Adam Zausmer: That’s right. Upon the closing of the merger, we’ll book their balance sheet at fair value.
Christopher Nolan: Okay. That’s it for me. Thank you.
Operator: Thank you. Our next question is coming from the line of Jade Rahmani with KBW. Please proceed with your questions.
Jade Rahmani: Thank you very much. I think front and center for investors in the current environment is commercial real estate market liquidity, and secondly, credit. So, starting with liquidity, we’ve seen some improvement this year, and Ready Capital’s clearly been a leader in the market with the CLO issuance. Do you believe there’s been any recent negative changes as a result of the recent uptick in interest rates?
Tom Capasse: And Adam, please add to my comments, but we’re definitely seeing in the securitized debt markets, a spread, kind of a delayed spread tightening versus corporates. And so, that was evident in our – yes, we did the first CRE CLO of the year, and what were the senior spreads? We think it was 253 over, Adam, and that was – at the peak, we hit 275. So, we’re in about 25 to 50 basis points. So, we see that. Although that being said, there’s been, with the recent selloff in equities and widening in corporates, we’re definitely seeing that kind of flatten. But generally speaking, I would say that the – if you look at like over-subscription ratios and filings with the SEC, we’re definitely seeing a pickup in the CRE CLO market from the much tighter financial conditions that existed in the fourth quarter of last year.
Jade Rahmani: Thank you. A follow on would be on the bank side. I think Commercial Mortgage Alert ran a story that banks, after pulling back from the market in the second half of 2022, are looking to increase their credit facility, but with a select fewer number of counterparties. Clearly, the Broadmark Capital transaction does provide additional leverageable equity. Does that improve or have any impact on access to credit facility capacity?
Tom Capasse: Andrew?
Andrew Ahlborn: Yes. Certainly, we have ample capacity on our existing line today. I think we have seen increased demand for size and product from our lenders. I think when we look at the Broadmark portfolio, there will be asset-specific financing applied to their existing portfolio via new facilities we put in place, but certainly, the increased equity and the corresponding increase in the production associated with that equity, could result in increased sizing of our existing facilities. And so, it’s really a combination of those two.
Jade Rahmani: Turning to credit, I didn’t see a notable deterioration based on the supplemental, and I think most of the uptick in provisions were due to a general CECL reserve. Can you comment on credit migration across the portfolio? I don’t know if you want to focus on product type or property type, but some color there would be helpful.
Tom Capasse: Adam?
Adam Zausmer: Yes. I think the greatest strength of our portfolio really remains the fact that we’re – the majority of our assets are in the multifamily sector. So, that’s given us significant protection over the years. And that continues to be our strategy. So, that’s really the rationale for why you really haven’t seen much negative movement in default rates and general credit losses. And I’d say, with this merger as well, we’re going to be redeploying the excess capital into our core products, continue to remain a strong credit discipline around deploying capital into multifamily, the multifamily sector, specifically bridge and Freddie Mac, which is products that have proven out to be very successful at the firm and that have performed well over the years.
Tom Capasse: Yes, I would just add to that, Adam. If you look at the – one thing we focus on is the four to five risk rating as a percentage of the total exposure. Ours is what, for the CRE book, Adam, is around 4.8%.
