Operator: Our next question comes from Brad Heffern with RBC Capital Markets.
Brad Heffern: Can you talk about the terms that you’re seeing in the sale-leaseback market right now? Are you seeing concessions from buyers besides the higher cap rates like higher escalators, longer terms, better lease protections, et cetera?
Jackson Hsieh: I mean, I can sort of tell you that the things that we’re looking at in the first quarter, the industrial assets that we have 2-plus percent annual escalators. So we’re seeing better opportunity on escalations particularly in sale-leaseback opportunities in the industrial area. Look, it’s still competitive. I mean we look at a lot of different things before we kind of land on. Hey, this has all 3 of the three-pronged underwriting pieces that are meaningful for us. So we tend to find that once we kind of knock those down, it is competitive. There are other people that look at the world the same way we do. So as Mike suggested that we’re just out here not competing with people. But I would say, generally, in the industrial area, companies are looking at sale leaseback, high-yield bank financing as a means to an end.
And so if the terms get too egregious in the sale leaseback, then all of a sudden, they look at corporate debt as an alternative. Retail has got just a little bit more commoditized, we are not seeing escalations to change in any meaningful way or lease term change in any meaningful way. I would say the other thing, we have seen that’s been a dramatic change in some of the industrial sale leasebacks that we’re looking at. A year ago, terms and conditions were really competitive as it relates to buyers. Tenants had a lot more leverage over buyers in that conversation. I just think there were just more buyers, more private buyers kind of willing to not look at some of this stuff because I think they’re not as long-term oriented in terms of hold periods.
For us, we’re buying these assets, expecting to hold them for the whole lease-term. So environmental matters, lease term matters, assignment matters for us. So that’s where we are, I think, in the current market. We’re finding good opportunities still competitive when we get down there, but it’s not as rambunctious as it was, say, a year ago.
Brad Heffern: And Michael, I just want to clarify on the unidentified reserves, are we purely talking about lost rent, we’re talking about that? Or is there some accounting reserve that you’re planning to take? I’m just a little confused about the terminology.
Mike Hughes: Yes. No. We’re purely talking about lost rent reserves. So just an assumption around things that could happen in the portfolio throughout the year that could cause rent to go away, right? So it’s just an assumption, it’s not an accounting reserve. It’s not anything that we’ve identified or is planned or that we have to take. It’s just an assumption, again, consistent in how we’ve approached it and all the other years, it’s just a reserve for the unknown.
Operator: Our next question comes from Josh Dennerlein with Bank of America.
Josh Dennerlein: Just one follow-up on the reserve and guidance. Sorry if I missed it, but how many cents was it in 2022?
Mike Hughes: It was about the same at the beginning of the year. Josh, it might have been a little bit slightly less. A little bit less than 1%. We typically look at 1% of ABR, so ABR was less. So from a dollar standpoint, it was certainly less. But generally, we target that 1% of ABR when we give our guidance.
Josh Dennerlein: Okay. But where did it end up? I guess, how many cents was in 2018?
Mike Hughes: Yes. Were it ended up. I think we ended up at about, I mean, 0.3% for the year, somewhere around there, about 30 bps for the entire year, I believe, if you average it out. So obviously, much less than what our assumption is for this year. We ended up for the year.
