Phillips Edison & Company, Inc. (NASDAQ:PECO) Q1 2024 Earnings Call Transcript

Phillips Edison & Company, Inc. (NASDAQ:PECO) Q1 2024 Earnings Call Transcript April 26, 2024

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Operator: Good day, and welcome to Phillips Edison & Company First Quarter 2024 Earnings Call. Please note this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin.

Kimberly Green: Thank you, operator. I’m joined on this call by our Chairman and Chief Executive Officer, Jeff Edison; President, Bob Myers; and Chief Financial Officer, John Caulfield. Once we conclude our prepared remarks, we will open the call to Q&A. After today’s call, an archived version will be published on our website. As a reminder, today’s discussion may contain forward-looking statements about the company’s view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management’s current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings, specifically in our most recent Form 10-K and 10-Q.

And our discussion today will reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now, I’d like to turn the call over to Jeff Edison, our Chief Executive Officer. Jeff?

Jeff Edison: Thank you, Kim, and thank you, everyone, for joining us today. The PECO team delivered another solid quarter of growth, with same-center NOI increasing by 3.7%, NAREIT FFO increased 4.9%, and core FFO increased 4.5%. The continued strength of our operating performance is attributable to our differentiated and focused strategy of owning grocer-anchored neighborhood shopping centers anchored by the number one or two grocer by sales in the market, the PECO team’s ability to drive results at the property level, and the many advantages of the suburban markets where we operate our centers. The continued strong performance of our portfolio has allowed us to affirm our 2024 core FFO guidance range. The midpoint represents year-over-year growth of 3% despite significant interest expense headwinds of nearly $0.10 per share.

We believe we can continue to deliver positive earnings growth despite interest expense headwinds. Today, we see a continued strong operating environment and a transaction market that is increasingly more active. The consumer remains resilient and our grocers continue to drive strong recurring foot traffic to our centers. Occupancy remains high at 97% lease, which gives us pricing power. Leasing demand continues to be elevated for our inline spaces and we have limited exposure to big box retailers. Retention remains strong and the PECO team continues to be proactive in getting spaces back and driving significantly higher rents. This is reflected in our continued strong new rent spreads. In addition, PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive strong neighbor demand.

We have a great balance sheet and we are well positioned for accretive acquisitions and growth. During the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million. We remain confident in our ability to acquire high-quality centers at attractive returns as the transaction market opens up further. While it’s early in the year, we continue to successfully find attractive acquisition opportunities. Activity in the second quarter remains strong. Given the current environment, we are reaffirming our guidance of $200 million to $300 million of net acquisitions for the year. We have the capabilities and leverage capacity to acquire much more if attractive opportunities materialize. We continue to target unlevered IRRs of 9% or greater for our acquisitions.

As a reminder, the acquisitions that we completed in the second half of 2023 underwrote to over 9.5% unlevered IRR. We will maintain our disciplined approach and focus on accretively growing our portfolio. We’re hopeful that volumes will continue to increase throughout the year. Looking beyond 2024 and assuming a more stable interest rate environment and acquisitions market, we continue to believe our portfolio can deliver mid to high single-digit core FFO per share growth on a long-term basis. This will be driven by both internal and external growth. We remain committed to successfully executing our growth strategy. Our high-quality portfolio, anchored by top grocers in favorable suburban markets supported by one of the best balance sheets in the sector, provides a long-term steady earnings growth profile.

PECO generates more alpha with less beta given our focused and differentiated strategy. As previously announced by Kroger and Albertsons, the estimated closing date for the proposed merger was pushed back to later this year. Also this week, Kroger added 166 stores to the disposition list to CNS. We remain cautiously optimistic about the impact of this merger on PECO. We continue to believe it is ultimately a positive for PECO, for our centers, and for the communities that our centers serve. The market still gives the merger a low probability of occurring, but should the merger close and 579 stores now on the list are sold to CNS, we believe the impact on PECO is a net positive. Our Albertsons stores will be operated by Kroger which reinvest regularly in their stores and produces higher sales volumes.

If the merger does not occur, our Albertsons anchored centers will continue the strong performance that they have produced to date. I will now turn the call over to Bob to provide more color on the operating environment. Bob?

A – Bob Myers: Thank you, Jeff, and good afternoon, everyone, and thank you for joining us. We had another quarter of strong operating results and leasing momentum. We continue to see high retailer demand with no current signs of slowing down. PECO’s leasing team continues to convert retailer demands into high occupancies with higher rents at our centers. Portfolio occupancy remained high and ended the quarter at 97.2% leased. Anchor occupancy remained high at 98.4% and during the quarter we executed five anchor leases including Ulta Beauty at Hilfiger Shopping Center, Five Below at Bear Creek Plaza, Crunch Fitness at Kirkwood Market Place, and two Medtail uses RISE Center at Ocean Breeze Plaza and a medical center at Colonial Promenade.

In the first quarter, we received six anchor boxes back. We currently have just 15 vacant anchored spaces in our portfolio. Importantly, we are able to drive significantly higher rents on these units. For reference, these six bases had an average ABR of $8.06 and the five we executed this quarter had an average ABR of $18.37, a 128% average increase. Activity for anchor lease is currently out for signature is extremely positive. And we are currently experiencing the strongest anchor demand we’ve seen in over 20 years. In-line occupancy ended the quarter at 94.8%, an increase of 50 basis points year-over-year and a sequential increase of 10 basis points from the fourth quarter. New neighbors added in the first quarter included quick-service restaurants such as Nashville Hot Chicken, The Great Greek, Starbucks, and Wingstop.

Several Medtail uses, health and beauty retailers such as Hand and Stone, Solar Salons, and other necessity-based goods and services. Our acquisitions in the first quarter were 96% leased at closing. Buying centers with some vacancy will continue to allow us to drive growth. Given PECO’s unique external growth strategy, we have added new disclosures for same-center leased and economic occupancy which you can find in our supplemental information packet. We continue to believe that we can push same-center in-line occupancy another 100 to 150 basis points given the continued strong retailer demand. In terms of new lease activity, we continue to have success in driving higher rents. Comparable new rent spreads for the first quarter were 29.1%. Our in-line new rent spreads were a record high 37.4% in the first quarter, which compares to our trailing twelve-month average of 27.7%.

We continue to capitalize on strong renewal demand and are making the most of the opportunity to improve lease language at renewal and drive rents higher. In the first quarter, we achieved a 16.9% increase in comparable renewal rent spreads. Our in-line renewal spreads remained high at 19.2% in the first quarter, which compares to our trailing twelve-month average of 18.2%. These increases in spreads reflect the continued strength of the leasing and retention environment. We expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future. Progress continues in terms of neighbor retention and while growing rents at attractive rates. PECO’s retention rate remained strong in the first quarter.

Our in-line retention rate is 83%, well ahead of the historical five-year average of 78%. Higher retention means less downtime and lower TI spend. In the first quarter, we spent only $0.54 per square foot on tenant improvements for renewals. We also remain successful at driving higher contractual rent increases. Our new and renewal in-line leases executed in the first quarter had average annual contractual rent bumps of 2% and 3%, respectively. Another important contributor to our long-term growth. The leasing spreads that we are achieving and the strength of our leasing pipeline are clear evidence of the continued high demand for space in our grocery-anchored neighborhood shopping centers. PECO’s pricing power is a reflection of the strength of our focused strategy and the quality of our portfolio.

PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive robust neighbor demand. These trends include a resilient consumer, hybrid work, migration to the Sunbelt, population shifts that favor suburban neighborhoods, and the importance of physical locations and last-mile delivery. The impact of these demand factors are further amplified due to limited new supply over the last ten years and going forward, given that current economic returns do not justify new construction. A healthy mix of national, regional, and local retailers adds many benefits to our grocery-anchored portfolio. 70% of our rents come from neighbors offering necessity-based goods and services, and our top grocers continue to drive strong reoccurring foot traffic to our centers.

PECO’s three-mile trade area demographics include an average population of 67,000 people and an average median household income of $87,000, which is 12% higher than the U.S. median. These demographics are in line with the store demographics of Kroger and Publix, which are PECO’s top two neighbors. Our centers are situated in trade areas where our top grocers are profitable and our neighbors are successful. We also enjoy a well-diversified neighbor base. Our top neighbor list is comprised of the best grocers in the country. Our largest non-grocer neighbor makes up only 1.2% of our rents and that neighbor is TJ Maxx. All other non-grocer neighbors are below 1% of ABR. To put a finer point on the neighbor mix, PECO has no exposure to luxury retail and very limited exposure to distressed retailers.

Our top ten neighbors currently on our watch list represent just 2% of ABR, with no one retailer representing more than 40 basis points of ABR. While our bad debt was slightly elevated in the first quarter, we actively monitor the health of our neighbors. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. To note, this is not attributed to national bankruptcies as we don’t have any meaningful concentrations. From an operations standpoint, we have always taken an aggressive stance to get spaces back, and in today’s environment, the PECO team is taking an even more aggressive stance on opportunities where we can get higher spreads. We are seeing 40% in-line rent spreads on the units we are getting back.

27% of our ABR is derived from local neighbors. The majority of our local neighbor rents come from retailers offering necessity-based goods and services. Our local neighbors are successful businesses run by hard-working entrepreneurs. They have healthy credit and are less susceptible to corporate bankruptcy caused by weaker-performing locations. Local neighbors offer favorable economic returns. A typical local retailer receives less capital at the beginning of their lease, accepts more PECO-friendly lease terms, and has high retention rates. PECO retained 85% of local neighbors in the first quarter. For inline local neighbors, renewal rent spreads remain strong at 20.2%. Importantly, local retailers meaningfully differentiate the merchandise mix that our neighborhood centers offer our customers.

Our in-line local neighbors are resilient and have been in our shopping centers for 9.7 years on average. In addition to our strong rental growth trends, we continue to expand our pipeline of ground-up out-parcel development and repositioning projects. During the first quarter, we stabilized four projects and delivered over 180,000 square feet of space to our neighbors. These four projects add incremental NOI of approximately $2.3 million annually. They provide superior risk-adjusted returns and have a meaningful impact in our long-term NOI growth. We continue to expect to invest $40 million to $50 million annually in ground-up development and repositioning opportunities with weighted average cash-on-cash yields between 9% and 12%. This activity remains a great use of free cash flow and produces attractive returns with less risk.

Our team continues to stay focused on growing this pipeline as the returns are accretive to the portfolio. In summary, the PECO team remains optimistic given the current strong operating environment and the continued positive momentum we are experiencing across leasing, redevelopment, and development. Our healthy neighbor mix and grocery-anchored strategy positions PECO well for continued growth. The overall demand environment, the stability of our centers, the strength of our grocers, and the capabilities of our team gives us great confidence in our ability to continue to deliver solid operating results. I will now turn the call over to John. John?

John Caulfield: Thank you, Bob, and good morning, and good afternoon, everyone. I’ll start by addressing first quarter results, then provide an update on the balance sheet, and finally speak to our affirmed 2024 guidance. First quarter 2024 NAREIT FFO increased 4.9% to $80.1 million or $0.59 per diluted share, driven by an increase in rental income from our strong property operations. Results were partially impacted by higher year-over-year interest expense. First quarter core-FFO increased 4.5% to $81.7 million, or $0.60 per diluted share, driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads partially offset by the aforementioned higher interest expense. Our same-center NOI growth in the quarter was 3.7%, driven by minimum rent growth of 4.2% year-over-year.

Regarding acquisitions during the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million. We had no dispositions during the quarter. Turning to the balance sheet, we have approximately $570 million of liquidity to support our acquisition plan and no meaningful maturities until November 2025. Our net debt to adjusted EBITDA remained at 5.1 times. Our debt had a weighted average interest rate of 4.3% and a weighted average maturity of 3.8 years when including all extension options. During the quarter, we entered into an interest rate swap agreement totaling $150 million. The new instrument swaps SOFR to approximately 3.45% effective September 25th, 2024, and matures on December 31, 2025. This swap helps us manage our floating rate exposure as we have swaps that expire in September and October of 2024.

We ended the quarter at 76% fixed-rate debt with 24% floating. We continue to monitor the debt market and work to access it opportunistically. While the recent moves in long-term treasuries has not been favorable, credit spreads have improved from year-end. We are continually looking at opportunities to enhance our liquidity and extend our debt maturity profile. Our lack of near-term maturities provides us with the flexibility to be patient. Between the significant free cash flow generated by our portfolio this year and the capacity available on our revolver, we can be strategic in our timing to access the debt market. Turning to our guidance for 2024, we have updated the net income per share range to $0.51 to $0.55. we’ve affirmed our guidance for NAREIT and core-FFO, which reflects a 6% and 3% growth over 2023 at the midpoints, respectively.

In addition, we’ve affirmed our range for same-center NOI growth of 3.25% to 4.25% given the continued strong operating environment. Included in our guidance is the negative impact of uncollectible reserves. We are affirming the range previously provided given the continued strong health of our neighbors. However, we will likely be at the high end of the range for the year, but it’s still early and this is being influenced by our team taking an aggressive stance on getting spaces back to drive higher rent spreads as Bob mentioned earlier. We currently have several acquisitions in our pipeline, either under contract or in contract negotiation. This activity provides a strong start for the year. As Jeff mentioned, it is still early, so we are affirming our acquisition guidance and expect net volume to be in a range of $200 million to $300 million.

If the transaction in capital markets improve, we have the capacity to meaningfully increase this number, but we are comfortable with this guidance range in the current environment. Looking beyond 2024, we believe our internal and external growth opportunities give us a long-term growth outlook in the mid to high single digits for core-FFO per share growth. We expect a comparable or faster growth rate for AFFO because there should be less tenant improvement dollars invested as we continue to increase same-center occupancy. In the near term, we continue to be impacted by interest rate increases as all borrowers are, which impacts our earnings growth. That said, we are pleased to guide to positive per-share growth. For 2024, we are updating the range of interest rate expense to $98 million to $106 million.

We estimate that higher interest rates could be a headwind of $0.07 to $0.11 for the year. If we added back the per share impact of interest rate increases to our updated 2024 guidance, this would be 7% core-FFO growth at the midpoint. 2024 is continuing to present challenges with high inflation, volatile and rising interest rates, and global conflict. However, the strength of our integrated operating platform positions PECO well for long-term steady earnings growth. We’re excited for the additional growth opportunities ahead this year, both internal and through acquisitions. With that, we will open the line for questions. Operator?

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Q&A Session

Operator: [Operator Instructions] Your first question is from the line of Caitlin Burrows with Goldman Sachs.

Caitlin Burrows: Hi, everyone. I guess good afternoon. Maybe just following up, John, on that last point on the bad debt headwinds. So I know the guidance was 60 to 80 basis points and you mentioned now it could come in at the high end. Granted it’s still early in the year. It sounds like your neighbors are performing generally very well. So, just wondering what’s driving the updated view and the 1Q results. And if anything is kind of PECO-driven, can you go through that nuance?

Jeff Edison: Well, hi, Caitlin, it’s Jeff. Thanks for the question. As we look at the operating environment, when we get to levels of occupancy that we’re at right now, we’re taking a very aggressive stance on getting property – getting back neighbors who are not paying. That has some impact on what we’re talking about here. But we’re generally going to continue to be really aggressive at getting spaces back on a go-forward basis and that will have an impact. And – but we are not seeing anything secularly that’s happening that is changing those numbers. And we do think they will more normalize over the – as the year goes through. John, did you have any additions to that?

John Caulfield: No, I think that that captures. I mean, Caitlin, we look at it, it is still early in the year and it can move from quarter-to-quarter but as we look at it, as Jeff said, we’re not seeing anything that is pervasive. I mean, this is not driven by national bankruptcies or things. And so we are taking an aggressive stance on getting the space back and taking the steps that Bob’s team has talked about. We do have – we do expect that at this time we’ll be at the higher end of the range, but it’s still early to tell. And ultimately the important thing for us is that we were able to reaffirm our same-store NOI guidance for the year. So, we feel very strong about that.

Caitlin Burrows: I guess maybe then just – go on, Jeff, or someone.

Bob Myers: No, I’m sorry, it’s Bob. I’m just going to add to that. In light of what we see on the operations platform and the demand that we’re seeing for the space, even in the spaces that we receive back, we were able to get over 40% new leasing spreads. So as long as we continue to see the demand there, it is a space-by-space decision and how hard we push, but it is a strategy that we’re seeing some benefit from. So, I’m encouraged by the demand and the spreads we’re seeing.

Caitlin Burrows: Got it. And then maybe just on the point of the same-store NOI guidance being reaffirmed and the FFO target being reaffirmed despite higher interest expense, I guess, can you guys go through some of the offsets of what might be performing better than expected?

Jeff Edison: John, you want to take that one?

John Caulfield: Sure, I’ll take that. So, yes, so, ultimately the leasing spread and the leasing activity that Bob is talking about is at the operating level allowing us to do that. We are actually also having better, and this goes to the FFO. We are having and forecasting better expense experience than we had anticipated. I mean, our NOI margin increased a little this quarter, but still, we’re seeing the things like G&A as well as some of our property level expenses are help offsetting. So the increase in interest is something, but we’re able to manage that and feel good about our guidance ranges.

Caitlin Burrows: Got it. Okay, thank you.

Jeff Edison: Thanks, Caitlin.

Operator: Your next question is from the line of Lizzy Doykan with Bank of America.

Lizzy Doykan: Hi, everyone. I was just hoping you – if you guys could talk a little bit more about the two centers acquired in the first quarter, both seemed pretty well leased at the point of acquisition. So just wondering on the opportunity set that you see at each of those centers, and then just wondering on plans for the land parcel that was acquired. Thanks.

Jeff Edison: Why don’t I – I’ll cover the two properties? Bob, you can talk through the land parcel that we purchased. The first project we bought, Lake Mary, was a center that we have actually have been looked at for a long time. It is a Publix-anchored center. It’s one of the best Publixes in its trade area. We really like that particular market outside of Orlando. And – so we – and we did find that there was some very good mark-to-market opportunities there. I think our underwriting was sort of in the between nine and nine-and-a-half on an unlevered IRR basis. So we felt pretty good about that acquisition. Our second acquisition was a very – I guess, in our mind, a very opportunistic purchase. It was a property that we had seen for a long time in a market that we were very familiar with and very active in.

It was in a higher-end market with density, with a dominant grocer, not in the center, but within a short distance from the center. So it was in a major – in our mind, corridor for the suburban shopper. And that was one where we had – we were getting a very strong IRR, well north of 9.5, and in a market that we knew really well, and we thought it was an opportunity to take advantage of. And those were the two acquisitions that I would say going into second quarter. I would say that we have a good pipeline. We’ve seen almost – in terms of investment committee, we put almost twice as many projects through investment committee this year, through the first quarter as we did last year. Obviously, last year is a pretty tough first and second quarter for product coming on.

So, we are encouraged by that, that we may see a little bit better opportunities this year than we did in the difficult market from last year. Bob, do you want to go through the outlaw that we purchased as well?

Bob Myers: Yes, absolutely. So, it’s called Goolsby Pointe, and it’s in Tampa, Florida. And this is one that we’ve had our eyes on. And it’s about a three-acre parcel. We paid right around $2 million for it. And our national account team has really been marketing this, actually, for the last six months. So we currently are thinking about separating the three acres and the three one-acre parcels. And we already have strong interest from national retailers and the Chase Banks and the Dutch Brothers and the Tropical Smoothies and Urgent Cares. So, again, you’re going to continue to see demand for these opportunities in the Medtail and the fast-casual space. So, as we can find these opportunities and generate the 9% to 12% returns that we’re focused on, they’re great complements to our existing assets, so we want to stay opportunistic and continue to look for land.

Lizzy Doykan: Okay, that’s good color. Thank you. And just to follow up to that, how did you fund first quarter acquisitions? And is there any change in thinking around the match funding strategy you guys have been employing to fund the rest of this throughout the year? Or if you could just give your updated thoughts on funding acquisitions? Thanks.

Jeff Edison: Yes, I would say, Lizzy, we have reaffirmed our pace, so we anticipate that we will be in that $200 million to 300 million range for the acquisitions. And we – from a pricing standpoint, the market is actually continues to have quite a bit of volatility in terms of buyers and sellers and expectations. And that’s not generally a real positive for volume. But it’s harder because that match funding that you’re talking about is changing in this environment almost daily. And – so you’re – it’s a difficult time to sort of figure that out. But we’re – I think we’re staying very disciplined in terms of where we see the returns that we’ve got to get to make them accretive to where – to our model and the – so that that’s sort of how we’re doing.

In terms of the match funding, last year, we did tapped ATM on the equity side and extended all of our debt maturities as well. So we’ve got our line that we will be using for these acquisitions, and then we will be looking to tie in longer-term fixed-rate debt as we tie in those acquisitions. John, did you have anything additional on that?

John Caulfield: No, I think that hits it. I mean, we have $570 million of liquidity and we’re looking to maintain our flexibility as we are looking to get to our long term target of 10% floating, but ultimately feel good about the assets that we’re buying and the opportunities in front of us.

Lizzy Doykan: Thank you.

Jeff Edison: Lizzy, does that answer your question?

Lizzy Doykan: Yes, that was. That was great. Thank you.

Jeff Edison: Okay, great.

Operator: Your next question is from the line of Ronald Kamden with Morgan Stanley.

Ronald Kamden: Hi, just my first quick one was, I remember back at the Investor Day, you talked about sort of part asset management partnerships and so forth. Just wondering, was there any update on that and what the thinking was?

Jeff Edison: We do. We are making progress there. And I think in the second quarter we should be at a point where we will be more openly discussing, giving a lot more detail on what they are. But our goal here is to we want to have projects bought into these funds before we make any public announcements. So, we continue to progress and we hopefully will have more news for you in the second quarter.

Ronald Kamden: Right. And then my second question was just going to be back to the acquisition pipeline and so forth. I think you talked about seeing a lot more volumes for this year versus last year. Has it all been just because of the environment or are you guys doing anything to source differently or to be more creative, look at deals?

Jeff Edison: I think it’s general volume. I mean, we are – we have a system that we’ve put in place and refined over probably 25 years, being in this acquiring the grocer-anchored shopping centers. So we have – but we’re obviously updating technology and those things. But in terms of our core strategy of focusing on 5,800 centers that we want to own and making sure that we’re in front of both the owners and the brokers to make sure we see those when they become available. That part really is – has stayed pretty consistent.

Ronald Kamden: Great. That’s it for me. Thank you.

Jeff Edison: Okay. Thanks, Ron.

Operator: Your next question is from the line of Haendel St. Juste with Mizuho.

Ravi Vaidya: Hi there. This is Ravi Vaidya in the line for Haendel. Hope you guys are doing well. Just curious, if you were to issue ten-year money today, what would it cost? And I guess, what is your interest in doing any alternative financing or agency via convertible debt deal or short-term debt? Just what’s your appetite for these different options?

Jeff Edison: Great question. We are looking at all of them, and the – our primary focus at this point is to get into the public – the longer-term public debt markets. And so the alternatives, though, interesting and something that we could – that could work for us. We have not sort of actively pursued those yet, but we are reviewing them because they are – there’s some pretty attractive options there that we will – that we’re continuing to look at. But John, any additions to that?

John Caulfield: Sure. So we are looking at everything. I would say that our long-term cost currently, if we were to issue would be, let’s say six to six-and-a-quarter. The important thing for us is building a track record in the unsecured bond market. We’ve made great progress with investors and speaking with them and building that, but we’ve been waiting for the right opportunity. As I mentioned in the prepared remarks, the spreads were a little wide at the beginning of the year and now they’ve improved, but the base rate has expanded. So it is something that we are actively monitoring. But because we have built this time in our maturity calendar, we have the ability to be patient. And so we’re just wanting to make sure we’re accessing it and building that reputation and track record in the market that has the most liquidity and availability.

But that said, depending on the market timing and things like that, we do evaluate all strategies. If you look at our current balance sheet funding, we use them all. We have bank debt, we have secured debt, we’ve unsecured bonds. So it’s something that we’re watching and we look – looking forward to accessing and getting more capital to buy more assets.

Ravi Vaidya: Thank you. That’s helpful. Just one more here. Regarding cap rates this year, this quarter’s acquisition cap rate was a bit higher than last year’s. And can we – from a modeling perspective, can we kind of assume that this year’s acquisitions would hang around in the six, eight, to seven range? Is that what you’re seeing based on what’s in your pipeline right now?