Lument Finance Trust, Inc.

Good morning, and thank you for joining the Lumen Finance Trust Fourth Quarter 2023 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. And I would like to turn the call over to Andrew Tseng with Investor Relations at Lumen Investment Management. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining our call to discuss Lumen Finance Trust Fourth Quarter 2023 financial results. With me on the call today are Jim Flynn, our CEO, Jim Briggs, our CFO, Jim Henson, our President, and Zachary Halpern, our Managing Director of Portfolio Management. On Friday, March 15th, we filed our 10-K with the SEC and issued a press release to provide details on our fourth quarter results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I'd like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this conference call, words like outlook, evaluate, indicate, believes, will, anticipates, expects, intends, and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statement. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q, and 10-K, and in particular, the risk factors section of our Form 10-K. It is not possible to predict or identify all such risks. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures will be discussed on this conference call. A presentation of this information is not intended to be considered in isolation nor as a substitute to the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures is the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at www.sec.gov. For the fourth quarter and fiscal years 2023, we reported GAAP net income of $0.07 per share and $0.29 per share of common stock, respectively. For the fourth quarter and fiscal year 2023, we reported distributable earnings of $0.10 and $0.26 per share of common stock, respectively. This past December, we also declared a dividend of $0.07 per share with respect to the fourth quarter, bringing our cumulative declared dividends for the year to $0.26 per share.

I will now turn the call over to Jim Flynn. Please go ahead. Thank you, Andrew.

Good morning, everyone. Welcome to the Lumen Finance Trust earnings call for the fourth quarter of 2023. We appreciate everyone joining us this morning. I'll start with the macro perspective. We're viewing 2024 with cautious optimism. Consensus expectation is that further hikes are now behind us, and most economists believe a soft landing is more probable in 2024 than just six months ago. The U.S. economy has remained resilient. Unemployment rates remaining below 4%. Inflation, albeit a bit moving up and down, is moving closer to the Fed target rate of 2%, with all the most recently seen available data. That being said, the risk of recession remains elevated as geopolitical uncertainty persists, and it's yet to be seen how the Fed's current monetary policy which operates on a lag, fully plays out across the economic landscape. Multifamily has its own set of opportunities and challenges. In the short term, the property sales market continues to be primarily driven by forced sellers, significantly limiting acquisition financing opportunities. In addition, the multifamily market is expected to experience slowed NOI growth, resulting from softening of short-term supply in some markets and higher property operating costs, including labor, insurance, and maintenance, in addition to the impact that higher rates have had across the industry. Despite the challenges, multifamily remains a favored asset class among investors, given its strong historical performance and constructive long-term fundamentals. A lower short-term rate environment in the latter half of 2024 could contribute to improved asset performance in our portfolio and perhaps a narrowing of the current bid-ask spread between property buyers and sellers, positively impacting valuations and, in turn, debt proceeds. Further, we expect to see significant refinance opportunity on the horizon, as the MBA and others in the industry are projecting well over $300 billion of multifamily loans expected to reach initial maturity by the end of 2025, and over $650 billion of multifamily loans are expected to mature within the next three years. As previously discussed on last quarter's call, the company had a busy and successful year, closing at $386 million in secured financing in July. That increased our levered investment capacity to approximately $1.4 billion. During the fourth quarter, we experienced $43 million of loan payoffs, and acquired or funded an additional $77 million of loan assets. As of year end, our capital was effectively fully deployed, with approximately 94% of our loan portfolio collateralized by multifamily assets, and more than 75% of the portfolio risk-rated three, which is moderate risk or better. We had only two assets identified as risk-rating five and recorded no asset-specific reserves during that period, five being the highest risk. The company continued to maintain an attractive long-dated liabilities, relying primarily on two secured financing structures to leverage investment portfolios. The reinvestment period of 2021 CRE CLO transaction ended this past December with an 83% effective advance rate and a weighted average cost of SOFR plus 155 basis points. Even as the transaction begins to de-lever, We expect the structure to continue to provide an attractive cost of capital relative to current securitization and warehousing alternatives in the market. We do, however, expect to explore and carefully consider refinance opportunities for that CLO over the coming quarters. With deep experience and expertise in multifamily lending, LST remains committed to its existing investment strategy. We believe the company provides its shareholders with a unique value proposition among comparable mortgage rates, given a deliberate focus on middle market multifamily credit, success in active asset management, and strong partnership from the broader Oryx platform. The company has been able to maintain a stable dividend, better than average credit performance within its investment portfolio, and it's a superior dividend yield relative to many of its peers. With that, I'd like to turn the call over to Jim Briggs, who will provide details on our financial results. Tim?

Good morning, everyone. Last Friday evening, we filed our annual report on Form 10-K and provided a supplemental investor presentation on our website, which we will be referencing during our remarks. Supplemental investor presentation has been uploaded to the webcast as well for your reference. On pages four through seven of the presentation, you will find key updates and an earnings summary for the quarter. For the fourth quarter of 23, we reported net income to common stockholders of approximately $3.8 million or $0.07 per share. We also reported distributable earnings of approximately $5.2 million or $0.10 per share. There are a few items I'd like to highlight with regard to the Q4 P&L. Our Q4 net interest income was $9.1 million compared to $9.5 million in Q3. While Q4 net interest income benefited from a full quarter's worth of levered earnings from the OMF 2023-1 financing transaction that closed in July, a sequential net decline was primarily driven by fewer payoffs during the period, which resulted in lower exit fees. Payoffs and paydowns during Q4 totaled $43 million, as compared to $111 million in the prior quarter. Associated Q4 exit fees of $210,000 were down approximately 57% from the prior quarter. Reduced Q4 payoffs also impacted our total operating expenses as well. As a reminder, when one of our loans are paid off in agency refinancing provided by an affiliate of our manager, the borrower exit fee is waived pursuant to the terms of our management agreement. In that instance, we do, however, receive a credit to expenses reimbursable to our manager of 50% of the waived exit fee. Total operating expenses were $2.7 million in Q4 versus $2.4 million in Q3. The majority of that expense increase is driven by lower waived exit fees and lower associated credit to expenses driven by overall lower payoffs relative to Q3. Outside of that, operating expenses were largely flat quarter on quarter. Primary difference between reported net income and distributable earnings was the approximate $1.4 million net increase in our allowance for credit losses, all with respect to our general reserves. The primary driver of that general reserve increase was a modest uptick in average risk rating from 3.4 to 3.5, changes in the macroeconomic forecast, and relative cautiousness in our estimate modeling as it relates to CRE pricing during this period, where there has been very little transaction activity. We evaluate our five-rated loans individually to determine whether asset-specific reserves for credit losses are necessary and determine that none were necessary as of December 31, 23. In that context, I'd like to note some subsequent events related to the two five-rated loans we had at year end. With respect to the five-rated loan on a multifamily property in Columbus, Ohio, that has been non-accrual with collections accounted for on a cost recovery basis. We received proceeds related to the loan in both Q4 and Q1. Our carrying value in the loan was reduced to $8.9 million as of year end from $12.8 million at the end of Q3. And with the $13.5 million in proceeds received in Q1, our carrying value in the asset will be reduced to zero. After taking into consideration certain legal and other costs deemed recoverable, We expect the net of the Q1 proceeds received to result in a gain of approximately $1.9 million in Q1. With respect to the $36.8 million I've rated loan on a multifamily property in Virginia Beach, Virginia, that was on non-accrual as of December 31st due to monetary default, we entered into a loan modification with the borrower that, among other things, resulted in a $3.6 million principal pay down. and all past dues being brought current, which will result in interest of approximately $500,000 that was unpaid as of year end being recognized in Q1. Jim will touch a bit more on this modification in his remarks. As of year end, the company's total equity was approximately $241 million. Total common book value was approximately $181 million, or $3.46 per share, flat versus prior quarter. We ended the fourth quarter with an unrestricted cash balance of $51 million, and our investment capacity through our two secured financings was effectively fully utilized. I will now turn the call over to Jim Henson to provide details on the company's investment activity during the quarter and portfolio performance. Jim?

Thank you, Jim Briggs. I will now provide a brief summary of recent activity within our investment portfolio. During the fourth quarter, we experienced a $34 million net increase in our loan portfolio after accounting for $43 million of loan payoffs and paydowns for the period. For the full year, we experienced a $388 million net increase in our loan portfolio after accounting for $271 million of loan payoffs for the period. The growth of the portfolio was driven primarily by our success in executing the LMF transaction in July, as well as our managers' diligent efforts to redeploy capital through reinvestment features in our secured financing vehicles. Of the $77 million of loan investments acquired or funded during Q4, approximately 70% were collateralized by multifamily properties. Of the $660 million of loan investments acquired or funded during the full year, Approximately 95% were collateralized by multifamily properties. As of year end, our portfolio consisted of 88 floating rate loans with an aggregate unpaid principal balance of approximately $1.4 billion, with 94% of the portfolio collateralized by multifamily properties. 100% of our floating rate portfolio is indexed to one month SOFR. Our investment portfolio continued to perform well during the fourth quarter. as we ended the period with a little more than 75% of our portfolio risk-rated a three or better, and experienced only a modest quarter-over-quarter increase in the weighted average risk rating, going from 3.4 to 3.5, primarily driven by a migration of some of our risk-rated two assets to a risk rating of three. Of positive note, our five-rated aggregate loan exposure decreased from three to two loan assets during the quarter. As previously stated, as a previously rated five loan with an unpaid principal balance of $19.6 million was brought current with respect to interest payments and restored to accrual status during the fourth quarter. Jim touched on the two five rated loans that remained at December 31st, 2023 and were evaluated for specific reserves. As noted, Based on proceeds received on the Columbus, Ohio loan, we have no remaining asset on the books coming out of Q1. With respect to the modification on the $36.8 million five-rated loan collateralized by a multifamily property in Virginia Beach, Virginia, the modification of the loan increased the note rate to SOFR plus 400 basis points from SOFR plus 327 basis points. in addition to a principal pay down and the bringing current of all past due interest escrows and reserves. The stated maturity of that loan has been amended to April 5, 2024, with the ability for the borrower to extend under certain conditions to May 3, 2024. Very positive developments and indicative of the success in active asset management that Jim Flynn mentioned in his opening remarks. Despite the potential for further issues with specific loans, We remain confident in our ability to proactively manage repayments and achieve positive asset management outcomes within our portfolio, particularly in light of successful results in recent months. With that, I will pass it back to Jim Flynn for some closing remarks.

Thank you, Jim. Thanks again to all of our guests on the call. We appreciate your time and your interest. I'd like to open the call up to questions.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And if you would like to withdraw from the question queue, simply press star followed by 2. And if you're using your speakerphone, please lift the handset before pressing any keys. And your first question will be from Crispin Love at Piper Sandler. Please go ahead.

Thanks. Good morning. I appreciate you taking my question. So just first on the two five-rated loans, I just want to make sure I got it right. You expect a gain in the Columbus loan based on kind of where you're holding it right now in the first quarter first. Kind of is that accurate? And then can you just go over the first quarter impact you expect on the Virginia Beach loan thing?

Sure. So this is Jim Briggs here. Thanks, Kristen. Yeah, so on the Columbus loan, we have been accounting for that on a cost recovery basis. So as we receive proceeds, we've just been bringing the asset balance down. As I mentioned in my remarks, we did some of that in Q4 with some proceeds that we received, and then we brought that asset value down to zero. It will be brought down to zero in Q1, and we're expecting... based on those proceeds received of $13.5 million to book a gain, book income in Q1 P&L of $1.9 million.

For the... On that, Jim, just to clarify, just to clarify, I mean, the gain is a result of recovering all of the deferred interest since it went on audit rule.

Yeah, that's effectively what that $1.9 million is, as Jim mentioned. So that $1.9 million will be booked in Q1, very likely for the reason just described in the interest income line. And for the Virginia Beach loan that had been on non-accrual, the $500,000 that we mentioned is what was accrued, what not accrued, what was due and unpaid and not accrued as a 1231 of $500,000. That has been brought current and sort of the out-of-period impact. Q4 interest coming into Q1 will be about $500,000.

Okay, thanks. That's helpful. And then just on multifamily bridge more generally. We've seen stress across the industry and some of your competitors' portfolios on balance sheet as well as free CLOs. But can you just discuss how kind of your performance is trending kind of more broadly kind of across the whole portfolio and what characteristics, if any, in your portfolio make Lumen kind of different from some of the multifamily bridge peers that are experiencing more stress?

Sure.

I mean, look, I think that obviously we're, you know, virtually entirely multifamily. So that helps. There are others that are there or close. So that's certainly been a positive. And while we have, you know, a meaningful component of our portfolio was originated in the, you know, toward the end of the pandemic. peak of the cycle, we've still got a number of assets that are longer dated that have been around for a longer period of time and perhaps not, you know, valuations and business plans were set prior to the peak. Those two things are helping. But I think probably, you know, one of the more critical aspects here or what's helped us and, you know, it doesn't necessarily relative to peers or not, but we've got a very experienced asset management team that has worked out assets and taken ownership of assets, managed assets. That has helped both in partnering with our sponsors and coming up with solutions, but has also helped us to act quickly when we find ourselves in a position of, you know, not being able to find a solution with a sponsor. um i think that that reputation has helped um you know our sponsors to to proactively work with us um we've had few instances even in across the broader platform of the sponsor of lumen um as a sponsor of of sponsors who who um are trying to negotiate by by maybe not doing things the way that you would want them to do, to say the least. And we've been able to kind of squash those pretty quickly. And it's resulted in us being reasonable with sponsors coming in, putting forward new consideration and legitimate plans to make an exit in exchange for more time or some relief, whatever it is that they're seeking. And usually we've been able to to find an answer. I think we have high-quality sponsors. Some sponsors get into trouble in terms of liquidity, and there's not much that they can do about it at the time. It's too late, so to speak. But with the exception of that, as long as we've got good sponsors, well-capitalized, good managers with a plan, we've got folks that can help you know, work with them to come up with a good plan. And we've had, you know, a great success rate for LFT. Similarly, in our parent company, our sponsors balance sheet as well. So, you know, we'll just continue to focus on asset management. We're regularly speaking to and visiting assets, making sure we don't get too far behind when we see an asset physically struggling. We're, you know, proactively out there and either, you know, thinking about ways that we can step in or working with the sponsor and how we can resolve that issue immediately before things deteriorate. So, active asset management is the number one reason why any portfolio can perform in a stressful environment.

Perfect. Thanks. And that's helpful. And then just one last quick one from me. you had $20 million of self-storage payoffs in the corner. Anything to call out there? Because those payoffs were pretty sizable in that portfolio. Was that just a low maturity or anything else at play there?

Yeah, they were longer. Those were some older assets. So it's not surprising they eventually were able to, you know, to seek, you know, permanent resolution, not resolution, but permanent financing and have those assets I don't think there's anything particularly noteworthy. In fact, I don't know, someone on the call could correct me, but I mean, those are probably maybe three years old or close to three years old, if I'm not mistaken. So they're, you know, they've been around a while.

Hey, I can jump in on that one, but this one, Zach.

Yeah, that asset sold well above our loan basis. Quick resolution. Okay, great. Thank you. I appreciate you taking my questions.

Thank you. Next question will be from Steve Delaney at Citizens BMP. Please go ahead.

Thanks. Good morning, everyone. And look, congratulations on a really solid quarter and the challenging environment that we have. So look, I know this is early. You hiked the dividend back in the third quarter, but very solid coverage here, and we're hearing of some nice recoveries here in the first quarter. Jim Flynn, what do you think would be, in your mind, and I guess more importantly, the board, what do you want to see to have the confidence to make any further increase in the dividend during 2024? Thank you. Thanks, Steve.

Good to hear from you. So there's a number of things. Obviously, we're talking to the board. We feel good about our liquidity position relative to our size, including those recoveries, as you noted. We feel confident in the earnings. So there's a lot of positives there. I would say in discussions with the board, we're looking at the broader market. And what we'd like to see is, you know, see how the next quarter or two goes in terms of what's the macroeconomic environment looks like. Are we going to continue to see, you know, improvement or more importantly, stability? That's really what I would say the focus is, is do we have stability? The capital markets have been a bit spotty. you know, we'd like to see some more transactions done. We are working, you know, to that end, looking at our own refinance activity and what we could at the corporate level and what we might be. So all of those things as we, you know, expect them to play out or hope, you know, our view, our base view would be that things do continue on the trajectory. And as we get clarity on those issues, I think that will help guide the dividend discussion with the board. But I would say from a corporate standpoint, taking a look at the market as a whole, having some concern about some of the maturity issues, maybe less so on the multi-side, certainly there's a lot coming up, I think a lot of loans will extend, such as what kind of stress the market sees, what kind of stress we see from some of our peers, perhaps in some of the other asset classes, and making sure that we're in a position to manage any of those issues or kind of macroeconomic stress that comes up. And if things continue on the base path that we are projecting, then we're going to be looking at maybe using some of that incremental cash to make new investments, There are ample opportunities to diversify a little bit from bridge loans in the multifamily space, whether that's in some of the MES and press capital available out there, whether that's looking at participating in some construction activity in the areas that are seeing, which will be almost everywhere, no deliveries over the next after 2025. So there's some opportunity there where we could make some new investments as well. But right now, we think that it's prudent to maintain our liquidity position and ensure that the market continues to move in the right direction. If it does, I think we'll be continuing to discuss with the board.

That's a very helpful overview, Jim. And it looks like you guys have a do have a lot of optionality moving forward, especially if we do, in fact, see lower rates sometime here in the next couple quarters. Thank you for the comments. Nice job. Thank you.

Thank you. Next question will be from Matthew Erdner at Jones Trading. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. Do you know what percentage of the loan portfolio, you know, extends or is fully extended through 2024? You know, because the average weighted term is 13 months. So just what's your expectation for payoffs this year? So there's very few, and Zach, you can pull that one. Very few are at the extended maturity in 2024, fully extended, I mean. We're still anticipating... about 30% payoffs, which is, frankly, a bit high, I think, relative to where the market is. But that is a function of, you know, the portfolio being more seasoned than it's been over the past, you know, several years as we've seen fewer payoffs. So we've seen loans move further down, further along their path on their business plan. And I think that you've seen a lot more activity of kind of the neutral or modest cash in refinancing or per financing in the market overall. And so we think we're going to be at, you know, that number 30% was kind of a normal number from, you know, 16, 17 through 2020 plus, some years even higher. So we do think we're going to end up in around that percentage. But again, I think the reason is less about in the past it was kind of assets basically being flipped into a new sale or a new owner because values were going so much higher so quickly. I think here we're in an environment where a lot of owners are either looking to sell, recover some equity, or do a cash-in refi because you know, their relative optimism on, you know, significant rate drops has become muted. And so there's a little bit more of a settling into the current environment. Zach Halpern, I don't know if you have this.

Yeah, I can jump in with a little context there. We do have one asset that is near its final maturity. This is an asset that we previously addressed on the call. I assume that you guys have access to COE, COE database and such. And as you review those, you would see that that asset has received a substantial pay down. And so we do expect that asset to refinance near term. Aside from that, we don't have any assets in that have their final maturity in 2024. Keep in mind that, you know, past initial maturities or upcoming maturities, there are also extension fees if the borrowers choose to extend, of which Lumen Finance Trust will benefit from that as well.

Awesome. Thank you, guys.

Thank you. Next question will be from Stephen Laws at Raymond James. Please go ahead.

Hi, thanks for taking my questions. This is Claire Jalapio on for Stephen Laws. First, could you please talk about your new investment pipeline and the overall competitive landscape? And what were credit spreads on the new investments this quarter? And how do you see credit spreads on new investments trending over the course of this year? Thanks.

Yeah, I'll let Jack give some color on the specifics of that. Look, we've certainly seen an uptick in the recent months of assets under review. Credit spreads have been pretty wide, but they've stayed, I'd say, roughly in the 300s. Depending on the location, maybe you get something closer to 400. I don't expect significant movement there. I think that's probably about where we end up. You've seen some lower spreads for low levered, high quality sponsors, but that's kind of where it's been. So I think there's pickup for a couple of reasons. One, we have seen some sellers needing to get out of their assets. And so it's created some transaction momentum. They're still significantly below, you know, any normal environment. Forget about just 2021. We've also seen these recap financing available options where Bridge loans, whether ours or more cases from other lenders or other places, where either a new borrower or current borrower is coming in with capital to complete a business plan at what are now the current levels or new levels. So we have seen anecdotally some new opportunities. We're not near the point where I would say it's robust like it was a few years ago, but encouraging. Zach, you want to add a little to that? Sure.

I mean, if I had to speak in generalizations of multifamily spreads, I would say in 2023, perhaps the widest of multifamily bridge was somewhere around 425 over SOFR. I think, as Jim Flynn alluded to, spreads are trended tighter. I think that baseline is somewhere between 350, 375 over SOFR right now. I think we've all seen the graphs of multifamily acquisition activity on the property side, and we know that that remains substantially muted, which has caused not a lot of supply and still enough lenders to keep the demand for loans escalated. I think that we settle into this sort of spread range here. Keep in mind that Things like warehouse lines, series, CLO spreads have also tightened in sympathy. And so economics are still in line despite tighter spreads.

Great. Thank you. And then my last question is just given the positive resolutions of the Q5 rated loans since year end, how do you think about your CISO reserve? Do you think there'll be a reserve release in Q1? Thanks.

Yeah, I mean, you're going to have a couple of things there. Jim talked about what is the macroeconomic environment that we're going to see, right? So we have a one-year forecast period there, and the reserve is going to be driven by what we see there. Yeah, I think from the positive resolutions, our feeling is there'll be some stability in our risk ratings. So that shouldn't be a driver. I think it's going to be driven more by the macroeconomic environment and what your views are of that and what reality ends up being.

Did you have any further questions? No, that's it.

Thank you. Thank you. Once again, as a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. And your next question will be from Chris Nolan at Leidenberg Thalmann. Please go ahead.

Hi. Given your comments in terms of landlords having narrower operating margins, can you give any color in terms of where the interest coverage is for your portfolio in the fourth quarter where it is compared to where it might have been in previous quarters?

Let me try to step into that one. Keep in mind that all of our loans, well, the vast majority of our loans do have interest rate caps, meaning that the borrowers have bought options if SOFR rises, and the majority of those caps are in the money. Fourth quarter versus third quarter interest coverage really hasn't changed all that much. SOFR's been pretty consistent. If I look at debt yield, which is an easier sort of metric to speak to, debt yield's been fairly consistent. These loans are generally transitional bridge loans, and so, yes, margins are, you know, all else equals tighter. However, these loans are getting towards the point of their business plans where rents are picking up and perhaps occupancies may be increasing as these units are leasing up post-renovation. And so I wouldn't say that we're seeing systematic stress quarter over quarter. Although, just like any portfolio, there are heterogeneous things that pop up here and there.

The system breaks. I'll just add on to that. Zach mentioned interest rate caps. We disclosed in our MD&A at 1231, 97.7% of performing loans had interest rate caps, and the weighted average strike was 2.5%. Okay. And then... Yes.

Go ahead. No, no. Please go ahead. I was going to go to another question, but go ahead.

Well, no. I was just going to say, I think that's a good point that many of these assets have obviously gone through this stressful period that we've seen with rates increasing that was preceded with every other cost increasing. But many of them were in the middle or early parts of their business plan. So even those that are, it really is an asset by asset look, meaning some assets are truly still turning units and putting new tenants in. And so much of the portfolio is still positively progressing in terms of debt yield, in terms of coverage, but most are not progressing at the original rate of their business plan. It doesn't mean that they're not having success in many cases, but it does mean that the success is the increase in NOIs is less than anticipated, but from a business standpoint, it still makes sense. The dollars being expended to increase the NOI are still accretive to us as lender and to the sponsor. It is a difficult question to answer as the whole portfolio because you really have to individually look at each asset and determine, is this asset just deteriorating in performance, which in most cases the answer is no. But, you know, how are they executing on their business plan?

Right. Okay. Turning to capital management. Your stock is trading roughly 63% of your book value. Any considerations in terms of buybacks? And if not, at what point would you consider buybacks?

So buybacks are something we do discuss with the board. You know, and there's no kind of, if we're at this level, we would we would do it. We do think that our stock trades at a discount to their value, particularly relative to the peers and to the expected full recovery of our portfolio. The challenge that we've always had with discussion around buybacks has been, one, we're already undersize and underscale and reducing our float even further, what impact would that have on long-term on the stock price? And also, how does that impact our desire, which is to actually find ways to expand the common equity base? So those are always the push and pull. There isn't a... specific answer that says, you know, if we're at 50% of book, we're going to do a buyback. But in terms of where our stock trades and relative to management's view and the board's view of value, it's a topic of discussion broadly every quarter.

Well, on the point, your stock has really taken a nosedive ever since you did the rights offering a couple years ago. And I'm just trying to think, you know, in terms of under scale, I totally get that. But at some point, you know, it makes more sense just to buy back your stock as opposed to investing in new multifamily loans.

I think that certainly the board and we have discussed those alternatives and options and will continue to do so.

Okay. That's it for me. Thank you.

Thank you. And at this time, Mr. Flynn, we have no other questions registered. Please proceed.

Okay. I want to thank you all for your time today and interest and look forward to speaking again next quarter. Thank you all.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.