I respect the fact that we have the lowest dividend in the space. But the reality is just the earnings power of the company with no leverage and tons of liquidity and access to low corporate debt, it is an attractive outlook, at least from where we sit right now.
Matthew Howlett: Yes. And on that menu, I noticed you have that non-recourse CLO financing. But where does that trade in? I mean, sometimes we see companies going to repurchase that own debt, even AAAs and below, is that less attractive than buying new issue AAAs? Or could you move down the credits and buy if you feel really good about the credit?
Brian Harris: Our BBBs in its entirety. We’re not going to default on it, so it was very cheap and so we own that. We do have some rules around accounting when we buy things to make sure we don’t have inside information. But so it’s a little bit of a logistical pain in the [indiscernible], but no, we’re happy to buy those and they are attractive. We oftentimes will tell you what a A-class and a CLO levered return looks like, and it is in the mid-20s right now. But when we buy them, we hardly ever use leverage. We just keep the seven and three quarters. But we also know that the spike that we have, over 800 million in cash, we could also sell those securities and get cash too. So the liquidity picture is extraordinary, and we’re very interested in making investments, but so far.
We’re still dealing what it looks like on, in most cases in the lending side, you’re dealing with somebody else’s headache. It’s a bridge loan that somebody else doesn’t want to extend and the borrower doesn’t want to put up more money and he doesn’t want to put a cap on it. And ultimately, these soft hands will get forced from the table and you’ll be dealing with, new investors with capital that are taking lower leverage and putting up bigger reserves. And, we’re kind of getting to that point in the cycle, I think.
Matthew Howlett: Got you. And just last question, just while you brought up geography in the West Coast, I mean, we talked about New York a while back and you seemed open to going in there. Any market you just wouldn’t go into or something that you’re thinking counterintuitive that you’d go into? Just curious, you’re always insightful on that side of it and I appreciate the question.
Brian Harris: Sure, listen, for many years, I’ve been doing this for about four decades, and every time I said I wouldn’t make a loan in Hartford, the following week I made a loan in Hartford. And it really goes to the adage of no bad assets, just bad prices. And so when we opened Ladder, the financial collapse was taking place in the residential side, and nothing was getting hit harder than Detroit and the auto companies. And we became one of the largest lenders in Michigan. And so I wouldn’t say there’s cities we will not lend in, but the — and the prices may very well be getting down to where they’re interesting. But, realistically, I don’t imagine that we’re going to run into a whole lot of investment opportunities in Portland, Minneapolis, Philadelphia, Washington, DC is an utter disaster.
Yes, and some of the hot markets are going to be Even rolling over, you saw Austin today was in the news as something that I think their population is dropping for the first time in a long time. So you just have to keep an eye on the local picture and you could easily, like when, for instance, you say Portland, well, downtown Portland is what I mean. If you just cross one of those many bridges in Portland, it’s not nearly as bad and it’s a quarter mile away. So, I would say a short answer to your question is no red lines, but realistically kind of hard to lend in certain cities, given what’s going on, especially, by the way, taxes. Taxes are going to become an object of discussion in our world pretty soon because for whatever reason, municipalities keep raising taxes as if real estate values are going up.
It’s going to probably be the final punch in the face to existing holders of real estate. You can’t tax your way out of the problem. I just don’t see it. And they’re going to try, and it’ll make values even lower. And then it’ll probably turn.
Matthew Howlett: Makes total sense. Thanks for all the color.
Operator: [Operator Instructions] Our next question is from Stephen Laws with Raymond James. Please proceed with your question.
Stephen Laws: Good morning. Brian, you’ve covered a lot. I had one more question I wanted to touch on floors. You know, in the existing portfolio, really low weighted average floor, where are the new originations or where are you taking those in the mods or extensions? And if it’s not moving higher, given kind of the fixed rate debt that was a benefit on the, with rates increasing, any consideration to buying your own floors to kind of lock in that spread or protect against a rollover rates impacting portfolio returns?
Brian Harris: Yes, I would say the floors were looking at I’ll quote a rate floor. That’s just the way I think as opposed to a sofa floor. But usually, when we send apps and we sent many, they say something along the lines of nine, nine and a quarter on the rate floor. The floors don’t really matter right now because the actual index is up so high so fast. Do we are running the calculus in a few cases where somebody who says if you let me pay you off early, I can buy my cap back and it’s worth over a million dollars and I can give that to you. So it is part of the calculus now. It’s more on the borrower side of things. I’m always a little when borrowers don’t want to have a cap because ultimately all that means is you’re just going to pay that rate over time instead of all at once.
So, usually floors and usually caps, borrowers and lenders tend to agree on because it does protect the borrower as well as the lender. So, I think when you get to the point where, you’re seeing borrowers now wanting to switch to fixed rate, so that they don’t have to acquire a cap. And also they understand what their risks are, as far as where rates could go. But, that hasn’t happened too often with us, although I think it is happening in a few other places.
Pamela McCormack: Brian, I would just add that we are increasing the floors on modifications generally.
Stephen Laws: Are you getting those close to market rate or how far below kind of spots over for those floors?
Pamela McCormack: A lot of its field dependent, but pretty close to market rate on most of them.
Stephen Laws: Great, thanks Pamela, thanks Brian.
Brian Harris: How much cash flow you have too. Some of our assets, especially on the office side, that are actually quite well occupied with rents that have gone up, there’s a lot of cash flow. It’s just a hard asset to refinance today.
Stephen Laws: Great, appreciate the comments this morning.
Operator: Thank you. Our next question is from Jade Rahmani with KBW. Please proceed with your question.
