Bryan Maher: And just staying on that for one last question. Your property tax and insurance was fairly meaningfully higher than we were expecting. You talked a little bit about acquiring assets in business friendly Salt Lake City, but you own a lot of assets in business unfriendly California and Illinois. Would you consider selling some of those assets to lessen your exposure to those two states? And that’s all for me.
Justin Knight: Absolutely, without singling those states out as the only states where we’re seeing increased cost pressure. Certainly, we’re mindful of our exposure and interestingly, looking at California specifically, we’ve benefited from being concentrated in Southern California versus Northern, where we have to-date seen revenue increases that have more than offset expense growth in those markets, such that the profitability for the assets has continued to be beneficial for our portfolio overall. That has not necessarily been the case, widely speaking, in and around Chicago, where the market dynamics are slightly different. I think, to the point I made earlier, we are constantly looking at the makeup of our portfolio, which now is over 220 assets, and looking to adjust in ways that ensure continued outperformance, which takes into consideration, the likely trajectory of cost relative to the potential upside from a rate standpoint.
Operator: [Operator Instructions] And our next question comes from Michael Bellisario with Baird.
Michael Bellisario: Justin, thank you for being diplomatic with your commentary on Chicago. Much appreciated.
Justin Knight: You’re welcome, Mike.
Michael Bellisario: Two questions. First, probably for Liz, just on — sort of a guidance related question, but more so on revenue management and bookings. Just how much is on the books today or when you turn the calendar from October to November for the next month or the current month rather, and then 60 days out? Basically trying to understand, how much are you dependent on in the month, for the month bookings, the last two months of the year, and is that any different than some of the higher demand months, call it June, July, August, for your portfolio?
Liz Perkins: Good question, Mike. Typically, we enter the month with about 50% of our occupancy on the books. And then in the month for the month, we realize the other 50%. And that stays pretty consistent month-by-month throughout the year. So 30 days out, 50% of our occupancy on the books, 60 days out, about half of that. And so really, you only have a small portion of your bookings overview towards occupancy, as you enter 30 days out, but certainly 60 days out, it’s not very clear where we may end up, especially if there’s a change in trends. If trends continue, we can project how we may materialize for the month, and trends seem to be consistent and still remain strong. And so we’re optimistic there. But really, as you progress through the months, especially in months where you have large holidays like Thanksgiving or Christmas and New Year’s, your view as you move throughout the month can change just depending on how business and leisure perform relative to those holidays.
And so, I think that’s where some of our caution comes in. At the midpoint around November, December, it’s not indicative of a change in trends in bookings that we’re seeing today. We entered the month of November very similar with average daily bookings above prior year and 2019 levels as we have been seeing. So I think overall, we’re still encouraged, but just have low visibility.
Michael Bellisario: Got it. That’s helpful. That’s what I was trying to understand, if it was just seasonality driven or if it’s just business versus leisure mix at the end of the year. And it sounds like it’s that. So, helpful there. And then just switching gears for — one for Justin. Just maybe can you big picture review your underwriting criteria more on the quantitative side than the qualitative commentary you’ve already provided. Where do cap rates need to be, where do IRRs need to be and then kind of how that all compares to where your stock is trading? Just kind of help us understand what goes in the black box and what gets spit out on the other end on your side.
Justin Knight: We’re continually looking at market trends and assessing those relative to the pricing for our stock and the implied multiples there. I think, share prices for the space, broadly speaking, have been more volatile, really since the onset of the pandemic than they had been in periods prior. And so, generally, we’re looking at a moving average — a daily pricing, as we think about our share price. And then from a property standpoint, we have seen some movement in cap rates, at least in terms of where we’re able to transact. And that’s been a positive for us. As we think about investments we have as a result of those shifts, really driven largely by a meaningful cost of capital change for private equity groups who had been very active in the space.
That puts us in a position to pursue high quality institutional assets in more challenging to enter markets at price points that meet our minimum hurdles from an investment standpoint. And outside of those harder to replace assets, moves the needle even further, such that we’re able to transact as we build out portfolios in ways that drive overall returns from the total acquisition activity. I think, generally speaking, we’re looking to acquire assets, either at measly higher implied returns on the day of acquisition than our current portfolio or at similar implied multiples, but with meaningfully different profiles from our growth standpoint and from our capital needs standpoint on a go-forward basis. And we’re open really to adding assets that fit into either of those two categories.
And I highlighted in response to several of the earlier questions, but it’s worth reiterating. We are continually looking at our existing portfolio as well, and looking to add and subtract from the portfolio in ways that that moved the value of the total portfolio in a positive direction. And from time to time, that will mean pruning from our portfolio. And as we’re adding to the portfolio, we’re looking to complement the holdings that we already have and shift or expand our exposure beyond the set of current demand generators and into markets where we have lower exposure.
Operator: Our next question comes from Anthony Powell with Barclays. Please go ahead.
Anthony Powell: So I guess on the acquisitions and financing the acquisitions, I think you used the line, which is pricing at about 7% I think currently. What’s your view on permanent financing, fixed versus floating, and how you’re looking at, and where could you finance assets like this in the market right now?
Justin Knight: Generally speaking, we’ve looked to balance fixed versus floating rate. Historically, when rates were extremely low and the risk to higher rates in the future was higher. We were near 100% fixed. As we progress through the changing rate environment and seeing the potential for future rate decreases, we pulled back slightly, but still predominantly fixed rate, largely through hedges on our unsecured line and/or — I mean, term loan.
Liz Perkins: Yea. We’re about 20% variable as of quarter end. I think as we look forward and certainly have some swaps that are maturing over the next couple of years, we’ll look at the curve closely and be in close contact with the banks and sort of evaluate our overall structure from a swap versus fixed or variable versus fixed perspective and try to manage that effectively given the current environment and the way the forward curve looks. But I think at one point, we felt like we were over-hedged, and I think 80-20 isn’t a bad place to be, but certainly, as these incremental hedges, mature over the next year, we’ll continue to look at it.
