Shankh Mitra: I can’t speak for other people, Mike. I will tell you that we have — our operators — operating partners are doing extremely well. And we are getting hit left, right and center with new operating partner who wants to be part of our story. So whether that’s because they’re inspired to do what John is doing, our data journey or we are trying to professionalize the business or the detailed transformation journey or they’re having troubles on their own end or both, I have no idea. But I could tell you that we have literally — I mean, it is — we’ve seen really good investment opportunities. but we have never seen anything like what we are seeing today. Whether that’s because of a pull or a push, I have no idea. And we are seeing operators from all parts of the country, in all three countries we do business with, is calling us to be part of it this well-capitalized, extraordinarily well capitalized platform, but also the part of — being part of John’s platform.
Operator: Our next question comes from the line of Ron Kamdem with Morgan Stanley. Please go ahead.
Ronald Kamdem: Hey, great. Just a big picture one. So looking at the presentation, the NOI, the incremental NOI build, I noticed that you guys added a bar here that looks like another $172 million. And I’m tying back to your comments about the focus on RevPOR versus ExpPOR. It’s clearly a margin benefit here. So I was wondering if you could talk about that, why add that to the deck where — is this — are we supposed to read into it just more confidence in the ability to get back to pre-COVID margins, is the question.
Tim McHugh: Yes, Ron. So we added that to deck through conversations with both investors and analysts alike. They’re looking at it interpreting kind of a stabilized point to be reflective of 88% occupancy and 31% margins. When in fact, with the rent growth we’ve seen since fourth quarter ’19, as we were ignoring that rent growth and — or with it, we are baking in around 29% margin. So what we wanted to do is just show getting back to just the NOI level on today’s rents means that you’re getting to margins that are 200 basis points plus below where we were margin wise in fourth quarter ’19, and what that final bar does is just shows you getting back to 88% occupancy, 31% margin in pre-COVID levels at today’s third quarter ’23 realized rents where NOI would be.
Shankh Mitra: And Ron, I’ve said this before, I’ll repeat it again. If that’s all we go back to Q4 of ’19 level or pre-COVID level, I would be very, very disappointed. If you have done this in Q4 of ’19, you remember, those were not the greatest days of this business, right? So we were getting it for 4-plus years at this point and through our supply cycle. That is not a high point like a lot of other businesses are and we’re very disappointed that’s all we get back to.
Operator: Our next question comes from the line of Jamie Feldman with Wells Fargo. Please go ahead.
Jamie Feldman: Great. Thanks for taking my question. I’m here with Connor. How should we think about funding assumptions for the next tranche of acquisitions? And then also, how does the quality of the assets you’re looking at compared to the quality of your existing portfolio? Or put differently, how do you assure investors that you aren’t moving up the risk curve to chase the return profile?
Shankh Mitra: I don’t want to assure investors of anything. I think investors are aware of our track record, and you guys do a very good job of visiting our properties. So you can see it. The chasing the risk curve to get investments might happen when things are really, really tight. It is an exactly opposite environment, Jamie. And when those environments have occurred in the past, we were massive sellers of assets. We don’t chase risk curves to get return. That’s just not what we do. Now going back to your actual — the crust of your question is, frankly speaking, the initial part of COVID, what we are noticing was sort of a lot of broken cash flows, right? Assets while 60%, 70% occupied; new development, brand new assets, 3 years, 4 years, 2-year-old assets, but broken cash flow because that’s normal for a business that had breaks even at 60% occupancy and your marginal sort of return, if you will, or your marginal or incremental margins sort of go hockey stake is normal for that period of time given how much occupancy we lost during COVID to have those kind of asset; great assets, broken cash flow because of what the occupancy is and how margins work in this business.
That was 2 years ago, 3 years ago, that’s what sort of we were seeing. Today, we are seeing broken capital structure, assets are generating the cash flow that you should be generating at 80% occupancy, 82% occupancy where the industry is, call it, 6%, 6.5%, whatever it is, the cash flow yield — that’s not the problem. The problem is the underlying leverage, which is now so far plus 350, 400 is at 9%. That’s the problem and those loans are coming to you, you are upside down on a cash flow basis and your upside down on a leverage basis. And those are the ones that are transacting today. So frankly speaking, the number of trophy buildings, number of high-quality, high high-quality buildings, which core investor zone, the core [indiscernible] zone that we have seen in last, call it, 6 months even last 4 months, I haven’t seen the 4 years before that, right?
And so the quality of opportunities are going up pretty significantly, but it is up to you to decide what is the quality of assets we are buying. And we give assets, you can go and visit them, and I think you will come to the same conclusion. Did I miss any part of the question?
Tim McHugh: And, Jamie, on your funding question. So in my prepared remarks, I spoke to kind of a liquidity build, and that’s as of October 30. So we talked about $900 million in investments just quarter-to-date closed in October, $1 billion pipeline ahead of us about $2 billion in cash and $6.6 billion of total available liquidity to fund that.
Operator: Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.
Austin Wurschmidt: Great. Thanks. Shankh, you were crystal clear with your thoughts on why development doesn’t make sense broadly in senior housing today, but you did expand the development pipeline, I think it was up $600 million this quarter, roughly half of that was in senior housing. And clearly, you have a cost of capital advantage today. But I mean, is that what gives you the comfort moving forward with these projects? And then I’m curious, are developers coming to you to partner on future projects that can’t sort of access construction financing? And how does that opportunity set compare versus acquisitions?
