Good morning and thank you for joining the Lument Finance Trust Fourth Quarter 2021 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the call over to Charles Duddy with Investor Relations at Lument Investment Management. Please go ahead.

Thank you and good morning everyone. Thank you for joining our call to discuss Lument Finance Trust fourth quarter and full year 2021 financial results. With me on the call today are James Flynn, CEO; Michael Larsen, President; James Briggs, CFO; and Precilla Torres, Head of Real Estate Investment Strategies. On Tuesday, we filed our 10-Q with the SEC and issued a press release, which provided details on our fourth quarter and full year results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim, I would like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this conference words such as outlook, evaluate, indicate, believes, will, anticipates, expects, intends, and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Form 8-K, 10-Q and 10-K and in particular the Risk Factors section of our Form 10-K. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by or in the future maybe amplified by the COVID-19 pandemic. It is not possible to predict or identify all such risks. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures will be discussed on this call. A presentation of this information is not intended to be considered in isolation nor as a substitute to the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at www.sec.gov. I will now turn the call over to James Flynn. Please go ahead.

Thank you, Charlie. Good morning everyone. Welcome to the Lument Finance Trust earnings call for the fourth quarter of 2021. Thank you all for joining. 2021 was a busy and important year for Lument Finance Trust. During the year and over the first few months of 2022, we've executed several significant capital transactions that have allowed us to meaningfully grow our equity capital and institutional investor base. At the same time, we made significant incremental investments and observed continued strong performance in our loan portfolio. Those were all accomplished and the environment marked with uncertain economic considerations around interest rates, unemployment, asset value, all exacerbated by the continuing impact of variables such as COVID and the tragic events going on in Ukraine and Europe. I'd like to begin by discussing our recent transferable rights offering, which was announced on January 7, 2022 and closed on February 22, 2022. This transaction, which entitled shareholders to purchase newly issued common stock in LFT at a discount to the market price resulted in the company raising approximately $83.5 million of gross common equity proceeds. We believe this is a transformative transaction that provides LFT with the growth capital necessary to further our objectives of achieving appropriate operating scale, expanding our capacity to make investments in target assets. We intentionally structured the equity raise as a rights offering to allow stockholders to participate in the company's growth by purchasing shares at a discount to the market price and avoiding ownership dilution. We believe this raise enables the company to improve our operating expense efficiencies and we anticipate that G&A expenses as a percentage of stockholders equity will decrease as a result of this offering. We also expect that the offering will increase liquidity and trading volume of our common stock. Finally, I note that…

Thank you, Jim. Good morning everyone. On Tuesday evening, we filed our annual report on Form 10-K and provided a supplemental investor presentation on our website, which we'll be referencing during our remarks. The supplemental investor presentation has been uploaded to the webcast as well for your reference. On pages 4 through 8 of the presentation, you'll find key updates and earnings summary for the quarter and the full year. For the fourth quarter of 2021, we reported net income to common stockholders of approximately $2.5 million or $0.10 per share. This result compares favorably to the prior quarter in which we reported net income to common stockholders of $1.2 million or $0.05 per share. For the full year of 2021 we reported net income to common stockholders of approximately $7.4 million or $0.30 per share. This compares to $8.4 million or $0.34 per share for the full year of 2020. With regards to the year-over-year comparison, I would like to note that our Q2 2021 results included a $1.7 million or $0.07 per share loss on extinguishment of debt pertaining to the refinance of our prior CRE CLOs. Excluding the impact of this non-recurring expense, our full year net income to common stockholders would have been $0.36 per share representing an approximate 5% increase year-over-year. For the fourth quarter of 2021, we reported distributable earnings of $2.6 million or $0.11 per share. And for the full year we reported distributable earnings of $9.7 million or $0.39 per share. Q4’s distributable EPS represents an increase relative to the prior quarters’ distributable EPS of $1.4 million or $0.06 per share. This increase, which have been in part by our ability to fully deploy our CLO and preferred equity capital during the quarter, which Jim noted and which we have alluded to…

Thank you, Jim. And good morning, everyone. As Jim and Jim noted, our strong fourth quarter results were driven in part by the full deployment of the capital that we raised last year. This was accomplished due to continued strong investment activity over the last three months of the year. During Q4 we acquired 23 new investments from an affiliate of our manager with total outstanding principal balance of $336 million. All of these acquisitions were secured by multifamily assets. The fourth quarter acquisitions had a weighted average spread to LIBOR of 321 basis points and a weighted average LIBOR for 12 basis points with a weighted average loan to value at origination of 70%. For the full year 2021, LFT acquired and funded $984 million of new loans. That represents a significant increase compared to just $58 million of new loan acquisitions during the full prior year of 2020. We continue to maintain a very strong pipeline of new multifamily bridge lending opportunities and we see no indications of a slowdown in our activity as we move into 2022. During the quarter, we experience $137 million in loan payoffs, which is in line with our recent prior quarters. And at quarter end, our total loan portfolio had an outstanding exceeding $1 billion. This is really a milestone for us. This is the first time that we've exceeded a $1 billion in loan balance. The portfolio consisted of 66 loans with an average loan size of $15 million. Our overall loan portfolio at year end was 92% multifamily that's a slight increase from 90% multifamily as of year and 2020. Our second highest asset type concentration is self-storage, which represents 5% of our portfolio. And we continue to believe that generally self-storage and industrial property provide the least volatility and…

Thank you, Mike. As I mentioned earlier, we feel that we are making great progress in the execution of our business plan to grow our capital base and deploy our capital prudently and continue to be excited about the long-term future for LFT. We look forward to updating you on our continued progress and appreciate your time and interest. With that I'd like to turn the call over to questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Crispin Love with Piper Sandler. You may now go ahead.

Thanks. Good morning and thank you for taking my question. So first on the dividend reduction for the first quarter, can you just speak to some of the aspects that you and the border seeing that warrants the $0.03 reduction and just also what that means for the core earnings power for Lument over the next several quarters? I understand the near-term drag here from the offering. But I seem kind of the key of the offering was to grow the portfolio and earnings over time. So I’m just kind of curious thoughts over next couple of quarters and how long it should take to deploy that capital?

Sure. So look, just to reiterate, we don’t believe that that fully deployed that’s the right dividend and we do believe it we can support something higher. Effectively we went through the rights offering we raised, the 80 – almost $84 million. We obviously executed that that offering when you look at the timing of hitting the market, there was not ideal with the inflationary pressure, really having an impact on the markets in the early part of 2022. And then book ended with the beginnings of what is now a crisis in Eastern Europe that has caused further market disruption. And so those obviously that has played into the timing of all of our investment decisions. So, we feel, we’ll be fully deployed in the next couple of quarters and be able to move forward, but we’ve considered, what that drag has – what impact that drag has on the earnings per share would impact the increased number of shares that were a result of the rights offering issued at a discount as we’ve discussed. And also the current market conditions given where they are volatility and lack of stability. All of those things we expect to our reason, well, at least the latter part, the market components were reasonably optimistic that those things will dissipate over time. But as we sat with our board, looked at the earnings not wanting to create any incremental dilution and of our book share price. We looked at those and decided that we think the prudent decision would be to make this reduction to success, knowing and looking at our earnings power and looking at what we’ve been able to do over the last full year – few years and feeling very confident that that is generally temporary and that our business plan and what we’ve been able to do will continue to be executed by the people that we have here. So it was really looking at all of the factors, and wanting to ensure that we’ve continued to state to all of you, how important it is for us to create stable earnings and to ensure that we cover our dividend and didn’t want to put ourselves in a position of potentially not being able to do so. But we also feel that we’ve taken a relatively prudent view. And I think as with earnings on to go forward basis, investors and shareholders will see that and over the long term basis we’re very comfortable and confident.

Great. Thank you. I appreciate the comments there. And would you say it’s fair to say that you’re for right now on hold on putting that $80 million of equity capital work before you can levered up and do a CRE CLO transaction and kind of part of that right now is just the markets are limiting that just as spread wide?

Yes. I mean, look, the reality is, we’ll put it to work on a – certainly on an unlevered basis relatively in short order. The timing of executing any securitization it would take time any –couple of months anyway regardless of the market conditions, just to get all of the go through the rating agency process and working with the banks and meet with investors and structuring the deal. So, we are in the midst of doing that. But we’re also looking and evaluating all of our potential options for leverage or financing the asset. Again there’s still high demand for in the CLO market for that type of paper. There’s been a couple of deals that I think the characteristics of those transactions are different than ours that provide for I think some rationale for the wider spread. And I don’t expect that we’re all hopeful for some resolution to start resolution to things that are going on in Europe, and hopefully the impact that will have on supply chain issues, and material costs and all the things that flow through on the economic side of this crisis to get us to a more stable environment. We could execute a deal now, it wouldn’t – to those levels would be not the same as we’ve done in the past, but they’re still they’re not unattractive, but from a timing standpoint, we actually think we’ve got a little time under a normal operating environment before we even have to make that decision.

Okay, great. Thank you. I appreciate you taking my questions.

Our next question comes from Stephen Laws with Raymond James. You may now go ahead.

Hi, good morning. To follow up kind of on the previous questions, as you think about fully deployed, how much and considering other types of financing, will you use some warehouse financing to ramp ahead of a potential – a future CLO, and if so, kind of how do we think about how much leverage should be willing to put on there?

So, historically, as you know, Stephen, we haven’t used that, because we haven’t had to, we’ve been able to effectively warehouse loans on the manager’s balance sheet, and in the – given the current kind of conditions, it’s something we’re going to look at and decide whether we want to go ahead and go through the process of putting warehouse in place. Eventually we would need to have some warehouse capacity, we would want some. So it is, we are talking with our banking partners to explore potentially putting something in place. I don’t think that we would – we wouldn’t utilize the warehouse at a max leverage kind of standpoint that you see in a CLO where you have the match term and the non mark-to-mark basis. But we could see – we are looking at that that’ll take a little bit of time to put in place. We’re kind of going through the pluses and minuses of the cost and time to do so, and comparing that to the options that exist to just continue down the path of putting a CLO in the market as soon as possible. Again, I think we are in the midst of significant turmoil in the market. I mean, broader markets, I don’t mean just CLO or real estate market. In fact, fundamentals are still pretty good despite inflation and other matters, but the geopolitical risk that’s overshadowing everything. It’s hard to put a pin in it, and say, okay, in a month, things are going to be different. So, we should take this path. As I just said, I think we have – we want to deploy the capital as quickly as possible. We still have some – there’s work to be done whether it’s on the warehouse or securitization financing under, in any market condition. So, we have the benefit, if you will, if you want to call it a benefit of having to undertake those actions anyway. But I think if we sit here and say, look, if there’s some reasonable outcome in Europe that stops the fighting and stops people dying and put some stability in the market, it's hard to imagine that that doesn't trickle through into more stable environment in the capital markets overall very quickly. But that could be a month. It could be few months. It could be a week if talks change. But again, I think we're still well. Our portfolio is doing great. Our pipeline is more than sufficient to utilize the capital. And we just want to ensure that we've put in place, especially if we're putting in place long-term financing of any sort that we do so, in the most sufficient manner that we can.

Great appreciate those comments definitely a lot going on out there impacting the markets. Michael, maybe this is for you, but can you talk about, competition, certainly multifamily, a lot of interest in lending, a lot of competition out there. Can you talk about what you're seeing, a lot of repeat business or kind of how does your competition among pipeline look?

Sure I'll touch on it. And then Precilla and others feel free to jump in. There is a lot of competition in market for these floating rate bridge loan investments. And particularly for multifamily, it is kind of the favorite asset class today. I think the big picture, what we continue to see a very strong pipeline and very attractive opportunities. And that's driven by the strength that our manager has in that space. We are really an expert in leader in the multifamily housing and seniors housing space and with a large sales platform spread across 30 plus offices and our other market executing transactions in the multifamily space every day that the manager that's across product types. So that drives investment opportunity and pipeline. That creates opportunities for LFT that's through quite a few repeat borrowers that, borrowers the larger platform has a long-term relationship with. And being able to offer a wide set of products brings loyalty and – from our clients and allows us to drive pipeline. Where I think we see the competition reflected most is on the pricing side. And continued tighter pricing, although as I said, I think we've seen it somewhat stabilized. But in terms of building pipeline, an opportunity – opportunities that that has not been an issue and is just managing the pricing. But Precilla, others, if you have anything to add, please do.

No, I agree with that. Notably in the fourth quarter of last year, there was some widening of spread that we expected to dissipate at the beginning of this year. But to Mike’s point, what we have seen actually is that spreads have held if anything over the past few weeks, I'd say there's been some slight widening, obviously because of the volatility. But very importantly is really what Mike mentioned, which bears iterating, which is the pipeline is extremely strong and that the theme of middle market workforce housing continues to be the anchor of that pipeline.

Great. Thanks for the comments this morning.

Our next question comes from Steve Delaney with JMP Securities. You may now go ahead.

Hey, good morning, everyone and congratulations on your successful rights offering. Wondering just how much cash is currently available in FL1? And where I'm really going with that is to see where do you see the maximum portfolio size capping out at with today's capitalization and financing sources? Thank you.

So within the current CLO, it's fully deployed plus or minus. And there are anticipated pay-offs, but that will be fully deployed. From this endpoint of where we could get where – what the total size would be, we think it's somewhere an incremental call it $500 million of assets. Could be a little bit higher and it could be a little bit lower depending on the nature of the assets and spreads, but that's probably about the max number. Because it sounded – we do have cash in the entity, right. We have cash in LFT that's not currently in the CLO. So from that standpoint we do have some or – I should say we had cash some cash prior to the offering – for the rights offering. We think the number is, somewhere between $400 million to $500 million plus of assets.

Jim that struck me as being a number and then just looking over press release forgot that they cut the rights offering will added 75% additional common equity. So 75% of what you had before. So it is certainly is in line there. And my follow-up is any consideration, I know you're very much targeted on multifamily, but given competition, given uncertainty around where the CLO market kind of ends up. Are you given any consideration to other multifamily debt investments, such as maybe Mezz loans or pref-equity in that sector?

Yeah, I mean, so we the Lument, the manager, right? We look and participate in those markets already. We would consider potentially some portion of the capital going into those types of assets. Frankly, the yields are kind of inline with, in some cases below what you could get from a levered senior position. But again, I think the market is moving at pretty dramatic pace. So opportunistically, there are some – we've done some structured finance, we've done some construction, some mass, some PREF on our managers’ balance sheet that result in securities or positions that would fall in the high yield category. Again, the yields are similar. They're either a little bit below or a little bit above. So we are contemplating that to your point, depending on where the best place is to put the capital. We've also – we have a number of equity investments in self storage. Mike mentioned that on the debt side, we have some other opportunities in seniors housing. We're one of the largest seniors housing lenders in the entire country on the managers’ platform. So there's opportunities to potentially add a little bit of mix to the portfolio, I think we've said that in prior earnings calls. I think any sort of volatility always provides for some assessment of what the opportunities are to improve the risk return profile. I think we've been in a very – the market has been very stable and very consistent, right? It's been increasing values and extraordinary transaction volume for the past five plus years. I expect now we still have significant volume, but we're starting to see some change, right? We’ve had low interest rates now have higher interest rates. So there's a bit more, I think opportunity for us to look at some other investments that we generally participate in and have experience in and expertise in at the manager level that still fit within our LFT strategy that could be beneficial. But again, we still think the CLO market is still attractive and will expect it to become even more attractive as things stabilize in the capital markets.

Understood. And thank you for the comments.

Our next question comes from Jason Stewart with JonesTrading. You may not go ahead.

Good morning. And thanks for taking the question. Briefly are there assets that you can buy from the Manager today or would that create a mark-to-market loss for LFT?

No. We've got – there are assets that that we can buy from the Manager. They would be – they would be par assets. I mean, the book that we have is a par book. I mean, we're originate – we're closing loans daily, if or weekly at least, if not daily on the Manager's books. So typically if we're removing assets over, they're all – they're almost, I don't want to put a timeframe on Precilla, but they're all newly originated assets. So they're not – they're transferred at par.

That's correct.

If they're not transferred at par – if they're not transferred at par, it would require us to go to the board, which we've never done to be clear.

Okay. And can you – can you share with us sort of a run rate of originations at the current point in time?

Precilla, you can give a run rate, but I can tell you in our fiscal year which ends in two weeks, we're going to do over 2 billion of bridge loans this year. That includes the loans that we've - that's the total loans that Lument the Manager has closed, including those that have been – that have been new to LFT. And more than half of that has probably been since December, but Precilla, you can give more specifics on that.

Right. So there – in terms of run rate, obviously it'll in terms of LFT itself, it will depend on capacity freeing up from our existing CLO because as mentioned it's already fully deployed, but basically with respect for instance, the existing CLO, I can say that we're very confident that prepayments this year will be fully reinvested, very fairly quickly. And we are obviously also confident if we did do a -if we did do a CLO market conditions permitting we are also confident of high deployment for that particular issuance. So our confidence on the robustness of production and transfer of that to the Manager is very strong.

Okay. All right. That's helpful. And I guess just one more question on the dividend. I mean, I think you were pretty thoughtful about the rights offering, it was pretty substantial dilution to book value. What was the Board's thought process to not just take a longer term view on the dividend and maybe you have $0.02 or $0.03 a quarter of additional book value reduction?

Well, it's something that we talked about as a group with the Board. I think that the view of the management team and the board was that, this is short-term – a short-term reduction that we think makes sense. We think it's important to cover the dividend. Ideally we would've preferred the rights offering to be done at a higher price with less solution, right? There was a lot of those considerations and didn't want to put ourselves in the position of paying back – paying dividends with capital that that we raised. I mean that's fundamentally the biggest component. I mean, but we did – we did talk about that. I think from the standpoint of, well, if we believe that we can do better than $0.06 on a go forward basis or as we get fully deployed in some of the factors I talked about, those investors that have – that have come into the stock will receive and achieve that that value. And just felt that that was a better message to send to shareholders more broadly, not just those who participated than then everyone to say, look we're going to cover our dividends. We hope that you see the long-term value and strategy here. We've got our Manager put in $40 million every officer and every Board member fully subscribe to the rights offering. So we all believe in the long-term strategy and just think it's important for us to continue the pressing we set of ensuring that we cover our dividend. We certainly took into account the market conditions and whether that would – that would perhaps delay deployment. We're not saying, I'm not saying that it will, but just that was certainly part of the discussion weighing on, on the overall decision.

Right. Thank you.

Our next question comes from Howard Blum with UBS. You may not go ahead.

Good morning. In the supplemental chart you put up you showed a sensitivity analysis to increasing LIBOR rates up to an increase of 1%, while none of us can predict the rate of increase of interest rates, clearly the direction is clear, beyond 1% is there any sensitivity or does it flatten out at that point?

No. It would, there would be, that trend would continue, right? It's hard to – that interest rate sensitivity is focused solely on the index rate, right? So if you – if the index goes up in general we have more assets and liabilities, so that trend would actually be positive, but if that that relates to steady spreads. So part of the reason for the sensitivity, again, this is as you look through the long-term investments of the platform as we put new assets on; some of our legacy assets burn off, but those assets that we put on are going on. We have assets that were put on when LIBOR was extraordinarily low, close to zero. We have assets that are going on today. So the floors and the impact of dramatic swings will have probably the greater – the greater the change to the index, the bigger the impact because of the floors that we have in our loans that are set at whatever the levels are at the time that we reshape the loan. So some of that – some of the interest rate sensitivity is muted because of floors that exist on the asset side of our balance sheet.

So in other words, if rates were to go up 2%, the number would be even larger than you showed as a negative impact.

No.

No, no.

It would flip.

It would flip. Okay. Thank you.

Yes. In general increase in short-term rates is positive to our earnings. Because as Jim said of the current floors that we have that are above LIBOR, its initial increases and in the short-term have a negative impact, but longer term and in general, an increase would have a positive impact.

Thank you very much.

The longer, the further back the asset was originated, you can assume that the impact would be – the impact would be worse or non-existent unless it were very high. But again, that's why I'm saying if we moved into a year from now a lot of the assets that that are not impacted by 25 or 50 basis point shifts would be impacted, right. So we would have the positive impact.

Thank you.

[Operator Instructions] Our next question comes from Matthew Howlett with B. Riley. You may now go ahead.

Hi, good morning. Thanks for taking my question. First, it's a goal to get through that mid teens, call it return on a CLO retain interest. I know you sort of said the market needs to come down. You're going to wait to see where it spreads shake out. But, one, if that's the goal, am I thinking the math right, that the capital raise $82 million, could adds up in like $10 million to net income after management fees? Is that math? Am I thinking about that sort of correctly, directionally where the performing net income, could go?

Directionally. Yes. I mean a couple of things. One would be I think the leverage is probably a little bit lower than if I understood. I think it's going to be roughly 20%. So 80 – four to one, we might be able to get a little bit of inside of that, like we have in the past, but BBD and the return profile. Yes, I think it's a currently kind of in a, low team return profile. If you did it, if you executed a trade for a day on a growth basis. I don't think that, we're suggesting that we're slowing down just to be clear. We are moving forward but we don't have to make by moving forward today, we're not making a decision to do something two months from now. But, so along the way, we're going to evaluate and explore all alternatives but we're still moving forward under the assumption that we execute a CLO in the short term. And if we're not going to execute a CLO, it means because, we've chosen a different strategy. And that's not in terms of probability in things that we're talking about, that's not our goal and that's not our expectation. It's just; I think in the last two, three years that you haven't really had to consider other strategies. And I think today's capital markets environment at least requires us to explore alternatives. But I think, as the management team, we still believe that the CRE CLO market is the appropriate financing tool for these types of loans.

Got it. I guess the way, I want to sort of summarize this is thinking about understanding where marketing conditions are and thinking about, thinking about the CLO market in other areas. I mean, is there any reason to believe that once the capital's fully deployed, if it's that sort of the rates, you feel are put in the, that the core EPS, couldn't go back up to sort of that $0.09, $0.10, per quarter area once fully deployed. And then on that note, you talk with some of the G&A savings that will happen, and then that secured term low – I want term loan, I want to ask you about possibly refinancing that. I think it's over 7%. Just talk about how we should think about, earnings picture when it all comes together.

Right? So the total deployed capital sorry, incremental deployed capital is probably closer to a 100 because it's the capital, excess capital we had on balance sheet plus what we've raised in the rights offering.

Okay.

Though, it’s – maybe it's in the mid 90s, but it's not, it's closer to a 100 than it is to 80. So yes, the earnings will go up by that much or expected to go by up by that much as we deploy that capital. We do expect to visit the refinancing or potential refinancing of our term loan and even look at, how we would, how favorable the preferred market is. We've said on prior calls that the, the prepayments penalties on the term loan make that, prohibitive to think about right now, but over the next 12 months or so, we will be working with our existing lender and looking at alternatives. So refi that, that would be accretive to from an – earnings standpoint. So yes, that's part of it as well on a per share basis. We've been undersized since we took over management. One of the reasons, we continued down the path with the rights offering and we still need to continue our capital raising is to get to a better operational expense efficiency level. And, this will help. So our per share G&A, should go down, should be more in line or, approach to levels at some of the larger competitors are at. But we need to continue on that growth trajectory to fully realize that benefit. So, ongoing – again, the long term view, ongoing refinancing or evaluation of our existing fixed capital step, that's the corporate level, reducing expenses on a per share basis, fully deploying the capital into accretive, hopefully long term investments that, that the deliver that return. And yes, our expectation is that, the $0.06 per share is something that we are hopeful. We can increase as we move forward, with all of those considerations.

Got it. So just to summarize, it's a $100 million in excess capital, you think you can refinance the term loan after 12 months G&A expense ratio should go down, and then you said the last part, the preferred is that I looked at it, it's trading looked like, your current preferred trading a little bit above par. Can you reopen that? I mean, how much would you with the new equity, common equity base? How much could that be increase?

Well, there's not a stated limit. We can just; we could raise incremental capital there. If the market, would bear it, we do have to – we have considerations around leverage that preferred structure is attractive from the stamp so of being perpetual. So there's not a limit to it. It's just a matter of what is the market, what is the market calling for in terms of rates and whether we think it's accretive from an earning standpoint. So, we still believe, now we've to continue to deliver earnings and return to what we've been doing for the last, three years. But raise, continuing to raise our equity base certainly our common base, but really any equity base is really important for us. So that we can de-leverage the entity as to corporate level a little bit more than we have and that that will continue to be the goal. And one of the ways will be to look at, refining what we already have and whether the preferred market is an attractive market to continue to raise capital. That's certainly on the table. On the term loan, I think that we looked at the step down; I'm going to put Charlie on the spot to give me the exact quarter where we think it starts to, to make sense. But I think it's the first or second quarter of next year, first quarter of 2023. So about a little less than a year from now.

Got it. Just last, real quick on MSR. It's now a good time to sell it. If you haven't sold it already, it's now a good time with the moving rates. Appreciate the question. Thank you.

Coming from – so, in addition to, in addition to just thinking about market and refinancing, we're already speaking for that lender, to have a discussion about whether there's a way to do something without having to go to market, to make that a more attractive piece of financing for the entity

Got it. Thank you.

And the question on the MSR is, as I say, that is it is at the point now where it's a very small asset relative to portfolio, we consider all options with respect to that, although well, this note that, it is very small. And so, the options for that are more limited just by its size.

Thank you.

This concludes our question-and-answer session. I'd like to turn the conference back over to Jim Flyn for any closing remarks.

Thank you all for joining. Thank you for the interest in LFT and the questions today. Please feel free to reach out with any additional questions or follow up. We'd love to talk to any investors or any of our analysts to give more information on or more detailed information on our strategy and where we are but appreciate the support that you've provided and appreciate you all joining us today. Thanks. And we'll talk soon.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.