Bryan Maher: Okay. And maybe sticking with Alfonzo for a minute. When you’re looking at your pipeline after announcing this deal, how deep would you say it is realistically maybe in a dollar number? And are you seeing any meaningful narrowing of the bid/ask spread?
Alfonzo Leon: Yes. So, two parts to that question. I mean, the first part is, I mean, the market has continued moving towards higher yields, and it’s interesting to look at the market from two ways. One is single tenant — sorry, single asset sales and portfolio sales. And what’s been interesting is there’s been actually more interesting opportunities in portfolios. There’s been fewer opportunities than they were a few years ago, but the ones that are available are interesting situations where you’re actually getting pretty attractive pricing and you get the efficiency of being able to transact a lot of properties at once, which is always great. And historically, that’s not been the case. You always have to pay a premium. So, we’re taking advantage of that situation in the current market.
In terms of the bid/ask spread, at the beginning of the year, my sense was that we started narrowing that bid/ask spread. And I think part of what has evolved is that a lot of the owners of medical office properties were hoping for Fed rate cuts towards the end of the year, and we’re hoping for a stronger pricing at the end of the year. So, you asked me the question a month ago, it would have been different. I feel today the bid/ask spread is at a minimum, not decreasing and maybe in some instances, widening as a result of no Fed rate cuts in the second half of the year. Having said that, though, I think there’s a lot of owners of medical office that have been, in a sense, kind of holding their breath and hoping for better pricing. And what I’m expecting and what I’m seeing is that a lot of these owners are increasingly more amenable to taking pricing that is — has not been available for buyers for a long time.
So, at this point, a lot of the stuff that is trading is in the low to mid-7 caps, and there’s increasing numbers of opportunities in the high 7s and I’m beginning to see opportunities also in the low 8s. And I expect that to continue to improve, and I expect increased opportunities for us going forward, just given where things are trending.
Bryan Maher: And how deep would you say your acquisition pipeline is $50 million, $100 million, $200 million?
Alfonzo Leon: Hard to gauge, again, because some of these are portfolio of opportunities. And so I’ve seen opportunities in the $10 million, $20 million range and I’ve seen some in the $50 million range. But I’d say going into 2025, I think $50 million to $100 million in potential acquisition is a reasonable number.
Bryan Maher: That’s helpful. And maybe just last for me for Bob. Your weighted average maturity on your debt is kind of like, I think you said 2.7 years. What are your thoughts on terming that out? I suspect your answer might be you want to wait a little while to see what happens with interest rates. But can you give us a little color there? And that’s all for me.
Robert Kiernan: Thanks Bryan. Yes, that is really the short answer. It’s just kind of putting some of the volatility in the market subside and we do still have that kind of 2.7 years to work with and to work with that time and again, being in a consistent context and discussions with our banks relative to opportunities, but to be patient on that front.
Bryan Maher: Thank you.
Operator: [Operator Instructions] The next question will be from Wes Golladay from Baird. Please go ahead.
Wes Golladay: Hey, good morning guys. You mentioned potentially selling some assets to fund the acquisitions. What type of cap rate are you looking at for the disposition?
Alfonzo Leon: No–
Jeffery Busch: On — we traditional — Alfonzo, you go ahead.
Alfonzo Leon: Yes. So, we’re looking to try to get the best pricing we can and so we’re looking for things in the low 7s.
Wes Golladay: Okay, fantastic. And then you did mention you’re looking to release the Steward asset based on the demand, it looks like you had pretty good demand there. How quickly could you turn the asset? And what type of carry costs will you have in the meantime?
Alfonzo Leon: Trying to understand that question. You want to understand how quickly we could release it?
Wes Golladay: Yes. It sounds like you have demand. So, assuming they say they reject the lease in a few months, do you have a tenant close to signing a deal upon a rejection of a lease and then you build out the space for a few months? Or just trying to get a sense of how long you can — based on the demand that you’re seeing for the space, how long — how quickly you can re-lease the space. And in the meantime, the could be picking up a little bit of the OpEx cost over the near-term for a few months?
Alfonzo Leon: Sure. Yes. And so it’s always hard to predict, but I mean, the interest was quick. So, shortly after the announcement was made that the facility was available, we got interest from a number of parties that expressed strong interest. And the conversations went pretty quickly as well. But it’s hard to gauge. I mean, it could be very soon that we are finding ourselves negotiating a lease or it could take a few months for us to be in that position, hard to say. But the interest seems sincere and the conversations have been very positive. I’d say on the other end of having a deal signed with a prospective tenant, again, not clear exactly how long it would take for them to occupy the space. I mean one of the things that we’re discussing is how exactly are they planning on using the space and what exactly the changes need to happen at the facility for that to happen.
