Starwood Property Trust Inc (STWD) 2010 Q2 法說會逐字稿

Greetings, and welcome to the Starwood Property Trust second-quarter 2010 earnings conference call. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Andrew Sossen, General Counsel for Starwood Property Trust. Thank you, Mr. Sossen. You may begin.

Thank you very much. Good morning, everyone, and welcome the Starwood Property Trust's conference call for the second quarter of 2010. Yesterday we released our financial results for the quarter ended June 30 and filed our Form 10-Q with the Securities and Exchange Commission. These documents are available in the investor relations section of our website at www.StarwoodPropertyTrust.com.

Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and certainties that could cause actual results to differ materially from those described in the forward-looking statements.

I refer you to the company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.

The company undertakes the duty to update any forward-looking statement that may be made during the course of this call.

Additionally, certain non-GAAP financial measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute for 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 www.SEC.gov.

With that, I'm now going to turn the call over to Jerry Silvey.

Good morning everyone. I am Jerry Silvey, the Interim Principal Financial Officer for Starwood Property Trust. I have been the CFO at Starwood Capital for 17 years and look forward to filling the interim reporting role for Starwood Property Trust as we search for a permanent CFO.

This morning I will be reviewing Starwood Property Trust's second-quarter 2010 results and investment activities. Afterwards Barry Sternlicht, Starwood's CEO, will discuss the current market conditions and our views on the current environment and recent events.

Also joining us on the call today are Leo Huang, Starwood's Head of Investments; and Andrew Sossen, who you've just met, and General Counsel.

For the second quarter ended June 30, 2010, we reported core earnings of $12.5 million or $0.26 per share, and $0.11 or a 73% sequential increase over first quarter 2010.

On a GAAP basis we reported net income of $10.8 million or $0.22 per share -- per diluted share.

We are very pleased with these results. We are right on plan, having invested all the proceeds from our IPO and are creating additional liquidity by leveraging our assets in deploying these proceeds into new investments to boost our yields into the double-digit range.

Our net interest margin for the second quarter was $18 million, up from $12.4 million in the first quarter, representing a 45% increase.

The net interest margin on our existing portfolio as of today for a full quarter is approximately $23 million. This quarterly run rate reflects a full quarter's contributions from both the $177 million of investments completed in the second quarter, the majority of which were completed in late May, and the additional $197 million of capital deployed to date in the third quarter.

As you think about our quarterly earnings, please keep a few things in mind.

First, one of the loans we completed in this quarter in the amount of $69 million is expected to fund over a 12-month period, and this run rate ignores repayments on our portfolio and any incremental investments made during this next quarter. It is simply a snapshot of our net interest margin generated as of today from the existing portfolio for a full quarter.

As Barry has previously stated, we do not intend to distribute more than our core earnings each quarter. Last quarter we had announced a dividend of 25% -- $0.25 per share and achieved core earnings of $0.26 per share.

The current run rate of the portfolio, the investment pace of this summer, and our pipeline gives us the visibility and confidence to conservatively declare a $0.33 dividend for the third quarter, which will be paid in October. This is an increase of $0.08 or 32% over the prior quarter's dividend and represents a 7.3% dividend yield on yesterday's closing share price.

Two other points of interest on the income statement --

G&A of $1.66 million for the quarter is down 6.5% from the first quarter, as we continue to focus on tight control of these expenditures while recognizing the cost pressure derived from the increased size of the portfolio and the need to actively pursue opportunities.

The second point, during the second quarter we completed our first loan denominated in a currency other than the US dollar. We paid 72 million for a B-note secured by four resorts in the United Kingdom. This B-note was purchased at a discount to face and is denominated in pounds sterling.

We utilized forward -- exchange forwards to hedge the face amount and a significant portion of the interest payment stream. However, from an accounting perspective, when converting the carrying amount of the loan at spot and valuing the full hedge position, there is a net $300,000 unrealized loss that's reflected in the income statement. This is simply a timing difference with no impact on the ultimate profits to be received from this investment.

Shifting to the balance sheet -- GAAP book value per share was $18.46 at June 30 and $18.16 on a fully diluted basis. We estimate that the unrealized appreciation of the fair value of the portfolio's assets would add another $0.86 per share to these numbers, bringing fair market value to approximately $19.32 per share.

I will now walk through the current composition of our asset portfolio.

Including post-quarter-end investments discussed in the earnings release yesterday, we had approximately $1.3 billion invested in first mortgages, subordinated debt, and mortgage securities at a weighted average levered return of 11.3% or 11.9% for our target portfolio.

Additional leverage that is in process will of course help boost these returns.

While we are very pleased with these results, perhaps the most satisfying aspect is the safety of the portfolio and the relative risk taken to achieve these returns. We are structuring a safe portfolio which has a weighted average LTV to the underlying collateral of 65% and is diversified from both a geographic and an asset class perspective.

$636 million of our total investments are in first mortgages, which have a weighted average coupon of 8%.

$288 million of these first mortgages have been levered with $204 million of financing, which has a 72% advance rate and a fixed-rate cost of debt of 4.16%. This results in an 11.7% levered return.

The remaining $348 million of first mortgages are currently unlevered, have an 8.2% coupon, and generate a return of 11.2%.

As a point of clarification, the coupon is measured as cash return on face value, whereas the overall return on the loan will also reflect entry and exit fees and accretion of any purchase discounts.

In addition to the first mortgages, we have $320 million of our total investments in subordinated debt. A portion of this portfolio is levered, with $74 million of financing, which has a fixed-rate cost of 4.16%, resulting in an overall levered return of 12.4% on the entire subordinated portfolio.

Our CMBS investments, which are currently categorized as held to maturity, totaled $248 million. Of this amount, $202 million is our TALF related multi-asset CMBS, which has been financed with $171 million of nonrecourse debt and generates a 16.5% levered return.

The remaining portfolio -- portion of our held to maturity CMBS position is unlevered single borrower securities, which are generating a 12.5% return.

We've also been utilizing high quality, short duration RMBS and CMBS securities as a way to achieve an enhanced return on our excess cash positions, which have not yet been invested in our target portfolio. As of June 30, these securities aggregated $70 million and have been categorized as available for sale on the balance sheet, with a return of over 6%.

On the liability side, to date we've placed roughly $450 million of debt on our investments, which have been match funded to the duration of the underlying collateral.

Of note also is both underlying assets and related debt are fixed-rate, so we are match funded with respect to fixed versus floating.

As noted in our press release, we've also closed an additional financing facility in the amount of $350 million, of which $5 million has been drawn to date.

As we suggested our last call, we've also been pursuing a strategy of contributing mortgages to CMBS offerings. We view this as a very efficient and inexpensive way of financing our first mortgage positions in a nonrecourse, matched term manner. We expect to contribute loans to a securitization over the next 10 days which will result in an additional $90 million of liquidity.

Because this is a private offering under Rule 144A, we cannot comment further on this particular transaction until it closes.

In addition to this new financing facility and the $90 million of expected proceeds from the securitization, we currently have $172 million of cash and liquid securities on hand and expect to receive $74 million in scheduled loan repayments over the next four months. Therefore, we believe we have significant additional capacity to invest and are excited about the pipeline -- our pipeline of opportunities.

I would like to turn the call over to Barry to comment on market conditions and give us other thoughts.

Thanks Gary. Good morning everyone.

I would like to say that we are very happy with our performance in the company, and I tell everyone internally that this is a long road. Obviously we raised quite a bit more capital than we originally envisioned, and now that we've fully deployed all of the capital, we've done it exactly along the theme that we told investors just about a year ago when we IPO'd.

We have a safe yield, which is very rare in a world that is yield starved. I would suggest my view is that the dividend here is coming off with almost a AAA portfolio. It's high quality. It's diversified. It is a low loan TV, as Jerry suggested, 65%, and that's today's V, which is often quite a bit down from the old V's. It's stable, it's predictable, and we are basically paying a dividend out of our earnings.

And rather than have a one-time adjustment at the end of the year to pad our 95% requirement of taxable income, we are going to build our dividend slowly and consistently quarter to quarter as we now deploy capital.

The exciting part is having now invested all the cash of the IPO, now we're levering the portfolio. We'll be drawing on the Wells facility, and most of our cash actually has come from the refinancing of the Teachers portfolio, which -- and then the repayments of the one-year duration loans of the Teachers portfolio, which is roughly $100 million, which you might recall we left unlevered as a cash alternative when we bought that portfolio.

So I was looking back on my comments from the last earnings call, and I think we've met every objective, which was to invest our remaining cash, to close on our bogey, which we told our shareholders we'd like to return 8% or better on the original IPO proceeds -- pricing, not $20 a share, not the current stock price.

We are building a very different looking book than the other public companies in the sector. We each have our place in the market, but I think we've been consistent from the start and have produced exactly what we suggested.

We also mention on the last earnings call that we'd like to contribute assets to a CMBS. We have five loans going into this CMBS, and we'll talk more about it after we can. But we mentioned -- Jerry mentioned -- it will also produce about $90 million of proceeds for the REIT.

And that development is probably the most interesting and the most exciting for the company. When we IPO'd a year ago, we talked about getting -- we didn't know where we were going to get senior financing for. We could write a loan at 8%.

We were hoping we could submit it to TALF. If you remember, they were talking about doing TALF loans. And our cost of funds back then might have been 5% from the government with an 8% underlying coupon on our first.

Today I would suggest -- we believe we can originate closer to 7.00%, 7.75%. And with the securitization markets opening up and the search for yield globally, we can achieve at least as high a levered yield, and probably in excess of 11.5%, 12.0%, when we contribute the seniors to these securitizations.

And our portfolio, relatively new as we are, we are one of the few people who can contribute loans to securitizations. So we are pleased that we were able to place five of our loans into upcoming securitizations.

I think that makes us more competitive, though when you lower the cost of funds when we can originate new mortgages at 7.00% or 7.25% and still achieve 12% yields, that borrowing now is a lower cost to the -- obviously to the borrower, and so that makes us more competitive, even with the life companies.

We are often finding ourselves partnering with these institutions, including the money center banks, that don't want to take that higher risk. And with the new financial regulations, which we also commented on in the last earnings call, now that they've passed, we think there's a great place for us to write loans or partner with the banks, the commercial banks, and write these loans, maintain the residual interest, and then contribute the seniors to their securitizations.

So it's a natural partnership that could lead us to become hopefully the kind of real estate finance company we'd like to be, which is a $5 billion or $6 billion enterprise, looking out several years, and with a very diverse book and a very stable and a very attractive dividend, especially in a world that almost has no yield in it with a record two years, treasuries at 50 basis points or something like that.

In general the market is not that -- there's not that much happening. What you see is a lot of borrowers simply enjoying their low LIBOR floater loans or the low coupons, and they can't refinance at the LTV's or the proceeds to get their loans paid off.

There's a lot of discounted payoffs going on. We are trying to find those, locate those opportunities for the REIT, where we will lend against a loan or we will lend somebody money to take advantage of a discounted payoff.

A lot of the DPOs in the marketplace today are focused on land, residential sites, development sites. It's -- we've looked at many of those opportunities. So far we haven't decided -- we haven't done any of them.

There are -- I suppose we might do it if -- we have seen some urban land that has attractive prices per foot with heavy equitization. We might make such a loan. But we've resisted doing that.

One of the other issues is, we don't want to get paid off. There's no point in us making a one-year loan at 12% and then having to redeploy the capital. So we've stayed away from that kind of investment.

One of the investments I would mention, which was new to us, was the loan we made to reopen the New Orleans Hyatt. That is a renovation loan, and we -- it was a $135 million loan which we originated. And then we sold off half of the loan to a foreign bank in an effort to build a relationship with them. And since then they've shown us a couple of the projects. So we kept our exposure at $65 million. It is a renovation loan. The hotel obviously closed during Hurricane Katrina.

And it is a very exciting loan for us. Hyatt invested north of $60 million in equity subordinate to us too. And Apollo is the other owner of the property. So we are quite pleased with that investment, and the duration is good. And we believe our safety is -- of our principle is very good.

So besides borrowers that want to enjoy whatever low floaters they have today -- and many of these loans were at LIBOR plus 100 or LIBOR plus 75. We can't make those investments work in our REIT. We are not going to have a 30 point accretion, because we'd be paying out cash from phantom income and hoping the loans will actually get redone without a bankruptcy, an interruption of the cash flow.

So we are mostly focused on higher coupon current investments.

And the other problem in the market obviously is the servicers. The servicers are extending everything they can extend because they get paid to extend it. And they can extend it multiple times. And we are assuming that most of this paper is going to get extended. And the servicers like to work them out over long periods of time. It's how they get paid.

That's one reason the REIT, we bid on CWCapital. It was reported in the press. We didn't win that bid. But I thought it was an interesting transaction to build an enterprise within the company.

The company does own -- Starwood Property Trust does own an interest in Centerline, which is one of the three top servicers, and that does provide the REIT some beneficial tagalong rights and looks at opportunities to refinance portfolios.

We are trying to build the capability to have a proprietary transaction pipeline for ourselves. And so we're also looking at several other corporate transactions, three of which we have passed on. But we continue to look for opportunities to build out capability and our productivity across multiple engines of growth or multiple cylinders so that if any one of them is not functioning at one time, we can continue to grow through other means.

And those really are our origination capability, our acquisitions, using our 40-plus person acquisition staff globally to source opportunities and the JVs and partnerships we've set up around the country to originate and bring us loans.

I would say that now that we are $1.3 billion strong, we are seeing a lot of things. We are getting a lot of phone calls. We're working hard on maintaining our discipline, which I don't think you have to worry about. We have a lot of money in the company alongside our shareholders, and we do -- as I mentioned last time, we treat the shareholders' money like it's our own, because it is.

I also said we would be patient, and we have been patient. We are going to -- it looks like we are going to close on a loan which we kicked out because the borrower wouldn't give us what's called a bad boy guarantee. And eventually he capitulated, and we'll be able to now make that loan with an attractive yield, and our respondent provided an interesting -- gave us an opportunity [to buy it].

So I think, again, the big news for the quarter for us is, I'm really happy about the dividend. I'm happy we are covering it easily, I would hope, through the third quarter.

The Wells line is a momentous event for us. Some of you pre-call have asked about the spreads, or the conditions of the line. It's a three-year loan with two one-year extensions. And the coupons vary based on the collateral we submit. There will be more detail in the 8-K, so I'd suggest you look there for it.

It is exciting to get a line, and we couldn't have gotten a line when we went public. And the good news and bad news is, we have a line which will allow us to produce, we think, levered returns which meets our double-digit bogey, so we can keep raising the dividend and growing the vehicle.

We also mentioned the securitization. I think that's very exciting for us, that's -- we would have dreamed about doing that a year ago. And it doesn't make us any worse than we were at the IPO. It's just different. We have to manufacture our returns differently. And anything that reduces the cost of funds to borrow I think is a good evolution in the property markets.

I will suggest -- and at times we probably will find ourselves flexing our LTV's up and down and take advantage of equity kickers. But so far that hasn't been required. We haven't seen anything that we wanted to stretch that far.

There have been situations that we use our extensive real estate underwriting expertise to decide we might go higher in LTV, particularly if we are very comfortable with the collateral or the credit or the cash flows. But it hasn't become an issue yet. And we will let you know if -- or an opportunity yet if that happens.

The other point that I hear often, and I -- I'm not a -- we've been insiders on our own stock for a long time with all these corporate transactions going on. But it is noteworthy that the fair market book value of the stock is almost $19.50 and much closer to the IPO proceeds. So we are accreting back any offering discounts that we had from the expenses of the offering.

I think that's it. I'm going to stop there. I'm just going to look through one more section of notes. But having looked at our last earnings quarter -- or conference call notes, I'm actually struck that we have executed just about everything we mentioned we would execute in the last quarter.

So I think with that, I hope you enjoy the transparency that we've provided in the earnings release. It's a little complicated with the various instruments we've invested and what's levered and unlevered.

Jerry and Julio are available to answer questions about the portfolio that we -- are not proprietary and would injure us, our shareholders, if we provided.

And with that, I think I will open it up to questions.

(Operator Instructions). Gabe Poggi, FBR Capital Markets.

A few -- can you guys just comment on how you view this CMBS pipeline going forward, what the opportunity set is there. I know, Barry, you commented on it, but how big -- for the remainder of the year, heading into 2011, is that a significant opportunity set for you guys with having 70% of your assets in first mortgages?

The second question would be, what are you guys seeing coming out of the FDIC? Are there any opportunities out of the FDIC you see going forward to participate there?

And then broadly speaking, what do you think -- if rates are going to stay at zero for a long, long time, what do you think is the catalyst to unlock additional transaction flow going forward? How do we move the needle so that the opportunities -- that the pipeline of opportunities grows?

Let's start at the first one, the CMBS markets. I think the CMBS markets are wide open right now. There's just not enough product to fill them. And there just aren't guys refinancing the transaction volume.

A lot of buyers today are core buyers. And there there's tremendous liquidity on big deals with big -- like the Wells Fargo transaction in California, which was sold to a bunch of Korean life companies, or the deal that recently got sold to a syndicator in Chicago at a record price per foot. They are probably levering 30% to 40%. Most core buyers don't lever very much. They are just -- and so we'd probably never see that deal. That is probably a 4.5% first mortgage. It goes to a life company, and they put it under the rug and go away.

That is an interesting return when the 10-year is 2.80. It seems ridiculous, but we may be in for a period of time that -- of low rates. And personally I think we have 2 years of deflationary forces -- 2.5 years, and then I don't see any way out of this except inflation. So it is influencing our strategy of portfolio to construct, and we are going to -- we have a relatively shorter duration book because three years out we would love to get the cash back and lay it out at 12% if we can -- or 9% or 10%.

But I think it's all going to evolve. If rates stay down at these levels, I don't think a portfolio of the equality we're assembling is going to be able to produce an 8% to 10% dividend yield four years out.

Right now I think what you're waiting for, we are all waiting for, are the maturities of these CMBS securities. They are [2012]. Everyone has seen the chart. That tidal wave that was there when we went public grows and grows between 11% and then 12% and 13%.

Some CMBS securities can be extended multiple times. Most of them have a two-year maximum life extension. So I do feel -- and that's one of the reasons we are staying short -- there will be a lot of opportunities to refinance stuff. We are going to be there for I would call the risk piece, the piece of that that is above the securitization markets.

And it's pretty clear that the securitizations are not yet being very bold. They are not doing very high LTV's. And the number of V piece buyers is still very constrained. There aren't a lot of guys in the market. We've looked at some of those V pieces coming off these few securitizations there are, and we -- they are too thin for us to play in them right now. Maybe that will change, but they are also obviously first losses. So they are the first thing to go if one of the loans in the portfolio doesn't make it.

And I think -- what was the third question?

FDIC.

Oh. So at the government level they are doing almost nothing. Most of these -- I think it will change, because they are modifying the assisted deals there with -- the loss sharing guarantees are being modified. And investors are now being asked to bid the loss sharing.

To the extent the recap of the banking system continues with banks being recapped without FDIC assistance, that is good. We will see some stuff from banks as they try to clean up higher LTV loans and get rid of stuff that the regulators are frowning on.

But for the most part, you are not seeing portfolios of performing loans out of the FDIC. The last statistics I saw, 86% of what they were selling was going back to bank. And there just haven't been a lot of pools, and the few give a -- in the equity shop we've bid on few of these transactions post the Corus transaction, and we have been smoked. And one portfolio sold for what we thought was an unlevered 4 yield.

A lot of this stuff they are selling is land -- land, just tiny, non-income-producing shopping centers, very asset intensive, a very difficult way to earn a living to -- with $600,000 loan balances and bankruptcies and all kinds of stuff and really not what we've been modeling.

I am hoping we will see, particularly from offshore banks, more portfolios of loans that are higher LTV's that we can structure and maybe put out a whole bunch of capital that way. But we haven't seen a lot of that. You haven't seen a lot of performing loans.

There are also -- I'd say the biggest competition in the market is actually the hedge funds. It's not real estate players, when it comes to what I call a creative situation, because many of them enjoy very large lines they signed four or five years ago that probably have another couple of years to go. And they are at very tight spreads, like LIBOR plus 35. And if we see a piece of paper that we would acquire, we can't match that. We don't have financing that's that tight.

So the good news is that we are a real estate underwriter, and we have looked at a lot of banks, and a lot of managements have called us to help them underwrite and look at the portfolios, and hopefully one of these days we'll get a big dividend from helping somebody underwrite a bank and carve out a nice pool of loans that we can take on balance sheet -- or joint venture with the institution and let them lever their capital.

Thank you. That's helpful. Good quarter, guys.

Don Fandetti, Citigroup.

Barry, I guess there was a report that maybe BB&T was selling a portfolio. I'm not sure the quality of that or if they are performing or nonperforming. I hear you that everyone is extending, but do you -- are you starting to see some movement from the banks?

Yes. There is much more liquidity now then -- not much more, but there's -- if we were at a standstill at a 1.0, we are probably closer to a 3.5% or 4%. The banks, because they are -- the stocks have recovered, they have access to equity, and they are earning record net interest margins, they are willing to take the hit, especially if they've written stuff off.

So we are beginning -- it's not a flood, but we are seeing more stuff.

Leo, you're on the phone. What do you think?

Yes. And we're -- the REIT's I think been effective in growing its presence in the market. We are a scale entity in the space that -- of lending and one of the best in acquiring existing portfolios or originating the junior piece of a new deal. We are able to write a sizable investment ticket. And given the level of activity that we've had in the market, it has made us a go-to provider in some of those flows.

And then on the corporate transactions, anything in particular that you would be looking at? I wasn't sure if it was just servicing, or would you look at buying corporates that already have loan books? Just want to dig a little deeper.

Yes, you've -- hopefully our shareholders backed us to be creative. So we've looked at a lot of things, and whether it's public or private, there's -- it would be nice if the REIT had some shelter. And so there is some credit like areas that might be interesting for us. But in general we are not going to talk about that stuff until it's completed.

We are kicking a lot of tires. It's very busy. And I will comment on one thing. We do have Jerry sitting in as Interim CFO, and behind him is a fellow we recently hired named Jim Allen, who came from I think it was 25 years managing the real estate funds of DLJ and then -- and Credit Suisse. If I have that wrong, Jerry, you can correct me.

But we've built a pretty good back of the house capability here. We've got very good models, risk management models, as well as cash management models. And many of the transactions we've been looking at came with CFOs. So that's one reason Jerry sits were he sits, because there's no reason to hire someone and then acquire someone and then have three CFOs. So we are taking our time. We are in good shape, and we are not concerned in the slightest at the moment.

Okay, thanks.

James Shanahan, Wells Fargo Investments.

Based on your disclosures on Form 10-Q, it appears that you have the capability to finance mezzanine loans on the new facility. Is this -- would you describe this as likely or probable?

It depends. It depends what it is. We have -- I'll give you one example of how the portfolio is. The $40 million repayment, which was one of the first maturing Teachers facility, was financed with a $65 million loan by an investment bank. So -- and I think our face rate was like 7 something on it, the original coupon. It was financed much tighter and with [$20 million] more in proceeds.

So the reason I'm hesitating is, you don't know how wide a mezz is. You don't know if it goes from 30% to 65% LTV or from 65% to 95%. Part of this is, we are not going to do any Kamikaze investing. But it depends on the credit. Depends on the cash flow of the underlying instrument. So -- but at the moment, I don't think we are -- have we levered any mezzanines?

We are looking at some lower leverage seasoned mezzanine pieces that are in the market. And those could be examples of -- that we would finance under the line. But those are situations where the credit characteristics -- it's sort of incidentally a mezzanine interest. But from a credit profile, given the passage of time and amortization, it's much higher in the stack than a typical transaction.

Okay. Well, not trying to put you on the spot here, but the one-month LIBOR-based spreads are listed on the Form 10-Q with a range of 175 to 600 basis points. Can you tighten that up for us? What do you think the weighted average cost of funds might be based upon the assets you'd anticipate pledging as collateral?

Below 300. How's that?

That's terrific, thank you. One more quick follow-up question. You mentioned, Barry, that with the $74 million in scheduled loan payments and the tendency for borrowers to extend, are there any issues there? Or do you -- you would expect with high probability the $74 million repayment within four months?

Yes, I would say extremely high probability. This paper, don't forget, was almost 10 years old. So it's amortized down and is probably -- I'm not familiar with exactly the notes -- Leo would be -- but there is no problem refinancing. A refinancing opportunity on a fantastic building is -- there's a lot of people who want to do it. So I'm not worried. Leo, is -- are those --

Yes, we are extending some of these because we want to, meaning -- I will give you an example. One of our loans has an 8.39% coupon. It's coming due this summer. We extended it 30 days to allow the underlying sponsor to facilitate a refinancing. And that 8.39% coupon is going to a sub 5% rate with a life company. So we view that as an attractive extension.

But I think the quality of the assets that are in the Teachers portfolio is quite high. It's -- there's also a number of those refinancing at very low coupons, but we are not worried about the ability to be repaid from those assets from a credit perspective or a liquidity perspective.

Thank you.

(Operator Instructions). Joshua Barber, Stifel Nicolaus.

I know that you guys made an additional investment into the Center Parcs B-note this quarter. There's been rumors in the last few months that Blackstone is going to be selling that. Is there a risk of prepayment of that in the next couple months? Or do you think that that's good for the next three years?

You really have to ask Blackstone. If it gets paid out off, it would be like a 70 IRR. We read what you read, and we were kind of surprised, but not surprised that it's a remarkable portfolio -- the EBITDA growth even in the recession. And I think the occupancy of these assets is in the 90s. They are booked on a weekly basis basically years in advance. So it's the most extraordinary looking portfolio I've quite ever seen.

And two different banks sold us their positions. And we are really happy with the paper. We really don't want to get paid off. It would be a windfall for the shareholders of the REIT.

Okay. Just to clarify, the loan that prepaid this quarter, was that the CBL loan? And that -- you said how much was that taken out for? What was the new loan on that?

Yes. The new loan was a $65 million. The existing loan with approximately $41 million.

Was it the CBL deal?

Yes, it was the CBL deal.

One final question. The loans that you contributed into the CMBS pool, were those all exclusively retail?

No. There was a mix of -- there was a mix. There was office, retail and certain of our industrial assets.

You'll see it next week; right Leo?

Yes. Settlement will be next week on the Tuesday, and then we'll elaborate on the -- some of the details of settlement.

All right. Great. Thanks very much.

There are no further questions at this time. I would like to turn the floor back over to Mr. Sternlicht for any closing remarks.

Just thank you everyone. We appreciate your support, and we think the more you know about us, the more you will like what we are doing, that it's a great company in this environment and is exactly what we told shareholders we would do -- grow the dividend over time -- and thought I'd see the 10-year at 2.80, but to return at current prices over 7% with almost no risk, you could probably securitize the whole company away today.

And so there's not a lot of downside, in my opinion. And our job is to create a lot of upside for shareholders, which we would like to do.

I will mention one other thing. We've -- you -- some of you may know there was a stock grant when we went public. It is not widely known, so I will say it. We said it in one of our road shows. There's about -- every single person in Starwood -- over almost 130 people, including secretaries and other help in the firm -- receive stock in the company. So everyone in the firm is rowing in the same direction to help this company succeed and grow. So we're really happy about it.

And thank you for listening on a warm August day. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.