Jason Weaver

Jason Weaver asked if Ellington Financial expects a wider range on intra-quarter recourse leverage and an acceleration of securitization activity due to increased financing flexibility. He also requested details on the reinvestment period for the new RTL securitization structure.

Answer

J.R. Herlihy, CFO and Treasurer, confirmed that intra-quarter leverage fluctuates and that securitization activity is currently ahead of 2025's pace. Larry Penn, President and CEO, added that higher warehouse loans and leverage could occur temporarily if securitization spreads widen. Penn and Herlihy clarified that the new RTL securitization is a revolver with a two-year reinvestment period, enhancing financing efficiency.

Jason Weaver asked if CTO has begun discussions regarding the 20% of base rent from leases expiring in 2028, and the potential for FFO growth from these expirations.

Answer

President and CEO John Albright highlighted that many of these leases are below market, and tenants are likely to exercise renewal options. He noted that even without active intervention, the portfolio's current setup allows for organic earnings growth through mark-to-market opportunities.

Jason Weaver asked about the relative merits and target preferences among grocery-anchored, lifestyle, and power centers for acquisitions, as well as their market availability. He also inquired about any early discussions or opportunities for FFO growth stemming from the 20% of base rent with leases expiring in 2028.

Answer

President and CEO John Albright characterized grocery-anchored centers as lower-yielding and slower-growth, lifestyle centers as fantastic but more expensive to operate, and power centers as stable with higher growth and less CapEx. He stated that CTO Realty Growth is not chasing grocery-anchored centers due to low yields but is actively looking at lifestyle and power centers, often finding future grocer opportunities within them. Albright noted that many expiring leases are below market, and tenants are likely to renew, positioning the company for earnings growth without needing 'anything special.'

Jason Weaver asked about Seven Hills Realty Trust's strategy for identifying pockets of inefficiency and attractive opportunities beyond traditional multifamily assets, given the heightened competition in the commercial real estate lending space.

Answer

Jared Lewis, VP, explained that while multifamily is liquid, it often leads to a 'race to the bottom' on yields. Seven Hills leverages its platform's breadth to find better risk-adjusted opportunities in sectors like storage, industrial, and medical office. Tom Lorenzini, President and Chief Investment Officer, added that the company remains focused on senior secured positions and is not currently evaluating junior tranches like mezzanine or preferred equity.

Jason Weaver asked about Seven Hills Realty Trust's strategy for identifying inefficient market pockets and diversifying its loan portfolio beyond traditional multifamily and industrial sectors, given the current competitive landscape. He also inquired about the company's interest in exploring junior tranche opportunities outside of its primary first lien focus.

Answer

Jared Lewis, VP, explained that while multifamily is liquid, it often leads to a 'race to the bottom' in yields. Seven Hills leverages its platform's breadth to find attractive risk-adjusted opportunities in sectors like storage, industrial, and medical office. Tom Lorenzini, President and Chief Investment Officer, clarified that the company's current focus remains on senior secured positions, not junior tranches like mezzanine or preferred equity.

Jason Weaver of Jones Trading inquired about the feasibility of reaching the $700 million year-end portfolio target, the required origination volume for the second half of the year, and how the sustainability of the new $0.28 dividend depends on achieving this target. He also asked about the most attractive current investment opportunities and the competitive landscape.

Answer

President & CIO Thomas Lorenzini clarified that reaching the $700 million target depends on the timing of loan repayments, with a baseline of approximately $90 million in new originations plus more if repayments occur. CFO & Treasurer Matthew Brown and Lorenzini both affirmed confidence in the new dividend's sustainability for at least 12 months, noting that if repayments slow, the higher-yielding legacy loans remaining on the books would support earnings. Vice President Jared Lewis added that while the multifamily and industrial sectors are competitive, Seven Hills finds attractive yields in smaller, middle-market transactions and niche sectors like medical office.

Jason Weaver from Jones Trading asked for clarification on the relationship between the projected $700 million year-end portfolio size, the required origination volume, and the sustainability of the newly reduced $0.28 dividend. He also inquired about the most attractive current investment opportunities and the competitive landscape.

Answer

President & CIO Thomas Lorenzini explained that achieving the $700 million portfolio target is dependent on the pace of loan repayments, noting that slower repayments would mean lower origination needs but would also support the dividend with higher-yielding legacy loans. CFO & Treasurer Matthew Brown affirmed confidence in the new dividend's sustainability for at least 12 months. Vice President Jared Lewis identified multifamily and industrial as active sectors, acknowledging intense competition and stating that Seven Hills focuses on smaller, middle-market deals and niche sectors like medical office to achieve attractive risk-adjusted returns through flexible financing.

Jason Weaver asked about the status of discussions with lenders, current all-in borrowing costs, and whether Seven Hills was modifying its underwriting standards to pursue market share amid competitive pressures.

Answer

Jared Lewis, Vice President, stated that lenders remain supportive and borrowing costs have been held steady, with new underwriting targeting the SOFR plus 2% range. Thomas Lorenzini, President and Chief Investment Officer, confirmed that the company is not altering its underwriting approach, emphasizing a commitment to credit discipline over pursuing market share.

Jason Weaver inquired about the specifics of the loan pipeline, including the Boston hotel deal, and asked for details on upcoming loan maturities in Q4 and Q1, including any pending extensions or refinancings. He also questioned if the company had considered investing its cash in securities as a temporary measure.

Answer

Thomas Lorenzini, President and Chief Investment Officer, detailed the status of four upcoming office loan maturities, noting that two are being extended, one is expected to be refinanced by the borrower, and another borrower has indicated they will extend. Regarding the use of cash, Lorenzini stated that while they have discussed purchasing securities, the current pipeline is significant enough that they prefer to hold the capital to fund new loans.

Jason Weaver noted that Alpine's acquisition and disposition guidance for 2026 is significantly lower than 2025, despite a growing capital base. He asked if this reflects conservatism, market hesitancy, or other factors. He also sought insight into the expected funding mix for new investments and unfunded commitments, specifically the combination of ATM draws versus credit facility drawdowns.

Answer

President and CEO John Albright explained that the lower guidance reflects a desire for a comfortable cadence, avoiding being forced into commodity assets, and focusing on curating a super strong portfolio. Regarding funding mix, John Albright indicated that the past mix, involving recycling non-core assets, natural loan maturities, and a modest use of the ATM and credit line, would likely be reflective of future activity.

Jason Weaver questioned the significantly lower acquisition and disposition guidance for 2026 compared to 2025, despite Alpine's growing capital base, asking if it reflects conservatism, market hesitancy, or other factors. He also sought insight into the expected funding mix for new investments and unfunded commitments, including the use of ATM draws versus credit facility drawdowns.

Answer

President and CEO John Albright explained that the lower guidance reflects a desire for a comfortable cadence, avoiding being pressured into acquiring less desirable 'commodity assets,' and focusing on curating a high-quality portfolio. Regarding the funding mix, John Albright indicated that the past approach of recycling non-core credits, utilizing maturing loans, and a modest mix of ATM and credit line draws would likely continue, with CFO Philip Mays concurring.

Jason Weaver inquired about Invesco Mortgage Capital's year-to-date capital investment strategy, specifically if they continued rotating down in coupon, and the perceived trade-off between elevated prepayment risk and current positioning in 5.5% and 6% pools. He also asked for an updated estimated book value.

Answer

Brian Norris, CIO, explained that future purchases are likely to be lower in the coupon stack (belly and lower coupons) due to the administration's focus on housing affordability and attractive TBA dollar roll market in those coupons, rather than selling existing higher coupon allocations. Mr. Norris also stated that the book value was up approximately 4.5% year-to-date through Wednesday.

Jason Weaver inquired about Invesco Mortgage Capital's year-to-date capital deployment strategy, specifically if they continued rotating down in coupon, and the trade-offs between elevated prepayment risk and positioning in 5.5% and 6% pools. He also asked for an updated estimated book value.

Answer

CIO Brian Norris indicated that future purchases are likely to be lower in the coupon stack (belly and lower coupons) due to the administration's focus on housing affordability and attractive TBA dollar roll market in those coupons. He also confirmed that the book value was up approximately 4.5% year-to-date through Wednesday.

Jason Weaver of Jones Trading asked about the relative risk versus reward in high coupon Agency RMBS given prepayment exposure, and the firm's comfort level with its current leverage.

Answer

Chief Investment Officer Brian Norris explained that wider spreads on higher coupons cushion prepayment risk, and the firm's focus on specified pools offers protection. He stated they are comfortable with the current, slightly lower leverage level, as attractive ROEs cover the dividend without needing to add risk amidst policy uncertainty.

Jason Weaver asked for a comparison of the current investment opportunity in Agency MBS versus the peak in October of last year and questioned the strategy behind reallocating specified pool exposure from low loan balance to credit-constrained collateral.

Answer

Brian Norris, CIO, stated that while spreads are attractive and consistent with previous widening episodes, the team is more conservative on leverage now due to the risk of delayed monetary policy adjustments. Regarding specified pools, he explained the rotation is driven by several factors: low loan balance pools are fully priced, credit-constrained borrowers may prepay slower in an economic slowdown, and it helps maintain a lower payout profile as they rotate into higher coupon securities.

Jason Weaver asked if the increased allocation to Agency Commercial Mortgage-Backed Securities (CMBS) would allow the company to support higher leverage targets in the future.

Answer

CIO Brian Norris confirmed that to the extent exposure to rate volatility declines due to the CMBS allocation, it could allow for increased leverage. CEO John M. Anzalone added that Agency CMBS has similar borrowing costs and haircuts to agency mortgages, so it does not negatively impact leverage from a financing perspective.

Jason Weaver from Jones Trading inquired about the financing costs for investor jumbo and agency-eligible deals, and whether PennyMac Mortgage Investment Trust would consider re-securitizing any legacy deals. He also asked about the correspondent channel's origination capacity under potential new affordability initiatives.

Answer

David Spector, PennyMac Mortgage Investment Trust's Chairman and Chief Executive Officer, described a robust and competitive financing market, noting the implementation of a new facility without a mark-to-market feature for risk management. Regarding origination capacity, Spector indicated ample system capacity for a $2.4-$2.5 trillion market, but significant demand from programs like streamlined refi would require increased capacity.

Jason Weaver asked about the financing costs for investor jumbo and Agency-eligible deals, potential re-securitization of legacy deals, and the correspondent channel's origination capacity under increased demand from affordability initiatives.

Answer

David Spector, Chairman and CEO, highlighted a robust and competitive market for financing, noting the implementation of a facility in Q4 without a full mark-to-market feature to manage risk. He indicated that the industry, including PMT's correspondents, has significant capacity for a $2.4-$2.5 trillion market, partly due to prolonged expectations of rate declines. However, a dramatic increase in refinance activity, such as a streamlined refi program, would likely outstrip current capacity, requiring expansion.

Jason Weaver from Jones Trading asked for an update on the potential for GSE privatization, the future of credit risk transfer (CRT), and the execution levels, such as advance rates, on recent securitizations.

Answer

David Spector, CEO & Chairman, responded that there is little discussion about GSE reform in Washington D.C. and that a return of the lender CRT program is unlikely. He emphasized that the company's non-agency securitization program creates comparable, high-return investments and has helped revitalize the private label market, which he described as the most robust in over 18 years. He confirmed execution beats agency levels but did not provide specific spread details.

Jason Weaver from Jones Trading asked for an update on the potential for GSE privatization and the future of credit risk transfer (CRT). He also inquired about the execution levels, such as AAA spreads and advance rates, on PMT's recent securitizations.

Answer

CEO David Spector responded that there is little discussion in Washington D.C. about GSE reform and he does not see lender CRT returning soon. He highlighted the non-agency securitization program as a strong alternative for creating comparable investments with mid-teen returns. While declining to provide specific execution spreads, Spector emphasized that the execution beats agency levels materially and described the current private label market as the most robust in over 18 years.

Jason Weaver of JonesTrading asked for an update on capital allocation priorities between credit-focused and interest rate-sensitive strategies, and also inquired about the visibility for Q2 correspondent volumes.

Answer

Chairman & CEO David Spector stated he is pleased with the current capital allocation, emphasizing the importance of growing the credit-sensitive strategy via securitizations while also replenishing the interest rate-sensitive portfolio to avoid runoff. EVP & CFO Daniel Perotti projected an increase in correspondent activity in late April and May as locked loans fund, while noting the overall market remains centered on a volatile, rate-dependent $2 trillion origination forecast.

Jason Weaver from JonesTrading asked about the impact of a steepening yield curve on PMT's earnings power and whether this changes the calculus for the dividend policy. He also inquired about potential shifts in equity allocation towards credit-sensitive strategies given the changing monetary policy.

Answer

Executive Daniel Perotti explained that a de-inverting yield curve enhances earnings power in interest rate-sensitive strategies, pushing the run rate towards the $0.40 per share level, which supports the company's stable dividend narrative. Executive David Spector added that there is a significant opportunity to increase investment in credit-sensitive assets, particularly through private label securitizations of investor and second home loans, which PMT is actively pursuing.

Jason Weaver asked about the appropriate size of the portfolio given the company's significant growth and current opportunity set, the forward run rate for G&A expenses, and the new corporate development capabilities.

Answer

T.J. Connelly, Chief Investment Officer, indicated that the opportunity set is growing dramatically, allowing for significant alpha generation even with a larger portfolio. Smriti L. Popenoe, Co-Chief Executive Officer and President, emphasized the benefits of scale for resilience and the shift to an environment requiring more clever portfolio management. Rob Colligan, Chief Financial Officer, confirmed that the Q4 G&A bump was due to incentive compensation, projecting a G&A run rate in the 2% of capital range for 2026, with potential for further reduction with additional growth. Popenoe explained that corporate development capabilities are being built to evaluate all types of strategic opportunities and investment options, creating flexibility for shareholders.

Jason Weaver questioned the appropriate size of the portfolio given the company's significant growth and the current opportunity set. He also asked about the forward run rate for general and administrative (G&A) expenses following an increase in Q4, and sought elaboration on the newly mentioned corporate development capabilities.

Answer

T.J. Connelly, CIO, stated that the opportunity set is growing dramatically, allowing the company to be significantly larger while still generating alpha. Smriti L. Popenoe, Co-CEO and President, added that continued growth enhances resilience and strategic flexibility, noting a shift from a 'beta environment' to one requiring more clever portfolio management. Robert Colligan, CFO, confirmed the Q4 G&A increase was due to incentive compensation accruals from strong 2025 performance, projecting G&A to remain around 2% of capital for now, with potential for further reduction with additional growth. Smriti L. Popenoe explained that corporate development capabilities are about evaluating all types of opportunities to deliver scale and strategic flexibility, creating options for shareholders.

Jason Weaver from JonesTrading asked for perspective on the current investment opportunity, balancing high ROE potential from wide spreads against a volatile interest rate backdrop, and also inquired about the pace of capital deployment since the end of Q1.

Answer

Chief Investment Officer Terrence Connelly acknowledged the significant ROE opportunity and stated that diversification across the coupon stack and into Agency CMBS helps manage volatility. Co-CEO and President Smriti Popenoe clarified that the recent leverage increase from 7.4x to 7.8x was entirely due to a book value decline, not new capital deployment.

Jason Weaver asked how portfolio performance would differ in the current bull steepening environment compared to a scenario with a general moderation of yields across the curve.

Answer

Co-CEO Smriti Popenoe responded that the portfolio is constructed to perform well in steep yield curve scenarios, as detailed in their earnings presentation (Slide 24). She noted that the mortgage market generally benefits from a steeper curve due to the opportunity to earn carry, and that the team has been actively locking in attractive forward financing costs.

Jason Weaver with JonesTrading Institutional Services inquired about Orchid Island Capital's potential changes to overall risk positioning, specifically regarding increased leverage, given consistent leverage, higher liquidity, and positive macro developments like lower volatility. He also asked about the upside potential for payouts from high coupon specified pools, especially with growing refinancing momentum.

Answer

Chairman and CEO Robert Cauley explained that leverage could increase if the Federal Reserve continues rate cuts and rates remain low, allowing them to lock in lower funding. However, if the economy strengthens, they would prioritize protection from rate sell-offs and extension. He also noted that payouts have increased due to changes in the TBA market, and while they've added call protection, they aren't paying for the highest quality. Chief Investment Officer, CFO and Director Hunter Haas added that they focused on buying higher quality stories in the first discount space when rates were higher, which should perform well in a rally.

Jason Weaver asked about Orchid Island Capital's potential changes to overall risk positioning, specifically regarding increased leverage, given consistent leverage, higher liquidity, and lower volatility. He also inquired about the upside potential for payouts on high coupon specified pools, especially with growing refinancing momentum.

Answer

Chairman and CEO Robert Cauley explained that if the Fed continues to cut rates and they remain low, Orchid might increase leverage after locking in lower funding costs. Conversely, if the economy strengthens, they would focus on protecting the portfolio from rate sell-off impacts rather than increasing leverage. Robert Cauley and CIO Hunter Haas discussed that payouts have recently increased due to market dynamics, but Orchid acquired most specified pools earlier in the quarter, benefiting from subsequent tightening. They noted the portfolio's average price is over $101 with a 33-tick average payoff, achieving good performance without extremely high payouts, and don't anticipate a return to 2020/2021 payout levels.

Jason Weaver of Jones Trading inquired about Orchid Island's recent capital raise, its stance on raising additional capital given the current ROE opportunities, the premium risk associated with its high-coupon mortgage pools, and the quarter-to-date book value.

Answer

Robert Cauley, Chairman, President & CEO, stated that future capital raises depend on the stock price, ideally at or above book value. He estimated current ROEs are 16-16.5%, with potential to reach 18%. Regarding premium risk, he noted their view is for rates to remain higher for longer and that they focus on lower pay-up pools. Hunter Haas, CFO & CIO, added that their specified pools have unique stories mitigating risk and are balanced by discount coupon holdings. Cauley concluded by stating the quarter-to-date book value was down approximately 3 cents per share.

Jason Weaver asked for clarification on post-quarter-end hedging activities, specifically regarding longer-dated swaps, and requested the latest quarter-to-date book value estimate.

Answer

Executive Robert Cauley clarified that the company unwound longer-duration assets, primarily discounts, which required unwinding only two swaps. He then provided a quarter-to-date book value estimate of $7.28 per share as of the previous night, representing an 8.3% decline. Cauley also detailed the total return for the quarter-to-date, which was -6.8% after accounting for the dividend accrual.

Jason Weaver inquired about the incremental risk to MBS spreads if the Federal Reserve shifts to a holding pattern or a more hawkish stance, and how a resulting flight-to-quality scenario might impact the market.

Answer

Executive Robert Cauley responded that a hawkish turn would likely trigger a spike in volatility and a sell-off in long-end rates, which is generally detrimental for mortgages in the short term. He noted that Orchid is positioned for this 'bear steepening' risk with its barbell strategy of hedging shorter-duration, higher-coupon assets with longer-duration instruments. While a flight-to-quality would be painful initially, a settled, steeper curve environment would ultimately present a very attractive investment opportunity.

Jason Weaver asked if the portfolio's shift towards higher-coupon mortgages reflects a view of sustained high benchmark rates and how this impacts the barbell strategy. He also inquired about the reduction in the hedge ratio and the firm's risk appetite heading into a volatile year-end.

Answer

Executive Robert Cauley stated the up-in-coupon bias reflects an asymmetric outlook where rates are more likely to rise than fall significantly. Executive George Haas added that lower coupons are retained for their positive performance in a potential rally. Haas explained the hedge ratio change was a tactical fine-tuning, not a core strategy shift, and that they expect volatility to remain elevated due to economic data uncertainty and the upcoming election.

Jason Weaver asked about the expected pace of non-agency lock volume and securitization issuance towards year-end, and inquired about the potential influence of President Logan's proposal to shift the Fed's primary policy tool to target tri-party repo.

Answer

Mike Fania, Co-Chief Investment Officer and Head of Residential Credit, noted that non-QM market penetration continues to grow, with September being their most active month for locks, and projected $65-$70 billion in non-QM issuance for the year. Ken Adler, Head of Mortgage Servicing Rights, clarified that President Logan's comments reflect the Fed's evolving view on better indicators for financing rates, not a policy shift.

Jason Weaver asked about the expected pace of lock volume and securitization issuance for non-agency credit into year-end, and the potential influence of the Fed shifting its policy tool to target tri-party repo.

Answer

Mike Fania, Co-Chief Investment Officer and Head of Residential Credit, noted that non-QM market penetration continues to grow, with securitization volumes expected to reach $65-$70 billion for the year. Ken Adler, Head of Mortgage Servicing Rights, clarified that President Logan's comments reflect the Fed's evolving view on financing rates, not a policy shift.

Jason Weaver of JonesTrading asked where Annaly sees the most attractive opportunities for capital deployment and requested details on the recent home equity securitization transaction.

Answer

CEO David Finkelstein stated that the marginal dollar is currently being allocated to the Agency sector due to wider spreads and attractive returns, while MSR growth remains opportunistic. Co-CIO Michael Fania detailed the successful inaugural HELOC securitization, noting it priced accretively and attracted new floating-rate investors to the platform, demonstrating liquidity for the asset class.

Jason Weaver of JonesTrading asked about the current relative attractiveness for capital deployment across Annaly's business segments and for insights from the recent home equity securitization transaction.

Answer

CEO David Finkelstein stated that the marginal dollar is currently being allocated to the Agency sector due to wider spreads, while MSR growth remains opportunistic. Co-CIO Michael Fania detailed the success of the inaugural HELOC securitization, noting it priced tightly and attracted new floating-rate investors to the platform, providing an accretive source of term funding.

Jason Weaver asked about the potential implementation of GSE deregulation to reduce borrower rates and the reasons behind the recent decrease in the hedge ratio.

Answer

CEO Scott Ulm discussed the various levers the administration could pull regarding GSE deregulation, balancing lower mortgage rates with making GSEs an attractive investment proposition. Co-Chief Investment Officer Desmond Macauley explained that the hedge ratio adjustments are primarily to manage duration across the entire curve, aiming for a balanced view with a bias towards Fed easing and maintaining a flat position in the back end of the curve.

Jason Weaver from JonesTrading asked CEO Scott Ulm about potential implementation details of GSE deregulation aimed at reducing borrower rates, such as changes in LLPAs or underwriting guidelines. He also inquired if the recent decrease in the hedge ratio from Q2 was due to timing or increased confidence in Fed easing.

Answer

CEO Scott Ulm acknowledged various levers the administration could pull, balancing lower mortgage rates with making GSEs attractive for a potential capital raise. Co-Chief Investment Officer Desmond Macauley clarified that the hedge ratio adjustments are dynamic, aimed at managing duration across the curve, with a current net duration of 0.2 and a bias towards Fed easing.

Jason Weaver from JonesTrading inquired if the actual returns on the $2 billion of recently deployed capital matched the stated 18-19% ROE target and asked about the primary risk factors for MBS spread widening.

Answer

CEO Scott Ulm confirmed that recent capital deployments have successfully achieved the targeted 18-19% ROE. He then identified several key risks for spread widening, including geopolitical events, headline risk from potential GSE reform, ongoing fiscal policy issues, Treasury supply, and the evolving inflation narrative.

Jason Weaver of Jones Trading asked about CLO issuance trends and the potential for a reversal by year-end. He also sought clarification on the perceived risk-return profile of CLO mezzanine versus equity tranches, particularly in light of tariff uncertainty, and requested an updated quarter-to-date NAV.

Answer

Portfolio Manager Gregory Borenstein stated that a revival in new CLO issuance is uncertain and depends on the arbitrage between asset and liability spreads, noting the recent market has favored resets and refinancings. He explained that equity tranches carry more risk from tariff-induced dispersion as they are first-loss positions, while mezzanine debt is better insulated from a small number of credit events. CEO Laurence Penn provided the updated NAV estimate for July 31, 2025, as $6.16 per share, plus or minus three cents.

Jason Weaver of Jones Trading asked about the outlook for CLO issuance trends for the remainder of the calendar year, the perceived risk difference between CLO mezzanine and equity tranches given tariff uncertainty, and requested an updated quarter-to-date NAV estimate.

Answer

Portfolio Manager Greg Borenstein noted that a rebound in new CLO issuance is uncertain and depends on whether the arbitrage between asset and liability spreads becomes more attractive. He clarified that CLO equity carries more risk from tariffs as a first-loss position, making mezzanine debt more insulated from smaller, tail-risk credit events. CEO Larry Penn provided the updated July 31 NAV estimate of approximately $6.16 per share.

Jason Weaver of Jones Trading asked about CLO issuance trends and the potential for a reversal by year-end. He also sought clarification on the relative value between CLO mezzanine and equity, particularly concerning increased risk to equity from tariffs, and requested an updated quarter-to-date NAV estimate.

Answer

Portfolio Manager Gregory Borenstein stated that a rebound in new CLO issuance is uncertain and depends on the arbitrage between loan assets and debt liabilities becoming more attractive. Regarding risk, he explained that CLO equity has more exposure to tariff-driven dispersion as the first-loss tranche, whereas mezzanine positions are better insulated from a small number of credit losses. CEO Laurence Penn provided the updated NAV estimate for July 31, 2025, as $6.16 per share.

Jason Weaver of Jones Trading asked about the outlook for CLO issuance for the remainder of the year, sought clarification on the perceived risks to CLO equity tranches from tariffs, and requested an updated quarter-to-date NAV estimate.

Answer

Portfolio Manager Gregory Borenstein stated that a rebound in new CLO issuance depends on the arbitrage becoming more attractive, potentially through monetary easing, but the market is currently focused on resets and refis. He confirmed that tariff uncertainty creates dispersion, posing a greater risk to first-loss equity tranches than to more senior mezzanine positions. CEO Laurence Penn provided the updated NAV estimate for July 31, 2025, which was in a range around $6.16 per share.

Jason Weaver of Jones Trading asked about the outlook for CLO issuance trends for the remainder of the calendar year, sought clarification on the perceived risk in CLO equity versus mezzanine tranches due to tariffs, and requested an updated quarter-to-date NAV estimate.

Answer

Gregory Borenstein, Portfolio Manager, stated that new CLO issuance is difficult to predict and is dependent on the arbitrage between asset and liability spreads, with the market currently focused more on resets and refis. He clarified that CLO equity carries more risk from tariffs as a first-loss position, whereas mezzanine tranches are better insulated from a small number of credit losses. CEO Laurence Penn provided the updated July 31 NAV estimate of approximately $6.16 per share.

Jason Weaver from Jones Trading asked about the outlook for CLO issuance trends for the remainder of the year, sought clarification on the perceived risk in CLO equity versus mezzanine tranches due to tariffs, and requested an updated quarter-to-date NAV estimate.

Answer

Gregory Borenstein, Portfolio Manager, stated that a reversal in CLO issuance trends is hard to predict and depends on the new issue arbitrage becoming more attractive. He clarified that CLO equity carries more risk from tariffs as a first-loss tranche, while mezzanine positions are better insulated from a small number of credit losses. Laurence Penn, CEO, provided the July 31 NAV estimate, which was a range around $6.16 per share.

Jason Weaver of JonesTrading asked about the outlook for CLO issuance trends and the potential timeline for redeploying capital from the Agency portfolio into new CLO equity once the shareholder vote is finalized.

Answer

Head of Corporate Credit Gregory Borenstein stated that he expects strong CLO issuance to continue, driven by demand for floating-rate products and favorable economics for resets. Regarding the timeline, he said they would be patient and selective, focusing on new issue CLO equity. CEO Laurence Penn added that based on the Q3 deployment of $60 million, a full rotation of capital could be achieved in a quarter or less, making a 90-day target 'very reasonable' post-vote.

Jason Weaver of Jones Trading inquired about any efficiency gains in the timeline for staffing and preparing newly activated facilities. He also asked for updates on the PayCo, Texas facility and clarification on the revenue timing for the newly acquired Farmville Detention Center.

Answer

President & COO Patrick Swindle explained that preemptive investments and planning since late 2024 have resulted in smooth and efficient activations at facilities like California City and South Texas. He noted there was nothing new to report on the PayCo facility. Swindle confirmed the Farmville acquisition closed on July 1, and its approximately $40 million in annual revenue would begin contributing immediately, with about $20 million expected in the second half of 2025.

Jason Weaver asked about the potential change in CoreCivic's margin profile if Safety segment occupancy were to increase into the low-to-mid 80% range and whether direct contracting with the U.S. Marshals Service (USMS) would remove bottlenecks.

Answer

President and CEO Damon T. Hininger estimated that margins could reach approximately 23% to 23.5% in the low-80s occupancy range, noting this is about 150-200 basis points lower than previous estimates due to the South Texas facility closure. He added that margins could increase by another couple hundred basis points in the mid-to-upper 80s. Hininger also confirmed that direct contracting would make it easier for the USMS to utilize their services. CFO David Garfinkle added the caveat that activating new facilities involves start-up costs that would initially impact margins before stabilizing.

Jason Weaver of Jones Trading asked about the distribution strategy for new transitional loans from Lima One in a lower rate environment, questioning the preference between securitization and loan sales. He also sought the rationale behind the recent $24 million sale of delinquent loans.

Answer

President & CIO Bryan Wulfsohn detailed that longer-duration rental loans are often sold to manage spread risk, while shorter-term transitional loans are typically securitized. He stated that the decision to sell delinquent loans versus pursuing a workout is a balanced one, made on a loan-by-loan basis depending on which path offers the most attractive outcome. CEO Craig Knutson added that lower rates would likely boost origination volume for the 30-year rental product.

Jason Weaver of Jones Trading inquired about the recent decline in non-variable underwriting expenses, asking for the expected run rate going forward. He also asked for any visibility into potential positive reserve development for the second half of the year.

Answer

Executive VP & CFO, Eric Martin, explained that the first quarter's expense ratio was unusually high and the current Q2 level of approximately 35% is a good run rate for the next few quarters, aided by leverage on fixed costs from growth. EVP & Chief Operating Officer, Julie Stephenson, added that while they cannot predict future reserve development, they are hopeful that the positive trends seen will continue.

Jason Weaver of Jones Trading inquired about the recent decline in non-variable underwriting expenses, asking for guidance on the future run rate. He also sought insight into the company's visibility on potential positive reserve development for the second half of the year.

Answer

Executive VP & CFO, Eric Martin, explained that the current expense ratio around 35% is a normal run rate for the upcoming quarters, following an unusually high first quarter. He noted that continued growth will provide leverage on fixed costs. Regarding reserve development, EVP & Chief Operating Officer, Julie Stephenson, stated that while current trends are favorable, the company is not in a position to predict outcomes for the second half of the year.

Jason Weaver of Jones Trading inquired about the recent decline in non-variable underwriting expenses, asking for the expected run rate going forward, and also questioned the company's visibility into potential positive reserve development for the second half of the year.

Answer

Executive VP & CFO Eric Martin explained that the Q2 expense ratio of around 35% is a normal run rate, following an unusually high Q1, and that growth will provide leverage on fixed costs. EVP & Chief Operating Officer Julie Stephenson added that while they are hopeful positive reserve trends will continue, the company is not in a position to predict second-half outcomes.

Jason Weaver from Jones Trading questioned the cause of the decline in property operating margin and asked what competitive advantages allowed BrightSpire to achieve net portfolio growth when peers have struggled.

Answer

CFO Frank Saracino attributed the margin change to the foreclosure of the San Jose hotel, which increased both property income and expenses. CEO Mike Mazzei clarified that they were actually disappointed with Q2 origination volume and do not believe they outperformed peers, citing the challenge of borrowers seeking cash-neutral refinancings, though he remains optimistic for the second half of the year.

Jason Weaver from Jones Trading Institutional Services inquired about whether macro uncertainty was causing borrower hesitancy despite a healthy pipeline and asked for the approximate levered return on equity (ROE) for the $182 million in loans originated during the quarter.

Answer

CEO Mike Mazzei explained that borrowers have a strong need to refinance existing debt, so inquiry remains high. The main headwind, he noted, is that borrowers are reluctant to inject new equity to complete a refinancing. He acknowledged a potential dip in Q2 originations due to market volatility but confirmed the pipeline is active. Mazzei also stated that the company consistently targets a 12% ROE on new originations.

Jason Weaver inquired about the drivers behind the increase in the general CECL reserve and asked for an update on the resolution path for the San Jose Hotel asset.

Answer

CFO Frank Saracino attributed the CECL reserve increase to updated inputs on specific risk rank 4 and 5 loans, not broad market deterioration. CEO Mike Mazzei addressed the San Jose Hotel, stating he was pleased with the dismissal of the borrower's bankruptcy attempt, which is a positive step for a lender. He declined to comment further on the specific resolution strategy due to the ongoing process but reiterated its importance as it constitutes one-third of the watch-list.

Jason Weaver requested more detail on the expected timelines for resolving remaining watch list loans and asked if these resolutions could lead to further releases of general CECL reserves. He also inquired about the future dividend policy, noting the company is currently over-earning the dividend and asking if this reflects better-than-expected performance.

Answer

CEO Michael Mazzei stated the company is comfortable with its current CECL level and expects a Texas multifamily loan to move to REO by next quarter. He noted that about 60% of the watch list is actionable, with the San Jose hotel loan in foreclosure. Regarding the dividend, Mazzei explained that while they covered it this quarter on a cash basis, there is a chance of "leakage" over the next 12 months depending on the pace of capital deployment. He affirmed the current dividend policy is stable for the foreseeable future.

Jason Weaver from Jones Trading asked for the company's outlook on the mortgage origination market and how it might affect their MSR appetite and the competitive landscape. He also requested a timeline for the resolution of the PRCM litigation and the value of their IP-related claims.

Answer

William Greenberg, President & CEO, stated that the origination effort remains small due to low refinance eligibility, and they are balancing cost against opportunity by using loan officers for second liens to maintain capacity. Regarding the litigation, he reiterated the prepared remarks, stating that a trial date has not been set and that he could not provide further details at this time but would update the market when possible.

Jason Weaver of Jones Trading inquired whether wide MBS spreads represent a new secular trend and asked about relative value opportunities within specified pool products.

Answer

Peter Federico, President, CEO & CIO, stated that while a new, wider trading range for MBS spreads has been established, he believes spreads are at the high end of that range. He noted that the 'do no harm' approach to GSE reform has removed a key risk. Regarding investments, he highlighted that 81% of the portfolio has prepayment protection and that AGNC favors higher coupon specified pools over TBAs due to a lack of funding advantage in the latter.

Jason Weaver asked about the characterization of the current loan origination pipeline and what level of net originations would be necessary to maintain the company's current dividend.

Answer

CEO James Flynn responded that dividend capacity is more closely tied to loan payoffs than originations and expressed confidence in Lument's ability to source new assets as needed. He described the pipeline as having attractive new construction and lease-up opportunities, a slowdown in bridge-to-bridge deals, and future opportunities from maturing loans requiring new sponsorship.

Jason Weaver asked about the visibility into the loan origination pipeline following the recent election and whether sponsors were delaying projects due to market uncertainty.

Answer

CEO James Flynn acknowledged that post-election uncertainty has caused some sponsors to pause, but he does not foresee a major slowdown comparable to early 2023, citing a still-positive economic outlook. Managing Director Zachary Halpern added that deal activity has picked up significantly since recent rate cuts, with a strong pipeline expected to close in December and into Q1.

Jason Weaver of JonesTrading inquired about reports of semi-permanent detainment facilities on military properties like Fort Bliss, whether GEO had engaged in discussions to reopen specific idle facilities, and the earliest potential timing for share repurchases.

Answer

CEO Dave Donahue clarified that the government had retracted the Fort Bliss procurement but affirmed GEO is positioned to support various capacity needs, including at its own idle facilities, which are all under active discussion with federal partners. CFO Mark Suchinski stated that share repurchases are a key goal after supporting client growth and reducing debt. He suggested the company would evaluate buybacks more meaningfully in the second half of 2025, with it becoming a 'very serious conversation in '26,' potentially accelerated by the Oklahoma asset sale.

Jason Weaver from Jones Trading asked whether the significant growth opportunities with ICE, the U.S. Marshals, and states might require expanding GEO's facility footprint, and if so, how that could impact the company's strategy regarding leverage reduction and capital returns.

Answer

Executive Chairman George Zoley responded that the company would be careful and thoughtful before expanding facilities. He noted that GEO might first re-evaluate its existing 85,000-bed portfolio across all clients (federal, state, and local) and potentially redirect contracts to meet prioritized federal needs before committing to new construction.

Jason Weaver from Jones Trading requested specifics on the recent home equity securitization, including advance rates and execution levels, and asked about the origination volume required at Arc Home to sustain its projected profitability.

Answer

CIO Nick Smith provided details on the securitization, noting advance rates of approximately 95% on the retained non-investment grade tranches with funding costs around 200 basis points over the index. He also confirmed that Arc Home is currently operating at volumes sufficient for breakeven and that the focus is now on top-line growth to drive further profitability.

Jason Weaver asked for more detail on the sourcing channels for home equity products, including the potential for Arc Home to be a source, and inquired about the company's comfort level with its current liquidity position.

Answer

CIO Nicholas Smith explained that while it's still early, sourcing comes from a wide range of entrants, and he expects the vast majority to come from nonbanks going forward. Regarding liquidity, Smith stated that the team feels comfortable with the current level of approximately $120 million and noted there is room to draw it down to enhance the firm's leverage profile.

Jason Weaver of JonesTrading inquired about discussions around GSE reform and its potential impact on the seller network, as well as the sustainability of recent reductions in G&A expenses.

Answer

CEO Christopher Abate clarified that while full GSE reform is distant, near-term advocacy focuses on curbing GSE mission creep, which would benefit Redwood's existing business. CFO Brooke Carillo explained that the Q4 G&A decline was due to lower performance-based compensation and that future expense levels will be closely tied to the profitable growth of the operating businesses.

Jason Weaver of JonesTrading asked about the quarter-end increase in leverage, seeking confirmation of its temporary nature and the current level. He also inquired about any significant developments in expanding seller partnerships.

Answer

CFO Brooke Carillo confirmed the leverage increase was a point-in-time metric and has since declined to ~2.2x following significant Q4 loan distribution. CEO Christopher Abate added that the seller base remains broadly diversified with no over-concentration, and the company continues to gain traction with bank partners, whose need for Redwood's services increases in a higher rate environment.

Jason Weaver from Jones Trading asked about the potential for an increase in the dividend payout, given the strong coverage by earnings available for distribution (EAD). He also questioned how Newrez manages its operational footprint to handle variable origination volumes.

Answer

CEO Michael Nierenberg explained that the current dividend policy, a Board decision, favors retaining capital for reinvestment at mid-teens returns to drive long-term value. Newrez President Baron Silverstein added that the company maintains significant operational headroom and flexibility, partly through offshoring, to manage volume fluctuations.

Jason Weaver from JonesTrading asked about the potential for a dividend increase, given the company's strong ROE and long history of earnings covering the payout. He also inquired about Newrez's operational flexibility to handle different origination volume scenarios.

Answer

CEO Michael Nierenberg explained that while he is frustrated with the stock price, the Board's current view is to retain capital for reinvestment in mid-teens return opportunities to drive long-term value, rather than raising the dividend. Newrez President Baron Silverstein added that the origination platform has significant operational headroom and flexibility, supported by offshoring, to manage shifts in market volume.