Kris Douglas : Yes. As we start looking at the end of ’23, it does come a bit once again back to interest rates. But we — as I mentioned, the $0.41 doesn’t have any expectation of changes in interest rates, but it also doesn’t have any growth in the underlying portfolio, which is meaningful. So our expectation is we get to the end of the year that we should be able to outpace the pressures on interest rates that would have us ending ’23 and a higher, better run rate position than we’re entering the year.
Mike Mueller : Got it. Even with net dispositions?
Kris Douglas: Yes, because we’re looking at those dispositions to fund some marginal acquisitions as well as our development.
Mike Mueller : Got it. And then on the development, it looks like you have about $350 million of starts slated for the second half of the year. I mean how should we think about as you move into ’24 and ’25 in terms of starts — annual starts?
Rob Hull : Yes. I think if you look at our prospective pipeline, you’re right, it’s about $350 million. There’s about $200 million of that, that we’ve slated to — expect to start second half of this year. So if you combine that with the existing pipeline of $235 million, there will be some of those that are rolling off, but we think that going into 2024, we could have six new starts towards the end of this year. First of next year, roughly $200 million. And that would equate to a funding run rate of moving from $25 million to $30 million per quarter this year, up to about $50 million per quarter next year. So we’re optimistic on those projects and pushing them forward and having a great dialogue with all of the prospective tenants and health system partners.
Operator: We now have Tayo Okusanya from Credit Suisse.
Tayo Okusanya : Yes. Kris, you just — your response to Michael was helpful to kind of talk through how the FFO run rate will build up in ’23. But when I apply that same logic to kind of how FAD should build up in ’23, I mean does it not imply that at some point you do end up meaningfully at kind of a dividend coverage above 100%, especially kind of given you were at 100% in 4Q? There’s a dilutive impact from a full year of asset sales. There’s probably still rate pressure going forward. You have forecasted a decent amount of recurring CapEx, TI leasing commissions as you kind of lease up the portfolio. So I’m just trying to think through that as well in the context of Richard’s earlier question about dividend policy.
Kris Douglas : Yes. As we’re looking at it, I think the same fundamentals that we’re talking about being able to drive improvement and overall growth of the operations that we’re seeing, that will flow through to FAD as well. As I’ve said in my prepared remarks, is the expectation for the year, we’ll probably be in the in that high 90s on the payout ratio. And as Rich said, does that in any particular quarter because the CapEx spend is not as smooth as earnings are. And so you are going to have some variation in any quarter. Could you be over 100% for some period of time? Yes, that’s possible. But as Todd kind of pointed to, we don’t see that as concerning, especially if that is being driven by additional capital spend for absorption, which is really growth capital.
And so plus or minus any one quarter depending on how you’re running your models, that would not be surprising, but we still feel like long term directionally with what we’re seeing in terms of internal growth, that we’ll be able to balance out this year as well as drive that payout ratio lower in the future.
Tayo Okusanya : And that high 90s number just for clarification, is that an average for ’23 or that’s the year-end target?
