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Malaysiakini
23-05-2025
- Business
- Malaysiakini
Rethinking graduate wages in M'sia: Are we seeing the full picture?
While concerns over low starting salaries for graduates are valid and deserve attention, it is important to frame the conversation around comprehensive data rather than isolated anecdotal accounts. The recent narrative, as featured in an article titled 'Degree holders lament incommensurate wages', paints a dismal picture of graduate earnings. However, key national statistics suggest a more nuanced and, in some cases, more optimistic reality. A broader look at graduate earnings Contrary to claims that most degree holders earn below RM3,000, the Department of Statistics Malaysia (DOSM) reports a median salary of RM4,409 and a mean salary of RM4,933 for graduates in 2023. These figures reflect a more accurate average of what degree holders are earning across industries, rather than the narrower lens of entry-level salaries in specific sectors. Furthermore, MYFutureJobs, Malaysia's national job matching platform, shows that graduate-level jobs advertise an average salary of RM4,537 as of April 2025. For better alignment with DOSM's data, another perspective from PERKESO's Data Placement 2024 reports that the average salary for graduates entering PMET (Professionals, Managers, Executives, and Technicians) occupations is RM3,598. These numbers show strong alignment between advertised and actual salaries, indicating that the labour market may be more competitive and fairer than suggested by individual employer surveys. Contextualising entry-level wages It is true that starting salaries in the public sector at RM2,250 for Grade 9 (formerly Grade 41) are lower than average salaries in the private sector. However, this doesn't capture the full compensation trajectory. Grade 9 positions in government service can reach up to RM11,110, and they often come with long-term benefits like pension schemes, job security, and annual increments that may not exist in many private roles. At the same time, graduates from arts and social sciences tend to earn lower starting salaries, largely due to a combination of market oversupply, limited demand, and the less direct commercial applicability of their qualifications. According to the Ministry of Higher Education's 2023 data, over 150,000 graduates, or more than 50 percent of total graduate output, were from non-STEM fields like Business Administration and Law (82,288 graduates), Arts and Humanities (22,558), Education (17,933), and Social Sciences (17,539). This oversupply creates a notable mismatch between graduate output and labour market needs. Bridging this gap requires targeted upskilling in areas such as digital literacy and analytical competencies, which are critical to enhancing employability and opening pathways to higher-value career opportunities, both in the public and private sectors. A case of mismatch, not oversupply One of the key issues at hand is not necessarily that there are too many graduates, but that many are underemployed. According to DOSM, 35.7 percent of employed graduates in Quarter 1, 2025, were in roles that did not match their qualifications, which is a symptom of skill mismatch, not an oversupply of graduates per see. The Graduate Employability Rate (GER) for 2024, on the other hand, stands at 92.5 percent, which reflects that the vast majority of graduates are indeed employed. Therefore, the challenge is aligning the quality of those jobs with the qualifications and aspirations of graduates, which is an issue that calls for better industry-academia alignment, not just wage reform. What needs to change Rather than placing undue emphasis solely on starting salaries, which are understandably lower as part of the natural career progression, the national conversation should pivot towards more sustainable and impactful solutions. One of the key areas requiring attention is the closing of the skill gap. This involves a critical enhancement of university curricula to ensure that graduates are equipped with competencies that align with the evolving needs of industry. A stronger emphasis on practical, industry-relevant education can bridge the disconnect between academic training and workplace expectations. Equally important is the support for upskilling and reskilling initiatives, which empower graduates to transition into high-demand and emerging sectors such as digital technology, green economy, and advanced manufacturing. These sectors not only offer better remuneration but also greater long-term career resilience in a rapidly shifting job market. Through data mining and analysis, efforts have been made to explore parameters that allow comparison between reskilled or upskilled graduates and fresh graduates. While direct official salary comparisons for reskilled individuals are limited, existing policy frameworks and research consistently highlight that reskilling enhances employability, job readiness, and career advancement. These improvements are generally associated with more favourable salary outcomes compared to those of fresh graduates entering the workforce without additional training or experience. In addition, greater industry collaboration must be encouraged. Structured partnerships between the public and private sectors can create clear, purposeful pathways from education to employment, including internships, apprenticeships, and industry-driven training programmes, which can ease the transition into the workforce and raise job quality. While there are legitimate concerns about business sustainability, especially among micro, small, and medium enterprises (MSMEs), blanket suppression of graduate wages should not be seen as a viable solution. Instead, a more balanced and forward-thinking approach is needed, one that integrates performance-based remuneration, targeted government incentives, and comprehensive labour market reforms. Such a strategy would not only support business viability but also ensure fair and equitable compensation for Malaysia's highly educated workforce. This Social Security series is in collaboration with PERKESO.
New Straits Times
23-05-2025
- Business
- New Straits Times
Rethinking graduate wages
WHILE concerns over low starting salaries for graduates are valid and deserve attention, it is important to frame the conversation around comprehensive data rather than isolated anecdotal accounts. The recent narrative, as featured in a news article, paints a dismal picture of graduate earnings. However, key national statistics suggest a more nuanced and, in some cases, more optimistic reality. A BROADER LOOK AT GRADUATE EARNINGS Contrary to claims that most degree holders earn below RM3,000, the Department of Statistics Malaysia (DOSM) reports a median salary of RM4,409 and a mean salary of RM4,933 for graduates in 2023. These figures reflect a more accurate average of what degree holders are earning across industries, rather than the narrower lens of entry-level salaries in specific sectors. Furthermore, MYFutureJobs, Malaysia's national job-matching platform, shows that graduate-level jobs advertised an average salary of RM4,537 up to last month. In alignment with DOSM's data, the Social Security Organisation's (Perkeso) 2024 Data Placement also reports that the average salary for graduates entering PMET (Professionals, Managers, Executives, and Technicians) roles is RM3,598. These numbers show strong alignment between advertised and actual salaries, suggesting that the labour market may be more competitive and fairer than what individual employer surveys suggest. ENTRY-LEVEL WAGES It is true that public sector entry-level salaries, such as RM2,250 for Grade 9 (formerly Grade 41), are lower than private sector medians. However, this figure does not capture the full compensation trajectory, as Grade 9 positions in the government can rise to RM11,110 and come with long-term benefits such as pension schemes, job security and annual increments, which are often absent in many private sector roles. At the same time, graduates from the arts and social sciences tend to earn lower starting salaries, largely due to market oversupply, limited demand and less direct commercial applicability of their qualifications. According to the Higher Education Ministry's 2023 data, over 150,000 graduates, or more than 50 per cent of total graduate output, came from non-science, technology, engineering, and mathematics (STEM) fields such as Business Administration and Law (82,288), Arts and Humanities (22,558), Education (17,933) and Social Sciences (17,539). This oversupply has created a mismatch between graduate output and labour market needs. Bridging this gap requires targeted upskilling in areas such as digital literacy and analytical competencies — skills critical to enhancing employability and creating pathways to higher-value career opportunities in both the public and private sectors. MISMATCH, NOT OVERSUPPLY One of the key issues is not necessarily an oversupply of graduates, but underemployment. According to DOSM, 35.7 per cent of employed graduates in the first quarter of this year were in roles that did not match their qualifications — a clear sign of skill mismatch rather than graduate surplus. Yet, the Graduate Employability Rate for last year stood at 92.5 per cent, reflecting that the vast majority of graduates are employed. The challenge lies in aligning job quality with graduate qualifications and aspirations. This issue calls for improved industry-academia collaboration, not just wage reform. WHAT NEEDS TO CHANGE Rather than focusing solely on starting salaries, naturally lower as part of early career progression, the national conversation should pivot toward sustainable and impactful solutions. Chief among them is closing the skill gap, which requires critically enhancing university curricula to ensure graduates are equipped with skills that align with evolving industry needs. Greater emphasis on practical, industry-relevant education can bridge the disconnect between academic training and workplace expectations. Equally important is supporting upskilling and reskilling initiatives, which empower graduates to transition into high-demand sectors such as digital technology, the green economy and advanced manufacturing. These sectors offer not only better remuneration, but also long-term career resilience. Data analysis has begun to explore ways to compare outcomes between reskilled/upskilled graduates and fresh graduates. Although direct official salary comparisons are limited, existing policy frameworks and research consistently show that reskilling improves employability, job readiness and career progression, often leading to better salary outcomes than those available to fresh graduates. Additionally, stronger industry collaboration must be encouraged. Structured partnerships between the public and private sectors can create clear, purposeful pathways from education to employment, such as internships, apprenticeships and industry-driven training programmes that ease workforce entry and raise job quality. While there are legitimate concerns about business sustainability, especially among micro, small and medium enterprises, blanket suppression of graduate wages should not be seen as a viable solution. Instead, a more balanced and forward-thinking approach is required: one that integrates performance-based remuneration, targeted government incentives and comprehensive labour market reforms. Such a strategy would not only support business viability, but also ensure fair and equitable compensation for Malaysia's highly educated workforce.
Yahoo
14-05-2025
- Business
- Yahoo
Q1 2025 Lument Finance Trust Inc Earnings Call
Andrew Tsang; Investor Relations; Lument Finance Trust Inc James Flynn; Chairman of the Board, Chief Executive Officer; Lument Finance Trust Inc James Briggs; Chief Financial Officer; Lument Finance Trust Inc Greg Calvert; President; Lument Finance Trust Inc Jason Weaver; Analyst; JonesTrading Steve Delaney; Analyst; JMP Securities LLC Christopher Nolan; Analyst; Ladenburg Thalmann & Co. Inc. Operator Good morning and thank you for joining the Lument Finance Trust first quarter 2025 earnings call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the call over to Andrew Tsang with Investor Relations at Lument Investment Management. Please go ahead. Andrew Tsang Good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's first quarter 2025 financial results. With me on the call today are Jim Flynn, our CEO; Jim Briggs, our CFO; Jim Henson, our President; and Zach Halpern, our Managing Director of Portfolio Management. On Monday, May 12, we filed our 10-Q with the SEC and issued a press release to provide details on our recent financial results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I'd like to remind everyone that certain statements made during the course of this call are not based on historical information, and they constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1,933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to various risks and uncertainties. That could cause actual results to differ materially from those contained in forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, in particular, the risk factors section of our Form 10-k. It is not possible to predict or identify all such risks, and listeners are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to update any of these forward-looking statements. Further, certain non-GAAP financial measures will be discussed on this conference call. Presentation of this information is not intended to be considered in isolation, nor as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC. For the first quarter of 2025, we reported a GAAP net loss of $0.03 per share and distributable earnings of $0.08 per share of common stock. In March, we declared a quarterly dividend of $0.08 for common share respected first quarter in line with the prior quarter. I will now turn over the call to Jim Flynn. Please go ahead. James Flynn Thank you, Andrew. Good morning, everyone. Welcome to the Lument Finance Trust earnings call for the first quarter of 2025. We appreciate all of you joining us today. Before we begin with the market update, I would like to officially welcome Greg Calvert as our new President, and newest member of our management team. I personally worked with Greg for almost 20 years. He has extensive experience in multi-family credit and nearly a 30 year tenure at Lument, and his predecessor entities make him an exceptional addition to our leadership team. Welcome, Greg. Turning to the economy and market, Despite ongoing uncertainty related to the pace and direction of interest rate policy, the broader US economy has continued to show somewhat surprising resilience. The labor market remains tight. Consumer spending has held up much better than anticipated, and inflation, while easing from the peak, continues to be a focus for the Fed and frankly for investors and the economy. However, the topic of the day continues to be trade and tariffs. Any developments, whether real or projected, have had significant impact on markets and sentiment as we saw yesterday and also are seeing this morning in pre-market as we move through 2025, we are mindful of the potential for volatility for this and all economic issues, but we do remain cautiously optimistic that good opportunities for investment will be present in 2025. Stability and monetary policy would provide a constructive backdrop for the returning health of the commercial real estate finance market. The multi-family sector continues to demonstrate relative resilience amid evolving market dynamics. While low rank growth remains muted, occupancy occupancy rates remain robust. On the supply side, multi-family construction starts have decelerated due to several contributing factors, including scarcity of attractive financing and increased construction costs. Looking ahead, the combination of steady demand, limited new supply, and the challenges faced by potential home buyers due to mortgage rates suggest a favorable environment for multi-family investments over the medium to long term. As a result of improving conditions, we have seen greater financing origination opportunities, albeit choppy over the past 25, 45 days, and the capital markets appear to be to continue to be engaged relatively significantly. Throughout this environment, active asset management has been and continues to be our priority. We take a proactive approach to monitoring borrower performance, market trends, and collateral values. Our team is in constant dialogue with our borrowers, ensuring that we can identify issues early and respond strategically in order to maximize recovery values, including foreclosure and REO strategies where prudent. As we have mentioned previously, we have executed several successful loan modifications and extensions that preserve value and enhance our downside production. We remain committed to preserving capital and maximizing risk adjusted returns across this cycle. Our credit risk ratings have remained largely stable quarter over quarter, and the sequential increases to our specific reserves are in line with our expectations for the portfolio performance. Given our focus on optimizing recovery from our existing investments, we have appropriately managed liquidity to maintain flexibility, holding a considerable amount of unrestricted cash on our balance sheet rather than deploying it into new loan assets. We have also elected to use principal repayments received on assets held within the LMS financing structure to partially pay down outstanding liabilities. This voluntarily voluntary partial delevering of the portfolio provides us with additional cushion in meeting various collateral collateralization and interest rate coverage covenants within that structure, which we believe is an acceptable trade-off as we continue to resolve the more challenged credits and seek to put more favorable secured financing in place later this year. We are currently reviewing options for a new secured financing for that portfolio, and we expect to close in the coming months. We expect the new financing will provide us with adequate flexibility to manage our seasons credits while putting us in a favor favorable position to viably access the CRE CLO market as a returning issuer. Following a lull in new deals post the Trump administration's April second tariff announcements. There's been a flurry of new CR CLO deals over the past several weeks, which has been encouraging and demonstrates a functioning capital market. Pending market conditions, we would anticipate a new issuance in the second half of 2025. We continue to leverage the origination underwriting and asset management expertise of our manager and its affiliates to identify and capitalize on compelling investment opportunities. Our ability to navigate the current environment, prudently manage our liquidity, optimize capital deployment on a lever basis, and manage our challenged assets will be key to delivering long-term value to our shareholders. With that, I'd like to turn the call over to Jim Briggs, who will provide details on our financial results. Jim? James Briggs Thanks, Jim. Good morning everyone. Last evening, we filed our quarterly report on Form 10-K and provided a supplemental investor presentation on our website, which we'll be referencing during our remarks. The supplemental investor presentation has been uploaded to the webcast as well for your reference. Pages 4 through 7 of the presentation you'll find key updates and earnings summary for the quarter. For the first quarter of 2025, reported a net loss to common stockholders of approximately $1.7 million or $0.03 per share. We also reported distributable earnings of approximately $4 million or $0.08 per share. Few items I'd like to highlight with regards to the Q1 P&L. Q1 net interest income was $7.7 million. The decline from $9.4 million recorded in Q4 of '24. The weighted average coupon and average outstanding UPB of the portfolio declined sequentially, largely due to declines in so for benchmark rate and the deleveraging of our secured financings. Exit fees were also lower as payoffs during Q1 totaled $55 million as compared to $144 million in Q4. The company recognized approximately $700,000 of exit fees during Q1 compared to approximately 1.1% in the prior quarter. Our total operating expenses, including fees to manager, were largely flat quarter on quarter as we recognized expenses of $2.6 million in Q1 versus $2.8 million in Q4. Approximately $450,000 of incentive fee that would have otherwise been incurred by the company as it relates to Q1 was waived by the manager. The primary difference between reported net income and distributable earnings was a $5.7 million net increase in our allowance for credit losses. So March 31, we had seven loans risk graded to five, including three assets newly downgraded to five in Q1. All seven loans are collateralized. Six of the loans are collateralized by multi-family assets, one by seniors. Greg will provide a bit more detail in his remarks. We evaluated these 75 rated loans individually to determined whether assets specific reserves for credit losses were necessary. And after analysis of the underlying collateral, we increased our specific reserves to $11.1 million as of March 31, an increase of $7.3 million versus the prior quarter. The general reserve for credit losses decreased by $1.6 million during the period, primarily driven by payoffs of performing loans, loan modifications, and the move of certain assets to specific evaluation. We ended the first quarter with an unrestricted cash balance of $64 million and our investment capacity through our two secured financings was fully deployed. The CRE CLO securitization transaction we issued in 2021 provided effective leverage of 75% to our loan assets and a weighted average cost of funds of sour plus 173 basis points. The LMF financing completed in 2023 provided the portfolio with effective leverage of 81% at a weighted average cost of funds of sour plus 314 basis points. On a combined basis, the two securitizations provided our portfolio with effective leverage of 77% and a weighted average cost of funds of sour plus 225 basis points as a quarter end. The company's total equity at the end of the quarter was approximately $232 million. Total book value of common stock was approximately $172 million or $3.29 per share, decreasing sequentially from $3.40 as of December 31, driven primarily by the increase in the allowance for credit losses. We'll now turn the call over to Greg Calvert to provide details on the company's investment activity and portfolio performance during the quarter. Greg? Greg Calvert Thank you, Jim. During the first quarter, LFT experienced a modest $55 million of loan payoffs. As referenced in Jim Flynn's earlier remarks, approximately $31 million of these payoffs were within LMF. And although these principal repayments were eligible for reinvestment into new loan assets, after much deliberation and with the understanding that the portfolio currently in a transitory phase as we work to line up new secured financing sources. Our team made the prudent executive decision to intentionally partially pay down a portion of the LMF bonds in order to provide us additional cushion in satisfying the over collateralization test as required by the LMF indenture. As of March 31, our portfolio consisted of 61 floatin,g 1 floating rate note loans with an aggregate unpaid principal balance of approximately $1 billion. 100% of the portfolio was indexed to one month so far, and 92% of the portfolio was collateralized by multi-family properties. As of the end of the first quarter, our portfolio had a weighted average note floating rate of sulfur plus 355 basis points. And an un amortized aggregate purchase discount of $3 million. The weighted average remaining term of our book as a quarter end was approximately 40 months, assuming all available extensions are executed by our borrowers. As of March 31, approximately 60% of the loans in our portfolio were risk rated at 3% or better compared to 64% in the prior quarter. A waiting average risk rating quarter on quarter remained flat at 3.5%. We had seven loan assets risk rated five, with an aggregate principal amount of approximately $108 million. For approximately 11% of the unpaid principal balance of our investment portfolio. One was a $15 million loan collateralized by two multi-family properties in Philadelphia, Pennsylvania. This loan The asset was risk graded five due to monetary default. During Q1, the company recognized approximately 300,000 of cash received from the borrower as a reduction in our carrying basis of this loan. Another 5 risk rated assets was a $20 million loan collateralized by multi-family property in Orlando, Florida. That was a monetary default. During Q1, the company recognized approximately $400,000 in interest from this loan. The third, 5 risk rated assets was a $15 million loan collateralized by a multi-family property in San Antonio, Texas that was in technical default. This asset was foreclosed on within the 2021 FL1 CLO structure subsequent to quarter end. The fourth 5 risk rated asset was a $10.5 million loan collateralized by a multi-family property in Colorado Springs, Colorado, that was in monetary default. The fifth. By risk graded asset was an $11.5 million loan collateralized by a multi-family property in Houston, Texas, that was a monetary default. The 6th 5 risk rated asset was a $24.5 million loan collateralized by a multi-family property in Clarkston, Georgia that was in monetary default. And finally, the seventh 5 risk rated asset was a $12 million loan collateralized by a multi-family property in Cloti, Michigan that was in monetary default. During the first quarter, we were successful in achieving positive outcomes on two of the six assets that were 5 risk rated as of December 31. These included a $32 million loan collateralized by a multi-family property in Dallas, Texas, and a $6 million loan collateralized by multi-family property in Orlando, Florida. In one of these cases, Our loan was assumed and approximately $2 million of our loan principal was paid down by the new borrower sponsor. In the other case, we provided a three month forbearance and agreed to extend the loan until November. Monthly debt service payments on our loan have since resumed as anticipated. We had not previously recorded any specific reserves on either of these two resolved assets. We diligently continue to engage with our loan borrowers and seek constructive resolutions with respect to our more challenged credit. We expect to proactively explore all strategies available to us, and we remain confident that the deep experience of our asset management team and broad capabilities of our manager and its affiliates will allow us to take advantage in whatever steps are necessary to preserve and recover recovery values. We expect to leverage our experienced asset management team to maximize recovery through modifications, foreclosure, and potential RAO operation. As we move through these resolutions, we may provide non-market financing to experience sponsors to maximize expectations for repayment. And with that, I will pass it back to Jim Flynn for closing remarks and questions. James Flynn Thank you, Greg. I'd like to thank everyone for joining and appreciate your time and interest in the platform. I look forward to answering some questions and we'll ask the operators to open the line. Operator (Operator Instructions) Jason Weaver, Jones Trading. Jason Weaver First, can you talk about what you're seeing? Can you characterize the pipeline today as well as a follow up? Is there a level of net originations that you need to see through the rest of the year to maintain the current dividend capacity? James Flynn Well, the second question, frankly, is, related more to payoffs, and there's not, I wouldn't put it as we have assets that we could put into, that have been recently originated at Lument and continue to originate so we have to, we'll have assets to deploy into LFT when there's capacity. So, there's not -- I'm not really concerned at an origination level now if volatility continued in the way that we've seen over the past, 45, 60 days, that would likely reduce the opportunities from where they, where we think they will be, but I don't think it dries up like we've seen in various points over the last couple of years. So from an origination standpoint, I think we're in pretty good shape. You know whether it's whether we need a couple $100 million or $500 million, I think we'll be able to have the assets to replenish LLT as needed. In terms of the the types of opportunities we're seeing on the origination side, continue to see there, there's, attractive assets at the, on the lease up level, new construction, new assets, those are certainly most desirable, from a credit standpoint, they tend to be priced tighter, as we've seen, relatively high competition for those assets. I would say a modest slowdown in, recapping and bridge to bridge, type of deals that we've seen a little bit more of over the last couple of quarters, that largely traps with kind of what we've seen in our own portfolio, those have, there's some for the right sponsor in the right market, you can achieve a premium there. But definitely seeing a little slowdown on that side, on the construction and lease up continue to see those opportunities. But as I stated in my remarks, deliveries have been on the decline, relative decline, and so over time those opportunities will start to decrease, but I do think we'll see some turnover in, the wall of maturity that we've been talking about now for two or three years, we're going to see some resolutions and I think opportunities for reinvestment into assets by new sponsors. Operator Steve Delaney with Citizens GMP. Steve Delaney I'm interested in your comments about financing. Now you mentioned obviously looking at the CLO market, which has been your sort of traditional vehicle for your semi-permanent financing on the portfolio, but I picked up in your tone, Jim, that there are other financing options out there. Whether it's private credit, whether it's banks that might give you a more custom or flexible inter interim type of facility. Did I hear, am I on the right track there that there might be something to do before you do your next CLO. James Flynn Yeah, I think, yes, there are definitely opportunities in the market. Really both from banks and private credit, obviously the bank providers are more closely structured, like traditional warehouses with some different terms, duration and, some flexibility on what, how long assets can stand in the line, those types of things, which makes them, more attractive than a traditional kind of repo. So, we're definitely looking at both, as you say, potentially as they're an interim step. And likely something that we would want to keep permanently to maintain flexibility if we can achieve the right flexibility there. The CLL market broadly is still remains. The most attractive financing in our opinion for, floating rate multifamily assets. Occasionally we've seen the capital markets being disrupted either through lack of or no availability of on the investor side or, gapping on the bond spreads. But today, we've seen continued interest. I know you've seen several deals here in the market in the last couple of weeks, that in our opinion, have either price kind of in line with where we might expect or in some cases, talks of maybe even better than we expected, and that suggests that there's a lot of capital on the sideline looking to get into the, deploy into the CLO space. So it's hard to replace a permanent vehicle like a C securitization, so that will continue to be our primary focus, but I do think there are a lot of not saying there are a lot of providers that are offering, alternatives and flexibility and look, this is a derivative of the market continuing to extend loans, business plans taking longer, new sponsors happening into older deals, those types of things have provided an opportunity to to lenders on the back leverage side to, offer some competing financing to the traditional securitization market. Jason Weaver Understood and appreciate those comments, and just as far as your problem loans that are under, asset management, seven loans, $180 million, can you comment if there's any, those things take each one is a different story, right, different borrower, but you, as far as and you may have new fi loans or by the end of the year, it's a fluid process, but are there. Is the market such and your relationship with these borrowers, do you anticipate, do you have any near term resolutions, say, between now and the next three to six months, do you think some of these will be resolved and go away, or is it more a matter of just incremental increases in the 5 rated bucket until we see a major, a a larger turnaround in the market. James Flynn I would, I would answer that. I would say one, there's certainly, possibility of, and personally I do see the potential there for there to be resolutions in the next three to six months as we've seen over the past several quarters. We've continued to have those, so do I think that that is a real possibility? Yes, I do. However, as the market has been, it's been choppy and sponsorship is really a key. The common theme that we've seen among assets obviously business plans didn't pan out the way that people thought that's clear, but in many cases due to. What happened with the timing of acquisitions and expectations around rental growth not achieving those even if there was some positive growth. But what we've seen. In the, but these assets that we're talking about here even in prior quarters is typically a sponsor just basically coming to the conclusion either voluntarily or often involuntarily that they don't have the capital to, improve the asset in a way that is, the most ideal situation, and so. When that happens, the lack of investment into these assets, particularly those of older vintage, deterioration happens quickly. So, the way that we envisioned potential outcomes in those situations is for us to gain control of the asset either directly or bringing in a new sponsor that is a known quantity of ours, potentially providing. Incremental capital, maybe non-market financing to a quality sponsor, which would allow for the asset to go from where it is today in this deteriorating kind of, The property condition and general performance is something that has a greater value. So that's really the strategy here. In terms of, as our portfolio has generally been declining as we deleverage and maintain liquidity. So the what I'll call the legacy portfolio, the number of opportunities for problem assets continues to decline as we work through those that are struggled, so struggling. So, whether it's this quarter or very soon, we feel like You can see the shift in the market where you're going to start to see, I think a, not just at LFT but more broadly, a lot more resolutions to some of these assets that have remained outstanding for longer than, lenders or sponsors anticipated. Jason Weaver Got it. Interesting. Well, I appreciate those insights into market conditions that we can't observe from our sea. James Flynn I see. Operator (Operator Instructions) Christopher Nolan, Ladenburg Thalmann. Christopher Nolan Following up on Steve's questions on the rise in cruel's, is this a cash flow issue for the sponsors where the property is simply not generating enough Oh A fo to cover the interest. James Flynn It is a cash flow broadly speaking, meaning I think it's true at the asset, but it's also true in the sponsor kind of investing in the property, in that cycle, I want, that's not universal but as a broad. A broad comment, that's a bad cycle because as you don't reinvest in the asset, your cash flow deteriorates even further, your operations decline further, and that's, that is the challenge, that many of these sponsors face and as a lender, and our, we have a very experienced and seasoned team around, workout resolutions and also REO management. But if we don't control the asset, that we continue to see that decline if there's not reinvestment going into the property. So it is a, some combination of cash flow and management and it's, I won't say it's a chicken and egg, exactly, but there's certainly a correlation there. Obviously the assets were generating significantly more cash flow, the management would likely be better or certainly, if it weren't, it would be certainly masked. Christopher Nolan Okay, well On the March 20 call that you guys had for the fourth quarter, you use terms like strong sponsors, fundamentals remain strong, constrained supply, robust demand, resilient rent trends. And given the rise non accruals, it doesn't sound like that's the case. Am I wrong or what? James Flynn Well, I No, I think that is true in the market and I think on average it is true in our portfolio, on a couple of these assets, we've had. Sponsors not follow through on some of their stated Goals and intentions at the asset and from, as I said in evaluating these deals if sponsors decide that they're going to not continue to support the asset in the way that they have historically, that deterioration can happen very quickly. And on a couple of these, we think that's a part of the issue. We also feel that well the values today and the reserves are appropriate that, we are looking at. Scenarios that we think should be, should have been better managed by a sponsor, and we think that we or someone else could do a better job. Operator There are no further questions at this time. I would like to turn the call over to Jim Flynn for closing remarks. James Flynn I just want to thank everyone for continuing support of LFT and joining us today, and we look forward to speaking again next quarter. Thank you all. Operator Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
