Arbor Realty Trust Inc (ABR) 2013 Q2 法說會逐字稿

Good morning, and welcome to the Q2 2013 Arbor Realty Trust Earnings Conference Call. At this time, all participants are in a listen only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session.

(Operator Instructions)

As a reminder, this conference call is being recorded today Friday, 2 August, 2013. I would now like to turn the call over to Paul Elenio and Ivan Kaufman. Please go ahead.

Okay. Thank you Gary. Good morning everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we will discuss the results for quarter ended June 30, 2013. With me on the call today is Ivan Kaufman our President and Chief Executive Officer.

Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risks and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events.

I'll now turn the call over to Arbor's President and CEO Ivan Kaufman.

Thank you Paul, and thanks to everyone for joining us on today's call. Before Paul takes you through the financial results, I would like to touch on some of our recent accomplishments, and then focus on our business strategy and outlook for the remainder of 2013.

We are very pleased with this quarter's progress, especially in our ability to continue to access the debt and equity markets, and deploy our long-term growth capital into high yielding investment opportunities resulting in increased core earnings and dividends growth. As we discussed on our last call, we completed our second perpetual preferred stock offering raising $30 million of capital in May at a substantially lower rate than our first preferred offering in the first quarter. We also continued to add to our short term funding sources in the second quarter, with the closing of a new $40 million warehouse facility. The new facility has a one year term, with pricing at 200 over LIBOR, and leverage of up to 75%, depending on the assets financed, and also includes a $10 million supplement to finance retail and office properties.

We feel the significant progress we have made over the last several quarters in accessing the debt and equity markets, including the utilization of non-recourse CLO vehicles to finance our investments, as well as the improvements we have made in our short term financing capabilities, has positioned us very favorably to continue to execute our business strategy of originating attractive investment opportunities, and generating mid teens levered returns on our capital. We are very pleased with the investment opportunities we continue to see through our external managers expansive multi family originations platform, which has allowed us to deploy our long-term growth capital quickly, and has increased our pipeline significantly over the last several months. This has resulted in an increase in our core earnings, which has allowed us to grow our dividend to $0.13 a share for the second quarter, representing an increase of approximately 8% over last quarter. In a moment, Paul will elaborate further on how this growth has translated into a substantial increase in our core earnings run rate going forward.

Additionally, we believe the growth in our pipeline and originations platform will allow us to continue to increase our earnings and dividends over time. We had a very strong second quarter, originating approximately $181 million of loans with an average yield of approximately 7.2%, and a levered return of approximately 15%, which combined with our first quarter originations of $99 million totaled approximately $280 million of loan originations for the first six months of the year with mid teens levered returns. In addition, we have had a good start to the third quarter originating approximately $50 million of loans in July. On our last call, we increased our 2013 guidance for loan originations from approximately $360 million to a range of $450 million to $500 million. As I mentioned earlier, our pipeline continues to grow rapidly, and this combined with our origination success for the first seven months of the year is allowing us to increase our 2013 guidance again to a new range of $500 million to $600 million in originations.

We also had an active quarter in our residential securities platform, purchasing residential mortgage securities in the second quarter totaling $85 million with mid teens expected levered returns. At June 30, 2013, we had $190 million of residential securities outstanding, with corresponding leverage of $157 million. As we have discussed in the past, a critical component of our business strategy continues to be to finance a substantial amount of our investments with non-recourse debt through CLO vehicles, allowing us to match the terms of our assets with the terms of our liabilities without being subject to event risks. We have a tremendous amount of securitization expertise, and as a result, have become a leader in the commercial mortgage REIT securitization market. As we discussed on our last call, we have two new CLO vehicles in place with $385 million of collateral, $265 million of leverage, and the ability to substitute collateral for a period of two years to [replenishment] feature in both vehicles. And we believe that our ability to continue to originate quality collateral from both our structured finance team and our manager's extensive multi-family origination sales force will allow us to continue to access the CLO market when appropriate and available.

We also believe the success we have had an increase in accessing the securitization market provides us with a significant long term strategic competitive advantage, allowing us to have permanent non-recourse debt financing with a liability structure that matches our asset maturities without being subject to market provisions. This has also resulted in additional warehousing line capacity and lower pricing, and as a direct result, has enabled us to remain competitive on our pricing and on our investments to adjust when market yields tighten, while still maintaining similar effective yields. On a long-term basis, we will see the greatest benefit if and when the market backs up and liquidity becomes an issue, as our debt structures will enable us not only to maintain stable liability terms, but will allow us to continue to operate with the same low cost debt, while assets are priced less competitively resulting in superior leverage returns.

As of today, we have approximately $90 million of capacity in our short term credit facilities combined with cash of approximately $60 million, for a total of approximately $150 million in cash and capacity to fund future investment opportunities. As we've discussed in the past, we've also been very successful in repurchasing our debt at deep discounts, recording significant gains and increasing our equity value. While we did not purchase any of our CDO bonds in the second quarter as previously disclosed, we did repurchase $7.1 million of CDO bonds for a gain of $3.8 million in the first quarter, and as of today, we own approximately $161 million of our original CDO bonds at an $89 million discount to par, which represents significant embedded cash flow that we may realize in future periods. We will continue to evaluate the repurchase for our CDO debts going forward based on availability, pricing, and liquidity.

Now I would like to update you on our view of the commercial real estate markets, and discuss the credit status of our portfolio. On our last call, we discussed how the significant increase in capital markets activity in our space to increase liquidity was creating a more competitive market, which was reducing yields on certain types of investment opportunities, and that most of our yield compression was being absorbed by reduced financing costs. As you are all aware, over the last few months, interest rates have backed up significantly, which has affected us positively in several ways.

First, we have seen an increase in deal flow as the increase in rates has resulted in fewer loans qualifying for permanent execution, and therefore more opportunity flowing into the short term lending arena. Secondly, the back up in rates has started to translate into high yields on our new investments while retaining similar debt costs that will potentially reduce the severity of future run off on our legacy CDO vehicles. As I have mentioned before, we believe we are uniquely positioned and have a strong competitive advantage in the market by levering off of our manager's top Fannie Mae FHA platform, with a significant sales force and a strong national presence in the multi-family lending arena. We are very confident in our ability to continue to produce significant investment opportunities for us to grow our platform, and increase our core earnings. We do expect the majority of our investments to continue to be in the multi-family asset class, although we have started to see accretive opportunities in commercial properties as well. We believe that multi-family assets will likely make up around 75% of our future originations, with the balance being invested in commercial assets.

Looking at the credit status of our portfolio in the second quarter, we recorded $1.5 million of loan loss reserves relating to two assets in our portfolio, and recorded $700,000 in recoveries of previously recorded reserves. And at June 30, we had six non-performing loans with a net carrying value of approximately $15 million, which was unchanged from the prior quarter. And although it is possible, we could see some additional write downs in our portfolio on our legacy assets based on market conditions, we are optimistic that any potential remaining issues will be minimal and that we will have some future recoveries on our assets combined with potential gains from debt repurchases to offset any potential additional losses. However, the timing of any potential losses, recoveries, and gains on a quarterly basis is not something we can predict or control.

In summary, we are extremely pleased with our accomplishments, especially in our ability to successfully deploy our capital into high yielding investments and grow our core earnings and dividends during the quarter. We're also very excited about the investment opportunities we continue to see from our deep originations network, which has significantly grown our pipeline and core earnings run rate going forward. We are confident that our originations network will continue to produce attractive investment opportunities to grow our platform, and allow us to achieve our goal of increasing the value to our shareholders by growing our core earnings and dividends over time.

I will now turn the call over to Paul to take you through the financial results.

Okay, thank you Ivan.

As noted in the Press Release, FFO for the second quarter was approximately $4.8 million or $0.11 per share, and net income was $3 million or $0.07 per share. Adjusted FFO was approximately $5.5 million or $0.13 per share for the quarter, adding back approximately $700,000 of non-cash stock compensation expense. As Ivan mentioned, we had a very successful quarter deploying the long-term growth capital we raised over the last several quarters, and as a result, we have increased our common dividend for the quarter to $0.13 a share. We did record $1.5 million in loan loss reserves related to two assets in our portfolio, and had $700,000 in recoveries of previously recorded reserves during the second quarter. And after these reserves, we now have approximately $147 million in loan loss reserves on 20 loans, with a UPB of around $248 million as of June 30, 2013. At June 30, our book value per common share stands at $7.60, and our adjusted book value per common share is $9.63, adding back deferred gains and temporary losses on our swaps. As we've mentioned before, we believe that our adjusted book value better reflects our true franchise value, as these deferred items will be recognized over time, while the significant economic benefit related to these items has already been realized.

Looking at the rest of the results for the quarter, the average balance in core investments increased to approximately $1.8 billion for the second quarter, compared to approximately $1.7 billion for the first quarter due to our second quarter originations. The yield for the second quarter on these core investments was around 5.47%, compared to 5.63% for the first quarter. The decrease in yield is primarily due to the collection of back interest in the first quarter on certain loans in our portfolio not previously accrued, partially offset by higher yields in our second quarter originations, combined with the full effect of our first quarter originations. However, the weighted average all in yield on our portfolio increased to around 5.48% at June 30, compared to around 5.22% at March 31, primarily due to higher yields in our second quarter investments.

The average balance in our debt facilities remained relatively flat at approximately $1.3 billion for first and second quarter. The average cost of funds on our debt facilities was approximately 3.15% for the second quarter, compared to 3.38% for the first quarter. This decrease was primarily due to higher costs associated with one of our warehouse facilities in the first quarter, due to the transfer of assets out of this facility to our second CLO, combined with reduced interest expense in the fees in the second quarter related to our legacy CDO vehicles as a result of timing of run off in these facilities. Additionally, our estimated all in debt cost was approximately 3.21% at June 30, 2013, compared to around 3.17% at March 31, 2013.

As we discussed on our last call, if we were to include the dividends associated with our two recent perpetual preferred stock offerings as interest expense around which cost of funds for the second quarter would be approximately 3.36% compared to 3.48% for the first quarter. And our estimated all in debt cost would be 3.46% at June 30, 2013 compared to 3.33% at March 31, 2013. This increase is mainly due to the closing of our second perpetual preferred offering in the second quarter.

So overall, normalized net interest spreads on our core assets on a GAAP basis was approximately 2.32% this quarter, compared to approximately 2.25% last quarter. Including the preferred stock dividends as debt costs, our net interest spread was approximately 2.11% for the second quarter, compared to approximately 2.15% for the first quarter. And our net interest spread one rate is now approximately $50 million annually at June 30, 2013, compared to approximately $44 million at March 31, 2013. This significant increase in our net interest spread run rate is again due to the tremendous success we have had in deploying a substantial amount of the long-term growth capital we raised over the last few quarters into higher yielding investments.

Other income, which primarily consists of net interest spread on certain RMBS securities, which are deemed to be linked transactions for accounting purposes, as well as asset management and miscellaneous fees, decreased $800,000 compared to last quarter. The decrease was mainly due to the reimbursement of certain fees and a loan in our portfolio in the first second quarter. And the net interest spread earned on our linked RMBS securities is not reflected in the net interest spreads that I just discussed. NOI related to our REO assets decreased $1 million compared to last quarter, due to the seasonal nature of income related to a portfolio of hotels that we own. As of today, we believe these two assets should produce NOI before depreciation and other non-cash adjustments of approximately $3 million for 2013, the majority of which was recorded in the first two quarters again due to the seasonality of our hotel portfolio.

This projected income combined with approximately $2 million to $3 million in other income related to our RMBS linked transactions, and approximately $50 million of net interest spread on our loan and investment portfolio, gives us approximately $55 million to $56 million of annual estimated core FFO before potential loss reserves. And operating expenses looking out 12 months based on our run rate at June 30, 2013, which is up substantially from the $50 million we reported as of March 31, 2013 again due to the significant amount of new originations at higher yields during the second quarter. Additionally, as Ivan mentioned earlier, we have originated approximately $50 million in loans in July, and clearly our goal is to continue to deploy our long-term growth capital into accretive investment opportunities, and continue to grow core earnings and dividends over time.

Operating expenses were up compared to the first quarter, largely due to increased legal and professional fees, and an increase in non-cash stock compensation from the issuance of 70,000 fully vested shares to our independent Directors as part of their annual compensation in the second quarter, compared to stock awards that were granted to certain of our employees and the employees of our manager in the first quarter. Next, our average leverage ratios on our core lending assets decreased slightly to 64% this quarter, compared to 67% last quarter, including the trust deferreds and perpetual preferred stock offerings as equity. And our overall leverage ratio on a spot basis, including the trust preferreds and preferred stock as equity, remained flat at 2.2 to 1 at March 31 and June 30.

There are some changes in the balance sheet compared to last quarter that I would like to highlight. Restricted cash decreased by approximately $38 million, primarily due to the full utilization in the second quarter of the ramp up feature associated with our second CLO vehicle, which closed in January. The purchase agreements and credit facilities increased by approximately $52 million, due to the financing of our second quarter originations. And total equity increased approximately $34 million this quarter, primarily due to our second preferred stock offering in the second quarter, as well as from a $5 million increase in the value of our interest rate swaps, which has accounted for and accumulated other comprehensive loss in the equity section.

Lastly, our loan portfolio statistics as of June 30 shows that about 71% of the portfolio is variable rate loans, and 29% are fixed. By product type, 71% was bridged, 16% junior participations, and 13% mezzanine and preferred equity investments. By asset class, 58% of the book was multi-family, 24% office, 6% hotel, and 8% in land. Our loan to value was around 78%, and geographically we have around 30% of our portfolio concentrated in New York City.

That completes our prepared remarks for this morning, and I'll now turn it back to the operator to take any questions you may have at the time. Gary?

Thank you. Ladies and gentlemen, your question and answer session will begin.

(Operator Instructions)

Steve DeLaney of JMP Securities.

Thank you. Good morning everyone. Congrats Ivan and Paul on another solid quarter and your steady progress.

Thank you Steve.

Would you please remind us about you have a $40 million new whole loan warehouse facility, and Ivan you mentioned $90 million of capacity. I was wondering, Paul, if you could just remind us of what your total bank financing availability is for whole loans, both available and already committed? I don't have that handy.

Sure. Steve, we do have I think three warehouse facilities in place, and then one revolving credit facility. And the totals, we have a $50 million facility, a $75 million facility, and this new $40 million facility. And then the $20 million credit facility that you've known about for a while. So that's the total amount of short term warehouse facilities we have.

And as we said in our prepared remarks, as of today, we have roughly $90 million of capacity in those lines. And one of the reasons for that is because of the large amount of originations we were able to create in the second quarter. If you remember from the first quarter, we had a $50 million ramp up built up in our second CLO. So we are able to utilize that ramp up in the second quarter, and really still retain a lot of the capacity in these lines going forward.

I think Steve, we have been very conscious not to have lines of credit that are too large with their associated fees with that. So we do have the capability, at least Management believes that we have the capability to increase those lines if our business grows.

We do.

So I guess we're looking to have a significant diversity in terms of the lenders we deal with, so recognizing that there's additional capacity with those lenders.

Yes. That was a good point you made about your ramp, but you also have a replenishment feature there in your CLOs, right? Where if you get loan pay off, some of your new originations can go into those two existing structures.

That's right Steve. And I think one of the comments I made in my prepared remarks is that our leverage ratio stayed flat quarter-on-quarter. And you would think with $181 million of new volume that would not be possible, but it's exactly the reasons you mentioned. The ramp up we used right away. We did receive $34 million in run off during the quarter, $30 million of which was in our CLO vehicles -- so the new CLO vehicles. So we were able to immediately replenish those assets.

So we do have lots of tools in the tool box. And one of them is that if we start to see run off in those vehicles, because the assets are relatively short term in nature, we have a period of time that we can replenish and not have to incur a significant increase in short term debt.

Yes, I was going to ask you about -- that was my next question is the four loan layoffs, were they legacy or post crisis? And it sounds like most of it was recent fresher loans that were in the CLO structures.

Yes, that's correct. They were mostly in the normal course of business. As you know, the loans we originate generally have a term of anywhere from 12 to 36 months. So that's normal course of business.

So we really -- when we think about the run rate you have now, $150 million capacity, that really understates really your ability to lend, because with the shorter term nature of your bridge loans, you're going to have to be originating to cover replacement as well for the near term. So that was healthy dialogue there.

I just have one other thing, because you guys are pretty thorough in your remarks. Paul, I happen to like AFFO, because it gets us closer to what we like to use a term core EPS. And the key there is take away non-cash items like your stock comp. I'm just wondering if you're considering either adding AFFO, or converting from FFO to AFFO as your primary earnings measure?

Yes, it's something we are considering, Steve, and I announced it my prepared remarks today. It wasn't in the Press Release, because the stock comp really was the major add back and that really only happened this quarter and last quarter. But as that becomes more recurring and you're leaking that in as an expense under the accounting rules each quarter, we are going to take a hard look at AFFO. It's how we look at things. It's how you look at things. and I think it's better representation of, really the cash generated to cover the dividend. And we'll definitely take that under advisement. It hasn't been material to date, but as it starts to become more material we will definitely look at that presentation.

All right. Well appreciate the comments guys, and good work. Thank you.

Thanks Steve.

Stephen Laws of Deutsche Bank.

Thank you. Like Steve DeLaney, I want to congratulate you guys on a very nice quarter. It looks like growth continues to accelerate with regards to your new investment activity. He hit on a couple of questions I was looking at. Maybe to follow up on his last point, you guys have done a great job of growing the dividend I think up about 63% since the first quarter of 2012. What's the best metric for us to really forecast the dividends? Should we look at the FFO and add back the non-cash? Is it really more massaged by Board, because you are in the position where you can retain some cash flow or reinvestment in growth of the portfolio? Or really how should we think about getting our hands around the dividend trajectory from here?

Sure Steve. It's Paul. I think the way we look at it and the Board looks at it is in my commentary -- in my prepared remarks, I talk about a core FFO run rate. And I think today in my prepared remarks, I said the core FFO run rate is about $55 million, $56 million as of June 30 looking forward with no new activity before operating costs and obviously reserves. I think our operating cost right now for the first six months are running at a run rate of around $31 million to $32 million for the year, so that puts you at roughly $24 million or $25 million of core FFO, over 43 million shares that's roughly $0.55 to $0.57. The dividend annually now is $0.52.

So we look at that pay out ratio with the Board and say we want to keep some cushion. I think what we have to be careful with when talking about what the dividend will be going forward, obviously we're very excited about the growth we've had. We're very excited about the pipeline, and we'll just monitor what our run off is and where our pipeline will go. And that will depend on how quickly we can grow -- one, the earnings, and two, the dividend. But we look at it based on core earnings. We look at it based on where we think it's going to go, and what a reasonable pay out ratio is. And that's all the factors we take into consideration when deciding a dividend.

And clearly, Management's focus is on core earnings. And to the extent that we can grow core earnings, we'd like to provide consistent growing and steady dividend.

Right. Well that's great color. I appreciate that. And again, you guys have done a great job growing that [task] for the last six quarters. On the RMBS side, looks like if I did the numbers quickly, and I think you roughly doubled the size of the investment base in Q1, a little over [$80 million] this quarter verses maybe [$40 million] in Q1. Can you maybe talk about what you're seeing in those opportunities? Did the volatility in the RMBS markets create more opportunities for you guys? I know it's still a relatively small piece of your portfolio, but it can still be a valuable contributor there. So can you talk a little bit about what you're seeing in the RMBS investment opportunity market?

Sure. I think it's a good opportunity for us to give a little bit of an overview on the RMBS market. When we entered the RMBS market, we were targeting high teens, low 20%s returns. The market was a little inefficient. And we saw that as a great opportunity to deploy our capital, especially if we were raising capital we could deploy it very quickly into short term instruments. What we've seen over the last six months is that market become extremely competitive, and the yields are decreasing on levered basis probably to mid to low teens.

So we've actually stepped back a little bit of recent in terms of our outlook in growing that book, because we believe that we can have superior risk adjusted returns in the commercial multi-family market, which is more our core strategy. So I think what you should be looking at on the RMBS side, is probably a shrinking book given the investment opportunities we're seeing in our core business. So I wouldn't be surprised, over a period of time if the yields continue to compress on the RMBS side to see that book go away over the next couple of quarters, replaced with superior risk adjusted returns on the commercial side, which could result in probably more attractive core growth.

Great. That color's very helpful. Thanks for taking my questions, and again congrats on a very nice quarter.

Thanks Steve.

Lee Cooperman of Omega Advisors.

Thank you. Good morning. Again, my congratulations. Like we have a hat trick here, three congratulations. (laughter) The most exciting thing you said this morning, but I'm trying to understand if I'm correct in my understanding, Ivan said that you thought you can a get mid teens leveraged return on capital. So I'm trying to figure out the linkage of FFO to the mid teens leveraged return capital.

Let's just say we used an average number, make it easy for you, of $8 book value, and a 15% return would imply like $1.20 or so of ongoing earnings. And I'm curious whether that is a goal that you see as realistic, how that relates to FFO? And do you have a timetable in mind where that profitability could be achieved? Because it's well above what we're currently earning. And secondly, does the access to the preferred market make it likely that we won't have to resort to any equity financing any time in the foreseeable future?

Hello Lee, it's Paul. I think I'll handle the second part of the question first, and then turn it to Ivan for the first part. I think the disconnect may be between the commentary that we give that we were looking to earn mid teens levered returns on our capital, versus what the FFO translates into -- which is a smaller number, is the expense load that we have in the Company. So I think FFO -- if you look at core FFO, the commentary I gave today of roughly $55 million to $56 million translates to about $0.55 to $0.57. That's a return on our common equity of about 7%, it's probably just under 6% on adjusted book value. And I think what you're saying is well if you can get mid teens, will you be able to get it up to mid teens on that capital? I think we can over time.

And I think where we can do that is we can continue to grow the book. Obviously the expense load becomes a smaller percentage, and then obviously we have more common use of scale. It will take time to do that. But I think that's maybe a little bit of the disconnect between the FFO and our commentary on mid teens levered return on capital. But I'll ask Ivan maybe to comment on where he thinks that grows over time.

Yes, I guess one of the issues we have, which takes a little time to work our way out of is we have a legacy book, and that legacy book is in our CDOs. And to the extent that we get pay offs, we lose income. And since those assets are in our CDOs, we don't get to redeploy that cash. Over a period of time, those CDOs will burn off, and we'll swap out of those. And when that happens, we can redeploy all that cash into those highly levered returns. So we are fighting a little bit of the drag that those legacy assets and CDOs have.

The second issue which we've talked about extensively, is we have old swaps on from the crisis era that are dragging down our earnings on quarter-to-quarter and an annual basis. Those swaps will burn off, and we'll get the earnings power back on those swaps. So I think over a period of time between the CDOs and the legacy assets and the swaps, it will allow us to really get the full benefit, not just a partial benefit, of the way we deploy our capital into the mid teens returns. But we're only getting partial benefit of that right now, which is offsetting the drag that the legacy and swaps have on us.

Would it be reasonable to think say the three, four year period that, that 7% ROE on FFO basis could be a 12%, 14% number?

Yes Lee, it's Paul. I think it's hard to look out three to four years, but certainly that's in our opinion a reasonable goal. Because in a few years from now, we hope to recover, as Ivan said, a significant amount of the cash for your capital we have trapped in our vehicles, and we'll have the burn off of the swaps. And then of course I can't predict where the market will be on the yield opportunities, but if we continue to see the yield opportunities we're seeing today or better, then yes that should grow quickly.

Keeping in mind, that our expense load should not grow nearly as quickly as the income. In fact, we should have huge economies of scale as we grow the portfolio from not having to add significant amounts to our expense load. So yes, we did see that as a reasonable target, and the target we have internally as well. How long that time frame takes to get there will determine on how quickly we can pair out of these CDOs, the legacy CDOs, and get that money to work again back into the investments.

Yes, we have three CDOs, Lee. And each time we flip out of them and able to liquidate and re-leverage those assets appropriately and redeploy that cash, will have an exponential impact on our core earnings rate.

Got you. And in terms of equity, do you have adequate capital between the deferred and your existing debt lines that we don't have to think about an equity financing?

I think right now we're not in the market for equity or debt. We're quite comfortable funding our existing pipeline. And based on our run off on our pipeline, we're quite comfortable with what we have to continue to run our business.

Thank you. Congratulations. And things are going in the right direction.

Thanks Lee.

Okay. Thank you. We don't have any further questions at this time.

Okay. Thanks for your participation everybody, and I'll look forward to our next call.

Thank you very much ladies and gentlemen. That now concludes your conference call for today. You may now disconnect. Thanks very much.