Shankh Mitra: Yes. So, if you think about it, we’re building occupancy, right? You know that Q1 is sort of the weaker point in the occupancy spectrum, and you build occupancy — occupancy growth happens through spring and summer. So your occupancy build on an average basis, you get closer to sort of that Q3, Q4 level where you get a better revenue, if you will, right, sort of in that annual journey. Now, think about expenses, which are also coming down, right? So you have — you probably have a better — significantly better exit run rate in Q4 than Q1, right? So following both revenue as well as expenses. Think about how other situation that I’ve described before, I think the last call, maybe the one before, is how REVPOR builds, right?
You move your rents on a bunch of people at the beginning of the year and as well as our — for our portfolio, just call it, half and half. We also have a very large operator who moved in Q4, but just think through how that plays out. And then you chase that in-place rent through your market rent, which is also going up for the year. So, if you think about from an occupancy, from rates, from expense improvements, which is we’re glad that agency cost is down from, call it, 7 to sub 4. We were very unhappy. It’s still sub 4. It should be significantly lower than that. So if you think through all of the main drivers, you’re going to get a much higher exit run rate in Q4 than Q1.
Operator: We’ll move next to John Pawlowski at Green Street.
John Pawlowski: John Burkart, could you just give me a sense for how much more pushback your operators are seeing on rent increases today than in recent quarters, so they’ve had no issue pushing rents? And if there’s any segments of the portfolio that are starting to hit a wall just in terms of absolute rents? Any color there would be appreciated.
John Burkart: Yes. No, glad to. I’m not aware of any pushback. It’s not to say, of course, when a rent increase goes out, there’s not a discussion. But in the sense of defining pushback as a market response to that, no, I’m not aware of that. I think, the — our partners have done a phenomenal job of communicating the increases and the reasons behind those increases. And I think our residents understand that they don’t want to see important services and care cut. They want to have what they paid for, the best of that, and we’re just not aware of any issues there.
Shankh Mitra: John, as I mentioned, I expect REVPOR increase to be better in ’23 than ’22. So, that sort of gives you — we’ll see what the market gives us. But as we sit here today, we think the pricing environment is getting better.
Operator: We’ll move next to Vikram Malhotra with Mizuho.
Vikram Malhotra: Just maybe building upon the pricing power, maybe Shankh or John, if you can just elaborate. You talked about the exit run rate, earnings run rate sort of as a guide to the earnings power. Can you talk about both on pricing and say, CapEx, as you see inflation come in, your costs come in, your maybe ability to push higher rates. You said near term is not hampered. But as you see inflation come in, but occupancy is still low, can you just give us some context on how you see pricing power evolving until occupancy recovers? And then, similarly, CapEx-wise, after 2, 3 years of COVID, what do you need to invest from a run rate standpoint, maybe percent of NOI? Is there an uptick needed over the next few years on CapEx? Thanks.
