John Thomas: Yes, Juan, this is JT. Yes, just to add to that, in the six largest overlapping markets for outpatient medical, PEAK’s always had a great high-performing team and organizational structure and approach to boots-on-the-ground operation property management. We have DOC team members in each of those large markets already, so there’s just a lot of synergy and scale that’s already — we can put in place day-one, and we’ll be working during the process towards closing to get that plan in place, and assume those responsibilities together day-one. And then, there’s many more markets to come. So, just a lot of upside opportunity, both financially, but also as Scott said, to get people just connected to the real estate.
Juan Sanabria: And then just a follow-up, maybe a little two-parter here, is the exchange ratio fixed or is that variable? And then is there any planned dispositions or exit of any markets with the combined companies?
Scott Brinker: So, the exchange ratio is fixed. And in terms of dispositions, it would only be opportunistic. The balance sheet’s in great shape today for both companies. It will be even stronger post-closing. We have a very high-quality portfolio. We toured the vast majority of DOC portfolio and feel the same. So, anything we do would be opportunistic. There’s no forced sales as a part of this transaction, given the strength of the balance sheet. But I did make comments in my prepared remarks that we would expect to be more active in capital recycling. So, doing things opportunistically, whether it’s outright sales or recaps with joint venture partners, we do think that we’ll be a partner of choice to the private capital community as well.
We already have a number of those relationships, and we think we could have more as we see a significant pipeline opportunity, as I described, really across the lab and medical business. And if the stock is not trading at a creative level, we could certainly look to recycle assets to capitalize that growth pipeline.
Juan Sanabria: Thank you.
Operator: Our next question comes from a line of Vikram Malhotra with Mizuho. Your line is open.
Vikram Malhotra: Thanks for taking the question and congrats on the deal. I guess this first one, when two of your peers merged, one of the theses was that this creates a much larger acquisition opportunity set, and theoretically the AFFO FAD growth is higher. I think there was a 500, 600 basis point number at that time. Is that part of the rationale here? Do you see a bigger acquisition set and just ultimately higher — you said steadier growth, but I’m curious if you also see higher growth?
Scott Brinker: Yes. Well, certainly on the external growth front, we do think that our balance sheet will be even more attractive to lenders, so our cost of capital should benefit. Clearly, our G&A as a percentage of assets will go down, so our cost of capital should improve. Hopefully, the market responds to the strategic benefits of this transaction and our cost of equity improves as well, so certainly we would expect that the external growth opportunity will be more attractive given the DOC relationships and the Healthpeak relationships on top of that improved cost of capital, but that’s not part of any of the accretion or synergy numbers that we’ve outlined. That would be all upside.
Vikram Malhotra: Okay. That’s helpful. I guess just one more, just following up on the whole, I guess the off versus on campus, part of what you mentioned is that the strategy, the consumer, the hospitals are going more off campus, but I guess that could be — that has been going on for a while, so I’m just sort of wondering why today, and as part of this, do you still see, you mentioned disposition, so do you still see a path where more of the dispositions are off-campus weighted?
Scott Brinker: No, it would just be opportunistic. Vikram, it’s not going to be by design, but I think really from day one, 12 months ago, this management team has described the desire to have a wider playing field. If we’re not servicing our tenants and health system partners in the medical business, we’re not going to be — we’re not going to find maximum success, and just given the emphasis of their strategy and growth plans, we have to be a participant in that.
Vikram Malhotra: Okay. So, I guess just to clarify, the dispositions would then still be like more broad-based, including potentially the CCRC that you’ve always had on that list?
Scott Brinker: Yes, I would put CCRCs in a totally different bucket. That’s a business that is performing well. We think it’s a great asset class. We’ve got a great portfolio and internal team running it, as well as a great third-party property manager in LCS, so the feedback and strategy on that portfolio hasn’t really changed. When the financing markets make sense and we get a fair price, that’s one that we’d be willing to sell and recapitalize or recycle into our core businesses, but on your specific point about on versus off-campus or lab, that will just be completely opportunistic. Wherever we get the best pricing is where we would look to try that.
Vikram Malhotra: Okay, great. Thanks again, you and John and both teams.
Scott Brinker: Thanks, Vikram.
Peter Scott: Thanks, Vikram.
Operator: Our next question comes from the line of Rich Anderson with Wedbush. Your line is open.
Rich Anderson: Hey, good morning. So, congrats to everybody. You’re making it clear no one’s buying the other and so on, but the fact is Healthpeak is issuing, if my math is right, 168 million shares. If I’m also doing my math right, the implied cap rate on DOC is in the quarter low to mid-sevens, and so if you do a cost of equity, if you just do an inverse of your AFFO multiple to keep it simple, it’s kind of nine-ish. So, I guess the question is, you need that 40 million of synergies to be able to talk about accretion. Without it, it is at least marginally diluted out of the gate to Healthpeak earnings. Is that a fair mathematical approach?
Peter Scott: I’m not sure. There was a lot there, Rich.
Rich Anderson: I’ll do it again, if you want. 168 million shares, implied cap rate on DOC of 7.25, 7.50 something like that. So, based on those two forces, it’s diluted without the synergies, correct?
