Timbercreek Financial Corp
TSX:TF
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Timbercreek Financial Corp
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Good day, ladies and gentlemen, and welcome to Timbercreek Financial's Third 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 third quarter financial results. I'm joined as usual by Scott Rowland, CIO; Tracy Johnston, CFO; and Geoff McTait, Head of Canadian Originations and Global Syndications.
Our Q3 results were highlighted by stable cash flows and dividends in spite of reduced transaction volume due to volatility in the commercial real estate markets. However, the latter part of Q3 and the first part of Q4 have seen stabilization in the commercial real estate environment generally with a number of sectors showing signs of price stability and improvement. We're very pleased to report that in spite of overall market activity remaining muted, we have been increasing the overall portfolio of loan investments in each of the first 3 quarters of 2024. We remain optimistic that additional rate cuts will strengthen market conditions and drive increased financing opportunities, which our business supports.
Looking forward, our expectation is that commercial real estate transaction volumes, we'll continue to revert towards historical trends in 2025. With this backdrop, we reported solid financial results in Q3. Net investment income was $25.4 million. Q3 net income was $14.1 million, and we generated distributable income of $0.18 per share at a payout ratio of 95%. At $8.42 per share, our current book value is well above the weighted average trading price in Q3. At the same time, our team is effectively managing the remaining exposure to stage loans. The improved environment will add a tailwind as we work to resolve these situations and redeploy this capital.
Lastly, I will highlight that we continue to deliver on our core objective of generating attractive risk-adjusted yield. As rates decrease further, we expect to see a widening spread between our dividend yield and other fixed income alternatives, such as GICs, magnifying the appeal of TF relative to these options. Of note, the spread between the TF dividend and tier GOC yield, the benchmark we have historically used is now approximately 5.3%.
I'll ask Scott to take over for the portfolio review. Scott?
Thanks, Blair, and good afternoon. I'll comment on the portfolio metrics and the progress with Stage 2 and Stage 3 loans, and I'll ask Geoff to comment on the originations activity and lending environment. Looking at the portfolio of KPIs, most were stable relative to recent periods and consistent with historical averages. At quarter end, 83.2% of our investments were in cash flow and properties, multi-residential real estate assets, apartment buildings, continue to comprise the largest portion of the portfolio at roughly 60%. I will note this is up from 52% in Q2 as new advances in Q3 were all in multi-residential real estate assets. The portfolio remains conservatively invested. First mortgages represented 87.1% of the portfolio. As expected, we have seen this percentage trend upward towards 90%.
Our weighted average LTV for Q3 is up slightly from Q2 to 63.8%. As the market stabilizes, we anticipate value growth. We expect LTVs on new originations to increase back to historical levels, which will bring this average higher in the coming quarters. The portfolio's weighted average interest rate or WAIR was 9.3% and down from 9.8% in Q2 and 9.9% in Q3 last year. The decrease is reflective of higher interest rate loans have been repaying in this period as well as the Bank of Canada's 75% policy rate decrease from June through to September of this year.
Lastly, floating rate loans represented 86% of the portfolio at quarter end the vast majority of which have rate floors. Half of these mortgages are now at their interest rate floors. In terms of the asset allocation by region, there were no other major shifts to highlight with approximately 94% of the capital invested in Ontario, B.C., Quebec and Alberta and focused on urban markets. From an asset management perspective, we continue to pursue resolution of our Stage 2 and Stage 3 loans. There's more detailed disclosure in our MD&A, so I will comment on the main developments in the period. There were no new stage loans added since Q2. However, there were movements within the stages.
In Stage 2, the previously reported Calgary and Vancouver loans are stable with no real material updates to discuss at this time. In terms of key developments on other assets, we have roughly $43 million of exposure on 2 loans related to industrial development sites in the GTA. As we disclosed in Q2, there was a dispute between the borrower and their general contractor due to cost overruns on our development that was unrelated to the Timbercreek loans. The issue has since been settled and the new DC will be brought into commenced construction of an industrial building on our primary site. We expect to be repaid in full on both loans post the sale of the completed project.
On this exposure, the first loan remains in Stage 2 as interest will be brought current by construction advances, while our second loan is moving to Stage 3 as the interest will accrue and not be brought current until sales proceeds become available. During the quarter, we also had some smaller loans advanced from Stage 2 to Stage 3. These include a $12 million loan on a residential development site in Downtown, Toronto. As we discussed in Q2, this is a very well-located site that the borrower has listed for sale. We signed a forbearance agreement with the borrower to allow the existing sales process to proceed as we believe it is the most efficient path to repayment.
We are confident in the value of the underlying collateral and expect to see the asset under contract to sell by the end of Q4. We also moved a small $3 million loan to Stage 3. In this case, the borrower is working toward a purchase offer in the near term, which is also expected to close in Q4. Finally, I will highlight that $4.2 million of remaining exposure on condo inventory in Edmonton was transferred from Stage 3 to real estate inventory. This project is now nearly resolved with full recovery of our remaining capital expected through sales of the final 13 units.
As a final update, our retirement facility in Montreal that is in real estate held for sale is currently in active discussions to be sold. We are negotiating a PSA that would see full recovery of our exposure potentially before year-end. We are fairly confident of this moving forward, but we do not have a firm deal at this time. In summary, we continue to make good headway on these loans and remain confident that they will be resolved in due course. We look forward to redeploying this capital into new loans in our core asset types such as multi-residential and industrial where we see positive long-term market drivers.
On that note, I'll ask Geoff to comment on the transaction activity in the portfolio. Geoff?
Thanks, Scott. While there have been some macro headwinds, as Blair previously mentioned, it's been a decent year-to-date for new investments given the circumstances, and we've been successful in building back the portfolio following several quarters of high repayments. In Q3, we advanced nearly $106 million in new mortgage investments and advances on existing mortgages, including 6 new loans, which were largely centered around low LTV multifamily investments. Total mortgage portfolio repayments in the quarter were $82.7 million, resulting in a turnover ratio of 8.4%. The net result is we grew the portfolio by about $14 million over Q2. Significantly year-to-date, the portfolio has grown by more than $70 million.
We believe the commercial real estate market likely reached its bottom in Q4 2023 or Q1 2024 and we see a steady improvement in market conditions as we look forward. The Bank of Canada has lowered rates by 125 basis points this year, including a 50 bp reduction on October 23, and the trajectory for future rate cuts is clear. We are seeing this translate to increased confidence amongst buyers, horizon activity across the market and expanding deal pipeline for Timbercreek. In short, we are poised for an improved Q4 and 2024 and next year of 2025.
To better illustrate the types of opportunities we're seeing, we've highlighted a recent industrial transaction. This is a $23 million first mortgage commitment on a portfolio of 4 small bay industrial buildings located across Mississauga Van and Oakville. In conjunction with the borrower zones significant cash equity upfront, our capital was required to facilitate the acquisition of the portfolio and execute on the renovation leasing strategy to optimize portfolio income and value. Overall, the subject is reflective of our typical industrial loan profile characterized by strong property fundamentals, an attractive LTV with significant forward cash equity. In addition, borrowers are repeat client and an experienced operator who has successfully executed on other similar strategies in these same markets. Relative to other lenders, we win transactions like this because of our ability to execute on committed terms and time lines and the ability to provide working capital and flexibility to enable their strategic execution.
I will now pass the call over to Tracy to review the financial highlights. Tracy?
Thanks, Geoff, and good afternoon, everyone. I'll start with the income statement highlights. Similar to Q2, the year-over-year income comparisons were impacted by lower average portfolio balances from the higher repayments we experienced at the end of 2023 and early this year. For context, the average net mortgage investment portfolio balance this quarter was $983 million, about 11% lower than $1.1 billion in Q3 of last year. We have also seen the weighted average interest rate contract as loans with higher rates have paid off in addition to the Bank of Canada interest rate cuts.
Q3 net investment income on financial assets measured at amortized cost was $25.4 million, down from $30.3 million in the prior year. Q3 net income was $14.1 million compared to $16.5 million in Q3 of last year and Q3 basic and diluted earnings per share was $0.17 versus $0.20 and $0.19, respectively, in the prior year. While the lower portfolio balance impacted top line income, interest expense on the credit facility also declined due to lower credit utilization, protecting our net income margin. Interest expense in the quarter was $5.7 million versus $7.3 million in the same period last year, a 22% decrease.
We reported quarterly distributable income of $15 million or $0.18 per share versus $16.8 million and $0.20 per share in last year's Q3. The Q3 payout ratio on DI was 95%. On a year-to-date basis, the payout ratio is 91% and we declared regular dividends of $14.3 million or $0.17 per share, representing 102% payout ratio on earnings per share and 98.1% on a year-to-date basis. As we think about the outlook for DI, I would highlight that we would expect lender fee income to increase as we experience an uptick in transaction activity over the upcoming quarters.
Looking quickly at the balance sheet. The value of the net mortgage portfolio excluding syndications, was just under $1.02 billion at the end of the quarter, an increase of about $72 million from the end of 2023. At quarter end, we had roughly $97 million of net real estate, including real estate held for sale, net acquirer liability of $62 million, which is 3 senior living facilities acquired in August 2023 that Scott spoke about earlier. The balance of the credit facility for mortgage investments was $324 million at the end of Q3, up from $306 million at the end of Q2. We continue to have capacity to deploy new capital as activity in the commercial real estate market accelerates.
I will now turn the call back to Scott for closing comments.
Thanks, Tracy. The past several quarters have played out largely as we expected, and the stage is now set for further recovery in real estate fundamentals and increased transaction activity. We were able to deploy a meaningful amount of capital to new investments during the first 3 quarters of 2024. And as you heard from us today, the market conditions support further growth in Q4 and 2025 as buyer confidence returns.
It's worth highlighting that this changing landscape, what this changing landscape means for Timbercreek's portfolio in the coming quarters. The weighted average interest rate is expected to continue declining since most loans in the portfolio are floating rate. However, this decline will occur more gradually than the pace of rate cuts due to interest rate floor structures on many loans. From a distributable income perspective, this reduction will also be mitigated by lower interest expense costs on our leverage, which is also primarily floating rate. While WAIR will decline, we anticipate increased income as a result of several other factors.
One, heightened transaction activity will lead to stronger fee income; two, a return to a higher portfolio balance generates more overall income; and three, improved loan margins as we return to a more typical and higher loan-to-value environment with confidence of asset value growth in a strengthening market. Overall, this for us marks a return to normalcy. -- and our team is confident with portfolio's growth for 2025. These improved market conditions will also accelerate the resolution of the remaining stage loans and we look forward to recycling that capital into compelling investments that our pipeline is generating.
That completes our prepared remarks. With that, we will open the call to questions.
[Operator Instructions] The first question will come from Stephen Boland.
I hope you can hear me okay. Great. Just in terms of the growth, and you're talking about getting back to historic levels, I mean, is this direct coming in direct to you? Is it coming through intermediaries like brokers, developers, where are you seeing the most interest in terms of getting borrowers back in?
Yes. Listen, that's a great question. And it's 1 of these things that can evolve and change year-to-year. I mean I'd say we have strong relationships, certainly, both on a direct and a brokered basis. And the market in Canada, I'd say, has become increasingly brokered over the last handful of years, again, with new brokers coming to the market, that brokerage reality becomes more competitive. There are more guys out there, representing direct borrowers interest in trying to get the best financing structures available.
That said, irrespective of whether it's a broker deal or not, the focus that we have internally on the direct relationship side is critical even where and when it's brokered. And I can give you an example of a deal that we're looking at right now, a broker deal. We had a relationship with the borrower directly. We got to see the deal ahead of the brokered process, the brokers still ran the process. The broker still gets paid if we do the deal, but that direct relationship is bringing that deal to us, and again, a very competitively bid reality. So I'd say it's increasingly broker, it's probably 50-50 in terms of the flow that we see. But even when it is brokered, it's that direct relationship that we focus on trying to build to ensure we get that last look are in the room for discussion to make sure that there's a deal that we like that we want to do, we have the opportunity to do so.
I'm going to go to a couple of Stage 3 loans, like the $55.9 million and $117 million. Obviously, you talked about that the properties are well collateralized and the lower LTVs. Could you just get an idea of counterparty risk in these situations. I mean, they're pretty material. Can you talk a little bit about the counterparties in terms of are they developers? Are they operators? Maybe you've given this detail out before. I just -- it's not in my notes, apologize would behave.
No, it's you may have given some details before, but in general, right? So though some of those larger exposures are well-known large developers and operators sort of depends on that project, Steve, specifically, but deep experience, institutional quality in general, I mean those are our general counterparties. I mean, Geoff, I don't know if you want to add. I mean we're not -- from that perspective, like these are large projects, right? So these aren't -- it's not like it's somebody's single asset.
We have confidence in our borrowers' capabilities. The market has been tough on a lot of these real estate owners over the last couple of years, right, as interest rates hit highs and it really sort of tapped into balance sheets. But I'll say, from our perspective, and I'm thinking through these exposures are primarily, I think, in the Stage 2 loans that you're referring to. I look at that as after 24 months, call it, of headwinds here, right, with the high rates. There's been a lot more confidence coming back into the market on both the leasing front within their assets as well as their balance sheets or just capabilities to handle debt service.
And then finally, on the transaction side, as we've had 1.25 points now of successive or cumulative cuts you start hearing more buyers coming to the market. We're hearing more sort of cap rates tightening, which is obviously very positive for values. So for us, we think this is wisely is a baseball analogy, which seems fitting given last night. I think we're probably in the sort of seventh inning on our staging loans. And we're looking forward to sort of the fall and certainly into the spring market of 2025, where we think buyers and sellers are matched and values you start going to see acceleration to values, which is nothing but positive for our counterparties.
Yes. And the only other comment I would add is just as it relates to the context of the sponsor. Again, experienced operators, there's no counterparty risk from an operational perspective in our view. And the reality is, where and when we're working with borrowers on resolving these stage type situations. In all cases, these counterparties are contributing economically to that solution. Otherwise, again, that's a different discussion for us. And fundamentally, the boards we're working with are both operationally strong, but have the capital strength to commit further capital to these projects to see collective resolution, yes.
And last one for me. In your disclosure, you mentioned that the higher yielding loans are being paid off and I presume that obviously comes into your yield expectation going forward. Is that -- how far along in that process is, I mean your portfolio turns over pretty quick, top for quarters. Should we expect this for the next 2 quarters, 3, 4 quarters, you see this prepayment activity from the high-yielding loans.
It's a really good question. We saw a lot of -- obviously, I'm thinking back to Q4 of 2023 in Q1, especially. That was really the turning point where rates were high and the bond market had moved down quickly to sort of allow some refinancings. But we've seen that repayment activity slow down now, Stephen. And as we look into Q4, I can say we're forecasting a fairly normal period for repayments. And I think we're through the majority of that situation and things will start to level off now. It would be our expectation. But it will be certainly meaningful earlier in the year.
Next question comes from Jaeme.
Yes. Can you hear me okay?
Yes, we can.
Good. So just kind of following on that last question just around the Q4, specifically the outlook. Obviously, I hear your comments around the pipeline and some tailwinds around transaction activity. What's your visibility on the repayment activity that Q4 typically brings a seasonally higher level of repayments. So is the visibility on Q4 right now that you will still produce growth? Or is some payments still coming through very -- at a higher level, even seasonally.
Yes. So I totally agree with you, Q4 is historically the highest quarter for repayments, right, on an annual basis. So I would expect Q4 to still have that as a realization. I'll say this, Jaeme, it's actually lower right now than typical. So I'm kind of waiting to see what's going to happen here in the next few weeks because Q4 is Q4. But as of right now, I'll say our repayments are a little shallower than historical averages, and our funding rates are actually quite positive. Again, there's a lot of room here still in Q4, but that's sort of the projection.
Yes, understood. There's still 2 months to go here. A question on the weighted average interest rate, may chat little bit already with Tracy on this. But just curious, where is the floor today on weighted average or floating rate loans, as you said. And then when it comes to time you originate new loans, what -- like how does the floor on those new loans compared to the floor on floating rate loans you would have been writing a year ago or, let's say, in the higher interest rate environment.
Yes. I'll take the first part of that question. So right now, about 77% of the portfolio has floors. 50% of that are actually at their floors right now and then the weighted average of all loans that have floors is about 8.23%. So a little bit to go there, obviously, but 50% are currently sitting at their floors. I'll turn it over to Scott for the second part.
Sure. And how the floors worked, that's a sort of bespoke negotiated item on new yields. So for all of our loans are generally speaking, right? They're prime plus some margin to get to the loan coupon. So we're in an environment, borrowers will come to us we're negotiating new deals, our originations team. We might do basically the coupon, which is prime -- we call that sort of prime flat, that's the floor. Often negotiate some discounts to that? Is it prime minus a $25 million, prime minus $50 million, minus $75 million, there's a little bit of a room of negotiation with clients. And that often depends on where we are in the interest rate cycle. If the borrower sees there's a 50 bp rate reduction being called in 6 weeks, we obviously take a lot of pressure to negotiate that into that floor. So it's sort of an actively negotiated clause on every loan in new business. But on every loan, we attempt to get a floor. Yes.
I mean the only other -- sorry, I was going to say the only other comment I would add, right, it is somewhat dictated by the market and the willingness to compete. It somewhat drives the credit spread that you're going to charge as well, right? So you may charge an incremental credit spread if you're going to provide some floor relief and certainly with 125 bps of reduction, our openness and willingness to accommodate meaningful floor relief on our loans today is much less than it would have been 125 basis points ago.
So again, it is to Scott's point, bespoke, but it can, it is negotiated now on every deal in a falling rate environment. Borrowers want to know what their optionality is. And frankly, there's fixed rate alternatives out there that come into play as we think about what we want to do and how we want to compete. But I think it is, at this point in time, it plays in my mind, also into the spread. We can charge incremental spreads to offset in some cases and -- but yes, bespoke by deal.
Yes. Understood. And as we're kind of moving to more, let's say, normal market as you describe it, how much extra spread do you need to be able to pick up as you do about the LTV curve from -- what's the maybe 60%, 70%, is that another able to take like a 50 type base -- what's the technical of course, not a case by case.
Yes. I'll say there's 2 elements to that. So 1 is it's just as you described side, which I think I described in my comments is, yes, when LTV goes up where you take a little more risk as understand over the last couple of years, we've been very risk off, right? As we saw services go up and a little more uncertainty in the market, we certainly pulled back on our risk profile. So as you look to increase risk profile you're totally right. It's in that sort of 25 basis points to 50 basis points range. We're still lending consistently, and we're not talking extreme differences in risk. We're talking to you about 5 -- if we land another 5% LTV, we might pick up an extra 25 points, 50 basis points.
The other reality for margin expansion and compression, as the total coupon was going up, that there's almost like there's only so much income and debt service that a property can hold. Do you start to see margin compression in those higher interest rate environments, as the prime gets lower and lower, we sort of have more of a floor rate, Jaeme. And so you sit there and that starts to expand that margin and what the property can bear. So as we get -- we saw this sort of -- I go back to 2019 or 2020 when prime was super low, we would have had a much larger margin above prime, right? So there's kind of a -- it's almost like a bit of a fixed component to pricing. So as we come down the curve here, we will be able to increase our risk a little bit as we get more confidence in value growth. That's the margin expansion and just the overall coupon, stays relatively high.
And I would say to this point in the market, you haven't necessarily seen that sort of market spread increase tied to these falling rates, to your point. But I think with this last cut and potentially another 1 to come, I think you're going to start seeing and we're certainly expecting to see the ability to drive some incremental margin above prime. And again, ideally, yes, holding floors aligned with those sufficient coupons that aligned with the credit profile of the deal.
And that's kind of a market experience for us to sort of transitional bridge lenders is sort of a baseline level of coupon that we expect to receive.
Yes. Okay. That's good. And on that, we're just still in this conversation of yields. You talked about like lender fees potentially increasing. And I just wanted to clarify, are you talking about lender fees increasing just on an absolute dollar basis because of the volumes? Or are you talking about being able to take a higher rate than perhaps what we did in recent quarters. Like is this something that we go back to maybe like beyond it like 1.5% and then we see some quarters licit so we haven't seen that for a while.
Yes. No, I think -- I would view it more as a fee percentage stays somewhat consistent and is more driven off of volume. So as there's more transactions in the market, we'll see more churn in the book, more activity. So I think it's basically -- I think our overall portfolio book grows a little bit, but there's more churn underlying that as well, as activity returns to the market.
The next question comes from Graham. Graham, I don't think we can hear you at this time. So just opening up the floor to any other questions. [Operator Instructions].
Maybe while we're waiting for a minute, I'll give just one further update when I'm thinking about it and maybe I'm trying to anticipate Graham's question. One thing I'd just like to talk about briefly is just the inventory, the land inventory and the inventory held for sale, which is about $97 million. And just wanted to give everyone sort of an update sort of 3 projects in that, that we're feeling very good about.
With the retirement in Montreal, which is the majority of that position, we think we can be off of that. Ideally, we're going to be under contract to sell that asset in the next few weeks. We have an LOI, we're negotiating terms, and we feel quite good about that. There's another sort of larger land in Ontario, a development land in Ontario that we have received full entitlement for and it is part of the settlement boundary and the talent that it's in. So we're looking to be able to put that up for sale in early 2025. And then we commented as well that remaining sort of cargo inventory in Edmonton we're down just a few units now. I feel very good about our ability to continue to see that sell to completion. So we're on track, I think, for resolving and the sale and the entirety of our inventory positions in 2025 and feel pretty good about that. Did Graham get an opportunity to come back?
I think, I'm here. Can you hear me?
Nice. Yes. Effectively. Nice to hear from you.
Yes, nice to be unmuted. I think it was probably my fault, I apologize. You're just over $1 billion in size now for your portfolio. I think you previously peaked around or recently peaked around 1.2 to 1.3 back in 2022. So is that a reasonable target for you to try to get the portfolio back towards do you add the debt capacity to do so? And if so, how long would you anticipate, it would take to get back to that size?
That is the objective. I think a combination of the market coming back and us having more of a normalized investment appetite I think that is our objective, Graham, is to get back to that size. But I just think of timing it's probably 12 to 18 months get back to that size. I think we're going to see some meaningful upward movement in 2025. .
Okay. That's reasonable. It looks like your allowance for credit loss overall came down a little bit quarter-over-quarter. Is that due to that condo inventory that you moved from your mortgage portfolio to, I guess, what you call investment properties?
Yes. So yes, it was the condo that was moved to inventory. So largely just moved out of this where it was in Stage 3 historically.
Okay. Understood. And then my last one would just be the provision for credit loss is $250,000 in the quarter. Any puts and takes there that you would call out because there did seem to be some movement of loans from Stage 2, Stage 3 how much provisioning to that driver?
No, it's more just mathematically in the model, and we've covered, we've talked about this a little bit before. You're forced to take the -- both the principal plus the forward-looking interest component. So as you kind of continue to have these stages in there, you're adding on this compounding of interest. So that's really just what it is, but no change in terms of underlying valuations or anything there on?
Okay. So the movement higher in Stage 3 in the quarter didn't really drive much on the provisioning side.
Correct. Yes. Yes. Value, literally is moving from 1 column to another, but the math, whether it's in Stage 2 or Stage 3 in the model is the same. .
And it looks like we have another question from Stephen.
Just one more. When you talk about optimism in the market probably after several years, that tends to drive in or bringing more competition. I know you're pretty insulated because of your relationships. But have you started to see a little bit more interest or even other lenders going after some of your brokers that you deal with? Like is there a threat of more competition coming into the market here in your segment?
I mean I'll let Geoff answer the second two, but I'll take the first crack at it. I mean it is Canada. So the lending universe does tend to be a little tighter. And I would say it's sort of the usual drummers, the interesting thing is as the market got a little softer on transaction activity, it's almost tougher, right? Like there's still the amount of capital chasing a smaller subset of deals. So there will be new competition, I'm sure, and the banks will sharpen their pencils and everyone wants to be aggressive.
But I've actually just in general, more optimistic and more looking forward to a broader transactional environment. I think there's just that much more opportunity, and we feel good about our position in the market and to your point, our relationships that I think will win our fair share. And just that large opportunity is actually more excited about that than I think I am about the fear of new entrants. But Geoff, do you want to add anything to that?
Yes. I mean I don't have much to add. I think those are fair points, like to Scott's point, where it's been largely renewal opportunities and a slower transaction reality. The domestic lenders have been here, they're still here. They have allocations they want to deploy. It hasn't been a competitive reality over these past few years. And so return to a normalized transaction environment, I think we'll increase opportunities.
Again, you see entrants leave the market. It's normally more like foreign lenders, banks, life companies and other such groups like German life co's or U.S. Life co's in particular, again, not direct competitors in our space, I would say, right? They tend to be more in the institutional large loan space. Canada is a big geography. It's not a huge market. You aren't going to get the big private equity money chasing the types of opportunities that we're looking for outside of the players that are already here and sure there may be a new player that crops up here and there at some future point, but we think the increased transaction opportunity will more than offset that. And again, similar competitive reality to what we're already facing.
Steve, it's Blair. I'll just add a quick point there. I've been quiet. I'm not in the office. I don't know what my connection is like, but it's -- this is more normalized environment that Scott and Geoff are both speaking to is really where we excel, right? We're -- speed of execution and the ability to understand the transaction, the underlying real estate and help out sponsors. I mean that's what we're great at. So banks are great for lots of things, but they're not great at that nor do they really even try to do that. So they're happy with getting exposure to what we do through providing us with a meaningful credit facility. So we very much embrace the improvement in the fundamentals.
If there are no other questions, I'll now turn the meeting back to Blair for closing remarks.
Great. Thanks, operator. Yes. So thanks, again, everyone. As usual, for taking some time to with the update, and we look forward to connecting in another quarter. If anything comes up in the interim, you know where to find us. Have a good afternoon. .
You will now be disconnected.