Unidentified Analyst: Thanks. Yes, I was hoping to get maybe a little bit of a preview about how G&A could trend over the next year. And I know this year, there was the build out of John’s group and just trying to understand like how far along that is and how that could affect G&A growth over the next year?
Shankh Mitra: Nick, as I mentioned early in the year, I think if you go back to fourth quarter call, we have at least another year of elevated G&A increase as a build out of the platform. So you should — we have come long, but we have a long ways to go. So G&A versus NOI, just a geography of where you see occupancies versus revenues. So we do believe that the platform build out is paying off, has started to pay off in spades. But from a purely just looking purely at G&A item, we would expect that another year of build out — at least another year of build out.
Operator: Our next question comes from the line of Michael Griffin with Citi. Please go ahead.
Nick Joseph: Thanks. It’s actually Nick Joseph here with Michael. Shankh, I recognize you said you’re not engaged, you won’t be engaged. But last year, you reportedly got involved in a similar public to public M&A situation within the medical office space. You talked in the past a lot about being an IR buyer and cost base focused and that you look at everything. So just curious in this situation or more broadly, is it kind of the current valuation and underwritten returns aren’t sufficient against the other opportunities that you’re seeing? Is it something about medical office that’s keeping you on the sidelines here?
Shankh Mitra: So first thing I mentioned that I don’t comment on other people’s deals. So I have nothing underwritten, so I can’t even comment on what the underwritten returns looks like. But specifically to medical office, I think I provided some color last quarter that we’re unsure at this point what the long-term inflation land. And because we are unsure we are unsure of at this point to make a huge bet on an asset class that we don’t know what the growth profile versus the long-term inflation looks like, right? So that’s a very important point. We are finding opportunities where we think we can small opportunities where we can do value add. We are buying assets at 70%, 80% occupancy and leasing up and so that we can see the growth rate higher.
But from a stabilized 95%, call it, occupied medical office with a 2.5% increase or whatever it is, the traditional medical office, which provides a good long-term, stable growth for institutional investors is not interesting for us. For that one reason. And the second reason is, it’s always — it’s relative opportunities is the question, right? If that’s the only thing that was available to us, will be a different conversation. We are easily picking off at low double-digit plus unlevered IRR opportunities in the senior living side assuming that we don’t add much value, and I’m pretty positive we will add value. So it’s just a question of relative opportunities of where we see we will today. And that’s why we have no interest. By no means that suggests that we don’t think it’s a good deal or not a good deal.
I have no idea what the deal is because I’m not engaged in it as I specifically mentioned will not because of the reasons I just pointed out to you.
Operator: Our next question comes from the line of Josh Dennerlein with Bank of America. Please go ahead.
Joshua Dennerlein: Yes. Hey, guys. I have a question on the transitions. Shankh, you mentioned you’ve been very active in terms of proactive portfolio management. You achieved a lot of early success recently with Avery and Oakmont. How have these operators driven such strong results so quickly? And just how would you encourage us to think about future transitions in the portfolio?
Shankh Mitra: Yes, I’m not going to answer the first question, Josh. Obviously, on a public call, I mean, things called trade secrets that you don’t want us to divulge on a public company call. But we’ll say that this doesn’t happen like automatically. As I’ve said before, we have learned. We have done a lot of transitions over the last, call it, 5, 7 years that I’ve been doing this, and we have learned our lessons from frankly, old school way of losing money. We have learned what we have done wrong. We have gotten better then sort of we learned how to start bleeding and then finally, we have gotten the other side of how do we — how we can make an impact. What the prep work you need to do on systems and process and frankly, that’s what John taught us, right?
So it’s just — it’s an evolution. It’s a process that we have gotten over the last few years, and I’m very, very happy that we are there. Now from the point of view of transitions, is it the last transition, would we do 1,000 more transitions. It just depends on the performance we are trying to optimize our performance. I’ve said it many, many times that this is a business in our opinion, in our humble opinion. It’s a business of optimizing location, product, price point and operator, right? So we’ll keep optimizing it until we think that we were done. And that’s kind of where we are. It’s a journey I’ve written about that I’m willing to do even if we take short-term hits. And it appears, at least from near-term results, no guarantee of the future that we have achieved how to even mitigate that short-term hit.
Operator: Our next question comes from the line of Rich Anderson with Wedbush. Please go ahead.
Richard Anderson: Hey, good morning, everyone. So I want to talk and perhaps to John on the rate number that you mentioned, the RevPOR number of 7% and specifically, the sustainability of that type of growth. It’s always been my view that there was some sort of implied ceiling of growing rents for people that are 85 years old. And that at some point along the way that there’s just a way of doing business. Now I don’t know that there’s a real ceiling of some sort, but it always seemed to me that was the case, correct me if I’m wrong? Number two, though, maybe it involves unpacking the rent, maybe it’s rent between rent and care and so that kind of muddies the conversation. But I wonder if you could comment at any level about how rate might grow in the future considering what I would think would be some pushback for the reasons I just described?
