Ladder Capital Corp

Good morning and welcome to Ladder Capital Corp's earnings call for the third quarter of 2025. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended September 30, 2025. Before the call begins, I'd like to call your attention to the customary safe harbour disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections And we refer you to our most recent form 10 K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward looking statements or projections unless required by law. In addition, ladder will discuss certain non gap financial measures on this call which management believes are relevant to assessing the company's financial performance. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available in the investor relations section of our website. We also refer you to our Form 10-K and earnings supplement presentation for definitions of certain metrics, which we may cite on today's call. At this time, I'd like to turn the call over to Ladder's President, Pamela McCormack.

Good morning. During the third quarter, Ladder generated distributable earnings of $32.1 million, or 25 cents per share, delivering a return on equity of 8.3%, with modest adjusted leverage of 1.7 times. Credit performance remained stable, and the quarter was marked by three notable developments. A significant acceleration in loan originations, continued progress in reducing office loan exposure and the successful closing of our inaugural investment grade bond offering. These results reflect our disciplined business model and conservative balance sheet philosophy positioning ladder for continued earnings growth and greater capacity to capitalize on investment opportunities across market cycles. Loan portfolio activity. Origination activity accelerated in the third quarter with $511 million of new loans across 17 transactions, at a weighted average spread of 279 basis points, our highest quarterly origination volume in over three years. The spread reflects the mix of assets originated, which were predominantly multifamily and industrial, consistent with our focus on stable income producing collateral. Net of $129 million in paydowns, the loan portfolio grew by approximately $354 million to $1.9 billion, now representing 40% of total assets. Year to date, we originated over a billion dollars in new loans with an additional $500 million under application and in closing. Notably, the full payoff of our third largest office loan, a $63 million loan secured by an office property in Birmingham, Alabama, reduced office loan exposure to $652 million, or 14% of total assets. Approximately 50% of the remaining office loan portfolio consists of two well-performing loans, secured by the Citigroup Tower in downtown Miami and the Aventura Corporate Senate in Aventura, Florida. Securities portfolio. As of September 30th, our securities portfolio totaled $1.9 billion, representing 40% of total assets. During the quarter, we acquired $365 million in AAA-rated securities, received $164 million in paydowns through amortization, and sold $257 million of securities generating a $2 million net gain. Paydowns and sales exceeded purchases, resulting in a modest net reduction in securities holdings this quarter. This reflects our disciplined approach to capital allocation, as we did not replace certain securities that ran off, consistent with our view that spreads may widen in the mortgage market given recent volatility and the Federal Reserve's ongoing runoff of mortgage-backed securities. Consistent carry income from our real estate portfolio. Our $960 million real estate portfolio generated $15.1 million in net operating income during the third quarter. The portfolio primarily consists of net lease properties with long-term leases to investment-grade rated tenants and continues to deliver stable, predictable income. Capital structure and liquidity. During the third quarter, we closed our inaugural $500 million five-year investment-grade unsecured bond offering at a rate of 5.5% representing 167 basis points spread over the benchmark treasury, the tightest new issuance spread in Ladder's history. The offering was met with strong demand and the bonds have since traded tighter in the secondary market, reaching spreads as low as 120 basis points. This transaction validates the strength of our conservative balance sheet philosophy and disciplined business model. As one of our premier debt capital markets bankers noted, it also firmly planted Ladder's flag in the investment grade market. The continued tightening of our bonds positions us for lower borrowing costs, stronger execution, and improved shareholder returns. As of quarter end, 75% of Lattice debt consisted of unsecured corporate bonds, and 84% of our balance sheet assets remain unencumbered. We maintain $879 million in liquidity, including $49 million in cash, and $830 million of undrawn capacity on our unsecured revolver, which provides same-day liquidity at highly competitive rates. outlook. Lattice's unique investment grade balance sheet, disciplined use of unsecured debt, and robust origination platform positions us to capitalize on investment opportunities while maintaining credit risk management. We expect fourth quarter loan originations to exceed third quarter production. Recent credit rating upgrades and our successful inaugural investment grade bond issuance have lowered our cost of debt and expanded our access to a deeper, more stable capital base that remains consistently available across market cycles. Over time, we expect our strong balance sheet, modest leverage, and reliable funding profile to position ladder alongside a broader set of high-quality peers, including equity REITs, rather than solely within the commercial mortgage REIT space. As investors increasingly recognize the strength of our senior secured investment strategy and conservative capital structure, we believe our equity valuation will reflect this alignment. Combined with our disciplined credit risk management and ability to deploy capital with speed and certainty, these attributes reinforce our capacity to deliver strong, stable returns for shareholders across market cycles. With that, I'll turn the call over to Paul.

Thank you, Pamela. The 3rd quarter of 2025 ladder generated 32.1Million of distributed learnings or 25 cents per share, achieving a return on average equity of 8.3%. The 3rd quarter, we closed our inaugural investment grade bond offering a 500Million dollar 5 year bonds at 5 and a half percent. The proceeds were partially used to call the remaining 285Million dollars of bonds that were returning in October and fund loan loan originations. As of quarter end, 2.2 billion or 75% of our debt is comprised of unsecured corporate bonds across four issuances with a weighted average remaining term of four years and a weighted average coupon of 5.3%. Our next corporate bond maturity is now in 2027. The offering strengthened our balance sheet and affirmed our commitment to the investment grade bond market as our primary source of capital. We're encouraged by the bond's strong trading performance in the secondary market and believe our bonds offer attractive relative value to fixed income investors with meat on the bones to tighten further as the market continues to recognize Ladder's distinct, longstanding investment strategy anchored by conservative lending attachment points, AAA rated securities, high quality real estate equity investments. As of September 30th, 2025, Ladder's liquidity was $879 million, comprised of cash and cash equivalents and our undrawn capacity of $850 million on Secure Revolver. Total growth leverage was 2.0 times as a quarter ends below our target leverage range. Overall, our balance sheet remains strong and primed for continued growth as our investment pipeline continues to build. As of September 30th, 2025, our unencumbered asset pool stood at $3.9 billion, or 84% of total assets. 88% of this unencumbered asset pool is comprised of first more results, investment grade securities, non-restricted cash and cash As of September 30, 2025, Lattice's undepreciated book value per share was $13.71, which is net of a $0.41 per share of CISO reserves established. In the third quarter of 2025, we repurchased $1.9 million of common stock for 171,000 shares at a weighted average price of $11.04 per share. The year to date in 2025, we have repurchased $9.3 million of common stock, or 877,000 shares, at a weighted average price of $10.60 per share. As of September 30, 2025, $91.5 million remains outstanding on LATA's stock repurchase program. In the third quarter, LATA declared a $0.23 per share dividend, which was paid on October 15, 2025. As of today, our dividend yield is approximately 8.5%, with a stock price that we believe has been pulled down by the broader market concerns around private credit. We'll note that our dividend remains stable, and our asset base continues to turn over into freshly originated loans, AAA securities, high-quality real estate equity investments. With a stable earnings base complemented by our investment-grade capital structure, we believe there's ample room for our dividend yield to tighten. specifically when compared to other investment-grade REITs with similar credit ratings to the latter. We continue to expand our investor outreach efforts now as an investment-grade company, and we look forward to further educating the market on our stories. Building on Pamela's overview of our performance, I'll highlight a few additional insights about each of our segments shared in the third quarter. As of September 30, 2025, our loan portfolio totaled $1.9 billion, with a weighted average yield of approximately 8.2%. As a quarter end, we have three loans on non-accrual, totally $123 million, or 2.6% total assets. In the third quarter, we resolved two non-accrual loans, first through the payoff at par of a $16 million loan through the sale by a sponsor of two mixed-use properties in New York City, and the second via foreclosure of a loan collateralized by an office property in Maryland with a carrying value of $22.7 million. No new loans were added to non-accrual in the third quarter. Our fiscal reserve remains steady at $52 million, or $0.41 per share. We believe this reserve is adequate to cover any potential losses in our loan portfolio, including consideration of the ongoing macroeconomic shifts in the U.S. and global economy. As of September 30, 2025, our securities portfolio totaled $1.9 billion, with a rated average yield of 5.7%, of which 99% was investment grade and 96% was AAA rated, underscoring the portfolio's high credit quality. As a quarter end, approximately 80% of the portfolio of almost entirely AAA securities are unencumbered and readily financeable, providing an additional source of liquidity, complementing our same-day liquidity of $879 million. In the third quarter, our $960 million real estate segments continue to generate stable net operating income. The portfolio includes 149 net lease properties, primarily investment-grade credits committed to long-term leases with an average lease term of seven years remaining. For further information on Lattice third quarter 2025 operating results, refer to our earnings supplement presentation, which is available on our website, and our quarterly report on Form 10-Q, which we expect to file in the coming days. With that, I will turn the call over to Brian.

Thanks, Paul. The third quarter was a particularly gratifying one, highlighted by the successful completion of our first corporate unsecured issuance as an investment grade issuer. We now have access to a much larger investor base in the investment grade market than the high yield market where we had issued our prior seven offerings over the last 13 years. Having access to this larger pool of capital should allow us to further optimize our liability management in the years to come. We believe that by being a regular issuer in the investment grade corporate bond market, we will be able to lower our overall interest expense to a greater extent than what we could expect in the secured repo and high-yield markets. We prioritized getting to investment-grade rating several years ago, so having that distinction today from two of the three major rating agencies is very satisfying, and we plan to maintain or improve our ratings over time. Wild Ladder has historically been grouped into a peer group of other commercial mortgage REITs. We believe we are more properly comped against other investment grade rated property REITs who finance their operations like we do, primarily with the use of corporate unsecured debt and large unsecured revolvers. If we succeed in curating an equity investor base that views us more in line with investment grade property REITs, we think our stock price will start to reflect a lower required dividend yield, more in line with how these investment-grade property REITs with lower leverage are valued. In the fourth quarter and beyond, we expect to continue adding to our inventory of higher-yielding balance sheet loans while staying nimble enough to pivot into securities acquisitions during periods of high volatility when these investments provide extraordinary opportunities to add safer, more liquid investments as market turbulence flares up. We are hopeful that the yield curve will steepen much more next year as the Fed makes good on market predictions of several cuts to the Fed funds rate. This, in turn, should pave the way for more regular contributions to securitizations. We are always on the lookout for opportunities to own more real estate, but we expect most of the lift to earnings next year to come from organic growth of our loan portfolio. We're expecting to finish this transformational year on a positive note, as market conditions do appear to favor our business model as we head into 2026. We can take some questions now.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Jade Romani with KBW. Please proceed with your question.

Thank you very much. I'm interested to know if you're doing anything differently on the origination side from prior to the IG rating. Perhaps that has opened you up to deals that are closer to stabilization or perhaps larger in size. Clearly, the IG rating might give you a competitive advantage over non-bank lenders. So if you could provide any color on that, it'd be helpful.

Sure. Thanks, Jade. Yeah, I would say we're looking at some slightly larger transactions. It's just a lot more stability around it, financing it this way. You don't have to go about trying to figure out if an individual lender will see the asset the same way you do. But I wouldn't call it anything wholesale indifference. Slightly larger, yes. Everything is a little bit more profitable when your cost of funds go down. But for the most part, the one real change that I see in this part of the cycle versus the last time is the assets on which we're lending are of much, much better quality than the garden apartment buildings and older warehouse properties. So we seem to, when I take a look at the assets that we're lending on, they're really newly built class A apartment complexes, resort style almost. And a lot of the industrial portfolios are also quite new as a result of all the onshoring that took place.

And on the origination side, I noticed a difference between fundings and commitments up front that seemed, at least from the outside, a little larger than historically. Were there any construction loans in there or any large CapEx projects in those deals, if you could provide any color?

I wouldn't say as a rule, but we generally don't write construction loans, so there are no construction loans in that portfolio. that you're looking at. And as far as, you know, heavy capex work, I think if you're gravitating towards a slightly wider spread than maybe you're expecting, I don't think it's as a result of a higher construction component or a lot of TI hammer swinging. It really is just, we're just getting a little bit better. I think the portfolio doesn't look like it's changing meaningfully. Right now it's, most of the assets are industrial and multifamily. I'm not sure it'll stay that way. Um, you know, and we haven't been avoiding hotels. Um, we put one under app recently, uh, but we just haven't run across too many of them. And as I said, a lot of the, uh, we try to focus more importantly, rather than property types is on, uh, on acquisitions where the borrower was buying, uh, something that usually had a reset basis. Some of these resets are quite remarkable, but, um, As opposed to cash out refinances. The only real cash out refinances that we're doing is if a guy is coming off a construction loan on an apartment building and he's only 50% leased now. So those oftentimes have 30% or 40% equity in them. And sometimes there's a cash out refi because the property is now complete and half leased. So other than that, it's pretty straight down the middle lending on apartments and industrial properties.

Thanks a lot.

Our next question comes from the line of Steve Delaney with Citizens JMP. Please receive your questions.

Good morning, everyone, and congrats on the strong quarter. I'm curious. Let's start with lending. You seem to like the market. You have plenty of capacity. Let's talk about just the $1.9 billion rather than the $5 billion overall portfolio, focusing on the loan portfolio because, You appear to be increasingly active there. Do you see, looking at that portfolio, if we were to look out over the next year, do you see further growth and meaningful growth in that $1.9 billion loan portfolio? And can you give us some idea of a range with your current capital base, how large the loan portfolio might be able to grow? Thank you.

Sure. Thanks, Steve. Let's start with capital first, because if you remember, in the second half of 2024, we took in over $1 billion in loan payoffs. And while we began originating loans more frequently, we were not originating at that pace. So what was happening is each quarter, the loan book would get a little bit smaller. This is really the first quarter in a while where we've originated more than has paid off. And we expect that to continue. So the fourth quarter is off to a very good start. I would expect, or as I said originally, the organic side of growth will come from just building up the bridge book. I think that's the place where we're focused right now. And we're pretty happy with where spreads are. They're a little bit less competitive than they were really, I would say, just a couple of months ago, which tends to happen after you hit the midpoint of the year. So I would expect that $1.9 billion portfolio to go up by a billion dollars in all likelihood. Maybe I would, if I had to take the over-under on that billion, I would take the over. You know, we're quite active right now, and, you know, business begets business. So I think that when we had a pretty strong origination quarter, that gets noticed by borrowers as well as brokers, and the phone rings a little bit more. As Pamela mentioned, we have over $500 million in loans under application right now. You never really know how many of these are going to close, depending on what happens with the volatility sometimes coming out of the political picture, as well as the geopolitical side of things. But generally, I would expect that we, I think we had that loan book up to around $3.4 billion a couple of years ago, and I would like to get back there. And I think that'll come from a few places. One, we have a larger revolver that's mostly undrawn. We have a lot of securities. Securities are paying off at a much more rapid clip than loans right now. And I think that's a testimony to the payoffs that have been coming in and the capital markets becoming more welcoming to, you know, single asset transactions. So as you pay down those AAAs in a CLO, the financing becomes quite unpopular. So they've been calling a lot of those bonds, and we'll expect that to continue. I think that our securities portfolio will, through attrition, pay off, but also we will sell them. As we said in the quarter, we sold a little over $250 million. I think we own over $2 billion today. I would expect that number to go down, but I would expect the loan inventory book to go up.

That's really helpful color, Brian. Thank you, in terms of special comparison. You mentioned the property REITs and their valuation is something that you would be envious of, whether it's on a P or a dividend yield. Looking at the ROE at 8.3%, I would say it kind of strikes me as being solid, but in terms of valuation and where the stock is trading relative to book, that, you know, some improvement to that, maybe something in the 9 to 10% range might be, you know, very beneficial to, you know, the stock price, and therefore, you know, your valuation relative to book. Is that, is improving the ROE in a prudent manner, is that part of your vision for the next one to two years? And do you think the strategy you have in place will necessarily take your ROE some higher?

I would say yes to all of those parts of that question. The game plan is to write more loans and we'll get through the cash component of our liquidity. As you remember, we had a lot of T-bills when T-bills were yielding 5.5% and that kept us away from very tight mortgage loans because if it wasn't at the margin worth sacrificing liquidity and safety of the securities, You know, we really didn't do it. But now with the Fed cutting rates and promising to cut further, we have a nice mix of floating rate and fixed rate liabilities. So we would expect our cost of funds to be going down. That revolver, I'll remind you, is now priced at SOFR plus 125. So if I am of the opinion the Fed is going to cut rates 100 basis points, usually probably bridging over Powell's last few stands and as well as the next Fed official that comes in. And if that happens, you get so for down around three percent, we can borrow and secure four and a quarter at that point. So that should all bode well. We've got floors in our bridge loan portfolio up around six percent, six twenty five. And so the loan, the rates were able to write loans that these days have actually gone up, not down. And in the last quarter anyway, so we're going to continue doing that. And after we get through the cash component of our liquidity, we'll then begin to sell down or pay down the securities. And the way it comes out on paper, we're hoping to add one to two billion dollars of assets net on the balance sheet. And we're hoping to pick up three to four percent of the profit margin. So if we can take a security that we're earning, you know, five and a half on and get it and pay that loan, pay the security off and then redistribute reinvest that money into a loan portfolio that's earning eight and a half. We think that bodes very well for dividend, ROE, as well as earnings. So it's not a hard ping-pong ball to follow. That is going to be what we're going to do. It's what we've been saying we're going to do. The one thing that has really masked all the work that we've done has been the very rapid pace of payoffs. And those are high yielding instruments. We hate to see them go, but when they've been around for a little bit past their expiration date, you do want them to pay off. And we've been pretty successful at that. So credit very stable. We like what we're seeing. The quality is good. The borrowers are good. They've been patient. They're not in difficult financial binds as a result of owning too many over levered properties. So it looks strong and You know, you've got the stock market at all-time highs. You've got spreads low, rates low, Fed cutting. These are all good conditions on the weather map for a successful lending business at Ladder.

Great. Thank you, Brian, for all the helpful comments.

As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Tom Catherwood, BTIG. Please proceed with your question.

Thanks, and good morning, everyone. Brian, I just wanted to go back to something that you said in response to Steve's question, and I want to make sure I heard it right. Did you mention that – I thought you said rates we can get on loans have gone up, not down. Did I hear that right?

The ones we're looking at, yes. I think they're – Well, you're seeing, I mean, I'm not immune to looking at corporate spreads, credit spreads, mortgage spreads. But there's a couple of things going on more recently in the last, literally the last 60 days, I would say. The Fed is letting the mortgage-backed securities portfolio run off. So the agency securities market is actually not as tight as you would think on spreads. And the reason why is the Fed is effectively letting $30 billion roll off. I think it's $30 billion. I'm not a Fed watcher, so if I have that wrong, please don't send me a bunch of email. But the other, after April, when the tariff talk started and now the back and forths that go on, you know, the commercial sector, as it always does, and I've said this to you probably several times, in January every year we go to a convention down in Miami called CREFSI. Everyone is a bull. Everyone comes out. It's going to be the best year ever. And they put a carry trade on until the middle of June. Around the middle of June, they think maybe we paid too much for these things. And they start to sell them, and they're less aggressive. At Ladder, we have found a nice little theme, I think, in loan sizes. We traditionally like loans at $25 to $30 million on middle market lenders by choice. However, we've dabbled occasionally in larger loans. The banks are not really writing loans in the $100 million range. That's a little too small for them to put on their balance sheet and then try to securitize. They'll write a billion-dollar loan with a consortium of banks, but a $100 million loan is under their radar, and $100 million is probably a little too big for a lot of the CLO issuers that are out there that we mainly compete with. So we're actually very happy in our $50 to $100 million range right now. And we'll try to stay there. And so don't think that we've changed our stripes if we start picking up loans that are a little larger than average. We're still doing plenty of smaller loans too. But the $100 million type loan is a better asset. It's newer. It's got better financial characteristics to it. And it is higher rate because the competitive landscape is just not as bad as it was. And keep in mind, I'm talking about the last 60 to 90 days. The first half of the year was very, very tight, and we were not originating a lot for that reason. In fact, we were buying a lot of securities. Another good proxy, Tom, if you want to take a look at it, is the CLO market. So there's a lot of CLOs coming to market, and they're in the 145, 155, 160 area for AAAs. That's wider than they were just a few months ago. It's not extraordinarily wider. But you're also seeing the VIX tick up. I think it was around 25 the other day after being at 15 for a month. So, you know, when you see the VIX ticking up like that and all the volatility around the rhetoric and the political circles, we're able to find things that are pretty attractive. Again, I also think we have a reputation as being very reliable. So as we get to the year end here, we tend to do, we always do better in the second half of the year than the first year, first half of the year when it comes to production. That has been something that has followed me around for my whole career. And I think it has more to do with seasonality and what happens. As you know, insurance companies, they allocate money into fixed income. Usually by June or July, they're fully invested. So even that competitive force kind of backs off a little bit, too. So we actually prefer to fatten up going into the end of the year.

Got it. Really appreciate that answer, Brian. And then if I think about then sources and uses, and again, I know you laid it out before, how you think about funding things, but if the spreads and securities are somewhat widening and the revolvers priced at S plus 125, wouldn't it make sense to then just put everything on the revolver and then term it out with unsecured once you get to you know, $400, $500 million and just keep, wash, rinse, repeat that? Or do you think selling down securities along with using the revolver gives some other benefit?

Well, I think it's almost like we have several companies that ladder with the products that we dabble in. But on the floating rate side, I'm sorry, on the security side, I mean, if you take a look at the rating agency REIT, you know, the agency buyers like AGNC and Annalee and a couple others. You know, these guys are throwing off dividends of 14, 15%. And they're levered, I don't know, seven, eight times in many cases. That's way too hot for us on leverage. But with government guaranteed paper with a lot of duration, I think your risk is in the duration side of that. But at where we are, these securities, if we levered them up and easily can, the financing cost is around SOFR plus 50 on a AAA. If we're buying things at 150, you can figure out that there is a pretty good spread in there. So we can lever those up to about a 15, but it's a lot of leverage. And the road we're on is not to just have a low cost of funds so we can lever things up. The game plan is to focus more and more in the years ahead on unsecured debt that we extend. But the change at ladder versus Before we were IG, we would normally be thinking about issuing another bond here because we're growing rapidly. We're going to need more capital. We've got sources of ability to get capital. But we might think about that. But if you really think the Fed is going to cut rates by 75 or 100 basis points, you would not go out and do a bond deal right now because that revolver is going to get down to a low 4% rate. And that's what we think will happen. It doesn't have to happen. But if it does, that's probably the first thing we'll do is draw that. We don't want to draw all of that because that's not what the agencies and investors want to see on the bond side. But my guess is we'll probably, I don't think securities were ever meant to be a long-term hold for us. They're kind of a parking spot for us while we're waiting for better opportunities to come by on the loan side. And I think our patience has been rewarded because I think Paul mentioned that our spread on the loans we wrote in the 500 million or so was around 279. I think the spread on what's coming in the fourth quarter is going to be wider than that.

Got it. All right. That makes sense. That's it for me. Thanks, everyone.

Our next question is a follow-up from Jade Romani with KBW. Please proceed with your question.

Thanks. Paul Cecala, Just curious if you would contemplate launching a securities fund if you can deliver 15% type returns with leverage, you could put the leverage in the fund not on ladder's balance sheet. Paul Cecala, And you know, create value for investors looking for that type of return profile. Paul Cecala, And, of course, comparing to residential mortgage securities commercial has a lot more predictable duration so. You don't have the prepayment volatility that the agency needs to deal with.

Yeah, I mean, we've done that before. When we first opened, we ran a few investment portfolios for even some individuals that we knew, because sometimes securities get cheap, but most people with a first and last name don't know how to go buy them. And so oftentimes we'll get a call and say, why don't you buy these? So we have an asset that's yielding, you know, as I said, a levered yield of around 15%, I think. So that's generally attractive, but it does come with a lot of leverage. Um, we've historically looked, we've looked at that. We've looked at stapling on a residential mortgage arm of things. Cause we all understand that business also, but haven't done it. And the last thing we've looked at too, is possibly spinning off our triple net portfolio. because we don't get much for that in valuation. So this is going to be, 2026 is going to be a year about really fine tuning the columns and what the right cap rate should be on those things. We have an internal manager that has no value apparently. So there's lots of things we can do now around the edges, but the first step was going to be becoming an investment grade company. We still like the, given where we are in the cycle right now, we like the commercial mortgage business better than the residential side. The residential side could get very interesting, though, not from a loan, but from a standpoint of if there's too much supply due to the absence of the Fed. So, you know, those are very attractive, but as I said, they do have a lot of duration on them. So we're probably, we're agnostic as to holding onto things that yield 15% or selling things that make one to two points. and then recycling the money. And I think that that is an option open to us right now, as you saw in the small sales that we did in the third quarter.

And then the New York office equity investment you made, how are you feeling about that? Is that a long-term hold? Looks like it was pretty prescient in terms of timing. But could you also remind us the size of that?

Sure. Our investment, we were a minority participant in the equity on that. But we may very well get involved in the debt side of that situation later on. But we have a loan from an insurance company for now. But that building, 783rd Avenue, by the way, if anybody cares, we put in a $13 or $14 million investment. At the time, the building was about 50% occupied. I don't know where we are on free rent, but I do believe we've now, the building is leased over 90% in just a short, under a year and a half um so we we do like that one again that's a very high quality building third avenue is not known for high quality buildings but a lot of the lower quality is becoming residential and a lot of those poorly occupied office buildings that are becoming residential those tenants are looking for space the real benefit we picked up was between jp morgan and the citadel park avenue is being you know just gobbled up on space And a lot of those tenants are also moving. So we didn't, we thought we were gonna get 3rd Avenue tenants looking for an address. We wound up getting Park Avenue tenants that were being displaced by JP Morgan's expansion. So all going well, I wish we had done more of that. And do we like that? We're looking at another situation right now of larger size than the one we did at 780 3rd Avenue. And we like it. These transportation hubs in New York City tend to do They come out a little bit quicker, especially when people have concerns around safety on mass transportation. I think that situation has largely corrected itself with the return of people. Our offices are full. We haven't ordered anybody to be in five days a week, but most of them are. So we generally like pockets of the office market, but we do understand the obsolescence associated with some of the older ones. So, yeah, we like where we are. We're happy to do more of those investments. And that long-term hold is the last part of your questionnaire. I wish we were going to hold that for a while, yeah.

Okay, great. Thanks so much.

We have no further questions at this time. Mr. Harris, I'd like to turn the floor back over to you for closing comments.

Thanks, everybody, for listening and those who dial in afterwards. And good year, 2025. We're in the fourth quarter. The reason I say that now is because we're not going to talk again until after the new year comes and we get through the audited financials. But a lot of this just falling into place the way we largely expected it. The only real surprises were the rapid pay downs that took place in the second half of last year. But we're catching up quickly. We've had an inflection point here in the last quarter. where we originated more than paid off, and we think that is going to be a consistent theme over the next four or five quarters. So thank you for tuning in, and we'll catch up with you after the new year.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.