Q4 2023 Lument Finance Trust Inc Earnings Call
Participants
Andrew Chang; Investor Relations; Lument Finance Trust Inc
James Flynn; Senior Director, Portfolio Management; Lument Finance Trust Inc
James Briggs; CFO; Lument Finance Trust Inc
James Henson; President; Lument Finance Trust Inc
Crispin Love; Analyts; Piper Sandler
Steve Delaney; Analyst; Citizens BNP
Matthew Erdner; Analyts; JonesTrading
Stephen Laws; Analyts; Raymond James
Christopher Nolan; Analyts; Ladenburg Thalmann
Presentation
Operator
Good morning and thank you for joining the Lument Finance Trust Fourth Quarter 2023 Earnings Call.
Today's call is being recorded and will be made available via webcast on the company's website. And I would like to turn the call over to Andrew Chang with Investor Relations at Lumen Investment Management. Please go ahead, sir.
Andrew Chang
Thank you, and good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's Fourth Quarter 2023 financial results with me on the call today are James Flynn, our CEO, James Briggs, our CFO, Jim Henson, our President, and Zachary Halpern, our Managing Director of Portfolio Management on Friday, March 15th, we filed our 10-K with the SEC and issued a press release to provide details on our fourth quarter 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 meaning of Section 27 A. of the Securities Act of 1933 and Section 21 E. of the Securities Exchange Act of 1934.
When used in this conference call. Words like outlook for valuate, indicate, believes, will, anticipates, expects, intends, and other similar expressions are intended to identify forward-looking statements. 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 statements.
These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q and 10-K, and in particular, the Risk Factors section of our Form 10-K is not possible to predict our or identify all such risks. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and the Company undertakes no obligation to update any of these forward-looking statements. Furthermore, 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 as the most comparable measures prepared COMPARED prepared in accordance with GAAP can be accessed through our filings with the SEC at www.SEC.gov.
For the fourth quarter and fiscal year 2023, we reported GAAP net income of $0.07 per share and $0.29 per share of common stock, respectively. For the fourth quarter and fiscal year 2023, we reported distributed earnings of $0.1 and $0.26 per share common stock, respectively. This past December also declared a dividend of $0.07 per share.
With respect to the fourth quarter, bringing our cumulative declared dividends for the year to $0.26 per share. I will now turn the call over to James Flynn. Please go ahead.
James Flynn
Thank you, Andrew. Good morning, everyone, and welcome to the Lument Finance Trust earnings call for the fourth quarter of 2023. We appreciate everyone joining us this morning. I'll start with the macro perspective and twice. We're viewing 2024 with cautious optimism.
Consensus expectation is that further hikes are now behind us and most economists believe a soft landing is more probable in 2024 than just six months ago, US economy has remained resilient. Unemployment rates remaining below 4%. Inflation, albeit a bit a bit moving up and down is moving closer to that target rate of 2% with all the most recently seen available data. That being said, the risk of recession remains elevated as geopolitical uncertainty persists. It is yet to be seen how the Fed's current monetary policy, which operates on a lag fully plays out across the economic landscape.
That's good. Multi-family has its own set of opportunities and challenges in the short term. The property sales market continued continues to be primarily driven by forced sellers, significantly eliminating acquisition financing opportunities. In addition, the multifamily market is expected to experience slower NOI growth resulting from short term softening of short-term supply in some markets sorry, supply demand dynamics, I should say in some markets and higher property operating costs, including labor, insurance and maintenance.
In addition to the impact, the higher rates have had across the industry. Despite the challenges, multifamily remains a favored asset class among investors. Given its strong historical performance and constructive long-term fundamentals, a lower short-term rate environment in the latter half of 2024 could contribute to improved asset performance in our portfolio and perhaps a narrowing of the current bid ask spread between property buyers and sellers.
Positively impacting valuations and in turn debt proceeds Further, we expect to see significant refinance opportunity on the horizon for the MBA and others in the industry are projecting well over $300 billion of multi-family loans expected to reach initial maturity by the end of 2025 and over $650 billion of multi-family loans are expected to mature within the next three years.
As previously discussed on last quarter's call, the Company had a busy and successful year closing at $386 million secured financing in July that increased our levered investment capacity to approximately $1.4 billion. During the fourth quarter, we experienced $43 million of loan payoffs and acquired or funded an additional $77 million of loan assets.
As of year-end, our capital was effectively fully deployed with approximately 94% of our loan portfolio collateralized by multifamily assets and more than 75% of the portfolio risk rated three to moderate risk or better. We had only two assets identified as risk rated five and recorded no asset-specific reserves during that period. Five being.
The Company continued the Company continued to maintain an attractive long-dated liability liabilities, relying primarily on two secured financing structures to lever its investment portfolio. The reinvestment period of 2021 CRE CLO transaction ended this past December with an 83% attractive advance rate and a weighted average cost of sulfur plus 155 basis points even as the transaction begins to delever.
We expect this structure to continue to provide an attractive cost of capital relative to current securitization and warehousing alternative alternatives in the market. We do, however, expect to explore and carefully consider repayment refinance opportunities for that CLO over the coming quarters.
With deep experience and expertise in multifamily lending policy remains committed to its existing investment strategy. We believe the Company provides its shareholders with a unique value proposition among comparable mortgage rates. Given our deliberate focus on middle market, multifamily credit success and active asset management and strong partnership from the product works platform company has been able to maintain a stable dividend better than average credit performance within its investment portal portfolio. And this is superior dividend yield relative to many of its peers.
That I'd like to turn the call over to Jim Briggs, who will provide details on our financial results. Jim?
James Briggs
Good morning, everyone. last Friday 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 4 through seven of the presentation, you will find key updates and an earnings summary for the quarter for the fourth quarter of '23 reported net income to common stockholders of approximately $3.8 million, or $0.07 per share. We also reported distributable earnings of approximately $5.2 million or $0.1 per share.
There are a few items I'd like to highlight with regard to the Q4 P&L. Our Q4 net interest income was $9.1 million compared to $9.5 million in Q3. While Q4 net income and net interest income benefited from a full quarter's worth of levered earnings from the LMF. 2023 dash one financing transaction that closed in July. A sequential Netflix decline was primarily driven by fewer payoffs during the period, which resulted in lower exit fees payoffs and paydowns during Q4 totaled $43 million as compared to $111 million in the prior quarter associated Q4 exit fees of 210,000 were down approximately 57% from the prior quarter. Reduced Q4 payoffs also impacted our total operating expenses as well.
As reminder, when one of our loans are paid off in agency refinancing provided by an affiliate of our manager. The borrower exit fee is waived pursuant to the terms of our management agreement. In that instance, we do, however, receive a credit to expenses reimbursable to our manager of 50% of the waste exit fee.
Total operating expenses were $2.7 million in Q4 versus $2.4 million in Q3. The majority of that expense increase is driven by lower weight exit fees and lower associated credit to expenses, driven by overall lower payoffs relative to Q3. Outside of that, operating expenses were largely flat quarter on quarter. Primary difference between reported net income and distributable earnings was the approximate $1.4 million net increase in our allowance for credit losses all with respect to our general reserves, the primary driver of that general reserve increase was a modest uptick in average risk rating from 3.4, 3.5 changes in the macroeconomic forecast and relative cautiousness in our estimate modeling.
As it relates to CRE pricing during this period where there has been very little transaction activity, we evaluate our five rated loans individually to determine whether asset-specific reserves for credit losses are necessary and determined that none were necessary as of December 31st, 23. In that context, I'd like to note some subsequent events related to the two five rated loans we had at year end with respect to the five rated loan on a multifamily property in Columbus, Ohio, that has been nonaccrual with collections accounted for on a cost recovery basis.
We received proceeds related to the loan in both Q4 and Q1 for carrying value and the loan was reduced to $8.9 million as of year-end from $12.8 million at the end of Q three. And with the $13.5 million in proceeds received in Q1, our carrying value in the asset will be reduced to zero after taking into consideration certain legal and other costs recoverable.
We expect the net of the Q1 proceeds received to result in a gain of approximately $1.9 million in Q1 with respect to the $36.8 million by rated loan on a multifamily property in Virginia Beach, Virginia that was on nonaccrual as of December 31st, due to monetary default, we entered into a loan modification with the borrower that, among other things, resulted in a $3.6 million principal paydown and all past dues being brought current, which will result in interest of approximately 500,000 that was unpaid as of year-end being recognized in Q1.
Jim will touch a bit more on this modification in his remarks. As of year-end, the Company's total equity was approximately $241 million. Total common book value was approximately $181 million or $3.46 per share, flat versus prior quarter. We ended fourth quarter with an unrestricted cash balance of $51 million and our investment capacity through our two secured financings where effectively what's effectively fully utilized.
I will now turn the call over to Jim Hanson to provide details on the Company's investment activity during the quarter and portfolio performance?
James Henson
Yes, thank you, Jim Briggs. I will now provide a brief summary of recent activity within our investment portfolio during the fourth quarter, we experienced a $34 million net increase in our loan portfolio after accounting for $43 million of loan payoffs and paydowns for the period for the full year we experienced a $388 million net increase in our loan portfolio after accounting for $271 million of loan payoffs for the period.
The growth of the portfolio was driven primarily by our success in executing the LMF. transaction in July as well as our manager's diligent efforts to redeploy capital through reinvestment features in our secured financing vehicles. Of the $77 million of loan investments acquired or funded during Q4, approximately 70% were collateralized by multifamily properties will be $660 million of loan investments acquired or funded.
During the full year, approximately 95% are collateralized by multifamily properties. As of year-end, our portfolio consisted of 88 floating rate loans with an aggregate unpaid principal balance of approximately $1.4 billion, with 94% of the portfolio collateralized by multi-family properties, 100% of our floating rate portfolio is indexed to one month.
So for our investment portfolio continued to perform well during the fourth quarter, and we ended the period with a little more than 75% of our portfolio risk rated a three or better and experienced on only a modest quarter-over-quarter increase in the weighted average risk rating going from 3.4 to 3.5, primarily driven by a migration of some of our risk-rated two assets to a risk rating of three of positive note, our five rated aggregate loan exposure decreased from three to own assets during the quarter.
As previously stated, as previously, as a previously rated five loan with an unpaid principal balance of $19.6 million was brought current with respect to interest payments and restored to accrual status during the fourth quarter, Jim touched on two five on the two five rated loans that remained at December 31st, 2023 and were evaluated for specific reserves. As noted, based on proceeds received on the Columbus, Ohio loan, we have no remaining asset on the books coming out of Q1.
With respect to the modification on the $36.8 million or five rated loan collateralized by a multifamily property in Virginia Beach, Virginia. The modification of the loan increased the note rate to sulphur plus 400 basis points from sulfur plus 327 basis points. In addition to a principal paydown center, bringing current of all past due interest, escrows and reserves, the stated maturity of that loan has been amended to April five 2024 with the ability for the borrower to extend under certain conditions to May third, 2020 for very positive developments and indicative of the success in active asset management that Jim mentioned in his opening remarks. Despite the potential for further issues with specific loans, we remain confident in our ability to proactively manage and manage repayments and achieve positive asset management outcomes within our portfolio, particularly in light of successful results in recent months.
With that, I will pass it back to Jim Flynn for some closing remarks.
James Flynn
Thank you, Jim, and thanks again to our all of our guests on the call and appreciate your time and your interest. And I'd like to open the call up to questions.
Question and Answer Session
Operator
Thank you. Ladies and gentlemen, if you would like to ask a question, (Operator Instructions)
Crispin Love at Piper Sandler
Crispin Love
Thanks. Good morning. Appreciate you taking my questions. So just first on the two five rated loans. I just want to make sure I got it right. You expect to gain in the Columbus loan based on kind of where we are holding right now in the first quarter, first kind of is that accurate? And then can you just go over the first quarter impact you expect on the Virginia each one?
James Briggs
Sure. So, for this is Jim Briggs here you've got. Thanks, Crispin. Yes. So, on the Columbus loan, and we have been accounting that are accounting for that on a cost recovery basis that we got as we receive proceeds, you've just been bringing the asset balance down. And as I mentioned in my remarks, we did some of that in Q4 with some proceeds that we received. And then we brought that asset value down to zero and it will be brought down to zero in Q1. And we're expecting based on those proceeds received of $13.5 million to book a gain a book income in Q1 P&L of $1.9 million.
Crispin Love
And for the on that JV is to clarify further, just as just to clarify, I mean the the gain as a result of recovering all of the that furniture are deferred in truck, it went on nonaccrual.
James Briggs
Yes, that's effectively what that nine is as Jim mentioned. So that 1.9 will be booked in Q1 and very likely for the reasons just described in the interest income. Why and for the Virginia Beach loan that had been on nonaccrual for 500,000 that we mentioned is the what was accrued but not accrued what was due and unpaid and not accrued as of 1231 oh 500,000, and that has been brought current and sort of the out of period impact and Q4 interest coming into Q1 will be about 500,000 of that they expect.
Crispin Love
That's helpful. And then just on multifamily bridge, more generally, we've seen stress across the industry and some of your competitors' portfolios on balance sheet as well as three CLOs but can you just discuss how kind of your performance is trending kind of more broadly kind of across the whole portfolio and what characteristics of any in your portfolio make limit kind of different from some of the multibranding French peers that are experiencing more stress?
James Briggs
Sure. I mean, look, I think that obviously we're virtually entirely multi-family, so that helps there are others that are that are there or close. So that's certainly been a positive. And while we have a meaningful component of our of our portfolio was originated in the toward the end of the on the peak of the cycle. We still we've still got a number of assets that are longer dated that have been around for a longer period of time. Perhaps not valuations and some business plans are set prior to the peak that those two things are helping. But I think probably on one of the more critical aspects here or what's helped us and it doesn't necessarily relative to peers or not.
But we've got a very experienced asset management team and that has that has worked out on assets and taking ownership of assets managed assets that has helped both in partnering with our sponsors and coming up with solutions, but has also helped us to act quickly when we find ourselves in a position of not being able to find a solution with the sponsor. I think that that reputation has helped some of our sponsors to proactively work with us. We've had a few instances, even across the broader platform of the sponsor we make on as a sponsor of sponsors who are trying to negotiate, but maybe not doing things the way that you would want them to do to say the least.
And now we've been able to kind of squash those pretty quickly, and it's resulted in us being reasonable with sponsors coming in putting forward a new consideration and legitimate plans to make an exit in exchange for more time or some relief, whatever it is that they're seeking. And usually we've been able to find an answer. I think we have high quality sponsors on some sponsors get into trouble in terms of liquidity. And there's not there's not much that they can do about it.
At the time, it's delayed, so to speak. But on with the exception of that, as long as we've got good sponsors, low capitalized, good managers with the plan, we've got folks that can help work with them to come up with a good plan and we've had, yes, great success rate for LST.
On similarly in our in our parent company, are sponsors on balance sheet as well. So we'll just continue to focus on asset management. We're regularly speaking to and visiting assets, making sure we don't get too far behind when we see an asset physically struggling where proactively out there and either thinking about ways that we can step in or working with the sponsor and how we can resolve that issue immediately before things deteriorate. So active asset management is the number one reason why by any portfolio can perform in a stressful environment.
Crispin Love
Perfect. Thanks. And that's helpful. And then just one last quick one from me. I think you had $20 million of self-storage payoffs. The corner, anything to call out there on to the past are pretty fast, both in that portfolio with that type of loan maturity or anything else at play there.
James Briggs
Yes, there were longer and those are some older assets. So constant pricing, they eventually were able to see and a permanent resolution, not resolution, but permanent financing and have those assets move out of the portfolio?
I don't think there's anything particularly noteworthy was the fact that I know someone on the call could correct me, but I mean those are probably maybe three years old or close to three years old by not seeking so there.?
James Flynn
Yeah, they've been around awhile, and I can jump in on our turnstiles, Zach and Tom.
Yes, that asset sold on well above our own basis.
Crispin Love
Quick resolution. Okay, great. Thank you. Appreciate taking my questions.
Operator
Thank you. Next question will be from Steve Delaney at Citizens BNP. Please go ahead.
Steve Delaney
Thanks. Good morning, everyone. And look, congratulations on a really solid quarter and the challenging environment that we that we have. So look, I know this is early on you all in the book. You hiked the dividend back in the third quarter, but very solid coverage here and we're hearing of some nice recoveries here in the first quarter. Jim Flynn, what do you think would be in your mind? And I guess more importantly, the Board, what do you want to see to have the confidence to make any further increase in the dividend during 2024? Thank you.
James Flynn
Thanks, Steve. Good to hear from you, sir. So, there's a number of there's a number of things that obviously we're talking to the Board. We feel we feel good about our liquidity position and relative to our size on including those recoveries, as you noted, and we feel we feel confident in the earnings. So there's there's a lot of positives there. I would say in discussion with the Board, we're looking at the broader market. And what we'd like to see is see how the next quarter or two goes in terms of what's the macro-economic environment looks like.
Are we going to continue to see some improvement or more importantly stability. That's really what I would say. The focus is is do we have stability on the capital markets have been a bit spotty, we like to see and so more transactions than we are working to that and looking at our own refinance activity and what we did at the corporate level and what we might be.
So all of those things as we expect them to play out or hook up our view, our base view would be that they still continue on the on the trajectory and as well, we get clarity on those issues. I think that will help guide the dividend discussion with the Board. But I would say from a from a corporate standpoint, taking a look at the market as a whole, I'm having some concern about some of the maturity issues, maybe less so on the on the multi side, certainly there's a lot coming up. I think a lot of loans will extend, which is what kind of stress the market sees, what kind of stress we see from some of our peers and perhaps in some of the other asset classes and making sure that we're in a position to manage any of those issues are kind of macroeconomic stress that comes up.
And if things continue on the on the base path that we are projecting, then we're going to be looking at it may be using some of that incremental cash to make new investments and there are ample opportunities for diversify a little bit from bridge loans in the multifamily space, whether that's come out in some of the mass and craft capital available out there whether that's looking at participating and some construction activity in those in the areas that are seeing, but which will be almost everywhere, no deliveries over the next after 2025 so there's some opportunity there.
We could make some new investments as well. But right now, we think that it's prudent to maintain our liquidity position and ensure that the market is continues to move in the right direction as it does. I think we'll be continuing to discuss with the Board.
Steve Delaney
That's a very helpful overview. Gentlemen, looks like you guys have I do have a lot of optionality moving forward, especially if we do, in fact, see lower rate sometime here in the next couple of quarters.
Thank you for the comments, restaurant.
Operator
Thank you. Next question will be from Matthew Irma at Jones Trading. Please go ahead.
Matthew Erdner
Hey, good morning, guys. Thanks for taking the question. Do you know what percentage of the loan portfolio extends or on is fully extended through 2024. And you know, because the average weighted term is 13 months. So just what's your expectation for payoffs this year?
James Briggs
So there's very few. In fact, we can pull that one very fewer at the extended maturity in 2024, fully extended. I mean, we're still anticipating about 30% on payoffs, which is frankly a bit a bit high, I think relative to where the market is, but that is a function of the portfolio being more seasoned than it's been over the past several years as we've seen fewer payoffs, are we seeing loans move further down further along their path on their business plan?
And Tom, I think that the you've seen a lot more activity of kind of the neutral or modest caching refinancing or financing in the market overall. And so, we've we think we're going to be at that number 30% as funding. That was kind of a normal number from 1617 through 2020 plus some years even higher. So we do think we're going to end up in and around that that percentage. But again, I think the reason is less about in the past it was kind of assets basically being flipped into the new sale or new owner because values are so much gone so much higher so quickly.
And I think here we're in an environment where a lot of a lot of owners are either looking to sell at recover some equity or to a cash-in refi because they're there relative optimism on significant rate jobs has become muted. And so there's a little bit more of a settling into the current environment of that, Catherine, I don't know if you have that.
James Flynn
Yes, I carry on with that. Yes, I can jump in with a little context there. Um, we do have one asset that is near its final maturity on. This is an asset that we previously addressed on the call. I assume that you guys have access to CRE, fewer visits and such as you review those, you would see that that asset has received a substantial paydown until we do expect that asset to refinance near term. On aside from that, we don't have and the assets and they have their final maturity in 2024 on Keep in mind that some of past initial maturities or upcoming maturities, there are also extension fees. If the borrowers choose to extent of which limit finance Truslow benefit from that as well.
Matthew Erdner
Awesome. Thank you, guys.
Operator
Stephen Laws from Raymond James
Stephen Laws
This is Clare whole appeal on for Stephen Law on first, could you please talk about your new investment pipeline and the overall competitive landscape and what were credit spreads on the new investments this quarter? And how do you see credit spreads on new investments trending over the course of this year?Thanks.
James Briggs
Yes, I'll let Dan, give some color just on the specifics because that look, we've seen we've certainly seen an uptick in recent months of assets under review on credit spreads. As you know, they've been pretty wide, but they stayed as say, roughly in the three hundreds on the Kate, you know, depending on the location, maybe you get from closer to 400 and I don't expect significant movement there because I think that's probably about where we will end up on new fee income, lower spreads for low levered, high, high quality sponsors, but that's kind of where it's been on.
So I do say I think there's pickup for a couple of reasons one, and we have seen some sellers on needing to to get out of their assets. And so that's created some transaction momentum. They're still significantly below any any normal environment. Forget about just 2021. We've also seen these recap financing available options where bridge loans, whether ours or more cases from other lenders or other places where either a new borrower current borrower coming in with capital to complete a business plan at what are the now the current levels or new levels. So, we have seen anecdotally some new opportunities. We're not going to be near the point where I would say it's robust like it was a few years ago but encouraging that you want to add a little to that.
James Flynn
Sure. I mean, relative speaking, generalizations and multifamily spreads, I would say in 2020 racetracks. The wides of multifamily bridge was somewhere around 425 or so for. I think as Jim Flynn alluded to, some spreads are trending tighter. I think that baseline is somewhere between 50 to 75 over. So for right now, I think we've all seen the graphs of multifamily acquisition activity on the property side, and we know that that remains substantially muted, which is cause now on supply and still enough lenders to keep the demand for loans escalated from. So I think that will settle into that sort of spread range here. Keep in mind that things like warehouse lines, CRE, CLO spreads have also tightened in sympathy. And so, economics are still online display, tighter spreads.
Stephen Laws
Great. Thank you. And my last question is just given the positive resolutions of the top five rated loan from PRN, how do you think about your C-stores, or do you think there'll be a reserve release in Q1? Thanks.
James Briggs
Today. I mean from yes, I mean from you're going to have a couple of things there, Jim talked about what is the macroeconomic environment that we're going to see, right. So we have a one year forecast period there and the reserves can be driven by by by what we see there.
Yes, I think from the positive resolutions. And our feeling is there will be some stability in our risk ratings so that that shouldn't be a driver. I think it's going to be driven more by the macroeconomic environment and what your views are of that and what reality is.
Stephen Laws
Okay.
James Henson
Please, do you have any further questions? Thank you.
Operator
Thank you. Once again, as a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone.
Christopher Nolan from Ladenburg Thalmann
Christopher Nolan
But given your comments in terms of landlords having a narrower on operating margins on, can you give any color in terms of where the interest coverage is for your portfolio in the fourth quarter, where does compare to where it might been in previous quarters?
James Briggs
Yes, from interest step into that one, keep in mind that all of our loans while the vast majority of our loans do have interest rate caps, meaning that the borrowers have bought options, if so for rises and the maturity of those capturing money on fourth quarter versus third quarter. Interest coverage really hasn't changed. All that much sector has been pretty consistent on. If I look at debt yields, which is an easier sort of metric to speak to Daniels been fairly consistent.
These loans are generally transitional bridge loans. And so yes, margins are and Apple all else equal tighter. However, these loans are getting towards the point of their own business plans where rents are picking up contain, perhaps occupancies clearly increasing as the units are leasing up post renovation, Phenom. And so I wouldn't say that we're seeing systematic stress quarter over quarter some, although just like any portfolio, there are heterogeneous things that pop up here and there and the system breaks.
James Flynn
I'll just add on to that as Zach mentioned, interest-rate caps, we disclosed in our MD&A at 1231, 97.7% of performing loans had interest rate caps and the weighted average strike was it 2.5%.
Okay. And then when you look closely, you know, please go ahead. Let's go to another question, but go ahead. Maria Jose, I think exactly to your point that many of these assets have obviously gone through this stressful period that we've seen with rates increasing. That has proceeded with every other cost increasing, but many of them are in the middle or early parts of their business plan.
So even those that are it really is an asset-by-asset look, meaning some assets are truly still turning units, including the new tenants. And so it felt much of the portfolio still positively progressing in terms of day yield in terms of coverage, but most are not progressing at the at the original rate of their business plan. That doesn't mean that they're not having success in many cases, but it does mean that the successes this increase in NOI is less than anticipated, but from a business standpoint, it still makes sense from the dollars being expended to increase. Noi are still accretive to us as lender.
And for the sponsorship, it is a difficult question to answer as as the whole portfolio because you really have to individually look at each asset and determine the fastest deteriorating and performance, which in most cases, the answer is no but you know, are they how they are are executing on their business plan.
Christopher Nolan
Right. Okay. On Turning to capital management, your stock is trading roughly 63% of your book value and considerations in terms of buybacks? And if not at what point would you consider buybacks?
James Flynn
Buybacks are something we do discuss with the Board. And if there's no kind of if we're at this level, we would we would do it. We do think that our stock trades at a discount to fair value, particularly relative to the peers and to the expected full recovery of our of our portfolio.
The challenge that we've always had with discussion around buyback has been one is loyalty, undersized and under scale and reducing our float even further, what impact would that have on long term on the stock price? And also, how does that impact our desire, which is to actually find ways to expand the common equity base so that those are always the push and pull.
There isn't a there isn't a specific answer that, as you know, if we're at 50% of bulk, we're going to do a buyback. But in terms of where our stock trades and relative to management's view and the Board's view of value, it's a topic of discussion broadly every quarter.
Well, on the point from your stock has really taken a nosedive ever since you did the rights offering a couple years ago. And I'm just trying to think Keno in terms of under scale, it totally get that by at some point, you know, it makes more sense to buy back your stock as opposed to investing.
No new multifamily loans.
I think that certainly the Board and we implement stuff that those alternatives and options, and we'll continue to do so for me, if like.
Operator
Thank you. And at this time Mr. Flynn, we have no other questions.
James Flynn
Please proceed. Okay. I want to thank Klaus. Thank you all for your time today and your interest and look forward to speaking again, next quarter. Thank you.
Operator
Thank you, ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.
