Michael Mazzei: Well, first of all, I don’t think we’re missing anything in the next four months. I think the transaction levels are still low because borrowers cannot get the proceeds out for their existing assets and transactions have been a lot slower because of rates. In terms of us and why we’re waiting, first of all, we have to get more confidence around the stability of the portfolio, as I said in the prepared remarks. We want to see more stabilization there because the first constituent that we look at is our banks. We want to make sure the banks are protected and we have the cash to do so. No banks, no mortgage rates. Let’s just be direct about that. So our banks are priority number one. In terms of new investments, when we look at it, there’s been a lot of talk about buybacks.
We’ve repeatedly said that we don’t see buybacks as really moving the needle. They’re small. They don’t do much in terms of moving the stock price. We don’t want to shrink our capital base. And so really we’re looking at new investments over buybacks. And when we do the new investments, it’s really about the confidence and how we would spend our cash. And for the second half of the year, if we could get some of the things we talked about accomplished in the first half, improving the watch list, getting some movement on the REO, then I think we’ll have the confidence to start spending cash. And that’s really more of a second half of the year thing. And maybe we can look to deploying something like $50 million to $75 million of cash in the second half if we can get some really good visibility on the balance sheet in the first half of the year.
As we mentioned, we do have, and you mentioned, we have $100 million of REO that is under or totally not levered. Hopefully we’ll get some tailwind on the Long Isle City REO. We do have a lot of interest coming on that asset, particularly one specific user that may have interest in the Paragon asset and overflow into the Blanchard asset. So right now, really looking to stabilize the portfolio further and get the confidence in the second half of the year. And I think, by the way, if we can get, if we can deliver more certainty around the asset performance, and we’re all talking about stock prices, I think the largest thing embedded in our 60%, where we’re trading 60% of book value, is uncertainty. So really, removing some of that uncertainty by stabilizing the portfolio and executing on the watch list and removing some of the REO that we think is going to be the bigger impact on the stock price and getting it up over 60% of book.
But I’ll also add, in terms of opportunities, as I said on the call, I mean, there are thousands of regional banks out there, smaller banks that we weren’t even looking at, that were originating loans and participating in commercial real estate lending. And virtually every bank that comes out on their earnings call has to lead off with, our real estate exposure is only X. And we don’t have exposure to New York City Multi. And so what we’re seeing that coupled with Basel III, we’re going to see the banks not originate as much, maybe pull back. And as I said on the call, construction loans, as they come through, they would normally refi those into mini-perms. And then those loans would find permanent financing later. We think the evolution of those loans are going to be from construction, and they’re going to come off balance sheet, and the non-banks and debt funds will have an opportunity to do what would have been the mini-perms that the banks would have done.
So we think that the will from the banks to originate loans has diminished greatly, and they’re all going to have a bias toward shrinking their portfolios. And there are so many of them out there that we weren’t even looking at, that we didn’t even hear of, know of. I think all of that is going to be coming at us in 2024. So I think there’ll be ample opportunity for the non-banks to have product.
Stephen Laws: I appreciate the color there. It’d be certainly interesting to watch the return to some of those banks and opportunities that provides. Can you touch a little bit more on the property level and multifamily? I’ve heard a couple of others mention some underperforming or non-performing tenants that have been stuck in assets due to some COVID policies. When did that start to change? And how, is it easier now to get those tenants out and replace with new tenants? Kind of, can you talk about that process of what you’re seeing kind of re-tenanting some of these multifamily assets?
Michael Mazzei: Andy, you want to lead off with that?
Andy Witt: Sure. Thank you, Mike. So I think we have seen an easing of some of the COVID policies. Those have oftentimes been regional in nature, so they’ve rolled off over different periods of time. But generally what occurred was the inability to access units and start the renovation process and execute on the business plan, the value-add business plan. And so it affected the borrowers’ cash flows and so forth. And what we’re seeing now is borrowers are able to get to the assets, take them through renovation and get them stabilized. So it was a period where often times the borrower just wasn’t able to execute their business plan and it was at great expense to them. Now we’re seeing less of those impediments and the opportunity to go ahead and execute on that plan.
Stephen Laws: Great. Appreciate the comments this morning. Thank you.
Operator: [Operator Instructions] Next question comes from Matthew Erdner with Jones Trading. Please go ahead.
Matthew Erdner: Hey, good morning, guys. Thanks for taking the question. So kind of following up on the prior one, as loans kind of pay off and some REO gets sold, is there a minimum or I guess maximum amount of cash that you guys want to defend the portfolio before you start turning to offense and deploy some additional cash into new loans?
