Operator: Our next question comes from Caitlin Burrows with Goldman Sachs.
Caitlin Burrows: Maybe somewhat related to the last question. But on the development yields, it looks like today, they’re expected to be 7.2% for the under construction set of properties which is up from like 6.5% a year ago. So how are you thinking about your cost of capital today and what yields are required to make development attractive? And I guess to what extent is that impacting your activity?
Peter Baccile: Yes. Thanks, Caitlin. So sure, the cost of capital has certainly gone up. When we look at that though and compare it to what we think we need to make to make reasonable margins and profits here, the yields on new developments need to be north of 6.5%, expected IRRs north of 8.5%, closer to 9%. And our — on a weighted average basis, our pipeline projects hurdle those returns. So we’re excited about the opportunity. As soon as we’ve digested more of this additional supply coming to the pipe nationally, we’ve got a lot of great projects that are ready to go in the best markets in the country.
Caitlin Burrows: Got it. Okay. And then maybe on the acquisition side. I know it’s historically not been as much of a driver for you guys and transaction volumes are down significantly this year across CRE. But are you seeing any attractive acquisition opportunities come to market? Or do you expect attractive opportunities to come up, either of stabilized properties or even lease-up properties?
Peter Baccile: I mean, economics certainly make a difference in terms of what’s attractive. But Joe, do you want to talk about some of the things you’ve seen and the reasons we’ve taken in the past?
Jojo Yap: Sure, yes. So we’re going to look out for those. We’re trying to see further stress in like merchant developers or owners or middle of their projects or need capital or just sellers who want to get our real estate. The reality is that there’s not a lot of those that fit our quality or geography. And in those situations that meet our geography and — it doesn’t meet our financial criteria, meaning that there are some buyers who are still acquiring real estate at prices don’t make sense to us. But there are a few small ones we’re in. We have a situation where a developer didn’t have the funds and that they kind of good build-to-suit. We’re stepping in and we think that’s a great deal. And then we have another situation, not a large deal, a one-off where the developer needs to fund their speculative project and suddenly they lend their folder [ph] the commitment unless the — this developer comes out with more equity.
And so we’re buying 1 of their buildings that are nice building lower — much lower price because they need to squeeze out equity on that very, very quickly. So those are just examples of what we’re trying to look for.
Caitlin Burrows: Got it. And just to clarify, those are things that you’re looking for or have already been like decided on and are moving forward?
Jojo Yap: I can’t really give you much more specifics as those are…
Peter Baccile: We’re pursuing. We’re pursuing.
Jojo Yap: We’re chasing it.
Peter Baccile: They are not by any means — we may not get it. But we’re pursuing.
Operator: The next question comes from Todd Thomas with KeyBanc Capital Markets.
Unidentified Analyst: This is A.J. [ph] on for Todd. Just going real quick back to the capitalized interest discussion. You said that you stopped capitalizing interest when development is completed. As you look at your construction pipeline today and everything under construction, do you see any potential delays or anticipate any delays for what’s currently supposed to be delivered over the next few quarters?
Scott Musil: I would say that’s our best thinking as of this point of time. So if you’re asking about developments under construction, we’ve got estimated building completion in our supplemental. That’s our best thinking at this point in time that that’s when those developments will be completed.
