Leonard Tannenbaum: So we’ve added to our investment approval process which I still remain — which I’m still Chief Investment Officer. We have four people now on Committee. We added a very skilled player to the committee, which we needed, right? We have — as we said we have two in receivership and this and that. So we’re really happy to have Bernie Berman joined that committee. He’s very, very skilled in this area and we’re happy to have him. And then Dan will be added after he joins on Monday to the Investment Committee, which — so it will expand which is really necessary to have more skill sets on investment committee and thinking through these opportunities. From a general standpoint if you just think about it, the new players are buying things at pennies on the dollar not pennies really $0.50 on the dollar.
And cannabis operators in general have built these cannabis facilities and dispensaries at 100 or more than 100 due to delays permitting delays and construction delays. And so if you think about that competitive advantage also of not having sale leasebacks that have now escalated into the 15% range in some cases debt loads that are out of control in some cases including debt costs which are in the mid to high double digits even for the largest MSOs and you’d see them trading. This is a real competitive advantage for the new well-capitalized companies. And we feel very comfortable that they have not only competitive advantage in terms of capital but many of these are run by really good operators that have learned through the business and so we’re excited to back them and back their growth.
John Hecht: Great. Thanks very much.
Operator: Thank you. Our next question comes from Mark Smith with Lake Street. Your line is open.
Mark Smith: Hi, guys. Len you just gave us a good update on some of the new states and things that you’re watching. Can you just give us a quick update on states where you are today any that maybe you’re seeing some signs of improvement or any that maybe haven’t bottomed yet and have moved down lower?
Leonard Tannenbaum: Look I think all states have — thank god all states have bottomed, but bottomed at really bad levels in terms of California, Oregon, Washington, Colorado and a lot of Michigan. The unlimited license states have gotten your per pound price below marginal cost of production. So those non-vertically integrated operators have really gotten killed. And that’s part of the real problem. You have — if your marginal cost of production is below — the price is below that you just want to buy for your dispensary and capture margin. And so — and Arizona is a good example of that. You’ve seen that in Michigan for sure. Having contrast with that is high-end or high-end brands or well-regarded brands like the one that we back in Michigan even though it’s had its challenges they’re paying our interest in cash.
They’re making very good cash flow and that’s in a very tough state. And why is that? Because the product is very well regarded. And so there are pockets of bright light even in the unlimited license states. That’s our only one, but we’re pretty happy about the way it’s performing. There are cannabis operators for example our credit in Pennsylvania that generates so much cash that we have cash flow sweeps every quarter and our loan has been paid down significantly almost in half Brandon?
Brandon Hetzel: A little less than half, yes.
Leonard Tannenbaum: Yes. And so we’re — we expect to be fully paid on that loan should we not convince them to do a dividend recap or something else by next year because they’re performing so well and generating so much cash flow. That’s a loan for example that we have an exit fee at the end of that loan. And if — when they fully pay off the loan we expect to get paid that exit fee and so we should have a benefit next year from that. So it’s not like all loans are bad or all loans are good. Oregon is one state are bad I don’t want to say it’s really company-specific company operations the way they’re constructed and their market positioning.
Mark Smith: Perfect. And then last question for me. Any updated thoughts as you look at the portfolio and where you want to be in fixed versus variable rates?
Leonard Tannenbaum: I think it is not important anymore. And look I’ve managed portfolios including a $5 billion asset manager before I sold it to Oaktree. And you always want to be in variable rates when rates are rising. You want to be in fixed rates when rates are dropping. I think this whole concept of being more in variable rates today is not important. I think you want to be — I personally would rather be fixed and floating today at this moment. I think the Federal Reserve in general has either stopped raising interest rates or within 0.5 point of the stop in raising interest rates. I think the inverted yield curve will reverse next year. And I think this is a good time to have more fixed rate than floating rate. So I know that that’s been exciting. And we’ve actually done a really good job having more floating rate and have benefited from it. If I were doing a new loan today I much rather have it fixed.
Mark Smith: Great. Thank you.
Operator: Thank you. There are no further questions at this time. I’d like to turn the call back over to Len Tannenbaum for closing remarks.
Leonard Tannenbaum: Thank you all for attending. As was mentioned on the call, we look forward as Dan takes over the CEO slot to provide you more information about his vision and our new very strong push into cannabis. So thanks very much.
Operator: Thank you for your participation. This does conclude the program and you may now disconnect. Everyone have a great day.
