New York Mortgage Trust Inc (NYMT) 2020 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Fourth Quarter and Full Year 2020 Results Conference Call. (Operator Instructions)

This conference is being recorded on Thursday, February 25, 2021.

A press release and supplemental financial presentation with New York Mortgage Trust fourth quarter and full year 2020 results was released yesterday. Both the press release and supplemental financial presentation are available on the company's website, at www.nymtrust.com.

Additionally, we are hosting a live webcast of today's call, which you can access in the Events & Presentations section of the company's website.

At this time, management would like me to inform you that certain statements made during the conference call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although New York Mortgage Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission.

Now at this time, I would like to introduce Steve Mumma, Chairman and CEO. Steve, please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for being on the call. Jason Serrano, our President, will be speaking to our investment portfolio strategy today, and Kristine Nario, CFO, will be speaking in more detail about the fourth quarter results. We will all be speaking to our supplemental financial presentation that was released yesterday after the market closed and is currently available on our website. We will allow questions following the conclusion of our presentation.

The company had a solid fourth quarter results, delivering $0.19 GAAP earnings per share and $0.22 comprehensive earnings per share. As of December 31, 2020, the company's book value per common share was $4.71, up 3% from the prior quarter, resulting in an economic return of 5% for the quarter.

During the fourth quarter, the company was able to build on positive momentum from the prior 2 quarters, executing longer-term financing through a residential securitization and expanding its investment portfolio to its highest level since March 2020.

The past year was a difficult and challenging time for our company as well as many other mortgage REITs. Over a 3-week span in March, we experienced unprecedented liquidity constraints on many of our credit asset classes as a direct result of the market disruption caused by the COVID-19 pandemic. These constraints across markets created a valuation gap that further drove down values and, in many cases, disconnected from the fundamentals of the underlying assets and generated historic levels of margin calls from our financing counterparties.

Through the coordinated effort of our investment professionals, we were able to reposition the portfolio and stabilize the balance sheet, but not before incurring sizable losses. These quick actions did allow us to maintain a large portion of our credit portfolio, where we saw significant price improvements for those assets during the balance of the year.

The company was able to trim the total economic return to a negative 15% for the year, an improvement from a negative 32% at the end of the first quarter. While the total economic return for 2020 on an absolute basis is disappointing, I'm proud of our team and the way we performed throughout the year.

Now going to the presentation, I will start on Slide 6. Our investment portfolio totaled $3.2 billion at year-end, up approximately $400 million from the previous quarter. Our total market capitalization was $1.9 million (sic) [$1.9 billion], an increase of approximately $500 million from the previous quarter.

Our capital is currently allocated at 71% to single-family and 25% to multifamily. Our portfolio growth has been focused on loan investments instead of CUSIP securities, as we believe we can generate better risk-adjusted returns with more stable funding. Jason will speak later to this in the presentation.

We remain at 57 professionals, still mostly working from home and running our business with minimal disruptions.

On Slide 7, some fourth quarter key developments. Our book value, as I said before, was $4.71 at the end of the period, an increase of approximately 3% from the previous quarter.

We declared a common stock dividend of $0.10, an increase of $0.025 per share for the previous quarter, bringing our dividend yield to 10.8% at year-end closing price and currently to 9.4% at yesterday's closing price.

We continued to strengthen our liabilities by completing our third securitization of the year. This was our second residential loan securitization, for a total of $364 million, reducing our mark-to-market debt, releasing excess margin and adding some additional liquidity to the company.

We ended the year with a portfolio leverage of 0.2x, down significantly from 1.4x as of December 31, 2019.

On Slide 9, we cover key portfolio metrics on a quarter-over-quarter comparison. Our net margin for the quarter was 2.3%, an increase of 12 basis points from the previous quarter.

Our asset yields increased 54 basis points, largely due to the continued rotation out of lower-yielding, fully valued CUSIP securities into higher-yielding residential multifamily loans.

The increase in asset yield was partially offset by an increase in financing costs of 42 basis points. The increase was due to several factors: the addition of a non mark-to-market residential repo line; the previously mentioned third securitization; and an increased cost from our residential loan warehouse lines that renewed in the fourth quarter.

We would expect to see improved costs going forward as we look to complete 2 additional securitizations in the coming months, as spreads have tightened significantly since our fourth quarter securitization. We will continue to focus on ways to extend maturities and decrease our exposure to mark-to-market call risk back to the company.

Kristine Nario, our CFO, will now go over our financial results in more detail. Kristine?

Thank you, Steve. Good morning, everyone, and thank you again for being on the call.

In discussing the financial results for the quarter, I will be using some of the information from the quarterly comparative financial information section included in Slides 21 to 28 of the presentation.

Slide 10 summarizes our activity in the fourth quarter. We purchased residential loans for approximately $320 million, agency RMBS for approximately $139 million and closed on $31 million of multifamily loan investments.

We had net income of $70 million and comprehensive income of $83 million attributable to our common stockholders.

Our book value ended at $4.71, an increase of 3% from the third quarter.

Slide 11 details our financial results. We had net interest income of $26 million, an increase of $0.4 million from the previous quarter. Our interest income increased by $1 million, primarily due to increased investments in higher-yielding business purpose loans, offset by a $0.6 million increase in interest expense which can be attributed to higher borrowing costs in the fourth quarter associated with a non mark-to-market repurchase agreement and nonrecourse securitization transactions that we entered into to finance our residential loans.

We had noninterest income of $67.3 million, mostly from net unrealized gains of $52.5 million due to improved pricing on our residential loans, multifamily loans and investment securities and $12.1 million of income generated from our multifamily and residential equity investments.

We had total G&A of $9.7 million, a decrease of approximately $0.5 million from the previous quarter. The decrease can be attributed to a reduction in annual incentive compensation, as the company did not achieve its annual quantitative performance targets. We would expect our G&A expenses to be between $11 million to $11.5 million per quarter, going forward.

We had operating expenses of $3.5 million during the quarter, primarily related to our investing activities in residential loans and direct multifamily lending.

The graph on Slide 11 illustrates the change in our book value from December 31, 2019. Our book value increased 3% during the quarter and 21% from the end of the first quarter. Although we sold assets and delevered our portfolio in response to the COVID-19-related market disruption, we avoided some of the larger-scale force selling that occurred during the first quarter, allowing us to retain assets whose pricing significantly improved throughout the remainder of the year and contributed to the increase in our book value.

Jason will now go over the market and strategy update. Jason?

Thank you, Kristine.

Now turning to Page 13. After last year's funding reset that began in late March, we fundamentally restructured how we build our asset pipeline and how we utilize our unrestricted cash. Prior to Q1 2020, we targeted income-generation opportunities with our unrestricted cash through bond markets which were quite liquid. After assessing [collateral pool] risk, we felt the spread generated from these holdings was attractive.

However, when the repo markets froze up in March, we required rapidly reduced borrowings against some of these positions. At this time, we use repo funding opportunistically, as we still carried over $1.6 billion of unencumbered assets on our balance sheet.

Our approach to protect against unexpected volatility in any associated margin calls was to post collateral or similar assets to meet any deficits. To our surprise, and the overall market, we experienced a period where posting additional collateral along with additional cash was no longer accepted. It was a cash-only market at the time. This was highly unusual and not seen even during the peak of the housing crisis.

Without the confidence to continue rolling the financing on our security book, we focused on a full rotation into residential and multifamily loan programs. The beginning of Q2 was a wait-and-see approach on the pandemic's development and governmental response to the crisis. But as shown in Q2, our loan investment activity nearly dropped to 0 as the market was resetting from a period of significant distress. At this time, many market participants focused on recapitalization funding plans, which provided us an opportunity to foster new long-term sourcing relationships without high pressure of competition in tow.

In late Q2, we began to lock up attractive sourcing arrangements in both business purpose loans and multifamily direct origination. Due to underwriting timelines to close these loans, the fruit of this labor became visible with investment growth witnessed in the fourth quarter.

Now turning to Page 14. With the elevated rate of asset deployment, we lowered our unrestricted and restricted cash to $293 million, versus $650 million, which will help to drive higher earnings. Now with $1.3 billion in unencumbered loans, we are focused on incrementally adding term financing arrangements through the securitization market. With our portfolio, we see an opportunity to generate 15%-plus equity returns with selective use of term leverage.

We're excited about our portfolio's ability to generate a high economic return under a low utilization of leverage. This is one metric we use to assess the quality of our risk-adjusted returns. We believe it provides for sustainable growth, path to growth of the company's earnings.

Now turning to Page 15. The housing market had an extraordinary year. Supply of single-family houses on the market for sale is approaching sub-1 million units or about 2 months of inventory of houses for sale. These are record lows going back to the beginning of this time series. A record 50% of houses across the United States went to contract within 2 weeks of listing in 2020.

The robust housing price growth continues to support this market, as Case-Shillers remained -- just reported a 10.4% year-over-year change in December. Our portfolio was designed to take advantage of home price growth to unlock value, but was carefully constructed to minimize downside risk.

First, in our RPL strategy, we have nearly $1 billion in assets, with a 75% LTV at a 4.8% coupon. We specifically targeted lower-LTV loans to provide additional downside protection. HPA reinforces our alignment with the bar against delinquency. As I said earlier, we are very focused on adding to our securitization program with new issues in the near-term in this sector.

Our performing loan opportunity is really split between business purpose loans and Scratch & Dent. Starting with business purpose loans, we are excited with providing short-term, high-coupon loans to seasoned contractors that rehabilitate properties and resell into a [technically] constrained market of housing supply. We ramped up our focus in this sector over the last 9 months, given expected HPA growth and additional security around business plan success.

Our portfolio had a 65% LTV to completion value, 80% LTV to origination. With robust HPA, these properties can be efficiently sold or rented for investment purposes over the course of the year, which would pay off our loan.

We believe we hit a sweet spot in the market with the accumulation of these loans at a 6.5% to 7%, on average, coupon that presents an attractive way to play the technical housing supply squeeze, but with robust downside protection as a senior mortgage holder. Over the past year, we carved a niche strategy with proprietary flow and expect to benefit from this throughout 2021.

On the Scratch & Dent side of the performing loan strategy, performance has been great with respect to this portfolio. We are able to acquire at a deep discount these loans. The recent refi wave helped to accrete our book value to par at a faster pace than projected. Pipelines to purchase Scratch & Dent loans at a steep discount are also increasing, due to seismic growth of new originations. More on this point in a minute.

On the security side of the equation, as a buyer of debt, we still hold certain CUSIPs that provide for an attractive near-term unlevered return, considering the discount and increased probability of these [trusts] being called. Neither agency nor nonagency sector is a large focus, considering the excess liquidity built in with the Fed support.

Now turning to Page 16, on single-family performance. COVID forbearance rates certainly moderated over the past quarter. We generally expect slight uptick in delinquency rates at year-end, which is a seasonal factor. Over all, our portfolio across our loan strategies has shown a strong reaction to high-touch servicing efforts. Since March of last year, performance related to RPL strategy generated great returns for us, with converting nearly 50%-plus of loans into a current status. This allowed our book to gain over 8% on a price basis in a very tenuous period.

Lastly, I touched on this earlier in our securitization plan's investment activity, our team continues to be fully engaged in similar asset opportunities. In particular, through our Scratch & Dent strategy, we are seeing explosive growth to acquire pristine loans at deep discounts, which is not surprising given the record origination volume that we saw in 2020. More loans originated equal more loan opportunities to make mistakes for originators, which can become problematic for some loan originators, with warehouse lines commonly structured as a 364-day facility.

Now turning to Page 17, our multifamily business. The multifamily sector contains 25% of our capital deployed today. Our direct loan origination business continues to offer incredible value, as we earn over an 11.5% coupon against stable properties located primarily in the South/South East United States.

Our portfolio continues to benefit from recent rate cap compression of 50 basis points due to the stable cash flows produced over 2020. I will touch more on this in a minute, but however, we see migration from the Northeast is accelerating due to lockdown measures in large cities and corporate acceptance of work-from-home environment. We also see consistent demand, primarily due to existing employment and growth (inaudible) in these regions, which helps support the cash flows and demand of these multifamily properties.

Like our single-family portfolio, our multifamily agency securities held is more of a near-term, pull-to-par opportunity to monetize in the near term. While we do not currently have a joint venture multifamily investment listed here, that will soon change, as the team recently evaluated numerous opportunities from sponsors with longstanding relationships with our company. The ability to earn a teens return in an expanding market is one of the most compelling risk-adjusted returns we see in this market.

Turning to Page 18. Our multifamily loan performance has been consistent, as we have just a couple of loans that are under special servicing review. In each case, these loans are expected to pay off at par after a change of control.

As mentioned before, the company has never taken a loss in our direct multifamily origination business. Our deep bench of asset managers and technology tie-ins to each property with general ledger reporting has allowed us to quickly spot performance issues and resolve them through management correction or an asset sale.

A benefit that we have seen more regularly of late is the ability to earn an upside optionality with respect to our loan payoffs. Our loan agreements are commonly structured with minimum return hurdles to capture upside return benefit. After applicable return hurdle multiples, we earned a 14%, or 1.45 multiple, on the life of the loan in the quarter, the loan payments. We expect to see more loan payoffs to take advantage of this upside.

Now turning to Page 19. We are very much looking forward to a successful year in 2021. A lot of the groundwork in building our proprietary investment pipelines across the single-family and multifamily sectors should continue to bring a high rate of capital deployment, which is evident in our investment activity through the first 2 months of this year.

With a robust securitization market that is offering financing execution at better levels than prior to the COVID period, this is going to help drive our return on assets from portfolios that we selectively finance, while keeping our portfolio leverage low.

At this time, I'll pass it back to Steve.

Thanks, Jason. Operator, you can open it up for questions, please. Thank you.

(Operator Instructions) Your first question comes from Bose George, with KBW.

First, just on book value. Are there unrealized losses that we should think about in terms of further book value recoveries? And also, just any comments just on book value trends quarter-to-date.

Clearly, first part of the question, unrealized losses, we certainly have some securities that still are underwater relative to the March 31 price which we think we will continue to recover. Those amounts are probably in the neighborhood of $0.10 to $0.15 per share.

And then as it relates to the current book value, we've had a pretty significant backup in rates. We don't have a tremendous amount of direct exposure to that rate from a leverage standpoint. So our credit assets, we've seen significant spread tightening in the first couple of months. So we would expect our book value to be [up] 1% to 2% right now relative to where the market is.

Okay. Great. And then just in terms of the earnings power of the portfolio, can you just talk about where do you think that currently stands and where that goes as you continue to optimize your funding?

That's right. Look, our total portfolio size still has a lot of room to grow given the current capital we have on the balance sheet. So as we do continue to deploy out securitizations, we continue to think that we will drive our -- we're going to continue to try to drive the net margin in what we would consider reoccurring revenues, which would include some aspects of income outside of the net margin because many of the mezzanine loans in multifamily that we have are accounted for as equity investments for accounting.

And so we'd like to think that that earnings power is going to grow substantially above where our current dividend rate is today. But the portfolio needs has -- we can grow our portfolio another $700 million to $800 million in size without putting tremendous pressure on the capital structure of the company.

Our next question comes from Eric Hagen, with BTIG.

Lots of different business purpose loans out there. It sounds like fix-and-flip is what you're targeting. Can you give us some color on the proprietary pipeline that you mentioned? Like, where are you guys sourcing loans from? And what are you paying for them?

And then on the 2 securitizations you expect to complete, can you say which types of loans you expect to finance there?

So on the first question, on business purpose loans, yes, we're focused on the fix-and-flip strategy. We like the short duration of these assets and the pickup on HPA for the contractors to convert these loans -- to pay off our loans at maturity.

There have been a number of originators in the market that were supported by market participants that no longer was funding their strategies because of the COVID stress on their balance sheets and liquidity. In that time period, we were able to foster relationships with these counterparties as originators that needed funding programs and new funding programs. So we were able to carve either flow agreements or bulk purchases with these organizations. And the market did kind of reset at that time as well, with lower LTVs and better experienced contractors that would be funded.

So we saw an excellent opportunity to move in there and pick up market share where, before, it was a well-banked market, plenty of liquidity and lots of demand and originators at that time really had a hard time feeding the demand that was there. So as that fell off, it created a nice gap for us to move in and pick up loans over the course of 2020 at attractive levels.

You mentioned on costs. This is a -- for new fundings, new loan originations, it's a par market. The coupon or the servicing fees is mainly stripped off and paid over the life of the loan to align the duration of that loan with the investor, us. So they typically are kind of par execution for new loan originations.

Helpful color. How about the securitizations that you guys plan on doing? I think you mentioned 2 deals, 1 that you expect to complete before the end of the quarter.

We have about $0.5 billion circled for securitizations, and that's growing. We had a very active first 2 months of the year, as I described earlier. And we are evaluating both rated securitization and unrated in the RPL space and a securitization related to our BPL strategy as well. The BPL securitization will be quite a little bit different than what's done in the RPL space, as it's a shorter duration loan and having to be able to recycle the cash in the securitization would be a nice feature to add. And those are the types of things we're working on at the moment.

Got it. And then a couple more. Can you discuss the maturity schedule of the commercial loans? And then on the Scratch & Dent, are those loans delinquent and subperforming? Or have they been disqualified from the agency channel for some other reason?

The commercial loans, which were all multifamily loan originations, mezzanine or pref originations, those are typically structured -- the structure is 10 years. And in the case of Scratch & Dent, we are buying what we think are technically -- loans that were technically dropped off of origination warehouse facilities because of some technical event. That could be related to a notice period that the borrower was supposed to receive on their current coupon, if it would have changed, and items like that. We typically do not fund loans that fall out because of heightened consumer risk or because of a valuation change on the asset itself. So we're focused on more of the nuanced origination criteria that the GSEs require and fallouts related to that.

And just further, to Scratch & Dent, they're generally performing. They're almost all performing when we buy them.

(inaudible) performing loans within a year of origination, and it's really a function of timing between when it was originated, when the Scratch & Dent item was noted and the financing facility to hold that loan under an agency delivery.

Got it. So more documentation-related issues, not related to delinquency.

Your next question comes from Christopher Nolan, with Ladenburg Thalmann.

On the dividend for 2021, given that you're a mortgage REIT, shouldn't we assume that the dividend payout will go out? Go up, I should say?

We continue to generate a large part of our earnings from unrealized, which obviously is not required distributable income. We will monitor our dividend. And as we drive the portfolio size up and look at the, what we would consider, [recurring] revenue stream, that's really what will dictate the dividend pay rate. So that's really what will dictate. We don't really comment about what we're going to do to the dividend going forward in the future in absolute terms.

Okay. And then I didn't see it in the deck, but how much dry powder, balance sheet dry powder, do you think you have now?

There's roughly $300 million of cash on our balance sheet as of -- and I'm speaking as of Q4. We have vast amounts of activity that's happened in the first 2 months that I won't comment on directly. But as of the end of the fourth quarter, roughly $293 million.

We just spoke about a securitization of upwards of about $500 million. That would free up some cash there. Most of those assets are unencumbered. I mentioned we have over $1 billion of unencumbered loans and assets on our balance sheet.

So when you think about dry power, the way we think about it is our unrestricted cash and financing arrangements that we believe are prudent to execute that go with our liquidity plan as a company. So we see upwards of over $1 billion of kind of that dry powder to execute into portfolios.

Great. And then a follow-up on Eric's question on the BPL loans. Are those loans made to the originators? Or are they sort of selling off their loan production to you guys?

So the originators are an originate-to-distribute kind of model. We're funding the loans that they're originating directly for contractors in local markets that are either flipping houses or buying up portfolios for rental purposes, which is a trend that we see increasing. So it would be for both those purposes.

We're buying closed loans.

I cover a fix-and-flip originator in my coverage. And the yields on those loans are closer to 12%, plus around 4% of fees and so forth. And you're getting an average coupon roughly 6%, 7% or so?

The market is -- there's a couple of ways fix-and-flip loan originate and a couple of different paths. Without going into very specific levels on what you're seeing at the 12% range, we can certainly structure a loan at a 15% coupon, and it would be more risk and higher risk of default.

One of the things that we do to manage the risk on fix-and-flip is to focus on the amount of work that is required to actually go through the transitional plan for that contractor. And in that area, we're focused on loans that are generally about 10% to 15% type of cost add to the purchase price to then transition into a sale or to a rental. We don't want to take a lot of construction risk in this space, given the timelines that we've established for the opportunity.

Now if the fix-and-flip market is not a market that you want to -? that would be [bang] into perpetuity, but there are definitely pockets in the market where it makes sense to look at these 12-month type of bridge loan arrangements, and we're currently there.

So for that reason, we're very cognizant of the potential extension risk due to construction. Construction, as we all know, we've all had experiences where it actually takes a little longer than suggested. And on top of that, the cost of labor and other related materials with houses has gone up quite a bit in the last year. So for those reasons, we kind of try to keep it tight to a quick turnaround with operators that have vast amounts of experience in these markets. And also we also constrain ourselves to certain markets where we see that migration of demand helping to foster the execution.

So there's a variety of fix-and-flip loans you can [carve] in the market, and we're focused on a shorter duration part of that market.

Final question. On the fix-and-flip, what sort of return does a contractor have to generate with your loan in order to make breakeven?

So there's 2 types of loans or 2 types of business plans that we lend to: one is a turnaround flip of the house; the other is more of a cap rate model where it's a rental play. And at times, that changes over the course of the loan, where the rental play becomes more formidable given cap rate compression and ability to sell a rented house in a market with vast amounts of quantity of cash that is looking to acquire portfolios of rentals in certain markets.

So these contractors are feeding both sides and also feeding the fact that there's a lull of housing construction in these markets, where this is a new upgraded product that's there that would be typically sold to a new housing buyer.

So when we look at both, the return that we're focused on for the contractor is a bit different depending on the business plan. But depending on which market you're looking at, you can see cap rates in the 5% area. And also, as it relates to the flip, they're definitely looking at teens return of opportunities. And again, if it's a flip, that is more of a just bought cheap and more of a superficial type of improvement.

Our focus is really on what the value of the home is, what the potential opportunity for that sale is, more so than the contractor's earnings. We're aligned with them in the fact that we only fund low-LTV loans with real cash contribution. We don't focus on refinance of fix-and-flip loans. These are purchase loans, for the most part, only. And in that area, our alignment comes from that perspective, the cash that they have into the particular house.

(Operator Instructions) Your next question comes from Jason Stewart, with JonesTrading.

Steve, if we could just go back to your comments on mid-teens ROE, should we think about that split between net income spread or net spread as we do in the multifamily as 2/3, 1/3? And I want to leave the legacy investments out and sort of think about it on a go-forward basis.

So the 2/3, 1/3 is asset allocation, right? And really, that's because we're putting a lot of -- we're putting more leverage, not a lot, on the residential side securitization. The majority of our multifamily assets today are mezzanine loans that we don't put financing on or secured financing on to date. So that asset balance will be a little different than the equity balance.

But as we build out our pipeline, certainly, our target return on anything that we're putting on the books is between 10% and 12%. And so when we look at those returns, it's a balance of -- in the residential side, it's a combination of the asset with leverage. On the multifamily side, it's generally the coupon on the loan and the opportunities on how long we think that loan is going to be outstanding and what other kinds of upside incentives we have on those particular lending models.

I think it's important to note that in the single-family strategy, particularly the assets we're looking to leverage in the RPL strategy, we're buying these loans, obviously, at a discount. They are loans that have been paying for a few months or have been delinquent for a few months, and our goal is to accrete those loans up.

So the first cycle of return in that opportunity is the accretion value we get, the benefit we get from the borrowers becoming consistent payers, which obviously has been a strategy, a focus where we've had 46% of the borrowers that when we purchased them were current. And as of 12/31, our borrowers were 62% current.

The value increase we receive from there from [90-94] is that first set of return opportunity. Once the borrower goes to a current status, there's a Phase 2, which is what we spoke of just earlier. The Phase 2 is taking those loans to a rated securitization market. And when we do that, we believe that the securitization equity returns are 15%-plus on our portfolio.

So we have basically book value accretion in the first stage and then more of a carry, excess cash flow stream on the NIM play on the RPL securitization, just to be clear. Multifamily, just to be clear, is an unlevered strategy with respect to our direct originations.

Okay. So the strategy -- asset aside, leverage aside, is there a minimum cash-on-cash return hurdle? Or is it because the duration is so short that you look at this as a total return play and there's no minimum cash-on-cash hurdle?

We don't focus on a particular IRR target for any portfolio. It's all risk-adjusted, obviously. We will look at assets that have a carry of less than 10%, but have a total growth opportunity greater than 10%. That is the RPL strategy. And there's other asset classes, such as multifamily, where it's unlevered double-digit type of return. And that is more of a coupon cash flow stream play. So it depends on which strategy you're referring to, but we look at both.

And we do have -- there was questions earlier about recovery from the March declines. Part of our book value growth also, which we've had consistently over the last few years, is a function of the fact that we buy assets at a discount and accrete those assets through time. So our expectation is that we will continue having book value increases due to the fact that we're buying these assets at discounts and using an operational strategy to extract value of those assets.

And I am showing no further questions at this time. I would now like to turn the conference back to Steve Mumma, Chairman and CEO.

Thank you, Operator. And thank you, everyone, for being on the call today. We look forward to discussing our first quarter as we continue to build the company and the portfolio.

Have a good day. Thanks, everyone.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.