Q1 2025 Franklin BSP Realty Trust Inc Earnings Call

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Speaker Change: Good day and welcome to Franklin D. S. B Realty Trust first quarter 2025 earnings Conference call.

Operator: Good day and welcome to Franklin BSP Realty Trust first quarter 2025 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

All participants will be in a listen only mode.

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Operator: After today's presentation, there will be an opportunity to ask questions. to ask a question. press star, then one on your touchtone keypad. To withdraw your question, please press star, then This event is being recorded.

Speaker Change: After todays presentation, there will be an opportunity to ask questions.

Speaker Change: Last quick question.

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Speaker Change: I would now like to turn the conference over to Lindsey Crabbe head of Investor Relations. Please go ahead.

Lindsey Crabbe: I would now like to turn the conference over to Lindsey Crabbe, Head of Investor Relations. Please go ahead. Good morning.

Speaker Change: Good morning, Thank you for hosting our call today and welcome to the FBR Cool first quarter earnings conference call as the operator mentioned I'm going to start with me on the call today are rich Byrne, chairman and CEO of STR tea, very badly and Chief Financial Officer, and Chief operating Officer, Becky and Mike <unk> President.

Lindsey Crabbe: Thank you for hosting our call today and welcome to the FDRT First Quarter Earnings Conference Call. As the operator mentioned, I'm Lindsey Crabbe.

Lindsey Crabbe: With me on the call today are Rich Byrne, Chairman and CEO of FDRT, Jerry Baglien, Chief Financial Officer and Chief Operating Officer of FDRT, and Mike Comparato, President of FDRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties, as described in our most recently filed SEC periodic reports, and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, April 29th, 2025. The company assumes no obligation to update any statements made during this call, including any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Speaker Change: The I T.

Speaker Change: We begin I want to mention that some of today's comments are forward looking statements and are based on certain assumptions. There was comments and assumptions are subject to inherent risks and uncertainties Aspen scratch. Our most recently filed SEC periodic reports and actual future results may differ materially inferred.

The information conveyed on this call is current only as of today.

Speaker Change: This call April 29th.

Speaker Change: The company assumes no obligation to update any statements made during this call, including any forward looking statements, whether as a result of new information future events or otherwise except as required by law.

Lindsey Crabbe: Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website at www.fbrtreet.com. We will refer to the supplementary slide deck on today's call.

Rich: Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck each of which are available on our website at www Dot FBR T. Rieck Dotcom, we offered the supplementary slide deck on today's call with that I'll turn the call over to rich.

Richard Byrne: With that, I'll turn the call over to Rich. Great. Thanks, Lindsey, and good morning, everyone, and thank you for joining us today. As Lindsey mentioned, our earnings release and supplemental debt were published to our website yesterday. We will begin today's call on slide 4. I'm going to review our first quarter results, and then we will open the call, as we always do, for your questions. I'll highlight the key developments for the first quarter, Jerry will cover our financial results in more detail, he'll also provide an update on our recently announced acquisition of Newpoint, and then Mike will discuss market conditions and the changes to our watch list and REO portfolio.

Rich: Great. Thanks, Lindsay and good morning, everyone and thank you for joining US today as Lindsay mentioned, our earnings release and supplemental deck, where published to our website yesterday, we will begin todays call on slide four.

Rich: I'm going to review our first quarter results and then we will open the call as we always do for your questions.

Rich: I'll highlight the key developments for the first quarter, Jerry will cover our financial results in more detail ill also provide an update on our recently announced acquisition of new point.

Rich: And then Mike will discuss market conditions and the changes to our watch list in the Oreo portfolio.

Richard Byrne: So with that, I'll start with our team remained active in the first quarter. We originated $341 million in new loan commitments. These new loans continue to enhance our portfolio because of the high quality of the underlying properties and borrowers, and because of their compelling economics and low loan-to-value ratio. We view market volatility as an important catalyst for generating opportunities, and we have a very strong track record of being a reliable capital provider in both stable and stressed market conditions. Certainty of closing is extremely valuable to our borrowers, and we have consistently delivered. Turning to our current portfolio, we continue to cycle through the loans originated pre-interest rate hike.

Rich: So with that.

Rich: I'll start with our team remained active in the first quarter, we originated $341 million in new loan commitments.

Rich: These new loans continue to enhance our portfolio because of the high quality of the underlying properties and borrowers and because of their compelling economics and low loan to value ratios, we view market volatility as an important catalyst for generating opportunities and we have a very strong track record of being a real.

Rich: Liable capital provider in both stable and stressed market conditions certainty of closing is extremely valuable to our borrowers and we have consistently delivered for them.

Rich: Turning to our current portfolio, we continue to cycle through the loans originated pre interest rate hike. We received 353 million of loan repayments in the first quarter predominantly from loans originated in 2021 and 2022.

Richard Byrne: We received $353 million of loan repayments in the first quarter, predominantly from loans originated in 2021 and 2022. Our continued new originations, plus these repayments, have brought the percentage of our portfolio originated post-interest rate hike to 56%. This is certainly well ahead of our peers. We believe it is a vitally important statistic when evaluating the quality of a mortgage-rate portfolio. Our REO has created a near-term drag on our earnings, however, the temporarily lower NIM that REO causes may often be in our best interest. This is because we believe foreclosure can be a prudent strategy, in some cases, to obtain the highest possible recovery.

Rich: Our continued new originations plus these repayments have brought the percentage of our portfolio originated post interest rate hike, 256%.

Rich: This is certainly well ahead of our peers. We believe it is a vitally important statistic when evaluating the quality of our mortgage REIT portfolio.

Rich: Our Oreo has created a near term drag on our earnings however, the temporarily lower NIM that Oreo causes may often be in our best interests. This is because we believe foreclosure can be a prudent strategy in some cases to obtain the highest possible recovery. This is also consistent with our proactive.

Richard Byrne: This is also consistent with our proactive acknowledge and address mindset. This quarter, we determined that the reserve we had on two office loans that are now held as REO should be charged off through distributable earnings. Consistent with our DE policy, this is how we went forward. Importantly, these charge-offs have already been recognized in GAAP earnings in prior quarters. As a result, our distributable earnings were negative. DE excluding realized losses worth $0.31 per fully converted share. This represents dividend coverage of 86%. For the avoidance of confusion, we have no new office loan loss reserve. We are simply running previously recognized gap losses through distributable earnings in accordance with our distributable earnings definition.

Rich: I acknowledge and address mindset.

Rich: This quarter, we determined that the reserve we had on two office loans that are now held at Oreo should be charged off through distributable earnings.

Speaker Change: <unk> with R. D E policy Oh. This is how we went forward importantly, these charge offs have already been recognized in GAAP earnings in prior quarters as a result, our distributable earnings were negative.

Speaker Change: G E. Excluding realized losses worth 31 cents per fully converted share this represents dividend coverage of 86%.

Speaker Change: For the avoidance of confusion, we have no new office loan loss reserve.

Speaker Change: We are simply running previously recognized GAAP losses through distributable earnings in accordance with our distributable earnings definition.

Richard Byrne: Excluding our largest office loan, which is a triple net leased headquarters and distribution facility, our traditional multi-tenant exposure is only 2.1% of our total portfolio, and the remaining loans and assets have been significantly marked down to reflect market conditions. As we have discussed previously, we anticipate we will likely fall short of dividend coverage in the near term. This is because of the short-term drag from our REO and non-performing loan portfolios. Also, we are planning to keep cash balances somewhat higher than normal due to market conditions and to satisfy the upcoming cash component of our new point acquisition.

Speaker Change: Excluding our largest office loan, which is a triple net leased headquarters and distribution facility. Our traditional multi tenant exposure is only 2.1% of our total portfolio and the remaining loans and assets have been significantly marked down to reflect market conditions.

Speaker Change: As we have discussed previously we anticipate we will likely fall short of dividend coverage in the near term. This is because of the short term drag from our Oreo and nonperforming loan portfolios also we are planning to keep cash balances somewhat higher than normal due to market conditions and to satisfy the upcoming <unk>.

Speaker Change: Cash component of our new point acquisition.

Richard Byrne: Jerry will cover our dividend policy in his section. At quarter end, our liquidity stood at $913 million, including $215 million in unrestricted cash. Our average risk rating at the quarter end was 2.2, with 146 of our 152 positions risk-weighted a 2 or 3. Our watch list loans represent 4% of our total portfolio, comprising six names at the end of the quarter. Mike will provide a comprehensive update on our watch list and REO in his remarks.

Speaker Change: <unk> will cover our dividend our dividend policy in his section.

Speaker Change: At quarter end, our liquidity stood at $913 million, including $215 million in unrestricted cash our average risk rating at quarter end was 2.2 with a 146 of our 152 positions rich waited a two or three.

Speaker Change: Our watch list loans represent 4% of our total portfolio comprising six names at the end of the quarter, Mike will provide a comprehensive update on our watch list and Oreo and his remarks looking.

Richard Byrne: Looking ahead, we are very excited about the pending acquisition of NewPoint. We believe this transaction will provide meaningful synergies. It also aligns perfectly with our strategic focus on the multifamily sector and enhances the quality and consistency of our earnings. We think the acquisition will be another catalyst for driving long term value for our stockholders.

Speaker Change: Looking ahead, we are very excited about the pending acquisition of new point.

Speaker Change: We believe this transaction will provide meaningful synergies. It also aligns perfectly with our strategic focus on the multifamily sector and enhances the quality and consistency of earnings. We think the acquisition will be another catalyst for driving long term value for our stockholders, we believe that FBR tea as well.

Richard Byrne: We believe that FBRT is well positioned for sustained growth. with the potential for our stock to trade at a premium-to-book value similar to other agency-focused platforms, especially as we continue to successfully recycle the bulk of our legacy book into current vintage loans.

Speaker Change: Positioned for sustained growth with.

Speaker Change: With the potential for our stock to trade at a premium to book value similar to other agency focused platforms, especially as we continue to successfully recycle the bulk of our legacy book and the current vintage loans.

Jerry Baglien: So with all that, I'll hand it over to Jerry now. Great, thanks Rich. I appreciate everyone being on the call today.

Jerry: So with all that I'll hand, it over to Jerry now.

Jerry: Great. Thanks, Rich I appreciate everyone being on the call today I'm.

Jerry Baglien: I'm going to go over the first quarter results starting on slide five. If you're following along. FBRT reported gap earnings of $23.7 million, or $0.20 per diluted common share, for the first quarter, and distributable earnings were negative $6.2 million, or negative $0.12, or $0.12 for fully converted share. Distributable earnings before realized losses were $31.9 million or $0.31 per fully converted common share. In the first quarter, we recognized $38.6 million in realized losses to distributable earnings, representing the full specific reserve on our office assets within our foreclosure REO portfolio. This loss was previously accounted for in our DAPR.

Jerry: I'm going to go over the first quarter results starting on slide five if you're following along.

Jerry: F. B R. A T reported GAAP earnings of 23.7 million or <unk> 20 per diluted common share for the first quarter and distributable.

Jerry: Earnings were negative $6 2 million or negative when it went to our 12 cents per fully converted share.

Jerry: Distributable earnings before realized losses were 31 9 million or 31 cents per fully converted common share.

Jerry: In the first quarter, we recognized $38 6 million in realized losses to distributable earnings representing the full specific reserve on our office assets within our foreclosure Oreo portfolio.

Jerry: This loss was previously accounted for in our GAAP earnings.

Jerry: As rich mentioned, our current exposure to the office segment is minimal.

Jerry Baglien: As Rich mentioned, our current exposure to the office segment is minimal. Our REO and non-performing loans also negatively impacted first-quarter earnings. However, we are actively working to recover our invested capital in our REO properties, with our team successfully closing several asset sales each quarter. In order to liquidate assets, we occasionally have been providing short-term, non-market financing for borrowers. in addition to REO. These loans also represent a short-term drag on earnings. Since we do not get the full benefit of repurposing this equity, we will be monitoring dividend coverage for the coming quarter.

Rich: Our Oreo and nonperforming loans also negatively impacted first quarter earnings. However, we are actively working to recover our invested capital in our Oreo properties with our team successfully closing several asset sales each quarter.

Rich: In order to liquidate assets, we occasionally have provided have been providing short term nonmarket financing for borrowers. In addition to the Oreo. These.

Rich: These loans also represent a short term drag on earnings.

Rich: We do not get the full benefit of Repurposing. This equity we will be monitoring dividend coverage for the coming quarters, while we believe in the long term, earning power of the company to cover the dividend if Oreo Oreo sales slow or volatile market conditions persist it could be prudent to revisit our dividend in the short term.

Jerry Baglien: While we believe in the long-term earning power of the company to cover the dividend, if REO sales slow or volatile market conditions persist, it could be prudent to revisit our dividend in the short term. Our book value per fully converted common share at the end of the quarter stood at $14.95. The decrease in book value during the quarter primarily reflects our dividend payout exceeding our earnings level.

Rich: Our book value per fully converted common share at the end of the quarter stood at $14 95.

Rich: The decrease in book value during the quarter, primarily reflects our dividend payout exceeding our earnings level.

Jerry Baglien: Costs associated with the pending acquisition of NewPoint and the first quarter grant of long-term incentive awards to our officers and employees, aligning their interests with the long-term stockholder value creation.

Rich: Costs associated with the pending acquisition of new point and the first quarter Grant of long term incentive awards to our officers and employees of <unk>.

Rich: Lining their interests with the long term stockholder value creation.

Rich: Moving to slide seven.

Jerry Baglien: Moving to slide seven. We have an overview of our origination. We originated $341 million in new loan commitments during the first quarter. Our primary focus remained on multifamily, which accounted for 79% of our total origination volume for the quarter. We received $353 million in loan repayments during the quarter, with 10 loans paying off in full. Multifamily loans made up the majority of our paydowns, and $288 million of our paydowns were from loans originated in 2021 and 2022.

Rich: We have an overview of our origination activity.

Rich: We originated $341 million in new loan commitments during the first quarter.

Rich: Our primary focus remains on multifamily, which accounted for 79% of our total origination volume for the quarter.

Rich: We received $353 million in loan repayments during the quarter with 10 loans paying off in full.

Rich: Multifamily loans made up the majority of our Paydowns and $288 million of our paydowns or from loans originated in 2021 and 2022.

Rich: Moving to slide eight our average cost of debt on our core portfolio with silver plus 2.18%.

Jerry Baglien: Moving to slide eight, our average cost of debt on our core portfolio with SOFR plus 2.18%. At the end of the quarter, 81% of our financing was through CLOs, and we had reinvestment capacity available in two of these deals. We are actively monitoring the CLO market throughout 2025 to strategically access it when conditions are favorable. Our warehouse lines maintain substantial capacity at quarter end and when combined with our CLO reinvestment availability and unrestricted cash, our total available liquidity stood at a strong $913 million. Our net leverage position was lower this quarter at 2.35 times, with our recourse leverage standing at 0.3 times.

Rich: At the end of the quarter, 81% of our financing was through Clo's and we had reinvestment capacity available in two of these deals.

Rich: We are actively monitoring the CLO market throughout 2025 to strategically access it when conditions are favorable.

Rich: Our warehouse lines maintained substantial capacity at quarter end and when combined with our CLO reinvestment availability and unrestricted cash our total available liquidity stood at a strong $913 million.

Rich: Our net leverage position was lower this quarter at 2.35 times with our recourse leverage standing at 0.3 times.

Jerry Baglien: Finally, regarding our pending acquisition of NewPoint, we are pleased to report that the process is largely unscheduled. We have already secured necessary regulatory approval from HUD and are actively engaged with Fannie Mae and Freddie Mac, anticipating their approvals early in the third quarter. Based on our current progress, we anticipate maintaining our previously announced closing timeline with an expected closing early in the third quarter. Upon the closing of the acquisition, we will publicly release certain historical financial statements for Newpoint and Pro Formas.

Rich: Finally regarding our pending acquisition of viewpoint, we were pleased to report that the processes largely on schedule.

Rich: We have already secured necessary regulatory approval from hard and are actively engaged with Fannie Mae and Freddie Mac anticipating their approvals early in the third quarter.

Rich: Based on our current progress we anticipate maintaining our previously announced closing timeline with an expected closing early in the third quarter.

Rich: Upon the closing of the acquisition, we will publicly release certain historical financial statements for new point and pro forma.

Michael Comparato: With that, I'll turn it over to Mike to give you an update on our portfolio.

Rich: With that I'll turn it over to Mike to give you an update on our portfolio.

Mike: Thanks, Gerry and good morning, everyone and thank you again for joining us I'm going to start on slide 12.

Michael Comparato: Thanks, Jerry. And good morning, everyone. Thank you again for joining us. I'm going to start on slide 12. Our core portfolio totals $4.8 billion a quarter end, comprised of 152 loans averaging $32 million. Multifamily remains our preferred sector, securing 71% of the portfolio. Our core portfolio decreased this quarter, primarily due to continued loan repayments and a deliberate moderation to our origination paper. In Q1, we witnessed very strong spread tightening and decided not to chase origination. Being incredibly active in 2024, we have the luxury of picking our spots on new loans and had no interest in chasing to the tightest spreads we had seen in years.

Mike: Our core portfolio totaled $4 8 billion at quarter end comprised of 152 loans, averaging $32 million.

Mike: Multifamily remains our preferred sector, securing 71% of the portfolio.

Mike: Our core portfolio decreased this quarter, primarily due to continued loan repayments and a deliberate moderation to our origination pace.

In Q1, we witnessed very strong spread tightening and decided not to chase originations.

Mike: Being incredibly active in 2024, we have the luxury of picking our spots on new loans and had no interest in chasing to the tightest spreads we had seen in years.

Michael Comparato: That said, during the quarter, we originated 11 loans at a weighted average spread of 325 basis points. Most of our new loans were originated in the first half of Q1. Unlike some traditional credit providers who may retract during periods of market stress, we have maintained our commitment to our borrowers by consistently closing loans on schedule. Echoing Rich's earlier point, the certainty we provide in closing is a highly valued commodity for our borrowers and a significant driver of the repeat business we see year after year. Many other lenders are also plagued with unaddressed legacy portfolios. This, coupled with ongoing market stress, may continue to create lending constraints from traditional credit providers and other commercial mortgage REITs, potentially presenting further opportunities for FBRT.

Mike: That said during the quarter, we originated 11 loans at a weighted average spread of 325 basis points.

Mike: Most of our new loans were originated in the first half of Q1.

Mike: Unlike some traditional credit providers, who may retract during periods of market stress, we have maintained our commitment to our borrowers by consistently closing loans on schedule.

Mike: Echoing Rich's earlier point the certainty we provide in closing as a highly valued commodity for our borrowers and a significant driver of the repeat business, we see year after year.

Mike: Many other lenders are also plagued with unaddressed legacy portfolio issues.

Mike: This coupled with ongoing market dress may continue to create lending constraints from traditional credit providers and other commercial mortgage Reits potentially presenting further opportunities for FBR T.

Mike: We believe our proactive approach to addressing legacy issues should position us favorably.

Michael Comparato: We believe our proactive approach to addressing legacy issues should position us favorably.

Mike: Slide 14 is a summary of our watch list you will see we have moved for loans to watch list status in the first quarter, bringing our total watch list loans to six.

Michael Comparato: Slide 14 is a summary of our watchlist. You will see we have moved four loans to watch list status in the first quarter, bringing our total watch list loans to Within our within our six watchlist positions, one is a Georgia office loan that qualified for an extension in January 2025. Importantly, the borrower has continued to maintain current payments and reduced the principal balance as part of the extension agreement. The next property is a 307-unit student housing property in Norfolk, Virginia, which is risk-rated of four. We entered into a loan modification with the borrower, who is looking to liquidate the asset in the next six to 12 months.

Mike: Within our within our six watch list positions one of the Georgia Office line. The qualified for an extension in January 2025.

Mike: Importantly, the borrower has continued to maintain current payments and reduced the principal balance as part of the extension agreement.

Mike: The next properties of 307 units student housing property in Norfolk, Virginia, which is risk rated a four.

Mike: We entered into a loan modification with the borrower who is looking to liquidate the asset in the next six to 12 months.

Mike: The remaining four properties are new to the watch list this quarter and are all multifamily loans originated in 2021 and 2022.

Michael Comparato: The remaining four properties are new to the watch list this quarter and are all multifamily loans originated in 2021 and 2022. One asset, a multifamily property in Austin, Texas, was recently taken REO. The remaining three properties are behind on business plan, and we are in active dialogue with the borrower. While there was some additional migration to the watch list, the amount of discussions regarding loan modifications and problem loans has decreased dramatically in the last few months. We believe this is a clear signal that we are much closer to the end of the modification workout cycle within FBRT than the beginning.

Mike: One asset a multifamily property in Austin, Texas was recently taken Oreo.

Mike: The remaining three properties are behind on business plan and we are in active dialogue with the borrowers.

Mike: While there was some additional migration to the watch list the amount of discussions regarding loan modifications and problem loans has decreased dramatically in the first and the last few months.

We believe this is a clear signal that we are much closer to the end of the modification work out cycle within F PRT than the beginning.

Michael Comparato: As we have discussed on every earnings call for the past six to eight quarters, we have taken an extremely proactive approach to resolutions and firmly believe we'll be out of the proverbial woods faster and sooner than any other market participant.

Mike: As we have discussed on every earnings call for the past six to eight quarters. We have taken an extremely proactive approach to resolutions and firmly believe we will be out of the proverbial words faster and sooner than any other market participant.

Mike: Moving to slide 15, our foreclosure Oreo portfolio stood at 12 positions at quarter end.

Michael Comparato: Moving to slide 15, our foreclosure REO portfolio stood at 12 positions a quarter. During the quarter, we sold four properties near or above our base. We also have purchase and sale agreements in place for two additional properties at or above our basis and expect to close in the second quarter. And we have an additional three letters of intent.

Mike: During the quarter, we sold four properties near or above our basis.

Mike: We also have purchase and sale agreements in place for two additional properties at or above our basis and expect to close in the second quarter and we have an additional three letters of intent.

Michael Comparato: We added two new properties to our foreclosure REO portfolio this quarter, an office property in Denver and a multifamily property in Houston. As Rich and Jerry both covered, we wrote off the remaining specific charge on the Denver and Portland office buildings to distributable earnings this quarter and are comfortable with our current basis. We do not think now is the right time to sell either of our office REO assets, but we'll continue to review our options quarterly. The multifamily asset in Houston is one of the properties that has an LOI. We hope to have a favorable update about this property in Q2.

Mike: We added two new properties to our foreclosure Oreo portfolio this quarter and office property in Denver, and a multifamily property in Houston.

Speaker Change: As rich and Jerry both covered we wrote off specific we wrote off the remaining specific charge on the Denver and Portland Office buildings does your view to distributable earnings this quarter and are comfortable with our current basis.

Speaker Change: We do not think now is the right time to sell either of our office Oreo assets, but we'll continue to review our options quarterly.

Speaker Change: The multifamily asset in Houston is one of the properties that has an LOI, we hope to have a favorable update about this property in Q2.

Speaker Change: Regarding the remaining multifamily Oreo properties, we're focused on quickly liquidating for the best possible outcome, even if it means holding some assets for stabilization.

Michael Comparato: Regarding the remaining multifamily REO properties, we're focused on quickly liquidating for the best possible outcome, even if it means holding some assets for stabilization. We recognize the earnings potential in these assets and want to redeploy the capital swiftly.

Speaker Change: We recognize the earnings potential in these assets and want to redeploy the capital swiftly.

Michael Comparato: Before we turn to questions, I also want to express my excitement about the NewPoint acquisition. This acquisition is highly synergistic and is a natural expansion within our core competency, multifamily lending. adding a scaled CRE agency loan origination and servicing platform to FBRT. It strengthens our platform, expands our market reach, and positions FBRT for sustained growth. The transaction should create book value growth and enhance earning powers over time.

Speaker Change: Before we turn to questions I also want to express my excitement about the Newport acquisition.

Speaker Change: This acquisition is highly synergistic and is a natural expansion within our core competency multifamily lending.

Speaker Change: Adding a scaled CRE agency loan origination and servicing platform to FBR T. It's.

Speaker Change: It strengthens our platform expands our market reach and positions FBR T for sustained growth.

Speaker Change: The transaction should create book value growth and enhanced earning powers overtime.

Michael Comparato: We're dedicating to resolving the legacy loans and REO portfolio to fully realize the potential of the combined FBRT and NewPoint, which will set us apart in the middle market CRE lending space.

Speaker Change: We're dedicating to resolving the legacy loans and Oreo portfolio to fully realize the potential of the combined <unk> and new point, which will set us apart in the middle market CRE lending space with that I would like to turn it back to the operator to begin the Q&A session.

Operator: With that, I would like to turn it back to the operator to begin the Q&A. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May Press Star then one on your Touchtone telephone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Matthew: Our first question comes from Matthew <unk> from Jones. Please go ahead.

Matthew Erdner: Our first question comes from Matthew Erdner from Jones. Please go ahead. Hey, good morning, guys. Thanks for taking the questions. And I appreciate all the color as usual.

Speaker Change: Hey, good morning, guys. Thanks for taking the questions and I appreciate all the color as usual.

Michael Comparato: You know, with the current levels of REO that you guys kind of took, I want to switch over to the loan portfolio and kind of, you know, where you guys see originating in the near term, you know, are you going to ideally remain neutral and then any capital that is from, you know, some REO sold, you know, we should expect that to get tossed into the loan portfolio and the new originations? Are you guys going to kind of hold the REO proceeds and cash over the near term? Just kind of want to gauge your thoughts on how you're thinking about it.

Speaker Change: With the current levels of Oreo that you guys kind of took I wanted to switch over to the loan portfolio and kind of where you guys see originating in the near term are you going to ideally remain neutral and then any capital that is from some Oreo. So we should expect that to get.

Speaker Change: Tossed into the loan portfolio into new originations are you guys going to kind of hold the Oreo proceeds in cash over the near term just kind of wanted to gauge your thoughts on how youre thinking about it.

Mike: Hey, Matt it's Mike Thanks for the question.

Michael Comparato: Hey, Matt. It's Mike. Thanks for the question.

Jerry Baglien: Yeah, I think we've always targeted a portfolio larger than where we're currently operating today. I think we're in this obviously unique moment where we're hoarding a little bit of cash to close on the new point acquisition, but I think we're positioned really well for that at this point. So, any new capital that came in through REO sales, I think we would be very proactively looking to put that back to work as soon as possible in new origination. Got it. That's helpful.

Mike: Yeah, I think we've always targeted a portfolio larger than where we're currently operating today.

Mike: I think we are in this obviously unique moment, where we're courting a little bit of cash to close on the Newport acquisition.

Mike: But I think we're positioned really well for that at this point, so any new capital that came in through Oreo sales I think we would be very proactively looking to put that back to work as soon as possible and new origination.

Speaker Change: Got it that's helpful and then Jerry I kind of want to touch on expenses for the first quarter is a lot of that due to the new point acquisition cost.

Jerry Baglien: And then, Jerry, I kind of want to touch on expenses for the first quarter. Is a lot of that due to the NewPoint acquisition cost, you know, or is there something that we should expect going forward that's similar to the first quarter? You've got a little bit of new point in there. So there's a few million dollars of transaction costs that are flowing through in OPEX this quarter, but you've also got similar to what we talked about in fourth quarter, you know, we're also carrying the REO expenses through there as well, which is elevating. our expenses versus kind of what I would expect on a run rate basis.

Mike: Or is there something that we should expect going forward that similar to the first quarter.

Speaker Change: Yeah.

Speaker Change: You've got a little bit of knee appointing there. So there's a few million dollars of transaction costs that are flowing through in Opex. This quarter, but you've also got similar to what we talked about in the fourth quarter.

Speaker Change: We're also carrying the Oreo expenses through there as well which is elevating.

Speaker Change: Our expenses versus kind of what I would expect on a run rate basis. So it's this quarter as kind of a double whammy from <unk>.

Jerry Baglien: So it's this quarter is kind of a double whammy from, you know, not just the REO but also some new point stuff that we basically pulled forward from the work that we already did. Got it.

Speaker Change: Not just the Oreo, but also some new point stuff that we basically pulled forward from the work that we already did.

Speaker Change: Yeah.

Speaker Change: Got it.

Jerry Baglien: I was actually going to say double whammy as it pertained to earnings and that once we get rid of the REO, not only do we get rid of that expense, but we get to redeploy that capital into, you know, earning loans again. That's right. Right. That makes sense.

Speaker Change: I was actually going to say double whammy as it pertained to earnings and that once we get rid of the Oreo not not only do we get rid of that expense that we get to redeploy that capital into earning earning loans again.

Speaker Change: Right right.

Michael Comparato: And then, you know, I guess with the REO, you know, how do you balance, you know, whether you want to move a loan off your balance sheet or, you know, kind of wait and hold and try and possibly get a gain on sale on some of these assets? I mean, we look at every asset on a case-by-case basis, obviously. You know, do we think that the asset's stabilized? Do we think that the NOI is stabilized? You know, do we think that there's upside if we held it a little longer? What's the cost of holding it longer versus selling today?

Speaker Change: Right that makes sense and then I guess what.

Speaker Change: How do you balance you know whether you want to move a loan off your balance sheet or kind of wait and hold.

Speaker Change: Try and possibly get a gain on sale on some of these assets.

Speaker Change: I mean, when we look at every asset on a case by case basis obviously.

Speaker Change: Do we think that the asset stabilized do we think that the NOI stabilized you know do we think that there is upside if we held out a little longer.

Speaker Change: The cost of holding it longer versus selling today I mean, we're constantly doing a property by property analysis and trying to maximize that recovery.

Michael Comparato: I mean, we're constantly doing a property-by-property analysis and trying to maximize that recovery. What I would say is there's no question that getting rid of the REO and redeploying that capital into earnings power is top priority. So, we're not holding an asset for an incremental gain three, six months later. We're only going to hold an asset longer term if we think it meaningfully moves the needle on recovery. Got it. That's helpful.

Speaker Change: What I would say is there's no question that getting rid of the Oreo and redeploying that capital into earning earnings power is top priority. So if it's we're not holding an asset for an incremental gain three six months later, we're only going to hold an asset longer.

Speaker Change: <unk>, if we didn't get meaningfully moves the needle on recovery.

Speaker Change: Got it that's helpful. Thank you guys I appreciate it.

Matthew Erdner: Thank you, guys. I appreciate it. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Randolph Binner: Your next question comes from Randy Binner from B. Reilly Securities. Please go ahead.

Speaker Change: Your next question comes from Randy Binner from B Riley Securities. Please go ahead.

Randy Binner: Hi, good morning. Thanks.

Randolph Binner: Good morning. Thanks. I if you would could you expand a little bit on the commentary around? dividend potentially being revisited. I think if Markets remain volatile, and then REO does not process as expected. It'd just be interesting to kind of get, you know, kind of some parameters around what that might look like.

Speaker Change: If you would could you expand a little bit on the commentary around.

Speaker Change: The dividend potentially being revisit I think you said markets remain volatile and in Oreo.

Speaker Change: No.

Speaker Change: Yes, it does not process as expected I'd just be interested can you kind of get you know kind of parameters around what that what that might look like.

Speaker Change: Yeah I'll take that.

Jerry Baglien: Yeah, I'll take that.

Jerry Baglien: I think what we're what we're, what we're monitoring is how quickly can we turn over the REO assets. Volatility is its own category. That's just uncertainty and ability.

Speaker Change: I think what we're what we're what we're monitoring is how quickly can we turnover the oreo assets volatility as its own category, that's just uncertainty and ability.

Jerry Baglien: or decision whether we want to deploy or pause and conserve capital with a market that, you know, has settled down now, but was moving very rapidly the last few I think the REO is the bigger bogey in all this in that, you know, you're holding 300 million or so of of assets that are under under earning relative to the equity we have deployed in our loan portfolio. And I think we want to be conscious of how much drag and, you know, erosion of book value you have by under covering that dividend. And if we think it's more of a prolonged hold, do we want to stop that erosion of book value?

Speaker Change: Or decision, whether we want to deploy or pause it and conserve capital with a market that.

Speaker Change: Has settled down now but was moving very rapidly the last few weeks.

Speaker Change: I think the oreos, the the bigger bogey and all of this and that Youre holding $300 million or so of assets that are under under earning relative to equity we have deployed in our loan portfolio and I think we want to be conscious of.

Speaker Change: How much drag and.

Speaker Change: Erosion of book value have by under covering that dividend.

Speaker Change: And if it if we think it's more of a prolonged holds do we want to stop that erosion of book value that that's what we're going to monitor I think you've heard that we have.

Jerry Baglien: That's what we're going to monitor. I think, you know, you've heard that we have. pretty good traction in terms of turning some of those things over. But I think we're also conscious that, you know, if it does get volatile, do some of those things fall out? Do we end up holding them for a quarter or two longer than expected? That's all we're saying. I think we want to be conscious of the environment and and what that lack of earnings power on those assets does to the book value.

Speaker Change: Pretty good traction in terms of turning some of those things over but I think we're also conscious that.

Speaker Change: If it does get volatile due some of those things fallout do we end up holding them for a quarter or two longer than expected. That's all we're saying I think we want to be conscious of the environment and.

Speaker Change: And what that lack of earnings power on those assets does does to the book value.

Speaker Change: Okay. That's helpful. And then I guess the follow up there would be that there is.

Randolph Binner: Okay, that's helpful.

Jerry Baglien: And then I guess the follow up there would be that there's a, you know, considerable amount of cash going towards NewPoint. So how, how does it, how does, how do you think of the, of the expenditure that cash? versus going towards the dividend. I mean, I think it's, you know, Newpoint is a fantastic transaction. It's good diversification synergy. It's going to be accretive.

Speaker Change: Considerable amount of cash going towards new point, so how how does it how does how do you think of the expenditure that cash.

Speaker Change: Versus going towards the dividend I mean, I think it's yes.

Speaker Change: <unk> is a fantastic transaction.

Speaker Change: Good diversification synergy, it's going to be accretive but.

Jerry Baglien: But, you know, is there, is that a consideration, that cash going out versus cash that could go to the dividend? I see that more as a short term issue than a long term issue in that, like you heard from Mike and Rich, we have a little more cash and liquidity, you know, cash to be created cash ahead of closing than we otherwise normally would. And you'd be building up the loan book a little bit higher. What you're going to do, though, is then deploy that cash into the new business line, which, you know, not immediately, but over the next few quarters becomes accretive to the rest of the operations.

Speaker Change: Is there is that a consideration that cash going out versus versus cash. They can go to the dividend.

Speaker Change: I see that more as a short term issue than a long term issue in that light.

Speaker Change: You heard from Mike and Rich, we have a little more cash and liquidity.

Speaker Change: Cash to be created cash ahead of closing than we otherwise normally would and you'd be building up the loan book a little bit higher.

Speaker Change: What youre going to do though is don't deploy that cash into the new business line, which you know not immediately but over the next few quarters becomes accretive to the rest of the operations.

Speaker Change: So that I kind of put it in a different bucket altogether right. That's just a construction zone part of building this into something broader in terms of our real estate platform not not something that I would say looking out for a year or two years.

Jerry Baglien: So that I kind of put in a different bucket altogether, right?

Jerry Baglien: That's just the construction zone part of building this into something broader in terms of a real estate platform, not something I would say looking out for, you know, a year, two years. the prime factor in the dividend consideration. Because we've sort of digested the implications of that, if you will. The other REO is more of a harder to predict drag, in some cases. You know, we have a pretty good sense of what new points going to be.

Speaker Change: The prime factor in the dividend consideration, because we've sort of digested the implications of that if you will the other Oreo is more of a harder predict harder to predict drag in some cases, we have a pretty good sense of what new points going to be.

Speaker Change: The.

Jerry Baglien: The exact timing of unloading the other stuff is obviously market dependent and not as perfectly predictable.

Speaker Change: <unk> timing of unloading the other stuff is obviously market dependent and not as perfectly predictable.

Richard Byrne: Hey, Randy, it's Rich. Randy, it's Rich. I would just add that new point we we disclosed discussed is going to close early in third quarter. I mean, that's only a quarter away, or maybe even less. So this, this need for some cash is going to go away pretty soon. And you know, we can get back to deploying more and adding to earnings power. So, and the other point I would make is we always set, along with our board, our dividend based on our earnings power, not based on, you know, a quarter, you know, the current quarter you're looking at.

Speaker Change: Hey, Randy it's rich Randy its rich I would just add that.

Speaker Change: <unk> point, we disclosed discussed is going to close early in the third quarter I mean, that's only a quarter away or maybe even less so.

Speaker Change: This need for some cash is.

Speaker Change: Going to go away pretty soon and we can get back to deploying more and adding to earnings power.

Speaker Change: So and and the other point I would make is we always said along with our board our dividend based on our earnings power not based on you know a quarter. The current quarter Youre looking at and we have had no concerns about our ability to cover our dividend at least cover our dividend just a.

Richard Byrne: And we have had no concerns about our ability to cover our dividend, at least cover our dividend.

Randolph Binner: It's just a question of the timing and that, you know, goes back to the context for Jerry's All right, appreciate the comments. Thank you.

Speaker Change: Question of the timing in that and that you know it goes back to the context for Jerry's remarks.

Speaker Change: Alright, I appreciate the comments thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Tom Catherwood: Your next question comes from Tom Catherwood from VTIG. Please go ahead. Thank you and good morning everybody.

Speaker Change: Your next question comes from Tom Catherwood.

Speaker Change: From <unk>. Please go ahead.

Tom Catherwood: Thank you and good morning, everybody.

Speaker Change: Maybe following up on Matt's questions on originations you know I know they can be lumpy.

Michael Comparato: Maybe following up on Matt's questions on originations, I know they can be lumpy, but there was a sequential slowdown, and Mike, I think you mentioned most activity was during the first half of 1Q. How have originations paced thus far in 2Q, and have you seen any shifts in your pipeline since tariffs were announced? Hey, Tom, thanks for the question. Believe it or not, our originations have not really been lumpy at all. I think as you look across the platform in 2024, it was wildly consistent. I think we did like just around $1.1 billion every single quarter in 2024.

Speaker Change: But there was a sequential slowdown and Mike I think you mentioned most activity was during the first half of one Q.

Speaker Change: Originations pace, thus far in <unk> and have you seen any shifts in your pipeline since tariffs were announced.

Tom Catherwood: Hey, Tom Thanks for the question.

Tom Catherwood: Believe it or not our originations have not really been lumpy at all.

Tom Catherwood: As you look across the platform in 2024. It was wildly consistent I think we did like just around $1 $1 billion every single quarter and in 2024.

Michael Comparato: And it's been relatively consistent deal flow for the beginning of 2025.

Tom Catherwood: And it's been relatively consistent deal flow for the beginning of 2025.

Michael Comparato: We have essentially shut down origination on FBRT just in the very short term while we were cash gathering for the Newpoint acquisition. So the pipeline for FBRT is really non-existent until we feel like, you know, that's completely ring fence, the acquisition that is, which at this point, I would say it is. So we'll probably be turning that back on momentarily. But remember, we're running other vehicles at the platform. So it's really just flipping a switch in the allocation policy that FBRT starts getting loan deal flow again. So tons of deal flow is available. As I mentioned in the prepared remarks, we saw a really aggressive tightening of spreads in kind of the last, you know, four to six weeks of the quarter.

Tom Catherwood: We have essentially shut down origination on FBR Qi just in the very short term one.

Tom Catherwood: We were cash gathering for the Newport acquisition.

Tom Catherwood: So the pipeline for <unk> is really nonexistent until we feel like that's completely ring fence. The acquisition that is which at this point I would say it is so it will probably be turning our back on momentarily, but remember we're running other vehicles that the platform. So it's really just flipping a switch in the app.

Vacation policy that FBR T starts getting loan deal flow again so.

Tom Catherwood: Tons of deal flow is available as I mentioned in the prepared remarks, we saw a really aggressive tightening of spreads and kind of the last four to six weeks of the quarter and I just didn't feel like there was a need to chase to levels that were I would say 50 basis points inside.

Michael Comparato: And I just didn't feel like there was a need to chase the levels that were, I would say, 50 basis points inside of the tightest pricing that we saw kind of the peak valuations in Q4, Q1 of 22. So we just selectively hit the pause button based on, you know, spreads being at the tightest levels we've seen in a long time.

Tom Catherwood: Of the tightest pricing that we saw kind of at peak valuations in Q4, 'twenty. One Q1 of 'twenty. Two so we just collectively hit the pause button based on spreads being at the tightest levels, we've seen in a long time.

Michael Comparato: But I do expect to flip that switch back on in short order for FBRT to start originating. Gotcha. And just to follow up on that, Mike, so you're seeing tons of deal flow. So Does it suffice to say that you have not seen a change in that pace of deal flow since the tariffs were announced? I apologize for missing the second part of your question. I think we saw a tiny little blip of people kind of saying what happened. I don't think it was the byproduct of tariffs, which was a 75 basis point swing in the 10-year in a matter of, I don't know, five or seven days.

Tom Catherwood: But I do expect to flip that switch back on.

Tom Catherwood: Is it short order for FBR Gee, that's originating again.

Speaker Change: Got it and just to follow up on that Mike So.

Tom Catherwood: You're seeing tons of deal flow so.

Speaker Change: Does it is it suffice to say that you have not seen a change in that piece of deal flow since the tariffs were announced.

Tom Catherwood: Even though I like dogs originations.

Speaker Change: I apologize for best in the second part of your question.

Speaker Change: I think we saw a a tiny little blip of people kind of thing what happened I don't think it was it was the byproduct of tariffs or switches, which was a 70 75 basis points swing in the 10 year in a matter of I don't know five or seven days so.

Michael Comparato: So, I think everybody just kind of took a deep breath and said, what the heck's going on? It seems like things have calmed back down. It seems like we've had a little bit of spread tightening again. CRE CLO issuance picked up again. CNBS issuance picked up again. Rates came back in, 30, 40 basis points. So, there's been a little bit of calm after that storm. And I would say looking longer term, I think that it's probably a net positive for CRE overall. So, we haven't seen much negative impact at all since that kind of five or seven day period.

Speaker Change: Everybody just kind of took a deep breath and said what the heck is going on.

Speaker Change: It seems like things have come back down.

Speaker Change: It seems like we've had a little bit of spread tightening again issuance CRE.

Speaker Change: CRE CLO issuance picked up against the MBS issuance picked up again rates came back in 30 or 40 basis points, So theres been a little bit of calm.

Speaker Change: After that storm and I would say looking longer term I think that it's probably a net positive for CRE overall.

Speaker Change: Yes.

Speaker Change: We haven't seen much negative impact.

At all since that kind of five or seven day period.

Speaker Change: I appreciate that Mike. Thank you and then last one for me what is your read on changes happening at Fannie Freddie and HUD and kind of any potential impacts on agency lending either near term or longer term I know, it's a crystal ball question, but I assume that you've got some insights into it now that youre going to the whole new point process.

Tom Catherwood: Appreciate that, Mike. Thank you.

Tom Catherwood: And then the last one for me, what is your read on changes happening at Fannie, Freddie, and HUD and kind of any potential impacts on agency lending, you know, either near term or longer term? I know it's a crystal ball question, but I assume that you've got some insights into it now that you're going through the whole new point process. I typically say my crystal ball shattered years ago, and as it pertains to predicting the government, that one's really, really hard. I think that NewPoint has got a phenomenal team. I think that they have three licenses that are very highly coveted.

Speaker Change: I typically say my Crystal ball shattered years ago.

Speaker Change: And as it pertains to predicting the government that that one is really really hard.

Speaker Change: I think that new point has got a phenomenal team.

Speaker Change: I think that they have three.

Speaker Change: Three licenses that are very highly coveted.

Michael Comparato: I think that we've got a really, really unique and special opportunity here to build one of the most, you know, creative and entrepreneurial platforms for multifamily lending. So, I don't know what this administration is going to do next. I'm not sure this administration knows what they're going to do next, but I'm guessing that as long as the playing field is even for all of the participants on the field, I'm going to say I think we're going to have a mousetrap that's a little bit better than everybody else once it's all put together.

Speaker Change: I think that we've got a really really unique and special opportunity here to build one of the most creative and entrepreneurial platforms for multifamily lending. So I don't know what this administration is going to do next I'm not sure. This administration knows what theyre going to do next but I'm guessing there.

Speaker Change: As long as the playing field is even for all of the participants on the field.

Speaker Change: I'm going to say I think we're going to have.

Speaker Change: Mouse trap that is a little bit better than everybody else once it's all put together.

Speaker Change: I appreciate all the answers thanks, everyone.

Tom Catherwood: Appreciate all the answers. Thanks everyone. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Steve Delaney from citizens JMP Securities. Please go ahead.

Steve DeLaney: Your next question comes from Steve DeLaney from Citizens GMP Securities. Please go ahead. Good morning, everyone. Certainly exciting. Yay! Hey Bridge, how are you? So great. world is always changing.

Steve DeLaney: Hi, good morning, everyone.

Speaker Change: Certainly David.

Steve DeLaney: Okay. Thank you Brad how are you.

Steve DeLaney: Great.

Steve DeLaney: Obviously, the world is always changing.

Steve DeLaney: It strikes me that The more tools you have in your toolbox, you know, you probably don't... them all every day, but it sure adds, I think, to the franchise value.

Steve DeLaney: Strikes me.

Steve DeLaney: Yeah.

Steve DeLaney: The more tools you have in your toolbox, you probably don't use.

The mall every day, but it sure ads I think to the franchise value.

Steve DeLaney: I guess to that point, my How many lenders out there, real estate lenders, actually have... products have both some agency multi-family product with Freddie family. and also have an account.

Speaker Change: To that point Mike.

Speaker Change: How many lenders out there real estate lenders have actually have.

Speaker Change: The products have both some agency multifamily product with Freddie Fannie.

Speaker Change: And also have a conduit.

Speaker Change: Program CBS conduit.

Steve DeLaney: Conduit, and the extension of that question . First, about who will compete with you when you have your full set, okay, of products. Secondly, the borrowers. Are there circumstances where you have multifamily borrowers? And certainly on maybe their core product, it fits for Freddie, Fannie, but do they have other multifamily products that can't go there for one reason or another, and therefore, they would find a conduit loan to be more attractive?

Speaker Change: And the extension of that question first about who compete who will compete with you. When you have your full set of products. Secondly, the borrowers are there circumstances, where you haven't launched multifamily borrowers and certainly on maybe their core product it fits for Freddie Fannie.

Speaker Change: Do they have other multifamily products that can't go there for one reason or another and therefore, they would find the conduit a conduit loan to be more attractive.

Michael Comparato: So, just some top-down. what the market looks like. Yeah, thanks for the question, Steve.

Speaker Change: Top down view of.

Speaker Change: What the market looks like.

Speaker Change: Yes. Thanks for the question, Steve and I look I think that this was the industrial logic of the acquisition.

Michael Comparato: And look, I think that this was the industrial logic of the acquisition. We have always preached, you know, for the 10 years that I've been running Benefit Street Real Estate Group, we want to have a one-stop shop. We want to be a cradle-to-grave provider for a borrower. We can do a construction loan, a bridge loan, a CMBS permanent loan. The one thing that we never had was an agency takeout. And I think it's a game changer. I it's going to change our comp set. I think we're going to look more like the agency lenders. You know, it might take us 18, 24 months to get there.

Speaker Change: Have always preached for the 10 years that I've been running benefit Street real estate group, we want to have a one stop shop, we want to be a cradle to grave provider for a borrower. We can do a construction loan in a bridge loan see MBS permanent loan. The one thing that we never had was an agency take out and I think it's a game changer.

Speaker Change: We do.

Speaker Change: I think it's going to change our comp set.

Speaker Change: I think we're going to look more like the agency lenders it might take US 18 to 24 months to get there, but maybe we're not comps to mortgage Reits going forward, maybe were more comps to the agency space.

Michael Comparato: But, you know, maybe we're not comped to mortgage REITs going forward. Maybe we're more comped to the agency space. You know, we've talked about and several times that, you know, we think that this is a clear path to trading above book value once we've integrated and grown the business together. But there's no one really out there that has it all. And I think that we will. And to your point, you kind of sold it better than I could, is there aren't any agency lenders that have a conduit. There aren't many agency lenders that have an actual balance sheet of their own that they use.

Speaker Change: We've talked about several times that we think that this is a clear path to trading above book value once we've integrated and grown the business together.

Speaker Change: But there is no one really out there that has it all.

And I think that we will and to your point you kind of sold it better than I could is there arent any agency lenders that have a conduit there arent. Many agency lenders that have an actual balance sheet of their own that they use theres certainly arent many that do construction financing and we even have a pause.

Michael Comparato: There certainly aren't many that do construction financing. And we even have a pocket of equity investing that we do.

Speaker Change: Market of equity investing that we do so I truly believe that once we put these two companies together.

Michael Comparato: So, I truly believe that once we put these two companies together, we become the most interesting provider of capital in the multifamily sector, literally overnight. There's going to be some teaching of the Newpoint folks of what we do. There's going to be some teaching of the Benefit Street folks of what the Newpoint folks do. But I think once we integrate these teams and integrate these products, it's going to be something very, very unique.

Speaker Change: We become the most interesting provider of capital in the multifamily sector literally overnight.

Speaker Change: There's going to be some teaching of the new point folks of what we do there is going to be some teaching at the benefit street folks of what the new point folks do but I think once we integrate these teams to integrate these products, it's going to be something very very unique.

Speaker Change: Yeah.

Michael Comparato: Now, having covered I think the unique thing, Steve, if you look at historically the originators to the agency space Almost all of them have tried to build out a balance sheet portion of the business, and most of them have not been successful in doing it. I think our building it the other way is what is really the differentiator here, and I just think that it's going to really stand out once we get these companies combined.

Speaker Change: <unk> covered some of those you know your competitors and the participants in this space.

Speaker Change: I have to agree with what youre, saying as far as.

Speaker Change: The breadth of your product line remind me, yes, I think I think the unique thing, Steve sorry to interrupt, but I just I.

Speaker Change: I think the unique thing.

Speaker Change: If you look at historically, the originators to the agency space.

Speaker Change: Almost all of them have tried to build out a balance sheet portion of the business.

Speaker Change: And most of them have not been successful in doing it I think our building it. The other way is what is really the differentiator here.

Speaker Change: I, just think that it's going to really stand out once we once we get these companies combined.

Speaker Change: Interesting.

Steve DeLaney: and remind me how many licenses that Fannie and Freddie each have have outstanding approximately.

Speaker Change: Remind me how many.

Speaker Change: Licenses that Fannie and Freddie each have had outstanding approximately.

Speaker Change: I don't recall off the top of my head I know I know that new point is one of 19 that has all three.

Steve DeLaney: I don't recall off the top of my head. I know that Newpoint is one of 19 that has all three. Yeah, okay. Yeah, I can get that. But I think it's I think it's like a couple dozen something like the 20s, not 100. It's something like, you know, 2025 something. kind of stuff. All right, thanks for the color. Thanks Steve.

Speaker Change: Yeah Okay.

Speaker Change: Hey, Greg Yeah, I can get that but I think it's I think it's like a couple of dozen something like twice not 100, and something like no no in 2025, something in that ballpark, but just to kind of size the plain field alright, thanks for the color.

Speaker Change: Thanks, Steve Thanks, Dave.

Jason Stewart: Thank you. Your next question comes from Jason Stewart from Jenny Montgomery Scott. Please go ahead. Hey, good morning. Thanks for taking the question. Quick follow up on New Point. I know we don't have full financials and we'll get those at some point in the future.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Jason Stewart from Janney Montgomery Scott. Please go ahead.

Jason Stewart: Hey, good morning, Thanks for taking the question a quick follow up on New point I know, we don't have full financials and we'll get those at some point in future do you have an initial ballpark of how much the agency business will be as a percentage of total revenue at close and then you go out a year.

Jason Stewart: Do you have an initial ballpark of how much the agency business will be as a percentage of total revenue at close and then out a year? No, we haven't disclosed that yet. Well, you'll get more color on that when we provide the financials in a couple of months.

Speaker Change: Yeah.

Speaker Change: No we haven't disclosed that yet well, you'll get more color on that when we provide the financials in a couple of months.

Speaker Change: Okay, Yeah, just with Michael's comment would be helpful to know how much of it as we're thinking about the comps that shifting.

Jason Stewart: Okay, yeah, just with Michael's comment, it'd be helpful to know, you know, how much of it is we're thinking about the concept shifting. towards a different concept, how much it is.

Speaker Change:

Speaker Change: Towards that towards a different constant how much it is but.

Jerry Baglien: But okay, following up on the dividend, as I look at distributable dividend coverage, Jerry, for you, before realized loss, in terms of that metric, is that a specific metric you're looking at relative to the sustainability of the dividend? Is there a simple metric we can look at to follow going forward in our models, let's say, and here's where your comfort level sits with the dividend? Yeah, I mean, I think it's If you look at where we've been... You know, X some of the charge-offs. I think we've been around 90%, give or take, a little bit.

Speaker Change: Okay.

Speaker Change: Following up on the dividend.

Speaker Change: You know as I look at distributable dividend coverage dairy free for you before realized loss.

Speaker Change: Terms of that metrics is that a specific metric you're looking at relative to the sustainability of that.

Speaker Change: You know is there a simple metric we can look at to follow going forward in our models that say, here's where your comfort level sits with the dividend.

Speaker Change: Yeah, I mean I think it's.

Speaker Change: If you look at where we've been.

Speaker Change: Ex some of the charge offs I think we've been around 90% give or take a little bit.

Jerry Baglien: I don't think we want to see a degradation to that. You know, and I don't even think if we... I don't even know if we want to sit there if we think it's quarters on end, either, right? I think if there's a clear path and a couple quarters, that's not... The End of the World, if you will, if we think it's four quarters, that's a little less appealing to us. So I think It's more of a timing question than just a delta to the coverage, right? We don't want to run at 90% in perpetuity. Like Rich said, our goal has always been to pay out what we earn.

Speaker Change: I don't think we want to see a degradation.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: Even think if we I don't even know if we want to sit there. If we think it's quarters on and either right I think if there's a clear path and a couple of quarters.

Speaker Change: That's not.

Speaker Change: At the end of the World. If you will if we think it's four quarters, that's a little less appealing to us So I think.

Speaker Change: It's more of a timing question than just a delta to the coverage.

Speaker Change: Right, we don't want to just.

Speaker Change: Run at 90% in perpetuity I don't think like rich that our our goal has always been to payout what we earn.

Speaker Change: We think that earnings power is there at the level. We said it. It is just how quickly can we get back to it.

Jerry Baglien: We think that earnings power is there at the level we set it. It's just how quickly can we get back.

Speaker Change: So I think maybe it doesn't.

Jerry Baglien: So I think the metric to follow is how quick you get off the REC. Yeah, and Jason, I would just point you again, we mentioned that last quarter, you know, we think there's 25 to 30 cents of earning potential in the REO. It's a question of when, right? Is it two quarters from now or four quarters from now? But we know what the earning potential is in that REO portfolio. We just got to get it moved and got to get it redeployed. Yeah, okay.

Speaker Change: The metric I would just like to follow as how quick you get off the Oreo.

Jason Stewart: Yeah, and Jason I would just point you again, we mentioned that last quarter, we think theres, 25% to 30, <unk> of earning potential and the Oreo.

Jason Stewart: It's a question of when is it two quarters from now or four quarters from now, but we know what the earning potential is in that Oreo portfolio. We just got to get it moved and got to get it redeployed.

Jason Stewart: Yeah, Okay and then the second part of that is you know how do you think about new point as it relates to that metric because I think the previous disclosure was accretive to distributable Etfs in the second half of 2026. So you know the second moving part to that metric now.

Jerry Baglien: And then the second part of that is, you know, how do you think about Newpoint as it relates to that metric? Because I think the previous disclosure was accretive to distributable EPS in the second half of 2026. So, you know, you have a second moving part to that metric now. We do, but I have that in some ways is more projectable based on the nature of that business, right? So a good portion of those income streams are fairly sticky with the servicing portion. I think we have. a pretty good back test on origination capabilities and targets there.

Jason Stewart: We do but I have that in some ways is more projected book based on the nature of that business writes a good portion of those income streams are fairly sticky with the servicing portion.

Jason Stewart: We have.

Jason Stewart: A pretty good back test on origination capabilities and targets there so.

Jerry Baglien: I think we have a tolerance for kind of what that will be. At the same time, it's also. It's also a building factor in terms of what it's going to add as you kind of grow that MSR portfolio too, so there's some offset to kind of growing the book. ahead of kind of hitting the distributable coverage, that, in some ways, is easier to understand and sort of factor in. What I don't want is the double drag, right, from the REO and sort of the integration of Newpoint, if you will. Okay. All right. Appreciate the question.

Jason Stewart: I think we have a tolerance for kind of what that will be.

Jason Stewart: At the same time, it's also.

Jason Stewart: It's also a building factor in terms of what it's going to add as you kind of grow that MSR portfolio too. So there is some offset to kind of growing the book.

Jason Stewart: It's kind of hitting the the the distributable coverage.

Jason Stewart: That in some ways is easier to understand and sort of factor in what I don't want the double drag right from the Oreo and sort of the integration of new point, if you will.

Jason Stewart: Yep.

Jason Stewart: Okay, Alright, I appreciate the question. Thanks.

Operator: Thanks. Thanks, Jason. Thank you. This concludes our question and answer session.

Jason Stewart: Thanks, Jason.

Jason Stewart: Thank you.

Jason Stewart: This concludes our question and answer session.

Lindsey Crabbe: I would now like to turn the conference back to Lindsey Crabbe for closing remarks. We appreciate you joining us today. Please reach out if you have any further questions.

Jason Stewart: I would now like to turn the conference back to Lindsey Crabbe for closing remarks.

Speaker Change: We appreciate you joining us today. Please reach out if you have any further questions. Thanks and have a good day.

Operator: Thanks and have a good day. Thank you.

Speaker Change: Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: You may now disconnect. Thanks for watching!

Speaker Change: Hum.

Speaker Change: [music].