Q4 2023 Mid America Apartment Communities Inc Earnings Call

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Andrew Schaefer: We didn't hear your introduction. Please go ahead. Thank you, Kerry, and good morning, everyone. This is Andrew Schaefer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning with prepared comments are Eric Bolton, Brad Hill, Tim Argo, and Clay Holcomb. Al Campbell, Rob Del Prori, and Joe Fracchio are also participating and available for questions as well.

Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements, and actual results may differ materially from our projections. We encourage you to refer to the forward-looking statement section in yesterday's earnings release and our 34-act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the differences between non-GAAP and comparable GAAP measures, can be found in our earnings release and supplemental financial data.

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Eric: The earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Eric. Thanks, Andrew, and good morning.

Core FFO results for the fourth quarter were ahead of our expectations. Higher non-same-store NOI performance and lower interest expense drove the outperformance. As expected during the fourth quarter, a combination of higher new supply and a seasonal slowdown in leasing traffic increasingly weighed on new resident lease pricing during the quarter. However, encouragingly, we did see some of this pressure moderate in January, with blended pricing improving 130 basis points from the fourth-quarter performance, led by an improvement in new lease pricing. Stable employment conditions, continued positive migration trends, a higher propensity of new households to rent apartments, and continued low resident turnover are all combining to support steady demand for apartment housing.

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We continue to believe that late this year, new lease pricing performance will improve, and we will begin to capture recovery in that component of our revenue performance. In addition, with the pressure surrounding higher new supply deliveries likely to moderate later this year, we continue to believe the conditions are coming together for overall pricing recovery to begin late this year and into 2025. As you may have seen, last week, MAA crossed a significant milestone, marking the 30-year anniversary of our IPO. Over the past 30 years, MAA has delivered an annual compounded investment return to shareholders of 12.6%, with about half of that return comprised of cash dividends paid.

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Operator.

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Speaker Change: Please go ahead.

Thank you Carrie and good morning, everyone Andrew.

Andrew Schaffer, Treasurer, and director of capital markets for MAA members of the management team participating on the call. This morning with prepared comments are Eric Bolton Redhill, Tim Argo and playful.

Al Campbell.

Speaker Change: <unk> are also participating and available for questions as well before we begin with prepared comments. This morning, I want to point out that as part of this discussion company management will be making forward looking statements actual results may differ materially from our projections. We encourage you to refer to the forward looking statements section in yesterday's earnings release, and our 34 Act filings with the SEC.

Through numerous new supply cycles and various stresses associated with the broader economy, MAA has never suspended or reduced its quarterly dividend over the past 30 years, which, of course, is a key component of delivering superior long-term investment returns to REIT shareholders. Today, I'm more positive about our outlook than I was at this time last year. Today, as compared to a year ago, we have more clarity about the outlook for interest rates, with downward movement likely later in the year. Worries associated with a material economic slowdown or recession are dissipating. Inflation pressures on operating expenses are declining, while demand for apartment housing and absorption remains steady.

SEC, which describe risk factors that may impact future results. During this call. We will also discuss certain non-GAAP financial measures a presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP terrible GAAP financial measures can be found in our earnings release and supplemental financial data earnings release.

Supplement are currently available on the for investors page of our website at Www Dot <unk> dot.

Speaker Change: Dot com a copy of our prepared comments an audio recording of this call will also be available on our website later today.

Some brief prepared comments the management team will be available to answer questions I will now turn the call to Eric.

Eric Bolton: Thanks, Andrew and good morning core SSO ourselves from the fourth quarter were ahead of our expectations higher non same store NOI performance and lower interest expense drove the outperformance.

And with clearly declining permits and new construction starts, we have increasing visibility that competing new supply is poised to moderate. With a 30-year track record of focus on high-growth markets, successfully working through several economic cycles, an experienced team, and proven operating platform, a strong balance sheet, and long-term shareholder performance among the top tier of all REITs, we're confident about our ability to execute on the growing opportunities in the coming year and beyond. Before turning the call over to Brad, I do want to take a moment to say a big thank you to Al Campbell, who will be officially retiring on March 31st.

Eric Bolton: As expected during the fourth quarter, a combination of higher new supply and a seasonal slowdown in leasing traffic increasingly weighed on new resident lease pricing during the quarter Encouragingly. We did see some of this pressure moderate in January with blended pricing, improving 130 basis points from the fourth quarter perform.

Eric Bolton: It's led by improvement in new lease pricing stay.

Eric Bolton: Stable employment conditions continued positive migration trends are higher propensity of new households to rent apartments and continued low resident turnover are all combining to support steady demand for apartment housing.

Al has been with our team for the past 26 years and has served as our Chief Financial Officer for the past 14 years. Al has been instrumental in the growth of our company, transitioning us to the investment-grade debt capital markets, and has built a strong finance, accounting, tax, and internal audit platform for MAA. Al leads our company and finance operation in strong hands with Clay and his team, and we're all grateful for Al's service and tremendous accomplishments. So, thank you, Al, for all you've done for MAA.

Eric Bolton: We continue to believe that late this year, new lease pricing performance will improve and we will begin to capture recovery in that component of our revenue performance. In addition, with the pressure surrounding higher new supply deliveries likely to moderate later this year.

Eric Bolton: We continue to believe it.

Eric Bolton: Conditions are coming together for overall pricing recovery to begin late this year and into 2025.

Eric Bolton: As you may have seen last week MAA crossed a significant milestone marking the 30 year anniversary since our IPO.

Brad: And with that, I'll now turn the call over to Brad. Thank you, Eric, and good morning, everyone. As mentioned in our earnings release, we successfully closed on two compelling acquisitions during the fourth quarter at prices 15% below current replacement costs. Both properties fit the profile of the type of properties we expect to continue to acquire throughout 2024. Properties in their initial lease-up, with sellers focused on certainty of execution with a need to transact prior to a definitive deadline. Our relationships with the sellers and our ability to move quickly and execute on the transactions utilizing the available capacity on our line of credit without a financing contingency were key components of MAA being chosen as the buyer for these properties. M.A.

Eric Bolton: Over the past 30 years MAA has delivered an annual compounded investment return to shareholders of 12, 6% with about half of that return comprised of the cash dividends paid.

Eric Bolton: There are numerous new supply cycles, and various stresses associated with the broader economy.

Eric Bolton: <unk> has never suspended or reduced our quarterly dividend over the past 30 years, which of course is a key component of delivering superior long term investment returns to REIT shareholders.

Eric Bolton: Today I'm more positive about our outlook that I was this time last year today as compared to a year ago, we have more clarity about the outlook for interest rates with downward movement likely later in the year.

Central Avenue, a 323-unit mid-rise property in the Midtown area of Phoenix, and M.A. Optimist Park, a 352-unit mid-rise property in the Optimist Park area of Charlotte, are expected to deliver initial stabilized NOI yields of 5.5% and 5.9%, respectively. We expect both properties to achieve further yield and margin expansion as a result of adopting MAA's more sophisticated revenue management, marketing, and lead generation practices, as well as our technology platform. Additionally, we expect to achieve operational synergies by combining certain functions with other MAA properties in the area as part of our new property potting initiative. Due to continued interest rate volatility and tight credit conditions, transaction volume remains tepid, down 50% year-over-year and 16% from the third quarter's pace.

Eric Bolton: Worries associated with material economic slowdown or recession are dissipating.

Eric Bolton: Inflation pressures on operating expenses are declining the.

Eric Bolton: The demand for apartment housing and absorption remained steady and was clearly declining permits and new construction starts we have increasing visibility the competing new supply is poised to moderate.

Eric Bolton: With a 30 year track record of focus on high growth markets successfully working through several economic cycles and experienced team and proven operating platform a strong balance sheet and long term shareholder performance among the top tier of all reads, we're confident about our ability to execute on the growing opportunities in the coming year and beyond.

Speaker Change: Before turning the call over to Brad I do want to take a moment just say a big thank you to the al Campbell, who will be officially retiring effective March 31.

Brad: Al has been with our team for the past 26 years and has served as our Chief financial officer for the past 14 years.

We continue to believe that transaction volumes will pick up later in 2024, providing visibility into cap rates and market value. For deals we tracked in the fourth quarter, we saw cap rates move up by roughly 35 basis points from the third quarter. Our transaction team is very active in evaluating additional acquisition opportunities across our footprint, with our balance sheet in a great position to be able to take advantage of more compelling opportunities as they continue to materialize later this year.

Brad: Al has been instrumental in the growth of our company transition yesterday is that investment grade debt capital markets and has built a strong finance accounting tax and internal audit platform for MAA.

Speaker Change: All of these are company and finance operation and strong hands with clay and his team are all grateful for our service and tremendous accomplishments. So thank you al for all you've done for MAA.

Speaker Change: And with that I'll now turn the call over to Brad.

Brad: Thank you Eric and good morning, everyone as mentioned in our earnings release, we successfully closed on two compelling acquisitions during the fourth quarter at pricing, 15% below current replacement costs.

Brad: Both properties fit the profile of the type of properties, we expect to continue to emerge throughout 2024.

Our forecast for the year includes $400 million of new acquisitions, likely in lease-up, and therefore dilutive until stabilization is reached. Despite pressure from elevated new supply, our two stabilized new developments, as well as our development projects currently in lease, continue to deliver good performance, producing higher NOIs and earnings than forecasted in our original proformas, creating additional long-term value. New lease rates are facing more pressure at the moment, but these properties have captured asking rents on average approximately 20% above our original expectations. Our four developments that are currently leasing are estimated to produce an average stabilized NOI yield of 6.5%.

Brad: Properties in their initial lease up with sellers focused on certainty of execution with a need to transact prior to a definitive deadline.

Speaker Change: Our relationships with the sellers and our ability to move quickly and execute on the transactions utilizing the available capacity on our line of credit without a financing contingency are key components of MAA being chosen as the buyer for these properties.

Speaker Change: M. A central Avenue, a 323 unit mid rise property in the Midtown area of Phoenix, and MAA Optimist Park 352 unit mid rise property in the Optimist Park area of Charlotte are expected to deliver.

Speaker Change: Initial stabilized NOI yields of five 5% and five 9%, respectively. We expect both properties to achieve further yield and margin expansion as a result of adopting MAA as more sophisticated revenue management.

We continue to advance pre-development work on several projects, but due to permitting and approval delays, as well as an expectation that construction costs are likely to come down, we have pushed the three projects that we planned to start in 2023 into 2024. We now expect to start between three and four projects this year, with two starts in the first half of the year and two starts late next year. Encouragingly, we have seen some recent success in getting our construction costs down on new projects that we're currently repricing. As we have seen a meaningful decline in construction starts in our region, we're hopeful to see continued decline in construction costs as we progress through the year. Our team has done a tremendous job building out our future development pipeline, and today we own or control 13 well-located sites, representing a growth opportunity of nearly 3,700 units. We have flexibility on when we start these projects, allowing us to remain patient and disciplined.

Speaker Change: Marketing and lead generation practices as well as our technology platform. Additionally, we expect to achieve operational synergies by combining certain functions with other area MAA properties as part of our new property parting initiatives.

Speaker Change: Due to due to continued interest rate volatility and tight credit conditions.

Speaker Change: Transaction volume remains tepid is down 50% year over year and 16% from the third quarter space. We continue to believe that transaction volumes will pick up later in 2020 for providing visibility into cap rates and market values.

Speaker Change: For deals we tracked in the fourth quarter, we saw cap rates move up by roughly 35 basis points from the third quarter or.

Speaker Change: Our transaction team is very active in evaluating additional acquisition opportunities across our footprint with our balance sheet in great position to be able to take advantage of more compelling opportunities as they continue to materialize later this year.

Speaker Change: Our forecast for the year includes $400 million of new acquisitions likely in lease up and therefore dilutive until stabilization is reached.

Any project we start this year will deliver the first units in 2026, aligning with a likely stronger leasing environment supported by significantly lower supply. Our development team continues to evaluate land sites as well as additional pre-purchase development opportunities. In this constrained liquidity environment, it's possible we could add additional development opportunities to our future pipeline. The team has our portfolio in good position. Our broad diversification provides support during times of higher supply, with a number of our mid-tier markets outperforming. As we ramp up activities in 2024, we're excited about the coming year, beyond the new external growth opportunities just covered. And as Tim will outline further, we continue to see solid demand and steady absorption of the new supply delivered across our markets and remain convinced that pricing trends will begin to improve late this year and into 2025.

Speaker Change: Despite pressure from elevated new supply, our two stabilized new developments as well as our development projects. Currently leasing continued to deliver good performance producing higher NOI and earnings and forecasted in our original pro forma creating additional long term value new lease rates are facing more pressure at the moment.

Speaker Change: But these properties have captured asking rents on average approximately 20% above our original expectations.

Speaker Change: For developments that are currently leasing are estimated to produce an average stabilized NOI yield of six 5%.

Speaker Change: We continue to advance pre development work on several projects, but due to permitting and approval delays as well as an expectation that construction costs are likely to come down we have pushed the three projects that we plan to start in 2023 into 2024.

Speaker Change: We expect to start between three to four projects. This year with two starts in the first half of the year and to start late in the year encouraging encouragingly, we have seen some recent success in getting our construction costs down on new projects that we're currently repricing.

In addition, we continue to make progress on several new initiatives aimed at further enhancing our leasing platform to further position us to outperform local market leasing metrics during this supply cycle. Before I turn the call over to Tim, to all of our associates at the properties and our corporate and regional offices, I want to say thank you for coming to work every day focused on improving our business, serving our residents, and exceeding the expectations of those that depend on us. With that, I'll turn the call over to Tim. Thank you, Brad. And good morning, everyone.

Speaker Change: As we have seen a meaningful decline in construction starts in our region. We're hopeful to see continued decline in construction costs as we progress through the year.

Speaker Change: Our team has done a tremendous job building out our future development pipeline and today, we own or control <unk> well located sites, representing a growth opportunity of nearly 3700 units. We have optionality on when we start these projects, allowing us to remain patient and disciplined.

Tim: Same store NOI growth for the quarter was right in line with our expectations, with slightly lower operating expenses, all setting slightly lower blended lease or lease price and growth. Following Eric's earlier comment on new lease pricing, developers looking to gain occupancy ahead of the holiday season and the end of the year did put further pressure on new lease pricing, particularly in November and December. However, because traffic tends to decline in the fourth quarter, again, particularly in November and December, we intentionally repriced only 16% of our leases in the fourth quarter and only about 9% in November and December. This resulted in blended lease over lease pricing of minus 1.6% for the quarter, comprised of new lease rates declining 7% and renewal rates increasing 4.8%. Average physical occupancy was 95.5%, and collections remained strong, with delinquency representing less than 0.5% of bill grants.

Speaker Change: Any project we start this year will deliver first units in 2026, aligning with a likely strong or at least leasing environment supported by significantly lower supply.

Speaker Change: Our development team continues to evaluate land sites as well as additional pre purchase development opportunities in this constrained liquidity environment. It's possible, we could add additional development opportunities to our future pipeline.

Speaker Change: The team has our portfolio in good position our broad diversification provides support during times of higher supply with a number of our mid tier markets outperforming.

Speaker Change: As we ramp up activities in 2024, we're excited about the coming year beyond the new external growth opportunities just covered and as Tim will outline further we continue to see solid demand and steady absorption of the new supply of delivering across our markets and remain convinced that pricing trends will begin to improve late this year and into 2025.

Speaker Change: In addition, we continue to make progress on several new initiatives aimed at further enhancing our leasing platform to further position us to outperform local market leasing metrics during the supply cycle.

These key components drove the resulting revenue growth of 2.1%. From a market perspective, in the fourth quarter, many of our mid-tier metros performed well. Being invested in a broad number of markets, sub-markets, asset types, and price points is a key part of our strategy to capture growth throughout the cycle. Savannah, Richmond, Charleston, and Greenville are examples of markets that led the portfolio in lease-over-lease pricing performance. The Washington, D.C. metro area, Houston, and, to a lesser extent, Dallas-Fort Worth were larger metros that held up well.

Speaker Change: Before I turn the call over to Tim to all of our associates at the properties and our corporate and regional offices I want to say, thank you for coming to work every day focused on improving our business, serving our residents and exceeding the expectations of those that depend on us with that I'll turn the call over to Tim.

Tim Argo: You, Brian and good morning, everyone same store NOI growth for the quarter was right in line with our expectations with slightly lower operating expenses.

Tim Argo: Offsetting slightly lower blended lease over lease pricing growth.

Tim Argo: Spanning on Eric's earlier comment on new lease pricing developers looking to gain occupancy ahead of the holiday season, and the end of the year did put further pressure on new lease pricing, particularly in November and December however, because traffic tends to decline in the fourth quarter again, particularly in November and December we essentially reply.

Austin and Jacksonville are two markets that continue to be more negatively impacted by the level of supply being delivered into those markets. Touching on some other highlights during the quarter, we continued our various product upgrade and redevelopment initiatives in the fourth quarter. For the quarter, we completed nearly 1,400 interior unit upgrades, bringing our full-year total to just under 6,900 units.

Tim Argo: Price only 16% of our leases in the fourth quarter and only about 9% in November and December.

Tim Argo: This resulted in blended lease over lease pricing.

Tim Argo: Minus one 6% for the quarter comprised of new lease rates declining 7%.

Tim Argo: <unk> rates, increasing four 8%.

Tim Argo: Average physical occupancy was 95, 5% and collections remained strong with delinquency representing less than 5% of Bill Graham. These key components drove the resulting revenue growth of two 1%.

We completed over 21,000 smart home upgrades in 2023 and now have over 93,000 units with this technology, and we expect to complete the remaining few properties in 2024. For our repositioning program, we have five active projects that are in the repricing phase with expected yields in the 8% range. We have targeted an additional six projects to begin in 2024 with a plan to complete construction and begin repricing in 2025. Now, looking forward to 2024, we're encouraged by the relative pricing trends we're seeing thus far. As noted by Eric, blended pricing in January was 130 basis points better than the fourth quarter. This was comprised of new lease pricing of negative 6.2 percent, an 80 basis point improvement for the fourth quarter, and a notably 150 basis point improvement from December, and renewal pricing of 5.1 percent, an improvement of 30 basis points from the fourth quarter, while maintaining stable occupancy of 95.4%. Similarly, renewal increases achieved thus far in February and March averaged around $5.

Tim Argo: From a market perspective in the fourth quarter many of our mid tier Metro has performed well.

Tim Argo: Being invested in a broad number of markets sub markets asset types and price points is a key part of our strategy to capture growth throughout the cycle savanna, Richmond, Charleston, and Greenville are examples of markets Atlanta portfolio and lease over lease pricing performance.

Tim Argo: The Washington D C Metro area of Houston and to a lesser extent Dallas Fort worth for larger metros that held up well.

Tim Argo: Boston and Jacksonville are two margins that continue to be more negatively impacted by the level of supply being delivered into those markets.

Tim Argo: Touching on some other highlights during the quarter, we continued our various product upgrade and redevelopment initiatives in the fourth quarter for the quarter. We completed nearly 1400 interior unit upgrades, bringing our full year total to just under 6900 units. We completed over 21000 smart home upgrades in 2023 and now have over 93.

Tim Argo: 3000 units with this technology and we expect to complete the remaining few properties in 2024.

Tim Argo: For our repositioning program, we have five active projects that are in the repricing phase with expected yields in the 8% range, we have targeted and just an additional six projects to begin in 2024 with a plan to complete construction and begin repricing in 2025.

Tim Argo: Now looking forward to 2024, we're encouraged by the relative pricing trends, we are seeing thus far.

As noted, new supply being delivered continues to be a headwind in many of our markets. While we do expect this new supply will continue to pressure prices for much of 2024, we believe we have likely already seen the maximum impact on new lease pricing and that the outlook is better for late 2024 and into 2025. It varies by market, but on average, new construction starts in our portfolio footprint peaked in the second quarter of 2022. Based on typical delivery timelines, this suggests peak delivery is likely in the middle of this year, with some positive impact of pricing power soon thereafter. While increasing supply is impactful, the strength of demand is more indicative of pricing power in a particular market. Job growth is expected to moderate some in 2024 as compared to 2023, but growth is still expected to be strongest in the Sunbelt market. Job growth combined with continued in-migration accelerates the key demand factor of household formation.

Tim Argo: As noted by Eric blended pricing in January it was 130 basis points better than the fourth quarter. This is comprised of new lease pricing of negative six 2%, an 80 basis point improvement from the fourth quarter, and notably 150 basis point improvement from December.

Tim Argo: Our renewal pricing of five 1% an improvement of 30 basis points from the fourth quarter.

Tim Argo: While maintaining stable occupancy of 95, 4%.

Tim Argo: Similarly renewal increases achieved thus far in February and March average around 5%.

Tim Argo: As noted in new supply being delivered continues to be a headwind in many of our markets. While we do expect this new supply will continue to pressure pricing for much of 2024, we believe we have likely already seen the maximum impact of the new lease pricing and that the outlook is better for late 2024 and into 2025.

Tim Argo: It varies by market, but on average new construction starts in our portfolio footprint peaked in the second quarter of 2022 base.

Tim Argo: Based on typical delivery timelines suggest peak deliveries likely in the middle of this year with some positive impact of pricing power soon thereafter.

Separately, the cost gap between owning and renting gapped out considerably in the back half of 2023, even before considering the impact of higher mortgage rates. Move-outs to buy a home dropped 20% in the fourth quarter on a year-over-year basis, and we expect a continued low number of move-outs due to home buying to contribute to low turnover overall in 2024. That's all I have in the way of prepared comments. Now I'll turn the call over to Clay.

Tim Argo: While increasing supply is impactful strength of demand is more indicative of pricing power in a particular market.

Tim Argo: Growth is expected to moderate some in 2024 as compared to 2023, but growth is still expected to be strongest in the sunbelt markets.

Tim Argo: Job growth combined with continued in migration accelerates the key demand factor of household formation separately the cost gap between owning and renting gapped up considerably in the back half of 2023, even booths before considering the impact of higher mortgage rates move outs to buy homes dropped 20% in the fourth quarter on a year over year basis.

Tim Argo: We expect a continued low number of move outs due to home buy to contribute to low turnover overall in 2024, that's all I have in the way of prepared comments now ill turn the call over to clay.

Clay: Thank you, Tim, and good morning, everyone. Reporting core FFO for the quarter of $2.32 per share was $0.03 per share above the midpoint of our quarterly guidance and contributed core FFO for the full year of $9.17 per share, representing an approximate 8% increase over the prior year. The outperformance for the quarter was primarily driven by favorable interest and the performance of our recent acquisitions and lease-ups during the quarter. Overall, St. Store's operating performance for the quarter was essentially in line with expectations. Same-store revenues were slightly below our expectations for the quarter, as effective rent growth was impacted by lower new lease pricing that Tim mentioned. However, same-store operating expenses were slightly favorable to our fourth-quarter guidance, primarily due to lower-than-expected personnel costs and property taxes.

Clay: Thank you, Tim and good morning, everyone.

Clay: Reported <unk> for the quarter of $2 32 per share was <unk> <unk> per share above the midpoint of our quarterly guidance and contributed core for the full year of $9 17 per share representing an approximate 8% increase over the prior year.

Clay: The outperformance for the quarter was primarily driven by favorable interest and the performance of our recent acquisitions and lease up during the quarter.

Tim Argo: Overall same store operating performance for the quarter was essentially in line with expectation.

Tim Argo: Same store revenues were slightly below our expectations for the quarter as effective rent growth was impacted by lower new lease pricing that you mentioned.

Tim Argo: Same store operating expenses were slightly favorable to our fourth quarter guidance, primarily from lower than expected personnel costs and property taxes.

Clay: During the quarter, we invested a total of $20.7 million of capital through our redevelopment, repositioning, and smart rent installation programs, producing solid returns and adding to the quality of our portfolio. We also funded $48 million of development costs during the quarter toward the completion of the current $647 million pipeline, leaving nearly $256 million remaining to be funded on this pipeline over the next two years.

Tim Argo: During the quarter, we invested a total of $27 million of capital through our redevelopment repositioning and smart man installation programs, producing solid returns and adding to the quality of our portfolio.

Tim Argo: We also funded $48 million of development cost during the quarter toward the completion of the current $647 million pipeline, leaving nearly $256 million remaining to be funded on this pipeline over the next two years.

Tim Argo: As Brad mentioned, we also expect to start to three to four projects over the course of 2024, which would keep our development pipeline at a level consistent with where we ended 2023, which our balance sheet remains well positioned to support.

As Brad mentioned, we also expect to start 3-4 projects over the course of 2024, which would keep our development pipeline at a level consistent with where we end in 2023, which our balance sheet remains well positioned to support. We ended the year with nearly $792 million in combined cash and borrowing capacity under our revolving credit facility, providing a significant opportunity to fund potential investment opportunities. Our leverage remains low with debt to EBITDA at 3.6 times, and at year-end, our outstanding debt was approximately 90% fixed for an average of 6.8 years at an effective rate of 3.6%. Shortly after year-end, we issued $350 million of 10-year public bonds at an effective rate of 5.1 percent, using the proceeds to pay down our outstanding commercial pay-per-view.

Tim Argo: We ended the year with nearly $792 million in combined cash and borrowing capacity under our undrawn revolving credit facility, providing significant significant opportunity to find potential investment opportunities.

Tim Argo: Our leverage remains low with debt to EBITDA at three six times at year end, our outstanding debt was approximately 90% fixed with an average of six eight years at an effective rate of three 6%.

Tim Argo: Shortly after year end, we issued $350 million of 10 year public bonds.

Tim Argo: Think of rate of five 1% using the proceeds to pay down our outstanding commercial paper.

Finally, we did provide initial earnings guidance for 2024 with our release, which is detailed in the Supplemental Information Package. Core FFO for the year is projected to be $8.68 to $9.08, or $8.88 at the midpoint. The projected 2024 same-store revenue growth midpoint of 0.9% results from rental pricing earn-in of 0.5% combined with a blended rental pricing expectation of 1% for the year. We expect blended rental pricing to be comprised of lower new lease pricing impacted by elevated supply levels and renewal pricing in line with historical levels. Effective rent growth for the year is projected to be approximately 0.9% at the midpoint of our range. We expect occupancy to average between 95.4% and 96% for the year, and other revenue items, primarily reimbursement and fee income, to grow in line with effective rent.

Tim Argo: Finally, we did provide initial earnings guidance for 2024 with our lease which is detailed in the supplemental information package course, it though for the year is projected to be $8 68 to.

Tim Argo: The $9 eight or.

Tim Argo: Our $8.88 at the midpoint.

Tim Argo: The projected 2020 for same store revenue growth midpoint of 9% results from rental pricing earn in of 5% combined with little blended rental pricing expectation of 1% for the year.

Tim Argo: We expect blended rental pricing has to be comprised of lower of lower new lease pricing impacted by elevated supply levels and renewal pricing in line with historical levels.

Tim Argo: Thank you Brent growth for the year is projected to be approximately <unk>, 9% at the midpoint of our range, we expect occupancy to average between 95, 4% and 96% for the year and other revenue items, primarily reimbursement and fee income to grow in line with effective rent.

Same-store operating expenses are projected to grow at a midpoint of 4.85% for the year, with real estate taxes and insurance producing most of the growth pressure. Combined, these two items are expected to grow almost 6% for 2024, with the remaining controllable operating items expected to grow just over 4%. These expense projections combined with the revenue growth of 0.9% result in a projected decline in Sing Store NOI of 1.3% at the mid-term.

Tim Argo: Same store operating expenses are projected to grow at a midpoint of $4 eight 5% for the year with real estate taxes and insurance producing most of the growth pressure.

Tim Argo: These two items are expected to grow almost 6% for 2024 with the remaining controllable operating items expected to grow just over 4%.

Tim Argo: These expense projections combined with the revenue growth of <unk>, 9% results a projected decline in same store NOI of one 3% at the midpoint.

Tim Argo: We have a recently completed development community and lease up along with an additional three development communities actively leasing.

We have a recently completed development community and lease up, along with an additional three development communities actively leased. As these four communities are not fully leased up and stabilized, and given the interest carry associated with these projects, we anticipate our development pipeline being diluted to core FFO by about 5 cents in 2024 and turning accretive to core FFO upon later stabilization. We are expecting continued external growth in 2024, both through acquisitions and development opportunities. We anticipate a range of $350 million to $450 million in acquisitions, all likely to be in lease-up and not yet stabilized, and a range of $250 million to $350 million in development investments for the year. This growth will be partially funded by asset sales, which we expect to generate dispositions of approximately $100 million, with the remainder to be funded by debt financing and internal cash flow.

Tim Argo: As these four communities are not fully leased up and stabilized and given the interest carry associated with these projects, we anticipate our development pipeline being diluted to Corp, Bob Bob.

Tim Argo: In 2024, and turning to accretive to corporate the latest stabilization.

Tim Argo: We are expecting continued external growth in 2024, both through acquisitions and development opportunities.

Tim Argo: Anticipate a range of $350 million to $450 million in acquisitions all of them.

Tim Argo: Likely to be in lease up and not yet stabilized in a range of $250 million to $350 million and development investments for the year.

Tim Argo: This growth will be partially funded by asset sales, which we expect dispositions of approximately $100 million with the remainder to be funded by debt financing and internal cash flow.

This external growth is expected to be slightly diluted to core FFO in 2024 and then again turn accretive to core FFO after stabilizing. We project total overhead expenses, a combination of property management expenses and G&A expenses, to be $132.5 million at the midpoint, a 4.9% increase over 2023 results. We expect to refinance $400 million in bonds maturing in June 2024.

Tim Argo: This external growth is expected to be slightly dilutive to <unk> in 2024, and then again turning accretive to core <unk> after stabilizing.

Tim Argo: We project total overhead expenses the combination of property management expenses, and G&A expenses to be $132 $5 million at the midpoint, a four 9% increase over 2023 results.

Tim Argo: We expect to refinance $400 million of bonds maturing in June 2020 for these bonds currently have a rate of 4% and we forecast to refinance north of 5%.

These bonds currently have a rate of 4%, and we forecast a refinance north of 5%. This expected refinance, coupled with the recently completed refinancing activities mentioned previously, resulted in $0.04 of dilution to Core FFO as compared to the prior year. That is all that we have in the way of prepared comments, so Carrie, we will now turn the call back to you for questions. If you pressed the star, then what would happen?

Tim Argo: This expected refinanced coupled with our recently completed refinancing activity activity as mentioned previously the results of <unk> dilution Corp.

Tim Argo: As compared to prior year.

Tim Argo: That is all that we have in the way of prepared comments. So Carrie we will now turn the call back to you for questions.

Carrie: Thank you we will now open the call up for questions.

Carrie: I'd like to ask a question. Please press the Star then one.

Carrie: One on your Touchtone phone.

Joshua Dennerlein: Please see the complete disclaimer at https://sites.google.com, Press Star, We will pause for a moment... And we will take our first question from the line of Josh Dennerlein with Bank of America. Go ahead. Yeah, hey guys. I appreciate all the color you provided on God.

Tim Argo: He would like to withdraw your question you May press star.

Speaker Change: We will pause for a moment.

Speaker Change: Questions.

Speaker Change: Thank you.

Tim Argo: And we will take our first question from the line of Josh <unk> with Bank of America. Please go ahead.

Josh: Yeah, Hey, guys.

Josh: You had all the color you provided on guidance.

Josh: My first question would just be on same store revenue growth outlook.

Tim: This question would just be on... revenue, The Bulletproof Executive 2013, Hey, this is Tim. So I think, you know, as far as the high end of the low end, I think, you know, we feel pretty comfortable with the renewal rates. And they've been steady for the last few months.

Josh: Can you provide us any more details on what would get you to the high and low end of guidance I guess I'm really curious about.

Josh: What you would assume for the blended rate growth at the high and low end.

Tim Argo: Hi, This is Tim.

Tim Argo: So I think as far as the high end of the low end.

Tim Argo: We feel pretty comfortable with the renewal rates.

And what we're seeing, as I noted, the next few months will be in that 5% range. I think that the new lease rates are what could, you know, certainly determine whether we get more to the high and low ends, which is going to be a function of the demand side. We expect to see steady job growth, steady demand for migration, all those factors. So that's a little bit better. You know, I think it obviously pushes new lease rates higher, but then the opposite is true.

Tim Argo: They've been steady for the last few months and what we're seeing as I noted the next few months as being in that 5% range I think that the new lease rates are what cuts.

Josh: Certainly determined whether we get more toward the high end low end, which is going to be a function of the demand side, we expect to see steady job growth steady demand and migration all of those factors, that's a little bit better I think it obviously pushes new lease rates higher and then the opposite is true, but if you think about our full year.

But if you think about our full-year guide, it's built on new lease rates for the year. And this will be seasonal, you know, starting a little bit lower in Q1, accelerating to Q2 and three, and then declining a little bit in Q4. But somewhere in the negative three, three and a quarter range on new leases for the year and expectations of the four and four and a half to 5% range on renewables, which blends out to the 1% blend, is what we're assuming for the full year... Okay, I appreciate that. And then, for the drag that you're assuming on...

Josh: It's built on new lease rates for the year and this will be seasonal starting a little bit lower in Q1 accelerating through Q2, and three and then declining over Q4, but somewhere in the negative three three and a quarter range on new lease for the year.

Josh: Of the four 5% to 5% range on renewals, which blends out to the 1% blended is what we're assuming for the full year.

Speaker Change: Okay appreciate that and then.

Speaker Change: Drag that you're assuming.

Speaker Change: $400 million of acquisitions is there a way to quantify that.

Clay: There's no way to quantify that. Yeah, I think you can, you can... Yeah, Josh, I think you can think through, you know, what we're projecting new rates to come in this next year and kind of the timing of those acquisitions. From a standpoint of just the timing of it, we're assuming that those start in the second quarter and then and then play out over the remainder of the year. And we think about maybe in the range of call it four acquisitions at roughly $100 million each. And I think they'll look similar to these other two acquisitions that we just completed in 2023. As far as how they will lease up and how they'll, you know, the drag that we'll see on earnings over 2024, And Josh, this is Brad.

Speaker Change: Yes. Thank you can you can thanks.

Speaker Change: Yes, Josh if you think through what were projecting new rates to come in in this next year and kind of the timing of those acquisitions.

Speaker Change: From a from the standpoint of just the timing of it.

Speaker Change: Assuming that those starting in second quarter, and then and then play out over the remainder of the year.

Josh: Maybe in the range of call it four acquisitions that roughly $100 million.

Speaker Change: And I think they'll look similar to what these other two.

Speaker Change: Acquisitions that we just completed in 2023 as far as how they will lease up and how will the drag that we will see.

Speaker Change: Earnings over over 2024.

Speaker Change: Hey, Josh this is Brad.

Brad: Just to add to that our assumption on the acquisitions is that.

Brad: Obviously, there is quite mentioned, they're very similar to the ones. We purchased last year. They are in lease up were assuming about a four 5% NOI yield.

Brad: Contribution at the time of closing given that those are in lease up and given the comments that quite made about where are our current commercial paper is and where our cost of debt as you can kind of do the math on what the dilution areas.

Clay: Just to add to that, our assumption on the acquisitions is that, you know, obviously, they're, as Clay mentioned, very similar to the ones we purchased last year, they're in lease up, and we're assuming about a four and a half percent NOI yield contribution at the time of closing, given that those are in lease up. And given the comments that Clay made about where our current commercial paper is and where our cost of debt is, you can kind of do the math on what the dilution there is. Thank you, Scott. Please, we'll take our next question from the line of Austin Wurschmidt with Key Bank. Please go ahead.

Speaker Change: Okay. Thanks, guys.

Brad: Sure.

Speaker Change: We'll take our next question is from the line of Austin <unk> with Keybanc. Please go ahead.

Austin: Great. Thanks, good morning, everyone.

Austin: We remain confident that new lease pricing is going to improve through this year, but really sounds like peak delivery.

Austin: <unk> mid year.

Austin: And we really yet to see I guess leasing volume pick up.

Speaker Change: With kind of that expectation.

Speaker Change: Improvement in new lease rates of the year do you think that lease rates get better in the back half of this year versus last year on sort of the lease weighted basis I know things deteriorate.

Brad: Well, I'll answer your question, and Tim, you can jump in here. But broadly speaking, yeah, we do think that as you get into the summer leasing season, we've traditionally seen leasing traffic pick up. And as we commented in our prepared comments, I mean, we just see no evidence of demand really deteriorating, and we do think that normal seasonal patterns will continue to play out. So as we think about supply delivery, we see it is pretty elevated at this point. And I mean, does it go up another 10%? I don't think so.

Speaker Change: Late in the year, but more interested in sort of that period of July through October.

Speaker Change: Well al.

Speaker Change: Answer your question, Tim you can jump in here.

Speaker Change: Broadly speaking, yes, we do think that as you get into the summer leasing season.

Speaker Change: We always traditionally seen leasing traffic pick up and as commented in our prepared comments I mean, we just see no evidence of demand really deteriorating and we do think that normal seasonal patterns will continue to play out.

Speaker Change: As we.

Speaker Change: We think about supply delivery and we see it is pretty elevated at this point I mean does it go up another 10% I don't think so I think that kind of where the where the sort of the peak of the storm from a supply perspective, I feel like right now.

I think that we're in the sort of the peak of the storm from a supply perspective, I feel like right now, in a weak demand quarter. And we think that supply now will stay high, certainly in Q1 and Q2, and probably even early Q3. It's hard to peg it by month.

Speaker Change: Weak demand quarter, and we think that supply now stays high certainly in Q1 and Q2.

Speaker Change: And probably even in early Q3.

Speaker Change: It's hard to peg it by month, but we do think that there is a lot of reasons to believe that supply starts to Peter out our starts to moderate a little bit as you get into particularly into Q4. So we do think that the.

But we do think that there are a lot of reasons to believe that supply starts to peter out or starts to moderate a little bit as you get in, particularly into Q4. So we do think that the pressure surrounding supply, Q3. Q4. Q5. Q6. Q7. Q8. Q9.

Speaker Change: Pressure surrounding supply.

Speaker Change: That will persist will be met with even stronger.

Q10. Q11. Q12. Q13. Q14. Q15. Q16. Q17. Q18. Q19.

Speaker Change: Leasing traffic and demand patterns as we get into the summer as a function of normal lease with normal seasonal patterns and therefore, it does lead us to believe that new lease pricing.

Q20. Q21. Q22. Q23. Q24. Q25.

Speaker Change: Forum's better in Q2 in Q3, and as Tim alluded to we expect again a function of normal seasonal patterns that begins to moderate a little bit in Q4, and the other thing that I would just point out of course is that we began to see.

Q26. Q26. Q27. Q28. Q29.

Q30. Q31. Q32.

Q33. Q34. Q35. Q36. Q37. Q38. Q39. Q40. Q41. Q42.

Speaker Change: Early effects of supply pressure really.

Speaker Change: In 2023, and particularly in the latter part of 2023. So in some ways. You could also suggests that the prior year comparisons in terms of new lease over lease performance starts to get a little bit easier. If you will in the back half of 2024 so.

Q43. Q44. Q45. Q46. Q46. Q47.

Q48. Q49. Q50. Q51. Q52.

Q53. Q54. Q55. Q56.

Speaker Change: <unk>, that's what leads us to the.

Speaker Change: The consensus of where we think things are headed I think Tim what would you add to that yes.

Tim: Consensus of where we think things are headed. I mean, Tim, what would you add to that? Yeah, I'll add on to what Eric was saying. If you go back to last year, our new lease pricing went slightly negative starting in July and then kind of progressively got more so throughout the year. So there is a comp component that plays into this as well.

Tim Argo: And on what Eric was saying if you go back to last year I mean, we our new lease pricing went slightly negative starting in July and then kind of progressively got more so throughout the year. So there is there is a cost component that plays into this as well as well. So I do think to answer one of your questions also.

Tim Argo: These pricing does look better than the end of 2024 as compared to the end of 2023.

Eric: So I do think, to answer one of your questions, Austin, that new lease pricing does look better at the end of 2024 as compared to the end of 2023, with those comps, and supply getting a little bit better. Now, I think, you know, the improvement won't be as clear to see because it is a lower demand time of year when you get into November and December, but I think the trends will be positive and really start to play out in 2025. I think new lease pricing probably doesn't go positive until 2025. I think it'll get close to flat, probably in the middle of this year, in highest demand. Part of the year, but even in a, quote, normal year or a good year, we typically see new lease pricing as negative in the back part of the year. So I think it'll be early 2025 as we see the supply pressures start to moderate more.

Tim Argo: With with those comps with supply and getting a little bit better. Thanks.

Speaker Change: Yes, the improvement will be as clear to see because it is a lower demand part of the year. When you get into that November and December, but I think the trends will be positive and really start to play out 2025.

Speaker Change: Lease rate growth.

Speaker Change: Positive and then.

Speaker Change: Second question is.

Speaker Change: Just curious how.

Speaker Change: What underlying assumptions at same store revenue guidance changed the most relative to what you published in November of last year.

Speaker Change: I think likely new lease pricing probably doesn't go positive until 2025, I think and I think I'll get closed.

Speaker Change: Flat probably in the Bill this year and the highest demand.

Speaker Change: Part of the year, but even in.

Speaker Change: Quote normal year, good year, we typically see new lease pricing is negative.

Speaker Change: In the back part of the year, So I think likely in early.

Speaker Change: Early 2025, as we see the supply pressures start to start to moderate more.

Tim: So I think that's probably the most likely scenario for new lease pricing. As far as what changed, I mean, it was really the earn-in, which is based on what we saw in November and December, as I mentioned in my comments. New lease pricing really moderated quite a bit, particularly in November and December, which the way we calculate our earn-in is just basically saying, all the leases that were in place at the end of, at December 31, if they all priced at zero for the rest of the year, what would our rent growth be? And that's, so the earn-in is more in the 0.5 range, a little bit lower than that range we talked about in ARE, but really driven by the new lease pricing in November and December and the pressure we saw from the developers looking for occupancy and that sort of thing...

Speaker Change: So I think that's probably the most likely scenario for new lease pricing as far as what changed I mean, it was really really the earn out which is based on what we saw in November and December as I mentioned in my comments. It was pricing really really moderated quite a bit, particularly in November and December which the way we calculate our <unk>.

Speaker Change: All the all the leases that were in place at the end of December 31.

Speaker Change: Prices in Europe for the rest of the year when our rate growth.

Speaker Change: So the <unk> more than <unk> five range will go lower than that range, we've talked about at NAREIT, but really driven by the new lease pricing in November and December and the pressure we saw from that.

Speaker Change: Developers.

Speaker Change: Looking for occupancy and that sort of thing.

Speaker Change: Thanks, everybody.

John P. Kim: And we'll take our next question from the line of John Kim with BMO Capital. Thank you. Good morning.

Speaker Change: And we'll take our next question from the line of John Kim with BMO Capital. Please go ahead.

John P. Kim: Thank you and good morning.

I want to follow up on that comment you just made on the earn-in that was basically half of what you expected in November. I realize the slended rates probably came in lower than expected. But you also mentioned, Tim, in your prepared remarks, that the leasing volume was very light in the fourth quarter with only 16% of leases overall. I'm just trying to understand the impact of the fourth quarter leases and why earnings have come down so much in just a month. Yeah, I mean, it's based exactly on that.

John P. Kim: I wanted to follow up on that comment you just made on the earn in that basically half of what you expected in November.

John P. Kim: We like them.

John P. Kim: Blended rates probably came in lower than expected.

John P. Kim: But you also mentioned Tim in your prepared remarks that the leasing volume with very light in the fourth quarter of only 16% of leases overall.

John P. Kim: I'm, just trying to understand that impact.

John P. Kim: The fourth quarter leases.

John P. Kim: <unk> come down so much demand.

John P. Kim: Yes.

I mean, I think the other component that played into it was that we did, we saw turnover for the year down, but in November and December, we had a little bit higher weighting on new lease pricing as compared to renewals. So, more new leases in November and December than renewals, which obviously had a bigger impact on the blended. Now, we've seen that shift more so to what we think will happen throughout the course of 2024, which is that we're waiting. We think turnover will remain down and be weighted a little more towards renewal. So while we have seen new lease pricing improve in January, the blended improved even more as we've seen more of what we think will be the lower turnover component. So it's really just that.

John P. Kim: Based on that I mean, I think the other the other component of played into as we did we saw turnover for the year down in November and December we had a little bit higher waiting on new lease pricing as compared to renewals more new leases in November and December than renewals, which obviously with the new lease pricing was was a bigger impact on the blended.

John P. Kim: Now we've seen that seem that shifts more so to what we think will happen.

John P. Kim: Throughout the course of 2024, which is where we're waiting we think turnover remained down the weighted a little more towards renewables. So while we have seen pricing improve in January the blended improved even more as we say more what we think will be the lower turnover components. So it's really just that like I said we're.

Like I said, you know, we're comparing at the lowest part, the lowest demand part of the year. We do expect the combined to be positive in 2024. So I think that's, you know, calculating loss of lease, earn it, whatever you want to call it at the end of December, certainly the most pessimistic time to look at it. But it was that pricing that drove it. But when you calculate earnings, you just take the blended lease change for your entire portfolio, not waited by the Number of Transactions, which is capital, basically.

John P. Kim: That's comparing.

John P. Kim: The wireless part of lowest demand part of the year, we do expect blended to be positive in 2024, so it makes sense.

John P. Kim: Calculating loss lease earn it whatever you want to call. It in the December certainly the most pessimistic time to look at it but.

John P. Kim: It was that pricing.

John P. Kim: Amit.

John P. Kim: But when you calculate hernia you just take the.

John P. Kim: Blended lease teams for your entire portfolio.

John P. Kim: Not weighted by.

John P. Kim: Number of transactions.

Now, we just said, when we talk about earnings, we're just saying, okay, if our total rents were $2 billion at the end of December, and or if we take just December, whatever that number was for rent, and apply that all the way through 2024, what is the full-year growth over 2023? So, you know, where that ends up can affect that number. Paramount. Okay, my second question is on acquisition yields, which... Your last two were 5-5 and 5-9.

John P. Kim: Hey cap with basically.

Speaker Change: No we just said.

John P. Kim: We talked about earlier and we're just saying okay. If our total rents were $2 billion at the end of December.

John P. Kim: Or if we take just December or whatever that number was for rent and apply that all the way through 2024, what is the full year growth over 2023.

John P. Kim: And so where that ends up Ken can affect that number.

John P. Kim: <unk>.

Ken: Okay. My second question is on acquisition yields with.

Ken: Your last two were at five five and $5 nine how do you see that.

Brad: How do you see that? The end of this year, when you see more acquisition activity occur, and your recent bond rate is down at 5.1%. How does that change your view on initial yields that are acceptable to you? Yeah, John, this is Brad. I'll start off with that.

Ken: Move towards.

Ken: This year when you see more acquisition activity.

Ken: Okay.

John P. Kim: And your recent bond raise done at five 1% how does that change your view and if so.

John P. Kim: Yields that are like that.

John P. Kim: Acceptable to you.

John P. Kim: Yes, John this is Brad I'll start off with that well.

Well, you know, certainly we were fortunate with the two acquisitions that we executed in the fourth quarter. And we felt like we got really good prices on those for the reasons I mentioned in my comments. But, you know, we haven't seen a lot of activity in that area.

Brad: Certainly we were fortunate with the two acquisitions that we executed in the fourth quarter.

Brad: And we felt like we got really good pricing on those for the reasons I mentioned really in my comments, but.

Brad: We haven't seen a lot of activity in that area and so even.

And so, you know, even in the first quarter, here in January, we've seen a little bit of an uptick in terms of the deals coming out. We were at NMHC last week, and certainly think that that volume picks up a little bit as we go through the year. But we haven't seen a lot of opportunities come in that way. Now, we do think, as we continue to get further into the year, that pressure, given where interest costs are for the developers, given the supply pressures, that they're likely to feel that, you know, the urgency from some of these developers to execute on transactions will continue to increase, and we're certainly hopeful that that yields additional opportunities.

Speaker Change: Even in the first quarter here in January we've seen a little bit of an uptick in terms of the deals coming out we were at <unk> last week and certainly.

Speaker Change: Think that that volume picks up a little bit as we go through the year.

Brad: But we haven't seen a lot of opportunities come in that way now we do think as we continue to get further into the year that pressure.

Brad: Pressure, given where interest costs are for the developers given the.

Brad: The supply pressures that they're likely to feel that the urgency from some of these developers to execute on transactions will continue to increase and we're certainly hopeful that that yields additional opportunities. The other thing that we're watching.

The other thing that we are watching, frankly, is some of the larger equity sponsors and what their exposure is to other sectors, whether that's retail or office. Some of them have big exposures to multifamily development, and some of them have liquidity needs which necessitates that they execute transactions in some of the multifamily space. So we're having some discussions with folks like that.

Brad: Frankly, as some of the larger equity sponsors and what their exposure is to other sectors, whether that's retail or office.

Brad: And some of them have big exposures to multifamily development and some of them have liquidity needs, which necessitates that they execute transactions and some of the multifamily space. So we're having some discussions with <unk>.

We're certainly hopeful that that will yield some opportunities. But I do think that the pricing expectations on the seller side are still a bit lower than where we think pricing needs to be. Pricing expectations are still in the low fives.

Brad: Folks like that we're certainly hopeful that that will yield some opportunities, but I do think that the.

Brad: The pricing expectations on the seller side is still a bit lower than where we think pricing needs to be.

Brad: Pricing expectations are still low fives, so we still need to see.

Brad: So we still need to see some movement up in cap rates from where those expectations are for the market to really pick up. So it's an area that we continue to work on. And we do think that there'll be more opportunities as we get through this year. Great. Thank you. Any questions from the line?

Brad: Some movement up in cap rates from where those expectations are for the market to really pick up so.

Brad: It's an area that we continue to work on.

Brad: And we do think that there'll be more opportunities as we get through this year.

Speaker Change: Great. Thank you.

Speaker Change: And we'll take our next question from the line of Jamie Feldman with Wells Fargo. Please go ahead.

Austin Wurschmidt: Great, thank you. I appreciate all the color on rents and, you know, how you think it can inflect a more positive change. But I guess just like a case study, if you think about your weakest market, your deepest supply challenge market, and what do you think the pace of rents would look like in that? For the kind of, you know, quarterly improvement, or is it still weak into 25? I think we should just look for, like, the worst case scenario here so we can build on the better.

Jamie Feldman: Great. Thank you I appreciate all the color on rents and how you think you can inflect more positive but.

Jamie Feldman: Yes. It is like a case study if you think about your your weakest market Youre your deepest supply challenged market I mean, what do.

Jamie Feldman: Do you think the pace of rents look like in that market.

Jamie Feldman: Or that kind of that quarterly improvement areas, they still weak into 'twenty five.

Speaker Change: Looking for like the worst case scenario here. So we can build on the better.

Well, I mean, when we talked about, you know, construction starts that peak somewhere around the middle of 2022, that was pretty consistent across our markets. There are a few that were a little bit later than that, a few that were a little bit earlier than that.

Speaker Change: Well I mean I.

Speaker Change: I will say when we talked about.

Speaker Change: Construction starts that peak somewhere around the middle of 2022.

Speaker Change: That is pretty consistent across our markets. There are a few that were a little bit later that few there a little bit earlier that it is.

So it is a relatively consistent supply wave in terms of the timing. Obviously, some markets are getting a lot more supply than others, which drives under- or over-performance. I mean, Austin is the market we've talked about forever that is our weakest one right now. I mean, it's just getting a ton of supply, and it's very widespread throughout the market, whereas some other markets are a little more targeted.

Speaker Change: As a relatively consistent supply wave in terms of the timing.

Speaker Change: Some markets are getting a lot more supply than others, which drives under or over performance I mean Austin.

Speaker Change: As soon as the market we've talked about forever that is our that is our weakest one right now I mean, it's just getting a ton of supply and it's very widespread throughout throughout the market, whereas some other markets a little more targeted so that's one that that has probably been the worst new lease performance right now.

So that's one that has probably had the worst new lease performance right now. So, I mean, I think a market like that will continue to struggle through most of 2024, probably until 2025 before it starts to see a little bit of improvement. But I would say, again, sort of the cadence of supply is relatively consistent across most of our markets. And, you know, just to add to what Tim's saying, while the cadence of supply is fairly consistent, where you do see a lot of differences on occasion is that, you know, by market, the percent of new supply coming to the market is a percent of the existing stock will vary a bit. And then there are, of course, market differences in terms of, you know, demand and demand drivers.

Speaker Change: I think a market like that will continue to struggle through through most of 2024, probably would be 2025 before it starts to see a little bit of improvement but.

Speaker Change: I would say that again sort of the cadence of supply is relatively consistent across most of our markets.

Speaker Change: Yes, just to add to what Tim is saying.

Speaker Change: While the cadence of supply is fairly consistent where you do see a lot of differences on occasion is.

Speaker Change: By market.

Speaker Change: As the percent of new supply coming to the market as a percentage of existing stock will vary a bit and then also you see of course market differences in terms of <unk>.

Speaker Change: Demand and demand drivers and so in a market like Austin, where it's probably one of our if not the most oversupplied market that we have.

And so in a market like Austin, where it's probably one of our most oversupplied markets that we have, or supply is high relative to a percent of existing stock, it also happens to be one of the strongest job growth markets that we have. And probably as a consequence of that, we're seeing absorption rates, if you will, probably running higher in Austin than we would in a market like, you know, Dallas or some of the others that are also getting a lot of supply. But, you know, maybe not quite the level. Dallas, obviously, is getting a lot of job growth. But a market like Jacksonville, where you're not getting quite the level of job growth that you get in a market like Austin. So I think you have to be careful with trying to extrapolate from one market to the whole portfolio in terms of performance expectations because it will vary quite a bit. And that's obviously why we diversify the way we do.

Speaker Change: Supply high relative to the percent of existing stock. It also happens to be one of the strongest job growth markets that we have and probably as a consequence of that we're seeing absorption rates. If you will probably.

Speaker Change: Running higher in Austin that we would in a market like.

Speaker Change: Dallas or are some of the others that are also getting a lot of supply, but maybe not quite the level of Dallas, obviously is getting a lot of job growth, but a market like Jacksonville, where youre not getting quite the level of job growth that you get in a market like Austin. So I think you have to be careful of trying to extrapolate one market to the whole portfolio.

Speaker Change: In terms of that performance expectations cost it will vary quite a bit and that's obviously why we diversify the way, we do as Tim and Brian alluded to in their comments.

As Tim and Brad alluded to in their comments, you know, this is why we also have a mid-tier market component to our portfolio, where we're seeing some of these mid-tier markets holding up in a much more steady fashion than some of the others. So I think that the question about, you know, how quickly any given market snaps through the supply pipeline, or snaps back through the supply pipeline, if you will, is going to largely be a function of, you know, the demand factors that we see in those markets. And, you know, a market like Austin, we think has huge potential long-term for us. And snaps back pretty strong probably late this year and more likely into early 25.

Speaker Change: This is why we also have a mid tier market component to our portfolio, where we're seeing some of these niche markets holding up in a much more steady fashion than.

Speaker Change: Some of the other so I think that the question about how quickly any given market snaps.

Speaker Change: Through the snaps back through the supply.

Speaker Change: Pipeline, if you will is going to largely be a function of.

Speaker Change: The demand factors and that we see in those markets.

Speaker Change: Market like Austin, we think has huge potential long term for us.

Speaker Change: Snaps back pretty strong probably late this year and more likely into early 'twenty five.

Eric: Okay, that's helpful. Yeah, I mean, the question is coming from I think most of you and most of your peers are thinking that. By the end of the year, a lot of these markets are much better. So, you know, that's what I'm trying to figure out, like, what, like, if you guys pick the market, like, what do you think is going to be the market that has the most pain for the longest period? Combining both job growth projections and supply, just so we can at least keep our eyes on that to see if this is the worst case. Yeah, I would put Austin in that group for sure. I mean, it's getting a lot of supply, and frankly, without, you know, the level of job growth, it would be worse off than it is. Still getting a ton of jobs, but that one's going to take some time to work through.

Speaker Change: Okay. That's helpful. Yeah, I think the question is coming from I think most of you unless you appears youre thinking that.

Speaker Change: By the end of the year a lot of these markets are much better.

Speaker Change: So that's what I'm trying to figure out like what.

Speaker Change: Maybe if you guys think the market like what do you think it's going to be the market that has the most pain for the longest period.

Speaker Change: Combining both job growth projections and supply. So we can at least keep our eyes on that to see that this is the worst case.

Speaker Change: I wouldn't put Austin in that group for sure.

Speaker Change: Yes, I would agree with Boston.

Speaker Change: And just getting a lot of supply and frankly without.

Speaker Change: Level of job growth that would be be worse off and it is still getting a ton of Jos.

Speaker Change: Im just going to take some time to work through.

Speaker Change: Okay, Alright, great Thats helpful.

Brad: Okay. All right, great. That's helpful. And then, you know, thinking about the acquisition opportunities, I mean, you currently have very low leverage versus your peers. How high would you be willing to take that leverage if you found the right opportunities? And then what do you view as your buying power, you know, absolute buying power right now? Yeah, I think just from a leverage standpoint, we would be comfortable moving it up to four-and-a-half to close to five. And, of course, that would take a lot of time at the rate that we're looking at these coming through to get to that point. But we would be comfortable taking our leverage up to up to that. Do you have a sense of the total dollar amount? Yeah, I think that gets to roughly a billion and a half. Okay. All right.

Speaker Change: And then thinking about the acquisition opportunities you currently have very low leverage versus your peers.

Speaker Change: Hi would you be willing to take that library.

Speaker Change: If you found the right opportunities and then what do you view as your buying absolute buying power right now.

Speaker Change: Yes, I think just from a leverage standpoint.

Speaker Change: We would be comfortable leaving it up to four and a half two.

Speaker Change: Close to half.

Speaker Change: And of course that would take a lot of time at this at the rate that we're looking at these coming through to get to that point, but we would be comfortable taking our leverage up to up to that point.

Speaker Change: Could you give a sense of total diet.

Speaker Change: All of them out.

Speaker Change: I think that gets to roughly.

Speaker Change: And a half.

Speaker Change: Okay alright, thank you.

Thank you. And we'll take our next question from the line of Nick Yulico with Scotiabank. Please go ahead. Hey, good morning. It's Daniel Trucarico with Nick.

Speaker Change: We'll take our next question is from the line of Nick <unk> with Scotiabank. Please go ahead.

Speaker Change: Hey, good morning, it's Daniel cargoes Nick.

Brad: Brad, you talked about improving absorption in the back half of the year. Can you comment on what you're seeing on the demand side, you know, job growth, migration that gives you this confidence, maybe the general economic outlook embedded in the guide? And, you know, maybe said another way, you know, what household formation or job growth scenario gets you to the low end of guidance? I'll start out, Tim can certainly jump in here, but a couple of points I'll make here on the demand side are definitely the traditional demand drivers that we see, whether it's job growth, population growth, migration trends, all of those are still very, very positive and steady within our region of the country. And those will continue to be significant drivers over the long term for us. But, you know, we also see another dynamic that's kind of at play here. And a big part of that has to do with the single family market and really has to do with the affordability and the availability that we see there.

Nick: Had you talked about the improving our absorption in the back half of the year and can you comment on what Youre seeing on the demand side, you know job growth.

Speaker Change: Great and that gives you this confidence maybe the general economic outlook embedded in the guidance.

Speaker Change: Maybe said another way what household formation job growth scenario gets you to the to the low end of guidance.

Speaker Change: Yes, so I'll start out Tim can certainly jump in here, but.

Speaker Change: A couple of points I'll make here on the demand side is.

Speaker Change: Definitely the traditional demand drivers that we see whether it's.

Speaker Change: Job growth population growth migration trends all of those are.

Speaker Change: It's still very very positive and steady within our region of the country.

Speaker Change: We will continue to be significant drivers over the long term for us, but we also see.

Speaker Change: Another dynamic that is kind of at play here.

Speaker Change: Big part of that has to do with the single family market and really.

Speaker Change: Has to do with the affordability.

Speaker Change: The availability that we see there as Tim mentioned in his.

As Tim mentioned in his opening comments, you know, we've seen a significant decline in the number of move-outs to buy a home. That's down 20 percent year over year with us. And if you look at the cost of buying a home in our region of the country, it's up significantly over the last couple of years. The monthly cost of homeownership is about 50 to 60 percent higher than the rents in our region of the country.

Speaker Change: Opening comments, we've seen a significant decline.

Speaker Change: And the move outs to buy a home that's down 20% year over year with us.

Speaker Change: If you look at the cost of buying a home in our region of the country, it's up significantly over the last couple of years.

Speaker Change: Monthly cost of homeownership is about 50% to 60% higher than the rents are within our region of the country.

So that's a significant hurdle for most people. We've also seen construction starts in the single-family sector continue to decline. So the inventory level of available single-family homes continues to decline. And so we think that's pushing a segment of demand into multifamily. And it's also pushing folks to stay longer in multifamily. We've seen the average tenure of our residents up to almost two years now.

Speaker Change: That's a significant hurdle for most people. We've also seen the construction starts in the single family sector continued to decline. So the inventory level of available single family continues to decline and so we think thats pushing.

Speaker Change: That's a segment of demand into multifamily.

Speaker Change: And it's also pushing folks to stay longer and multifamily we've seen the average tenure of our residents. After almost two years now so that scatter demand component to it as well and then we've also seen some preference shift within the demographics.

So that's got a demand component to it as well. And then we've also seen some preference shift within the demographics that are, you know, our rental demographics, honestly. And that is a preference to, you know, live alone.

Speaker Change: That or.

Speaker Change: Our rental demographics honestly in that is a preference to.

Speaker Change: To live alone and so that also is extending the household formation numbers that we're seeing and so all of that really combines.

And so that also is extending the household formation numbers that we're seeing. And so all of that really combines to point to a point that Eric made in his comments, which is that, you know, apartment rental continues to make up a higher percentage of occupied housing. And so as we look out and see demand in our region of the country, those traditional drivers continue to be important. But there's also this other component that is really adding to the demand component that we see in our region of the country. Tim, what would you add?

Speaker Change: Point to a point that Eric made his comments, which is that.

Speaker Change: Apartment rental continues to make a higher make up a higher percentage of the occupied housing and so as we look out and see demand in our region of the country. Those traditional drivers continue to be important but there's also this other component that is really adding to the demand component that we see in our region of the country.

Speaker Change: Tim what would you add.

Tim: Yeah, and I'll add a couple of points there. I think the job growth component and how much there is will probably be the factor that determines, to your original question, kind of high-end, low-end, that sort of thing. I mean, I think we expect the in-migration and all things Brad just noted to be there, and that component of demand to be pretty consistent with what we've seen in the last couple of years. We've dialed in about 400,000 new jobs into our expectations for our markets for 2024. That's down, certainly, from 2023, but still net positive, and we still expect job growth to be highest in the Sunbelt markets. And encouragingly, if you look at the national job growth numbers for January, added, I think about 350,000 new jobs in January. Comparing that back to 2023, the average is about 250,000 a month, so while we do expect job growth to be down some to 2023, the early indications are that it's still holding up pretty well. That's great news.

Tim Argo: I'll add a couple of points there I mean, I think the job growth component.

Tim Argo: How much there is will be probably more likely the factor that determines to your original question kind of high end low end that sort of thing I mean, I think we would expect and migration of all things Brad just noted to be there and that component demand to be pretty consistent with what we've seen in the last couple of years.

Tim Argo: Dialed in about 400000, new jobs into our expectations for our markets for 2024.

Tim Argo: <unk> down certainly from 2023, but still net positive and still expect job growth in the sunbelt markets.

Speaker Change: <unk>, if you look at the national.

Tim Argo: Job growth numbers for January you added I think about 350000, new jobs in January.

Tim: Compare that back to 2023, the average is about 250000 a month.

While we do expect job growth to be down from the 2023. The early early indications are that it's still holding up pretty well.

Brad: Thanks, guys. Follow up on development, you have three or four developments starting this year, development starts. You know, what markets are those in, and what are the underwritten stabilized yields on those? And I guess, along the same line, you talked about Austin being the weakest. You stabilized Windmill Hill in Austin in the fourth quarter.

Speaker Change: No that's great color thanks, guys.

Speaker Change: I'll hop on to.

Joshua Dennerlein: To sell them and you have three or four development start this year development starts.

Tim Argo: What markets are those in and and what our underwritten stabilized yields on those and I guess along the same line you talked about Austin being the weakest you stabilized windmill Hill in Austin and in the fourth quarter.

You know, can you give us a sense of how that asset leased versus your expectations? And obviously, a little bit more suburban, but how do you expect that asset to perform within the Austin market this year, given that, you know, it's expected to be one of the weaker markets? This is Brad.

Tim Argo: Can you give us a sense of how that asset leased up versus your expectations and.

Tim Argo: Obviously, a little bit more suburban but how do you expect that asset performance in the Austin market. This year, given its expected to be one of the weaker markets.

Brad: A couple of comments on the development side. Yeah, we do have three to four starts that we expect this year, two in the first half.

Tim Argo: Yes.

Tim Argo: This is Brad a couple of comments on the development side, Yes, we do have three to four starts that we expect this year to.

Brad: Two in the first half one of those is in Charlotte.

One of those is in Charlotte. The other one is in the Phoenix Chandler sub-market of Phoenix. We've got two other ones that we're working on. One's a Phase II in Denver. The other one's a Phase II in Atlanta.

Brad: Other one is in the Phoenix Chandler Submarket of Phoenix.

Brad: We've got two other ones that we're working on one is a phase II in Denver. The other ones are phase II in Atlanta.

And in terms of the yields we're seeing there, you know, we are pushing those at the moment to – we're repricing all of those, trying to get the construction costs down to really get to a yield called mid-sixes. That's really what our goal is. We have had some success on the project in Charlotte. We've been able to get between five and six percent of the construction costs down, which really helps support our ability to get that yield. So we feel really good about where we are with those developments. You know, the two that are late in the year are Phase II projects, so we're hopeful that the yields there continue to increase as we get further construction costs out of those as well. And I'm sorry, the second part of your question, Nick? The Windmill Hill in Austin for KFW, how does that sound, go ahead.

Brad: And in terms of the yields we're seeing there.

Brad: We are pushing those at the moment too we're repricing all of those trying to get the construction costs down to really get to a yield call. It mid sixes.

Brad: Really what our goal is we have had some success on the.

Brad: Project in Charlotte, we've been able to get between five and 6% reduction in the construction cost, which really helps support our ability to get that yield so.

Brad: So we feel really good about where we are.

Brad: With those.

Brad: Developments.

Brad: And then.

Brad: The two that are late in the year of phase II projects. So we're hopeful that.

Brad: The yields there continued to increase.

Brad: As we get further construction cost out of those as well.

Speaker Change: I am sorry, the second part of your question Nick.

Speaker Change: The Windmill Hill and in Austin and <unk>.

Brad: How does that go ahead.

Brad: Yes.

Brad: Yeah, that asset performed extremely well for us. The average rents that we achieved on that asset were almost 24% higher than what we expected. So from a yield perspective, it significantly outperformed what we expected. And part of that was, you mentioned it was a suburban asset in Austin, great execution on the property, had two adjacent lease-ups going on at the same time as it, but we were very patient in how we leased that asset up. We didn't have to offer concessions to meet the market, and really performed extremely well there. So I think, given the execution on the construction side, as well as on the leasing side, we did not have to compete quite as much head-to-head with some of the competition that was in that market, and we've got pretty good results there. Thanks for the time. And we'll take our next question from Eric Wolfe with Citi. Please go ahead.

Brad: Asset performed extremely well for us the average rents that we achieved on that asset, we're almost 24% higher than what we expected so from a yield perspective significantly outperformed what we expected.

Eric Wolfe: And part of that was you mentioned, it's a suburban asset and in Austin.

Brad: Execution on the property had to.

Eric Wolfe: Jason lease ups going on at the same time as it but we were very patient in how we leased asset up we didn't have to offer concessions to meet the market.

Brad: And it really performed extremely well there so I think.

Eric Wolfe: Given the execution on the construction side as well as the leasing side.

Eric Wolfe: We did not have to compete quite as much head to head with some of the competition that was in that market and we've got pretty good results there.

Eric Wolfe: Thanks for the time.

Brad: And we'll take our next question from Eric Wolfe with Citi. Please go ahead.

Eric: Hey, thanks. So I understand your point on comps getting easier through the year, especially in the fourth quarter. But if the largest amount of supply is delivered in the middle of this year, and it takes like a year to lease up, I guess why would rents start recovering sort of later this year before the developments are fully leased? Isn't there typically like a compounding effect of the supply?

Eric Wolfe: Hey, thanks.

Eric Wolfe: I understand your point, the comps getting easier through the year, especially in the fourth quarter, but it's the largest amount of supply is delivering in the middle of this year and it takes a year to lease up.

Eric Wolfe: Brent start recovery sort of later this year before the development Chipotle typically like a compounding effect of the supply.

Tim: Well, I think, you know, one is that while we're talking about completion or starts peaking in the middle of 2022, it's been pretty steady. So I think we've seen a relatively steady level of supply being delivered over the last several quarters. And then we have the steady level of demand as well. I mean, we have seen absorption keep up pretty well even though supply kind of compounded, as you said, certainly certain markets are a little bit different.

Tim: Well I think one is the while we're talking about completely starts peaked in the middle of 2022.

Tim: <unk> been pretty steady so I think we've seen a relatively steady level of supply being delivered over the last several quarters and then we have the steady level of demand as well I mean, we have seen absorption keep up pretty well, even as supply kind of compounded as you said certainly certain markets are a little bit different but the other.

But the other thing is, you know, the middle of the year, obviously, is the strongest demand component. And so I think the timing of that with the timing of most of our traffic and most of the demand coming in is what we believe helps keep it from, you know, we talked about how we think new lease pricing is kind of the bottom helps keep it from getting worse than where it is now, just sort of that normal seasonality and all the different demand factors that we've talked about. And then, you know, you'll have a few months after the middle of the year when it's peaked, where there's still pressure, but we typically see it start to drop a few months after those final deliveries, which is what gives us some confidence in the back half of the year that we start to see some improvement. And as Tim mentioned, I mean, we also assume that new lease pricing moderates in the fourth quarter. And that's also what it's important to remember.

Josh Dennerlein: Thing is middle of the year, obviously is the strongest demand component and so I think the timing of that with the timing of most of our traffic in most of the demand coming in is what we believe helps keep it from we've talked about we think new lease pricing is kind of bottom helps keep it from from getting worse awareness now just sort of that.

Tim: Normal seasonality and all the different demand factors that we've talked about and then you'll have a few months after the middle efforts Peach, where theres still pressure, but we typically see it start to drop a few months. After this final deliveries, which is what gives us some confidence in the back half of the year that we start to see some improvement.

Tim: As Tim mentioned, we also I mean, we assume that new lease pricing moderates in the fourth quarter and that's also what's important to remember that's also why we stacked stagger our lease explorations. The way, we do such that we're repricing a smaller percent of leases of the portfolio in that holiday period of November December so.

Eric: It's also why we stagger our lease expirations the way we do such that we're repricing a smaller percent of the leases of the portfolio during that holiday period of November and December. So I understand the point that you're making, but, you know, we feel like we've accounted for that, both in terms of our new lease or lease pricing performance expectations, seasonal patterns, if you will, but also just the way we manage lease expirations over the course of the year. So, you know, we think that we've got it dialed in appropriately. And we do think that as we get into it again, it varies by market so much. So it's hard to make any real conclusive, broad observations as relates to the point that you're making.

Eric: I understand the point that you're making but we feel like that we've accounted for that both in terms of our new lease over lease pricing performance expectations.

Eric: Seasonal patterns, if you will but also just the way we manage lease explorations over the course of the year. So.

Eric: We think that we've got it dialed in appropriately and and we do think that as we get into.

Eric: Again, it varies by market. So much so it's hard to make any real conclusive broad observations as it relates to the point that you're making but we do think that there are certain markets for sure that we began to see the supply pressures meaningfully.

Tim: But we do think that there are certain markets for sure where we begin to see the supply pressures meaningfully moderate in terms of new coming in late in the year. And that begins to, you know, establish some early signs of recovery in that new lease pricing performance as we head into 2025. I think one more point I'll add just back to the kind of middle of the year. I mean, we're still dialing in somewhere in the negative 2.5% range during that strongest period of 2024 for new lease pricing. So, you know, we certainly don't see it getting positive yet. But, you know, I think with the demand components, it'll be a little bit better than what we're seeing right now. Thanks.

Tim: Moderate in terms of new coming in.

Tim: Late in the year and that begins to.

Tim: <unk>.

Tim: Establish some early signs of recovery in that new lease pricing performance as we head into 2025.

Tim: One more point I'll add just back to the kind of the middle of the year I mean, we're still down and somewhere in the negative two 5% range during that strongest period of 2024 for new lease pricing.

Tim: And we certainly don't see it getting positive.

Speaker Change: Yet, but I think with the.

Tim: Demand component.

Tim: It'll be a little bit better than what we're seeing right now.

And then just maybe a quick clarification on the earn-in. Does that include your sort of loss or gain on the lease and real-time changes in market rents? Or is it based purely on the leases signed at one point in time?

Speaker Change: Okay. Thanks, and then just maybe a quick clarification on the earnings does that does that include your sort of loss or gain to lease real time changes in the market rents or is it purely optical leases signed at one point in time, just trying to understand if like real time moves the market ends up impacting earnings.

Tim: Just trying to understand if like real-time moves and market rents end up impacting that earn-in such that it's always going to end up being lower at the year-end. Yeah, well, for the earn-in, like I said, it's basically just saying all the leases that were in place at the end of 2023. So call it all the December leases. If those just held steady for all 24, that's the earn-in

Tim: Earnings have said, it's always going to end up being lower than at the year end.

Tim: Yes.

Tim: More the earn in like I said, it's basically just saying all the plant all the leases that were in place at the end of 2023, so call. It all the December leases. It says it's always just held steady for all 24 that started in on a loss to lease how we think about that if you look at all of the leases that went effective in January.

Tim: I mean, lost lease, how we think about that, if you look at all of the leases that went effective in January compared to our end place, it's about a negative 1% lost lease looking at it that way. But we are dialing in, as we said, positive 1% blended for the course of 2023. Thank you. And we'll take our next question from the line of Rich Anderson with Wedbush. Please go ahead. Thanks. Good morning, everyone.

Richard Anderson: During <unk> compared to our input in place about a negative 1% loss lease looking at it that way, but we are dialing in as we said positive 1% blended.

Richard Anderson: For the course of 2024.

Richard Anderson: Okay. Thank you.

Tim: And we'll take our next question from the line of Rich Anderson with Wedbush. Please go ahead.

Richard Anderson: Thanks, Good morning, everyone.

Richard Anderson: So what do you make of this January effect that's happening? Like, you guys have seen this sort of, you know, recovery in January. Some of your peers, many of your peers have seen the same thing. It's still, you know, frickin' cold outside.

Richard Anderson: So what do you make of this January effect, that's happening like you guys have seen this sort of you know.

Richard Anderson: Recovery in January some of your peers. Many of your peers have seen the same thing it's still freaking cold outside why why why do you think January is recovering the way. It is for you and others at this point.

Eric: Why do you think January is recovering the way it is for you and others? Two reasons. One, you don't have the holidays in January. I think nobody likes to move during Christmas and or Thanksgiving.

Eric: Two reasons one.

Eric: You don't have the holidays in January I think nobody likes to move during Christmas or Thanksgiving I think I think the holiday effect is real.

I think the holiday effect is real, and I think it weighs on people's interest in moving. Secondly, I think that there is, and we have seen some evidence to suggest that some developers were facing kind of a calendar year-end pressure point. And I think that we, as we started to see in the early part of the fourth quarter as we were approaching year-end, developer lease-up practices were getting increasingly aggressive as we were headed towards the holidays and, I think, a calendar year-end. And so I just think that developer practices got a little bit more aggressive during the holidays and approaching the year-end, and I think that to some degree, there was some moderation on that. And certainly, you know, absent the holidays, even though it is cold and so forth, I think people's capacity to deal with the hassle of moving just improves a little bit better once you get past the holidays, and therefore, you know, traffic picks up.

Eric: And I think it weighs on People's.

Eric: Interest in moving.

Eric: Secondly, I think that there are and we have seen some evidence to suggest that some developers were facing kind of a calendar year end.

Eric: Pressure point and I think that we as we started to see in the early part of the fourth quarter. As we are approaching year end developer lease up practices, we're getting increasingly.

Eric: <unk>.

Eric: We're headed towards the holidays and I think a key.

Eric: Calendar year end.

Eric: And so I just think that developer practice has got a little bit more aggressive in the holidays and approaching the year end and I think that to some degree there was some moderation on that and certainly absent the holidays, even though it is cold and and.

Eric: And so forth I think people's capacity to deal with the hassle of moving just improves a little bit better once you get past the holidays and therefore traffic picked up do you think.

Eric: This holiday factor moderates in February as you know when it's still sort of a seasonally slow period of time or the January pick up and then you kind of get back to normal course sequential business up there.

Eric: Do you think this holiday factor moderates in February, you know, when it's still?........ pick it up, and then you kind of get back.

Brad: Yeah, I think that's good, reasonable. And then the second question is, you know, someone asked about how much you'd lever up and appreciate that color. And I know you're sort of waiting for the transaction market to be sort of... Disclaimer, you know a part of the uh... a bigger part of the external world. You seem to be slowing it down more than speeding it up. Yeah, hey Rich, this is Brad

Speaker Change: Yes, I think that's reasonable.

Speaker Change: And then second question is someone asked about how much you'd lever up and I appreciate that color.

Brad: And I know, you're sort of waiting for transaction market to be a sort of.

Brad: More attractive to you to execute it with still low cap rates, but you have this sort of development opportunity sitting I don't remember what the number was but you got a lot that you can you can do right now why wouldn't you if youre going to deliver into 2026, which is likely to be a very good year to deliver why not really accelerate development right now and have that.

Brad: Well, you're right; we do have a pretty big pipeline of projects that are ready that we could execute on, and really, it's just a matter of working out the costs on those projects right now. I mean, you know, as I mentioned, we are seeing early signs of costs coming down. On the project in Charlotte, call it five to six percent. We do think we'll continue to see costs come down as we get later into this year. So while we do expect to start three or four projects this year, we have another four to five that are approved where plans are nearly ready, and if costs came in, we could certainly pull the trigger on those. So we have the option to be able to do that, but we think it's prudent to be sure that the costs are in line.

Brad: B a.

Brad: Part of the a bigger part of the external growth story.

Brad: You seem to be slowing it down more than speeding it up at this point. So just curious on that thanks, Yeah, Hey, Rich. This is Brad well you are right. We do have a pretty big pipeline of projects that are ready that we could execute on.

Brad: And really it's just a matter of working the cost on those projects right now.

Brad: As I mentioned, we are seeing early signs of costs coming down.

Brad: On the project in Charlotte is call it 5% to 6%. We do think we'll continue to see costs come down as we get.

Brad: Later into this year, so while we do expect to start three or four projects. This year. We have another four to five that are approved where plans are nearly ready and if it if cost came in we could certainly pull the trigger on those so we have the optionality to be able to do that but.

You know, we also agree with you that these line up very, very well from a delivery perspective into 2026. The other area where we are seeing opportunity that I think could yield itself more immediately is in our pre-purchase area. So we are talking with developers on a number of opportunities where the projects are approved, the entitlements are complete, and in some instances, GMPs are already in place.

Brad: But we think it's prudent to be sure that the costs are in line.

Brad: We do also agree with you that as these line up very very well from a delivery perspective.

Brad: To 2026, the other area, where we are seeing opportunity.

Brad: Think could yield itself more immediately is in our pre purchase area. So we are talking with developers on a number of opportunities where the projects are approved and title plans are complete in some instances gmp's are already in place, but given some of the other liquidity constraints out there that I was talking about earlier.

But given some of the other liquidity constraints out there that I was talking about earlier, and pressures in other sectors, you know, equity or even debt has pulled out of the projects. So we are evaluating projects in that way. And so if we can find well-located opportunities with good partners that meet our return requirements, we'll definitely lean into that area a little bit more. Okay, great. Thanks very much.

Brad: And pressures in other sectors, the equity or the or even the debt has pulled out of the project. So we are evaluating projects and that way and so if we can find well located opportunities with good partners.

Brad: <unk> meet our return requirements, we will.

Brad: <unk> leaned into that area, a little bit more.

Brad: Okay, great. Thanks very much.

Brad: And we'll take our next question from the line of Alexander Goldfarb with Piper. Please go ahead. Hey, good morning.

Brad: And we'll take our next question from the line of Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander David Goldfarb: Hey, good morning, good morning down there.

Tim: Morning down there. So, two questions and an apology about the clock in the back. Uh, the first one is, can you just talk a little bit about renewals? I think you said you expected them to be sort of 5%, but new rent's down 3%, so an 8% spread. Walk us through why that seems a rather wide spread, but in your comments, you said that's, you know, sort of consistent with history, so maybe you could just talk about that and why existing residents would accept an 8% spread versus new residents. Yeah, this is Tim and Alex.

Alexander David Goldfarb: So two questions.

Tim: Policies about the clock in the background.

Tim: The first one is could you just talk a little bit about renewals I think you said you expect them to be sort of 5%, but new rents down three.

Tim: 8% spread can you just walk us through why that that seems rather widespread but in your comments you said that sort of consistent with historic. So maybe you could just talk about that and why existing residents would accept an 8% spread versus new residents.

Tim: Yes. This is Tim.

Tim: I mean, the gap is a little bit wider than historical. If we look at January, for example, it's about 1,100 base points gap for the month. But if you look at last year at this time, it's about 900. And even if you look at the last several years, really, as long as we've been tracking it, Q1 runs about an 800 base point gap. And even as you get into the spring and summer, there's typically always a gap where we see renewal pricing outperforming new lease pricing. But I mean, I think there are a few reasons for that, frankly.

Speaker Change: I mean, the gap is a little bit wider than is than historical if we look at January for example, it's about 100 basis point gap for demand, but if you look at last year. At this time was about 900 and even if you look at over the last several years really as long as we've been tracking it.

Tim: Q1 runs about 800 basis point gap and even as you get into the spring and summer Theres. Typically there is typically always a gap, where we see renewal pricing outperforming new lease pricing, but I mean, I think there's a few reasons for that frankly is one there is a there is a real cost.

Tim: One, there is a real cost, both a hassle cost and a financial cost to moving. Then there is the customer service component. When we have someone that's lived with us and knows kind of what to expect and knows what kind of service they're going to get, if you look at our Google star ratings, we averaged 4.4 Google star ratings in 2023, which is the highest in the sector. 80% of our ratings were five stars.

Tim: Carlson, our financial cost to moving so there is customer.

Tim: Customer service component.

Tim: Some of US lived with us and those kind of what to expect and knows what kind of services, they're going to get if you look at our our Google Star ratings, we averaged $4 four Google Star rating in 2023, which is highest in the sector, 80% of our ratings were five star in that that is a component that plays out and it manifests itself in this.

Tim: And that is a component that plays out and manifests itself in this way with our renewal pricing. And then we do dedicate a lot of time and resources to this renewal process, both in our corporate office and on the field teams. There's a lot of thought.

Tim: This way our renewal pricing and then we just we do dedicate a lot of time and resources to this renewal process.

Tim: Within our corporate office and on the onsite team Theres not theres a lot of thought Theres a lot of factors can centers.

Tim: There are a lot of factors considered. There's a level of buy-in that we get from our teams that makes them comfortable with the rates we're sending out at. And again, that manifests itself well. It'll narrow.

Tim: The level of buy in that we get from our teams that get them comfortable with with the rates, where we're sending out at and again that manifests itself.

Tim: It will narrow and as we see as we see new lease pricing, we expect to accelerate as we get into the spring and summer that gap will narrow but.

Tim: And as we see new lease pricing, we expect it to accelerate. As we get into the spring and summer, that gap will narrow. But as I made in the prepared comments, you look at February, March, and even April; we're averaging right around that 5%. So I think that can hang in there, particularly as new lease rates start to accelerate around that same time frame. Okay, then the second question is, on the supply front, it only seems like a handful of your markets have supply. But, you know, pressure on new rents seems to be broad-crushed, and yet, you know, Sunbelt still has a good economy, good jobs, good in-in migration, so how do we, like, we understand weakness in new rents in-in markets that have a lot of supply, but how do we interpret So I just want to understand the non-supply markets and why there's rent pressure there as well.

Tim: And as I made in the prepared comments you.

Tim: When you look at February March and even April where we're averaging right around that 5%. So I think that can hang in there, particularly as new lease rates are to accelerate around that same timeframe.

Speaker Change: Okay and then the second question is on.

Tim: On the supply front it only seems like a handful of your markets have supply issues, but pressure on new rents seem to be broad brush and yet.

Tim: It goes good economy good jobs good in migration. So how do you like we understand the weakness in b rents in markets that have a lot of supply, but how do we interpret brent softness sort of portfolio wide, especially in the markets that arent beset by supply.

Tim: And clearly your price point seems to be.

Tim: Portable for the community. So just wanted to understand that non supply markets why why there's been pressure there as well.

Brad: Well, we are seeing pretty good strength, and as I've commented, some of the mid-tier markets, if you think about Greenville and Savannah and Richmond and Charleston and those markets, we are seeing pretty good relative performance. Now, I mean, the supply is obviously varying by market, and we're seeing it a lot more in some of the larger markets, and I think, frankly, we're seeing it in some of our higher-concentration markets. So, if you think about Austin and Charlotte and Dallas, some of our higher concentration markets are where there's more supply, which is not surprising.

Speaker Change: Well, we are seeing pretty good strength in the us.

Brad: Ill comment on some of the mid tier markets. If you think about Greenville, and Savannah in Richmond, and Charles some of those markets we are seeing.

Brad: Good relative performance I mean, the supply is it obviously varies by market and we're seeing a lot more in some of the larger markets and I think frankly, we're seeing it in some of our higher concentration markets. So if you think about <unk>.

Brad: And in Charlotte and Dallas, some of our higher concentration markets is where is where there is more supply which is not surprising as a good markets to be in those are good long term demand markets.

Brad: Those are good markets to be in. Those are good long-term demand markets, so that's not really a surprise. So, I think there's some of that market concentration factor that's weighing into it where those obviously have an outsized impact on what you see at the portfolio level overall. But if you look at 2023, for example, across all of our markets, deliveries were about 4 – between 4 and 4.5 percent of inventory across the portfolio. So, while it varies pretty wildly by market, we did see pretty good results: the historical average is probably 3 to 3.5, so even for some of the ones that weren't getting – On supply, they were still higher. Okay, that's helpful.

Brad: Not really a surprise so I think theres some of that market concentration factor that's weighing into it where it is.

Brad: Obviously, we have an outsized impact on what you see at the portfolio level overall, but if you look at 2023 for example across all of our markets deliveries were about four between four and four 5% of inventory across the portfolio. So.

Brad: While it varies pretty widely by market, we did see pretty good historical average is probably three to three and a half so even for some of the ones that werent getting.

Brad: Tonnage supply and there were still higher than average.

Speaker Change: Okay. That's helpful. Thank you.

Brad: Thank you. And once again, ladies and gentlemen, if you would like to ask a question, please press star 1. We'll take our next question from the line of Michael Goldsmith. Good morning.

Speaker Change: And once again, ladies and gentlemen, if you would like to ask a question. Please press star one.

Michael Jason Bilerman: We will take our next question from the line of Michael.

Michael Jason Bilerman: With UBS.

Brad: Thanks a lot for taking my question. My first question is on the expense side, on expenses. Can you kind of walk through where, which line items you're seeing?

Michael Jason Bilerman: Please good morning. Thanks.

Michael Jason Bilerman: For my question.

Michael Jason Bilerman: First question's on the expense on expenses.

Michael Jason Bilerman: Can you kind of walk through.

Michael Jason Bilerman: For which.

Michael Jason Bilerman: Line items, Youre seeing particular pressure.

Clay: pressure and how you anticipate expense trending through the year. Yeah, uh, just a couple things around... There are a lot of expenses, but our point is, one, our uncontrollable expenses are really what's driving some of that expense growth. Whenever you kind of break that down, real estate taxes are projected to grow at roughly 4.8% for the year. I think you saw that in our guidance. And then you have insurance that's growing at roughly 16%, 15-16% for the year.

Michael Jason Bilerman: Envision expense trending through the year.

Clay: Yes.

Clay: Yeah.

Clay: A couple of things around that.

Clay: Okay.

Clay: 0.2 is one uncontrollable expenses are really what's driving.

Clay: Some of that expense growth whenever you kind of break that down real estate taxes are projected to grow at roughly four 8% for the year I think you saw that in our guidance and then you have insurance that's growing.

Clay: At roughly 16%, 15%, 16% for the year.

Clay: So that continues to be a bit of a headwind for us as we go into 2024, and for all the same reasons that we've seen in previous years, just as the market is trying to catch up. Then when you get into some of our controllable expenses, really, the biggest driver there is probably repair and maintenance, while the other items around expenses are pretty much right there at that overall growth rate of 4.1% or actually slightly lower than that. And I'll add just a couple points there on the controllable.

Clay: Can use to be a bit of a headwind for us as we go into 2024.

Clay: For all the same reasons that we've that we've seen in previous years, just as the market is trying to catch up there.

Clay: And when you get into some of our controllable expenses really the biggest driver there is probably repair and maintenance while other items around expenses are pretty much.

Clay: Yes, right there in that overall growth rate of four 1% actually slightly lower than that.

Clay: And I'll I'll add just a couple of points there on the controllable and then we do expect that if you look back to 2023 that that all of those controllable line items will moderate in 2024 as compared to 2023.

Tim: I mean, we do expect that if you look back to 2023, that all of those controllable line items will moderate in 2024 as compared to 2023 pretty significantly. And you can see that in the guide that we have. I think marketing is the one that's a little bit variable, may not be. You know, we had pretty reasonable marketing costs in 2023, and certainly in the environment we're in, that's something we want to make sure we're careful about and make sure we're properly spending there. So that may be the one where you don't see a significant decrease, but I think the others will see some pretty good moderation. Thanks for that.

Tim: <unk> and you can see that in the guide that we have a marketing is the one that's a little bit variable may not we had pretty reasonable marketing costs in 2023, and certainly in the environment. We're in and that's something we want to make sure we're careful down and make sure. We're properly spend in there. So that may be the one where you don't see a significant decrease I think.

Tim: The others will see some pretty good moderation.

Speaker Change: Thanks for that Mike.

Brad: And my follow-up is on concessions. How have concessions and competing lease-up properties trended? And are you offering any concessions at your stable? Concessions for us at Stabilize are pretty minimal.

Speaker Change: Follow up is on concessions.

Brad: Concessions.

Brad: Lease up properties trended and are you offering any concessions that you are stabilized properties.

Brad: Yes.

Brad: I mean in concessions for us stabilize is pretty minimal I think across the portfolio were about half a percent or so of rents and concessions and with the way we price. There's a lot of net pricing, we don't do a ton of concessions when you see it more in some of the.

Tim: I think across the portfolio, we're about half a percent or so of rents in concessions. With the way we price, there's a lot of net pricing. We don't do a ton of concessions.

Tim: We do see it more in some of the lease-ups that we're competing against. I would say in general, concessions... In the market, and what we're competing against went up a little bit in Q4, probably where we saw the biggest change, some of our Carolina markets, Charlotte, Raleigh, were ones where we saw concessions pick up a little bit, but still in terms of lease-up and areas of a lot of development, the concession practice, © The Bulletproof Executive 2013, Thank you very much... And we'll take our next question from Haendel Juste with Mizzou Security. Please go ahead. Hey there.

Tim: The lease up so we're competing against I would say in general concessions.

Haendel Emmanuel St. Juste: In the market and what we're competing against went up a little bit in Q4, probably where we saw the biggest chains. Some of our Carolina markets, Charlotte and Raleigh were ones of resolve concessions pick up a little bit, but still still in terms of lease up in areas with a lot of development the concession practices.

Haendel Emmanuel St. Juste: It's still pretty pretty strong kind of that one month to two months range.

Haendel Emmanuel St. Juste: Thank you very much.

Tim: Yes.

Haendel Emmanuel St. Juste: And we'll take our next question from handle Haisheng.

Haendel Emmanuel St. Juste: Securities. Please go ahead.

Brad: I'm here. Going back to your comments on your five..., I guess I'm curious if that 5% renewal price, Doug Holt. The market rate growth is just 1%. Aren't you creating a game? How do you feel about that? Next to you in line. Outlook 4. For more information, visit www.

Haendel Emmanuel St. Juste: Hello there.

Speaker Change: We feel good.

Brad: I'm here.

Brad: Going back to your comments on your 5%.

Speaker Change: All right.

Brad: I guess I'm curious.

Brad: 5% renewal pricing.

Brad: Oh.

Brad: But market growth is just 1%.

Brad: Arthur creating.

Brad: And how do you feel about that.

Tim: FEMA.gov, cut out of there a little bit, Haendel, again, is that what you were saying? Sorry about that. Yes, I was saying that if the 5% renewal rate forecast that you're expecting this year does hold, and market rate growth is just 1%, aren't you creating a gain on lease? And then how would that impact your outlook for next year when you are expecting market rates to recover? or your rental rate in your portfolio.

Brad: Your line of.

Brad: Our outlook for rental rate recover.

Speaker Change: You cut out there a little bit and now just a gateway so that would tell you that what you are saying.

Speaker Change: Sorry about that yes, I was saying that if the 5% renewal rate.

Tim: Forecast that you're looking at your vessel and market rate growth is just 1%.

Tim: And then how would that impact your outlook for next year, when you expecting market rates to recover.

Tim: Are your rental you've went through late in your portfolio to recover.

Eric: Yeah, I mean, you know, like I said, the gap is a little wider right now, but I expect it to come in. We haven't seen any, any signs, like I said, going all the way out to April. We're still kind of in that 5% range. And obviously, depends on the mix, you know, and who's renewing, who's new lease, you know. We typically, our average stay is somewhere in the 20 month range; somebody leases, and then they do one renewal, then typically move out. So all of it is, you're not renewing on top of renewing on top of renewing, where that gap continues to get larger and larger. But, as I said, we've always seen a gap there, and it's a little bit wider right now, but I expect it to narrow as we get into spring. But, you know, no concerns with where we sit here right now.

Speaker Change: Yes, I mean like I said, the gap is little wider right now, but I expect it to come in we haven't seen any any signs I think going all the way out to April we're still kind of in that 5% range and obviously depends on the mix.

Eric: Who's renewing his new lease we typically our average stay somewhere in the 20 month range. So money money leases. They do one renewal then typically moving out so all of us.

Eric: Youre not renewing on top of our new again top of renewing where where that gap continues to get larger and larger.

Eric: We've always seen a gap there and a little bit wider right now, but I expect it to narrow.

Eric: As we get into the spring.

Eric: No concerns with with where we sit.

Eric: Sit here right now.

Brad: And I'll just add, Handel, that I mean, over time, you know, to the extent that obviously, We, the new lease pricing pressure we're seeing right now is obviously largely a function of supply coming into the market. If that begins to moderate late this year into 2025, you know, in the event that we do see renewal pricing need to moderate a little bit more next year, call it, instead of 5, we're in the 3 or 4 percent range. We also, though, expect new lease pricing to start to show some improvement next year, such that we probably continue to get, you know, the blended performance that we need and that we're after. So it's a give and take back and forth. We've historically seen new lease pricing in that kind of, you know, 4 to 5 percent range. I don't recall it ever really getting a lot lower than that.

Eric: Ted.

Eric: Time to the extent that obviously.

Brad: <unk>.

Brad: The new lease pricing pressure were seeing right now is obviously largely a function of supply coming into the market as that begins to moderate late this year into 2025.

Brad: In the event that we do see renewal pricing need to moderate a little bit more next year call. It instead of five were in the three or 4% range. We also expect new lease pricing to start to show some improvement next year, such that we probably continue to get the blended performance that we need and that we're at.

Brad: After so it's a give and take back and forth. We've always historically seen new lease pricing in that kind of 4% to 5% range I don't recall it ever really materially getting a lot lower than that maybe maybe it was a year back years ago, where it got to 3%, but generally when thats happening in certainly we.

Eric: Maybe there was a year back in the past where it got to 3 percent, but generally, when that's happening, and certainly we think that will be the scenario this time, by that point, you know, renewal or new lease pricing has started to show some improvements such that the overall blended performance continues to hang in there pretty well. Yeah, I appreciate that, Eric. I guess I'm just thinking ahead and...?? www.larryweaver.com Yeah, yeah. Okay, one more.

Eric: Think that would be the scenario. This time by that point renewal or new lease pricing has started to show some improvement specialty overall blended performance continues to hang in there pretty well.

Speaker Change: Yes, I appreciate that Eric I guess.

Speaker Change: Thinking ahead and thinking.

Eric: Essentially that renewal rates would need to drop next year, how much CBD market.

Eric: A market rate growth does improve.

Eric: <unk> may be into the mid single upper single digit rate growth yes.

Brad: I appreciate the color you guys gave on the building blocks to see them for revenue, but could you give us some color on what you're assuming for bad debt, ancillary, and for turnover? Haendel, on bad debt, you know, the way that we're thinking about that is it'll remain pretty consistent with where it's run here recently. I mean, we'd probably run around that half a percentage point range, turnover staying low, at least for our guidance, staying low around that 45% range. And then, what was the last one that you asked about?

Brad: Okay.

Brad: One more I appreciate the color you guys gave on the building blocks for revenue, but could you give us some color on what youre assuming for.

Brad: That.

Brad: Ancillary and for turnover.

Brad: Oh.

Brad: And.

Haendel: On bad debt.

Haendel: So the way that we're thinking about that is it will remain pretty consistent with where its run here recently with probably right around that five.

Brad: Percentage point range.

Brad: Turnover staying staying low.

Haendel: At least for our guidance staying low around that 45% range.

Brad: And then what was the last one that you asked about.

Brad: The End. Yeah, the ancillary income, it would grow in line, we're assuming it'll grow pretty much in line with our overall effective rent growth, so right around that 1%, got it, got it, okay. And then one last one, I think it was the last quarter, there was a lot of chatter.

Brad: <unk> income.

Brad: Yes, the ancillary income it would grow in line, we're assuming it will grow pretty much in line with with our overall effective rent growth right around that 1% level.

Speaker Change: Got it got it Okay and then one last one I think it was last quarter as a lot of chatter around a versus b.

Brad: A versus B rental pricing and the impact that the new supply was having on that dynamic. Curious if there's any updated perspective, anything that you've seen in this past quarter, or any updated views on how the performance of A versus B in your portfolio is or has changed over the last quarter or so. Yeah, I mean, we've probably seen a gap a little bit.

Brad: Rental pricing and the impact that the new supply was having on that dynamic.

Brad: Curious if there's any updated perspective anything that you've seen in this past quarter or any updated views on how the performance of a versus b in your portfolio.

Brad: Is or has changed over the past quarter or so.

Brad: Yeah, I mean, we've probably seen a gap a little bit.

Tim: I mean, our Bs, whether you would call them Bs or even if you want to think about suburban versus urban, suburban is outperforming urban. The CBD and the inner loop, if you think about suburban, we're probably about... 80 basis points better in Q4 in January on a blended lease or release basis from what we're seeing on the secondary. A versus B, in the way we think about our portfolio, it's about 55% A, 45% B, a little bit tighter there, probably about a 30 basis point gap with the Bs doing a little bit better. I can see pretty consistently for both, but I would say the biggest notable thing there is certainly that suburban assets are outperforming, and there's a little bit less supply in those areas as well. Thank you. And we'll take our next question from the line of Brad Heffern with RBC Capital. Please go ahead. Hey everybody.

Brad: <unk>.

Brad: You would call. It. These are even if you want to think about suburban versus urban suburban is outperforming urban.

Bradley A. Hill: Kind of the CBD in the inner loop, if you think about suburban we're probably about eight.

Bradley A. Hill: 80 basis points better than Q4 in January on a blended lease over lease basis from what we're seeing on the secondary.

Bradley A. Hill: <unk> be in the way, we think about our portfolio, it's about 55% and 45% be a little bit tighter there in probably about a 30 basis point.

Bradley A. Hill: GAAP with the B is doing a little bit better occupancy pretty consistent for both but I would say the bar.

Bradley A. Hill: Biggest the biggest notable thing there is certainly suburban assets are outperforming.

Bradley A. Hill: A little bit less supply in those areas as well.

Tim: Thanks.

Tim: And we'll take our next question from the line of Brad Heffern with RBC capital markets. Please go ahead.

Brad: Thanks. First, I just wanted to say congratulations to Al. I hope you enjoy your retirement.

Bradley A. Hill: Hey, everybody. Thanks first I just wanted to say congratulations to al Hope you enjoy your retirement.

Brad: On your lease-ups, can you talk about how those are going in terms of pace? Obviously, you're outperforming on the rent side, but I'm just curious if they're taking longer than normal just given the supply backdrop. Yeah, hey, this is Brad.

Bradley A. Hill: On your lease up can you talk about how those are going in terms of pace, obviously, you're outperforming on the rent side, but I'm just curious if they're taking longer than normal just given the supply backdrop.

Brad: Yeah, Hey, this is Brad.

Brad: You know, those are pretty much in line with our expectations. Certainly, there's been a slowdown in the velocity in line with our overall portfolio kind of over the holidays and the winter months, but there's nothing material in terms of difference there versus what we expected. You know, our daybreak asset is, you know, leasing up a little bit slower and has been, but in general, all of our assets, and that's the one in Salt Lake City, but in general, all of our assets are leasing up pretty much in line with our expectations in terms of velocity given a slowdown here over the winter season. Okay. And maybe I just missed it.

Brad: Those are pretty much in line with our expectations certainly theres been a slowdown in the velocity.

Brad: In line with our overall portfolio kind of over the holidays and the winter months, but there is nothing material in terms of difference there versus what we expected.

Brad: Our our day break asset.

Brad: Is leasing up a little bit slower than it has been but in general all of our assets and that's the one in Salt Lake City, but in general all of our assets are leasing up pretty much in line with our expectations in terms of in terms of velocity given the slowdown here over the winter winter season.

Speaker Change: Okay got it and maybe I missed it but can you give your expectation for market rent growth. That's underlying the guide obviously you gave the blend assumption, but just looking specifically for the market.

Brad: But can you give your expectation for market rent growth that's underlying the guide? Obviously, you gave the blend assumption, but just looking specifically for the market piece. Our blended, as we talked about, is about 1%, and really, we expect market rent, if you will, to be pretty consistent with where it is right now. Sorry, consistent as in flat or consistent as in similar to the 1% number. Yeah, it's flat.

Brad: Our blended as we talked about is about 1% and they really know what you expect.

Brad: Market rent, if you will to be pretty consistent with where it is right now.

Brad: Sorry, consistent as in flat or consistent there then similar to the 1% number.

Brad: Yes flat okay.

Brad: 1% is what we're expecting in terms of our blending growth. Okay, thank you, and we'll. Our next question comes from the line of Adam Kramer with Morgan. Please go ahead.

Brad: 1% is what we're expecting in terms of our blended growth.

Adam Kramer: Okay. Thank you.

Adam Kramer: And we will ask them.

Brad: Our next question comes from the line of Adam Kramer with Morgan Stanley. Please go ahead.

Brad: Hey guys, thanks for the question. I just want to, you know, I think we talked a little bit about capital allocation and potential opportunities with acquisitions or development. We have a similar question, and again, recognizing where the balance sheet leverage is, but we're wondering about the opportunity or maybe the appetite for share buybacks here, if that's something you'd consider, and maybe kind of what it would take for that to be under greater consideration. Well, I mean, you know, as you point out, we do think that attractive acquisition opportunities are going to start merging later this year into 2025 as the merchant builders continue to struggle with their lease up, more likely than not, below what they underwrote. And so we believe, for the moment, that at current prices, the longer-term yield performance that we can pick up on acquiring these lease-up properties provides a more attractive long-term investment return, especially on an after-CAPEX basis, as compared to investing in our existing portfolio earning stream.

Speaker Change: Hey, guys. Thanks for the question I just wanted to I think we talked a little bit about capital allocation and so opportunities with acquisitions or developments.

Brad: Similar question again, recognizing where the balance sheet leverage.

Brad: I was wondering about the opportunity.

Brad: Or maybe the appetite for share buyback here, if that's something you'd consider.

Brad: Kind of what it would take for that to be under under greater consideration.

Brad: Well I mean.

Brad: <unk>.

Brad: As you pointed out I mean, we do think that attractive acquisition opportunities are going to start emerging later this year into 2025 is that merchant builders continues to struggle with their lease up.

Brad: More likely than not below what they underwrote.

Brad: And so we believe for them all that debt.

Brad: At current pricing.

Brad: Longer term yield performance that we can pick up on acquiring these lease up properties provides a more attractive long term investment return, especially on the after capex basis.

Brad: As compared to investing in our existing portfolio our earnings stream.

Brad: We also see it providing a better ability to continue investing in our new tech initiatives that we think offer the opportunity for meaningful margin expansion over the entire portfolio over the next few years, creating significant amounts of value. And then, you know, as you know, I mean, there's a REIT. You know, we've long oriented our thinking around the idea that, you know, the best way for us to reward shareholders over a long period of time is through the dividend and earnings growth.

Brad: So see it providing a better ability to continue investing in our new tech initiatives that we think offer the opportunity for meaningful margin expansion over the entire portfolio over the next few years.

Brad: <unk> significant amounts of value.

Brad: And then.

Brad: <unk>.

Brad: As you know I mean as a REIT.

Brad: We've long oriented our thinking around the idea of it the best.

Brad: Best way for us to reward shareholders over a long period of time.

Brad: As to the dividend and through earnings growth and and we think that.

Eric: And we think that, you know, continuing to find ways to put capital to work that supports those first two agenda items I just mentioned and supports our ability to continue to push dividend growth through all phases of the cycle over time is the best way to reward re-capital. But, you know, having said all that, I mean, we obviously continue to monitor the public pricing of our existing portfolio in the company, and, you know, obviously, it should continue to maintain a strong balance sheet. I mean, if we continue to see dislocation or even, you know, more dislocation in terms of public versus private pricing of real estate, I mean, we do have a buyback program in place, and an authorization in place.

Eric: Continuing to find ways to put capital to work that supports those first two agenda items I just mentioned.

Eric: And supporting our ability to continue to push dividend growth through all phases of the cycle over time is the best way to reward.

Eric: Capital, but having said all that I mean, we obviously continue to monitor the public pricing of.

Eric: Of our existing portfolio of the company and.

Eric: And obviously it shouldn't continue to maintain a strong balance sheet I mean, if we continue to see.

Eric: Location or even.

Eric: More dislocation in terms of public versus private pricing of the real estate.

Eric: I mean, we do have a buyback program in place authorization in place we've done it before.

Eric: We've done it before, and we wouldn't hesitate to do it again if conditions warranted it. But for right now, given the outlook and the opportunity we think we have in front of us, we think it's better to sort of hold on to our powder, and we think the long-term value proposition is likely better with the focus that we have. Great, thanks. And you mentioned some of the tech investments and the kind of opportunities that they are. Maybe just, you know, I don't know, the one or two there that you're most excited about, and to be able to share them with the public. This is Brad.

Eric: And we wouldn't hesitate to do it again, if conditions warranted it but for right now given the outlook and the opportunity. We think we have in front of US, we think better to sort of hold onto our powder and we think that the long term value proposition is likely better with the focus that we have.

Brad: Great. Thanks, you mentioned some of the tech investments and kind of the opportunities that they are maybe just.

Brad: I'm wondering if the one or two there that you're most excited about.

Brad: You're kind of able to able to share with the public.

Brad: You've definitely heard of these in the past, but I'd say number one is our continued investment in our CRM platform. We rolled this out a couple of quarters ago, but we continue to update and refine that platform, which really allows better management of our prospects and our leasing process. This is also really an enabler to a number of other things that we're working on, our centralization, our specialization, our porting. All of those things have our CRM platform at the center of them. We continue to focus on our potting of properties. We're up to 27 potting properties today, and we'll continue to look to expand that when opportunities present themselves.

Eric: Yes. This is Brad you've definitely heard of these in the past, but I'd say number one is our continued investment in our CRM platform. We rolled this out a couple of quarters back when we continue to update and refine that platform, which really allows better management of our prospects and our leasing process in this.

Brad: It is also a really an enabler to a number of other things that we're working on our centralization or specialization our potting.

Brad: All of those things have kind of our CRM platform at the center of those.

Brad: We continue to focus on our potting.

Brad: <unk>, we've got we're up to 27 parted properties today.

Brad: And we will continue to look to expand that when opportunities present themselves.

Brad: We're also investing right now in updating our website, and we're hopeful that we'll be able to roll this out later this month. Really, our goal there is to be able to drive more leasing traffic through our website, which is the most cost-effective way for us to do that. We get a large portion of our traffic now through our website, and we're looking to continue to improve that. We're also really working to optimize our website for mobile use, which will support our online leasing and our self-touring.

Brad: We're also investing right now and updating our website, we're hopeful that we'll be able to roll. This out later this month.

Brad: Really our goal there is to be able to drive more leasing traffic through our web site, which is the most cost effective way for us to do that we get a large portion of our traffic.

Brad: Now through our website and we're looking to continue to improve that we're also really working to optimize our.

Brad: Our mobile our website for mobile use which will support our online leasing in our in our self touring.

Brad: The last one that I'll mention is we're rolling out right now property-wide Wi-Fi on select properties this year. We're also adding this to some of our new developments. This is really an opportunity for our residents to have really seamless Wi-Fi across our properties, whether it's in the unit, common areas, and amenities, and really provides a better opportunity and service for our residents.

Brad: And the last one that I'll mentioned.

Brad: As we're rolling out right now property wide Wi Fi so.

Brad: Select properties. This year, we're also adding this on some of our new developments.

Brad: And this is really an opportunity for our residents to have really seamless Wi Fi across our property, whether it's in the unit common areas amenities and really provides a better opportunity and service for our residents and that has a really big revenue component to it as well.

Brad: That has a really big revenue component to it as well that we're testing at the moment. Great. Thanks for your time. And we'll take our last question from the line of Jamie Feldman with Wells Fargo.

Brad: <unk> testing at the moment.

Jamie Feldman: Great. Thanks for the time.

Brad: And we'll take our last question from the line of Jamie Feldman with Wells Fargo. Please go ahead.

Brad: Thanks for taking the follow-up and sorry to extend an already long call, but you had mentioned an expectation that you think rents will decline. You have a decent amount of exposure to floating rate debt. Can you talk about what's in your guidance in terms of rates this year and then, as of the year end, you had $500 million on the Commercial Paper Facility. Do you expect to keep that in place all year? Do you think you can pay for that door?

Jamie Feldman: Hi, Thanks for taking the follow up and sorry to extend an already long call, but you had mentioned expecting.

Brad: You think rental decline please.

Brad: The amount of exposure to floating rate debt can you talk about.

Brad: Your whats in your guidance in terms of rates. This year and then as of the year and you had $500 million on the.

Brad: Commercial paper facility do you expect to keep that.

Brad: In place all year do you think you pay that down or is that already paid down.

Clay: Yeah, we, Jamie, we paid that down in the first week of January with the bond issuance that we completed, and the effective rate on that issuance was right up, just north of 5%. You know, our placeable, you know, the place we look to next for the next dollar is our commercial paper program, and right now, it's at roughly 5.5%, and so we'll keep an eye on that, and as rates are expected to decrease over the back half, over the year, we expect that number to maybe come down a bit. So what's your assumption in your guidance for where rates will go? Yeah, we've got it dropping down 25 basis points through halfway through the year and then another 25 basis points at the very back end of the year. This year down 75 basis points by year-end. Just 50.

Speaker Change: Jamie we paid that down.

Clay: First week of January.

Clay: With the bond issuance that we completed in that effective rate on that instrument.

Jamie: Just north of 5%.

Clay: Our place of all the points, we look to next for the next dollar as our commercial paper program and right now it's that roughly five 5%.

Clay: We will keep it and keep an eye on that and as rates are expected to decrease over the back half over the year, we expect that number to maybe come down a bit.

Jamie: What's your assumption in your guidance for where rates go.

Speaker Change: Yes, we've got it dropping down 25 basis points through halfway through the year and then another.

Jamie: Another 25 basis points on the very back end of the year.

Jamie: Okay, So you're down 75 basis points by year end.

Clay: 50.

Jamie: 50, okay.

Clay: Okay, and then you had mentioned a five cent drag from developments that are not stabilized yet. Is there any variability to that? Is any of that being capitalized? There shouldn't be so much of a hit to earn.

Jamie: 25 at the end of the year.

Jamie: Okay, and then you had mentioned a <unk> <unk> drag from development that are not stabilized yet.

Jamie: Is there any variability to that is any of that being capitalized.

Jamie: Yes, there is it shouldn't be so much of a hit to earnings.

Clay: Yeah, there is some capitalization there. And you look at our capital interest capitalized year over year, a slight increase, but pretty steady. But what really comes into play there is just the timing of the developments. And in 2023, we delivered and leased units to developments. In 2024, we're going to be delivering and leasing units to developments. And so you got a bit of a play there that's creating some headwind.

Jamie: Yes. There is there is some capitalization there and if you look at our capital interest capitalized year over year slight.

Clay: Slight increase but pretty steady, but what really comes into play there. It's just the timing of the developments.

Clay: In 2023, we delivered.

Clay: And at least up to developments in 2024, we're going to be delivering and leasing up for developments and so you've got a bit of a play there that's creating some headwind and then just in general just the overall.

Clay: And then just in general, just the overall rate at which we're capping that interest comes into play; you're, you're looking at an effective rate, you know, roughly three and a half that we're capping, and then we're borrowing, you know, at a higher rate today than what we've capped at. So I guess, like, even if you have an aggressive lease-up or lease-up better than expectations, do you think that five cents is still locked in, or there's a way that could go away? Uh, I mean, it would have to be a pretty meaningful change in how that would lease up to really move the needle on that.

Clay: The rate at which we're capping net interest comes into play you are.

Clay: Youre looking at an effective rate of roughly three and a half that we're capping and then we're borrowing at a higher rate today than what than what we've capped at previously.

Clay: Okay. So I guess like even if you have an aggressive lease up are linked up better than expectation do you think that <unk> is still locked in.

Clay: That could go away.

Clay: I mean, it would have to be pretty meaningful change in how that would lease up to to really move the needle on that process.

Clay: Okay, and then finally, just a clarification, I think you had mentioned 0.85 as your blend assumption, and then you answered the last question with 1%. I know we're splitting hairs here, but is 0.85 still the right number, or is it 1%? Yes, so our blended number is 1%, so that's the blended price that we've got built into our revenue guidance, but our overall effective rent growth is 0.85%. So that 0.85% includes the earn-in that we've got from 2023, plus the 1% of the blended that we're looking at.

Clay: Okay, and then finally, just a clarification I think you had mentioned 85 is your blend assumption and then you answered the last question with 1% I know, we're splitting hairs here, but it's 85 is still the right number or is it 1%.

Clay: Yes, so our blended number is 1%. So that's the blended pricing we've got built into our revenue guidance, but our overall effective rent growth as to 0.85%. So that point, 85% includes the earn and that we've got far off from 2023.

Clay: The 1% off the blended that we're looking at for 2024.

Speaker Change: Okay, alright, thanks for taking the question.

Speaker Change: We have no further questions at this time I will return the call queue.

Clay: Okay. All right. Thanks for taking the... We have no further questions. Please return the call to MAA for closing remarks. Alright, thanks everybody for joining us this morning, and we'll, I'm sure, speak to many of you over the spring. Thank you. This concludes today's program. Thank you for your participation. And now, this...

Clay: Eight for closing remarks.

MAA: Alright, thanks, everybody for joining us this morning, and we will I'm sure speak to many of you over the spring. Thank you.

Clay: This concludes today's program. Thank you for your participation and you may now disconnect.

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