Cesar Bracho: Got it. And then one more, if I may. Like what’s the realistic time line for – to put the excess cash to work — like I acknowledge the comment to Lizzy’s question on the optionality of using to pay down debt, depending on where rates go. But just curious, I will think the priority is to grow the property portfolio. So just curious what — what’s a realistic time line to put that to it?
DJ Busch: It’s a good question. I think we look at it as a fluid situation. I mean, we’re still active in our pipeline still has assets that we would love to transact. It’s just obviously, the hurdle rate is much higher. We’re looking at using our cash to pay down a portion of our debt the same way we would look at growing our business. Now obviously, our mandate is to try and grow this business, but we have to do it in an accretive manner. So the overarching goal for this company is to grow cash flow. Obviously, we want to do that while growing scale. But I don’t see it — we try to look at it under the same lens. But to your point, shrinking the company via paying down debt with maybe portions of cash is — it’s just one option that we’re considering. But you’re absolutely right. I mean if we can find accretive acquisitions so where we can continue to grow cash flow and expand the asset base, we’ll absolutely do that. We just have to do it in a prudent manner.
Cesar Bracho: Thanks for the time. Congratulations on the good quarter.
DJ Busch: Thanks, Cesar.
Operator: Thank you. [Operator Instructions] The next question today comes from the line of Paulina Rojas from Green Street. Please go ahead. Your line is now open.
Paulina Rojas: Good morning. Your implied guidance range for 4Q for same-property NOI is relatively wide. I think that 1 month of 4Q is already behind us. And you’re not the only one — some of your peers are on the same. So my question is what leads you to keep in place this wide range? And how conservative do you think you will be with your ’24 guidance? And do you think it’s wise at this point to be conservative and think that perhaps next year we will see higher than average tenant fallout?
DJ Busch: It’s a good question, Paulina, good morning. When we think about our implied guidance for the fourth quarter, you have to think about the size of our company, we’re talking about $600,000 or $500,000 on both sides of the midpoint. So really, it’s just — if there’s any unforeseen fallout really that we can’t — that we don’t see today for the last couple of months of the quarter. And it can move the needle a little bit. But I think we’re very comfortable with the range that we’ve provided. But it is just a box here and there, not even a box, really came full of small shops here or there that as we think about bad debt in the fourth quarter. Looking forward to next year, look, I don’t think Argo or anybody in the space is [goals] to be conservative.
But I think it’s just to be pragmatic on the current environment. It’s been very resilient up to this point. I think with a lot of the opportunities that were created by Bed Bath & Beyond and maybe some of the other bankruptcies, timing is going to play a big factor next year as it relates to getting some meaningful rent back online, not only for InvenTrust but for many of our peers. And that timing will dictate how and the ability to kind of get those back online will dictate how successful next year will be. I do think when we look forward to next year, we’re going to overcome many of those headwinds because of the — our ability — our ability to push rents and the strength of — the strength of our ability to push in-place escalators, everything that we’ve been discussing, that’s going to obviously translate into or translate and transfer into 2024 as well.
Paulina Rojas: And in terms of additional tenant fallout, I know we can’t predict the future, but because of that uncertainty and everything we’re seeing from a macro perspective, is it reasonable to assume higher than average — higher than historical average for [debt]?
DJ Busch: Look, I think it’s — what’s been fascinating to me this year, most shopping center REITs have stayed within their bad debt range even with a material bankruptcy or that for many was a top 20 tenant. And then you had a handful of other bankruptcies as well. I think that’s a testament to the strength, the overarching strength of the fundamentals in the business. As we look forward to next year, without getting too much into 2024, I don’t see it being that much different. When we think about anchor risk, I feel like that’s been — that’s been minimized because of — we had some of that this year. The resiliency to small shop continues to be very impressive. I would expect that to be more normalized next year as well.
But it is something that we’re looking at. Look, the financing costs for many of our small shop retailers has obviously gone up, but the credit quality of our small shop retailers has also improved. So the strength of their balance sheets have improved as well, even though they’re facing some of the inflationary and other headwinds that are out there. So when we look forward to next year, I don’t see it being too dissimilar as we think about tenant fallout or bad debt.
Paulina Rojas: If I may, one last one. I saw you moved the project for (inaudible) to the product development. And here, you are transforming a single tenant building to multiple tenant — multiple tenant buildings. You don’t show the G&A, but I’m curious what’s the cost per square foot to do a project like this? And I think you mentioned in your prepared remarks, the cost and I couldn’t catch the details. So if you could repeat it, please, but I think you said just replacing a tenant with a senior use. And so yes, overall, you could provide an update on the cost of retenanting different types of assets.
DJ Busch: Yes. So I kind of missed the first part of your question — or the second part of the question, Paulina, but I answer the first part and then maybe you can repeat the second part. But the Sarasota Pavilion is obviously a remerchandising opportunity for us. We — the costs obviously are higher than what a single-tenant uses, and that’s not — that’s certainly not unique to us. So if you think about — and I’m just going to use very broad-based numbers, and it all depends on what you’re working with and what the initial build-out looks like. But we’re — for a single tenant use, I mentioned earlier that for many of our Bed Bath & Beyond opportunities, it’s somewhere close to, call it, $90 a square foot for something where you’re cutting it this space in half.
And like I said, it depends on the size, it could be upwards to $150 to $170 — $175 a foot. We’re still working through that math and making sure the economics and returns make sense for InvenTrust, but it’s certainly an exciting opportunity for that center. It’s a really strong center in Florida. And obviously, we’re doing it because we can get to that — to those returns that are acceptable and value accretive for us. And then if you can just repeat that second part.
Paulina Rojas: Yes, No need. I think you have articulated well and we got it. Thank you so much.
DJ Busch: All right. Great.
Operator: Thank you. [Operator Instructions] There are currently no additional questions waiting at this time. So I’d like to pass the call back over to the management team for any closing remarks.
DJ Busch: No, thank you, everyone, for joining us today, and we look forward to seeing many of you this – later this month at NAREIT in Los Angeles. Enjoy the rest of the day.
Operator: This concludes today’s conference call. Thank you all for your participation. You may now disconnect your lines.
