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Colony Credit Real Estate, Inc. (NYSE:CLNC)
Q2 2019 Earnings Call
Aug 08, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greeting, and welcome to the Colony Credit Real Estate second-quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions].

Please note that this conference is being recorded.I will now turn the conference over to your host, Lasse Glassen, managing director of investor relations. Mr. Glassen, you may begin.

Lasse Glassen -- Managing Director of Investor Relations

Good afternoon, everyone, and welcome to Colony Credit Real Estate Inc.'s second-quarter 2019 earnings conference call. We will refer the Colony Credit Real Estate, Inc. as CLNC, Colony Credit Real Estate or the company, throughout this call. With us today are the company's president and chief executive officer, Kevin Traenkle; and Chief Financial Officer Neale Redington.

Chief Accounting Officer Frank Saracino, is also on the line to answer questions. Before I hand the call over to them, please note that on this call, certain information presented contains forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward-looking statements are described in the company's periodic reports filed with the SEC from time-to-time.

All information discussed on this call is as of today, August 8, 2019, and the company does not intend and undertakes no duty to update for future events or circumstances. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental presentation, which was released this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors. And now, I would like to turn the call over to Kevin Traenkle, president and chief executive officer of Colony Credit Real Estate.

Kevin.

Kevin Traenkle -- President and Chief Executive Officer

Thank you, Lasse . And thanks everyone for joining Colony Credit Real Estate conference calls to discuss the company's 2019 second-quarter results. I will provide a brief overview of our second quarter, including an update on the acceleration of our portfolio-rationalization strategy. Neale Redington, our CFO will discuss the details of our second-quarter financial performance, including specifics on earnings growth, deployment activity, investment portfolio, balance sheet and liquidity positions.

Colony Credit Real Estate had a productive second quarter and we are pleased with a progress toward delivering a stabilized portfolio of core holding, origination activity, portfolio rationalization efforts, and quarter over quarter in place for earnings growth all continue on a positive trajectory, while at the same time we continue to call the portfolio of legacy non-core and low yielding assets. We have prioritized the deployment of our available cash, as well as rotating out of select assets that provided minimal and in some cases no yield. Our team has established new borrow relationships and bolstered repeat customer business. In less than 18 months ago, we have completed $3.4 billion in committed transactions, including $1.2 billion year to date. Over the short periods excluding gains and losses, prioritizing deployment has resulted in approximately 20% increase in annualized core earnings from $170 million to $203 million today.

As planned, we have converted excess liquidity into high quality loans generating stable yield. From the onset of launching Colony Credit Real Estate the plan has consistently been to rotate out of non-core assets, including the sale of a real estate-private equity interest, as well as other opportunistic disposition. Along those lines, the company has already reduced its exposure to non-core assets identified at the time of our listing by over 50%. This includes the disposition of a significant majority of our private equity secondary interest resulting in $142 million, a newly available cash for us to deploy.

Our remaining non-core assets are mainly comprised of operating real estate that we categorize as other real estate, and select legacy non-performing or low yielding investments. It is worth mentioning that the majority of these non-core assets were contributed as part of the merger with to legacy non-traded REITs at our formation, and are not part of our long-term targeted asset classes or assets typically associated with traded REIT. These assets will be a particular focus during the next quarter, and we will continue to explore ways to accelerate the resolution of these non-core assets. Our plan of simplifying the business, growing earnings, prudently divesting on for or underperforming assets is paramount.

As we move forward with our accelerated rationalization strategy, there may be an interim impact on our financial statements. However, we believe the end results of executing the strategy will be an in place portfolio that produces stable-quarter earnings. Additionally, we will continue to grow earnings through the deployment of our liquidity into target asset classes at low-double-digit yield. We are confident in our ability to continue to execute this transition. And we expect the results of these initiatives will allow us to close the gap between current share price and net asset value and best position Colony Credit Real Estate for long-term success.

And now, I will turn the call over to Neale Redington for a more detailed explanation of our second-quarter operational financial results.

Neale Redington -- Chief Financial Officer

Thank you, Kevin. Good afternoon, everyone. As we discussed our second quarter financial results, I want to draw your attention to our supplemental finance report, which is available on our website. We believe this supplement will help investors and research analysts understand our company by given the additional data it provides on each of our business segments. CLNC reported a second quarter GAAP net loss $107.3 million or $0.84 per common-share and core earnings of $36.3 million or $0.28 per diluted share.

Excluding realized losses during the quarter, core earnings for $50.7 million or $0.39 per diluted share. After adjusting for favorable hotel seasonality, run-rate core earnings for the second quarter was approximately $0.38 per-diluted share, increasing our dividend coverage to 86%. As a reminder, reported-core earnings is not included in permanent real-estate provision for loan losses and seller realization event has occurs. In the fourth quarter of 2018 we recorded a $14.5 million-loan-loss provision in anticipation of a loan foreclosure that occurred in the second quarter of 2019. So, because of this timing difference, the provision reduced GAAP net income during the fourth quarter, and reduced reported-core earnings during the second quarter.

This timing issue will probably recur in the future as we execute on accelerated portfolio rationalization strategy that Kevin communicated in his remarks. Now, I would like to take a moment to discuss the impairments taken during the second quarter of 2019. First, as Kevin mentioned, as part of our overall portfolio-rationalization strategy, we began to significantly accelerate the pace of which we divest our non-core assets. As a result, we recorded $119 million of provisions of loan losses during the quarter related to four separate borrowers, as well as a $10 million impairments on owned real estate held for investment.

So let me provide some specifics about the $129 million in right down taken during the second quarter. One of the impairments is related to the ongoing resolution efforts of New York City Hospitality loans. This is a key part of our overall-portfolio rationalization strategy, as the full loans secured by this asset remain on non-accrual status and therefore are not currently contributing core earnings. We initially impaired this asset in the third quarter of last year, based on market pricing estimates provided to the borrower by its broker.

The borrower launched the sales process for the property earlier this year, which is adversely impacted by deteriorating hotel-market conditions throughout New York City in the second quarter. This resulted in lower bids from potential buyers than originally anticipated. And therefore, during the second quarter, we impaired the asset to a revised estimate of current value. The borrower is monitoring-market conditions, and we will share a progress with you in the near future.

In addition, during the second quarter, we impaired a portfolio of owned real estate in preparation for disposition we intend to execute an accelerated timeframe. One of the assets from that portfolio is on the contracts and expect it to close during the third quarter. And lastly, additional impairments were also taken related to three separate borrowers whose loans secured by reasonable retail assets, deteriorated in credit quality during the quarter. These retail assets were a high priority focuses of QMC and are included in our portfolio-rationalization strategy. Turning to deployments. We had an active second quarter by allocating and initially funding $750 million and $616 million of capital respectively.

The deployment activity for the quarter was all within the United States and the property-type mix approximately 57% multifamily, 41% office and 2% diversified. In addition, so far in the first quarter, we have initially allocated and funded an additional $234 million and $107 million of capital respectively. During the second quarter, we paid a monthly cash dividend the $0.145 common share for the months of April, May and June. And we have declared a $0.145 a share dividends for the month of July and August.

Based on our current stock price, our analyzed dividends of $1.74 per share represents an above market yield of approximately 11%. Looking at our in place-investment portfolio, our loan book continues to be the largest segment within our portfolio, with the carrying value of approximately $3.1 billion a quarter-end. The unlevered yield on our loan book is 8%, and with an average loan size of $44 million. The portfolio remains well diversified in terms of size, collateral type and geography.

At lease real estate comprises 23% of the portfolio and had a carrying value of $1.3 billion at the end of the second quarter. This portfolio consists primarily of industrial and office properties with the high-single-digits weighted average return on equity, and a weighted average lease term of 9.2 years. We view the net least assets as a core business of CLNC providing long-term stable cash flows, with the potential for capital appreciation. Moving to CRE debt securities.

Our portfolio had a carrying value of $399 million at quarter end. And the majority is investment-grade rating. In addition to generating effective yield, as CRE debt-securities portfolio provides CLNC with additional liquidity options within our investment portfolio, and access to efficient borrowing. To that end, subsequent to quarter-end, we saw the CMBS fee piece sort of premium-to-fair market value, which resulted in an approximately $33 million of proceeds, and a $4 million realized gain that we recognized in the third quarter. Turning to our other real estate segment.

This segment is predominantly cash flowing operating real estate with the carrying value of $789 million, as of quarter-end. This increased during the second quarter, mainly due to a previously identified foreclosure. Moving to our balance sheet, our total share assets stood at $5.8 billion as of June 30, 2019. Our debt to assets ratio was 52% at the end of the quarter, and our current-liquidity stands at approximately $383 million between cash on hand and availability under a revolving-credit facility.

In closing, we remain focused on executing our deployment strategy. And are convinced that our acceleration of portfolio-rationalization activities focused on non-core and low yielding assets is the best path toward delivering a stabilized portfolio. Looking ahead to the second half of 2019,we will continue in our efforts to enhance our portfolio and we see, we feel we are well-positioned to achieve our strategic objectives for the year and to drive shareholder value. I would like to thank you for your time today. And we'll now ask the operator to please open the line for questions.

Questions & Answers:


Operator

At this time, we will be conducting a question answer session. [Operator instructions] Our first question is from Stephen Laws, Raymond James. Please proceed with your question.

Stephen Laws -- Raymond James -- Analyst

Hi, good afternoon. Thanks for taking my questions. Hey Kevin and Neil and Frank. Neil, I guess maybe just to jump in and apologize but I missed, because I was trying to write some stuff down about the loan-loss provisions the impairment, but a couple of them you mentioned accelerated resolution, third quarter even or second half.

Has there anything changed since June 30 to make you think you need to take a bigger provision or impairment just given the what is going on in the market, especially recent volatility of REIT that that is having any impact and then along those same lines, I may have missed it, but is any of the New York City rent legislation or do you have any exposure there to a multifamily asset that face that new legislation.

Kevin Traenkle -- President and Chief Executive Officer

So, Stephen, let me pass on. So the last part first, because that was the largest piece of the impairment during the during the quarter, which was in the New York area. And there are a number of different factors impacting the New York market. I think most of it we see is actually foreign tourism being down, that has adversely impacted the entire New York market and in particular this property.

There are some other factors like you mentioned that the apartment aspects, but we were really seeing is probably most related to the overall-inbound market from Europe and from the UK. Jumping back out to your first question as to whether we reevaluate it. We do evaluate through issuance of financials, so which will be tomorrow. And no, we don't see any additional impairments that are related specific to the service to the movement in the bond market in particular, and the outlook. It is something that we will continue to monitor.

But as of today, we don't see any further impact.

Stephen Laws -- Raymond James -- Analyst

Great, thanks. And, this couple of moving parts to this next question. But, we kind of had a goal from I think the February call of dividend coverage by end of year kind of on a run-rate basis, maybe for December. When we adjust Q1, I think on the call from a note that kind of a run rate, number of 36.

It looks like this quarter, that number is 39, excluding the realize loan losses. It seems like trajectory still there to exit the year on a run-rate basis of $0.435. That is I guess, first is, is that accurate to think about if we if we exclude the realized-loan losses that, you know that may take place, especially given the recent provisioning that you guys took, because it looks like the loss you took in Q2 was right in line with the provision that was recorded last year for that asset. if I'm comparing everything correctly.

Kevin Traenkle -- President and Chief Executive Officer

Yes, so Stephen, I will take that. And Neil might be able to fill in on some of the specifics. But I mean, just kind of going back and reiterating what our number one priority is and I guess our top priorities. Well one kind of getting to that stabilized steady-state portfolio, and kind of-and we talked about accelerating our portfolio rationalization plan, kind of getting to know what we believe to be our core business going forward and kind of eventually divesting ourselves from some of these legacy assets that don't belong in a credit REIT.

But right up there is delivering a sustainable well-covered dividends. So, we are a highly focused on growing earnings. We have put a lot of liquidity to work since listings. And we have made a number of investments, we have increased our earnings pretty tremendously.

Our dividend coverage has gone up by probably over 20% from when we first listed. So, that is one of our priorities. Now, some of that is dependent upon the when we rotate out of some of these lower-yielding assets. And we did talk a little bit.

And you mentioned just a little bit ago in the New York City hospitality loan. That is on non-accrual status right now. So 100% of the capital that is tied up in that investing investment is not giving us, any credits our earnings. When we monetize that is going to have an impact in terms of when we hit run-rate-dividend coverage, but it is our number one priority.

It is something that we are very focused on.

Stephen Laws -- Raymond James -- Analyst

Right, appreciate that update and putting the money to work. You mentioned in your answer, and that was the least, my next question the new investments, number of investments they are roughly the same average price increased, pretty good amount, $36 million to 44? Are you seeing larger investments now opportunities there? Can you talk about what is the one shift you are seeing that is causing that average loan-size increase and maybe kind of what the pipeline looks like here for the second half?

Kevin Traenkle -- President and Chief Executive Officer

Yes, absolutely. And, our market is tied to the broader markets and the global markets at a certain extent. And we have seen everyone seeing what is going on in the stock market, and what is going on in the bond market, which is pretty amazing right now. So, interest ratio is just in general had been coming down, it is something that we have been very focused on.

We have been also very focused on, kind of looking at, and maybe revisiting the risk-reward profiles of the investments that we make, that are both in our pipeline, and some of you know, some of the targeted areas that we want to go after in the future. So, it is something that we are pretty focused on. I mean, we have put a lot of capital to work this year. You have seen migration to larger loans.

I think what you are also seeing there, and is probably a migration toward safer positions and better market, better credit. I think, right now, given where we are, we think that we would rather be in a safer position within the capital structure right now, even if it means trading some basis points in terms of yield is just a better place to be.There is a lot of capital that is that is in the market, I mean we were cognizant of that. We are not going to chase deals just for the sake of chasing deals, but we do have a pretty big pipeline of transactions that we are pursuing. I think we are going to continue to maybe, be a little bit more bias to the bigger assets, to better sponsors, to bigger markets and a time like this.

Stephen Laws -- Raymond James -- Analyst

Great, and maybe you touch on Europe a little bit along that. I mean you have got the financing facilities in place. You talked about even looking at my notes from back in February opportunities there. Is it the less competitive, are the returns more attractive, you like the credit more there? Can you maybe talk about what makes the increase in the focus in Europe attractive to you?

Kevin Traenkle -- President and Chief Executive Officer

Yes, so yes, we still are focused in Europe. And it is a market that we have a lot of knowledge of and a lot of relationships. So, you know, we do have a pipeline of investments that we are looking at in Europe. The overall volume and deal volume itself in Europe is not that high.

I think maybe the overall financing market probably still isn't as healthy as it is here in the in the U.S. So just, the amount of opportunities that we have to put the work, might not be as great, as what we have here. But we also don't think that there is as much capital-chasing opportunities that are there. So, perhaps on a on a relative basis, I think we can get better yields.

And it doesn't seem like when we are invited to maybe pitch for particular business. We are not competing with nearly as many people, as we are competing with here in the states and a lot of circumstances, we are dealing with some proprietary relationships that we have had for a number of years. So Europe is an area that we are continuing to look at. We do have a pipeline there.

We'll do the selected deals and once again in the bigger markets with the better sponsors. So it is going to be a market that we continue to focus on.

Stephen Laws -- Raymond James -- Analyst

Great. And one last thing looking for an update on the remaining private equity stuff. I think, for my note it looks like, I think remaining 10% was in JV and I believe you guys have been having ongoing discussions with those partners about liquidity options. Any developments, you can share with us on that or timelines to dispose of the remaining PD interest.

Frank Saracino -- Chief Accounting Officer

That piece Steven, we are probably going to hold on for a period of time, it isn't in JV. And I think our partners is happy to hold on to that for a period of time. Perhaps just in terms of metrics and I think you might be that coming through with 90%, I think collected on the cash we were expecting to receive, right. So we will get the rest of that in Q3.

So we are pretty much out of the sales process. Just takes a little while to get the cash in and then that will be coming through over the next month or so.

Stephen Laws -- Raymond James -- Analyst

Great. Well Kevin and Neil, thank you very much for taking my questions. Take care.

Kevin Traenkle -- President and Chief Executive Officer

Thank you Steven.

Operator

Our next question is from Randy Binner, FBR. Please proceed with your question.

Unknown speaker

Hey Kevin and Neale, it is actually [inaudible] on for Randy tonight, thanks for taking the question. I just want to follow up on the writedown. I don't know, if you guys are able to size up between the four borrowers how much the 120 million made up. I'm assuming the hospitality loan made up a decent chunk of that?

Neale Redington -- Chief Financial Officer

Yes, it is. I mean, frankly, it is 80% of it. So 104 million was related to that side of things. And then the remainder, were in the retail assets.

Unknown speaker

Perfect and then turning to the sales of BP, you guys announced after the quarter. Can you just touch on what you guys are seeing in the market that prompted you to sell that? And then going forward? If you see those conditions are going to be using that book as a source of liquidity? Are you going to be selling opportunistically? So any color there would be great.

Kevin Traenkle -- President and Chief Executive Officer

Yes. So I think we have seen an appreciation in that book just given like, where interest rates are. We have exposure to a handful of different trusts, each trust have their own makeup in terms of credit, asset class, geographic exposure. So it is a book that we are actively monitoring, and then from time-to-time, we see bonds that are trading at pretty attractive levels. We are a little bit opportunistic in terms of the sales process.

I think that was more of an opportunistic sale. I think we saw run up in the prices of that bond for some reason. That was actually several bonds that we sold in a particular trust. And just given what was in that particular trust, we thought it was a very attractive opportunity to sell at a pretty nice price.

Just given the overall strategy with that part of the portfolio. Yes, it is not something that it is not like a trading operation that we are looking to do, I mean, we are more than happy to kind of hold those bonds, right through to maturity, if we if we have to, we do detailed underwriting of the individual assets within the within the trust and feel good about the level that we were purchasing, various bonds. But it is a very liquid-asset class. So, we view it as-we get a two-for-one, we are getting a good risk-adjusted-investment current returns.

But at the same time, if we do see your market conditions, that give us the opportunity to sell something at a price that looks attractive to us you know we will do it. And then in addition if we have a need for capital for deployment opportunities in other asset classes or origination opportunities we can use that as a source of liquidity to redeploy capital out of that part of our portfolio into other parts. So yes, we will be opportunistic, we have seen a run up in prices, especially with, interest rates dropping spreads I think typically lag interest rates a little bit, especially when we see interest rates kind of moving as fast as you do now. So, I think we are going to see spreads probably tighten overtime, got to give that a little bit of time. I think the market, generally speaking, probably, this is for all asset classes, not even for credit or even for real estate.

I think they feel like they are getting a little bit whisked off maybe by some of the political climate around the world and some of the trade issues going on. But if the low-interest rates do persist, I think we will see a tightening in spreads as well.

Unknown speaker

Understood. Thanks for that. And then one more if I could. The outside of obviously, the New York-hospitality loan.

The three other borrowers you talked about this quarter, the rest of the non-core assets? Is that going to be more of a next year things to try and get through this year cleaning up all the problem was you guys do have? Or are you guys going to be making any progress on that this year?

Kevin Traenkle -- President and Chief Executive Officer

Yes, so I mean, just to be clear. I mean, the non-core bucket isn't all problems. I mean, we do have some, some lower yielding, assets and loans, like, for instance, the New York-hospitality loan that is not yielding anything that we would love to monetize and redeploy that, that capital. But our non-core bucket is primarily operating real estate.

It is just basically core holdings in our office buildings, multifamily buildings etc. So I think, we will look to opportunistically sell those, as well. I think our priorities have been to focus on the ones that had been lower yielding. So we can get, those off the books and then redeploy that capital into our core-asset classes. You know, in some cases, some of that some of the assets that we do have longer term debt that we have had some-and some kind of breakage costs if we sold them today.

So, we are always looking at the, most efficient time to sell those types of assets and redeploy them. So, I think definitely our focus is on the lower-yielding stuff. First, obviously on anything in the portfolio that we deem to be a little bit more risky or volatile. And we have talked about some of our retail holdings in the past, retail continues to be an asset class that struggles really hasn't found its footing? Yes.

To the extent there we can lighten our exposure to retail, something we are going to continue to do. We are not making new retail loans going forward. In the last quarter, we had a couple of retail loans to pay off. We are actively in discussions with other borrowers and getting those borrowers, they are going to refinance the data positions, because we would like our exposure. It is down to around 5% today.

Our retail exposure to the overall book was something a little bit higher. When we first started, we want that to kind of keep ongoing in that direction for the foreseeable future.

Neale Redington -- Chief Financial Officer

Kevin, just to expand on that Ryan, we had 400 million of retail loans at the beginning of the year. And year-to-date, we have reduced that by about 110 million, including a couple of sales quite recently. So we are quite pleased with the reductions there in terms of our overall-risk exposure.

Unknown speaker

Understood. Thank you guys for your time.

Neale Redington -- Chief Financial Officer

Thanks Ryan.

Kevin Traenkle -- President and Chief Executive Officer

Thanks Ryan.

Operator

Our next question is from Jade Rahmani, KBW. Please proceed with your question.

Jade Rahmani -- KBW -- Analyst

Thanks very much. The secondary PE investments, who is the JV with his that was--?

Neale Redington -- Chief Financial Officer

No, it is not. It is with a different third-party. But no, it isn't with Colony Capital.

Jade Rahmani -- KBW -- Analyst

The decline and underappreciated book value. Was that due to the loan-loss provisions this quarter?

Neale Redington -- Chief Financial Officer

It was a combination of things. It was primarily the loan-loss provisions and then just generally depreciation. There is a fair bit of depreciation, I think I want to say it was about $0.22 or so related to depreciation on our operating real estate.

Jade Rahmani -- KBW -- Analyst

So the underappreciated book value declined based on loss provisions then.

Neale Redington -- Chief Financial Officer

I'm sorry. You asked me what on depreciation, not undercoated. So yes, it is relates to the loan-loss provisions for the underappreciated, yes.

Jade Rahmani -- KBW -- Analyst

OK. The 119 million of loan-loss provisions, you say that that is [inaudible] pro-rata-share. Do you know what the aggregate amount was inclusive of the other party.

Neale Redington -- Chief Financial Officer

It wasn't that much more about four million more, I think it was four or five, it was a little bit more. There is just very small JV system in that.

Jade Rahmani -- KBW -- Analyst

And do you know what percentage of the carrying value or property basis that represented just put that amount of concepts? Even a range just a general ballparks would be helpful?

Neale Redington -- Chief Financial Officer

It varies quite a bit by the different types of properties. So for a couple of the smaller adjustments, it was 10% or so. But I think on the larger asset like New York hospitality loan, that was a pretty sizable amount, perhaps as much as 50% it is quite highly levered of that-our proportionate share of-or the equity position as opposed to the total value of the asset, underlying asset.

Jade Rahmani -- KBW -- Analyst

OK. Looking at the fixed rate mortgage portfolio, which totals about $872 million, there is $225 million of first mortgages, senior loans, and massive the highest yield in that portfolio was only a 1.3 million-year-remaining term. So, first of all, what kinds of loans are these that are bearing a 14.1% unlevered yield, and two, what is the likelihood of default over the next 1.3 years?

Neale Redington -- Chief Financial Officer

So that is our European exposure, where as we think we have mentioned, there are better opportunities to deploy and frankly, have a higher rates there. We are quite comfortable with the credit racing over there and not expecting lease holds related to that investment.

Jade Rahmani -- KBW -- Analyst

So just to push back, I mean, they are yielding, it says in the presentation 14.1%, unlevered you can redeploy that at higher than 14.1%.

Kevin Traenkle -- President and Chief Executive Officer

So those investments, I mean, in primarily, it is in the Dublin market, right now, We have no exposure to two loans in Dublin, right now. Senior financing on to next mixed-use development projects. So the yield can be higher, especially when you are talking about a development project.One of which of those projects has now been fully let to one of the biggest companies like in the world on that 25-years, couple of these phases. So we are feeling pretty good about that exposure.

We have pretty good insights. And the developers inside that were financing the let out of space in the other building that we are financing. But the construction lending market, in Europe in general, but in particular, in Dublin is not very advanced at all. We did due to do a very big dive on Dublin itself.

We like a lot of the metrics there, and we are pretty bullish on the on the go forward I guess outlook for Dublin. We don't think that there is, I mean-we just originated those loans. So we don't think that there is much chance of a default at all. It is, early days in terms of the second loan, the one loan where we have, the triple net lease.

And I think we feel very, very comfortable about. The other loan on the building that is to be leased, just given some of the progress and discussions developers had with some, major multinational corporations in terms of space that they need. We feel pretty confident that that building will get let out as well. The Class A office market in Dublin is less than 4% vacant right now, just based upon some of the demand that we have had on other buildings that we have owned in Dublin.

It is kind of off the charts, it's not enough space in Dublin. So we are confident that the space does get let out and it derisks the project pretty extensively. So it is something that, we are actually pretty bullish on and pretty happy to make these kind of returns given the risk profile.

Operator

We have reached the end of the question answer session, and I will now turn the call back over to management for closing remarks.

Kevin Traenkle -- President and Chief Executive Officer

Alright. Well, thank you everyone for joining us today. There are a couple of highlights that I would love to reiterate, because we have made a lot of progress with this company since going public about 18 months ago. A few of these, we have invested $3.4 billion in some high quality investments. Since listing, so we have grown our AUM by over 30%, we have grown our core earnings by 20%, we have increased our dividend coverage rate from the low 70% range to the mid to high 80% range.

And we are also reducing our non-core investments and we have reduced that from around 24% of our total portfolios to 15% today. So there is a lot of positive things going on at the company and we look forward to continuing to update you as we grow our earnings and execute our portfolio-rationalization strategy. And thanks again for joining us today.

Operator

[Operator signoff]

Duration: 40 minutes

Call participants:

Lasse Glassen -- Managing Director of Investor Relations

Kevin Traenkle -- President and Chief Executive Officer

Neale Redington -- Chief Financial Officer

Stephen Laws -- Raymond James -- Analyst

Frank Saracino -- Chief Accounting Officer

Unknown speaker

Jade Rahmani -- KBW -- Analyst

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