Scott Brinker: I mean they’re better. I mean contract labor is down 70% from the peak. So I mean, things have improved. But part of bringing that number down is just paying workers more. So despite the headlines around labor, I think for the most part, the service level employees making $20, $25 an hour, that’s still a very competitive market. So we have seen contract labor come down, but certainly, there’s still pretty strong cost inflation, utilities, food insurance. So our margins are improving. We’re a couple of 100 basis points higher in the fourth quarter than we were throughout 2022 as we recapture occupancy. Pete mentioned, we’ll get a big rate increase this year, but some of that gets spread out because the residents a lot of them are on anniversary date increases as opposed to January 1.
Nonetheless, we’ll get good rate growth over the next year, but margins aren’t going to reflect all of that improvement in rate and occupancy. And then just last point is, I think you know this, but that cash receipts continue to be really strong and far exceed what we’re able to recognize in earnings is about $22 million in 2022. So when you think about year-over-year growth rates in both 2022 and 2023, our actual cash results are a lot stronger than what we’re able to recognize via gap because of that entry fee amortization model.
John Pawlowski: Yes, understood. Thanks for the time.
Operator: The Next question comes from Aditi Balasandran with RBC.
Unidentified Analyst: One general question for me. But given that life science demand appears to be normalizing and supply will likely pick up in a few of the major costs, what is your expectation of market rent growth in 2023 and 2024?
Scott Bohn: This is Scott Bohn. I can take that one. So in 2022, we saw rent growth kind of across all three markets in the mid-single digits. I’d say pegging bank growth in 2023 is probably a bit challenging as we sit here today, given the macroeconomic environment. We do see rents doing well currently with minimal concessions on goodwill located products, properties in A locations with experience life science sponsorship continued to perform well from a rent standpoint, this type of product that and always will capture the bulk of the tenant demand. So I would say any slowing in the market persists, there will be probably more of an impact on rents in secondary markets or submarkets, Thankfully, we don’t really have much of that product is really any of that product in the portfolio. So really more anecdotal they are from other landlords and brokers. But I think things will generally hold up pretty well in 2023 and good product.
Unidentified Analyst : Great. Thank you.
Operator: The next question comes from Dave Rodgers with Baird. Please go ahead.
Daniel Hogan: This is Daniel Hogan on for Dave. I just wanted to ask, you mentioned balance sheet strength being a big positive. I was just curious about with the remaining swap from the new debt versus commercial paper, do you intend to do anything that along those lines in 2023? Or is that just reserved for if short-term and long-term rates continue to move further apart.
Scott Brinker: Yes. I think I understand the question. If you think about our commercial paper rate, we look at the forward curve for 2023 and that’s what’s embedded in our guidance, and that translates to around 5.5% average rate for the year. Could we do better than that in the bond market today — think we could. So, that is the plug in there is worst case. We would draw down on our line to fund any debt needs we have for the year, but we certainly could look to access the market inside of that rate, and that’s something that we are actively looking at. So while we have no capital markets risk because we don’t need to do that, we certainly could have an accretive opportunity as the year progresses to do some permanent financing inside of that.
Daniel Hogan: Great. Thanks. Helpful color.
