Greetings. Welcome to Starwood Property Trust's Fourth Quarter and Full-Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. At this time, I'll hand the conference over to Zach Tanenbaum, Head of Investor Relations. Zach, you may now begin.

Thank you, operator. Good morning, and welcome to the Starwood Property Trust earnings call. This morning the Company released its financial results for the quarter and year ended December 31, 2023, filed its Form 10-K with the Securities and Exchange Commission and posted its earnings supplement to its website. These documents are available on the Investor Relations section of the Company's website at www.starwoodpropertytrust.com. Before the call begins, I would 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 during the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. A 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 our filings with the SEC at www.sec.gov. Joining me on the call today are Barry Sternlicht, the Company's Chairman and Chief Executive Officer; Jeff DiModica, the Company's President; and Rina Paniry, the Company's Chief Financial Officer. With that, I'm now going to turn the call over to Rina.

Thank you, Zach, and good morning, everyone. Starting with our results. We reported distributable earnings or DE of $189 million or $0.58 per share for the quarter and $663 million or $2.05 for the year. The strong quarter was highlighted by contributions across our businesses, although it likely does not constitute a run rate. We had outsized performance from our conduit this quarter after a slow start to the year, and also had $0.04 of earnings related to commercial lending repayments, including prepaid penalties and foreign currency hedge online. GAAP net income was $71 million or $0.22 per share for the quarter and $339 million or a $1.07 per share for the year. GAAP book value per share ended the year at $19.95 with undepreciated book value at $20.93. These metrics were impacted by an increase in our commercial lending reserves, including increases in our general CECL reserve charge-offs and impairments related to REO properties totaling $129 million and $351 million for the quarter and year. I will begin my segment discussion with commercial and residential lending, which contributed DE of $205 million to the quarter or $0.63 per share. In commercial lending, we originated $707 million of loans, which brings our full-year originations to $1.1 billion. Repayments of $815 million in the quarter and $2.9 billion in the year, outpaced fundings of $664 million and $1.7 billion. Our portfolio of predominantly senior secured first mortgage loans ended the year at $15.9 billion with a weighted average risk rating of 2.9. This is consistent with last quarter despite downgrades of four loans totaling $502 million to a four risk rating, of which $450 million were U.S. office. Offsetting this were upgrades from a four to a three risk rating, totaling $197 million, including a $159 million formerly vacant office loan…

Thanks, Rina. Our industry originated more loans from late 2020 through early 2022 than any other period in our history, thus creating a significant amount of initial maturities in the late 2024 and early 2025. Fortunately, the 10-year treasury yield fell 100 basis points in the fourth quarter and forward SOFR made a similar move and is now pricing at a 175 basis point reduction to 3.6% in 2025. While this more optimistic interest rate environment has reduced tail risk for the 90% of our assets that are not loans on U.S. office. The rate move to date has not been large enough to materially change U.S. office market outcomes as office pricing also has to deal with lower net effective rent, the persistence of work from home and a lack of liquidity in the office lending markets. Being managed by one of the largest real estate private equity firms in the world, asset management has always been a hallmark of our company's outperformance and our entire team is focused on asset management today. We have had net realized gains on REO to date, but with lenders continuing to move away from the office sector, we have had multiple asset sales fall out of contract at our basis in recent months, and we are evaluating alternate disposition plans. Rather than wait for a better option that may not come, we have uniquely moved over $600 million of loans into REO to date. These assets are now the focus of our asset management teams and our goal is to maximize shareholder value. We will continue to evaluate options including adding capital and repositioning assets rather than quickly selling into a distressed market with seller financing that could put a longer term drag on earnings. Rina mentioned we placed a $124 million…

Thanks, Jeff. Thanks, Rina, and thanks, Zach. Good morning, everyone. I wrote a colorful quote in our press release, but I do think it's worth noting that the real estate industry just has a balance sheet crisis. It's affected nearly every asset class, maybe safe data centers. But even there, yields on costs have to rise to reflect the increased cost of capital. And the real estate distribution caused this economic situation. We were just an unintended consequence. But a material consequence for cities and municipalities as values drop and real estate values – real estate taxes based on values will come down and cities and municipalities won't be able to fund their police fireman, waste management and schools. So the Fed has three victims of their current policy, and we are headed towards 300 basis point real rates unless they were lent. The first is the government themselves saying 5%, 5.3% on $33 trillion, a third of which rolls over this year. The second are the regional banks, which cannot stay solvent with these current interest rates, with $1.9 trillion of real estate exposure, not to mention the mark-to-market or not required mark-to-market on the securities book. And the third would be probably the entire real estate industry in the complex. People talk to me about the level of rates in the 4.3%, 10 years is not an issue. We all could adjust to it. We've adjusted to it before. But simply the pace of the increase, the rapid increase and of course, the statements that we were going to stay lower longer in December of 2021. And then actually easing into May of 2022, and the fact that the Fed relied on stale data or very delayed data for a third of its CPI, so when rents were…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] First question comes from Sarah Barcomb with BTIG. Please go ahead.

Hey, good morning everyone. Thanks for taking the question. I'm wondering if you can talk a bit more about your new focus on middle market lending strategy. What's driving the decision to enter that market? Is it mostly a function of regional banks backing away or maybe reduce takeout liquidity on the large balance side? And would you consider looking at an existing middle market loan portfolio or primarily focused on new originations? Thank you.

We definitely look at existing books if they were, I mean, they have to be performing. We're not really in the NPL business here. It's just – it's really hard to run a public company because you don't have any earnings until you can restructure the loan, and that would – it may not be much return on capital. As far as middle market, if you look at the pyramid of opportunities in the world, it's a pyramid that the biggest deals, over $1 billion deals, which we've written loans as large as I think $800 million. There are not that many of those. And today, there are not many large transactions being done. And most of our opportunities are refis, $160 million of multi loan. Those are the kinds of things you see at the moment, there are not any really giant transactions being financed, and most of those will probably get done in the CMBS markets right now. So in terms of opportunity, there are the best opportunities in the middle markets and the smaller loans, which have been cleared out by the regional banks, which are not lending. So recently in two different situations, we went out on assets we own, not in the REIT, but in the Starwood opportunity funds and one was an office building fully leased in Tennessee. The other one was a hotel in the Midwestern state. And you send out 128 books and you get four letters of intent and they're all from debt funds at 500 over. So we want to play in those markets. And the gentleman we hired to do that is actually sitting to my left. Say hi.

Hi, guys.

That's Pawan Melgiri. Pawan joined us from Stellar. He was at Citi and Wells as a banker before that. And after Wharton, he spent nine years, I guess, at Stellar running. There are investments on both the debt and equity side, and we're super happy to have him joining us this week. So we'll be a few work in progress.

It's just another cylinder. It's obviously in the same sector, but it's a totally different scale asset. If we can build a giant book, that's a couple of billion of dollars of mid-market loans would be very happy.

Barry gave you the reasons why we're unlikely to buy a portfolio of loans. We like current loans. We don't want to bring in 4s and 5s, and we like current income. So as we've looked at that, we've also talked to probably three or four different middle market lenders about us buying a team, partnering with the team. We looked at a lot of different ways to do this. And ultimately, we decided with the data we have, with the infrastructure we have, that it made more sense to build this internally. And we realize that these are going to be smaller loans. We're not going to have 75-page investment committee decks on smaller loans. So we're working on ways to scale this business, using India resources and other that will allow us to scrape data and potentially asset management and underwrite, but they'll still go through our credit process as Starwood Property Trust. The hardest thing for us over the years on this is been deciding how can we put the same amount of credit attention. We have a Chief Credit Officer. Many of our peers don't. We have a separate underwriting function, 18 people that do nothing but underwrite loans and bring them through investment committee for us. Our originators don't do that, at most other shops, that's what an originator does. They take it through fruition. Our credit process is very bank-like. Barry set it up that way in 2009. We've never changed from that. We don't intend to change from that. And we needed to find a way to be able to do this at the right cost, but we think it's a very large market, and we think it prices better than the large loan business. So we will earn a higher return on less dollars and hope that we can build it. So send us brokers, anybody, borrowers, please give us a call.

Marketing call?

It's a marketing call. Thanks, Sarah.

Thank you. Next question, Stephen Laws with Raymond James. Please go ahead.

Hi, good morning. Two questions this morning. First, regarding Woodstar. Rina, I think in your prepared remarks, you mentioned it was a third-party appraisal that drove the valuation increase. But can you talk a bit about the cap rate where that asset is today? What gives you comfort in that? And any color on rent bumps that we expect to see in the second quarter?

Yes, Stephen, thanks a lot. Rina did mention that we're required to get an appraisal in the funds that, that is in. And so we got our required appraisal that came in a couple of months ago. I think you asked about cap rate. It's basically a 4.5% in-place asset level cap rate. We expect that forward income as we look to May, when rents get given to us by the State of Florida again. We expect them to be higher. They're based on, formulaically, on median income and CPI, both were higher this year. We expect them to be not insignificantly higher. If you remember, last year, we had a 3.8% holdback on our rents that we were allowed to put through as it's the first time in the State of Florida did that. They wanted to make sure that we weren't increasing rents at a pace that tenants couldn't keep up with. We're okay with that. We know we're going to get the money down the line. So we expect to be able to add 38% incremental onto the median income and CPI. So this year will probably be another year that we will be a fairly high number. And because of that, we will probably get capped again. And we'll...

Just to figure that up, they allowed, I think, an 8% increase. By formula, it was like 11.3%, and the 3.8% or whatever, they did that rolls over to the next year. So we would think the rent – pretty certain, the rent growth of between 5% and 10%. And again, if it's above 10%, they're not going to let you take it. So it will roll into 25%. So that's not so unusual asset – let me – hold on a second. This is a very unusual asset class. You're 100% full. You're effectively full. The only vacancy you have is turning of units because your rents are 30%, 40% below market rents. So you run 97%. Actually, we have one issue with squatters in one city in Florida. But other than that, you're full and rents can't go down. So it's a totally different animal than market rate apartments, which are obviously softening in many markets. In some cases, rents are negative. New leases in some markets, given the supplier going negative. So you can go read Rick Campos' comments to Camden Property Trust or [indiscernible] and you get a very good sense of what's going on. Maybe the Fed should release these reports and adjust their numbers. They maybe they should fire 400 PhDs and get two people with a computer making full rents from rent.com and have one million data points.

Yes, Stephen, it's interesting. We are more – our rents – even though our rents have gone up significantly, and that's driven the value increase that you've seen on our financials, our rents are more below market today than they were when we bought the portfolio. So market rents have gone up by more. And to Barry's point, to being 99% leased, that sort of almost ensures it. So as we look to April, May, when we'll get more information on the forward rents, as I look at that in-place cap rate, the asset level cap rate that I quoted before, you can almost think of that as a mid to high-4s cap rate against where they see forward income coming at the – with the increases that we have coming.

But again, this sector of multi isn't impacted by new supply. Sadly, all of the 80/20 [indiscernible] deals. I mean, there's no affordable housing, not enough to be built. So you have no issues of supply in affordable. And that's one of the reasons for the differentiation to cap rate between what I'd say a market clearing price today would be for market multi and affordable housing project. You got a second question, Stephen?

Yes. As a follow-up, I wanted to touch on – I heard recently, you bought an $80 million loan out of a CLO. Can you maybe talk about that? How you think about managing collateral in your CLOs and kind of what drove that decision?

You're good. That just came out deep into the reports in the last week or two, but I appreciate the call. CLOs for us have always been an opportunistic financing. A notes are our favorite financing. They have no recourse, they're term. They have no credit marks, and they have no crop. CLO is our second favorite form of financing. We get rid of the mark, the ability to credit mark and we get rid of the recourse. And we've issued three CLOs to date, $3.375 billion in total of CLOs. And they've come in general, it spreads slightly inside, even with our issuing costs, slightly inside where our bank repo financing costs were and at slightly higher advance rates. That makes them very accretive to returns. And one of the things that makes them continually accretive for a longer period of time is as loans pay off that you reinvest in those CLOs. We've done that, I think, $1.1 billion of reinvestments on 53 or 56 different loans over the life of these three CLOs that we have, which has been very good for us. But we think of the CLO as a partnership with our bond holders. We intend to issue again when it's accretive. But again, it will be opportunistic. We've said before that having a CLO finance only public company is more of a trade and not a business. The CLO market does go away at times. We've seen it go away in the last year from being accretive to repo. And when it is accretive, again, we will be back in the market. As part of being a partnership with our bondholders, and they allow us to reinvest, and that allows us to keep a lower cost of funds because we're not paying down the…

Thank you. Next question comes from Rick Shane with JPMorgan. Please go ahead.

Hey. Jeff, just one quick clarification. The $260 million, that was in the fourth quarter or that was for 2023?

No, that's life to date. In the quarter, the – if you go into [indiscernible] you can see that we bought an $81 million senior office loan.

Got it. Okay. Thanks for the clarification. Look, I'd like to talk a little bit about two aspects of the – well, first, REO. You guys have basically indicated that you are positioned to be long-term holders of REO and think that you're good operators and that this mitigates to some extent the charge-off risk associated with it. As we think about distributable earnings, is there enough cash flow off of those assets to come close to replacing what you were generating as lenders?

Yes. It's a really interesting question. So a lot of the things that you're seeing go into our higher risk rated buckets, even the office, generally have four to six debt yields. They just don't have the seven or eight debt yield you might need to escape. So four to six debt yield means that there is cash after operating the – after operating the office building, there is cash to distribute. It's just not quite enough to distribute to cover a new interest – full interest loan. So there is cash flow coming out. So the drag is less because of that, Rick. So we will take that into account. We certainly – we've talked about a few assets that we would like to move on from because they don't pay current. We do care a lot about current income. So if an asset is sort of too big of a drag and it's more of an opportunity fund play where it's not going to pay something for an awful long time, that will be difficult on DE in the shorter run. I think you would only see us doing that if we feel really comfortable with our ability to cover our dividend away from that. If we started to feel like we were uncomfortable being able to cover it, we would probably move on those assets more quickly, and we wouldn't have the room. But fortunately, we've had some cushion in earnings, and we expect to have some cushion now so we'll be able to be flexible and choose what we want to keep longer and what we want. So I think we've seen some numbers this week on percentages of assets in REO. And you just asked – excuse me, in non-accrual, and you just asked about REO. Between non-accrual and REO, it's only 3.4% of our assets. So not a terrible burden yet. If you think – as long as you cover the dividend by 1.034x and they don't even kick off any cash flow, you are going to be able to cover the dividend. I just made a scenario where they do kick off some cash flow, and we cover the dividend historically by more than 3.4%. So we don't see it as a major drag to distributable earnings, but it could become one. If the cycle continues, it could become one, if rates don't follow the forward curve, and we are aware and at our battle stations that this could get more difficult. But today, we feel okay about it.

Just to quickly sum up, I mean, they're all different, some of these assets. And we get a multi back, it's probably yielding 6% or 7% to 6.5%. So but that's kind of where we would expect to get assets back. And if the cap rates for multis are not 6.5% today. So having said that, if it's a single asset partnership that borrowed against us, they may not have access to money. They may just don't have the capital or the investors don't want to put the money up. But again, that we would love to get those back. The challenging assets would be the office buildings, like 1200 K Street, which I think we have that capability and it's now unlevered on our books. We can borrow the money to renovate and turn it into an apartment. That will just take a couple of years to go through the development process. Or we bring in a partner, he either buys it for us, we JV it with him. He puts up the money to renovate it, and we just establish a base property value and we go 50-50 or something like that. So we have a lot of flexibility. I mean, one of our loans that we know is – I believe is money good. It's the American Dream Mall, which has had quite a long history. But I think we're probably $0.25 or $0.30 of construction costs on that asset, and it is ramping. It's burning through its free rent. The theme park is doing really well. I think it's making like $90 million of EBITDA. And we just got paid.

90% of our original underwrite.

Right. And we just got paid $50 million of the principal that's got paid down because we have cross-collateralization with another asset he has, another major mall, which did a CMBS transaction and funded $50 million to us for a base, for accounting like $0.69 or something like that. So – and I actually think we have a chance of getting a lot of money back. So there's upsides, too to our marks, and it's going to be all over the place. It's a little hard to figure out. In one situation, one of our borrowers had $400 million against the $400 million loan or half of their costs. And we do think that we are expecting them to walk and that’s a pretty [indiscernible] into household named borrowers. So that's a fairly significant hit to them. We don't want the building back. It's an office building. But if we get it back, that will be creative. The good news is we'll take the basis down appropriately, and it will be reflect in a book guide. Thank you.

Next question, Don Fandetti with Wells Fargo. Please go ahead.

Jeff, the conduit volume was up this quarter. Can you talk a little bit about gain on sale margins on that production relative to normalized? And is this like a one to two quarter type opportunistic? Or could we see elevated levels for more of a mini secular type trend?

Yes. Don, thanks. I have Adam Behlman in the room, who runs LNR and runs the condo business for us, so I'll turn it over to him. But I would say that we are looking at this year as a comeback year. I think 2024 will feel a lot better. We had a great fourth quarter, with the first quarter starting off really well. I'll let Adam talk about it. But we've been profitable in this business because Adam probably won't go here, pretty much every quarter since we took the business over in – or since we took over LNR, excuse me. And that's for a bunch of reasons. There's a lot of reasons for that. We don't tend to do the bigger investment grade tighter loans. We tend to do smaller sized loans where you have a little bit more cushion. And we hedge interest rates, and we hedge 40% or so of the credit exposure in the loans, and that's a very expensive thing to do, but it creates consistency. So we've been really excited about having a consistent book that we think has some upside this year as we're seeing some green shoots in CMBS. But I'll turn it to Adam to discuss.

Yes. I mean, I think you can say, look, it's going to be a volume game. I think our net P&L will be consistent to what we've been doing over time throughout our business within SMC. I think the big problems you saw in total, we did $760 million of origination in 2023, we're aiming to beat that much earlier this year than I think that would have its tighter spreads on CMBS deals. The less opportunity for other lenders out there, we’re just at the [MBA] conference, and we were – the CMBS lenders of the [indiscernible].

Left standing.

Yes, exactly. So there really isn't – there's a lot of people who realize that.

Not that many people at the ball.

Right. So it was good to see that. And we're seeing it. We're getting – our Head of Credit is bombarded, he hasn't gone home very early these days, and neither have I. So it's, I think we're seeing rebound.

We used to do 1.2 billion to 1.5 billion.

Yes. I think it's – I'm hopeful that we're certainly not going to see what we did last year, definitely.

Thank you.

So we don't really quote gain on sale, but I would say it's consistent with historic levels. And one other thing in the CMBS market that I find interesting. We've pivoted to having a decent-sized five-year CMBS market, and that's a newish phenomenon. We needed to get B piece buyers comfortable because it's – they don't have a long of a period of time to accrete from a lower dollar price and a B piece on a five year, so they have to buy a higher dollar price B piece. So that was a little bit difficult to digest at first, but I think people are realizing there's a lot of value there. So we look all the time at CMBS versus Dennis and Mark’s book of transitional floating rate lending. And today, I think the CMBS market we're quoting something like 275 over five-year swaps on a fixed rate basis for sort of multis, industrials, et cetera, maybe 350 over four hotels. And those numbers are really consistent with where we're quoting transitional floating rate, which are three-year loans floating with two, one-year extensions. So the pricing wise, if you can get the certainty of not having to deal with that role and you have cash flow that has debt service coverage that can get you into the CMBS market. The CMBS market is very interesting for that transitional borrower who has a lot – who has a decent amount of cash flow to go into in five years, where historically, they probably would have all gone into the transitional floating market because they didn't want to take 10-year debt. So that will help volumes. They're not quite as profitable because it's a five-year deal instead of a 10-year deal, but it will help volumes, and we think we can grow there.

We are part of every securitization that takes place in the non-banking five and 10-year world. And I'll tell you it's – Jeff's right, it's almost 70% of the new deals out there are really five-year origination, which is taking the place and why we're below the ball because we're kind of taking where – what the floating rate market was. But market again, the floating rate side here is open, too, on the mid-market side. So hopefully, that's going to allow us to really capture a lot of that business.

Good for borrowers to have choices, and we think they have more choices now, it's good for everybody. Thank you for the question, Don.

Next question Jade Rahmani with KBW. Please go ahead.

Thank you very much. Are you seeing any projects eligible for conversion to data centers as an alternative use? This quarter, we saw a homebuilder agree to sell a vacant piece of land carried at $5 million for a whopping $180 million. So I just thought I'd ask if you're seeing any alternative use cases there?

Wow. We have one asset. I'll speak to where this sort of made some sense. It's in L.A. And I'm going to quote the megawatts wrong because I'm out of my area of expertise, but I think we thought that the side of the building, it would be accretive if we get something like 90 megawatts, and we could only get 30. And the problem is they're in a Downtown environment, you can't create power. You can't put a power center next to it. Barry knows this better than anybody, and it's why you're seeing a lot of data centers in place like Virginia where they can create more power. So we could only take the power that was available on the grid to us, and there wasn't enough power available on the grid to accretively turn this into a data center, which we had hoped to do. So in areas that are infill, I think it will be more difficult in power oriented and in areas where there's more land, you can create that if you create a large enough data center, but Barry is an expert, I'm going to turn it to him.

We got to have a substation that's underutilized. So to the extent that there are, yes, it's possible. And we're the fourth largest owner of data centers now in the world privately held. And it's quite a little business there. So we probably have to do a $3 billion capital raise in STWD. These things require a lot of money. They are gigantic commitment of capital. So yes, if we got lucky, and I was visiting a building that actually we did take back, but not the REIT, actually our opportunity fund. And there is a substation right next to it and the [fibers] right there. So we could get lucky, not in the building, the building will stay a building, but we actually own the land next to the substation that's empty, it was going to be a multifamily site and maybe it will be a data center someday. So yes, I mean, it does – it requires the power. The land isn't worth anything other than its original use unless the power is there, and the power has to be available. So these are negotiations, utility by utility, and there's a long queue. And to some extent, the tenants can help break the queue or move around the order of the queue. But some states have made data centers a big business like Virginia, and others are catching up like Texas and California has no excess power, so California won't have any data centers for a while. But that's to the benefit of the places that do have a power. So yes, it'd be great. I'd love to have it. And it better be lucky than good. But I don't see in any of our current assets that I just – I actually haven't looked if there's an extra power station next to the American Dream Mall. But in Washington, the office building is on K Street, no, I don't think our station there plus [indiscernible] nicest-looking data center in the history of mankind. Most of these are ugly [indiscernible]. So most cities won't want them inside, they just [indiscernible] existing shell. The L.A. property would have worked. A big box, big load-bearing floors, which you need for the equipment.

You have the high level Internet.

So we may not get the original basis, the asset Rina talked about that we had a $250 million, $40 million book [indiscernible] down to $150 million, I think. Yes, that puts a floor under the value because $30 million, 30 megawatts, if somebody bought it for data centers, it doesn't have to be an office building and we're working on a resi conversion there. So I just think it's a beautiful building, an office in downtown L.A. This is close to [indiscernible] market in the United States right now. So it's a race to the bottom, but that's certainly be in contention with San Francisco and Austin. Those are two really tough markets right now.

Thank you, Jade. Operator, any other question.

Yes. Our last question comes from Doug Harter with UBS. Please go ahead.

Thanks. Hoping you could give us an update on your casino loan in Australia, just given that there has been some news about that in the – recently?

You mean the news about Taylor Swift stayed in the casino, that one? So she was there last night, it's in the papers today. So we're expecting a big income pop.

Yes. Earnings for one quarter will be great. We obviously don't own the casinos. They are held by a name firm, and we're less than half of the capital stack at our basis. They actually own the other half of the mortgage that we own on those assets. So they're sort of 75% of the cap stack, if you will. We're 51, they're 49 in the debt and the equity. And the – they're continuing to support the property with a recent $0.5 billion infusion to cap stack. It's a fairly significant investment of the firms. So we're comfortable that they have the expertise and they'll straighten it out. They're using some of this money to renovate their properties, which they were – they intended to renovate them. So they never finish that, but they are major [domo] assets in these markets. And we're comfortable right now that this credit is fine. So we'll see if things change. But as you know, they're coming out of some licensing issues the prior owner had, that has not been resolved as quickly as they hoped. But they are very, very supportive of the credit. So we'll see as they do – won't have the paper as well down the equity.

Great. Thank you.

Thank you, Doug.

Thank you. I would like to turn the call over to Barry for closing remarks.

Thank you, everyone, for joining us. I hope we have continued reasonably good news, and I look forward for this company to go back on offense. We're all chomping at the bit more offense, not that we're not in the markets, but we are cherry picking and sitting on $1.2 billion of liquidity, and then having these non-accrual assets, it's not the greatest position, but to be able to easily cover with the year dividend is certainly a very comfortable position we have. You are aware, we mentioned some of the things we're – one of the things we're selling in the first quarter, which will close in it. So we are – and the recent repayment of $0.5 billion of senior loan, that's the equity in the line. It puts us in a really good shape through to combat this next eight months of relenting pressure from the Fed on the complex. So thank you, and we're excited about the future of the company.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.