change: 2020 forward $4 3 billion of juice the agency volume, despite a volatile rate environment throughout the year.
Speaker Change: With rates, where they are today, we expect we experienced a very challenging patient climate.
Speaker Change: When you to remain elevated as likely quite likely going forward, resulting in 10% to 20% decline. Our agency production 125 to a range of $3 4 billion, which will again be very dependent.
Speaker Change: We also did a good job converting our balance sheet loans and agency product in 2020, despite elevated rates in the fourth quarter, we generated $900 million of payoffs.
Speaker Change: $530 million up 59% of these loans being refinanced fixed rate agency deals for the full year 2020.
Speaker Change: We recaptured 65% one 6 billion up two five.
Speaker Change: Multifamily balance sheet runoff since the agency production. This is on top of the $3 billion of multifamily runoff, we generated in 2023 with a 56% recapture rate and agency loss as I stated earlier with rates at these levels. It has certainly become more challenging for borrowers to obtain an agency take I don't know.
Balance sheet loans.
Speaker Change: We continue to do an excellent job in growing our single family rental business, we had a strong quarter with $1 7 billion loss in 2020.
Which is our best year yet.
Speaker Change: It was well above our 2023 production of one 2 billion. We have now eclipsed $5 billion of production in this platform to date and we are very excited about the opportunities we're seeing to continue to grow this platform.
Speaker Change: A bigger contributor to our overall business. This is a great business that would offer us returns on our capital to construction Brexit permanent lending opportunities generate strong levered returns in the short comps, while providing significant long term benefits by further diversifying our income streams.
Speaker Change: Also continue to make steady progress until we added construction lending business. We believe this product is very appropriate for our platform as office three times on our capital construction bridge and permanent lending opportunities and generate mid to high teens returns on our capital. We've closed our first deal in the third quarter 47 billion a second.
Speaker Change: The all in the fourth quarter from $54 million with a growing pipeline roughly $200 million under application.
Speaker Change: $200 million and allies and $800 million of additional deals we are currently screening and <unk>.
Speaker Change: Based on our deal flow, we are confident in our ability to originate between 250 to 500 million of this business in 2025 and.
Speaker Change: Summary, we had a strong 24 once again significantly outperformed our peers, we've executed our business plan very effectively and align with our objectives clearly the landscape has shifted significantly in the last 90 days and we expect it to be a substantial headwinds future. We believe we do believe we will have some positive offsets.
Speaker Change: And from reduced borrowing costs, our bank clients.
Speaker Change: <unk> efficiencies and securitization market as Wallace will continue to fund up operator.
Speaker Change: Question lending business, which generate strong levered capital. Additionally, it's short term and long term rates declined further mitigate somewhat hedged currently experiencing increased on future earnings in the meantime, we will remain heavily focused on working to look and manage our loan book.
Speaker Change: While content growth areas business increased many diverse countercyclical when it comes to develop.
Speaker Change: We have a very seasoned experienced management team that has operated effectively through multiple cycles.
Speaker Change: Onto the balance is left with.
Speaker Change: <unk> and I'm confident we will continue our longstanding track record of being.
Paul: Top performing space I will now turn the call over to Paul to take you through the financial results.
Paul: Okay. Thank you Ivan we had a strong fourth quarter and full year 2024, producing distributable earnings of $81 6 million or <unk> 40 per share for the fourth quarter and $1 74 for the year, which translates into <unk> of approximately 14% in 2024 as Ivan mentioned due to the drastic change in the macroeconomic.
Paul: Climate adjusting our forecasted distributable earnings for 2025 to 30 to 35 cents per quarter clearly rates have played a big factors earnings outlook future changes in interest and the interest rate environment will more certainly dictate whether we can grow our earnings and implant. We have also been affected by elevated legal and consulting fees.
Paul: As a direct result of the short sellers reports, which is something we expect will continue for the foreseeable future. We estimate these fees will be approximately three to five cents a share going forward, which is reflected in our new guidance in.
Paul: In the fourth quarter, we modified another 15 loans totaled totaling $470 million on approximately $206 million at these loans, we requiring borrowers to invest additional capital to recap their deals thus, providing some temporary rate relief to repaying a cool feature and pay rates were modified in average to approximately five 5%.
Paul: With two 3% of the residual interest due being deferred until maturity.
Paul: $140 million of these loans with the link last quarter are now current in accordance with their modified terms and.
Paul: The fourth quarter, we accrued $18 7 million of interest related to all modifications paying a cool features $7 6 million is related to modifications that were completed in years prior to 2024 and $1 million on Mezz and PE loans originated in 2004 behind agency wells have obtained a full feature as.
Paul: Part of their normal structure. This leaves $10 million worth of accrued interest in the fourth quarter related to modifications and bridge loans in 2020 for one 5 million of which is related to our fourth quarter modifications.
Paul: Table summarizing all of our 2023 and 2020 for material modifications and then related to accrued interest on these loans is detailed in our 10-K, which we expect to file later this afternoon.
Paul: Total delinquencies are down 13% to $819 million compared to 945 billion. At September 30. These delinquencies are made up of two buckets loans that are greater than 60 days past due and loans that are less than 60 days past due were not reporting interest income on and Thats, we believe the cash.
Paul: <unk> to.
Paul: The 60, plus delinquent loans or Npls are approximately $652 million this quarter compared to 625 million last quarter due to approximately $128 million of loans progressing from less than 60 days delinquent to greater than 60 days past due and a hutch.
Paul: $53 million of additional defaulted loans during the quarter, which was largely offset by a $134 million of payoffs and modifications at $120 million in loans taken back is already set.
The second bucket consisting of loans that are less than 60 days past due came down to $167 million this quarter from $319 million last quarter due to a $157 million in modifications and run off $128 million of loans progressing to greater than 60 days past due which was partially offset by approximately 100.
Paul: $33 million of new delinquencies during the quarter.
Paul: And while we're making good progress resolving these delinquencies at the same time, we do anticipate that we will continue to experience new delinquencies, especially in this current rate environment in accordance with our plan and resolving certain delinquent loans, we have foreclosed on some real estate and we expect to take back more over the next few quarters as I've guided to earlier.
Paul: The process of taking control at Martin to improve these assets and create more of a current income stream takes time, which is even more challenging in this climate.
Paul: Additionally, we have been very successful over the last few quarters and collecting back interest when we would modify certain months a good portion of our remaining delinquencies are more of a heavy lift through foreclosure and repositioning over time, which will likely result in less back interest being collected going forward on workouts. These are some of the reasons why.
Paul: To reduce earnings in the near term.
Paul: In the fourth quarter, we took back a $120 million of Oreo assets.
Paul: Been highly successful.
Paul: And bringing in new sponsors on certain assets take hold with real estate smart that this strategy is a very effective tool in terms of debt capital and nonperforming loan into an interest, earning asset which will increase our future earnings.
Paul: The fourth quarter, we had hospitals test on to Oreo assets totaling about $70 million, which we're counting for sales and new loans. The other $51 million of Oreo was related to one asset we took back in fourth quarter that we subsequently decided to flip to a new sponsor and provide a new long we close on this deal yesterday and the purchase.
Paul: Prices at our net carrying value of $45 million, which is net of $5 7 million in specific reserves that we took on this asset in 'twenty three 'twenty four as a result, we will have a onetime unrealized loss in the first quarter of approximately $6 million, which we've already reserved as reflected in our book value We will now.
Paul: Have a performing loan which will add to our run rate of data. We believe we have done a very effective job properly reserving for our assets over the last two years.
Paul: Did not incur any material losses in 2024, we are expecting to have some realized losses in 2025 through similar executions on our Oreo assets and by repositioning certain loans with new sponsors, which we expect will be in line with our prior reserves in these assets.
Paul: Timing and magnitude of these losses is hard to predict at this point, but once we know what transactions is likely to occur. We will continue to signal that resolved ahead of time, if possible and again. Please keep in mind that these potential losses reflect reserves, we've already taken which demonstrates how prudent we've been recording the right level of reserves on our loan book.
Paul: As a result of this environment, we continue to build our seasonal reserves record an additional $13 million in specific reserves on our balance sheet loan book in the fourth quarter and again, we feel we've done a good job of putting the right level of reserves and our assets, which is evidenced by transactions, we have been able to effectuate date at or around our carrying values.
Paul: Net of reserves.
Paul: It's also important to emphasize that despite pumping approximately $107 million and seasonal reserves across our platform in the last two years $135 million of which was in our balance sheet business. We saw a very nominal decrease in book value of around 2%, while our peers experienced an average book value decline of approximately 20% over that same time.
Paul: Period.
Paul: Additionally, we are one of the only companies in our space that has seen significant book value appreciation over the last five years with 26% growth during that time period versus our peers, who spoke patents actually declined an average of approximately 25%.
Paul: In our agency business, we had an exceptional fourth quarter and despite headwinds from higher rates.
Paul: Produced $1 1 billion in originations and $1 3 billion in loan sales and very strong margins of 175% for the fourth quarter compared to $1, 67% last quarter. We were also incredibly pleased with the margins we generated in 2024 of 163% which exceeds 2023.
Paul: A 148% by 10% and we recorded $13 3 million of mortgage servicing rights income related.
Paul: 135 billion of committed loans in the fourth quarter, representing an average MSR rate of around 1%, which is down from $1 two 5% last quarter due to a higher mix of Freddie Mac loans in the fourth quarter, which contained lower servicing fees.
Paul: Our fee based servicing portfolio also grew 8% year over year to approximately $33 5 billion at December 31, with a weighted average servicing fee of 38 basis points and an estimated remaining life of seven years. This portfolio will continue to generate a predictable annuity income going forward of around $127 million.
Paul: <unk> actively.
Paul: As I mentioned earlier, the 100 basis point decline in short term rates as reducing earnings on our cash in escrow balances.
Paul: Now in a run rate of between $80 million to $85 million at 125 compared to approximately $120 million that we earned in 2024 or $35 million to $40 million reduction, which will affect our 2025 earnings.
Paul: And our balance sheet lending operation are $11 3 billion investment portfolio had an all in yield of seven 8% 731 compared to $8. One 6% at September 30, mainly due to a decrease in software during the quarter. The average balance in our core investments was $11 5 billion this quarter compared to <unk> 11.
Paul: 8 billion last quarter due to run off exceeding originations in the third and fourth quarters. The average yield on these assets decreased to 852% from nine 4% last quarter, mainly due to a reduction in sulfur, which was partially offset by more back interest collected in the fourth quarter on loan modifications and pay downs.
Paul: Total debt on our core assets decreased to approximately $9 5 billion at December 31 from $10 billion September 30th mostly due to paying down CLO debt with cash in those vehicles in the fourth quarter. The all in cost of debt was down to approximately $6 eight 8% and 12 31 versus 718% and nine <unk>.
<unk>, mostly due to a reduction in cellphone, which was partially offset by lower rate debt tranches being paid down from CLO run off and the new $100 million unsecured debt instrument and closed in the fourth quarter.
Paul: The average balance in our debt facilities was down to approximately $9 7 billion for the fourth quarter compared to $10 1 billion last quarter, mainly due to pay downs in our CLO vehicles from run off in the fourth quarter and the average cost of funds in our debt facilities was seven 1% in the fourth quarter compared to 758% for the third quarter.
Paul: Again, some of the decline in sulfur our overall net interest spreads in our core assets was relatively flat at $1 four 2% this quarter versus 146% last quarter and our overall spot net interest spreads for 92% December 31, and <unk>, 98% at September 30, and lastly, and very significantly.
Paul: We managed to Delever, our business, 30% during this dislocation to a leverage ratio of two eight to one from a peak of around four point <unk> two years ago that completes our prepared remarks. This morning, and I'll now turn it back to the operator to take any questions. You may have at this time.
Paul: Thank you and as a reminder to ask a question. Please press star one on your telephone to withdraw.
Paul: Your all your question Press Star two.
Speaker Change: Can you hear your questions clearly, we ask that you pick up your handset for best sound quality and we will take our first question from Steve Delaney with citizens JMP. Please go ahead.
Steve DeLaney: Good morning, Ivan and Paul Thanks for taking the question Hey look.
Speaker Change: For starters, just really appreciate you guys being upfront with us today about your expectations for the dividend in 2025.
Speaker Change: Thank you flagged it for the market to hear that today than when March when Youre halfway declared a first quarter. Thank you for that clarity.
Speaker Change: Ivan.
Speaker Change: Talked about some resolutions involving outside money I'm curious.
What's the opportunity there.
Speaker Change: That starts with distressed bridge loans and eventually it rolls into Oreo.
Speaker Change: So I think we're talking about the same investment opportunity are you seeing institutional money.
Speaker Change: Big money fresh money looking at this space.
Speaker Change: It's a unique maybe once in a decade opportunity is that money coming in.
Speaker Change: And if it's not coming in.
Speaker Change: Do we need that to get this problem cleaned up in the next one to two years. Thank you.
Scott.
Speaker Change: I'm going to bifurcate My response, because you have.
Add a little color number one.
Speaker Change: In the third quarter fourth quarter win.
Speaker Change: Bob considerably you were seeing.
Speaker Change: A real level of activity, we entered into the space.
Speaker Change: And then prior to the election.
Speaker Change: The 10 year jumped from $360 Arabian I think everything went on pause.
Speaker Change: A bit of a pause period.
Speaker Change: But there are two types of collateral that we are looking at.
Speaker Change: In my comments.
Speaker Change: The ones that we effectively transitioned to sponsors there's a lot of demand for that.
Speaker Change: And there is plenty of capital and plenty of <unk> capital for that.
Speaker Change: A lot of it is.
People have access to institutional money Oracle.
Speaker Change: But they are all network.
Speaker Change: And there's plenty of activity every time, we do have an asset.
Speaker Change: It is on those assets.
Speaker Change: The more difficult part is the ones were.
Speaker Change: The heavy lift cargoes, which is kind of where it takes time to get your hands on those assets sponsors kind of rational still the cash go manage those assets and again brought down to a level, where we need to bring in.
Speaker Change: Our own capability get those up to speed once they are up to speed there'll be a lot of demand.
Speaker Change: But I think theres, a little bit of a pause in the market and that's really reflective of a lot of comments I'm not sure why.
Speaker Change: Everybody so.
Speaker Change: Excited.
Speaker Change: MHC.
Speaker Change: So about a month and a month a half ago and I was shocked at how people were thinking that you're going to have a great year in light of the increased.
Speaker Change: Rate environment. So I think a lot will have to do with where rates settle in.
Speaker Change: Clearly will help Runoffs will 50.
Speaker Change: Did you see rates go down to where they will.
Speaker Change: You'll see tons of money back into the space and they'll have the exuberant cellular experience last quarters call were.
Speaker Change: The refinance volumes and the activity was tough and pick up so it's alright lunch break.
Speaker Change: Great.
Speaker Change: So I'm hearing you say the outside money right now as you sit today you rework a bridge loan and there is there's new sponsors people willing to step in there the heavier lift if you've got an Oreo 30% lease needs. Further renovation that's something you feel like your team at Arbor is better.
Speaker Change: We're equipped to take that property over manage the property and then look to sell that property in 12 to 24 months am I hearing you.
Speaker Change: We're on that Brad.
That's correct every time, we got on and a decent one square, it's more difficult hands hunker assistance at the sponsor.
Speaker Change: Oh bad players in the market using the legal system latest process deal on the cash flow manage the assets. So every single asset that we take back as we are taking a back way above.
Speaker Change: Walmart plan.
Speaker Change: We were able to really show how we can get it from where it is today monthly monthly monthly increase your NOI, putting the right Capex gets us up to speed and our guess is going to.
Speaker Change: Be able to sell those assets somewhere between 12, and 24 months right valuation once we stabilize it.
Okay. Thanks, Paul a quick one for you to close out.
Amber.
Speaker Change: Upgraded arbor's primary servicing a rating to CP.
Speaker Change: <unk> II plus.
Speaker Change: It looks like a large focus of that was on your agency servicing.
Speaker Change: To any extent that servicing upgrade reflect.
Speaker Change: The work you were doing on the bridge loans in your CLO.
Speaker Change: Yes.
Speaker Change: I don't have the definitive answer, but I do believe you're correct.
Steve DeLaney: Steve that the majority of that rating if not all of it.
Speaker Change: I'm sorry.
Dan: Hi, Dan.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: You made a lot of them.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Just keeps getting better.
Speaker Change: Okay.
Speaker Change: You just mentioned.
Speaker Change: Okay.
Speaker Change: No.
Speaker Change: Hi, good morning, guys.
Speaker Change: We track well.
Speaker Change: Assets.
Speaker Change: Sponsors.
Speaker Change: The level of improvement.
Speaker Change: So probably.
Speaker Change: Mid seventies.
Speaker Change: All of that.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: The cosmetics.
Speaker Change: Mark.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Very good.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Key to the table with that expertise capital we're lacking on the stuff that we retain our goal is to get these assets that position.
18 months or whatever.
Speaker Change: Bringing those sponsors we can get the right valuation.
Speaker Change: Well reflected what we think the values are would have a great track record on it.
Speaker Change: In fact, we have a loan we took back two years ago.
Speaker Change: Which was 70% occupied we're just selling it right now.
Speaker Change: Probably close importantly, the debt at the occupancy up to 93%.
Speaker Change: Almost where it needs to be so that's kind of standard for how we run our business.
Speaker Change: Thank you both for the color this morning.
Steve DeLaney: Thanks, Steve.
Speaker Change: Thank you.
Speaker Change: And we will take our next question from Stephen laws with Raymond James. Please go ahead.
Stephen Laws: Hi, good morning.
Stephen Laws: I wanted to touch on modifications from last year I think it was around $4 billion a lot of which was done in early part of the year, maybe it wouldn't when borrowers and everybody had a different interest rate outlook can you talk about how you expect those modified loans to perform over 25, where those modifications.
Stephen Laws: How many were somewhat reliant on some relief from rates over the course of 'twenty five and how do you expect.
Stephen Laws: Are those modifications typically 12 or six months duration extensions or how do we think about that modified loans maturing over the course of this year.
Stephen Laws: I think it's important to have a little bit of an overall view keep in mind.
Stephen Laws: And we had run off in our portfolio over the last two years of almost $6 1 billion and that's going to either refinance or sale or other people taking amount. So the amount has been dramatic with respect to the modified loans keep in mind bridge loans are short term nature.
Stephen Laws: They have a lot of tests.
Stephen Laws: It's very very normal modify alone in this kind of rate environment.
Stephen Laws: And give people a little bit more runway.
Stephen Laws: Capital, there's a period of time when software was set at $5 30, when it dropped.
Stephen Laws: A lot of relief of bars for Bob White caps.
Stephen Laws: Yes lifestyle to give them more opportunity. So when we look at a modification of the loan.
Stephen Laws: Take a look at whether the sponsor could bring more capital sponsored doing a good job.
Stephen Laws: Whether he has a capability to improve the performance of those assets and the majority of those kind of in the supermajority of catastrophe track that performance and doing extremely well there are periods of time.
Stephen Laws: They don't quite do against us.
Stephen Laws: They could result in additional delinquencies and paybacks, but on the whole.
Stephen Laws: The strategy has been extremely effective.
Moving to <unk>.
Stephen Laws: Almost those collateral Keith.
Stephen Laws: Keep in mind that.
Speaker Change: Almost all of our loans have recourse provisions with multiple sponsors. So it's not like people can just hand back the keys.
Speaker Change: The alternative they are being put in the position where they have to bring capital to the table and there are many circumstances, we do take over ownership, we still have access to those personal financial some judgments as well. So our goal is always to improve the collateral get into better position specifically in markets.
Speaker Change: Our experience a little bit of <unk>.
Speaker Change: Softness or delays in courts and things of that nature.
Speaker Change: For the most part.
Speaker Change: We are seeing tremendous improvement at the NOI for the property sector.
Speaker Change: I appreciate the comments, there and Paul could you touch on the servicing.
Speaker Change: Escrow balances again, I think you said $80 million to $85 million, but I want to make sure I understand that the new level, we should think about and kind of what's driving the change in that what the components are driving that that reduction sure. So.
Speaker Change: I speak of earnings on our <unk> cash, it's two components, we lump it into one we can break it out. So we are sitting with $1 five of escrow balances right now and we have.
Speaker Change: At year end, we had about $500 million of cash between cash on hand in cash in the CLO. So that's call it $2 billion two.
Speaker Change: Right now so far is that the 430, where earnings slightly below that probably about $4 15 is what we're earning currently so if you take that $2 billion multiply it by $4 15, you're probably at $85 million. Both in earnings on the cash that we have on our balance sheet and in the vehicles and on our escrow.
Speaker Change: Last year, we earned $120 million.
Speaker Change: Between earnings I'd ask Roes and earnings our cash for two reasons, one sofa was higher throughout the year and remember so far it has been dropping so the full effect of the drop so far is not in the 'twenty four numbers it will be in the 25 numbers and our cash to come down obviously as we do some of our cash to run our business. So that's the two components that drive.
Speaker Change: The 120 versus the 85, the one thing I will say is that that's a number that's math. The one thing I will say that were partially offset that as we are expect to even though we're guiding to lower agency volume today, if rates stay where they are we still believe our agency volume will eclipse a runoff in the agency business. So we will have some growth in service.
Speaker Change: Portfolio that will partially offset that but that's the math.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: Slightly.
Speaker Change: Kind of compensate given the beef.
Speaker Change: We experienced $3 1 billion of run off in 2024.
Speaker Change: That was it.
Speaker Change: Great.
Speaker Change: <unk> existed in today's interest rate environment. We're forecasting remains at this $4 50 level to 475 before level numbers will be more like one and a half. However, if we go back to the interest rate environment.
Speaker Change: Sure.
Speaker Change: We'll revise up our numbers a runoff 3 billion, that's a material difference and that material difference will result, biased in our agency business well, so our outlook really reflect the elevated interest rate environment and how it impacts our business and we would see a similar run rate as we did.
Last year.
Speaker Change: <unk> works and the real inflection point is really going to be the five and 10 here. If we see the 10 year and five year get back around that 4% level Youll see the same trend that we're seeing in the third quarter fourth quarter.
Speaker Change: Yes.
Speaker Change: Various numbers of spaces.
Speaker Change: And Steve one of the things I want to add is we were obviously very aware sofa, which dropping and we knew it would have an impact on our RASK growth of our cash, but I think that the real fundamental change over the last 90 days that was a little bit surprising to us and we've talked about this on prior calls we knew you can look at our filings that shows what the shock would be if rates go down or up on.
Speaker Change: Our cash in escrow is in our portfolio, but we thought it would be a pretty big offset in the fact that that the 10 year would be low and we had significantly more origination volume on the agency side that is not happening right now and May change as Ivan said with the rates, but that's the big change. So it's not a surprise to us that <unk>.
Speaker Change: Cash earnings go down with sulfur dropping but we also thought we'd have a lower 10 year, which where we were last quarter and we have a much more robust origination platform to offset that.
Speaker Change: Yes, I appreciate the comments on that and one last question regarding <unk>.
Speaker Change: Our new dividend level being determined now I know the 30% to 35 sink guide for quarterly distributable earnings are you going to base the dividend on that or will you look at kind of distributable earnings less pick and calm and think about the dividend closer to a cash earnings level. How do we think about how will you and the board think about determining that new dividend level. Thank you, yes, So I think we.
Speaker Change: We'll look at it as distributable with Pic.
Speaker Change: But again, we adjust as we go right just to give an example, we've modified $4 7 billion of loans in the last two years as Ivan said in his commentary $2 4 billion of those have pain accruals features.
Speaker Change: But we're only accruing on $1 7 billion of those so there's another 500 million that we've decided not to accrue on so we make decisions as we go along and we adjust as we go along on whether we think we still should be accruing this or not based on value, but the ones. We are accruing we feel really confident we're going to receive so we have those in distributable earnings but again.
Speaker Change: None of this has been decided yet with the board we need to see what we've done today is give you as of today, where we think the short term guidance would be we need to see where the first quarter comes in we need to see a couple of more months of this market and by May when we were on our first quarter call. We'll have three months in the books and another month of <unk>.
Speaker Change: <unk> data and we will base our dividend on what we think it looks like going forward not just for one quarter. So we will look at it out 12 months and we will say where do we think we get it to and where are we comfortable today with just the guide of a range of what we're seeing right now I mean, just to give you a concept where you said it was $1 billion.
Speaker Change: And our pipeline that are interest rate sensitive.
Speaker Change: That can't close less the 10 year drops too.
Speaker Change: For the fourth quarter right, so our guidance could change to the upside with the change in interest rates.
Speaker Change: Be realistic we don't want to we don't want to mislead anybody Thats right. We bought had taken consideration with us through elevated rate base date. This huge volatility with the election and it seems like we're in a range whether it be a quarter two quarters three quarters or four quarters, we're not sure.
Just accordingly, we think we just responsible by laying out where this current interest rate environment, which is different from where it's been.
Speaker Change: That affects our business.
Speaker Change: That makes sense I appreciate the comments this morning. Thank you.
Steve: Thanks, Steve.
Speaker Change: Thank you and we will take our next question from Leon Cooperman with Omega family Office. Please go ahead.
Speaker Change: I misspoke as core because I had a conflict with another company jumped off the call.
Speaker Change: Yeah.
Speaker Change: No.
Speaker Change: Said differently, let me just say that I think that you guys are doing a terrific job.
Speaker Change: In managing through a difficult environment.
Speaker Change: Firstly, we offended by the cost of dealing with re <unk>.
Speaker Change: I think you've been extremely transparent with.
Speaker Change: With the investors.
Speaker Change: Surprises here.
Speaker Change: Did a very good job of navigating environment.
Speaker Change: Let me ask you some questions rather than give you a shout out.
Speaker Change: What's your comfort with your book value.
Speaker Change: Good.
Speaker Change: Will your willingness to use liquidity buyback quickly.
<unk> stated book value.
Speaker Change: <unk>.
Speaker Change: What kind of return do you think you should earn on a recurring basis on your book.
Speaker Change: Good.
Speaker Change: So relative to our book value I'm glad you asked that question because.
Speaker Change: We've had a tremendous success.
Speaker Change: And track record in terms of taking distressed loans bring sponsors.
Speaker Change: Having proper service or even take them back.
Speaker Change: So we're really comfortable with it and we modify our loans, which are always the lowest which have the biggest highlight on them.
First by accounting for any major modification to re appraisals based on those re appraisals were forced to take whatever.
Reserves are necessary, we've been right on the Mark So I'm extraordinarily comfortable with the reserves that we've taken.
Speaker Change: But.
Speaker Change: Sure.
Speaker Change: Track record speaks for itself.
Speaker Change: Why don't I just think the.
Speaker Change: Book value, where it is today Lee if the market stays where it is today, we may have to take some more level of reserves on certain assets as we move through this higher for longer scenario and it may take book value a little bit, but we don't think it'll be material. Because we think we have provided the right level of reserves to date. So I think it could go down a little bit but I do.
Speaker Change: I think it goes down significantly and our track record has been that it has moved down significantly over the last two years in a very difficult market.
Speaker Change: As far as.
Speaker Change: Returns on equity I think.
Speaker Change: Yes, it depends on where we set our dividend, but if you look at our range on the low end of the range would probably 10 or 11% of the high end of the range. We're 12% return on equity right I Havent, given where it is so we did have 14 for 2024 I think we did similar for 'twenty three I think 10% to 12% is realistic and I think.
Speaker Change: There is upside on top of that if this market doesn't stay where it is.
Longer than we're expecting.
Buying back stock and things of that nature.
Speaker Change: Keep in mind.
Speaker Change: Have a very very vibrant business, specifically any asset Bob Barr site generating outsized returns we have to fund that business. Our construction lending business, we have to fund it.
Speaker Change: In addition, we are expecting to do one and a half to $2 billion.
Speaker Change: Bridge loans. So so we have a $5 billion worth of growth business, which is important to us surely we will have about $1 billion type of run off.
Speaker Change: We'll use some capital to not run off.
Speaker Change: We have to be sensitive to keep our business growing we have done an outstanding job of that.
Speaker Change: And that's where our focus is going to be returns on the new business is in the mid teens, which is very accretive.
Speaker Change: So we will continue to focus on growing our business and then of course, managing some of the legacy issues.
Speaker Change: What does it mean.
Speaker Change: Great.
Speaker Change: But she would not buy it.
Speaker Change: It would be a strong possibility I think what you're epitope.
Speaker Change: <unk> bye.
Speaker Change: Listen to what I say I watch what I know.
Speaker Change: I've always been very forward in covenant my own actions I'm the largest shareholder.
Speaker Change: Right.
Speaker Change: This does not charity of this pipe drops you will see EMEA and I'm sure plenty of management of the active in the spot and the stock.
Speaker Change: Well good luck and congratulations you've done a very good job.
Speaker Change: So it shows what would you say do so with that understanding the quality of the earnings quality of the management.
Speaker Change: Well.
Speaker Change: You said a lot more than I, usually say about about the short sellers, but anyone who cares to take the time to look up the history and the problems of the short sellers and their founders.
Speaker Change: Take a look at them are poised to see the issues they've had with the regulators around the world and they can take the comments for what they're worth you've done your research I've done mine.
Speaker Change: Our investments accordingly.
Speaker Change: Okay well good luck. Thank you very much I appreciate you for fluids.
Andy: Thank you Andy.
Speaker Change: We will take our next question from Rick Shane with J P. Morgan. Please go ahead.
Rick Shane: Hey, guys. Thanks for taking my questions. This morning, I sort of two lines.
Speaker Change: First a little housekeeping.
Speaker Change: Paul you mentioned $500 million of non accruing loans can we just go through in the 30% to 35 guidance, what's the drag from non accruals whats the contribution from Pik and was the three to five that you cited for legal and regulatory quarterly.
Speaker Change: Can you help us sort of understand the context of that.
Speaker Change: Expense.
Speaker Change: Yes, so the three years to five <unk> annually.
Speaker Change: Run, we've run probably <unk> to two and a half cents already in 2024, and we're expecting that number will just be.
Speaker Change: The same number but for a longer period of time, because it really wasn't wrapping up until the second quarter.
Speaker Change: So I would say that it's three to five for the year on the cost between consulting legal and administrative related to the short sellers. If it continues that.
Speaker Change: Our view and then as far as the drag on earnings I think we have $819 million of loans, earning zero.
What we've commented is that we do think in this environment will resolve some and we'll have some new ones I think our track record has been that we still think even in this rate environment, we will be able to make progress in the 10% range. We did 13% this quarter, which we were impressed with but it will also impact us on the Oreo side because.
Speaker Change: I think the big debate and temporary drag Rick is that as I've alluded to.
Speaker Change: We already took back a $100 billion of loans in the first quarter and we have $50 million on our books right now that aren't legacy we have 100 to look at the numbers, we have a $176 million and Oreo on our balance sheet $45 million alone. We flipped yesterday that I mentioned, so now you're down to 131 80 million.
Speaker Change: Dollars are that are legacy assets, we've had on our books before the crisis and we're working through to try to.
Speaker Change: Try to dispose of them. So about 50% to 55 is due for this crisis. We took back another 100 in January already swept the 150 and as Ivan said, we're probably going to end up between four and $500 million. So the drag is that $4 million to $500 million has an NOI of about $7 million.
But certainly not nearly what it would've been had it been paying occur in interest rates and then that's going to be temporary until we can reposition those assets and then hopefully we will have significant upside in the future, but thats, probably 24 months out so I think the drags from where we are now.
Speaker Change: To where we're guiding to 30 to 35 cents.
Speaker Change: These are the components reduced agency origination volumes, which obviously hit earnings right.
Speaker Change: The full effect of sulfur on your S grows and your cash balances offset slightly by servicing the full effect of the delinquencies.
Speaker Change: A longer period of time than they have been outstanding and the Dragon the REO assets, where we have some positive offsets, yes, we'll probably be largely more efficient through the securitization markets.
Speaker Change: And obviously if rates change we can pick up volumes that have a better performance on our assets, but those are kind of the components.
Speaker Change: And how much of the quarterly 30% to 35 census from Pik.
Speaker Change: I don't have those numbers here, but I would say, it's probably going to be similar to what we've had it's probably.
Speaker Change: 10% to $15 million a quarter.
Speaker Change: Okay, great. Thank you and then.
Speaker Change: Pivoting that was sort of the housekeeping stuff.
Speaker Change: In the quarter, you guys did 35, almost $36 million or perhaps in mezz, 97% for the year.
Speaker Change: Are those part of is that loans on outside.
Speaker Change: Investments opportunistically or is that related to the structured portfolio, where you are providing additional capital to existing borrowers.
Speaker Change: And I'd love to.
Speaker Change: And I'd love to relate that to some extent to the $130 million of capital contributed.
Speaker Change: The mods during.
Speaker Change: During the quarter during the year.
Speaker Change: Yes.
Speaker Change: Yes, So I think there were a little different we may be combining concepts, but.
Speaker Change: So the $97 million that you referred to if not all.
Speaker Change: Fast majority are not new investment opportunities there press and Mezz, we're putting behind agency loans that it's Keith taken off our balance sheet. So what happens the guy has a balance sheet loan.
Speaker Change: And he wants to convert it to a fixed rate loan at depending where rates are he'll come to the table it'll be short capital because of the restrictions and the agencies on the debt cover and the LTV and he'll bring to the table some money and we will put some money in the form of Mezz and PE behind him, which puts us in a better spot.
Speaker Change: Right because if we were 80% LTV on a bridge loan that struggling and now he has a 70% LTV loan on on the agencies. He had a kick and 5% and we had a kick in 5% RPE mezz behind 70, not behind eight right. So and then.
Speaker Change: They usually get about a 14% return and then there's a pick on it because you you have to give you.
Speaker Change: You have to have the current pay has to be a debt cover like 110 through your Mezz and PE. So it's just a calculation.
Speaker Change: Like some of the ones. We did this quarter with 910, 11% PE and the rest was picked because we had good coverage through our p/e.
Speaker Change: Wanted to just add to that that's been a normal course.
Speaker Change: Correct.
Speaker Change: I really appreciate the clarification on that it is helpful.
Speaker Change: It.
Speaker Change: If I can just pivot to my very last question. So during the year you guys moderated $4 1 billion you took in $130 million of additional capital associated with that.
Speaker Change: Which equates to about 3% can you put that 3% additional capital in the context of what you see the decline in property values, how does that sort of match up.
Speaker Change: Terms of.
Speaker Change: How much property is actually down.
Speaker Change: I don't understand your question.
Speaker Change: So you had borrowers put in you had borrowers put in 3% in order to modify loans.
Speaker Change: And I think anecdotally property values are down substantially more than that so I'm kind of curious how you think about how much additional capital of borrower needs to put in in order to maintain in LTV.
Okay every case is different Rick.
Speaker Change: All properties declined some improved performance.
Speaker Change: I can't I can't answer your question in the macros, we take each situation.
Speaker Change: Valuate the capital link them put in how the assets perform and how kind of improves each one is different.
Speaker Change: Okay got it.
Speaker Change: Hey, guys. Thanks, I always appreciate you taking my questions. Thank you.
Kurt: Thanks Kurt.
Speaker Change: Thank you and we will take our next question from Jade Rahmani with <unk>. Please go ahead.
Jade Rahmani: Thank you very much can you discuss the lower cash balance and the structure of the business what drove the quarter on quarter decline and also did you experienced any margin calls.
Jade Rahmani: Sure. So we did not experience any margin calls we have great relationships with our lenders in fact, I'd, probably give some color that the market for commercial banks in Securitizations.
Jade Rahmani: <unk>.
Jade Rahmani: Really really strong right now so we're not maybe it's a good time to come on that comment on that because I'm sure you are aware.
Jade Rahmani: Ed.
Jade Rahmani: The CLO market and the bank lending market has improved dramatically.
Those are some of the benefits that will offset some of these other factors.
Jade Rahmani: The CLO market share you've seen deals are getting done in the 150 to 175 range.
As opposed to deals that two years ago Couldnt get done and then spreads within the 275 range. So we've seen huge efficiencies on that side.
Jade Rahmani: The commercial banks are partners and relationships, we've had they've been more and more aggressive higher advance rates.
Jade Rahmani: Lower spreads and these things will translate to.
Jade Rahmani: March is for us going forward.
Jade Rahmani: <unk> affect as well beginning over the last couple of months that we should have some positive impact.
Jade Rahmani: On our income streams going forward, which will be offset to some of these negative issues and as far as the cash balance dropping.
Jade Rahmani: Its math right. We had we have put on as you saw $377 million of bridge and our new product that we love we funded up our <unk> business, which continues to grow so that requires cash and obviously the runoff has partially offset that theres also timing on cash right. When you are taking back in Ontario asset.
Jade Rahmani: Have to buy it out of the vehicle and then you re lever. It. So there is always timing all why those cash numbers move, but we're sitting at about $450 million of cash and liquidity today.
Jade Rahmani: And obviously, we view some of that cash to grow the platform.
Jade Rahmani: And then just the agency business cash balance when you break out with different segments is that more akin to corporate cash how fungible is that cash.
Jade Rahmani: It's all fungible you just the agency business, obviously generates cash it's capital light and then it gets moved up to the it's just the way you break out the segments, but when you look at a company like ours that youre managing cash all of that cash is fungible and all of that is corporate cash.
Jade Rahmani: Lastly, just on the GSE side have you gotten any push backs I know JL closed one.
Speaker Change: Walker and Dunlop talk about what they've received.
Jade Rahmani: Be helpful to hear if you've received any loan put backs.
Speaker Change: We have not we have not.
Jade Rahmani: How to put back or had a buyback loan.
Speaker Change: Thanks, a lot.
Jade Rahmani: Thanks.
Speaker Change: Thank you and we will take our next question from Crispin Love with Piper Sandler. Please go ahead.
Speaker Change: Thanks. Good morning, everyone. First you had 307 million plus a bridge originations in the fourth quarter highest level in a long time in line with your guidance from last quarter can you speak to expectations going forward Enbridge as rates have backed up since September and then do you have an outlook for agency originations for the first quarter.
Speaker Change: Yes.
Speaker Change: The $370 million of breakfast good quarter as I mentioned in my comments, we're expecting.
Speaker Change: <unk>, one 5 billion for the year and we expect it to look fairly evenly over the year.
Speaker Change: If short term rates crop you can see that number going up considerably.
Speaker Change: Level up we think interest rate environment.
Speaker Change: And as far as your second part of your question Kristen.
Speaker Change: The reason, we've given a 30% to 35.
Speaker Change: <unk> per quarter.
Speaker Change: It won't be linear right certainly the first quarter or two maybe on the lower end of that range and then it will grow from there.
Speaker Change: A lot has to do with the fact that the agency business given where rates are is off to a slow start so we're expecting a.
Speaker Change: Much lower first quarter in the agencies and then we expect it to build from there for two reasons. One historically the first quarter is usually a slower quarter because a lot of people close all their loans at the end of the year and to the backup in rates has put some people on the sidelines has got a big pipeline. We've got a lot of loans ready to go it's just a matter of convincing borrowers to transact.
Speaker Change: <unk>.
Speaker Change: At these levels in a lot of them are still patiently waiting to see where where the 10 year ago. So we are expecting the numbers to be.
Speaker Change: Much lighter in the first quarter and then hopefully grow from there, but what you did see as a strong fourth quarter not all with offer but all agency lenders agencies scars.
Speaker Change: If you look at the comments I had.
Speaker Change: Yes, we would have even been done or but the agencies look back up when rates jumped.
We have this huge pipeline sitting on the side of the first quarter is going to be.
Speaker Change: A little light because so much was done.
Speaker Change: The fourth quarter.
Speaker Change: Rates are today.
Speaker Change: And sitting on the side of the balance sheet.
Speaker Change: Pipeline and if you do see a meaningful for the 10 year down and Youll see that number increase substantially.
Speaker Change: It wouldn't be surprising if the agency business for the quarter was $6 million to $800 million. It all depends on what's going to happen.
Speaker Change: Yeah.
Speaker Change: Great. Thank you and I appreciate all the color there and then just last one for me can you provide any update on the Doj and SEC investigations from last year, and you mentioned legal fees related to short seller reports in your prepared remarks does that also include legal fees related to these investigations as well.
Speaker Change: So as you know, we don't comment on regulatory inquiries with respect to.
Speaker Change: Elevated costs.
Speaker Change: No.
Speaker Change: What is re audits tend to step up the ordering process the expenses with respect to ordering.
Speaker Change: Our compliance and all those kind of factors.
Speaker Change: We are working extremely hard order.
Speaker Change: Orders are going to double or triple or quadruple arc.
Speaker Change: To step up our compliance and all our procedures and processes. So that's what we estimate the costs are going to abate to work in this environment.
Speaker Change: Thank you.
Speaker Change: And it appears that we have reached our allotted time for questions I will now turn the program back to Ivan Kaufman for any additional or closing remarks.
Speaker Change: Okay, well, thank you everybody for your time.
Speaker Change: Okay.
Okay.
Speaker Change: Before.
Speaker Change: Next year.
Speaker Change: In this current rate environment. We appreciate your participation on the call.
Speaker Change: The ratio come in our favor.
Speaker Change: Thanks.
Speaker Change: However, even with.
With this adjusted interest rate environment.
Speaker Change: Okay.
Speaker Change: It's to be extremely strong.
All peers in the space and have a great weekend.
Speaker Change: Thank you. This does conclude today's presentation. Thank you for your participation you may disconnect at any time.
Speaker Change: Okay.
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