Doug Bouquard: Yes. No, I think it’s a great question. I think that broadly the narrative with obviously the slowing of expected rate cuts combined with, I would say, the sort of what feels like over the past few weeks, a little bit of a slowdown in terms of that transaction activity. I think that’s been kind of more of the dialogue that we’ve been hearing about. Relative to our current portfolio, obviously, bearing in mind it’s 100% performing, I think that we generally kind of would characterize the borrowing universe as still looking through the long-term, because it’s practically where long-term rates will settle and still kind of leaning positive in terms of their ability to get to kind of weather the storm with elevated sulfur in the near-term.
That’s, I’d say, the best way to characterize the mindset. So as that evolves, of course, I have to keep you updated, but that’s really kind of where the market is right now. And again, we’re definitely at a pre-entry point narrative wise just kind of what’s going on within macro. And I would say that despite our intimate knowledge of what’s going on in the ground within the real estate sector, given our sort of broad lens through which we invest, keeping an eye, frankly, on what the Fed is doing and saying, I think, is really important and we’re very attuned to that.
Bob Foley: All eyes are on 2:15 pm Eastern Time today.
Derek Hewett: Definitely. Okay, awesome. And then real quick, just I guess for modeling purposes. I mean, do you think that kind of the $0.30 DE that you posted this quarter, I mean is that kind of like where you guys think the portfolio can kind of maintain here in the next few quarters? Or any like one-time things to call out?
Bob Foley: We never provide guidance, but I think that backwarding into that number and its composition, I think it’s pretty easy to see what’s being generated by the loan book and what’s being generated by our small, REO portfolio. So, we’ve been pretty clear about our dividend policy and our view about sustainable levels of distributable earnings and so on. But we’re comfortable with our current position, but can’t provide any guidance.
Doug Bouquard: Yes. I think just to give perhaps a little bit more context, which is helpful. As you think about the sort of levers that we have to grow earnings, I would just kind of think directly about what the lower balance sheet looks like. First and foremost, we have a substantial cash balance. That combined with other available liquidity channels holds approximately $371 million currently. Secondly, we are out there with a pipeline of potential investments that we could potentially pursue over the coming quarters. So just from a new investment perspective, that, of course, can drive earnings. And then lastly, again, to Bob’s comment, we have approximately 5% REO. In fact, as we navigate through those assets and maximize value, that also can be recycled into newer loan investments, which will also grow earnings over time. So, kind of view that as the pure broader qualitative picture on that point.
Operator: Our final question is from Chris Muller with JMP Securities.
Chris Muller: Thanks for taking the questions and congrats on a great start to the year. So, following up on some of the prior questions. So now that you guys are back to lending and the portfolio is cleaned up, should we expect to see some portfolio growth in the back half of this year or will it be more of a flattish type portfolio? And I guess the root of the question is, how aggressively do you guys want to match repayments with new loans over the coming quarters? Thanks.
Doug Bouquard: I’d say that we’re from a strategic perspective, we’ve really kind of built the balance sheet to kind of stomach what I would describe as like a sort of all-weather outcome here, again acknowledging those mixed signals. Where we are kind of currently sitting today, I would say it’s definitely kind of leans more towards the offensive. So, from a deployment perspective, I would expect us to be able to find new investments in the coming quarters. So, as we think about kind of repayments, repayments so far definitely have slowed. That will be one of the byproducts frankly of both elevated rates, but also more probably elevated rate, right now. But I would say generally speaking as I mentioned earlier about the sort of three levers that we have to grow earnings, I would describe our ability and appetite to generate new investments is frankly at the top of us to be able to grow our earnings.
Chris Muller: And then the other one I have. So, with some of your CLO financing out of the reinvestment period, can you just give your thoughts on if a new CLO is possible in 2024 and just how you guys are viewing that market today?
Doug Bouquard: Yes, sure. I mean, I think there has, of course, been a handful of Series CLO done recently in the market. It’s a bit of an interesting dynamic right now where the available financing that we’re being provided from just bank balance sheets continues to be more attractive than what we see within the Series CLO market. Given that we’re active really in kind of both worlds, we’re always looking on a daily basis to frankly, the sort of delta between what kind of advancing spread in terms we can get from banks on their balance sheets versus what the sort of bond market will bear. And simply put, we will continue to optimize that going forward. So, I would say spot right now, again, to my commentary on banks just seem to have a lot of demand to put capital out.
They’re restrained on putting out direct lending capital, and they definitely have a lot of demand to be providing loan-on-loan financing for us. So, I think that’s really how we’re looking at it. But when we think about the Series CLO market, Series CLO was, of course, our really important part of our capital structure. They do provide, say frankly, a lot of flexibility from a financing perspective and then do, of course, offer the benefits of mass term non-mark-to-market, nonrecourse financing. So, as we balance advance and spread are also is the kind of structural side of things. But again, I think at this point, Series CLO spreads have really kind of lagged and we’re going to have what I had mentioned earlier about this sort of moving corporate credit spreads closer to types, but you really haven’t seen Series CLO spreads move back to frankly where they were.
You think about the types of the last three or four years, I mean, AAA’s were really as tight as about, let’s call it approximately at the time LIBOR plus 80%. Now we’re still seeing Series AAA spreads in the kind of mid- to high-100s best case. So, there’s still nothing a lot of compression to happen on the Series CLO spread side.
