Financial Data and Key Metrics Changes - For Q2 2025, the company reported a GAAP net loss of $1.3 per share and a distributable loss of $0.77 per share, with distributable earnings prior to realized losses at $0.10 per share [13] - The held for investment loan portfolio decreased to $5 billion at June 30 from $5.9 billion at March 31, primarily due to loan resolutions [13][14] - Total liquidity increased to $323 million as of August 5, representing a $221 million increase compared to December 31 [9][29] Business Line Data and Key Metrics Changes - The company resolved eight loans totaling $873 million of UPB during the second quarter, including four loans paid off in full and four watch list loans [6][7] - Year-to-date resolutions total $1.9 billion of UPB, consisting of $1.55 billion of loan repayments and sales, and $305 million of multifamily property foreclosures [17][29] - The watch list loans decreased to 17 loans and $2.1 billion of UPB, a net decline of $758 million of UPB and seven loans from the first quarter [7][17] Market Data and Key Metrics Changes - The elevated rate environment remains a headwind for commercial real estate, but investor sentiment has improved and transaction volumes have been recovering [5] - The company has seen significant turnover in its loan portfolio, with a higher percentage of resolutions compared to peers [65] Company Strategy and Development Direction - The company outlined three strategic priorities for 2025: resolving watch list loans, improving liquidity, and redeploying capital [5] - The management believes that their experience as a value-add owner and operator of real estate assets provides a competitive advantage in evaluating opportunities [10] - The company is optimistic about monetizing multifamily REO assets in the coming quarters [11][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the healing of the real estate capital markets and the potential for continued loan resolutions and liquidity generation [5][32] - The company is focused on addressing the upcoming maturity of its Term Loan B in August 2026, with potential uses for liquidity including partial paydowns or replacement financing [28][29] Other Important Information - The total CECL reserve on loans increased to $333 million or 6.4% of UPB at June 30, compared to $243 million or 4.1% at March 31, reflecting a conservative outlook amidst market uncertainty [22] - The company completed the commercial condomization of a mixed-use building in New York City, generating $29 million in gross proceeds [10] Q&A Session Summary Question: Does the liquidity number reflect the discounted payoff of the New York City multifamily? - Yes, the $323 million amount reflects the liquidity generated by the New York multifamily loan in July [31] Question: What is the outlook for continued resolutions and liquidity generation in the second half? - The capital markets are healing, and additional payoffs are expected, but the company will rely more on regular repayments moving forward [32][34] Question: What are the signposts for deploying liquidity? - The company will continue to focus on deleveraging the balance sheet and may consider stock buybacks, but will prioritize resolving watch list assets [35][36] Question: Can you provide an update on the REO balance and strategies for the assets? - The REO balance is approximately $525 million, and the company is pursuing various strategies for asset sales and operational improvements [40][41] Question: How is the term loan refinancing process progressing? - The company is engaging with private credit providers and expects to reduce the size of the financing, while also considering preferred equity in the future [72]

Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $10.6 million or negative $0.22 per basic common share for Q1 2025, which includes a provision for credit losses of $3.8 million or negative $0.08 per basic common share [23] - The book value at March 31 was $8.24 per common share, a decline of about $0.23 per share from Q4, primarily due to the GAAP net loss [24] - The aggregate CECL reserve at March 31 was approximately $180 million or $3.72 per common share, down from $201 million or $4.12 per common share in the previous quarter [24] Business Line Data and Key Metrics Changes - The total loan portfolio commitments ended the first quarter at $2 billion, with an outstanding principal balance of $1.9 billion and about $93 million of future fundings [14] - The loan portfolio yield for Q1 was 6.8%, up from 6.6% in the prior quarter, while excluding nonaccrual loans, the yield was 8.5% compared to 8.8% previously [15] - The company resolved two nonaccrual loans totaling about $97 million in UPB during the first quarter, reducing the risk-rated V loan count from seven at year-end to three remaining [10][11] Market Data and Key Metrics Changes - The commercial real estate market showed improved sentiment at the beginning of 2025, with tightening credit spreads and enhanced liquidity, although recent tariff announcements have introduced renewed uncertainty [8] - The company noted that commercial real estate is better positioned today compared to previous years, with a lower reset basis across most property types and markets [8] Company Strategy and Development Direction - The company plans to maintain higher liquidity, extend debt maturities, and engage in value-enhancing activities while navigating market volatility [12] - The company anticipates returning to new originations in the latter part of the year, which is expected to improve run rate profitability and earnings over time [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the commercial real estate market, noting that while there are headwinds, the debt markets remain open and functioning [11] - The management team emphasized the importance of resolving nonaccrual loans and maintaining liquidity to maximize value during uncertain times [21] Other Important Information - The company repurchased about 900,000 shares of common stock during the first quarter and has about 3.9 million shares remaining under its existing buyback authorization [12] - The company has three remaining nonaccrual loans rated five, with a total balance of about $223 million [25] Q&A Session Summary Question: How does the company balance stock buybacks versus originating new loans? - Management indicated that they are currently focused on preserving liquidity and have been active in stock buybacks, with plans to balance this against new originations later in the year [28][29] Question: What is the status of the risk-rated loans and potential downgrades? - Management noted that the majority of the portfolio is performing well, with no negative credit migration in the first quarter, and they are closely monitoring the risk-rated loans [30][32] Question: Can you clarify the realized losses and their timing? - Management confirmed that the $37 million write-off includes $22 million related to one resolution, and they expect to recognize these in distributable EPS [40][41] Question: What percentage of the portfolio matures in 2025? - Management clarified that a little over 20% of the portfolio has a final maturity in 2025, with loans maturing in 2026 and beyond as well [49][50] Question: What is the reserve on risk-rated four loans? - The reserve on risk-rated four loans is approximately $13.1 million, which relates to a balance of $174 million [53][54] Question: What is the status of the Miami office property? - Management indicated that the Miami office property is a high-quality Class A asset with potential, and they are actively reviewing resolution alternatives and leasing discussions [63][64]