Financial Data and Key Metrics Changes - The company reported a net loss of $69.8 million or $2.3 per share for the second quarter, compared to a net income of $1.7 million or $0.06 per diluted share in the prior quarter [17] - The allowance for credit losses increased to $183 million, representing coverage of total loans at 2.38%, an increase of 75 basis points from the prior quarter [11] - The Tier one leverage ratio decreased by 48 basis points to 10.63%, and the common equity Tier one ratio decreased by 60 basis points to 14.01% [18] Business Line Data and Key Metrics Changes - The provision for credit losses was $138 million, with $45.4 million related to an increase in the office overlay and $11.1 million associated with individually evaluated loans [10] - Over two-thirds of loan originations in the second quarter were C and I loans, indicating a shift towards this segment [22] - Non-interest income decreased to $6.4 million from $8.2 million in the prior quarter, primarily due to a loss from a repositioning trade [23] Market Data and Key Metrics Changes - Nonperforming loans increased to $226.4 million, a net increase of $26 million for the quarter [12] - Total criticized and classified loans increased to $875.4 million from $774.9 million, driven by new classifications in multifamily and land loans [14] - The company noted that multifamily loans showed strength due to governmental mandates, contrasting with the office portfolio's challenges [14] Company Strategy and Development Direction - The company is focusing on reducing reliance on wholesale funding and strengthening its core deposit base, with core deposits increasing by $304.1 million [21] - A strategic decision was made to manage excess cash, leading to a revision of average loan growth expectations from 2%-5% to flat [24] - The company aims to normalize provision expenses and return to a more stable credit provisioning environment by 2026 [72] Management's Comments on Operating Environment and Future Outlook - Management expressed that the current market environment is uncertain, particularly regarding the office sector, which is believed to be facing long-term structural changes [5] - The expectation is that the third quarter will show improvement compared to the second quarter, with hopes for a normalized provisioning environment in early 2026 [16] - Management emphasized the importance of maintaining a strong capital position despite the current losses, with extensive loss absorption capacity on the balance sheet [17] Other Important Information - The company declared a dividend this quarter but is evaluating a near-term reduction or suspension to preserve flexibility [26] - The company has $4.8 billion of available liquidity, maintaining more than two times coverage of uninsured deposits [18] - The company is confident in its non-interest income forecast, supported by stable contributions from BOLI and expected growth in treasury management sales [23] Q&A Session Summary Question: How does the company view the current credit provisioning cycle? - Management indicated that they believe net charge-offs in the next quarter will be similar to the current quarter, with no larger impact expected on the income statement [33][34] Question: What is the outlook for inflows to nonperforming assets? - Management believes that the degree of inflow going forward will not be as significant as in the past quarter [39] Question: Are there any regulatory restrictions related to classified assets? - Management stated they are diligently working to reduce criticized and classified loans and expect to see a decline in the total portfolio towards the end of the year [40][41] Question: What is the expected impact of deposit costs on margins? - Management noted that deposit costs are expected to improve in the third quarter due to successful renewal rates and growth in relationship deposits [42] Question: Is there a potential for bulk loan sales to clear problem credits? - Management is evaluating each situation on a case-by-case basis and may consider strategic patience to maximize exit values [70][72]

Financial Data and Key Metrics Changes - The company reported distributable earnings (DE) of $156 million or $0.45 per share, while GAAP net income was $112 million or $0.33 per share [5] - The company committed $2.3 billion towards new investments, marking the highest quarter in nearly three years [5] - The overall loan book grew by $859 million, reaching $14.5 billion at quarter end [6][23] - The CECL reserve decreased by $26 million to a balance of $456 million, representing 4.2% of the lending and REO portfolios [10] Business Line Data and Key Metrics Changes - Commercial and residential lending contributed DE of $179 million or $0.51 per share, with $1.4 billion of loans originated [6] - The residential lending portfolio ended the quarter at $2.4 billion, with repayments totaling $55 million [10] - The investing and servicing segment contributed DE of $50 million or $0.14 per share, with an active servicing portfolio of $9.6 billion [12] - Infrastructure lending committed a record $677 million of loans, with a portfolio totaling $2.8 billion at quarter end [13] Market Data and Key Metrics Changes - The company noted that the CMBS single asset single borrower market has pulled back, creating opportunities for well-capitalized lenders [16] - The company has seen a significant increase in debt and equity deals in the market, with 50% more deals compared to the same period last year [16] - The U.S. office exposure declined to just 9% [24] Company Strategy and Development Direction - The company aims to achieve investment grade status and is exploring various investment opportunities, including a potential acquisition of a RESI originator [35][72] - The focus is on three investment themes: data centers, Europe, and multifamily assets [22] - The company plans to maintain a strong dividend, having paid it for 45 consecutive quarters [19] Management's Comments on Operating Environment and Future Outlook - Management anticipates a weakening economy but believes it will lead to lower interest rates, which will benefit the property segment [28][32] - The company is optimistic about transaction volumes re-accelerating despite current market uncertainties [33] - Management expressed confidence in their ability to navigate the current environment, citing a strong balance sheet and liquidity [44] Other Important Information - The company completed a $500 million issuance of senior unsecured sustainability notes, enhancing its liquidity position [14] - The company has significant credit capacity across its business lines, with $9.5 billion of availability [15] Q&A Session Summary Question: Progress on resolving nonperforming loans - Management indicated that there are several apartment deals likely to be sold at their basis this year, with ongoing efforts to resolve other assets [49][50] Question: Opportunities in residential credit - Management acknowledged the potential in residential credit and is exploring various opportunities, including the possibility of acquiring an originator [70][72] Question: Corporate M&A outlook - Management expressed optimism about potential M&A opportunities as some companies may face challenges in the current environment [76][78] Question: Timing of loan closings and interest income - Management expects an increase in interest income in the upcoming quarters due to a strong pipeline of loan closings [82]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a GAAP net loss of $0.56 per share and a distributable loss of $0.25 per share [11] - Distributable earnings prior to realized losses were $0.08 per share, with earnings from REO investments contributing a distributable loss of $0.03 per share [11] - The held for investment loan portfolio decreased to $5.9 billion at March 31 from $6.1 billion at December 31, primarily due to loan resolutions [12] Business Line Data and Key Metrics Changes - The company fully realized five loans, receiving $7 million in proceeds from repayments and resolutions, which improved liquidity and reduced leverage [8] - Hospitality exposure was reduced by $326 million, reflecting a strategic move in light of economic headwinds [9] - A $214 million facility was closed to finance non-performing loans through the REO stage, indicating progress in the multifamily REO strategy [9][15] Market Data and Key Metrics Changes - The company noted widening spreads in the real estate capital markets and a pause in transactions by institutional participants due to heightened uncertainty from U.S. tariff and foreign policy volatility [6][7] - The economic and political climate is impacting capital markets and investor sentiment, which may affect the company's operational strategies [10][16] Company Strategy and Development Direction - The company is focused on enhancing liquidity, reducing leverage, and optimizing outcomes on watch list loans, with strategies including loan sales and discounted payoffs [11][12] - Management is considering various paths for loan resolutions, including divesting, extending, recapitalizing, or taking assets over as REO, depending on market conditions [10] - The company aims to achieve $2 billion in realizations over the year, with $600 million already completed [60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing higher rate environment and its headwinds to broader real estate recovery, while expressing optimism about achieving strategic goals [7][10] - The company is navigating a period of uncertainty and volatility, with plans to remain pragmatic and proactive in its approach [16] - Management believes that fundamentals at the property level remain strong, despite the challenges in the broader market [59] Other Important Information - The company reported total liquidity of $136 million as of March 31, which includes cash and undrawn credit capacity [16] - The company has extended repo facilities with Wells Fargo and Goldman Sachs, indicating constructive relationships with repo counterparties [35] Q&A Session Summary Question: Update on two large multifamily loans - Management is still anticipating payoffs for the two loans maturing on July 31 and August 1, but may need to evaluate other options due to market volatility [18][19] Question: Current thoughts on term loan B - The term loan matures in August 2026, and management is evaluating options including amending and extending the loan or exploring private credit solutions [21] Question: Update on repo counterparties - The company has extended its repo facilities with Wells Fargo and Goldman Sachs, and is evaluating capacity size based on current financing needs [34][35] Question: Summary statistics for the overall portfolio - The portfolio is transitioning, with a significant reduction in construction assets and an increase in cash-flowing multifamily exposure [41][45] Question: Total REO expected this year and liquidity implications - The company is actively working on monetizing current REO assets and expects to take on additional multifamily assets, with no initial liquidity outflow anticipated from the new financing facility [50][51] Question: Consideration of splitting the company into separate entities - Management is considering various strategies for REO but currently has no plans to split the company into separate entities focused on development and mortgage REIT operations [55]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a GAAP net loss of $0.56 per share and a distributable loss of $0.25 per share [10] - Distributable earnings prior to realized losses were $0.08 per share, with earnings from REO investments contributing a distributable loss of $0.03 per share [10] - The held for investment loan portfolio decreased to $5.9 billion at March 31 from $6.1 billion at December 31, primarily due to loan resolutions [11] Business Line Data and Key Metrics Changes - The company fully realized five loans, receiving $67 million in proceeds from repayments and resolutions, which improved liquidity and reduced leverage [7] - Hospitality exposure was reduced by $326 million, reflecting a strategic move in light of economic headwinds [8] - A $214 million facility was closed to finance non-performing loans through the REO stage, indicating progress in the multifamily REO strategy [8][14] Market Data and Key Metrics Changes - The company noted widening spreads in the real estate capital markets and a pause in transactions by institutional participants due to heightened uncertainty [6] - The economic and political climate is impacting capital markets and investor sentiment, which may affect the company's operational momentum [9] Company Strategy and Development Direction - The company is focused on enhancing liquidity, reducing leverage, and optimizing outcomes on watch list loans through various strategies including loan sales and discounted payoffs [10] - The management is considering various paths for loan resolutions, including divesting, extending, recapitalizing, or taking assets over as REO depending on market conditions [9] - The company aims to manage liquidity effectively while preparing for future liability maturities and seeking to improve asset performance [58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing volatility in U.S. tariffs and foreign policy, which has created uncertainty in the economy and commercial real estate [5] - Despite the challenges, management expressed optimism about achieving strategic goals and improving liquidity through realizations [6][58] - The company is preparing for potential economic headwinds and recessionary fears while remaining proactive in its strategies [9] Other Important Information - The company reported total liquidity of $136 million as of March 31, which includes cash and undrawn credit capacity [15] - The company has a target of $2 billion in realizations for the year, with $600 million achieved so far [58] Q&A Session Summary Question: Update on large multifamily loans - Management confirmed that two large multifamily loans are still in process, with maturities approaching [17][18] Question: Thoughts on term loan B - Management is evaluating options for the term loan B, including amending and extending the existing loan or exploring private credit solutions [19][20] Question: Repo counterparties update - Management extended the Wells Fargo facility for another year and the Goldman Sachs repo facility for two years, indicating constructive relationships with repo lenders [31][32] Question: Portfolio statistics and liquidity implications - Management discussed the transitional nature of the portfolio, with a focus on improving liquidity and managing funding commitments [40][41] Question: Total REO expected this year - Management indicated that the REO strategy is fluid, with potential monetization of assets in the near term and ongoing evaluations of additional REO acquisitions [48][49]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a GAAP net loss of effectively zero and distributable earnings (DE) of $0.17 per share, with DE prior to charge-offs at $0.42 per share [4][20] - The company paid a dividend of $0.47 per share for the first quarter [4] - The impaired loan balance decreased by 58% from its peak, now standing at $970 million or 5% of the portfolio [15][22] Business Line Data and Key Metrics Changes - The company achieved $1.8 billion in repayments, with 86% from office properties, and $1.6 billion in new investments, marking the highest quarterly originations in over two years [10] - The portfolio is now 95% performing, up from 88% at the trough, with US office exposure reduced from nearly 40% to 21% [12][22] - The company commenced a net lease investment strategy, acquiring 27 properties concentrated in defensive businesses with average lease terms of 18 years [13][14] Market Data and Key Metrics Changes - The company noted that real estate cash flows are expected to benefit from diminished supply, which is at historically low levels [7] - The overall cost of capital remains around 40% lower than peak levels, with banks and investors under-allocated to real estate, supporting continued lending demand [8] Company Strategy and Development Direction - The company is focused on minimizing credit risk while leveraging its platform to generate target returns, with 90% of 2025 activity backed by multifamily properties or cross-collateralized industrial portfolios [11] - The strategy includes optimizing the balance sheet, with liquidity at $1.6 billion and a leverage ratio of 3.4 times, the lowest in three years [16][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the real estate sector's ability to outperform despite macroeconomic uncertainties, citing a recovery phase and a well-functioning capital market [6][7] - The company anticipates continued strong performance in multifamily and industrial sectors, while monitoring the hospitality sector closely [60][61] Other Important Information - The company has a robust balance sheet with nearly 70% of its structure being non-mark-to-market, providing stability in volatile market conditions [17][27] - The company executed a $1 billion CLO with a 30-month reinvestment feature, enhancing its capital structure [27] Q&A Session Summary Question: What is the current status of the four-rated loans? - The company has around $500 million in non-modified four-rated office loans, down significantly from $1 billion a year ago, and is focused on modifications and resolutions [33][34] Question: How do you see the impact of the new CLO on originations? - The new CLO provides optionality for financing new originations, with strong relationships with lenders ensuring good liquidity [35][36] Question: How do you expect loan growth in the coming quarters? - The company aims to grow the portfolio towards the $20 billion mark, with a focus on credit quality [44] Question: What trends are observed in the repo market? - The company has maintained strong relationships with lenders, with banks eager to grow their credit facility exposure [50][53] Question: How is the performance of the hospitality sector? - Hospitality exposure is currently at 6.5% of the portfolio, and while it is being monitored closely, the overall performance has been resilient [57][60] Question: What is the outlook for international exposure? - The company has a strong presence in Europe, with no specific cap on international exposure, and is optimistic about the relative value of investments in that market [74][78] Question: Will there be another CLO issuance this year? - The company is monitoring the CLO market closely and sees potential for another issuance later in the year if market conditions remain favorable [80][82] Question: What is the pace of resolving remaining impaired loans? - The company is optimistic about continuing to resolve impaired assets, with a clear path for several resolutions already in progress [84][86]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a GAAP net loss of effectively zero and distributable earnings of $0.17 per share, with distributable earnings prior to charge-offs at $0.42 per share [5][21] - The company paid a dividend of $0.47 per share for the first quarter [5] - The capital allocation strategy has improved the credit composition of the overall asset base, with 95% of the portfolio performing, up from 88% at the trough [12] Business Line Data and Key Metrics Changes - The company achieved $1.8 billion in repayments, with 86% in office, and $1.6 billion in new investments, marking the highest level of quarterly originations in over two years [10] - The investment strategy focuses on minimizing credit risk while leveraging platform advantages, with 90% of 2025 activity backed by multifamily properties or cross-collateralized industrial portfolios [11] - The impaired loan balance has been reduced by 58% from the peak, with resolutions contributing to a $64 million reversal in the CECL reserve [15][25] Market Data and Key Metrics Changes - The company noted that real estate is well-positioned to outperform despite macroeconomic uncertainties, with capital broadly available and cost of capital around 40% lower than peak levels [8][9] - The company has diversified geographically, with over 40% of investments abroad, and US office exposure reduced from nearly 40% to just 21% [12] Company Strategy and Development Direction - The company is focused on three key drivers: portfolio turnover through repayments and redeployment, resolution of impaired loans, and optimization of the balance sheet [6][10] - The company has commenced a net lease investment strategy, acquiring 27 properties in defensive sectors with strong lease terms [14] - The company aims to grow its portfolio towards the $20 billion target discussed in the previous quarter while being mindful of credit risks [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the real estate market's recovery, noting that cash flows should benefit from diminished supply and historically low levels of new construction [7][9] - The company is well-positioned with a strong balance sheet, $1.6 billion in liquidity, and a debt-to-equity ratio of 3.4 times, the lowest in three years [16][27] - Management highlighted the importance of maintaining strong relationships with lenders and the competitive dynamics in the borrowing market [51][52] Other Important Information - The company has executed a $1 billion reinvesting CLO, enhancing its capital structure and providing flexibility for future investments [17][26] - The company has seen a shift towards less transitional and more resilient investment strategies due to rising construction costs and market volatility [66] Q&A Session Summary Question: About the migration of loans rated four to three - Management indicated that the focus is on non-modified four-rated office loans, which have decreased significantly from $1 billion to around $500 million [33][34] Question: Impact of the new CLO on originations - Management confirmed that the new CLO provides optionality for financing new originations, with strong liquidity and capital markets access [36][37] Question: Growth potential of the loan book - Management expects to grow the portfolio towards the $20 billion target, with $2 billion in loans currently closing [44] Question: Trends in the repo market and relationships with lenders - Management noted strong relationships with lenders, with banks eager to grow their credit facility exposure [51][52] Question: Performance of hospitality, multifamily, and industrial sectors - Management highlighted that hospitality exposure is down to 6.5% of the portfolio, while multifamily performance remains resilient, and industrial sectors are also showing strength [56][59] Question: Changes in borrower profiles post-tariff announcements - Management observed a shift towards lighter value-add business plans and shorter duration risks due to cost pressures [66] Question: Future CLO issuance - Management indicated that the CLO market is stabilizing, and they are monitoring opportunities for future issuances [81][84] Question: Context around the general reserve increase - Management clarified that the general reserve increase reflects long-term credit risk profiles and is not meant to capture short-term volatility [91] Question: Size of recent loan resolutions - Management mentioned that recent resolutions total around $200 million, with a focus on maximizing value over time for REO assets [93][96]