Claros Mortgage Trust Inc (CMTG) 2021 Q3 法說會逐字稿

Welcome to Claros Mortgage Trust Third Quarter 2021 Earnings Conference Call. My name is Alex, and I will be your conference facilitator today. (Operator Instructions) I would now like to hand over the call to Anh Huynh, Vice President of Investor Relations for Claros Mortgage Trust. Please proceed.

Thank you. I am joined by Richard Mack, Chief Executive Officer and Chairman of Claros Mortgage Trust; and Mike McGillis, Chief Financial Officer and Director of Claros Mortgage Trust. We also have Kevin Cullinan, Executive Vice President, who leads MRECS originations; and Priyanka Garg, Executive Vice President, who leads MRECS asset management.

Prior to this call, we distributed CMTG's earnings supplement. We encourage you to reference these documents in conjunction with the information presented on today's call. If you have any questions following today's call, please contact me.

I like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of CMTG's control. Forward-looking statements include risks and uncertainties, and actual results may differ materially from expectations. You should not place undue reliance on these forward-looking statements, and we do not undertake any obligation to update or correct any forward-looking statements if later events prove them to be inaccurate.

In addition, we will also refer to certain non-GAAP financial measures. For non-GAAP reconciliations, please refer to the earnings supplement.

I would now like to turn the call over to Richard.

Thank you, Anh, and good morning, everyone. Thank you for joining us. As many of you know, Claros Mortgage Trust recently completed its initial public offering, marking an important milestone in our evolution. During the Company's formative years, we made a strategic decision to scale the business before going public. We did that to provide our initial investors with a nonmarket-to-market investment with a steady dividend. But more importantly, we believe that debuting as a public company with both scale and a multiyear track record would best position Claros or CMTG with a lower cost of capital to fuel dividend growth.

Since this is our first earnings call as a public company, I would like to welcome our new investors and recognize and thank our foundational investors for getting us here. We appreciate all of your support, and we look forward to sharing our progress with you in the quarters and years ahead.

Let me begin today with a quick background on our Company for those of you who may be new to CMTG. Our investment strategy is to focus on lending opportunities in the transitional commercial real estate sector that are secured by high-quality assets with institutional-grade sponsorship. Transitional CRE lending was dominated largely by banks pre-Dodd-Frank. However today, nonbank alternative lenders such as CMTG are increasingly providing capital for this segment of the market.

Transitional properties are assets that require some level of repositioning, renovation, leasing, development or redevelopment in order to maximize value. Currently, we lend on assets located in the United States where our sponsor, Mack Real Estate Group, has a significant presence either through boots on the ground or existing infrastructure and/or deep experience.

One of CMTG's key differentiators is that we are affiliated with Mack Real Estate Group, a commercial real estate owner, operator, property manager, developer, investor, and lender with roots dating back through the 1960s. Mack Real Estate Group or MREG, has a proven track record and established scaled platform with more than 220 employees across the US.

CMTG is distinct from many alternative lenders in that we employ an ownership mindset towards lending. Our sponsor's roots as an owner, operator and developer with decades of real estate experience enables us to fully appreciate and understand our borrowers' collateral and business plans.

We believe this vantage point enables us to underwrite transitional loans more effectively and ultimately be better capital partners to our borrowers. Our investment portfolio primarily comprises assets owned by premier commercial real estate institutions, in addition to many repeat borrowers who choose us for the following reasons: we have proven ourselves time and again to be a dependable, reliable source of debt capital; we understand complexity, and we can participate in large-scale institutional projects; and lastly, we have the expertise to create bespoke lending solutions for our borrowers.

Our ownership mindset also serves as the foundation for how we manage risk in our investment portfolio. What this means is in part that we only lend on assets that we would want to own, in markets we know well, and a basis we find compelling.

Fundamentally, we believe that taking an appropriate level of execution risk rather than basis risk and excess financial leverage by leveraging our balance sheet too much provides for better risk-adjusted returns to our investors. Past cycles have proven to us time and time again that it is extremely difficult to resolve problems that stem from excessive lending or excessive balance sheet leverage.

At the loan level, we drive our underwriting process with a focus on assessing execution risk. It involves extensive analysis and due diligence that is reviewed by a cross-functional executive team from across our platform. We also place an emphasis on structuring our loans in a way that allows us to mitigate risk and identify problems early.

Finally, given our focus on basis, we often require borrowers to have significant subordinate capital to protect. This proactive approach to asset management also provides us with a competitive advantage and that it is continuous, comprehensive, and is supported across the broader MREG organization throughout the life of the loan.

Our asset management team is integrated into the originations process and monitors and holds our borrowers accountable to their business plans as reflected in the loan documents. When there are plan variances, our asset management team often collaborates with the broader MREG platform in order to work with our borrowers to help effectuate positive outcomes. And because of our significant local management and development presence on the ground, we usually know about potential problems at the asset before the borrower reports them to us.

Since commencing operations in 2015, we have originated over $12.6 billion of investments, which reflects the strength of our business model and originations capability. Since our formation, we have not incurred any credit losses, and we have only taken over one loan out of the 95 we have originated. Lastly, CMTG has a weighted average IRR of 13.2% on our realized loans, which we are very proud of.

Now turning to the quarter, during third quarter, we significantly increased CMTG's origination activity, closing more than $900 million floating-rate transitional loans, which represents an annualized origination run rate in line with the $4 billion of originations CMTG achieved in 2018 and 2019 pre-COVID on a smaller capital base. We originated loans in several high-growth markets, such as Austin, Texas, and Atlanta, Georgia.

Historically, we have been very active in coastal gateway markets, and recently, we have been capitalizing on the favorable demographic trends and underlying job and rent growth in other select markets. We have the benefit of following our equity investment group's lead into these markets. This is where we are most active on the equity side now given our pre-COVID pivot and more recent acceleration of investments into these markets. We believe these high-growth markets offer attractive returns on a relative basis while providing CMTG with an opportunity to further diversify its portfolio.

Back to our portfolio. During the quarter, we also added industrial exposure and capitalized on attractive opportunities in certain out-of-favor asset classes, such as the hospitality and office sectors. The largest loan we originated during the quarter was the refinancing of a $225 million loan on a hotel located in Savannah, Georgia. The collateral is a drive-through leisure asset that is newly constructed, luxury branded, and it is reporting strong occupancy and ADR despite the uneven recovery across the hospitality sector.

We also closed a $167 million construction loan for an industrial project located in Atlanta that is fully leased to a global e-commerce firm for 15 years on a triple net basis. The borrower is a repeat borrower of ours who provide us with an exclusive opportunity to provide the lending solution on this project, and we were able to provide a solution because there were unique attributes related to the deal that we were able to effectively underwrite by working alongside our internal industrial development team. We believe that this investment is yet another illustration of the advantages of the Mack Real Estate Group platform and our ability to cultivate deep, repeatable borrower relationships and to underwrite complex transactions.

Most of our recent investments speak to our ability to understand and price large, complex transactions, and because of our balance sheet capacity, we can serve as a capital provider to sophisticated borrowers on major institutional projects.

CMTG seeks to originate loan balances of size, which is what we did during the quarter. Not only does this segment of the market play to our strengths, but there are only a handful of market participants who can originate transitional loans of this size. There continues to be healthy demand for transitional CRE loans and continued support from the banks who prefer to lend to us and to make these loans directly.

As transaction activity has picked up and capital markets have stabilized, we have seen an increase in equity sponsors with dry powder looking to execute on transitional, development, and construction business plans, especially in many of the high-growth markets where supply is not currently able to keep up with demand. We expect this dynamic to continue in the medium term, increasing the demand for transitional lending for the foreseeable future.

We have a robust investment pipeline that we anticipate closing in the coming weeks and into the first quarter of 2022. As we look to the future, we will continue to execute our investment strategy and proactively manage our portfolio with the objective of delivering an attractive dividend to our stockholders. On that note, we are pleased to share that we recently announced a fourth-quarter 2021 dividend of $0.37.

I would now like to turn the call over to Mike McGillis. Thank you again for your support and for listening.

Thank you, Richard. For the third quarter of 2021, CMTG reported GAAP net income of $52.9 million or $0.40 per share, and net distributable earnings of $45.3 million or $0.34 per share. We paid a third quarter dividend of $0.37 per common share. And at September 30, 2021, CMTG's book value per common share was $18.78. Before reflecting reserves for CECL, book value per share was $19.28.

As of September 30, CMTG's loan portfolio based on UPB was $6.4 billion with a weighted average all-in yield of 6.4%. During the quarter, we originated $905 million of loans with initial fundings of $745 million.

For existing loans, total fundings during the period were $248 million. We also received $676 million in full or partial repayments, which is indicative of the strong transaction volume we're currently seeing in the market. We have constructed a well-diversified portfolio that reflects our ownership mindset, our ability to price complexity, and our platform's experience as an owner, operator, and developer.

Our portfolio is comprised primarily of transitional floating-rate senior loans. As of quarter end, senior loans represented 93% of the portfolio with the balance being subordinate loans, and the weighted average LTV of our loan portfolio was 66%. We are highly selective when it comes to our subordinate loan exposure as we look to be compensated for the risk associated with this structure. Our subordinate loans have a lower detachment point to meaningfully higher all-in yield than the portfolio average.

As of September 30, 2021, the LTV and all-in yield for our subordinate loans was 63.5% and 11.3% respectively. The portfolio is highly diversified by collateral type as no single property type exceeds 20% of the portfolio.

Loans against multifamily and for-sale condo commercial real estate collectively represent 28% of the portfolio and have been a strategic focus for us.

Coming out of the pandemic, we expect that concentration to increase as a percentage of the portfolio in the near term. Not only do we view these loans to be lower in the risk spectrum, but we also believe that we have the expertise to reduce risks associated with this asset type, given our platform's expertise in residential development, ownership, and management.

It is also worth noting that we do not originate loans secured by standalone retail assets, which is by design. Our collective view is that retail is overbuilt throughout the US and the available returns do not sufficiently outweigh the secular risk associated with this asset class.

As Richard mentioned, we have been diversifying our portfolio by geography, adding select high-growth markets to the portfolio, and reducing exposure to the New York City market. While we anticipate this trend to continue, New York will always be a core component of our portfolio. Our investment strategy is to lend on large transitional and complex assets, and New York City offers an abundance of these opportunities. We also have deep expertise in this market and organizationally have a large team here.

Turning now to our internal risk ratings, our asset management team conducts a rigorous loan-by-loan quarterly review to determine a risk rating for each investment on a 5-point scale. During the quarter, CMTG's weighted average risk rating improved to 3.0 compared to 3.1 for the prior quarter. With respect to certain loans, we have been observing favorable trends in the performance of the underlying collateral, supported by continued improvements in the broader economy.

We take a conservative stance towards leverage. As of quarter end, our net debt-to-equity ratio and total leverage ratios were 1.8 times and 2.1 times our equity base respectively.

As you are aware, subsequent to the quarter end, we executed an IPO, resulting in gross proceeds of approximately $103 million. As a result of the IPO, 7.3 million shares of redeemable common stock were converted into common stock.

During our IPO process, we identified several key catalysts that we believe will help us increase our earnings and dividend profile over the next couple of years. First was repricing of our $763 million Term Loan B financing, which we were able to reprice a couple of weeks ago, reducing the coupon rate by 1%, thereby reducing our cash interest expense by about $7.5 million per year, and shortening the next potential repricing period from one year to six months. The transaction meaningfully reduced our overall cost of financing and will benefit our net distributable earnings going forward.

Looking ahead, we believe that leveraging our strong performance and track record as a public company will provide additional opportunities to further optimize our capital structure and reduce our cost of capital.

Second, capital deployment, the excess liquidity we held as a defensive measure during the COVID-induced market disruption has adversely impacted net distributable earnings. With more than $300 million in cash and available liquidity at quarter end, coupled with the proceeds from the IPO, we have ample liquidity to close on our robust pipeline and to continue to grow our portfolio.

Lastly, continued progress resolving nonaccrual loans as well as improved operating performance of our REO portfolio of New York City limited service hotels provide us with strong potential for increases to future earnings.

Thank you for giving us an opportunity to provide you with a summary of our third-quarter results. Our team is looking forward to updating you on our progress in the coming quarters, in addition to delivering attractive risk-adjusted returns to our stockholders.

I would now like to open the call up for Q&A.

(Operator Instructions) Rick Shane, JPMorgan.

Terrific. Thank you guys for doing this. And would love to hear a little bit about sort of trends into the fourth quarter. You provided an update, $392 million of loans or investments originated in four loans so far. I am curious, do you expect that sort of normal year-end rush? And can we see a significant acceleration versus that $400 million? Or help us understand the run rate there.

Sure, Rick. It's Kevin Cullinan, and I'll take that. So as you noted, we've closed on four investments in the quarter totaling just under $400 million, but we are very much experiencing that year-end rush that I think most of the folks across the street are experiencing right now, and we expect that run rate to tick up pretty meaningfully.

I would say, we have a conservative view that we will close over an additional $1 billion between now and the end of the year, and it could be greater than that, but some of the things that we are working on could slip into early first quarter. But certainly, a meaningful pickup versus what you have seen so far in the fourth quarter.

Kevin, you broke up. Did you say -- oh, Richard, sorry.

Go ahead.

Kevin, just to clarify, did you say an additional $1 billion by year-end?

I think in excess of that. Conservatively, we expect it to be in excess of $1 billion between now and the end of the year. And it could be greater than that, but there are a number of things that we are working on that could slip into the beginning of the first quarter. But by all accounts, a meaningful pickup over what we have closed so far in the fourth quarter.

Okay, thanks. Sorry, Richard, I just wanted to make sure I understood that totally.

Yeah, no. It is a big number. So, Rick, what I would point out is that the securitization market is a bit backed up, and this is providing an opportunity for us here at year-end, not only to get a lot of originations done, but also to do things at pricing that might not necessarily be available. So it's a pretty interesting time for us right now; we're trying to lean into it.

Jade Rahmani, KBW.

We have all seen quite a lot of mortgage REIT IPOs, and tends to happen is they trade somewhat poorly initially. And so I am curious since this is somewhat of a different construct than prior IPOs, particularly the alignment of interest that the management team has with the shareholders, and I do also want to clarify and comment to confirm that management participated in the offering.

But my question is, what are the plans to get the stock price higher to create shareholder value? In my mind, that could include a potential stock buyback, some clarity around the alignment of interest, potentially dividend increases ahead of forecasts, and also value that is there to be unlocked from the nonaccrual loans. Can you give any comment as to those questions?

Richard, why don't I --

Yeah, go ahead, Mike. You start first.

Yes, so in terms of how we get the stock price back up, I think it really is all about execution on a number of catalysts that will help drive net distributable earnings and then in turn drive dividend increases. And those are really as follows: repricing of our Term Loan B, which we completed a repricing of that a couple of weeks ago, effective early December, that will save us about 1% in coupon on that, which translates to about 5% -- $0.05 per share per year on NDE and GAAP earnings.

In addition to that, deployment of the excess liquidity that we've been holding. We've seen -- as Kevin mentioned, really the pipeline is very strong and getting that capital deployed should have additional NDE and ability to pay dividends.

The other critical pieces here are the improvement in our REO asset, the hotel portfolio, which we have seen very good trends on through the third quarter and into the fourth quarter, so optimistic about that; that has been a drag on GAAP and GAAP earnings and NDE over the course of the year, but it is turning a corner.

And then with respect to the nonaccrual loans, getting those resolved, getting that capital back to earning again is another key component for us. I think it's also worthwhile to highlight, there significant unrecognized contractual coupon interest on those loans as well as default interest on those loans, which in the event those ultimately get realized would be a significant boost to GAAP earnings and NDE in the coming quarters and years. So those are really the key things that we view we have to execute on to drive NDE and drive dividends on a go-forward basis.

Jade, let me jump in. I just want to answer a few more of your questions. I want to start by emphasizing what Mike said. This is about execution and demonstrating that we can continue to improve our dividend performance, and we are going to do that, I think, and we are making a lot of progress on the REO asset as well as the nonaccruals, and we hope to have more concrete news that we can share on that. But we are working very hard, and we have every expectation things are going to continue to get better there.

As it relates to in alignment in investment, we had about $30 million in equity invested originally in this business, not counting the substantial amount of dollars that we expended to carry the infrastructure and create the business. So we had $30 million in cash invested in loans, and we put approximately another $30 million in at the IPO. So I think a big show of faith in the business and more alignment of interest. And we believe in this business 100%, and we think the market over time is going to see it the way we do, but it's going to be all about execution.

Thank you very much and appreciate the clarity on the alignment of interest. Did see the management's $30 million participation in the IPO.

I wanted to ask secondarily around strategy. You emphasized to a great extent the ownership mindset as well as the Mack company's historical track record in development. So my question is why not go a step further, especially if you believe we're at perhaps an earlier point in the economic cycle, with the economy fully coming out of lockdown and post-COVID trends emerging? Why not do some kind of hybrid equity strategy to participate on the upside on the assets that you say you're lending on? And in fact, you only lend on assets you would want to own. Is that something that you might contemplate in such transactions?

Jade, look, we are open to everything. I think the first thing to do is to execute on the core business plan and make sure that people have great confidence in that. We have confidence in this. We have been executing on it for several years now. But we want to execute it as a public company.

I think there could be a natural opportunity over time. But to look at the triple net lease space, it is a place where equity ownership and credit seem to intersect, and it might -- we have seen other mortgage REITs execute strongly in that space and then that might make sense for us over time. But we are going to be very cautious about moving into any new businesses, and really make sure that people understand the base business, and that any type of move like that will be well received by the market.

But as to your point, we do have significant expertise on the equity side, and we also have significant expertise and ownership in the past in the triple net lease space. So it's something we are thinking about.

Steve DeLaney, JMP Securities.

Just one thought, the IPO's done, we're getting ready to turn the calendar. As you look out to 2022 and you're going to deploy this additional $100 million in your cash pretty quickly, can you just share your thoughts about alternative capital sources such as preferred stock and unsecured senior notes, and how you see those getting into the capital structure to support additional growth next year?

Sure, Steve, and thanks for the question. I think there's a few things that we're thinking about. Obviously, we completed the repricing of our Term Loan B. We think that shortening that soft call period will help us achieve another repricing and perhaps even diversify that financing going forward a little bit more, which we view should be accretive to earnings.

I think as a public company, obviously there's a few other sources of capital that could be available to us that we'll continue to evaluate. And I think the other key thing is we have been accumulating a lot of capital that we think could be attractive for CLO execution, and so we would look to execute a CLO at some point in 2022, and that would help sort of clear out some of our repo lines and further bolster our ability to effectively deploy capital.

Yeah that's a good point because your loans tend to be a little chunkier. Do you think you have assets on the books now that property types, LTV or such, that maybe you could pull together, cut a loan in half, and break it down into a 50% participation so that it would fit better into a CLO? Could that be part of that strategy? Obviously rather than dropping all the way down into the middle market.

Exactly. That is one of the strategies we're evaluating right now.

Don Fandetti, Wells Fargo.

Mike, as you look to Q4, do you expect any new nonperforming loans?

At this point, no. It's as Priyanka likes to say, every loan in our portfolio is a watchlist loan because we are a transitional lender. So we are continuing to very closely monitor the portfolio. I would say at this point, no, but it's something that we are monitoring vigilantly across the portfolio, and hopefully we can have some -- as Richard mentioned, we can get some resolutions on some of the existing nonaccruals in the near term.

But Priyanka, I don't know if you want to comment any further on that.

No, I agree with that. It's very fluid. We're constantly evaluating it. We look at every loan based on underlying collateral, submarket, broader asset class, borrower, sponsorship considerations. So it's very fluid, but I agree with Mike as we sit here today.

Okay. And Mike, can you put a number out there in terms of the REO, the hotels, what occupancy is or RevPAR? Just give us some perspective on where you are today say versus one, two, three quarters ago, just so that we can keep an eye on it and track that progress.

Sure, I'm going to hand that one over to Priyanka. She has been running with that.

Okay. Thanks, Don. We have been very pleased with performance thus far. RevPAR has certainly been moving in the right direction this summer with a good pickup once the economy started opening. The fall was relatively strong, particularly on the weekends. But where we are now is that performance is not very consistent throughout the week. We're seeing dips on mid-week demand, but the difference here in December as we sit here today is we're having very strong weekdays.

So peak RevPAR pre-COVID was around $200, and we're seeing some nights that are touching that frankly exceeding that on our strongest nights, but there's no consistency around that. So it's something we're monitoring very closely, but we feel like the market will recover over time and have consistent performance, and that will ultimately yield a monetization opportunity for our investors.

Got it. Can you just give us a sense on the occupancy? I mean, you have seven hotels. Is it 20%, 50%, 70%?

Yeah. The averages are tough. I mean, on a monthly basis, they're kind of 60% to 70%, and again, just very high on the weekends versus the weekdays. So it's really spotty and inconsistent, and I think as is always the case in New York City, we are on the precipice here of the first quarter. It's just we're going to be dealing with some seasonality issues as well.

Got it. I guess my last question, Richard, if you could just comment. You have a lot of New York exposure, the COVID cases are up, what is your thought process on your overweight position in New York?

Look, we believe in New York long term. And we have the loans that we have to some of the best sponsors in the city means that they are either performing well or protecting, and they believe in New York. So it is a question of getting through a little bit of a rough patch. We have no retail exposure here, and we have not much office exposure. But I think we are worried about building a diverse book of business, and I think we're going to continue to diversify out of New York as loans pay off, and I think you're going to see that progress continue.

But we need a meaningful presence in New York. As a large loan transitional lender, we believe in the long-term prospects of New York. We have real kind of strong views on what sectors to be in and not be in. In New York, over a long period of time, one thing we have never done here is luxury, or rather call it super luxury condo, and I think that was the right view, and I don't think anything is going to change.

And we focused significantly on residential exposure and what I would call more affordable luxury and smaller-size condominiums to the extent that it was outside of the rental market. That strategy has proved very, very strong, and I think we'll continue to be looking at those type of positions going forward.

But this is about diversification and acknowledging that there are places in New York that are going to be very strong and places in New York that are going to be challenged.

And as we look to continue investing in the biggest real estate market in the US, having conviction around the places that are going to continue to perform and perform better in the places that we really shouldn't be investing.

(Operator Instructions) Brock Vandervliet, UBS.

I'll admit I'm coming at this more as a bank analyst than a REIT or BDC analyst. In bank land, often the attitude with distress is your first loss is your best loss, or at least it's been that way up until COVID.

I guess, can you -- first on the REO asset. It sounds like -- it makes sense; you're hitting good RevPAR numbers here in a seasonally strong period, but Q1 tends to be weaker for New York hotels. What's the -- can you comment more about what the end game is? And I'm kind of curious what you're playing for and why not just move on?

Brock, it's Priyanka. I will start and others can chime in if they want. We feel really good about our basis is the short answer. We foreclosed on this portfolio in February of 2021. Obviously, a very challenging time for hospitality. And at that time, when we foreclosed, our basis was in line with appraisals at that time, which obviously values had been hit quite hard. So we have the liquidity to continue to carry these assets, and we feel that once there is real stabilization, real forward bookings, there is some view into stability of RevPAR forward-looking, that will be the right time to go to market and monetize and make a meaningful increase in profits for our investors.

And it's an attractive asset class to the extent that you're going to be in hospitality in New York City, the limited service nature and the scale that's provided by the seven hotels together, we think, will make it an attractive investment.

Got it, okay.

Brock, let me add one thing to that. Sorry, it's Richard. Our goal is not to own assets, but I do think there is historical precedence. And I've been a distressed buyer, and that's not our plan to the real estate business, it's the early 1990s. And over and over again, the returns that have been made buying from the banks who have taken that first loss had been in excess of other places in the real estate market.

And so we don't want to hold REO, but we want to make sure that we're not selling at the bottom because we have the capacity and the expertise to hold REO if we need to. But our goal is to have as little REO as possible and do everything that we can to work with our borrowers to ensure that that does not happen. But I don't think we can run away from the historical nature of real estate being a business that is incredibly cyclical.

Okay. And separately on the nonaccrual, can you just talk about how much of that nonaccrual amount is raw land, and what sort of the game plan is there? Are those being marketed to an outside party? Or is the game plan to ultimately extend construction financing there to the current owner? What is the plan there?

It's Priyanka. I'll start there. So one of those ones that's on nonaccrual is raw -- it's not raw land. There are improvements on the properties, but we made the loan on -- we consider it a land loan. We feel the collateral value of the land alone is how we underwrote our exposure. So on that nonaccrual, in particular, we are pursuing all rights and remedies available to us.

In that instance, that includes we've recently filed foreclosure papers on that loan. And we -- as you know, if it's a judicial foreclosure, that will take plenty of time to work through the system. But we have other opportunities that are available to us, some of which you just mentioned, and so the outcome is still to be determined. But we feel very good, and I always come back to the fact that we're very well collateralized against the real estate there.

That concludes the Q&A for today. I will hand back to Mike McGillis for any closing remarks.

Thank you, everybody, for joining us for today's earnings call. We really appreciate your time and your support. Should you have any further questions, feel free to reach out to Anh or myself. Thank you so much, and I hope everybody has a wonderful holiday season and happy new year as we head into 2022. Take care all.

Thank you for joining today's call. You may now disconnect.