Timbercreek Financial Corp
TSX:TF
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Timbercreek Financial Corp
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Good day, ladies and gentlemen. Welcome to Timbercreek Financials' Second Quarter Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the meeting over to Blair Tamblyn. Please go ahead.
Thank you, operator. Good afternoon, everyone. Thanks for joining us to discuss the second quarter financial results. As usual, I'm joined by Scott Rowland, CIO; Tracy Johnston, CFO; and Geoff McTait, Head of Canadian Originations and Global Syndications.
It was another solid quarter financially with strong year-over-year increases in earnings and distributable cash. The highlights include net investment income of $31.5 million, which is up 22% from last year; adjusted net income of $17 million, which is up from $15.2 million in the same period last year; and a significant increase in distributable income, which reached $17.8 million or $0.21 per share at a very comfortable payout ratio of 81.1%.
As we commented on with our Q1 results, borrower demand has increased, supported by a more active commercial real estate market, and we should see this translate to healthy transaction levels in the coming quarters. The majority of the portfolio continues to perform well, which speaks to the emphasis on high-quality income-producing assets in the main urban centers across Canada. The strategy has served us well over the past 15-plus years through periods of economic and financial market segments. With that said, in certain situations, borrowers are experiencing challenges in this environment, and this is reflected in the near-term increase in the level of Stage 2 and Stage 3 bonds.
Scott will provide additional color in his remarks, and we've also expanded this discussion in our MD&A this quarter. The key takeaway is we remain confident in the quality and value of the underlying assets and our ability to recover all of our principal. This remains a hands-on process for the team and very much in our DNA as long-time investment managers in this asset class. Strong cash generation and a low payout ratio, we are fundamentally well positioned to manage through a uniquely challenging period for certain borrowers and deliver on our core financial objectives.
With that, I'll turn it over to Scott to discuss the portfolio trends and market conditions. Scott?
Thanks, Blair, and good afternoon. Our quarterly results once again showed strong year-over-year growth across key financial metrics as our portfolio continues to generate strong top line income at a low payout ratio. I'll quickly cover the portfolio metrics before commenting on the loans in Stage 2 and Stage 3 at quarter-end.
Looking at the portfolio of KPIs, at quarter-end, 87.7% of our investments were in cash flowing properties compared with 89% at the end of Q1. Multi-residential real estate assets, apartment buildings continue to comprise the largest portion of the portfolio at 50.4% at quarter end with minimal change from Q1, including loans on retirement assets, approximately 57% of the portfolio was in multifamily residential assets at quarter-end.
We continue to ensure the portfolio is conservatively positioned. First mortgages represent 91.4% of the portfolio consistent with 92% in Q1. Our weighted average LTV for Q2 was 68.3%, consistent with the prior quarter, which was 68.5%. And the portfolio's weighted average interest rate or WAIR was 9.8%, up slightly from 9.7% in Q1. For context, the WAIR in Q2 last year was 7.2%. The year-over-year increase is due, of course, to the impact of Bank of Canada rate hikes on our floating rate loans, which represented 88% of the portfolio at quarter-end. Our Q2 exit WAIR was 9.9%, up from 9.7% exiting Q1, reflecting the policy rate increase in June.
After a less active first quarter, we saw an uptick in portfolio activity in Q2. We invested $108 million in new mortgage investments and additional advances on existing mortgages. This was offset by net mortgage repayments and syndications of about $133 million, resulting in a decrease in the net value of the mortgage portfolio from Q1. The portfolio turnover ratio was higher at 11.6% and closer to the long-term historical average compared with 8.4% in Q1. We are also seeing a pickup in our originations pipeline, which gives us confidence in the outlook for new transactions for the second half of the year.
In terms of asset allocation, there were no material changes from Q1 with respect to geographic concentration. The vast majority of the portfolio is tied to assets in urban markets in Ontario, Quebec, BC and Alberta. We are well established in all these regions, and as a result, continue to see good quality deal flow.
In addition to our focus on income-producing multifamily properties, we are also seeing diversification opportunities within industrial warehouse and land that is zoned for industrial or multifamily use. Bank lenders have receded from land, creating an opportunity to invest in low LTV deals with stronger sponsors than typical. Conversely, we remain cautious on the office sector that is experiencing headwinds from the shift to work-from-home. Our office exposure represents only 8% of the portfolio, and we continue to be comfortable with these current loans.
Finally, given our shorter-term loans turnover relatively quickly, we have the flexibility to respond to changing market conditions and invest opportunistically in a given region or asset type.
Let me now spend some time on the Stage 2 and Stage 3 loans in the portfolio and where possible, provide additional transparency on the status and path to resolution for these loans. Our Stage 3 loans include the following: $17.9 million in condo inventory. During Q2, we discharged $1.3 million of this inventory with more units expected to close in Q3 and Q4. We are satisfied with the proceeds to date and expect to be materially out of disposition by the end of 2024. We also continue to work on our exit plan for our medical office building in Ottawa. We recently engaged a new property manager with deep expertise in the market to complete a lease-up strategy. In recent earnings calls, we've highlighted 2 assets owned by a sponsor group that filed for CCAA in Q4 2022. Both assets are attractively located in Montreal, one is a high-quality income-producing senior living facility and the other is a multifamily building that is currently under construction. In this instance, we expect a resolution to the court process this quarter and an eventual full recovery of our exposure.
Lastly, a series of loans with 1 sponsor group were moved to Stage 3 from Stage 2 during the quarter. Together, this represents $143 million in exposure on 7 high-quality income-producing multifamily assets. Along with the broader lender group, we successfully put a receiver in place to resolve these loans via a sales process. Process is advancing well, and we believe we will be largely, if not entirely resolved by the year-end. Now in terms of Stage 2 assets, the balance sheet relates to an income-producing multifamily loan in Edmonton. This loan matured in Q2 and an extension is being negotiated to provide the borrowers time to complete a sales process. The loan is current and we expect full repayment.
To summarize on the Stage 2 and 3 loans, we remain confident in the underlying assets and our ability to get repaid. For certain borrowers, the increase in interest payments or other costs within their portfolio has added strain and is leading to necessary recapitalization or disposition decisions. This is normal activity at this point in the interest rate cycle, and we are working closely with our borrowers as they go through this stage. For loans that do come under stress, there is a wide range of remedies available to lenders. And rest assured, the Timbercreek team is experienced and focused on ensuring the best outcomes for our shareholders. At the same time, while the high rate environment creates some challenges, this is, of course, offset by record levels of portfolio income, they provide a significant cushion for TF.
I will now pass the call over to Tracy to review the financial results. Tracy?
Thanks, Scott, and good afternoon, everyone. You can find our full filings online, so I'll focus on the main highlights of the quarter.
As Blair mentioned, we reported strong income growth for Q2. Net investment income on financial assets measured at amortized cost was $31.5 million, up 22% from $25.8 million in the prior year, reflecting significantly higher interest rates positively impacting the variable rate loans. Fair value gain and other income on financial assets measured at fair value through profit and loss decreased from a gain of $352,000 in Q2 2022 to a gain of $306,000 in Q2 2023. We reported a modest net rental loss from real estate properties of $293,000, which relates to expenses out of Marina on the Lagoon City portfolio. You will recall that we acquired this from an equity interest conversion completed last year. We intend on selling the land and have accordingly recorded as land inventory.
Provisions for mortgage investment losses were $0.9 million for Q2 2023 versus [ $0.3 ] million in last Q2. The provisions are largely representative of future interest to be earned up until the anticipated time of disposition. As Scott said, we expect to recover the principal amounts on all these loans. Lender fee income was $1.7 million, down from $2.1 million in Q2 2022, reflecting lower originations in the period relative to last year.
Q2 net income increased by 15% to $16.9 million compared to $4.7 million in Q2 last year. And Q2 basic and diluted earnings per share were $0.20, up from $0.17 in the prior year. After adjusting for net unrealized fair value gains and losses, Q2 adjusted net income was $17 million compared to $15.2 million in Q2 last year. Q2 basic and diluted earnings per share were $0.20, up from $0.18 in the prior year. We also reported strong growth in quarterly distributable income and adjusted distributable income of $17.8 million in Q2 2023, up 12% from the same period last year. On a per share basis, we reported DI of $0.21, up from $0.19 in the same quarter last year. The Q2 payout ratio in DI was very healthy at 81.1%, up slightly from Q1, but considerably lower than last year's Q2 of 91.3%.
Turning now to the balance sheet highlights. The net value of the mortgage portfolio, excluding syndications, was $1.12 billion at the end of the quarter, a decrease of about $25 million from the first quarter as repayments exceeded new investments in the period. The enhanced return portfolio decreased to $58.7 million from $68.2 million at Q2 2022. The balance on the credit facility for mortgage investments was $361 million at the end of Q2 2023 compared with $387 million at the end of Q1 2023. Shareholders' equity increased modestly to $701 million at quarter-end, up from $700 million last year and $699 million at year-end 2022. Under the normal course issuer bid program, we repurchased for cancellation 300,000 common shares this past quarter at an average price of $7.40 per share. We will continue to evaluate opportunities to use this program to acquire shares accretively.
I will now turn the call back to Scott for closing comments.
Thanks, Tracy. We remain broadly positive on the market environment for the rest of 2023. Commercial real estate activity is picking up as both buyers and sellers adjust to the current interest rate environment. This should translate into increased activity within the Timbercreek portfolio. With the high percentage in floating rate loans, we will continue to see strong top line income, supporting healthy distributable income, earnings and payout ratios. As we continue to make meaningful progress on the Stage 2 and 3 loans in the coming quarters, we will be in a position to evaluate opportunities for growth after exiting the previous ultra-low rate environment.
With that, that completes our prepared remarks, and we will now open the call to questions.
[Operator Instructions] Graham, your line is now open. Please go ahead.
I appreciate the disclosure you provided there on the incremental sort of Stage 3, Stage 2 loans. That's very helpful. Could you maybe talk about the loan to values associated with those for loans in particular in Stage 3? And then just any sort of, I don't know, incremental color on sort of your confidence on these things being resolved without any associated credit losses?
Yes. Let's go through that sort of one at a time, Graham, if you want. I think -- let's take a look at the Rosemont the retirement asset and correct, we talked about for a long time, the CCAA situation. We'll start there. So for this, we're working through the court process now, and we're going to be -- we're essentially crediting our asset.
So from an LTV perspective, we probably believe we're in the -- I mean it's hard to sort of estimate what that would be right because of the way the process is working out, but we would probably be in the 80s, I'm going to say, Graham, and for us -- but we're going to be taking control of that asset. And then we'll be looking to -- look to market for a third-party sale in the -- sort of the coming quarter or 2. The ultimate outcome for that loan, I think we certainly feel we're going to have our full position back and then we'll likely be offering sort of a BCB-type of position, I would think, with a third-party purchaser.
When it comes to the loans, that sort of the larger group of assets that moved from Stage 2 to Stage 3, this is a larger sort of sales process and it involves a number of assets, some of ours and some are third parties like nothing to do with us. These would also be loans, we would say, are probably in the -- again, loan-to-value in this environment is sometimes difficult to gauge, but probably in the -- again, I would say, in the 70s to 80s percentages, and we'll just have to see how the sales process happens. We're working collectively as a group on this, the single receiver in place. A broker is actually being hired imminently and will be in the market this fall. So we anticipate that, that should get wrapped up. And certainly, we're anticipating getting our full P&I recovered there, ideally by the end of the year.
The condo inventory, again, we're working that down sort of loan by loan, and we are recovering our position as we go. Yes, sorry, unit-by-unit -- sorry, in 1 -- it's 1 loan, 1 building.
And then the medical office building we've talked about, we put in a new property manager, we believe there's actually a considerable value to be unlocked here. And we may be doing a bit of an investment program. Again, this is a small loan, so it's not overly material, maybe $1 million or so in going further into the deal. Our loan balance is 8.7%, and I think we can actually achieve a decent outcome on that one as well.
Okay. That's helpful. So the loan-to-values that you're quoting me there, is that sort of your estimate of perhaps the mark-to-market in the current environment and the current situation behind those mortgages and it's not -- doesn't necessarily reflect, what would be in, I guess, your -- I think you quoted 68% for your portfolio overall. Is that fair when you're sort of giving me a 70% to 80% on those situations?
Well, that would be kind of what we're reflecting in our 68%, Graham, on these assets, these are higher levered assets at this point as we sort of work through the process. With them, what it does -- that result in what the final sort of purchase price will be, it's hard to tell in these sort of lender selling processes. Sometimes those proceeds -- final bids are lower than what you would accept as sort of a one-off market trade, but it's in that range. So if we were held it long term, if it was -- we were in control with our asset. There's probably more value attributed to it than what a borrower might see in this type of a situation on the actual net selling proceeds. But from a value perspective, that mid-70s, low 80s, those would be reflected in what works out to the weighted average 68%. Those are the values that are in there.
Okay. Understood. And what's reasonable in these situations when you go through receivership and when not at like a 5% to 10% discount on the price? Is that -- is that reasonable? Or could it be more than that?
I doubt because it's high-quality assets, like example of this larger portfolio are newly built like within the last sort of 5, 6 years -- like mainly fully occupied multifamily assets. That discount is a lot smaller than what you would -- it's not like we're trying to sell -- like a fashion mall or an old office building, right? This is a high-end demand product. So that discount could be anywhere from paragram to be up maybe 5%, 10%, that will be sort of my expectation.
Yes. This is Goeff here. I'll just add that I think that Scott's just noted is absolutely correct. Obviously, our values will also include just the current softer market reality tied to the higher interest rates. But in discussions with the brokers as it relates to these multifamily assets that will be for sale in this larger portfolio, the high-quality nature of the assets, the limited availability of this type of inventory at scale, frankly, in any market across the country is expected to deliver strong -- more typical market demand without necessarily an expectation for a material discount tied to the receivership process itself.
But obviously, that's -- yes, to your point, is it 5% to 10% discount potentially, it's going to be market dependent. But we do think the portfolio itself, and again, the issue underlying the receivership process is not asset specific, right? It is more broadly sponsor-driven and broader external corporate capitalization issues that has pushed our assets otherwise high-quality performing assets into this receivership process. But again, good quality assets for which we expect to receive strong demand and market interest on the exit.
Brad, it's Blair. I'll just add. I mean, obviously, LTV, as Scott's alluded to, is a bit tricky here, right? I mean we were -- on a stabilized basis, assets you can calculate LTV using a normalized valuation methodology. I mean in this case, we're not really focused on the LTV, right? We're focused on recovering our exposure, and that's kind of it, right? So it's a bit different than when you're talking about the published 68% on a broader performing portfolio.
No, that's fair. I just wanted to make sure that these assets weren't at 90%, 95% loan-to-value and obviously once you're actually...
No, I get what you were asking. Yes, it was just...
So for us really -- And Graham, it's the final comment, Scott here again. Just -- for us, it's just the time of it, right? Like as we sit there and look at the portfolio. We had -- as Goeff alluded to, there's a sponsor that had outsized debt within their portfolio like beyond us within their own equity stack, after created the distress for them, not the assets themselves. But us as the first mortgage lender, we just -- we sort of find ourselves in these positions at this time in the cycle. And we have to work through the court process and we have to go through sort of a selling process. So for us, it's -- we're confident in getting our recoveries here. It's just the time of working through the process. The nice thing is on this new one, it's been very coordinated. Our receiver went in almost immediately, and we're already talking about building a sort of sales process out. So hopefully, we can move through this quickly.
And on that, actually, there's quite a bit of competition to get the listing. So I think we could extrapolate to that. They believe that there's going to be strong demand for the assets, right?
Okay. That's helpful. Good color. Can I just jump to the provisioning side? So it sounds to me like these are high-quality assets, and you're comfortable with the marketability of them or the potential to resolve. But still, if you take a step back, you've got I think roughly 20% of your portfolio sitting in Stage 3. Perhaps can you talk about why you didn't provision more on the PCL front this quarter, just given there's arguably some credit loss exposure here with your Stage 3s?
Graham, it's Tracy, and I can take that question. So as you recall, so for the 2 assets that are through CCAA, we would have taken a larger provision, obviously, in Q4, which still remains on the books. With respect to the portfolio that moved from Stage 2 to Stage 3, there is an additional approximate $500,000 that was taken on that portfolio. So again, just given kind of where the LTV's are and how we do our provisioning in accordance with IFRS, we do continue to feel confident that -- following that methodology consistently and particularly with defaulted loans on a case-by-case basis that we still have -- to have adequate provisions and reserves on the books and just be mindful that the larger one was actually taken in Q4. So it remains there against the CCAA portfolio in particular. And in the Stage 2 loans that moved to Stage 3, we already had another $1 million against those loans as of Q1. So we've added another $500,000 to those this quarter. And again, we do see that adequately covers our exposure there just given we expect to recover the principal.
Great. Did you want to just clarify for Graham on what we're provisioning, like...
Yes. I mean not to go crazy -- yes, not to go crazy to the math here, but the model such as it takes the value -- the principal exposed? And then what it does is it adds forward-looking interest to the time of disposition. So at minimum, a year is apply, and then that is really compared to the value of the asset. And as Scott said, we've looked at those carefully. So really the provisioning math is kind of driven off of that forward-looking interest in these cases because they're generally under 100% LTV. So you wouldn't really have a provision there outside of that interest. So again, it's -- we feel like we have enough coverage there and largely the math on that provisioning is really forward-looking interest.
Okay. Okay. Understood. And then if you've got a sizable portion of your book into Stage 3, I assume they're not paying interest right now. How should we think about the early impact on your distributable cash flow in this sort of situation over the near term?
Yes. So with respect to the larger assets that is in CCAA, we've actually haven't recorded the full interest receivable on that. What we've recorded since January 1st has actually just been the expected NOI on that property and the cash that we expect to receive. So our -- and similarly, with the condo portfolio, we actually haven't recorded any interest in our top line income. So when you look at the DI there, that really truly is kind of reflective of the cash, the running cash yield that we're guiding on these assets currently.
Additionally, with the Stage 2 to Stage 3 assets, now that we put the -- so the other portfolio of assets that are now into Stage 3, we now having put the receiver in place -- are in control of the assets and the cash associated with them. So we are receiving the NOI on them now. They don't fully cover, but we're estimating that they cover about 50% of the interest to date.
So, Graham, that payout ratio that we're talking about, obviously, is using as a numerator the cash -- the net cash received, right? So, yes...
Absolutely net cash...
Yes. Go ahead.
The net cash being received right now is factoring in what you're not getting from these roughly 20% of your portfolio on Stage 3?
Right. yes, it's not 20% that is generating [ no ] income as Tracy is saying, it's sort of case-by-case, but it is reflective of what we're receiving, not what we would notionally be receiving. So that's why yes, we're happy to talk about the Stage 3 assets and working through those. But in spite of that, obviously, the cash flow that's being generated to cover the dividend is substantial.
[Operator Instructions] Jaeme, your line is open. Please go ahead.
Just a couple of more questions on the -- on these Stage 3 loans. The $140 million portfolio, the 7 loans, are they -- are these all like similar properties like 7 loans $20 million? And the way I stand it is you're the only lender on these loans. It's not like there's other lenders that have security against the loans those are, let's say, subordinated lenders in the capital stack. Did I understand that all correctly?
So there are definitely similar assets and actually in a similar markets. Like it's a sort of a Quebec City portfolio. And picture -- clusters of 4 or 5 buildings that are together that are individual separate buildings and separate loans. So in our world, we control 7 of these loans. And we are more -- in all cases, the one where we are the first mortgage, Jaeme, because we have one position where we have a small second mortgage and not as a secured debt stock.
And then there are other buildings with other loans with -- from other lenders, like nothing to do with us. It's in a similar situation. And it's the same with same sponsorship group. And so there's a coordinated effort amongst various lenders on how we go through this realization process. Each lender has their own security and their own cash flows coming out of it. We're just being efficient by using a similar receiver and going through. We believe it's more efficient on an opportunity to get a higher price by offering [ light ] buildings into the market.
Yes, it's Goeff. Just to clarify a little bit further. So, call it 5 projects, each project has multiple phases. We've lended on a phase or 2 within a project, let's say, there are other lenders on other phases within those projects. As Scott said, only 1 loan position is $2.5 million second mortgage in 1 phase of 1 project with everything else in a first mortgage position. The assets are all recently built over the last handful of years. They are similar, albeit some cater to a slightly higher end use tenant. Some are -- so they do span across slightly different price points.
So there is some diversity as it relates to that as well as diversity in relation to location. But they are all exceptionally high quality, highly amenitized, well laid out and very marketable assets from our perspective. And we do believe the opportunity to buy a project or the opportunity to buy multiple projects does create a broad base for potential interest from other domestic buyers and/or non-Quebec and/or non-Canadian investors through the sales process, which is in the process of being engaged and will be implemented fairly imminently.
Okay. And a couple more on this. And are these -- just remind me, are these like purpose-built rentals or...
Yes, yes...
They are. Okay. And then...
And fully leased.
Fully leased. Okay. Perfect. And then your exposure is $140 million. What would be the total project exposure? Like how much does the sponsor need to sell, let's say, if they were to sell the entire portfolio in one shot?
And beyond us, right? Like so the entirety?
Beyond yours. Yes, Yours is $140 if you're 1 or 2 phases is the entire ownership or property asset like $500 million?
Goeff and I are just looking at each other and [ $500 ] million sounds about right. It's a bit of a guess from us, we don't have all the details, but like as is -- was spot on, okay and definitely some math...
And then forgive me for my ignorance here, like how many $500 million multifamily purpose-built rental deals, have there been in Quebec that you can kind of point to for evaluations or expected when it comes on this?
No, listen, I think it's Quebec and beyond. I mean there are lots of large multifamily deals that trade and portfolios of trade. I can think of publicly listed companies as well as privates. But again, as we look at this, this was a bit of a unique situation, right? Like I think this is an extremely attractive product for some larger pension funds, especially ones who are looking to rebalance sort of away from office and go deeper into multifamily. This is a high-quality portfolio where you can get scale day 1. So I think there is a large institutional interest that will come for this portfolio.
And then separately, I also think going into more of the Montreal, Quebec City markets is absolutely Quebec local players that might be interested in picking up 1 cluster. The [ those ] work dependently. It's not like you can buy 1 building, and that's a stand-alone working property. It's more efficient, I think, to have more and you to be able to scale your infrastructure. So I think we get portfolio of bids. But I mean this is early days. I mean we're still in the process of hiring the broker. And I'm not the broker who will be selling the portfolio. But I think there's a lot of liquidity for this particular product, especially at this time in the cycle.
Jaeme, it's Blair. I'd just add like it's -- it wouldn't take you long to find statements from Scott point pension plans, in particular 1 or 2 Quebec pension plans that have said they're looking for some additional exposure in core multi-res. So -- nor U.S., larger U.S. players that are looking for additional exposure to the marketplace. It doesn't mean it's going to be a portfolio trade, but I mean it's a pretty -- as I said before, when Graham was asking this question, there's some competition for this listing. So...
It's actually a nice size, right? It's not $5 billion and it's not $50 million or $100 million, right? I think it's like at the $500 million, it's going to attract a lot of attention. right?
There's smaller individual projects within that broader. There's large individual projects. There's obviously the entire portfolio as a whole in that $500-plus million range. But it's also unique in terms of the quality, right? Newly built at scale. I mean the opportunity to buy scale historically has meant '60s to '70s vintage older products, right? So this is a -- again, unique opportunity, obviously, for a variety of reasons, but the expectation is there will be broad-based demand, and it can be carved up and looked at it in a number of different ways.
Okay. And the last part of the question here is just there's nonreimbursable legal fees. Would you expect any other nonreimbursable fees to flow through on the sales process like in addition to just these sort of run rate legal fees that we see here, whether it's commissions or something along those lines? Or this sort of like extra $600,000 per quarter of legal fees about the right run rate?
Yes. I'll let Tracy answer to. Really, some of those fees are sort of more or like legal fees, consulting for us as we work through how we're legally going to go about making sure we're in court correctly. And this is for all the assets and how we handle our processes and to make sure we were well represented at the table. But that really is it. The things that you're mentioning things like commission structure, that's a real build that will get paid to a broker, but that is not a nonrecoverable to the lenders, right? This comes out of net sales proceeds. That is all calculated and formulated when we come and say, hey, we think we're very comfortable that the net selling proceeds will cover our position.
And the only other thing I would add is going back to Blair's point about the demand to list this project, it does result in and in light of the fact that the priority is on recovering the secured lenders positions across a number of lenders and projects. The fee structure within the brokers, again, has been aggressively bid and tied back to, hey, look, there is a very, very nominal minimal, well below market baseline fees tied to achieving a sales price that recovers the secured debt.
And then thereafter, it's much more highly incentivized such that the borrower can -- or sorry -- the broker can burn a better fee for outperforming the recovery of the secured debt. So it's a more of a unique structure in that sense, but it does limit the cost burden of the brokered sales process in this aspect.
Understood.
The only other thing I'd there Jaeme, it's Blair again. And when you think about the process, I mean, this is a very different situation than if you had $500 million of land that was entitled that was worth a whole bunch more in somebody's mind 1.5 years or 2 years ago, and now you don't really know what it's worth. I mean this is cash flowing real estate, right? So it's really -- and that's why we're comfortable, generally speaking, I'm not going to guarantee obviously, we're -- this is going to be done in 4 or 5 months. But I mean it's a see line of sight to the stop getting started out fairly easily.
[Operator Instructions] Since there are no further questions at this time, I'll turn the call over to Blair for final remarks.
Great. Thanks, everyone, for taking the time to join us today. Obviously, a lot to discuss. And we appreciate the opportunity to go through with you, and we look forward to regrouping again in 3 months. Enjoy the rest of your summer.