Alec Brackenridge: Hey Steve, this is Alec. Yes. So, our cost of debt is somewhere around 5%. We would expect a cap rate to be close to that or above that. Longer-term, we’d look at an unleveraged IRR of about 8%. And that’s really hard to find in today’s market. There are a few opportunities here and there, but largely, sellers are still hanging on to a 4.5% to 4.75%, which is just hard to make the numbers work. And as I said before, I think there might be a little movement on that end. Harder still is the development yield. And if you’re thinking that stabilized properties are pricing at around of 5, then development really should be around 6, and it’s hard to get to that number with costs continuing to escalate, not as fast as they had been,, whereas they used to be escalating at say, 1% a month, now probably closer to 0.5% a month, but they’re still going up and getting from a 5 to 6 is a pretty heavy lift.
And most deals prior to the rate hikes were price — development deals pricing out to about 5% to 5.25%, and that was a nice spread when cap rates were below 4%. Obviously, that’s not the case anymore. So getting to a 6% is a heavy lift. And there’s just so much that can come out of the price of the land because land is typically, say, 10% to 15% of the entire deal. So it’s a heavy lift to get to there.
Operator: And we’ll take our next question from the line of John Kim with BMO Capital Markets. Please go ahead.
John Kim: On the subject of bad debt, given the resident relief funds are likely not going to be there as much this year. Can you just clarify what your bad debt was in 2022 on a gross basis versus where you think it is going to be this year? We calculate it at 2.3 going to 1.9, but I’m sure there’s other factors in there. So I just wanted to clarify that with you.
Bob Garechana: Hey John, it’s Bob. No, your math is actually pretty accurate. So page 13 kind of gives you a perspective. We were 1% net. When you add back the $32 million that is — and the math that you probably did to the bad debt, that does work out to, I would have said, 2.25% as a percentage of revenue. And then when you move forward based on the drag on same store, we get to like around 1.90, a little bit closer to 1.85 as a percentage of revenue on that. So you guys have got it triangulated correctly.
John Kim: Minor miracle. So, where do you see it going in €˜24? Are you saying it’s normalizing, where does it go back to normal levels? Can you remind us what that is?
Bob Garechana: Yes. So, normal would have been around 50 basis points, would have been kind of typical. And we still do think that that is given the quality of our resident base, et cetera, that that is the likely long-term outcome. And as I mentioned in my remarks, just to be fair, too, it is very difficult to forecast kind of the projection of how fast this improvement that we have seen even outside of rental relief will come. We’re hopeful that it’s faster than what we put in the numbers, and that could get us there quicker and closer to that 50 basis points faster than what are in the numbers, but you’re correct as to as to — it is not only a minor miracle, but it is great when math works. So your math works perfectly in that specific numbers.
John Kim: Just one quick follow-up. You said on the $800 million debt maturity this year that it needs to be refinanced in secured market. Can you just clarify on that comment? Is that because the pricing is better, or are there other factors?
