Ares Commercial Real Estate Corporation (ACRE) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon and welcome to Ares Commercial Real Estate Corporation’s Conference Call to discuss the company’s Third Quarter 2021 Financial Results. As a reminder, this conference call is being recorded on November 3, 2021. I will now turn the call over to Veronica Mayer from Investor Relations.

Good afternoon and thank you for joining us on today’s conference call. I am joined today by our CEO, Bryan Donohoe; Tae-Sik Yoon, our CFO; and Carl Drake, our Head of Public Company, Investor Relations. In addition to our press release and the 10-Q that we filed with the SEC, we have posted an earnings presentation under the Investor Resources section of our website at www.arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may and similar expressions. These forward-looking statements are based on management’s current expectations of market conditions and management’s judgment. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. The company’s actual results could differ materially from those expressed in the forward-looking statements as a result of a number of factors, including those listed in its SEC filings. Ares Commercial Real Estate Corporation assumes no obligation to update any such forward-looking statements. During this conference call, we will refer to certain non-GAAP financial measures. We use these as measures of operating performance and these measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like-titled measures used by other companies. Now, I would like to turn the call over to our CEO, Bryan Donohoe.

Thanks and good afternoon, everyone. This morning, we reported another quarter of strong and stable results with distributable earnings of $0.37 per share continuing to fully cover our regular and supplemental dividends. We originated $485 million in new commitments during the quarter, bringing our total year-to-date originations to $1 billion. In the first 9 months of the year, we have already surpassed our previous yearly record of $955 million. At quarter end, the portfolio was $2.4 billion, up 33% year-over-year, with portfolio growth in all four quarters. While we are seeing a surge in commercial real estate activity and improving fundamentals, our originations momentum also reflects the growing presence of the broader Ares Real Estate platform. The Ares Real Estate Group now stands at $36.5 billion in global assets under management, with approximately 200 investment professionals in 17 offices, including Ares acquisition of the Black Creek Group. We are a constant presence in the market, continuously buying, selling, borrowing, and lending against high-quality real estate throughout the top MSAs in the U.S. and Europe. There are numerous benefits to this. First and foremost is the depth of the relationships that we maintain in our target markets, which help us drive value in our investment universe. When you combine our relationships and the opportunities generated with the data, information and experience within the Ares platform, the result is a broad funnel and a very selective investment process. For example, we are pursuing more investments in the industrial and industrial logistics sectors, which align with the activity and conviction of the broader Ares platform. As of quarter end, the Ares Real Estate platform owns over 200 industrial investments and approximately 145 million square feet of industrial space. ACRE has the opportunity to benefit from this in-house product expertise, which allows us to lend earlier in the lifecycle of an industrial asset. As our debt platform also continues to scale, currently standing at $9 billion of AUM across all our vehicles, we have become an even more attractive partner to the highest quality institutional sponsors. This quarter, we had an almost even split between repeat sponsor business and new sponsors. Our incumbent borrowers appreciate the reliability and efficiency of our execution and these relationships enable us to make new commitments with attractive risk return profiles. We are also pleased to have provided financing to new relationships this quarter. Our new relationships are with well-established sponsors like Shorenstein and Northwood that have come to appreciate that we can provide a broad array of capital solutions. We continue to efficiently deploy the capital that is available to us, including fully deploying the capital from our June equity offering at a consistent weighted average ROE in the low double-digits. In the third quarter, we originated three loans for $282 million, secured by Class A lead Gold certified office properties with desirable amenities, reflecting the relative value that we are currently seeing in certain assets. These loans were in our target markets, which include regions with strong demographic growth engines, like e-commerce and technology or are linked to national universities. All of these loans were for new acquisitions at post-COVID valuations to well-established institutional sponsors with strong track records. Our robust activity is continuing into the fourth quarter with a deep pipeline of diversified loans. As a result, we expect to remain fully deployed through year end, which should support our earnings. Our originations pipeline reflects the relative value that we are finding across the spectrum from larger loans with top sponsors to efficiently partnering with nimble sponsors on portfolios of loans in thematic investments, where the macro tailwinds are significant. Good examples of these loans would be self-storage and industrial-related assets. While continuing to target opportunities in the Sunbelt and states benefiting from tax migration, we are seeing opportunities in gateway cities where values in certain sectors have reset lower. These cities are now attracting strong capital positions out of the equity side and given our limited exposure to these areas pre-COVID, we can provide moderate leverage at these reset values at attractive targeted returns. Our loan book continues to be well positioned with approximately 98% invested in senior floating rate loans and approximately two-thirds of our loans collateralized by multifamily, office, industrial and self-storage properties. We continue to be underweight hotels and retail exposures and the credit quality of our portfolio remains stable. Before I turn the call over to Tae-Sik to discuss our financials in further detail, I want to note that we declared our regular $0.33 per share quarterly dividend and our $0.02 per share supplemental dividend in the fourth quarter. We expect to more than fully cover both our regular and supplemental dividends from our distributable earnings for the full year 2021. With that, I will now turn it over to Tae-Sik.

Great. Thank you, Bryan and good afternoon everyone. Earlier today, we reported GAAP net income of $10 million or $0.21 per common share and distributable earnings of $17.5 million or $0.37 per common share. This brings our total distributable earnings for the first 9 months of the year to $1.14 per common share, well in excess of $1.05 per common share that we have paid in dividends for the comparable period, including $0.06 per common share in supplemental dividends. Our earnings this quarter benefited from strong momentum in originations, accompanied by subdued repayment activity, which resulted in a record portfolio of $2.4 billion in loans held for investments at quarter end. In addition, we continue to benefit from LIBOR floors, which had a weighted average rate of 1.17% at quarter end. Our leverage remains modest with a debt-to-equity ratio of 2.5 as of the end of the third quarter, excluding CECL reserve. Our CECL reserve was at $24.5 million at the end of the third quarter, a net increase of $6.4 million from the previous quarter. This $6.4 million net increase in CECL was primarily due to recognizing initial reserves against the $485 million in new loan commitments for the quarter as well as extending the expected maturities of a few loans. As a reminder, changes in CECL reserve does impact our GAAP net income with the net $6.4 million change this quarter, representing approximately $0.13 per diluted common share. Changes in CECL reserve, however, are added back from GAAP net income as part of calculating our distributable earnings. We had no material changes to our overall portfolio-wide risk ratings with our weighted average portfolio risk rating remaining at 2.8, with 92% of the loan portfolio rated at 3 or better, all on a five-point scale. And similar to past quarters, approximately 97% of our loans made their contractual debt service payments for the third quarter. We did, however, add a second loan this quarter to non-accrual status. It is a small $14 million senior loan backed by our residential property located in Los Angeles. Despite its non-accrual status, however, we believe that the loan is protected through sufficient collateral values and have not taken an impairment on this loan. Together with the one other senior loan backed by hotel property outside Chicago, the total balance of the two non-accrual loans represent less than 2% of our overall total portfolio. Finally, before I turn the call back over to Bryan let me touch upon a question that we have been recently asked from several shareholders about the impact of potential higher interest rates on our earnings. As we have discussed previously, we believe materially higher short-term rates will positively impact our distributable earnings as the vast majority of our loans pay us interest based on LIBOR. While the majority of our loans have LIBOR floors that are currently in the money, our most recently originated loans, particularly those in 2021, do not have significant LIBOR floors and will benefit from material increases in short-term rates. At the same time, early this year, we hedged a significant portion of our floating rate liabilities so that increases in LIBOR won’t have a basis point by basis point increase in our funding costs. So, with that, let me turn the call back over to Bryan for some closing remarks.

Great. Thanks so much, Tae-Sik. In summary, ACRE delivered another strong quarter of stable distributable earnings. The portfolio is at a record $2.4 billion. Our origination activity is at record levels. And we continue to find opportunities to achieve consistent all-in yields with what we believe are higher quality assets than available to us pre-COVID. We have the opportunity to continue to optimize our balance sheet efficiency and we are well positioned to benefit from a rising interest rate environment. With that, I will ask the operator to please open the line for questions.

The first question will be from Doug Harter of Credit Suisse. Please go ahead.

Thanks. I just want to get your thoughts around leverage going forward, 2.5x seems relatively conservative versus some of your peers, but you kind of commented that you were kind of relatively fully deployed in terms of capital, so just kind of want to get your thoughts on leverage?

Sure, Doug. This is Tae-Sik Yoon. Thank you very much for your question. No, you are absolutely right, our long-term target leverage rate for our company is 3.0x. And obviously, prior to the pandemic, those were the type of levels that we were able to maintain. During the pandemic, we obviously emphasized liquidity and so took our leverage down as low as the low 2s and we have been building up from there. Fortunately, we have been able to more than maintain our earnings more than able to cover our dividend with lower levels of leverage, but it is our intent, it is our goal to take it up to approximately 3.0x on a long-term basis. Some periods, it will be lower than that. Some periods, it will be slightly higher than that, but we do think it will be hovering right around 3.0x, which really means versus September 30, 2021 that we have about half a turn of leverage, which is around $350 million of additional capacity that we want to put on to the balance sheet largely in the form of debt capital to get us to that 3.0x leverage ratio.

Yes. Just – I guess just to be clear on that, Tae-Sik, I mean, I guess, are you comfortable in today’s environment kind of getting up to the 3.0x level versus kind of the conservatism you have shown in the post-COVID world?

Yes. I will let Bryan speak on this as well in terms of the credit quality, but certainly, one of the things that we always have emphasized is that not all debt is treated equal. So, for example, when we lever our loans using CLO debt, collateralized loan obligation debt, we feel very comfortable actually taking it above 3.0. In fact, the two CLOs that we have today have closer to 4:1 debt-to-equity leverage ratios. And that is because of the type of assets that are included in those CLOs as well as the type of debt being non-mark-to-market, being match funded really gives us more comfort to take on more leverage than the average 3.0. On the other hand, when we are leveraging loan by loan, using some of our warehouse lines, other forms of financing, oftentimes, we will be below 3.0. So, I think really to answer your question, it is more of a loan by loan, financing by financing decision in terms of risk and reward, but yes, I would say, Bryan will comment further, but I would say we are comfortable given the type of quality assets that we have today and the overall balance sheet today, the fact that we have almost 60% of our liabilities in the form of non-recourse match-funded debt that we are comfortable at that 3.0 level.

And I would just add, Doug, I think this is more of a timing issue more when than an if. I think there is ample liquidity in the space today and being a part of the Ares platform and reduced borrowing costs that come alongside that, we think this will be something that will have further results over the next couple of weeks and months.

Great. Thank you.

Thank you, Doug.

The next question is from Stephen Laws with Raymond James.

Hi. Thanks. I guess, first, if you comment on the REO asset, revenue was up, it looks like margins are profitable and have increased over the last few quarters. Can you talk about the outlook there as well as the seasonality we should think about in that asset?

Sure, no absolutely, Steven. Thank you very much for your question. I think, our hotel, we are very pleased with its performance. Clearly, it was impacted, just so I think almost every other hotel during COVID, but I do think couple of things that have benefited us. One is some of the competition in the immediate area have either shutdown permanently or on a temporary basis and have left fewer competitors, fewer choices and we have also been very much benefiting from a focus that we have had to put in some necessity workers and they have been a very strong user and we are very grateful for that, but we have very much focused on group business and that has created a lot of tailwind for us. The third, I think, is that we have always mentioned that we have very strong asset management capabilities. This is not something we outsource to a third-party servicing company. This is not something that we defer to someone else. This is something that we have in-house as part of our asset management business – real estate asset management business here at Ares. And so we actively managed this hotel throughout COVID to make sure we are optimizing both revenues and expenses. And so, on the expense side in particular, we have really been running this hotel quite efficiently. In terms of the type of amenities, the types of services, we absolutely want to provide our guests as many amenities and services as possible, but at the same time, being very judicious about cost and expenses. So, you can see that operating costs are variable with revenues, but that we are able to maintain a positive operating margin. And what we are seeing is that as travel comes back and especially as business travel comes back, we are starting to see more and more pickup in activity. And seasonally, as you mentioned, fourth quarter is a pretty good quarter generally. We always find that first quarter is generally the hardest coming out of winter for this Northeast corridor, but fourth quarter tends to be a pretty positive quarter and we expect the hotel to continue to show improvement in performance.

Great. Appreciate the color, Tae-Sik. Second question, Bryan, can you talk a little more about office, majority of your 3Q originations were collateralized by office assets. Can you talk about what you are seeing there? Why you guys believe that’s the most attractive risk reward to deploy capital today and kind of your outlook for that asset class in the coming quarters?

Yes, absolutely. I think we found some unique opportunities, again, given our clean allocation to some of the gateway markets going into COVID. And then we remain extremely particular about the type of office that we will seek to finance and even take it another step, specifically what sponsors we want to partner with on those capitalizations. So what attracted us to the deals that we invested in during the quarter was really a reset basis. So, New York office, for instance, down somewhere between 15% to 30%. We did not have an allocation there. So, when we think about that from an historic basis, there are certainly some attractive macro parts to the story. The types of investors we partnered with, we mentioned earlier on the call, I think that type of intellectual capital was something that was really important to our underwriting. And then the types of buildings, we mentioned the lead certification, I think that will provide some defensive nature to our investments from just any things that might come up over the future, such as carbon taxes and the like and that was certainly a big part of our analysis. But these buildings, we were fairly provincial about what we like in the office sector, but we think these buildings, in particular, will be actually a recruiting tool and be outsized beneficiaries of a return to work environment that we are seeing really in New York on a weekly basis.

Great. Thanks for that color, Bryan. Appreciate you for taking my questions.

Absolutely. Thank you.

The next question comes from Jade Rahmani of KBW.

Thank you very much. A big question investors are thinking about is the sustainability of stable EPS considering the runoff of loans that have high LIBOR floors. You mentioned that in terms of deploying the capital you raised, you were able to achieve consistent ROEs and your commentary has characterized the earnings as stable, is the $0.37 distributable EPS rate as a sustainable number to think about?

Jade, thank you again for your question. Yes, no, I think we feel very good about our earnings certainly this quarter. We are very focused on, as you mentioned, the runoff – eventual runoff of our LIBOR floors. Frankly, it’s occurred a little slower than we had anticipated. We only had two loans, for example, runoff this quarter. And therefore, we are pleased with where our portfolio sits today. I guess, in your question about sort of go-forward earnings, again, as you know, we don’t give specific guidance on our earnings. And right now, I guess, looking ahead to 2022, what we are really planning on doing is recognizing that we will continue to have runoff of our LIBOR floors. I think what will be very important to do is to make sure that we can pull every lever possible so that we can continue to optimize earnings. So, one of the things that we have done is, obviously, first half of this year, we raised about $200 million of new capital. That significantly increased our capital base, such that one of the benefits we have talked about is with further scaling of our business, we should be able to scale our expenses. And so, you saw that this quarter, in particular, third quarter, which is the first full quarter of having this additional capital, our expense load on capital was probably one of the lowest that we have ever had, was under 30 basis points for the quarter. So, even if you annualize that, you can see that the run-rate is much more efficient. The other as we mentioned is that we do plan on using a bit more leverage. So, we have been able to generate the type of earnings that we have had more than fully covering our regular and supplemental dividends for the past three quarters, with significantly less leverage, low to mid-2s. And again, I think the optimized model really looks at something around the 3.0 range, as we mentioned. Third is, I think we continue to see pricing of our liabilities go down. We experienced certainly that with our latest CLO earlier this year and we will continue to see that. As you know, we are coming upon the maturity of our term loan and suffice to say, we would feel very comfortable saying that as we look to refinance that term loan or put in a new type of financing that we do expect to achieve material savings on interest expense on the term loan. So longwinded way of saying, while we won’t have a permanent benefit of LIBOR floors, we do expect to offset so much of that runoff of LIBOR floors with other ways that we can optimize our business model. And then maybe importantly, as we mentioned in our opening remarks, should interest rates rise, again, no one knows, but should interest rate rise and if you look at today’s LIBOR curve, there is some built-in expectation of increasing LIBOR. Again, we think that is something that can help us as a further tailwind. Because we have hedged a substantial portion of our liability costs and certainly, the new loans that we booked in 2021 have LIBOR floors that are not significantly or materially in the money, increases – material increases in LIBOR will benefit us. And I would say, for example, if you look back at our earnings in 2018, 2019, you can see that full year earnings – distributable earnings were $1.40 or so, which would have covered our $0.35 dividend for the year and of course, that was done in a higher interest rate environment where LIBOR was closer or right at that 2% average mark for those years. So, I think there are definitely ways to again, run our balance sheet, run our company more efficiently to offset the LIBOR floors. And we will see about what happens with actual interest rates. But I think those are really the factors that will play into what our future earnings look like.

Thank you very much. Are you expecting for the fourth quarter a pickup in repayments? And on the funding side, would you expect something similar to the third quarter?

Yes. Maybe I can start with repayment, and then I’ll turn it over to Bryan on the funding side. So third quarter, we certainly experienced less runoff than we originally anticipated. So far, for the fourth quarter, we have not had any material repayments, but we do expect, I would say, more to a more normal level of repayments towards the end of the year. As you know, seasonally, there is a lot of transaction activities that happen in the fourth quarter, particularly right at year-end. And we are closely monitoring and working with a number of our borrowers, where we do expect some material repayments to happen towards the end of the quarter. Obviously, given that lead time, we are very busy building up our pipeline. And so I’ll turn it over to Brian to talk further about that.

Yes. I think, Tae-Sik, covered it pretty well. But I think one thing I’d add to the equation here, Jade, is that the active asset management and constant dialogue we have with our borrowers gives us as much insight as possible to the timing of repayments. So, we’d like to try to understand what that looks like 45 to 60 days in advance. And then we will certainly manage the pipeline as well as the warehouse facility to make sure that we can maintain as best we can efficient deployment of our capital base. So, as we sit here today, we feel pretty confident in the pipeline to effectively replace those assets that will run off during this quarter and subsequently.

And then lastly, could you just say if you expect net portfolio growth in the quarter, which some of your peers have commented as to?

I mean, it’s tough to predict it down to the quarter, right? Obviously, we’re running something that we think about as more of an annual business or even longer term. So tough to predict exactly when the repayments and then redeployment of that capital will occur, but if you look at the net portfolio growth over the past couple of years, certainly, the trend would support further growth, and I think probably been echoed throughout the earnings calls of some of our peers. I think the activity in our space is extremely robust, and there is no sign of abatement there. So again, tough to predict quarter-to-quarter, but over the long-term, certainly feel pretty comfortable about portfolio growth.

Thank you for taking the questions.

Of course, thank you.

The next question is from Richard Shane with JPMorgan.

Hey guys, thanks for taking my question this morning. I just want to talk about the origination environment. Obviously, we’ve been asking a lot of questions in general about spread compression, floors rolling off. I am curious, when you look at the dynamics with repayments and repricing, with base rates being lower and floors getting struck lower, is there an opportunity to pick up a little spread? And are you starting to, as you think about higher rates starting to require some sort of hedging on behalf of your borrowers?

Overarching, I would say that the environment is very positive for the lending community right now and we talked about ROEs being maintained in that low double-digit realm. Typically, what happens in our space as base rates decline, spreads do widen. That can be especially true as we near the end of the year, just typically speaking. I think while we don’t necessarily directly compete with insurance companies and banks, a lot of the equity allocation that these firms would have received in the first quarter have largely been deployed. So just the supply of capital, especially when you think about how constrained we all are from a human capital perspective, you could expect to see some spread widening, both, again, as a function of underlying base rates as well as just available liquidity. And when you combine that with the borrowing costs I referenced that we benefit from both as a real estate platform, but also within the broader Ares family of companies, I think that net interest margin really is our focus. And again, the ROEs that we’re underwriting too are consistent with past performance as well.

Terrific. Thank you so much.

The next question will be from Steve Delaney of JMP Securities.

Hi Bryan and Tae-Sik, congrats on a very solid quarter. Look, you’ve covered pretty much everything I was interested in leverage, repayments, etcetera. I guess the only thing I would come back to on the hotel, and thanks for your comments on that Tae-Sik from an asset management standpoint. Certainly, nice to see it breakeven, not a shock there, given the world reopening, etcetera. But if we think about that, I mean, that’s a $37 million asset. First question is, you don’t have any financing on that property at this time. Do you?

Steve, we do. We do.

Okay.

We have about $28 million of financing on it, non-recourse financing. So, our net equity position is right around 13 – I am sorry, right around $11 million for this asset.

Okay. So, we need to think of it closer to 10% or 11% as far as if you were able to transfer that off to someone else as far as your net pickup of investable capital and obviously, it would be a better return, I’m sure, on the 11, if you could fund new loans at 3x leverage than you’re seeing now, but, okay. Well, props on, I guess, Tae-Sik, would the plan be to the extent that you could find the buyer, as the hotel industry continues to recover, find a buyer at your basis, you would say goodbye or is this something that you see maybe a more strategic investment, you’ve worked hard to get it where it is, do you want to potentially hold on to it and realize a larger gain?

Steven, a really good question. Now our goal, as a lender, obviously, is to recover our capital, recover our loan basis, and we will actively manage and do all of the asset management possible to do that. Obviously, on the equity side of the Ares Real Estate business, we own very similar hotels to this property. So, we know how to manage this from both an equity perspective and debt perspective. But now the answer is we’re not here to maximize value for the last dollar, we’re here to fully recover our loan basis and put the dollars back to work in our primary and only business, which is as a lender.

Yes. Yes. I think that’s certainly the right answer for our commercial mortgage REIT. Well, thanks for the comments, Tae-Sik. Appreciate it.

Absolutely. Thank you, Steve.

The next question will come from Tim Hayes with BTIG.

Hey, good afternoon, guys. A lot covered clearly. Just one follow-up, kind of wrapping that altogether, look, I know it’s a Board decision, and it’s tough to give forward guidance, but you mentioned being able to cover your expectation that you’ll cover the total dividends paid, including supplementals this year. Just wondering if you can provide any comments on how you think about it next year, $0.37 of earnings this quarter, you are hedged against rates next year and your outlook does seem pretty positive in terms of growth, although no one has a crystal ball. We don’t know where repayments are going and when they can pick up, but given just your comments, I’m just curious what headwinds to your ability to continue paying kind of $0.35 total dividends that you foresee? And how we should think about that heading into next year? Thanks.

Sure, Tim. Thank you for your question. Absolutely. Certainly, our goal is to pay a consistent and growing dividend for a company. And for 2021, as we announced at the outset of this year, we absolutely did want to share with our shareholders some of the benefit that the company has arrived from LIBOR floors and we certainly felt very comfortable at the beginning of this year to basically say that our outlook would certainly feel very confident that we would be able to pay the supplemental dividend throughout 2021. We did not give really any much guidance about what would happen thereafter. We certainly didn’t say we will continue, and we certainly didn’t say we won’t continue. But we said we feel very comfortable throughout 2021. And certainly, with the declaration of the fourth quarter dividend hasn’t been paid yet, obviously, but with the declaration of the fourth quarter dividend, we will have kept up to what we said we would do. I think to maybe put some parameters, some bookends on kind of how we think about this, it is a number of factors. Clearly, one of the factors will be is how much further runoff that we could see on our LIBOR floors. Like we said for the third quarter, we saw much less runoff than expected so far, early part of the quarter. But as of today, we’ve had no additional runoff of any loans in the portfolio. But as we did say, we do expect meaningful repayments before year-end and so that will certainly be an important part of the equation. And the other important part of the equation is what we talked about before, getting a little bit more optimized in terms of leverage. We’re already benefiting from scaling expenses. We will see where LIBOR is. Some of this, again, I don’t want to overcomplicate the message. We will see kind of what happens with LIBOR with SOFR and other indices taking into effect as well. We will see where the markets are in terms of spreads and originations, but so far, things look good. So, I think we will be in a much better position on our next earnings call to cover our fourth quarter earnings and a little bit more outlook on 2022 to provide more specificity and certainly, with a little bit more passage of time, we will be able to do that. But right now, I would say, very much stay tuned. I think it’s a little bit of an evolving situation and story. But certainly, our goal is to continue to share with our shareholders the benefit of increasing earnings and cash flow from our business.

Yes. Makes sense. But regardless, I appreciate you walking through that. And yes, we will look forward to more commentary on that next quarter.

Fantastic. Thank you.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Bryan Donohoe for any closing remarks.

Thank you so much. And first and foremost, just want to thank the entire team for their contribution this quarter and say how great it is to be all back together in person. But thanks, everyone, for joining today. We appreciate the continued support of ACRE and look forward to speaking with you again in a few months. Thank you.

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today’s call, an archived replay of this conference call will be available approximately one hour after the end of this call through November 17, 2021, to domestic callers by dialing 1-877-344-7529 and to international callers by dialing 1-412-317-0088. For all replays, please reference conference number 10159872. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website.