Michael Mueller: Yes, it was basically, I know the environment, the demand picture has been pretty good. But what do you think the macro trigger is that retailers – look at it as just slower decision-making?
John Kite: Yes, you know, look, I think, I think it’s – we’re certainly in a good environment right now. I think the supply and demand you know kind of picture that we have today because there has been such a lack of supply over so many years, puts us in a position where the run rate on this is probably a little longer than normal cycles. And as we’ve talked about in the past, Michael, you know that the retailers, when they are making these decisions, these are longer decisions than an 18-month out – you know, look out forward in terms of the economy. So I think it would have to be a pretty material turn negatively to get people to slow down significantly, especially in the backdrop of a 3.5% unemployment rate, because as you – as we’ve all seen, the consumer continues to be pretty buoyant.
So I believe that, you know, we’re in a pretty good spot and it would have to be a very negative kind of economic backdrop or something else geopolitically whatever that would be a surprise. But when you look at the amount of supply that’s out there of high-quality retail and the amount of retailers that are investing in their platforms, I think it puts us in a good spot and should continue for a bit.
Heath Fear: And then Mike, on the fee income question, you know, the fee income from this year, or basically from the Hamilton Crossing project, and that one is going to be winding down as we head into 2024. However, there are potential for some other projects to commence, so we don’t have perfect visibility, so what our fee income will be for 2024, and we’ll talk more about that on our February call.
Michael Mueller: Got it. Okay. Thank you.
John Kite: Thanks.
Operator: Thank you. One moment for our next question, please. All right. It comes from the line of Linda Tsai with Jefferies. Please proceed.
Linda Tsai: Hi, just going back to bad debt on the 75 bps to 100 bps, does that reflect higher than average conservatism or is it based on a bottoms-up forecasting process? Just wondering if you had some specific tenants in mind.
John Kite: No, I think the 75 basis points to 100 basis points is just history. So when we look back and say what is bad debt typically, land. That’s where it typically lands. In terms of forecasting forward, of course, we do a bottoms-up analysis every year, when go into our budgeting season. And then when we go into our earnings season in February and give guidance for the full year, you know, we’ll give a number that we think based of both, you know – sort of our specific assumptions, and then some general assumptions will give you a sort of a blended bad debt number that we think we’re going to experience. I will tell you that going into next year, you can be assured that we’re not going to start a 45 basis points that we’re experiencing this year and that will probably start with something more conservative than that.
But yes, that’s how we basically do the – do our bad debt assumptions. So again, we’ll talk more in February but assume that we’re going to be in a more normalized number on our assumptions.
John Kite: I mean, we – obviously Linda, we do go through every month, we go through the receivables monthly. And when we’re doing our reserves, we do – we do a bottoms-up analysis of that. But when we’re looking out in the future, and we’re trying to look at normalization, that’s what this is really about it. It’s really just at some point you’ve got a normal or not have to. But at some point, it’s likely that we would normalize and that’s why we’re saying that 75 to 100, and that’s why the beginning of that would be the fourth quarter at 75 bps. But that – as we sit here at this very second that seems conservative.
Linda Tsai: Yes. [technical difficulty] really surprised that bad debt kind of came in as low as it has year-to-date. And just given the strength in the overall environment, would you expect that number or that historical number to be a bit conservative because the environment is stronger?
John Kite: Yes, I don’t know, Linda. I think, yes, were we surprised. Clearly, we were surprised, because we started out the year at 125 bps. So we were surprised. And I think even if you look at this quarter, I mean, it was – as we said it was essentially almost nothing in terms of bad debt and then we had prior period collections that continue to happen. So when you add the prior period collections to the current environment, I mean, that’s what’s creating that bad debt line item. And then certainly from a same-store perspective, but looking out, it’s really going to depend on how next year unfolds and what the economy brings. And I think, who knows, I think we’re just assuming at this point in time that we’re going to reach that normalization or that return to the mean so to speak. But who knows, it’s just hard to say, right now continue the way it is, which would be great. But we’re assuming that for purposes of numbers, that it kind of normalizes.
Linda Tsai: Thanks for that color. And then just one follow-up, what do you think leasing capital will look like in ’24 versus in ’23?
John Kite: I mean, I think if you look at where we’ve been over the last couple of quarters and you track, as we put our trailing numbers in the sup. You can see these numbers have gone up, the costs have gone up, and that’s really more of a reflection of the type of leases that we’re doing in a particular quarter, i.e. we have a handful of anchor tenants that there is a significant amount of work done in the space, that’s going to bring that number up. You know, in the following quarter, if we do a ton of renewals and not unless new deals, that number is coming down. So the numbers are a little volatile in that respect. But certainly, when you kind of think about it on a macro basis, it’s a little more expensive today than it was say six months ago.
However, the returns on capital are even higher because of the demand. So as long as we’re getting the return on capital, that’s the game, it’s not really whether our numbers 90 bucks a foot or 75 bucks a foot, it’s what’s the returns that we’re getting, and we’re extremely happy with those returns. And we’re really happy with the quality of the retailers, as Tom pointed out, you know, the different type of people that we’re dealing with, that are backfilling these boxes are just great. So it’s a pretty darn good situation right now.
