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Good day, and welcome to the Blackstone Mortgage Trust Fourth Quarter and Full Year 2024 Investor Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance at any time, please press star zero. If you would like to ask a question, please ensure your device is unmuted to allow your signal to reach our equipment. At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

Good morning. Welcome everyone to Blackstone Mortgage Trust Fourth Quarter and Full Year 2024 Earnings Conference Call. I'm joined today by Katie Keenan, Chief Executive Officer, Tony Marone, Chief Financial Officer, and Austin Pena, Executive Vice President of Investments. This morning, we filed our 10-K and issued a press release for the presentation of our results, which are available on our website and have been filed with the SEC. I'd like to remind everyone that today's call may include forward-looking statements which are subject to risks, uncertainties, and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the risk factors section of our most recent 10-K. We do not undertake any duty to update forward-looking statements. We will also refer to certain non-GAAP measures on this call, and for reconciliations, you should refer to the press release and 10-K. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. For the fourth quarter, we reported GAAP net income of $0.21 per share, distributable earnings of negative $1.25 per share. Distributable earnings prior to charge-offs were $0.44 per share. A few weeks ago, we paid a dividend of $0.47 per share with respect to the fourth quarter. Let me know if you have any questions following today's call. With that, I'll now turn things over to Katie.

Thanks, Tim. The fourth quarter marked a meaningful positive inflection point for Blackstone Mortgage Trust. We resolved $1.1 billion or 49% of our impaired loans, proving out our view that credit performance troughed last quarter and bringing our performing loan percentage to 93% today. Book value ended the quarter within 1% of 3Q levels, the combined result of limited further credit migration and upside wins on impaired asset resolutions above our marks. Robust repayments continued with $1.6 billion in the quarter, bringing us to $5.2 billion for the year, including $2 billion of office. And we've seen another $1.6 billion year to date, bringing our liquidity to a record $1.9 billion today. Our capital markets access continues to prove exceptional. We completed the largest corporate debt transaction in our history, a $1.1 billion deal, which turned out our maturities and attracted robust demand at four times oversubscribed. At the same time, we reduced overall debt to equity to 3.5 times, our lowest level in eleven quarters. And with all the pillars in place—a healthy balance sheet, plenty of liquidity, a more normalized credit outlook, and most importantly, a historically attractive environment for real estate lending—we've turned our attention to offense. We enter 2025 poised for portfolio and earnings growth with $2 billion of pipeline closed or in closing today. While not V-shaped, we are squarely amidst a real estate recovery. Values have shown four straight quarters of improvement. Through the end of last year and coming into the first quarter, we've seen a meaningful return of liquidity across real estate markets. Despite the uptick in long rates, a robust macroeconomic backdrop, and strong fund flows, have driven tightening risk premium across the credit space, reducing the cost of capital and creating a solid baseline for real estate markets. The MBS issuance, which eclipsed $100 billion last year, is off to a strong start in 2025, with $20 billion already closed and another $20 billion anticipated in the coming weeks, including the sixth office SaaS deal this year. Transaction volumes were up 30% quarter over quarter, representing a 72% increase from the 1Q24 trough. Underpinning the recovery are solid real estate fundamentals, with demand bolstered by resilient economic activity and new supply roughly two-thirds lower than recent peak levels across core asset classes, a powerful long-term driver of performance. We believe real estate credit offers highly compelling relative value. Reset values mean better credit, higher debt yields, and more cash flow coverage for our loans. Spreads, while compressing, remain attractive, especially relative to credit alternatives which are pushing all-time tight. And with base rates elevated, all-in yields are high. Moreover, within Blackstone Mortgage Trust, our returns are generated based on the difference between where we lend and where we borrow. Cost of capital for more stabilized senior risk is compressing most rapidly. And with market-leading access to a diversified base of bank lenders and securitized markets, we are uniquely positioned to capitalize on this dynamic and drive incrementally improving net interest margin. This backdrop offers a fruitful environment for new investment I'll cover shortly. But it also spells a meaningful uptake in repayments and resolutions, accelerating the turnover of our portfolio. Our $5.2 billion of repayments this year were 36% above last year's levels and indeed represent our second-highest repayment year ever. Notably, our office loans continue to repay roughly proportionately to our overall portfolio. And we have therefore reduced our office exposure by over $3 billion since the beginning of 2022 through repayments of 27 individual loans, and that's before $1.5 billion of office repayments so far this year. Our loan portfolio continues to show meaningful liquidity, powerful evidence of the resilient credit of the vast majority of our pre-rate hike portfolio, and the institutional demand for our high-quality collateral. This is now a cycle-tested business multiple times over. Through two years of difficult market conditions, our loans continued to repay, liability structure proved durable, and we maintained near-record liquidity levels throughout. The stability of our balance sheet through this extended credit cycle also allowed for patience, affording us the flexibility to proactively manage challenged assets and resolve or monetize them now when markets are healthier rather than fire selling at the illiquid depths of the cycle. Case in point, the sale of New York City and West LA office buildings this quarter through competitive institutional bidding processes, ultimately selling within 10% of our par balance on average. Overall, we resolved ten impaired loans this quarter, generating $32 million of book value as sale proceeds came in above our aggregate reserve levels. And on our REO assets, we see longer-term upside potential as we implement business plans in coordination with our highly experienced real estate asset management team. And despite rates moving at the end of the year, we've seen no slowdown in the pace of our resolution, with several deals closing at year-end and an incremental $400 million of resolution closed during closing in 1Q. We believe credit performance troughed in the third quarter and while it won't be linear, the direction of trouble is clearly positive. More broadly, the substantial portfolio turnover underway will enable us over time to shift our asset with larger concentration in new investments originated at reset bases in today's attractive credit environment. Depending on the pace of repayments, we estimate that nearly 40% of our year-end portfolio could constitute 2025 origination. We're off to a great start with a robust global pipeline. Our current $2 billion of closed and committed deals are concentrated in strong lending sectors like multifamily, industrial, and self-storage, with levered yields averaging more than 900 basis points over base rates, and safe overall credit characteristics. And we are leveraging our sourcing capabilities to drive differentiated opportunities. In addition to nine deals in the US, our pipeline is over 60% Canada, Europe, UK, and Australia, markets which offer attractive relative value, including a $100 million cash-flowing industrial portfolio in Europe, and a $140 million multifamily loan in Australia, both around 100 basis points wide of comparable US transaction pricing. The Blackstone real estate debt business is the largest alternative manager of real estate credit in the world, which positions Blackstone Mortgage Trust to best capture the investment opportunity today. With over 150 real estate debt professionals, over $100 billion of historical originations, and relationships with over 500 borrowers driving 84% repeat business, our ability to access an attractive pipeline of new deals is exceptional. This is the platform that was uniquely positioned to originate the spiral, a flagship Blackstone Mortgage Trust loan and the largest in our portfolio, which after seven years repaid earlier this month. It was a $1.3 billion senior construction loan originated in 2018 at 28% pre-leased and 50% loan to cost, now 94% leased. The loan repaid through a banner CMBS execution, which was five times oversubscribed, priced at the low 100 spread, and yielded proceeds two times our basis, implying an exit LTV on our loan of 29%. While larger and somewhat lower leverage than our typical office loan, this loan shares many qualities with our overall origination philosophy: high-quality real estate that outperforms, strong institutional sponsorship, and moderate leverage. Liquidity has definitively returned for high-quality office, and with more than 75% of our one to three risk-rated office newer vintage, our portfolio should benefit. As we look ahead, we are leveraging the same Black platform advantages and entrepreneurial DNA to look across the real estate credit universe and identify the best-suited incremental strategic opportunities for our business. With interest rates remaining elevated, a positive outlook for the US consumer, and essential needs-based retail showing resilient performance, we see a compelling setup today to build a credit-oriented, diversified net lease strategy. This business produces stable, long-duration cash flows with the potential for value appreciation, elements which naturally complement Blackstone Mortgage Trust's core floating rate lending business. We believe we can acquire assets at a significant discount to replacement cost, with ten to twenty-year leases and strong EBITDAR coverage generated by established businesses. Over time, we expect to curate a diversified portfolio, generating compelling cash yields with duration. We have a differentiated approach, building our business from scratch through a dedicated platform established in partnership with our real estate equity colleagues and an experienced handpicked team. While this strategy will take time to ramp, it is meaningfully scalable, with a total addressable market in the trillions. And further, it brings the benefit of adding another attractive outlet for capital deployment, further expanding the scope of Blackstone Mortgage Trust's new investment pipeline, and positioning the company to capture the best relative value across real estate credit markets. In closing, we are optimistic about the trajectory of the real estate cycle and our business. The composition of our portfolio will be enhanced through resolutions, repayments, and redeployment of capital into attractive new opportunities. These drivers have put Blackstone Mortgage Trust on a clear path to rebuilding earnings power over the course of the year and beyond. The credit pressures are easing and at the same time, we are building the potential for long-term value creation, including the net lease and agency strategies and the upside we now own in our REL assets where valuation resets have been reflected in book value but we see the potential for upside through value add as the market recovers. The entry point for Blackstone Mortgage Trust remains highly attractive. The S&P is near all-time highs, corporate bond spreads near all-time highs, and we continue to see retracement and valuations across the real estate market. Commercial mortgage rate dividend yield spreads to base rates are virtually the only liquid real estate credit product that has not tightened materially since the Fed's first rate cut in September. Blackstone Mortgage Trust today trades at a 10% dividend yield and 87% of post-reserve book value, offering the opportunity to buy into a growing portfolio at a substantial discount, and collect meaningful current income with valuation upside. And we're expressing this view actively with over $50 million of stock buybacks in the last three months. Before I close, I want to thank our team for their tremendous efforts, taking a tireless unrelenting approach to maximizing outcomes on behalf of our investors. And today, those efforts put Blackstone Mortgage Trust on excellent footing for growth into an attractive market. I also want to welcome Marcin Urbasek, who I think is well known and highly regarded by many on this call, as he joins our growing Blackstone Mortgage Trust team. Thank you. And with that, I will turn the call over to Tony.

Thank you, Katie, and good morning, everyone. I want to begin by also welcoming Marcin to the team who brings significant mortgage REIT experience and deepens our finance team's bench as Blackstone Mortgage Trust enters this next phase of the cycle. Turning to our fourth quarter results, Blackstone Mortgage Trust reported GAAP net income of $0.21 per share, and distributable earnings or DE of negative $1.25 per share. Notably, DE this quarter included $294 million or $1.69 per share of charge-offs related to impaired loan resolution. These resolutions were achieved at levels above our aggregate carrying values and will result in more loans resolved in 4Q than we anticipated on our call last quarter. While these resolutions crystallized DE losses already reflected in our CECL reserves and book value, more importantly, they are a leading indicator of our ability to recapture earnings from this capital forward, which is a natural tailwind to dividend coverage. Although headline DE was negative, the long-term benefits from the substantial progress we have made in resolving our challenged assets far outweigh that short-term impact. With continued strong momentum in loan resolutions and a growing pipeline of new investments, we expect our earnings will grow and more closely align to their longer-term potential as we progress through 2025. Excluding the impact from CECL reserve charge-offs, fourth quarter DE was $0.44 per share, which notably included $0.02 per share related to startup costs incurred in connection with our new net lease strategy and the acceleration of deferred financing cost amortization resulting from the retirement of our 2026 term loan B. We ended the quarter with a book value of $21.87 per share, which benefited from a $32 million reversal of CECL reserve as we executed loan resolutions at an aggregate premium to our carrying value, and also from $18 million of common stock repurchased at an average share price of $17.91, nearly a $4 discount to our book value. All in, book value was down just 1% from the third quarter, reflecting the positive market trends driving strong credit performance broadly throughout our portfolio. And importantly, factoring the $0.47 per share dividend paid during the quarter, we delivered a positive 1% economic return to our stockholders. Digging deeper into credit, portfolio performance improved to 93%, up 5% quarter over quarter and the highest level since 4Q23. This improvement was primarily driven by $1.1 billion of impaired loan resolution, which represents 49% of the total impaired loan balance as of September 30. These resolutions included four loan sales and PPOs, with realized prices at an 8% premium to our aggregate carrying value, an important benefit to our stockholders and validation of the accuracy of our reserves. Upon exit, we immediately experienced an earnings benefit by repaying the related financing, reducing associated interest expense, and we expect to see further earnings uplift as we redeploy this capital into new investment. We also completed two loan restructurings, receiving $96 million of incremental subordinate capital from borrowers to significantly de-risk these positions, and acquired four REO assets, all transactions where our basis has been reset to reflect the current environment. Our REO portfolio now stands at $588 million across seven investments and generated $1.6 million of DE in the fourth quarter, which excludes the impact of depreciation and amortization included in GAAP results. Looking ahead, we expect the loan resolutions completed in the fourth quarter will have a positive earnings impact over time as capital is fully redeployed and rotated into new investments in today's attractive environment. And we see an additional near-term and long-term earnings tailwind through loan resolutions, with another $400 million closed or in closing so far this quarter, bringing aggregate resolutions over two-thirds of the three-quarter peak, and continued progress on the remainder. For context, our thirteen remaining impaired loans as of December 31 were burdened by $0.10 per share of quarterly interest expense last quarter. Credit trends were stable this quarter with five upgrades more than offsetting four downgrades. Included in upgrades was a four risk-rated multifamily loan, where the borrower committed new cash equity, purchased a new rate cap, and continues to execute their business plan. In downgrade, we had just one new impairment, a leased UK office loan with long-term development potential where we have visibility into a near-term loan resolution. Overall, our CECL reserve ended the quarter at $746 million, down 27% quarter over quarter, reflecting the impaired loan resolutions and otherwise generally stable credit in our portfolio. We received $1.6 billion of repayments in 4Q, including a four risk-rated multifamily loan, and $5.2 billion of repayments throughout 2024, including $2 billion of office loans, a strong indication of performance and institutional liquidity for Blackstone Mortgage Trust's loan collateral, outstanding challenging market conditions. So far in 2025, we've collected another $1.6 billion of repayments. In addition to our strong liquidity, nearly $7 billion of available financing capacity positions Blackstone Mortgage Trust well to redeploy low repayment proceeds and capitalize on our growing pipeline of new investment opportunities. To that end, Blackstone Mortgage Trust closed $186 million of loan originations in 4Q, largely concentrated in multifamily and industrial sectors, and has over $2 billion of loans closed or in closing so far in the first quarter of 2025. With capital deployment lagging repayments, we expect near-term portfolio contraction to modestly weigh on DE. So given the robust investment pipeline, we see our portfolio balance stabilizing in 1Q and then growing from there. In addition, the first four loans closed in our M&T multifamily agency lending partner this quarter, generating fee income and creating book value for our participation in the underlying MSRs, all with virtually no incremental expense or capital outlay from the exit date. We continue to maintain a best-in-class balance sheet with well-structured term match financings and no capital markets mark-to-market provision. We reduced debt to equity to 3.5 times from 3.8 times quarter over quarter, squarely within our target range of three to four times, while maintaining strong liquidity of $1.5 billion. The ability of our balance sheet, which has been borne out over the recent credit cycle, continues to be a critical differentiator that consistently affords Blackstone Mortgage Trust patience and optionality to maximize economic outcomes for our stockholders. It is an asset that will support the next phase of growth for our business. We completed a $1.1 billion corporate debt transaction in November, which added to liquidity and meaningfully extended the maturity profile of our corporate liabilities. The deal was met with strong institutional demand and emphasized Blackstone Mortgage Trust's broad access to capital markets. Along this line, we see additional opportunities to capitalize on tighter financing spreads to drive further enhancements to our capital structure across several markets, notably in CLOs where we have been an opportunistic issuer in the past, and today are building a strong pipeline of new investments that are a natural fit for that market. In closing, we are proud of our 2024 results and proactive measures we have taken to resolve the majority of our challenged assets, while maintaining a strong balance sheet and robust liquidity positioned Blackstone Mortgage Trust for growth in 2025. While earnings today reflect the natural near-term headwinds from portfolio turnover, the tailwinds of the market recovery, our growing investment pipeline, and our expansion into new diversified investments all combine to generate a positive forward trajectory for our business. Thank you for joining today's call. Now, I ask the operator to open the call to questions.

Thank you. As a reminder, please press star one to ask a question. We ask you to limit yourself to one question and one follow-up question to allow as many callers to join the queue as possible. We'll take our first question from Stephen Laws with Raymond James.

Hi. Good morning. Congratulations. You guys got a lot done at the end of the year and year to date as well. Katie, I want to start with a few moving parts. And, you know, I think the towards the end of the prepared remarks about the portfolio balance stabilizing in Q1 and growing helps provide some color. But I'm curious to think about an earnings bridge in the beginning of the year. We think about earnings troughing, you know, you've had additional repayments, you know, one new NPL at year-end. But you've also got the benefit of some, you know, financing on resolved non-accruals that goes away as well as a couple of penny drag from some one-time expenses in Q4. So just trying to think about, you know, what is the, you know, ex-losses, earnings power of the portfolio earlier in the year and how do we think about that ramping as we move forward?

Sure. So I think that, you know, the way we think about it, we had obviously $0.44 in the fourth quarter, $0.46 if you take out, you know, the amortization of cost on the refi and the startup cost. And then from there, you know, the most impactful driver of earnings is resolution, and we're executing. We have a billion dollars that, you know, over the course of the quarter, another $400 million in closing. The other key driver and, you know, impact in terms of ins and outs, you know, last quarter, this quarter is repayments. We received a lot. It's a great sign for credit and we're now reinvesting those proceeds with $2 billion closer in closing and growth capacity beyond that. So, you know, both resolutions and reinvestments obviously will take a quarter to see the full run rate impact. So I think we're in the trough now, and we'll come through it as we get into the second quarter.

Great. And that leads to my follow-up about the resolution. I think you mentioned $400 million. As we think about the remaining $1.5 billion of five-rated loans, is the $400 million what you think about maybe as first-half resolution? Is that more first quarter? How do we think about the, you know, if we assume for now no new five-rated loans, how do we think about that existing balance of five-rated loans kind of unwinding over the year?

Yeah. So, you know, the $400 million is assets that we have very clear visibility into, you know, hopefully near-term closings. These things can always move around a bit. But, you know, those are deals that we're, you know, on the ten or fifteen-yard line on. So I would hope that those would be first quarter, and, you know, hopefully, we'll have more beyond that in the first half of the year at the risk of, you know, overpromising for my asset management team, but we're extremely focused on getting our impaired loan balance down as quickly as possible, and we're working on every single one of them. The $400 million, it's really just deals that we have effectively, you know, signed, you know, deals agreed and in closing.

Great. Appreciate the comments this morning, Katie.

Thank you.

We'll take our next question from Steve Delaney with Citizens JMP Securities.

Okay. Thanks. Good morning, everyone, and hello again, Marcin. From my two cents in on that. Katie, if we look at the realized losses, they ran I think I calculated about 13% of UPB. So if we think about the, you know, the $400 million or whatever else is, you know, in the five plays out in, say, the first half of this year, is something in that magnitude, let's just call it round number, like, 13%, is that a reasonable assumed loss on UPB when you resolve these remaining five?

Yeah. What I would point you to, thanks for the question. If you look at our CECL reserves, they tend to be kind of in the mid-twenties. And we're resolving around that mark or slightly better. So I think the 13% we could take offline. I'm not sure exactly the math you're doing, but I would look to our CECL reserves on the which have mostly been down to be accurate or a little bit conservative, and think about that as your assumption for where things play out on future resolutions.

Okay. I'm asking then off, and I will follow-up on that just to be clear. I had like, $140 million of realized losses on $1.1 billion. And I was at I took $0.81 times 173.5 million shares. But I'll follow-up on that, Tony. Hey, just on the buyback, certainly applaud that. Would you expect that if the stock remains, say, under 85% a book value, should we expect those to continue and would the board do you think the board will consider increasing it once the current authorization is expired? Or has been used up. Thank you.

Sure. Thank you. So, you know, I think our view on, you know, the stock and the economic, you know, the economic proposition on offer is clear. I covered that in my remarks. We have $90 million left on our stock buyback authorization. We also have almost $2 billion of liquidity today, and we're looking to actively deploy into, you know, a bunch of different real estate credit investment opportunities. So I would certainly see the stock as very much, you know, on that list.

Appreciate the comments.

Thank you. We'll take our question from Tom Catherwood with BTIG.

Thanks, and good morning, everybody. Katie, you want clarification here. I think I heard you mention that 40% of the portfolio could be 2025 originations. And if we do a quick back of the envelope and assume the same repayment level as 2024, that would imply something like $10 billion of originations in 2025. Are we thinking of this correctly?

So I think that when we think about our repayment projections for this year, you know, we had $5.2 billion last year, but I think we anticipate that this year will probably be higher than that. That's really a factor of what I mentioned, I think on the last call. There's an element going on right now of a catch-up in our portfolio. We have a lot of loans that are performing well that are in a place in their business plans where they can be repaid. And now that the capital markets have clearly normalized and a lot of liquidity has returned, you know, we would expect a lot of that portfolio to turn over and then for us to then reinvest those proceeds. So I think that, you know, we would expect a higher repayment level this year and therefore a higher reinvestment level this year sort of getting towards that 40% number.

Got it. It's really helpful. Thank you for that. Understood. And then switching over to your comments on net leased investing. I know you mentioned total addressable market in the trillions, but this is also a sector with some of the most sophisticated investment platforms anywhere. How would Blackstone Mortgage Trust's approach differentiate itself from that of the other major institutional players in the net lease sector?

Yeah. It's a great question. You know, we think that there are obviously some very high-quality peers in the space, but it is also a very large market and an extremely granular market. And so, you know, when we think about building this platform, you know, a little bit, I think, will go a long way, and we'll look to grow it over time. You know, we're not in a place where we have, you know, a multibillion-dollar portfolio where we need to be buying, you know, a billion dollars a year or a quarter to show growth. So I think that we can be thoughtful, but also build up a portfolio that is granular, diversified, well protected from a credit perspective, and additive, very complementary to the earnings profile of our overall business. And we're doing that, you know, with a thoughtful and I think well-conceived approach and a very high-quality experienced platform.

Got it. Appreciate the answers. Thanks, everyone.

Thank you. We'll go next to Doug Harter with UBS.

Thanks. Something you could talk about the types of spreads or IRRs you expect to get on the new loans that you'll be doing in 1Q and all 2025?

Sure. Austin, you want to take that one? Yeah. Thanks, Doug. Yeah. In terms of spreads, you know, I think as Katie alluded to, spreads have come in, but importantly, so have the spreads on the liability side. And so when you look at the levered spreads or the IRRs as you referred to, they're really quite consistent with what we've seen historically, you know, around 900 or 1000 over. And importantly, when we look at the risk-adjusted returns today on the investments in our pipeline, we really see them as quite compelling, really given the credit profile of the deals in the pipeline. You know, today, we're making loans at reset basis that reflect today's valuation environments. So we really feel very good about the risk-adjusted returns we are able to create right now.

I appreciate that. And then as you think about, you know, as the portfolio regrows, how are you thinking about, you know, what type of leverage level you want to be, you know, running this business at as, you know, kind of as things are as the market is beginning to heal.

Yeah. Absolutely. So, you know, I think that the performance of our balance sheet and the stability and durability that we've seen over the last couple of years has really proven out that the strategy we've run for this business, making, you know, senior first mortgage loans at a reasonable leverage and having a leverage level of sort of between three and four times has always been our target, has worked well. You know, we were three and a half times at the end of the year. We've gotten a lot of repayments since then. And so I think we're sort of squarely at the mid to kind of today probably a little lower end of the range and, you know, we feel good about the prospect of portfolio growth beyond within our target level.

Great. Thank you, Katie.

Thank you. We'll take our next question from Jade Rahmani with KBW.

Thank you very much. Just wondering in terms of rates, has that created any new potential credit challenges just merely as a result of the rate volatility we've seen, or do you feel like you know, you have your arms around the problem set at this point?

Yeah. I think it's a question we think a lot about. And, you know, I think that the couple of things we see, you know, first of all, we haven't seen any material impact of the rate uptick on repayments. You know, we obviously got pretty strong fourth quarter and then another, you know, significant amount of repayment so far in the first quarter. We monitor the capital markets obviously on a daily basis. We're actively investing in them. Has not been a meaningful change. And if anything, you know, I think that, you know, the slight uptick in rates has driven more capital into the credit markets, which has created more liquidity for repayments and that is a benefit in terms of the credit profile of our portfolio. So I think that, you know, we have 130, 150 loans. There's always a little bit of movement, and that's normal, and we should expect that. But, you know, the direction of travel is clearly positive, and I think that the liquidity that we see ongoing in the market is going to continue to result in repayments and resolution.

Thank you very much. And then on the net lease strategy, you know, is one component the eventual enabling of access to unsecured debt as one of your peers definitely has done. And in addition, how quickly do you think that you can ramp up this strategy?

Yeah. So I think that, you know, access to different financing markets with the net lease strategy, whether it is, you know, the ABS market, other types of securitized markets, or, you know, a broader corporate debt strategy is one of the reasons that we like, you know, that business in addition to just the fundamental yields that we're acquiring assets at and credit profile that we can generate there. So certainly thinking about continuing to expand the diversification and flexibility of our balance sheet, which has always been a big strength of how we deliver sort of consistent returns over time, you know, whether that's unsecured or, as I said, ABS securitized markets, you know, that's something that we'll be thinking about as we ramp this up.

And just the follow-up about timing to scale it.

Yeah. I mean, look, we really like the opportunity money into getting this platform up and going. We have a couple of deals that I think closed today or this week. So we're actively out there, you know, we're going to be guided by the investment opportunity as we always have been. So, you know, I don't want to put a number on it because, you know, the key is just finding great deals we like and building the portfolio allocation that we think is appropriate. We're going to do that, you know, with regard to thinking about the underwriting cash flow coverage, structure of the leases, performance of the underlying businesses, and be very, you know, thoughtful about building a durable and resilient and diverse high portfolio with credits that we like. So, you know, we hope it ramps quickly, but, you know, this is also a build. You know, this is a build. This isn't a buy, and so we want to do it the right way.

Thank you.

Thank you. We'll go next to Harsh Hemnani with Green Street.

Thank you. So you mentioned sort of the improving fundamental backdrop and the improving capital market liquidity for office. And it seems like about 4% of 2025 originations are in that sector. I want to ask what sort of the willingness to expand into office, given an improving fundamental backdrop for high-quality office, in 2025.

Yeah. Harsh, it's Austin. I can take that one. You know, I think we've been very consistent throughout this cycle about, you know, our belief in high-quality office, which really is our performing. I think you're seeing that today in the capital markets, obviously, as Katie alluded to earlier. You know, the bar for us is high for new investment in office. But as you noted, we are seeing opportunities to lend on really high-quality well-leased assets at very low basis. You know, I think overall, office exposure for us continues to come down. We don't really see it meaningfully growing from here, but we are going to pursue opportunities that we think make sense and generate attractive returns that we feel, you know, on high-quality assets.

Got it. And then is there sort of a percentage of your portfolio that you would feel comfortable at in terms of office exposure?

You know, I think it really comes down to the opportunities that we see. I mean, if we could do more deals like the Spiral, we absolutely would. You know, I think that though as Austin mentioned, you know, the aperture of the type of office opportunities and where we see performance is quite narrow and we're going to be extremely selective. So, you know, I think we would expect that exposure within our portfolio to come down, you know, over time because, obviously, we're getting a lot of repayments and we're going to be very selective on the new stuff. So, you know, I think that's the general approach we're taking. We'll certainly see less office in the portfolio as we move forward here.

Got it. That's helpful. Last one from me. Going back to leverage, I want to ask how you're thinking about leverage. I want to ask how you're thinking about leverage. I want to ask how you're thinking about leverage. I want to ask how you're thinking about the long-term leverage of this business changing with the addition of the net lease strategy if it changes at all in your mind.

Yeah. You know, I think that as I mentioned, you know, I think in one of the other questions, you know, we do see a lot of opportunities for securitized financing net lease. That's obviously been a strategy, and it is fundamentally, you know, a business that is lower leverage than our core lending business because we're obviously buying assets as opposed to making 65% senior loans. So, you know, I think that it's positive, in terms of our overall leverage profile going forward, and, yeah, we think can generate, you know, similar returns to our core strategy. That's one of the reasons we like it.

Okay. Thank you.

Thank you. We'll take our next question from Don Fandetti with Wells Fargo.

Katie, can you talk a little bit about the international markets, how you're thinking about them? It looks like, you know, you're still active on originations and seeing pretty good returns. And then also on the credit perspective from international.

Sure. Absolutely. So, you know, yeah. So as you mentioned, you know, we definitely have seen positive relative value in international markets overall. And, you know, there's different markets, obviously. We're active in Australia, which is a very stable market. We're active in the UK and Europe and Canada. You know, I think that, obviously, you know, the growth profile of the US is the most positive that we see from a global perspective. I think that's clear. But at the same time, you know, looking at high-quality, high-conviction sectors in these markets, industrial, multifamily, we see very stable trends. Supply, if anything, is even lower in a lot of these markets than it is in the U.S. And obviously, supply in the U.S. is coming down quite materially. Rates in Europe are coming down more quickly than in the U.S. And the competitive dynamic really, it can't be overstated, it's quite different outside of the U.S. And so our ability to drive low leverage, very strong credit profiles, attractive returns because there's not much of a CMBS market in these other areas because our platform differentiation, competitive advantages that we have in terms of sourcing these deals is really, I would say, even stronger outside of the U.S. than it is here. We were able to generate, in our view, very high-quality credit opportunities, notwithstanding what I think we can all acknowledge is probably a slower growth profile outside of the U.S. today.

We'll take our final question from Rick Shane with JPMorgan.

Marcin, welcome. I just want to make sure, did I -- I know there was about $1.6 billion in repayments in the fourth quarter. Did I hear that it's $1.6 billion repayments quarter-to-date as well?

That's correct.

And are those repayments at par? Or is there -- are there going to be any discounted repayments there?

Those are all at par.

Okay. Great. Next question is, you guys had talked about the $2 billion pipeline for the first quarter. How should we think about that translating into funding as we move through the quarter. Is this a pipeline that is largely sort of funded at time of origination? Or are there going to be substantial draws on this going forward?

Yes. It's a good question. What we see is a good mix of sort of refis and acquisitions, which are generally funded at closing with maybe a little bit of construction. Construction activity has come way down across the U.S. We like that opportunity today from a risk return perspective, but there's just not a lot of deals there. So as we think about the funding, I would expect that it's largely close to funded balance. But of course, we're just going to into pursuing all the opportunities that we like. And if we can find multifamily construction to do, we'd like to do it. But again, that segment of the market is not as active today as it's been historically, just given higher replacement costs and the overall downtick in new supply starts that we're seeing across sectors.

Got it. Okay. That's helpful. And then last question. It looks like PIK income increased incrementally from the third quarter, I think the run rate to be about $3 million a quarter, looks like it's ticked up to at least $7 million. Is that correct? And is that what we should assume as a run rate through '25? Presumably, it will be diluted away, but from a dollar perspective, should we assume $7 million a quarter?

I don't know that I would assume that is necessarily a run rate. I mean the PIK income in our portfolio is generally pretty idiosyncratic and varies deal by deal. We don't have many deals that pick and where they do, they're usually for particular reasons within the structure of the loan. So I think that you're going to see that bounce around in particular, as we have some of these legacy loans repay or resolutions of NPLs. So I would probably not assume a straight line there, and that's just going to be something that bounces around. In either case, not a material component of our earnings.

Thank you. That will conclude our question-and-answer session. At this time, I'd like to turn the call back over to Tim Hayes for any additional or closing remarks.