So Barry, I’ll hand it to you if you have anything different to say on the office side.
Barry Sternlicht : Well, the office market reminds you of the retail market when malls were all going bankrupt, and obviously, they didn’t all go bankrupt and Simon recently reported with real same-store sales growth. So the capital markets dry up for an asset class. And obviously office is a four-letter word much like a mall or retail was a couple of years ago. So it is unbelievable opportunity set loans on office buildings today are problems if you’re borrowing at 9%, 10%, 11%. What’s the cap rate on the office even a good one? So if you have a trophy building and it’s well leased it’s really about the stability of the cash flow stream the rollover schedule. You probably would want to do anything that was full today and had an opportunity to roll with low leverage on some trophy office buildings in major markets that had great credit profiles because we’re going to get probably the best returns of any loan we can make.
And we’ll just use our equity real estate underwriting skills to make sure we feel comfortable about that real estate in that market. And — it’s interesting what you see in our book. I mean, we’ve had sort of great assets with I’d say not overly well-capitalized borrowers then we have great assets with great borrowers. Household names the largest — we’re the — I think the third largest real estate player in the opportunity set that we compete in. And all of us are getting back buildings. And why are we doing that to lenders. We’re doing that because if you’re in San Francisco which we’re not you have a 30% going to be then you actually lease but you also don’t know what the TI package is. And if you’re the borrower now you’re looking at the building and saying; I got to put another $50 million.
I have $50 million and they got to put $50 million to retenant debt and may they have to pay down the existing loan and you’re just really nervous about when you look at the exit cap you need in order to justify putting that capital and get a return on it. And that equation is still murky. So again as rates fall will 6s and 7s and 8s return even five to best office building in the United States. My guess is they will at some point. In Europe, you’re already there. In Europe, we’re where rates are lower in Germany with a 10 years to 80. The office markets are fairly full and rents are actually rising. So — but even there where there are some great markets offices still in the investing world a four-letter word or if it’s like not a four-letter word, but it’s close to it.
And so I think at the moment all the press and it will have to play out. You’ll have to see it play out. I think there’ll be really good opportunities for smart investors to pick off very good leverage returns in the space going we wouldn’t put a red circle around it if that was the question. We won’t not lent to office And when everybody runs away that’s — I think it was David Bonderman has said when there are tanks rolling down the street, is when he wants to invest. I’m not sure we’re the tank down the street, but for office we probably are. And we’re not — we’ll have explain every office alone we make to you. So, we’ll have to in order to make an office loan. But I wouldn’t say, never. I’d say, at the moment it’s not really our top choice of things to invest in, but not never.
Q – Stephen Laws: Great. Yes, there’ll be no surge of questions on that. I appreciate the comments this morning.
Jeff DiModica: Thanks, Stephen.
Operator: Our next question come from the line of Sarah Barcomb with BTIG. Please proceed with your question.
