Michael Goldsmith: That’s really helpful. And then as I follow up, occupancy took a slight step back but still well above your guidance range. So can you just talk about what you’re seeing in the market in terms of pushing rents versus occupancy and how you use that to drive or maximize revenue overall?
Sumit Roy: Sure. That’s a great follow-on question, Michael. So for us we are looking at a particular real estate through the lens of maximizing revenue. And the revenue maximization strategy by its very definition will mean that we are more than comfortable holding on to certain assets that are vacant for longer. If we have concluded that there is a use for that particular location and that it’s not the very first client that comes in and gives us a rent proposal. But the kind of client that we are targeting and the client and a profile of rent that we are targeting that takes time. And so we are more than comfortable taking a little bit of a hit on the occupancy side to make sure that we get the best revenue optimization for that given location.
And that’s what you’re going to see. That’s the reason why even though we’ve been running the portfolio at 99% for the last three quarters, we have always maintained that our occupancy is going to be up slightly above 98%. Because that we believe is a natural state of occupancy for the business model that we are trying to run here. And look, where it makes sense, we will continue to sell assets vacant, if we believe that that is the most economically desirable outcome that holding on to those assets does have a cost and that just continues to drag into the return profile. So selling assets vacant is also a strategy that we will continue to implement. So I just don’t want you to start thinking now in terms of, hey, there will be no more vacant asset sales.
All of those options are available to us and we will pursue the one that generates the best revenue outcome.
Operator: The next question comes from Brad Heffern with RBC Capital Markets. Please go ahead.
Brad Heffern: Hi, everybody. Sumit, the European deal volume was a record this quarter after a period of time where it seemed like the region was maybe a bit slower to reflect the new reality. I’m wondering if Europe is back to competing for capital on sort of a heads-up basis with the US or if this was just a one-off where you happen to have two large deals get over the finish line at the same time?
Sumit Roy: We’ve been talking about these two transactions for a while now, Brad. So, some of it’s just taken a little bit longer to get this over the finish line. And some of it has been that cap rates do take a little bit longer to adjust in the international markets than they do here just because of the depth of the market here. You should continue to see a fair amount of product coming in from the international markets and that’s reflected in our pipeline. But I always go back to when somebody asks at the beginning of the year where do you think you’re going to end up? We always say that it’s right around that 30% to 40% will be the international investments. And 60% to 70% will be the US And I think that is probably where we’ll end up at the end of the year as well.
Brad Heffern: Okay. Got it. And then can you talk broadly about the attractiveness of the different capital sources. The $750 million in unsettled equity isn’t quite as much as I would have thought given you have the $3-plus billion to close by the end of the year. But I’m wondering if you’re shifting to maybe a greater debt balance given where the relative costs of capital are.
Jonathan Pong: Hey Brad, it’s Jonathan. So, all options are available to us. Obviously, each one of them on a nominal or absolute basis isn’t where we would want it to be. But I think the one thing to consider is we’re always going to prioritize that 5.5 times leverage first and foremost. And so when you look at our equity costs, you compare it to our indicative cost of 10-year unsecured debt across all three currencies that we can operate in. There is a difference that isn’t necessarily wider than usual but there is a bit of a gap but we aren’t going to sacrifice the balance sheet we are going to lever up just to eke out a couple of extra 10th of a basis point of growth for next year. So you could expect us to be very predictable from that standpoint and by predictable, it’s carrying a reasonable balance on the line in our CP program having 10% or so of variable rate debt outstanding at any point in time and being very prudent with laddering out our maturities on a go-forward basis.
Brad Heffern: Great. Thank you.
Operator: The next question comes from Eric Wolfe with Citi. Please go ahead.
Eric Wolfe: Hey. Thanks. With regard to the Cineworld agreement, can you talk about whether that helped your guidance relative to what you were forecasting before and remind us how much income you booked on Cineworld prior to October 1, just so we can understand the incremental impact for next year?
Sumit Roy: Yeah. Everything that we’ve shared with you on Cineworld is obviously in the form of an agreement. So any impact that, it’s going to have is reflected in the comments that we’ve made about next year and the fourth quarter of this year. Eric, I don’t know if you’re looking for anything more that we are not expecting to give you a surprise that because of the Cineworld transaction there’s going to be a drag on anything that we’ve shared with you. That’s already been absorbed and shared. It’s reflected in the updated guidance that we have for 2023 and in the comments that I’ve made about what we expect to see happen in 2024.
Eric Wolfe : And then in the second quarter so I guess not the third quarter but the second quarter you saw around $0.5 billion increase in financing receivables within other assets. Is that more a reflection of the type of deals that were done in that quarter or rents were on those deals relative to the market? Just wondering whether we should expect a similar jump in the third quarter and sort of the quarters going forward?
Jonathan Pong: Hi, Eric. That’s really driven by the accounting guidance where when you have sale-leaseback transactions and you look at the rent relative to market, the classification of that revenue goes into a different bucket it goes into other revenues and also the corresponding balance sheet impact also will show up there. So it’s no different than any other regular way transaction we do it’s just given the nature of it being a sale-leaseback deal with the purchase price accounting that’s dictating some of the valuation associated, with the real estate versus the cash flow and that’s why you see that as that bump.
Eric Wolfe: Okay. Right. So any type of sale leaseback would create sort of more outsized impact on financing receivables versus another type of deal. I’m just understanding that correctly?
