Please note this event is being recorded. I would now like to turn the conference over to Jack Switala. Please go ahead, sir.
Great. Thank you, operator. Welcome to the KKR Real Estate Finance Trust earnings call for the first quarter of 2021. We hope that all of you and your families are safe and healthy. As the operator mentioned, this is Jack Switala. I recently joined KKR, and going forward, will serve as the head of investor relations for KREF. I'm looking forward to connecting with you directly. Today, I'm joined on the call by our CEO, Matt Salem, our President and COO, W. Patrick Mattson, and our CFO, Mostafa Nagaty.
I would like to remind everyone that we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in our earnings release and in the supplementary presentation, both of which are available on the investor relations portion of our website. This call will also contain certain forward-looking statements which do not guarantee future events or performance.
Please refer to our most recently filed 10-Q for cautionary factors related to these statements. Before I turn the call over to Matt, I will provide a quick recap of our results. For the first quarter of 2021, we had GAAP net income of $29.2 million, or $0.52 per share, which included a $1.6 million benefit from a lower CECL provision. Distributable earnings this quarter were $30.4 million, or $0.55 per share, driven by the growth of our portfolio and continued strong asset performance. Book value per share as of March 31st, 2021, increased to $18.89, which includes the CECL impact of $1.06 per share, as compared to $18.76 as of December 31st. Finally, I would note in mid-April, we paid a cash dividend of $0.43 per share with respect to the first quarter. Based on yesterday's closing price, the dividend reflects an annualized yield of 8.7%.
With that, I would now like to turn the call over to Matt.
Thank you, Jack, and welcome to the team. Good morning, everyone, and thank you for joining us today. We hope you are all healthy and safe. KREF is off to a great start this year. In terms of financial results, another outstanding quarter, with distributable earnings of $0.55 per share, covering the $0.43 dividend by 1.3x . This is a continuation of the success we had in 2020, where distributable earnings covered our dividend by over 1.1x , despite the global pandemic. Our earnings continued to benefit from strong portfolio performance and existing LIBOR floors. We are seeing good progress on property business plans, which we expect to lead to elevated repayments in the back half of the year, after which earnings will begin to normalize. On the origination front, we remained active with a continued focus on high-quality real estate owned by premier sponsors.
In the first quarter, we originated three loans totaling $535 million, comprised of two office properties and one multifamily property. Net funding this past quarter exceeded $330 million, and our portfolio grew to over $5.3 billion as of March 31st. Our pipeline remains robust, with approximately $750 million of loans either closed or under exclusivity subsequent to quarter end. To support this growing opportunity set, earlier this month, we raised $172.5 million of perpetual preferred stock at a fixed-for-life cost of 6.5%. This permanent capital allows us to take advantage of current market opportunities, service our institutional clients, and grow our portfolio, which should lead to improved operating leverage over time. On the origination front, I want to highlight the Dallas office loan we recently closed.
COVID has impacted the office market. I thought it would be helpful to give a little color on how we are approaching the sector. The short answer is we are marginally more conservative on office. We'll continue with our same approach as pre-COVID, with a focus on growth markets and a cautious approach to the gateway markets. The first thing we start with on all loans is sponsorship. In this case, it's a premier sponsor with over $100 billion of real estate AUM and a deep knowledge of the Dallas-Fort Worth market. Second is asset quality and location. This is a Class A property located in an infill suburban location in close proximity to affluent housing and decision-makers that value convenience. Third, the business plan is consistent with our light transitional target profile.
The property has recently undergone a CapEx plan and is currently 75% occupied to a diverse tenant base. The sponsor intends to increase occupancy and rents as tenant leases expire. Finally, we have a low basis on acquisition financing at 65% loan-to-cost. Turning to our forward pipeline, we have been active in the market with six senior loans that are either closed or under exclusivity, which represents $750 million in committed principal amount for KREF. Our activity reflects our desire to capitalize on attractive opportunities in the current market, some of which stem from COVID's impact on real estate. While we continue to target similar profiles to our pre-COVID activity, like multifamily and select office, we are increasing our focus and activity in the life science and industrial sectors. I would note that this current pipeline is underwritten to a weighted average IRR in the 13%-14% range.
Our portfolio composition remains consistent and is comprised of predominantly lighter transitional floating rate senior loans secured by institutional quality real estate. 85% of the portfolio is comprised of multifamily and office properties. Hospitality and retail continue to be underweight and represent just 6% of the portfolio. Performance of the loan portfolio remains strong, with interest collected on approximately 97% of the portfolio as of the first quarter. To summarize, we had a successful quarter across earnings, originations, and portfolio performance. We're excited about our franchise and our competitive positioning in the market as we head into the second quarter and beyond. With that, I will turn the call over to Patrick.
Thank you, Matt, and good morning, everyone. At the quarter end, a market leading 76% of our asset financing remains completely non-mark-to-market, and the 24% remaining balance is only subject to credit marks. Also as of quarter end, our debt to equity ratio and total leverage ratio were 2.1 and 3.7 x respectively. Following the preferred stock raise, our debt to equity ratio and total leverage ratio sits at 1.7 x and 3.1 x respectively today. We expect our leverage ratios to return to the first quarter range in subsequent quarters as we invest in new capital. As we have discussed in the past, we have a robust quarterly asset review process, and we evaluate every loan in the portfolio to assign an updated risk rating. The current portfolio risk rating of 3.1 on a five-point scale is consistent with the weighted average risk rating last quarter.
As we've done in prior quarters, we continue to provide a detailed breakout of our watch list loans in the supplemental presentation. Notably, 89% of our loans are now risk rated three or better, which has improved from 84% in Q4. The improvement is the result of two, four risk rated loans being upgraded to a three risk rating in Q1, specifically the Fort Lauderdale hotel loan and the San Diego multifamily loan. We are seeing improving trends in additional properties, which may lead to positive credit momentum in other assets. Approximately 2% of our portfolio is risk rated a five, and is primarily comprised of our Portland retail loan. While the property remains challenged, we continue to dialogue with the existing and prospective sponsors regarding the next phase of the property, and we continue to believe there are adequate CECL reserves.
We received approximately $244 million of repayments in the first quarter. While it's always difficult to predict repayments with certainty, consistent with our comments last quarter, our expectation remains for increased repayment activity in the second half of the year. In the near term, KREF should continue to benefit from its in-place LIBOR floors and elevated effective net interest margins. While the portfolio is almost entirely floating rate, currently 69% of the loan portfolio has a LIBOR floor of at least 1%, and half of the loan portfolio is subject to a LIBOR floor of at least 1.65%. LIBOR floors on new loans are resetting to spot rates, typically around 10 - 15 basis points. As we experience a rotation in our portfolio through loan repayments and new originations, we expect our effective portfolio NIM to compress over time.
Finally, KREF finished the quarter with a strong liquidity position of over $570 million. This total included $209 million of cash and $335 million in undrawn corporate revolver capacity available to us. Combined with our recent closing of the preferred stock offering, we remain well positioned to capitalize on the growing pipeline of opportunities.
In summary, another strong quarter with elevated distributable earnings of $0.55 per share. We remain on offense, originating three new floating rate senior loans totaling $535 million, and have a robust pipeline of approximately $750 million under exclusivity or closed since quarter end. We completed an inaugural perpetual preferred stock issuance, adding permanent capital that positions the company for portfolio growth and improved operating leverage. Thank you for joining us today. Now we're happy to take your questions.
Our first question today will come from Jade Rahmani with KBW. Please go ahead.
Thank you very much. I was wondering, Matt, if you could just put a little color around your comments that around back half of the year, elevated repayments, after which you expect earnings to normalize. Are you saying that earnings could be elevated in the back half of the year or under pressure in the back half of the year?
Hey, Jade. Thanks for the question. I think as we look forward over the next couple of quarters, we still feel like earnings could be elevated as we sit with the existing portfolio and the embedded LIBOR floors. We're seeing that our best guess, and it's difficult to predict for sure, but our best guess right now is that, in the third and fourth quarter, we'll have some pretty heavy repayments. Once we get through those quarters, that's when you'll start to see a more normalization of earnings.
Will those repayments have an earnings benefit from accelerated prepayment income?
Yeah. We'll get some of that. We'll come through obviously in that particular quarter. Then, the following quarter, obviously, we're not benefiting from those LIBOR floors anymore and the kind of excess NIM. In those quarters they pay off, we'll see a little bit of that come through.
The weighted average IRR of 13%-14% on the pipeline, how does that compare with the IRRs the company has historically generated?
Yeah. You want to just think about the market environment today. I guess comment one would be the pipeline is very big. There's lots of opportunities to look at. That's certainly a positive in what we're seeing. Competitive environment is high. You've certainly seen spread and yield compression in the market. That being said, the way we finance ourselves, there's also a lot of competition in that market, and you've seen cost of capital from the debt side compress. You asked about the ROE that we saw in the pipeline. I would say that's slightly higher than what we saw pre-COVID.
My guess is some of the loans that we're doing over the next couple quarters will look a little bit more like we did pre-COVID, so closer to that 11%-12% all-in IRR context, just as our expectation of the competitive pressures on the market continue.
Just the last question would be, in terms of capital management, capital issuance, the preferred stock issuance. With the stock at about 6% above book value, at what level would it make sense to issue common equity?
Yeah. I think we've been pretty disciplined in the past about accessing the market when it's only accretive to the stock. The preferred equity issuance took a lot of our near-term or solved for a lot of our near-term needs for liquidity. We had a developing pipeline. I think on the last call we mentioned we were focused on equity, we were able to execute a really successful deal on the preferred. Looking ahead, what we're really trying to balance is our expectations of these repayments. As we start to think about the third and fourth quarter and heavy repayments, I'd say that it probably gives us a little bit more caution in terms of raising equity here in the near term because we did the preferred.
We can certainly take care of our existing pipeline, and then we'll start to get into a repayment schedule. That's not to say things can't change. Our pipeline could continue to grow beyond what we think our repayments are. That's how we're thinking about it in the near term.
Thank you very much.
Our next question will come from Stephen Laws with Raymond James. Please go ahead.
Hi, good morning. I guess first maybe to follow up on Jade's questions, I realize these are all unique loans and certainly could be coincidence, but when I look at the subsequent quarter end loans, it looks like a much lower percentage of that loan was funded than your originations in Q1. As you try and manage your pipeline into that repayment wave in the second half, are you actively trying to increase the unfunded commitment balance to have those drawdowns take place in three or six months or 12 months? Is that something you look to do or is that just coincidental with the post 2Q originations or post 331 originations?
Well, thanks for the question, Stephen. Good to talk with you. I think having some base level of future funding is appropriate and takes a little bit of the pressure off quarter-to-quarter originations. That being said, I think what you're describing is a little bit more coincidental and it's a little bit in response to some of the market opportunities you're seeing. Some of that future funding or most of that future funding is coming from our participation in the industrial sector of the market, where we've rolled out a program where we have some construction lending for obviously new build industrial. That's driving most of that, not all, but most of that kind of future funding component that you're seeing in terms of the change quarter-over-quarter. It's a sector that historically we haven't lent a lot on.
Obviously with COVID, and it's a big accelerated sector and with e-commerce and we think it's a really attractive opportunity set. We've done a couple of deals and that's driving that number.
Great. PIK income, apologies, I haven't made it through the entire 10-Q yet. What was PIK income for the quarter? Maybe how did that change on a year-over-year basis, which would obviously be a very tough comp for most companies. Maybe how did that change on a sequential basis?
Stephen, it's Patrick. I'll talk about that. On the PIK income, we saw a little bit of change into the first quarter. It's really driven by just a couple of assets. I think we've talked about some of these assets in the past, including our one hotel loan in Brooklyn as well as the condo loan in New York. We've got about $3.3 million in total. I would note that in the quarter we also saw a reversal of a PIK. One of our hotel loans or other hotel loan, which is the Fort Lauderdale hotel loan, got modified. There was a $10 million pay down, a true-up of the PIK balance. That loan is now current going forward. It's a modest amount that we had. I think that the net change was about $850,000 for the quarter.
Okay, great. Pretty small then, especially relative to some peers. Thanks, Patrick. Matt, last question. Of the four loans, two New York resi, Brooklyn hospitality, Queens industrial. Can you maybe just talk about New York? You guys are there, feet on the ground. Maybe just give us a bigger picture of New York and how you guys are seeing things as far as the reopening and people returning to the office and other things like that, just given you guys are all based there.
Sure. Well, I think you're just starting to see the reopening, as you mentioned, and that's impacting, I would say, first and foremost, multifamily where you've seen the move-ins that a number of folks obviously that moved out during the pandemic. I think you're starting to see the repopulation to come back as these offices open. I think New York is probably opening more slowly than some of the other markets with people opening either a little bit now but a lot of talk about opening full in the fall from a lot of tenants. You're just starting to see, I think apartment prices stabilize, start to go up a little bit. We've seen some concessions come down in the apartment sector.
I think the office market is still delayed in terms of trying to understand where rents are resetting, where sublease rates are, where occupancy will settle in. That's a little bit more, I would say, uncertain at this point in time. I would say the financing markets are cautious on certainly the office sector in New York still. The embedded assumptions I think people are making on new loans are very conservative in Manhattan. In terms of specifically on the asset qualities or the asset property types that we have, we think about the condo inventory loans that we have, the two that you mentioned. One that has product readily for sale. It's a little bit later in its business cycle, or business plan. We've seen a lot of progress and a lot of velocity. I think you're seeing that across the market.
Certainly, you can read about articles in terms of how much velocity there is on condo sales in New York now. We've certainly seen that at our property. I think we've had almost $50 million of sales since COVID, and there's a whole number of units still under contract that haven't closed yet. Certainly positive in that regard. I think it just shows you that if you lower prices as the market comes down to meet the market, you can certainly sell units, and there's liquidity in clearing levels. Those are the comments I'd make around New York.
Great. I appreciate the color there. Thanks for the comments, Matt and Patrick, and congratulations on a nice quarter and the recent capital raise.
Thanks, David.
Thank you.
Our next question will come from Timothy Hayes with BTIG. Please go ahead.
Hey, good morning, guys. I just want to circle back my first question around, I think you might have made a comment about funding costs and how that relates to the all-in ROEs you're seeing on new loans versus pre-COVID. Are you seeing repo costs come down and/or advance rates move up as the banks are competing with a very hot capital markets backdrop right now? Just part B to that is, a lot of your peers have executed on CRE CLOs this year and just curious with your light transitional strategy. I know you already have done one before, but how you feel about that financing strategy in the near term as well.
Tim, good morning. It's Patrick. I'll take both of those. First on the financing cost, yes, we are seeing compression on the liability side. Sometimes these don't always move in tandem, and sometimes there's a delay to what's happening on the asset side. We're certainly seeing across the board repo spreads compress in the market. I think in part, that's driven by what's happening in the broader securitization market, including the CLO side. I think this has been a very active year on the CRE CLO side, and as you noted, some of our public and private peers have accessed that market. We're seeing one or two deals come to market a week. Very active and at a very efficient cost of capital. That's a market that we continue to track closely. We have a very attractive cost of capital on our existing CLO.
We haven't had a lot of repayments to date, so even though we're past the reinvestment period, we're still benefiting from that very attractive cost of capital. We're encouraged by what we're seeing on the liability side, in particular in the CRE CLO market, as we're thinking about financing needs over the course of this year.
Got it. That's helpful. I guess we'll see what happens there, but just based on kind of what the velocity of those spreads coming in and maybe what you would expect with the CRE CLO, do you think that the trajectory in funding costs would just partially offset the pressure on asset yields you're seeing as repayments are recycled into new assets at tighter spreads or lower basis? Would it partially offset, fully offset, or more than offset? Just curious what your expectations are there. I guess, just more broadly, I'm trying to see if it's really the spread, the NIM spread that's coming in that's going to bring earnings power more to more normalized levels next year, or if it's really just maybe expectations for portfolio contraction as repayments pick up.
Sure. I think about the offset as being sort of partial to what's happening on the asset spread. I think you also have to separate a little bit of the current effective NIMs that we have in the portfolio are really a benefit from these LIBOR floors. When we originally underwrote those loans, that's not the NIM that we were anticipating, but obviously we've gotten the benefit of over the last year and a half or so. If I compare the market today to some of the pre-pandemic levels and think about that from a NIM standpoint, it's not actually very different from the pre-pandemic market. We're seeing NIMs that are, on a relative basis, very attractive. I think if we try to compare them to our effective NIMs today, it will look like a lot of compression.
If you look at it in comparison to the market pre-pandemic and before we saw a really dramatic drop in LIBOR, they're actually very comparable. We're obviously pleased with that and the level of activity that's happening on the liability side. I think the other thing that we will likely get the benefit of as some of these loans pay down with these higher LIBOR floors, as I mentioned on the opening remarks, we're resetting new LIBOR floors to the current spot rates, 10-15 basis point LIBOR floors, which means that at some point in the future, if and when LIBOR does rise, we'll have some positive correlation within the portfolio to that rising LIBOR, and we'll get some positive benefit in a higher rate environment.
Right. No, that definitely makes sense. I can go back and see what dividend coverage looked like before COVID, and if that's where NIM is expecting to trend, we can put two and two together. I'm just curious if you could just provide some comments around your expectations for dividend coverage as we get to that more normalized earnings run rate early next year.
Yeah. I think our pre-COVID quarters where we were fully deployed, I think, are fairly representative. That said, it's really early to think about that and how that all transpires over the next year or so. I think our expectation is that they will normalize, i.e., that some of the elevation that we've had in these earnings will sort of come down. I think in terms of exact levels, in terms of coverage, I think it's too difficult to predict at this point.
Sure. Okay. Just on credit, I know you made some comments earlier, but can you maybe give us an idea how interest collection or just rent collections on properties underlying your portfolios have trended so far in April relative to the first quarter?
I think on some of the April numbers, it's probably a tad bit early to get all of that sort of flow through. I would say that from an interest collection standpoint, it remains the same two loans that we're not collecting on, which is the five rated loans. I think on the underlying properties, if I look at just some of the occupancy trends that we're seeing, in particular on the multifamily assets, we're seeing positive improvement there from the later quarters of last year. I think that's encouraging. Directionally, I think it's positive. I don't have an exact figure in terms of what those collections have been, but they've been very high across the portfolio. We've seen very little issue with tenant collections at our assets, and I expect that trend to continue.
Great. Well, I appreciate the color there, guys. Congrats on a strong quarter.
Thanks, Tim.
Our next question will come from Charlie Arestia with JPMorgan. Please go ahead.
Good morning, guys. Thanks for taking the questions. Most of them have been covered already, wanted to follow up, I guess, on Tim's question on the financing side, or I guess realistically asking a similar question in a different way. You guys closed the term loan late last year at L + 475, and I think there was a 100 basis points floor on that. I believe that started amortizing in March. When you look at the new loans that are coming on the portfolio that are inside those spreads and overall the more diversified funding structure that you guys have beyond the traditional warehouse lines, can you just talk a bit about where you see loan origination spreads directionally going from here?
I guess ultimately how you see the economics of those new loans coming on the book flowing through to the bottom line versus your all-in funding costs.
Hey, Charlie. Thanks for the question.
Yeah. Patrick, I can take the first part of it.
Sure
kind of hand it over to you. I would say on the new origination front, for light transitional assets, we're seeing all-in coupons, call it in the mid-to-low 3% context right now. We've been creating a little bit more return than that playing in some of the sectors we like industrial, for instance. You can capture a little bit more return there, and that's on the construction lending side. I would say in that, call it mid-to-low 3% context for the very light transitional assets right now. Patrick, I'll hand it over to you for the second part.
Yeah. On the financing side, Charlie, the Term Loan B obviously is one piece of our diversified financing structure. I think we're encouraged by what we're seeing in that market. We've got a soft call date that expires September 1st of this year. We think that there are potentially a number of deals that will see fresh pricing points between now and then. We're encouraged by what we're seeing in that market, and obviously there's an ability to kind of reset rate there. It's one component of what we're doing, and we think about that cost of capital holistically. You'll see that we've got a range from our repo facilities to the CLO to the Term Loan B that all aggregate to form this kind of weighted average cost of capital.
I think you've seen we've been very disciplined about, one, diversifying it, but two, driving costs down over time.
Got it. Okay, thanks for that. Just switching gears real quick. Looking at the forward pipeline, I saw one of the new April loans secured by a single-family rental portfolio. Would love to get your thoughts more broadly on that property type. It seems like it's been a real growth area over the last couple of quarters post-COVID, kind of just curious to get your outlook on the competitive environment there.
Yes. It's Matt, I can take that one. Yeah, it's a sector we like a lot. Obviously, one of the COVID-accelerated areas as well. When you think about what we're doing across industrial life sciences would certainly be another area that has benefited from the pandemic. This particular loan, it's a build-to-rent for an institutional sponsor that we covered pre-pandemic. It's a unique opportunity within Phoenix. This is an area that has a lot. When I say area, single-family rental broadly. It's got a lot of access to liquidity across both debt and equity. I don't see this as being a very large part of the portfolio, but we like the sector, and if we can find opportunities like this, we'll continue to do these.
There's a lot of liquidity in this sector, so we'll have to kind of pick our spots in terms of where we can create returns and the risk profile that makes sense for us.
Thanks very much for taking the question.
Our next question will come from Donald Fandetti with Wells Fargo. Please go ahead.
Yes. Jack, congratulations on the new role. Matt, on the Fort Lauderdale Hotel, can you remind us where RevPAR occupancy was pre-COVID, where it sort of dipped and where we are today, just to give a sense on the recovery there?
Don, thanks for the question. Let me pull that up. I don't have those numbers off the top of my head.
No problem.
Let me give you the current month. Occupancy was in the 70s, ADR in the high 300s. RevPAR, very high, 200s. If you look back to a stabilized number, call it like a T12 pre-COVID. Occupancy's in line with that, and ADR is actually higher. Our RevPAR for this current month is ahead of, call it a T12 number pre-COVID. Now, keep in mind this is obviously a good time to be in Florida in terms of vacations and things like that. We would have expected that. The performance has been very strong, and clearly the sponsor here is committed to the asset with the most recent modification coming out of pocket and paying off the accrued interest that we had or the PIK interest and de-leveraging the loan by $10 million.
We upgraded this loan from a four to a three for all these performance and the most recent modification, et cetera.
Got it. Thanks for the details. I guess also on the shift to a little bit leaning harder into industrial. I would think that sort of these developments that it sounds like is in the pipeline for e-commerce would be pretty competitive. Are you seeing a lot of competition on those types of deals, or is there enough sort of construction risk to where you can create some value?
It's a competitive sector. It does feel like there's a lot of opportunity here. The construction component of industrial obviously is a little bit more simple than a multi-story building, whether that's multi or office. Just the fact that it is construction does limit the capital base, especially from some of the regulated institutions. I think there's certainly opportunity here, and it's an area, if you think about the equity side of our business, we have millions of square feet of exposure and market knowledge. I think it works nicely with our overall theme of investing in areas that we have a lot of knowledge in that we can use the overlap from what we're doing on the equity side and the credit side and vice versa.
I do think we're certainly seeing a lot of opportunity just given the increase in demand in that sector. I'm hoping that will continue through the year.
Okay. Thank you.
Our next question will come from Steve DeLaney with JMP Securities. Please go ahead.
Yeah, thanks, and good morning, everyone. I would also like to welcome Jack. We look forward to working with you moving forward. Guys, obviously everything has been covered pretty thoroughly. The only thing I have left on my list is the $1.6 million reduction in the CECL provision. Is that specifically related to the two four loans that were upgraded to three? Given that there are several other four-rated loans, if those were to also be upgraded, could there be additional CECL recoveries in the year ahead? Thanks.
Good morning, Steve. This is Mostafa Nagaty. Hope you're doing well. Thanks for that question. Hi, Stephen. Yeah, good question. With respect to the CECL, obviously we had the $1.6 benefit, there's a variety of factors that kind of resulted in this net decrease of our reserve quarter-over-quarter. I think for most it's really the macroeconomic scenario that we implemented this quarter, which is pretty much in line, slightly better than prior quarter. That's resulted for a good portion of the increase. There were some offsetting factors, I think, on some of the upgrades that we had, namely the Fort Lauderdale Hotel that were also resulted in but a good portion of the decrease. That was also offset by some of the originations. Keep in mind that this quarter, our originations were double the repayments, there were some offsetting factors.
I think the two key factors here are kind of the upgrades in the upgrade for the hotel loan that you just touched on, as well as the macroeconomic assumption.
Okay. Well, I know you guys have taken a lot of questions, so I will leave it there. Sounds like you're in a great position set up for 2021, so congratulations.
Thank you.
Our next question will come from Arren Cyganovich with Citi. Please go ahead.
Thanks. You mentioned your pipeline is fairly large, and you've had some nice activity post-quarter. What's the activity of the sponsors? Are you seeing that kind of continue to increase? Are the sponsors coming with a lot of the similar type of properties? Are you seeing a more broadening of sponsor activity related to your business?
Well, thanks for the question. I definitely think we see increased activity from all of our sponsors. That's just a continuation, really, of, I would say, what we saw in the fourth quarter of last year, certainly ramping up into this year. I think there was a lot of pent-up demand, both on the refinance side, but as well as on the acquisition side. The flow of capital continues in the alternative space and specifically within real estate. If you think about kind of the real estate setup right now from a macro view, in a low interest rate environment, where there's potentially long-term concern around inflation, real estate's set up pretty nicely. It's got a yield component to it, and can be a hedge against inflation.
Our expectation is that you'll see continued capital flowing into the sector, which will obviously benefit our sponsors and create deal activity for us. In terms of where we see the focus, it's similar to what I think we described on the call. There's a lot of haves in the real estate world now, and there's a much more clear bifurcation between the haves and the have-nots. Sectors with the most entrants are all the housing sectors. Obviously multifamily, single family rental. I think there's a lot of demand coming back for student housing as schools announce their back-to-school programs for the fall. Senior housing is probably a little bit behind all that, given the unique impact of COVID on that sector. You're seeing things like life science, industrial, a lot of activity in those sectors.
That's not just from capital base, it's obviously from the tenant base as well, that's driving this activity. There's a real need for either converted space or new space in some of these sectors. That's great for our capital base because that's really what we're set up to do, is to lend on that level of transition. I still think there's a big question mark for most of our sponsors around how to play some of the office sector, how to play the retail sector. Obviously, the retail sector is not something we've historically been that involved in. Certainly you've seen a big pause there for the obvious reasons. I'd say nothing too unexpected, just continued activity and a real focus on where people have identified growth.
Very helpful. Thank you.
This will conclude the question and answer session. I'd like to turn the conference back over to Jack Switala for any closing remarks.
Great. Hey, everyone. Thanks for joining our call today. Feel free to reach out to me or the team here with any follow-ups. Thanks, everyone.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.