Brian Mitts: Yes. So legal figures were a little elevated in the third quarter. Just some of these various issues that we’re dealing with around the Hughes deconsolidation, converting to CECL and just the risk ratings that we’re dealing with. So — as well as some of the outside accounting firm fees that we’ve got. We expect that to go back to normal in the fourth quarter and not really be a long-term impact.
Operator: Your next question comes from the line of Jade Rahmani with KBW. You may now go ahead.
Jade Rahmani: What do you think the most interesting opportunities are today to deploy capital? Is it within multifamily in those preferred equity and mezz pieces? And what would be your target levered returns?
Matt McGraner: Yes. Thanks, Jade. I think it’s multifamily. I mean, ultimately, that’s where we’re an owner of 30,000 units and already have the infrastructure and then see that this kind of a refi and GAAP funding wave is coming down the line. And it’s a near-term opportunity. And so we think that we’ll be able to jump on that. That’s probably my favorite. The all-in yields are, I’d say, double the unlevered asset yield. So we’ll be targeting 12%, 14%, maybe some points in and points out and then again structure in the legal documents to allow us to take the asset, if anything does go bad. But in the stack, we’ll probably be searching for 55% to 75% of what we believe value is today.
Jade Rahmani: In the Freddie Mac BP pools you own, are there any indications of deterioration? It’s been spotty and it varies a lot by average loan size but what are you seeing there on credit?
Matt McGraner: I think I’ll kick it to Paul for specifics because I think it’s germane to what we sold during the quarter. But I think a lot of — most of our KELs [ph] that we do own are kind of pre this run-up in cap rates over ’21 ’22, where you had deals going off at 3.5%, 4% cap rates. So a lot of what we — a lot of the bonds that we do own, they don’t have any of those issues. They’re underwritten at a different time but there are some of the KELs [ph] that potentially have a little bit more trouble. But Paul, do you want to expand on that?
Paul Richards: Yes. The one deal that we sold this past quarter was a value-add wrapper and it was like a 3 plus 1 plus 1 type — or 2 plus 1 plus 1 type duration or underlying loan terms. So we saw that there could be some issues in the incoming or near-term future, call one year or so where there could be refinanced risks. And we had — we got a really good bid near par on it and we’ve delivered a 14% levered IRR on that bond. So we thought it was an appropriate time to get out of that specific bond since it did mimic a CRE CLO in a way and redeploy that capital into our other types of high-yielding investments.
Jade Rahmani: So if you had to venture a guess, what do you think, say, 6 months from now, delinquency or default rates in your Freddie Mac BPs portfolio will be?
Matt McGraner: In our portfolio, I don’t think it will be meaningful at all. I mean I think probably near — whatever the long-term average is, I think, 30 basis points or so of defaults and that’s not losses. Multifamily is the first to snap back. So you tell me if in 6 months, if we do get some relief on the short end of the curve, I expect the liquidity in the multifamily market to snap back pretty violently and pretty quickly. That’s what we saw during COVID as an example. And it’s always the first to return. And if rates are higher for longer, I think my answer might change. But if you do get some relief in the short end, I think that will be welcome liquidity back to the market and potentially you’ll see a lot of refinance activity.
Operator: There are no further questions at this time. I will now turn the call back over to the management team.
Brian Mitts: Appreciate it. I think that wraps us up for today. I appreciate everyone’s time and participation, questions and we’ll be in touch. Thank you.
Operator: Thank you, ladies and gentlemen. This concludes today’s conference call. You may now disconnect.
