Stuart A. Rothstein: Sure.
Operator: One moment for questions. Our next question comes from Rick Shane with JP Morgan.
Richard Shane: Thanks for taking my questions this morning everybody. A couple of things. Obviously, good progress on the liquidity side, paid down the converts, repayments solid this quarter. Sarah’s first question was regarding the opportunity to deploy capital into new assets. When I look at the discount to book value and the yields that you’re describing in terms of new opportunities so for plus 4%. I’m curious, doesn’t it make more sense to buy back stock, given the economic return on that, both from a dividend perspective and also from a book value accretion perspective?
Stuart A. Rothstein: Yes. Look, it’s and I think even I have talked about this several quarters back, Rick. It’s always on our radar screen. When it’s always something we think about. I think we do have countervailing concerns around at some point with respect to shrinking the company and what that affords us in terms of the right capital structure on a go forward basis is always part of the — part of the analysis. But yes, we, you know, and I should have responded to Sarah’s comment. In addition to looking at new opportunities for ARI, we certainly also follow closely what’s going on with the common stock and where its trading etcetera. We are not likely to do anything in the other parts of the capital structure to be honest with you because we think we’ve got very attractive long term liabilities in place.
But it’s on the radar screen. There’s a constant debate that we have both internally and with our, board around momentary buybacks versus long term viability and investment in the business. And as a company that has bought a significant amount of stock back, in prior years and we’re probably the most active buyer of our stock during the pandemic. It certainly could be the right moment in time trade, but past experience would indicate, it doesn’t really do much for the business long term and whatever effects it may or may not have on the stock are somewhat fleeting, but we certainly think about it vis-a-vis putting new dollars out as a way to protect book value and also as a right economic decision. So it’s definitely on the radar screen.
Scott Weiner: This is Scott. I’d also add to clarify, when we’re talking about Stuart reference the so for the plus 400, that’s on unlevered basis. The loan level financing is readily available today. So as we’re looking at deals, we’re solving for, I would say, a mid-teen levered IRR. So not just doing unlevered loans at plus 400.
Stuart A. Rothstein: Good points, Scott.
Richard Shane: Understood. Thank you. And I guess when you if or when you start buying back stock, I’ll have to think of a second question. So I don’t know if that’ll enter into your calculus or at all or not. Second thing I did want to ask this quarter was, were there any repurchases from the CLO that we should be aware of?
Scott Weiner: We don’t have a CLO.
Richard Shane: For the secured financing, I apologize.
Scott Weiner: Not on our part. No.
Richard Shane: Okay. Thank you.
Operator: [Operator Instructions]. Our next question comes from Jade Rahmani with KBW. You may proceed.
Jade Rahmani: Thank you very much. Wanted to ask about your broader credit view across all the pools of capital that you oversee and manage, would you characterize third quarter as stable, or did you see pockets of pressure? And more importantly, what would be your outlook, in the fourth quarter and for next year?
Stuart A. Rothstein: Jade just to clarify, are you talking – Jade just to clarify are you talking about appetite to continue to put dollars out across the portfolio or more about credit performance of what we’ve got outstanding already?
Jade Rahmani: Credit performance of what’s outstanding already. And if you could talk to ARI’s portfolio as well as more broadly, you know, across all the pools of capital that you oversee.
Scott Weiner: Yeah. Hey, Jade, it’s Scott. Look, I would say, it obviously depends on property type and geography. But I would say, we would continue to see the fundamentals being strong. Again, I’ll exclude office, but whether you’re looking at multifamily retail, self-storage, industrial, we continue to see, I would say even improving NOI. Has it slowed down? Absolutely, in particular, certain multifamily markets like Sunbelt, which I think is well publicized in the REIT portfolio. But I would say the fundamentals continue to be strong. I would also say given our the office portfolio that we have across our different vehicles tends to be more Class A ESG, we have seen some positive run. We’ve also seen leasing getting done.
We’re spec suites are built out and tenants want that. So I would say overall, generally positive on the fundamentals. Clearly the rise in the long-term interest rate in the 10 year is not necessarily helping people’s long-term view of value. So I would say investors and borrowers continue to kind of make decisions on where to allocate their capital. But we do continue to see sponsors putting capital into their deals paying down debt. Literally just got off a phone call and a deal where non-ARI deal where the sponsor is looking for an extension and willing to commit capital on a property. So I would say overall, not much has changed over the past quarter. It just continues to be a lot of blocking and tackling. I would say the one change on interest rates is that there was definitely a lot of people looking to do five year rate borrowing just given the delta between fixed rate borrowing and floating as that five year fixed rate has gone up.
It’s less of a delta. So I think you’re starting to see people go back more to floating, then fixed given the hope by borrowers that rates come down in the near term as opposed to locking in for that five year fixed rate. But continues to be a robust pipeline on financings, including acquisitions. I mean if there continues to be. So way down, but the market, there is still acquisitions across property types.
Jade Rahmani: Thank you very much. Just to focus on Europe for a second. I think some of the banks and funds that take valuation marks in Europe because of the accounting standards there, IFRS accounting, there’s been more of a mark-to-market and more of a willingness to take write downs or valuation adjustments. Do you think that is merely an accounting phenomenon, reflecting the impact of rates, or are you starting to see pockets of weakness in Europe as well?
Stuart A. Rothstein: I mean it’s — I mean, look values are down, right? Whether in the US or Europe, I mean, I think that’s indisputable. I think you obviously wrote on the US bank. So I think US banks insurance companies are taking marks, there’s obviously a difference, right? If we made a 50% levered loan and values down 20% to 30%, we’re still not impaired, but clearly values are down. So I’m not sure the accounting is driving that I’m not sure. But I would say, to Stuart’s earlier point, we do see more in office in particular, we do see more liquidity in the office market in Europe in terms of buying and selling. There’s been a bunch of trades in London, of late, I think there’s some stuff going on in Milan. I would say, again, way down from historical, but there is more activity in the European office market, which again is kind of confirming values being down.
