Lument Finance Trust Inc (LFT) 2021 Q3 法說會逐字稿

Good morning, and thank you for joining the Lument Finance Trust Third Quarter 2021 Earnings Call. (Operator Instructions) Today's call is being recorded and will be made available via webcast on the company's website.

I would now like to turn the call over to Charles Duddy with Investor Relations at Lument Investment Management. Please go ahead.

Thank you, Gary, and good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's Third Quarter 2021 Financial Results. With me on the call today are James Flynn, CEO; Michael Larsen, President; James Briggs, CFO; and Precilla Torres, Head of Real Estate Investment Strategies.

On Tuesday, we filed our 10-Q with the SEC and issued a press release, which provided details on our third quarter results. We also provided a supplemental earnings presentation, which can be found on our website.

Before handing the call over to Jim, I would like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. When used in this conference, words such as outlook, evaluate, indicate, believes, will, anticipates, expects, intends and other expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements. These risks are discussed in the company's reports filed with the SEC, including its reports on Form 8-K, 10-Q and 10-K, and in particular, the Risk Factors section of our Form 10-K.

Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by or in the future may be amplified by the COVID pandemic. It is not possible to predict or identify all such risks. 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.

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

With that, I will turn the call over to James Flynn. Please go ahead.

Thank you, Charlie. Good morning, everyone. Welcome to the Lument Finance Trust Earnings Call for the Third Quarter of 2021. 2021 has been a very busy year and an important year for Lument Finance Trust. During the year, we executed several significant capital transactions that allowed us to grow our capital and institutional investor base. At the same time, we have made significant incremental investments, observes continued strong performance in our portfolio and generally positive performance. These were all accomplished in an environment marked with uncertain economic considerations, interest rates, unemployment, asset values, all exacerbated by the impact of such variables like COVID-19 and also the political and social unrest, particularly related to COVID-19.

While the lending market continues to be competitive, the breadth of Lument's platform and its strength in multifamily, in particular, continue to provide us with compelling and large investment opportunities. During Q3, we invested over $300 million in new floating rate bridge loans, showing our ability to quickly deploy substantial amounts of recently raised capital. Our expansive origination capabilities of the manager have driven this strong deal flow and based on the current pipeline, we expect to be fully deployed ahead of schedule by the end of the year.

As we continue to grow, we also expect to identify other investment opportunities in commercial real estate and to invest a portion of our capital and investments such as preferred equity, mezz loans, and other high-yield CRE instruments.

It's important to acknowledge that our focus on multifamily bridge lending and the strength of our credit and asset management platform has allowed our portfolio to continue to perform well. As of the end of the quarter, September 30, our loan portfolio was again 100% performing, no impairments, no loan defaults and no loans subject to forbearance. Similar to previous quarters, I'm happy to report we have still not granted a single forbearance and more importantly, have not had the need to grant a single forbearance during the COVID era. Continue to believe this is a testament to both our rigorous credit standards, our high-quality production and our proactive asset management efforts.

Perhaps most importantly, our ability to continue to execute on our business plan is reflected in the results. Through September 30, on a year-to-date basis, our total distributable earnings has been $0.28 per share, which provides support for our dividend. While the company did experience a decline in distributable EPS during Q3, this was anticipated. As we discussed in previous calls, due to the successful closing of our preferred equity offering on May 5, the recalling of our prior 2 CLOs and the refinance into a $1 billion CLO on June 14, we experienced a short-term decline in our distributable earnings as we deployed the proceeds from those transactions. We believe this capital deployment impact is transitory in nature, and we do not anticipate any negative impact to our long-term earnings outlook on a fully invested basis. We'll speak more about that later. But as discussed, our pipeline has grown significantly, and the deal flow continues to increase in velocity.

When the management team took over as the manager of LFT in January 2018, we were clear on our goal of deploying capital into commercial real estate and investments with a focus on multifamily in order to provide stable earnings to support the market return to our shareholders. We indicated a desire to grow LFT to a larger scale, which we felt will provide the most value to our shareholders. This quarter, we continue -- we've made progress on those goals and I'm excited for our continued growth as we focus on executing that business plan.

In the coming months, we hope to continue discussions with investors, educate market participants about LFT and the opportunity that we offer investors. Although relatively small in the commercial mortgage space, our manager and the Lument platform are not. We are one of the nation's largest capital providers in multifamily and seniors housing space, executing over $16 billion in transaction volume in 2020. Lument services a $49 billion servicing portfolio and employs over 600 employees in 25 -- more than 25 offices nationwide. The scale of that platform benefits the LFT investors and provides great support for the execution of our investment strategy.

As we continue to show over these last years, we are utilizing the strength of our manager to focus our investments in middle market multifamily bridge and those have continued to perform well. With that, I'd like to turn the call over to Jim Briggs, who will provide some details on our financial results. Jim?

Thank you, Jim, and good morning, everyone. On Tuesday evening, we filed our quarterly report on Form 10-Q and provided a supplemental investor presentation on our website, which we will be referencing during our remarks. The supplemental investor presentation has been uploaded to the webcast as well for your reference.

On Pages 5, 6 and 7 of the presentation, you will find key updates and an earnings summary for the quarter.

For the third quarter of 2021, we reported net income to common stockholders of approximately $1.2 million or $0.05 per share. There were 2 primary distributable earnings adjustments for the quarter. The first of these was an approximately $150,000 noncash hyper-amortization of purchase price premiums on 2 loans acquired into our recent CLO, which prepaid during the quarter and caused a nonrecurring decrease in interest income during the quarter. The other nondistributable item experienced during Q3 was a $60,000 unrealized loss on mortgage servicing rights, which was driven by higher realized prepayment speeds in our legacy residential MSR portfolio.

I'd like to note that as of quarter end, the carrying value of our legacy MSR asset was less than $700,000, and therefore, we do not believe that any future changes in the value of this asset should be a meaningful driver of our earnings. After these adjustments for the third quarter of 2021, we reported distributable earnings of $1.4 million or $0.06 per share, which represents a decrease relative to Q2's distributable earnings of $2.8 million or $0.11 per share. As Jim alluded to in his opening remarks, the primary driver of this decline was a cash drag as we work to deploy the proceeds from our recent capital-raising transactions. The risk continues to exist in the short term for some drag on net income to common stockholders as we complete this capital deployment phase. We expect this phase to be transitory in nature and do not anticipate any negative impact to our long-term earnings outlook.

I'd like to highlight a few additional drivers of the decline in distributable EPS during Q3 relative to prior quarters. The first of these is related to exit fees. LFT's loans are typically structured with exit fees, which are recognized as interest income when the loan pays off and the fee is collected in cash. Therefore, the timing of loan payoffs and the associated exit fee income can cause some variability in LFT's earnings from quarter-to-quarter. In Q3, LFT earned exit fees of approximately $800,000 on loan payoffs of approximately $118 million. In the prior quarter, LFT earned exit fees of $1.4 million on loan payoffs of approximately $176 million.

Another driver of Q3's performance relative to Q2 was an increase in total expenses from $1.8 million to $2.4 million. There are a few primary drivers of this increase. First, Q3 was our first full quarter of management fees and expense reimbursements paid on our preferred equity offering, which closed on May 5 of this year. Secondly, G&A has historically included and continues to include a 5 basis point servicing expense on our bridge loan portfolio due to the increase in portfolio size from $611 million as of 6/30 to $803 million as of 9/30. We did experience enough uptick there. Lastly, there is some seasonality to the timing of our recurring professional fee expenses and the prior quarter was a bit below trend.

With respect to our balance sheet, we discussed on last quarter's earnings call that on April 21, the company entered into an amendment to a secured term loan, which, among other things, provides the company with an incremental secured term loan in the aggregate principal amount of $7.5 million and extends the maturity date of the secured term loan to February 2026. The incremental $7.5 million funded on August 23, and therefore, you will see a corresponding increase to our liabilities on our 9/30 balance sheet.

Our total stockholders' equity at September 30 was approximately $169 million, which represents a $55.5 million increase relative to the year-end stockholders' equity of approximately $114 million. As discussed on prior calls, this increase was driven by the execution of a preferred equity offering during Q2. Our common book value per share was $4.37 as of September 30. As discussed in prior quarters, I would like to remind everyone that as a smaller reporting company, as defined by the SEC, we have not yet adopted ASC 2016-13, commonly referred to as CECL, short for Current Expected Credit Losses, which is a comprehensive GAAP amendment of how to recognize credit losses on financial instruments. As a smaller reporting company, we are scheduled to implement CECL on January 1, 2023. Until then, we continue to prepare our financial statements on an incurred loss model basis. As of September 30, we do not consider any of our loans to be impaired under the incurred loss model, and we have not recorded any impairments or allowance for loan losses in the current quarter.

While the current performance of our bridge loan portfolio remains healthy, uncertainty about the recovery continues to exist, including its impact on our borrowers and the value of the properties that collateralize our commercial mortgage loan investments. We will continue to evaluate the loan portfolio for credit losses and will record any impairments or allowance as incurred.

With respect to our common dividends, in accordance with normal course timing and process, we have not yet made a dividend declaration for the fourth quarter of 2021. We expect to make a determination on our dividend in December after discussing with our Board in normal course.

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

Thank you, Jim, and good morning, everyone. I'll start by touching on recent investment activity. The last several months have been very active for us from an investment standpoint. During Q3, we acquired 15 new investments from our manager with a total UPB of $309 million. All of these acquisitions were secured by multifamily assets. And these acquisitions had a weighted average spread to LIBOR of 339 basis points, a weighted average LIBOR floor of 16 basis points and weighted average LTV of 75.7%. We have seen a significant increase in bridge lending opportunities, particularly within the multifamily space, which we expect to continue due to high levels of acquisition activity in the market.

During the quarter, we experienced $117 million in loan payoffs. And at quarter end, our total loan portfolio had an outstanding principal balance of 108 -- 103 -- sorry, $803 million. The portfolio consisted of 53 loans with an average loan size of $15 million, which provides for significant asset diversity. Our portfolio has a weighted average spread to LIBOR of 346 basis points. 98% of loans in our portfolio have a LIBOR floor above the current spot LIBOR rate, with a weighted average floor of 83 basis points.

Due to the general strength in the economic recovery, the high level of acquisition activity in the multifamily sector and robust level of series CLO issuance, competition in the bridge lending space continues to be fierce. While we have seen some stabilization in spreads, LIBOR floors have come down significantly over the last year, and we are seeing pressure on exit fees as well.

Our overall loan portfolio at quarter end was 89% multifamily. That does represent an increase from 85% multifamily for -- as of Q2. The second highest asset type concentration is self-storage, which represents 7% of our portfolio. As mentioned on previous calls, we believe that generally, self-storage and industrial property types provide the least volatility in performance outside of multifamily. And typically, our self-storage debt investments are related to top national operators in our end markets, with per capita existing supply below historical national average of 70 square feet per capita.

Furthermore, we focus on moderate leverage assets as reflected by the weighted average LTV at 61% in our self-storage portfolio.

Our exposure to retail and office remains very low as of the end of the quarter at 4% of total UPB on a combined basis. That's a decline relative to our year-end '20 level of 9% of total UPB on a combined basis. And due to our managers' strong focus in multifamily, we continue to anticipate that the majority of our loan activity will be related to multifamily assets. However, we will look to supplement those multifamily investments with strong quality investments in other asset types that can offer strong return profile relative to multifamily.

As of 9/30, our loan portfolio was financed with 1 series CLO securitization, with weighted average spread of 143 basis points over 1 month LIBOR and an advance rate of over 83%. This CLO has a reinvestment period running through December of 2023 that allows principal proceeds of repayments of our loans to be reinvested in qualifying mortgage assets. We do not currently utilize repo or warehouse facility financing at LFT and therefore, we are not subject to margin calls on any of our assets from repo or warehouse lenders.

After quarter end, as of November 5, LFT acquired an additional $98.5 million of loans from our manager. These loans have a weighted average interest rate of LIBOR plus 326 basis points and a weighted average LIBOR floor of 10 basis points. Year-to-date, we have made $745 million of new loan investments, and we continue to maintain a strong pipeline as we move into next year. This investment activity has allowed us to deploy a meaningful portion of our remaining CLO capital, and we anticipate to fully deploy that CLO capital by year-end.

In general, market confidence in the economic recovery from COVID positively impacted borrower demand for bridge loans during the year. And with these market dynamics and increase in our pipeline, we feel positive about our investment opportunities looking forward.

With that, I'll turn the call back to Jim.

Thanks, Mike. I appreciate the update. I appreciate you all joining. As we've mentioned on the call, we've really begun to make progress on our business plan. We're very excited about our ability to raise capital and deploy it quickly. We look forward to talking to you more about our ongoing plans at LFT. We look forward to updating you on our progress, and we appreciate your time today.

And with that, I will turn it over to questions.

(Operator Instructions) Our first question is from Stephen Laws with Raymond James.

I appreciate the comment in the prepared remarks on the ramp and the color on G&A. That was helpful. I wanted to touch on repay fees. You gave the contribution on exit fees and the net interest income. How should -- what kind of repayment expectations do you expect in the coming quarters, so we can kind of make sure we have the exit fee contribution reflected correctly on the top line?

Yes. So we have had the -- obviously, in 2021, in general, we've seen fairly elevated prepayment fees, in large part driven by valuations, right? Business plans are being executed more quickly and/or partially and then sales are occurring. So we do anticipate the fourth quarter having elevated payoffs similar to what we've seen in the past couple of quarters. Obviously, it will depend on the timing of actual payoffs. So I think you can use kind of the most recent quarters as a general guide for what we continue to expect. Obviously, the portfolio has grown as well. So that's a good thing.

And then the other positive there for the platform, generally, is we've really seen a tremendous amount of volume coming in on the front end. And in some ways, capacity is our -- and capital is our limitation. So in some ways, we don't love to see payoffs, but it certainly provides us more opportunity to do more business as well.

Great. Appreciate the color on that. A follow-up, you mentioned looking at some preferred and mezz investments. Can you talk about a little more detail on that? Sourcing, maybe how much capital you're willing to allocate there? And then what type of coupons you're seeing? And will you put any leverage on those assets? And if so, what type of leverage are you looking to use?

Right. So there's a pretty wide band there in terms of opportunity. We have fairly limited capital outside of the CLO today, but we do have some. And we'd like to use a portion of that to earn something on a -- to your question, while not a commitment, so to speak, but I think the idea would be to do so on an unlevered basis. There'll be structural leverage in the asset itself, whether it's a B Note or preferred equity or a mezz loan.

We have looked at opportunities in -- on -- Lument, the sponsor, continues to seek out opportunities in the construction lending space. So that's an opportunity for carving out a B Note or a mezz position that could potentially be an asset there. That, again, has been focused in multifamily. We've looked at self-storage. We've looked at some hospitality more because of the opportunity set today as opposed to just a general thesis.

On the preferred and mezz space, we do provide preferred and mezz behind Fannie and Freddie loans. We have looked at it behind other CRE long-term fixed investments. There is a challenge, right? If you look at where debt yields are and where cap rates are, the return profile on those investments is not really better than a levered first position. In many cases, I think, for some -- perhaps on the construction side or some of these other structured finance trades, there's an opportunity. But I do see as rates continue to rise, we continue to, I think, just normal course, rising as we've seen in the market here. You'll see a natural increase in that band of available capital.

I think when you look at the risk return profile for preferred and mezz today, it's a bit of a tough sell unless you believe kind of debt yields and cap rates are going to stay extraordinarily low for a long period of time. So if you look at the market and generally, I think you haven't seen a tremendous amount of need for it, right? There's been a lot of equity capital available to sponsors, and there's a lot of first lien capital available to sponsors at reasonably high leverage. So it's not that we haven't seen any. We've taken a couple of swings at some deals, but there's just -- I think the pipeline in general is kind of toward the narrow end of where it would be historically.

I'll ask maybe Precilla, I don't know if you wanted to add anything there, but that would be your -- my high-level comments there.

I agree with everything you said, Jim. But to Jim's point, though, what I want to emphasize is that because of a number of direct relationships we have, we may -- we are able to explore and evaluate opportunities that provide some of these off-market type yields, and we will continue to focus on those as avenues for these types of opportunities.

Right. I appreciate the comments from both of you and certainly nice having the source, ability and flexibility to pursue those when appropriate.

The next question is from Steve Delaney with JMP Securities.

Jim, appreciate the -- Jim Briggs, I appreciate the detail on the expense items. I think a drop in distributable was certainly expected. We were at $0.07 against your $0.06. So $0.01 is really no big deal.

One thing you didn't mention or I didn't hear it, you had an existing CLO and then you did the larger $1 billion CLO. Within that transaction, was there any write-off of deferred issuance costs related to the prior CLO that was paid off in full? I assume there probably was, but I didn't hear that in your commentary.

Thanks, Steve. Yes, there was. The refinance was last quarter. So the loss on extinguishment of debt that you see in our 9-month numbers was the acceleration of those deferred financing costs. So it was an EPS to distributable rec item for last quarter. Got it behind us for this quarter, and you'll see it in our year-to-date results. And yes, they were -- it was approximately $1.7 million.

Yes. Those are big items for sure. And Mike Larsen, $800 million portfolio, absent new capital of any -- some type, what would you say the peak size of the portfolio? I guess I'm saying how much capacity do you have on a net basis to grow that $800 million?

Well, if you look, the primary source of financing our portfolio today is $1 billion CLO. So you're looking at $1 billion or a little over $1 billion based on our current capital base for the peak portfolio. And as we've discussed, we think there's a real opportunity to grow the scale of LFT and continue to consider ways to grow our capital base as we move into next year so that we can increase the scale and efficiency of LFT.

So you think maybe a couple of quarters to kind of fully utilize the capacity within the CLO?

No, as mentioned, we expect to fully deploy the CLO before the end of this year.

By the end of the year. Okay. Very good. Jim Flynn, lot of effort on the capitalization side recently, obviously, with the preferred and the new supersized CLO. I'm just trying to think of next steps. I think you're about a little over $216 million of total capitalization. We consider the term loan to be quite [high] capital. We'll put it in there in terms of from a portfolio perspective. And my question is, would -- it would seem the press is great and that it's there for a long term. There's no short-term put, but 8% is expensive money. Would shorter-term unsecured notes, 4-, 5-, 6-year notes, would that make sense as a next step in your capitalization goals in trying to grow that base?

Yes. So there's a couple of thoughts on that. Obviously, from a market standpoint, the debt markets, in particular, have continued to really look attractive for issuers, whether that's the CLO space or the corporate space. And pretty much since we've done our -- every -- I mean -- and this isn't unique to LFT, but every kind of debt capital raise that someone has done over the past, probably a couple of years, over the passage of time, that deal is -- could have been better, right, if you waited, but you can't as we all know.

So would -- today, it would be great to replace all of our more expensive capital with that cheaper capital that's available today. There -- so the answer is yes, that would be better. There are considerations for -- if you think about our term loan, prepayment penalties and things of that nature. But we are looking at that on a regular basis of there's an inflection point where it makes sense to say, "Hey, we should be looking at replacing this source of capital because it's accretive to do so, even if you have to pay fees." We're not quite there, but if you run the math and look at it, we're pretty close, to be honest with you. So that's one thing. So clearly, you're spot on in terms of evaluating what's available in the market and does it make sense to replace your existing capital.

And then as we talked about on other calls and really, since we took over as manager, one of the keys to growing this platform was to prove out the business plan, to get some new investors into the stock, to increase the book value from the 50s and 60s to a point where you can actually think about raising common equity. We think we've done that. We look at common, we look at preferred, and we look at our overall leverage. So to my earlier statement about capital being our constraining factor at this point, our path is set on growth. And we have a tremendous amount of production and deal flow that can be made available to this platform and to this -- to LFT's balance sheet and to its shareholders.

And we're working with all of our banking teams and advisers on at least weekly basis, talking about opportunities to, okay, we did the preferred, we increased the term loan, we did the CLO, we're going to be deployed ahead of schedule. So kind of what's next? And there's -- you mentioned one outlet, but there's many across the capital stack from common all the way to senior secured, and we're kind of evaluating all of it. And I expect us to continue to be active on a go-forward basis and thinking about ways to raise more capital.

Great. Well, it's worked, you've gotten the stock up to a little bit over 90% of books. So congratulations on that.

The next question is from Christopher Nolan with Ladenburg Thalmann.

Jim Briggs, on a follow-up on the loss of -- excuse me, extinguishment of debt, was that a 3Q item or a 2Q item? I seem to recall it was last quarter.

That's correct, Chris. It was last quarter. It was recorded at the time we redeemed the 2 existing CLOs and closed the $1 billion CLO. So last quarter item, it was around $1.7 million.

Great. And I appreciate the detail you gave on all the expenses. Just a clarification, why was the interest expense up so much this quarter versus last quarter?

We've got a full quarter of the CLO, right? So we refinanced our 2 existing CLOs put on the $1 billion CLO and the associated debt there. So this was our first full quarter of interest expense on the CLO debt.

Okay. And so that was...

We had some $600 million to $1 billion. Just to be clear, right, we -- so you raise the preferred, you raise the term loan and you raise the $1 billion of CLO. So the CLO is roughly $600-odd million and now you're $1 billion. So -- but this would be the first full quarter with the $1 billion of -- the $1 billion CLO, the $800 million plus of CLO notes.

Okay. Just want to make sure there wasn't anything else in there. And I guess for Precilla, the deck shows that your LTVs on most of your deals are around 72%. So what's the cash coverage ratio for many of your borrowers?

So what I can share is with respect to our most recent financial statements received from our clients, the weighted average debt service coverage of the portfolio in LFT is about 1.5x. So it's very healthy. And as we originate assets, we are generally very cognizant of the, if you will, going in debt yield and debt service coverage of our assets that are going in, and we seek to have a balance.

Obviously, from time to time, we do some very strong lease-up transactions, which are at the lower end of the going in debt yield or debt service coverage. But on a portfolio basis, we are certainly cognizant of that in our originations.

Great. And your observation in terms of rent stabilization laws, are they proliferating in your markets? They're pretty common in the larger markets, but I don't know how they are in the Southeast or Midwest.

So to your point, the focus of our program, as has historically been demonstrated, is in the more middle market sector, also in the middle of the country kind of thing. So we tend not to be generally in the markets which have more stringent rent stabilization laws, which typically are in the East and West Coast. So I'd say the substantial component of our portfolio, historically, is not impacted by that.

(Operator Instructions) The next question is from Matthew Howlett with Nomura.

Just you talked about the Board meeting on the dividend and we look at distribution, obviously, running ahead of this quarter's earnings. But is it -- to sort of reconcile or get to a run rate numbers, is it as easy as sort of saying you have $44 million of cash at the end of the quarter and $148 million restricted cash. Putting that -- most of that to work at 4% gets you sort of $0.07 per share quarterly increase from -- I mean, is that as simple as just saying the cash is going to work and carries the EPS impact, and this is our sort of quarterly run rate earnings?

So I think you'd have to -- you should look at those 2 buckets of cash slightly differently, right? The $140 million of restricted is what's available inside of the CLO. So when that cash is deployed, I guess, based on what you're saying, you're already paying the interest, so yes. That is a fair statement to -- the ROE of that money is more, but the incremental is the loans you put in.

And the $40 million, look, we'll see -- we won't deploy 100% of our capital even if we were to put loans on the balance sheet whether high yield or otherwise. But I think 50% to 60% of that or slightly more, I think your assumption is a fair one of the $40 million.

Got you. And you said by the end of the year, so maybe the fourth quarter, you don't get the full benefit, all of it from day 1. But is that -- I guess where I'm going is, is the Board sort of looking at the run rate when they look at the dividend and they look at the run rate?

Yes. I mean we do expect the CLO to be fully deployed, and I would expect a reasonable -- I would expect half of that other capital to have been put to work at some point this quarter or early next of the $40 million.

Got you. Okay. Great. I'll definitely take that into account. And then -- just I don't know if you've spoken about it recently, but could you just give us sort of the update on the merger? I know it was 2 years ago, Lument and ORIX, just sort of give us an update on the manager and how that's going, and where does LFT fit in on longer-term plans?

Sure. So in terms of the merger, we're fully integrated, the platform, the Lument platform, the sponsor's platform. We're fully integrated. There's no real silos or parts of the overall company that have not been integrated. So all of our lending products, investment products that fall under the Lument brand are operating seamlessly with singular leadership and under one brand, one set of credit metrics and those types of things. So that's gone very well. I think the team did a tremendous job of getting us there, particularly given that we really haven't been back to the office until recently, until this quarter since March of 2020. So that was a heavy lift, but happy and proud to say that that's gone extremely well and really has been relatively seamless.

And in terms of where -- how LFT fits in, if you look at our business model as a sponsor, we've got this mortgage banking lending business. We've got our servicing book, fee-based businesses. We're growing our advisory business and investment sales and M&A, transaction-based, fee-based businesses. And then we have our capital-intensive businesses -- business, primarily the bridge lending business. And the high-yield consider -- those considerations are kind of in between, right? They're still capital-intensive, but on a lower scale than first lien bridge loans. This is the perfect vehicle for that outlet. It's got this market and LFT have an investor base that are looking for stable cash flow, stable dividend. The expectation is you do good lending, you do good assets, you manage your dividend to the market and you're generally rewarded with a good investor base and happy investors.

And so I think the marrying of those 2 business models is really -- perfect is probably an extreme word, but they fit very well together, right? You have seamless management. You have investor bases that kind of choose the higher octane kind of valuation of a fee-based business, and then you have the fixed income dividend yield investor that's looking at LFT. So in terms of how it fits in, I think it's kind of the right vehicle for us to pair with the rest of our platform, and we really expect it to continue to grow and be a significant component of our strategy going forward.

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

Thank you, and thanks all for the questions. Great call today from the attendees. I appreciate all that feedback. We hope to be in touch with all of you soon, and look forward to speaking over the -- during the quarter and on our next investor call. Thanks all for joining. Take care.

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