Acres Commercial Realty Corp (ACR) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Second Quarter 2015 Resource Capital Corp. Earnings Conference Call. My name is Lucy and I'll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a Q&A session towards the end of this conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the call over to Jonathan Cohen, President and CEO of Resource Capital Corp. Please proceed.

Thank you for joining the Resource Capital Corp. earnings conference call for the second quarter ended June 30, 2015. I am Jonathan Cohen, President and CEO of Resource Capital Corp. Before I begin, I would like to ask Purvi Kamdar, our Director of Investor Relations to read the Safe Harbor statement.

Thank you, Jonathan.

When used in this conference call the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. Although, the Company believes that these forward-looking statements are based on reasonable assumptions, such statements are subject to certain risks and uncertainties, which causes actual results to differ materially from those contained in the forward-looking statements.

These risks and uncertainties are discussed in the Company's reports filed with the SEC, including its reports on forms 8-K, 10-Q, and 10-K, and in particular, item 1A on the Form 10-K reported under the title risk factors. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any of these forward-looking statements.

And with that, I'll turn it back to Jonathan.

Thank you, Purvi.

In looking at the quarter ended June 30, 2015, we believe we are faced with contradictions. Our core businesses continued to perform consistently with our expectations and remain well positioned for the future. However, we cannot ignore the significant pressure on our stock price, which has certainly been a source of frustration for our shareholders and for us, personally. On top of that, a legacy mezzanine loan that we purchased in 2007, one of the last two mezzanine positions in our portfolio, deteriorated suddenly due to its exposure to Puerto Rico and we were forced to impair that asset. We stopped investing in this type of loan in 2007, and the remaining mezzanine loan in our portfolio is a very good credit, a $7 million position, secured by property in New York City, and we expected to pay off within the next 18 months. This impairment causes our book value to decrease to $4.56, leaving us trading at approximately 78% of GAAP book value. We are mightily undervalued and are very focused on improving our stock price and returns for our shareholders.

First and foremost, we are implementing a one-for-four reverse stock split, which the Company believes will benefit shareholders by attracting a broader range of investors as a result of a higher per share stock price. Second, the Board has authorized a $50 million repurchase program for our securities, which we will begin in the near future and focus on the common stock. Third, we will strategically review our business lines and contemplate alternatives for our middle-market corporate lending practice, so that we can have a company that is predominately real estate focused. Fourth, you will see substantial executive and director buying of shares post earnings. Fifth, we will keep on running our business and earning substantial adjusted funds from operations as we always have.

After discussing the quarter's operating results, we're going to try to outline very clearly the current state of our businesses, which we think are very good, and our operating and strategic objectives for the next year and how we might go about achieving them.

First our results. Our main business, originating and holding transitional commercial real estate whole loans, performed very well this quarter. We originated loans with commitments of $184.5 million, which was 18% higher than the first quarter of this year. A further look back shows exponential growth. During the last 12 months, we originated loans with commitment of $787.8 million which was 52% higher than the previous trailing 12-month period. The diversity of asset classes, geography and borrowers has been well received in the securitization markets enabling us to term finance our new originations and achieve high teens ROE on them. We continue to march forward to our previously disclosed guidance of commercial real estate origination of $800 million to $950 million for 2015. Dave Bloom will comment more on this when he speaks.

Northport Capital, our middle market corporate lending business, originated almost $51 million of new loans this quarter. Overall, our net interest income was approximately $43.5 million year-to-date, an increase of 16% from the same period a year ago. AFFO or adjusted funds from operation was $0.15, but would have been $0.17 except for the impairment that we will discuss more a little later, which (inaudible). Our businesses are performing well, they're growing, prudently lending money, carefully financing their portfolios and generating very solid returns on newly generated assets. Credit remains extremely benign outside of this loan. In addition, the vast majority of our loans are floating rate in nature.

Obviously, a large and very disappointing element of our results this quarter was the loan loss reserve that we recognized on our position in the mezzanine loan whose borrower is an affiliate of one of the world's largest private equity firm. The loan we impaired was one where we had a small percentage of a subordinated mezzanine position in a complicated multi-tranche $2.8 billion transaction that finance luxury hotels. Our investment was purchased in 2007 had a very well capitalized and committed borrower went through several restructurings over the years to provide runway for the borrower to complete its business plan, and we do expect it to be paid off when that happened, but the last three assets are in Puerto Rico. The borrower's ability to favorably refinance its senior loan was impacted by economic and credit conditions in Puerto Rico, and the new loan, which closed in May, meaningfully reduced the borrower's time to achieve its plan. On such a highly-leveraged transaction, even small changes in value can have a large impact on the subordinated tranches, which unfortunately, is where we were. Accordingly, we are fully reserved for it.

The good performance of our businesses, very solid, exciting, makes the poor performance of our stock all that more frustrating. With that in mind, let me address our operating and strategic objectives for the next year. It is becoming clear to us that Resource Capital Corp.'s story is not clear enough to others. For instance, when the interest rate sensitive stocks declined in anticipation of higher interest rates, our stock tends to trade down with them. However, we have very little interest rate sensitivity. Virtually, our entire commercial real estate portfolio is floating rate. And we regularly securitize and that's we are term financed. Northport's entire portfolio is floating rate as well. We've examined that and our analysis shows us that increases in the interest rate would actually serve to increase our ROE, net income, and AFFO.

Also another area that we become to believe is unclear to some investors involves the differences between our main, commercial real estate transitional loan, origination business, and Northport Capital, which makes middle market corporate loans. While both businesses are similar insofar that they make similar duration, secured floating-rate loans, we recognize that Northport's business is more typically found in a business development company or BDC. We are very proud of the remarkable growth to scale that Northport has achieved in the two years, since we launched it. From a complete ground-up creation, it now has a portfolio of $331 million. That very success creates one of the contradictions we seek to clarify.

Many people interested in BDCs and similar businesses do not necessarily focus on commercial mortgage REITs. And many REIT investors are not attuned to understanding and following BDCs. Moreover, as a REIT, we are required to keep Northport in a taxable re-subsidiary, adding a layer of inefficiency. Therefore, we have been examining strategic alternatives regarding Northport. Our Board and our management have been reviewing our options in this regard, which include an IPO, a spin-off, keeping Northport as part of our own business, selling a portion or all of Northport and other alternatives. The Board will continue its analysis and we will let you know when we have come to any conclusions, which we expect to happen during the fourth quarter.

As we look to all factors impacting our Company, our businesses, the financial sector and the economy as a whole, we still cannot understand our stock price we think it is too low. The Company would have been aggressive buyers during the second quarter for its own account, but because we were considering some of the things that I've outlined today, we were precluded from buying back our stock. No more, with the information we provided today, we're free to buy back our stock and we mean the Company and several of our executives and directors will be doing so. Our Board of Directors has also approved a reverse stock split as we recognized the perception matters and a low stock price may be perceived in a manner, which we think is inconsistent with our current operations and prospects.

I will now ask Dave Bloom to review our real estate activities.

Thank you, Jonathan.

Resource Capital Corp.'s committed commercial mortgage and CMBS portfolio has a current balance in excess of $1.93 billion in a pool that remains both granular and diverse. RSO's commercial mortgage portfolio is comprised of 88 individual loans with an aggregate committed balance of approximately $1.74 billion and it's comprised of 96% self originated whole loans, 3% mezzanine loans and 1% B notes. The underlying collateral base securing RSO's commercial mortgage portfolio continues to be spread across the major asset categories in geographically varied markets with a portfolio breakdown of 49% multi-family, 20% office, 15% retail, 14% hotel and 2% other such as [next year's] deals.

During the second quarter of 2015, RSO closed new loans with commitments totaling $185 million, which was in line with our anticipated production target. Of more significance, though RSO's trailing 12-month production as of the end of the second quarter of 2015 was approximately $788 million, which is a 52% increase over the trailing 12-month period as of the end of the second quarter of 2014. In addition, since the end of the second quarter, we have closed new loans with commitments totaling approximately $76 million and have another $132 million of new loans in the process of closing. As of today, just slightly over seven months into 2015, RSO's aggregate new loan production activity stands at approximately $550 million across 27 separate loan positions.

Our origination pipeline remains full and continues to grow. We currently have approximately $325 million of new lending opportunities, underwritten, quoted and in negotiation with a forward pipeline of opportunities under review of approximately $300 million in active underwriting instruction.

Jonathan addressed the specific reserve that we took this quarter on a mezzanine loan that was part of a very large multi-tranche financing that included a $1.3 billion first mortgage, $625 million of mezzanine debt split into eight tranches, many with multiple participants, and over $830 million of borrower at equity into the transaction. It is important to note that this loan dates back to mid-2007 and was restructured and amended in 2012. And since that time, interest was on an accrual basis, so it is not contributed to our income since September of 2012 in any meaningful way. Pursuant to the terms of the extension, the loan has not come due, nor is it in default. That said, in the ordinary course of closing our quarters, we review all of our loan positions and after our review of the subject transaction, the determination was made to impair the position in the current quarter, as we have serious doubts about the ultimate collectability of loan upon maturity. That said, markets can change suddenly and with almost a year until the loan matures, no one can be absolutely certain about the ultimate resolution of this impaired loan.

By way of brief history, RSO's commercial real estate business plan has always been to directly originate floating rate whole loans on likely transitional properties across the country. Having commenced operations in mid-2005, during the time that we were building out our national origination team, we still recognize relative value in certain mezzanine loan and B note investments. Markets were extremely liquid and the majority of these sub-debt positions paid off in relatively short order. That said, we were always cognizant of the fact that multi-tranche debt transactions involve other lenders which result in a lack of unilateral control should a problem arise. Our investments into such transaction stopped over eight years ago.

In total, since June of 2005, RSO has closed approximately $3.2 billion of loans and with another $132 million of new loans in process with a total in excess of $3.3 billion of commercial real estate lending activity to date.

During the period 2008 to 2010, RSO was not actively originating new loans due to the dislocation in the real estate and credit markets. Since beginning to lend again in 2011 as various markets have recovered, RSO has significantly increased loan production on a year-over-year basis for each subsequent year, culminating in record production in 2014 with the origination of approximately $780 million of new whole loans across 35 separate positions.

Since 2011, RSO's aggregate self-originated whole loan production has been in excess of $1.9 billion and current loans in process brings this total to over $2.1 billion. While last year saw a record production, we've guided the market to between $800 million and $950 million of production for 2015 with approximately $550 million of new loan production activity. Already we remain confident in our guidance for 2015, and with our long-established CRE platform comprised of 15 professionals, we are optimistic about maintaining loan production levels.

As I've described on previous calls, we utilize our term financing facilities with our commercial banking partners to finance our loans, while we aggregate portfolios that we ultimately term finance through the issuance of CRE CLOs on a regular basis. In three CRE CLOs we've issued to-date, we have financed over $1.1 billion of loans at a weighted average cost of LIBOR plus 1.74%, and weighted average leverage of 77.24%. RSO is an established issuer in the CRE CLO space, and we've had in excess of 30 different accounts to invest in the liabilities secured by our loan collateral. Our core commercial mortgage platform consistently generates mid-teen returns. And as we continue to deploy equity from legacy businesses into our core business, we anticipate continued meaningful growth in our net interest margin and ROE.

With that, I'll turn it back to Jonathan and rejoin for Q&A at the end of the call. Thank you.

Thank you, Dave. Now, I will ask Dave Bryant, our Chief Financial Officer, to discuss our financials.

Thank you, Jonathan.

Resource Capital Corp. declared and paid a cash dividend in the second quarter ended June 30, 2015 of $0.16 per common share. Our adjusted funds from operations or AFFO for the quarter of $20 million was $0.15 per common share. In determining AFFO for the second quarter there were several non-cash adjustments that netted to approximately $47.3 million and cash adjustments of $3.8 million. The non-cash adjustments include the $38.1 million mezzanine loan impairment discussed earlier. We passed all of the interest coverage and over collateralization tests in all of our securitizations that require such tests, including our legacy real estate CDOs and one legacy bank CLO. Our two most recent securitizations, 2014-CRE2 and 2015-CRE3 are subject only to over collateralization test, which we had easily passed.

Each of these structured finance vehicles did very well and produced healthy cash flow to us in Q2, 2015. We had one of our legacy bank CLOs liquidate in Q2 as expected and we received $7.6 million and expect to receive additional $4.8 million in Q3. This return of capital when combined with a Q1 CLO, which liquidated, brings legacy CLO cash returns to $42.2 million, which we intend to deploy in our real estate lending platform and to a lesser extent, our middle market loan platform.

We have commitments of $400 million on our commercial real estate term facility, which of course we employ until we obtain longer term match funding typically through CLO securitization. We saw the healthy new loan production by our commercial real estate originators continue in Q2 and this provides us with certain benefits. First, we have a strong track record with the credit quality of our self originated commercial real estate loans. Second, we have weighted average LIBOR floors of 52 basis points on $1.4 billion of loans of which $1.2 billion have remaining terms of two to five years, and weighted average floors of 36 basis points. This means that incremental increases in LIBOR do not have a negative effect on our earnings. In fact, as 30-day LIBOR increases by about 50 basis points, the result becomes slightly accretive to our earnings.

We increased net interest income on our real estate loan portfolio by $3.5 million or 16% year-to-date in 2015, compared to the same period in 2014, which we attribute to our real estate origination platform and match funding strategy. Note that this includes the $3 million interest write-off we took this period for the impaired loan. When we add that back for comparative purposes, we see an increase of $6.5 million or nearly 30%.

In Q2, 2015, we booked provision of loan losses of $38.8 million. Besides the CRE impairment discussed by Jonathan and Dave, we saw net increases in our other portfolios of [$740,000] during the period. Virtually all of this charge is a result of increased positions in our commercial finance portfolio which was added to a previously impaired position in our middle market space. We end the period with $42.1 million in commercial real estate loan allowances and $4.2 million in commercial finance loan allowances.

In terms of delinquencies, only two bank loans or $474,000 are delinquent out of a portfolio of $187 million. And all but one of our middle-market loans are current out of a portfolio of $331 million. And none of our 88 CRE loans totaling $1.6 billion are delinquent. We noted that our corporate G&A was a bit lumpy last quarter and we saw a return to normalized levels in Q2. Again, we expect our 2015 corporate G&A run rate to be in the $15.5 million to $16 million range comparable to the amount incurred in 2014.

Leverage remained flat at 2.1 times at June 30. When we treat our TruPS issuances which have a remaining term of approximately 21 years as equity, our leverage is 1.9x. With regard to real estate leverage, we ended Q2 2015 at about 2.2 times on our entire real estate portfolio, including cash earmarked for new real estate loan originations. Overall, our weighted average effective cost on net proceeds from all three series of preferred stock is 8.77% and our weighted average cost of capital from all sources was 6.05% as of June 30. We ended June 30 with GAAP book value of $4.56, down from $5 per share on March 31. Of this decline of $0.31 per share is attributable to the impairment charge we recognized in the June quarter.

Our real estate lending platform is in high gear and remains centered on underwriting and originating high-quality credit combined with conservative use of leverage. We look forward to implementing the stock buyback plan in Q3, as we continue to trade well below book value. We have relatively low leverage and are substantially match funded with non-recourse floating rate term financing on the vast majority of our platform. Our use of recycled capital is helping us grow our balance sheet and improve earnings quality with the utmost focus on credit, and when coupled with our long-term match funding financing is focus of our long-term growth.

With that, my remarks are completed, and I hand the call back to Jonathan Cohen.

Thank you, Dave.

You've heard today the important message that the operations of the business have been solid, credit good, increasing with originations, strong credit quality again and the excellent securitization execution. I hope that you've also heard that we recognize and appreciate how frustrated our investors have been with our stock performance. We are large holders of the stock and completely share that frustration, and are committed to do all we can. We will be buying back our stock, we will execute the reverse stock split, we will work to accelerate the improvements, the ROE that we know are coming as our remaining older credits repay, and we will evaluate strategic alternatives to maximize the value of Northport, and we will keep focused on maximizing shareholder return. Thank you.

And now, we're available for any questions.

Thank you. (Operator Instructions) Steve DeLaney, JMP Securities.

I know this is a tough call for you guys, and I appreciate you stepping up addressing the stock situation right upfront for us, thank you. I'd like to clarify, for starters, not the, we'll come back to that large mezz loan, but at March, you were carrying $67.5 million of mezz loans with the $38 million impaired, suggesting maybe, $29 million, $30 million of other mezz loans. I wanted to compare that -- you mentioned there was one remaining of $7 million in New York, can you just clarify what is left in the mezz bucket beyond this hotel loan?

Steve, this is Dave, let me reconcile that for you. So, you're right. It was $67 million less $38 million gets you to about $29 million. Now $13 million paid off in Q2 on one position, and another $9 million or $9.5 million paid off in July, right after the quarter ended. So that's why we're now left with a little over $7 million on that one position.

Okay, great. That's helpful, appreciate you clarifying that and the characteristics of the remaining $7 million. And look, we recognize you guys have done an amazing job over the last two, three years just shedding mezz where you could and just getting back to the large problematic loan. I guess it sounds like to me that it was a combination of both the structure, the original loan structure and what became sort of an idiosyncratic situation with respect to what you ended up with is residual credit and that's really the only question I have is you started off with 13 loans and it sounds like you're ending up with three loans that are happen to be in Puerto Rico, you use the term the last loans. So help me understand as payoffs were made, collateral was released, did you benefit from any of the paydown and as these other 10 hotel properties were sold or did all that cash flow go to senior tranches, let's start there?

Steve, this is Dave. So just to be clear, the priority of payment is sequential. So the senior loan it was retired first and then tranches of mezzanine loan are retired in a specific order after that.

Yes, that's what was going through my mind. So, you end up going from, it's almost like adverse selection. The most liquid properties, I guess, go out first and as a subordinate investor, you're kind of left with -- you're really lending on the weaker loans in the pool, I guess, and you acknowledge that that was the weakness in that structure and one reason why you guys ceased doing that business. Okay, so and just to be clear, there is three hotels left and they're all in Puerto Rico. Correct?

There are now two.

Two, where?

They are all in Puerto Rico.

Both in Puerto Rico. So let me suggest this and maybe other analysts will have questions after this, but just a thought this is very complicated. I think look, there is a $0.31 hit to book that's all fine, we know you're not in this business, I think investors will like to make their own decision about a possibility of any type of recovery, it can't hurt you any more now, right? But a thought I had is -- because it is so detailed and involved, I think people might want to know, how many room keys, what RevPAR, would you at least consider, and you don't have to answer this, but I'm going to suggest that you consider putting in information piece together on the two loans whatever you can disclose publicly and maybe put that out on an 8K, and then real sophisticated real estate investors can kind of draw their own conclusions as to whether there is any possibility of recovery, what would have to develop, so just a suggestion there if I may.

This is Jonathan. Thank you, Steve, and we will take that under the consideration.

You are very welcome. When you have these legacy situations, John, where you could end up in effect with a $40 million credit loss, is there any reach back on prior incentive fees that may have been paid, is there any adjustment to that for the benefit of shareholders, how would you and the Board address that if this becomes a real loss?

First of all, we haven't -- unfortunately, for us made very -- many incentive fees over the years. So I don't think there is many to reach back too, but obviously it -- when it becomes real loss, it goes into that calculation.

Okay. So, going forward it would kind of create a hard (multiple speakers)?

Exactly.

Got it. Okay, that's helpful. And then one final thing, you have everything you're doing with the buyback, with insiders, I think the reverse split will be helpful, we've seen that help in a couple of other situations recently, notably Chimera, you didn't mention the dividend. And I guess when we look at your liquidity situation, the money that you want to put into the buyback, can you make any comment as to how you view the stability of the dividend over the next two or three quarters?

Sure. This loan actually did not pay us very much. It was a combination of mezz and preferred equity in the restructure and therefore as you can see, if you do the calculations on its effects on this quarter, even writing off all the [crew] that we have wrote off, it was like $0.015. So we don't look at this as being any affect on our ability to come through with our plan which has $0.16 dividend in it.

Lee Cooperman, Omega Advisors.

Just if I may, not to say -- just to tell you a little bit. Stock prices declined after reverse splits, that's the history of the academic literature. So you should be aware of that. Second, we make this sound like the stock market treated us badly, but we have to accept the fact that really we've done a bad job. You disrespected your equity, whenever the stock traded, it's slightly above book value, you flooded the market with additional equity. And then, you look at the trend of the dividend. In 2007, the dividend was $0.41 a quarter, then it went to $0.39, then it went to $0.30, then it went to $0.25, then it went to $0.20, then it went to $0.16. So the market is just basically extrapolating the trend. As Steve answered the question, I guess you've answered it, as far as you can see, the dividend at the present level of $0.16 per quarter is secure.

So I would say, given how optimistic you sound and how miss-valued the stock is in your opinion, okay, why with the [$50 million] representing 11% of the market cap, why don't we resort to a Dutch auction tender to buy those shares and while they are cheap, rather than stretching this out, and buying it, maybe, when it goes back up, which is what we don't want to do. So explain to me, if you're so frustrated, you think the stock is so undervalued, so miss-priced, and [$50 million] is 11% of the market cap, why don't we basically retire this dividend and retire the stock more quickly, rather than slowly?

Lee, could you -- when you say retire this dividend, what do you mean by that?

When you're buying back a stock [giving 18%], you can't earn 18% on your money. So buying back is anti-dilutive. You're buying back at a discount to book value, you're buying back stock at a return that you can't generate. The problem you got yourself into is by having constant equity offerings and putting out more stock, you had to -- the cash flow had to service more shares, and it became very dilutive, because the world we live in, you can't earn 18% on your money. So, the reason I say it's anti-dilutive, if you're sitting on [$15 million] and cash earning nothing, I think that's what you earn these days, right, in an interest rate like 0.5% or 1%, if you're lucky, so take the [$15 million] and buyback a share that yields 18%, it's accretive to the remaining shares. And you come across very, very -- I won't say optimistic, but very positive on how undervalued you are, and my question is, why not buy the $15 million now when the stock is depressed? Because if you're right at the stock is depressed and undervalued, you'll be buying at a higher price of six or 12 months from now.

I generally agree with your analysis, and it's something that we will take under consideration.

Very good. Good luck.

Thank you, Lee.

Richard Eckert, MLV & Company.

Actually, I may jump around here now, got two or three different questions.

The first is on the share repurchases. I believe you had the existing share repurchase authorizations dates back to last September, October and really, very little of that was used despite the shares trading well below book value, well below 90%, 80% of book value, why is it that you're only getting aggressive now?

Two things. One is, as we went into the end of the year quarter of that year, our business is, which have been growing dramatically and putting out high teens type ROEs, had a need for a lot of capital and in fact, we raised money around the convert at that time, because we were so worried about the amount of origination we had. So while we started buying back stock, and wanted to buy back stock at 90% or 85% of book, really when we put it out, the stock was somewhere around 95% of book, 90% of book and then it got lower as it got lower, we were actually investing in the business and immediately we felt that we needed the capital to support our businesses. We now have pretty good liquidity, although we do need capital to grow our businesses and obviously there is a difference, the impact you can make buying something at 75% of book versus 90% of book. We think it is substantial to future owners of the stock, not just in terms of the dividend and retiring that but also in terms of the actual value of these assets and (multiple speakers).

I'm just thinking at current levels, the shares have languished for a while now. Buying back shares has to be your highest ROE type of investment?

And that's why we are very committed to it.

Okay. We were talking about the sustainability of the dividend. Are you still pre-split, are you still optimistic that you can reach $0.70, $0.71, $0.72 in AFFO per share this year?

Yes, we were at $0.17 before writing off the entire accrued interest from that AFFO which was about $3 million, bringing it to $0.15-plus. So we would have been around $0.17, having because it didn't add very much to this quarter and growing. The question really there always is getting net income to get up to closer to the $0.16 level and we think that we can do that and if we feel like that we're on the path to do that, then we will feel very good about the $0.16 dividend. Right now, we feel like our -- this doesn't change the path that we have been moving forward on.

Okay. And finally, Dave Bryant, did I see anywhere in the press release the allocation between commercial real estate and commercial finance?

Yes, it's disclosed in there Rich. It is currently 68% real estate, 29% commercial finance and 3% other. We did go down a little bit this quarter in real estate, but I see that as a temporary blip because we have such a strong origination pipeline coming from Dave Bloom and his team that again that's temporary and will move back up into the low 70%s and we remain committed to growing that to a minimum of 75% and more as we implement some of the strategies that John talk about.

Ryan Tomasello, KBW.

I was wondering if you can provide some color on the types of loans you're currently originating for the CRE book. For example, can you give a sense of the range of loan yields and LTVs currently, and how those have trended over the past year?

We are still focused on cash flowing loans, slightly transitional. If we look at a pool of our and sort of most recent loans, I think we have kind of a weighted average coupon over LIBOR of about 4.96%. There are wins out there blowing with some pressure on pricing, we have as of the end of the last quarter, our analysis showed 40% of our borrowers were repeat borrowers. There is a premium on closing and we are able to maintain our spreads. Our LTV breaks at 75% or a little less. And our average loan remains sort of about 75% and for a three year term interest rate protection required to one year extensions.

Yes that's some good color. Given the volatility that we saw in the CMBS market in 2Q, have you guys seen any spread widening in 2Q on the loans, you've been making for our loan yields continuing to tighten?

It's a very interesting dynamic. I think that there is a ripple effect and the security -- the sort of term securitization market needs sort of spreads widening out. You should put us in a fairly stark contrast to CMBS loans, although we always look at that sort of on a daily basis where that breakeven is. So we are sizing our loans for either sale or take out which we sensitize every loan for regardless of what the sponsor says they are going to do, But that considered, there are banks with major shares who have the ability to flex borrowers and have as much as 30 basis points on spread.

As you know, they've seen sort of super senior on AAAs pricing at swaps 102 swaps, 103 swaps. It will ripple through that market and make (inaudible). We have no interest in being involved in a race for the bottom without the right execution and the type of return hurdles that we are looking for.

Great, thanks. And then I guess moving on to some other questions, just given the current level of the stock price, can you talk about how management thinks about current capital availability and accessing the capital markets?

Yes, we really don't need to access the capital markets for the next foreseeable future six months plus, nine months something like that, at the growth rate that we're at right now. And we have lots of assets that we are moving around, and finding additional capital, and tightening up our own balance sheet.

Okay, thanks. And then just finally, overall, can you just give your current view of where we are in the commercial real estate cycle and the trajectory of current lending standards?

I would say that, we think that there are people making stretching a little bit, but we haven't seen the kind of stretching that we saw, for instance, in 2005 to 2007. And we continue to find loans to do -- to make at our standards.

Thank you. And now, I'd like to turn the call back over to Jonathan for closing remarks.

Thank you. I just wanted to say, we appreciate your support, and are as frustrated as you are. So, hopefully, we'll have much better things to report in three months. Thank you.

Thank you. Thank you for joining today's conference, and this concludes the presentation. You may now disconnect. Good day.