Q4 2023 UDR Inc Earnings Call

Greetings and welcome to Udr's fourth quarter 2023 earnings call. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference call is being recorded it is now my pleasure to introduce your host Vice President of.

Investor Relations Trent Trujillo.

Mr. Julio you may begin.

Operator: Welcome to UDR's quarterly financial results conference call. Our press release, supplemental disclosure package, and related investor presentations were distributed yesterday afternoon and posted to the investor relations section of our website at ir.udr.com. In the Supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Thank you all for joining us today.

Welcome to Udr's quarterly financial results Conference call. Our press release supplemental disclosure package and related Investor presentation were distributed yesterday afternoon and posted to the Investor Relations section of our website at IR Dot UDR Dot com.

In the supplement we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.

Statements made during this call, which are not historical may constitute forward looking statements. Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met and.

Operator: When we get to the question and answer portion, we ask that you be respectful of everyone's time and limit your questions to one but follow-up. Management will be available after the call for your questions that did not get answered during the Q&A session today. I will now turn it over to the call to UDR chairman and CEO, Tom Toomey. Thank you, Trent, and welcome to UDR's fourth quarter 2023 conference call. Presenting on the call with me today are president and chief financial officer, Joe Fisher, and senior vice president of operations, Mike Lacey. Senior officers Andrew Kanter and Chris Van Im will also be available during the Q&A portion of the call.

A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC, we do not undertake a duty to update any forward looking statements.

When we get to the question and answer portion we ask that you be respectful of everyone's time and limit your questions to one plus a follow up management will be available after the call for your questions that did not get answered during the Q&A session today I.

I will now turn over the call to Udr's, Chairman and CEO Tom Toomey.

Thank you tram and welcome to Udr's fourth quarter 2023 conference call.

Presenting on the call with me today are president and Chief Financial Officer, Joe Fisher.

And senior Vice President of operations, Mike Lacey.

Senior officers, Andrew Kantor, and Christopher and will also be available during the Q&A portion of the call.

Thomas W. Toomey: To begin, on this quarter's call, we enhanced how we communicate our outlook for the year ahead. The volatility we have experienced for the last five years, combined with the supply-induced challenges our industry is expected to face in 2024, translate into a wider range of potential outcomes for this year than for a typical year. As such, in conjunction with our earnings release, we published an Outlook presentation that highlights these potential outcomes and their drivers. I prepared remarks aligned with the presentation, and those on our webcast should see the slides on your screen. We will resume our usual format of prepared remarks only on future audience calls.

To begin.

For this quarter's call, we enhanced how we communicate our outlook for the year ahead.

The volatility we have experienced over the last five years combined with the supply induced challenges our industry is expected to pace in 2024 translate into a wider range of potential outcomes for this year first of all our typical year.

As such in conjunction with our earnings release, we published an outlook presentation that highlights these potential outcomes and their drivers.

Our prepared remarks aligned with the presentation and those on our webcast should see the slides on your screen.

We will resume our usual format I prepared remarks, only on future earnings calls.

Thomas W. Toomey: Moving on, two takeaways from our press release and our 2024 outlook are summarized on slide four of the deck. These are first, fourth quarter, and full year 2023 FFLA per share and same store results. And that's the guidance expectation set forth on our third quarter call. Full year 2023, the same story, and wide growth of 6.8% was particularly strong and one of the highest amongst our peers. Second, based on consensus estimates, we expect that economic growth and partner demand will remain resilient in 2024, but historically high new supply will continue to weigh on our core growth. Third, ongoing investments in innovation will continue to drive incremental NOI growth above the broader market in 2024. Mike Lace will give you greater detail on this.

Moving on to key takeaways from our press release and our 2020 for outlook are summarized on slide four the deck. These.

These are first fourth quarter and full year 2023 F. F. L. A per share and same store results met the guidance expectations set forth on our third quarter call.

Full year 2023 same store NOI growth of six 8% was particularly strong and one of the highest amongst our peer group second based upon consensus estimates, we expect that economic growth in apartment demand will remain resilient in 2024, but historically high new supply.

We will continue to weigh on our core growth.

Third ongoing investments in innovation will continue to drive incremental NOI growth above the broader market in 2020 for like Leesville.

Greater detail on that subject.

Thomas W. Toomey: Fourth, we're maintaining a capital rights strategy given our still elevated cost of capital, but we will take advantage of opportunities when appropriate. For example, in 2023, we executed roughly $1 billion of accretive deals through joint venture and operating partnership unit opportunities. We will continue to keep our eyes open for external quotes and heed our cost of capital formula. And, fifth, our balance sheet remains well-positioned to fully fund our capital needs in 2024 and beyond. With that, I'll turn the call over to John. Thank you, Tom.

Fourth we're maintaining a capital light strategy get it are still elevated cost of capital.

But we will take advantage of opportunities when appropriate.

Example, in 2023 we executed roughly $1 billion of accretive deal through joint venture and operating partnership unit opportunities.

We will continue to keep our eyes open for external growth.

And he'd our cost of capital signals.

And fifth our balance sheet remains well positioned to fully fund our capital needs in 2024 and beyond.

With that I'll turn the call over to Joe.

Thank you Tom the topics I will cover today include our fourth quarter and full year 2023 results, including recent trends on transactions.

John: The topics I will cover today include our fourth quarter and full year 2023 results, including recent trends and transactions. The 2024 macro outlaw that drives that four-year guidance, and the building blocks of our 2024 Garden. First, beginning with Quad Five.

'twenty 'twenty four macro outlook that drives our full year guidance.

And the building blocks of our 'twenty 'twenty four guidance.

First beginning with slide five.

John: A fourth quarter and full year FFO disaster per share of $0.63 and $2.47 achieved the midpoints of our previously provided guidance range. On the bottom half of the slide, you can see that during the quarter, we shifted to a more defensive operating strategy and built occupancy going into 2024. Huckabeendee trended sequentially higher for each month during the fourth quarter, resulting in a 20 basis point sequential improvement versus that of the third quarter. However, as anticipated, this austerity pivot resulted in lower blended straight growth versus original 4-2 expectations. But it was the right decision to place our portfolio in a position of strength given the elevated new multifamily supply in 2024. For January, operating terms have improved. MarketRankGrowth turns sequential positive and is following normal signal patterns thus far. Blended lease rate growth improved to positive 0.2%, with new lease rate growth of minus 3.6% and renewal lease rate growth of plus 4%. The discretionary activities continue to be turned forward.

Fourth quarter and full year I thought that was adjusted per share of 63.

And $2.47 achieved.

We achieved the midpoint of our previously provided guidance ranges.

On the bottom half of the slide you can see that during the quarter, we shifted to a more defensive operating strategy until occupancy going into 2024.

Occupancy trended sequentially higher for each month during the fourth quarter.

Resulting in a 20 basis points of control improvement versus that of the third quarter.

As anticipated this occupancy did it resulted in lower blended lease rate growth versus original expectations.

But it was the right decision to place our portfolio in a position of strength given elevated new multifamily supply in 2024.

For January operating trends have improved.

Market rent growth turns sequentially positive and is following normal seasonal patterns thus far.

Blended lease rate growth improved to positive, 0.2% with new lease rate growth of minus three 6% and.

Renewal lease rate growth was plus 4%.

Concessionary activity continued to trend lower in.

John: And occupancy increased further to 97.2%. One month did not make a trend, but we are encouraged by these results. Moving on. It's detailed on slide six. During the quarter, we executed a variety of transactions that both enhanced our liquidity and set us up well for future accretive growth. He's been great.

And occupancy increased further to 97, 2%.

Speaker Change: One month does not make a trend, but we are encouraged by these results.

Moving on.

As detailed on slide six during the quarter, we executed a variety of transactions the bulk enhanced our liquidity and set us up well for future accretive growth.

These include.

John: Number one, our joint venture with LaSalle acquired a 262 home community in suburban Boston for a profit of $114 million at an initial mid to high 5% yield. To platform initiatives and various fees, we expect the state of our field to be in the mid to high 6% range due to the, We continue this for investment opportunities that exist, which will provide skill-oriented efficiencies to our operations, expand our CEO income, and drive future earnings accretion and enhanced ROE for our shareholders. Number two, we've sold or worked money hard on $180 million of this position. These are expected to be executed at a weighted average fire cap rate in the mid 5% range. Surger and Ens are already shown with it.

Number one our joint venture with Lasalle acquired a 262 home community in suburban Boston for approximately $114 million at an initial mid to high 5% yield.

Through platform initiatives in various fees do you expect the stabilized yield to be in the mid to high 6% range to your D. R.

We continue to explore investment opportunities with Lasalle.

Which will provide scale oriented efficiencies to our operations expand our fee income and drive future earnings accretion and enhanced ROE for our shareholders.

Number two we sold or what money hard on $180 million of dispositions.

Is there expected to be executed at a weighted average buyer cap rate in the mid 5% range and further enhance our already strong liquidity.

John: Three. We assumed a DCC developer's ownership interest in a distressed Oakland asset. The year-and-a-half-old community was appraised at $67 million, or $387,000 per unit, which resulted in a non-cash investment loss of approximately $24 million TBR. The community is still in leach-up in a sub-market of Oakland where two- to three-month concessions are the norm. The initial yield on the assumed asset is in the mid 3% range. However, once stabilized, we expect the yield to be in the low 5%. Attorneys at 5-7 and our macro outlaw.

And three.

We assumed a D C D developers ownership interest in a distressed Oklahoma asset.

A year and a half old community was appraised at $67 million or 387000 per unit, which resulted in a noncash investment loss of approximately $24 million to the D. R.

The community is still in lease up and its submarket of Oakland, where two to three months concessions are the norm.

The initial yield on the assumed asset is in the mid 3% range.

However, once stabilized we expect the yield to be in the low 5%.

Turning to slide seven and our macro outlook.

John: As the years pass, we utilize top-down and bottom-up approaches to set our 2024 macro and fundamental course. For example, our 2024 market rent growth forecast of roughly 1% was informed by third-party forecasts and consensus expectations for a variety of economic factors that drive market rent growth and our internal forecasting model. We combined this top-down forecast with a bottom-up growth estimate built by our regional teams as they best understand global supply and demand dynamics in their markets.

As in years past.

Utilized top down and bottom up approach is to set our 2024 macro fundamental forecast.

Our 2020 for market rent growth forecast of roughly 1% was informed by third party forecasts and consensus expectations for a variety of economic factors that drive market growth and our internal forecasting models.

We combined us top down forecast with a bottom up gross estimate built by our regional teams as they best understand local supply and demand dynamics in their markets.

A 1% market rent growth forecast for 2024.

John: Our 1% market rent growth forecast for 2024 is slightly conservative when compared to prominent third party forecaster estimates at 1.7%, and is driven by stable positive demand set against historically high multifamily deliveries and the expectation for continued elevated concessions. As Mike will discuss, the approximately 1% rent growth tied to our assumption for 2024 blended lease rate growth. Primary variables to our forecast include GDP growth. WannaEmbraceGroup?

Slightly conservative when compared to prominent third party forecasts or estimates at one 7%.

And it's driven by stable to positive demand set against historically high multifamily deliveries and the expectation for continued elevated concessions.

As Mike will discuss.

Speaker Change: Approximately 1% rent growth ties to our assumption for 'twenty 'twenty four blended lease rate growth.

Primary variables to our forecast include GDP growth.

Why not in wage growth change.

John: Changes to the homeownership rate, supply, and its impact on pricing, economic, and social. Turning to slide eight, if we step back and consider the near to intermediate-term outlook for this industry, we remain encouraged by a variety of key supply and demand. First, at the top left, our consumer remains resilient with rent-to-income ratios at the long-term average. Second, at the top right.

Speaker Change: Changes to the homeownership rate supply and its impact on pricing economic uncertainty.

Turning to slide eight if we step back and consider the near to intermediate term outlook for the industry.

We remain encouraged by a variety of key supply and demand metrics.

First at the top left our consumer remains resilient rent to income ratios at the long term average.

Second the top right Red.

John: Relative affordability versus alternative housing options remains decidedly in our favor at roughly 50% less expensive than rent than own. That's 20% from three children. It supports a stable to declining home ownership rate and, absent a major correction in home prices for a significantly more accommodative long-term interest rate environment. We do not expect this dynamic to change in their terms. Third, at the bottom left, the latest census data indicates that the largest U.S. Easter horse population remains in its prime winter years.

Relative affordability versus alternative housing options remains decidedly in our favor.

Roughly 50% less expensive than London, a 20% for them, that's some pretty told them.

This supports a stable to declining home ownership rate and absent a major correction in home prices quite significantly more accommodating long term interest rate environment. We.

We do not expect this dynamic to change near term.

Third at the bottom left the latest census data indicates that the largest U S age cohorts remain in their prime renter years.

John: This should provide continued support for future long-term rental demand. Forth, at the bottom right. While multifamily deliveries are expected to remain elevated through at least 2024, the search activity has significantly retreated and is down 70% from recent highs and is now well below historical averages. They should benefit from your growth. That's a near-term change in financing. Moving on to part nine.

This should provide continued support for future long term rental demand.

And fourth at the bottom right.

While multifamily deliveries are expected to remain elevated through at least 2024.

Starts activity is significantly retreated and is down 70% from recent highs and is now well below historical averages.

This should benefit outer year growth absent near term change in financing cost.

Moving onto slide nine.

Third party data providers are forecasting record multifamily deliveries for the U S and in our markets over the next four to six quarters.

John: Third-party data providers are projecting record multifamily deliveries to the U.S. and in our markets over the next four to six quarters. Based on completion forecasts, peak deliveries are currently expected to occur in the middle of 2024 before trending downwards closer to long-term historical averages in the second half of 2025. We are cognizant that there will be supply slippage as we move to 2024 and that lease-up concessions could remain elevated after new deliveries are made. However, positive, heat deliveries in the coming quarters are not materially above the levels we have seen in the second half of 2023 and into the start of 2024, where market level concessions will be a primary driver of our ability to capitalize on our market microscope.

Based on completion forecast peak deliveries are currently expected to occur in the middle of 'twenty 'twenty four before trending downwards closer to long term historical averages and second half 2025.

We are cognizant that there'll be supply slippage as it goes through 2024 and that lease up concessions could remain elevated after new deliveries.

Positively.

Peak deliveries in the coming quarters or not materially above the levels. We have seen in the second half of 2023 and into the start of 2024.

Our market level concessions move throughout 'twenty 'twenty four will be a primary driver of our ability to capitalize on our market rent growth forecast.

On slide 10, we provide more context on which regions and markets are expected to feel the greatest impact of 'twenty 'twenty four supply.

John: On slide 10, we provide more context on which regions and markets are expected to feel the greatest impact of 2024 supply. Sundell, for example, is forecast to pay significantly higher absolute deliveries than the coastal margins. Although all regions will face higher relative supply in 2024 as compared to their long-term supply, As is evident on the bottom of the page, this dynamic is reflective of the market. Sunbelt market supply growth rates are expected to be more pressured than coastal markets.

Sunbelt, it's forecast to pay significantly higher absolute deliveries than the coastal markets.

Although all regions will face higher relative supply in 'twenty 'twenty four as compared to their long term averages.

As is evident on the bottom of the page. This dynamic is reflected at the market level.

Sunbelt market supply growth rates expected to be more pressured in coastal markets. This year.

John: Mixing this all together, we arrive at our 2024 guidance, which is summarized on slide 11. Primary expectations include four-year FFOA for shared guidance of $2.36 to $2.48. Thanks for watching. It translates it in a wide row, ranging from negative 1.75% to positive 1.75%.

Mixing this all together we arrive at our 'twenty 'twenty four guidance, which is summarized on slide 11.

Primary expectations include full year, I felt that way per share guidance $2.36 to $2.48.

Same store revenue and expense expectations.

Translate to NOI growth ranging from negative 175% to positive 1.75%.

John: Slide 12 shows the building blocks for our full year 2024 ethical way for shared guidance at $2.42, representing a 2% year over year decrease. Drivers included a seven penny increase in revenue and fees from income from recently developed communities, offset by a seven-penny decrease from train store expenses, and a two and a half penny decrease on DCP activities due to a lower average investment balance in 2024, including a potential two penny impact from assuming ownership of a D.C.C. development is dependent on the refinancing of a senior construction bond while the developer continues to advance refinancing discussions. We have chosen to take a conservative approach by including the downside scenarios in our guidance.

Slide 12 shows the building blocks for our full year 2024 at the four eight per share guidance at the $2 40 to Centerpoint.

And in a 2% year over year decrease.

Drivers include a.

730 inquiries same store revenue and lease up income from recently developed communities.

All set by southern Penny decrease from same store expenses.

A two and a half penny decrease M. D. C. P activities due to a lower average investment balance of 2024.

Including a potential two penny impact I'm, assuming ownership of a D. C. P development dependent on the refinancing of its senior construction loan.

While the developer continues to advance refinancing discussions we have chosen to take a conservative approach by including the downside scenario and our guidance.

John: We expect to have clarity on the refinancing by the second quarter and do not see additional 2024 earnings risk from our DPP investments. Continuing with the Building Blocks, and approximately two penny decrease from interest expense due to a higher average interest rate and the expiration of certain pledges, and an approximately one penny decrease in GNA, reflective of inflationary wages. Moving on to slide 13, to give it to the first quarter.

We expect to have clarity on the refinancing by the second quarter and do not see additional 'twenty 'twenty four earnings risk from our D. C. P investments at this time.

Continuing with the building blocks.

Approximately two penny decrease from interest expense due to higher average interest rates and the expiration of certain hedges.

And then approximately one penny decrease G&A reflective of the inflationary wage growth.

Moving on to slide 13, and.

Specific to the first quarter that's.

John: That's February for shared guidance. It's 60 cents, it's 62 cents, on approximately a 20% sequential decrease at the midway. This is driven by a one-and-a-half penny decrease in exchange for NOI, primarily due to higher expenses as a result of seasonal trends, and approximately a half penny decrease in higher interest expense in GMI. Less on slide 14.

That's helpful way per share guidance range is 60.

62.

Or an approximately 3% sequential decrease at the midpoint.

This is driven by.

One and a half Penny decrease same store NOI, primarily due to higher expenses attributable to seasonal trends.

At approximately a half penny decrease higher interest expense and G&A.

Last on slide 14.

John: We present our Debt Maturity Schedule and Requirements. Only 13% of our total Consolidated Debt matures to 2025, thereby reducing future refinance opportunities, combined with roughly $1 billion of buying capacity. Minimal Connected Capital, a projected first quarter destination on free cash flow. Our balance sheet sits in an excellent position. In all, despite near-term macro and potential GCC-related headwinds in 2024, our balance sheet and liquidity remain in excellent shape.

At present, our debt maturity schedule and liquidity.

Only 13% of our total consolidated debt matures through 2026.

By reducing future refinancing risk.

Speaker Change: Combined with roughly $1 billion of wind capacity.

Minimal committed capital.

Our projected first quarter disposition and strong free cash flow.

Our balance sheet sits in an excellent position.

In all despite near term macro and SM.

D C D related headwinds in 2024.

Our balance sheet and liquidity remain in excellent shape.

Mike: We remain opportunistic in our capital deployment, and we continue to utilize a variety of capital allocations that are advantages to drive long-term growth. With that, I will turn the call over to Mike. Thank you.

We remain opportunistic in our capital deployment.

And we continue to utilize a variety of capital allocation competitive advantages to drive long term accretion.

With that I will turn the call over to Mike.

Mike: Today I'll cover the following topics. How our 20.3 results and other drivers factor into the building blocks for our full year 2024 Game Store Revenue Growth Guidance. An update on our VIRS innovation initiative. Expectations for operating trends across our region, and our outlook for things to our students. Turning to slide 15.

Today I'll cover the following topics.

How our 2023 result, and other drivers factor into the building blocks of our full year 2020 for same store revenue growth guidance.

An update on our various innovation initiatives.

Expectations for operating trends across our regions and.

And our outlook for same store expense growth.

Turning to slide 15 the.

Mike: The primary building blocks of our 2024 Same Store Revenue Growth Guidance include our embedded earnings from 2023 lease rate growth, branded least rate growth expectations for full year 2024, and contributions from our innovation and other operating initiatives. Starting with our 2024 earnings growth rate of 70 basis points, or about half of our normalized historical average. The 20 basis point increase in average occupancy we achieved during the fourth quarter of 2023 came at the expense of some rates, which reduced our earnings by approximately 30 basis points versus what I spoke about on the third quarter call. However, we believe this is a prudent defensive trade given the elevated use of client work in many of our markets.

The primary building blocks of our 2020 for same store revenue growth guidance include our embedded earn in from 2023 lease rate growth.

Our blended lease rate growth expectations for full year 2024.

In contributions from our innovation and other operating initiatives.

Starting with our 2024 earned in a 70 basis points or about half of our normalized historical average the 20 basis point increase in average occupancy we achieved during the fourth quarter of 2023 came at the expense of some rate growth, which reduced our earnings by approximately 30 basis points versus what I spoke to on the third quarter.

Carl.

We believe this is prudent defensive trade given the elevated new supply outlook in many of our markets.

Mike: Next, Portfolio 1, the Leach Rate Growth is forecast to be approximately 70 basis points in time. Given a mid-year convention, Great Growth should add about 35 basis points to our paying store revenue growth issue. Our expectation is that Glenn's will be lighter in the first half of 2024 before marginally improving during the second half of the year.

Next portfolio blended lease rate growth is forecast to be approximately 70 basis points.

Given a mid year convention break ROE should add about 35 basis points to our same store revenue growth this year.

Vacation is that Glenn will be lighter through the first half of 2024 before marginally improving during the second half of the year.

Mike: This dynamic, if accurate, means that blended growth should have less of a positive impact on 2024 but be more impactful on 2025. Underlying our blended rate growth forecast are assumptions of approximately 3% renewal rate growth in 2024 and approximately negative 1.5% median straight growth. As a reminder, even during recessionary periods, we have seen approximately 2% renewal rate growth on average, which combined with recent trends provides support for those assumptions. Lastly, we expect the combination of oxygen and bad gas to be roughly flat in 2020.

This dynamic is accurate it means that blended grow should have less of a positive impact on 'twenty 'twenty, four but more impactful to our 2025 growing underlying.

Underlying our blended rate growth forecast, our assumptions of approximately 3% renewal rate growth in 2024, and approximately negative one 5% new lease rate growth.

As a reminder, even during recessionary periods, we have seen approximately 2% renewal rate growth on average, which combined with recent trends provide support for those assumptions.

Lastly, we expect the combination of occupancy and bad debt to be roughly flat in 2024.

Moving on innovation and other operating initiatives are expected to add approximately 45 basis points to our 2020 for same store revenue growth, which equates to $5 million to $10 million.

Mike: Moving on, innovation and other operating initiatives are expected to add approximately 45 basis points to our 2024 St. Croix revenue growth, which equates to five to $10 million. The bulk of this growth should come from the continued rollout of our property-wide Wi-Fi, other property enhancements such as the addition of package lockers, as well as improved retention and less fraud. So retention, our guidance assumes that our 2024 resident turnover will be 200 basis points below that of 2020, and half of this comes from the year's first half comp. As you may remember, long-term billing foot skips and evictions were elevated through the first half of 2023. However, we do not anticipate this repeating in 2024, as we have seen long-term delinquent activity stabilize.

The bulk of this growth should come from the continued rollout of our property wide Wi Fi other property enhancements such as the addition of package lockers as well as improved retention and less fraud.

For retention our guidance assumes that our 2020 for resident turnover will be 200 basis points below that of 2023.

Passes this comes from easier first half comp as you may remember long term delinquent skips and evictions were elevated through the first half of 2023.

We do not anticipate this repeating in 2024 as we have seen long term delinquent activity stabilize.

Mike: The other 100 basis points improvement should come from our proprietary customer experience project, which helps us improve our resident experience throughout their time with UDR, thereby improving their probability of renewal. We have seen yearly benefits from this initiative, with resident retention higher on a year-to-year basis for nine consecutive months. For every 100 basis points of improved retention or reduced turnover, approximately $3 million drops to our bottom line. We believe our customer experience project will continue to improve our turnover and expand our operating margin advantage, as it appears. Regarding fraud, we are implementing a variety of AI-based screening measures, process improvements, and credit threshold reviews to enhance our upfront resident screening.

The other 100 basis point improvement should come from our proprietary customer experience project, which helps us improve our resident experience throughout their time with UDR, thereby improving their probability of renewal.

We are seeing the early benefits of this initiative with resident retention higher on a year over year basis for nine consecutive months.

For every 100 basis points of improved retention or reduce turnover approximately $3 million drops to our bottom line.

We believe our customer experience project will continue to improve our turnover and expand our operating margin advantage relative to peers.

Regarding fraud.

We are implementing a variety of AI based screening measures process improvements and credit threshold reviews to enhance our upfront resident screening.

Mike: Given the resident-friendly legislation we continue to see throughout our portfolio, minimizing the potential for bad debt before it gets to the front door is critical. Blowing all this up, our 2024 state solar revenue guidance ranges from 0% to 3% with a midpoint of 1.5%. The 3% high end of our same store revenue growth range is achievable through improved year over year occupancy, additional accretion from innovation, and blended lease rate growth that occurs more readily throughout the year or at a higher level than our initial forecast. Conversely, the low end of 0% reflects four-year blended lease rate growth of approximately negative 2%, some level of austency loss, and delayed income recognition from our innovation initiative.

Given the resident friendly legislation, we continue to see throughout our portfolio minimizing the potential for bad debt before it gets in the front door is critical.

Pulling all this up our 2020 for same store revenue guidance ranges from zero percent to 3% with a midpoint of one 5%.

The 3% high end of our same store revenue growth range is achievable through improved year over year occupancy additional accretion from innovation and blended lease rate growth that occurs more ratably throughout the year or at a higher level than our initial forecast.

Conversely, the low end of zero percent reflects full year blended lease rate growth of approximately negative 2% some level of occupancy loss and delayed income recognition from our innovation initiatives.

Mike: Turning to slide 16, in our regional revenue growth expectation, we expect the Coast will continue to perform better than the Sun Belt in 2024, led by the East Coast. The East Coast, which comprises approximately 40% of our NOI, is forecast to grow base load revenue by 1% to 4%. We expect Boston, Washington, D.C., Baltimore, and Philadelphia to each deliver full year same store revenue growth of at least 2%.

Turning to slide 16, and our regional revenue growth expectations. We expect the coast will continue to perform better than the sunbelt in 'twenty 'twenty four led by the East coast.

The East Coast, which comprises approximately 40% of our NOI is forecast to grow same store revenue by 1% to 4%.

We expect Boston, Washington, D C Baltimore and Philadelphia can each deliver full year same store revenue growth of at least 2%.

Mike: Although signs of reconciling and demand in New York were slightly more cautious on that one. The West Coast, which comprises approximately 35% of our NOI, is forecast to grow revenue by 0% to 3%. Orange County, Los Angeles, and the Moderate Peninsula are expected to produce upper-tier growth while San Francisco, San Diego, and Seattle are forecast to be somewhat poorer.

Signs of recent softening in demand in New York, we've a slightly more cautious on that market.

The West Coast, which comprises approximately 35% of our NOI is forecast to grow same store revenue <unk> percent to 3%.

Orange County, Los Angeles, and the Monterey Peninsula are expected to produce upper tier growth, while San Francisco, San Diego and Seattle are forecast to be softer.

Mike: Plus, our Sunbelt market, which comprises roughly 25% of our NOI, is forecast to grow same-store revenue by negative 2% to positive 1%. Austin, Nashville, Denver, and Orlando are scheduled to see some of the highest levels of new supply in 2020, which should continue to pressure pricing power on a relative basis. We expect Dow and Tampa to be leaders among our Sunbelt markets.

Glass, our sunbelt markets, which comprise roughly 25% of our NOI are forecast to grow same store revenue by negative 2% to positive 1%.

Austin, Nashville, Denver, and Orlando are scheduled to see some of the highest levels of new supply in 'twenty.

We should continue to pressure pricing power on a relative basis, we expect Dallas and Tampa to be leaders among our sunbelt markets.

Mike: Moving on, as shown on slide 17, we expect 2024 same store expense growth of 5.25% in the mid 40s. This is primarily driven by growth in real estate taxes, personnel, and insurance. While only 6% of total expenses, insurance expense growth of 15% to 20% reflects the premium increase we realized when our policy was renewed in September.

Moving on as shown on Slide 17, we expect 2020 for same store expense growth of 525% at the midpoint.

This is primarily driven by growth in real estate taxes personnel and insurance.

While only 6% of total expenses insurance expense growth of 16% to 20% reflects the premium increase we realized when our policy was renewed in December.

Mike: In terms of year-over-year expense growth cadence, the first quarter should be elevated due to a one-time $3.7 million employee retention credit we realized at the beginning of 2023. This has the effect of increasing total first quarter 2024 pay store expense growth by more than 300 basis points. Additionally, for full year 2024, the costs associated with our property-wise Wi-Fi initiative amount to an incremental $2 million.

In terms of year over year expense growth cadence the first quarter should be elevated due to a one time $3 7 million dollar employee retention credit we realized at the beginning of 2023.

This has the effect of increasing total first quarter 2020 for same store expense growth by more than 300 basis points.

Additionally for full year 2020 for the costs associated with our property wide Wi Fi initiative amount to an incremental $2 million.

Mike: As with these two factors, we would expect normalized gains to our expense growth to be in the low 4% range throughout the year, or approximately 120 basis points lower than our total year midpoint. In closing, while the near-term operating environment presents some challenges, we continue to innovate with the intention of increasing revenue growth, improving resident retention, and further expanding our operating margin over time. I thank our teams for their collaboration and eagerness to leverage new and innovative tools for our superior results. I will now turn over the call to Tom.

Absent. These two factors, we would expect normalized same store expense growth to be in the low 4% range throughout the year or approximately 120 basis points lower than our full year midpoint.

In closing, while the near term operating environment presents some challenges we continue to innovate with the intention of increasing revenue growth improving resident retention and further expanding our operating margin over time.

I. Thank our teams for their collaboration and eagerness to leverage new and innovative tools to drive superior results.

I will now turn over the call to Tom.

Thomas W. Toomey: Thank you, Mike, and as summarized on slide 18. When we consider our potential 2024 growth trajectory, I come back to the key components of running a successful business. First, you need to understand your customer.

Thank you, Mike and as summarized on slide 18.

When we consider a potential 2024 our growth trajectory.

I come back to the key components of running a successful business.

First is to understand your customer our residents have healthy rent to income ratios and relatively affordability continues to favor apartments over other forms of housing.

Thomas W. Toomey: Our residents have healthy rent-to-income ratios, and relative affordability continues to favor apartments over other forms of housing. So we view the effect of elevated supply as transitory and expect that the demand versus supply dynamics will revert to our favor sometime after 2024. In terms of resident satisfaction, we can measure success through our customer experience initiatives and how they translate into greater retention, which has improved for nine consecutive months. We expect this trend to continue. The second component is an understanding of yourself.

So we view the effect of elevated supply as transitory.

And expect that the demand versus supply dynamics will revert to our favor sometime after 2024.

In terms of resident satisfaction, we can measure success through our customer experience initiatives and how they translate into greater retention, which has improved for nine consecutive months. We expect this trend to continue.

The second component is the understanding of your associates to have frequent discussions surveys and town halls, we have created an open dialogue and a culture that fosters engagement and innovation.

Thomas W. Toomey: Through frequent discussions, surveys, and town halls, we have created an open dialogue and a culture that fosters engagement and innovation. UDR is a proud and recognized leader in corporate responsibility as well. And the third characteristic is listening to investors. We're highly engaged, conducting roughly 500 investor calls meetings each year. You're confident we have a good read on what investors think we are doing well and where we can improve. From these interactions, we have created a company we believe is a full-cycle investment and maximizes value creation for our stakeholders regardless of the economic outlook. In 2024, we plan to focus on what we can control, mainly this means leaning into our operating platform and innovation, Developing Talent, Remembering, and Adjusting Our Operating Strategy in the Face of Supply, and taking a capital-wide approach to maintain liquidity and balance sheet flexibility. Together, we believe we can successfully navigate whatever macro environment we face moving forward. With that, I'll open it up to Q&A, Operator. Hey, thank you.

Speaker Change: UDR is proud and recognized leader in corporate responsibility as well.

And third characteristic is to listen to investors. We are highly engaged conducting roughly 500 investor calls meetings each year.

We are confident that we have a good read on what investors think we are doing well and where we can improve.

From these interactions we have created a company. We believe is a full cycle investment and maximize value creation for our stakeholders, regardless of the economic outlook.

In 2024, we plan to focus on what we can control, namely this means leaning into our operating platform and innovation.

<unk> talent.

Emily adjusting our operating strategy in the face of supply.

And taking a capital light approach to maintain liquidity and balance sheet flexibility taking.

Taken together, we believe we can successfully navigate whatever macro environment, we face moving forward.

With that I'll open it up to Q&A operator.

Thank you.

We will now be conducting a question and answer session.

I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Eric Wolfe: Can you walk us through the math on how you get to the two and a half cents of pollution from taking ownership of the two PCP assets? And I think in the past you've talked about a third asset that might see a similar outcome. So just help us understand if there's likely any incremental impact beyond what's in the 2024 guide. Hey, Eric. Good morning. It's Joe.

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One moment, please while we poll for questions.

Thank you. Our first question comes from the line of Eric Wolfe with Citibank. Please proceed with your question.

Joseph Douglas Fisher: Maybe some quick math on the two and a half pennies and then I'll kind of take you through some of that remaining DCP risk and how we approach that. So, as I think we kind of mentioned up front, there is a silly asset that I'll get into that has a binary outcome coming up in 2Q related to its refinancing, which right now is in process and being discussed with lenders. But if that were to not be refinanced and we were to take ownership of that asset, we'd effectively be moving from a high-yield DCP investment to a lower-yield acquisition, which naturally results in some dilution. So, that's about two pennies of that number that shifts the whole range down, including at the midpoint.

Hey, Eric Good morning, it's Joe.

Maybe some quick math on the two and a half pennies and then I'll kind of take you through some of that remain in D. C. P risks and how we approach that so.

As I think we kind of mentioned upfront there is a philly asset that I'll get into that has a binary outcome coming up in <unk> related to its refinancing which right now is in process and discussing with lenders, but if that were to not be refinanced and we were to take ownership of that asset we would effectively be moving from a high yield D. C. P.

Joseph Douglas Fisher: So, if that refinancing did occur, in theory, the entire range would shift right back up by two pennies. The rest of that has to do with we took ownership of Madera Link Merit, as we mentioned there in the release, that has a little bit of dilution to it. In addition, we've got an assumption in there that we have roughly $75 million of payoffs in the back half, as we have some of these deals that are opening into their prepayment window, and it may make sense for them economically to go out and refinance with a cheaper cost of capital. And so, you get a little bit of drag from that as well, offset by continued accruals on the rest of the portfolio. That's kind of the percentage on the 2.5 pennies. If it relates to getting into the rest of the portfolio, we walked through Madera Link Merit. I think everybody understands kind of what took place there.

Investment to a lower yield acquisition, which naturally results in some dilution. So that's about two pennies of that number that shifts the whole range down including at the midpoint. So if that refinancing did occur in theory, the entire range would shift right back up by two pennies.

The rest of that has to do with we took ownership of Madera like Merit as we mentioned there in the release there is a little bit of dilution to it. In addition, we've got an assumption in there that.

We have roughly $75 million of payoffs in the back half as we have some of these deals that are opening under their prepayment window.

It may make sense for them economically to go out and refinance with a cheaper cost of capital and so you get a little bit of drag from that as well offset by continued accruals on the rest of the portfolio. So that's kind of the puts and takes on the two and a half pennies.

As it relates to getting into the rest of the portfolio.

It walks through Madera like Merit, I think everybody understands kind of what took place there and we go into these deals you really have three primary areas of risk that we're trying to underwrite one is the upfront cost and delay in timing aspect of any development two is going to be the cash flow perspective, what's going to take place on rents.

Joseph Douglas Fisher: When we go into these deals, we really have three primary areas of risk that we're trying to underwrite. One is the upfront kind of cost, delay, and timing aspect of the development. Two is going to be the cash flow perspective, what's going to take place with rents and the supply in any given market. And three, just the capital markets component, what happens with interest rates, cap rates, and capital availability.

And the supply in any given market.

Three just the capital market's component, what happens with interest rates cap rates and capital availability and so.

That's kind of the three main areas, we're trying to underwrite when we go into these clearly any one of those factors is not going to be enough to drive a distress on any of these deals, but when you kind of get a couple of them that stack up you do run into a little bit more distress, which is really what happened with madera like merit.

Joseph Douglas Fisher: And so, those are kind of the three main areas we're trying to underwrite when we go into these. Clearly, any one of those factors is not going to be enough to drive distress on any of these deals. But when you kind of get a couple of them that stack up, you do run into a little bit more distress, which is really what happened with Madera Link Merit.

Everybody is pretty familiar with what happened in norcal since pre COVID-19 rents still being down and then downtown Oakland, perhaps one of the worst submarkets in that respect with runs still down 30 plus percent and so.

Joseph Douglas Fisher: I think everybody's pretty familiar with what happened in NorCal since pre-COVID, rent still being down. And then downtown Oakland, perhaps one of the worst sub-markets in that respect, with rent still down 30 plus percent. And so, we did take the keys back on that asset as the developer didn't want to continue to support the cash flow shortfalls.

We did take the keys back on that asset as the developer didn't want to continue to support the cash flow shortfalls.

That said as we continue through lease up and hopefully burn off of concessions in the next couple of years, you'll see it in the presentation and getting to a more palatable to yield here in the next couple of years.

As it relates to the affiliate asset that I mentioned, a couple of those same risks not to the same degree but.

Joseph Douglas Fisher: That said, as we continue to restock and hopefully burn off the concessions in the next couple of years, you see it in the presentation, get into a more palatable yield here in the next couple of years. If it relates to the Philly asset that I mentioned, a couple of those same risks, not to the same degree, but a challenged market in downtown or city center Philadelphia from a supply and concession perspective, and so NY has been a little bit weaker. We did have some delays coming through COVID on that development, but as I mentioned, that development partner is in the process with a couple of different funders, just trying to make sure that they can get it to the finish line on proceeds and terms, but we felt it prudent to take perhaps a more conservative approach and put the risk out there on the street. Beyond that, you mentioned what else is out there.

Challenged market in downtown or city centre, Philadelphia from a supply and concession perspective.

So the NOI has been a little bit weaker we did have some delays coming through COVID-19 on that development, but as I mentioned that development partner is in process with a couple of different lenders.

And to make sure that they can get it to the finish line on proceeds in terms, but we felt it prudent to take perhaps a more conservative approach and put the risk out there to the street.

Beyond that you mentioned what else is out there.

So you kind of got 12 other assets roughly $475 million of outstanding balance of those 12, when we go through the stress testing and scenarios are just three of those are what we would considered watch list and the balances on those three or plus or minus $50 million. So it only about 10% of the rest of the book.

I have the same degree of risk the first to do but they are on our watch list for varying reasons. They don't have maturities come up until 'twenty five 'twenty six so we do have a little bit of time, there unless of course, another developer partner decided not to continue making payments.

Joseph Douglas Fisher: You can see here I've got 12 other assets, roughly $475 million in outstanding balance. Of those, when we go through the stress testing and scenarios, just three of those are what we would consider watch lists, and the balances on those three are plus or minus $50 million. So it's only about 10% of the rest of the book.

So if we did have to take those back that's really plus or minus a penny of risk over time.

Don't see all three obviously, having a near term and or potentially even longer term.

Joseph Douglas Fisher: They don't have the same degree of risk that the first two do, but they are on our watch list for varying reasons. They don't have maturity dates to come up until 25 and 26, so we do have a little bit of time there unless, of course, another developer partner decides not to continue making payments. So if we did have to take those back, it's really plus or minus a penny of risk over time. We don't see all three, obviously, happening near term and or potentially even longer term. Beyond that, you get into the rest of the book on business.

Beyond that you get into the rest of the book of the business. The other 400 plus million dollars. That's out there. Most of these are in their lease up and stabilization process. So we've got pretty good visibility on rents and NOI, which at this time the rest of those are in line to above pro forma expectations and so we feel pretty good about the rest of that book of business.

That's very helpful. And then maybe just quickly the Oakland property look married I guess why not just sell it take the small loss you mentioned some of the struggles in northern California. So I guess the question is why.

Sort of increase your exposure there versus just selling it today.

Joseph Douglas Fisher: The other $400 million that's out there, most of these are in their lease up and or stabilization process. We've got pretty good visibility on rents and NOI, which at this time, the rest of those are in line with or above pro forma expectations, and so we feel pretty good about the rest of that book of business. Thank you very much. We're going to move quickly to the Oakland property with Mary. I guess why not just take a small walk?

More accretive uses in the near term.

Yeah. So I think the valuation obviously, a third party appraisal there that dictated that noncash impairment, but when you look at where we're at today on that asset we are taking it over and we do think theres quite a bit of upside be it through real estate tax resets. Other income obviously burning off concessions in getting this stabilized so it's probably.

Better value in our hands than bringing it to the market right now, we're clearly in northern California, as a whole in Oakland, specifically from a transaction market perspective.

Pretty challenged given some of the risk out there so I'm not sure you optimize price and value by simply trying to liquidate I think it's better to keep it in our operations teams hands for a couple of years and then evaluate down the road when the market's a little bit better.

Joseph Douglas Fisher: You mentioned some of the struggles in Northern California, so I guess the question is why. So increase your exposure there versus just selling it today and putting it to more creative uses in the near term. Yeah, so I think the valuation, obviously a third-party appraisal there that dictated that non-cash empowerment, but when you look at where we're at today on that asset, we are taking it over, and we do think there's quite a bit of upside, be it through real estate tax receivable, other income, obviously burning off concessions and getting it stabilized. So it's probably better value in our hands than bringing it So I'm not sure you optimize price and value by simply trying to liquidate. I think it's better to keep it in our operations team's hands for a couple of years and then evaluate it down the road when the market's a little bit better. I got it.

Speaker Change: Got it thank you.

Thank you. Our next question comes from the line of Austin, where Smith with Keybanc capital markets. Please proceed with your question.

Great. Thanks, Mike.

Average 60 basis points of blended lease rate growth in the second half of last year and you mentioned, the 70 basis point lease rate growth assumption in guidance.

Austin Wurschmidt: Lower growth in the first half of this year and then you know.

Kind of picks up a little bit in the back half is it fair to say that you think that lease rate growth bottoms in the first half of 'twenty four and we see continued improvement in the back half and then into 2025.

Hey, Austin. Thanks for the question Yeah, I think what you can expect to see as the first half is going to look very similar to the back half of last year. So that 60 basis points first half is where we expect things to track today.

Mike: Thank you. Hey Austin, thanks for the question. Hey, I think what you can expect to see is the first half is going to look very similar to the back half of last year. So that 50 basis point first half is where we expect things to track today. As of right now, the second half is closer to 1% on blends. And I'll tell you what we've been promised to see the where we're at today, just in terms of blends. If you look at December to January, you can see it in our deck. We went through a 150 basis point increase, and a lot of that has to do with our strategy. And you've heard us talk about this before, but we tend to operate closer to 96 and a half to 97%. And we're able to drive our occupancy closer to 97 and 2% in January. Again, that put us in a better position today to start paying our rent.

Speaker Change: As of right now that the second half is closer to 1% on blends.

And I'll tell you what we've been.

Our promise to see that where we're at today and just in terms of blends you look at December to January you can see it in our deck. We went 150 basis point increase in a lot of that has to do with our strategy and you've heard US talk about this before about we tend to operate closer to 96, 5% to 97%.

We're able to drive our occupancy closer to 97, 2% in January again that put us in a better position today to start driving our rents.

Seeing some some promising trends, we don't want to call that things are significantly better as we go.

Have to get through some more of the leasing season, but to start the year things are starting off a little better than we expected.

Okay, great. So it sounds like that that lease rate growth should inflect, I guess comparing spreads year over year in the back half of this year.

Mike: We've seen some promising trends. We don't want to call them significantly better as we, we have to get through some more of the leasing season, but to start the year, things are starting off a little better than we expected. Yeah, that's another really good question.

And Bell markets had been kind of in the most challenging for your portfolio and I'm, just wondering sort of how that stacks up versus the portfolio overall this year and how youre thinking about.

Mike: We put a good slide in here, page 16, that shows just where we expect the East Coast to perform against the West Coast, as well as the Sun Belt. And I tell you that even though the Sun Belt, we're definitely facing higher supply, and that's playing out in some of our expectations for the year. We're coming off a very strong year, and we compare ourselves on a relative basis within the markets against our different peers. And I can tell you the teams are proud of what they're able to accomplish, and we're off to a good start this year as well.

Inflection or further deterioration across the markets that year and just any detail you can provide and how youre thinking about the cadence.

For that you know that.

<unk>, 25% to 30% of the portfolio.

Yeah.

Really good question and we put a good slide in here page 16 that walks, just where we expect east coast to perform against the West coast as well as the Sun belt and I would tell you that even though the sunbelt, we're definitely facing higher supply and that's playing out in some of our expectations for the year, we're coming off of a very strong here.

Speaker Change: And we compare ourselves on a relative basis within the markets against our different peers and I can tell you. The teams are proud of what they were able to accomplish.

Mike: I think a lot of that has to do with what we expect with supply that we're facing here over the next four quarters or so. But on top of that, it's still relatively strong job growth. We're still seeing wage growth in that area, so we're seeing pretty positive absorption. And for us, what's interesting is that when you think about what we put on page 15 and we break down our earn inverse, our expectation for blends and other incomes, other incomes expected to make up about 45 basis points of our total revenue at the portfolio level for the Sunbelt, that's double. So a lot of things that we've been working on as it relates to, like rolling out our WiFi, for example, that's Hey, thanks, everybody.

And we're off to a good start for this year as well.

Speaker Change: A lot of this has to do with what we expect with supply.

Speaker Change: We're facing here over the next four quarters or so.

On top of that it's still relatively strong job growth, we're still seeing wage growth in that area. So we're seeing pretty positive absorption and for us what's interesting. When you think about what we put on page 15, and we we break down our earn in versus our expectation from blends in other income.

Other income is expected to make up about 45 basis points of our total revenue at the portfolio level for the Sunbelt. That's double so a lot of things that we've been working on as it relates to like rolling out our Wi Fi for example, that's starting to pay dividends and that's what's translating to positive relative performance against our peers.

No. That's all very helpful. Thank you.

Our.

Our next question comes from the line of Brad Heffern with RBC capital markets.

Please proceed with your question.

Hey, Thanks, everybody occupancy in January was about 50 basis points above the 23 level, but guidance assumes flat occupancy. So I'm. Just curious is the expectation that you plan to trade that occupancy for rent growth in the spring or is that just a conservative assumption.

Brad: Occupancy in January was about 50 basis points above the 23 level, but guidance is for flat occupancy. So I'm just curious, is the expectation that you plan to trade that occupancy for rent growth in the spring, or is that just a conservative assumption? It's a good chat, Brad.

Mike: We're starting to see that today. So again, we wanted to build our options during a period of time when our yeast expirations are the largest. It allows you to just push your occupancy up.

Oh, that's a good catch Brad we're starting to see that today. So again, we wanted to build our occupancy in a period of time, where our lease explorations or the law. It's allows you to just push your occupancy up and then as you move into the leasing season, you can start to get more aggressive as leases start to turn and so the 97 two.

Mike: And then as you move into leasing season, you can start to get more aggressive as leases start to turn. And so, 97.2 is probably a high mark for us. I think as we move through the quarter, we expect that to come down closer to 97, maybe even the high 95 range, and we will continue to test our blends. And from what you can see is that rate of change from December to January, again, very positive momentum. A lot of that is on the new lease side, so we had negative 5.6% new lease growth in December. January was negative 3.6%. February, it's only seven days in.

It's probably a high mark for US I think as we move through the quarter.

We expect that to come down closer to 97, maybe even in the high 96 range and continue to test our blends and from what you can see is that rate of change from December to January again, very positive momentum a lot of that is on the new lease side. So we had negative five 6% new lease growth in December January was negative three.

6% February it's only seven days and so it's probably too early to call, but things are promising and it looks like it's trending upwards.

Mike: So it's probably too early to call, but things are promising. It looks like it's trending upward. Okay, thanks for that.

Okay. Thanks for that.

Joseph Douglas Fisher: And then, how are you treating the DCP book going forward? As you take back assets and redemptions come in, do you plan to shrink the book just based on recent experience, or do you plan to reinvest in DCP and kind of keep it at the same size that it always was? I think naturally you're going to see a little bit of potential shrinkage embedded in guidance. We mentioned that binary outcome there with that Philadelphia asset, which if we were to take that back, that's plus or minus $100 million balance. So that would bring the price down to $475 million.

And then how are you treating the D C P, but going forward as you take back assets and redemptions come in do you plan to shrink. The book just based on recent experience or do you plan to reinvest in D. C P and kind of keep it at the same size and it always was.

So I think naturally youre going to see a little bit of potential shrinkage.

On guidance, we mentioned that binary outcome, there with that Philadelphia asset, which.

If we were to take that back that's plus or minus $100 million balance so that would bring it down to $4 75, and then we mentioned that we have about $75 million of assumed redemptions are in the back half of the year. So you could see that balanced slow down which near term is a little bit dilutive.

Said I don't think there's any desire to continue to shrink beyond that I think the hope is as we get some of those paybacks, we find opportunities to continue to redeploy into either on the traditional DCP side for the recap side.

Joseph Douglas Fisher: And then we mentioned that we have about $75 million of assumed redemptions in the back half of the year. So you could see that balance slow down, which is, near term, a little bit dilutive. That said, I don't think there's any desire to continue to shrink beyond that.

That said, it's kind of a double edged sword in terms of we're not seeing a lot of opportunities out there in that space right now, but that speaks to the fact that starts have dropped off to kind of annualized 200000 unit level. So not a lot of developers out there.

Joseph Douglas Fisher: I think the hope is that as we get some of those paybacks, we find opportunities to continue to redeploy them either on the traditional DCP side or the recap side. That said, it's kind of a double-edged sword in terms of, you know, we're not seeing a lot of opportunities out there in that space right now, but that speaks to the fact that starts have dropped off to kind of an annualized 200,000 unit level. So not a lot of developers out there start for that.

<unk> today, but I do think over time, you'll see us continue to pivot between that between acquisitions redevelopment development as it makes sense, but I wouldn't expect it can be a shrink much beyond that.

Speaker Change: Okay. Thank you.

Yeah.

Thank you.

Next question comes from the line of Josh Sanderlin with Bank of America. Please proceed with your question.

Joseph Douglas Fisher: But I do think over time you'll see us continue to pivot between that, between acquisitions, redevelopment, and development, as it makes sense. But I wouldn't expect it to continue to shrink much beyond that. OK. Thank you. Thank you. Thank you.

Yeah, Hey, guys I appreciate the time, Mike I, just wanted to explore your guidance assumption for 3% renewal rate growth in 2024.

Are there specific markets driving that lower or is there just some kind of split the difference between Conservatives on Mike I think he said recessions are cheaper sand versus maybe more normal years, it's closer to four just trying to gauge where you guys are coming from.

Mike: Yeah, hey guys, appreciate the time. Mike, I just wanted to explore your guidance a bit. Are there specific markets driving that lower? Or is there just some kind of Yeah, good question.

Mike: I'll tell you, as we think about renewals and new leases in general, as we started the year, you can see our renewals started to come down close to that 4% range, and it feels pretty comfortable. We're still sending down that 3.5% to 4%, and as we move forward over the next two months or so, our expectations are that with seasonality picking up, even though we're facing supply, typically, your market rents start to pick up as well. So if we can continue to see our new lease growth continue to improve, you'll see that the spread between new and renewal is in a more healthy range. And then we can start testing our renewals again as we move forward. But as it relates to just regional performance, there's not a big difference typically between the Sun Belt versus East Coast and West Coast; you're usually in that range of call it two, two and a half to all the way up to around 5% on renewals. But it's pretty tight overall.

Yeah. Good question I'll tell you just as we think about renewals and new leases in general just as we started the year you can see our renewals starting to come down closer to that 4% range and it feels to be a pretty comfortable.

We're still sending out in that three 5% to 4% as we move forward over the next two months or so our expectations are with seasonality picking up even though we are facing supply typically your market rent start to pick up as well. So if we can continue to see our new lease growth continuing to improve you're going to see that that spread between new and renewal is.

Is it a more healthy range and then we can start testing our renewals again as we move forward, but as it relates to just regional performance, there's not a big difference typically between.

Sunbelt versus the East Coast West Coast Youre <unk>.

Usually in that range of call. It two two and a half to all the way up to around 5% on renewals, but it's pretty tight overall.

Okay, and then maybe just one follow up on that does that imply the second half renewals like 2.5%.

Mike: Okay, and then maybe just one follow-up on that: does that imply the second half?...

Mike: They're pretty consistent right now. Our playbook is around 3% for the year. And again, when we send out three and a half to 4%, we typically negotiate on 25 to 30% of our renewals, and it's usually in that 50 basis point range. So I feel comfortable, at least in the foreseeable future, for the first couple of quarters, with that range. And we'll see what happens with market rent. And again, if we can test the waters and push rent renewals back up, we will......

Spreads to your NAV.

They're pretty consistent right now are our play playbook is around 3% for the year and again, when we send out three 5% to 4%.

We typically negotiate on 25% to 30% of our renewals and it's usually in that 50 basis point range. So I feel comfortable at least in the foreseeable future and the first couple of quarters with that range and we'll see what happens with market rents and again, if we can test the waters and push rent renewals back up well.

Thanks, I appreciate that.

Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Jamie: Great, thank you. So I guess we're thinking about slide 10, the more than 250 basis points above the stock average market. I mean, how do you even invest in those markets? Excuse me right now. I mean, what do you like?

Great. Thank you.

So I guess, just thinking about slide 10, more than 250 basis points above historic average markets.

Do you even guide in those markets excuse me right now I mean, what do you like what gives you can you just talk about how you think about visibility on in terms of like where rents can really go what gives you comfort, giving any kind of numbers on those.

Joseph Douglas Fisher: What gives you? Do you talk about how you think about visibility in terms of like where rents could really go? What gives you comfort giving any kind of numbers on those? Whether it's historic cycles, or maybe the numbers you're seeing from third parties or, you know, however else you're seeing them. Really just a question on the kind of visibility in the highest deployment. Hey Jamie, it's Joe.

Whether its historic cycles or maybe the numbers youre seeing from third parties or whoever else youre thinking about it really just a question on kind of visibility in the highest supply markets.

Yeah, Hey, Jeremy It's Joe maybe I'll start off and Michael come in behind me here, but.

Joseph Douglas Fisher: Maybe I'll start off and Mike will come in behind me here, but I do think to your point on the visibility, when you look at the deliveries that we were facing in the back half of 23 in here to start this year, there really isn't a material difference between deliveries that we were facing at that point in time versus what we expect to face as we get in the middle of the year. It goes a little bit higher as we kind of get in the 2-2-3-2, but it's really not a big change. The fact that we're already facing kind of a run rate delivery schedule during a typically seasonally weak period of time, and we're putting up the results that we did in terms of blends and renewals and the traffic that we saw, and we were able to drive occupancy, that gives you some conviction that as we go into a seasonally stronger period of time and we have season sessions come back a little bit, we're seeing good traffic, the pricing power to start the year is off to a good start in terms of pushing rents up on a month over month basis.

I do think to your point on the visibility.

You know when you look at the deliveries that we were facing kind of in the back half of 'twenty three in here to start this year, there really isn't a material difference between deliveries that were facing at that point in time versus what we expect to face as we get into the middle of the year. It goes a little bit higher as we kind of get into Q3, Q, but it's really not a big change. So the fact that we have.

We're always we're already facing kind of a run rate delivery schedule. During a typically seasonally weak period of time and we're putting up the results that we did in terms of blends and renewals of the traffic that we saw and we were able to drive occupancy that gives you. Some conviction that as we go into a seasonally stronger period of time, and we have seen concessions come back a little bit more.

And good traffic the pricing power to start the year is off to a good start in terms of pushing rents up on a month over month basis. It gives you some conviction that maybe not the worst is behind us, but at least we're finding a little bit of a floor here as we move into the year. So that helps a little bit in that approach to those high supply markets.

Joseph Douglas Fisher: It gives you some conviction that maybe the worst is behind us, but at least we're finding a little bit of a floor here as we move into the year. So it helps a little bit in that approach to those high-supply markets. If I could just add, for us, we spend a lot of time doing both a top-down and a bottom-up approach, whether it's coming from the field, and they're telling us how the supply is impacting them directly versus all of our third-party data that we're able to look at here in Denver. We triangulate around a range of outcomes, and that's why we've provided that by reason here Again, we feel pretty good to start the year, and we'll see how it plays out, especially as it relates to moving into the leasing season. Okay, thank you, that's very helpful.

And if I could just add I think for US we spend a lot of time doing both a top top down and a bottom up approach and whether it's coming from the field and they're telling us how the supply is impacting them directly versus all of our third party data that we're able to look at here in Denver, we triangulate around a range of outcomes and that's why we've provided that.

By region here and again, we feel pretty good to start the year and we'll see how it plays out, especially as it relates to moving into the leasing season.

Okay. Thank you that's very helpful.

And then a big.

Big week for headlines in terms of distressed commercial real estate.

<unk> Hi, it's all kinds of stories out there what are you guys seeing now in terms of merchant stress you think at all that present, even more.

Joseph Douglas Fisher: And then, you know, a big week for headlines in terms of distressing commercial real estate, the CARES Act. What are you guys seeing now in terms of merchant stress? Do you think it will present even more opportunities than you were originally thinking for the year? And any change in marketing developer behavior and concessions, as you're starting to see. Hey, Jamie. It's Joe.

More opportunities than you originally thinking for the year.

And any change in marching developer behavior and concessions as you're starting to see more things seem to have issues.

Joseph Douglas Fisher: I guess maybe just stepping back first, as you think about the sector versus broader commercial real estate, I do think it's important to think about multifamily maybe a little bit differently than some of the headlines that are out there. A lot of that bank stress revolves around other sectors because the reality is that when we have Fannie Mae and Freddie Mac in the multifamily space, they do take the majority of the financing for our space, and so the banks end up having to go heavy on some of those. So you've got to delineate between those two to start. In fact, in an e-space business, plenty of capital is still flowing through it or wanting to flow into it. You typically don't see that same level of distress within multi-tasking.

Hey, Jamie it's Joe I guess, maybe just stepping back first as you think about the sector versus broader commercial real estate I do think it's important to think about multifamily maybe a little bit differently than some of the headlines that are out there.

Out of that bank stress revolves around other sectors because the reality is that when we have Fannie Mae Freddie Mac and the multifamily space. They do take the majority of the financing for our space and so the banks end up having to go heavy some of those are sometimes more risky sectors.

So you've got to delineate between those two to start and the fact that in a needs based business with plenty of capital still flow into it or wanted to flow into it.

Typically you don't see that same level of distress within multi so I think I'd keep with a little bit of what we've talked about in the past, which.

Joseph Douglas Fisher: So I think I'd keep with a little bit of what we've talked about in the past, which will see some distressed developers, for sure. So to the extent that you have full-format NOIs that are below expectations, obviously higher interest rates and cap rates, or delays, as we talked about earlier, you are going to see some of these developers that feel distressed, just like in this Madera Lake Merrill deal that we were talking about. That said, you see distressed pricing on the other side is another discussion. And with well-priced capital from the GSBs and the availability of that capital, yeah, you're still seeing quite a bit of demand for multifamily. You know, Andrew Tanner and his team just spent a ton of time out at NMHC, meeting with a lot of different partners, brokers, capital providers, and I'd say the general consensus was cap rates at broker minus 5% at this point in time. There's still got to be a little bit of meeting of the minds about some of the risks that are out there between buyers and sellers, but it still seems like we're in that plus or minus 5 cap world. So that really doesn't feel like distress, I'd say, as a buyer. Okay, if I could just ask a follow-up question on that.

Youll see some distress developers for sure so to the extent that you have pro forma NOI that are below expectations, obviously higher interest rates and cap rates or delays as we talked about earlier you are going to see some of these developers that field distress just like on this Madera Lake Merritt deal that we're talking about that said do you see distressed pricing on the other side of that.

Another discussion.

With well priced capital from the GSE and availability of that capital.

We're still seeing quite a bit of demand for multifamily.

Andrew Kessner and team just spent a ton of time out of NMFC meeting with a lot of different partners brokers capital providers and I'd say the general consensus was cap rates plus or minus 5% at this point in time.

Still got to be a little bit of a meeting of the minds with some of the risks that are out there between buyers and sellers.

But it still seems like we're in that plus or minus five cap world. So that really doesn't feel like distress I would say as a buyer.

Okay, if I could just ask a follow up on that.

Joseph Douglas Fisher: I mean, when you think about the... your debt lending business and your preferred lending business, and you look at the experiments you've taken or some of the projects you're talking about, is it part of the story that you just don't get great deals, even in distressed moments? I mean, does this make you rethink at all some of the other ways you're investing beyond just, you know, development and clearly, very strong core operating skill sets? So much capital that wants to be in this. I don't think it makes us rethink the suite of options that we have.

I mean, when you think about that.

Our debt lending business and your preferred lending business.

And you look at the impairments you've taken.

Some of the projects you're talking about I mean, it is part of the story like you just don't get great deals even in distressed moments I mean does it make you rethink at all some of the other ways Youre investing.

John just development in and clearly very strong core operating skill set.

Just because there's so much capital that doesn't want to be in this space.

I don't I don't think it makes us rethink that suite of options that we have like that's one of the powers of the platform. Obviously in terms of diversification of markets, but also diversification of ways. We've been deploying capital, we're really not a one trick pony and so I don't think it changes at all our thoughts on where we continued to deploy in the D. C. P like investments those over.

Joseph Douglas Fisher: I think that's one of the powers of the platform, obviously, in terms of diversification of markets, but also diversification of ways we've been deploying capital. We're really not a one-trick pony, and so I don't think it changes at all our thoughts on whether we will continue to deploy DCC-like investments over time.

Thomas W. Toomey: It's provided solid returns for us. It's a good way to pivot at certain points in time when other capital decisions may not make sense. I really don't see that being a pivot for us. We'll continue to go into all forms of capital. Hey, Jerry, this is Toomey.

Time has provided solid returns for us it's a good way to pivot at certain points of time when other capital decisions may not make sense.

So I don't I really don't see that being a pivot for us will continue to go into all forms of capital.

Speaker Change: Jamie This is Tony I might just add what's interesting.

Thomas W. Toomey: I might just add, hey, what's interesting, everybody can find one or two deals that are in distress, and we highlighted the path that causes a lot of that distress. And you've gotten slightly repaid in the last 90 days with rates coming down 100 bits. That's certainly helpful. But when you say the scale of distress, what my experience is that there are a lot of people with a lot bigger capital capabilities than ours, and even in the public arena, to write large checks for significant, Signature Bank, for example, a lot of distress inside of that entity with real estate, and it was never offered up; no one ever got a hard look at it. So, the range of distress, one to deals in a market, yes, and they will get picked off, but in math, no, because the Fannie and Frannie capability is a backstop, and then that leads to significant capital beyond ours that probably can reach and grab, should it become entity-level type distress.

As seen everybody can find one or two deals that have distress and we highlighted the path that creates a lot of that distress.

And you've gotten slightly a reprieve in the last 90 days with rates coming down 100 bps that certainly help.

But when you say the scale of distress what I my experiences is theres a lot of people with a lot bigger capital capabilities than ours and even in the public arenas.

Write large checks for significant signature bank for example, a lot of distress inside of that M&A team with real estate.

And it was never offered up no one ever got a hard look at it. So the range of distress 112 deals in our market, yes, and they will get picked off but in mass no because the Fannie and Freddie capability as a backstop and then that leads to.

Two significant capital beyond ours that probably can reach and grab should it become entity level type of distress, So we'll be smart and nimble about it.

Thomas W. Toomey: So we're being smart and nimble about it, you know, program with respect to DCP. Not going to be a lot of development activity coming online anytime soon, and the recap market is pretty competitive and full of capital. We'll be cautious about any aspect of going back into that, but we're going to keep, as Joe said, all our options open and see what makes sense on a risk adjusted, again, snatched against Okay, great. Thank you for your thoughts and ideas. Good afternoon; thank you all for coming.

Program with respect to DCP.

Not going to be a lot of development activity coming online anytime soon and the recap market is pretty competitive.

<unk> in a lot of capital will.

We will be cautious about any aspect of going back into that but we're going to keep as Joe said, all our options open.

And see.

What makes sense on a risk adjusted against matched against our cost of capital.

Okay, great. Thank you for your thoughts on that.

Thank you.

Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.

Good afternoon, Thanks for taking my questions.

Michael: Can you talk a little bit about the piece of recovery you're trying to do? And when you look at your slide 16, you have... How wide is the gap between these cohorts and then, you know, can you just talk about Jeff Drew and some of these markets, whether we can start to see them improving. Michael, this is Michael.

Can you talk a little bit about the pace of recovery trending for northern California, and Seattle and when you look at your slide 16.

On top and bottom growth markets on the west coast to the wholesale how wide is the gap between these cohorts and then can you just talk a little bit about the trajectory of some of these markets. When we can start to see them improving.

Michael: I'll take a crack at it first. Specific to Seattle and the San Francisco area, I'd say first, starting with San Francisco, it's good to be diversified. We are 50-50 urban-suburban. We've got 50% of our exposure in the Somer downtown area and then the rest down along the peninsula. And it covers about 8% of our NOI. Teams did a really good job last year, I can tell you.

Sure. Michael This is Mike I'll take a crack at it first.

Specific to Seattle, San Francisco area, I'd say first starting with San Francisco.

It's good to be diversified.

Our 50 50 urban suburban <unk>, 50% of our exposure in the Soma downtown area and then the rest down along the peninsula and it covers about 8% of our NOI.

<unk> did a really good job last year I can tell you we expect to be number one in terms of total revenue growth in that market. So we've been able to do a lot with what we have to work with there today, we're sitting around 97% 97, 5% occupancy we've seen concessions come down as of late really over the last 30 days or so.

Michael: We expect to be number one in terms of total revenue growth in that market, so we've been able to do a lot with what we have to work with there. Today, we're sitting around 97, 97.5% occupancy. We've seen concessions come down as of late, really over the last 30 days or so, and we're starting to drive a ramp.

And we're starting to drive our rents and I think specific to your question around trajectory and trend San Francisco is the one market out of all of ours that had the highest momentum and when I say that I look at December for example, our blends were around negative 7% in January were actually flat so about a seven.

Michael: And I think specific to your question around trajectory and trends, San Francisco is the one market out of all of ours that has the highest momentum. And when I say that, I look at December, for example, our brands were around negative 7%. In January, we're actually flat.

Michael: So about a 7-750 basis point increase month over month. Again, it's a short lease expiration period of time. So try not to get too excited about it.

Speaker Change: 750 basis point increase month over month.

Again, its low lease expiration period of time, so try not to get too excited about it but we have seen demand pick up there a lot of that has to do with the city being cleaned up more you don't have as much supply so today's San Francisco feels relatively well see.

Michael: But we have seen demand pick up there, and a lot of that has to do with the city being cleaned up more. You don't have as much supply.

Michael: So today San Francisco feels relatively well. Seattle's not too far behind for us. Again, a very diversified market. We are all along the suburbs and have a lot of exposure to the Bellevue area, where most recently we've heard that there are about 200 plus thousand square feet of office space being taken out by TikTok. So more recently, we've seen traffic pick up in that area. I can tell you our blend just going from December to January increased about 250 basis points from about zero to call it two and a half percent. So that part of the country feels a little bit better today than we would have expected moving into the year. Thanks for that.

Seattle is not too far behind for US again, a very diversified market.

We are all along the suburbs and a lot of exposure to the Belvieu area, where most recently we've heard that there's about 200 plus thousand square feet.

Office space being taken out by a tic Tac. So more recently, we have seen traffic pick up in that area. I can tell you. Our blends just going from December to January increased about 250 basis points from about zero to call. It two 5% so.

Speaker Change: Is that part of the country feels a little bit better today than what we would've expected moving into the year.

Thanks for that and then.

Michael: And then my follow-up question is, you're including 45 basis points of benefit. What are the current opportunities for further revenue generation? Yeah, a few things.

Youre, including 45 basis points of benefit from innovation in other income in your same store revenue guidance for the mid point and what are the current opportunities for further revenue generation.

Michael: Let me step back and give you a little bit of color on some of the initiatives we're working on, both on the revenue side and the expense side. I mean, for us, you've heard us talk a lot about the Customer Experience Project. And I put in my prepared remarks that we do expect about 100 basis points of improvement and turnover this year from that. But that's just the start of it.

Savings from the platform.

Yeah, a few things, let me step back and give you a little bit of color on some of the initiatives. We're working on both on the revenue side and expense side.

For us you've heard us talk a lot about the customer experience project.

We put in my prepared remarks that we do expect about 100 basis point improvement in turnover. This year from that that's just the start of it and we just recently armed our teams with a lot of information there putting it to use today and theyre starting to question the power of knowing exactly what retention can be and what it will do for them.

Michael: We just recently armed our teams with a lot of information. They're putting it to use today, and they're starting to question the power of knowing exactly what retention can be and what it will do for them. And I'll give you an example.

And I'll give you. An example, we went through call it 300000 data points and recognize that.

Michael: We went through, call it, 300,000 data points and recognized that you can have a 20% higher retention rate if you can move people with a negative sentiment or more on a bad trajectory to a good trajectory. And again, we use a lot of our proprietary information to score this, whether it's presentation scores or survey scores, service scores, and we have an understanding of how we can change those trajectories. For example, over the last nine months, we've seen an improvement in turnover just by putting a flashlight on this. And specific to the fourth quarter, our turnover was actually 400 basis points better than the historical average. So, again, we're just now scratching the surface.

You can have a 20% higher retention rate if you can move people with a negative sentiment.

Or more on a bad trajectory too.

And again, we use a lot of our proprietary information to score this whether it's their sentiment scores their survey scores service scores.

Understanding of how we can change those trajectories over the last nine months, we've seen an improvement in turnover just by putting a a flashlight on this and specific to the fourth quarter. Our turnover was actually 400 basis points better than the historical average. So again, we're just now scratching the surface we expect.

Michael: We expect a benefit this year, but even more to come in 2025 and 2026 as it relates to that program. In addition, we talked a little bit about our Wi-Fi rollout. We've got about 20,000 units installed today.

A benefit this year, but even more to come in 'twenty five 'twenty six as it relates to that program. In addition, we talked a little bit about our Wi Fi rollout. We've got about 20000 units installed today, we've got another 12000 coming throughout the year and so this is going to continue to pay dividend.

Michael: We've got another 12,000 coming throughout the year, and so this is going to continue to pay dividends not only this year but into the future. As of right now, we think that's about a $6 million benefit in incremental revenue in 2024 and more to come in 2025. Aside from that, we're really excited about our fraud and bad desk detection, and we started to utilize more AI around that, just to be able to understand who's coming in and try to block people from getting in the front door. So we're utilizing it in terms of our proof of income, as well as our ID verification.

This year, but into the future as of right now we think that's about a $6 million benefit and incremental revenue in 2024 and more to come in 2025 aside.

Aside from that really excited about our fraud and bad debt detection startled starting to utilize more AI around that just to be able to understand who's coming in and try to block people from getting in the front door. So we're utilizing it in terms of our proof of income as well as our I'd verification and were starting to see that that may.

Michael: And we're starting to see that that's making a difference for us as well, and as it relates to expenses. You know, we're highly focused on driving that number down. You saw the midpoint of our guidance is around five and a quarter. I'd remind the audience that aside from our anniversary of the CARES Act, as well as Wi-Fi, our organic growth is probably closer to around 4%. Still, after what we can control, trying to drive that number down, some of the things that I can think of off the top of my mind are vendor and product consolidation, working with a team to try to drive that into a more efficient stage, more personnel efficiency, and more ROIs around expense savings, where an example is a repipe. We can limit some of the insurance costs that are hitting us, and we can also eliminate some of the service requests that we So those are just a few examples of things that we can control that we do expect will help us throughout the year. Hey guys.

A difference for us as well and as it relates to expenses.

We're highly focused on driving that number down you saw the midpoint of our guidance is around five and a quarter.

I'd remind the audience that aside from our Anniversarying off of the cares Act as well as Wi Fi our organic growth is probably closer to around 4%.

Still after what we can control trying to drive that number down some of the things that I can think of off top of my mind, our vendor and product consolidation working with the teams to try to drive that into a more efficient state.

More personnel efficiencies and more rois around expense savings were an example is a re pipe we can limit some of the insurance costs that are hitting us and we can also eliminate some of the service requests that we're having to face. So those are just a few examples of things that we can control that we do expect will help us throughout the year.

Thank you very much.

Adam: Thanks for the question. I'd like to ask a little bit about the sequential move in January versus December and blended rate growth, and I guess kind of the occupancy build as well. And looking at slide nine, it looks like there was a kind of decent drop-off in 4Q in terms of deliveries in your market. I'm wondering, you know, did that kind of play a factor in, you know, maybe kind of January results or the December-January results, and then maybe how you're thinking about, you know, vetting some of the further sequential improvements that you guys kind of talked about here in July versus January and kind of in the months going forward relative to the fact that, you know, there is kind of a premature step-up in deliveries, it looks Hey Adam, it's Mike.

Okay.

Thank you.

Next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.

Hey, guys. Thanks for the question.

Now looking at slide nine it looks like there was a kind of decent drop off in <unk> in terms of deliveries and your market wondering did that kind of play a factor in.

So yes, maybe in kind of the January results with the December January resolved. So then maybe how youre thinking about kind of I think some of the further sequential improvements that you guys kind of talked about here.

New lease in February versus January.

And then kind of in the months going forward relative to the fact that there is kind of pretty material step up in deliveries it looks like.

In <unk> I guess, the <unk> 24 in your.

Markets.

Hey, Adam it's Mike I'll start and if Joe wants to jump in he can.

Mike: I'll start and if Joe wants to jump in again for us, we took the stance of trying to drive that occupancy up in the fourth quarter. And a lot of that has to do with you just having lower lease expiration. So it's a period of time where you can really get in there and make a difference. And I'll tell you, probably more specifically, how we did it. It's not necessarily with the delivery.

Again for US we took the stance of trying to drive that occupancy up in the fourth quarter and a lot of that has to do with you just have lower lease exploration. So it's a period of time, where you can really get in there and make a difference and I'll tell you it probably more specific to how we did it it's not necessarily with the deliveries I would say it's more around.

Mike: I'd say it's more around our focus on retention. And so again, when we look at our turnover, and it's 400 basis points better than what we would have historically experienced during that period of time, we are trying to drive our retention up, which obviously helps you with occupancy. Once we're able to build that up into that 97% range, we can continue that into January. 97.2, again, is probably a high mark for us.

Our focus on retention and so again when you look at our turnover and it's 400 basis points better than what we would have historically experienced during that period of time, we were trying to drive our retention up which obviously helps you with occupancy once we are able to build that up into that 97% range.

We're able to continue that into January 97, two again, it's probably a high mark for US we're actively bringing that down today I think February is probably closer to 97% and we're comfortable in the high 96%, 97% range, while testing a rats and so probably the thing I would point to the most probably most excited.

Mike: We're actively bringing that down today. I think February is probably closer to 97%. And we're comfortable in the high 96 to 97% range while testing our reps. And so probably the thing I point to the most and probably am most excited about is that trajectory. So looking at that rate of change from December down, let's call it negative 1.2, negative 1.3 to 0.2 in January, it's a positive trend. And the fact that a lot of that's coming from new lease growth gives us a lot of confidence as we move forward. But very, very low lease expirations in January and February. So give us a little bit more time to see how this plays out over time. And Adam, just to kind of close out there on the kind of mid-year spike, if you will.

Good about is that trajectory so looking at that rate of change from December of.

Down call it negative one to negative $1 three to 0.2 in January.

Positive trend and in fact that a lot of that's coming from new lease growth. It gives us a lot of confidence as we move forward but.

Very low lease expirations in January February so give us a little bit more time to see how this plays out over time.

And Ed just to kind of <unk>.

Those other on the kind of midyear Spike if you will what we're showing there on page nine is based off third party forecast and I think we are.

Joseph Douglas Fisher: Yeah, what we're showing on page nine is based on a third-party forecast. I think we all kind of know and accept that there's always going to be some degree of slippage. And so even with that spike, you're only running maybe 7,500 units a quarter of volume. We have been kind of in the back half a lot this year, so it's not a big number.

All kind of know and accept that there's always going to be some degree of slippage and so even with that spike here only running maybe 7500 units a quarter above where we have been cut in the back half of last year in front of US here. So it's not a big number there'll probably be some slippage, but youre, just having that slippage in that higher delivery schedule underway.

Joseph Douglas Fisher: There will probably be some slippage, but you're just having that slippage and that higher delivery schedule over a typically seasonably better period of time, which we would expect. When you've got roughly 8 million units in our corrected market, and you're only talking about maybe another 7,500 units a quarter, yeah, it really isn't a big number. We're cognizant of the risk it creates, obviously, so given that risk and some others, I think it's appropriate for us to be balanced in our approach and try to be cognizant of that and not get too far ahead of ourselves in terms of what we think is to come in terms of price and salary guidance. That's really helpful, guys. Thank you.

Typically a seasonally better period of time, which we would expect when you've got roughly 8 million units in our collective markets and you're only talking about maybe another 7500 units a quarter yeah. It really isn't a big number we're cognizant of the risk. It creates obviously, so I think given that risk and some others I think it's appropriate for us to be balanced in our approach and try to be.

Cognizant of that and not get too far ahead of ourselves in terms of what we think is to come on pricing power in guidance.

Great. That's really helpful. Guys. Thank you just wanted a quick follow up wondering what the bad debt reserves that you have embedded in guidance and I know you've accounted for there is a little bit differently, maybe than some of the peers. So maybe just what the bad debt reserve and guidance and then kind of the assumptions around that I guess, we're back where bad debt is today and then kind of what the assumption is for <unk>.

Joseph Douglas Fisher: I just needed a quick follow-up. I'm wondering what the die-debt reserve you have embedded in guidance is. I know you've accounted for this a little bit differently maybe than some of the peers, so maybe just what the die-debt reserve and guidance and then kind of the assumptions around that. I guess what a die-debt is today and then kind of what the assumption is for where it is, I guess, at your end.

Where it is I guess at year end.

Yes so.

After a challenging first part of 2003, when we had the excess of level of long term delinquents. The last six months of last year really leveled out. So we are pretty consistently get into call. It 98, 5% collected during that period of time and Thats really our base case assumption as we go into 2024.

Joseph Douglas Fisher: Yeah, so after kind of a challenging first part of 23 when we had an excessive level of long-term delinquents, you know, the last six months of last year really leveled out. So we were pretty consistently getting to, call it, 98.5% collected during that period of time. And that's really our base case assumption as we go into 2024. And so those higher turns that we saw in the first part of this past year help out in terms of thinking about stress on occupancy, on expenses, and, potentially, rates. But because we have reserved those individuals at an appropriate level, there's really no year-over-year impact for bad debt. So we've taken the assumption that we basically stay at the same level. That said, I think it might serve to go into some of those actions that were taken.

So those higher turns that we saw in the first part of last year.

Those help out in terms of thinking about a stress on occupancy on expenses on potentially rates, but because we had reserved for those individuals' at an appropriate level, there's really no year over year implications for bad debt and so we've taken the assumption that we basically stay at the same level.

That said I think Mike started to go into some of those actions that were taken and so we haven't really assumed those actions benefit us in terms of who comes in the front door and the possibility of fraud and delinquency subsequent to that theater kind of those AI based our income and I'd verification efforts.

Reevaluate and a lot of our deposit and credit thresholds, taking a look at some of our processes related to move moneys and other aspects to ensure that we.

Joseph Douglas Fisher: And so we haven't really assumed that those actions benefit us in terms of who comes in the front door and the possibility of fraud and delinquency subsequent to that. Again, through kind of those AI-based income and ID verification efforts, we're re-evaluating a lot of our deposit and credit thresholds, taking a look at some of our processes related to move-in monies and other aspects to ensure that we continue to try to limit the front door because it really has become a cottage industry in terms of creating fraud and trying to get in and take advantage of landlords at this point in time. But we're down flat year-over-year on this assumption. We hope there's some upside over time. Great, thanks guys, and then Joe or Mike on the low five. Got into the double clicked on it.

We continue to try to limit the front door because it really has become a cottage industry in terms of credit and fraud and tried to get in and take advantage of our landlords at this point in time, but pronounced flat year over year assumption there is some upside over time.

Great. Thanks, guys.

Speaker Change: Thank you.

Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

Thanks for fitting me in Joe or Mike.

With respect to the low 5% expense growth guidance can be double clicked on it roughly what would the average sunbelt market look like in terms of 2020 for expense growth expectations.

Joseph Douglas Fisher: Roughly, what would the average thumb belt market look like? For Expense Protection. Yeah, John, they're all pretty close, probably within 100 basis points of each other. We are experiencing a little bit more pressure just on personnel in a place like that, just getting the supply. Aside from that, we do have more of our rollouts on Wi-Fi today, so we're incurring that expense. But we're seeing the offset again in other interim because that's double of what we're seeing on the portfolio as a whole. So it is slightly elevated on the front belt, but not materially different.

Yes, John they're all pretty close in probably within 100 basis points of each other we are experiencing a little bit more pressure just on personnel in a place like that just given the supply.

Aside from that we do have more of our rollouts on the Wi Fi today. So we're incurring that expense, but we're seeing the offset again in other income because thats double of what we're seeing on the portfolio as a whole so slightly elevated in the sunbelt, but not materially different.

John: Okay, and then just to follow up on that point, Mike, did I understand your comment correctly, so the Sunbelt has double the lift in ancillary income, so call it 90 bps, and so the range of 1 to negative 2% revenue growth in terms of we're just looking for organic market level revenues is really closer to 0 to negative 3% in your Sunbelt market. Yeah, I'll give you a little bit more color on our expectations at the midpoint for SunBell. We, we're coming into the year with probably a negative 20 dip in our earnings. And that would imply about negative 2% expectations on full-year blends, but the contribution from that will be closer to about a hundred basis points negative. Okay, thanks for the time. Hey Rich, you might be on mute.

Okay, and then just a follow up to that point, Mike did I interpret your comments so the sunbelt as double the lift of ancillary income so call. It 90 bps and so the.

The range of one to negative 2% revenue growth in terms of if we're just looking for organic market level revenues really closer to zero to negative 3% in your sunbelt markets my interpreting that math correctly.

Yeah, I'll give you a little bit more color on our expectations at the midpoint for the sunbelt.

We're coming into the year with call. It negative 20 bps on our earn in and that would imply about negative 2% expectations on full year plans, but the contribution from that will be closer to about 100 basis points negative.

Okay. Thanks for the time.

Okay.

Thank you.

Next question comes from Rich Anderson with Wedbush Securities. Please proceed.

Rich: Thanks, Joe. Yeah, here I am. I find it interesting that the blended number, excuse me, the renewal number is still 3 or 4% or whatever it is, and people are sort of confident that they've been able to get it. Even though they know they can get two or three months free across the street, they're sticking around to avoid the inconvenience of moving. And that tells me something about what the swing factor is for your guidance going forward. You know, it really is, you've got this blob of supply cholesterol in the system that, you know, perhaps will go away over time, but if we get an economy in the future that, you know, avoids any kind of material drop-off, isn't this guidance really sort of realistic in today's, you know, present-tense view but also designed to be beaten if we get an economic picture into the middle part of Hey Rich, this is Toomey.

Yeah.

Yeah.

Okay.

Hey, rich you might be on mute.

Alright, Thanks, Joe Yeah here I am.

No.

I find it interesting that the.

You know the the blended number I mean excuse me the renewal number is still three or 4% or whatever it is and people are sort of confident that they they.

Even though they know they can get two or three months free across the street, they're sticking around it to avoid the inconvenience of moving and that tells me something about what the swing factor is for your guidance going forward.

You know we it really is you've got this blob of supply cholesterol in the system that you know, perhaps will go away over time, but if we get if we get an economy in the future that avoids any kind of material.

Drop off isn't this guidance really sort of realistic in today's present tense view, but also designed to be beat and if we get a economic picture into the middle part of this year that is.

Resilience continues to be resilient and so on so is that the swing factor here to the upside.

Pure economic activity and the demand side of the equation.

Thomas W. Toomey: I think you nailed it perfectly. It's a job well done. Okay, we've seen a robust set of numbers, and the revisions have been up. We're surprised at the strength of the job market, and the people re-entering the wage growth side of the equation. And if that were to continue, the absorption of what the supply picture is goes pretty darn smoothly. So, I mean, our business starts with jobs. Supply is a truck, you know, if you will, a bump in the road, and we'll get past it. But that's the upside.

Hey, Rich this is toomey I think youll mailed ahead now that perfectly it's jobs.

We've seen a robust set of numbers and the revisions have been up.

We're surprised at the strength of the job market people reentering, the wage growth side of the equation and if that were to continue the absorption.

Of what the supply picture is goes pretty darn smoothly.

So I mean, our business starts with jobs.

Speaker Change: Supply is.

Chuck if you will a bump in the road and we will get past it but that's the upside scenario and I'm not sure anybody's hit the jobs number right in the long time. So we will see how that plays out but we're encouraged by where it started off in January and February as Mike pointed to and hope that that trend continues and that would.

Thomas W. Toomey: And I'm not sure anybody's hit the job number right in a long time. So we'll see how that plays out, but we're encouraged by where it started off in January and February, as Mike pointed out, and we hope that that trend continues. And that would be, you know, material revisions to our results. So right now, we're playing it by consensus, as Joe outlined right down the middle. I think, too, Rick, the only thing to add here is just your comment there on renewals and why individuals are jumping for those concessions. Keep in mind that those concessions are not a market-wide concession. Those are concessions that you're seeing some developers offer in very distressed submarkets, so maybe two to three months in certain locations, but when you only have, call it, two and a half percent of stock delivering across our market, that implies a lot of units that aren't offering those distressed levels of concessions, so it's not as if every resident has the opportunity to jump shift, avoid that 3% renewal, and go get three Nobody's asked it yet, but last quarter, we talked a lot about the A versus B continuum in terms of in the Sunbelt, some of our B renters jump into A's for the concessions.

No material revisions to our result, but right now we're planning on a consensus as Joe outlined right down the middle.

Okay. Thank two risks that the only thing I'd add hey, Richard just on the.

Your comment there on renewals and wire individuals' jump in for those concessions keep in mind that those concessions are not a market wide concession those or concessions that you are seeing some developers offer and very distressed submarkets. So maybe two to three months in certain locations, but when you only have call. It two 5% of stock delivering across our market.

That implies a lot of units that arent offered those distressed levels of concessions. So it's not as if every resident has the opportunity to jump ship avoid that 3% renewal and go get three months. So it creates a little bit of a stickiness not just the fact that they don't want to move and it's costly to move but also theres just not that abundance to jump too and we are starting to see that a little bit.

Nobody's asked it yet, but you know last quarter, we talked a lot about the a versus b continuum in terms of in the Sun belt some of our B renters jumping to as for the concessions. We are starting to see a shift in that dynamic. After the last couple of months of seeing concessions start to ratchet down a little bit.

Joseph Douglas Fisher: We are starting to see a shift in that dynamic. After the last couple of months, we're seeing concessions start to ratchet down a little bit. We're seeing that continuum start to shift back to a more traditional approach to the B renter and staying in the B location. Okay, cool. And then, real quick, what do you make of Camden's market share comment about, you know, new households increasingly going the rental route? Obviously, it's much more expensive to own a home in this market.

And that continuum start to shift back to a more normalized approach to the beam printer.

Staying in a b location.

Okay Cool and then real quick what do you make of Camden's market share comment about no new households, increasingly going the rental route obviously, it's much more expensive to own a home in this market are you seeing that play out at all in your in your neck of the woods.

Rich: Are you seeing that play out at all in your neck of the woods? I think Camden and his team are spot on on that in terms of seeing more of a capture for the rentership study equation, be it on the multifamily or the single family rental side, where you have affordability pretty much as distressed as it has been at any point in the last 30, 40 years for single family homes. Typically, when you see that, you see the pendulum swing the other way, and so you've started to see signs of that with the homeownership rate kind of peaking out at approximately 66% over the last year or two. You've started to see that tick down a little bit, so I think on a macro level, definitely agree on that.

Yeah, I think Camden and team are spot on on that in terms of seeing more of a capture for the renter ship side of the equation multi or the single family rental side, but when you have affordability pretty much as distressed as it has been at any point in the last 30 40 years for single family.

Typically when you see that you see the pendulum swing the other way and so you have started to see signs of that with homeownership rate kind of peaking out at plus or minus 66% over the last year or two you start to see that tick down a little bit. So I think on a macro side definitely agree on that we expect that to be the case in terms of the macro backdrop for our guidance and then when you.

Rich: We expect that to be the case in terms of the macro backdrop for our guidance, and then when you look at what we're actually seeing on the ground, you look at our move-outs-to-buy activity, it's still significantly below what it used to be, and so we're keeping more and more people in the renter pool, which obviously helps on the retention side and helps on the pricing side, so we're at 100% agreement with Camden on Yeah, I mean, I get the theory. I was just wondering if you're seeing it in your numbers, and you're saying you are already. That's all I have got. Thanks guys. Thank you for watching. Thank you. Hey there, two quick ones from me today.

Look at what we're actually seeing on the ground you look at our move outs to buy activity.

It's still significantly below what it used to be.

So, we're keeping more and more people and the renter pool, which obviously helps on the retention side and helps on the pricing side. So we're 100% agreement with Camden on that yeah.

Yeah, I mean I get the the theory, just wondering if you're seeing it in your numbers and you're saying you are already which is interesting.

Got it thanks guys.

Thanks Rich.

Thank you. Our next question comes from the line of home Dale. Thank you.

Securities.

Please proceed with your question.

Speaker Change: Okay.

Yes.

Hey, there two quick ones for me good afternoon, Mike.

Haendel Emmanuel St. Juste: Michael, I wanted to follow up on your comments on San Fran and Seattle. I don't think you mentioned it, so perhaps you could share specifically what contestants you're seeing in those two markets today and what you're offering in your own portfolio, and then maybe also outline where usage as concessions is being used more broadly and more prevalently in the portfolio. Yeah, Haendel, thanks for the question.

Mike I wanted to follow up on your comments on San Fran and Seattle I don't think you mentioned it. So perhaps can you share specifically what concessions are you seeing in those two market today and what you're offering in your own portfolio and then maybe also outlined where contestants usage is concessions are being used more broadly and more prominently in the portfolio.

Yes, and thanks for the question specific to San Francisco, we were offering around three weeks during the quarter during the fourth quarter, that's actually come down to about half that range over the last 30 days and that's where you see it translate into those blends that I mentioned that 700 750 basis point pickup from December.

Mike: Specifically to San Francisco, we were offering around three weeks during the quarter, during the fourth quarter. That's actually come down to about half that range over the last 30 days. And that's where you see it translate into those blends that I mentioned, that 700, 750 basis point pickup from December. A lot of that is just concessions coming down in that market, as well as market rents coming up. And it's pretty consistent across the board. As I mentioned earlier, we're 50% exposed in the downtown Sonoma area, 50% in the downtown Sonoma Peninsula. It's pretty consistent across the board.

A lot of that is just concessions coming down in that market as well as market rents coming up and it's pretty consistent across the board I mentioned earlier, we're 50% exposed downtown Soma area, 50% down along the peninsula, it's pretty consistent across the board.

Haendel Emmanuel St. Juste: As it relates to Seattle, we haven't really offered concessions there over the last year or so. That's a market where we tend to adjust our market rents more than anything else. And today, we're not offering any concessions.

As it relates to Seattle, we haven't really offered concessions there.

Last year or so that's a market, where we tend to adjust our market rents more than anything else and today, we're not offering any concessions.

Joseph Douglas Fisher: Thank you for that you guys made on capital deployment here. It certainly sounds like there is a conservatism as you wait for perhaps the better returns versus not necessarily not having an interest, so I'm curious if you could talk a bit more about how hurdle rates your hurdle rates have changed here and what you need to see to get more active with on down, and perhaps more DCP deployment. Hey Haendel, so I guess the overarching capital deployment strategy is that we still sit in a capital white mode. Obviously, the cost of debt has dramatically improved in the last 60 to 90 days.

Speaker Change: Yeah.

Okay. Thank you for that.

Back to I think comments that you guys made on capital deployment here. It certainly sounds like there is that.

Conservatism as you wait for perhaps up to see better return versus not necessarily not having an interest. So I'm curious if you could talk a bit more about how hurdle rates here or we can have changed here on what you'd need to see to get more active with on balance.

And perhaps.

Perhaps more DCP deployment.

And so I guess overarching our capital deployment strategy is that we still sit in a capital light mode.

Obviously the cost of debt has dramatically improved in the last 60 to 90 days cost of equity has improved a little bit asset pricing has probably improved a little bit. So the backdrop, clearly getting better and you continue to take off a little bit of risk at a time in terms of the supply of macro environment as we move throughout the year. So maybe some increased degrees of conviction.

Joseph Douglas Fisher: The cost of equity has improved a little bit, asset pricing has probably improved a little bit, so the backdrop is clearly getting better, and you continue to take off a little bit of risk at a time in terms of the supply and macro environments we've moved throughout the year. So maybe some increased degrees of conviction, but today I'd say the area that we are most focused on deploying capital. Joint Venture Partner LaSalle, and a big props to Andrew and the LaSalle team on that one up, one deal that we got done in the mid to high fives initially. You know, with the capital flows we've seen in compression and race, that deal would clearly trade for a cap rate inside of where we just bought it So we'd like to continue to deploy with them, go out there, and get more opportunities. We put about $150 million at the high end at share within our guidance.

But today I'd say the area that we're most focused on deploying is continue to deploy capital.

The joint venture partner Lasalle.

Big props to Andrew in the Lasalle team on that one up one deal that we got done in the mid to high fives initially.

The capital flows we've seen in compression on rates that deal would clearly trade for a cap rate inside of where we just bought it a few months ago. So we'd like to continue to deploy with them go out there and get more opportunities we've put about $150 million at the high end at share within our guidance. So that's the priority today.

To the extent that DCP opportunities come along and maybe we get some paybacks and we can redeploy we'll take a look at that obviously development, we've seen a little bit of a reprieve in terms of hard cost they are starting to come down a little bit and so.

Joseph Douglas Fisher: So that's the priority today; to the extent that DCP opportunities come along and make some paybacks, and we can redeploy, we'll take a look at that, obviously. Development, you know, we've seen a little bit of a reprieve in terms of hard costs. They are starting to come down a little bit, and so I'd say on the shovel-ready deals that we have prepared, we're probably in the 5.5% to 6% type range on current NOI and plated cash. I think we'll continue to take a hard look at that as we move throughout the year in terms of when to start those given the fundamental picture, which, if you go into 25, should be a little bit better, and then 26, clearly, when you're delivering well below historical levels of supply, should be a good year to potentially deliver into.

So I'd say on the shovel ready deals that we have prepared.

And the five 5% to 6% type range on NOI weighted cost I think we will continue to take a hard look at that as we move throughout the year in terms of once the appropriate time to start those given the fundamental picture, which is he going to 25 should be a little bit better than 'twenty, six clearly when you're delivering well below historical levels of supply.

[laughter].

Okay.

Thank you. Our next question comes from the line of John Kim with BMO capital markets.

Please proceed with your question.

Hi, This is robin handle on for John.

Joseph Douglas Fisher: So that's the other piece that we'll be taking a look at as we move through the year. Thank you. Hi, this is Robin Haendel, and I'm home from John. How many of these are currently on a cash register? versus simply accruing the rate of return to the balance. And it looks like a couple of the preferreds were extended. Johnson faced one at infield, not for any particular reason.

I just wanted to touch on the DCP.

How many of these are currently on a cash basis versus simply a crewing debate a return to the balance and it looks like a couple of the preferreds were extended junction face wanted infield was there any particular reason for this.

Haendel Emmanuel St. Juste: Yeah, so in terms of cash pay versus accrual, you know, the majority of these, by definition, because they are developments, are going to be accrual based. So just the same way that the senior loan is going to have an interest rate reserve to help fund their portion, we're going to have an accrual on ours. And so over time, as those assets migrate to cash flowing and operational, yeah, at that point, they'll start to generally pay the senior with cash flow, but it will typically accrue.

Yes, so in terms of cash pay versus accrual majority.

The majority of these by definition because they are developments are going to be accrual basis. So just the same way that the senior loan is going to have a interest rate reserve to help fund their portion.

We're going to have an accrual on ours and so over time as those assets migrate to cash flow and an operational yes at that point they'll start to generally pay the senior with cash flow, but will typically accrue. So we can probably follow up offline and get you a little bit more specifics on which ones have some degree of cash flow, but for now I'd assume majority are accruing as you think about it.

Joseph Douglas Fisher: So we'll probably follow up offline and get you a little bit more specifics on which ones have some degree of cash flow, but for now, I'd assume the majority are accruing as you think about it. In terms of the years to maturity, you want to delineate between our maturity and the senior loan maturity, because sometimes those are not coterminous.

In terms of the eight years to maturity do you want to delineate between our maturity and senior loan maturity, sometimes those are not co terminus and so what we disclose there in the supplemental on 10 B that is our maturity for our proposition and our most position and so typically they're gonna have extension rights built into those.

Joseph Douglas Fisher: And so what we disclose there in the supplemental on 10B, that is our maturity for our cross position and our most mature position. And so typically, they're going to have extension rights built into those. So that's really all you're seeing there is exercises of some of their extension rights that they have.

So that's really all you're seeing there is exercise of some of their extension rights that they have.

Joseph Douglas Fisher: That's it in terms of senior maturities. We talked a little bit about the asset in Philadelphia coming up with a maturity here in 2Q. Beyond that, our next maturity is starting at 25 and 26. We really don't have much in terms of senior maturities upcoming, which typically triggers some type of capital event.

That said in terms of senior <unk> maturities, we talked a little bit about the asset in Philadelphia coming up with a maturity here in <unk> beyond that our next maturity is starting 25 and 26. So we really don't have much in terms of senior maturities upcoming which typically trigger some type of a capital event.

Mike: And on SoCal, given the current state of emergency, are your renewal rates impacted in any way, and can you touch on your flood risk insurance policy? Yeah, so right now, they are in a state of emergency. So there are price charging efforts in place. So there's a maximum of around 10% that we can charge at any given time. Right now, just in terms of how it's impacted us, and I'm happy to say it hasn't had a huge impact. We do have probably 10 or 12 units that are currently facing some leaks, but overall, it hasn't been a big impact on us.

And on Socal, given the current state of emergency on your renewal rates are impacted in any way and can you maybe just touch on your flood risk insurance policy.

Yes, so right now they are in a state of emergency center. There are price gouging efforts in place. So there's a maximum of around 10% that we can charge at any given time right now just in terms of how it's impacted us.

But happy to say it hasnt been a huge impact we do have probably 10 or 12 units that are currently facing some leaks, but overall it hasnt been a big impact for us.

Joseph Douglas Fisher: Yeah, just from the insurance perspective, every single year when we go through our renewal, we obviously renew, take a look at the adequacy of limits, you know, across earthquake, rain, storm, water, whatever that may be, and so I feel we're appropriately covered at this point in time with the insurance program. Thank you. Thank you. Thank you. Hi, on back.

Yeah, and just from the insurance perspective.

Any signal here when we go through a renewal we obviously.

Take a look at adequacy of limits across quake named storm water or whatever it might be and so I feel were appropriate covered at this point in time with the insurance program.

Thank you.

Thank you. Our next question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.

Mike: Bye. L.A., from Innovation. 5-10 Million Year Guiding. No, nothing's changed in our outlook. I think for us, we're just looking at the initiatives that are out in front of us. We still have a list of about 60 others that we're assessing today. And so we're constantly trying to figure out which ones to move the dial on and where we should put our efforts.

Hi, Juan.

Question back to innovation and other income you highlighted the $5 million to $10 million contribution in 'twenty four I think back at NAREIT in Hawaii. There was a slide showing 40 million from innovation over the next 24 to 36 months, so $13 million a year conservatively.

$5 million to $10 million or guiding to the series last did anything change in your outlook versus back at NAREIT.

Mike: And again, we think that that's a pretty good place to start the year. And it's consistent with probably the last five or six years of around 50 basis points of incremental NOI that we've been able to produce. And I think as it relates to that 40, a big component of that goal, 15 to 20 million was related to Wi-Fi. It still is.

No nothing's changed in our outlook I think for US. We're just looking at the initiatives that are out in front of US we still have a list of about 60, others that were assessing today and so we're constantly trying to figure out which ones to move the dial on and where we should put our efforts and again, we think that that's a pretty good place to start the year.

Year, and it's consistent with probably the last five or six years of around 50 basis points of incremental NOI that we've been able to produce.

Joseph Douglas Fisher: But as Mike talked about, yeah, that's going to be 5 to 6 million incremental, so a lot of that lift comes in the coming years as we continue those rollouts and then you mature through the leasing cycle at each asset once we get that installed. I would say, too, just a little bit of context to that 45 or so basis points we talked about in innovation. That number is explicit about what I would say are very concrete ideas where things like Wi-Fi or parking or storage where you can charge an explicit fee. We know what the rollout schedule is.

Yeah, and I think as it relates to that 40.

A big component of that call it $15 million to $20 million was related to Wi Fi and still is.

But as Mike talked about yeah, that's kind of five to 6 million incremental so a lot of that lift comes in the coming years as we continue those rollouts and then your mature through the leasing cycle at each asset once we get that installed I.

I would say to just a little bit of context to that 45, or so basis points that we talk about innovation.

That number is explicit to what I would say, it's very concrete ideas, where you know things like Wi Fi or parking or storage, where you can charge an explicit fee. We know what the rollout schedule is that's really component sized within that 45 bps.

Joseph Douglas Fisher: That's really componentized within that 45 bits to look at some of our biggest opportunities that Mike mentioned when it comes to customer experience and fraud efforts. Those were not captured within that $40 million that we talked about, but those are also outside of other income. Those have pretty big implications as it relates to occupancy, pricing power, expenses, capital, et cetera. And so those are opportunities above and beyond that that are very soft in nature because they're harder to quantify in terms of explicit timing by a resident, and so those will come over time, but aren't embedded in our guidance, but they are an opportunity. We do think there's an opportunity in 24.

When you look at some of our biggest opportunities that Mike mentioned when it goes to customer experience. When it goes to fraud efforts those were not captured within that $40 million that we talked about but those are also outside of other income those are pretty big implications as it relates to occupancy pricing power expenses capital et cetera, and so.

So those are opportunities above and beyond that but a very soft in nature, because they're harder to quantify.

In terms of exports that timing by residents and so those will come over time, but arent embedded in our guidance.

But it is an opportunity in 'twenty four.

Joseph Douglas Fisher: Mike mentioned we captured the kind of 1% of reduced turnover from customer experience. Yeah, that adds a little bit to our 24 number, plus or minus $3 million on a year-over-year basis. But we do think there's a lot more opportunity above and beyond that to continue to push that customer experience and move the trackers into supporters, and start to encourage them to continue to renew with us. Similarly, on the fraud side, we assumed no improvement year-over-year on bad debt.

We do think Theres an opportunity in 'twenty four Mike mentioned, we captured the kind of 1% of reduced turnover from customer experience.

As a little bit to our 24 number plus or minus $3 million on a year over year basis, but we do think there's a lot more opportunity above and beyond that to continue to push that customer experience and move detractors into supporters and start to continue to renew with us. Similarly on the fraud side, we assumed no improvement year over year on bad debt.

Joseph Douglas Fisher: But in totality, at that 1.5% number, that's $25 million of revenue right there. But the real cost is usually about 2x that when you factor in upstream, downstream costs, expenses returned, capital returned. So that's a $50 million opportunity, of which we're going to be going at a proportion of, obviously, as we move into future years and roll out some of this fraud prevention. Hi, good afternoon. Just one for me.

Speaker Change: In totality at that one 5% number that's $25 million of revenue right. There in the real cost is usually about two weeks that when you factor in upstream downstream cost expenses return capital for turn so that's a $50 million opportunity of which we're going to be going on a proportion of obviously as we move into future years and roll out some of those fraud prevention.

Thank you.

Okay.

Thank you. Our next question comes from the line of Anthony Powell with Barclays.

Proceed with your question.

Anthony: I think you mentioned earlier in the call that you saw some stoplights in New York. You didn't talk about, you know, what's going on there and your, kind of, meetings and outlooks. Sure, Anthony, this is Mike.

Hi, Good afternoon, just one for me I think you mentioned it earlier in the call that you saw some softness in New York, maybe talk about what's going on there in your kind of medium term outlook for that market.

Sure. Anthony This is Mike just to give a little background, New York to 8% NOI market for us mainly down in the financial district.

Mike: Just to give a little background, New York, an 8% NOI market for us, mainly down in the financial district. And I'll tell you, as part of the team this year, we're going to end up with the top revenue amongst our peers in that market. So they did a really good job. But I'll tell you what we experienced. We were coming off pretty good highs. We were obviously running 97.5%, and 98% of our expenses.

We are obviously running 97, five <unk> occupancy and then we started going to no more seasoning period of time I'm happy to see that in January our planes did actually increase from December they're up about 150 basis points and they're roughly flat today. So some of that's probably seasonal some of it coming off of a <unk>.

Anthony: And then we started going to a more seasonal low period of time. I'm happy to see that in January, our blends did actually increase from December. They're up about 160 days at once, and they're roughly flat today. So some of it's probably seasonal, and some of it's coming off of a high. But we're anxious or hopeful that things are going to continue to improve there. Okay, great, thanks. Thanks to all of you for your time, interest, and support of UDR. We look forward to seeing many of you at the upcoming events. With that said, take care.

Hi.

We are anxiously are hopeful that things are going to continue to improve there.

Okay, great. Thanks.

Okay.

Thank you.

No further questions in the queue I'd like to hand, the call back over to chairman and CEO, Mr. <unk> for closing comments.

Thanks to all of you for your time interest and support of UDR.

We look forward to seeing many of you in the upcoming events with that take care.

This concludes today's teleconference. You may disconnect your lines at this time.

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