Thank you, operator. Good morning and welcome to Starwood Property Trust's earnings call.

This morning we filed our 10-Q and issued a press release with a presentation of our results, which are both available on our website and have been filed with the SEC. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are forward-looking statements, which do not guarantee future results or performance.

Please refer to our 10-Q and press release for cautionary factors related to these statements. Additionally, certain non-GAAP financial measures will be discussed on this call.

For reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, please refer to our press release filed this morning. Joining me on the call today are Barry Sternlicht, the company's Chairman and Chief Executive Officer; Jeff DiModica, the company's President; and Rina Paniry, the company's Chief Financial Officer.

With that, I am now going to turn the call over to Rina.

Thank you, Zach, and good morning, everyone. Today, we reported distributable earnings of $147 million, or 39 cents per share, for the first quarter.

Our results were impacted by continued higher-than-normal cash balances, the resolution of non-performing assets, and the ongoing optimization of our new net lease cylinder, adjusted for which DE would have been 47 cents. I will provide more details for these items within my business segment discussion.

As we continue on our stated path to grow our investment base, resolve our non-performing assets, and optimize our new net lease platform, our underlying earnings power continues to build. In the quarter, we deployed $2.5 billion of capital across our businesses, including $1.5 billion in commercial lending, $597 million in infrastructure lending, and $128 million in net lease, bringing total undepreciated assets to a record $31.7 billion at quarter-end.

We deployed another $1.5 billion after the quarter, 70% of which was in commercial lending. Our company is diverse, with commercial lending comprising just 52% of our investment base and owned property increasing to 25% this quarter.

We are really not a typical mortgage REIT. I will now take you through our individual segment results, beginning with commercial and residential lending, which contributed DE of $172 million to the quarter, or 45 cents per share.

In commercial lending, we funded $894 million of our $1.5 billion in loan originations, along with another $278 million of preexisting loan commitments. After factoring in repayments of $835 million, our funded loan portfolio grew to $16.7 billion.

This does not include $1 billion of new originations after quarter-end, which brings our loan portfolio to its highest level since inception, or $2.3 billion of unfunded commitments on previously closed loans that will generate future earnings when funded. I mentioned earlier that our run-rate earnings were impacted by a resolution of non-performing assets.

During the quarter, we sold a multi-family asset in Conyers, Georgia that was foreclosed in February of last year. We repositioned the asset during our one-year hold period, cutting delinquency in half, from 16% to 8%, and increasing occupancy from 86% to 91%.

After a broad marketing campaign and over 20 qualified bids, we sold the asset for a $5 million DE loss and a small GAAP gain, reflecting the adequacy of the GAAP reserves we previously recorded on this asset. We foreclosed on three 5-rated non-accrual loans in the quarter, the first of which was a $248 million mixed-use property in Dallas, consisting equally of multi-family and hospitality.

The second was a $71 million multi-family in Phoenix, and the third was a $28 million multi-family in Dallas. We obtained independent third-party appraisals for all three assets, with the mixed-use property that represented two-thirds of this quarter's foreclosures appraising 10% above our basis.

The other two assets carried a combined $25 million of specific CECL reserves. The weighted average risk rating on our loan portfolio improved to 2.9 this quarter versus last quarter's 3.0.

This improvement is net of two small multi-family loans that were downgraded from a 3 to a 4 in the quarter, which Jeff will discuss. We ended the quarter with $676 million of reserves, $455 million in CECL and $221 million in REO.

Together, these translate to a $1.82 per share book value, which is reflected in today's undepreciated book value of $18.97. Turning to residential lending, our on-balance sheet loan portfolio ended the quarter at $2.2 billion, down from $2.3 billion last quarter, due to repayments of $38 million and a $21 million negative mark-to-market adjustment on the portfolio that was offset by the $31 million positive mark-to-market we recorded last quarter.

Our retained RMBS portfolio remained relatively steady at $400 million. Next is infrastructure lending, which contributed DE of $22 million, or 6 cents per share, to the quarter.

Our strong investing pace continued, with $597 million of new loan commitments, of which $567 million was funded. After factoring in repayments of $320 million, our portfolio increased to a record $3.2 billion.

Nearly 70% of this quarter's commitments were self-originated, bringing our total self-origination volume to $950 million. Also in the quarter, we completed our seventh actively managed infrastructure CLO, a $600 million transaction at a record-low spread of SOFR plus 168.

We used a portion of the proceeds to repay CLO 3 for $330 million. CLOs now represent 75% of our infrastructure debt, providing a durable, non-recourse, non-mark-to-market financing.

Turning to our property segment, we recognized $29 million of DE, or 8 cents per share, across all three major portfolios. I will start with a brief comment on our Florida affordable multi-family portfolio, Woodstar.

Last week, HUD released the new maximum allowable LIHTC rent levels, which were set 8.9% higher than last year. Certain properties were in geographies where the rent increases were once again capped by HUD, with the incremental rent growth being deferred to next year.

To date, we have recouped 100% of our original equity investment in this portfolio, plus an incremental $540 million that we have been able to reinvest across our business lines. We have $416 million of Woodstar debt maturing in Q4 and anticipate another cash-out refinancing, again affirming our valuation on these assets.

In net lease, as I mentioned earlier, we are still in the ramp-up phase of this business, which has been quite dilutive following our acquisition eight months ago, a dynamic we anticipated and disclosed at the time. If optimized and at scale, this business would have contributed 3 cents of incremental DE to the quarter.

The quarter's acquisition volume was in line with our original underwriting, with $128 million of purchases, containing a weighted average lease term of 19.5 years and weighted average rent escalations of 2.5%, bringing our total portfolio at quarter-end to $2.5 billion, with a weighted average remaining lease term of 17.4 years and zero defaults. As you are aware, we adjust DE for the straight-line rental income reflected in our GAAP numbers.

If we were to include straight-line rent in DE, it would add another penny to the quarter. We continue to optimize this platform's capital structure, completing two notable refinancings since our last earnings call.

The first is a new ABS transaction, which was used to replace a more costly issuance that we assumed in connection with the acquisition. The ABS financing totaled $466 million at a weighted average fixed rate of 5.06%, a record tight spread for this platform.

This allowed us to replace $324 million of existing ABS financing, which carried a weighted average fixed rate of 6.65%. The impact on our master trust was a reduction of 44 basis points, from 5.73% to 5.29%, a benefit that we will realize in DE over time.

However, during the quarter, we recognized a 1 cent non-recurring DE loss as a result of unwinding the interest rate hedges we had put in place in anticipation of this securitization. The second refinancing was completed after quarter-end, with the closing of a new five-year, $1 billion warehouse facility.

It has a 40% lower spread and is nearly twice the size of the in-place financing we assumed at acquisition. These accretive financings, combined with the ramp in transaction volume, builds the foundation for the earnings power embedded in this platform and paves the way to overcoming the 3 cents of dilution that we recognized this quarter.

Concluding my business segment discussion is our investing and servicing segment. Collectively, the cylinders in this segment contributed a robust DE of $57 million, or 15 cents per share, to the quarter.

Our special servicer, LNR, continues to perform as the positive carry credit hedge we have long described, with servicing fees increasing to $52 million this quarter. Our active servicing portfolio totaled $9.9 billion, while our named servicing portfolio was $95 billion.

LNR continues to be the highest-rated special servicer in the country, with a rating of CSS1, the highest rating possible. Our conduit, Starwood Mortgage Capital, securitized or priced $153 million of conduit loans in three transactions at profit margins that were at or above historic levels.

We typically see lower securitization volume in Q1 and expect to see volumes increase in the near term. Turning to liquidity and capitalization, our current liquidity stands at $1 billion, which does not include liquidity that could be generated from cash-out refinancings, sales of assets in our property segment, direct leveraging or issuing corporate unsecured debt backed by our unencumbered assets, or issuing term loan B, where we have nearly $1 billion of capacity today.

In addition, we have $9.4 billion of availability across our bank financing lines. We continue to operate at conservative leverage levels, ending the quarter with a debt-to-undepreciated-equity ratio of 2.59 times.

Also notable this quarter, our board authorized a $400 million share repurchase program on February 26th. In March, we deployed the first $20 million of that program, purchasing 1.1 million shares at a weighted average price of $17.67, a discount to both our current stock price and undepreciated book value per share.

One final note, during the quarter, we are proud to have been awarded the 2025 Mortgage REIT of the Year by PERE Credit. The award reflects the breadth and resilience of our diversified platform across market cycles.

With that, I will now turn the call over to Jeff.

Thanks, Rina, and good morning, everyone. Let me start with the broader backdrop, because it's important context for the quarter.

Capital markets have been volatile to start the year, driven largely by geopolitical developments in the Middle East. Treasury yields and credit spreads have moved with each headline, and while volatility has increased, the overall environment remains relatively stable.

Refinancing volumes are significantly elevated, with loans originated before the 2022 rate rise facing their final extensions, and newer vintage loans coming out of call protection and taking advantage of spreads that are today at the tight end of their long-term ranges. This backdrop is constructive for our legacy investments and leaves us well-positioned to capitalize on new origination opportunities at scale.

Starwood Property Trust is a differentiated multi-cylinder platform that was built to outperform in volatile market environments, spanning commercial, residential, and infrastructure lending, owned real estate, and special servicing. This diversification gives us the earnings profile of a credit business, with the upside from our large owned property portfolio, our counter-cyclical special servicer, early prepayment income, and further resolutions in our lending book.

We have invested in every quarter of our 17-year history, and when we see outsized opportunities like we have over the past year, we have the firepower to lean in. We've done just that, with nearly $4 billion of investments closed year-to-date.

We are expecting a very robust finish to the first half of the year, with an equally strong pipeline extending into the second half. From a portfolio standpoint, we continue to see the benefit of repositioning we began several years ago.

Multi-family and industrial continue to dominate our pipeline, and we continue to grow our non-US loan portfolio, where our manager, Starwood Capital, has large originations teams spanning the globe with decades of lending experience. Starwood Capital is also one of the largest private data center owners in the world, with over 150 dedicated people in the sector, giving us the expertise to also make loans on data centers with confidence.

Their footprint also allowed us to be a first mover lending in this space, taking advantage of wider spreads on loans that generally have 15 to 20-year leases to investment-grade tenants and fully amortize over the initial lease term. US office represents 7.6% of our assets today, which is well below our peers and represents the bulk of our reserves.

Additionally, we only have one life science loan for $56 million, and together these sectors are less than 8% of our assets, which is extremely low in our industry and allows us to have more certainty regarding potential portfolio outcomes. As Rina mentioned, our overall risk rating fell from 3.0 to 2.9 in the quarter.

I will note that nearly half of the over 50 loans in our history that have been risk-rated 4 or 5 have now been resolved or returned to a 3 or lower rating. Also, over half of our CRE lending commitments have been originated since 2024 at a lower basis and with better loan coverage metrics.

We still have work to do, but we have meaningfully repositioned the portfolio in this cycle, leaving us in a good position relative to where the market is today. Our approach to credit remains consistent.

We lean into situations where we have conviction and control, and we are willing to use our balance sheet and large internal asset management resources to actively manage outcomes rather than fire-sale assets at a worse outcome to shareholders. We have a proven track record of successfully stepping in when sponsors stop supporting and investing in assets.

Along with our manager, we have the willingness and proven operational capability in-house to improve performance and protect and potentially grow value. We continue to make steady progress resolving legacy assets.

Non-accrual and REO balances declined again this quarter, and we have now resolved over $300 million of assets that were previously a drag on earnings. We have additional REO sales in process and expect further reductions in the remainder of the year and in 2027.

We did see some ratings migration in this quarter, which is consistent with where we are in the cycle. Two loans moved into the 4-rated category, both in multi-family.

The first is an $81 million multi-family asset in Georgia, where the current debt yield is tracking below the extension threshold required at the upcoming maturity. The second is a $40 million multi-family asset in Texas, where the sponsor has signaled an unwillingness to continue supporting the asset.

Both situations are ones we have navigated many times. We have defined action plans.

Both are being actively monitored, and we are prepared to step in and execute these plans should we need to. Our 5-rated loan category declined by over $200 million in the quarter, including the $347 million Rina mentioned, offset by our purchase of the $114 million senior position on a large industrial asset proximate to Manhattan.

We are working to resolve this asset, and the sponsor has leases under negotiation for almost all of the available space. Successful resolution of this loan, our largest in the 5-risk category, would decrease our 5-rated bucket by over 50%.

That progress, along with continued growth in our investment balance, represent the core pillars of management's plan to grow earnings and dividend coverage, as we have outlined in prior quarters. In infrastructure, a business we are in our ninth year investing in, we committed $597 million at above-trend returns in the quarter.

A majority of that activity was self-originated, which allows us to dictate credit and structure while continuing to grow our portfolio and earn excess return, given our ability to finance this business accretively. These loans are also supported by durable long-term demand drivers from the energy transition and AI-driven power infrastructure build-out, leaving us with a pristine, low-LTV portfolio.

Our financing is diverse, low-spread, and benefits from non-recourse, non-mark-to-market provisions in our CLOs, which, as Rina said, account for 75% of this segment's debt. Our net lease platform, Fundamental Income, continues to ramp as per our acquisition plan.

We expect volumes to increase throughout the year as the team completes their first year under Starwood Property Trust. As Rina mentioned, we again made meaningful progress on the financing side in the quarter.

The combination of a lower cost of funds and a higher advance rate, which we underwrote and have now executed on, is directly accretive to the ROE of this cylinder and demonstrates what Starwood's capital markets relationships help bring to this platform. These improvements should help turn this business accretive in 2027, in line with our underwriting, supporting our thesis of creating long-term shareholder value at the expense of short-term earnings dilution we have experienced to date.

Our REIS segment again performed very well. The servicing platform continues to act as a positive carry credit hedge, generating higher earnings during periods of stress.

Since the rate rise, we feel the equity market has undervalued the counter-cyclical nature of this business on our stock, but it proved again this quarter it is a real differentiated earnings contributor with our highest ROE. I would now like to spend a few minutes discussing our low-leverage balance sheet.

We have been, and plan to continue to, tactically increase our unsecured debt as a percentage of our company's capital structure. Unencumbering assets to move to more stable, non-mark-to-market financing is supportive of our corporate credit ratings, which we hope to improve as we execute on this plan.

Our unsecured debt continues to trade very well, which we view as a reflection of the debt market's confidence in our balance sheet and the value of the diversity of our platform. Our next corporate unsecured maturity is $400 million in July, and we have multiple options to address it.

We have ample liquidity to repay it with cash or refinance it to take advantage of the strong current credit market backdrop I started today's call describing. Our access to the debt capital markets is genuinely differentiated.

There is no other company in our space with the same footprint across secured, unsecured, and securitized funding channels. Wrapping up, we are the oldest and largest mortgage REIT, with an equity base that is larger than our next four peers combined, and as much trading volume as those peers combined, giving shareholders unparalleled liquidity.

In our 17 years, we have built a unique, diversified business and invested almost $120 billion of capital while successfully navigating multiple cycles, leaving us as the only mortgage REIT to have never cut our dividend. We have a clear path forward: continue to resolve legacy assets while scaling our investment platforms.

Progress across each of these areas is tangible, which we expect to improve earnings and dividend coverage. With that, I will turn the call to Barry.

Thanks, Jeff. Thanks, Rina.

Thanks, Zach. Good morning, everyone.

I apologize up front. I am not feeling well.

I'm doing this [laughter] with half a stomach. Wow, it's an interesting world.

I think we'd like to say that there's never been so excited and so terrified at the same time. It's not just the war.

Obviously, it's what is the impact of AI long-term on the markets, the office markets, the employment base? What will politicians do in the face of potentially job losses?

What will happen with Taiwan, which the markets obviously think is a zero risk given the ascent to daily highs? I tend to think the real estate sector, in general, is coming out of the frozen tundra of the last three years.

We're still recovering from the 500 basis point increase in rates, that no one saw coming, and then the slow descent even though ex-rents, inflation has clearly descended. If you think about the world, it's sort of an odd concept.

I was in a room of a lot of people out west recently and I asked people to raise their hands, how many of you would have expected with what's going on in the world, the war, oil prices, deglobalization, trade wars, how many people would expect the stock markets to be at all-time highs? It's sort of a strange thing.

In the middle of this, the real estate markets are curing themselves, although it's slow, and it's not quarter-to-quarter. Supply is dropping dramatically in multi-family.

Supply is dropping in industrial. Supply is stagnant, almost nonexistent, in the office markets, same in retail, senior housing.

All these sectors are benefiting from capital being sucked into other things, including data centers, which is an asset class we play on both the equity and the debt side, which is to the moon and beyond, of course, with the risk of Taiwan shutting it all down and ending the party. I'm sure the Chinese know.

When it comes to us, where we sit here is a unique company with its diversified business lines. We keep adding new business lines.

We have quite a few assets that aren't earning a fair return, whether they're REO or they're non-accrual loans. When you look at our stock, you're earning from about 75, something like that, percent of our asset base.

It's not our full asset base. It's almost like valuing a company that has a major tower under construction and on the balance sheet it shows up in, well, work in progress, not as an asset, but when it's completed it will produce earnings.

I think that's the same story today here. We earned 39 cents for the quarter, not a number we're happy with.

If you backed out the dilution, which will go away over time in Fundamental and the triple net lease business, it'd be 41, 42. There'd be about a point and a half drag of what we took in the quarter just hits to our earnings from the REOs.

Some of those REOs, when fixed up, we expect to actually make money on, but it takes time. We've a property that the developer will lose several hundred million dollars.

We'll take it back, and we expect to be able to lease the whole thing and hopefully sell it at a gain. Those are the kinds of opportunities, but they're not quarter-to-quarter.

With that confidence, we stepped up and bought stock in the quarter. We actually can't buy stock when we go into the blackout periods, so that stopped several weeks before earnings.

We'll continue to repurchase stock as it's a pretty good investment for us. Some of our businesses are really spectacular at the moment, and they're masked in some of the noise of the less-than-spectacular parts.

The special servicer is cranking. Amazing this far along in a cycle we still have $100 billion of named servicing and almost eight I think it's 8.5 in the active in the servicing book.

It's not going to be going down. [laughter] That there is still a lot of distress.

Rates are still higher. I should have mentioned when I talked to you about what would you think of the world, the 10-year?

We're hovering around 4.40, 4.36, 4.32, 4.42. That's materially higher than I think most people would think.

We're creating unprecedented deficits, but the equity markets don't seem to care very much. Again, finishing the thought, this is all good for real estate.

The tide had gone out and the tide is turning. We're going from headwinds to tailwinds.

There are really two things behind the tailwinds. One, three really.

One, the re-shoring in the United States, bringing back all these plants, equipment, creating demand for industrial. That's a real trend.

It's starting. It's not a massive tidal wave, but you're beginning to see the impact a little bit.

Two, supply, which we talked about. Three, interest rates, because the forward curve is still lower.

The markets are very confused, as most executives are, about a world I think post-World War II record low consumer confidence, but retail spending continues up. I tend to think the posted GDP numbers are sort of illusory.

You can talk about them as being great, and they are what they are. They're really driven by two things: AI spending, which isn't felt by the average American, and by productivity gains.

That kind of GDP is not the kind of GDP that normally would send those consumers to the store. As consumption is 70% of GDP.

It is a miraculous economy, but it's not your grandma's economy, [laughter] and it's creating all kinds of odd things and investors chasing multiples of revenues in the equity markets. I think we will catch a bid, the entire real estate sector.

I can say that we're about to complete our 13th fund raise of a fund on the equity side, and seeing robust investor demand where a year ago they wouldn't talk to us. That's really a reflection of the turn in the markets.

Several of my peers in the asset management business have harped on their recent earnings calls, and we tend to agree. Things will be getting better.

Our pace of our originations is solid. We're all looking for the earnings to come out of the book.

We're confident in the ability to pay the dividend. We sit on a billion and a half dollars of gains in our multi-family book.

We actually made 5 cents selling one asset, just one asset, last quarter. Quarter-to-quarter we're sequentially up, 37 to 39 cents, but we chose not to take any of those gains.

We're playing long ball, not short ball, and we're confident in our ability to create a dynamic company that's capable of producing superior earnings, and therefore, dividends. I want to thank the team that continues to work really hard to continue to lead the market in our field.

Thank you.

Now, we'll take questions.

Hi, this is Jason Sabshon on for Jade. Thanks for taking the question.

It would be helpful to hear your thoughts on the outlook for resolving non-accruals and foreclosed assets, maybe comment on the time horizon, and if possible, give a percentage range for resolutions in 2026 and 2027. Thank you.

Thanks so much. Appreciate the question.

I think we told you we've resolved over $300 million. We have a resolution that you'll see as an upgrade on a lease that was signed for about $100 million in the quarter in Brooklyn.

That will take an asset that now through three large leases has completely moved from a troubled risk rating of a 4 or 5 back into something lower. We are expecting potentially a lease, as I spoke about, on another asset just outside Manhattan, where should we sign that lease, that will go from a 5 or 4.

I think I mentioned in my script that 25 of the 53 loans we've ever had as a 4 or a 5 have now been either worked out or moved back down. Our strategy is just different than other people's a bit on these.

A lot of people are willing to fire-sale to a higher cost-of-capital buyer, potentially with financing, when they have a difficult asset. We look at every loan on a present value of the likely outcomes to us, and given our access to liquidity, we have chosen to lean in.

Rina gave you some examples in the quarter of even the multi that we lost $5 million or so on. We increased occupancy significantly, decreased the delinquencies significantly in the six months or so that we managed that property.

Being managed by Starwood Capital, we have people with expertise in these. We're not afraid to take something back.

We're not afraid to stay in. We don't stay in for the sake of staying in, but if the present value of getting the money back today versus investing in the asset, if the present value is higher on the latter, we'll do the latter.

We have a few that you'll see play out. It'll put us over $500 million or so, I think, in the very near future.

We're expecting $900 million by the end of the year in our plans. Then another $500 or so million next year in our base plan.

That will work most of the way through it, but it's very difficult to judge when you will get a lease and when something will play out and when the present value calculus for us will turn positive versus negative on making that decision.

Great, thank you. That was very helpful.

Then separately, it'd be helpful to touch on the outlook for net lease and when you'd expect it to become accretive. I know you guys cited 3 cents of dilution, but you've also issued ABS and entered into a new credit facility.

Any commentary there would be helpful.

Thanks so much. This is an interesting one.

We signed on, you all know we weren't earning the core dividend at the time we closed this deal in July of last year. We made a decision, knowing this business is running exactly at what we expected it to run in the short run.

We knew we had to optimize the financing, we knew we would get originations up. We made a decision to take on negative DE for up to six quarters, I think.

When we did it, we told people that it would become accretive in '27. It's not often that a company like us takes six quarters of negative DE in a time where we're not earning the dividend, but we did that because we wanted to own this platform.

We were buying a platform that we knew would be short-term dilutive, and as you look at the rent bumps over a number of years, it becomes very accretive down the line. As large shareholders with management and our board, we looked at the long term here.

We are obviously paying a penalty for it in the market today, because missing a number, as you see in today's stock price, is not something that bots like very much. We set this up for the long term.

We think the business will perform. As you said, we've now optimized the financing, which should start kicking in, and help it turn to being accretive in '27.

It becomes very accretive beyond that. I'll turn it to Barry for any other comments that he might have.

Couple things. One, the Fundamental business, if it traded separately, would probably trade at a 5 or 6 dividend yield.

It's tucked into us, and obviously, it's hurting us when, in fact, it's probably of substantial value as a standalone business, which isn't lost on us. One way or another, we're going to get this thing to scale or spin it out or do something that will reflect the value in the businesses.

We're not using straight-line accounting on the leases. Some of our peers do that.

With that, our yields would be significantly higher even this year. Zero defaults, 100% occupied portfolio.

I'd say it's growing at the pace we underwrote, but not nearly as fast as I would have hoped. That's one of the reasons you see the dilution.

I think you have to look at, just answering the former question, we're going to work as fast as we can to repair these non-accrual assets and the REO assets. As Jeff mentioned, we don't have the need to give them away.

At the end of the day, we're real estate guys. What you see in most of these assets, especially the ones that get in trouble, is the borrower just stopped taking care of them, right?

You have a multi that has rooms out of service, because he just didn't care, because he was going to lose the asset. Or you have tenants that won't take on an office asset, because the borrower has no desire or any need to put into tenant improvement dollars.

He's just flushing his cash. You get these, in some cases, really good assets that have been abandoned by the borrowers, take time to actually get them back to stabilization, and then you sell them.

Sadly, it'd be easier if this was a closed-end fund kind of thing. It's not done to optimize earnings quarter-to-quarter.

It's done really to maximize return on the capital that we've invested behind these properties. We are blessed with a fortress balance sheet, we can put the money into convert, as we are, 1201, I think it's K Street in DC, which is being converted from an office building to a rental.

In the time that we've taken the underwriting, rents have gone up, our yields on cost could be even better than we thought, and we expect they will be. If they'd seem to fire half of DC.

That's not going to get done for another year or a year and a half. That's the kind of situation.

We're confident. We're major shareholders of our stock, as you saw, we repurchased stock.

We're confident in our ability to weather the storm and continue to pay the dividends. Wait for cleaner numbers, frankly, because they aren't bad, it's just not very clean.

We know all that. Thanks.

Hey, good morning. Thanks for taking the questions.

It's kind of a piggyback on the last question. If 48 cents of the dividend coverage is the goal, help us, or me, shape kind of where we are in that timeline based on these first-quarter results.

I know Barry just said there's a lot of noise in it and the dilution from net lease, etc., but how should we think about kind of the timetable to get to 48 cents as you guys are working through non-accruals, as you're taking time with REO and being patient, etc., etc.? That's question one.

Hey, Gabe, thanks for the question. As I mentioned in my remarks, I think we're there on a recurring basis today, right?

We're not there on a reported basis. We talked about Fundamental, and we think that becomes break-even, call it early next year, and then accretive thereafter.

We think on a recurring basis, we would be in excess of the dividend at some point, probably late next year. We had higher-than-normal cash balances that we talked about last quarter.

We raised excess financing on our Woodstar refi, we had two debt raises. We're still fighting the cash drag from having over a billion dollars of cash for the quarter.

We need to get the money deployed, and I think that'll help, but I would say you're not going to see kind of above on a recurring basis until next year at some point. We still have to work through the REO assets.

That's right. We've been saying that consistently though, Gabe, for a while, that end of '26, as we get into '27, that's when we hope.

There are little nuances along the way. She talked about cash drag.

We don't tend to whine about the timing of cash flow, but in this quarter of the billion dollars or so of CRE loans, 57% of them were funded, which means 43% weren't. On average, they were only funded for 27 days on that 57%.

We're getting very little credit there versus in the quarter our repayments were outstanding for 64 days. That probably cost us a penny or two as well.

There are just small nuances, but I think if you normalize Fundamental, you go into the upside that Rina talked about and the other businesses, we start to get down as per the plan I just told you on non-accruals, etc., and we continue to originate at this very elevated pace with great quality originations. We're really proud of the book that we're building over the last couple years, half of which is 2024 and beyond originations.

[cough] It will all come together as we turn the year to getting to that 48 cents that actually is reported, and the bots like more than today's.

I'm going to be more optimistic than Rina and Jeff, because I know about some situations that we will trigger. If we have to sell some assets to be able to redeploy the capital at the 11, 12, 13% ROEs, then we'll do it.

I think there's some loans that are toggling to becoming accrual again. They're material.

I'd expect at least one of them to have a resolution certainly by the end of this year. It's a material earnings mover for us.

I do think it's not acceptable to have 11 cents or so, 12 cents of dilution from Fundamental, so that's not a stable situation. If it doesn't get better, we're going to put it in the rightful home, which may not be here.

It's not acceptable, even though the business is performing well. The noise is too much for shareholders to comb through.

We can invite you into the house and show you our assets and you'd see the values are all there. Our ability to earn the dividend and exceed it is certainly in the house.

We told you about this last quarter. It's going to be a rocky road to get there.

It's a puzzle and we've got to manage it in the best way to maximize returns to the shareholders. We are, as I said, large shareholders, we're very motivated to do the right thing.

Getting back to the 48 cents, obviously, it would be the Holy Grail if the only thing that we did was CRE lending. That's 52% of our business.

We have $1.4 billion of gains, Gabe, away from this. We've always had recurring non-recurring gains that come from things.

The servicer had a good quarter this quarter. SMC often has a good quarter; it was light this quarter.

We used to get a lot of prepay penalties. Those are coming back.

In this tighter spread environment, we're going to start getting prepay penalties again. All these recurring non-recurring things will get us over that number, never mind the fact we have $1.4 billion of gains sitting outside of it.

I think the construct that holds somebody to earning it all in the core business or you take the stock down significantly doesn't really apply as much to a well-diversified company that's always had recurring non-recurring gains, and we will have recurring non-recurring gains through the rest of this year. Thank you for the question.

That's all very helpful color, especially on the timing stuff, Jeff, and I fully appreciate that it takes time to work through this. Follow-up, Jeff, you had mentioned that there was some REO kind of potentially in the sales process or beginning to kind of kick that ball down the road.

Is there any more color you can give on that as it pertains to you took some keys this past quarter, just kind of what we're looking like potentially, and Barry just alluded to that, if those sales can be pulled forward to reallocate capital?

We prefer to let you know when they happen because the markets move pretty quickly. There are two or three that we think happen fairly soon or a couple of leases that could move some non-accruals away from non-accrual.

I think you'll see that, and then with the potential upgrades. I don't want to signal any of the sales quite yet, Gabe, but I gave you the sense that we hope to get through $900 million this year and $500 million next year off that list, and that will be a combination of a number of things.

Nothing imminent that we're going to report here, looking forward.

Got it. Thank you for the comments.

Thanks, Gabe.

Thank you, everyone, for joining us, and we'll see you again next quarter.