Lument Finance Trust - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 GAAP EPS was $0.07 and Distributable EPS was $0.10; net interest income was $9.36M, roughly flat quarter-over-quarter, supported by higher exit fees on elevated loan payoffs.
• Book value per share declined to $3.40 from $3.50 in Q3, primarily reflecting the regular $0.08 dividend and a one-time $0.09 special dividend calibrated to distribute 100% of 2024 taxable income; leverage fell to 3.7x (liabilities/equity) from 4.2x, improving balance sheet flexibility.
• Management is deferring a new CRE CLO until visibility improves on seasoned asset resolutions; they are actively pursuing warehouse financing lines to enhance flexibility and manage challenged loans, with further updates expected in coming quarters.
• Portfolio credit softened: performing assets fell to 90.8% and six loans ($98.3M) were risk-rated “5”; specific reserves increased to $3.7M, though two previously 5-rated loans achieved full principal recovery earlier in Q4.
• Consensus estimates via S&P Global were unavailable at the time of request due to API limits; comparisons to Street forecasts are not provided (S&P Global data unavailable) .

What Went Well and What Went Wrong

What Went Well

• Elevated payoffs ($143.6M) drove exit fee income (~$1.1M vs. ~$0.15M in Q3), offsetting modest pressure on net interest income and supporting Distributable EPS stability at $0.10.
• Liquidity and leverage improved: cash and equivalents rose to $69.2M and leverage declined to 3.7x, enhancing optionality ahead of potential refinancing.
• Active asset management delivered positive outcomes on two previously 5-rated loans (Augusta, GA and Brooklyn, NY) with full principal recovery, reflecting disciplined borrower engagement and credit oversight.

What Went Wrong

• Credit metrics deteriorated sequentially: performing loans fell to 90.8%, and risk downgrades to “5” increased to six loans ($98.3M), necessitating higher specific reserves (+$2.9M q/q to $3.7M).
• Net interest income edged down to $9.36M on deleveraging of the 2021 securitization and lower average SOFR; though largely offset by exit fees, underlying earning power faces rate and leverage headwinds.
• Reinvestment capacity remained constrained; originations were minimal within LFT (one new $13M loan at SOFR+375bps) while payoffs accelerated, limiting near-term portfolio growth until new financing is secured.

Transcript

James Flynn (CEO)

Good morning. Thank you for joining the Lument Finance Trust's fourth quarter 2024 earnings call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the conference over to Andrew Tsang with Investor Relations at Lument Investment Management. Please go ahead.

Andrew Tsang (Head of Investor Relations)

Thank you. Good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's fourth quarter 2024 financial results. With me on the call today are James Flynn, our CEO; James Briggs, our CFO; James Henson, our President; and Zach Halpern, our Managing Director of Portfolio Management. On Wednesday, March 19, we filed our 10-K with the SEC and issued a press release to provide details on our recent financial results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to James 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 meanings of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statement. These risks and uncertainties are discussed in the company's reports filed with the SEC, in particular the risk factors section of our Form 10-K. It is not possible to predict or identify all such risks, and listeners are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to update any of these forward-looking statements. Further, certain non-GAAP financial measures will be discussed on this conference call. The 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 fourth quarter and fiscal year 2024, we reported GAAP net income of $0.07 per share and $0.34 per share of common stock, respectively. For the fourth quarter and fiscal year 2024, we reported distributable earnings of $0.10 and $0.44 per share of common stock, respectively. This past December, we declared a quarterly dividend of $0.08 per share with respect to the fourth quarter and an additional one-time special dividend of $0.09 per share, bringing our cumulative dividends declared for 2024 to $0.40 per common share. I will now turn the call over to James Flynn. Please go ahead.

James Flynn (CEO)

Thank you, Andrew. Good morning, everyone. Welcome to Lument Finance Trust's earnings call for the fourth quarter of 2024. Appreciate everyone joining us today. We'll start with a quick view of the overall market. The broader macroeconomic environment continues to be shaped by geopolitical uncertainty, financial market volatility, and to a lesser degree today, inflation. As we entered 2024, we anticipated multiple rate cuts over the course of the year, but given the resilience of the economy and the ongoing inflationary pressures, most of those cuts did not materialize, and now it's clear that interest rates will remain elevated. With inflation currently moderating and the economy cooling, the Federal Reserve is currently projected to make two cuts in 2025. Despite the volatility, we are encouraged by increasing stability in commercial real estate, particularly cap rates, which have begun to normalize after a period of dislocation.

Rental growth is anticipated in nearly all major measures this year and beyond, and transaction volumes, while below historic norms, have also picked up in recent months. We believe the positive momentum for lending activity that we saw in late 2024 relative to earlier in the year will continue in 2025. Although we remain cautious, we are optimistic that as market conditions continue to stabilize, opportunities to deploy capital at attractive risk-adjusted returns will emerge. On the asset management side, we continue to prioritize proactive asset management across our portfolio to drive positive outcomes. Our credit risk ratings have remained largely stable, reflecting disciplined underwriting and ongoing borrower engagement, and while we've made modest increases to specific reserves, these adjustments have been prudent and in line with our expectations for the portfolio performance.

Managing our existing book of credit remains a core focus, and our team continues to work closely with all borrowers to maximize recovery values and ensure that assets perform in line with our underwriting expectations. We remain confident in our ability to effectively navigate this environment and optimize outcomes for all shareholders. While the manager's lending affiliate, Lument, continues to actively deploy capital into new loan investments with a focus on multifamily, backed by strong sponsors, LFT's investment activity during the quarter was modest, primarily limited by the available reinvestment capital. Our 2023 secured financing vehicle, LFT 23-1, remains in its reinvestment period into July of this year, and we expect to source new loan assets as investment capacity becomes available. During the period, we also had significant payoffs of seasoned loans in the portfolio.

In terms of our financing strategy, as our 2021 securitization continues to deliver, we have dedicated significant time with our lending partners and advisors to explore options to refinance our investment portfolio. In recognition of the fact that our portfolio today is primarily comprised of seasoned assets and we expect some loan borrowers will be challenged to exit our loans at the time anticipated in their underwritten property business plans, we believe it prudent to continue to defer the execution of a CRE CLO or similar securitization transaction until such time that we have more visibility into those loan resolutions.

In the interim, we have engaged in active discussions with select counterparties for other forms of potential secured financing, including bank-provided warehouse facilities, which provide us with the flexibility to better manage both our performing loan portfolio and a handful of more challenged assets, and expect to provide additional details in the coming quarter as these conversations progress. We expect such secured financings will allow us to remain highly flexible from a liquidity perspective and position ourselves to achieve positive asset management outcomes for our existing portfolio without sacrificing significant economics. That said, we continue to believe that a securitization transaction later this year remains a viable potential option, as obtaining non-mark-to-market match term secured financing, as always, is an attractive economic priority for the company.

As we look ahead, we remain committed to our core investment strategy of deploying capital into transitional floating-rate mortgages, with a particular emphasis on middle-market multifamily assets. Multifamily fundamentals remain strong, supported by robust demand, constrained supply, and resilient rental trends. We continue to leverage the origination, underwriting, and asset management expertise of our manager and its affiliates to identify and capitalize on compelling investment opportunities. Our ability to navigate the current environment, prudently manage our liquidity, and optimize capital deployment on a levered basis will be key to delivering long-term value to our shareholders. With that, I'd like to turn the call over to James Briggs, who will provide details on our financial results. James?

James Briggs (CFO)

Thanks, James. Good morning, everyone. Last evening, we filed our annual report on Form 10-K and provided a supplemental investor presentation on our website, which we will be referencing during our remarks. Supplemental investor presentation has been uploaded to the webcast as well for your reference. On pages four through seven of the presentation, you'll find key updates and earnings summary for the quarter. For the fourth quarter of 2024, we reported net income to common stockholders of approximately $3.6 million or $0.07 per share. We also reported distributable earnings of approximately $5.4 million or $0.10 per share. A few items I'd like to highlight with regards to the Q4 P&L. Our Q4 net interest income was $9.4 million, which is relatively flat to the $9.5 million recorded in Q3.

The weighted average coupon and average outstanding UPB of the portfolio declined sequentially, largely due to declines in the SOFR benchmark rate and the deleveraging of our 2021 securitization. These reductions in net interest income were largely offset by increased exit fees related to loan payoffs. Payoffs during Q4 totaled $144 million, as compared to $51 million in the prior quarter, with the company recognizing approximately $1.1 million of exit fees during Q4 compared to approximately $150,000 in Q3. Our total operating expenses were largely flat quarter on quarter, as we recognized expenses of $2.8 million in Q4 versus $2.9 million in Q3. The primary difference between our reported net income and distributable earnings was a $1.8 million net increase in our allowance for credit losses. I'll walk through the components of that.

As of December 31, we had six loans risk-rated a five, including four assets downgraded a five in Q4. All six loans were collateralized; five loans were collateralized by multifamily assets. One of those loans is collateralized by healthcare. James Henson will provide a bit more detail on the six in his remarks. We evaluated those six five-rated loans individually to determine whether asset-specific reserves for credit losses were necessary, and after analysis of the fair value of the underlying collateral, we increased our specific reserves to $3.7 million as of 12/31, an increase of $2.9 million versus the prior quarter. Our general reserve for credit losses decreased by $1.1 million during the period, primarily driven by payoffs of performing loans and the move of four assets to specific evaluation. In terms of basis points of reserve on the general pool, that was flat quarter on quarter.

We ended the fourth quarter with an unrestricted cash balance of $69 million, and our investment capacity through our two secured finances was fully deployed. The company's total equity at the end of the quarter was $238 million. Total book value of common stock was approximately $178 million, or $3.40 per share, decreasing sequentially from $3.50 per share as of September 30 as a result of aggregate dividends, including the $0.09 special common dividend paid on January 15. As a REIT, we are required to distribute at least 90% of our taxable income in order to meet REIT testing requirements. Our $0.09 special dividend declared in December was calibrated to distribute 100% of our taxable income so that the company will not be taxed at the corporate rate for any of its 2024 taxable income.

The $0.09 special dividend also largely tracks the annual difference between distributable income and GAAP income of $0.10, which was driven by unrealized provisions for credit losses during 2024, which does not impact taxable or distributable income. I'll turn the call over to James Henson to provide details to the company's investment activity and portfolio performance during the quarter.

James Henson (President)

Thank you, James. During the fourth quarter, LFT experienced $144 million of loan payoffs and acquired one new loan asset with an initial principal balance of $13 million and a weighted average coupon of SOFR plus 375 basis points. As of December 31, our portfolio consisted of 65 floating-rate loans with an aggregate unpaid principal balance of approximately $1.1 billion. 100% of the portfolio was indexed to one-month SOFR, and 92% of the portfolio was collateralized by multifamily properties. As of the end of the fourth quarter, our portfolio had a weighted average floating note rate of SOFR plus 358 basis points and an unamortized aggregate purchase discount of $3.5 million. The weighted average remaining term of our book as of quarter end was approximately 26 months, assuming all available extensions are exercised by our borrowers.

The CRE CLO securitization transaction we issued in 2021 provided effective leverage of 75% to our loan assets at a weighted average cost of funds of SOFR plus 171 basis points. The LFT financing completed in 2023 provided the portfolio with effective leverage of 83% at a weighted average cost of funds of SOFR plus 314 basis points. On a combined basis, the two securitizations provided our portfolio with effective leverage of 78% and a weighted average cost of funds of SOFR plus 226 basis points as of quarter end. As of December 31, approximately 64% of the loans in our portfolio were risk-rated a three or better, compared to 60% at the end of the prior quarter. Our weighted average risk rating remained relatively unchanged, improving modestly to 3.5 versus 3.6 at the end of Q3.

We had six loan assets risk-rated a five with an aggregate principal amount of $98 million, or approximately 9% of the unpaid principal balance of our investment portfolio. One was a $15 million loan collateralized by two multifamily properties in Philadelphia, Pennsylvania. This loan asset was risk-rated five due to monetary default. During Q4, the company recognized approximately $432,000 of cash received from the borrower as a reduction in our carrying basis of this loan. Another five risk-rated asset was a $32 million loan collateralized by a multifamily property in Dallas, Texas, that was in technical default. Both of those loans were also risk-rated five at the end of the third quarter. The third five risk-rated asset was a $20 million loan collateralized by property in Orlando, Florida, that was in monetary default.

The fourth five risk-rated asset was a $15 million loan collateralized by a multifamily property in San Antonio, Texas, that was in technical default. The fifth risk-rated loan was a $6 million loan collateralized by two multifamily properties in Orlando, Florida, MSA, that was in monetary default. The sixth risk-rated asset was a $10.5 million loan collateralized by a multifamily property in Colorado Springs that was in monetary default. During the fourth quarter, we were successful in achieving positive outcomes on two of the four loans that were five-rated as of September 30. These included a $20 million loan collateralized by multifamily properties in Augusta, Georgia, and a $17 million loan collateralized by a multifamily property in Brooklyn, New York. We received full recovery of principal on both of these investments, thanks to the diligent efforts of our manager's asset management team.

There were no existing specific reserves on these two resolved assets. We continue to work closely with borrowers on the six five-rated assets that were outstanding at the end of the year. With that, I will pass it back to James Flynn for closing remarks and questions.

James Flynn (CEO)

Thank you, James. I would like to take the opportunity to thank James Henson for his dedication, sage advice, and support of the LFT platform. We wish James the best in his retirement. I would also like to welcome Greg Calvert as our new President. Being part of a large organization with a well-capitalized parent, as we are, gives us the opportunity to have a deep bench of experienced professionals. Greg has had a more than 30-year career in real estate, primarily on the investment and credit side, and he will be a great addition to our team in 2025. Lastly, I want to thank all of our guests. We appreciate your time and your interest in our platform, and I look forward to hearing from you. With that, I will ask the operator to open the call to any questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. If you are using a speakerphone, please pick up your headset before pressing any keys. To withdraw your question, please press the star followed by the number two. Once again, please press the star one to join the queue. Your first question comes from the line of Stephen Laws with Raymond James. Please go ahead.

Stephen Laws (Managing Director and Senior Analyst)

Hi, good morning. Appreciate the comments and the prepared remarks. Wanted to touch on the '21 CLO. How does that, given it's paid down, how does that currently compare from a blended financing cost to current market conditions for a new CLO? Around your comments, I know you're considering some financing lines and other options, but as you look to maybe doing another securitization or deal later this year, is that a—would you collapse the FL1 from '21 and roll the collateral in? Kind of how do you think about managing the financing side of the balance sheet through the year?

James Flynn (CEO)

Yeah. Obviously, we're looking at all of those things. We are looking to basically refinance the portfolio as we move forward here in the coming quarters. FL1 today is about 75% advance at a cost of $171 over SOFR. The cost is still attractive, but the leverage, obviously, is lower. We've seen deals going off kind of in the mid to high 80s on an advance rate. In terms of how we're looking at the portfolio, as we said, we are working with some of our partners to consider some alternatives that give us a little more flexibility in the short term around dealing with some of these assets that we're working through with existing borrowers or potentially new borrowers and do expect to move forward with one or more of those types of financing arrangements as we move through the year.

Stephen Laws (Managing Director and Senior Analyst)

Great. As here we are almost into the Q1, can you give us an update on originations and repayments year to date? How do we think about when leverage is going to trough? Assume you need a new financing facility in place before we see it turn up, but is that a Q2 event with leverage troughing?

James Flynn (CEO)

Sorry, the Q2 event for what specifically?

Stephen Laws (Managing Director and Senior Analyst)

I guess the first question, year-to-date originations, I mean, we're almost at the end of Q1. Can you talk about portfolio, how much is runoff, repayments versus originations in Q1?

James Flynn (CEO)

Got it. On the origination side, I mean, we've had very—LFT has had very few, right, because we don't have any capacity at FL1. At LFT, it's been minimal. We've had about $25 million of payoffs there, and do expect more in the coming quarters here. On the origination side, again, just broadly at the parent level in terms of what we're seeing, we've got somewhere around $400 or $500 million that we've originated since, call it, October-ish. The beginning of 2024 was pretty light across the industry. It's picked up significantly. While it's not back to the levels it was, even forgetting about peak kind of normal levels, I would say it's not quite there, but we are seeing significant opportunity. We are making those loans. We have them on the manager's balance sheet. Opportunity is there, and we feel good about that.

In our book, we've continued to manage it. We have a very experienced management team, both in special and REO, and we've been able to get to a positive resolution in LFT's book and across most of the parents' book wherever we've needed to. The biggest challenge we have and have had, or one of the biggest challenges, is just the timing of those things. One, not controllable by us, and two, just take a bit longer than you'd like, which is why we're moving toward or evaluating financing options that give us flexibility with that in mind.

Stephen Laws (Managing Director and Senior Analyst)

Great. Appreciate the comments this morning. Thank you.

Operator (participant)

Your next question comes from the line of Steven Delaney with Citizens Bank. Please go ahead.

Steven Delaney (Managing Director and Senior Equity Analyst)

Hey, good morning, everyone. Thank you for taking the question. Obviously, a little activity in terms of downgrades with the new five risk ratings, and it looks like you did boost your specific reserves. First, let me make sure I have the numbers right. On the five-rated loans, am I correct that specific reserves, and I assume they're on the five-rated loans, was $3.7 million as of year-end 2024? Is that the correct level?

James Flynn (CEO)

Yeah, that's right, Steven.

Steven Delaney (Managing Director and Senior Equity Analyst)

Okay. These are—you've got, what, six loans, $98 million, so $15 million or so average loan size, it would seem. As we're—everything runs nicely through GAAP, but then as we're modeling for this year and trying to come up with distributable EPS, can you give us some sense of, from where you sit internally, your expectations of timing of resolutions? Are you going to get after—first quarter's already done, and we're not talking about anything—guess, of course, you're reporting on Q4. Is it going to be—is it going to be more back-end weighted in 2025 in terms of the resolutions as we want to try to start loading some realized losses into our distributable earnings estimates? I guess I'm just trying to get a sense.

I know you can't be specific, but how we should sort of look at 2025 with respect to those realized losses. Thanks.

James Flynn (CEO)

Thank you, Steven. Look, obviously, it's a difficult question to answer, as you know.

Understood.

Given where we are, yeah, no, given where we are, I mean, would I wait toward the back end versus, say, the second quarter or early third? I would because, from a modeling and prudent perspective, and that's how we're thinking about it, similarly to you and how we manage the book and the portfolio. That being said, and what we've seen, and I think this is a little bit related to the market, right? We've seen things starting to loosen up where people are wanting to get to resolutions, whether—and I mean sponsors in particular—whether those resolutions are them wanting to walk away and just doing it, or whether they think there's actually opportunity for them to continue to create value at these assets. The timeline of getting those done is difficult.

In some cases, if we have a borrower that is not negotiating with us or not in a way to discussing a real resolution, we have had to move toward foreclosure and other remedies in order to either bring them to the table or, from our perspective, to say, "Okay, let's bring someone to the table who would." We still have—we have had assets that have had reserves where we have resolved them and gotten paid back in full, including default interest and other fees and expenses. I suspect that will be the case for some of our assets here. We also have assets that have been challenged in a greater way than we anticipated. I do think that we are, relative to the market, our book is still fairly healthy.

We have not modified loans with sponsors through PIKs and A/B structures and other types of tools that we've seen in the market. We do think there's opportunity for us to bring in new sponsors into some of our deals, perhaps offering them seller financing or other opportunities or other structures that could make it a more attractive asset to a new sponsor who wants to take over the asset. Time is a big one, right? A new sponsor will want to say, "How much time do I have?" Because the further out that horizon goes, the more likely they're being attractive assets. In terms of resolutions and to the first part of your question, I would put it back-weighted.

In terms of our team and our discussions, we are kind of on a daily basis trying to, either with the existing sponsor group or a new sponsor, try to put these assets in a place that says, "Okay, these are now performing assets. Finish the business plan. Rent growth is expected," as I mentioned earlier. In almost all markets, there is still some absorption issues in certain markets that we need to manage through over the coming 12 months. We are hopeful that we can continue to have positive resolutions as we have in the past.

Steven Delaney (Managing Director and Senior Equity Analyst)

Thanks. That's helpful context for the way you view it, and I hear you loud and clear. Just a quick follow-up. Your loan portfolio is about $1.1 billion on roughly $240 million of capital. James Flynn, you talked about a new kind of state-of-the-art CLO. As you look apart from this credit resolution issue we were talking about earlier, but just looking at the portfolio in more of a macro sense, is there, with a new improved financing structure, let's just say mid-2025, CLO, I assume, do you see potential for expanding the portfolio slightly with the existing capital base with some improved financing structure?

James Flynn (CEO)

The answer is, I mean, the short answer is yes. I think that during this now, it's been a couple of years, we've maintained a higher liquidity than we have in the past, in the historical past, for a good reason. We are delevering today through the FL1 payoffs. In a normalized market, as we get through resolving these assets in a positive way, I do think, again, using that match term financing like a CLO and understanding the size of this entity, that we're slightly under-levered compared to historical norms. Assuming that we are comfortable with our liquidity position, comfortable that we've resolved the assets that we want to make sure that we get through, I think that there's a reasonable expectation that the portfolio would grow a bit. Even on the resolutions, a lot of what I'm talking about is liquidity, right?

We can't control when we need the liquidity. We might need liquidity for three assets over one quarter. If we only needed it for one, we would think about it differently. There really is a drag from maintaining that flexibility and that we hope to go away or at least decrease over the coming quarters.

Steven Delaney (Managing Director and Senior Equity Analyst)

Thank you both for the additional color this morning.

Operator (participant)

Thank you. Once again, if you would like to ask a question, simply press Star, followed by the number one on your telephone keypad. Your next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Please go ahead.

Christopher Nolan (Managing Director and Equity Research)

Hi. On a question of loan loss provision expenses, what's the correlation between your risk rating and provision charges?

James Flynn (CEO)

On the specific reserves there, Chris, as is policy, when we specifically evaluate those, we're looking at the fair value of the underlying collateral. Fives, we look at individually. In terms of the general pool for the portfolio, clearly, the risk ratings are going to bring with it a higher probability of default as you scale up from threes to fours. As I mentioned, the fives are specifically evaluated. It is also dependent upon underlying loan metrics that are going to drive risk rating, but it is also going to be driving probability of default in the model that we and others use for the general pool.

Christopher Nolan (Managing Director and Equity Research)

Great. Thank you. Then.

James Flynn (CEO)

But.

Please.

To be clear, for the fives, we're looking at the underlying collateral.

Christopher Nolan (Managing Director and Equity Research)

Okay. Understood. In the early market comments and talking about the stability of multifamily cap rates, does the changing market expectation in terms of rate cuts sort of start derailing refinancing negotiations for any portfolio companies or so? Simply, is that really affecting it at all, or is really the financing all about the cash flow of the property?

James Flynn (CEO)

Yeah. Look, obviously, any cut in the short-term rates helps current sponsors. I do not think that 25 or 50 basis point cut this year is having a huge impact or will have a huge impact in how people think or act psychologically. I think it is probably a good thing. I mean, one thing to remember, if we are cutting rates, the reason for the cuts, I mean, just broadly speaking, is either because inflation is completely in check or there is some concern about the health of the economy and whether we are headed toward a recession. Neither, especially the latter, is not exactly a positive event. When you also consider multifamily, historically, multifamily still performs pretty well in those times of the market. People are buying homes less. They stay in their apartments. They rent more.

There is kind of an odd dynamic there with the economy versus performance in multifamily. I think the bigger driver is that the 10-year has stayed in the relatively low fours here for a few months. Most expectations for the year-end 10-year have come down a bit over the last quarter and a half. Some are still up towards five, but consensus is more in the 4-4.5% range. I think that is the big driver. You have a lot of capital that wants to be deployed, some international, I mean, large checks that want to get back into the US market that have sat on the sideline. That is going to drive some value appreciation, in my opinion, and also just transaction volume going up. There are a lot of positives there.

As you know, deliveries in most markets, not every single market, but in most markets have peaked and will continue to run off. There is a bit of an absorption issue, but there is still, long-term, a supply-demand imbalance in most markets. That is why we are currently seeing rent growth in almost all major metros. Where we are not seeing rent growth, there are still projections for rent growth as we move throughout the year. You have a lot of all of those signs, I think, for sponsors and people that are either managing an existing asset or thinking about getting back in the market are a bit more bullish and real than maybe they have been in the past year or two.

Christopher Nolan (Managing Director and Equity Research)

Okay. Thank you.

Operator (participant)

Thank you. I am showing no further questions at this time. I would like to turn it back to James Flynn for closing remarks.

James Flynn (CEO)

Just appreciate everyone joining and the interest in the platform, and look forward to speaking to you all again next quarter. Take care.

Operator (participant)

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.