Tom Catherwood

Tom Catherwood asked for Victor Coleman's longer-term vision for Hudson Pacific Properties a year from now, assuming continued recovery and successful execution in 2026. He also questioned what actions the company would take if it achieves its goals but the market fails to recognize the progress, leading to an inappropriate cost of capital.

Answer

CEO Victor Coleman envisioned a stabilized occupancy in the low to mid-80s, with the core office business (87% of portfolio) performing as envisioned, and the studio business becoming a smaller focus. He stated that if the market doesn't recognize progress, the board would evaluate alternatives for highest company value, noting increased reverse inquiries.

Tom Catherwood asked Victor Coleman to describe what Hudson Pacific Properties would look like in a year if the current recovery continues and everything goes according to plan in 2026, focusing on the longer-term vision. He also expressed concern about what the company would do if it executes as expected but the market doesn't recognize the progress, leading to an inappropriate cost of capital.

Answer

Victor Coleman, CEO and Chairman, envisioned a stabilized occupancy in the low to mid-80s, with the core office business (87% of the portfolio) performing as envisioned. He expects the focus on the studio business to diminish as office performance improves, positioning Hudson Pacific as a best-in-class office REIT with a studio component. Regarding market recognition, he stated that the board continuously evaluates alternatives for highest company value, noting increased 'reverse inquiries' and confidence in execution, suggesting they will revisit the process if market valuation remains disconnected.

Tom Catherwood of BTIG asked for an update on leasing activity for large block vacancies, including Hill7 and Met Park North, and questioned the downside risk of the upcoming Hollywood media portfolio refinancing.

Answer

EVP of Leasing Art Suazo reported strong progress, with 58,000 sq. ft. in negotiations at Hill7 and 145,000 sq. ft. in negotiations at 505. Regarding the refinancing, CEO Victor Coleman stated they expect no paydown requirement and highlighted a key risk mitigant: HPP and its partner hold junior debt that can be converted to equity if needed. He confirmed that selling their stake is not under consideration.

Tom Catherwood asked about Ladder Capital's funding strategy, specifically if it would make more sense to put everything on the revolver and then term it out with unsecured bonds, rather than also selling down securities, and if selling securities offered other benefits.

Answer

CEO Brian Harris explained that while the revolver (SOFR + 125) would become very attractive with Fed rate cuts, Ladder's strategy is not solely about leveraging up at a low cost of funds. The game plan is to increasingly focus on unsecured debt with extended terms. He noted that securities were never meant to be a long-term hold but rather a parking spot for capital, and their patience has been rewarded with wider spreads on new loans. He indicated that drawing the revolver would be a primary step, but not fully, as agencies and investors prefer a balanced approach, and selling securities allows for recycling capital into higher-yielding loan opportunities.

Tom Catherwood sought clarification on CEO Brian Harris's comment that rates on new loans have gone up, not down, in recent months. He also questioned the strategy of selling down securities alongside using the unsecured revolver for funding, asking if solely relying on the revolver and then terming out with unsecured bonds would be more beneficial given widening security spreads and the revolver's pricing.

Answer

CEO Brian Harris confirmed that rates on loans Ladder Capital Corp is currently originating have indeed increased over the last 60-90 days, attributing this to factors like the Fed's MBS runoff, wider CLO market spreads, and increased market volatility. He highlighted Ladder's competitive advantage in the $50-100 million loan range due to less competition. Regarding funding, Mr. Harris explained that while securities offer attractive levered yields (around 15%), the company's long-term strategy focuses on unsecured debt. He noted that securities serve as a temporary "parking spot" for capital, and while the revolver is attractive, drawing its full capacity might not align with agency and investor expectations for an investment-grade company.

Tom Catherwood followed up on disposition questions, asking if prices for the $542 million in transactions came in stronger than expected on the original non-core asset pool, or if more assets were sold than initially planned. He then asked if the $150 million increase to sales guidance was due to market recovery enabling more sales or a re-evaluation leading to more assets being transferred to the non-core bucket. Finally, he sought more details on Mahbod Nia's comments about early signs of renewed interest from Core Plus Capital and the drivers behind this trend.

Answer

Mahbod Nia (CEO, Veris Residential) clarified that prices for the sold assets were largely in line with expectations, crystallizing value at or near NAV, primarily for smaller assets, with a blended cap rate around 5.1% (excluding land). He stated that the $150 million increase in sales guidance was a combination of improving market conditions over several months and the ongoing evaluation of alternatives that make sense for shareholders. Regarding Core Plus Capital, Mahbod Nia explained that this capital previously shifted to credit strategies due to rising rates. With recent rate declines and the understanding that credit lacks equity multiples, Core Plus groups are becoming more active in capital raising and seeking opportunities, suggesting a potential shift from the opportunistic/value-add capital that has dominated the market.

Tom Catherwood with BTIG asked if the $542 million in closed or contracted transactions achieved stronger pricing than anticipated on the original non-core asset pool, or if more assets were sold than initially planned. He followed up by inquiring if the $150 million increase in sales guidance was due to market recovery enabling sales of previously unviable assets or a reevaluation of assets into the non-core strategic bucket. Finally, he sought more details on the early signs of renewed interest from Core Plus Capital.

Answer

Mahbod Nia, Chief Executive Officer, clarified that pricing for the $542 million in sales was largely as expected, with an average cap rate of approximately 5.1% (excluding land). He attributed the increased sales guidance to a combination of improving market conditions over recent months and the continuous evaluation of alternatives for shareholder value. Regarding Core Plus Capital, Mr. Nia noted that with recent rate stabilization and the inherent limitations of credit investments, these groups are showing renewed activity in capital raising and seeking Core Plus opportunities, signaling a potential shift from the dominance of higher-cost value-add capital and a return to more normalized capital flow dynamics.

Tom Catherwood questioned the valuation of the Metropolitan at 40 Park disposition, noting a seemingly high implied cap rate. He also asked for confirmation on the intended use and development potential for the recently sold Wall Land parcel.

Answer

Chief Executive Officer Mahbod Nia clarified that the Metropolitan at 40 Park sale was viewed holistically as part of a package transaction with other illiquid assets, rather than on a standalone cap rate basis. Nia confirmed the intended final use for the Wall Land parcel is multifamily but stated he would need to follow up regarding the precise number of entitled units and further development potential.

Tom Catherwood of BTIG questioned the next phase of the company's balance sheet overhaul and the tools available. He also asked for the reason behind the quarter's asset impairment and sought color on the sale of the shops at 40 Park, where Veris was a minority partner.

Answer

CEO Mahbod Nia detailed that the new financing structure offers flexibility to use cash flow, proceeds from land sales, or potential JV resolutions to pay down debt. CFO Amanda Lombard clarified the impairment was on a consolidated land asset due to new valuation information from negotiations, not a JV. Regarding the 40 Park sale, Nia stated that as a minority partner, Veris was supportive of the transaction but did not lead it.

Tom Catherwood asked about the four 3-rated life science loans in the portfolio, noting an early stage rebound in demand from smaller life science tenants, and if KKR Real Estate Finance Trust was seeing similar recovery in tenant demand for these assets.

Answer

CEO Matthew Salem indicated that while they are seeing 'green shoots' and some pickup in the sector, most of their life science assets cater to larger pharma companies rather than smaller VC-funded ventures. He expressed a positive long-term outlook for the sector.

Tom Catherwood inquired whether KKR Real Estate Finance Trust's lower leverage and higher liquidity reflected a defensive strategy or merely a timing issue with originations and repayments. He also asked about the potential for a prolonged earnings lag due to capital redeployment and the early-stage recovery in demand for life science lab space, specifically for the four remaining three-rated assets in the portfolio.

Answer

Matthew Salem, CEO, clarified that the situation was primarily a timing issue, influenced by a large multifamily loan repayment and elongated closing timelines for European originations. He stated the strategy remains unchanged, with expectations to invest and originate in line with repayments. Regarding life science assets, Mr. Salem noted green shoots from sponsors and some pickup in the sector, particularly for larger pharma tenants, expressing long-term positivity despite cyclicality.

Tom Catherwood from BTIG asked what the NewPoint platform needs to ramp up origination activity, what might spark a sustained recovery in investment sales, and about the savings from migrating FBRT's loans to NewPoint's servicing platform.

Answer

Michael Comparato, President, stated that ramping NewPoint originations is about expanding the sourcing network by adding more originators, not a need for more capital. He believes the market recovery will be a gradual 'acceptance phase' rather than a single catalyst. Jerome Baglien, CFO & COO, confirmed that migrating all BSP-managed loans to NewPoint's servicer will generate meaningful savings, which is factored into the projected $0.08 per share quarterly earnings contribution from the acquisition.

Tom Catherwood of BTIG asked what is needed to increase NewPoint's origination volume, what catalyst could trigger a sustained recovery in CRE investment sales, and about the savings from migrating FBRT's loan servicing to NewPoint.

Answer

Michael Comparato, President, stated that ramping up NewPoint's originations requires expanding the sourcing network by adding more originators, not more capital. He believes the CRE market recovery will be driven by "exhaustion" with "pretend and extend" strategies. Jerome Baglien, CFO & COO, confirmed that migrating the ~$10 billion BSP-managed loan book to NewPoint will generate meaningful savings, which is factored into the projected $0.08 per share quarterly earnings contribution.

Tom Catherwood requested details on the makeup of the $700 million in year-to-date office repayments and asked for expectations on realized losses from the $500 million of challenged loans earmarked for near-term resolution.

Answer

CEO Katie Keenan described the office repayments as a mix of CMBS refinancings, sales, and balance sheet takeouts. CFO Tony Marone addressed the second question, stating that while there is no specific guidance on losses, historical resolutions have been slightly above their marks, implying losses would be in line with existing CECL reserves.