Financial Data and Key Metrics Changes - For Q3 2025, the company reported GAAP net income of $8 million or $0.12 per share, with a book value of $13.78 per share, reflecting a decrease of 0.4% quarter over quarter [3][12] - The company reported a distributable loss of $2 million, primarily due to taking ownership of the Raleigh Multifamily property, with distributable earnings (DE) of negative $0.03 per share, or $0.18 per share excluding losses [3][7] - A cash dividend of $0.25 was paid for the third quarter [3] Business Line Data and Key Metrics Changes - The company has been actively lending, expecting over $400 million in originations for Q4 2025, having already closed $110 million across the U.S. and Europe [5][9] - The company’s portfolio currently stands at $5.9 billion, with repayments of $480 million received in the quarter and $1.1 billion year-to-date [9][12] - The company downgraded the Cambridge Life Science Loan from risk rated 3 to 4, increasing CECL provisions due to this downgrade [8][12] Market Data and Key Metrics Changes - The commercial real estate lending market remains robust, with a $1.5 trillion wall of maturities expected over the next 18 months, and banks returning to the market [4] - The company has established a dedicated European real estate credit platform, originating over $2.5 billion to date, and closed its first European loan in October [5][6] Company Strategy and Development Direction - The company aims to optimize its REO portfolio and redeploy capital efficiently, focusing on stabilizing and selling assets to unlock embedded earnings power of $0.13 per share per quarter [8][14] - The company is committed to maintaining a disciplined approach to lending, targeting institutional sponsors and high-quality real estate [7][12] - The company has built a dedicated asset management platform, K-Star, managing over $37 billion in loans [7] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive sentiment towards the real estate market, noting strengthening fundamentals and lagging values [4] - The company anticipates greater than $1.5 billion in repayments in 2026, expecting to match repayments with originations [9] - Management remains optimistic about the life science sector, noting early signs of recovery in tenant demand [26][32] Other Important Information - The company ended the quarter with near-record liquidity levels of $933 million, including over $200 million in cash [10] - The total CECL reserve at quarter end is $160 million, representing around 3% of the loan portfolio [12] Q&A Session Summary Question: Clarification on lower leverage and higher liquidity - Management indicated that the lower leverage and higher liquidity were primarily due to timing issues related to repayments and originations, rather than a defensive positioning [16][22] Question: Impact of repayments on future earnings - Management noted that while there may be a lag in earnings due to the timing of repayments and originations, they do not expect to always be behind and anticipate some quarters will be ahead [23][24] Question: Update on life science loan portfolio - Management acknowledged seeing early signs of recovery in tenant demand within the life science sector, although most assets are lent to larger pharma companies [25][26] Question: NPV analysis on sub-performing deals - Management stated they continuously evaluate the trade-offs between holding assets for potential appreciation versus selling and redeploying capital [31][33] Question: Current ROE and timeline for improvement - Management provided a timeline for improving ROE, indicating that they expect to recover about half of the impacted assets in the near term, with others taking longer [42][44] Question: Comparison of EU loans versus U.S. loans - Management highlighted that while the quality of real estate and sponsorship is similar, the opportunity set in Europe differs, with larger loan sizes and a more bank-dominated market [50][52]