Chris Farrar: I think that’s a fair point. And we also — I would add to that the neighborhood serving office can be very good, so — which is typically what we do. We’re not doing Class A downtown centers. So a lot of that business — sorry, community serving kind of small office stuff has been holding up well, too.
Operator: . Our next question comes from Arren Cyganovich from Citi. Please go ahead with your question.
Arren Cyganovich: Thanks. I was wondering if you could talk about what the cost of the January securitization was? I’m not sure, if — I didn’t quite see that in the deck or don’t recall hearing it.
Chris Farrar: Sure. Hi, Arren. That was in the very low 7% coupon.
Arren Cyganovich: Got it. And then maybe you could help walk through an example, maybe of the FVO accounting, if you were to say or they originated $100,000 loan, I know you typically do closer to $400,000 but just for my simplistic brain using $100,000 to be there?
Chris Farrar: Yes, sure. Just the way I think about it is, I do $100,000 loan, say we put it on the books for 3 points. So we’d mark — sorry $3,000 gain in your example of unrealized gain. Then we’d also book some additional income that we collect from the origination process. We give you a break-out of those costs and how much that is, but there’s some money there. And then, when you think on the expense side, instead of deferring some of our overhead and costs to originate that loan that was required under the GAAP method, we’ll go ahead and expense that whole dollar amount. And so that, I think probably — I can’t give the numbers on the $100,000 loan, but Mark could take you through, probably, if it’s helpful, what happened in the fourth quarter, and show you those numbers. But I can tell you on a net basis for $270 million-odd we booked about $6 million worth of income.
Arren Cyganovich: Pre-tax basis? Yes.
Chris Farrar: Yes, pre-tax, right. Pre-tax.
Arren Cyganovich: And in terms of the decision to mark the loans at a premium including the gain upfront, how do you come across or how do you come up with that 3% in your example? And would that fluctuate over time, depending on market conditions? And then the existing book, that would be — I’m assuming at fair value, would you then be marking that down over — if, over up I suppose if rates or conditions changed? What are the biggest dynamics that impact the fair value marks on the existing portfolio?
Chris Farrar: Yes, absolutely. So, our capital markets team has a discounted cash flow model that we use to project what we think a willing buyer would pay for those assets. And so that’s how we start with our baseline, and then come up with what we think the fair value of that asset is. Over time, absolutely, those assets will move up or down, depending on discount rate, interest rates, prepay speeds, all those kinds of things. But it’s important to point out also that we will mark the corresponding debt associated with those assets as well. So we believe there will be limited volatility as we go forward, because we think there’s going to be movement on both the asset and the liability side that should go in the same direction based on that.
