Lument Finance Trust - Q2 2024
August 13, 2024
Transcript
Operator (participant)
Good afternoon, and thank you for joining the Lument Finance Trust second quarter 2024 earnings call. Today 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 Chang at Lument Investment Management. Please go ahead.
Andrew Tsang (Head of Investor Relations)
Good afternoon, everyone. Thank you for joining our call to discuss Lument Finance Trust second quarter 2024 financial results. With me on the call today are Jim Flynn, our CEO, Jim Briggs, our CFO, Jim Henson, our President, and Zachary Halpern, our Managing Director of Portfolio Management. On Monday, August 12, we filed our 10-Q with the SEC and issued a press release to provide details on our second quarter 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 may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 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 in the forward-looking statements. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC, in particular, the Risk Factors section of 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. A 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 second quarter of 2024, we reported GAAP net income of $0.07 and Distributable Earnings of $0.09 per share of common stock, respectively. In June, we also declared a dividend of $0.08 per share with respect to the second quarter, which represented a 14% increase over the first quarter dividend of $0.07 per share of common stock. I will now turn the call over to Jim Flynn. Please go ahead.
Jim Flynn (CEO)
Thank you, Andrew, and good day, everyone. Welcome to the Lument Finance Trust earnings call for the second quarter of 2024. We appreciate everyone joining today. Through the first half of 2024, the U.S. economy largely outperformed consensus expectations. However, the CPI measured in June showed a declining rate of growth in the Consumer Price Index, and August jobs reports were weaker than expected. As a result, the market seems to have renewed confidence that the Fed will start its easing cycle in September, as reflected in the 10-year Treasury remaining below 400 basis points since the beginning of August. While such easing will likely be beneficial to a number of sectors, including commercial real estate, we expect to proceed cautiously as the economy remains at elevated risk of recession.
While the economic data has generally outperformed, commercial real estate has suffered through the high rate and inflationary environment. Improvements in the rate environment and the bottoming of property values should translate into a thawing of capital markets and an uneven recovery of transaction flow in the commercial real estate sector. Despite the modest softening of multifamily fundamentals impacted by a large supply of newly constructed units coming online over the last six months, we believe that multifamily, and particularly middle-market multifamily, will continue to remain a strong-performing asset class in the long term. We firmly believe that LFT has differentiated itself from its peer group through its deliberate focus on middle-market multifamily credit, which has enabled the company to deliver a sustainable, stable dividend to our shareholders and preserve shareholder capital during this challenging part of the cycle.
Our expertise in the origination, underwriting, and active asset management of multifamily mortgage investments has been, and we expect will remain, central to the company's identity for the foreseeable future. Coupled with the strong sponsorship from the broader Lument and ORIX platforms, we believe LFT represents a truly unique value proposition in the public markets today. In an environment where others have found it challenging to sustain stable dividend levels, we are proud to have been able to benefit our shareholders and raise the common dividend in June by a penny, which represents a 14% sequential increase over Q1. Approximately a year ago, we closed the LMF secured financing transaction, which provided the company with additional investment capacity and extended our runway for future reinvestment. By the end of 2023, we were successful in fully deploying our capital into strong, predominantly multifamily credits.
Since that time, we've been focused on actively managing our loan investment portfolio. Although we experienced a slight decline in our weighted average risk rating to 3.6 as compared to 3.5 as of March thirty-first, we believe our investments have continued to perform well on a relative basis, thanks to our heavy focus on multifamily, which has generally outperformed other CRE asset classes, our prudent upfront underwriting, and our active approach to asset management. We continue to maintain a strong liquidity position, ending the quarter with approximately $65 million of unrestricted cash on our balance sheet. The persistence of elevated short-term rates has allowed us to generate attractive returns on our cash balances, while we continue to intentionally take a defensive cash position to provide us with flexibility in managing the more challenging credits in our portfolio.
As discussed on prior earnings calls, our loan portfolio is financed with long-dated secured financings that are not subject to mark-to-market or margin calls. The LMF financing transaction has a reinvestment period that continues into July 2025, and we intend to reinvest capital into new loan investments as liquidity becomes available through repayments of existing collateral. On the other hand, the reinvestment period of our 2021 CLO ended in December 2023, and we are actively exploring alternatives to recapitalize this structure. As of quarter end, the cost of funds for FL1 was SOFR plus 161, and the effective SOFR and the effective advance rate was approximately 80%, which we believe will represent attractive terms relative to other secured financing options currently available in the market.
We have observed that the issuance of new CRE CLO transactions remain muted, with just one managed vehicle pricing in the market last quarter and just three since the start of the year. With that, I'd like to turn the call over to Jim Briggs, who will provide us details on our financial results. Jim?
Jim Briggs (CFO)
Thanks, Jim. Good afternoon, everyone. Yesterday, we filed our quarterly report on Form 10-Q and provided a supplemental investor presentation on our website, which we'll be referencing during our remarks. Supplemental investor presentation has been uploaded to the webcast as well for your reference. On pages 4 through 7 of the presentation, you will find key updates and earnings summary for the quarter. For the second quarter of 2024, we reported net income to common stockholders of approximately $3.4 million, or $0.07 per share. We also reported distributable earnings of approximately $4.8 million, or $0.09 per share. There are a few items I'd like to highlight regarding the activity during the period. Our Q2 net interest income was $9.5 million, compared to $13 million in Q1 of 2024.
Sequential decrease was primarily attributable to the company recognizing, in the prior quarter, approximately $3 million of one-time cash to income related to the resolution of two defaulted loans. One collateralized by an office property located in Columbus, Ohio, in which we reduced our carrying value to zero, and another collateralized by a multifamily property located at Virginia Beach, Virginia, which was modified and brought current through Q1, and which remains performing in risk rating of four. One component of the sequential variance in net interest income was also a result of average outstanding amortized loan portfolio size decreasing versus the prior quarter, as we received approximately $98 million of principal payoffs within the FL1 securitization, which is no longer within its reinvestment period.
Aggregate payoffs and paydowns during Q2 totaled $98 million, as mentioned, as compared to $97 million in the prior quarter, with exit and other fees similarly comparable quarter-over-quarter. Total operating expenses were $3.5 million in Q2 versus $4.3 million in Q1. The majority of the decrease in expenses was driven primarily by a lower sequential accrual of incentive fees due to our manager, which are payable on a quarterly basis, equal to 20% of the excess of core earnings, as defined in the management agreement over an 8% per annum return threshold. Other general operating expenses were largely in line quarter-over-quarter. The approximately $1.4 million dollar difference between reported net income and Distributable Earnings to common was attributable to an increase in our allowance for credit losses. As of June 30th, we had 4 loans risk-rated a 5.
One was a $17 million loan collateralized by a multifamily property in Brooklyn, New York, and was risk-rated a 5 due to maturity default. Another was a $20 million loan collateralized by two multifamily properties near Augusta, Georgia, that was risk-rated 5 due to monetary default. Third was a $15 million loan collateralized by two multifamily properties in Philadelphia, Pennsylvania, that was risk-rated 5 due to monetary default. All three of these loans have been placed on non-accrual status, with cash received on the Philadelphia property to be recognized on a cost recovery basis. Fourth, 5-risk rated asset was a $32 million loan collateralized by a multifamily property in Dallas, Texas, that was in technical default.
We evaluated these four higher risk-rated loans individually to determine whether asset-specific reserves for credit losses were necessary, and after an analysis of the underlying collateral, we recorded a specific allowance in Q2 of approximately $900,000. The general CECL reserve increased by approximately $500,000 during the period, driven primarily by changes in the macroeconomic forecast, as well as non-watch risk rating migration in the portfolio. Company's total equity at the end of the quarter was approximately $242 million. Total book value of common stock was approximately $182 million, or $3.48 per share, largely flat from $3.50 per share as of March 31st.
...We ended the second quarter with an unrestricted cash balance of $65 million, and our investment capacity through up to 2 secured financings was effectively fully deployed. I'm going to now turn the call over to Jim Henson to provide details on the company's investment activity and portfolio performance during the quarter. Jim?
Jim Henson (President)
Thank you, Jim. Good afternoon, everyone. I will now share a brief summary of the recent activity in our investment portfolio. During the second quarter, LFT experienced $98 million of loan payoffs. A portion of these payoffs related to the defaulted loans discussed by Jim just a few moments ago. We did not acquire or fund any new loan assets during the period. As of June 30, our portfolio consisted of 78 floating rate loans with an aggregate unpaid principal balance of approximately $1.2 billion. 100% of the portfolio was indexed to one-month SOFR, and 93% of the portfolio is collateralized by multifamily properties. While we endeavor to actively manage the maturity risk within our portfolios, it is worth noting that we had the foresight at the time of loan origination to include extension features within our loan investment documents.
As a result, the weighted average remaining term of our book is approximately 30 months if all available extensions were to be exercised by our loan borrowers. As of the end of the second quarter, our portfolio had a weighted average floating note rate of SOFR + 359 basis points and an unamortized aggregate purchase discount of $5.6 million. As mentioned earlier, our secured financing remained attractive. The quarter ended with FL1, our CRE CLO transaction, providing effective leverage of 79.5% at a weighted average cost of funds of SOFR + 161. The LMF financing provided the portfolio with effective leverage of 82.2% at a weighted average cost of SOFR + 314 basis points.
On a combined basis, at the end of the quarter, our two securitizations provided our portfolio with effective leverage of 80.4% and a weighted average cost of funds of SOFR plus 212 basis points. As of June 30, approximately 63% of the loans in our portfolio were risk-rated 3 or better, down from 77% in the prior quarter. Our weighted average risk rating was 3.6, a slight deterioration from 3.5 sequentially. While both loan assets that had been risk-rated 5 as of March 31 were fully resolved during the second quarter, our aggregate loan exposure on the four newly risk-rated 5 loans was approximately $84 million at the end of the second quarter, up from the aggregate $38 million at the end of the first quarter.
As Jim Briggs outlined earlier, we evaluated the four 5-rated loans individually to determine whether asset-specific reserves for credit losses were necessary. After an analysis of the underlying collateral, we recorded a specific allowance of approximately $900,000 in the second quarter. We expect to continue to rely on the expertise of our talented asset management team to actively resolve these 5-rated loan assets, protecting our investors' capital and maximizing value for our shareholders. I will now pass it back to Jim Flynn for closing remarks and questions.
Jim Flynn (CEO)
Thank you, Jim and Jim, and appreciate everyone joining, but we'll open the call to questions.
Operator (participant)
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star button followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star button followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Crispin Love of Piper Sandler. Please go ahead.
Crispin Love (Senior Research Analyst)
Thanks, and good afternoon, everyone. Just first off, on credit quality, you have had pretty stable credit for several quarters now, but I did see some degradation here in the second quarter related to some non-performers migration, rated 5 loans, and then the allowance build that you discussed. Can you just discuss the credit outlook as we stand today? Do you believe that we've reached a peak stress in multifamily credit during this cycle? And just your intermediate-term outlook, just given the environment and how you look at the portfolio.
Jim Flynn (CEO)
Yeah, I think, I mean, it's hard to—we've all kind of been a little bit off here for the last six quarters on predicting the market, but it—there does seem to be, you know, a some expectation that we're kind of at or near that peak stress period. We do see rate reductions on the horizon, both obviously long term, we've seen their 10-year come down and expectations around SOFR, which SOFR cuts, which will... Or Fed cuts, which will impact directly impact these floating rate borrowers. So those things are obviously beneficial to the credit quality of the portfolio... certainly in a vacuum. They come on the heels of other economic data and news, which, you know, generally isn't positive.
But I think if you take a look at multifamily and how it's performed throughout cycles, you know, near term and long term, it's done pretty well. And the supply-demand dynamic in the country isn't changing, in fact, probably getting worse. And so there's some stability, even in times of economic stress. Now that being said, with respect to our portfolio, Zach and others can provide some more detail, I'm sure we'll have some other questions. We've seen, you know, more stress over the last couple of quarters as we continue to go through this cycle. And we've continued to actively manage those and feel, you know, pretty good about our ability to do so. You know, but we have to work through issues.
We've had, you know, elevated risk assets in the past that we've been able to resolve. You know, from a value standpoint, we still feel pretty good. You know, we did take a reserve on one asset, as was noted in the 10-K. You know, that is consistent with how we've looked at value throughout our history managing this entity. We do and will continue to work toward, you know, resolution of that without a loss or minimizing a loss. But from a, you know, GAAP and consistent standpoint, we felt it was appropriate to take a reserve on that asset.
With respect to the other assets, you know, we have a great team here that is, you know, daily managing those and speaking to the sponsors on those assets and helping to participate in creating plans to improve the assets' performance. As we've discussed in the past, you know, we do have the ability to really add operational expertise where needed with our sponsors or without. So yes, we're in a period of elevated stress. We still continue to feel pretty confident in the quality of our portfolio, but do need to continue to work through some of these more challenging assets.
Crispin Love (Senior Research Analyst)
Great. Thank you, Jim. I appreciate the comments there. And then, just on deployment, for the second quarter, didn't add any new investments, but I think you had nearly $100 million of payoffs. So kind of what, what's keeping you from being more active here? Is it a concerted effort as you focus on asset management on the current portfolio? Or, are there also a lack of opportunities out there? And, how would you expect kind of the opportunity landscape to change as rates do come down in the coming months?
Jim Flynn (CEO)
Sure. So first, on the capacity standpoint. So, you know, as I mentioned at the end of my remarks, the larger CLO, the 2021 CLO, is through its investment reinvestment period. And so that securitization is de-levering. It's still an attractive financing swap, SOFR plus 161 and 80% leverage even with those payoffs. So you know, we do intend to continue to evaluate options there as we move through the next few quarters. But that's part of the reason, right? That capacity is just really deleveraging. On the LMF transaction, we've generally remained fully deployed, you know, some timing as an asset pays off.
And we've kept, you know, for the size of our entity, a relatively high cash position, in large part just to ensure that when needed, we can offensively manage the portfolio with our sponsors. In terms of the market, we are seeing more opportunities today than you know, what we've seen over the last, you know, handful of quarters of high-quality deals. There's, You know, it's competitive. It's not the volume that you would like to see, but it's starting to appear. There's, you know, anecdotal evidence out there, and on some of the calls from the peer group, you've heard of the competitive environment for acquisitions. You know, the thing that's really slowed this market down has been the lack of assets changing hands.
There's very active buyer community out there, and there does seem to be some loosening on the seller side for folks to, you know, exchange assets, and that will help find good deals for the bridge market. The other tailwind on the transaction side is these deliveries, particularly in the Sun Belt, of all those construction assets coming online or at least coming through the construction period and maybe need a lease-up period, and that provides some opportunity in the bridge space. So I do think that, you know, we're going to continue to see transaction opportunities increase over the coming quarters.
It may be a little slower than we'd like to see, but it will, it will at least be going forward, which is a welcome change to where it's been.
Crispin Love (Senior Research Analyst)
Great. Thank you so much. That's, that's all I have for questions. Appreciate it.
Operator (participant)
Your next question comes from the line of Matthew Erdner of JonesTrading. Please go ahead.
Matthew Erdner (Analyst)
Hey, good afternoon, guys. Thanks for taking the question. Could you talk about the timing of the payoffs this quarter and kind of what led to the sequential decline in commercial loan income?
Jim Flynn (CEO)
Sure. Jim, Jim and Zach, I guess, do you guys want to...
Jim Briggs (CFO)
Zach, you want to touch just timing? I mean, I think it was just sort of normal quarter.
Zachary Halpern (Managing Director of Portfolio Management)
Yeah.
Matthew Erdner (Analyst)
Yeah. Well, were the payoffs kind of towards the beginning of the quarter rather than the end, which led to it kind of being, you know, $5 million less than the prior quarter?
Zachary Halpern (Managing Director of Portfolio Management)
Yeah, I mean, you know, when I look at sort of loan balance, the read by month, really somewhere around $1.3 at March 31, $1.3, April 30th, and then a drop off to $1.25, May 31st, and, you know, $1.2, June 30th. So I don't know. I think it sequentially moved down pretty steadily throughout.
Matthew Erdner (Analyst)
Okay, gotcha. And then, you know, as a follow-up, you know, what are you guys seeing within your portfolio in the secondary and tertiary markets, given the two Augusta multifamilies, the default, and then the kind of move to non-accrual there? And then also, you know, following up on that, you know, how are you guys working through these loans once they defaulted? You know, are you looking to get more equity in the deal? Are you guys making the borrowers kind of, you know, list the property on the market? You know, just how are you guys working through the process and going after these loans?
Zachary Halpern (Managing Director of Portfolio Management)
So as it pertains to secondary, tertiary, I wouldn't say that we have specific issues that I'd point to there. I'd say that, all the issues that we have, have been idiosyncratic. You know, things like, upcoming maturities and, needs for interest rate caps, which have, have brought borrowers back to the table in terms of negotiation.
As it pertains to working through these assets, you know, if and when they default, our asset management team is taking a, you know, very active, proactive approach with our sponsors and all the above in terms of bringing them back to the table, whether that be cash contributions or negotiating top-line recourse, reviewing business plans, you know, aiming for lower interest rate caps such that they prepaid debt service, or pushing them along towards refinancing somewhere else. All the above are options. You know, initiating foreclosure is an option as well, as need be. We hope not to generally get there, but you know, we continue to be active and proactive as it pertains to deal with defaults.
Matthew Erdner (Analyst)
Got it. Thank you, guys.
Operator (participant)
Your next question comes from the line of Steve Delaney of Citizens JMP. Please go ahead.
Steve Delaney (Analyst)
Good afternoon, everyone. Thank you for taking the question. You know, we, we noticed that you don't, at this point, have any REO real estate owned on your balance sheet. There is a investment-related receivable for about $33 million. Could you tell us what that, what that asset represents?
Jim Briggs (CFO)
Sure. I can take that, Steve. It's Jim Briggs here. When
Steve Delaney (Analyst)
Yeah.
Jim Briggs (CFO)
We've gotten borrower proceeds, but it's past the remittance date from servicing, so it's cash sitting with them that we haven't received from servicing yet. We'll put it as an investment-related receivable, so there's not risk to the borrower there. We just haven't received the cash from our servicer yet.
Steve Delaney (Analyst)
From the servicer. Okay. So it could be a mixture of principal interest, all of that?
Jim Briggs (CFO)
That's gonna be... We'll still have the interest accrual on the books, but we'll record that as a pay down from the borrower, so you won't see it in the loan balance. You'll see it as the investment-related receivable until we actually receive the cash. So, you know, think of that as money good. We just haven't gotten it in the bank.
Steve Delaney (Analyst)
Just timing.
Jim Briggs (CFO)
Yeah, correct.
Steve Delaney (Analyst)
Pending liquidity.
Jim Flynn (CEO)
Just inter-quarter timing, like, yeah.
Zachary Halpern (Managing Director of Portfolio Management)
Yep.
Steve Delaney (Analyst)
All right.
Jim Briggs (CFO)
That is related, you know, just to go back to Crispin's question before, that $33 million is related to an FL1 asset. So that will be used to pay down bonds once the cash is received.
Steve Delaney (Analyst)
Okay, great. And it sounds like, you know, you're having some maturity default, some business plans not working out, but, you know, as evidenced... And by the way, that disclosure and the Q on the four new five-rated loans, that was, that was exceptional. We're not accustomed to receiving that kind of detail and really understanding the story, so thank you for that. But the... You know, those sound like there is a workout or resolution, but are you guys—do you envision that as we are, as Jim Flynn said, you know, in a challenging market, it's probably gonna get, could get a little worse before it gets better, but.
Do you envision that either any of those four loans or that you may end up having to take a property back in the next year? I know that's sort of a what-if question, but just curious how much y'all think about that and whether, you know, you see that as a, you know, as a likelihood that you will have some REO on your books at some point.
Jim Flynn (CEO)
Thank you, Steve. The way I would answer that is, obviously, our strong desire is to not have any REO.
Steve Delaney (Analyst)
Yeah.
Jim Flynn (CEO)
In most cases, and as you know, you know, Lument and its broader sponsorship, and, you know, we have a $51 billion servicing book. You know, we're seeing a lot of activity in assets across the country outside of just what we have here at LFT.
Steve Delaney (Analyst)
Yes.
Jim Flynn (CEO)
You know, when we've had good borrowers, who have done the right thing and worked with us and are still capable of, you know, managing their assets and you know, improving operations, we've been able to work with them to find resolution to what we hope are short-term issues, whether it's valuation, cash flow, or both. Where we've discussed REO broadly as a, or foreclosure broadly as a platform, not just of LP, is where we don't have cooperative borrowers. And in the overwhelming majority of those cases, you know, it’s not something that ends up having to come to fruition. And so, you know, I would like to think that that will be the case here.
But we do have a, you know, very seasoned, capable, and sizable group that manages our special servicing and in particular, REO for LFT and for Lument as a whole. And, you know, what we've shown is that, you know, we're more than capable operators, but more importantly, with our sponsors say, "Hey, we're here to help and work with you, but, you know, we're not going to go down the path of using default as kind of a negotiating technique." I remember several quarters ago, I think, Ivan Kaufman at Arbor mentioned that in a call that you saw borrowers' kind of strategically defaulting or trying to use that as a negotiation tactic. It may have been four or five quarters ago.
Steve Delaney (Analyst)
Yes.
Jim Flynn (CEO)
I think that largely went away. But I will say that I think with this most recent decline in the 10-year and the rate cuts on the horizon in the very near term and probably, you know, fairly extensive over the next 18 months, I feel like I've seen a little bit of that from some borrowers trying to maybe see if they can take advantage of that. You know, we feel very confident in our ability to manage the borrowers and manage the assets. So our goal is to not have any REO. But if we did, if we were to have REO, it would mean that we've done the math on what's the highest value to our shareholders and concluded that, you know, that's the action we can take, and we're capable of doing so.
But obviously, the goal is to not have that happen.
Steve Delaney (Analyst)
Appreciate, Jim. That's helpful.
Operator (participant)
Your next question comes from the line of Stephen Laws of Raymond James. Please go ahead.
Stephen Laws (Analyst)
Hi, good afternoon. Just one quick one on the three new non-accruals been covered a good bit, but can you let us know when those went on non-accrual or, or ask another way, how much interest income did they contribute to the second quarter?
Jim Briggs (CFO)
Yeah, I mean, actually, even two of those were fours last quarter, well, fives last quarter, so only two new ones. The two new fives are the Philadelphia loan that I talked about. That's gonna be on a cost recovery basis. And the Dallas loan that's in technical default. We actually came out of last quarter with the other two. We are receiving payments on a cash basis for a couple of those. And I believe it was about $200,000 was the impact for non-accrual in the current quarter, right? It's tough to predict those that are in a non-accrual, whether we're gonna continue to get cash payments or not. But in the current quarter, we're looking at about a couple hundred thousand shortfall net for non-accrual.
Stephen Laws (Analyst)
Great. You know, switching over to the financing side, you know, another competitor out of CLO done, I think last week or this week, with some legacy stuff, but, you know, that, that market's there. Can you talk about, you know, what you would like to see to grow? You know, do you have a financing facility with the parent you could use to ramp, you know, to pool assets ahead of a deal? You know, would you look to get one possibly at the mortgage rate level, a bank line to allow you to use, you know, to pool some loans, some new investments, or, you know, how do you think the market? You know, how do you look at potentially doing another deal to grow even.
You know, I realize the CLO one is still attractive, but it is gonna continue to delever. So just curious to get your thoughts on, you know, how you may manage the balance sheet in order to price a new deal sometime over the next, say, six or 12 months?
Jim Flynn (CEO)
So, well, let me just say one thing. Like, since we just on the ramp, and then Zach can give you some more detail, but you know, since we took over management of this vehicle, when you know, Hunt took it over, and then since ORIX acquired Hunt, and we became Lument, we've always continued to originate bridge assets on our corporate balance sheet outside of LFT, and we'll continue to do so. LFT is a vehicle that has the first look and where we are always looking to place assets, but obviously it has you know, full capacity. We continue to originate.
And for all of our securitizations, these two plus the others we've done, historically, at least some, if not the majority of the assets included in those securitizations were assets that were pooled on the corporate balance sheet, and when the REIT LFT had capacity, would be transferred as part of that securitization to the REIT. So from that standpoint, we'll continue to operate that way. We operate that way today, and nothing about that will change. And I'll let Zach handle the capital markets aspect there.
Zachary Halpern (Managing Director of Portfolio Management)
Yeah, from a capital market standpoint, we're continuing to explore, really starting to explore options as FL1 dips below 80% advance rate. Yeah, options include an entirely new securitization or a combination of warehouse financing with a smaller securitization or warehouse financing remains to be decided based on prevailing market conditions. These are active conversations, at least internally and yeah, things we're exploring.
Stephen Laws (Analyst)
Okay. And then I guess to follow up with that, I mean, around timing, it sounds like it depends a lot on repayments. So, can you give us an outlook over the back half of the year of what your repayment expectations are? Been running about $90 million a quarter. Is that level likely to continue, or do you expect more or less than that over the back half of the year?
Zachary Halpern (Managing Director of Portfolio Management)
I think that's a good estimation at the moment. You know, just over the near term, in the next month or two, it looks like another $70 million-$80 million. So it's, it's right in that range.
Stephen Laws (Analyst)
Okay. Great. Appreciate it.
Zachary Halpern (Managing Director of Portfolio Management)
It's possible that it accelerates. Yeah, it's possible that it accelerates as maturities are upcoming, but tough to say at present.
Stephen Laws (Analyst)
Yep. Great. Well, appreciate the comments this afternoon. Thank you.
Operator (participant)
Your next question comes from the line of Christopher Nolan of Ladenburg Thalmann. Please go ahead.
Christopher Nolan (Analyst)
Hi, thanks for the question. The loan-to-value ratios on your 10-Q, are those at the time of re-origination of the loan?
Zachary Halpern (Managing Director of Portfolio Management)
Yes.
Christopher Nolan (Analyst)
Okay. Then if I'm looking at the table correctly, it looks like a lot of the loans were originated in 2021 and into 2022. So it looks like a fair number of your loans sort of predate the Fed tightening cycle. Is that a correct view of that?
Zachary Halpern (Managing Director of Portfolio Management)
Yes.
Christopher Nolan (Analyst)
And so, on that basis, is it fair to say that the loan-to-value ratio is now significantly higher than what's shown in the Q?
Zachary Halpern (Managing Director of Portfolio Management)
It depends. Keep in mind, these are all transitional properties with business plans. And so when you do a bridge loan, you have an as-is valuation, and you also receive a stabilized valuation from the appraiser, assuming that the business plan has been executed. And so, as an example, let's say the as-is valuation was 75, and the stabilized valuation was 65, you assume that if the borrower executed their business plan and market conditions did not change, the value would or the asset would then be 65 LTV. To your point, overlaying market movements on there, the LTV could be higher. So it's, it's a kind of convoluted way of saying it, it depends on how well the borrower executed their business plan, relative to market movements and, and submarket movements.
Christopher Nolan (Analyst)
Okay. I guess just a logical follow-up to that is, and just sort of dovetails into your earlier comments, that it sounds like a lot of these borrowers are upside down on their loans, potentially.
Jim Flynn (CEO)
I would say it's more the case that their equity has been impacted, right? So, yes, maybe their expected LTVs when they entered the deals are higher than what they thought they would be. But their equity, I don't know if I'd say upside down, but their equity has been impacted. There's no question about that, and that's probably true on most assets. But that doesn't necessarily translate to, you know, the loan being upside down. I think it is fair to say that, you know, perhaps the value today, the loan-to-value today is higher than where it was projected to be. It may not be that much higher, depending on which loan and the performance than where it was entering.
The reality is those owners, you know, invest the capital into the deals, and haven't gotten the full recognition of value that they anticipated, at least not yet. Which is frankly why I think we've seen so many multifamily deals being held because of the expectation that if you're able to hold on to assets, you will realize that value, over the next, you know, couple of years, just not necessarily the full value today. I don't think that trend's gonna dramatically change, but I do think there is, with this reduction in rates and you know, you might see more transactions, more people putting current financing on things like that. But, that's where we are.
Christopher Nolan (Analyst)
Okay, and Jim Briggs, so were there any non-recurring items in earnings?
Jim Briggs (CFO)
Not for this quarter. There was a big impact from the non-recurring from last quarter. So if you were looking sequentially, as I spoke to, interest income or net interest income has come down pretty significantly from last quarter. But we had a, you know, we had a bunch of one-timers last quarter for catch up on, on a couple of resolutions that we spoke about last quarter. So outside of that, no, I do speak to the operating expenses came down. If you recall, you know, the incentive fee that we accrued last quarter was about $1.3 million. It was around $700,000 for this quarter. So that came down.
I'd expect that $700,000, as it's a trailing 12-month calc, that takes into account payments over those 12 months. But that'll come down, so you can maybe look at that as a bit of a one-timer on the expense side. That will come down for the next quarter or 2 before it normalizes.
Christopher Nolan (Analyst)
Great. That's it for me. Thank you.
Jim Briggs (CFO)
Yep.
Operator (participant)
Once again, ladies and gentlemen, should you have a question, please press the star button followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. There are no further questions at this time. I'd now like to turn the call back over to our speakers for final closing remarks. Please go ahead.
Jim Flynn (CEO)
I just want to thank everyone for joining today. We look forward to speaking again next quarter. Thanks, all.
Operator (participant)
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.