Starwood Property Trust (STWD) 8 May 242024 Q1 Earnings call transcript

Greetings. Welcome to Starwood Property Trust's First Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

At this time, I'll hand the conference over to Zach Tanenbaum, Head of Investor Relations. Zach, you may now begin.

operator. you, Thank welcome and Property Earnings Trust Good to Call. morning, Starwood the company This filed results with website. Commission released to for earnings the posted its and its and the XX-Q XXXX, financial its XX, its morning, supplement Exchange March quarter Form Securities ended website are documents company's the section of Investor These www.starwoodpropertytrust.com. Relations in the available at

historical the constitute the begins, uncertainties I from described that the call differ any that actual statements. with differ in made forward-looking statements forward-looking statements detailed of company's are call SEC or to for management's cause today. would those a to this everyone based may actual subject trends Before in current of beliefs the cause in not a materially are factors information filings These those statements on and expectations and results from based the risks certain expressed of more could number made forward-looking and like statements. materially to and to to the course on results that discussion could remind you I are and made refer implied

undertakes no may made call. update the any duty forward-looking be this statements course that of to during company The

discussed Additionally, call. non-GAAP on measures certain will financial be conference this

are the intended Our with our filings accordance GAAP. or not of most for presentation www.sec.gov. accessed GAAP SEC through this in measures information information non-GAAP at can comparable accordance presented in with Reconciliations measures to isolation the financial considered be the is with prepared as be these financial a in substitute of

Jeff Paniry, With to I'm company's Chairman call the the Chief Financial President; Rina. call and going today Rina Sternlicht, on the company's Joining company's and now the to Officer; Chief Executive the Barry over DiModica, turn Officer. that, me are

$X.XX We everyone. morning, good $XXX.X or million distributable DE quarter and with a reported share. Zach, you, per earnings or strong of Thank

of performance underperformance offset Our the in from all fees book. results partially portfolio CMBS and in outsized commercial our with lending our of sale property by our across were in master contributions from prepayment businesses was highlighted lease which by

net value my They higher In $X.XX book or this was share. an fundings $XX.XX which at per loan with Residential share. lending, is the quarter the Undepreciated $XXX commitments. DE which book $X.XX to at GAAP discussion all, $XXX $X.XX of million Beginning segment on quarter million $XXX outpaced per value DE morning from Commercial contributed includes $XXX pre-existing Lending, ended also and million million these net to GAAP contributed repayments In or of gain income, $XX.XX. commercial of items.

Our portfolio rating of weighted predominantly greater mortgage senior cover of our $XX.X X.X. billion a Jeff risk loans with ended changes quarter balance funded of detail. will and secured risk rating first the in a average

in loan specific the no reserves CECL, REO to we or and had new no Turning impairments. new quarter

impairments reserve of million, general which outlook million office. selecting us available REO our these book third-party and Together of lending $XXX of of with reserves per translate $X.XX our Our of the our CECL driven seven and taken our value. was scenarios by portfolio our of increased model for XX% X.X% pessimistic to economic loans. previously represent to $XXX $XX in most share office to by million, This a to balance REO increase relates

lending I Next, our will residential discuss business.

quarter. agency a mark million $XXX million par million GAAP quarter the $X a $X.X million million includes in quarter price and to repayments contributed And million loans. on purposes. at $XXX $X on-balance the We which in the a billion, negative market our sheet quarter. mark-to-market of cash portfolio, our during a ended million RMBS including offset call of mark hedges, had loans, the on $XX portfolio by a This mark retained $XX negative change loan assumptions of $XX adjustment Our $XX our during net positive negative million for provided mark recorded

which our contributed of will Property or DE discuss I $XX Next, to $X.XX million segment the per quarter. share

we million. assets. income transaction net proceeds $X.XX a months million, million results net DE in the million. from of $XXX these late DE portfolio of $XX completed the and gain sale The include sold our master Because GAAP $XXX of for lease resulted of During quarter, or $XX in a our gain was QX X net February, of

quarter. X.X% by Our geographies $XX capped were set the released properties increases next Subsequent were to housing levels, Certain DE be new by the any in maximum determined last in would HUD affordable to HUD formula Florida increase end, generated of million This rent rent year. were growth quarter which XXXX. HUD, X.X% the fund in rent resulted than to incremental in which the of in where year. being deferred addition higher

mature term medical Subsequent ] $XXX was And the CMBS in entered new a of these We we points. outstanding refinanced [ $XXX X-year and million million, at loan on finally, quarter million plus in with debt end, of a blended basis our to coupon both a assets, which office portfolio, November. of to into a mezzanine XXX debt scheduled of $XX SOFR

completed and to with servicing more half Turning investing and by levels. a of in, primarily consistent in billion due we Starwood conduit, active in In positive $X.X transfers increased were billion special $XXX million contribution four CMBS. $X.X servicing from to the which portfolio results to profits our component. in special contained office servicer, our than contributions of securitizations at $X.X This our from billion, quarter or our historic office servicing. the LNR, breakeven negative businesses, produced segment totaling Capital, with Mortgage In conduit offset

billion quarter billion. ended offset $X.X billion in maturities, assignments at new the of named portfolio by driven servicing by $XX.X Our $X.X

to appraisal first assets, Due lower-than-anticipated the $XX pool. financial assets the three recorded a these million Finally, in of in as particular, our DE CMBS securitization typical in and on we annual a impairment received holdings. NOI had lower-than-anticipated nonperforming for our assets bond. the XX on portfolio, is statement reporting underlying the bond quarter, One remaining out the we for

portfolio committed share or Concluding we at is additional quarter. an Infrastructure XXX, and a completed $XX plus commitments. to bringing $XXX [indiscernible] at $X.X infrastructure the to balance of Jeff we on CLO contributed our totaled million funded which quarter million per million, third to of segment $XX the my will million business new segment, our end, coupon discussion billion pre-existing Repayments end. to of We average for Subsequent of discuss. $XXX million which Lending SOFR $XXX a loans which weighted quarter $X.XX loan DE million

address capitalization. I and And will morning, finally, our liquidity this

our quarter financing the availability assets of to under $X.X billion. with We ending continue existing business capacity our have ample billion and across unencumbered lines, lines, $X.X credit of

decrease ratio adjusted Our from undepreciated [ to equity X.Xx debt the last X.XXx quarter. ], quarter a at ended

In leverage, has unsecured in term that of market. through that could be position our segment liquidity via low generated debt a current addition to record $X.X assets our increased include loan to B not billion. sales does capacity the or and liquidity Property have This we

I'll to that, Jeff. turn over the With call

with over leaving Thanks, $XXX XXX everyone. morning, notes, institutional X from record for markets Rina, in first oversubscribed in investors, industry was million in both our This issuing liquidity accessed our today. the unsecured good We records the issuance orders years and sustainability was Xx the senior with company. capital of us debt quarter,

a fixed by leverage, in basis ramp of issuance rate SOFR a us plus liquidity to, rate equivalent at our pace points, company line time. leverage-neutral and the tighten over basis pricing affect it as maintain of paying points. as Record leverage are this our will picking it this in a Market today demand will after investment we swapping allowed actionable XX at allow has just And borrowed to fashion and deals our we was pricing floating, appropriate Creating of environment. X repo years. high down dividend up excess again, issuance our volumes bank to turns throughout despite strong low X.X XXX to lines, not our history allowing After for pipeline is transaction X-year us ability. neutral, in up with achieved today's and paying spread us warehouse been

estate pace rate per interest per issuance again we falling in the rose from of quarter month, treasury last to after number you the environment, year. seeing turn by last reduce will and our our billion portfolio since billion of caps protection. employment now have interest interest decision Rates year. CRE thus X/X has sector face have our commercial offsetting loans embedded higher, of Partially the last headwinds the to for As for $XX tapering that $XX by rates continues rate per month are quantitative cap $XXX slow macro spoke rates to that, begun XX% in causing increases bond real weaker-than-expected reserve the in which have Fed's week's driven in higher and created the place billion and

as transaction notes, said, seeing low alternatives. time, market inside all At much volume MOB tighter expectations the seek tightening, leverage good in a will our market We built and and portfolio proxy over are has credit our third unsecured diversified CMBS CMBS increased refinance months our the are a spread same CLO us BBB energy spreads. they borrowers accretive to tightening Recent to back infrastructure which on a conditions second tightened issue at levels they issue to expect we to to which the credit issued when spreads, lending points do we refinancing the today. be basis XXX in quarters. of choppy business mezzanine I in withstand create opportunities, tailwinds coming allowed have half like go and and as outsized this for position which, to are Spread in by CRE last X in offense XXXX help

the called in general credits, to our quarter. we in we third-party advisers increased computing use regards a again With which reserve, model most CECL our like commercial lending banks, macroeconomic

have CRE $X largest our cap participant book businesses, we have largest the in Xx second But on business a home, work Our of rates leverage on equity seven class market sector. do tightening loans we XX% our only most of We are the since to offices, model due run COVID conditions. is not assets of sector. billion and in since other loan asset U.S. the low credit estate and the from disrupted higher real very our nearly

That by not highest reserve and holdings reserve could that the have COVID and come cushion that, largest were a specific general assets with a sector by reduced began value CECL half have second our taken average. us is giving Despite the on what book losses for we potential our of for. before our value dollar we percentage in of peer set fraction

their $X.X new XXXX, have received XXXX. to in already after Our assets an in sponsors and commitments receiving support million sponsor math additional $XXX equity we continue and billion of

our at types. property Looking

XXXX. in which years experience and same-store company's growth X.X remaining of our Our type rents XX% up is assets, of X.X% with continues largest term multifamily, rent property average an to has year-over-year

The of had paid XX the to sponsors XX% have X XX Class to A all not type, equity of and them or date. assets, have that on additional don't not we our their fresh off multifamily office just loans inject which mature these company's our of assets. X are our until beyond. to equity issues property second including loans, for XX% our of foresee XX and comprised XX% committed largest getting rated any I XXXX loan, mentioned do and of

third property XX%. portfolio of today, of our this hotels Our average is largest in-place an debt has type X% yield and assets over

saying refinancing these not the do foresee assets. since COVID, beginning As been we hotel we of with issues have

was value increased of quarter, dollar Houston. loan rating upgrade following risk additions, the of $XXX this in in our for lower office bucket new a our while million X-rated As with changes bucket the the X-rated X quarter,

the in Nashville default where to accretive to payment we building multifamily and extend runway This more that XXXX loans important on. activity, to is million CapEx we We complete term including current, new and projects to complete has extending secure expect in loan leasing sufficiently remained term, borrower loan and working office the and an space in tenant taking Houston allowing a in X is the time an leasing accretive are $XX smaller lease has seen with asset incremental leasing. to downgraded quarter, foreclose X mezzanine on to Los capitalized and in anchor million Angeles, $XX

or We will cap basis sell quarters whether as and decide in near short-term to we or asset maximize the direction the at on past value it the our have rates. depending holding of stabilizing this coming by in

risk in downgraded X a also loans We the from quarter to X a rating. X

Minneapolis. The $XX million and $XX first in outside million Atlanta loan a two asset, loan are a

payment and final assets should to find in million working lower that on are both X the We borrowers close investments is escape velocity a time continue The for equity years Phoenix that downgrade loan is repair. accretive to carry that preferred would giving $XX markets continue our in to default. rates leasing create multifamily to will X

asset we allow allowing us as to Property take XX%, and and to the management will our XX%. one drop of hope owners affordable and bring medical segment, new to after into sold this back, the our occupancy our the has asset which of we that been occupancy sell multifamily housing Group to asset assets Starwood managed, office bringing back hold will quarter. decide largest This master in of poorly expertise and Capital portfolio lease we market whether In manager Should the the our mentioned portfolios asset. or Rina our in we nation's

gain a lease X XX XX portfolio We of asset in $XX for the million. million the DE XXXX and purchased XXXX sold originally master assets We million. in $XXX of for $XXX

XX gain this the assets $XXX We equity investment origination doubled years, X over leases had years. million. sale remaining for of fallen XX XX-year successfully had These $XX IRR to XX.X% for the we sold a This lease of assets million on at an producing term DE shareholders. and our quarter, and

opportune remaining early COVID years Our to take looking more an of retail lease leverage term we thought slowed while sell to their our than plan gains reduce was sales and further increase, these company's have opportunities this to our since given with and reinvest elsewhere. for XX was time

cash loans on our and business insulates Rina higher non-mark-to-market months increased to deleveraging on position. A lending to energy and we In are continued have structural nonrecourse, loans assets and our over almost are significant of company's needs portion continues mentioned, asset these from energy those due and trading which life LTVs this of in actively on debt This CLO. XX prices AI infrastructure We alone. up markets last our holdings on to lower further of now XX% points that lending, in have driven X our financing, quoted benefit by the completed third competition fall segment term, EVs. these profitability the loans.

million loans up portfolio to in our $XXX of expected returns In at committed our portfolio we approximately of the now of with acquisition and makes IRR high quarter, over new XX% levered XX% post-XXXX the teens. an

continue to investments of accretive to advantage these outsized We by expect take segment return this tailwinds in highly making going forward.

call to I Barry. will that, the With turn

I'm Coast. West and good Jeff. morning, Zach, want to I Rina Thanks, thank and everyone. the on

bottoming say get think I'm going when So are most dialing in everyone's remotely they complex. Milken the [indiscernible] mind to clear type, not is the pretty we better, is and to property Are -- at the that at question on I we level. okay the are team's would And I property call. it's will things where in the better? cycle? that get every

is asset a balance finance And of the where classes the really more that the less decelerating estate you in real multifamily. yourself? or rents of as rent so are it's precipitously completes supply reaccelerate. question in This Most a And should in how is States, going there of this knows soon of a fall then sheet United XX%. as is not do wave level crisis sophisticated to everyone some middle new crisis. Most property apartments

come are done CBS of wide Even portfolios particularly are CMBS you in. seeing the market So are the credit diversified markets, since the getting markets buyers out spreads are woods, in the open.

tone what? what least who's but as the the to better happen, get large with of themselves. is the getting they around banks slightly even markets the going do are arms grasp repairing they So And banks what their at they

rates, lot then loans a going the I with one to large working track. the of push car U.S. pit buying sponsors like peak you're powder we're do the recently in you've two there's stacks, dry many your their Canada, into are in out and doing of and transactions coming their come There I you private and flag It's fix repair around is of ratios. like caution are think the the taking into private coverage It head trying the caps, a on and And you're track, seen and definitely And sidelines, them. to we're take sector. yellow back on one the to the it's out, the Blackstone's in remarkable how place go kind to in -- of capital multifamily, in

modify both for here maximize an our gives position, opportunity back activity, both footprint, basically restructure, dry us our in to are going the shareholders. We in this do liquidity enviable with I where our much with that this there's being value and more powder think, also the will -- with Europe take thing but into

read. always couldn't that that -- as We've year. and we to growth unique pointed XX,XXX always we've that be right next units equity rent affordable We continue are the significant are keeps our gift been growth, year giving in out all sector in take the because assuredly growth owned housing rent on Rina this

that the can the is housing to real is help material other structures, estate, there affordable relief has and for the in us foreseeable So which growth actually insurance, particularly for being thing and year-over-year. on been know don't future, rental sector full margin for And be count one our to down you of will significant insurance us. is and our we you probably expect

the every and would it that that. be We [indiscernible] not As thought housing that we margins we year, affordable do already the or our gains opposites should we the improve budgeted expect support in but help value have year, increase and book.

thing lending paper. group We've infrastructure returns maybe estate correlated a is like new at XX the large we that us for just to it as talk years, quite the offer we look invested. cylinders the every not real continue about like would XX, multiple lines the target for do other business a such XX% energy cylinders, with book, continue and quarter I to on loan

there that go and deeper We investing. accelerate will

We things. looked at also always are at other looking We've things. other

[indiscernible] we are market have the And to our on probably enterprise. we And smaller abroad the that just some will look not different [indiscernible], grow and will opportunities our that companies with issues. to continue general -- capital created I other mean be here -- achieve dominant of the ultimately sector. the makes corporate on [ perpetual the is think our the which in credit space, will ] called goal, things, industry. and given companies the And which capital find should in figure side some done in I at both it's out pullback to of its of course, would that grade of flywheel this some private we that like cards be banks, a to player have in investment space.

largest the it's job player. That's there. our to execute So

a stream our recent to as dividend. our portfolio just Star can to instead just smaller business, our It accord root, small this in used as for thing to of to we we I them pay continue and very dependable we be. unusual loan think rates need and hope high become punitive hires out business oaks income nearly We borrow lines the is shareholders to higher support such our take in it as to in on off but are ROE with again. then is sitting Solutions not saplings contribute our our beginning an cash they to

are off paying written at and we're is SOP, XX% which that XXX least something off over. are lines spreads of So

assets and short What on It's capital dilutive. be through are our recovering, having our dividend a the as dilutive able we off will not nonaccruing they balance continue soon prudent. work have but into bad outcome the is though an a and even without to position X% that So portfolio support back blessed about debt bring the sheet, for as that we're accruing to earnings we is order. you're to not talking X%, REO paying is

banking billion the thing rates job think Fed real faster they It's nearly the working I growth toolkit other has adding Meta, industries. power manufacturing will as money $XXX military in interest by for the better billion out construction in announcements defense tech the Amazon, not NVIDIA, which and there only laying I'd up. simulated. the administration of at chip [indiscernible] new not do Facebook, see system $XX be. certainly flowing down Microsoft It's you The $X billion bill, in estate and say now back economy the slow the data level, the States that, the the for Obviously, here, there, complex wrong and this and is many realize the $X not billion, will the this weapons innovation, United the and off it's centers, a

are We bill. infrastructure the turning on

construction with point getting government the job you'd rates. basis in see So is increase normally a losses, which XXX not any

is can first of kill the construction. One you things

X raising 'XX. the hand, and economic education almost the jobs rates other can that of government. added care, On May X.X you the in million of today out those point half is in XX% workforce And have in health start industries of

working So does the health such nor points he's basis anyone not hospital, raised doesn't the get it's back, the doctor. close Nobody rates care. to door, interest call for because XX not not go

was big retreated, food those other to interest and problem rates. affect both driven had we have energy partly [indiscernible] not going of prices, he's The and inflation but by prices

it's and that banks of of the kind throwing say all have tool many follow thing other country and little on to are been which into a the of communities. their because the services real commercial valuations and and the over disarray an the regional run people estate their I'd all academic commercial bit damage these a to because the assets collateral of that assets the us. the waste is globe has And just management from municipalities is cities system, and banking and that provide depending taxes police not So schools

taxing keep taxing and going do the decreasing property we So the down. and the decreased you you keep value, of keep but values our NOI keep can buildings,

spiral you're rate. worse X% X.X% than And a soon, a a in versus far pretty inflation

implications the has which deflation, country. asset bad have across You unbelievably

it's sector, and think we'd economy, tech will up So ahead the from without a like people should free get Fed get he loss think job wants and the configured recession, to think leading can election the in something, I maybe that do serious the productivity the way with to, that force. but the he of hardband don't the as labor and leading tech this causing I

say like the I lending country. the probably So data opportunities we'll area center center into data advantage largest firmware we of weigh fourth would take where also the in is would and some player private

quite side. active the So on build we are

that and people can lend place have that the data very XX new require there to those a very interesting be good news, is to very of ones our doing us there are But big, -- there they So sector, centers could lot And will achieve and of capital, to badness. against. one for returns issues which that good opportunities nice continue for lenders in it's is a are vertical credit.

look something this be would in investment With this that, again, and doing future. is the hands on to real the portfolio working the not teams are the our try a to time. thank be that for can we It's return steering team I So to shareholders. with time want combat that hand we'll forward entire borrowers on maximize and out working to and Twilios

very I weather are in ability in we in that the we're good feeling confident a think our So world. sector. I But to tough think leader toman pretty emerges,

So questions. take thanks, We'll everyone.

Jade with KBW. First Rahmani Instructions] question [Operator comes from

quarter two This been tale a has of cities.

been no peers. performing than deterioration pronounced of terms banks there better with broad migration, time, ongoing of recognition been Starwood and there's we've to the being clearly drop. much positive same At seen credit surprises there the shoes has in While is the losses. some mortgage commercial big REITs, from

comments, the up think you of the players you so, should be that nature discrepancy explains open what a constrained very for if curious liabilities. more it's your Starwood it's have as assets I'm acquirer or liability, transitional the the structures. to that in net So of weaker opportunities to alluded capital if the And

want you to start? me Barry,

and keep tremendous start. of for would and advantaged X.X up hard you to nonbanks over. better We've set in I will looking having Jay, U.S. hide of I a market. The us things that's leverage banks been perform to is foreclose for Fort repeating it, XX% expect with portfolio and put by this liquidity, the lowest fact to the and we there. it's I the would that better goes this turns, all some the but from on did think, difficult you early. market, outcomes thing at office it hate

back to was last May If XXXX you X.X%. go of to going forward in year, be SOFR

October If X.X%. of you to went last it year, was back

year, today, XX If of Well, XXX the X.X% was a of later from is expected COF area. and it into a the you went be year this back middle now year to in to January be to X%.

X XXX basis go we from X% year years. that over points. by So don't We doing we thought were a now. below for

these was to the be note So SOFR spread higher reserve the I of with being And would forward-op a say going above builds points supposed made out. basis having in was 'XX. versus priced back XX-year where the to move Fed significantly with XX the XX-year beginning the year the

be. to supposed SOFR Forward what below it's Now

the see out of Fed loans. And very the reserves the is this transitional extent being go here we've today. to QT from flatten And to weaker move continues market, We're get to continue week for some floating you'll the build. recently, I think out difficult Fed good. and to the priced So extent is rate rates lower seeing that some we seen the numbers low last of priced take advantage

I think line. to A live Hopefully, that say power. lot I But these our difficult power down same X the the reserves that will staying X good have whatever us data, years, stop building. have peers of it's is the years, the on to think

liquidity. tremendous have We

high having to access yield. massive just have issued We liquidity,

for because peers lower give same helpful the will our that to likely very head power be number. I'll you M&A. we hope I my rates, saying so have cell And will ultimately, as and phone that

that XX%, We would be to this help We've can that the impossible whose fab doing near love like would to XX% want Boards with doing of assets we'll had love have to that value teams luck aren't that, that. rather defend to anybody People we'd don't and would in do management consolidate don't to, industry. try expect XX and board value discussion. we have at and you their the any consolidate If acquired it's have who almost at and in XX%, future luck to the no that look sector. book and I looking

fun little I'll about optimistic that. be nothing stock. more have when not do, you you It's a can't to issue

managers write-downs, volunteer books one sophisticated sector, take repo sheet. if form will is, the regional stronger a experienced levered more loans the what's I But you with they or they market of on? not hits of that's think want of do interesting wonder borrower it's I merge have other. getting and calls. fairly going almost balance to have seen about because It you some -- the in everyone in these, or to their banks that is a yes, call be maybe You're But you've it and thing or it's of think, book, -- trillion just REO has $X one whether X:X? question the

experiencing they to book. losses, levered portfolios. be in their out take office an that wouldn't Like wipe of could not equity And certainly much it larger how in XX the book

a went tertiary don't in execution. have how liquidity the CMBS the option which on markets, they So of of properties placed typically and being smaller

our extraordinary the it. additional we to game, back for we get your us. want but to So think filling them we're to about go could active be an there to it prudent because is stay -- out opportunity people we in head. out busy, do be raise have continue And but markets keep in And capital at to our these you incredible vehicles in this will we to credit continue and private market, fortunate deploy to enough I scratch it's returns.

So repos. -- have down we paid

have liquidity have do been banks We the that. to Where wobbly.

still and remain And with significant liquidity. of they've $X.X billion been we

up. of So going rates that camp I'm the are not

the say numbers regional The [indiscernible]. banking now. And fading we the to those at about looking lunch. knows a the think well every not bank also week the rates, thing of he's free lower back our system that, inflation. into is is help way the second to loans will of out forget that get like corner focused It's as to the deficit. obviously capital And as on bailout banks way best securities it has seeming he's about the is He he that's I basically.

Everyone this trillion defense $X.X well, biggest in to rates, States. $X interest which entire out, Xx we'll any tells federal raise you bill, in victim United defense the of million, if government, play the the on expense, them the the

not we earning sitting negative I And less thing it that X%. money printing, rates They in pay do, in this lower They States, running not mean fixed their while as their expense. which almost slowed, billion market the expected foolish world mean, cash it's which of especially got of to mean assuredly their dollar, June, accounts a the and you they're becomes income to United jobs, and They interest, that's Their balance mortgages. 'XX. down. in U.S. is he rate doing flywheel, Xx over the interest That's a wages economy you that engine exports competitive. crack They we all is billion it'll sheets in uncle very today. it's want the I $XXX printing put Americans -- before was then has it actually rate will have why. cave, to fixed. be have I working. were has $XXX growth from in the rock are simple in what it not interest have regard a it's of in job. on lower will pressure no want rates Europe growth make huge can't

sign you no there's actually And how get services, people cracks. than obvious business hired but you're of seeing

McDonald's, you enough, you look see If hard you Starbucks. seen

see beginning and beginning banks, pass you're not credit the this hikes savings, mean they so There average nonmoney-center price to I they companies Shopify's are are were able see cracks. at in able American broader at economy, numbers the the You on slowdown that single there are do morning. a the out card as a runs to delinquencies before. to

has of we China the a put we rates that across growth not you to listened about capital I you just could be think So the us wait. either. have don't implications to done globe. I incentive do increasing in this. the what of the again, the if wouldn't out have way what one have Europe to recession. And he election. drivers think raise markets Europe in call want you'll wrong managed be because, seat did will I rates, wait wouldn't pull by I to And to to back and

Nothing rates gets no get there's jobs it going No housing -- take to XX little build are to points. will huge housing get inflation, market, going prices he's bit So maybe the accelerate of road if today. a changes. solve home deficit the and he basis off shortage he at wants ever years nothing is lit again up maybe filled. creating and he's to creating you drops then And because don't if larger But should of builders a look the X.X as down stronger.

want, us 'XX I'm bought So can do would applause. and he gentleman them is, of bonds. I that and that what mean, through corporate give 'XX, you stay May through it told Well, and pretty was rates longer December people you lower he clear and that the in rights but

he is you this knock manufacturing. and -- on he small XX flat he's industry economy. jobs be super -- is in to have So economy United grandmother's now, of manufacturing believe your on going has not I this only today. don't wasn't It's will toolkit economy, can a I States then, jobs million wasn't to where in because is right right careful millions

well turn very we're poised we're But we're now. to and see. waiting, the heat at we'll the chomping So bit on

many that seeing not You're still. transactions

you'll So things, there's see many not that construction. and less

need So transactions just not [indiscernible], modifications. in or we and

a the in future. is and is environment rate data hope be banks are for happening and as So set who the of ought one it one to modify of ability and large low of the restructure reasons because that's the as of loans capitalized well not to things the

levels you transactions, -- like the the of think, not it's to see is commercial XXXX. I of volume down So

relent. trading is the are for And are he assets. -- to So Thanks. we will. Powell forward. take people not Hopefully, waiting step Everybody economy a will

Wells Next Fandetti question, Fargo. Don with

talk X Can Last the quarter, of loans about a was from outlook pretty there rated. big office little migration bit to X of you increase. a Yes.

just those Are few driving getting of quarter? what's at handful closer this quarter. looking movements You've we a a the got this loans we end? each And to Are quarter?

desire forward move put higher, sulfur already people. I in and said my curve I going in or rate the or helping and bit a SOFR [indiscernible] to on billion are remarks, had less continues almost the or doing discussions from cutting supported aggressive continue in capital really to date. less by stress loan that, borrowers potentially is requires and $X.X of this to the are think noncurrent a have put in little that year. fully loans prepared we loans in I carrying people going current signifies carrying the have that doing to about to we Clearly, aggressive involved potentially us billion that about ability we anything which and putting is talked that something go be the be potentially being move they in May to in to is to last And front $X.X that. it go X, want year this to be If and And as Yes.

to end stays making We're support commit we an could feel higher, a this where more any environment help not having economic for SOFR asset. up to if we capital concessions and stays to

be spoke type neither earlier, support curve SOFR this way think is or other assets in to certainly billion been, so X was next quarter. given in in here I normal course, sheet about capital an may migration the go is wrong we huge. assets. the shouldn't and the this space But the in Donald, And office quarter saw we're being not of think in it's the I unexpected a sort quarter balance going put but where $XX-odd as higher It's that's versus of that help to from have conservative one both just was you did forward quarter goes apartment. X one the X much if to it

think this as we the in and down coming slows it hopefully, follow will It migration. quarters around. So credit SOFR it turn I

for And mortgage it. credit Jeff, Got portfolio was what's residential flattish. sort appetite of your

credit If good. a opportunities you deals Are you not non-QM, is I seeing about or there? think out of mean ton pretty still just

out some on was side? that apologize, I investment resi credit, the Is On we was just question? And the something else. would I notes into go mortgage looking back question? your at

Yes.

good. Credit I Just of there. thinking flat pretty of are on you kind until are Or to you sort has been the are more get going the offense? keep seeing mean how asset portfolio you opportunities? about growth you

We're deals by securitizations two well. It's seeing interesting. side has about [indiscernible], on It's What's tightening AAA XX credit really markets. area anytime driven certainly is is to as that over. are XXX, a lot talked are There We Credit and is AAAs AAAs. bonds across that companies remember point XXX that basis one for me I other recently, rated. the those this the between in really resi insurance tightened more on spread bit. are for tight. XXX a a week, that and interesting highly BBB is don't BBBs

insurance So the the bid smaller others credit curve classes much in of those significantly. is for tightened the collapsing, and where we've BBBs,

interesting. So is with there, active it securitization pretty an market

[indiscernible] of the return in resi mortgage a speeds. of an you make gross are for WACC that eight seniors, type of And are There tremendous non-QM plus you type but to we books. type coupons, over spreads those at have can our coupons of You a the on if the things XXX you look being assets, at prepayment lot on securitize produced today. can levered X% very

about the lot an has baseline WACC the repay. so not had And loan, around going very of quick people be to think discussion they're add who go last take and points Barry's that one, XXX our rates out to to just for coupon rates been what financials basis speed, we've lower? if to or X.X% and gross their got X% whether is they go a internally we do I baseline do think And really to happens residential lower ready

repayments I think could you on those. historically see quick

high for to great obviously, earnings. IRR and lot rates So have a It's you're could our rates if turn not that rally good lower XXs going for is lower a IRR that's something into going credit. significantly

bunch significantly hedges outperformed So time. at increased front happy end, this convexity the book. is last something carry have the to resi moved trade with our it at and so performed the into couple negative prepayment years. enticing, looked not we've to We do. our we're over We're looking is our hedge to performance even very our a a though more the [indiscernible]. of We lever

XXX not will coupon. securitized we're basis points are, we financing years were liquid than X could anyway. by lower it Our resi X keeping in of today, but in is rather -- given financing securitize roll that book financing most It's we it or costs as saving as in bank

the staying we're So course resi on side. the

written We X in bit troubling reality X, most of and of I any wouldn't credit are our XX-plus lot disruption. years resi are -- book you've way. a X a HPA. seeing was ago, say the tiny had days The of that X, is X,

-- good. the some that places credit and resi loans for should loans wrote were time So the LTV our be writing awfully if we be and writing fraud If that, should today. we XX we correct LTV like absent XX loans, they were

them. fraud it ones where should home The price does situation, a be which will So happen space. in less really newer we support have have the appreciation obviously to only unfortunately loans

of coupon, XXXX But couple have latest. book loans. years the more credit the higher probably issues resi you'll more our at So the 'XX newer over next to or on XXXX is

Shane Rick with JPMorgan. question, Next

start in sentiment portfolio starting in terms in curious longer, some have within relief rate either we've sort even or your if portfolio, cheaper, the with get outlook saw really an a January, to more who throw in attractive I'm thing. towel the thought of within of going you more aggressively to behavioral markets seen. capitulation special one than caps to Just behaviorally servicing for higher change refinance significant borrowers buy they in opportunity were

It's up when not caps quite volatility but still little Listen, move. we've Volatility question. not bit so is Yes. it good couple is really of cap a it's are since as a expense higher, been months a as bad was expensive. seen was only the -- this

to decision going based not going on which decide who cap based most, view follow their may of where on rates, our a will rates. borrowers they're find and the going multifamily to buy earlier, to really make on I interest somebody support, to is is make as said their to cap, You decision need a are this a side,

is borrower. this a really multifamily So

of capital more earlier, I have XX committed think said XX of borrowers I pocket. out our

The other XX, we are not worried about loans. those

have of the not continue I to support that to people The capital them, So going decision. they're against to commit their five that four up loans, support think have out we've rated probably pocket four multifamily coming continued loans. are we or to and

equity you're decision today. that about a have. talking the support going that you're of you that the decision lot to So And to that of to that's type is continue on depend

you at If going a to looking the put have down have to a on XXXX, We syndicator call we're said and even all opportunity. past, make most unfortunately, -- and that's pay going and And you're be the and that to a you to in them up an able are stop in there loan 'XX, loan, were and likely to your as guys different syndicators XXX XXXX, early in Barry of probably not call to a paying. $XXX wealthy 'XX. lot a not the pick support a XXX you're guys to phone to have to piece person capital continue

and good have -- over hit X%. the on would think is effectively that are these job hit those the rate forward years, over first our debt yield opportunity potentially next investments. X make that or expect we We X we get back, which if will that at have a our of money book an of going all, capital that X we'll and to and for cap own shareholders, as cycle multifamily These the we our is

larger, likely on it's continue some debt money hang to people X over money to And put a cap. in probably selling you hang to will because are be have more effectively if X a think in, been to the yield likely and I much in. well-capitalized you have going more

step rest to seen So are Barry, we've to that will and and of the the money wait syndicators we're cycle. in be on, the anything for trade money add and we'll hold think better a I capitulation real that? that real and the happy

changes think breathe. the jobs right. little hope Again, is a to caution it's people think curve economy, XXX,XXX and reports. the were report not mean, the I in forward the report interest the XXX jobs I of No, I service again, downgrades that. the the just really anyone last economy with power are It at in surprised to and the health changing care. the rates the prior jobs to

the think people lot and worried mean them, West not a of cracks if -- a -- lot will So I lot can and sign don't I'm it's the not out is be he I Coast. you think I net a so of start breaking with today. worth, a capital cracks in obviously, of small about of and seeing I high -- I open do confidence really the economy it think

isn't have IRRs. yield the endowment property an You're treasuries overweighted. leverage, of that if happy in And know as know, we that X.X go if having to seeing a world that there's world may lot at X, But And are tries of regions capital. unattractive interest asset you interested from get not need a probably X X, a They're X even X, you don't in probably on lower. the unlevered they they're even to in the get XX. a of sector every lot XX of They need.

in you your offices, the they some So are fewer cities office are and do office our taking sublet up way to inevitable it price of there XXX% you sublet But They have as of in market that taking Banks to a even York smaller hotel cost, market, and like do they and side sort shoppers hand, in and office in want are will San very you which have weeks The explain from industrial reacceleration meatpacking Francisco, in concessions. purchase States the on major at buildings the a not covered and see increase. opportunity the tower the people in they're below exposure. to and leased occupied the markets X is want other and came being out, it relate buildings and our that probably is of district, It's you're rent replacement this industry and significantly see for apartment is full, the not rents, multi-sector United long-term rents. in offices LTC. -- brush. City going themselves or taking no they're happening. the one office trades positioning Miami, the XX% want exactly They recovery the back. are fully are right what's with entire and headquarter even the month other a position for and floor Walt came lease can buildings seen expensive. People get They at the the a York you lease. you the can there with in protect when from that's and if you building you've New advantage well an in don't like tenant $XX up on the on was building our higher the within our the New of asking a if sector, at

which office, but most of BNC with by tearing yet, no anything packages issue and down huge something come enough come for eventually to cheaply converted will trading to will people that conversion a concession is there into brush, governments the broad down. are it markets have residential, else, credits the it it's and scrape get to So will buildings and/or with opportunity turn to probably them mid-block forward not

on start another I'll cycle. then And

it's and asset the and the Real pick trading And class is So going side. money away. asset on in class, asset both world. if day a it's a you'll you estate but your And investing not it long class, spots, not and on the is largest long-lived the make lending side

losing I'm Sorry, my voice.

Next James. Laws with is Raymond Stephen question

Jeff, dates opportunity. the Appreciate original some a far, bit so expirations, cap upcoming maybe commentary about maturity or talked you providing little

Looking of a all gets that window. sudden X, miss level there for How early clearing level a it they back to rates people rates? back about what do opportunities? goes are more move rates, what on of clearing transaction X.XX a there that for you it creates because year their quickly on increase think this transactions? the to X.X other X, If hoping way Is maybe were would at or

It's interesting.

think seen recently. some it's You're rate as cap low going some be dependent in We've well, the to seeing I Xs. multifamily just trade right?

things. some at are some You're seeing could to trade the turning they sure out people equity they equity can they that gets steel want and that on if you start get you where rates office better if fatigue get of some something yesterday one-off. everybody are believe to get from think equity people And they do can move cap point I if to out weren't and sort where repatriating than else.

not where I look far but need I from think really a that's up, flow meant deal -- than you're every today pick you as probably today, starts means it. XX that it's to ever to which at XXX more

As And it, cap been we I look by LTV. at into. at seen cushion lending rate eaten that with started to date, all has expansion that we've XX%

XX every correct. up Barry right eaten point The So for not curve as is XXX% into that end basis forward has we gets cushion been years. where and

the are given to actually been point has [ attending loan. just lenders when assume it expansion, they cushion equity But up by let's basis to don't NAS they ] going historically rate eaten some cap that where matters So and go. our every than has than because were closer more the we know it's of made

to side. those curve of you equity I choppy it. rates, would to rates a XX points months X It's every And basis basis think had for don't need starts It's and XX other you XX-year, significantly. January basis tremendously sustain sort difficult, year, or to on to very I the the say very by up higher unable in but you down last the points move, something were later, think Volumes, to the transaction the volume large We've forward market. there years. anything. been side setting sustained be I get and XX points up we start trended pick So way. a up X.X need would just lending in both rates. been XXX think, you XXX to sustain today, time X are months basis XX We the I it's January

get XX at sort January's that's in think XX-year points than you I this X the haven't seen volumes. the if basis rate, we of XX, XX back [indiscernible] in And and points lower months why basis sustained SOFR. But

of lot a you'll So transaction I think see volume.

I for us. that an And who think if lot like that's exciting they stability. to of would a trade there's opportunity people see

significant to We capital have today deploy.

I touched Our pipeline, on hours briefly, for we it couple of yesterday. but saw a

decided we liquidity, liquidity our couple see of almost in use of [indiscernible] I've in big and as we're but to lending our seen of years. If best debt the to here businesses. of we a CRE starting a pipeline choose as opportunities. use all we're next those, could X It's Energy our of all going to the months our between

the are Some lender you're previous refis refis. really is lender previous against where the but maturity It's question transactions where up fatigue. those has a deal where to of happen not and your final

So they're somebody going for to else. look

think, talking have seeing that. a The So know equity but perspective. decent with rally. will was to I up, a what I'd of about, we decent say to pick the lender's if from have pipeline majority we're I is that the don't a add pipeline over Barry anything you transaction Barry,

Next question, Doug Harter with UBS.

talk on Hoping does against more a about the medical office little you the value bit little $XXX the a of imply came like about looks your that? anything the building. property the down million, on refinance debt over And could thoughts that properties?

more Jeff. Go Less service but go coverage ahead. ahead, -- about

Barry. Yes,

perform, is cap they're less bit but a rate lower. properties to It agencies the income allow that cap rate higher It's today, are not problem to and take is so I the little problem. the you to the valuation a against think going an you continue debt. know performing higher

We us basis good sort XX against points. gave need -- of that, levels. good that against tightened to market The we agencies the this. like about this happy news we're Now The underlever good felt is don't enhancement asset. really

So us on yes, it's we're in we of for sitting did cash, return put $XXX a equity decent of a lot of million cash. but and

how which of [indiscernible] for And on we a take, issued over. over in pretty rate that did given what feels also yield. equivalent so we just got good, market this at $X.XX really good We

more to to that taken have junior we dilutive I going No, the leverage, just could was are but say the classes dividend.

-- just are. with it's So the spread, rates not where base

$XXX the buy debt which over service we decent debt debt. increase wasn't It's And and borrow it rate. the coverage so levels we higher, much was not it to if a money really attractive it, that's we So it. want it. get cap have The take pretty enough leverage to could million was silly to

we and a was just to we proceeds thought to So level that and the company, it. that's attractive the cut accretive

remarks. over Barry would I the for floor to like turn closing to Sterling

pay Take loans thank you, we We Well, and you good to you, off. and in, everyone. your Thanks, care. listening luck hope team. appreciate

teleconference. today's concludes This

may for disconnect this participation. You your and lines time, you thank your at