Steven Hamner: I will also point out, Jonathan, most of them are part of larger portfolios that are master leased and it’s not just LTACHs in those portfolios. So, they are well covered at a master lease level.
Jonathan Hughes: Okay. Last one for me, and this is kind of going back to the updated capital allocation strategy announcement from August. And that was a discussion of kind of expected cost reductions. Are you able to share anything like magnitude or timing? What line items are being reviewed there? We were ex the litigation expenses, we have noticed that G&A is already down kind of mid-teens year-to-date already. So, there has been good progress there, but just curious how much more savings we can expect over the next 12 months or so? Thanks.
Steven Hamner: Well, yes, to the extent we commented in our prepared remarks, it continued sequential. By that, we mean in the fourth quarter, we expect to see further reduction, virtually every line item. Of course, we are looking at and you are seeing those reductions. So, that going into 2024, and of course, we haven’t announced any guidance yet. But compared to 2022, we expect to see double-digit annualized reduction in those costs. And the reason the comparison is 2022 is because obviously, 2023 has been a very transitional year already.
Jonathan Hughes: Yes. Alright. Thanks for that. Appreciate it.
Steven Hamner: Thank you.
Operator: The next question comes from Mike Mueller of JPMorgan. Please go ahead.
Mike Mueller: Yes. Hi. I guess first, given the comments about having ample liquidity to address near-term maturities. Just curious why you are considering tapping secured debt?
Steven Hamner: Well, the reason would be because of the credit environment that we are in now and that translates into – or a lot of buyers, not all of them, but for a lot of buyers that rely on debt, it drives the purchase price down. Now, to the extent you believe that maybe this environment we are in now is not long-lasting or not permanent, it’s better for us, all else equal to borrow against those assets rather than permanently give up value by virtue of selling them. And again, to be clear and to reiterate, I wouldn’t expect that we would do all $2 billion under secured debt. It would be limited temporary and frankly, not that dilutive given where we are paying interest right now in any case.
Mike Mueller: Okay. And then I guess you kind of touched on the next question. For the $2 billion of new liquidity – should we think of that as largely coming from asset sales with only a minor portion of that coming from the secured debt, or I mean any kind of ballpark guidance on a mix of those two?
Steven Hamner: Yes. I just don’t know about the timing, the pricing, the cost and the character. So, other than to repeat, it would be limited secured debt then that’s probably as far as I would be able to predict.
Mike Mueller: Okay. And maybe last one here if I could sneak one more in. Any high-level commentary on what you are seeing, expecting, thinking about cap rates on asset sales given the current environment that you are evaluating?
Steven Hamner: Well, nothing specific other than to absolutely acknowledge that cap rates are elevated vis-à-vis where they were even six months ago, as you can imagine. And that again is why we may not – under certain circumstances, we may not be willing to take those cap rates. We may prefer because we know our rent on those assets will continue to increase at least inflationary levels. Then we may prefer to monetize on a temporary basis versus selling into a high cap rate environment.
Mike Mueller: Got it. Okay. Thank you.
Operator: The next question comes from Connor Siversky of Wells Fargo. Please go ahead.
Connor Siversky: Hi everybody. Thanks for having me on the call. Just another one on Steward, looking at the rent coverage, but the figures represented look to be at the facility level. I am just trying to get any indication of what those numbers could look like coverage at the corporate level.
Edward Aldag: Well, if you look at their corporate level, remember that it includes a lot of other things than just the hospitals. So, when you look at – if you try to take what the actual M would be on the facility levels, then if you reduce that just by that amount, the coverage goes down to just over 2x.
Connor Siversky: Okay. Understood. And then just one more on the secured debt question for Steve. I can’t ask for individual properties, but is $2 billion the maximum amount of gross assets that you would use to collateralize such an instrument?
Steven Hamner: We – I mean we don’t have anything we are looking at that – that’s not what the $2 billion was meant to imply. The $2 billion are meant to imply liquidity of $2 billion. So and again, without being able to even predict answers to Mike’s earlier questions, how much is secured debt, how much is sales, you should not look at that $2 billion as being a collateral value.
Connor Siversky: Okay. Understood. And then just last one, jumping back to Steward. On the ABL, I know there are some transactions, MPW selling off a piece of the exposure, but any indication of what the total draw is on that ABL right now?
Steven Hamner: No. I think that’s – first of all, I don’t know. And secondly, I think that’s more for Steward, but…
Connor Siversky: Okay. Understood. Thank you for the time.
