New Mountain Finance Corporation 8.250% Notes due 2028 (NMFCZ) Q1 2017 Earnings Report, Transcript and Summary

Good day and welcome to the New Mountain Finance Corporation’s First Quarter 2017 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Hamwee, CEO. Please go ahead.

Thank you and good morning, everyone and welcome to New Mountain Finance Corporation’s first quarter earnings call for 2017. On the line with me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital; John Kline, President and COO of NMFC; Shiraz Kajee, CFO of NMFC. Steve Klinsky is going to make some introductory remarks, but before he does, I’d like to ask Shiraz to make some important statements regarding today’s call.

Thanks, Rob. Good morning, everyone. Before we get into the presentation, I would like to advise everyone that today’s call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our May 8 earnings press release. I would also like to call your attention to the customary Safe Harbor disclosure in our press release and on Page 2 of the slide presentation regarding forward-looking statements. Today’s conference call and webcast may include forward-looking statements and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections. We do not undertake to update our forward-looking statements or projections unless required to by law. To obtain copies of our latest SEC filings and to access the slide presentation that we will be referencing throughout this call, please visit our website at www.newmountainfinance.com. At this time, I’d like to turn the call over to Steve Klinsky, NMFCs Chairman, who will give some highlights beginning on Page 4 and 5 of the slide presentation. Steve?

The team will go through the details in a moment, but let me start by presenting the highlights of another successful quarter for New Mountain Finance. New Mountain Finance’s adjusted net investment income for the quarter ended March 31, 2017, was $0.34 per share in the middle of our guidance of $0.33 to $0.35 per share and once again covering our quarterly dividend of $0.34 per share. New Mountain Finance’s book value was $13.56 per share as compared to $13.46 per share last quarter, or $0.10 increase per share. We’re also able to announce our regular dividend for the current quarter, which will again be $0.34 per share and annualized yield in excess of 9% based on last Friday’s close. The company had a very productive quarter of deal generation invest in $349 million in gross originations. Repayments in the quarter were $99 million. The significant increase in activity was partially funded by the $82 million equity offering, we completed in early April. I and other members of New Mountain continued to be very large owners of our stock with aggregate ownership of 8.7 million shares or approximately 13% of total shares outstanding. In summary, we are pleased with NMFC’s continued performance and progress overall. With that, let me turn the call back over to Rob Hamwee, NMFC’s CEO.

Thank you, Steve. Before diving into the details of the quarter as always I’d like to give everyone a brief review of NMFC and our strategy. As outlined on Page 6 of our presentation, NMFC is externally managed by New Mountain Capital, a leading private equity firm. Since the inception of our debt investment program in 2008, we have taken New Mountain’s approach to private equity and applied it to corporate credit with a consistent focus on defensive growth business model and extensive fundamental research within industries that are already well known to New Mountain. Or more simply put, we invest in recession resistant businesses that we really know and that we really like. We believe this approach results in a differentiated and sustainable model that allows us to generate attractive risk adjusted rates of return across changing cycles and market conditions. To achieve our mandate, we utilized the existing New Mountain investment team as our primary underwriting resource. Turning to Page 7, you can see our total return performance from IPO in May 2011 through May 5, 2017. In the six years since our IPO, we have generated a compounded annual return to our initial public investors of 12.2%, meaningfully higher than our peers in the high yield index and well over 1000 basis points per annum above relevant risk free benchmarks. Page 8 goes into a little more detail around relative performance against our peers that benchmarking against the ten largest externally managed BDCs that have been public at least as long as we have. Page 9 shows return attribution. Total cumulative return continues to be largely driven by our cash dividend, which in turn has been more than 100% covered by NII. As the bar on the far right illustrates, over the six years we have been public, we have effectively maintained a stable book value, inclusive of special dividends, while generating 10.5% cash on cash return for our shareholders, fully supported by net investment income. We are very happy to be able to deliver this performance over a period of time where risk free rates have been effectively zero and will strive to continue this performance. We attribute our success to one, our differentiated underwriting platform, two, our ability to consistently generate the vast majority of our NII from stable cash interest income, three, our focus on running the business with an efficient balance sheet and always fully utilizing inexpensive appropriately structured leverage before accessing more expensive equity, and four, our alignment of shareholder and management interests. Our highest priority continues to be our focus on risk control and credit performance, which we believe over time, is the single biggest differentiator of total return in the BDC space. If you refer to page 10, we once again layout the cost basis of our investments, both the current portfolio and our cumulative investments since the inception of our credit business in 2008 and then show what is migrated down the performance ladder. Since inception, we have made investments of over $4.6 billion in 198 portfolio companies, of which only 7 representing just $112 million of cost have migrated to non-accrual and only 4, representing $42 million of costs have thus far resulted in realized default losses. This $42 million figure included our 27% realized loss in Transtar, which has now been fully incurred and the balance of the position monetized. Approximately 97% of our portfolio at fair market value is currently rated one or two on our internal scale. Page 11 shows leverage multiple for all of our holdings above $7.5 million when we entered an investment and leverage levels for the same investment as of the end of the most recent reporting period. While not a perfect metric, the asset by asset trend in leverage multiple is a good snapshot of credit performance and helps provide some degree of empirical fundamental support for our internal ratings and marks. As you can see by looking at the table, leverage multiples are roughly flat or trending in the right direction with only a few exceptions. Two loans that shown negative migration of 2.5 terms or more, one, which we have discussed for a number of quarter is Sierra Hamilton, where restructuring talks continue and underlying business trends are improving. The second is a high quality business that have save to certain end market challenges and where we expect financial metrics to approve – to improve in coming quarters. The company has significant cash flow and liquidity and should have no issue servicing its debt for the foreseeable future. The chart on Page 12 helps track the company’s overall economic performance since its IPO. At the top of the page, we show the regular quarterly dividend is being covered out of net investment income. As you can see, we continue to more than cover 100% of our cumulative regular dividend out of NII. On the bottom of the page, we focus on below the line items. First, we look at realized gains and realized credit and other losses. As you can see looking at the row highlighted in green, we’ve had success generating real economic gains every year through a combination of equity gains, portfolio company dividends and trading profits. Conversely, realized losses including default losses highlighted in orange have generally been smaller and less frequent and show that we are typically not avoiding non-accruals by selling poor credit at a material loss, prior to actual default. Despite our first significant realized loss since our IPO, we continue to have a net cumulative realized gain of $11 million highlighted in blue. Looking further down the page, we can see that cumulative net unrealized appreciation highlighted in grey stands at $22 million and cumulative net realized and unrealized loss highlighted in yellow is at $11 million, an improvement of $7 million from last quarter. I will now turn the call over to John Kline, NMFC’s President to discuss market conditions and portfolio activity. John?

Thanks, Rob. As outlined on Page 13, the credit markets are stronger today than they have been since we went public in 2011. Spreads are uniformly tighter across all of the leverage finance asset classes in which we invest, including first lien, unit tranche, second lien, bonds, mezzanine and preferred. While pricing premiums for middle market assets still exist the spreads compared to the syndicated market have narrowed. Leverage levels for the highest quality companies have not materially changed in recent quarters. However, more of lower quality companies are getting access to the highest levels of leverage, which makes credit selection extremely important. Investors are aware of this increased risk, but still view direct lending strategies as an attractive relative value compared to index credit and equities. While banks are not active lenders in our market that do play a large role in the continued decline of CLO liability spreads, which are powerful driver of broader market loan pricing. More than ever, we rely on the important for our disciplined focus on defensive growth industries and differentiate access to deal flow afforded to us by the broader New Mountain platform. Turning to Page 14, NMFC continues to be well positioned in the event of future rate increases as 86% of our portfolio is invested in floating rate debt. Meanwhile, we have locked in 42% of our liabilities at fixed rates to ensure attractive borrowing costs over the medium-term. Three months LIBOR has increased to 118 basis points, which is slightly above the average LIBOR floor on our floating rate assets. As the chart on the bottom of the page shows, given our investment portfolio and liability mix, NMFC is very strongly positioned in the event of an increase in short-term rates. Even a moderate increase in base rates of 100 basis points at $0.09 or 7% to our annual net investment income. Moving on to portfolio activity as seen on Pages 15 and 16 consistent with the strong pipeline that we mentioned on the last call, we saw a robust new origination activity in Q1. Total originations were $349 million offset by $99 million of repayments and $35 million of sale proceeds, yielding net investment income of $215 million. Our new originations were highlighted by HI Technology, AmWINS and CRGT. All three investments highlight the advantages of the NMC sourcing platform. HI Technology were sourced to our private equity teams relationship with the founder. AmWINS, the former NMC fund three portfolio company. And CRGT has been a long-term NMFC investment, where we have partnered with the company and the sponsor to steadily grow through acquisitions. Since the end of the quarter, despite the very competitive deal environment we have continued our strong investment pace with $112 million of new investments offset by $110 million of sales and repayments. Based on our pipeline of both committed and anticipated deals, we expect to maintain our solid new investment momentum into the summer months. Turning to Page 17, we show the breakout of investments by asset type. While our repayments were relatively consistent with our historical mix, our originations by asset type were impacted by our large preferred stock investment in HI Technology. Excluding this investment, our mix was consistent with our historical experience. As shown on Page 18, in Q1 asset yields on new originations were a bright spot for us. NMFC had an average yield on new origination of 11.4%, which enabled us to maintain a portfolio yield inclusive of the impact of the forward curve in excess of 11%. Going forward, given the competitive deal environment, we expect modest spread compression compared to our historical portfolio of spreads. However, we believe that any spread compression could be offset by rising base rates leaving nominal yields on our portfolio stable. On the top of Page 19, we show a balanced portfolio across our defensive growth oriented sectors. In the services section of the pie chart, we now show a breakout of subsectors to give better insight into the diversity within our largest sector. On the bottom of the page, we continue to maintain our targeted mix between senior and subordinated investments, and on the lower right we show that the vast majority of our portfolio continues to perform at or above our expectations. Finally, as illustrated on Page 20, we have a broadly diversified portfolio with our largest investment at 5.8% of fair value and the top 15 investments accounting for 42% of fair value. With that, I will now turn it over to our CFO, Shiraz Kajee, to discuss the financial statements and key financial metrics. Shiraz?

Thank you, John. For more details on our financial results in today’s commentary, please refer to the Form 10-Q that was filed last evening with the SEC. Now, I’d like to turn your attention to Slide 21. The portfolio had approximately $1.8 billion in investments at fair value at March 31, 2017 and total assets of $1.9 billion, with total liabilities at $934 million, of which total statutory debt outstanding was $745 million, excluding 122 million of drawn SBA-guaranteed debentures. Net asset value of $947 million or $13.56 per share was up $0.10 from the prior quarter. As of March 31, our statutory debt to equity ratio was 0.79 to 1. On Slide 23, we show our historical leverage ratios, which are broadly consistent with our current target statutory leverage of between 0.7 and 0.8 to 1. Though, we finish the quarter to high-end of the range, the ratio has come back down to low end of the range with almost recent equity offerings. We also show our historical NAV adjusted for the cumulative impact of special dividends, which portrays a more accurate reflection of true economic value creation. On Slide 23, we show our quarterly income statement results. We believe that our adjusted NII is the most appropriate measure of our quarterly performance. This slide highlights that while realized and unrealized gains and losses can be volatile below the line, we continue to generate stable net investment income above the line. Focusing on the quarter ended March 31, 2017, we earned total investment income of approximately $43.3 million. This was slightly down from the prior quarter due to a decline in non-recurring fee income. On the expense side, interest and operating expense will modestly higher from prior quarter. The cover shortfall in pre-incentive fee operating income, the investment and by the way the portion of its incentive fee. Also as in prior quarters, the investment advisor continues to waive certain management fees such that the effective annualized management fee is 1.4%. It’s important to note that the investment advisor cannot recoup previously waived. This results in first quarter adjusted NII of $23.4 million or $0.34 per weighted average share, which in line with guidance and covers our Q1 regular dividend of $0.34 per share. In total, for the quarter ended March 31, 2017, we had an increase in net assets resulting from operations of $30.4 million. Slide 24 demonstrates our total investment income is recurring in nature and predominantly paid in cash. As you can see, 95% of total investment income is recurring and cash income remained strong at 93% this quarter. We believe this consistency shows stability and predictability of our investment income. As mentioned earlier, you can see the decrease in investment income this quarter was driven by decline in non-recurring fee income. Turning to Slide 25, our adjusted NII for the first quarter covered our Q1 dividend. We now believe that our Q2 2017 adjusted NII will fall within our guidance of $0.33 to $0.35 per share. Our board of directors has declared a Q2 2017 dividend of $0.34 per share, in line with the past 20 quarters. The Q2 2017 quarterly dividend of $0.34 per share will be paid on June 30, 2017 to holders of record on June 16, 2017. Finally, on Slide 26, we highlight our various financing sources. Taken into account SBA-guaranteed debentures, we had a little over $1 billion of total borrowing capacity at quarter end with no near-term maturities. As a reminder, our Wells Fargo credit facility’s covenants are generally tied to the operating performance of the underlying businesses that we lend to, rather than the marks of our investment at any given time. With that, I’d like to turn the call back over to Rob.

Thanks, Shiraz. It continues to remain our intention to consistently pay the $0.34 per share on a quarterly basis for future quarters so long as the adjusted NII covers the dividend in line with our current expectations. In closing, I would just like to say that we continue to be pleased with our performance to date. Most importantly, from a credit perspective, our overall portfolio continues to be healthy. Once again, we’d like to thank you for your support and interest. And at this point, turn things back to the operator to begin Q&A. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Jonathan Bock of Wells Fargo Securities.

Good morning, and thank you for taking my questions.

Hey, Jonathan.

Hey, Rob. So when we looking at the last equity raise sort of $81 million or so give or take. And then we look at kind of the math, when you include credit losses to effectively make that accretive from an NOI perspective, understanding that, you wouldn’t do anything that’s not accretive from NAV perspective. Looking at new investment yields, with first lien at 7, second lien at 9, help us in terms of how we bridge the gap to that effective cost. I know you talked about the potential for rate rising, et cetera. But what are some of the other plugs that you’re using to effectively raise net return on the portfolio to hit. What would be the effective cost of capital of that recent equity brought on balance sheet?

Yes. Sure, sure Jonathan. So couple of things right, that there is, obviously, the rising rate environment, there is always the mix when you think of things that we’re doing when you look at what we did in Q1 with an 11%, which is meaningful in excess of our target range. We also have the second SBA license expected to come on board, they’ve mentioned before. Right, that’s not the fee, very accretive. So it’s really the combination of all those things that we’re not talking about dramatic swings right. We’ve been very, very consistent rate at which we’ve deployed the capital. And so the other thing that’s really important as the private credit markets continue to evolve is our scale is increasingly allowing us to get access to lead positions in deals that the otherwise wouldn’t have happened, that scale is also generally accretive to the overall ability to source and execute on the – the deal that we want to do.

And Rob, you’ve got about $30 million of additional capacity under the SBA. I think we’d be – maybe it wouldn’t be a thought that a lot of that could have been eased up pretty perhaps by now. And can you talked about the second license on – coming online here in the very near future. What are some of the limiting factor to effectively deploying that capital? Are you just finding not enough deals that necessarily fit the SBIC bucket? Or are you finding that it’s just a matter of audit, et cetera, sometimes that can slow the process down.

Yes, I mean it’s a number of things. I mean, the important thing is we never do a deal to fill a bucket, right. We only do deals and businesses, we know well through the private equity platform, and then based on that knowledge we feel very, very good about their prospects. So we always resist the temptation to say, oh we have a more accretive bucket we can put something in let’s do a deal to put it in that bucket. That being said, we did have, we basically finished the open capital with the Allegis deal that we did in late April, that you can see on Page 16, where we put the full $22.5 million allowance into the into the SBA entity. So we’re pretty ramp and we can get a repayment tomorrow who knows, but we don’t really have any room left there. So getting that second license will open up some meaningful incremental capabilities.

And then just a small accounting question is – what was the reasoning behind the Net Lease Corp consolidation on the balance sheet this quarter.

Shiraz, you want to…

Yes, talk about that. I mean, so we continuously review all of the consolidations every quarter, with our accountants to make sure we got the right approach to how we go about doing things. So looking at the ramp in the Net Lease, we’ve only done four deals to date. Those deals look to be slightly more passive in nature than active in terms of creating there’s an operating company and not consolidating. So we made a decision to consolidated at this point, but that could change in the future.

So the commission logic that’s actually go back and forth. The next item is, would it be fair to say that you wouldn’t consolidate if you did not see additional growth in that vertical on a forward basis, right. Because the point was to get higher yielding returns and what you would be receiving which is why the reasoning was to keep it off balance sheet or am I missing something?

Yes, we’re just to be clear Jonathan. This is purely a accounting non-substantive issue. Remember that the Net Lease entity invest down at individual SPV’s – lease resides in where we have non-recourse leverage. That leverage is not consolidated, whether we do or do not consolidate the REIT.

Okay got it.

There’s no impact on our leverage ratio, whether we consolidated the REIT or don’t consolidate the REIT. Because again, we’re leveraging the individual asset with non-recourse debt down at individual a leaf by leaf or property by property SPV’s.

Got it. Okay, great. Thank you. Thank you for taking my questions.

Yes. Great, thank you.

[Operator Instructions] The next question comes from the line of Paul Johnson of KBW. Please go ahead.

Hi, Paul

Hi guys. Good morning, thanks for taking my question. My first question was in regards to the fee waiver approximately $1.8 million or so that you guys waived during the quarter. Was that something that’s totally voluntary and I guess, what was the motivation behind it and then some of that we would expect to see in the coming quarters as well if needed.

Yes I mean – look Paul, yes, first of all clearly it’s totally voluntary, we’ve always say that covering our dividend out of NII is one of our absolute primary driver with the business that in avoiding losses of the really the two fundamental tenants of the business. So it’s a lever we have to prolonged, certainly not going to fit here and say that we’re committed to doing that every quarter, but we do have a long history as you know of shareholder friendly and – transparency. And that’s – it’s all part of that continuing. So I think we feel that the business is capable in the coming quarters of being in the $0.33 or $0.35 range. But it’s certainly an option we do have if we were to have another shortfall down the road. And again remember, it’s really the core was fine and we had a little bit of volatility around the non-recurring, we had virtually no pre-payment income that quarter, which is – this quarter, which is obviously very volatile. So we’re talking about pretty small dollar, and it’s just another tool we have to make sure we’re delivering on what we sort of covenant to our shareholders.

Okay. And just to be clear I mean that was outside of the regular agreed upon a few waivers that you guys haven’t place, this is something that was done voluntarily by management.

That is correct. That is incremental to the thing we’ve been doing since our IPO in terms of the senior assets that initially we’re in a different well facility, where we get more to return to leverage and they’re always had been charging on the leverage of that facility. And then as you recall we consolidated that facility and then have been waiving on those assets ever since. So yes, we have the 1.75% sort of headline fee is really historically – consistently been about 1.4%, that’s on the base management fee and then this was a 100% voluntary waiver of some increment of the performance fee.

Okay, that’s great. Thanks. My other question headed to with your investment in HI Technology, roughly $100 million obviously a large investment. I just wondering if you guys can give a little color on kind of what attracted you to the company to make such a large investment and also a preferred equity investment versus what you’ve done more historically with the debt to senior debt positions you’ve taken.

Yes, absolutely. I mean for this is something we’re really excited about I’m glad you brought it up. This is a transaction we’ve been working on for virtually a year on the private equity side. And something that we initially, it’s in one of our core spaces and we’ll identify the company as a real sort of niche market leader and we’re able to – it’s a founder owned and controlled, wealthy large, large business and the founder was really interested in working with us, because of some ability we had to the potentially help him with some customer acquisition. And so as we went through the reps and did all the diligence on private equity and thought about different transaction structures, ultimately it didn’t fit into our classic control buy up mode just because the owner was not yet ready to make that move. So, that kind of became more and more of a smaller for the fee fund, minority type investment where the founder was also very focused on dilution. We really kind of more fit into a great contractual return opportunity. And we still have – we have one our key partners on the board now, and so we still have a great strategic dialogue with the company. But this is really I think show us the power of the platform to deliver in a tough credit environment to deliver differentiated very proprietary opportunities that are both attractively structured and attractively priced. And the other element was from our credit – with our credit heads on is very low leverage. I mean, we’re talking about a sub four times leverage through the preferred in an enterprise that is worth a double-digit TE multiple. And then on top of that, we are always looking for opportunities to build book value through capital appreciation and in addition to being a contractual return type of security. It also has a convertibility feature to it, such that if the business does, some of the things we actually expected to do based on our private equity underwriting. There’s real upside from a capital gain perspective. So this is really one of the most compelling opportunity if we see and that’s drove our desire and willingness to do it in the scale we’ve done it.

Sure. Yes, thanks for. That’s really good color. I have two shorter questions, if that’s okay.

Yes, of course.

About different stuff, one is just a smaller one, I just – as I kind of look at your interest income sort of year-over-year, it comes down from about $38 million to – I mean, they does get a little bit of dividend income in there as well $38 million to $36 million year-over-year. I mean, I know there’s a lot of originations in the quarter. Is that mostly because of the timing thing with the originations being falling took a later half of the quarter? Or what we see now a better run rate of kind of what interest incomes going to look like on the portfolio or to get dividing thing around that?

Yes. It’s a combination yes, we were definitely skew towards late in the quarter from the origination side versus the repayment side was skewed earlier in the quarter. So there’s some of that, there’s also some mix there and when you think about the interest income and the dividend income, I mean those dividend numbers are also very – that’s effectively contractual, those are not sort of non-recurring dividends, right. Because you’re looking at the – and if you look you can see it better on Page 24, but we talk about kind of the cash interesting, you can see much greater stability there. And then you’ve always been allocating more capital for the SLP as we ramp up SLP II. And so there’s a mix issue right a bigger percentage of the balance sheet. So you really got to look at that recurring cash investment income line.

Sure

On Page 24 I think see the more the more meaningful trend from an operating metrics perspective.

Sure. Okay, that makes sense. My last question is just about the Net Lease Corp, I guess just if you had any commentary on what your plans are for growth there if any – and then also just kind of a side question to that is if you guys planned on providing any more disclosure on that I guess in the future if you were to grow it more…

Yes. I think in terms of our plans for the medium-term, it’s really just doing more of what we’ve been doing and again being disciplined and opportunistic and again not trying to fill up a bucket for the sake of filling up a bucket. We’re out in the marketplace and the Net Lease team here, which we added last year as you know, actively looking at new opportunities that are consistent with our criteria around risk and return, and when we find those opportunities will execute on them. And when we don’t – we won’t, and so we don’t have we’re not slave to some non-objective growth target there. We will see where it goes and it does provide nice outlet for incremental kind of proprietary following the deal flow. And in terms of disclosure down the road, I feel like we’re giving pretty good disclosure I think if it were to get more material we could certainly talk about increasing the level of disclosure there but given the current materiality I think we feel pretty comfortable with what we’re laying out.

Okay. Can you guy’s remind me what you’re target leverage is within the Net Lease Corp?

So again the assets are leveraged down at individual SPV so there is no actual leverage at the REIT itself. The individual assets tend to be levered at about 60% to 65% loan to value.

Okay. Okay, well thanks for taking my question. There’s a lot a help and take care.

Yes I know happy to do it. Thanks for the question.

[Operator Instruction] The next question comes from the line of Chris Kotowski of Oppenheimer. Please go ahead.

Hey, Chris

Yes. Hi, good morning. Just on the disclosure and on the Net Lease Corporation I’m looking at the 10-Q Page 17 and there you breakdown the individual investments and a couple questions on that. First, I mean I add up all the dividend income and divided by $27 million I get around an 11.5% yield. So the first question is that roughly what we should see going forward is that kind of a run rate?

Yes that’s pretty – that is consistence you recall the Net Lease one of the things we like about it is there are escalators built in to leases unlike commercial loans and there is real duration there so these are 15 year plus or minus leases. So all that equal about numbers should actually trend up overtime the escalators are – they are 1.5% to 2% per year but that compounds on itself. But yes, you’re thinking about it correctly.

Okay. And then secondly you said there were four deals I see five here?

One of the deals – was two components there was a U.S. piece and a Canadian piece of that.

Okay.

But it’s the same company.

Okay. And then in the future let’s say you want to do another $15 million of deals in the second quarter or third quarter whatever. Should we expect to see more in the – in your terms of your disclosure should we expect to see more capital flow into the $27 million equity that we saw at the start or will they just show up as individual investments.

So going forward they’ll show up as individual investments.

Okay. And then finally just when we look at this like – if you look at the APP Canada you see $7.3 million that represents your equity commitment to that right?

Yes, that’s the portion of the $27 million that we’ve down streamed for the REIT to the SPV.

And then that $7.3 million is levered 60% to 65%

Yes, it still represents roughly $20 million.

Okay.

Purchase of a building or a set of building.

Bingo, got it. Thank you.

Thanks.

Okay. That’s it for me.

Okay, thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Rob Hamwee for any closing remarks.

As always thank you everybody for their interest and attendance. And look forward to speaking to everybody in a few months.