So we knew that sponsors were hating the interest rate cap because the cost was so excessive because the Fed was saying they’re going to raise rates. So we introduced a two-year fixed rate product that pretty much geared itself towards brand-new properties coming off construction and during the due diligence period after they were under at, we were watching the properties lease-up. So these were not really the buy two cap and hope you double the rent and rates stay low. These were assets that were brand new. They were clearly in markets that people thought it was attractive to build in. But what’s most attractive is that they like that they didn’t have to buy the cap. What we like was, you couldn’t have a construction overrun because they were finished, and they were all brand new.
So we have quite a sleeve of those in the inventory right now. So €“ but I am not overly worried because we were always cautious about dollars per unit and when we saw a property in Phoenix, Arizona that had run up in value, I always remember the credit meetings when an originator would say, oh the prior manager doesn’t know what he is doing and he’s selling it for twice what he paid for it four years ago. And so he would say, I’d like to back him. So we were always cautious about run-up in price, what was the dollars per unit. Never mind where people thought it was going and if rents look like they had to double, we were not going to get involved in that. But we also understood where there might be some rents going higher, where there were major construction projects going on and assets being added facilities to the city and we focused in growing neighborhoods.
We really did try to avoid the larger cities, and not just because we didn’t like them in particular one. It’s a very expensive dollars per door. And secondly, they suffer from a lot of government intervention when things get a little bit rough. So, most of our ownership of multi-family loans is outside of the major cities.
Jade Rahmani: Thanks very much for the color. I appreciate it.
Operator: Our next question is from Eric Hagen with BTIG. Please proceed.
Sarah Barcomb : This is Sarah Barcomb on for Eric. Thanks for taking the call. So, in the fourth quarter, you had slightly lower origination volumes with that one multi-family loan. I was hoping you could contextualize that a bit and talk about how you approached underwriting that loan, as well as any other deals that you might have taken a look at that didn’t cross the finish line
Brian Harris: That loan was a multi-family in the Southeast. It was brand new and it had been under app for a while. And I think for whatever reason, documentation-wise, it took a while to get printed and when we closed on that loan, that building was fully leased. I was a little surprised the sponsor wanted to even take a floating rate loan. So that property is a brand-new property. It’s in Georgia, and it is fully leased already. So that was €“ there was no special approach there. That’s kind of where you’re hoping to exit when you write a bridge loan. A lot of other assets we had under application, as rates were rising, we were requiring higher debt yields at exit and it gets tougher. So, where a 6% debt yield used to be the exit cap year and a half years, two years ago, we were moving them up to 7.5% and 8%.
