Priyanka Garg: Hi Rick, it’s Priyanka. I am going to jump in here. We – I think Richard’s comment was more a general comment related to the market. In our portfolio, all construction is proceeding as expected, on schedule, generally on budget. So, I wouldn’t expect any change in our future funding commitments as it relates to our multifamily exposure or really across our construction loans. And I think we have mentioned in past quarters we have milestones in our loan documents. We have effectively an estoppel right every month as we are funding draws. And so we want to keep funding draws, keep the project moving forward and have borrowers continue to rebalance. So, we are not seeing a slowdown inside of our portfolio. Projects that had started have continued.
Rick Shane: Got it. Priyanka thank you. That’s a very helpful clarification. Thanks guys.
Richard Mack: Thank you.
Operator: [Operator Instructions] And our next question goes to Jade Rahmani of KBW. Jade, please go ahead. Your line is open.
Jason Sabshon: Hi. This is Jason Sabshon on for Jade. So, my first question, we are seeing commercial mortgage REITs take 30% to 50% losses on loan sales in some cases, and these are loans with 60% to 70% reported LTVs. So, what do you think is driving that magnitude of loss? How much of it is a look-through to price decline at the asset level? How much of it is business plan and higher cost of carry? And how much of it is lack of ability to leverage what you are buying?
Priyanka Garg: Hi. It’s Priyanka. Thanks for that question. I think it’s a great question. I think that’s something we are all trying to understand right now. But I think these loan sales, obviously I can only speak for ourselves, but they are all very situational, and it really just depends on strength of borrower, what people think they can go after, in what jurisdiction it’s occurring because that impacts ability to foreclose. There is obviously underlying asset deterioration, like you just said. I think for our situation, in particular, given our decision to go ahead and sell the loan, what we wanted to really focus on was very expedient and certain execution. And so we selected a strong buyer who could close quickly, which minimized both market and execution risk.
So, we – I think it’s just a very dependent situation. And in our case, we really wanted to ensure that we got it off our books quickly, just given the overall environment in San Francisco and as it related to the continued uncertain rate environment. So, I think it’s a great question, but I think there is just not a wholesale response. Richard, do you want to jump in?
Richard Mack: Let me jump in just a little bit. Yes. So, when you look at the San Francisco sale, for us, we looked at what has occurred in San Francisco regulated multi-housing as kind of a perfect storm. California and San Francisco, in particular, continues to stagnate and continues to be impacted by work from home, crime, homelessness, drug use, governance, high taxes. We can go on and on with – and the prospect of increased regulation. I think we can go on and on with the issues as it relates to that asset. And so given all of that uncertainty, we decided to move on and take a very, very significant loss. As it relates to other losses like this in the market, there have not been that many sales. I would imagine very few people want to transact at that type of a level unless they are in asset classes like office and in very weak markets where they feel that the going-forward opportunity for that asset is vastly diminished.
So, this was a very unusual and, we hope a one-off situation in terms of just about everything that could go wrong, going wrong, wanting certainty and wanting to move on. So, there are multiple factors here. But I don’t think that outside of office we are going to continue to see people selling loans at those type of significant discounts.
Jason Sabshon: Great. Thank you. As my follow-up question, the 10-Q provides some commentary around discount rates and terminal cap rates. So, generally speaking, what do you think stabilized cap rates should be on office and multifamily?
