Debra Cafaro: Well, again, happy to give as many tea leaves and more as soon as we can. I would say that we are in active discussions with Kindred and others. It’s more likely that Kindred would be part of a solution going forward. But we’re continuing to keep working on every alternative so that we can reach the goal, which, again, is optimizing value for Ventas shareholders and the NOI from these properties. So we’re very focused, and we’re very on it.
Vikram Malhotra: Great. Thank you.
Operator: Your next question comes from the line of Richard Anderson of Wedbush Securities.
Richard Anderson: Thanks, good morning everyone. So Justin, you talked a little bit about what you do with assets once you own them price optimization, investing in the properties. And also perhaps transitioning to other operators that are proving themselves to be worthy. If you do $1 billion, how much do you think will fall in the transition category? And would you be expecting any meaningful downtime whereas you get the full benefit, maybe not this year, but a year from now?
Justin Hutchens: Good question. So I’m going to step back and just talk a little bit about the pressure tick. Obviously, we’ve talked a lot about markets and first step is always to make sure we’re entering the right markets to support upside opportunity and affordability. And then from there, we focus on the particular asset. We’re focused on need-driven assisted living and memory care, and a lot of the campus is also including independent living, high-growth, need-driven product. Then it’s who’s really in the best position to manage that. And we make the decision really not because we’re trying to cause the delay. It’s because we’re trying to cause better performance sooner. So when we move a new manager in, that’s our expectation.
We’ve had very good results with transitions. There’s always risk associated with the transition. Obviously, we have a lot of experience having transitioned well over 150 communities over the past few years, managing through that and getting good outcomes. And so it’s going to come down to like the decision really is going to be putting ourselves in the best position to drive performance in that community.
Richard Anderson: Okay. And then second question, I think, Bob, you mentioned a lot of what’s or everything that’s been done so far has been funded with equity. Just back of the envelope, I’m looking at like an AFFO yield of about 6%. But then when you talk about dispositions, and I think you called it OMAR, which is a new one. What — how much how comparable are disposition cap rates to your equity cost in your view and how much of it comes out of OM and how much comes out of AR, like I’m curious…
Robert Probst: Yes. It’s a memorable acronym OMAR, outpatient medical and research.
Debra Cafaro: The A is for an.
Robert Probst: Yes, an. OMAR. For you to remember. So step back, the guide of dispose of $300 million includes OMAR, but is also across asset classes, including senior housing and others. So I would say the blended cap rate is roughly mid-single digits on that, not dissimilar to the number you quoted. So again, as we think about reinvesting maybe neutral in the short run, but again, upgrading the portfolio and with the growth potential in the investments really accretive over time. So hence, capital recycling increase is another source of funds that we’re very focused on.
Richard Anderson: [Indiscernible]
Operator: Your next question comes from the line of Michael Mueller of JPMorgan. Please go ahead.
Michael Mueller: Yes, hi. I was wondering, can you give us some high-level color on how the SHOP outlook varies maybe from the AL to the IL segment.
Justin Hutchens: Yes, sure. So most of our NOI growth is coming from AL. We have — that’s going to be on the much higher end of the average, particularly in the U.S. So the IL growth really — there’ll be some growth and some contribution this year, but really more of a 2025 opportunity that we see it in terms of big contributions in the U.S. Occupancy trends have been excellent across our independent living portfolio in the U.S. I mentioned that we ran at 127% of prior year move-ins in the U.S. in the first quarter in independent living. We’ve had multiple months of occupancy growth. April looks good and kind of living and so there’s good leading indicators in that portfolio that will ultimately drive the NOI, but AL is really leading the way right now in the U.S.
Michael Mueller: Got it. Thank you.
Debra Cafaro: Thank you.
Operator: Your next question comes from the line of Wes Golladay of Baird. Please go ahead.
Wesley Golladay: Hey guys, good morning everyone. I just want to follow up on that last question regarding the IL picking up next year. Is that just more so operating leverage kicking in next year?
Justin Hutchens: Yes, exactly. So IL is a high-margin business. It has relatively high fixed costs because you’re not delivering care, you’re offering more limited services. So the operating leverage is very, very high. And the higher the occupancy, the more you benefit from that, and we have a long runway in terms of occupancy upside. So we look forward to some continued growth there and then see how that plays out, driving NOI moving forward.
Wesley Golladay: Okay. And then I want to go back to that slide. You have about the $19 billion of loans. How much of those loans do you think will have some issues on the refinancing front? And has your view on the amount of distress changed over the last, call it, six months. On one hand, you have rates just continue to grind higher, but then the recovery is also accelerating.
Debra Cafaro: Right. I would say that there is a large percentage of those loans that have some difficulty in refinancing without additional equity contributions. The assets are good, the markets can be good, the growth can be good. But because LTVs are lower, and as you say, rates are higher and the NOIs, many of them have not recovered to pre-COVID levels or they were newly constructed assets that really were delivered in COVID and therefore, aren’t meeting their original pro formas. There’s really good upside, but the refinancing mass doesn’t necessarily work without significant paydowns. And so those owners, which again, I think, is a significant percentage of the $19 billion either have to decide if they want to reach in their pocket and put more equity in or if they can sell them for a reasonable value and just move on whether that’s really where they want to go.
And that’s really part of that opportunity. But as Justin said, there are many other market forces that are pushing sellers to market and that are creating the overall pipeline opportunity that we’re seeing.
Wesley Golladay: Thanks for the time everyone.
Debra Cafaro: Thank you.
Operator: Your next question comes from the line of Michael Stroyeck of Green Street. Please go ahead.
