Good morning, ladies and gentlemen, and welcome to the third quarter 2023 Arbor Realty Trust earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this period, you will need to press star one on your telephone. If you want to remove yourself from the queue, please press star two. Please be advised that today's conference is being recorded. If you need operator assistance, please press star zero. I would now like to turn the call over to your speaker today, Paul Elenio, Chief Financial Officer. Please go ahead. Okay, thank you, Mike, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning we'll discuss the results for the quarter ended September 30, 2023. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer. Before again, I need to inform you, statements made in this earnings call may be deemed forward-looking statements that are subject to risk and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. I'll now turn the call over to Arbor's President and CEO, Ivan Kaufman. Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we had another outstanding quarter as our diverse business model continues to generate earnings that are well in excess of our dividend. This has allowed us to maintain one of the lowest dividend payout ratios in the industry, which was 78% for the third quarter. Additionally, and very significantly, despite being in a very challenging environment over the last several quarters, we've managed to maintain our book value while recording reserves for potential future losses, which clearly differentiates us from every one of our peers. In fact, we are one of the only companies in our space to have experienced significant book value appreciation over the last three years, with roughly 40% growth from around $9 a share to nearly $13 a share. As we discussed on our last call, we feel we are right in the thick of this, dislocation and operating our business with the expectation that the next two or three quarters will be the most challenging part of this cycle. We've been laser-focused over the last two years preparing for this environment. One of our primary focuses has been and continues to be preserving and building up a strong liquidity position. We're very pleased to report that we currently have approximately $1 billion in cash, which gives us a tremendous amount of flexibility to manage through this downturn and provides us with the unique ability to take advantage of the opportunities that will exist to generate superior returns on our capital. Clearly, given the current interest rate environment, we expect to experience additional stress. We need a tremendous amount of discipline and expertise to successfully navigate this market, and we're very, very pleased to have a tenured senior management team with a track record of managing through multiple cycles, as well as what I consider to be the best asset management team in the industry. This is an extremely challenging environment, and I'm very pleased with the level of success we've had to date in managing through this downturn, which is a real testament to the quality of our franchise and the extraordinary efforts being put forth by our entire organization. As we have said before, we feel we are very well positioned compared to our peers, given our strong liquidity position, multifamily-centric portfolio, the depth and skill of our management team, and the strength of our balance sheet and the versatility of our franchise. We also believe we are uniquely positioned to step back into the lending market and garner some very creative opportunities to continue to grow our platform. While others in this space will be dealing with significant internal issues, we feel we are well positioned, which allows us to reenter the lending market at a time when there is a great opportunity to put some of our, the high-quality loans with attractive returns while the competition is less active. In addition, we recently launched our first construction lending business, which is something we are very excited about, and we believe we can generate 10%-12% unlevered returns on our capital and eventually leverage this business and produce mid to high teens returns. We also believe this product is very appropriate for our platform as it offers us returns on our capital through construction, bridge, and permanent agency lending opportunities. We are very committed to this business, and as a result, we went out and hired some of the best and top people in the construction lending field. We are extremely pleased with how quickly we're able to roll out this product and get ahead of the market and build an incredibly talented team to execute this strategy. Turning now to our third quarter performance, as Paul will discuss in more detail, our quarterly financial results were once again remarkable. We've produced distributable earnings of $0.55 per share, which is well in excess of our current dividend, representing a payout ratio of around 78%. The dividend policy that we have implemented with our board of keeping such a wide disparity between our earnings and dividend has provided us with a large cushion and was very strategic, knowing full well that we were entering into a market dislocation. We certainly could have raised our dividend again this quarter based on our substantial cushion and continued strong earnings. The board decided to keep it flat since we believe we are not getting credit for raising it in this environment, and it would be more prudent to preserve a large cushion as we head into the most challenging part of the cycle. We're also the only company in this space that has been able to consistently grow our dividend with approximately 40% growth over the last three years, all while maintaining the lowest dividend payout ratio in the industry. Just as importantly, in a time of tremendous stress, we've managed to maintain a book value over our accrued reserves for future losses, which clearly differentiates us from our peers. We believe our diverse business model uniquely positions us as one of the only companies in this space with the ability to preserve our book value and continue, continue to provide a very stable, protected dividend, even in this extremely challenging environment. In our balance sheet lending business, we remain focused on converting our multifamily bridge loans into agency product, allow us to recapture a substantial amount of our invested capital and produce significant long-dated income streams. In the third quarter, we continued to have success in this area with another $665 million of balance sheet runoff, $350 million or 53%, which was captured into new agency loan originations. As a result, we're able to recoup approximately $100 million of capital and continue to build up our cash position, which again, currently sits at around $1 billion. Again, we're excited about the opportunities we think will be available to us over the next three to six months to reenter the market, grow our balance sheet loan book, and generate very attractive returns on our capital while we continue to build up our pipeline for future agency business. In our GSE agency business, we had another solid quarter, originating $1.1 billion of loans in the third quarter, and our pipeline remains strong. Despite the significant recent rise in the 10-year, we are poised to complete the year roughly in line with our 2022 originations numbers, which is a tremendous accomplishment in light of the fact that the agencies are down 20%-25% in production year over year. We've done a great job in continuing to gain market share and in converting our balance sheet loans into agency product, which has always been one of our key strategies and a significant differentiator from our peers. This agency business offers a premium value as it requires limited capital and generates significant, long-dated, predictable income streams, and produces significant annual cash flow. To this point, our $30 billion fee-based servicing portfolio, which grew another 2% in the third quarter and 11% year over year, generates approximately $119 million a year in recurring cash flow. We also generate significant earnings on our escrow and cash balances, which acts as a natural hedge against interest rates. In fact, we are now earning almost 5% on around $2.9 billion of balances, or roughly $140 million annually, which, combined with our servicing income annuity, total approximately $260 million of annual gross cash earnings, or $1.25 a share. This is in addition to the strong gain on sale margins we generate for our origination platform, and again, is something that is completely unique to our pro- platform, providing a significant strategic advantage over our peers. We remain very committed to our single-family rental business, as we are one of the only remaining lenders in this space, allowing us to aggressively grow the platform. We had a strong third quarter with approximately $140 million in fundings and another $430 million of new commitments signed up, and we also have a very large pipeline. We love this business as it offers us returns on our capital through construction, bridge, and permanent lending opportunities, and generates strong levered returns in the short term, while providing significant long-term benefits by further diversifying our income streams and allowing us to continue to build up our franchise. In summary, we had another great quarter, and we believe our unique business model clearly demonstrates our ability to generate strong earnings and dividends in all cycles. We understand very well the challenges that lie ahead, and we are very well positioned to manage through this cycle. Our earnings significantly exceed our dividend run rate. We invested in the right asset class with very stable liability structures, highlighted by a significant amount of non-recourse, non-mark-to-market CLO debt with pricing that is well below the current market. We are well capitalized with significant liquidity, which has put us in a unique position to be able to manage through the downturn and take advantage of accretive opportunities that will exist in this environment. And again, with our best-in-class asset management capabilities and seasoned executive team, we are confident that we'll continue to be one of the top-performing companies in our space. I will now turn the call over to Paul to take you through the financial results. Okay, thank you, Ivan. As Ivan mentioned, we had another very strong quarter producing distributable earnings of $112 million, or $0.55 per share. These results translated into industry-high ROEs again of approximately 18% for the third quarter, resulting in a dividend to earnings payout ratio of around 78%. Our quarterly results were slightly higher than our internal projections, largely due to increased earnings on our cash and escrow balances from higher interest rates, combined with stronger gain on sale income from slightly higher agency sold loan volumes than we anticipated. As Ivan mentioned, we do expect to continue to experience some level of stress as we manage through this very challenging environment. As a result, we recorded an additional $15 million in CECL reserves in our balance sheet loan book during the quarter. Additionally, we did see a slight net increase in delinquencies in the third quarter of approximately $28 million. We experienced $98 million of new delinquent loans and resolved a $70 million delinquent loan from last quarter through a successful restructuring. As Ivan said earlier, we are in the most challenging part of the cycle, and new issues arise each day. We are very pleased with the level of success we've had to date and believe we are well positioned to manage through this downturn, given our multifamily focus, strong liquidity position, and our best-in-class dedicated asset management team with extensive experience in loan workouts and debt restructurings. It's very important to reiterate that despite booking approximately $70 million in CECL reserves across our platform over the last nine months, we still grew our book value per share almost 2% to $12.73 a share at 9/30, from $12.53 a share at 12/31/2022. We are one of the only companies in our space that have seen significant book value appreciation over the last three years. In our GSE agency business, we had a strong third quarter of $1.1 billion in originations and $1.2 billion in loan sales. The margins on these loan sales came in at 1.48% this quarter, compared to 1.67% last quarter, largely due to significantly more FHA loan sales in the second quarter. We are very pleased with the margins we've been able to generate over the first nine months of the year, which are well ahead of last year's pace. We also recorded $14.1 million of mortgage servicing rights income related to $1.2 billion in committed loans in the third quarter, representing an average MSR rate of around 1.16%, compared to 1.46% last quarter. Mainly due to a higher percentage of Freddie Mac loan originations, combined with a greater mix of larger loans in the third quarter, both of which contain lower servicing fees. Our fee-based servicing portfolio grew another 2% in the third quarter to approximately $30 billion at September 30th, with a weighted average servicing fee of 40 basis points and an estimated remaining life of 8.3 years. This portfolio will continue to generate a predictable annuity of income going forward, around $119 million gross annually. In the third quarter, we also received $1 million in prepayment fees, as compared to $3 million last quarter. Given the current rate environment, we are estimating that prepayment fees will likely remain nominal at around $1 million a quarter going forward. In our balance sheet lending operation, our $13.1 billion investment portfolio had an all-in yield of 9.12% at September 30th, compared to 9.07% at June 30th, mainly due to increases in the benchmark interest rates, which was largely offset by an increase in nonperforming loans in the third quarter. The average balance in our core investments was $13.4 billion this quarter, as compared to $13.6 billion last quarter, due to runoff exceeding originations in the second and third quarter. The average yield on these assets increased slightly to 9.25% from 9.19% last quarter, mainly due to increases in the benchmark index rates, which was largely offset by an increase in nonperforming loans. The total on our core assets was approximately $11.9 billion at September 30th, with an all-in debt cost of approximately 7.41%, which was up from a debt cost of around 7.25% at June 30th, mainly due to the increase in the benchmark rates. The average balance on our debt facilities was approximately $12 billion for the third quarter, compared to $12.5 billion last quarter. The average cost of funds in our debt facilities was 7.37% for the third quarter, compared to 7.11% for the second quarter, again, primarily due to the increase in benchmark index rates. Our overall net interest spreads on our core assets decreased to 1.88% this quarter, compared to 2.08% last quarter, and our overall spot net interest spreads were 1.71% at September 30th and 1.82% at June 30th. Lastly, we believe it's important to continue to emphasize some of the significant advantages of our business model, which gives us comfort in our ability to continue to generate high-quality, long-dated, recurring earnings. We have several diverse and countercyclical income streams that allow us to produce strong earnings in all cycles. The most significant of which is our agency platform, which is capital light and generates very high ROEs through strong gain on sale margins, long-dated service and annuity income, increased escrow balances that are on significantly more income in today's higher interest rate environment. Additionally, we are multifamily centric and have a substantial amount of non-mark-to-market, non-recourse CLO debt outstanding with pricing that is well below the current market. We are also well capitalized with significant liquidity and have a best-in-class asset management and senior management team that have tremendous experience and expertise in operating through multiple cycles. And we believe these features are unique to our platform, giving us confidence in our ability to continue to outperform our peers. That completes our prepared remarks for this morning. I'll now turn it back to the operator to take any questions you may have at this time. Mike? Thank you. As a reminder, to ask a question, please press star 1 on your telephone. To withdraw your question, please press star two. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. We will take our first question from Steve Delaney with JMP Securities. Taking the question. Congrats on another solid, solid quarter, guys. The number that jumped out in the report to me was the $500 million in cash sitting in the CLOs. My thought there is— and you did put $240 million to work in new structured loans I noted in the third quarter. I guess the question is, first, did the $240 million, were they done within the CLOs or outside of the CLOs? What are your thoughts about— how can you reduce or do you plan to reduce that $500 million meaningfully over the next couple of quarters? Thank you. We've done a really good job in managing our cash balances and our CLOs and keeping them low. But what we're seeing is a lot of payoffs coming at the end of the month. So when they come at the end of the month, it, you know, it takes time to redeploy that money, that money. It used to come more evenly over a period of time. So that's kinda, kinda what we're seeing. So there's probably a larger number of payoffs. We are constantly looking at our inventory and moving stuff out of our bank lines into it and keeping that cash balance as low as possible. But it's a process. It's not always perfect. Yeah, Steve, it's Paul. Ivan's 100% correct. We did have some late, late runoff in the third quarter. To answer the rest of your questions, of the $240 million we funded during the quarter, $140 million, as we said in our commentary, were fundings of prior commitments on our SFR business. Okay. So that all gets funded through our, our warehouse lines, and that business has been tremendously accretive for us. We're generating almost a 17% levered return on that business for the quarter. Of the other $100 million that was funded, you know, $92 million were bridge loans, and $8 million were mezz and PE behind our agency business. So the mezz and PE is obviously not financed, and it's 13%— Sure. —yield on your money. And the other 92, I think 62 of it went into one of our CLOs, and the other one's on a bank line. So that's kind of the breakout of how we financed our business. But as Ivan said, we've got, you know, $6.2 billion of replenishable CLOs at 170 over. We've got a nice amount of cash in those vehicles to reinvest. And, you know, as loans run off, you know, it, it's, it's a process of moving it around and being efficient, but we've got a lot of dry powder to be able to execute very well going forward. Got it. That leads into my follow-up. Ivan, you know, which, in terms of the new loan demand on the structured side, are you seeing long-term Arbor borrowers, people that you guys have had relationships for, you know, 10, 20 years, stepping up and looking to take on new projects, new multifamily projects in this environment? Or is everything you're looking at really just refinancing existing projects? Thank you. We've done some purchase activity, especially on the agency side. And I think that you still don't have the price discovery in the market and the buyers and sellers meeting of the eyes to have active transactions. So I don't think it's a very active part of the market. You are seeing some refis in the market, and, you know, you're seeing existing bridge loans from time to time get refi, perhaps some cash or restructured deals. But, you know, we've been real cautious. We've been spending more of our time on the build to rent, where we feel the opportunities are a little greater. And now, as I mentioned, we just launched a construction lending business, which we think is great. All the banks are kind of out of the market. All this concern about, you know, new deliveries. We think our timing is outstanding because the lending we're going to be doing now, you know, the deliveries are going to be in about 36 to 48 months from now, where we think the absorption here and a lack of opportunities will create a good opportunity and our yields will be outsized, and that's kind of where we're putting the use of our capital. Thank you both for the comments. Thanks, Steve. We have our next question from Stephen Laws with Raymond James. Hi, good morning. Congrats on a solid quarter in a very difficult environment. You know, Ivan, I'm going to start. You know, can we talk about you know, you mentioned the next two to three quarters being the most challenging, and you said something similar last quarter. You know, when you look at the fourth quarter of 2021 origination volume, you have a pretty big quarter. You know, two-year loans would be hitting original maturity dates next quarter. So, you know, can you talk about you know, how many of those have caps that might expire? You know, given the outlook increase since the last quarter, you know, how does that impact you know, your expected stress you think you may see in the next couple of months, given where rates are? You know, and maybe at the, a more detailed level, you know, how many of those borrowers do you think are on track with their business plan? You know, how many need more time versus how many have a real cap rate issue around, the rate move? Yeah. Most of our loans are three-year loans with extensions, not two-year loans. Just to have a correction on that comment. Great. It's an ongoing process. We don't wait till the expiration of a rate cap, or we don't wait for loans, people to come to us. We're very proactive. I think the biggest risks other than the rate cap, which is a true risk, and that's just an economic issue because the cost of a new rate cap is a stated dollar amount. For us, the real concern is performance and, you know, making sure that the assets are being managed. A lot of the bridge assets required execution to get to their business plan. There was a lot of upside in the rents and unit turns and getting them to market. And I think if anything, is what we see in the industry, is the lack of execution, which creates, you know, which creates an economic risk for the borrowers. They're not getting to their numbers. So we're putting a lot of time and attention to really managing these assets, staying on top of the borrowers, working with them to change management companies and recapitalize their deals well ahead of time. So it's an ongoing process. It's not get to the cliff and deal with it then. Makes sense. Appreciate the correction on the, the original maturity term. Paul, as a follow-up on the financing side, you know, a couple of lines, I think, in the queue mentioned that they're currently being, you know, discussed for, for extensions. And then, you, you know, can you talk about how those conversations are going with counterparties? You know, do you expect those lines to be extended with no change of terms? You know, and as you think about, you know, CLO buyouts, you know, did you buy any loans out? And if so, kind of what is the typical liquidity need to move out of a, a loan out of a CLO onto a, a bank line? Sure. So we have some data for you, Steve. Thanks for the question. During the quarter, we have about $6.5 billion of committed warehouse lines, about 15 different relationships, and $4 billion of that was extended during the quarter. If you go look at our Q, we had some maturities coming due. We were very successful in extending pretty much all of them. I think there's one line left that we expect to have done by the end of the month, so no issues there. But the conversations have been pretty similar across the board. We've not seen much of a move, if any, on existing product that's being financed in the vehicle, so we've been able to hold the line and keep that pricing pretty consistent. What we're seeing is more of a conversation about new product and what the pricing would look like on new product. But for the most part, we've done a great job of having very deep relationships with our banks, very long-standing relationships, and getting those lines to roll, with no significant material changes to the terms that we have outstanding. So that's been really, really helpful. The second part of your question was around—r emind me again, it was? CLO buyouts and liquidity— Sure. —to move. Sure. So as you know, from time to time, when loans have issues, we do exercise our right to buy loans out of the vehicles, restructure them, either put them back into another vehicle or put them into our warehouse lines. And that's a fluid process that happens each quarter. This quarter, I think we ended up buying $140 million of loans out of our vehicles, but one of those was a loan that I had mentioned in my commentary, that we restructured a $70 million defaulted loan late last quarter that was restructured. So that was pulled out, restructured, and then financed on one of our warehouse lines. So net, we probably had about, you know, call it $80 million of buyouts during the quarter, and it changes every quarter. It depends on performance. Last quarter, we had 50. So it's just a fluid process from how loans perform and how you operate your vehicles. Fantastic. Thanks for the comments this morning. Our next question comes from Jay McCanless with Wedbush. Hey, good morning. Thanks for taking our questions. The first question I had, if rates stay at these levels or even higher into 2024 and 2025, could you talk about what you think could potentially happen with the loan book? Yeah, I mean, rates are clearly at a very elevated level, and, you know, it's put a lot of stress on people being able to exit into the fixed rate market. You know, when rates were in the threes, it was already stressful, and we were encouraging borrowers to convert. You know, the short-term rates have gone up a little bit, but they're maintaining at these levels. Clearly, it's an elevated stress level. We're thinking they're going to stay at these levels for the next three quarters and are planning accordingly. But make no mistake about it, that's the stress in the system. You know, people, you know, when they have their business plan, they exit to a fixed rate, and it was anticipated in their minds that, you know, the 10-year would be around 3%, 3.50%. Now it's sitting close to 5%, so their opportunity to exit is much more difficult. So they've got to bring more capital to the table or bring more capital to the table to carry their assets. That's as simple as it is, and that's the stress in the system. Are rate caps even available in this market? And if so, what type of cost are people having to incur to extend or create a new rate cap? Rate caps are always available. At least they have been, they continue to be. And the costs vary. You know, I think people have to bring, you know, roughly three points to the table to buy a rate cap, you know, you know, in order to bring their debt service down to a level that this would, you know, make it a breakeven. So they have to make capital calls to figure out ways to bring that capital to the table. So that's the cost to balance their loans. You know, it's roughly three points. Okay. And then if I may, one more. With the new construction lending opportunity you were discussing, are these loans going to be on actual new construction, or is this — are you going to be looking at maybe some transitional assets to bring on where banks are walking away from deals? So maybe just kind of what type of product are you envisioning for this new construction lending vehicle? It's pure ground up, multifamily, primary markets, primary sponsors. When we have the opportunity to do a construction loan and turn it into a bridge loan and get the end loan, that's what it is. The banks are out of that market. There are some local and regional banks. The advance rates, which used to be in the 75%-80% range, are in the 50%-65% range, and the guarantees on the deals are very good. So we think it's a great opportunity, a great market, great way to play our capital and where the short-term rates are. Our unlevered returns are very, very good, and our levered returns are outstanding. Okay. Any just sense around what type of nominal rate for some of these projects right now? I mean, our borrowing rates will be between, you know, 450-600 over, a nd that's kind of where all the SOFR. So your unlevered returns are, you know, 11%, you know, my estimation, 11%-12.5% unlevered, without fees and without, you know, the benefit of adding multiple products to what we've done. Okay, great. Thank you for all the color. Appreciate it. And just a reminder, if you would like to ask a question, that is star one on your telephone keypad. And our next question comes from Jade Rahmani with KBW. Thank you very much. I was definitely impressed by the very moderate increase in, I would say, the category of, you know, substandard and doubtful accounts, you know, very slight uptick. But overall, I wanted to ask, do you have a sense for what percentage of the balance sheet loans have been modified in recent quarters, problems dealt with? And what percentage, in your view, is remaining to go through some kind of modification? I don't have those numbers. I, I don't have those numbers ahead of me, but I will tell you this has been a process that began two years ago. You know, we got out ahead of it. We started managing loans that, you know, we thought would be requiring adjustments and changes. It's an ongoing process. We resolve a few, we modify a few, we get a few new ones to come in. I see this trend continuing over the next three to four quarters in this elevated interest rate environment. So, you know, whether it ticks up a little bit, it should tick up a little bit, but it's been pretty consistent. Yeah. Hey, Jade, it's Paul. I mean, it's been fairly nominal. We've been pleasantly surprised over the last few quarters. As Ivan said, we're expecting continued stress, and we think over the next two quarters, we'll continue to have those conversations with borrowers. But during the quarter, we only had one material modification, which we disclosed, which was that $70 million loan I mentioned in my commentary. That was a defaulted loan last quarter that we were able to restructure and get to a performing loan. That was the only material modification we had in the quarter. So as a percentage, that's a pretty low percentage, and we've been fairly fortunate that those numbers have been quite low over the last few quarters. Nothing comes to mind that was a significant modification other than that item over the last few quarters, but, you know, that's obviously could change in the next few quarters. Cumulatively, reviewing CLO surveillance performance, it does seem that the percentage would be in the 15%-20% range over, you know, not just the last two quarters, but maybe, say, 18 months. Does that number strike you as too high or reasonable? I think that number is high. I, I'd have to look back. I mean, we did, as I said, buy out— I think what you're referring to is loans that may be more credit risk under the— Yeah terms and provisions of it, not loans that are being modified. Two different categories and two different terms. Yeah, there's a difference. Okay. Turning to cash flow performance, you know, I understand that when we look at the cash flow statement, there's timing of loan originations for Fannie and Freddie, and then the loan sales, which take place, you know, 30 to 60 days after that. So adjusting for that, were there any items that drove negative working capital? There is a category called other assets and liabilities, that working capital account, and I think in the quarter, it was -$200 million, which doesn't usually occur. Wanted to see if you could provide any color on that. Yeah, I'll have to look at what item you're talking about. A lot of things get netted into the cash flow. You know, I'll take a look at the details, Jade, and I can call you after, because there's a lot of things netted in there. But the cash flows were, I think, pretty, pretty stable compared to last quarter, but I'll get back to you on that item. Okay. But just overall, your feeling about cash flow performance is that it remains strong and steady. Is that how you would characterize it? Yeah, that's how we look at it. I mean, distributable earnings were $0.55. I mean, that's the best representation of, of cash flow, right? It's, it's the, it's the item, the metric we use to, to cover our dividend, right? So we look at it with a tremendous coverage ratio, $0.55 versus $0.43, but we've not seen a significant decline in cash flow. Obviously, you have a few more non-performing loans, so that hurts your cash flow a little bit. But again, we're ramping up our SFR business. We're putting out some mezz and pe. We've not seen a significant decline in that cash flow number yet. Thank you very much. We have our next question from Rick Shane with JP Morgan. Thanks, guys, for taking my questions this morning. First, can we talk a little bit about the $70 million restructuring? What is the advance rate that you received on the facilities that you pledged it to? And, was any of the MEZ that was funded during the quarter associated with that restructuring? Paul, before you answer that question, I want to give you a little perspective on that loan because it kind of touches upon some of the questions that were asked, and I think it's a good case study. That was a very, very good asset in a very good market that required a, you know, a certain execution and business plan, the borrower 100% failed on his execution, 100%. Couldn't execute, whether he was distracted, whether he had other issues, we have no idea. We were able to bring in another operator, and within this short period of time, he's already transitioned this asset because he knows the market, knows the asset quality, and has done a remarkable job. So that's kind of the overview of that transaction. Great asset, great opportunity, bad management, bad execution, replaced with a good operator, and a recapitalization. Paul, you can go now and give the specifics. Yeah, sure. Exactly what Ivan said, right? A great asset, just sponsor was not getting the asset to plan like we thought he would. Was behind on his payment last quarter, had gone delinquent two months, and then we have the three months this quarter, which is five months. We restructured the deal, and we were able to get a payment of three months in back interest, so we did get $1 million for recovery this quarter in interest. Restructured the deal on which the property was sold to a third-party borrower. A third party, a new borrower, who assumed our debt, and as part of his assumption of our debt, we modified our loan to a three-year loan. The first 18 months, the interest rate is at 6% fixed, and then after that 18 months, it reverts back to its original SOFR plus 3.40%. As Ivan mentioned, a quality sponsor that has committed $10.5 million to the project. $2.5 million was funded day one as an interest reserve, and the other $8 million is capital improvements that are going to be made into the asset over the next 15 months. If those are not made or if they've come up short, the borrower needs to post a rental reserve of the lesser of $2.5 million, and the difference between the $8 million capital improvements and what he spent. It's also important to note that, you know, he's guaranteed those $8 million of capital improvement. So that's a perfect example of what we're capable of. We took a borrower who wasn't executing his plan. We brought in a new borrower who's committed significant capital to the asset. He's going to improve the asset, get it to stabilize value quicker. Took a slight reduction in interest rates for 18 months, but then it goes back to its original rate, and that's kind of the whole structure. Got it. That is all now carried at par. Did you provide any mezz associated with that? We did not provide mezz on that loan, and we did not have a reserve on that loan because the loan—we like the asset a lot, and we think we're money good. We did end up restructuring that loan, putting it into one of our facilities and getting a pretty standard advance rate, but we did not provide mezz against that loan. Thank you. That, that's helpful. Second question, there were $347 million of extensions in the quarter. Curious if you can just sort of give us, and I realize it's gonna be idiosyncratic over a wide array of loans, but if you can give us some perspective on what extensions look like, what you are able to get in terms of pay downs and, what you're requiring in terms of rate caps, and finally, what you're doing with coupons on those. Sure. So I can give a little color. Ivan will probably be able to give the rest on the market, but most of all those extensions were as-of-right extensions, which is what borrowers have. If they're making their payments and they're doing the things they should be doing, they have an as-of-right extension, so there's not really much we do differently. They're entitled to that extension. They've executed their plan, and that extension is part of their terms. I think there was one loan in which the extension was granted, and as a concession to grant extension, we ended up having a pay down on the loan of $2 million and increasing the actual interest rate for, like, a 3-6-month extension. But almost all of the extensions we did during the quarter were as-of-right extensions. Ivan, I don't know if you want to give a little color on that. Yeah, listen, if it's as-of-right, there's not much to talk about, but if it's not as-of-right, we usually seek a level of consideration to warrant that extension to put the asset and our loan in a better position. So each one is individually analyzed to see how we can improve our position on a particular asset. Does as-of-right require getting a rate cap extension as well? It depends. If it is, if that's part of it, then it's as-of-right. If it's not, then it's not. Got it. Okay. Not to answer Jade's question, but I think it ties into something that we didn't fully understand in terms of the cash flows. There was commentary in the 10-Q related to a $211.7 million related party transaction— Yeah. — on servicing. Is that? Yeah, that's, that's the answer. I, I just looked it up and I was gonna respond to Jade. So this is timing, and this is what we talked about early in the, in the commentary. Steven, Steve Delaney asked the question. We had very, very late run off in the quarter, which sometimes happens, doesn't always happen. When that run off occurs, it runs off in our servicing shop, which is off balance sheet, and so we have to create, you know, a due from related party because that money is moved a day later. So if loans are paying off at the end of the month on 9.30, the money is sitting in our off balance sheet servicer, but it's removed out of our portfolio, and it's a receivable that comes in the next day. So that cash flow change that you see of $200 million is all to do with the change in the related party line, the due from related party line, which is totally timing, and all that money came in on October first. Got it. Okay, and then last question. Stock is now trading pretty much at book value. You guys have issued $185 million this year, repurchased $35 million. What are the parameters, where—as we think about this, what is the premium you should be trading at book to approach the ATM? And what is the discount where you would consider repurchasing? And I'm assuming that at really close to par, you're doing neither. We can't answer that in a vacuum. There are too many factors. It all depends on our liquidity position, the obligations we have to fund, the opportunities that we have in front of us, where the market dislocation is. So each circumstance presents us a different opportunity. Certainly, buying back our stock at the right value is a great opportunity for us. If we have liquidity, it's something that would be extraordinarily attractive. We always feel our best investment is within our own sphere, on the other hand. On the other hand, we always want to grow our franchising, grow our business, and if there are really great lending opportunities to grow our franchise, we keep our eye on that as well. So it's a balancing act based on a variety of factors. Got it. Now, now, the balance sheet has continued to shrink this year. I think assets are down about 6%. You've issued equity into that. If the balance sheet continues to run off, would you continue to issue equity, or is this something that will sort of stall until you have objectives of growing the balance sheet again? Well, let's keep in mind that we booked a lot of SFR business, and that SFR business funds over time. So when we're booking business, we have a capital obligation, and we try and match our capital obligations and keep our cash, you know, very, very constant in this kind of environment. So we're really sensitized to the opportunities and our capital needs and keeping our cash balances at a very heightened level during this economic cycle. So that's one of the things we pay a lot of attention to. You know, clearly, when our book was high and we're able to, you know, raise capital and then increase the amount of lending we did on the SFR side, we thought that was a really good match to generate, you know, 16% and 18% returns, and, you know, we'll manage that and monitor that accordingly. Got it. Okay, that's, that's very helpful. And last question, I promise. There is, and it ties into what you just said. There is a $56.9 million mezz commitment. I am curious what the CECL reserve levels are for unfunded commitments on mezz. Yeah, it's a model that we run. I don't have that at my fingertips, Rick. I mean, the models are run. Obviously, subordinated paper gets a higher CECL reserve than obviously first lien senior bridge stuff. We do have roughly, right now, we're sitting with about $73 million in general CECL on our balance sheet. I don't have it in front of me. It may actually be disclosed, I'm not sure, but we can get you that, of how much is related to mezz and what's related to unfunded commitments. It's just, it factors into the model. It certainly factors in at a higher loss level because of the subordinate position it's in. Terrific. Hey, guys, thank you for taking all my questions. You're welcome. We have our next question from Crispin Love with Piper Sandler. Thanks. Good morning, everyone. Appreciate you taking my questions. Just looking at the nonperformers in the quarter, you added 5 loans there, but only $16 million. Just curious a little bit more detail there. Are those smaller loans, or was that due to resolving that delinquency you mentioned? And just any additional info and detail on the new nonperformers and credit generally would be helpful. Thanks. Sure. We added actually six new nonperforming loans during the quarter for a total of about $98 million in total UPB. They range anywhere from $10 million-$30 million are the assets. We resolved the $70 million asset that I took Rick through on the change in the terms. The net change was $28 million during the quarter. The assets are, you know, not particularly different than the type of assets we've done. They're all multifamily, all bridge, they're throughout the country. The LTVs on these assets range anywhere from, you know, high- 60s to, you know, 90, and then in one, we have 100 because we took a reserve against it of $1.5 million. Really nothing different than the type of assets we've had in the past. Okay, great. That's helpful. And then just if we're in a higher for longer scenario, which you alluded to, I think, Ivan, you said that you expect rates to be somewhat stable over three quarters. How would you expect that to impact the structured loan book and originations? I think as expected, Bridge continues to soften a bit, but you have been seeing some nice, solid activity in SFR. So curious on your thoughts on forward originations in this rate backdrop in both of those areas. If, if rates drop, you know, our agency business will explode. There's a lot of our balance sheet is really well positioned to be, you know, to be transferred into fixed long-term fixed rate. So, you know, that's where the opportunities will come in the growth of, of the, of the agency business. With respect to the floating rate business. When there's price capitulation, you know, people want to buy assets that need improvement. More short-term in nature, you'll see that business pick up. So a drop in rates will create great opportunities, and, you know, we don't expect that to happen until perhaps the third quarter or maybe even the fourth. Okay. I just, just following up on that, looking at the agency business, a 10-year right now is about 4.80. In order for you to kind of see a meaningful pickup in agency originations, do you think—how do you think about that when you're looking at the 10-year? It'll pick up at each level, 4.50, you'll see an increase. On accordions, you'll see a bigger increase, or you'll see an increase. Sub 4, it will explode. As the 10-year drops, the agency business will ratchet up, and the deeper it goes, the more exponential it will be. Sounds good. I appreciate all the color there. That's it for me. Thanks. We now have our next question from Stephen Laws with Raymond James. Hi, Ivan. Just wanted to ask a quick follow-up. You know, we've touched a lot on, on Arbor-specific stuff, but can you maybe give us your views, more macro, on the fundamental side of multifamily, kind of around, you know, new supply in the near term, maybe a lack of supply in the medium term, you know, slowing rent growth near term related to that? And then on the expense side, anything around, you know, property taxes or insurance-related costs, given the type of multifamily assets you guys play in and the regions you're in? Thank you. Listen, I think new construction, the absorption is slower. We all see that. Rent growth is slow. Expenses are a little higher than everybody thought. In your primary markets, you're looking at, you know, flat, you know, your flat rent growth to expense. So that's the way we've looked at it for quite some time now. But the markets, you know, with new deliveries, Class A, the absorption, the concessions are higher than expected, and it's going to take a little bit to absorb. Given the housing market where it is, people aren't really buying houses. So, you know, I think that the demand for rentals are continue to be fairly strong. Great. Thanks a lot. We have our next question from Jade Rahmani with KBW. Thank you very much. The stock had been up in response to the results, but is now down 2%. Just a big picture question, what do you think is most misunderstood by the market as it relates to whether it be the book value or the credit risk or the earnings outlook? Listen, we can't speak to that. All we can speak is that the whole sector is down. We've outperformed the sector and in terms of the company's performance, and, you know, it's a hard mentality. There's large concern in the sector, and the sector is down. You know, we're just going to continue to perform, do our thing, outperform our peers, and I think it's patience, and it's hard, it's hard for me to speak to the investor mentality. We just run our company, have consistent performance, and sometimes you get grouped in, and, and sometimes you just— there are just headwinds, a lot of headwind in the market. On the NPL side, maybe this gets to the point. It's $138 million today, 1% of loans. What do you think the peak number of that will be? It's not something we forecast or we'll talk to. Paul, you have any comment on that? I don't. I mean, as we've said in our commentary, you know, Jade, new issues arise every day. We knock them down, and then we get new ones. I can't tell you where that number goes. I think we've done a great job of managing it to date and putting our efforts where it needs to be, but I don't have a crystal ball on, you know, what happens to the market and where that number goes. First two quarters have been okay. On the cash flow number, the cash flow performance number, you talked in response to Rick's question about the other liabilities and the due from related party line item. So that line item resolved October 1, that cash flow was very strong in the quarter. Is that how we look at that? Yeah, that's right. It's just timing. We had a bunch of loans pay off late by the end of the month, 9/30, 9/29, and those loans, the cash is not remitted to us until October first. It takes a day or two to get it out of our servicing shop once they process it. So yeah, so that's why that number is down so much in the cash flow. But again, it's timing. That'll just— That would imply? A late run-off. That would imply about $140 million of cash from operations in the quarter, and the dividend costs you $90 million, or so, sorry, about $95 million, including the preferred. So cash flow is continuing to be in excess of the dividend. That's correct. All right. Thanks a lot. We have reached our allotted time for our Q&A session today. I will now turn the call back over to Ivan Kaufman for any closing remarks. Participation, a lot of questions? Yeah, we're done with our questions. Well, we certainly appreciate everyone's support. We think our results have been outstanding and above our peers, and we continue to grind forward, and we continue to have confidence in our ability to manage through the downturn. Hope everybody has a great weekend. Thank you. This does conclude today's teleconference. Thank you for your participation. You may now disconnect.