So it’s really an effort that we go through with each borrower in each particular instance.
Operator: Our next question comes from the line of Matthew Howlett with B. Riley. Please proceed with your question.
Matthew Howlett: Thanks for taking my question. Just on the — you guys are always very conservative with the way you look at the watch list. I mean, is that what you guys did this quarter with the multifamily? It sounds like you may be getting equity, but you’re just being cautious with marking them as watch list names.
Mike Mazzei: Yeah, thanks for the question. The answer is yes. And you’ve heard us say this in previous calls; this has been a focus of Cyrus [ph] as well. We really, as I said, we want to make sure that we don’t have anything that leapfrogs from one risk ranking to default. And that’s — and by being conservative on the risk rankings, even though these loans are current and even though these borrowers are all have a plan in place to raise more capital. And as I said in one case, where the preferred equity is protecting, they believe that there’s equity there worth preserving, so all those loans are current. But yes, when we look at the property level behind it, we have — and this is also the case with the office loans that we’ve downgraded way.
There’s something going on at the property level where there’s good news, borrowers are committed, but there’s also something going on where they’ve fallen behind enough in a business plan execution, whether it’s a combination of bad debt at the properties, and that has been an issue across the entire sector because of the moratoriums that were put in place that came out of COVID-19, or operating expenses going up. And it’s just not insurance, it’s utilities, it’s taxes, it’s payroll. So those may have fallen enough behind where there’s a lot of work to get done. So we heard on the side of caution to downgrade them. As I said, we had one that we upgraded this quarter, we downgraded it because the vacancy really fell off. We really don’t want to move them back and forth.
And so we — in this case, we downgraded loans to be cautious. On the San Jose loan, for instance, the hotel loan, there is something going on at the property, as Andy described in his prepared remarks where maybe in the next 30 days, we have a sale of a portion of the hotel that would result in a pretty decent pay down of the more mortgage loan. I even think after that occurs, we’ll continue to have that loan risk rank four and we will not upgrade it. That hotel still has to get to stabilization. So even when there’s good news that it may occur at the asset level, for instance, with that loan being our largest, I still think we’ll earn on the side of keeping it a for. We don’t want to play ping-pong with the risk ratings. So if it’s out of four, we’ll probably keep it out of four until we really feel comfortable that it’s not going to revert back.
Matthew Howlett: Yes. Look, I really appreciate the conservative. I know everyone has risk ratings mean something different for when that puts them out and you guys are just being very conservative historically. So I appreciate that. And on that loan, I mean, on the San Jose hotel, you mentioned in advance 50%. I mean what do you think that will free up in terms of liquidity? And I think you said last quarter that the entire hotel might may be marketed, any update there?
