Starwood Property Trust Inc (STWD) 2017 Q2 法說會逐字稿

Good day, and welcome to the Starwood Property Trust Second Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Zach Tanenbaum, Director of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning and welcome to Starwood Property Trust Earnings Call. This morning the company released its financial results for the quarter ended June 30, 2017, filed its 10-Q with the Securities and Exchange Commission, and posted its earnings supplement to its website. These documents are available on the Investor Relations section of the company's 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 uncertainties 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 no duty to update any forward-looking statements 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 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.

Joining me on the call today are Barry Sternlicht, the company's CEO; Rina Paniry, the company's CFO; Jeff DiModica, the company's President; Andrew Sossen, the company's COO; and Adam Behlman, the President of our Real Estate Investing and Servicing Segment.

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

Thank you Zach, and good morning everyone. This quarter we reported core earnings of $137 million or $0.52 per share up from the $51 cents we reported last quarter. We continue to see strong contributions from each of our businesses evidencing the power of our diversified multi-cylinder platform.

I will begin the discussion this morning with the results of our lending segment. During the quarter, this segment contributed core earnings of $99 million or $0.38 per share. We originated or acquired $871 million of loans with an average size of $218 million and 11.5% optimal IRR to [spot] LIBOR and a 53% LTV. We funded $615 million of which $423 million related to new loans, and $192 million related to preexisting loan commitments.

Repayments totaled $656 million for the quarter in line with our expectations. The credit quality of our book remains strong with the LTV of our large loan portfolio remaining steady at 63%. In addition, we saw improvement in some of our [poor] rated loans this quarter with the loan loss reserve declining from $9.5 million to $6.8 million. This was mostly due to a $170 million loan that prepaid in full shortly after quarter end.

Our book continues to be positively correlated to rising interest rates with just over 92% of our portfolio being floating rates. We estimate that a 100 basis point increase in LIBOR would add $0.09 of core earnings annually, not including the incremental benefit that could be realized by our servicer in a higher-rate environment.

Next, I will discuss our investing and servicing segment which contributed core earnings of $71 million or $0.27 per share. As a reminder, this segment houses our CMBS conduit origination business, CMBS book, servicing platforms, and properties purchased from CMBS Trust. It also houses our investment in Ten-X the former Auction.com which we acquired in 2013 as part of the L&R purchase.

[GAAP] earnings exceeded core earnings for this segment principally because of a mark-to-market adjustment related to our investment in Ten-X. Last week Ten-X issued a press release stating that they entered into a strategic transaction with an investor to acquire a controlling stake in the company. Through a 50/50 JV, we own two types of financial instruments in Ten-X. [Warrant] which we record on a mark to market basis and common stock which we record as historical cost. Combined our investment in Ten-X at a GAAP carrying value of 21.6 million last quarter.

As a result of the recent announcement, during the second quarter the [Warrants]were mark to market based on the implied value of the transaction. This resulted in a GAAP gain of $26 million which you will see reflected as an increase to our GAAP carrying value and as earnings from unconsolidated entities in our P&L.

Because we hold our JV investments in a taxable REIT subsidiary, we also recorded a corresponding tax provision of $10 million. Both of these are excluded from core earnings. We will record core gains for this transaction when it closes, which we expect will be next quarter. If we were to sell 100 percent of our equity position, the pretax core gain would be approximately $60 million.

Moving onto the other cylinders in this segment, we continue to capitalize on opportunities to harvest gains in our CMBS portfolio and in the properties that we acquire for CMBS Trust. During the quarter, we sold CMBS for core gains of $6 million and properties for core gains of $8 million.

On the servicing front, resolutions once again outpaced transfers in mainly due to the liquidation of five large loans totaling over $650 million. These resolutions drove the $4 million increase in servicing revenues from last quarter. We also obtained one new servicing assignment this quarter on a deal totaling $1.1 billion of collateral. This brings our named servicer portfolio to 153 trusts with a balance of $72 billion.

And before leaving this segment, I will say a few words about our conduit performance. We securitized $272 million of loans in two securitization transactions this quarter and expect volumes during the last half of the year to be significantly higher than the first.

I will now turn to our property segment, this segment contributed core earnings of $18 million or $0.07 per share. The wholly owned assets in this segment continue to generate consistent returns with a blended aggregate cash-on-cash yield of 10.5% and a weighted average occupancy of 94%. These statistics are down slightly from last quarter due to the planned departure of a below market tenant that occupied roughly 9% of the space at one of our Dublin properties.

We are in the process of renovating the space and have agreed terms with a perspective tenant for a 20-year lease commencing in December. The new lease is at a blended rate of just over 55 euros per square foot which is a nearly 50% increase from the 37 euros per square foot of the vacated lease.

I will conclude with a few brief comments about our capitalization and third quarter dividend. We ended the quarter with $3.8 billion of undrawn debt capacity and a debt to equity ratio of 1.5 times. If we were to include off balance sheet leverage in the form of [A] notes sold, our debt to equity ratio would be 2.2 times or 2.1 times excluding cash. For the third quarter, we have declared a $0.48 dividend which will be paid on October 13 to shareholders of record on September 29. This represents an 8.8% annualized dividend yield on yesterday's closing share price of $21.78.

With that, I'll turn the call over to Jeff for his comments.

Thanks, Rina. There's been much written about the number of new public and private entrance in the (inaudible), but we believe the story is one of haves and have notes. We will significantly increase loan production this year while at the same time taking advantage of the lowest borrowing spreads since our inception. Continuing to originate double digit IRRs while maintaining the same credit-first discipline we built the company with eight years ago.

We will continue to do this by using the breadth of our multi-cylinder platform to go where the capital markets offer us the best returns for the lowest risk. We will continue to focus on large complex transactions where our credit-first platform, cost of capital, decades of experience in equity real estate, and access to the information provide us with the greatest competitive advantage.

In anticipation of more competition, we have doubled our origination staff in the past 12 months as an investment in our future. Which has enabled us to continue to produce high-quality transactions and a very robust pipeline. We closed $871 million of loans this quarter in our lending segment, have over $1 billion of transactions already in process of closing in Q3, and have as robust a forward pipeline as we have seen.

We have achieved double-digit optimal IRRs in our lending book every quarter for the last three years and a 11.5% optimal IRR this quarter conservatively assuming a flat LIBOR curve. Importantly, approximately one-third of our second quarter originations were unencumbered by asset-level debt. Our IRR would have been higher had we taken asset-level debt on all originations. But by continuing to create unencumbered assets, we have the unique ability amongst our peers to issue unsecured bonds at extremely attractive rates. We have approximately $3.5 billion in unsecured assets on our balance sheet today that serve as collateral for our unsecured borrowing, a significant multiple over our peer group.

We have approximately $2 billion of unsecured debt today between convertible bonds and our $700 million five-year unsecured bond deal we issued in December of 2016. Those bonds trade at 104.25 today implying a 3.9% borrowing cost for 4.5 year unsecured debt. That is a lower rate than where others in our sector issued convertible bonds this week, giving us a significant funding advantage without risking equity dilution.

With over 100 institutional owners of those bonds the debt markets have shown great support for our business model and are trading our bonds in line with higher rated companies. Giving us the opportunity to utilize corporate debt in a manner and pricing that our peers simply cannot match.

Despite this access to capital at best in class rates, we continued to run the business very conservatively and our debt-to-equity ratio stands at just 1.5 times today, as Rina said, or 2.2 times when we add back A notes, significantly lower than our mortgage REIT or finance company peer group. Our credit profile continues to be exceptionally strong with our LTV falling slightly this quarter to 62.9%. We continue to be our own harshest critic as two of our largest loans that were risk rated of 4 in 2017 paid off after being refinanced at higher proceeds than we were willing to consider.

Like our competitors, the full impact of our closings has not been reflected in the second quarter due to the delayed nature of capital deployment on deals with future funding. But that is routinely the case as we make new loans.

In REITs, we continue to reinvest run offs in our CMBS book which has seen spreads continue to tighten in each of the last five quarters. And as we frequently do, we [sold] CMBS for a core gain of $6 million in the quarter.

Rina also told you that we sold two properties this quarter that we acquired from CMBS Trust recognizing $8 million of core gains. We have many similar assets left in the book, and expect to continue to buy and sell going forward. In addition to gains in this book, we've spoken before about our significant unrealized gains in our property segment and equity kickers in our loan book. And you will see us realizing some of those gains from our Ten-X investment next quarter.

We are excited to announce that subsequent to quarter end we became members of the Federal Home Loan Bank of Chicago, giving us access to an extremely attractive capital source for present and future business lines at STWD. In 2012, we created a single-family residential rental portfolio that was later spun out of STWD and has been renamed Starwood Waypoint Homes or FFR.

We have also owned R&B Securities almost since inception that have performed extremely well. We have continuously looked at the residential mortgage business as an opportunity given our expertise. The health of the residential market, the dislocated nature of the lending markets, and our borrowing costs in the space.

This year, the dedicated team of residential mortgage professionals and our manager, Starwood Capital Group, has helped us take advantage of an attractive opportunity in the residential housing market for non-agency mortgages. Since the great financial crisis, residential borrowers who don't fit squarely within the agency Fannie and Freddie credit box have found it very difficult to get a loan to buy a house even if they have a very good credit profile. The quality of the non-agency borrower and lower LTB makes this segment the antithesis of subprime lending.

Discovering an area underserved by more traditional forms of capital we have developed full relationships with top-tier originators to begin buying non-agency loans that fall just outside the agency credit box. With an average borrower having nearly 40% equity in a property and a prime credit score. In addition, the securitization market and funding markets have reopened as well, and we are in the process of evaluating securitization exits versus the extremely accretive return profile we achieved by funding our non-agency portfolio through our Federal Home Loan Bank membership.

Securitizations for prime, low LTB pools like ours are consistent with our investment objective today. We have aggregated a portfolio of non-agency loans that are carried as loans held for sale on our lending segment balance sheet. These loans have FICO scores over 700, and LTBs consistent with our lending book.

We will continue to look for other ways to use this line and further diversify our business while using conservative leverage and best in class financing techniques across all of our business lines to produce outsized risk adjusted return for our shareholders.

With that, I'll turn the call over to Barry.

Thanks Jeff, thanks Rina. I want to wish Rina a happy birthday which was Sunday. And she hasn't been feeling well, so thanks for putting in time and effort.

One thing I'd say again and I just got the trophy from NARIT for disclosure. You know when we went public in 2009 we said we'd be in best in class in transparency to our LPs, our shareholders, and treat you like partners. And it's nice to see for the third year in a row we were recognized with a gold award from NARIT. And our disclosure package sets the standard for our space.

And I think most people feel that mortgage REITs have always gotten into trouble. And what we promised you, for those of you who have been with us for the entire ride since we began our company, is that we would never push the envelope. And we'd be careful, and we would also diversify ourselves so that if there were trouble or we couldn't meet the returns we thought were attractive for our shareholders we would open up other cylinders of business that potentially could capture some of the capital freed up from our loan book if in fact it became difficult to produce the returns we were used to.

And so I'm really excited that we consider ourselves more of a real estate finance company than just a large loan mezzanine lender. And as you know with our conduit business and our servicing business and including our continued strength in the (inaudible) going forward and CMBS 2.0. We've now added two other interesting really exciting new businesses for us.

The Federal Home Loan Bank purchase and license agreement which allows us to borrow it. Truly extraordinary rates and we can grow some other lending businesses with Freddie and Fannie who have been great partners and will be great partners we anticipate and as we work to help correct some of the wrongs of a too tight credit cycle in the resi markets. As well as the move into -- well I consider them two different things (inaudible) Federal Home Loan Bank purchase as well as the move into non-QM lending which is a new cylinder for the company.

There's several others we're evaluating which would increase our ROE and reduce the drag which has been incredibly significant. Rina could tell you, but I'm guessing $0.05 to $0.10 year to date from the excess cash we have from the (inaudible) raised and debt offering we did earlier in the year. So we've been sitting on a lot of cash which is a significant drag on our earnings, and we've been doing it in part to have the option to retire for cash, the October maturity of the convert.

And Jeff mentioned that one our peers issued a convert this week, and we have [stray bonds] that trade inside of the convert. It also created unusual volatility on our earnings as you have to mark them in and out as they go in and out of the market. And so we've avoided that particular cure even though we could do it tighter than our bonds.

And our bonds are trading as if we were investment grade, and as you know we're a DD straight [of] a positive outlook from the rating agencies. So the markets are competitive, the debt markets. There's been a coming off of the lulls in the market we've had a tightening of the markets as a lot of a hunt for yield across some asset classes. And others are wider. We're trying to be super careful. I think this is the fourth or fifth cycle of tightening since we started the business. I'm very reassured with 11.5 optimized debt yield which isn't even optimized as Jeff pointed out for our portfolio.

And then looking at the book for the third quarter, we're pretty optimistic that we expect originations to be larger in the third quarter than the second quarter as Rina pointed out in our pipeline and Jeff pointed out. And all of these mortgage REITs have LIBOR at their back. So if in fact the fed continues to raise rates unlike our resi peers and we get swept up in ETFs because we all sit in the same ETFs, our earnings will go up and theirs might go down.

So it's been interesting as the world stretches for yield again at the ten year. As you know this morning it's back below 2.2%. 8.8% dividend yields over last [night] with a 63% LTV book is just compelling for shareholders. And as I point out to my hedge fund friends if they use modest leverage on their stock purchase of us they'll be the best performing hedge fund in the United States practically.

The other thing I think is relevant as we move on in the cycle here is the asset classes in the United States in particular are still pretty much in balance. There isn't a ton of growth in the hotel space. RevPAR is at 1% to 2%. The office markets are actually improving almost across the board in the United States. Hotel markets have a few pockets of weakness, New York City, to some extent Miami. But those weaknesses also present opportunities to us as a lender.

And since we are now in the equity business if we were wrong and we took back the asset we wouldn't be complaining too much. It's a business we've long done at Starwood Capital Group. And while we don't intend to do [loan to own] it isn't the worst outcome now that we are in the equity business as you know.

Trump has five stimulus packages, none of which as you know have passed. Any one of which would accelerate the U.S. economy, we believe, from it's laggard pace now that we are lagging both Asia and Europe in growth. So if he gets repatriation completed, his infrastructure spending on line, any kind of tax cut for either businesses or personal taxes he continues to actually execute his deregulatory policy which really hasn't taken place for the banks at least. There's been talk but not a lot of change. Or makes any changes eventually the healthcare (inaudible) lower healthcare costs.

All of this would be good for the U.S. economy. And what's good for the economy is good for wages, create inflation, increase replacement cost for real estate assets. And I think our LTV of 63 would drop to 58 or 55. And even be more compelling for the shareholders as a risk reward basis. And we would love to see that because LIBOR would go up and our earnings would go up with LIBOR. And we need that to create the wage growth which has been sorely lacking in this recovery, and it continues to surprise me that we had such weak wage growth when we all see significant employment issues or lack of available people to hire in markets and categories today.

I want to take one aside besides the FHLB purchase and the non-QM lending, and talk quickly about Ten-X in the context of our non-core businesses. I mean Ten-X was something we picked up in the LNR transaction and we own a piece of the company. In total, the gain we think is around $60 million plus or minus. There may be an opportunity to roll over some of our gain and continue to invest with the private equity firm that is buying them with a consortium of investors.

It's an interesting company. It was always in our taxable sub given it's an auction business and has only non-qualified REIT income in it. But the $60 million is found money for our shareholders and we're excited about that. And it points to the fact that we did have our current value as less than a third of that or about a third of that.

So a point of fact, we do have these embedded assets in our portfolio which we think are significant. And I'm going to talk about quickly through a couple of the larger investments. We have about $2 billion of gross asset costs in the equity book which is around 20% of our gross assets. The equity attributed to those investments because they carry asset specific debt is around $700 million. That's 15% of our book equity and significantly less on our market cap.

And if you take the largest investment in the group which is the medical office portfolio we bought last year for about $800 million, [$770] million. There was a recent trade by I guess it was Healthcare Reality Trust at 5 cap and we bought our portfolio which we think is better at a [5 6] in place. And interest rates at the time were 80 to 90 basis points lower, so they paid about 470 a foot, we paid about 394 a foot. The occupancies were similar, 96 and 95. Their average age of their buildings was slightly better than us.

But we have 65% of our tenants are credit. Theirs about 60%. So we're excited about that market. It happened I think just last week. And you can see it on the leverage basis that that's a significant increase over 10% which on the gross cost would be almost $75 million if you use that cap rate on our book.

Similarly, our apartments are performing magically. They're 98.5% occupied, which is higher. We own 107,000 apartments. We're one of the largest apartment owners in the United States. This is the highest occupancy portfolio we have because it caters to the affordable housing market. And they're really nice assets so these are good-looking assets. They were newer in quality, and continue to perform at or above our forecast.

And I'll mention the Dublin Office portfolio because that is the third biggest equity investment at the time, right now, and we were offered a opportunity to sell a significant chunk of that equity, all of it or part of it at a significant premium to the [carrying costs]. We decided not to do it because we have enough cash right now.

And probably I'm more bullish on Dublin's office prospects than even our European office given the BREXIT opportunity. And it's asymmetric. They're going to either tighten the market even though there's construction. The construction is good because it allows the banks a place to leave and go to. And as you can see with the lease renewal in the one asset which was up 50% year over year or over in place rents, the market is really on fire and enjoys a sub-5% vacancy rate.

On the other hand, I'll mention the investment in the retail portfolio which is the four malls. And that is just 5% of our equity book, 2.8% of our book equity and 2.2% of our market value equity. The mall business is under attack more because of the media and the hype than the reality of the business. Having said that, it is impacting tenants. Tenants are panicking. Many of them are (inaudible) tremendous turnover in the malls.

So while we think these are great, (inaudible) real estate, the capital costs are probably higher as you re-tenant the spaces. The occupancies remain okay. You recently saw Simon's earnings report last week and his malls continue to function well. The reality is they're functioning quite well, but there's higher capital costs and I think you'd see some weakness which would be immaterial to the company in that category potentially going forward. And more than offset by the investments that are materially larger for our company. You can find the data for that on Page 21 in the supplement.

So with that, I really think the team is gelling, doing great. I'm excited about growing our origination team. Trying to open up new markets for us and new lending relationships. I can't overestimate or overemphasize how important it is to have experience in these markets.

From the equity perspective, it's wonderful to have a team of 50 acquisition people that are active in all these markets and can help underwrite and check the credit memos that the team puts together on the debt side. And the collaboration is probably as good as it's ever been. The markets are wide open. We enjoyed a significant competitive advantage in the funding markets. I'd like to see us move more to the unsecured debt markets because we have this collateral we can use.

And business is okay. It's pretty good. So we're looking forward to continuing to innovate and continue to find new ways to deploy capital and meet our objectives over time. So as we've always said and we'll finish the call with, we're going to be consistent and transparent and do what we say we're going to do. So Jeff and Andrew and Rina and the team and Adam Behlman in the REITs which is the real estate Investment servicing operation down in Miami, everyone. I want to thank all of them for their hard work on behalf of the shareholders and the board.

So with that we will take questions.

(Operator Instructions) Our first question comes from Steve Delaney with JMP Securities. Your line is open.

I'd like to start with one of the headlines on your press release, the access to the federal home loan backed system. I wondered if you could provide some color as to how you were able to navigate that given I guess the ban, if you will, that the FHFA put on captive affiliates of mortgage REITs back in January of 2015? And then I realize some of that you may not be able to say too much there, but is that also strategically, is that in some way tied to your interest in the residential mortgage space? Thanks.

It is obviously tied. You know there are other buckets like multifamily and places where the Home Loan Bank could potentially be helpful. But given what we're doing and looking at on the residential space it certainly makes sense. Shortly after quarter end, we acquired a captive entity with an existing five-year charter with the Home Loan Bank of Chicago. We've executed (inaudible) out to the end of the five-year sunset period which is currently about three and a half years. But we're not disclosing at this time any additional information about the transaction itself or our capacity for borrowing on that line. But we're excited to be part of Home Loan Bank.

The only thing I'll say is the 3.5 year, it's Barry, is current policy. It could change just like this has opened up for us. So it might be ten years. You have no idea what they'll decide. It's all political I'd say.

Barry, I understand there is a bill in the House that actually would expand membership. And we know the federal home loan banks themselves want the mortgage REITs in the system. So hopefully this could always be resolved through some sort of a regulation that would be tied into.

I think Rina has a number of $10.6 billion of debt capacity that's there's one additional lever we have. And yes, it's really where we use the financing which is significantly inside the cost of any of our credit lines. You know it is somewhat constrained by what they want to see us borrow it for. So it's very attractive for us and one of our peers it's more of a trading house. They actually have this. And we were going to do it and they shut it down, and the guys found one and we bought it. So they did a nice thing and I think it's going to be exciting for our shareholders.

(inaudible) I said in my script we do run a fairly large book of unencumbered assets. We go out of our way to create unencumbered assets at the expense of IRR at the time. And those unencumbered assets will help us be able to borrow on lines like this. So it's not just owning the license. It's really having the balance sheet that allows you to take advantage of it. And we've set ourselves up well for that.

Understood, thanks. And one for Rina if I may, just looking at conduit sale activity in the quarter. I guess just roughly looking at a gain on sale margin that would be in excess of 5%, does that tie into your view of your results?

Steve, I would say it was relatively small from an amount of origination time. And as you know better than anybody and you know this sector very well, spreads have continued to tighten. When spreads are tightened that business looks like a really good business. When spreads are widening it's a little bit more difficult. We've had a tailwind for the last five quarters of spreads tightening.

If you remember in the first quarter of 2016, we spent a lot of time talking about our book and spreads had widened significantly. In that quarter we stayed the course. Added to it. We then rewarded on our CMBS holdings and we've been rewarded for staying in this CMBS conduit origination business that probably 10 or 12 people have walked away from in the last year.

And we are picking up market share versus other non-banks. Obviously, the large banks have picked up market share in total, but we've picked up market share versus the non-banks. And we're excited about it, and we'll continue to grow modestly and slowly. But it's hard to look again on sale of margins absent looking at spreads, and spreads have tightened. And that's a good thing for our business. So we try not to focus on those margins. We try to focus on making good loans.

Understood. So certainly a business that's in much better shape than any of us expected it might be a year ago today when we were staring risk retention in the face.

Than any of you expected.

Yes, okay any of us. That's right the outsiders. I hear you. One just to close, one big picture question, CBRE's been reporting about $900 billion of private equity capital commitments that are sitting there available to the US commercial real estate market. Barry, I'm just wondering if you think that entire amount is actually going to be called and invested? And some idea of over the period of time? So just a view on where we are on the cycle and the amount of money. This seems to be the fuel behind the market. And I'd appreciate your views on that. Thanks.

The cycle you're betting two things when you're making equity investments today. What's going to happen to the U.S. economy over the five-year period? Will Trump get infrastructure spending done? That might help suburban hotel portfolios. Any growth in GDP will help RevPAR growth.

Are we going to roll over? I don't think so. I think the fact that we've had such a week nine-year recovery means we have more capacity. There's no bubbles that I can really point to in the market. On the other hand, I think investors are nervous. I think as you've seen or maybe you haven't seen, year over year the property sales have declined. And there has been (inaudible) spreads that have opened up in some asset classes because even though there's money people are assuming rates would rise, and they're more worried about their exit cap rates.

So I think that's the question. Like we all expect the under rides for the exit yields to be wider. Some of us say they'll be constant. Then if you think they're going to hold flat then you probably win in auction. And if you think they're going to cap out you're not going to win the auction.

And whether they gap out or not will really depend on what happens to rental growth. And if rents continue to rise, rental growth will be more important than the movement in interest rates if it's modest, and I don't think anyone expects it to crazy. So actually I'm concerned about a different thing. All the markets price off sort of at the top bid. And the top bid has been an Asian bid. In some markets you've seen whether it was the sale of the Waldorf or the bail out of strategic hotels deal, (inaudible) was on the edge or the top of the heap in what they were willing to pay for assets.

So I mean I've been through the cycle for 30 years, everybody thinks they're rich when the guy pays 2 cap for an asset or 1 cap. So I think it's good that the Chinese have stepped on some of the crazier things that have happened in the market. If there were six bids of $1 billion and one guy did $1.5 billion, I'd ask you to tell me where the LTV is of the loan, right? Against 8.5, right?

So this is easier for us in some ways. We know where the markets are. It looks like cap rates for apartments have stayed fairly stable I would say. I think cap rates for offices. Nothing is drifting down. I don't think this weight of money is affecting the property markets that values are screaming ahead. So I don't think that's the case at all. I would say that those outlier bids, the guys who are looking at real estate as alternative bonds. And those are primarily foreign sovereigns. Those have left the market right now.

And the market that absorbs the most foreign capital, New York City, maybe D.C., maybe San Francisco. Those markets have their own issues. And I think some of the Middle Eastern investors whether the Saudis are successful getting RIMCO public has affected their flow of funds. I think politics raise their head about if you're having a fight with our administration you're just not going to invest here. And there you have the Qatar issue for the Saudis and our response to it. And they were very quick to shut down capital flows.

Or they need liquidity and sell assets, right? So it has nothing to do with the asset class, it has to do with politics. So I'm not worried at all about that. I wouldn't say the markets are easy. But I think on the other hand there are markets that are doing much better because they've tightened and there really isn't a ton of speculative construction in the office markets.

But I think the industrial markets are just ridiculously tight. And their cap rates are five, sub-five for industrial. It's been a darling of the sovereign wealth funds with foreign investors and it may not stay that way if in fact they curtail their investment. You could see cap rates gap out fairly significantly. Because that was not a domestic bid. I forgot the number, but it's something like 70% or 80% of the industrial deal is done with the foreign capital. So these big purchases of basically bond equivalent credit yields. You know they're not really real estate plays, they're just buying yield.

So far I think we have to pick and choose on the equity side where you think you can get. I'm laughing. We had an investment committee meeting on Monday and we were talking about a foreign country in Asia and their office markets that are 5%. And I asked our guy over there who's based in Hong Kong what he thought rents would grow and he said we're using 3% and they're at 4.5% vacancy rate. And then we were working on a deal here in one of cities where we own assets, what do you think rents will grow? They're growing at 3%.

So that's like a 9% [exit driver]. You have to call the rent growth now. Like you have to step up to the plate and [look] into the trade because you're later in the cycle and there's not much in the way of [distressing] the United States. So there probably is distress coming, and obviously we're beginning to see the cracks of the high-end residential market in Manhattan. It's going to be a debacle. The building on 57th Street just went through it's B lender. Those deals, of the building going up next to (inaudible) those deals are going to be a disaster. But we knew that. We told you that three years ago, two years ago.

So high-end res in New York really in trouble. All the new construction. The construction lenders typically are not -- we don't have exposure to that market. There's a hedge fund that made $1 billion mortgages against some of these properties out of Europe and we'll see how that fairs.

But you can see the headlines and the issues coming in that market. And we don't really have exposure (inaudible) 8000 a foot pro forma in residential in Manhattan. That is not going to end well. But it's also not a bank issue. As I said, the loans are not being made by the commercial banks. These were made by hedge funds, and so there's [$3 billion] in New York that have $1 billion mortgages provided by hedge funds. So maybe they like the return, but they lose capital and can't get paid off when they find out their basis is accreting because they're not getting paid currently obviously. (inaudible) currently it's their own money paying themselves so it doesn't mean anything.

I think we kind of want a train wreck. We like those markets. We like capital getting scarce, but I don't see that coming right now other than some crazy stuff coming out of D.C. which is possible.

Steve, for clarity, Barry is talking about Central Park South when he talks about 57th Street. As you know, we have a large asset on East 57th Street with a residential that's doing great and will pay off in the very near future. (inaudible)

Yes, I'm talking about a condo in Philly. Our price attachment points are $1500 a foot, not $6000 a foot.

Steve, I would add that regardless of prices up or down the pent up capital should be good for transaction volume staying somewhere near here which is good for us as a lender. (inaudible)

But it's been down. I mean in the first quarter (inaudible) volume is down like 30%. That's now down I think 20% or 18%. But one of the reasons I think that people don't talk about it, not only bid outspread widening is tax reform. I mean if you thought your capital gains tax rate was going to drop dramatically as the Trump proposal has talked about, you would wait. You're getting paid. You've got great positive leverage on your real estate. You just wait.

So private owners are saying, well let's just see what comes out of this. And I think it has affected the real estate markets from a transaction volume standpoint which indirectly affects us and also tightens spreads because there's fewer assets to lend against with fewer transactions.

Our next question comes from Jade Rahmani with KBW. Your line is open.

When you talk about growing the platform, I wanted to see if you could provide your thoughts on whether there's any interest in the healthcare lending space such as the recent RX Lancaster deal or in the GSE multi-family lending space?

Barry Sternlicht A: We look at everything. That's all I'm going to say. We don't have any particular reason not to do healthcare lending. We've been looking at the assisted living space. We think the train wreck that we anticipated is not going to abate for a while. Senior housing is over built and rents are falling. That is a very tough segment to lend into. So we knew that. We could see the construction.

I can't believe the numbers, we just talked about it and [investment commanding] 8% increase in supply, and rents are falling in many markets. So that is an area of assisted independent living we are kind of staying away from. And we are staying away from it, we don't have a single loan exposed to that business.

But healthcare facilities, hospitals, things like that, we would do that. As you know, we're like credit first as Jeff says. And we're underwriting these risks, and we're going to close a loan on the third quarter that might raise eyebrows. And we'll tell you why we did it after we do it, but the returns are terrific and we think it's a exciting opportunity for us.

(inaudible). Sorry, on the assisted living side I think I read recently the average age of occupants is 82. But Baby Boomers are still in their mid-60s. So all the supply came in early, and you're going to have a decent amount of time before you can sop it all up in addition to Barry's point.

And how about acquiring a license in the GSE multi-family landing space?

Not a bad idea. I mean it's something obviously. It's a business we look at.

The residential mortgage business, what are the target ROEs? And do you expect it to take up the leverage on the balance sheet through the FHLD?

Potentially with commensurate returns it'll exceed the book, the returns that we've achieved in our lending business. I'll say that.

If we achieve securitization, Jade, which is our goal over long periods of time our on balance sheet leverage won't actually go up. The (inaudible) will give us term financing off balance sheet.

And it won't be (inaudible) is what Jeff is saying. So that is our intention is to exit the securitization. So no they won't be as attractive financing as FHLD credit facilities.

In the core lending business, can you talk to the relative attractiveness of structured investments like subordinate debt, mezzanine loans, preferred equity (inaudible) originating whole loans, or first mortgages and levering those? Which are risk reductions?

(inaudible) for 7 years. We're so much better off making the loan ourselves, right? And the mezzanine in certain asset classes right now the mezzanine bids are mind boggling. If it's manufactured on the Street and you want to sell a mez you can find sub 7 guys out there right now, and 6.5. It's a feeding frenzy again for Street-originated debt. But it's okay, we continue to find the kinds of loans that we need to make.

And I guess you call them transitional, and we look very hard at the attachment point. Where are we creating the asset if we're wrong? And so far we haven't been wrong. We haven't had a loan go bad.

But yes, I mean the market right now for mezzanines is as tight as we've seen it. And there's a lot of offshore money, particularly from Asia, that is buying this paper. And there are managers that are doing this. If it disappears to gap out on (inaudible) it could be 200 basis point if that market may again, if the money is from places like Korea and there's an issue in Korea that could stop instantly.

So we just can do what we do all the time, originate the loan the whole loan, partner with other guys if we can, sell the A note, put it on a credit facility, and now we have other ways to finance it too and use corporate debt if we have to. And just own the whole loan or buy or own sheet.

Yes, Jade, we've talked about this but as you know we do 60 to 80 page credit memos as if we were underwriting equity. We really prefer to eat our own cooking from a credit perspective regardless of the fact that we're getting significantly more yield. And the [mez] market is a funny one. I think every year for the last five years post-crisis at some point in the year the spreads widen, the banks lose some money on a trade or two and they stop doing it. And that's an opportunity for us to come back in and a couple quarters later they jump back in. So they're cyclical. That'll always be the case. We're here for long term and we'll do the work for a longer term holder.

I just want to ask about the dividend deal versus peers, if I assume special servicing is around a third of the LNR segment and do you think it's fair to assume it contributes around 10% or so of total earnings?

Rina?

On a net basis? Jade, I'm not sure if that's a fair statement.

Let's get back to you on that.

Yes.

Yes.

I think the core question is if any of the dividend is supported by special servicing revenues that may speak to why there is a bit of a higher dividend yield for Starwood versus [Pierce].

Well, that's clearly the case and we do make money in the business. And unlike our peers we're uncovering our dividend, handsomely I might add. So it goes away. We [can now] cover our dividend too. That would be fine. They still trade at a lower dividend yield than we do. And they trade with a [long term] more leverage than we do, so explain that to me. And we have other ways to make money if the lending business gets really tough and they don't. So just straight up it's sort of ridiculous [and the] way you cover these companies is insane.

But on the other hand, we do know what it does. It creates nice ROE for us. It's a high ROE business. We're working to replace it with other business lines as you can see, we're not sitting still. The FHLD thing we didn't think we'd have last year, and now we have it. So we have new businesses. We have another new business that Jeff's trying to convince me to go into and the board which will decide if we're going to play, and probably will take our ROE up again. And it might come with higher leverage though, and we might begin to look a little more like they do. I think they're 3 or 3.1 times and we're 2.1, 2.2.

So just to give a heads up, yes you can't explain our dividend yield based on our book and being higher than theirs given the diversity of our businesses. We're twice the size that they are by market value, so they have a bigger loan book. We have other stuff.

And we know we're a complicated story. I mean there is a simplicity to that model, but I think we've been doing this for what, 7, 8 years. And we have better gains in our book that they don't have as we showed you with Ten-X I mean to find $60 million you didn't know you had that's a gain. I guess the investment was something beyond that because there's more cash coming out from that investment.

But yes we scratch our head and we understand the complexity and the fact the servicing book will go down, and is declining. Our tangible right now, Rina is around $60 million?

Yes, $66 million at the end of the quarter.

So the intangible has been dropped from the original. It was probably what, $500 million?

No, the original was about $240, $250.

$240? Yes, so we've taken it down fairly aggressively and the size of the intangible and the servicing now is the same size as the gain on Ten-X. How's that for maybe a giggle. If it was zero, it would be fine. So we think it'll go back up as stuff gets transferred into servicing. But I would say that the frothiness of the lending market has not lead to the kind of fees we [would not] have expected from the rest of the 2007 maturities. But it's fine. I mean it's one of many businesses that we're in.

Our next question comes from Doug Harter with Credit Suisse. Your line is open.

With the monetization of Ten-X coming up, can you talk about the potential for other monetization's, equity kickers on loans in particular?

Like I said, we passed on a opportunity (inaudible) in our Dublin portfolio. I mean we really didn't make these investments to trade them. We made these investments that we decided well we'd like to own for 10 years. And by [buying] the investment we basically increased the duration of our book. And also in meeting with the credit agencies they were supportive of that. And so we have moved into that business.

And finally, we have another investment we're looking at right now (inaudible). But finding deals that meet our criteria, which I think Rina, the book (inaudible) 10.5 cash-on-cash yield, is that right?

That's correct, yes.

So finding investments like that, with that cash yield are not easy to find today given the markets. But we always find something, and we have. We found another investment that we're working on. Actually two, one will close in the third quarter and the other one we're still working on.

But I guess the biggest asset on the equity kicker side would be (inaudible) 7th Avenue which is nearing completion. It's the [Addition] Hotel on top and I guess they have retail at the base which is led by --

NFL Cirque Du Solei.

NFL is doing a NFL experience in the heart of the building which can generate north of 5 million visitors a year so the retail is two-thirds lease. There's one remaining space which is the best space, the corner space. I think they did it [with] Hershey's. They're moving across the street. So this is the corner of --

47th and 7th.

47th and 7th and is catty-corner to the tickets booth and half a million people walk by there every day. So I'm highly confident he will lease the corner retail, and we and the developer don't agree on how valuable this building is. And we have almost no value for this. He thinks it'll be worth nine figures to us. We own close to 20% of the property after the payment of debt. So we'll see.

I mean if that sells as a trophy property, we'll see. But we've been pretty conservative, but we're optimistic he's right. And he swears he's right so we'll see if he's right. So anyway that's a big number given our share count, and we'll see.

So that one because we're not controlling the sale. He is going to sell it when he wants to sell it and we're not looking to market our position, we're just going to hold it and (inaudible) no cash flow from it right now. I don't know the building must be a couple million feet, it's a giant building. And we have no debt exposure to that asset by the way. He brought in EB-5 financing, and J. P. Morgan took the senior and we're out of the deal. So the only thing we have left is the equity [kicker] which is 20% unsubordinate, straight up. It's actually ahead of the other equity players. So it's a pretty valuable position.

And then, as you know, we've been buying assets from the trust and using the fair value purchase option. And so that business has been a good business for us, and we continue to mine that base. And there's a lot of assets in it, and some bigger assets now in it and we'll continue to do that. We sold two of them and there's a bunch more that we have on our books that we think are in the money quite a bit. And so we're just finding new ways to make money for the shareholders.

And then on the Dublin Office you had the nice lease renewal. What does the lease renewal schedule look like? And is there any other sort of big step ups that you can expect there?

That is a really good question that I don't have in front of me.

I don't think there are any other tenants that occupy that much space. That was our largest tenant. There are other tenants that are rolling at higher rents but not that would really move the needle in terms of a cash-on-cash yield and occupancy. But you're not going to see the uptick on that until probably first quarter of next year because the rent commitment data on the new lease isn't in until December. So you're going to see the current [step] kind of stay about the same for the next six months.

(inaudible) lower cash yield right now and then a much higher cash yield next year. And we should get [two] because I don't have it at my fingertips and Rina will get it for you, the lease rollover schedule if you want to see it. I don't actually know what it is.

Our next question comes from Jessica Levi-Ribner with FBR, your line is open.

Hi, guys. This is Tim for Jessica. Thanks for taking my questions. You had touched briefly on the lending pipeline and cited it was robust. And just wondering if you could potentially size that for us and given your expectations for increased conduit activity in the back half of the year and other investment? Just any directionally how you expect the second half of the year to stack up to the first half of the year in terms of lending?

I'll say one thing, when we deployed the book that we think will deploy in the third quarter our cash balances will go down. And so it's accretive to put the money out, right? And I don't know the net of the repayments, Jeff, and the money going out. I don't know how accretive it is. But Jeff was just telling me that he thinks the fourth quarter might be bigger than the third quarter. So we're (inaudible) deals as you know. We don't get to choose when the bar wants to close.

I would say the third quarter paid on to be about the same as the second quarter, and we expect a little pickup in the fourth quarter, and then back to around here for the first quarter of next year. So the pay downs that were elevated as a result of a lot of the 2013 and 2014 construction loans that we successfully made and are now paying off and we'll complete that cycle in the next few months will play out.

I will tell you that our normally two page small font pipeline sheet is now over three pages. That doubling the size of our origination team has meant a lot of stress on the team and long hours but good stress. And if we can bring them in I'm as optimistic about the third and fourth quarter as I've been any time since I've been here in the three years that I've been in this seat. So we think we built a really great pipeline and we're excited about it. But as always, we'll see how many of those fish we can get in the boat, but it feels really good right now.

I would just add one thing. I mean we talk about this all the time, the higher we go, the more risky the asset the more likely we can make a loan and clear the market. On the other hand, as soon as the borrowers fix the asset it pays us off. And the duration of loans is not great. The IRRs are great, but [all our] profits aren't great.

So we would like to move, and our credit facilities reflect this, if it's a transitional asset we might borrow at 250 over on our credit facility. A more stabilized asset or very stabilized asset we might borrow at 180 over. And if we can meet and work towards lowering our funding costs, which we should at our scale, we would be okay if our 11.5 optimal yields drifted to 10, even to 9.5 if we got three year duration out of the paper instead of 12 months or 18 months.

So we're really focused on credit quality of the assets, and we have lines of scale based on the credit quality of the asset. So I'm pushing the team to be more competitive on higher-quality assets. And take advantage our cheaper funding lines. And also may possibly take advantage of the unsecured debt markets which are attractive to us and a good way for the company to finance itself. Particularly if we want to achieve an investment grade rating someday.

So everything is tied to everything, but we size. Sometimes as you probably know but it's worth saying (inaudible) years. We want to write as wide a piece of paper as we can so that let's say we're making a loan that's 65% LTV. If we can write 45 to 65 at 11 or we can write 55 to 65 at 14, we're going to write the wider piece of paper at 11.5.

So these are not B notes. These are not B pieces. These are not 5% of the capital [back]. These are much wider pieces of paper, and the market has never given us credit for that, but we don't care. Because I'm a shareholder. I have a lot of money in this company, and I want to earn a great return on my capital. And reflecting risk and there's no free lunches. Which we're getting a 14 and we might be doing it on 2% of the capital back .

I mean some of these B notes are double digit. They're like 17% but it's on your insurance for a stack of paper below you. And if you're not in the servicing business you have no offsetting credits for the servicing fees that you're taking of the [truck]. If there's one loan in that portfolio that goes bust, you're gone. I mean or depending on which loan and the size of it, but I'm talking about in a major securitization of ten assets one big hiccup and the B Note is now toast.

So that's a nuance that seems to be lost on many people in the market, but we try to [right] these wide pieces of paper as we can and target the double digit yield on our remaining equity investment in the assets. And we [cited] to that. We do not try to optimize and lever the (inaudible) paper, which we could do. We could borrow 80%, but we don't do that so --

Barry mentioned unsecured. Today we could a issue five-year unsecured in the 4 and 8 range and eight-year unsecured inside 4.5%. So the market is very open, and it will be very accretive to us when we have the right use.

(inaudible) we move towards investment grade, right? And (inaudible), right? Because then that paper is wide and it keeps coming in and that's the Holy Grail. We win because we have the cheapest cost of funds.

I guess just piggybacking off the last part of that just on the unsecured debt comments, I believe you have to convert that matures in the fourth quarter. Are you looking to potentially pay that down with additional unsecured debt or as of now are you planning to just use liquidity on hand to pay that off?

Right now liquidity on the end. It could change. It depends on our deployment of capital, right? I mean it can be paid off. As you can see where our bonds are trading we could pay it off with a unsecured bond issue or we can pay it off with cash. Correct, Andrew?

Yes, correct. I mean obviously, as Jeff said, we're reissuing unsecured today or we could assure unsecured today it would be accretive to the extent we replaced our convertible debt with [straight] unsecured.

Our final question comes from question Kenneth Bruce of Bank of America. Your line is open.

You know I've been following this company for a long time and I've learned to expect the unexpected, but I'm not sure that I was quite thinking non-QM loans. So I'm hoping maybe you could just give us a little sense as to what's so attractive about that market? And why now?

Yes, sure. Part of it's the funding advantage which makes it uber attractive for us versus anyone else, but when Starbucks -- it's a credit play for us.

He's talking about the FHLD loan.

Yes, it's really a credit play. We have a lot of people here, myself included, have a lot of experience going back through the crisis. These are the type of loan, these 700 plus, plus FICO. 60 LTV loans that did perform extremely well through the crisis. We believe will perform extremely well going forward.

They give us the opportunity to create cash-on-cash return. That's in excess of what we're able to make in any of our commercial books today. And certainly with upside to that on the financing side. We have the expertise in house. This is not our first rodeo in residential. We've looked at all sectors of residential mortgage finance for a long time. It wasn't until we were able to develop some flow relationships with the best premiere guys that are originating this stuff. People who have been around since before crisis, not new guys in the space by any means, that we feel really confident that we're going to be able to originate really strong loans with extremely low to zero losses and zero losses are a viable scenario for us to think about in that space and financing levels that are great.

You know at the end of the day our goal is to find areas that are underserved by private capital. We think that market still is today the securitization exit has come back. If the securitization exit goes away, I don't think you'll see us balance sheet with warehouse financing or home loan bank financing a massive portfolio of that stuff. And I don't think this is a greater than 10% equity position in our book over time. It's just something that we're able to take advantage of the opportunity today. Where other people don't have our funding and maybe don't recognize the ability to leverage as many of these originator relationships as we have.

Right, so this would be an originate to distribute to gain on sale model?

That would be right. We would do gain on sale. I apologize, that is incorrect. What we would be doing is doing financing and keeping the bottom of the financing. Not gain on sale.

Just by way of background obviously we started (inaudible) in the country and I don't know 30,000 lots or something like that. We were once the largest owner of lots that wasn't tied to a homebuilder. This is the parent Star Capital. And we created Starwood Way Point which is [37,000] houses. And so I'm not sure if anybody has a better view of the residential market than we do. But we still do land deals in California and other places. So we're comfortable with our exposure in the 60s on LTVs on these homes and these markets. And it's again, Jeff, said it's 10% maybe target. And we might adjust that but --

It might be 2% to 4% this year.

Of our equity, so we're not turning ourselves into a resi REIT (inaudible) it's just another way to deploy capital at, we think are, attractive rates. And as you guys have pointed out and the market obviously is pricing in, we need to find ways to replace the income from the servicer (inaudible). Right?

Yes, well I mean from my point of view it's been an area where there's been a lot of inefficiency. There is great return opportunity. I guess I hadn't realized that the securitization market has opened up in a way that kind of makes it maybe something a bit more mainstream than it's been in the past. So that's encouraging to hear.

I guess as you think about it and you're probably quite aware that the residential mortgage finance can kind of tighten things up very quickly if it makes its way into some of the bigger lenders. I don't know if you think that that's kind of off the purview of the big banks who really want to be involved in that business which will give you kind of a statutory mandate over and above what they're willing to do in that business.

Steven Ujvary who's running the business for us is sitting here, and I think he's probably best equipped to talk about it.

I think that point is kind of spot on. To sum up Barry and Jeff's comments, it's an opportunity for private capital that are outside of the bank construct and to take advantage of an opportunity where banks haven't really piled in and attracted some of these really high-quality borrowers that since the financial crisis can't qualify for an agency mortgage. So what you've seen over the past few years is the private mortgage finance, residential mortgage finance contracts fell away after the crisis. And it hasn't really been replaced yet outside of borrowers being able to sell loans into Fannie and Freddie.

So that's what we're targeting is high-quality borrowers right outside of the agency credit box. And we've been following the market closely over the past [40] years. And as Jeff mentioned we're working with the highest quality mortgage originators. And we think at 60 LTV in mid 700 FICO scores, and we stress the borrowers through the financial crisis we're projecting kind of zero losses and the ability to take advantage of that market where the banks [are] lending is very attractive.

Right, will you have servicers? I assume that you won't pick up servicing in this case or you'll have it subserviced?

That's right. We'll have it subserviced.

And last question, you put a lot of emphasis on the competitive advantage that you have in financing markets which certainly in the primary businesses that you're in has a huge impact on your ability to compete. Is this an area that, one I guess what do you think gives you that cost advantage? And secondarily, do you think that there's some natural barriers that will prevent others from replicating your cost structure?

We're an extremely large counter party to the Street. So across the board our financing lines if we need to use Wall Street are as good as anybody in the space. And a lot of people who play in the space simply don't have the gravitas of the 2,200 person organization that our management employees. And so that importance and the gravitas of the size of being the largest commercial mortgage REIT, we just tend to get better rates. And that is a great thing. We have the Home Loan Bank on top of that, and we have expertise in securitization finance here.

But if we can borrow 50 basis points in size unsecured versus a competitor and we translate it into a three to one or two to one leverage, you can originate lower and achieve the same returns, right? If that's how you're choosing to finance your paper or your investments. And we kind of target that leverage. We kind of assign the corporate debt to unencumbered assets and we, in our minds, lever those assets. We're not trying to over lever the book.

And I would say that it's fascinating to me, and it should be to you, that the equity markets trade at a higher dividend yield than our peers. Our debt is inside of our peers. So if you think the credit markets are the best analyst of risk and return, they've voted aggressively for the business model we have. And the shareholders have not. Right? We have a wider dividend yield than our nearest largest competitor. That's kind of fascinating to me. So the credit markets are quite happy, and the debt and the equity markets are less convinced.

Our stock trade is fine. We trade at a reasonable premium to book value. Less to fully adjusted book value for the equity investments we have and the embedded gains in our books. And probably close to parity I would say when you take those into account. And yet we have, I think, a more sustainable business model in the sense that we have more ways to deploy capital to achieve our targeted returns.

Yes, I tend to agree with your assessment of it, and can appreciate your frustration. It feels that equity --

(inaudible) frustrated.

Well, it feels like equity markets sometime ignore some of the risk aspects of one business versus the next and focus on other aspects. But that's probably for a research report. Thank you for your time this morning. I appreciate it.

Do we have one call or are we done? Thanks everyone for your time today. And sorry, Operator. You can go ahead.

I'll turn the call back to management for closing remarks.

Well, again we're going to thank everyone for being with us today. And this team stands ready to answer your questions as we always do after the call. Thank you.