Rithm Property Trust Inc. (RPT) Q3 2022 Earnings Report, Transcript and Summary

Please standby, we are about to begin. Good afternoon, ladies and gentlemen, welcome to the Great Ajax Corporation Q3 2022 Financial Results Call. At this time, all participants are in a listen-only mode. And please be advised that this call is being recorded. After the speakers' prepared remarks there will be a question-and-answer session. [Operator Instructions] And now, I'd like to turn the call over to the Great Ajax, Chief Executive Officer, Mr. Larry Mendelsohn. Please go ahead sir.

Thank you very much. Thank you very much everybody for joining us on the Great Ajax third quarter earnings call. I apologize for my voice. I'm getting over some laryngitis of the last few weeks. So it may come and go a little. Before we get started I want to point you to Page 2 of the presentation, the Safe Harbor disclosure and disclosure regarding forward-looking statements. And with that we can get – jump to Page 3, the business overview and an introduction regarding the third quarter. Q3 was what I would call a patient quarter. However, there is some noise in the Q3 income statement numbers, which makes it a bit confusing and we'll walk through this on today's call. Loan performance increased and loan cash flow velocity from property sales continued and has also continued into the fourth quarter of 2022. Repayments from borrower refinancing declined as you would expect. The significant cash flow velocity from the mortgage loans and mortgage loan JV structures increases income acceleration through the requirements of CECL, but it also rapidly paid down our loan and securities portfolio as well as the associated asset-based financing, which can also reduce net interest income and the return on equity. At September 30, we had approximately $73 million of cash as well as significant amount of unencumbered securities and loans. And in Q3, we repurchased $66 million face amount of our preferred shares and the associated warrants. While these repurchases create a one-time charge, it creates very significant savings going forward beginning in Q4. Our managers' data science guides the analysis of loan characteristics and geographic market metrics, which you'll see later are really important for performance and resolution pathway probabilities and its ability to source these mortgage loans through the long-standing relationships it's developed really enables us to acquire mortgage loans that we believe have a material probability of prepayment and/or long-term continuing reperformance. We've acquired loans now in 372 different transactions since 2014, 10 of which were in Q3 of 2022. We own just under 20% of the equity of our manager and have a zero basis. We don't mark-to-market on our balance sheet or through the income statement. As a result, book value does not reflect market value of our 20% interest in our manager. Additionally, our affiliated servicer Gregory Funding provides us a significant advantage in non-performing and non-regular paying loan resolutions and time lines and it also provides a data feedback loop for our managers' analytics. In today's volatile environment having the portfolio teams and analytics group working together with the servicer is really essential. We've certainly seen the benefit of this with significant increases in credit performance, as you'll see our consistent prepayment from property sales, especially for delinquent loans. And with the securitization structures that we've done so far this year the first ever AAA-rated structures with 40% of the loans greater than 60 days delinquent at the time of issuance. Like our 20% equity interest in our manager, we have a 20% economic interest in the servicer also at a minimal basis. We don't mark-to-market our equity interest in the servicer and the balance sheet or income statement, either our servicer currently is evaluating a private equity round as part of rolling out a few new data technology-driven programs through joint ventures. The data analytics and sourcing relationships with the manager and the effectiveness of our servicer enables us to broaden our investment reach through joint ventures with third-party institutional investors. And that way we can invest as a co-investor in very large transactions as well and control the outcome of loans. The servicer's loan expertise is definitely appreciated by the JV partners as several of our JV partners now pay the servicer for providing third-party diligence services for other transactions they've been working on. They've hired the servicer to solve problems they may have with other services they use. We still have low leverage. At September 30, our quarter end corporate leverage ratio of 3.3 times. Our third quarter average asset base leverage was 2.5 times. Our corporate leverage increased as we issued $110 million of unsecured debt securities and used a portion of the proceeds to redeem 66 million of preferred shares and the associated warrants and put rights. We also own a 22% equity interest in Gaea Real Estate Corp. Gaea is currently a private equity REIT that primarily invest in repositioning multifamily properties in specific markets and a triple net lease freestanding veterinary clinic properties in conjunction with large national veterinary practice owners. We carry Gaea – our Gaea interest on our balance sheet at the lower of cost or market. Gaea completed an additional round of equity in the first quarter of 2022 at a premium to our carrying value but our balance sheet and income statement don't reflect any market. We expect that Gaea will raise additional equity and ultimately become a public company in 2023. On Page 4, some highlights from the quarter. Net interest income from loans and securities including $1.9 million of interest income from the decrease in the present value of expected credit reserves under CECL was approximately $10.5 million. Gross interest income excluding from the decrease was about $20 million, which is about $900,000 lower than in Q2. This primarily stems from having approximately 16 million less average interest-earning assets on the balance sheet in Q3 versus Q2 and having significantly more delinquent loans than expected become performing loans. As delinquent loans become performing, they provide more cash flow but over a longer period. Since we provide loans at a discount, this increase in performance can extend expected duration which can lower the yield. However in a recession and in a housing – and in a declining housing price environment, our low LTV loans provide a material hedge as increased CPR and CDR shortens duration and correspondingly increases yields materially. A GAAP item to keep in mind is that interest income from our portion of joint ventures shows up in income from securities not interest income from loans. For these joint ventures servicing fees for securities are paid out of the securities waterfall. So our interest income from joint ventures is net of servicing fees and our interest income from loans is gross of servicing fees. As a result, since our joint venture investments have been growing faster than our direct loan investments, GAAP interest income will be lower if we directly purchase loans outside of joint ventures by the amount of the servicing fees and GAAP servicing expense will decrease by the corresponding offsetting amount. The important part of discussing interest income is the payment performance of our loan portfolio. At September 30, almost 80% of our loan portfolio by UPB made at least 12 of the last 12 payments was 74% at June 30, and compared to a fraction of this at the time we purchased the loans. Our NPL purchases over the last 12 months increased materially relative to RPL purchases. Previous increases in housing prices helps maintain payment and prepayment patterns and leads to decreases in the present value of expected reserves and the related income recognition of $1.9 million of unallocated loan purchase discount reserves under CECL in the third quarter, as well as reserve releases under CECL in each of the previous six quarters. More than 50% of our full loan payoffs in the third quarter and continuing into Q4 were from loans that were materially delinquent when they paid off. While loans that become regular paying produce higher total cash flows over the life of the loan the extended duration and because we purchased loans at discounts that can reduce percentage yield on the loan portfolio and related interest income. Loans that do not migrate to regular monthly pay status typically have materially shorter durations. We're seeing that prepayments from property sales especially for non-regular paying loans is continuing or even accelerating. Prepayment from rate term refinancing as you might imagine slowed in Q3 for refinancing eligible loans. Our weighted average cost of funds in Q3 was higher than Q2 by approximately 80 basis points. Some of this comes from the issuance of our fixed rate unsecured notes in late August of 2022. Given inflation and Fed rate increased expectations, we'd expect our cost of funds on adjustable rate repurchase agreements increase over time all of our other debt is fixed rate including our unsecured notes. Net income attributable to common holders was negative $16 million or $0.71 a share. There are several items of note that had a material impact on earnings in the third quarter. To make a little easier to follow, we have a table that ties GAAP income to operating income on page 16 in the presentation as well as in our 10-Q. Operating earnings was $3.1 million or $0.14 a share. Taxable income net of preferred dividends was $0.26 per share. Taxable income is very instructive of the current cash economics of the portfolio. Taxable income was primarily driven by continued prepayment and related loan purchase discount capture from nonperforming loans and increasingly monthly payment performance from nonperforming loans and regular performing loans somewhat offset by higher interest expense and $60 million less loans and securities on the balance sheet. Our acceleration of discount allowance related to credit performance and cash flow velocity was $1.9 million versus $1 million in Q2 but versus $3.9 million in Q1. We expensed approximately $2.9 million related to GAAP fair value accrual of the warrant put rights from our Q2 issuance of preferred stock and warrants versus $3.6 million in Q2 and $3.2 million in Q1. This number will continue to materially decline in Q4 as well, and a few one-time unusual items. A large one but one that brings down significant savings going forward is the repurchase of $66 million face for our outstanding preferred shares and retirement of the associated warrants on common shares and the warrant put rights. This requires us to recognize a $5.7 million charge from the acceleration of deferred issuance costs and issued discount, as well as $8.8 million charge for the acceleration of expense related to the warrants and warrant put rights. The total one-time charge is approximately $14.5 million or $0.64 a share. This repurchase more than offsets the cost of the $110 million secured note issuance in Q3 on a go-forward basis. As a result of the repurchase of preferred shares and less average equity, going forward the management fee will also be reduced by approximately $2 million a year. We recorded a loss on investments in affiliates of $500,000 or approximately $0.02 a share as a result of the flow-through of the mark-to-market decline in the price of our common shares owned by our manager and servicer in Q3. Our manager receives a significant portion of their fee in shares and changes in market value of the shares floats through to us based on our 20% ownership interest percentage. Our servicer also owns a significant number of shares. Book value was $13.75 at September 30 versus $14.98 at June 30. Book value decreased primarily as a result of the acceleration of deferred issuance costs through repurchase of the preferred and the extinguishment of the associated warrants and put rights. We also paid a common dividend of $0.27 per share and preferred dividends of $0.05 during Q3. Book value change is non-cash other than the payment of the dividend and the warrant repurchase. There is a table on page 17 that details the change in book value. We do not mark-to-market our ownership interest in our manager and servicer and have close to a zero basis for these on our balance sheet. In late August, we issued $110 million of our 8.875% unsecured notes, a significant portion of which was used to repurchase preferred shares and the associated warrants and put rights. The remainder is to be used for general corporate purposes and investments as we see some opportunities starting to present themselves, which we think will become more so over the next few quarters. At September 30, we had approximately $73 million of cash and for Q3 we had average daily cash and cash equivalent of approximately $62 million. We had approximately $58 million of cash collections in the third quarter. As I mentioned earlier in this call at September 30, we also had a significant amount of unencumbered securities from our securitizations and joint ventures, as well as unencumbered mortgage loans. Approximately 79.6% of our portfolio by UPB made at least 12 of their last 12 payments compared to a fraction of this at the time of loan acquisition. This increased from 73% in Q1 and 74.2% in Q2 despite buying significantly more NPLs and RPLs since the third quarter of 2021. On page 5, an overview of our loan portfolio. Purchased RPLs represent about 89% of our loan portfolio at the end of Q3. They represented 96% at the end of Q3 last year. We primarily purchase RPLs that have made less than seven consecutive payments and NPLs that have certain loan level and underlying property specifications that our analytics suggest lead to positive payment migration, property sales and prepayment on average. We typically buy well-seasoned, lower LTV loans. On page 6, you can really see this that we continue to buy and own lower LTV loans. Our overall RPL purchase price is approximately 41% of the current property value. We've always been focused on loans with lower loan-to-values with certain threshold levels of absolute dollars of equity and in target geographic locations. This has become even more important for RPLs and NPLs in the last six months to nine months. On page 7 in Q3 and Q4, we significantly increased – 2021, we significantly increased our NPL purchases. NPLs on average have shorter duration than RPLs. For NPLs on our balance sheet our overall purchase price is 47% of property value. As a result of the low loan-to-value and higher absolute dollars of equity on average for our NPL portfolio, we have accelerated prepayment on NPLs as borrowers can turn significant equity into cash, especially, in a volatile economic environment. Under CECL, this can lead to reserve capture from the acceleration of unallocated credit reserve from the loan purchase discount. As I mentioned earlier for both RPLs and NPLs purchasing aged loan low LTV loans at more than 50% discounts to property value provides a natural hedge to housing price declines and recession as resulting increases in CPR and CDR shorten duration and increase corresponding yields. At September 30 approximately 78% of our loans and their underlying properties were in our target markets. This is up from 72% a quarter ago. California continues to represent the largest segment of our loan portfolio although it is a smaller percentage than in 2021 due to rapid prepayment. In 2021 in California was nearly 30% of our portfolio it's now approximately 22% of our portfolio. However, California has been nearly 40% of all prepayments. 80% of our California mortgage loans are primarily in Los Angeles, Orange and San Diego counties. Florida represents approximately 17% of our portfolio in Southeast Florida it's approximately 75% of that. Significant prepayments from property sales have continued there. We purchased an NPL portfolio of approximately $85 million in late Q3 of 2021 in which all of the loans are secured by properties in Miami-Dade, Broward and Palm Beach counties in Florida. Since servicing transferred to our servicer Gregory Funding in Q4 of 2021 these loans have far outperformed expectations both in prepayment from property sales, but even more so in monthly payment reperformance. We continue to see demand for homes in our price ranges in our target markets. On page 9, you can see that at September 30 almost 80% of our loan portfolio made at least 12 of the last 12 payments compared to 74.2% at June 30 almost 70% have made at least 24 of the last 24 payments. More than 81% have now made at least seven consecutive payments. This compares to a minimal fraction of that at the time of purchase. Significant increase in monthly performance is more notable given that since Q3 of 2021 we primarily purchased low LTV NPLs and not RPLs. Historically -- as I mentioned earlier, historically, we have seen that when our purchase loans reach seven consecutive payments there's a 92% chance that they get to 12 consecutive payments. In subsequent events, in late October we co-invested with three third-party institutional investors and a joint venture to purchase almost $300 million UPB of very low LTV sloppy sales mortgage loans. The purchase price including all joint venture formation expenses was 86.7% of UPB and only 40% of the underlying property values of $653 million. We own approximately 17.5% of the joint venture. Our loan servicer Gregory Funding is a loan servicer for the joint venture and was also the due diligence provider to the joint venture. On November 3, we declared a cash dividend of $0.27 per share to be paid on November 29, 2022 to holders of record on November 15, 2022. Our taxable income in 2022 so far is higher than cumulative 2022 distributions. On page 11 some financial metrics. Average loan yields excluding the accelerated income from CECL-related credit reserve releases were primarily unchanged. Average yield and beneficial interest declined primarily due to significant loan yield performance. For debt securities and beneficial interest remember that yield is net of servicing fees and yield on loans is gross of servicing fees. Debt securities and beneficial interest is how our interest in our JVs are presented under GAAP. As our JVs increase as they did in the last three years relative to loans, the GAAP reporting shows lower average asset yields by the amount of servicing fees. We would expect loan yields to decline a little in Q4. We expect this for loans consolidated on our balance sheet for loans held in joint ventures that show securities and beneficial interest. Since we purchased loans at a discount, the increased reperformance of delinquent loans materially in excess of expectations can extend duration reduce yield. The significant absolute dollars of equity for our loans on average, accelerated prepayment from home sales on delinquent loans which released reserves under CECL, which also reduces yield over time. This -- in the future over time. This reperformance increases total cash flow, but it can reduce yield. The rise in interest rates strangely has accelerated the sale of properties for our delinquent loans with certain absolute dollar amounts of equity and certain underlying demographics of the borrower. Leverage continues to be low, especially, for companies in our sector. We ended Q3 with asset level debt at 2.7 times average asset level debt for the quarter was 2.5 times. Our total average debt cost was higher in Q3 versus Q2, but this is primarily the result of rising base rates for repurchase agreements and the issuance of our unsecured notes in August. Fixed rate debt is currently approximately 60% of our total debt and is increasing as a percentage as our repo debt pays down rapidly. Our total repurchase agreement related debt at September 30 was approximately $463 million down from $509 million at the end of June. $237 million was non-mark-to-market non-recourse mortgage loan financing, $226 million is financing primarily on Class A1 senior bonds in our joint ventures. We also as you can see at the bottom of page 12 have a significant unencumbered assets. And with that if anybody has any questions, I'm certainly happy to answer to the extent I know the answer.

Thank you Mr. Mendelsohn. [Operator Instructions] And we'll take our first question this afternoon from Kevin Barker of Piper Sandler.

Hi, guys. It's actually Brad Capuzzi on for Kevin Barker. I hope you're feeling better.

Thanks.

I just had a quick question what do you expect for run rate operating EPS relative to the operating income reported today?

To some extent it depends on kind of movements in swap rates but -- and SOFR, but we have increased our balance sheet materially at the end of October and rates have gone up a little bit. That being said, prepayments on delinquent loans continued pretty much at the same level perhaps even a little higher than what we saw. So I wouldn't expect that that much difference other than there'll be some fluctuations based on what the what I'll call December prepayments or December prepayments tend to be a little less predictable.

Awesome. And then -- yes. And then one...

Yes, we've had December is where prepayments were really high we've had December where prepayments were average. So but we'll run a thought probably in another two weeks to three weeks looking for homes that are listed to give us a feel for December 31 prepayments.

Awesome. And then one follow-up. I know you touched on this a little bit but can you quantify the impact of higher short-term rates and when the offsets from the higher asset yields are starting to flow through?

Sure. The higher – the Ford joint venture that we bought at the end of October has higher yields. In fact it's significantly higher yields in a recession than it has in a boom economy because of the LTVs and locations and the amount of equity and what would cause prepayment rates – prepayment rates would change. But the – so we'll see an increase in yield from that investment. Existing yields should go down I would say marginally not considerably just because just extension [ph] performance. And I would say obviously, our securitization funding is – that doesn't change, we'll see some increase in our debt securities funding costs based on changes in SOFR, but even that has a lag effect because of royalties. So a lot depends on how many more assets we put on between now and the end of the quarter. That being said, we've been – we're pretty patient only buying things that we really can't resist because we think there's going to be the opportunity sets going to increase not decrease over the next three months to four months.

Awesome. Thanks, Larry. That's it for me.

Sure.

Thank you. We'll go next now to Eric Hagen of BTIG.

You got Eaton Sadie [ph] on for Eric tonight.

Sure.

Just a couple from me. What do you see as catalyst for RPL spreads to tighten right now? Is there anything specific to the behavior outlook for RPLs, which would support more tightening as compared to other mortgage credit?

Sure. Yes. So let me kind of separate RPLs a little bit from what I'll call new non-QM origination. RPLs especially in large pools are trading actually tighter than where the structured finance market is trading. Fannie sold a pool of RPLs sold four pools of RPLs we bought the sloppy pay pool. But the two regular paying pools traded in a yield of below 6s back in – and this was in late September, early October. And those were kind of $300 million $400 million $500 million pools that – and they were lower LTVs. So in loan land, there's clearly a distinction being made between what I call lower LTVs and higher LTVs. And for example – and one of the things we're seeing in the non-QM space a little bit in loans is we're seeing that kind of the LTVs are going up and the properties – it seems that the aging LTVs are really 85 to 90s not 80s. So there's a little more what I'll call property credit risk in those than in kind of larger very seasoned RPL pools. That being said, RPL pools of smaller amounts, spreads are much wider, although still tighter than where we would necessarily expect them. The structured finance market is a little bit broken. This – the unrated market which is more kind of NPL RPL is – most of the investors have outflows. So that's kind of a market that doesn't have much liquidity. One of the reasons why we spend so much time working with rating agencies be able to do deals with 40% NPLs as AAA-rated structures is because we could see that coming in and that's why we did two rated deals early in the year – in middle year April and June rated NPL deals. The rated market is also a bit choppy and illiquid, although there's definitely a difference between who the issuer is. We've seen – we have a group of what I'll call regular investors who know our shelf and know how we think and also who co-invest with us in joint ventures and they still have been kind of regular buyers in our securitization structures. But the credit spreads widened dramatically and I'm not sure it necessarily reflects what the true credit – the probability of A -, RPLs not getting paid in full are pretty remote absent high LTVs. For us our LTVs in our securitizations and loans are in the 40s high LTVs for us is 55%. So -- and purchase price to LTV is 39% to 40%. So it's in the pool we just bought in our joint venture. So, we're kind of making sure we buy things that we're almost indifferent as to what happens in the economy.

How sensitive do you think distressed or reperforming borrower -- borrowers will be to lower home values? Does the fact that they've bonded in the past make them more sensitive to certain factors now?

Yes. That's -- yes, RPLs the R stands for reperforming which means sometimes in the past 15 years, they were not paying. And they tend to be a little more -- a little more multiplier effect than a brand-new loan. The other thing is that, if you look at our loans, our loans have an average origination date it's about 15 years or 16 years ago for kind of pool high. Our portfolio goes from say 1994 origination, all the way through 2022 origination. But on average, they have -- they were originated back in 2007. So one of the things we see significantly is, especially in a declining home price environment is acceleration of selling by empty nesters. And so, if you look at our portfolio, the percentage of empty nesters is about 50% of our portfolio. And by 2028, if our portfolio is stagnant, the percentage of empty nesters is 70% of our portfolio. So -- and they are much more sensitive to declining home prices because, if you were a borrower, who had previous delinquency and HPA in the last three years caused you to have significant equity that you didn't previously have in a declining home price environment, you actually accelerate the probability of selling your home to make sure you capture that equity.

Got it. That's a great color. Really appreciate it. Thanks.

Sure.

We'll take our next question now from Matt Howlett of B. Riley.

Thanks, Larry. Good afternoon. Question, did I hear you correctly, what the yields are being negatively impacted by the phenomenon of an NPL carrying and being longer duration given it's performing?

Yes. The -- when loans become regular paying, they have -- they can become -- they don't always become longer direction, but they -- I would say on average, they become a little longer duration than say a loan that stays delinquent, because the -- in today's market, a loan that keeps paying is less likely to refinance than it would have say two years to three years ago or even 12 months -- nine months ago. So, in today's interest rate environment, a loan that becomes a 12-month, 24-month paying, is less likely to do a rate term refi. So -- but because of the -- what I'll call like I mentioned before, the kind of the empty nesters scenario, we still see a significant amount of prepayment from property sales of performing loans. It's just not quite as predictable as it is for more delinquent loans.

Got you. Okay. I was just -- typically that's a good thing for your business model you get...

Yes, it's -- one of the things -- one of the oddities of kind of the last six months is typically, you -- a nonperforming loan becomes performing becomes more valuable, now a nonperforming loan becomes performing somehow becomes less valuable.

That's absolutely incredible. Okay. It just takes you longer to I guess just -- I mean collection I mean, it doesn't really destroy the long-term value of it, it just takes you a little bit longer and how I think about it right?

Right. In fact, when they're reperforming, you get over the life of loan, you get more total cash flow.

Right.

And you collect the regrade from the delinquency just like you do when it doesn't perform, but you collect more cash flow than you would have if it didn't perform, but you collected over a long period of time on average.

Got you. Got you.

Which a year ago was probably not a distinguishable difference?

Right. Good. Interesting dynamic. Thanks for pointing that out.

Yes.

Larry, I mean you were active in October, it's great to see the deals. When I think of in the next or call it just two quarters I mean, we've heard from some other people that are in your space anything sort of pipelines are clogged and things are going to get just sold out from originators that can't securitize, can't get things out. I'm assuming that's -- when I look at your business with NPLs as RPLs, I guess it sort of kick out loans, whatever you want to call it. I mean, but the sense is there's going to be a lot of supply. But do you intend -- that's great to your business? Do you think that's going to happen? I mean or do you think at some point there'll just be more loan sales from banks from Fannie Freddie? And then, where prices are going, do you feel like you're going to just need to use less leverage already under levered, but do you feel like you can start to buy things even with no leverage at some point?

The answer is yes. We think the opportunity set is actually forming. Certainly, on the origination side, we think there's going to be some opportunities to be, a, what I'll call lifeline or to be – to potentially acquire an originator, who can do specific things like if nothing else work on refinancing some delinquent borrowers and things like that. But we also are seeing for example in commercial land, we're seeing the community banks basically exit like commercial bridge business and the commercial bridge with renovation financing line of business. And we're seeing that business being harder and harder for people to get financing facilities, or even originators to fund material amounts of it. Having a permanent balance sheet and having joint venture partners, we can aggregate a significant amount of that. And that is rapidly becoming, what I would call an unlevered double-digit yield business, with points and fees. And so we're spending a lot of time. That's something we've done for years and years and years and years, but the – it got so competitive at rates that we didn't understand in 2020 – late 2020, 2021 and early 2022 that we kind of step back a little. But that's something where we think there's going to be significant opportunity. It's – we can see it coming. We're starting to see some opportunities that we're evaluating with our joint venture partners. And we've had three or four joint venture partners interested in it reached out to us about being able to expand that. So we think that's going to be an opportunity set as well. And we think that you will see – despite what the Fed said yesterday, we talk to borrowers every day. The recession has already started for a lot of borrowers. And so we think, there's going to be some delinquency opportunity – purchase opportunities that will start to kick in probably still three months or four months away but it's coming.

Yeah. I forgot about Great Ajax capabilities come – with Gaea in the commercial space and that could be just significant with all the bridge loans what we're seeing in terms of –

We've had a couple of private equity firms reach out to us about structuring joint ventures, where they can put money to work and pay fees to Great Ajax, and to Gaea to help put assets together and oversee them for them and things like that as well as that's really Great Ajax comes in. Yeah.

So that's a significant opportunity. And the first thing you said with the origination strategy that could be interesting too. I mean, it's exciting time of your business. You're always sort of counter-cyclical and it's – you're really positioned to take advantage of this. I mean, it's nice to see you're cleaning up the balance sheet too. That put your ability to spend that's sort of accounting drag that's going to go lower, right, as you extinguish some of that I mean that fair value address –

Yeah. Yeah. Well, let's put it this way, we did $110 million of notes. Just the $66 million of preferred that we retired more than offset 100% of the interest on the $110 million of notes.

Unbelievable. That's…

We'll, acquire even the preferred and the retiring put options that by itself more than covers just the interest on the notes. Plus, we have cash left over from that for acquiring things.

Right. Well, mainly for the – working on the balance sheet during this time we'll wait for an update, but we look forward to the progress you're making. Thanks a lot Larry.

Yeah. That being said, with the economic environment and the broking markets, it's not quite as fun as it used to be.

Right. I hear that, where the yield curve is and with the Fed being aggressive, I certainly hear that.

Yeah. Yeah. But one thing, we've definitely heard from our borrowers is that the recession has already started.

Absolutely. Thanks for that.

Yeah.

Thank you. [Operator Instructions] And Mr. Mendelsohn, it appears we have no further questions this afternoon. I'll turn the conference back to you for any closing comments.

Thank you very much everybody for joining us on the Great Ajax third quarter 2022 earnings call. I apologize I was difficult to understand, with my voice. But I appreciate you putting up with it. And thanks again for being on. And if you have any questions feel free to reach out to us. We're happy to discuss anything we can. And with that, have a good evening.

Thank you Mr. Mendelsohn. Again, ladies and gentlemen that does conclude the Great Ajax Corporation Q3 2022 earnings conference call. We'd like to thank you all so much for joining us, and again, wish you a great evening. Goodbye.