Good day, and welcome to the Starwood Property Trust Fourth Quarter and Full Year 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Zach Tanenbaum, Director of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning, and welcome to Starwood Property Trust earnings call. This morning, the company released its financial results for the quarter ended December 31, 2015, 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 in 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. Reconciliation 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 CEO, Rina Paniry, the Company’s CFO, Jeff DiModica, the Company’s President and Andrew Sossen, the Company’s COO. With that, I’m now going to turn the call over to Rina.

Thank you Zach and good morning everyone. I will start by walking you through our overall 2015 performance, then move to our fourth quarter results and conclude with our outlook for 2016. 2015 proved to be a great year for us again demonstrating the strength of our multi cylinder platform. We saw continued strong performance from the various components of our business. And we lengthened the duration of our book by adding $842 million of stabilized real estate assets, 43% of which were multi-family. Core earnings came in at the high end of our previously announced range at $2.19 per share for the year and $0.55 for the quarter. We believe that our diversified model is one of our greatest strength, especially in a period of market turbulence. The effectiveness of that model can be seen in our annualized return on equity, which stood at 12.8% this quarter. We were able to maintain this ROE even after considering our conservative approach to leverage. Our debt to equity ratio was just 1.3 times at December 31st. If we were to include our balance sheet leverage in the form of A-Note fold our debt to equity ratio would be only 2.4 times, excluding cash, these ratios would be 1.2 times and 2.3 times. We believe these levels are extremely conservative when compared to others in our sector and when compared to the LTV of our loan portfolio. They're even more conservative than the numbers the loan would suggest when you consider the non-recourse nature of our structural off balance sheet leverage. As of December 31st, book value per share stood at $17.29. This amount reflects depreciation and amortization associated with our new property segment. As a result, we introduced a new metric this quarter for undepreciated book value per share, which was…

Thanks, Rina. Rina spoke about liquidity and I would add that we are purposely holding more cash today than we have at any time since our IPO. We also expect considerate repayments that will add to our available capital this year and we're excited about the opportunity to reinvest in the current environment. But we've been patient in deploying capital over the last three months and we will continue to be. As a borrower, lender and an active participant in financing and capital markets, we have the wholesale seeds [ph] from which to see strong both build and path. We pulled back last summer as volatility increased and as we watch the growing distress in the commodity credit and capital markets in the fall, we made the decision would have better opportunities to deploy capital and they're starting to see them now. We're seeing them in loans, in equity and in security. But will remain patient as the global financial correlations and volatility remain elevated. CMBS issuance is likely to fall again this year. In 2015 saw 92 billion in CMBS originations versus an expectation of 110 billion is slated for third quarter and this year similar expectations have already been lowered by 30% and spreads have widened which will likely create more investment opportunities and eventually scarcely should be good for spread. In the short run, our kind of origination business would be less profitable but we expect to recover as market stabilize, which we are now seeing signs of and making even more as spreads were lower again. Today CMBS is nothing like what was issued prior to the crisis and we expect going forward to get more yields for a less risky bigger slice of the capital structure. Fair enough [indiscernible] quarters not years from the risk…

Good morning everyone I'm actually remote, I'm not in the same location as Jeff and Rina and Andrew I so when we get questions I'm going to pass them to those guys. Rina and Jeff’s comments are pretty thorough, but I think I will take a step backwards and tell you about the environment and how we've been thinking about things. The first things you do in environment like this when credit spreads start to back up probably late early fall, make sure your house is in order. So we sat together as a group went through every loan in our 6.3 billion or $6.4 billion loan book and as Jeff said, it is actually rock solid. I think the credit quality has been the lowest, loans in our highest category that we've ever had. And as Rina mentioned are exposure to more vulnerable factors over the of the economy, just like hotels has never been really lowered than this point, lower but it is 25%, which we think is terrific. Obviously there's a massive hedge in our company, which is further deterioration and if things do go awry or get worse from here. We never thought we'd be able to say this, but our service should have a field day with a chunk of $12 billion named servicing of which 10 [indiscernible] and some changes within servicing already. So I actually love this environment, fantastic for the largest player in the space, which is us, two times the size of anyone else. We have looked at our loan repayments because mortgage REIT gets in sometimes in trouble when loans don’t get repaid. And I give you one example with a loan on a tower in London. Think our loan is like 400 over something like that first mortgage and…

Thank you. [Operator Instructions] We will go first to Daniel Altscher with FBR.

Hey, thanks. Good morning everyone. You know I don’t want put words in anyone’s mouth, but I think the tone has been maybe what we are seeing out there in CMBS really driven by some regulatory items, a broader commercial real estate, I mean there seems to be more to stay, a pricing exercise and really a greater fundamental exercise I think you probably could agree with that right.

Yeah, I totally agree with that. I mean I think there is plenty of liquidity, I think it was Jamie Dimon [ph] recently at a conference, today the bank had about 7 trillion of deposits prior to the crisis they had, I am sorry of loan, and they had about 7 trillion of loans in the peak of the financial crisis and then they had deposit of 7 trillion today and deposit of 10 trillion. So there is tons of capacity to lend between regulatory changes and restrictions and scarcity tactics, I mean things that they have to do and there is - everyone need deal, whether it is an insurance company or sovereign wealth fund I mean people are desperate for yield. The people right now are like, they don’t really know what it is going on, so I am going to take step back and that is creating and the markets were looking to begin with and the banks are making the market and securities where they used to. It has created the kind of funny environment and nobody likes losing money, margins have always been thin, the conduit is just saying, okay, I’ve made a loan at 375 over it is now 475 and we saw that starting to happen probably six months ago, I mean in parts of some market. Spread started to widening, because of the widening in the credit complex which actually didn’t start in the real estate space, it really started in the high yield and it is the energy complex began to implode and money just left the factor I think to go to the higher yielding opportunity in other places. Whereas it looks like it might be distressed, so I think it is the pause, I think you are in a…

18 years.

18 years, so we have debt in place of eight years on a multi-portfolio. So we’re hopefully built to withstand and whether the cycles and having a ton of cash available to use good things at times like this and unfortunately cash hasn’t earned much.

So, with that in mind and I think I’ve understand that the reason to be cautious and may be conservative on the capital fund but what needs to maybe changed to reverse that course of it, further pricing exercise or is it actually seeing better quality loans, actually seeing better quality sponsors, better LTVs, better terms. What gets you the kind of - out of that I mean [indiscernible] not be action and be proactive to do that.

We are open for business right now, we just committed to more loans. We are not making loans, we’re just being pickier and we are adding spread, we are adjusting our loans pricing to the reality of the marketplace, so whether it’s an A-Note buyer or credit facilities, we are going to even though our credit facilities don’t move in terms of their spread but we have even us even though the biggest and have tons of capacity, we don’t have infinite capacity. So we want to make sure that we are turning high spreads on what we do and that we really like what we’re doing, but we are continuing to trend towards safety I mean we’re trying to find things that we look at obviously really good about the real estate. That is fundamentally good real estate in our catchment point, we did a [indiscernible] on the property now that we have going to equity, it is kind of joke and housed it, [indiscernible] will get the asset back at a great price which is something that never happen to us in $20 billion loan but we do look fundamentally at the real estate, these are the credit committee of the REIT includes a lot of guys from start-up capital group and most active players in the space we are very, very cautious and the things we are avoiding, junior notes and hotels stacks, you can get them at 900 over today, 1000 over we are going to stay away. Especially, and other people take them and it might workout but it may not and we are just going to try to be very cautious about the risks we are taking in this environment. I do think being that way and given the scale we are, given the…

And we will go next to Steve DeLaney with JMP Securities.

Good morning everyone and thank you for taking the question. Barry you just commented on B-Piece blowing out 700 basis points slider. When looked at your release, maybe the most impressive number to me was the fact that your book value held up so well just the GAAP figure down $0.14 or less than 1% I think frankly the streets looking at everybody that has CMBS whether it is senior stuff that you have in your core portfolio or the subordinate bonds in investing and servicing segment, I just was wondering Rina I don’t emphasis or Barry could talk a little bit about I’m looking at page 10 of your slide deck and your carry value on a CBS and the investing and servicing portfolios is right at a billion and it represents about 22% of the phase. How do we think about that in your methodology because you’re using a fair value option talk to us a little bit about exactly how you are applying fair value and whether it is actually mark to market or mark to model, just so we can kind of understand, I guess the question is why did this whole hold-ups so well for you relative to the third quarter when we have seen what was going on in the market. Sorry for the long question.

It is okay, [indiscernible] you want to answer that?

Yeah, we applied a fair value option to our entire portfolio that includes our 1.0 or 2.0, the BB is that we have are more susceptible to spread market, the spread mark that you are seeing are really on our double book. The other bonds that we have are kind of they are mark to model. So in all cases we looked at expected cash loans but our discount rate is more sensitive to spread marks on the DD.

This is David, Jeff. I would add that I don’t think anything has happened in spreads the last couple of months and I do believe mostly affecting both I don’t believe any of it has to do with the likelihood of loan made in 2014 or ‘15, paying off in 2024 or ‘25. From a credit perspective we feel both those loans as we did and we are not going to go around the surprising dramatically although we will be cognizant of the market being weaker

That is very helpful Jeff and obviously you have been have these things, on the VIE you have some of them consolidated. So in a fact you have got the loans on your balance sheet you got debt on your balance sheet and at the end of the day it really is the performance of the loans that the drops your return on your net equity. So that’s very helpful to know that your book values is going to be more stable relative to your subordinate investments and you’re going to look at the fundamentals and mark to model not just have to sap our OLC [ph] price because that is where the market is raise last printed a deal at the end of the quarter sure. Thank all for you for the comments that is very helpful.

I have one thing of interesting because we have this enormous data on certainly the legacy CMBS securities. It is - you scratch your head about it like amount of capital you want to deploy when you understand and know so much about, exactly might even own a tranche of bonds and the fact that. Some of these feel like really opportunities, so we are enabling here and there on buying stuff, when we know it is money good and straitening it to bid [ph], so it is kind of like as you know as you seen the default percentage of loans going to default in commercial real estate is historically low, I think multiple Euro practically.

Right in 2%

It is really an odd thing and we are so bullish on I anything in the residential space, whether it is I mean houses residential platform has 30,000 houses or apartments we are now the fifth largest owner in the country and we see - we have a homebuilder that we are involved with not right now it is sort of it is good opportunity even the retail which is probably the most controversial most media hype is actually using pretty record occupancy involved. So I mean you don’t need if you are a lender the cash flows to go 4%, 5% a year you just need the stability and ability to get to stay.

That’s helpful thanks Barry.

Sure.

We will go next to Doug Harter with Credit Suisse.

Thanks can you talk about the relative attractiveness you are seeing today across the different investment opportunity whether property loans, B-Piece?

Everything is good, the question of go our core businesses lending and we had a choice between are earning 15, 16 in a B-Piece or 16 in our [indiscernible] probably we do the loan to 13 versus 15 even though the B-Piece. Even though B-Piece is higher than it was even though you may be able to collect your collateral we’ll do them, in fact we just talked about doing one. But we are going to balance that and probably 3 to 1 in terms of ratio and how are like the Capitals but we want to be kind of essentially opportunistic and we see great opportunities and we are going to go after them. So they may not be in what we are exactly doing. So we looked at I’ve new program that we are working on, I won’t tell you about but it is a business that is super exciting and joint-venture and we think we can produce and we actually think we can produce money on that you’ll find it very interesting. But we have got to keep your eyes open in this kind of landscape and make sure that we are comfortable with what we’re doing we have a very good collegial group of executives that I think are more than ever before passing information amongst them and sharing knowledge and data to man actually make I personally have spent a lot of times in the LNR offices in Miami last few months and [indiscernible] whether to do that, but it has been interesting to see that a cross pollination between lending side and heritage LNR side and Larry Brown really a significant mortgage company. So and the feedback we got from our banking syndicate are just that one of the bank’s lending groups this week, I had dinner with them. So we are keeping our eyes open and again it is not easy by the way, I mean it is not like people are throwing 11 or 12 yields are doing ten year is 175, but we think we can find charge of things to do.

And then can you talk about the balance of spread widening versus lower kind of absolute yields and then how that might impact kind of specialty services refinancing that need to happen in the next two years?

We still expect the vast majority of legacy CMBS to reify. The message that we are going quoted by life company Steven have gapped out probably as 100 basis points but that is the way inside what we create or we make a whole loan [indiscernible] A-Note, so like we may be 11, maybe four, then maybe an eight, and now it is seven, 8.5 to 7.5. So the same has been true for the last several years that we originate that we’re going to go out [indiscernible] and if we buy off the street or we buy another need from a bank, just trying to - [indiscernible] securitization stuck with. So Jeff you want to talk about the other question about spread widening versus base rates and Rina, is there anyone in [indiscernible] want to answer that?

I will add on a macro level first we are seeing loans come out of bank. The stats being market single asset single borrower market is certainly wide with CMBS and lot of banks do have loans that expected to be bring out in large pouring rate or fixed rate securitization. They’re now potentially selling those and we are seeing discounted loans come out of there and other opportunities for investments. and on the lending side we are also same borrowers willing to pay for certainty and internally a lot of deals in the markets in the last couple of weeks people would like to get something done, it feels like there are less lenders to compete with, so on that side I think we feel good, could you sort of restate, we all look at each other here and none of us were exactly sure on the spread question, when you asked it, could you just restate exactly what you mean by that spread question, so that we can answer.

Sure yourself talked about the inputs, if rate rise and the impact the amount of people the amount of loans that ultimately could be refinanced of the coming maturities out of CMBS just wondering sort of the give-and-take between spread widening and lower base rates.

Got it now [indiscernible] the best example I can give you hear us we are placed out in AAA CMBS and I will get our answer. You have seen AAA CMBS spreads go from 85 last year to 120 beginning of this year to 165 or something today, maybe 160 today is more likely the right number. So 40 or so wider, but at the same time you have seen ten-year swap rate to go from 220 on January 1, to probably 160 today so road, so rates have rallied by 60 basis points, spreads are widened by 40, the net of it is the all in CMBS AAA rate is actually 20 basis points lower even though we had to slow of everyone talk about spread widening, the reality is yields are actually lower yields lower. You have yield buyers in the CMBS market who are willing to take those periods for 20 basis points or less. When I think about the rate impact on the book, as we talked before we have a $0.08 cushion o for a 100 basis points increase LIBOR we make $0.08 for, so what is going to drive more loans into special servicing is higher rates and it is wider spread because refinancing will be harder. So on a higher rate side, I think it is fairly clear we are able to lay out what exactly what that is, the harder part is what spread widening will do. Anyhow certainly would be the amount of high yield loans and others coming up from the 06 and 07 vintages, these wider spreads that we are seeing in CMBS loan spreads which are 100 basis points or so wider from three or four months ago, is going to push more loans in special servicing. We don’t really advertise a number, we through look at debt yield and try to figure out what we think the percentage of loans of the 30% of the 06, 07 that are rolling off that we are special services, we try to think in a loan by loan debt yield basis what is going to happen, but certainly spread widening will push more in, higher rates will push more in, we are not counting on higher rate, but spread widening side is going to help us there and again that is one of the hedges to a spread widening in our book overall.

I just add one quick comment to that you know just on swap rates in the treasury. It gets worse as you get further out on the LTV and there I think you get junior class and there I think you are seeing overall deals are gone up. So but it’s an interesting market because there isn’t level of leverage today in real estate that there was back in ‘07, ‘08. Nobody really borrowed 85% of anything or 90% of anything. The nature of the most buyers today is actually to push the leverage down and that is not totally true in conduit market, but it’s certainly true of the big asset. Real estate is not the problem child of the economy is here. In fact we are probably rock solid best place to put capital for stability in the world right now because there is not a lot of new supply anywhere and values in real estate look solid, given where the alternatives are and where the treasuries and where the spreads to the cost of debt between the yields and the cost of capital. So it looks like a very comfortable place to be and we traded [indiscernible] I can find hedge funds doing at 10.5, I would go over and hug the guy, not all companies doing 10.5, there is no 80 - 20 split here, so not like that anyways so not zero, that’s my comment, I’m going to stop talking.

We will go next to Jade Rahmani with KBW.

Thank you which of the higher incentives seen in the quarter at this earnings level is that a run rate or did something unusual happened because it was placed what we modeled despite earnings being close to what we projected?

Jade, that has to do with the adjustment that we made in the fourth quarter of last year. If you recall, we adjusted the calculation of the incentive fee to account for the spin off and because of that calculation runs off of our rolling fourth quarter the large payment we made in the fourth quarter of last year, rolled off and first quarter of this year. So we will continue to have this issue for the first quarter ends up being a catch-up because they are dropping off a quarter that has a high payment in it.

Okay I’ll have to follow up with you afterwards to really understand that. On credit, can you comment on the overall credit quality in the portfolio and if there is any deterioration you have seen over the last quarter or 10 year to date and any loans that you are moving into a watch list or increasing your risk ratings on.

We actually didn’t increase risk ratings on any loans this quarter. We have spent nine hours, a full day with our entire management team and about 30 people in the room going over every asset, we did that about two and half weeks ago. And we did not increase the risk rating on any asset, we had a decreases and don’t really see anything that I think somebody on the outside looking in would think was troubling at all. I don’t know Barry, if you have a different comment, you [indiscernible] as well.

No, as I said in my comments we went through everything we have [indiscernible] all the hedges were bought in the storm and we went through the loan book and we have a loan on an apartment building, construction loan on a part of building in New York but are basically thousand dollars a foot. So there is an example of something that gets to me 1100 a foot. They are trying to sell the units of probably I don’t know 23 or 24, 500 a foot, 1100 a foot I don’t if I’m happy or sad if I get the building back. So we’re fine. We actually talk about selling oil and we said why able to keep it, but it is actually it is not even, loans and balance not like out of balance, it’s just the guy is selling a little bit slowly to get permits and get his building built, but our construction enclosure is dropping rapidly and things like Hudson Yards, where I think we are in at $400 or $500 a foot or something on the first mortgage as a building to try with 1200, 1300, 1400, 1500 a foot, priced 30% of LTV. I don’t even call id construction loan anyway, I don’t know what it is, but it is not really construction. We haven’t really made any construction loans in a year and half.

And I guess the other thing to point out Jade, one of the loans actually that we had rated a four at the end of the year paid off in full by a week or two ago.

Okay that is good to hear regarding, I guess cash flows coming in can you just address the timing of anticipated 2016 repayments, the magnitude and timing and also the unfunded commitments are significant over what time period do you expect the makers and finally, how are you actually thinking at this stage about 2017 converts?

I’ll start on the payouts and I think we expect over 2 billion in loans to and repay this year. That’s on our conservative estimate and we go through and put eight percentage chance on each loan and then kind of come up with some of profit across the curve and we think it will be north of 2 billion which will return a little north of a billion-dollars equity this year. As Barry said most of those are once where we have great insight into, it’s very few that we’ve been questioning whether that will pay off at or around the open date when they pay off with or without fees. As for the convert Barry, would you like me to begin?

Well, I mean they are due next fall I guess, year and half away, is that right Rina?

Yes October 2017, that’s right.

Yeah, October - I just double checked on the other side of the year [ph] and we’re aware of that. We are looking at other ideas now that we could extend and potentially extend and replace them or just pay cash to redeem them or I guess we can redeem the stock if we wanted to, you know it is year and half away, but we are putting attention. I mean we are working on something right now that might allow us to get rid of them.

Sorry, we have bought back 110 million or so to date and when the opportunity is there and that look like cheapest investment for us effectively, we could spend cash here.

That is a good point by the way. We did buy $110 million [indiscernible] stock repurchase.

And we will go next to Charles Nabhan with Wells Fargo.

Thanks Good Morning guys. When we think about the gap in capital that need to be filled as a result of Dodd Frank risk retention it is obviously an opportunity that Starwood is well positioned to capitalize on but we are also hearing about capital pursuing that capital forming that pursue that opportunity, there is a possibility of banks holding on to that bottom pieces well. So I was wondering if you could comment on your expectation for I guess the filling of that gap and how you see that competitive dynamics playing out over next couple of years.

Barry here, I’ll start if you want to we have our entire LNR team and senior management from LNR in New York [indiscernible] banks and we talk about nothing but that topic I do think there is a chance that a bank could be involved but when we did talk to them none of them are telling us first hand their intention, the number of third-party talking about solution where they will affectively take the loans on to their book and securitize of their own shelf. We think that may be difficult and people may have a hard time with the fact that a loan that was on a dealers book yesterday, we are putting it on your book just so you can securitize. We don’t know if that model works, but we are out talking to the bank we think we have a structure or two that works better and will lessen the blow to the overall CMBS market. We have the advantage being a sponsor in transaction by virtue of what Larry Brown does in forward market capital and by being a sponsors and potential that we can go beyond that. I won’t get in great deal and became a retaining sponsor and be somebody who is working with the bank to bring the deals and we will effectively lower the cost of capital and allow us to bring in third-party partner money alongside of us which is similar to what we have done in our B-piece program over the last three years. We brought in partners and minority of the capital, I guess, a majority of 100% of the servicing deeds, we look to do something similar to that and we are out talking to people and we expect with our brand and our experience in long history in the sector and if anyone is going to be successful there it should be up, so we’re spending a lot of time on it and certainly know that it is advantage to us.

I just say we have 300 people in LNR so we are well-positioned and we are aware of what should be an interesting opportunity for us and we’re excited about it and this transformation is depending on how banks react to this, there are other areas that are completely going to be fascinating. It is really good for real estate by the way it is really hard to get construction loan, going forward in some capacity because there is [indiscernible] apartment so difficult for banks and the Fed is watching and warn the banks and the banks aren’t even going crazy, they really not, may be the conduit go sloppy in here, some of them, not all of them and the market is differentiating frankly between the paper, the different conduit sponsors. So it is just - in a way the better our market, it is little more disciplined than it was. But I think we really think the net of this got to be a positive for us and all of this, the only thing I know the direction is good and it is good for guys like us, unregulated lenders that can fill holes in the capital deck.

Barry, Adam is actually also remote, Adam Behlman within New York, right from New York on the tour [indiscernible] Adam do you have anything to add.

Adam, tell him what you do.

Hi, so I’m the President of the real investing and servicing segment which collectively is [indiscernible]. So Jeff was right, we’re up here in New York talking to all the banks that work with Larry on the SMC side which is six of them, which is why it gets to do 18 yields a year. And first your point about the banks are dealing a portion of it, that maybe true, that need for some banks may try to build on that road, but even if that’s the case, they still wouldn’t be retaining most - definitely not the horizontal or the old B-piece on the bottom. So that market wouldn’t go away from - and you need to have those kind of moves. In addition, Jeff’s right, we’ve been talking to everybody so far and we’ve even putting to them kind of our deals on an alternative structure that could be used and its receiving very positive feedback and it’s going to definitely I think change a bit of the discourse going forward here, that there may be other opportunities or options that they can use, some more liberal, some more conservative, but certainly different than I think they had in their minds beforehand.

And we’ll come back to you over the next couple of quarters when we’re able to be a little bit more open about where we are, but we’re certainly working out on that.

We’ll take our last question in the queue from Eric Beardsley with Goldman Sachs.

Hi, thank you and thank you for all the color. So just wanted to clarify, spreads have widened out, you feel good about the environment, why not lend into this, why where you further quote unquote stormed to clear when margins will be lower?

Though we’re lending into this, we’re just being careful on the quality what we are looking at. I mean I think borrowers are moving up - our last - they’re behind the market, right. So the - [indiscernible] you only thought it was 350 during the quarter and it goes somewhere else, right, so and then he finds out there’s no 350 bid. So we are lending and we’re actively lending, we’re happy to put out all of our [indiscernible], but we want to be careful because we are - I mean our business of balance sheet [ph] lender, we’re going to not - we’re being judicious because even we, certainly we, we’re not that bigger player in the capital markets, we’re the biggest in our space, but we’re not big. We want to make sure that we’re investing our money wisely in a world that looks a little soft, I mean it looks like - it’s a little like quick sand right now, you just turn over the floors. We don’t know big - and partly because nobody knows what’s going on in China. There isn’t anyone that [indiscernible] what’s happening to their economy. Nobody can tell us to 5% growth or 5.5% or it’s really all fiction, I mean I think that kind or uncertainty in the - at the political uncertainty of our election, it’s quite something out there and it just feels like a time to be prudent. So - no, we’re wide open for business, we’re not - we shouldn’t be giving you the idea of that –but we are asking a lot of, we are asking a lot for our paper, for our loan, we are going to keep our spreads little wider and I think the proof is that we just hired Dennis Schuh, a 19 year veteran of significant $15 billion book over JPMorgan Bank. So we wouldn’t hire Dennis if we weren’t going to put the pedals to the metal and grow our origination capability to continue and we just hire another [indiscernible], so we will use this opportunity to sweep up some really good originators and we don’t have anything to capitals but we have to be very careful.

Got it, so relative to funding cost, where are the loan yields gone, if they have been fully kept up.

I think we recorded basically flat 11–

11.2, optimal, yields were actually up slightly from last quarter and it is driven mainly by increases in LIBOR.

I guess on the warehouse, where you guys have more fixed pricing compared to someone who is relying on market funding.

Yeah, I would say that, we are starting to see a little bit of pressure on the A-Note side, I mentioned that in my call that we are certainly getting more than that on the home loan side that who are borrowers. So I think we have a good window here, where we borrow hasn’t really been priced or fairly moving and where we are able to lend it is moving fairly significantly both into less competition and a more volatile [indiscernible] they want to do a loan with somebody they know will get to the table and close and has the ability to underwrite a complex transaction. So we think it would be good period for us.

Got it, and then just really quickly, what percentage of the CMBS book is mark to market versus market prices.

I would say that will be probably two third of the portfolio.

They are mark to market.

Mark to market.

If you want Mark to market, we can come back and more exactly answer to that.

No actually it is two thirds, it is quarter to quarter [indiscernible] 1.0 positions

Adam I don’t think - I didn’t understand you case earlier.

Oh, I am sorry; we have 1.0 and 2.0 positions. Of the 2.0 the BBs are I think it is about $250 million right now.

The 1.0 for those who don’t know is the legacy CMBS financial crisis 2.0 of the double [indiscernible]

Okay and 1.0 is mark to model, sorry I just want to clarify that.

Yeah, 1.0 is our mark to model and of course another 2.0 is our result.

Okay, they were on, thank you.

Thanks guys, thank you for being with us today, good luck and around the world. Bye - bye.

And that does conclude today's conference. Thank you for your participation.