Ric Campo: Southern California is that, if you look at projected popular — projected migration from either immigration, legal immigration or domestic migration, Southern California over the next three years has almost $0.5 million — 0.5 million people leaving. And on the other hand, if you look at Texas, including Houston, we have about — the projections show around 350,000 of new migrations. So that’s one of the big things is you just have this drag on people moving out of those markets and moving into our markets. What could help Houston fundamentally is continued energy transition jobs that are happening here and continued strength in the oil and gas market. The oil and gas folks just to give you some numbers laid off about 80,000 people in the pandemic period and have only added back about 50.
So what’s happened is as they become more efficient, even though they are printing money right now, if you look at their earnings, but they haven’t really stepped up to hire people and they become a whole lot more efficient. I think Southern California has some upside, because ultimately, when you get past the COVID measures. I mean, that’s been the biggest challenge there is you have a huge gap between economic occupancy and physical occupancy almost 1,300 basis points. And part of that — and I think it’s all driven by the fact that in California, you don’t have to pay your rent, and so, ultimately, when that clears then which hopefully they extended it to the end of May or end of March in terms of restrictions. But, hopefully, once that ends, you will have a positive situation where you will be able to kind of run your business like a business.
Today, we can’t get our real estate back and people smile as they live free and drive their BMWs and Teslas and feel pretty good about the world.
Nick Joseph: Thanks. I appreciate that. And then just on your opening comments on the transaction market, you mentioned the wide bid ask spread and kind of having some patients. Where would you by today, I guess, from a cap rate or an unlevered IRR basis, what would you be comfortable underwriting and transact and if the seller was willing to do it there?
Ric Campo: Yeah. The cap rate side is kind of hard to peg, because the question will be whether — what we think the upside of the property is, a lot of times in five properties they are pretty poorly managed using revenue management wrong in a long-headed way, and we can create a lot of value from that. So we find properties that are stressed, you may be buying by the pound, not the cap rate and then we will be able to drive the cap rate up. In terms of unlevered IRRs, we have increased our unlevered IRR hurdles by at least 100 basis points, so given our cost of capital rise. So we would be looking at for acquisitions in the $0.07 kind of plus range on levered IRR basis.
Nick Joseph: Thank you very much.
Operator: Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.
Austin Wurschmidt: Hey. Good morning, everybody. Alex, I believe you referenced a $1.5 negative impact to fourth quarter FFO from lower rental assistance and I was wondering if you expect any additional impact going forward and just what you are assuming for net bad debt for this year in your guidance?
