Operator: Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.
Juan Sanabria: Good morning. Hoping you could talk a little bit about what you’re seeing with Kindred given the lease expiration coming up there? And as part of that, if you could talk a little bit about how deep the operator pool is if, in fact, there is a transition that has to happen at some point? And how we should think about the delta between EBITDARM and EBITDAR coverage? Thank you.
Debra Cafaro: That was a multipart question Juan. Good morning. So, the — a portion of the Kindred lease for 23 LTACs is up for renewal in 2025. We’ve talked about EBITDARM coverage being about 0.9 and what’s most important, obviously, is what the earnings capacity of these assets is likely to be post 2025 in terms of thinking about the outcomes. Right now, you can see that Kindred has adopted some initiatives for improving the operating performance, which we know are focused really on cost savings, in particular, labor and contract labor. And we’re seeing that even in the quarter to date, those are beginning to show early signs of improvement. And so that’s how we’re really thinking about the 2025 renewal/maturity. LTAC certainly have a pool of qualified operators across the country from publicly traded select to a variety of regional operators, and we’re familiar with all of those.
Operator: Our next question comes from the line of Mike Mueller with JPMorgan. Please go ahead.
Mike Mueller: Hi. I was wondering, can you talk a little bit about the pace of development leasing in the R&I portfolio that you’re seeing? And has there been any material change in the past three to six months in terms of the pace?
Debra Cafaro: Yes, I mean one of the things I talked about is at our largest project, which is in Charlotte, North Carolina, which is really at this intersection of universities and medicine and research. It’s our largest project. It’s one of the fastest-growing cities, and it is already 80% pre-leased. We just had Siemens sign a large lease there. And we’re really at kind of the mid construction phase. And so that’s the most significant, but we are seeing other leasing activity. We only have a couple of other developments underway and we are seeing leasing activity there.
Operator: Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please go ahead.
Ronald Kamdem: Hey. Just — so last quarter, you had the operator transition and looks like that’s progressing pretty well. So, the question really is have you guys sort of changed sort of the way you think about the relationship with operators and evaluating it? And how do you sort of get comfortable that in 2024, there isn’t sort of another surprise on the transitions or that you feel pretty good about what’s coming down? Thanks.
Justin Hutchens: Hi, it’s Justin. So first of all, just backing up a little bit, where we always start is evaluating are we in the right markets. And so we’ve done a lot of work over the past years to make sure that we’re well-positioned to benefit from the recovery. If we’re in markets that we didn’t think we’re going to provide attractive growth for our respective assets, we’ve had dispositions. And we’ve used that part of the toolbox in terms of making sure that the assets are well-positioned, we’ve obviously made investments into our communities. And then — we then have the operator selection and operator selection has been just a regular part of our toolbox. Certainly, shouldn’t be deemed as a surprise that we’re tweaking and trying to make sure we have the right fit, the best operator really to create value in those respective markets and assets.
And to your point, we are pleased with the results we’re getting. We had a recent transition. We had a number of things that we worked on to make sure that we could get quick results and that was getting boots on the ground. We have the management teams and the CEOs of the companies in the communities right away. We secured the lead bank so we can start executing on leads right away. We transfer the website. And the early results are good, and we’re going to stay close to it and we’re really pleased with the execution thus far.
