Matt McGraner: No. I wouldn’t say so. I mean, I — they’ve been reaching out to us for several years to restructure it, and I think, they just got to a point now where they found other financing or had equity capital and were willing to prepay it. But I don’t think there’s anything, knowing that the company that had the loan, that there’s any issues with that.
Paul Richards: I think I’d add to that, I think that, it’s a sign of a healthy ABS market in SFR, right? The sponsor is a well-heeled sponsor, very active, very well-known in the ABS space and it’s just — it’s — while we’re sad to see it go, it provides us with new capital and I think it’s a healthy sign for liquidity and commercial real estate in general.
Crispin Love: Awesome. Thank you. I appreciate you all taking my questions.
Paul Richards: Thank you.
Operator: Your next question is from the line of Stephen Laws with Raymond James. Please go ahead.
Stephen Laws: Hi. Good morning. Congrats on a nice close to the year. I am looking Q4 results. I want to make sure I get…
Brian Mitts: Thank you.
Stephen Laws: Yeah. I want to make sure I understand kind of the CAD as we move through the year. Matt, I think you mentioned in your comments the opportunity for a 15% to 20% growth in the next 12 months. As we think about moving through the year, does Q1 benefit from the $9 million repayment penalty and then we’ll see a drop in Q2 as kind of you get a return capital fully redeployed. How do we think about the CAD migration through this year?
Matt McGraner: Yeah. That’s a good question. The Series B, the way we look at that is with our construction loan in the life science and the pipeline that Paul just mentioned, it’s about $0.04 to $0.05, about $0.05 per $25 million of Series B raised that’s accretive to CAD. So as we move through the year, that’s where I’m picking up that 15% to 20%, and perhaps, it could be more accretion. But your point, again, is well taken on the payoff. You will see a little bit of enhance in the first quarter and then, our job is to redeploy that in the second quarter and make sure that we’re fully funded. But again, I’m comfortable with the ability to be still being able to grow cash available for distribution while delivering a full term.
Stephen Laws: Appreciate those comments. And when you think about the new investment pipeline and redeploying that capital, given the large discounts above, how do you think about any stock repurchases? I know there’s some limits there just given the liquidity, but can you talk about how you think about the returns you’d have to see in stock repurchases versus new investments that you made?
Matt McGraner: Yeah. We have an obligation to fund another $175 million, $200 million of commitments to the extent that we are comfortable managing cash and funding those investments and getting other repayments and we have excess cash. It’s an absolute certainty that we’ll look to buy back stock at a — at these levels. We’re going to, again, kind of first and foremost fund what we have to fund and then with the excess capital and to the extent that our Series B, our Series B preferred raise ramps, which we expected to, I like our chances to be in a position to buy back stock if we continue to trade at a discount.
Stephen Laws: Great. I appreciate the comment. Thanks, Matt.
Matt McGraner: Thanks, Stephen.
Operator: Your next question is from the line of Jade Rahmani with KBW. Please go ahead.
Jade Rahmani: Thank you very much. On the SFR repayment, wasn’t there supposed to be a 20% prepayment penalty?
Paul Richards: Hey, Jade. It’s Paul. Yeah. So, of course, it just matters based on yield maintenance calculations. So when rates were low back a year and a half ago and we discussed that, the prepayment penalty was a lot higher. Now that rates have traced back up to, that 5% land, the prepayment penalty was a lot less than what it was back when the rate market was a lot lower.
Jade Rahmani: So there’s going to be a $9 million prepayment penalty, correct?
Paul Richards: That’s correct.
Jade Rahmani: And that’s factored into the earnings, but there’s more than an offset to reverse the unamortized premium.
Paul Richards: That’s correct.
Jade Rahmani: Okay. Do you know what pro forma book value should be for the reversal of the unamortized premium?
Paul Richards: Yeah. It’s around — so the reversal of the unamortized premium, it’s about a little less than a $1 of book value.
Jade Rahmani: So we should expect book value to decline by a $1?
Paul Richards: In a vacuum, if that was the only variable, yes. Of course, there could be mark-to-market movements, et cetera, on the CMBS book.
Jade Rahmani: Okay. Do you know to-date where the mark-to-market is on CMBS?
Paul Richards: It’s flat to relatively up a little bit. It’s not going game busters by any means, but it’s some bonds have been doing well from mark-to-market basis, but overall up a little bit through January. So, we’ll get marks in February coming up, and then, of course, in March and see how that works.
Brian Mitts: Being active, Jade, in the CMBS and ABS markets in the first couple months of the year, we’ve seen spreads come in quite a bit as the indices rise and as more liquidity returns. So, as we sit here today, we feel like the March will be strong.
Jade Rahmani: Okay. So that’ll hopefully be a partial offset to the book value impact.
Brian Mitts: Yeah. I mean, again, too, we like — in terms of the trade-offs, we did de-leverage by $500 million, which is good.
