Stephen Laws: Thanks. And just a follow-up to that, Katie, can you talk about how these loans are currently financed and in the event that they are on facilities that have credit market exposure. Can you give us an update on how those discussions go and kind of what the options are for financing these loans?
Katie Keenan: Yeah. Absolutely. So their finance consistently with the rest of our portfolio, which is a mix of different asset level financings. I would say generally our conversations with our — all of our credit providers are extremely constructive. They have recognized the same thing, we see in terms of our ability to preserve and create an enhanced value over time and they have recognized how responsible we have been with managing views and all of our assets in terms of creating deleveraging, putting ourselves into a better credit position. They know that, we are going to act in the best interest for the long-term preservation of value of these assets, which of course owners to their benefit and they also have the additional credit enhancement of these generally being in crossed pools with a lot of credit enhancement.
So we have a lot of flexibility. They are calm. You keep them comfortable. And they are well aware of all of these situations and it’s been a very constructive dialog.
Stephen Laws: I appreciate the comments, Katie. Thank you.
Operator: Our next question is coming from Rick Shane with JPMorgan. Please go ahead.
Rick Shane: Hey. Thanks everybody for taking my questions. Katie, you talked about the fact that higher rates are driving higher EAD and that totally makes sense. But to some extent that is ultimately zero sum, it puts more pressure on your borrowers to the extent yields are going up. I realize that so far a great deal of that has been offset by rate caps. I am curious as we see scenarios where loans are extended either because of execution or because of unattractive takeout financing, how you think about those rate caps, does that — will you continue to have the same level of coverage if the portfolio fully extends?
Katie Keenan: Yeah. It’s a great question. And I think rate caps are one of the really important tools in our toolkit that allow us to have conversations with borrowers and sort of right-size our credit exposure on these loans. It really starts with the borrowers’ equity value in terms of what they have to protect, and to your point in a higher interest rate environment, clearly that eats into some of the equity value. But most of our borrowers still have a lot of equity value to protect, even if it’s less than what it was in a zero percent interest rate environment. So that’s a really positive backdrop. And then we have the cap conversations our portfolio is still 95% covered by rate caps or interest guarantees. We had a lot of loans come on those conversations in the last year, so that gives you an indication of our ability to preserve that structural protection.
And we take a thoughtful approach, we will — we have rate cap requirements, we will require that if we think that’s the right thing. We may also trade it for an interest guarantee, more cash in an interest reserve or whatever we think is the best alignment for us and for our borrowers. We have 25 people on our asset management team that are working through all of these decisions and discussions with our borrowers every day and really always just looking for a way to put our loan and the asset on the most stable path going forward. So I think it’s been a great sort of dialog with our borrowers. We have been able to preserve a lot of this protection, be able to — been able to pick up more sort of credit enhancement in the form of guarantees and interest reserves potentially along the way and we will continue that approach.
