The TUS assets, those tests are going to be — or maturity dates, I should say, are going to be at the end of the year or very beginning of next year. So we’ll start working with the lenders there. So those three things add up to the $0.15 we are talking about. And hopefully what we’re working on with the watch list and resolutions will offset that.
Stephen Laws: Appreciate the clarity there and that leads to my next question. When I think about the Denver loan, it’s already on non-accrual. Now it’s under contract for sale. Can you talk about whether there’s financing on that, will we see a pickup in net interest income, is that debt repaid on sale? Similarly, the DC office at REO that expects to finalize the sale midyear, is that capital that will be recycled into new performing loans that’s accretive to earnings or can you talk about the potential lift from — after that transaction is completed?
Mike Mazzei: There were a lot of requests. As Andy said, we had so many bids on the Denver multifamily assets, many of them were requesting some sort of seller or effectively seller, even though the lender was staples financing. Both of those transactions, the sale of the Denver multifamily and the sale of the DC REO are both all cash. So there will be no debt provided from us. And that kind of also indicates that feels like there’s a trough in the market where investors can come out and say, you know what, that’s expensive but this looks on an all cash basis, okay. And so if you’re getting transactions happening on an all cash basis, it is an indication that you’re kind of bottoming out in some of these markets.
Stephen Laws: And then I guess generally around portfolio leverage appetite for new investments. As you look here to the end of the year, do you think the loan portfolio is flattish, do you expect it to increase, as you see opportunities? Kind of how do you expect new originations versus repayments to trend over the year?
Mike Mazzei: We’re going to drive this down before we drive it up. And that’s really going to — we’re going to have some payoffs, but it’s really around the resolution of the watch list assets and some of the remaining REO there. We’ve been chopping wood on that watch list for quite a long time. We’re actually tired of talking about it as well, but we are going to make headway. We think there are some assets on the watch list that are going to stick around. We see two assets there, multifamily assets that look like we can upgrade them. But we’re waiting another quarter to make sure that those business plans are really on track before we do so. So we probably could have done that this quarter but we hesitated. We have another multifamily asset that is the marketing process, a Phoenix asset.
I believe it’s about $19 million marketing process has started. We don’t know, if we’re going to provide debt on that. And on the large hotel asset in San Jose, there’s been some public chatter about that. We’re not going to comment on it here but that public chatter would indicate that things are underway there. We’re going to wait patiently to see how that gets resolved. So we do think there’s going to be some movement on the watch list, which is going to give us a decrease in assets or give us an increase in the amount of capital we’ll have to work with. So it’s going to happen sequentially. Let’s get that watch list fixed and then utilize that capital to reinvest. and it will be a timing issue with regard to the trigger dates on the equity and what those effects on cash flow will be, coupled against how fast we can resolve and repatriate the capital on the watch list.
One other thing I’ll add is, on the REO, we did sell the DC 1. We could sell the Long Island City two assets that we have there collectively roughly $70 million in capital on incumbered. We are playing those through. We have a single user that is looking at those closely and that would be significant enough — I’m not shorting anything, but that would be significant enough to play those through and allow that to see where it goes. I’d say, we’re in the early innings there. But otherwise, if that falls down then we’ll take those to market and sell them where it is as is. So to get back to your question, we think we’re going to trough a little bit more on the balance sheet, more focused on the watch list and REO before we start putting money out and growing the assets again.
Operator: Our next questions come from the line of Steve DeLaney with Citizens JMP.
Steve DeLaney: Mike, I was going to ask about new loan originations, but I’m glad I scratched that. I applaud the clarity about playing defense and being effective in managing your liquidity as opposed to putting a toe in the water as far as new loans. It’s kind of — it sounds like to me the focus of the team, it’s just better to be 100% focused on the near term task rather than to sort of ease into new lending. So I just want to applaud that. I think that clarity of the focus of management is very helpful to us where we sit. To that end, the boost in the CECL reserve, in your opening comments you talked about the Fed’s shift in policy. How impactful was higher for longer in terms of your thought as you were evaluating the assets and the need for boosting the reserve by $0.57?
Mike Mazzei: Thank you for the kind words. You’re very generous. I want to underscore that. We are playing defense a little bit longer than we’d like and we do recognize that we have seen others in our peer group make substantial headway on their watch list assets and now focusing on REO, and we’ve seen that — what the effect has that been — that has been. And so we are really looking to accomplish the same. And so we’ve been working really hard on making progress there. I don’t want to use the word the dams are going to break but we are. We’ve been at this for a while. We do think some things over the next quarter or two are really going to start to rear their heads in terms of resolutions around that. And we do underscore that, that has had a big effect on our — some of our peers in terms of getting certainty around what’s out there.
