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Broadmark Realty Capital Inc
NYSE:BRMK

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Broadmark Realty Capital Inc
NYSE:BRMK
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Updated: Jul 12, 2024
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Earnings Call Transcript

Earnings Call Transcript
2022-Q3

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Operator

Greetings. Welcome to Broadmark Realty Capital's Third Quarter 2022 Earnings Call. At this all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host Nevin Boparai, General Counsel. Thank you, sir. Please go ahead.

N
Nevin Boparai
General Counsel

Good afternoon. Thank you for joining us today for Broadmark Realty Capital's third quarter 2022 earnings conference call. In addition to the press releases issued this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the Investors section on our website at www.broadmark.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings.

During this call, we will also be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filings. This afternoon's conference call is hosted by Broadmark's Interim Chief Executive Officer, Jeffrey Pyatt; Interim President, Kevin Luebbers; and Chief Financial Officer, David Schneider. Management will make some prepared comments, after which we will open up the call to your questions.

Now I will turn the call over to Jeff.

J
Jeffrey Pyatt
Interim Chief Executive Officer

It's been a busy time here at Broadmark. This afternoon we announced a change in leadership for the company. I have assumed the role of Interim CEO and Kevin Luebbers, a Director and Chair of the Audit Committee, has been named Interim President. The board is in the process of launching a search for a new Chief Executive Officer and Kevin and I will serve in our roles until that individual is hired. Also, Kevin and I will remain members of the board and I will continue to serve as its Chairman. These appointments follow a mutual agreement to separate between the board and Brian Ward, who will leave his role as CEO and resign as a director of the company effective immediately. We thank Brian for his contributions to Broadmark and we wish him all success in the future.

Additionally, I am pleased to share that Jonathan Hermes has been hired as our Chief Financial Officer effective December 1, 2022. He is a highly capable financial leader with technical accounting and capital markets experience. Jon is no stranger to Broadmark as he worked closely with the company when we were going public. Jon will succeed David Schneider, who previously announced his intention to resign to accept an opportunity at a private company. David will remain with Broadmark until year-end to ensure a seamless transition. Given this is his last call with us, David, on behalf of the board of directors, we thank you for your numerous contributions and helps in the transition and we wish you all success in your next chapter.

While we've experienced significant leadership change over the past year, the foundational principles of our business remain unchanged. We founded Broadmark over a decade ago in the wake of the global financial crisis, so we know a thing or two about navigating choppy waters. We built this business from the ground up and have been tested through multiple economic cycles. We have a long history of successfully deploying capital and we have originated over $4 billion in loans since inception. Through it all, we have lived up to our commitments to our borrowers and thrived as a trusted go-to provider of capital.

The keys to our success have been woven into our DNA from the beginning. We are disciplined underwriters requiring significant equity from our borrowers. Our loans are generally short-term in nature, allowing us to reprice our book with relative speed. Notably, we have always operated with little or no debt, significantly reducing risks associated with liquidity, refinancing and interest rate exposure.

As we look to the future, we remain confident in our cycle-tested strategy. We are diversified across a national footprint and have a deep and experienced team of ground level, real estate investment experts. As we manage our existing portfolio in the current economic and financial market turmoil subsides over time, we believe we will emerge in a strong position to take advantage of the opportunities that arise to resume growth and create value over the long term.

I'll now turn the call over to Kevin to share some additional perspective.

K
Kevin Luebbers
Interim President

Thank you, Jeff. Good afternoon everyone. I'd like to comment a bit more on the external environment and on one additional announcement we made today. 2022 continues to bring unprecedented challenges to the global economy, real estate and the financial markets. Persistently high inflation has forced the Federal Reserve to rapidly increase rates, greatly impacting asset values in the near term. 30-year residential mortgage rates have risen from roughly 3% one year ago to over 7% today, and commercial mortgage rates have followed a similar pattern. And while overall employment has continued to grow, real wages have declined and there are increasing signs of recession risk amid a backdrop of political uncertainty.

With counter vailing risks of inflation along with the rising rates and recession fears, financial market volatility has hit levels not seen since the global financial crisis in 2008, 2009. Virtually all equity and fixed income assets have been significantly impacted. Despite this environment, we believe that Broadmark is positioned ultimately to thrive as opportunities arise as they always do from market dislocation and uncertainty. We believe over time we will be able to capture more than our share as we move ahead.

Beyond originating new business and ongoing critical priority that we are focused on is effectively addressing our nonperforming loans. Capital is precious and while we have confidence, we will ultimately resolve those loans in a manner favorable to Broadmark until they are resolved, it continues to create a drag on our growth and our earnings. To that point, the team will remain hyper focused on this issue. David will provide additional detail, but we wanted to call out that this will continue to be one of our most important areas of focus.

Let me now turn to our share repurchase program. Today, the board approved a share repurchase program to purchase up to $75 million of common stock. We remain committed to continuing to source and fund new loan originations, but we recognize the value of our company and wanted an additional capital allocation lever on which to potentially add opportunistically in the future.

I'll end by saying that the board has taken decisive actions on behalf of shareholders and stakeholders to ensure the company is positioned with strong leadership and clear strategy to weather the current environment and create long term value. With an experienced team in place and the lowest levered balance sheet in the industry, Broadmark is poised to build the business in a disciplined and thoughtful manner.

I'd like to thank our team for their hard work and contributions, and while this will take some time, we believe we are taking the right actions to move forward and achieve long-term success.

And with that, I'll turn the call over to David.

D
David Schneider
Chief Financial Officer

Thanks, Kevin and good afternoon, everyone. Our operating results are detailed on Slide 7 of our earnings presentation. For the third quarter of 2022, we produced total revenue of $27.1 million and net income of $2.6 million. On a per share basis, this reflects GAAP net income of approximately $0.02 per diluted common share. The quarter-over-quarter change in GAAP net income reflects an increase to our CECL loan loss reserve of approximately $0.07 per diluted common share. This increase was primarily due to an increase in specific loan loss reserves of $9.6 million that I will discuss shortly.

Adjusting for the impact of non-recurring costs and other non-cash items, our distributable earnings prior to realized loss on investments for the third quarter were $18 million or $0.14 per diluted common share. Interest income on our loans in the third quarter was $20.7 million, and fee income was $6.4 million. On the expense side, for the third quarter, we had cash compensation and employee benefits expense of $2.7 million, while G&A was $3 million.

Our total cash compensation and G&A expense improved 3.4% from the second quarter of 2022 and with $18.3 million in expense year-to-date. We maintain our expectation of approximately $24 million in total cash compensation and G&A expenses for the full year 2022.

In the third quarter, we executed on 18 loan originations with an average loan size of $7.8 million at an unlevered yield of 12.9%. As a reminder, our loans remain short-term with a weighted average term of 14 months at origination for the third quarter. The short-term nature of our loans reduces our exposure to interest rate fluctuations. It also allows us to be nimble and pivot fairly quickly as the environment evolves.

Turning to portfolio management, as of September 30, we had contractual default rate of 19% of the total portfolio by value. During the third quarter, we foreclosed on one small loan and received payoffs on six loans in contractual default status, representing $18 million in total commitment. At the end of the quarter, we owned 11 foreclosed properties with $93.5 million in carrying value.

As I noted earlier, our CECL reserve was up in the third quarter. This was primarily due to a specific $9.1 million loan loss reserve associated with a loan collateralized by a hotel in Colorado with a borrower in bankruptcy and a fail plan to flag the hotel resulting in material deterioration and the appraised value. As a reminder, our portfolio is less than 5% hotels and weighted towards single and multi-family collateral with substantially lower LTVs, and we do not believe this troubled loan is representative of our broader portfolio.

Outside of this specific reserve, we noted a 13% increase in our aggregate CECL general reserve based on consideration of current macroeconomic factors. From an earnings perspective, as of September 30, we had approximately $115.4 million in principle outstanding on loans and non-accrual status and foreclosed properties, which resulted in a drag on earnings of approximately $0.05 per diluted common share for the third quarter of 2022.

As Kevin mentioned, effectively addressing our non-performing loans remains a high priority as we continue to work diligently to resolve these issues to achieve the best result for Broadmark and in a manner accretive to shareholders. Ultimately, we strive to generate strong cash flow and earnings growth, so effectively executing on this strategy is essential as we work to maximize performance.

Now turning to our balance sheet as detailed on Slide 16 of our earnings presentation. We had $61 million of cash in a fully undrawn $135 million credit facility or total liquidity of $196 million as of September 30. While our loan payoffs were significant in the third quarter of 2022 at $198 million, this was largely due to a few expected prepayments on storage facility loans.

However, given the changing economic backdrop, we began to see a slowdown and payoff activity in October associated with a decrease in available takeout financing in the market. We continue to work with borrowers to find exit opportunities as we focus on capital and liquidity preservation.

With our $100 million of five-year 5% fixed coupon senior unsecured notes outstanding, we currently have a debt equity ratio of 8.8%, which remains the strongest in the mortgage REIT sector. Maintaining a fortress balance sheet has always been a foundational principle for Broadmark, this provide a significant competitive advantage in the current environment that will allow us to remain opportunistic with an evolving market environment.

With that, I’d like to pass the call back to Jeff.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Thank you, David. We understand that we delivered a significant amount of news this afternoon. Given the circumstances, the Board will continue to take clear, decisive action on behalf of shareholders as necessary. We have a leadership team in place that has significant and proven industry experience that will work together to unlock long-term value. We understand this will take time, but we know the right path forward and given our alignment of interest with our shareholders, we can and will achieve the desired results.

This concludes our prepared remarks. We will now open up the line for questions. Operator?

Operator

Thank you, sir. Ladies and gentlemen, we’ll now be conducting a question-and-answer session. [Operator Instructions] The first question we have is from Stephen Laws from Raymond James.

S
Stephen Laws
Raymond James

Hi, good afternoon, Jeff.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Hi, Stephen.

S
Stephen Laws
Raymond James

Good to talk to you again. I guess I first want to start with talking to you, the management change, can you talk about timing of what you think it’ll look like to get the new permanent team in place? Any search expenses, severance expenses, we need to think about the model and is that I believe David gave a comment on the full year, but how do we think about expenses around the turnover?

J
Jeffrey Pyatt
Interim Chief Executive Officer

I’ll let David address those parts. But the – this just happened Stephen, and so the Board is going to begin a search to find a new CEO and I think the important takeaway there is that Kevin and I, who both have a lot of experience working together in this company, our committed to being here until we find that person and get him or her up to speed.

And then David, you want to discuss the costs and so on that part of the question?

D
David Schneider
Chief Financial Officer

Sure. Yes, absolutely. Thanks. Thanks, Stephen. Great to hear from you. So the current structure with the leadership changes that we described with specifically with Jeff and Kevin coming on Board, those will have no material expense. In fact, there’s probably a bit of a net savings from that perspective. Longer term to your question, if we do engage a search firm, there could be a potential search fees associated that similar to what we incurred in the first quarter of this year. But it’s probably too soon to tell what that number would be. So I think right now, I’m still comfortable running with the $24 million of cash comp and G&A expenses and we can provide you an update in the interim and we’re in the fourth quarter.

S
Stephen Laws
Raymond James

Great. Thanks, David. To think about the investment portfolio, now it’s on a footnote on the supplement. I think you did your first mezz loan at $10 million. Given the change and the increased focus on asset management or continued focus on improve portfolio performance, how do you think about portfolio transition or appetite for mezz loans? Is that something you’d be sort of put on hold until you get the new team in place or how do you look at that?

K
Kevin Luebbers
Interim President

Jeff, why don’t you take that on the mezz loan piece?

Operator

Apologies. It seems Jeffrey has dropped off and he is in the process of reconnecting with us.

K
Kevin Luebbers
Interim President

So Steven, I’ll take this. This is Kevin. Hi, by the way. It’s been a little while. No change to the strategy. Broadmark’s always made loan decisions based on underwriting and attractiveness, and so they’ll continue to do that. But it’s early days. So we’re going to look at all that. Dave, do you have anything to add?

D
David Schneider
Chief Financial Officer

No, I mean, I think when we did the first mezzanine loan, we said, don’t expect this to be a large portion of our portfolio. I think the focus is just on finding good risk weighted investments while also kind of juggling that with capital liquidity preservation. So doesn’t mean we’re going to do a bunch of mezzanine loans, it doesn’t mean we won’t do mezzanine loans. I think we’re just looking for good opportunities to play capital, while being mindful of the current macro environment.

U
Unidentified Analyst

Great. And when you think about the dividend level versus current portfolio earnings, given the performance levels. How do you think about the trade off of continuing to maintain the stable dividend that’s not being covered? Or do you think about right sizing the dividend and then increasing a back up as portfolio performance improves?

D
David Schneider
Chief Financial Officer

I’ll take that one. Ultimately Steven, this is a Board decision that is reviewed and determined each month. So in light of the rapidly changing business environment, management is taking a hard look at the business. That work is ongoing and will take a little time. The Board’s policy has always strived to set a dividend that is sustainable and that overtime is covered by distributable EPS. But again, it’s a Board decision and they’ll continue to review and determine it each month.

U
Unidentified Analyst

Great. Appreciate the time this afternoon, Jeff.

J
Jeffrey Pyatt
Interim Chief Executive Officer

You’re welcome.

U
Unidentified Analyst

You’re back, Jeff.

Operator

Thank you.

J
Jeffrey Pyatt
Interim Chief Executive Officer

I am back. Yes, Sorry.

Operator

Thank you, sir. [Operator Instructions] The next question we have is from Steve Delaney from JMP Securities.

S
Steve Delaney
JMP Securities.

Hello, everyone. And Jeff and Kevin nice to connect with you again. Probably wasn’t part of – necessarily part of your plan six months ago, but I respect you have a lot of talent to bring to bear and the company is lucky to have you to step in. So we are in a very different world than we were six months, 12 months ago from a real estate standpoint. Brian, there was obviously some enthusiasm. He referred to a rebranding. I think just maybe trying to raise visibility and broadened products. Unfortunately, maybe where we are right now in terms of priorities in the market for all real estate lenders, maybe broadening or expanding is less important than focusing on the existing portfolio. I guess, my question there is about your current lending focus.

Can you talk about what you’re comfortable doing and you’re having repayments obviously come in, although my next part of my question is the slow down there. I was caught by David’s comment about takeout financing and that seems logical. So as we think about it today and as your team comes to work, what is the like intensity or focus about generating new credits relative to where it may have been over the last couple years? And just comment that on that and whether there’s a different level of selectivity, yield requirement, et cetera at this time in your lending appetite? Thanks.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Sure. That’s a lot packed into that question, Steve. And I guess that the overarching theme is that whether I was in the seat or Brian or now me again, we’ve never changed from our strict underwriting standards. When you and I first met, I think we were in nine states. We’re now a national lender. We look at every market with the same careful eye that we always have and every loan opportunity. And so we still make sure that we’re paying attention to loan to value ratios, to loan to cost ratios, to all those things that have always been underpinnings of our loan portfolio. And in these markets it is an uncertain time. And so we probably want to look a little more carefully, not that that’s probably not the right term, but we want to continue to look carefully and just make sure that we’re underwriting good loans.

K
Kevin Luebbers
Interim President

And this is Kevin. Let me just add a little bit to that. And I think careful is an appropriate word. Payoffs are an important source of capital for us. And for the reasons David mentioned, rising interest rates, rising cap rates, the exits are difficult for our borrowers and we expect that they will be for who knows how long. So we’re just being cautious and careful, but we are a lender and so we’re going to continue to make good loans where they’re available.

S
Steve Delaney
JMP Securities.

And on your borrower’s situation, I assume if you have a good property and you have a reasonably responsible borrower and he’s basically just saying, one, normally you would think, okay, if I complete it, I sell it. Two, I just – I refi it in some fashion, you have a certain term, you’re in there for the renovation or construction, and you’re not in there necessarily for a five year loan. Does this – is you’re primary, if it’s a good borrower and a good property is the logical thing to do just to provide extensions and have that developer get more involved in leasing or whatever the strategic plan was for the property, if in fact a new operator can’t be brought into the property, or in fact, for your REO, you guys have a lot of expertise, do you – are you thinking about some of your REO if there’s just not going to be a bid that you like to kind of take over and manage that property in the interim, and try to ride this thing out without giving away property?

J
Jeffrey Pyatt
Interim Chief Executive Officer

Kevin or David, do you want?

K
Kevin Luebbers
Interim President

Yes, I’ll take it. I’d say it’s a, Steve, it’s a case by case basis, and that’s exactly what we’re working on. The answers are different depending on the situation.

S
Steve Delaney
JMP Securities.

Sure.

K
Kevin Luebbers
Interim President

Yes.

S
Steve Delaney
JMP Securities.

Well, listen, I know it’s a challenging time. You’ve got a great fortress balance sheet, and I’m sure that you’ll come through it, and applaud the effort on the buy back. And I kind of echo Stephen Laws’ comment, the dividends obviously a board decision were – there’s going to be a lot of dividends reconsidered simply because – one, a 15% yield is kind of crazy, but two, you got to a balance it against liquidity needs and the buyback opportunities. So, nobody signed on buying your stock thinking they were going to get 15% yield. So, I’ll just leave it with that thought and wish you all well and good health.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Thank you, Steve. Nice talking to you.

S
Steve Delaney
JMP Securities.

Yes, sir.

Operator

Thank you. The next question we have is from Crispin Love from Piper Sandler.

C
Crispin Love
Piper Sandler

Thanks. good afternoon, gentlemen. Just starting with the leadership transition Jeff, I’m just curious why now for the change in CEO, as Brian’s just been in the seat for about 18 [ph] months or so in what’s been a very difficult economic environment. And just related to that, do you expect any strategic changes with a new CEO?

J
Jeffrey Pyatt
Interim Chief Executive Officer

The why now, I think the answer is that the board and Brian sat down and looked around and decided this was the right time. And, I think, I don’t think I can go much beyond that, candidly. And then as far as strategic changes, Brian did a lot of good work around here. I don’t see us unraveling all of the good work that he did if that’s the question. And we’ve got great management in place. The underwriting and the portfolio management are all good folks. And so I really think the underpinnings are good for where we are.

C
Crispin Love
Piper Sandler

Thanks. That’s helpful. And then a second one just on loans and contractual default, so they’re now just under $290 million. Can you just speak to some of the key reasons for the continued increases that we have seen? Is it due to being more aggressive and putting loans in contractual default, which Brian has talked about in the past? Or is it the current environment or just curious what else might be at play here?

D
David Schneider
Chief Financial Officer

Sure. Thanks, Crispin. This is David. I’ll take this one and let Kevin and Jeff comment as needed. So, I think we were up quarter-over-quarter about $60 million in defaults. And the biggest driver I would say is primarily the latter. In terms of being more aggressive, I could note that, I think $40 million out of the $60 million was us deciding to strategically put seven loans. Six of them were performing, one was default with the same borrower, and we decided to put the whole package in default just to expedite the process around probably the most valuable, but risky loan. That was the one in default. So we’re making a little bit quicker decisions around putting borrowers in default, exercising our right to start the foreclosure process to put a little bit more pressure and just trying to find more timely exits.

In the third quarter, I think we had about 18 million of defaults resolved in October, want to say we were about 20 million. And we’re expecting kind of a little bit of an increased pace consistent with that on a monthly basis, just by way of being a little bit pushier, being a little bit tougher, being more aggressive with foreclosure action or threatened foreclosure action and finding ways to exit as quickly as we can.

C
Crispin Love
Piper Sandler

Thanks, David. And just one last one for me, just on the $12 million provision in the quarter, was that provision, was it all due to the Colorado hotel loan? And then what is the size of that loan?

J
Jeffrey Pyatt
Interim Chief Executive Officer

Sure, I’ll take that one, Crispin. It’s nearly totally driven. So I think our increased quarter-over-quarter was about $10 million and $9.1 million of that was a specific reserve on this one, Colorado World Resorts loan. It was a about a 40% discount to the principal outstanding in the appraised value that we had originally expected on it.

C
Crispin Love
Piper Sandler

Thanks for taking my questions.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Thanks.

Operator

Thank you. The final question we have is from Matt Howlett from B. Riley.

M
Matt Howlett
B. Riley

Good afternoon. Hi Jeff, nice speaking with you again.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Yes.

M
Matt Howlett
B. Riley

My question is on the buyback. I mean, Jeff, I think a lot of shareholders are going to ask the question and I’m curious to hear the answer. I mean, you look at buying back shares today, your stocks roughly at a 30% discount to tangible book value. You look at that versus originating new loans, the 13% unlevered. What can you tell us in terms of the propensity of the Board today to aggressively pursue share repurchases in light of the stocks discount to tangible book and what metrics do you look at versus originating with Broadmark [ph] shares?

J
Jeffrey Pyatt
Interim Chief Executive Officer

Kevin, would you handle this one, please?

K
Kevin Luebbers
Interim President

Sure. Sure. So hey Matthew. The Board did approve a $75 million share repurchase program. It’s just one additional capital allocation lever that we think is prudent to have. So, in terms of our use of capital, our main business is to source and fund loan originations. But we do understand the value of our company and again, we thought it was prudent to have this additional lever on which to potentially act in the future.

I’ll also say that we announced the plan, but the amount, the timing, the execution, all of that is part of our overall capital allocation strategy, which will determine over time. So not much to add in terms of price or expectation or all that kind of stuff. In terms of the dividend, you asked about that, obviously, it’s a balance. Both are taken into consideration. Our shareholders expect dividends. Our goal, as I said, is to set a dividend that’s sustainable over time and covered by distributable EPS. So we’ll continue to do that. Our Board will continue to do that. This is just another use of capital lever that we now have.

M
Matt Howlett
B. Riley

Got you. When you look at, obviously, is tangible book value, the stock price to tangible book, a good reasonable proxy on when it would be attractive to buyback share originating, I mean, just walk me through the accretion sort of analysis. I guess my question is why wouldn't that take priority when the stock is that tangible, meaningful discount to book?

J
Jeffrey Pyatt
Interim Chief Executive Officer

It's something we'll analyze, but I can't tell you exactly what the price is or how we're going to look at it. Well we put the plan in place and now we intend to do the work and execute when we think it's appropriate.

M
Matt Howlett
B. Riley

Okay, fair enough. And then on the topic of yield, I mean obviously there was guidance of yields falling over timeline 10% to 12%, clearly that that [indiscernible] 13%, I mean, with spreads now higher interest rates, I mean, is – can we sort of look at our models and say, the margin, the spread, the unlevered spread is going to start moving the other way, given the environment we're in or is something else there?

J
Jeffrey Pyatt
Interim Chief Executive Officer

I'll say something just generally and then I'll turn it over to David for more specifics. We do think given all the dislocation that there will be opportunities we want to be poised to take advantage of those opportunities. It's still very early. But in terms of kind of where we see that, I'll let David answer the questions more specifically.

D
David Schneider
Chief Financial Officer

Sure. Thanks for the question, Matthew, it’s David. Yes, so we were at 12.9% on new origination dollar yield unlevered this quarter. I think last quarter we were around 10.1%. So I think we talked a little bit last quarter about there being a lag in timing in terms of price discovery from bid ask spread on construction lending. So I think this was the first quarter we started to see that close. Now, I would say some borrowers are probably hesitant to pull the trigger and do new loans given the current macroeconomic environment. But we did finally start to see that gap close a bit from the bid-ask spread, and it went in our favor.

So, I think we said in our prepared marks expect to be somewhere around 12% to 13%, at least in the near term. I think that's just feels good based off this past quarter.

M
Matt Howlett
B. Riley

Got you. And I guess just the last question why I have you, I mean, clearly the priority is to get to the non-accruals that cost you free of cash and capital. Are the debt markets open? I mean, are they available to Broadmark? I mean, you talked about in the past, I mean, maybe things have changed now, but I mean, what – you look at the leverage, what does stand out? I mean, there's nothing obviously do for a while let’s say 8.8%, but I mean, what's – when you talk about issuing debt, what can you tell us in terms of where you can issue it?

D
David Schneider
Chief Financial Officer

Sure. I mean I’ll take this and let Kevin and Jeff chime in as well. I mean, right now doesn’t seem like the time to be raising capital. We still continue to have conversations where we’re ready to access the capital markets if they, we see some windows of sustainability but current market, just you can see how few transactions there are. So if I, we certainly wouldn’t be able to execute at a 5% fixed rate coupon like we did in November. I wish I could go back in time and triple the sides of that. But I think, in terms of cash liquidity position, we feel good about where we are for now.

We’re measuring that against our origination pipeline, other demands like the dividend and where share repurchases could come into play in the future. So I think there’s a few different levers that we’re measuring, but we don’t need capital right now. And now it feels like a time where if you’re raising capital, it’s a bit of a really urgent need or desperation, which we’re not in that position. So we continue to monitor it and hopeful that we see some more transaction volume in the near term.

J
Jeffrey Pyatt
Interim Chief Executive Officer

I would just add, I would echo what David said, but that’s the job is to stay in touch with the capital markets. Like all REITs need to stay in touch. It’s a capital intensive business. We need capital. So whether now is the right time, I don’t disagree with what David said but that can change. And so we need to just be ready. And so that’s what, we’ll try to be.

M
Matt Howlett
B. Riley

Well, my question asked another way, but do you still feel like, the model could support, when the time is right? Eternal leverage a half – something where there is, there’s leverage on the balance sheet?

J
Jeffrey Pyatt
Interim Chief Executive Officer

No decisions. I think, it all depends on how everything, it’s just another decision that we make. It depends on loans that we can originate. So no I’m not signaling anything more than that. It’s just being in touch with the markets. I think, as David has mentioned in past calls, we constantly evaluate the capital markets and make decisions all the time. So we’ll just keep doing that.

M
Matt Howlett
B. Riley

Got you. Well, I’ll leave it there and good luck on the search and we’ll wait and update. Thank you.

D
David Schneider
Chief Financial Officer

Thank you.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Thanks.

Operator

Thank you, sir. That concludes the question-and-answer session. I would like to turn the floor back over to management for closing remarks. Jeffrey, please go ahead, sir.

J
Jeffrey Pyatt
Interim Chief Executive Officer

Thank you everyone for joining us. One last time, David Schneider, we all wish you the very best and I look forward to speaking with all of you on our next call. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, that then concludes today’s conference. Thank you for joining us. You may now disconnect your lines.

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