with the repayment? Looking forward, do you expect to just reduce your off-exposure further, potentially zero, or are you okay with that level going forward?

It's a great question. I think that really the substantial reduction in office has been primarily or exclusively driven by legacy office deals that we'd originated many years ago. When we think about new investments, although we do not have any office deals currently signed up, there are office deals in our pipeline more broadly that we are evaluating. So I wouldn't say that we are a no to office. I'd say that simply put, we're just being very selective. Frankly, it wouldn't surprise me if we did an office deal or two between now and year end. But again, nothing signed up and just being very, very selective in that sector.

Got it. Thanks. Thank you.

And next, I'll move to Tom Catherwood with BTIG.

Thanks, and good morning, everybody. Maybe building on Gabe's first question, how did the balance sheet optimization, all the work you did there, impact 2Q results? And what else needs to happen to get the balance sheet to where you kind of are in a perfectly optimized state?

Yeah, thanks. This is Ryan. I'll answer the first part of this question. and then maybe Doug or Frank will have a hat on. But, you know, this quarter, as you kind of noted, we opportunistically kind of accessed the corporate low market, what we believe are historically attractive terms. I think as to, like, why now? Why did we do it this quarter? It was a unique period of time where we could immediately deploy the $400 million that we raised without really creating any earnings drag or increasing our cost of capital. So what we were able to do is on a leverage-neutral basis and really a cost-of-funds basis, deploy $400 million to retire a legacy liability structure that was just in amortization mode and getting more expensive via each repayment. So if you think long-term, there'll be a lot of accretion to the balance sheet over time. So that's kind of the rationale. And, again, there wasn't much of an impact from a P&L standpoint.

Got it. Sorry, go ahead, Doug. No, I was just going to ask if that accretion to the balance sheet was from the structure the way it is today, or was that retiring that older CLO and then kind of getting a new CLO out the door just to make the cost of capital more efficient? What drives that accretion?

Well, I think just having a piece of reliability structure that is, you know, long dated, low cost, non-mark to market, you know, we know that over the next seven years spreads are going to, you know, move in probably both directions. So just having a very stable part of our liability structure that will allow us to be offensively oriented, I think it's just a good thing to have long term. So, we think just, again, as we try to position the company for earnings growth and kind of an all-weather balance sheet, we think it's just the right thing to do. So, that's at least how we thought about it.

Yeah, and look, I was going to add one other thing is, you know, huge credit to Ryan, who leads our capital markets team and, frankly, our whole franchise on just what we were able to do on the liability side of our balance sheet. I think on page 12 of our supplemental, there's a sort of updated, pretty thoughtful summary. But when you look at sort of all corners of it in terms of, you know, the really high percentage of non-mark-to-market, the long duration of the liability set, we really have built, I'd say, a sort of fortress liability structure. And I think a lot of that is a credit to, A, you know, the sort of de-risk balance sheet that we have relative to competitors. But then also I think it was great to get the acknowledgement from the corporate loan market that, in fact, you know, we have a clear strategy. We have a very low risk balance sheet. And again, I think we've been kind of rewarded by what I'll call the sort of debt side of our balance sheet very resoundingly. So big credit to Ryan and the team.

Got it. Appreciate that color. And then last one for me, maybe Doug, a bit of a broader question on rates and the impact on CRE. You mentioned that almost 70% of your portfolio is newer, vintage, post-2023 loans. But as the 10-year stays 4, 6 and above, how does that increase the potential for some of those legacy loans to just not be able to refinance? There's no equity left, and we end up getting more watchless migration. Or on the flip side, are you seeing kind of new origination opportunities where buyers would normally be going to agency financing and they're choosing bridge loans just because the rates are more attractive than what they would be getting a longer term fixed rate? How is it impacting both sides of the equation right now?

Sure. Yeah. I mean, I'll say first, if, you know, again, I guess we'll find out later today exactly the sort of path of the Fed. So, you know, it'll be interesting. But I think first and foremost, I think the current rate complex is definitely driving two very clear trends in our market. I think one is both marginally elevated rates, but more particularly actually rate volatility tends to reduce transaction activity. And that reduced transaction activity, I think, has led to two things. One is I'd say we are on the margin seeing slower repayments. But then, you know, two, I think what you're seeing is just, frankly, you know, a new origination market where we're still seeing primarily refinancing. So, this is kind of the two kind of like first-order effects. When I think about our balance sheet versus the market, you know, probably where we're different is if we had a portfolio of, let's just say, 100% loans that were originated, let's say, you know, pre-Fed hike. I think a move higher in rates could really kind of exacerbate the sort of breaking of those capital structures and potentially some further credit stress, whereas our balance sheet is generally different from the rest of the market in that, you know, close to about 70% of it is originated post-FED hikes. So in some ways, we view, you know, a higher rate complex as on the marginal positive for us because, you know, that ultimately, I think it's on page 14, the supplemental, you can look at, you know, sort of moves in the index rate and how that affects our earnings and simply put, as SOFR goes higher, that's going to be a net positive for, you know, for our platform. So, again, we're somewhat unique in that I think because we have newer vintage collateral that is, you know, we've done $1.7 billion of new loans over the past year. We're going to have, I think, probably a more positive earnings outcome if rates do either stay or, frankly, rise from here.

Got it.

That's it for me. Thanks, everyone. Appreciate it. Thanks, Tom.

And next we'll hear from Chris Muller with Citizens Capital Markets.

Hey, guys. Thanks for taking the question. And congrats on all the progress on the balance sheet. So I guess following up on a prior question on the new financings, I hear you guys on the cost of funds and leverage neutral, but were there fees or any drag on earnings that hit in the quarter? I'm just trying to think through the earnings run rate and if there was an impact from that in the quarter or not.

Yeah, no, that's a very good question. And obviously, there were fees associated with the transaction. The transaction closed mid-quarter, so middle of May, and you will have some amortization of the fees in the quarter for the quarter. And within our debt footnote, you can see the components of it. But there were about $8 million or so fees that got partially amortized in. And it's over the life of the instrument itself. So between five and seven years, given the term loan and the corporate revolver maturity dates.

That's helpful. And then I guess changing gears a little bit to repayment. So repayments, excluding a large office loan, were pretty low. So I guess What are you guys expecting in terms of repayments in the back half of the year? And is the slower pace of repayments just due to a slower lending pace you guys did back in 23 and 24?

I think there's a few things. I think one does dovetail with what I mentioned earlier as it relates to Tom's question. You know, from a balance sheet perspective, because we have, you know, again, largely kind of post-Fed hike collateral, What we're seeing is that, you know, those loans are more recently originated and in many cases have call protection. So we're just going to see just from like an organic perspective, I think a lower level of repayments versus competitors that probably have more pre-PEDHIC exposure. That's one. And then, two, look, I think that, you know, it can be idiosyncratic, as I've shared. I mean, even that New York City office deal that I had mentioned paid off early in the quarter. I mean, that, you know, the sort of timing on that was definitely moving around. We sort of knew it was going to happen, but at the same time, sometimes, you know, as you know, kind of getting a buyer and a seller and a new lender all in the same room to close on the same day can be challenging, and that's kind of what we're seeing. So I think it's that dynamic, I think, combined with, you know, look, I think that, you know, conviction level, I think, across our borrower base is not incredibly high right now. I mean, we're obviously both a debt and equity platform, so we're seeing kind of both sides of the coin. I mean, I think that if you're on the real estate equity side of the coin right now, I mean, it's a tricky market to really want to want to deploy capital to sort of the face of a lot of the different kind of trends that are happening. So I think those are the two factors that I'd probably highlight as it relates to due to repayments. I think, again, the last thing I'll add perhaps is when we look at our repayments going forward, again, I think that we have also primarily multifamily and industrial collateral. And the, you know, business plans there are relatively straightforward and sort of allow for us to have perhaps a better window into what that repayment profile is going to look like over the next coming quarters.

That's all very helpful.

I appreciate you guys taking the questions today.

Yep, no problem. Thanks a lot.

There are no further questions at this time. I would like to turn the floor back to management for closing remarks.

This is Doug Bucard, and again, just wanted to thank everyone for taking the time this morning on the call. and we look forward to updating you on further progress. Thank you very much.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.