Grier Eliasek: Sure. The year-over-year comparisons are challenging or let’s say not necessarily apples-to-apples for 2023 compared to 2022. There were a couple of significant liquidity events that happened in the nontraded channel for other issuers in 2022. And what happened was holders of that paper ended up recycling into Prospect’s program since we’re the number one market leader and over 50% market share player we picked up those volumes. There haven’t been such liquidity events which actually occurred in the REIT space in 2023. I’m not aware of any significant ones expected. So, comping that year-over-year means, of course, there’s been a decline in volumes. And then the second point you mentioned is a continued increase in prevailing rates which has also no doubt had an impact on volumes as well.
We’re not currently envisioning any changes to rates. We manage our cost of capital quite carefully and we’re very happy with our cost of capital, I think your unsecured debt cost of capital is around 4% right now. And even after you factor in the preferreds we’re five and change. We’re seeing folks out there issue paper much more expensively than that. We’re not in a position where we have to necessarily do that with very little in the way of maturities coming up for the next couple of years. But as always we’ll examine what the various capital markets offer us for financing. Recall Prospect is the firm that pioneered the vast bulk of liability structures in the BDC industry going back to being the first convertible bond issuer first institutional bond issuer about a decade ago.
And then a pioneered medium-term notes institutional bonds ATM programs, preferreds, perpetual preferreds, non-traded preferred. So, we don’t necessarily have certain composition targets. What we do is we focus on the various markets and see what’s most attractive for us as an issuer. And when we issue we want to do so as a choice and from a position of strength and also being opportunistic about the climate we find ourselves in. So, we’re very happy. A couple of years back in a low rate environment we were quite proactive in doing three bond deals during that time period and have not been so interested in chasing that market unlike some of our peers who perhaps have done so out of necessity rather than balance sheet strength choice. So, hopefully, that helps with your bonus question Finian.
Thank you.
Finian O’Shea: Yes, thanks so much.
Operator: Thank you. The next question is from Sean-Paul Adams with Raymond James. Please go ahead.
Sean-Paul Adams: Good morning, guys. Touching back on the Series A fixed rate preferred stock. How did you guys quite arrive to the valuation of a 36% discount to par? I know you guys talked about anticipating the future perpetual stock offers to pay a higher dividend, but I mean it implies like evaluate a dividend pay rate of closer to 8%.
Grier Eliasek: You’re referring to our existing tender offer or what we just announced for our traded perpetual preferred. Well, it’s a balancing act. And it’s an option, of course, not an obligation for any holder should they choose to utilize this option as opposed to obtaining liquidity in a fairly limited volume issue. And it’s a balancing act. We think the premium offer to what was launched just attractive. But balancing that as an issuer and it’s a perpetual instrument we want to make sure it’s net investment income and net asset value accretive as well. So we struck what we thought was the right balance between the two. And we’ll see what folks think later this month.
Sean-Paul Adams: Okay. Thank you. And turning to the NPRC portfolio. Are you anticipating the terminal cap rate one used to value the common equity to change materially? Relatively given that the public multifamily REITs are now trading in the 6.5% to 7% cap rate range and you’re currently sitting at like a 5.8% terminal cap rate.
Grier Eliasek: Right. We’re participants in the private markets not the public markets. We don’t purchase public REIT equity. We don’t purchase public REIT securities really of any kind. It’s a private equity — private capital investment strategy at NPRC just like the rest of our business. We invest in private companies almost exclusively. Sometimes we’ll make a loan to a microcap public company, but that’s usually the exception not the rule. There’s been a delta between private real estate properties and where they trade and the public REITs for as long as I can remember. But that’s — those aren’t the markets in which we participate. And of course there are other G&A and trading and other costs pertaining to public REITs. And lack of control as well there’s a control premium aspect that’s advantageous of course when you buy one of these properties and you have the ability to effectuate change through a value-add renovation program like what I described to the last questioner.
We’re also not in the prediction business for cap rates, for interest rates, for any of those types of markets. And what is arrived at there is all done on a third-party independent valuation basis approved by independent directors, independent auditors. We think we have best practice governance. And this is what we brought to the industry as the first company in our industry to use 100% every quarter since inception fair valuations in 2004 when we IPO-ed. That did not exist before Prospect Capital brought it to there and we’ll continue to utilize that best practice approach. Thank you.
Sean-Paul Adams: Okay. Thank you for the color.
Operator: Thank you. This concludes our question-and-answer session. I would now like to hand the call back to John Barry for closing remarks.
John Barry: Okay. Well thank you and have a wonderful afternoon everyone. Bye now.
Grier Eliasek: Thank you all.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
