But we’re never going to make a change just to make a change. It has to make sense economically. And right now, we’re happy with the footprint, but we’re always analyzing it.
Operator: And our next question comes from the line of Wes Golladay from Baird.
Wes Golladay : I think there was about a $4 million increase in leases opening this year, including the $6 million that opened in the first quarter. Is the SNO opening faster, you point anything from 2025? Or is it just the new leasing that you’re signing this year that’s opening later in the year that is driving this?
Heath Fear: Yes, Wes. So, I’m sorry, can you repeat the question again? You were a little muffled.
Wes Golladay: Oh, yes. So, you have about $4 million warrant in your SNO, including the leases that opened this year. Yes, I’m just curious if that’s — the theater is obviously, and there’s going to be a small part of it. But I’m just wondering what is driving the $4 million increase in the SNO this year opening? Is it the SNO [indiscernible]?
Heath Fear: Sure. That’s all new leases, Wes. All the new leases signed up.
John Kite: Yes. That’s just new leases opening greater than the leases that — in the previous quarter.
Wes Golladay: Okay. And then you also added some new disclosure in your AFFO, the amortization of debt discount premium and hedge instruments. Is the $3.8 million a good run rate going forward for this year?
Heath Fear: Hold on one second. I have that answer right here. For the run rate, yes, it’s directional.
Operator: And our next question comes from the line of Paulina Rojas from Green Street.
Paulina Rojas : My question is about the transaction market. So, treasury yields have rebounded. Have you seen any change in cap rates given the higher base? Any change in investors’ appetite to transact, especially in the last months, really?
John Kite: No, I don’t think so, Paulina. I mean, I think, look, the reality of — we’re kind of in a place right now where the market is finding stability. So sure, the curve has changed a little bit in the last 30 days and the 10 years at 460, 470 versus 4. But the reality is, I think the majority of the investment community believes over time that, that will stabilize lower. And when you look at the rent growth and the NOI growth that people are getting, particularly if something has upside associated with it, I think the IRRs are very comfortable. And my personal opinion is as we move into next year, you probably see the 10-year begin to settle in the lower 4 range. This is just my personal opinion. And when you can buy something at a 6, that has 2%, 3% growth embedded, has some upside, that’s a great return.
So, I think probably back half of this year, you’ll probably see it accelerate even more. Again, this is all my personal opinion, but we haven’t seen anything slow down because of the volatility over the last month. And quite frankly, the fact that we’re tethered to that is unfortunate. And I wish people could look beyond that. And I particularly wish the Fed would think about a range of inflation versus one hard number that just doesn’t make sense against an unemployment market at 3.5%. So, one of these days, maybe they’ll take my advice, but not looking — looking really — I’m not betting it on drafting, let’s put it that way.
Paulina Rojas: Okay. And then you mentioned a drag on expenses net of recoveries that had to do with the timing of some of the recovery. So overall, what’s your expectation for this line item for the year? And I think the easiest way for me to see is if you expect this to be a contributor to same-property NOI growth or not?
Heath Fear: So, the expenses in the first quarter, Paulina, there were — again, this is just timing. And so, we have higher expenses. And then you’ll see a little bit, you’ll see a little bit of a dip in our recovery ratios because of the fixed CAM. But as the year goes on, we’ll see that expense normalize. So again, it was just the timing of sort of front-loaded first quarter expenses.
John Kite: Yes. In terms of — I mean, look, it’s particularly around real estate taxes. So, if you — if we have previous years’ experience in real estate taxes, it’s probably a contributor, but we’ve got to wait and see when we get into the end of the year.
Paulina Rojas: Okay. Thank you, very mush.
Operator: And our next question comes from the line of Dori Kesten from Wells Fargo.
Dori Kesten : Heath, can you talk about how the Moody’s upgrade may benefit your interest costs going forward? And just when you may look to address your 25s?
