I understand your point about $31 million across the whole complex being a low number. That’s a valid point. The other side of that argument though, is that it does indicate that they have a viable long-term business. Otherwise they would not have reinvested that $31 million into new land loans. Taking that step further, if they have a viable lending platform still, then there is value to The portfolio. We just don’t know how much value there is remaining in the portfolio.
I assume that they liquidated their loans against finished lot Loans and and houses under construction for builders. They probably did not take much of a loss, if any, on those. They also have a good portion of the portfolio invested in first lien loans. If They have to sell those they probably took a discount. However if they held those loans all the way through development of land, they probably will get the money back. The highest concern for me is the second lien loans that were primarily backed by municipal reimbursements and a pledge of the equity. If you had to sell those I’m sure you took a loss. However, if they are holding those until the land is ultimately developed they have a good chance of getting full recovery given underlying collateral value has increased in recent years.
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