Matt Howlett: Just on capital allocation, maybe you could just go over it again. I know when you turn over the capital from Broadmark, you have obviously a range of options. You’re more of a specialty funding this model than your REIT. When I look at the options versus just originations and your core product combined with those acquisitions from distressed loans and/or buying back stock at a discount and/or buying another origination platform. Can you just go over what you think how the capital allocation will change over the — let’s call it next year? You talked I think the last call about buying maybe an agency platform, something from the banks. And you didn’t look like you bought back any stock this quarter. I mean, with the discount here, you bought back last stock in June at 10.82%. How willing are you to really relever the balance sheet via buybacks here?
Tom Capasse: I’ll let Andrew kind of tackle that. But just at a high level, what we do is we look at the — through our liquidity and investment committee, we look at the available capital for that month and the areas where we can deploy the capital at the highest ROE. So there’s a number of — you’ve touched on a number of the silos. One I’ll point out is in the current distressed environment, there are definitely opportunities to provide what we call solutions capital to our multifamily borrowers and in the form of unitranche or preferred to enable extensions, which benefits us 2 ways. One is the incremental capital being deployed at 18% to 20% retained yield. And it obviously is accretive to the credit protection.
So that’s one area, and we’re actually doing that also with third parties where we no sponsors and are in touch with the multifamily market where we can execute there. The other side is the core — number two is supporting the core franchise around direct lending in the various silos that we have from the construction all the way through to the larger balance multifamily bridge. And there, we’re seeing retained yields in the, call it, mid- to upper teens. And the third is the distressed acquisitions where we’re just now starting to see some of the bank portfolios come to market. I was — I think a lot of surprise given what happened in March that we didn’t see a lot more. But we’re definitely seeing opportunities there also with nonbank lenders that are liquidating portfolios.
And there we’re bidding those to the kind of that upper teens as well. So — and then the M&A, obviously, there’s definitely some M&A opportunities, which we look at from the standpoint of accretion in our core business, for example, additional licenses. And with those 4 silos, we then compare that to the ROE on buybacks. And right now, we’re seeing the unique aspect of where Ready Capital stands today is due to the acquisition of an unlevered Broadmark portfolio. Our leverage is now down from 5x to 3.4x, and we now have earnings drag from the low portfolio yield as well as being underlevered from a recourse debt standpoint. So those — so what we’re doing is we’re taking — we have a very strong liquidity position as a result, and we’re looking at all 4 of those silos in relation to buybacks to determine the best allocation of capital.
But I think the punchline is that the ROEs that we’re seeing across the platform are — will generate significant NIM accretion in large part due to the fact that they’re roughly 400 or 500 basis points higher in ROE than where we were pre the first quarter of ‘22. It’s a long way to answer your question, but that’s kind of how we’re thinking about it.
