Scott Brinker: Yes. We are at 85% occupancy today. I would think we could get back into 90s. In that portfolio, it’s performing well. We have got good assets, mostly in Florida, obviously, favorable supply/demand. In that market, for seniors, we have got a really good operating partner. In LCS, we have got a really strong internal team overseeing it. So, we are not in a rush. At the same time, it really has no strategic overlap with our medical and lab businesses, which are highly complementary, same process and procedure, etcetera. So, at some point, I think we will recycle. But to my comment earlier, would be price sensitive. We don’t need to do anything. It’s performing fine. We have got the team to run it, but the capital markets have just been too tight and soft to transact on a portfolio of that size, but we will see if things start to open up in 2024.
Jim Kammert: I appreciate the color. Thank you.
Operator: Your next question comes from the line of Joshua Dennerlein with Bank of America. Please go ahead.
Joshua Dennerlein: Yes. Hey guys. Appreciate all the color around guidance. One quick question on that, I think you – I think if I heard correctly, you are including DOC in your same-store medical office NOI outlook. If you strip out DOC from the 2024 same-store pool, what would the same-store MOB NOI growth look like?
Scott Brinker: Yes, hard to say. We are getting the benefit of the internalization in the PEAK portfolio that we obviously would not have done absent the merger, so it comes hard to parse the two numbers. But I think we said historically, DOC has lower in-place escalators than Healthpeak, but that’s converging over time as they sign new leases with, as John said, 3% or better escalators. So, I am guessing it would be a little bit lower, but not materially. I think they have said numerous times, their growth rate in 2023 was impacted by some unique asset specific events and proactive termination. So, I would expect our growth rate to mirror or closely mirror the Healthpeak growth rate going forward.
Joshua Dennerlein: Okay. That’s helpful. And then maybe one different kind of question, just you mentioned the stock price, you are not happy with it, just kind of curious for your appetite for stock buybacks here.
Pete Scott: Yes. We did buyback some stock, albeit at a higher price 1 year, 1.5 years ago. And I would say that the response from the Street was pretty unenthusiastic to that. That said, we do put an authorization every quarter for stock issuance or buyback with our Board. And we are not at a level, I think today, where we buy back stock, but certainly, it’s something that we are paying attention to. We are certainly a long ways away from a level where we even consider issuing equity, which is why we are talking more about capital recycling. So, we have a buyback program in place. We don’t need to file one. We still have $400-plus million of buyback we could do, but we are not going to look to lever up if we ever bought back shares, we would look to do something through capital recycling. But I think I would probably just leave it at that, Josh.
Joshua Dennerlein: Okay. Thanks guys.
Operator: Your next question comes from the line of Mike Mueller with JPMorgan. Please go ahead.
Mike Mueller: Yes. Hi. I know there are some moving parts with properties that are going into redevelopment. But can you give us a little more color, unless I missed it, in terms of the lab same-store NOI, what’s embedded in there for occupancy and spreads for ‘24 compared to what you did, especially when the spread tightened in ‘23.
Pete Scott: Yes. Hey Mike, it’s Pete. I will handle that. So, obviously, our outlook is 1.5% to 3% positive. What are the positive drivers within that, I mean obviously, you have got rent escalators, which tend to be on average in the low-3s. we have got some positive mark-to-market embedded in there on lease renewals that we do get done. And then as we have said, there is a little bit of internalization benefit as well. So, I think if we just stop right there, we would probably be 5% plus from a same-store growth perspective, which actually would kind of mirror what’s happened over the last 10 years. That said, there are some offsets, which I think are pretty well known. We have got average occupancy will probably be in the low-96% area.
So, you compare that to where we were last year. That’s probably 100-plus basis points decline, so a modest decline, but nevertheless a headwind. The free rent that I mentioned, some years, it’s up, some years, it’s down. It’s up this year, but it certainly is a little bit of a headwind as well. And then as we always do, we have a little bit of bad debt cushion in order to provide ourselves with a little bit of flexibility depending upon what goes on within our tenant portfolio, that certainly improved pretty significantly year-over-year, but we still do include a little bit there. So, when you take all the positives and you take all the headwinds kind of blends out to that 1.5% to 3%. I know it’s not what it was for the last 10 years, but our stock price is also not where it was a couple of years ago as well.
So, it’s certainly been factored into, I think our valuation at this point of time.
Mike Mueller: Sure. And maybe one follow-up, talk about positive spreads. Would you think that the spreads would be closer to what you were showing in ‘24 – fourth quarter ‘24 or full year ‘23?
