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Claros Mortgage Trust, Inc. (CMTG) Q4 2022 Earnings Call Transcript

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Claros Mortgage Trust, Inc. (NYSE:CMTG) Q4 2022 Results Conference Call February 17, 2023 10:00 AM ET

Company Participants

Anh Huynh - VP, IR

Richard Mack - Chairman, CEO

Jai Agarwal - CFO

Mike McGillis - President, Director

Kevin Cullinan - EVP, MRECS

Priyanka Garg - EVP, MRECS Portfolio & Asset Management

Conference Call Participants

Rick Shane - JP Morgan

John Fanti - Wells Fargo

Jade Rahmani - KBW

Chris Muller - JMP Securities

Operator

Hello, everyone and invited to Claros Mortgage Trust Fourth Quarter 2022 Earnings Conference Call. My sanction is Bruno and I will beryllium your convention provider today. [Operator Instructions].

I would now for illustration to manus complete nan telephone to Anh Huynh, Vice President of Investor relations for Claros Mortgage Trust. Please proceed.

Anh Huynh

Thank you. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Claros Mortgage Trust; Mike McGillis, President and Director of Claros Mortgage Trust; and Jai Agarwal, CMTG's Chief Financial Officer. We besides person Kevin Cullinan, Executive Vice President, who leads MRECS Originations; and Priyanka Garg, Executive Vice President, who leads MRECS Portfolio and Asset Management.

Prior to this call, we distributed CMTG's net supplement. We promote you to reference these documents successful conjunction pinch nan accusation presented connected today's call. If you person immoderate questions pursuing nan call, please interaction me.

I'd for illustration to punctual everyone that today's telephone whitethorn see forward-looking statements wrong nan meaning of nan Private Securities Litigation Reform Act of 1995. Actual results whitethorn disagree materially from those indicated by these forward-looking statements arsenic a consequence of various important factors, including those discussed successful our different filings pinch nan SEC.

Any forward-looking statements made connected this telephone correspond our views only arsenic of today, and we undertake nary responsibility to update them. We will besides beryllium referring to certain non-GAAP financial measures connected today’s call, specified arsenic nett distributable earnings, which we judge whitethorn beryllium important to investors to measure our operating performance. For non-GAAP reconciliations, please mention to nan net supplement.

I would now for illustration to move nan telephone complete to Richard.

Richard Mack

Good morning, everyone, and convey you for joining america for nan Claros Mortgage Trust’s 4th fourth net call. I do not person to punctual everyone that 2022 is simply a volatile year, and coming we stay successful an economical situation of conflicting signals. The broader markets proceed to wrestle pinch beardown maturation reports connected nan 1 manus and persistent ostentation connected nan other. But signals do look much bullish coming than astatine twelvemonth end. Deciphering nan existent economical effect of a sharply higher complaint situation remains a cardinal attraction of investors arsenic we effort to expect really nan Fed will construe and respond to unfolding marketplace data.

This is astir apt nan number 1 facet impacting non-office existent property assets, and it is our position successful nan plus valuation rates betwixt rising rents and liking rates. Rising rates look to beryllium winning astatine this moment. Still, location are truthful galore factors and flux that whitethorn effect nan economical outlook successful nan coming quarters.

China's determination to extremity its zero COVID policies, continued volatility successful world power and nutrient prices, and ongoing geopolitical risks are conscionable a few. As a result, our position connected nan system remains circumspect, and is mostly successful statement pinch statement views of a mild recession occurring astir apt during nan 2nd half of 2023. With each this successful mind, CMTG is approaching this twelvemonth pinch caution.

Looking backmost to quickly recap 2022, it was a very productive twelvemonth for CMTG. We delivered connected nan strategical priorities we outlined complete nan past year, including maintaining liquidity and taking advantage of what we judge were charismatic consequence adjusted returns disposable to us.

We concluded nan twelvemonth pinch full originations of 3.5 billion, this importantly outpaced nan anterior twelvemonth and drove nan portfolio to an all-time precocious of 7.4 cardinal of carrying value, and 9.4 cardinal of full indebtedness commitments. During nan year, we chiefly focused connected elder floating complaint loans collateralized by multi-family assets successful summation to different prime spot types pinch beardown proviso request dynamics specified arsenic industrial, life subject and build to rent homes. We besides accrued our beingness successful markets that proceed to use from accelerated economical and demographic growth, including Dallas, Nashville, and Miami. And we entered caller precocious maturation markets specified arsenic Phoenix and Salt Lake City.

As noted antecedently successful quarterly net calls, these are immoderate of nan plus types and markets wherever Mack Real Estate Group has been expanding its equity investments astir quickly and wherever we judge plus valuations are holding up best. In addition, during nan year, we expanded and diversified our backing sources, which included entering into $150 cardinal acquisitions installation and closing connected a $1 cardinal financing facility. We judge our expertise to diversify and turn our financing options successful a difficult superior marketplace situation speaks to nan credibility of our platform, nan spot of our portfolio, our guidance team, our organization relationships and nan reasonably blimpish leverage position of our equilibrium sheet.

We expect 2023 to beryllium a challenging twelvemonth for nan existent property manufacture overall. We expect that nan effect of a higher liking complaint and indebtedness dispersed situation and imaginable slowing user request will apt construe into continued unit connected existent property valuations and muted transaction volumes, moreover if caller dispersed tightening accelerates successful nan precocious output enslaved market, nan CLO and CMBS markets.

In summation to nan challenges, we person seen successful nan agency plus class, we are opening to spot first weakness successful capacity astatine nan plus level crossed nan industry, particularly successful bluish states and cities. And while we expect this inclination to continue, we judge that plus capacity will beryllium uneven and highly limited connected spot type plus value and market. As a wide perspective, we consciousness our plus allocations and marketplace selections position CMTG to withstand deteriorating conditions, and Mike will supply a much elaborate chat of our portfolio later successful nan call.

Despite our assurance successful our portfolio, we admit that our business and borrowers are not immune from nan existent macroeconomic aliases liking complaint environment. Therefore, we person employed a protect and disciplined attack to really we negociate our business during this time. Maintaining little leverage coming could let america to grow our equilibrium expanse to capitalize connected opportunities that originate and to beryllium prepared for chartless portfolio problems yet to unfold. Further we judge that staying up of our borrowers done proactive plus guidance and maintaining a semipermanent finance position will beryllium captious to delivering shareholder value.

In addition, Mack Real Estate Group's acquisition successful commercialized existent property development, ownership and spot guidance provides america valuable and chopped marketplace intelligence driven by boots connected nan crushed and a ample web of manufacture relationships. Our guidance squad has extended world existent property finance acquisition crossed aggregate economical cycles. We understand that a play marked by challenging marketplace conditions is an inherent facet of managing a commercialized existent property portfolio, and that this should supply america pinch an opportunity to separate our capacity and to spell connected nan violative erstwhile nan clip is right.

As I look ahead, I person overmuch assurance successful our team's expertise and expertise to lead america done these times and to find nan introduction constituent to resume an opportunistic stance erstwhile nan tides inevitably change. Thank you each for your clip today.

I will now move nan telephone complete to Mike McGillis.

Mike McGillis

Thank you, Richard. For Mike prepared remarks this morning. I'd for illustration to supply a summary of our investing activity for nan 4th fourth and afloat twelvemonth of 2022, and past move to our marketplace perspectives and outlook connected definite spot types, specifically multi-family, hospitality and office.

During nan 4th fourth and afloat twelvemonth of 2022, we executed 359 cardinal and 3.5 cardinal successful originations respectively, while further diversifying our portfolio by spot type and geography. Our 4th fourth originations were each elder floating complaint transitional loans crossed 3 investments, collateralized by life sciences, multi-family and business spot types pinch a weighted mean in installments dispersed of 600 ground points complete -- and a weighted mean LTV of 58%.

Repayment activity for nan 4th was reasonably muted, coming successful astatine $75 million. As a consequence of nan higher liking complaint environment, we expect this inclination to proceed arsenic borrowers workout arsenic of correct extensions and protect their investments pinch further equity infusions.

CMTG'S portfolio based connected carrying worth accrued 2% 4th complete 4th to $7.4 billion. At twelvemonth end, nan portfolio had a weighted mean each successful output of 8.6% and a weighted mean LTV of 68%. Notably, we accrued our multi-family vulnerability to 41% astatine December 31, 2022 from 30% astatine twelvemonth extremity 2021, while besides decreasing our vulnerability to office, onshore and for waste condo.

As Richard mentioned, we besides enhanced our geographic diversification by expanding our beingness successful precocious maturation markets while expanding our nationalist footprint by entering respective caller markets. During nan year, New York arsenic a percent of nan portfolio organically decreased arsenic a consequence of our robust origination activity and New York indebtedness repayments we received during nan period. At December 31, 2022, New York represented 23% of nan portfolio down meaningfully from 38% astatine twelvemonth extremity 2021. The higher liking complaint situation chiefly drove nan summation successful portfolio yields to 8.6% astatine twelvemonth extremity 2022 from 5.7% astatine twelvemonth extremity 2021.

I would now for illustration to supply marketplace colour successful our thoughts for nan coming year. We've seen borrowers proceed to support their properties by replenishing liking reserves, backing indebtedness work shortfalls, backing operating expenses retired of pocket, and purchasing replacement liking complaint caps. However, arsenic Richard mentioned, fixed nan economical outlook and expectations for nan existent property industry, we are approaching nan coming twelvemonth pinch caution. Multifamily continues to beryllium our largest vulnerability by spot type, representing 41% of nan portfolio astatine twelvemonth end.

In nan portfolio, we're seeing mostly beardown occupancy and affirmative trade-outs connected caller leases and rent maturation connected renewals. However, we are besides starting to spot softening rent growth, marking nan extremity of grounds maturation rates reported by nan manufacture complete nan past respective years. While we expect rental request to stay beardown successful nan look of a much costly location ownership market, we do expect to spot nan apical statement normalize arsenic owners compete to clasp residents and markets sorb caller supply. We proceed to judge nan underlying fundamentals of this assemblage will mostly outperform comparative to different plus classes successful a recessionary environment.

However, we're keenly focused connected nan plus people arsenic borrowers contend pinch antagonistic leverage successful this rising liking complaint environment. Thus far, we've been encouraged by nan desire and wherewithal of our borrowers to protect their equity, but are prepared for nan replacement arsenic well. Jai will supply colour connected 1 of our multifamily loans later connected nan telephone wherever nan sponsor has elected to not protect their equity.

Turning to our hospitality portfolio, hospitality represented 20% of our portfolio astatine twelvemonth extremity 2022. Throughout nan year, nan manufacture benefited from a crisp rebound and edifice request arsenic consumers redirected their discretionary income from user equipment to recreation and leisure coming retired of COVID. Today, we proceed to spot grounds mounting ADRs and galore markets and continued onslaught and occupancy taking into a [Cal] seasonality. But erstwhile we look retired to nan coming year, we are pragmatic.

Consumers and businesses person historically pulled backmost connected recreation related spending during our session, and we expect they'll behave likewise during this economical cycle. However, nan broader effect is apt to beryllium a reduced group request and firm transient request arsenic companies tighten recreation budgets. Additionally, we expect to spot continued rising labour costs impacting nan bottommost line. In anticipation of imaginable softening request and elevated costs, our plus guidance squad has been cautiously monitoring our investments collateralized by hospitality assets, and we expect that arsenic nan twelvemonth unfolds, definite loans successful our portfolio will require a much keen attraction than others.

Ultimately, nan hospitality assemblage would beryllium highly limited connected nan extent and long of a recession if location is one. In position of office, agency comprised only 15% of our portfolio astatine year-end 2022, 19% including nan agency allocation wrong mixed usage assets. While nan prevalence of activity from location seems to beryllium waning a bit, it remains a persistent taxable driving overmuch of nan uncertainty astir nan sector's future.

On a affirmative note, location person been agleam spots successful nan agency sector. In request agency assets are outperforming based connected their plus value and location, and New York City leasing successful peculiar has seen a number of beardown information points. That said, successful this higher complaint environment, borrowers are required to make decisions astir investing further superior to protect their equity. In ray of reduced request for definite types of agency properties, we expect a wide assortment of outcomes limited connected each borrower's root and costs of capital, their expertise to withstand a prolonged play of uncertainty.

In summation to nan location plus value and request for abstraction wrong nan submarkets wherever collateral is located. Jai will supply immoderate colour connected 1 of our mixed-use loans that has an agency constituent wherever nan sponsor has elected not to protect its equity. We judge that nan expertise of our plus guidance team, nan measurement we building our loans coupled pinch our heavy borrower relationships and broader manufacture relationships, position america good to respond to immoderate conclusion our borrowers scope successful their decision-making exercises. We are very focused connected nan challenges our borrowers are facing truthful that we tin present affirmative outcomes for our shareholders successful nan upcoming years.

I'd now for illustration to move nan telephone complete to Jai.

Jai Agarwal

Thank you, Mike, and convey you, Richard. For nan 4th fourth of 2022, distributable net accrued to 53.7 cardinal aliases $0.38 per stock compared to 47.1 cardinal aliases $0.33 per stock past quarter. This was chiefly owed to higher benchmark rates, continued superior deployment, arsenic good arsenic capacity of nan REO edifice portfolio.

Our 4th fourth dividend of $0.37 per stock was covered by distributable earnings. We reported a GAAP nett nonaccomplishment of 22.7 cardinal aliases $0.17 per share, which reflected summation successful some circumstantial and wide CECL reserves during nan quarter. Our full CECL reserve now stands astatine 1.9% of our UPB and our wide CECL reserve accrued to 1.1% from 1.0% past quarter. We recorded a circumstantial CECL reserve of $60 cardinal aliases 17% of nan aggregate indebtedness magnitude connected 2 investments that were moved to a consequence standing of five. This represents astir a 50% diminution successful worth of these assets.

Both investments are rate flowing, but were impacted by rising liking rates requiring borrowers to determine whether aliases not to support nan properties. The first is simply a $209 cardinal finance collateralized by a mixed-use spot located successful nan Times Square Submarket of New York. The spot has 3 components, one, important unit that is connected a semipermanent lease to chiefly a nationalist drugstore chain. Two, good leased signage and three, 9 stories of sub performing office. We recorded a $42 cardinal circumstantial CECL reserve against this $209 cardinal investment. The 2nd is $139 cardinal finance comprised of 20 multi-family properties pinch nan rent regulated constituent located successful San Francisco.

The sponsor has supported these assets passim nan covid downturn, but was incapable to proceed doing truthful successful nan rising liking complaint environment. We recorded an 18 cardinal circumstantial CECL reserve against this investment. We are now successful nan process of determining nan champion solution for each of these investments, seeking to maximize shareholder value. Both loans were financed connected our accommodation astatine nan extremity of nan year. Turning to nan equilibrium sheet, we proceed to support blimpish leverage levels, astatine December 31st our nett leverage ratio was 2.2 times, which is simply a flimsy summation from 2.0 times astatine September 30th.

So we did mean beforehand complaint connected loans taxable to plus circumstantial financings remained astatine a blimpish 65%, which tin beryllium further bifurcated into a 74% beforehand complaint connected multi-family loans and 58% connected nan different loans. Lastly, astatine December 31st, we had a beardown liquidity position of complete 500 million. While nan superior markets person shown humble signage betterment truthful acold successful 2023, we proceed to attraction connected maintaining capable liquidity.

I would now for illustration to unfastened nan telephone for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility is from Rick Shane from JP Morgan.

Rick Shane

I admit you taking my question. Look, descent 12, nan indebtedness maturity schedule is very adjuvant fixed nan situation we're in. One of nan questions and we've asked consistently passim earning play is to benignant of subordinate nan indebtedness maturity schedule to expiration aliases word of immoderate liking complaint caps that your borrowers person taken. Obviously, that's a imaginable consequence and I conscionable want to understand whether aliases not caps are benignant of afloat extended aliases we should deliberation astir them arsenic expiring pinch nan first term.

Priyanka Garg

So we do person a number of borrowers that do person liking complaint caps that are expiring anterior to their first term. Overall, 90% of our portfolio has liking complaint caps successful spot coming arsenic we beryllium here. We person been very clear pinch borrowers that they person to bargain replacement caps. They person been doing precisely that. We've had a fewer that person already had to put up nan superior to do it. And 1 point we did while we were reviewing 2023 budgets pinch our borrowers was making judge they understood, looking guardant to nan adjacent 12 months and past nan ensuing six months aft that erstwhile successful nan almanac twelvemonth they'd person to travel up pinch nan superior and ensuring that they were speaking to their investors to nan grade that they had investors if they person to telephone superior for, to bargain those caps.

So, frankincense far, borrowers are doing what they're expected to do, but obviously, you're asking a mobility for nan correct reason, which is costs person skyrocketed, but we've not waived those conditions to this point.

Rick Shane

And so, -- and again, I admit that you guys are, that nan quality of your contracts is very precise and you guys are very diligent astir maintaining those covenants. Is nan request that if personification pinch a 3 twelvemonth indebtedness chose to widen it, they would beryllium obligated to return a cap? Or is that a negotiation?

Priyanka Garg

So each of our indebtedness documents person that request that's successful nan dock. So successful immoderate cases immoderate borrowers person only moreover if they person 3 years left, they mightiness return only a 1 twelvemonth cap. And that was negotiated astatine origination. We do person others wherever upon expiration they person to spell each nan measurement to first maturity. So, it varies passim nan portfolio. And I will besides opportunity successful galore cases we person guarantees for that replacement headdress acquisition and past successful a fewer instances we besides person existent reserves that are rate collateralized by borrowers.

Operator

Our adjacent mobility is from John Fanti from Wells Fargo.

Don Fandetti

Hi, it's Don. Two questions. One, evidently non-accruals went up this 4th done nan 2 loans. Do you consciousness for illustration based connected what you're benignant of seeing successful nan protector pipeline and proceeding from borrowers, do you spot that expanding substantially this twelvemonth successful position of non-accruals?

And past secondly, tin you talk astir nan migration of nan loans to 4 rated? It looks for illustration it went from 7 to possibly 10 loans what benignant of loans are those?

Priyanka Garg

Okay. Hi Don. It's Priyanka again. Thanks for nan question. I'm going to return those successful reverse orders. So, yes, we did obviously, arsenic Richard said successful his remarks, we're approaching 2023 pinch utmost caution. We expect location to beryllium continued unit connected valuations successful nan assemblage broadly. So fixed that backdrop, we did downgrade a fistful of loans. We downgraded 2 agency loans, 2 hospitality loans, and past nan investments that Jay mentioned that person nan circumstantial CECL reserves, 2 agency loans and 2 hospitality loans that we downgraded was really, because nan squad is spending further clip connected those loans moving pinch borrowers to guarantee that we person a way to salary off. And that's really because of immoderate pending maturity dates and delayed business plans and of people conscionable lease up concerns connected nan agency side. So that's really what was driving those nan 2 agency and nan 2 hospitalities, it wasn't immoderate benignant of circumstantial borrower behavior.

On your 2nd question, connected non-accruals, yes, it of people it accrued to 4.8%. It's nan 4 loans, 2 nan aforesaid arsenic nan anterior 4th and nan 2 that it sewage added, aliases nan aforesaid 5 rated loans that Jai mentioned that person nan circumstantial CISO reserves. In position of looking forward, again, we're cautious. Borrowers are dealing pinch a very challenging environment. We're really cognizant of that. We're moving pinch borrowers. So I can't opportunity either measurement what's going to happen, but I will opportunity that there's respective reasons that we consciousness very bully astir nan spot of our portfolio composition. Number 1, our agency vulnerability is only 15%, which is I deliberation nan agency is nan 1 assemblage wherever we deliberation location mightiness beryllium a existent basal displacement successful values, and our vulnerability location is limited, and it's constricted really to agency stock. That's non-commodity, which we consciousness amended about.

The 2nd constituent I would make is nan aforesaid constituent Mike made, which is 60% of our exposures successful nan multi-family and hospitality sectors. And Mike went done that, and talked astir really they're performing rather well. So we consciousness bully astir that and arsenic a protect posture successful this environment. And past nan 3rd constituent I would make is that 3rd of our portfolio is construction. So that intends that sponsors are going to person best-in-class existent property upon completion, which intends that we're going to fare amended successful an uncertain environment, and it reduces our consequence connected repayment. So put each of that together. It's each borne retired by borrower behavior. They've been protecting their interests, they've been doing everything that they're expected to do successful nan indebtedness documents, backing indebtedness work shortfalls, rebalancing, building loans purchasing nan replacement complaint caps we conscionable discussed. So to maine that intends that sponsors judge successful their semipermanent business plans. So while we're cautious and I hesitate to make a connection either way, and wherever non-accruals go, we do consciousness bully astir wherever nan portfolio stands today.

Operator

Our adjacent mobility is from Jade Rahmani from KBW.

Jade Rahmani

Reviewing nan multi-family exposure, there's rather a batch of loans successful immoderate of these precocious maturation markets, which will person highly elevated portion deliveries complete nan adjacent astir apt 18 months, including Colorado, Arizona, Texas, Tennessee, Utah. So conscionable wanted to spot if you could supply an update connected that exposure, arsenic immoderate of those loans were perchance originated during benignant of nan highest frothiness of nan market.

Priyanka Garg

Yes. Jade, it's Priyanka, I'll return that. We're very focused connected precisely nan consequence that you're pointing out. We're surely seeing antagonistic rent growth. The gait of maturation is swelling, but we're still seeing affirmative waste and acquisition outs. So nan assets successful those markets are besides mostly catering to a little transient population. So we're really seeing our borrowers greatly benefiting from higher retention rates. I deliberation successful an uncertain environment, group are little apt to move. And of course, location ownership, you know, has go a small spot much retired of scope for group arsenic rates person risen. So that's helping our borrowers really support and attraction connected economical occupancy. That said, nan semipermanent thesis location successful galore of those loans that were made successful nan markets you mentioned were really astir investing a small spot of superior and moving it from a Class B plus to a Class A asset. And we deliberation that nan borrower still continues to judge successful that agelong word thesis. And that's been borne retired by nan truth that a batch of those aforesaid assets had liking rate, aliases sorry, had liking reserves. And truthful those person required replenishment fixed the, you know, gait of summation of underlying rates. And borrowers person been replenishing those. So, truthful we deliberation that while nan maturation is surely slowing, borrowers are continuing to judge successful their semipermanent thesis. Richard, do you want to jump successful here?

Richard Mack

Yes, if you don't mind. Thank you. So Jade, I deliberation that it's besides important to retrieve that a batch of our origination successful these markets happened station nan CLO marketplace backup. And truthful while valuations were still high, we were capable to make these loans astatine beautiful wide spreads and astatine blimpish LTVs. And arsenic we look astatine it pinch very small bully news happening, we really for illustration some what we're getting paid and our ground successful these assets. There's, you know, unluckily correct now the, for nan borrowers, they're moving from antagonistic leverage to affirmative leverage, successful astir cases arsenic they are marking to marketplace and surely arsenic they renovate. But astatine our basis, we person a beautiful important magnitude of affirmative leverage to our position, moreover successful an elevated environment. And so, yes, location is softness because of accrued growth, but I deliberation I'd still alternatively beryllium successful nan precocious maturation markets because we person seen building starts autumn disconnected a cliff. And yes, we're delivering a batch successful those markets, but I deliberation you're going to person different surge successful rent maturation arsenic we sorb a batch of nan projects that are being completed now.

Jade Rahmani

Thank you. With nan commercialized owe REITs and moreover immoderate CMBS loans, location seems to beryllium a arena processing from an outsider's position of borrower strategical defaults. And 1 of your peers utilized language, they said, you know, nan borrower's acting successful non-economic ways and immoderate of immoderate of nan in installments sub-performance has caught group disconnected guard. Are you seeing borrowers strategically default arsenic a intends to extract concessions from lenders because they cognize galore lenders are caught, you know, successful a, betwixt a stone and a difficult place, they person loans funded connected in installments accommodation that request to support sum and they whitethorn not beryllium capable to rumor CLOs arsenic well. So could you conscionable remark connected that phenomenon?

Priyanka Garg

Hey, Jade, it's Priyanka. I'll commencement and past I'll manus it complete to Richard. Just successful position of nan strategical default, I deliberation that because of really we building our loans, we really person not, person not seen that because we person progressive rate guidance successful place. So each nan dollars that are coming successful nan door, we're benignant of -- we're capable to salary indebtedness work to ourselves first. So there's not this expertise of borrowers to benignant of clasp backmost rate and opportunity there's going to beryllium a default, and then, effort to usage that arsenic a negotiating tactic. So we've not seen that successful our portfolio to date. So, and past Richard, I'm judge you'll want to reply much broadly there.

Richard Mack

Yes. I mean, look, we're we -- that strategy doesn't activity that good pinch us. Our borrowers comprehend that we're not acrophobic to return nan keys. And truthful we don't spot this a batch and forgive maine for saying it that way, but I deliberation it's important that we -- that borrowers understand that we're surely successful almost each nan plus classes that we're progressive in. And we're large proprietor usability developers and we want to activity pinch nan borrower to thief them succeed. But if they're being opportunistic pinch us, we'll beryllium opportunistic pinch them.

Operator

[Operator Instructions] Our adjacent mobility is from Chris Muller from JMP Securities.

Chris Muller

I'm connected for Steve today. So I conscionable wanted to deed connected originations, which slowed successful nan 4th and sounds for illustration it's owed to macro conditions and you guys conscionable being cautious. So I conscionable wanted to cognize really you guys are reasoning astir portfolio maturation successful 2023. Isn't nett maturation a reasonable anticipation this year? Or will it beryllium much of a level plus guidance type here?

Kevin Cullinan

Sure. It's Kevin calling in. I'll return that. So yes, I deliberation you've seen 4th complete 4th passim nan people of nan twelvemonth origination aliases transaction measurement slow down. And we do expect that to beryllium nan lawsuit for nan first 4th aliases moreover spell truthful acold arsenic to opportunity nan first half of nan year. But arsenic we look astatine nan wide portfolio size, fixed nan early fundings that we expect to money complete nan people of nan coming quarters, that we do expect nett portfolio maturation arsenic we benignant of weight that against projective repayments complete that play of time. But astir apt a small spot much muted connected nan origination broadside until nan superior markets are successful nan healthier position.

Chris Muller

And past connected nan different broadside of that, pinch nan repayments and that repayment schedule is helpful. So there's not a batch of loans maturing successful 2023. Is it adjacent to presume repayments will beryllium connected nan debased extremity for astir of nan year?

Priyanka Garg

It’s Priyanka, I'll return that question. Yes, that is our expectation. We're assuming very fewer repayments passim nan year, and we person very fewer last maturities during 2023. So astir of those borrowers person arsenic of correct extensions that we're that person really already been executed aliases we expect will beryllium executed.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would for illustration to move nan convention backmost complete to Richard Mack for immoderate closing remarks.

Richard Mack

I conscionable want to opportunity acknowledgment for everyone for joining again, and decorativeness by possibly making nan evident connection that this squad is laser focused connected execution and plus guidance each day. And we deliberation that complete clip our in installments underwriting, our plus management, and our execution done these difficult times will differentiate us. And we admit everyone's clip again, and convey you, and we look guardant to speaking to everyone connected nan adjacent quarterly our net call.

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You whitethorn now disconnect your lines.

Editor: Naga



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