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Starwood Property Trust (STWD) Q4 2019 Earnings Call Transcript

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STWD earnings call for the period ending December 31, 2019.

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Starwood Property Trust (STWD -2.30%)
Q4 2019 Earnings Call
Feb 25, 2020, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Greetings. Welcome to Starwood Property Trust fourth-quarter 2019 earnings call. [Operator instructions] Please note, this conference is being recorded. I would now turn the conference over to your host, Zach Tanenbaum, head of investor relations.

Please go ahead.

Zach Tanenbaum -- Head of Investor Relations

Thank you, operator. Good morning, and welcome to Starwood Property Trust earnings call. This morning, the company released its financial results for the quarter ended December 31, 2019, filed its Form 10-K with the Securities and Exchange Commission and posted its earnings supplement to its website. These documents are available in the investor relations section of the company's website at

Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. I refer you to the company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The company undertakes no duty to update any forward-looking statements that may be made during the course of this call.

Additionally, certain non-GAAP financial measures will be discussed in this conference call. A presentation of this information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at Joining me on the call today are Barry Sternlicht, the company's chief executive officer; Jeff DiModica, the company's president; Rina Paniry, the company's chief financial officer; and Andrew Sossen, the company's chief operating officer.

With that, I'm now going to turn the call over to Rina.

Rina Paniry -- Chief Financial Officer

Thank you, Zach, and good morning, everyone. The fourth quarter capped off another strong year for us. Core earnings in Q4 totaled $139 million or $0.47 per share. After adjusting for certain items impacting our property segment, core was $0.53 per share this quarter and $2.10 for the full year.

I will discuss each of these items in detail a little later. Our performance this quarter was led by our largest segment, commercial and residential lending, which contributed core earnings of $109 million to the quarter. On the commercial lending side, we originated 16 loans totaling a record $2.2 billion, bringing our 2019 volume to $5.5 billion with an average loan size of $147 million. In the quarter, we funded $1.4 billion on new loans and $536 million on pre-existing loan commitments.

These fundings were offset by $551 million in loan repayments, bringing our commercial lending portfolio to a record $9.1 billion at a weighted average LTV of 64%. As a reminder, we update the LTVs on our loan book at least once a year or more frequently if circumstances warrant. The values are typically based on internal debt underwriting, which tends to be more conservative than the third-party valuations we received. With our implementation of the new current expected credit loss, or CECL, accounting standard, we will be revising our policy to utilize third-party instead of internal valuations.

With this change, we expect our weighted average LTV to drop below 60%. On the residential lending side, we continued our expansion of this business by purchasing $541 million of non-QM loans and completing our fifth securitization totaling $370 million. This brought our residential loan portfolio to $1.3 billion and our retained RMBS portfolio to $147 million at year-end. The loans carried an average LTV of 69% and an average FICO of 732, with $672 million of these loans classified as held for investment.

Our retained RMBS portfolio produces a double-digit yield, and unlike our securitization game is not taxable. I will now turn to our infrastructure lending segment, which contributed core earnings of $7 million to the quarter. We acquired a record $640 million of loans, of which $424 million was funded. The fundings were back ended with 85% occurring in the second half of the quarter.

This brings our post-acquisition portfolio, representing the non-GE loans to $843 million at year-end. As for the loans we acquired from GE, these lower-margin loans continue to roll off with $336 million of repayments in the quarter. Between sales and repayments, this portfolio has decreased by 63% since acquisition, bringing the balance to $751 million at year-end and bringing the total infrastructure loan book to $1.6 billion. As we work to deploy capital into this segment, we continue to increase our borrowing capacity.

In October, we closed a $500 million five-year financing facility at our lowest spread to date of L 175. This brings our total financing capacity in this segment to $2.3 billion, of which $1.2 billion was drawn. Next, I will turn to our investing and servicing segment, which contributed core earnings of $63 million to the quarter. As we have said in the past, the various cylinders of this segment work together to produce a consistent and strong return.

Our CMBS portfolio continues to perform very well. In late December, we entered into our eighth and largest strategic CMBS joint venture. In doing so, we sold CMBS totaling $333 million to the JV with a third-party obtaining a 49% interest for cash consideration of $163 million. For GAAP purposes, we consolidate the JV, which is why our financial statements do not reflect the sale.

Instead, the 49% third-party interest is reflected within the noncontrolling interest line on our balance sheet. In our conduit, we securitized $794 million of loans in four transactions this quarter, bringing our total securitization volume for the year to $1.8 billion in 11 transactions. And finally, on the segment's property portfolio. We continue to harvest gains as these assets reach stabilization.

At year-end, we had 17 assets remaining with an undepreciated balance of $278 million. And finally, I will discuss our property segment or several significant items affected core earnings. First, we completed the sale of our Dublin portfolio on December 23, which generated a core gain of $60 million or $0.20 per share and net cash proceeds of $214 million. The transaction was structured in a away or we did not directly pay tax in Ireland.

Instead, there was a tax withholding adjustment, which was treated as a reduction of the gain. Without this tax adjustment, our gain on the transaction was $83 million. The second item impacting the property segment's core earnings this quarter was a $72 million or $0.24 impairment relating to our interest in our regional mall portfolio. During the quarter, we commissioned independent appraisals for each of the assets within this portfolio, which resulted in a reduction of our investment to zero.

The last item I wanted to mention was the refinancings of two of our property portfolios this quarter, which enabled us to take out $190 million in debt proceeds and increase our cash-on-cash yield. In our medical office portfolio, we refinanced $495 million of debt. With $600 million of five-year financing. This took our cash yield from 10% to just under 13%.

We also entered into an $85 million, six-year supplemental financing for our first multifamily portfolio, which took our cash yield from 16% to just over 19%. In connection with these refinancings, we recognized a $5 million or $0.02 per share loss on extinguishment of debt. Following these events, we expect the blended cash yield related to the assets in this segment to be 15%, with weighted average occupancy remaining steady at 97%. These assets are financed with debt containing an average remaining duration of seven years at a weighted average fixed rate of 3.7%.

As of quarter end, these properties, along with those in our investing and servicing segment, carried accumulated depreciation of $311 million or $1.10 per share. As we have said in the past, we believe these assets have appreciated meaningfully since we acquired them, and the appreciation is not reflected in our GAAP book value. At a minimum, adding back $311 million to our GAAP of value would arrive at our purchase price for these assets. The gains that we believe exist in this portfolio would be an incremental increase to undepreciated book value.

And now turning to our capitalization and dividend. We continue to have ample credit capacity across our business lines. During the quarter, we entered into new or expanded facilities totaling $1.8 billion, bringing our undrawn debt capacity to $9 billion. We ended the year with an adjusted debt-to-undepreciated equity ratio of 1.9 times.

As for our dividend for the first quarter of 2020, we have declared a $0.48 per share dividend, which will be paid on April 15 to shareholders of record on March 31. This represents a 7.5% annualized dividend yield on yesterday's closing share price of $25.60. Before I conclude, I wanted to say a few words about CECL, which took effect on January 1 and will be more fully disclosed in our first quarter 10-Q. Because we have no history of realized loan losses, we have subscribed to third-party database services to provide us with industry losses for both CRE and infrastructure loans.

Using these losses as a benchmark for our loans, we estimate that the total change to our allowance from the implementation of CECL will be between $30 million and $40 million. Approximately half of this change relates to infrastructure, which currently has no reserve, and the other half relates to our CRE book, which currently have a $3.6 million general reserve, along with specific reserves for certain loans. This adjustment will go against equity at the date of implementation. Afterwards, any changes to the reserve will flow through GAAP earnings.

Consistent with our current policy, core earnings will not include the allowance. With that, I'll turn the call over to Jeff for his comments.

Jeff DiModica -- President

Thanks, Rina. A strong fourth quarter capped off a banner year for shareholders of Starwood Property Trust. Our stock price was up 26% for a 37% total return with dividends, the highest return in our 11 years since inception. Our dividend yield today is over five and a half times the yield of the 10-year U.S.

treasury, and we believe the proven consistent performance of our multicylinder business; our best-in-class leverage; the low loan-to-value ratios of our loans, which are going lower; our diversified liability structure; and embedded gains of over $800 million or over $2.83 per share justifies continued outperformance both versus rates and versus our peers in the years to come. Before commenting on our segment highlights, I would like to discuss our work on ESG initiatives in 2019. We're proud to report that MSCI this quarter upgraded our ESG rating to BBB, making us the leader in our peer group. I will direct shareholders to the corporate responsibility tab on our website, where we talk about our positive social and environment total impact and quickly highlight our large affordable housing portfolio, actions we have taken in our owned portfolio to reduce environmental impact, our very strong diversity hiring statistics and our community involvement initiatives.

As Rina said, we originated 16 CRE loans in our property segment for a record $2.2 billion in the quarter. Expected IRRs in these originations were in line with the first three quarters of 2019 and at similar leverage levels. 60% of our Q4 loans closed in the final two weeks of the quarter, thus had a small impact on Q4 performance, but will have a greater impact on 2020 and beyond. After starting 2019 cautiously following the credit widening in December 2018, we're happy to report that our CRE loan book is at a record size of $9.1 billion today and over $12 billion, if we included senior financing, sold as part of our originations.

Q1 is off to a strong start as well, and we expect the first seven months of the year to be busy as we head into the summer holidays and then the elections in November. We care about volume of originations, but care more about credit quality. And the quality and pricing of our liabilities. Our debt-to-equity ratios, both on- and off-balance sheet of 1.9 times and 2.9 times, are significantly below our peer group.

Only 40% of our $9.1 billion loan book is financed using bank warehouse lines today, which is also significantly below our peer group and keeps us in better position should credit markets deteriorate in the future. With $9 billion of warehouse line capacity available today and $3.2 billion of unencumbered assets on balance sheet, we have tremendous secured and unsecured debt capacity. At the accretive A Note sales, CLO and term loan restructuring we executed in 2019 to the mix and the diversity of the right side of our balance sheet allows us to borrow extremely efficiently and therefore, invest in higher-quality assets at the lowest possible leverage to achieve our return threshold. As a final point on credit, our CRE lending book's loan-to-value fell to 64.1% in the quarter, and as Rina said, we expect it to fall below 60%, the lowest in our history with the implementation of CECL in Q1.

2019 was the first year in our 11 years of the company where our LIBOR fell, bringing into focus the value of the LIBOR floor as we negotiate for in our loan book. We have LIBOR floors on all our domestic loans. 32% of our floors are in the money today and our 2019 originations had a weighted average floor of 190 basis points, putting them $17 million in the money to our expected maturities today. Due to these floors, our LIBOR sensitivity shows our floating rate loan book counterintuitively performs even better when LIBOR falls than when it rises.

And our worst-case scenario is our underwritten case, static LIBOR. Our non-U.S. loan book was just 11% of our CRE loan portfolio at the beginning of 2019 and is 19% today, and we expect going higher. We have hired talent to our loan originations team based in London and expect to continue to grow our international exposure as we take advantage of larger net interest margins and a positive basis swap when hedging expected cash flows back to dollars.

Finally, only 3% of our lending portfolio is in retail today. Half of that is in the American Dream Mall, which we've spoken about a lot recently and is opening in full soon. In property, as Rina mentioned, we opportunistically filled our Dublin office portfolio in the quarter at a significant gain as our internal models expect moderating rent growth in that market going forward. Our property portfolio gives us significant asset duration and once again, performed very well in 2019, with income up, cap rate tightening and our cash yields improving due to the accretive refinancing we executed in the quarter.

We refinanced our MOB portfolio and our first Florida multifamily portfolio, bringing the cash yield of our property portfolio up to 15%, not inclusive of the over $700 million in gains in our property book alone, which come predominantly from our Florida multifamily portfolio, where rents can go up based on median MSA income growth, but rents cannot go down. In REIS, as Rina said, we formed a $333 million, the CMBS BPs joint venture in the quarter, of which we hold a 51% majority. STWD received asset management fees and the promote on the JV, which will increase the return on our retained investment while allowing us to keep the vast majority of the future servicing revenue. In the last nine quarters, we've increased our name special servicing by 34% to $93 billion across 185 trucks, while simultaneously taking advantage of tighter spreads and lower interest rates to tactically reduce our own CMBS book by 26% from its high to just 4.4% of our assets versus 10.4% of our assets five years ago.

Being named special service around more loans while decreasing our own book will ensure this book outperforms should an unexpected downturn hit the property or credit markets. Our equity investments in REIT continue to perform very well. As Rina mentioned, we harvested some gains in the quarter and expect to continue to harvest significant gains for the next two years until the time when our special servicing revenue is expected to pick back up. Rina also mentioned the performance of our conduit originations business, Starwood Mortgage Capital, which securitized $1.8 billion of loans and 11 transactions in 2019.

We continue to be among the largest, best-performing nonbank loan originators with the lowest historic delinquency rate of the top non-bank originators, producing very consistent earnings at a very high ROE, which expands our multiple-to-book value and creates long-term shareholder value. Turning to our non-QM book, as we underwrote, the credit performance of this sector has been stellar, and we continued to add acquisition channels in 2019, allowing us to acquire over $2 billion of high-quality loans. We expect to continue to grow this book in 2020 and beyond. Subsequent to quarter end, we priced our sixth securitization and our deals continue to price at the tightest liability spreads in the market, a testament to the quality of the platform we have built.

There is tremendous capacity of warehouse lines for this product, and we expect to add significantly more warehouse capacity in 2020 as we get closer to the February 2021 maturity of our FHLB line. Finally, in infrastructure, we're pleased to report that our energy infrastructure business is now running at full capacity with three financing facilities in place for $1.5 billion and two more in process. We took advantage of wider lending spreads to put out $640 million in the quarter, which is well above our underwritten annual run rate at spreads above our original underwriting. We still own some lower-yielding assets from our acquisition portfolio, but are happy to report that the $1 billion in loan volume in 2019 had an optimal IRR, well in excess of 13%, and we believe the outlook for 2020 is good, and hope to execute our first CLO in the sector to further diversify our financing options for this business.

Before turning it to Barry, I would like to add something on the dividend. On an adjusted-earnings basis, we again covered our dividend handily in 2019. We are confident in our ability to continue to earn our dividend in the coming years and are in the unique position of having over $800 million in unrealized gains to harvest, if we choose, leaving us in the enviable position to never have to take outsized risks in our core businesses. We begin this new decade with the same investment philosophy in which we began the last, flow, steady and thoughtful.

With that, I'll turn the call to Barry.

Barry Sternlicht -- Chief Executive Officer

Thank you, Rina, and thank you, Jeff. Good morning, everyone. Thank you, Zach. I wonder what I can talk about today.

These comments were fairly extensive. We'll start with the world, though, because it's a fascinating world today. I think one thing is the stock sells off a little bit on the contagion from coronavirus. We have no impact from coronavirus.

I mean, that is not a risk for our firm, in any way, shape or form. So it's just market sentiment to sell off. And the one thing that's fascinating though is what the bond market is telling you. The bond market is telling you the economy is -- or the global economy is slowing.

It clearly will slow from coronavirus. Again, I actually think it makes property more valuable. And I expect cap rates to drift down. Our cap rates in property have probably have been adjusted to 1.38% treasury and not only are the base rates coming down, LIBOR will now fall this year, which will make Jeff's LIBOR floors even more valuable.

But my guess is that spreads will come in as lenders are searching the world for yield. So our enterprise and the mark to market of our loan book is becoming more and more valuable, sort of every day. And we had a 3.25% 10-year, and the stock was $24 or whatever, and now we have a 1.38% 10-year. The stock is totally misvalued.

The market is getting the quarter all wrong. You should have known that the Taubman transaction was in trouble. We told you that. And we had offset that with the gain from Dublin to prove to you the gains we talked about.

The $800 million, was real. We debated whether we should sell it or not. And ultimately decided that we thought the rent profile in Dublin and new construction was going to slow the rate rent of growth, and we totally offset the loss from the Taubman write-off with the gain from Dublin. And we thought you might like that.

It was an imperative that we do that, but it was an $84 million gain, a $70 million write off. It looks funny in your GAAP accounting. So you can't bind it correctly because there's all kinds of issues with taxes and hedges, but it was an $84 million total gain on Dublin, which made a terrific investment for us. And the only asset that we own, that we actually thought we might want to sell.

Everything else I want to own for 150 years, although at some point, we probably will harvest some of those gains. As Jeff mentioned it, as Rina mentioned, I mean, when your property earning 15% annually, cash-on-cash on invested capital, and it's growing every year. "Oh, my god, it's as good as you can get." And that was the purpose of buying those asset was to create duration in our book. There's no issue in repayment.

We control the sale, and it's almost a third of our assets. So that was really exciting for us. I think, actually, the company is in a better position probably than it's ever been overall. We had a transitional year in the energy business.

We started out very slow. Selling assets, and we did not have matched duration financing for the loans we're originating. So rather than put on five-year paper with two-year debt, we just didn't do it. And we waited until we got the facilities in place to have duration.

You don't see that in our earnings, but it speaks to how we run the company, which is, as Jeff said, safe and predictable and transparent, which, as you know, we've won every award you can win from NAREIT on disclosure, and we want you to understand everything we're doing because all our business lines are performing well and getting better. So at the end of 2020, we actually are more bullish than we've ever been, I suppose. One thing I think you'll see us do is do more loans in Europe. There are better spreads in Europe right now.

The banks are sitting back. I think you've seen some of our peers increase their exposure to Europe. We hope that will come to fruition. Those markets are very sound actually.

Despite the slowing economies, the markets like places -- like the German property, are just seeing substantial rent increases in the office markets, as well as places like Spain, and even the London market has really recovered in both residential and in office. Another thing that's kind of fascinating, this will be our lowest LTV ever when the CECL numbers come in, and below 60% LTV on a broke earnings, what are we earning? Like 11.4% or something like that on the asset level. It's just ridiculous, frankly. When Rina told me, we'd have to revalue the assets to go with outside appraisals, which is a requirement of CECL.

I kind of grip the table and was fearful that she can tell me we're 70% LTV, and we're actually, it shows you the conservative nature of our marks. We were 64%, we're dropping below 60%. Most of our peers are already using that methodology. So we haven't really been apples-to-apples to our comp set in our LTV marks.

One thing also that's maybe not that obvious, is we are growing our resi book on the held-to-sale. One reason we do that, which we've kind of never talked about, is that the GAAP accounting for the resi book is substantially lower than what we actually think we're going to earn on those assets. When you buy these or originate these loans, you basically can't assume for GAAP, the refinancing of the remaining trust. And in reality, you will do that.

You will pop a gain, and we'll take the IRRs that we have in our financials higher. So also, they're not taxable when we put them in the REIT and hold them to maturity. So you will see us continue to deploy capital behind that business, not taking any excess credit risk. But that is a relatively a new thing that the board has approved.

And we really like because it's a double-digit yield on capital. And it's been a very good business for us, and we'll continue to do that, as well as continue to securitize some of the loans that we acquire. So the other -- a couple of other things. The book at $9 billion is as high as it's ever been in our loan book, and that's good.

We continue to look at yield versus duration. And we still have a significant number of what we'd call transitional loans, large loans and we'd like to originate slightly lower yields and help keep these assets around longer, something we keep talking about. Some of our peers are probably doing a little bit more of that than we are, and it's something we can do and expand our loan book going forward. Lastly, I think on the CMBS, we didn't have to execute this trade that we did and lower our CMBS exposure, but there's been some volatility in the CMBS markets historically.

Right now, it's really a good time to have them. We'll continue to grow that base, restocking the pool, if you will, with new credits, which have less risk in them. Obviously, retail is all over the CMBS books of different lenders and retail will reset. It will have a value, even if it's an alternative value, and you have a chance to do that in any new deal, which you didn't have in an old deal.

So it's one of the reasons we've lightened up a little bit on our CMBS book in a JV with a partner, which will, as Jeff said, are going to promote to the firm, partly, we'll go to some of the employees as a retention vehicle. So overall, I'm very confident in our business in 2020, probably entering next year -- this year in as good a position as we ever have a year and the team is focused, and we've a diverse business, all of which cylinders are doing just fine, and we're excited. So with that, I'm going to stop and we're going to take questions. Oh, I will say one more thing, operator, before you go.

The WeWork headquarter in the Lord & Taylor deal, as you are aware, we have a piece of the first mortgage and a senior mezz in that transaction. You may also know that there are rumors that Amazon is going to take the building down. It's been published. And we have call protection in that loan.

Obviously, if they want to stay, it will be a really good loan, if don't want to keep us in the tag. We'll be really happy. But I think you're going to see a good outcome there, and it's not an exposure for the firm at all. As is the American Dream mall loan, you shouldn't even think of that as a retail only.

And we underwrote that as never opening a retail store, and we operate it, we underwrote it as -- it's a theme park, which it is. It has indoor skis and whatever, ferris wheels. And we also have the Mall of America's collateral. So I mean, there's no chance that we'll ever see a problem in that loan.

So it was an unbelievable arbitrage of a moment in time when people needed that and it's like less than 50% LTV, if I recall. So well, less especially if you take the additional collateral the company gave us. So those are not issues. And with that, I'll take questions or we'll take questions.

Thank you.

Questions & Answers:


[Operator instructions] Our first question comes from Doug Harter with Credit Suisse. Please go ahead.

Doug Harter -- Credit Suisse -- Analyst

Thanks. Can you talk about the environment as we look into 2020, for the return environment, for commercial mortgage loans and kind of what your expectation is for net growth for the year?

Jeff DiModica -- President

Yeah. Thanks, Doug. I would say that we're earning very similar to what we historically earned. We're probably 50 basis points lower on levered IRR today than we were one and a half years ago or something like that, but it stayed fairly consistent through '19.

We are borrowing better. We continue to borrow better. As I think I told you a year ago when our best warehouse facilities were LIBOR plus 150, I said for our cash flow, we're going to be seeing facilities at LIBOR plus 125 on our bank warehouses. That's come to fruition.

So as you're seeing spreads tighten, you have to also measure the fact that liability spreads are tightening. We did our CLO this year at a mid-130s, I think, but a tremendously tight financing spread. Other people are doing the same across all parts of our financing capital structure. If we went into the high-yield market, we can finance ourselves better today.

The Term Loan B market, which we use this year is very efficient, in the low LIBOR plus 200, and we can sort of do whatever we need and want to there. So we're borrowing better. We are lending a tighter spread. Lending a tighter spread does give you more duration.

People are less motivated to prepay those loans. We like duration. It gets us off the treadmill. I would expect that last year, after $5.5 billion when, if you remember very well, Doug, that in the first quarter, we sat together, and we told you we are being extremely conservative in doing some stress testing coming out of the December widening.

So we started the year slow. If we hadn't, it would be right around the same $6 billion as we were last year. And we expect this year we'll do another $6 billion somewhere right around these returns. So we're seeing a tremendous amount.

I think we've got $109 billion of loans last year that we looked at versus maybe $104 billion the year before. So we're looking at more loans. We have a larger team to do that. And I'm optimistic that 2020 will look very similar to 2019 in the lending book, with a little bit more of a bent toward Europe, where we're seeing some incremental return opportunities.

Doug Harter -- Credit Suisse -- Analyst

And just a comment on kind of added duration. Is that any different loan products you're offering to kind of get that duration? Or it's just that the loans wind up staying outstanding longer because --

Jeff DiModica -- President

Yeah, the lower spread, you just have less rationale for refinancing it. You'll still sell it at the same time, arguably, and potentially with the debt. But you have less rationale for refinancing, a lower coupon than you do for refinancing a higher coupon, so they tend to stay on our books a little bit longer. I guess, closer to three years on the lower coupon stuff, as opposed to 28 to 30 months on the stuff where you get a higher coupon.

It's more transitional and people are more motivated.

Doug Harter -- Credit Suisse -- Analyst

Great. And Rina, it looked like there was a GAAP provision against the infrastructure. Just, I guess, what was that for?

Rina Paniry -- Chief Financial Officer

So that was a loan that we had acquired from GE. We had marked it below par at the time we acquired in purchase accounting. We had marked that to $0.80 on the dollar. The project that was underlying, that long length of bankruptcy.

In 2019, it emerged from bankruptcy in November. So that was the appraised valuation coming out of bankruptcy related to that loan. We hold a 10% participating interest. So it's a much larger loan overall.

Jeff DiModica -- President

And what's the total?

Rina Paniry -- Chief Financial Officer

So our total basis is now about $25 million, after the $3 million writedown.

Jeff DiModica -- President

That's kind of irrelevant to point that out.

Doug Harter -- Credit Suisse -- Analyst

But I guess, how does the $3 million compare to kind of where you had it more? Is that below kind of the 80% when you market it?

Jeff DiModica -- President

No, it was never marked.

Doug Harter -- Credit Suisse -- Analyst

OK, got it.

Barry Sternlicht -- Chief Executive Officer

So it's $0.80. On the dollar market, $0.69.

Doug Harter -- Credit Suisse -- Analyst

Got it. OK. Thank you.


Next question comes from Steve Delaney with JMP Securities. Please go ahead.

Steve Delaney -- JMP Securities -- Analyst

Thanks, and good morning, everyone. Your total investment portfolio of $17 billion, and Barry highlighted the $9 billion loan book. When you look at those numbers kind of macro, do you see yourself as roughly fully invested at December 31? And if not, how much how much growth do you think you could have in your investment portfolio with the existing capital base? Thanks.

Barry Sternlicht -- Chief Executive Officer

We're never fully invest it.

Steve Delaney -- JMP Securities -- Analyst

Yeah, that would seem so.

Barry Sternlicht -- Chief Executive Officer

I mean,we have probably $3 billion or $4 billion.

Jeff DiModica -- President

I would throw out away from just the capacity, which you can see in the supplemental, in the $300 million to $400 million of cash that we normally did on. We have tremendous amount of unencumbered assets. We could go out and raise more debt on if we wanted to. We are underlevered versus our peers.

We could take more asset-level debt. Every one of those could add $4 worth of assets for every dollar we brought in, if we're putting them out and levering them. So there's clearly the potential to bring that $17 billion up to $20-plus billion if we wanted to run the business harder, but we've decided to run a more low-leveraged conservative business here, Steve. And we like having cash on the balance sheet.

It does create a little bit of drag, but it leaves us opportunities, money for opportunities, when they come in. If we were trying to be more perfect, we would run our cash balances a little tighter and reduce drag in the business. The conservatism that comes with holding cash is good for us, and it gives us opportunities when things widen.

Steve Delaney -- JMP Securities -- Analyst

Great. And I had a second part to that question, but you've kind of already answered it, but I'll go ahead and throw it out there. I mean, you guys have been very respectful of your shareholders over the years. Stock is up 30% since the end of 2018, and the dividend yield down to 7.5%. So the question would be if the right opportunity presented itself and you needed more than $3 billion, at what point -- and what would the return profile have to look like for you guys to consider issuing common equity because you certainly, I think, would have earned the right to do that if you saw the opportunity?

Barry Sternlicht -- Chief Executive Officer

We're always in the market looking at ways to grow the enterprise. It have to be accretive. So earning -- the returns, at least, is consistent with what we earn on our book, strategic, fits our overall plan. And when you're stewarding capital like this, it is about reward versus the risk.

And again, if you take the long-term view, and this is our 11th year of something as an enterprise, you never want to put the enterprise at risk, right? So we can produce higher returns, but I was planning on sticking around and not having used to meet bombs in the mail. So we don't -- we're going to be careful on how we deploy capital and what we do with it. And this is really as opposed to be an incredible risk-reward with a 7.5% dividend yield in a world with a 1.38% treasury. So that's the play.

We've always been in the play. You've seen me then -- we have not entered the equity market every time the stock moves up. We've been very disciplined on issuing equity. Obviously, we like to grow the enterprise, but not for the reason you might think.

It's not about management fees or anything like that. I think bigger is better in this space. So it will drive our cost of funds down, it will help us achieve investment grade. And some of the assets that we're buying, like our resi is higher-leverage loan -- higher-leverage business.

So as we enter their businesses, our leverage levels of the firm are creeping up. The risk isn't changing in my view because the resi book is so diversified in such good credit, when no one house is going to hurt us, not even 10 houses in a securitization. So it doesn't matter, and we're optimizing an ROE for the asset classes, and it gets blended savvy by the street into even though our overall debt remains below our peers, even bringing back the off-balance sheet leverage. We don't trade at the best-in-class and we used to think it was a servicer, maybe that was the issue with the service.

It's not making much money anymore. It's just an option on the future. So it's not the service there. Maybe it's the resi book, maybe just too complicated, but you should want us to be complicated because we won't force feed the commercial lending book.

If we don't have to, and we can grow the resi book, we can grow. The conduit business has been a steady performer now for as long as we've owned LNR. And we had one quarter where we didn't make money. We've never lost money in the conduit business with 11 securitizations.

We're a housing company. We just manufacture paper and sell it. And not only that, the big banks want our paper because we're the top-rated conduit provider in the country. So all these businesses sort of sit nicely with each other.

They're all related to each other. The one I have to say we are disappointed with its early performance was the energy infrastructure business, but when we slowed it down. We didn't want to take that mismatching maturities. You would never know until there was a problem.

And we don't run the company that way. So we like A Notes because we're match funded. We did our CLOs because they're match funded, and there's a off -- you can't see that from our quarterly earnings, but it's the way we're running the company and Jeff highlights the fact that the company has the best, I guess, the right or left side. I guess, if you remember.

Jeff DiModica -- President

Right. Both sides, both sides.

Barry Sternlicht -- Chief Executive Officer

Left brain or right brain? I don't know. So I think it looks -- it's just a solid, solid, solid company. The $17 billion. Well, how many loans have we done? $60 billion dollars?

Jeff DiModica -- President

I think it's about almost $60 billion.

Barry Sternlicht -- Chief Executive Officer

Total investments?

Jeff DiModica -- President


Barry Sternlicht -- Chief Executive Officer

Total investment, essentially $60 billion. I mean, it puts us in the top 10 as a bank in the United States, by the way.

Jeff DiModica -- President

Steve, you're one of the analysts, who does a great job, and we appreciate the flattering version of the question. It does the great job of pointing out our adjusted book value. But looking today, and these numbers are a couple of days old. We're 1.54 times book.

That doesn't include depreciation and taking out our fair market value gains that we've told you about. If you would do that, we're around 1.2 times. And our peer average is above that. And our largest peer is well above that.

We feel like we've created a low leverage, diverse amazing business. As Barry said, it was a great right side of the balance sheet that can compete with any of them. And we're really low on a price-to-book value, not high on a price-to-book value basis when you consider taking out depreciation.

Barry Sternlicht -- Chief Executive Officer

That is a gate on us issuing equity, right, because we look at our fair value of our company as opposed to the book site of our company, and I mean, we own 15,000 affordable housing units running like 97% occupancy, with upward zone rent adjustments and two of the fastest-growing income towns in the United States. I mean, this is the gift that keeps on giving. Frankly, we blew it. I mean, these assets would be among the greatest equity assets we've ever seen.

So they're fantastic. They're in the REIT. They determined that would provide earnings literally forever for the company. So we talk about realizing those gains, and we have to figure out how we deploy all that excess cash and we'll do it at the point we're confident we can put out all that capital.

So there's only one way apartment cap rates are going. It's not up.


Thank you. Our next question comes from Don Fandetti with Wells Fargo. Please go ahead.

Don Fandetti -- Wells Fargo Securities -- Analyst

Yeah. My first question is for Barry. Barry, I tend to agree with you that low rates and lower cap rates are probably going to continue to be good for companies such as yourself. One thing that does cross my mind in this environment with coronavirus is, could you have some type of capital markets of that? And I wanted to see if you can talk about how you're positioned and what your playbook would be if you did get into some type of situation where securitization market got wobbly, if you can address that.

Jeff DiModica -- President

Hi, Don, it's Jeff. I'll start and then let them -- let Barry clean up. As you know, we do a lot of things every day to prepare ourselves for what happens to the capital market if event happens. We've taken our CMBS book down from 10.5% to 4.5%.

That's the one place where when the credit markets have wobbled, where people have said, while they own a lot of CMBS, we should sell STWD. That book has performed tremendously well with a high teens return over the 11-year life, and we expect it to have a similar high-teens return over the next 11 years. But as you head into a credit downturn, that certainly helps. Having a CMBS special servicer will help us significantly outperform.

Our peers will make more money in credit distress. On the CRE lending book side, we would make more money if we finance everything we do on a warehouse line. Many of our competitors lean toward doing almost that. 40% of our book is on warehouse lines.

We can borrow at L 125 on warehouse lines and cash flowing assets today. We can make tremendously higher returns if we leaned in there. We have 40% of our book there today. It's not the best earning place to be, but it's the safest place to be having diversity on the right side of our balance sheet, which includes our term loan.

It includes our high-yield assets that include the CLO that we've done. And importantly, it includes all of the A Note sales that we have a separate group of professionals who's to help us sell A Notes and do CLO securitization. So we're extremely cautious when it comes to managing the right side of the balance sheet and the left side of the balance sheet for a potential credit event if we were to get one. So we think we will outperform in that environment.

We get frustrated, and you probably heard me talking about being below the peer average on a price-to-book, which makes no sense to me, but we always say that we will outperform if and when the credit markets do deteriorate, so we've tried to set the company up to be ready for that. Barry, I don't know if you have other thoughts?

Barry Sternlicht -- Chief Executive Officer

I don't see that as a big issue for the company, really. I mean, I look at it as a double-edged sword of lever our loans because we have longer -- because we have a matched financing. So it's like -- yes, I mean, people who get nervous, I mean, they may not refinance. And I don't see -- I don't know.

I mean, it's hard to figure out what you might do if the credit markets just froze, the bank markets. I think this cycle, again, you have to remember where we are. Property is not a problem for any bank in the United States. These banks have been very, very, very disciplined shockingly.

The excesses in the market don't come from the banks. They come from our peers, the shadow banks. And the one thing that's creeped into the market, and it is happening now, is you see these sort of outlier bids and I remind our guys as we go through our loan review, and we're looking at investment committee for these loans. Just because somebody pays, it doesn't mean it's worth that.

And when you get times like this where somebody is saying, "I own enough for your treasuries. I'm going to buy a building at a 2% cap." It doesn't mean it's was a 2% cap. And so now in the equity book, we're selling assets all the time, and you might see one guy 20% higher than the pack who is right on the LTV. And I think this is where our experience doing this for 30 years is super helpful.

I mean, I see all kinds of things. And we've been to these movies through multiple crises. So as a steward for capital, at least we have experience. We're not going to get -- there's a bunch of stuff out there that is really that we just debate and have arguments, three loans on the table that are probably $1 billion.

I'm looking at Jeff. He's shaking his head because we're just --

Jeff DiModica -- President

The arguments are, "Barry, can we please do this loan?" No, not at all they go.

Barry Sternlicht -- Chief Executive Officer

Well, I mean, there's always going to be another loan. And there's issues like unions and all kinds of stuff. I mean, the one thing I should say is construction costs are rising. If people think inflation is 1%, they're certainly not in the real estate market.

And we're seeing almost double-digit cost inflation on the West Coast. Labor is just scarce. It is one benefit of a 3.5% unemployment rate. So the contracts are telling you what your buildings are going to cost.

And then they just say, "Well, we can't do that for you." So we were building a hotel on the West Coast, in the Bay Area and through 80% drawn with the quote was $170 million. And then when we went to complete, the budget is $250 million. Like how is it even possible? But it's sort of that -- what do you do? You don't build. And that's good for existing loans and property prices are increasing even because construction costs are rising.

There are markets in cities where you shouldn't invest. And as we have an interesting portfolio because we don't have a lot of exposure other than we worked in New York City, for example. And we're not particularly bullish on the New York City office market. We think expenses might rise faster than rents and we're going to be super careful there.

Our cap rates are obviously low, but they may change if people get the view that net rents are going to fall. And what's driving all these major markets is the same thing that's driving the stock market, five companies. They are expanding into Berlin, into New York, into Toronto and even Nashville. Amazon, you're -- what do they call you? The fangs? And you can add three or four other names, Salesforce.

These are driving these commercial property markets. And if they get in trouble in the stock market, they will get in trouble in the real estate market. The markets have never been more intertwined. And it's a very -- you don't care about banks expanding anymore.

Your city used to be our banks. It's not about banks anymore. It's PMT. And same thing, too, in London, like all the incremental space is being driven by what Google wants, what Amazon wants, what Facebook wants, what Netflix wants, what Twitter wants, and then a dozen other unicorn.

So for them, the cost of space is minuscule on their P&Ls and they only care what they pay. Kind of like the hedge funds of old, and we'd just be careful about the exposure to those markets because actually, the thing that will stop these companies is regulation. It's the hardest thing to underwrite, right? If somebody decides that Amazon is destroying the world, and as we know it, and Congress decides to change things, it will change things. So it's an interesting world.

It's very -- but there are asset classes that -- I mean, the office markets in the United States are fairly sound across the board. And other than San Francisco and New York, I can't really think of something that I think is in the Chicago, there are always more bonds. But it's fine. It's stable.

It's just -- but the other markets are -- new rents are rising smartly ahead of expenses.

Jeff DiModica -- President

And Don, back to your original composition. If credit markets widen, we have the most cash. We have the most availability on our facilities. We have the most unencumbered assets.

And we have the only equity assets that we can sell. We're in a tremendously better position than others. So I hope you're going to ask a question about if credit markets deteriorate to others who report in the cycle because I think we've set ourselves up for 10 years. That would perform in exactly that scenario.


Our next question comes from Stephen Laws with Raymond James. [Operator instructions]

Stephen Laws -- Raymond James -- Analyst

OK, good morning. I guess, to follow-up then on the regulatory comment, but switching gears, maybe thoughts on how QM patch exploration plays out. Additionally, GSE reform that might open back up FHLB. I think, Barry, you mentioned in your prepared remarks that your facility there expires, I think, 2021.

But those two issues, and I'll leave it at that. Thanks.

Jeff DiModica -- President

Yeah. Listen, it's on the upside on the QM patch. We have no idea how it's going to play out. It's $180 billion that get done at the agencies of non-QM.

To the extent that the QM patch goes away, that's $180 billion. That floods a $50 billion market, and we're a part of that $50 billion market. And it gets a lot, bigger, and our footprint can get bigger. Assuming that we can finance ourselves, as well as we do today, that would be wonderful.

My best guess is that along the way, some portion of the patch comes off, but $180 billion of non-QM doesn't leave the agencies to flood the nonagencies. I don't think the market is equipped for it. And I don't think that's what the government really wanted. So there's upside to us.

There's no real downside if they don't, we're back to where we are today. So we're excited about that. And as far as GSE reform, there'll be a lot written. Most important thing we can do is get ourselves set up, as well as we can that if February 21 comes and we don't have home loan bank, then we have tremendous amount of capacity elsewhere.

We have an RFP out for quotes on warehouse lines. I think we had 11 or 12 different banks, who want to provide us warehouse lines in that space. And I think they'll trickle for each other, but finance them at the cheapest levels that they can find. And ultimately, we will end up in a very similar place on a level return.

Barry Sternlicht -- Chief Executive Officer

Because you think our business is tough to be a bank today. I mean, they're chasing ever-lighter spreads and it's benefiting us, too. So it's again, I mean, I wouldn't have thought when we started that the markets will evolve this way, but to produce the same return on equity today that we did in 2008 and '09, or '10, I guess, we launched in '09. It's kind of remarkable, but it is because the banks have lowered their spreads to us, and we've been able to lower our spreads to borrowers, and it's been a nice evolution of cheaper and more available financing.

And we use our underwriting skills to pick our spots. It's -- and in a way, I feel bad for our -- I actually do feel bad for our origination team because it's been a bull market in real estate. We probably killed $3 billion or $4 billion of loans. That worked out just fine.

And somehow they don't complain all the time. To me, they'll probably complaining to Jeff. But that's the way it's going to go, right? I mean, we're not going to approve every loan that comes in, in a bull market and all boats were at a rising tide, all boats rise. But we're trying to keep afloat when the tide goes out.

And there are crazy people in the world doing crazy things. And are they crazy? I mean, property, we're seeing yields in Europe and building is at 2.5%, and that sounds insane, right? But every treasury, every duration treasury in Germany is negative. So you're picking up 250 basis points. So take that to United States, the 1.38% plus 2.50% is like close to 4% on an apartment, right? That's the same arbitrage, if you will.

So you have to have in the borrowing spreads, but still, people are issuing a 25-year paper in Germany, like 1%. It's bananas. But there's an opportunity there for us. 1.5%.

I mean, Rina is looking at me like this, that's not -- were that possible? It's true. A guy issue that I was talking about, though, issued a 100-year bond in Austria at 1.8% on an office building. So I mean, there's an opportunity to make real money today. It's a little uncomfortable, frankly, for guys who used to buy sixes, sevens and eights.

But I don't think we're getting back there. I don't see any pressure or upwards pressure on rates in Europe. And you won't have to marvel. I went to HBS, which is a school in Boston.

I mean, I never learned that you could run a $1 trillion-plus deficit on its way to $2 trillion deficit at a 3.5% unemployment rate. Economy growing at 2% negative real rates and the 10 years at the lowest point in U.S. history. This is not a class I attended.

So every economist got it wrong in '19. I have -- my big worry is they're all getting it wrong this year. They're all expecting rates to be low forever. That worries me because they were.

But the entire consensus is 100 out of 100 economists were wrong on 12/31/18, about where rates will wind up in -- at the end of, I guess, 31 '18, kind of at end of '19, yes -- '19, that's was last year. And we are all talking about some money managers, they're about 6%, 10 years. If you remember, Jeffrey Gundlach and even Stanley Druckenmiller. They're not exactly dumb people.

And rates went the other way. So conventional economics would have said -- and it's really -- I think at the end of the day, this -- the slowdown that came from the trade uncertainties was one of the key reasons that global rates fell, particularly in Europe, and they pulled U.S. rates down with it. So I don't see it changing anytime soon.

And there's just too much money that has been printed searching for yield. 28 banks easing at the same time or something like that. I mean, it's like fuel pumps. And everyone thinks there's no piper to pay.

So far, they've been right. Somehow, this doesn't feel like it will be right long term.


Our next question comes from Jade Rahmani with KBW. Please go ahead.

Jade Rahmani -- KBW -- Analyst

Thanks very much. As you look at the portfolio, the loan book is about 19% hospitality. How do you feel about the hotel loans and any potential impact from coronavirus?

Barry Sternlicht -- Chief Executive Officer

Good question. I think everything we have is U.S. We don't have any hotel loans offshore, right?

Jeff DiModica -- President

We have one other construction in Spain, but no. That -- nothing else to operate. Yes.

Barry Sternlicht -- Chief Executive Officer

Nothing. So far, obviously, the U.S. has been spared coronavirus. I would have to get back to you because I have to look at the individual loan exposures, and I'm not as familiar with it.

Dennis, are you on the phone.

Dennis Schuh -- Chief Originations Officer

I am, Barry.

Barry Sternlicht -- Chief Executive Officer

Do we have much exposure to coronavirus anywhere? I don't think so.

Jeff DiModica -- President

In New York City hotels or a portion, Dennis, which is very helpful. Obviously, you'd have a lot more there. Our portfolio is much more national, not really in much for tourist cities, not in Miami, not in New York. I doubt that it's going to have as big of an impact on us.

But go ahead, Dennis.

Dennis Schuh -- Chief Originations Officer

Yeah. I think, Jade, we should probably follow up with you and get granular sort of asset-by-asset. But none of the markets that have had a ton of exposure to coronavirus. We don't have any exposure there.

But obviously, it's an evolving issue.

Barry Sternlicht -- Chief Executive Officer

There are no markets in the U.S. that have had exposure to coronavirus that I'm aware of other than something in California, right? A couple of things. We'll come back to you on that.

Jade Rahmani -- KBW -- Analyst

Thank you.


Next question comes from Rick Shane with JP Morgan. Please go ahead.

Rich Shane -- J.P. Morgan -- Analyst

Hi, guys. Thanks for taking my questions this morning. Jeff and Barry, you both mentioned the conduit business. I'm just curious how much capital you allocate to that.

How much you think you can allocate it, realizing that it's a capital-light business and what types of returns sort of on an annual basis? Because I realize there's going to be some volatility there.

Jeff DiModica -- President

You really -- on the conduit business, it's difficult to grow using more capital. It's a relationship business. We could write larger loans. We could write tighter spread loans that have a little bit less P&L, and that creates a little bit of volatility for us and take some more balance sheet, but our balance sheet-light strategy here is going to continue.

It's $100 million plus of balance sheet, and it's across three or four different warehouse lines. And we write $8 million to $12 million loans, occasionally at $20 million. We don't try to take on really big investment-grade positions. We're good at what we're good at, and we sort of stay in our sandbox.

We pushed the team to do a little bit more. We're up a little bit. We did $1.6 billion. We're up to $1.8 billion.

That's good. The larger the loans get, the lower the profitability gets. And we picked a sweet spot for us in our relationships, and I think it works well. So I don't foresee us putting more balance sheet behind that business, not that we wouldn't, but just because we're going stick to what we're good at.

Rich Shane -- J.P. Morgan -- Analyst

Got it. And the second part of the question was sort of what is your return target there over time?

Jeff DiModica -- President

Yeah. It's not really a returns business. It's a gain-on-sale business. So I don't -- even though the ROE is tremendously high and very accretive to our book -- to our price-to-book ratios and other I don't really think about it that way.

We try to write smart loans that we are confident we'll get into a securitization. Some of those securitizations will end up owning the BPs on, maybe a quarter of them or so. So we obviously care an awful lot about the credit on those. But we care about the credit of what we write because, ultimately, we will be more successful in that space.

We will get better enhancement levels when our loans perform better. And I think I just looked at something. We have 1.1% lifetime delinquencies when I looked at some Morgan Stanley end-of-year data, and that was the best of the nonbanks. And it's not that far from the very best of the banks, and it's better than a lot of the banks.

And they're writing large investment-grade loans. So our credit performance has been stellar. You don't see that on our balance sheet or in our performance. But it's important that that business writes really good loans because that's going to allow them to get into more deals at better enhancement levels, but we're proud of what those guys have achieved in what's been a volatile market.

The consistency has been amazing. And as Barry said, other than the one quarter, we've made a lot of money.

Barry Sternlicht -- Chief Executive Officer

We didn't lose money. We just didn't make any. I think that's the end.


Thank you. Our final question comes from Tim Hayes with B. Riley. Please go ahead.

Tim Hayes -- B. Riley FBR, Inc. -- Analyst

Hi. Good morning guys. Thanks for taking my question. Just a quick one for me.

On the JV writedown, I'm just wondering if there's a path to partial recovery there? And if there are any actions being taken by you or the other sponsors to improve those assets.

Barry Sternlicht -- Chief Executive Officer

Well, our basis is now approximately zero. I mean, our held. So yes, I mean, we're not giving up. We're going to look at restructuring the deal with the servicers.

The first step was the appraisal because it marks where that it is now in servicing, special servicing. And now if you should look at it as a pure option. If we can create value, great. And if we can't, we won't.

And just talk about retail in general today. The retail assets need capital to be fixed. There's no way to transition like the bankruptcies of Forever 21 and the dozens of other retailers have gone bankrupt without replacing them with other tenants. There are -- we had a record leasing year in our retail assets, but rents are lower.

Tenants have all the leverage. And I would say the tenants themselves are doing an incredibly shitty job running their stores. If you walk into some stores, even brand-new stores here in Miami on Lincoln Road, a brand-new Nike store, if you walk in and want a medium short, they're out. How could they be out of shorts? And so they're sending you to their online.

And why? Because the Wall Street wants to hear about their online sales. So it's kind of a -- it's a big mess. It will stabilize. The really good malls are still busy.

But their tenants are -- there are fewer tenants out there. Interestingly, I wonder how this is going to translate into logistics, which had been an incredibly hot industry in the United States, and it's something we don't have much exposure to, actually, almost nothing in the REIT that I can think of. Because if the credits go bankrupt in the mall, they go bankrupt in their distribution centers. And so I mean, you haven't seen that happen.

But, oh, my god, this has to happen, right? Almost every single distribution center is going to be occupied by Amazon, which I highly doubt. So it's an interesting business today. And there are just fewer tenants. The malls have to be smaller.

They were built too big for the environment there is today, but every one of those properties has an alternative use. Everyone, you can chop down. I was looking at a property. It's similar showing that they were dealing within a Northeastern City, and they're taking down three quarters of a mall and building apartments on it.

It's well located. It's obviously got great access, got great parking. There is value for these properties. Somebody bold, not us, we're not in that business here, is going to make a lot of money buying distressed retail.

It's certainly the place where the most distressed in the United States today. And it is hard to figure out where the bottom might be. I mean, JCPenney stock, I think, is $0.70. I think the bond yield is 40% yield to maturity.

So I think the most junior bond. So it's not over yet. And so we have to be super cautious if we're going to deploy any capital into that business in any respect.


Thank you. I would now turn the call over to Mr. Sternlicht for closing comments. Please go ahead.

Barry Sternlicht -- Chief Executive Officer

I would just say that we had a really interesting and a good year, solid year, but we really feel better about next year, this year, 2020, than we did about 2019. We just had our three-year budget planning -- our three-year business planning meetings. And we all looked at each other and said, "This looks pretty good". So we're happy with where we are.

The team's never been more cohesive, the board is supportive and adds tremendous value to our enterprise. And we want to thank you because this is the first quarter call and for all your support over the years, and we look forward to continuing what we're doing and doing it even better going forward. Thank you very much.


[Operator signoff]

Duration: 64 minutes

Call participants:

Zach Tanenbaum -- Head of Investor Relations

Rina Paniry -- Chief Financial Officer

Jeff DiModica -- President

Barry Sternlicht -- Chief Executive Officer

Doug Harter -- Credit Suisse -- Analyst

Steve Delaney -- JMP Securities -- Analyst

Don Fandetti -- Wells Fargo Securities -- Analyst

Stephen Laws -- Raymond James -- Analyst

Jade Rahmani -- KBW -- Analyst

Dennis Schuh -- Chief Originations Officer

Rich Shane -- J.P. Morgan -- Analyst

Tim Hayes -- B. Riley FBR, Inc. -- Analyst

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