iStar Inc (STAR) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to iStar Financial's first-quarter 2009 earnings conference call. (Operator Instructions). As a reminder, today's conference call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to iStar Financial's Senior Vice President of Investor Relations and Marketing, Mr. Andrew Backman. Please go ahead, sir.

Thank you, John, and good morning, everyone. Thank you for joining us today to review iStar Financial's first-quarter earnings report.

With me today are Jay Sugarman, Chairman and Chief Executive Officer; Jay Nydick, our President, and Jim Burns, our Chief Financial Officer.

This morning's call is being webcast on our website at istarfinancial.com in the Investor Relations section. There will be a replay of the call beginning at 12:30 PM Eastern time today. The dial-in for the replay is 1-800-475-6701 with the confirmation code of 996727.

Before I turn the call over to Jay, I would like to remind everyone that statements in this earnings call which are not historical facts may be deemed forward-looking statements. Factors that cause actual results to differ materially from iStar Financial's expectations are detailed in our SEC reports.

Finally, as we are currently engaged in a series of private exchange offers and cash tender offer for our debt securities, we will not be able to discuss these transactions on this call. These offers currently expire on May 6, after which we would expect to announce the final results unless we extend or terminate any of the offers.

Now let me turn the call over to Jay. Jay?

Thanks, Andy. Welcome, everyone. The first quarter marked another difficult quarter for iStar and for the overall commercial real estate industry. While the market appeared to hold up relatively well through much of 2008, a sharp reduction in commercial real estate values is now taking place in almost all sectors as credit availability has remained at very low levels and fundamentals have weakened materially. Hoped-for policy initiatives have been delayed and remain somewhat murky at this point, so we are battening down the hatches and trying to create an operating runway that can carry us out through 2010 and beyond as we deal with the reality of weak asset values and continued liability maturities.

Our goal in the first quarter was to make sure we provided for projected capital needs through 2009 even in a downside scenario, and as we announced in March, we were successful in putting in place a new secured bank line that gives us more flexibility in managing down our asset base and helps us meet our obligations through the end of this year. This was an important step, and we appreciated the constructive approach our bank group took in working with us to accomplish it.

Let me move on to first-quarter results. Unfortunately earnings in the first quarter reflected this increasingly harsh environment. First-quarter adjusted earnings were negative $0.61 per share, driven negative by continued high loss provisions on the loan portfolio and lost income from the high level of nonperforming loans. That was offset somewhat by continued reductions of outstanding debt at discounts to face.

As we have said in the past, slower resolution of non-earning assets continues to be a problem, and one of the drivers of the bank transaction was to give us more runway to accomplish sales and resolutions at the appropriate time and price. And while repays and asset monetizations tracked reasonably well in the first quarter, we see increased signs of stress coming from our borrowers as we look out over the next three quarters. Both financing and asset sale levels in the industry are down and show no real signs of a quick recovery. And while I think most in the industry hope we will see some form of bottom reached in the coming quarters, almost everyone I talked to is making plans based on the assumption no recovery is imminent and we are trying to do the same.

With that in mind, we recently proposed the bond exchange Andy mentioned that partially recaps our liability structure, and we hope to create more flexibility to deal with tough market conditions for an extended period of time. We are still in the middle of that process and cannot share much info on it, but the goal of the bond exchange is consistent with our worsened view of the recovery time in the real estate markets.

Lastly, we continue to focus on shrinking our asset base, liabilities and share count as best we can. As you might imagine, there are a lot of needs on the liquidity fronts, particularly while we still have significant unfunded commitments to fulfill. So that process will be methodical and tempered by the many constraints on what we think we can do. But we do hope to end this year with progress having been made on reducing the Company's size and leverage. With that quick overview, let me turn it over to Jim. Jim?

Thanks, Jay, and good morning to everyone. Before diving into our usual review of quarterly earnings, I would like to first provide a quick recap on a couple of capital markets initiatives that we touched on during our last call and that we subsequently announced and that Jay just mentioned.

On March 13 we closed the restructuring of some of our credit facilities that resulted in a new $1 billion delayed draw secured term loan, as well as our securing $2.6 billion of our then existing $3.4 billion of unsecured credit facilities. As part of this transaction, we also modified some of the covenants in order to provide the Company with additional operating flexibility. In addition to the bank transaction, we are currently offering to exchange a portion of our existing unsecured bonds for two new series of secured bonds that would have a second-lien on the same collateral as the secured bank group. As Andy and Jay mentioned, because the exchange offers are ongoing private securities offerings, we are not able to discuss the transaction on this call. As mentioned, the exchange offers currently expire on May 6, and we would expect to announce the final results of the exchange offers unless we extend or terminate them.

Okay. Let me run through the results for the quarter. Adjusted earnings for the quarter were a loss of $64 million or $0.61 per common share. These results included $164 million of gains associated with the retirement of $286 million of debt at a discount, as well as $11.6 million of gains from the sale of two corporate tenant lease assets. Also included in the quarter are $258 million of additional loan loss provisions versus $252 million from the prior quarter. During this quarter we recorded $25 million of impairments relating to OREOs, assets in our corporate loan and debt portfolio and other investments, and I will discuss this in some more detail shortly.

Revenues for the first quarter were $268 million versus $412 million for the first quarter of 2008. The year-over-year decrease is primarily due to a reduction of interest income as a result of an increase in nonperforming loans and lower interest rates, as well as a reduction in other income. Net investment income for the quarter was $252 million versus $177 million for the first quarter of 2008. The significant year-over-year increase was primarily due to gains recognized in the quarter associated with the early extinguishment of debt I have already mentioned, offset by lower interest income resulting from an increase in our NPLs.

At the end of the first quarter, our leverage, defined as book debt net of unrestricted cash divided by the sum of book equity, accumulated depreciation and loan loss reserves, was 2.9 times, down from 3.1 times at the end of the fourth quarter. We expect to continue to delever the balance sheet during the remainder of 2009 through various efforts, including loan repayments and asset sales, NPL and OREO resolutions, debt maturities and repurchases and reduction of debt expected from our announced bond exchange.

During the first quarter, we funded a total of $391 million under pre-existing commitments. We received $736 million in gross principle from repayments and loan sales versus $730 million received the last quarter. We also generated $106 million of net proceeds from CTL and OREO sales. Based on principal repayments and asset sales associated with the Fremont portfolio in the first quarter, the A-participation interest was reduced by $284 million. The principle balance of the A-participation interest at the end of the first quarter was $1.0 billion, down from $1.3 billion last quarter and $2.4 billion at the end of the first quarter last year. As you know, 70% of all proceeds from principal repayments and asset sales associated with the Fremont portfolio go to reduce the A-participation until it is paid off. After that, iStar will retain 100% of all proceeds received.

Our remaining unfunded commitments were $1.9 billion at the end of the first quarter, of which we expect to fund $1.5 billion. Approximately 20% relate to the Fremont portfolio.

Okay. Let me turn to the portfolio and credit quality. At the end of the first quarter, our total portfolio on a managed asset basis with $16.3 billion. This was comprised of $12.3 billion of loans and other lending investments, $3.6 billion of diverse corporate tenant lease assets, $234 million of OREO assets, as well as $170 million of other investments. 92% of our portfolio is first mortgages, senior loans and corporate tenant lease assets. As a reminder, managed asset values represent iStar's book value, gross of any reserves, plus the A-participation interest in the Fremont assets.

On a managed basis, the loan portfolio is comprised of $8.6 billion of iStar loans and $3.7 billion of Fremont loans with the average loan to value of 78% for the total portfolio at the end of the quarter. At the end of the quarter, our total condo exposure was $4.8 billion. Completed condo construction assets represented $1.5 billion, while in-progress condo construction represented $2.7 billion. Completed condo conversion assets and in-progress condo conversion assets each represented approximately $300 million. Our total land loan portfolio represented approximately $2.6 billion at the end of the quarter.

Let's take a look at the NPLs. At the end of the first quarter, 76 assets representing $3.9 billion or 33% of managed loan value were NPLs. This compares to 68 assets representing $3.5 billion or 28% of managed loan value last quarter. We continue to expect the Company's total NPLs to increase as we continue through this very difficult credit cycle. We believe that many of our borrowers will continue to have difficulty refinancing and selling their projects in order to repay us in a timely manner.

Let me begin with a discussion of the iStar legacy NPLs. Approximately $2.4 billion or 60% of the Company's NPLs are iStar legacy loans. In aggregate, the iStar NPLs consisted of 33 loans ranging in size from $3 million to approximately $250 million. 93% of iStar's NPLs are first mortgages or senior loans, and 7% are mezzanine or junior loans. As we have mentioned before, we believe that being in the senior position gives us more control and the ability to recover maximum principal during the workout process.

The breakdown of the iStar legacy NPLs is as follows. 55% are related to land; 25% are related to condo. Of the remaining loans, 9% are classified as entertainment leisure, 5% are hotel, 5% are mixed use, and the balance is made up of a small retail loan and a small corporate loan. Geographically 18% of the iStar legacy NPLs are located in Florida, 16% are in New York, 14% in Washington DC, 13% in California, 10% in Phoenix, 9% in Las Vegas, and the remaining 20% are diversified across the country.

Now let me turn to the Fremont NPLs. $1.6 billion or 40% of our total NPLs are Fremont-related. They are comprised of 43 loans ranging in size from under $1 million to $193 million, and nearly 100% of these loans are first mortgages. The largest group representing 36% are condo construction projects. Also 10% are condo conversions, and 11% are other residential. Additionally 15% are retail, 14% are related to land, 8% are mixed use, 3% are industrial, 3% are hotel. Geographically 26% of Fremont NPLs are located in Florida, 16% in California, 9% in New York City, 9% in Kansas City, 8% in Hawaii, 8% in Chicago, 6% in Phoenix, and the remaining 18% are diversified across the country.

Let me now turn to watchlist and other real estate owned assets. On the performing loan watchlist at the end of the first quarter, we had 30 assets representing $1.3 billion or 10.7% of managed loan value. This compares to 28 assets representing $1.3 billion or 10.1% of managed loan value last quarter.

As we said in the past, real estate loans often take longer to resolve than other types of financial assets. They tend to have higher recovery rates. In order to maximize recovery, it is sometimes necessary to foreclose on assets. During the first quarter, we took title to nine properties that had an aggregate gross loan value of $118 million prior to foreclosure. At the end of the first quarter, we had 16 OREO assets with a book value of $234 million. During the quarter we recorded $6.6 million of impairments on the portfolio, primarily associated with OREO sales.

At the end of the first quarter, 29 assets on our NPL list representing approximately $1.8 billion of managed asset value were in foreclosure. While the foreclosure process can take anywhere from three to 18 months, our asset management team is focused on resolving each NPL as expeditiously as possible to achieve the optimal outcome.

Let me now move on to reserves and impairments. As you know, as part of our quarterly risk rating process, we determine assets are impaired when we believe we will not be able to collect all of our principal and interest. We establish specific reserves if the underlying collateral value of the assets are below our basis in the loan.

During the first quarter, we recorded $258 million of loan loss provision, of which $238 million was specific. The level of reserves is based upon the increase in nonperforming loans, as well as our current assessment that larger reserves are needed on some assets based upon the decline in value of the underlying assets.

At the end of the quarter, our reserves totaled $1.8 billion -- our reserves totaled $1.1 billion, consisting of $939 million of asset-specific reserves and $198 million of general reserves. Our reserves represent 9.4% of total managed loans and 22% of total nonperforming loans and watchlist assets combined. At quarter end we also conducted a comprehensive review of our non-loan assets for impairment.

As a reminder, we are not able to take specific or general reserves on these assets. Based upon this review, we took $14.5 million of impairments on assets within our corporate loan and debt and other investments portfolio for the first quarter. We also impaired the remaining $4 million of goodwill associated with our AutoStar platform.

Okay. Let me review our covenants. First, we continue to be in compliance with all of our bank and bond covenants. The bank credit facilities, which we recently secured, contain various covenants of which compliance needs to be maintained. At the end of the first quarter, our tangible net worth was $2.3 billion versus the covenant requirement of $1.5 billion. Our fixed charge coverage at the end of the first quarter calculated on a trailing 12-month basis was 2.8 times versus a covenant requirement of one times, and our unencumbered assets to unsecured debt ratio was 1.3 times at the end of the quarter versus the covenant requirement of 1.2 times.

For our unsecured bonds, our fixed charge coverage at the end of the first quarter was 2.3 times versus an occurrence covenant requirement of 1.5 times. Our unencumbered assets to unsecured debt ratio was 1.3 times at the end of the quarter versus the covenant requirement of 1.2 times.

Now let's review our liquidity. At the end of the first quarter, we had approximately $1 billion of unrestricted cash and available capacity on our credit facilities. This was comprised of approximately $500 million of cash and approximately $500 million of remaining capacity on our new secured term facility. Our expected uses for the remainder of 2009 April through December include approximately $800 million of unfunded commitments and $1 billion of remaining debt maturities and other uses. This brings our estimated uses for the last three quarters of the year to approximately $1.8 billion. We expect to fund our commitments and debt maturities using our primary sources of capital, which are loan repayments, asset sales, and the incremental capital from the recently completed bank transactions. The primary purposes of the bank transaction were first to provide us additional flexibility to assess the appropriate timing and level of asset monetizations and second to bridge our funding needs in light of the continued variability we expect to see and the timing and amount of our loan repayments. We expected to have all of these liquidity sources to meet our funding and debt obligations through 2009, but the exact amount of each source will depend primarily on market conditions.

With that, let me turn it back to Jay. Jay?

Thanks, Jim. A lot of information there, but the bottom line really is there are no easy answers. And what we are trying to do is preserve and protect value the best we can. I think that is going to likely be the story for quite awhile.

Let's go ahead and open it up for questions, operator.

(Operator Instructions). Omotayo Okusanya, UBS.

Just a couple of questions. Jay, in prior quarters you used to give a little bit more detail in regards to sources and uses of cash. And this quarter at least we have an update on the sources side, opted on the user side but not as much detail on the sources side. Is that just because it has become a little bit more unclear where you are going to be getting capital from, and you are just kind of leaving it open to directly explore your different options?

Yes, I guess it is a combination of difficulty predicting far out. I think we have pretty good clarity on the near-term kind of quarter to quarter. But you may remember predicting things a year or so out has been a fool's game, and we have not been very good at it.

I think what we have seen is an ability to kind of switch among different sources of capital whether it be sales of credit tenant leases or loan monetizations or actual loan repayments. A lot of those things are just blurring together right now. Borrowers are making partial paydowns instead of full paydowns. We are giving partial extensions. So unfortunately giving you hard numbers on each of the various categories is difficult, and frankly I am not sure it is a great exercise.

We know what we have to achieve on the uses side. We know we have the multiple sources of capital to do that, and so what I think we are trying to do is tell you what we have got to do to tell you that we think we have all the levers to do it but rather than give very specific projections that right now I have got to tell you I would not believe anyway.

Okay. And then with the new line of credit, with the whole private exchange offering, it changes some of the covenants a little bit if you do go through with the private exchange offering. How should I be thinking about, if all that gets done, the amount of unencumbered assets just to have on the books and the amount of those unencumbered assets you can encumber such that you are still in compliance with your covenants?

One of the things about both the bond exchange, as well as the fact that we have been buying back some of our debts at a discount, as well as actually delevering the balance sheet each time we pay down more debt, and the combination of all three of those factors actually increases the ratio of unencumbered assets to unsecured debt. While both the amount of unencumbered assets and the amount of unsecured debt is shrinking, again really the primary driver is just the balance sheet delevers, and that is really just an unencumbered leverage ratio. The leverage actually improves. So it depends a little bit on the outcome of some of these transactions, as well as the speed or the rate at which the balance sheet shrinks.

So there are two real constraints on us. One is obviously the UAUD test at 1.2. There is also a constraint inside our new bank deal of how much incremental assets we can encumber, and that is $750 million. So those are the two constraints within which we can do anything that still works.

But is there -- do you have a sense of what you think could work within those constraints?

If you are taking a dollar of unsecured debt out of the system, basically you are freeing up $1.20 at a minimum and today $1.30 of unencumbered assets. So mathematically there are plenty of things we can do. If we were to take $1 billion of assets and encumber them, we would have to eliminate approximately $800 million of unsecured debt.

So given that, as Jim said, some of the debt is trading at a discount and given that we still have some room and flexibility under UAUD and we are at 1.3 times and we need to maintain 1.2, there is still an ability to encumber some level of debt. Although I will tell you the banks are quite focused on that, and they have given us a constraint on an overall number which we can do that.

And that is the $70 million, $75 million number?

$750 million, right.

I am sorry, $750 million. All right. Thank you very much.

Jim Shanahan, Wachovia Securities.

I had a question here about non-performers and LTVs. How do the average last dollar LTVs for NPLs and watchlist assets compare to the overall reported metrics, and relatedly how are you able to get comfortable with current LTVs in these volatile markets?

Well, let me tell you the process we use to tell you that I am comfortable with then kind of goes back to my overall comments about what is happening to real estate values. Every one of those assets is revalued as a function of all the current market environments that we see out there. Discount rates, cap rates, all the factors that a typical net present value depending on the product type would take into account. So free rent concessions, ultimate market rents achieved. We do that every time we do an NPL, and that is where the specific reserves come from.

Some NPLs actually have access value in them. It is really more a matter of who is going to own the upside of the asset. So if a borrower is not willing to negotiate with us and we think there is going to be a fight, that can go on NPL even though there is sufficient value to protect us.

So I would tell you the overall NPL LTV is probably in the mid-90s. That is a function of many of the deals being at 100% and a few deals being under 100% because we are just fighting about who owns the upside. I think in watchlist it is better than that, but we clearly see dimunition of value events that could impact our position, or we see a borrower who is destroying value as opposed to preserving value, and so we are projecting out a problem. That is probably in the high 80s. That is not a comfortable place, but in stabilized markets those should be okay. Unfortunately we are not looking yet at a market that is stabilized.

So I think the measures we use are, if we were a buyer, using the input and metrics that we see in the market today, how do we value those assets? We have confidence that we have chosen the appropriate inputs, but whether the scenarios that we are choosing are the ones that come true, clearly in the last 12 months they have been worse than we had hoped. I think we are probably going to reach a bottom at some point in 2009. Value reductions are beginning to crystallize across the board, and I think our expectations are based on that kind of crystallization. But right now we just give you the best number we can based on what we would say even going back two or three quarters ago really had a fairly negative view of the world.

Thanks for that. I would like to ask one additional follow-up question if it is okay. You can probably answer this question certainly better than I can. But I am speculating here that there is a fair amount of time and distraction involved with managing all of the public company relationships on the equity side and kind of getting into the question of, have any strategic alternatives been considered here, like potentially a going-private type transaction as well for the next three, four or five quarters you continue to kind of work through all of these nonperformers? It seemed like there could be some nice upside for equity investors from the current dollar price and a lot of value to be achieved from management and maybe a strategic investor. Maybe iStar comes out of this cycle a few quarters from now a much stronger company and maybe in a better position to raise capital, debt and equity capital in the public markets versus today where you are either issuing secure debt or maybe buying back stock. You are certainly not an issuer of capital in these markets. So just sort of some commentaries, Jay, if you don't mind about what you might be thinking strategically and if any of these might be a realistic option?

Well, I think you partially answered it with some of your comments, which is we right now are a buyer of our securities, not a seller. We believe existing shareholders have a lot of upside. We are trying to protect that and preserve it the best we can in a market that continues to shift beneath our feet. I think if the right strategic investor ever approached us, we would look at the expected value of that course of action versus what we think we can achieve on our own. I don't think any of the pressures of being a public company is driving our decision right now. We know what our job is every day, and we are trying to execute it, and I think so far we have been able to protect book value for shareholders reasonably well. Ultimately we think that value will be recognized, but it is a long slow slog here. We thought perhaps there would be some green shoots appearing, and I can talk about some of the things we see that are positives and some of the things we see that are negative. But right now we have got our heads down, and we are just doing what we think is best, and I don't think there is really any big strategic course of action that we are considering.

Are there any issues with regards to retention of talent, or is the market for talent in commercial real estate, is it poor everywhere else and there really are not a lot of quality places to go in the current market?

Well, there are always places for talent to go. So we fundamentally believe this is going to be a great business for the next five to seven years. We think that opportunity set still exists at iStar, and we try to give our folks both the incentives and the understanding of why we should be one of the players who can achieve that. It also requires them to try to keep their noses down to the grindstone for awhile as well. So there is a balancing act. I would not say there is no place for talented people to go. That is probably not a true statement, but we think we still have something pretty special here. This is probably as challenged as we have ever felt as a Company, but we certainly are not giving up, and we certainly think some of that upside is still out there for all of us to benefit from.

Tim Wengerd, Deutsche Bank.

I was wondering if you could talk about the loan sales this quarter and where you saw them as a percent of sales and what types of loans were sold?

I think it is a combination of things. We are reaching a point where either because of low coupons or relatively near-term payoffs we sold just to accelerate some of the cash flow. Those are probably done in the 90s and even higher, and then there were some actual assets that we had credit concerns about, and those were probably done in the 80s. You know even touching probably in the 70s for a couple of them.

So I think in many cases we felt pretty good about the underlying credit quality, and just so for economic reasons, we thought we could take that money and redeploy it at higher rates of return. But there were real credit issues in some of these as well that we sold.

Great. I was wondering if you had any thoughts on the Fremont AB and just sort of when you might expect to complete repaying that?

Yes, I think going back to Omotayo's question, we are having an increasing variability in repayments. And so I think we were hopeful that the first quarter would kind of see the tail end of the Fremont A note. I would push that out a quarter or two. It is still possible that it might move in from there, but right now given it feels like the market still has not quite reached bottom and we are seeing a lot of borrowers acting like they are going to need an extra six months or so for sure. That tells us that it is better to err on the side of saying probably mid-2010 late second quarter, mid-third quarter than to tell you the first quarter still feels good.

Now the good news about that is that paper obviously at LIBOR plus 150 still remains a very attractive liability. And so the actual extending of 7% or 8% loan when 70% of its cost is effectively 2%, 2.5% is okay by us.

And on expected uses of cash, I think it was mentioned at $800 million. Is that fairly lumpy, or is it spread out through the year?

The declining --?

Expected uses for the remainder of the year.

The forward commitments are continuing to decline from today's kind of monthly number. Every following month is a little bit lower. So those we feel like we have a pretty good handle on how they are going out the door. The debt maturities obviously are scheduled. So we have a pretty good handle on exactly when and exactly what is going out the door, a little less confidence in what is coming in. And again, as Jim said, it is a combination of the safety net of the bank line plus the repays and the assets sales we are working on.

Matt Burnell, Wachovia Securities.

Just an administrative question. The remaining purchase discounts on the Fremont portfolio, am I correct in asserting that that was essentially used up this quarter?

Yes. It is pretty low. It is down to around $30 million.

Okay. And then an unrelated question, in terms of the geographic performance of the portfolio, we are hearing sort of I guess green shoot arguments for the residential mortgage markets and some markets in California, beginnings of some green shoots I guess in Florida. Is that having any beneficial effect on the commercial real estate markets, or is that yet to follow through?

I would say in the commercial market there are not many green shoots per se, but the required corrective mechanisms are slowly taking shape. And we have said low interest rates generally help heal real estate. Obviously the Fed has put those in place, and the longer they stay in place, the more quickly this market can recover.

We were pleased to see that there is some capital market access for some of the top names in the business. We think you need to have some healthy folks who have incremental capital to clean up some of the issues. We have not had that in this industry for the last six to 12 months. We are happy to see that some of the bigger players are being able to access capital right now probably more defensively but hopefully going forward a little more offensively. We think that is good for the industry.

As you mentioned, the affordability of housing, low interest rates, lower prices and cheaper construction costs, all are a pretty good mix for some healing in that market. We are just waiting for consumer sentiments to pick up because we think the affordability indices in California and Florida and Phoenix and other markets are starting to look fairly good on a historical basis. And over arching all of that is obviously there is going to be relatively little new construction for quite awhile.

So our old basic supply/demand charge all are starting to look pretty good. If you think that if you don't start permitting today, you are not getting out of the ground and you are not getting financing for a couple of years. We do think the commercial real estate markets can work off some of the problems, but offsetting that is values have fallen pretty materially. And without financing, without credit, there is just no way to turn that market around on a dime. So we continue to look and hope that some form of credit availability becomes apparent towards the second, third and fourth quarter this year. We just cannot point to it right now.

We have spent a lot of time with the Fed and Treasury over the last six months. My candid assessment is we have missed the period where an ounce of prevention was possible. We are now into the pound of cure period, and it is going to take a lot of cure to really turn around values and undo some of the damage that has been done.

So I think the green shoots in residential are a positive. Parts of our book will definitely benefit from that. But I would tell you our sentiment on overall commercial real estate still has a way to go before we think the real bottom has formed.

Joseph Schatz, Goldman Sachs.

It is actually Louise Pitt here from Goldman. I just wanted to ask one question on the $286 million of debt buyback. Can you give us any more of a breakdown on what that parcel was by maturity?

It has really been across the curve. So we have looked for where we think our securities have been undervalued where there has been liquidity. I would say it is pretty evenly spread out.

Okay. Great. And then just a follow-up. In terms of the guidance on NPL resolutions and asset repayments, I know that they mentioned earlier that it was difficult to predict. But is there anything you can give us on that?

I think as we said, Jay kind of pointed out there is some blurring here in terms of, we are trying to as things come due or with things that are in default, the way we are resolving them and the way that we are creating liquidity is to either get somebody to pay us back. In some cases we will need to foreclose and sell assets. But in other cases, we can get partial paydowns. There are things that we can do to restructure assets. So we are looking at that as being kind of fungible across those options, and it is a little bit difficult to predict the exact mix that we will actually realize.

John, we have time for one more question, please.

David Fick, Stifel Nicolaus.

It is actually Josh Barber here with Dave. Jay, in light of your comments on the residential market and weakness in construction, could you talk a little bit more about your land exposure? Specifically what kind of values you are seeing on any possible NPL resolutions or sales and what the eventual endgame is with a lot of that product?

Yes, I hate to generalize again. I think there is a very large proportion of that portfolio that is well located with strong sponsors that just the market has kind of gotten ahead of them or really diminished value in the near term. But there is long-term value. And so I think many of those positions we are kind of anticipating holding for quite a while and probably will not try to resolve in this kind of market environment.

We have been able to sell a few things at prices that were reasonable either to adjoining property owners or in places where commercial or residential development is starting to feel like it is a possibility. But I have got to tell you that is probably the part of the portfolio we push least hard on because we think we are pushing against the stream a little bit. As the residential market picks up, certainly some of the stuff we have in California is a low enough basis that we should be able to make some progress. But I would tell you like the projects we have in New York City proper are not going to get built for quite awhile.

So our view is some of these are going to be long term holds. We like the real estate. We certainly like the position. In most cases we think since we put up 30%, 40%, 50% of the original buyer's costs that we have a reasonable basis. But I will tell you some of these markets I am not sure there is a bit.

So we have broken that portfolio down into things we can resolve, things we think there are natural buyers for that there is a fair price. We will certainly consider JVing with some of the top builders in individual markets or some of the top national builders. We certainly have the ability to land bank or provide seller financing. And then there are a few positions we are just going to land bank ourselves because we think they have real value. We are pretty sure we are not going to be paid for that value today, and it probably makes more sense from a portfolio strategy to keep the best pieces and ultimately wait until the markets come back a little bit.

Thank you. Jay, that is all we have, all the questions we have for today. So I want to thank everybody for joining us this morning. If you should have any additional questions on today's earnings call, please feel free to contact me directly in New York, and John, would you please give the conference call replay instructions once again, thank you.

Certainly. Ladies and gentlemen, the conference replay starts today at 12:30 PM Eastern and will last until May 14 at midnight. You may access the replay at any time by dialing 800-475-6701 and entering the access code 996727.

That does conclude your conference for today. Thank you for your participation. You may now disconnect.