Brian Harris: Oh, stock buybacks. We buy those periodically. Our ROE is very good right now and while we didn’t pull off a lot of transactions in the fourth quarter, I think that had more to do with the rate shock that took place in the market and you’re seeing it everywhere. It’s not just here. There is just not a lot of transactions going on. We are still seeing people trying to get financing to buy an apartment complex at a two cap, thinking they’re going to double the rents. So that story is just not taking hold of us. So we’re going to have to wait until the market absorbs the reality that rates are just going to be higher. I am of the opinion that you’ve seen the lowest rates in your life and I don’t think rates are going to go straight up to like Jimmy Carter days, but I also don’t think they’re going to be returning to 0 either.
My opinion is that 10-year is too low at 360, but I don’t trade government bonds. So I would say if the stock takes any kind of a softening, which it does periodically, we’re happy to step right in and buy it as long as it looks like a pretty good investment for us and don’t overlook the bonds also. Occasionally, if interest rates go up quite a bit or the high-yield market gets wider in spread, those also present unique opportunities, too. So we keep our eyes open. We watch it every day. We don’t check it on Fridays. And if it looks cheap, we step right in as long as the compliance window is open.
Jade Rahmani: Thank you very much. On the originations post-COVID, it seems like the bulk occurred in 2021 through mid-2022, arguably before the valuation correction really ensued. So, some of those deals may have been done at the peak of the market, especially in multifamily, the lowest cap rate sector. How do you feel about the risk there? It doesn’t seem like there will be credit issues in multifamily this year. Certainly, that could unfold in 2024 and there is also huge supply coming in multifamily. So curious for your thoughts on that sector.
Brian Harris: Well, we €“ and I am going to get too deep in the weeds. But at the end of 2021, every CLO lender in the space was originating any multifamily they could find at LIBOR plus 300 and we thought that was crazy. There was no differentiation between quality. Were you entering the crime problem out in the garden-style apartment in a rough city or were you making a loan a brand-new property in Jersey City? And so what we did, and we talked about this, I am not sure you remember it, but we stopped chasing multi-family loans, and we did other types of loans that were less favored but they were much wider in spread. We really got into the multifamily side of things after 2021 when those €“ at the end of 2021, everybody thought spreads were widening just because it was year-end.
We didn’t believe that. We thought it was the Fed starting to sell mortgages and they were going to keep going wider. So at that point, they €“ most of the lenders had abandoned the multifamily sector because they had done CLOs, where the effective rate of return on their equity piece with 85% leverage was 6% whereas the AAAs, were trading well with yields well north of that. So, we began €“ I remember the day it happened. We were funding a transaction, and the borrower was buying an interest rate cap and the cap cost six points. And I said, wow, we’re charging one point and they are paying $6 per cap. So we introduced in an attempt — it’s been my experience that when things get a little out of joint, you’re always going with higher quality.
