Mitch Germain: Great. Thanks a lot. Good quarter.
John Moragne: Thank you.
Operator: The next question today comes from the line of Ki Bin Kim from Truist. Please go ahead. Your line is now open.
Ki Bin Kim: Thanks. And just going back to the last question on the additional 20% of healthcare assets that you might look to sell. Any sense of what the cap rate range might be?
John Moragne: Similar to the first half.
Ki Bin Kim: Okay. And going back to your comments about consumer health and maybe the impact on inflation that certain retailers might be feeling. I know you went through a list of some of the credit risk that you see today, but do you see other restaurants or retailers that are perhaps kind of getting closer to that red zone where you have to worry more about them?
John Moragne: Consumer discretionary industries like restaurants, casual dining, some retailers wherever else are absolutely focus for us right now. The ones that we talked about are the ones that are at the top of our list for things that we’re concerned about. And it’s sort of an obvious list that we’ve been talking about for a little bit here. But there still continues to be some resiliency. Our rent coverage ratios are still strong. You saw us announce more than it was 3.2%, I think, for this quarter for our restaurant assets. The retail stuff continues to perform generally well. They are experiencing some pressures on a corporate basis, but our sites themselves continue to perform well, and that gives us a lot of confidence.
Ki Bin Kim: And you don’t have a ton of lease expirations this year or next year, I think, 80 basis points this year and then 1.6% next year. Any early indications of renewal probabilities for those type of tenants?
John Moragne: For this year, we’re really pleased with it. On an aggregate basis, we’re north of 100% rent recapture on those. So some good assets that are rolling that had below-market lease expirations. Next year, we’re starting to work on it now, but no direct line of sight or absolute view as tenants are going to continue to work on those right up until they make the final decision.
Ki Bin Kim: Okay. Thank you, guys.
John Moragne: Thank you.
Operator: [Operator Instructions] The next question today comes from the line of Ronald Kamdem from Morgan Stanley. Please go ahead. Your line is now open.
Ronald Kamdem: Hey. Two quick ones. Just starting on the guidance raise on sort of the redeployment timing and so forth is really interesting, but trying to figure out what’s the bad debt assumption in the guidance that did change at all? And to be a little bit more specific, curious about Red Lobster and what sort of contemplated in that bad debt number?
Kevin Fennell: Hey, Ron, it’s Kevin. I’ll take the first part and John can take the second. But we started the year with 75 basis points of cash revenue, which we did last year as well. We hold that throughout the year. And so as you saw, 15 basis points for the quarter, operating inside of that, and we’ll certainly update as the quarter rolls forward or the year rolls forward.
John Moragne: And on the Red Lobster point, we’re actually monitoring that. I mean, it’s certainly in the news, anticipated bankruptcy. They haven’t done it yet. But we’ve gone through and evaluate our portfolio every single quarter for the last few years. As we talked about a handful of times, we reduced that exposure from 25 assets down to 18. When we first initiated that position in 2016, it was 4.5% of our ABR. It’s 1.6% today. Some of that’s attrition from the growth in the portfolio. Some of that’s from us being able to sell it off. We’ve got a really strong real estate, about two times coverage across the portfolio. The real estate is performing well there. With the Red Lobster on a going forward basis, it’s going to need — real estate to be able to operate the restaurants and get people in the door, and we think that we offer that to them.
But even if we’re just looking at it from investment from our standpoint, we’re $0.82 on the dollar out of these, including the one Red Lobster that we sold at a mid-6 cap rate in Q4. So it doesn’t take much for us to get our money back out. We’re out in the business of just making our money back though, and we expect that there’s going to be plenty of opportunity here into the future. As I’ve said a handful of times, we’re cautiously optimistic about where this goes, even if it goes through a Chapter 11, improve to not have the jobs to be able to manage casual dining in the continental United States, and someone’s going to see good opportunity here with a strong brand, strong real estate, strong historical performance, and they’ll be able to take it over and be able to do something with it.
So, I feel good about — we’re cautious and optimistic I should say about where we’re headed.
Ronald Kamdem: Great. And then on the portfolio simplification, obviously, a big chunk of it got done, so nicely done. With the sort of move in rates, does — could the timing slip a little bit or do you have sort of enough line of sight where you do feel like you’ll be below that 10% by the end of the year or potentially?
John Moragne: Yes. We’re pretty confident we’ll be below 10% by the end of the year. With the next 20%, 25%, having a good line of sight to where that’s headed, that gives us a lot of confidence. And then as we work through the rest of the portfolio on a individual basis, we think we can get there pretty confidently. And then we’ll take our time with the rest of it. As we said, focus there is often with disposition outcomes and not just sort of pushing them out the back of the truck.
Ronald Kamdem: Great. Thanks so much.
Operator: The next question is a follow-up question from Caitlin Burrows from Goldman Sachs. Please go ahead. Your line is now open.
Caitlin Burrows: Hi. I don’t know if you’re suggesting this might be something more for the second quarter call, but I was just wondering if you could talk about the retail deal for a little bit kind of how it came to be? It seems like a different kind of unique strategy in terms of, I think, also the wording in the press release is that you invested or something rather than acquired. So invested in that property, it seems like you’re generally like keeping the outparcels and then we’ll be ground leasing the rest of the retail center. But could you just kind of talk about how that came to be and if that’s something you’d be interested in doing more of?
