FBRT - NYSE

Good day, and welcome to Franklin BSP Realty Trust First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] This event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Head of Investor Relations. Please go ahead.

Good morning. Thank you for hosting our call today, and welcome to the FBRT first quarter earnings conference call. As the operator mentioned, I'm Lindsey Crabbe. With me on the call today are Rich Byrne, Chairman and CEO of FBRT; Jerry Baglien, Chief Financial Officer and Chief Operating Officer of FBRT; and Mike Comparato, President of FBRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties as described in our most recently filed SEC periodic reports and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, April 29, 2025. The company assumes no obligation to update any statements made during this call, including any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website at www.fbrtreit.com. We will refer to the supplementary slide deck on today's call. With that, I'll turn the call over to Rich.

Great. Thanks, Lindsey, and good morning, everyone, and thank you for joining us today. As Lindsey mentioned, our earnings release and supplemental deck were published to our website yesterday. We will begin today's call on Slide 4. I'm going to review our first quarter results, and then we will open the call, as we always do, for your questions. I'll highlight the key developments for the first quarter. Jerry will cover our financial results in more detail. He'll also provide an update on our recently announced acquisition of NewPoint, and then Mike will discuss market conditions and the changes to our watch list and REO portfolio. So with that, I'll start with our team remained active in the first quarter. We originated $341 million in new loan commitments. These new loans continue to enhance our portfolio because of the high quality of the underlying properties and borrowers and because of their compelling economics and low loan-to-value ratios. We view market volatility as an important catalyst for generating opportunities, and we have a very strong track record of being a reliable capital provider in both stable and stressed market conditions. Certainty of closing is extremely valuable to our borrowers, and we have consistently delivered for them. Turning to our current portfolio. We continue to cycle through the loans originated pre-interest rate hike. We received $353 million of loan repayments in the first quarter, predominantly from loans originated in 2021 and 2022. Our continued new originations plus these repayments have brought the percentage of our portfolio originated post interest rate hike to 56%. This is certainly well ahead of our peers. We believe it is a vitally important statistic when evaluating the quality of a mortgage REIT portfolio. Our REO has created a near-term drag on our earnings. However, the temporarily lower NIM that REO causes may often be in our best interest. This is because we believe foreclosure can be a prudent strategy in some cases to obtain the highest possible recovery. This is also consistent with our proactive acknowledge and address mindset. This quarter, we determined that the reserve we had on two office loans that are now held as REO should be charged off through distributable earnings. Consistent with our DE policy, this is how we went forward. Importantly, these charge-offs have already been recognized in GAAP earnings in prior quarters. As a result, our distributable earnings were negative. DE, excluding realized losses were $0.31 per fully converted share. This represents dividend coverage of 86%. For the avoidance of confusion, we have no new office loan loss reserve. We are simply running previously recognized GAAP losses through distributable earnings in accordance with our distributable earnings definition. Excluding our largest office loan, which is a triple net leased headquarters and distribution facility, our traditional multi-tenant exposure is only 2.1% of our total portfolio, and the remaining loans and assets have been significantly marked down to reflect market conditions. As we have discussed previously, we anticipate we will likely fall short of dividend coverage in the near term. This is because of the short-term drag from our REO and nonperforming loan portfolios. Also, we are planning to keep cash balances somewhat higher than normal due to market conditions and to satisfy the upcoming cash component of our NewPoint acquisition. Jerry will cover our dividend policy in his section. At quarter end, our liquidity stood at $913 million, including $215 million in unrestricted cash. Our average risk rating at the quarter end was 2.2 with 146 of our 152 positions risk weighted at 2 or 3. Our watch list loans represent 4% of our total portfolio, comprising 6 names at the end of the quarter. Mike will provide a comprehensive update on our watch list and REO in his remarks. Looking ahead, we are very excited about the pending acquisition of NewPoint. We believe this transaction will provide meaningful synergies. It also aligns perfectly with our strategic focus on the multifamily sector and enhances the quality and consistency of our earnings. We think the acquisition will be another catalyst for driving long-term value for our stockholders. We believe that FBRT is well positioned for sustained growth with the potential for our stock to trade at a premium to book value similar to other agency-focused platforms, especially as we continue to successfully recycle the bulk of our legacy book into current vintage loans. So with all that, I'll hand it over to Jerry now.

Great. Thanks, Rich. I appreciate everyone being on the call today. I'm going to go over the first quarter results, starting on Slide 5, if you're following along. FBRT reported GAAP earnings of $23.7 million or $0.20 per diluted common share for the first quarter, and distributable earnings were negative $6.2 million or negative $0.12 million or $0.12 per fully converted share. Distributable earnings before realized losses were $31.9 million or $0.31 per fully converted common share. In the first quarter, we recognized $38.6 million in realized losses to distributable earnings, representing the full specific reserve on our office assets within our foreclosure REO portfolio. This loss was previously accounted for in our GAAP earnings. As Rich mentioned, our current exposure to the office segment is minimal. Our REO and nonperforming loans also negatively impacted first quarter earnings. However, we are actively working to recover our invested capital in our REO properties with our team successfully closing several asset sales each quarter. In order to liquidate assets, we occasionally have been providing short-term non-market financing for borrowers. In addition to REO, these loans also represent a short-term drag on earnings. Since we do not get the full benefit of repurposing this equity, we will be monitoring dividend coverage for the coming quarters. While we believe in the long-term earning power of the company to cover the dividend, if REO sales slow or volatile market conditions persist, it could be prudent to revisit our dividend in the short term. Our book value per fully converted common share at the end of the quarter stood at $14.95. The decrease in book value during the quarter primarily reflects our dividend payout exceeding our earnings level, costs associated with the pending acquisition of NewPoint and the first quarter grant of long-term incentive awards to our officers and employees, aligning their interest with the long-term stockholder value creation. Moving to Slide 7. We have an overview of our origination activity. We originated $341 million in new loan commitments during the first quarter. Our primary focus remained on multifamily, which accounted for 79% of our total origination volume for the quarter. We received $353 million in loan repayments during the quarter with 10 loans paying off in full. Multifamily loans made up the majority of our paydowns and $288 million of our paydowns were from loans originated in 2021 and 2022. Moving to Slide 8. Our average cost of debt on our core portfolio was SOFR plus 2.18%. At the end of the quarter, 81% of our financing was through CLOs, and we had reinvestment capacity available in two of these deals. We are actively monitoring the CLO market throughout 2025 to strategically access it when conditions are favorable. Our warehouse lines maintained substantial capacity at quarter end. And when combined with our CLO reinvestment availability and unrestricted cash, our total available liquidity stood at a strong $913 million. Our net leverage position was lower this quarter at 2.35 times with our recourse leverage standing at 0.3 times. Finally, regarding our pending acquisition of NewPoint, we are pleased to report that the process is largely on schedule. We have already secured necessary regulatory approval from HUD and are actively engaged with Fannie Mae and Freddie Mac, anticipating their approvals early in the third quarter. Based on our current progress, we anticipate maintaining our previously announced closing time line with an expected closing early in the third quarter. Upon the closing of the acquisition, we will publicly release certain historical financial statements for NewPoint and pro formas. With that, I'll turn it over to Mike to give you an update on our portfolio.

Thanks, Jerry, and good morning, everyone. Thank you again for joining us. I'm going to start on Slide 12. Our core portfolio totals $4.8 billion at quarter end, comprised of 152 loans averaging $32 million. Multifamily remains our preferred sector, securing 71% of the portfolio. Our core portfolio decreased this quarter, primarily due to continued loan repayments and a deliberate moderation to our origination pace. In Q1, we witnessed very strong spread tightening and decided not to chase originations. Being incredibly active in 2024, we have the luxury of picking our spots on new loans and had no interest in chasing to the tightest spreads we had seen in years. That said, during the quarter, we originated 11 loans at a weighted average spread of 325 basis points. Most of our new loans were originated in the first half of Q1. Unlike some traditional credit providers who may retract during periods of market stress, we have maintained our commitment to our borrowers by consistently closing loans on schedule. Echoing Rich's earlier point, the certainty we provide in closing is a highly valued commodity for our borrowers and a significant driver of the repeat business we see year after year. Many other lenders are also plagued with unaddressed legacy portfolio issues. This, coupled with ongoing market stress, may continue to create lending constraints from traditional credit providers and other commercial mortgage REITs, potentially presenting further opportunities for FBRT. We believe our proactive approach to addressing legacy issues should position us favorably. Slide 14 is a summary of our watch list. You will see we have moved 4 loans to watch list status in the first quarter, bringing our total watch list loans to 6. Within our 6 watch list positions, one is a Georgia office loan that qualified for an extension in January 2025. Importantly, the borrower has continued to maintain current payments and reduce the principal balance as part of the extension agreement. The next property is a 307-unit student housing property in Norfolk, Virginia, which is risk rated a 4. We entered into a loan modification with the borrower who is looking to liquidate the asset in the next 6 to 12 months. The remaining 4 properties are new to the watch list this quarter and are all multifamily loans originated in 2021 and 2022. One asset, a multifamily property in Austin, Texas, was recently taken REO. The remaining 3 properties are behind on business plan, and we are in active dialogue with the borrowers. While there was some additional migration to the watch list, the amount of discussions regarding loan modifications and problem loans has decreased dramatically in the first - in the last few months. We believe this is a clear signal that we are much closer to the end of the modification workout cycle within FBRT than the beginning. As we have discussed on every earnings call for the past 6 to 8 quarters, we have taken an extremely proactive approach to resolutions and firmly believe we'll be out of the proverbial woods faster and sooner than any other market participant. Moving to Slide 15. Our foreclosure REO portfolio stood at 12 positions at quarter end. During the quarter, we sold 4 properties near or above our basis. We also have purchase and sale agreements in place for 2 additional properties at or above our basis and expect to close in the second quarter, and we have an additional 3 letters of intent. We added 2 new properties to our foreclosure REO portfolio this quarter, an office property in Denver and a multifamily property in Houston. As Rich and Jerry both covered, we wrote off the remaining specific charge on the Denver and Portland office buildings to distributable earnings this quarter and are comfortable with our current basis. We do not think now is the right time to sell either of our office REO assets, but we'll continue to review our options quarterly. The multifamily asset in Houston is one of the properties that has an LOI. We hope to have a favorable update about this property in Q2. Regarding the remaining multifamily REO properties, we're focused on quickly liquidating for the best possible outcome, even if it means holding some assets for stabilization. We recognize the earnings potential in these assets and want to redeploy the capital swiftly. Before we turn to questions, I also want to express my excitement about the NewPoint acquisition. This acquisition is highly synergistic and is a natural expansion within our core competency, multifamily lending, adding a scaled CRE agency loan origination and servicing platform to FBRT. It strengthens our platform, expands our market reach and positions FBRT for sustained growth. The transaction should create book value growth and enhanced earning powers over time. We're dedicating to resolving the legacy loans and REO portfolio to fully realize the potential of the combined FBRT and NewPoint, which will set us apart in the middle market CRE lending space. With that, I would like to turn it back to the operator to begin the Q&A session.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Matthew Erdner from Jones. Please go ahead.

Hey. Good morning, guys. Thanks for taking the question. I appreciate all the color as usual. With the current levels of REO that you guys kind of took, I want to switch over to the loan portfolio and kind of where you guys see originating in the near term. Are you going to ideally remain neutral and then any capital that is from some REO sold, we should expect that to get tossed into the loan portfolio into new originations? Or are you guys going to kind of hold the REO proceeds in cash over the near term? Just kind of want to gauge your thoughts on how you're thinking about it.

Hey, Matt. It's Mike. Thanks for the question. Yeah, I think we've always targeted a portfolio larger than where we're currently operating today. I think we're in this obviously unique moment where we're hoarding a little bit of cash to close on the NewPoint acquisition, but I think we're positioned really well for that at this point. So any new capital that came in through REO sales, I think we would be very proactively looking to put that back to work as soon as possible in new origination.

Got it. That's helpful. And then, Jerry, I kind of want to touch on expenses for the first quarter. Is a lot of that due to the NewPoint acquisition costs? Or is there something that we should expect going forward that's similar to the first quarter?

You've got a little bit of NewPoint in there. So there's a few million dollars of transaction costs that are flowing through in OpEx this quarter. But you've also got similar to what we talked about in fourth quarter, we're also carrying the REO expenses through there as well, which is elevating our expenses versus kind of what I would expect on a run rate basis. So it's - this quarter is kind of a double whammy from not just the REO, but also some NewPoint stuff that we basically pulled forward from the work that we already did.

Got it. I was actually going to say double whammy as it pertains to earnings and that once we get rid of the REO, not only do we get rid of that expense, but we get to redeploy that capital into earning loans again.

That's right.

Right. That makes sense. And then I guess with the REO, how do you balance whether you want to move a loan off your balance sheet or kind of wait and hold and try and possibly get a gain on sale on some of these assets?

I mean we look at every asset on a case-by-case basis, obviously. Do we think that the assets stabilize? Do we think that the NOI is stabilized? Do we think that there is upside if we held it a little longer? What's the cost of holding it longer versus selling today? I mean we're constantly doing a property-by-property analysis and trying to maximize that recovery. What I would say is there's no question that getting rid of the REO and redeploying that capital into earnings power is top priority. So if it's - we're not holding an asset for an incremental gain 3, 6 months later. We're only going to hold an asset longer term if we think it meaningfully moves the needle on recovery.

Got it. That's helpful. Thank you, guys. I appreciate it.

Thank you. Your next question comes from Randy Binner from B. Riley Securities. Please go ahead.

Good morning. Thanks. If you would, could you expand a little bit on the commentary around the dividend potentially being revisited? I think if you said markets remain volatile and then REO does not process as expected. I'd just be interested to kind of get kind of some parameters around what that might look like.

Yeah, I'll take that. I think what we're monitoring is how quickly can we turn over the REO assets. Volatility is its own category. That's just uncertainty and ability or decision whether we want to deploy or pause and conserve capital with a market that has settled down now, but was moving very rapidly in the last few weeks. I think the REO is the bigger bogey in all this in that you're holding $300 million or so of assets that are under earning relative to the equity we have deployed in our loan portfolio. And I think we want to be conscious of how much drag and erosion of book value you have by under covering that dividend. And if we think it's more of a prolonged hold, do we want to stop that erosion to book value? That's what we're going to monitor. I think you've heard that we have pretty good traction in terms of turning some of these things over. But I think we're also conscious that if it does get volatile, do some of those things fall out? Do we end up holding them for a quarter or two longer than expected. That's all we're saying. I think we want to be conscious of the environment and what that lack of earnings power on those assets does to the book value.

Okay. That's helpful. And then I guess the follow-up there would be there's a considerable amount of cash going towards NewPoint. So how does - how do you think of the expenditure of that cash versus going towards the dividend. I mean I think it's NewPoint is a fantastic transaction. It's good diversification synergy. It's going to be accretive. But is there - is that a consideration that cash going out versus cash that could go to the dividend?

I see that more as a short-term issue than a long-term issue in that like you heard from Mike and Rich, we have a little more cash and liquidity, cash to be created cash ahead of closing than we otherwise normally would and you'd be building up the loan book a little bit higher. What you're going to do, though, is then deploy that cash into the new business line, which not immediately, but over the next few quarters becomes accretive to the rest of the operations. So that I kind of put in a different bucket altogether, right? That's just the construction zone part of building this into something broader in terms of a real estate platform, not something I would say, looking out for a year or 2 years is the prime factor in the dividend consideration because we've sort of digested the implications of that, if you will. The other REO is more of a harder to predict drag in some cases. We have a pretty good sense of what NewPoint is going to be. The exact timing of unloading the other stuff is obviously market dependent and not as perfectly predictable.

Randy, it's Rich. I would just add that NewPoint we disclosed, discussed is going to close early in third quarter. I mean that's only a quarter away or maybe even less. So this need for some cash is going to go away pretty soon, and we can get back to deploying more and adding to earnings power. So - and the other point I would make is we always set along with our Board, our dividend based on our earnings power, not based on a quarter - the current quarter you're looking at. And we have had no concerns about our ability to cover our dividend, at least cover our dividend. It's just a question of the timing and that goes back to the context for Jerry's remarks.

I appreciate the comments. Thank you.

Thank you. Your next question comes from Tom Catherwood from BTIG. Please go ahead.

Thank you and good morning, everybody. Maybe following up on Matt's questions on originations. I know they can be lumpy, but there was a sequential slowdown. And Mike, I think you mentioned most activity was during the first half of 1Q. How have originations paced thus far in 2Q? And have you seen any shifts in your pipeline since tariffs were announced?

Tom, thanks for the question. Believe it or not, our originations have not really been lumpy at all. I think as you look across the platform in 2024, it was wildly consistent. I think we did like just around $1.1 billion every single quarter in 2024. And it's been relatively consistent deal flow for the beginning of 2025. We have essentially shut down origination on FBRT just in the very short term while we were cash gathering for the NewPoint acquisition. So the pipeline for FBRT is really nonexistent until we feel like that's completely ring-fenced the acquisition that is, which at this point, I would say it is. So we'll probably be turning that back on momentarily. But remember, we're running other vehicles at the platform. So it's really just flipping a switch in the allocation policy that FBRT starts getting loan deal flow again. So tons of deal flow is available. As I mentioned in the prepared remarks, we saw a really aggressive tightening of spreads in kind of the last 4 to 6 weeks of the quarter. And I just didn't feel like there was a need to chase to levels that were I would say, 50 basis points inside of the tightest pricing that we saw kind of at peak valuations in Q4 '21, Q1 of '22. So we just selectively hit the pause button based on spreads being at the tightest levels we've seen in a long time. But I do expect to flip that switch back on in short order for FBRT to start originating again.

Got you. And just to follow up on that, Mike. So you're seeing tons of deal flow. So does it - is it suffice to say that you have not seen a change in that pace of deal flow since the tariffs were announced, even that you're not being active [indiscernible] originations...

I apologize for missing the second part of your question. I think we saw a tiny little blip of people kind of saying, what happened? I don't think it was the byproduct of tariffs, which was a 70, 75 basis point swing in the 10-year in a matter of, I don't know, 5 or 7 days. So I think everybody just kind of took a deep breath and said, what the heck is going on. It seems like things have calmed back down. It seems like we've had a little bit of spread tightening. Again, issuance CRE, CLO issuance picked up again, CMBS issuance picked up again. Rates came back in 30, 40 basis points. So there's been a little bit of calm after that storm. And I would say, looking longer term, I think that it's probably a net positive for CRE overall. So we haven't seen much negative impact at all since that kind of 5 or 7-day period.

Appreciate that, Mike. Thank you. And then last one for me. What is your read on changes happening at Fannie, Freddie and HUD and kind of any potential impacts on agency lending either near term or longer term? I know it's a crystal ball question, but I assume that you've got some insights into it now that you're going through the whole NewPoint process.

I typically say my crystal ball shattered years ago. And as it pertains to predicting the government, that one is really, really hard. I think that NewPoint has got a phenomenal team I think that they have 3 licenses that are very highly coveted. I think that we've got a really, really unique and special opportunity here to build one of the most creative and entrepreneurial platforms for multifamily lending. So I don't know what this administration is going to do next. I'm not sure this administration knows what they're going to do next. But I'm guessing that as long as the playing field is even for all of the participants on the field, I'm going to say, I think we're going to have a mousetrap that's a little bit better than everybody else once it's all put together.

Appreciate all the answers. Thanks, everyone.

Your next question comes from Steve Delaney from Citizens JMP Securities. Please go ahead.

Good morning, everyone. Certainly exciting times there.

Hi, Steve.

Hey, Rich. How are you/

Great.

So obviously, the world is always changing. having - it strikes me that the more tools you have in your toolbox, you probably don't use them all every day, but it sure adds, I think, to the franchise value. I guess to that point, Mike, how many lenders out there, real estate lenders actually have the products have both some agency multifamily product with Freddie Fannie and also have a conduit program, CMBS conduit. And the extension of that question, first about who compete - who will compete with you when you have your full set, okay, of products. Secondly, the borrowers, are there circumstances where you have multifamily borrowers? And certainly on maybe their core product, it fits for Freddie Fannie, but do they have other multifamily products that can't go there for one reason or another, and therefore, they would find the conduit loan to be more attractive. So just some top-down view of what the market looks like.

Yeah. Thanks for the question, Steve. And look, I think that this was the industrial logic of the acquisition. We have always preached for the 10 years that I've been running Benefit Street here with [ph] a group, we want to have a one-stop shop. We want to be a cradle-to-grave provider for a borrower. We can do a construction loan, a bridge loan, a CMBS permanent loan. The one thing that we never had was an agency takeout. And I think it's a game changer. I really do. I think it's going to change our comp set. I think we're going to look more like the agency lenders. It might take us 18, 24 months to get there. But maybe we're not comped to mortgage REITs going forward. Maybe we're more comped to the agency space. We've talked about several times that we think that this is a clear path to trading above book value once we've integrated and grown the business together. But there's no one really out there that has it all. And I think that we will. And to your point, you kind of sold it better than I could is there aren't any agency lenders that have a conduit. There aren't many agency lenders that have an actual balance sheet of their own that they use. There certainly aren't many that do construction financing, and we even have a pocket of equity investing that we do. So I truly believe that once we put these two companies together, we become the most interesting provider of capital in the multifamily sector literally overnight. There's going to be some teaching of the NewPoint folks of what we do. There's going to be some teaching of the Benefit Street folks of what the NewPoint folks do. But I think once we integrate these teams and integrate these products, it's going to be something very, very unique.

Having covered some of those, you know, your competitors and the participants in the space, I have to agree with what you're saying as far as the breadth of your product line. And remind me....

Yeah. I think the unique thing, Steve - sorry to interrupt. I just like to add. I think the unique thing is if you look at historically the originators to the agency space, almost all of them have tried to build out a balance sheet portion of the business, and most of them have not been successful in doing it. I think our building it the other way is what is really the differentiator here. And I just think that it's going to really stand out once we get these companies combined.

Interesting. And remind me how many licenses that Fannie and Freddie each have outstanding approximately.

I don't recall off the top of my head. I know that NewPoint is 1 of 19 that has all 3.

Yeah. Okay. Okay. Great. Yeah, I can get that. But I think it's like a couple of dozen, something like - it's not 100. It's something like 20, 25, something in that ballpark and just to kind of size the playing field. All right. Thanks for the color.

Thanks, Steve.

Thanks, Steve.

Thank you. Your next question comes from Jason Stewart from Janney Montgomery Scott. Please go ahead.

Hey, good morning. Thanks for taking the question. A quick follow-up on NewPoint. I know we don't have full financials, and we'll get those at some point in the future. Do you have an initial ballpark of how much the agency business will be as a percentage of total revenue at close and then out a year?

No, we haven't disclosed that yet. You'll get more color on that when we provide the financials in a couple of months.

Okay. Yeah, just with Michael's comment, it would be helpful to know how much of it is we're thinking about the comp set shifting towards a different comp set, how much it is. But okay. Following up on the dividend. As I look at distributable dividend coverage, Jerry, for you before realized loss, in terms of that metric, is that a specific metric you're looking at relative to the sustainability of the dividend? Is there a simple metric we can look at to follow going forward in our models and say, here's where your comfort level sits with the dividend?

Yeah. I mean I think it's if you look at where we've been, ex some of the charge-offs, I think we've been around 90%, give or take, a little bit. I don't think we want to see a degradation to that. And I don't even think if we - I don't even know if we want to sit there if we think it's quarters on end either, right? I think if there's a clear path in a couple of quarters, that's not the end of the world, if you will. If we think it's four quarters, that's a little less appealing to us. So I think it's more of a timing question than just a delta to the coverage, right? We don't want to just run at 90% in perpetuity. I don't think like Rich said, our goal has always been to pay out what we earn. We think that earnings power is there at the level we set it. It's just how quickly can we get back to it. So I think...

Yeah...

The metric to follow is how quickly you get off the REO.

Yeah. And Jason, I would just point you again, we mentioned it last quarter, we think there's $0.25 to $0.30 of earning potential in the REO. It's a question of when, right? Is it two quarters from now or 4 quarters from now. But we know what the earning potential is in that REO portfolio. We just got to get it moved and got to get it redeployed.

Yeah. Okay. And then the second part of that is, how do you think about NewPoint as it relates to that metric? Because I think the previous disclosure was accretive to distributable EPS in the second half of 2026. So you have a second moving part to that metric now?

We do. But I have - that, in some ways, is more projectable based on the nature of that business, right? So a good portion of those income streams are fairly sticky with the servicing portion. I think we have a pretty good back test on origination capabilities and targets there. So I think we have a tolerance for kind of what that will be. At the same time, it's also a building factor in terms of what it's going to add as you kind of grow that MSR portfolio, too. So there's some offset to kind of growing the book ahead of kind of hitting the distributable coverage. That, in some ways, is easier to understand and sort of factor in. What I don't want is the double drag, right, from the REO and sort of the integration of NewPoint, if you will.

Okay. All right. Appreciate the questions. Thanks.

Thanks, Jason.

Thank you. This concludes our question-and-answer session. I would now like to turn the conference back to Lindsey Crabbe for closing remarks.

We appreciate you joining us today. Please reach out if you have any further questions. Thanks, and have a good day.