Steven Hamner: All very good questions. The buyers today, even in this rate environment, include operators, for example. And again, you have seen even in the last year, we have sold facilities back to Prime, for example, and others. Sovereigns, who remain interested, probably weighted more toward Europe and higher acuity than the U.S. at this time, but in the U.S., in particular, infra funds and other managed assets that, again, as I alluded to earlier, aren’t IRR determined. So by that, I mean in order to make an attractive investment based on their return requirements, they don’t need to load up on high rate secured debt right now. So, those are the buyers. And when combined with that level of demand with real estate assets that, I mean this is not like office or retail that has really structural some would say even existential issues about keeping occupancy and rate.
Hospital assets are long-term, well-covered absolute net leased with inflation protection and is drawing a significant amount of attention. So, even in this rate environment, we are not seeing the kind of discount demands or lack of a market even that other types of real estate are having.
Vikram Malhotra: Okay. That’s helpful. And then just one last if I may, just given you have had a bar in the last year or so, you have had a multiyear period of growth – external growth and now you are sort of switching more dispositions, reducing the leverage. From incentives to, I guess senior management or leadership, do you envision or how perhaps maybe the hurdles for LTIPs or just other incentives may change as the strategy is changing going forward?
Steven Hamner: Well, it does change and it has changed. And of course, when we file the proxy in the coming months, you will see that even in 2023, there were meaningful changes in what the Board is incentivizing management to do. There is no longer aggressive accretive growth that we successfully executed in earlier years. That’s certainly not going to be what you see in the proxy that describes the 2023 plan. And I doubt very seriously that when the compensation committee gets together to look at 2024, you will see a continued evolution towards fixing, assuring a good strong balance sheet and a return to access to affordable capital because the market we are in remains, in our view, very, very attractive. The attraction to all of the buyers that I just described, whether it’s operators or sovereigns or infra funds or pension funds continues to be drawn to these types of assets.
And part of the reason for that is their continued performance vis-à-vis other types of real estate when you consider – if you consider and you have to believe this, that these truly are critical community assets that will remain occupied and operated by competent hospital operators. We are eager to see a return to affordable capital, so we can continue to participate in that. And as Ed mentioned earlier, actually restart growth at the appropriate time.
Vikram Malhotra: Great. Thank you.
Operator: The next question comes from Jonathan Hughes of Raymond James. Please go ahead.
Jonathan Hughes: Hi there. Good morning. Just on Steward, do you still expect to file the financials for last year? And if so, just what do you think you might have an expected timeline that you could share?
Steven Hamner: We do. When we receive the financial – the origin financials with auditor consents, it’s our expectation that we will file them as the SEC has asked.
Jonathan Hughes: Okay. I just want to make sure that was still the case. And then maybe turning to the seven facilities that are being sold back to a tenant in the first half of next year, just trying to understand the operator’s decision to buy them in the current higher cost of capital environment, were those subject to a purchase option, and it was kind of now or never? And then maybe when did those discussions beginning, and can you share expected yield on that sale?
Edward Aldag: So, I can give you some of those answers, Jonathan. So, the properties that we have with this tenant actually performed fairly well. The coverages are good, strong coverages in the middle of our range for those particular types of facilities. They have issues with other facilities that other people own that we don’t have anything to do with. So, from a corporate standpoint, that’s where their issues have come from. We knowing the value of our properties have pushed them to fix their issues. And they came back with, hey, it may take longer than you are willing to do or you may take longer than you want, what if we just buy them, buy these particular ones back from you. And we said, sure, if you can make it hold, we will do that. So, that’s where that came from.
Jonathan Hughes: Okay. And then I mean just – are you able to share like again, the expected kind of yield on it, or is that still under negotiation?
Edward Aldag: No, it’s not under negotiation, but we generally, as you know, don’t disclose those, but it’s a good strong yield in today’s market.
Jonathan Hughes: Okay. And then maybe switching to another part of the portfolio, I realize it’s – look, it’s not very big, but just the outlook, if you could share kind of your views on the outlook for the long-term acute care space, coverage there continues to kind of trend a little bit lower while the other asset types have stabilized or even improved. Would those be potential divestiture opportunities within that expected $2 billion of liquidity over the next 12 months?
Edward Aldag: Well, you are right, in the first part of your question for sure is that they represent a very, very small part of our portfolio these days. And you are also right that they have come way down. The entire industry has come way down from the exemptions that they all had during COVID when those went away. We think they essentially stabilized at where they are now, not great coverages, but at least coverages and we don’t expect to see any further decline in those.
