Justin Knight: Interesting question. Certainly, we have dialogue with the brands on an ongoing basis about how to further improve the experience for consumers at our hotels. Generally speaking, as of today, those conversations are absent significant references to increases in amenities or services with the hotels. I think, by and large, the majority of the conversations that we’re having today with brands, and as you know, we sit on a number of brand advisory boards. So these conversations extend beyond specifics related to our own portfolio. The focus has tended to be much more around the condition of the assets. And I think the need for as an industry reinvestment in the hotels, and greater emphasis and attention paid to repairs and maintenance.
So I think in the near-term, meaning in the next 12 to 18 months, much more likely that we’ll see continued focus on those areas, which for our business, put us in a very good position having reinvested in our portfolio consistently. We have assets that are in very good condition, but as an industry, I think, a more significant amount of attention will be going to that than expanding dinner offerings, or returning to pre-pandemic housekeeping models. By and large, that — the adjustments in housekeeping have really furthered a trend that had begun pre-pandemic. And we’re still making accommodations for guests who would like their room cleaned every day in order to maintain guest satisfaction. So, I think I see very little movement on that part impacting our ability to drive profits.
And because of the position of our hotels, I think we will, given how brand pressure is likely to be focused, or for the near-term we’re in a very good position.
Michael Bellisario: Okay. Helpful there. Thank you. And then just a second question just on the development deals. More broadly, can you remind us of the math you do on a development deal like Nashville? And what type of excess return you’re targeting over buying a stabilized asset like Cleveland? And then secondarily, kind of how big are you willing to take your development commitment dollars at this point?
Justin Knight: So the answer to the first part of your question is a little bit complicated. Technically, we target a return that’s equal to the return we could achieve on existing assets functionally, because we tend to be more conservative in underwriting market growth in out years. We tend to be more conservative overall in our underwriting and new development deals. And the result has been that when we look at our acquisitions in total, by and large, our acquisitions of new development deals have outperformed, that the properties that we acquired that were stable and operating prior to acquisition, That’s more of a function of conservatism in our underwriting for markets, than a specific target yield. But the result ends up being about the same, certainly taking into consideration the incremental market risk, or theoretical incremental market risk we’re taking.
But remember in every case, we do not take any risk related to cost overruns on the project. Those are borne 100% by the developer. And then remind me what your other question was? Oh, total [indiscernible]. Generally speaking, we were given the size of our portfolio. Like to have a pipeline of three to five deals, I think, given the scale of the current deals that we’re doing, that would be an appropriate level with delivery over a 2 to 3-year period. To the extent we were to pursue development deals smaller than the 2 week currently have under contract, we could scale in terms of number of deals slightly higher than that. And again, remembering that as we think about funding development deals on a go-forward basis, we certainly have, at least for the deals, we have under contract, ample capacity on our line of credit.
But the bulk of those acquisitions, we intend to fund utilizing excess cash from operations and or disposition proceeds, and hopefully, at some point with potential equity raise. Though, obviously, given today’s valuation, that would not be attractive to us.
