Q1 2026 BrightSpire Capital Inc Earnings Call

April 29, 2026

Operator: Welcome to the BrightSpire Capital Q1 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to David A. Palamé, General Counsel. Please go ahead.

Speaker #1: Welcome to the BrightSpire Capital, first quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad.

Speaker #1: To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to David Palome, General Counsel.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and welcome to BrightSpire Capital's first quarter 2026 earnings conference call. We will refer to BrightSpire Capital as BrightSpire, BRSP, or the company throughout this call.

David A. Palamé: Good morning, welcome to BrightSpire Capital's Q1 2026 Earnings Conference Call. We will refer to BrightSpire Capital as BrightSpire, BRSP, or the company throughout this call. Speaking on the call today are the company's Chief Executive Officer, Mike Mazzei, President and Chief Operating Officer, Andy Witt, and Chief Financial Officer, Frank Saracino. Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements, which are based on management's current expectations, are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties could cause the company's business and financial results to differ materially. For a discussion of risks that could affect results, please see the Risk Factors section of our most recent 10-K, and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time.

David Palamé: Good morning, welcome to BrightSpire Capital's Q1 2026 Earnings Conference Call. We will refer to BrightSpire Capital as BrightSpire, BRSP, or the company throughout this call. Speaking on the call today are the company's Chief Executive Officer, Mike Mazzei, President and Chief Operating Officer, Andy Witt, and Chief Financial Officer, Frank Saracino. Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements, which are based on management's current expectations, are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties could cause the company's business and financial results to differ materially. For a discussion of risks that could affect results, please see the Risk Factors section of our most recent 10-K, and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time.

Speaker #2: Speaking on the call today are the companies Chief Executive Officer Mike Mazzi, President and Chief Operating Officer Andy Witt, and Chief Financial Officer Frank Saracino.

Speaker #2: Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements, which are based on management's current expectations, are subject to risks uncertainties and assumptions.

Speaker #2: Potential risks and uncertainties could cause the company's business and financial results to differ materially. For a discussion of risks that could affect results, please see the risk factors section of our most recent 10-K and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time.

Speaker #2: All information discussed on this call is as of today April 29th, 2026, and the company does not intend and undertakes no duty to update for future events or circumstances.

David A. Palamé: All information discussed on this call is as of today, 29 April 2026, and the company does not intend and undertakes no duty to update for future events or circumstances. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental presentation, which was released yesterday afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Before I turn the call over to Mike, I will provide a brief recap on our results.

David Palamé: All information discussed on this call is as of today, 29 April 2026, and the company does not intend and undertakes no duty to update for future events or circumstances. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental presentation, which was released yesterday afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Before I turn the call over to Mike, I will provide a brief recap on our results.

Speaker #2: In addition, certain financial information presented on this call represents non-GAAP financial measures. The companies' earnings release and supplemental presentation which was released yesterday afternoon and is available on the company's website presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors.

Speaker #2: Before I turn the call over to Mike, I will provide a brief recap on our results. The company reported first quarter GAAP net income attributable to common stockholders of $4.8 million or 3 cents per share.

David A. Palamé: The company reported Q1 GAAP net income attributable to common stockholders of $4.8 million or $0.03 per share, distributable earnings of $15.6 million or $0.12 per share, and adjusted distributable earnings of $18.2 million or $0.14 per share. Current liquidity stands at $206 million, of which $58 million is unrestricted cash. The company also reported GAAP net book value of $7.05 per share and undepreciated book value of $8.24 per share as of 31 March 2026. Finally, during this call, management may refer to distributable earnings as DE. With that, I would now like to turn the call over to Mike.

David Palamé: The company reported Q1 GAAP net income attributable to common stockholders of $4.8 million or $0.03 per share, distributable earnings of $15.6 million or $0.12 per share, and adjusted distributable earnings of $18.2 million or $0.14 per share. Current liquidity stands at $206 million, of which $58 million is unrestricted cash. The company also reported GAAP net book value of $7.05 per share and undepreciated book value of $8.24 per share as of 31 March 2026. Finally, during this call, management may refer to distributable earnings as DE. With that, I would now like to turn the call over to Mike.

Speaker #2: Distributable earnings of $15.6 million or 12 cents per share and adjusted distributable earnings of $18.2 million or 14 cents per share. Current liquidity stands at $206 million of which $58 million is unrestricted cash.

Speaker #2: The company also reported GAAP net book value of $7.05 per share and underappreciated book value of $8.24 per share as of March 31st, 2026.

Operator: Good morning, welcome to the BrightSpire Capital Q1 2026 Earnings Conference Call. I would now like to turn the conference over to David A. Palamé, General Counsel. Please go ahead.

Operator: Good morning, welcome to the BrightSpire Capital Q1 2026 Earnings Conference Call. Our participant will be in listening only mode, should you need assistance, please I would now like to turn the conference over to David A. Palamé, General Counsel. Please go ahead.

Speaker #2: Finally, during this call, management may refer to distributable earnings as DE. With that, I would now like to turn the call over to Mike.

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad.

Speaker #3: Thanks, David, and welcome to our first quarter 2026 earnings call. I will keep my preparedly more brief and, as always, Andy will walk through the quarter's loan originations and portfolio activity.

Michael J. Mazzei: Thanks, David. Welcome to our Q1 2026 earnings call. I will keep my prepared remarks brief. As always, Andy will walk through the quarter's loan originations and portfolio activity. Since reinitiating new loan production, we have closed 37 loans totaling $1.1 billion, with an additional 9 loans in execution for $283 million, for a combined total of just over $1.4 billion. While the process has been gradual, we have steadily increased our loan book each quarter, and it now stands at $2.7 billion. Our strategy remains focused on middle-market lending with an average loan size of approximately $27 million. We have been focused on increasing diversification and avoiding loan size and investment concentrations that we deem too large for our equity capital base. This, in turn, will also allow us to maintain slightly lower cash balances.

Mike Mazzei: Thanks, David. Welcome to our Q1 2026 earnings call. I will keep my prepared remarks brief. As always, Andy will walk through the quarter's loan originations and portfolio activity. Since reinitiating new loan production, we have closed 37 loans totaling $1.1 billion, with an additional 9 loans in execution for $283 million, for a combined total of just over $1.4 billion. While the process has been gradual, we have steadily increased our loan book each quarter, and it now stands at $2.7 billion. Our strategy remains focused on middle-market lending with an average loan size of approximately $27 million. We have been focused on increasing diversification and avoiding loan size and investment concentrations that we deem too large for our equity capital base. This, in turn, will also allow us to maintain slightly lower cash balances.

Speaker #2: To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to David Palam, general counsel.

Speaker #3: Since reinitiating new loan production, we have closed 37 loans totaling $1.1 billion with an additional 9 loans in execution for 283 million. For a combined total of just over $1.4 billion.

Speaker #2: Please go ahead. Good morning and welcome to BrightSpire Capital's first quarter 2026 earnings conference call. We will refer to BrightSpire Capital as BrightSpire, B-R-S-P, or the company throughout this call.

David A. Palamé: Good morning, welcome to BrightSpire Capital's Q1 2026 Earnings Conference Call. We will refer to BrightSpire Capital as BrightSpire, BRST, or the company throughout this call. Speaking on the call today are the company's Chief Executive Officer, Michael J. Mazzei, President and Chief Operating Officer, Andy Witt, and Chief Financial Officer, Frank V. Saracino. Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements, which are based on management's current expectations, are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties could cause the company's business and financial results to differ materially. For a discussion of risks that could affect results, please see the Risk Factors section of our most recent 10-K and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time.

David Palamé: Good morning, welcome to BrightSpire Capital's Q1 2026 Earnings Conference Call. We will refer to BrightSpire Capital as BrightSpire, BRST, or the company throughout this call. Speaking on the call today are the company's Chief Executive Officer, Michael J. Mazzei, President and Chief Operating Officer, Andy Witt, and Chief Financial Officer, Frank V. Saracino. Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements, which are based on management's current expectations, are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties could cause the company's business and financial results to differ materially. For a discussion of risks that could affect results, please see the Risk Factors section of our most recent 10-K and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time.

Speaker #3: While the process has been gradual, we have steadily increased our loan book each quarter and it now stands at $2.7 billion. Our strategy remains focused on middle market lending with an average loan size of approximately $27 million.

Speaker #2: Speaking on the call today are the companies chief executive officer Mike Mazzi, president and chief operating officer Andy Witt, and chief financial officer Frank Saracino.

Speaker #3: We have been focused on increasing diversification and avoiding loan size and investment concentrations that we deem too large for our equity capital base. This in turn will also allow us to maintain slightly lower cash balances.

Speaker #3: Thus far, the overwhelming majority of new loans have been multifamily. Contributing to a more favorable property type exposure. During the quarter, our portfolio also benefited from payoffs and resolutions of office loans.

Michael J. Mazzei: Thus far, the overwhelming majority of new loans have been multifamily, contributing to a more favorable property type exposure. During the quarter, our portfolio also benefited from payoffs and resolutions of office loans. We expect a further reduction in our office loan exposure to occur this next quarter. As an aside, we also closed loans on hotel and industrial properties during Q1. However, overall, we expect multifamily loans to continue to comprise the majority of our activity in the medium term, with bridge loan demand being driven by valuation resets and increasing levels of sales transactions. This reflects lenders incentivizing borrowers with greater frequency to sell or refinance 2021 and 2022 vintage bridge or construction loans.

Mike Mazzei: Thus far, the overwhelming majority of new loans have been multifamily, contributing to a more favorable property type exposure. During the quarter, our portfolio also benefited from payoffs and resolutions of office loans. We expect a further reduction in our office loan exposure to occur this next quarter. As an aside, we also closed loans on hotel and industrial properties during Q1. However, overall, we expect multifamily loans to continue to comprise the majority of our activity in the medium term, with bridge loan demand being driven by valuation resets and increasing levels of sales transactions. This reflects lenders incentivizing borrowers with greater frequency to sell or refinance 2021 and 2022 vintage bridge or construction loans.

Speaker #3: We expect a further reduction in our office loan exposure to occur this next quarter. As an aside, we also closed loans on hotel and industrial properties during the first quarter.

Speaker #2: All information discussed on this call is as of today April 29th, 2026, and the company does not intend and undertakes no duty to update for future events or circumstances.

Speaker #3: However, overall, we expect multifamily loans to continue to comprise the majority of our activity in the medium term. With bridge loan demand being driven by valuation resets and increasing levels of sales transactions.

Speaker #2: In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental presentation which was released yesterday afternoon and is available on the company's website presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors.

Speaker #3: This reflects lenders' incentivizing borrowers with greater frequency to sell or refinance 2021 and 2022 vintage bridge or construction loans. It is worth noting that in particular, the Sunbelt markets are seeing very high demand for multifamily bridge lending as that region works to absorb vacancies and rent concessions over the next 12 to 18 months.

Michael J. Mazzei: It is worth noting that in particular, the Sun Belt markets are seeing very high demand for multifamily bridge lending as that region works to absorb vacancies and rent concessions over the next 12 to 18 months. As we look ahead, our priorities remain straightforward, and those are to redeploy capital from the watchlist and REO resolutions into new loans, to grow the loan book to $3.5 billion by year-end, and to execute a 5th CLO in H2 of the year. This plan positions us to cover the dividend by year-end. Achieving that goal will provide greater financial clarity, while the continued reduction in REO should remove credit uncertainties that may be overhanging the stock. Taken together, we are confident these actions will position BrightSpire to drive long-term shareholder value. With that, I will turn the call over to our President, Andy Witt. Andrew?

Mike Mazzei: It is worth noting that in particular, the Sun Belt markets are seeing very high demand for multifamily bridge lending as that region works to absorb vacancies and rent concessions over the next 12 to 18 months. As we look ahead, our priorities remain straightforward, and those are to redeploy capital from the watchlist and REO resolutions into new loans, to grow the loan book to $3.5 billion by year-end, and to execute a 5th CLO in H2 of the year. This plan positions us to cover the dividend by year-end. Achieving that goal will provide greater financial clarity, while the continued reduction in REO should remove credit uncertainties that may be overhanging the stock. Taken together, we are confident these actions will position BrightSpire to drive long-term shareholder value. With that, I will turn the call over to our President, Andy Witt. Andrew?

David A. Palamé: The company reported Q1 GAAP net income attributable to common stockholders of $4.8 million, or $0.03 per share, Distributable Earnings of $15.6 million, or $0.12 per share, and Adjusted Distributable Earnings of $18.2 million, or $0.14 per share. Current liquidity stands at $206 million, of which $58 million is unrestricted cash. The company also reported GAAP net book value of $7.05 per share and undepreciated book value of $8.24 per share as of 31 March 2026. During this call, management may refer to Distributable Earnings as DE. With that, I would now like to turn the call over to Mike.

David Palamé: The company reported Q1 GAAP net income attributable to common stockholders of $4.8 million, or $0.03 per share, Distributable Earnings of $15.6 million, or $0.12 per share, and Adjusted Distributable Earnings of $18.2 million, or $0.14 per share. Current liquidity stands at $206 million, of which $58 million is unrestricted cash. The company also reported GAAP net book value of $7.05 per share and undepreciated book value of $8.24 per share as of 31 March 2026. During this call, management may refer to Distributable Earnings as DE. With that, I would now like to turn the call over to Mike.

Speaker #3: As we look ahead, our priorities remain straightforward. And those are: to redeploy capital from the watchlist and REO resolutions into new loans, to grow the loan book to $3.5 billion by year-end, and to execute a fifth CLO in the second half of the year.

Speaker #3: This plan positions us to cover the dividend by year-end. Achieving that goal will provide greater financial clarity, while the continued reduction in REO should remove credit uncertainties that may be overhanging in the stock.

Speaker #2: The company also reported GAAP net book value of $7.05 per share and undepreciated book value of $8.24 per share as of March 31, 2026. Finally, during this call, management may refer to distributable earnings as DE.

Speaker #3: Taken together, we are confident these actions will position BrightSpire to drive long-term shareholder value. With that, I will turn the call over to our president, Andy Witt, Andrew.

Speaker #2: Thank you, Mike. Starting with our originations activity, it has been a busy start to the year despite the geopolitical issues in the Middle East.

Andy Witt: Thank you, Michael J. Mazzei. Starting with our originations activity, it has been a busy start to the year despite the geopolitical issues in the Middle East. Equity markets have largely taken the events in stride, and with the exception of a couple of weeks when decision-making slowed, the commercial real estate credit markets have been similarly resilient. In Q1 and subsequently, we closed on 8 loans totaling $311 million in commitments. Currently, we have 9 additional loans in execution totaling an incremental $283 million in commitments. In total, this year, we have closed or are in execution on 17 loans for total commitments of $594 million, 14 of which were multifamily. Transaction volume picked up in Q1.

Speaker #2: With that, I would now like to turn the call over to Mike.

Michael J. Mazzei: Thanks, David, and welcome to our Q1 2026 earnings call. I will keep my prepared remarks brief, and as always, Andy will walk through the quarter's loan originations and portfolio activity. Since reinitiating new loan production, we have closed 37 loans totaling $1.1 billion, with an additional 9 loans in execution for $283 million, for a combined total of just over $1.4 billion. While the process has been gradual, we have steadily increased our loan book each quarter, and it now stands at $2.7 billion. Our strategy remains focused on middle market lending with an average loan size of approximately $27 million. We have been focused on increasing diversification and avoiding loan size and investment concentrations that we deem too large for our equity capital base. This, in turn, will also allow us to maintain slightly lower cash balances.

Michael Mazzei: Thanks, David, and welcome to our Q1 2026 earnings call. I will keep my prepared remarks brief, and as always, Andy will walk through the quarter's loan originations and portfolio activity. Since reinitiating new loan production, we have closed 37 loans totaling $1.1 billion, with an additional 9 loans in execution for $283 million, for a combined total of just over $1.4 billion. While the process has been gradual, we have steadily increased our loan book each quarter, and it now stands at $2.7 billion. Our strategy remains focused on middle market lending with an average loan size of approximately $27 million. We have been focused on increasing diversification and avoiding loan size and investment concentrations that we deem too large for our equity capital base. This, in turn, will also allow us to maintain slightly lower cash balances.

Speaker #2: Equity markets have largely taken the events in stride. And with the exception of a couple of weeks when decision-making slowed, the commercial real estate credit markets have been similarly resilient.

Speaker #3: Since reinitiating new loan production, we have closed 37 loans totaling $1.1 billion, with an additional 9 loans in execution for $283 million, for a combined total of just over $1.4 billion.

Speaker #2: In the first quarter and subsequently, we closed on eight loans totaling $311 million in commitments. Currently, we have nine additional loans in execution totaling an incremental $283 million in commitments.

Speaker #2: In total, this year we have closed or are in execution on 17 loans for total commitments of $594 million, 14 of which were multifamily.

Speaker #2: Transaction volume picked up in the first quarter. We saw over 29 billion at the top end of the funnel, which represents an increase of over 50% versus the same period last year.

Andy Witt: We saw over $29 billion at the top end of the funnel, which represents an increase of over 50% versus the same period last year. It is worth noting that we are focused on the middle market opportunity, mostly between $20 million and $70 million, highlighting the breadth of transaction volume we're seeing at the top end of the funnel. Repayments during the quarter consisted of $169 million across 6 positions, including 2 risk rank 5 loans. 3 of the repayments were office loans, further reducing our office exposure to just over 20% of the loan portfolio. We expect to continue reducing office exposure, both nominally and as a percentage of our loan portfolio, throughout the remainder of 2026. Currently, the property underlying the Phoenix office loan, our largest office loan, is being marketed for sale.

Speaker #2: It is worth noting that we are focused on the middle market opportunity. Mostly, between 20 and 70 million dollars. Highlighting the breadth of transaction volume, we're seeing at the top end of the funnel.

Michael J. Mazzei: Thus far, the overwhelming majority of new loans have been multifamily, contributing to a more favorable property type exposure. During the quarter, our portfolio also benefited from payoffs and resolutions of office loans. We expect a further reduction in our office loan exposure to occur this next quarter. As an aside, we also closed loans on hotel and industrial properties during Q1. Overall, we expect multifamily loans to continue to comprise the majority of our activity in the medium term, with bridge loan demand being driven by valuation resets and increasing levels of sales transactions. This reflects lenders incentivizing borrowers with greater frequency to sell or refinance 2021 and 2022 vintage bridge or construction loans.

Michael Mazzei: Thus far, the overwhelming majority of new loans have been multifamily, contributing to a more favorable property type exposure. During the quarter, our portfolio also benefited from payoffs and resolutions of office loans. We expect a further reduction in our office loan exposure to occur this next quarter. As an aside, we also closed loans on hotel and industrial properties during Q1. Overall, we expect multifamily loans to continue to comprise the majority of our activity in the medium term, with bridge loan demand being driven by valuation resets and increasing levels of sales transactions. This reflects lenders incentivizing borrowers with greater frequency to sell or refinance 2021 and 2022 vintage bridge or construction loans.

Speaker #2: Repayments during the quarter consisted of $169 million, across six positions, including two risk rank five loans. Three of the repayments were office loans further reducing our office exposure to just over 20% of the loan portfolio.

Speaker #3: We expect a further reduction in our office loan exposure to occur this next quarter. As an aside, we also closed loans on hotel and industrial properties during the first quarter.

Speaker #2: We expect to continue reducing office exposure, both nominally and as a percentage of our loan portfolio throughout the remainder of 2026. Currently, the property underlying the Phoenix office loan, our largest office loan, is being marketed for sale.

Speaker #3: However, overall, we expect multifamily loans to continue to comprise the majority of our activity in the medium term, with bridge loan demand being driven by valuation resets and increasing levels of sales transactions.

Speaker #2: Our loan book at quarter-end was approximately $2.7 billion across 100 loans, a modest increase quarter over quarter. Our average loan balance is $27 million and our risk ranking is 3.1, consistent with the previous quarter.

Andy Witt: Our loan book at quarter-end was approximately $2.7 billion across 100 loans, a modest increase quarter-over-quarter. Our average loan balance is $27 million, and our risk ranking is 3.1, consistent with the previous quarter. Given the recent momentum, we expect to cross $3 billion in loans by approximately halfway through the year. Further, we anticipate our loan book will continue to grow in H2, targeting at least $3.5 billion loan portfolio by year-end. As it relates to portfolio management, during Q1 and subsequently, exposure to watchlist loan continues to move in the right direction. During Q1, we resolved 3 loans, including one property we took ownership of through foreclosure, bringing watchlist exposure down to $166 million or 6% of the loan portfolio.

Speaker #2: Given the recent momentum, we expect to cross $3 billion in loans by approximately halfway through the year. Further, we anticipate our loan book will continue to grow in the back half of the year, targeting at least $3.5 billion loan portfolio by year-end.

Michael J. Mazzei: It is worth noting that, in particular, the Sun Belt markets are seeing very high demand for multifamily bridge lending as that region works to absorb vacancies and rent concessions over the next 12 to 18 months. As we look ahead, our priorities remain straightforward, those are to redeploy capital from the watch list and REO resolutions into new loans, to grow the loan book to $3.5 billion by year-end, and to execute a fifth CLO in H2 of the year. This plan positions us to cover the dividend by year-end. Achieving that goal will provide greater financial clarity, while the continued reduction in REO should remove credit uncertainties that may be overhanging the stock. Taken together, we are confident these actions will position BrightSpire to drive long-term shareholder value. With that, I will turn the call over to our President, Andy Witt. Andrew?

Michael Mazzei: It is worth noting that, in particular, the Sun Belt markets are seeing very high demand for multifamily bridge lending as that region works to absorb vacancies and rent concessions over the next 12 to 18 months. As we look ahead, our priorities remain straightforward, those are to redeploy capital from the watch list and REO resolutions into new loans, to grow the loan book to $3.5 billion by year-end, and to execute a fifth CLO in H2 of the year. This plan positions us to cover the dividend by year-end. Achieving that goal will provide greater financial clarity, while the continued reduction in REO should remove credit uncertainties that may be overhanging the stock. Taken together, we are confident these actions will position BrightSpire to drive long-term shareholder value. With that, I will turn the call over to our President, Andy Witt. Andrew?

Speaker #2: As it relates to portfolio management, during the first quarter and subsequently, exposure to watchlist loan continues to move in the right direction. During the first quarter, we resolved three loans, including one property we took ownership of through foreclosure, bringing watchlist exposure down to $166 million, or 6% of the loan portfolio.

Speaker #2: We also downgraded and simultaneously resolved one multifamily mezzanine loan for $32 million. As of today, we have four loans on our watchlist for an aggregate value of $134 million.

Andy Witt: We also downgraded and simultaneously resolved 1 multifamily mezzanine loan for $32 million. As of today, we have 4 loans on our watchlist for an aggregate value of $134 million. Multifamily properties underlying 2 of the remaining 4 watchlist loans are under purchase and sale agreements, both of which are expected to close during the Q2. Following the sale of these 2 properties, our watchlist will consist of 2 positions: a Dallas office loan and an Austin multifamily loan with an aggregate gross book value of $67 million. The reduction in watchlist exposure, both completed and underway, in combination with new loan originations, are foundational to our loan portfolio growth plan.

Speaker #2: Multifamily properties underlying two of the remaining four watchlist loans are under purchase and sale agreements. Both of which are expected to close during the second quarter.

Speaker #2: Thank you, Mike. Starting with our originations activity, it has been a busy start to the year despite the geopolitical issues in the Middle East.

Andy Witt: Thank you, Mike. Starting with our originations activity, it has been a busy start to the year despite the geopolitical issues in the Middle East. Equity markets have largely taken the events in stride, with the exception of a couple of weeks when decision-making slowed, the commercial real estate credit markets have been similarly resilient. In Q1 and subsequently, we closed on 8 loans totaling $311 million in commitments. Currently, we have 9 additional loans in execution totaling an incremental $283 million in commitments. In total, this year we have closed or are in execution on 17 loans for total commitments of $594 million, 14 of which were multifamily. Transaction volume picked up in Q1.

Speaker #2: Following the sale of these two properties, our watchlist will consist of two positions: a Austin multifamily loan with an aggregate gross book value of $67 million.

Speaker #2: The reduction in watchlist exposure, both completed and underway, in combination with new loan originations, are foundational to our loan portfolio growth plan. While we continue to make progress on the portfolio, we recognize there are headwinds still ahead, particularly in overbuilt Sunbelt markets.

Andy Witt: While we continue to make progress on the portfolio, we recognize there are headwinds still ahead, particularly in overbuilt Sun Belt markets that are both challenged from a market fundamentals and policy perspective, particularly as it relates to immigration, which is pronounced in border states such as Texas and Arizona. As a result, these markets are experiencing rental rate and concession challenges. As Mike mentioned, it is in these same markets where we are seeing lenders lean on borrowers to sell underlying assets, resulting in a wave of sales, particularly in Texas. As for the REO portion of the portfolio, there are six positions totaling $336 million of gross carrying value. Two of the four multifamily properties are currently in the market for sale following the completion of value add business plans we've executed over the past 12 months.

Speaker #2: In total, this year we have closed or are in execution on 17 loans for total commitments of $594 million, 14 of which were multifamily.

Speaker #2: That are both challenged from a market fundamentals and policy perspective, particularly as it relates to immigration, which is pronounced in border states such as Texas and Arizona.

Speaker #2: Transaction volume picked up in the first quarter. We saw over 29 billion at the top end of the funnel, which represents an increase of over 50% versus the same period last year.

Andy Witt: We saw over $29 billion at the top end of the funnel, which represents an increase of over 50% versus the same period last year. It is worth noting that we are focused on the middle market opportunity, mostly between $20 and $70 million, highlighting the breadth of transaction volume we're seeing at the top end of the funnel. Repayments during the quarter consisted of $169 million across 6 positions, including 2 risk rank 5 loans. 3 of the repayments were office loans, further reducing our office exposure to just over 20% of the loan portfolio. We expect to continue reducing office exposure, both nominally and as a percentage of our loan portfolio, throughout the remainder of 2026. Currently, the property underlying the Phoenix office loan, our largest office loan, is being marketed for sale.

Speaker #2: As a result, these markets are experiencing rental rate and concession challenges. As Mike mentioned, it is in these same markets where we are seeing lenders lean on borrowers to sell underlying assets, resulting in a wave of sales, particularly in Texas.

Speaker #2: Repayments during the quarter consisted of $169 million across six positions, including two risk rank five loans. Three of the repayments were office loans further reducing our office exposure to just over 20% of the loan portfolio.

Speaker #2: As for the REO portion of the portfolio, there are six positions totaling $336 million. Of gross carrying value. Two of the four multifamily properties are currently in the market for sale, following the completion of value-add business plans we've executed over the past 12 months.

Speaker #2: The remaining two multifamily properties are currently undergoing value-add business plans, and we expect to be in a position to take them to market in late 2026 or early 2027.

Andy Witt: The remaining two multifamily properties are currently undergoing value add business plans. We expect to be in a position to take them to market in late 2026 or early 2027. The final two REO properties consist of the San Jose Hotel and the Santa Clara multifamily pre-development property. We continue to make progress on the San Jose Hotel property, driving operational performance while making physical improvements and upgrades to the property. The loan represents 43% of our current REO exposure with a carrying value of $143 million. Lastly, as it relates to our Santa Clara multifamily pre-development property, market conditions continue to evolve favorably as the Bay Area is achieving some of the strongest rental rate growth in the country, fueled by the AI boom. We anticipate taking this property to market later this year or very early in 2027.

Speaker #2: The final two REO properties consist of the San Jose Hotel and the Santa Clara multifamily pre-development property. We continue to make progress on the San Jose Hotel property, driving operational performance while making physical improvements and upgrades to the property.

Andy Witt: Our loan book at quarter-end was approximately $2.7 billion across 100 loans, a modest increase quarter-over-quarter. Our average loan balance is $27 million, and our risk ranking is 3.1, consistent with the previous quarter. Given the recent momentum, we expect to cross $3 billion in loans by approximately halfway through the year. We anticipate our loan book will continue to grow in H2, targeting at least $3.5 billion loan portfolio by year-end. As it relates to portfolio management, during Q1 and subsequently, exposure to watchlist loan continues to move in the right direction. During Q1, we resolved 3 loans, including 1 property we took ownership of through foreclosure, bringing watchlist exposure down to $166 million or 6% of the loan portfolio.

Speaker #2: The loan represents 43% of our current REO exposure, with a carrying value of $143 million. Lastly, as it relates to our Santa Clara multifamily pre-development property, market conditions, continue to evolve favorably as the Bay Area is achieving some of the strongest rental rate growth in the country.

Speaker #2: As it relates to portfolio management, during the first quarter and subsequently, exposure to watchlist loans continues to move in the right direction. During the first quarter, we resolved three loans, including one property we took ownership of through foreclosure, bringing watchlist exposure down to $166 million, or 6% of the loan portfolio.

Speaker #2: Fueled by the AI boom. We anticipate taking this property to market later this year, or very early in 2027. In closing, we made significant progress during the quarter and subsequently, in all phases of the business.

Andy Witt: In closing, we made significant progress during the quarter and subsequently in all phases of the business, and results were consistent with the expectations we set for the quarter. Looking ahead, our focus remains on growing the portfolio and increasing earnings over the course of the year. With that, I will turn the call over to Frank V. Saracino, our Chief Financial Officer.

Speaker #2: And results were consistent with the expectations we set for the quarter. Looking ahead, our focus remains on growing the portfolio and increasing earnings over the course of the year.

Speaker #2: We also downgraded and simultaneously resolved one multifamily mezzanine loan for $32 million. As of today, we have four loans on our watchlist for an aggregate value of $134 million.

Andy Witt: We also downgraded and simultaneously resolved one multifamily mezzanine loan for $32 million. As of today, we have four loans on our watch list for an aggregate value of $134 million. Multifamily properties underlying two of the remaining four watch list loans are under purchase and sale agreements, both of which are expected to close during Q2. Following the sale of these two properties, our watch list will consist of two positions: a Dallas office loan and an Austin multifamily loan with an aggregate gross book value of $67 million. The reduction in watch list exposure, both completed and underway, in combination with new loan originations, are foundational to our loan portfolio growth plan.

Speaker #2: With that, I will turn the call over to Frank Saracino, our Chief Financial Officer.

Speaker #2: Multifamily properties underlying two of the remaining four watchlist loans are under purchase and sale agreements. Both of which are expected to close during the second quarter.

Speaker #1: Thank you, Andy. And good morning, everyone. For the first quarter, we generated adjusted DE of $18.2 million or $0.14 per share. First quarter DE was $15.6 million or $0.12 per share.

Frank V. Saracino: Thank you, Andy, and good morning, everyone. For Q1, we generated adjusted DE of $18.2 million or $0.14 per share. Q1 DE was $15.6 million or $0.12 per share. DE includes a specific reserve of approximately $2.6 million. Additionally, we reported total company GAAP net income of $4.8 million or $0.03 per share. Quarter over quarter, total company GAAP net book value decreased to $7.05 per share from $7.30 in Q4. Undepreciated book value decreased to $8.24 per share from $8.44. The change is mainly attributable to equity granted as part of our stock compensation program and consistent with past practice. Additionally, the first vesting of our performance stock unit awards also contributed to this decrease.

Frank Saracino: Thank you, Andy, and good morning, everyone. For Q1, we generated adjusted DE of $18.2 million or $0.14 per share. Q1 DE was $15.6 million or $0.12 per share. DE includes a specific reserve of approximately $2.6 million. Additionally, we reported total company GAAP net income of $4.8 million or $0.03 per share. Quarter over quarter, total company GAAP net book value decreased to $7.05 per share from $7.30 in Q4. Undepreciated book value decreased to $8.24 per share from $8.44. The change is mainly attributable to equity granted as part of our stock compensation program and consistent with past practice. Additionally, the first vesting of our performance stock unit awards also contributed to this decrease.

Speaker #2: Following the sale of these two properties, our watchlist will consist of two positions: a Dallas office loan and an Austin multifamily loan with an aggregate gross book value of $67 million.

Speaker #1: DE includes a specific reserve of approximately $2.6 million. Additionally, we reported total company GAAP net income of $4.8 million or $0.03 per Quarter over quarter, total company GAAP net book value decreased to $7.05 per share, from $7.30 in the fourth quarter.

Andy Witt: While we continue to make progress on the portfolio, we recognize there are headwinds still ahead, particularly in overbuilt Sun Belt markets, that are both challenged from a market fundamentals and policy perspective, particularly as it relates to immigration, which is pronounced in border states such as Texas and Arizona. As a result, these markets are experiencing rental rate and concession challenges. As Michael mentioned, it is in these same markets where we are seeing lenders lean on borrowers to sell underlying assets, resulting in a wave of sales, particularly in Texas. As for the REO portion of the portfolio, there are 6 positions totaling $336 million of gross carrying value. Two of the 4 multifamily properties are currently in the market for sale following the completion of value add business plans we've executed over the past 12 months.

Speaker #1: Unappreciated book value decreased to $8.24 per share, from $8.44. The change is mainly attributable to equity granted as part of our stock compensation program and consistent with past practice.

Speaker #2: That are both challenged from a market fundamentals and policy perspective, particularly as it relates to immigration, which is pronounced in border states such as Texas and Arizona.

Speaker #1: Additionally, the first vesting of our performance stock unit awards also contributed to this decrease. Going forward, PSU vesting will be an annual first quarter occurrence.

Frank V. Saracino: Going forward, PSU vesting will be an annual Q1 occurrence. Looking at reserves, during Q1, we recorded a specific CECL reserve of approximately $2.6 million. As Andy mentioned earlier, we downgraded and simultaneously resolved 1 mezzanine loan and as a result, charged off the associated reserves. Our general CECL provision decreased slightly to $87 million or 306 basis points on total loan commitments versus $88 million or 315 basis points reported in Q4. Our debt-to-assets ratio is 68%, and our debt-to-equity ratio is 2.4x. Lastly, our liquidity as of today stands at approximately $206 million. This includes $58 million of cash, $120 million available under our credit facility, and approximately $28 million of approved but undrawn borrowings available on our warehouse lines.

Frank Saracino: Going forward, PSU vesting will be an annual Q1 occurrence. Looking at reserves, during Q1, we recorded a specific CECL reserve of approximately $2.6 million. As Andy mentioned earlier, we downgraded and simultaneously resolved 1 mezzanine loan and as a result, charged off the associated reserves. Our general CECL provision decreased slightly to $87 million or 306 basis points on total loan commitments versus $88 million or 315 basis points reported in Q4. Our debt-to-assets ratio is 68%, and our debt-to-equity ratio is 2.4x. Lastly, our liquidity as of today stands at approximately $206 million. This includes $58 million of cash, $120 million available under our credit facility, and approximately $28 million of approved but undrawn borrowings available on our warehouse lines.

Speaker #1: Looking at reserves, during the first quarter, we recorded a specific CISO reserve of approximately $2.6 million. As Andy mentioned earlier, we downgraded and simultaneously resolved one mezzanine loan and, as a result, chart dropped the associated reserves.

Speaker #2: As for the REO portion of the portfolio, there are six positions totaling $336 million of gross carrying value. Two of the four multifamily properties are currently on the market for sale, following the completion of value-add business plans we've executed over the past 12 months.

Speaker #1: Our general CISO provision decreased slightly to $87 million or $306 basis points on total loan commitments versus $88 million or $315 basis points reported in the fourth quarter.

Speaker #1: Our debt-to-assets ratio is 68%, and our debt-to-equity ratio is 2.4 times. Lastly, our liquidity as of today stands at approximately $206 million. This includes $58 million of cash, $120 million available under our credit facility, and approximately $28 million of approved but undrawn borrowings available on our warehouse lines.

Speaker #2: The remaining two multifamily properties are currently undergoing value-add business plans, and we expect to be in a position to take them to market in late 2026 or early 2027.

Andy Witt: The remaining two multifamily properties are currently undergoing value add business plans, and we expect to be in a position to take them to market in late 2026 or early 2027. The final two REO properties consist of the San Jose Hotel and the Santa Clara Multifamily Pre-Development property. We continue to make progress on the San Jose Hotel property, driving operational performance while making physical improvements and upgrades to the property. The loan represents 43% of our current REO exposure with a carrying value of $143 million. Lastly, as it relates to our Santa Clara Multifamily Pre-Development property, market conditions continue to evolve favorably as the Bay Area is achieving some of the strongest rental rate growth in the country, fueled by the AI boom. We anticipate taking this property to market later this year or very early in 2027.

Speaker #1: This concludes our prepared remarks, and with that, let's open it up for questions. Operator?

Frank V. Saracino: This concludes our prepared remarks. With that, let's open it up for questions. Operator?

Frank Saracino: This concludes our prepared remarks. With that, let's open it up for questions. Operator?

Speaker #3: We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: Our first question today is from Timothy D'Agostino with B. Riley Securities. Please go ahead.

Speaker #2: The loan represents 43% of our current REO exposure, with a carrying value of $143 million. Lastly, as it relates to our Santa Clara multifamily pre-development property, market conditions continue to evolve favorably as the Bay Area is achieving some of the strongest rental rate growth in the country, fueled by the AI boom.

Speaker #3: To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question today is from Timothy D'Agostino with B-Raleigh Securities.

Speaker #2: We anticipate taking this property to market later this year, or very early in 2027. In closing, we made significant progress during the quarter and subsequently, in all phases of the business, and results were consistent with the expectations we set for the quarter.

Operator: Our first question today is from Timothy D'Agostino with B. Riley Securities. Please go ahead.

Speaker #3: Please go ahead.

Speaker #4: Yeah, hi. Good morning and thank you for taking the question. I guess for me, it'd be interesting to hear how the investment landscape and the market is in the second quarter compared to the first quarter.

Timothy D'Agostino: Yeah. Hi, good morning, and thanks for taking the question. I guess for me, it'd be interesting to hear how the investment landscape and, you know, the market is in Q2 compared to Q1. You know, obviously 10-year Treasury was heightened kind of in May, and it'd just be good to hear, you know, the opportunity out there. Is your pipeline growing in Q2? Thank you.

Speaker #4: Obviously, 10-year Treasury was heightened kind of in May, and it'd just be good to hear the opportunity out there. Is your pipeline growing in the second quarter?

Speaker #2: Looking ahead, our focus remains on growing the portfolio and increasing earnings over the course of the year. With that, I will turn the call over to Frank Saracino, our Chief Financial Officer.

Speaker #4: Thank you.

Speaker #5: Hey, thank you. It's Mike. Thank you for the question. As Andy alluded to in his opening, we did see a little bit of a pause given what was going on in private credit, given what's going on geopolitically.

Michael J. Mazzei: Hey, thank you. It's Mike. Thank you for the question. As Andy alluded to in his opening remarks, we did see a little bit of a pause given what was going on in private credit, given what's going on geopolitically, but that was pretty brief. It got pretty much right back on track after about 2 or 3 weeks. Overall, the market is doing pretty well. You're seeing spreads remain tight. We did not see a gap out in spreads that we saw in pricing in certain sectors in private credit. Real estate spreads continue to stay resilient. We kinda hit a wall on how tight we've gone. Everything is getting done pretty much for multifamily around the mid 200s, plus or minus, 10 basis points. We are seeing some good response in the capital markets.

Mike Mazzei: Hey, thank you. It's Mike. Thank you for the question. As Andy alluded to in his opening remarks, we did see a little bit of a pause given what was going on in private credit, given what's going on geopolitically, but that was pretty brief. It got pretty much right back on track after about 2 or 3 weeks. Overall, the market is doing pretty well. You're seeing spreads remain tight. We did not see a gap out in spreads that we saw in pricing in certain sectors in private credit. Real estate spreads continue to stay resilient. We kinda hit a wall on how tight we've gone. Everything is getting done pretty much for multifamily around the mid 200s, plus or minus, 10 basis points. We are seeing some good response in the capital markets.

Speaker #1: Thank you, Andy. And good morning, everyone. For the first quarter, we generated adjusted DE of $18.2 million, or $0.14 per share. First quarter DE was $15.6 million, or $0.12 per share.

Frank V. Saracino: Thank you, Andy, and good morning, everyone. For the first quarter, we generated Adjusted DE of $18.2 million or $0.14 per share. First quarter DE was $15.6 million or $0.12 per share. DE includes a specific reserve of approximately $2.6 million. Additionally, we reported total company GAAP net income of $4.8 million or $0.03 per share. Quarter over quarter, total company GAAP net book value decreased to $7.05 per share from $7.30 in the Q4. Undepreciated book value decreased to $8.24 per share from $8.44. The change is mainly attributable to equity granted as part of our stock compensation program and consistent with past practice. Additionally, the first vesting of our performance stock unit awards also contributed to this decrease.

Frank Saracino: Thank you, Andy, and good morning, everyone. For the first quarter, we generated Adjusted DE of $18.2 million or $0.14 per share. First quarter DE was $15.6 million or $0.12 per share. DE includes a specific reserve of approximately $2.6 million. Additionally, we reported total company GAAP net income of $4.8 million or $0.03 per share. Quarter over quarter, total company GAAP net book value decreased to $7.05 per share from $7.30 in the Q4. Undepreciated book value decreased to $8.24 per share from $8.44. The change is mainly attributable to equity granted as part of our stock compensation program and consistent with past practice. Additionally, the first vesting of our performance stock unit awards also contributed to this decrease.

Speaker #5: But that was pretty brief. It got pretty much right back on track after about two or three weeks. Overall, the market is doing pretty well.

Speaker #1: DE includes a specific reserve of approximately 2.6 million dollars. Additionally, we reported total company GAAP net income of 4.8 million or 3 cents per share.

Speaker #5: You're seeing spreads remain tight. We did not see a gap out in spreads that we saw in pricing in certain sectors in private credit.

Speaker #1: Quarter over quarter, total company GAAP net book value decreased to $7.05 per share, from $7.30 in the fourth quarter. Unappreciated book value decreased to $8.24 per share, from $8.44.

Speaker #5: Real estate spreads continue to stay resilient. We kind of hit a wall on how tight we've gone. Everything is getting done pretty much for multifamily around the mid-200s plus or minus 10 basis points.

Speaker #1: The change is mainly attributable to equity granted as part of our stock compensation program and consistent with past practice. Additionally, the first vesting of our performance stock unit awards also contributed to this decrease.

Speaker #5: We are seeing some good response in the capital markets. We're seeing CRE, CLO transactions with price talk on the AAAs. At 135, I think that's 10 tighter.

Michael J. Mazzei: We're seeing CRE, CLO transactions with price talk on the AAA at $135. I think that's 10 tighter than where we printed in January before the Iran affair started. Market's pretty much on track. Pipeline looks good. As Andy mentioned, subsequent to quarter end, we've got a lot of stuff in execution, over $300 million in loans in execution now for closing. We're expecting to hit the $3 billion mark mid-year. Right now, things are, things are pretty calm. Pipeline looks good. The flow looks good. We also mentioned that, you know, we're seeing a lot of lenders leaning on incentivizing, maybe I should say, borrowers to get to the market, either vis-à-vis short sales, foreclosures or, that's happening tremendously in Texas.

Mike Mazzei: We're seeing CRE, CLO transactions with price talk on the AAA at $135. I think that's 10 tighter than where we printed in January before the Iran affair started. Market's pretty much on track. Pipeline looks good. As Andy mentioned, subsequent to quarter end, we've got a lot of stuff in execution, over $300 million in loans in execution now for closing. We're expecting to hit the $3 billion mark mid-year. Right now, things are, things are pretty calm. Pipeline looks good. The flow looks good. We also mentioned that, you know, we're seeing a lot of lenders leaning on incentivizing, maybe I should say, borrowers to get to the market, either vis-à-vis short sales, foreclosures or, that's happening tremendously in Texas.

Speaker #5: Then where we printed in January, before the Iran affair started. So market's pretty much on track. Pipeline looks good. As Andy mentioned, subsequent to quarter end, we've got a lot of stuff in execution.

Speaker #1: Going forward, PSU vesting will be an annual first quarter occurrence. Looking at reserves, during the first quarter, we recorded a specific CISO reserve of approximately 2.6 million dollars.

Frank V. Saracino: Going forward, PSU vesting will be an annual Q1 occurrence. Looking at reserves, during Q1, we recorded a specific CECL reserve of approximately $2.6 million. As Andy mentioned earlier, we downgraded and simultaneously resolved one mezzanine loan, and as a result, charged off the associated reserves. Our general CECL provision decreased slightly to $87 million, or 306 basis points on total loan commitments versus $88 million or 315 basis points reported in Q4. Our debt-to-assets ratio is 68%, and our debt-to-equity ratio is 2.4 times. Lastly, our liquidity as of today stands at approximately $206 million. This includes $58 million of cash, $120 million available under our credit facility, and approximately $28 million of approved but undrawn borrowings available on our warehouse lines.

Frank Saracino: Going forward, PSU vesting will be an annual Q1 occurrence. Looking at reserves, during Q1, we recorded a specific CECL reserve of approximately $2.6 million. As Andy mentioned earlier, we downgraded and simultaneously resolved one mezzanine loan, and as a result, charged off the associated reserves. Our general CECL provision decreased slightly to $87 million, or 306 basis points on total loan commitments versus $88 million or 315 basis points reported in Q4. Our debt-to-assets ratio is 68%, and our debt-to-equity ratio is 2.4 times. Lastly, our liquidity as of today stands at approximately $206 million. This includes $58 million of cash, $120 million available under our credit facility, and approximately $28 million of approved but undrawn borrowings available on our warehouse lines.

Speaker #1: As Andy mentioned earlier, we downgraded and simultaneously resolved one mezzanine loan and, as a result, chart dropped the associated reserves. Our general CISO provision decreased slightly to 87 million dollars or 306 basis points on total loan commitments versus 88 million or 315 basis points reported in the fourth quarter.

Speaker #5: Over $300 million in loans in execution now. For closing. So we're expecting to hit the $3 billion mark mid-year. And right now, things are pretty calm.

Speaker #5: Pipeline looks good. The flow looks good. We also mentioned that we're seeing a lot of lenders leaning on incentivizing maybe, I should say, borrowers to get to the market, either vis-à-vis short sales for closures or that's happening tremendously in Texas.

Speaker #1: Our debt-to-assets ratio is 68%, and our debt-to-equity ratio is 2.4 times. Lastly, our liquidity as of today stands at approximately 206 million dollars. This includes 58 million of cash, 120 million available under our credit facility, and approximately 28 million of approved but undrawn borrowings available on our warehouse lines.

Speaker #5: Right now, we're seeing a lot of activity there. A lot of price resets. And in that, we're seeing opportunities for new loans.

Michael J. Mazzei: Right now, we're seeing a lot of activity there, a lot of price resets. In that, we're seeing opportunities for new loans.

Mike Mazzei: Right now, we're seeing a lot of activity there, a lot of price resets. In that, we're seeing opportunities for new loans.

Speaker #1: This concludes our prepared remarks, and with that, let's open it up for questions. Brader.

Frank V. Saracino: This concludes our prepared remarks, and with that, let's open it up for questions. Brad?

Frank Saracino: This concludes our prepared remarks, and with that, let's open it up for questions. Brad?

Speaker #1: Okay, great. Thank you so much. And then I guess just as a second question, you had mentioned on the call that the San Francisco area is performing better from the AI boom.

Timothy D'Agostino: Okay, great. Thank you so much. Then I guess just as a second question, you had mentioned on the call that, you know, the San Francisco area is performing better from the AI boom. Is that true, you know, across multifamily, office, and industrial? I guess it'd just be interesting to get a little bit more color on, you know, per asset class in that area, because I have heard that before that, you know, San Francisco is doing better with the AI boom. Thank you.

Speaker #3: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question today is from Timothy D'Agostino with B. Riley Securities. Please go ahead.

Operator: We will now begin the question and answer session. To ask a question you may press star then one on your telephone keypad .At this time, we will pause momentarily to assemble our roster. Our first question today is from Timothy D'Agostino with B. Riley Securities. Please go ahead.

Speaker #1: And is that true across multifamily office and industrial? I guess it would just be interesting to get a little bit more color on per asset class in that area.

Speaker #1: Because I have heard that before that San Francisco is doing better with the AI boom. Thank you.

Speaker #5: Yeah, I would say San Francisco and the Bay Area even there was a commentary by Green Street, I think, last night that even Oakland is starting to see some positive tailwind.

Michael J. Mazzei: Yeah. I would say San Francisco and the Bay Area, even there was a commentary by Green Street, I think last night, that even Oakland is starting to see some positive tailwinds. On the resi side, absolutely. If you look at rent increases around the country, I think San Francisco is leading the way even above New York City. With positive rent growth. We also see the same thing in office. You're seeing a lot of activity in AI where startup companies are starting off with a small amount of square footage year 1, and they get a second round of financing if they get traction on their strategy, and they're coming back for 20,000, 25,000 square feet.

Mike Mazzei: Yeah. I would say San Francisco and the Bay Area, even there was a commentary by Green Street, I think last night, that even Oakland is starting to see some positive tailwinds. On the resi side, absolutely. If you look at rent increases around the country, I think San Francisco is leading the way even above New York City. With positive rent growth. We also see the same thing in office. You're seeing a lot of activity in AI where startup companies are starting off with a small amount of square footage year 1, and they get a second round of financing if they get traction on their strategy, and they're coming back for 20,000, 25,000 square feet.

Speaker #3: Please go ahead.

Speaker #5: So on the resy side, absolutely. If you look at rent increases around the country, I think San Francisco is leading the way even above New York City.

Speaker #4: Yeah, hi. Good morning, and thank you for taking the question. I guess for me, it'd be interesting to hear how the investment landscape and, you know, the market is in the second quarter compared to the first quarter.

Timothy D'Agostino: Yeah. Hi, good morning, and thanks for taking the question. I guess for me, it'd be interesting to hear how the investment landscape and, you know, the market is in Q2 compared to Q1. You know, obviously 10-year Treasury was heightened, kind of in May, and it'd just be good to hear, you know, the opportunity out there. Is your pipeline growing in Q2? Thank you.

Speaker #5: With positive rent growth. And we also see the same thing in office. You're seeing a lot of activity in AI where startup companies are starting off with a small amount of square footage, year one, and they get a second round of financing if they get traction.

Speaker #4: you know, obviously, 10-year Treasury was heightened, kind of in May, and it'd just be good to hear, you know, the opportunity out there. Is your pipeline growing in the second quarter?

Speaker #4: thank you.

Speaker #5: Hey, thank you. It's Mike. Thank you for the question. we, as Andy alluded to in his opening remarks, we, we did see a little bit of a pause, given what was going on in private credit, given what's going on geopolitically.

Michael J. Mazzei: Hey, thank you. It's Mike. Thank you for the question. As Andy Witt alluded to in his opening remarks, we did see a little bit of a pause given what was going on in private credit, given what's going on geopolitically, but that was pretty brief. It got pretty much right back on track after about two or three weeks. Overall, the market is doing pretty well. You're seeing spreads remain tight. We did not see a gap out in spreads that we saw in pricing in certain sectors in private credit. Real estate spreads continue to stay resilient. We kind of hit a wall on how tight we've gone. Everything is getting done pretty much for multifamily

Michael Mazzei: Hey, thank you. It's Mike. Thank you for the question. As Andy Witt alluded to in his opening remarks, we did see a little bit of a pause given what was going on in private credit, given what's going on geopolitically, but that was pretty brief. It got pretty much right back on track after about two or three weeks. Overall, the market is doing pretty well. You're seeing spreads remain tight. We did not see a gap out in spreads that we saw in pricing in certain sectors in private credit. Real estate spreads continue to stay resilient. We kind of hit a wall on how tight we've gone. Everything is getting done pretty much for multifamily.

Speaker #5: On their strategy and they're coming back for 20,000, 25,000 square feet. So I think you're seeing office leasing in San Francisco doing better than it was pre-2019.

Michael J. Mazzei: I think you're seeing office leasing in San Francisco doing better than it was pre-2019. We also think that the same effect is gonna be in the lodging sector. That sector has been dormant for quite a while. San Francisco was kind of like on a no-fly list for a few years now. Given what's gone on with the new mayor of San Francisco, who's done a miraculous job in turning that city around, and what's going on AI, I think generally people are more bullish on San Francisco, yes.

Mike Mazzei: I think you're seeing office leasing in San Francisco doing better than it was pre-2019. We also think that the same effect is gonna be in the lodging sector. That sector has been dormant for quite a while. San Francisco was kind of like on a no-fly list for a few years now. Given what's gone on with the new mayor of San Francisco, who's done a miraculous job in turning that city around, and what's going on AI, I think generally people are more bullish on San Francisco, yes.

Speaker #5: But that was pretty brief. it got pretty much right back on track after about two or three weeks. Overall, the market is doing pretty well.

Speaker #5: We also think that the same effect is going to be in the lodging sector. That sector has been dormant for quite a while. San Francisco was kind of like on a no-fly list for a few years now.

Speaker #5: You're seeing spreads remain tight. We did not see a gap out in spreads that we saw in pricing in certain sectors in private credit.

Speaker #5: But given what's gone on with the new mayor of San Francisco, who's done a miraculous job in turning that city around, and what's going on AI, I think generally people are more bullish on San Francisco, yes.

Speaker #5: real estate spreads continue to stay resilient. we, we kind of hit a wall on how tight we've gone. Everything is getting done pretty much for multifamily around the mid-200s, plus or minus, 10 basis points.

Speaker #1: And then sorry if I could just ask a follow-up question there. Is there any tailwinds being drawn to the San Jose Hotel from that?

Timothy D'Agostino: Sorry, if I could just ask a follow-up question there. Is there any tailwinds being drawn to the San Jose hotel from that, or not as much?

Michael J. Mazzei: Around the mid-200s, plus or minus 10 basis points. We are seeing some good response in the capital markets. We are seeing CRE, CLO transactions with price talk on the triple As at 135. I think that is 10 tighter than where we printed in January before the Iran affair started. Market's pretty much on track. Pipeline looks good. As Andy mentioned, subsequent to quarter end, we have got a lot of stuff in execution, over $300 million in loans in execution now for closing. We are expecting to hit the $3 billion mark mid-year. Right now, things are pretty calm. Pipeline looks good, the flow looks good.

Michael Mazzei: Around the mid-200s, plus or minus 10 basis points. We are seeing some good response in the capital markets. We are seeing CRE, CLO transactions with price talk on the triple As at 135. I think that is 10 tighter than where we printed in January before the Iran affair started. Market's pretty much on track. Pipeline looks good. As Andy mentioned, subsequent to quarter end, we have got a lot of stuff in execution, over $300 million in loans in execution now for closing. We are expecting to hit the $3 billion mark mid-year. Right now, things are pretty calm. Pipeline looks good, the flow looks good.

Timothy D'Agostino: Sorry, if I could just ask a follow-up question there. Is there any tailwinds being drawn to the San Jose hotel from that, or not as much?

Speaker #5: We are seeing some good response in the capital markets. We're seeing, CRE, CLO transactions with price talk on the AAAs, at 135. I think that's 10 tighter than where we printed in January, before, the Iran, affair started.

Speaker #1: Or not as much?

Speaker #5: Not as much right now. We're still very largely dependent upon group business. We're still going through our CapEx program and upgrading the hotel. We had some very serious events occur with the Super Bowl and March Madness NCAAs.

Michael J. Mazzei: Not as much right now. We're still very largely dependent upon group business. We're still going through our CapEx program and upgrading the hotel. We had some very, very serious events occur with the Super Bowl and March Madness NCAA. The hotel handled those very well. We did very well with those. We have FIFA coming, as well as another event in July, the CrossFit national championship. That should also be a tailwind for us. We're not yet seeing that transient business traveler yet. We're seeing a lot better in resorts, in hotels because of the amount of money that the baby boomers have in terms of discretionary income. We need a pickup in transient overnight stays to really get us to the NOI level that we want.

Mike Mazzei: Not as much right now. We're still very largely dependent upon group business. We're still going through our CapEx program and upgrading the hotel. We had some very, very serious events occur with the Super Bowl and March Madness NCAA. The hotel handled those very well. We did very well with those. We have FIFA coming, as well as another event in July, the CrossFit national championship. That should also be a tailwind for us. We're not yet seeing that transient business traveler yet. We're seeing a lot better in resorts, in hotels because of the amount of money that the baby boomers have in terms of discretionary income. We need a pickup in transient overnight stays to really get us to the NOI level that we want.

Speaker #5: So market's pretty much on track. Pipeline looks good. as Andy mentioned, subsequent to, quarter end, we've got a lot of stuff in, in, in execution.

Speaker #5: The hotel handled those very well. We did very well with those. We have FIFA coming. As well as another event in July, the CrossFit National Champions Championship.

Speaker #5: over $300 million in loans in execution now, for closing. So we're expecting to hit the $3 billion mark, mid-year. And right now, things are things are pretty calm.

Speaker #5: So that should also be a tailwind for us. But we're not yet seeing that transient business traveler yet. We're seeing a lot better in resorts and hotels because of the amount of money that the baby boomers have in terms of discretionary income.

Speaker #5: Pipeline looks good. The flow looks good. We also mentioned that, you know, we're seeing a lot of lenders leaning on in-incentivizing maybe, I should say, borrowers to get to the market, either vis-à-vis short sales for closures or, that's happening tremendously in Texas.

Michael J. Mazzei: We also mentioned that, you know, we're seeing a lot of lenders leaning on incentivizing, maybe I should say, borrowers to get to the market either vis-à-vis short sales, foreclosures. That's happening tremendously in Texas. Right now we're seeing a lot of activity there, a lot of price resets. In that, we're seeing opportunities for new loans.

Michael Mazzei: We also mentioned that, you know, we're seeing a lot of lenders leaning on incentivizing, maybe I should say, borrowers to get to the market either vis-à-vis short sales, foreclosures. That's happening tremendously in Texas. Right now we're seeing a lot of activity there, a lot of price resets. In that, we're seeing opportunities for new loans.

Speaker #5: But we need a pickup in transient overnight stays to really get us to the NOI level that we want. But as we said, we intend to hold that asset.

Michael J. Mazzei: As we said, we intend to hold that asset through the balance of the year and market it at the end of this year or beginning of next year.

Mike Mazzei: As we said, we intend to hold that asset through the balance of the year and market it at the end of this year or beginning of next year.

Speaker #5: Through the balance of the year and market it at the end of this year, beginning of next year.

Speaker #5: right now, we're seeing a lot of activity there, a lot of price resets. And in that, we're seeing opportunities for new loans.

Speaker #1: Okay, great. Thank you so much for the color today.

Timothy D'Agostino: Okay, great. Thank you so much for the color today.

Speaker #2: The next question is from Chris Mueller with Citizens. Please go ahead.

Operator: The next question is from Chris Muller with Citizens. Please go ahead.

Timothy D'Agostino: Okay, great. Thank you so much. I guess just as a second question, you had mentioned with Paul that, you know, the San Francisco area is performing better from the AI boom. Is that true, you know, across multifamily, office, and industrial? I guess it'd just be interesting to get a little bit more color on, you know, per asset class in that area, because I have heard that before that, you know, San Francisco is doing better with the AI boom. Thank you.

Speaker #1: Okay, great. Thank you so much. And then, I guess just as a second question, you, you had mentioned in the call that, you know, the San Francisco area is, is performing better, from the AI boom.

Speaker #4: Hey guys, thanks for taking the questions. So it's great to see the expected REO sales and also the five-rated loan repayment and expected underlying property sales there.

Chris Muller: Hey, guys. Thanks for taking the questions. It's great to see the expected REO sales and also the five-rated loan repayment and expected underlying property sales there. It looks like that's gonna clean up the rest of the five-rated loans. I guess first off, am I reading into that correctly? Will there be any realized losses associated with those subsequent activity and that will hit Q2 earnings?

Speaker #1: And i-is that true, you know, across multifamily office and industrial? I, I guess it would just be interesting to get a little bit more color on, you know, per asset class in that area, because I have heard that before that, you know, San Francisco is doing better with the AI boom.

Speaker #4: And it looks like that's going to clean up the rest of the five-rated loans. So I guess first off, am I reading into that correctly?

Speaker #4: And then will there be any realized losses associated with those subsequent activity that will hit second quarter earnings?

Speaker #1: Thank you.

Speaker #5: Well, on the properties that we have up for sale now in REO, those bids are coming in now. And so the answer is we'll find out.

Speaker #5: Yeah, I would say San Francisco, and the Bay Area, even there was a commentary by Green Street, I think, last night, that even Oakland is starting to see some, some positive tailwinds.

Michael J. Mazzei: Yeah. I would say San Francisco and the Bay Area, even there was a commentary by Green Street, I think last night, that even Oakland is starting to see some positive tailwinds. On the resi side, absolutely. If you look at rent increases around the country, I think San Francisco is leading the way, even above New York City, with positive rent growth. We also see the same thing in office. You're seeing a lot of activity in AI, where startup companies are starting off with a small amount of square footage year 1, and they get a second round of financing if they get traction on their strategy, and they're coming back for 20,000, 25,000 square feet.

Michael Mazzei: Yeah. I would say San Francisco and the Bay Area, even there was a commentary by Green Street, I think last night, that even Oakland is starting to see some positive tailwinds. On the resi side, absolutely. If you look at rent increases around the country, I think San Francisco is leading the way, even above New York City, with positive rent growth. We also see the same thing in office. You're seeing a lot of activity in AI, where startup companies are starting off with a small amount of square footage year 1, and they get a second round of financing if they get traction on their strategy, and they're coming back for 20,000, 25,000 square feet.

Michael J. Mazzei: Well, on the properties that we have up for sale now, in REO, those bids are coming in now. The answer is we'll find out. We think we're pretty close to the pin, but as Andy alluded to, there's a lot of supply coming in those markets. One thing that I want to highlight is as we wind down and making a magnificent headway on the watch list, there are still areas of the country, particularly in the Southwest, as Andy mentioned on his prepared remarks, that are experiencing a lot of softness. The Dallas-Fort Worth market seems to be tightening. It seems to be coming out of a trough. We could see a potential tightening of rent concessions over the next 6 months.

Mike Mazzei: Well, on the properties that we have up for sale now, in REO, those bids are coming in now. The answer is we'll find out. We think we're pretty close to the pin, but as Andy alluded to, there's a lot of supply coming in those markets. One thing that I want to highlight is as we wind down and making a magnificent headway on the watch list, there are still areas of the country, particularly in the Southwest, as Andy mentioned on his prepared remarks, that are experiencing a lot of softness. The Dallas-Fort Worth market seems to be tightening. It seems to be coming out of a trough. We could see a potential tightening of rent concessions over the next 6 months.

Speaker #5: We think we're pretty close to the pin, but as Andy alluded to, there's a lot of supply coming in those markets. And one thing that I want to highlight is as we wind down and we're getting making a magnificent headway on the watch list, there are still areas of the country, particularly in the Southwest, as Andy mentioned on his prepared remarks, that are experiencing a lot of softness.

Speaker #5: So on the resy side, absolutely. If you look at rent increases around the country, I think San Francisco is leading the way, even above, New York City.

Speaker #5: with positive, rent growth. And we also see the same thing in office. You're seeing, a lot of, activity in AI where startup companies are starting off with a small amount of square footage, year one, and they get a second round of financing if they get traction, on their on their strategy.

Speaker #5: The Dallas-Fort Worth market seems to be tightening. It seems to be coming out of a trough. We could see a potential tightening of rent concessions over the next six months.

Speaker #5: And they're coming back for 20,000, 25,000 square feet. So I think you're seeing office leasing in San Francisco doing better than it was pre-2019.

Michael J. Mazzei: I think you're seeing office leasing in San Francisco doing better than it was pre-2019. We also think that the same effect is gonna be in the lodging sector. That sector has been dormant for quite a while. San Francisco was kind of like on a no-fly list for a few years now. Given what's gone on with the new mayor of San Francisco, who's done a miraculous job in turning that city around and what's going on in AI, I think generally people are more bullish on San Francisco, yes.

Michael Mazzei: I think you're seeing office leasing in San Francisco doing better than it was pre-2019. We also think that the same effect is gonna be in the lodging sector. That sector has been dormant for quite a while. San Francisco was kind of like on a no-fly list for a few years now. Given what's gone on with the new mayor of San Francisco, who's done a miraculous job in turning that city around and what's going on in AI, I think generally people are more bullish on San Francisco, yes.

Speaker #5: However, you move to markets like Arizona, and Vegas, and particularly Arizona, we're seeing very few asset sales. So we have an asset in Mesa that we're selling right now in the REO.

Michael J. Mazzei: You move to markets like Arizona and Vegas, and particularly Arizona, we're seeing very few asset sales. We have an asset in Mesa that we're selling right now in the REO. The bids are due next week, there have been very, very few, I think maybe 5% of asset sales relative to the peak of asset transactions in, like, 2022. I think asset sales in Arizona are kind of like the 2009 levels. That market has been more slow to recover. We've got a lot of vacancy and a lot of absorption that needs to be dealt with, and that's probably gonna take another 12 to 18 months. We have eyes. We've made some new loans in Arizona at reset basis that we really like.

Mike Mazzei: You move to markets like Arizona and Vegas, and particularly Arizona, we're seeing very few asset sales. We have an asset in Mesa that we're selling right now in the REO. The bids are due next week, there have been very, very few, I think maybe 5% of asset sales relative to the peak of asset transactions in, like, 2022. I think asset sales in Arizona are kind of like the 2009 levels. That market has been more slow to recover. We've got a lot of vacancy and a lot of absorption that needs to be dealt with, and that's probably gonna take another 12 to 18 months. We have eyes. We've made some new loans in Arizona at reset basis that we really like.

Speaker #5: The bids are due. Next week. But there have been very, very few. I think maybe 5% of asset sales relative to the peak of asset transactions in like 2022.

Speaker #5: But given what's gone on with the new mayor of San Francisco, who's done a, a mi-miraculous job in turning that city around, and what's going on AI, I think generally, people are more bullish on San Francisco, yes.

Speaker #5: I think asset sales in Arizona are kind of like the 2009 levels. So that market has been more slow to recover. We've got a lot of vacancy and a lot of absorption that needs to be dealt with.

Speaker #1: And then, s-sorry if I could just ask a follow-up question there. I-is there any tailwinds being drawn to, the San Jose Hotel? from that, or not as much?

Timothy D'Agostino: Sorry, if I could just ask a follow-up question there. Is there any tailwinds being drawn to the San Jose hotel from that or not as much?

Speaker #5: And that's probably going to take another 12 to 18 months. So we have eyes. We've made some new loans in Arizona and reset basis that we really like.

Michael J. Mazzei: Not as much right now. We're still very largely dependent upon group business. We're still going through our CapEx program and upgrading the hotel. We had some very, very serious events occur with the Super Bowl and March Madness NCAAs. The hotel handled those very well. We did very well with those. We have FIFA coming as well as another event in July, the CrossFit National Champions, Championship. That should also be a tailwind for us. We're not yet seeing that transient business traveler yet. We're seeing a lot better in resorts, in hotels because of the amount of money that the baby boomers have in terms of discretionary income. We need a pickup in transient overnight stays to really get us to the NOI level that we want.

Michael Mazzei: Not as much right now. We're still very largely dependent upon group business. We're still going through our CapEx program and upgrading the hotel. We had some very, very serious events occur with the Super Bowl and March Madness NCAAs. The hotel handled those very well. We did very well with those. We have FIFA coming as well as another event in July, the CrossFit National Champions, Championship. That should also be a tailwind for us. We're not yet seeing that transient business traveler yet. We're seeing a lot better in resorts, in hotels because of the amount of money that the baby boomers have in terms of discretionary income. We need a pickup in transient overnight stays to really get us to the NOI level that we want.

Speaker #5: Not as much right now. We're still very largely dependent upon group business. We're still going through our CapEx program and upgrading the hotel. we had some very s very serious, events occur with the Super Bowl and March Madness NCAAs.

Speaker #5: But with regard to our portfolio, we have some exposure in Arizona and we're watching it very closely because that market has been chronically difficult with rent concessions, vacancies.

Michael J. Mazzei: With regard to our portfolio, we have some exposure in Arizona, and we're watching it very closely because that market has been chronically difficult, with rent concessions, vacancies. As Andy mentioned, we're seeing kind of a reversal of the immigration that we've had over the past few years. That's going backwards now. A lot of the in-migration to the state because of the work from home during COVID has pretty much completely unwound, but there's a lot of supply that's still hitting the market this year. Well, all eyes and ears on Arizona, and we'll know more about our REO sales this week. As I said, we're expecting bids this week and next week.

Mike Mazzei: With regard to our portfolio, we have some exposure in Arizona, and we're watching it very closely because that market has been chronically difficult, with rent concessions, vacancies. As Andy mentioned, we're seeing kind of a reversal of the immigration that we've had over the past few years. That's going backwards now. A lot of the in-migration to the state because of the work from home during COVID has pretty much completely unwound, but there's a lot of supply that's still hitting the market this year. Well, all eyes and ears on Arizona, and we'll know more about our REO sales this week. As I said, we're expecting bids this week and next week.

Speaker #5: The hotel handled those very well. We did very well with those. We have FIFA coming, as well as, another event in, in July, the CrossFit, National Champions.

Speaker #5: As Andy mentioned, we're seeing kind of a reversal of the immigration that we've had over the past few years. That's going backwards now. A lot of the immigration to the state because of the work from home during COVID has pretty much completely unwound.

Speaker #5: Ch-Championship. So that, that should also be a, a, a tailwind for us. But we're not yet seeing that, that transient business traveler yet. we're seeing a l a lot better in resorts and hotels because of the amount of money that the baby boomers have in terms of discretionary income.

Speaker #5: But there's a lot of supply that's still hitting the market this year. So all eyes and ears on Arizona. And we'll know more about our REO sales this week as I said, we're expecting bids this week and next week.

Speaker #5: But when we need a pickup in, in transient overnight stays, to really get us to the NOI level that we want. But as we said, we, we, we intend to hold that asset, through the balance of the year, and market it at the end of this year, beginning of next year.

Speaker #1: Got it. And it looks like the remaining four-rated loans are in Dallas and Austin. Anything you can share on the potential path of those?

Michael J. Mazzei: As we said, we intend to hold that asset through the balance of the year and market it at the end of this year or beginning of next year.

Chris Muller: Got it. It looks like the remaining 4 rated loans are in Dallas and Austin. Anything you can share on the potential path of those?

Michael Mazzei: As we said, we intend to hold that asset through the balance of the year and market it at the end of this year or beginning of next year.

Speaker #5: The multifamily one, that'll be pretty straightforward. We'll time the market on that. There's liquidity there. It's all a matter of pricing. On the Dallas office, we have some activity going on with existing tenants that we think will be positive.

Speaker #1: Okay, great. Thank you so much for the color today.

Timothy D'Agostino: Okay, great. Thank you so much for the color today.

Michael J. Mazzei: The multifamily one, that'll be pretty straightforward. We'll time the market on that. There's liquidity there. It's all a matter of pricing. On the Dallas office, we have some activity going on with existing tenants that we think will be positive. We're waiting for the outcome there. That property is holding its own. There are two buildings on the property. The smaller building is up for sale. If we get a bid on that'll help reduce the loan amount. It's a nice building, good location. It's been holding its own. The occupancy is about 70%. If we get some of this leasing done and re-leasing done, there's a pretty good chance that we may ask that owner to put that building on the market.

Mike Mazzei: The multifamily one, that'll be pretty straightforward. We'll time the market on that. There's liquidity there. It's all a matter of pricing. On the Dallas office, we have some activity going on with existing tenants that we think will be positive. We're waiting for the outcome there. That property is holding its own. There are two buildings on the property. The smaller building is up for sale. If we get a bid on that'll help reduce the loan amount. It's a nice building, good location. It's been holding its own. The occupancy is about 70%. If we get some of this leasing done and re-leasing done, there's a pretty good chance that we may ask that owner to put that building on the market.

Operator: The next question is from Chris Muller with Citizens. Please go ahead.

Speaker #6: The next question is from Chris Mueller with Citizens. Please go ahead.

Speaker #7: Hey, guys. Thanks for taking the questions. so it's great to see the expected REO sales and also the five-area loan repayment and expected underlying property sales there.

Speaker #5: We're waiting for the outcome there. That property is holding its own. We're also there are two buildings on the property the smaller building is up for sale if we get a bid on that.

Speaker #7: And it looks like that's going to clean up the rest of the five-rated loans. So I guess, first off, am I reading into that correctly?

Speaker #7: And then, will there be any realized losses associated with those, subsequent activity? And that will hit second-quarter earnings?

Speaker #5: That'll help reduce the loan amount. But it's a nice building, good location. It's been holding its own. The occupancy is about 70%. And if we get some of this leasing done, and we leasing done, there's a pretty good chance that we may ask that owner to put that building on the market.

Speaker #5: Well, on the on the properties that we have up for sale, now, in REO, those bids are coming in now. And so the answer is we'll find out.

Michael J. Mazzei: Well, on the properties that we have up for sale now, in REO, those bids are coming in now. The answer is we'll find out. We think we're pretty close to the pin, but as Andy alluded to, there's a lot of supply coming in those markets. One thing that I want to highlight is as we wind down and we're getting, making a magnificent headway on the watch list, there are still areas of the country, particularly in the Southwest, as Andy mentioned on his prepared remarks, that are experiencing a lot of softness. The Dallas-Fort Worth market seems to be tightening. It seems to be coming out of a trough. We could see a potential tightening of rent concessions over the next six months.

Michael Mazzei: Well, on the properties that we have up for sale now, in REO, those bids are coming in now. The answer is we'll find out. We think we're pretty close to the pin, but as Andy alluded to, there's a lot of supply coming in those markets. One thing that I want to highlight is as we wind down and we're getting, making a magnificent headway on the watch list, there are still areas of the country, particularly in the Southwest, as Andy mentioned on his prepared remarks, that are experiencing a lot of softness. The Dallas-Fort Worth market seems to be tightening. It seems to be coming out of a trough. We could see a potential tightening of rent concessions over the next six months.

Speaker #5: We think we're pretty close to the pin, but, as Andy alluded to, there's a lot of supply coming in those in those markets. and one thing that I want to highlight is, as we get as we wind down and we're getting making a magnificent headway on the, on the watch list, there are there are still areas of the country, particularly in the southwest, as Andy mentioned on his prepared remarks, that are experiencing a lot of softness.

Speaker #1: Got it. That's very helpful. And thanks for taking the questions.

Chris Muller: Got it. That's very helpful, and thanks for taking the questions.

Speaker #2: The next question is from John Nicodemus with BTIG. Please go ahead.

Operator: The next question is from John Nicodemus with BTIG. Please go ahead.

Speaker #6: Hi, and good morning. Knowing the prepared marks you mentioned that you had originated in an industrial and a hotel loan during the quarter, are those areas that you're looking to incrementally add to at all, or are these more just one-off opportunities given that those are your only loans in the portfolio in either of those sectors?

John Nicodemus: Hi, good morning. Knowing the prepared remarks, you mentioned that you had originated an industrial and a hotel loan during the quarter. Are those areas that you're looking to incrementally add to at all, or are these more just one-off opportunities given that those are your only loans in the portfolio in either of those sectors? Thank you.

John Nickodemus: Hi, good morning. Knowing the prepared remarks, you mentioned that you had originated an industrial and a hotel loan during the quarter. Are those areas that you're looking to incrementally add to at all, or are these more just one-off opportunities given that those are your only loans in the portfolio in either of those sectors? Thank you.

Speaker #5: The Dallas-Fort Worth market seems to be tightening. It seems to be coming out of a trough. We could see potential tightening of rent concessions over the next six months.

Speaker #6: Thank you.

Speaker #5: Andy, would you like to take a swing at that?

Michael J. Mazzei: Andy, would you like to take a swing at that?

Mike Mazzei: Andy, would you like to take a swing at that?

Speaker #4: Sure, Mike. So we did do a couple of loans away from multifamily. We're certainly looking to do more. We like the industrial sector. We're going to be selective in the hotel space.

Andy Witt: Sure, Mike. We did do a couple of loans away from multifamily. We're certainly looking to do more. We like the industrial sector. We're going to be selective in the hotel space, and there are other asset classes that we're looking at. However, I would say, going forward, look for us to be predominantly investing in multifamily.

Speaker #5: However, you move to markets like Arizona, and Vegas, and particularly Arizona, we're seeing very few asset sales. So we have an asset in Mesa that we're selling right now in the REO, the bids are due.

Michael J. Mazzei: However, you move to markets like Arizona and Vegas, and particularly Arizona, we're seeing very few asset sales. We have an asset in Mesa that we're selling right now in the REO. The bids are due next week, but there have been very, very few, I think maybe 5% of asset sales relative to the peak of asset transactions in, like, 2022. I think asset sales in Arizona are kind of like the 2009 levels. That market has been more slow to recover. We've got a lot of vacancy and a lot of absorption that needs to be dealt with, and that's probably gonna take another 12 to 18 months. We have eyes. We've made some new loans in Arizona at reset basis that we really like.

Michael Mazzei: However, you move to markets like Arizona and Vegas, and particularly Arizona, we're seeing very few asset sales. We have an asset in Mesa that we're selling right now in the REO. The bids are due next week, but there have been very, very few, I think maybe 5% of asset sales relative to the peak of asset transactions in, like, 2022. I think asset sales in Arizona are kind of like the 2009 levels. That market has been more slow to recover. We've got a lot of vacancy and a lot of absorption that needs to be dealt with, and that's probably gonna take another 12 to 18 months. We have eyes. We've made some new loans in Arizona at reset basis that we really like.

Speaker #4: And there are other asset classes that we're looking at. However, I would say going forward, look for us to be predominantly investing in multifamily.

Speaker #5: Next week. But there have been very, very few. I, I, I think maybe 5% of asset sales relative to the peak of asset transactions in, like, 2022.

Speaker #5: We've looked at some industrial. The issue there is it's all about back leverage as well. We're seeing opportunities. We're seeing opportunities where there is a lot of binary lease-up risk that really doesn't lend itself for well for a CLO or for back leverage.

Speaker #5: I think asset sales in Arizona are kind of like the 2009 levels. so that market has been more slow to recover. we've got a lot of vacancy in a lot of absorption that needs to be dealt with, and that's probably going to take another 12 to 18 months.

Michael J. Mazzei: We've looked at some industrial. The issue there is, you know, it's all about back leverage as well.

Mike Mazzei: We've looked at some industrial. The issue there is, you know, it's all about back leverage as well.

Andy Witt: Well-

Michael J. Mazzei: We're seeing opportunities where there is a lot of binary lease-up risk that really doesn't lend itself well for a CLO or for back leverage. Really, that's really more of a private credit fund type of investment. We're seeing a lot of that. We're looking in industrial for more granular rent rolls. While there is lease-up needed, and the reason why they're coming to a non-bank is for that reason, we're looking for the ones that have a little less binary risk than some of the deals that we've been seeing. In hotel, listen, RevPAR for the year 2025 was down a little bit in the US. The shiny spots were resorts, as I said earlier.

Mike Mazzei: We're seeing opportunities where there is a lot of binary lease-up risk that really doesn't lend itself well for a CLO or for back leverage. Really, that's really more of a private credit fund type of investment. We're seeing a lot of that. We're looking in industrial for more granular rent rolls. While there is lease-up needed, and the reason why they're coming to a non-bank is for that reason, we're looking for the ones that have a little less binary risk than some of the deals that we've been seeing. In hotel, listen, RevPAR for the year 2025 was down a little bit in the US. The shiny spots were resorts, as I said earlier.

Speaker #5: So we have eyes we've made some new loans in Arizona at reset basis that we really like. but with regard to our portfolio, we have some exposure in Arizona, and we're watching it very closely because that market has been chronically, de difficult.

Speaker #5: Really, that's really more of a private credit fund type of investment. So we're seeing a lot of that. We're looking at an industrial for more granular rent roles.

Michael J. Mazzei: But with regard to our portfolio, we have some exposure in Arizona, and we're watching it very closely. That market has been chronically difficult with rent concessions, vacancies. As Andy mentioned, we're seeing kind of a reversal of the immigration that we've had over the past few years. That's going backwards now. A lot of the in-migration to the state because of the work from home during COVID has pretty much completely unwound, but there's a lot of supply that's still hitting the market this year. We're all eyes and ears on Arizona, and we'll know more about our REO sales this week. As I said, we're expecting bids this week and next week.

Michael Mazzei: But with regard to our portfolio, we have some exposure in Arizona, and we're watching it very closely. That market has been chronically difficult with rent concessions, vacancies. As Andy mentioned, we're seeing kind of a reversal of the immigration that we've had over the past few years. That's going backwards now. A lot of the in-migration to the state because of the work from home during COVID has pretty much completely unwound, but there's a lot of supply that's still hitting the market this year. We're all eyes and ears on Arizona, and we'll know more about our REO sales this week. As I said, we're expecting bids this week and next week.

Speaker #5: While there is lease-up needed, and the reason why they're coming to a non-bank is for that reason, we're looking for the ones that have a little less binary risk than some of the deals that we've been seeing.

Speaker #5: with rent concessions, vacancies, as Andy mentioned, we're seeing kind of a reversal of the immigration that we've had over the past few years. That's going backwards now.

Speaker #5: In hotel, listen, RevPAR for the year 2025 was down a little bit. In the US, the shiny spots were resorts. As I said earlier, there's a vast amount of wealth in a certain demographic.

Speaker #5: A lot of the immigration to the state because of the work from home during COVID has pretty much completely unwound. But there's a lot of supply that's still hitting the market this year.

Michael J. Mazzei: There's a vast amount of wealth in a certain demographic that's looking to spend money on wellness and experiences and things like that. The resorts are doing better. It's really the more full-service economy side of the hotel sector that has been struggling a little bit. We're very selective there. The hotel loan we did is a very unique transaction. As much as the asset and the metrics on the loan, the capital structure on the transaction was also very appealing to us. That was almost a very unique set of circumstances that transcended the fact that it was just a hotel loan. We're seeing opportunities in those sectors. Still, as Andy said, very selective.

Mike Mazzei: There's a vast amount of wealth in a certain demographic that's looking to spend money on wellness and experiences and things like that. The resorts are doing better. It's really the more full-service economy side of the hotel sector that has been struggling a little bit. We're very selective there. The hotel loan we did is a very unique transaction. As much as the asset and the metrics on the loan, the capital structure on the transaction was also very appealing to us. That was almost a very unique set of circumstances that transcended the fact that it was just a hotel loan. We're seeing opportunities in those sectors. Still, as Andy said, very selective.

Speaker #5: So we're our all eyes and ears on Arizona. and we'll know more about our, our REO sales this week, as I said, we're expecting bids, this week and next week.

Speaker #5: That's looking to spend money on wellness and experiences and things like that. So the resorts are doing better. It's really the more full-service economy side of the hotel sector that has been struggling a little bit.

Speaker #1: Got it. And it looks like the remaining four-rated loans are, in Dallas and Austin. Anything you can share on the potential path of those?

Chris Muller: Got it. It looks like the remaining 4 rated loans are in Dallas and Austin. Anything you can share on the potential path of those?

Speaker #5: So we're very selective there. The hotel loan we did is a very unique transaction. And as much as the asset and the metrics on the loan, the capital structure and the transaction was also very appealing to us.

Michael J. Mazzei: The multifamily one, that'll be pretty straightforward. We'll time the market on that. There's liquidity there. It's all a matter of pricing. On the Dallas office, we have some activity going on with existing tenants that we think will be positive. We're waiting for the outcome there. That property is holding its own. There are 2 buildings on the property. The smaller building is up for sale. If we get a bid on that'll help reduce the loan amount. It's a nice building, good location. It's been holding its own. The occupancy is about 70%. If we get some of this leasing done and re-leasing done, there's a pretty good chance that we may ask that owner to put that building on the market.

Speaker #5: the multifamily one, th-that'll be pretty straightforward. We'll, we'll time the market on that. there's liquidity there. i-it's all a matter of pricing. On the Dallas office, we have some activity going on with existing tenants that we, we think will be positive.

Michael Mazzei: The multifamily one, that'll be pretty straightforward. We'll time the market on that. There's liquidity there. It's all a matter of pricing. On the Dallas office, we have some activity going on with existing tenants that we think will be positive. We're waiting for the outcome there. That property is holding its own. There are 2 buildings on the property. The smaller building is up for sale. If we get a bid on that'll help reduce the loan amount. It's a nice building, good location. It's been holding its own. The occupancy is about 70%. If we get some of this leasing done and re-leasing done, there's a pretty good chance that we may ask that owner to put that building on the market.

Speaker #5: So that was almost a very unique set of circumstances that transcended the fact that it was just a hotel loan. So it's very we're seeing opportunities in those sectors.

Speaker #5: We're waiting for the outcome there. That property is holding its own. We're also in there—there are two buildings on the property. The smaller building is up for sale.

Speaker #5: Still, as Andy said, very selective.

Speaker #1: Great. Thank you, Mike and Andy. Other one for me, just regarding dividend coverage. I believe last quarter you mentioned you were looking for full coverage by mid-year and then positive coverage by year-end.

Speaker #5: if we get a bid on that, that'll help reduce the loan amount. but we it's, it's, it's a it's a nice building, good location.

John Nicodemus: Great. Thank you, Mike and Andy. Other one from me, just regarding dividend coverage. I believe last quarter you mentioned you were looking for full coverage by mid-year and then, you know, positive coverage by year-end. Now it kind of sounds like it's more full coverage by year-end. I'm just curious if there's anything that's changed there on your path back to dividend coverage. Thanks.

John Nickodemus: Great. Thank you, Mike and Andy. Other one from me, just regarding dividend coverage. I believe last quarter you mentioned you were looking for full coverage by mid-year and then, you know, positive coverage by year-end. Now it kind of sounds like it's more full coverage by year-end. I'm just curious if there's anything that's changed there on your path back to dividend coverage. Thanks.

Speaker #5: It's been holding its own. The occupancy is about 70%. And if we get some of this leasing done, and we get leasing done, there's a pretty good chance that we may ask that owner to put that building on the market.

Speaker #1: Now it kind of sounds like it's more full coverage by year-end. I'm just curious if there's anything that's changed there on your path back to dividend coverage.

Speaker #1: Thanks.

Speaker #5: Yeah, it's just the timing of asset resolutions and putting out money that you could see over a longer period, six-month period, you get there.

Michael J. Mazzei: It's just the timing of asset resolutions and putting out money that, you know, you could see over a longer period, 6-month period, you get there. Just over the short term, things happen, things get delayed. For instance, we delayed on the Arizona sale. We delayed taking indications on pricing by 2 weeks. Things like that are occurring. We're in ebbs and flows. We're still hovering very close to the dividend, just shy by $0.02 this quarter. We are very confident that we'll get there by year-end. When you look at the pipeline and look how much progress we've made, I think we're pretty comfortable that mid-year we'll get to the $300.

Speaker #1: Got it. That's very helpful, and thanks for taking the questions.

Chris Muller: Got it. That's very helpful. Thanks for taking the questions.

Mike Mazzei: It's just the timing of asset resolutions and putting out money that, you know, you could see over a longer period, 6-month period, you get there. Just over the short term, things happen, things get delayed. For instance, we delayed on the Arizona sale. We delayed taking indications on pricing by 2 weeks. Things like that are occurring. We're in ebbs and flows. We're still hovering very close to the dividend, just shy by $0.02 this quarter. We are very confident that we'll get there by year-end. When you look at the pipeline and look how much progress we've made, I think we're pretty comfortable that mid-year we'll get to the $300.

Operator: The next question is from John Nicodemus with BTIG. Please go ahead.

Speaker #6: The next question is from John Nicodemus with BTIG. Please go ahead.

Speaker #5: But just over the short term, things happen. Things get delayed. For instance, we delayed on the Arizona sale. We delayed taking indications on pricing by that by two weeks.

Speaker #8: Hi, and good morning. knowing the prepared marks you mentioned that you had originated in industrial and a hotel loan during the quarter, are those areas that you're looking to incrementally add to at all?

John Nicodemus: Hi, good morning. You know, in the prepared remarks you mentioned that you had originated an industrial and a hotel loan during the quarter. Are those areas that you're looking to incrementally add to at all, or are these more just one-off opportunities, given that those are your only loans in the portfolio in either of those sectors? Thank you.

Speaker #5: So things like that are occurring. We're an ebbs and flows with still hovering very close to the dividend, just shy by 2 cents this quarter.

Speaker #8: Or are these more just one-off opportunities, given that those are your only, loans in the portfolio in either of those sectors? Thank you.

Speaker #5: But we are very confident that we'll get there by year-end. And when you look at the pipeline and look how much progress we've made, I think we're pretty comfortable that mid-year we'll get to the 300.

Speaker #5: Andy, would you like to take a swing at that?

Michael J. Mazzei: Andy, would you like to take a swing at that?

Michael Mazzei: Andy, would you like to take a swing at that?

Speaker #9: Sure, Mike. So we, we did do a couple of loans away from multifamily. we're certainly looking to do more. We like the industrial sector.

Speaker #5: And it looks like really based on the payoff projections that we're looking at, it looks like the 3.5 million is really a stone's throw away.

Michael J. Mazzei: It looks like really, based on the payoff projections that we're looking at, it looks like the $3.5 million is really a stone's throw away. I think we're pretty optimistic about getting there by year-end. I'm sorry, during the course of the year, you know, we get the ebbs and flows of things that get delayed, and it causes a little bit of a blip, but we're confident we'll get there by year-end.

Mike Mazzei: It looks like really, based on the payoff projections that we're looking at, it looks like the $3.5 million is really a stone's throw away. I think we're pretty optimistic about getting there by year-end. I'm sorry, during the course of the year, you know, we get the ebbs and flows of things that get delayed, and it causes a little bit of a blip, but we're confident we'll get there by year-end.

Speaker #9: We're going to be selective in the hotel space. And there are other asset classes that we're looking at. However, I would say, going forward, look for us to be predominantly, investing in multifamily.

Speaker #5: So I think we're pretty optimistic about getting there by year-end. I'm sorry, but during the course of the year, we get the ebbs and flows of things that get delayed.

Speaker #5: And it causes a little bit of a blip. But we're confident we'll get there by year-end.

Speaker #5: We've looked at we've looked at some industrial. The issue there is, you know, it's all about back leverage as well. We're seeing opportunities we're seeing opportunities where there is a lot of binary lease-up risk that really doesn't lend itself for well, for a CLO or for back leverage.

Michael J. Mazzei: We've looked at some industrial. The issue there is, you know, it's all about backed leverage as well.

Michael Mazzei: We've looked at some industrial. The issue there is, you know, it's all about backed leverage as well.

Speaker #1: Totally get it. Thank you so much, Mike. That's all from me.

John Nicodemus: Totally get it. Thank you so much, Mike. That's all for me.

John Nickodemus: Totally get it. Thank you so much, Mike. That's all for me.

Andy Witt: Well-

Michael J. Mazzei: We're seeing opportunities where there is a lot of binary lease-up risk that really doesn't lend itself well for a CLO or for backed leverage. That's really more of a private credit fund type of investment. We're seeing a lot of that. We're looking in industrial for more granular rent rolls. While there is lease-up needed, and the reason why they're coming to a non-bank is for that reason, we're looking for the ones that have a little less binary risk than some of the deals that we've been seeing. In hotel, listen, RevPAR for the year 2025 was down a little bit in the US. The shiny spots were resorts, as I said earlier.

Michael Mazzei: We're seeing opportunities where there is a lot of binary lease-up risk that really doesn't lend itself well for a CLO or for backed leverage. That's really more of a private credit fund type of investment. We're seeing a lot of that. We're looking in industrial for more granular rent rolls. While there is lease-up needed, and the reason why they're coming to a non-bank is for that reason, we're looking for the ones that have a little less binary risk than some of the deals that we've been seeing. In hotel, listen, RevPAR for the year 2025 was down a little bit in the US. The shiny spots were resorts, as I said earlier.

Speaker #2: Again, if you have a question, please press star, then one. The next question is from Jason Weaver with Jones Trading. Please go ahead.

Operator: Again, if you have a question, please press star then one. The next question is from Jason Weaver with JonesTrading. Please go ahead.

Speaker #7: Hey, guys. Thanks for taking my question. First, I appreciate your comments on the pricing environment out there. But when I look at it, it looks like the originations out of 1Q were quite a bit tighter inside of the existing book at 259.

Speaker #5: really, that's really more of a private credit fund type of investment. So we're seeing a lot of that. We're looking in industrial for more granular rent roles.

Jason Weaver: Hey, guys. Thanks for taking my question. First, I appreciate your comments on the pricing environment out there. When I look at it looks like the originations out of Q1 were quite a bit tighter inside of the existing book at 259. With your stated ROE target of around 12% on new originations, what's your all-in financing spread you're underwriting to these loans? At what point does spread compression force you to either widen the credit screen or reduce origination pace rather than compress ROE?

Speaker #5: While there is lease-up needed, and the reason why they're coming to a non-bank is for that reason, we're looking for the ones that have little a little less binary risk than some of the deals that we've been seeing.

Speaker #7: So with your stated ROE target of around 12% on new originations, what's the all-in financing spread your underwriting to these loans? And at what point does spread compression force you to either widen the credit screen or reduce origination pace rather than compress ROE?

Speaker #5: In hotels, listen, RevPAR for the year 2025 was down a little bit. In the US, the shiny spots were resorts. As I said earlier, there's a vast amount of wealth in a certain demographic.

Michael Mazzei: There's a vast amount of wealth in a certain demographic that's looking to spend money on wellness and experiences and things like that. The resorts are doing better. It's really the more full-service economy side of the hotel sector that has been struggling a little bit. We're very selective there. The hotel loan we did is a very unique transaction. As much as the asset and the metrics on the loan, the capital structure on the transaction was also very appealing to us. That was almost a very unique set of circumstances that transcended the fact that it was just a hotel loan. We're seeing opportunities in those sectors. Still, as Andy said, very selective.

Speaker #4: Yeah, hi. This is Matt Hessen. I'll take that one. So as spreads have marched in on the whole loans, we've seen similar on the back leverage side.

Matthew Heslin: Yeah. Hi, this is Matthew Heslin. I'll take that one. As spreads have marched in on the whole loans, we've seen similar on the back leverage side. You know, we've generally tried to maintain about 100 basis points spread between our loans and our financing source. That's been pretty consistent to date. As Mike mentioned, you know, we priced our CLO in the early part of Q1 this year, we've seen spreads, you know, despite the noise, continue to march in there as well, which is great news, right? A lot of demand for that paper. We've been able to maintain our ROEs despite the tightening.

Speaker #5: that's looking to spend money on wellness and experiences and things like that. So the resorts are doing better. It's really the, the more full-service, economy, side of the hotel sector that has been struggling a little bit.

Speaker #4: So we've generally tried to maintain about 100 basis points spread between our loans and our financing source. And that's been pretty consistent. To date.

Speaker #5: So we're very selective there. The, the hotel loan we did is a very unique transaction. And a-as on the loan the capital structure and the transaction was also very appealing to us.

Speaker #4: And as Mike mentioned, we priced our CLO in the early part of the first quarter this year. And we've seen spreads despite the noise continue to march in there as well.

Speaker #5: So that was that was almost a, a very unique set of circumstances that transcended the fact that it was just a hotel loan. So it's very we're, we're seeing opportunities in those sectors, still, as Andy said, very selective.

Speaker #4: Which is great news, right? A lot of demand for that paper. So we've been able to maintain our ROEs despite the tightening.

Speaker #7: Got it. The FL3 surely helped out with that.

Jason Weaver: Got it.

Michael J. Mazzei: And overall-

Mike Mazzei: And overall-

Jason Weaver: The FL3 certainly helped out with that.

Speaker #5: And Jason, overall, listen, the banks show some of the line lenders listening to the call. I don't want to speak on their behalf. But the banks are flush with capital.

Michael J. Mazzei: Jason, overall, listen, the banks, I'm sure some of the line lenders listen to the call. I don't want to speak on their behalf. The banks are flush with capital, a lot of because of the changes in Basel III that were anticipated. This has been a sector that's, you know, may be the one of the best performing sectors at the banks because we know that we don't see any losses on any bank lines for any of our competitors or funds in the back leverage warehouse sector. The risk-based capital treatment for these assets is favorable versus making whole loans. The banks very much have an appetite for warehouse lending. They have been slowly playing ball with spreads tightening.

Speaker #6: Great, thank you, Mike and Andy. Another one from me, just regarding dividend coverage. I believe last quarter you mentioned you were looking for full coverage by mid-year and then, you know, positive coverage by year-end.

Mike Mazzei: Jason, overall, listen, the banks, I'm sure some of the line lenders listen to the call. I don't want to speak on their behalf. The banks are flush with capital, a lot of because of the changes in Basel III that were anticipated. This has been a sector that's, you know, may be the one of the best performing sectors at the banks because we know that we don't see any losses on any bank lines for any of our competitors or funds in the back leverage warehouse sector. The risk-based capital treatment for these assets is favorable versus making whole loans. The banks very much have an appetite for warehouse lending. They have been slowly playing ball with spreads tightening.

John Nicodemus: Great. Thank you, Mike and Andy. Other one from me, just regarding dividend coverage. I believe last quarter you mentioned you were looking for full coverage by mid-year and then, you know, positive coverage by year-end. Now it kinda sounds like it's more full coverage by year-end. I'm just curious if there's anything that's changed there on your path back to dividend coverage. Thanks.

Speaker #5: A lot of because of the changes in Basel III that we're anticipated. This has been a sector that's may be one of the best performing sectors at the banks because we know that we don't see any losses on any bank lines for any of our competitors or funds.

Speaker #6: Now, it kind of sounds like it's more full coverage by year-end. I'm just curious if there's anything that's changed there on your path back to dividend coverage.

Speaker #8: Thanks.

Speaker #5: Yeah, it's just it's just it's just the timing of, of asset resolutions and putting out money. that, you know, you could see over a longer period, six-month period, you get there.

Michael J. Mazzei: Yeah, it's just the timing of asset resolutions and putting out money, you know, that you could see over a longer period, 6-month period, you get there. Just over the short term, things happen, things get delayed. For instance, we delayed on the Arizona sale. We delayed taking indications on pricing by that by 2 weeks. Things like that are occurring. We're in ebbs and flows. We're still hovering very close to the dividend, just shy by $0.02 this quarter. We are very confident that we'll get there by year-end. When you look at the pipeline and look how much progress we've made, I think we're pretty comfortable that mid-year we'll get to the $300.

Michael Mazzei: Yeah, it's just the timing of asset resolutions and putting out money, you know, that you could see over a longer period, 6-month period, you get there. Just over the short term, things happen, things get delayed. For instance, we delayed on the Arizona sale. We delayed taking indications on pricing by that by 2 weeks. Things like that are occurring. We're in ebbs and flows. We're still hovering very close to the dividend, just shy by $0.02 this quarter. We are very confident that we'll get there by year-end. When you look at the pipeline and look how much progress we've made, I think we're pretty comfortable that mid-year we'll get to the $300.

Speaker #5: In the back leverage warehouse sector. And the risk-based capital treatment for these assets is favorable versus making whole loans. So the banks very much have an appetite for warehouse lending.

Speaker #5: But just over the short term, things happen. Things get delayed. For instance, we, we, we delayed on the, the Arizona sale. We delayed, taking indications on pricing by that, by two weeks.

Speaker #5: So they have been slowly playing ball with spreads tightening.

Speaker #5: So things like that are occurring. We're in ebbs and flows. We're still hovering very close to the dividend, just shy by 2 cents this quarter.

Jason Weaver: That's good color. I appreciate it. On that same subject, almost with the pricing environment as is right here versus where the stock's trading at a discount to undepreciated book value, talk to me about the trade-off of repurchase versus deployment into new originations and how you're looking at that today?

Speaker #7: it. And then on that same subject, almost with the pricing environment as is right here versus where the stocks trading at a discount to underappreciated book value.

Speaker #5: But w-we are very confident that we'll get there, by year-end. And when you look at the pipeline and look how much progress we've made, I think I think we're pretty comfortable that mid-year we'll get to the 300.

Speaker #7: Talk to me about the trade-off of repurchase versus deployment into new originations and how you're looking at that today.

Speaker #5: And it, it looks like, really, based on the payoff projections that we're looking at, it looks like the $3.5 million is really a stone's throw away.

Michael Mazzei: It looks like really, based on the payoff projections that we're looking at, it looks like the $3.5 million is really a stone's throw away. I think we're pretty optimistic about getting there by year-end. I'm sorry, during the course of the year, you know, we get the ebbs and flows of things that get delayed, and it causes a little bit of a blip, we're confident we'll get there by year-end.

Speaker #5: Well, listen, the buybacks are something we've done. You've seen us do it in the course of 2025. We did a couple to several times.

Michael J. Mazzei: Well, listen, the buybacks are something we've done. You've seen us do it on the course of 2025. We did it, a couple to several times. We'll look to do it again. When we did it before, the price was more in the mid-5s. When we looked at the dividend yield on the stock at that level versus where we could put out money, there was a crossover there where it looked very, very attractive versus making new loans. We did that. As long as the stock is trading where it is now and hopefully higher into the 6s, making loans is what we do, and that's what we wanna preserve the capital.

Mike Mazzei: Well, listen, the buybacks are something we've done. You've seen us do it on the course of 2025. We did it, a couple to several times. We'll look to do it again. When we did it before, the price was more in the mid-5s. When we looked at the dividend yield on the stock at that level versus where we could put out money, there was a crossover there where it looked very, very attractive versus making new loans. We did that. As long as the stock is trading where it is now and hopefully higher into the 6s, making loans is what we do, and that's what we wanna preserve the capital.

Speaker #5: So, I think we're pretty optimistic about getting there by year-end. I'm sorry, but during the course of the year, you know, we get the ebbs and flows of things that get delayed.

Speaker #5: We'll look to do it again. When we did it before, the price was more in the mid-fives when we looked at the yield on the dividend yield on the stock at that level versus where we could put out money.

Speaker #5: And it—it causes a little bit of a blip. But we're confident we'll get there by year-end.

Speaker #6: Totally get it. Thank you so much, Mike. That's all from me.

John Nicodemus: Totally get it. Thank you so much, Mike. That's all for me.

Speaker #5: There was a crossover there where it looked very attractive versus making new loans. And so we did that. But as long as the stock is trading where it is now and hopefully higher into the sixes, making loans is what we do.

Speaker #1: Again, if you have a question, please press star, then one. The next question is from Jason Weaver with Jones Trading. Please go ahead.

Operator: Again, if you have a question, please press star then one. The next question is from Jason Weaver with JonesTrading. Please go ahead.

Speaker #5: And that's what we want to preserve the capital. We do realize that there is a halo effect, positive halo effect in buying back stock that typically is not long-lived.

Speaker #10: Hey, guys. Thanks for taking my question. first, I appreciate your comments on the pricing environment out there. But, when I look at it, it looks like the originations out of 1Q were quite a bit tighter inside of the existing book at 259.

Jason Weaver: Hey, guys. Thanks for taking my question. I appreciate your comments on the pricing environment out there, but when I look at it looks like the originations out of Q1 were quite a bit tighter inside of the existing book at 2.59. With your stated ROE target of around 12% on new originations, what's the all-in financing spread you're underwriting to these loans? At what point does spread compression force you to either widen the credit screen or reduce origination pace rather than compress ROE?

Michael J. Mazzei: We do realize that there is a halo effect, positive halo effect in buying back stock that typically is not long-lived. We're not buying back enough stock to really affect the overall book value. We can drive it by a few cents a quarter, but not really a material enough, as much as we see the effect of making new loans and what that'll do to the stock price. The bias is make new loans. At this level, we think making new loans at the levels we've discussed is more attractive to us with our capital.

Mike Mazzei: We do realize that there is a halo effect, positive halo effect in buying back stock that typically is not long-lived. We're not buying back enough stock to really affect the overall book value. We can drive it by a few cents a quarter, but not really a material enough, as much as we see the effect of making new loans and what that'll do to the stock price. The bias is make new loans. At this level, we think making new loans at the levels we've discussed is more attractive to us with our capital.

Speaker #5: We're not buying back enough stock to really affect the overall book value. We can drive it by a few cents a quarter. But not really a material enough as much as we see the effect of making new loans and what that'll do to the stock price.

Speaker #10: so with your stated ROE target of around 12% on new originations, what's the all-in financing spread you're, you're underwriting to these loans? And at what point does spread compression force you to either widen the credit screen or reduce origination pace rather than compress ROE?

Speaker #5: So the bias is make new loans. And at this level, we think making new loans at the levels we've discussed is more attractive to us with our capital.

Speaker #11: Yeah, hi. This is Matt Hessen. I-I'll, I'll take that one. So as spreads have marched in on the whole loans, we've seen similar on the back leverage side.

Matthew Heslin: Hi, this is Matthew Heslin. I'll take that one. As spreads have marched in on the whole loans, we've seen similar on the back leverage side. You know, we've generally tried to maintain about 100 basis points spread between our loans and our financing source. That's been pretty consistent to date. As Mike mentioned, you know, we priced our CLO in the early part of Q1 this year, and we've seen spreads, you know, despite the noise, continuing to march in there as well, which is great news. Right? A lot of demand for that paper. We've been able to maintain our ROEs despite the tightening.

Speaker #7: All right. Thanks. Appreciate you guys.

Speaker #5: Thank you.

Speaker #2: The next question is from Gaurav Mehta with Alliance Global Partners. Please go ahead.

Jason Weaver: All right. Thanks. I appreciate you guys.

Speaker #11: so you know, we've generally tried to maintain about 100 basis points spread between our loans and our financing source. and that's been pretty consistent.

Michael J. Mazzei: Thank you.

Mike Mazzei: Thank you.

Speaker #5: Yeah, thank you. Good morning. I wanted to ask you on your the $3 billion and $3.5 billion expectations for mid-year and end-of-the-year and some of your commentary around Sunbelt and the Bay Area.

Operator: The next question is from Gaurav Mehta with Alliance Global Partners. Please go ahead.

Gaurav Mehta: Yeah, thank you. Good morning. I wanted to ask you on your, the $3 billion and $3.5 billion expectations for midyear and end of the year and some of your commentary around Sun Belt and the Bay Area. As you look to, you know, deploy that capital, do you have any regional preferred trends as you hear the biggest in demand and where you want to put that new capital in?

Speaker #11: to date. And as Mike mentioned, you know, we, we priced our CLO, in the early part of the first quarter this year. And we've seen spreads, you know, despite the noise, continue to march in there as well.

Speaker #5: So as you look to deploy that capital, do you have any regional preference as to where you're seeing demand and where you want to put that new capital in?

Speaker #4: Sure. This is Matt Hessen. I'll start on this and Mike can jump in. I mean, I think we're generally looking at all those places.

Speaker #11: Which is great news, right? A lot of demand for that paper. So we've been able to maintain our ROEs, despite the—despite the tightening.

Speaker #4: Basis is obviously very important as Mike said. Despite the headwinds and some of the Sunbelt markets, we are still lending there. At reset basis.

Matthew Heslin: Sure. This is Matthew Heslin. I'll start on this, and Mike can jump in. I mean, I think we're generally looking at all those places. You know, basis is obviously very important, as Mike said. Despite the headwinds in some of the Sun Belt markets, we are still lending there, you know, at reset basis. You know, acquisition, new capital coming in, you know, debt yields that work on a going-in basis are obviously very attractive. Yes, we're also looking and have done stuff and we'll continue to do stuff in the Bay Area. You know, we're seeing great rent growth there. Even some older vintage properties are getting the benefit of that. Mike, anything you wanna add?

Speaker #10: Got it. The FL3 surely helped out with that.

Jason Weaver: Got it.

Matthew Heslin: Overall-

Jason Weaver: The FL3 surely helped out with that.

Speaker #5: And Jason, overall, listen, the banks show some of the line lenders listening to the call. I don't wanna speak on their behalf. But the banks are flush with capital.

Michael J. Mazzei: Jason, overall, listen, the banks, I'm sure some of the line lenders listening to the call, I don't want to speak on their behalf, but the banks are flush with capital, a lot of because of the changes in Basel III that were anticipated. This has been a sector that's, you know, may be one of the best performing sectors at the banks because we know that we don't see any losses on any bank lines for any of our competitors or funds in the back leverage warehouse sector. The risk-based capital treatment for these assets is favorable versus making whole loans. The banks very much have an appetite for warehouse lending. They have been slowly playing ball with spreads tightening.

Michael Mazzei: Jason, overall, listen, the banks, I'm sure some of the line lenders listening to the call, I don't want to speak on their behalf, but the banks are flush with capital, a lot of because of the changes in Basel III that were anticipated. This has been a sector that's, you know, may be one of the best performing sectors at the banks because we know that we don't see any losses on any bank lines for any of our competitors or funds in the back leverage warehouse sector. The risk-based capital treatment for these assets is favorable versus making whole loans. The banks very much have an appetite for warehouse lending. They have been slowly playing ball with spreads tightening.

Speaker #4: So acquisition, new capital coming in, debt yields that work on a going-in basis are obviously very attractive. And then, yes, we're also looking and have done stuff and will continue to do stuff in the Bay Area.

Speaker #5: A lot of because of the changes in, in Basel III that we're anticipated. this has been a sector that's, you know, may be the one of the best performing sectors at the banks because we know that, we don't see any losses on any bank lines for any of our competitors or funds.

Speaker #4: So we're seeing great rank growth there. So even some older vintage properties are getting the benefit of that. Mike, anything you want to add?

Speaker #5: I think if you also look at thank you for the question. I think also if you look at and something that we've been studying recently, when you look at the transaction volume, that's occurred in 2020, '21, and '22.

Speaker #5: in the in the in the back leverage warehouse sector. And the, the risk-based capital treatment for these assets is, is favorable versus making whole loans.

Michael J. Mazzei: Thank you for the question. I think also if you look at something that we've been studying recently. When you look at the transaction volume that's occurred in 2020, 2021, and 2022, when interest rates were close to zero, and we had, in some cases, double-digit rent growth in these markets, and an influx of immigration where people were living somewhere, and we're sure a lot of that was in workforce housing. The number of transactions that have occurred were higher than anywhere else in history in some of these markets. I mean, you see what we're doing with our watch list, with our REO.

Speaker #5: When interest rates were close to zero, and we had in some cases double-digit rent growth in these markets, and an influx of immigration where people were living somewhere, and we're sure a lot of that was in workforce housing, you had the number of transactions that have occurred were higher than anywhere else in history.

Mike Mazzei: Thank you for the question. I think also if you look at something that we've been studying recently. When you look at the transaction volume that's occurred in 2020, 2021, and 2022, when interest rates were close to zero, and we had, in some cases, double-digit rent growth in these markets, and an influx of immigration where people were living somewhere, and we're sure a lot of that was in workforce housing. The number of transactions that have occurred were higher than anywhere else in history in some of these markets. I mean, you see what we're doing with our watch list, with our REO.

Speaker #5: So the banks very much have an appetite for warehouse lending. So they have been slowly playing ball with spreads tightening.

Speaker #10: That's good color. I appreciate it. and then on that same subject, almost, with the pricing environment as is right here versus where the stock's trading, a-at a discount to underappreciated book value.

Speaker #5: In some of these markets. We are expecting I mean, you see what we're doing with our watchlist, with our REO. We are expecting other lenders and we're seeing this in deals we quote where existing lenders are behind the scenes encouraging borrowers to get out to the market.

Speaker #10: think t-tell me talk to me about the trade-off of repurchase versus, deployment into new originations and how you're looking at that today.

Michael J. Mazzei: Well, listen, the buybacks are something we've done. You've seen us do it on the course of 2025. We did it a couple to several times. We'll look to do it again. When we did it before, the price was more in the mid-$5s. When we looked at the dividend yield on the stock at that level versus where we could put out money, there was a crossover there where it looked very, very attractive versus making new loans. We did that. As long as the stock is trading where it is now and hopefully higher into the $6s, making loans is what we do, and that's what we want to preserve the capital.

Speaker #5: well, listen, the, the buybacks are something we've done. you've seen us do it on the course of 2025. We did a, a couple to several times.

Michael Mazzei: Well, listen, the buybacks are something we've done. You've seen us do it on the course of 2025. We did it a couple to several times. We'll look to do it again. When we did it before, the price was more in the mid-$5s. When we looked at the dividend yield on the stock at that level versus where we could put out money, there was a crossover there where it looked very, very attractive versus making new loans. We did that. As long as the stock is trading where it is now and hopefully higher into the $6s, making loans is what we do, and that's what we want to preserve the capital.

Speaker #5: And we set values. There is a disgorgement that's going to have to happen. And while we think real estate is in very late innings, certainly relative to private credit, with Cecil reserves that we've taken across the board with our brethren in the market, we still see that the transactions need to occur.

Speaker #5: we'll look to do it again. When we did it before, the price was more in the mid-fives when we looked at, the yield on the dividend yield on the stock at that level versus where we could put out money, it there was a crossover there where it looked very, very attractive versus making new loans.

Michael J. Mazzei: We are expecting other lenders, and we're seeing this in deals we quote, where existing lenders are behind the scenes encouraging borrowers to get out to the market and reset values. There is a disgorgement that's going to have to happen. While we think real estate is in very late innings, certainly relative to private credit, with CECL reserves that we've taken across the board with our brethren in the market, we still see that the transactions need to occur. You may have taken a CECL against the loan, but now that loan has to go out into the market and get restructured and re-recapitalized.

Mike Mazzei: We are expecting other lenders, and we're seeing this in deals we quote, where existing lenders are behind the scenes encouraging borrowers to get out to the market and reset values. There is a disgorgement that's going to have to happen. While we think real estate is in very late innings, certainly relative to private credit, with CECL reserves that we've taken across the board with our brethren in the market, we still see that the transactions need to occur. You may have taken a CECL against the loan, but now that loan has to go out into the market and get restructured and re-recapitalized.

Speaker #5: And so we did that. But as long as the stock is trading where it is now and hopefully m higher into the sixes, it making loans is what we do.

Speaker #5: You may have taken a Cecil against a loan, but now that loan has to go out into the market. And get restructured. And we capitalize.

Speaker #5: And that's what we, we wanna preserve the capital. we, we do realize that there is a halo effect, positive halo effect in buying back stock that typically is not long-lived.

Michael J. Mazzei: We do realize that there is a halo effect, positive halo effect in buying back stock that typically is not long-lived. We're not buying back enough stock to really affect the overall book value. We can drive it by a few cents a quarter, but not really a material enough as much as we see the effect of making new loans and what that'll do to the stock price. The bias is make new loans. At this level, we think making new loans at the levels we discussed is more attractive to us with our capital.

Speaker #5: So we still think there's going to be a big opportunity on the back end of the 2020 to 2022 cycle where we're going to see a lot of transactions coming out in 26, 27, and 28.

Michael Mazzei: We do realize that there is a halo effect, positive halo effect in buying back stock that typically is not long-lived. We're not buying back enough stock to really affect the overall book value. We can drive it by a few cents a quarter, but not really a material enough as much as we see the effect of making new loans and what that'll do to the stock price. The bias is make new loans. At this level, we think making new loans at the levels we discussed is more attractive to us with our capital.

Speaker #5: We're not buying back enough stock to really affect the overall book value. We can drive it by a few cents a quarter, but not really a material enough, as, as much as we see the effect of making new loans and what that'll do to the stock price.

Speaker #5: The issue with some markets are they're lagging. And as I highlighted, some of the states in the Southwest are still very much lagging. Texas is doing better.

Michael J. Mazzei: We still think there's going to be a big opportunity on the back end of the 2020 to 2022 cycle, where we're gonna see a lot of transactions coming out in 2026, 2027, and 2028. The issue with some markets are they're lagging. As I highlighted, some states in the Southwest are still very much lagging. Texas is doing better. We're seeing a lot of activity in Texas. We do think that there's going to be a dam that breaks in Arizona and Nevada. There'll be a lot of opportunity to lend there at reset basis.

Mike Mazzei: We still think there's going to be a big opportunity on the back end of the 2020 to 2022 cycle, where we're gonna see a lot of transactions coming out in 2026, 2027, and 2028. The issue with some markets are they're lagging. As I highlighted, some states in the Southwest are still very much lagging. Texas is doing better. We're seeing a lot of activity in Texas. We do think that there's going to be a dam that breaks in Arizona and Nevada. There'll be a lot of opportunity to lend there at reset basis.

Speaker #5: So the bias is make new loans. And at this level, we, we think lo making new loans at the levels we discussed, is more attractive, to us with our capital.

Speaker #5: We're seeing a lot of activity in Texas. We do think that there's going to be a dam that breaks in Arizona and Nevada. And there'll be a lot of opportunity to lend there at reset basis.

Speaker #10: All right. Thanks. Appreciate you guys.

Jason Weaver: All right. Thanks. I appreciate you guys.

Speaker #5: Thank you.

Michael J. Mazzei: Thank you.

Michael Mazzei: Thank you.

Speaker #4: All right. Thank you. That's all I had.

Speaker #1: The next question is from Gaurav Mehta with Alliance Global Partners. Please go ahead.

Operator: The next question is from Gaurav Mehta with Alliance Global Partners. Please go ahead.

Speaker #2: This concludes our question and answer session. I would like to turn the conference back over to Michael Mazzi for any closing remarks.

Speaker #12: Yeah. Thank you. Good morning. I wanted to ask you on your, th-the $3 billion and 3.5 billion dollar, e-expectations for mid-year and end-of-the-year and some of your commentary around Sunbelt and the Bay Area.

Gaurav Mehta: Yeah, thank you. Good morning. I wanted to ask you on your, the $3 billion and $3.5 billion, expectations for mid-year and end of the year and some of your commentary around Sun Belt and the Bay Area. As you look to, you know, deploy that capital, do you have any regional preference as to, you know, where you're seeing demand and where you want to put that new capital in?

Speaker #5: Thank you. Thank you, as always, for joining us today. And if we're not scheduled to have a one-on-one with you, please call on us and we'll be glad to do that.

Speaker #12: So as you look to, you know, deploy that capital, do you have any regional preference as to, you know, where, where you're seeing demand and where you wanna put that new capital in?

Speaker #5: If not, we'll see you all on the second quarter earnings call in July. Thank you.

Gaurav Mehta: All right. Thank you. That's all I have.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Michael Mazzei for any closing remarks.

Speaker #11: Sure. This is Matt Hessen. I'll, I'll start on this. And Mike can jump in. I mean, I, I think we're generally looking in all those places, you know, basis, is obviously very important as Mike said.

Matthew Heslin: Sure. This is Matthew Heslin. I'll start on this, Mike can jump in. I mean, I think we're generally looking at all those places. You know, basis is obviously very important, as Mike said. Despite the headwinds in some of the Sun Belt markets, we are still lending there, you know, at reset basis. You know, acquisition, new capital coming in, you know, debt yields that work on a going-in basis are obviously very attractive. Yes, we're also looking and have done stuff and we'll continue to do stuff in the Bay Area. You know, we're seeing great rent growth there, so even some older vintage properties are getting the benefit of that. Mike, anything you wanna add?

Michael J. Mazzei: Thank you. Thank you as always for joining us, today. If we're not scheduled to have a one-on-one with you, please call on us, and we'll be glad to do that. If not, we'll see you all on the Q2 earnings call in July. Thank you.

Mike Mazzei: Thank you. Thank you as always for joining us, today. If we're not scheduled to have a one-on-one with you, please call on us, and we'll be glad to do that. If not, we'll see you all on the Q2 earnings call in July. Thank you.

Speaker #11: Despite the headwinds and some of the Sunbelt markets, we are still lending there. You know, at reset basis. So you know, acquisition, new capital coming in, you know, debt yields that work on a going-in basis are obviously very attractive.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker #11: and then, yes, we're also looking and, and have done stuff and will continue to do stuff, in the Bay Area. so you know, we're seeing great rent growth there.

Speaker #11: So even some older vintage properties are getting the benefit of that. Mike, anything you want to add?

Speaker #5: You know, I think if you also look at thank you for the question. I think also, if you look at, and something that we've been studying recently, when you look at the transaction volume, that's occurred in 2020, '21, and '22, when interest rates were close to zero.

Michael J. Mazzei: You know, I think if you also look at. Thank you for the question. I think also if you look at, and something that we've been studying recently, when you look at the transaction volume that's occurred in 2020, 2021 and 2022, when interest rates were close to zero and we had, in some cases, double-digit rent growth in these markets, and an influx of immigration where people were living somewhere, and we're sure a lot of that was in workforce housing. You add the number of transactions that have occurred were higher than anywhere else in history in some of these markets. We are expecting, I mean, you see what we're doing with our watch list, with our REO.

Michael Mazzei: You know, I think if you also look at. Thank you for the question. I think also if you look at, and something that we've been studying recently, when you look at the transaction volume that's occurred in 2020, 2021 and 2022, when interest rates were close to zero and we had, in some cases, double-digit rent growth in these markets, and an influx of immigration where people were living somewhere, and we're sure a lot of that was in workforce housing. You add the number of transactions that have occurred were higher than anywhere else in history in some of these markets. We are expecting, I mean, you see what we're doing with our watch list, with our REO.

Speaker #5: And we had, we had in some cases double-digit rent growth in these markets, and an influx of immigration where people were living somewhere, and we're sure a lot of that was in workforce housing.

Speaker #5: You had a, a the number of transactions that have occurred were higher than anywhere else in, in, in history. In some of these markets.

Speaker #5: we are expecting I mean, you see what we're doing with our watchlist, with our REO. We are expecting other lenders and we're seeing this in deals we quote where existing lenders are behind the scenes encouraging borrowers to get out to the market.

Michael J. Mazzei: We are expecting other lenders, and we're seeing this in deals we quote, where existing lenders are behind the scenes encouraging borrowers to get out to the market and reset values. There is a disgorgement that's going to have to happen. While we think real estate is in very late innings, certainly relative to private-Credit, with CECL reserves that we've taken across the board with our brethren in the market. We still see that the transactions need to occur. You may have taken a CECL against the loan, but now that loan has to go out into the market and get restructured and re-recapitalized.

Michael Mazzei: We are expecting other lenders, and we're seeing this in deals we quote, where existing lenders are behind the scenes encouraging borrowers to get out to the market and reset values. There is a disgorgement that's going to have to happen. While we think real estate is in very late innings, certainly relative to private-Credit, with CECL reserves that we've taken across the board with our brethren in the market. We still see that the transactions need to occur. You may have taken a CECL against the loan, but now that loan has to go out into the market and get restructured and re-recapitalized.

Speaker #5: And we set values. There is a disgorgement that's going to have to happen. And while we think real estate is in very late innings, certainly relative to private credit, with CECL reserves that we've taken across the board with our brethren in the market, we still see that the transactions need to occur.

Speaker #5: You may have taken a Cecil against a loan, but now that loan has to go out into the market. And, and get re get re, restructured.

Speaker #5: And we, we capitalize. So we still think there's going to be a big opportunity on the back end of the 2020 to 2022 cycle, where we're gonna—we're gonna see a lot of transactions coming out in '26, '27, and '28.

Michael J. Mazzei: We still think there's going to be a big opportunity on the back end of the 2020 to 2022 cycle, where we're gonna see a lot of transactions coming out in 2026, 2027, and 2028. The issue with some markets are they're lagging. As I highlighted, some states in the southwest are still very much lagging. Texas is doing better. We're seeing a lot of activity in Texas. We do think that there's going to be a dam that breaks in Arizona and Nevada. There'll be a lot of opportunity to lend there at reset basis.

Michael Mazzei: We still think there's going to be a big opportunity on the back end of the 2020 to 2022 cycle, where we're gonna see a lot of transactions coming out in 2026, 2027, and 2028. The issue with some markets are they're lagging. As I highlighted, some states in the southwest are still very much lagging. Texas is doing better. We're seeing a lot of activity in Texas. We do think that there's going to be a dam that breaks in Arizona and Nevada. There'll be a lot of opportunity to lend there at reset basis.

Speaker #5: The issue with some markets are they're lagging. And as I a as I highlighted, some of the some states in the Southwest are still very much lagging.

Speaker #5: Texas is doing better with seeing a lot of activity in Texas. We do think that there's going to be a dam that breaks, in, in Arizona and, and, Nevada.

Speaker #5: And there'll be a lot of opportunity to lend there at reset basis.

Speaker #12: All right. Thank you. That's all I had.

Gaurav Mehta: All right. Thank you. That's all I had.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Michael Mazzei for any closing remarks.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to Michael Mazzei for any closing remarks.

Speaker #5: Thank you. Thank you, as always, for joining us today. And if we're not scheduled to have a one-on-one with you, please, please call on us and we'll be glad to do that.

Michael J. Mazzei: Thank you. Thank you as always for joining us today. If we're not scheduled to have a one-on-one with you, please call on us and we'll be glad to do that. If not, we'll see you all on the Q2 earnings call in July. Thank you.

Michael Mazzei: Thank you. Thank you as always for joining us today. If we're not scheduled to have a one-on-one with you, please call on us and we'll be glad to do that. If not, we'll see you all on the Q2 earnings call in July. Thank you.

Speaker #5: If not, we'll see you all on the second quarter earnings call in July. Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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