Private Credit Masterclass - Part 1 feat. Anton Mattli

Hello, future billionaires. Welcome back to another episode of the Invest Like a Billionaire podcast. I'm your host, Ben Fraser, and today we've got something unique for you. We recently did a webinar called a Private Credit Masterclass. And so this is an area of discussion that a lot of people are curious about, especially right now in the current economic environment we're in and been hearing the buzzwords around private credit, credit investing. What does that mean? And why is it such a unique opportunity right now? And so periodically we do these kind of masterclass webinars, really educational focus to just lay the landscape of these particular topics. So today's part 1 of the private credit masterclass. We have a special guest that we brought on who's been in credit and banking for over 30 years, good friend Anton Matley, to just bring some great experience and perspective to what's going on. And if you have any interest at all learning about private credit and really the whole landscape of opportunity, definitely encourage you to check this out. It's going to be a two-parter because we've spent quite a lot of time really laying the groundwork for understanding what this is. So I think you're really going to enjoy it and appreciate you all listening. If you are enjoying it, please feel free to share with a friend, leave a review, share some feedback with us. We always appreciate that. Thanks so much. Enjoy. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Hello, welcome to today's masterclass. We're calling it Private Credit Masterclass. So this is a topic that a lot of investors are very interested in, and as we've started having dialogue with investors around this asset class, um, like, it was helpful to do, uh, kind of a behind the scenes, here's the universe of private credit, because There's a lot of misuse of the term private credit, or it can mean a lot of different things to a lot of different people. What we really wanted to do today was lay a framework and a helpful way for investors to understand what does it mean, how do you invest in private credit, and how do you underwrite these? What's a good deal versus a not good deal and understand the different types. And so today we're going to do all that. We've got a lot of ground to cover. We got an amazing panel of speakers here today that we're going to introduce you to and very excited to dive into private credit. So without further ado, we're going to jump right in. Before we get into the meat, going to give a little agenda here. We're going to do some backgrounds just so you have a little sense of who the team here presenting is. And then we're going to get into the state of multifamily. And so really the, the opportunity in the short term is being driven by a real dislocation of the capital markets in multifamily specifically. And so we're going to talk a lot about that. Then we're going to talk about private credit, just lay the framework for all the different types of private credit. What does it mean? The different ways that you can invest in it. And then we're going to get into some case studies and this is where the real, you could put, meat on the bones here, understand, you know, actual practical examples of what it looks like and much, much more. So without further ado, let's do some background. So we have Bob Fraser here, who's also my father. Bob, you want to give a little bit of background on yourself and what you do for Aspen Funds?

Yeah, primarily a technology guy, computer science guy for years, and then CFO. So Got kind of a, what I call a street MBA and finance. Very good but very expensive and way more expensive. So anyhow, I've been a finance guy for 20-plus years and today I'm CFO for Aspen Funds.

Yeah, my background, I'm a chief investment officer at Aspen Funds responsible mostly for capital markets but also for deal sourcing, underwriting. And my background was actually as a commercial banker. A banker, an underwriter, and has spent the first part of my career in the world of credit and learning how to underwrite deals from a credit perspective, from a debt perspective, and then jumped over to the equity side with Aspen Funds about nearly 7 years ago. I'm also the co-host of the Invest Like a Billionaire podcast and love doing that. And we have a special guest presenter today. We're very excited to be doing this presentation with our good friend, Anton Mattli. So he's the CEO of Peak Financing and he is our Swiss banker. So if you know anything about the Swiss, they're really good at making cheese, chocolate, and they're really good bankers. Anton has spent a long time in the world of credit. So, Anton, give a little bit of background on what you do and kind of your experience in this world.

Sure. So as you mentioned, I was born in Switzerland, went to school in Switzerland, and After I graduated, I was going into a program in New York for— with an investment bank, with UBS, and they hired me for that. And I was— that was in the '90s, so I was thrown right into the so-called workout world where all the workouts had to be done for the savings and loan crisis that was already years back in the '80s. And so I, that's what I learned about commercial real estate, right? From the banking side. I was then working in New York for 5 years, Tokyo for 4 years, Hong Kong for 3 years. And then I left banking and we worked with our own businesses. We worked with family offices on the investment side for primarily commercial real estate. Which brought me back to the US. And with all these, uh, investments for, uh, family offices, we realized that there is a need to, uh, to support them with financing for all these transactions. And that's how we started Peak Financing, which is a commercial real estate debt brokerage, uh, firm. We focus a lot, uh, on multifamily, but we also do a lot of commercial real estate.

Thanks for sharing that, Anton. And really excited to have you as part of this because of your experience. And you said you run your own brokerage, and so your team last year, I believe you told me, placed over $1 billion of debt capital or credit capital in this space. And so you've seen the gamut of, you know, from super distressed situations to new acquisitions that have gap funding needs. And we're going to cover all of that in this masterclass of the different types of uses, all the way from distressed situations to not distressed, to new acquisitions and everything in between. And so very excited for you to share from your experience. And real quick before we dive into that, for those that are newer to Aspen Funds, just want to give a little bit of context for, you know, why are we doing this as a masterclass, right? This is an educational webinar today, but it really plays into our themes of how we look at opportunities as investors. And the way that we're different from a lot of different operators is we first look at the macro and we want the macro trends that are in play that we believe are going to continue for a period of time to drive and support our investment themes and the strategies and the asset classes that we choose to invest in. And we believe You know, private credit has been around for a very, very long time, as you'll see as we explain it. But there's a very unique window in the next few years that we think is going to make this asset class very, very attractive for investors and really for the foreseeable future. And so again, it's really driving home that the macro drives the investment thesis. And then the way that we work is we put together best-in-class teams. Advisory boards, investor-friendly structures. And then we invest as our four principles into every deal and fund that we put, put out alongside of our investors. A little bit of our track record. We've been Inc. 5000 for several years, been operating over 11 years. We manage about $200 million in investor capital, over half a billion in assets we manage. And my favorite number is we've sent over $50 million distributions back to investors since inception. Gotta give the last plug here for our podcast. If you like listening to podcasts and you haven't checked out Investing Like a Billionaire, we encourage you to do that. This is our primary education platform where we're really trying to help investors learn to invest like the ultra-wealthy. We found that there's a lot of things that the institutional investors, the family offices, you know, the ultra-wealthy investors are doing differently than The Everyday Millionaires, and there's a lot of things that we can learn and apply that they're doing. And so this podcast is all about that, helping you learn and to become a better investor. So check that out if you've not yet. And with that, let's dive right in. So Bob, do you want to kind of kick it off here with just talking about the state of multifamily and what's going on that's kind of driving this opportunity that we're seeing right now?

Yeah, absolutely. So we're going to hit a few slides here. So if you can advance that, Ben, and we're going to look at, so as Ben alluded to, there's a real opportunity right now in the multifamily space. So there's a, it's a little bubble that happened and is creating a fantastic opportunity. And so what's happening in the multifamily space? Well, first of all, I want to point out the good that there is a lot of long-term demand, that there's been a chronic under— underinvestment in housing. This first chart you can see up here, it shows the number of housing units started divided by the number of households, and you can see it's basically crashed in the Great Financial Crisis in 2008-9, and it's never really recovered. So there's not enough housing units, there's a housing shortage. Meanwhile, single-family homes have gotten, you know, priced out of the market because of high interest rates. And that's the chart on the right. And of course, you know, the good right now is that renting, so multifamily apartments, are cheaper than owning houses. And household formation has also been strong. The millennials are forming houses. Meanwhile, the bad, well, what happened is during the, you know, in the last few years, we've seen debt costs, of course, spike. As interest rates have risen. So debt costs are massively up for these multifamily operators. So any loans that are coming due, and there's a lot of them as we're about to see, are going to be financed at much higher interest rates. And what it makes, it means, you know, marginal projects are going to be in pretty deep trouble. Meanwhile, operating costs as well are up, oh, you know, almost 10%. And that's due to, you know, insurance costs, you know, what are the other big costs?

But property taxes.

Property taxes going up. And there have been some real surprises here for a lot of these operators and including wages. Vacancies are up. So we're seeing vacancies on the rise. It's been on a tear and rent growth is being down. So everything is going in the wrong direction. And here's the ugly. So we've hit the good, the bad, the ugly. And so in the midst of basically really bad economics for apartment complexes and apartment complex owners, landlords, we've seen record deliveries of new apartments. So And in the next 2 years, we have 1 million units, over 1 million units, 1.1 million new units being delivered into the market. So here's the worst time, really one of the worst times ever for multifamily. Lots of new units being delivered primarily in the upper end of the market because that's where people developed. So we're seeing a lot of pressure in the upper end and the ugly. So this is according to Newmark. You're seeing absorption of these 1 million units is going to take over 6 years in a bunch of these markets on the left, which is the most popular markets where the, where the greatest amount of development has taken place. And so we've still got a lot of, a lot of, you know, a lot of absorption to be happening here and it's going to take a while. So there's a bit of pain. And then the ugly, the final ugly here, and it's very ugly. Again, according to Newmark, there's almost $160 billion in multifamily loans that are troubled and they're maturing in the next 2 years. So this year and next year, so $160 billion maturing. And these loans are troubled, meaning, you know, roughly a third of them have a DSCR of less than 1.25. And all my bankers up here, my fellow bankers are, you know, You know, know what that means. And for if you don't know what that means, it's the debt service coverage ratio. It means how much of your earnings does it take to— or what's your earnings relative to the debt service? So, and having 25% margin, meaning you can pay your debt and have 25% left over is considered good. 1.25, your debt service, your cash flow is, is 125% of your debt service. Well, these are less than that, which means they'll never qualify for refinance. And then even worse, almost a third of these multifamily loans had origination cap rates below 4%, meaning they overpaid. These things are way over— they were way overpriced when they bought them. And what's going to happen? Well, either one of these two factors is enough to mean a loan can't Can't be refinanced. And so there's a huge amount of trouble coming. And we've already seen, you know, we've seen recently a lot of extensions are happening. So the services, rather than forcing liquidation, they're basically extending the terms and these kind of things. But more and more, we're going to start to see some liquidation happening and foreclosures happening. And the worst, the worst of it, as you might imagine, where the biggest deliveries were, were the Sunbelt markets. So you can see in the South, the Southeast, and those are, those are where the biggest pain points were. This is the— these are the ugliest places to the, you know, where we're going to see the biggest, the biggest trouble. And I believe this is my last one. And it's a tale of two markets. So we're seeing, believe it or not, rent growth actually going up in the Midwest, in the Rust Belt, in the Northeast. So these— and these are primary markets. That have not had high deliveries. So they haven't had— they didn't participate in the building bubble, the construction bubble, and the, you know, the financing bubble where, you know, a lot of these markets were just ignored as boring. The bottom quartile markets are the high supply markets. These are places where the most demand has been historically and where the biggest deliveries are happening. So Florida, Texas, you know, Atlanta, Georgia, Phoenix, Salt Lake City. These markets are very, you know, have been very appealing. I've had high growth, but they're having 4% rent declines while the Midwest and these less sexy markets are having 6% increases. So tail of two markets and it's creating a pretty big disruption in multifamily where we see the greatest opportunity.

So With that, Anton, I want you to kind of chime in a little bit about, from a credit perspective, from the bank side, how are they viewing this, right? So we're seeing a lot of constriction on the operations side, but as we know, right, as these things start to happen, as banks are starting to kind of see their write on the wall for a certain portion of their portfolios, they start to pull back. So you want to talk a little bit about you know, from your perspective with the banks, what are you seeing from their perspective and how might that create opportunities down the road?

Yeah, sure. So as a multifamily owner, obviously it's for other commercial real estate too, but solely we talk specifically about multifamily here. Bob Fraser already talked about all the, the headwinds that multifamily is currently facing. And again, it's important to understand it's temporary. For the next 2, maybe 3 years. So it creates a lot of opportunities there. But not only do we have operational headwinds, we also have a situation of financing issues. So, so when it comes to banks, they, they have been tightening pretty significantly. It's— we have heard about Silicon Valley Bank, Signature Bank, and all the others. That were not necessarily— the trigger for that was not really the commercial real estate part. It was really, uh, uh, the way they, they operated at, uh, at Silicon Valley Bank. But that also opened then again the question of what the health of the various banks are. And with that, uh, we also, as it's well recognized in the news already, that, uh, the office sector is in, in pretty deep trouble. So, uh, this chart here shows the, the overall sentiment of, uh, of banks out there, right? And obviously everyone is concerned about interest rates. You have to imagine that a lot of these loans that banks do, that particularly the ones that were done in 2021, 2022, they very often, they do fixed rate loans maybe for 5 years. Now their funding is only up there at the same level or even above of where they were actually granting these loans at. So these are creating funding issues for, for these banks. And at the same time, they also know that all these loans that are maturing that, uh, Bob Fraser has referred to, they need to be refinanced. But everyone knows that values have come down massively, obviously. For offices, but also very significantly for, for multifamily, depending on the markets, depending on what, what you believe, because there is not that much of an activity out there. But I would say it's only of actual transacted deals. We see anywhere between 15% and 30% value destruction that has taken place over the last 2 years. In multifamily, and banks and other lenders obviously recognize that. So there is just an overall, overall view that one needs to be cautious. Next slide, please.

Yeah. When you have like a mindset of a traditional lender, right? And this is from, you know, my background being one is when you're underwriting these loans, you only look at the downside, right? Because a bank doesn't participate in the upside. So if it performs well, the bank doesn't benefit from that. They are only worried about loss. And so when the potential for loss increases and we're seeing all these factors that are driving in the short term, again, potential for loss, it forces the lenders to pull back. And that's called credit tightening because of that, that, you know, negative sentiment. And so it really can impact the leverage rates that they're going to put out going forward. And then we have another issue which you're going to talk about here, which is, which is payoffs.

Yes, absolutely right. So a lot of these loans obviously have already been troubled over the last year or so. As soon as interest rates moved up, there are— everyone knows that many of these loans, and Bob Fraser was already referring to them, that they cannot really be refinanced into a new loan without the borrower bringing equity to the table. So what does one do? We extend, right? And, uh, so a lot of loans that, uh, were supposed to mature in 2023 were extended into 2024. My suspicion is many more that are now maturing in 2024 will also be pushed out into 2025. The problem is that at some point you can only extend for so much, and that extend and pretend element comes to an end at some point. And I would say that is happening already in 2024 with a lot of deals, and it definitely is going to happen next year. So there is definitely that element of extend and pretend that we have heard that term survive until 2024, then it was survive until 2025. And at one point, uh, everyone realizes that there is no really a solution except bringing additional cash to the table, right?

So, Anton, a question for you. We've seen these, you know, obviously a lot of extensions. So there's a lot of maturities that hit last year, 2023. Very few foreclosures. And so most of those were extended, is what you're saying. And it looks like they're doing again this year. At what point do they stop extending and what will drive that?

Yes. So if it's a bank, obviously a bank has a little bit more flexibility because that loan typically sits on the bank's books, right? So they may have other banks participating, but traditionally it's— they have much more flexibility in making decisions when it comes to the bridge loans that are securitized. And really the biggest problem that we have out there in the multifamily space right now is really in the bridge loan space, right? So yes, we may have $160 billion that are so-called troubled loans, but in the scheme of everything, uh, within multifamily, it's still not a massive amount, uh, but it's large enough because it is so concentrated in that particular space. And when we also look at it a little bit closer, who is actually affected by it? It's primarily the middle market. It's a lot of syndicators that are affected by it. And bridge lenders generally do not want to take the keys back on these, on these properties if they can avoid it. So what we have seen a lot so far, at least in 2023, that a lot of Uh, borrowers and deal sponsors, they have continued to fund these deals even though they had a negative cash flow, uh, hoping that somehow there is a solution for it. And as long as you have a technical default, your debt service coverage, debt yield, whatever you, you have as a covenant may already be breached. As long as you do not have a payment default, very few lenders are, are going to foreclose on you. Right.

So they, they really could keep extending for multiple years, and there's really no expiration date, uh, even, even for the CLOs and the, the securitized loans. Do you think they, they have the power to continue to push these things until interest rates—

for the CLOs, it's a little bit different. Uh, they are typically 2 or 3 years initial term with 1 or 2-year extension options. So once you hit that final extension, there is not really any, any way to extend that further unless there is a really, really good argument, right? So obviously there are always investors in there, so-called first loss investors that have the decision to make. But when it comes to the CLOs, they are at some point they come to an end and the investors want the money back, right? So you can't extend it forever. So as a lender, you can take it back. Right? You can take it back onto your own book as long as you have the capacity as a bridge lender to do that, right? And we obviously have heard about Weisselrohr Research, uh, talking about Arbor and that they are, uh, in deep trouble. White Arbor is a, is a perfect example where so far whatever they have had in CLOs, in troubled loans, very often they take them back out of the CLO and replace that, put them on their own balance sheet. Their own balance sheet and replace it with a better loan into the CLO. So you have a lot of flexibility there, but that only works for as long as you, as a bridge lender—

your balance sheet is great.

Yeah, that's right.

Which it gets harder and harder to do.

It's harder and harder. Uh, uh, we see— have seen many more, uh, loans now that are, uh, not not payment delinquent yet. Typically in the bridge space, it's if once you're 30 days late or 60 days late. If you are just within the first month, it doesn't count. But we have seen a massive uptick of borrowers that are not paying on time. So that also shows to us the distress that is in the system. And you have talked about also the debt service coverage as well as the LTVs, right? So we have done a lot of analysis of the bridge loan space that is visible, which is the securitized world. I would say half of all the bridge loans that are out there need some form of a cash infusion to be refinanced.

Yeah.

And that is— that is that all, all the bridge loans, like including office and everything else, or is that just multifamily?

That's, that's the multifamily. Yeah.

So 50% need a cash infusion in order to, to refinance. And there's a lot of these smaller syndicators, they simply, I mean, you know, there's very few deep-pocketed investors out, out there.

Absolutely.

And we, we get to that to the, in the next slide. But what's really, what it's going to cause, one is the idea to extend is we hope we can make it till when interest rates kind of maybe get cut here soon, maybe we have some rent growth the next couple years. So it's the, the survive to '25 idiom is hopefully things turn the corner at some point to where it gets easier to operate these and we kind of operate ourselves out of the issue. And so it is possible and it's likely that a portion of these will make it out, but there's a lot that we'll get to here in a little bit of distressed deals that it's unlikely that, you know, whether they, you know, kick the can down the road or not, they wipe the equity out. It's— they're not going to be able to recover at the current basis that they bought it at and the current debt service that they have. And so the other kind of thing that this does is it further elongates the credit tightening, right? Because the way that the banks lend and, you know, I'm speaking here mostly traditional banks, is they have certain leverage ratios that they have to hit and they can only lend based on a certain amount of equity capital they have. And if they don't have payoffs, they don't have new capital to put out to new loans again.

So if existing loans don't pay off, they can't make new loans, right?

Yeah, right. So it's creating that tightening. You know, you have this chart here, bridge loans that were originated. So we saw a huge amount of bridge loans. And so just as a real quick explanation of bridge loans, so these are non-banks, these are private funds, and they were very popular in 2021 and 2022 because they would do super high leverage rates, a lot of times up to 80% of the purchase at these very low cap rates. So very high values. And then a lot of times they would lend up to 100% of the renovation budget. And so it was very compelling for a lot of these operators because one, it's not a big down payment they got to put in and they can finance the whole renovation through leverage and it's non-recourse generally. So these were loans that did not require them to sign a personal guarantee so that if it doesn't, you know, if things go poorly, then they're not on the hook personally. And so this is a very popular funding source, but it's also where the biggest issues we're seeing in the market is in the bridge loan space. You want to add any commentary to that, Anton?

Yes. So this chart is really representing of what I have mentioned earlier, where a lot of the borrowers run out of gas to keep the deals alive. Right. So as we know, why the interest rates have now been high for, for a while. And for, for all these bridge loans, they are mostly floating rate loans. They, most of them have a so-called interest rate cap. So even though the all-in interest rate on the loan may be somewhere between 9% and 10% because of the interest rate cap, the actual interest rate that they pay net might be around 6%, 6.5%. So but that's still creating in most instances a negative cash flow for all, for all these, these borrowers. Because it's not just the interest rates. Uh, Bob Fraser referred to that, right? We, we have insurance that is much higher, taxes are much higher, payroll that is much higher, higher vacancy, higher bad debt. So operationally, they also are struggling already. Combined with that 6 to 7% interest rate is just too much for many. So they have been feeding this monster for maybe a year or so. And now they realize that they run— just run out of money, right? So only the smaller operator—

you want to talk a little about the regulations that are also impacting the, the credit availability here?

Yes. So, uh, obviously, Ben, you, you know a lot about banking, right? So banks are extremely regulated. Uh, now, uh, there is a regulation worldwide called Basel III CORE is the new one that is now being slowly implemented also in the United States starting in 2025. And all the banks have, have a number of years to implement all these new regulations, which is not just capital requirements but also the way they operate their business. So they need to invest more into technology. So, uh, and compliance. So all that combined has a massive cost element for these, for these banks, particularly for smaller banks. But it's only the capital requirement is a, is a key aspect for, for any, for any bank. And once you realize that certain loans that you have out there will likely require more capital once the new Basel III Accord is implemented, what do you do? You're pulling back with your lending in order to prepare yourself for that new environment.

Right, so you have a lot of different regulations, but a lot of times if you have loans that are what's called risk-rated higher, so you have loans that are, you know, not looking as good as they did when you originated them, you actually have to reserve additional capital on the balance sheet to potentially cover any loan losses. And so one, they already have to do that anyway, but these new requirements are going to further increase and make the requirements more stringent. So it's going to further exacerbate that problem. So that's the bank side. And then we're also seeing on the equity side, right? A lot of these multifamily apartments that were purchased through bridge debt with maybe smaller syndicators or even mid-sized operators is, you know, the one you're talking about here is a pretty, a pretty big operator. They've started seeing distributions being paused. They've started seeing requests for capital calls to, as you said, inject and infuse capital to sustain the operations to hopefully make it through to the other side of the short-term squeeze here. And so, you know, talk a little bit about, I mean, this, this was on the Wall Street Journal here. And this just happened very recently where a huge syndication basically gave the keys back on 3,200 units in the Houston area.

Yeah. So actually that was in April of last year. So that was kind of the first one of the big foreclosures that, that made the news. And it made the news also because it's obviously it's a, it's a large portfolio, but it's also a student of one of the coaching gurus in multifamily, if you want to call it that way.

Yeah.

So naturally, that's always good for a juicy story, right? Now, the reality is that they were not the only ones. They were just the first ones. And there are many that we have learned about since then, and there will be many, many more that come. Uh, but even though there are plenty of excellent operators in that space, all these news to combine with the capital calls and distribution stops that are really widespread now, uh, if you're a passive investor, you're starting to wonder whether you really want to invest additional money into multifamily or into private placements in general. Uh, particularly when you have, at least temporarily, uh, the ability to put your money into, uh, say, high-yield savings accounts or, uh, shorter-term treasuries that return somewhere around 5 to 5.5%. So you, you have a challenge that, that a lot of investors are, are also now a little bit more cautious in in investing, which naturally, if you're a syndicator and you have a great deal, it makes it much harder to raise equity.

Right. So we've talked a lot about the negative things that are happening. Right. And so you might say, well, wow, where's, where's the opportunity here? And, you know, it's important to understand the setup because this is where the private credit really makes sense. Right. If you understand all the things at play. So we have the credit tightening, you know, the banks are pulling back, the banks are having a hard time digesting and managing the current balance sheet and the loans that they've already made. Now we have equity that's a lot harder to come by. They've seen deals not work and now it's very difficult to raise equity. So it further creates a bigger funding gap because it's harder to raise. And we do in the short term have some challenges in multifamily, but we spent a lot of time on this. Most of these things are short term in nature, meaning that they will be resolved over the next 24 months. You know, absorption is going to take some time and these operating costs are going to take some time to absorb. Might take some time to get back to rent growth, but they will normalize. And even in certain markets like Bob mentioned in the top, in the top quartile, we're actually here in Kansas City right now. This is in the Midwest and we're actually seeing rent growth this year. Right. So it's very idiosyncratic about what market you're in. And so it's really understanding the dislocation of the, of the capital markets, but also finding the opportunities. And one of the cool ways that you can inject capital into these properties is through preferred equity and mezzanine debt, which we're going to talk about here, which is the focus of our private credit.