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Arbor Realty Trust, Inc. (NYSE:ABR)

Q3 2010 Earnings Call Transcript

November 5, 2010 10:00 am ET

Executives

Paul Elenio - CFO

Ivan Kaufman - President and CEO

Gene Kilgore – EVP, Structured Securitization

Analysts

Steve DeLaney - JMP Securities

David Chiaverini – BMO Capital

Eric Berkley - Barclays Capital

Operator

Good day ladies and gentlemen, and welcome to the third quarter 2010 Arbor Realty Trust earnings conference call. My name is Chanole and I will be your operator for today. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session.

(Operator instructions) I would now like to turn the conference over to Mr. Paul Elenio, Chief Financial Officer. Please proceed.

Paul Elenio

Okay. Thank you, Chanole, and good morning everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we will discuss the results for the quarter ended September 30, 2010. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer.

Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risks 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 as of today, or the occurrences of unanticipated events.

I will now turn the call over to Arbor’s President and CEO, Ivan Kaufman.

Ivan Kaufman

Thank you Paul, and thanks to everyone for joining us on today’s call. Before Paul takes you through the third quarter results, I would like to reflect on how we have successfully repositioned the company and what our operating philosophy and outlook would be for the balance of 2010 and through 2011. Over the past three years, and over the last several quarters in particular, we have focused our strategy on strengthening the right side of our balance sheet, managing our portfolio, maximizing liquidity, repurchasing our debt at deep discounts and preserving our equity of value, with the ultimate goal in mind of returning to our core lending business.

Last quarter, we reported what we considered to be a transformational improvement to the right side of our balance sheet by completing the debt retirement with Wachovia, which combined with the payoff of our $26 million term debt facility last week, eliminated all of our short-term recourse debt. We were able to accomplice this goal without raising additional equity and diluting our shareholders. As a result of eliminating all of our short term recourse debt, there will be a substantial improvement in our core earnings, liquidity and operating flexibility enabling us to return to our core business activities.

Our strategy going forward is combined value from our legacy assets, enhance the yield in our portfolio and begin the process of selectively lending and investing in the appropriate opportunities. One of the advantages we have is the ability to utilize our low course, non- recourse CDO vehicles to enhance our return significantly and increased our core earnings over time. We will also continue to focus our attention on effectively managing our portfolio as well as our liquidity and take advantage of opportunities to repurchase our debt at favorable pricing when available.

Additionally, we will remain extremely focused on selectively monetizing our non-performing and unencumbered assets which will continue to increase our cash position given us the resources as I mentioned earlier to selectively invest in new opportunities going forward. In fact our success in monetizing our non-performing and unencumbered assets during the third quarter and especially in October contributed greatly to a significant increase to our cash position which as of today is approximately $70 million not including approximately $27 million of cash collateral posted against our swaps, and approximately $13 million of investable in our CDO vehicles.

These cash numbers have already been reduced by $26 million that were used to pay off our term debt facility in October. This facility had a maturity date of December 31, 2010 and its early payoff will save us some interest expense and fees for the balance of the year. Additionally, the assets securing the facility are now part of our unencumbered assets and we expect to refinance these assets over the next several months, recovering the capital used to pay off this facility. So currently we have around $175 million of net unencumbered assets and between cash on hand, cash posted against our swaps and our unencumbered assets, we have around $270 million of value. In addition, through approximately $250 million off equity value in our CDO vehicles.

We are also pleased with our ability to manage our CDO vehicles efficiently receiving all of the cash distributions from these vehicles in 2009 and the first three quarters of 2010. And while there can be no assurances that our CDO vehicles will continue cash flow in the future, we will remain focused on optimizing and utilizing these facilities by transferring assets and originating new loans when available and appropriate. During the third quarter, we also continued to selectively repurchase our CDO debt by purchasing $21 million of bonds for a price of around $9 million resulting in a net gain of approximately $12 million.

This is yet another demonstration of our success in purchasing our debt at deep discounts adding to the approximate $220 million in gains for the first half of 2010 and since this market, this location occurred over three years ago, we have recoded approximately in $285 million of gains from the retirement of our debt at discounts which we said many times before has mitigate the losses we have taken preserving a substantial amount of our equity value.

We do believe that there may be similar opportunities to be repurchased on debt at discounts going forward and we will continue to evaluate these transactions based on availability, pricing and liquidity. As we have mentioned earlier and on previous calls, the aim of our strategy has been to position ourselves to return to our core lending business, while we are keenly aware and we must be disciplined and selective in this recovery - but still and still uncertain markets. During the third quarter we originated one $5.5 million loan with an average yield of around 11% and in October we originated in one $4.7 million loan with a yield of 9%.

Combined with our second quarter originations so far this year we have originated four loans totaling $15.2 million with an average yield of approximately 10%. To date, we financed three of these assets to our low course non-recourse CDO vehicles greatly increasing our returns on these investments. As we have discussed earlier, we will continue to focus on aggressively monetizing our assets and work with our borrowers to generate run-offs when appropriate in order to further increase our cash positions and continue to evaluate and pursue new opportunities that have attractive risk reward profiles.

Now I would like to update you on our credit status of our portfolio and discuss our views of the commercial real estate market. The environment over the past three years has clearly had an impact on every borrower and on our portfolio as commercial real estate fundamentals of the real estate values have remained weak for some time. We have recorded $15.2 million of loan loss reserves during the third quarter related to 11 loans with an outstanding balance of approximately $188 million.

Of that amount, $8.1 million where on loans on which we have previously recorded reserves, while $7.1 million were new reserves. We also recorded $5.4 million in losses from restructured assets and recovered approximately $3.8 million on previously reserved loans for net losses for the third quarter of approximately $17 million from our portfolio. In addition we received $31 million in loan payoffs, refinanced and modified $119 million of loans and extended $235 million of loans during the third quarter. At September 30, the net carrying value of our non-performing loans was down to approximately $53 million from $74 million at June 30 which was mainly due to our success in monetizing and restructuring our non-performing loans in the quarter.

And of the $53 million of non-performing loans as of September 30, $25 million is currently under contract we sold. What we can gather from these numbers is that, for the third straight quarter, we were able to report that the level of our loan losses reserves is down from last year's pace mostly due to what we believe is movement towards the stabilization of the commercial real estate market. While we believe, we are adequately reserved at this time, if real estate values and fundamentals decline; this could result in additional delinquencies and losses. Accordingly, we would continue to focus on aggressively managing our portfolio and increasing our liquidity.

We are extremely pleased with our success and repositioning the company, our operating philosophy going forward will continue to be aggressively managing our portfolio, increase our liquidity, repurchased debt at discounts are available and selectively redeploy our capital into new investments with the appropriate risk reward profiles over time. We will also focus heavily on maximizing the utilization of our non-recourse CDO vehicles, greatly enhancing the yield on these investments and increasing core earnings on a long-term basis. We are very excited that not only our accomplishments but with the challenges and opportunities that lie ahead. I will now turn the call over to Paul to take you through some of the financial results.

Paul Elenio

Okay, thank you Ivan. As noted in the press release, we had a net loss for the third quarter of $1.4 million or $0.06 per share and net income of $154.1 million or $6.03 per share for the nine months ended September 30, 2010. We recorded a total of $16.7 million in net losses from our portfolio for the third quarter, consisting of $20.5 million in loan loss reserves and losses from restructured loans, net of $3.8 million in recoveries of previously recorded reserves. We were also successful in liquidating several of our non-performing and unencumbered assets. This resulted in us charging off the loan loss reserves related to those assets against the allowance for loan losses. As a result, we now have $288 million of loan loss reserves on 32 loans with a UPV [ph] of around $623 million at September 30, 2010.

As we have mentioned before, this environment has clearly had an impact on every borrower and in our portfolio and we will continue to take a proactive approach in evaluating our portfolio and actively managing and monetizing our assets. Additionally, we continue to effectively execute our strategy of retaining equity value due to the retirement of our debt instruments of deep discounts. We were very pleased with our success at retiring the Wachovia debt last quarter and we continue this success from the third quarter while we were purchasing more of our CDO debt back at deep discounts recording a gain of approximately $12 million, which helped mitigate our quarterly loan losses and preserve our book value.

We believe there may be similar opportunities for us to repurchase our debt at discounts going forward and as Ivan mentioned, we will continue to evaluate these transactions based on availability, pricing and liquidity. This has been a very successful strategy for us during the significant downturn that the buyback of debt instruments at discounts generating approximately $285 million in gains to date from these transactions. As a result, our book value per share stands at $9.21 at September 30 and our adjusted book value per share is $14.04 at September 30 gaining back deferred gains and temporary losses on our swaps. These book value numbers do not take into account any dilution for the potential exercise of the warrants issued to our Wachovia as part of 2009 debt restructure.

Additionally, as Ivan mentioned, we are very successful in October of continuing a strategy of monetizing our non-performing and unencumbered assets, resulting in a substantial increase to our cash position which currently stands at approximately $70 million. So between cash on hand, cash posted against our swaps and our unencumbered assets, net of reserves as of September 30, we currently have approximately $270 million of value not including the equity value in our CDO's which today is approximately $250 million net of loan loss reserves as of September 30. Looking at the rest of the results for the quarter, the average balance in our core investments declined by $121 million from last quarter to around $1.9 billion mainly due to payoffs and pay downs in the second and third quarters.

The yield for the third quarter on these investments was around 5.29% compared to 5.20% for the prior quarter. Without some non-recurring items such as additional interest received in both quarters on a loan that exceeded our investment basis in the asset, the yield on these core assets was flat to around 4.90% for both the second and third quarters. Additionally the weighted average (inaudible) in our portfolio was around 4.72% at September 30, 2010 compared to 4.81% at June 30, 2010. This decrease was mainly due to run-off at higher rates and a decrease of LIBOR during the quarter and this was partially offset by the payoffs of some of our non-performing loans and originations in the third quarter. The average balance in our debt facility decreased by around $256 million from last quarter to around $1.4 billion; which was mainly due to the completion of our retirement of the Wachovia debt on June 30, 2010.

The average cost of funds in our debt facilities was approximately 4.47% for the third quarter compared to 4.04% for the second quarter, excluding the unusual impact on interest expense from our swaps, our average cost of funds was approximately 4.16% for the third quarter down from around 4.29% for the second quarter again primarily due to the retirement of all of our Wachovia debt on June 30. In addition, our estimated all in debt cost was relatively flat at around 4.20% at September 30 compared to around 4.17% at June 30, 2010. So overall normalized net interest spreads on our per assets increased to approximately 0.72% this quarter from 0.60% from last quarter primarily due to the full impact reduced interest expense due to the retirement of the Wachovia Debt.

Next our overall leverage ratios by around 63% on our core assets and around 73% including the trust preferred as debt for the third quarter compared to 72% and 81% respectively in the second quarter. And our overall leverage ratios on the swaps basis with 3.1 (inaudible) at both September 30 and June 30. The decrease in the average level is the ratios was due to the significant reduction in debt from the successful retirement of the Wachovia facilities on June 30. Other expenses were down slightly from last quarter primarily due to stock-based compensation expense is in the second quarter from the issuance of 90,000 fully vested shares to our independent directors in April. There were no significant changes in the balance sheet from last quarter however as Ivan mentioned, we did pay off our $26 million term debt facility last week which effectively eliminated all of our remaining short-term recourse debt. And lastly, our portfolio statistics as of September 30 showed that about 65% of the portfolio was variable and 35% was fixed. By product type, about 59% were bridged loans, 14% junior participations and 27% were mezzanine and preferred equity investment. By asset class, 36% of our portfolio was multifamily, 31% was office, 18% hotel, 9% land and 1% condo. All of which are relatively unchanged from the prior quarter. Our loan to value was around 92%, our weighted average median dollar was outstanding with 65% and geographically we have around 36% of our portfolio concentrated in New York City. That completes our prepared remarks this morning and I will now turn the back to the operator to answer any questions that you may have at this time, operator.

Question and Answer Session

Operator

Thank you. (Operator instructions) and your first question comes from the line of Steve DeLaney of JMP Securities.

Steve DeLaney - JMP Securities

Hey good morning guys, how are you?

Paul Elenio

Good Steve. How are you doing?

Steve DeLaney - JMP Securities

Good fine. I'm just trying to connect the dots on all the work out activity and thank you for the amount of details you provided there, it is very helpful. The one number I could not connect back to the – either the P&L or the loss from reserve balance. Is this market value adjustment $7.7 million on the two modifications related to loan assumptions. How does that run through on the accounting, does that go back into the reserve or is it in the P&L somewhere?

Paul Elenio

Sure, Steve this is Paul. Those items, the accounting rules you talk about when you unwind transactions or borrow it at your, lending it is against sells a transactions and you provide financing to the new borrower, but you have to look at the market rates of the loan and so those market value adjustments are due to what the market value of the loans are today compared to maybe the loans you gave to the new borrower and those items do, flow through. They get hung up on your balance sheet as kind of against your loans, they float through your P&L, tag through your provision and then what happens is you, over time you can take that back into income as you creep back up to the original loan value that you have discounted.

Steve DeLaney - JMP Securities

Okay, got it so in your - it's included - you are saying it's included in your $16.7 million net credit expense for a quarter.

Paul Elenio

Correct.

Steve DeLaney - JMP Securities

But it will be recovered over time as you - creep that - I guess the discount’s a fair value of the loan.

Paul Elenio

That's correct, so as the loan gets closer to maturity, you keep accreting that discount back into income and then you get the loan back up to its original value.

Steve DeLaney - JMP Securities

Okay great, and then the second thing on the October - the large recovery that you had in the $14 million in October. I guess two questions there, one how did that - fortunate result come about - it is one thing to have a small recovery but that is pretty unusual to have a basically - a full recovery of your reserve and then the second part is how are you going to account for that recovery. Will it just go back to the general loan losses reserves or will go back through the P&L.

Ivan Kaufman

Yes, it was not full recovery of our reserve, it was a partial recovery against the large transaction and it was a transaction that we were working on probably for two years to get that recovery, so it just took a lot of expertise and a lot of work to get that recovery. I guess when we did recover the assets, we wrote it down all the way and we were successful in receiving that recovery. In terms of the accounting of that number I will give it back to Paul.

Paul Elenio

Sure, Steve and the accounting is exactly what you had mentioned is that will be a full recovery into the P&L, it is a partial recovery of our prior reserve but it will reduce any, if there are any provision for loan losses in the next quarter.

Ivan Kaufman

So that is $14 million that will appear in the fourth quarter.

Paul Elenio

In the fourth quarter as income or a credit against any other reserves if there are.

Steve DeLaney - JMP Securities

So if you have - if you have the same level of $16 million or whatever - that credit right there would pretty much cover your any additional costs in the fourth quarter. I know we're just talking here radically but –

Paul Elenio

That's correct.

Steve DeLaney - JMP Securities

Okay.

Ivan Kaufman

It was a great recovery, it took a lot of work, it was a very substantial number and I think that for the fourth quarter, it is going to be a very nice number.

Paul Elenio

And Steve, that obviously increased our cash position in the fourth quarter as well.

Steve DeLaney - JMP Securities

Yes great, okay and obviously it properly help you with your loan payoff. So Paul, what's the -we're just one number, I guess I could wait for the queue, but what was the total active loan count, the number of loans at September 30?

Paul Elenio

The number of loans, I can give it - it is not more than, I believe it is the hundred and, the queue is out Steve.

Steve DeLaney - JMP Securities

Okay, I will go there.

Paul Elenio

But, you can ask another question and I will pull it out for you and tell you what the -

Steve DeLaney - JMP Securities

Well here is where I was going and I can find the number. You are giving us ten nonperformers. I think in prior press releases you mentioned how many were otherwise impaired but not in the NPL’s. I'm just trying to get to - to get 10 NPL’s, approximately how many other - otherwise impaired loans and then –

Paul Elenio

That is easy to do. We have $288 million of loan loss reserves against $623 million of total UPV, of the $623 million of total UPV, 120 were non-performing.

Steve DeLaney - JMP Securities

NPL.

Paul Elenio

So, the other 500, we will call it, around $500 million of performing loans that we have reserves against and we have about $225 million of reserves against those loans.

Steve DeLaney - JMP Securities

Okay, great. That's helpful and I will take a look at the queue. If I have any issues or questions I will call you up Paul. Thanks guys.

Paul Elenio

No problem, Thanks Steve.

Operator

Your next question comes from the line of David Chiaverini of BMO Capital.

David Chiaverini – BMO Capital

Thank you, good morning. A couple of housekeeping questions, first you mentioned in your prepared remarks, unencumbered assets - do I have the number right- is it - was at $270 million.

Paul Elenio

The unencumbered assets David were $175 million

David Chiaverini – BMO Capital

$175 million, Okay.

Paul Elenio

And combined with the cash of $70 million and cash posted against our swaps of $27 million, we have $270 million in value without the equity value of our CDO’s.

David Chiaverini – BMO Capital

So it is $175 million and then what are the other two items?

Paul Elenio

The cash of $70 million, that's on hand as of today and another $27 million of cash we have posted against our swaps. So it reflected we had just under $100 million in cash between cash on hand and cash posted against our swaps as collateral and combined with $175 million of unencumbered were around $270 million of value.

David Chiaverini – BMO Capital

Okay, now looking at - I just pulled up the cash so it is $53 million of restricted cash but - so that is not really - that is not unencumbered right, because its-

Paul Elenio

That is correct but the numbers we gave in a prepared remarks, if you recall we mentioned we have $13 million of investable cash in our CDO's currently. We had $52 million at the end of September and we did a great job of monetizing some of our unencumbered assets in October and utilizing that restricted cash in the CDO's to move those assets in and then creating cash on hand so flipping it from restricted cash to gash on hand. To date, we have around $13 million of availability to invest new loans in our CDO's cash we use a substantial amount of that in October.

David Chiaverini – BMO Capital

Oh I see, so the $270 million is more of an unencumbered asset figure post quarter-end.

Paul Elenio

Correct, it is as of today.

David Chiaverini – BMO Capital

Okay, very good and the new loan, the $5.5 million loan, did you say that the yield on that is about 11%.

Paul Elenio

That's correct.

David Chiaverini – BMO Capital

Okay thank you, and now related to the CDO, OC tests which are CDO 1 and CDO 2, are getting a little tight. What are your options and potential remedies if the OC tests are breached?

Paul Elenio

I guess it is- we have been effectively managing our CDO's on our test to continue and to get our cash distributions and I guess some - we will continue to do that and there are different ways to do that and - as we have discussed on prior calls also, there was some litigation outstanding with respect to the ability to collapse existing securities to keep those tests alive. I believe that specific litigation is going forward and should be successful which will give us another option if in fact we get tested on that. I have Gene Kilgore on the phone as well who manages our CDO, Gene you want to give some color on that. Maybe he is not on the phone. Chanole is Gene (inauduible)

Gene Kilgore

I am here, can you hear me?

Paul Elenio

Hey Gene.

Gene Kilgore

Yes hi. Can you hear me?

Paul Elenio

Yes, we can here you.

Gene Kilgore

Ok sorry. With regard to CDO's, we have only one that is beyond (inaudible) investment period and the option there is somewhat more limited than it is in our other two CDO's which was still actively managed but even within that CDO, you have the ability to do a couple of things. One is, you could purchase assets from the CDO's and if you purchase those above the recovery assumption then that would have the effect improving the cushion in your OC tests and the second thing to remember is to the extent if there is any amortization payments or pay downs of the notes, but that too has the effect of improving the test. And in the other two CDO's, we have the option of purchasing assets at a discount which we certainly have done and in fact I think the numbers have improved slightly since quarter-end as we have done a couple of trades both in the first CDO and the second CDO where the tests were tight. You attain all the options that I just outlined for the first CDO, plus you have the ability to purchase any assets that - at a discount which has the effect of improving the test.

David Chiaverini – BMO Capital

Okay, so would you use some of your unencumbered assets to purchase some underperforming assets out of the CDO to improve some of those tests.

Paul Elenio

Yes, I mean – we have from time to time – what we do, do is - of the unencumbered assets that are eligible, we do sell them into the CDO and depending on the market levels and objectives they could be so that discounts to rebuild that. From time to time if we do have non-performing loans or loans that perhaps are running off, those get purchased out of CDO's when it is appropriate and available so it is a whole mixture of different techniques that we do use to optimize our structures.

David Chiaverini – BMO Capital

So, it sounds as if you would - use these sort of strategies to keep those cash flowing as opposed to letting the OC tests - if they are going to fall below the tests and fail rather than letting them cure themselves from cash flow being diverted to the senior bonds, rather than just letting them cure themselves you will actively try to keep them cash flowing.

Ivan Kaufman

Clearly on a historical basis, we got our cash flowing and I think we will continue to operate in a similar way in the next several quarters but we have been effective in maintaining those questions and as I said in my script. They have cash flowed every single quarter.

David Chiaverini – BMO Capital

Okay, and then, I didn’t hear right that there is a $31 million of loan payoffs in the quarter?

Paul Elenio

That's correct.

David Chiaverini – BMO Capital

Can you remind me what the payoffs have been over the past few quarters or year-to-date?

Paul Elenio

Sure, we had $31 million of payoffs this quarter, about $60 million in run-off last quarter and in the first quarter we had around $54 million on run-off, so year-to-date we have definitely done about $140 million to $145 million on run-off.

David Chiaverini – BMO Capital

Okay, and is there a way for you to sort of see or anticipate how much run-off there is or is there a that kind of a - it happens, it happens and it is kind of a last-minute surprise, a borrower hit us back as opposed to they give you an indication couple of months ahead of time that they may be paying off. I was just curious as to how that works.

Ivan Kaufman

I think the market is constantly evolving and clearly there is a little bit more liquidity in the market today, a lot more lending and with values stabilizing. I think that combination has given borrowers some greater options so I think as the market gets more competitive as values stabilize and borrowers have different optionality and specifically in today's market too assets trading at very high levels so that is another option to the borrowers to actually sell an asset as opposed to refinance. So I think it is constantly evolving, it is hard to give guidance on that because we ourselves get impacted on a quarterly basis but I definitely am more optimistic in terms of the borrowers having greater opportunities to take out some of their loans. Some of the facts also are when the loans are up for extension, whether there is a bump in rate and what their options are relative to the rates we have in our in options better than the market but going forward it is a little bit difficult to give guidance. We ourselves were very surprised in our inability to facilitate these payoffs which was very instrumental in allowing us to complete debt repurchase with Wachovia without going for outside debts. So we’re able to creating more cash and more availability in our CDO vehicles through that level of run-off.

David Chiaverini – BMO Capital

Okay, thank you.

Operator

(Operator instructions) your next question comes from the line of Eric Berkley [ph] of Barclays Capital.

Ivan Kaufman

Good morning Eric, Hello.

Eric Berkley - Barclays Capital

Good morning, of the bridge loan that you funded in the quarter, just wandering what type of property that was and what you thought your focus would be going forward.

Ivan Kaufman

For which loan was that? That was a – that was a property down in Tahoe which was a cash flowing asset net leased that produced really, really good coverage that has to be done very quickly. It was a small opportunity in the market that we know it - we knew extremely well. I think what we're seeing on a go forward basis is a little bit small opportunities which were less competitive so I think we will be focusing on loans in the range of probably $2-$10 million so they will be a little bit smaller in size, number one. Number two, we're seeing a lot of loans that were perhaps distressed that people are buying back in those with discounts and putting back together and we are providing the capital to facilitate that to occur. We are seeing a lot of bridge loans of properties that perhaps were - went through a difficult time and now getting stabilized and the bridge loans are performing the purpose of - stabilizing our assets before a permanent loan could be taken out.

We are also seeing some pretty good mezzanine opportunities, albeit smaller loan opportunities for existing loans that still have yield maintenance on but cannot be refied for another year or two or three that have good coverage, but the borrower needs some additional capital to make CapEx into the property in order to improve that asset and get it repositioned. So a lot of that is repositioning assets, but I will tell you that in a large loan area we are seeing greater competition but what we can do because of our cost structure and originations capacity and because the managers is so active in the multi-family side of the business. We are seeing significant opportunities in the $2-$10 million area.

Eric Berkley - Barclays Capital

Great, thanks. In terms of portfolio composition, is there any target to move towards one asset type or another or you are just being opportunistic here?

Paul Elenio

I think that - our sweet spot has always been and we like to stay as close to it as possible as a multi-family lending side of the business and clearly that is where - that is where the firm began. We like to have as much concentration as possible. So in terms of asset class, we'd like to have as much more multi-family as possible, in terms of geographic location, clearly being in New York City, the five [ph] borrowers and major markets like San Francisco, Boston and DC. We like to stay in those major markets as well.

Eric Berkley - Barclays Capital

Alright great, thanks.

Paul Elenio

Thanks Eric.

Operator

As there are no further questions, I would now like to turn the call back over to Mr. Paul Elenio, Chief Financial Officer.

Ivan Kaufman

Okay, it's Ivan Kaufman. Well, thank you for your time today and your participation. We are really pleased with where we are today and the ability to transform the company and move forward and get active in our core lending business and thank you for your time, have a nice day.

Operator

Ladies and gentlemen, that concludes the presentation. Thank you for your participation, you may now disconnect. Have a great day.

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