Q4 2021 Camden Property Trust Earnings Call

February 4, 2022

Speaker 1: Good morning and welcome to Camden Property Trust's fourth quarter 2021 earnings conference call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Rick Campo, Camden's Chairman and Chief Executive Officer, Keith Odin, Executive Vice Chairman and President, and Alex Jessett, Chief Financial Officer. If you haven't logged in yet, you can do so now through the Investor's section of our website at CamdenLiving.com.

Good morning, and welcome to Camden Property Trust fourth quarter 2021 earnings Conference call I Am Kim Callahan Senior Vice President of Investor Relations. Joining me today are Ric Campo Camden's, Chairman and Chief Executive Officer, Keith Oden, Executive Vice Chairman and President and Alex Jessop Chief.

Financial Officer if.

If you Havent London, yet you can do so now through the investors section of our website at Camden living Dot com.

All participants will be in listen only mode.

Speaker 1: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. And please note, this event is being recorded.

Did you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions and please note. This event is being recorded.

Speaker 1: Today's webcast will be available for replay this afternoon, and we are happy to share copies of our slides upon request.

Today's webcast will be available for replay this afternoon, and we are happy to share copies of our slides upon request.

Speaker 1: Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations.

Before we begin our prepared remarks, I would like to advise everyone that we will be making forward looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations.

Speaker 1: Further information about these risks can be found in our filing with the SEC, and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events.

Further information about these risks can be found in our filings with the SEC and we encourage you to review them any forward looking statements made on today's call represent management's current opinions and the company assumes no obligation to update or supplement these statements because of subsequent events.

Speaker 1: As a reminder, Camden's complete fourth quarter 2021 earnings release is available in the investors section of our website at CamdenLiving.com and it includes reconciliations to non-GAAP financial measures which will be discussed on this call.

As a reminder, camden's complete fourth quarter 2021 earnings release is available in the investors section of our website at Camden living Dot Com and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.

Speaker 1: We hope to complete our call within one hour, and we ask that you limit your questions to two, then rejoin the queue if you have additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email after the call concludes. At this time, I'll turn the call over to Rick Campo. Good morning.

And we hope to complete our call within one hour and we ask that you limit your questions to two then rejoin the queue. If you have additional items to discuss if we are unable to speak with everyone. In the queue today, we'd be happy to respond to additional questions by phone or email. After the call concludes at this time I'll turn the call over to Rick Campo Good morning.

The opening ceremonies for the 2022 Winter Olympics are today and.

Speaker 2: The opening ceremonies for the 2022 Winter Olympics are today. And as you could tell from our on hold music and slideshow, team Camden has embraced the Olympic spirit. The Olympic theme set me down memory lane and into Camden's archives for the video I'm going to show you today.

And as you could tell from our on hold music and slideshow team Camden has embraced the Olympic spirit.

Olympic theme sent me down memory Lane and into Camden's archives for the video I'm going to show you today.

Speaker 2: During the 2012 Summer Olympics, the US women's swim team made a video using a very popular song titled Call Me Maybe.

During the 2012 Summer Olympics the U S Women's swim team made a video using a very popular song titled Call Me maybe.

Speaker 2: At Camden, we are proud to be a friendly and welcoming workplace.

Camden, we are proud to be a friendly and welcoming workplace.

Speaker 2: One unique way we show this is by greeting teammates with a hug instead of a handshake.

One unique way we show this is by greeting teammates with a hug instead of a handshake.

Speaker 2: Camden employees probably give and receive more hugs per day than any other workplace in America.

Employees, probably give and receive more hugs per day than any other work place in America.

So if you combine our hugging culture with the Olympic Spirit, a call me maybe video becomes a hug me maybe video.

Speaker 2: So if you combine our hugging culture with the Olympic spirit, a call me maybe video becomes a hug me maybe video.

Speaker 2: and following the 2012 Olympics, this happened at our corporate office.

And following the 20 I think 2012 Olympics this happened at our corporate office.

Speaker 3: I sent my resume in, got interviewed by Odin I got the job, what a win, and now I'm here to stay My first day full of steel, I can't believe this is real I didn't know I would feel it, but now I'm here to stay Nine values we're holding, key strategies to show us, green birds, feathers blowing And nothing's where we're going, baby Hey, I just started, and this is crazy So come on over, and hug me, maybe And all the other reeds, they tried and chased me Won't get my number, we're kidding, baby

[music] merchant Marine is a mean.

Danny reviewed by one in a cabinet blood, who win and now I'm here to say my third faithful deal I can't believe this is we have added no lab would be live but now I'm here to say.

Hello.

EBITDA was three <unk>.

Yes.

Okay.

[music].

Thank God.

Sure.

Yeah.

Okay.

Yes.

Yeah.

No.

I'll be brief.

Okay.

Yeah.

Okay.

Yes.

Speaker 3: Our teams work to be best, there is just no contest Camden is not like the rest And now I'm here to stay Falling for you all to success Performance with the next Wait is that we're gonna dress Oh yeah, I'm here to stay Happy we're all smiling We're aware we are silent Seven best and not four flies Next year we'll be number one baby Hey, I'm just buzzing and this is crazy So come over and hug me baby, let's start off right? For you baby, cuz we're all family So hug me baby, hey I'm just buzzing and this is crazy We're come over and hug me baby, and all we are to breathe They tried to teach me, we'll get my number We're kidding baby, we're all starting up this place I want to go back Bring in the soul back And now I'm going back, I'm going to start it up this place I want to go back And you should know that, the kids are going back

[music] my team to be that there is just no fault.

<unk> now and here at <unk>.

You bet.

And the way it is that we can address OEM he views.

We're all smiling.

We also added seven vessels.

Okay.

And this.

Okay.

Yeah.

Will you.

Yes.

Okay.

And yes.

No.

Okay.

Thanks, Adam.

Yeah.

Okay.

It takes nine months or so.

Okay.

Yeah.

Okay.

Thanks Savi.

Okay.

Victor.

Okay.

Yes.

[music].

Speaker 2: And but for you and ST ST, one of the many adjustments.

Okay.

But.

Yeah.

Got it.

For humans.

Yeah.

Okay.

Yes.

Okay.

Thanks, Alex.

No.

Now.

Okay.

Thanks, Alex.

Yeah.

[music].

One of the many adjustments in Camden's world caused by social distancing during the pandemic was replacing the actual hubs with virtual hubs since Camden is a fully vaccinated workplace. We have recently seen an uptick in breakthrough cases of actual hugging in our workplace.

Speaker 2: One of the many adjustments in Camden's world caused by social distancing during the pandemic was replacing actual hugs with virtual hugs. Since Camden is a fully vaccinated workplace, we have recently seen an uptick in breakthrough cases of actual hugging in our workplace.

Speaker 2: We all look forward to the day when all virtual hugs at Camden will become actual hugs. 2021 Sunday

We all look forward to the day when all virtual hugs at Camden will become actual hubs.

2021 turned out to be a remarkable year and we clearly exceeded our original guidance that we provided at this time last year, our 2021 budget call for F. O a $5 per share with same property revenues up slightly and net operating income down approximately 1%.

Speaker 2: And we clearly exceeded our original guidance that we provided at this time last year.

Speaker 2: Our 2021 budget called for FFO of $5 per share with same property revenues up slightly and net operating income down approximately 1%.

Speaker 2: As reported last night, we closed 2021 with SSO of $5.39 per share and same property growth of 4.3% and 4.8% for revenues and net operating income respectively. We expect 2022 to be our best year on record for earnings and same property growth.

As reported last night, we closed 2021 with SSO or $5 39 per share and same property growth of four 3% and four 8% for revenues and net operating income respectively. We expect 2022 to be our best year on record for earnings in same property.

Growth the midpoint of our 2022 guidance calls for <unk> per share of $6.24.

Speaker 2: The midpoint of our 2022 guidance calls for FFO per share of $6.24.

With same property revenue growth of eight and three quarters percent and net operating income growth of 12% are geographically and product diverse portfolio in the sunbelt markets continue to ask outperform.

Speaker 2: with same property revenue growth of 8.75% and net operating income growth of 12%. Our geographically and product diverse portfolio in the Sunbelt markets continue to outperform.

I want to thank each of our Camden team members for their hard work and commitment to our values and for improving the lives of our team members.

Speaker 2: I want to thank each of our Camden team members for their hard work and commitment to our values, and for improving the lives of our team members.

Speaker 2: and our customers one experience at a time. 2021 was a great year, but the best is yet to come. Thank you, and I will now turn the call over to Keith Oden. Thanks, Rick. We have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of every year. I'll start with a review of the supply and demand conditions we expect to encounter in Camden's markets during 2022 and rank the markets in the order of best to work.

And our customers one experience at a time 2021 was a great year, but the best is yet to come.

You and I will now turn the call over to Keith Oden.

Thanks, Rick we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of every year I'll start with a review of the supply and demand conditions, we expect to encounter in Camden's markets. During 2022 and ranked the markets in the order of best to worst for the first time in 10 years Camden's overall.

Speaker 2: For the first time in 10 years, Camden's overall portfolio earned an A with a stable outlook. And no market received a grade below a minus.

Portfolio earned an a with a stable outlook and no market received a grade below a minus.

Speaker 4: In addition, we are now providing this report card to you as part of our earnings call slide deck, which is showing now and will be posted on our website after today's call.

In addition, we are now providing this report card to you as part of our earnings call Slide deck, which is showing now and will be posted on our website. After today's call.

We anticipate overall same property revenue growth this year in the range of seven and three quarter percent to 93 quarter percent for our entire portfolio with most of our markets falling within that range. The outliers on the positive side would be Phoenix, and our Florida markets, which should produce double digit revenue growth than Houston.

Speaker 4: We anticipate overall same property revenue growth this year in the range of 7.75% to 9.75%

Speaker 4: for our entire portfolio, with most of our markets falling within that.

Speaker 4: The outliers on the positive side would be Phoenix and our Florida markets, which should produce double-digit revenue growth, then Houston and DC, which will likely lag the overall portfolio average, but still show significant improvement versus 2021.

N D C, which will likely lag the overall portfolio average, but still show significant improvement versus 2021.

Speaker 4: Our outlook for supply and demand in 2022 is based on multiple third-party economic forecasts that generally reflect strong job growth in Hamden's markets, coupled with a steady amount of new supplies.

Our outlook for supply and demand in 2022 is based on multiple third party economic forecast that generally reflect reflect strong job growth in camden's markets, coupled with a steady amount of new supply.

Estimates range from one to $1 2 million new jobs created in our 15 major markets in 2022, along with 150000 to 200000, new completions. So our outlook reflects somewhere around the midpoint of both projections it.

Speaker 4: Estimate rains from 1 to 1.2 million new jobs created in our 15 major markets in 2022, along with 150,000 to 200,000 new completion.

Speaker 4: So our outlook reflects somewhere around the midpoint of both projections.

Speaker 4: It is likely no surprise that for 2022, our top ranking once again goes to Phoenix, which has averaged 7% revenue growth over the past three years and hasn't expected revenue growth well above 10% this year.

It is likely no surprise that for 2022, our top ranking once again goes to Phoenix, which has averaged 7% revenue growth over the past three years and has an expected revenue growth well above 10% this year.

We give this market an a plus rating with a stable outlook supply and demand metrics for 2020 to look well balanced with estimates calling for 80000, new jobs in Phoenix and 18000, new units coming online this year.

Speaker 4: We give this market an A-plus rating with a stable outlook. Supply and demand metrics for 2022 look well-balanced with estimates calling for 80,000 new jobs in Phoenix and 18,000 new units coming online.

Speaker 4: Up next are our three Florida markets. Southeast Florida, Tampa, and Orlando. Each also earned a plus ratings with stable outlooks. These three markets should achieve revenue growth of over 10% in 2022, and are projected to have strong job growth to offset new supply coming online.

Up next are three Florida markets, Southeast, Florida, Tampa and Orlando.

Orlando.

Each also earned a plus ratings with stable outlooks. These three markets should achieve revenue growth of over 10% in 2022 and are projected to have strong job growth to offset new supply coming online.

Speaker 4: Current estimates for job growth are approximately 50,000 in both Southeast Florida and Tampa and 60,000 in Orlando. Completions are expected to be 10,000, 6,000, and 9,000 units, respectively.

Current estimates for job growth of approximately 50000 in both South East, Florida, and Tampa and 60000 in Orlando completions are expected to be 10000, 6009 thousand units respectively.

Speaker 4: Our next eight markets all earned an A rating with a stable outlook and should produce revenue growth generally within our guidance range of three and three quarters to nine and three quarters in 2022.

Our next eight markets all earned an a rating with a stable outlook and should produce revenue growth generally within our guidance range of three and three quarters to 93 quarters in 2022.

Speaker 4: Atlanta, Austin, and Raleigh should achieve revenue growth toward the high end of our guidance range in 2022. In Atlanta, job growth is expected to be 90,000 with around 10,000 new apartment completions. And Austin projections call for 50,000 additional jobs with completions of roughly 18,000 units. And in Raleigh, the jobs to completions ratio should be five times with 35,000 new jobs versus 7,000 new apartment completions. And in the future, the jobs to completions ratio should be five times with 35,000 new jobs versus 7,000 new apartment completions.

Atlanta, Austin, and Raleigh should achieve revenue growth towards the high end of our guidance range in 2022, and Atlanta job growth is expected to be 90000 with around 10000, new apartment completions in Austin projections call for 50000 additional jobs with completions of roughly 18000 units and in Raleigh the job.

To completions ratio ratio should be five times with 35000, new jobs versus 7000, new apartment completions.

Speaker 4: San Diego, inland empire and Charlotte are next, following around the middle of the pack in Camden's portfolio. For the San Diego, inland empire market, we expect to see over 100,000 new jobs in 2022, with new supply around 8,000 units.

San Diego inland Empire in Charlotte or next falling around the middle of the pack in Camden's portfolio for the San Diego Inland Empire market, we expect to see over 100000, new jobs in 2022 with new supply around 8000 units Charlotte should also deliver 8000 units with 40000, new jobs created for.

Speaker 4: Charlotte should also deliver 8,000 units with 40,000 new jobs created, providing a good balance of supply and demand in that mark.

Riding a good balance of supply and demand in that market.

Speaker 4: Nashville is Camden's newest market as we acquired two communities there last summer. While Nashville will not be included in our 2022 same property pool, we would rate the city as an A with a stable outlook. There has been significant a significant amount of construction in Nashville and that will continue in 2022 with approximately 10,000 new units expected to deliver this year.

Nashville is camden's newest market as we acquired two communities there last summer while Nashville will not be included in our 2022 same property pool, we would rate the city as an a with a stable outlook. There has been significant a significant amount of construction in Nashville, and that will continue in 2022 with approximately 10000 new units.

As expected to deliver this year.

Speaker 4: However, demand for apartment homes has remained strong in Nashville with positive end migration trends and projections for over 40,000 new jobs.

However demand for apartment homes has remained strong and in Nashville with positive in migration trends and projections for over 40000, new jobs.

Speaker 4: Dallas and Denver are both solid markets and we expect market conditions to be favorable again in 2022.

Dallas and Denver are both solid markets and we expect market conditions to be favorable again in 2022.

Speaker 4: Supply to man ratios in Dallas and Denver remain steady with 95,000 and 55,000 new jobs anticipated respectively during 2022 with supply at 15,000 and 10,000 new units respectively scheduled for delivery this year.

Apply demand ratios in Dallas, and Denver remains steady with 95050 5000, new jobs anticipated respectively. During 2022 with supply at 15010 thousand new units, respectively scheduled for delivery this year.

Speaker 4: LA Orange County in Houston are the last two markets earning an A rating.

L a orange County, and Houston are the last two markets, earning an a rating.

Speaker 4: but both have improving outlooks. Our portfolio in LA County saw higher to link with season bad debt in 2021 than our other markets, but we are hopeful that conditions will improve in 2022 as COVID restrictions begin to ease and regulatory issues around evictions are reduced. LA Orange County faces healthy operating conditions with favorable supply and demand met.

But both have improving outlooks our portfolio in L. A county saw higher delinquencies and bad debt in 2021 than our other markets, but we are hopeful that conditions will improve in 2022 as COVID-19 restrictions begin to ease and regulatory issues around evictions are reduced.

L. A orange county faces healthy operating conditions with favorable supply and demand metrics job growth should be around 150000 with completions of 16000 expected in 2022.

Speaker 4: Job growth should be around 150,000 with completions of 16,000 expected in 2022.

Speaker 4: In Houston, conditions began to improve in 2021 after the market had struggled with many newly sets giving high levels of concession.

In Houston conditions began to improve in 2021 after the market had struggled with many new lease ups, giving high levels of concessions.

New supply is expected to ease in 2022 to around 17000 units and.

Speaker 4: New supplies expected to ease in 2022 to around 17,000 units.

Speaker 4: And job growth should remain strong with around 75,000 new jobs expect

Job growth should remain strong with around 75000, new jobs expected.

Our final market is D C Metro, which we gave an a minus but with improving outlook supply remains steady with over 13000, new units coming on this year, but job growth should be healthy as well with 80000, new jobs expected similar to L. A Orange County, Washington D. C has been a challenging market gives.

Speaker 4: Our final market is DC Metro, which we gave an A- but with improving outlook. Supply remains steady with over 13,000 new units coming on this year, but job growth should be healthy as well with 80,000 new jobs expect.

Speaker 4: Similar to LA Orange County, Washington, D.C. has been a challenging market, given the COVID environment, and the many restrictions that were put in place as a result of the pandemic. While we are optimistic that 2022 will reflect and improve operating environment there, we have budgeted low to mid single digit revenue growth for DC Metro this year.

The COVID-19 environment and the many restrictions that were put in place as a result of the pandemic. While we are optimistic that 2022 will reflect an improved operating environment. There we have budgeted low to mid single digit revenue growth for D. C Metro this year.

Speaker 4: Now a few details on our fourth quarter 21 operating results in January 2022 trend.

Now a few details on our fourth quarter 21 operating results in January 2022 trends.

Same property revenue growth was eight 5% for the fourth quarter and four 3% for full year 2021, our top performers for the fourth quarter all had over 10% revenue growth and included Tampa, Phoenix, and Southern California, Raleigh, and South East, Florida.

Speaker 4: Same property revenue growth was 8.5% for the fourth quarter and 4.3% for full year 2021. Our top performers for the fourth quarter all had over 10% revenue growth and included Tampa, Phoenix, Southern California, Raleigh and Southeast Florida.

Speaker 4: Rental rates for the fourth quarter had signed new leases up 16.7%, renewals up 14.1%, for a blended rate of 15.5%.

Rates for the fourth quarter had signed new leases up 16, 7% renewals up 14, 1% for a blended rate of 15.5%.

Speaker 4: Our preliminary January results indicate similar trends with blended growth of over 15% on sign lease.

Our preliminary January results indicate similar trends with blended growth of over 15% on signed leases.

Speaker 4: February and March renewal offers were sent out with an average increase in the mid 14%

February and March renewal offers were sent out with an average increase in the mid 14% range.

Speaker 4: Occupancy averaged 97.1% during the fourth quarter and compared to 97.3% last quarter and 95.5% in the fourth quarter of 20. January 2022, occupancy, as averaged 97.2% compared to 95.7% in January of last year and it's slightly up from our fourth quarter 21 level.

Occupancy averaged 97, 1% during the fourth quarter and compared to 97, 3% last quarter and 95, 5% in the fourth quarter of 'twenty Janney.

January 2022 occupancy has averaged 97, 2% compared to 95, 7% in January of last year and slightly up from our fourth quarter 'twenty one levels.

Speaker 4: Annual net turnover for 2021 was in line with 2020 at 41%. And move outs to home purchases were 15.8% for the quarter and 16.4% for the full year of 2021, relatively in line with our reported 15.8% for full year 2020. I'll now turn the call over to Alex Jessett, Camden's chief financial officer.

Annual net turnover for 2021 was in line with 2020 at 41% and move outs to home purchases were 15, 8% for the quarter and 16, 4% for the full year of 2021 relatively in line with our reported 15, 8% for full year 2020.

Now I'll turn the call over to Alex just at Camden's, Chief Financial Officer, Thanks, Keith before I move onto our financial results and guidance a brief update on our recent real estate activities during.

Speaker 2: Thanks Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activity.

Speaker 2: During the fourth quarter of 2021, we purchased Camden Greenville, a recently constructed 558 unit, mid-rise community in Dallas. And we purchased five acres of land in Denver and two acres of land in Nashville for future development purposes.

During the fourth quarter of 2021, we purchased Camden Greenville, a recently constructed 558 unit mid rise community in Dallas, and we purchased five acres of land in Denver, and two acres of land in Nashville for future development purposes.

Speaker 2: For the full year of 2021, we have completed acquisitions of 4 communities with 1,684 apartment homes for a total cost of approximately $633 million, ahead of our original 2021 acquisition guidance of $450 million.

For the full year of 2021, we have completed acquisitions of four communities with 1684 apartment homes for a total cost of approximately $633 million ahead of our original 2021 acquisition guidance of $450 million.

And we acquired four undeveloped land parcels for a total cost of approximately $72 million.

Additionally, during the quarter, we disposed of two operating communities in Houston, and one operating community and Laurel, Maryland for total proceeds of approximately $260 million.

These three dispositions were on average 21 years old with average monthly rents of $1350 per door and annual capex of approximately $2300 per door.

Speaker 2: These three dispositions were on average 21 years old, with average monthly rents of $1,350 per door, and annual capex of approximately $2,300 per door.

Speaker 5: Using actual CAPEX, these dispositions were completed at a 3.9% AFFO yield, generating a 10.5% unleveraged IRR over a 20-year hold period.

Using actual Capex. These dispositions were completed at a 3.9% <unk> yield generating a 10.5% unleveraged IRR over a 20 year hold period.

Speaker 5: Based on a broker cap rate, which assumes $350 per door in CapEx and a 3% management fee on trailing 12 months NOI, the cap rate would have been 4.3%.

Based on a broker cap rate, which assumes $350 per door in capex and a 3% management fee on trailing 12 months NOI the cap rate would have been four 3%.

Speaker 5: And finally, during the quarter, we stabilized ahead of schedule Camden North End II, a 343 unit, $79 million new development in Phoenix, generating an approximate 8.75% yield. And we completed construction on Camden Hillcrest, an $89 million new development in San Diego.

And finally during the quarter, we stabilized ahead of schedule Camden, North end to a 343 unit $79 million new development in Phoenix generating an approximate 875% yield.

And we completed construction on Camden, Hillcrest and $89 million New development in San Diego.

On the financing side during the quarter, we issued approximately $180 million of shares under our existing ATM program.

Speaker 5: On the financing side, during the quarter we issued approximately $180 million of shares under our existing ATM program.

Moving on to financial results last night, we reported funds from operations for the fourth quarter of 2021 of $162 million or $1 51 per share exceeding the midpoint of our prior guidance range by <unk> <unk> per share.

Speaker 5: Moving on to financial results. Last night we reported funds from operations for the fourth quarter of 2021 of $160.2 million or $1.51 per share, exceeding the midpoint of our prior guidance range by two cents per share.

Speaker 5: This outperformance resulted primarily from higher levels of occupancy and rental rates at our non-same store acquisition and development communities and lower taxes and utilities at our same store communities.

This outperformance resulted primarily from higher levels of occupancy and rental rates at our non same store acquisition and development communities and lower taxes and utilities at our same store communities.

For 2021, we delivered full year same store revenue growth of four 3%.

Speaker 5: For 2021 we delivered full year same store revenue growth of 4.3% expense growth of 3.5% and NOI growth of 4.8% as compared to our original 2021 same store guidance of 0.75% for revenue 3.5% for expenses and negative 0.85% for NOI.

Expense growth of three 5% and NOI growth of four 8% as compared to our original 2021 same store guidance of <unk> 75 per cent for revenue.

Three 5% for expenses and negative eight 5% for NOI.

You can refer to page 27 of our fourth quarter supplemental package for details on the key assumptions driving our 2022 financial outlook.

Speaker 5: You can refer to page 27 of our 4th Quarter Supplemental Package for details on the key assumptions driving our 2022 financial outlook.

Speaker 5: We expect our 2022 FFO per share to be in the range of $6.09 to $6.39, with a midpoint of $6.24 representing an $0.85 per share increase from our 2021 results.

We expect our 2022 <unk> per share to be in the range of $6 nine.

To $6 39.

With a midpoint of $6.24, representing an 85 cent per share increase from our 2021 results.

Speaker 5: This increase is anticipated to result primarily from an approximate $0.79 per share increase in FFO related to the performance of our same-store portfolio. At the midpoint, we are expecting same-store net operating income growth of 12%, driven by revenue growth of 8.75% and expense growth of 3%.

This increase is anticipated to result, primarily from.

An approximate 79 cent per share increase in SFO related to the performance of our same store portfolio at the midpoint. We are expecting same store net operating income growth of 12%.

By revenue growth of 875% and expense growth of 3%.

Speaker 5: Each 1% increase in same-store NOI is approximately $0.065 per share in FFO.

Each 1% increase in same store NOI is approximately six and a half cents per share in SFO.

Speaker 5: an approximate $0.35 per share increase in FFO related to the growth in operating income from our non-same-store, joint-venture, and retail communities, resulting primarily from higher rental rates, lower bad debt, and the incremental contribution of our four acquisitions completed in 2021 and our nine development communities in lease-up during either 2021 and or 2022.

And approximate 35 cent per share increase in <unk> related to the growth in operating income from our non same store joint venture and retail communities.

Resulting primarily from higher rental rates lower bad debt and the incremental contribution of our four acquisitions completed in 2021, and our nine development communities in lease up during either 2021 <unk> 2022.

Speaker 5: and an approximate $0.07 per share increase in FFO due to an assumed $600 million of proforma acquisitions spread throughout the year at an initial yield of 3.5%.

And an approximate seven cent per share increase in <unk> due to an assumed $600 million of pro forma acquisitions.

Fred throughout the year at an initial yield of three 5%.

Speaker 5: This $1.21 cumulative increase in anticipated FFO per share is partially offset by an approximate $0.11 per share decrease in FFO from our completed 2021 dispositions, an approximate $0.04 per share decrease in FFO from an assumed $250 million of pro forma dispositions anticipated to primarily occur late 2022.

This dollar 21 cumulative increase in anticipated <unk> <unk> per share is partially offset by <unk>.

An approximate 11 cent per share decrease in <unk> from our completed 2021 dispositions and approximate <unk> <unk> per share decrease in <unk> from an assumed $250 million of pro forma dispositions anticipated to primarily occur late 2022.

An approximate <unk> <unk> per share decrease in <unk>, resulting primarily from the combination of lower interest income from lower cash balances higher franchise and margin taxes, and higher corporate depreciation and amortization.

Speaker 5: An approximate $0.03 per share decrease in FFO resulting primarily from the combination of lower interest income from lower cash balances, higher franchise and margin taxes, and higher corporate depreciation and amortization.

Speaker 5: Our combined general and administrative, property management, and fee and asset management expenses are anticipated to be effectively flat year over year.

Our combined general and administrative property management and CNS. It management expenses are anticipated to be effectively flat year over year.

Speaker 5: and an approximate 18 cent per share decrease in FFO due to the additional shares outstanding for full year 2022 following our 2021 ATM activity.

And an approximate 18 cents per share decrease in <unk> due to the additional shares outstanding for full year 2022, following our 2021 ATM activity.

Our revenue growth midpoint of 875% is based upon an anticipated 11% average increase in new leases and a 7% average increase in renewals.

Speaker 5: Our revenue growth midpoint of 8.75% is based upon an anticipated 11% average increase in new leases and a 7% average increase in renewals.

Speaker 5: We are also anticipating that occupancy will moderate slightly to 96.5%.

We are also anticipating that occupancy will moderate slightly to 96, 5%.

Speaker 5: Page 27 of our supplemental package also details other assumptions for 2022, including the plan for 400 to $600 million of on-balance-use development starts, spread throughout the year with approximately $315 million of annual development spend.

Page 27 of our supplemental package also details other assumptions for 2022, including the plan for $400 million to $600 million of on balance sheet development starts spread throughout the year with approximately $315 million of annual development spend.

We expect <unk> per share for the first quarter of 2022 to be within the range of $1 45 to $1 49 the.

Speaker 5: We expect FFO per share for the first quarter of 2022 to be within the range of $1.45 to $1.49. The midpoint of $1.47 represents a $0.04 per share decrease from the fourth quarter of 2021, which is primarily the result of an approximate $0.02 per share decrease in FFO resulting from our fourth quarter 2021 dispositions.

The midpoint of $1 47 represents a four cent per share decrease from the fourth quarter of 2021, which is primarily the result of an approximate <unk> <unk> per share decrease in <unk>, resulting from our fourth quarter 2021 dispositions.

Speaker 5: An approximate one cent per share decrease in sequential same-store net operating income resulting primarily from the reset of our annual property tax accrual on January the 1st of each year and other expense increases primarily attributable to typical seasonal trends including the timing of onsite salary increases.

An approximate one cent per share decrease in sequential same store net operating income, resulting primarily from the reset of our annual property tax accrual on January the first of each year and other expense increases primarily attributable to typical seasonal trends, including the timing of onsite salary increases.

And.

Speaker 5: An approximate one cent per share decrease in FFO due to the additional shares outstanding from our fourth quarter 2021 ATM activity.

And approximate one cent per share decrease in <unk> due to the additional shares outstanding from our fourth quarter 2021 ATM activity.

Speaker 5: Our balance sheet remains strong with net debt to EBITDA at 3.8 times and a total fixed charge coverage ratio at 6.4 times.

Our balance sheet remains strong with net debt to EBITDA at three eight times and a total fixed charge coverage ratio at six four times.

As of today, we have approximately $1 $4 billion of liquidity comprised of approximately $500 million in cash and cash equivalents and no amounts outstanding under our $900 million unsecured credit facility at.

Speaker 5: As of today, we have approximately $1.4 billion of liquidity comprised of approximately $500 million in cash and cash equivalents and no amount outstanding under a $900 million unsecured credit facilities.

Speaker 5: At quarter end, we had $199 million left to spend over the next two years under our existing development pipeline, and we have no scheduled debt maturities until late 2022.

At quarter end, we had $199 million left to spend over the next two years under our existing development pipeline and we have no scheduled debt maturities until late 2022.

Speaker 5: Our current excess cash is invested with various banks, earning approximately 15 basis points.

Our current excess cash is invested with various banks, earning approximately 15 basis points.

At this time, we will open the call up to questions.

Okay.

Speaker 6: Thank you. We will now begin the question and answer session.

Thank you we will now begin the question and answer session.

Speaker 6: To ask a question, you may press star, then one on your telephone keypad.

Can I ask a question you may post spa and one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker 6: If you are using a speakerphone, please pick up your handset before pressing the keys.

So let's go question Keith Pascal <unk>.

Speaker 6: To withdraw your question please press star, then too.

At this time, we will pause momentarily to assemble our roster.

Speaker 6: At this time, we will pause momentarily to assemble our roster.

Our first question comes from Handel St. Juste Mizuho. Please go ahead.

Speaker 6: Our first question comes from Handel St. Just with Mizzouha. Please go ahead.

Hey, good morning.

Speaker 7: Hey, good morning. Appreciate all the market color, all the detail. I had a question more so on the, I guess we're starting to see a bit of a divergence here in the new lease rates and renewals. The new lease rates continue to accelerate and the new lease rate is slowing a bit. How do we think about that relationship near term? I expect new lease rates to come under more pressure as we face tougher comps, but I guess I'm curious also, which markets are you seeing the best and weakest pricing power on renewals? What's causing the drag? I expect.

Appreciate all the market color all the detail.

I had a question more so on the I guess, we're starting to see a bit of a divergence here in the new lease rates.

Renewals, the new lease rates continued to accelerate in those slowing a bit.

We think about that relationship near term I expect lease rates have come under more pressure as we face tougher comps, but I guess I'm.

I'm curious also.

Which markets are you seeing the best and weakest pricing power renewables, what's causing the drag.

Yes, so handle the <unk>.

Speaker 4: Yes, so Handel, the gap between new leases and renewal rates is something that moves around quite a bit, primarily because

GAAP between new leases and renewal rates is something that moves around quite a bit primarily because of what we do on renewal rates from time to time, depending on what's going on in a market or a submarket we might put in place.

Speaker 4: of what we do on renewal rates. From time to time, depending on what's going on in our market or a sub-market, we might put in place renewal caps, and which is not something we would ever do on new lease rates, not in this environment. So it's gonna move around a little bit depending on, kind of what, it's literally our pricing team looking at the trends day to day. Ready?

Renewal caps, which is not something we would ever do on new lease rates not in this environment. So it's going to move around a little bit depending on kind of what it's literally our pricing team looking at the trends day to day and making recommendations.

Speaker 4: and making recommendations. I think in the first quarter,

In the first quarter.

Speaker 4: We had a couple of markets that we had renewal caps in place, but I mean, you're talking about

We have a couple of markets that we had renewal caps in place, but I mean, you're talking about renewal caps on a.

Speaker 4: on a what might have been as much as a 20 plus percent renewal rate.

Might've done as much as that.

Plus percent renewal rates.

Speaker 4: being capped at 18% and that would have been in some place like Pantheos St. Petersburg, but it's not so it's not unusual for that to move around I would expect to see the that over the course of the year you probably will see a narrowing in that

Being capped at 18% and that would've been in someplace like.

Tampa St. Petersburg, but it's not so it's not unusual for that to move around I would expect to see that over the course of the year, you probably will see a narrowing in that.

Speaker 4: But I think yes, I think our guidance is Alex pointed out has new leases at 11 over the course of the year and and granules at seven so it's not too far off of where we are right now but it's it's it's it's it's absolutely part of the art and science of the Robedy Management and

But I think I think our guidance is as Alex pointed out has new leases at 11.

In the course of the year and renewals of seven so not too far off of where we are right now, but it's clear it's absolutely part of the art and science of revenue management and it.

Speaker 4: It's just our revenue team looking at current trends and making recommendations.

It's just our revenue team looking at current trends and making recommendations.

Speaker 7: Got it, got it. So no particular market note on the renewal side that you're seeing a more meaningful difference in any form?

Got it got it so no particular market of notes on the renewal side that youre seeing them more meaningful differences in any form.

No.

Speaker 4: No, and I would say, you know, when we talk about less strength, I mean, I think that's the overriding message of this entire, of all the data set that we sent out last night. I mean, you're talking about pretty unprecedented levels of both new lease and renewal rates across all of our markets. And we had, um,

And I would say you know we talk about less strength.

The overriding message of this entire.

Of all the data set that we sent out last night, I mean, youre talking about pretty.

The levels of both new lease and renewal rates across all of our markets.

We had.

Speaker 4: 12 of our 14 markets with double digit in a wide growth in the fourth quarter and that's trend that's continued over in the first quarter. So, you know, somebody always has to be at the bottom and right now Washington DC is at the bottom and some of that is just the drag from the DC Metro properties where we are really precluded from, you know, finding a market clearing rate for the communities at the apartments that we have there. but overall this R is

12 of our 14 markets with double digit.

NOI growth in the.

Fourth quarter and that trend has continued over in the first quarter.

Somebody always has to be at the bottom and right now in Washington D. C is at the bottom and some of that is.

The drag from the DC Metro properties, where we are really precluded from.

Finding a market clearing rate for the communities.

<unk> that we have there but overall these are.

I think the lowest grade that we gave was an a minus and that was Washington D. C. And so this is the first time, we've ever had that happen in our portfolio, obviously, a lot of strength out there.

Speaker 4: I think the lowest grade that we gave was an A minus and that was Washington, D.C. And so this is the first time we've ever had that happen in our portfolio. Obviously a lot of strength.

Yes, yes, that's very well noted actually your comments lead me to my second question, which is I guess your longer term views on your Houston and DC portfolio exposures here.

Speaker 7: Yes, but very well noted. Actually, you're your comments leave me to my second question, which is, I guess your longer term views on your Houston and DC portfolio exposures here. You know, both markets have been exactly been the strongest of late, although they're improving at least the outlook for this year. I guess I'm curious on your exposures here. They're your two largest markets.

Both markets have been exactly been the strong as of late although there.

Proving that at least the outlook for this year I guess I'm curious on your your exposure to either your two largest markets.

Speaker 7: your increasing exposure to other smaller Sunbelt market. You filled a few assets in Houston in this past quarter. So I guess how do we think about your exposure there the next few years? Do you want to become source of the funds for your expansion into some of these other smaller, higher growth Sunbelt markets?

You're increasingly exposed to other smaller sunbelt markets you've sold a few assets in Houston. This past quarter. So I guess, how do we think about your exposure. There. The next few years and you must become source of the funds for your expansion into some of these other.

Smaller higher growth sunbelt markets. Thanks.

Okay, that's exactly what our strategy has been and we've talked about it that will call last time, which was we were going to use this environment to sell down in Houston, and DC and then expand our portfolio into.

Speaker 2: Well, Hanyal, that's exactly what our strategy has been. We talked about it at the call last time, which was we were going to use this environment to sell down Houston and D.C. and then expand our portfolio to increase the exposure in some of the markets that we're underweighted in. Ultimately, that's our strategy. It's going to take us a few years to get there, but it makes a lot of sense.

Increased.

And some of the markets and we are under weighted in.

Ultimately.

That's our strategies can take us a few years to get there, but it makes lot of sense, I mean, literally geographic diversification and primarily being in the Sunbelt has definitely helped us a lot and I think ultimately as we do that sort of portfolio redistribution over the next couple of years it will.

Speaker 2: Clearly, geographic diversification and primarily being in the Sun Belt has definitely helped us a lot.

Help us be more geographically FERC do you look at the last cycle in terms of how much we bought call I mean, we really.

Speaker 2: more tea at Bradford Lake, the birth. If you look at the last cycle in terms of how much we bought and sold, I mean, we really transformed the portfolio from 2010 through about the port to the pandemic. And we sold on average 26-year-old assets and redistreated that cash flow, sold out in Las Vegas. So we did a lot of portfolio management then. One of the numbers I thought was really interesting if you look at how many sales we did relative to our total assets base in 2010. We re-

<unk> transformed the portfolio from 2010 through about the fourth to the pandemic and we sold on average 26 year old asset and redistributed that cash flow sold out of Las Vegas. So we did a lot of a lot of portfolio management than.

When the numbers I thought was really interesting if you look at how many sales we did relative to our total asset base in 2010, we've redistributed 44% of our NOI around the country as a result of those transactions.

Speaker 2: You look at how many sales we did, well-listed to our total asset base in 2010. We redistributed 44% of our NLI around the country as a result of those transactions, where we sold assets, nearly $3 billion in the cost of properties, and then we opened the developed properties. And so we'll continue that. I think this environment gives us the opportunity to do it on a very, very low spread basis.

Where we sold assets nearly $3 billion.

Our properties and then we also developed properties and so we'll continue that I think this environment gives us the opportunity to do it on a very very low spread basis, where we're we're not giving up a lot of cash flow given the.

Speaker 2: We're not giving up a lot of cash flow, given the amazing market that people want by, you know, those are properties.

Amazing market that people want to buy the properties.

That's kind of the hot hottest spot in the market right now, even though it's very hard for sure.

Got it that's helpful is there any pricing difference or noticing any significant demand difference in selling say Houston assets versus.

Speaker 7: Got it, that's helpful. Is there any pricing difference or noticing any significant demand difference in selling face use to assets versus DC given some of the challenges you know that earlier?

D C. Given some of the challenges you noted earlier.

Early on there.

Speaker 2: You know, early on there was a sort of a pricing differential in Houston relative to other markets and a DC a bit, but that is damaged because of the wallet capital. When you look at what's happened, I mean, in 2021.

There was a sort of a pricing differential in Houston relative to other markets and in D. C a bit but but that is damaged because of the wall of capital. When you look at what's happened in 2021.

Speaker 2: you know, there was roughly $350 billion in multi-family transactions. And just pretty prospective gateway markets, the sales were up 8% from the prior year. And in non gateway markets, you're up 90%.

Roughly 300, almost $350 billion of multifamily transactions.

And just play perspective, the gateway markets.

<unk> were up 8% from the prior year and in non gateway markets were up 96%. So all of the non.

Speaker 2: So all the non-gateway markets is where the capital went. So for us, when we started talking, I think last year when we talked about selling down and redistributing these assets, we talked about perhaps having 100 to 125 basis point negative spread on the cap rates, and that's narrower to under 50.

Non gateway markets is where the capital with so for US when we started talking I think last year, when we talked about selling down.

Redistribution.

Talked about perhaps having 100 to 125 basis point negative spread on the cap rate and thats narrower to under 50.

Of that.

Speaker 2: massive bid for those properties. And there is no discount today in Houston or in.

The massive bid for those properties and there is a discount today in Houston or in.

Speaker 2: or DC and I think the other part of that equation is we think about Houston.

R&D C and I think the other part of that equation when you think about Houston.

Speaker 2: If Houston added 154,000 jobs this year, it's going to add 75,000 jobs next year. 2022 is the year where energy companies are actually hiring. And that has to do with $90 oil. Some people are thinking that oil is going to go to over 100. But...

<unk> added 154000 jobs this year and at 75000 shops next year two.

<unk> 2022 is the year, where energy companies are actually hiring and that has to do with $90 oil. Some people are thinking that oil.

Over 100, but so the bottom line is that while Houston has not added all of those jobs back from the pre pandemic level and all of the other cities in Texas have Houston Hertz gas in effect it is our lower.

Speaker 2: So the bottom line is that while Houston has not added all of its jobs back from the pre-pandemic level and all of the other cities in Texas have, Houston has gas in its tank. And it is our lower, you know, the Houston and DC, while they're the lower growth cities today, you know, they still have the ability to, they have gas in their tank because they haven't been able to...

Houston and DC, while there's a lower.

Growth is today, they still have the ability to they have gas in our tank because they haven't been able to.

Pushing as hard as other cities and then D C as Keith mentioned.

Speaker 2: as far as other cities. And then DC, as Keith mentioned, in our district, we have some really significant assets that we cannot raise renewal rates.

In our district in the district, we have some really significant asset.

We cannot raise we cannot raise renewal rate.

Speaker 2: So you just have to renew it at the original number. And you have a little market there, and that's what's driving DC at the bottom of our growth. But even when you look at Houston number, and in a normal year, I'd be cheering Houston, the problem is you've got these.

So you just have to renew it at the original number.

You have a lid on the market there and that's what's driving for D. C to be at the bottom of our growth, but even when you look at.

Houston number on.

In a normal year I maturing Houston, but the problem is as you've got markets like Tampa, Phoenix or just out of control good.

Speaker 2: markets like Tampa and Enix are just out of control good and and so the slowness of Houston makes you feel like it's dragon because you know, I mean it is on a fundamental basis but you know

And so.

Slowness of Houston makes you feel like it's dragging because.

It is a fundamental basis, but it's still.

Speaker 2: really good well above trans producing and I think we have

Really good well above trend for Houston, and I think we have the benefit of.

Speaker 2: the benefit of more growth there when other markets perhaps start slowing the future. Pretty nice.

More growth there.

What other markets, perhaps start to slow in the future.

Great that's fantastic color I appreciate the time and the effects. Thank you.

Our next question comes from Derek Johnston with Deutsche Bank. Please go ahead.

Speaker 6: Our next question comes from Derek Johnston with Deutsche Bank. Please go ahead.

Speaker 8: Hi everybody, thank you. Can you touch on the 2022 expense environment kind of baked into guidance really in regards to taxes and payroll pressures? You know, it generally seems to be a favorable setup, but any additional color on possible tax rate increases or expectations given that the expenses seem to remain largely in check.

Hi, everybody. Thank you.

Can you touch on the 2022 expense environment kind of baked into guidance really in regards to taxes and payroll pressures generally seems to be a favorable setup, but any additional color on possible tax rate increases our expectations given that the expenses seem to remain largely <unk>.

Check.

Yeah, absolutely. So we are anticipating that property taxes are going to be up about three 3% in 2022, a large component of that.

Speaker 5: No, absolutely. So we're anticipating that property taxes are going to be up about 3.3% in 2022. A large component of

Speaker 5: uh... is some significant property tax refunds that uh... we've already settled the cases and so it's a matter of

Is some significant property tax refunds that we've already settled the cases and so its just a matter of of receiving the checks that to give you an idea.

Speaker 5: of receiving the checks to give you an idea.

Speaker 5: Our total property tax refunds in 2021 was about 2.2 million.

Our total property tax refunds in 2021 was about $2 2 million and were expecting about $3 1 million of refunds in 2022. So that's that's one of the primary drivers of the property tax number being.

Speaker 5: and we're expecting about 3.1 million of refunds in 2022. So that's one of the primary drivers of the property tax number being relatively mild at 3.3%. The other thing I'll point out is that rates in Texas, so both Houston, Austin and Dallas, rates came in much lower than we had originally expected for 2021, and I think that bodes very, very well for 2022.

Relatively mild at three 3% the other thing I'll point out is that rate in Texas, So both Houston, Austin and Dallas rates came in much lower than we had originally expected for 2021, and I think that bodes very very well for 2022.

Speaker 5: If you think about the arrests, that's where the rest of our expense categories, we continue to do a really good job of controlling and being more efficient with our marketing spend. A lot of that is driven by the technological advancements that I've talked about in prior quarters. And we're seeing the same thing on the salary side. You know, if you think about the technological advancements that we've talked about, including installation of installation.

If you think about the arrest the show the rest of our expense categories. We continue to do a really good job of controlling and being more efficient with our marketing spend a lot of that is driven by the technological advancements that I've talked about in prior quarters.

And we're seeing the same thing on the salary side.

If you think about the technological advancements that we've talked about including the installation of smart access for all entrance ways.

Speaker 5: smart access for all interim ways, which not only improves the customer experience, it also provides efficiencies for our maintenance teams.

Which not only improves the customer experience. It also provides efficiencies for our maintenance teams and then most importantly facilitate self guided tours.

Speaker 5: And then most importantly, facilitate self-guided tours. And then we're also improving our sales process through our funnel implementation, which is our sophisticated customer relationship management tool, and then also a marketing automation platform. When you put all that in place, and then we're also working on AI, that all helps to counter some of the inflationary expense controls.

And then we're also improving our sales process through our funnel implementation.

<unk>, which is our sophisticated customer relationship management tool and then also a marketing automation platform.

Put all of that in place and then we're also working on AI.

That all helps too.

Counter some of the inflationary expense controls in 2022 and beyond so so that's really the primary drivers and that's why we feel pretty good about the 3% number.

Speaker 5: in 2022 and beyond. So that's really the primary drivers, and that's why we feel pretty good about 3% number.

No that's very helpful. Thank you.

Speaker 8: No, that's very helpful. Thank you. For you, in this quarter and last year, the land acquisitions certainly show a commitment to develop even a mid-rise and construction material labor cost.

So yeah in this quarter and last year, but land acquisitions, certainly show a commitment to develop even amid rising construction material labor costs. So a rising rent encouraging enough to further ramp development now I mean, what yields would you expect on any new starts but what Neil.

Speaker 8: So, our rising rent encouraging enough to further ramp development now. I mean, what yields would you expect on any new start?

Speaker 8: What are the deals that you need to make a project to go? Especially when you look at apartment cap rates for acquisitions, especially the new stuff you like, or so tight down in the mid to high threes. What development yield is kind of makes a project to go and what's the minimum or what's the tipping point?

Yields would you need to make a project to go, especially when you look at apartment cap rates for acquisitions, especially the new stuff you like.

So tight down in the mid to high threes, what development yield it kind of makes a projected go and what's the minimum or what's the tipping point.

Okay.

Rick you're on mute.

Speaker 2: Well, me development deals are what we look at as our unlimited IR or seven year period. And when you look at so you can talk about it from that perspective and clearly, you know, the good news is that rental rates have risen faster than construction costs at least in the cycle.

Mute the development yields are when you look at us our unlevered IRR over seven year period.

And when you look at so you can talk about it from that perspective and clearly good.

Good news is is that rental rates have risen faster than construction cost inflation in this cycle, which is pretty amazing just give you some data points. The 600, plus if you take the 600 million, we have under construction plus a $200 million and we've already finalized.

Speaker 2: pretty amazing. Just give you some data points that 600 plus, it take the 600 million way of under construction plus the 200 million that we've already finalized. We have cap rates are initially yields on stabilization have actually gone up because of that.

We have cap rates, our initial yields on stabilization have actually gone up because of that.

Speaker 2: and interest rates or the rise in rental rates to roughly 6% of start going in yield. When you look at our pipeline that we have, which is roughly another billion dollar, a billion two, something like that, most of the average that we're looking at for those are gonna be in the five, low fives probably, and we haven't really updated the numbers on both costs or the rents in those performance. So when you look at cap rates in the low threes and existing yields in the fives, clearly a development is a preferred option when you think about risk reward and the returns that we're making.

Interest rates are rising rental rates to roughly 6% sort of going in yield.

When you look at our pipeline that we have which is roughly another.

$1 billion billion, two something like that.

Most of the sort of average that were looking at.

We're going to be in the and the and the fives low fives, probably we haven't really updated numbers on on both cost or for the rents and those pro forma so when you look at cap rates in the low threes and.

Just in yields in the five clearly.

Development is a preferred option when you think about risk reward in the.

The returns that we're making.

Speaker 2: We have pressed our development people to try to let

Press Star development people too to try to.

Expand the pipeline and if you look this year, we're going to mid part of Caf $1 billion to starts which will take our pipeline back up to a little over $1 billion.

Speaker 2: expand the pipeline and if you look this year we're going to, you know, a midpoint is half a billion dollars to start which will take our pipeline back up to a little over a billion dollars or at least our construction.

At least our construction.

Speaker 2: progress up to a billion dollars. It's a really good business right now and one of the

Progress up to $1 billion.

It's a really good business right now and one of the.

The challenge is obviously as the forward looking start members and those are also peaking so.

Speaker 2: The challenge is obviously is the forward-looking start numbers and those are also peaking. So we're long-term holders obviously, so we can work through those cycles. And I think it's hard, if you ask me, could we double our pipeline and go from a billion to two billion? Really hard to...

We're long term holders, obviously, so we can work through those cycles.

I think it's hard if you asked me could we double our pipeline to go from 1 billion to $2 billion really hard to do.

Speaker 2: just give timing and just what it takes to get a development done. But we usually do 300 million a year and we'll do 500 million this year and hopefully maybe something like that next year. So at the margins, we're comfortable in that billion, billion, two billion.

Timing and just what it takes to get a development done, but we're we usually do $300 million a year will be $500 million. This year, hopefully maybe something like that next year. So at the margin we're comfortable in that $1 billion $1 2 billion three range.

Thank you.

Our next question comes from Nick Joseph with Citi. Please go ahead.

Speaker 6: Our next question comes from Nick Joseph with City. Please go ahead.

Speaker 9: Thanks. What's the current loss police for the portfolio? And then for the 11% increase assumed on new leases, how does that look in the first half of the year versus your expectations in the back half of the year?

What's the current loss to lease for the portfolio and then for the 11% increase assumed on new leases how does that work in the first half of the year versus your expectations for the back half of the year.

Speaker 5: Yeah, so if you look at current loss deli and there's, you know, as we've talked about in the past, because of dynamic pricing, there's lots of different ways you can sort of slice this number. If you look at all of the new leases that we signed in December and you compare those to the effective leases in place, that would put loss deli sort of in the 10 to 11% range right now.

Yeah. So if you look at current law escalation and theirs as.

As we've talked about in the past because of dynamic pricing theres lots of different ways. You can sort of slice. This number if you look at all of the new leases that we signed in December and you compare those to the effective leases in place.

That would put the loss to lease sort of in the 10% to 11% range right now.

Speaker 5: So that's sort of where we are. If you think about the way we are anticipating 2022 to sort of roll out, we're anticipating continual, very strong numbers in obviously in the first quarter. And then second quarter, third quarter, we get into sort of our peak periods. But we are expecting seasonality to start kicking in towards a lot of part of the third quarter in the fourth quarter. So you'd start to see a lot of that coming back.

So that's sort of where we are if you think about.

The way, we are anticipating 2022 to sort of rollout.

We're anticipating continual very strong.

Number is in obviously in the first quarter and then and then second quarter third quarter, we'd get into sort of our peak periods, but we are expecting seasonality to start kicking in towards the latter part of the third quarter and the fourth quarter, so you'd start to see it.

Hard to see a lot of that coming back down.

Thanks, and then just on the <unk>.

Speaker 9: Thanks. And then just on rental assistance, I think you had 5.3 million in the third quarter. What was that number in the fourth quarter? And then what is assumed in 2022?

Rental assistance I think you had $5 3 million in the third quarter, what was that number in the fourth quarter and then what is assumed in 2022 guidance.

Yeah, absolutely so the $5 3 million in the third quarter that was a total on a same store basis for the third quarter. It was $4 2 million that.

Speaker 5: Yeah, absolutely. So the 5.3 million in the third quarter, that was a total on a same store basis for the third quarter. It was 4.2 million that did increase to 5.1 million in the fourth quarter of 21. So that gave us for a same store basis, about 12 and a half million dollars for 2021. And what we've got in our in our assumptions today is that we're going to recognize about half of that amount in 2022.

That did increased to $5 1 million in the fourth quarter of 'twenty. One so that gave us for a same store basis about 12, and a half million dollars for 2021, and what we've got in our in our assumption today is that we're going to recognize about half of that amount in 2022.

Thank you very much.

Mhm.

Our next question comes from Brad Olsen with <unk>.

Speaker 6: The next question comes from Brad. Cutthorn with RBC.

RBC. Please go ahead.

Hey, everyone, Alex just as a follow on to that last question about new lease growth and then you have the 15% plus number in January and it seems like you can probably sustain.

Speaker 9: Hey everyone, Alex just as a follow on to that last question about new lease growth.

Speaker 9: You have the 15% plus number in January and it seems like you can probably sustain double digits through the second quarter before the comps get really tough. Just to hit the averages that you talk about, it seems like it would be some sort of low mid single digit number in the second half of the year to hit the averages. So is that the right way to think about it? And is that?

Digital through the second quarter before the comps get really tough, but just stay at the averages that you talk about it seems like it would be some sort of low mid single digit number in the second half of the year to hit the average and so is that the right way to think about it and is that is that kind of what we should think about as your expectation for market rent growth from where we.

Speaker 9: Is that kind of what we should think about as your expectation for market rent growth from where we are right now?

You are right now.

Yeah, absolutely I think that's probably a pretty good way of thinking about it is if you sort of look at December of 2021 to December 2022, and what do we think market rent growth is going to be over that period and you know we think it's sort of in the.

Speaker 5: Yeah, absolutely. I think that's probably pretty good way thinking about it. If you sort of look at December of 2021 to December 2022 and what do we think market rent growth is going to be over that period? You know, we think it's sort of in the call it the 4 to 5% range and then you've obviously got the loss to lease that we're going to that we're going to be going to have to maximize partially throughout the rest.

I'd call it the 4% to 5% range and then you've obviously got the last release that we're going to that we're going to.

Be able to recognize partially throughout the rest of the year.

Speaker 9: And then on the balance sheet, obviously this quarter you text below the bottom end of your typical 4-5X range. I'm curious for funding needs beyond the positions in 22, should we expect that those will come from debt? Or do you have a desire to keep the balance sheet cleaner than it would normally be just given the place in the cycle?

Okay got it.

And then on the balance sheet, obviously this quarter in your text below the bottom end of your typical four to five X range I'm curious for funding needs beyond the dispositions in 'twenty two should we expect that those will come from that or do you have a desire to keep the balance sheet, maybe a cleaner than it would normally be just given the place in the cycle.

You know we've always had this stated view that we should we should have our debt to EBITDA in the 4% to 5% range and were obviously below that as a result of the equity.

Speaker 2: You know, well, we've always had the stated view that we should have our debt to EBITDA on the 4 to 5% range. We're obviously below that as a result of the equity issuance, but we also have a net acquisitions or net investment.

But we also have a net acquisitions are a net net investment.

Speaker 2: We take acquisitions minus dispositions plus the development spend.

You take acquisitions dispositions.

Dispositions plus development spend so we will be.

Speaker 2: execute all that and we'll get that debt to you to talk back into the middle part of the equation. But you know today it's an interesting time when you when you look at the ability to to put permanent capital in the books with and then employ that capital into what's a very very very frothy acquisition market but I've never seen our FFO yield and a 3% on our stock price.

Execute all that and we'll get that debt to EBITDA back into the middle part of the equation, but.

Today, it's an interesting time when you win when you look at the ability to two.

To put permanent capital on the books with and then deploy that capital into what's very.

Very frothy acquisition market, but I've never seen our <unk> yield at a 3% on our stock price.

Speaker 2: generally in my business career. So I think we have a green light to use every source of capital and we will continue to be in that band and it's opportunistic for us to issue equity we will and it's opportunistic to issue debt we will but we'll stay in that band.

Italy in my business career, so I think we have a green light to use every source of capital and we will continue to be in that band and when it's opportunistic for us to issue equity, we will and when it's opportunistic to issue that we will stay in that band generally.

Great. Thank you.

Yes.

Speaker 6: Our next question comes from Neil Malkin with Capital Insecurities. Please go ahead.

Our next question comes from Neil Malkin with capital One Securities. Please go ahead.

Speaker 10: Hey, thanks. Good morning, everyone. First question, a little bit bigger picture. So you guys have a unique insight into sort of the divergence between Sun Belt and Coastal to some extent, you know, you have the DC and then obviously Southern California. And I'm wondering, you know, I've heard kind of mixed things between

Hey, Thanks. Good morning, everyone first question, a little bit bigger picture. So you guys have a unique.

Insight into sort of the divergence between some bolton and coastal to some extent you know you have the D. C and then obviously southern California.

I'm wondering I've heard kind of mixed thing between.

Speaker 10: Some people have elevated coastal exposure kind of, you know, being...

Some people who have elevated coastal exposure kind of being.

Speaker 10: incrementally positive and seeing people return to the office or whenever that happens maybe in 2025 and you know expecting solid growth and sort of almost like a return to you know normal in in a California market you know kind of like a pre-COVID type of thing but at the same time you're seeing amazing historic levels of immigration to year some about markets and just very strong growth as evidenced you know by where you are relative to pre-COVID rent levels

Incrementally positive and now seeing people return to the office or whenever that happens maybe in 2025.

And we're expecting solid growth in sort of almost like a return to normal in the California market.

Kind of like a pre COVID-19 type of thing, but at the same time, you're seeing an amazing historic levels of in migration to your sunbelt markets and just very strong growth as evidenced by where you are relative to pre COVID-19 rent levels.

Speaker 10: So I'm just wondering if you can kind of give your view on over the next call it three years, what you see in terms of job growth, population growth, migration, in the sunbelt versus what you're seeing in California. And if you just think California may be a little bit impaired, just given the significant outflow of businesses and people. Thanks.

So I'm just wondering if you can kind of give your view.

Over the next call it three years, what you see.

In terms of job growth population growth migration.

In the sunbelt versus kind of what Youre seeing in California, and if you just think California, maybe a little bit impaired I, just given the significant outflow of businesses and people.

Yes.

Speaker 4: Yeah, so I think, you know, we do have a little bit of a unique perspective because we've operated in Coastal and the sun that felt markets for many years now. And I think, I mean, our general, then that

Yes.

We do have a little bit of a unique perspective, because we've operated in social in Sun belt markets for many years now.

Yes, I think.

Our general than that.

Speaker 4: the patterns of migrations from coastal market in particular California and Northeast into the Sun Belt Market that was already in place pre-COVID, clearly accelerated during.

The patterns of migration from coastal market in particular, California, the northeast into the Sunbelt markets that was already in place pre COVID-19 clearly accelerated during COVID-19 and.

Speaker 4: And our view is that when COVID, when it all settles back down to a more normal pattern, you're still going to be left with the normal, with the pre-COVID trends of migration to the Sun Belt, for a whole for reasons that really don't have anything to do with COVID and the experience, although that clearly wasn't accelerator. But interestingly enough, in California for 2022,

But our view is that when tobey.

When it all settles back down to a more normal pattern you are still going to be left with the normal with the pre COVID-19 trends of migration to the sunbelt for a home.

The reasons that really don't have anything to do with Covid and experience, although that clearly was an accelerator that interestingly enough.

California for 2022.

Speaker 4: based on our game plan, California is really not gonna be a drag on the portfolio in 2022. So the job growth that's happening in LA County versus the number of new starts there puts that particular market in a really good place.

Based on our game plan, California is really not going to be a drag on the portfolio in 2022, so the job growth that's happening in La county versus the number of new starts there.

Splits.

That particular market in a really good place clearly the.

Speaker 4: Clearly the difference in, and you still have, we still have some, you know, kind of fighting the regulatory construct in California, but we do anticipate that that will improve in 2022. So I think we are gonna get some relief.

The difference in.

And you still have we still have some kind of fighting the regulatory construct in California, but we do anticipate that that will improve in 2022, Southern I think we are going to get some relief.

Speaker 4: In DC, our issue in DC relative to the balance of the portfolio, as Rick mentioned, is more a DC proper experience for us. The metro, there are a couple of outliers in the DC metro suburban markets where it acts as a

In D C.

Our issue in D C relative to the balance of the portfolio. Rick mentioned is more of a D. C proper experience for us the Metro there were a couple of outliers in the D C Metro suburban markets where.

Speaker 4: You know, there's still some regulatory constructs in place, but they're minor in the overall scheme of things. So I think that both of those markets, post-COVID post-regulatory constructs,

There's still some regulatory construct in place, but they are minor in the overall scheme of things so I think that that.

Both of those markets post Covid post regulatory construct.

Speaker 4: are still gonna be going through the reset and rinse.

Still going to be going through the reset and rent that the rest of America is already a lot of America is already in the midst of.

Speaker 4: that the rest of America has already, a lot of America is already in the midst of.

Speaker 4: I don't think they're going to get passed over in the sense of, you know, that we're going to come out of this and look back two years from now. There was a reset that didn't include the last 10% up in both California and DC and the DC Metro market. It's just going to come in a different timing. And as Rick mentioned, it kind of bodes well for us as we roll through 2022 to have two of our larger market.

I don't think theyre going to get passed over in the sense of that.

We're going to come out of this and look back two years from now there was a reset that didn't include the last 10% up in both California and D C and the D. C. Metro market is just going to come in a different timing and as Rick mentioned I mean, it's kind of it kind of bodes well for us as we get as we roll through 2022 to have.

Two of our larger markets.

Speaker 4: And then I'd throw Houston in that basket as well, because we clearly haven't gotten, we're not gonna get the reset all at the same time as we got in our other markets in Houston. So yet, we're of our largest markets that are kind of going through the reset at a different phase than the others, but in our view, fundamentally hadn't changed about the investment pieces for why we're in California and why we're...

And then I'd throw Houston in that basket as well because we clearly haven't gotten that we're not we're not going to get the reset all at the same time as we got into our other markets in Houston So yet.

Of our largest markets that are kind of going through the.

The reset at a different phase in the in the others, but.

Our view fundamentally hasn't changed about the investment thesis for why were in California, and why we are where we are in California, which is primarily subject, which is exclusively southern California in the DC Metro market.

Speaker 4: where we are in California, which is primarily subdued, which is exclusively sub-incalifornia, and the DC Metro market, I think, is due for a nice recovery post-go.

I think is due for a nice recovery post COVID-19 .

Speaker 10: I appreciate the color. And then maybe just again on

I appreciate the color.

And then maybe just again on.

Speaker 10: you know, just thinking about the acquisition side, I mean, obviously putting a lot of capital to work, and, you know, it's great. You know, I'm just curious to see...

Just thinking about the acquisition side, I mean, obviously, putting a lot of capital to work and now that's great and just.

Curious to see.

Speaker 10: If you're underwriting standards have changed, you're unlearned IRR targets have changed. I understand that you're cost of capital is at his store.

If your underwriting standards have changed your Unlevered IRR targets.

<unk> I understand that your cost of capital is at historic levels.

Speaker 10: But you know, it's just buying at a three cap and you know, you kind of uncertain about what the terminal or exit capray would be and

But.

We buy it at a three cap and you've kind of uncertain about what the terminal or exit cap rate would be in.

Speaker 10: You know, so when you're having those internal discussions, I mean, has anything changed, or have you gotten more bullish on your, like, sort of, year one through three rent growth assumptions that make you comfortable, you know.

So when you are having those internal discussions I mean has anything changed or have you gotten more bullish on your like sort of year, one through three rent growth assumptions that that make you comfortable.

Uh huh.

Speaker 10: going in at a load amidst 3 cap. And yeah, so if you could just maybe expand upon that and if you'd use debt more so to get an even higher positive leverage this year, thanks.

Going in it.

Low to mid three cap.

And yes. So if you could just maybe expand upon that and if you'd use that more soda getting even higher.

Positive leverage this year. Thanks.

Yes.

Well I think clearly our cost of capital has gone down and we do adjust our our hurdle rates based on our cost of capital and it's just a simple model right.

Speaker 2: I think that clearly our cost of capital has gone down and we do adjust our hurdle rates based on our cost of capital. It's just a way simple model, right? It's the equity, your equity cost, your debt cost and the weighted average cost of capital and you compare that to your unlebert IR. So to a couple of points, one being the exit cap rate, that's always a very tricky number, right? Which is what are you used and that can be all of the map. We generally try to move that up from our initial acquisition, a number by 25 to 50, I don't like that. But that's obviously a crap.

Equity your equity cost plus your debt cost and the weighted average cost of capital and you compare that to your Unlevered IRR.

So just a couple of points one one being the exit cap rate and that's always.

Very tricky number right, which is what do you use.

And that can be all over the map, we generally try to move that up from our initial acquisition a number by 25 50 of like that but but.

That's a that's obviously a crap shoot.

Speaker 2: what our cap rates and prices going to be in 27 years.

Our cap rates and pricing is going to be in <unk> and 'twenty seven.

Seven years, right, so which is our model periods in terms of going in yields.

Speaker 2: So, which is our model period. In terms of going in yields, though, when we, underwriting today, I mean, if you go in and we buy a property today in Phoenix, for example, or only using an example, or we actually bought one like in that.

Underwriting today I mean, if you go in and we buy a property today in Phoenix. For example are only using example, where we've actually bought one like in Nashville.

Speaker 2: So in our original national underwriting, the two-bottles we bought last year.

And our original national underwriting the two properties, we bought last year.

We had moderate growth.

We bought those in May right. So we didn't have to stick to it.

Speaker 2: So we didn't have this big wave that sort of happened. And we knew it was good markets. And we knew that friends were starting to move up, but we didn't think we didn't realize they're going to move up as fast as they did. So all of our acquisitions last year are outperforming by a substantial margin of what we thought that we'd be doing. We put in moderate growth through 2021 and forward. And today, our underwriting is a little different because it just depends on where the rep rule is. But we definitely are increasing ramps at a faster pace in the first 12 months of the acquisition today. And then we start back to the off of that in 2023. So we probably have better than average growth in 2022 for obvious reasons.

Wave that sort of happened in the U S.

<unk> markets and we knew that rents were starting to move up but we didn't think we didn't realize were going to move us fast.

So all of our acquisitions last year outperforming by a substantial margin of what we thought that we'd be doing we we put in moderate growth through 2021.

Forward.

They.

Our underwrites a little different because it just depends on where the rent roll is but we definitely are increasingly ramp.

Faster pace.

In the first 12 months of the acquisition today and then we then.

And we start backing off of that in 2023 and.

We felt we probably we have.

Speaker 2: Better than average growth in 2022 for obvious reasons. Better average growth in 2023. And then we start moderating it to long-term historical numbers. And we use somewhere around three or three and a half percent depending on where it is. And after that, the numbers, if the numbers generally still work pretty well, even when you're going at these low numbers, because a low cap rate is because of the outside growth there, and you get in 2020.

Better than average growth in 2022 for obvious reasons better average growth in 2023, and then we start moderating it to long term historical numbers.

US somewhere around three or three 5%, depending on where it is and after that.

The numbers work.

If the numbers generally still worked pretty well, even when youre growing at these low numbers because of low cap rates because of the about box grocery and to get in 2022 and 2023. So we're comfortable that we're making good spreads over our long term average for our long term weighted average cost of capital and not underwriting so much that we have.

Speaker 2: So we're comfortable that we're making good spreads over our long term, or long term, we have to cross the capital and not underwriting so much that we have to have prices go up or cash flow has go up dramatically to make those numbers.

To have prices go up our cash flows go up dramatically to make those numbers work.

Speaker 10: Okay, great. Thank you guys and nice quarter.

Okay, great. Thank you guys and nice quarter.

Thanks.

Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Speaker 6: Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Speaker 11: Hey, born down there. So a few questions here. First, looking at this year and the rent growth, how much of the rent growth are you getting this year from the burn off of pre-rent from last year? I'm guessing probably very few of your markets really had material free rents, but maybe DC or Southern cows, just sort of curious how much of this year's rent growth is coming from just the expiration of pre-rent in last year's numbers.

Hey.

Good morning down there.

So a few questions here first.

Looking at this year and the rent growth how much of the rent growth that you're getting this year from the burn off of free rent from last year I'm guessing probably very few of your markets really hard material free rent, but maybe DC or or southern couch, just sort of curious how much of this year's rent growth is coming from.

Just the exploration of free rent in last year's numbers.

Speaker 5: So we don't offer concessions and so that's not a fact.

So we don't offer concessions and so so that's not a factor for us.

Okay. Okay. So then I think it was the handouts questioner or next question, the 4% to 5% market rent growth that you're expecting that's on top of the mark to market. So basically it's all face value at face value right.

Speaker 11: Okay, okay, so then I think it was to Handel's questioner or Nick's question. The 4 to 5% market rent growth that you're expecting, that's on top of the market. So basically it's all face value on face value rent.

Correct.

Okay second question is on market.

Speaker 11: Okay, cool. Second question is on market, you guys just entered Nashville, the two other markets that, you know, between the jump out and the nationals would be Salt Lake and San Antonio. So as you guys look on recycling capital from Houston and from DC, what's the appetite for entering additional new market?

You guys just entered Nashville, but two other markets that would seem to jump out and be nashville's would be salt Lake and San Antonio. So as you guys look on recycling capital from Houston and from D. C.

What's the appetite for entering additional new markets.

Well, we clearly like the markets, we're in otherwise we'd be there.

Speaker 2: Well, we clearly like the markets we're in, otherwise we'd be there. I think today entering the market, when we enter Nashville, we did it in a pretty big way and we did it early on a relative basis to the big run-up and pricing and run-up.

I think today entering a new market, we entered Nashville, we get in a pretty big way and we get it.

Early on a relative basis.

Big run up in pricing in the run up in <unk>.

That was good.

Speaker 2: You know, those markets are interesting markets long term. San Antonio has always been kind of a unusual market. We were close to it in Texas. We see it and we generally have kind of not done to San Antonio because of the depth of the employment market there. AT&T moved there at 10 quarters. They have a

Those markets are interesting markets long term San Antonio has always been kind of a unusual market we were close to it in Texas, we see it.

We generally have kind of gone to San Antonio because of that the depth of the employment market. There AT&T moved their headquarters.

Speaker 2: a couple of really good things going on, but we just kind of stayed out of San Antonio because we didn't like the pace of the job market. They're on an ongoing basis. So, Salt Lake, we've looked at other markets, like smaller markets, like.

A couple of really good things going on but we just kind of stayed out of San Antonio because we didn't like the pace of the job market there on an ongoing basis.

Lake we've looked at we've looked at other markets, but smaller markets like voice in Charleston, and we just think that our markets today or.

Speaker 2: Charleston and we just think that our markets today are, you know, we've got enough to say grace over and we have enough under represented markets where we don't really need to get into the markets. On that being said, you know, we did enter Nashville and there's clearly, we follow these markets and try to try to decide whether we're going to allocate capital there. But we have enough places to allocate capital without going to new markets right now.

We've got enough to say.

Say grace over and we have enough under represented in markets, where we don't really need to get into other markets.

That being said.

We did international in there.

There is clearly we can follow these markets and try to try to decide whether we're going to allocate capital there, but we have enough places to allocate capital at that point Union markets right now.

Okay. Thank you.

Speaker 6: For an ex-question, comes from John Kim with BMO Capital Markets. Please go ahead.

Our next question comes from John Kim with BMO capital markets. Please go ahead.

Speaker 12: Good morning. I wanted to follow up on your update of lost release, which Alex mentioned is 10 to 11% now versus 16% just a few months ago.

Good morning.

I wanted to follow up on your update of loss to lease, which Alex mentioned is 10% to 11% now versus 16% just a few months ago.

Speaker 12: But if only 20 to 25% of your leases rolled in the 4th quarter, and all of those went directly to market, which I think those are pretty aggressive assumptions. Shouldn't that figure be at least 12% maybe as high as 20% versus 10 to 11.

But if only 20% to 25% of your leases rolled in the fourth quarter and all of those went directly to market, which I think those are pretty aggressive assumptions.

Shouldn't that figure would be at least 12% maybe as high as 12, 8% versus the 10 to 11.

Speaker 5: Yeah, and that's why I was trying to make a differentiation between if you think about the dynamic pricing, right? So our pricing is changing every single day. And if you take a sort of a snapshot at the end of the quarter, right? And you say, this is our asking price as compared to our effective rents. And you're going to come up with a different number.

Yeah, and that's why I was trying to make a differentiation between if you think about the dynamic pricing right. So our pricing is changing every single day and if you take a sort of a snapshot at the end of the quarter.

And you say this is our asking price as compared to our effective rent and you're going to come up with a different number what.

Speaker 5: what I was telling you is that if you actually look at the leases that we signed during the month of December and you compare those to the effective

What I was telling you is that if you actually look at the leases that we signed during the month of December and you compare those to the effective rent, that's where youre going to come up with sort of this 10% to 11% level. So.

Speaker 5: That's where you're going to come up with sort of this, you know, 10 to 11 percent level. So it's two different ways of looking at it. If you just look at it based upon the pure asking runs, yeah, that's going to be about a 13.

It's two different ways of looking at it if you just look at it based upon the pure asking rents.

That's going to be about a 13% number right, but that but as we know with dynamic pricing.

Speaker 5: Right, but as we know with dynamic pricing, that there is a typical or there's a tendency where as pricing is sort of ticking along and then it'll drop and then we sign good amount of our leases at that little drop and then it'll go back up.

That there is a typical or there's a tendency whereas pricing is sort of ticking along and then it'll drop and then we sign.

A good amount of our leases at that little drop and then it'll go back up and so really two different ways to look at loss to lease I think that the that there's sort of 10% to 11% is probably a probably a better way to look at it in an environment like this in a typical environment, where youre sort of talking about 3% to 4% loss to lease there is not as dramatic but.

Speaker 5: And so really two different ways to look at loss to lease. I think that the sort of 10 to 11% is probably a better way to look at it in an environment like this. In a typical environment where you're sort of talking about, you know, 3 to 4% loss to lease is not as dramatic. But clearly when we're here with unprecedented new lease and renewal increases, I think it's important that you look at it both.

But clearly when we're here with unprecedented.

New lease and renewal increases I think it's important that you look at it both ways.

Speaker 12: Okay, I get that, but at the same time the market rents for your market is probably going to see that much seasonality I'm guessing. So...

Okay, I get that but at the same time the market rents for your markets, probably didn't see that much seasonality I'm guessing so.

Speaker 12: I would have thought that would have been a further support from that number being higher.

I would've thought had been that would have been further supports that number being higher.

Speaker 5: You know, we certainly did see some seasonality and you can see that if you look at the effective versus the signs, so we did see some seasonality particularly in the month of December . But yeah, so that's the math and that's our numbers.

We certainly did see some seasonality and you can see that if you look at the effective versus the signs. So we did see some seasonality, particularly in the month of December .

But yes, so that's that's the math and that's how our numbers are working out.

Speaker 2: You know, the seasonality we had this year was interesting because usually you're dropping rents pretty dramatically from the second quarter, third quarter, fourth quarter. What happened here is we got a slight decrease in the slight negative seconds of riveted, still a very robust number that you, you know, if you go back probably 10 years, you wouldn't see the number.

The seasonality we had this year was interesting because usually youre dropping rents pretty dramatically from the third quarter second quarter third quarter fourth quarter, what happened here.

Slight decrease.

Slight negative second derivative.

<unk>, a very robust number that if you go back probably 10 years you wouldn't see.

The number.

The amount of rental increases that we're getting in the fourth quarter and you just wouldn't see it like that because of the seasonality. This year was very it was like a like a really slow but not dramatic at all in any major market, which is usually unusual.

Speaker 2: amount of rally increases that we're getting in that fourth quarter and you just wouldn't see it like.

Speaker 2: So the seasonality this year was very, it was like a really slow and not dramatic at all in any major.

Speaker 2: usually, it's usually an application. You know, what's happened is you just had more people coming into the market and more demanded the market, which kept occupancies high and where we didn't have to drop rents or lower renewables during this period dramatically to keep market sharing, to keep occupancy up.

It's usually not applications with <unk>.

Happened as she has had more people coming into the market and more demand in the market, which kept occupancy is high and where we didn't have to drop rents.

Sure renewals during this period dramatically to keep market share and to keep occupancy up in that.

Speaker 2: It's just an equation where you just have a whole lot more demand for multi-family than you have to fly. And it just created a very, very, very slight personality, but generally not like we know.

That's just part of the equation, where you just have a whole lot more demand for multifamily than you have supply.

And it just.

It created a very very very low.

Right.

Reality, but generally not like we normally have.

Alright, Okay, and then Rick you mentioned, what development expectations arent Irr's on development starts.

Speaker 12: Right, okay. And Rick, you mentioned what development expectations are and IRRs on development starts. You had one development at eight and three quarter stabilized yields coming in this period.

Had one development at eight in three quarter stabilized yields.

Coming into this period.

Speaker 12: What should we be modeling for at the existing pipeline? Just give it how much rents have come up in the last 12 months.

What should we be modeling for the existing pipeline just given how much rents have come up in the last 12 months.

Speaker 2: Well, the existing pipeline without remodeling it was sort of in the mid-5.

Well the existing pipeline without without re modeling and it was sort of in the mid fives.

Speaker 2: I respect, you know, it's probably going to be better than that. You know, it's just one of those things where we have a really remodeled all of our pipeline development deals at this point with the rents, but also we have a remodel of what new costs either. So, you know, we'll do, I think the development yields will be higher than we originally projected, but...

I respect.

It's probably going to be better than that.

It's just one of those things were.

We haven't really remodeled all of our pipeline development deals at this point with new reps, but also we haven't remodel them with new cost either so.

I think the development yields will be higher than we originally projected but it's hard to tell right now and especially when you're talking about initial occupancies that were looking at my pipeline report right now on our initial occupancies on our pipeline or in the second quarter first quarter through the third quarter of 2024.

Speaker 2: and especially when you're talking about initial occupancies that I'm gonna look at in my pipeline report right now or initial occupancies on our pipeline are in the second quarter, you know, first quarter through the third quarter of 2020.

Speaker 2: So for us to kind of try to model that today, and we're just not gonna do that yet. So the bottom line is, is that it looks like the development pipeline will be pretty robust and good.

For us to kind of try to model that today.

We're just not going to do that yet so so.

But bottom line is is that they look it looks like the development pipeline.

Pretty robust and good pipeline.

And so is that the pipeline of communities that we haven't started if you think about the ones that we have started.

Speaker 5: And that's the pipeline of communities that we haven't started.

We're looking at yields north of 6% there on average.

So that eight quarters that was truly.

Speaker 12: So that 8 and 3 quarters, that was truly a one off or could there be others north of 7%?

A one off or could there be others north of 7%.

Yes.

Speaker 2: We have that hit over seven percent in Phoenix, but most of them are in the sixes, mid-sixes to high-five. Some of the ones, for example, that when you think about real urban properties or California properties, those are in the generally tend to be in the, when we un-road them.

We have that hit over 7% in Phoenix.

But most of them are in the pictures mid sixes.

Hi Fi.

Some of the ones for example that when you think about real urban properties of our California properties. Those were and are those generally tend to be on the.

When we underwrote them originally they were in the.

Speaker 2: low five, five is and definitely wanted to be better than that on those, but we getting the the outliers like the age in the seven.

The low five five years and definitely we are going to be better than that on those but.

Getting the the outliers like the <unk> in the Sevens.

Speaker 2: hard to do that in this environment, but you know giving where cap rates are, you know, you think about a, you're producing a 6% or 6.5% and you have a re-in-a-quarter cap rate. I mean we talked about some creation of value there. It's pretty...

Hard to do that this environment, but.

Given where cap rates are if you think about distribution of 6% or six and a half and you have a three and a quarter cap rate I mean, we've talked about some creation of value there it's pretty nascent.

Speaker 2: Development of margins are probably at the highest level I've ever seen them. And I said that probably in 2010 and 11, but these are higher today. It's capricious compression.

The development margins are probably at the highest level ever seen them and I said that probably in 2010 and 11.

These are higher today, because temperatures compressco so much.

Thank you.

Speaker 6: Our next question comes from Austin Worshmet with T-bank, please go ahead.

Our next question comes from Austin worse isn't that great Keybanc. Please go ahead.

Hey, guys. Thank you for the time here just curious what the rates are on your renewal leases that are going out into February and March.

Speaker 13: Hey guys, thank you for the time here. Just curious what the rates are on your renewal list that are going out into February and March.

Okay.

Mid 2014.

Speaker 13: mid-14, Britt, thank you. And then when you talked about some of the technological advancements and the savings that you're getting in your operating expenses, can you give us a sense what the total amount or breakdown of that is that you have left to capture over the next few years?

Mid Fourteens great. Thank you and then when you you talked about some of the technological advancements in the savings that youre getting.

And your operating expenses can you give us a sense of what the total amount or breakdown of that is that.

That you have left to capture.

Over the next few years.

Yeah, I would tell you that we're really on the forefront of this.

Speaker 5: Yeah, I would tell you that we're really on the forefront of this. And ultimately, we expect the efficiencies to continue through 2022 and really, really take hold in 2023 and beyond. It's obviously the trend that we're all moving towards is self-guided tours. And as I said, when we rolled out our...

And ultimately we expect the efficiencies to continue through 2022, and really really take hold in 2023 and beyond.

Obviously the trend that we're all moving towards is self guided tours and as I said, when we rolled out R. R.

Speaker 5: for an access solution, which is what you must have in order to effectively do self-guided tours. I think...

Smart access solution, which is what you must have in order to effectively do self guided tours I think I think that's going to be a big driver as we go forward, especially if we can start adding way finding which is going to be the sort of the next thing that we're all working towards and then I think I think our virtual leasing agent, which we're in the process of <unk>.

Speaker 5: I think that's going to be a big driver as we go forward, especially if we can start adding wayfinding, which is going to be the next thing that we're all working towards.

Speaker 5: And then I think our virtual Elysian agent, which we're in the process of building out right now, I think is gonna...

Right now I think it's going to create some real significant efficiencies as we go forward. So really excited about where we are today, but that but even more excited about where we're going to be.

Speaker 5: create some real significant efficiencies as we go forward. So, really excited about where we are today, but even more excited about where we're gonna be as I said, latter part of 2022 into 2023.

As I said, the latter part of 2022 into 2023 and beyond.

Speaker 13: Could you quantify how big that savings potential is or NOI creation, however you guys are looking at it to give us a sense of how that could play out in the years to come.

Could you quantify how big that savings potential is or you know NOI creation. However, however, you guys are looking at it to give us a sense of you know.

How that can play out in years to come.

Stay tuned and we will we will continue to as we flesh this out.

Speaker 5: Stay tuned and we will continue to, as we flesh this out, give you guys better information around the actual dollar amount. But I will tell you, I think we're all very well aware that we are operating in a very inflationary time frame right now, and we're coming out with expense growth at 3%. So you can start to see that we're already captioned quite a bit. yeah.

Give you guys better information around around the actual dollar amounts but.

But I will tell you I think we're all very well aware that we are operating in in a very inflationary timeframe right now and we're coming out with.

Expense growth of 3%. So so you can start to see that we're already we're already capturing quite a bit.

Alright got it thanks al.

We'll give more clarity on that in the next quarter call.

Speaker 6: Next question comes from Joshua Dennerlin with Bank of America. Please go ahead. Yeah.

Your next question comes from Josh <unk> with Bank of America. Please go ahead.

Yeah, Hey, guys.

Speaker 11: I guess I was, I mean, could you walk us through the assumptions that get us to the low end of your guidance? I guess I was particularly focused on kind of the rate assumptions you're assuming to get there.

I guess I was.

Maybe could you walk us through the assumptions that get us to the low end of your guidance I guess, there is particularly focused on.

The rate assumptions, you're assuming to get there.

Speaker 5: Yeah, here's what I would say. It's probably a little bit different. If I think about the factors that could cause us to be below the midpoint, one of the big ones is bad debt. And it's is the Iraq, right? We talked about that we had 12 million or 12 and a half million dollars of Iraq in 2021.

Yeah, Here's what I would tell you, it's probably a little bit different.

If I think about the factors that could cause us to be below the mid 0.1 of the big ones is <unk>.

Bad debt as the wrap right we talked about.

That we had 12 $12 million or $12 $5 million of Iraq in 2021.

Speaker 5: And then we're anticipating about half of that in 2022. Obviously, that's a very variable.

And then we're anticipating about half of that in 2022, obviously that the very variable item right and that's something that we're that we're very focused on the.

Speaker 5: item right and and that's something that we're that we're very focused on The other thing I'll tell you is that you know, we took our occupancy Down to 96 and a half percent from 96.9% in 2021 and so you know We'll watch that very closely and then really the third factor is How does a third and fourth quarter shake out? I mean there are certainly You know, obviously we feel very very very good about our business but

The other thing I'd tell you is that we took our occupancy.

Down to 96, 5% from 96, 9% in 2021, and so we'll watch that very closely and then really the third factor is.

Is how does the third and fourth quarter Shake out I mean, there are certainly.

Obviously, we feel very very very good about our business but.

Speaker 5: But there are things out there that we're all watching, which are more on the macro side, and we'll have to see how that affects the third and fourth quarters. OK.

But there are things out there that we're all watching which are more on the macro side and we'll have to see how that affects the third and fourth quarters.

Okay that makes sense.

Okay.

Yeah.

I would add onto that which is which is we still do have these regulatory and <unk>.

Speaker 4: I would add one to that, which is, which is we still do have the regulatory impediment.

Pediments in California, and then D C proper in a little bit.

Speaker 4: in California and then DC proper in a little bit in suburban DC markets, where we've made some reasonable estimates of when things return to normal and by that means, can you evict people who haven't paid rent for two and a half years? Can you, are there rental controls in place or rental caps in place?

Sure.

Suburban D C markets, where we've made some reasonable or are reasonable.

Estimates of when things return to normal and by that means can you evict people, who haven't paid rent for two and a half years can you are there rental controls in place of renewal caps in place and we do believe that that we're heading towards.

Speaker 4: And we do believe that we're heading towards improvements and some of these things that are going to be taken off the table as far as impediments to run in our business. But it doesn't take, what is it taken today's environment for policymakers who have been kind of behind the curve on adapting?

Improvements in some of these things.

They're going to be taken off the table as far as impediments to running our business but.

It doesn't take what does it take in today's environment for policymakers, who have been kind of behind.

The curve on adapting to that.

Speaker 4: The pandemic is an endemic versus, you know, you get the first hint of the new variant. And it just seems like all bets are off and they retreat to the lowest common denominator of, you know, start talking about lockdowns again. So I would just add that to the outlook of, you know, kind of what's out there that could be different.

The pandemic is an endemic versus.

You get the first hint of the new variant and it just seems like all bets are off.

Retreat to the lowest common denominator of start talking about Lockdowns again so.

Add that to our lift node kind of what's out there that could be different.

Speaker 4: and create headwinds for where we are in our portfolio.

And create headwinds for where we are in our portfolio.

Got it one follow up to that on the.

Speaker 11: Got it. One follow up to that on the on the occupancy that moderation you're factoring in.

On the occupancy that moderation you're factoring in.

Speaker 11: What's driving that? That just conserve criticism and what you kind of normally see when I can see if there's high or if there's something more specific. There's...

What what's driving that is that just conservatism in what you normally see when occupancy is higher or is there something more.

More specific.

You are saying.

Speaker 5: Well, we don't normally see occupancy this eye, so I'll point that out the first place. We're on record levels of occupancy, and obviously, that's one of the things that we're watching closely, and we are looking at our yield management software to make sure that as occupancy gets to these type of levels that we are pushing rents, and the natural effect of that is that you to see occupancy sort of curtail a little.

Well, we don't normally see occupancy this guy so I'll point that out in the first place.

No.

We're on record levels of occupancy and obviously, that's one of the things that are there that we're watching closely and we are.

We are looking at our yield management software to make sure that that as occupancy gets to these type of levels that we are pushing rents and the natural effect of that is that you would expect to see occupancy sort of curtail a little bit.

Speaker 4: Oh, God, we've been doing this for four and 96 and a half doesn't feel conservative to me.

We've been doing this for 40 and.

96, and a half doesn't feel conservative to me.

Speaker 2: Yeah, big the question where all these people come from. So, but Well, that's a, you know, it's a big thing because when you think about the demand, it has come, people came out of the woodwork, right? And I think what they did is, when you think about this, is that, in the endemic, there were like a million millennials of this.

[laughter] Yeah begs the question why are all these people come from so.

Well that's fine.

Because when you think about the demand you have come.

People came out of the woodwork right and I think what they did is when you think about this is that is that.

Endemic there were like a million millennials that are missing from the from the market a lot of those folks are still living at home or in their room makes scenarios.

Speaker 2: market. A lot of those folks who are still living at home when they're roommates and

Formed households, but then if you think about what happened with the pandemic so everybody caught it up yet.

Speaker 2: But then if you think about what happened then with pandemic, so everybody potted up, you have more people that were potted up during the pandemic. And then once it started releasing, those folks had jobs, number one. Number two, they probably got raises because of the issues.

Do you have more people that were part enough during the during the during the pandemic and then once it started releasing those folks had jobs number one number two they probably got raises because of the issues with with.

Speaker 2: you know, that are facing employers today. And they got checks from the government, massive stimulus checks. So when you think about it, you had,

That are facing employers today and they've got checks from the government massive stimulus checks. So when you think about it you had.

Speaker 2: By the end of the last year, there were 2.7 trillion dollars of access savings. Now we have about 2 trillion dollars of access savings. So if you were part of that and you were, you're, you're, you have, you know, weariness from COVID and being around the people that you've been around for so long, you go out and form a household and run an apartment because you got plenty of money in your pocket, you got a job and, and life is good. And all of a sudden this massive demand came out as a result of

By the end of last year, I think there were $2 seven trillion dollars of excess savings now we have about two trillion dollars of extra savings. So if you were part of it up in your <unk>.

We're in this from Covid and being around the people that have been around for so long.

Go out in the form of household and rent an apartment because you've got plenty of money in your pocket you got a job and life is good and all of a sudden this massive demand came out as a result of.

Speaker 2: opening up and especially in our markets now you didn't have that happening California in New York it's as fast as it did in Texas in Florida but I think just had a lot of people who didn't have funds pre-COVID but have them now because of the late timness of labor force and the massive government stimulus.

Opening up and especially in our markets now you're going to have that happen in California, and New York.

And in Texas, and Florida, but.

I think just had a lot of people, who didnt have funds pre COVID-19 have them now because of the labor tightness of Labor force and the massive government stimulus.

Got it thank you.

Yes.

Speaker 6: Our next question comes from John Poloski with Green Straight. Please go ahead.

Our next question comes from John Pawlowski with Green Street. Please go ahead.

Speaker 14: Hey, thanks for keeping the call going. Keith, can you give me a few details on how the team sets the boundaries of the bands for the letter grades and the outlook? Because there's pretty big disparities between job, job and completion ratio. You take a look at Atlanta nine job per unit deliver. You take a look at Austin sub three, they're the same grade and the same outlook. So any additional comment or be great.

Hey, Thanks for keeping the call going Keith can you give me a few details on how the team.

The reason the bands for the letter grades in the outlook, because there's pretty big disparities between job job.

Jonathan completion ratio as you take a look at Atlanta at nine nine jobs per deliver or did you take a look at Austin sub three yet or the same grade in the same outlook. So any additional commentary would be great.

Speaker 4: Yeah, the primary driver, John is first of all, we're only looking at one year out, we're looking for the forecast year. And if I were given three year or you know, letter grade, they would probably move around somewhat.

Yes, the primary driver John It is first of all we're only looking at one year out we're looking for the forecast year.

They were given three year.

Letter grades they would probably move around somewhat but.

Speaker 4: But the primary driver is just looking at revenue growth that's in our forecast model. And so if you...

The primary driver is just looking at revenue growth.

It's in our forecast model and so if you if you you'd.

Speaker 4: You'd have to grade on a curve, which I don't do. And I didn't do it the 22-year-old graduate assistant teaching college accounting at the University of Texas. So I'm not gonna change now. I don't grade with a curve. And when the lowest revenue grows. you

You'd have to grade on a curve, which don't do and I didn't do as a 22 year old graduate assistant teaching cost accounting at the University of Texas, So I'm not going to change now.

Curve and when the lowest revenue growth.

Speaker 4: in your entire portfolio for the year forecast is DC it for, you know, for a change.

In your entire portfolio for the year forecast is D. C. At four four and change which in any year in any given year, you would say that that's clearly an eight because it's a b plus it worse, but in a.

Speaker 4: which in any year, in any given year, you would say that's clearly an A, because it's a B-posit worse, but an A minus certainly. And then you go from there to Houston at a six and a half, and while it's sort of paled in comparison to our portfolio-wide average.

Certainly.

You go up from there to Houston at a six and a half and wallet.

Paled in comparison to our portfolio wide average again, six and a half for Houston.

Speaker 4: Again, six and a half were Houston. That's a solid A in my book and always will be. So it's not that you're right, the disparity on the, there's quite a bit of disparity on the ratio for the year.

That's a that's a solid a and in my book and always will be so its not youre right. The disparity on the there is quite a bit of disparity on the ratio for the year, but.

Speaker 4: Honestly, that ratio tends to not swing things around in the forecast period because all it's up gets delivered over.

Honestly that tends to not that ratio tends to not swing things around in the forecast period, because all that stuff gets delivered over 12.

Speaker 4: you know, 12 months and there's sub-market, you know, where is it being built and all those things? And our bottom-up budget process is things that...

12 months and there is sub market.

Where is it being built and all of those things and our bottom up budget process assumes that we know exactly what's going to be delivered in our submarkets, we take that in consideration as we do our our revenue growth forecast so I.

Speaker 4: We know exactly what's going to be delivered in our submarkets. We take that into consideration as we do our revenue growth forecast. So I still look at them and say, you know, every student in this class is a nice student this year.

I still look at them and say every student in this class is a nicely this year.

Speaker 14: That helps. One final one for me, DC around 4% revenue growth. Could you give us a sense of what it would have been had regulation, regulation curve's been gone on January 1. I'm just trying to understand the kind of structural earning power of DC right now.

Okay that helps one final one for me.

D C around 4% revenue growth could.

Could you give us a sense of what it would have been had regulation regulation curve has been gone on January one I'm just trying to understand the kind of structural earnings power of D. C right now.

So the.

Speaker 4: So if you look at the forward looking construct as a model, kind of what the past year was, and in the past year, we think in DC our overall result portfolio wise.

If you look at.

The forward looking.

Construct isn't as a model kind of the past year was and in the past year, we think in D. C. R.

Our overall it affected our overall results.

Portfolio wide of about 40 basis points.

Speaker 4: I mean, it's not a huge thing. And going forward, we do expect that we will see some relief in 2022 and DC proper and probably in the suburban markets as well. We kind of got that, you know, our thinking process is maybe somewhere around mid-year, you get a, you know, you get the beginnings of returns, a return to normal. But that's, again, like I said, that's the...

It's not a it's not a huge thing.

And going forward, we do expect that we will see some relief in 2022 and D C proper and probably in the suburban markets as well, we've kind of got that.

Our thinking process is it maybe somewhere around mid year, you get a you get.

The beginnings of return a return to normal, but again like I said that.

Speaker 13: That's crystal balling to a certain extent and there's always the possibility that you get some new stealth variant that people get freaked out about and retreat to their field habits. But yeah, it's not a huge deal on our portfolio. It wasn't last year and it wouldn't be in a reasonable scenario in 2022.

That's crystal balling to a certain snap and theres always the possibility that you get some new.

Stealth variant that people will get freaked out about retreat to their.

The old habits, but yes.

Yes.

Not a huge deal in our portfolio it wasn't last year and wont be wouldn't be.

In a reasonable scenario in 2022.

Yes.

Okay. Thank you for that.

Yes.

Speaker 6: Our next question comes from Chan Lee Lutheru with Goldman Sachs. Please go ahead.

Our next question comes from Chad do you agree with Goldman Sachs. Please go ahead.

Hi, good afternoon.

Speaker 15: Hi, good afternoon and thank you for keeping this call going. Most of my questions have been answered, but your peer yesterday talked about or expecting to see more opportunity for acquiring stabilized properties, potentially later in this year.

And thank you for keeping the call going.

So most of my questions have been answered.

Your Bill yesterday talked about seeing alright, I seem to see more opportunities for quieting stabilized properties.

Potentially later in this year.

What are you all talked around that are you seeing similar situations developing and how would you approach would you be aggressive if the opportunity presents just trying to.

Speaker 15: What are your thoughts around that? Are you seeing similar situations developing and how will you approach, will you be aggressive if the opportunity presents just trying to gauge? How would you...

Gauge how would you.

I've talked to that.

Sure well I don't think that based on what we see.

Speaker 2: Sure, well, I don't think that based on what we've seen through the least of, if your progress is the way we think it will, I don't think they'll be, I think you're going to have a competitive acquisition market. I don't think that's going to be...

Lisa.

We're progressing the way we think it will I don't think there'll be I think youre going to have.

A competitive acquisition market I don't think thats going to change.

Speaker 2: I guess it sort of depends on what the Fed does, right? If the Fed gets ahead of itself and all of a sudden people are starting to forecast an economic slowdown because they are moving too fast and people worry about the session and rates go up really fast. And you start worrying about that. Underline economic activity. Maybe you'll have some softness and acquisitions, but right now if they...

It sort of depends on what the fed does right.

If the fed gets ahead of itself and all of a sudden people are starting to forecast the economic slow down because they are moving too fast and.

And people worried about recession and rates go up really fast.

Start worrying about that underlying economic activity, maybe youll have some softness in acquisitions, but right now.

Speaker 2: that if they moderate inter-frage and inter-frage start going up, you're still a wall of capital and it's still a great supply and demand dynamics. And when you think about pricing of real estate or any sort of asset.

Yeah, I'd say its a.

Moderate interest rates and interest rates start going up and Youre still a wall of capital and there is still great supply and demand dynamics and when you think about pricing.

Real estate or any sort of outlook, it's really about liquidity and there's massive liquidity as shown in the market and defense market liquidity.

Speaker 2: really about liquidity and there's massive liquidity still in the market and the fence not going to just move the liquidity day one and then the second biggest issue is flying the man and you think about pricing and so

Liquidity day, one and then the second biggest issue is supply and demand, we think about pricing and so liquidity is not going away.

Speaker 2: Liquidity is not going away and supplying the man is great.

Supply and demand is great and so.

Speaker 2: And so, you know, then you start thinking about inflation issues and then ultimately,

When you start thinking about inflation issues and then ultimately.

Interest rates are so.

Speaker 2: interest rates. So I think I don't see an opportunity for you know for rising cap rates or better pricing for multi-family assets you know this year. We will get our fair share and you know when there's a $300 billion of transactions you know we can eke out a few in our little corner of the world. So I think that we'll still be able to buy properties but I think it's going to be you know

I think I don't see.

On the opportunity for four rising cap rates or better pricing for multifamily assets. This year, we will get our fair share and you know when there is a 300 billion tranche.

Transactions, we can eke out a few in our.

Little.

Corner of the world So.

That will still be able to buy properties, but I think it's going to be.

That's for sure.

Speaker 15: understood and you know migration has sort of been a tremendous deal for the sun belt.

Understood and migration has put us in a tremendous tailwind for the sunbelt.

Speaker 15: Obviously through 2020 and then 2021 was perhaps justice.

Obviously 2020, and then 2021 one.

Perhaps just as robust.

Speaker 15: As you think about 2022, do you see any signs of reversal yet? I mean, I understand that you know, a lot of years is a long time and lives and have its form and things become permanent from temporary. But any signs that you know, as we are in the endemic stages of the swirors, perhaps those who moved from the coastal regions are now maybe thinking about, you know, moving back.

As you think about 2022 do you see any signs of reversal, yet I mean I understand that you know, we always has a long time and I didn't and habits for them and things become permanent from temporary but.

Any signs that you know.

The R&D endemic stages of this slide.

Perhaps those who moved from the coastal region are now may be thinking about you know are moving back.

Speaker 2: You know, it's interesting if you look at from 2017 to 2020, Florida, the two largest markets that had in migration domestically for Florida and Texas. And in one, they, Florida had 100,000 more people go to Florida versus the average for 17 through 20. Same thing in Texas, we had a little less 75,000 people came in from domestic migration. And the two states lost the most for a New York and California.

It's interesting if you look at from 2017 to 2020.

Florida, the two largest markets that had in migration domestically for Florida and Texas.

One, Florida had 100000 more.

People go to Florida versus the average for 2017 through 20 same thing in Texas, We had a little less 75000 people came in from domestic migration and the Tuesday lost most were in New York and California. So this is this.

Speaker 2: So this out migration of those high costs, highly regulated markets has been going on from what he mentioned earlier. And what happened during the pandemic is people moved because the other markets were open.

Our migration of those high cost highly regulated market has been going on for Keith mentioned earlier and what happened during the pandemic as people moved it because the other markets were open right. I mean, you could go to a restaurant and.

Speaker 2: Right? I mean, you could go to a restaurant in Texas or in Florida and so that when you think about that part of the equation, I don't think you're going to have a most economist don't think you're going to have, okay, we're going to run back to California or New York because we moved, because they're sitting down buying houses and leech departments and they don't really need to be in a specific place to do their job yet because of

Texas and Florida.

And so when you when you think about that part of your question I don't think you're going to have a mark.

Most economists don't think youre going to have okay were going to run back to California or in New York, because we move.

Thanks Alan.

Buying houses and apartments, and they don't really need to be in a specific place to do their job yet because of.

The opposite question. So I think we probably don't have the big piece or the big Spike if we if we are out of the past, but it just will continue in its normal.

Speaker 2: I think we probably don't have the big peak or big spike if we're out of the pan. But it just will continue in its normal pattern, which is people want to be in a place with less regulation and over housing prices.

Pattern, which is people want to want to be in a place with less regulation.

Housing prices and.

Speaker 2: you know, good weather and that's what's been driving the sun belt for the last 20 years. And clearly, I agree with Keith when he made the comment that California and New York are not going to wet. I mean, they're still big.

Good weather.

And that's just that's what's been driving the sunbelt for the last 20 years.

And clearly the I agree with Keith when you made the comment that California, and New York are not going away. I mean, there is still big large economies and people love to live there and they'll still live there, but at the margins youre going to have the cost forces people out in the businesses move in and so that's going to I think.

Speaker 2: large economies and people left the way they're and they'll still live there. But at the margins, you're going to have the cost forces people out and the businesses, you know, move. And so that's going to, I think that's going to keep happening, but that doesn't mean that they're not going to do well long term because they have plenty of other, you know, in migration from, from,

That's going to keep happening, but that doesn't mean that they're not going to do well long term because there are plenty of other.

In migration from from.

Speaker 2: immigrants and from just natural births that actually using population.

Immigrants.

From just natural birth.

Actually losing population generally.

Speaker 5: In our portfolio in the fourth quarter of 21, 20.4% of all of our new leases in our sunbelt were from people outside of the...

In our portfolio in the fourth quarter of 21, 24% of all of our new leases in our sunbelt.

We're from people outside of the Sun belt and that is a 430 basis point increase year over year. So to Rick's point, we're clearly seeing it in our portfolio and we're seeing it continuing to accelerate.

Speaker 5: And that is a 430 bassist point increase year.

Speaker 5: So I took the rich point. We're clearly seeing it in our portfolio and we're seeing it continuing to accelerate. All right.

Oh, that's remarkable thank you for that color.

Our next question comes from Anthony Powell with Barclays. Please go ahead.

Speaker 6: Our next question comes from Anthony Powell with Barclays. Please go ahead.

Hi, Good afternoon, a question on I guess housing affordability in your markets. How do you see the rise in rates impacting the rent versus buying I guess calculation in your markets and we're seeing a lot of capital flow into rent to own I guess startups and schemes and a lot of your markets. How do you expect that development, so maybe impacted that decision over.

Speaker 16: Hi, good afternoon. To question on, I guess, housing affordability in your markets, how do you see the rise in rate in impacting the rent versus buying, I guess, calculation in your markets? And we're seeing a lot of capital flow into rent to own, I guess, startups and schemes in the value of markets. How do you expect that development to maybe impact that decision over the long run?

In the long run.

Yes.

Speaker 2: The Fort Ability still remains, you know, really good in our portfolio. There, there's just even with rents going up as much as they are. You have to look at it on a relative basis. If you have, if you average it over a three year period, since we didn't raise rents in 2020, and rents only went up 4% of this in 2021 on...

Affordability is still remains really good in our portfolio. There is even with rents going up as much as they are you have to look at it on a relative basis. As you asked if you average it over three year periods and we didn't raise rents in 2020, and recently went up 4% in 2021.

Speaker 2: a whole year. You're talking about a 4% and a 5% rental increase over a three year period with these big rent increases, right? So it's not like people are going up from, you know, that it's just higher and higher and higher and they're having problems paying. Plus, wages are gone up.

For the whole year, you are talking about a 4%, 5% rental increase over a three year period with these big rent increases right. So.

Not it's not like people are going up from from that is just higher and higher and higher and they are having problems paying plus right.

<unk> has gone up so our how our market is still a very affordable.

Speaker 2: So our market still are very affordable. When you look at actual rents, relative to incomes, the other piece of the piece of the equation on single-family rentals. So single-family rentals are, I think it's a really interesting market and clearly the public time piece have proven that single-family rentals are real thing and they figured out how to run it, which is pretty good. So, the other piece of the equation on single-family rentals are real thing and they figured out how to run it, which is pretty good.

When you look at.

Actual rents relative to income the other piece is the piece of equation on on single family rentals. So single family rentals are I think it's a really interesting market and clearly the public companies have proven that that single family rentals, a real thing.

<unk> figured out how to run it which is really good.

Speaker 2: You think about what somebody goes with someone who is to a single family rental. The average fur footage is 2,000 square feet compared to a 950 square foot average apartment of the Camden House. They tend to be more suburban rather than urban. They tend to be, some of those people when you think about Bina House or Leet scene a house, they're doing it for not capital, money reasons, they're doing it for social reasons. They need more space. They have kids or they have...

Think about what somebody goes when someone moves to a single family rental the average square footage is 2000 square feet compared to 950 square foot average department. The Camden House, they tend to be more suburban rather than urban they tend to be so most people when you think about buying a house or.

Leasing in house.

We're doing it for not capital.

Money reasons Theyre doing it for social reasons may need more space.

Have kids or they have.

Speaker 2: just need more space. And so, with that said, we've never had a, where you say, well, it's house in the Houston suburbs and it is in the urban core, which it is. I mean, if you are listening downtown, Houston or Midtown, you can go out 30 miles out of downtown and buy a house and have an abbe oxybushy cost that's lower than your rent.

They just need more space and so with that said we've never had a.

When you say went well.

Now.

In the Houston suburbs and it is in the urban core which is it.

Or at least near downtown Houston or in Midtown you can go out 30 miles out of downtown.

Buy a house and have an occupancy cost that's lower than your reps.

Speaker 2: But people don't do that because they want to be in the urban core and they're not married They have average don't have kids and so you have to It's really not Because I can go rent a house or buy a house that's not the dining and the money side of it whether it's affordable or not It's really not a drives the people to go do that with drives and it's their social position over

Essentially.

People don't do that because they want to be in the urban core and they are not married.

Average don't have kitchen, and so you have that.

It's really not.

Because I can go rent a house or buy a house, that's not the dynamic and the money side of it whether it's affordable or not there's really not a driver for people to go do that would drive some of this is social position there over there.

Speaker 2: you know, be more spaced at kind of things. So that really has a curve on the market obviously, because we still have more demand than we have supply and our occupancies are 97% and using their 96% and some change yet, you can go out and buy a house from the summer. It's for a lot less than you could pay for rent near Red Corp.

It'd be more space that kind of thing so.

That really hasnt hurt our market obviously because.

We still have more demand than we have supply and our occupancy is 97% in Houston were 96, and some change yet you can go out and buy a house in the suburbs.

Got less than you pay for rent in the urban core.

Got it so it sounds like Youre, not looking to get into the adjacent spaces that far yourself over the time youre pretty content with a focus on multifamily is that fair I don't think it's an interesting space and we've looked at it a lot and.

Speaker 2: Got it. So it sounds like, you know, you're not looking to get into the adjacent space. It's as far yourself over the time you're pretty content with, you know, focusing on multifamily. Is that fair? I don't think it's an interesting space. And we looked at it, you know, a lot. And it is a, to me, there's just another niche, right? And the question of whether we would get into a big, you know, we tested things like, for example, we tested, um, independent living.

It is to me there is it's just another niche right in the question of whether we would get into a big we tested things like for example, we tested.

Independent living and we decided once we did a couple of independent living deals that.

Speaker 2: And we decided once we did a couple of independent living deals that the cycle and the market was very different than our normal than just a market rate apartment project. So we decided that we wouldn't expand that. And we're gonna dabble in single family housing and see how we like it. We think it's an interesting model because

The cycle on the market was very different than our normal.

Then just a market rate apartment projects that we decided that we wouldn't expand that and we're going to dabble in single family.

See how we how we like it we think it's an interesting model because it's really just another segment is as long as we can operate efficiently. The way we operate our apartments than it might be a nice growth area over some period of time.

Speaker 2: It's really just another segment and as long as we can operate it.

Speaker 2: efficiently the way we operate our our apartments then it might be a nice growth area, you know, over some period of time.

Got it alright, thank you.

Sure.

This concludes our questions.

Speaker 2: This concludes our question. Any other questions in the queue? I think we are, that was the last one.

In the Q I think we are that was the last one.

Correct.

Speaker 2: Correct. Thank you for your time and we'll be some of you in South Florida. And so take care and we'll talk to you next time. Thanks.

A lot of your time and we'll see some of you in South Florida.

So take care and I will talk to you next time thanks.

Thank you bye bye take.

Okay.

Thanks.

Speaker 3: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].

Yes.

[music].

Speaker 3: I ORA.

[music].

Okay.

Yeah.

Okay.

Yeah.

Okay.

Yes.

[music].

Q4 2021 Camden Property Trust Earnings Call

Request a DemoDemo

CPT

Camden Property Trust

Earnings