Blackstone Mortgage Trust Inc (BXMT) 2008 Q1 法說會逐字稿

Hello and welcome to the Capital Trust fourth-quarter 2007 results conference call. Before we begin, please be advised that the forward-looking statements expressed in today's call are subject to certain risks and uncertainties including but not limited to the continued performance, new origination volume and the rate of repayment of the Company's and its funds loan and investment portfolios, the continued maturity and satisfaction of the Company's portfolio assets as well as other risks contained in the Company's latest Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

There will be a Q&A session following the conclusion of this presentation. At that time, I will provide instructions for submitting a question to management.

I will now turn the call over to Mr. John Klopp, CEO of Capital Trust.

Thank you. I think is this Q1, I hope. Good morning everyone. Thank you for joining us and for your continuing interest in Capital Trust. Last night we reported our numbers for the first quarter and filed our 10-Q. In yet another wild period in the capital markets, arguably the most volatile we've experienced to date, CT stuck to its plan. We dialed back new originations, focused hard on our existing assets and liabilities, raised significant new capital to profit from the market disruption and produced steady earnings and dividends.

Geoff will run you through the details later in the call but the financial headlines include the following. Net income totaled $14.8 million, virtually unchanged from the first quarter of 2007 during a period when LIBOR averaged 3.3%, 200 basis points below the level of a year ago. On a per-share basis, EPS was $0.82, down $0.02 and 2% year-over-year due primarily to a higher share count resulting from our March common equity offering. More on that in a moment. And most importantly to us, we paid a regular quarterly dividend of $0.80 per share consistent with our run rate for the last five quarters.

On our last call in early March, we identified the three priorities that we set for 2008, managing credit, maintaining financing, and raising new capital. On all three fronts, we feel very good about the progress we made in the first quarter.

Here is our report card. First, credit. We had no losses and no additional reserves and in general our assets continued their strong performance. However, two balance sheet loans totaling $22 million, less than 1% of our total interest-earning assets were nonperforming as of 3-31 and as of today. One is a $10 million second mortgage secured by land, the other a $12 million first mortgage on a stalled condo convergent project; both are in Southern California. We believe that our existing provision is adequate to cover any losses and thankfully we have zero additional exposure to the California housing market.

The only other assets that experienced turbulence in the quarter was our Macklowe EOP position which came due in February but was subsequently extended by the lending group to February 2009. Our Macklowe exposure is $50 million at the balance sheet plus an additional pari passu amount held by one of our funds and is secured by a portfolio of four Class A midtown Manhattan office buildings.

As reported in the press, the properties are currently in the very early stages of being offered for sale pursuant to a consensual arrangement with the borrower, with the proceeds going to lenders to repay debt. While transaction volume has been light for midtown Manhattan office buildings, recent comps in the market support our position in the capital structure and we continue to believe that our investment is money good.

As the year unfolds and the liquidity crisis grinds on, we fully expect that additional credit issues will emerge in the commercial real estate sector creating problems for existing lenders and opportunities for those with capital. While no categories are immune, the obvious problem areas are loans with near-term maturities, condos and land. Other than Macklowe, we have seven loans aggregating $113 million with '08 maturities, $47 million of which is scheduled to pay off tomorrow.

Other than the $12 million loan that just defaulted, we have four condo loans aggregating $89 million of outstandings, three of which, $67 million are sold out and scheduled to repay in the next 60 days. Other than the $110 million loan against which we've already taken a reserve and the full amount of our net exposure, we have no land exposure -- no other land exposure in our loan portfolio. While there may be noise along the way, we are confident that our portfolios can weather this storm and will significantly outperform the market.

Second, financing. During Q1, we extended the maturity of our senior unsecured credit facility and made good progress in discussions with our repo lenders in anticipation of rollovers later in the year. In this environment, financing is a precious commodity, allocated by Wall Street to only the strongest and most reliable counterparties. CT is clearly one of the select few.

The unfortunate events at Bear Stearns claimed one of our best trading and financing partners. But the resolution with JPMorgan represents a very positive outcome for Capital Trust. While the process will require some give and take, probably mostly give by us, we are absolutely confident in our ability to roll over our lines as they come due later in the year.

Third, new capital. In this difficult market, the true winners will be the firms that can manage their existing assets and liabilities and raised fresh capital to exploit current opportunities in a disruptive market. On this score, CT is demonstrating the power of its people and its platform. During the quarter, we continued the capitalization of CT Opportunity Partners, our newest private equity fund, which now stands at just under $500 million of committed equity capital. We expect to finish this raise in Q2 and continue to build out our investment management business with additional targeted vehicles that complement the investment strategy of the balance sheet and allow us to take advantage of the full range of opportunities available in the market.

In the process, we generate additional streams of fee income which leverage our corporate capital and our human resources. Just before the end of the quarter, we also chose to augment our capital at CT raising $113 million through a 4 million share common issuance. This highly successful offering of straight common at a 20-plus% premium to book value was executed at a time of extreme uncertainty and volatility when most of our peers were either shut out of the public market entirely or relegated the painful rescue type financing.

We are already deploying this capital into some of the best opportunities that we have seen in many years. Overall, we are satisfied with our performance in the first quarter and cautiously optimistic about the balance of the year. As I constantly tell my guys, this isn't a sprint, it's a marathon. It may not be pretty along the way, but we intend to finish strong. Thanks for sticking with us.

I will turn it over to Geoff to go through the numbers in detail.

Thank you, John, and good morning everyone. Before we begin, I want to point out that we are unable to comment further on any of our investment management products that are still in the marketing phase and our comments on those funds will be limited to our prepared remarks.

I'll begin with the balance sheet. Total assets of the Company were $3.3 billion at 3-31, an increase of $95 million or 3% when compared to where we were at the end of the year. During the period, we did not originate new assets for the balance sheet by design and the increase of our total assets was due primarily to $107 million net increase in our cash position generated by the proceeds of the common equity offering that we closed at the end of the first quarter.

We've already begun to put the proceeds to work having consummated origination post quarter end and have a healthy pipeline. It is our expectation that we will continue to ramp up origination and while we have strong demand for our capital, we will continue to exercise caution when putting it to work.

On the investment management front, we originated one new $49 million loan for the new CT Opportunity Partners Fund and like the balance sheet, we've originated additional assets subsequent to quarter end and have a healthy pipeline of potential transactions.

We continue to expect investment management activity to accelerate in 2008 as we now have multiple mandates investing and are continuing to actively pursue additional investment management strategies that we expect will further increase the scope of our platform.

On a net basis, Interest Earning Assets decreased by approximately $10 million. Repayments of approximately $40 million were partially offset by loan fundings during the period of approximately $30 million. At March 31, the entire $3.1 billion portfolio of Interest Earning Assets had a weighted average all-in effective rate of 6.31%. From a credit standpoint, the average rating of the CMBS portfolio was BB, and the weighted average last dollar loan to value for the loan portfolio was 67%.

During the quarter, the CMBS portfolio experienced two upgrades with a total book value of $10 million and four downgrades with a total book value of $48 million. Two of our downgrades were in vintage bonds that we acquired at deep discounts and we expected downgrades when we purchased the security.

The third security was downgraded for special servicing fees paid by the trust despite continued positive outlook for the underlying credit. The fourth security is a 2006 vintage floating-rate security where our net exposure to the underlying properties is sub 50% LTV. In all cases, our bonds are either performing better than expected or the performance issues raised by the rating agencies are not expected to impact our cash flows.

In total after giving effect to the quarter's ratings activity, almost 70% of the portfolio is rated investment grade with 40% of the portfolio rated A, AA or AAA. And all of the ratings data mentioned is based upon the lowest rating available for each to bond that we own. Furthermore, over 80% of our CMBS exposure is vintage 2005 and earlier. In summary, we continue to believe that our CMBS portfolio will perform well.

Over to the loans, our $2.3 billion portfolio continued to perform well despite one additional nonperforming loan since year end. We currently have two nonperforming loans on the balance sheet at quarter end with a total outstanding balance of $22 million, less than 1% of our portfolio. The first NPL is the $10 million land loan that we reserved against in the fourth quarter of 2007. Our reserve against the loan is $4 million and as we have noted in the past, we have financed the loan on a stand-alone nonrecourse basis such that our net exposure to the loan is a maximum of $4 million, the amount of our reserve.

The second loan is a condominium conversion project in Southern California where we have a $12 million pari passu participation in a first mortgage and while the loan is nonperforming, we continue to expect a full recovery of our $12 million loan balance. We are in negotiations with the borrower to take title to the property and the current borrower is cooperating in the transfer process.

Taking a deeper look into the loan portfolio, other than the one land loan against which we have taken a reserve, we do not have any other land exposure in the portfolio. We have five loans with a carrying value of $101 million collateralized by residential condominiums and other than the $12 million first mortgage that was previously discussed, all of these loans are performing and we expect them to continue to perform through maturity.

Looking at maturity exposures, we have seven loans with a carrying value of $113 million with final maturities in 2008 and six loans with a carrying value of $176 million with final maturities in 2009. In general, we feel confident that our portfolio will perform well. As we have stated in the past, we do not expect -- we do expect that we will continue to have noise in the portfolio and potentially isolated losses as the credit crisis evolves but we feel that our underwriting process is second to none and that our experience will be strong on both an absolute and relative basis.

Moving down to equity investments. We have two equity investments in unconsolidated subsidiaries as of March 31. Both are coinvestments in funds that we sponsored, A roughly $1 million investment in Fund III and our investment in the new Opportunity Fund. Our equity commitment to the new fund is $25 million and we expect to fund our commitment over the fund's three-year investment period. Fund has raised $389 million of total equity commitments at quarter end and subsequent to quarter end, we raised an additional $100 million bringing total commitment to $489 million.

Over to the right hand-side of the balance sheet, total interest-bearing liabilities defined as repurchased obligations, CDOs, our unsecured credit facility, and trust preferred securities, were $2.3 billion at March 31 and carried a weighted average cash coupon of 3.9% and a weighted average all-in effective rate of 4.15%.

Our repurchase obligations continued to provide us with a revolving component of our liability structure from a diverse group of counterparties. At the end of the quarter, our borrowings totaled $910 million against $1.6 billion of commitments from nine counterparties. We remain in compliance with all of our facility covenants and have $663 million of unutilized capacity on our repo line.

During the quarter, one of our repurchase agreement counterparties, Bear Stearns, experienced what can only be described as extreme liquidity pressure and responded by agreeing to combine with JPMorgan. Bear is one of our largest counterparties with $480 million of commitment, most maturing in August of this year, and $344 million of borrowings at quarter end on the balance sheet in addition to multiple relationships with our investment management vehicles.

At quarter end, our relationships with Bear Stearns were being managed by JPMorgan and we expect that our Bear Stearns lending relationships will be formally assumed by JPMorgan once the merger is consummated this summer. JPMorgan is also a repurchase agreement counterparties with $250 million of commitments maturing in October of this year and $187 million of borrowings at quarter end on the balance sheet in addition to relationships with our investment management vehicles. We anticipate based upon our conversations with both Bear and JPMorgan that both of these credit relationships will be extended in 2008.

Our repurchase obligations are marked to market and we have posted additional collateral to our lenders as the fair value of our assets pledged to them as security has migrated as spreads have widened. Since the beginning of 2007, we have received a total of $83 million of margin calls, $46 million in 2008. Since quarter end, however, we have not had any material marks to market activity and it had in some instances improvements in previous marks.

Our CDO liability at the end of quarter totaled $1.2 billion. This amount represents the notes that we have sold to third parties in our four balance sheet CDO transactions to date. At March 31, the all-in cost of our CDOs was 3.9%. All of our CDOs are performing and in compliance with their respective interest coverage over collateralization and reinvestment tests. At quarter end, total cash in our CDOs recorded as restricted cash on our balance sheet was $16 million.

In addition, we received upgrades on two classes of our third CDO from Fitch during the period. Of the 14 rated classes since issuance, nine have been upgraded by one to two notches and the remaining five classes have had their pre-existing ratings affirmed twice. Fitch attributes the rating activity to the improved credit quality of the portfolio and the seasoning of the collateral.

On March 31, we borrowed $100 million under our unsecured credit facility for a syndicate led by WestLB. During the quarter, we executed our option to extend the facility for a year now maturing in 2009, with pricing of LIBOR plus 175.

The final component of interest-bearing liabilities is $125 million of trust preferred securities. In total, our $125 million of trust provides us with long-term financing at a cash cost of 7.2% or 7.3% on an all-in basis.

Over to the equity section, shareholders equity was $503 million at March 31, representing a $95 million or 23% increase from December 31. The increase was primarily attributable to our public share offering of 4 million Class A common shares that generated $113 million of net proceeds. This increase was offset in part by a non-cash fair value decrease of $17 million on the value of our interest rate hedges. Based on shareholders equity at quarter end, book value per share was $23 even compared to $22.97 at the end of 2007.

Had we marked all of our assets and liabilities to market using the values disclosed in the 10-Q, the net asset value of the Company would have been $705 million or $32.21 per share, a 40% increase over stated book value. To be clear, this figure is arrived at by replacing book values for all of our interest earning assets and interest-bearing liabilities by using the fair values discloses in Part 1, Item 3 of our 10-Q.

As always, we remain committed to maintaining a matched asset liability mix. At the end of the quarter, we had approximately $556 million of positive floating rate exposure on a notional basis on our balance sheet. Consequently, a change in LIBOR of 100 basis points would impact annual net income by approximately $5.6 million.

Given the recent movement in short-term rates, one month LIBOR averaged 3.3% during the first quarter while LIBOR averaged 5.25% during 2007, a change of 195 basis points. Adjusting out the proceeds from the equity offering that increased our exposure to LIBOR at quarter end, we earned $2.2 million or roughly $0.12 per share less in Q1 2008 due to lower LIBOR than we would have had LIBOR remained at 2007 levels.

Our liquidity position remains strong and at the end of the quarter, we had $220 million of total liquidity comprised of $138 million in cash and $84 million of immediately available borrowings.

Turning to the income statement. We reported net income of $14.8 million or $0.82 per share on a diluted basis for the first quarter of 2008. Both interest income and interest expense were impacted by lower LIBOR, netting to interest margin for the quarter of $18.6 million. Other revenues continued to increase reaching $2.6 million for Q1 as management fees from the new funds and additional servicing revenues were recorded. Other expenses were $7 million for the period with G&A at $6.9 million and roughly $100,000 of depreciation and amortization.

Income from our funds was flat as our coinvestment in Fund III is de minimus now and our $25 million coinvestment in the new fund has no impact as we are in the start up phase of that vehicle.

Down to taxes, we recorded a $599,000 tax benefit on our taxable REIT subsidiary, CTIMCO, as operating expenses exceeded operating income. All of this activity resulted in $14.8 million of net income for the period or $0.82 per share on a diluted basis.

In terms of dividends, our policy is to set our regular quarterly dividend at a level commensurate with the recurring income generated by our business. At the same time in order to take full advantage of the dividends paid deduction of a REIT, we endeavor to pay out 100% of taxable income. In the event the taxable income exceeds our regular dividend payout rate, we will make additional distributions in the form of a special dividend. We paid regular quarterly dividends of $0.80 per share for the first quarter of 2008 unchanged from the fourth quarter of 2007.

Before I turn it back to John, I want to spend a moment discussing three accounting items, first is FAS 157. FAS 157 defines fair value, establishes the framework for measuring fair value, and expands fair value disclosure. FAS 157 had a de minimus impact to CT as we hold only two items at fair value on our balance sheet, one $10 million AAA-rated CMBS bond that is held on an available for sale basis, and our interest rate hedges. Both of these items were recorded as level 2 valuation.

While our other assets and liabilities are not recorded at fair value because they are held to maturity, we do disclose all asset and liability fair values in the 10-Q in Part 1, Item 3.

The second accounting item is FAS 159. We adopted FAS 159 in January and elected to value -- and elected not to value any of our assets or liabilities at fair value other than the aforementioned items. Our decision not to elect FAS 159 is founded in our business models and what we believe is the appropriate presentation of our financials to investors. We are a held to maturity investor like a bank and believe that our interest-earning assets and interest-bearing liabilities should be recorded on that same basis.

As noted earlier, had we marked our book to market, we would have shown a book value of over $700 million compared to $500 million using our current presentation. While this is one way to look at CT, it is not the manner in which we as management view our business.

Finally, the third accounting item has to do with our CMBS portfolio. We hold our CMBS portfolio on a held to maturity basis and not at fair value for the reasons discussed above. That said, the current market disruption has created a difference between the fair value of our CMBS and its carrying value. As noted in the 10-Q, our $873 million book balance portfolio CMBS has a fair value of $772 million or roughly $100 million less than carrying value. We continue to carry our CMBS at book value based upon our assessment of performance and our intent and ability to hold these securities until they mature.

We will mark our assets down only in the event that we believe that our cash flows are impaired. There is a movement, however, in the accounting world to potentially require companies to mark these types of assets to market. We believe that liquidation value is an inappropriate presentation of our financial statement and are working with our accountants to avoid such a change. As discussed above, we do not believe that we should mark any additional asset to liabilities to market given our intention to hold both until they mature.

That wraps it up for the financials and at this point, I will turn it back to John.

Okay. Thanks, Geoff. Let's open it up for questions, Chris.

(OPERATOR INSTRUCTIONS) David Fick, Stifel Nicolaus.

Good morning. You've disclosed the $50 million exposure to Macklowe. You also have a position pari passu position in your -- one of your funds for an additional amount. Is that correct?

If that was a question, the answer is yes.

Okay. And you are not prepared to disclose how much that is?

We do not disclose details on our private equity funds.

Okay. You are not impairing that at this point, is that correct? Obviously that hasn't happened yet?

That is also correct.

So you feel like you are fully recoverable at this point?

We do.

Okay. Can you give us some details on where you are in conversations with your borrowers regarding reoriginations or extensions? What did you do this past quarter and what is your posture going forward?

If I understand your question, David, I would say that we don't have much in the way of conversations regarding reoriginations because we haven't had and don't have much in the way of near-term maturities. I'm not entirely sure I understand your question but obviously as the few loans that we have come due, we will make an assessment if they are not -- if the borrower is not able to cleanly refinance or repay us as to what is in the best interest of Capital Trust. The only extension that we've had which we obviously have disclosed and talked about is the Macklowe extension in February of this year.

Okay. I'm sorry if I didn't make the question clear. I'm aware that you have about $113 million in maturities this year and that was really my focus is those maturities and what your posture might be with respect to stuff that is meeting underwriting but can't find take out financing.

We're going to take them one at a time and see what happens. In many of those cases, we actually anticipate that those loans are going to pay off this year cleanly -- the vast majority. If we have a situation where a borrower comes to us, says they cannot because of the capital markets roll over a loan and we are comfortable with the underlying collateral, our position and our sponsor, then certainly we would consider a reorigination -- I guess if that it's being called. But again, most of our near-term maturities I think I mentioned, we have a large loan, $47 million that we've actually held for quite a long time. It is coming due later this year. It is scheduled and fully ready to pay off tomorrow.

A lot of the other product that we have that is "coming due" is actually our few condominium exposure loans and in the vast majority of those again, the condos are fully sold, under contract, closing out, paying off the debt sequentially and we are anticipating in the next two to three months, we will be paid out entirely on most of those.

One of your competitors, I think, coined the term reorigination on their call last week and I apologize for using that. Geoff, thank you for the detail on the Bear and JPMorgan repo status. Are you working on anything else in terms of financing with other lenders? And can you give us an idea of where you think pricing is going to come out both with JPMorgan and anything else you are working on?

I think our conversations -- we have conversations with all of our lenders as well as the new counterparties and sort of very positive conversations on all fronts. Nothing to report just yet. I would say in general, relative to where we priced our -- what I would call our last set of premarket disruption repo agreements -- I would say two changes. Number one, advance rates have probably come in 5% to 10%. And pricing is probably 25 to 75, let's call it 50 basis points wider than it was at the beginning of 2007.

Great, thank you.

Rick Shane, Jefferies.

Thanks for taking my question. Geoff, you had made the comment about you are in discussions with JPMorgan and it seems to be progressing. In terms of their aggregate risk exposure, does it seem like JPMorgan is willing to be as exposed as Bear and JPMorgan were in total? Or are they going to reduce their overall exposure when they look at the book?

I think the answer is yes. They are -- the indication is that they are comfortable with their current combined exposure.

Great, thank you. Next question obviously when we look at the balance sheet over the last three quarters, you guys have clearly been playing defense. Especially with your own balance sheet on -- and I realize that has to do with capital constraints and strategy, etc. And you've been a little bit more aggressive on the managed fund side. Is it fair to take today's commentary and the recent equity raise as an indication that you are willing now to go more on the offensive with your own balance sheet?

We're getting a string of yes/no questions which I am going to take advantage of. Yes.

John, you are a pain. So the answer is yes you are willing to go more on the offensive right now?

Absolutely. I mean we have seen just in the last number of weeks some degree of light at the end of this tunnel. CMBX spreads coming in significantly, cash spreads in the CMBS market coming in less but nevertheless significantly at least at the top end of the credit curve. Loan spreads more sticky but the feel is from our standpoint is more liquidity moving off the sidelines, more urgency from some of the banks to move product off of their balance sheet and therefore more action and we intend to participate both balance sheet and investment management vehicles.

Great. I appreciate the humor of the first response and the depth of the second one. Thank you, guys.

Don Fandetti, Citi.

Good morning. John, I appreciate the color on the market. I wanted to see if you could dig in a little bit more about what you are sensing and seeing in terms of liquidity in commercial real estate? Obviously the economy is slowing, we are seeing some cracks. Is your sense that this thing could tip and get messy on a down side or are you feeling a little more constructive here?

Well, I guess there's a couple of different parts to your question. Unfortunately it's not a yes or no. I think we are feeling more constructive in terms of liquidity but the focus really today continues to be secondary market and clearance sales of dealer inventories. The truth is that the securitization machine of Wall Street is still virtually stopped. There have been some deals done on the fixed-rate CMBS side in Q1 but the level of issuance is significantly down. I think the numbers are roughly $6 billion of new issuance in Q1 '08 versus $60 billion in Q1 '07, gives you a sense. And Wall Street is really not originating a lot of new product right now because the funding mechanism is still broken, both on the fixed and particularly in fact on the floating-rate site.

What ultimately transpires in terms of fixing that machine, bringing back some new origination liquidity to the marketplace I think is playing out as we speak. But we don't think it's going to just snap back in the near term.

In addition, I guess your other question is about underlying fundamentals. We haven't seen a lot of credit issues so far at least with the exception of the areas we've already highlighted, land, condominiums are sort of the first -- have been the first to crack. But we do think that as this stretches on, it's going to bite more and you will see more borrowers who have trouble rolling over their financing, even good borrowers and good properties. And ultimately you may well see some impact -- negative impact on cash flows which we have not seen to date.

But again, we are daily scrubbing and rescrubbing our existing portfolio and feel pretty darn good and we think with the fresh capital that we've been able to raise both corporate and in our funds, that it's actually a pretty good opportunity for us.

Do you see any risk of let's say credit starts to crack, CMBS doesn't open up for another quarter or two and then it really doesn't open up because credit is starting to crack. Is that a potential scenario?

Sure, I think that there is still a lot of uncertainty in this world and there are lots of potential scenarios. I think the market was indicating in the end of Q1 post Bear if you looked at CMBX spreads that we were literally on the verge of Armageddon here and virtually 100% of all loans in CMBS, at least the most recent vintages, were likely to default and have big severities. I don't think that is going to happen. I've been around a long time and this one is different, it doesn't mean it's better or lesser it is just different. And the underlying fundamentals in real estate at least commercial income producing real estate, have held up pretty well so far based upon supply and demand.

We will see if the economy truly flushes itself down the toilet what it does to the demand side of the equation and therefore cash flows. But right now don't see it in the near term.

Okay, thanks for your perspective.

(OPERATOR INSTRUCTIONS) Bose George, KBW.

Good morning. I had a question on leverage. What do you guys see as an optimal leverage level given that funding is probably just going to be from the repo market for the foreseeable future?

I think the answer to that question is an answer that we've given frequently when asked this question which is our leverage will go where the assets take us. If we end up finding a tremendous amount of AAA opportunities, we may feel comfortable with leverage in this range. I think if we continue to originate the same type of credits that we've originated in the past, I think that as I responded earlier to the question about repos, I think that our book will have 5 or 10 points less leverage on the revolving component of the debt stack.

One thing I will say though is the opportunity that we are seeing today certainly in dealer inventory has two components to it. Number one, it is at lower risk point, lower loan to value if you want to use it that way than we traditionally originate at. And number two, it's coming with seller financing which has more duration to it and more protections mark-to mark cushion and in some instances has leverage levels that are what I would say consistent with leverage levels in 2007. So higher leverage levels that we are comfortable with given the structural enhancements of seller financing.

Great. Thanks very much.

Mr. Kopp, we don't have any other questions in the queue.

Wow. Well thank you all for listening and staying with us and we will talk to you again next quarter. Have a good day. Thanks.