Paul Elenio - CFO Ivan Kaufman - Chairman, President & CEO

Steve DeLaney - JMP Securities Jade Rahmani - KBW Richard Eckert - MLV & Company Lee Cooperman - Omega Advisors

Thank you, Sheila. Good morning everyone and welcome to the quarterly earnings call for Arbor Realty Trust.

This morning we will discuss the results of the quarter and year-ended December 31, 2014. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer.

Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risks and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. These statements are based on our beliefs, assumptions and expectations of our future performance taking into account the information currently available to us.

Factors that could cause actual results to differ materially from Arbor’s expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today.

Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. I’ll now turn the call over to Arbor’s President and CEO, Ivan Kaufman.

Thank you, Paul and thanks to everyone for joining us on today's call. As you can see from this morning's press release we finished the year with very strong results and have also achieved some extremely significant milestones in the first quarter of 2015.

Before Paul takes you through the financial results I would like to reflect on how we closed out the year touch on some of our more significant accomplishments and then turn my focus to our business strategy and outlook for 2015. 2014 was a tremendously successful year for us on many fronts and we are very excited about the opportunities that we foresee for the future.

As we laid out very clearly in the beginning of 2014 we’re faced with several challenges and key objectives that we needed to resolve and achieve in order for us to maintain our earnings and dividends in 2014 and more importantly transition and position us for significant growth in 2015 and beyond. We continue to make significant progress during the year in achieving these goals and completed 2014 with solid operating results and maintaining our dividend.

As we announced this morning we successfully completed the deleveraging of CLO1 in the fourth quarter and more significantly legacy CDO 1 and 2 in January resulting in a completion of substantially all the significant objectives we set out to achieve in order to grow our earnings and dividends going forward. The recent unwind of a number of our securitization vehicles is a significant accomplishments which will result in substantially reduced debt costs, access to significant amounts of capital that were trapped in these vehicles to deploy at the high yield of investment opportunities and be a catalyst for substantial growth in our core earnings rate in 2015.

We’re extremely pleased with our success in this area and believe we’re now poised to draw dividend as early as mid-2015. As we have mentioned before we were highly confident we could achieve our goals and therefore very strategic and disciplined in our approach for our 2014.

We experience significant accelerator run-off during 2014, a substantial amount which was in our legacy CDO vehicles. This resulted in the proceeds from the run-off not being available for reinvestment, as a cash which is temporarily trapped in these vehicles which continue to reduce our margins and delever these vehicles.

Therefore we worked exceedingly hard on raising the most cost effective and accretive forms of capital in order to continue to fund our long pipeline allow us to replace the majority of our run-off and maintain our margins. We were very successful in this approach raising approximately 125 million of fresh capital in 2014 mainly by issuing senior unsecured debt instruments and preferred stock offerings as we were very sensitive to dilution given where our stock price was trading.

This allowed us to bridge the gap until we could successfully unwind the majority of our securitization vehicles which resulted in releasing a significant amount of cash equity that was invested in these vehicles which we will now use to fund future originations and grow a portfolio without an immediate need for additional capital. As a result we now have approximately 80 million of cash on hand, roughly 90 million of cash available for reinvestment in our remaining CLO vehicles combined with approximately a 120 million of additional unlevered assets from the securitization unwinds that we expect to monetize the majority of and 75 million of capacity in our short term credit facilities to fund our investment opportunities.

Additionally we expect to unwind one of our remaining legacy CDO vehicles at some point in 2015 which should also generate additional cash in unlevered assets and in further to our liquidity. In 2014 we also continued to demonstrate tremendous success in growing our originations platform allowing us to effectively replace most of our run-off at higher yielding investments.

We originated approximately $212 million of loan in the fourth quarter with an average yield of approximately 6% and generated levered returns of approximately 13.5% on those investments. We closed out 2014 with total originations of approximately 900 million which serves an increase of approximately 50% compared to 2013 originations.

Our 2014 originations had an average yield of approximately 7% and generated levered returns of approximately 14%. We also have originated approximately a $110 million of volume thus far for the first quarter of 2014 with an average yield of 8.5% and an estimated lever return of approximately 13% and based on our active growing pipeline we expect that we will be able to maintain similar volume levels in 2015 as compared to 2014.

We remain extremely disciplined in our lending approach continuing to focus mostly on multi-family home loans allowing us to invest the appropriate part of the capital structure and generate strong risk adjusted returns on our invested capital. We experienced a significant amount of accelerated run-off in our portfolio in 2014 a fair amount of which was in our legacy CDO vehicles.

We had approximately 280 million of run-off in the fourth quarter, a 142 million which is now legacy CDOs and at a total of approximately 972 million run-off in 2014, 411 million of which occurred in our legacy CDO vehicles and while it continues to be very difficult to actually predict what our run-off will be due to the continuing improving market conditions. The successful unwind of several of our securitization vehicles will allow us to reinvest proceeds from future run-off directly into new investment opportunities.

Additionally we experienced approximately 85 million of run-off in the first quarter to-date the proceeds of which can also be redeployed immediately as a majority of this run-off was in our reprehensible CLO vehicles. We also continue to focus heavily on improving our liability structures which is critical component of our business strategy.

We successful increased the capacity on our short term lending facilities by 70 in 2014 while reducing our borrowing course in these facilities as well. Additionally in January of 2015 we added a 150 million financing facility that was mainly used to redeem two of our legacy CDO vehicles.

This facility has kind of two years with a one year extension option and in all-in rate of 2.75%. We also redeem CLO 1 in the fourth quarter by financing these assets in our existing credit facilities with our debt cost going forward by a 150 basis points.

As I’ve mentioned earlier these are significant accomplishments which will reduce our debt cost substantially going forward and allow us to redeploy the equity capital from our legacy securitization vehicles into high yielding investments resulting into substantial growth in our core earnings run-rate in 2015 and beyond. We have also have had tremendous success in adding to and improving a non-recourse financing facilities the debt and experience of our securitization team and our strong reputation in the market has contributed greatly product success in this area and continues to allow us to be a leader in the commercial mortgage REIT securitization market.

We issued a third CLO in 2014 and we will continue the full collateral for future securitizations when available. This will allow us to continue to finance the substantial amount of our investments with non-recourse, non-mark to market, match funded debt and delivering the teens returned on our capital while insulating us from market volatility.

Another significant accomplishment in 2014 was our ability to recognize the $58 million gain related to our interest in the 450 West 33rd Street Property. This gain was differed on our books for many years and that was a significant component of our reported adjusted book value per share.

The resolution of this item resulted in us recording this significant gain and increasing our book value per share by a $1.15 which accounted for the bulk of the increase in book value per share of a $1.31 to $8.84 per share as of December 31, 2014. We continue to look for ways to diversify our revenue sources and gain access to additional markets to new business opportunities.

In January 2015 we purchased 50% of our managers indirect interest in a joint venture with a prominent private equity firm which operates residential mortgage banking company for approximately $9.6 million. This results only approximately 22.5% of this residential platform.

The primary operating business of this joint venture is the origination and sale of qualified residential, agency mortgage loans and a non-qualifying mortgage loan platform. We believe that at this point in the cycle in investment in residential mortgage banking lending business will generate strong returns on our capital while diversifying our income stream and growing our business platform.

While this venture is a new opportunity for the REIT I personally as well as significant portion of my senior management team have a tremendous amount of experience and expertise in the residential mortgage lending arena. Now I would like to update you on our view of the commercial real estate market.

Overall commercial real estate market continues to improve especially in a multi-family sector. Significant amounts of capital are constantly being invested in this space, this has continued to increase the competitive landscape in compressed yields.

We expect this trend to continue and therefore we remain disciplined and patient in our approach focusing mainly on multi-family bridge loans. We believe we’re well-positioned and have a competitive advantage in the market by levering off of our manager who provides us with a consistent pipeline of multi-family bridge loan opportunities from a significant agency platform.

There despite the increasing competitive market we feel confident that we will be able to continue to generate significant quality investment opportunities and strong levered returns through the utilization of our financing vehicles increasing our core earnings overtime. In summary we’re extremely pleased to have substantially completed all of the key objectives we set out to achieve and in order for us to significantly grow our earnings run-rate for 2015 while producing at the same time very strong results in 2014 and maintaining our dividend.

We worked exceedingly hard on delevering and replacing our remaining legacy securitization vehicles and further enhance our liability structures through the continued access to the non-recourse securitization market when available. We’re also very confident in our ability to continue to grow our originations platform and replace our run-off with higher yielding investments will result in future growth in both our earnings and dividends and allow us to ultimately achieve the long term goal of increasing shareholder value.

I will now turn the call over to Paul to take you through the financial results.

Thank you, Ivan. As noted in the press release net income for the fourth quarter was $5 million or $0.10 per share and AFFO was $7 million or $0.14 per share adding back depreciation expense and non-cash stock compensation expense.

Net income for 2014 was 27.7 million or $0.55 per share and AFFO was 37.3 million or $0.74 per share both of which exclude the large non-cash gain in the 450 West 33rd Street transaction during the third quarter. We ended 2014 with an AFFO return on average common equity of approximately 9% and produced a total shareholder return of approximately 9.5%.

We recorded 1.2 million in loan loss reserves and had 3.9 million in recoveries of previously recorded reserves and gains from the sale of ROE assets for net recoveries of $2.7 million during the fourth quarter. We finished 2014 with 9.3 million of loan loss reserves and impairment charges and generated 10.9 million of gains from the sale of ROE assets and recoveries of previous reserves during the year.

And at December 31, 2014 we had approximately 115 million loan loss reserves representing approximately 7% of the UPB of our loan portfolio. Additionally we did sell the remaining piece of our equity investment in the 450 West 33rd Street property recording a gain of approximately $800,000 in the fourth quarter.

Looking at the rest of the results for the quarter, the average balance in core investments decreased slightly to approximately 1.64 billion for the fourth quarter from approximately 1.68 billion for the third quarter due to the fourth quarter run-off outpacing our fourth quarter originations. The yield on these core investments decreased to 6.43% for the fourth quarter from 6.99% for the third quarter largely due to significantly more accelerated fees from early run-off during the third quarter than in the fourth quarter.

And the weighted average loan yield on our portfolio increased slightly to around 6.16% at December 31, 2014 compared to around 6.14% at September 30, 2014. The average balance in our debt facilities also decreased to approximately 1.20 billion for the fourth quarter from approximately 1.23 billion for the third quarter.

The average cost of funds in our debt facilities increased to approximately 4.56% for the fourth quarter compared to 3.97% for the third quarter largely due to $1 million of deferred fees related to CLO 1 which were accelerated into interest expense when we unwound this vehicle in the fourth quarter combined with accelerated run-off in our legacy CDO vehicles the proceeds of which we use to pay down lower cost debt. And our estimated all-in debt cost was relatively flat at approximately 4.07% at December 31, 2014 compared to around 4.06% at September 30, 2014.

If you were to include the dividends associated with our perpetual preferred offerings as interest expense, our average cost of funds for the fourth quarter will be approximately 4.83% compared to 4.27% for the third quarter and our estimated all-in debt cost will be 4.36% at December 31, 2014 compared to 4.35% at September 30, 2014. Our overall debt cost did increase in 2014 largely due to the issuance of our senior unsecured notes and perpetual preferred stock offerings which carry higher interest rates at our overall debt facilities.

As we mentioned earlier we were very confident we will be able to delever and redeem most of our legacy securitization vehicles generating significant liquidity to fund our future investments and therefore we strategically decided to raise capital in the form of debt as an attractive alternative to raising dilutive common equity while we were deleveraging these vehicles to fund our loan and investments. This increase in overall debt cost is temporary as we have the ability to call both the senior notes and preferred stock instruments over the next several years.

Additional with the successful redemption of CLO 1 in December and legacy CDOs 1 and 2 in January, our overall debt cost will come down substantially in 2015 due to the termination of certain interest rate swaps associated with our legacy CDOs which were inflating debt cost and from a 150 basis point savings due to a significantly lower interest rate associated with our existing warehousing facilities which we used to replace CLO 1 debt. Overall net interest spreads in our core assets on a GAAP basis decreased from 3.02% last quarter to 1.87% this quarter including the trust preferred stock dividends as debt cost, our average net interest spread also decreased from approximately 2.72% last quarter to approximately 1.60% this quarter largely due to significantly more fees from accelerated run-off during the third quarter combined with accelerated expenses associated with the early redemption of CLO 1 in the fourth quarter.

And our overall spot net interest spread including the preferred stock dividends as debt cost was up slightly to 1.82% at December 31, compared to 1.79% at September 30 and again we expect these spreads to improve going forward from substantially reduced debt cost associated with redeeming certain securitization vehicle. NOI related to our OREO assets decreased approximately $1.4 million compared to last quarter due to the seasonal nature of income related to a portfolio of hotels that we own.

We did NOI before depreciation of approximately 4.8 million from our OREO assets in 2014 which was slightly higher than the 4.5 million we projected for the year. As I discussed earlier we sold two of our OREO assets in the fourth quarter generating gains of approximately 1.8 million and we sold two additional assets in the first quarter of 2015 with estimated gains of approximately $4 million.

Therefore the NOI we expect to produce in 2015 of our remaining ROE assets is approximately $3 million to $3.5 million. The projected NOI in our OREO assets combined with the net interest spreads on our loan and investment portfolio gives us approximately $44 million of annual estimated core earnings before potential loss reserves and operating expenses at December 31, 2014 compared to $48 million at September 30th.

This reduction is mainly due to the temporary reduction in our net interest margins from the accelerated run-off we experienced in our legacy CDO vehicles during the fourth quarter combined with the reduction in projected NOI on our OREO portfolio from the sale of certain assets. As we discussed before we were very successful in delevering and redeeming some of our securitization vehicles late in the fourth quarter and early in the first quarter which will substantially increase this core earnings run-rate in 2015 from reduced debt cost and from deploying the trapped capital that was released from those vehicles into new investments with higher yields.

Additionally we had a higher than usual amount that restricted cash in our reprehensible CLO vehicles from accelerated run-off which once it is redeployed in 2015 will also contribute to an increase in our core earnings run-rate going forward. Next our average leverage ratios on our core lending assets remain relatively flat at approximately 63% including the trust preferred and perpetual preferred stock as equity for both the third and fourth quarter and our overall leverage ratio on a spot basis including the trust preferreds and preferred stock as equity was also flat at 1.6 to 1 at both December 31 and September 30.

We did have some changes to the right side of our balance sheet this quarter including CDO debt declining by approximately 40 million mainly due to our third quarter CDO run-off that was used to repay CDO debt in the fourth quarter and an increase of approximately 109 million in our short term credit facilities and a decrease of approximately 88 million in our CLO vehicles largely due to the redemption of CLO 1 in the fourth quarter the assets of which were transferred into our existing warehouse facilities. Lastly our loan portfolio statistics as of December 31, shows that about 70% of the portfolio were variable rate loans and 30% were fixed.

A product type of about 80% were bridge loans, 7% junior participations and 13% mezzanine and preferred equity. By asset class 73% of our portfolio is multi-family, 15% is office, 8% land and 4% hotel.

Our loan to value is around 76% and geographically we have around 28% of our portfolio constrained in New York City. That completes our prepared remarks for this morning and I will now turn it back to the operator to take any questions you may have at this time.

Sheila?

I guess I would like to start with CLO 1, when you referenced, when you talked about that transaction you talked about the cost of funds benefit of a 150 basis points. It looked like there was about 38 million of equity in the structure and I'm just curious when you move that 125 million collateral to the new financing facilities, did that roughly that amount of equity has to stay in the underneath supporting the loans or was there any free up there?

It was pretty close. We did pick up a little bit, but not a ton, the leverage points were pretty similar but as we mentioned that CLO was the first CLO we came to market with after the credit crisis and that CLO definitely had a much higher interest rate associated with than the once we have done since then.

So if you remember the blended rate on that facility was about 435 with cost and we moved into the lines which were about 270 - 280 so we picked up a significant savings but the leverage points were relatively similar, we did pick up a little additional leverage but not material.

So given that these are like floating rate bridge loans I assume, do you intend to just leave them on your lands [ph] or would those loans be eligible to go into your next new CLO--

So each asset is different, it depends on a duration and it depends on our judgment and how it fits but the majority of them are eligible, it's upto us what we want to do with them.

Moving to the CDO 3 which is the last of the legacies. Can you estimate for us how much equity you’ve in that structure at this time?

Yes, we can. Right now, we have had some run-off Steve subsequent to year-end so it continues to delever that vehicle and right now it's about I think about a 135 million of assets in that vehicle and we have around 80 million of debt right now so there is significant equity there.

It's about 55% to 58% levered and obviously our intention is if we can continue to get some ore run-off we will time that when we can but our intention is to delever that vehicle as well as soon as we can.

And Paul you had, you mentioned in your prepared remarks I didn’t see it in the press release but you mentioned, in the first quarter you have had further gains on the sale of two additional ROEs and I think at year-end there was a remaining balance of real estate held for sale of 14 million. Did these sales pretty much wipe that out at this point?

Yes, that’s correct. We did reclassify some assets to held for sale and those assets that were reclassified to held for sale get wiped out with the sales in the first quarter.

Things have improved but nicely in our ROE book and we have certainly seen some activity on some very attractive prices and we have taken advantage of that and liquidated certain parts of our portfolio what we think are really good value. But yes that wipes out that held for sale component that’s on the balance sheet.

And you decision to hold these after you took them back from borrowers, was that sort of an intentional strategy to try to like just managed optimize the stability of the cash flow and then wait for a better day to liquidate?

Let me comment on that, clearly these assets were suffering in the crisis and many of the sponsors didn’t have the capital and liquidity that keep them upto the level and keep occupancies and CapEx. So we feel like that by managing them and proving them and waiting for the market to improve while maintaining the quality asset will get us an optimal result and that was our strategy.

And just one final thing because clearly the combination of OREO sales and your equity investments or equity interest if you will have helped in 2014 deal with the challenges you had from this legacy CDOs. I'm just wondering, the new market, I know it's a competitive market, you’re getting your share of loans but back in the day in many cases you were able to find transactions where you could extract an equity kicker.

Do you see that type of opportunity in the marketplace today or are we really back to just sort of a straight senior financing type of market.

I think those opportunities come up from time to time. It's really a matter of our focus really being on originating senior debt for the most part and levering it and by originating senior debt and getting mid-teens returns.

We’re pretty comfortable and it's pretty conservative strategy. We feel chasing equity kickers by a higher lever lending right now, may not be the best time in the cycle and those opportunities might not be as lucrative if they were for at least 2 or 3 years ago but we’re really pleased with our ability to take multi-family assets on a senior basis, lever them and probably get one of the best risk adjusted returns in the market of any lender.

And also building the percentage of floating rate assets for the inevitability of the Fed tightening. That’s all I’ve guys, and thanks for the comments.

Can you give us some color on the types of loans originating particularly given the 8.5% yield you cited? What enables you to achieve that level of yield, for example is it due to the average loan balance at around 10 million or existing relationships with the external manager?

Jade, you’re talking about the guidance we gave on what we originated in the first quarter to-date the 110 million?

Yes.

Yes there were couple of loans and Ivan can comment further but we did -- that’s a 110 million, there are couple of loans that were -- one was a preferred equity instrument which drives up the gross yield but on a levered return basis it's pretty much the same because it's unlevered and then another one was a deal that was unlevered as well with a higher rate. So we did have a few assets in that 110 million that had a higher gross yields on them but again overall whether it's levered or unlevered our target is the 13% to 14% range and that’s what we guided was that 110 -- although that 110 million has an 8.5% gross yields, it's probably going to come in at about 13% - 14% on levered basis.

It's just a mix of the product that we had so far for the first quarter.

Let me just comment a little bit more on that because in general we do mostly business with only our repeat customers and on these smaller loans we tend to have a little more flexibility on yield. Of the one loan Paul was speaking about, we did a highly structured transaction with the repeat customers that had done $700 million worth of business over the last couple of years and we’re able to grow on our very significantly yield to boast yields, our front yield and that’s just a matter of having relationships in the marketplace.

At this point based on what you’re seeing and your comments on the competitive environment, are you do you expect use more structural leverage through preferred equity, mezzanine loans, subordinate type positions or do you think that you will be still mainly doing whole loans?

We think we’re going to continue to do somewhat of what we did last year, the manager produces a tremendous opportunities for the REIT. The manager has a growing originations capability and we’re just forecasting flat to next year from last year.

So we think we will continue to do a significant amount of our production in multi-family senior debt and leverage that and of course sprinkle in some of the asset classes well some preferred equity and mezzanine and other types of assets but primarily it will be multi-family senior debt.

Okay, broadly speaking do you think, are you expecting the portfolio to be roughly flat for the year? Or do you think it has a potential to grow?

Yes, sure. As we guided in our prepared remarks we expect to be able to produce similar volume in even a more competitive market this year than we did last year.

I think last year we said we did about 900 million, we’re expecting to come in at that range. Very hard to guide on the run-off because we have seen so much accelerated run-off.

We think our portfolio will grow, we think the run-off will be less but it's very hard and very difficult for us to predict that. However having said that the real difference in 2014 is that if the run-off is more excessive than we think and we’re hopeful it won't be, it's a different dynamics for us this year because last year a lot of that [inaudible] was trapped in these legacy vehicles and we couldn’t access to capital so we weren't able to take that capital, redeploy it and we went out and had to get debt or equity capital to do that this year if there is accelerated run-off all those vehicles are pretty much unwound except one.

So we will have immediate access to that capital to put to work, hopefully at higher yields but right now very hard for us to tell you how much the portfolio would grow but we do anticipate it will grow.

Okay. Just on the interest expense side, what do you think a reasonable blended cost of funds is factoring in the CLO unwinds?

Yes, I think that, the way I look at it and it's difficult right to talk about the fourth quarter when you have so much positive stuff happen subsequent that really does pro formally affect those numbers. So I think the guidance I gave on the call was at the end of the year if you count the preferred stock dividends as debt cost and we do sometimes our all-in blended rate was 436 at 1231.

I will tell you pro forma after CDOs 1 and 2 were delevered in the first quarter that blended rate dropped to about 407 so we saved about 30 basis points right there on our cost of funds. Additionally, we do expect that we will be able to continue to reduce those cost of funds with maybe some reductions in our warehouse lines and hopefully be able to get if the market permits another securitization vehicle off down the road that will hopefully reduce those rates but right now the pro forma rate is about 407 and we do expect that that can come down.

Okay. And do you think there will be accelerated financing fees in the first quarter like you experienced in the fourth quarter/

That will depend on whether we delever one or two of the vehicles, if CDO 3 is delevered and I don’t know when it will be delevered it really isn't much left in fees that we haven't brought into interest expense so I don’t see that being a material acceleration at all. I don’t know what will happen with whether it's CLO 2 or not.

It could have some accelerations in the first and second quarter depending on if we’re able to delever one or the other CLOs but it's tough to tell at this point because we are still working through that.

Okay. Just on the real estate operating property side, the own real estate or any of those assets going to be looked at to potentially be sold or do you view those as core assets and can you also remind us what drives the seasonality and if you expect for the full year the real estate operating property segment to be profitable?

Sure, Ivan do you want to take the first part of the question on w we’re going to retain those assets or look to sell them and I will take the second part?

Sure, I think what we like to do on the real estate own is once we get them up to a reasonable level especially in today's market we will look to exit them. Given the nature of some of them in the CapEx needed in the management [ph].

We have been executing them as we have moved along and the markets improved and the assets have hit the performance level we expect. So I would think we will see periodically us to continue to liquidate those assets one by one It's not part of our core operating strategy right now at this present time, the [inaudible] for the income that we derive off of those.

So once we get them to an effective level or get an attractive enough price you will see consistent existing of those assets.

And Jade, in my prepared remarks and I know that this is important for your model. In my prepared remarks after the sale of the assets in the first quarter I guided you to 3 million - 3.5 million of NOI, that is none of the other assets that’s sold.

Obviously if there is sold then you will have maybe some gains, maybe not from the sales and that NOI will drop off but we will get the capital to redeploy into our regular lending business. As far as why there is seasonality, we do have a portfolio of [inaudible] hotels in Daytona Beach and that is an area where it's highly seasonal, they have several key events, would be the Daytona 500 and Bike League and things like that but generally their first quarter and second quarters are their strongest quarters, and their third and fourth quarters are their weakest quarters and that’s just the way that business runs.

I will just make one comment on that, and generally what we will do is when we will sell an OREO that means we feel that the earnings on the proceeds will replace the loss of the net operating income from those assets and probably even put us in a better position.

Okay and just last question, you know your comments around potentially being able to issue another CLO, what's your view of this securitization market right now and if the current terms would be attractive at this point.

I think our ability to execute into the securitization market has been very good. We have a good track record, a good reputation and we feel the market is open for us.

We just have to have the right collateral in order to get into the market. So we feel relatively comfortable but if we were to enter the market then we would have successful execution and the execution will be significantly better than the last execution we had because the market has improved as well.

I wanted to know if you still plan on unwinding the last of the legacy securitizations if I say sometimes in the middle of this year?

I think the timing of that unwind would probably be in the second half of the year, it has to do with some of the liquidation and pay-offs and the ability to releverage those assets and redeploy it. So we do intend to do it this year and as soon as we’re able to do it we will get it done.

A couple of times in the call you mentioned about increasing shareholder value, the best way to increase shareholder value is basically to increase return on equity, your earnings and your dividend. I'm just curious what do you think a reasonable target return on equity is for your business as you’re running it and do you’ve a time table to get there and secondly if can kind of update in the status of the consolidation with the private company, since the private company has a lot of interesting businesses that might be helpful to the public company.

I think that -- what we put out today was we had a return on our average common equity of about 9% for the year and AFFO I think it came in at about 8% if you did it on adjusted book value I just know where some people focus. We think reasonable return obviously is anywhere from 8% to 10% and we’re getting there.

I mean certainly the things we did in the first quarter will help greatly our run-rate in '15. We will still deal with the run-off we had in 2015 affecting '15 in the beginning but we certainly expect as Ivan said in his prepared remarks to be able to be poised to increase our dividend as early as maybe mid-2015 and that’s really looking at our run-rate.

We expect the run-rate for 2015 really to grow towards the middle and lateral half of '15 really setting up '16s earnings to be very strong but also for our run-rate to be very strong to be able to increase our dividend and get those returns up to shareholders. As far as the transaction that you asked about, we don’t unfortunately have any updates for you at this point, what we have disclosed in our 10-K is what we have.

There have been discussions but no updates.

Thanks everybody for participating on the call. We had a very, very good '14 and we’re really poised for positive momentum in all respects and particularly our dividend on 2015.

Have a nice day.