John Moragne: Sure, that will take a bit longer are likely to be one-off transactions. They were not ones that were viewed as being a fit for larger portfolio deals, larger portfolio deals if you’re looking at the private institutions or the public rates that are evaluating healthcare assets that are on the market right now, need to fit a certain playbook for them and not everything that we’ve owned and acquired is going to do that. As a reminder we’ve been acquiring health care since 2009, 2010 going back to some of the earliest years of our 16 year operating history. So there’s a lot that’s in there. And so these one-off transactions and that last little bit our focus is optimal disposition outcomes. We’re not looking to sell these at just any price.
And we are good asset managers. We have really strong operational expertise. We’re in the real estate business. And so our plan is to look at each of those individually, not rush through a decision on them. And if it takes a little bit of opportunity no effort for us to work with the tenant on a lease extension or maybe we need to invest some TI dollars into it to get the asset repositioning where it’s going to be attractive for somebody to buy on a one-off basis. That’s what we’re going to do. So it will take a little bit more time to work through those but that’s okay.
Caitlin Burrows: Got it. And just for the additional healthcare asset sales that you expect to happen in 2024, would you expect those would be in a single transaction or multiple?
John Moragne: We’re currently working on one single transaction, but it would have staged closings. So we would tried to time it out in a couple of different tranches over the course of the second half of the year.
Caitlin Burrows: Got it. Okay. And then just to follow-up on the build to suit opportunities too, I guess what does on the on land that you already have? You mentioned maybe 12 to 24 months outlook or impact, but it seems like it could take longer if you need to get the land and the approvals and permitting. So just wondering if you could talk about that, kind of what you have, what you — impact on timing?
John Moragne: No. We’re not buying land for spec development purposes. These are deals already in place. We would acquire the land on the front-end in connection with funding the deal. But these are opportunities we’re looking at where the lands already been identified. The tenants already been identified, and so there’s no risk that you would traditionally see in sort of spec industrial development.
Caitlin Burrows: So like somebody else has already worked on getting it set up or it just seems like from what we hear on the industrial side like there’s some time it takes from talking to a potential partner and saying, we’re going to build this to actually being able to put a shovel in the ground? Is it that that process has already happened or somehow you’re able to do it more quickly?
John Moragne: No. And process already happened. Think of this as the same sort of scenario we’ve been seeing the last 12 months starting for us with UNFI, the dislocation you’re seeing commercial real estate lending where they haven’t been able to find a capital provider but they’ve already got a project in mind. They’ve got the lands secure. They’ve got the permits. They need. They’re ready to break ground but they don’t have the funding to do it and we can step in and provide them with funding.
Caitlin Burrows: Got it. Okay. Thanks.
Operator: The next question today comes from the line of Mitch Germain from JMP Securities. Please go ahead. Your line is now open.
Mitch Germain: Thanks so much. John, are you — do you have a committed team? Well, it is now dedicated to these development opportunities or is it just part of the broad skill set of your acquisitions people?
John Moragne: Yes. So we have — we’re leveraging existing experience and expertise. Our head of acquisitions has done a significant number of build to suits over the course of his career. We have a 25 year licensed architect on staff that’s able to come in and provide us with really strong expertise in working through the build structure and the construction over the course of the time. And we’ve got a team that having gone through this with UNFI as well as a handful of retail sites during 2023. That’s continuing to grow their expertise. So it’s built into the fabric of our acquisitions and investment team and we’re very excited about the types of opportunities that they’re seeing.
Mitch Germain: Great. And I think you had said you’re looking at yields in the mid-7 area give or take right now, is that consistent with a — once these development transactions or these transactions may be skewed a little bit higher versus what you could be acquiring a similar asset for?
John Moragne: Once again mid-7 is really on a blended basis. There’s a handful of things that we’re looking at in that low-7 to 7 cap range annual things in the higher cap range a place that we continue to see a lot of great benefit from the build to suits in the industrial space as well as sort of regular way acquisitions is what the straight line yield on these becomes when you start building in long lease terms with the rent bumps and the rent bumps are consistently above 2% at this point, 2.5%, 2.7%, 3%. Those straight line yields on these opportunities are really attractive even when you’re talking about cap rates in the low-7.
Mitch Germain: Great. Last one for me. You reference 25% 30% of the healthcare expected sales maybe kind of extended into 2025. Was that always the expectation or did that come about from the education of marketing properties and seeing where the demand in the market was?
John Moragne: So I think the answer is both. As we — as I talked about during our Q4 earnings call, it takes a long time to run a process and get to the point where we were when we made the announcement about the healthcare portfolio simplification strategy in February. We have started that process early in 2023, work through the process internally with our Board over the course of the summer, brought on JLL and CBRE to work with us on the process in the fall. So we went into it with an open mind as to how we might be able to execute on it. But when we came out and announced the strategy to the market, we fully anticipated that we’d be able to execute really quickly on the first half the next 25%. We were looking to stretch out a little bit in the last 25%. We’re going to be onesie-twosie that we’re going to take more time. So this is exactly what we thought it was. And we started talking about this a few months ago.
