Good day, and welcome to the Starwood Property Trust's Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Andrew Sossen, Chief Operating Officer and General Counsel. Please go ahead, sir.

Good morning, everyone. I'd like to welcome you to our second quarter earnings call. With me this morning are Barry Sternlicht, the company's Chairman and Chief Executive Officer; Boyd Fellows, the company's President; Stew Ward, the company's Chief Financial Officer; Cory Olson, the President of LNR; and Mike Berry, the company's Chief Accounting Officer. This morning, the company released its financial results for the quarter ended June 30, 2013, and filed its Form 10-Q with the Securities and Exchange Commission. In addition, the company has once again posted supplemental financial information to its website. These documents are available in the Investor Relations section of the company's website at www.starwoodpropertytrust.com. Before the call begins, I'd 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 in the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. The company's presentation of this information is not intended to be considered in isolation or as a substitute for 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 the company's filings with the SEC at www.sec.gov. With this behind us, I'm now going to turn the call over to Stew.

Thank you, Andrew, and good morning. This is Stew Ward, the Chief Financial Officer of Starwood Property Trust. This morning I will be reviewing Starwood Property Trust's results for the second quarter of 2013 and third quarter to date. I'll also highlight a variety of new and expanded items contained in the financial statements we filed this morning that now incorporate the operations of LNR and provide new segment level breakouts for our traditional lending business, for LNR and for single-family residential property business. Following my comments, Barry will discuss current market conditions, the state of our business and the opportunities we see looking forward for our newly expanded platform. Let me begin by pointing out that LNR's results and contribution are not for the full quarter, since the acquisition closed 3 weeks into the quarter on April 19. For the second quarter of 2013, we reported core earnings of $86.1 million before the transaction and restructuring expenses associated with our acquisition of LNR or $0.52 per fully diluted share. Net of these transactions and restructuring expenses, which were comprised of professional, due diligence and severance costs totaling $17.1 million, core earnings stood at $69 million or $0.42 per fully diluted share. GAAP net income for the same period, inclusive of these transaction expenses, totaled $62.3 million or $0.38 per fully diluted share. A component of the $0.04-per-share difference between GAAP and core net income is an $8.5 million expense associated with an accounting anomaly regarding change in control payments to LNR executives per their old contracts, which are deemed to be expenses of Starwood Property Trust under GAAP, but which, in fact, were always contemplated as a liability of the sellers and were fully funded by the sellers at close. As of June 30, 2013, GAAP book value per…

Thank you, Stew. Now we got a little more complicated. Good morning, everyone. I've got to use this opportunity to talk about where we've been and where we are and what we see in the market today. We are approximately 5 days short of our 4-year anniversary of the birth of the company. I'm really proud of what we've done and the accomplishments of our team, and use this opportunity to thank the team that's made this company as one of the biggest and most successful in this year in the public markets. So far, in 4 years from a standing start, we've invested more than $9 billion of capital. And we've done so, it's interesting to note, even though credit spreads have come in and the world has gotten more competitive and lenders have entered the market, the leverage yield on our core business is about what it was when we started. And as we told you during multiple conference calls over the last 4 years, as our credit facility spreads narrowed, we were able to keep our net yields on our mezzanine positions or I call them the [indiscernible] relatively consistent despite the volatility in the market. We have now built up the largest commercial real estate platform in the United States and with a total enterprise value well in excess of $7 billion. I am really proud to say that I recently saw some data that said we are the best performing, not only are we big, but we are the best-performing commercial or residential mortgage REIT over this time period in United States. We also secured something like $2.4 billion of credit facilities, and when we started, we couldn't get any credit facilities, from 7 district [ph] institutions, and we've completed 2 very shareholder-friendly converts that…

[Operator Instructions] And we'll take our first question from Joel Houck with Wells Fargo.

I guess the first question is maybe obviously, the origination pace in Q2 and post-Q2 is very robust, and maybe that's a result of some spread widening we've seen. Maybe if you could comment and provide a little more color in terms of where you see value in kind of what I'll call the traditional Starwood business and what the pipeline looks like going forward.

This is Boyd. The pipeline today is as robust as ever. It's -- I guess, it's a combination of a whole host of things coming together. It's very common that before, we've become sort of a go-to player for big transitional transactions. Right now, the pipeline itself is very diverse, both by a property type as well as geographically, domestically. And then there's several solid deals in the U.K. that feel imminent [ph] . It is the competitive environment, but in the end, there's a very short list of players that we compete with on these large transactions. Retrospectively, if you go -- our average transaction was roughly $65 million to date, but if you look at our current portfolio, our average -- the average transaction in the current pipeline is more than double that right now. So we really are focusing on a lot of large transactions, that our scale enables us to, as Barry said, feel like we can win them when we want. One other thing I would just point out is that one of the things that I love about this business especially when LIBOR is at 25 basis points is that virtually all the transactions we do we're lending to a borrower who's got a transitional underlying transaction, and so by definition, they need prepayment flexibility, and by definition accordingly, they expect the loan to float. So we're really building an enormous portfolio of loans that float over LIBOR. And when LIBOR's at 25 basis points, that feels pretty good to me. The overall pipeline, I'd say is, what is it, $3 billion? It's right now, pretty big. I didn't even want to use -- I didn't want to -- it's solid, and we're calling through it and picking our -- we call it cherry picking, picking up deals we really like the most.

Well, and I'll point out that it is difficult as it's always been and that's been consistent quarter-to-quarter on the timing of the closings. We don't get to choose when the borrower closes. And we like it when the asset close because then we know we have to close. But when they're just doing refinancing and the work in Europe particularly, guys are usually buying back their loans, term loans from a bank or -- and then they keep negotiating and it's sort of hard to predict. And the good news is we have many pieces of paper today. We're not -- we don't have 7 loans, we have over hundreds of loans, over 100 direct loans and obviously LNR of $17 billion of special servicing assets. So the pipeline is -- as I said, ebbs and flows, right now, it's flowing. It's not the ebbing part. It's flowing.

As Barry said earlier, the spike in rates helped cause the back up in the CMBS world, which pushes people back into our hands. So that really helped, and we're still feeling that.

And one other nuance with the market, as you probably know, the wise [ph] companies tend to be more aggressive in the first half of the year than the second half of the year as they put out their allocation. So that's good for us, and we'll see how that works going forward.

Okay. I guess more of a numbers question. The income tax provision for LNR, it looks like about 25%. Is that indicative of what we should model going forward, that rate?

Can you repeat that?

It looks like the income tax rate with respect to LNR, the TRS is around 25%. Is that a good estimate going forward?

This is Stew. I'd say that's on the -- I would say that would be the high side. Their earnings for the quarter were very -- were lumpy and very strong. We had a few sort of extraordinary, as it occurs in that business, recoveries of -- ease in recoveries and some other things that pushed income up for the quarter. In general, we do expect the quarter to be in sort of a more normalized run rate. We'll probably have a little lower tax rate.

They're at $40 million in 18 days that weren't included in the quarter, so they nearly doubled their earnings in 18 days. They just -- all that money just went against the goodwill provision for the company and bizarre accounting. So we effectively reduced the purchase price by $100-something million. They earned while they were kind of being held at for our benefit, and we got the approval to close the company. It's -- I'll say this about the LNR transaction. So far, the pace of the diminishing of the special servicing book is ahead of our forecast. It's not going down as fast as we thought and modeled. And Cory and his team have done a pretty good job of rightsizing our G&A ahead of our estimates. So yes, we're -- and we're deploying capital, which we didn't really model the B-pieces, which is a new line of business for us. It's hard to predict, but they are uniquely qualified to be fueling special servicing in B-piece buying because I know many of the loans, and they can underwrite them in a way we never could because the loans are different, small and just too many of them. So all of that stuff is we hope very accretive to the company long term. And I think we're one of the top 5 B-Piece buyers. But even there, we choose not to bid on certain paper, and they're pretty picky.

And Joel, this is Andrew. One other point to make is that, as Stew mentioned in his remarks, when we've modeled this transaction, as we restructured it today, all of the special servicing income sits within the taxable REIT subsidiary. We have been looking at ways and have been in dialogue with the IRS as to different structures to use to potentially move some of the special servicing income out of the TRS, which, depending on what tax rate you want to use, could provide some incremental...

Don't model that. If we can get it done, that will be great. We'll let you know.

And we'll go next to Ken Bruce with Bank of America Merrill Lynch.

My question really kind of starts with where Barry was ending his comments in terms of the size of Starwood Property Trust. It's obviously grown quite significantly here in the last few [ph] years. And I'm wondering, is there any natural place that you think this business should be in terms of its ability to turn over capital and essentially support the lending function? How should we be thinking about the longer-term growth potential for the company because you're kind of in the situation where, as you pointed out, the market opportunities are quite attractive, there's been the ability to raise capital in an accretive manner. Where do you think this business naturally should get to?

Well, it's unclear. I don't know the answer to the question. As long as the market appreciates what we're doing and we're delivering, I'd say terrific dividends at a very attractive risk profile, I think they'll continue to be open and support the growth of our company. And if we can do that, keep the stock of [ph] book value or even higher than book value, like that may be spread further away from books. It can be a better machine the bigger it gets. And I kind of look at it a little like Wells Fargo Bank, and I'm giving them a compliment here. They survived maybe better than some of the other real estate-laden banking institutions by keeping their LTVs quite low. And the real estate -- they're the largest lending bank in the country, and they should by all rights have seen that disaster when the world ended in '07 and '08 given their book. But because their LTVs are low, they also had lower funding costs than many major other institutions, and they weathered the storm pretty well. And I think for us, we're trying to follow the same kind of philosophy, better loans, bigger assets to allow us to borrow on our credit facilities or secure fixed-rate or floating-rate seniors on our paper at tighter spread, yielding higher ROEs. And then we have to have other cylinders that thinks [ph] business lines that we can execute on when there's nothing to do or less attractive things to do in our other -- in our core business. So we continue to explore other areas that we might want to be in lending, without getting too exotic. I don't think we should have to explain in gross details and you not capable of modeling things we're doing. We're not going to go into Angola and make loans on gold mines with [ph] kickers. Not that there's anything wrong with that. It's not our business plan. So we're going to keep this as core and understandable as we can. And we think, long term, the shareholders will reward us for that.

Right. And just in the context of the market opportunities you -- that you're -- we're viewing today, is there evidence of any diminishing returns? Have you -- we've been very encouraged by the ability of Starwood to produce very consistent returns over what has been, looking back, a very unstable market backdrop by many respects. So are you just able to essentially pivot towards different parts of the market that give you this return bogey that call it the 12%, the 13%, 14% range? And do you see a kind of a collection of opportunities that are out there? Or are we seeing any evidence of diminishing return, that it's just been interrupted by, in a sense, the back-up in rates in May and June?

I'd say that the market's gotten tighter. I'd say that, overall, it's tighter. Maybe at the moment, it's better for us. European yields are a little better than domestic yields on the retained piece. But I would say that, like-for-like, you're probably a couple hundred basis points inside of where you started in '09, like [ph] just scrubbed it directly. I mean, I had credit facilities that were wider by probably 100 basis points from where they are today in '09. So that absorbed some of the decrease in pricing that you had to chase to stay competitive. But I would say 10% to 11%, we have seen guys in 8s and 7s. And again, if you're buying off the Street, you see mezzanines at 7%. We don't play there, and we have to be the manufacturer, not the buyer off the Street. We will not be competitive. You see still many money market funds, hedge funds, big money managers buying paper at -- fixed paper at 7%. And again, for those of you who are new to our business and we are writing very wide mezzanines or B notes. So we make a loan, with the average loan-to-value is 65%, the A note might be 45%, 50%, the B note would be 15 points in the LTV stack. In the old days, that B note would have the same yield, but B is 72% to 73%. It might have 12% yields but of a totally different risk profile because it was 1 LTV basis point or 100 basis points wide. So there's more safety in it. And as you look at that sheet that we give you in the disclosure statement, it shows you that almost -- if you took out the 50% -- the 0 to 50% portion of our book, our permanent book, which would be AAA, that would trade today at 105 [ph] over the curve. So the -- like in this curve, if the average duration of paper's less than 5 years, the curve's about 30. That would be 230 [ph] paper, something like that. And we're paying out 7. So it's kind of a so far, so good. But I will say that we will have to follow the market. If peers are price leaders and start winning every deal because all they want to do is be big, we're going to have an issue. So we're trying to keep our ROE up and -- but it's good that the market has sort of sorted itself out. We don't have in a public market that many guys who can do the scale of what we can do. So...

Okay. I was going to add, you were asking about diminishing returns. I think that our scale and the rate at which we've grown, has been a huge advantage and allowed us to avoid having to go down to the lower -- those yields that people -- when people are buying things at 7% or 8%, those are typically very small shops that are -- that don't have the scale and the enormous number of [indiscernible] .

And they can't warehouse the deals, so we'll talk about for one, as the example, is the loan we made on Hudson Yards. There, we haven't sold them, we are funding the construction ourselves. Though [ph] spread was wide enough and a structured transaction that it's -- I think I won't tell you what it is, but it's pretty damn good. And later down the road, we're going to lever that position. We're not going to lever it today. We're going to wait until we get a really good price on the A-note when we sell it, and that'll boost the yield on the paper substantially higher, probably 400 to 500 basis points higher than it is today. And that's a big loan. But we can do that. We have a balance sheet to do a very large transaction as we did in 701 Seventh Avenue. So I think those are really poster child deals that are kind of things we want to focus on. And the best case for us is a 40% leased office building in San Francisco or where the debt yield's low, the lenders don't want to do it, and we step up and make the loan because we feel very comfortable on our basis [ph] on the loan and -- so then we get paid for that.

Sounds good. Well, you've had some amazing -- your pricing discipline or just stayed out of the price-sensitive parts of the market, so congratulations for that.

And we'll take our next question from Jade Rahmani with KBW. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: I wanted to ask what kind of runoff rate you think is reasonable to expect on both the special servicing portfolio and the legacy CMBS portfolio? You mentioned the runoff was coming in better than you expected. What do you expect in modeling in your guidance? And also if you could comment on 2014.

We don't do want to do that yet. And like I said, it's kind of a -- obviously the company has its view, and we don't want to give you that view yet. I mean, we'll probably update our guidance at the end of the third quarter for 2014. I can't say it's directionally up, not down, but we don't know. It's a funny business because it's not that easy to model parts of it. And I don't think -- what Stew mentioned, the fair market value marks on the CMBS book, I don't know if that's going to be a big deal if rates kind of just sort of stay here. Our view, by the way, relevant to our businesses is that rates probably won't move materially over the next 24 months or 48 months. Maybe you'll see it 2.75%, 2.85% to 3% or maybe even go to 3%. We're fine with that. That's actually good for us. And it is, as Stew said, you have this -- I mean, Boyd said, you have the big call on LIBOR. If they ever increase LIBOR for us, we're going to earn better numbers. So embedded in this is, is a free call on interest rates, which is kind of interesting. And we would clearly increase our ROE dramatically if short rates went up. Well, somebody mentioned short rates. It really isn't short rate. They're our friend that's -- the long rate is -- being volatile is good for us because it keeps the conduits kind of sidelined. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: With the -- do you view the rate volatility as potentially slowing the runoff rate on LNR? Is that what the driver is or...

That's an interesting question. I mean, higher rates are good for LNR obviously. There's more defaults, more things will fall into special. I think their named servicer at 100 -- it's $110 billion [ph] or something.

131.

Is that Cory or...?

Yes. 131 deals.

Thank you for that. And, Cory, do you want to answer that -- any of these questions? You want to give him a little color, so they can...

Yes, I think clearly, to the extent that we have a rising interest rate environment that, generally speaking, is going to drive more defaults and more assets into the SS [ph] book, I don't think, per Barry's comment, we want to target a specific number of runoff for you for the SS [ph] portfolio. I will tell you we monitor it on a monthly basis. And as was mentioned, I think, in the opening remarks, our fee income, our special servicing fees are coming in significantly higher than expectations. And the portfolio is tracking right about on plan, so both good factors for us, higher fee income and the stability as it relates to our underwriting for the runoff in the portfolio.

When he says plan, he's actually not talking about Starwood's underwriting, they had [ph] a plan that was more aggressive than our underwriting for the acquisition. So they're doing just fine. I will mention that the CMBS book that we have is fairly short duration. And you can see by the financials, by the disclosure, that we've marked it at a fraction of its face, right? I mean, it's like, what, $0.20?

Yes.

$0.20, so that's -- we have this natural hedge, which is kind of fascinating. And they're unique among the special services in the scale of their CMBS books. There are other -- there's 2 other major players, they don't really look like this. So you have -- if the rates get -- go down as CMBS is worth more, and if rates go -- and the special services are worth less, maybe because you can refinance and the opposite holds true, if rates go up, the servicer gets more stuff, and the CMBS might be worth less. But we're pretty -- there's a lot of -- some of what we own are fairly liquid positions and as Stew said, we mark [indiscernible] checkmark so we're hopefully bordering on being conservative. And I think I can tell you for a fact, we're pretty conservative. On a number of things that we have trouble marking, we just don't mark them or we keep them at 0. So they wind up being positive surprises. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: I have 2 other quick questions, one, on Auction.com, whether your earnings for the quarter included any of those -- the 50% share of those equity earnings? And then just on the single-family if you, in addition to concerning a spinoff, would consider combining that with another existing entity's portfolio.

So, Cory, we only take earnings from Auction when we get distributions out of Auction. I don't believe we got any. Cory, is that correct?

There was a small distribution, less than $1 million. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: So you're seeing nothing for that?

Don't forget we own 7.5% of that -- of the company. Is that 100% or is that -- because of the warrant, how many additional fees was...

We're only half the 7.5%.

Right. That's right. We're only 3.75% as of right -- that we own of them right now. It's kind of tiny. And there's a warrant for additional equity in their company, depending on what we contribute to their platform for sale. For the moment, it's at 0, it's an asset that has no income coming out of it for us. What was the second question on that, was it about combining them? Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: Yes. On the single-family residential portfolio, you've put together -- I mean, there's several existing public entities that are trying to get scale. Would you consider combining your portfolio with another company in order to accelerate the size and scale of the operation?

Possibly. I mean, you could also see us be a consolidator, we'd do the opposite. While we might not be the largest, we're the second largest, potentially, of the public companies that filed, was it [ph] Silver Bay and RCAP, I think that's what it's called, as being smaller, and we're twice the size of those guys. We're un-levered at the moment also, so that not only is no earnings but there's no leverage against it. And the -- I think you're going to like we're going to do there, so hang on to your chairs.

We will go next to Stephen Laws with Deutsche Bank.

To kind of follow up on the single-family residential strategy, can you maybe talk about the timeline to expected cash flows with regards to the homes that you've purchased versus those acquired through the NPL strategy. Looks like, from the supplemental deck, that, that business had about a $0.03-per-share drag on core earnings. So can you talk about kind of the outlook of when we should see that move to breakeven and then a contributor to core earnings?

Yes, NPLs, obviously, are nonperforming loans, so they don't have much in the way a coupons associated with them there. The loans there in Florida, we had a pretty interesting development in Florida, which is they shortened the foreclosure process and that -- so that -- those loans, they'll be there -- today, if you bought NPLs in Florida, they will be trading tighter than what we bought, just the process is kind of cut in half of the eviction [ph] . What you see in the loan book, by the way, is you're going -- we're going to -- some of those assets, we'll just sell. And we have sold houses that we've gotten back that don't fit our geographic footprint or core portfolio. Others, we'll remodel in terms of rental pool or -- and others, we'll continue to work through the inventory. Our largest concentration, as you can see from the deck -- the closure deck, is in Florida with nearly 2,000 houses in loans. So that's not an accident. We wanted to be in that market. And I think all these companies here have different footprints. And just like the Avalon Bay and the associated estates, eventually, the markets will separate between the footprints of the companies and decide that my coastal strategy, it might have been a higher -- the Avalons, and we're worth more and traded better than associated states because they're in the middle of the country without any kind of growth. You might ask why we did this in the REIT to begin with. You haven't ask, but I'll tell you. So the reason was that we expected that as home price appreciation accelerated, more of the total return would come from appreciation and less from current yields. And in fact, the inverse…

Great. I appreciate the color on that. I guess one more -- just kind of a more specific question to guide us. When we think about the new range, x LNR transaction-related expenses of about $2.04 to $2.24, is that comparable number for the first half there, the $0.98, basically, the $0.52 in Q2 and the $0.46, which will be core, x related expenses in Q1?

I don't really follow -- I'm not following your question.

Okay. I'll ask you guys -- I'll follow up with you guys after the call to try and...

Yes, sorry, but it's a clean year last year. What do we do in 2012 for the year.

Without LNR? We did 1 -- what do we do last year, we did $1.97 last year or some, right?

I was looking at the first half this year. I think you reported second quarter core, x the $0.10 in LNR, it will be $0.52.

That's correct.

And Q1, I think, was $0.46. Is that accurate? Were there about $4.5 million of expenses in Q1?

Right.

Okay. So those are the 2 numbers that would compare to the core guidance of $2.04 to $2.14 for this year?

That should work. Sure.

$2.04 to $2.24. Great. Just wanted to make sure I was getting the right numbers.

That's correct. Yes.

[Operator Instructions] And we'll take our final question from Dan Altscher with FBR. Daniel K. Altscher - FBR Capital Markets & Co., Research Division: Yes, just thinking about the taxable earnings that's now going to be coming out of LNR, how do you think about that in terms of dividend policy? Is there now a targeted payout ratio on, I guess, gap for core earnings that you can think of that incorporates the taxable earnings that are coming out of LNR?

Obviously, REIT regs still apply and we still have to pay 95% of our taxable income. I don't want to really comment on our dividend policy ahead of the board because it is -- we like dividends to go one way. I guess, it was a year -- 2 years ago, we did a special onetime last year, and we decided we didn't get any benefit from the shareholders for that, so we did raise the dividend instead. And of course, given -- if you look at the guidance, and you can take estimate of what we might do. But we'll also be looking at the 2014, obviously, and the pace of what we're doing and where the stock is. And then one of the things that we do -- I mean, we've done $9 billion of transactions and -- while market cap is x, less than that, we are recycling capital aggressively. There are loans being repaid [ph] seeing the [ph] CMBS being paid off or NPLs being sold. So we are redeploying. And our pipeline of the loans, if we close it, it might not be that we have to go out and raise new capital. It might be capital that we -- we look at our maturity schedules. And when we're open to repayment, and we try to -- we kind of like some of the -- the difference between the commitment, I think, in the quarter were like $850 million, and we funded $550 million, something like that. So we kind of like that because we know that we can match that with repayments on our loans coming in. So we look at the whole book that way and say, "okay, we got these loans coming in, they are paying off, and we have the -- we know where the proceeds are going, they're going on this loan, on Hudson Yards, for example. So that's actually -- we're trying to manage our ROE that way. What we don't want is cash. We don't want cash. It's a very derivative thought [ph] . Actually, it's the moment we don't want cash or houses. We didn't realize -- I'll explain. I would tell you, we didn't realize just how much we'd hurt ourselves, from an earnings perspective, not from a value perspective, going into the -- that business. Daniel K. Altscher - FBR Capital Markets & Co., Research Division: Yes, no, I mean, I guess it's kind of part of the market's phenomenon, too. Right? And then just last couple of months haven't been good for [indiscernible] rental space. Barry, just one last question. When you think about the recent securitization that you, I think, just completed or maybe in the market as selling, how can we think about the returns on your share of the subordinate pieces that you are going to be retaining?

Well, I mean, I think the right way to describe there are -- I mean, there are a couple securitizations that were -- have been in the marketplace recently, so I'm not quite sure which ones you're discussing. There are some we may -- the Eleanor conduit unit contributes loans on a very, very systematic basis. They have one of the quickest turnover rates in the industry, so they're contributing to 5 or 6 securitizations a year, and they haven't had recent sales. We also have a securitization in the market involving one of -- a large loan that we -- that effectively, the commercial real estate division originated, and that securitization is really akin to an A-note sale for us. It's a securitized sort of sale of the senior component of a loan, very, very much akin to the sale of an A-note. So if -- were you referring to the... Daniel K. Altscher - FBR Capital Markets & Co., Research Division: Yes, I was referring to that latter transaction.

Yes. The right way to look at that, is that's a substitute for either A note sale yields or warehouse borrowings, that you can assume that if we undertake one of those transactions, that, that's a transaction that is accretive to one of the lot to stay, a warehouse line for the same asset. In this particular instance, it reduced our borrowing cost by 25 to 30 basis points. But it importantly improves the -- it creates a perfectly matched funded, non-recourse, non-cross-collateralized financing source. But all -- for all intents and purposes, it's leveraged to produce that -- the B-Piece that we retain.

And it opens up lines and stake for the line, so it creates additional capacity for us.

And we've talked about a lot in the past. If you look -- we relentlessly utilize the sales of the A-note markets, whether they're through securitization or direct sales. As substitutes for line draws [ph] , it gives us current market, again, at market pricing, and it has all those positive risk-related attributes, whereas, in fact, if you look at the aggregate amount of -- I mean, "financing activity" we've done since the beginning of the year, my bet is A-note sales dominate new draws [ph] online [ph] by 8:1.

It's 8:1. And what the lines wind up functioning as is a warehouse for us to let the asset sit on the lines, while we run an auction and eventually sell the A-notes. In some cases, it could be 100 basis points tighter than what we were paying to have them on the line. They're a great vehicle for us. The lines to the A-note sale is interesting. In the CMBS business, people put long-time, short-term warehouse lines and sell the deals and the securitizations. In our case, we're essentially putting the loans on matched-term long-term lines, and then ultimately sell A-notes.

We are -- as I mentioned in my comments, we are working with our lenders to lower our spreads on our credit facilities to keep our -- us competitive. I'd say the bad news is we are in business for so long before this time period is that we have heritage spreads which are wider than market today. So the team assures me that's going to change. So we're going to -- a lot of effort is going into [indiscernible] extend and restructure in ways that facilitate using -- we got to be competitive on both sides of our balance sheet. Daniel K. Altscher - FBR Capital Markets & Co., Research Division: Right. And I guess the other synergy that comes along with that, that I think LNR was also named the special servicer on that transaction to you, right?

Oh, absolutely. We'll use those...

We hope that, that deal never goes [indiscernible]

[indiscernible] is if they don't make any money.

[indiscernible] Not make any money on that.

Let's assume that's of no value.

And that concludes our question-and-answer session. I'd like to turn the conference back over to Barry Sternlicht for any closing remarks.

Well, I do think it was a transitional quarter but an excellent quarter for us. It was a lot of tough work by a lot of people in both Florida, the Miami headquarters at LNR, and the team in San Francisco, as well as some of the people that will clear out the grass at [ph] the headquarters. So I want to thank them for -- in behalf of the shareholders and the board, for doing a great job. And I think it will [ph] be easier now. I mean, this was a complicated quarter for us. Closing the books this quarter was a Herculean task. And LNR has 1,000 little pieces, and we've gone and still going on -- going forward, we're actually collapsing the accounting system and other software and programs onto their system, so that is ongoing and moving ahead nicely. So again, thank you all, and we look forward to our next quarter with you.

Thanks, everyone. That does conclude today's conference. We thank you for your participation.