Scott Brinker: Yes. I mean I’ll do my best, but some of it is anecdotal just because not much is actually closed, but I still think it’s directionally correct. But like the assets in durum at a 5 cap relatively small portfolio at $113 million. It’s an unlevered buyer that we’ve done — they’ve done a counterparty of ours in the past. So we know them well. But we had signed a 10-year lease extension with Duke a couple of quarters ago. So there’s really not much more work to do in collecting rent. And it’s a 3-ish percent escalator on top of the 5% initial cap rate. So when I said earlier, the unlevered IRR expectations for the highest quality product in our segments was probably started with the 6%, plus or minus 6% a year ago, that’s probably more like plus or minus 7% today, and that seems to line up with the type of price that we got in Durham.
Now we do think that it was a strong price just given the environment that maybe a buyer was willing to pay a bigger price for what’s deemed as a kind of a low-risk collective rent type investment.
Vikram Malhotra: Thank you.
Operator: The next question comes from Rich Anderson with SMBC. Please go ahead.
Richard Anderson: Thanks. I think I’ll just wait 30 seconds to ask my question because I like that anticipation with Juan. So on the acquisition versus development conversation, I may have based on this, but I understand the spread is making it more interesting on the acquisition side. and you have some cost to capital advantages and so on. But is the spread also narrowing because of just the general cost structure of development still because I would have thought that, that would have been a conversation last year with costs sort of starting to moderate now. I just want to get a sense of what driving that declining gap between acquisitions and development? If I can have more detail on that. Thanks.
Scott Brinker: Yes. I’m happy to take that one. Rich, I mean, what’s driving the change in acquisition cap rates is just cost of capital. Risk-free rates are obviously a lot higher, which is changing return expectations for equity, LTVs are down, cost of borrowing is up. So that one is pretty straightforward, as I’m sure you appreciate. On the development side, costs have been up 10% or more for a couple of years in a row now, just given supply chain issues and a lot of demand. As a result, the cost to build continues to climb. And rents for a while we’re keeping up, if not exceeding the change in construction costs, but that’s obviously starting to change a little bit in 2023, which is putting some compression on return on cost. Now obviously, it’s cyclical. So both of those things will change over time. But from where we sit today, that’s the dynamic that we see in our two core businesses, Rich.
Richard Anderson: Okay. Great. And then another follow-up on the UPREIT conversion. Is that — I know — the question was have you missed on some things and perhaps this is sort of a rainy day opportunity or optionality for you down the road. But maybe more real-time or near term as well. Are you seeing more UPREIT potentially OP unit type of deals in medical office versus life science, I imagine it’d be more on the medical office side, but maybe you could just sort of give some color on that in terms of the opportunity set using the UPREIT structure.
Scott Brinker: Yes. I think that’s more likely, Rich, it’s certainly possible we could see it in life science, but it’s more likely to be applicable to individual owner, a small group of owners, which, generally speaking, that’s going to be more in medical office. It tends to be more the institutions that are doing the big life science projects. But there are examples that we could envision OP units being used for life science as well.
