Earnings call transcript Q1 2023

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Operator

Good morning and thank you for joining the Lument Finance Trust First Quarter 2023 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. [Operator Instructions]

I would now like to turn the call over to Charles Duddy with Lument's Investment Management. Please go ahead.

Charles Duddy

morning, good and you everyone. Thank joining Thank Finance to Lument call first you quarter for Trust's XXXX discuss our financial results.

With James Flynn, fourth quarter On call press release, today James issued on SEC the our CFO. our details the filed Thursday me Briggs, we a with and results. provided CEO; on and XX-Q are

also a supplemental found website. our provided earnings be We on presentation, which can

evaluate, the of statements. like statements made other XXE intended may the handing call When course call Before indicate, during remind of statements anticipates, XXA that forward-looking Securities certain expects, of constitute similar meaning Jim, Section to conference XXXX. based would identify over and used Act of not Act Section everyone to the I and in expressions the Securities outlook, words on within this are information of are of to historical believes, intends XXXX will, and the Exchange this as such forward-looking

subject XX-Q and These risks our Such materially in in in Form on SEC statements. forward-looking statements including results with uncertainties the of filed the from uncertainties section and X-K, those its various are differ Factors reports actual cause are Form the and discussed to forward-looking and the could XX-K contained that to company's particular reports risks Risk XX-K.

which forward-looking are It update company is statements, not as date to of any statements. only not cautioned Listeners undue no all predict place on undertakes or risks. possible to hereof. forward-looking speak to of such obligation reliance these these identify The the

GAAP to of to SEC a to this be presentation these sec.gov. on with discussed isolation the financial this nor can at the information in accordance accessed as with will the accordance A GAAP. substitute measures certain in Furthermore presented our through with measures in measures comparable prepared filings most financial non-GAAP non-GAAP is Reconciliations intended not considered financial of information be be call.

James to the will call I Flynn. over ahead. Please turn now go

James Flynn

call first Charlie. the morning, of the for XXXX. for Thank Welcome Trust everyone. Good you you joining. quarter to Thank earnings Lument Finance

typically do, addressing start by current we As to economic we'd environment. like the

the and interest we've has experience lenders volatility. to some investment multifamily the investors as a towards While economic to react of period movement uncertainties, capital transition higher seen continued rates, markets stability, market

market CRE indicators a work continued recent declined impacts of market the new in activity reassessing investment in crisis, has structures. as of years the multifamily a longer. year-over-year the slower and banking increasing rate we've and past the than levels the asset growth remains strong for potential although or the and and few costs leading buyers supportive negative valuations recessionary finding normal most at Despite over of sellers financing employment market towards seen

quality workforce that attractive opportunity. credit We do continue expenses. see of And we housing rents to believe focus outpace we to the remains the middle where market to expect be an

it During saw the annual saw XXXX, remains the first pre-COVID that's X.X%. decline while well-above the we US in X.X%. annual significant XX% a And quarter, growth industry QX in for of the assets -- from average we multifamily increase of the growth of across

in basis overall saw less was increase dynamics QX supply In XX than point in that XXXX indicating by XX may a and X.X% basis multifamily terms XXXX, increase of stabilize. the QX point but QX we up vacancy, demand of points rate we to to that basis the and of begin XX quarter-over-quarter increased in saw

coming sustained slowdown help market That to that of trend XXX,XXX lower in quarters, units. We improve could in which is four calendar in saw total the annual QX, If XXX,XXX the new the quarter in construction units deliveries year than total fundamentals. the is XX,XXX slightly of brought deliveries XXXX.

a acquisition in XXXX. the industry decrease financing said, of in lowest volumes, being QX sales volume to last transaction XX% average We year since relative directly drive and XXXX the it saw of and QX property have represents and XX% significantly. XXXX which That less opportunities between QX the declined than

that housing dynamics, believe demographics, do continues attractive profile credit we favorable long-term, growth creates the supply/demand investment for support middle-market our the to of long-term and trends, the shareholders. opportunity Over an rent

interest has the Our risk assets to multifamily perform sole of investment rating quarter well. book our our remainder multifamily And some continued book a did loan portfolio increase on to performed for while well. the loss on the this office of our rate we elevated environment, continues realized account and

although quarter Within the last increased on bridge see two new months. last stabilized few market, certainly lending we loans the Pricing the or continue or lending have tighten. Opportunities I over standards to do pay transaction expect as our the we portfolio but volume off. out, reinvest have loans we the to on spread acquisition increase declining, pointed as average as declined, over investment with

financing and can industry, as With for compete banking with banks, create such pullback investment opportunities grow credit share opening the to to attractive for regards market ongoing platforms believe in non-bank the sales We often softening pullback, we we whom meaningful from aggressiveness smaller a of and particularly as volatility begin banks volumes opportunities. in regards have access seen to increase. this Lument to regional

market, has broader markets show XXXX. of trends QX to Conditions relative the backdrop the have This begun remained capital to in volatile. encouraging CRE/CLO

last new in few developments and the the over uncertain has industry. due banking increasingly the the However, to months has few issuances market become a

basis market. continue to According expressing from sat volatility AAAs line of basis that which last XXX as to CRE/CLO points, in have year. X, spreads BBB points a is XXX the again end spreads bond in that points to the we managed where May Wells, see research of minus with at from basis increased averaged XXX bond spreads

origination financing investments our attractive capabilities, of on to well a leverage to focused mark-to-market take our do we historically features. CRE/CLOs finance In as that provide and loan as used on we due deploy know, have order you to our and non-recourse transaction. As source an capital favorable leverage fully believe actively remain the they basis financing executing advantage on

execute including structures, A-note prepared we the to in market. to warehouse to exploring the private we facilities markets are a and extent financing, attempt CLO the improve, quickly conditions note-on-note replicate public financing transactions CLO while to are actively And options

With and this is declared share. for regards a long-term I quarters. note dividend, execute loan will dividend of time our March line XXXX EPS ratio level the we at strong QX, per financing dividend represented dividend that of our $X.XX a that transaction. continue in This anticipate during to coverage we to a able quarterly a ability of increase have prior common to $X.XX such first on we're that the we our four with to XX, on the quarter our over dividend would GAAP

continue will our a multifamily. real commercial with We capital focus deploy on to into investments estate debt

of the providers nearly capital over As you offices. is XXX investors over know, and one benefit space, of and XX in approximately our will believe of executing multifamily continue expertise billion and volume the employing nation's housing that of billion to seniors employees and our that $XX manager We scale XXXX LFT. in the servicing total assets $XX broader largest platform in in transaction

Briggs, Jim? more our will turn With provide the that, results. I'd like call over who financial details on to to Jim

James Briggs

as on Form Thursday the you, reference. report has filed we'll Thank XX-Q investor presentation presentation be our On quarterly during for we supplemental website, and everyone. well investor remarks. been evening, good uploaded and webcast which The referencing on to our your Jim, provided a morning supplemental our

of our you the the find through earnings four for On pages presentation, summary key eight quarter. will updates and

quarter to share. per of we income approximately first were XXXX, net million The reported $X.X stockholders common or $X.XX

approximately distributable earnings $X.XX of also share. $XXX,XXX, We per reported

continue QX like I'd highlight which items, will continue income, profile to our our few a $X.X with an we QX to over $X.X are compared XXXX, increase Beginning XX% to coming quarter-over-quarter. There was regards with to elevated, interest in remain million benefit of QX LFT's million net expect income which approximate the P&L. net interest quarters. interest Short-term to represents rates earnings

our was contributor QX million for in the $X Primary the to reimbursed penalty manager. prepayment of QX in that form increase reduce fees in QX and $XXX,XXX where loan approximately saw exit fees expenses in waived interest over on we payoffs credits to exit approximately

we million during XX% payoffs represents during slight payoffs the payoffs million payoff loan annualized experienced a payoffs, represents $XX quarter of loan relative increase of of million QX, of rate. experienced during $XX Speaking The to $XX a which QX.

payoff interest rate persistent long-term experiencing historical continue our payoff to we due below uncertainty. and quarters is similar this expect economic to averages, coming volatility rate speeds While over the

which The was at primary call. loss fully our discussed distributable income loan, $X.X for QX share Chicago during between per a was difference year-end and during reserved $X.XX million which reported property the office the we and year-end on net realized or

no discounted sold our longer was As via office amount. call the discussed sector. property borrower February a payoff any the on and auction XXth, we've to XXXX, in that exposure on We ultimately for the $X from have million year-end accepted

expenses. Moving on to

QX for QX. expenses $X.X million total Our versus million were in $X.X

This primarily fees. driven as we've we like X to adopted quarter-over-quarter these launched XXXX. CECL increase calls, on was point I'd professional some January in on by also of out seasonality signal that

default As loss loans. that our noted combined with Trepp loan loss represents transitional data that on we the focus given of of from model in probability subset default filing, bridge historical was our most a use license closely

per subsequent We or reflected X stockholders' will as equity. earnings. be recorded million to $X.X was in January on our implementation reduction $X.XX the approximately X, a allowance share which recorded Changes adjustment to an implementation January through

which allowance, an a recognized is for approximately the of remaining was in payoffs, $XXX,XXX offset that portfolio some benefit In function the in from profile. changes the partially function uptick we forecast portfolio of changes by macroeconomic change in and risk current loan the in reserve an quarter, a

company's $XXX book million was or per book As share. $XXX total the of Total equity approximately value March approximately common XXst, $X.XX was million.

Excluding the increased implementation in change both $X.XX of QX by would have quarter, QX sequentially per and -- in the value share. the book January over CECL X the quarter, by per share approximately impact

Charles the will to our turn now will investment call over and activity. provide portfolio on I details composition who Duddy,

Charles Duddy

these broader declined. opportunities in you slow market has at to the relatively to the top acquisition which be Jim continued new of Flynn touched on has volatile. Due activity economic number the Thank remained Jim. conditions, the and conditions, have bridge

of value-add However, new are value-add as selected a to evaluate deals a lease-up and while on attractive transactions, we focus well we less basis, heightened timing on with new explicit an opportunities reviewing on construction are to opportunities. still bridges focus HUD, as continuing

expect anticipate to as near-term the payoffs seen to for time, XXXX, rate this we by new for the speeds reset the At while general prior and moderate quarters. temper trend same estate increases capacity relative well environment. to the in reducing remainder market investments interest real rate of have new our continuing and interest the We

The investments. quarter and portfolio the asset consisted portfolio LFT during loan diversity. loans million end, loan billion. outstanding of any or significant average not total for balance During payoffs acquire We size which QX, XX at new did experienced an loan of loan originate was million quarter $XX with of principal $XX $X our provides

exposure and portfolio Our at no was end multifamily we quarter to office. XX% have

backed With Therefore, our multifamily owned as LFT today, regards manager's asset XXX% backed the housing self-storage anticipate these retail to retail, in X/XX strong housing property. focus majority portfolio the $XX than ,we successful ultimately ,we one to via paid refinance. by million as Due by seniors quarter to off to assets. classes. our will a seniors of end, be retail one asset, this Subsequent that of is other loan loan and activity related continue and of to asset multifamily

also ratings. risk I'll on touch

our five loan we specific million was classified this we'll one on and we case This not of X. we any currently receivership continue to X/XX, XX/XX reserved as foreclosure informed. filed as expect multifamily loan and for guarantee keep not have risk shareholders and do risk-rated any monitor loss of loss, $XX.X of and enforcement As also while rated and loan have rated a

XX has profile table a have rates benefit overall, elevated sensitivity we return presentation expect our included we correlation and short-term positive rising page supplemental a with earnings from to of investment Our rates. and LFT rate interest strong on

Since quarter continued coming over over rate positive has a today. the end, the one-month X% impact We to anticipate increased quarters. X.X% from term SOFR

CLO that of was points portfolio financed spread rate XXXX XXX mortgage XX%. side, over subject weighted from certain securitization the replacement X conditions. of X/XX, December and an principal average of to repayments advance has the CLO basis series one-month as financing to with LIBOR of a loan with reinvested On period proceeds over assets an qualifying of This our reinvestment running through assets be allows

some for call I'll that, Jim the With pass back Flynn to closing remarks.

James Flynn

you, update look in informed. forward on We to you continue to Thank volatile our this progress Charlie. continuing keep market to you

Now, I'd open to like call questions. to the Operator?

Operator

you. Thank

Sandler. first Love question [Operator with begin now go Please The Instructions] Piper question-and-answer comes will We from the ahead. Crispin session.

Crispin Love

Thanks, and good morning, everyone.

First on didn't have first funding. I you the where this think I is acquisitions, any recall that fundings and quarter can

quarters? term do would over fundings, short? expect multifamily on you you grow the second that forward to payoffs fundings there depressed over dynamics? just to the maybe quarter, to other remain would given or going quarter, next would near Are seniors you you expect sectors looking just So And expect match the second few at in think fundings then they'll fall the just

James Flynn

Yeah.

The for in -- timing. terms of with to the it's quarter the question. So fundings thanks respect really

the So our I second payoffs. that would is our fundings to think answering is yes of question informative we match which expect

would such CLO. as we As opportunities, above or have potential obviously I would able private solution that replicate we're the increase more mentioned we on as leverage to then as potential continue deploy. fundings to or looks If transactions call, find capital because execute our evaluate earlier that in to attractive transaction is a payoffs to the a

we do have manager's for criteria sheet are that hold we meet balance -- up the the LFT. assets And investment that

So not about from fundings. that standpoint, concerned we're

the In the driver in acquisitions. is bridge of market, market market clearly particular I terms this mean the overall or -- the of biggest

market. acquisitions market. earlier acquisition activity agency terms in heard down significant levels XX% just relatively other in areas can to the tell about of our refinance you of nearly I being including seen in activity overall Anecdotally, You comment business my we've consistent of the relative where quarter-over-quarter

that increase people seen say that evaluating. I business with lot an That of activity that increased activity the getting suggested conferences transactions translated And think I industry, peers hasn't being we've into recent will across they're fully also more in seen transactions completed, in terms discussions and but at they've most have evaluated. a

moving sellers the in terms I together spread think valuations. on that are of buyers and suggests that closer bid-ask

familiar And pricing. banking industry that today, of understanding relative I are ago. accepting of we as and despite were think the the the available recent the most challenges available year in more some terms the financing seen have the owners ones that are and market in a not example, in options stability spread with

that is But reason much something more moving a a and of that there's stable to towards of we're all cautious transactions. environment that to Some some optimism one have lower some operate becomes us that's I better in. for think

Crispin Love

in the CLO performing? and uncertainty But All That's are to Thanks. CRE comments just quality, due CLO and relates the all risk the on And ratings it right. underlying helpful. your portfolio then you to there. how on as credit I your share able it's rates credit shift heard the to out any stats on and

James Flynn

In CLO. terms the held terms assets the that are the of sheet the mean of are in in assets balance individual I of all held the on -- assets virtually

office about deal for a -- seen the had in of look we assets deal mentioned that We had look So last we've in add in Charlie all those free feel if that quarters. retail if the here, provided we've couple as the we've you to information I Charlie supplemental one the we you our virtually are payoff had. mean CLO. and -- the a and talked

of basis the interest increases the biggest And as most rest enough a business they're in plans in this plan outpace obviously costs well the most part, that challenges, is relative inflationary for part, that that's they're performing for we portfolio environment. was. can whether transactions relative rental original the expenses their facing it's and to what case our are And their the on the feel in the

inflationary on when still business well-capitalized Charlie, frankly, doubled seen rental their getting guys rates on of pressure please overall forward these add with financing include trying that plan portfolio spread, their overall when lot plans. not I refinance rates they're of the the look a we've the since expenses, or And many where to short-term can want and but of free. for I feel they mean implemented in and they anything not overall moving interest cost -- interest still think there that, months, other recent does any increases. at their you have to consider -- larger They're you is. particularly refinance approximately -- their if the of because sponsors

Charles Duddy

Sure.

on yes, just specifically question. the So,

portfolio criteria separate can have deals because CLO So or so the is we caps, reported deals XX% six the interest of in think mature a perspective I credit of that are LFT's loans within is lastly, from the book all the have as plus you just earlier. stated for of risk -- expected about look the then, to -- XXX% of through quarter, with rate next of whole, that also within environment having only or SOFR this quickly. you we historically certainly assets out are helping LFT this not primarily CLO, if is bucket months. that in so within that the excuse as to Everything DSCR that. a And increased there's one rated kind me current point which would from

we have well. the And refinance. deal So the $XX payoff from borrower maturity bit of multifamily growing requests which before million little is on we that starts a And wall a a runway bit. do is received have a performing deal a

type maturity of So deal. don't any expect any issue with or we default other that

Crispin Love

taking I I question. my appreciate the all color. Thanks. appreciate

Operator

comes DeLaney go question JMP with Please Securities. Steve from next The ahead.

Steve DeLaney

this Its morning. everyone. nice morning to Good on be call your

four up Thanks. as risk-weighting comment X.X of average you of and specifically reported loans are on five-rated Following -- Can the many how many you XX? March a times. question, on there rating weighted risk how

Charles Duddy

that start Steve, Hey can thanks for I joining. one. on

well. those portfolio of one loans. risk that five risk and was X Of as XX is deal total is the rated So XX/XX XX, as rated

And rated deals there. are four. XX change no So, risk

it as the just were service to industry this time score They're of folks performance we those to none XX to any a XX during story debt what issues. made similar all rating of across be COVID concerns. out look and risk across market book is, happened about ratings the just ratios generally where as sense -- and of the as prudent think up is are thought works Jim think bit, tick specific coverage and I and when around where asset we little a on the mentioned, that kind And business risk we XX% a Similar things. out more to of their board through portfolio. So the plans opposed ratings

Steve DeLaney

it. believe CECL the move last say, we we a that it's Got loss. is that's that okay, million it's out off, actually on is that what's an oversimplification. -- a coached five? an been as you to be give expect mortgage we -- okay a and question but this years don't was paid But And a in talk to five, not -- kind $XX taken full? since -- But I I as little I'd little a loan. have one, to to you you you that the we're need first since the for -- been put seemed loan on a guess rating couple a time of us over not causes it it's overriding why And characteristic update around principal do at that that. thanks multifamily retail was you my that and just Can That expect will comment just you it profile we positive by add there that. loss. loss maybe of think five, about the Thanks. a on was a comments that of do expect incongruent has we that we've curious color comment but five, you your there you it when out the I additional at REITs hear because, put that it commercial won't expect probably

James Briggs

pool investment are It's that are it. their Xs at from Hey we'll point This Briggs I right, default, right generally of in that's Steve, on as specific folks based so risk to here. out and relates five time, loan those the some of is right pulling and our analysis we than driving it more you're thanks thing monetary Jim the for for you're upon you're do often the loss that this the our of recover in rating right the the think have the evaluations in there. then Yes, level associated full Xs question. not, perspective that's doing -- CECL, us. with think And --

Steve DeLaney

Got it.

on no you be interest nonaccrual. reserve. stop of pocket. I probably guess And paying They're -- that it So not out Would have accurate?

James Briggs

on It's right. that's correct of those. Yes, all

Steve DeLaney

Excellent. Okay. aggressive -- hiking. one thing. the We're just Fed's we've from think final still suffering Jim, I we're -- And

in the the the that all points rates problems the to market of well -- that is short be XXXX does think you real uncertainty everybody be up brought was XX that is by I locked year the into the feeling then lower markets? over the have tremendous futures pretty basis XXX and last Fed past is of caused rates. it. market are positive and And as over that so XXXX just I kind looking or going thinks majority the the significant cure this And telling estate to pain just to as out mean, reversing rates. Thanks. the be possibility -- one this Thanksgiving of could drop that us thing it's

James Flynn

a probably word. is strong Fear Steve. Thanks,

Steve DeLaney

Okay. Relieve, relieve.

James Flynn

where were financing I but to anything hard we have to that -- and No. guys been to dramatic happen biggest, this we're to be before that of looking or it's obviously, mean, relative exchange the transactions needs rates say sellers around happen, speed as and unprecedented heard slowdown. all most for you and in increase Look in driver. the have magnitude assets. right the And right stability my big perspective for factor this around expectations. biggest me there transactions pricing buyers – And the in important to from the me of terms has expectations to for

forth. and we've as then period But through constant gone this this had back we've

was Fed decreasing whether least mean, a XX%, at Now whether XX%. quarters, they're increasing I would one. consistent was of pretty increasing raise of rates I -- continued I going or the rates for Maybe year, had there there had this some where every was But we XX%, last consensus go to there fall expectation most rates. they of it you think debate we've would if on Fed pretty built-in say, back meeting single on few haven't this or on question were recent it. a they

so more - to has people and to kind was little going view that bit everything stability. created of And it of a started a desensitized on bit that

So portfolio deteriorating unlock costs. think do sponsors I accompanied the by under do a or lower may also if facing gets economic terms lower just to control. rates doesn't interest caution lot rates conditions. help be in right It inflation certainly could will of people be I that of issues their have interest that

done we some general, they going modest get I the more think stay full do decline see in XXX are rates I think even transactions think. you're and see But maybe XXX with not to plus, where if or I

there we still a have little as look but to We were touched have clean remarks construction out comes lull middle-market housing is of you in on we market massive there broadly at bit kind supply-demand it what's specifically. kind starts. of another we And few when where housing here in in a very -- the today, deliveries and shortage

to the fix that's not there's problem. horizon going something on so that And

trading more shifts, that and at there there's in be just just ongoing going seems an of in that So the space to assets dynamic hands. momentum appetite terms be for until transactions housing to least industry that this

pick volumes transaction quarter any it Lower is middle a saying will environment obviously my we're help be of not which significantly general, approach see up, rates this year. I year believe into that in think economic the long not particularly out. third the to for dampens end a as half it will of so so a we're of downturn ton. I transactions severe in -- quarter think opinion beyond that relative we And the is overall first more as the the and But second I basis the to healthy, going compared not on

Steve DeLaney

James, much. you thank really appreciate that so I perspective.

that and thank detail a got You’ve row front well. Stay for seat, you response.

James Flynn

Thanks, Steve.

too. You

Operator

Please The with next ahead. Laws Stephen question from go Raymond comes James.

Stephen Laws

a CECL credit A follow-up and Hi. I quarter, reserve was of general payoffs actually X.X during conjunction connect first Good couple of the couple didn't disconnect a I loan think I the the the build and the the -- the went of even hundred combination But a with from too reserve I morning. X.X, to guess of and between downgrades comments Can downgrades. a thousand from think average CECL surprised standpoint. you CECL were released kind in a number release? of that rating of rating reserve kind versus

James Flynn

Sure. One a bit the portfolio. point of off loans that paid than carrying a reserve were basis remainder perspective the reserves the just from of more

there. release the had you So,

there has increased -- So, the While magnitude increased loss risk right? not while still there, the say, much. -- any I'd the have ratings of the fundamentals from collateral perspective are

levels the mean it's of -- of on we impact not the because cushion, there. So the value significant increase have collateral had ratings average I itself and yes, a the weighted underwritten in has the the

So...

Stephen Laws

like financing. you and base end you a year. around waiting put would I I non-CLO are Okay. Thanks. And options the to of When through replenishment in are touch period? something the the mean, to wanted -- then that looking that follow-up, to You've possibilities as closer on got place?

over over any like, there -- with next Kind we I -- might of or or So that any play how the you've mean, the balance can out of the about look you options what options? the of talk ROEs see year? leasing pricing Kind got? are

James Flynn

CLOs was I I that done. particular. were reasonably that others coming Sure. would of year know we've part are -- evaluating closely was our public attractive actively in the and with done for think that several were for securities, We Well, we financing -- this suggests have early as similar who and that of paying series look those, transactions, peers, along a attention to market, that window

And and as the stability in with stability And largest just second goes third history US as it. story quickly as, that that collapses we the was bank got history. expectations came, and along

if would then happen -- you February, to that's I financings had of changed. and would my a I -- from have now. at Obviously, back number That see been public probably point. would expected that between So view in asked have

be have is transaction. if, Along for continued about partners a to other when talk to we a the if to our parties, I believe and to the public markets we're And there do continue way, that predict, done. couple some way market private But private of banking private "Well, just I deal?" all the appetite kind with be market. get might continue to this that for going reasonably frozen taken or public activity in can I for part to necessarily done to elevated to So, investors type we're of of about a can't a folks interest is, public to on of of us there transactions private those that that in way to they able participants, find deal evaluate have a regular can't from talk to if to is discussions a options. do get otherwise execute say appetite, we going there

five that modest match lower terms I than and more to of or going has And -- banking of the say, time. it's assets, that monitor We're mark-to-market, our of and four hopefully, most very counterparty terribly some the interest our been of nature. also been won't turned today, traditional markets. around proposals thinking bit or with over the greater that of side is It's financing -- how probably public things we've in is term we've the in but of aspect eliminated some the to changes even a from past partners terms quarters, that any for different

Stephen Laws

To do point short hopefully, follow-up. last help I quickly. certainly your earlier in rates ball. issues bank stabilization closed No, Yes. and have very window that that one can things the on some was

extensions, you or As any have discussions of other you new buy hesitancy borrowers looking around around pushback extensions? to Are for and protections loans structural caps?

James Flynn

or Look, terribly cap at looked a cost I the think cap. been -- of the and excited every about buying has borrower not and new it new

is so the but them. -- with work ways it's could word, think other I certainly not we resistant right

be part I tried And accepting the to better?" a of focus that part can of been "Okay, would an make and had that's think those, borrowers else on pretty where We of that modification do reasonably to we -- anything our kind the many do general, I any say, for have clear on haven't too extension. in But to we've yet. been, for things we going of that or most

What say, has considering are I cost borrowers The the increased. the increased. -- is would cost of of have cash financing

the if bit is pay would usually when talked the are cost cost other maybe help of me was than so, leverage our appetite -- areas? about -- down we've rates right? reduce or if nice more profile. think from out the yes, reduce that people lower in That of just the you risk way discussion. there's was of can the times, a here making saying, the these borrowers answer well, more probably to certainly part everything of probably And paydowns cap, Deleveraging the I able be, short-term And way. is perspective, that I'm to often a other But overall the principal, something during the to I cost going but financing,

pointed this rates get many is you interest where through are they looking they -- Steve short-term, borrowers year. as are most expecting borrowers the consensus their look you at think in that curve at, if decline the costs a out, and expectation on at also if I look can

very to we're sure us with with to work they're so them. motivated that make And and loan their comfortable

fairly in And been coming pleased these have with the I which would few sides where I've the active been we've in instances, say, table. I've the fairness been had -- negotiations to both

the and ahead little they that quality or not we concerned then and of about paid payoffs leverage were of their of condition, kind were we've assets a asset in had off. some went terms that frankly And

out, we Sometimes I figure guess. it can't

Stephen Laws

Well, great Yes. no, Q&A discussion certainly it. it's Appreciate been a and it. enjoyed in the I

Operator

comes Matthew Please question next with from ahead. The go JonesTrading. Erdner

Matthew Erdner

Thanks Hey, on Jason for question. Matthew the guys. It's taking morning. for this

ago to rent guys' say, plans You describe compared growth rent now and going growth get were the And Could for two mentioned rent you guess on that long-term as on years I multifamily. growth? view were your well? can I the then forward what business underwritten expectation

James Flynn

rent do see Yes. an asset macro I on all, we look Well, I to on think, to that level, going basis. at you first have believe growth, asset rent mean, to of continue you're I it by think national growth markets It But plus I some a and or average X% get think range. in to at you there. not the micro identify to there. X, or but minus that's may least really have approach specifically

terms and being most were in above In and expenses some where close but debt everywhere, that's buyers the been terms not but the rental with these line inflationary on and in our plans -- they're but the the largely they're part don't markets in the we give by side it has cases that were, growth. of buying business but getting publicly they were -- in of some expectations of of just kind pressure. the where for rent out It's accompanied go growth elevated statistically,

we've those the the of what we've was be So we rehabbing rental had closely are There as growth are that that achieved. recently. units rent just one submarkets in we the -- borrowers ones sponsors have magnitude to deal not bigger has I and for working been pay more is off issue the obviously which of where have expected not assets mentioned after with. with that seen Or been growth where

recapping forward go-forward rates on on a to growth. debt opportunity a I but we is them they a so On potential there with less at measures lower opportunities lower in some cost and out the were bridge the -- a think, deals albeit that opportunities or -- rental the pure but loans lie savings from more some experience in to that I gives the level. more that total So have have these about prior deals expense may growth. they've but mean, taken, the say, portfolio, the NOI and those go appropriate competitors implemented, of that think, already issue -- is I the -- other basis, about -- deal rent

rent markets where that XX-plus I still say, able before across seeing X% in to rehab XX years get and the pick markets to be could growth to XX, you're people are over the deals. some country. areas going the were you mean, But prior XX% -- range seeing whereas for we in

to I rental -- -- of XXXX But don't believe match our the I in overall, for and there's our I housing the inflationary So in is still has something suspect But like what believe cost said that the a in growth and term really to couple of need in portfolio around not continue think I I others been saw think we'll although, and that driver we issues. those rental I late and It's next leverage opportunities XXXX volume have the of in foresee we years. of been that increase still going primary is in XXXX. in I near dollar costs. opportunities, see not the performance

Matthew Erdner

Okay. That's helpful. Thanks for your answer

Operator

from Services. comes Howard question Blum UBS Financial next with Please go The ahead.

Howard Blum

Hi.

into if widen Just looking in with see spreads expect loans? better future, giving these area, regional the out continued real it is in returns us banks new terms the you problems to estate reasonable of to and

James Flynn

the in particular -- anyway pockets fairly levels is a the capital yes, that muted. what logical that are that conclusion. In there answer those market past as keep there or arises keep that's six think of come quickly obviously to -- are years debt short to that opportunity seen -- is is I somewhat funds we've five

-- lower the a just on new of see portfolio spreads overall I the do spread vintage. in I mean, than But are our portfolio because

to the in things below fours. years we're A seeing ago be were done few declining was than some fours So a few transactions when maybe I in still do spreads -- even the that. expect more spreads there

a they've companies not not point most and space. the active mean, if Fannie out participants FHA your lender this in But I accurate. massive in So think Freddie participants really lending been pullback in this right I there. that and there's are is life are space, right?

So pull you debt you have of to and and the funds. lot going have opportunity leaves in And debt have you funds. a banks. that are of mortgage and public certainly REITs form Banks REITs, private back that

chasing to And spread of so guys all the be deal transaction would increasing, because accompanied to -- for be my depressed. that need need keep some things there number opinion you by other expansion without that to opportunity should tend in a opportunities same if an have volume

Howard Blum

you. Thank

Operator

next a go The from Private Greg question comes Investor. ahead. Vineet, Please

Unidentified Analyst

Good now of million, or morning. been what the indicate position? from you entered with your couple second cash you whether quarter that's clarifications not with -- $XX are right reinvested did you that A where

Charles Duddy

can Greg, this is Charlie. I start.

James Flynn

Charlie, go ahead.

Charles Duddy

we expect quarter. the we're asset sheet we the mid-quarter to LFT a some kind during are on historically by so But reported manager's through transferring. acquisitions yet balances. final haven't there balance We have working We don't historically of on transferring -- currently assets working and we are would number there be that assets

balance we decline So to to the do from [ph]. expect cash XXX XXX

Unidentified Analyst

Okay.

or or risk are loan buying retail a the a one question when your numberXX -- what When you of a a -- buy to Second parent rating. just view average two in from on, put table portfolio, from look weighted point investor's loan you or is at page you criteria? are all loans the

James Flynn

performing. ahead. all I yeah, They're mean, go the short --

Charles Duddy

Okay. Yeah.

think right. I that's

the need to value; eligible all so number be be assets performing; financing fair -- criteria at are one the parent: facilities. they seem think market three to acquiring assets two loans number from the I in transferred to

one those it's whether or or within performing fall that think all three bucket. possible it's So I the two

long the As expect asset with anything we priced that as a wouldn't from appropriately is higher management transfer and has performance market it's our to that group no concern perspective, risk. considered

Unidentified Analyst

versus one say your the I is at pricing and looking look you're if a in pricing at you in the visually parent from a there a three? one, Is and difference difference guess I the acquiring retail what trust? when at would start investor buying are looking you're huge or you if for a a it,

James Briggs

are the rating. debt think occupancy, typically risk LTV jump Jim yeah, I which feel free drive say to things in are drive that – one things I'll the pricing and thing service then the same that

say a wouldn't difference. I So massive there's

it's a say leverage But and is a a the you'll let's it's where and profile. the asset. XX% mark -- theoretical little the if at three based kind in rating LTV loan the be one on is loan on of some just asset by XX% is risk the see So change there would rating

Go ahead Jim.

James Flynn

a in brand-new everything today you if the we've like underwriting you a pretty But one, right? were a But one lived to the upfront. a It's And loan thought exercise. spreads, often was spread. So spread, more do I a rates, was a addressed just don't like loan at we it that the that as mean et that's originate through cetera. change today dramatic two,

same we're where one So a to we apples-to-apples, for that that's risk to risk. slightly time that's going well a the originated would -- paid has at higher deal expect say what we be

So at is that may necessarily It or have higher an asset a higher just that's that far. spread. a asset trade spread it's an below not trades

Unidentified Analyst

business loans the in been -- the acquired all the the all are from parent, model which parent. are has your And past underwritten these by

cooking You so eat to speak. own your

loans buying that not -- do I have right? Is from You're banks. regional that

James Flynn

That's correct. do. You

Unidentified Analyst

you for liquidity And after what purposes, -- regional if parent to that's to intend consider on do guys loan own you've your done is banks something or would your continuing sell loans that may underwriting? you buying consider a need that

James Flynn

the at capital of I mean, about there. considerations I and a talk we don't things that want the parent say lot level there's to with

would oh So parent do really never of saying, of to parent of our that's that. not the business preclude Lument or or I wouldn't LFT. plan we But

own to So production ones inception. would our loans at the and ourselves expectation team be from our -- originate our to continue underwrite with

presented great were that We Board we're the look something some at thinking LFT doesn't Does to market? or something talk the it. that really want and would It's to us that that would have that's disruption mean to necessarily because we not of that in but to, turmoil about. may either. need in Generally the there about participate a opportunity to if banking mean it were take

Unidentified Analyst

us price that you in have loans with by stock I'd suggestion going or taken start from and rather and -- Xs stock going spread understand our ones your we out improve were mean you won't a view, I spread less were and off that you're -- a we'd take take return I'd are -- rather I I think have return that reward your to two think on forward if a is a year capital Xs on more the just not stock reverse. point less in going less maybe yielding a of the Well, that underwritten. your were would the return to the told And price. But capital but and and twos. one ago we're investors community capital I higher right XX%. People investment a now. with in shareholders' would your maybe environment a or have And

James Flynn

I'm to right? be clear Well true. you suggesting I to we But I higher out hope at And underwrite point I risk not rating that starting want said well mean that's clarify. but don't taken. just yes that a deals are that

Unidentified Analyst

risk were on about forward retail if we next Thanks much. concerned I or is to now. very chart to this comment color. if see everybody point view. we from right we guys If are forward of you just go mean change but a look Anyway look were I'm --if working the you a do Appreciate and your CLO sure

James Flynn

you. Thank Okay.

Operator

[Operator Instructions] Ladenburg from with Christopher go Please The comes Thalmann. Nolan question next ahead.

Christopher Nolan

Hi.

any you stock where are consideration share to giving price Given repurchases? your is,

James Flynn

discussed as So more of trying not out is we've has it's Board. to challenge the about The less. repurchases raise more the something just share and always that we've the talked flow this platform market. capital we're with even takes with it And challenge

consideration to trading Board is the that the excess that So is that is certainly it's stock risk not of We about. the that at far a the big a the is. no in but it believe talked do of yield where is -- part we've

look something at. of and admittedly evaluate forefront It's but continue the discuss. is it thinking we'll what we're to continue we something not that at to it's So

Christopher Nolan

How low the for book to does to the in planning capital relative discussions? it stock go be price of to forefront have

James Flynn

is stated think we've that direct Board. something to talked that answer the it a that about with don't I there's publicly, we've but that

Christopher Nolan

Thank Okay. you.

Operator

like would to any to James back Flynn remarks. the over concludes conference This I for closing our session. turn question-and-answer

James Flynn

call. Please with keep to the I'm to to group. out That all speaking I follow-ups. quarter. again good look here I want the and Thanks you to to glad all. everyone free to thank to for forward Charles. team feel We'd the informed reach of a any happy be thanks questions. was want me or next

Operator

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

disconnect. now may You

Lument Finance Trust (LFT) 12 May 232023 Q1 Earnings call transcript